Workiva Inc. Class A

Ladies and gentlemen, thank you for standing by and welcome to our Kiva Q3 2021 conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. If anyone should require assistance during the conference, please press star zero on your touch-on telephone. I would like to turn the conference over to your host, Mr. Mike Cross. Please go ahead, sir.

Good afternoon and thank you for joining us for this third quarter 2021 conference call today's call has been pre recorded and will include comments from our chief executive officer Marty Vanderplou followed by our chief financial officer Jill clint will then open the call up for live Q amp a session. Julie is co our chief operating officer is also on the call. A replay of this webcast will be available until November 10 2021. Information to access the replay is listed in today's press release, which is available on our website under the Investor Relations section. 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 the fourth quarter and full fiscal year 2021 and preliminary guidance for the full fiscal year 2022. 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 and subsequent filings 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 will refer to certain non-GAAP financial measures. Reconciliations of non-GAAP to GAAP measures and certain additional information are also included in today's press release. With that, We will begin by turning the call over to our CEO, Marty Vander Plauw.

Hello, and thank you for joining today's call. The Workiva team delivered another strong quarter, beating third quarter guidance for revenue and operating results. We achieved 30% organic growth in subscription and support revenue and approximately 28% in total revenue. As a result, we are raising our full year guidance. Jill will provide further details about our financial results and future outlook. We continue to build on our market leadership and the increased demand for transparent reporting, including financial and ESG reporting solutions that drive digital transformations. We target being a low to mid-20% growth company. In Q3, as in the past several quarters, we have benefited from the strong IPO market, the increase in the number of new public companies, and enhanced compliance and reporting requirements. During the quarter, we saw strong bookings in capital markets, SEC, ESG, and ESF. Cap markets, ESG, and ESF are three markets which we believe have high growth potential. We'll talk more about these fit-for-purpose solutions, our expanding TAM, and our outlook for growth during our Virtual Investor Day on November 18th. Our differentiated technology and extraordinary talent are clearly making an impact on our customers. During the quarter, we grew our global customer base to 4,146, adding 197 net new customers. We retained our existing customers, increasing our S&S revenue retention rate to 96.5%. And our enhanced ability to cross-sell multiple solutions helped increase the number of customers with ACB over $100,000 and $150,000. We are pleased with the investment that our partners continue to make in growing their Workiva practices. During the quarter, we had a number of large partner-related wins. Some examples include... A Big Four advisory firm expanded a major healthcare company's use of our platform to include our ESG solution. The advisory firm had previously implemented insurance statutory reporting for this company. Our APAC team, in partnership with a Big Four advisory firm, signed its largest single opportunity with a global financial services group. The customer purchased our connected annual and interim financial reporting and tax reporting solutions. Another key partner-related win was with a large building society in Europe. The customer invested in the Workiva platform, purchasing our ESF financial reporting and banking solutions. Our partners also played an important role at our 2021 Workiva Amplify Conference, where they collectively hosted 33 of the 70 sessions. This year's virtual conference held in September was our largest yet. We welcomed 10,000 attendees from 3,700 companies across 108 countries. Next year's conference will be both virtual and in-person. Please mark your calendars to join us September 12th through 15th, 2022 in Las Vegas. Workivo was recently named a leader among governance risk and compliance platforms by Forrester Research. Our platform received the highest scores in 12 criteria, including audit management, data integration, vision, and planned enhancements. We believe this placement validates our position as the global leader in the market to simplify GRC's most significant challenges and deliver a greater return on investment for our customers. Looking ahead to 2022, we believe now is the right time to strategically invest in our business in order to deliver consistent 20 plus percent growth. Outside of SEC, we believe penetration of our TAM is still early in all solution areas. Therefore, we intend to invest to accelerate global growth, advance our product roadmap, and increase demand generation. Jill will further discuss the details of our 2022 preliminary guidance. In closing, we delivered a strong third quarter driven by the focused execution of our strategy. We continue to grow the business by attracting and retaining top talent, investing in the innovation of our platform and solutions, and consistently delivering an outstanding customer experience. It continues to be an exciting time for Workiva. We believe we are well positioned and have the right strategy in place to capitalize on the increasing opportunities to power transparent reporting for a better world. With that, I will now turn the call over to Jill.

Thank you, Marty, and good afternoon, everyone. We continued to feed broad-based demand for our solutions in Q3 with strong revenue performance across our solution portfolio. As Marty mentioned, we are raising guidance for full-year 2021 revenue and operating results, which I will discuss later. I will talk about our results and guidance on a non-GAAP basis. Refer to our press release for a reconciliation of our non-GAAP and GAAP results and guidance. We beat Q3 2021 revenue guidance at the midpoint by $4.2 million. Higher subscription revenue accounted for the majority of the beat. We beat guidance on Q3 operating results at the midpoint by $10 million. The revenue beat mentioned above, coupled with lower T&E expense, makes up the majority of the beat on operating income. Turning to Q3 2021 results versus Q3 the year before. We generated total revenue in the third quarter of $112.7 million, showing growth of 27.9% from Q3 2020. Breaking out revenue by reporting line items. Subscription and support revenue was $98.9 million, up 30.4% from Q3 2020 New logos and new solutions helped to drive strong revenue growth in Q3 2021. 69% of the increase in S&S revenue in Q3 came from new customers added in the last 12 months. Higher capital markets revenue was also a factor. Professional services revenue was $13.8 million in Q3 2021, up 12.5% from the same quarter last year. This was largely due to higher XBRL services revenue. Turning to our supplemental metrics. We finished Q3 with 4,146 customers, a net growth of 563 customers from Q3 2020, and a net growth of 197 customers from Q2 2021. Our revenue retention rates improved. Our subscription and support revenue retention rate was 96.5% for the third quarter of 2021, an increase compared to 94.9% for the same period last year. With add-ons, our subscription and support revenue retention rate improved to 111.1% for the third quarter of 2021, compared to 110% in Q3 2020. The strength of this metric is having a positive impact on our revenues. The number of larger subscription contracts continues to show impressive growth. In the third quarter of 2021, we had 1,043 contracts valued at over $100,000 per year, up 33% from Q3 the prior year. The number of contracts valued at over $150,000 per year totaled 541 customers in the third quarter, up 41% from Q3 2020. Moving down the P&L. Gross profit totaled $87.4 million in Q3, up 30.7% from the same quarter a year ago. Consolidated gross margin was 77.6% in the latest quarter versus 75.9% in Q3 2020, a net expansion of 170 basis points. Breaking out gross profit. Subscription and support gross profit totaled $84 million, equating to a gross margin of 85% on S&S revenue an expansion of 30 basis points compared to Q3 2020, primarily driven by high FNS revenue. Professional services gross profit in the third quarter was $3.4 million, up 28% versus Q3 2020. Gross margin was 24.6%, a net expansion of 300 basis points. Research and development expense in Q3 totaled $27.2 million, up 24.9% from Q3 2020 due to headcount investments. R&D expense as a percentage of revenue improved to 24.2% in Q3 2021 from 24.7% in Q3 2020. Sales and marketing expense for the quarter increased 27.8% from Q3 2020 to $41.9 million as we make investments in support of our go-to-market strategy. General and administrative expenses totaled $13.3 million in Q3, up $4.7 million compared to Q3 2020. G&A expenses as a percentage of revenue increased to 11.8% from 9.8% in Q3 2020. We posted an operating profit of $5 million in Q3 2021 compared to an operating profit of $3.7 million in Q3 2020. Turning to our balance sheet and cash flow statement, At September 30, 2021, cash, cash equivalents, and marketable securities totaled $522 million, a decrease of $29.3 million compared to the balance at June 30, 2021. This decrease was driven by the acquisition of OneCloud. Net cash provided from operating activities in Q3 2021 totaled $16.3 million, compared with cash provided of $7.9 million in the same quarter a year ago. I'll now go over the impact from our OneCloud acquisition. Our reported results contain the full absorption of our OneCloud transaction, which was closed on July 30, 2021. As highlighted on our Q2 earnings call, This strategic acquisition added to our platform the capability to connect, harmonize, and control data across multiple disparate source systems. We believe this is a long-term competitive differentiator for us. Please review our financial statements and related footnotes contained in the Q3 2021 10Q for additional information related to the acquisition. Turning to our guidance. We are factoring in the expected impact of the COVID-19 pandemic on our business and results of operations based on information available to us today. For the fourth quarter of 2021, we expect total revenue to range from $116.5 million to $117.5 million. We expect subscription revenue will continue to grow at a faster rate than services revenue in Q4. We expect non-GAAP operating loss to range from $2.8 million to $1.8 million. We are modeling higher travel costs and investments in growth opportunities and hiring through the remainder of 2021. For the full year 2021, we are raising guidance for revenue. We now expect total revenue to range from $439 million to $440 million. We expect non-GAAP operating income to range from $15 million to $16 million. And in 2021, we expect to post positive free cash flow for the fifth consecutive year. Turning to 2022. Our current 2022 assumptions are dependent on a variety of factors that are subject to change and that we believe are appropriately conservative for the current environment. We expect to provide formal 2022 guidance on our Q4 2021 call next year. On a preliminary basis, we expect total revenue to exceed $528 million in 2022. We expect the growth rate of subscription and support revenue will continue to outpace the growth rate of professional services revenue. We expect non-GAAP operating loss as a percentage of revenue to be in the low single digits for 2022. This conservative guidance for operating margin includes new investments in sales and marketing, geographic expansion, and research and development as we intend to take advantage of growth in new markets and an expanding TAM. This guidance takes into account the return of expenses that were reduced by COVID, primarily travel costs. I am very proud of our team's continued performance and would like to thank all our employees for their hard work and incredible dedication We will now take your questions. Operator, we are ready to begin the Q&A session.

Thank you. Ladies and gentlemen, if you have a question at this time, please press the number one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Your first question comes from the line of Matt Stadler from William Boulayre Linings Open.

Hey, guys. Thanks for taking the questions. Very great to see the positive results here and the initial guidance for 2022 as well. It's been super helpful. Maybe just starting with that, we'd love to kind of dive through, obviously, you know, it's a great business model. There's a lot of, you know, kind of positive things going on in terms of demand drivers. But any kind of key factors that you're, you know, kind of looking at when you think about the confidence and visibility into that, you know, 528 plus million for next year?

Hi, Matt. Thanks for the question. Oh, Marty, go ahead.

Go ahead, Jill. Go ahead, Jill. All right.

So we are really positive in thinking about how we want to grow going into next year. And we know that we're going to need investment in order to get there. But we're really looking forward to growth across our solution portfolio. So thinking about all the ones that Marty had talked about earlier in this call. And where we think that those lead us is to that $528 million in revenue as what we're willing to put up at that low end of revenue growth. And we will continue to invest, as we've talked about, towards that growth across the board and across all solution areas and across all of our growth drivers. Marty?

Well, I would just add that, you know, we're – We're seeing good growth on all our solutions, and like I always say, the portfolio approach gives us a lot of stability, and we have pretty good visibility at that number that you mentioned, the 528. Obviously, our goal is always to do better. That's our history and track record, and we're always going to try to push the envelope and do everything we can, but You know, we like to put numbers out there that we're very confident in, and, you know, that's the true mark of a management team, you know, do what you say and say what you do. So that's really what's reflected there. Got it. That's very helpful. And then maybe just one follow-up here on the international expansion. Obviously, it seems like things are, you mentioned, continued, not only forward investment and growth there, but solid performance currently. Anything you can speak to in terms of I guess the ESF kind of opportunity and the progress you're seeing there. You talked about that being maybe a little more kind of back-end loaded in terms of linearity for this year. So are you continuing to see that play out? And then in international markets outside of ESF, any demand pool for additional solutions at this point? Well, you know, I've always said this, that, you know, the enterprise software business is, you know, you don't see, you know, hockey sticks, very rarely do you see hockey sticks. And so, you know, ESF is going just as we expected. We've always talked about how the bulk of the ESF solution providers at day one is going to be bolt-on solutions that are very inexpensive and just go on the very end of the process. And then as time goes on, our platform wins those. That's what happened in the state. So ESF is a really good market for us. It's not overrepresented now. It's just one of all our portfolio. But it has a really long tail in terms of growth. So that business will grow for years now, just like our SEC business. Our SEC business is still growing. So it's just one of many things that give us the platform for our growth. And in terms of other things, we're starting to see, obviously, some ESG movement in Europe. You know, and we're optimistic about all of our solutions in both EMEA and APAC. Got it, got it. Thanks again. Thank you.

Thank you. Next up we have Terry Tillman from Truist. Your line is open.

Hey, Marty, Joe, and Mike, congrats for me as well. I had a couple of questions. The first might be a little bit of a multi-parter, so bear with me. On the capital market side, you did call that out. Any more kind of quantification you can provide in terms of its contribution to new bookings or billings?

And then on those transactions, is that recurring or is that more of a kind of a one-time thing and then you hope to get them for SEC reporting and other things thereafter and then add a follow-up? Yeah, you know, I would say that, you know, cap markets was one of our better solutions but not, you know, not something that just overshined everything else. You know, there really is a fairly balanced, you know, revenue bookings, I'm sorry, bookings each quarter. And, you know, they're all in the same order of magnitude. They're not wildly different. We did see it tick up. We still have less than 10% of the market, which gives us a growth window there for that. Now, in terms of the recurring nature of it, it's a more complex thing than even that. A lot of times we've gotten into the company when it's private, and so we're already seeing some revenue stream. Many times that's how we get the business. Other times we're not. They just call us up for the cap markets. In either event, when you say hope, we almost always get them for SEC reporting and a very high percentage on SOX after we do the cap markets work. Oftentimes they sign up for management reporting, and if they're a financial services company, they'll sign up for other things too. The cap markets does create a bump of sorts, but shortly thereafter, all those other solutions shore it up. And usually, in many instances, we don't even see a drop-off just based on how many we sell. So it's complex. It's a really good thing for driving all of our solutions. And so, you know, for that reason, we're going to continue to grow that market share. We're starting to see for the first time a real – a real tipping point where attorneys realize that we're in the game and we're a very reliable and steady organization to do this. And when we have a law firm use it a couple times, they tend to just keep coming back. So we're very optimistic about it. Did I get both your questions, Terry, there? I lost track. You did. You did a nice job on that, and that was great.

It sounds like, yeah, quite often you can at least be made whole, if not potentially expand with these other built-for-purpose solutions. So that's great, Marty. The follow-up question for whoever wants to take it is just on the ESG side. I'm curious in terms of is it still a lot of kicking of the tires, or are you now seeing kind of broad-based conversion now to beyond kicking tires and they're ready to buy a solution now?

And kind of related to that is, is there any parallel with the ESIF market where, you know, maybe there's a stopgap or something or just throwing people at the reporting area? Or is there any parallels with that? Thank you. I'll let Julie take that. She's really in deep with all the solutions. Thank you.

So we've been out for about a quarter or so now with our ESG solution, and we are absolutely seeing strong momentum. And, yes, I think you're probably aware in the 2023 final year there is a – a regulatory requirement to have ESG and ESF in the same annual report. So that lends to some of the momentum as well. So we are out in the market with the product. We are moving strongly and absolutely seeing trends in momentum.

Thanks, Julie.

Thank you. Next up, we have Rob Oliver from Verity Lani's OpenSearch.

Great. Thanks. Good evening. Thanks for taking my question. My question for you guys is on the partner side. Some really nice deal momentum, Marty, that you alluded to that were partner-driven. It sounds like those initiatives are taking hold, and you guys spent some time, I know, profiling that at amplify as well just curious what you're seeing in those partner deals any patterns that might be evolving are they do they tend to be larger do they tend to be more multi-product on the land are they part of larger digital transformation initiatives just any color you could provide there would be great and then I just had a quick follow-up as well thanks Julie

I will take that one. Certainly part of our strategy is to expand this partner ecosystem. And the goal, of course, is to sell higher, sell broader, sell more. We want to be everywhere those strong advisory partners, our alliances are. They are in financial and digital transformation. And certainly our platform is absolutely amazing. fit for purpose for those financial and digital transformations. So yes to everything you said. That is absolutely part of the strategy that we have, and we are seeing trends in that direction.

Great. Thanks, Julian. My follow-up is going to be for you, so appreciate that. Just on the ESG side, a follow-up to Terry's question.

Obviously, we've got the mandate in Europe, but it does strike me that we are beginning to see some thought leaders in the U.S. start to pursue ESG strategies outside of a mandate. And just was curious, given, you know, how strong you guys are in North America, you know, kind of just what you're seeing in terms of color. I know we don't expect that market to kind of reflect the way Europe will be mandate-driven, but just curious if you're seeing any activity levels there or ESG attached in U.S. on top of the core Workiva platform. Thank you.

Sure. And the regulatory is still a ways away, and we are just getting started here with ESG. I mean, we are out in the market, but we're working with partners. We're working with customers to refine our solution. We are adding some development capabilities on and making sure the solution that we have is fit for purpose for the market so again we are just getting started and the market is just getting started around it but we are seeing our pipeline is strong uh and we are seeing um traction here companies are looking into esg not because of regulatory north america necessarily but not just stakeholders now shareholders but you know communities and employees and customers partners they're all demanding more transparency and accountability beyond the regulation so companies are looking to differentiate with their esg strategies they're looking to ensure that they are providing their their not just shareholders but their stakeholders with the information they want to be more transparent and show them what they're doing in the market so we are seeing momentum pipeline increasing and so forth but again this this is a a long play, and we are just getting started in the market.

Understood. Okay, thanks, Julie. Sorry, go ahead, Mark. I would just add that Julie's point is really well taken. I mean, we're seeing as much activity in North America as we are in Europe. And, you know, it looks so much like the early days for SEC, you know, where you have a close rate that's, you know, pretty healthy. But then everyone we talk to is very interested, and it's not a matter of if, it's generally a matter of when. So really, even though it's very, very early days, North American activity is just as strong as EMEA.

Thank you guys very much. Look forward to the analyst day. Appreciate it.

Thank you. Next up we have Tom Roderick from CISO. Your line is open, sir.

Yeah, great. Hi, Marty. Hi, Julie. Hi, Jill. Thanks for taking my questions here. Congratulations on the great results, the ongoing momentum here. It looks fantastic. So I'm hearing some great things coming out of international, and I know you don't quantify it typically until the end of the year. Maybe we can start with APAC. I mean, Marty, you highlighted a handful of logo wins in the APAC region, I think, at a very large global financial services win. Talk a little bit about what your go-to-market looks like over there and perhaps what you can say to what the scale of that looks like in APAC or just generally some of the success levels, what's driving that there in that part of the world, and then maybe we can get to Europe after that.

Well, APAC is by far the newest or most immature market we have. We have a small team of people there, but they've closed some really nice deals over the last year. And we sort of roll with the get some really good anchor accounts, reference accounts in the territory before we invest heavily. And so we've accomplished that. We've seen a mixture of solutions there. And the go-to-market is very much partner-oriented. Even though the numbers are small, they have the highest percentage of partner attachment rate. And so, you know, we have direct sellers. We have all the same types of people there we have in any place in terms of, you know, solution engineers, consultants, SAs, all that stuff. But, boy, the partners play an outsized role in that. And it's still early days. And as far as I'm concerned, That's good news because we got a lot of runway left there. So, you know, I'm very bullish about APAC, and I'm happy with everything that's going on there. Wonderful.

And then EMEA, you know, I know even going back as far as last year, you were ramping up the headcount in that region pretty aggressively. I think even, you know, if we go back to this quarter last year, you talked about 25% of your new logo wins, if I remember, were from the EMEA region. Would love to hear just a little bit more of an update. I know ESF, you mentioned, is a little bit more back-end loaded this year. That's understandable. But talk a little bit about what you're doing to build pipeline and To add headcount, are you still being as aggressive in adding new heads? And just generally, again, on the go-to-market and leadership in that region, how do you feel about all those things?

Yeah, I'm real happy with the growth there we've had in terms of putting a team on the ground and getting things going. Anytime you grow fast, there's a learning curve you have to deal with, and everybody understands that in this business. But in general, we've been able to hire good people, We've seen continued bookings growth. You know, the numbers are starting to get to where they're actually material in terms of us achieving our goals, and it's very promising. We're going to continue to add headcount there. I mean, with ESG coming, with ESF up and running, with financial services, there's tons of financial services there, you know, and even SBC reporting. We're going to continue to invest there, and we think that, you know, as we said all along, 25% or 30% of our revenues will come from there eventually. Getting that number to grow has been a challenge because North America has been legging it out and making the denominator bigger all the time, which is a good thing. But as I look in terms of, you know, just not as a percentage but as absolute numbers, I'm happy with what's going on. I mean, especially the – ability to hire good people, ramp them, and get things going. So, yeah, very optimistic. And, again, you know, that's early days. I talk about it a lot. The GDP there is pretty, you know, commensurate with the U.S. GDP, and they're even more regulated, you know, than we are. So a lot of opportunity there. And so when I look at our growth opportunities here, That's early days, too. And for me, we have a lot of solutions that are early days, and we have two of the biggest regions on the planet in early days. So just a lot of runway for us. That's excellent. Thank you so much. I'll jump back into here.

Thank you. Next we have Alex Clark from Raymond James. Your line is open.

Thanks. Marty or Julia, I wanted to ask on the existing customer growth, the growth of the 100,000 paid customers. It's been really strong again this year. I'm curious how much of it's being driven by new logos coming in above that level from day one versus expansion. And then as a follow-up, one of the things we've talked about in the past, is you've got 1,000 of those 100K customers, and saying that another way still means there's 3,000 customers that are basically only taking one of your solutions. So can you just remind us about your strategy around the expansion motion more broadly? Thanks. Sure, I'll let Julie take the first shot at that one. Julie, I think you're on mute.

I will take the first question there, the last question on the multi-solution. We do continue to increase our effort and our focus around account expansion. And while, of course, we started out as an individual or a single solution company, we are now selling more and more multi-solution deals, and we're also selling additional solutions into existing accounts. And Marty talked earlier about the private to public journey where we can sell multiple solutions to a company going through that. It's our private financial reporting solution, controls management, and SEC. So we have bundles that we are focused on. So we are putting a lot of attention now to the multi-solution. But you're right, we did, again, start out as that single solution.

Yeah, and I would add that, you know, that to the very first question you had, you know, it's roughly, you know, 50-50 new solutions. You know, it could be 40-60. I didn't look at it, to be honest. But new solutions and existing solutions that go over that number because of adding solutions. So, you know, just like everything, we tend to be pretty balanced there. And it isn't just one solution either. It's all over the board or one market. It's pretty broad-based, and we're really pleased to see that ACV just keep growing. Okay, got it. Very helpful color. And then just following up on the ESG question from Robin Perry, and I do get the aspect that we don't have formal rules in the SEC, but could you just help frame the range of kind of deal sizes that you're seeing today? Is it going to be looking something similar to stocks or perhaps kind of larger than that? What are you kind of seeing in the market now? You know, we're seeing a, it's early days, so it's hard to really quantify it. You know, we're seeing on average, the average deal size is a little bit below our company-wide ACV, but we see big deals that are, you know, well into six figures, and then we see smaller deals for smaller companies. So, There's a pretty big standard deviation, but I think it's going to come out roughly like our ACV for our entire portfolio. So we're really happy about that. And obviously the number of prospects or the SAM for that market is really healthy because, you know, to Julie's point, if consumers are driving the right behavior, if the capital markets are driving the right behavior, then – even private companies are going to have to, you know, put their best foot forward. And so we think that the beauty of that is it's just a lot of entities that are going to be looking to do this across not just, you know, for-profit corporations, but government and nonprofits and everything else is going to have to have some type of ESG statement. Okay.

Probably also worth noting that we are taking a partner approach and partner-first approach with ESG. And as we talked about earlier with the transformations, these are higher up and broader and larger deals.

You know, the thing that is promising is we – We're starting at a pretty high point, and we'll learn how to get it higher over time as we get better and better at defining our value and adding features of the software to increase value. So, you know, it's going to be, I think, ultimately a little higher than our average ACV, but we're starting a little below it. Okay, great. Thank you very much.

Thank you. Next up we have Andrew De Gasperi from Barenburg. The line is open.

Thanks for taking my question. I guess the first one, in terms of the 2022 guidance, I'm not sure if I caught it, but do you include any capital markets activity or, I guess, activity from EMEA in that number? Or is that, should we consider that anything coming out of that would be incremental?

There's very little capital markets activity there currently. So I don't think we model much there, do we, Joe?

We include a modest amount of cap markets in our model generally. If the – as it has been, if the market is very strong, then we do see upside there related to that business.

So there would be a modest amount in the 2022 numbers. And you also asked about – is that correct?

Yeah. I was just going to say that the – you know, we – You know, we have not had any focus on doing cap markets business in APAC or EMEA. A couple of deals drifted in, but certainly that's something that is not modeled any more than it's traditionally been and something we're looking at for potentially investing.

Got it. And then just to follow up on that, just in terms of your, I guess, I wouldn't call it legacy, but let's call it flagship solution, your SEC reporting. I mean, you have high market share numbers there. I was just curious to know, like, at what point should we see that business mature? Or do you think you could sustain the level of growth for that product for a longer period of time?

Well, I would have had a different answer for you a year ago. It's become very fashionable to be public again. You know, they've added, I think, 600 or 700 new public companies in the last, year-plus, and so that's given a lot of potential to us to attack those customers. Now, typically they go with the cap markets provider initially, and so we got some of those, but there's a large majority of those to chase. So we anticipate, you know, good growth in that market for, you know, a couple, three, four years, depending how long the whole cap markets and going public stays in vogue. Got it. Thank you.

Thank you. Next up, we have Stan Zyrowski. Your line is open. You may ask your question.

Hi, guys. You have Demetan from Moe Stanley here for Stan today. It would be really helpful for us to sort of understand, how do you guys feel about the balance in terms of the value that you're delivering to your customers from your products versus, like, how much you're able to monetize those products across your customer base? And I also have a second question following up to that.

You know, that's a really thoughtful question. You know, that's always the name of the game, right? And, you know, if I look back historically, our average SEC deal when we started was $25,000, and now it's well over three times that. So, you know, as an organization, you learn – where the value is, you learn to communicate it, the word gets out on the street, and then you start to learn just what the value is, then you start price increase programs, and you monitor that carefully, and eventually when you start to see noise about the price increases or actual churn, then you know you're starting to reach that limit. So we've been through that with a couple solutions, and I think we know how to do that. Obviously, ESF, I think we have a pretty good handle on what that value proposition is going to be long-term and what we can get for those solutions. It'll be more than we're getting now, but I think we'll run up that same curve. ESG is so early and still trying to define the value. There's so many pieces of value in that process, and we'll probably have partners and not just delivery partners but technical partners through a very complex process process it's hard to say but we'll definitely watch that and try to optimize what what we monetize so understood maybe building upon that a little bit uh how are you guys about on the capital markets front you mean from a value point of view yeah Yeah, I mean, when you're the new kid on the block, you know, you try to use price as a lever, but our price has been steadily going up on that work. And, you know, there was a press release from Wilson Sonsini, which is one of the leading IPO law firms, and we're in a partnership with them where they're more or less using our tool as a managed service. And so we're seeing as people start to understand the value in that space, we're starting to see growth. you know, our ability to charge go up and up. It's a different model. You know, the financial printers charge you, you know, a certain amount and then they triple it by change orders. And so you have to get the customer acclimated to the fact that they're going to charge, we're going to charge them one amount and it isn't going to triple. So there's all those dynamics. But we're starting to get higher and higher deal values. Some of them are, you know, two or three times what we started at. So we're starting to understand that and learn it and and getting market acceptance, too. That's why we're going to invest. We always wait until we have critical mass in the market before we scale marketing and sales, which, you know, which we're going to do this year in that market, so.

Interesting. Great. And just for my second question, in terms of net revenue retention, I know you guys don't guide to it, but as we think about sort of Q4 in 2022, how do you see –

sort of net revenue retention um as we finish up the year and roll over like the development of it and i we should be thinking about it and for our modeling purposes so we put a lot of focus on retaining existing customers and as we move through our pricing our pricing change in 2019 moving to solution-based licensing And as we put last year, we put our new platform into place across our customer base. We did see some dips there on both of our retention metrics. But you've seen this year that we've had some nice upticks. And we do think that the programs that we put in place around making sure that our customers are engaging with the platforms and getting in there and using the functionality and The ability, as Julia talked about a little bit earlier, around adding on additional solutions and looking at ways to bundle different solutions, the more that we can get customers in and using our platform, we really do feel like it's going to be a positive message. We don't have specific guidance around that right now, but we do expect that it will remain strong with these things that we're putting in place.

Thank you, guys. to answer my question. Thank you.

Thank you. Next, we have Mike Grondle from Northlands Capital. Your line is open.

Hi, this is Mike Long for Mike. Thanks for taking the question. Most of my answer remains just briefly on Marketplace. Is there anything to call up there, that launching earlier this year, any traction? Truly.

Yes. We did launch our marketplace in July, so we've been out in the market now for just a few months, but we are seeing increased engagement and traffic month over month, and we continue to increase the assets and the content, and it's going well.

We're pleased with the results at this point.

Great. Thanks.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for joining Human All Disconnect.