Q4 2022 Workiva Inc Earnings Call
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Good afternoon, ladies and gentlemen, my name is Emma and I will be your host operator on this call after.
After the prepared remarks, we will conduct a question and answer session.
Instructions will be provided at that time.
If at any time during the conference you need to reach an operator, Please press star followed by zero.
Please note that this call is being recorded on February 21, 2023 at five P M. Eastern.
I would now like to turn the meeting over to your host for today's call, Mike Ross Senior Vice President of corporate development and Investor Relations at where keep up.
Please go ahead.
Good afternoon, and thank you for joining us for <unk> fourth quarter and fiscal year 2022 conference call.
During today's call, we'll be discussing the results announced in the press release that was issued after the market closed.
Today's call has been prerecorded and will include comments from our Chief Executive Officer, Marty Vanderploeg.
Julie is cole, our president and Chief operating Officer, and Jill Klindt, our Chief Financial Officer.
We will then open the call up for a live Q&A session.
Yes.
A replay of this webcast will be available until February 28, 2023.
Information to access the replay is listed in today's press release, which is available on our website under the Investor Relations section.
Before we begin I would like to remind everyone that during today's call, we will be making forward looking statements regarding future events and financial performance.
Including guidance for the first quarter and full fiscal year 2023.
These forward looking statements are subject to known and unknown risks and uncertainties.
Were he would cautions that these statements are not guarantees of future performance.
All forward looking statements made today reflect our current expectations only and we undertake no obligation to update any statement to reflect the events that occur after this call.
Please refer to the company's annual report on Form 10-K, and subsequent filings for factors that could cause our actual results to differ materially from any forward looking statements.
Also during the course of today's call, we will refer to certain non-GAAP financial measures.
Reconciliations of non-GAAP to GAAP measures and certain additional information are also included in today's press release.
With that.
We'll begin by turning the call over to our CEO Marty Vanderploeg.
Hello, and thank you for joining us today, I know you've likely seen the exciting news that jewelry ESCO will be taking over as CEO on April one.
Before I turn the call over to Julie and Jill, let's discuss our fourth quarter and full year performance.
For the quarter were kiva generated record revenue, which resulted in revenue growth of 21% in subscription and support.
And 19% in total revenue.
We also delivered a non-GAAP operating profit margin of three 3%, beating the high end of our guidance by 660 basis points.
For the full year 2022, we exceeded the guidance set back in November of 'twenty, 'twenty, one and the target set in February of 2022.
Our strong performance resulted in a revenue growth rate of 23% in subscription and support and 21% and total revenue.
In terms of market demand, we have seen macro pressures elongate some deal cycles, we continue to navigate this environment by demonstrating the value of our platform.
At the same time, the Q4 momentum we're seeing in E. S. T is outpacing the slowdowns, we are seeing in capital markets and S. E C.
Our strategy and investment in ESG is paying off.
In Q4, our global sales and marketing initiatives continued to grow our pipeline and generate new business. We added 123 net new logos during the quarter, bringing our total customer count to 5000 and 664 companies.
Our gross revenue retention rate of 97, 8% remains above the industry benchmark.
We are pleased that customers continue to see the value of our platform and appreciate the strong support they receive from our customer facing teams.
In Q4, our continued focus on driving multi solution deals propelled our growth of large contract values. We.
We delivered strong growth in multiple solution areas led by E. S. G.
Our financial services and <unk> solutions also showed strong year over year revenue growth C suites and boards continue to prioritize and are taking an increasingly active role in shaping their organization's approach to risk.
Our <unk> solution suite enables organizations to identify track and manage risk to drive principal performance in their businesses.
We're kiva offers the only assured integrated reporting platform that brings financial reporting ESG and DRC together in one controlled secure audit ready environment.
This unified platform offering is a unique and key differentiator that separates us from the competition.
Customers that invested in this platform approach during the quarter included a large global bank that added ESG to its existing solution portfolio of SEC G R C and financial services.
We were the only ESG solution considered by the customer because of our platform stringent data security ability.
The ability to connect the data sources and assurance capabilities.
And a large multinational supply chain management company added <unk> to their existing where kiva solution portfolio that included S. E C management reporting and ESG.
This opportunity was influenced by a big four advisory firm.
Yes. He has quickly become a key component in many solution expansion deals.
Early returns show that customers spent significantly more on E. S T than on our S. E C solution yeah.
Yesterday has become the fastest growing part of our business.
During the quarter, we signed several landmark ESG accounts, including a mid six figure account expansion with a global services company that will be using that we're keep a platform for their global ESG reporting.
This client will be using ESG in coordination with their FCC and global statutory reporting solutions.
We had a new ESG logo win with a global technology solutions provider. This private company has sustainability is a core tenet of its business strategy.
The deal was a co sell with a big four advisory partner, who will also deliver the project.
Another new logo win during the quarter was an EU based manufacturing company that purchased the ESG along with our annual reporting solution.
This private enterprise will be advised by a big four partner, who will also deliver the project.
Our advisory partner source influence and deliver many of the deals we engage in each year. In addition, when partners are involved we consistently have a larger deal size and higher win rate.
ESG is a rapidly expanding new market.
In November the European corporate sustainability reporting directive passed into law.
As outlined in the directive over 50000, EU companies will be required to report against 13, new standards, including climate governance value chain and workforce.
It will be phased in over multiple years, beginning with our fiscal year 'twenty 'twenty four annual reporting process. We believe we are uniquely positioned to capture this expanded market opportunity.
In the U S. We continue to see strong demand well ahead of specific regulatory mandates such as the proposed the S. E. C climate disclosure rule, which is expected to be clarified in the first half of this year.
In December our corporate ESG efforts earned us a AAA rating in the 2022 MSCI ESG ratings assessment.
We are one of only four public SaaS companies in the U S that has achieved this rating.
This signifies our industry leader status in managing the most significant ESG risks and opportunities.
On behalf of the entire leadership team I'd like to thank our global team of dedicated employees you're focused efforts throughout 2022 helped advance where kiva strengthen our culture and produce strong financial results are.
Our technology, our products and our people are unrivaled.
It has been an honor to lead where kiva in many capacities over the last 15 years. The last five a C E O.
We first started out in 2008 launching our first FCC solutions soon thereafter.
Today, we're kiva offers the worlds, leading cloud platform for assured integrator reporting.
And our 5500 customers now include 88% of the fortune, 181% of the Fortune 1000 companies.
We're kiva has always been more than just the software company. It is about people and the great things we continue to accomplish together.
Collectively we have built an employee culture focused on creating the best products and serving our customers with excellence.
We're kiva is best days are still ahead, and we'll be in great hands with Julia C E O.
Since day one of her arrival she has made our organization better. She has spent the past three years thoughtfully building and shaping a remarkable leadership team and executing on our strategy.
In my new role as Nonexecutive chair of the Board I will continue to support and champion the executive team.
I'm so proud of what we've achieved together and continue to be energized about the future I would now like to hand, the call over to Julie.
Thank you Marty I consider it a distinct privilege to succeed here.
Well, Stephen it's one of the most relevant and innovative technology companies of our time.
We have a transformative platform unbridled potential and an enduring foundation on which to build our future and I'm looking forward to continuing to work with our incredibly talented team as we move what keeps us legacy forward into our next phase of growth and impact.
Marty and I are aligned on where Keith is core principles and values.
People first culture.
Continuous innovation.
The prioritization of customer experience and success.
And a commitment to impact.
These will continue to be cornerstones of our operations as we drive greater performance and productivity due to focused execution of our strategic initiatives.
Before I turn the call over to Joe I'd like to summarize a few key highlights from marty's prepared remarks about the quarter and full year.
First we finished the year strong and we beat our full year guidance on revenue and operating margin.
Second.
ESG with one of our fastest growing solutions in 2022.
This is a result of the investments that we made in our talent technology partners and go to market strategy in order to capitalize on the significant market opportunity.
Terry.
We are the only company that brings financial reporting.
S T E N G R C together in one.
Controlled secure audit ready platform.
Our platform and our technology has never been more relevant given these times and increasing stakeholder scrutiny.
And finally, our loyal global customer base continues to realize the value of our platform and our differentiated capabilities.
This leads further account expansion higher contract values and strong customer revenue retention rates.
We remain bullish on our future opportunities as we continue to address a large and untapped $25 billion Tam.
With that I'll now turn the call over to huge Hill.
Thank you Julie and congratulations.
Excited to continue working alongside you and the rest of the breakeven team as we execute on our strategy and advance for Kiva to drive value for our customers partners employees and shareholders.
Let's turn to our results.
Today, I will review, our financial performance for the fourth quarter and provide Q1 and full year 2023 guidance before opening the lines for questions.
As Marty and Julie discussed we ended 2022 on a positive note with a strong finish to what was a solid year of performance for <unk> highlighted by a healthy beat on revenue and operating margin for both Q4 and the full year 2022.
We continued to see broad based demand with revenue contribution across our solution portfolio.
We beat Q4, 2022 revenue guidance at the midpoint by $4 $4 million.
That's an asset higher services revenue accounted for the beat.
We beat guidance on Q4 operating results at the midpoint by $10 million.
Revenue performance, along with lower G&A and employee related expenses led to the majority of the operating income beat.
Now, let's go through some key results and highlights for Q4.
We generated total revenue in the fourth quarter of $143 $8 million showing growth of 19, 1% from Q4 2021.
Subscription and support revenue was $125 $9 million.
Up 27% from Q4 2021.
New logos and account expansion both helps drive strong revenue growth in Q4 2022.
56% of the increase in instrument revenue in Q4 came from new customers added in the last 12 months.
Professional services revenue was $17 $9 million in Q4 2022.
Up eight 7% from the same quarter last year.
The increase was driven by higher ex BRL services revenue.
We added 123 net new customers in Q4 for a total customer count of 5664.
Gross of 1349 customers from Q4 2021.
Our total customer count includes 922 parse part customers.
As Marty mentioned, our subscription and support revenue retention rate was the best in class 97, 8% for the fourth quarter of 2022.
An increase compared to 97% for the same period last year.
With add ons, our subscription and support revenue retention rate declined to 108, 5% for the fourth quarter of 2022 compared to 110% in Q4 2021.
This rate is up 150 basis points compared to the third quarter of 2022.
As we have discussed this metric is being impacted by the lifecycle of our customers who purchased our capital market solution during 2021.
Transitioning to a lower cost ongoing ACD in the Q4 2022 calculation.
Excluding the impact of capital markets. This metric would be 240 basis points higher than the fourth quarter.
Please note the parse part customers will not be included in our retention rate calculations until we have a full year of comparable data.
As Marty noted our focus on multi solution deals and account expansion has led to the number of larger subscription contracts continuing to show growth.
In the fourth quarter of 2022, we had 1345 contracts valued at over $100000 per year.
20% kind of Q4 the prior year.
The number of contracts valued at over 150000 totaled 718 customers in the fourth quarter.
24% from Q4 2021.
The number of contracts valued over $300000 totaled 236 up 29% from Q4 2021.
Gross profit totaled $110 $9 million in Q4 up 19% from the same quarter a year ago.
Gross margin was 77, 1% in the latest quarter versus 77, 2% in Q4 2021.
Operating expenses increased 17% from Q4 2021 due to investment in hiring third party labor and return to travel.
We have continued to talk about our focus on operating leverage.
Those efforts led to our strong Q4 operating results.
We posted an operating profit of $4 $8 million in Q4 2022.
<unk> to an operating profit of $2 $2 million in Q4 of 2021.
At December 31, 2022, cash cash equivalence and marketable securities totaled $431 million.
A $2 $2 million compared to the balance at September 32022.
Cash flows from operating activities in Q4, 2022 resulted in adhesive cash of $1 $3 million compared with an increase in cash of $9 $3 million in the same quarter a year ago.
For the full year of 2022, we have a cash flow positive for the sixth consecutive year, delivering 11 $3 million in cash from operating activities.
Let's now turn to our guidance.
Can you believe our guidance assumptions are prudent for the current macro environment.
For the first quarter of 2023, we expect total revenue to range from 149 million to $150 million.
We expect non-GAAP operating loss to range from 12 million to $11 million and net loss of 23 to 21 cents on a per share basis.
Our share count will be approximately 53 7 million weighted average shares.
We expect Q1 services gross to be nearly flat.
The return and timing of annual in person events, coupled with a significant increase in seasonal employee expenses drove the sequential decline in operating results.
For the full year 2023, we expect total revenue to range from 624 million to $626 million.
We are setting our guidance for non-GAAP operating loss to range from 9 million to $7 million or a net loss of <unk> 13 cents to 10 cents on a per share basis.
Our share count will be approximately 54 million weighted average shares.
We expect full year services growth to be a low single digit percent.
And for the full year 2023, we expect to post positive free cash flow for the seventh consecutive year.
While we are guiding to a loss in Q1, we are projecting improved operating margins for the remainder of the year.
We expect to post a significantly smaller loss in Q2.
Be breakeven in Q3 and be profitable in Q4.
With that we will be non-GAAP profitable in the second half of 2023 and are committed to improve the margins for the full year in 2024.
We remain committed to the long term operating model outlined at our September 2022 Investor Day.
In summary.
I want to thank all our employees customers and partners for their continued support and hard work in 2022.
Before we turn to Q&A I would like to reiterate three important points.
One we are focused on are significant long term opportunity in multiple growth levers. This includes the new and rapidly expanding ESG market.
Two we have a highly differentiated platform that continues to deliver value for our customers.
As Marty and Julie highlighted we are the only company that brings financial reporting ESG and GIC together in one controlled secure audit ready platform.
And three we expect strong improvement in sequential operating margin each quarter in 2023, beginning in Q2.
We are committed to our long term operating model.
We will now take your questions operator, we are ready to begin the Q&A session.
Thank you.
If you would like to ask a question press star followed by the number one on your telephone keypad. If you would like to remove your question again press the star one.
Your first question today comes from the line of Rob Oliver with Baird. Your line is now open.
Great. Good afternoon. Thanks for taking my questions first of all Marty it's been great working with you over the years.
Wish you every success and hope to see you again soon and Julie Congratulations I guess the question is maybe for both of you guys to start just within the macro environment.
In your prepared remarks.
It really sounds like they're kind of a couple of things going on on the one hand, Marty you called out elongated.
Cycles, not uncommon for software companies nowadays on the other.
I think you mentioned that the pace of ESG is helping to offset some of that.
Slowdown so could you talk a little bit about what youre seeing in the macro has that pays for ESG continued.
Here in the start of the new year and what how that macro played into your guide and then I had a quick follow up thanks.
Sure. Thanks, Bob.
I will say this the macro is definitely out there we feel some.
Like I said in the prepared remarks, we do see occasionally deals.
Spending a little bit.
Our platform is regulatory and it's.
And we're also very focused on mission critical stuff so.
The thing that really think this I think we sort of beat it to death was really the FCC and the.
And the cap markets you know those two markets were down for us.
I'm actually very pleased we made our forecast way back from November of 'twenty one.
Even when the macro hit us and that was all based on our ESG performance and our platform performance, we're really starting to resonate with customers on having all this capability on one platform and ESG has taken on a fourth quarter we were.
Like 85% over our plan number in bookings so.
You know there is.
The Board's know ESG is real Europe knows it's real.
And we're really seeing I'd like I've always said, a generational opportunity for us so.
The macros there.
It doesn't affect us that much other than cap markets in SCC. So we're pretty bullish about next year frankly.
Okay.
Great. Okay. Thanks, Marty I appreciate that and just one follow up for you just and appreciating your commentary relative to the trajectory of <unk>.
Operating income throughout the whole year.
The full year does come in a little bit below I think street expectations.
Just wanted to get a put a finer point on.
Some of the variance.
Relative to our model just is that I know you mentioned the return of in person events are there other things going on.
I know you guys are have been Reconfiguring Europe , a bit to be more partner led I know there was a call out in the prepared remarks of a deal. There just any color you could provide around the expenses this year and how youre thinking about it relative to that.
The losses in the first half of the year and the overall year would be great. Thanks.
Yeah definitely thank you for that question. So we do see some amount of as I had mentioned during the prepared remarks.
Certain events that we did not have during 2022, because if you remember we were still fairly well locked down on Q1 and 22 in <unk>.
And as we move into a hybrid environment, where making taking great care to get our teams together and so we have an in person.
Sales kickoff event sales marketing kick off event in Q1 of 'twenty three and we're also going to be holding.
An in person development team event in Q1, and those are things that were not in last year, but we do expect them to be.
Going forward as a way to bring teams together, it's really important for us and so <unk> is a piece of the spend that we're seeing into 2020 in 2023, so within that guidance.
The other piece of that we talked briefly about some of the seasonality in employee expenses.
As we hired.
Talk about all the investments that we're making in 'twenty and two some of those hiring some of that hiring happened later in the guaranteed up to the full year impact until you go into 'twenty three.
That's another piece of it and I know when you will hear from you.
Julie going forward is that we are.
We're still very invested in our business and we use the resources that we need to in order to execute on our strategy and on this opportunity and we're being very careful and keeping the leverage that we have in our business, but there is some amount of returned to traveling there.
But otherwise we're moving towards our long term operating model and still very much believe in those numbers.
Just want to add on that a little bit you know in November of 'twenty. One we told everyone. We're going to invest in ESG for the obvious reasons that we've beaten to death.
In response to general macro stuff and.
And investor sentiment, we did reduce that investment in Q2, I'm, sorry, Q3, and Q4 of 2022, we slowed down I think we.
Well.
One third of that investment, we actually pulled back sort of at the request of the whole investment community.
We actually streamlined our core businesses that we've had a while and move some of that resource over to ESG. So.
Julie has been doing a wonderful job.
Streamlining and putting efficiency in but.
The fact, the matter is you know all not all SaaS companies are created equal and we just happened upon a very big piece of Tam that we are in the very early days and we're just showing tremendous demand and success there. So.
We understand the you know the desire and demand to go back to more profit, we're heading that way starting Q2.
In Q1 looks worse than it is just because of some one time events and other things but.
We have a good plan put in place to continue.
Continue to let the investments we made in in 'twenty two.
You know Joe their return and then also tack towards.
Profitable growth. So we're very comfortable where we are we didn't want to just pull the plug right away. After just hiring and training all of those people and we're just very thoughtful and careful but we're right at the beginning of a tam or large greenfield opportunity.
Where we have the right to win we have the best solution and we're winning very.
And I think we have.
A significant part of the Fortune 1000 already in the U S. Using the hours for our solution for ESG. So.
We're really really bullish and we are definitely going to go back to a more profitable operating model, but that's why we're sort of delayed a couple of quarters compared to the rest of the pack.
Got it very helpful. Thank you guys appreciate it.
Yeah.
Your next question comes from the line of Andrew <unk> with Bahrenburg. Your line is now open.
Thanks for taking my questions.
Julian congratulations.
Hope congratulations to you as well.
Maybe that would lead me to my next question is one is.
I guess what.
Kind of drove the timing around the change.
At the top end I guess.
It sounds obvious.
It sounded like this was planned for a while I'm just wondering if there was something specific that.
Led to that.
No I really don't think so Andrew I mean.
Julie has been with us almost three and a half years. She was hired with the intention of taking over for me.
It's a very complex business, we had and she's got a really good handle on it she's been doing operations at all three and a half years.
Is really ready and I have a 100% confidence in her ability to do that it was more about when she felt ready and we all felt good about the transition, making in an orderly way and protecting.
Outcomes of the company and.
Certainly protecting investors. So we think it's just the right time, no nothing really precipitated.
That's helpful. And then in terms of Europe I just wanted to ask you put it you put in lean leadership, there, particularly on the on the go to market side.
Maybe can you give us an update in terms of what's going on there.
Sounds like all the investments you're making for the year I unrelated to that but just wondering if theres anything that you want to elaborate on from from that region.
Well I would say this the hiring in Europe is slow right I think.
Hired our new VP of sales there several months ago Couldnt get out of an existing contract just started a month ago. So.
Europe is a different beast, we feel really good about the new leadership, we have both in Europe and APAC.
And we've done some some.
Some changes in our sales teams there we've streamlined it we have a really good team in there and theyre starting to.
To get the hang of it under his leadership. So we've had some pretty good quarters or the last couple of quarters.
You know we have work to do there no doubt, but it's a huge opportunity and with CSR D. The whole.
The the sustainability reporting USD reporting that has been mandated in Europe .
We think we'll be ready for that.
And.
So overall I am still very bullish on Europe .
Well, Thanks, I'll go back in the queue.
Your next question comes from the line of Adam Hotchkiss with Goldman Sachs. Your line is now open.
Good afternoon, thanks for taking the questions and I Echo my congratulations Julia on your new role and wishing Marty all the best going forward.
Really just wanted to put a finer point on Europe on the back of Andrew's question I think the progress there from a Rev share perspective has been relatively consistent over the last few years and I think with <unk> and par sport in a number of the investments you've made there it's pretty clear that there is sort of a lot of upside in the model.
How are you thinking about what that looks like for this year and how long it takes those investments to ultimate ultimately play out.
Oh, that's a good question, we really see the.
The latter half of the year starting to see.
Accelerated growth there I mean, we're seeing good growth there right now, but we expect to see accelerated growth in the latter half of this year and Thats. When leadership has had time to figure out everything in CSR D is becoming very real so there's a lot of things going on then so.
And that certainly where were building ESG distribution team is still a lot of the hiring we did last year and we have a little bit left to go is all around ESG distribution and working with our account owners. So that's all in progress right now and so we'll start to see a return for that.
Third and fourth quarter of next year over this year I'm sorry.
No. That's really helpful. Thanks for that and then just on the ESG point from a competitive perspective, what are you seeing from sort of the two buckets of competitors.
Whether it's the saps oracles of the world or on the flip side sort of the Disruptors on the back of this regulation.
Anything you're seeing there that's a cause for concern for you guys or do you just see that.
Sort of you being ahead, there is an opportunity.
The big guys are more focused on carbon accounting carbon accounting is has in and of itself a huge Tam I mean there'll be carbon markets.
So we're still seeing them primarily focus there.
The new Disruptors, we see them in accounts now and again.
We haven't had.
Issue in terms of win rate against them I mean, we might have lost in one to each one of them or something like that and usually it's for some pre relation when we're pretty much straight up we've been we've been winning.
Against all the competitors, we just have a big advantage in terms of the platform, which was more or less made for this so.
So far the disruptors are not disrupting.
That's why I felt in investment was so important when we did it and why we're a little bit out of phase with the rest of the world.
We had to go strong on distribution, while we had the big lead.
In terms of product and it's paying off like I said the.
The over performance of this year was really surprised us and.
The pipeline continues to expand rapidly. So we're we're really bullish on it.
It's all really helpful. Thank you Marty.
Your next question comes from the line of Matt Stotler with William Blair. Your line is now open.
Hi, everybody. Thank you for taking the questions ill start off by echoing the sentiments from everyone's asked question. So far congratulations both Marty and Julie why it's been great working with you and Julie looking forward to continuing to do so.
Maybe first question here on the net retention, it's nice to see that.
Pick up sequentially in the quarter, obviously, Joe you gave some good color around the year over year comps.
As you think I think forward into 2023.
And then the role of NR is going to play in kind of the ultimate growth rate there and what's included in guidance would love to get some more color. There in terms of how you frame that up and maybe some of the key factors.
Going forward right, obviously, it seems like ESG, so youre going to be key components, there, but any other thoughts would be helpful.
Yes, we intend to parts.
To maintain our base retention and then.
I'm thinking about how we can expand that with the impact of.
Especially related to add ons in the cap markets impact on that metric.
I expect it to be able to keep.
Returning.
So some of our historical levels, but we were very encouraged by our ability for customer success teams to keep our customers happy all of our development teams to keep our platform relevant and useful to our customers.
And we really do think that we can keep maintaining that best in class retention.
Thanks.
I would add that.
The platform play is really working I mean, I talked to several customers a day or prospects and when.
When you explain our vision for the future and where we're investing and how that adds more value for them. It resonates and so we're going to see as we did this quarter a lot more add on deals.
And <unk>.
Customers pretty much using the platform for almost everything that we have so that's.
Think that is what's what's going to help bring that number up.
Got it that's all very helpful. And then maybe one on the partner Enablement front you mentioned a couple of key wins in the prepared remarks with big four consulting firms well, let's just get a broader update on your partner enablement efforts as you look forward to 2023, and then maybe any observations in terms of getting to the point where partners are.
Are you seeing huge case creation AD partners and how that motion is moving forward.
Sure I'll take that one.
Partners continue to be an integral part of our growth strategy, we've been talking about it for a while now they work with us in customer acquisition in the deal sourcing and coastal motions and importantly, we leverage their deep relationships with our customers.
US communicate the value proposition to the C suite, that's our prospects.
And wherever they are involved we have higher deal sizes and higher win rates. So we're continuing to invest in our partner relationships.
I would also say, they're very focused on advisory services, along with the implementation services. So they they help our customers recognize even more value from our platform, which can also help with that retention retention rate. So.
Our partners allow for accelerated SNS for us and we're going to continue to.
Leverage them across the portfolio of solutions, we have.
And we're looking forward to a stronger engagement in all levels of the partnerships.
Yes.
The sign the thing I like is that.
Julie said, we're seeing.
Bigger deals broader deals in terms of platform, but.
I also like that this may sound, well I think everybody understands that our our services burden is being reduced in fact part of the reason our growth in Q1 as is down is because I think were almost flat on services revenue quarter over quarter that took several points.
Off our growth rate in Q1, and that's a good thing as far as I'm concerned.
Once we retire a lot of that services work, obviously, we'll be supporting our partners, but that will really help us in terms of margins.
Great. Thank you very much.
Your next question comes from the line of Joe mirrors with Truest. Your line is now open.
Great. Thanks for taking the question and congrats Marty and Julie maybe a question for Julie at a high level. What's your biggest focus for 2023 is a growth or profitability or maybe something else.
Okay.
Didn't hear the question will go to Robert <unk> for 2020, what's your biggest focus growth.
We are going to continue executing on our strategy those foreign growth levers that we talk about our fit for purpose solutions R. R.
Our platform of course as already described.
One play.
Play and.
Excellence across the globe and.
Partner ecosystem that we just described so those are the four areas of the <unk>.
Focus for us for growth, we're of course, looking at ESG and selling that.
Gut feel on ESG.
BSG, along with financial reporting and along with our DRC assured integrated reporting.
That's helpful and then I think.
The commentary around services revenue I believe implies subscription growth of about 19% for the full year, how much of that is coming from ESG and parse part is that does that kind of like half the growth and then I guess any commentary around ESG.
<unk> growth coming from current customers versus new customers and the runway within that 5000, plus customer base still very large thanks, so much.
Yes. So we continue to have broad based demand across our solution portfolio and really do you have contribution across all solutions in our growth in revenue.
You talked about.
Weighted to Q4 in ESG it was our fastest growing solution in Q4 and so on.
It's on a smaller base compared to some of the more in long tenure installations, but where we are.
Looking forward to continued growth from ESG, but it really will have.
Contribution throughout the portfolio solutions.
Thanks again.
Your next question comes from the line of Steve Enders with Citi.
Your line is now open.
Okay, great. Thanks for asking for taking the questions and congrats again on everybody for the FERC and the new rules here.
I guess, maybe just to start.
Really appreciate the commentary on the bookings our performance on the ESG side in the corner I guess, how should we think about the other parts of the portfolio and maybe how they how they executed versus your expectations going into the going into the quarter here.
Sure.
The.
We had as we mentioned ESG was the top bookings.
Booking solution in Q4 and Q3.
Outperforming and pleasant surprise of the year for sure, especially when you make that investment you love to see it come to fruition.
We also made investments in integrated risk integrated risk and a very good quarter.
And that's partially because we've discontinued to enhance the product create more value.
Got better at selling it and.
And the other key part of that is the whole platform play.
Deals that competitors have one at the low level and we got up to senior levels. So they wanted everything on one platform and reversed that so that is really resonating and financial services had a good quarter.
Good quarter and.
So.
This is really as a portfolio approach its gives us a lot of stability and.
And it creates a very large tam and as I always say it's.
The reason that we're so bullish as we have a very large tam without a competitor that's really focused on the overall platform play.
And so.
So it's just early days there. So we're very fortunate from that point of view.
Okay, Great I.
I appreciate the answer there.
I guess, maybe two to.
To follow up I mean, I know the CSR D.
Regulations are so still fairly fairly new but I guess, what kind of impact is that beginning to have on.
On the pipeline and how youre thinking about that.
The new opportunities that are coming in.
ESG side is that having a meaningful contributor at this point to the top of funnel are you still primarily.
Executing against preexisting deals as we think about the.
<unk> provided for 2003.
Well you know it's your unit you hit the nail on the head. It's early days, we're getting lots of inquiries about it thats for sure.
Also the building out of the ESG team started in North America.
And we start there because it's cheaper and we have better this better infrastructure here.
And then we started building out the ESG go to market in Europe , a little later as I alluded to earlier. So we're seeing good traction there in terms of interest.
Team is coming up to speed CSR D is going to happen I mean, the EU is very committed to making it happen and youre seeing other countries.
I think Switzerland, the U K, Australia, everybody is going to do the same thing and we're gearing up studying the regulations from all the different countries that are that are going to start mandating this type of reporting.
And so that's why I keep talking about the Tam.
How has it started to feed our funnel, yes. It has started to feed the funnel in Europe .
But it's still early days and people know they have to do it.
And we even see that North America, the bantering, how ESG has become political and all that in and.
And what the FCC is doing but.
The boards in the U S and North America know that this was coming and they continue to.
Sure willingness to buy and invest in the whole program. So.
Yes.
Obviously the reason, we're so bullish on.
I was told them today in the whole company to meeting I said. This is the most optimistic I've been about where give us since we started the company 15 years ago. So it really really fortuitous events.
Perfect. Okay, that's great to hear I appreciate you taking the questions here.
Yeah.
Your next question comes from the line of Daniel Jester with BMO. Your line is now open.
Great good.
Good evening, everyone. Thanks for taking my question.
It's been clear from your commentary 2022 was a year of investment for ESG I, just wonder for 'twenty, three and 'twenty four how many more investments do we need to make here is that all sort of distribution and go to market or on the technology side should we be looking for more things that need to be in place.
In order to truly capture the opportunity that's in front of us.
Well.
First off let me say this about R&D in terms of percentage of.
Spend its peaked okay, it's going to start coming down now we haven't really good robust team.
<unk>.
They're going to be able to.
Sustain our goals in terms of products for some time.
So the bulk of the investment moving forward is distribution I mean, we have tens of thousands of opportunities with potential targets I think it's 50000 in EMEA.
There's a lot in the U S. Two in North America, and we're seeing some demand in APAC even.
So it's all going to be about account coverage ultimately in <unk>.
That's where most of the ESG investment remains.
But the product I think we have a good roadmap for the platform for Trc for ESG and with the resources, we have we're going to be able to do just fine there.
Got you. Thanks, that's helpful and then Joe maybe for you quickly maybe a little bit in the weeds here, but on stock based comp we've gone from 49 million to $71 million now.
$96 million in the guide and so that is growing way faster than revenue is there something we should be thinking about in terms of stock based comp is there some cyclicality to this.
Anything to kind of help sort of size the.
Outsize growth there would be helpful. Thanks.
Sure. So we do have sometimes one time adjustments within its dot com.
We have transitions within the team, but in general we continue to believe the stock comp is an important way that we reward and incent them and compensate our employees and it will continue to be a part of of how we.
I guess put together our compensation packages.
So you will continue to see it and in a similar.
And I would I would say.
But there can sometimes be a tiered question there can sometimes be a onetime adjustment.
Items that run through there let me, let me comment on that too I mean.
The layoffs and we're hearing about all of the.
All the avail.
Availability of labor now the people you want or employed for the most part.
And in this day and age to keep these top notch people. We have you have to give them incentives now it's going to fluctuate.
Year to year, depending on what we're doing but we had a lot of leadership changes over the last two years I think that had a lot to do with it. The first incentive you give them is larger and typically people leaving.
So affect the accounting so but in general you have to do that in this day and age to be competitive in and.
I think it's just very important.
Great Marty Julian Good luck. Thank you.
Your next question comes from the line of Mike Grondahl with Northland Securities. Your line is now open.
Thanks, and congratulations to you both.
Marty I think you mentioned when you win deals in the partner channel.
A higher win rate.
Bigger deals.
Could you directionally quantify that a little bit for us.
And then secondly help me understand a little bit why FCC was down.
Year over year.
And then maybe lastly, just sort of what's embedded for capital markets in 2023 guidance.
Yeah.
The first question is Directionally I really don't I havent looked at that data, so I'm, sorry, I can't answer that.
It is material they are bigger than the increase in win rate isn't material, but maybe you can give some of that color from Mike later, but.
What was the next part of the question.
Being down <unk> FCC being down just theres fewer new public companies, we're still doing really well on takeaways from the traditional printers.
And.
And foreign filers, but it's.
Just you just don't have as many new public companies coming in and you have less targets essentially let me be clear. The revenue is still growing its just the bookings were down year over year.
Our retention so high there or any any sales results and growth almost so.
And then what was the last question three questions are too much in my brain capital markets guidance.
Very little in there I've learned my lesson from the last time I made a comment.
We have very little capital markets capital markets as upside I will say this we closed a few ipos in the last few days. So I always have hope, but it's not built into the guidance. The guidance you know Australia someone wrote about that prior to this we.
We like to give the investors a baseline that some people call. It conservative [laughter], we'd like people to invest in numbers that they can feel really confident we're going to make or beef and so yeah. We we always behave that way and we're leaving cap markets, though.
Got it hey, thanks a lot.
Your next question comes from the line of Alex Skylar with Raymond James.
Your line is now open hi, thanks for taking.
Hi, Thanks for taking the question. This is John on for Alex.
And congratulations to Julie I, just wanted to start with ESG and it's great to hear all the color on ESG activities.
Marty alluded to in an earlier question, but where are we in terms of adoption for the ESG solution within the installed base and then what's the adoption curve look like to get to call. It 10, or 25% is that a one two year outlook or a five year really just any color there would be great.
Well.
In the.
We're very early days, we have several hundred logos and in the U S. We have.
How many logos not lose track having here in the U S. But 4000 in the U S. I believe something like that.
So we're well under 10% penetrated.
How long is it going to take us to get to.
2030, 40% is probably.
No.
18 months two years, two and a half im guessing now I hate to do that because you guys will read this back to poor Julie later, but.
It's hard to say, if the SEC rulings come out and they withstand the litigation that will go a lot faster, but we don't plan on that we're seeing plenty of demand without the SEC Reg So I don't know.
Think it's it's going to be hard for another company to come in and say, we're also going to report to the SEC with your ESG stuff and not.
They just it's a very natural thing.
Added onto their existing way, they do with the SEC and the regulatory environment.
Okay.
Perfect. Thank you that was helpful color there and I just wanted to ask one quick follow up here on the billings are and <unk>, they seemed a bit stronger than seasonal anything you'd call out with regard to timing or duration that impacted that number. Thank you.
Sure. So we did see as we talked about really nice bookings.
Bookings for Q4.
I'm very pleased by the results there and that then helps drive up our billings in Q4. So we're very excited about where that leads us going in 2023, and what we can do with that yes, we had record billings and.
Q4 by a significant amount we were really pleased with.
With the demand and the activity.
Thank you very much.
Your next question comes from the line of Brad Reback with Stifel. Your line is now open.
Great. Thanks, very much Jill quick point of clarification, the commentary on seasonal employees on <unk>, what's that related to.
Payroll taxes far one K match those types of things tend to be heavier in Q1.
You might recall last year was the first year that we had to borrow and K match in the U S and so that is something that is.
Yes.
<unk> two <unk>.
Do you think <unk> built into the plan and wanted to call that out for all of you.
Great. Thanks, and then Julie if I look at customers added this year, taking out parse port they were down a bit.
Versus last year.
Should we think about that going forward.
You can think about that as you think about our capital markets business, primarily the drop was due to that.
Sure.
That's great. Thank you very much.
Alright.
There are no further questions and this concludes today's conference call. Thank you for attending you may now disconnect.
Please wait the conference will begin shortly.
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