Workday, Inc. (WDAY) Earnings Call Transcript & Summary

Well, hello, and good morning, everybody. Thanks so much for joining us on this warm Monday in New York. And hopefully, everybody enjoyed the walk in. You've all made it, so that's half the battle. And are going to join us for this pretty fun session that we have today. The star of the show is going to be joining me on stage here in a second. I have a few housekeeping items that we're going to go through and then we're going to just jump in and have a lot of fun together. So in case you didn't know, this session is actually sponsored by Workday. We'll talk a little bit about that as we kind of kick off, and I'll be your kind of your MC or host or moderator through that process as well. So by way of introduction, my name is Joe. I've been with the Workday about 10 years. I lead our technology and strategy, and also the CTO. And I love what we're doing. I'm pretty bullish on the experience, but I also wanted to do a little bit of an intro about what we're doing in terms of the market before we get our good friend, Art from P.F. Chang's to join us on the stage. So with that said, let me start with this foundational preface, which is, I think, probably pretty salient for putting me in the crowd today. It might seem a little bit awkward for somebody who actually has been involved in the creation of software for the better part of 2.5 decades, but here's the thesis statement, right? What do people really want to do? I hope that one of these things that you're seeing on screen resonates with you, if not, you're probably not human. But here's kind of the capstone to that, right? It's all about experience. It's all about generating those efficiencies. It's all about removing friction. It's all about improving the opportunity for better, for more, and for faster. And so when we think about that then, what we've done within Workday in the last gosh, 18-plus years is capitalize on a network effect. This concept that things can, in fact, get better as additional users of goods or services actually pile on. And we see this in spades in our own personal lives. I would assume that every single one of you is probably carrying a mainframe computer in your front or back pocket, yes, a smartphone, that would not exist had a network effect not occurred within that facet of the industry. And that exact same thing has been happening over the past 18 years at Workday. The evidence of that is in these numbers right here. So at the macro, we've got over 10,000 customers, over 65 million users that are engaging on the platform globally across all industries of size and scale. Within the retail specific domain, here's the numbers, a nice slice of that big macro that we just reviewed. And these are your partners. These are your opportunities within your domain to actually capitalize on that network effect as well. Now of course, you're going to hear a lot about artificial intelligence. And you're probably going to see it on everybody's booth and everybody's copy and you're going to probably be like whatever by the end of the conference. But I want to actually talk about what we're doing that makes it a little bit different. So when you think about how we apply this, we do it at the platform. We're not thinking about it as an aftereffect, we're not keeping a tool and saying, good luck with a swift pad on the rear. We're actually doing this for you so that you can capitalize on the outcomes on the benefits as opposed to the creation and the curation. We're also leveraging that massive corpus of data that we collect from all of our customers with their permission and leveraging that really important trust to then take those transactions at scale that nobody has ever seen before in this space. Scale that exceeds social media interaction utilization, which, by the way, is a lot for those that know and then applying that to generate better outcomes. But along the way, really making sure that we think about trust, that's foundational. And we're going to maintain that because we believe in that. It's a quarter our fabric. But ultimately at the end of the day, everyone can talk to you about AI and everyone can put it on their mock their copy. They can place it over their booth. But I want to literally highlight this very brilliant comment that I saw in what was formerly known as Twitter now X. It's all about the data. Algorithms or commodities. If you don't have the data right, nice algorithm. All right. So with that, let me welcome up our friend from P.F. Chang's who's going to be joining us for this big idea session, Art Kilmer, would you join me on stage? And this is where we get to awkwardly sit in some wildly uncomfortable chairs. Watch. It's so tiny. Comfy. Yes. No, serious. After the talk, they should come try it, it's tiny.

All right. So he's joined us all the way from Scottsdale, Arizona. He did have a lot of stops across various areas, but you kind of grew up in the Texas area, grew the market, blah-blah-blah. Now you're in Scottsdale and you're joining us. You left the awesome desert and Art joins in New York. Could you give me a favor and actually talk a little bit about P.F. Chang's at the high level?

Sure. Great company, great brand. First of all, Joe mentioned P.F. Chang's in the house. Okay, that's better. I feed off energy a little bit that way. And I think it's great you brought an operator out to talk about a tech platform. That should be really engaging for most of you in here, but I'll do the best I can. But P.F. Chang's started in 1993, located in Scottsdale, Arizona. First one was in Scottsdale Fashion Valley. I joined P.F. Chang's in 2000. So I've seen a lot, been around a lot. It's been an exciting run. But currently, 17,000 employees. We -- P.F. Chang's is our main brand. We've dabbled in some other things, but it's our mothership, it's what drives the boat. Great food. We still do everything from scratch, made in-house, walk cooking. I'm extremely proud of that through all the years, all the things we've dabbled with and mistakes we've made and messed up, we've stayed true to that and who we are. And we've really been about, too, creating a great experiences for our people, great growth avenues, and I'm an example of that. I did not start in this role. I was in Texas running restaurants many years ago, and it kind of worked my way to this painful position I'm in today. So -- but yes, we're really excited about the partnership, the opportunity we've had with Workday, and I know we'll talk a little more about that, but it's been a great collaboration and a lot of learning together as we've grown together, Joe.

That sounds amazing. Just, so for a point of reference, Art mentioned they've been with the company since 2000. Workday was founded in 2005. The iPhone was announced in January of 2007, and we can't really remember life without the iPhone, can we, right? So you've been at P.F. Chang's for a hot minute.

Yes. A hot minute. People ask me, what have I seen? What are the most drastic changes I've seen in the industry because I've been in the industry a long time, and I'll go back to -- well, electricity was big. That was big for the business and refrigeration, really key components, but technology has really been, I think, the most explosive change in the industry. And I do want to mention, we've got over 200 restaurants, domestic U.S. and almost 100 international. We just opened one this past week in Mumbai, in India. So we're really excited about our partnership with India. But a lot of people don't know that. We are a global brand, and we've got 100 locations globally as well. So...

Okay. Perfect. So maybe really quickly, let's poll the audience. Is there anybody out there that has never had the opportunity or privilege to actually dine at the P.F. Chang's? It's okay to be where if. Okay. A couple of hands -- a couple of hands. So here's the plug. At the end of this session, I'm going to tell you how you can dine at P.F. Chang's for 3, right? So that will be kind of fun, but there's actually some early goodness that comes from that, too. So again, stay tuned to the end of the session. I'm going to give you the details, and you'll have the opportunity to remedy that shortcoming in your life, which is not how ever have the opportunity to eat at P.F. Chang's. All right. So we're going to go into some of this kind of moderated Q&A. Yes, my team at Workday was very kind and drafted these prompt cards, and Art was kind enough to actually cycle through these as well. But I'm going to do my best -- we're going to do our best to keep it real, if that's okay -- at 9:15 AM on a Monday morning. Okay. So we're going to start first with this idea then of -- tell me about the journey of Workday, your customer in the below 3,000. You've been doing this for a little bit. You had life prior to Workday at P.F. Chang's. So tell me about the macro journey of your kind of move to Workday?

Yes. I think like many companies out there, the first thing through evolution, you start to realize, but we have a lot of different software platforms that we're dealing with and logins and all of that. And candidly, and honestly, like many companies, our HR and our finance platforms might have been a little long in the tooth, a little antiquated and outdated. And so we started discussions around what's next and what would be best for the organization. And how do we really address the number of software platforms, the potential for integration and communication across those, the various logins and the breakpoints that happen. That's always the frustration. Each software component is another opportunity for a break in your system. So that was really kind of the foundation for what started dialogue around. We need to think about a longer-term, more holistic solution to ease this discomfort in the organization.

Okay. So you saw the opportunity in Workday and then your journey started. It's been going on for a little while now, and you've done a lot there. So just kind of round out what are the applications -- human capital management, financial management, workforce scheduling and pretty much all the things around that?

Yes. I think we certainly were exploring options, looking at what was out there, but we really did like the holistic solution that Workday seemed to be able to provide for us. And not just the HR and the financial platforms were great. And we -- I think we -- knowing the difficulties around managing multiple software platforms, multiple logins, we were not afraid to go in and kind of look for a holistic solution for both HR and finance. So we thought if we're going to do it, let's rip the band-aid off, and we could clearly see the advantages of doing it all at once. And we like the -- what Workday was offering. I would say kind of more importantly to that, through the discussions, it was kind of the support, the partnership, the collaboration that Workday was offering that really -- those are fundamental to our values at P.F. Chang's and the core of what we are and how we work. So that was part of the tipping point for us to say, look, they work like we work, they're willing to provide support for us. They know the challenges that a change of this magnitude will be, but really holistically to have a one log in, one platform, one solution that covers a lot of ground for us really tip the scales for us to make the decision to come to Workday.

So as a part of our introductions, as we were kind of discussing this opportunity, you mentioned this concept of one wok, and I want to be careful because sometimes my pronunciation isn't great. I'm not talking about one work. I'm talking about one wok, W-O-K.

We like the one work, but we changed it for our adaptation to be a one wok experience. So it's -- again, it's one log in, one holistic, one place to go for everything, and we have branded it our one wok experience. So...

Okay. And this please back to how you do it cooking as well.

Absolutely.

Okay. I'm seeing the thread. Okay. So as part of the digital transformation, then did you like that word, that was marketing the digital transformation? Yes, it sounds so good when you say it. So as a part of that journey then, what were some of those kind of macro outcomes that you've realized your experience as part of that one walk experience?

Yes. I think we could readily see the benefit across the organization, a, peace of mind, again, all those software integrations -- to me, I always look at it as break points, they're failure points. They're places that you're going to stumble the organization and getting communication and integration across those platforms was -- is always a challenge, right? And there's always a break somewhere. Something doesn't work. It's funny. I read something the other day that it's funny that we could always -- those of us that grew up a while ago, I could remember everybody's phone numbers, but we can't remember passwords. So it's funny, our brains could do that, but we can't remember all the passwords we have for all the different platforms. But again, this streamline simplified. We saw a lot of kind of administrative workload benefit from, again, one platform, one login, and one place to go for all things, HR, people-wise, finance. And then really as we were working through it, the discovery kind of with the learning applets was a big part of the unlock for us too. The ability to get learning and developmental programs in the platform readily accessible for our teams was a huge unlock for us. And the way we could do it to make learning more engaging for our people too was another big sell for us.

So you mentioned your personal issue with passwords that's fascinating. We'll discuss that later. Please, I can tell you why it's hard.

There's technology people in here, my passwords are generally not very secure.

He did not say that I'll...

I got to remember.

Okay. So you talked about this idea then of learning and that kind of leads to this other system, the advantages that you're seeing in terms of having finance, HR, workforce management and one system with Workday. Can we spend a moment to talk about the learning example that you shared specifically around getting folks that have no, maybe education or background and kind of profit and loss P&L and then what you did to solve for that?

Sure. It's interesting as we were kind of unveiling the learning applets and the learning platforms in there. So we developed a -- because it's always in our industry, kind of, gosh, I need to learn the P&L, I need to fully understand the P&L. And we have a lot of young chefs that want to understand the business side of our business and what we do. And so it's always for a lot of our people, understanding the P&L seems to be what they think is their path to career development when I'm always like, I can't teach anybody to run a P&L, but teaching people to lead people and make great decisions when people are the most important thing. But okay, you want to be fed the P&L. So the first real learning development tool we put in an applet was kind of a basic business acumen kind of how to understand and learn a P&L. And we loaded that into the Workday platform. We had gotten Workday through the system from an HR and a finance standpoint, people were familiar with it. And the other thing -- there were great piece for Workday was the mobile capabilities and the free app. So people have accessibility to everything they need in Workday very readily. So we loaded this kind of P&L how-to business acumen course and Workday for our managers and our chefs. And it was, by far, the most fast adaptation of any learning module we've ever put across the system, and we can see the completion rates much more readily than we could before through the Workday platform, but it went through the system and was completed and done faster than any learning platform we've ever tried to put across the system and required much less follow-up because people were -- it was easy to access, they were excited about doing it, and they did it quickly and it was amazing to see. We were all pretty stunned by how quickly the teams all adapted to using the Workday applets and we got that through the system without the level of follow-up a lot of us need all the time. So that was a big win.

So in my mind, I'm imagining a chef who is orchestrating the chaos and a kitchen on the walk with the mobile app, learning about how to actually evaluate P&L at the same time.

Well, we really don't want them doing that over the walk. It's not good for the phone. It's not good for the dish. But they do have a little bit of time to peel off and knock that out. But yes, they can do it. That's the beauty of the mobile capability in the app is they can do it on their time when it's convenient for them to do it, preferably not while they're cooking in a walk. But yes.

So this is probably a great example of how Workday can really win in a quick serve, right? When you think about like the opportunity, there's no way that there's going to be a desktop or a station or whatever for every single employee within the restaurant space. So to be able to have that other avenue of access that's personal and tailored but also very secure, so they can uplift or uptake that training, I imagine that's just like huge. So when you think about what you learned from that kind of virtuous cycle of engagement, you put it out there, people adopted it, passes completion rate ever, what else did you see more of that happening? And did it pervade across the organization...

That fuel to us to see how much more of the developmental tools, the learning apps can we get in there? And then how can -- and now the operators have insight into the training progress of their team members, training progress with their managers. We can see completion rates. We always -- there's a fair degree of compliance training that has to happen in our industry. So being able to get that in that platform. So a, it's much more accessible, and people can do that, the fun HR and compliance training everybody loves to do. They can do it on their time and knock that out. And again, it's really helped us reduce the level of follow-up, speed up completion rates. And then we have visibility into where people are in their progression and their learning and development at our fingertips. So that's a big win for us.

Okay. You also are here at your first art thing, say, HR compliance training is fun. So well, let's shift for a second and talk then. So you've got the core systems for finance or human capital. You're doing the things around the workforce scheduling, which we'll dive a little bit more into in your minute. But you've also been able to partner with and leverage Workday AI as part of your journey. What are some of those kind of macro outcomes that you've seen thus far?

Well, actually, that's a great story because as we were aware of the scheduling platform, but we started a dialogue around the whole thought of machine learning, AI and really assisting the operators with forecasting. Forecasting is fundamentally one of the most important pieces of what we do in our business. And it was interesting because we found the Workday teams, we're just as excited about the capabilities of machine learning, AI and kind of developing forecasting tools that then drive your schedule output. And for us, it was about taking a lot less interpretation out of the operator's hands, which, again, I do believe will reduce as we do at administrative time for operators. But it was really interesting because we found Workday was just as excited about the possibilities, the capabilities of what machine learning and AI could do from a forecasting standpoint to drive schedule outputs as we were. So it immediately came this, "Hey, this is a great idea." And this could be a great partnership and great collaboration and let's work together to really refine this system and make it work out there because the benefits are huge, both from a time and talent standpoint, and the outputs for us to be able to use our rule sets, our metrics to ensure that the schedules are delivering, the standards we want to execute is just huge. So it was interesting because we found really Workday was just as excited and saw the possibilities of what this could be as we were. So it was instantly kind of a great partnership for us.

So you're leveraging some of those kind of broader data points that would be relevant to any forecasting, but also considering others as well, right? So the common ones, the foot traffic, the seasonality, the uncommon ones, weather prediction, things like that, to really inform and build schedules based on those things that you just candidly at the operator level, would have the capacity to understand or even make decisions.

Well, true or that they have to spend so much time gyrating over. But I think -- and we're in the early stages. I would say, look, it's certainly -- it's been a learning process. I'll be candid, there's been bumps along the way with anything new. But -- and we're not in the sustainability stage just yet. But I will tell you, like we're getting enough kind of reps with it, enough repetition that the operators are starting to see, especially some of the early ones that we've gotten on this platform are seeing that the machine learning is learning. It's starting to adapt. They're seeing it get easier, and they're having much more confidence in what it can do as we progress through it and do it. I mean we're not there yet. Like I said, we're not in the sustainability stage yet with the AI forecasting, but it's getting there. And they're seeing -- they can see the learning happening. So they start to trust it more, and they'll allow it -- they'll allow themselves to accept the scheduling outputs that come from that versus I don't know about that. I don't know about robots telling me how to schedule...

I think there's that break point for all of us when we begin to trust kind of that informing capability of large data sets that are being curated and applied [ appropriately ], right? We've seen that trust bridge crossed in our personal lives and now being able to see it happening within the business domain is equally impressive.

You'd be surprised to know, but it actually forecasted Green Bay advancing in the playoffs, Joe. So I don't know how it knew that...

Too soon. All right. So when you talked about scheduling, not on the other side of the forecasting side, what are some of the outcomes that you've seen thus far around that?

I think what's great is, first of all, I've always preached in this business. I start with a great forecast. You have to have a great forecast. And then scheduling from that delivers the 2 key fundamental things in our business: a, it's the right schedules for our team members; and b, it sets us up to be in the best proactive position to take the best care of our guests. So if I can do those 2 things, I'm really on the right path to a very successful business. And we've seen that. I think that particularly for our team members, we're seeing the schedule outputs because it can drive their work preferences. It knows their work preferences. The learning learns that, hey, I really like to work Thursday nights. I'm a college student, I need to work a double on the Sundays to really make my money. So it will learn to do that, and it's seeing us accommodate the team member schedules in a way that's helping us drive retention and reduce turnover through the organization. And I'll say that our turnover trends currently are now below where we were precoated and we're continuing to trend down. And the team members are -- there's much less gyration between management and team members who are, hey, here are my schedule request, here's what I need. But on the same token, as I said, we can put our rule sets in it so that we know it's driving our metrics and the standards we want to execute the business on a day-to-day business from a guest experience standpoint as well.

And probably the big part of that is predicated again on your one wok experience.