WORKIVA INC Q1 FY2025 earnings call

Key Points

• Q1 was a solid quarter with subscription revenue up 20% y/y and total revenue up 17% y/y, beating guidance. Operating margin outpaced guidance.
• Broad-based demand across solution portfolio, with strong growth in large contract customers. Number of contracts over $100k, $300k, $500k increased.
• Deal highlights: Multi-solution expansion with a U.S. regional bank, mid six-figure new logo deals in APAC and Europe, and Financial Reporting, GRC, and Sustainability wins.
• Product innovation: Advancements in SEC Reporting and launch of Fund Reporting Solution for public funds. Adaptability to regulatory changes like EDGAR NEXT.
• Sustainability updates: EU Omnibus Package provided clarity on CSRD, with Workiva's target market still having reporting obligations. Customers using Workiva for sustainability saw operational efficiencies and brand benefits.

Workiva had a solid first quarter. Subscription revenue grew 20% year-over-year to $186 million, contributing to total revenue of $206 million, which was 17% higher than Q1 2024. Professional Services revenue was $21 million, flat compared to Q1 2024. Financial Reporting is the primary revenue driver. Governance, Risk and Compliance saw notable wins, including new logo deals and account expansions. Sustainability Management was active with regulatory changes in the EU and customer examples of leveraging sustainability data for business performance. Subscription revenue from customers with multiple solutions increased to 69% from 66% in Q1 2024. The number of contracts valued over $100,000, $300,000, and $500,000 all saw year-over-year increases of 23%, 32%, and 32% respectively.

Guidance

• Q2 2025 total revenue expected to range from $208 million to $210 million. Services revenue expected to be down compared to Q2 2024, and non-GAAP operating margin expected to be approximately breakeven.
• Full year 2025 total revenue expected to range from $864 million to $868 million. Subscription revenue growth expected at ~20% midpoint. Non-GAAP operating margin expected to range from 5% to 5.5%. 2025 free cash flow margin revised to 10% due to macro uncertainty.

Risks

• Macro environment and market turbulence posing risks to bookings momentum. Uncertainty around regulatory change and new U.S. administration policies.
• Impact of foreign exchange rate headwinds and Leap Year on financial metrics like net retention rate.

Q: Could you bridge the gap on maintaining full year revenue guidance despite a more cautious buying environment?

A: Jill Klindt stated that Q1 was strong with 20% S&S revenue growth, and they felt confident in maintaining a measured approach to guidance given their long-term market opportunity and growth strategy.

Q: How have demand for ESG and Sustainability Solutions been relative to expectations?

A: Julie Iskow mentioned sustainability was a top booking solution in Q1, with strong opportunities in Europe (despite CSRD changes), and sustainability not just driven by regulation but also by business performance and stakeholder needs.

Q: What does a soft buying environment mean for Workiva?

A: Julie Iskow explained it means customers are being more thoughtful with spend, dealing with market uncertainty, but the business continues to grow with 20% Subscription revenue growth guide maintained.

Q: How should we think about the opportunity from the mandated financial consolidation order for federal agencies?

A: Julie Iskow said Workiva is well-positioned as they are on the marketplace, and it's a multiyear opportunity aligned with the administration's tech-first approach.

Q: Any update on pricing philosophy and how it relates to innovation?

A: Julie Iskow stated they focus on bringing value to customers through cross-selling and up-selling additional solutions rather than relying heavily on price increases, emphasizing value over pricing levers.