Welcome to Workday's second quarter fiscal year 2023 earnings call. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of the call. During the Q&A, please limit your questions to one. With that, I will now hand it over to Justin Furby, Vice President of Investor Relations. Please proceed. Thank you, operator. Welcome to Workday's second quarter fiscal 2023 earnings conference call. On the call, we have Aneel Bhusri and Chano Fernandez, our co-CEOs, Barbara Larson, our CFO, and Pete Schlampp, our Chief Strategy Officer. Following prepared remarks, we will take questions. Our press release was issued after close of market and is posted on our website, where this call is being simultaneously webcast. Before we get started, we want to emphasize that some of our statements on this call, particularly our guidance, are based on the information we have as of today and include forward-looking statements regarding our financial results, applications, customer demand, operations, and other matters. These statements are subject to risks, uncertainties, and assumptions, including those related to the impact of the ongoing COVID-19 pandemic and recent macroeconomic events on our business and global economic conditions. Please refer to the press release and the risk factors in documents we file with the Securities and Exchange Commission, including our 2022 annual report on Form 10-K and our most recent quarterly report on Form 10-Q for additional information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of Workday's performance. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results in our earnings press release, in our investor presentation, and on the investor relations page of our website. The webcast replay of this call will be available for the next 90 days on our company website under the investor relations link. Additionally, our quarterly investor presentation will be posted on our investor relations website following this call. Also, the customers page of our website includes a list of selected customers and is updated monthly. Our third quarter fiscal 2023 quiet period begins on October 15th, 2022. Unless otherwise stated, all financial comparisons in this call will be to our results for the comparable period of our fiscal 2022. With that, I'll hand the call over to Aneel. Thank you, Justin, and welcome to Workday's second quarter fiscal 2023 earnings conference call. I'm pleased to report that Workday delivered a strong second quarter thanks to healthy demand across all product areas and geographies. Additionally, we closed on two of the larger deals that had pushed from Q1, which we referenced on last quarter's call. Our results, which outperformed across our key operating metrics, underscore the continued importance of digital transformation for finance and HR. Even with the uncertainty in this environment, we remain confident in our long-term growth prospects because Workday continues to serve as a mission-critical partner to our customers with a proven track record of success. Before I turn it over to Chano, who will share more on our go-to-market success, and Barbara, who will provide specifics on our Q2 financial results and outlook, I'd like to share some second quarter highlights. We had another strong quarter for Workday HCM, where the migration to the cloud continues with notable customer additions, including Electrolux, First Student, The Adecco Group, Korean Air, and Raymond James. As always, customer success remains a key differentiator for Workday. In Q2, we had several HCM go-lives, including Cox Enterprises, Southwest Airlines, and United Overseas Bank. Turning to Workday Financial Management, we saw very strong growth in the second quarter as we added two Fortune 500 core financial management customers. I'm very excited to share that one of those was Salesforce, the global leader in CRM. Already a long-time Workday HCM customer and partner, Salesforce's expanded use of Workday now includes Workday Financial Management, along with Accounting Center, Workday Adaptive Planning, Prism Analytics, and more. Our growing partnership reinforces the opportunity we have to help support customers in the cloud. With this broad relationship, Salesforce becomes one of an increasing number of high-profile customers to expand from Workday HCM to both HCM and Financial Management. Other new financial management customers in Q2 included American Electric Power, which was the second of our Q2 Fortune 500 wins, Apex Group, Dave & Buster's, Express LLC, and the State of Vermont. While key go-lives in Q2 included Comerica Bank, RSM, and the University of Virginia. In addition to the strong growth from our core suite of HCM and finance applications, Q2 also saw notable momentum across our broader portfolio of solutions. Workday Adaptive Planning recently celebrated its four-year anniversary as part of Workday, and I'm happy to share that we now serve more than 6,000 planning customers, including over 20% of the Fortune 500. It was also our second full quarter with VNDLY as part of Workday, and we're already seeing solid results as it's opening up new opportunities for us to expand our relationship with customers who want to embrace a more holistic workforce strategy. We also continue to see strong adoption of Workday Extend and Prism Analytics as both solutions are providing organizations, including the Office of the CIO, with the ability to adapt in today's changing world. With Extend, customers build apps that are tailored for their unique use cases, which can eliminate the need for other custom development tools. Over the last year, we have more than doubled the number of customers and now have more than 750 applications that have been developed on the Workday platform. Prism Analytics, with now more than 1,000 customers, is enabling organizations to bring operational data into Workday to drive real-time business insights. These solutions are not only critical to our customer community, but are enabling a new level of engagement with our partner community as well. Speaking of our customer community, customer service has always been one of our core values. As a result, we strive to maintain a customer satisfaction rating of over 95%, and I'm pleased to announce that in 2022 we surpassed this rating again, as we have for more than a decade. This achievement is a direct testament to the amazing work of our employees and their commitment to helping our customers thrive. We look forward to sharing more about our product innovation, customer success, and market opportunity in September at Workday Rising, our annual customer conference. This will mark the first time since 2019 that we're able to hold Workday Rising in person, and we are so excited to get more than 9,000 members of the Workday community together in Orlando, with thousands attending virtually for what is always a special event. In closing, we had a strong second quarter and first half of the year. While we recognize that the current environment will likely moderate the pace of growth in the second half of the year, we firmly believe that the strong get stronger during periods of economic uncertainty. We will continue to manage the business with that mindset and expectation, all in support of driving enduring growth for many years to come. With that, over to you, Chano. Thank you, Aneel, and thank you to everyone for joining today's call. I want to begin by expressing my sincere thanks to the entire global organization for an incredible Q2. Every one of our nearly 17,000 Workmates really leaned in and drove these results, and I couldn't be prouder of our execution. Great job, team. Our strong Q2 results were driven by momentum across several of our key growth initiatives, including customer base, international, medium enterprise, and the office of the CFO, a testament to our strategy and the significant long-term opportunity that we have ahead. In addition, as Aneel mentioned, we closed the two largest deals that slipped out of Q1. While the near term market environment remains uncertain and we are not immune to it, we continue to see organizations of all sizes prioritizing their investments with Workday to continue their digital backbone transformation and drive increased agility and flexibility. From a geographic standpoint, we executed incredibly well across our global market. In the U.S., we saw healthy growth in the large enterprise, including five Fortune 500 core HCM or Fins wins. In the medium enterprise, our suite approach continues to resonate, driving another quarter of very strong results. International performance was again a highlight as our investment in key regions and the ongoing journey to the cloud are resulting in significant growth. In EMEA, we had outperformance across a number of key countries, including France, Germany, and the United Kingdom. Finally, in APJ, we had very solid performance in strategic markets like Japan and Australia. As you know, we go to market with land and expand sales motions, and both teams drove healthy growth in Q2. Aneel already mentioned several of our core HCM and Fins wins, many of which were new customers to Workday. We also closed several strategic deals across our emerging land motions, including Planning First wins at ExxonMobil and Ninja Van, and a Peakon First led win at a 300,000+ employee global organization headquartered in Europe. In addition to strengthening our land motion, our customer base sales teams in Q2 once again drove very strong results, including solid renewals and meaningful acceleration in new ACV, with broad-based strength across a number of solutions, including core Fins, Extend, Peakon, learning, payroll, and talent optimization. We're also seeing momentum build within our Planning First customers who are expanding their footprint by adding core HCM and financials. Carle Health is a great example of this. They started as a Planning First relationship and expanded their footprint to include core Fins in Q2. Industry is another area of significant opportunity and investment, and I am pleased to share that financial services is our first industry to exceed $1 billion in annual recurring revenue. Some of our most strategic transactions and go lives in Q2 came out of our financial services team, including new lands that Aneel referenced at Raymond James and Apex Group, expansion deals at Bank of Montreal and Cushman & Wakefield, and go lives at United Overseas Bank and Comerica. Other established industries, including healthcare and education and government, also saw continued momentum, and we are gaining steam in verticals such as retail, hospitality, and technology media, where wins included Salesforce, Avalara, and GoPuff. Needless to say, we have several other industries that are on the path to one billion and beyond. Our expanding partner ecosystem is becoming an increasingly important driver of our growth and industry success. The excitement we're seeing within our partner community for the joint opportunity in front of us was on full display recently at Altitude, our annual partner event. Strategic systems integrators such as Accenture, Deloitte, KPMG, and PwC are not only ensuring successful deployments, but also serving as an innovation engine addressing our customers' needs. Together, we're also targeting industry accelerators with specific solutions and use cases. We look forward to sharing a lot more on these at Workday Rising in a few weeks. As we move through the second half of the year, we expect the environment to remain uncertain, and we see signs that in certain deal cycles, particularly some of our more strategic opportunities, there is increased scrutiny and potentially longer sales cycles as buyers do extra work before making investment decisions during these uncertain times. The good news is that when companies go through their due diligence, we typically come out on top, given the compelling return on investment and reduced total cost of ownership that our solutions provide, our track record of successful deployments of scale, and our reference base of thousands of customers who can speak to the meaningful business value that Workday delivers. With that, I will turn it over to our CFO, Barbara Larson. Over to you, Barbara. Thanks, Chano, and good afternoon, everyone. As Aneel and Chano mentioned, we delivered a strong Q2 as enterprises of all sizes increasingly realize the need for a flexible, modern finance and HR solution to navigate their businesses and drive change during these uncertain times. Subscription revenue in Q2 was $1.37 billion, up 23% year-over-year, and professional services revenue was $168 million, up 15%. Total revenue outside of the U.S. was $383 million, representing 25% of total revenue. 24-month backlog at the end of the second quarter was $8.37 billion, growth of 22%. The outperformance was driven by strong new ACV across both our land and expand sales motions, along with solid renewals, with growth and net revenue retention rates over 95% and over 100% respectively. Total subscription revenue backlog at the end of Q2 was $13.47 billion, up 27%. Our non-GAAP operating income for the second quarter was $302 million, resulting in non-GAAP operating margin of 19.6%. Margin overachievement was driven by a combination of top-line overperformance, the timing of certain projects, and some favorable expense variances. Q2 operating cash flow was $114 million, which reflects typical seasonality from our annual merit cycle increase. In addition, with the final 2 days of the quarter falling over a weekend, we saw roughly $40 million of collections shift out of Q2 into early Q3, which will have a positive impact on our third quarter cash flow. Our largest investments continue to be in our people and attracting top talent to Workday. During the quarter, we successfully added approximately 1,000 net new employees, ending Q2 with a global workforce of more than 16,900. Our hiring was focused on adding key talent across strategic growth areas of the business, notably go-to-market resources and product innovation roles. Overall, we're extremely proud of the strong company-wide execution in Q2 and remain focused on leveraging our leadership position to drive sustainable 20%+ subscription revenue growth on our path to $10 billion in revenue. Turning now to guidance, which reflects the momentum in our business and the mission-critical nature of our solutions, while also balancing an uncertain macro environment, which Aneel and Chano described. With that context, we are maintaining our guidance for FY 2023 subscription revenue of $5.537 billion-$5.557 billion, representing 22% year-over-year growth. We expect Q3 subscription revenue to be $1.418 billion-$1.420 billion, 21% year-over-year growth. We still expect professional services revenue to be $650 million in FY 2023 as we continue to tightly align with our growing partner ecosystem to help ensure our customers have successful implementations that support the highest levels of customer satisfaction and business value. For Q3, we expect professional services revenue of $164 million. We expect 24-month backlogs to grow approximately 19% year-over-year in Q3. We now expect FY 2023 non-GAAP operating margin of 19%, reflecting a more measured pace of hiring in the second half of the year as we continue to monitor the macroeconomic environment. Investing for long-term growth alongside ongoing expense discipline remains our priority. We continue to have confidence in the strength of our business model and in achieving 25% non-GAAP operating margin and 35% operating cash flow margin at $10 billion in revenue. For Q3, we expect non-GAAP operating margin of 18%. GAAP margins for the third quarter and the full year are expected to be approximately 22 and 23 percentage points lower, respectively, than the non-GAAP margins. The FY 2023 non-GAAP tax rate remains at 19%. We're raising our FY 2023 guidance for operating cash flow to $1.64 billion. We now expect capital expenditures of $450 million this year to support our customer growth and continued business expansion. As a reminder, during the third quarter, we plan to pay off the principal balance of our $1.15 billion convertible debt in cash. When this occurs, our non-GAAP diluted share count will decrease by roughly 8 million shares. Due to the late Q3 timing, this share reduction will not be fully reflected in our non-GAAP weighted average share count until Q4. Finally, I'll close by thanking our amazing employees, customers, and partners for their continued support and hard work. We look forward to seeing you on September thirteenth, either in person or virtually for our Financial Analyst Day, part of the broader Workday Rising program being held in Orlando, Florida, where we'll share more insights on our strategic product initiatives and long-term market opportunities. With that, I'll turn it over to the operator to begin Q&A. Thank you. We will now conduct a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in a question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, please limit your questions to one. One moment while we poll for our first question. Our first question comes from Kash Rangan with Goldman Sachs. Please proceed. Hi. Thank you very much. What a delightful way to spend Thursday afternoon listening to your earnings conference call. Aneel and Chano and the rest of the team, couple things on my mind. One is previous quarter, you were one of the first companies to talk about deal slippage, et cetera. How did that end up for this July quarter? What were the certain customer behaviors you saw in the month of July? Also a question philosophically, as we open up and you have your first in-person user conference in a few years, what are the opportunities that are afforded to Workday as you enter calendar 2023 as a result of doing all the in-person activities that you couldn't do as we were all working through this pandemic? Be it growth rate acceleration, new product adoption strategy, whatnot. Just curious to get your thoughts. Thanks, and congratulations again. I'll answer the first part and then hand it over to Chano. You know, we did not see a slowdown in July, Kash. We did have a few deals slip from Q1 to Q2, but Doug Robinson and team closed those deals. We are very cognizant of macro environment heading into the second half of the year, and so we are taking a cautious stance on hiring. We didn't see any slowdown in July. It was about as strong a month as we could have hoped for. Rising is a great opportunity for us. We always do better when we're in person. It's just that simple. It's a chance to get reconnected with customers, make sure we're doing a good job for them. Equally importantly, you know, as the product portfolio has grown, it's a chance to showcase some of the newer products and have that customer base motion continue to thrive. So, Chano, anything you want to add? Thank you, Aneel. Thank you, Kash. As Aneel commented, we saw strength across the whole quarter from beginning to end, but we're clearly seeing more uncertainty and scrutiny on the pipeline going forward. Regarding Rising, we are very excited after three years, certainly, and it's about, you know, ensuring great relationship with the customer community, and that bodes very well with Workday. Clearly, as customer base becomes a larger part of our business, it's a more opportunity and a great opportunity for us to build some good pipeline. Fabulous. Thank you. Congrats. Our next question comes from Mark Murphy with JP Morgan. Please proceed. Thank you very much. It's impressive to see these two big Fortune 500 core Fins wins. Do you get the sense that the COVID logjam is somehow clearing up there, despite all the recession headlines? Or do you see many finance teams still kinda lacking the smooth sailing they might need to do a cloud migration? Perhaps you would have a little extra core Fins pipeline, you know, building up that might get released at some point if that's the case. Barbara, just curious if there's any sense for the magnitude of change on the hiring pace that you're contemplating for the rest of the year. I'll ask Pete to answer the first question on financials side. I'm sure there was definitely some pent-up demand, but Pete, wanna... Hey, Mark. Good to talk to you. You know, right now from what we're seeing, we're not seeing any difference in demand for our HCM and financials from what we've been seeing in the past. That's, you know, that's obviously good news as we saw here in Q2. What we will say is as we go into more uncertain economic environments, which are likely happening, then typically in those situations, buyers on the financial management side tend to delay those deals a little bit longer. That's just based upon our experience being in this market for a while. You know, that's what we're kind of expecting to have happen going forward. Hey, Mark, it's Barbara. On your question on the hires, I'm not providing a specific target other than to say we expect fewer hires compared to the first half and the second half. We'll continue to be flexible and disciplined based on the environment we see in the second half. Understood. Thank you very much. Thank you. Our next question comes from Kirk Materne with Evercore ISI. Please proceed. Yeah, thanks. Thanks very much, and I'll echo the congrats on the quarter. Actually, maybe this one, it sort of echoes Mark's question, but I was curious, you know, when you look at the pipeline build right now relative to what's going. You guys can't control what sort of happens at the end of the deal cycle necessarily, but I was just kind of curious if the macro is having any impact at the front end of the funnel. Are you still seeing the same number of deals come in? You know, when Doug's talking about sort of companies maybe taking a pause, is it sort of just at the end? I guess, is there anything you can do to make your products more modular in nature so that they can continue through the process without getting sort of stuck at one, you know, point within the sales funnel? Thanks. Chano? Thank you, Kirk. We felt good about the new pipeline build that we saw in the quarter across solutions and across geographies. Barring any meaningful changes in the macro, we feel good about the pipeline we have for the second half. Certainly, we are never satisfied, and we are focused on continuing to build pipeline, particularly with some of the faster sales motions, like our customer-based motion and our land-first motions, because we can certainly create new opportunities, and we can still close them within the fiscal. Thank you. Our next question comes from Brad Sills with Bank of America. Please proceed. Oh, great. Thank you. Wanted to ask a question about a comment you made earlier, Aneel, on a couple of the Fins wins being Planning First customers. Is there another set of Fins in the installed base of other modules around Fins that's brewing here that we could also see some upgrades that could come from? Just any commentary on that Planning First pipeline as kind of a leading indicator potentially for more Fins additions. Thank you. Well, we're now up over 6,000 Planning customers, and each one of those to me is an opportunity to sell our core financial products. That is probably the one land product in the world of finance that we could go in with first and have it be meaningful. It's played out that way and it plays out that way more and more, the more we get into financial planning and we continue to do workforce planning, but the more we do financial planning, it's a great way in. That's probably the one app that's our lead into core financials. Thanks, Aneel. Our next question comes from Michael Turrin with Wells Fargo. Please proceed. Hey there. Thanks and congrats on the results here from me as well. You started somewhat an investment cycle ahead of all the uncertainty. I'm just wondering if there's anything you'd point back to that you're finding is able to provide a bit of a favorable offset. It sounds like you're not seeing as much of the shift in buying behavior as others across software are pointing to. Maybe as a second part of the question, if you do see demand signals start to slow, you did have some comments suggesting second half growth could still moderate. How quickly are you able to toggle towards expense control and dial back as needed? Thank you. Well, I'd say on the first part of the question, you know, who knows how the future is gonna play out? But I think one thing that's different about Workday than some of the other cloud companies is that we're still very lightly penetrated in our installed base. When I look at how much revenue we drive, it's not as high as some of our peers in the cloud. And so that's always a good place to sell during tough economic times. Your customers are already committed to Workday, they're already happy, and they're. And so I would say it's less about toggling expenses, more about toggling to a different sales strategy. I think what we're also doing is we're dusting off the TCO analysis that we used to do many years ago during the 2008, 2009 collapse, where we had to prove out our TCO in order to even get invited to the game. This market has not been about TCO, it's been about digital transformation, but we do have a very compelling TCO story as well. Chano or Pete, Barbara, you want anything? You want to talk about expenses, Barbara? Yeah. I think on the expenses, as we said, we're moderating the pace of hiring in the second half, being cautious going in, into the second half. But we're going to continue to add resources. At the same time, we're gonna be flexible based on the environment we see in the second half. We feel confident if we need to toggle some of that hiring down in the second half, that we can do that. Thank you. Our next question comes from Keith Weiss with Morgan Stanley. Please proceed. Excellent. Thank you guys for taking the question and really great quarter you guys put up. I think you could probably see in all our questions, a lot of us are trying to figure out, like, how do you guys pull this off while a lot of other of your peers are struggling? You know, I think you're trying to get at it, and you're talking a little bit about being more lightly penetrated into the base. I was wondering if you could expand on that, because a lot of us think of you guys as having a really good presence and a big presence in HCM, particularly in the U.S., maybe a little bit less so in Europe. Fins is definitely on the come. What do you mean by lightly penetrated in the base? It's just that there's a lot more to upsell, and a lot more product to give to your customers. Why is that such an advantage at a time like this? Well, I would just echo what I said on the previous answer. A happy customer is always an easier sale than a net new customer that doesn't have experience working with you. In terms of penetration, I'll turn that over to Chano to talk about where we are. Chano and Doug really were the drivers of our back to the base motion, and it's still relatively new for us. It's only a few years old versus I think other companies have had it more land and expand where we don't really have that opportunity. We land and expand, and then we wanna add more modules. Chano? Yeah, that's correct, Keith. I would say first that our key growth drivers have played out well during the quarter, both customer base, international, the office of the CFO and medium enterprise. They all behave pretty well across geographies and across different solutions. In terms of the penetration, as you know, we've been focusing more on the customer base because we've been heavily net new during a very long time, and we've been doing investments there that are paying off. Clearly, we're also been innovating and adding a significant number of solutions. As Aneel is saying, when customers are happy and seeing value, and we're focusing on showing the return on investment on those solutions, they tend to buy more, and that is exactly what is happening across the segments. Clearly there, our penetration is lower when you compare to other peers that have been more heavily focused on customer base for a longer period. I would say both of the net new logos and customers we've never done business with and customer base behaved very strong this quarter. Having said all that, as we are saying, we're starting to see a bit more scrutiny, particularly on the larger deal cycles, where, you know, customers will go a little bit more through another cycle of approval or a better reassurance on the full implementation projects or whatever that most likely will lengthen or potentially some of the sales cycles on the larger transformational transactional deals around HR or financials. Got it. If I could just sneak in a last one for Barbara. You guys just talked about sort of more conservatism in the back half guidance, and I'm assuming the outperformance that you guys saw in Q2, particularly like that 24-month backlog, would have normally translated into sort of a raise of the guidance and you didn't raise the guidance. Can you give us some kind of sense of the magnitude of that conservatism in the back half now? Yeah. I'll just say coming off a quarter as strong as Q2, we would have liked to have been able to raise our outlook for the full year. While we outperformed and the business remains resilient, we also see evidence of increased scrutiny in certain sales cycles. Our outlook assumes a continuation of this in the second half. Got it. Thank you. That's very helpful. Our next question comes from Alex Zukin with Wolfe Research. Please proceed. Hey, guys. Since Keith asked both of the exact questions I was gonna ask, I'll try to basically do it, kinda go at it a different way. You know, it feels like, Aneel, what you're saying is that there's a lot of surface area that you have left to kinda go after inside of your client base. Based on the TCO analysis, I'm assuming there's also an opportunity for a lot of your customers to consolidate, particularly on the HCM side, from many point solutions to a platform. How is that message kinda resonating in your conversations? How long before that type of a playbook, you know, can be run at the financials level? I realize obviously you're going in with the full suite right away, but just walk us through those dynamics, if you could. Well, I'll just offer up a high level view that happy customers are the most important thing that we have, right? I mean, if you have a happy customer, they're just inclined to buy from you. What we've seen, especially in large enterprises, they typically don't tie the HR and financials decision together. They're separate decisions. A lot of these solutions like planning are also separate decisions. As long as we keep that base happy, when these customers look for new solutions, you know, we do have quite a bit of surface area, especially in the HR, especially in the HR base, where we've got over, I think 4,000 HR customers and 1,400 finance customers, so that you can just see where that gap is. also every time we come out with a new module that's either something we built or an acquisition, it's an opportunity to go back to that base. You know, one thing I'd add there, Aneel, just to give everybody some perspective on it, is we've got 22 SKUs in our HCM portfolio, and we've talked about the fact that 14 of them have been made generally available in the last four years. Just to give you some perspective on that. What you can read into that is you've got a large percentage of SKUs that are not penetrated into that base yet. It's what we've been working on for years, and we do, you know, as just to repeat again what Aneel and Chano said, which is focusing on making our customers happy, delivering the value that we've been talking about delivering to them, makes them want to buy more things from us. That's key part of that strategy. Perfect. Then maybe just as a follow-up, I wanna clarify because I wanna drill in on this. Aneel, it sounds like what you're saying is July has been really good, but then from what I think Chano and Barbara are saying is that there's more scrutiny on sales cycles, there's more conservatism in the guide. I guess, is that something you're actually seeing, or you are preparing to see and adding a, you know, kinda heightened level of conservatism in the assumptions that you're making around close rates, in pipe, you know, pipeline generation, et cetera? You know, I think Chano is best to answer that one. Yeah, Alex, I will reassure you July has been very strong. In terms of the sales cycles moving forward, particularly some of the larger ones around HCM and Fin, we're seeing some more scrutiny already on those sales cycles. As you can imagine, some of those cycles are long. Some, we definitely have different stages that they move from one to another through different gates and milestones, and it's kind of easy for us to check on the pace that those deals are moving. As you can see, the same things are clearly lengthening or potentially lengthening on the sales cycle. Got it. Perfect. Thank you, guys. Our next question comes from Scott Berg with Needham. Please proceed. Hi, everyone. Congrats on a good quarter. I'll change it up from the macro questions at the moment. Leave those for later. I had a question on the announcement during the quarter about your new FedRAMP status, in particular at the moderate security impact level. How should we think about that opportunity in Fed? I know you guys have had some general, you know, success in the government angle as a whole through throughout the domestic United States. But is that something that can be meaningful over time, or is it really just kind of a maybe smaller, you know, incremental opportunity? Thanks. It can be very meaningful over time, but it's gonna take some time for it to develop. Those sales cycles are longer than commercial sales cycles. They always have been. Now as we've gotten that FedRAMP certification, now the sales cycles begin, and they can be, you know, 12-month, 18-month, 24-month sales cycles. But it's a meaningful opportunity. There's a lot of ex PeopleSoft customers still running PeopleSoft there. It's one that we invested in because we see it as a big opportunity, but also gonna be patient in that it takes a while for the pipeline to develop. Pete, we want anything? I think you said it very well. We see it as an over $2 billion opportunity for the business, but and something that we've been investing in for a while. It will take us some time to see that pay off because of these longer sales cycles. We're, you know, I think also the government should be a great customer for us. Another customer that we can sell more things into than just core HCM over time. Our next question comes from Brent Bracelin with Piper Sandler. Please proceed. Good afternoon. Thanks for taking the question. Obviously, with increased scrutiny around larger deals, appreciate that. We're also seeing, you know, belt-tightening across the broader enterprise. My question here, with your focus around cross-sell, what's the narrative around cost savings, vendor consolidation to bundle HCM and Fins with some of your larger customers? You're starting to get some higher profile Fortune 500 wins there. Love to hear if there's an appetite to further consolidate vendors from a cost savings perspective, to bundle HCM and Fins, specifically with some large U.S. customers. Thanks. Well, that trend is definitely happening, and we saw it happen with a series of big financial wins in the second quarter. I wouldn't underestimate the strength of our medium enterprise business. I don't see the same belt-tightening in the medium enterprise business, and they tend to buy the whole platform. You know, that's it's a pretty healthy market for us. It's kind of our run rate business, and they tend to wanna have the fewer vendors as possible because they don't wanna spend all the money on best of breed and integration. Chano, anything you wanna add? Very well said, Aneel. I would just say that some of the larger customers, they do retire double-digit number of legacy systems. What we're trying to do right now, as Aneel was mentioning before, is ensuring that they understand very well the total cost of ownership and the benefits that our solution will provide and the return on investments. Of course, we're getting in contact with other customers that have already implemented and really seen those become tangible. That's the playbook we are putting in play. We've gone before some of these downturn cycles. Some of us are unfortunately old, but you know, there's an advantage of that at times and the whole management team and we've seen that working before, as Aneel mentioned. We're playing that playbook. Appreciate the color. Thank you. Our next question comes from Brad Zelnick with Deutsche Bank. Please proceed. Great. Thank you so much for taking my question, and congrats on a great set of results. I wanna follow up on Keith and Alex's line of questioning about happy customers, but also maybe from a little bit of a different angle. As you presumably still have the large renewal cohort flowing through the model that we talked about last year, is the current environment in any way impeding the magnitude of expansion that you would otherwise expect upon renewal? And is that factoring into what appears to be a conservative backlog guide for Q3? Understandably so, just given the environment. Thanks. Barbara? For the backlog guide, in Q3, our guidance takes into account the best view of the business that we see today. That's reflected in our 24-month backlog guide for Q3. Keep in mind the timing of renewals can fluctuate from quarter to quarter and have an impact on that backlog growth. If you recall at the beginning of the year, we did discuss our expectation for the renewal base to return to a more normalized rate of growth for the full year, which continues to be our view. Great. Any color though on just the expansion rate that you're seeing upon renewal? Aneel? It remains very strong, Brad. I think it is a testament to the mission critical of our applications and the customer satisfaction, and the renewal ratios remains very, very good and very healthy across the board. Excellent. Fantastic to hear. Thank you. Our next question comes from Ari Terjanian with Cleveland Research. Please proceed. Good afternoon, and thanks for taking the question. Congrats on the results. Just want to follow up on some of the Fortune 500 wins in the quarter. You know, what do you think, you know, finally drove those to go over the goal line? You know, more broadly, you know, what's a timeline you're thinking about for go lives for those? The reason I'm asking, just wondering when, you know, if and when you think there could be more of a halo effect from some of these higher profile wins. Thanks. I'm gonna assume you mean on the finance side, because on the HR side we've always had a stream of Fortune 500 wins. I think at this point we're well over 50% of the Fortune 500 running us for HCM. On the finance side, I think it's a combination of the systems aging. It's a combination of our product becoming more mature. New products like Accounting Center that are really strategic to customers and Prism Analytics. Now we've got the full suite. You know, people have to modernize. They really don't have a choice. I don't. I mean, I think this is just, it's just a healthy run rate business as opposed to this moment in time where it's gonna go through the roof or I don't. It's not that kind of business. The more data points we have of customers choosing us than going live, obviously, the better we are. Comerica went live this past quarter. That's a fantastic reference for us. You know, a big regional bank going live is a great data point for us. Most of these projects are 12 months-18 months. It all depends on the scope of what they're trying to do. It's a pretty reasonable timeframe to get these projects live. If it's a smaller scale implementation, just core accounting, it can be done in less than a year. If it's a series of modules, I think 12 months to 15 months to 18 months is pretty reasonable. Thanks. We have time for one more question, and our final question will come from D.J. Hynes with Canaccord. Please proceed. Hey, guys. Congrats on the quarter. Chano, when you talk about scrutiny on deals, we've heard that from a lot of companies now. For Workday, what exactly does that mean? I mean, is it haggling on price? Is it more reference checks? Is it about implementation timelines and processes? Like, what's involved there? Any color would be interesting to me. Yeah. Thank you for the question, D.J. It can vary, but you can think about it sometimes it's just, you know, more scrutiny around the implementation timeframe and the readiness they have on their side or on the partner side or on our side in terms of resources. It also means many times prioritizations on projects and which usually that happens, we typically come on top because we are mission-critical and because again on the ROI and the TCO, but you're competing against other projects. It also means, you know, an additional level of approval or two additional levels of approval, so going up to the board depending on the level of approval. Those are some of the things that it typically means around business case, around management approvals, around, you know, prioritization of projects and around reassurance in terms of success and implementations and availability of resources and cost of opportunities and impact on potentially other investments or opportunities they are managing or considering. Yeah. Yeah. Okay. Makes sense. Thanks for the color. Thank you. Thank you for the question, D.J. I will turn the call back over to management for closing comments. Yeah, everybody have a good night. Ladies and gentlemen, thank you for your participation on today's conference. This will conclude Workday's second quarter fiscal year 2023 earnings call. Thank you again for joining us today and have a great day.