Good afternoon, ladies and gentlemen. My name is Nick, and I will be your host operator on this call. After the prepared remarks, we will conduct a question-and-answer session. Instructions will be provided at that time. Please note that this call is being recorded on May 1, 2025, at 5 p.m. Eastern Time. I would now like to turn the meeting over to your host for today's call, Katie White, Senior Director of Investor Relations at Workiva. Please go ahead.

Good afternoon, and thank you for joining Workiva's Q1 2025 conference call. During today's call, we will review our first quarter results and discuss our guidance for the second quarter and full year 2025. Today's call will include comments from our Chief Executive Officer, Julie Iskow, followed by our Chief Financial Officer, Jill Klindt. We will then open up the call for a Q&A session where we will be joined by Mike Rost, our Chief Strategy Officer. After market closed today, we issued a press release, which is available on our Investor Relations website, along with supplemental materials. This conference call is being webcast live and following the call, an audio replay will be available on our website. During today's call, we will be making forward-looking statements regarding future events and financial performance, including guidance for the second quarter and full fiscal year 2025. These forward-looking statements are based on our assumptions as to the macroeconomic, political and regulatory environment as of today, reflect our best judgment based on factors currently known to us and are subject to significant risks and uncertainties. Workiva cautions that these forward-looking statements are not guarantees of future performance. We undertake no obligation to update or revise these statements. If the call is reviewed after today, the information presented during the call may not contain current or accurate information. Please refer to the Company's annual report on Form 10-K and subsequent filings with the SEC for factors that may cause our actual results to differ materially from those contained in our forward-looking statements. Also, during the course of today's call, we will refer to certain non-GAAP financial measures. Reconciliations of GAAP and non-GAAP measures are included in today's press release. With that, we'll begin by turning the call over to Workiva's CEO, Julie Iskow.

Thank you, Katie, and thank you all for joining us today. Jill and I look forward to sharing our Q1 results and our guidance for Q2 and full year 2025. We'll also provide an update on the regulatory environment and our views on the macro. Q1 was another solid quarter. Subscription revenue grew 20% year-over-year and total revenue grew 17% year-over-year, beating the high end of our guidance. At the same time, operating margin came in slightly ahead of our first quarter guide. In Q1, we once again saw broad-based demand across our solution portfolio. CFOs trust Workiva to be the platform that drives performance and productivity for their current requirements and prepares them for their next digital, financial and operational transformations. Our portfolio of 20-plus solutions across governance, risk and compliance and financial, regulatory and nonfinancial reporting, continues to resonate in the market. Consistent with the past several quarters, we saw outpaced growth in our large contract customers. This is driven by both additional solution sales into our installed base and larger new logo lands. In Q1, the number of contracts valued over $100,000 increased 23%. Those over $300,000 increased 32%, and contracts valued over $500,000 were up 32% as well, all compared to Q1 of 2024. Although we remain optimistic on our market opportunity, we did see signs of a more cautious buying environment toward the end of Q1. The uncertainties of regulatory change and the policies of the new U.S. administration have put pressure on the bookings momentum that we saw in the previous three quarters. As we monitor the current macro and the market turbulence, we remain focused on the execution of both our long-term growth strategy and our productivity initiatives. We believe that we have the competitive differentiation and focused execution to continue to deliver…

Thank you, Julie, and good afternoon, everyone. Thank you for joining us. Today, I'll begin by providing an overview of the financials and key metric highlights for the first quarter of 2025. I will then move on and provide guidance for Q2 and the full year 2025. As Julie discussed, we had a solid first quarter with execution across our broad portfolio of solutions. We beat the high end of our Q1 revenue guidance by $1 million generating $206 million of total revenue in the first quarter, up 17% over Q1 2024. Q1 Subscription revenue was $186 million, up 20% from Q1 2024. New customers and account expansions both contributed to our strong revenue growth. New customers added in the last 12 months accounted for 49% of the increase in our Q1 Subscription revenue. Q1 Professional Services revenue was $21 million, flat versus Q1 2024, with higher XBRL services offset by a decline in setup and consulting services. Moving on to our Q1 2025 operating results, all on a non-GAAP basis. Q1 gross margin improved 100 basis points year-over-year, increasing to 79%. Operating margin for the quarter was 2.4%. This outperformance over our guidance was the result of our top line beat and our continued focus on leverage as we scale our business. Moving on to performance metrics for the quarter. We had 6,385 customers at the end of Q1 2025, a growth of 311 customers from Q1 2024. Our gross retention rate was 97%, exceeding our 96% internal target. And our net retention rate was 110% for the quarter. This metric saw pressure from foreign exchange rate headwinds as well as the year-over-year impact of Leap Year on the calculation. We generated 69% of our Subscription revenue from customers with multiple solutions, up from 66% in Q1 2024. As…

[Operator Instructions] And your first question today will come from Patrick Schulz with Baird. Please go ahead.

I guess maybe the first one just on the guidance. I know you mentioned they saw a more cautious buying environment towards the end of the quarter, but still maintain the full year revenue guidance. Can you just help bridge the gap there? Maybe provide a little bit more color on confidence in achieving the guidance. Why not just take the guide a little lower right now?

So, the reason that we kept the guide the same was, we really felt that Q1 was a great quarter. We had 20% S&S revenue growth. We're talking about in the guide that we expect to have 20% revenue growth for the full year on S&S. And we really feel like taking everything into account that we're able to maintain with our -- we can maintain a really measured approach on setting our guidance assumption. So, it's a really similar approach as to what we took in prior quarters, but we remain confident in our long-term market opportunity and our growth strategy. And with our large relatively unaddressed TAM that we felt like it was the right move to leave our guide flat for the year.

Helpful. And maybe one follow-up to maybe for Julie. I appreciate your commentary on CSRD and the ESG mandates in your prepared remarks. Could you maybe just give us a sense on how demand for the ESG and Sustainability Solutions have been relative to your expectations prior to the Omnibus legislation? I guess, how should we think about the pace of deals for remainder of the year into 2026, now that some of these recently proved EU legislation deals are in place?

Sure. And not an unexpected topic for discussion here today, given what's been going on. But I would like to give a little bit of detail here on sustainability though I provided some in the remarks, but I would just take a step back. Yes, there have been a lot of changes in the past three months. But I'll just say highlight here are three things, right. First, our sustainability market continued to grow. Sustainability remains a top booking solution for us in Q1. And when we think about sustainability, we break it down into geography and company size. And finally, as a highlight, we've said before, even as far back as when we entered the sustainability market, regulation is not the only driver of sustainability initiatives and reporting. So, we'll just think about the different geos. If we start with Europe, as I mentioned, with regard to CSRD and the Omnibus, I mean, it did bring a lot of clarity. Companies know what they have to report and by when that first large Wave 1 companies still need to report 2025, no change to that time line. And actually, the large non-EU companies still have to report on their same time line as well. And these large companies are target market, and they have -- I've got a report with double materiality, they have to report using taxonomy and ESRS. They've got limited assurance. So, we believe we still have a large opportunity in this market. And as I highlighted in Q1, in Europe, we saw multi-six-year deals, including sustainability. I'm going to be next week with our European customers and partners at our Annual Europe Customer event, still focusing on sustainability. Now if you move over to the U.S. change in the administration has influenced some of those…

And your next question today will come from Steve Enders with Citi. Please go ahead.

Okay. Great. Actually, I just want to follow up on the last point that you were kind of making there. But just in terms of what you saw in 1Q? Just maybe how are things different compared to the deals that we saw from the sustainability portfolio versus I guess, the broader Workiva portfolio? And maybe kind of what's the view here moving forward as well?

I mean, continued -- we had a strong quarter. We saw broad-based demand across the portfolio. And again, sustainability in Q1 was still one of the top booking solutions. I did mention in our remarks that we saw a cautious buying environment, but across the portfolio. And it really is more in conversations with customers and compared to our 2024, which was -- we had stellar bookings quarters in 2024. So again, we are looking at what's happening today with market uncertainty with turbulence in the market, but it's really broad-based demand across our portfolio.

Okay. Got you. So, I guess just to put a finer point on it, there wasn't really a difference in the timeline or like I guess when things started to slow down between the ESG side of the equation and the rest of the portfolio?

This quarter, we had demand for all solutions. Yes.

All right. And then -- just in terms of the, I guess, broader change between the U.S. opportunity, and it seems like the Wave 4 side of it is kind of moving forward. But how is maybe the opportunity for -- in terms of like a number of logos or the number of opportunities. How is that different now with the changing regulatory landscape? And maybe for what you're seeing from the CSRD regulations versus the things that are coming from a state level for those U.S.-based companies?

Yes. As I mentioned, in Europe, our target market is alive and well. It's the large companies, the large Wave 1 companies that need to report in 2025, many of those in April. April 30th was the deadline, but others, depending on geography. So that's our market. That market is strong. The Wave 2 and 3 companies, some will delay. Those are further out in the time line. But our target market, again, is largely -- it is a global opportunity. But as I highlighted in the U.S., again, we've got the box checkers, compliers and those that will wait for regulation. But again, everything -- so much of what we sold was for companies that want to play in a global ecosystem. They want to participate in the global supply chain. They're doing this for stakeholders. They're doing this for a number of other reasons beyond regulation, and we're seeing that, and we've seen that for the full years that we've been in the sustainability market.

[Operator Instructions] Your next question today will come from Jake Roberge with William Blair. Please go ahead.

Really helpful commentary just around the sustainability business. Julie, are those 7,000 or so Wave 1 reporters that are still being regulated under the updated CSRD proposals. I know there's been no change to the regulatory time line. But do you think there will be any change to kind of the adoption cadence related to CSRD just following the updated Omnibus proposals?

We do see significant opportunity in that larger market. I mean, many of those companies that you mentioned did have to comply on April 30. And while we've made significant headway in the market, the opportunity is there because what's clear when you look at those reports that have come out and we have looked at them. There's a lot of complexity those companies have to deal with. Many are still on the legacy systems. They're getting through it with muscle. And so, we believe there are a number of companies that are still using those current processes that we can help with our platform. And the platform brings together the financial data and the nonfinancial data. It brings -- with assurance, and we help manage the complexity. And I think that is where our opportunity remains in the upmarket. So, it's again, a significant opportunity, and that is our target market.

Okay. That's helpful. And then could you talk about how the go-to-market transition has been trending this year? I know you're starting to step that up more meaningfully at the start of the year. So, it would be great to hear how that's going? And that those plans could change at all just given the uncertain macro environment?

Sure. And as you know, for the go-to-market, as we've scaled, we've been maturing our organization. And as we roll into 2025, continue to do so. We further expanded our team of major account sellers. We continue to shrink territories, just providing greater focus on a smaller number of accounts. We've dedicated new logo teams and so forth. So, we're maturing. That's on the structure side. On the staff side, just continue to hire more experienced platform sellers, those that can embrace and leverage our partners just those sellers that have proven experience with scale. So, coming off of a successful year out there in the market, most of our sellers have higher quotas and we're pushing hard on the go-to-market side. Strategy, again, continue to focus on better enablement, more refined sales plays and so forth. So, we're continuing to improve, continuing to invest and up-leveling teams and building out that go-to-market team that's very capable and confident as we scale.

Your next question today will come from Adam Hotchkiss with Goldman Sachs. Please go ahead.

I guess Julie to start, could you maybe just clarify what a soft buying environment means for you? Is this just deferral of decision-making or something else just coming up in conversations off hand? And is there any way for us to quantify either the number of deals or revenue that's being pushed out of Q1 or future quarters because of this? Just trying to understand what exactly is going on?

Thank you for the question. Just to clarify, our business continues to grow, and we've reaffirmed our 20% Subscription revenue growth guide for 2025. And that's important. When I talked about signs of a cautious buying environment or change in momentum. Again, it's really compared to the year that we had in 2024. Again, very strong stellar bookings quarters for us. That's what we're comparing it to. But listen, there's no denying in Q1 as a turbulent market and there's market uncertainty. And I hear when I talk to customers, right, they're just being more thoughtful with spend. And the reality is they're dealing with constant changes, new risks to their business and their business models. And we do believe that this had an impact on some organizations spend behavior. And we're -- again, there's uncertainty there. We don't know what's coming. Our guide is very balanced, given the uncertainty, the turbulence in the market and what we're hearing from our customers. I did some deals are maybe taking longer even when we're the vendor of choice, right? But I will reiterate, we've affirmed our guide for 20% Subscription growth in 2025. We've got that large unaddressed TAM that I continue to talk about, and we believe that with our broad solution portfolio, we've got that platform advantage and proven record of delivering value and we have the opportunity to drive continued growth throughout 2025 and beyond.

Okay, Julie. That's a really helpful clarification. And then I wanted to talk a little bit about the press release you had, I think, a couple of weeks ago around the mandated financial consolidation order for federal agencies. How should we think about the opportunity for you there? And have you started to see any conversations around this over the last month?

Yes. Thank you for highlighting that. We did have a press release on that opportunity. We talked about the requirement that all 24 CFO Act agencies need to modernize their systems. And probably the most important part of that order is, as soon as practical, all heads of CFO agent agencies must use standard Financial Management Systems and they must use what's on that marketplace and we are on that marketplace. And we're encouraged that the administration is leaning into a tech-first approach and we believe this will be an opportunity for us. We're well positioned but we also believe it is a multiyear effort. So, we're optimistic over the long haul that the federal government is taking, again, that tech-first approach, and they're focused on trust and transparency and accountability as we are with our platform, and we believe that our platform is a great fit for these transformational needs and actions.

Your next question today will come from Ryan Krieger with Wolfe Research. Please go ahead.

Appreciate all the commentary on the macro, but I do just want to ask one more. You guys have a really good purview into a lot of verticals and a lot of major regions. So, I'm just curious, when you talk about this cautious behavior, I understand it's just kind of starting, but is it more broad-based? Or is it related to certain verticals or regions while others might be more safe?

I think, again, we'll reiterate, we had a strong Q1. But -- and it was broad-based. We're not seeing it in any particular geo, not seeing it in any particular segment that we're in for solutions either. It's again, conversations with customers and just a more cautious environment like we are doing at Workiva. We're thinking about our spend in a more thoughtful way. We're looking at those things that are more important. We're looking at the dollars we have and thinking about our own operational effectiveness and so forth and our spend.

Okay. Great. Appreciate it. And then also on solution pricing. In the prepared remarks, you talked a lot about a lot of innovation coming into the platform, and we are seeing quite a few software companies kind of lean into the pricing lever. So just wanted to get an update on maybe your pricing philosophy, how you guys think about it? And then maybe how you think about that lever going forward?

Sure. And this is a philosophy of ours that we've stood by, which is we want to bring value to the customer, and we would rather sell additional solutions and have more impact than get a few more dollars out of a renewal or price increase. Having said that, we have made price increases routine for our on our renewals. So, we do up, of course, we take a risk-based approach depending on where the customer is and what's transpired and where they are. But again, that's not -- we're not at the point where we're squeezing dollars out of a customer for a renewal or price increases there. It really is about providing value cross-selling and up-selling. And that's the way we've been approaching it. So yes, we're working to optimize our pricing, but the real lever is value and selling more solutions to expanding an account and bringing more value to our customers.

And your next question today will come from Terry Tillman with Truist. Please go ahead.

This is Dominique Manansala on for Terry. So just looking at the capital markets side of the business. Just wondering how you're thinking about contribution from that side for this year? I guess, with the market volatility, has your assumption changed in terms of pipeline or deal timing for IPO or S1 related use cases even?

Thanks for the question. And we really have not changed our outlook on cap markets. It remained consistent contributor in Q1, and we've modeled it that way through the end of the year. So, any return on capital markets remain an upside for us.

Great. Just one more for me. So now that Workiva Carbon has been in the market for several quarters. Just wondering if you may -- if you've -- if there's a noticeable difference in win rates or deal sizes? Maybe even in carbon-intensive industries.

Sure. Thank you for asking about Carbon. Workiva Carbon, as you recall, was a strategic addition for us to our platform that's made Sustainability Solutions and overall assured Integrated Reporting platform even more remarkable and relevant. So yes, it has opened up doors for us in terms of opportunities, and we expect that's going to continue to help us win new Sustainability Reporting deals going forward. If you do think about the regulations, the most consistent part of regulations across all, right? It's the one common thread around all regulation. And a lot of companies do want to go carbon first and want a vendor that provides both the Reporting and the Carbon Accounting together. So it absolutely opened up doors for us.

And your next question today will come from Andrew DeGasperi with BNP Paribas. Please go ahead.

I wanted to maybe ask one on the Fund Reporting side because you brought it up in your prepared remarks, and I just wondered, how much of an opportunity it is for you? I know you're obviously great in the public corporate reporting side, but just wondering in terms of the potential for that market?

Sure. Thank you for asking the question. New market we just entered another, I would say, fit-for-purpose high-value solution and a great example of how our platform can be easily extended and used for multiple regulatory use cases. So, I'll just start off by saying when we think about the market size here, there are over 12,000 public funds globally, that includes 9,000 or more ETFs with assets under management of over $11 trillion. So, it's a nice market for us to enter into. There are, let's say, 139,000 regulated funds reported globally. So, we're focused on this market as well and along with the market for public funds. So good market for us to enter.

And maybe, Jill, on the -- one follow-up on the NRR. You mentioned FX and Leap Year. And I was just wondering, is this -- what would it have been excluding that? I'm not sure if you provided that. So sorry if I missed it. And then second, when I think about the free cash flow target you provided. Obviously, you didn't take down the Subscription target for the year. But I was just wondering, is this like a very small change? Or is it because you expect that weakness to extend into next year?

Thanks for the question, Andrew. So, on NRR, I did not say so you did not miss it, but it was about 1.5 points or so impact between the Leap Year and the currency fluctuations on NRR. So, it would have been 11.5% or so, on 111.5% or so, without that impact. As far as the free cash flow target, we really -- we're -- in taking a holistic look at our guide for the full year, this was one area where we felt like we needed to bring this down a couple of points just because of the potential impact of any slowing impact from customer buying throughout the year, might show up. And so that was really the reason that you're only seeing any kind of a pullback is in that free cash flow number. And so that was our consideration.

And your next question today will come from Brett Huff with Stephens. Please go ahead.

Congrats on a nice quarter in a tough environment. Two quick questions. One, still macro, but maybe a little bit different angle. As you all think about your long-term guidance, which is super helpful and how you think about them helping us think -- see how you think about the business. It's hard to have imagine something like the environment we're in now. How do you all sort of factor that in as you still look at your long-term guidance and puts and takes and things like that?

Yes. Thanks for your comment. Really appreciate it, and, thanks for the question. As we think about the impact of the current environment and our ability to reach our long-term guide, we do operate the Company in order to reach those numbers, just to be really clear, we both reiterated our -- that we stand behind the guidance that we've given for 2027 and 2030, and we continue to operate the business with those targets in mind. And so, we do have ways that we can impact our margins in order to reach those goals. But as we saw in Q1, we performed and had a 20% S&S revenue growth. We reiterated that we expect 20% S&S revenue growth for the full year 2025. And we have a large unaddressed TAM and a broad portfolio of solutions to execute against. And so, we still will invest in that growth. But we know that we can do that, while still keeping those targets in mind. And so, we will continue to move towards that as we operate.

Great. Makes sense. And then just a quick follow-up, thinking about customer conversations. Maybe what about through the lens of partner conversations? I know a lot of the Big 4 are key partners of yours they approached the ESG market any differently? I mean, we're believers that it's not going away either. But I'm just curious if they have taken a different tack or if they've doubled down or pulled back or just become a little bit different strategies around at least the sentiment around ESG?

Sure. We work with our partners extensively and intimately in the sustainability market, and we are committed to working with our customers and providing the value. And again, they see it as we do. This is about -- this is regulation, yes, but it's also about performance. It's also about stakeholder requirements and about risk mitigation. So, we're very much aligned with our partners, particularly the consulting and advisory partners and going to market together jointly. So, we are aligned in our messaging. We're aligned in the value that we create for customers as they move into their sustainability activities and reporting and disclosure.

And your final question today will come from Alex Sklar with Raymond James. Please go ahead.

This is John on for Alex. I wanted to start with multi-solution deals in the booking environment. Julie, you're obviously very focused on selling the broader Workiva platform. But just given the macro backdrop and budgetary pressures, any change in the willingness to sell? Or have you seen any more customers focused on single solution deals? And then I have a quick follow-up.

I think that remains a key differentiator for Workiva and I think of myself when I was a CIO and I think of our CIOs, who's currently buying for work even. And I think about the priority, which is efficiency and effectiveness and consolidation of solutions. So, I think this is an environment where a platform can be very effective and high-performing because it does satisfy those requirements. I mean you know all of the platform advantages, and it really is about consolidation and experience and ensuring the solutions work together, which really is an efficiency and productivity play. So no, probably the opposite kind of -- platforms are a key differentiator in a market like this.

Great. And then Joe, maybe just a little bit of follow up on the previous question there. The guidance for the year, mid-single digits non-GAAP Op margin, that would imply a pretty meaningful ramp in incremental margins in '26 and '27 to hit the more medium-term targets. Any update on how you're thinking about the cadence of that ramp and when we would expect more of that inflection to come?

So, you can see that in our guide that we have significant improvement in our margin in the second half of 2025 moving into 2026. And we don't expect to have necessarily linear results, but we are starting to move really quickly towards that 2027 timeframe. And so, we do expect to and we'll be operating towards execution on those targets. And you will start to continue to see that movement as we move through the end of 2025, which you see in our guide and into '26 and '27.

Ladies and gentlemen, this will conclude our question-and-answer session as well as conference call. Thank you for attending today's presentation. You may now disconnect.