Workiva Inc. Class A

Good afternoon, ladies and gentlemen. My name is Abby and I will be your host operator on this call. After the prepared comments, we will conduct a question and answer session. Instructions will be provided at that time. If at any time during the conference you need to reach an operator, please press star followed by zero. Please note that this call is being recorded on November 2nd, 2022 at 5 p.m. Eastern Time. I would now like to turn the meeting over to your host for today's call, Mike Rost, Senior Vice President of Corporate Development and Investor Relations at Workiva. Please go ahead.

Good afternoon, and thank you for joining us for Workiva's third quarter conference call. During today's call, we will review our third quarter 2022 results and discuss our guidance for the third quarter and full year 2022. Today's call has been pre-recorded and will include comments from our Chief Executive Officer, Marty Vander Plauw, followed by our Chief Financial Officer, Jill Clint. We will then open the call up for a live Q&A session. Julie Isco, our President and Chief Operating Officer, is also on the call. A replay of this webcast will be available until November 11th, 2022. 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 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'll begin by turning the call over to our CEO, Marty Vander Plauw.

Hello, and thank you for joining today's call.

We are pleased with our Q3 results, delivering revenue growth near the high end of our quarterly guidance. Q3 subscription and support revenue grew by 19.9%. Total revenue grew 17.9%, even after a 1.9% negative impact from foreign currency. For the full year 2022, we are targeting a total revenue growth of 20%. The strategic investments we've made in our platform and solutions over the past year are paying off. For the quarter, we showed continued bookings growth in multiple solution areas led by ESG. Global stat delivered a strong quarter with the signing of both new logos and account expansion deals. GRC also continued to deliver on year-over-year growth. Demand for our ESG solution exceeded expectations. The market is investing in ESG well ahead of regulations to manage the disclosures for multiple stakeholders. During the quarter, we signed several landmark ESG accounts. A Big Three auto company purchased our ESG solution to complement their current SEC and management reporting solutions. This opportunity was sourced by a Big Four advisory firm. A big box retailer expanded their use of our platform to modernize their ESG disclosure. This opportunity was sourced by a top 10 accounting firm. It was influenced and will be delivered by one of the big four. And one of the world's largest energy companies added our ESG solution with the influence from both an ESG technology partner and a big four advisory firm. The advisory firm will be doing the implementation. We were also pleased with the continued growth in GRC. We have seen significant wins as customers recognize the value of our platform. As an example, a European-based global telecommunications company purchased our audit and controls management solutions. This opportunity was influenced and will be implemented by a global technology consulting partner. And a global investment management firm purchased the Workiva platform for operational risk management to address expanded GRC requirements. The addition of OPRIS complements their existing use of the Workiva GRC platform. The continued focus on driving multi-solution adoption has propelled our growth. As organizations face increased macro uncertainty and cost challenges, the relevance of our platform becomes increasingly important. Our 5,500 customers trust that we will provide an innovative cloud platform, fit-for-purpose solutions, and customer support to solve their most complex reporting and assurance challenges. Market demand and customer loyalty continue to improve in Q3. Our organic revenue retention rate remains best in class at 98.1%. We continue to capitalize on our substantial growth opportunity outside of North America. In EMEA, our centralization efforts and focus on multi-solution selling produced strong bookings growth in the third quarter, building off the momentum reported in Q2. Last month, we hosted our first ever hybrid customer user conference. We welcome to Workiva Amplify over 5,500 virtual and 1,700 in-person attendees. It was great to spend time in person with our customers and partners. Over 2,500 companies participated in this year's event, many of them new prospects. During the event, we showcased Workiva's innovative platform and solutions. We also shared the stage with many of our customers who spoke about their successes with our platform and the value we bring to their organizations. 39 partners participated as session speakers and 20 partners were conference sponsors. We also held another successful partner summit and recognized our 2022 Workiva Partner Award winners. Deloitte was recognized as our Global Partner of the Year for their innovation solution extensions, and delivery of clients reporting transformation. PWC-US was recognized with the Partner Innovation Award. PWC continually invests in new platform innovations and accelerates the success of their global customers. And in managed services, KPMG was recognized as the America's Managed Service Partner of the Year. KPMG has built and delivered industry-leading service lines leveraging the Workiva platform. It was also nice to see many of you who joined us in person at our Investor Day. We appreciate you taking the time to attend and learn from our customers, partners, and employees. Some of the key themes that were communicated at our Investor Day include that we believe that the demand for regulatory software is consistent and durable. We continue to invest in key platform capabilities and our growth solutions. We have entered into a new phase in our operating lifecycle, increasing our focus on operating leverage. Our investment thesis is stronger than ever. Our TAM is intact and significant. Our platform is ready for these times. Our strategy is driving clear results. Our customer base is ripe for expansion, and our partner ecosystem is expanding and strengthening. Julie and I are aligned that achieving the proper balance between growth and operating leverage will lead to future margin improvement. We expect to return to a quarterly operating profit on a non-GAAP basis in the latter half of 2023. We remain confident that we will become a billion-dollar revenue company and have the platform and the team to deliver on that goal. In closing, I'd like to thank our global team of dedicated employees who continue to execute on our strategy, take care of our customers and each other, and live by our company values. With that, I will now turn the call over to Jill.

Thank you, Marty. Today, I will review our Q3 operating results and provide Q4 and full year 2022 guidance. before opening the line for questions. As Marty discussed, we have delivered another solid quarter, highlighted by a healthy B on our operating margin. We beat Q3 2022 revenue guidance at the midpoint, and we would have exceeded the top end of guidance if exchange rates had stayed constant. We beat guidance on Q3 operating results at the midpoint by $4.1 million. Now let's go through some key results and highlights for Q3. We generated total revenue in the third quarter of $132.8 million, showing growth of 17.9% from Q3 2021. Subscription and support revenue was $118.6 million, up 19.9% from Q3 2021. New logos and new solutions both helped drive strong revenue growth in Q3 2022. 66% of the increase in S&S revenue in Q3 came from new customers added in the last 12 months. Professional services revenue was $14.3 million in Q3 2022, up 3.5% from the same quarter last year. The increase was driven by higher XBRL services revenue. We added 160 net new customers in Q3 for a total customer count of 5,541, a growth of 1,395 customers from Q3 2021. our total customer count includes 895 Parsport customers. As Marty mentioned, our subscription and support revenue retention rate was a best in class, 98.1% for the third quarter of 2022, an increase compared to 96.5% for the same period last year. With add-ons, our subscription and support revenue retention rate declined to 107% for the third quarter of 2022, compared to 111.1% in Q3 2021. As we discussed during our Q2 call, this metric is being impacted by the lifecycle of our customers who purchased our capital markets solution during 2021, but have transitioned to a lower cost ongoing ACV in the Q3 2022 calculation. Excluding the impact of capital markets, this metric would be about three points higher this quarter. Please note that Parsport customers will not be included in our retention calculation until we have a full year of comparable data. The number of larger subscription contracts continues to show growth. In the third quarter of 2022, we had 1,257 contracts valued at over $100,000 per year, up 21% from Q3 the prior year. The number of contracts valued at over $150,000 totaled 676 customers in the third quarter, up 25% from Q3 2021. The number of contracts valued over $300,000 totaled 214, up 21% from Q3 2021. Gross profit totaled $101.8 million in Q3, up 16.5% from the same quarter a year ago. Consolidated gross margin was 76.6% in the latest quarter versus 77.6% in Q3 2021, a net decline of 100 basis points. Operating expenses increased 33.7% from Q3 2021 due to investment in hiring, return to travel, and impact from Amplify, which was held 100% virtual in 2021 due to COVID. We posted an operating loss of $8.4 million in Q3 2022, compared to an operating profit of $5 million in Q3 2021. At September 30, 2022, cash, cash equivalents, and marketable securities totaled $433 million, an increase of $4 million compared to the balance at June 30, 2022. Cash flows from operating activities in Q3 2022 totaled $4.9 million, compared with an increase in cash of $16.3 million in the same quarter a year ago. Now, turning to our guidance. Our current 2022 guidance assumptions are dependent on a variety of factors that are subject to change, including the challenging macro environment. We continue to believe our assumptions are appropriately prudent for the current conditions. For the fourth quarter of 2022, we expect total revenue to range from $139 million to $140 million. We expect non-GAAP operating loss to range from $5.7 million to $4.7 million, a net loss of 10 cents to 8 cents on a per share basis. our share count will be approximately 53.3 million weighted average shares. We expect operating cash flow to be negative in Q4 due to the timing of the payment of certain annual cash bonuses. For the full year 2022, we expect total revenue to range from $533 million to $534 million. We are improving our guidance for non-GAAP operating loss to range from $23.5 million to $22.5 million, or a net loss of 47 cents to 45 cents on a per share basis. Our share count will be approximately 53 million weighted average shares. And for the full year 2022, we expect to post positive free cash flow for the sixth consecutive year. In summary, Rekiva posted another strong quarter. Even with the challenges that we are seeing in the world today, we are confident in the opportunity ahead. We continue to experience broad-based demand for our solutions, and we remain committed to our strategy and are focused on capitalizing on our market opportunity. We will now take your questions. Operator, we are ready to begin the Q&A session.

Thank you. If you would like to ask a question, press star then the number one on your telephone keypad. If you wish to withdraw your question, simply press star one once again. And we'll pause for just a moment to compile the Q&A roster. And we will take our first question from Andrew De Gasperi with Barenberg. Your line is open.

Thanks for taking my question. completely understandable in terms of the guidance for the year. I was just wondering if you can maybe elaborate a little more what you're seeing in the fourth quarter so far. And I might be mistaken, but if I remember last year, you did issue a soft guidance for the next year. I was just wondering, is the macro environment still relatively uncertain? Is that why one hasn't been issued?

Yeah. Thanks for that question, Andrew. That's always the elephant in the room these days. First off, what we're seeing in Q4, you asked about. I mean, Q4 is going well. We're seeing better performance in Q3 at this point in time. And we feel very good about the numbers we put out there. So all things considered, especially since cap markets, which represents some of our growth each quarter, is pretty much dead right now, and the creation of new companies is pretty much dead. So I'm really pleased with where we're at in Q4. All our other solutions are picking up the pace and keeping us in a good place. So I'm happy about that. We are seeing some macro things going on still in Q4. Every once a week I hear about some place that's clamped down on you know, new spend. And so we're seeing some of that. And that plays into why we're being cautious on 2023. You know, we're going to give that soft guidance next quarter. But we just want to see when, well, you're in tune with it all too, right? What inflation is going to be, what the Fed is going to say over the next couple months. And, you know, I think that once things turn, it'll, you know, Who knows when that'll be, but we'll see some firming up of the markets and spend. Luckily, we're in a compliance area and we're a solution that is still center on what people do. It's still very, very important and they really can't do it. But we have seen some tightening of budgets that slows decision processes and things like that. We haven't lost deals because of lack of budget. It's just been a slowing. So relatively speaking, we're in a really good place being a sort of mission-critical compliance platform for all different types of reporting. So we remain optimistic, and as soon as we feel things have solidified and we're at the bottom, so to speak, and we're starting up, then I think we'll be able to give a lot more pertinent guidance You know, my rule of thumb is we give guidance and we miss it at all. You guys cut our heads off, and rightly so. So we're just going to be real careful and give guidance when we're confident and not give guidance when, you know, we just can't tell what's going on. It's not anything internal either. It's all macro stuff. So sorry for the long answer, but I knew that would be one of the, you know, biggest questions of the day. Okay.

And just to clarify, Andrew, so we did reiterate the guidance on profit that we do expect, as Marty had said earlier, that we expect to return to that quarterly operating profit on a non-GAAP basis later half of 2023. So we're reiterating that from what we talked about at our analyst day.

That's helpful. And Jill, maybe in terms of the deferred, the non-current part, I noticed a sequential uptake. I was just wondering, is this just a function of more longer-term contracts being signed, or is there anything else that we should be aware of?

For billings, is that what you're asking about?

Yeah. Sorry, I missed the question. The non-current deferred. Deferred, okay.

So the RPO, yes. So that one is just related to exactly like you're saying. It's We have been moving towards more of those long-term contracts, three ones. We've talked about this quite a bit, where we're signing three-year deals that are annual pay that does impact that long-term RPO number.

Great. Thanks.

We will take our next question from Alex Sklar with Raymond James.

Your line is open.

Great, thanks. Julia or Marty, a lot of talk in the partner influence deals and the prepared remarks. I'm curious about that backdrop, if there's any opportunity to scale your own sales and marketing faster than you previously anticipated.

Alex, I didn't quite get the question. You said a lot of talk about partners, but are we also going to scale our direct team? Is that what you asked?

Yeah, sorry, I'm losing my voice a little bit here. But, yeah, all the wins you mentioned seem to have a high level of partner influence. So I was asking if there's any opportunity to scale your own sales and marketing costs faster.

Scale them back?

Yeah, or grow them by a slower amount than kind of what I've been previously. I see, I see.

Well, I mean, I think when you get to this scale and you try to look for operating leverage, Partners become a very important part of it. And when partners bring leads, the cost to secure a new customer goes down and the size of the deal goes up. We are definitely putting more focus on partners. That was the whole intent of those examples. And yeah, I think over time we'll see a trend where we see more and more coming from partners and less and less from our direct sales force. I will say this. I've never seen a real successful SaaS company to date in any way where, you know, partners could do it all alone. You always have to have a balance. And, you know, we're making great progress. We're still going to get a lot more out of our partners than we are now, so there is some leverage to be had there for sure. And we're seeing that. So we're very optimistic. And the partners, the thing that excites me is the partners' confidence can see the opportunity now. They can really see the opportunity. They get two or three bucks at least from every dollar we get, usually more than that. And so, you know, that's the real encouraging thing. And we're seeing a lot of uptick from them. And Julie's done a fantastic job of pushing that. So I think you will see a lot more leverage. Yep.

Okay, great. And I appreciate the comments about the strong ESG bookings, even without the formal rules. I'm curious, kind of, so are you seeing any pause from kind of customer behavior with kind of the FTC going back to common period or any color broadly on what you're hearing as far as a timeline for formal rules around ESG?

You know, when formal rules come out, it's going to be the way we look at and how we model and look at the world is going to be a you know, an upside for us, so to speak. But that being said, as I sort of said in the first question, I mean, we're continuing to see solid interest and demand for our ESG tool. It surprised me after just one year of selling how well we're doing in that product line. And the resolve of customers is coming from different places. I think regulation is going to be the last driving factor, frankly. I think... They realize that customers who buy their products care now. The capital flow obviously cares, the flow of capital and the owners of their company ultimately. And the boards, the boards care. And I can't tell you how many times I've heard someone say, well, our board said we have to do X, Y, Z. So I think that regulation will sort of be the cherry on top when that comes for us. But I really see most of that demand being driven out of the different constituents I just mentioned, the customers who actually buy the products, the capital flow, and then ultimately the boards. And, I mean, my purchases are based a lot on corporate behavior now, and I think that's only going to accelerate. And I think most companies agree with that. That is going to be what happens.

Okay. Thanks for the call, Eric.

We'll take our next question from Joe Mears with Truist. Your line is open.

Great. Thanks for taking the question. I'm curious if you guys are seeing any benefit from vendor consolidation in the current environment given the breadth of your platform and with budgets coming under some pressure here.

Joe, when you say any benefits from vendor consolidation, tell me what you mean by that.

Just buyers going from using a bunch of different individual niche solutions.

Oh, yeah, yeah, yeah. I'm sorry. I'm sorry. Yeah, absolutely. I mean, you know, we live that every day. I think we peaked out over 200 SaaS apps in our small company. And so we're really trying to, you know, choose the winners in terms of providing platforms. And I don't know exactly what the drive is. I think that's one of them because I feel it, and colleagues I talk to feel it too, but we're seeing a lot of resonating with platform. We're transitioning everything we do to platform selling now. We've been an application or solution seller for quite a while, and we're in the midst of that, and it's resonating. Customers want to have one platform to do reporting and assurance. and all sorts of reporting, financial, ESG, multiple entity, which is the GSR. And then they want to assure all those and make sure that they have all the different assurance, controls management, audit, all those on the same platform. And that is definitely resonating. Is it partially because of the vendor consolidation? Probably. I can't tie it to that for sure. But we're definitely seeing more interest in platform, less interest in buying apps. That's how we're behaving too. So I see it internally in our own company.

That's really helpful. And then just from the product side, I think you guys had launched a mobile solution somewhat recently and some of the customers we spoke with at Amplify were pretty excited about that because C-suite, you know, they come into a meeting and they want to look at stuff on their iPad. So I'm just curious if you're seeing any initial traction from the mobile.

Yeah, I'll let Julie answer that.

We had a mobile app over the years, and it wasn't something that our customer base really embraced and utilized. But we did do a reboot of it, and we showed it at Amplify, and we're putting it in the hands of the customers. So a little early on the reception, but we do see the demand for it and requirements for it coming in far stronger than they had in past years. So we're very enthusiastic about rolling it out and the capabilities that it will have. and the uptake with the customers. Great. Thanks, all.

Yeah, and I would just say, you know, Julie's really pushed that with the product team to, you know, we're so proud of our modern platform, and a modern platform better have a, you know, better have that component. So she's done a great job of getting that product to a really good place.

Great. Thank you.

And we will take our next question from Patrick Schultz with Baird. Your line is open.

Hey guys, congrats on a good quarter. You touched on the multi-solution strength quite a bit in your opening remarks. Could you just provide some additional color on the trends you are seeing in light of the current macro environment? Are you seeing a better uptake in multi-solution deals from your larger customer cohorts or is this pretty broad based across all customers? And then in relation to the partner channel, are you seeing these partner-led deals have an impact on the mix of multi-solution deals?

Yeah, I'll let Julie answer that one, too. She's writing the thick of it every day.

On the multi-solution, there are some patterns. I mean, we tend to see, certainly, with our GRC suite of solutions, we see multi-solutions there. We have a number of capabilities there, controls, audit, risk, and so forth. So we do see multi-solution there. And then the trend in the market around controls, GRC, with other capabilities, like ESG, is something we're working towards. So we do see those in the market. And certainly one of the compelling reasons to work so tightly with our partners is to go higher in organizations, go broader in organizations. They bring us in their digital and financial transformation journeys with their customers. So absolutely, that is the goal. of getting source deals and continue to sell broader multi-solutions with our partners.

Excellent. Thank you. And then just regarding Europe and Parsport a little bit, can you just talk about the current demand environment you're seeing in Europe and if there are any noticeable inter-quarter trends you want to call out? And then just Parsport specifically, can you just provide some additional color on the cross-sell and up-sell opportunity you have, especially in the light of the current macro?

First off, the passport acquisition, there were three primary drivers. One you referenced, that is the cross-sell, and we're just starting to ramp that now. And we've had some success already moving some of those accounts. And in terms of macro in Europe, the word on everyone talking is it's worse in Europe than here, inflation's higher, all that stuff. We have not seen... a larger downturn there than we have in the States. And the one in the States is not that great yet. You know, 2023 will be interesting to see how the budgets look. But we're seeing similar, you know, not widespread, but some, you know, some slowing down of deals in both markets. And it's roughly the same. We don't see it any harsher. But like I said earlier, we're mission critical and we're regulatory. And you know, Europe, they're even more regulatory than us. So I think we're sort of being, we're a little immune from that in some ways. So not a lot of difference there. And then, you know, Parsport, you know, the European mandate for ESEF is an annual mandate. So we haven't really seen a lot of uptick in new selling there. We're just getting into that season now. It's just starting. So I'll be able to report back later. But We have done a nice job of dealing with our existing customers there because they need new capabilities for the new requirements. There's new requirements for the next several years. And so we're seeing a lot of goodness there in terms of dealing with partners to sell them new capabilities. And we're starting to see the beginning of the cross-sell. So we're still very pleased with that acquisition. Great team, great product. And it's going to broadly serve the low-end customers Anytime someone has to tag a PDF, it's the perfect thing to just grab it and tag it. And for all the SG reports, small companies will have to do. And it's really got a long tail on the benefits for us.

Great. Thank you guys so much. Thank you.

As a reminder, it is star one if you would like to ask a question. And we will take our next question from George Kurosawa with Citibank. Your line is open.

Hi, thank you. This is George. I'm for Steve. First question, you know, you talked about kind of slowing deal cycles that echoes some comments that you gave last quarter. Curious if you could just compare and contrast what you're seeing in terms of trend. Would you say things have deteriorated slightly or is this kind of more of the same?

Hi, George. Yeah, I mean, I know you're trying to compile a view from talking to a lot of people, and I'll say this. It's really anecdotal so far, and it's here and there. If it's gotten worse between Q3 and Q4, it's just marginal. It isn't a big change. I think people's budgets, they have intact now, and Some are being pulled back a little bit, but I think the real test will be in 2023 when we see what the new budgets look like for our customers. When we do our job selling and we explain and convince customers they'll actually save money using our solution, they just have to get up over that transition hump of buying, implementing, then see the return a little later. We're still optimistic in 2023, but between Q3 and Q4, not a ton of difference, no.

Got it. Thank you. Very helpful. And then a quick follow-up on the FTEX impact. I think you talked about a 2% headwind. Presumably you have some headwinds built into the guide already. So I guess what was kind of the amount of that that was incrementally surprising, I guess? Thank you.

Yeah, so we did have, you know, we always have to plan for some amount, but I think that you're hearing this probably from a lot of other companies that Q3 did have a pretty significant impact. And so, as we talked about on the call, we would have, we feel like we would have beaten the high end of our guidance had it not been for the currency impact.

Got it. Thanks for taking the questions. You're welcome. Thank you.

And we will take our next question from Adam Hotchkiss with Goldman Sachs. Your line is open.

Good afternoon, and thanks very much for the questions. Marty, great to see the progress on ESG. Could you give us a sense for how your thinking has evolved around the go-to-market for the product given your early demand signals? Just wanted to get a sense for channel performance across new lands versus cross-sell as well as partner channel versus direct. And also to that point, what the profile of customers who are moving more quickly on this typically look like?

Okay, I'll try to get all those. If I forget one, Adam, let me know. You know, I would say that the deal sizes are coming in larger than we anticipated. And there's partners involved in a lot of these deals. The partners, you've heard all the public announcements from the partners about jumping headfirst into the ESG arena, and they view us as really a premier starting point. So we're getting a lot of selling from partners. I would also say initially we've really targeted our customer base because we wanted to get the biggest footprint as quickly as we could since we really view this as a land grab, a logo grab, and I think we're being successful there. We're getting a lot of deals in our customer base, and we're going to be able to use those references and those numbers as we expand into other areas to justifiably be the number one leader of ESG reporting, which we believe we already are, but that will only continue. And then I think you asked geographic, but we're ahead in North America just because it takes longer to hire in Europe. lot longer to hire sellers there but they're coming up to speed and we're starting to see a lot more activity this quarter in Europe actually and getting some nice deals out of there too so it's really a mix of direct and partner we're you know we're a few months ahead in North America just because of what I alluded to but we're seeing you know Europe's going to be as strong a market as the US just based on the fact that the EU is taking this whole thing a lot a lot more seriously so

Yeah, that's super helpful. Thanks, Marty. And then just a quick follow-up for Jill. When you think about the margin ramp and how that's progressing, I think op profit was a little bit better this quarter than we expected. What were the drivers there? Is there any impact on hiring or expense plans given the current macro? Thanks.

Sure. So when we came into this year, we talked about the fact that we were making these investments specifically around execution on our strategy. But that we were doing it this year. And so coming into the end of the year, we are slowing on hiring and listening to the market as we shift. As you all care more about, of course, the margins as opposed to just focusing on growth, we're balancing that growth to margin picture and making sure that we're making decisions now that'll allow us to be successful in reaching and achieving the guidance that we've given already for 2023 around getting that quarterly profitability towards the end of next year.

Great. I would just add that I realize, you know, communication takes a lot of repetition, but to echo what Jill said, you know, this has been our plan all along. Invest in 2022. And we were clear that mainly for ESG, but also some for cap markets. The cap markets investment, even though it hasn't shown a return yet, we're making great strides in law firms and companies that will go public someday. So we're building backlog already with that investment. These were things, and we've also said way back then that we would shift back to leverage in 2023. So we really haven't changed much, except we did at the end of this year, reduce a little of the investment. We did sort of cut the end of it off a little bit because of the pressures in the market. I'm still a big believer in growth because in SaaS companies, you can cut the cash flow and margin any time you want, but I'd rather do that when we're bigger. So we're still focused primarily on growth, but we're going to be very, very thoughtful on our ability to perform and also maintain improved margin as we go forward. That's why we've made the commitment for the end of the year.

Really helpful. Thanks, Marty. Thanks, Jill.

And we will take our next question from Brad Reback with Stiefel. Your line is open.

Great. Thanks very much. Marty, maybe following up on that last series of commentary, what, if anything, would make you move faster on the profitability side?

You mean externally or internally?

What, if anything, is your choice?

Well, I mean, if the macro got a lot, lot worse, but, you know, our retention is very high. When we see a downturn like this, we see a reduction in growth. We don't see our revenues shrink. And so we're still going to post a healthy increase in revenues this year and next year. And so that's our main focus. We do think we're at a natural size now with some of the things I've alluded to, partners, maturing of the platform. There's a whole bunch of things going on in our life cycle that is going to make creating leverage very feasible, very attainable, and at the right time in our growth cycle. The ESG, like I've always said, is a generational opportunity for this company. We had to bite the bullet one year and spend money, and I would not change that decision at all. But in general, from our quarters before that, we were always showing profit and reinvesting a lot of it, but some of the profit putting to the bottom line, and that's the way we'll move forward over time. But we will be focused on operational leverage.

and but are still our primary focus is growth we want to get to a billion as quick as we can because then if someone wants cash flow we can produce a whole lot of cash flow in short order twice what we could produce now so to speak so anyway that's uh that's super helpful and then uh maybe a more strategic question obviously late in the quarter there was a a bloomberg story that you potentially had been approached by some pe firms how do you balance the uh the need to stay public versus the potential optionality that you could have being private?

Well, this is my GC answering now. We really can't comment on rumors, but I'll say this. We're a great company. And I think in general, we think we are... on the upswing. We don't think we're broken. And, you know, typically you see PEs, you know, to make their model, they have to buy companies cheaper than what the really good companies are trading for. So we think we have a ton of upside as a public company, especially where we're trading now. We're going to continue to grow around that, you know, plus or minus 20% mark. And that in and of itself provides a a hefty return for investors. If our multiple increases, there's more there. We're really bullish on our future. It doesn't surprise me. PEs are all over. We talk to them all the time. I learn a lot of good stuff from PEs. Rumors are going to circulate when the prices are down on SaaS companies. We've seen a lot getting taken out. We think we're a very healthy company with a lot of upsides. So that gives us our optimism and our drive to continue. Awesome. Thanks very much.

And we will take our next question from Matt Stotler with William Blair. Your line is open.

Hi there. Thank you for taking the questions. Maybe first question here on how you're seeing, I guess, the renewal pipeline for the next 12, 18 months. You know, if we go back, you know, 2019, 2020, at the time when you were, you know, moving people to the new pricing model, you know, you were moving customers to the new platform, you know, we'd love to get some color on kind of the average duration of those contracts. And if you think about, you know, anyone on a three- to five-year contract renewing in the coming years, you know, any thoughts on ability to, you know, adjust pricing or, you know, upsell or do different things that you could see as a potential opportunity? as you kind of move through that period?

Well, again, I'm a big, you know, life cycle of company guy. You know, you do things when you're mature enough and good at it. And certainly, you know, renewals have never been hard for us, but then we've never really taken advantage of them as we should. And I think this year one of the initiatives we have is to always engage renewals sooner than later. and have a very structured program in terms of how you price things, even what the price increase would look like compared to adding a new solution, for instance, and giving them leverage in that decision. And we start doing that in a limited basis, and we've had some success, so we're going to roll it out and really, as we mature as a company, keep bringing in these types of programs. I'm optimistic that renewals is going to be a driver for us now that we've sort of taken a different approach to it and You know we most of about I think roughly half our contracts are three-year contracts, and that's going up every year and and You know so we prefer three-year contracts just because of the workload and the you know lack of buying decision opportunity for customers and then engage them early and and and and and help them get more value out of our platform. So, yeah, we're getting in a good place on using that as a lever. Got it.

That's helpful. And then maybe just another follow-up on the international markets. Obviously, you guys have talked about some of the sales changes you're making there. Any updates in terms of how that's progressing forward, whether that's, I guess, what you're seeing is resonating with customers in terms of the approach and kind of how you expect that to progress going into 2023?

Yeah, I'm really bullish on EMEA in 2023. Obviously, we have to fight the macro issues, so that might slow it down some, but huge opportunity there. The centralization efforts, Julie, did have really paid off. We've really got a good strategy, a good execution cadence there. And, you know, we have a lot of, you know, well, I shouldn't say a lot. We have several very significant solutions we're going to market there with IRR, IR solution, also our financial reporting solution, and ESG. So it's not just ESG, but there's almost as much opportunity there as in the States, and it's more greenfield, ton of white space there. So we're very optimistic with the internal changes we've made, and I just see that as just one of our bigger opportunities moving forward, frankly.

Great, good to hear.

Thank you again. Thank you.

And we will take our next question from Mike Grondahl with Northland Capital Market. Your line is open.

Hi, this is Mike Pachuccio for Mike Grondahl. Thanks for taking the question. Maybe first, just on our support, I think last quarter you mentioned it was $1.7 million in revenue and $500,000 in services. Do you have what those numbers were this quarter?

So for Q3, parcel part revenue was $1.4 million for those 895 customers. They do have fewer services in Q3 compared to Q2. So that's the split quarter over quarter.

Got it. Just a reminder on that, it's going to be more seasonally strong fourth quarter, first quarter for their customers and that kind of ramping.

Certainly, they tend to have more activity around filing. So, as companies are thinking about doing those filings for the ESOP filings into Q4, and then as the actual activity is happening, Q1, Q2 timeframe.

There's some seasonality there to their numbers. Got it. Thanks.

And ladies and gentlemen, this concludes today's conference call and we thank you for your participation. You may now disconnect.