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Workiva Inc. (WK) Q4 2022 Earnings Call Transcript

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Workiva Inc. (NYSE:WK) Q4 2022 Earnings Conference Call February 21, 2023 5:00 PM ET

Company Participants

Mike Rost - Senior Vice President of Corporate Development and Investor Relations

Marty Vanderploeg - Chief Executive Officer

Julie Iskow - President and Chief Operating Officer

Jill Klindt - Senior Vice President and Chief Financial Officer

Conference Call Participants

Robert Oliver - Robert W. Baird & Co.

Andrew DeGasperi - Joh. Berenberg, Gossler & Co.

Adam Hotchkiss - Goldman Sachs Group, Inc.

Matthew Stotler - William Blair & Company LLC

Joseph Meares - Truist Securities, Inc.

Steven Enders - Citigroup Inc.

Daniel Jester - BMO Capital Markets

Michael Grondahl - Northland Securities

John Davis - Raymond James & Associates, Inc.

Brad Reback - Stifel, Nicolaus & Company, Inc.

Operator

Good afternoon, ladies and gentlemen. My sanction is Emma, and I will beryllium your big usability connected this call. After nan prepared remarks, we will behaviour a question-and-answer session. Instructions will beryllium provided astatine that time. [Operator Instructions] Please statement that this telephone is being recorded connected February 21, 2023 astatine 5:00 PM Eastern.

I would now for illustration to move nan gathering complete to your big for today's call, Mike Rost, Senior Vice President of Corporate Development and Investor Relations astatine Workiva. Please spell ahead.

Mike Rost

Good afternoon, and convey you for joining america for Workiva's Fourth Quarter and Fiscal Year 2022 Conference Call. During today's call, we will beryllium discussing nan results announced successful nan property merchandise that was issued aft nan marketplace closed.

Today's telephone has been pre-recorded and will see comments from our Chief Executive Officer, Marty Vanderploeg; Julie Iskow, our President and Chief Operating Officer; and Jill Klindt, our Chief Financial Officer. We will past unfastened nan telephone up for a unrecorded Q&A session.

A replay of this webcast will beryllium disposable until February 28, 2023. Information to entree nan replay is listed successful today's property release, which is disposable connected our website nether nan Investor Relations section.

Before we begin, I would for illustration to punctual everyone that during today's call, we will beryllium making forward-looking statements regarding early events and financial performance, including guidance for nan first 4th and afloat fiscal twelvemonth 2023. These forward-looking statements are taxable to known and chartless risks and uncertainties. Workiva cautions that these statements are not guarantees of early performance.

All forward-looking statements made coming bespeak our existent expectations only, and we undertake nary responsibility to update immoderate connection to bespeak nan events that hap aft this call. Please mention to nan Company's yearly study connected Form 10-K and consequent filings for factors that could origin our existent results to disagree materially from immoderate forward-looking statements.

Also, during nan people of today's call, we will mention to definite non-GAAP financial measures. Reconciliations of non-GAAP to GAAP measures and definite further accusation are besides included successful today's property release.

With that, we'll statesman by turning nan telephone complete to our CEO, Marty Vanderploeg.

Marty Vanderploeg

Hello, and convey you, for joining america today. I cognize you person apt seen nan breathtaking news that Julie Iskow will beryllium taking complete arsenic CEO connected April 1. Before I move nan telephone complete to Julie and Jill, let’s talk our 4th fourth and full-year performance. For nan quarter, Workiva generated grounds revenue, which resulted successful gross maturation of 21% successful subscription and support, and 19% successful full revenue. We besides delivered a non-GAAP operating profit separator of 3.3%, beating nan high-end of our guidance by 660 ground points.

For nan full-year 2022, we exceeded nan guidance group backmost successful November of 2021 and nan target group successful February of 2022. Our beardown capacity resulted successful a gross maturation complaint of 23% successful subscription and support, and 21% successful full revenue. In position of marketplace demand, we person seen macro pressures elongate immoderate woody cycles. We proceed to navigate this situation by demonstrating nan worth of our platform. At nan aforesaid time, nan Q4 momentum we are seeing successful ESG is outpacing nan slowdowns we person seen successful superior markets and SEC. Our strategy and finance successful ESG is paying off.

In Q4, our world income and trading initiatives proceed to turn our pipeline and make caller business. We added 123 nett caller logos during nan quarter, bringing our full customer count to 5,664 companies. Our gross gross retention complaint of 97.8% remains supra nan manufacture benchmark. We are pleased that customers proceed to spot nan worth of our level and admit nan beardown support they received from our customer facing teams.

In Q4, our continued attraction connected driving multi-solution deals propelled our maturation of ample statement values. We delivered beardown maturation successful aggregate solution areas led by ESG. Our financial services and GRC solutions besides showed beardown year-over-year gross growth. C-Suites and Board's proceed to prioritize and are taking an progressively progressive domiciled successful shaping their organization's attack to risk. Our GRC solution suite enables organizations to identify, way and negociate consequence to thrust opinionated capacity successful their businesses.

Workiva offers nan only assured integrated reporting level that brings Financial Reporting, ESG, and GRC together successful 1 controlled, secure, audit-ready environment. This unified level offering is simply a unsocial and cardinal differentiator that separates america from nan competition. Customers that invested successful this level attack during nan 4th included a ample world slope that added ESG to its existing solution portfolio of SEC, GRC and financial services.

We were nan only ESG solution considered by nan customer because of our platform's stringent information security, expertise to link nan information sources and assurance capabilities, and a ample multinational proviso concatenation guidance institution added GRC to their existing Workiva solution portfolio that included SEC, guidance reporting and ESG. This opportunity was influenced by a Big 4 advisory firm.

ESG has quickly go a cardinal constituent successful galore solution description deals. Early returns show that customers spent importantly much connected ESG than connected our SEC solution. ESG has go nan fastest increasing portion of our business. During nan quarter, we signed respective landmark ESG accounts including a mid six-figure relationship description pinch a world services institution that will beryllium utilizing nan Workiva level for their world ESG reporting.

This customer will beryllium utilizing ESG successful coordination pinch their SEC and world statutory reporting solutions. We had a caller ESG logo triumph pinch a world exertion solutions provider. This backstage institution has sustainability arsenic a halfway tenant of its business strategy. The woody was a co-sell pinch a Big 4 advisory partner who will besides present nan project.

Another caller logo triumph during nan 4th was an EU-based manufacturing institution that purchased ESG on pinch our yearly reporting solution. This backstage endeavor will beryllium advised by a Big 4 partner who will besides present nan project. Our advisory partner source, influence, and present galore of nan deals we prosecute successful each year. In addition, erstwhile partners are involved, we consistently person a larger woody size and higher triumph rate.

ESG is simply a quickly expanding caller market. In November, nan European Corporate Sustainability Reporting Directive passed into law. As outlined successful nan directive, complete 50,000 EU companies will beryllium required to study against 13 caller standards including climate, governance, worth chain, and workforce. It will beryllium phased successful complete aggregate years, opening pinch a fiscal twelvemonth 2024 yearly reporting process. We judge we are uniquely positioned to seizure this expanded marketplace opportunity.

In nan U.S., we proceed to spot beardown request good up of circumstantial regulatory mandates specified arsenic nan projected SEC ambiance disclosure rule, which is expected to beryllium clarified successful nan first half of this year. In December, our firm ESG efforts earned america a AAA standing successful nan 2022 MSCI ESG Ratings assessment. We are 1 of only 4 nationalist SaaS companies successful nan U.S. that has achieved this rating. This signifies our manufacture leader position successful managing nan astir important ESG risks and opportunities.

On behalf of nan full activity team, I'd for illustration to convey our world squad of dedicated employees. Your focused efforts passim 2022 helped beforehand Workiva fortify our civilization and nutrient beardown financial results. Our technology, our products, and our group are unrivaled. It has been an grant to lead Workiva successful galore capacities complete nan past 15 years, nan past 5 arsenic CEO. We first started retired successful 2008, launching our first SEC solution soon thereafter. Today, Workiva offers nan world's starring unreality level for assured integrator reporting, and our 5,500 customers now see 88% of nan Fortune 100 and 81% of nan Fortune 1000 companies.

Workiva has ever been much than conscionable a package company; it is astir group and nan awesome things we proceed to execute together. Collectively, we person built an worker civilization focused connected creating nan champion products and serving our customers pinch excellence. Workiva's champion days are still ahead, and will beryllium successful awesome hands pinch Julie arsenic CEO. Since day-one of her arrival, she has made our statement better. She has spent nan past 3 years thoughtfully building and shaping our singular activity squad and executing connected our strategy. In my caller domiciled arsenic Non-Executive Chair of nan Board, I will proceed to support and champion nan executive team. I'm truthful proud of what we person achieved together and proceed to beryllium energized astir nan future.

I would now for illustration to manus nan telephone complete to Julie.

Julie Iskow

Thank you, Marty. I see it a chopped privilege to win you. Workiva is 1 of nan astir applicable and innovative exertion companies of our time. We person a transformative platform, unbridled potential, and an enduring instauration connected which to build our future. And I'm looking guardant to continuing to activity pinch our incredibly talented squad arsenic we move Workiva's bequest guardant into our adjacent shape of maturation and impact.

Marty and I are aligned connected Workiva's halfway principles and values: a people-first culture; continuous innovation; nan prioritization of customer acquisition and success; and a committedness to impact. These will proceed to beryllium cornerstones of our operations arsenic we thrust greater capacity successful productivity done nan focused execution of our strategical initiatives.

Before I move nan telephone complete to Jill, I'd for illustration to summarize a fewer cardinal highlights from Marty's prepared remarks astir nan 4th and full-year. First, we vanished nan twelvemonth beardown and we hit our full-year guidance connected gross and operating margin. Second, ESG was 1 of our fastest increasing solutions successful 2022. This is simply a consequence of nan investments that we made successful our talent, technology, partners, and go-to-market strategy successful bid to capitalize connected this important marketplace opportunity.

Third, we are nan only institution that brings Financial Reporting, ESG, and GRC together successful 1 controlled, secure, audit-ready platform. Our level and our exertion person ne'er been much applicable fixed these times of expanding stakeholder scrutiny. And finally, our loyal world customer guidelines continues to recognize nan worth of our level and our differentiated capabilities. This leads to further relationship description , higher statement values, and beardown customer gross retention rates. We stay bullish connected our early opportunities arsenic we proceed to reside our ample and untapped $25 cardinal TAM.

With that, I'll now move nan telephone complete to you, Jill.

Jill Klindt

Thank you, Julie, and congratulations. I'm excited to proceed moving alongside to you and nan remainder of nan Workiva squad arsenic we execute connected our strategy and beforehand Workiva to thrust worth for our customers, partners, employees, and shareholders.

Let's move to our results. Today, I will reappraisal our financial capacity for nan 4th fourth and supply Q1 and full-year 2023 guidance earlier opening nan statement for questions. As Marty and Julie discussed, we ended 2022 connected a affirmative statement pinch a beardown decorativeness to what was a coagulated twelvemonth of capacity for Workiva, highlighted by a patient hit connected gross and operating separator for some Q4 and nan full-year 2022.

We continued to spot broad-based request pinch gross publication crossed our solution portfolio. We hit Q4 2022 gross guidance astatine nan midpoint by $4.4 million. Both S&S and higher services gross accounted for nan beat. We hit guidance connected Q4 operating results astatine nan midpoint by $10 million. The gross capacity on pinch little T&E and employee-related expenses led to nan mostly of nan operating income beat.

Now let's spell done immoderate cardinal results and highlights for Q4. We generated full gross successful nan 4th fourth of $143.8 million, showing maturation of 19.1% from Q4 2021. Subscription and support gross was $125.9 million, up 20.7% from Q4 2021. New logos and relationship description some helps thrust beardown gross maturation successful Q4 2022. 56% of nan summation successful S&S gross successful Q4 came from caller customers added successful nan past 12 months.

Professional services gross was $17.9 cardinal successful Q4 2022, up 8.7% from nan aforesaid 4th past year. The summation was driven by higher XBRL services revenue. We added 123 nett caller customers successful Q4 for a full customer count of 5,664, a maturation of 1,349 customers from Q4 2021. Our full customer count includes 922 ParsePort customers.

As Marty mentioned, our subscription and support gross retention complaint was a best-in-class 97.8% for nan 4th fourth of 2022, an summation compared to 97% for nan aforesaid play past year. With add-ons, our subscription and support gross retention complaint declined to 108.5% for nan 4th fourth of 2022 compared to 110% successful Q4 2021. This complaint is up 150 ground points compared to nan 3rd 4th of 2022.

As we person discussed, this metric is being impacted by nan lifecycle of our customers who purchased our superior marketplace solution during 2021, but person transitioned to a little costs ongoing ACV successful nan Q4 2022 calculation. Excluding nan effect of superior markets, this metric will beryllium 240 ground points higher successful nan 4th quarter. Please statement nan ParsePort customers will not beryllium included successful our retention complaint calculations until we person a full-year of comparable data.

As Marty noted, our attraction connected multi-solution deals and relationship description has led to nan number of larger subscription contracts continuing to show growth. In nan 4th fourth of 2022, we had 1,345 contracts weighted astatine complete $100,000 per year, up 20% from Q4 nan anterior year. The number of contracts weighted astatine complete $150,000, totaled 718 customers successful nan 4th quarter, up 24% from Q4 2021. The number of contracts weighted complete $300,000, totaled 236, up 29% from Q4 2021.

Gross profit totaled $110.9 cardinal successful Q4, up 19% from nan aforesaid 4th a year-ago. Gross separator was 77.1% successful nan latest 4th versus 77.2% successful Q4 2021. Operating expenses accrued 17% from Q4 2021 owed to finance successful hiring third-party labour and return to travel.

We person continued to talk astir our attraction connected operating leverage. Those efforts led to our beardown Q4 operating results. We posted an operating profit of $4.8 cardinal successful Q4 2022 compared to an operating profit of $2.2 cardinal successful Q4 2021. At December 31, 2022, cash, rate equivalents, and marketable securities totaled $431 million, a alteration of $2.2 cardinal compared to nan equilibrium astatine September 30, 2022.

Cash flows from operating activities successful Q4 2022 resulted successful adhesive rate of $1.3 cardinal compared pinch an summation successful rate of $9.3 cardinal successful nan aforesaid 4th a year-ago. For nan full-year of 2022, we were rate travel affirmative for nan sixth consecutive year, delivering $11.3 cardinal successful rate from operating activities.

Let's now move to our guidance. We proceed to judge our guidance assumptions are prudent for nan existent macro environment. For nan first 4th of 2023, we expect full gross to scope from $149 cardinal to $150 million. We expect non-GAAP operating nonaccomplishment to scope from $12 cardinal to $11 million, a nett nonaccomplishment of $0.23 to $0.21 connected a per stock basis. Our stock count will beryllium astir $53.7 cardinal weighted mean shares.

We expect Q1 services maturation to beryllium astir flat. The return and timing of yearly in-person events coupled pinch a important summation successful seasonal worker expenses drove nan sequential diminution successful operating results. For nan full-year 2023, we expect full gross to scope from $624 cardinal to $626 million. We are mounting our guidance for non-GAAP operating nonaccomplishment to scope from $9 cardinal to $7 million, aliases a nett nonaccomplishment of $0.13 to $0.10 connected a per stock basis. Our stock count will beryllium astir $54 cardinal weighted mean shares.

We expect full-year services maturation to beryllium a debased single-digit percent, and for nan full-year 2023, we expect to station affirmative free rate travel for nan seventh consecutive year. While we are guiding to a nonaccomplishment successful Q1, we are projecting improved operating margins for nan remainder of nan year. We expect to station a importantly smaller nonaccomplishment successful Q2, beryllium breakeven successful Q3, and beryllium profitable successful Q4. With that, we will beryllium non-GAAP profitable successful nan 2nd half of 2023, and are committed to improved margins for nan full-year successful 2024. We stay committed to nan semipermanent operating exemplary outlined astatine our September 2022 Investor Day.

In summary, I want to convey each our employees, customers, and partners for nan continued support and difficult activity successful 2022. Before we move to Q&A, I would for illustration to reiterate 3 important points. One, we are focused connected our important semipermanent opportunity and aggregate maturation levers. This includes nan caller and quickly expanding ESG market. Two, we person a highly differentiated level that continues to present worth for our customers. As Marty and Julie highlighted, we are nan only institution that brings Financial Reporting, ESG, and GRC together successful 1 controlled, secure, audit-ready platform. And three, we expect beardown betterment successful sequential operating separator each 4th successful 2023 opening successful Q2. We are committed to our semipermanent operating model.

We will now return your questions. Operator, we are fresh to statesman nan Q&A session.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Your first mobility coming comes from nan statement of Rob Oliver pinch Baird. Your statement is now open.

Robert Oliver

Great. Good afternoon. Thanks for taking my questions. First of all, Marty, it's been awesome moving pinch you complete nan years and wish you each occurrence and dream to spot you again soon. And Julie, congratulations. I conjecture nan mobility is possibly for some of you guys, to start. Just pinch connected nan macro environment, successful your prepared remarks that really sound for illustration location are benignant of a mates of things going on. On nan 1 hand, Marty, you called retired elongated woody cycles not uncommon for package companies nowadays. On nan different I deliberation you mentioned that nan gait of ESG is helping to offset immoderate of that slowdown. So could you talk a small spot astir what you're seeing successful nan macro? Has that gait for ESG continued present successful nan commencement of nan caller year, and really that macro played into your guide? And past I had a speedy follow-up. Thanks.

Marty Vanderploeg

Sure. Thanks. I'll opportunity this, nan macro is decidedly retired there. We consciousness some. Like I said successful nan prepared remarks, we do spot occasionally deals extending a small bit. But our level is regulatory, and it's – and we're besides very focused connected mission-critical stuff. So nan point that really dinged this, I deliberation we benignant of hit it to decease was really nan SEC and nan headdress markets. Those 2 markets were down for us. I'm really very pleased we made our forecast measurement backmost from November of 2021, moreover erstwhile nan macro deed us. And that was each based connected ESG capacity and our level performance. We're really starting to resonate pinch customers connected having each this capacity connected 1 level and ESG has taken off.

Fourth quarter, we were for illustration 85% complete our planned number and bookings. So there's – nan Boards cognize ESG is real. Europe knows it's real, and we're really seeing, for illustration I've ever said, a generational opportunity for us. So nan macro is there. It doesn't impact america that overmuch different than headdress markets and SEC. So we're beautiful bullish astir adjacent year, frankly.

Robert Oliver

Great. Okay. Thanks, Marty. Appreciate that. And Jill, conscionable 1 follow-up for you. And appreciating your commentary comparative to nan trajectory of operating income passim nan full year. The full-year does travel successful a small spot below, I think, Street expectations. And conscionable wanted to get a – put a finer constituent connected immoderate of nan variance comparative to our model. Is that – I cognize you mentioned nan return of in-person events. Are location different things going on? I cognize you guys are – person been reconfiguring Europe a spot to beryllium much partner-led. I cognize location was a call-out successful nan prepared remarks of a woody there. Just immoderate colour you could supply astir nan expenses this twelvemonth and really you're reasoning astir it comparative to that, nan losses successful nan first half of nan twelvemonth and nan wide twelvemonth would beryllium great. Thanks.

Jill Klindt

Yes, definitely. Thanks for nan question. So we do spot immoderate magnitude of, arsenic I mentioned during nan prepared remarks, definite events that we did not person during 2022 because if you remember, we were still reasonably good locked down successful Q1 successful 2022. And arsenic we move into a hybrid environment, we're making – taking awesome attraction to get our teams together. And truthful we had an in-person income kickoff event, income and trading kickoff arena successful Q1 of 2023. And we're besides going to beryllium holding an in-person improvement squad arena successful Q1. And those are things that were not successful past year, but we do expect them to beryllium – it's each going guardant arsenic a measurement to bring teams together, it's really important for us. And truthful T&E is simply a portion of nan walk that we're seeing into 2023, truthful it's successful that guidance.

The different portion of that, we talked concisely astir immoderate of nan seasonality successful worker expenses. As we hired, we talked astir each nan investments that we were making successful 2022. Some of those hiring – immoderate of that hiring hap later successful nan year, truthful you don't spot nan full-year effect until you spell into 2023. And truthful that's different portion of it. And I cognize what you'll perceive from Julie going guardant is that we're still very invested successful our business. And we usage nan resources that we request to successful bid to execute connected our strategy and connected this opportunity. And we're being very observant successful utilizing nan leverage that we person successful our business. But location is immoderate magnitude of return to recreation successful location that, otherwise, we're moving towards our semipermanent operating exemplary and still very overmuch judge successful those numbers.

Marty Vanderploeg

I conscionable want to adhd connected that a small bit. In November of 2021, we told everyone we were going to put successful ESG for nan evident reasons that we've beaten to death. In consequence to wide macro worldly and investor sentiment, we did trim that finance successful Q2 – I'm sorry, Q3 and Q4 of 2022. We slowed down, I deliberation we – astir 1 3rd of that investment, we really pulled backmost benignant of astatine nan petition of nan full finance community. We really streamlined our halfway businesses that we've had a while and moved immoderate of that assets complete to ESG. So Julie has been doing a awesome occupation streamlining and putting ratio in. But nan truth of nan matter is each – not each SaaS companies are created equal, and we conscionable happened upon a very large portion of TAM that we're successful nan very early days, and we're conscionable showing tremendous request and occurrence there.

So we understand nan desire and request to spell backmost to much profit. We're heading that way, starting successful Q2. And Q1 looks worse than it is conscionable because of immoderate one-time events and different things. But we person a bully scheme put successful spot to proceed to fto nan investments we made successful 2022 show their return and past besides tack towards profitable growth. So we're very comfortable wherever we are. We didn't want to conscionable propulsion nan plug correct distant aft conscionable hiring and training each those people.

And we're conscionable very thoughtful and careful, but we're correct astatine nan opening of nan TAM, a ample greenfield opportunity wherever we person nan correct to win. We person nan champion solution, and we're winning very – I deliberation we person a important portion of nan Fortune 1000 already successful nan U.S. utilizing our solution for ESG. So we're really, really bullish and we are decidedly going to spell backmost to a much profitable operating model, but that's why we're benignant of delayed a mates of quarters compared to nan remainder of nan pack.

Robert Oliver

Got it. Very helpful. Thank you, guys. Appreciate it.

Operator

Your adjacent mobility comes from nan statement of Andrew DeGasperi pinch Berenberg. Your statement is now open.

Andrew DeGasperi

Thanks for taking my questions. Julie, congratulations. Marty, I dream congratulations to you arsenic well. And possibly that would lead maine to my adjacent question, is – 1 is I guess, what benignant of drove nan timing astir nan alteration astatine nan top? And I guess, to sound obvious, I mean it sounds for illustration this was planned for a while. I'm conscionable wondering if location was thing circumstantial that led to that.

Marty Vanderploeg

No. I really don't deliberation so, Andrew. I mean Julie has been pinch america almost 3.5 years. She was hired pinch nan volition of taking complete from me. It's a very analyzable business we had, and she's sewage a really bully grip connected it. She's been doing operations that full 3.5 years and is really ready. And I person 100% assurance successful her expertise to do that. It was much astir erstwhile she felt ready, and we each felt bully astir nan transition, making successful an orderly measurement and protecting nan outcomes of nan institution and surely protecting investors. So we deliberation it's conscionable nan correct time. Nothing really precipitated it.

Andrew DeGasperi

That's helpful. And past successful position of Europe, I conscionable wanted to ask, you put successful activity there, peculiarly connected nan go-to-market side. Maybe tin you springiness america an update successful position of what's going connected there? And it sounds for illustration each nan investments you're making for nan twelvemonth are unrelated to that, but conscionable wondering if there's thing that you want to elaborate connected from that region.

Marty Vanderploeg

Well, I would opportunity this, nan hiring successful Europe is slow, right? I deliberation we hired our caller VP of Sales location respective months ago, he couldn't get retired of this existing contract, conscionable started a period ago. So Europe is simply a different beast. We consciousness really bully astir nan caller activity we person some successful Europe and APAC. And we've done immoderate changes successful our income teams there. We've streamlined it. We person a really bully team, and they're starting to get nan bent of it nether his leadership. So we've had immoderate beautiful bully quarters present nan past mates of quarters. And we person activity to do there, nary doubt. But it's a immense opportunity. And pinch CSRD, nan full sustainability reporting, ESG reporting that has been mandated successful Europe, we deliberation we'll beryllium fresh for that. And truthful overall, I'm still very bullish connected Europe.

Andrew DeGasperi

Well, thanks. I'll get backmost successful nan queue.

Operator

Your adjacent mobility comes from nan statement of Adam Hotchkiss pinch Goldman Sachs. Your statement is now open.

Adam Hotchkiss

Good afternoon. Thanks for taking nan questions. I echo my congratulations to Julie connected your caller domiciled and wishing Marty each nan champion going forward. I really conscionable wanted to put a finer constituent connected Europe connected nan backmost of Andrew's question. I deliberation nan advancement location from a rev stock position has been comparatively accordant complete nan past fewer years. And I deliberation pinch CSRD and ParsePort and a number of nan investments you've made there, it's beautiful clear that there's benignant of a batch of upside successful nan model. How are you reasoning astir what that looks for illustration for this twelvemonth and really agelong it takes those investments to yet play out?

Marty Vanderploeg

That's a bully question. We really spot nan second half of nan twelvemonth starting to spot accelerated maturation there. I mean we're seeing bully maturation location correct now, but we expect to spot accelerated maturation successful nan second half of this year. And that's erstwhile activity has had clip to fig retired everything and CSRD is becoming very real. So there's a batch of things going connected then. So certainly, we're building ESG distribution squad still. A batch of nan hiring we did past twelvemonth and we person a small spot near to spell is each astir ESG distribution and moving pinch our relationship owners. So that's each successful advancement correct now. And truthful we'll commencement to spot a return for that 3rd and 4th fourth of adjacent twelvemonth – of this year, I'm sorry.

Adam Hotchkiss

No. That's really helpful. Thanks for that. And past conscionable connected nan ESG point, from a competitory perspective, what are you seeing from benignant of nan 2 buckets of competitors, whether it's nan SAPs, Oracles of nan world, aliases connected nan flip side, benignant of nan disruptors connected nan backmost of this regulation? Anything you're seeing location that's a origin for interest for you guys? Or do you conscionable spot that benignant of you being up location arsenic an opportunity?

Marty Vanderploeg

The large guys are much focused connected c accounting. Carbon accounting has, successful and of itself, a immense TAM. I mean there'll beryllium c markets. And truthful we're still seeing them chiefly attraction there. The caller disruptors, we spot them successful accounts now and again. We haven't had rumor successful position of triumph complaint against them. I mean we mightiness person mislaid 1 to each 1 of them aliases thing for illustration that. And usually, it's for immoderate pre-relations.

I mean we're beautiful overmuch consecutive up. We've been winning against each nan competitors. We conscionable person a large advantage successful position of nan platform, was much aliases little made for this. So far, nan disruptors are not disrupting, but that's why I felt an finance was truthful important erstwhile we did it and why we're a small spot retired of shape pinch nan remainder of nan world. We had to spell beardown connected distribution while we had nan large lead successful position of product. And it's paying off. Like I said, nan overperformance this twelvemonth was – really amazed america and nan pipeline continues to grow rapidly. So we're really bullish connected it.

Adam Hotchkiss

It's each really helpful. Thank you, Marty.

Operator

Your adjacent mobility comes from nan statement of Matt Stotler pinch William Blair. Your statement is now open.

Matthew Stotler

Hey, everybody. Thank you for taking nan questions. I'll commencement disconnected by echoing nan sentiment from everyone who asked questions truthful far. Congratulations, some Marty and Julie. Marty, it's been awesome moving pinch you, and Julie looking guardant to continuing to do so. Maybe first mobility present connected nan nett retention. It's bully to spot that tick up sequentially successful nan quarter. Obviously, Jill, you gave large colour astir nan year-over-year comps. As you deliberation guardant into 2023 and past nan domiciled that NRR is going to play successful benignant of nan eventual maturation complaint location and what's included successful guidance, would emotion to get immoderate much colour location successful position of really you framework that up and possibly immoderate of nan cardinal factors wrong NRR going forward, right? Obviously, it seems for illustration ESG, GRC are going to beryllium benignant of cardinal components there, but immoderate different thoughts would beryllium helpful.

Jill Klindt

Yes. We intend to, of course, expect to support our guidelines retention and past reasoning astir really we tin grow that pinch nan effect of – particularly related to add-ons and nan headdress market's effect connected that metric. We do expect it to beryllium capable to support returning to immoderate of our humanities levels, but we're very encouraged by our expertise for our customer occurrence teams to support our customers happy, each of our improvement teams to support our level applicable and serene to our customers. And we really do deliberation that we tin support maintaining that best-in-class retention metrics.

Marty Vanderploeg

I would adhd that nan level play is really working. I mean, I talked to respective customers a time aliases prospects, and erstwhile you explicate our imagination for nan early and wherever we're investing and really that adds much worth for them, it resonates. And truthful we're going to see, arsenic we did this quarter, a batch much add-on deals and customers beautiful overmuch utilizing nan level for almost everything that we have. So that's – I deliberation that is what's going to thief bring that number up.

Matthew Stotler

Got it. It's each very helpful. And past possibly 1 connected nan partner enablement front. You mentioned a mates of cardinal wins successful nan prepared remarks pinch Big 4 consulting firms. We'd emotion to conscionable get a broader update connected your partner enablement effort arsenic you look guardant to 2023? And past possibly immoderate observations successful position of getting to nan constituent wherever partners are? You're seeing usage lawsuit creation astatine partners and really that mobility is moving forward.

Julie Iskow

Sure. I'll return that one. Partners proceed to beryllium an integral portion of our maturation strategy. We've been talking astir it for a while now. They activity pinch america successful customer acquisition successful some woody sourcing and co-sell motions. And importantly, we leverage their heavy relationships pinch our customers to thief america pass nan worth proposition to nan C-suite of our prospects. And wherever they're involved, we person higher woody sizes and higher triumph rates. So we're continuing to put successful our partner relationships. And I would besides opportunity they're very focused connected advisory services on pinch nan implementation services. So they thief our customers admit moreover much worth from our platform, which tin besides thief pinch that retention rate. So partners let for accelerated S&S for us, and we're going to proceed to leverage them crossed nan portfolio of solutions we have, and we're looking guardant to stronger engagement successful each levels of nan partnerships.

Marty Vanderploeg

Yes. The motion – nan point I for illustration is that, arsenic Julie said, we're seeing bigger deals, broader deals successful position of platform, but I besides for illustration that, this whitethorn sounds well, I deliberation everybody understands that our services load is being reduced. In fact, portion of nan logic our maturation successful Q1 is down is because, I deliberation we're almost level connected services gross quarter-over-quarter. That took respective points disconnected our maturation complaint successful Q1. And that's a bully point arsenic acold arsenic I'm concerned. Once we discontinue a batch of that services work, evidently we'll beryllium supporting our partners, but that will really thief america successful position of margins.

Matthew Stotler

Great. Thank you very much.

Operator

Your adjacent mobility comes from nan statement of Joe Meares pinch Truist. Your statement is now open.

Joseph Meares

Great. Thanks for taking nan mobility and congrats, Marty and Julie. A mobility for Julie, astatine a precocious level, what's your biggest attraction for 2023? Is it maturation aliases profitability aliases possibly thing else?

Julie Iskow

I didn't perceive nan question.

Joseph Meares

Well, profitability for 2023?

Marty Vanderploeg

Yes. What's your biggest attraction growth?

Julie Iskow

We are going to proceed executing connected our strategy. Those 4 maturation levers that we talk astir are fresh for intent solutions. Our platform, of course, arsenic Marty described nan level play and excellence crossed nan globe and our partners’ ecosystem that we conscionable described. So those are nan 4 areas of nan attraction for america for growth. We're, of course, looking astatine ESG and trading that trio of ESG on pinch financial reporting and on pinch our GRC assured integrated reporting.

Joseph Meares

That's helpful. And past I think, nan commentary astir services gross I judge implies subscription maturation of astir 19% for nan full-year. How overmuch of that is coming from ESG and ParsePort? Is that benignant of for illustration half nan growth? And past I conjecture immoderate commentary astir ESG regarding maturation coming from existent customers versus caller customers? Is nan runway wrong that 5,000 positive customer guidelines still very large? Thanks truthful much.

Jill Klindt

Yes. So we proceed to person broad-based request crossed our solution portfolio and really do person publication crossed each solutions successful our maturation and revenue. As we talk astir related to Q4 and ESG, it was our fastest increasing solution successful Q4. And truthful it's connected a smaller guidelines compared to immoderate of nan much agelong tenured solutions, but we're looking guardant to continued maturation from ESG, but really will person contributions passim nan portfolio solutions.

Joseph Meares

Thanks again.

Operator

Your adjacent mobility comes from nan statement of Steve Enders pinch Citi. Your statement is now open.

Steven Enders

Okay, great. Thanks for taking nan questions and congrats again connected everybody for nan caller roles here. I conjecture possibly to start, really admit nan commentary connected nan bookings, our capacity connected nan ESG broadside successful nan quarter. I guess, really should we deliberation astir nan different parts of nan portfolio and possibly really they executed versus your expectations going into nan 4th here?

Marty Vanderploeg

Sure. As we mentioned, ESG was nan apical booking solution successful Q4 and Q3, really outperforming and pleasant astonishment of nan twelvemonth for sure. Especially, erstwhile you make that investment, you emotion to spot it travel to fruition. We besides made investments successful integrated risk. Integrated consequence had a very bully quarter. And that's partially because we've conscionable continued to heighten nan product, create much value. We've gotten amended astatine trading it. And nan different cardinal portion of that is nan full level play. We had deals that competitors had won astatine nan debased level and they sewage up to elder levels. They wanted everything connected 1 level and reversed it. So that is really resonating.

And financial services had a bully quarter, had a really bully quarter. And truthful it’s really is simply a portfolio approach. Its gives america a batch of stableness and creates a very ample TAM. And arsenic I ever say, it's nan logic that we're truthful bullish is we person a very ample TAM without a competitor that's really focused connected nan wide level play. And truthful it's conscionable early days there. So we're very fortunate from that constituent of view.

Steven Enders

Okay, great. I admit nan reply there. I conjecture possibly to follow-up, I mean, I cognize nan CSRD regulations are still reasonably new. But I conjecture what benignant of effect does that opening to person connected nan pipeline and really you're reasoning astir nan caller opportunities that are coming successful connected nan ESG side? Is that having a meaningful contributor astatine this constituent to apical of funnel? Or are you still chiefly executing against preexisting deals arsenic we deliberation astir nan [guidance] provided present for 2023?

Marty Vanderploeg

Well, you deed nan nail connected nan head, its early days. We're getting tons of inquiries astir it, that's for sure. Also, nan building retired of nan ESG squad started successful North America. And we commencement location because it's cheaper and we person amended – conscionable amended infrastructure here. And past we started building retired nan ESG go-to-market successful Europe a small later, arsenic I alluded to earlier. So we're seeing bully traction location successful position of interest. The squad is coming up to speed. CSRD is going to happen. I mean nan EU is very committed to making it happen. And you're seeing different countries, I deliberation Switzerland, nan UK, Australia, everybody is going to do nan aforesaid thing. And we're gearing up studying nan regulations from each nan different countries that are going to commencement mandating this type of reporting. And truthful that's why I support talking astir nan TAM.

Now, has it started to provender our funnel? Yes, it has started to provender nan chimney successful Europe. But it's still early days and group cognize they person to do it. And we moreover spot that successful North America, nan bantering, really ESG has go governmental and each that and what nan SEC is doing. But nan Board’s successful nan U.S. and North America cognize that this is coming and they proceed to show willingness to bargain and put successful nan full program. So, yes, that's evidently nan logic we're truthful bullish on, for illustration I was telling today, nan full institution successful nan meeting, I said, this is nan astir optimistic I've been astir Workiva since we started nan institution 15 years ago, truthful really fortuitous events.

Steven Enders

Perfect. That's awesome to hear. I admit you taking nan questions here.

Operator

Your adjacent mobility comes from nan statement of Daniel Jester pinch BMO. Your statement is now open.

Daniel Jester

Great. Good evening, everyone. Thanks for taking my question. I deliberation it's been clear from your commentary, 2022 was a twelvemonth of finance for ESG. I conscionable wonderment for 2023 and 2024, really galore much investments do we request to make here? Is it each benignant of distribution and go-to-market? Or connected nan exertion side, should beryllium looking for much things that request to beryllium successful spot successful bid to genuinely seizure nan opportunity that's successful beforehand of us?

Marty Vanderploeg

Well, first off, fto maine opportunity this astir R&D. In position of percent of spend, it's peaked, okay? It's going to commencement coming down now. We person a really bully robust squad and they're going to beryllium capable to prolong our goals successful position of products for immoderate time. So nan bulk of nan finance moving guardant is distribution. I mean, we person tens of thousands of opportunities, imaginable targets. I deliberation it's 50,000 successful EMEA and there's a batch successful nan U.S. too, successful North America, and we're seeing immoderate request successful APAC even. So it's each going to beryllium astir relationship sum ultimately, and that's wherever astir of nan ESG finance remains. But nan product, I deliberation we person a bully roadmap for nan platform, for GRC, for ESG and pinch nan resources we have, we're going to beryllium capable to do conscionable good there.

Daniel Jester

Got it. Thanks. That's helpful. And past Jill, possibly for you quickly, possibly a small spot successful nan weeds here, but connected stock-based comp, we've gone from $49 cardinal to $71 cardinal to now complete $96 cardinal successful nan guide. And truthful that's increasing measurement faster than revenue. Is location thing we should beryllium reasoning astir successful position of stock-based comp? Is location immoderate cyclicality to this? Anything to benignant of thief benignant of size nan outsized maturation location would beryllium helpful? Thanks.

Jill Klindt

Sure. So we do person sometimes one-time adjustments wrong stock-comp if we person transitions wrong nan team. But successful general, we proceed to judge that stock-comp is an important measurement that we reward and incent and compensate our employees. And it will proceed to beryllium a portion of really we, I guess, put together our compensation packages. And truthful you will proceed to spot it successful a akin maturation load, I would say. But location tin sometimes beryllium – to your question, location tin sometimes beryllium one-time items that tally done there.

Marty Vanderploeg

Yes. Let maine remark connected that, too. I mean nan layoffs and we're proceeding astir each nan readiness of labour now. The group you want are employed for nan astir part. And successful this time and age, to support these top-notch group we have, you person to springiness them incentives. Now it's going to up and down year-to-year depending connected what we're doing, but we had a batch of activity changes complete nan past 2 years. I deliberation that had a batch to do pinch it. The first inducement you springiness them is larger. And typically, group leaving besides impact nan accounting, so. But successful general, you person to do that successful this time and property to beryllium competitive. And I deliberation it's conscionable very important.

Daniel Jester

Great. Marty, Julie, bully luck. Thank you.

Operator

Your adjacent mobility comes from nan statement of Mike Grondahl pinch Northland Securities. Your statement is now open.

Michael Grondahl

Thanks. Congratulations to you both. Marty, I deliberation you mentioned erstwhile you triumph deals successful nan partner channel, you person a higher triumph complaint and they're bigger deals. Could you directionally quantify that a small spot for us? And past secondly, thief maine understand a small spot why SEC was down year-over-year. And past possibly lastly, conscionable benignant of what's embedded for superior markets successful 2023 guidance?

Marty Vanderploeg

Well, nan first mobility is, directionally, I really – we don't – I haven't looked astatine that data, truthful I'm sorry I can't reply that. It is material. They are bigger and nan summation successful triumph weight is material, but possibly you tin get immoderate of that colour from Mike later, but nan – what was nan adjacent portion of nan question?

Michael Grondahl

SEC being down.

Marty Vanderploeg

SEC being down, conscionable there's less caller nationalist companies. We're still doing really good connected takeaways from nan accepted printers and overseas filers, but it's conscionable you don't person arsenic galore caller nationalist companies coming successful and you person little targets, essentially. Let maine beryllium clear, nan gross is still growing. It's conscionable nan bookings were down year-over-year. Our retention is truthful precocious there, immoderate income results and maturation almost. And past what was nan past question? Three questions are excessively overmuch for my brain.

Michael Grondahl

Capital markets guidance.

Marty Vanderploeg

We person very small successful there. I've learned my instruction from nan past clip I made a comment. We person very small superior markets. Capital markets is upside. I will opportunity this, we closed a fewer IPOs successful nan past fewer days. So I ever person hope, but it's not built into nan guidance. The guidance, you cognize us, right, personification wrote astir that anterior to this. We for illustration to springiness nan investors a baseline.

Some group telephone it conservative. We for illustration group to put successful numbers that they tin consciousness really assured we're going to make aliases beat. And truthful yes, we ever behave that way, and we're leaving headdress markets out.

Michael Grondahl

Got it. Hey, acknowledgment a lot.

Operator

Your adjacent mobility comes from nan statement of Alex Sklar pinch Raymond James.

John Davis

This is John connected for Alex. And congratulations to Julie. I conscionable wanted to commencement pinch ESG, and it's awesome to perceive each nan colour connected ESG activities. I deliberation Marty alluded to an earlier question, but wherever are we successful position of take for nan ESG solution wrong nan installed base? And past what's nan take curve look for illustration to get to, telephone it, 10% aliases 25%? Is that a one, two-year outlook aliases a five-year? Really conscionable immoderate colour location would beryllium great.

Marty Vanderploeg

Well, successful nan – we're successful very early days. We person respective 100 logos. And successful nan U.S., we person – really galore logos now? I suffer way really galore successful nan U.S., but 4,000 successful nan U.S., I believe, thing for illustration that. So we're good nether 10% penetrated. How agelong is it going to return america to get to 20%, 30%, 40%? That's astir apt 18 months, 2 years, 2 and a half, I'm guessing now. I dislike to do that because you guys will publication this backmost to mediocre Julie later. But it's difficult to opportunity if nan SEC rulings travel retired and they withstand nan litigation, it will spell a batch faster. But we don't scheme connected that.

We're seeing plentifulness of request without nan SEC rigs. So I don't know. We're – I deliberation it's going to beryllium difficult for different institution to travel successful and say, we're besides going to study to nan SEC pinch your ESG stuff. And not – they conscionable – it's a very earthy point to conscionable adhd it connected to their existing measurement they do pinch nan SEC successful their regulatory environment.

John Davis

Perfect. That was adjuvant colour there. And I conscionable want to inquire 1 speedy follow-up present connected nan billings location successful 4Q. They seemed a spot stronger than seasonal. Anything you'd telephone retired pinch respect to timing aliases long that impacted that number? Thank you.

Jill Klindt

Sure. So we did see, arsenic we talked about, really bully bookings for Q4. Very pleased by nan results there, and that did thief thrust up our billings successful Q4. So we're excited astir wherever that leads america going into 2023 and what we tin do pinch that.

Marty Vanderploeg

Yes. We had grounds billings successful Q4 by a important amount. We were really pleased pinch nan request and nan activity.

John Davis

Thank you very much.

Operator

Your adjacent mobility comes from nan statement of Brad Reback pinch Stifel. Your statement is now open.

Brad Reback

Great. Thanks very much. Jill, a speedy constituent of clarification. The commentary connected seasonal labor connected 1Q, what's that related to?

Jill Klindt

Payroll taxes, 401(k) match, those types of things thin to beryllium heavier successful Q1. You mightiness recall, past year, it was nan first twelvemonth that we had a 401(k) lucifer successful nan U.S. And truthful that is thing that is – starts to conscionable – that we conscionable request to commencement to build into nan scheme and wanted to telephone that retired for each of you.

Brad Reback

Great. And then, Julie, if I look astatine customers added this year, taking retired ParsePort, they were down a spot versus past year. How should we deliberation astir that going forward?

Jill Klindt

You tin deliberation astir that arsenic – deliberation astir our superior markets business, chiefly nan driblet was owed to that.

Brad Reback

That’s great. Thank you very much.

Jill Klindt

Sure.

Operator

There are nary further questions, and this concludes today's convention call. Thank you for attending. You whitethorn now disconnect.

Editor: Naga



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