Earnings Call Transcript
Workiva Inc (WK)
Earnings Call Transcript - WK Q4 2021
Operator, Operator
Ladies and gentlemen, thank you for standing by, and welcome to Workiva's Fourth Quarter Fiscal 2021 Earnings Call. All lines are muted to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you. Mike Rost, Senior Vice President of Investor Relations, you may begin your conference.
Mike Rost, Senior Vice President of Investor Relations
Good afternoon, and thank you for joining us for Workiva's fourth quarter and full year 2021 earnings conference call. During today's call, we will review our fourth quarter 2021 results and discuss our guidance for the first quarter and full year 2022. Today's call has been prerecorded and will include comments from our Chief Executive Officer, Marty Vanderploeg; followed by our Chief Financial Officer, Jill Klindt. We will then open the call for a live Q&A session. Julie Iskow, our Chief Operating Officer, is also on the call. A replay of this webcast will be available until March 1, 2022. Information to access the replay is listed in today's press release, which is available on our website under the Investor Relations section. Before we begin, I would like to remind everyone that during today's call, we will be making forward-looking statements regarding future events and financial performance, including guidance for the first quarter and full fiscal year 2022. These forward-looking statements are subject to known and unknown risks and uncertainties. Workiva cautions that these statements are not guarantees of future performance. All forward-looking statements made today reflect our current expectations only, and we undertake no obligation to update any statement to reflect the events that occur after this call. Please refer to the company's annual report on Form 10-K and subsequent filings for factors that could cause our actual results to differ materially from any forward-looking statements. Also, during the course of today's call, we will refer to certain non-GAAP financial measures. Reconciliations of non-GAAP to GAAP measures and certain additional information are also included in today's press release. With that, we'll begin by turning the call over to our CEO, Marty Vanderploeg.
Marty Vanderploeg, CEO
Hello, and thank you for joining today's call. The Workiva team once again delivered strong financial results. In both the fourth quarter and full year, we beat the high end of our guidance in revenue and operating profit. We generated record revenue during Q4, which resulted in growth of over 28% in subscription and support revenue and total revenue. Our results reflect our market leadership in transparent connected reporting and the significant increases we're seeing in macro trends, such as digital transformations, increased compliance and reporting requirements, and stakeholder demand for ESG data. In Q4, we outperformed in multiple solution areas, including ESG. We continue to see substantial upside in this growing and exciting solution area and plan to invest heavily to secure more of the ESG market. I will discuss our ESG strategy later in this call. Workiva continues to perform with our extraordinary talent and our innovative reporting platform. In Q4, we had strong new logo growth, adding 169 net new logos. We delivered a 32% increase in the number of customers with contract values over $100,000. We also achieved our highest revenue retention rate of 97%. In 2021, we continued to expand our partner ecosystem, which now includes over 200 entities. Our partners are an important part of our growth strategy. They extend our geographic reach, accelerate the usage and adoption of our platform, and enable more efficient delivery of professional services. Most recently, we announced new partnership relationships to support our ESG growth. In Q4, we announced that we are expanding our alliance with PwC to bring a people-led and tech-powered approach to ESG strategy and reporting. We are aligned in our belief that the convergence of both regulatory pressure and investor demand will dramatically impact how and the level at which companies disclose their ESG data. Working together, we plan to build purpose-driven ESG strategies for our mutual customers. We also expanded our relationship with the KPMG ESG practice. Workiva and KPMG are collaborating in the marketplace and have engaged in discussions with executives from leading financial institutions about how their organizations are addressing ESG in light of stakeholder, investor, and government expectations. On the ESG technology side, we announced last week a new partnership with Persephone, a carbon accounting platform that enables users to turn financial operational and supply chain data into certified carbon footprint data. The Persephone partnership will enable customers to integrate and transfer data between our respective platforms and will provide access to carbon benchmarking and a carbon offsets marketplace. We have also been busy on the M&A front. In the fourth quarter, we completed two tuck-in acquisitions that we believe will further support the competitiveness of our platform. On December 21, we announced the acquisition of Audit Net. Audit Net's cloud platform serves as a primary communications resource and digital network where over 160,000 audit practitioners access and share content, resources, tools, and templates. This strategic acquisition supports our investment in the future of audit transformation, adds to our customer offering, and helps to grow our marketplace. We also announced the December acquisition of Arelle, the global standard XBRL validation engine. Arelle is used by a community of over 50 global regulators, banks, and technology companies, including Workiva, who depend on it for data quality and comparison. We believe transparency will bring about a better world, and Arelle helps make that happen. Moving on to 2022. We entered the year with great momentum and are now strategically investing in our ESG offering to accelerate global growth, advance our product roadmap, and increase pipeline. We believe that we have a large total addressable market (TAM), and we continue to invest to expand our TAM. At our Investor Day in November, we discussed that outside of the SEC solution, we believe our penetration is still early in all other solution areas. With new markets and expanded opportunities, we communicated a revised conservative TAM estimate of $25 billion, including ESG. ESG reporting is complex, making it a natural fit for our platform and a compelling market for us. We have over a decade of experience and have invested over $600 million to deliver a cloud platform that supports investor-grade reporting for the world's largest organizations. We are highly encouraged by our customers' and partners' initial response to our ESG solution. It is still early, but the global market is moving fast. This year, we are strategically investing in our people, technology, partners, and go-to-market strategy in order to capture the significant ESG market opportunity. The majority of our new investments are being leveraged in support of ESG. We believe the investments we are making in ESG, along with our other solutions, will position us to deliver durable low to mid-20% revenue growth. To support our growth and scale, I am pleased to share that Julie Iskow has been promoted to President and Chief Operating Officer. In her expanded role, Julie will be responsible for Workiva's global growth strategy and commercial operations including enterprise-wide product development, platform innovation, sales, marketing, service delivery, and customer success. Congratulations to Julie on this well-deserved promotion. I'm looking forward to working closely with her as we advance Workiva's mission of powering transparent reporting for a better world. In closing, we delivered very strong results in 2021 driven by the focused execution of our strategy. We continue to grow the business by attracting and retaining top talent, investing in the development and innovation of our platform and fit-for-purpose solutions, and consistently delivering an outstanding customer experience. It continues to be an exciting time for Workiva. We believe we are well positioned and have the right strategy in place to capitalize on the increasing global opportunities to power transparent reporting for a better world. With that, I will turn the call over to Jill.
Jill Klindt, CFO
Thank you, Marty, and good afternoon, everyone. Q4 was a great quarter, providing a strong finish to what was an outstanding year for Workiva. We continue to see broad-based demand with revenue performance across our solution portfolio. Today, we are providing guidance for Q1 and an update to our full year guidance for 2022, which I will discuss later. I will talk about our results and guidance on a non-GAAP basis. Refer to our press release for a reconciliation of our non-GAAP and GAAP results and guidance. We beat Q4 2021 revenue guidance at the midpoint by $3.8 million. Solid market demand and higher services revenue accounted for the beat. We beat guidance on Q4 operating results at the midpoint by $4.5 million. The revenue beat coupled with lower consulting fee expense and travel and entertainment makes up the majority of the beat on operating income. Turning to Q4 2021 results versus Q4 the year before. We generated total revenue in the fourth quarter of $120.8 million, showing growth of 28.7% from Q4 2020. Breaking out revenue by reporting line item. Subscription and support revenue was $104.3 million, up 28.8% from Q4 2020. New logos and new solutions helped drive strong revenue growth in Q4 2021. 72% of the increase in subscription and support revenue in Q4 came from new customers added in the last 12 months. Professional services revenue was $16.5 million in Q4 2021, up 28.2% from the same quarter last year. This was largely due to higher XBRL services revenue. An expanding SEC customer base combined with the introduction of FERC XBRL services were the primary drivers of the increase. Turning to our supplemental metrics. We finished Q4 with 4,315 customers, a net growth of 592 customers from Q4 2020, and a net growth of 169 customers from Q3 2021. This performance capped off a fantastic year for new customer growth as Q3 and Q4 represented the two highest net increases to customer count we have had as a public company. Our revenue retention rates improved compared to the prior year. Our subscription and support revenue retention rate was 97% for the fourth quarter of 2021, an increase compared to 95% for the same period last year. These numbers reflect our focus on customer experience and continued investment in our platform. With add-ons, our subscription and support revenue retention rate improved to 110% for the fourth quarter of 2021 compared to 109.5% in Q4 2020. The number of larger subscription contracts continues to show impressive growth. In the fourth quarter of 2021, we had 1,121 contracts valued at over $100,000 per year, up 32% from Q4 of the prior year. The number of contracts valued at over $150,000 totaled 578 customers in the fourth quarter, up 38% from Q4 2020. At our November 2021 Investor Day, we introduced the disclosure of subscription contract value over $300,000. This contract value segment showed the highest growth of the three, up 54% from Q4 2020, with a number of contracts valued at over $300,000 totaling 183. Moving down to P&L. Gross profit totaled $93.2 million in Q4, up 31.3% from the same quarter a year ago. Consolidated gross margin was 77.2% in the latest quarter versus 75.6% in Q4 2020, a net expansion of 160 basis points. Breaking out gross profit, subscription and support gross profit totaled $87.7 million, equating to a gross margin of 84.1% on subscription and support revenue, a contraction of 10 basis points compared to Q4 2020. Professional services gross profit in the fourth quarter was $5.5 million, up 95.7% versus Q4 2020, equating to a 33.5% gross margin. Q4 gross margin was particularly high as substantial professional services revenue growth, coupled with a modest increase in compensation, led to strong year-over-year performance. Research and development expense in Q4 totaled $28.6 million, up 29.6% from Q4 2020 due to new headcount investment. R&D expense as a percentage of revenue increased to 23.7% in Q4 2021 from 23.5% in Q4 2020. Sales and marketing expense for the quarter increased 33.1% from Q4 2020 to $46.8 million as we continue to make go-to-market investments in support of our growth objectives. General and administrative expenses totaled $15.6 million in Q4, up $7 million compared to Q4 2020. G&A expenses as a percentage of revenue increased to 12.9% from 9.1% in Q4 2020. This increase was driven primarily by investment in headcount, coupled with higher travel and entertainment and software expenses as we scale our business for growth. We posted an operating profit of $2.2 million in Q4 2021 compared to an operating profit of $5.2 million in Q4 2020. Turning to our balance sheet and cash flow statement. At December 31, 2021, cash, cash equivalents and marketable securities totaled $530 million, an increase of $8.1 million compared to the balance at September 30, 2021. Net cash provided from operating activities in Q4 2021 totaled $9.3 million compared with cash provided of $13.4 million in the same quarter a year ago. Impact from Audit Net and Arelle acquisitions. Our reported results contain the full absorption of the Audit Net and Arelle transactions, which were both closed in December 2021. These two strategic tuck-in acquisitions will not have direct material impact on revenue or operating profit. Turning to our guidance. For the first quarter of 2022, we expect total revenues to range from $127 million to $128 million. We expect subscription revenue will continue to grow at a faster rate than services revenue in Q1. We expect non-GAAP operating loss to range from $7 million to $6 million, a net loss of $0.16 to $0.14 on a per share basis. Our share count will be approximately 52.6 million weighted average shares. For the full year 2022, we are raising guidance for revenue. We now expect total revenue to range from $532 million to $534 million. We expect non-GAAP operating loss to range from $37 million to $35 million or a net loss of $0.80 to $0.76 on a per share basis. Our share count will be approximately 53 million weighted average shares. And in 2022, we expect to post positive free cash flow for the sixth consecutive year. Our current 2022 assumptions are dependent on a variety of factors that are subject to change and that we believe are appropriately conservative for the current environment. This guidance for operating margin includes new investments in sales and marketing, geographic expansion, investments in research and development and ESG as we intend to take advantage of growth in new markets and an expanding TAM. This guidance takes into account the return of expenses that were reduced by COVID, primarily travel costs and in-person events, as well as the market pressures we are experiencing related to attracting and retaining top talent. In closing, I would like to thank the more than 2,100 global Workivians who have enabled us to drive record-breaking results in Q4 and the full year 2021. You are the key to Workiva's success. With this great team, we are very well positioned to execute on our 2022 strategy. We will now take your questions. Operator, we are ready to begin the Q&A session.
Operator, Operator
Your first question comes from the line of Matt Stotler with William Blair. Your line is open.
Matt Stotler, Analyst
Maybe I'll just start off with one on ESG and the plans to increase spending there in the coming year. Obviously, a massive multibillion-dollar opportunity. It seems like you guys are obviously really leaning into that, given the early days there and then kind of the leadership position. Would you help maybe to put a finer point on how you're thinking through those expenses as we go into 2022, whether that's more on the direct sales partnership side, sales and marketing, whether there's a heavy amount of additional product investment that's embedded in that guidance or across the board? Any color there would be helpful.
Marty Vanderploeg, CEO
Matt, thanks for the question. Probably one of the more relevant questions in my brain out of days is attacking the CSG market and since the last time I talked to you or even since we gave our guidance for 2022, the opportunity is even becoming more compelling. And so to answer your question specifically, the majority, the largest portion of that is sales and marketing. We're expanding our sales team with a focus on ESG, and we're going to do that aggressively. We're also making significant R&D investments. There are things we had to enhance on our platform. Luckily, all these things play into our other products as well. So even though they're specifically for ESG, they do support and improve the other solutions, things like workflow and better connectivity and then some of the more specific things like supporting all the different frameworks they have to report in ESG data. So, it's a mixture of both of those. We're also going to put more effort into our go-to-market in terms of PR and building on our brand. So those are the main areas. And like I said, this is becoming so compelling. It's a really generational opportunity for Workiva and for our employees and shareholders. So you know how careful we are with capital. We built this company with very little capital, and we're still going to remain cash flow positive, but we were just compelled to make a really meaningful investment into this market. So that's really the reason for what you see in terms of the reduction in margin.
Matt Stotler, Analyst
I wanted to ask a quick follow-up regarding the capital markets products. Last year, we saw some strength in that area, and I recall there wasn't much mentioned about it during the original commentary for 2022. I'd appreciate an update on what you're observing in that segment and how it connects to 2022. Also, since you've mentioned it as a leading indicator, I'm curious about your perspective on how the current slowdown in that market segment will impact the rest of the year.
Marty Vanderploeg, CEO
Sure. First off, I want to emphasize that we have accounted for all of that in our guidance. There is considerable political uncertainty globally right now, along with inflation. We understand that it will be a challenging year in the capital markets. As I mentioned previously, we have only a small percentage of that market at the moment, but we have expanded our sales team significantly. I believe this will help us counter any overall slowdown throughout the year as we aim to increase our market share. Many companies still plan to go public, which is important for us. While there has not been a surge of IPOs this year, we are observing some slowdown, though it isn’t substantial. We've anticipated this, and I believe we will capture a larger portion of the market. Additionally, our other solutions consistently perform well. Our multi-solution strategy has proven effective, and we had strong results in the last quarter that set us up well for this quarter. Investor Relations has been performing better compared to past trends. We are gaining momentum with our GRC integrated risk product line, and our multi-solutions for private to public transitions remain robust. This diversified portfolio strategy helps buffer the slower segments of our business. We have all of this considered, and we are optimistic about 2022 overall.
Operator, Operator
Your next question comes from the line of Daniel Jester with BMO Capital Markets. Your line is open.
Daniel Jester, Analyst
Maybe just sticking with ESG, can you expand and give us some more color on sort of the pipeline creation? How is that evolving? And maybe compare and contrast your conversations with current customers on ESG versus potentially brand net new adds on the ESG side?
Marty Vanderploeg, CEO
Sure. That's a good question in many ways. First, I would say that our performance in ESG for Q4 surprised everyone in the company. We had an excellent quarter in ESG sales, which has quickly become a significant part of our portfolio. We're also experiencing solid pipeline growth, which is encouraging. However, we're still managing with a relatively small number of salespeople focused on this area, and we are in the process of significantly ramping up that team. Most of our current customers are those who are already looking into ESG. We have gained new clients through the ESG solution, but this primarily reflects our strategy of reaching out first to existing customers. Additionally, it's clear from regulators like the SEC and EU authorities that ESG metrics will eventually be integrated with financial metrics, using the same reporting standards and technology. This gives us a substantial advantage since we already hold a significant share of the financial reporting sector within those companies. Therefore, it makes sense for them to approach a trusted provider with whom they have established relationships to enhance their reporting capabilities for ESG metrics. We believe we are positioned to capture a major portion of the market for ESG reporting both in the EU and the U.S., given our financial reporting market share. While our sales teams are starting to engage more with non-customers, the majority of our new clients so far have been existing customers, as I've mentioned.
Daniel Jester, Analyst
And then on the revenue retention metric of 97%, excluding add-ons, that's been improving sequentially for a while now. Just can you dive in a little bit as to what specifically you think is driving that? And do you have further improvement there baked into your 2022 outlook?
Marty Vanderploeg, CEO
I’m not sure if we can enhance that figure. It resembles diminishing returns; you can invest significant capital and only see a modest return. I believe that number indicates that the new platform is well-received and preferred. Customer satisfaction has increased and is now even better than it was with the old platform. We are continuously adding value to the platform, and customers recognize that. Additionally, we have dedicated a lot of time to building relationships with customers as we transitioned them to the new platform, which contributes to our additional sales afterward. It's the result of effective strategies we've implemented to lessen those concerns. I don't anticipate a significant increase in that figure, though we could potentially raise it further. However, I believe focusing on that isn’t the best use of our budget right now. The customers are very satisfied, and most of those who leave do so due to mergers, acquisitions, or bankruptcy; instances related to cost are quite rare.
Operator, Operator
Your next question comes from the line of Terry Tillman with Truist Securities. Your line is open.
Joe Meares, Analyst
This is Joe Meares on for Terry. I'm just wondering if you can comment on recent hiring and international markets that you play in, both management hires as well as sales and go-to-market hiring? I'm just wondering what regions you're growing headcount the fastest in.
Marty Vanderploeg, CEO
Well, thanks for the question, Joe. I mean, growing fastest as a percentage or growing fastest in raw numbers. Obviously, EMEA is further ahead in terms of its development. We're getting up to the size where several hundred people in EMEA. And like I mentioned before, a significant number of our sellers. We're adding sellers there. We're recruiting and hiring. Obviously, that's a slower process in EMEA than it is in the U.S. We're also adding from a percentage point of view, actually more sellers in APAC off a smaller number. So in terms of the life cycle of those regions, EMEA is about halfway between APAC and North America. And we're adding sellers in all those regions being driven by the fact that so many of our solutions now like global statutory reporting and ESG are global activities. And our customers are asking us to have a presence in all their major markets at some level. And so we really need strong teams covering APAC and EMEA, and we're making really good progress building those teams out, and it's a significant part of the spend build as we expand.
Joe Meares, Analyst
Super helpful color. I appreciate it. Just as a follow-up. I think you've said in the past that average SEC deals started around $25,000 and are now well over three times that. Acknowledging ESG, I guess, as a super new product, how should we think about the cadence of price increases for newer products?
Marty Vanderploeg, CEO
I mentioned this before, although my memory isn't what it used to be. Our average deal size has quite a variation, with initial deals slightly below our average deal size. As we grow, we will tailor our offerings for larger companies, mid-market, and smaller firms, which means we'll have differently priced products for these markets, and we are still working on the specifics. We are learning quickly, but I expect the average deal size to start somewhat lower than our current product mix and gradually increase as we add more value and achieve greater usage. I anticipate a trend similar to what we've experienced in the past, but not as intense as it was when we were a startup focused on gaining recognition and establishing our business. You will see a similar trend but not as pronounced as with the previous SEC numbers.
Operator, Operator
Your next question comes from the line of Stan Zlotsky with Morgan Stanley. Your line is open.
Stan Zlotsky, Analyst
Perfect. And congratulations on good results and a strong finish to the year. Wanted to dig in on the partner side of the business. And how are partners playing into your international expansion, especially in Europe and maybe in Asia Pacific? And then a quick follow-up.
Marty Vanderploeg, CEO
That's a good question, Stan, and I appreciate it. The partners are even more crucial in EMEA and APAC; we observe significantly higher closed rates with partners. We also see larger deal sizes. Hiring is slower in APAC and EMEA, so we are focusing a lot on partners, which will be even more critical than in North America. It's important there as well, but when entering new regions and gaining the attention of partners, it really makes a difference. In APAC, our presence would be nonexistent without partners at this stage. EMEA is also a significant part of our business there. So yes, it is very important.
Stan Zlotsky, Analyst
And then a quick follow-up on billings. They came in a little bit less than consensus numbers in the quarter. Is there anything that we need to be mindful of as far as like was there something maybe around like billing duration or just the cadence in the quarter, anything that pulled into Q3 or maybe you fell out of the quarter to highlight specifically on the billing side?
Marty Vanderploeg, CEO
Well, I'm going to let Jill answer that. So go ahead, Jill.
Jill Klindt, CFO
Yes, no worries. Thanks for the question, Stan. And I think that we've talked about the fact that for billings for us, we do have some variability in the contract length that we have. And we do have some two- and three-year deals that are prepaid that can sometimes throw some fluctuations into the mix on our billings number. But we didn't see anything that caused us concern related to Q4 billings. It continues to move around a little bit, but we thought we had good growth in Q4 and are really encouraged going into the new year.
Marty Vanderploeg, CEO
Yes. I would add, Stan, that we've been very consistent on that. Our billings numbers are just not good indicators of our bookings numbers. And we were very happy with our Q4 bookings.
Operator, Operator
Your next question comes from the line of Rob Oliver with Baird. Your line is open.
Rob Oliver, Analyst
Great. Workiva team, I think I'll try to get Julie in the mix here. Julie, congratulations on your promotion. My question is, obviously, a big focus on ESG here, and I think rightfully so, given the magnitude of the opportunity and the early strength you guys have shown. You guys did make reference to some other fit-for-purpose solutions, which are getting investment in '22, albeit a smaller portion of the investment, but I'd be curious to hear from you which of those you're most excited about and which we can expect to maybe start to hear you guys talk about on calls like this first? And then I had a follow-up.
Julie Iskow, President and COO
Sure, and thank you for the congratulations. I'm honored and enthusiastic about our opportunity and where we're headed, our strong team and how we'll be able to contribute going forward. I think as we typically talk about, we have our incubation solutions and our growth solutions. We don't really disclose all of that information while we're working through that. But we're continuing to invest in some of our solutions to make them more fit for purpose at some level, but we're also investing in some work around MSP, so the managed service provider. So we are investing in technology there, and some of our solutions fit very nicely in that play with our partners. So areas in that is where you'll see some of our continued efforts.
Rob Oliver, Analyst
Jill, I wanted to follow up on a question from earlier. In your prepared remarks, you provided great insights about the factors affecting the bottom line, but I would like to hear about the top line. Specifically, what factors influenced your top line guidance for this year?
Jill Klindt, CFO
Yes, absolutely. And I did give some color on that, and I'm happy to talk through it a bit more, but we really do feel like those assumptions are where we're at right now. There's a lot going on, obviously, in the current environment. And so we are being conservative to the extent that we think that that makes sense for us right now. There's no sense in getting out ahead of ourselves. We have a lot of investment for growth happening. And while, as you would expect, not all that investment will result in top line growth this year, we do have a lot of optimism around how we came into the year with the current pipeline, the bookings that we saw towards the end of last year that do impact 2022 revenue. And so that's why you're seeing in Q1, we do have a higher growth in the guidance than would be shown based on the total year guidance number. Now we are a company that always wants to outperform guidance. And so we think where we're at right now for our full year guidance is the right spot. And we look forward to trying to outperform that guidance throughout the rest of the year, not only with our existing solutions but working through the ESG opportunity that we have in front of us and continuing to work with our existing customers, our partners, and expanding all those relationships across our broad-based solution portfolio.
Marty Vanderploeg, CEO
I just want to add a little on that too, just from my perspective. This isn't my first rodeo. I got a lot of miles on me. And as a management team, our credibility is very much determined by how well we predict the future. That's not an envious place to be. And so we're always going to take the position that we're going to beat and raise. And with all the uncertainty, Jill and I and Julie and our finance team and a whole bunch of people got together and we said, where are we looking? I mean, last year, the consensus guidance was between 16% and 17%. And I'm not saying that we're going to beat these numbers this year as much as last at all, but I'm going to make sure on a baseline that we are not going to be viewed as someone that can't predict their own business. We're going to predict our business and be conservative and remain relevant as good managers. And so we always are going to beat our quarters on our road to $1 billion. And we see that clearly now. We know we can get there. And so that's really our mentality. We're in this for the long run. And when we put our guidance numbers out, people are always disappointed at the end of the year, they're not. So that's just how we operate.
Operator, Operator
Your next question comes from the line of Mike Grondahl with Northland Securities. Your line is open.
Mike Grondahl, Analyst
And congratulations on the quarter. Just listening to the call, reading the press release, I mean ESG sounds like probably roughly your number one priority for '22. What would you describe as your second priority and third priority?
Marty Vanderploeg, CEO
Thank you for the question, Mike. I hope my points were clear. ESG is definitely our top priority this year. As I mentioned before, I have spent considerable time engaging with ESG specialists, regulators, and U.S. senators to understand this market. It's evident that this shift is imminent, and it represents a substantial opportunity. We have invested over $600 million into our platform since its inception, which positions us well. It's true that sometimes luck plays a role, but I believe we are fortunate and well-prepared, with approximately 90% of our platform ready to tackle this challenge. We are fully committed to this effort, and there's a strong demand for assurance around ESG metrics, which involves controls and audits. We plan to integrate our controls and audit products to ensure the accuracy of ESG reporting to entities like the SEC and the EU. This is a critical moment for us to capture significant market share. Additionally, our focus on enhancing the platform will improve all our offerings, including annual and interim reporting for private companies and various financial reports. We are investing in R&D and supporting our sales team to maintain healthy bookings and revenue streams. However, ESG is receiving the majority of our attention and investment right now because it is truly transformative for us. We feel fortunate to be in this position, and I believe it would be a failure in my responsibilities to the company not to pursue this opportunity.
Operator, Operator
Your next question comes from the line of Andrew DeGasperi with Berenberg. Your line is open.
Andrew DeGasperi, Analyst
I guess first on the partnership you have with Persephone, I just had a question in terms of the data integration. What other data sets do you think you would need to really make the product more to the like and what regulators are likely to ask a few on these reporting requirements? Do you think there's any other tech partnerships you could sign that potentially help improve the product?
Marty Vanderploeg, CEO
There's no doubt about that. Persephone is well-known as a startup that has raised significant capital and focuses on carbon accounting. We, however, do not handle carbon accounting; instead, we focus on reporting ESG metrics and aggregating that data. Our approach includes integrating with numerous companies, and our initial acquisition was centered on enhancing those integrations, which has grown to over 150 now. For instance, we extract ENI metrics directly from Workday, allowing users to generate necessary reports, and we plan to integrate with other HR systems as well. With regard to carbon data, we anticipate many companies will partner with us. We offer robust open APIs for integration, which can be executed either by us, the customer, or technology partners. Currently, we are in discussions with several potential tech partners. They recognize that we provide the reporting and disclosure pipeline essential for them to present their data in the required documents. This understanding is clear in our discussions, and you can expect to see many integrations develop over time.
Andrew DeGasperi, Analyst
It was recently revealed that some of your competitors experienced a breach in their financial reporting. I'm curious if you are having more discussions with customers or potential customers regarding the security features of Workiva's platform, and how this activity has evolved in recent weeks.
Marty Vanderploeg, CEO
The conversation around the people not using our platform has definitely increased. The discussions about security are ongoing. Our major customers conduct on-site audits with little notice, and we frequently perform penetration testing for large banks and other clients. We identify as a tech company focused on developing software tools, and we have a strong cultural emphasis on security. We have sizable teams dedicated to security from a software perspective. In the unfortunate event of a hack, access would be limited to only a small number of customers, as we have everything segmented. If a breach occurred, they would access only five or ten customers rather than all of our 4,000-plus clients. We take various preventative measures, such as monitoring logins, requiring two-factor authentication, training our employees about phishing, and regularly testing our defenses. This is a core part of our culture. While anyone could potentially be hacked, we invest significant energy into security and feel very confident about it. Our documentation of security practices, including FedRAMP compliance, is top-notch, and we're proud of our investment in these areas. Despite being the largest in market capitalization on U.S. exchanges, we have not experienced a hack.
Operator, Operator
Our next question comes from the line of Alex Sklar with Raymond James. Your line is open.
Alex Sklar, Analyst
And I'll add my congratulations, Julie, on the new role as well. Jill, we saw the sales efficiency metrics really pick up nicely in 2021. I know part of that is just the lower T&E around the pandemic. But given the ESG demand comment, all the partner investments that have gone into place, and some of the regulatory catalysts still out there, I'm curious if you think the 2021 levels are sustainable going forward?
Jill Klindt, CFO
We're certainly making significant investments in sales and marketing. In addition, we anticipate a return to in-person events, similar to what we experienced in 2022. This means our investments will not only focus on hiring for our go-to-market efforts but will also include the return of travel expenses. Consequently, while we expect these new hires to enhance sales growth and efficiency, we also anticipate some pressure on expenses due to these new hires and the resumption of other related costs.
Marty Vanderploeg, CEO
I was just going to add that, and I think Julie has talked about this in the past, and we're doing a lot of investment in enablement, training our sales force and so on and so forth. But your point is well taken. When you ramp a sales team, you get a lot of greener salespeople, and so you're going to see a dip and then things like Amplify are coming back. So yes, we're going to continue to improve sales efficiency over time; the trend will be upwards, but I think there will be an adjustment this year. I usually don't provide exact numbers for that, but I can tell you that it will be a significant part of our bookings this year. It will rank among the top categories, and we've never experienced anything growing this quickly. What makes it compelling is that our financial reporting platform is widely adopted by public companies for obvious reasons. We are also making significant progress with private companies and some government entities. However, ESG will ultimately be relevant for every type of organization, including NGOs, all nonprofits, government agencies, water districts, and all companies. The EU has stated that 50,000 companies will need to report on this, though I'm not certain that number is precise. The most compelling aspect is the potential sales to each customer and the sheer number of customers available; the size of the market we can tap into is the largest we have seen in our history. That is what makes this so exciting.
Operator, Operator
There are no further questions at this time. And this does conclude today's conference call. Thank you for participating. You may now disconnect.