Good afternoon, ladies and gentlemen. My name is Gary, and I will be your host operator on this call. [Operator Instructions] Please note that this call is being recorded on July 31, 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 Q2 2025 Conference Call. During today's call, we will review our second quarter results and discuss our guidance for the third 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 the call up 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 third 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 this 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. In Q2 of 2025, we delivered another quarter of solid financial performance, powered by the continued demand for our broad portfolio of solutions and our unified platform. We beat the high end of our revenue guidance with 23% growth in subscription revenue and 21% growth in total revenue. We also exceeded non-GAAP operating margin guidance by 380 basis points. Our business results reflect continued execution on the 4 pillars of our growth strategy: our connected platform; our high-value, best- of-breed solutions; a high-performing partner ecosystem; and continued global expansion. We continue to see companies standardize on the Workiva platform and expand their solution use across financial reporting, GRC, sustainability and industry-specific solutions. Workiva continues to be a clear choice for those businesses that are looking to drive innovation across the office of the CFO while reducing total cost of ownership with a unified platform. The success of our strategy is showcased by the continued strength in our large contract cohorts. In Q2, the number of contracts valued over $100,000 increased 27%. Those over $300,000 increased 37%, and contracts valued over $500,000 increased 35%, all compared to Q2 of 2024. This growth was driven by both additional solution sales within our existing customer base and the acquisition of larger new logos. We are not just focused on growth. We are also committed to profitable growth. Entering the second half of 2025, we are raising our operating margin outlook to account for anticipated margin expansion in both Q3 and Q4. We also remain committed to the 2027 and 2030 operating margin targets that we announced a year ago. We believe that our disciplined approach to margin expansion will deliver on these results. While in the macro environment, economic conditions are still…

Thank you, Julie. I appreciate the kind words. My journey at Workiva has simply been extraordinary, from joining this company as one of the first 10 employees of a start-up to crossing any number of growth milestones over the past 17 years. I am thankful for the experience, and I am incredibly proud of what we have built. It has been such a privilege to work with the entire team of passionate, hardworking and dedicated employees at Workiva. I also want to thank all of you, our investment community, and in particular, our shareholders, for your continued support of Workiva. Moving on to our results. I will begin by providing an overview of the financials and key metric highlights for the second quarter of 2025. I will then provide guidance for Q3 and the full year 2025. As Julie discussed, we had a strong Q2, generating $215 million of total revenue in the second quarter, up 21% over Q2 2024 and beating the high end of our revenue guidance by $5 million. There was an approximately 1 point positive impact due to foreign currency fluctuations on revenue growth. Q2 subscription revenue was $198 million, up 23% from Q2 2024. Both new customers and account expansions continue to contribute to our solid revenue growth with new customers added in the last 12 months accounting for 41% of the increase in Q2 subscription revenue. Q2 professional services revenue was $17 million, flat versus Q2 2024, with the decline in setup and consulting services offset by higher XBRL services. Our non-GAAP operating margin for the quarter was 3.8%. This outperformance relative to our guidance was driven by stronger-than- expected top line results and our ongoing efforts to enhance operational leverage across the business. I'll now move on to our performance metrics for the…

[Operator Instructions] Our first question today is from Alex Sklar with Raymond James.

First question, maybe for you, Jill. I just had a 2-part question on the revenue outlook. First, are you seeing any contribution from capital markets picking back up? And anything that you incrementally embedded into the 2025 outlook from that? And then second, I appreciate all the callouts on FX. Did FX impact the guide at all as well?

Alex, thanks for the question. So for capital markets, we continue to see steady revenue from capital markets in Q2, similar to in the past. It's one that we're watching really closely given the activity that we've seen. And Julie would -- if you want to dive in after I answer the second part of Alex's question, I would love to hear from you, too. But we have continued to include capital markets at a steady rate in the future. And so it could be potential upside if there's a heavier return to activity in the second half. Related to FX, we took a look at FX, and it is a part of our risk-adjusted model. We took into consideration potential changes in the -- through the rest of the year. But I would say that we aren't expecting large changes, and we don't expect it to impact our ability to reach those goals considering that we have risk-adjusted the guide. Julie, was there anything else you wanted to see -- reply related to capital markets?

Sure. I mean you covered the important element, which is that our -- we've not baked anything -- any comeback into the guide for capital markets. But we have seen some increased activity in the past few months and -- supported by some of the recent and upcoming well-publicized IPOs. In fact, a great story for Workiva, we had the IPO for Figma and also Shoulder Innovations, both of which went public today. But that detectable increase in the market activity admittedly comes off a very low comparable. So we are seeing some growth here, but nothing like we saw in the other more active periods. But continue, as Jill says, to think about cap markets as upside and not considered any cap markets return yet in the guide.

Great. Congrats on those cap markets wins. Maybe, Julie, one for you and maybe it's a 2-parter with Jill, too. But some of the financial reporting success you called out this quarter, can you talk about some of the SEC reporting bundles that you've been working on in market in terms of kind of driving upsell within that base? And did that have any impact on kind of the strong NRR in the quarter?

Sure. I'll let you know about our -- the way we've been approaching the market. We're moving towards that good, better, best model. So we bring in some additional capabilities onto our cornerstone SEC reporting or financial reporting, and we add additional capabilities and features and enhancements. And that's how we're approaching the market to get additional revenue from the customer and get additional value to the customer as well. So Jill, if you want to comment on the NRR, please do.

Sure. So we did see a nice uptick in NRR during the quarter. We had -- a few of our metrics reflected the nice upside that we had related to upsells into our existing base with -- nearing 60% of our revenue growth. S&S revenue growth from the quarter came from existing customers, and we continue to expand on the number of customers with multiple solutions. And so that participation and that movement will continue to be an important one for us. And SEC is a great way for us to -- a great place for us to start with those upsells because those are some of our oldest customers. And we have a great opportunity to go in and talk to them about what else the platform can do for them.

The next question is from Rob Oliver with Baird.

First, Jill, I just wanted to say it's been a pleasure working with you, and I wish you all the best. And you're not done with me yet because one of my questions is for you. But I'll start with Julie. Julie, there's a lot of concern in the market among companies in our coverage list of the broader software universe about the potential erosion from generative AI on seat-based models. And you guys do not have a seat-based model. You have a solutions-based model. And I'm wondering, particularly as you're showing really nice go-to- market motion and success, say, for example, in the financial services vertical, I'm wondering if that solutions-based model is being viewed as attractive by your customers and a potential asset for you guys in your go-to-market motion at this time. And then I had a quick follow-up.

Sure. Thank you, Rob, for highlighting our pricing mechanisms and models. And it certainly -- we put it in place because we wanted to let customers use the platform and not feel constrained by number of seats. So we did go to that solution-based licensing model several years ago, and it has served us well for that reason, unconstrained use of the platform. However, we do have value metrics for each of the solutions, again, broad-based demand across the portfolio. And each area has different value metrics that customers leverage and pay accordingly. So it has served us well, and it certainly will serve us well in the AI category as well. Certainly not seat-based, and we continue to leverage that. And with AI, we'll be adding that in at some point. It's only in premium pricing today, but yes, serving us well with customers. Thank you for highlighting.

Great. Okay. Good to hear. And then, Jill, just one for you on the improved operating margin outlook for the remainder of the year and the improved free cash flow margin. I know you touched on it in your prepared remarks, but would love to hear from you where you have been able to find additional margin and opportunities for additional margin as investors look towards your reiteration of the long- term targets and the kind of margin ramp that's implicit within that.

Yes. Thanks, Rob, and thanks for the kind words. I appreciate it. I have enjoyed working with you as well. As far as our improved margin, we're very pleased with the results that we had for Q2 and for the guidance that we're providing. It's a result of continued focus on execution across the business and focusing on productivity and ways that we can work much -- work smarter. And it really is not one thing and not one part of the business, but an overall focus by the team to be better and execute at a higher level. And we're starting to see the results of some of the things that we've been doing. And you'll see us continue to focus on that as a movement as we continue to show the results and execute on our strategy.

The next question is from Steve Enders with Citi.

Congrats again on working with you and looking forward to seeing where things go from here. I guess I want to start on the sustainability portfolio and, I guess, get a little more detail on what it is that you are seeing in the marketplace. I guess, for one, it sounds like it's being accounted for in the guide or some of the weaknesses. But maybe just how does that manifest? Or what is that -- or how is that kind of playing out in the numbers? And then I guess, secondarily, just how are you kind of viewing the pipeline or the opportunity from here and maybe what that looks like over the next few years?

Sure. Thank you. Thank you for the question. Not unexpected, given the political and regulatory landscape and nor was it unexpected for us in terms of what we saw. As I highlighted in the prepared remarks, we did observe a moderation in demand in Q2 within our corporate account segment across both U.S. and Europe. But while the strong momentum we saw really in the latter half of the year -- that's what we tapered off from. And I think that's really important to recognize. And while it has tapered off from those prior quarters, strong quarters, it still continues to drive growth for us, both in new logo wins and account expansions. And I do think you asked about some numbers and impact. Probably worth reminding again, sustainability is only 20% of our TAM, and it's less than 15% of our revenue. So current demand, yes, we're seeing that slowing in the -- primarily in the corporate segment, but it's been factored, as you said, into updated revenue guidance that we're providing today. So that's really the gist of it. But we remain optimistic on the long, durable demand of the market. We're seeing deals come in with -- well, I should say associated with, yes, regulation. But beyond that, too, science-based targets have been set. There are now up to 85 companies -- 8,500 companies, excuse me, setting Science Based Targets initiative. Organizations are just looking to better manage risk and address their stakeholder expectations. So we are seeing market demand beyond the regulation. We just wanted to highlight that given the strong quarters that we had, we had multiple strong quarters last year, yes, the growth has moderated. So that's essentially what it is. We still, of course, believe this is a long, durable demand market.

Okay. That makes sense. That's good to hear. And then just on the free cash flow guide, I guess, good to see the EBIT margin raise. But I guess I would have expected maybe free cash flow to show maybe a similar pace of expansion in the updated guide for this year. So I guess any factors that we should be taking into account there? Or maybe what's different in the assumptions on the free cash flow side versus the EBIT margin side?

Sure. Free cash flow is a really complex metric for us because it does have a lot of factors related to the timing of cash inflows and cash outflows in addition to just the impact from the margin guide that we provided. And so it can have some amount of fluctuations aside from that. But I think that similar to what we talked about in our last earnings call, when we talk about a risk-adjusted guide, this is one of the areas where it shows up. There is more risk and more uncertainty the further out from today that we get. And the free cash flow margin that we provided is really that risk-adjusted metric that we believe properly reflects our business through the end of the year. And with the timing differences and some of that complexity rolled into it, we feel very good about that number.

The next question is from Terry Tillman with Truist Securities.

This is Dominique Manansala on for Terry. So just looking at the mandate for CFO Act agencies to modernize their financial system using approved marketplace vendors, have you seen any early RFP activity from these agencies? And how significant could that opportunity become over the back half of the year or in the long term?

Dominique, can you actually repeat the question? Sorry, it cut out a little bit for us.

Yes, sure. No problem. So just referring back to that CFO Act where agencies have to modernize their financial systems using the approved marketplace vendors. Just wondering if you're seeing any early RFP activity from these agencies and how that opportunity can look in the back half or in the long term.

Sure. We have been able to get into conversations, and we are the only SaaS platform in the marketplace that has a platform to cover the integrated reporting and assurance and GRC as we do. So we're seeing early signs of -- I'll say we're having good discussions. So no comments on the actual uptick at this point. But our platform does provide an opportunity, yes, to go in and provide services to the government who is looking primarily to transform and automate, become efficient, accountable and so forth. So it's a good opportunity for Workiva.

Got it. And then just as you evaluate growth opportunities in the current environment, how are you thinking about M&A? Just wanted to know if there are any specific product areas like GenAI, ESG or vertical solutions where you may be more inclined to build -- to buy versus build.

Sure. We -- as I always say, we scour the earth essentially to look for all opportunities, whether it's a gap to close on the platform, whether it's technology to level up all solutions, adjacencies, et cetera. So no preconceived notions, but we're continually looking to find potential partners and M&A that can really strengthen the platform and either go after our large and addressed TAM in a faster way or potentially expand that TAM.

The next question is from Andrew DeGasperi with BNP Paribas.

Julie, maybe -- earlier in the prepared remarks, you mentioned some big wins. And I think financial services or a large bank was one you mentioned tied to the Federal Reserve. Can you maybe provide a little more context on that? Like is this something that potentially could be a driver in the near term for that cohort of customers?

Financial services regulations have been drivers for years. And we are going deeper into the market. While our focus has been there, we're going to continue to go in even more extensively. So yes, absolutely, we're continuing to increase the use cases that we have under the financial services area, regulatory, certainly, and we're going to continue to focus on banks and the risk regulations and investments and fund reporting. So you will see more of that. Also have insurance market with 20-or-so regulations that we sell to as well.

That's helpful. And then, Jill, by the way, also a pleasure to work with you and wish you all the best going forward. I just had a question in terms of what you said earlier in terms of the margin. And what I'm trying to understand is, are you making any changes to the sales and marketing investments assumptions that you had for the back half? Is that some of the driver behind the outperformance?

So I would say that we're constantly looking at our sales and marketing resources and reallocating based on current business. But there wasn't any large-scale change to that investment. And what you'll see from us is a lot of what you've seen in the past, which is being thoughtful around how we built the business, thoughtful around how we approach our markets. And sometimes that does include adjustments in territories and adjustments in teams. And you've seen us do that across the sales team as it is. And one of those examples would be moving towards a hunter-farmer model in certain areas this year. And so we will continue to make those kind of changes in order to focus on profitability and efficiency throughout the business. And so within sales and marketing, those aren't held aside. We'll also be trying to make those improvements and find efficiencies and better leverage for the resources within our sales and marketing teams. And that's definitely a part of the improvement. But something you can always look towards is our 2027 targets, which we reiterated on the call, prepared remarks. And we are still focused on executing and progressing on our goals with those 2027 margin targets in mind, inclusive of the split between the different areas of the business.

The next question is from Jake Roberge with William Blair.

Jill, I wish you all the best moving forward. It's been great working with you. Julie, just on the macro, I know you referenced some pressure on demand for your sustainability suite. But just given the solid results here, did you see any other changes or improvements across the broader base over the last few months? Or was it fairly consistent with the trends that you called out last quarter?

I appreciate the question. The macro is on top of minds of most of us running SaaS companies these days. And the reality is we didn't really see much change from Q1 to Q2. Overall, market conditions remain fairly constant. And we saw some uncertainty maybe across all sectors and very similar to what we saw in Q1, the deal cycle elongation, which is expected in an uncertain market. In some cases, we saw -- even when we were selected as a vendor, I would say, we saw it's taking more time to get some deals over the line. And you see some companies just being more thoughtful in the timing of their spend for some of these transformational purchases. But we still continue to see some signature deals come in and we have some great wins, some of which I did share in the prepared remarks. But I think overall, demand has moderated for us compared to the momentum that we saw in those stellar bookings quarters we had in 2024. But all of that's been factored into our latest guide, as Jill has mentioned. And we've raised the guide in our subscription revenue for 2025 to reflect the beat. But really, in direct answer to your question, very consistent from this quarter from last.

Okay. That's helpful. And then just to double-click on the sustainability front. You referenced the tempered demand in the corporate segment. But can you talk about what you're hearing from some of the larger enterprise and wave 1 CSRD reporters and if that kind of is different versus the corporate segment? And if there's been any change on that front over the last few months.

Sure. We talk about our corporate segment -- I mean, the mid-market primarily. We have our sales categorized into corporate, strategic and major accounts. And we did see the softening there, I mean, around regulation, some delays and so forth. But that's really where it is. Our market is primarily upmarket. That's where our strong market is. And the regulation with CSRD for the most part remains in place there for the large companies in the wave 1 in Europe. And those that want to play in a global ecosystem and supply chain continue on with their demand and so forth. So -- and as I said, it's beyond regulation, it's stakeholders and risk management and so forth. So yes, we did call out primarily where we saw the tapering off a bit and a softening, I'd say, for that corporate market or mid-market.

The next question is from Adam Hotchkiss with Goldman Sachs.

I would like to ask an earlier question a different way, Julie. I think you mentioned how sustainability was a bit stronger in 2024 and that things have moderated. But subscription revenue here has accelerated. I think it's your highest growth quarter in the last number of quarters. Forward-looking metrics like billings have accelerated, and cRPO continues to be strong. And so could you maybe marry some of those moderation comments, in particular around sustainability and the broader market, with the acceleration or broad-based acceleration we're seeing in the business ex sustainability? And what do you think is driving that? And how sustainable do you think that is?

Our guide, of course, just took into account the comments I already made just a moment ago, which is just overall the risks, and that's from the uncertain macro and what we're seeing overall and broad-based across the portfolio. But we also adjusted for risk there on the sustainability because, again, of the regulatory and political environment. But we had strong revenue this quarter, and that comes from a lot -- our subscription revenue is generated from customers with multiple solutions. The platform is resonating -- our partner ecosystem and so forth is just performing there. So we do have a very resilient platform, and we're selling -- it's again, broad-based. We have a large portfolio of solutions that we offer in the market. So that's really kind of where the revenue comes from. And then, of course, we are a subscription SaaS company. And inherent in that business model is that in any given quarter, we've got deals booked from prior quarters as well. So that's where subscription revenue comes from as well. But it really -- again, I'll highlight again, less than 15% of our revenue is from sustainability. We have broad-based platform, and it's resonating in the market. And again, strong growth. But we, of course, are going to take a risk-adjusted approach as we look at the guide.

Okay. That's really helpful. And then just on the -- asking the AI question another way, how do you think about -- and especially given how things have evolved recently, how Workiva's moat against generative AI technologies writ large in some of these agents that allow companies to utilize their operational data in different ways? Could you just maybe speak to the moat that Workiva has built around AI? And you think -- how you think about the insulation of your reporting product set and workflow product versus some of these newer upstart technologies?

Sure. We've spent 1.5 decades building trusted relationships with our customers. And we have the most innovative technology, and we really focus on the customer data. That's very important to customers that we care for it and it's important to us. But of course, we are bringing in the latest technology and data. When it comes to AI, data is a differentiator. And we happen to have data that we can leverage in these AI capabilities. But we're bringing the capabilities and the technologies onto the platform to ensure that we bring additional value to the customers and differentiate. So we are going to continue to invest in AI across the platform. We bring it into our platform. And our controlled, secure, auditable environment give customers the comfort and the knowledge that their data remains within the platform, not used to train models and so forth. But we're helping them with, of course, speed and efficiency, helping them to respond quickly to risk and volatility with greater focus. We're seeing some ROIs from our customer that show measurable impact, and they're leveraging those capabilities on the platform. So I do want to emphasize, we take it very seriously that we have trusted relationships with our customers, but we will be committed to bringing value to the customers using AI.

The next question is from Daniel Jester with BMO Capital Markets.

This is Kyle Aberasturi on for Dan Jester. It looks like a strong quarter for customer growth, especially the larger businesses. Could you help us unpack where in the product portfolio the strength is coming from and then more generally, what you're seeing in the competitive landscape?

I caught the part of the -- you want to talk about the product portfolio. Can you repeat the initial part of the question prior to the competitive landscape?

Yes, sure. So it looks like a strong quarter for customer growth, especially for larger businesses. Could you help us unpack where in the product portfolio the strength is coming from and then more generally, what you're seeing in the competitive landscape?

Sure. We continue to see broad-based demand across the portfolio. That's something that's been consistent quarter after quarter. Our platform -- one of the strengths of the platform, very resilient. And for the most part, the demand continues across all solutions. So it really depends on where the customer is, if they're doing transformation, if they're in financial services, where they are, whether they're focused on sustainability. It's not one area or another that we're seeing trends -- deep trends on. It really is broad-based across the portfolio. In terms of the competition, we continue to have competition, but it is point solution primarily, not a platform as we have for all the capabilities that we have on one platform. But also there's a lot of legacy technology there that we are competing against. So status quo, legacy and point solutions are primarily the competitors that we face. But our differentiation comes in very strong with a broad- based platform, also connection to all the partners in our ecosystem. So that's really how we win, high-value, fit-for-purpose solutions, but it's on the platform connected, ever becoming more open and intelligent platform.

Got it. And then can you just discuss how you're thinking about investment plans and the business' headcount expectations for the remainder of 2025 and into 2026?

Thanks, Kyle. So we will continue to focus on productivity and leverage with our existing resources. We, of course, will continue to make investment decisions based on the potential outcomes from those investments. And that will, in some cases, lead to hiring in certain areas. But really, the focus that we have as we execute on our midterm, long-term margin goals is just ensuring that we are -- we have profitable growth and that we're executing on our strategy in a way that makes sense with our margin goals in mind.

The next question is from Ryan Krieger with Wolfe Research.

Congrats on a solid quarter. I just want to touch on retention quickly. It was incredibly strong this quarter, even excluding FX. So can you provide some additional color on maybe what drove that strength and help us think about the mix of pricing versus peer expansion contribution there? And then how should we think about retention the rest of this year? I know you've historically talked about over 110% being positive, but is this potentially an inflection point just given the momentum that you're seeing?

Yes. So exactly right, Ryan. And thanks for the kind words on the quarter. So when we think about NRR, this was a high point for us certainly. And there was the impact from currency. But overall, what we were seeing here was really about the upside of selling into our existing base. At any point in time, we have been focusing more on price increase, but that's not a large part of our NRR in any quarter generally. The majority of our uplift on NRR tends to be from the additional solutions sold into our base, and that's really where we focus when we think about NRR. And of course, we get the benefit of amazing gross retention as well and retaining our existing customers and contracts.

And then any way to maybe think about it for the rest of the year?

For the rest of the year, I would still say that, that 110% plus is what we think of as a good result there. It can fluctuate because of currency. It can fluctuate, of course, because of the mix between sales into new customers versus the existing customer base, but 110% plus is a good result for us.

This concludes our question-and-answer session, and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.