Workiva (WK) 8 Aug 182018 Q2 Earnings call transcript

Good afternoon. My name is Chris, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Workiva Second Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Instructions]. [Operator you. Thank Mr. of Director you begin may Adam Investor conference. the Rogers, Relations,

with Welcome A good call Call. Workiva begin by President Executive and Financial Vanderploeg; you the and Stuart Officer, to Chief This from Executive and afternoon we'll Vice Conference Thank turn followed Earnings Miller, everyone. the and over Marty we'll our to XXXX Second afternoon Chief President comments Officer, the and Quarter then replay line the is Klindt, Chief today on be Accounting Investor under President until press Information Officer. listed our this questions. XX, Also on the available today's Relations available of Senior Jill which will replay call XXXX. Vice is section. in website release August to is access

also is being call conference broadcast via today's reminder, a webcast. live As

our included with the President we'll over certain measures of Reconciliations press begin by that risks any everyone events forward-looking course our like Marty release. and full begin, unknown we guarantees quarter cause today's will on that and any statements refer Quarterly our additional XX-K during could statements that Before And making financial non-GAAP the we Annual for will that, results to these forward-looking events Report measures. All earnings our materially Workiva Form fiscal regarding non-GAAP and information subject XXXX. Please reflect future XX-Q to call, CEO, also to call. are forward-looking remind of to today cautions guidance after we not reflect third today's Report performance. during including I'd statements the GAAP Vanderploeg. to forward-looking Form are for These to be known year and to and financial future obligation performance, we update Also no in expectations and made only, this of factors undertake current that company's statements and occur refer to statements. on call today's statement from the are turning uncertainties. actual to differ and certain call

need Thank XXXX am would thanks investments net I as to and in now and conference our use everyone just Because proud second by new have money you I a that We joining customers. future. of in importantly are for for I first start of call. a our organization, call am they our More and accountability We made about data XXX control, the Workiva believe my QX Thousands tools Adam, use saying like them Fortune of very reason. organization transparency never to time saving Workiva them in XXX of reducing position case platform and the we over we for our Wdesk excited we than CEO and companies have the signed to quarter progress. least risk. distribution Wdesk the XX% at have and conference give one customers grow better most I use been XXXX started. getting for Wdesk and and the

Promoter Net our it remarkably high any XX is company. and rates of Score SaaS which retention customer for an world-class post BXB to is continue We all-time high

previous is for Wdesk rose increase to we began Our opens pricing Wdesk. to our June of roll-out model. offers subscriptions In we seat the solution per trend by continue. and easier year. continues Value-based XX% subscription last more The customer that quarter-over-quarter quarter customer of expect large markets by our revenue number value-based second our contracts customers the more base scale, to value delivers to rather than and pricing which over

this global well-positioned financial in known our required capture Meanwhile that taxonomy European as sales, or will of EU leaders for use a their and EMEA XBRL More is product of Wdesk annual leads Adoption we adoption standard by be format Overtime worldwide. use to APAC in marketing, XXXX. requires single could past reports X,XXX which included XBRL contribute and in market. are to getting we the XBRL this We continues as taxonomy. ESMA issuers reporting format inline large X, markets ending Markets revenue. of XX% inline customers. than our than expanding spread to started continue after international on our to January hire for work APAC. multinational its top electronic Authority just European with and Workiva talent year expect inline Securities more

and with We are workspaces including making new great progress towards workflow, to enterprise serve collaboration. capabilities the improve enhancing Wdesk

launched we to existing have sets Wdesk. connect connectors number enable the Wdesk. new and our expands cases to APIs with combines data to our which large use data This Wdata recently addition, In of preparation for capabilities customers

continue sales advisory augment partners. channel We to service as and as well with our partners technology

operate more an with of to with For FedRAMP's to ensuring agreement first-party example, we SAP and customers’ can and data Wdesk. With authorization easily which improving processes range reporting. commitment OEM our Government of the this adopt help achieved Wdesk analysis to wide demonstrates Federal announced recently to a authorization provide data. We recently security agencies our a integration new streamline

In addition authorization, FedRAMP those monitoring cloud continuous in software. many industries commercial the assessment, standard regulated and highest of particularly enterprises consider for security

place collaborative high several best culture strengthen employee to We awards. which throughout in our Workiva retention rates results work and continue to

XXXX placed Workiva in that for Cloud Solutions vision recently proud Close the leaders a for year its in second in Financial the are the We row. for furthest Magic position of Quadrant in quadrant Gartner completeness

looking are in We to our seventh annual conference user forward September.

Wdesk. ways best We will XX practices offer advanced on than use more and to sessions

include tell As to to growth. profitable also Workiva that analyst pursuing in like investors would conference I is will track. years committed Today our an past user

our CFO. Wdesk add Wdesk to organizations. platform, Stuart turn expand Miller, me We it and customers our to let our continue enhance and that With will partners new Stuart? customers’ across over

Marty. our quarter Thank review I'll You second results.

ASC as using discussed note modified the our in call revenue the method. model accounting retrospective on Thereafter, we I'll on recognition XXXX and outlook. year quarter financial adopted third comment full last XXX standard One new

XX-Q results. and Our of of our of adoption Form a provides on second the year-to-date reconciliation XXX financial the impact ASC quarter

revenue. under Now

the same existing QX we both add-on We made from to SEC, last growth all from came sales was $XX.X related sales. from capital performed million added believe have in quarter. Breaking customers line support controls, remainder in and the markets and revenue new particularly for months. increase Professional base. the and the of increase revenue new second Professional by our internal $XX.X from and accelerated million in XX.X% was of services our for penetration due the came XX total XXXX. months. XX.X% of the in of internal in logos the guidance SNS in in services. to we QX of expectation tagging out in is XBRL QX the reporting QX some item generated transactions revenue acceleration volume XXXX. revenue of more using to quarter in description existing number The XXXX, Revenue showed an QX last XXXX. large increase a a was logos revenue revenue training So services QX an strength. from of million revenue new increase of reporting $XX.X XX.X% quarter of above investments customers XX.X% higher a our We due up customer deeper XX

net of XXXX. QX XXXX a net from customers of a XXX we customers supplemental our XXXX metrics, Turning customers from QX and with increase XXX increase finished to QX

Our retention be continue to rates strong.

a month and of and reports subscription to June experience rate add-ons revenue SEC XX.X% subscription XXXX. acquired the file was rate of the With or our majority retention revenue Our ceasing Customers for accounted XXX.X% revenue support for consistent of being our attrition retention with was for support June XXXX. month otherwise to-date.

ASC legacy using revenue retention As standard we a XXX. accounting reminder calculate rates the

larger reporting rates we using contracts. encouraged progress data standard accounting we're revenue the next start making will year. retention We new by the comparable We're have when with

XXX For second value in the we XXX customers year. annual last exceeding contract had XX% from $XXX,XXX in up QX quarter customers

the For XXXX. customers exceeding XXX we in from had customers XX% quarter ACV up in second QX $XXX,XXX XXX

the before GAAP expense our statement. adjustments which a are about Please for CEO to Moving release down press results the compensation separation income to our our based numbers. our reconciliation non-GAAP I'll and stock refer results. talk GAAP two and of

million year compared a XX.X% to out gross XX.X% QX to due period Breaking $XX.X year in was million in quarter in in was utilization a due the pricing. XX.X% to latest a and margin same ago. margin up million same last QX the revenue a in higher utilization better margin a subscription on a to XX.X% margin up a equating quarter XXXX of gross gross from profit up Professional profit was rate. rate gross equating gross margin two $X.X XXXX. services profit in $XX.X First gross from quarter the and profit; margin the higher Gross QX XX.X% support second to SNS XX.X% gross of of was a XX% from gross profit

down outperformed QX compared guidance to a in year XX.X% slightly in last expense QX Research to P&L loss. headcount was percentage and Moving development in revenue of operating compensation. an the from quarter expense for QX year. we of $XX.X last R&D quarterly due to increase XX.X% this XX.X% million our rose higher as

XXXX QX in year. million QX QX XXX $X.X revenue Most the higher $X.X expense. and loss in in $X.XX shared Net due basis quarter a the to operating Operating to of because Our sales share a revenue and expense loss net Sales to to quarter General the ranks, QX growth year was year same quarter last ago. was QX Workiva's exceeded and $X.XX in expense basis capitalizing were million million. to loss QX of of compensation, $XX.X million compared of administrative versus in XX.X%. the to million for executive improved QX the QX $X.X R&D was points and of XXX. marketing and loss spend net compared last from increased expenses a quarter commissions points share QX. same as compensation XXXX posted and million compared as year last year X% $X.X from per XXXX loss administrative, in primarily growth from We $X.X sequentially to million was Sales the margin to last ASC XXX QX and a under XXXX. operating the of improvement relatively net due flat for compared this and improved marketing services. required QX XXXX headcount percentage XXXX up $X.X per loss

used cash due included statement cash our of million $X.X million flows cash of used $XX.X and subscription in quarter and decrease $X.X our former cash, and was In at QX compared XXXX At XX severance XXXX equivalents latest customer to $X.X sheet. a to to with XXXX. from deferred balance conversion payment of net in growth CEO. XX operating million; quarterly cash the to June payment. sales the activities Short-term $XXX,XXX Turning and Net contracts of securities balance a revenue support marketable totaled annual March increased million.

subscription end of customers We make of under annual terms continue quarter. contracts professional and QX Short-term in the deposits by good prepayment a to to a converting the Long-term dollars so to of million in convert QX. to a or we remaining revenue represents annual XXX progress services majority the substantial XXXX. quarterly grew support contracts deferred which just customer $XXX,XXX decreased expect

to our XXXX. for Turning guidance

and reconciliation the loss for from Please CEO of non-GAAP our excludes full refer impact the loss guidance. to non-GAAP non-GAAP press excludes also per share a expense. on guidance and guidance of our compensation operations stock-based year separation release basic Our GAAP for and

For expect quarter to to we $XX.X XXXX million. the million $XX third from total revenue range of

$X.X operating the loss loss to million be $XX.X $XX million. range of operating Non-GAAP to GAAP in from expect $X.X to is expected to million range We million.

loss $X.XX. share the $X.XX the net is $X.XX expect in Non-GAAP to per of net from a $X.XX to per expected range to be We to loss GAAP range share. share QX in

million Our outstanding. basic and $XX.X shares loss for share diluted guidance seems

Our is XXXX as follows. guidance full year

to We operating We now $XXX million. to range are guidance $XXX non-GAAP $XX.X loss our of raising GAAP to raising to million. $X.X from midpoint $XX.X full-year million. million $XX.X the million. expect loss to now range guidance on expect million revenue by total $XX.X our We're to range revenue operating of from our We previous total million full-year a

operations We continue in to from to expect cash XXXX. Workiva show flow positive

We loss share net range from expect to $X.XX. to per GAAP $X.XX

range expected to in of Finally per be the is share $X.XX non-GAAP share. per net loss $X.XX to

now strong and growth full for platform summary, basic million for on Our loss shares posted we seems focused guidance another our capitalize and outstanding. our the question. share We're remains diluted remain $XX.X your take robust plan In dollar per opportunity. to ready to Demand year multi-billion on Workiva quarter. market executing our

back it turn I'll to you operator for So Q&A.

Thank Humphrey. with you. Tillman question [Operator Instructions] comes from Our Robinson Terry first SunTrust

Your line is open.

for of board so specifically beats and sort between quarter [Eric] between looking taking growth and This across nice since I any the one at the going for had think you've balance guys. question going on the public Terry. about there and is profitability of job really the largest this Thanks only forward Hey thing on and change is is philosophical that profitability?

we have investments. on our a focused Definitely view Yes. taken more

gotten have where to without again you Stuart? clarity make can lean and our moving We from journey we do believe so fairly investments to profitability. anything We good will on definitely and this we toward forward sacrificing growth accelerating

No.

think confidence. or and product are on the side we really the I development where in it reflects on our underlying building side that's

financial well solutions you vendors looking cloud are and you that for really at like some that mentioned you those in the vendors with you that Magic into but Quadrant, those guys what the and Quadrant Thank or that fit of the Okay. space other Magic for line you and performed -- in Gartner see Magic report then cloud vendors do Trendtec? do guys overlap black that Quadrant in

reconciliation. focus downstream clearly They Trendtec significant. with reporting on on slight line the With overlap but on there's a We and process not. black focus not

overlap of bit little a still IBM. There's with

Yes, there's in referred little he very those two overlap. to

on have don't larger it. of players focus the products really they but Some

Okay. Great. job. Thanks guys. Nice

Thanks Eric.

Tom next Your from with comes question [indiscernible] Stifel.

Your is open. line

towards down the there on on last want there the of last the the after making larger the and enterprise. end just guess on will Great aggressively remember here a financial that really question some Hey sales relates seats push financial CPM With a product line, gentlemen within double and the should on sentiments profitable in CEO. going job, and how to growth the the to product question. and context appointment and Eric's concept going lot thanks push particular going larger for I commitment we efforts to I Marty, after execution in to into upstream the push the of echo more the and to as is investments enterprise? that development of the CPM broader as about I think as sets the you great desire congratulations just of were your a it at year, ongoing deal enterprise of particularly quarter. the

XXX platform. big the a in accounts footprint our We've growth those that's great out as strategy. mentioned such it access Having really large us call gives part on Well, I place. and to clearly of still our a we've the Fortune the getting just rounded

through lot We can have really We feel we team gone really and improving our the sales having that's of and messaging. and key. focus training a process,

come Stuart for versus think on marketing be you And marketing, on just on side or to Should you it and maybe would in we about investments of it question better leverage collectively model? of forward? us sales and sales about back sort leverage bit trade-off encourage going the R&D but model the as how a the should then should in we R&D little more think that this the where and model one might a you and

Yes.

not lot we're R&D I in to going A leverage give I in you there. probably not think side expect XXXX, -- to to say guidance probably but of the XXXX. on see would would on beginning [indiscernible] more give

context I balance in help something what an annualized you this that more course DSOs of understand accounts payments. do played think sheet quick the of to rising push on there? the upfront just with towards from and perfect and role the push Stuart you and last us Okay the one may has Can receivables have contracts

Yes.

adoption on in time simultaneous in sheet. was shows there which the a as the impact item DSOs increase and and right also we So ASC customer hand revenue, different up XXX the as balance was receivables, talked deferred about on of last of side biggest in the deposits line

the requires So to us in DSOs. of there ASC receivable. XXX receivable. It was no was the there really actual a Previously gross how show was simply down change

on actually the a invoice side at the receivable the when time sheet. you the balance shows Now of issue left-hand up

Perfect.

So yes.

you in great. I'll but back That's Really jump very Yes. much. queue helpful. thank guys

next Raymond question Brian with Peterson from Your James. comes

line is open. Your

adds] had question [indiscernible] overall biggest looks since It XXXX. quick but some quarter. out? is on to the for seen Brian. you'd quarter-over-quarter the know know there had you environment like point increase wanted in due This was Thanks. kind they if the [net change it acceleration I've a mentioned was in the I to training sales that I of any

the So for thanks question.

it So broad-based was mean it pretty was controls. it internal wasn't I SEC just

from But services, and XXXX. think was of since managed made I reporting contribution. largest Some new a net also partners, from markets came the right company accounts. capital private logos It it of was add that from you're actually nice

And that sales there is that very - we things it and reflection the really stood saw our where also really are the all same product and our that of of in a those organization at just time. a was now markets not across out all one improvement the getting together demand think coming I is the

and Great revenue to and X% up looks growth looks it's bucket only pointing industry see worth anything the particular like out? is technology that like showed by think? the of Obviously largest what you the information it Is that outside in area two other then Okay. it's the data of is at the there quarter-over-quarter in quarter quarters bucket. looking it but most the wanted

among because get leads broadly the very a there been those People of but distributed it for and how customers sophisticated like part adopters thing. it revenues so way They the beautiful is our they tend that's to footnotes. using Wdesk. are kind in of you and are many technology see industries. the them It's so definitely it's industry why from the read Yes, remarkable appreciation broad can our cloud real way across early comfortable you using groups. leading a and have be Information increases productivity

Perfect. you. Thank

you. Thank

Mike question Northland comes with from next Grondahl Your Capital Markets.

line Your open. is

Thanks Mike us that? there Grondahl. is Are any first you [indiscernible] customers for June. that responding can initial give based the just and in value this Maybe are to rollout on feedback how

Sure.

we I manage as and it. have value-based to many get pricing important to process simplifies the been in is want about administering customers from the not out also process general of really think about very and positive customers only thing is real seats that in as account on. the they it also The everybody in our have and strength The the trying platform of leaving them prevents cost a process. people let

So by it it that's things. simplifies standardizing and other in value-based really price a based too our metrics on back-office it simplifies

So real been positive. it's a

allows of say example. to team Yes. the has number as SOX within and the workspace a it I SEC have nicely. unlimited enabled the set SEC they unlimited to so would and further solution which clarify seats been many workspaces as customers it just the that within to lot of have seats are track some development team And it's by going that of easier the allows and platform SOX have within and workspace scales for to to seats the number want

and drive organizations more in to the those also within much lot a our And accounts. really platform organization us people get to those just for as it will possible exposes expansion as the in exposure

the there anything quarter? about capital and be there? the markets Are things you internal paying should sales? attention helpful. drove guidance. else Then Was we the Are that the second and controls That's thinking on increased to [indiscernible] just pipeline

you I'm question. say it catch can didn't the -- sorry I exactly. did you repeat

Yes.

for should or things quarter the the to the pipeline there driven today similar the paying be second else guidance have full anything increase attention we is on Just it that there? and is year, looks the

No.

broad-based. think very pretty it's financial we half might in year a bit -- in services had more be the There think broad-based. pretty second the in we it's of quarter the back I it's than but

Our last with Morgan question Stanley. comes from Stan Zlotsky

Your line is open.

could to to for that? recently and Has We've partnerships. numbers yet been dig on we [Hamza] integrations with in material the little a not when is of bit Stan tech this the start market if to and I some see Zlotsky. this want heard Hi, number a announcements in partners.

have it's partner worth of a bus So the which days. still the we revenue not say contribution early but -- always It's they it's we help really on it's not definitely force driving and contribution to well not seen do from yet the partners I it's visible number and logos but but purchases which as exactly was think easy effort do multiplier. track been influence influencing sale, wouldn't

it's the though even growing the it not is seen simplifies delivery thing for other we've really process rapidly certainly it us. it's material And and

type distribution. lot there's advantages to So of that other of a

all for me. That's Understood.

you. Thank

and This disconnect. does now conclude Thank you your may conference. the and the Q&A participation session for you