Workiva Inc Q3 FY2022 Earnings Call

Good afternoon, ladies and gentlemen. My name is Abby 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 November 2, 2022, at 5:00 PM Eastern Time. I would now like to turn the meeting over to your host for today's call, Mike Rost, Senior Vice President of Corporate Development and Investor Relations at Workiva. Please go ahead.

Good afternoon. And thank you for joining us for Workiva's third quarter conference call. During today's call, we will review our third quarter 2022 results and discuss our guidance for the third quarter and full year 2022. Today’s call has been pre-recorded and will include comments from our Chief Executive Officer, Marty Vanderploeg; followed by our Chief Financial Officer, Jill Klindt. We will then open the call up for a live Q&A session. Julie Iskow, our President and Chief Operating Officer, is also on the call. A replay of this webcast will be available until November 11, 2022. 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 fourth quarter and full fiscal year 2022. These forward-looking statements are subject to known and unknown risks and uncertainties. Workiva 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 today's call. We are pleased with our Q3 results, delivering revenue growth near the high-end of our quarterly guidance. Q3 subscription and support revenue grew by 19.9%. Total revenue grew 17.9% even after a 1.9% negative impact from foreign currency. For the full year 2022, we are targeting a total revenue growth of 20%. The strategic investments we've made in our platform and solutions over the past year are paying off. For the quarter, we showed continued bookings growth in multiple solution areas led by ESG. Global stats delivered a strong quarter with the signing of both new logos and account expansion deals. GRC also continued to deliver year-over-year growth. Demand for our ESG solution exceeded expectations. The market is investing in ESG well ahead of regulations to manage the disclosures for multiple stakeholders. During the quarter, we signed several landmark ESG accounts. A major auto company purchased our ESG solution to complement their current SEC and management reporting solutions. This opportunity was sourced by a large advisory firm. A major retailer expanded their use of our platform to modernize their ESG disclosure. This opportunity was sourced by a top accounting firm and was influenced and will be delivered by another large advisory firm. Additionally, one of the world's largest energy companies added our ESG solution, influenced by both an ESG technology partner and a big advisory firm, who will also be implementing it. We were also pleased with the continued growth in GRC. We have seen significant wins as customers recognize the value of our platform. For example, our European-based global telecommunications company purchased our audit and controls management solutions, influenced and implemented by a global technology consulting firm. A global investment management firm purchased the Workiva platform for operational risk management to address expanded GRC requirements. The addition of operas complements their existing use of the Workiva GRC platform. The continued focus on driving multi-solution adoption has propelled our growth. As organizations face increased macro uncertainty and cost challenges, the relevance of our platform becomes increasingly important. Our 5,500 customers trust that we will provide an innovative cloud platform fit for purpose solutions and customer support to solve their most complex reporting and assurance challenges. Market demand and customer loyalty continued to improve in Q3. Our organic revenue retention rate remains best in class at 98.1%. We continue to capitalize on our substantial growth opportunity outside of North America. In EMEA, our centralization efforts and focus on multi-solution selling produced strong bookings growth in the third quarter, building off the momentum reported in Q2. Last month, we hosted our first-ever hybrid customer user conference. We welcomed over 5,500 virtual and 1,700 in-person attendees. It was great to spend time in person with our customers and partners. Over 2,500 companies participated in this year's event, many of them new prospects. During the event, we showcased Workiva's innovative platform and solutions. We also shared the stage with many of our customers, who spoke about their successes with our platform and the value we bring to their organizations. 39 partners participated as session speakers, and 20 partners were conference sponsors. We also held another successful partner summit and recognized our 2022 Workiva Partner Award winners. Deloitte was recognized as our global partner of the year for their innovation, solution extensions, and delivery of clients' reporting transformation. PWC U.S. was recognized with the Partner Innovation Award. PWC continually invests in new platform innovations and accelerates the success of their global customers. In managed services, KPMG was recognized as America's Managed Service Partner of the Year. KPMG has built and delivered industry-leading service lines leveraging the Workiva platform. It was also nice to see many of you who joined us in person at our Investor Day. We appreciate you taking the time to attend and learn from our customers, partners, and employees. Some of the key themes communicated at our Investor Day include that we believe the demand for regulatory software is consistent and durable. We continue to invest in key platform capabilities and our growth solutions. We have entered a new phase in our operating lifecycle, increasing our focus on operating leverage. Our investment thesis is stronger than ever. Our TAM is intact and significant. Our platform is ready for these times. Our strategy is driving clear results. Our customer base is right for expansion, and our partner ecosystem is expanding and strengthening. Julie and I are aligned that achieving the proper balance between growth and operating leverage will lead to future margin improvement. We expect to return to a quarterly operating profit on a non-GAAP basis in the latter half of 2023. We remain confident that we will become a $1 billion revenue company and have the platform and the team to deliver on that goal. In closing, I'd like to thank our global team of dedicated employees, who continue to execute our strategy, take care of our customers and each other, and live by our company values. With that, I will now turn the call over to Jill.

Thank you, Marty. Today, I will review our Q3 operating results and provide Q4 and full year 2022 guidance before opening the line for questions. As Marty discussed, we have delivered another solid quarter, highlighted by a healthy beat on our operating margin. We beat Q3 2022 revenue guidance at the midpoint, and we would have exceeded the top end of guidance if exchange rates had stayed constant. We beat guidance on Q3 operating results at the midpoint by $4.1 million. Now let's go through some key results and highlights for Q3. We generated total revenue in the third quarter of $132.8 million, showing growth of 17.9% from Q3 2021. Subscription and support revenue was $118.6 million, up 19.9% from Q3 2021. New logos and new solutions both helped to drive strong revenue growth in Q3 2022. 66% of the increase in SMS revenue in Q3 came from new customers added in the last 12 months. Professional services revenue was $14.3 million in Q3 2022, up 3.5% from the same quarter last year. The increase was driven by higher XBRL services revenue. We added 160 net new customers in Q3 for a total customer count of 5,541, a growth of 1,395 customers from Q3 2021. Our total customer count includes 895 ParsePort customers. As Marty mentioned, our subscription and support revenue retention rate was an impressive 98.1% for the third quarter of 2022, an increase compared to 96.5% for the same period last year. With add-ons, our subscription and support revenue retention rate declined to 107% for the third quarter of 2022 compared to 111.1% in Q3 2021. As we discussed during our Q2 call, this metric is impacted by the lifecycle of our customers who purchased our capital markets solution during 2021 but have transitioned to a lower-cost ongoing ACB in the Q3 2022 calculation. Excluding the impact of capital markets, this metric would be about three points higher this quarter. Please note the ParsePort customers will not be included in our retention calculation until we have a full year of comparable data. The number of larger subscription contracts continues to show growth. In the third quarter of 2022, we had 1,257 contracts valued at over $100,000 per year, up 21% from Q3 the prior year. The number of contracts valued at over $150,000 totaled 676 customers in the third quarter, up 25% from Q3 2021. The number of contracts valued at over $300,000 totaled 214, up 21% from Q3 2021. Gross profit totaled $101.8 million in Q3, up 16.5% from the same quarter a year ago. Consolidated gross margin was 76.6% in the latest quarter versus 77.6% in Q3 2021, a net decline of 100 basis points. Operating expenses increased 33.7% from Q3 2021 due to investment in hiring, return to travel, and impact from Amplify, which was held virtually in 2021 due to COVID. We posted an operating loss of $8.4 million in Q3 2022, compared to an operating profit of $5 million in Q3 2021. At September 30, 2022, cash, cash equivalents, and marketable securities totaled $433 million, an increase of $4 million compared to the balance at June 30, 2022. Cash flows from operating activities in Q3, 2022 totaled $4.9 million, compared with an increase in cash of $16.3 million in the same quarter a year ago. Now turning to our guidance. Our current 2022 guidance assumptions are dependent on several factors that are subject to change, including the challenging macro environment. We continue to believe our assumptions are appropriately prudent for current conditions. For the fourth quarter of 2022, we expect total revenue to range from $139 million to $140 million. We expect non-GAAP operating loss to range from $5.7 million to $4.7 million, and a net loss of $0.10 to $0.08 on a per share basis. Our share count will be approximately 53.3 million weighted average shares. We expect operating cash flow to be negative in Q4 due to the timing of the payment of certain annual cash bonuses. For the full year 2022, we expect total revenue to range from $533 million to $534 million. We are improving our guidance for non-GAAP operating loss to range from $23.5 million to $22.5 million, or a net loss of $0.47 to $0.45 on a per share basis. Our share count will be approximately 53 million weighted average shares. For the full year 2022, we expect to post positive free cash flow for the sixth consecutive year. In summary, Workiva posted another strong quarter. Even with the challenges that we are seeing in the world today, we are confident in the opportunity ahead. We continue to experience broad-based demand for our solutions, and we remain committed to our strategy and are focused on capitalizing on our market opportunity. We will now take your questions. Operator, we are ready to begin the Q&A session.

Thank you. And we will take our first question from Andrew DeGasperi with Berenberg. Your line is open.

I guess it's completely understandable in terms of the guidance for the year. I was just wondering if you can elaborate a little more on what you're seeing in the fourth quarter so far? And I might be mistaken. But if I remember last year, you did issue a soft guidance for the next year. I was just wondering, is it the macro environment still relatively uncertain? Is that why one hasn't been issued?

Yes, thanks for that question. And that's always the elephant in the room these days. First off, what we're seeing in Q4, you asked about, and Q4 is going well. We're seeing better performance in Q3 at this point in time. We feel very good about the numbers we put out there. So all things considered, especially since capital markets, which represent some of our growth each quarter is pretty much dead right now, and the creation of new companies is minimal. So I'm really pleased with where we're at in Q4; all our other solutions are picking up the pace and keeping us in a good place. So I'm happy about that. We are seeing some macro things going on still in Q4. Every week I hear about some place that's clamped down on new spending, and so we're seeing some of that, which plays into why we're being cautious on 2023. We're going to provide that soft guidance next quarter, but we just want to see when things stabilize. You're in tune with it all too, right? What inflation is going to be, what the Fed is going to say over the next couple of months. I think once things turn, who knows when that'll be? But we'll see some firming up in the markets and spending. Luckily, we're in compliance, and we’re a solution that is still central to what people do. It's still very important and they really can't do without it. But we have seen some tightening of budgets that slows decision processes. We haven't lost deals because of lack of budgets; it's just been a slowdown. So relatively speaking, we are in a really good place as a mission-critical compliance platform for all different types of reporting. So we remain optimistic, and as soon as we feel things have solidified and we are starting up from the bottom, then I think we will be able to give a lot more pertinent guidance. My rule of thumb is, we give guidance, and if we miss it at all, you guys cut our heads off, and rightly so. So we are just going to be careful and give guidance when we are confident and not give guidance when we just can't tell what's going on. It's not anything internal; it's all macro stuff. Sorry for the long answer, but I knew that would be one of the biggest questions of the day.

And just to clarify, Andrew, we did reiterate the guidance on profit. We expect, as Marty said earlier, to return to that quarterly operating profit on a non-GAAP basis in the latter half of 2023. So we are reiterating that from what we talked about at our Analyst Day.

That's helpful. And Jill, maybe in terms of the non-current part, I noticed a sequential uptick. I was just wondering if this is just a function of more longer-term contracts being signed, or is there anything else that we should be aware of?

For billings, is that what you're asking about?

Yes. The non-current deferred.

Deferred, okay, to RPO. Yes. So that one is just related to exactly like you are saying. We have been moving towards more of those long-term contracts, three-year contracts, which we've discussed quite a bit where we're signing multi-year deals that are annual pay. That does impact that long-term RPO number.

And we'll take our next question from Alex Sklar with Raymond James. Your line is open.

Great, thanks. Julie or Marty, there was a lot of talk about partner influence deals in your prepared remarks. I'm curious about that backdrop; is there any opportunity to scale your own sales and marketing faster than you previously anticipated?

Alex, I didn't quite get the question. You said a lot of talk about partners, but are we also going to scale our direct team? Is that what you asked?

Yes, sorry. I'm losing my voice a little bit here. But yes, all the wins you mentioned seem to have a high level of partner influence. So I was asking if there’s any opportunity to scale your own sales and marketing costs faster?

So, scale them back?

Yes, or grow them by a slower amount than kind of what I've been anticipating.

I see. Well, I mean, I think when you get to scale and you try to look for operating leverage, partners become a very important part of it. When partners bring leads, the cost to secure new customers goes down and the size of the deal goes up. We are definitely putting more focus on partners; that was the whole intent of those examples. Yes, I think over time, we will see a trend where we see more and more coming from partners and less and less from our direct sales force. I will say this: I've never seen a real successful SaaS company to date where partners could do it all alone. You always have to have a balance. We're making great progress; we're still going to get a lot more out of our partners than we are now, and we're seeing that, so we're very optimistic. What excites me about the partners is they can see the opportunity now. They can really see it. They get two or three dollars at least from every dollar we get, usually more than that. And so, that's the really encouraging thing. We're seeing a lot of uptick from them. Julie has done a fantastic job of pushing that, so I think you will see a lot more leverage.

I appreciate the comments about the strong ESG bookings, even without the formal rules. I'm curious, are you seeing any pause from customer behavior with the SEC going back to the comment period or any color broadly on what you're hearing as far as the timeline for formal rules around ESG?

When formal rules come out, the way we look at and model the world is going to be an upside for us, so to speak. But that being said, as I mentioned in the first question, we're continuing to see solid interest and demand for our ESG tool. It's surprised me after just one year of selling how well we're doing in that product line. The resolve of customers is coming from different places. I think regulation is going to be the last driving factor. Frankly, I think they realize that customers who buy their products care now, the capital flow obviously cares, the flow of capital and the owners of their company, ultimately, and the board. So the boards care, and I can’t tell you how many times I’ve heard someone say, "Our board said we have to do X, Y, Z." So, I think regulation will sort of be the cherry on top when that comes for us. But I really see most of that demand being driven out of the different constituents I just mentioned: the customers who actually buy the products, the capital flow, and then ultimately, the boards. My purchases are based a lot on corporate behavior now, and I think that’s only going to accelerate. Most companies agree with that; that is going to be what happens.

We'll take our next question from Joe Meares with Truist. Your line is open.

I'm curious if you are seeing any benefit from vendor consolidation in the current environment, given the breadth of your platform and with budgets coming under some pressure.

Joe, when you say any benefits from vendor consolidation, tell me what you mean by that?

Just buyers going from using a bunch of different individual solutions to your platform.

Yes, I'm sorry. Yes, absolutely. I mean, we live that every day. I think we've picked out over 200 SaaS apps in our small company, and so we're really trying to choose the winners in terms of providing platforms. I don't know exactly what the drive is. I think that's one of them, because I feel it from colleagues I talk to as well. But we're seeing a lot of resonance with our platform, and we're transitioning everything we do to platform selling now. We've been an application or solution seller for quite a while, and we’re in the midst of that, and it’s resonating. Customers want to have one platform for reporting and assurance, and all sorts of reporting—financial, ESG, multiple entities, which is the GSR—and then they want to assure all those and make sure they have all the different assurance controls management audit, all those on the same platform, and that is definitely resonating. Is it partially because of the vendor consolidation? Probably, but I can't tie it to that for sure. We're definitely seeing more interest in platforms and less interest in buying apps. That's how we're behaving too, so I see it internally in our own company.

That’s really helpful. I also wanted to ask about the product side; I think you launched a mobile solution recently, and some of the customers who spoke with me at Amplify were pretty excited about that because the C-suite comes into meetings and they want to look at stuff on their iPads. So, I’m curious if you’re seeing any initial traction from the mobile app?

I'll let Julie answer that.

We had a mobile app over the years, and it wasn't something that our customer base really embraced and utilized. But we did reboot it. We showcased it at Amplify, and we're putting it in the hands of customers now. Early on, the reception has been positive, and we see the demand for it and the requirements coming in much stronger than in past years. So, we're very enthusiastic about rolling it out and the capabilities that it will have, and the uptake from customers.

I would just say Julie's really pushed that with the product team. We're so proud of our modern platform. A modern platform better have that component, and she's done a great job of getting that product to a really good place.

And we'll take our next question from Patrick Schulz with Baird. Your line is open.

You touched on the multi-solution strength quite a bit in your opening remarks. Could you just provide some additional color on the trends we're seeing in light of the current macro environment? Are you seeing a better uptake in multi-solution deals from your larger customer cohorts, or is this pretty broad-based across all customers? In relation to the partner channel, are you seeing these partner-led deals impact the mix of multi-solution deals?

I'll let Julie answer that one too. She's right in the thick of it every day.

On the multi-solutions, there are some patterns. We tend to see, certainly, with our GRC suite of solutions, we see multi-solutions emerging there. We have a number of capabilities there, such as controls and audit risk. So we do see multi-solution engagement there, and then the trend in the market around controls, GRC with other capabilities like ESG is something we are working towards. Absolutely, that is the goal of getting sourced deals and continuing to sell broader multi-solutions with our partners.

Regarding ParsePort a little, can you just talk about the current demand environment in Europe and if there are any notable inter-quarter trends you want to call out? And for ParsePort specifically, can you provide additional color on the cross-sell and up-sell opportunity you have, especially in light of the current macro?

Well, the first off, the ParsePort acquisition had three primary drivers. One you referenced is the cross-sell, and we are just starting to ramp that now. We have had some success already moving some of those accounts. In terms of the macro in Europe, the word on everyone talking is, it's worse in Europe than here—higher inflation, all that stuff. We have not seen a larger downturn there than we have in the states, and one in the states is not that great yet. 2023 will be interesting to see how the budgets look, but we are seeing similar, not widespread, but some slowing down of deals in both markets and it's roughly the same. We don't see it any harsher, but like I said earlier, we are mission-critical and regulatory. In Europe, they are even more regulatory than we are. I think we are a little immune from that in some ways, but so not a lot of difference there. And then, ParsePort—the European mandate for ESEF is an annual mandate. We haven't really seen a lot of uptick in new selling there; we are just getting into that season now. It's just starting. We have done a nice job of dealing with our existing customers there because they need new capabilities for the new requirements. There are new requirements for the next several years, so we are seeing a lot of goodness there in terms of dealing with partners to sell them new capabilities, and we're starting to see the beginning of the cross-sell. We are still very pleased with that acquisition—a great team, great product. It's going to broadly serve the low-end when someone has to tag a PDF. It's the perfect thing to just grab it and tag it. For all the ESG reports, small companies will have to do it, and it's really got a long tail on the benefits for us.

And we will take our next question from George Kurosawa with Citibank. Your line is open.

Hi, thank you. This is George on for Steve. First question: you talked about kind of slowing deal cycles that echo some comments you gave last quarter. Curious if you could just compare and contrast what you're seeing in terms of trends. Would you say things have deteriorated slightly, or is this kind of more of the same?

Hi, George. Yes, I mean, I know you're trying to compile a view from talking to a lot of people, and I'll say this: it’s really anecdotal so far, it's here and there. If it’s gotten worse between Q3 and Q4, it's just marginal; it isn’t a big change. I think the budgets they have intact now, and some are being pulled back a little bit, but the real test will be in 2023 when we see what the new budgets look like for our customers. When we do our job selling and we explain and convince customers who actually save money using our solution, they just have to get up the transition hump of buying and implementing, then see the return a little later. We remain optimistic in 2023, but between Q3 and Q4, not a ton of difference, no.

And then a quick follow-up on the FX impact; I understand you had a 2% headwind. Presumably, you had some headwinds built into the guide already. So I guess what’s more is, what was the amount of that that was incrementally surprising?

Yes, we always have to plan for some amount. But I think you're hearing this probably from a lot of other companies that Q3 did have a pretty significant impact. As we talked about on the call, we would have beaten the high end of our guidance, had it not been for the currency impact.

And we will take our next question from Adam Hotchkiss with Goldman Sachs. Your line is open.

Good afternoon, and thanks very much for the questions. Marty, great to see the progress on ESG. Could you give us a sense for how your thinking has evolved around the go-to-market for the product given your early demand signals? Just wanted to get a sense for channel performance across new lands versus cross-sell, as well as partner channel versus direct? And also to that point, what do the profiles of customers who are moving more quickly on this typically look like?

Okay, I'll try to get all those. If I forget one, Adam, let me know. I would say that the deal sizes are coming in larger than we anticipated, and there’s partners involved in a lot of these deals. The partners have jumped headfirst into the ESG arena, viewing us as a premier starting point. We’re getting a lot of referrals from partners. We've really targeted our customer base initially because we want to get the biggest footprint as quickly as possible since we view this as a land grab, and I think we're being successful in that. We're getting a lot of deals in our customer base, and we'll be able to use those references and those numbers as we expand into other areas to justifiably be the leader in ESG reporting, which we believe we already are, but that will only continue. I think you asked about geographic performance. We’re heading into North America, because it takes longer to hire in Europe; it takes a lot longer to hire sellers there. But they're coming up to speed, and we're starting to see much more activity this quarter in Europe, actually, and getting some nice deals out of there too. It's really a mix of direct and partner. We're a few months ahead in North America just because of what I alluded to, but we are seeing Europe becoming a stronger market compared to the U.S. simply based on the fact that the EU takes this much more seriously.

And then, just a quick follow-up for Jill. When you think about the margin ramp and how that’s progressing, I think your profit was a little bit better this quarter than we expected. What were the drivers there? Is there any impact on hiring or expense plans given the current macro?

Sure. When we came into this year, we talked about making these investments specifically around executing our strategy. So coming to the end of the year, we are slowing down hiring and listening to the market. As we shift, have you all care more about margins as opposed to just focusing on growth? We still are balancing that growth to margin picture and making sure that we are making decisions now that will allow us to be successful in reaching and achieving the guidance we've given already for 2023 around getting that quarterly profitability towards the end of next year.

I would just add that I realize communication takes a lot of repetition. But to echo what Jill said, this has been our plan all along. Invest in 2022; we were clear that mainly for ESG, but also for capital markets. The capital markets investment has not shown a return yet. We’re making great strides in law firms and companies that will go public someday. So, we’re building backlog with that investment. These were things we also said that we would shift back to leverage in 2023. We really haven't changed much. We did reduce some investment at the end of this year because of pressures in the market. I believe strongly in growth, because in SaaS companies, you can cut cash flow and margin anytime you want, but I'd rather do that when we're bigger. We are still focused primarily on growth, but we’re going to be very, very thoughtful about our ability to perform and also maintain and improve margin as we go forward. That’s why we've made the commitment for the end of the year.

And we will take our next question from Brad Reback with Stifel. Your line is open.

Marty, maybe following up on that last series of commentary. What, if anything, would make you move faster on the profitability side?

You mean, externally or internally?

What, if anything? It's your choice.

Well, I mean, if the macro got a lot worse, but our retention is very high. When we see a downturn like this, we see a reduction in growth; we don't see our revenue shrink. We’re still going to post a healthy increase in revenues this year and next year. That’s our main focus. We do think we’re at a natural size now. With some of the things I've alluded to, the maturing of the partners and the platform, there’s a whole bunch of things going on in our lifecycle that are going to make creating leverage very feasible and very attainable at the right time in our growth cycle. ESG is a generational opportunity for this company; we had to bite the bullet one year and spend money, and I would not change that decision at all. But in general, in our previous quarters, we were showing profit and reinvesting a lot of it, but we put some of the profit into the bottom line. That’s the way we’ll move forward over time. But we will focus on operational leverage, however, our primary focus is growth. We want to get to a billion as quickly as we can, because if someone wants cash flow, we can produce a lot of cash flow in a short order, twice what we could produce now.

And then maybe a more strategic question. Late in the quarter, there was a Bloomberg story that you potentially had been approached by some PE firms. How do you balance the need to stay public versus the optionality that could come from being private?

Well, this is my GC answering now. We really can't comment on rumors. But I’ll say this: we are a great company. We think we are on the upswing. We don't think we are broken. Typically, PE firms, to make their model, have to buy companies cheaper than what really good companies are trading for. We think we have a ton of upside as a public company, especially where we're trading now. We're going to continue to grow around that plus or minus 20% mark, and that in and of itself provides a hefty return for investors. If our multiple increases, there is more there. We are really bullish on our future, and it doesn't surprise me; PEs are all over. We talk to them all the time. I learn a lot of good stuff from PEs, but rumors will certainly arise when the prices are down on SaaS companies, and we have seen a lot getting taken out. But we think we are a very healthy company with a lot of upside, which gives us our optimism and our drive to continue.

And we will take our next question from Matt Stotler with William Blair. Your line is open.

Hi there. Thank you for taking the questions. My first question is about how you are seeing the renewal pipeline for the next 12, 18 months. If we go back to 2019, 2020, the time when you were moving people to the new pricing model, moving customers to the platform, I would love to get some color on the average duration of those contracts. As you contemplate anyone on a three to five-year contract renewing in the coming years, what are your thoughts on the ability to adjust pricing or upsell or do different things that you could see as potential opportunities as you move through that period?

Well, again, I’m a big lifecycle of company guy. If you do things when you mature enough and are good at it, certainly renewals have never been hard for us, but we've never really taken advantage of them as we should. This year, one of the initiatives we have is to engage renewals sooner than later, and have a very structured program in terms of how you price things, even what the price increase would look like compared to adding a new solution, for instance. We’re starting this in a limited basis and have had some success. We're going to roll it out and really, as we mature as a company, continue bringing in these types of programs. So, I'm optimistic that renewals are going to drive us now that we've taken a different approach. Roughly half of our contracts are three-year contracts, and that’s going up every year. We prefer those three-year contracts just because of workload and the lack of buying decision opportunity from customers and engaging them early to help them get more value out of our platform. We’re getting to a good place on using that as a lever.

Got it. That’s helpful. And then maybe just another follow-up on the international markets. Obviously, you’ve talked about some of the sales changes you are making there. Any updates on how that’s progressing forward, whether that's what you're seeing that is resonating with customers in terms of the approach and how you expect that to progress going into 2023?

Yes, I’m really bullish about EMEA in 2023. Obviously, we have to fight the macro issue, so that might slow it down some. But there’s a huge opportunity there. The centralization efforts that Julie executed have really paid off. We’ve got a good strategy, good execution cadence. We have several very significant solutions we’re taking to market there, including our IR solution, our financial reporting solution, and ESEF, as well as ESG. There’s almost as much opportunity there as in the states, and it's more greenfield with a ton of whitespace. We're optimistic about the internal changes we've made, and I just see that as one of our bigger opportunities moving forward.

We will take our next question from Mike Grondahl with Northland Capital Market. Your line is open.

This is Mike Grondahl. Thanks for taking my question. First, regarding ParsePort: last quarter, you mentioned it had $1.7 million in revenue and $500,000 in services. Do you have those figures for this quarter?

So for Q3, ParsePort revenue was $1.4 million for those 895 customers. They do have fewer services in Q3 compared to Q2, so that’s the split quarter-over-quarter.

Got it. Just a reminder that it’s going to be more seasonally strong in the fourth quarter, first quarter for the customers and that kind of ramping?

Certainly, they tend to have more activity around filings. As companies are thinking about those filings for ESEF into Q4 and then as the actual activity is happening in Q1 and Q2 timeframe. There’s some seasonality there to their numbers.

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