WK - Earnings call transcript Q2 2019

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Operator

Good afternoon. My name is Jessie, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Workiva Inc.

Second Quarter 2019 Earnings Conference Call. [Operator Instructions]. you. Thank of may Director your Relations, Investor Rogers, begin you conference. Adam

Adam Rogers

with Accounting Welcome and on Call. is Workiva begin Chief Chief Financial good then by you, Also Miller. turn Vanderploeg; to Officer. Officer, This from Klindt, Marty Executive Jill afternoon, we'll Officer, Conference Thank questions. our Earnings the today everyone. the call the followed to our line XXXX Second afternoon, Chief And Stuart comments we'll Quarter over

will be access section. call website until August listed A today's to this replay Investor which our available XX. Information available the in Relations of under the on is replay is press release, also

a webcast. As broadcast call being also live today's via reminder, conference is

we'll performance, known forward-looking future and we risks made and current factors call. events materially XXXX. be Form that occur refer future on actual to report Workiva events Before fiscal any guidance this and are including of today our regarding subject making to our All company's and are not everyone begin, results obligation for Form we statement like the no differ call, reflect to statements from financial I'd our annual forward-looking expectations guarantees to statements reflect report that statements. after performance. update only, year and XX-K the remind quarterly cautions Please statements to full statements unknown third XX-Q to for forward-looking any undertake on could These that quarter these uncertainties. today's that and during cause forward-looking

information also of measures. press earnings and to of included certain Also measures in will financial are we today's additional GAAP to course refer during the certain non-GAAP Reconciliations today's call, release. non-GAAP

CEO, the begin call we'll Marty by our that, with And Vanderploeg. to over turning

Martin Vanderploeg

Second Conference Quarter Thank for and the to everyone Call. XXXX thanks Workiva joining you, Adam,

and the operating provide are proud for exceeded call. later more details in second share. loss of quarter our will which per loss revenue, results, guidance We Stuart

we we to reporting; increase year, investments and strategy key Wdata, continue risk; APIs our includes prep, discussed, improved success growth operational in efficiencies, this statutory opportunities. and in expansion; As date, past connectors. to invested will and data global integrated our we have growth on EMEA focused our which our Based

EU. to are by sales of build solutions, traditional We significant progress and remainder with our We market. and investments growing and the support are XXXX capture more for accelerate companies part as EMEA into EMEA throughout increased in and in plan mandate demand the platform aggressively this out to a our encouraged approaches our our than seeing we ESEF X,XXX the in XXXX of for

plan to also accelerate statutory We global in our reporting. investments

are Our sales which demand important for have to in of product validated of fit; this and significant X lack activity. second, competition, a first, all efforts factors: marketplace; our initial the solutions our third, early go-to-market contributing

transparent systems and connected in integrations universal reports We variety data these of and and provide the automate data more risk data to With wide specialized types, customer the HCM and reduce accurate consolidation, invest also Part compliance. our resulting and beyond a systems go is many to reporting customers SOX market. to CRM continue our from plan are reconciliation in for and integrated APIs and planning. of downstream amounts ERP, to to and integrated expanding solve solution and based customers prospects and our audit analysis. between Wdata, set orchestrate able expansion their To requests problems, on applications vast we broader to to continue in to in faced Wdata record improve as connectors platform same seamlessly Every and risk financial from policies of as and audit reporting applications, speak with procedures. is of their how I a risk for prospect internal risk frameworks for supports data when enterprise such general with controls, problem: to as that management systems invest of or build well this

into more demand markets for geographies, our and platform confident the new we and broader As that Workiva only are sophistication global for and trust. even reporting the we and continue of our the need and expand is connected scale governments compliance to with platform cloud platform. enterprises

to some We talent. Places Magazine our companies most Fortune underpins Workplaces culture, the successful and On continue Work top to Monday, which named the win Workplaces for awards in Fast quarter this Innovators IT retain us Magazine list, Computerworld for to Best which for Magazine. Millennials among in of Best Workiva to attract and awards our its by ability included Best in Company world. places by amazing Other

to look at forward next than month advanced best prospects time conference, feature our with reporting customers practices spending annual our user use platform. our which We XX connected to on and Amplify, and more sessions ways will

conference user invitation-only an track analysts. also for will and investors As in years, include our past

connected with visit continue I a transparency more confident world. and Workiva will customers am and As the be throughout data I in reporting trusted prospects, that to force driving even

Miller, With me CFO. it that, turn let over our to Stuart

Stuart Miller

Thank you, Marty.

of to with add-ons. acceleration the to understand revenue our growth guidance XXXX. converting We customers revenue licensing, or of our So growth raising the revenue both rate are solution-based past on revenue contributed for over has we retention growth and the that and want SBL, pleased few we're quarters, to rest investors with

vectors challenging in this this end conversion complete revenue revenue to of will been SBL To later we've growth year, of more drive we meet create this in source As challenge, in XXXX. customers XXXX. and growth model comparisons the X to investing

and vectors rest Also Marty for on integrated opportunities growth these X reporting, The these global, statutory EMEA, Wdata. our progress is our we growth investments areas. the risk operating on reflects encouraging. major making of loss are are: in XXXX As guidance said, the

financial the rest to turning results of and quarter second XXXX. for Now our outlook

GAAP refer We outperformed QX to non-GAAP our $XX.X As total generated of results the second Please We million, results and guidance an increase press and guidance basis. or always, of reconciliation nearly I'll guidance. revenue talk a about compensation the on release quarter. XXXX. and from quarter stock-based for in our XX.X% of our our non-GAAP for revenue before a

Breaking and up both Subscription revenue XX.X% million, out Deepening penetration item. customers in with services conversion XXXX. solutions subscription our QX add-on by reporting to solution-based from QX and growth year. $XX was in Growth related support revenue existing helped a from revenue QX, services last in revenue XXXX. revenue in million was to line in of XBRL Professional decrease was of of revenue and changes. regulatory $XX.X from professional the licensing other quarter increase QX overcame services in from XX.X% seasonal an same XBRL Growth services. accelerate

for to the single-digit return revenue to services growth of expect We XXXX. professional in low second half

XXX finished to Turning customers metrics. a supplemental We net customers from our with QX a of net and XXXX from QX XX increase X,XXX of increase customers, XXXX. QX

Our retention rates continue to show strength.

quarter XX.X% for subscription retention improved retention XX.X% of compared compared for Our period second second the the XXXX the of support June support to add-ons, XXXX at was to rate revenue to last and same year. With for rate quarter XXX.X% revenue and XXXX. our subscription XXX.X%

last valued with XXX number of larger up per quarter of contracts the year at in subscription $XXX,XXX from Our over XXXX, year. contracts second QX encouraging. XX% totaled is The progress

quarter, For XX% the annual XXX customers QX contract second XXXX we in from value of up plus, had results. $XXX,XXX

revenue, our gross XX% pricing. better was year XXX S&S in XX.X% from Moving gross period due the to from rate basis the transition down gross in was line gross due talent year services Subscription of QX, $X profit growth. last XX.X% equating to next-generation $XX.X and second latest and customers enhance Consolidated revenue same profit P&L. to margin Gross a in ago out points QX quarter from higher on Breaking with additional $XX.X was and investments margin quarter. the the Professional was equating in a XXXX XX.X% the an help million, up platform. and utilization of to new gross services, in a gross support markets million, address down profit. million $XXX,XXX same a profit margin, improvement quarter to to

lower for gross and forward services on to expect quarter. seasonally together revenue Looking QX, negative demand a investments, we for lower services, margin to result these XBRL in with the professional

percentage QX last to million up as QX growth. $X.X compensation. year XX.X% with revenue to over Research of and line basis the XX.X% was a revenue QX, quarter X.X%, in compared XXX a compensation to improved X.X% development QX in year expense $XX.X expenses. Sales to million, primarily to and $XX.X million increased expenses expense quarter from last administrative of G&A in due higher improved X points million, to revenue as year. General to expenses compared percentage totaled due from this expense R&D $X.X for QX of reduction a points QX XXXX. last marketing down percentage and

XXX operating last quarter compared XXXX operating QX QX $X.X the basis points in Operating latest in of year. Workiva's income was improved in QX XXXX. to $XX,XXX an loss to million margin compared

flow balance XXXX. our balance equivalents XXXX, operating In sheet activities from XXXX, At with cash, cash March increase XX, to million the and XX, securities QX cash at of an $XXX.X totaled Turning totaled of higher the to last ago. same Relative $XX.X million, marketable net cash provided and working June management compared record statement. and revenue year quarter contributed growth a quarter cash same with million to cash a $XX.X used operating improved profit year, million compared margins, flow. capital $X.X deferred in the all in

terms. revenue as we to multiyear Remaining with differ performance billing continue deferred implement obligations annual from contracts

guidance. to our Turning

our services $X.X beat So from we in by midpoint. total came guidance on Half million revenue. at beat of QX revenue the the

half. stated previous and seasonally first the revenue on As higher quarter-to-quarter lumpy in services we is calls, our

half. expect in We to growth single-digit the services second return revenue from to low

an the decline $XX expect we Specifically $XX.X expected to million quarter total in entirely sequential revenue in for due revenue million. revenue. reduction is third range to in to QX of XXXX, from services total professional The

revenue grow We to expect sequentially. subscription

to year. midpoint, of a the guiding growth last we total to rate QX compared XX.X% QX At revenue are in for

We to to investment in expect we the $X $X.X non-GAAP reflecting operating vectors growth million million, range mentioned. from loss

marketing a on In spend addition, our seasonal user with conference high our September. reaches in point

guidance to XXXX, growth this the year guidance, for of XX.X%. we total million midpoint a million. for range to revenue revenue $XXX For raising $XXX is the full At of updated year are

XXXX. We services the growth rate and the of revenue subscription of half second growth expect all outpace rate to for the of in revenue

from We operating modestly expect from range million, million to $XX to our guidance. previous loss improved non-GAAP $XX

want we because given in QX. to We time but in flow QX to to expect favorable capital. specific on in was working materially do cash Now we've capital change never previously, high OCF one help part don't due working in this in so operating changes guidance

approximately So for operations total million. $XX we cash the full expect to year flow XXXX, from

So Q&A And operator, the ready to we're now session. your begin please take questions.

Operator

[Operator Instructions].

SunTrust from Your Eric question Robinson. comes Lemus with first

Eric Lemus

to mid-XXXX Looking in want end your from looks the when like you year, now -- the to of the it through the and at you XX-Q, some XXXX. the for the notes solution-based transition changed of expectations pricing

can a target little of just So on the do you bit give overall you of part as make I change for year? with why that change guess color in that uplift of you see to what terms decided guidance? And this

Stuart Miller

Yes.

quarters. So second -- quarter the we much made in the see that We've from on frankly, and progress accelerated first customers so into good value it. on really because, second

customer our are changed we And it. of so our why SBL certainly, now relationships a on outlook majority on so that's

where In because customers terms some keep depends said was started by XX%. points. Marty the with an equalization starting last have from different an to of sort try we think I of the was and XX% on it uplift, on to may solution call, It customer

I if Eric, sorry, can just -- things interrupt. the of One

a on thing apparently XXX. X-X-X, back and before you customer adds your was -- here We new misspoke of is One the the we misread actually of different the misspoke, I it. I script I on number -- gave number. to I get

you. thank So

Martin Vanderploeg

it and of our out compete with higher more a we to to offer allows one value really us about, ADS want because always go But niches, and similar question, solutions the thing that lower just help not because get number that, as strategic is who, is in and certain keep seats. solution-based sell to in for continue of to licensing. companies types I also, a licensing only us add thing I've and the mind your talked is will it

to everyone impact. to realize I it's going have done. it's -- So a really like a long-term strategic as thing like we've that

Eric Lemus

Yes. Understood.

out release receiving press agreement a bit just into expectations Workiva a partnership? data with guys investment. go little are you Can and of on recently, just then OEM what your And that OneCloud about with some Okay.

Martin Vanderploeg

customers that see in, tool, we size substantially I really and included When first that. the deal about do Sure. has and prep I'll our the us, for that connectors Wdata explain a I value, APIs only now higher. talked and what data mean good deal a been by lot off, have, the thing is every But more

was is more the to. as many customers we're goal to of with to, connect hired we traditionally good the company get. our found systems at to connected The possible. And as number systems a with systems that really so more And value this connecting connect

interface embedding connect consolidation so And some and for to the our we're of it's systems, efficiently with and to ability to really systems easy their end those of ERP popular platform some in the accelerated very user. our more systems and technology

Operator

comes from question Stifel. next Your Roderick Tom with

Matthew Van Vliet

It's and were and Matt Van helping buying more you use deals of color getting more years give modules acceleration guess the some if I on of pricing? for or cases you you Wonder how for Are drive more touching are customers formulating newer on a just solution-based point that year. larger. of could last more Wdata us now the ago? been this couple deal Or Tom. Vliet than sizes in on seeing some about you more had terms large throughout

Martin Vanderploeg

Well, it's multitiered effect. a

off, has increased solution. solution-based First to given going the just for licensing value a

therefore, a a and item line large factor, more platform. we sure. part and see charge so size. that's customers we deal been that that's include value obviously, So of seeing Wdata, When our the a increases as That for on we more more

And instead starting platform last the a really solution. to in we're a and seeing selling then single point we're selling right that important most I is mature maturing, go a We platform in definitely Europe. company. as bat think off of this And the

higher platform, we and to bring that different on. in report And can have things then do say that an use that's at initial deal on we this you much to go new -- a just these get we all So we you when logo. point, size

So to We're at how a communicating that. learning to the platform. learning technology really the -- and platform, but starting value be a snuff also sell up to we're and describe not only of mature good to getting getting

Matthew Van Vliet

fact, look in those of at sales that having or plus? And sort terms then hit with are that you in delayed as what -- regulation I where a method in in situation? sort you some of pipeline? as where next to of or we are saw on the the And be with things comes the -- is and how time I in that, early of as particular, and year delayed tend fully How of side will, market year? how these guess the down Europe confident the the approaching of being things is being guess, conversations deal opportunity at times the you full the ready flow customers security in

Martin Vanderploeg

put dramatically. came all off, expect Union ticked They've sudden, first is the in when indication European interest the the delayed. And fact, every of taxonomy the when all to we, don't taxonomy taxonomy and companies the up XBRL it in Well, we already level out, be to that's real -- out. became a those

I load, scaling, and we from way fully a of designed have pretty be -- view both providing be ready so the to the wanted to for sales we're to our and on of terms in years point in take we think well ready next XXXX. support, The a X.X Just schedule. ramp

well so I doing there. so I And we're on and very that really timing mark. doing happy we very we're the hiring had salespeople. think think I've luck good with -- been We've well hitting

say seriously. is are see how it it's similar The But that larger the responding. are thing us taking on I that last will just very pattern a we companies very to interesting companies

on lower mid-tier You the they and it you the see as mixture yet. see then a focused in end, aren't on

in rolled ago. SEC think we'll see to the process So similar out very a years States several how I the

Operator

comes Baird. next Oliver from Rob question Your with

Matthew Lemenager

stack to for you of others? there have It's of vectors way hit of sooner be kind Rob. Matt one these growth so terms we through could like line? And have impact any going impact. solution-based X are have kind And when the time licensing Lemenager those you Marty, on any they those on in of going in And XXXX. we vectors. kind Would could I in growth and growth rank rank sounds terms in could like then just if have potential to the roll the the vectors. than of XXXX, X it kind

Martin Vanderploeg

would a of to the for from the That's reception shown we far marketplace. frankly. them have good really really laid or marketplace seeing me all in so hopeful question hit, all the answer, tough these X I X of vectors. really out, When We're good legs X for that was and growth

chose. a very because we pleased X vectors investment have of we're we talking the all of increased very, think So about Obviously, juice. been we've with lot them

plan really size the obvious. I stack rank there. in there. barely all We're we can't as invest the single-digit just That's U.S., the still surface the the most say it. sort whole would almost that terms number I logos so to in of is we've EU. and And of And revenue scratched them, of same EMEA GDP the of

So early view. slam down great that's and X, them. all a my out revenue point other sort when but for of potential -- us, sit of things, on of really are days, reception figure great substantial initial actually initial all and we the from dunk seen all we've and And those

Matthew Lemenager

EMEA. in of what kind I in with sales there's ask it going I in that EMEA But the U.S. comparing was any the in this going do be of far. to selling we're comparing early time so platform, the appreciate days as expect go on SEC? the cycle around realize was when sold the difference you to days, No. in cycles SEC, ramping you a it that. And to more of back it's And U.S. we've cycles early in Okay. to sales I sales limited

Martin Vanderploeg

interesting asked that. you Well, it's

in in the companies the European I -- and quite larger watched what -- Europe the think studied U.S. have happened that.

approaching so companies are already us larger deals. the that and doing deals platform And are were

they -- just a and and sales they because there's are more deals longer do those take approvals X-figure like Now cycle things that. and they're bigger have a deals

X but expect few we to be slower the remember, very did We years. that market be much in our deals first I -- the to of SEC that in bigger. will that's in transactional SEC the part think what because the will be we similar those deals also significant X there'll X-figure days, did a

to see to smaller I going market SEC will very going lower like that many So we're in we're the I a be and transactional see the that's think think going in company, mid-market, instances. fast mid-market, go to very just

So a bifurcated it's really market.

I think approach we both handle of have on to market. ends a good that how

Operator

comes from James. question Alex with next Your Sklar Raymond

Alexander Sklar

Sticking about has you growth usage terms the are over per for how talk investments the SBL trended what enterprise? can licensing users moved getting number of solution-based of the or with increased and has just if then you connectivity, company, plans to around that in the kind of user

Martin Vanderploeg

we We're want. value too. for starting drives organizations visible solutions. that, create demand that possible see already be I and users question. it's That's is of in terms an Yes, in which to stickiness platform to increasing the the is of curve want We astute of growing dramatically number say the want you. days what other don't exponentially, as these many Thank quite is early exactly I of the of slope to really users the the but mean ramping. as to end then users,

number that So so the of users. talked in strategic, about definitely seeing as I we're SBL being

Alexander Sklar

kept to well? that of know, don't you Are as of in terms outside case are versus of proof of, maybe I record terms that of track systems work in amount your able system in papers

Martin Vanderploeg

monitor have the I -- customers careful to not solely are them Yes. sure monitor to things those all of they better. say approach and use that platform And health, don't, -- very links and and we how track customers things. that's can. -- best making to is We can reason -- it we -- those keep we health the them we help be we that we the we customer monitor If but obviously they -- do using customer usage also why monitor for types many how of also

global are different dramatic Not We many scale seen like as that as as things we of users. and watch numbers of types And have well. how documents created that. we've

also opposed think also I being more the that to being platform has more the on process users cycle well. put but processes into each as brought as more first launched, being seen processes are

So a in sense. we global monitor that

Alexander Sklar

impact were the it. or XBRL as Did And helped revenue customers on growth the Got any you already mentioned boost services in mandate then with quarter. professional that you? those logo have well

Stuart Miller

already Vast majority customers. those of were

Operator

question comes Northland Grondahl Mike next with from Capital. Your

Michael Pochucha

Mike. Michael on opportunity in the about This and Europe you the Maybe just for longer but APAC? talked maybe is -- EMEA term,

Martin Vanderploeg

got the learned team in started Yes. put built then this similar was number so When out market, built smaller a platform I different to applications EMEA, going we of right. time references, the like a some a of knew really and logos sort when for we thing a the logos, we in decided to there some do and APAC. learned and we're ramp it, say very would

to have we see measured for started. We We're early want well. starting invest. We see market. when is accelerate investment. team me, the measured there as small our figuring We're there And in to We're after time returns it's we'll sales. investments. Obviously, the a right, a very out some that

And certainly out sniffing so seeing and we everybody. we'll what's invest, we tell to when is think But are the there. time it right

so it opportunity And good us. like a looks for far, there's

Michael Pochucha

is then partners growth there Maybe specific out? any maybe it like pretty And Okay. is just broad-based. call on -- to seems channel

Martin Vanderploeg

to I are some Well, starting starting -- bookings show ones and us. definitely are for to consultancy the larger push would that say the firms interest of

consultancy And are to wait moving in terms bookings going results to firms, I've solid in As huge a when about, really But But we strategy a assisted -- North more our we we're quarter in we talk Europe. by partners that much it be household of another double of talk this good digits are it's have in percentage. talk the as to talked on X didn't about. we part we're later. now names to want said we'll America forward, about of call, success and both certainly seeing larger about with that some partners

Operator

from comes Stanley. next Your Zlotsky with Stan question Morgan

Stan Zlotsky

just but vectors sustainable mean Maybe that now is start high-level look the year, I on XX% basis? right XXXX thinking Because appreciate is as, then you guidance Workiva? 'XX, put exciting this Workiva question, company on supportive grower so board investors investors I way as going this be EMEA, as for growth out initiatives for to kind a quarter as the that forward a the this a is we about and of with well X should start hey, a just in the for and at and many coming to regulatory thinking environment being so about that going

Stuart Miller

Stan, then so in we infer thereafter, and subscription think QX it's to plus you growth in kind that really can too from revenue expect guidance XX% But early keep investing of which than And QX. high our I teens as we X updated these subscription be appropriate. growth, to is We And teens better we'll are subscription revenue why aspire do reasonable. growth high you in vectors. forecast. should

Martin Vanderploeg

would to one is just like I interesting. that that really comment and that, it's to add

a we're good, a look system of opportunity seeing SaaS at so a in, good records. all very large and polished very, of market look alone then we're that. much Intelligence, companies. people there's out of And the space, the when If there's But lot the you with without because a you a lot markets in bad the all of we're there's there, companies, the space Business And ERP in right And lot different very definitely that's making at competition now. right we're now. partially different

Now competition could come.

lot spend We're and plunge measured something We to going also in believe not money. of into a investment.

tell negative success to And very companies very prudent do just a based doing company, that our of because the opportunity we're larger at it's a size is see that most some there. market large measured the take margins. that. feel of some I'll on said, things we But the going certainly do had much Stan, have and that And that, thing than you having it SaaS to approach it's we you

Stan Zlotsky

just of prior any question APAC following with kind been of track For that sort seeing what there initiatives opportunity. line -- need EMEA? the we sure. And the then on regulatory in up specific Are to we've around in

Martin Vanderploeg

we're hundred It's increase. so now of carefully. Asian XBRL a monitoring that world We're coming seeing those interesting. in and on, the There's we're around over companies a those mandates very seeing exponentially lot and

to is become over I think years, XBRL in puts position. the next us just an that X and excellent widespread going

So that we're out. at. a bunch we're monitoring There's looking not that. There's one stands

out And companies, sell so a -- that with of take number large and get We'll record platform well APAC, now. and to needs is all address Excel different their sale. we they're be integrated go to then the it can platform will by time the and manual a of that of regulatory Word, systems a process all using

a addresses more. be their consistently any platform It's get to to we're to selling going X-figure that add and and then dealmaker. for number continue a us of to one to needs things, going where not regulatory that's so are it's we going And different a more

attention new happening. -- we that's in that location. So And but have and changes think team we're to how sort terms of an of moving positions those what's I all to us ideal pay and nothing happen a going just does to the of XBRL, markets, in in that's that regulatory

Stan Zlotsky

up just some with higher those customers down that of graduating along metrics Very could essentially for strong function $XXX,XXX less Is Perfect. than very customers declined. Okay. that just for natural it me. customers greater tiers, it quarter for sequential If $XXX,XXX, a just attrition a at that maybe end? noticed question. but to with quick second in and we detail XXX,XXX, sneak That's the on one than low I

Stuart Miller

Yes.

the solutions definitely we XX the level. net of is up, side, pushing categories. market we're the new had deals converting new at seen, them just end, high size that I quarter, the say But think the to a the and logos on buying -- those new that initial is going logos middle not in in but also I are too, which So seeing logos would customers into SBL, we've higher new

see the much So long the we're too I metric across assured the -- we quoted. that, wouldn't by when read board. as that you into as particularly growth

Martin Vanderploeg

Yes.

I way. think just Europe that the some of when other back It's could it's totally comes swing hard an artifact. really mean predict. I But online, we don't... to

Stuart Miller

the logos. back way in of of terms Swing new other number

Martin Vanderploeg

logos. Yes, the for to I in quarter, manage to return I least friction way. business is mean, that the and mean the number going new that we we're highest return. highest don't amount wherever the it of managing a of sell bookings. We're given means get But more

think a goes, don't but real see I So that relevant we'll it's how indicator.

Operator

further no today's This call. questions. concludes conference are There

You may now disconnect.

Workiva (WK) 6 Aug 192019 Q2 Earnings call transcript