Workiva (WK) Q2 2025 Earnings Call July 31, 2025 05:00 PM ET Speaker0Good afternoon, ladies and gentlemen. My name is Gary, and I will be your host operator on this call. After the prepared comments, we will conduct a question and answer session. Instructions will be provided at that time. Please note that this call is being recorded on 07/31/2025 at 5PM 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 ...

Core Insights - The S&P 500 has nearly recovered from a 19% drop due to tariffs, but many enterprise software stocks, including Datadog and Workiva, have not returned to their 2021 highs [1][2] Datadog - Datadog offers an observability platform that monitors cloud infrastructure, with over 30,500 businesses using its services across various industries [4] - The company has expanded into AI observability, with customer usage of its new AI tool more than doubling in the first quarter of 2025 compared to six months prior [5] - Datadog reported that 4,000 customers were using at least one of its AI products in Q1 2025, also doubling year over year [6] - Following strong Q1 results, Datadog raised its full-year revenue forecast for 2025 to $3.235 billion, representing a 21% growth from 2024 [7] - The price-to-sales (P/S) ratio for Datadog has decreased from around 70 in 2021 to 15.5, making it more attractive compared to its historical valuation [8] - Analysts are optimistic, with 31 out of 46 assigning a buy rating, and an average price target of $140.72 indicating a potential upside of 15% over the next 12 to 18 months [10] Workiva - Workiva provides a platform that integrates various digital applications, allowing managers to streamline workflows and reduce human error [11][12] - The company is becoming significant in the ESG reporting space, helping businesses track their impact on stakeholders [13] - Workiva had 6,385 customers at the end of Q1 2025, a 5% increase year-over-year, with higher-spending customer segments growing even faster [14] - The company expects to generate up to $868 million in revenue for 2025, a 17.5% increase compared to 2024 [15] - Workiva's P/S ratio is currently at 4.8, near its lowest level since going public [15] - Analysts are bullish on Workiva, with 11 out of 13 giving it a buy rating and an average price target of $97.64, suggesting a potential upside of 44% over the next 12 to 18 months [17][18]

Financial Data and Key Metrics Changes - Subscription revenue grew 20% year over year, while total revenue increased by 17% year over year, exceeding the high end of guidance [6][37] - Operating margin for Q1 was 2.4%, slightly ahead of the first quarter guidance [7][38] - Gross margin improved by 100 basis points year over year, reaching 79% [38] Business Line Data and Key Metrics Changes - The number of contracts valued over $100,000 increased by 23%, contracts over $300,000 rose by 32%, and those over $500,000 also increased by 32% compared to Q1 2024 [8][40] - Professional services revenue remained flat at $21 million compared to Q1 2024, with higher XBRL services offset by a decline in setup and consulting services [37] Market Data and Key Metrics Changes - The company noted a more cautious buying environment towards the end of Q1, influenced by uncertainties in regulatory changes and the new U.S. Administration's policies [9][8] - Despite the cautious environment, the demand for sustainability solutions remained strong, with sustainability being a top booking solution in Q1 [49][55] Company Strategy and Development Direction - The company continues to focus on long-term growth strategies and productivity initiatives, believing in its competitive differentiation to meet 2025 and longer-term targets [9][33] - The company is committed to product innovation, having launched new capabilities for SEC reporting and a fund reporting solution for public funds [30][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term market opportunity and growth strategy, despite the cautious buying environment [33][42] - The company reaffirmed its full-year revenue guidance, expecting subscription revenue growth of approximately 20% at the midpoint [42][43] Other Important Information - The company repurchased approximately 462,000 shares for $40 million as part of its share repurchase program [41] - The company highlighted the importance of sustainability reporting as a valuable asset for enhancing business performance and driving efficiency [24][27] Q&A Session Summary Question: Guidance and cautious buying environment - Management maintained the full-year revenue guidance despite a cautious buying environment, citing strong Q1 performance and confidence in long-term market opportunities [46][47] Question: Demand for ESG and sustainability solutions - Demand for sustainability solutions remains strong, with clarity brought by recent regulatory changes, particularly in Europe [48][50] Question: Broader market conditions and deal timelines - The cautious buying environment is broad-based, affecting various sectors without specific regional or vertical weaknesses [78] Question: Pricing philosophy and strategy - The company focuses on providing value and expanding accounts rather than solely increasing prices, maintaining a customer-centric approach [81] Question: Capital markets contribution outlook - The outlook for capital markets remains consistent, with no changes expected in pipeline or deal timing [85] Question: Opportunities in fund reporting - The market for public funds presents a significant opportunity, with over 12,000 public funds globally [93]

Financial Data and Key Metrics Changes - Subscription revenue grew 20% year over year, while total revenue increased by 17% year over year, exceeding the high end of guidance [6][37] - Operating margin for Q1 was 2.4%, slightly ahead of guidance, with gross margin improving by 100 basis points to 79% [7][38] - The number of customers reached 6,385, an increase of 311 from the previous year, with a gross retention rate of 97% and a net retention rate of 110% [39] Business Line Data and Key Metrics Changes - The number of contracts valued over $100,000 increased by 23%, contracts over $300,000 rose by 32%, and those over $500,000 also increased by 32% compared to Q1 2024 [8][40] - Professional services revenue remained flat at $21 million, with higher XBRL services offset by a decline in setup and consulting services [37] Market Data and Key Metrics Changes - The company noted a more cautious buying environment towards the end of Q1, influenced by uncertainties in regulatory changes and the new U.S. Administration's policies [9][18] - Demand for sustainability solutions remained strong, with significant multi-six figure deals in Europe, indicating continued growth in this market despite regulatory changes [50][51] Company Strategy and Development Direction - The company remains focused on executing its long-term growth strategy and productivity initiatives, believing it has a competitive differentiation to meet its targets for 2025 and beyond [9][33] - The introduction of new capabilities for SEC reporting and a fund reporting solution for public funds reflects the company's commitment to product innovation and market expansion [30][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term market opportunity and growth strategy, despite the cautious buying environment [33][42] - The company reaffirmed its full-year revenue guidance, expecting subscription revenue growth of approximately 20% at the midpoint [42][43] Other Important Information - The company repurchased approximately 462,000 shares for $40 million as part of its share repurchase program [41] - The European Union's proposed changes to the CSRD regulation are expected to create demand for the company's GRC solutions [22][23] Q&A Session Summary Question: Guidance and cautious buying environment - Management maintained the full-year revenue guidance despite a cautious buying environment, citing strong Q1 performance and confidence in long-term market opportunities [46][47] Question: Demand for ESG and sustainability solutions - Sustainability remained a top booking solution, with clarity from the CSRD bringing opportunities for large companies to report [48][50] Question: Impact of market volatility on capital markets - The outlook for capital markets remains consistent, with no changes expected in contributions for the year [85] Question: Pricing philosophy - The company focuses on providing value and expanding accounts rather than squeezing additional dollars from renewals [80][81] Question: Opportunities in fund reporting - The market for public funds is significant, with over 12,000 public funds globally, presenting a strong opportunity for the company [92]

Workiva Inc. Investor Presentation May 1, 2025 Safe Harbor This presentation includes forward-looking statements. All statements contained in this presentation other than statements of historical facts, including any statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words "may," "will," "could," "would," "should," "expect," "plan," "assume," "anticipate," "intend," "beli ...