Workiva Inc Q1 FY2023 Earnings Call

Good afternoon, ladies and gentlemen. My name is Mandeep, and I will be your host on this call. Please note that this call is being recorded on May 2, 2023, at 5:00 p.m. 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 First Quarter Conference Call. During today's call, we will review our first quarter results and discuss our guidance for the second quarter and full year 2023. Today's call has been pre-recorded and will include comments from our Chief Executive Officer, Julie Iskow, followed by our Chief Financial Officer, Jill Klindt. We will then open the call for a live Q&A session. A replay of this webcast will be available until May 9, 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'd 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 second 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, Julie Iskow.

Thank you for joining our earnings call, my first as Workiva's CEO. Jill and I look forward to sharing our strong Q1 results. We'll also discuss our continued growth opportunities and our outlook for Q2. The Workiva team delivered a solid quarter and continued to execute at a high level, resulting in subscription revenue growth of 21%. Accelerating subscription growth drove revenue above the high end of our Q1 guidance. We also beat the high end of our guidance for operating results by $3.7 million. In Q1, we continued to see healthy market demand for our platform and our best-of-breed solutions even in an uncertain macro environment. We believe this is a result of the rapidly evolving market trend of increasing stakeholder scrutiny of both financial data and nonfinancial or ESG data. This has made our product offerings and our platform more relevant than ever. Workiva was born in the cloud. It established itself in financial reporting and then expanded to a broad portfolio of solutions. Today, Workiva offers the only reporting platform that brings financial reporting, ESG, and GRC together in one secure, controlled, audit-ready environment. This unified platform offering, known as Assured Integrated Reporting, is a unique and key differentiator that sets us apart from our competition. And in Q1, we saw continued momentum with customers expanding their solution portfolio to include all three of our Assured Integrated Reporting solutions. I'd like to highlight a few examples. First, one of the world's largest big-box retailers added ESG to their existing Workiva portfolio that included SEC, GRC, and management reporting. This long-time SEC client began working with a big 4 advisory firm during their initial purchase and implementation of Workiva management reporting back in 2020. This same advisory firm led the co-sell and delivery of Workiva GRC in 2022 and then sourced an ESG opportunity for us in Q1 of this year. As a testament to the breadth of our partner ecosystem, a different big 4 firm will be providing advisory and implementation services for this ESG project. But that's not all. This ESG account expansion was further influenced by one of our climate accounting technology partners. The Workiva ESG solution on our open platform can be complementary to any purpose-built climate accounting solution on the market. A second assured integrated reporting customer win was with a Fortune 100 diversified health care services provider. During Q1, this existing SEC and GRC customer added ESG to their solution portfolio through a joint deal with two different big 4 firms. Both firms have a long-standing relationship with this customer and a robust and growing ESG solution practice with Workiva. These two Workiva partners competed for the advisory and consulting services on this ESG project. Also critical to securing this ESG expansion was our platform's ability to connect to the customer's already established carbon accounting system. Because we're carbon solution agnostic, meaning our platform has the ability to integrate with any source system, including carbon accounting systems, we're able to set ourselves apart from other ESG reporting solutions. These two account expansion multi-solution stories highlight that the value and flexibility of our platform is being recognized and that businesses and partners are going all in with Workiva. As I mentioned, financial reporting has been the historical foundation of our platform. And 15 years later, the market continues to invest in our leading financial disclosure, financial statement, and industry-specific financial reporting solutions. During the first quarter, the Workiva team booked a number of new financial reporting logo wins and competitive SEC takeaways. We also landed with financial reporting outside of our SEC solution with a diverse cohort of new private and government reporting customers. Although the IPO market has yet to rebound, we continue to drive account expansion and closed a record number of capital market follow-on offerings. An important financial reporting win secured during the quarter was a mid-six-figure new logo deal with a Big 4 accounting firm. The firm purchased our fund reporting solution to be used as a managed service to deliver reporting services to their investment firm clients. We believe the continued trust that the world's top accounting firms place in Workiva as the platform they can standardize on is a testament to the power of our solutions. I'll now turn to GRC. During the first quarter, we saw strong demand and momentum for our GRC suite of solutions in both the U.S. and Europe. Our R&D investments in new functionality and an enhanced user experience continued to support our solid growth in this market. A few key GRC highlights during the quarter include a mid-six-figure deal with a British multinational bank for controls management to replace the legacy GRC platform. This long-standing customer had already invested in SEC, ESEF, ESG, and our financial services solutions. This U.K. SOX opportunity was a joint pursuit with a Big 4 advisory partner that had an existing relationship with the bank's SOX team. This partner will be providing both advisory and implementation services for this deal. Another notable GRC win was with a European-based global airline that purchased our controls management solution. This new logo win was a competitive replacement of a legacy on-premise GRC platform. This deal was a joint pursuit with a regional advisory firm who will be providing the implementation and advisory services. Landing with GRC provides a great future account expansion opportunity for both financial reporting and ESG. Now I'll cover some ESG highlights. ESG remained one of our top solution bookings in Q1. We added several Fortune 500 clients to our already elite roster of ESG account expansions. The best of the best are investing in Workiva for their ESG reporting. And our partner-first strategy is driving results. The vast majority of our ESG opportunities continue to be either sourced or co-sold with a Workiva advisory or technology partner. Yes, there's ongoing political debate in the U.S., and there is an extended evaluation period for the proposed SEC climate disclosure regulation. But we continue to see strong demand for the Workiva ESG solution. This observation is supported by a joint PwC-Workiva survey published in March. Seventy percent of business leaders report their companies will proceed with ESG compliance regardless of when the SEC climate disclosure rule becomes law. This survey also reported that 96% of executives say they'll proceed with independent assurance, whether it's required in the final rule or not. We're hearing from our ESG customers and prospects that ESG reporting is a board-level mandate. It's driven by a number of stakeholders, including investors, customers, vendors, and employees. Organizations that have made public ESG commitments or have published science-based targets have set their own standards for what they've committed to report on and disclose. More than 3,000 businesses and financial institutions are working with the science-based targets initiative to reduce their emissions in line with climate science. With this market momentum, we anticipate that companies will continue to consider their investment in ESG, a critical factor in driving sustainable long-term value creation for their enterprises, regardless of politics. I'll turn now to highlight some of our investments in R&D, which continue to be an important part of our strategy. Our ongoing innovation expands the capabilities of our platform, keeps our solutions differentiated, and opens up new total addressable market. At Workiva, we continue to provide new functionality that prioritizes our customers' experience and success and plays a significant role in driving strong gross retention and long-term subscription growth. Our R&D team released several platform and solution enhancements during Q1. We updated the capabilities for regulatory disclosure, including the release of full-featured in-platform access for the 2023 U.S. GAAP XBRL taxonomy. We released it the same day it was published by the SEC. Our customers' SEC reporting teams are on the clock with locked-in reporting deadlines. By providing instant access to a new taxonomy within our solutions, it allows them the valuable time to explore, assess, and implement changes to their XBRL tags and deliver on-time validated quality disclosures. For our European customers, we released important enhancements for design reporting to better support Assured Integrated Reporting. We worked with both our design agency partners and our current customers to provide highly stylized and design reports that are also audit ready and can deliver XBRL output. For our GRC customers, we released meaningful new features supporting more advanced risk assessments, enhanced navigation for audit management, and a fully enabled modernized user experience for all GRC solutions. To support rapidly evolving ESG reporting requirements, including the EU's Corporate Sustainability Reporting Directive, we released important new enhancements, including support for and integration with CDP, which is cited as the gold standard of environmental reporting. More than 13,000 companies disclose through CDP. As an accredited CDP solution provider, Workiva was also selected to pilot the new CDP API. This API will support automated data transfer, which provides an enhanced and streamlined disclosure experience, reducing the need for manual data entry. We also released enhancements in our ESG Explorer to better enable new versions of frameworks and standards. This included the addition of GRI sector standards. More than 10,000 companies around the world communicate their impacts using GRI standards. These examples are just a few of many enhancements that we released that demonstrate our commitment to enable our customers to optimize their investments with us. We believe that we will see improved R&D operating leverage over time and remain committed to our long-term operating model. To summarize my comments this afternoon, Workiva delivered another solid quarter. We're focused on subscription revenue growth while improving our operating leverage, and we remain committed to delivering on both our short-term and long-term operating margin targets. Our unified platform offering, known as Assured Integrated Reporting, is a unique and key differentiator that sets us apart from the competition and underpins our multi-solution and account expansion strategy. The value of our platform is being recognized. Businesses and our partners are going all in with Workiva. And finally, investments in our platform, in our solutions, and in our people have positioned us well to drive greater performance and productivity through focused execution of our strategic initiatives. In closing, I'd like to thank our talented team of dedicated employees. Their commitment to our values and the way they support our customers and our communities and each other have once again earned us a spot on the list of Fortune's 100 Best Companies to work for, and it's our fifth consecutive year. This award celebrates the world-class culture we've created. And thank you, too, to our customers, our partners, and our shareholders for your continued trust in Workiva. We believe we have the right team, the right technology, at the right time to capitalize on the increasing global opportunities to power transparent reporting for a better world. And with that, I'll turn it over to you, Jill.

Thank you, Julie. It's great to join you on your first earnings call as CEO. Let's turn to our results. This afternoon, I will review our financial performance for the first quarter 2023 and provide Q2 and full year 2023 guidance before opening the line for questions. As Julie mentioned, we beat our Q1 revenue guidance due to accelerating subscription revenue growth, which was somewhat offset by a decline in services revenue. We beat guidance on Q1 operating results at the midpoint by $4.2 million. Our revenue beat, along with lower compensation, T&E, and other employee-related expenses drove the remainder of the operating beat. Now let's go through some key results and highlights for the quarter. We generated total revenue in the first quarter of $150.2 million, delivering growth of 16% from Q1 2022. Subscription revenue was $129.7 million, up 21% from Q1 2022. While new logos and account expansions both helped drive strong revenue growth in Q1 2023, 58% of the increase in subscription revenue in Q1 came from new customers added in the last 12 months. Professional services revenue was $20.5 million in Q1 2023, down 9% from the same quarter last year. We discussed in our Q4 call that we expect services revenue to be flat for Q1. However, the Q1 numbers came in below our forecast, showing a year-over-year decline primarily driven by the timing of XBRL services. I want to expand on professional services revenue a bit more. As we've discussed, 2023 will be a pivot year for us in professional services. Our strategy this year is to transition lower-margin setup and consulting services to our partners. Given this, we expect setup and consulting services revenue to decline year-over-year for the full year 2023. Alternatively, we believe that we will show improved performance for XBRL services revenue in Q2 and for the balance of the year. Our strategy is to continue to deliver these higher-margin XBRL services through our dedicated and talented services team. Overall, we believe that for the full year, our total services revenue will remain flat compared to 2022. Now on to our performance metrics. We added 90 net new customers in Q1 for a total customer count of 5,754, a growth of 1,346 customers from Q1 2022. Our total customer count includes 919 ParesePort customers. Our subscription and support revenue retention rate remained at the best-in-class 98% for the first quarter of 2023, remaining comfortably ahead of our internal objective of 96% or above. With add-ons, our subscription and support revenue retention rate remained flat at 109% for the first quarter of 2023 compared to the same quarter last year. This rate improved 70 basis points compared to the fourth quarter of 2022. Please note that ParesePort customers will not be included in our retention calculation until next quarter when we have a full year of comparable data. As Julie noted, our focus on multi-solution deals and account expansions led to the increase in the number of larger subscription contracts. In the first quarter of 2023, we had 1,363 contracts valued at over $100,000 per year, up 21% from Q1 the prior year. The number of contracts valued at over $150,000 totaled 746 customers in the first quarter, up 24% from Q1 2022. And the number of contracts valued over $300,000 totaled 247, up 33% from Q1 2022. Moving on to our operating metrics. Gross profit totaled $113.4 million in Q1, up 13% from the same quarter a year ago. Gross margin was 75.5% in the latest quarter versus 77% in Q1 2022. The decrease is due to higher compensation, server, and T&E expenses versus Q1 2022. Operating expenses increased 19% from Q1 2022, driven by investment in new headcount and the return to travel and events. We posted an operating loss of $7.3 million in Q1 2023 compared to an operating loss of $1.2 million in Q1 2022. As we discussed in our Q4 call, we expect sequential quarterly improvement in our operating leverage Q2 through Q4 of 2023. We are focused on delivering non-GAAP profitability for the second half of 2023 and for the full year 2024. At March 31, 2023, cash, cash equivalents, and marketable securities totaled $440 million, an increase of $9 million compared to the balance at December 31, 2022. Cash flows from operating activities in Q1 2023 resulted in cash provided of $5.6 million compared with a decrease in cash of $937,000 in the same quarter a year ago. Although we had healthy bookings growth in Q1, we did see a decrease in deferred revenue from Q4 2022 to Q1 2023. There were a couple of drivers that led to this decrease. First, historically, there is seasonality in our deferred revenue. We see that the change in deferred revenue is usually the slowest from Q4 to Q1. This is largely driven by the seasonal timing of annual renewals that are heavily weighted to Q4. And second, specifically in Q1 2023, the timing of several large contract renewals and contracts with prepayments led to a shift of invoicing and deferred revenue into Q2. I want to reiterate that we did have healthy bookings growth in Q1. We don't believe that this decrease in deferred revenue indicates weakness in market demand, but rather is a result of the timing of contract renewals between quarters. For the remainder of 2023, we are modeling for deferred revenue to track in line with our historical run rate. Turning now to our guidance. We continue to believe our guidance assumptions are prudent for the current macro environment. For the second quarter of 2023, we expect total revenue to range from $153 million to $154 million. We expect non-GAAP operating loss to range from $5 million to $4 million, a net loss of $0.09 to $0.07 on a per-share basis. Our share count will be approximately 53.8 million weighted average shares. We expect Q2 services revenue growth to be a low single-digit percent. For the full year 2023, we are raising our full-year revenue guidance, which we now expect to range from $626 million to $628 million. We are raising our guidance for non-GAAP operating loss to range from $7 million to $5 million or a net loss of $0.13 to $0.09 on a per-share basis. Our share count will be approximately 54 million weighted average shares. As I highlighted earlier, we expect full-year services revenue growth to be flat. XBRL services revenue is expected to continue to grow and be offset by a decline in setup and consulting services revenue. For the full year 2023, we continue to expect we will post positive free cash flow for the seventh consecutive year. While we are guiding to a loss in Q2, we are projecting improved operating margins for the remainder of the year. We expect to be non-GAAP breakeven in Q3 and be non-GAAP 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 and partners for their continued support and hard work in the first quarter and for delivering a strong start to 2023. Before we turn to Q&A, I would like to highlight three key points: one, we delivered strong subscription revenue growth in Q1, and we believe we can deliver 20% subscription revenue growth for the full year 2023; two, we continue to benefit from broad-based demand across our solution portfolio. As Julie highlighted, new logo wins in financial reporting, solid performance in GRC, and continued momentum in ESG and account expansions to embrace the platform contributed to our subscription growth; and three, we are focused on improved operating leverage and delivering non-GAAP profitability in the second half of 2023. We remain committed to our long-term operating model. In closing, I would like to echo Julie's excitement about our placement on Fortune's 100 Best Companies to Work For for the fifth year in a row. To all Workivians, this achievement reflects the passion and commitment you bring to work every day. By nurturing such a healthy and vibrant company, we continue to deliver a positive impact that benefits everyone involved: customers, partners, shareholders, and employees. We will now take your questions.

Our first question comes from the line of Matt Stotler from William Blair.

Maybe just to start off, one on the international opportunity here. I would love to get an update on what you're seeing in terms of demand and progress in international markets growth outside of North America. Obviously, been a focus for the company for the last several years. You've got a little bit of a different go-to-market approach in the last couple of quarters. Would love to get an update there, how that's rolling out and then how ESET, ESG, and the rest of the geography-specific opportunities are playing out even though they're early days.

Sure. I will start with that one. Looking at our work over in Europe, I will say we've had some improvement over there, both in Q3, Q4, and Q1. We're, of course, closely monitoring our pipeline and any changes to our buying behavior. But we've taken a partner-first approach there. We are focusing in the areas we can win, where we've got sales teams on the ground, referenceable customers, and strong partner relationships. Certainly, we're leading with our messaging around Assured Integrated Reporting, which is resonating. So is there work to do? Yes. Have we made some changes? Yes, around leadership, as you know. We have centralized teams and so forth, but we're very optimistic about our ability to continue to execute there.

Got it. That's helpful. For Jill, could you provide more details on the billings dynamic? It sounds like the issue is mainly related to renewal timing. If that's accurate, what should we anticipate in terms of progress in Q2? Additionally, are you noticing any macro trends regarding large deal cycles becoming increasingly difficult? Any insights on that would be appreciated as well.

Sure. Just to expand on the prepared comments a little bit, you might recall that we have some amount of variability in contract lengths that we've had over time. That has given a little bit of lumpiness in our deferred revenue in the past, and this is just another example of that quarter, Q1 coming in with some movement related to timing of renewals. As we always see then also it's movement away from those contracts with the three-year pay upfront, more of the three-year, one-year, three-year with annual payments, and when we have that, it does cause some lumpiness in deferred. To your question further in the year, we do expect to return more to our historical norms of it as far as billings and deferred revenue goes. I would also always push you back and point towards RPOs. We think the RPO number is a better metric for our business. It has less of that lumpiness. Although there is some amount of impact, of course, when you have the timing issue, it does smooth out some of the lumpiness around contract length and payment terms and that sort of thing. We feel like that was a really good result for Q1 for us.

Our next question comes from the line of Steve Enders from Citibank.

Okay. Great. Maybe if I could just follow up on the last comment on the RPO and billings dynamics. For one, is there a way to quantify how much of billings maybe shifted from 1Q to 2Q on the timing there? And then, secondarily, on the RPO dynamic, was there a bit of a timing impact that would have hit that number as well? Or is that a little bit more muted on that side?

I think a good way to look at it, Steve, would be to look at some of our historical Q4 to Q1 transitions and see what would have been more normalized there. There’s always going to be some amount of movement between quarters. We saw in Q1, in particular, we had some larger contracts that had delays with getting closed on those renewals into Q2. I don't have a direct number for you. But I think if you look back at some of the historical Q4 to Q1 transitions, hopefully, that will help normalize what we would have expected to see there aside from those larger impacts. The same would hold true for RPL.

Our next question comes from the line of Adam Hotchkiss from Goldman Sachs.

Great. Just a follow-up on your comments from the fourth quarter around your ESG momentum. I think you had mentioned ESG bookings were 85% ahead of your expectations in that quarter, and that drove quite a bit of momentum in the business. Could you just give us a little bit more color on the sort of trends more broadly around momentum and where that shook out this quarter on the ESG side relative to the ahead of expected results last quarter?

Sure. So we did see good momentum still in Q1. ESG, as we talked about all last year, continues to be right in the mix for top bookings solutions. We're really excited to see that.

Yes, it remains in the top three solutions, again, for the third quarter in a row, plus also top for bookings growth solution as well.

Great. That's super helpful. And then could you just talk a little bit about the traction that you mentioned you're seeing with private companies? I recognize a lot of that is tied to capital markets activity, but where we are today versus a year ago as things began to soften? Could you just review for us what the go-to-market motion looks like for this cohort of companies? How much of that is inbound versus outbound?

To begin, I want to highlight that we are still concentrating on facilitating the transition from private to public companies. Our focus remains on closing deals with private firms, particularly those preparing for an IPO or seeking alternative financing options. We believe we can support them on their journey to becoming public. As you've noted, there hasn't been a significant increase in this area. In the first quarter, we assisted a few companies in starting their processes, but generally, the activity related to capital markets has involved mostly secondary operators. This reflects the current state of our business. As you are aware, if the market does recover, we are likely to participate actively. We will continue to work with private companies during their readiness preparation as they consider going public.

Absolutely. Financial reporting and the private market has been a focus for us with a compelling offering, as you see companies preparing years out for a public offering. A good market for that.

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

Great. Julie, on ESG reporting, you referenced the survey that you published a few weeks ago, 40% of company survey had invested in some sort of ESG reporting technology. Can you help frame that in the context of your own installed base? And any color on what percent of your base you've cross-sold ESG to to date?

Sure. We see in our installed base is what the survey has borne out. I believe the survey indicated that 70% of the companies reported they will be investing in ESG regardless of regulation. We're seeing that certainly in our base. There is momentum for interest in the momentum and demand for our ESG offering, reflecting what the survey showed.

Our next question comes from the line of Joe Meares from Truist Securities.

This is Connor Passarella on for Joe. Just wanted to start with an update on the ParsePort acquisition as it pertains to cross-selling and upselling to legacy customers with Workiva products and then maybe the other side, what are the dynamics around the growth of their legacy products to new customers as well.

Sure. Just for those who aren't fully aware, ParsePort is a leading ESET financial reporting provider that's been providing XBRL conversion software in Europe for more than a decade now. We acquired them a year ago. In fact, it was exactly a year ago last week that we had acquired them. So we celebrated their one-year anniversary. In fact, they have completed about 900 disclosures over the last four months and integrating well with the company. But we're pleased with the execution over the last year, and we're executing on a program, to your question, around cross-sell and are very happy with the momentum we're seeing there.

Our next question comes from the line of Daniel Jester from the Bank of Montreal.

This is Kyle on for Daniel Jester. So Julie, you've been with the company for more than three years, and you've seen a lot during that relatively short time. So as you plan on how you're going to drive the company forward, what are some key strategic goals you're focused on to really drive that success?

Sure. You're right. I've been here for 3.5 years, the day of the transition. We've developed a strategy that we continue to execute on. It's intact. We have a large total addressable market, and our focus, of course, remains both on growth and operating leverage. So strategy execution, operating margin improvement, and growth, and really going after that opportunity that I described in the comments earlier around Assured Integrated Reporting.

Our next question comes from the line of Andrew DeGasperi from Berenberg Capital Markets.

This is Stephanie on for Andrew. Wondering if there have been any noticeable changes in demand trends so far in the second quarter that would differ from the first quarter? Or even if there were any changes in demand towards the end of Q1?

We saw, as we said in Q1, we were pleased with our bookings, and going into Q2, we do think that everybody is keeping a really close eye on the macro. Of course, we’ve got a potential rate increase tomorrow, we’ll see how that trends out. There is some uncertainty, especially if we’re looking at EMEA. They have a lot of factors with the war in Ukraine and other factors impacting them. We are watching it very closely. We’re pleased with the way that we’ve been able to execute – and it’s something that we feel like we’ve still been able to make progress. But you may feel a little bit of pressure in certain deals, but sometimes we move forward. So I think that it can just vary. But we’re not seeing an overall negative impact from the macro environment. It’s just something we’re watching along with all of our customers and just the whole market.

Our next question comes from the line of Mike Grondahl from Northland.

Maybe just on CDP and that integration. Can you talk about what the kind of cross-sell or different solutions outside of ESG looks like there?

So with the CDP, we are still in the early stages. The regulation is only a few quarters old, and while the law has been passed, the details are still being worked out. For us, it serves as a trigger for sales conversations, allowing us to discuss Assured Integrated Reporting, and that message is definitely resonating. Ultimately, it’s about the clients who utilize it, which is a strong group of clients.

Our next question comes from the line of Brad Reback from Stifel.

That's great. Looking into 2Q with ParsePort now getting into the NRR calculation, can you give us a sense of how we should expect that to trend?

I don't really think that it's going to impact our overall company trend. The deal sizes there are pretty small, so any individual customer impact is going to be a lot smaller if you do see churn there. They have really good retention at the client base. So I wouldn't expect you to see a very large impact from the overall historical trends that we've seen.

Perfect. That's helpful. And then, Jill, just following up. The deals that slipped out of 1Q, have most of them already closed or the expectation is they will close in the coming weeks?

Expect maybe either closed or the expectation is that we would close them out here very quickly.

Our final question comes from the line of Patrick Schulz from Baird.

I appreciate the color you provided on the strength you're seeing in ESG. It's pretty good to hear that. Can you just touch on what you're seeing in terms of the average selling prices for ESG solutions? Are these customers going all in with their initial investment? Or are they breaking the spend up over time? And for your ESG sales and pipeline, how should we be thinking about the breakdown between the mix of new account growth versus existing customer expansion?

I would say that our average deal size, as we talked about in the last call, was trending higher than our general average deal size across all solutions. We've still been seeing that there's a lot of expansion within our existing customer base as opposed to new logos, not that new logos aren't happening within ESG. We certainly are getting some of that business. But we just have such a strong base of customers, especially in North America, that we're seeing a lot of account expansion there with strong deal sizes.

I would also have different segments in the market. There are some mature customers who have their ESG program solidified and have a much better idea of where they're going, what they're doing, and strategy in place, and the deal size there is very different than those that are emerging and beginning their journey. While we can see some very large deal sizes, we're also moving in the lower part of the market as well.

Thank you, ladies and gentlemen. This does conclude today's call. Thank you for your participation. You may now disconnect.