WDAY - NASDAQ

Welcome to Workday's First Quarter Fiscal 2024 Earnings Call. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of the call. During the Q&A, please limit your questions to one. With that, I will now hand it over to Justin Furby, Vice President of Investor Relations.

Thank you, operator. Welcome to Workday's first quarter fiscal 2024 earnings conference call. On the call, we have Aneel Bhusri and Carl Eschenbach, our Co-CEOs; Barbara Larson, our CFO; and Doug Robinson, our Co-President. Following prepared remarks, we will take questions. Our press release was issued after close of market and is posted on our website, where this call is being simultaneously webcast. Before we get started, we want to emphasize that some of our statements on this call, particularly our guidance, are based on the information we have as of today and include forward-looking statements regarding our financial results, applications, customer demand, operations and other matters. These statements are subject to risks, uncertainties and assumptions that could cause actual results to differ materially. Please refer to the press release and the risk factors and documents we file with the Securities and Exchange Commission, including our fiscal 2023 Annual Report on Form 10-K and our most recent quarterly report on Form 10-Q, for additional information on risks, uncertainties and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of Workday's performance. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results in our earnings press release, in our investor presentation and on the Investor Relations page of our website. The webcast replay of this call will be available for the next 90 days on our company website under the Investor Relations link. Additionally, our quarterly investor presentation will be posted on our Investor Relations website following this call. Also, the customers' page of our website includes a list of selected customers and is updated monthly. Our second quarter fiscal 2024 quiet period begins on July 15, 2023. Unless otherwise stated, all financial comparisons in this call will be to our results for the comparable period of our fiscal 2023. With that, I'll hand the call over to Aneel.

Thank you, Justin, and welcome to Workday's first quarter fiscal '24 earnings call. I'm pleased to share that Workday reported strong Q1 results and once again outperformed against our key operating metrics, which include a subscription revenue growth of 20% for the quarter. While the macro environment continues to be unpredictable, we remain positive about our future growth prospects for a couple of reasons. First, we got the year off to a strong start and have built a healthy pipeline of opportunities, which gives us better visibility into the rest of fiscal '24. And second, we're seeing the value proposition of the full Workday platform combined with our unique approach to artificial intelligence and machine learning, continue to gain momentum as more and more organizations across geographies and industries put their trust in us to help them drive the future of work. When it comes to AI and ML, we think about implementing differently than any other enterprise software company in the world. And we've been at it for nearly a decade, while many of our competitors are scrambling to catch up. We approach AI and ML with a heavy emphasis on being human-centric, using these capabilities to augment people in organizations to make them more productive, better informed to make decisions, and to help them reduce business risk. Several things set us apart. One, AI and ML are embedded into the very core of our platform, allowing us to rapidly deliver and sustain new ML infused capabilities into our products to drive more business value for our customers. Two, we have the quantity and quality of data that further differentiates us, meaning that we not only have access to an enormous amount of data due to the more than 60 million users representing more than 600 billion transactions over the last year. But we also have a unified data model that allows us to build and train models in a way our competitors simply cannot replicate. And three, we firmly believe that to deliver on the possibilities it offers AI and ML must be leveraged in a trustworthy, unethical way. Workday has always been a trusted partner to help companies keep their most critical assets, their people and money, safe, secure and private. This approach becomes even more essential when leveraging AI and ML. As you know generative AI is driving the AI and ML discussion right now. Despite the recent hype around large language models, Workday has been delivering AI and ML including LLMs for several years. We believe we need to look past the hype cycle and identify the real ways our customers can extract business value from LLMs. Today we're using generative AI tools behind the scenes to help power products like Workday search and skills cloud, while exploring a variety of generative AI use cases for our customers. For example, we're looking at many content generation use cases within our Workday talent management, recruiting, financial management, and core HCM applications. Additionally, for years, we have taken a leading role in AI focused policy discussions at the federal state and local level in the U.S., while partnering with the European Union and other governments around the world to provide thoughtful and concrete policy approaches to responsible AI. Simply put, we believe AI technology should be regulated. This is an area that you will continue to hear more from us in future quarters, and I look forward to sharing updates about how Workday is helping to drive AI policy globally. Moving to our core set of applications, we continued our investment in Workday Peakon Employee Voice by recently unveiling semantic search capabilities, which leverages AI to analyze millions of employee comments and present the most meaningful insights. While manual keyword searches take hours or days, semantic search can analyze employee comments in seconds to quickly provide leaders with the insights they need to address emerging workplace trends. Employee engagement is one of the biggest hot buttons for CEOs today, and we're continuing to see more organizations turn to Peakon to help them stay on top of and address employee sentiment. In fact, Peakon hit a significant milestone in Q1 as it surpassed more than 500 million total survey responses, and 70 million written comments, providing us with one of the world's largest standardized datasets on employee sentiment. For the office of the CFO, we recently unveiled predictive forecaster, a capability within Workday adaptive planning, that creates ML-based forecasts with the ability to add additional regressors and datasets. The feature which is in limited availability today, supports our next evolution of Workday adaptive planning to produce increasingly predictive plans and enhance insights to help organizations more effectively navigate today's business landscape. Another important innovation focus area for us is to be more open and connected. Whether that's by providing an open and extensible platform or by working closely with our partners to deliver added value to our customers. For our Workday platform, we're continuing to deliver tools and capabilities that simplify and enhance application development with Workday Extend. For example, we introduced our first set of ML APIs in Q1 to enable our Extend customers to build extensions that leverage ML. We also released low code no code development functionality with App Builder. enabling developers to create apps with Extend via a simple drag and drop user interface. And we built on our decade plus partnership with AWS to create a native integration from Extend to AWS. With this integration, developers can easily and securely leverage AWS services in their Extend applications. The integration is in early access with GA to follow later this year. Extend which surpassed 500 customers in Q1 continues to be a major differentiator for us with the office of the CIO. Additionally, we held Workday DevCon, our third annual developers conference earlier this month. In person attendance for this year's event grew by nearly 200% over last year, which is a testament to the excitement we're seeing from our customers and partners to build on top of the Workday platform, not only with Extend, but with Prism, Adaptive Planning, Journeys and Integrations. And on the partner front, we recently announced an expansion of our partnership with Alight to deliver an integrated payroll experience to customers across six key regions for us in Europe, Benelux, Germany, Italy, the Nordics, Spain and Switzerland. As you know Workday's core values are foundational to everything we do, and guide the decisions we make. In recognition of our efforts to always strive to do what's right. I'm pleased to share that Workday for the third consecutive year, was named one of the world's most ethical companies by Ethisphere. Additionally, we continued our commitment to sustainability by joining Frontier, and advanced market commitment to accelerate carbon removal. Finally, I want to note an organizational change that we will be making. After nearly nine years with Workday, Barbara Larson, our current CFO is stepping away to spend more time with her family. During her time with Workday, Barbara has served in several senior leadership roles across our finance and product organizations, has played an integral role in shaping Workday into the company we are today. I'm extremely grateful for her friendship and for the countless contributions she has made to the company. And I wish her nothing but the best in her next endeavor. With Barbara leaving, I'm pleased to announce that

Thanks, Aneel. And thank you everyone for joining today. I want to start by offering my sincere thanks to Barbara for all she has done for Workday in her nearly nine years here. As a Board Member and now as Co-CEO, I've had the opportunity to watch her grow and help drive Workday forward across her many leadership roles. Without question, Workday is a better company because of her. We will miss her and we wish her well. As we searched for a leader to take over as CFO [indiscernible] and I cannot think of a better person than

Thanks, Carl. I appreciate the kind words. It's been such a pleasure to work and grow alongside you, Aneel and this entire organization these last 9 years. But after much thought, I know this is the right time for me to step back and focus on my family. And I can't think of a better person to pass the CFO reins to than

[Operator Instructions] Our first question comes from the line of Kash Rangan with Goldman Sachs. Please proceed with your question.

Considering that it's a Q1 and macro headwinds are persistent, this is a significant outperformance in the backlog. So congratulations to the team Workday. One quick one for Aneel. With generative AI, what is your view on how Workday can potentially get paid? Is it to a new SKU or improvement in ARPU? And if I can slip one for Carl, any update on the net new business back-to-the-base initiative and how that's powering through these results would be useful. Thank you so much.

So I think touch the part about ChatGPT and then or generative AI, and then what was the follow-on to that?

How can you monetize it, Aneel, in terms of a new SKU or an ability to charge more for the productivity improvement that you can offer to your customers?

Yes. I think in general; AI and ML are technologies that all customers should expect to be embedded in their products. The way we've thought about it is using it to enable products that couldn't have existed before. We announced some of them as new SKUs, but our big ones so far have been Skills Cloud. That just couldn't exist without AI/ML. You could say the same about Talent Optimization. As it relates to generative AI, by the way, those are based on generative AI maybe not ChatGPT, but generative AI. And Skills Cloud is a great example of a large language model as well. There's other SKUs coming down the road. There's content generation. You could think about the one that everybody talks about, performance reviews as an example. There are ways to monetize it, but we want to make sure it's a brand-new product that couldn't be built without it. And I would just say stay tuned. You'll see us start rolling things out, but we're doing things around generative AI very carefully to make sure that we follow our path on ethics and security and doing it the right way.

Yes. Kash, as it relates to the net new business, as you can see, we had a really strong start to the year here in Q1, and that includes our net new business or our new ACV business. And it was across all industries. It wasn't specific to one. It was across all industries. It was across all market segments. And geographically, we saw strong performance both in the U.S. and in EMEA as well. So our net new business is the lifeline of Workday. It gives us the customer installed base to sell back into. And we saw a strong performance in Q1, and that was reflected in our guide for both Q2 and the rest of the year.

Our next question comes from the line of Mark Murphy with JPMorgan. Please proceed with your question.

Congrats on the great consistency. And Barbara, best wishes, and thank you for everything. Carl and Aneel, in this environment, are you better off spending the next incremental dollar on financials or on products that help to navigating this challenging labor market, like recruiting and skills cloud and talent marketplace. I'm just wondering where you see stronger prioritization and willingness to buy. And then, you did mention a significant expansion with ExxonMobil. I'm a little surprised because I recall that as a very large planning deal just announced last summer. Can you just clarify why the expansion is so rapid there?

On the R&D side, they're long-term investments. And I feel very comfortable that they're all fully funded. I think in this environment, it's more of a question on how you allocate go-to-market resources. And that's really up to Carl. So Carl, how would you think about that?

Yes. Sure. So we saw a really solid performance in financials this quarter. And as we talked about last quarter, we were doubling down on go-to-market around financials and hiring a significant number of quota-carrying capacity reps. And we're going to continue to do that because of the pipeline that we saw build specifically around financials. We also called out in our prepared remarks that we continue to see a lot of momentum in our land business, specifically around planning. We land customers with planning, and then they come right back in and buy both. Financials, obviously, but we're also seeing people buy HCM on the back of a planning land because of workforce planning. In the example of Exxon, we only had a portion of their business for Planning, and they expanded it much more broadly across their entire business because they saw the value that they got from that platform that they started to use a year ago. So again, planning is a good lead-in for us, and we'll continue to invest in go-to-market around financials because of both the strength of financials and the planning land business we see today.

Our next question comes from the line of Keith Weiss with Morgan Stanley. Please proceed with your question.

Very nice quarter. I wanted to ask a question really about the macro environment and what you're seeing out there. You referred to it as still uneven. But like the idea of customers co-terming and sort of pulling forward contracting seems a little bit more aggressive than what we saw, like this time last year when customers were delaying deals and shifting it out. So one, should we take that as any indication on kind of the overall macro environment? And then as a follow-up, I just wanted to ask about that state of Iowa contract that was in the news that got canceled. Did that have any impact on the quarter in terms of RPO or bookings or is that already out of there? Thank you.

Yes. Thanks, Keith, for the question. I think it's consistent from what we described last quarter. There's an uncertain environment out there which, in some cases, caused customer uncertainty, increased scrutiny. We're seeing the CFO be involved in a lot more deals. And in some cases, we're even seeing lengthening of sales cycles, but that's specific, if you will, more to net new opportunities. And even if they get pushed out, they don't go away. They just push out by a quarter or 2. That being said, we couldn't be more proud of how we executed in Q1 with this backdrop. And one of the reasons we think that's the case is because companies continue to prioritize both HCM and financial transformations to support two of their most critical assets: their people and their money. And in an environment like this, we're starting to see our value proposition actually only become that much stronger. The reason for that is we think our platform is a consolidation play. And as people consolidate more on to a specific platform, there's a total cost of ownership benefit that they get. And if you think about the headwinds most of our customers are facing specific to the HCM platform, they need to drive two things, they need to drive productivity gains and they also need to make sure their employee experience is at the highest level, and that's exactly what we do on the HCM side. On the financial side, the value proposition also is resonating in this environment, why? Because finance role has continued to change in an environment like we're playing in today. They have to be agile and nimble. They have to be able to do forecast, and they have to make quick [indiscernible]. And we just see this as another example where our platform play on the financials only get that much stronger. So I think overall, we're not immune to the environment that's out there, but our value proposition is resonating more than ever in a market like we're dealing with today.

And then, Keith, this is Barbara on Iowa. We don't provide customer-specific revenue or backlog disclosures but do keep in mind that no single customer is material to our business.

Keith, Doug Robinson here. I'd just say that the storyline for me of the quarter is the diversity of the business. And so you talk about the macro, it's sort of the core of your question. And there's enough diversity in that business that we're not seeing where there are pockets of weakness, we have lots of diverse lines of business where we do see industry a lot of strength. And specific about like the early renewal comment, I think that's just a function of not a focus or any specific sales play that's being run, but I do think it's a function of we're getting a larger percentage of our revenue from our existing customer base doubling down and back to rationalizing a number of suppliers.

Our next question comes from the line of Kirk Materne with Evercore. Please proceed with your question.

Congrats on the strong start and, Barbara, best of luck going forward. Aneel, I was wondering if you could just talk a little bit about the unified data model and then the explosion of interest around AI. You guys, as you mentioned, have been investing in AI for a while. Can you just talk a little bit about how much of an advantage the unified data model is, as you bring in more generative AI into the product suite versus if you didn't have that? And I was just curious do customers recognize this, meaning when they're making a bet on your long-term product portfolio, do they realize the benefits of this model even more so as we start talking about AI in a bigger way? Thanks.

Well, I think it's a great question. I think it's our job to explain to them the benefits of the unified data model, and it's a huge advantage, right? We have a data model that we can run huge algorithms against that are not just all of HR, but it's all of HR and finance. And if you wanted to bring in third-party data, we can bring that in through Prism Analytics. If you think about a company that's been built through acquisition, the first thing they need to do is figure out how to get all the data and probably have to dump it into a data mart where you lose a lot of intelligence along the way, kind of lose the data model alongside. So it's huge. But the other part that's huge for us is the amount of data we have in a normalized multi-tenant fashion. We have over 60 million employees in the system and hundreds of billions of transactions every year. We have a huge advantage on the data being in a way that makes it easy to run algorithms against, where I just think for almost everybody else, it's so hard just to get the data all in one place and then they don't have the data sets that we have.

I would say, too, from a sales perspective, we see it now becoming part of the buying criteria and part of the decision-making, whereas a year ago, there wasn't perhaps the customer pushing it so much as the sales teams and the consulting teams trying to demonstrate the value of it and shine a spotlight on it. Even within customer base now, we've always done, as Aneel mentioned before, predictions and recommendations based off of AI and ML, and customers have been using that for years. And there's now set an interest in understanding how we go about doing that in deeper detail.

And one other piece architecturally, a lot of companies are approaching AI and ML as something brand new, so they're trying to attach AI and ML technologies to the applications. Our applications have that in their foundation through the technology set or the tool set. And that goes back really to 2014. We've always looked to the consumer Internet as a guiding light for where new technologies are first born, and then we apply them in a secure way, in a way that protects data privacy. So we've been at it for almost a decade now honing in. And I think ChatGPT, and conversational AI is an important next step, but we have all the foundational elements. And I would not forget about the value of more traditional AI and ML techniques because we haven't even touched the tip of the iceberg about what companies can do to make their businesses better.

Our next question comes from the line of Brent Thill with Jefferies. Please proceed with your question.

Aneel and Carl, financial services, I believe, is one of your largest verticals. And many are curious ultimately what you saw post March. Have you seen any change in terms of appetite there? I'd just love to get your thoughts on the overall vertical.

Yes. Sure. Thanks, Brent. Yes, it is one of our larger verticals. In fact, a few quarters ago, we talked about crossing $1 billion in ARR in this vertical. So it continues to be really important to us and strategic. It's important also to note though, Brent, when we talk about the financial services industries, it's inclusive of many things, including insurance, asset managers. We have investment banks there, commercial banks and regional banks. But as a whole, we were really pleased with our performance across the financial services segment this quarter. Specifically in the U.S., in our large enterprise segment, we saw probably the best quarter out of all the things I articulated there. At the same time, the regional banks, the regional banks fall more into our medium enterprise business here in the States. And we did see a little bit of softness in that business. But I think that was to be expected considering what was going on with the banking crisis in those regional banks. But overall, we saw a really solid performance in financial services.

Our next question comes from the line of Brad Sills with Bank of America. Please proceed with your question.

My question here is on the momentum you're seeing with those expansion deals, it sounds like, from planning to fins. I know this has been an effort that's been underway for a number of years, but it really seems like you're hitting your momentum here. What would you attribute that to? Is this just planning is becoming more or less a system of record, just given the need for analytics and the development of the platform, the challenging macro that need to change for forecasting and run ad hoc forecasting? Or is this more of an emphasis on kind of selling back into the base in that particular segment? Just curious as to why you're seeing the momentum now. Thank you.

I'll just answer the product piece. There's no question planning is a system of record. And I think if there was any question during the pandemic, it became very clear that companies that could plan and adjust faster and better were going to do better. And so it is now clearly a core system of record. So Doug and Carl will take it from there.

I mean I'd definitely say the product investments have helped our sales effectiveness with financial and workforce planning. But frankly, it's a simple answer, which is adding more Fins-focused sellers who wake up every day really focused on that motion and then partnering them closely with the team that lands with the planning so that there's great collaboration between setting a vision starting with Planning but setting a vision for a full platform with Workday.

Yes. I don't have anything to add. You said it well, Doug.

Our next question comes from the line of Alex

So maybe just the first one around the way that macro evolved throughout the quarter, did you feel like it was kind of -- it's still tough, but it's not getting worse? And then kind of exiting the month of May, any commentary that you would kind of compare? And then on a product point, a really interesting partnership around global payroll with Alight. As you look at customers that are increasingly wanting to consolidate functionality onto one platform, where does it make sense to partner versus -- build versus buy or partner versus buy functionality? And why was payroll, in this case global payroll, kind of the right one to partner on versus acquire?

Well, let's start with your last question, and then I'll follow up on the quarter and what we're seeing. Aneel, why don't you take the payroll.

Yes. So we have six of our own native payrolls. They're huge investments. And when you get to Europe and the works councils in particular, every country is very different. And it's always a trade-off about building a payroll versus HR Fins functionality that can be used in every country. There are great payroll solutions out there. Alight is a good partner. Frankly, ADP has been a very good partner almost since the start of the day of the Workday. And we have a good partnership in the field with them, a good partnership in the field. And really, what we want to do is provide choices to our customers and the more that we can do with integrations that work out of the box. Frankly, what it does is it opens up market for us where companies in some of these geographies, they expect HR and payroll to come together as opposed to just HR. So when we don't have payroll, we're not able to access all that marketplace. So these are really important partnerships to us.

Yes. And as it relates to the macro, the question was around whether we're seeing anything change throughout Q1 and the start of year Q2. And no, it's pretty consistent. It's very uncertain. And as I said earlier, we're clearly seeing deals go for another level or two of approval, including all the way up to the CFO office. And that hasn't changed throughout the last four months. In fact, it's pretty consistent with what we even saw at the end of last year. That being said, we're prepared for it. The teams understand this is going to happen. They're very prepared for these extra levels of approval. And I think we've navigated these choppy waters quite well. I will say, we also mentioned in Q1, we were going to be prudent with our guide both in Q1 for the full year based on the choppy waters we see out there, and that's exactly what we're seeing. And it's playing out in the guidance. And as you saw in our guide for the full year, we maintained it because of the healthy pipeline we built coming out of Q1.

Our next question comes from the line of Karl Keirstead with UBS. Please proceed with your question.

Maybe this is for Doug and/or Carl. But the HCM seat expansions can be harder to come by upon renewals in an environment where your customer base isn't hiring as aggressively. But it certainly doesn't appear from these numbers that was an issue for you guys at all. But I'd love to just comment on the seat expansion dynamic you're seeing upon renewals. Thank you.

Yes. It's a great question and one that we purposefully built into the plan. We expect it as part of this year's plan for some moderation there. And in fact, that did play out. Now the customers that did renew in the aggregate added more employees at the end of the quarter than at the time at the end of their agreement, but it did moderate just as we planned. So to us, it's playing out as we had predicted. No deviation up or down from it.

The only thing I'd add there, Doug, is if you look at the head count contraction in the market, I think it's much more acute in one industry versus others, and that's in hi-tech. So in a lot of our other customers where we did have renewals come up, they did expand their head count because not everyone is reducing their head count and doing risks out there in the market. It's much more acute in hi-tech.

Our next question comes from the line of Brent Bracelin with Piper Sandler. Please proceed with your question.

Clearly seeing good momentum here with the planning-first sales motion. I want to pivot a little bit to Extend, particularly on the heels of Workday DevCon. You're crossing over 500 Extend customers now. What are the types of applications people are building with Extend to run on Workday? And as you think about exposing AI and large language models, does that potentially accelerate the app build opportunity with Extend? Thanks.

Yes. I'd say most of the applications are basically, it's called Extend. They're usually apps that customers wanted to build that are either in HR or finance that are custom apps that they had before that they now want to move into the Workday environment. So it just helps them retire legacy applications and put everything in the same environment where they also get the benefit of those applications getting updated and move forward to the next version by Workday. So it's a very powerful opportunity. And exactly what you said around AI and ML is what we're doing. And if you think about the announcements, we made at DevCon, a lot of it was enabling AI and ML development. And of course, what we're doing with AWS was huge. That was probably one of the most exciting announcements we made at DevCon. Now people can natively build on top of AWS and have it represent through Extend and tie into the rest of their Workday application suite. I think Extend is still one of our best-kept secrets. And it's hard for me to see how every customer shouldn't want to have at least some presence of Extend in their Workday footprint.

We will take two more questions. Our next question comes from the line of Michael Turrin with Wells Fargo.

You're talking about a return to 20% growth, but still above that number. So congrats on that. Maybe just one on margin, you drove 200 basis points of outperformance in the quarter, still holding on to the full year guide. I know Barb mentioned some items around timing of expenses, but anything we should be mindful of in modeling out expenses for the rest of the year? And maybe, Barb, just any further comment on how you ensure there's a seamless transition given some good transition through the management team thus far? Thanks.

Yes. Thanks for the question. You're right. We outperformed Q1 margins. Some of that was due to a slower-than-expected hiring ramp and also some timing of certain expenses. So it's really early in the year. We have a lot of strategic growth areas of the business where we're looking to invest and help sustain durable long-term growth, while also planning to deliver healthy margin expansion this year. And in terms of the transition, I'm here through the end of July and focused on making this as smooth and as seamless as possible for

But I will add, you will be missed Barbara.

Our last question comes from the line of DJ Hynes with Canaccord. Please proceed with your question.

Congrats on the results. Maybe one on international. I don't think we've hit that yet. It sounds like you're happy with the leadership that's in place now. I think in the past, you've talked about some product gaps that need to be filled internationally. Maybe you could just talk a little bit about kind of where you are in that process and maybe in what markets you see the most opportunity to jump start international.

You want to go?

Yes, I'll start. So yes, thanks for the question. And it is a big focus for us here. We always talk about our TAM. And we talk about half of our TAM is outside the U.S., and only 25% of our revenues this quarter come from that market. And if you look at it globally, we're only penetrated 5% of our total TAM. And a lot of that's going to come going forward from our international expansion. In Europe, specifically, last quarter, we talked about a number of new leadership changes we made, and we're starting to see really good traction in Europe. In fact, the leadership we talked about last quarter continued. Just last week, we brought in two new leaders, both in France and a new leader in the U.K., so that team has hit the ground and they're doing super well right now. A number of us in the leadership team spent time in APJ last quarter as well. And we saw a tremendous amount of opportunity there in those markets. As it relates to the product, Aneel talked earlier about Alight, an example of us expanding our partnership with them to get more payroll in market. We've built out additional data centers over the last year in Singapore, in Germany, in Australia. And I think you can expect us also to look at the ecosystem, our partners going forward to expand our presence in international markets. We just recently rolled out a referral program for our partners. So if they bring us net new opportunities, they'll get paid. We launched that and we see that across EMEA. And we're also going to do some of that in APJ. So we're really pleased with the early signs of some of the transformation we're going to in the international market and it's going to come across all functions of the business, both go-to-market, product and our ecosystem.

Yes. And I would just add that the payroll is the big solution for a lot of those international markets. But there are capabilities required for Japan and Korea. They have a business process where thousands of people will change jobs once a year. And it's a very unique -- it's almost like a re-recruiting process. And it's been a chicken-and-egg thing, where without the pipeline, we haven't made the investments as the pipeline is building, we're making the investments in those capabilities. Japan is a country we should be doing a lot better in, and we have some product gaps that we can fill to make it better for the sales teams.