Workiva Inc. (WK) Earnings Call Transcript & Summary

Welcome to the 2022 Workiva Investor Analyst Day. We are coming to you live from Las Vegas at the Workiva Amplify Conference. This is our first in-person user conference we've had since 2019. We have both investors and analysts here in the room today. We are also live streaming this and have many joining us via the live stream. So thank you for all of those of you out there in the live stream. My name is Mike Rost. I am the Senior Vice President of Corporate Development and Investor Relations at Workiva. And we have a great session here today joined by Marty, Julie, Erik and Jill walking through both strategy and some financials to give you an outlook on Workiva. To kick things off here, a couple of housekeeping items. First off, for those of you joining via the live stream, there is a Q&A function up on the top right of your screen. That's where you can submit questions online. We will have a Q&A session at the end. For those of you in the room, we will be taking questions live. So be prepared with the questions. I'm assuming we'll have a few here in the room as well. So thank you, in advance for that. To kick things off, the obligatory safe harbor statement. So this presentation includes forward-looking statements. All statements contained in this presentation other than the statements of historical facts, including statements regarding our future results of operations, financial position, our business strategy and plans, objectives and future operations are forward-looking statements. We're going to use a lot of words like believe, and will and estimate. So just, again, please familiarize yourself with the safe harbor statement because we will be making some forward-looking statements that may change in the future. With that, I'm going to kick things off right out of the gate here to Marty Vanderploeg, our CEO. Marty, welcome to stage.

Well, welcome, everybody. Great to see familiar faces out there and some that aren't familiar, but thanks for making the trip to Las Vegas. I know that isn't a real heavy lift because there's always something to do here. But -- and welcome to all those virtual. I know there's a lot of other investor conferences going today. So I'm sure a lot of people went virtual and are hopping around. So good to have everybody here. We have a really good day of stuff. I think part, I always look forward to the most is the Q&A. We'll run through a few slides here, just to -- I think most of you know most of this information. But first off, I want to talk just a little bit about our mission statement because it does play into where we're going and where we think we can get to. This was Julie's masterful. She came up with this mission statement. And why a mission statement is important is a company needs to have a north star. They're always chasing. And this is something that really motivates people. It motivates me for many reasons and trying to bring transparency to the world to make it a better place. We'll talk about a lot of things we do that -- is something that our people really rally behind and we have some reality behind you always get really good performance from your team. The other thing I want to mention on this slide is that -- if you look at most of the things we do, look at the key regulatory. We know there's going to be more regulation. There's just no way around it so many people and so many things going on. Reporting financial and ESG data, we know where ESG is going. ESG demand is being driven by the capital flows and by consumers. Consumers are pushing that more than the regulators are. The regulators will catch up, but -- and then and the nonfinancial data performance data, all things that are up and coming. All this is an up-and-coming list, and so we really feel good about our position right now in terms of the markets and which way they're going in our TAM that we'll talk about later. One other thing I will mention is that just a very high level, some key takeaways. First off, I just want to say, as we're pretty unique as a SaaS company for several things, you'll hear about our product, which is a platform, a true platform that we've invested a lot of dollars in and it's just coming to maturity now. That's a big thing for us in terms of growth. The second thing is, in many aspects of our growth profile, we're a little bit behind the curve in terms of our life cycle. We have big growth opportunity with partners. We started that a little late because we wanted to finish the new platform. We have great growth opportunities international. And we've invested a lot in getting reference accounts, putting infrastructure in those international markets. And I'm very optimistic that between partners and expanding TAM, being able to expand overseas and then having a freshly built platform, we're really well positioned. And then the last thing before I move through some of these numbers is that unlike most SaaS companies, I think we have spent a lot of time, a lot of money investing in our TAM. We bumped our head on our TAM once when we went through the SEC reporting market so fast. That was not a pleasant experience. We've seen lots of other software companies start to hit their head on their TAM and you start to get into the late majority selling it's a lot harder, growth is more expensive [ in stalls out ]. So we're really bullish on the fact that we spent a lot of our dollars, our investment dollars on expanding TAM, okay? So those are sort of the major takeaways I want everybody to have when they think about Workiva where we're at in our life cycle. So with that, I'll get to some numbers. I think most of these you're all familiar with -- I think the 1 I'm proudest of is the 97.9% revenue retention. That's a hard number even to keep up that high, but it's really world-class in terms of retention. So much cheaper to keep a customer than they go get a new 1 and onboard them and get them happy. So we're very proud of that. And then we've penetrated a lot of big companies. We're 71% of the Fortune 1000. We're going to make that number higher. That's something that we believe we can do. And -- but really, in the U.S., we see a lot of other expansion opportunities. We'll talk about those as we go and Julie will talk a lot about our growth initiatives. The 180 companies is interesting. We don't sell in 180 companies. These are all multinational corporations that buy it and -- we see lots of seats in countries. We've never sold anything like India and places like that. So it's really a true cloud-based application you can access anywhere -- see if there's anything else I wanted to mention there -- you'll see the partner number. And the last 1 in the corner just talks about usage. That's 21 billion links across our customers. I say, I'm sorry, 2.1 billion links across our customer base. That shows how active our customers use our software. That's the thing we sort of measure even by account to sort of understand how well they're using the high-value features in our platform. And then this is obviously -- I talk about this quite a bit. The founders of this company were accountants and engineers, software engineers, engineers in general. So we -- this company, the culture of this company is a product company. We really are a product company. We take great pride in our product and we believe we have a really robust, brand-new platform and a true platform. And the thing that you go to a lot of SaaS companies website and you scratch your head trying to figure out what they do. We are really good at connecting data into a central location and creating reports, creating textile reports, creating spreadsheets, creating presentations. And that's really our strength, integrating with source systems and creating these reports, cutting time out of the process, cutting effort and cutting risk. And so the real value drivers of our platform are risk reduction, efficiency and time. And when I talk about time, that sounds like the same thing, but it's not some of our management reporting solutions have taken the time to create a report that management teams need to make a decision from 3 weeks down to overnight. And so getting the data overnight, you can actually steer the ship and you don't have to wait 3 weeks to know which way to turn. So that's what I knew when I talk about time. And it's on 1 single cloud-native platform. The company has been built primarily organically, and we're all on the same platform. Again, these are mostly -- 2 things. These have come primarily from the fact that we are a platform, #1. And #2, we put a lot of emphasis on security. We have a really strong security team, and obviously, in this day -- that's becoming more and more important. And all the rest of these are just features of a really well-built platform. One thing I'm also very proud of and the whole company is proud of is our continuous deployment model, where we put out 60 or plus new pieces of software every day out into production. And that's something that you see in the biggest B2C software companies, you don't see it in the B2B, not that I'm aware of. And that's a huge lever for us when we're building software and deploying the customers. Obviously, I said we spent a lot on our platform, and I wasn't kidding. And those are dollars I never mind spending because it builds a moat, builds a strong competitive moat, and it creates a very feature-rich platform that, as you saw on the last slide, scales and is secure and all those types of things. When I talk about competitors, most of them are niche suppliers of some of our solutions. We have a lot of solutions we sell, and we'll talk about that more today. Most of those niche providers are on old platforms. The only place we have a modern software competitors in the GRC and the integrated risk, and we'll talk about that. That's really the only place we have a modern competitor, if you will, our modern piece of software being sold by a competitor. XBRL is a big lever for us. XBRL is coming everywhere. Every year, there's more mandates, and we expect more and more of those. We're considered the leader in XBRL tagging and as that -- that's sort of a layer on top of everything we do that just drives demand and gives us competitive advantage being really good at XBRL. We're seeing that demand for or I'm sorry, we're seeing those mandates all over the world, too. The most recent when we've talked a lot about is ESEF and a lot in Asia and more and more are coming. So that's another growth driver. I don't see if I missed anything else I want to mention. That's pretty self-explanatory. And then solutions. This will talk about a lot today, 3 general categories: financial reporting, I think you're all familiar with all those there. We've talked about them at length, the different financial reporting solutions. The operational reporting, something maybe we haven't talked about 2 of those now really in that category. One is management reporting, which we've been selling for quite some time. We haven't put a lot of distribution focus on that, a lot of go-to-market focus on it, but there's -- we have a number of customers using it for management reporting. And then ESG, obviously, which is the new -- the new solution that obviously, you've heard me talk about ad infinitum. I have some verticals overlaid as well. We haven't verticalized all of our products because we're primarily a horizontal solution. But in some markets, it's made sense. Financial Services, we've been vertical there for quite a while and the public sector as well and energy, that's sort of a new 1 we've just started in the last year or 2. So -- let's see. Talk just a little bit about M&A. As you all know, we've done 4 smaller tuck-in acquisitions lately. We're very active in the market looking for M&A opportunities. We look at hundreds of companies all the time. Our philosophy has always been -- you have to check a lot of the boxes before we'll go down that road. So many M&A activities are unsuccessful, and we believe that you have to have a fit on almost every box to really pull the trigger. And I know Investors always watch that very carefully. I hate to see big acquisitions that don't look well fit. We try to avoid revenue roll-ups. That's not the game we're in. We always look for leverage if we do an acquisition. The 2 that are most notable up there is OneCloud, which was -- that was a company that we OEM their product, that was the connectors that we connect to all different source systems. We had some ourselves through APIs, but that was really a play to get more connectivity to source systems. We have been working with them for quite a while, and our software was well integrated, and we were OEMing their product, and it became clear that, that would be a really strategic piece of technology to own. So that's what drove that acquisition. And then more recently, the ParsePort acquisition was about our -- that was a Denmark company that had done a lot of the bolt-on -- selling bolt-on solutions for the ESEF tagging market. And we added about 900 logos, ESEF logos that we can now access in Europe. It was also partially defensive. We didn't want some of our traditional printers to buy them. And it was a really good team of people and their culture fit really, really well, just good people. And so we wanted to keep our XBRL dominance, we wanted access to those ESEF customers, and it was partially defensive to keep it out of other hands, and it's worked out really well so far. So the [ array ] was an XBRL investment, that was something we'd invested in quite a while in terms of validation, the XBRL validator that the SEC uses and a lot of others. It's open source, and we bought that from a company. We had done about half of that investment ourselves already, but bought it from a sole owner. And then we will continue to have that open source by the way. And then AuditNet was a large -- it was an older company, had a large set of audit templates, and we're selling those in our marketplace currently. I talked about our TAM. We invested a lot in this, and we think this is not an overly aggressive number at all. And again, that's from investing in all these different solutions and our platform and building more and more fit-for-purpose solutions. And sort of the end, I would just summarize here I've been talking a lot about growth opportunities. We have a big TAM. We have lots of space out there to sell, lots of white space in our existing customers. We're very bullish on that. Obviously, in the current environment, operating leverage has become more and more focused on. In the last earnings call, I talked about that quite a bit. It's also in our life cycle of time for us to focus on that more. You go through different phases of a company. And so we will be focusing on operating leverage. And we have some really good levers to pull, frankly. And so we're optimistic that as we scale and get -- I'll pass that $500 million of recurring revenue. There are levers we plan to pull to increase our operating leverage. So investment highlights. I think I've hit almost all of these -- I want to comment on 1 more, the team. We have a fantastic team of people, great culture. People are very collaborative, work together, and I think culture beats out strategy any day. And we just have a fantastic culture. You'll feel it all around when you go around the conference today. Good people working hard, trying to do the right thing and working very hard and they're very smart. So we just have a great group of people in this company. And I would -- that's the horse I always been on. It's just a great group of people, and they trade very, very hard and always deliver some of the things they've done. The first time we did FedRAMP, we then moved all our customers, the R&D team building the new platform, those are just Herculean efforts and stuff you don't see very often. It's all because of the team and the culture. And one other thing, we have a great management team. I've said this many times. At this point, I'm happy with every single person on our management team. They're all doing a great job in moving the ball forward, and that's the first time in 14 years, I can say that, that I'm happy with every person that works in the organization and the management. And with that, I turn it over to Julie, right? Yes. I got to make sure I get my agenda right, a lot of meetings, so I get lost in my agenda. You don't get the clicker. The clicker goes to.

Got a clicker. Well, it's still good to see all of you. Hopefully, you got a chance to attend our general session because early this morning, it's only a short walk from here. I told the crowd here at Amplify that transparency and accountability have never mattered more. The efficiency and the accuracy and the integrity of reporting, it matters. And its regulations are not. That is we'll give a sweet spot, okay? We make it easier for companies around the globe to be more transparent and more accountable to their stakeholders. Our relevant, our impact and our potential impact has never been greater. So with that as a backdrop, I will take you through a picture of where we are today and where we're headed, and it's all in the context of our growth strategy. So without question, 2022 has brought some challenges. Top of mind for us, of course, is Capital Markets, and it's seen a significant decrease in activity over say, year-over-year. You've also heard in our last earnings call, we talked about our expectation is, we're not expecting Capital Markets to come back in the second half of the year. But even without there are this economic uncertainty, there's also challenges like inflation. There's challenges like supply chain issues, and the war and so forth. So the list goes on and on that you have here. But the thing that hasn't changed is our opportunity. And what also hasn't changed is our positioning, we're beautifully positioned to capitalize on that opportunity. We do have the right platform for the right time. It's risk, regulation, compliance, ESG, digital transformation. I mean these are the topics of our day, CEOs and board rooms everywhere. These are the topics being discussed. And we see it, too. I mean we see it in the interactions with our customers. We're getting traction with decision-makers and across multiple functions. And here's an example, was just recently on a call with a $400 billion market cap company to talk about ESG, I expected the head of sustainability to come in 1 other person, maybe. But who showed up on the call were 5 executives from 5 different functions to talk about individual Workiva solutions, but also to talk about how those solutions work across our platform. Three of these people weren't even invited to the call. This customer, a decade has been a happy SEC customer. And just last year, they added GSR to the platform. And now they're looking at expanding 3 more solutions. So because of who we are today and the power of this platform that we have, this kind of conversation is now possible, and it's happening with more and more frequency. Probably 1 of the best ways to tell the Workiva story is just to take a look at some of our recent customer wins. The first is a new customer, top 20 European bank, mid-6-figure deal, 5 solutions. We landed with the platform, ESG, ESEF, GSR, management reporting and banking risk. The second example, this is an account expansion deal with a leading medical device company. It's another mid-6-figure deal. It's another long-term SEC customer, 4 solutions. It's the SEC to the platform. And this, this is our plan to win strategy in action, fit-for-purpose solutions on our open intuitive connected platform with partners and going global. Now these are just a few of our wins, but let's take a look at the numbers. We continue to see an increase in multi-solution deals, 20% year-over-year. We see the increase in accounts with ACV greater than $150,000, up 28% year-over-year. Basically, we're going after that $25 billion TAM that Marty just spoke about. And it's all a part of our strategy, that same strategy that we've been talking about for the last 2 years. I mean, this strategy is driving results for us, higher deal sizes, more multiple solutions, more account expansions, strong retention, increased partner source deals. I mean we're seeing the value of the platform play out. But as we grow and evolve, our strategy grows and evolves as well. In fact, we recently made a change to it. You probably recall, we rolled out the marketplace last year. It's now a part of our platform. So we've moved the marketplace under our platform pillar. And we elevated a new pillar. It's global excellence. Our solutions are global. They serve a global market. So global excellence has become a top priority. So let's dive into this new pillar of ours and our growth strategy. So Marty talked about the global TAM. And you can see here what our TAM looks like across the key regions. It's why we continue to drive to be excellent everywhere in go-to-market, in delivery and in product. So let's focus on that EMEA piece. I mean we know we have significant headroom here. There's a strong regulatory environment. They've been doing sustainability for years, and there's significant opportunity still for financial transformation. And as Marty mentioned, ParsePort, we have 850 logos from ParsePort. These logos are now Workiva customers, and they're accessible for upsell and for cross-sell. All of this was less than 10% of revenue in North America. And we have a lot of upside to go after. So how are we going to do it? Well, we've learned a lot since we've expanded into EMEA in the past few years, and we're better at understanding the approach to the market. We intend to apply more focus, more discipline and more rigor to both our go-to-market strategy and the way we operate. On the EMEA operations front, we just completed centralizing all of our operational functions, sales, marketing, service, customer success, partners, they all report into their global leaders in North America. This will improve efficiency and will operationalize best practices across the globe. How are we going to get this done? Please meet Erik Saito, our new GM for EMEA.

Hi, everyone. Thank you, Julie. I'm Erik Saito. As Julie mentioned, I'm responsible for Workiva's business in EMEA and APAC. It's a pleasure to be here and speaking to you. I've been with Workiva for about 4.5 years. I was originally hired by Marty to stand up our APAC business from the ground up. And earlier this year, when there was an opportunity to take EMEA to the next level, I jumped at the opportunity. And, boy, there's so much upside in EMEA. And I'm happy to talk today about what we're going to do to capture that upside and that TAM that Julie and Marty talked about. Prior to joining Workiva, I spent 7 years at a publicly traded Fortune 500 manufacturing company, where I held some leadership roles and 1 of the leadership roles I held the last 1 I held was as the CFO of the Asia Pacific division. That, I believe, gives me a unique perspective on Workiva's customers challenges that we sold at Workiva because I also experienced firsthand their challenge. In that organization, I went through very, very manual processes similar to the challenges that our customers face across the reporting, compliance, assurance and planning processes. So because I've been in their shoes, it gives me that empathy to understand exactly why the Workiva solution fits so well to solve their problem. Prior to that company, I also worked as an investment banker and strategic adviser. And that also gives me a unique perspective when Marty and Julie talked about how we're going to increase operating leverage. Well, as an investment banker, I learned firsthand the importance for a publicly traded company like us to make sure that we're making fact-based prudent decisions with allocating our shareholders' capital.

Thank you, Erik. We'll do a little Q&A here. How is that? So we talk about me and our go-to-market strategy, and we're making some changes there. Do you want to give us a few details?

Absolutely. There are 3 main changes we're making in the EMEA go-to-market strategy. The first change is focus. We're focusing our resources on markets where we have the highest probability of winning. This means the largest TAM, for example, [ Denmark ], Nordics, U.K., Ireland, France, Benelux, Iberia. We have boots on the ground in all those markets, and we have highly engaged partners in the top-tier partnership space. And I'll talk about that a little bit later. And finally, it's important that we focus on markets where we have reference customers, customers that are willing to speak on our behalf to other CEOs, executives about how they win on that finance transformation journey and deployed Workiva to achieve that value. The second change we're making is incorporating the corporate reporting go-to-market play into our playbook. In Europe, companies look at and their CFOs look at their reporting process in an integrated corporate reporting process. What that means is they look at the reporting process in 1 continuous workflow from data gathering to transformation, to compliance against jurisdictional compliance requirements across Europe and other markets to ensuring that their operations have good corporate governance, to finally providing third-party assurance. All of that in a continuous workflow, not in disjointed looking for solutions to problems in a disjointed process. So by incorporating that into our go-to-market playbook, it enables us to sell the Workiva as a solution, as a true platform. We provide a connected experience to our customers, and that's critical in this corporate reporting play. So that means that our solution is able to help our customers in the entire workflow [indiscernible] experience, and that enables us to truly differentiate ourselves in the market. The third change we're making is leveraging our tier -- top-tier partners more, not just in deploying our software, which is the traditional way that software companies work with partners, but actually in making Workiva part of the partners solution for their clients. So I call it the Workiva being powering our partner solution. How we're doing that is we're training our -- the client relationship partners at these firms on how to position Workiva as part of their solution to solve their clients' corporate reporting challenges. We're also having our solutions architects deploy solutions alongside their project teams until they're self-sufficient. And finally, we're executing a lot of co-marketing activities. CFO forums, webinars where we're featuring how Workiva is powering the finance transformation journeys for their client base. So all these initiatives enables us to increase and increase the pace at which we can capture that TAM in Europe that Marty and Julie talked about.

Well, thank you, Erik. Let's go to operating leverage. We've been talking a lot about that as well. Do you want to talk about some of the areas we're focusing on in EMEA?

Absolutely. Once again, there are 3 areas. The most important thing to increase our operating leverage is increasing productivity. So what we're doing is we're increasing sales productivity, first of all, and reducing our customer acquisition costs. So earlier, I talked about partnerships, when partners source opportunities to us when they're selling the Workiva solution as part of their toolkit to solve their clients' corporate reporting challenges, it naturally enables us to access the C-level executives that they're trusted advisers to more efficiently and more directly. By doing that, we lower our -- we increased our win rate. We increased our deal size with multi solutions and also, hopefully, over time, it shortens our sales cycle because we can access directly the decision-makers at these European companies. The second thing we're doing is we're also reviewing the productivity across the sales teams to ensure that we're aligning the right resources with the right markets where we have the highest probability win that we talked about earlier. We're reviewing productivity also from the perspective of raising the bar on results, expectations and accountability. Aligning our teams against those market opportunities is critical to make sure that we're able to increase our productivity, which in turn allows us to increase the leverage of the resources we invested in Europe to capture that TAM.

Excellent. Thank you for that, too, Erik. I have 1 final one. Let's talk about results. Can you highlight a couple of recent wins for us and showing our momentum in demand.

Absolutely. I actually wrote these down so that I can capture all the details for you. So I'll highlight 3 deals that capture the -- some of the themes that I talked about earlier -- that we're implementing across EMEA. The first deal is earlier this year, we won a large managed services partner deal with a big 4 firm around global statutory reporting. We replaced their legacy technology with our platform to help them achieve efficiencies across their client reporting teams while continuing to provide a great service to their clients. We also recently closed a mid-6-figure multi-solution deal at a top 15 European bank. This is a different bank than the 1 that Julie referred to earlier. This includes -- this multi-solution deal included SEC, management reporting and ESEF, all being delivered by a partner. This deal was an example of our corporate reporting go-to-market play at work. And finally, I'm particularly proud of this 1 is -- another example of the corporate reporting playbook paying off is a mid-6-figure deal, multi-solution win at an S&P Global 500 manufacturing company based in Europe. This company purchased ESG, SEC, management reporting and global SaaS solutions all at once. This deal was particularly significant for us because it showcased our investment in a different set of partners. In Europe -- I earlier talked about corporate reporting play. In Europe -- in European companies, there is a much greater prevalence of the concept of integrated reports where companies would have 1 report that highlights everything from ESG to corporate governance and the traditional financial all in 1 report. However, in a lot of those -- a lot of European companies, different stakeholders and external parties influence different parts of that report. So as you know, the office of the CFO, clearly controls the financial statements and footnotes the back end of the report. But the front end report is often controlled by Investor Relations or Corporate Secretary and is highly influenced by design agencies. So we partnered in this particular multi-solution deal with the design agency external that actively influence that deal to help us win. That was significant. So that was another highlight of our partnership strategy and the success of how we're going to go after it with our strategy.

Thank you, Erik. Again, I appreciate it. Thank you. You can see why perhaps we're so enthusiastic about our opportunity in EMEA. So let's go to the most talked about solution in our portfolio right now, ESG. We highlight often ESG represents a generational opportunity for growth for us. We continue to see momentum and we are winning landmark accounts early in our journey. I mean just take a look at some of these wins in our key industries. And this was only 1 year in with our ESG offering. And it's not just regulation that's the driver. The companies are adopting our ESG solution even without regulatory mandates. But the mandates are coming. Required ESG disclosures that you can see various stages of maturity across the globe. I mean most of the proposed regulations include ESG disclosures in the annual report, but along with audit and tagging being required. So the platform, this integrated reporting, audit and tagging. That's Workiva. That's our wheelhouse. It's also why our end-to-end platform with ESG is unrivaled. The ESG requires the collection, the ingestion, the preparation, the mapping, the assembly of data from [ different ] sources, it requires the collaboration of multiple stakeholders across many functions and it requires investor-grade audit-ready reporting that meets global framework standards. This is what we excel at. So it's a natural fit for our platform, and it's a natural fit for Workiva, and we'll continue to invest in ESG to remain differentiated and to keep our leadership position. This will drive our long-term growth. Another key driver for growth for Workiva is GRC. Quite simply, risk is rising in terms of importance. There are more risks with greater impact on businesses. I mean, economic volatility, supply chain, climate change, risks around the war, list goes on. Risk management is a priority for CEOs and Boards everywhere. And our platform excels at identifying, tracking and managing risk. This is why we're bullish, and this is why we continue to look positively in the market. We have an industry-leading solution, we're recognized in the Forrester Wave as a leader in GRC, and we're seeing strong growth in a number of GRC customers. It's up 26% year-over-year. And the product density in GRC is increasing as well. In fact, with GRC, the platform shines. It's our competitive advantage. I mean, when customers want more than just a single solution or far more likely to win. In fact, GRC is our top-selling multi-solution combination and whether that's within the GRC suite of solutions or it's across the broader Workiva platform. And we're leveraging this trend in our go-to-market tactics. We're approaching the market with solution bundling and the platform play. I don't need to go into the detail about the enhancements we've made to the GRC portfolio because you've got an opportunity here to see them for yourselves at Amplify. Last area to highlight today, it's partners. Partners is critical for our growth. I mean when partners are involved, we see higher deal size, increased win rate and further adoption, just as Erik described as a situation in EMEA. Here are a few large partner-sourced wins for Q2 across our globe: North America, APAC and EMEA. And this is where you see strategic pillars of ours building on each other. It's that multi-solution on the platform and across the globe. We're also seeing an uptick in MSP deals. Now that partners know how to implement and service and support our customers with their -- on their own with their own services. They see value in the platform for the customers and for themselves. So what I'll leave you with is our market opportunity remains strong. our TAM, it's intact and it's significant. Our platform is ready for these times. Our strategy is driving clear results. Our customer base, it's right for expansion. Our partner ecosystem is continuing to expand and strengthen. So it's on us. It's on Workiva to go after the opportunity. It's all about execution. So we'll hear from Jill's financial update, we're focused on operational efficiency and improving our operating leverage as we grow. Thank you, and I'll hand off to Jill.

I'll walk through a few financial updates, and then we'll go into, as Julie has talked about, a little bit of the expectations that we have around how we're going to continue to move towards more operating leverage and -- and really just how we're going to have you all expect to see the results of all the strategy and execution that everybody was talking about in our numbers. So we'll start out here with just a few highlights. Nothing new here for any of you, of course. Q2 2022 was a good quarter, continued to see good revenue growth across both subscription and total revenue. And we also had, as Marty had mentioned, our best-in-class gross dollar retention and also still strong net dollar retention with add-ons. We'll go into a little bit more detail on that in the next few slides here. But strong results, we're very pleased, and we're going to continue to grow into the end of the year, but just a quick overview for Q2. And then another overview would be so our company total customers, logos. So this is without ParsePort. So we had 15% growth year-over-year in Q2 in organic customer growth. And as both Marty and Julie mentioned, we -- this doesn't include ParsePort, which was over 850 new ESEF clients that we added as part of that acquisition. We will continue to show those separately and together. So I think on Marty's slide, you would have seen the total customer count that was inclusive of ParsePort. Since they are such a different business, different deal size than our normal customers are more organic customers. We want to make sure we can give you all that information so that we can continue to disaggregate that. They're different enough -- we won't really be able to split them together. So -- but good continued acceleration in logos. And the other piece that's helping us to drive that revenue growth and to add more logos, is just word of mouth, because everybody continues to be a happy customer. And this is something you can see on the right of this graph here, you can see excluding Capital Markets for that net revenue retention. This is something that verbally I've given in the past couple of quarters, but we thought it would be good to just call this out more graphically. Capital Markets is a business for us that makes a lot of sense. You talked about this with -- all of you, I feel like quite a lot, but I'll go over it again. It makes a lot of sense for us to get in and do those deals, but they do cause some noise in our numbers. So last year, when the Capital Markets business was doing so well, we had those very large deal sizes for those initial IPOs. They're often accelerating in their revenue in the speed of the recognition. But what that does in a year-over-year comparison in this calculation, is that -- even though we're keeping that logo, if they complete their transaction, they're definitely be using us for at least SEC and hopefully more solutions. But it does look like net dollar churn year-over-year in this calculation. And so we want to make sure we call that out that if we were excluding capital markets. We do see still a pretty solid number around our net revenue retention. So we'll keep calling this out. It will -- as Capital Markets starts to -- as Julie said, we don't expect it to come back at the end of the year, but eventually something will happen. We'll keep talking about that because it does cause some noise in the numbers. We want to make sure I call that out to all of you. This is a look at it, as you're all very familiar with, the average deal size tranches of our customers. So a customer is greater than 100,000, greater than 150,000 and greater than 300,000. And we continue growth in this. Something else that we wanted to provide to all of you today is a little bit of more information on these 3 tranches. So what you're seeing here on the left, you see the graph has the average historical ACV of each of these -- of the 100,000 and 150,000 plus tranches. So you can see that we have really nice growth in average deal sizes in each of these customer groupings. And you'll note, just to call out, I want to make sure that the 100,000 plus group is inclusive of everything up through the biggest customers. 150,000 growth up through the biggest customer. So they're inclusive they're additive throughout. And then on the right you can see that for the largest tranche of customers with the 3 that have more than 300,000 in annual contract value, that our average deal set or the average ACV for those customers is greater than 600,000. So we have some very large customers. We have some very small customers. They're all just as important to us. And we think that we have a lot of room for growth even in that base of customers that 75% of our customers that have less than 100,000 in ACV with us. We know that executing on the strategy, as Julie was talking about, we have the opportunity to bring them in for more solutions added usage and really to drive up that ACV by having them see the added value that they can get with additional solutions from the product and continuing to be able to use our platform and -- and as our retention numbers have shown, we're very pleased with the platform as well. So we're definitely solving problems for them, and we know that we can continue to grow this. But this would be some good data for you all to have. And the next one that we have here is a variation on that theme, again, back to a lot of what Julie was saying, the execution that we've been able to have around adding more multi-solution customers. In Q2 of 2022, 56% of our total revenue came from customers that had more than 1 solution. So that's total revenue, not number of customers. And so it's talking about those really some of our biggest customers and that biggest tranche of customers that have multiple solutions, and this is something that we want to continue to grow, of course, as well. And we think that we can as we are providing additional value within the platform, allowing our customers to get their data in there, use that same data across all of the different solution areas. This is something that we will -- we expect to see grow over time. But again, just showing that progress that we're seeing as we do execute on that strategy, that Julie so nicely laid out. And also in EMEA, it's smaller there. We have less than 10% of our revenue outside of North America, but that's going to be 1 area of growth here, too. And a lot of those customers are adding multiple stations that Erik talked about. The next slide that were going to go into, we're going to talk about our customer cohort revenue. So this is a look at our total revenue, S&S revenue, -- excuse me, total S&S revenue by cohort. Those cohorts are the customers were adding [indiscernible]. So the bottom silver and black would be the customers that we added in 2010 and how they're still contributing to revenues -- S&S revenue today. If you recall, he might not recall, but we started selling in March of 2010. So that would have been base year, very small, but growing fast and very scrappy at that point, [indiscernible], I call it scrappy. And so growing over time, we had some really great growth years around SEC in 2011, 2012, 2013 and really built up that base of revenue for the company. But those are our companies today, our customers today that are adding more solutions. So that long-term connection is very strong. I was able to sit in on some of the -- we have customer advisory boards, as able to talk to some of those customers that are on those advisory boards yesterday. And most of them are very long-term customers and very pleased with the platform, very engaged. And so it's always the conversations to have with them to see how they're continuing to grow with the company and looking to have more control over their data and feel very confident in what they can complete within their jobs, using the platform. And I think this shows that as well. It's not only our retention numbers, but it's showing here in the annual subscription revenue with these cohorts. So hopefully, this is a good fee for you as. Now the next thing I know is new and dear to all of your hearts, we're going to start looking at our long-term historical target operating model. So we've done a couple of different times, put out some long-term models. 2018 Investor Day in the fall. And then 2020, we didn't provide an update. So I've been in this role now for about 18 months, give or take. And it's been -- we had some up -- we've had the market has come down. But a lot of different factors. Julie talked about it a lot that we've seen over the last year, but I think even over time, over that 18 months, we've grown a lot as a company. I think that the progress that we're making in our partners and how we're moving forward with them, getting -- getting used to having the platform complete [ deal with our ] customers moved over, which happened in 2020. It's just been a lot going on. And you always want to reflect, okay, is this still what we think makes the most sense. And so we are going today talk about an updated long-term operating model. And I think that some of the things that continue to ebb and flow -- or is Marty even talked about it was that we're really -- we're a platform company. We're driven by development or driven by the product. We've made some great investments in that platform. And we know that, that's going to be how we execute and win. And so as we flip over, we can look at our new model, and what we're going to move towards is that this is something that in the past we haven't given is a specific time frame around what that model around when we would expect to execute against that model. And we are saying here that we would expect this is a 5-year model. So a 5-year plan in 2027, we would expect to move towards these results. And there is some that's changing here, some that's not as different. We're keeping the same bottom line, but we really think that the mix that we had within those numbers did not make so much sense. Given that we have a lot of different solutions, a lot of different geographies that we thought that the sales and marketing and the go-to-market -- go-to-market spend in the old model didn't make as much sense for us. We really thought that, that was underpinning what it was going to take for us to move forward and execute in all the areas where we wanted to -- and so we have adjusted that upward. As we look at R&D over time and as our revenue grows, we do think that, that will continue to come down as a percentage of revenue. We're still going to see growth, of course, in our R&D team because our platform is very important. And we know that that's going to be how we execute and win over time is relying on that platform to deliver to our customers everything that they need. And so we did bring that down though over time because we think that as our revenue growth as we grow as a company, as we become a larger company, this seems to make more sense for what we thought would be the result that we could expect. A small adjustment on G&A. At the top of the model here, you can see that we really do anticipate that our subscription and support revenue will continue to increase as a percentage of the whole. I think we talked about this a lot with all of you already, but just to reiterate, those partner relationships that we value so much, we also expect that over time, more and more of just the consulting that we would potentially do for customers would go to partners. So the services that we're going to keep doing will be those XBRL tagging services, XBRL services of all forms. We think that it's giving some more sense for us to keep those in-house. But a lot of those other big projects, implementation projects, where we can get a partner engaged, help us to win better, help that implementation to go better, help to get our customers in the platform and using it better, that's going to be a way for us to win in the long term. And so we do think that professional services revenue as a part of the whole comes down over time. And then we did see a small change in our gross margin as well related to that. So updated target margin model with the date of expectation around 2027 would be -- when we would be moving towards this. So hopefully, everybody can take a look at this. And I'm expecting a lot of good Q&A. Don't let me down. But then we can also look at some historical financial review just to see how we progressed over time in a lot of these metrics. And you'll recall that we did throughout the pandemic, lack of travel and just being more efficient over that period. I would say, we were really sitting back and we were finishing the platform, working through some things as a company, a lot of what Julie was talking a lot about, Marty was talking about. We did move towards non-GAAP profitability during that time frame. This year, we've all -- at the beginning of the year coming into it, we talked about the investments that we're going to be making in ESG in that go-to-market process in the platform. And we still believe very fully that, that was the right investment to make this year. But going into next year, to reiterate what we had said at our last earnings call, we will be moving towards non-GAAP profitability into the quarterly towards the end of next year. And all of that's going to start to lead towards this long-term target over time. And so we understand where to get leverage from our business. Erik talked a lot about it in EMEA and where we are making some changes to really make that business work for us and to bring better services, better product to our customers there And it's happening throughout North America and APAC, too. We know that we have a lot of ability to grow this company. We have a large TAM to go after. And as we execute on the strategy that Julie so nicely laid out, and that's my favorite slide actually is that strategy slide. As we execute on that, we really feel that we'll move towards these numbers fairly naturally. We'll leave in ebbs and flows, but -- and we'll invest where we need to. We're always going to be a company that if we see something as a great opportunity, we will invest in it because we know that over time, driving that revenue growth and in the case of ESG, in particular, we really still feel like getting in very quickly, finding a solution for customers around that issue that it's going to lead us to the right results there around that solution. So that's what I had for everybody today. And I think with that, well, non-GAAP reconciliations. So these are non-GAAP numbers. Let's keep that in mind. If anybody wants to peruse, you can check out the reconciliation that will be available on the slides online. I'm not going to go through that in detail though. With that, I think we're moving towards Q&A. Is that right? Okay. And Erik and I will share mic, I think. So we're going to get everybody -- I think we're going to get Julie and Marty back up on the stage, and then we'll get going.

Yes, I'd like to welcome everybody back up on stage. And thank you, everyone, for the fantastic presentation. For those here that are in person, strongly encourage you to go visit the exhibit hall, go to some sessions, go talk to our customers. What you will see is what we presented here today. This is real, right? There's the energy here around our customers. There's a lot of activity, talk to our business partners, do your own channel checks on that. You'll hear fantastic stories from our customers. For those of you online, please go visit some of our sessions, right? We have a lot of the sessions you can visit on the Amplify site today and tomorrow. So strongly encourage you go see some of those customer sessions, listen to our partner sessions, see some of the product overviews. Really try to understand the Workiva story. This is a fantastic momentum we have going on here. So again, strongly encourage you to go listen to that. So with that, we are going to open it up for Q&A. And I see some hands already getting ready to raise in the room. Karen will be walking around with a microphone. So everybody get their chance. For those of you online, there's also a Q&A function on the top right. Submit those online and we'll try to get through those as well. All right, Karen, go for the first question here.

Thanks. I guess, the sound is still off. But Andrew DeGasperi of Berenberg. I guess the first question I have, you clearly made a change in your European sales strategy?

Yes. Hold a second. [Technical Difficulty]

So again Andrew from Berenberg. The first question was on the European sales strategy, clearly made a change. I guess the first question is what didn't work in the previous strategy or as well as you thought? And then the second is, in terms of your plan to offset to make the sales process more efficient using leveraging partners in that region, are you concerned at all, but first of all, any conflicts of interest that may emerge with your partners since a lot of that services business is very lucrative to them, particularly when you look at ESEF and ESG?

So Marty, do you want to start with the past?

Sure. I'll start with the past. There were several factors there, frankly. Most of the issue there was we needed fresh leadership. And so we've banged most of the people out there at the top. And there was -- the strategy was we were trying to sell everything to everybody. And that was a mistake, and I own that mistake. I would also say that the whole COVID thing had a problem, we couldn't get over there. That was just a factor of what happened in the last 2 years. I didn't go over there for 2.5 years. And so we're relying on a lot of different ways of communicating. And when you get on the ground, it makes a big difference. Erik spent there. How long Erik? Month after month now?

Pretty much 90% of my time there.

The other thing that I think we realized is that, and this again, was my mistake, is that centralizing things like marketing and sales back to North America, where we just had more track record and more experience, is already showing dividends already. And so basically, we realigned those people with their North American leadership. We put in a new GM that would orchestrate all that, Erik. And we're much more focused on the products we're selling. We've knocked that number way down in terms of solutions we're trying to sell in Europe. So I think those are the major changes. What was the second part of the question? I'm sorry.

The second part was really more on the future efficiency. Are there any conflicts with partners. Of course, Erik maybe on partner distribution. If you're going heavy on that, you want the partner to be fighting with together?

Actually, we are -- the way we can better coordinate is to actually plan with partners. So the way we're going to market with the partnerships is not just enabling them to position Workiva as part of their solution, as we talked about earlier, but also actually doing joint planning. So segmenting the market in terms of where we co-sell with them and which part of the segment where we deploy them as a managed services partner, where they're using the Workiva platform to deliver services to their clients. So by doing so, we're -- as long as we're well coordinated, which we're doing right now, there should not be the conflict with our partners.

I think they're used to that too. I mean, in North America, they win some, lose some because we have the same thing in North America. So we really haven't seen a big issue there. Once in a while, there's some competitive juices flowing. But in general, partners have sort of their turf, and that's where they tend to live.

Rob Oliver with Baird. Jill, my question is for you and maybe for the rest of you guys as well. So I appreciate all the detail in your presentation. I wanted to just start with the operating model changes looking out to 2027. Just one thing that struck me was that what you guys are seeing in terms of the gross margin benefits from the move more towards subscription and away from services, you're not seeing the benefit on the bottom line because of the increase in sales and marketing over the previous target. So I just wanted to understand your thought process with the operating margin target unchanged and sales and marketing as a percentage coming up. How should we think about that? Is this ESG opportunity more expensive than you guys initially thought? I know in some cases, you've been hiring additional salespeople. Just maybe help us understand the costs associated with that opportunity?

Yes. So I'll start out and then if anybody else has any other thoughts. But I think that even within the old models, we weren't giving as much of a nod to the way that we were needing to execute on that go-to-market with the -- looking at it all -- it's not the same as a lot of other SaaS companies, and I think that we were trying to fit ourselves into that model. But we have lots of solutions. We are growing organically globally. And I think that, that will change a little bit as we talked about and bringing more partners in. But honestly, it's not all just one solution. It's not that ESG is going to be expensive. I think that in general, just rightsizing that cost to how we are going to need to grow as a company with a big piece of it and thinking about all the solutions that we have to execute on the different geographies. That's really how we were thinking about that. Is there anything...

Yes. I'd add some color to the -- we're learning. That's just part of what a management team goes through and multi-solution larger dollar deals, take a different type of seller in general. I think that we're also learning that distribution internationally is a little more expensive. And so there's also a lot of uncertainty and the fact that we are trying to build more product-led growth into our product. And you've seen those companies what those numbers look like, right? There's more R&D and less marketing and sales. If you look at the real extreme cases of that, you'll see that profoundly. So we're not sure exactly where we're going to end up. I'll just comment on our R&D team and our R&D team was focused for 5 years on a new platform. This last year, in 2021, they were primarily focused on finishing some GAAP items, but also customer satisfaction. Now we're pivoting that sales team to all new features, revenue, to reducing gross margin because you mentioned that making support more efficient and effective. And the last thing is product-led growth, making the product easier to use and more viral in terms of in the organization, people can try it easily, it's easy to get up and running, all those types of things. So there's a lot of transience in our company that have a lot of potential upside. And so we like to put out a conservative model and think that over time with all these things, we can even do better, but that's where we always start.

Matt Stotler from William Blair. So I guess to start off with and then I've got a follow-up. In terms of kind of the overall product investment strategy, right? Something you guys have talked about historically has been the expansion of the breadth of what you offer getting to almost 20 productized use cases, probably more at this point, with customers using a lot more than that. In the context of what we're seeing today in terms of the deep investments on ESG and ESEF, the commentary around not being afraid to invest in incremental opportunities where they exist, and then the updated long-term R&D target, which is lower as a percentage of revenue. Has that changed materially, right? Is it, hey, we've identified ESG, ESEF as being massive opportunities. So we're going to really focus here and then continue to look for additional broadening in maybe a more deliberate way than we used to or any color around whether that breadth versus depth change from an R&D perspective will be helpful?

Do you want to take that and...

Sure. I mean, I'll start out and say keep in mind, again, we're a platform company. And when we make enhancements to ESG, most of that is applicable to all of the solutions or a large number of them. So we get a lot of leverage when we put in capability within the platform. So that's important, and we're going to continue to do that. We -- the areas where we have large TAM, where we are successful, similar to Erik's strategy in EMEA, we are going to focus. But much of that R&D is not per solution. It is across the platform. Our platform continues to grow with capability. Again, that brings up all the solutions and keeps us.

Yes. And I would add on to that, that what I just said a minute ago, I'd emphasize that again. R&D used to have one mission, let's get the new platform built. And then the second mission was let's make sure everybody is happy, I'm not going to lose any customers, pretty simple mission, right? And then now the mission is, okay, got to keep the customers happy. We have to create more value to charge more for our products. That means more features and identifying how value is seen by the customer. It's about reducing the -- I mean, increasing our gross margin, meaning reducing support cost. That's part of their OKRs now. And then finally, product-led growth. All that stuff is platform stuff, for the most part, to echo what Julie is saying. It's all platform-related things. Now there are 2 solutions that we are tacking toward a little bit in terms of what the R&D spend is, it's ESG and it's GRC integrated risk. Both of those have what we feel to be very large TAMs and are just perfect opportunities for us right now. So there is a slight tacking towards that -- those two. But in general, we're trying to build a platform and not build 10 solutions sit by themselves. I think that it would be the very wrong thing to do. But Julie's guidance on just building a platform is the right way to go.

That's very helpful. And then maybe just one follow-up. And something we've talked about a little bit before, but we also get a lot of inbound on it from investors, is how to think about how some of these new opportunities layer into the -- layer into revenue, layer into the bottle over time. I'd imagine that if you look at something like ESEF, you could probably use SEC as a little bit of an allegory for kind of penetrating that market or how that could play out. When you think about ESG or GRC, how is that different? How is that similar? And could things ramp structurally faster given that you now are a platform rather than being more of a single product solution?

You want to take that? Or you want me to take it?

Why don't you get started?

Okay. Okay. I like the throne to you as often as I can. The ESG is going to -- every human organization is going to have to be concerned about that, not just public companies, not just private companies, not government, NGOs, and everyone is going to have to be worried about that. So it's a really big TAM. And it's hard to predict how fast or slow that's going to go. I think it's going to go at a pretty good clip. The integrated risk, one is a little different. Those tend to be bigger deals. We sell to bigger companies in general. And I think we'll get a good steady growth out of that. I don't think it's going to be something that just explodes on us, if you will. So now remember, we have significant -- we have one product line where we're at maturation for the most part, it's growing slower, and that's SEC. So that's why we model the growth the way we do. Some of these new solutions are going to grow much faster, some are going to grow slower. And we're always looking for stability from having those different solutions and the different operating margins in each solution, the different growth rates. And when you have enough of them, you can predict pretty much what the blend is going to look like. So that's really the strategy in general. But I think ESG and IR are the 2 that we're most bullish on in terms of getting substantial growth. ESEF as well, but -- and GSR. But those 2 are the bigger TAM in the longer runway.

All right. Now, weave in an online question quick here. This question comes from Mike Grondahl from Northland. And the question is, what should our takeaways on macro outlook be. You mentioned global economy, capital markets, war in Ukraine. So in general, what is your real look on macro outlook right now?

Well, if I could see that, I wouldn't be sitting here, right? So no, I mean, you tell me, I don't know what's going to happen. Today was a surprise for me as well. I thought we started over that hump, but apparently not. I will say this about our -- first off, we have really reduced our expectations on cap markets even into '23. We're not expecting cap markets to come back. I know that eventually, it will be very, very strong. Again, there's so much backlog of private companies needing liquidity for their investors and their employees. So there will be a day when we're smiling about cap markets again. I don't -- we haven't baked that into our plans at all for this year or next. We're assuming a very modest number there. So take that out of the formula anything there is upside from my point of view. The macro stuff, we're not seeing a lot of effect yet in the buying cycles of these different businesses. That doesn't mean if it gets worse, it won't happen. But so far, there's been like one or two companies out of all the companies we deal with, where we've heard we're going to have a 6-month pause on software buys or something like that. When those start happening, the salespeople are screaming and you hear about it. I can only think of one or two that happened since this whole thing. So I think companies are still committed to transformation. They're committed to trying to lower their cost structure and reduce their risk. I think they are, and it hasn't gotten to the point where we've seen a big pull on the reins to stop that. But Cap Markets did have an outsized effect on us because it went from a big number, one of the biggest in history, to almost zero in about that much time. So that did hit us hard. But the good news is, is all the other solutions are doing well, deal size is going up. We're seeing good opportunity out in the market. So I'm still optimistic and feel good about where the company is, near term and long term, especially long term, once we get through this economic situation right now, but even near term, I'm optimistic.

John Messina from Raymond James. Just 2 for me. First on the platform. From the slides, it looked like multi-solution customer growth was really strong in 2016 through 2018 and then again in 2020 through 2022. Can you maybe talk about what drove those -- what drove that growth in those 2-year periods versus 2018 through 2020?

I don't know. Do you have a good explanation to that, Jill?

Yes. So during the time frame that 2018, 2019, 2020, we were working through our solution-based licensing transition. And so that wasn't as much growth from multiple solutions, but growth just within the way that we were making sure that we were measuring value to our customers. So if you look back at that time frame, you'll hear a lot of the conversations that we had were around how we moved from user-based licensing to solution-based licensing during that time and really focusing on the value drivers for each of our individual solutions for the customer base. And what it -- it wasn't specifically called out as a price increase, but it did bring up the standard value of individual contracts without adding another solution or adding multiple solutions because it was a rebalancing of that overall pricing model during that time frame.

There were a couple of factors there. One was what Jill just alluded to when salespeople have an easy avenue -- that's where they always go. So we were selling the new -- we were pushing and managing the customer through that new pricing, which has proved to be very good for us, value-based pricing or solution-based pricing has done a world of good for us because our value is not correlated to the number of seats at all. It just wasn't. So we get some -- that we're way undervalued and some way overvalued solutions. So that -- even though you can look at it as a price increase structurally, it actually did a lot of long-term good for us. The second thing was, as you remember, we were coming up on a customer transition. We're going to be moving all of our customers. So we're telling the customer, get ready. We're going to move all of you to a new platform. By the way -- by the way, buy a couple more solutions. They all go, what are you talking about? So you have these structural things in your life cycle that you work through and get through and tell me -- trust me, building the new platform, moving all our customers about hardly any churn and our NPS is right back where it was before. That was a huge value add for the company long term. And even though you see the perturbations in those numbers you're looking at, we weren't trying to sell multi-solution deals than as much with the platform change coming, and we were managing that change to value-based or solution-based pricing, correct? A lot of big things happened in the last 5 years, and that's why there's a lot of choppiness in a lot of things.

Yes. That's very helpful color there. And also, I appreciate all the color on the new operating margin targets. But as we think about the 2027 target model there, does that still factor in the prior 2026, $1 billion revenue target?

So we still believe that we talked a lot about our expected long-term revenue growth and if you run the numbers, we do believe that, that would still be directionally where we're headed from top line.

Yes. Obviously, the economy has something to do with this, right? I mean if we come out of this in the next 6 months to a year, we're in really good shape to reach the goals we've talked about. If not, it might take a year longer, I don't know. But yes, we're still directionally wanting to grow as fast as we can and get bigger as fast as we can. And one of our goals now is to get over $1 billion. When you're a SaaS company, this life cycle thing, first goal is to get over $100 million. You feel like you're in rare air, you get over $100 million. And then the next goal is $500 million. And we feel really good, we got there and our run rate right now, we're very proud of having achieved that through all the c*** we went through. Sorry, that was not a very technical term, but you know what I mean. Now we're at a different point in our life cycle. We have a new platform and $1 billion is the next step. When you get to $1 billion in revenue as a SaaS company or in rare air. That motivates everybody in our company. We want to be viewed as this Midwest SaaS software company that always had the Rodney Dangerfield point of view -- because we're from the Midwest, and we want to kick butt and show we can be as good as any of them. So yes, $1 billion is a target that we talk about all the time, and we get there, we're going to pick the next target. So there's always a target in our people's minds and where we're trying to get to.

Well, we're waiting here. I got a question for online. Jill, it's specific to you. There is no specific name given for the person who asked the question, but the question is in 2021 Investor Day, you outlined stock-based comp would be 12% of sales in your long-term target for your 2027 goals. What would be stock-based comp?

We think that it will still drive towards that around 12%. That's not really going to change. We didn't reiterate it on the model. But yes, we do think that that's still in line with where we expect long term that is it.

Yes. The only color I'd add, sorry -- the only color I would add there is that these software industry is a very lucrative industry. You -- and because of that, and everyone's seeing the wealth that's been created there, retaining high-level talent it's just structural now. You have to have an RSU program to keep the very best people in the company. It's just the way it is now. And so to Jill's point, I don't think we're going to see a lot of change there in the industry as a whole. That's pretty typical number, I think, across -- no that's what I've been told. That's a pretty typical number across most software companies now at our point in our life cycle.

Andrew from Berenberg again. I guess I wanted to discuss ParsePort a little more. I don't know if this question is better for Julie or Erik. But when you think about the customer base is obviously relatively smaller relative to the organic Workiva. And I was just wondering, you mentioned upselling and cross-selling as part of the strategy. Are you -- do you have any specific products in mind that you're tempting to push into that cohort of customers? And are you going to potentially change your pricing strategy when it comes to that customer base?

Yes. Actually, that's part of the alignment, the global excellence and the alignment across our sales teams that Julie talked about and we're applying between ParsePort and Workiva. So the roughly 900 logos that Marty talked about earlier with ParsePort, we have a prime opportunity to upsell the Workiva platform because ParsePort has opened the door already with a -- with the public disclosure for those European companies. But public disclosure, as we talked about earlier, with the corporate reporting as end-to-end is just one part of that reporting -- corporate reporting process for European companies. So it gives us with partners a great opportunity to sell the platform with ParsePort as part of the Workiva family of solutions. So we are working together closely with the ParsePort team to segment that market to make sure that we can actually go after that together and figure out where -- which part of their logo base is prime for upselling the platform.

I was going to say, we also expect ESEF to get more complex over time. And as we do see that, we'll see potentially some transitions to our broader platform as well. The platform, ESEF, and certainly, ESG, along with ESEF, will come together as well. So that's another one that we'll be moving towards sooner rather than later.

And it's -- with GDPR, it's just harder to get into European companies it is. I wish we had something like that when I look at my inbox of e-mails every day. But having access to those -- we'll try to sell everything to them. But the most natural thing we're going to see is a platform solution for ESEF, as Julie mentioned, and ESG is right behind it. So that's the primary thing we see. We're also going to -- if people stick with a bolt-on solution, we're going to slowly raise that price too. That initial price was a logo grab price like we did when we were starting and ParsePort was early in their life cycle. And so there's opportunity to just even a bolt-on solution to raise that price as well. And we -- when XBRL tagging is required for ESG and what is it, 40,000 companies left to report in Europe, Mike. Most of those will look for a bolt-on solution day 1. So that's another part of the strategy there.

Great. Thanks. Steve Enders with Citi. I guess when we think about the GRC and ESG investments that you're making, how does the personas that you're targeting kind of change versus the more traditional audit and accounting side? And how do you kind of think about this augmenting the go-to-market strategy to better target those individuals?

One is -- well, we are with partners, with our own go-to-market strategy, we're going broader within the organization, certainly within the office of the CFO, as I mentioned, on the conversation I was just in. So we're going across the organization. And when you think about the solutions together like ESG and controls, those things go together. So it's -- we are targeting the specific buyers, but we're also looking more broader across the organization. And they're entering those conversations themselves. I mean we have an ESG executive summit here, and there are people who are in the sustainability, but they're also the controller's office, they're also around heads of compliance. So we're seeing multiple functions looking at our platform, not just single buyers for a specific solution. And we're seeing that with more and more frequency.

And I think that, as you mentioned, the go-to-market, to Julie's point, I mean, remember, we started selling a $25,000 a year product on a quarterly subscription, that's where we started. Now we have half our customers on a 3-year contract. Our deal size is what, 80-ish, mid-70s. So it went from 25% to 70%. Our another goal is to get our average deal size in the 6 figures, different sellers, different motions. But we're learning, and we're getting better. And to Julie's point, she's really pushed the multi solution, get as many people and as a meeting as you can, and they start to see that they should all use the same platform. There's an industry trend right now, I feel that we have over 200 SaaS apps in our company, drives me crazy. I would love to have that be 20 or 30 platforms and just do everything and then you don't have to have so many people maintaining SaaS. We don't know if there's so many people learning it and training everybody. And we're seeing that trend when we're selling, whole an IR platform, instead of having 10-point solutions to do all my GRC, that's attractive. And so we're learning to sell to a road map, we're learning to sell bigger visions, but it's a work in progress.

It's also one of the reasons partners is so important and critical to us. When we're with partners, we expand our solutions to the accounts, and we also sell broader. So that's a big part of our go-to-market strategy.

While we wait for the next question here in the room, I have a question -- it's a product question online here. Erik, I'm actually going direct this to you. Question is, in many countries, PDFs are the primary format for financial document submission? What technology challenges do you face when trying to work with static formats like PDFs? And how much do you rework your U.S.-based solution based on submission in PDF or HTML? So how are you dealing with all the design reports in Europe and all the different formats you see in those countries?

There's 2 things there. One is now that we have the ParsePort solution, they're able to tag the finished report, right, the PDF finished report. That's one big advantage that we have now that we have ParsePort as part of our product family. The other thing is you mentioned design agency. So as I mentioned earlier in the corporate reporting, there is the front end of the integrated report for European companies that are heavily designed, particularly for the larger companies, where the ESG report and the corporate governance report is reported in the company. And that we're continuing to invest in our product, the design capabilities of our product, to not only within the platform for companies to be able to utilize our platform for more of the design capabilities, but also integrating with design platforms that the design agencies use. And we're continuing to invest in that. And that ability will make it easier and easier for the stakeholders that control the front end of the integrated report and the design agencies that they work with to use Workiva as an end-to-end platform.

Rob Oliver from Baird again. I have 2 questions. The first one, Erik, will be for you. And the next will be for Marty and Julie. Erik, so just really appreciated all the color in your presentation around not just revenue, but also on operating leverage. You talked about some of the changes you made to the sales force and I think implied in that was quota changes as well. So just be curious to hear from you, what is the state of the sales force over there in Europe -- in EMEA right now? Is the headcount right? Is it what it needs to be? And has there been any turnover related to the new regime and the operational changes that you have brought in? I can pause on the second one or just wait?

Yes. I think the more important thing about the change that we're making is to Julie's point about global excellence. We centralized the functions, including sales. So what that did is it enabled us to be much more efficient in leveraging the global resources and processes so that we're not reinventing the wheel in EMEA. So that's one big change already. So -- and then the second thing is we're able to -- we're making a lot of changes in Europe in the -- not just the sales team but the solution sales, account ownership teams to make sure that we're actually able to get more efficiency, more productivity out of the sales team and how we go to market. So that's where the partnership go-to-market comes in so that we can actually increase when we co-sell with partners, when we're sourcing opportunities from partners, we're able to sell at a higher win rate, larger more -- larger deal size, multi-solution plays. So that in itself will increase our leverage, right? But existing resources, we can get more top line growth out of that.

Great. The other question is for you, Julie and for Marty. Just around the acquisition strategy, Marty, I think you got -- you said maybe you were very active in the market right now. Looking for solutions and it's still a relatively new motion for you guys, but it's one I think you have four under your belt and it's been a bit of a mix. There's no pattern. I think it's some -- have been enhancing capability you have. Others have been sort of either defensive or sort of geographic acquisition acceleration type buys. How should we think about being that you're so active in the market? Is there a way for us to think about how that acquisition strategy may evolve?

Primarily, we're looking still for tuck-ins. I mean we're looking for technology and teams potentially access the customers. I think the reality of buying a company with substantial revenues in terms of our ability to do that both from a capital point of view, having the money to buy them and from an operational point of view, knowing how to integrate them, I just don't think we're ready for that yet. So we're going to continue to do small things and primarily along the same lines we have and increase our technology, maybe look at access to logos, things like that, that are more strategic with high leverage and not trying to roll up revenue with some leverage associated with that. Our pure platform right now is such an advantage. And if you buy a big chunk of revenue, all of a sudden, a whole bunch of your time has been trying to integrate 2 products or support 2 products. I would be very happy if we get to $1 billion and everything is still running on our same platform. That's a huge operational long-term advantage.

And I was going to add our corporate development team, Mike, continues to scour for what's out there for acquisition targets. I do think there might be a gap of capability. We might acquire something like the OneCloud that brought the platform up to something we might find to -- so in addition to the logos Marty is talking about or I do think there is a chance we might do that. But we -- again, the capabilities we want to be able to integrate, we want it to be something that levels up the entire platform or it closes a particular gap or brings in a feature.

Yes, I just wanted to clarify on the word active. So that is the other half of my job is in the corporate upside. So I mean active, it's interesting is, as you're probably well aware, right, given valuation changes and like that, there's a lot of inbound activity we're now seeing. And part of that, just to let the investor community know right, we review everything, right? We will look at everything. We will take a first pass, look at everything to see if there's a fit, we will run it against our screening criteria. So that is a lot of what the activity is now. We also do go and look at the outbound as well, right? So there are -- with our solution owners, we have a list for each of them and go look and figure and have conversations and get involved early and all sorts of things. So activity is not so much 10 deals sitting in the pipeline, it is really us scouring the market to make sure that we're not missing anything, that we're always looking at anything, and we're going to be on top of finding that right opportunity. I think the one other thing that we often talk about is from a strategy perspective, as you saw on the TAM, right, we're not looking for TAM expansion necessarily from an acquisition. We don't believe we need that. We're looking for TAM accelerators. And that's really kind of the guiding principle for us and everything we look. That being said, some fantastic opportunity across our plate that we thought was adjacent enough and made sense. Obviously, we're going to take a look at it. But right now, the focus is really on TAM accelerators.

Matt Stotler, one more from me. So you talked a lot about the average ACV, and I thought that what you showed in terms of how it's progressed over time and each cohort is very helpful. Obviously, looking at the 300,000-plus ACV cohort on average, there being actually 600 kind of speaks to the upside opportunity. I think the punchline here to the question I've got to ask you is probably that 75% of the customer base is still under $100,000. But how do you think about, especially at the enterprise level, would these larger customers, potential customers, what is the upside there in terms of ACV? What's kind of the fully baked potential opportunity there, if you will?

Within that 75%?

Within the -- within, I guess, across the customer base.

Okay. So I can start on that. Julie, if you have any thoughts to you, feel free. So we think that we have a very large opportunity at many companies. Certainly, with our larger companies, we do tend to have the -- that's what's really driving that $300,000 plus met, with $600,000 average ACV metric that you mentioned. But we think that across our customer base, even for companies that are maybe not that large, they can still take advantage of a very wide swath of our solutions within their business. It's just a matter of us finding the right message to show them what that value would look like. And so I think that our average deal size or average revenue per customer continues to grow. We think that, that will continue to happen because of -- because of all the multi-solution activity that we're driving because of the new logos that we're pulling in that have multiple solutions, larger deal sizes. I don't know that we would provide a specific target, per the question. But I mean I do think that you'll continue to see that grow. I don't -- Julie, did you have anything else to...

No, I mean, that is the strategy, right? We want to have 5 solutions in each of the customers that we have. That is it. It's expanding accounts. That's what it is. And we see a lot of headroom for growth on ACV.

And on the Fortune 500, let's say, I expect us to at maturation be over 7 figures and sometimes multiple 7 figures, that really know the Fortune 50 would be multiple 7 figures and I can see some of the big banks getting bigger than that. I was just going to say, but the long-term strategy -- that's what it's all about. We want to get into IT. We want to sell platforms to whole organizations. We want to get ELAs that are re-upped every 2 years based on some metric, have product-led growth living inside those organizations. So more and more people jump on it to do more and more stuff and that's how you grow your ACV in those big customers, but that's -- we're just at the beginning of that journey.

We do have an online question here from Brad Reback at Stifel. The question, I'll throw this one to you, Jill. As we think about the progression to the 22%, 2027 operating margin target, will it be fairly linear over the next 4.5 years or more back-end loaded?

I would say that we will not move towards any one of those numbers in a direct line. That's just not how the economies, I'm sure, across globally will go. We will certainly have in the next 5 years, other opportunities for investment that might have us look at some different things. And I would say that to the question, it won't be linear just because we're living in a world of change, and we will -- I think, Marty, Julie, everybody has already said this, but we'd like to learn as we go, and we will certainly learn things throughout those 5 years that will have us continue to ebb and flow as needed, but still moving towards that long term -- those long-term goals. But I wouldn't say that we would expect it would be a direct line. I think that we'll get there over time, and we'll continue to make good progress. But we will take a vintage of opportunities as they arise. Marty, did you have anything else you want to add?

Yes. I would just say we are focused on those numbers, and we're going to try to drive to get there. Whether it's straight line or not, it's not some bunch of numbers are thrown out there in the 5-year ethos that we're going to ignore. We're going to try to get to those numbers. That's our internal goal. And I'm not sure how long it will take, but we're looking at margin every quarter, every year, every 2 years. It's going to be something we work on all the time.

Kyle Aberasturi, BMO. So another question on the long-term targets. Could you give any insights around the revised 8% growth rate on the professional services. Hopefully, I didn't miss it, but was there a change in strategy? Or I guess, why isn't this growing as fast as previously forecasted?

So the 8% would be that we think that over time will move towards professional services being 8% of revenue. And that does, we think, trend downward just because we're continuing to grow that top line, growing that S&S revenue. But a lot of what we talked about otherwise with partners, we do think that more of our implementation and consulting and set up revenue will start to go towards partners as they develop their programs, they get up to speed. And so we do think that more of that business will move towards those partners. And we actually want them to do that because it helps us to -- as I think I mentioned this before, but it helps us be a better sale. It helps the customers be more engaged. It helps their using the product, and it's a good relationship with those partners. So yes.

I mean my -- we have a funny piece of -- not funny, a really good piece of recurring service revenue. That's our XBRL tagging. That's almost different than the other revenue, which is more about standing up new customers and doing projects for them around our platform. That second part, not the XBRL, because that reoccurs and has a real nice margin. The second part, I would just assume went to 0. I mean, because that means I'm stealing Julie's thunder here, that means partners are doing it all. That means we're getting more dollars. We're focusing more of our investment in our software and building SMS off the software. So yes, I mean, seeing that decline as the growth rate decline doesn't bother me. At the least, it makes me feel better.

Jo Meares from Truist. Yes, certainly, in one of the breakout sessions, the Head of ESG and one of your customers mentioned that among the Fortune 500, she believed that about 25% were actively working on ESG, 50% were in kind of like a wait and see what the regulation is going to be like. And then 25% were like not going to do it until they were dragged kicking and streaming. So do you believe in that breakdown? And if you do, do you feel like a step function of growth when the regulation comes from that 50%? Just curious how you're thinking about that?

I don't believe in those percentages per se because we've been what we've been in -- we've been in sales like talking this to customers, we've talked to more than half of our customers, let me put it that way, already about ESG or right around half. And I know the number that the decisions being driven by the Board and the capital flows and the consumers, that's where the pressure is coming from right now. So that number is bigger. There is a percentage that will be the kicking and screaming. There is a percentage that is going to wait and see. There's no doubt. And when that regulation comes in, yes, that will be an uptick for us. When there's a hard regulation, we always see very good growth in that, whatever that regulation is. So I think that's there. I have no idea when it will happen. The court system is even in play now, right? Anything that does come out of the SEC will be in front of the courts within a few months, and we sort of know where that ends up. So -- but luckily, I know this, we're a tech company. We don't have a big greenhouse footprint. I'm getting so much pressure from my Board to get to net 0, you wouldn't believe it. And so that's happening in many, many boardrooms. Boards are worried about the reputation of the organization. They're worried about being a good corporate citizen. They're worried about a lot of things. And most of this pressure is going to come from capital flows, boards and then ultimately consumers. There's a big group of consumers that aren't going to buy stuff from bad corporate citizens. That's just clear. So...

Andrew from Berenberg again. Just one question on multiyear contracts versus annual. Just wondering where do you see that mix moving to, particularly towards these targets that you laid out? And then secondly, on a free cash flow basis, just wondering should we expect the cash flow to move ahead of operating margins like you've done in the past?

So I would say on the...

Go ahead.

On the first question was around the length of contracts, we would like to move more customers towards that 3-year contract length generally, and we've talked a little bit about this, so it's 3 years with annual payments. We think that locking in the customer for those longer deals makes a lot of sense for us. It gives us room to move. It gets us in the door and able to have conversations with more users at those customers, we think that it gives us more ability to execute on that strategy actually. So we would prefer to move towards those 3-year agreements. Anything on that before we...

Yes, I would add that we're starting to see the rate of acceptance dropping. So I think we'll get to -- we'll be well over 50% but we're not going to get -- we're not going to get near 100% either. There's just a certain amount of companies that want to do a 1-year deal, and that's it. I can't project where it's going to be -- could it be 75%, 70%. I don't know. But -- and Jill hit it spot on. We just like the stability of a 3-year contract. There's no buying moments for the customer until you have plenty of time, it's all good. What was the second part of that...

Second question was free cash flow margin. And so the way the customers are paying up front, so yes, we will still get ahead of -- cash will still be very positive for us. We continue to focus on cash flows as something that we take very seriously, keeping cash flow positive. But I would expect that you'll see the similar trend into that model period as what we already have because it's a similar flow of cashes related to the contracts. So...

We are reaching the top of the hour, maybe room for one final question in the room, if there's any. One question in the back.

John Messina from Robert James again. You gave some color around the strong GRC customer growth. Can you maybe put some numbers behind that, what you're seeing or expecting from integrated risk, given that you've called it out as being one of your larger opportunities there? And also, can you maybe talk about the main use cases that you're seeing for integrated risk?

Seers first.

So certainly, SOX has been one that we've -- that is our largest selling solution now. We are also seeing audit. And as I mentioned earlier in the comments, it is -- GRC is the top selling bundle that we sell within that suite that we offer, the multiple solutions within the GRC suite. And the -- so those are the top selling solutions, probably SOX, Audit, ERM -- enterprise risk management, within the suite.

I would add that that's where we want to go. I mean, SOX and Audit has been a strong solution. But where we want to go is selling a platform with a road map and saying, you can do all your GRC stuff in this eventually and have that single platform and have a high dollar total coming out of that customer around IR. And I think that that's becoming what the customer wants. In terms of numbers, we don't talk about that by solution. So that would be a can of worms that would never end for us. You guys are so good at asking questions that would never end. But it is going to be in terms of new sales, it's going to be one of the top 2 moving forward every quarter, in my opinion. I believe it will be at the top two. I always use that believe word, right?

Okay. Well, that concludes our Q&A session. So thank you very much for everyone here in person. Thank you to all of those who joined us online. We will have the slides posted later today. So please look up for those on the Investor Relations website. And with that, this concludes our live stream. Thank you.