Welcome to Workday's 4th Quarter and Fiscal Year 2018 Earnings Call. At this time, And with that, I will hand it over to Mike Maguera, Vice President of Investor Relations. Sir, you may begin your conference.
Welcome to Workday's 4th Quarter Fiscal 2018 Earnings Conference Call. On the call, we have Aneel Bushery, our CEO, Robin Sisco, our Co President and CFO and Chano Fernandez, our Co President. Following the Neil and Robin's prepared remarks, we will take Our press release was issued after the close of market and is posted on our website, where this call is being simultaneously webcast. Statements made on this call in could forward looking statements regarding our financial results, applications, customer demand, operations and other matters. These statements subject to risks, uncertainties and assumptions.
Please refer to Commission, including our most recent quarterly report on Form Ten Q for information on risks, uncertainties and assumptions that may cause actual results to differ materially from those set forth in such statements. Measures, which including reconciliations with comparable GAAP results in our earnings press release 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. Also, the customers page of our website includes on April 13, 2018, unless otherwise stated, all financial comparisons in this call will be to our results comparable period of our fiscal 2017. With that, let me hand it over to Anil.
Thank you, Mike, and good afternoon, everyone, from Sunny Florida, where we are holding annual sales kickoff event. Support. Our success as a company continues to be driven by our forward thinking and continue to choose Workday as their partner for their move to the cloud for finance and HR. We now have over 2 customers and our consistent sales execution throughout the year extended into Q4 and enable us to deliver excellent full year fiscal year 2018 results. In Q4, we saw healthy demand across all product areas and geographies.
Starting with HCM, we added 9 new Fortune 500 customers, including 5 in the Fortune Fifty. A few of the new additions include Home Depot, Banco Santander, General Electric, PNC Bank, Chevron USA, and Telstra. We now have over 175 Fortune 500 for our HCM product line, including more than 20 of the Fortune Fifty. And consistent with past quarters, more than 70% of our HCM customers are now in section. Switching over to our financial management applications.
Q4 was our best quarter ever for this product line. In the 4th quarter alone, we added 58 new core financial management customers, up 45% from last year, including 2 Fortune 500 customers, one of which is a Fortune 1 company. In addition to the strength of our core financial management offering, we also added over 60 planning customers, bringing our total number of planning customers to over 250 and our total number of financial management customers to over 450. A few of the notable new financial management customers include American Family, Mutual Insurance, and Quicken Loans. Indeed, we continue to see strong signs of increasing customer base will be 3% of our financial management customers now in production.
As we head into fiscal year 2019, we are confident in the we have built and the sales execution model we have put in place. As such, we expect fiscal year 'nineteen to be another strong year of growth. Fiscal year 2019 is also another big investment more driven innovation and are ramping up the investment into our 2 newest pillars, Workday Prism Analytics and Workday cloud platform, both of which are off to a great start. On the Prism Analytics front, we saw over 45 new customers sign up for this new offering in its first quarter of availability. On the date cloud platform front, significant development progress has been made over the past several quarters.
Customer and partner interest in the Workday cloud platform continues to grow, and we are pleased with the initial results and feedback from our early adopter program. Switching to the people front, a key part of our success continues to be our vibrant company culture which allows us to maintain high levels of employee satisfaction and greatly helps us attract and retain talent across all levels of the company. To that end, we are proud of our recent recognition as number 7 on the list of Fortune's 100 best companies to work for in the U. S. And number 2, on great place to work institutes best workplaces in Ireland.
Being a great place to work is something that Dave and I have cared about since day 1, so it's an honor for Workday to be on these prestigious lists. Staying on the people topic, we also recently announced some leadership changes that strengthen the company and underscore our belief that much of Workday's ongoing and future success company. As we announced earlier this month, Robin Sisco and Chano Fernandez are stepping into the roles of Co President and will lead us through our next phase of growth. This move enables Phil Wilmington and Mark Peak to focus on strategic initiatives for us, while also continuing to serve as key members of our senior team. Phil now serves as Workday Vice Chairman and Mark has taken on the role of Managing Director and Co Head of Workday Ventures alongside Leanne Levin pillar.
As we head into fiscal year 'nineteen, I'm optimistic as ever about the future of Workday. On the innovation front, we are delivering against our unique vision of bringing planning, transactions, and analytics into 1 unified cloud system. And with the introduction of Workday cloud platform, Workday is being increasingly viewed by our customers as not just an applications company, but as a platform provider too. We continue to invest heavily in our company, culture and our value system and have a great group of employees committed to delivering the highest levels of satisfaction to our them. I'll now turn it over to our CFO and newly minted Co President, Robin Sisco.
Over to you, Robin.
Thanks, Anil, and good afternoon, everyone. Our fourth quarter capped a very strong year where we continued to demonstrate momentum across our subscription revenue growth drivers We added a record industry leading renewal rates as well as strong add on sales to existing customers. Our subscription revenue grew 34% to 490,000,000 for the 4th quarter and was up 39% to 1,780,000,000 for the full year. Total revenue 4.3000000000 of our $490,000,000 of subscription revenue or 90 percent came from the balance sheet, consistent with the Q4 last year. To $131,000,000, representing a record 22 percent of total revenue.
Subscription revenue backlog was $5,200,000,000, growth of 34 percent against a very difficult comparison period a year ago. We non GAAP operating profit for significant leverage in our business of 7 percentage points year over year. Operating cash flow for fiscal 2018 was $466,000,000, representing 33% growth from last year. Our free cash flow was also strong, increasing to 3 24 was primarily driven 1600 net new employees to Workday this year, bringing our total employee count at year end to over 8200. Operationally, we continued execute well against our long term vision and appreciate we enter fiscal 2019, our strong pipeline gives us confidence in our continued growth story.
We see significant opportunity across product segments and geographies with financial management and business outside the U. S, incrementally becoming a larger portion of the overall mix. Our focus contract economics, which will likely result in continued quarter to quarter variability in some of our business metrics that will us well in the long run. Let me now turn to guidance for fiscal 2019. For the first quarter, we expect subscription revenue to be between $514,000,000 $516,000,000, representing For the full year, representing to increase by approximately 6%.
On the professional services front, system. Our partners are seeing robust growth $93,000,000 in Q1 $405,000,000 in fiscal 2019, or growth of 16 14 percent, respectively. Professional services margins will be slightly lower and to sustain our structures and payment terms, especially with larger customers, are expected to continue to impact unearned revenue trends period to period. As we look at FY19, we want to provide some additional color on our expected balance sheet trends given what we know today. Current unearned revenue growth is expected to fluctuate during the year year growth rate in 20s, with growth in the second half of the year likely to return to the low 20s.
We would expect long term unearned revenue continue to decline year over year, but expect it will fluctuate period to period based on upfront cash dynamics. We expect more typical seasonal trends in our subscription revenue backlog We estimate non GAAP operating margins of approximately 10% to 11% in Q1 and expect a normal seasonal sequential decline in Q3 2. We expect our non GAAP operating margins for the full year to be approximately 12%. This 200 basis point year over year improvement for FY19 reflects our continued investment in products and other areas of the business to support our long term growth aspiration The GAAP margin. We expect operating cash over 22%.
Given our recent non GAAP profit, we are now introducing a non rate. We have determined this rate by using a 3 year non GAAP outlook and calculating the average expected tax rate over that period. Taking into account the impact 18 $200,000,000 in FY2019. The entire project is on track for completion in early fiscal 2020, and we continue to fund construction for cash on $200,000,000. The increase from furniture purchases as we near occupancy of our development center.
Thank
you. And your first question comes from the line of Mark Murphy with JP Morgan.
Yes, thank you very much and congrats on a very strong finish to the year. And Neil, You mentioned a Fortune 100 win, I believe, in financial management. And I realize that's not the very first singular situation like that, but, it seems like it's something that's probably pretty meaningful. Could you share any more details on the deal dynamic there in terms of, which general ledger might have been displaced, which vertical, when it when maybe it would go live? Anything else that you think might be interesting?
Sure. It's a company that we're not able to name right now. It's, it's a full platform opportunity. I'd say it's best described as in the food business. And its volumes are, almost an order of magnitude higher in some areas than anything we've we've, we've taken on in the past, and that's relative to the AAON's and J.
B. Hunt's in the world, which are already in really high volume. So our view is this one really from a scalability perspective demonstrates that we can scale to Fortune 100 size companies, even in sectors that are not necessarily a target sector for us. This is more of a traditional ERP oriented company that decided to go with the full platform from Workday. I believe the, the displaced product is SAP, not sure, but I'm pretty sure that's is.
Your next question comes from the line of Richard Davis with Canaccord.
Thanks very much. So what do you think? What would be as an outsider like kind of a reasonable set of milestones, that we should expect in terms of kind of your ISV partners that you're building on kind of a more open platform because in the end, I think that's a really positive move because it's going to make your software, like, really sticky? Thanks.
Well, it's a great question, Richard. We're still in the mode of early adopter work with our customers and exploring what they can do with the Workday cloud platform. And the takeaway so far is, there are a lot more use cases and ideas than than we had ever expected. By the time that we're together in 6 months for, or a little bit more than 6 months for Workday Rising, you'll see a more, deliberate step forward on how we're going to open it up with business partners. And that's consistent with what we said at the last rising.
We were gonna be in early adopter mode. Basically every one of our big systems integrators is lined up to either, want to extend on behalf of customers or come up with ideas where they would like to build their own intellectual property on top of the Workday cloud platform, and it you know, I'm, right now, my goal is to actually, keep expectations, both from a bookings perspective and a customer perspective in check because it's, you know, it's an exciting new move for the company. But just stay tuned for rising when we open it up more to the broader ecosystem.
Your next question comes from the line of Kash Rangan with Merrill Lynch.
Congratulations on the quarter. And I'm curious to get a little bit more perspective on the sequential growth in the backlog, which was quite impressive. And what in rank order of descending terms of priority, where the product sets that contribute to the significant growth and backlog And I'm also wondering if at this point in time, the headwind that has affected the calculation of deferred revenue, short term deferred revenue due to invoicing durations coming in. Are we well past the anniversary so as to expect a more moderate set of comparisons for this particular metric since the invoicing terms had been coming under pressure, but presumably that should go in exchange. Just want to clarify these 2 things.
Thanks.
Yes. So cash on the backlog, There are really 3 main factors that drive the incremental backlog number, and that is net new ACV, obviously, Q4 being our strongest quarter. You saw a similar trend Q4 last year in the backlog, where we got our largest increase quarter over quarter in Q4. Additionally, renewals add to that backlog number. So any contract that renews during Q4.
That contract value goes into the backlog as well. And Q4 being our historical seasonally high quarter. We've got a lot of back renewals that happened in Q4 as well. And then duration, we did see a slight uptick in duration in Q4. But it wasn't a meaningful change from prior quarters.
So those are the big drivers. We expect seasonality in backlog to be very similar in FY 2019 as what you saw in FY 2018, meaning really flat Q4 to Q1 and then some incremental movement in Q2 and Q3. And then another big increase next Q4. So this represents normal seasonality for us. On the deferred revenue front, as you know, we've continue to structure deals in a manner that best serves the long term interest of Workday and the customers.
And our business isn't linear and contract structures can vary particularly with the larger ones, which means that we expect both billings and unearned revenue to continue to have variability quarter to quarter So I don't think we're going to really lap anything that will give us consistent consistency. I still expect it to vary. We did think it would be helpful to give you some color on what we're seeing in current unearned from where we stand today, the year could unfold in a different manner because it really will depend on some of the new contracts that we do and how those shares play out.
Your next question comes from the line of Ross MacMillan with RBC Capital Markets.
Thanks so much. You mentioned that growth from international and from financial management are obviously going to be incrementally large in 2019 than 2018. Is there any way to, to sort of parse those out? And as a follow on, I'm curious especially in HCM, given the success we've had in the U. S.
In the last 12 to 18 months, especially in large Fortune Fifty account, does the onus begin to shift towards international wins a little bit more as you look forward?
I'd first say that, the U. S. Market continues to be a very healthy market for HCM. There's still a number of companies that have not made decisions I think the trend in, in the parts outside the world, I'm going to turn it over to China, is that we are both experiencing markets that are later to the cloud. And so we're, we're, we're seeing the early adopters.
And 2, we're opening up new markets. Maybe you want to get into more detail about what you're seeing internationally? Yes, we're getting more mature
in some of the markets that we're already presence I'm definitely with great customer reference abilities, opening more opportunity to ask, which the team is executing well on. And as Anil is saying, we are expanding into new markets, which opens opportunity as well.
And Robin, any comment on financials and international within the backlog mix or any other way to think about that?
If you look at the Q4 data as a point, the representation of financials in international is pretty balanced, meaning that they also contributed well to the growth and to our best ever quarter.
And your next question comes from the line Brian Schwartz with Oppenheimer.
Yes, hi. Thanks for taking my question. And Neil, I just wanted to ask you if you could comment on the business linearity and quarter. You're one of the first companies to report with the January quarter end. We saw very strong results in the December quarter from the SaaS companies.
There was a change with tax reform and the regulatory environment. It seems that the business optimism has picked up since the start of the year. Maybe hard to parse that given the 3rd month is typically strong in enterprise software. But can you comment at all on the cadence of the business activity? And what you saw in the linearity during the quarter?
Thank you.
Yes. It's a pretty healthy business environment, frankly, Across the Globe now. And, I was, I was interviewed on CMBC during the World Economic Forum. I always get a little nervous when everybody is so optimistic, but I would say right now, there's optimism to be had really across the globe. What's driving what's driving Workday though is this is focus on really 2 things.
The, the transformation of the HR function into a people oriented leadership oriented talent oriented function, and it's, and it's hit the CEO agenda. And it's, it's happening across the globe. People realize that we're in a very competitive job environment and their but are their most important asset. And we just have far more proof points of success, not just of deploying, cloud systems, but actually people getting the benefits of that transformation. And now we're beginning to see that same, that same cycle with the finance organizations.
And so I think people are looking at this environment as, hey, business is good. Let's get on with getting ready for the future and looking at how we're going to be more competitive against our own set of competitors and is driving a lot of interest in the products we have I also think the last piece is that we're seeing the linearity has been strong all year. That's kudos to Chano and his sales team. I don't think the 4th quarter was any different, strong linearity through every quarter. The conversations we're having with companies are much more around the business drivers rather than our quarter end drivers.
And that is a really healthy, healthy change, change for us. And on our previous question, we talked about the, I think Ross had asked about financials. We said we experienced 45% growth in customer count. That's a pretty good proxy for ACV growth, too, just to give you just to give you a little more sense as to the growing strength of our financial product line.
Your next question comes from the line of Karl Keirstead with Deutsche Bank.
Thanks. Robin, I wouldn't mind going back to your decision to give us some much comment on that metric in a while. And I just wanted to dig a little bit into why you felt comfortable now. Is it that Workday is getting to be sufficient scale. Maybe the volatility around payment terms is a little bit less.
Your visibility into the pipeline is a little bit better. What gave you the comfort maybe to give us a little color where you haven't for a good 12, 18 months?
Yes, Karl, it was really the recognition that even though we're not focused on billings, we know that it's something that, all of you have been using to model that way. We just want to give you some color because there is a lot of variability, right? And the historical trends really don't apply, and we expect them to continue to not apply going forward. And so we thought it would be helpful to take some of the noise out of the system to give you guys just a little color in the just what we're seeing as we go into the year and what we expect.
Your next question comes from
and congrats on a nice end of the fiscal year. Anil, I was wondering, can you just talk a little bit about within the financials business where you're seeing some momentum from a vertical perspective? I know this market relative to HCM is a little bit more sold at into a vertical. So I was just kind of curious where you might be seeing some nice uptick both in terms of deal signed as well as you look into your pipeline? Thanks.
I'll offer up a couple of comments and then ask Chandra to weigh in as well. We have, we have stated strategies around several key industries. The first one was education and government. 2nd was health care. We've been doing more work in financial services.
And then I think the last one is technology. And those are really the four places where we saw, continued strength with our financial manager products in particular. Financial Services continues to be a great market for us. The 2 wins we highlighted, the family health insurance and Quicken Loans are 2 great names in the financial services area. But when you look at the wins in healthcare, those that they have been strong as well and the education and government heritage from 5 or 6 years ago continues to be a really strong driver for us.
Anything you want to add, Chano?
Those are really the key strong ones. Those are potentially where you see the stronger pipeline. Potentially, the only one to add would be, hospitality and in some areas, business services as well, but the key ones are the ones you highlighted.
And I think, I think as China laid out, new industry or those additional industries, I think what you should expect from Workday over the next 12 to 18 months is we will become more industry from our go to market, messaging, our go to market organization and our products beginning to reflect some of that industry specific capabilities that our customers want.
If I may add, Anil, there is also increased interest in areas like retail, where our solution can fit very well for companies that will do their merchandising and logistics on separate systems, which is a very common practice as well. And that's a big, large interesting one.
Your next question comes from the line of Keith Weiss with Morgan Stanley.
Excellent, guys. Thank you for taking my question and very nice quarter. I wanted to a little bit bigger sure about the financials opportunity. In our CIO survey work over the past year, we've seen actually ERP rise in priority. Are you seeing anything from an industry or sort of macro perspective that you think is driving guys more to sort of evaluate how they're doing financials, how they're doing ERP that could be in addition to just the product getting better could be helping that overall business?
I think there's 3 things. Number 1, the CFO organization tends to be a conservative organization for all the right reasons. They're not going to be the 1st years of new technology. I think it's pretty well established now that the cloud is mature technology that works across the biggest companies in the world and frankly more secure than the legacy systems. So I think that's number 1.
The cloud has become main stream from the CFO perspective. Number 2, the finance organizations are trying to transform themselves into being better business partners to the business. And that involves, being better at planning and being better at analytics. So our message of planning analysis and execution all wrapped into the same system is beginning to really resonate. Where just a new accounting system wasn't enough to drive change, The whole vision that we're able to present gives the CFO and their team a way to really transform the CFO organization And then I'd say the last thing is the, the product capabilities that the product as it matures from a global perspective just continues to open up new markets and people don't look at it as something that's 2 or 3 years down the road.
Many companies can look at it and say we can make this change right now.
Your next question comes from the line of Scott Berg with Needham
Hi, everyone. Thanks for taking my question and congrats on a really good quarter. I guess my question is I don't know if for Aneel or Chano, but around the implementation efforts for the financials platform with some of the uptick in deals that you've had, are these deals to be implemented by partners or direct? Imagine that Fortune 100, when might be, might be more of a direct type of implementation, but just wanted to see how you're planning for those over the next year?
In the HR world, as well, it's far greater than eightytwenty being done by partners. I think it's probably 85, 15 at this point. Financials is, was fiftyfifty, but it's beginning to also become more partner centric On the Fortune 100 account, you, you mentioned you're absolutely right. We decided to take the lead role, but it's very important for us to continue to get skills into our ecosystem. So we are subbing out work to our partners so that the next financial opportunity that pops up, they could lead ourselves.
And that will continue to be our strategy. And I think in 2 years, we'll be at pretty similar levels on the services, services component for both HR and financials. Anytime we have a newer initiative and we're really trying to prove out customer success, in the case of Prism Analytics right now, we're going to be front and center just to ensure cutters customer satisfaction.
Your next question comes
has really been fixated on these Fortune 500 financials deals for you guys for some time. So maybe, Anil, do you see these 2 signings representing an inflection point for, Fortune 500 from a pipeline perspective. And is it possible at a high either for ACV growth in fiscal 2019 as a percentage of total bookings contribution to get a sense for how you're thinking about targets for financials or how we should think about them?
Yes, I personally think there's too much focus on the Fortune 500 accounts. Although we are very happy with where we are, from fiscal year 2018 and the pipeline for fiscal year 2019 has a lot more of them in there, they're just hard to predict. I think the important trend is that across the board, finance is becoming mainstream in the cloud. And when you look at the medium enterprise, which in many ways is our bread and butter business. We have a huge advantage over any competitor in that HR and finance delivered by one vendor in a unified system.
Almost everybody else is cobbling together multiple technologies. And The idea for a medium enterprise company to want to integrate multiple solutions for multiple vendors is just not, it's just not very practical. They just don't have the skills Well, they have the skills. They don't have the IT, scale to do all those integration. So the idea they can get a lot one vendor is really, is a really great opportunity for us.
And we really, in that medium enterprise, we really stand alone as the only one that can deliver that the fully unified solution. But on the Fortune 500 accounts, I think we're now beginning to see the movement it's going to continue to be lumpy. We can't predict when they land, but they're in the pipeline. And now we have some really good proof points. AAON is pretty far along the way, to close the books for globally for the first time.
So that's, that's gone really well. I think a lot of people are looking to see what they do post this next few months. You know, with this Fortune 100 company, it just opens up a new new scale of opportunity for us. I think in the traditional Fortune 500, they're all beginning to look at financial systems in the cloud now.
Your next question comes from the line of Philip Winslow with Wells Fargo.
My question, a question to sort of a neon channel. Obviously, you didn't mention about another large Fortune 100 at this on the financial side. But if I think about over the course of this whole fiscal year, there's been a number of large displacements, both financials, but in HCM, when you look back on over the past 12 months, is there anything that you'd suggest from just a competitive standpoint versus, let's say, the 3 kind of legacy players where either win rates rates are improving versus those competitors or as you look at the pipeline for this coming fiscal year, where the opportunity set is really starting to diverge and you think there's sort of a greater opportunity for some because of some sort of competitive window versus any of these given players?
You know, we've said this on past calls, win rates have been fairly consistent over the last few years. I think what continues to be the case for both HCM and financials. Customer success and proof points really matter especially in those large Fortune 100 situations where, frankly, cost is not the driver. They just cannot afford to have a failed project. It's huge investment.
They usually have a burning platform issue or a major transformation they wanna get done. And they call around to the different vendors, customers, and ours are really happy. And a couple of years ago, it was still early enough where it was hard to compare But now it's very clear that Workday has the happiest customers, and I think that continues to drive success for us and that is, you know, that's our golden goose. We gotta protect it. If I were to, if I were to say one thing about financials on a competitive side, It really is just it really is just two players in the cloud.
SAP does not have a cloud financial offering That's just not our perspective. That is the analyst perspective. There is, there's nothing to evaluate against. So, most of the opportunities for cloud financials come down to us in Oracle, and it's a plenty big market for both of us. Without getting to the commentary that they say or what we would say, I would just say it's a huge market for 2 vendors and we really like our position right now.
Your next question comes from the line of Brad Redack with Stifel. Great.
Thanks very
much. And Neil, I think last quarter you said Financial Management ACV grew at least 50%. Obviously, you said 45 a little while ago. Given the big signings, I'm just trying to understand what may have caused that deceleration? Thanks.
Honestly, I know it's at least 45%. I was asking Robin, I don't know what number was? It's not deceleration.
It's more than it was last quarter.
Yes.
I know you said it is a good proxy.
I said it was a good proxy in terms of recount, but it's better than, yes, whatever Chano said.
It's not deceleration, it's deceleration.
Your next question comes from the line of Buhavan Suri with William Blair.
Hey, this is actually Vanae on Thanks for taking my questions and congrats on the quarter. Just want to talk about mid market. I know you haven't touched on that. Could you provide a nail commentary on what the market was like in Q4 within the mid market and what that pipeline looks like with fiscal 2019 and then I have follow-up for Robin. Thanks.
I would say in the mid market, less so about Q4, but generally the trend for the year was that our win rates past year, the medium enterprise were better than they were the previous year. And I think that's, that's due to great sales execution by Doug Robinson and his team in the U. S. We're getting to roll out the medium enterprise story in, in the rest of the world. And, Andre O'Toole and the development folks in Ireland have been coming out with, with, better and better tools to reduce the cost of implementation, which we've always said is the biggest driver for our success in the medium enterprise, software costs are similar.
Our implementation costs were a bit higher and we're beginning to address that with these implementation tool. So, our win rates went, I think historically, we're in the 50% range in the medium enterprise and they're significantly better in, fiscal year 2018.
Got it. That's helpful. Robin, just wanted to follow-up on the 2 large enterprise financial wins. I know you've mentioned talking about focusing on the longer term and looking at contract structures that focus on long term value. I'm just curious, would these 2 large Fortune 500 wins?
I know they're still early, but Are they more ramped in nature than maybe some of the strategic HCM wins or any color to help us think through that?
No. They're actually not unusual in structure at all. They're fairly, standard structured deal
And your next question comes from the line of Samad Samana with Stephens Inc.
Hi, thanks for taking my questions and a very, very nice quarter. I guess, I wanted to ask on Prism Analytics. It looked like there was a big jump in and to sign up a number of customers now that it's generally available. Is there any particular profile of the adopters that you've seen so far and maybe color on what they're either replacing it with or are they treating it as an add on to existing BI implementations or is it a replacement? And then Robin, maybe if you could just remind us how the pricing model for Prismworks, that would be helpful.
Thank you.
It's still too early to tell in terms of patterns, the number 45 was a bigger number than I had expected, whether it's replacement for BI or additional project you know, I think it's too early to tell from a 202100 customer base to know what 45 think What we are seeing are use cases that are very, very valuable from a customer perspective. And in all the cases so far, they're marrying data from other systems with Workday to get to insight that they could not have gotten on their own. The, the prison products was built around the platform technology that we acquired 2 years ago. It was rewritten in a pretty broad way to work within the Workday cloud construct and be completely unified with the rest of the platform. It has this great ability to get data in and then to transform it to fit to fit our RBI strategy.
And so some examples have been for, for hospitals where they they're able to take, HR data, finance data, and patient data and better understand the profitability or lack thereof of certain procedures and certain patients. And, that's the kind of analysis, bringing multiple types of data and allowing them to do it really quickly and simply that they they're not able to do. So I think we're gonna see a whole host of use cases around it. My gut tells me many of the use cases are gonna be very industry Civic, there'll be a set of healthcare use cases, set of financial services use cases, and they'll be using Workday as that system of record to bring in their core business data whether it's health care data, patient data for a health care organization or trading data for a financial service organization, bring it into prism and then do the rich analytics that they've always wanted to do.
And in terms of pricing, prism pricing is structured largely like most of our other products are, as a percent of HCM, and it runs approximately 40%.
We will now take 2 more questions. Your next question comes from the line of Adam Holt with MoffettNathanson.
Great, thanks. And I'll echo the congratulations. Looks like a really nice end of the year, well done. I had a question for Aneel and then one for Robin. Understanding that billings is just one metric to look at.
You beat the street by more than 10% this quarter and it was a real outlier from a growth rate perspective, well above the last couple of quarters and well above the forward guide. Do you think you're getting to the scale where you're just going to see more backend loading of the year or more concentration of the larger deals in Q4? Any thoughts around that? And then a question on cash flow for Robin.
Yes. So Adam, I do think that what you're seeing here is the compounding seasonality effect, right, that some of our peers have as well. And I don't see that that will change anytime soon. Then on top of that, you also have the variability of different contract structures, right, which just make it a metric that's very, very difficult to predict. And it becomes less meaningful to really our model and our focus on long term revenue growth on a subscription basis.
Got
it. And just on cash flows, we think about cash flow for next I know you didn't guide to it, but just to put some parameters around it, it seems like there are a few things that converge in fiscal 2019 that should drive strong cash flow, whether it's the mix of revenue changing, the anniversarying of some of the deal terms, there's a few different things. How should we be thinking about growth of cash flow relative to either revenue or the soft billings guidance that you gave? Thank you.
Yes, Adam. So I actually did guide cash flow at 30% growth, which will give us cash flow margins in the mid to high 22%, right, which is higher than they've been in the past. And I would expect over the coming years that we'll continue to see strength in cash flow and cash flow
Thanks for taking my question and congrats also on the quarter. So changing a little gear, a little bit. As you're expanding in general, especially in financials, are you seeing increasing client requirements for local cloud data centers delivering your functionality in the country that the client specifically is? And how do you expect the plan to be able to meet those forms? Thanks.
We have been, we have been distributed from a data center perspective for, really, for almost our entire history. We have, several data centers in the U. S, several data centers in Europe. We're opening up 2 data centers in Canada through our partnership with AWS We were a, we were, a leader and, way ahead of the pack in, in, adopting GDPR and actually working with the EU to be, to be, really a progressive company and making sure that the data is protected around the globe. So at this point, we don't really have any, any concerns.
If we do down the road, it's likely that, if we have to open up an specific country. It's likely that, we, we'd use a 3rd party provider like an Amazon to out there.
We thank you for your participation in today's earnings