Welcome to Workday's Fourth Quarter 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 conference. With that, I will hand it over to Mike Haase. Sir, you may begin.

Welcome to Workday's fourth quarter fiscal 2016 earnings conference call. On the call, we have Aneel Bhusri, our CEO; and Mark Peek, our CFO and Philip Wilmington, our Co-President. Following Aneel and Mark’s 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. Statements made on this call include forward-looking statements, such as those with the words will, believe, expect, anticipate, and similar phrases that denote future expectation or intent regarding our financial results, applications, customer demand, operations, and other matters. These statements are subject to risks, uncertainties, and assumptions. Please refer to the press release and the risk factors in documents filed with the Securities and Exchange Commission, including our most recent quarterly report on Form 10-Q, for information on risks and uncertainties 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, including non-GAAP operating losses, operating margins, EPS and interest expense. These non-GAAP financial measures exclude the effect on our GAAP results of share-based compensation, employer payroll tax-related items on employee stock transactions, amortization of acquisition-related intangible assets, and debt discount and issuance costs associated with our convertible notes. We will also discuss free cash flow. These non-GAAP financial measures, which are used as measures of Workday's performance, should be considered in addition to, 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 and on the Investor Relations page of our website. Also, the Customers page of our website includes a list of selected customers and is updated monthly. The webcast replay of this call will be available for the next 45 days on our company website under the Investor Relations link. Our first quarter quiet period begins at the close of business April 15, 2016. Unless otherwise stated, all financial comparison in this call will be to our results for that comparable period of our fiscal 2015. With that, let me hand it over to Aneel.

Thank you, Mike. And thanks again to everyone joining us for our Q4 call. We appreciate your interest in Workday. I’m pleased to announce that Workday ended fiscal year 2016 on a high note with very strong Q4 across product lines and across the globe. As you hear from Mark Q4 was also an excellent quarter from a financial metrics perspective and sets us up for a very exciting fiscal year 2017. So let’s start with some of the highlights for Q4. Workday in Q4 and fiscal year 2016 with 1,181 customers representing an increase of over 100 customers from Q3 as we add Airbus, Marsh & McLennan, Kohl's, and F. Hoffmann-LaRoche and 200,000 person global profession services organization as new HCM customers. Even more exciting Workday also ended fiscal year 2016 with 2007 financial management customers adding over 40 new customers in Q4 alone far in way our strongest quarter of selling our financial management applications in the history of the company. During Q4 the pipeline for financials also grew significantly up over 150% as compared to the fourth quarter of fiscal year 2015. As we continue drive sales of our financial management applications into larger and larger organization we are pleased to announce several large enterprise Financials customers. The Ohio State University, Arizona State University, Brown & Brown Insurance, Godaddy.com are one of leading security exchanges in the world. Q4 also saw two very important customer goal-lives at Workday. First of all, Transportation Leader, J.B. Hunt live in our full management suite making them our biggest financial customer in production. As a Fortune 500 Company J.B. Hunt is a strong proof point that supports the breadth and scalability of our financial suite and our ability to meet the needs of Fortune 500 companies. And the HCM side of…

Thanks, Aneel, and good afternoon, everyone. Our fourth quarter capped an excellent year for Workday. Let me start with our strong financial results for the quarter and the year. Subscription revenue is now at a $1 billion run rate and grew 44% to $262 million for the quarter and 52%, $929 million for the year. Total revenue was $323 million reflecting growth of 43% from Q4 of last year and $1.162 billion or 48% for the full year. We continue to demonstrate strong momentum across our subscription revenue growth driver, new customers, renewals and sales of additional products to existing customers. This momentum is also positively reflected in our backlog and unearned revenue. At the close of fiscal 2016, the sum of backlog in unearned revenue represented $2.5 billion in future subscription revenues. Our non-cancelable backlog which is not yet on the balance sheet was $1.56 billion or annual growth of 62% -- or 63% in constant currency. On our balance sheet unearned revenue at the end of fiscal year 2016 was $900 million which is 42% growth year-over-year, 44% in constant currency, current unearned revenue which will be recognized over the next fiscal year subscription revenue was $769 million or annual growth of 40%. The financial visibility provided by this future subscription revenue is a high confidence in the sustained strength of our business. We continue to invest in the large opportunity we see ahead of us. Our non-GAAP operating loss for the fourth quarter was about $800,000 close to breakeven. For the year our non-GAAP operating loss was $2.7 million or about 23 basis points of total revenue. Throughout fiscal 2016 our non-GAAP operating margin was within 1% plus or minus to breakeven. We are able to continue to invest in our business as our strong result translates…

[Operator Instructions] Your first question comes from the line Mark Murphy with JP Morgan.

Yes. Thank you very much and congratulations on a very strong finish to the year. I had a question for either Aneel or Phil. So, it appears that Oracle's cloud credits, in other words their free trials, are expiring or perhaps not being offered as aggressively anymore as they had been previously. So, I'm curious if you sense that you have “weathered the storm” if you will, in terms of that type of competitive tactic that could perhaps be subsiding at this point? And if so, could that enable your win rates to continue trending higher this fiscal year as it appears they have been in the last few quarters?

Thank you, Mark, for the question. I’d say first and foremost what’s impacting our competitors, our legacy competitors in particular is their inability to get customers live and in the production especially the large customers. And I think when both companies, when SAP and Oracle moved in to the cloud they were given a bit of a hall pass. They marketed the right terms, they used the same buzz word. But at the end of the day we all get measured about getting customers successful and in production and they failed. They have some proof points here and there, but in the large part neither really embraced a true cloud model and I think they are paying the price for that. Whether the sales activities or promotions that they've had has had an impact, I’ll come back and ask Phil to respond to that. I do think that referenceability is much important today than it was 12 months ago, because now they’ve had the time to take customers into production they haven’t been able to and we continue to move forward, still 75% of our customers are in production and with J.B. Hunt and Bank of America, two proof points of very large companies in production with Workday and being happy. So I think that’s actually the real driver behind win rates going forward.

I think the only think that would say in addition to that market is that, it’s a very educated consumer in the marketplace right now. And they realize that discounted subscription offer is only one piece to the equation. The amount of time that it takes to bring the application live, the cost of implementation, these are all factors that impacted total cost of ownership over time. And again to Aneel’s point, referenceability drives home all of factors. So prospects are doing their homework. They are talking to customers who have gone through similar experiences and they’ve looked at the balance of not only discounting, but the cost to implement et cetera as it rounds out the financial picture and that's what they're basing their decisions on

Thank you very much.

Your next question comes from the line of Keith Weiss with Morgan Stanley.

Excellent. Thank you, guys, for taking the question and good quarter. I was wondering about, as you enter FY 2017 and as you change the go-to-market strategy around the edges in terms of giving as more to sales, selling across the entire portfolio and also getting partners more involved in terms of pushing more professional services, is there any chance of disruption or any sort of reorientation that has to go on that we should be aware of as we head into Q1 and further in the year as those changes are put into place? Or do you expect them to be pretty seamless?

Well, I think we expect them to be seamless. They've already happened. In particular on the sales change to carrying our products, first of all, that’s been the case in the mid-market for quite some time and what we’ve seen in this success of selling the full platform and we highlight that 30% of our customers in Q4 bought everything that we have or bought HR and Financials together, that’s beginning to move our market. So it’s a natural move to have the sales person carry both products. And it’s something we’ve already experienced with in the mid-market. We’re now just moving it up market. So, the part with the partners, again, that just a natural progression, frankly we built out a much bigger professional services organization several years ago, because the Ecosystem wasn’t necessarily sure that Workday was going to be the vendor of choice in many cases. Now that we won so many large account, all of the big vendors over the last 12 months have made big investments and they’re doing a great job. They getting our customers live. They’re ramping up more training consultants and it just takes the pressure off of us to be part of all the deployments, so it’s a natural progression and it’s a right time for us to shift that model and that was always the intention going back to when we started the company to rely and work closely with our Partner Ecosystem. We just took a little longer than we’d expected.

Got it. And then on the margin side of the equation, I’d imagine that there should be a pretty nice positive gross margin impact on the overall gross margin as you guys focused more on subscription business versus doing the services work yourself?

Yes. Absolutely. I don’t know, Mark, do you want to add any detail.

Yes. Certainly, we’ve guided professional services to be down 14% and that will drive gross margin as we pick it up with subscription revenue.

Excellent. Thank you very much, guys.

Your next question comes from the line of Brent Thill with UBS

Thanks. Mark, you accelerate the backlog to 63% constant currency, which I believe is up over the low 50% number you put up last year. Yet you’re guiding the billings for somewhere around to low 30% growth rate. Can you just walk through the delta behind the backlog growth and then billing delta for this year?

Brent, when you look subscription revenue billings, it’s going to be mid-30s, still part of it is just part of the 30% to 31% as a result of where we see profession services going next year. And we just had a terrific year with respect to large customer, just a slightly expanded length of contract by about two months relative to a year ago. And so we focused very much on the economics on a contract-by-contract basis and all-in-all it’s a great year.

Okay. And for Aneel and Phil, just as relates to the highest win rate in eight quarters. Can you maybe just talk a little bit about what you’re seeing –what you think was the cost for that nice acceleration in the fourth quarter and just so I’m clear, when you now have all the reps on financials, when you look at the extra capacity now that’s been brought to the behind financials, can you just give us a sense of what percent was on quota to now everyone's on quota, what tailwind if you will that you’re adding now on a percentage basis or if there’s another relevant metric, that would be helpful?

In terms of our success in Q4, I would attribute to great sales execution, great sales team led by Phil. And again coming back we’re going to sound like a broken record on this, but it’s really coming back to customer success. We really do a great job getting customers into production and success. We're running at 98% customer satisfaction. And that just becoming a much more important factor as the market matures. Again I’ll say it again, in the early days when the slide where look the same and the buzz word sound the same, it’s hard for customers to tell. But after the legacy guys have had a couple of years of trying and not succeeding, getting customers into production, they begin to understand that there might not be so much meat behind the bone or meat on the bone in terms of actually not focusing on sales but actually customer success. I guess the best thing to look at for how we believe the business is going to move forward next year. We say very clearly we expect the net new ACV growth rate to accelerate in 2017 versus 2016 and that comes largely due to our belief that financials is really beginning to hit its stride and HR continues to do quite well. And Phil, do you want to talk about sales force productivity or anything else on that side.

Well, I think part of sales force productivity is not only the efforts that the account executives or sales people have in their process, but along with our referenceability, along with driving our message by encouraging prospects, talk to other customers, we will continue to lead with our product. We show our product very early in sales cycles. We put it in the hands of prospect. We help them get a feel for how that product could improve the day-to-day operating environments and efficiencies within their company. And then we challenge our competitors to do the same. So as Aneel said there were lot of claims that were made early on as to what products could do. What slide said and that’s now what helps drive customer’s decision. We’ve got great solution consultants in our organizations that play part of our sales teams and they help put that product in the hands of prospects during the demonstration and evaluation and our products speak for itself and our customers help then substantiate that with the referenceability.

Thank you.

Your next question comes from the line of Justin Furby with William Blair & Company.

Thanks guys and congrats. I want to first ask you Aneel or Phil, the 45 Financials wins in the quarter, that’s a big number. I was just wondering if you look out to fiscal 2017 and you billings guidance, are we at a point where financials could be something like 15%, 20% of billings or no, not yet. I’m just curious how long in your mind until we’re at a spot where we at parity in terms of new business between HR and financials and when we get there how fast do you think the HR business is growing at that point. I know it’s obviously a guess, but appreciate any commentary?

It’s like five questions in there.

Yes. I try to make as many as I can.

Definitely we see a future where financials will be at least half of the net new business and I think Q4, I won’t it caught us by surprise, because we’ve been planning for financials to take off. It did happen. It took off. And we’re seeing the platform deals, we’re seeing the high attach rates and we’re seeing the customer success. An interesting data point which will help you model this out. It took us a six years to get us to our first 100 financial customers and additional year to get to our 200 customer level. So obviously the pace of financials sales has accelerated quite dramatically in the last 12 months. And we’ve continue – we expect that to continue over the foreseeable future. The hard part in answering your question is, HR continues to grow well and grow at a nice clip and it’s hard for us to forecast that far out when Financials might takeover HR, we don’t it to take over HR in time soon, could that mean HR slowing down, but Financials is growing at a much fast clip than HR. I don’t think – I don’t know, Mark, 15% to 20% thus probably a little early for that?

That’s bit early for that.

It’s a bit early for that. But it’s not a crazy assumption in the not so just in future.

Okay. That’s helpful. And then Mark on the 10% sequential sub guide in – I think you said Qs [ph] through four. That seems to be even bigger than what you’ve done last few quarters. So I’m wondering try to better understand what drives the confidence around that number? And I’ve got one more if I can flip in as well.

We initiated subscription revenue guidance for the year and wanted to make sure that we had a nice clean calendar going out through fiscal 2017. But the subscription revenue guidance is really a derivative of the billings and the bookings that we’ve done as reflected in the current unearned. And so it’s just under 10% sequentially as is our starting point, I’m driven off of the 277 to 278 we expect in Q1.

Okay. And then on the commentary around HR and Financials, and I appreciate that in terms of two very different margin profile. So, just wondering how long you think it is before Financials might hit something like a breakeven trajectory in terms of EBIT margin? Thanks.

Well, I think it goes back to the question that to ask Aneel about where the bookings cross. But we’re not putting a timeframe on it, but clearly what we’ve seen from HRs, once we have a business with now has 1200 customers is progressing really nicely, we’re beginning to go through a renewal cycle on it, is that there is a lot of leverage to this model. And we continue to invest also on additional products as we move forward and expanded our TAM in the last few years by almost 50%. So I don’t want to put a timeframe on individual products but certainly we wanted to give you a look at least at HR and to show you the profitability of this model.

I might also add that the competitive landscape for financials looks quite appealing. I think we continue to win our fair share in HR. I’d say the financials landscape is probably even more attractive. SAP doesn’t really have a cloud strategy for Financials. And Oracle is going to struggle with the same issues about getting customers into production with Fusion as I have with HR.

Got it. Thanks guys and congrats.

Your next question comes from the line of Heather Bellini with Goldman Sachs.

Great. Thank you. I just had a couple of questions. I was wondering if you could walk us through some of the initial feedback from the sales changes where now the sales people are carrying all the products. And I guess what I’m wondering is how do we think about the sales cycles for Financials accelerating as a result to that? And then, the second question would just be related to, have you noticed any changes in conversations with the Fortune 500 where it seems like they’ve obviously embraced HCM and the cloud and Financials has been forward to take off. I’m just wondering how the conversations with those customers over the last few months might have started to differ in the largest customers? Thanks you

So, I’ll take the second question first Heather and then I’ll turn over the first one to Phil.

Okay. Thanks.

Second question, definitely a lot more Fortune 500 conversations around Financials, the Fortune 500 marketplace is generally a risk-neutral to risk-averse marketplace. So, they’ve been looking for proof points. J.B. Hunt is really, really important proof point for us to have them in production. And they have fairly high transaction volumes. And then people are looking Aon, Netflix has been in production for a while. So now we have the proof points that are not theoretically, that are actual and its causing us to have more of those conversations. And we’re not finding any issues about financials and the cloud, seeing any difference that HR and the cloud. So, I suspect it’s going to play out the same. People were looking for proof points and they were looking for enough functionality to turn off the legacy systems and I think we now have both. And so I do expect that Financials is going to accelerate both in terms of the number of deals as well as the size of deals and Q4 was a proof point. And again, it took us six years to get to 100 and only a year to get to 200, so – and that just tells you what’s happening in the business right now.

And Heather on the first part of your question I think one of the things that we are learning is that in direct response what are customers were asking for. They want to deal with the consistent approach as it relates to looking at our applications to fulfill all the needs on the application side of their enterprise. The way we first came to market they dealt with an HR rep and then as we were rolling Financials out they would deal with another team that would coming on Financials. Now that’s a consistent approach, so the development of the understanding of the customers’ needs that we get in the beginning parts of the sales cycles goes all the way through our sales cycle. And the role of technology and the role of the CIO was also changing as we’re not viewed as just a particular one application vendor, so it allows our people a better opportunity to engage and work with the CIOs of organizations as they look Workday as a complete application platform partner for both HR and Financials. And we’re seeing that consistency come back in terms of feedback from prospects and customers has been very beneficial so that they get the understanding of the impact of our applications across our enterprise and I think with the 30% of the wins we have been platform wins during the last quarter, during the fourth quarter is evidence is that is that’s working.

Great. Thank you.

Your next question comes from line of Karl Keirstead with Deutsche Bank.

Thanks. Question for Mark. Mark, long-term DR upticked meaningfully for the second quarter in a row. Do you mind taking a second to walk through that? Assuming its greater demand for multi-year deals, does it take any added discounting to pull that off? A little color would be helpful. Thank you.

Sure. It’s relatively simple. First of all, our discounting discipline has stayed really strong and really consistent over the last eight quarters or so. Its – and so with the non-current unearned revenue really represents is just the amount of revenue that we won’t be recognizing in that next year. And it goes back to the five points that we talked about. Last quarter and that impacts the subscription this year.

Okay. Thank you, Mark.

Your next question comes from the line of Brendan Barnicle with Pacific Crest.

Thanks so much. Mark, I wanted to follow up on that 5%, actually. So, that was what you guided to last quarter as well. It had been a little bit lower earlier on. Are we now at a stable point where you think 5% is what it will be? Or will that change as you have more of a mix towards financials?

That’s what we think it’s going to be. We've reflected it back in the commentary a quarter ago and it’s reflected in the guidance this year and things have really remained unchanged. And then we expect that to reverse beginning next year and ended 2019.

Terrific. And then, just a follow-up for Aneel. Aneel, over the years you've talked about verticals. Now that you've built out more of the financials and more of the add-ons to HCM, do you think or look at focusing more on those verticals as you do product planning for this year?

If you were to look at our success with Financials, it actually is very much tied to the verticals we focused in on. We have said from day one we’re focused on the 70% of the market that is non-manufacturing, so that 70% of the market that’s services based and first three verticals we really focused in on were E&G, Education and Government plans and services and healthcare and we’re seen strong tractions across all three of those verticals. And with professional services automation, we’re moving more into the technology vertical. So, we’re just going to continue to expand verticals as we get proof points and the ones that we’re in until we’ve got pretty good coverage across all the services verticals. I also do think that over time we will get some traction within the manufacturing vertical by way of integrating into an existing on-premise manufacturing where they want to modern accounting system but might want to leave their manufacturing system on premise.

Great. Thanks so much for taking my questions.

Your next question comes from the line of Scott Berg with Needham.

Hi, guys, I echo the sentiment on the great quarter. I guess two questions for either Aneel or Phil on the financial side. First of all, who do you consider to be your primary competition from what you saw in the quarter? Just trying to understand who you displaced more, because the mid-market competitors in that end segment are certainly different than the enterprise customers? And then secondly, from a capacity standpoint, your implementation capacity was being shifted off to partners. Trying to understand how that directly relates to financials versus the more mature HR market that I assume the partners are really probably working with.

Sure, so from a competitive perspective it is the same, it is SAP and Orcale. We really moved out of the low end of the midmarket, where we might have seen NetSuite, we see NetSuite in a very, very small handful of situations now. So it really is primarily SAP and Orcale. And every now and then we will replace great plans or dynamics, Microsoft doesn't really have a Cloud strategy for their financial products. I would say that is the competitive landscape and more and more as we move upmarket with some of the enterprise wins you highlighted it is SAP and Orcale, and it shouldn't be a surprise those systems were bought together, HR and financials were bought together in the client server way from SAP, Orcale and PeopleSoft. So, we win HR, we go back and win financials. It is going to be those two vendors. On the professional services front we feel very comfortable with where the ecosystem is with HR. We feel pretty good about where it is with financials, but given some of the roadmap items you might have for Aon, if there is roadmap items for a customer like that we will stay more involved on the services side. But for a mainstream financials customer that buys Workday and goes live on Workday, we feel very comfortable with the ecosystem. Phil, do you want to add anything?

Your next question comes from the line of John Di Fucci with Jefferies.

Thank you. Mark I like to just go back to Carl’s question on the jump in long-term deferred. I mean obviously customers are paying more upfront, the longer duration upfront. I guess why would they do that and then should we expect that to continue going forward and is that at least a primary driver of your increased billings guidance?

Yes, john. It is less about how much the customer pays upfront as it is some of the other contractual terms. And we talked about it at some length last quarter, and so this just represents revenue or billings where we have actually billed and collected the cash, but the revenue recognition isn't going to happen until next year. And so a lot of it is reflected in the five points of growth impact we have talked about in 2017. Certainly we have some customers who make the decision to pay upfront. As we have said repeatedly we don’t discount for upfront payments. We have a model that funds itself with $260 million of operating cash flow and $125 million of free cash flow this year.

And so – but is this at least part of what is driving your increased billings guidance?

Yes.

And I guess if I could just quickly Aneel you talked about an acceleration in new subscription ACV and I am just curious is that pipeline based, is that just thinking, looking out at financials, it sounds like you are getting some good traction there early but good, what is that – what is behind that?

It is all of the above, and I wouldn't say it is early. I mean we had a great year for financials customers. It might have been early in Q1, but after Q4 it has now become mainstream and it has become a product line that we can predict what we are going to close in a given quarter, which we couldn’t have done 12 or 15 months ago. So we just have a lot more confidence in what numbers we can drive off of financials and HR. And the full HR platform continues to be very strong. Recruiting continues to attach well, and we have all of these new products coming online like learning and planning. So, it is – we have a lot of – we just have a lot of market opportunity in front of us and more SKUs coming and so we just feel – I frankly feel better about the business going into this year than I have the last two. And maybe Phil you want to talk abouthow you see the market developing and why we have the confidence that business will accelerate this year.

Yes, I think a couple of things. One we talked about a significant increase, over 150% increase in financial pipeline as we enter the year versus when we entered last fiscal year. And then the last point that Aneel just mentioned I think is very important and that is we continue to see attach rates go up with some of the new SKUs that come out of product development. So we are developing product in conjunction with requests that our customers are making for what they need to see and to round out the product suites. Aneel mentioned recruiting, there has been expenses. Talent management, we have learning – we have learning on the horizon. So all of these increase a very powerful product suite that we have in human capital management. The same is true for financials. So it is an increase in pipeline and it is an increase in opportunity with each of the customers that make up that pipeline. And both of those components are key to our growth strategy.

Great guys. That is clear. Thank you.

Your next question comes from the line of Kash Rangan with Merrill Lynch.

Hi guys, thanks for taking my question. Aneel, Phil and Mark, the question for you is since financial is being sold by the broader sales force is a relatively new approach as far as the enterprise segment is concerned. I am just wondering if the weight of the billings performance is going to be shifted towards the second half of the year, or is this something that is going to be equally weighted throughout the year. And I guess the second question, Aneel, I am really pleasantly surprised by the success, of course, you declared at our conference last year that financial service becoming mainstream, I'm curious if you can give us a little bit more color are these big MNCs that are replacing financials, or are these smaller companies that are implementing financials for the first time, and also the scope of these implementations, these pedal-to-metal full breadth of the entire business or if it is just some portions of larger businesses, any color would be useful, thank you very much?

Sure. So just on that last question, in almost all cases it is the full breath of our financial products, and it is for the full company. We generally on the HCM or on the financial side have not sold to departments. We have always been enterprise level. In terms of size of the companies they have been across the board. We will take the mid-market business when it is there just like HR. if this kind of a run rate business, but we are also landing large organizations. People might not lend as much credence to the higher ed world [ph] because they don't know the scale of the businesses, but the Ohio State University and Arizona State University are like Fortune 500 organizations, both in terms of the scale and complexity of their business, the transaction volumes and the use of the product. So across the board – we are seeing traction across the board. I suspect you will see in this fiscal year ’17 some more Fortune 500 names. We feel comfortable with where we are with Fortune 500 names as proof point. So we will take them on, but right now we are trying to take as much business as we can across the marketplace.

I think as to the first part of your question that transition – Aneel used the word transition and really stated that transition is largely behind us. This isn't something as it relates to everyone selling financials that we just began to launch as we launched into this fiscal year. Training, preparation, sharing of accounts and the participation that is necessary in the field was really executed on in the fourth quarter of the previous year, and we were still able to achieve great results. We got a tremendous amount of appreciation and respect for the way that our field organization handled the transition in the fourth quarter to position us to be ready and to continue that performance as we entered the first quarter of this year and as we will see I think consistently throughout the year.

Operator, we are going to take two more questions.

Absolutely. Your next question comes from the line of Mark Moerdler with Sanford Bernstein.

Thank you. So two questions, first Mark understanding that financials are still subscale and growing fast, but looking longer term is there any reason that financials won't have the same margins as HCM and then a follow-up for Phil?

Yes, I can't see any reason why financials won't have at least the same margins as HCM.

Excellent and Phil are you seeing any change in the time it takes to close financial deals from when you start the process the deal closes?

No, I think the sales cycle itself is very similar, and I – we see both in the platform sales, as well as independent product suite sales very consistent sales cycles, and again leading with product and then substantiating with reference helps kind of collapse that selling time. So I think we will see the same trends going forward.

Thank you. I appreciate it and congrats on the quarter.

Your final question comes from the line of Steve Ashley with Robert W. Baird.

Hi, thanks very much. With moving your – the implementation to – professional services of to your ecosystem partners, clearly customer satisfaction is the most important thing for you, have you done anything in terms of structuring the oversight of their deployment that allow you to be able to closely monitor it, is there anything within SLA and customer satisfaction related to monitoring their activity, just wondering if you are putting in some structure to that – to that relationship?

Yes, it is a great question. So first of all I would say this is definitely a continuum decision rather than, we just flipped a switch and hand it over to the partners. This has been something that has been in process for the better part of five years. And we are not going the way as a professional services organization. We just said we are not going to grow it as fast. So a couple of things to your question. We have had metrics in place both on certifications and the quality of projects really since we started engaging with partners and we continue to work with them to make sure the certification process is a good one as well as the customer success is high. So that has always been a key part of what we do, and we have an engagement manager on every project – implementation project regardless of whether Workday is involved or not. That is just the way that we can stay close to the project even if we are not the implementation arm doing the implementation itself. So, in many cases our best partners are doing the implementation, but I still might be an executive sponsor. Phil might be an executive sponsor staying close to these projects with support from our services team to make sure that the implementation is going well. So, I just want to make it clear this is not a binary handoff; this is just a continuum and professional services as an organization is going to continue to grow. We just don’t feel like we need to grow it at the same rate because the partners have filled the gap.

That is really helpful. Thank you.

Thank you everybody for joining us today.