Workiva Inc. (WK) Earnings Call Transcript & Summary

[Presentation]

Hello, and welcome. My name is Mike Rost, Senior Vice President of Corporate Development and Investor Relations. And I'd like to welcome everybody here to our event. We are doing both an on-site Investor Day as well as for those of you online. Our on-site event is in coordination with the Workiva annual user conference that we call Amplify. We have 2,000-plus customers and partners that will be at our event here in Nashville this week. We have a packed agenda here, and I can't wait to get started. Before we get started, just a little housekeeping. Please review our safe harbor statement. We may be making a few forward-looking statements. Those forward-looking statements may change. And again, read the details there and looking forward to the rest of the questions that will be coming later on today. Looking at our agenda, we're going to kick things off with CEO and President, Julie Iskow. That will be followed up by CTO, David Haila, who will be focusing on product and innovation Finally, wrapping up our prepared comments, we have CFO, Jill Klindt. We will have a Q&A session at the end, where all 4 of us will be back up on stage, and we'll talk about Q&A once we get to that section. So to kick things off, I would like to welcome to stage, President and CEO, Julie Iskow. Welcome, Julie.

Thank you, Mike. Thank you very much. Good to see all of you here, and thank you for being with us. We intentionally hold Analyst Day at Amplify. And we do it because it gives you an opportunity that you might not otherwise get, to hear from our customers and our partners, both in scheduled sessions and informal conversations. So to hear -- you'll get a chance to hear about why they're using our platform. You'll get to hear about how our solutions are transforming the way they work. And while we want to hear -- we want you to hear from us this morning, there's nothing quite like hearing about Workiva directly from our customers and our partners. Speaking of customers, I'm just going to kick us off here with a deal. And I'm doing that because this deal is so representative of what we hope you understand about Workiva and who we're becoming. It's a Fortune 5 company that recently added management reporting globally across their entire accounting team. This is their ninth solution and their second largest solution spend with us. They purchased this solution initially, SEC, in 2013, and then in 2018, they added a second solution. In 2020, they added a third and fourth solution. In '21, they added a fifth and sixth solution. And in '22, they had seventh and eighth solution. And in '23, just last month, they added their night solution with us. That 7 solutions in 3.5 years, 9 in total, and ACV grew from $200,000 to over $2 million, all on our unified platform. But wait, there's more. We're about to close on our tenth solution with this customer. And you know what it is? It's GRC controls for sustainability. This customer will have financial reporting and ESG and GRC. They recognize the importance of GRC controls for both financial reporting and nonfinancial reporting, again, all on one platform. Here's why they purchased management reporting, for the exact same reason, exact same reason they purchased the other 8. It's because this is what it looks like before Workiva, complete chaos, lacking a single source of truth, inefficient review process, limited internal transparency, time-consuming manual processes, risks of inaccuracies and reports and on and on and on. We showed them a better way. We lowered the risk. We increased their transparency. We made it easier and more efficient and more streamlined. And at the same time, they could be more assured of what they report. And what I just showed you is why we win. And this is how we roll now. I mean multiple solution, global account expansion and with partners. Like many of our large deals, this project is being delivered by a Big 4 partner doing financial transformation. Now this deal also illustrates why we're resilient. It's not just our broad portfolio of best-of-breed solutions. It's because we solve for issues that our customers must address. We're not just another project management tool or a travel application. Companies need transparency. Companies need to comply with regulation, and companies need accuracy in reporting and disclosure. We provide solutions that company needs -- companies need in good times and in challenging times. That's why you'll see more than 2,000 customers here this week in person at Amplify, with thousands more joining virtually. And there will also be hundreds of partner attendees and dozens of sessions showing our newest capabilities and innovations. We'll have CFOs and CIOs and heads of sustainability and audit execs here, and they'll be with the teams that execute for them every day. And they're looking to us to bring solutions to their most challenging problems. And it's why we do what we do. Now with that, I'm going to take you now through where we are as a company today and where we're headed. So we're going to start with the opportunity. We have a $25 billion TAM, which is largely untapped. And with companies continuing to invest in digital and financial transformation, and with an ever-evolving and changing regulatory landscape, we see nothing but upside to our TAM moving forward. When you look at the opportunity in front of us, in financial reporting, in GRC and ESG, we're clearly not opportunity constrained. Now as the regulatory environment continues to grow in both scope and complexity, so too does the need for transparency and disclosure of both financial and nonfinancial or ESG data. I mean just in the past few months alone in the U.S., the SEC has come out with 2 new regulations. First, it's focused on the disclosure of cybersecurity incidents; second, requiring PE firms to provide fund reports subject to audit, and it's on a quarterly basis. And these are beyond the climate disclosure rule that we expect to get clarity on in October. In Europe, the opportunity is growing as well, particularly with CSRD. Now CSRD requires companies to report the environmental and social impact of corporate activities. And it requires the audit, it is the assurance of both financial and nonfinancial data. An ESG regulation is not limited to the U.S. and the EU. I mean, we continue to see new ESG laws passed around the globe. In Switzerland and Australia, they both passed laws this summer around ESG regulation. So the opening video said it pretty clearly, with increasing regulation globally and the growing stakeholder demands, we help companies respond with speed and with confidence and with accuracy. This is who we are now, and it's what we do and it's why the Workiva platform is so relevant. Not only are we relevant, but we're also best positioned to capture the growing opportunity. We have distinct competitive advantage. And these advantages can be seen in 3 clear categories: our experience, our ecosystem and our capabilities. We have unrivaled experience. We've been doing investor grade reporting for more than a decade. And we have regulatory expertise. The day the regulations become law, our software will already have had the latest updates, enabling our customers to be compliant. And we are the world's leader in XBRL tagging, fast, efficient and accurate. And yes, we've been using AI and tagging for years. We have a quickly maturing ecosystem of over 200 partners. They include the Big 4 and the advisory and technology companies and MSPs, and that's globally and regionally. They want to work with us because of the opportunity for commercial success that it creates for them. We have 5,800 customers worldwide. They already trust us and they love us. It's an enviable installed base. Think NRR. They already use us for critical functions. They already understand the value of our platform. And this increases their willingness to expand with us. Think ACV. We also have a diverse and growing portfolio of best-of-breed solutions, and it's all within a true platform, the only unified platform bringing together financial reporting, ESG and GRC in one secure controlled audit-ready environment. This is assured integrated reporting. So let's take a quick look at the numbers. 5,800 customers in 180 countries, 88% of the Fortune 100, 85% of the Fortune 500 and 80% of the Fortune 1000. And we've got 200-plus partners in our ecosystem. We've been on the Fortune 100 Great Places to Work list for 5 years running. And importantly, we've been awarded MSCI's AAA rating. It's their top rating. And it indicates industry-leading status for us in managing ESG risks and opportunities. and that's 2 years running. Our midpoint guidance for 2023 remains at $627 million, and our retention rate is consistently greater than 96%. So this is where we sit right now. A clear competitive advantage, a large and relatively untapped TAM with well-defined strategy that we continue to execute on. So what's next? We've been clear on our next growth target. It's $1 billion. And we're focused on driving productivity and performance to get there. We believe we have the right platform, the right strategy and the right team to make it happen. Our relevance is increasing, and that gives us optimism that we can capture the opportunity in front of us. So what do we look like 2, 3, 4 or 5 years from now? What are we evolving to? The opportunity as such and our technology as such that we're becoming the world's leading platform for transparency, regulatory reporting and disclosure. Why? Because we shine where data consistency, data integrity and accuracy are critical and narrative is required. So how are we going to get there? Well, we're going to start by capturing that TAM right in front of us, that $25 billion TAM. And here's what we're going to focus on. We're going to strengthen our leadership, execute on our strategy, and we're going to relentlessly innovate to keep meeting and exceeding our customers' expectations and strengthening our moat. So let's talk about leadership, which is critical to our strategy. It's my priority to bring on experienced SaaS leaders with a track record of successful results at scale. And make no mistake about it. This is not a replacement of our current teams. We need both new leadership as well as our existing Workiva teams who have expertise in industry and across markets and with our products. Look at this slide. We've got 4 new senior leaders with years of experience, and they all have one thing in common. They've all been with multiple SaaS companies, and they've all scaled to the billions of dollars and beyond. And importantly, they also align with our values, and they'll be additive to our culture and our existing leadership team. This team is focused on executing our growth strategy. The 4 tenants of that growth strategy remain relevant and intact; fit-for-purpose, best-of-breed solutions that are better together and powered by our platform, our open, intuitive intelligent and connected platform; an expanded global footprint with excellence everywhere we play; and a high-performing partner ecosystem to extend our value and expedite our growth. So we're going to look more closely at each of these growth tenants. We're going to start with our best-of-breed solutions. Our solutions are categorized into 4 groups: financial reporting, nonfinancial reporting or ESG, GRC and our industry verticals. We've got a diverse portfolio, which is a key component to our resilience. And it also contributes, of course, to our growing ACV. Now when you look at this slide, you might think it's a lot. And you might wonder how we're able to maintain the quality of these solutions as we expand. But that's the power of the platform. At least 80% of each solution is the platform. So in most cases, an enhancement to the platform enhances all the solutions. Now let's dive into the portfolio, and we're going to start with financial reporting. Now it's hard to overstate the importance of this next point that I'm about to make. Financial reporting for Workiva is not just SEC. It also includes, for example, global statutory or multi-entity reporting, private company reporting, management reporting and capital markets. I mean you can see it here. We have a sustained growth coming from multiple financial reporting solutions. Now over the next few days, you're going to get a chance to see it amplify customers, and they'll be talking about some of these solutions. NASDAQ will be presenting with our partner, VantagePoint, on how they use Workiva's platform to redesign their company-wide statutory reporting process. And you can join in a panel discussion on investment reporting with CBRE and Citadel. And then we've got dual lingo and i3 and are going to talk about their private to public journey and how they were able to optimize their capital markets transactions. Okay. We're going to jump in now to ESG. ESG is a sizable opportunity for us. And we believe we're well positioned for it. So I'm going to take you through our solution and our platform differentiation and the market in both North America and Europe. ESG reporting requires the same capabilities that are needed to support financial reporting. This enabled us quickly to go to market and take a leading position just with the existing platform capabilities that we had. I'm talking about capabilities like the ability to handle complex and composite reports with numbers and narrative and charts and graphs and footnotes. I'm talking about a collaborative system where multiple stakeholders can update and edit the same document at the same time. And I'm talking about data and document assembly, taking data from multiple systems of record. Those are the same capabilities needed to support financial reporting. But then we decided to move on and develop the fit-for-purpose features that are needed for ESG today. And those features are like support for multiple ESG frameworks and ESG program management and design reporting. And so this is how we captured the market opportunity for ESG. So let's turn now to that market opportunity. Now even before there's ESG legislation in the U.S., we're seeing demand for our ESG offering. In some cases, yes, it's about preparing for what's coming. And in other cases, it's about risk management and servicing risks for better business outcomes. But it's also about stakeholder demand for transparency and accountability and not just shareholders, but customers, employees and communities. Now when it comes to regulation, there are a few we're watching closely right now, the SEC's proposed climate disclosure rule, of course, and the bills in flight in California. Now we expect the SEC to provide further clarity of their proposed climate disclosure rule in October, this October. In California, just last week, the State Assembly passed the Climate Corporate Leadership Accountability Act, and it's anticipated that the governor will be signing that into law in October. This new law will require all U.S.-based companies doing business in California that make over $1 billion annually to publicly disclose their full carbon footprint. Bigger U.S. companies are also concerned about the impact of CSRD, which they'll have to comply with as well. Now we believe we can continue to drive durable growth in North America as these regulations evolve. Now in Europe, we also expect the ESG to be a long and durable demand market with about a 5-year adoption cycle. And while CSG was passed into law last November with clarity in July, there's a lot still left to be defined. I mean there's the further definition of reporting standards, the publishing of an XBRL taxonomy and clarity, of course, on enforcement. Now we believe that our platform is ready to address the requirements as they get clarified. The key requirements of CSRD are everything we do well: financial reporting, ESG in the same integrated report with assurance and XBRL tagging. So let's take a look at a few metrics here. We're seeing strong early performance in customer count, 184% increase year-over-year in partner delivery, 42% increase year-over-year, and we have 20% of the Fortune 100 using our ESG offering today. So we're going to move on now to ESG -- excuse me, GRC. GRC is a broad market segment that includes internal audit, controls, risk management and policy management. Now some key market drivers of this: a heightened regulatory environment. I mean this increases scrutiny and the need for governance, risk and compliance. And increasing regulations are requiring assurance. I mean just look at CSRD that we talked about a moment ago and look at the recent PE legislation. Another driver is the changing and evolving risk landscape, and it's a topic in almost every C-suite and every boardroom. And GRC is a core component of financial reporting and ESG. I mean as ESG grows, it will further drive the GRC market. It prioritizes a need for controls. And for example, that 9-solution customer that I just spoke to you about in the opening, they're buying controls for sustainability. All companies will need to manage their ESG risks. All of these factors are driving GRC momentum. Now Workiva is a recognized leader in GRC, and it's the only software company to also provide ESG and financial reporting. Are there competitors? Sure. But they're mostly point solutions and legacy technology. Here, again, we have a decade of experience helping companies solve complex reporting challenges. And we have best-in-class technology, and we continue to innovate. And you're going to hear it again. We are the only company bringing together financial reporting, ESG and GRC on one unified platform. So at Amplify, you're going to have plenty of opportunity to learn more about our GRC solution. Just check your agenda, and you'll find lots of GRC customer panels, excuse me, and product sessions. There's also a SOX and internal control summit, and it's the largest dedicated event for SOX professionals in the U.S. So as we wrap up GRC, here's 1 last slide showing you some of our metrics. We've got 38% increase year-over-year of those customers with greater than $100,000 ACV. We've got greater than 40% of our GRC deals being multi-solution deals. And we have our partner source deals increasing by 83% year-over-year for GRC. So we're going to move on to the platform tenet of our growth strategy. Workiva is a true platform company, and you're going to hear this from us over and over again as well. Quite simply, all of our best-of-breed solutions are better together, and our platform makes that possible. This is a strong and key differentiator in the market, and it's resonating with our customers. We're a tech company, and our success comes from relentless innovation. It's core to who we are, and it's something that's not new for us. We've been doing it since day 1. It sustains our excellence, and it ensures that the solutions that we build are transformative. And you're going to see this throughout Amplify, and David, our CTO, is going to give you some detail on it in just a few minutes. And he's going to be highlighting some clear examples of how we're leveraging technology to remain differentiated and best-of-breed. So let's talk about global excellence. A core part of how we'll drive our growth is getting expansion right in Europe. Our focus has been on refining our approach within our market segments, clarifying our platform messaging of assured integrated reporting and better leveraging our partner ecosystem. We're making progress. Four years ago in 2019, revenue from outside the Americas was less than 4%. And at the end of 2022, it was 11.5%. It's a great example of assured integrated reporting win is with Telefónica, one of the largest telecom companies in the world. It's based in Spain. It's listed on the Stock Exchange, and they have to comply with both SEC and ISA. Now with CSRD requirements in multiple regions, Telefónica is leveraging financial reporting, and that's including multi-entity reporting, controls and ESG. And we believe great customer stories like Telefónica will help us win additional business across the region. We're seeing momentum, and there are some positive signs of progress here in Europe. Our new sales and marketing leadership is improving the effectiveness of our go-to-market capability. Our platform messaging is resonating, and we've also embraced Partner First motion in Europe. Our partners are providing some of our strongest growth in the region, both in deal size and in win rate. And speaking of partners, we're moving to a partner-first strategy across our entire company and not just Europe. We know that a high-performing partner ecosystem is an important growth accelerator for us. I mean look at this, we're a great set of logos on this slide. Partners like these drive value to Workiva by sourcing opportunities and co-selling with us and enhancing the value of our platform for our customers. Now important to note, for Workiva, partners are not replacing our direct sales channels. They're an additional channel. So what's the impact? Everyone wins, customers, partners and Workiva. Partners extend the platform value, shorten the sales cycles and increase the likelihood of account expansion. When partners are involved, our win rates are higher, our deal sizes are larger and our customer experience is stronger. And we have a number of sessions at Amplify, where our partners are presenting with our customers. They'll talk about how they've implemented Workiva, and they've extended the value and capabilities of our platform. And just down the hall right now, we have a few hundred partners at our partner cement. And our partners are engaged, and the impact on -- their impact on Workiva and our customers, it's just -- it's clear, it's significant and it's growing. As I wrap up the overview of our opportunity and our strategy, here are a few closing thoughts. Our strategy is intact and it's relevant. Our opportunity is large and it's relatively untapped, and we're confident in our ability to execute on our strategy. It's because we are the only unified platform for financial reporting for ESG and GRC, all in one, secure, controlled, auditable environment. And we have a significant edge in experience and expertise. And we have a large installed base and a growing partner ecosystem. And we have the team in place to execute. Our opportunity is growing, and at the same time, we are getting better. We remain confident in the resiliency of the business, the continued demand of our assured integrated reporting platform and our ability to expand in our large and relatively unaddressed TAM. I'm going to leave you with this, another example of the power of the platform and opportunity in front of us. And this time, it's 11 solutions and almost $3 million. It's with a Fortune 50 company, and they started with SEC 12 years ago back in 2011. And yes, it's another customer recognizing the value of assured integrated reporting, SEC with ESG and GRC. Take notice here, too. They're also leveraging our platform for a number of use cases beyond our core. And this is what I mean when we say we are becoming the leading platform for -- technology platform for transparency, regulatory reporting and disclosure. The proof points are here, and we're going after more. So now I'm going to hand you over to our CTO, David Haila. He's going to take you through a deeper look into some of our critical investments in innovation. David? [Presentation]

All right. Well, thank you, Julie, and thanks to those who have joined us in the room today and those who have joined us online as well. As Julie mentioned, I took over my role of CTO this past spring. I feel like I'm uniquely positioned to take on this role. And for those that aren't familiar with my journey, I started Workiva back when we were just in our start-up phase. At the time, there were just a handful of us, sitting around the room, working long hours to develop a first-of-its-kind solution to help financial reporting teams overcome daunting new challenges. And much in the same way as we see today, they were facing increased regulations that were piling on and making things a lot more comfortable -- uncomfortable. It sounds a bit familiar, right? So at that time, I was an Engineer, but I journeyed from there through product. And along the way, took on this role as CTO. So for me, though, it was never just about the technology. My passion has always been to sit at the combination of customers as well as the technology itself. So throughout the years, I've been deeply impacted by the stories of our customers, the stories of how our platform has been life-changing for them. In fact, one year at Amplify, a customer even told us, Workiva saved my marriage. Now I'm sure that you'll all leave this week hearing more stories, maybe not exactly like that. But I see the opportunity ahead for us to delight more and more teams around the globe. And now as our CTO, I'm excited to be leading the team responsible for delivering new and innovative solutions on our powerful one-of-a-kind platform. And as Julie mentioned, one of our core drivers of our ability to execute was to continue to strengthen our leadership team, and we've done just that. Julie already mentioned, our new Chief Product Officer over here, Nitin Bhat. And Nitin brings over 18 years of experience in product and engineering at companies like Amazon, Microsoft, Intel and Smartsheet. Our SVP of Technology is Clay Stanley, and Clay has been with Workiva for 3 years. In that time, he's transformed our engineering and productivity processes. And he's responsible for the technology direction of our platform. The next leader on this slide is Paul Volpe, our SVP of Growth Solutions. Now Paul has been with Workiva for 12 years and as a leader with deep expertise commercializing enterprise software. Paul is responsible for the incubation, launch and go-to-market strategy of our new solutions, including ESG, which will be discussed throughout the week. And the fourth leader on this slide is Kevin Nanney. Kevin joined Workiva late last year from ServiceNow as our SVP of Platform Solutions. Kevin brings more than 25 years of experience building cloud solutions and taking them to market. We have built this team to blend technical proficiency and commercial expertise. And with them, I am confident that we'll continue to build on a legacy of innovation that we have and keep bringing solutions -- customers the best solutions in the market. As we continue to expand our portfolio of best-of-breed solutions, innovation is foundational to how we operate across the technology team. We're constantly refining, developing and enhancing new features and capabilities. This afternoon, I'll be on the main stage, showcasing 3 important investment themes shaping our vision for Workiva. Those are AI, controlled collaboration and the unified platform. For the next few minutes, I'm going to give you a preview of what our customers are going to see this afternoon. Let's start with AI. Anyone in the market have been talking about AI, we are not new to this space. We started a data science team a number of years ago, and we've been conducting a set of research projects that are now being productized. We see AI as transformative technology that will shape the next decade of innovation. It will be our customers' copilot for writing content, a creative partner for brainstorm new ideas, a research assistant generating insights and a workhorse for automating their tasks. The foundational efforts that we've put into machine learning and prompt engineering have enabled us to move quickly and responsibly to take advantage of the latest advancements in large language models. You may have seen our press release 6 weeks ago, announcing our generative AI offering. Every one of our Workiva solutions can be leveled up with generative AI, harnessing best-in-class LLMs that are embedded directly into the platform. And we've approached generative AI and tight partnership with our vendors, including Google, Microsoft and Amazon. And it's been incredibly well received from our early adopters and partners due to our responsible implementation. First, we provide the assurance that no customer data or prompts are stored or used in any way to train the models. By solving for enterprise-grade security, we've eliminated one of the top concerns of using publicly available generative AI tools. In fact, CIO at a financial services company called Workiva generative AI, and I quote, "Exactly the kind of implementation they wanted to use from a data security standpoint." Second, we're leveraging gen AI to augment user workflows versus fully automating them. These capabilities supercharge work allowing users to accomplish more with less. And because the human element remains intact, our customers remain in the driver's seat. Let me show you a solution-specific example of how we'll be delivering generative AI. Unlike other off-the-shelf AI-powered chat tools, Workiva's AI extensions will be anchored to specific content and financial reporting, ESG and GRC. For example, if you ask ChatGPT a question about the European sustainability reporting standards that were rolled out earlier this year, you get an answer that's dated, vague and it fumbles trying to explain what the ESRS is. By contrast, when you use Workiva's AI extension, you get concise information, from an up-to-date version of the framework with a clear list of disclosures. And in the results, you actually get links, which take you directly to the information conveniently located in our ESG Explorer. Trust, but verify. As you can see, we're building in security, transparency, control and context to deliver a generative AI experience with a high degree of trust that our customers expect from Workiva. We will be announcing today that the availability of Workiva Gen AI will extend to customers across North America. The second investment theme that we'll be highlighting today is collaboration. But with Workiva, it's not just collaboration, it's collaboration with control. In the earliest days of Workiva, we combined and united the work of accountants and XBRL specialists on a single document versus a bolt-on approach. Now not only did that provide a better way of working, it also reduced the risk of data getting out of sync. Solving the initial challenges around auditability, permissions and real-time collaboration got us here. But since that time, the number of teams that we serve and the processes themselves have gotten even more complex. New people keep getting added to the mix, and we all know that there's always going to be more data. So whether it's the customers, external auditors, their legal teams or a design agency, my team spends an enormous amount of time thinking now how we can ensure the best experience for every one of those groups collaborating in the platform, all while keeping the reporting team in control. Earlier this year, I spent about a week in Europe meeting face-to-face with some of our top design partners. And each one of them shared an all-too-familiar narrative about the inefficiencies and risks of using disconnected tools. Prior to Workiva, their teams would work around the clock during busy season, trying to ensure that design document didn't get out of sync with the reporting document. They are always worried that they'd miss updating a number or narrative. But now with in-platform design with Workiva, these agencies have mitigated their biggest risk and have become strong advocates for this better way of reporting. For example, the designs you're seeing here from Mastercard and Cognizant are just a glimpse of what's now possible when designers and Cognizant reporting teams work together. And it was all created completely in the Workiva platform. Today, we're pleased to announce that we're extending the capabilities that we originally built for ESEF and ESG customers to our SEC customer base as well. And to do this, we actually had to create an entirely new engine for how we export EDGAR. Instead of simply writing paragraphs that freely flow and compromise the design esthetic, we now explicitly place every line of text, every chart and every image. We believe this innovative approach can't be easily replicated and further differentiates Workiva from our competitors. That brings us to the third investment theme that we'll be discussing today, which is our unified platform. We believe a unified platform is critical to achieving the vision of assured integrated reporting. With Workiva, the platform that powers financial reporting is the same platform that powers ESG, and it's the same platform that powers GRC. And on that platform, we make solution-specific investments that distinguish our solutions and set us apart from competitors. Today, we'll highlight a number of the investments that we've made in the past year. Again, each of these investments create differentiation between our offerings and also help to tailor these solutions to compete and win as best-of-breed solutions. But as Julie said, every time that we invest in the platform itself, we get leverage, driving new capabilities across all of our solutions. So that's why the largest share of investment goes into the platform itself. And in addition to Gen AI, we'll be announcing platform-wide support for the following capabilities today: automated table of contents and text documents; private comment support and documents, spreadsheets and presentations; and new certifications experience; and a new task experience. But our platform goes far beyond these shared capabilities. At the foundation, we provide a layer of shared data without an IT integration project. This afternoon, we will unveil an advancement to our core linking technology we call smartlinks. With smartlinks, one team can publish a reported metric like revenue or number of employees for use across all their other Workiva solutions. This has been a highly requested feature, and we can't wait to get it in the hands of customers. And in addition to linked data, we're designing experiences to optimize key cross-solution workflow with the new capability we call GRC connections. GRC connections is a tailored experience to create specific relationships of risks and controls with the metrics that they're designed to govern. We're excited to build on this to deliver future innovations that bring both automation and insight without customers having to work for it. You'll get to see all of this and more later this afternoon. And while we're on stage highlighting these advancements, our teams are hard at work actively building out new capabilities. Our innovation journey is just getting started. We have a talented team that operates with a disciplined approach to researching, defining, building and launching new solutions and platform innovation. Now one of the most common questions that I get from customers and investors alike is what solution is next. And while we won't discuss any specific new solutions today, I can assure you that we have a disciplined approach to building what we believe will be commercially successful. The guidepost that we operate on in this journey are: number one, amazing our customers. We recognize one of our most valuable assets as a company is having a customer base of raving fans who become champions of Workiva. We want them to advocate for expansion opportunities that improve our annual contract values and our net revenue retention. Right now, in another room, running customer advisory boards with over 50 combined members. These cabs are a great venue for soliciting feedback from our customers and hearing how we can best innovate on their behalf. The second guidepost is innovation for growth. Our team is constantly evaluating new opportunities to expand our TAM through the addition of new solutions to our portfolio. Internally, we have a disciplined shark tank-like process to evaluate new opportunities and score them against criteria like platform fit and market fit. We call that process ideation to incubation or I2I. And the benefit of that process is that we have a fast-moving but focused team that helps us arrive at a go, no-go decision as quickly as possible. During the incubation cycle, we work through all facets of getting the product market fit while refining other aspects of the new business model, like our support and partnership strategy. The third guidepost is agile development and continuous deployment. By the time that we make a broad release, we've already been through numerous release cycles with a small cohort of customer development partners. We believe that more validated learning cycles that we go through and the more feedback that we get, the better position that we are to drive commercial success at scale. To enable this, we continue to make investments in automated testing to tighten our QA cycles and be able to release with confidence. And I'm proud to say, with these strategies in place, we're in the upper portion of high and elite across benchmarks that measure delivery performance. And finally, accelerating our partners' success. As Julie described, a high-performing partner ecosystem is critical to our strategy. For our teams, accelerating partners' success means that we're investing in their enablement. And just like the cab, we're taking every opportunity this week at Amplify to invest in our network of partners. Yesterday, I spent the bulk of my afternoon and evening with our partners at the Partner Summit. But it doesn't stop at just evangelization. We're continually investing in opening up our platform to equip partners to extend and build on it to solve larger problems for our joint customers, all while improving their service margins. Additionally, as more and more partners choose to power their business as managed service providers, we're committed to their satisfaction efficiency in the same way that we are other customers. To recap, the leadership transition from Jeff to myself has been a seamless one. Over the past 6 months, we've driven stronger internal alignment, and we've strengthened our leadership team. We now have a great blend of experienced long-time Workivans along with seasoned external talent to help lead us forward. We're innovating to strengthen our unified platform that already stands alone in its ability to deliver assured integrated reporting. And we have the discipline to continuously deliver innovations to power the next phase of our growth. Now for a closer look at our financial outlook, I will hand it over to our CFO, Jill Klindt. [Presentation]

Hello, and welcome, everybody. Thanks, David, for handing it over and really excited to have you in the room here for those of you that were able to attend in person. Very excited that you, that are online, were able to join us today. Thank you for taking the time. And what I'm really excited about, because you just hear everything that Julie and David were talking about. What an amazing opportunity we have in front of us. Myself, personally, I'm excited to be a part of this team, all the great new leadership that Julie talked about and that David talked about. This is just a phenomenal opportunity, and we're all very glad to have you here to speak to it about, because what some would that be if we couldn't share what all we're doing? So thank you for joining us. And I'm going to dive a little bit into the numbers that show our progress and the things that really give us the confidence that we can execute on the strategy that Julie talked about and some of the things that David talked about as well. There's a lot that we have going on and starting out, thinking about subscription growth. So subscription growth is one of the main things that we focus on when we talk about how are we doing. And I think that you all know, and hopefully, if you don't know, call us. We're happy to have a conversation. But what you all know is that our subscription growth is really made up of our entire portfolio of solutions. And everything that I'll go through right now is really in support of all the tenants of our growth drivers that Julie mentioned. So we're talking about our broad portfolio of solutions here. We also have our connected unified platform. We have our global excellence. We've got our partner ecosystem. But in thinking about subscription growth, one of the things that I think -- all those things are feeding into that. But one of the things that we really focus on, and you saw actually Julie and David had the same slide, thinking about that really broad portfolio of solutions supported by the platform. Majority of -- 80% of it is supported by platform functionality. The way that I hope that you can think about it is that it's complex, but it's also how we win. When we think about how we grow within our customer base, we would not have that growth within the base if we didn't have all the additional solutions. So bringing in new logos with multiple solutions, bringing additional solutions and new functionality to customers as they grow their relationship with us. That is a really big opportunity for us and something that really does drive our growth. And then Julie talked about our large untapped TAM. So that's even more that we can go after. There's more new customers that we can approach. There's more growth within our existing customer base. And thinking of that, we've got some operating metrics that really support and show, we hope. I know these are all things that all of you in the room and online, you all pay a lot of attention to. But we think that these metrics really reflect the success that we're having in the execution of our strategy. Thinking about our durable retention. Not only gross retention, 98% for Q2, it's a great result. We're very happy with that. We think that -- and Julie mentioned, we aim for 96% plus. There's always some more that you can do and push on price. I know that, that question will probably come up. And sometimes, that can have a negative effect on that number. But in any case, we are very confident that even at that, it's still best in class. We have an engaged customer base. They love us, and we want to keep growing that, and then thinking about the net retention, showing how we can sell into existing customers. It continues to get stronger, and we're very happy to see the results there. The quality of the customer base. You heard Julie talk about some of our customers' statistics, greater than customers in the Fortune 500 and the Fortune 1000 plus. Our customers are quality in size and scale but there are also quality in the users within the organizations and how they enjoy our platform. David mentioned the Customer Advisory Board is going on right now. I got a chance to sit at a table with some customers last night. And just hearing them talk about not only how they're enjoying and using the platform today, which is great, but also how they expect to use it in the future, which I love to hear, and I hope all of you get a chance to speak with them, those that are in the room, and hear some of those stories as well. So this is a quality customer base. These are great customers. They have businesses that are growing as well, and we just want to be there to help them. And so we think that we can. Again, take that opportunity to speak with them here, if you're here. If you're joining us online, reach out to them. They'll be happy to talk to you. I know it's the case. And then we've got our annual contract value growth and seeing how that will go into a little bit more detail in a bit. But how we continue to grow annual contract values across the base, and that is another thing that shows the execution of our strategy and shows how we're doing. Finally, we've got better financial model. So we've got a strong balance sheet. We have a lot to work with. And we're continuing to get leverage out of our business. You heard David talk about how we innovate and grow within the platform, thinking about how we use those resources; how do we get leverage out of the existing business that we have, the existing people that we have. How do we continue to grow and scale to that $1 billion plus? Well, this strength in our financial model, we think, will help us get there. So we've got a strong balance sheet. We recently had raised a little bit more additional funds through the convertible debt offering you would have seen. And not to say that acquisitions is the only way that we will grow, because we have. Everything that Julie just laid out. We have this huge untapped TAM. We have so much opportunity in front of us. But that doesn't mean that potentially, we couldn't have in the future some sort of an M&A opportunity that will help us to further that growth. And that's what we'll focus on is that measured additional adds to the existing base functionality within our platform, whether it's -- and then using potentially acquisitions to accelerate that growth. It's definitely an opportunity and one that we think is made stronger by not only the raise that we did, but we're cash generating. We've been generating cash as a company, as an organization for 7-plus years now. And so thinking about the strength of our financials and how it helps us execute on that strategy is very encouraging for me, and I hope it's encouraging for you. So I'm going to dive into a few more metrics. These are ones that I know that you know and love. I do as well, but thinking about our strong subscription revenue growth. So this is something that has been durable. This is growth across the solution portfolio. Again, if we didn't have that broad base of solutions, we would not be sitting here with this result. We have just now, in over the past few -- the past year or 2, gotten to the point where more than half of our subscription revenue is coming from solutions outside of SEC. And that has taken a while because, obviously, our business was built on SEC reporting. And so nice of these. We've got another slide here. We'll talk about that in a little bit. But it takes a while to build up and grow past that really nice base of revenue. And so we're encouraged that we're growing outside of SEC. The other metrics that we talk about is that in Q2, in particular, 55% of this revenue growth came from customers that were already in our base, so coming from existing customers. We tend to have about a 50-50 split. It fluctuates a little bit. But over time, we always expect to have about half of our revenue growth coming from our existing customer base and about half coming from new logos. And this is the metric that we talk about at each earnings call. And so hopefully, you're seeing that result. And I just wanted to point out how important that is as well because we can't succeed as a business unless we have both. And we'll see more of that new logo growth as we go into some of the other geographies outside of North America, but we are growing in North America as well with new logos. I want to go back and then dive into revenue retention. So this is a slide that you all have seen, but it's worth diving into and talking about it a little bit more because, again, these revenue retention, both gross and net revenue retention, is a great way to see the success that we're having as a business. It is a great way to understand why we are so optimistic about our future opportunities. It takes execution, absolutely. There will be things that we need to execute on, things that we need to do. But without this strong revenue retention, we would not have as much, again, enthusiasm or we would not be as sure about how we can go forward. And it takes -- again, execution is required. But retention like this helps make that job easier because we're not losing a lot of existing revenue. And the majority of the revenue that we lose is not controllable. So we've got M&As and bankruptcies and that sort of thing. And then thinking about our net revenue retention, the majority of this strength of that metric and the growth that we've seen there is coming from additional solutions. So while we have been pushing more on price increases, and we talked a little bit about that, the majority of that growth is still coming from additional solutions into our existing portfolio. We're not getting this result from those price increases. So there's an opportunity there, and we will keep pushing. But if we can take an additional solution into an existing customer, we'll do that all day long over pushing harder on pricing. And then we know history had shown that we are able to grow that base revenue, that base pricing for each solution and the customer over time. And so it's worth more to us to get that additional solution now. So these are very strong metrics. And then talking about our customers. We already talked a little bit about this. New logo growth has been very encouraging. We're very happy to see this continued growth over the last 4 years. And a part of this was ParsePort, which has been a great add to the company and some good opportunity in Europe. But it really just shows that the continued interest in our platform, the continued way that we're delivering this message and that we're bringing in these customers in a very real way. I'm thinking about that cab dinner that I set out last night. And one of the people that I was talking to, he's in audit. And he said that his past 2 job offers, the job like offer letter that he had, he put in there that he was required at all times to be able to use Workiva in the execution of his duties and of his job. And so I can't help but think that, that is a great story. And I think we've even had stories like this before, but he specifically, in his offer letter, requires Workiva. And so of course, you're going to have some amount of logo growth. When you have these really excited customers that are using the platform, they're engaged with our teams. They want to know more. To the other side of me was a person that was talking to me about how they use Workiva today. And she said, 'But I'm trying to talk them into more. I think we should do this. I think we should do that." It's those kinds of things that within these customers that we think is such a great opportunity for us that makes this such a strong metric because we have this great base of customers that we can continue to sell into and that we are getting the word out and that we are continuing to grow this base as well. So it's all opportunity for us. Thinking about how we grow the customers within the -- related to average contract value. So we've been giving these metrics now for a while. And looking at customers with greater than $100,000 annual contract value, greater than $150,000 annual contract value, greater than $300,000 annual contract value. The growth that we see here and continuing to drive, especially at that top level, this is what we're trying to do. This is everything that Julie was talking about and how we really win when we have multiple solutions, whether we're going in brand new to a new logo with multiple solutions, whether we're selling additional upsells like that first example that Julie talked about, this growth helps to underpin how we're executing. And so we hope that you see this. Now another metric that I wanted to talk about is to go into what is the average annual contract value for each of those tranches? And looking at this growth over the past 4 years of that information, of that average, and this growth has really been strong because bringing that whole group of customers on average to such a high level and then thinking about that first tranche. So those $100,000-plus average contract value customers, annual contract value customers, there's about 1/4 of our customer base that sits in that tranche. That means we have 3/4 of our customer base that we can continue to sell into and bring into that $100,000 plus. This is nothing but opportunity to us. This is all of those customers that aren't in one of these tranches yet that we can continue to sell into. This is nothing but opportunity and being growth within each of these. And so we're very happy that this has been the result within each of these tranches. Now another thing that we've brought impact years as well, and it's actually very relevant from the customer examples that Julie talked about, too, is how we grow within these cohorts of customers based on the year that they came into the company. So from 2010, when we first released our product in March, until today, well, this is through 2022. And one of the examples she gave was a customer that came on board originally in 2011, another one was 2013. So looking at these tranches of customers and how they have not only stayed with the company, but how they've continued to grow and looking at just that multiple of growth within each of these tranches. It's -- again, it's showing the results of everything that has been built, that we've built today and how that gives us comfort continuing to make the platform better. David said it best in his slides and just thinking about how we can continue to innovate drive more functionality, keep our customers engaged, this is the result. And then also thinking about our subscription revenue by customer type being either single solution or multi-solution. This is another example of that. So 62% of our subscription revenue coming from customers with multiple solutions. Again, it's something that's a very strong metric. And we hope that you're able to use this to not only build your models because I know we all love the models, but also to really just see how we're expecting to continue to succeed. Speaking of models, I did want to dive into a little bit our operating model and talk about some of the changes that we've seen over the past year as we've been executing and thinking about and talking a little bit about how we intend to move towards that 2027 year. Julie talked about that we're a company that expects to have over $1 billion in revenue. Certainly by the end of this model horizon, we expect to be in that range. So more than $1 billion in revenue. And while we will continue to make progress, it won't be linear. I have to throw that out there, and I know that it's very hard to model them. So I apologize for that, but it won't be linear. We will continue to make progress but it's not going to be a straight line to the end of this. So I wanted to walk through at each level, a few things, just to give you some updates and information, starting with our subscription revenue. And so thinking about how we will continue to grow subscription revenue to that 92% target. And what it's going to be is that we will continue to grow subscription revenue at a faster rate than services. And so that is something that we talked about before and something that's not a surprise to you. But calling that out is that's how we will approach that goal, specifically around services revenue. And we talked a little bit about this, especially in the past couple of quarters and into the guidance for the end of this year. We are going to grow and continue to grow XBRL services revenue. It's a way that we -- that's another way that we are very sticky for our customers because that's work that they don't want to necessarily have to staff in-house. It's work that we can easily do. It's a very high-margin business for us, and that will maintain. It will grow at a rate of low single digits, mid-single digits around in there. And thinking about, though, the setup and consulting revenue, that's the piece that we are moving specifically methodically over to our partners. We want our partners to do that work. It's a low margin. It's something that if we can pass that revenue over to our partners, they are more engaged. And it helps to drive even more success for us, we think, by having those partners engaged. That helps to grow that partner ecosystem. Unless we can move some of that work over to our partners, it makes it harder for them to see a path forward to also execute on their strategies and succeed with Workiva. So moving those revenues for setup consulting will continue -- so we will see total revenue. Services will be continuing to be smaller as a portion of total revenue. But what moving those low-margin services off does for our gross margin helps us to improve this metric because those are expensive. We're not necessarily making money on those setup and consulting revenue. And so this is part of the way that we will continue to achieve our goals around gross margin. Another part of this is that we continue to be more efficient in the way that we help to serve our customers, driving more of the platform to help them succeed, being more efficient in the way that we can serve those customers. And again, it's on here, but these are all in non-GAAP. So these are all non-GAAP results. And so diving into the operating margin, focus on productivity. You heard Julie say productivity. We're talking about getting leverage from our existing business. So throughout the rest of this model, where we focus on is getting leverage, making sure that we're putting -- David talked about it within our R&D teams. How do we make sure that we put the right resources on the right project to have the best returns? And that is something that we focus on, both from a productivity standpoint, looking at the opportunity in front of us, that's a big piece of this. So we'll do that within R&D. Within sales and marketing, how can we make sure that we can continue to be more efficient in the way that we sell and market our product, G&A, be more efficient, use more systems that can automate things. It's really just a matter of productivity throughout. Julie introduced some new leaders that we have on board, people that have helped to scale companies past $1 billion. It's that knowledge. How do we shift our operations to be more productive? How do we make changes that help us achieve these goals? These are things that we're acting on. We're bringing people in. We're learning, we're making changes to be more productive and start to execute towards these targets. All coming down to moving towards profitability, which for this year, we talked about, we will be non-GAAP profitable for the second half, non-GAAP profitable for the full year '24, all in the path towards these 27 targets. We hope that you understand where we're going. I hope that these metrics help to really show you the direction and the way that we intend to execute on that strategy. Thinking about those key growth tenants, our fit-for-purpose solutions, connected platform, our global excellence, global growth and our strong partner ecosystem, all of those things supported by our new leadership, helping to become more productive helping to really get leverage from our existing business. We feel like this is the way that we are going to win. This is the way that we will execute and not only take on and achieve our additional bookings from that untapped TAM but also just grow our business and help make our customers' lives easier, continue to make our customers' lives easier. Has your company saved any marriages? I don't know. So I think that there's just some really great opportunity here, and I'm going to leave that with you, and we're going to then move into a Q&A session.

All right. Start of the Q&A session. [Operator Instructions] So with that, I'm assuming there's a lot of shy people in the room here. I see some hands already. So all right. I think we found the first victim here. All right.

Adam Hotchkiss with Goldman Sachs. Would love to hear a little bit more detail from the broader team on how customer conversations are evolving in Europe around the new regulation. Has stakeholder pressure changed at all from investors and Board rooms to the actual regulation coming into effect? And how do you see that impacting numbers over the next 5-year period?

Julie, do you want to take the first on the conversation?

Sure. I'll start in. We're absolutely seeing the interest and pipeline building. They're having conversations now. They've been doing sustainability for a long time. But I do think the law itself has moved people in the direction. They understand it's coming. But listen, Europe is slower to move in general, and that's why I mentioned it's -- we look at Europe with, say, a durable demand, kind of a 5-plus year adoption that CSRD is over a period of a couple of years. So it's not a hockey stick. Suddenly, the law passed in November got some more clarity in July, and they're all going there. It evolves over the couple of years, which companies depending on size and type will need to be compliant. So again, we're seeing the interest. We're having the conversations. Our teams are out on the ground, and they're very interested in moving forward. But again, not a hockey stick.

Andrew DeGasperi from Berenberg. One question on the Partner First strategy. I know you started that in Europe last year or EMEA, excuse me. Just wondering why change that for the U.S. as well specifically given that's a market you're more penetrated in? And maybe could you elaborate what does that mean in terms of your sales strategy going forward and if that translates into any of your financial metrics as well.

Sure. And I love the question because, again, it gives us a chance to talk about why a high-performing partner ecosystem is so important for us and how it expedites our growth. It's not just because we have a -- we're in a base that we won't need partners. But they help bring value to our customers. They extend the value of our platform. They make us stickier. They're there in digital financial transformation everywhere we want to be. So they will, of course, support our -- and help with our account expansion. So deals we win faster, that's initial deals and follow-on deals. We win faster. The sizes of deals are larger. The win rate is higher. So for a number of reasons, partners in our deal are significant. We also have costs associated with the services, and they were happy to give those services. All those are lower-margin work, not our XBRL services, of course, that are higher margin. But the services that they provide take us, we're interested in the S&S revenue, subscription revenue. And we're happy to have them take that, makes them more commercially successful and they could offer other services around it. So we use partners for so many reasons, not just to go in as a channel.

Dan Jester, Bank of Montreal. Maybe 2 questions, if I can. First, Julie, appreciate all the insight about the changing in the executive leadership and all of the changes in terms of people. Where are we in terms of that? Is that complete? Or should we expect continued kind of evolution as you work through those new folks joining the team? And then Jill, on the target model, it seems, if I remember correctly, sales and marketing as a percent of revenue looks higher now than the last target model. Maybe just expand about what exactly is driving that.

I'll start on the leadership side. Those 4 individuals, so Senior Vice Presidents, today are here and hit the ground running. We will continue to level up the teams as we move forward to the $1 billion and beyond. So we're never done with anything. It's an evolution, particularly in software. So as new technology becomes available, we may bring on more leaders around certain technology. But where we are today, we have a good, solid executive team, but we'll continue to level that forward. We're never stopping.

And specifically, on your other question, so sales and marketing in the model, it did update last year, so it's not changed from last year's model. But the original model, the version that we had before that, we did not feel like it properly reflected the investments that we were going to need to make within sales and marketing to sell within that broad base of solutions. And so that was one of the updates that we made specifically in order to just better reflect how we expected to invest towards that broad base of solutions was the reason behind the change.

This is Alex Sklar with Raymond James. Julie or Jill, I want to ask kind of on the expansion opportunity. Julie, you highlighted that Fortune 5 customer that's taking 10 solutions now and over 2 million ACV. I remember kind of going back 4 or 5 years, we talked about $150,000 per customer. So clearly, we've seen a lot of expansion to date. But can you just talk about ways that you're still looking to accelerate multi-solution adoption. I don't know if that's more product bundling or other work around ELAs, but just ways to kind of accelerate that multi-solution journey.

Sure. I'll let Jill talk on numbers, financials, but I will say one is going out with the assured integrated reporting, they're going and taking that opportunity. We're not just selling single solutions anymore. We're selling a platform. And that is resonating both in U.S. and in Europe, as you can see. And so it really is leaning that from a marketing and branding front, but also our organization going out from a go-to-market perspective around the platform. You asked about the partners earlier. That is a significant way we'll be able to expedite our expansion opportunities. And it isn't just -- they're in there helping us with value in the customer. They're bringing us source deals, and we have co-sell opportunities. And those are within our base as well as new customers. So with partners, with our opportunity there, with the platform and assured integrated reporting, we're able to move and expedite.

And then just a little bit more on the financial. What we expect that to show us financially would be thinking about those, the net retention metrics and how we can keep that strong. And specifically, those are better wins. They make us more sticky. They encourage more solutions. So new solutions begets additional new solutions. It really is just a factor that helps to drive additional growth back to that customer that sat next to you last night. So they have added some additional solutions over time. And it's that thought process says, "Oh, well, we didn't used to use Workiva for this, and now we do." And I think there's more opportunity. I think it's that having in their mindset within our customers that Workiva is a company that can help them execute against their goals as well and that we make their teams better, being able to utilize our platform for them to control the narrative, control their numbers. And I think that's how we see it in our financials is that it makes everything stronger.

It really goes back to that relevancy that I talked about earlier. The combination of what we have, the financial reporting with the ESG and the controls and GRC, it's the way we can go to market that brings all the solutions together and getting good at that, again, not going into a customer site, selling a pain point, solving a pain point, but talking about it and going in, and as Jill says, solving the complexity of everything we're dealing with around those 2 categories.

Rob Oliver with Baird. You guys are starting to look and sound a little like a much bigger SaaS company we follow with the opportunity for expansion within existing accounts, partner-led focus, platform, global workflow opportunity. So in that context, I just would like to help on -- I'd like to understand a little bit better how, as the platform becomes more important, if that at all changes the calculus around acquisitions. Because is there an increased risk with that platform being something -- David even talked about how you started in a small room, and you guys have had this benefit of really being a true platform out there. So how does that, if it all, impact your thought process around acquisitions?

You want me to take it, David?

Do you want to start with that?

Yes, I'll start with it. First off, from an M&A standpoint, we're thorough and thoughtful on how we go about looking at things, and that is one factor, right? If there is something interesting that we start looking at, David is usually the first person that I bring in a field trip with me, and we are looking at all those aspects. That being said, right, I mean, there are areas where there could be some adjacencies and things like that. And -- but yes, how things would factor in to rule it in, that is one of those criteria that we need to look at. And our technical screen is high because we do have the platform. But we're open to whether it be tuck-in or even larger. We'll look at everything right now and look for the best areas of growth. David, do you want to...

Yes. And one of the things that I hear time and time again when I talk to partners as well as interact with some of these customers that we've seen grow and expand is how much they realize the more time they spend in Workiva the depth and breadth that exists in the platform as it is today. I think most people are just scratching the surface of what's possible. So as it comes to acquisitions, if you take a look at what we did with One Cloud as an example, we also like to look at integration first and maybe happening a partnership in place. In this case, we did an OEM with them for a number of years in that way. We had a lot of confidence when we went forward with that acquisition that we would have the ability to have those capabilities embedded in a first-class way and made a lot of sense to our customers. So again, that's not going to be the only model that we follow, but that is what we're looking at. And build by partner, it's always going to be something that we look at for all of our technology decisions.

Okay. Just one addition to that, right? I think the interesting thing is, if you remember, when we did the redo of the platform and that we launched in 2020, it is micro services-based, right? So one of the other ways we think of things, right, is an acquisition could, in essence, be another set or set up micro services that become part of the broader piece, right? So the fact that we're not one monolithic code base doesn't make it a little more open. And I think that's the long-term gains we get for all that replatform than we did back in our teen years.

This is Marc Bachner from Stifel. Just a question on the Europe opportunity that you guys laid out. I think you've spoken about 25% to 30% over time of your revenue coming from Europe with 11% today. Do you think that the CSRD opportunity is large enough? Or would that potentially be an area of acquisition as well?

So I can start, and then Julie can fill in blanks. So I would say that CSRD will be a big part of what will help to drive forward additional revenue in Europe, but it's not the only thing. There's a lot more that those companies similar to our strong base in North America. It might be a way that they come to Workiva and start with Workiva, but it's not where it ends. If we think about what that CSRD reporting requirement is over time, there's also assurance components of it that become more strong through to '26 and '28. And so it's additional audit services that can be purchased alongside of the reporting. It's the ESG reporting. How can we help them expand their ESG report in support of those numbers that they're also going to have to report for CSRD. There's -- it might be an inroad, and it's a good conversation starter, great conversation starter. But it's probably not the only way that we will continue to expand within Europe.

I mean the good news is what CSRD is, is it says that requires that you have financial reporting, along with ESG, along with assurance and then ultimately XBRL tagging. So it really is the full portfolio. It's assured integrated reporting. And I think what Jill's saying is, over time, we'll get there. But yes, I mean, it's a tremendous opportunity for us in Europe and will be significant in terms of the revenue from the area and region.

Steve Enders with Citi. I guess I'll ask the AI question. And now that it's out in customers' hands and people can utilize it, I guess what's been the early feedback from customers? And I guess, how do you view the monetization potential of those opportunities now?

Yes. Yes, I'll start off. Early feedback is -- has been really encouraging. So just to zero in on one specific customer example, and I think it's a customer that actually is speaking on a panel this week around their experience. They were sitting on a policy backlog in their organization for a while. And when they got access to the Workiva generative AI capabilities, within a week's time, I think they were able to plow through 10 different policies that were just sitting there. And what they would tell you is it wasn't perfect. They needed to take it out of that. But that's where -- when we talked about having our customers remain in the driver's seat, it got them so many steps down the road. It's much easier to edit than it is to create oftentimes. So instead of staring at that blank sheet of paper, they're starting now with a starting point that gets them a few steps down the road. So we've also heard examples of looking at new audits and again, using it as that brainstorming partner for what are the risks that they might encounter. And again, maybe it just gives them one new insight that they didn't have before. but that would be an example of where we're going. So as it relates to the monetization aspect of it, right now, we're focused, first and foremost, on getting value into the hands of customers. And as it relates to adoption of software, there's oftentimes a number of other hurdles that you have to overcome without putting a monetization wall in place. So I think we've demonstrated our ability as an organization to drive larger and larger contract values over time. So right now, our focus is really on adoption and also using this as a differentiating capability. So think about the quantity component, being able to go in and showcase it in new opportunities that we're having to drive the acquisition of new business and new logos and use AI as part of that. I don't know if anybody else wants to weigh in, but that's kind of how we're thinking about it right now.

Talk about value and iterating with customers to find what really does bring the value. We have lots of potential use cases, putting them in customers' hands and understand what really does move the needle for them and their willingness to pay ultimately. So monetization is there for us in the future. It's what we're looking towards. But for now, it's all about making sure the customer has what they need to do their work efficiently and effectively and productively and what can expedite that for them.

Next question here, before we get to one question in the audience, we do have a question online. Jill, this one is for you. It's on the long-term model. And the question is, what assumptions are you making long term for stock-based comp?

So stock-based comp, we do assume about 12% of revenue for the stock-based comp expense. So by the end of that model term, the gap operating margin would be 10%.

Andrew from Berenberg. Just one question on the EMEA changes with CSRD this summer, just in terms of what you were expecting. I guess the time line seems to have been extended out, at least from initial expectations earlier this year or even last year. I'm just wondering, did you change in terms of maybe not the total in terms of the investments that you're making, but did you change the allocation of resources going to EMEA versus North America?

I think we've anticipated the increase that we would need to go to market for this, again, a slow uptick, where their willingness to adopt the regulation itself and its definition. Again, we got some clarity. The lobby became law in November with clarity in July. And then there's still a lot yet to be defined. So we really haven't. We are investing, however, we have invested in teams in Europe to go after the opportunity, and we'll continue to do so to go capture that market opportunity, but I don't think there was any change in -- there was no change in that for us. We've been thinking about it in the same way.

Yes. One thing I would add as well, and it builds on what Julie talked about. The European sustainability reporting standards, those were just launched this summer. So we took those and we put them right into our ESG Explorer. As an example, the XBRL taxonomy, the DelCor [indiscernible], the CSRD. A member of our team sits on the working group for the development of that taxonomy. It's not even released yet. So it's not -- we're diverting resources. We're applying resources there. And any time that we have the opportunity to be a first-mover advantage, we're going to be there. And companies have to be getting ready right now. So some of those time line extensions, their preparation work starts today. So it's not that, that's impacting us in that way.

Rob Oliver with Baird. Jill, this one is for you. So you said the majority of growth in NRR is coming from new solutions and not price increases. I was wondering if you could put a little bit more granularity around that. And as you start, you have 3/4 of your customers. Obviously, they still have an opportunity to migrate above that $100,000 number. How should we think about that majority? And how is that going to move around or fluctuate, i.e., price increases versus software off to cross-sell?

Yes. So I hope I get both of them -- both questions. So specifically on the NRR, we do push on price increases. And I think a way to think about that is that we've moved from -- for the customers that are eligible for a price increase in any period because we do have the majority of our contracts are now on 3-year contracts. So we're, of course, only even looking at a customer maybe every 3 years. For those that are eligible for a price increase, we've moved that from maybe a low single digit on average to maybe mid-single-digit for price increase. And so that will continue to expand a bit, but the majority of that growth within NRR is just going to continue to come from the growth into the existing customer base. And so that's that piece of it. And then specifically around your other question. So that was around, remind me...

[indiscernible] kind of [indiscernible] target as you get the update for managers [indiscernible]. If there's an opportunity, I mean, majority could be 51%. So I was just trying to get a better sense for how we should think about those 2 variables within the NRR.

Yes. So then as far as expansion into the continued expansion of revenue within, I think that we'll continue to see that growth within -- from new logos and growth for existing customers will tend to just -- it still will sit around 50%. So specifically on revenue growth and then thinking about how we are able to expand into that 3/4 of customers that aren't above $100,000, it's not going to be linear, but it's something that we are paying attention to. We're trying to sell multiple solutions in -- even at a new logo, we go in and have the conversation. We don't necessarily just want to sell one solution. But we will, if that's all that they're interested in the time because the past history has shown that we are successful in expanding into the base. And if you think about that $100,000 in annual contract value, that's approximately a breaking point. If it's less than that, more likely than not, they have one solution. If it's greater than that, more likely than not, they have a -- it's multiple solutions. And so it's not something that is just defined. It really is about how we execute over time and continuing to expand with multiple solutions as a way to make that usage more sticky, the customers getting more data into the platform, more connected elements, it's all those things that will help to drive that.

Corey Tobin from William Blair. A quick question on what I'll call ESG NRR. So like the upsell of ESG modules, once you've sold the initial ESG modules into a customer, what would that -- what does that look like?

We've talked a little bit -- yes, I think we talked a little bit about that, is that a lot of the business, the majority of the business that we've been having for ESG is into our existing base. We have this really strong portfolio of customers, honestly, in North America. When you have that many large companies, it's just more likely that you are going to sell ESG when you're selling it into an existing customer because it's more likely than not that they're already a customer. And so it really is that we're selling at a higher level for those ESGs in North America into the existing base. And so it is showing up in that NRR.

Right. But I just -- I'm curious, once you sell the ESG module into a customer, what is the opportunity for additional ESG module sales into that same customer?

For ESG module sales?

Yes, specifically for ESG.

Sure. I mean, there is -- as we showed on the customer, there is an opportunity for audit and controls around ESG, and some start out with there in one area of the business and expand for larger -- for more entities if you're talking about just ESG specifically. But again, all 3 financial reporting in ESG and the GRC capabilities, risk management controls and audit, all tie into doing ESG.

There are some companies who might adopt initially one of our packages, which is an ESG Essentials offering. And for them, there's the opportunity to go back and sell the larger platform to them for ESG, which would be a an expansion play just with ESG alone. But as Julie pointed out, some of the conversations that are happening within GRC right now are happening because companies are looking at ESG, how do I provide the assurance around the new processes that need to be stood up around countless new data sources that exist around our organization. So we'll see it as likely there as it is in the ESG expansion.

Also for some of the Fortune 1000 that we've sold ESG to, they will need to comply ultimately with the CSRD, and there's opportunity for selling more into that customer. So there's a number of ways you can spend with entities and regions and so forth.

Steve Enders with Citi again. I guess I want to ask on some of the newer opportunities that are coming out there. I mean California has new regulations on the ESG side. I think SEC was mentioned about coming out with new PE regulatory reporting. So I guess how are you thinking about those opportunities? And how the kind of platform develops to maybe go capture some of those?

Exactly. That's why we put up there on the big slide, it's not about ESG and financial reporting and GRC as we move into the next 2, 3, 4, 5 years. It's about being a platform for being able to accommodate the regulatory reporting, again, where your data and narrative and so forth is required and accuracy is required. That private equity regulation, we can do that today. It's essentially our fund solution, right? The cybersecurity, that's all about controls and disclosure. That's us, right? All these regulations coming out. That's not baked into our TAM. That's upside as we move into the next 2, 3, 4, 5 years. Now that's exactly the point we're trying to make. In building our platform fit for purpose for financial reporting over the last decade plus, fit for purpose for ESG and fit for purpose for GRC, audit risk management and controls, what we've done is we've created a platform suitable for regulatory, and disclosure and transparency. And that's what we're enthusiastic about in the coming years. And you can envision laws like what you described as potentially going into certain verticals and so forth. So that's the picture we put out there and what we want to become over the next few years.

Yes. Just a little color on that, Steve. I was having dinner last night with a PE firm that's now using our fund reporting product. And I said, so what did you do before? They were using -- they had 600 Word docs, right? So people oftentimes asked about our competition, right? There is an incredible amount of still manual process that sits out there. And the value and the time and more importantly, you can't have an auditor come in typically and look at 600 Word docs, right? Jill, what would happen if your auditors came in?

That would be expensive.

So there is a lot of opportunity in just those new things because you're getting into these processes that are not automated yet. It is just manual. And organizations know they need to pass an audit, go through and have an investor-grade platform to manage that process.

Dan Jester back from Montreal again. So David, you said that customers are just scratching the service and what they can do on the Workiva platform. So what are you doing in terms of customer success and driving adoption to actually utilize these tools and to go back and harness that, accelerate the back to the base opportunity?

Yes, I'd say a couple of things there. One is that there's internal things that we're doing as an organization, but also this represents a pretty massive opportunity for our partner network as well. So internally, it's all about our data strategy as an organization. So we're taking the telemetry data, those insights, making sure that they're getting fed into the dashboards for our customer success team. So they're able to take a much more proactive approach with our customers. So when they go in and they do a QBR, they're talking to them about areas where they've seen other customers like them go further. And customers are looking for that. They're looking for a little bit more prescriptive journey, both on how they can take more advantage of what they already have access to. Maybe that's in the workflow automation capabilities, maybe it's taking advantage of some of the data and connectivity capabilities that have been added over time. And it also has to do with their expansion into what is the next solution that I should be using now as well? What are other companies like me doing? So to hit on the partner point, then we have some partners who specialize specifically and just coming back through our customer base, going in there and talking to them about more -- what more they have at their disposal as well. And it's fantastic because once they're in there, once they're talking to them, they are creating more value with those customers, which makes it stickier but they're also talking to them about what else they could be doing as well, which is going to lead to those expansion opportunities as well. So there are just a few other things that we're doing.

I'll say that. I mean we talked about Partner First strategy, meaning go with a partner first to deliver a little earlier. But partners, as David is describing, they've been a growth tenant of our growth strategy for the last several years. And we recognize we're not going to achieve those growth objectives without that high-performing partner ecosystem. So exactly what David is saying. But I would also say that we have a customer success organization under our customer and partner experience organization that is second to none. I mean, please go out and talk to the customers around, and they have tears in their eyes describing our customer success managers. And they are in there every day with the customers working with them, ensuring that they are exposed to the ability to leverage the capabilities across the platform, both within the applications that they have today and also explaining to them what other opportunities there are. And we're doing that more and more as we move toward that platform company.

All right. We're reaching the top of the hour. We have one final question in the room. All right. Andrew has got one more question here.

Just one question on AI specific, David. Just in terms of the data protection you put through, you mentioned the customer privacy aspect of it. Was that something that Workiva specifically implemented? Or was it something that Microsoft or others have delivered to you?

Yes. It has been a conversation that we've had with all of our vendors to make sure that we have the assurance that none of that data is stored or used in any way by them, which is not the default policies for some of those tools. There are additional things that we've put in place as well. So you can think about a data processing pipeline essentially before it even goes to one of those services. So we have done some additional things on our part as well.

Excellent. Well, that concludes the session today. Thank you for all the great questions, and thank you for everyone online for joining. With that, we will conclude the 2023 Analyst Day.