All right, good morning, everyone. My name is Alex Sklar. I'm one of the application software analysts here at Raymond James. Very pleased to have Workiva with us again this year. We've got Mike Rost, Chief Strategy Officer. We also have Katie White in the audience, who's the Senior Director of IR. This is going to be a fireside chat. If there's any questions at the end, I'll open it up to the audience. But Mike, thanks for joining us today. Maybe just to kind of start with an intro, just walk us through the Workiva platform broadly. What is assured integrated reporting? How does that differentiate Workiva and market?
Excellent, and Alex, thanks for having me, and thanks for everybody joining us today here and online, and yes, for Workiva, we sell a cloud-native AI-powered platform that covers functionality across three categories, which are financial reporting, governance, risk and compliance, and sustainability. We've been doing investor-grade reporting for more than a decade and help organizations through their processes of aggregating and assembling data, managing disclosures, managing all the audit and oversight that goes involved as part of that. That's where the assurance part comes in, and yeah, we have a couple dozen solutions across these categories, of which we help companies, including the 6,500 companies we have. We have 85% of the Fortune 1000 that are our clients and are serving them well across the globe.
That 85% stuff has been marching up nicely over the last several years. But maybe just start with kind of the demand environment. Year-to-date bookings have been very strong in what's been a tougher software tape. What are you seeing in the current demand environment? What's helping Workiva solutions kind of go to the top of mind for organizations as they think about their kind of finance priorities?
Yeah, so we talk about demand. We oftentimes, if you go back and look at our earnings transcripts the last several years, we talk about it being broad-based. Again, this goes back to us having a couple dozen of solutions, and yes, in any given quarter, we'll have ups and downs in our portfolio of solutions. Some are outperforming, some are underperforming, but based on all the different variables that might exist in the economy, the fact that we have this resilience in our business across these different solutions, I think, is one of the things that sets us apart. Specific to this year, it has been an interesting year. Yes, there's been some uncertainty, weekly, quarterly. You tell me what's been going on, but again, I think we've been very proud of the performance we've had. We've talked about it.
Yeah, we've seen certain solutions like sustainability have seen some moderation in demand. Yet we have a lot of other things that we have been selling that have been driving that bookings performance and revenue performance throughout the year.
Moderation of demand and sustainability, but still growth. Is that the message?
Yeah. It's still a strategic part of our business. And we are optimistic on the long, durable outlook of that market. Yes, in any given quarter, in any given geography, might we have some changes there potentially. And that's what's happened this year. But we have a lot of other things to sell outside of sustainability.
Diversification of solutions, I think, has been a message for a while now. Anything kind of inflecting that something that you've been flagging for investors that they might not appreciate that's been contributing kind of more to the growth algorithm in the past year?
Yeah. Kind of the standouts in the portfolio this year we've been talking about fairly consistently. One is financial services. So we have specific solutions that are focused on investment firms, insurance companies, banks. So fit-for-purpose solutions to those firms. And financial services has been a great market for us to sell into this year. We've been selling very well in multi-entity reporting. So if you're a multinational company, when you have operations in multiple countries, you have a legal entity in those countries, you have to report to those tax authorities in local jurisdictions. We've seen Q3, we talked a little bit of an uptick in cap markets. Again, we've gone from, using the bankers' words here, an IPO desert to actually some activity. And obviously, this has been seen by, I'm assuming, many in the investment world, some uptick there. And we participate in that.
Again, private companies is another area where we've been selling well into private companies, our private company reporting solution, and broader platform to private companies outside of just public companies.
All right, great. So we kind of hit on some of the demand stuff. From the Workiva execution standpoint, there's been a lot of go-to-market changes. You've had some leadership changes. You've recently announced you brought in a new Chief Revenue Officer. Maybe talk about what's happening on the go-to-market side. You laid out a strategy. I think it's been almost a year and a half now around staff and structure and strategy. New Chief Revenue Officer now. What are you doing from a go-to-market standpoint? Where do we stand in that kind of evolution?
Yeah. It's something we've been talking about even most recently at our investor day back in September and our earnings call in November. Yeah, we are looking at there. We are focused on driving greater leverage in our sales and marketing line. We're well aware that there's room for improvement there. And we've been focused on making those changes. At our investor day, even on our medium-term targets, we provided a 200 basis point improvement in that guide for sales and marketing. We're also mindful of how we make those changes. Interesting enough, we make a 200 basis point improvement in the guide. And the first two questions are, well, how is that going to impact growth? So we know there's that balance of getting leverage as well as not impacting growth. And we're being very thoughtful and thorough about how we do that.
As you highlighted, yeah, that is around how do we structure the sales team. We know we have some room for leverage there as we've had solution specialists and account owners and maybe some duplication of labor there, so how do you make a methodical change in that over time? On the staff side of it is, as we move up market and are selling much more on platform, it's the right type of seller that sells that larger transactional platform, and strategy is where are we selling and where do we expand into and how do we do that in a way that we're also looking at that.
So maybe just on one of those. So the concept, effectively, you're showing more leverage on the sales and marketing line. But underneath all of that, we could actually be seeing true kind of direct sales headcount going up because there was a big mix. It's a big bucket of sales and marketing. What's in there? Is that the right way to think about some of the changes?
Yeah. I mean, when we look at our overall growth algorithm, is there budget and is there an outlook for more quota-carrying sellers? Yes. Are we also expecting and building in some uplift and efficiency as part of that overall model? Yes, that's also part of it. And it's really finding that right mix of how that operates. But yeah, that is part of growth. And growth is important to us. Growth is hard, but it is a focus for us as well as that balance on productivity.
Maybe we can dovetail this into kind of the growth side of things. But what are some of the metrics that you're tracking internally or what can investors track externally in terms of signs of success around some of these go-to-market changes? Is it on the growth side? We should see something just in terms of a forward-looking metric there, or is it more on the sales efficiency? What are some of the big ones that you're following in terms of success there?
Yeah. I mean, we've talked about this. We actually gave some metrics at our investor day back in September of we're looking at that solution count by customer. We've highlighted how even today, across our 6,500 customers, 55% of our customers only have one solution. We see significant opportunity in that account expansion motion. And that is one area. We've been highlighting our large contract cohorts for a number of years and have shown great growth, even in Q3, north of 40% in some of those categories on the $300K and $500K contract values. So that is for us an indication that we're selling platform and multi-solution and are executing well there. NRR is an important focus. We've been doing well there, 114% latest. There is 100 basis points of currency impact there. And Mark continued to figure out how do we keep momentum there.
That metric has fluctuated for us over time. But still, we've been fairly consistent in punching above 110%. And Mark continued to focus what has to be true for us to keep that metric strong.
So you have targets out there on longer term for kind of a $1.1 billion-$1.2 billion of revenue. You're tracking above what that kind of target would have been when you initially gave it out. What's the right way to think about kind of linearity towards those targets the rest of the duration through 2027, given some of the things we're talking about?
Yeah. So on the top line side, I mean, yes, we put out targets back in August of 2024. That's for our year-end 2027 targets, both on the top line and the operating model side of that. I'm not going to give a guide, I guess, on the linearity of that, which would to some degree imply a guide for 2026. So some of that's going to be answered with the revenue guide we give in our February call on our Q4 results. We'll highlight that. So I guess we get to some predictability there. We are pleased that we gave a medium-term target. We're punching above that target right now. Nothing's ever linear in this business. But yeah, we feel good about the performance we've executed against those targets so far.
Yeah. So I think the growth story has been great this year. I think one of the big incremental things has been on the profitability side. You've raised your operating margin target by 400 basis points, I think, as this year has progressed. And you increased your medium-term targets by two points on that. What's happening? We talked about sales and marketing. But I think a lot of the leverage has been in other places of the model. So what's been happening on the profitability side? What's the outlook in terms of incremental margins going forward?
Yeah. I mean, we've highlighted in our calls, especially the last two quarters and at our investor day, this is a very deliberate approach. As a management team across every function, across every department, we are looking to get greater leverage. It isn't a mindset the management team has. We recognize that we are at a run rate to be a billion-dollar company next year. And that as a billion-dollar company, there are a lot of things we just need to operate differently on and generate greater leverage in our business. And for us, it's just going through and methodically going through and looking at where we can drive those efficiencies, whether it's on figuring out what areas we focus on more than less. Is it leveraging AI? Are there ways that we just go about doing things differently? And yeah, it's just an overall focus.
And we've been very deliberate in our language on our commitments to those margin targets. And our focus on that is part of our future path.
I do want to pivot to AI, but maybe just one more on that. Just you've been with the company for a while. Is this mindset shift you've talked about kind of across all layers of the organization, how different is that this year versus where you've been in the past years? Has it been kind of a more notable shift in that regard?
Yeah. I mean, and I'll use words that, for people like you and others that have even written on this in the last couple of quarters, there's a notable shift in how Workiva is talking about that. So yeah, it is a change, and part of it is some of the leadership that Julie's brought to the organization and just her mindset of where she believes the organization needs to be at this stage of the company. And I can say this is also just from those that sit with me on the management team of, yes, we've recognized at this stage of company that a very deliberate focus on a balance of growth and productivity is needed, and that's part of their focus.
Yeah, and it helps to keep up 20% growth to show those incremental margins, but all right, so for AI, a couple of things I want to hit on, but you had a slide at the investor day, and it kind of showed this next leg of the platform kind of beyond assured integrated reporting into financial, non-financial sustainability of what AI could be, and so when you kind of look at the whiteboard or when you think about the vision for Workiva, what's most exciting to you about the AI front from a product standpoint?
Yeah. I mean, AI, I believe, will be an incredible positive disruption in the overall market. That being said, we have to meet customers where they're at on the readiness for adoption. There does exist some corporate inertia into bringing in new things as much as we want to talk about things and hype things up. So for us, it's about being very pragmatic and delivering value to our customers and AI capabilities that are both usable and useful that drive that incremental return of productivity to those customers in where their workflow is at. So those are the areas that we've been focused on, whether it be at our September user conference, we introduced something called SEC Intelligence.
This is providing curated data sets of information for our customers that are involved in doing SEC filings where they can go look up and benchmark and assess what other companies have filed or other categories or areas in their K or Q and get representative expanded language, all in the context of their workflow. On the GRC side, this is all about how do you manage evidence and set up new control libraries and new controls and new policies. We highlighted a use case in our most recent earnings call where we had a net new customer that looked at the embedded capabilities we had around AI for GRC, and they said, wait a minute, I can actually utilize Workiva to start up some of my GRC program and maybe not invest in some outside consultant labor.
So we see some tangible benefits there where customers are looking at this going, wait a minute, I can maybe go about doing something different and get a better ROI on the platform by leveraging AI.
And I think, talking to you all in the past, you all use the Workiva platform internally for, I think, over 100 different use cases, not all of which I'm sure you sell. But does the AI at all help kind of new product roadmap in terms of thinking about new solutions to productize, whether it be the vertical-specific ones, like some of the ones you've done lately around utilities? Is that something on the roadmap or that's a little more about existing workflows and embedding it in there?
I think it's both. Again, this goes back to this pragmatic approach of continuing that focus on innovation, but yet delivering something that's pragmatic and practical to our customers. So yeah, we work with our customer advisory boards. Yes, we work with our internal teams and are always testing things out. As Chief Strategy Officer, I often talk to myself as I'm customer zero. I'm utilizing our platform every day and in the function of some of the workflow that our customers go and do, making sure that it is there. And then also challenging the teams on those next stages of innovation of how do we embed some of these new capabilities that are there.
I want to hit on some of the specific solutions in the suites, and maybe just starting with SEC. It's kind of the biggest one that you disclosed publicly. I think it's a little over 40% of revenue last year. You introduced some newer. I'll call them good, better, best plans. I don't know if that's your formal term that you're using as well, the packaging. But what's been driving better adoption of some of those higher-tier packages? Can you just talk about that trend that you're seeing broadly in the business? What's in the higher-tier packages that most of your customer base today isn't currently buying?
Yeah. So we've talked about this over the past couple of quarters. Yes, we've introduced some stratification in our packaging. And yeah, in simple terms, it's a good, better, best model. So specifically for SEC, our large client base of SEC, everybody's automatically on the Standard version of our SEC solution. Not all SEC filers are the same. And part of this is how do we move customers up to a more Advanced version of that, which is, one, delivering greater capabilities on that solution to our customers and also being able to monetize that for those that are willing to pay for it. So for example, for SEC, if you look at SEC Advanced, what's included in that is greater data capabilities, data management capabilities, enhanced design reporting capabilities for those that want to have a much more graphical layout of their filings, and also Advanced AI capabilities.
And to date, over the last several quarters, we've seen some good uplift. We believe this will be a multi-year durable demand driver on how do we get uplift in that 40% of our revenue base by offering something of higher value. That's optional. Yes, if you don't want to take that, you will go through the normal price increase mechanism. If you're looking for that enhanced version, we have an option for you. And that will also mean a greater uplift in wallet share that we get from that client.
You gave some details at the September investor day on what that uplift could look like. I don't know if you want to speak to it broadly outside of just SEC or within SEC, but just frame what does a typical customer look like as they progress through kind of the better and the Standard and the Advanced plan?
Yeah. I mean, the uplift from Standard to Advanced on the SEC side has been north of 20%, and we think there is opportunity there. Other areas on this packaging stratification. A different example of this is, I'll use GRC, for example. Not all companies have the same level of sophisticate in their GRC processes. So for us, one of the things that we've done in the past year as well is we also came out with a GRC Essentials product, which is meeting the customer where they're at. If you only have one stratification of that product, you end up discounting the actual value of that product so you can land that customer that might be at the beginning part of their journey.
And for us now, by landing them with the essentials, we can migrate them through a couple of tiers of product over time and not just use price as a mechanism, but moving through those tiers of product of giving them more value that they'll pay for over time.
So, as you say that, GRC, it's hard not to note GRC's accelerated this year based on the disclosures you gave. I think you said it was 30% ARR growth as of second quarter. Is that playing out already in those numbers? Is that just a more recent change that it's helping you to land with essentials? It's more to come. What's kind of been behind some of the growth acceleration in GRC?
Yeah. I mean, I think there's multiple variables driving our growth in GRC. One is the market in general. We're on our fourth generation of GRC software. There's just a lot of old software out there on-prem. And I would say legacy GRC platforms just exist out there as people migrate through and look at their journeys on what their staff is looking for. It could be some investing in platforms that are AI ready or things like that. There's multiple things. On renewal, people are looking for different software. And for us, it's about going out and competing and winning our fair share of those things that are for renewal. I think part of it is I think we're just getting better. I think our platform is resonating better. I think we're getting better at selling into that and highlighting our value propositions.
Yeah, we've also had some disruptions in some of the other competitors out there and are focused on how do we just compete better in the market.
So I don't know if everyone always appreciates this in your conversations, but GRC is obviously a catch-all term. You have, I think, a ton of sub-solutions under the GRC umbrella with audit and controls and policies and procedures. What's kind of the typical buying pattern for customers? Do they land with one of those and then there's a land and expand motion within GRC? I'm kind of just curious about kind of go-to-market within the GRC bucket.
Right. So GRC, that acronym stands for Governance, Risk, and Compliance. It started coming into kind of the mainstream starting about 20 years ago, 2005, is when you first started seeing software talked about in the context of GRC. Ultimately, it is a category of categories. And for Workiva, we play in those GRC business processes that are more financial related. So for us, it's around internal controls, internal audit, risk management, and policy management. And as that, a lot of our GRC sales are multi-solution. Oftentimes, it's a combination of internal controls plus risk management or internal controls plus internal audit or internal audit plus policy management. So selling into that audience, which is typically the Chief Audit Executive, sometimes into the Controller or CFO are the buying centers for that. And yeah, we sell into that part of the GRC market.
I don't know how many buckets this hits, but just with prolif proliferation of AI within enterprises right now, is that a factor that's starting to drive growth, either whether it's around the controls or around the policies and procedures? Is that something that's more still on the come? I'm kind of curious about with all the AI data growing, AI usage within enterprise that you already have as customers. How much of a driver is that?
Yeah. I mean, I think just in general, I think the adoption of AI does create the requirement for additional governance on top of that. And some of that just gets back into, do you need additional controls or different policies or things like that to manage it? So yeah, we've seen some of that. I think it's just one of the many factors that enter into an overall governance framework for any type of company. I wouldn't say it's outsized that AI is driving that. I think I look at AI as just another one of those elements of the overall IT stack that you just have to make sure that you have control and policy and audits on top of.
Switching to your sustainability, 10%-15% of revenue, I think, is what you came out and you spoke about. You talked about kind of somewhat moderating, but still demand for the solutions. Why have you continued to see growth in there? Just maybe talk about the backdrop with some of the state rules out there, omnibus. What's the latest happening there? What's driving some of the continued demand for that sector given the noise that's out there in the market?
Yeah. I mean, first off, for any given company, for a lot of companies, there are multiple drivers of why they're focused on sustainability. Regulation is part of it, yes. But for a lot of companies, this is about managing risk. There are many businesses that have some sort of environmental or climate risk or things that are there. This is about managing cost. We've had a number of customers that are, as they go through, whether it's looking at carbon and operations or spend management on broader things there, they identify areas of cost savings and efficiencies they can get to. For many companies, it's all the different stakeholders they have, whether it's other parts of the world that maybe they have regulations for or it's selling to the consumers. It might be their overall supply chain and demands they're getting from their customers on what it is.
I would say at times, I say, don't overthink this. If your customers are demanding that you provide them sustainability information and it's a good commercial decision for you to make, you're going to go do it for that reason, not because of some given governmental issue. Now, on the regulatory front, as of 2:37 A.M. Central European Time this morning, there was a proposal that has been agreed on that they can actually vote on for the CSRD. So we may have some clarity. I'm not going to predict European politics here, but there may be some more clarity that we have on the CSRD. The proposal has landed from where we thought it would be on company size and revenue size of what things. So as much drama that's happened there, I think we have a lot more clarity as we exit the year now for those companies.
The Wave one filers and CSRD, they still have to file. Not much has changed for them. The Wave two and Wave three, the smaller companies, we're one year into a two-year delay on that. So yeah, we believe there's still durable demand there. In the U.S., the state of California does have laws on the books. They've published a list of companies that have to comply with those. There are a few things happening in the courts right now and some good headlines. You can go read about that. But we believe over time that there will be some regulation in the U.S. related to climate and companies will be disclosing on that.
Sitting here now, it sounds like it's hot off the press with the European rules, but sitting here today, are you more or less the same kind of excited about sustainability as a growth factor going into next year versus kind of maybe this time last year?
Yeah. I mean, it's still a strategic market for us. And we believe there's long durable demand. I'm not going to call out that on any given quarter or year of where we see that. But I think over time, one, we believe that we have a strong platform and a right to win and reason to win there and have the ability to compete in that market. And two, we think over time there'll be strong demand drivers out there. We're seeing that and just looking at the numbers of companies that have committed to science-based targets. Public information, you can go out and look at the Science Based Targets initiative on their dashboard. And there's been a significant increase over the last couple of years of companies that are voluntarily signing up for targets and disclosing against those.
So yeah, I think over time, we believe this is a long durable demand market. And yes, 2025 has had a bit of disruption primarily on the policy side of things.
Let's see if there's any questions from the audience? Okay. So one of the other big growth factors that's been a catalyst to growth for a while now is kind of the international motion. Obviously, some of the solutions we've been talking about are key reasons behind that. But what's changed from a go-to-market standpoint internationally that's really helped unlock some of that growth opportunity there?
Yeah. I mean, it's been a focus of us. We've talked about this over the last several years of our increased focus of kind of building out those teams and having the right focus on those markets. For us, it's primarily been Europe the last several years that's been a significant focus. When I look at the numbers, I think a lot of this is just execution. We are just getting better. And it's time and repetition and just getting better at the overall go-to-market execution there. For Europe, what's also been successful, we've been very successful in selling multi-solutions and platform first. And it's also been our partners. We've taken a partner first and in some markets a partner-only approach on that expansion. And I think our reps and cycles and success with those partners has grown over time. And that's also contributing to the results.
In terms of capital allocation, obviously, investing for growth, investing back into business, I think is your stated kind of number one objective. But how are you thinking about kind of other uses of cash going forward now that the profitability profile is kind of significantly ramping here as we have exited this year?
Yeah. No, that's a great question. Yeah. I mean, as we move into a higher margin profile, we will be, just by nature of the business, spinning off more cash. That does provide us more optionality. As we look at that, yes, M&A is part of that, that we're doing that. But we've been very thorough and thoughtful in how we look at M&A. And we will look for things that will accelerate our strategy, but don't feel that we have to go out there and buy TAM or buy customer lists or things like that. We've started, we have a couple of quarters now under our belt here on share repurchase. That is part of the overall strategy as well. And as we generate more cash, again, we have more, I think, more optionality on the share repurchase side as well.
So maybe just a last one to wrap up. But in all your investor conversations, I don't know if since the quarter or the year, but what do you feel like still the most underappreciated part of the story? And what might change that in 2026 from your seat?
Yeah. I mean, especially when I talk to new investors, it's just walking through the broad portfolio of solutions that we have. We are covering a lot of surface area. And that diversification of solutions, I think, is what's driven the strong resilience of this business over the last, go back and look at our subscription growth over the last 10 years. We are showing very strong resilience and durability on that subscription line. So yeah, I think it's just understanding all the moving parts we have in that portfolio and understanding the benefit that can bring in. I think the second part of it is just what is the track record we've had historically on profitability and are you committed to those targets? And we've been very deliberate in the last couple of quarters of talking about that.
And when it comes down to it, we believe this is a durable growth, expanding margin story. And yeah, we have to earn that. But we want to make sure people really understand that that's part of what Workiva is about.
Awesome. I think that's all the time we have. Mike, thanks for joining us. Thanks to everyone in the audience.
Thank you.