WORKIVA INC Q3 FY2024 earnings call

Management highlighted that the outcome of the U.S. presidential election didn't dampen the market opportunity for sustainability management and reporting. Workiva had a beat and raise in Q3, with subscription revenue growing 19% and total revenue 17%. It was a record bookings quarter with broad-based demand across all solution portfolios and regions globally. Key drivers included enhanced internal execution, customer demand from approaching regulatory deadlines like CSRD, and a general improvement in the macroeconomic environment. Deal highlights included financial reporting deals, GRC deals, and sustainability management and reporting deals. Workiva Carbon showed momentum with sales team training, partner certification, pipeline building, and deal closures. The CSRD was noted as a game-changer, with European companies set to start reporting in Q1 2025 and over 1,000 new data points to report under the regulation.

In Q3 2024, Workiva achieved strong financial results. Total revenue was $185.6 million, up 17% from Q3 2023. Subscription revenue was $171 million, growing 19% year-over-year. Professional services revenue was $14.6 million, slightly down from Q3 2023. Gross margin improved by 170 basis points to 79%. Operating margin was 4%, a 70 basis point increase from Q3 2023. At the end of Q3 2024, there were 6,237 customers, an increase of 292 from Q3 2023. The gross revenue retention rate was 97.5%, exceeding the internal target of 96%, and the net revenue retention rate for the quarter was 110.5%. 68% of subscription revenue came from customers with multiple solutions, compared to 64% in Q3 2023. The number of contracts valued over $100,000 per year was 1,926, up 23% year-over-year; over $300,000 was 383, a 29% increase; and over $500,000 was 166, an 28% increase.

For Q4 2024, total revenue is expected to range from $194 million to $196 million. Non-GAAP operating income is projected to be between $13 million and $15 million, or a non-GAAP net income per share of $0.31 to $0.34. For the full year 2024, total revenue is raised to between $733 million and $735 million. Non-GAAP operating income is expected to be in the range of $30 million to $32 million, or a non-GAAP net profit per share of $0.93 to $0.96. Subscription revenue growth is anticipated to be over 19% at the midpoint, and the full-year free cash flow margin is expected to be 11%.

Forward-looking statements are subject to known and unknown risks and uncertainties. Actual results may differ materially from forward-looking statements due to factors outlined in the company's annual report on Form 10-K and subsequent filings.

Q: Steve Enders asked about the deal environment and go-to-market changes.

A: Julie Iskow responded that it stems from internal execution, momentum from the CSRD, and the resonating platform. Regarding go-to-market, investments in representatives take 6 to 12 months to ramp up.

Q: Jake Roberge inquired about the competitive landscape in the ESG space.

A: Julie Iskow stated that Workiva has a differentiated platform, and Workiva Carbon is part of the robust sustainability offering.

Q: Rob Oliver asked about ERP migrations.

A: Julie Iskow stated that ERP implementations and upgrades are trigger events and Workiva is involved in finance transformation. Jill Klindt mentioned that hiring of quota-bearing reps is still ongoing globally.

Q: Ryan Krieger asked about verticals/geos with better buying trends.

A: Julie Iskow said the demand is broad-based across solution portfolios and regions. Jill Klindt stated there is no pull-forward of deals.

Q: Dominique Manansala asked about financial reporting growth outside of SEC.

A: Julie Iskow said financial reporting is strong beyond SEC, and Jill Klindt said there is no return to capital markets factored into models at this time.

Q: Kyle Aberasturi asked about S/4HANA deals and Workiva Carbon.

A: Julie Iskow said Workiva is part of ERP transformations, and Jill Klindt said Workiva Carbon represents organic growth.

Q: John Messina asked about go-to-market changes and Workiva Carbon pipeline.

A: Julie Iskow said go-to-market changes are ongoing, and Workiva Carbon is gaining traction.

Q: Adam Hotchkiss asked about the ESG mix in Europe and ESG uptake.

A: Julie Iskow said partners are prominent in Europe for ESG, and ESG uptake varies by customer compliance stage.