All right. Good afternoon, everybody. My name's Alex Sklar. I'm one of the application software analysts here at Raymond James. Very happy to have Workiva with us this year. We've got Jill Klindt, Executive Vice President, Chief Financial Officer. We also have Yogi Shah, Manager, Corporate Development and Investor Relations in the audience as well. Jill and I are gonna have a fireside chat. I'll open up the audience with about 10 minutes remaining if there's any questions. But Jill, thanks for joining us today.
Yeah. Thanks, Alex.
I think I just wanna start with a couple overview questions for the frame kind of the story for the audience. But I think a lot of people in this audience spend time digesting information that's published kind of using Workiva software and the SEC filings. But you do a lot more than SEC. I think you've kind of even put some numbers around it now that SEC's less than 50% of the business. Can you kinda just provide an overview of, like, where Workiva what Workiva does, kind of the breadth of your solutions now and the platform for Assured Integrated Reporting?
Yeah. Thanks for the question. Thanks for the invite to the conference. It's the first time we've been able to join this conference. And it's really been really great. It's,
Good.
Well done. Thank you. So, Workiva was founded in 2008. And, we're cloud-native solution. And like Alex mentioned, what you probably know us best for would be SEC filings. But we have expanded our platform much more past that. And, along with SEC filings, we can help companies around the globe with regulatory reporting of all kind, especially if XBRL tagging is a component of that. We also, you probably have heard us talking about our ESG reporting. And so ESG reporting would be another piece that we layer on within our platform. And, around that, we also put controls management. And so, you'll hear us talk a lot about Assured Integrated Reporting. And that's what it means. It means that we can help companies report whether it be financial information or non-financial or ESG information, all within a controlled controlled managed environment.
And we feel like we are the only solution in the world that actually puts those three things together. Alongside of that, we also have other solutions that we help companies with, more specific to industry solutions, whether it be fund reporting, insurance reporting, bank reporting. We also do different statutory reporting around the globe. And we also help with federal, state, and local government reporting, in the US amongst other things. So we do have a really deep breadth of solutions that we help companies with. And very proud of the platform that we built.
Yeah. Great overview. I'm curious kind of on the idea of the platform. One of the big kind of advancements and you've been with the company for several years. But you launched kind of the more modern platform. I think it was right around went live with almost all your customers around 2020-ish timeframe, I think. How much did that going live with that new next-gen platform kind of enable in terms of broadening out the solution suite for the company?
So what that did for us was really to make it a lot more seamless to release even additional functionality and additional solutions. The way that we, the way that we built the platform, allowed us to slide in different code and functionality more easily within the platform. And so it was a game changer for us as to how easily we can now build out additional functionality quickly if regulations change or if certain segments of our markets shift. And so it does allow us to more easily make changes within the platform, within the code. And it really was a game changer. And also, that was around the time that we changed our pricing structure.
That allowed us to really monetize better within our existing customer base and to add additional solutions and more easily because we moved from a user-based licensing to a value-based licensing model, more solution-based licensing. So all of that happened around the same timeframe for us. We think that that is really what has driven us into this next level and will help us actually continue to grow as we evolve over the next few years.
Yeah, just one more overview question. Can you just, for the audience, frame the financial profile today of the company? And you've got some medium-term targets, I think, you put out there at the Investor Day last year. And with the $1 billion in revenue, can you just kinda talk about the targets that you've got out there?
Sure. So we have a long-term operating model that goes out through 2027. In the current term for 2024, we've given our guidance target to be SaaS revenue of 16% growth. We will continue to have non-GAAP operating profit in 2024. In our long-term operating model out through 2027, we expect to be able to have operating margin of about 22% of revenue. And if we think about how we grow to that, getting to over a billion in revenue is certainly on our plan by 2027 at least. We expect to get there using all of the solutions that I had talked about. So it's not going to be just SEC or just ESG that gets us there. It really is the combination of all those things that we help bring value to our customers when they're using our platform.
That's how we expect to be able to win into that timeframe.
All right. Perfect. That's a great overview. And that kinda just dovetails into this idea of the growth. And so you gave a stat that, I think over the last year, 70% of over 70% of your bookings now are coming from non-SEC solutions. You've talked about ESG reporting already today. But ESG reporting's been a top three kinda booking. Can you just talk about what have been those big drivers, absent kind of SEC growth, which is still growing for you all, but absent kind of SEC public companies coming about? What have been the big drivers of that 70% of bookings, and why have your solutions have been such a good fit for those parts?
Sure. So, we talked a lot at our, during our earnings call. Julie actually gave quite a few examples of customers, deals that we had closed in, in Q4 in particular, that helped to, I guess, elaborate on, the answer to this. But the what it would be is we have a lot of ESG sales, certainly, is a big component of it and the growth that we're seeing there. We had a lot of wins within funds, and some of those financial services companies, in Q4 especially. We are seeing a lot of companies pick up even if they're, either new customers or existing customers picking up and using our GRC, which would be our controls management solutions. And those would be that Assured Integrated Reporting, are the central focus of what we see within our customer base.
And, for us, that's a big push to make sure that all of our customers understand how we can help them with that assured integrated reporting using not only financial reporting, regulatory reporting for financial and ESG, but also controls management within the platform. And then around that, we have had, like I mentioned, fund reporting. There's some other ancillary solutions that have done quite well for us over the past few quarters, and actually our history too, so.
All right. Great. So I wanna kinda just switch to the macro and the demand environment broadly. So you've got a lot of regulatory catalysts that have benefited the company. Obviously, macro's been challenging for a lot of software, broader than software in general. But what are the kinda puts and takes as you've kinda seen the demand environment? On the one hand, you've got these great regulatory catalysts in Europe, some here in the US as well, but offset kind of by some just overall macro pressures. Like, how have you seen the puts and takes kind of play out in the demand environment the last several quarters and going to 2024?
Mm-hmm. We talked a lot in 2023 that we were seeing extended deal cycles. Customers were just taking longer to make decisions and move things through a process, and a decision. We haven't seen that macro environment change going into 2024, which is why you saw our guide be fairly prudent going into 2024. We think that regulation for us has always driven growth. As we see additional regulation around the world, U.S. and Europe especially, around ESG, we do think that that can help to drive upside for us. We were really expecting, when we build our model for 2024, to have a more consistent macro environment to what we saw in 2023. Or at least we weren't seeing enough to make us think that there might be extended or significant relief from that. It did impact our bookings in 2023.
We talked about that it had slowed bookings throughout the year. We were really pleased with how we closed out the year. But we did see pressure from that macro environment throughout the year.
All right. So the approach to the outlook for 2024, though, was kind of underwriting a similar. But there are green shoots in some of those areas like ESG and capital markets where that would be as far as the outlook was concerned, those would be considered upside. And has you all approached the model?
Yeah. We didn't even talk about capital markets yet. But.
Absolutely. We have a great team that's been focusing on building relationships within capital markets with the lawyers and the banks that are involved in those transactions. We've had some consistent but lower bookings even over the last few years within capital markets around secondary offerings. Throughout last year, there were a few IPOs that pushed their way through. Some of them were our customers. What we tend to really focus on there now ahead of a potential reopening of IPO is that private-to-public transition, to the extent that we can help companies even prior to entering into a transaction with their financial public, their private company, financial reporting and how we can help them build that out through an IPO. But we didn't build in any kind of a return to IPOs, any significant return in 2024.
We really kept it more consistent with what we had seen in 2023 because it, it could be upside for us if that returns. But we weren't seeing enough to make us build that into any model.
Okay. I definitely wanna hit on that private companies starting earlier with companies a little bit later. But just given you brought it up, how's the traction been so far in terms of that motion? I know. It's much more dedicated. There's a lot more offerings than just the capital markets piece, management reporting.
Absolutely.
A lot of the getting compliant ahead of getting your reporting in order. So how has the traction been going earlier with private companies?
It's been going really well. I think it resonates because the bar for private companies to go public is much higher than it was in, say, 2021 timeframe. The advice that those companies are getting from their bankers and lawyers is that they really need to have their house in order. That involves not only what you're talking about, management reporting, financial reporting, getting into a cadence of closing the books, creating and generating financial reports, but also starting to even think about controls management and how do you think about what your processes and practices are gonna look like within a SOX environment, if you are, you know, as you think about becoming public. It's really resonated, I think, for us because we can help them throughout that whole cycle.
We have a lot of resources within the company and within our partners that can get involved in helping private companies as they're thinking about that. So we have had some success there. It's something that we talk a lot about with those private companies.
Yeah. That's definitely. I assume it's one of the bigger new logo drivers. I guess switching kinda the logo side more to the expansion side, the net expansion's been a great story the past couple of years. You've got 80% of the Fortune 1000. I don't know if that's your published data or something that we've tried and tracked. But,
Maybe a little bit of both.
Yeah. A little bit of both. But you've got now this broader platform. We talked about the shared integrated reporting. Can you just talk about kind of how you're driving that cross-sell activity and how you're getting, you know, you announced on the last call a customer taking their 15th solution with you, I think? So how do you actually drive that greater level of cross-sell across the organization?
Our sales team has done a really great job, especially with those largest companies that you're talking about, of building a relationship and understanding their buying cycle, understanding how they use software, and understanding how we can bring value to those organizations. And so it's really a credit to those teams. And the other thing that helps us there is working alongside of our partner network. And the partner relationships that we've built out over the past few years. We're still in the process of building that partner network and really scaling up those relationships. But we've made great, great strides. And partners are always a part of those conversations because they can bring us into these really large organizations as a software solution that they're offering alongside of those services that they're doing for these companies, in any case.
And so, partners are a piece of that and just the great relationships that we're building. And as far as how we continue to drive into these existing customers is those relationships. But it's having the conversation and making sure that they understand how Workiva can help them. I would say that we've had a conversation at least with every single one of our existing customers around ESG reporting because we want them to know that if they're thinking about a need for ESG reporting, we want them to know that Workiva can help them with that. And even if they're not gonna buy now because many of them don't, we want them to know that that's something that we can do for them. And so it really is making sure that they know who we are.
They know what we can do so that down the road, if they're thinking about, "Oh, you know, we need to do this. We need to do our ESG reporting. We're looking at a change for controls management. Workiva can help us. We already have them as a vendor. Let's look at them as we look at an RFP type of process.
I've a couple of places to go from there. The partners, maybe we'll save next. But on ESG, just giving you – you brought that up. So I think that is one of the biggest cross-sell opportunities, at least over the next five years, right? We'll see when the.
Absolutely.
The rules formally come out maybe in, in the U.S. But we've got them in Europe. We've got them in California. Can you just talk about those conversations a little bit more that you're having with customers? And, and I'd love to kinda hear, like, how you feel about your overall competitive positioning on ESG as you're talking to these folks. Like, even if they're not ready, are you do you feel like the win rates are, are higher for that solution and some of your other, other solutions?
Well, I mean, we talked about earlier that ESG has definitely been one of our highest solutions as far as bookings for quite a few quarters here at this point, for the past few quarters. We're really excited that actually the SEC announced that at their meeting on Wednesday they are going to make a decision about the ESG regulations, the reporting requirements. So, that'll be Wednesday. You'll start to hear us give a lot more information about how that turns out, that decision. We're expecting that it'll be Scope 1 and 2 as required reporting within that, within those regulations. And so for us, that's a potential driver of business, of course. We already have the regulations in Europe laid out. The timing is set.
They've pushed out the definitions of those regulations a bit, which was confusing because it made it sound like they were pushing out or delaying the rollout of the required reporting. But they just gave themselves a little bit more time before they defined exactly what that reporting might look like. So things are starting to really line up as far as the regulatory environment in the U.S. and Europe around ESG. Other countries around the world are starting to follow suit. And for us, that is nothing but potential future business. And like you said, it might be that a company looks at their ESG data and needs. And maybe they go with another component of that process. Potentially, they're buying a carbon solution. But eventually, we're generally not hearing a no if they aren't buying Workiva's ESG solution. We're hearing a not now.
Yeah.
And so, potentially in the future, as they're looking at their needs, as these regulations become more clear, as the timing is clear, as the rules are clear, we really do believe that we are well poised to be able to take advantage of that opportunity.
The Wednesday meetings, it sounds like a reason for optimism. I guess one of the things that's really interesting with the original kind of report that they put out and what we have in Europe is the idea of moderate assurance around kind of the ESG reports.
Exactly.
I think that's always been viewed as kind of the big catalyst because the platform that you all have with full audit trail, I think that's what's the sense in terms of kind of the assurance piece? Is that something that you're hearing is gonna be a component of anything that comes out later this week?
Absolutely. It'll be key. In Europe, it's a part of the rollout of the rules. So there's different levels of assurance required in the European mandate in 2026 and 2028, that requires controls to be put around the data, so that you're collecting and reporting within a control environment. For the SEC, I don't know about you, but anytime that we're Workiva is putting out anything for the SEC, the auditors are looking at it, which means that you have controls around it, which means that you're tracking the source of the information. You're tracking the process to collect it. You're making sure that it's consistent over time. And absolutely, controls is a piece of any of that data that will be reported to the SEC as well.
So, controls are gonna be absolutely required within that process because you're not gonna put something out to the public in that kind of a regulatory report that isn't very well, very well known, very well managed as far as the collection. It'll be different than potentially some early ESG reports. You heard a lot of companies had issues with greenwashing because they weren't necessarily collecting and reporting that ESG data in a really controlled environment. It was more of a gut feel kind of a thing. And so I think that this puts some really clear rules around what's going to be required and will also require companies to put some structure around how they do that and how they collect and remit that information.
All right.
So it fits nicely within the platform as well.
Yeah. This is the last question on ESG. But just given you brought up that idea of bundling ESG and controls as part of your GRC solutions, I think that came up a lot at the user conference talking to partners.
Yeah.
Can you just kind of give a flavor? Like, the customers that have bought ESG from you today, are they all taking controls with it? Like, you just kinda have to take the two together? Or I'm kinda curious what you're seeing in terms of kind of uplift of that those being bundled together.
We're not always seeing it today. But a lot of companies might not already be thinking about it in that way.
Yeah.
But we are definitely talking to them about it in that way. And so we think that there's definitely some long-term opportunity, even if they aren't buying controls alongside of ESG. We think there's long-term opportunity for us to be able to bring those together within the platform over time.
All right.
We'll sell them together.
Yeah.
To start with, if we can, if that's, you know, if that's resonating. But we'll go with one solution if that's what's making the most sense to the customer because we know that given our net retention, that we can win them over time and our gross retention, we're gonna keep them as a customer.
Yep. Yeah. Maybe we'll head on to gross retention in a second here. I did wanna kinda switch gears. One of the things I think that came out last year at the investor events in more earnest is kind of what you've brought in on the leadership team, not just kind of at the C level, but kind of that next level of leaders, new heads of America and Europe and Asia-Pac , and the go-to-market. Can you just talk about kind of what you've brought in talent-wise? What are some of the changes that are going on in the business now as we kinda get underway into 2024?
Yes. So the way that we talk about it and the way that Julie talks about it too is that we really are evolving the organization. We wanna be a company that is built for the long run. We are focused on growth. We are focused on profitable growth. And in order to get there, we need, we think that the right path forward is for us to sell within a platform, to sell within the broad base of solutions that we have, taking on a really large unaddressed TAM. And in thinking about that, we wanna make sure that we're building for the long term.
A lot of these new people that we've brought on are from larger SaaS organizations that have been there during those kinds of periods of growth and are helping us to scale up our internal operations, and thinking about the people, the processes, the systems, what do we need in order to really scale up as a company? I had one person started within my organization. So Junko Swain, I hired a chief accounting officer. And what she's brought with her is really that kind of experience. And the same is true in across all of our other hires that we've talked about. Our head of North American sales was formerly with ServiceNow.
And so that experience that they bring is helping us to learn what types of things that we're Workiva should put in place, learn some lessons, what worked, what didn't, and try to build out that kind of a company so that as we're moving towards those long-term targets that we talked about, we can do it in a, you know, we're making sure we're making the right decisions and trying to be really thoughtful about how we grow.
So this kinda dovetails perfectly into kind of the profitability side. So is the right way to think about 2024 is, like, you've got a lot of leadership kind of that you've brought in now. Is 2024 kind of a little bit of a one another investment year just to kinda build out now? They've come in. Now they're building out their teams, how they see that because you've got the 22% growth, profitability target, versus this year, I think it's calling for around 3%.
Mm-hmm.
So it implies, like, a pretty steep ramp. But is this? Should we investors think about this year as kind of maybe a one last big grow push on the investment side before we start seeing some of the scale? I'm curious how that all plays in.
So we still stand behind our long-term operating model, which, of course, leads to higher profitability. It's not linear, though, as we get there. So for this year, it is what I was. I don't know if I'd call it an investment year. But we are making investments in the business for long-term growth. And we think that adding to, adding resources within our sales team around ESG, capital markets, and readying for the next stages that we can clearly see as opportunities, makes sense, the same within our development teams and making sure that we have the right resources there to build out what we need in order to take advantage of these opportunities. So it's building teams around some of the leaders that we've hired. But it's, it's back to thinking about those people, processes, systems.
How do you build the right company to take advantage of those opportunities? And, we are focused on that, solely focused on that. And, thinking about our platform, our partners, global growth, you know, all these things are where we expect to be able to make progress over the next few years.
So you talked about this earlier. But the gross retention kind of 98%-ish rounding, kind of best in class, out there. But you've talked about kind of this optimal level of gross retention might be a little bit less than that over the long term. I'm curious kinda some of the puts and takes as you've thought about what the optimal level is and what you might, what are the things you're evaluating from your seat to kind of consider, like, what's the right balance over the medium term there?
Mm-hmm. So, you know, we've said that greater than 96% would be optimal. Honestly, that's still phenomenal in the market, is how we view that. But the way that we think about it is that our current level maybe leaves some opening to push on price a little bit more. And not that we want to churn customers, of course not. But you where we tend to see customers leave us that are controllable. We have a lot that are not controllable because of bankruptcy, M&A, that kind of thing. It tends to be at the low end of our market. So we think that it makes sense to push on price, though. We've talked about that last year. We raised our list prices for new customers. We've pushed more on price increases. And so that kind of activity does tend to drive down the gross retention.
But we think that even at 96+% , it's still very healthy. And it puts us in a better position, probably a healthy position too, with some of those activities that likely would drive that retention down. So 98%, of course, we're very proud of that. But potentially, it's not reasonable to maintain at that level.
Yeah. Got it. Yeah. It's not a bad problem.
No.
So, yeah. It's interesting that you've kind of—I just wanted to hear kind of the thought process on what how you shook out at that level. So it's helpful. I guess maybe just two questions before we wrap up here. So the billion-dollar target, it's 2027. I think you've given yourself some wiggle room. Maybe you can come earlier. But, what are some of the big swing factors as you view it in terms of, like, the getting from the—I think we're 600-ish plus right now, to that billion level? What are some of the biggest factors that you're watching that can kind of maybe swing that being a little bit closer nearer term or kind of sticking with the 2027?
Yeah. So, thinking about our long-term goal of $1 billion+ in revenue, capital markets for us is always something that can drive upside. So depending on the type of return that we might see there and the ability for us to participate in that at a higher level than we did in the past, certainly can drive some upside there. These ESG regulations and thinking about how quickly do customers take advantage of that, take advantage of our solution in order to ready themselves for it, that tends to be a pretty long tail. But if you do drive a little bit more urgency through some of those regulations, if we're able to, then that can potentially have some earlier upside. Although, you know, for that, we do think it's a really long-term, durable business.
But there you could get some spikes with regulation. We'll see here with the SEC release and what that might drive. But so those are some of the main ones. But I would say that really it's just how can we well and the other thing would be potential relief on the macro environment and customer buying cycles that can have an impact on revenue growth as well. So.
Got it. That's good. Yeah. Those are. There's some big ones, though, in that list. So I'll open up to the audience if there's any question. Yep.
Hi.
I'd be curious to ask you on your profitability. I think it was +3% or -3%.
Positive.
Non-GAAP. And then when you factor in, say 16 percentage points of stock comp, I think you're at, say, negative 15, negative 15 operating margins, roughly, with, say, mid-teens growth, say, 16% subscription growth. Is that right? Because we see a lot of other software companies that have either faster growth or either faster growth with those kinds of margins or much stronger margins with that kind of growth. And maybe can you help us understand how over the next, say, 3-5 years, what's gonna is that the end state? Or I guess that's not the goal just given.
Huh.
Given your target. So what are maybe the two or three key drivers that are going to drive improvement on those two metrics?
I'll, because I think we are webcasting too. So I'll try to briefly just reiterate the question. It's talking about what's driving our profitability targets for 2025, thinking about what are in comparison to our long-term operating targets. But roughly, I'm not stating it as well as you had stated it. But yeah.
Yeah. So you're taking it, what, what's driving the balance?
Yeah. Driving the balance.
The balance of growth and profitability, what's especially to the profitability side, I think, is the crux of the question.
Rule of 40, non-GAAP, Rule of 0, GAAP business to a stronger.
Mm-hmm. So, what we think that, what we expect to get us there is really the ability for us to execute. We are driving profitability within the business. We're trying to drive efficiency throughout the business. We're working on sales productivity. It's not where we want it to be. And it is something that we focus on. We're pushing on teams, making sure that they get leverage out of their existing resources. But we are adding new resources in where we think it makes sense. And for us in 2024, what we're thinking about is, what is that long-term opportunity within this really large unaddressed TAM? And what are the resources that we think we need to put in place in order to take best advantage of that?
What gets us there, though, is really carefully monitoring what is working, what isn't working, making sure that we pull back if something isn't getting the kinds of returns that we're expecting. We've never been a company that has does layoffs. We've just never done that. But that doesn't mean that we're not managing really carefully how people are performing. And we, over the past few years, have had a really heavy focus on performance management and thinking about how, how do teams, how do individuals meet their goals? And that whole process, as we've evolved, as we've matured, we think will help to really deliver results over time, get us to our long-term operating model and the billion and beyond in revenue. And so it's really gonna be a lot of different things.
It's gonna be success in some of these things that we're really diving into around ESG. Capital markets likely will be eventually, that's likely to pick back up. It can't stay down forever, probably. And, and just all the other advantages that we have within our broad-based portfolio of solutions, and getting the right resources there to be able to have conversations with these really large companies that are our customers, and just driving, you know, multiple solutions. And we think that that's how, that's how we get there.
I think, though, the 84%-85% subscription gross margins probably help some too. But maybe just.
Yeah.
One last thing to wrap up, just to you've had a lot of investor conversations since you reported your fourth quarter call. What do you think's still kind of the most underappreciated aspect of the Workiva story as we head into 2024 more?
Well, it's something that we appreciate and hopefully can be appreciated is just that long-term opportunity for us. We're not a company that's really looking for; we're planning for the long term. And we think that we have this really large opportunity in front of us. We've already been able to take advantage of so much within that market and within the great base of customers that we've built. But it's just that we have so much more to do. And so I think that that's really where we focus is that long-term opportunity and everything that we have to still achieve.
Great. Thank you very much, Jill. Thanks, everyone, for joining.
Thank you.