Workiva Inc Q1 FY2025 Earnings Call

Good afternoon, ladies and gentlemen. My name is Nick, 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 May 1, 2025, at 5 p.m. Eastern Time. I would now like to turn the meeting over to your host for today's call, Katie White, Senior Director of Investor Relations at Workiva. Please go ahead.

Good afternoon, and thank you for joining Workiva's Q1 2025 conference call. During today's call, we will review our first quarter results and discuss our guidance for the second quarter and full year 2025. Today's call will include comments from our Chief Executive Officer, Julie Iskow, followed by our Chief Financial Officer, Jill Klindt. We will then open up the call for a Q&A session where we will be joined by Mike Rost, our Chief Strategy Officer. After the market closed today, we issued a press release, which is available on our Investor Relations website, along with supplemental materials. This conference call is being webcast live and following the call, an audio replay will be available on our website. 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 2025. These forward-looking statements are based on our assumptions as to the macroeconomic, political and regulatory environment as of today, reflect our best judgment based on factors currently known to us and are subject to significant risks and uncertainties. Workiva cautions that these forward-looking statements are not guarantees of future performance. We undertake no obligation to update or revise these statements. If the call is reviewed after today, the information presented during the call may not contain current or accurate information. Please refer to the Company's annual report on Form 10-K and subsequent filings with the SEC for factors that may cause our actual results to differ materially from those contained in our forward-looking statements. Also, during the course of today's call, we will refer to certain non-GAAP financial measures. Reconciliations of GAAP and non-GAAP measures are included in today's press release. With that, we'll begin by turning the call over to Workiva's CEO, Julie Iskow.

Thank you, Katie, and thank you all for joining us today. Jill and I look forward to sharing our Q1 results and our guidance for Q2 and full year 2025. We'll also provide an update on the regulatory environment and our views on the macro. Q1 was another solid quarter. Subscription revenue grew 20% year-over-year and total revenue grew 17% year-over-year, beating the high end of our guidance. At the same time, operating margin came in slightly ahead of our first quarter guide. In Q1, we once again saw broad-based demand across our solution portfolio. CFOs trust Workiva to be the platform that drives performance and productivity for their current requirements and prepares them for their next digital, financial and operational transformations. Our portfolio of 20-plus solutions across governance, risk and compliance and financial, regulatory and nonfinancial reporting continues to resonate in the market. Consistent with the past several quarters, we saw outpaced growth in our large contract customers. This is driven by both additional solution sales into our installed base and larger new logo lands. In Q1, the number of contracts valued over $100,000 increased 23%. Those over $300,000 increased 32%, and contracts valued over $500,000 were up 32% as well, all compared to Q1 of 2024. Although we remain optimistic about our market opportunity, we did see signs of a more cautious buying environment toward the end of Q1. The uncertainties of regulatory change and the policies of the new U.S. administration have put pressure on the bookings momentum that we saw in the previous three quarters. As we monitor the current macro and the market turbulence, we remain focused on the execution of both our long-term growth strategy and our productivity initiatives. We believe that we have the competitive differentiation and focused execution to continue to deliver on our 2025 and longer-term targets. Our Q1 results highlighted once again that our platform remains a key differentiator for our new logo wins and account expansion deals. We offer our customers a platform for trust, transparency, accountability and efficiency. Our relentless focus on customer outcomes has continued to resonate with the office of the CFO. I'd like to start off our deal highlights for the quarter with three wins demonstrating the success of our unified platform around the world. First, we signed a seven-figure multi-solution expansion deal with a U.S. regional bank. This 13-year loyal customer purchased two additional solutions and expanded use across other solutions on the platform. This customer added Management Reporting to support their operational data analysis and financial statement processes and added our Policy Management Solution to manage their credit risk and accounting policies. The deal also included expanded usage across bank-specific reporting, including Basel III, Call Reports and Liquidity and Tax Reporting. This deal was a co-sell with the Big 4 advisory firm. Second, we signed a mid six-figure new logo deal with a digital and telecommunications company in APAC. This new customer purchased seven solutions across the platform. Management Reporting, Global Statutory Reporting, Controls Management, Financial Reporting, Risk Management and Carbon and Sustainability Reporting. This company has been on a multi-year digital transformation journey, which included a move to S/4HANA back in 2022. Their investment in Workiva supports their vision to achieve greater agility, efficiency and competitiveness as an organization. The deal was sourced and will be delivered by a Big 4 advisory firm. And third, a European travel company became a new customer signing a six-figure multi-solution deal that included Financial Reporting, Global Statutory Reporting, Management Reporting, Controls Management, Policies and Procedures and Sustainability Reporting. This venture-backed organization has raised over $1 billion and has a long-term goal of a public company IPO. This was a competitive win, which included multiple partners co-selling the deal. Let's move on now to Financial Reporting, which continues to be the primary revenue driver for our business. We saw broad-based demand in our Financial Reporting Solution set that includes SEC Reporting, Multi-entity Reporting, Private Company Reporting and Management Reporting. I'd like to highlight three Financial Reporting-specific deals from the quarter. First, we signed a mid six-figure new logo deal with a top five U.S.-based insurance company. This customer invested in the Workiva platform to replace a legacy solution and manual processes. They purchased Workiva for Insurance Reporting, Investment Reporting and Management Reporting. There were multiple partners involved in the co-selling and the delivery of this deal. Second, we signed a mid six-figure new logo deal with a top 10 global oil and gas company for Global Statutory Reporting. This company invested in Workiva as part of a broader financial transformation initiative. They'll be using the Workiva platform to manage their data and statutory reporting across 250 entities. The opportunity was sourced and will be implemented by a Big 4 firm. And third, we signed a mid six-figure new logo deal with a privately held U.S. spacecraft manufacturer for Private Company and Multi-entity Reporting. This company purchased the Workiva platform to replace manual processes and work done by service providers in support of financial statements, data management and the reporting for 140 legal entities. The deal was a co-sell and will be delivered by a regional consulting firm. I'll turn now to governance, risk and compliance. Companies today are faced with an environment of changing risks, new compliance requirements and stakeholder oversight, all of which require a mature GRC program. In addition to existing macroeconomic and geopolitical risks, the policy uncertainty of the new U.S. administration as well as other emerging risks is on the rise. We believe that this ever-changing business environment will continue to create demand for our GRC Solutions. Looking back at Q1, here are three signature GRC wins. First, a European-based environmental services provider signed a six-figure new logo deal that included Controls Management and Sustainability Reporting. This company is working with multiple Big 4 firms as a key part of the future of reporting and assurance strategy project. This was a competitive deal to replace a legacy GRC platform and was a co-sell with multiple Big 4 firms. Second, a U.K.-based oil and gas company signed a mid six-figure new logo deal that included Controls Management, Audit Management, Operational Risk Management, ESEF and Sustainability Reporting. This was a competitive deal with multiple GRC vendors being evaluated. The expanded value of the Workiva platform for the reporting use cases was a competitive differentiator for this GRC opportunity. This deal was sourced and will be delivered by a Big 4 firm. Third, we closed a two-solutions six-figure account expansion deal with a U.S.-based utility company. This company purchased Controls Management and Audit Management. The customer first signed with Workiva in August of 2024 for SEC Reporting and then quickly followed on with this GRC solution expansion. The opportunity was a co-sell and will be implemented by a regional advisory firm. Let's move on now to Sustainability Management. There's been a lot of activity on the regulatory front in Q1. As discussed on our Q4 call, the European Union has proposed changes to the CSRD regulation through the EU Omnibus Package. On February 26, 2025, the European Commission published its proposed omnibus legislation, which introduces changes to the CSRD. These changes include a limit to the scope of the CSRD to EU organizations that have more than 1,000 employees and an increase to the threshold for U.S. and other non-EU companies, those in Wave 4, from €150 million in revenue to €450 million in revenue generated within the EU. More recently, the EU Parliament brought the first step of clarity to the Omnibus proposal with the vote on April 3 that confirmed that Wave 2 and Wave 3 companies will now be required to report on their 2027 data in 2028. This vote also signaled overwhelming EU support for the passing of the full Omnibus Package. The Omnibus outlines that large Wave 1 companies, which is Workiva's primary target market, will still be subject to reporting in 2025 on 2024 results with no change in timeline. What also remains unchanged is that all companies subject to the CSRD must report using double materiality and in accordance with the EU taxonomy. They also need to comply with the ESR standards, and these reports will be subject to limited assurance. With the publishing of the EU Omnibus, companies now have much better clarity on who will be subject to the CSRD, what will need to be disclosed and when they will need to disclose it. But sustainability reporting is not just about complying with regulation. Corporations have recognized that sustainability data is not merely a reporting obligation but a valuable asset that can be leveraged to enhance business performance and drive efficiency. A great example of a Workiva customer that's built stakeholder trust through their sustainability reporting is a European utility company with 36 million customers that focuses on renewable energy. This company is one of the largest global investors in wind and solar power projects. With the Workiva platform, they have oversight of all financial and nonfinancial information, and they've created greater efficiencies and increased data confidence. The entire end-to-end process for connected results is now much quicker with higher quality data being presented during both internal and external reviews. By measuring, monitoring and tracking their investment projects through the Workiva platform, this customer has the information it needs to unlock new markets, reduce risks and support long-term resilience and profitability. Another Workiva customer, a global food manufacturer, hit their 2025 emissions targets three years early and now sources over 80% of their product volume sustainably. They reported that achieving lower emissions and pursuing sustainable packaging creates efficiencies and ultimately drives profitability. At the same time, the Company's focus on sustainability transparency aligns with consumer demand and helps distinguish their brands in a competitive market. That's not just about reporting or compliance; it's about business performance. Across industries, companies are using sustainability data to drive operational efficiency, mitigate risks, increase customer loyalty and ultimately create value. The need for organizations to measure, monitor and track nonfinancial information continues to drive market demand for our Sustainability Reporting Solutions. Here are two notable wins from the quarter. First, a Fortune 500 global food and beverage company signed a six-figure Sustainability Reporting contract. This long-time SEC and Global Statutory Reporting customer has set ambitious goals related to sustainable sourcing and packaging and environmental impact and they chose Workiva to streamline and improve what had previously been a fully manual reporting process. For a consumer products company, sustainability reporting is central to managing energy, waste reduction and the cost of goods for their products. By capturing and reporting on this data, this company is not only working to improve cost savings and increase operational efficiency, but it is also fostering brand loyalty and creating product differentiation that could open up new market segments and ultimately drive long-term value creation and a stronger, more resilient company. Second, a Fortune 500 global investment management company purchased Sustainability Reporting with Assurance to meet their needs for voluntary reporting. This existing customer was already using Workiva for financial reporting and internal controls. And after engaging in a competitive RFP led by their Sustainability Officer, they chose Workiva because of the connectivity to their existing Financial Reporting and GRC Solutions. The firm has set ambitious environmental targets such as achieving NetZero Scope 1 and Scope 2 greenhouse gas emissions by 2040. This increased focus on sustainability reporting is not only about managing risk and increasing operational efficiency. It's about addressing stakeholder demand, enhancing trust and loyalty in the market and attracting new clients. We believe that sustainability reporting is a market with long durable demand and that many corporations will embrace sustainability tracking and disclosure to address multiple stakeholder requirements. By bringing both financial and nonfinancial data together, Workiva's platform enables our customers to gain insights that drive competitive advantage and informed business decisions. I'd like to take a moment to thank the Workiva team as well as our partners for all of our strong Q1 wins. They are the result of focusing on customer outcomes and demonstrating the value of our platform. Moving on to product innovation. In Q1, we delivered a number of advancements to the Workiva platform, including new capabilities for SEC Reporting and the launch of a Fund Reporting Solution for public funds. For SEC Reporting, all filers are required to go through a mandatory process change driven by an overhaul to the EDGAR system. On March 24, the SEC launched enrollment for new security requirements for the EDGAR system called EDGAR NEXT. This update impacts every SEC filer, including public companies, foreign private issuers, investment companies, directors, and officers filing with the SEC. Our platform is ready to support filings the day the EDGAR NEXT system went live. Our ability to quickly adapt to regulatory changes is one of the reasons Workiva is the market leader for regulatory and financial reporting. In Q1, we also launched a new solution for public funds. This is a new Investment Reporting Solution on the Workiva platform that supports the rapidly growing public funds market, this includes those firms that manage ETFs. This new solution expands our investment reporting market opportunity and supports the unique requirements of public funds, including the ability to create fund summary prospectuses and review and submit hundreds of regulatory filings at once. We will continue to focus R&D on the pace of product innovation, consistent execution, and enhancing our high-performing differentiated platform. I'll move on now to say a few words about our guide. Jill will provide the numbers for our revenue on our profit guidance for Q2 and full year 2025. What you'll see is that while we're pleased with our Q1 growth, we're not raising our full year 2025 expectations. We reaffirm our top line outlook for the rest of this year as the current cautious buying environment may persist until customers see clarity in market conditions. We are confident in the resiliency of our business and the durable demand for our platform and our solutions. And we'll continue to invest in the long-term growth opportunity in line with our strategy. In closing, I'd like to thank all of our employees and our customers for another great quarter. We're focused on driving better business outcomes through transparency and accountability, and we look forward to meeting the demands of organizations around the world with our best-in-class platform and solutions. And with that, I'll now turn the call over to Jill to walk you through our financial results and 2025 guidance in more detail. Over to you, Jill.

Thank you, Julie, and good afternoon, everyone. Thank you for joining us. Today, I'll begin by providing an overview of the financials and key metric highlights for the first quarter of 2025. I will then move on and provide guidance for Q2 and the full year 2025. As Julie discussed, we had a solid first quarter with execution across our broad portfolio of solutions. We beat the high-end of our Q1 revenue guidance by $1 million generating $206 million of total revenue in the first quarter, up 17% over Q1 2024. Q1 Subscription revenue was $186 million, up 20% from Q1 2024. New customers and account expansions both contributed to our strong revenue growth. New customers added in the last 12 months accounted for 49% of the increase in our Q1 Subscription revenue. Q1 Professional Services revenue was $21 million, flat versus Q1 2024, with higher XBRL services offset by a decline in setup and consulting services. Moving on to our Q1 2025 operating results, all on a non-GAAP basis. Q1 gross margin improved 100 basis points year-over-year, increasing to 79%. Operating margin for the quarter was 2.4%. This outperformance over our guidance was the result of our top-line beat and our continued focus on leverage as we scale our business. Moving on to performance metrics for the quarter. We had 6,385 customers at the end of Q1 2025, a growth of 311 customers from Q1 2024. Our gross retention rate was 97%, exceeding our 96% internal target. And our net retention rate was 110% for the quarter. This metric saw pressure from foreign exchange rate headwinds as well as the year-over-year impact of Leap Year on the calculation. We generated 69% of our Subscription revenue from customers with multiple solutions, up from 66% in Q1 2024. As Julie discussed, we continued to see expansion in the relationships with our large contract customers. As of the end of the first quarter, we had 2,079 contracts valued at over $100,000 per year, up 23% from Q1 the prior year. The number of contracts valued at over $300,000 totaled 439, up 32% from Q1 2024, and the number of contracts valued over $500,000 totaled 191, up 32% from Q1 2024. Moving on to the balance sheet. As of March 31, 2025, cash, cash equivalents and marketable securities were $767 million, a decrease of $49 million over the prior year. Our primary use of cash in the quarter was our repurchase of approximately 462,000 shares of our Class A common stock for $40 million as part of the share repurchase program approved by the Board in July 2024. As of the end of the quarter, we had $60 million remaining of the original $100 million authorization. Turning now to our guidance for Q2 and the full year 2025. While we remain confident in our long-term market opportunity, and growth strategy as well as in our large, relatively unaddressed TAM, we did see a move towards a more cautious buying environment at the end of Q1. As such, we continue to take a measured approach to setting our guidance assumptions. For the second quarter of 2025, we expect total revenue to range from $208 million to $210 million. We expect Services revenue will be down compared to Q2 2024. We expect non-GAAP operating margin to be approximately breakeven, reflecting ongoing investment in our long-term growth strategy and the timing of preplanned events. For the full year 2025, we continue to expect total revenue to range from $864 million to $868 million. Similar to 2024, we expect total Services revenue will be down year-over-year as we move low-margin services to our partners. We expect Subscription revenue growth to be approximately 20% at the midpoint. We continue to expect non-GAAP operating margin to range from 5% to 5.5%, delivering improved productivity compared to 2024. We now expect 2025 free cash flow margin will be 10%. This revised target reflects pressure on bookings expectations for the rest of the year given the macro uncertainty Julie and I discussed. We continue to operate our business with our 2027 and 2030 targets in mind, improving productivity and operating leverage as we execute on our long-term growth strategy. In closing, I would like to thank Workivians around the globe for their hard work and dedication to providing value to our customers. Thank you all for joining the call today. We're now ready to take your questions. Operator, please open the line for Q&A.

And your first question today will come from Patrick Schulz with Baird. Please go ahead.

I guess maybe the first one just on the guidance. I know you mentioned they saw a more cautious buying environment towards the end of the quarter, but still maintain the full year revenue guidance. Can you just help bridge the gap there? Maybe provide a little bit more color on confidence in achieving the guidance. Why not just take the guide a little lower right now?

The reason we kept the guidance unchanged is that we believe Q1 was a strong quarter, with 20% revenue growth in S&S. We are projecting a 20% revenue growth for the full year in S&S as well. Taking everything into consideration, we are able to maintain a measured approach in setting our guidance assumptions. Our strategy is consistent with what we have done in previous quarters, and we remain confident in our long-term market opportunities and growth strategy. Given our large, relatively unaddressed total addressable market, we felt it was appropriate to keep our guidance flat for the year.

Helpful. And maybe one follow-up to maybe for Julie. I appreciate your commentary on CSRD and the ESG mandates in your prepared remarks. Could you maybe just give us a sense on how demand for the ESG and Sustainability Solutions have been relative to your expectations prior to the Omnibus legislation? I guess, how should we think about the pace of deals for remainder of the year into 2026, now that some of these recently proved EU legislation deals are in place?

Sure. And not an unexpected topic for discussion here today, given what's been going on. But I would like to give a little bit of detail here on sustainability though I provided some in the remarks, but I would just take a step back. Yes, there have been a lot of changes in the past three months. But I'll just say highlight here are three things, right. First, our sustainability market continued to grow. Sustainability remains a top booking solution for us in Q1. And when we think about sustainability, we break it down into geography and company size. And finally, as a highlight, we've said before, even as far back as when we entered the sustainability market, regulation is not the only driver of sustainability initiatives and reporting. So, we'll just think about the different geos. If we start with Europe, as I mentioned, with regard to CSRD and the Omnibus, I mean, it did bring a lot of clarity. Companies know what they have to report and by when that first large Wave 1 companies still need to report 2025, no change to that timeline. And actually, the large non-EU companies still have to report on their same timeline as well. And these large companies are target market, and they have to report with double materiality, using taxonomy and ESRS. They've got limited assurance. So, we believe we still have a large opportunity in this market. And as I highlighted in Q1, in Europe, we saw multi-six-year deals, including sustainability. I'm going to be next week with our European customers and partners at our Annual Europe Customer event, still focusing on sustainability. Now if you move over to the U.S., change in the administration has influenced some of those companies that were box checkers and compliers, meaning those that were only reporting or adhering to the compliance, the regulations just because there is a regulation, they may choose to delay or no longer report. This includes those that would have been subject to the SEC climate disclosure rule and those that were subject to the previous thresholds on CSRD. But the state of California rules are still something that organizations are preparing for. We do see this as a buying driver today. And then, of course, there are a number of other state regulations and bills that are coming up in various stages. Now the rest of the world. We've still got the 20 countries or so that have chosen to align with the ISSP guidelines, and they are now over somewhere 7.600 organizations that have committed to science-based targets through SBTi. All of these companies will be measuring, monitoring and tracking our sustainability data. So final note in Europe, final note in the U.S. and everywhere, sustainability reporting isn't just about complying with regulations. Companies are buying it ahead of regulation. They have, even when they're there is no regulation that they need to comply with. They're doing it just to participate in the global supply chain and enhance business, as I described in my prepared remarks. Deal and company size dependent...

And your next question today will come from Steve Enders with Citi. Please go ahead.

Okay. Great. Actually, I just want to follow up on the last point that you were kind of making there. But just in terms of what you saw in Q1? Just maybe how are things different compared to the deals that we saw from the sustainability portfolio versus I guess, the broader Workiva portfolio? And maybe kind of what's the view here moving forward as well?

We had a strong quarter with broad-based demand across our portfolio. Sustainability in Q1 remained one of the top booking solutions. While I noted that we encountered a cautious buying environment, this trend was observed throughout the entire portfolio. In comparison to our stellar booking quarters in 2024, we are currently navigating market uncertainty and turbulence, but overall demand remains strong across our offerings.

Okay. Got you. So, I guess just to put a finer point on it, there wasn't really a difference in the timeline or like I guess when things started to slow down between the ESG side of the equation and the rest of the portfolio?

This quarter, we had demand for all solutions. Yes.

All right. Given the broader changes in the U.S. opportunity, it looks like the Wave 4 aspect is progressing. How is the opportunity regarding the number of logos or prospects different now due to the evolving regulatory landscape? Specifically, how do the CSRD regulations compare to the state-level developments affecting U.S.-based companies?

Yes. As I mentioned, in Europe, our target market is thriving. It's the large companies, particularly the Wave 1 companies that need to report in 2025, many by April. April 30th was the deadline, but other deadlines vary by geography. Our market is strong. Some Wave 2 and 3 companies may delay, as their timelines are further out. However, our target market is primarily a global opportunity. In the U.S., we have the box checkers, compliant companies, and those that will wait for regulations. A significant portion of what we sold was to companies eager to engage in a global ecosystem. They want to participate in the global supply chain for a variety of reasons beyond just regulation, and we have observed this consistently throughout our years in the sustainability market.

Your next question today will come from Jake Roberge with William Blair. Please go ahead.

Really helpful commentary just around the sustainability business. Julie, are those 7,000 or so Wave 1 reporters that are still being regulated under the updated CSRD proposals. I know there's been no change to the regulatory timeline. But do you think there will be any change to kind of the adoption cadence related to CSRD just following the updated Omnibus proposals?

We do see significant opportunity in that larger market. I mean, many of those companies that you mentioned did have to comply on April 30. And while we've made significant headway in the market, the opportunity is there because what's clear when you look at those reports that have come out and we have looked at them. There's a lot of complexity those companies have to deal with. Many are still on the legacy systems. They're getting through it with muscle. And so, we believe there are a number of companies that are still using those current processes that we can help with our platform. And the platform brings together the financial data and the nonfinancial data. It brings assurance, and we help manage the complexity. And I think that is where our opportunity remains in the upmarket. So, it's again, a significant opportunity, and that is our target market.

Okay, that's helpful. And then could you talk about how the go-to-market transition has been trending this year? I know you're starting to step that up more meaningfully at the start of the year. So, it would be great to hear how that's going? And that those plans could change at all just given the uncertain macro environment?

Sure. And as you know, for the go-to-market, as we've scaled, we've been maturing our organization. And as we roll into 2025, continue to do so. We further expanded our team of major account sellers. We continue to shrink territories, just providing greater focus on a smaller number of accounts. We've dedicated new logo teams and so forth. So, we're maturing. That's on the structure side. On the staff side, just continue to hire more experienced platform sellers, those that can embrace and leverage our partners just those sellers that have proven experience with scale. So, coming off of a successful year out there in the market, most of our sellers have higher quotas and we're pushing hard on the go-to-market side. Strategy, again, continue to focus on better enablement, more refined sales plays and so forth. So, we're continuing to improve, continuing to invest and up-leveling teams and building out that go-to-market team that's very capable and confident as we scale.

Your next question today will come from Adam Hotchkiss with Goldman Sachs. Please go ahead.

I guess Julie to start, could you maybe just clarify what a soft buying environment means for you? Is this just deferral of decision-making or something else just coming up in conversations off hand? And is there any way for us to quantify either the number of deals or revenue that's being pushed out of Q1 or future quarters because of this? Just trying to understand what exactly is going on?

Thank you for the question. To clarify, our business is still growing, and we've confirmed our 20% Subscription revenue growth target for 2025, which is significant. When I mentioned signs of a cautious buying environment or shifts in momentum, that was in reference to the strong performance we had in 2024. This includes very strong bookings quarters. However, in Q1, we faced a turbulent market with uncertainty. Conversations with customers reveal they are being more thoughtful about their spending. They are navigating ongoing changes and new risks to their business models, which we believe has influenced some organizations' spending habits. There is still uncertainty ahead, and we don’t know what the future holds. Our guidance reflects a careful approach given the market's turbulence and customer feedback. Some deals might be taking longer, even when we are the preferred vendor. Nonetheless, I want to emphasize that we have maintained our 20% Subscription growth target for 2025. We have a significant untapped total addressable market, and with our wide range of solutions, we believe we are well-positioned to drive growth through 2025 and beyond.

Okay, Julie. That's a really helpful clarification. And then I wanted to talk a little bit about the press release you had, I think, a couple of weeks ago around the mandated financial consolidation order for federal agencies. How should we think about the opportunity for you there? And have you started to see any conversations around this over the last month?

Yes. Thank you for highlighting that. We did have a press release on that opportunity. We talked about the requirement that all 24 CFO Act agencies need to modernize their systems. And probably the most important part of that order is, as soon as practical, all heads of CFO agent agencies must use standard Financial Management Systems, and they must use what's on that marketplace and we are on that marketplace. And we're encouraged that the administration is leaning into a tech-first approach and we believe this will be an opportunity for us. We're well positioned but we also believe it is a multiyear effort. So, we're optimistic over the long haul that the federal government is taking, again, that tech-first approach, and they're focused on trust and transparency and accountability, as we are with our platform, and we believe that our platform is a great fit for these transformational needs and actions.

Your next question today will come from Ryan Krieger with Wolfe Research. Please go ahead.

Appreciate all the commentary on the macro, but I do just want to ask one more. You guys have a really good purview into a lot of verticals and a lot of major regions. So, I'm just curious, when you talk about this cautious behavior, I understand it's just kind of starting, but is it more broad-based? Or is it related to certain verticals or regions while others might be more safe?

I want to emphasize that we had a strong Q1, and this strength was broad-based. We're not observing any specific trends in particular regions or segments related to our solutions. However, conversations with customers indicate a more cautious environment, similar to what we're experiencing at Workiva. We are being more thoughtful about our spending, prioritizing what is important, and considering our operational effectiveness as we review our available resources.

Okay. Great. Appreciate it. And then also on solution pricing. In the prepared remarks, you talked a lot about a lot of innovation coming into the platform, and we are seeing quite a few software companies kind of lean into the pricing lever. So just wanted to get an update on maybe your pricing philosophy, how you guys think about it? And then maybe how you think about that lever going forward?

Sure. Our philosophy is focused on delivering value to the customer. We prefer to offer additional solutions and create a greater impact rather than just increasing revenue from renewals or price hikes. That said, we have implemented regular price increases for our renewals. We adopt a risk-based approach, considering the customer's situation and past interactions. However, we're not in a position where we're just squeezing money from customers during renewals or price adjustments. Our emphasis remains on providing value through cross-selling and up-selling. While we're working on optimizing our pricing, the main focus is on enhancing customer value and selling more solutions to expand accounts.

And your next question today will come from Terry Tillman with Truist. Please go ahead.

This is Dominique Manansala on for Terry. So just looking at the capital markets side of the business. Just wondering how you're thinking about contribution from that side for this year? I guess, with the market volatility, has your assumption changed in terms of pipeline or deal timing for IPO or S1 related use cases even?

Thanks for the question. And we really have not changed our outlook on cap markets. It remained a consistent contributor in Q1, and we've modeled it that way through the end of the year. So, any return on capital markets remain an upside for us.

Great. Just one more for me. Now that Workiva Carbon has been in the market for several quarters, I'm wondering if you've noticed any difference in win rates or deal sizes, particularly in carbon-intensive industries.

Sure. Thank you for asking about Carbon. Workiva Carbon, as you recall, was a strategic addition for us to our platform that's made Sustainability Solutions and overall assured Integrated Reporting platform even more remarkable and relevant. So yes, it has opened up doors for us in terms of opportunities, and we expect that's going to continue to help us win new Sustainability Reporting deals going forward. If you do think about the regulations, the most consistent part of regulations across all, right? It's the one common thread around all regulation. And a lot of companies do want to go carbon first and want a vendor that provides both the Reporting and the Carbon Accounting together. So it absolutely opened up doors for us.

And your next question today will come from Andrew DeGasperi with BNP Paribas. Please go ahead.

I wanted to maybe ask one on the Fund Reporting side because you brought it up in your prepared remarks, and I just wondered, how much of an opportunity it is for you? I know you're obviously great in the public corporate reporting side, but just wondering in terms of the potential for that market?

Sure. Thank you for asking the question. New market we just entered another, I would say, fit-for-purpose high-value solution and a great example of how our platform can be easily extended and used for multiple regulatory use cases. So, I'll just start off by saying when we think about the market size here, there are over 12,000 public funds globally, that includes 9,000 or more ETFs with assets under management of over $11 trillion. So, it's a nice market for us to enter into. There are, let's say, 139,000 regulated funds reported globally. So, we're focused on this market as well and along with the market for public funds. So good market for us to enter.

And maybe, Jill, regarding the follow-up on the NRR. You mentioned FX and Leap Year. I was wondering what it would have been without those factors. I'm not sure if you provided that information, so I apologize if I missed it. Additionally, considering the free cash flow target you shared, you didn't lower the Subscription target for the year, but I was curious if this change is minimal or if you anticipate that weakness will carry into next year.

Thank you for your question, Andrew. Regarding the Net Revenue Retention, the impact from the Leap Year and currency fluctuations was about 1.5 percentage points. Without that impact, it would have been around 11.5%. As for the free cash flow target, we took a comprehensive look at our guidance for the full year and decided to lower this expectation slightly, due to the potential effects of reduced customer purchasing throughout the year. This adjustment is the only area where we are seeing a pullback in our forecasts, and that was the basis for our decision.

And your next question today will come from Brett Huff with Stephens. Please go ahead.

Congratulations on a solid quarter despite challenging conditions. I have two quick questions. First, regarding the macro situation but from a slightly different perspective. As you consider your long-term guidance, which is very informative, how do you perceive this will help us understand your outlook for the business? It's difficult to envision a scenario like the current environment. How do you take that into account while assessing your long-term guidance and the various factors at play?

Thank you for your comment and question. As we consider the current environment's impact on our ability to achieve our long-term guidance, we are committed to meeting those targets. We affirmed our confidence in the guidance provided for 2027 and 2030 and continue to operate with those goals in mind. We have strategies to influence our margins to achieve these objectives. In Q1, we achieved a 20% revenue growth in S&S, and we expect to maintain that growth rate for the full year of 2025. Our significant untapped total addressable market and diverse product portfolio will support our growth investments. We are mindful of our targets as we proceed with our plans.

Great. Makes sense. And then just a quick follow-up, thinking about customer conversations. Maybe what about through the lens of partner conversations? I know a lot of the Big 4 are key partners of yours they approached the ESG market any differently? I mean, we're believers that it's not going away either. But I'm just curious if they have taken a different tack or if they've doubled down or pulled back or just become a little bit different strategies around at least the sentiment around ESG?

Sure. We collaborate closely with our partners in the sustainability market and are dedicated to working with our customers to provide value. They share our perspective that this involves regulations, but also focuses on performance, stakeholder requirements, and risk mitigation. We are well-aligned with our partners, especially those in consulting and advisory, as we jointly approach the market. Our messaging and the value we deliver to customers as they engage in sustainability activities, reporting, and disclosure are consistent and synchronized.

And your final question today will come from Alex Sklar with Raymond James. Please go ahead.

This is John on for Alex. I wanted to start with multi-solution deals in the booking environment. Julie, you're obviously very focused on selling the broader Workiva platform. But just given the macro backdrop and budgetary pressures, any change in the willingness to sell? Or have you seen any more customers focused on single solution deals? And then I have a quick follow-up.

I believe that remains a key advantage for Workiva. Reflecting on my time as a CIO, I recognize that our current CIOs prioritize efficiency, effectiveness, and solution consolidation. This is a setting where a platform can excel and perform well because it meets those needs. The benefits of the platform are clear, focusing on consolidation, user experience, and ensuring the solutions integrate seamlessly, which ultimately boosts efficiency and productivity. So, in fact, platforms serve as a key advantage in this kind of market.

Great. And then Joe, maybe just a little bit of follow up on the previous question there. The guidance for the year, mid-single digits non-GAAP Op margin, that would imply a pretty meaningful ramp in incremental margins in '26 and '27 to hit the more medium-term targets. Any update on how you're thinking about the cadence of that ramp and when we would expect more of that inflection to come?

So, you can see that in our guide that we have significant improvement in our margin in the second half of 2025 moving into 2026. And we don't expect to have necessarily linear results, but we are starting to move really quickly towards that 2027 timeframe. And so, we do expect to and we'll be operating towards execution on those targets. And you will start to continue to see that movement as we move through the end of 2025, which you see in our guide and into '26 and '27.

Ladies and gentlemen, this will conclude our question-and-answer session as well as conference call. Thank you for attending today's presentation. You may now disconnect.