Welcome to Workday’s Fourth Quarter Earnings Call. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of the conference. With that, I will hand it over to Mike Haase. Please proceed.

Welcome to Workday’s fourth quarter fiscal 2014 earnings conference call. On the call we have Aneel Bhusri, our Chairman and Co-CEO; and Mark Peek, our CFO. Following their prepared remarks, we will take questions. Our press release was issued after close of market and is posted on our website where this call is being simultaneously webcast. Statements made on this call include forward-looking statements such as those with the words will, believe, expect, anticipate and similar phrases that denote future expectation or intent regarding our financial results, applications, customer demand, operations and other matters. These statements are subject to risks, uncertainties and assumptions. Please refer to the press release and the risk factors in documents filed with the Securities and Exchange Commission, including our most recent quarterly report on Form 10-Q for information on the risks and uncertainties that may cause actual results to differ materially from those set forth in such statements. In addition, during today’s call, we will discuss non-GAAP financial measures. These non-GAAP financial measures which are used as measures of Workday’s performance should be considered in addition to, not as a substitute for, or an isolation from GAAP results. Our non-GAAP measures exclude the effect on our GAAP results of stock-based compensation and for fiscal 2014 also exclude employer Payroll taxes on employee stock transactions and non-cash interest expense associated with our convertible notes. The fiscal 2013 non-GAAP measures also exclude a donation of shares to the Workday Foundation. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results, in our earnings press release and on the Investor Relations page of our website. Also, the customers’ page of our website includes a list of selected customers and is updated at the beginning of each month. The webcast replay of this call will be available for the next 45 days on our company website under the Investor Relations link. Our first quarter quiet period begins at the close of business April 16, 2014. Unless otherwise stated, all financial comparisons in this call will be to our results for the comparable period of our fiscal 2013. With that, let me hand it over to Aneel.

Thanks Mike. I’ll spend a few minutes on a look back at fiscal year 2014 and a very brief outlook on fiscal year 2015 before handing things over to Mark. Over the past year we experienced a significant amount of growth with the addition of 200 customers bringing year-end numbers to over 600. In particular, we’ve experienced increased adoption of our financials product, ending the fiscal year with more than 70 customers. The fourth quarter was the second quarter in a row that we experienced double digit new customer growth in financials. We attribute much of this momentum to market readiness and product maturity and expect this trend to continue. In fiscal 2014 we also added two key members to the Workday leadership team. Ashley Goldsmith, joined as our Chief Human Resources Officer and Chano Fernandez, joined as our President of EMEA. With more than 2,600 employees and an exciting growth plan, Workday is already benefiting from Ashley’s leadership in employee development programs and recruitment as we continue to open offices and attract top talent around the world. Chano’s vision and guidance will be instrumental to Workday’s future as more European companies make the shift to bring HR and Finance through the cloud. Even as we scale, we continue to earn top rankings from our employees and customers, earning the number one spot on two Bay Area Best Place to Work With last year and receiving a 97% customer satisfaction rating in our annual customer survey. Kicking to innovation, we delivered three updates over the past year, Workday 19, 20, and 21. Major highlights included the general availability of Workday Big Data Analytics and the completely redesigned new user experience for the browser built on HTML5. We’ve made significant progress in Workday financial management and Workday human capital management and…

Thanks Aneel and good afternoon, everyone. We finished an outstanding fiscal 2014 with a great fourth quarter generating record revenue, billings and trailing 12 month operating cash flows. Before I get into the fourth quarter details and our outlook for Q1 and fiscal 2015, let’s spend a little time looking back on our accomplishments this past year. Fiscal 2014 was a year of tremendous success financially and across our operating metrics. Total revenue increased 71% to $468.9 million and subscription revenue increased 86% to $354.2 million. Total unearned revenue for the year increased 45% to $413.6 million and we generated positive operating cash flows for the year. Non-cancellable subscription backlog at year-end was $636 million. So combined with unearned subscription revenue; we have over $1 billion of subscription revenue to be recognized in future periods or nearly three times our fiscal 2014 subscription revenue. The year-over-year increase in total unearned subscription revenue, plus backlog was 47%. We raised net proceeds of $1.1 billion during the year from our convertible debt and follow on common stock offerings and ended the year with nearly $1.9 billion of cash. Operating cash flows for the year were $46.3 million and free cash flows were a negative $29.6 million. Including our calculation of free cash flows is $10 million we invested in a 95 year ground lease for potential future expansion of our primary product development center in Pleasanton. For the full year, we significantly improved our operating margin. We are making a conscious decision to invest in product and market expansion and do not anticipate this pace of margin improvement in the near future. We still believe we are several years away from positive non-GAAP operating margins. However we expect continued progress in cash flow generation in 2015. We also added more than 800…

(Operator Instructions) Our first question will come from the line of Jennifer Liu from Morgan Stanley. Please proceed.

I wanted to drill into the financial component and this seems like it’s a second quarter in a row where you’ve talked about adding double digits in terms of new customers there. Are you starting to see an inflection in that business now? And to the extent that you are seeing an uptick there, is that a function of now your functionality being more comprehensive then it was 12 to 18 months ago or is it a bigger push from your sales force or more customer demand? What are some of the factors playing into the stronger ads that you’ve seen in the last couple of quarters?

Yes, I’m not sure I’d use the word inflection. I would say increasing momentum around financials. And I think it’s really due to three things. Number one, the product continues to mature, both from feature and function perspective and from a scalability perspective. Number two, we do have a dedicated financial sales force that did a terrific job last year and goes into this year with a lot more experience selling the product line and confidence that they can do well. And actually lastly, the market is definitely moving in that direction. We have a quite a few large companies where the success with the HR products have caused the CFOs to want to evaluate Workday for the finance side and it's not surprisingly very similar to the pattern of adoption that we saw in the late 90s with ClientServ and PeopleSoft where we went from HR opening up doors in financials. So, I think it’s a lot of things but it’s just gaining momentum in many ways like HR did four or five years ago.

And maybe tied to that, Mark and your guidance, you mentioned that the financial management and the investments that you’re making to get the implementation force up there is one of the impacts on Professional Services gross margins for this year, for fiscal ’15. Is it reasonable to think that as you look out a year from now that we should continue to see that that strong momentum building in the financials or is it just too early to make that kind of statement yet?

Jennifer, I was trying to talk towards Professional Services and the fact that we were making a ramped investment in Professional Services to handle financials customers while we train the ecosystem, but certainly as we look ahead to fiscal ’15 and beyond, part of our plan as that financials continues to grow at an accelerated ramp.

Our next question will come from the line of Heather Bellini. Please proceed. Heather, your line is open.

Operator, let’s move to the next one please.

Our next question will come from the line of John DiFucci. Please proceed, sir. Your line is open.

Can you tell you talk to us a little bit more about Identified and how it feeds into predictive analytics, and that’s what was described in the press release, and the Workday customer experience overall, and then Mark, if you could on the same subject, it’s a $15 million purchase. I realize that’s relatively small. But what's the theme going forward and maybe in the same context talk a little bit about the purpose of the equity raised in the quarter. You did a convert before that and now that you mentioned your cash flow from operations positive but not free cash flow positive, but you did say you’re going to see continued progress in cash flow generation in 2015.

Sure, on the Identified side, if the last five to seven years were about the emergence of the cloud as a new platform, for us I think the next five to seven years are about the analytics that can get built on top of that cloud platform. And so you’re going to continue to see investment, whether it’s our own Big Data analytics offerings as that we have rolled out or acquisitions like Identified. So very consistent with that. Identified had some unique technology, some search and machine learning capabilities that we are going to take and build into the core Workday platform. So it won't be adjunct, it will be built into the Workday platform. Most importantly they had and now we have very talented people in these two domains, in search and in machine learning and predictive analytics that will leverage the Workday platform into the HR and finance areas for these kinds of capabilities. So I'd say that more than anything else the acquisition was about the people that we were able to get. They are truly fantastic and have very unique skill sets.

With respect to moving forward, we did the capital raise, raised over $1 billion this past year and part of it was to put the balance sheet where we wanted it from a customer perspective. From time to time, some of our larger competitors will reach out in customer engagements and question the viability of Workday and with the cash on our balance sheet, those are questions we don’t have to answer any longer. And at the same time there are opportunities for us to continue to fill in the technology to find great teams of people that can help us accelerate our growth.

Our next question will come from Heather Bellini from Goldman Sachs. Please proceed

I was wondering if you could actually share with us, Aneel, kind of, can you give us an update on what add-on products you think are ramping the fastest and kind of which ones do you expect to ramp the fastest if you look out for this calendar year. The add-on products for HCM, my apologies.

Sure, so. I think payroll continues to be a very strong add-on in the markets where we offer payroll, like in the U.S. and Canada. There are other markets outside the U.S. and Canada where we are introducing payroll, in UK and France in the next few years. But in other places we don’t have that add-on capability. The one that has global applicability to date has been super strong in terms of early adoption is obviously recruiting. Quite honestly the number of customers that signed up was a pleasant surprise, given that the product is not yet generally available. We've also had strong traction around time tracking. Again it all depends on the workforce, but there is more of a global offering. So I would say that payroll is containing to be a strong add-on in the markets where we offer it. But the one that looks like it’s going to be the strong one going forward will be recruiting.

And then just a follow-up. Are any of those -- do you see those that pace of the expansion, do you see those accelerating? Because payroll has been a top performer, I think for a while as an add-on. Are some of the others catching up to that?

You mean like expenses and time?

Yes, exactly.

The basic pattern is that as the product matures and has customers hit moments in time where they hit a re-up for their legacy systems that we can replace and so in the case of both time tracking and expenses, the adoption rates have increased over time. But candidly, the recruiting one is in its own league so far.

Our next question will come from the line of Brent Thill from UBS. Please proceed. Brent your line is open. Brent you have an open line.

Operator let’s move to the next one please.

Okay. Our next person will come from the line of Raimo Lenschow. Please proceed.

The first one is on the competition front, are you seeing SAP or Oracle try to respond more strongly, given the ongoing momentum you have in financials?

Candidly, we don’t see much of either of them on the financial front right now. I think we see them consistently on the HR front. On the SAP side, I am not sure which product we would compete with. It’s unclear what’s happening with business by design, the financial offering and there really isn’t anything else. And in the case of Oracle Fusion, we just don’t see it very much in competitive situations in financials.

Right. So, just follow-on on it -- just are there any particular verticals that really stood up to you in Q4, perhaps some vertical spend, haven’t been [ph] anything positives as core [ph] but have been getting a lot of traction from your competitors?

When you look at our wins in Q4, there is no real new patterns with strength in education and government but that’s been the case for several quarters now. In the HR world, there's really a not sector that we're not selling into effectively, whether it’s manufacturing or financial services or tech or business services. We are starting to get some good wins in healthcare. So it really is across the board. Not surprisingly in financials -- since we're not focused on product based industries, it’s much more in the services areas. So we had a very strong quarter in the tech world in selling financials, which by the way is very similar to our early ramp up in HR. We had good success with finance. That’s where the early adapters are and we are beginning to get some early good wins with our financial products in the financial services category.

Our next question will come from the line of Karl Keirstead from Deutsche Bank. Please proceed.

This question is for Mark and it relates to the expected uptick in renewal activity as deals signed three years ago come up for renewal. So I know you probably don’t want to be exact in terms of categorizing new billings and renewals but as you think about your billings growth guidance of 850 to 870 for fiscal ‘15, how would you encourage us to think about the new billings and renewal mix?

We're still at the stage where there is an, just given the growth that we've had over the last four years, an awful lot of the billings is coming from the multiyear that is rolling off of deferred revenue and off of backlog. And also we just continue that great opportunity in new billings and so predominantly the numbers that we're shooting for this year in bookings is heavily weighted by net new customers and net new bookings. Certainly renewals is a growing focus and at this stage, we have the assumption just based on the history that we've had over the last couple of years that the renewal rates will continue to be strong. But we're still predominantly in net new bookings business.

Our next question will come from the line of Walter Pritchard from Citi. Please proceed.

This is Robert for Walter. I do have a question about recruiting. You talked about the sort of unprecedented strength there. Curious about sort of the go-to market there in terms of how you're penetrating those talents and some of the deal sizes that you are seeing in those early customers?

Again, the product is not in general released yet. That happens in the spring, which is why I think we had the pleasant surprise of all the add-ons. At this point, we didn’t have a dedicated sales force selling recruiting. It was part of the core HR suite deals in Q4. And I would say the two reasons is that customers are buying into the vision and they are timing it with when their Taleo or other recruiting applications are coming due to renewal. I am saying at the time of that we want to be on to the Workday recruiting. Workday recruiting is really a leap forward from the past recruiting systems and I would say really two dimensions. One, in usability and the mobile capability that really is geared towards the people and managers during the recruiting. And then the second piece is the concept of unifying recruiting with core HR. So it's a theme that if you listen to Leanne, our Head of HCM talk about it, it just provides a very unique way to recruit where you can look at internal candidates as well as external candidates. And that just hasn’t been possible when the recruiting Apps have been bolt-ons and in a job environment where there is no growth, in many cases the best candidates are internal and the Workday product is unique in being able to surface those candidates alongside our external candidates. So we’re just seeing a lot of demand and in most cases it’s a replacement of an existing recruiting system. Those companies had purchased one and so that’s a good early sign for us.

And then secondly on the Big Data product, I know that it’s still relatively early there but can you talk about some of your larger deals there and use cases and the deal sizes that you’re seeing?

We’re continuing to sell the Big Data application. I would say candidly that there is a more of queue of large customers building up for when Workday brings it into its own datacenter. In the midmarket, we’re able to position AWS effectively since the Big Data offering is on AWS. In the high end of the market, most customers want it directly from the Workday datacenter where there is no hand off between the Workday Apps and our Big Data offering in terms of datacenters. So it’s tracking well. The use cases are similar in terms of customers figuring out how to bring in third-party data. And I’d say at this point mostly data is still structured data as customers are learning what they can do with some of the unstructured data like social media data. I'd say those are still evolving use cases and frankly we're learning about them as well. As we head into the second half of this year, I expect, as we roll it into the Workday datacenter they have some pretty big uplift.

Our next question will come from the line of Richard Davis from Canaccord. Please proceed, sir.

I know it’s in the future but it seems that from your comments that Workday student is aimed at kind of recruiting communications and analytics. Do eventually see the functionality Venn diagram of that business kind of inching toward areas where we’ve historically seen firms like Blackboard or I guess Moddle on the open-source side or private companies like Desire2Learn, because they kind of often times focus on learning tools? Thanks.

I’d probably defer a comment on that until we get the core student platform to a place a where we really replace the DataTel and Peoplesoft student systems first. The areas you’ve described could definitely be areas of extension but I’d say the first focus is just to be able to be a replacement platform for the legacy student system platforms.

Our next question will come from the line of Pat Burton from Winslow. Please proceed.

I must have inadvertently hit a number. Congratulations on the quarter.

Our next question will come from the line of Samad Samana from FBR Capital. Please proceed.

For the recruiting deals, you said there are about 39 customers that signed up. Could you tell us how many of those were replacements of legacy systems versus companies for the first time adopting kind of a formal recruiting platform and what the size of those deals were?

We’re not disclosing size of the deals at this point. Again, the product is not in general availability yet. I don’t have the stats handy in terms of what was replacement versus just a net new recruiting opportunity. My guess is that two-thirds of the market is already penetrated by recruiting systems that's mostly replacement, but for the next for follow-up call we’ll get that data.

Okay and then one follow-up question. The sales force is more seasoned and customers are more and more accepting of SAS and HR and finance at the enterprise. Are you seeing a change in sales cycles? Is that getting easier to sell to Enterprise customers? How is the length of sales cycle track for the company?

I don’t think the sales cycle length has changed. Most of the sales cycles that we were participating in a few years ago, we had already vetted out whether cloud was an option or not. So I’d say that what has changed is the likelihood that we’ll win because we have great referenceable customers and our two large legacy competitors struggle with referenceable customers of any scale. And there is really not an option for deploying new systems on premise. So it’s everyone’s cloud against each other. And I think that just simplifies things. That just simplifies the messaging and the market and so I think if anything, the market is just growing faster rather than sales cycles happening quicker. Enterprise is by software or software as a service historically in six to nine month sales cycles. That just hasn’t really changed.

Our next question will come from the line of Pat Walravens from JMP. Please proceed.

Oh great, thank you. You know Aneel I think SAP is now making the argument that financials require more industry specific, country specific functionality than HR does. So while HR makes sense being multitenant, there’re certain single tenant approaches that are better for financials. I’d just love to hear what your perspective is on that, what key points should it take?

Yes, that sounds a lot like the arguments the legacy vendors said about HR four-five years ago. So two things. First of all, the uniqueness country by country is much tougher in HR than it is for financials, especially as you get near areas like absence and payroll, because of workers councils. When you look at accounting models, there’s not dozens of accounting models. There’s U.S. GAAP, you got the Continental European Accounting Model with the push to IFRS which we’re in the path of supporting, that goes away. So I don’t see that frankly at all. I think there’s more commonality in financials than there is in HR across the globe. As it relates to industry capabilities, I do agree with that component and if you look at our roadmap, as we think about our focus on service industries we’re adding capabilities like professional services automation for software in Professional Services, average daily balance for financial services. We’ve added a lot of capabilities specifically for ENG in terms of capabilities like grants, endowments and lastly we announced our intent to build inventory which would open up the market for healthcare. So they are industry driven. We’re at a place now where we have most of the global core. We've got a great financial footprint and we’re beginning to add that industry layer that makes it more attractive to the various industry segments.

Our next question will come from the line of Brendan Barnicle from Pacific Crest. Please proceed.

I wanted to follow up on John DiFucci’s question on Identified. Given proprietary infrastructure that you guys have built, what does that do in terms of the integration or the depth of integration and I guess with that, how we kind of think about acquisitions as a result of that.

Well proprietary in what way?

You’ve built many memory databases on your own. You haven’t done you know sort of standard off the shelf infrastructure which a lot of companies have. And so as you integrate those, does that become a challenge?

No, so, when you think about a technology like Identified, we’ll probably take some of the, we’ll look at our underlying toolset, it’s all written in Java, we just have our own database. That’s the object oriented in memory database that you described. But for most things that integrate into Workday, we integrate through our -- both through our open set of web service APIs as well as our own integration broker, that was the former Cape Clear that’s now our web services design center. In the case of Identified those are just rebuilt into the core platform and we guess those are going to be Java development projects and we’ll see how much of the code we can reuse.

Terrific and then on the pricing side, we picked up some survey work recently suggesting that there’s a little bit emerging pricing pressure in some areas of software. I’m just wondering if you were seeing any pricing changes during quarter?

Legacy vendors have been pricing very aggressively. For as long as I can remember I don’t think it's changed. It continues to be their best way of competing with us, cut price in some cases, cut price aggressively. But I don’t think -- there's nothing new in that front that we have seen. We're going to take two more questions, please.

Our next question will come from the line of Brent Thill from UBS. Please proceed.

Thanks. Aneel, I just want to get back to Heather's question about the add-ons. And I'm curious if you're seeing a new customers stepping up with a broader portfolio in the Workday platform kind of out of the gate, realizing these products are matured. Are you still seeing steady progression really start with HR they are adding few products on overtime. Any dynamics change there and a quick follow up for Mark as well.

We definitely see that today as we've had -- we have a broader HCM footprint that more and more customers are just buying the full footprint. Whether it's payroll or time tracking or expenses or now recruiting more and more are buying the full suite. And that's not a surprise. In the early days we really just had core HR. Then we added on payroll and if there's an opportunity to include it as part of one sales cycle we'd much rather do it in and so would the customer. Frankly we haven’t spent a ton of time until more recently, putting an effort to sell the add-ons back into the install base, but that will change overtime. But that is not going to keep focus as much more than around getting new accounts. So if you can sell the full suite to a new account, that's obviously a better way to go and that definitely is the trend line we’re seeing.

We definitely see that today as we've had -- we have a broader HCM footprint that more and more customers are just buying the full footprint. Whether it's payroll or time tracking or expenses or now recruiting more and more are buying the full suite. And that's not a surprise. In the early days we really just had core HR. Then we added on payroll and if there's an opportunity to include it as part of one sales cycle we'd much rather do it in and so would the customer. Frankly we haven’t spent a ton of time until more recently, putting an effort to sell the add-ons back into the install base, but that will change overtime. But that is not going to keep focus as much more than around getting new accounts. So if you can sell the full suite to a new account, that's obviously a better way to go and that definitely is the trend line we’re seeing.

Okay. And Mark, just a thought from the client and when you look at the guidance this year it’s about a $30 million range. Last year I think was about a $50 million range and I understand you’re on a bigger base. So you have probably have a bigger variance. Is that all that is or is there something else in terms of the guidance that you’re giving that we should think through that’s a little different this year than maybe last year?

Brent it’s really just, it’s just really about being a larger company and then also providing little bit broader range of professional services as we fill in some gaps from a product perspective that the ecosystem currently doesn’t have.

Our last question will come from the line of Peter Goldmacher from Cowen & Company. Please proceed.

It’s Joe for Peter here. I was wondering if you guys could give us a little bit of color on the kinds of customers -- the kinds of new customers you’re signing on and how much of the growth is from new versus existing customers and any sort of color on the mix would be great.

We’re still in the phase where we’re more focused on acquiring new customers. Mark has talked about in the past, there are 23,000 companies across the globe that fit our profile and we’ve now passed 600. So we definitely focus more on new customer acquisition. We are over-time going to build a team though and have been doing a team that will sell back into installed base but that’s not nearly as big a focus for us. Okay, thank you. That concludes the call.