Workiva Inc

NYSE:WK

Earnings Call Transcript 2019-Q2

[Operator]

Good afternoon. My name is Jessie, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Workiva Inc. Second Quarter 2019 Earnings Conference Call. [Operator Instructions]. Thank you. Adam Rogers, Director of Investor Relations, you may begin your conference.

[Adam Rogers, Director, IR]

Thank you, and good afternoon, everyone. Welcome to the Workiva Second Quarter 2019 Earnings Conference Call. This afternoon, we'll begin with comments from our Chief Executive Officer, Marty Vanderploeg; followed by our Chief Financial Officer, Stuart Miller. And then we'll turn the call over to questions. Also on the line today is Jill Klindt, Chief Accounting Officer.

A replay of this call will be available until August 13. Information to access the replay is listed in today's press release, which is also available on our website under the Investor Relations section. As a reminder, today's conference call is also being broadcast live via webcast.

Before we begin, I'd like to remind everyone that during today's call, we'll be making forward-looking statements regarding future events and financial performance, including guidance for our third quarter and full fiscal year 2019. 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 quarterly report on Form 10-Q 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 earnings press release.

And with that, we'll begin by turning the call over to our CEO, Marty Vanderploeg.

[Martin Vanderploeg, President, CEO & Director]

Thank you, Adam, and thanks to everyone for joining the Workiva Second Quarter 2019 Conference Call. We are proud of our second quarter results, which exceeded guidance for revenue, operating loss and loss per share. Stuart will provide more details later in the call.

As we have discussed, this past year, we improved operational efficiencies, focused our growth strategy and invested in key growth opportunities. Based on our success to date, we will continue to increase our investments in our EMEA expansion; global statutory reporting; integrated risk; and Wdata, which includes data prep, APIs and connectors.

We are encouraged by our progress in EMEA with our traditional solutions, and we are seeing increased demand for our platform as the ESEF mandate approaches for more than 5,000 companies in the EU. We plan to accelerate our investments and aggressively build out sales and support in EMEA throughout the remainder of 2019 and into 2020 to capture a significant part of this growing market. We also plan to accelerate our investments in global statutory reporting. Our initial go-to-market efforts have validated 3 important factors: first, a demand for our solutions in this marketplace; second, our product fit; and third, the lack of significant competition, all of which are contributing to early sales activity.

We also plan to continue to invest in expanding our solution set in the integrated risk market. Part of this expansion is based on requests from our customers and prospects to go beyond SOX and audit to provide a broader integrated risk platform that supports general frameworks for internal controls, a wide variety of audit types, enterprise risk management and policies and procedures. Every customer or prospect I speak with is faced with the same problem: how to reduce risk when reporting vast amounts of data from their systems of record such as ERP, HCM and CRM systems as well as specialized applications for financial consolidation, reconciliation and planning. To solve these universal problems, we continue to invest in Wdata to build more APIs and connectors to improve data integrations and automate downstream reports and analysis. With Wdata, our customers are able to seamlessly orchestrate data between many of their systems and applications, resulting in accurate and transparent data for connected reporting and compliance.

As we continue to expand our platform into new markets and geographies, we are even more confident of the broader global demand for our platform. Workiva is the only cloud platform for connected reporting and compliance with the scale and sophistication that enterprises and governments need and trust. We continue to win awards for our amazing culture, which underpins our ability to attract and retain top talent. On Monday, Fast Company Magazine named Workiva to its Best Workplaces for Innovators list, which places us among some of the most successful companies in the world. Other awards this quarter included Best Workplaces for Millennials by Fortune Magazine and in Best Places to Work in IT by Computerworld Magazine.

We look forward to spending time next month with our customers and prospects at Amplify, our annual user conference, which will feature more than 80 sessions on best practices and advanced ways to use our connected reporting platform. As in past years, our user conference will also include an invitation-only track for investors and analysts. As I visit with customers and prospects, I am even more confident that Workiva will continue to be a driving force in data transparency and trusted connected reporting throughout the world.

With that, let me turn it over to Stuart Miller, our CFO.

[Stuart Miller, EVP & CFO]

Thank you, Marty. So we're pleased with the acceleration of revenue growth over the past few quarters, and we are raising guidance on revenue growth for the rest of 2019. We want investors to understand that converting our customers to solution-based licensing, or SBL, has contributed to both our revenue growth rate and revenue retention with add-ons. As we complete conversion of customers to the SBL model later this year, this source of revenue growth will end and create more challenging comparisons in 2020. To meet this challenge, we've been investing in 4 vectors to drive revenue growth in 2020. As Marty said, the 4 major growth vectors are: EMEA, global, statutory reporting, integrated risk and Wdata. The progress we are making on these growth opportunities is encouraging. Also our guidance on operating loss for the rest of 2019 reflects our investments in these areas.

Now turning to our second quarter results and financial outlook for the rest of 2019. As always, I'll talk about our results and guidance before stock-based compensation or on a non-GAAP basis. Please refer to our press release for a reconciliation of our non-GAAP and GAAP results and guidance. We outperformed our revenue guidance for the quarter. We generated total revenue in the second quarter of nearly $73.5 million, an increase of 24.3% from Q2 2018.

Breaking out revenue by reporting line item. Subscription and support revenue was $60.5 million, up 23.8% from Q2 2018. Deepening our penetration of existing customers with both add-on solutions and conversion to solution-based licensing helped accelerate growth of subscription revenue in Q2 2019. Professional services revenue was $13 million in Q2, an increase of 26.4% from the same quarter last year. Growth in revenue from XBRL professional services overcame a decrease in revenue from other services. Growth in XBRL services in Q2 was seasonal and related to regulatory changes. We expect revenue for professional services to return to low single-digit growth in the second half of 2019.

Turning to our supplemental metrics. We finished Q2 with 3,421 customers, a net increase of 119 customers from Q2 2018 and a net increase of 55 customers from Q1 2019. Our retention rates continue to show strength. Our subscription and support revenue retention rate was 95.4% for the second quarter of 2019 compared to 95.6% for the same period last year. With add-ons, our subscription and support revenue retention rate improved to 114.5% for the second quarter of 2019 compared to 106.9% at June 2018. Our progress with larger subscription contracts is encouraging. The number of contracts valued at over $100,000 per year totaled 558 in the second quarter of 2019, up 52% from Q2 last year. For annual contract value of $150,000 plus, we had 238 customers in the second quarter, up 48% from Q2 2018 results.

Moving down the P&L. Gross profit was $53.6 million in Q2, up 24.1% from the same quarter a year ago and in line with revenue growth. Consolidated gross margin was 73% in the latest quarter. Breaking out gross profit. Subscription and support gross profit was $50.7 million, equating to a gross margin of 83.8% on S&S revenue, an improvement of 100 basis points from Q2 2018 due to a higher utilization rate and better pricing. Professional services gross profit in the second quarter was $3 million, equating to a 22.8% gross margin, down $200,000 from the same period last year due to investments in additional talent to enhance services, address new markets and help transition customers to our next-generation platform. Looking forward to Q3, we expect these investments, together with seasonally lower demand for XBRL services, to result in lower revenue and a negative gross margin on professional services for the quarter.

Research and development expense in Q2 was $19.9 million, up 3.8% from Q2 last year due to higher compensation. R&D expense as a percentage of revenue improved 540 basis points this quarter to 27.1% compared to Q2 last year. Sales and marketing expense for the quarter increased 25.8% from Q2 last year to $26.2 million, in line with revenue growth. General and administrative expenses totaled $7.4 million in Q2, down $1.2 million compared to Q2 2018. G&A expenses as a percentage of revenue improved over 4 percentage points to 9.7%, due primarily to a reduction of compensation expenses.

Operating income was $86,000 in Q2 2019 compared to an operating loss of $5.4 million in Q2 2018. Workiva's operating margin improved 930 basis points in the latest quarter compared to Q2 last year. Turning to our balance sheet and cash flow statement. At June 30, 2019, cash, cash equivalents and marketable securities totaled $137.6 million, an increase of $23.2 million compared with the balance at March 31, 2019. In Q2 2019, net cash provided from operating activities totaled $18.8 million compared with cash used of $2.5 million in the same quarter a year ago. Relative to the same quarter last year, higher profit margins, growth in deferred revenue and improved working capital management all contributed to a record operating cash flow.

Remaining performance obligations continue to differ from deferred revenue as we implement multiyear contracts with annual billing terms. Turning to our guidance. So we beat our guidance on total revenue in Q2 by $4.5 million at the midpoint. Half of the beat came from services revenue. As we stated on previous calls, our services revenue is lumpy quarter-to-quarter and seasonally higher in the first half. We expect revenue from services to return to low single-digit growth in the second half. Specifically for the third quarter of 2019, we expect total revenue to range from $72 million to $72.5 million. The sequential decline in total revenue in Q3 is due entirely to an expected reduction in professional services revenue. We expect subscription revenue to grow sequentially.

At the midpoint, we are guiding to a growth rate of 18.7% for total revenue in Q3 compared to Q3 last year. We expect non-GAAP operating loss to range from $7.5 million to $8 million, reflecting investment in the growth vectors we mentioned. In addition, our spend on marketing reaches a seasonal high point with our user conference in September. For full year 2019, we are raising guidance for total revenue to a range of $290 million to $291 million. At the midpoint of this updated guidance, revenue growth for the year is 18.9%. We expect the growth rate of subscription revenue to outpace the growth rate of services revenue in the second half and for all of 2019. We expect non-GAAP operating loss to range from $12 million to $14 million, modestly improved from our previous guidance.

Now we've never given specific guidance on operating cash flow previously, but we want to do so this one time because OCF was high in Q2 due in part to favorable changes in working capital. We don't expect change in working capital to help materially in Q3. So for the full year 2019, we expect cash flow from operations to total approximately $32 million.

So now we're ready to take your questions. And operator, please begin the Q&A session.

[Operator]

[Operator Instructions]. Your first question comes from Eric Lemus with SunTrust Robinson.

[Eric Lemus, SunTrust Robinson Humphrey]

Looking through the -- some of the notes in the 10-Q, and it looks like you changed your expectations for when you want the transition to solution-based pricing from mid-2020 to now at the end of the year, 2019. So can you just give a little bit of color on why you decided to make that target change for this year? And I guess what do you see as part of the overall uplift with that change in terms of guidance?

[Stuart Miller, EVP & CFO]

Yes. So we made really good progress on that on -- in the first and second quarters. We've accelerated into the second quarter because, frankly, customers see so much value from it. And so certainly, a majority of our customer relationships are now on SBL so that's why we changed our outlook on it. In terms of an uplift, I think on the last call, Marty may have said it was sort of 20% to 30%. It depends on where the customer was starting because we try to keep an equalization by solution with customers and some started from different points.

One of the things -- sorry, Eric, if I can just interrupt. One of the thing on your -- before we get back to you is I apparently misspoke on the script here and I misread it. We actually -- the number of new customer adds was 1-9-9, 199. I misspoke, I gave a different number. So thank you.

[Martin Vanderploeg, President, CEO & Director]

I just want to add one thing to your question, and that is keep in mind that, as I've always talked about, the solution-based licensing is really a strategic thing because it will continue to help us not only because our ADS is higher and we compete with companies who, in certain niches, offer similar types of licensing. But also, it allows us to go out and sell more solutions and get the value for a lower number of seats. So it's going to have a long-term impact. I really like as -- like everyone to realize it's a strategic thing that we've done.

[Eric Lemus, SunTrust Robinson Humphrey]

Yes. Understood. Okay. And then just recently, a press release out about OneCloud OEM agreement with Workiva and receiving some investment. Can you guys just go into a little bit of data on what your expectations are with that partnership?

[Martin Vanderploeg, President, CEO & Director]

Sure. When I talked about our connectors and APIs and the data prep tool, that has been a really good thing for us, and I'll explain what I mean by that. But first off, every deal that we have, Wdata included in, now only do the customers see a lot more value, the deal size is substantially higher. And so our goal is to connect with as many systems as possible. The more systems we're connected to, the more value the customers get. And we found that this company was really good at connecting with a number of traditionally hired systems to connect to. And so we're embedding some of their technology in our platform to interface with some of the more popular consolidation systems and ERP systems, and it's really accelerated our ability to connect to those systems very efficiently and easy for the end user.

[Operator]

Your next question comes from Tom Roderick with Stifel.

[Matthew Van Vliet, Stifel, Nicolaus & Company]

It's Matt Van Vliet on for Tom. I guess touching on the last point about Wdata helping drive deal sizes larger. Wonder if you could give us some color in terms of how that acceleration on large deals had been formulating throughout this year. Are you getting more for some of the newer solution-based pricing? Or are you seeing customers buying more and more modules now or more and more use cases than you were just a couple of years ago?

[Martin Vanderploeg, President, CEO & Director]

Well, it's a multitiered effect. First off, just going to solution-based licensing has increased the value for a given solution. So therefore, we charge more so that's been a factor, for sure. When we include Wdata, obviously, that's a line item and we see more and more customers seeing that as a large part of the value on our platform. That increases deal size.

And then I think the most important and last point is that we're really maturing, starting to mature as a platform company. And we're definitely seeing this in Europe. We go in selling a platform right off the bat instead of selling a single solution. So we go in and say this platform, you can use to do all these different things that you have to report on. And then we -- at that point, we get an initial deal size that's much higher just when we bring on a new logo. So learning -- not only getting the technology up to snuff to be a platform, but also learning how to sell and describe the value of a platform. We're really starting to mature and we're getting good at communicating that.

[Matthew Van Vliet, Stifel, Nicolaus & Company]

And then as you look at the opportunity in Europe in particular, where are you in terms of being fully sort of ready and having those sales conversations with customers as the regulation comes down in the next year plus? And how confident -- or I guess, where is the security that, that will, in fact, sort of hit the market on time as these things tend to be delayed at times or -- and what we saw with the method side of things of being delayed a full year? I guess how are you approaching that situation? How is some of the early deal flow in the pipeline?

[Martin Vanderploeg, President, CEO & Director]

Well, first off, every indication is we don't expect it to be delayed. They've already put the taxonomy out. And in fact, when the taxonomy -- the XBRL taxonomy came out, we, all of a sudden, became real to all those companies in the European Union and that's when the interest level ticked up dramatically. Just in terms of our scaling, I think we're on schedule. The way -- we wanted to be fully ready to take the load, both from a sales point of view and providing support, and so we have a ramp pretty well designed for the next 1.5 years to be ready in 2021. And so I think we're doing well there. We've had really good luck hiring salespeople. I've been very happy with that and we -- so I think we're doing very well on hitting the timing mark.

But the last thing I will just say is that it's interesting to us that we see a very similar pattern on how companies are responding. The larger companies are taking it very seriously. You see a mixture in the mid-tier and then you see on the lower end, they aren't as focused on it yet. So I think we'll see a very similar process to how the SEC rolled out in the States several years ago.

[Operator]

Your next question comes from Rob Oliver with Baird.

[Matthew Lemenager, Robert W. Baird & Co.]

It's Matt Lemenager on for Rob. I have one on the 4 growth vectors. Marty, it sounds like so we have solution-based licensing kind going to kind of roll through in 2019. And then in 2020, we have these 4 growth vectors. Would there be any way you could kind of rank those growth vectors in terms of the time line? And like are any going to hit sooner than the others? And just kind of if you could stack rank those in terms of the potential impact and when they could have impact.

[Martin Vanderploeg, President, CEO & Director]

That's a really tough question for me to answer, frankly. We're seeing really good reception from the marketplace for all 4 of the growth vectors. When we laid these out, I was hopeful that 2 or 3 would hit, and all of them so far have shown really good legs in the marketplace. So we're very, very pleased with the vectors we chose. Obviously, we've been talking about increased investment because we think all 4 of them have a lot of juice. And so we plan to invest in all of them, and I really can't sort of stack rank it. I would say that EMEA is just the most obvious. We're still single-digit revenue there. That's almost the same size the GDP as the U.S., the whole EU. And we've barely scratched the surface in terms of number of logos there. So that's sort of a slam dunk from my point of view. And the other 3, when we actually sit down and figure out revenue potential and all those things, all are really substantial for us, and we've seen great initial -- early days, but great initial reception on all of them.

[Matthew Lemenager, Robert W. Baird & Co.]

Okay. No. I appreciate that. And I was going to ask on the sales cycle in EMEA. And I realize it's early days, we're limited in what we've sold so far. But comparing that to the sales cycles in the U.S. back when it was ramping with SEC, as you go in selling more of a platform, do you expect there's going to be any difference in the sales cycles in EMEA this time around comparing it to kind of the early days of U.S. SEC?

[Martin Vanderploeg, President, CEO & Director]

Well, it's interesting you asked that. I think the European -- the larger companies in Europe watched what happened in the U.S. quite -- and have studied that. And so the larger companies are approaching us already and were doing deals that are platform deals. Now those are a 6-figure deals and they take -- they do have a longer sales cycle just because they're bigger deals and there's more approvals and things like that. We expect that the -- those deals will be slower but bigger. I also think there'll be a significant part of the market that's transactional that will be much similar to what we did in the SEC because remember, in the SEC days, we did very few 6-figure deals in our first 3 to 4 years.

So I think that we're going to see in the mid-market, lower mid-market, smaller company, I think we're going to see a very transactional market that's going to be just like the SEC and will go very fast in many instances. So it's really a bifurcated market. I think we have a good handle on how to approach both ends of that market.

[Operator]

Your next question comes from Alex Sklar with Raymond James.

[Alexander Sklar, Raymond James & Associates]

Sticking with the solution-based licensing and then the increased investments around connectivity, can you just talk about how user growth has trended for the company, if that has moved over to the SBL plans in terms of what kind of usage are you getting or number of users per enterprise?

[Martin Vanderploeg, President, CEO & Director]

That's an astute question. Thank you. Yes, it's really ramping. I mean the number of users is growing I don't want to say exponentially, but the slope of the curve is increasing quite dramatically in terms of end users, which is exactly what we want. We want the value of the platform to be visible to as many users in these organizations as possible that create stickiness and then drives demand for other solutions. We're already starting to see the early days of that, too. So as I talked about SBL being so strategic, we're definitely seeing that in the number of users.

[Alexander Sklar, Raymond James & Associates]

Are you able to track in terms of maybe amount of work papers that are kept in your system versus outside systems of record in terms of, I don't know, proof case of that as well?

[Martin Vanderploeg, President, CEO & Director]

Yes. We do keep track of how many links customers -- all types of things to obviously monitor usage and customer health, that's the reason we monitor those things. And -- but we have -- we also monitor not -- we also -- I can be very careful to say how we -- why we monitor those is solely for customer health and making sure that customers are using the platform to the best that they can. If they don't, we approach them and help them use it better. We have global numbers we watch of how many types of different documents are created and things like that. And we've seen that scale as well. Not as dramatic as users. I think the first cycle has seen more users being brought into each process as opposed to more processes being launched, but also more processes that are also being put on the platform as well. So we monitor that in a global sense.

[Alexander Sklar, Raymond James & Associates]

Got it. And then you mentioned the XBRL mandate helped boost professional services revenue in the quarter. Did that have any impact on logo growth as well or were those customers already with you?

[Stuart Miller, EVP & CFO]

Vast majority of those were already customers.

[Operator]

Your next question comes from Mike Grondahl with Northland Capital.

[Michael Pochucha, Northland Capital Markets]

This is Michael on for Mike. Maybe just the -- you talked about Europe and EMEA but maybe longer term, the opportunity in APAC?

[Martin Vanderploeg, President, CEO & Director]

Yes. When we started in EMEA, we sort of put a smaller team out there and built some logos, built some references, learned the market, learned the different applications for a platform like this and got a number of logos so we knew it, and then decided to really ramp when the time was right. I would say we're going to do a very similar thing in APAC. We have a small team there that started. We're starting to see some early sales. We're figuring out the market. And when the time is right, we'll accelerate there as well. Obviously, for me, it's a measured investment. We're very measured in our investments. We want to see returns after we invest. And so when we think the time is right to invest, we'll certainly tell everybody. But we are sniffing it out and seeing what's there. And so far, it looks like there's a good opportunity for us.

[Michael Pochucha, Northland Capital Markets]

Okay. And then maybe just on -- it seems like growth is pretty broad-based. Maybe is there any specific channel partners to call out?

[Martin Vanderploeg, President, CEO & Director]

Well, I would say that the consultancy firms are -- some of the larger ones are definitely starting to show interest and starting to push bookings for us. As I've talked about, we didn't really talk about it much on this call, we said we want to wait another quarter to 2 when we have more solid results to talk about. But partners are going to be a huge part of our strategy moving forward, both in North America and in Europe. And we're seeing good success with some of the larger consultancy firms, household names that we'll talk about later. But it's certainly -- we're in double digits now in terms of bookings that are assisted by partners as a percentage.

[Operator]

Your next question comes from Stan Zlotsky with Morgan Stanley.

[Stan Zlotsky, Morgan Stanley]

Maybe just a high-level question, should investors start thinking about Workiva as, hey, this is a company that is now going to be a sustainable 20% grower on a going forward basis? Because I mean I appreciate the guidance that you put out for this quarter and for this year, but just as we look at 2020 and '21, with so many exciting initiatives coming on board and then the 4 growth vectors as well as the regulatory environment being so supportive in EMEA, is that the right way for investors to kind of start thinking about Workiva?

[Stuart Miller, EVP & CFO]

Stan, so I think you can infer from our guidance that we expect kind of 20% plus growth in subscription revenue in Q3 and Q4. And then thereafter, it's really too early to forecast. But high teens subscription revenue growth should be reasonable. We aspire to do better than high teens subscription growth, which is why we are investing in these 4 vectors. And we'll keep you updated as appropriate.

[Martin Vanderploeg, President, CEO & Director]

I would like to just add one comment to that, and that is that it's really interesting. If you look at all the different markets out there, there's a lot of people in the ERP space, all the different system of records. And then in the Business Intelligence, there's a lot of SaaS companies, very, very good, polished companies. And when you look at the space we're in, we're very much alone right now. And that's partially because we're making a market so there's good and bad with that. But we're definitely seeing a large opportunity without a lot of competition right now. Now competition could come. We also believe in measured investment. We're not going to plunge into something and spend a lot of money. And some SaaS companies have had success doing that, having very large negative margins. But we're going to take it at a very measured approach just because we feel that it's the most prudent thing to do and we do see that opportunity based on some of the things you said, Stan, that is certainly there. And it's a much larger market than the size of our company, I'll tell you that.

[Stan Zlotsky, Morgan Stanley]

For sure. And then just following up on the prior question around the APAC opportunity. Are there any specific regulatory initiatives that we need to -- kind of track sort of in line with what we've been seeing in EMEA?

[Martin Vanderploeg, President, CEO & Director]

It's interesting. There's over a hundred XBRL mandates around the world now and we're seeing those exponentially increase. We're seeing those in a lot of Asian companies coming on, and so we're monitoring that very carefully. I think XBRL is going to become widespread over the next 5 years, and that puts us in just an excellent position. So we're monitoring that. There's not one that stands out. There's a bunch we're looking at. And so -- and then by the time we get to APAC, it will be a platform sale. We'll go to the large companies, sell a platform that can address a number of different regulatory needs and is well integrated with all of their systems of record and take out that manual Word, Excel process they're all using now. And so it's not any one that's going to get us to where we're consistently a 6-figure dealmaker. It's going to be selling a platform that addresses their needs for a number of different regulatory things, and then we are going to continue to add more and more. So that's sort of how that's going to happen in I think all of the new markets, and we're -- we have a team that does nothing but pay attention to those regulatory changes and what's happening. And in terms of moving to XBRL, that just positions us in an ideal location.

[Stan Zlotsky, Morgan Stanley]

Okay. Perfect. If I could just sneak in one very quick detail question. Very strong metrics on customers with greater than $100,000 and $150,000, but we noticed that for customers less than 100,000, that for a second sequential quarter it declined. Is that just a function of essentially customers graduating up to those higher tiers, along with just maybe some natural attrition down at the low end? That's it for me.

[Stuart Miller, EVP & CFO]

Yes. So I think that we're definitely seeing customers buying new solutions and converting to SBL, which is pushing them into the higher categories. But I would say we've also seen, on the new logos side, we had a 55 net new logos in the quarter, that the size of new logos is -- those initial deals are going up, too, in not just the high end, but at the middle market level. So we're assured by that, particularly as long as the -- when we see growth across the board. I wouldn't read too much into the metric that you quoted.

[Martin Vanderploeg, President, CEO & Director]

Yes. I think some of it's an artifact. I mean when Europe really comes online, that could totally swing back the other way. It's just hard to predict. But we don't...

[Stuart Miller, EVP & CFO]

Swing back the other way in terms of number of new logos.

[Martin Vanderploeg, President, CEO & Director]

Yes, number of new logos. But I mean, we don't manage the business that way. I mean we're managing it for the highest return. We're going to sell wherever the highest return is in a given quarter, and that means the least amount of friction to get more bookings. So we'll see how that goes, but I don't think it's a real relevant indicator.

[Operator]

There are no further questions. This concludes today's conference call. You may now disconnect.