Welcome to Workday's Fourth Quarter and Fiscal Year 2023 Earnings Call. At this time, all participants are on a 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. Thank you, operator. Welcome to Workday's Fourth Quarter Fiscal 2023 Earnings Conference Call. On the call, we have Aneel Bhusri and Carl Eschenbach, our co-CEOs, Barbara Larson, our CFO, and Doug Robinson, our Co-President. 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 wanna 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 that could cause actual results to differ materially. Please refer to the press release and the risk factors in documents we file with the Securities and Exchange Commission, including our fiscal 2023 annual report on Form 10-K, for additional information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. 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. The customers page of our website includes a list of selected customers and is updated monthly. Our first quarter fiscal 2024 quiet period begins on April 15th 2023. 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 Fiscal 2023 Fourth Quarter and Full Year Financial Results Earnings Call. I'm pleased to share that we delivered solid Q4 results and once again outperformed against our key operating metrics, which included subscription revenue growth of 22% for the quarter and for full year fiscal year 2023. While the macro environment continues to be unpredictable, Workday's value proposition is only getting stronger as more organizations turn to us to help them adapt and manage their two most important resources, their people and their finances. As a result, our thriving customer community continues to grow and fuel our path to $10 billion in revenue and beyond. In fact, we achieved a significant milestone in Q4 as we surpassed the 10,000 customer mark with more than 4,750 of those being our core HCM and finance customers. A true testament to the power of the Workday platform and our ability to address the needs for the offices of the CHRO and CFO. Additionally, approximately 629 billion transactions were processed with Workday in fiscal year 2023, an increase of 42% year-over-year. Further proof of the scale that we had reached. Before we share some Q4 highlights, I wanna touch on several recent leadership moves and one organizational announcement that we made, all of which will help set us up for our next phase of growth. The first is the appointment of Carl Eschenbach as co-CEO, which we announced in December. Carl has been a Workday board member since 2018, and for the past 35 years has been one of the finest sales and operational leaders in enterprise technology. With his experience and commitment to our values and culture, Carl is a perfect fit to help Workday scale and lead us forward. At the end of our fiscal year 2024, Carl is expected to assume sole CEO responsibilities while I will stay involved with our product and technology teams and all of our employees as a full-time executive chair and chair of the Board. Carl's transition into the co-CEO role has been seamless, I'm excited to work alongside him going forward as we continue to grow Workday and strengthen our position as a leader in cloud HR while building on our momentum in finance. I also want to acknowledge the great work Chano Fernandez did during his nine years with Workday, and for the last two years as co-CEO. He played a significant role in helping to shape the company into who we are today, and I want to thank him for his contributions. Additionally, Sayan Chakraborty, our EVP of Product and Technology, has been elevated to co-president alongside Doug Robinson. Since joining Workday more than seven years ago, Sayan has been a driving force behind our evolving and expanding innovation strategy, led our efforts to scale the Workday platform to support and enable some of the world's largest organizations, and is one of the foremost experts in artificial intelligence and machine learning as it relates to the world of enterprise offerings. Sayan will continue to lead our Product and Technology organization, and we are pleased to recognize his leadership role across the organization now as Co-President. With Sayan stepping into a Co-President role, Robynne Sisco, who was previously Co-President, and before that CFO, will now assume the role of Vice Chair. In this role, Robin will work closely with our global sales team to help us build on our momentum with the office of the CFO and further cement Workday as a leader in cloud finance. The last leadership update is related to our board of directors. I'm pleased to share that we announced today that Mark Hawkins has been elected as the newest member of our board. With more than 35 years of finance leadership experience at global software and technology companies, most recently at Salesforce, Mark will bring invaluable experience and perspective to Workday. The final announcement I want to highlight, which we made at the end of January, was a restructuring and realignment of some teams across Workday that led to the elimination of roles impacting about 3% of our global workforce. While it's always difficult to see employees leave under those circumstances, we made this decision to align our resources and people against the most strategic areas of the business to help ensure that Workday is set up for continued growth for many years to come. Throughout this process, we did our absolute best to treat the affected employees with compassion and offer them generous severance packages. This restructuring move was not a cost-cutting effort, and we will continue to hire in fiscal year 2024 for roles that support our strategic initiatives. With that, I'd like to share some product and technology highlights from the quarter. From an innovation perspective, our continued focus on uniquely embedding AI and ML into the core of our platform is enabling us to drive the future of work for our HR and finance customers and their more than 60 million employees around the world. On the HR front, the combination of our Workday Skills Cloud, which is powered by AI and ML, and Workday Talent Optimization is supporting customers in their transition to a skills-first mindset. To date, nearly 50% of all live Workday HCM customers are leveraging Workday Skills Cloud, while Talent Optimization is Workday's fastest-growing SKU with an attach rate on new deals of more than 85% in fiscal year 2023. For planning, we introduced new demand forecasting capabilities that leverage AI and ML to help retailers forecast business demand based on external data such as sales and foot traffic history. Retail continues to be one of our target industries as more than 50% of the retail organizations in the Fortune 500 are Workday customers. Innovations like this will enable us to build on our momentum in this space. We're also continuing to double down on AI and ML through our Workday Ventures fund. We announced a $250 million expansion of the fund to focus on larger growth areas such as generative AI, all with an eye to embracing emerging technologies that help us further enable our customers in today's changing world of work. Finally, I wanna touch on how we're continuing to invest in our brand. Hopefully, you all saw our fun rockstar-themed advertisement during the Super Bowl, which reached an estimated 110 million viewers. While finance and HR leaders are familiar with us, we saw the Super Bowl as the stage to help us become more well-known to a broader audience. We firmly believe that our brand is strategic and investments in marketing drive awareness and demand for our products and services. Going forward, we feel very confident in our ability to capitalize on the long-term growth opportunity in front of us, thanks to the strategy we have in place, the mission-critical nature of our solutions, and the amazing talents of our more than 17,700 Workmates around the globe. In fact, we are hosting today's call from our annual sales kickoff meeting, and the excitement from all of our go-to-market teams here in Las Vegas about the incredible opportunity we have in front of us is palpable. With that, I'll hand it over to our Co-CEO, my buddy, Carl Eschenbach. Carl, over to you. Thank you, Aneel, for those kind words, and thank you to everyone for joining us today. Let me start by saying that I am humbled and honored by the opportunity to partner and work alongside Aneel and our Workmates across this amazing company. I am truly energized by Workday's unique opportunity to be one of the largest and most profitable software companies in the world. This was my first quarterly close as co-CEO, and I could not be more proud of our teams for their incredible execution. Despite a macro environment that remains uncertain and that no one is immune from, we drove strong close rates in Q4 and built a healthy pipeline for the year ahead. Our team was prepared to respond to the extra scrutiny we knew would come with deals in this environment, and because of that, we are heading into our new fiscal year in a position of strength. I can tell you the excitement for the year is all around us as we are coming to you live from our annual sales kickoff conference in Las Vegas. As a board member for the last five years, I have been actively involved in Workday's growth journey. Today, more than two months in as co-CEO, I have had the privilege of spending time with hundreds of Workmates, customers, partners, and prospects around the world. Those meetings have given me an even greater appreciation of how compelling Workday's value proposition is and how differentiated we really are. I have also gotten to know Aneel and the leadership team even better. While I already considered Aneel a partner and a friend, our co-CEO relationship is working really well as we have very complementary skill sets. It's a true one plus one equals three equation. As I reflect upon my first couple of months, a few things in particular have stood out, starting with the culture and values of Workday. This, frankly, was the most important driver for me taking this role. I have long admired the culture that Dave and Aneel built and see it as a true differentiator. We have six core values at Workday, and each of them are important. To me, the one that I keep coming back to is integrity. If you do the right thing, everything else falls into place. I have been blown away by the talent that sits across this company and by how ingrained our values are in everything we do. Another observation is around our land opportunity with net new customers. I will tell you it's wide open. We have a footprint with over 50% of the Fortune 500 and more than 25% of the Global 2000, but we still see plenty of room to grow. Q4 was a great validation of this, with seven new Fortune 500 and 11 new Global 2000 customers. New HCM customers we added in the quarter included Allstate, Camping World, Cracker Barrel, Delaware North Companies, Mercedes-Benz Group, and Whataburger. Key go live included Heidelberg Materials and Mitsui Chemicals. In addition, we once again added several full platform HCM and financial customers, including Fidelity National Title, Panda Restaurant Group, and the State of Georgia. We had several FINS go live, including The New York Times and Sanford Health. One of the exciting things about our land opportunity is that it's not limited to replacing outdated on-premises systems. In fact, three of our new Fortune 500 wins replace cloud solutions from our legacy ERP competitors. The land opportunity extends well beyond the upmarket as the medium enterprise has become an increasingly important driver of net new ACV. That team drove record performance in the quarter. What's also important is the strength of our customer relationships and the strategic nature of what we do for them. This provides us with an incredible opportunity to expand our business with our installed base of customers who rely on Workday as their intelligent digital backbone to adapt and manage their people and money. This quarter, we once again drove very strong renewals along with solid new ACV bookings, including expansions at Belk, GE, Old Dominion Freight, Prudential, and Truist. We saw momentum across our solutions portfolio, including Learning, Planning, Prism Analytics, Accounting Center, and Candidate Engagement. An increasing number of our expansion deals added core financials as we lean into our market leadership in HCM to drive increasing momentum with the office of the CFO. Our opportunity is truly global. The U.S., which continues to be our largest market, had a solid Q4 and has a healthy runway going forward. We also have a tremendous international opportunity, which is only about a quarter of our revenue, but more than half of our TAM. Our momentum is building in strategic markets like DACH and Nordics, where we had a number of important wins during Q4, including CCB Management Services, Mila, and NorgesGruppen. Accelerating our international business is a strategic priority, and we are investing in both talent and products to help drive that. Our continued industry focus is gaining momentum, and it is a core part of our ongoing strategy. We had wins in a number of key verticals in Q4, including state and local government, where in addition to the win at the State of Georgia, we had wins at the City of Austin, the City of Charlotte, and New York City Housing Authority, to name a few. In fact, new ACV from our state and local teams more than doubled year-over-year in Q4, and we expect our traction to continue in FY 2024. Finally, our partner ecosystem will be critical to our next phase of growth. Our partners, from the global system integrators to the boutiques, have been incredibly important to get us to where we are today. They drive the vast majority of our customer deployments and serve as an important source of co-innovation. One of the ways they do this is through Workday Extend, which now has over 1,000 applications in production across our customer community. We expect our partners will play an even more important role in FY 2024 as we look for them to drive an increased number of new opportunities while we strategically shift more customer deployments to our ecosystem. We see this as a clear win-win. We are also focusing our efforts across our broader ecosystem of ISVs and technology partners. A great example is our recent partnership with AWS, which extends our infrastructure relationship to a more formal go-to-market motion. I am excited to work alongside our Chief Customer Officer, Sheri Rhodes, and our newly appointed SVP of Global Partners, Matt Brandt, and our entire ecosystem on this journey. Heading into FY 2024, we have a clear strategy in place, which is rooted in strengthening our HCM market leadership and winning in FINS across our key industries. We are optimizing the business to double down in strategic growth areas, such as investing in our customer base, focusing on key industries, evolving and investing in our partner ecosystem and relentlessly focusing on innovation, including shaping the future of work through our application of AI and machine learning. Having the right strategy is only part of the equation. You also need the right people, which is why we plan to continue to add sales capacity and key engineering talent as we position Workday for the next wave of growth. We also made some recent changes to strengthen our leadership bench that will be critical to helping us execute on our strategy. Doug Robinson will continue in his role as Co-President and now has full responsibility for all go-to-market functions. As Aneel mentioned, Sayan Chakraborty has also been elevated to Co-President, and I'm also excited to have Robynne Sisco serve as our Vice Chair, now squarely focused on helping us sell FINS. Patrick Blair, who joined a year ago to run North America sales, has been elevated to Head of Global Sales. His team across the regions is a talented mix of seasoned Workday veterans and proven, recently added external talent who will rally around our global opportunity. It's an amazing time to be at Workday, and I'm so inspired and energized by the incredible journey ahead. While we continue to see certain sales cycles, primarily net new opportunities, taking longer than normal to close, our FY 2024 subscription revenue guidance prudently factors this in. We are positioning the business to return to 20%+ subscription revenue growth when the environment improves, while simultaneously delivering margin expansion. I look forward to meeting many of you on the road in the quarter ahead, and thank you for your support. With that, I'll turn it over to Barbara. Barbara, over to you. Thanks, Carl, and welcome. I know I speak for the broader Workday organization when I say that I'm incredibly excited to partner with you on the next phase of our growth journey. As Aneel and Carl mentioned, we had a solid close to the year, driven by strong execution across the company, combined with durable demand for our solutions as organizations of all sizes prioritize finance and HR modernization during these uncertain times. Subscription revenue in Q4 was $1.50 billion, up 22% year-over-year. For the full year, subscription revenue was $5.57 billion, also growth of 22%. Professional services revenue was $151 million for Q4 and $649 million for the full year. Total revenue outside of the U.S. was $396 million in Q4, representing 24% of total revenue. 24-month subscription revenue backlog at the end of the fourth quarter was $9.68 billion, up 21%. The result was driven by solid new ACV bookings and strong renewals, with growth and net revenue retention rates over 95% and over 100% respectively. In addition, early renewals added roughly 1 percentage point of upside to 24-month backlog growth and roughly 2 percentage points to total backlog growth. Total subscription revenue backlog at the end of Q4 was $16.45 billion, up 28%. Our non-GAAP operating income for the fourth quarter was $305 million, resulting in non-GAAP operating margin of 18.5%. Margin overachievement was driven by revenue upside and continued cost discipline. The workforce realignment we announced at the end of January was a $34 million non-GAAP expense in the quarter or a roughly 2 percentage point headwind to Q4 non-GAAP operating margin, most of which was factored into our guidance. For the year, non-GAAP operating income was $1.21 billion, representing a margin of 19.5%. Q4 operating cash flow was $694 million, growth of 13%. As a reminder, the Q4 result was impacted by a roughly $70 million one-time IP transfer tax payment. Full year operating cash flow was $1.66 billion. During the quarter, we repurchased roughly $75 million in shares and have $425 million in remaining authorization under our buyback program. We ended the fourth quarter with more than 17,700 global Workmates. As Aneel and Carl mentioned, we will continue to add key talent across strategic growth areas of the business, notably go-to-market and product and technology. We are planning for fewer headcount additions in FY 2024 as compared to FY 2023. Overall, we're very proud of the strong company-wide execution in Q4, and we enter FY 2024 in a position of strength. Turning to guidance, which reflects both the continued momentum in our business while also balancing what remains an uncertain macro environment. In addition, we recently completed an assessment of our server and network equipment. Beginning in FY 2024, we are increasing the useful life assumption from three years to five years, reflecting advances in technology that we're benefiting from. This change will have a positive impact on our FY 2024 non-GAAP operating margin, which I will cover shortly. Following a solid Q4, we are maintaining the midpoint of our preliminary FY 2024 subscription revenue guidance and narrowing the range to $6.525 billion-$6.575 billion, representing 17%-18% year-over-year growth. We view this guidance as prudent in the context of the environment. As Carl mentioned, we're positioning to return to a 20%+ subscription revenue growth when the environment improves. We expect Q1 FY 2024 subscription revenue to be $1.517 billion-$1.520 billion, representing 19% year-over-year growth. We expect subscription revenue to increase sequentially by approximately 6% in Q2 and approximately 4% in Q3. We expect FY 2024 professional services revenue to be in the range of $630 million-$650 million. As Carl mentioned, we are strategically shifting more deployments to our partner ecosystem as part of ongoing investments we are making in the channel. For Q1, we expect professional services revenue of $148 million. We expect 24-month backlog to grow approximately 20% year-over-year in Q1. We currently expect FY 2024 non-GAAP operating margin of 23%. The expected margin expansion is primarily being driven by the scalability of our model, a strong moderation of hiring, and ongoing expense discipline. In addition, we estimate the change in server and network equipment useful life will result in a roughly $100 million reduction to the GAAP and non-GAAP cost of subscription revenue in FY 2024, creating a benefit to operating margin of about 150 basis points this year. Looking forward, the impact from this policy change is expected to trend down and result in an approximately $50 million reduction to GAAP and non-GAAP cost of subscription revenue in FY 2025. We estimate Q1 non-GAAP operating margin of approximately 21.5% and expect a normal seasonal sequential decline in Q2 as we invest in our people through our annual compensation process. GAAP operating margins for the first quarter and the full year are expected to be approximately 26 and 22 percentage points lower, respectively, than the non-GAAP margins. The FY 2024 non-GAAP tax rate remains at 19%. We expect FY 2024 operating cash flow of approximately $2.05 billion, growth of 24%. On a year-over-year basis, our first quarter cash flow will be impacted by the first full year payout of our performance-based cash bonus plan, severance costs associated with the recent realignment, and an interest payment that did not occur last Q1 due to the timing of our debt offering. We expect capital expenditures of approximately $340 million in FY 2024 to support our continued business expansion. Finally, I'll close by thanking our amazing employees, customers, and partners for their continued support and hard work. With that, I'll turn it over to the operator to begin Q&A. At this time, we will be conducting 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 the 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. One moment, please, while we poll for questions. Our first question comes from the line of Kirk Materne with Evercore ISI. Please proceed with your question. Thanks. Thanks very much, and, congrats on a strong finish to the year. You know, Carl, since you have, you know, a relatively fresh pair of eyes looking at the business, you know, I was wondering if you could just talk a little bit about what you're seeing in the close in 4 Q and in the pipeline that leads you to believe that getting back to 20% growth is achievable once we get into a more, sort of normalized operating environment. Just some specifics around that or what you're seeing would maybe be helpful on that front. I have a quick follow-up for Barbara. Well, first of all, thank you, Kirk, for the question. Let me start by just saying I wanna thank all of our Workmates around the world for delivering a strong close to the year and setting us up for a strong FY 2024. As you know, Kirk, announcing a CEO transition in the middle of a Q4, your biggest quarter, is probably not always optimal, and we talked about our priorities at that time was to finish the year strong, and we did just that. As far as, you know, what we're seeing in the environment to think about getting back to a 20% growth, we see plenty of opportunity to continue to invest in the business, both on the go-to-market side with additional sales capacity in quota-carrying reps, as well as continuing to invest in product and technology. A couple key insights early on, you know, now, I guess, over 60 days into the role, is we see continued opportunity in our international business, both in EMEA and in APJ. Today, we have only 25% of our business coming from our international operation, yet it represents greater than 50% of our TAM. We see a really big opportunity there. What we did is we brought in strong leadership, both in EMEA and APJ, and Doug and Patrick have actually brought in additional strength even under our top leaders in those respective markets. We also think we're gonna double down even further on our FINS opportunity, both to sell back into our customer base as well into net new. We see this as a rich opportunity. We did a nice job in Q4 selling back into our HCM base with our FINS solution. We think that's something we can do a lot more of. The last thing, although there's plenty more, Kirk, I'd highlight, is we're gonna continue to leverage our ecosystem. Our partners around the world are doing a great job implementing our technology and driving deployments, but we're also gonna work with them to build business plans just so they can help us drive net new business, not just do implementations, but help us drive new business into the base as well as net new customers overall. Last thing on the ecosystem, we were excited to be able to announce today a partnership, with AWS that allows us, for the first time, to sell our technology platform through their marketplace, allowing their customers to leverage the spend they have with AWS on Workday solutions. That's an aggregate of, you know, why we think over time, depending on when the macro turns more favorable, we'll be able to get back to 20% growth on the subscription side. That's super. Just real quick one for Barbara. Barbara, just in terms of margins, thanks for the commentary on 1Q and 2Q. Just so we're thinking about it correctly, I assume because rising's in 3Q, you know, we should see the rest of sort of the margin expansion in 4Q, maybe more seasonally flat or sequentially flat between 2Q and 3Q? Yeah, that sounds about right. Okay, that's great. Thanks, all. I appreciate it. Thank you, sir. Our next question comes from the line of Kash Rangan with Goldman Sachs. Please proceed with your question. Thank you so much. Congratulations, Aneel, Carl, and Barbara. Carl, the question is targeted for you since I get only one or maybe one and a half. One is, as you speak with customers, what are the key themes that are emerging from your conversations with respect to how they are prioritizing investments in software, and in particular Workday, given inflation worries, rate worries, et cetera? Also everybody is conscious of the risk of a recession. I think our models are all increasingly building that. Since you've been through multiple cycles before in your very long career, as Aneel mentioned, what are the signs you're looking for in terms of a recovery? Although it might be a little foolhardy to entertain the hopes of a recovery, what are the things that you could be looking at that could increase your conviction that we go from high- teens to 20%+ when the environment gets better? Thank you so much. Yeah, thanks. I'll start off, and then I'll turn it over to our Co-President, Doug, who's joining us on the call here today. First, Kash, I'd say companies continue to prioritize both HCM and their financials in driving a digital transformation. Everyone is looking to get more value out of both their people and their financial systems, and I think we're at the core of that. While it is true, customers are reprioritizing where they're gonna make their investments, I think we move to the top of that list because we do drive true digital transformation, which is a term we've all talked about for probably the last five or 10 years, but it's in the midst of happening right now. We're seeing early signs of us being a beneficiary of that transformation, including the seven Fortune 500 wins we had, you know, last quarter. We had 11 global wins in the Global 2000. And by the way, a number of those weren't just, you know, replacing legacy on-premises solutions. Three of the Fortune 500 wins came with us replacing our legacy competitors' cloud solutions. That's another really good sign. Then two other things is, while it's true people are moving to the cloud and they're doing it faster than ever, we have the opportunity to be at the forefront of that. When people move to the cloud, whether it's HCM or FINS, Kash, we are gonna get a look. When we look at our win rates just last quarter, they're improving, and we're not seeing any additional discount to actually win those opportunities. We think we're well positioned for the digital transformation that's happening. You know, it's interesting because with scarcity, all of a sudden customers get clarity. It's clear that we're in the middle of the opportunity here, unlike we've seen before, to help them drive their digital transformation to focus on both their people and their financial systems. Doug? Yeah. Why don't you tag in? Yeah. Hi, Kash. Doug here. Thanks for the question. There's a couple things I'd highlight for you. The first, the question went to what are you hearing from customers and executives? The first is tight labor markets continue, you see CEOs increasingly turn back to how do I reskill, retain, and get the company positioned for the jobs of tomorrow? It shows up, it's showing up, I think, in those seven Fortune 500 wins, some familiar themes there, those 11 Global 2000. Really on the really driving the FINS side of it, there's talk at the CEO level about reinventing entire business model. Of course, Workday doesn't reinvent business models, we give you an agile enabling technology for you to be able to make those changes to your business over time. The last thing I'd say as it relates to your question about, you know, what signs do we look for when we're starting to come out of it? To me, it's sales cycle duration on the net new, and we track that, as you might guess, by industry, by size of company, by geography. When we see that start to come down, I think we'll be in a position to go up and over 20%. What we're seeing right now is solid pipeline build. We're pleased with the pipeline build, but we're still dealing with some of those elongated cycles in the net new space. Yeah. One other thing to Doug, to add there, Doug, is, you know, we see customers, during times of tailwind, typically wanna buy best-of-breed solutions. When there's headwinds, they buy best of suite. Today, we have the best platform for both FINS and core HCM. We see more and more customers, to your point, Doug, consolidating on our platform, than we've ever seen before as they look to drive efficiencies in their own infrastructure. Thank you, Carl and Doug. Congratulations. Our next question comes from Mark Murphy with JPMorgan. Please proceed with your question. Thank you very much. Carl, Workday's revenue growth really is not slowing very much. If we just look around and compare it to the rest of the software industry, there's so many companies suffering through this period where their growth has slowed by 10 or 15 or 20 points or more. Is Workday's resilience more driven by the ability to help companies navigate through this complex type of a labor market? Or do you think it's more of a function of the diversification across verticals where I think you have a little less reliance on the tech industry? Or is there some other factor that's kinda coming to the forefront for you? I have a quick follow-up. Yeah, sure. Thanks for the question, Mark. I'll start, and then I'll hand it over to Aneel to make some additional comments. First, I think the diversity of our business is what allows us to be so differentiated from the rest of the companies out there in our, in our peer group. What I mean by that is we have a large install base that we get to sell back into with high renewal rates. We're landing net new customers. We're selling across all industries and all verticals. The diversity of our business is radically different than most people out there. Also I think, you know, the other thing is our business is quite predictable. When you have a renewal rate like we have, on a quarterly basis, we can really, you know, dial in what we think we're gonna deliver to all of you in the street and hit that with consistency. We are diverse in our business. We have durability in our business model with good operating margin and good solid growth and good cash flows. I just think, you know, as compared to the rest of the industry, we can weather any potential headwinds we're seeing going forward, which is reflected in our FY 2024 guidance. Aneel, maybe you'd like to add some color around this question as well. Yeah. I think the other part is our applications are they're just proven out to be mission-critical. you know, some of the apps that did well during the last few years when you have a downturn, they're not viewed as mission-critical. A lot of companies are doubling down on becoming more efficient during a downturn, I think we're a beneficiary of that. It supports our business, it's all based on those very sticky systems of record. Excellent. Just a quick follow-up for Barbara. Is the trend of seeing some of those very sizable planning deals in the pipeline, which I think you might have mentioned a quarter or two ago, seeming to continue here as you look forward into FY 2024? Do you wanna take that one in terms of- Yeah. I'll take it. planning in the pipeline? Yeah. Planning We had a really strong planning performance in Q4, and we do see more of it coming. In fact, there's two of the areas and changes we're making for this fiscal year is increasing sales capacity in two ways. 1. With dedicated sellers to help convert the planning customers or those planning first customers into core financials, Accounting Center, Prism Analytics, some of the other solutions that are a nice follow-on to the office of the CFO. 2. Is dedicated land sellers for the planning business, for Adaptive. We're increasing sales capacity there. That's not just a U.S. phenomenon, that we actually see that opportunity internationally as well, as Carl highlighted earlier. Thank you very much. Our next question comes from D.J. Hynes with Canaccord. Please proceed with your question. Hey. Thanks very much for taking the question. Curious if you're seeing any additional signs of large projects being put on hold. I think last quarter we talked about some services revenue disruption. Understand kind of the ecosystem handoff is influencing the numbers a bit in the guide, curious if that was kind of a one-off event or something that's starting to show up a little bit more broadly with implementation cycles. Doug, why don't you take that one? Yeah. Not seeing if I understood your question correctly, wholesale stoppages of projects. It's more about round trips of approvals. I do think companies are looking for CEOs are looking for productivity gains and operating margin leverage. Every investment is getting extra scrutiny. I think one of the things I'm really, frankly, quite proud of in this quarter and in this year is that I think our sales team did a great job of anticipating that and really building solid business cases in conjunction with our customers to get those projects over the line. No, no question, these cycles happen, take a longer bit of time to close on the pure net new large transformational projects. Got it. The only thing I'd like to add is just thank Doug and Patrick and our teams around the world. We knew these deals would get extra scrutiny, and we were prepared for it. The level of deal inspection we had throughout Q4 was taken up a couple notches. We saw the, you know, the outcome of that in, if you will, the close rates in Q4, and we anticipate that going forward. Got it. Got it. Doug, maybe a more strategic question for you. Just as you talk with customers about evolving to become kind of a skills-based organization, right? Adopting ML and AI strategies. Like how much change management has to accompany the technology adoption, right? And I guess I'm curious, like how deeply bought into this playbook are your partners? Is this something they're leading to or leading with in their, you know, go-to-market conversations? I think that's a great question, and the answer is a lot. There is work to be done more around strategy up front to really take advantage of the Workday Skills Cloud in and of itself as an enabling technology. So, you know, you've heard us talk about how important partners are to our growth this year and beyond. We are partnering with some of the large global GSIs that you know all too well, who are really bringing that skill set, their IP around that change management and how to look at skills and through the lens of skills and anticipating skills needed five years from now or 10 years from now, as opposed to just job profile-based analysis of where to build out your teams. Yeah, it goes hand in hand, and both are needed to give a complete solution to the customer. Anything you guys wanna add? No. Aneel? I'd say it's a one to two year process. It's not a simple journey, but coming out the other end, it just enables you to do business the way everybody is looking forward to doing business in a skills-based world. You know, I'd point to one of our biggest HCM customers is one of our biggest partners, Accenture. They have done this for their own organization, so they're going around and using that learning to help our customers do it as well. It's a big investment, and I think the payoff is huge. Yeah. Makes sense. Thank you guys for the color. Our next question comes from Michael Turrin with Wells Fargo. Please proceed with your question. Hey. Great, thanks. Appreciate you taking the question, and nice job in closing out the year. Barbara, given the change in accounting, you mentioned the useful life policy brings the operating margin expectation up to 23% for the coming year. Does that impact how you're thinking about the longer term 25% margin targets at $10 billion in scale, as we kind of trend line towards those? Or anything you can add around just views and opportunities near- term for margin leverage versus longer- term is helpful. Thank you. Yeah. Thanks so much for your question. There's no change to that 25% operating margin target at $10 billion. We haven't updated our medium-term framework for that at this time. You know, when we provided that outlook, we weren't factoring in this change in useful life assumptions. While it has a near-term positive impact on our margins, the impact will reduce over time. The focus remains on driving profitable long-term growth, and that's exactly what we described at our Analyst Day. We definitely see opportunity to drive non-GAAP operating margin beyond 25% over the longer- term. If that's all the questions for Michael, our next question comes from the line of Keith Weiss with Morgan Stanley. Please proceed with your question. Excellent. Thank you guys for taking the question. A couple of kind of cleanup questions for Barbara. You mentioned 1 percentage point benefit to the 24-month backlog from early renewals. Can you talk to us, is that unusual? Because one of your peers talked about missing their guidance because they didn't get the early renewal. So like, to what extent were those early renewals already kind of in your expectations, or to what extent were they unusual? Two, on the other side of that, how should we think about sort of the tightening in the range on the guidance from the 17-19 to the 17-18, after the outperformance that you saw in Q4? Is it adding more conservatism to the forecast, or was there some push and pulls of like those early renewals that we should be thinking about? Like, is it a more conservative guide or are there other factors that we should be considering? Let me go ahead and take that first question on early renewals. We had healthy customer- base activity in Q4 as customers added new SKUs to their Workday footprint. As part of that, many of the customers renewed early. We do see renewals move around from time to time, but just with the strength of customer- base, we saw a larger impact this quarter and wanted to make sure we called that out. On your second question around, you know, what's going into our guidance for subscription revenue next year. Really, after a solid Q4, we have more visibility into our FY 2024 subscription revenue, allowing us to maintain the midpoint of $6.55 billion and narrow that $100 million range down to $50 million that we shared last quarter. Still very early in the year, and the guidance prudently accounts for the fact that the environment remains uncertain and consistent with what we've described over the last couple of quarters. Got it. That, that makes a ton of sense. Maybe one big picture question for Carl. A question I've been getting a lot from investors is, what changes should we expect from Carl? Or what big impacts can Carl have on Workday and the company on a go-forward basis? I have my answers obviously, but I'd love to hear from the horse's mouth. I'd love to hear from you. When you look at this opportunity to take on the co-CEO role, what are the big changes or sort of big improvements that you think you can make to Workday over the next year, three years or whatnot? Yeah, sure. A couple of things. As you know, I had a front row seat the last five years as a board member, and I had a good understanding of Workday, the business model and the opportunity. What I would say is now being on board almost a full quarter, right? The opportunity is probably even bigger than I anticipated. That being said, the company is doing a lot of things right. Just look at our results for the full year last year, our results for Q4. What the executive team and our Workmates have done, you know, is pretty special. That being said, there are opportunities for us to, you know, get back to that 20% growth going forward. I've mentioned a couple of them earlier. First and foremost, I think one of the things we're doing around consolidating all go-to-market under Doug Robinson, who's been here for, you know, 11+ years, was a good move. He now is responsible for everything from a go-to-market perspective, including sales, pre-sales partners, our industries and revenue operations, where before that was broken up. I am focused on driving operational efficiency across the company and across organizations, and we're starting to see that play out already. The second thing I mentioned earlier is I just think we have a tremendous opportunity to grow the business internationally. You know, our performance internationally is, I don't think where it should be, but we're going to really focus on it. We have new leadership in place, and we're going to drive a different level of execution, both in EMEA and across APJ. I think that's also important. The last thing, as both Aneel highlighted and Barbara and myself, we are looking for ways to optimize our workforce. One of the things we're doing here in Q1 is we're doubling down our efforts on product and technology, so we continue to focus on innovation, and we're also investing heavily in go-to-market, specifically around quota carrying capacity. It is our belief, and my personal belief, that those who can invest in innovation, in technology, and go-to-market when markets are potentially challenging, like we're faced today, will be the fastest to emerge on the other side and re-accelerate growth. I think there are just a couple areas of focus for us, along with a number of other things, including the ecosystem, what we spoke about and Doug mentioned earlier. There's some of the things in the near- term you can expect from us, and I think they'll drive long-term durable growth that gets us back to that 20%. Outstanding. Thank you for the comment. If I could just add a couple other things. Carl is definitely an innovator on the go-to-market side, and so we're all learning, you know, some new approaches on what we can do differently. I'd frankly say, including myself, just raised the sense of urgency and energy level in the entire management team. I think it's great, and I couldn't be happier that he's here. He's telling us all to have more giddy up. Outstanding. We will now take two more questions. Our next question comes from Karl Keirstead with UBS. Please proceed with your question. Okay, great. I've got two for Barbara. Barbara, the relationship between CRPO today and subscription revenue growth tomorrow is not perfect, but it's actually pretty good. Despite all the macro, your CRPO is hanging in there like a champ at like 20s or low- 20s, but your guidance on the sub revs growth implies a decel from 22% this most recent quarter down to like 16%-17% in the second half. I'm just curious, why would that be? At first blush, it makes your guidance for sub revs growth look somewhat conservative, but maybe I'm missing something in the relationship that might explain that. Maybe go lives are getting extended but are still within the 24 months. Is there anything that you would flag? No. I mean, I would just reiterate what you said at the beginning, which, you know, keep in mind that backlog isn't a perfect proxy for future subscription revenue growth due to many factors, including the timing of renewals. As we called out, early renewals had roughly 1 percentage point of upside to our 24-month Q4 backlog, though it does not impact the underlying subscription revenue growth. The FY 2024 subscription revenue guidance is our best view at the time, and we think it prudently factors in a macro environment which remains uncertain. Okay, that's helpful, Barbara. If I don't think anyone's asked on your cash flow guide, if I could, I think a quick calculation suggests that you're guiding to operating margin improvement or percentage increase year-over-year of about 30%. Your operating cash flow guidance implies more like a modest, more modest 25% growth. Is there anything going on in your operating cash flow guide, any sort of one-time factors to highlight that might create a somewhat bigger spread between it and the operating margin expansion? Thanks a lot. Yeah, you're welcome. The cash flow guidance does reflect the strong margin expansion that we are expecting in FY 2024. When you're looking at it from a year-over-year standpoint, both Q1 and FY 2024 cash flows impacted by the first full year payout of our company-wide performance-based cash bonus, the severance costs associated with the recent realignment, and then an interest payment that didn't occur last Q1 due to the timing of our debt offering. Also keep in mind that the change in server and network equipment useful life has an impact on margin, but it does not impact cash flow. Yep. All that makes sense. Thanks a lot, Barbara. All right. Thank you. Our last question comes from Alex Zukin with Wolfe Research. Please proceed with your question. Hey, guys. Thanks for squeezing me in. I guess maybe one for Carl and Aneel, and then just to follow up on the cash flow question. If you, if you kind of stand back and you think about where we are right now from the macro environment, the demand environment, it does seem like things aren't getting progressively worse. They seem to have stabilized, at least based on commentary from some other companies. As you look at the current kind of configuration, do you feel like we've kind of rebased in terms of a net new sales cycle, a net new, you know, digestion phase or period? What, you know, is this the trough, basically, is a question we get a lot. Do you have any signals or data points that kind of give you a view one way or the other on that? I personally still think it's a very uncertain environment. It doesn't feel like the economy's falling off a cliff anymore. I don't think it ever really did feel like it was falling off a cliff. There's, there's, you know, conflicting signs as to whether the Fed is gonna continue to slow down the economy, and, get inflation under control, and that continues to be a challenge. I think it's still pretty much the same it's been for the last couple of quarters. I definitely don't see it getting better anytime soon, but maybe not getting worse. Yeah, maybe we're in a stable view. I don't know what you think, Carl. Yeah, I agree with you. Actually, the commentary I always respond when people ask this question, I say it's consistently inconsistent depending on who you talk to out there. What we do know is, you know, companies are continuing to invest in technology. If you have a strong value proposition like we have around HCM and FINS, we should be able to navigate the choppy waters that we're faced with going forward. I think that was reflected in both Q4 and our FY 2024 guide. We're staying the course, we're prudent in our guidance, and we have a lot of confidence that our team will execute regardless of what we face in the future. It's uncertain, but we're prepared for it as well. Maybe just one on the ecosystem, specifically the SI community. It does feel like they're getting a little bit even reinvigorated to some extent from some of the moves and changes that you're making around driving, you know, helping them continue to be also a driver of growth or enabling them to be a driver of growth for your business. What are kind of the key dynamics we should be, you know, tuning to that could make that really a bit of a different growth driver this year or in the coming years than it's been in the past? Yeah. Doug, why don't you take that, and then I'll add any color. Yeah, it's a great question. Couple things to think about or that you should be looking for. Where it really comes to life is when we can take, I mentioned this before in another question, the IP from our partners and couple it with what we deliver and then give something more profound to our mutual customer. We loosely put that under umbrella called Industry Accelerators, and I think that's where you're gonna see it show up with our partners, much more openness to drive industry-specific solutions with their expertise, partnered with our technology. That drives things like Prism and Extend, which we haven't talked about much on this earnings call, but really taking Workday and extending it beyond core capabilities. I think it's really well said, Doug, and that's specific to the GSIs, but we're also looking for alternate routes to market, like the announcement we just made with AWS to be on their marketplace, which is a new distribution channel for us here at Workday. We're looking at driving, you know, operating leverage on the go-to-market, both through GSIs and additional ecosystem partners going forward, which is really important. We haven't done that in the past. Perfect. Congrats, guys. Thanks again. Thank you. Ladies and gentlemen, thank you for your participation on today's conference. This will conclude Workday's Fourth Quarter and Fiscal Year 2023 Earnings Call. Thank you again for