WK - NYSE

Good afternoon, ladies and gentlemen. My name is Phil and I will be your host operator on this call. [Operator Instructions] Please note that this call is being recorded on August 3, 2023 at 5:00 p.m. Eastern. I would now like to turn the meeting over to your host for today's call, Mr. Mike Rost, Senior Vice President of Corporate Development and Investor Relations at Workiva. Please go ahead, sir.

Good afternoon, and thank you for joining us for Workiva's Second Quarter Conference Call. During today's call, we will review our second 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 up for a live Q&A session. A replay of this webcast will be available until August 10, 2023. Information to access the replay is listed in today's press release, which is available on our website under the Investor Relations section. Before we begin, I would like to remind everyone that during today's call, we will be making forward-looking statements regarding future events and financial performance, including guidance for the 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, Mike. And good afternoon, everyone. During today's call, we'll walk you through our Q2 results. And we'll discuss where we're winning in the market across our solution portfolio, will also provide a perspective on the current macroenvironment, will highlight exciting new platform innovation, and will provide guidance for Q3. Q2 was another solid quarter. Subscription revenue grew at 21% driving a beat to the high end of our revenue guidance. Q2 operating margin also beat the high end of our guidance by 222 basis points. This was my first quarter as CEO. The leadership transition has been smooth and successful. I've had the opportunity to spend a lot of time of the last few months meeting with employees and customers and partners all around the world. I'm more optimistic than ever in the opportunity in front of us. Despite the challenging macro, I'm confident in our ability to successfully execute our growth strategy and advance of productivity initiatives. We're winning with assured integrated reporting. Workiva remains the only platform that brings financial reporting, ESG and GRC together in one secure, controlled audit ready environment. This is showcased by the growth we're seeing in our large contract customers, the number of contracts valued over $100,000, increased 24%. Those over $150,000, increased 28% and contracts valued over $300,000 are up 40% all compared to Q2 of 2022. Along with our best-of-breed capabilities, our platform is a strong and key differentiator in the marketplace, and it's resonating with our customers. I'd like to highlight three Q2 expansion deals, all of which are full, assured, Integrated Reporting wins. First, a Fortune 100 aerospace and defense company purchased ESG to complement their previous investment in SEC global statutory reporting and GRC. This 10 year loyal SEC customer was engaged with the Big Four firm in transforming their ESG program. The Big Four firm recommended Workiva as the technology of choice, and they'll also be providing delivery for the project. Second, a privately held provider of IT infrastructure, and IT products and services expanded their existing investment in GRC and ESG by purchasing a suite of financial solutions consisting of our private company reporting, our global statutory reporting, and management reporting. This assured Integrated Reporting win was sourced by the same Big Four advisory firm that delivered the customer's current GRC and ESG solutions. The firm will also be handling project delivery of this new Financial Reporting Solution Suite. And third, a European based multinational telecommunications company purchased both our ESG and our GRC solutions to complement their existing investments in SEC, and global statutory reporting. This deal was a co-sell win with the Big Four advisory firm and will be partnering with them on the delivery of this project. These examples showcase the value and the flexibility of our innovative platform. And they speak to the value of managing financial reporting, nonfinancial ESG reporting, and audit, risk and controls all in one platform. They also highlight the important role that our partners play in extending the value of our platform and an account expansion. The strength of our partner program continues to contribute to both new logos and deal expansions that are sourced by or co-sell with a Workiva advisory or technology partner. Our partner for strategy is also driving results in ESG. I'd like to highlight a few examples from Q2 where customers invested in and expanded their ESG program with Workiva. First, a Fortune 500 provider of food facilities and uniformed services purchased ESG to complement their existing SEC solution. This longtime SEC customer was looking to expand their program in ESG data management, reporting and climate accounting. This opportunity was influenced by both a regional advisory firm partner and by a climate accounting software partner. The combination of Workiva ESG data management reporting along with the partner delivered integrated climate accounting solution will provide this client a comprehensive ESG solution. And second, a European based consumer products company with a new logo win with their purchase of ESG. This opportunity was sourced by a Big Four advisory firm who had been engaged on an ESG transformation project. The driving force behind this project was the customers future compliance with the new CSRD ESG disclosure requirements. The software selection went through a formal RFP process and Workiva prevailed as the top solution to address this company's ESG reporting requirements. While non-financial reporting is a new growth driver, we continue to benefit from strong growth in our financial reporting solutions. This portfolio of solutions goes beyond our well established SEC solution. In Q2, we had signature wins in our vertical specific solutions for banks, investment firms, and state and local governments. We also saw strong momentum in our private company financial reporting solutions, including those companies on a private to public journey. I'd like to highlight two financial reporting deals that close during the second quarter. First, a top 20 US city purchased seven solutions to support their annual comprehensive financial report. This new logo win was a joint sales pursuit with an ERP technology provider to support a finance transformation project that included a new ERP system. Workiva and this partner submitted a joint proposal and aligned on supporting the city's financial reporting requirements. This opportunity was also influenced by a regional consulting partner who had a previous relationship with the city and this regional partner will be implementing the project. Our financial reporting suite of solutions provide significant value to finance transformation in ERP selection projects. The complexity of this type of finance transformation is where our platform truly shines. And second, we closed a seven figure solution upsell for fund reporting with the US based Global Investment Company. This new purchase expands the use of our fund reporting solution across their private equity and credit fund portfolio. The project will be implemented by a regional accounting advisory firm whose implemented to other Workiva solutions for the same client. I'd like to move on now to talk about our GRC suite of solutions. With increasing stakeholder scrutiny, establishing an integrated enterprise wide governance Risk and Compliance Program is a strategic priority for many organizations. At the core GRC programs include processes for controls, risk, and audit management. I'd like to highlight two GRC deals that closed during the second quarter. First, we landed the new logo win with a publicly traded consumer products company that purchased controls management to support their SOX process. This deal was brought to us by a Big Four firm who is advising the clients accounting team on their controls process. Once they saw the power of our controlled testing capabilities, the deal was locked in. And second, a Top 15 US based mutual insurance company expanded their investment in Workiva with audit management, this solution will be the sixth Workiva solution purchased and expands on a GRC investment in controls management and enterprise risk management. This opportunity was sourced by a regional advisory firm who implemented the controls and the risk management solutions back in 2022. Now I'd like to shift gears and share perspective on the macro environment. Not unlike other SaaS companies, we continue to operate through some challenging market conditions. While our top of funnel activity is growing, we do see sales cycles extending and customer budgets under increased scrutiny. And it's clear from my conversations with both our customers and our partners that more executives have become involved in the decision making process. And budgets are tightening. And that's regardless of company size or industry sector. Having been a CIO and a buyer of SaaS software for many years, it's my experience that you become more selective and focused on business critical applications when budgets tighten. So our focus continues to be on communicating our value and working with our partners to deliver high ROI projects. We do have some positive news to share on capital markets. In Q2, secondary offerings remain strong and we saw an uptick in our IPO activity. We're pleased with how we're competing for these IPO deals that are starting to emerge. In Q2, we supported the successful IPO of a fast casual chain of restaurants. This company started out with Workiva through the purchase of private company reporting back in Q2 of 2022. They then purchased capital markets in Q1 added on the Workiva SOX solution and converted to the SEC solution in Q2. While, it's encouraging to see IPO movement, we're not forecasting a measurable comeback in the second half of this year. We are, however, encouraged by our win rates in the larger deals that are going to market. Another part of the macroenvironment that impacts Workiva is the fast pace change in the evolving ESG market. ESG has emerged as an important and sometimes polarizing topic in US politics, and it's frequently captured the news headlines. But even with the ongoing political debate, stakeholder demands for transparent, non-financial data continue to grow louder. What's clear from our experience working with our corporate clients is that new impending ESG regulations across the US and Europe are driving the convergence of non-financial and financial reporting, as well as the requirement that data be audit ready and investor grade. Other stakeholder groups such as investors, suppliers, consumers and employees are also requiring greater disclosure of material and non-financial information. And as evidenced by a number of ESG related actions taking place around the world. We still believe there's a generational opportunity in front of us. Here's just a shortlist of regulations and potential legislation that evolved during the second quarter. On June 9, EFRAG, which is the technical advisory to the European Commission under the CSRD issued a draft set of enterprise reporting sustainability standards for providing further clarification on this already past mandate. And on Monday, July 31, the EU voted on final approval for these reporting standards. Next, on June 18, Swiss voters accepted the new law that formalizes Switzerland's commitment to climate protection and adoption of new reporting requirements. Then, on June 26, the International Sustainability Standard Board launch new ESG standards IFRS S1 and IFRS S2, the ISSB states that the release of these standards will usher in a new era of sustainability related disclosures and capital markets worldwide. On June 27, the Australian Government announced plans to implement mandatory climate related financial disclosure requirements for companies and financial institutions. And finally, here in the US, there are two important updates. First, the SEC reported that they are targeting October 2023, to provide further clarity on the climate disclosure rule. And second, in California, two ESG disclosure bills have passed the Senate and are now in committee review in the assembly. These two state bills would require companies operating in California to report their greenhouse gas emissions from across their supply and value chains and their climate related risks. And both in line with GSCD. This list speaks to how the regulatory environment continues to expand globally in both scope and complexity. Regulations are increasing, as is the demand for more data and disclosure. This is what we do. And it's why our platform is so relevant. I'll turn now to R&D and our continuous platform innovation. We remain focused on innovating and developing new capabilities and furthering the openness and the extensibility of our platform. We believe we're leading a new wave of innovation in which transformative business value will be achieved through a combination of human expertise, contextual data, and the responsible use of generative AI technology. Generative AI has the potential to revolutionize the business reporting market by further boosting productivity efficiency. And by enabling insights that lead to better and faster data driven decisions. Our platform is open ecosystem approach, we'll let our customers decide which industry leading large language model best fits their needs, including those models from Google and Microsoft. Customers will never have to move their data from Workiva platform to leverage generative AI. And neither Workiva nor technology partners will store or use customer data to train models. It's a capability that brings together our differentiated technology, data security, and domain expertise. We'll be discussing generative AI and we'll be providing a business and strategy update at our 2023 Analyst Day on Tuesday, September 19. So please mark your calendars. This year's hybrid event will take place in Nashville, Tennessee, and will also be available via livestream. We've once again combined our Analyst Day with Workiva Amplify, our Annual Customer Conference. We want to ensure that all in person, attendees also have an opportunity to meet with our customers and our partners. We look forward to seeing you there. In closing, I'll leave you with a few final remarks. Workiva delivered solid second quarter results. We are winning with our multi solution account expansion strategy, resulting in strong growth in large contract customers. We remain confident in the resiliency of our business, to continue to demand for assured integrated reporting platform and our ability to expand in our large and relatively unaddressed tam. Notwithstanding the current macro challenges, we remain committed to both our growth strategy and achieving operating leverage. Finally, I'd like to thank our global team of dedicated employees who continue to execute on our strategy, take care of our customers and each other and live by our company values. We were honored to be recognized by Fortune, which named Workiva on its Best Workplaces for Millennials list. This is our seventh year on the list. Millennials make up almost 70% of our workforce, which is why this award is so meaningful to us. And with that, I'll now turn the call over to Jill.

Thank you, Julie. Let's turn to our results. This afternoon I will review our financial performance for the second quarter 2023 and provide Q3 and full year 2023 guidance before opening the line for questions. As Julie mentioned, we beat our Q2 revenue guidance at the high end primarily due to strong subscription revenue growth. We beat guidance on Q2 operating results at the midpoint by $3.9 million. Our revenue beat coupled with productivity initiative and a reduction in consulting expenses drove the operating beat. The results of the focus on operating leverage we discussed last quarter is evidenced by improved profitability for the first half of 2023 versus 2022. Let's go through some key results and highlights for the quarter. We generated total revenue in the second quarter of $155 million, delivering growth of 18% from Q2 2022. Subscription revenue was $136.8 million, up 21% from Q2 2022. While new logos and account expansions both helped to drive strong revenue growth in Q2 2023, 45% of the increase in subscription revenue in Q2 came from new customers added in the last 12 months, professional services revenue was $18.3 million in Q2 2023, relatively flat compared to the same quarter last year. This was consistent with the expectations we outlined in our Q1 call. As we have discussed, our strategy for professional services is to transition lower margin setup and consulting services to our partners. Part of building a high performing partner ecosystem is to provide our partners a strong business opportunity, delivering professional services to our common customer and promoting the value of the platform. In doing this, we expect setup and consulting services revenue to decline year-over-year for the full year 2023 which should be mostly offset by our growth and higher margin XBRL services. Now on to our performance metrics. We added 106 net new customers in Q2 for a total customer count of 5,860, a growth of 479 customers from Q2 ‘22. Our subscription and support revenue retention rate remained at the best-in-class 98% for the second quarter of 2023, which is comfortably ahead of our internal objective of 96% or above. With add-ons, our subscription and support revenue retention rate increased to 111% for the second quarter of 2023 compared to 108% for Q2 2022. This rate improved 190 basis points compared to the first quarter of 2023. We are very pleased with the increase we are seeing in net revenue retention. A driver of this improvement is the strong account expansion activity we are seeing led by the addition of new solutions and expanding the use and spend for existing solutions. One customer highlight from Q2 was a US Department of Health Agency expanding their use of Workiva GRC via their six figure purchase of our audit management solution. This government agency initially purchased our controls management solution in Q1 2021 to support their OMB Circular A-123 requirements for managing risks in establishing a system to assess, correct and report on the effectiveness of internal controls. Account expansions like this are also a strong contributor to the increase in large contract value customers. As Julie mentioned, we continue to see momentum and are optimistic that we can continue to expand the number of customers spending over $100,000. In the second quarter of 2023. We had 1,470 contracts valued at over $100,000 per year, up 24% from Q2 the prior year. The number of contracts valued at over $150,000 totaled 823 customers in the second quarter, up 28% from Q2 2022. And the number of contracts valued over $300,000 totaled 272, up 40% from Q2 2022. In addition to account expansion, six figure new logo wins, many of which are sourced by or a co-sell with our partners are also driving this large contract cohort. A great key to example of this is a six figure new logo private company financial reporting win with a building products manufacturer. This deal was sourced by a technology consulting partner who will also be providing delivery on the project. This new customer was purchased by private equity in 2022 and will be using Workiva to manage more stringent financial reporting requirements. Moving on to our operating metrics, gross profit totaled $117.6 million in Q2. up 17% from the same quarter a year ago. Gross margin was 76% in the latest quarter versus 77% in Q2 2022. The decrease is due to higher cloud computing T&E and compensation expenses versus Q2 2022. Operating expense increased by 8% from Q2 2022. We are pleased with the operating leverage we are seeing. The trend is improving as operating expense growth is the lowest since 2020 and half the rate of revenue growth year-over-year, we posted an operating loss of $600,000 in Q2 2023. A substantial improvement compared to Q2 2022’s operating loss of $8.3 million. As we discussed in our Q1 call, we expect improvement in our operating leverage in the second half of 2023. And we are focused on delivering non-GAAP profitability for the second half of 2023 and for the full year 2024. At June 30, 2023, cash, cash equivalents and marketable securities totaled $466 million, an increase of $26.4 million compared to the balance at March 31 2023. Operating activities in Q2 2023 resulted in cash provided of $26 million, compared with an increase in cash of $8.7 million in the same quarter a year ago. This was a record addition to cash from operating activities. The collection of several large multiyear customer prepays drove the increase on cash in Q2. We do not expect similar accretions to cash but do believe that cash flows will continue to stay positive in the second half of 2023. Q2 delivered a rebound in our deferred revenue, as discussed in our Q1 earnings call, Q1 was impacted by seasonality in our deferred revenue and the timing of several large contract renewals, and contracts with prepayments. Our Q2 deferred numbers reflect that those contract renewals have been completed. Also, our cash flow numbers highlight the impact from a few large contract prepayments. Turning now to our guidance, we continue to believe our guidance assumptions are prudent for the current macroenvironment. For the third quarter of 2023, we expect total revenue to range from $155 million to $156 million. We expect revenue growth to be driven by subscription revenue. Q3 Services revenue growth is expected to be slightly down versus the same period in the prior year. Growth and higher margin XBRL services should be offset by reductions in setup and consulting services as we move those towards more partner delivery. We expect non-GAAP operating loss to range from $1 million to breakeven. A net income of $0.03 to $0.05 on a per share basis. Our share count will be approximately 54.1 million weighted average shares. For the full year 2023, we are holding our full year revenue guidance to that reported in our Q1 call, a range from $626 million to $620 million. We are raising our guidance for non-GAAP operating loss to range from $3 million to $1 million, or a net income of $0.09 to $0.12 on a per share basis. Our share count will be approximately 54 million weighted average shares. As I highlighted earlier, we expect the growth from XBRL services revenue to 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. We will be non-GAAP profitable in the second half of 2023 and are committed to improve margins for the full year in 2024. We remain committed to the long-term operating model outlined in our September 2022 Investor Day. In summary, I want to thank all our employees and partners for the continued support and hard work. Before we turn to Q&A, I would like to reiterate three key points. One, we delivered 21% subscription revenue growth in Q2 and we continue to believe that we can deliver 20% subscription revenue growth for the full year 2023. Two, we delivered a beat on Q2 operating margin guidance and are focused on continuing the momentum of margin improvement and targeting a non-GAAP operating profit in Q4. And three, we remain committed to our strategy and our long term operating model. In closing, I want to echo Julie's thanks to all Workiva employees. You are an amazing team and I am proud to be working beside you. For the analysts and investors listening to our call today. I look forward to seeing you next month at our Investor Day event. We will now take your questions. Operator, we are ready to begin the Q&A session.

[Operator Instructions] We'll take our first question this afternoon from Rob Oliver of Baird.

Great. Good afternoon. Thanks for taking my questions. Julie, what really stood out to me was that very strong, large customer growth, the large customer metrics, particularly that 40% growth and customers paying over $300,000. And I think you did a really nice job in your prepared remarks of giving some hints as to the partner influence, which is a relatively new thing for Workiva. So I just was hoping you could touch on that what are you seeing when you see say, for example, these Big Four partners, do those automatically suggest larger deals? And are these the types of deals you're landing that are full assured, and you're ready to reporting deal? So SEC, GRC and ESG? Let me talk about the components of some of those large deals will be great. And then I had a quick follow up for Jill.

Sure. Hi, Rob, and thank you for the question. I'm glad we get to highlight this key tenet of our growth strategy. Partners are everywhere we want to be and yes, we sell higher, we sell more, we sell broader, we sell larger deal sizes. Our goal, of course is to make them commercially successful with us. And we've been taking a partner first approach. And the percent of the deals that are delivered by partners continue to increase. The goal there is of course, so that we get sourced deals and co-seller partners more and more. So we are seeing high engagement from our partners. And as I highlighted in some of those customer examples, we are seeing more and more of that and broad based demand across the portfolio. And yes, the short, Integrated Reporting concept to that platform we're out with is resonating with customers. So thank you for the question, we are able to highlight that.

I appreciate that. Thank you. And then Jill, I think you are totally better profitability in the second half on the guidance. I think investors will welcome that. And you mentioned in your prepared remarks about OpEx expense growth running at its lowest greater than half of revenue growth is what you said, where are you finding that leverage? Can you just point to some things? Is it on the sales and marketing side, like can you just give us a sense of where you're finding that leverage? Thank you very much.

Yes, thanks for the question. So Robert, looking at it really across the business, we're being very careful about how we operate. And we're looking for leverage throughout the business, no matter what the team is, we're looking for it in sales and marketing, we're looking for it in R&D , we're looking for it in G&A. And we're making sure that we're using our resources to the best of their abilities and structuring the work and the teams in a way that they can succeed in a way that is just more efficient. And so I wouldn't say that it's spread across the business, it would be wrong to just call out one team in particular, because we really are looking at it in a very holistic way.

If I might jump in there. I mean, Robert, you know that we're moving from the $500 million to the $1 billion right now just requires more automation, more rigor, more discipline, accountability, performance management all over. So across the board, setting goals, targets, tracking progress, and it's also having the right people in the right roles and leadership ICs. So we're focusing all around on the productivity.

We're going next to now to Alex Sklar at Raymond James.

Great, thank you, Julie. Lots of info on the prepared remarks. The partner influence Rob mentioned definitely stood out. I wanted to start on your commentary around the macro. Can you just talk about if this is a change versus what you've called out in the past couple quarters? Or are you just kind of reiterating a difficult operating environment?

Not an unfamiliar question these days, I will say, we did have a solid quarter. And we're pleased with our results. And we do continue to continue to see the broad base demand for our platform and a diverse portfolio of solutions. But yes, the budgets are tightening, sales cycles elongating some and just seeing a lot more people in the procurement process and needing approvals and so forth. So it's not been a change, it's continued for the most part. I will say I do find myself on a lot of customer calls these days, talking to C-level executives to get deals over the lines, it was just on one earlier in the week. We're just -- we're hearing not that the value isn't there, that they're not seeing the value. They're just being more thoughtful about their choices. But again, as I highlighted in my earlier remarks, we're seeing a lot of large deals six even seven figures across the portfolio across the industry and geo, so just general macro, continuing on.

Yes, okay. Appreciate that color and lots of definitely strong bookings for, I imagine you and Jill are having those same conversations with some of your suppliers right now so. Jill, on the high growth retention that you flagged running right above your internal objective, I think that was a term you use. I'm curious how you're thinking about pricing broadly as a growth levers, is there any plans or opportunity to kind of further optimize pricing in the coming quarters as a result of that high retention?

Yes, so pricing something that we pay a lot of attention to, of course, and especially we've talked about this quite a bit that maybe that metric is even a little bit too high, maybe we're not pushing enough. And so whenever we come to a renewal inflection point, on a contract, we look at the whole customer relationship and the potential opportunities ongoing for additional solutions, additional value that we might continue to provide to that customer. And we absolutely have been pushing more on price increases, as contract renewals come into play, something that we look at very carefully. And so yes, I would say that absolutely is the reason that we say that we're --we expect it to be 96 plus is that we think that maybe, as that metric remains the high in potentially, there's a little bit of room for us to push a little bit harder on price.

Understood, so that’s tactical price increases on renewal more so than kind of blanket across the board.

Correct.

We move next now to Andrew DeGasperi at Berenberg.

Thanks for taking my question. First, in terms of the ESG activity in Europe, I know there was a change where they loosened some of the language, particularly for smaller businesses there. I was just wondering if you at all, it changes your view on ParsePort and the opportunity there, given that what happened? And I have a follow up.

So I don't think that it really changes our; how favorably we look at passport and our team what they do. There are still ongoing requirements for filing financial and integrated reports in Europe. And we think that there's still market pressure for these customers to continue to provide even more information on what's material to their business going forward. Something that we're watching very closely [inaudible] and Julie mentioned quite a few different things that are happening in Europe, and that might have potential impacts to our business. But overall, we feel like the market is still driving ESG reporting. And we still think that the ParsePort acquisition and what they bring is a very valuable piece of our ongoing European strategy.

That's helpful. And then maybe Jill, can you elaborate a little bit on the full year guide? I mean, given the strength in the metrics? I mean, is there something on the services side that potentially holds down? Yes, I mean, I know you mentioned that's going to get lower as you outsource to partners, but just wondering if there's something else that is preventing you from raising it, given the billings growth, where it is and the quarterly results.

So specifically on around revenue, we wanted to, as I mentioned, we're being very prudent with how we provide that full year revenue guide. We are careful about how the macro might be impacting those results. We have seen some of that movement of something consulting services moving to our partners, that's been a little bit more quick in a couple quarters. We talked about that in Q1. And so we are balancing that potential professional services shift and the macro environment and just being very careful and prudent about how we're guiding for the year.

We go next now to Adam Hotchkiss at Goldman Sachs.

Hey, everybody, this is Connor on for Adam tonight. Thanks for taking the time and the questions. You call out a competitive win in Europe with the ESG solution during an RFP process, which was driven by the CSRD regulation. Can you talk about some of the things that differentiated Workiva from the competition than the RFP and if the product is starting to gain some more reference ability with each incremental win there?

Sure. I will tell you we're very pleased with our progress in Europe. A lot of momentum there. And we did have some signature wins this quarter multi solution six figure deal. And I really think to your question specifically, it's the value proposition of assured integrated reporting. It's resonating. So again, you did pass the CSRD deal on November, and there was much more clarity for us, the specific requirements just as late as last week. So the companies know what's coming. And we have the platform to serve. So bottom line, a lot of opportunities for us to go after in Europe, and we're going after it, we got the right platform, right time, ready to serve the market.

That's definitely great to hear. And if I could dig into Europe a little bit more with CSRD being implemented, the timelines for the reporting are coming up. Are you guys able to kind of better to find the market size because that become a little bit more tangible? And then if you're looking at both public and private companies, given CSRD impacts both sides of the fence, are the opportunity sets that you see different? Are they fairly similar for private and public companies?

So with CSRD, what are -- we have targeted specific markets to go after where we know we win initially, well, the rules are being defined even more, there are those that are going to need to comply within the 2024 and the 2025 year filing in ‘25 to ’24 year, so we were targeting those so we have very specific go-to-market plans and targets. So again, CSRD has a long timeline, groups of companies will need to comply based on the requirements. So long timeline long tail, so we are of course targeting those early on the ones that are going to need to comply first.

We're going to next now to Matt Stotler at William Blair.

Hey there, thanks for taking the questions. Maybe first just on generative AI, obviously, still very early, but we'd love to get a sense of how much of your installed base is especially your enterprise customers are actively exploring, kind of tying generative AI into their reporting processes. And then if you think about potential penetration within the base, are there any incremental monetization opportunity for Workiva associated with generative AI?

Sure, thanks for the question. Seems to be the tech innovation question of 2023. We're very excited about our first announcement, using generative AI to power new features and capabilities on the platform. We've been working with a select group of clients right now on feature validation. And we're getting early feedback from them and appreciated some of the things I highlighted in my earlier remarks both convenience and data security, leveraging those large language models. So we're making it available to customers, we haven't rolled it out entirely to the whole base and globally. But we're actually making a lot of progress in terms of what is -- what will bring value to customers. And that ties into your question around monetization. So first and foremost, it's how do we bring value to customers, as we talked about efficiency and productivity and helping them make better decisions? So we're doing that making sure we have what we have. And what we're releasing for customers really brings the value. And then of course, we'll move on to the next phase of monetization, but right now it's differentiation and it’s customer value.

Got it. It's very helpful. Just maybe just one follow up. Again, on the large customer forward growth, I would love to just double click on what's driving the acceleration, right, obviously, very nice growth and acceleration in Q2, you touched on an earlier question on the partner influence there, because it largely just the kind of the partner motion ramping up and enforced, are there other factors there that are driving that acceleration?

I'd say it's our focus on multi solution account expansion. And the concept of assured integrated reporting, we continue to say we are the only platform, only technology platform where ESG and non-financial reporting along with financial reporting and assurance GRC are all on the same platform that is resonating with our customers and our prospects. And again, multi solution account expansion is where we're focusing and yes, you hit it on the head there with the partners, they help to accelerate that.

We will go next now to Joe Meares at Truist.

Hey, guys. Thanks for taking the questions. I'm going to hit the partner topic from a little bit of a different angle, last year at Amplify you increase your target percentage sales and marketing spend from 25% of sales to 32%. Is there any conservatism in that now that you're seeing some real help from the partners as far as the sales motion is concerned? Not talking your churn but in the next couple of years?

Yes, so thanks for the question, Joe. I think what we're -- what you're talking about is our long term operating model is there, right?

That's correct.

Yes. And so as we think about that model, we believe that even with the partners involved, there still is, we think that model is inclusive of the impact that we'll see from partners. So even though we will continue to work with partners, and closely alongside of partners to help drive some of this growth, we still will have organic sales that are happening within the company. And that's what's reflected in that long term model.

Great, that's helpful. Throughout ESG, if you could give us an idea, generally about how many logos you have now, was there any inflection sequentially in the bookings? They're up or down? And, yes, just curious what your thoughts are there?

Sure. Thank you for the question again, we'd love to highlight. ESG was yet again one of our top three bookings solutions in Q2. And it's also been a top solution in bookings growth. And it was again in Q2. As I mentioned earlier, we added several Fortune 500 clients to our already elite roster of ESG account expansions. We are not yet giving any numbers around customer acquisitions in terms of ESG at this point, but a lot of opportunity there and continue to be very optimistic about the market now under the longer term and going after the TAM.

We go next now to Marc Bachner at Stifel.

Thanks for taking the question. This is Marc for Brad. Wanted to see broad thoughts on hiring in the back half and any areas that you're prioritizing? And then just we'll have a second question on guidance

So on hiring unlike a lot of companies, we didn't over hire, we're busy, of course, focusing on growth and executing. So we're not taking the time now to right size, we don't need to. So we do believe we're operating the company in the right way for our opportunity stage of company that we are, ESG in front of us, short integrated reporting in front of us. So while we become highly intentional around hiring and focusing on productivity, we will continue to focus on growth, and we're going after the opportunity in front of us, our talent, and we will continue to hire.

Great, thank you for that. And then just on guidance, kind of having a little bit of difficulty here. So the $0.12 lawsuit, so far this year, about $0.10 of loss and $0.03 to $0.05 in Q3. That would imply $0.14 to $0.16 in Q4. So just trying to kind of understand there was something different in Q4, that's going to drive profitability much higher.

So when you're looking at those earnings per share number that's inclusive, of course, our interesting income. And we have been pretty intentional about as rates have risen, improving our investment portfolio. And so I don't have the numbers of the math that you're doing right in front of me at this time Marc, but we can follow back up with you and clarify. But we have been seeing quite a bit of actually improvement in our interest income. And that's driving that difference between the operating loss range versus a net income on the per share basis.

[Operator Instructions] And we'll go next now to Mike Grondahl at Northland Capital Markets.

Hi. This is was Mike Pochucha on for Mike Crandall. Most of mine is answered, but maybe just on that SEC ruling coming in October, do you have any insight on what the final timeline look like for a ruling like that as to when companies actually have to apply that to their filings?