Ladies and gentlemen, thank you for standing by, welcome to the Workiva Q4 2019 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Adam Terese, Director of Investor Relations. Thank you. Please go ahead, sir.
Good afternoon, everyone. Thank you for joining us for Workiva's fourth quarter 2019 earnings conference call. This afternoon, we will begin with comments from our Chief Executive Officer, Marty Vanderploeg, followed by our Chief Financial Officer, Stuart Miller. Then we will turn the call over to questions. Also on the line today is Jill Klindt, Chief Accounting Officer. A replay of this call will be available until February 27th. Information to access the replay is listed in today's press release, which is available on our website under the investor relations section. As a reminder, today's conference call is also being broadcast live via webcast. Before we begin, I would like to remind everyone that during today's call, we will be making forward-looking statements regarding future events and financial performance, including guidance for our first quarter and full fiscal year 2020.
These forward-looking statements are subject to known and unknown risks and uncertainties. Workiva cautions that these statements are not guarantees of future performance. All forward-looking statements made today reflect our current expectations only, and we undertake no obligation to update any statement to reflect the events that occur after this call. Please refer to the company's annual report on Form 10-K for factors that could cause our actual results to differ materially from any forward-looking statements. Also, during the course of today's call, we'll refer to certain non-GAAP financial measures. Reconciliations of non-GAAP to GAAP measures and certain additional information are also included in today's earnings press release. With that, we'll begin by turning the call over to our CEO, Marty Vanderploeg.
Thank you, Adam, and thanks to everyone for joining the Workiva fourth quarter and full year 2019 conference call. We are pleased with our fourth quarter and full year 2019 results that beat guidance for revenue, operating loss, and loss per share. I am proud of the many accomplishments in 2019. We rolled out the next generation of the Workiva platform. We expanded our global presence. We accelerated investment in our partner ecosystem. We transitioned a majority of our customers to solution-based licensing, and we increased investments in markets where we see the most potential for growth. One of our top priorities this year is upgrading customers to the next generation of our technology, which is an end-to-end platform. Our customers now have the power to connect and manage all of their data from initial systems of record to final reports in our secure cloud platform.
The new Workiva platform is faster, more open and scalable, and feature-rich. It enables customers to connect data from ERP, GRC, and CRM platforms, along with other third-party applications and systems of record. Examples include Oracle, SAP, Salesforce, Workday, BlackLine, and Tableau. Our ability to integrate with third-party systems and applications is critical to the evolution of our platform. Once the data is connected in the Workiva platform, users can automatically refresh data from multiple sources, which in turn populates the data in spreadsheets, documents, and presentations. This enables real-time reporting of all types of performance data. Our advisory and service partners can combine their domain expertise with our new, more open platform to create high-value solutions for their clients. We see our partners as a catalyst for growth in 2020.
For example, KPMG now leverages the Workiva platform to deliver a unified and streamlined solution for their risk management and regulatory compliance customers. We continue to see broad adoption of our platform. In 2019, 72% of new solution and new logo bookings came from markets outside SEC or SEDAR. It is important to reiterate, all of our solutions run on the same end-to-end platform. In 2019, we were pleased with increased bookings from our growth vectors, EMEA, Wdata, and our platform solutions for integrated risk and Global Statutory Reporting. We are also seeing good early demand for the Workiva platform from the U.S. government. We plan to continue to invest in these core growth areas, which Stuart will discuss later in the call. Culture is everything at Workiva. We encourage people to truly support each other at work through peer recognition, resource groups, and cultural events.
Transparency is the backbone of our workplace, and we empower our employees to voice their feedback through frequent town halls, Q&As with executives, employee surveys, and open digital chat channels. Just two days ago, Fortune Magazine named Workiva one of the 100 best companies to work for the second consecutive year. We are proud to be joining many of our customers in this prestigious group. Our ability to attract and retain top talent is what makes us successful. In closing, as we roll out the next generation of the Workiva platform, I'm more excited than ever about our future. When I talk to our customers and prospects, they also see the power of the platform, which we believe will fuel our growth in the coming years. With that, let me turn it over to Stuart Miller, our CFO.
Thank you, Marty. Consistent with comments on previous calls, we are investing in our sales organization to drive revenue growth from EMEA, Wdata, and our platform solutions for integrated risk and Global Statutory Reporting. We're encouraged by our progress in bookings and pipeline from our growth vectors, and we remain committed to our plan. Our Q4 results and 2020 guidance reflect our investment in these vectors. Our program of converting customer contracts to our solution-based licensing model, or SBL, is approaching successful completion. At year-end 2019, about 82% of subscription value was contracted on our SBL model. The lift in revenue growth from SBL, which I have previously estimated at a couple of hundred basis points, wanes after Q1. We expect bookings from new solutions and new logos, particularly from our growth vectors, to drive revenue growth going forward.
Our shift to SBL has contributed lasting benefits to our business. SBL has raised deal sizes for both new logos and new solutions. For example, average new logo size increased 32% to $72,000 in fiscal 2019. Unlimited seats per solution have made our platform easier for our customers to administer. SBL has simplified our sales process and internal administration, thereby improving scalability. In addition, SBL has helped expand the number of active users on our platform substantially. In 2019, the number of active users on our platform increased almost 32% from 2018. Expanding our user base has created opportunities for sales of new solutions. Turning now to our financial review. As always, I'll talk about our results and guidance on a non-GAAP basis. Please refer to our press release for a reconciliation of our non-GAAP and GAAP results and guidance. We outperformed our revenue guidance in Q4.
We generated total revenue in the fourth quarter of $80.3 million, an increase of 24.6% from Q4 2018. Breaking out revenue by reporting line item. Subscription and support revenue was $66.1 million, up 23% from Q4 2018. New logos, new solutions, and conversions to solution-based licensing helped drive strong revenue growth in Q4 2019. 60% of the increase in S&S revenue in Q4 came from existing customers. The balance of the increase came from new customers added in the last 12 months. Professional services revenue was $14.1 million in Q4 2019, an increase of 32.5% from the same quarter last year. A one-time lift of $2.5 million in XBRL services due to a change in an SEC regulation that affected large accelerated filers accounted for a majority of the growth in professional services revenue in Q4. Turning to our supplemental metrics.
We finished Q4 with 3,510 customers, a net increase of 170 customers from Q4 2018, and a net increase of 56 customers from Q3 2019. Our revenue retention rates remain strong. Our subscription and support revenue retention rate was 94.7% for the fourth quarter of 2019, compared to 96.1% for the same period last year. More than half of the attrition in the quarter came from M&A, delistings, and bankruptcies. With add-ons, our subscription support revenue retention rate improved to 113% in the fourth quarter of 2019, compared to 107.1% in Q4 2018. Our progress with larger subscription contracts continues to be promising. The number of contracts valued at over $100,000 per year totaled 652 in the fourth quarter of 2019, up 47% from Q4 the prior year. The number of contracts valued at over $150,000 totaled 285 customers in the fourth quarter, up 50% from Q4 2018 results.
Moving down the P&L. The gross profit totaled $58.1 million in Q4, up 22.6% from the same quarter a year ago. The consolidated gross margin was 72.3% in the latest quarter versus 73.5% in Q4 2018. Our long-term target for consolidated gross margin continues to be 75%. Breaking out gross profit. Subscription and support gross profit totaled $54.6 million, equating to a gross margin of 82.6% on S&S revenue, a contraction of 160 basis points compared to Q4 2018. Additional headcount to help upgrade customers to our next generation platform, together with higher cloud services costs, accounted for the contraction. Professional services gross profit in the fourth quarter was $3.4 million, equating to a 24.4% gross margin, up $1.4 million from the same period the previous year. Research and development expense in Q4 totaled $21.2 million, up 11.3% from Q4 2018, due to higher compensation and cloud services expenses.
R&D expense as a percentage of revenue improved 320 basis points in the latest quarter to 26.4% compared to Q4 2018. Our long-term target for R&D expense to revenue continues to be 25%. Sales and marketing expense for the quarter increased 44.5% from Q4 2018 to $31.1 million, reflecting accelerated investments in sales talent, primarily to drive bookings in EMEA integrated risk, Global Statutory Reporting, and government. General and administrative expenses totaled $10.3 million in Q4, up $3.3 million compared to Q4 2018. G&A expense as a percentage of revenue increased 200 basis points to 12.9% due to higher headcount to support our growth. Our long-term target for G&A expense to revenue remains at 10%. Operating loss was $4.6 million in Q4 2019, compared to an operating loss of $300,000 in Q4 2018. Workiva's operating margin contracted 540 basis points in the latest quarter, which was better than our guidance.
Turning to our balance sheet and cash flow statement. At December 31, 2019, cash equivalents, and marketable securities totaled $488 million, an increase of $3.2 million compared to the balance at September 30, 2019. In Q4 2019, net cash provided from operating activities totaled $2 million, compared with cash used of $400,000 in the same quarter a year ago. Remaining performance obligations on subscription contracts continue to vary from deferred revenue as we implement multi-year contracts with annual billing terms for some customers. Turning to our guidance. For the first quarter of 2020, we expect total revenue to range from $82.8 million to $83.3 million. At the midpoint, we're guiding to a growth rate of 18.7% for total revenue in Q1 2020 compared to Q1 2019. As a reminder, Q1 is seasonally the high point for our services revenue in terms of contribution to total revenue.
We anticipate that the highest quarterly growth rate for services we will post this year will be in Q1. Nevertheless, we expect our subscription growth rate to outpace our professional services growth rate. We expect non-GAAP operating loss to range from $7 million-$7.5 million in Q1 2020. For full year 2020, we expect total revenue to range from $341.5 million-$343.5 million. We expect non-GAAP operating loss to range from $36 million-$38 million, reflecting investment in the growth sectors we highlighted earlier. We expect positive operating cash flow for the full year 2020, which would represent our fourth consecutive year of positive cash flow. Before I close, I want to highlight two items related to our full-year guidance. First, we expect revenue from professional services to grow at a low single-digit rate for fiscal 2020.
When updating your financial models, please note that we posted one-time increases in professional services revenue in Q2 2019 of $1.9 million, and in Q4 2019 of $2.5 million that we do not expect to recur. Second, our revenue guidance assumes strong growth in EMEA in 2020, but it does not assume a surge of demand from new logos seeking to comply with the impending ESEF mandate. We'll have better visibility on the demand from that sector later in the year. We'll now take your questions, and operator, we're ready to begin the Q&A session.
Certainly. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound or hash key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Tom Roderick with Stifel. Your line is open.
Hey, gentlemen, thank you for taking my question. It's a nice finish to the year. Marty, let me ask you the first question here, just thinking about some of the components of where you want to spend money next year and how that's all constructed. In particular, I was hoping you could start with a little bit more detail just on the platform upgrade and moving customers to a modernized platform. What is that going to take with respect to additive R&D heads, professional services bodies?
The second part of that, I guess, is in putting that in the context of the guidance, Stuart, as we look at a $36 million-$38 million loss on the year, that more than doubles the loss this year with $50 million more in revenue. Perhaps you could kind of help us think through the components of how much of that additive increase in OpEx goes to R&D versus sales and marketing versus geographic expansion. That would be great. Thank you.
Thanks, Tom. First off, I would say that, in terms of moving to the new platform, there is not an increase in R&D cost. That's pretty much behind us. Now we're moving toward onboarding our customers, and we're well underway in that effort. We did hire some additional customer support people. Most of those are already on board, and the bulk of the new spend this year is still go-to-market. It's primarily sales, and it's building out sales teams both in North America and in EMEA. That's where the bulk of the spend is. Stuart, do you want to add anything?
No, I agree with that. When you see the incremental spend, it's on the sales and marketing line, Tom.
Got it. Okay.
There's a little bit of support on G&A. There's a little bit on customer success. As Marty said, we've already hired those people, but we'll have a flow-through of a full year of expense on them.
That's helpful. Stuart, just kind of parsing through your comment there in terms of expecting strong EMEA growth, but that seems to be even without the benefits of the ESEF mandate. Let me work backwards on that statement, just in terms of, do you still feel like that can be a real catalyst for the business, that regulatory mandate? Any update in terms of the way that customers in that geography are thinking about their digital transformations? Are you hopeful that that mandate will in fact start to drive an impact to your business as you look out to 2021? Just talk a little bit more about Europe with being able to drive growth without that mandate even really playing a factor this year, it sounds like?
I think that the mandate has played a factor in the sense that it has prompted discussions with customers, and it's been easier to get meetings as a result of that staring companies in the face. Our success to date there has been more about selling our whole platform to larger companies. As I mentioned, we're not projecting sort of a surge of growth in new logos coming from compliance with the ESEF mandate. We need to watch how that's going to play out through the rest of the year. We're confident we'll get our share of that business, but I just wanted the Street to know that that's not baked into our forecast.
Hopeful that the mandate plays out, but not baking it into the forecast. If it happens, we'll treat it as upside.
I think that's right. We're experiencing quite a bit of success in Europe with the current go-to-market strategy.
T his is Marty. We haven't really had any indication one way or the other in terms of more or less optimistic. We still see that mandate coming. It looks like it's going to be enforced. We're getting a lot of incoming calls asking about it. Those types of things, you just don't know. We more or less have modeled just based on selling the platform, which is going very well.
Really helpful. I'll jump back in the queue. Thank you, gentlemen.
Thanks, Tom.
Your next question comes from the line of Terry Tillman with SunTrust. Your line is open.
Hey, how are you guys? This is actually Nick on for Terry. Can you hear me okay?
We can.
Thanks for taking our questions. I guess the first one, I just wanted to ask about the competitive dynamics. Has there been any changes competitively in terms of SEC reporting or other use case areas? I guess, what are you seeing right now in Europe, competition-wise?
We haven't seen any change competitively, really anywhere in the globe. In Europe, the competitive situation there, at least for ESEF, is very similar to what it is in the U.S. It's the financial printers, and then there's some smaller companies that are going to be focused on their home countries. No change there.
For me, what I always look for primarily is competition from a platform point of view, and we still don't see any reporting platforms on the horizon.
T hat's helpful. I guess just looking into 2020 and beyond, also taking account the growth investments you guys had previously mentioned, can you just talk about the drivers of the model between new customers and expansion sales going forward?
Did you say 2021?
He said 2020, I think.
2020 and beyond.
I think it's going to stay pretty consistent. It'll be balanced for the most part between new logos and add-on sales. New logos, there's a lot of new logo opportunity, obviously overseas, and also in the private company space. Now that we've launched our new platform with the connectivity, there's a lot of opportunity in our existing customers. I think it's going to stay pretty well balanced.
T hat's helpful. Thanks, guys.
Appreciate it.
Your next question comes from the line of Chris Merwin with Goldman Sachs. Your line is open.
T hanks so much for taking my question. I just wanted to ask a bit about billings growth. Obviously, revenues were super healthy in the quarter. Billings growth stepped down just a little bit. I was wondering if you could talk a bit about why that was. Is it just the fact that we're lapping the impact of solution-based pricing? I'm just curious if there's anything else to call out there. Thanks.
Hey, Chris, it's Stuart. As you know, we had record billings for the quarter, and the current billings were up about 15%. As we'd called out on the previous, the last November or so, we had pointed out that there had been a surge of conversions in Q4 2018 onto SBL. That's really what you're seeing is the comparison from the conversion to SBL.
That makes sense. Just a follow-up on Europe, from an investment standpoint, where are you in particular with adding headcount? Sales headcount, that is. Just trying to think about any further hiring there and how that could then impact the pace of new logo growth? Thanks.
Well, we are continuing to grow our sales team there. We really don't disclose exact numbers, but we're still aggressively hiring salespeople in Europe.
We made good progress in hiring them in the latter half of 2019, you'll see the full year impact of that. As Marty said, we're continuing to hire in Europe. It's such a natural market for us.
Thank you.
Your next question comes from the line of Rob Oliver with Baird. Your line is open.
Hey, gentlemen. Good evening. Thanks for taking my questions. Marty, one for you, and then Stuart, I had one follow-up for you. Marty, you mentioned Fed government prepared remarks, as early positive signs there. I can't remember your exact words, but I know, having recently gotten FedRAMP, just was curious for any more color around the Fed opportunity, how that's shaking out, and color on activity there?
You hit the nail on the head. The FedRAMP, the authorization really enabled us to go after that. We hired several really seasoned salespeople and had some good initial success. The pipeline looks good. The deal size is really good. One thing our core team has a lot of experience here is in the government. We're quite optimistic.
That's helpful. Thanks, Marty. Stuart. Sorry, I'm going to go back to Europe. I think a pretty good indicator, I guess, that you guys aren't expecting a lot from ESEF really in the numbers this year. Just the risk of beating a dead horse, just wanted to dive in a little bit more on that. I know you guys have put some sales resources on the ground there, and that it sounds like things are going pretty well. I know deal sizes have been moving higher for you guys generally. Just curious, getting that kind of platform style traction early on in Europe would seem to be a positive. Curious for a little bit more color there and whether there are other maybe outside drivers like S/4HANA upgrades or people just thinking about their financials more broadly, which are helping to drive interest in Workiva platform? Thanks, guys.
Thanks, Rob. N ot a lot more color to give other than to say that the ESEF mandate has catalyzed a lot of conversations that otherwise would take us longer to earn. There is real openness to digitization of the office of the CFO. There's certainly a compliance focus among really larger European companies that is every bit as sophisticated as the most sophisticated companies in the U.S., and real appreciation for the power of our platform. We're quite encouraged.
This is Marty. Certainly, we've used Europe as a test bed for platform selling. Because of that, we've learned a lot. The deal size in Europe has really proven that selling a platform is really a good way to approach our market. In other words, one place to do all of your reporting and compliance activities. It's resonating in Europe, and obviously, we're going to start to do that in the U.S. as well, and we're getting underway with that. Just the fact we've launched a new platform and we have direct connectivity now has really enabled platform selling. That's really what is forecasted in the media this year, as opposed to the ESEF, which on the high end, is a platform sell, but on the bottom half, it's more of an application sell.
Again, if you would like to ask a question, press star one on your telephone. Your next question comes from the line of Mike Grondahl with Northland Securities. Your line is open.
Thanks guys. Hey, your four growth vectors, any chance you could kind of rank those how you're doing kind of on a relative basis there?
Well, the short answer is no. I will give some more color. We've talked a lot about EMEA, that is going well. Integrated Risk, just having a platform approach there, we're already seeing good results there, selling multiple types of use cases within GRC on our platform. That's really helped tick up the ADS and has really helped to minimize the competition in many ways. Wdata has been really a special thing in terms of getting ADS up across the board. It's played a big role in getting ADS up for all of our new solution sales. Obviously, we're going back to our existing customers and getting an uptick there when we put Wdata in. That's been a really good story as well. They're all working out fairly well. I really would say that we're very positive on all of them, and we'll continue to invest in all of them.
I'll say Global Stat is doing well both in North America and in Europe, and it's very promising.
I didn't mean to leave Global Stat off. I t's doing very well, as the other three are.
With the solution-based pricing, you called out 82% penetration. Can that go a lot higher, or is that kind of a top-end ceiling?
That was the number at year-end, which included some of the contracts that were signed right at 12/31. I think it's fair to say that we're hopeful to drive that number higher. I doubt it'll ever be 100%, though, Mike. Just because the preferences of certain customers.
Any thoughts, high level, just on your acquisition pipeline, kind of post the convert, what you're thinking?
There's nothing that rises to the level of disclosure, of course. We look at everything. We're continuing to evaluate targets that we're reaching out to, as well as ones that are brought to us by our management team around the world, and bankers and consultants and so forth. We've been canvassing quite a few prospects, but nothing has risen to that level yet. We're not in any real hurry to do something. When we make an acquisition, we want it to be the right one that really enhances our platform and has strong business logic behind it. We're not interested in doing a deal for deal's sake.
I just want to reiterate that. We're looking for potential acquisitions that have a high probability of success and really mesh with what we're trying to accomplish strategically. We're hoping we find the right one, but obviously, you never know.
Okay. Thanks, guys.
Thanks, Mike.
Your next question comes from the line of Stan Zlotsky with Morgan Stanley. Your line is open.
Hey, guys. Thank you so much for taking my questions. Good afternoon. One from us. Just as investors think about the opportunity in the EU, when could they start to see the results show up in actual reported numbers, whether it's billings or-- that's probably going to be the leading indicator? What are some of the success milestones that we should be mindful of in engaging the traction that you guys are seeing in Europe?
Well, one thing that might help you, Stan, is for the first time, and I know we just filed the 10-K today, and it's buried in a footnote, but for the first time, we started to disclose revenue by geography at a high level. we reported Americas revenue and then non-Americas revenue. Most of the revenue outside of the Americas is in EMEA for us, because it's early days elsewhere. you'll see the growth rate in revenue in non-Americas revenue was over 66%. It was like 66.7%, if memory serves, versus 20% in Americas. That's a new disclosure that should help investors a bit.
Super helpful. Thank you. Then maybe just one more. How are you thinking about partnerships specifically as you push deeper into the European opportunity?
This is Marty. I would say that obviously partnerships in EMEA are very important. The real significant change for us is that we're starting to see pull from partners, meaning partners are calling us quite regularly, both in the U.S. and in EMEA. That's because now we really feel we have a platform that's end-to-end that you can connect directly to. They're going to be a big part of growth in EMEA and also in the U.S.. We have to get that engine going, which we've been sort of late to do, but we didn't want to do it before the new platform came out.
Very helpful, guys. Thank you so much.
Thanks, Stan.
Your next question comes from the line of Brian Peterson with Raymond James. Your line is open.
Thanks, guys. Kevin here on for Brian. I think you posted some nice upside on margins this quarter, despite some of the investments you've mentioned stepping up in 2020. Was there any change in the timing of some of those items that might have been planned for this year but maybe got pushed out into 2020?
No, I think most of the margin beat was really as a result of the revenue beat. A lot of the revenue beat was in services. I think that's the right way to interpret it.
Maybe just another one on the partner ecosystem. Can you help us frame the percentage of deals that involved a partner in the quarter versus a year ago? Maybe how many certified partners do you have now versus same time last year?
I don't have the number off the top of my head, but our number of partners has increased significantly, and we really haven't disclosed historically what percentage of our bookings come from that.
But it's up.
Yes, it's definitely up.
Got you. Thanks, guys.
Thank you.
There are no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.