Good afternoon, ladies and gentlemen. My name is Emma, and I will be your host operator on this call. After the prepared remarks, we will conduct a question-and-answer session. Instructions will be provided at that time. Please note that this call is being recorded on February 21, 2023 at 5:00 PM Eastern. 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 Fourth Quarter and Fiscal Year 2022 Conference Call. During today's call, we will be discussing the results announced in the press release that was issued after the market closed. Today's call has been pre-recorded and will include comments from our Chief Executive Officer, Marty Vanderploeg; Julie Iskow, 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. 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. 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 us today. I know you have likely seen the exciting news that Julie Iskow will be taking over as CEO on April 1. Before I turn the call over to Julie and Jill, let’s discuss our fourth quarter and full-year performance. For the quarter, Workiva 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 3.3%, 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 2021 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% in 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 are seeing in ESG is outpacing the slowdowns we have seen in capital markets and SEC. Our strategy and investment in ESG is paying off. In Q4, our global sales and marketing initiatives continue to grow our pipeline and generate new business. We added 123 net new logos during the quarter, bringing our total customer count to 5,664 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 delivered strong growth in multiple solution areas led by ESG. Our financial services and GRC 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 GRC solution suite enables organizations to identify, track, and manage risk to drive principled performance in their businesses. Workiva offers the only assured integrated reporting platform that brings Financial Reporting, ESG, and GRC 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, GRC, and financial services. We were the only ESG solution considered by the customer because of our platform's stringent data security, ability to connect the data sources, and assurance capabilities. A large multinational supply chain management company added GRC to their existing Workiva solution portfolio that included SEC, management reporting, and ESG. This opportunity was influenced by a Big 4 advisory firm. ESG has quickly become a key component in many solution expansion deals. Early returns show that customers spent significantly more on ESG than on our SEC solution. ESG 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 the Workiva platform for their global ESG reporting. This client will be using ESG in coordination with their SEC and global statutory reporting solutions. We had a new ESG logo win with a global technology solutions provider. This private company has sustainability as a core tenant of its business strategy. The deal was a co-sell with a Big 4 advisory partner who will also deliver the project. Another new logo win during the quarter was an EU-based manufacturing company that purchased ESG along with our annual reporting solution. This private enterprise will be advised by a Big 4 partner who will also deliver the project. Our advisory partners 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 50,000 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 a fiscal year 2024 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 SEC 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. Your focused efforts throughout 2022 have helped advance Workiva, strengthen our culture, and produce strong financial results. Our technology, our products, and our people are unrivaled. It has been an honor to lead Workiva in many capacities over the last 15 years, the last five as CEO. We first started out in 2008, launching our first SEC solution soon thereafter. Today, Workiva offers the world's leading cloud platform for assured integrated reporting, and our 5,500 customers now include 88% of the Fortune 100 and 81% of the Fortune 1000 companies. Workiva has always been more than just a 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. Workiva's best days are still ahead, and will be in great hands with Julie as CEO. Since day one of her arrival, she has made our organization better. She has spent the past three years thoughtfully building and shaping our remarkable leadership team and executing on our strategy. In my new role as Non-Executive Chair of the Board, I will continue to support and champion the executive team. I'm so proud of what we have 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 you. Workiva is 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 Workiva's legacy forward into our next phase of growth and impact. Marty and I are aligned on Workiva's core principles and values: a 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 in productivity through the focused execution of our strategic initiatives. Before I turn the call over to Jill, 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 was 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 this significant market opportunity. Third, we are the only company that brings Financial Reporting, ESG, and GRC together in one controlled, secure, audit-ready platform. Our platform and our technology have never been more relevant given these times of increasing stakeholder scrutiny. And finally, our loyal global customer base continues to realize the value of our platform and our differentiated capabilities. This leads to further account expansion, higher contract values, and strong customer revenue retention rates. We remain bullish on our future opportunities as we continue to address our large and untapped $25 billion TAM. With that, I'll now turn the call over to you, Jill.

Thank you, Julie, and congratulations. I'm excited to continue working alongside you and the rest of the Workiva team as we execute on our strategy and advance Workiva 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 line 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 Workiva, 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 contributions across our solution portfolio. We beat Q4 2022 revenue guidance at the midpoint by $4.4 million. Both S&S and higher services revenue accounted for the beat. We beat guidance on Q4 operating results at the midpoint by $10 million. The revenue performance, along with lower T&E 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 20.7% from Q4 2021. New logos and account expansion both helped drive strong revenue growth in Q4 2022. 56% of the increase in S&S revenue in Q4 came from new customers added in the last 12 months. Professional services revenue was $17.9 million in Q4 2022, up 8.7% from the same quarter last year. The increase was driven by higher XBRL services revenue. We added 123 net new customers in Q4 for a total customer count of 5,664, a growth of 1,349 customers from Q4 2021. Our total customer count includes 922 ParsePort customers. As Marty mentioned, our subscription and support revenue retention rate was a 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 but have transitioned to a lower cost ongoing ACV in the Q4 2022 calculation. Excluding the impact of capital markets, this metric will be 240 basis points higher in the fourth quarter. Please note that ParsePort 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 1,345 contracts valued at over $100,000 per year, up 20% from Q4 the prior year. The number of contracts valued at over $150,000 totaled 718 customers in the fourth quarter, up 24% from Q4 2021. The number of contracts valued over $300,000 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 compared to an operating profit of $2.2 million in Q4 2021. At December 31, 2022, cash, cash equivalents, and marketable securities totaled $431 million, a decrease of $2.2 million compared to the balance at September 30, 2022. 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 were cash flow positive for the sixth consecutive year, delivering $11.3 million in cash from operating activities. Let's now turn to our guidance. We continue to 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, a net loss of $0.23 to $0.21 on a per share basis. Our share count will be approximately 53.7 million weighted average shares. We expect Q1 services growth 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 $0.13 to $0.10 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 improved 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 the 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 our significant long-term opportunity and 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 GRC 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. 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, and I 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 with on the macro environment, in your prepared remarks that really sound like there are kind of a couple of things going on. On the one hand, Marty, you called out elongated deal 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 you're seeing in the macro? Has that pace for ESG continued here in the start of the new year, and how that macro played into your guidance? And then I had a quick follow-up. Thanks.

Sure. Thanks. I'll say this, the macro is definitely out there. We feel some. Like I said in the prepared remarks, we do see occasionally deals extending a little bit. But our platform is regulatory, and it's mission-critical stuff. So the thing that really dinged this, I think we sort of beat it to death was really the SEC and the capital markets. Those two markets were down for us. I'm actually very pleased we made our forecast way back from November of 2021 even when the macro hit us. And that was all based on 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 off. In the fourth quarter, we were like 85% over our planned number in bookings. So the Boards know ESG is real. Europe knows it's real, and we're really seeing, like I've always said, a generational opportunity for us. So the macro is there. It doesn't affect us that much other than capital markets and SEC. So we're pretty bullish about next year, frankly.

Great. Okay. Thanks, Marty. Appreciate that. And Jill, just one follow-up for you. And appreciating your commentary relative to the trajectory of operating income throughout the whole year. The full-year does come in a little bit below, I think, Street expectations. And just wanted to get a finer point on some of the variance relative to our model. Is that – I know you mentioned the return of in-person events. Are there other things going on? I know you guys 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 you're thinking about it relative to that, the losses in the first half of the year and the overall year would be great. Thanks.

Yes, definitely. Thanks for the question. So we do see some amount of, as I 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 in Q1 in 2022. And as we move into a hybrid environment, we're making – taking great care to get our teams together. And so we had an in-person sales kickoff event, sales and marketing kickoff event in Q1 of 2023. And we're also going to be holding an in-person development team event in Q1. Those are things that were not in last year, but we do expect them to be all going forward as a way to bring teams together. It's really important for us. T&E is a piece of the spend that we're seeing into 2023, so it's in that guidance. The other piece of that, we talked briefly about some of the seasonality in employee expenses. As we hired, we talked about all the investments that we were making in 2022. Some of that hiring happened later in the year, so you don't see the full-year impact until you go into 2023. That's another piece of it. I know what you'll hear from Julie going forward is that we're still very invested in our business. We use the resources that we need to in order to execute our strategy and this opportunity. We're being very careful in using the leverage that we have in our business. But there is some amount of return to travel in there that, otherwise, we're moving towards our long-term operating model and still very much believe in those numbers.

I just want to add on that a little bit. In November of 2021, we told everyone we were going to invest in ESG for the obvious reasons that we've beaten to death. In response to general macro stuff and investor sentiment, we did reduce that investment in Q2 – I'm sorry, Q3 and Q4 of 2022. We slowed down, I think we – about one-third of that investment, we actually pulled back sort of at the request of the whole investment community. We streamlined our core business that we've had a while and moved some of that resource over to ESG. Julie has been doing a wonderful job streamlining and putting efficiency in. But the fact of the matter is not all SaaS companies are created equal, and we just happened upon a very big piece of TAM that we're in the very early days, and we're just showing tremendous demand and success there. We understand the desire and demand to go back to more profit. We're heading that way, starting in Q2. Q1 looks worse than it is just because of some one-time events and other things. We have a good plan put in place to continue to let the investments we made in 2022 show their return and then also tack towards profitable growth. We’re very comfortable where we are. We didn't want to just pull the plug right away after just hiring and training all those people. We're just very thoughtful and careful, but we're right at the beginning of the TAM, a large greenfield opportunity where we have the right to win. We have the best solution, and we're winning very – I think we have a significant part of the Fortune 1000 already in the U.S. using 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.

Your next question comes from the line of Andrew DeGasperi with Berenberg. Your line is now open.

Thanks for taking my questions. Julie, congratulations. Marty, I hope congratulations to you as well. And 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? I guess, to sound obvious, I mean it sounds 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 3.5 years. She was hired with the intention of taking over from me. It's a very complex business we had, and she's got a really good handle on it. She's been doing operations that whole 3.5 years and is really ready. I have 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 it in an orderly way and protecting the outcomes of the company and certainly protecting investors. So we think it's just the right time. Nothing really precipitated it.

That's helpful. And then in terms of Europe, I just wanted to ask, you put in leadership there, particularly on the go-to-market side. Maybe can you give us an update in terms of what's going on there? And it sounds like all the investments you're making for the year are unrelated to that, but just wondering if there's anything that you want to elaborate on from that region.

Well, I would say this, the hiring in Europe is slow, right? I think we hired our new VP of Sales there several months ago, he couldn't get out of his 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. We've done some changes in our sales teams there. We've streamlined it. We have a really good team, and they're starting to get the hang of it under his leadership. We've had some pretty good quarters here the last couple of quarters. We have work to do there, no doubt. But it's a huge opportunity. With CSRD, the whole sustainability reporting, ESG reporting that has been mandated in Europe, we think we'll be ready for that. Overall, I'm still very bullish on Europe.

Well, thanks. I'll get 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. I echo my congratulations to Julie on your new role and wishing Marty all the best going forward. I 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. I think with CSRD and ParsePort and a number of the investments you've made there, it's pretty clear that there's 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 ultimately play out?

That's a good question. We really see 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. That's when leadership has had time to figure out everything and CSRD is becoming very real. A lot of things are going on then. We're still building the ESG distribution team. 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. That’s all in progress right now. We'll start to see a return for that by the third and fourth quarter of this year.

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 as an opportunity?

The big guys are more focused on carbon accounting. Carbon accounting has, in and of itself, a huge TAM. I mean there will be carbon markets. We're still seeing them primarily focus there. The new disruptors, we see them in accounts now and again. We haven't had issues in terms of win rate against them. I mean we might have lost one to each one of them or something like that. Usually, it's for some pre-relations. 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 far, the disruptors are not disrupting, but that's why I felt an 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 overperformance this year really surprised us, and the pipeline continues to expand rapidly. So 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.

Hey, everybody. Thank you for taking the questions. I'll start off by echoing the sentiment from everyone who asked questions so far. Congratulations, both Marty and Julie. Marty, it's been great working with you, and Julie looking forward to continuing to do so. Maybe the first question here on the net retention. It's nice to see that tick up sequentially in the quarter. Obviously, Jill, you gave big color around the year-over-year comps. As you think forward into 2023 and then the role that NRR 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 within NRR going forward, right? Obviously, it seems like ESG, GRC are going to be kind of key components there, but any other thoughts would be helpful.

Yes. We intend to, of course, expect to maintain our base retention and then thinking about how we can expand that with the impact of – especially related to add-ons and the capital market's impact on that metric. We do expect it to be able to keep returning to some of our historical levels, but we're very encouraged by our ability for our customer success teams to keep our customers happy, and all of our development teams to keep our platform relevant and valuable to our customers. We really do think that we can keep maintaining that best-in-class retention metrics.

I would add that the platform play is really working. I talked to several customers a day or prospects, and when you explain our vision for the future and where we're investing and how that adds more value for them, it resonates. We're going to see, as we did this quarter, a lot more add-on deals and customers pretty much using the platform for almost everything that we have. So I think that is what's going to help bring that number up.

Got it. It'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 4 consulting firms. We'd love to just get a broader update on your partner enablement effort as you look forward to 2023? And then maybe any observations in terms of getting to the point where partners are? You're seeing use case creation at partners and how that motion is moving forward.

Sure. 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 both deal sourcing and co-sell motions. Importantly, we leverage their deep relationships with our customers to help us communicate the value proposition to the C-suite of our prospects. Wherever they're involved, we have higher deal sizes and higher win rates. 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. They help our customers recognize even more value from our platform, which can also help with that retention rate. So partners allow for accelerated S&S for us, and we're going to continue to leverage them across the portfolio of solutions we have. We're looking forward to stronger engagement at all levels of the partnerships.

Yes. The sign – the thing I like is that, as 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 services burden is being reduced. In fact, part of the reason our growth in Q1 is down is because I think we're almost flat on services revenue quarter-over-quarter. That took several points off our growth rate in Q1. 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 Meares with Truist. Your line is now open.

Great. Thanks for taking the question, and congrats, Marty and Julie. A question for Julie, at a high level, what's your biggest focus for 2023? Is it growth or profitability or maybe something else?

We are going to continue executing on our strategy. Those four growth levers that we talk about are fit for purpose solutions. Our platform, of course, as Marty described the platform play and excellence across the globe and our partners’ ecosystem that we just described. So those are the four areas of focus for us for growth. We're, of course, looking at ESG and selling that trio of ESG along with financial reporting and along with our GRC 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 ParsePort? Is that kind of like half the growth? And then I guess any commentary around ESG regarding growth coming from current customers versus new customers? Is the runway within that 5,000-plus customer base still very large? Thanks so much.

Yes. We continue to have broad-based demand across our solution portfolio and really do have contribution from across all solutions in our growth and revenue. As we talk about related to Q4 and ESG, it was our fastest-growing solution in Q4. This is a result of the investments that we made in 2022. It's on a smaller base compared to some of the more long-tenured solutions, but we're looking forward to continued growth from ESG, but really will have contributions 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 taking the questions and congrats again on everybody for the new roles here. I guess maybe to start, really appreciate the commentary on the bookings, our performance on the ESG side in the quarter. I guess, how should we think about the other parts of the portfolio and maybe how they executed versus your expectations going into the quarter here?

Sure. As we mentioned, ESG was the top booking solution in Q4 and Q3, really 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 had a very good quarter. That's partially because we've just continued to enhance the product, create more value. We've gotten better at selling it. The other key part of that is the whole platform play. We had deals that competitors had won at the low level and they got up to senior levels. They wanted everything on one platform and reversed it. This is really resonating. Financial services had a good quarter, had a really good quarter. It’s really a portfolio approach that gives us a lot of stability and creates a very large TAM. As I always say, that's the reason that we are so bullish is we have a very large TAM without a competitor that's really focused on the overall platform play. So it's just early days there. We’re very fortunate from that point of view.

Okay, great. I appreciate the answer there. I guess maybe to follow-up, I know the CSRD regulations are still fairly new. But I guess what kind of impact is that beginning to have on the pipeline and how you're thinking about the new opportunities that are coming in on the ESG side? Is that having a meaningful contributor at this point to the top of the funnel? Or are you still primarily executing against preexisting deals as we think about the guidance provided here for 2023?

Well, you hit the nail on the head. It's early days. We're getting lots of inquiries about it, that's for sure. The building out of the ESG team started in North America. We start there because it’s cheaper, and we have better infrastructure here. We started building out the ESG go-to-market in Europe a little later, as I alluded to earlier. We're seeing good traction there in terms of interest. The team is coming up to speed. CSRD is going to happen. The EU is very committed to making it happen. You're seeing other countries, like Switzerland, the UK, Australia, and everybody is going to do the same thing. We're gearing up studying the regulations from all the different countries that are going to start mandating this type of reporting. That's why I keep talking about the TAM. 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. We even see that in North America, the bantering, how ESG has become political and all that and what the SEC is doing. The boards in the U.S. and North America know that this is coming; they continue to show willingness to buy and invest in the whole program. Yes, that's obviously the reason we're so bullish. I told the whole company in the meeting, this is the most optimistic I've been about Workiva since we started the company 15 years ago, so really fortuitous events.

Perfect. That's great to hear. I appreciate you taking the questions here.

Your next question comes from the line of Daniel Jester with BMO. Your line is now open.

Great. Good evening, everyone. Thanks for taking my question. I think it's been clear from your commentary, 2022 was a year of investment for ESG. I just wonder for 2023 and 2024, how many more investments do we need to make here? Is it all sort of distribution and go-to-market? Or on the technology side, should 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, it's peaked, okay? It's going to start coming down now. We have a really good robust team, and they're going to be able to sustain our goals in terms of products for some time. The bulk of the investment moving forward is distribution. We have tens of thousands of opportunities, potential targets. I think it's 50,000 in EMEA and there's a lot in the U.S. too, in North America, we're seeing some demand in APAC even. It's all going to be about account coverage ultimately, and that's where most of the ESG investment remains. But the product, I think we have a good roadmap for the platform, for GRC, for ESG and with the resources we have, we're going to be able to do just fine there.

Got it. Thanks. That's helpful. And then Jill, 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 to now over $96 million in the guide. That's 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 outsized growth there would be helpful?

Sure. We do have sometimes one-time adjustments within stock comp if we have transitions within the team. But in general, we continue to believe that stock comp is an important way that we reward, incentivize, and compensate our employees. It will continue to be a part of how we, I guess, put together our compensation packages. You will continue to see it in a similar growth load, I would say. But there can sometimes be – to your question, there can sometimes be one-time items that run through there.

Yes. Let me comment on that too. I mean the layoffs and we're hearing about all the availability of labor now. The people you want are employed for the most part. To keep these top-notch individuals, we 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. Usually, people leaving also affect the accounting. But in general, you have to do that in this day and age to be competitive. It's just very important.

Great. Marty, Julie, good luck. Thank you.

Your next question comes from the line of Mike Grondahl with Northland Securities. Your line is now open.

Thanks. Congratulations to you both. Marty, I think you mentioned when you win deals in the partner channel, you have a higher win rate, and they're bigger deals. Could you directionally quantify that a little bit for us? And then secondly, help me understand a little bit why SEC was down year-over-year. And then maybe lastly, just sort of what's embedded for capital markets in 2023 guidance?

Well, the first question is, directionally, I really – I haven't looked at that data, so I'm sorry I can't answer that. It is material. The increase in win rate is significant, but maybe you can get some of that color from Mike later. The SEC being down, there are fewer new public companies. We're still doing really well on takeaways from the traditional printers and foreign filers, but you 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. It's just the bookings were down year-over-year. Our retention is so high there, any sales results and growth are almost guaranteed. What was the last question? Three questions are too much for my brain.

Capital markets guidance.

We have 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 are upside. I will say this: we closed a few IPOs in the last few days. I always have hope, but it's not built into the guidance. The guidance, you know us, right? Someone wrote about that prior to this. We like to give investors a baseline. Some people call it conservative. We like people to invest in numbers that they can feel really confident we're going to make or beat. So yes, we always behave that way, and we're leaving cap markets out.

Got it. Hey, thanks a lot.

Your next question comes from the line of Alex Sklar with Raymond James.

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. I think Marty alluded to 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.

We're in very early days. We have several hundred logos. In the U.S., we have about 4,000, I believe. We're well under 10% penetrated. How long is it going to take us to get to 20%, 30%, 40%? That's probably 18 months, two years, two and a half, I'm guessing now. I hate to do that because you guys will read this back to poor Julie later. It's hard to say, but if the SEC rulings come out and they withstand the litigation, it will go a lot faster. But we don't plan on that. We're seeing plenty of demand without the SEC rulings. I think it's a very natural thing to just add it on to existing ways they do with the SEC in their regulatory environment.

Perfect. That was helpful color there. And I just want to ask one quick follow-up here on the billings in Q4. 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. We did see, as we talked about, really nice bookings for Q4. Very pleased by the results there, and that did help drive up our billings in Q4. We're excited about where that leads us going into 2023 and what we can do with that.

Yes. We had record billings in Q4 by a significant amount. We were really pleased with the demand and the activity.

Thank you very much.

There are no further questions, and this concludes today's conference call. Thank you for attending. You may now disconnect.