Workday Partnership & Co-Sell drives £200m Target

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Kainos Group plc

("Kainos" or "the Company")

Workday Partnership & Co-Sell drives £200m Target

Kainos Group plc (KNOS), a UK-headquartered IT provider with expertise across three divisions - Digital Services, Workday Services, and Workday Products, today announces an increase to the Annual Recurring Revenue (ARR) target for its Workday Products business, from £100m to £200m, following the signing of an enhanced strategic partnership with Workday, Inc.

Increased ARR Target

As a result of this agreement and the underlying momentum in the Workday Products division, Kainos is increasing the ARR target for the division from £100m (by 2026) to £200m (by 2030). In its most recent results, to 31 March 2024, the exit ARR associated with the Kainos Workday Products was £61m, an increase of 26% on the prior year. With over 450 global customers using its products, existing Kainos customers include JLL, Capital One and Match Group.

Enhanced Strategic Partnership

Announced by Workday in June 2024, Built on Workday enables partners to create purpose-built apps that address customers' business and industry challenges and to accelerate the distribution of those apps to Workday's 10,500+ enterprise customers through the Workday Marketplace.

Kainos' enhanced strategic partnership will see Workday's sales teams across North America, Europe and Asia Pacific incentivised to introduce and co-sell Kainos Products. The agreement covers the existing Kainos products, Smart Audit, Smart Test and Kainos Employee Document Management as well as future products that Kainos will develop on Built on Workday. It is a multi-year agreement with payments to Workday of approximately £7.8m per year.

Increased Investment

To maximise the opportunity presented by this enhanced agreement, there are costs that are expected to be incurred. These costs include Kainos sales costs to support the wider Workday sales organisation and on-going development in Smart Test, Smart Audit and Kainos Employee Document Management to utilise the full power of Built on Workday. These costs are in addition to the annual Built on Workday licence fees.

In total, these costs are expected to be approximately £7m during the current financial year which will therefore reduce the Adjusted PBT by the same amount. This represents an 8% reduction on current market consensus forecasts*. There is a mobilisation phase for this enhanced partnership, which will result in revenue building from FY26, underpinning the £200m ARR target and starting to offset the annual investment. As a result, there will be negligible revenue uplift in the current financial year.

Comments

Malachy Smith, Workday Global Practice Leader at Kainos, commented:

"Over the past ten years we have developed and launched fantastic products that, alongside Workday, help our customers overcome their industry and business challenges. We are delighted to sign this transformative innovation agreement allowing us to co-sell our products with Workday. We believe this will more than triple our ARR over the next six years."

Doug Robinson, Co-President of Workday, commented:

"This strategic expansion is an exciting step in our partnership with Kainos, and underscores our companies' mutual dedication to customers, co-innovation, and the Built on Workday program. By collaborating to accelerate app development and distribution, we can help our joint customers recognise even greater value from their Workday investment, helping them keep pace in a changing world of work."

* Note: Company compiled range is based on known sell side analyst estimates. The ranges are: Revenue £408.9m - £459.0m and Adjusted PBT £81.2m - £91.0m. The respective consensus figures are £425.8m and £86.0m.