Workiva Inc. Class A

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Good afternoon, and thank you for joining us for Workiva's first quarter conference call. During today's call, we will review our first quarter results and discuss our guidance for the second quarter and full year 2024. Today's call has been prerecorded and will include comments from our Chief Executive Officer, Julie Isco, followed by our Chief Financial Officer, Jill Clinton. We will then open the call up for a live Q&A session. A replay of this webcast will be available until May 9th, 2024. 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 second quarter and full fiscal year 2024. These forward-looking statements are subject to known and unknown risks and uncertainties. We keep a caution 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 CEO Julie Isco.

Thank you, Mike, and thank you to everyone on today's call. Jill and I look forward to sharing our Q1 results. We'll also discuss our outlook for Q2 and updated guidance for the full year 2024. Q1 was another solid quarter. Subscription revenue grew at 20% and total revenue grew at 17%, which drove a beat to the high end of our revenue guidance. An operating margin came in slightly above the top range of our Q1 guide. In Q1, we once again saw broad-based demand across our solution portfolio. ESG was yet again one of our top solutions for new bookings. It was followed by strong execution in both our financial reporting and GRC solutions. Consistent with the past several quarters, we continue to see outpaced growth in our large contract customers. This is driven by additional solution sales into our install base. In Q1, the number of contracts valued over $100,000 increased 24%. Those over $150,000 increased 29%. And contracts valued over $300,000 were up 34%, all compared to Q1 of 2023. Despite these positive proof points, We still saw a cautious buying environment. Nonetheless, I remain confident in our ability to successfully execute our growth strategy and advance our productivity initiatives. We have the strategy, the team, and the platform to deliver results. Our platform remains a key differentiator for our new logo wins and account expansion deals. Workiva is the only platform that brings financial reporting, ESG, and GRC together in one secure, controlled, audit-ready environment. We are the platform for assured, integrated reporting. I'd like to highlight three integrated reporting wins that we signed in Q1. First, a top 10 U.S. bank expanded use of the platform with investment in ESG. This was the 11th solution purchased by this bank. This 11-year loyal customer was engaged with two Big Four advisory firms for an ESG transformation project. Forgiva was the clear ESG solution of choice based on the connected value of the platform. The Big Four firm that's driving the CSRD transformation engagement at this bank will be delivering the project. Second, we signed a six-figure account expansion deal with the North American Financial Cooperative who added to their investment in Workiva with GRC. The purchase of the controlled management solution complements their previous investment in ESG, SEC, and financial services solutions. This company first purchased the Workiva platform for funds reporting in 2019. The opportunity was a co-sell with a Big Four advisory firm that was engaged in a GRC platform replacement at this company. the same big four firm, will be providing delivery for this project. And third, we signed a four-solution new logo assured integrated reporting deal with a Canadian-based real estate and asset management company. They purchased Workiva's management reporting, controlled management, risk management, and ESG solutions. This was a true platform win. In this opportunity, there were multiple solution alternatives being evaluated for ESG, risk management, and control management. And it was not just the strength of our individual solutions, but it was also the connected platform approach that made Workiva the clear winner. This opportunity was a co-sell with a regional advisory firm who will be providing delivery for the project. Let's move on now to one of our top booking solutions for seven quarters in a row. And yes, I said seven quarters. ESG. Sustainability continues to be front and center in boardrooms and C-suites across the globe. And our sustainability solution is driving pipeline expansion and success in winning both new logos and account expansion deals. We already support sustainability reporting for some of the world's most complex companies, now including over 30% of the Fortune 100. I'd like to highlight three ESG wins from the quarter. First, a Fortune 50 telecommunications company purchased our ESG solution to support their global ESG reporting initiatives. This company has been a loyal SEC customer for four years. At the time of the initial purchase, they chose to continue their manual processes for sustainability reporting using office productivity tools. But with the new regulatory requirements on the horizon, including the CSRG in Europe, the company engaged a specialized ESG regional advisory firm that worked with Rorkiva on a co-sell for this deal. This partner will be providing delivery for the project. Second, we signed a six-figure new logo deal for ESG with a privately held European-based retailer. This opportunity was a co-sell with their trusted design agency, a Workiva partner that's been working with them on their integrated report for many years. Design agencies are an important stakeholder in the financial and sustainability reporting processes for many firms in Europe. So the design reporting features available in our platform are a significant differentiator for CSRD deals, and they also provide an opportunity for these design firms to drive enhanced value to their clients. Our clients' long trusted relationships with these design agency partners instill further confidence in the purchase of Orgiva. In addition to the influence from the design agency, this opportunity was a co-sell and will be delivered by the Big Four firm. And third, we signed a multi-six-figure account expansion deal with a U.S.-based Fortune 500 global payments company for ESG. This customer also owns Workiva's SEC, controls management, risk management, policy and procedures, and management reporting solutions. Since this firm has more than 30% of its revenue outside of the U.S., our CSRD-related platform features for double materiality assessments were critical in the decision criteria for this client. This opportunity was a co-sell with a Big Four firm that will be providing delivery for this project. I'll now turn to financial reporting. Our financial reporting solutions go well beyond SEC. They also include multi-entity reporting, private company reporting, management reporting, ESF, and industry-specific solutions. In Q1, financial reporting continued to contribute significantly to both new logos and account expansion deals. I'd like to highlight three financial reporting wins from the quarter. First, we closed a mid-six-figure new logo deal with a US-based privately owned hedge fund. This was for our fund reporting solution. This deal was sourced and will be implemented by a regional advisory firm. We have seen an increase in private investment firms purchasing our fund solution now that they're subject to recent SEC regulatory disclosure requirements. Second, we closed a three-solution new logo deal with a South American bank. The bank purchased a multi-six-figure deal for SEC reporting, global statutory reporting, and ESG. This deal was sourced and will be implemented by a Big Four advisory firm. And third, an Australian bank invested in Workiva's platform as a new customer with the multi-solution platform purchase that included private company reporting, global statutory reporting, and ESG. Our financial reporting solution replaced their legacy reporting systems and was a competitive win over multiple ERP vendors. This opportunity was a co-sale with the Big Four advisory firm who will be providing delivery for this project. With increasing stakeholder scrutiny, establishing an integrated enterprise-wide governance, risk, and compliance program is a strategic priority for many organizations. At their core, GRC programs include processes for controls, risk, and audit management. I'd like to highlight three GRC deals that closed in Q1. First, an international specialty insurance and reinsurance group became a new platform customer with a multi-six-figure investment in our audit, controls, risk management, and SEC solutions. This opportunity was sourced by a Big Four firm that was actively working with the company on an outsourced GRC project. The company decided to bring the GRC work in-house and will use Workiva's platform to support their SOCs, audit, and risk management processes. This project will be implemented by the big for advisory firm. And 2nd, the European based pharma and medical supplies company purchased our risk management solution to compliment their purchase to manage risks. This new logo deal was a Co, sell and will be implemented by a big for advisory firm. We're even more selected as the vendor of choice in this competitive deal. since we were the only solution to provide capabilities that addressed not only GRC specific requirements, but also supported their future CSRD reporting needs. And third, we signed a new local deal with the European based automotive parts manufacturer who purchased our audit, controls, and risk management solutions. This was a competitive deal against a GRC platform provider. The opportunity was sourced and will be delivered by a global professional services firm. I'll move on now to an update on global regulations. On March 6, the Securities and Exchange Commission announced that it adopted its long-awaited climate disclosure rule. This new rule is set to enhance and standardize the disclosure of climate-related data and associated financial risk. The goal is to provide investors with consistent, comparable, and reliable data in annual reports and registration statements. Since the announcement, there have been several legal challenges to the rule. Energy companies and business groups contend that the rules amount to environmental regulation and therefore overstep the SEC's legal mandate. On the other side, environmental groups, including the Sierra Club and Natural Resources Defense Council, have countered that the rules don't go far enough. On April 4th, the SEC announced that it exercised its discretion to stay the final rules pending a review in the Eighth Circuit U.S. Court of Appeals. The SEC is just one of many stakeholders that organizations must factor in as they transform their sustainability data collection and reporting processes. As we've communicated in the past, Regardless of regulatory mandates, companies have been purchasing and will continue to purchase software to report their sustainability and financial information. The regulatory timing in the enforcement in Europe is much clearer. As highlighted in several of our Q1 client wins, we're seeing CSRD requirements driving purchasing decisions in both the U.S. and Europe. Q1 did bring further clarity on the digital disclosure requirements for CSRD On February 8th, the European Financial Reporting Advisory Group, or EFRAG, announced its public consultation on the draft ESRS XBRL taxonomy. With the CSRD, the EU has stated that it aims to bring sustainability reporting on equal footing with financial reporting. And this includes requirements around digital disclosure using XBRL. The draft CSRD taxonomy published the first week in February will utilize the European single electronic format, ESF, which is already required for EU publicly listed companies in reporting their annual financial statements. The European single electronic format, which is based on inline XBRL, will be the same standard used for sustainability disclosures. Workiva is a global leader in XBRL and already supports over 1,200 organizations in their XBRL reporting using the ESF format for annual financial disclosures. Similar to the process used for financial reporting, companies will have to tag their CSRD disclosures with a digital XBRL taxonomy, having a unique definition for every data point. This draft XBRL taxonomy has more than 1,000 data points with a wide range of types, including GHG emissions, water and energy consumption, headcount, pollution, and the number of narrative disclosures. Workiva stands ready to serve our clients with these new XBRL requirements. In fact, Workiva clients already have the ability to explore and test this new CSRD XBRL taxonomy with their disclosure data. The publishing of this new taxonomy reinforces the requirement that financial and sustainability information will need to follow a consistent disclosure process. This is what Workiva does, and this is what Assured Integrated Reporting is all about. The sustainability regulations in MIRA go beyond the CSRD. Just last week, the European Parliament approved the Corporate Sustainability Due Diligence Directive, moving it one step closer to formal adoption by the European Union. Referred to as the CS3D, this regulation will require companies to track and report the adverse human rights and environmental impacts of their operations and their value chains. It also requires that they put in place appropriate compliance measures. The directive applies to EU companies with more than 1000 employees and a global revenue of over 450 million euros. And it also applies to non-EU companies generating that same amount of revenue within the EU, 450 million euros. Companies will be required to integrate mandatory human rights and environmental due diligence into their policies and risk management systems. Companies that do not comply with the CS3D may face sanctions from national administrative authorities, including fines of up to 5% of their global revenue. Let's move on now to platform innovation. In Q1, we continued to deliver new capabilities that address our customers' ever-changing requirements. As I speak about often, a significant driver of many of our product requirements are new and changing regulations. Delivering features that enable our customers to comply with regulations the day new standards are released and, of course, well ahead of regulatory deadlines is a strong differentiator for Workiva. In Q1, we released enhancements to our ESG solution to support the draft ESF XBRL taxonomy. These capabilities enable customers to explore the CSRD tagging requirements defined in the new ESF standard that was released in February. We also released new features for financial reporting, and these include support for UK ESEF 2024 and additional country-specific tax disclosure taxonomies. We're a global leader in XBRL tagging, fast, efficient, and accurate. And yes, we've been using AI in our tagging for years. Speaking of AI, Q1 also saw the release of new enhancements to the generative AI capabilities that we launched last year. We've built AI into our platform and we're delivering capabilities our customers can trust. In Q1, we released a new generative AI information assistant. It's available anywhere on the Workiva platform. It provides a conversational prompt to get details about our solutions, best practices, and enablement. And this is just one example of delivering an AI solution that works for our customers, that leverages trusted data sources, and that provides immediate value. For the balance of 2024, we'll continue to focus R&D on the pace of product innovation, consistent execution, and enhancing our high-performing differentiated platform. You can expect to see continued development in response to the ever-changing requirements for ESG, more comprehensive DRC functionality, and enhanced capabilities throughout the platform to support our reporting and disclosure use cases. I'll move on now to say a few words about our guide. Taking into consideration the current demand environment, we were pleased with our subscription revenue growth for Q1. With respect to our future outlook, Jill will provide the numbers for our updated revenue and profit guidance for both Q2 and full year 2024. What you'll see in this guide is that overall we remain first and foremost focused on growth. Not unlike other SaaS companies, though, we remain cautious on the top line as the current measured buying environment may persist until we see changes in market conditions. We are increasing our full-year non-gap operating margin guide by over 100 basis points as a result of increasing operating leverage. And we remain committed to improving our productivity and performance. We're confident in the resiliency of our business, the continued demand for our assured integrated reporting platform, and our ability to expand in our large and relatively unaddressed TAM. Regulations around the world are increasing in both scope and complexity. Our customers are faced with greater investor scrutiny, more rigorous audit requirements, and an increased need to manage material risk and disclosures. Companies need transparency. Companies need to comply with regulation, and companies need accuracy in reporting and disclosure. We provide solutions that companies need in both good times and in challenging times. In closing, I'd like to thank our talented team of dedicated employees. Their commitment to our values and the way they support our customers, our communities, and each other have yet again earned us a spot on the list of Fortune's 100 Best Companies to Work For. And it's our sixth consecutive year winning this award. Workiva again ranks in the top 50 on this list. This award celebrates the world-class culture we've created and maintained. And thank you to our customers, our partners, and our shareholders. for your continued trust in Workiva. We believe we have the right team, the right technology at the right time to capitalize on the increasing global opportunities to power transparent reporting for a better world. And with that, I'll now turn the call over to you, Jill.