Workiva Inc

NYSE:WK

Earnings Call Analysis

Improving Margins and Strong Momentum into 2024

In Q4 2023, the company's performance exceeded expectations with a $2 million revenue beat, totaling $166.7 million, marking a 16% increase from Q4 2022. Growth was driven by strong subscription revenue, up 18%, with new customers accounting for 47% of this rise. Professional services revenue dipped slightly due to a strategic shift towards partners handling low-margin services. The company's operational efficiency improved, yielding an 18% hike in gross profit and an operating profit of $12.7 million, representing a 430 basis point improvement from the previous year. Customer growth remained robust, with 89 new additions. For 2024, total revenue guidance ranges from $718 to $722 million, with subscription revenue expected to grow by 16%, and non-GAAP operating income is projected at $17 to $21 million.

Financial Summary and Business Performance

We delivered impressive financial results in Q4 2023, exceeding our initial revenue guidance by $2 million, owing to robust subscription revenue growth and greater service revenues than anticipated. The quarter's total revenue stood at $166.7 million, up 16% from Q4 2022, with subscription revenue reaching $148.8 million, an 18% year-over-year increase, and services revenue at $17.9 million. The enhanced revenue performance also translated into considerable operating profit growth, which, at $12.7 million, represented a 430 basis point improvement from Q4 2022.

Customer Metrics and Market Expansion

Our customer base continued to expand in Q4, adding 89 net new customers for a total count of 6,034, marking a significant addition of 370 customers from Q4 2022. Gross revenue retention impressively outperformed our internal target, hitting 98%, while net revenue retention rose to 110%. We observed sustained revenue growth from multi-solution customers, underscored by a 21% year-over-year increase in contracts valued over $100,000. These metrics not only reflect our customer acquisition success but also our ability to upsell and expand existing accounts.

Profitability and Expense Management

Our optimized business approach resulted in gross profit totaling $130.7 million in Q4, up 18% from the previous year, with gross margins improving to 78%. Operational expenses, although increased by 11% from Q4 2022, resulted in a margin improvement of 300 basis points year-over-year. The operational performance, strong gross profit, and controlled operating expenses manifested in an enhanced operating profit of $12.7 million. Additionally, our cash position remains strong, with $814 million in cash, cash equivalents, and marketable securities, underpinning our financial stability and capacity for future investments.

2023 Wrap-Up and Strategic Milestones

Despite the challenges posed by the economic environment in 2023, the company not only met but exceeded its full-year revenue guidance, with a total revenue of $630 million and subscription revenue growth of 20%. Notably, operating expenses displayed the lowest growth rate since 2020, confirming efficiency gains. Geographically, we extended our reach beyond the Americas, with now 15% of revenue generated internationally and subscription revenue from outside the Americas growing by 50%. The company produced $71 million in operating cash flow, the highest in its history, outlining a year of significant achievements and reinforced financial discipline.

Guidance for Q1 and Full Year 2024

Looking forward, while acknowledging the uncertain macroeconomic climate, we anticipate Q1 2024 total revenue between $173 and $175 million, with expected services revenue to remain flat. We project non-GAAP operating income to be in the range of $4 million to $6 million. Our full-year 2024 guidance anticipates total revenue between $718 and $722 million, with subscription revenue projected to grow by 16% and a non-GAAP operating income between $17 million and $21 million. This prudent guidance factors in seasonality and continued investment in our growth strategies, without losing sight of our commitment to delivering margin expansion as we scale.

Operating Margin, Seasonality, and Future Profitability Potentials

In keeping with our business model, we've been able to maintain and improve non-GAAP operating profits despite seasonality affecting expenses, particularly in Q1. Looking ahead, we remain committed to balancing growth with profitability, aiming for incremental investments to pursue opportunities within our Total Addressable Market (TAM) while concurrently enhancing margins through ongoing efficiency and productivity initiatives.

ESG Solutions and Regulatory Landscape

ESG solutions continue to be a primary driver for growth, even in the absence of formal legislation. As political and stakeholder demands for ESG transparency intensify, we see both sourced and co-sold partnerships contributing significantly to our ESG bookings, suggesting robust demand for our offerings. While we don't anticipate a sudden surge ('hockey stick'), the steady increase in the need for ESG solutions alludes to durable growth in this sector, especially considering the potential regulatory changes on the horizon with CSRD and other ESG-related mandates.

Hiring Plans and Growth Trajectory

As we navigate through 2024, we plan to onboard new talent selectively, reinforcing areas that present the best opportunities for growth and success. Our strong application pipeline implies we are well-positioned to attract high-caliber candidates. This strategic hiring is pivotal to our efforts in maximizing our existing customer base penetration - a significant asset that includes the majority of the Fortune 1000 companies. With ample room to sell additional solutions, we are poised for a continued upward trajectory in growth.

Outlook and Ambition

While we guide conservatively for a 16% subscription revenue growth at the midpoint for 2024, we are not content with this as our ceiling and aspire for higher growth rates. A revival in capital markets, increased adoption of ESG software due to new regulations, and an overall uptick in software spending could bolster our growth. We remain focused on leveraging our significant TAM for sustained, durable growth over the long term.

Earnings Call Transcript 2023-Q4

[Operator]

Good afternoon, ladies and gentlemen. My name is Mandeep and I will be your host operator on this call. [Operator Instructions] Please note that this call is being recorded on February 20, 2024, at 5:00 p.m. Eastern. I would now like to turn the meeting over to your host for today's call, Mike Rost, Senior Vice President of Corporate Development and Investor Relations at Workiva. Please go ahead.

[Mike Rost, executive]

Good afternoon, and thank you for joining us for Workiva's Fourth Quarter and Full Fiscal Year 2023 Conference Call.

During today's call, we will review our fourth quarter results and discuss our guidance for the first quarter and full year 2024. Today's call has been prerecorded 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 February 27, 2024. 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 2024. 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 CEO, Julie Iskow.

[Julie Iskow, executive]

Thank you, Mike, and thank you to everyone on today's call. The Workiva team closed out 2023 with solid Q4 results, delivering subscription revenue growth of 18% and a non-GAAP operating profit that beat the high end of our guidance by 367 basis points. For the full year 2023, we exceeded guidance for the targets that we set in both February and Q3 of 2023. Our solid performance resulted in a revenue growth rate of 20% in subscription revenue and 17% in total revenue. These results were driven by broad-based strong demand across our solution portfolio. Consistent with the past several quarters, we continue to see outpaced growth in our large contract customers. This is driven by additional solution sales into our installed base.

In Q4, the number of contracts valued over $100,000 increased 21%. Those over $150,000 increased 27%, and contracts valued over $300,000 were up 32%, all compared to Q4 of 2022. Although 2023 brought with it a tough macro environment, we finished the year strong, and we believe we are set up for durable growth in the years to come.

Our platform is a key differentiator in the marketplace. Workiva remains the only platform that brings financial reporting, ESG and GRC together in one secure, controlled audit-ready environment. We are the platform for a short integrated reporting. I'd like to highlight three assured integrated reporting wins that we signed in Q4.

First, a Fortune 50 U.S. multinational food company rounded out their platform with investment in GRC. The purchase of the controls management solution complements their previous investment in ESG, SEC and management reporting. This 10-year loyal SEC customer was engaged with a Big 4 advisory firm in a 2023 ESG implementation project and this firm recommended Workiva as the technology of choice for GRC. This same firm will also be providing delivery for the GRC project.

Second, a European-based biopharmaceutical company expanded their platform usage with the purchase of ESG and global statutory reporting. This ESG win was in competition with a regional ESG point solution that could only address some of the company's requirements. This customer initially purchased Workiva for ESEF reporting, internal controls and enterprise risk management back in Q3 of 2022. The Big 4 firm that successfully implemented those solutions was a co-sell partner in this Q4 deal, and they will be providing delivery on both the ESG and the global statutory reporting solutions.

And third, more than just account expansion, we're landing with the platform, including a 5-solution new logo win with a European-based holding company that purchased global statutory reporting, ESG, controls management, audit management and enterprise risk management. This was a competitive deal against 5 GRC platform solution providers. This assured integrated reporting win was sourced by a Big 4 advisory firm, who will be providing implementation services for this project.

In addition to the assured integrated reporting wins that I just described, we also saw some large platform deals this quarter in financial services. While our platform itself is a clear differentiator, the wins we saw were also driven by the specific fit-for-purpose solutions we offer to banks, insurance companies and investment firms. I'd like to highlight three financial services specific deals.

The first is a new logo, 7-figure opportunity, with a top 20 U.S. bank holding company. This was a 5-solution deal that included SEC reporting, ESG reporting, stress testing, living will and bank regulatory reporting. This deal was sourced and will be implemented by a Big 4 advisory firm.

The second is a 7-figure account expansion with a top 10 global bank. This bank is now using 15 solutions across the platform with an annual spend of over $5 million. This existing account renewal included expanded use of financial reporting, ESEF reporting and bank-specific solutions, including ICAAP or the Internal Capital Adequacy Assessment Process, which is part of the Basel Pillar 2 framework. It also included resolution planning, stress testing and Basel Pillar 3 disclosure report.

And these platform wins are not just limited to banks. The third highlighted deal is a 7-figure account expansion with a top 10 global life insurance company. This customer has now licensed 17 solutions with an annual spend of over $3 million. This solution expansion included the addition of ESG and 3 insurance-specific solutions, insurance statutory reporting, Solvency II reporting, and actuarial memorandum and National Association of Insurance Commissioners reporting requirement. This opportunity was a co-sell with a Big 4 firm, who will be providing delivery for the ESG solution.

The connecting theme between these financial services customers is that they're all spending more than $1 million in annual recurring revenue with us. Although the Workiva customer base is spread across all industries, more than half of those customers spending more than $1 million in ARR with us are financial services firms. We are encouraged by the increased spend that we saw in financial services customers in 2023, and we believe we have room for significant growth in this industry in the coming years.

This optimism is driven by the value that we deliver to these customers, and it's supported by our unrivaled platform, internal expertise and an expanding partner ecosystem. First, we've been doing SEC and investor-grade regulatory reporting for more than a decade. And second, we have the market-leading ESG reporting solution, and ESG is quickly becoming a must-have for financial services firms as they manage ESG risks as part of their overall risk program. Third, we have fit-for-purpose capabilities for financial services regulations. We have more than a decade of experience supporting firms with their Dodd-Frank, Solvency II, stress testing, living will and other regional regulatory reporting requirements.

And importantly, our partner ecosystem and staff expertise enable us to support complex regulatory requirements. We have a proven track record of delivering to top global banks, insurance companies and investment firms.

Let's move on to a top booking solution yet again for the quarter. ESG. We're beginning to see early signs that the upcoming deadlines for regulations such as the European CSRD are influencing purchasing cycles. Reporting for the CSRD begins in 2025. And while we still see many firms purchasing ESG outside of mandatory regulatory requirements, we did see more deals in Q4 referencing the CSRD and the reporting requirements approved this past year, the Enterprise Sustainability Reporting Standards, ESRS.

Our ESG account expansion activity remains strong, and both our differentiated platform and our partner first strategy are contributing to our win rate. I'd like to highlight 3 ESG wins from the quarter. First, a Fortune 25 oil and gas company purchased our ESG solution to support their global ESG reporting initiatives, including the CSRD. This healthy 6-figure account expansion deal was sourced by a regional advisory firm, who has been engaged with this company on a 3-year finance transformation project that includes the Workiva platform. This deal was also influenced by a Big 4 firm that's working with the company's carbon accounting solution and will provide integration between Workiva and this carbon solution.

Second, a European-based shipping company expanded to their sixth solution on the Workiva platform with the addition of ESG. This company first purchased Workiva to support SEC reporting back in 2017. Over the years, they've added ESEF reporting and the GRC solutions to their platform usage. The specific features offered by Workiva, to support the enterprise sustainability reporting standards and connectivity to the GRC solutions, were a differentiator for this customer. This opportunity was a co-sell with a Big 4 firm.

And third, we signed a new logo deal for ESG with a top U.S.-based private consumer products company. This company has publicly committed to achieving net 0 emissions by 2050, and it's investing more than $1 billion in the coming years to become more sustainable. With over half of its revenue coming from outside of the U.S., compliance with the European CSRD was one of the drivers for this deal. This was a co-sell deal with a Big 4 advisory firm who will also be leading the implementation.

I'd like to shift the discussion now towards the performance of our GRC solution set. GRC provided a significant account expansion opportunity for us in 2023. In the face of economic slowdown, geopolitical events and heightened awareness of sustainability, organizations are grappling with increased uncertainty. As a result, managing risk and controls has become more important than ever. I'd like to highlight 3 GRC deals that closed during the fourth quarter.

First, a Fortune 100 U.S.-based consumer staples company expanded their use of the Workiva platform with a 6-figure investment in our controls and risk management solutions. This customer had previously purchased Workiva's SEC, Global Statutory Reporting and ESG solutions. This was a competitive deal against a GRC point solution provider, where the Workiva platform approach was a significant differentiator. The connectivity of ESG and GRC data, along with a single vendor platform approach, were key in achieving the sign-off by IT on this important transformation project. This opportunity was sourced and will be implemented by a Big 4 advisory firm.

And second, a European-based digital media company purchased our controls management solution. This new logo deal was a co-sell and will be implemented by a Big 4 advisory firm. The co-sell motion on this GRC deal also positioned Workiva's ESG solution. We were selected as the top vendor in this competitive deal, since we were the only solution to provide capabilities that addressed not only GRC specific requirements, but also supported their future CSRD reporting needs.

And third, a top U.K. insurance company expanded their investment in Workiva with the 4-solution deal, including controls management, audit management, policy management and enterprise risk management. This customer had previously invested in Workiva's financial reporting, global statutory reporting and insurance-specific Solvency II solutions. This healthy 6-figure product expansion into our GRC solution set was sourced and will be implemented by a Big 4 advisory firm. Over the past 2 years, this firm has been working with the company on a finance transformation project that includes the Workiva platform.

I'll move on now to an update on global regulations. 2023 was a busy year for regulators with a number of final rulings on ESG, both in Europe and in the U.S., including the State of California Climate Disclosure rule, which passed in October. During Q4, there was additional ESG regulatory activity in Europe with further updates announced in 2024. On February 7, the EU Council in the EU Parliament announced a 2-year delay in developing standards for specific industry sectors and third country companies. The CSRD defines third country companies as those non-EU organizations with over EUR 150 million in annual revenue from the EU for the past 2 consecutive years.

This standard setting delay, which will not impact reporting time lines will provide regulators more time to develop specific disclosure rules for non-EU companies and certain industries. The end result of this action is that it will provide affected companies less time to prepare once the final rules are published, To be very clear, this was not a change to the reporting time line for non-EU companies. The qualifying non-EU company reporting dates remain unchanged. What this change is likely to do is cause greater uncertainty with those companies affected.

We believe that this provides an opportunity for Workiva to offer additional guidance to clients on how to be ready for when these specific ESRS guides are published. What remains unchanged is that companies will need to build the processes and reporting systems to disclose additional climate and sustainability information and deliver those disclosures on the date as originally outlined in the CSRD.

As we enter 2024, the ESG regulatory landscape is taking shape. In Europe, the CSRD and related enterprise sustainability reporting standards are in place and the time lines are set. Large enterprises will be required to begin reporting in 2025 and 2024 results. In the U.S., the California Climate Disclosure rule has been passed with reporting dates outlined in those regulations. State Bill 253 requires subject companies to report Scope 1 and Scope 2 emissions starting in 2026. Starting in 2027, those subject companies will have to report Scope 3 emissions.

State Bill 261 requires covered entities to prepare, publish and submit a climate-related financial risk report on or before January 1, 2026, and biannually thereafter. Also in the U.S., we're still awaiting the finalization of the proposed SEC Climate Disclosure rule. In December, the SEC communicated that the proposed Climate Disclosure rule has targeted completion on their April regulatory calendar. As we've communicated in the past, regardless of regulation, organizations are purchasing software to report through sustainability and financial information. Regulation or not, what remains constant is that when companies report both numbers and narrative, it needs to be accurate. And we shine where data consistency, data integrity and data accuracy are critical and narrative is required.

How we manage this data is all driven by our platform that we continue to invest in. We remain focused on innovation and commercializing market-leading solutions. In Q4, we continued to deliver new capabilities that not only address our customers' current requirements, but that also prepare them for what's on the horizon. One of Workiva's strengths is our speed to deliver net new innovation. One example is our ambitious generative AI road map. Workiva first launched in-app gen AI platform capabilities in July 2023 to deliver a Gen AI experience to our customers that was secure and protected, that focused on customer workflows and was tailored to our solutions.

At our November EMEA Amplify event, we announced the availability of new Gen AI capabilities specific to ESG. These new capabilities support ESRS disclosure statement generation that will assist those customers that need to comply with the EU Corporate Sustainability reporting directive. These new capabilities employ semantic search, along with retrieval augmented generation techniques, which allow us to combine the power of large language models with domain-specific data to help solve our customers' challenges. ESRS disclosure statement generation supports our ESG customers in adopting the new CSRD-ESRS reporting standard, by enabling them to identify relevant disclosures and then automatically generating draft disclosure statements based on their data.

In Q4, we also launched new design reporting capabilities. The ability to create formatted and highly stylized disclosures is an important part of our customers' workflow. Whether they utilize an outside design agency or they do the work in-house, the Workiva platform offers unique capabilities for layout and design, which sets us apart. In Q4, we added more features for designers to create integrated reports with highly stylized designs. These features included locking object properties, SEC Edgar support for reports, and advanced BlackLine and track changes capabilities. As a result of the new design reporting capabilities launched in Q3 and Q4, hundreds of customers and partners across Europe and North America are now adopting Workiva's platform to build designed reports.

Finally, in Q4, Workiva shared its global commitment to enable customers to work in their preferred language. Although Workiva has supported multi-language capabilities for years, the newly released platform features will reduce the time it takes to add new languages and will provide translation for both menu labels and content. The platform now supports several new languages, including Castilian and Latin America Spanish, French, German, Japanese and traditional Chinese. Hundreds of customers are already using our platform in these languages for a better user experience.

We continue to deliver technology innovation on our platform and differentiating capabilities with our solutions, both are being embraced by our customers.

Moving on to the setup for 2024. Jill will provide you with detailed information for our Q1 and full year 2024 guidance. Setting the backdrop for the guide, I'll provide a few comments on what we're seeing in the market and our 2024 focus areas.

As we step into 2024, we still observe cautious buyers and continuous uncertainty in the economic and geopolitical environment in both the U.S. and Europe. While we're optimistic for improved market conditions, uncertainty persists, and this uncertainty is reflected in our full year guidance. From a strategy perspective, in 2024, we're first and foremost focused on subscription revenue growth. Across the company, we continue to focus on driving growth and going after our large and untapped TAM. We plan to balance this growth focus with a continued emphasis on productivity.

We're building strong teams, improving the way we work and incentivizing the right behaviors to achieve our growth. We also remain enthusiastic about the opportunity that we see with account expansion and the increased leverage delivered from our expanding partner ecosystem. Furthermore, we're pleased with the progress made by our sales and our customer success teams who are working closely with our clients to address their most challenging reporting and compliance needs. Leading organizations are investing in our strategic platform that brings together financial reporting, GRC and ESG.

Workiva's position as the assured integrated reporting platform to power transparent reporting continues to gain momentum. Our value proposition has never been stronger or more relevant.

In closing, I'd like to thank the entire Workiva team for their commitment and their achievements in Q4 and throughout 2023. We have an incredible opportunity in front of us, and I remain confident in our ability to capitalize on it, thanks to the more than 2,500 Workivians dedicated to our mission.

And with that, I'll now turn the call over to Jill.

[Jill Klindt, executive]

Thank you, Julie. For our call today, I will be discussing the financials and key metric highlights for the fourth quarter and full year 2023. Following that, I will provide commentary and guidance for Q1 and full year 2024 before opening the line for questions.

I'm pleased to report that we have exceeded our Q4 revenue guidance by $2 million. This beat was driven by strong subscription revenue growth as well as higher-than-expected services revenue. We also beat our guidance on Q4 operating results, generating $12.7 million of operating profit, a 430 basis point improvement versus Q4 2022. Stronger revenue, improved efficiency and productivity, and lower travel expenses drove the beat, reflecting our focus on growth and improved operating leverage.

We generated total revenue in the fourth quarter of $166.7 million, delivering growth of 16% from Q4 2022. Subscription revenue was $148.8 million in Q4 2023, up 18% from Q4 2022. Once again, this quarter, a combination of new customers and account expansions contributed to our strong revenue growth. New customers added in the last 12 months accounted for 47% of the increase in subscription revenue. Professional services revenue was $17.9 million in Q4 2023, down 37 basis points compared to the same quarter last year. The decline in setup and consulting revenue was mostly offset by growth in XBRL services. As I have previously mentioned, we are currently working on shifting our lower-margin setup and consulting services to our partners. We are actively implementing this plan and anticipate that the revenue from setup and consulting services will continue to decrease throughout 2024.

Moving to our performance metrics. We added 89 net new customers in Q4 for a total customer count of 6,034, a growth of 370 customers from Q4 2022. Our gross revenue retention rate of 98% was well ahead of our 96% internal target metric. And our net revenue retention rate increased to 110% for the fourth quarter of 2023 compared to 109% for Q4 2022. For Q4 2023, 64% of our subscription revenue was generated from customers with multiple solutions. This compares to 62% reported in Q4 2022. This account expansion trend is also reflected in our large contract customers. In the fourth quarter of 2023, we had 1,631 contracts valued at over $100,000 per year, up 21% from Q4 the prior year. The number of contracts valued at over $150,000 totaled 915 customers in the fourth quarter, up 27% from Q4 2022. And the number of contracts valued over $300,000 totaled 311, up 32% from Q4 2022.

Moving on to our operating metrics. Gross profit totaled $130.7 million in Q4, up 18% from the prior year. Gross margin improved year-over-year by 130 basis points, increasing to 78% in Q4 2023. This was driven by improved leverage on both compensation and cloud computing costs versus the same quarter a year ago.

Operating expenses increased 11% from Q4 2022, driving 300 basis points of our margin improvement versus the prior year. Improved productivity resulting from process automation and efficiency efforts drove margin improvement along with a favorable variance in R&D cloud computing costs compared to Q4 2022.

We posted an operating profit of $12.7 million in Q4 2023, a continued improvement compared to the Q4 2022 operating profit of $4.8 million. We were pleased with the leverage we delivered in Q4 and in the second half of 2023. The operating profit beat in Q4 was driven by revenue outperformance, disciplined investments and managing controllable expenses, including travel.

At December 31, 2023, cash, cash equivalents and marketable securities increased $31 million sequentially to a balance of $814 million. Operating activities in Q4 2023 resulted in cash provided of $24 million compared with a use of cash of $1 million in the same quarter a year ago.

Moving to our milestones and key takeaways for 2023. Although 2023 brought with it a tough macro environment, we finished the year strong. For the full year 2023, we generated $630 million in total revenue, beating the high end of the full year revenue guidance we provided in both Q3 and back in February of 2023. Our year-over-year subscription revenue grew by 20%. We also improved operating leverage with operating expenses growing by only 11%, the lowest growth rate since 2020. We finished the year with 15% of our revenue coming from outside the Americas, an improvement of 317 basis points compared to year-end 2022. Subscription revenue grew at 50% outside of the Americas. For 2023, we generated $71 million in operating cash flow, the strongest in Workiva's history.

Turning now to our guidance for Q1 and the full year 2024. While we remain encouraged by our opportunities to drive growth over the longer term, it still remains an uncertain macro and a measured customer buying environment. As such, we continue to remain prudent with our guidance assumptions.

For the first quarter of 2024, we expect total revenue to range from $173 million to $175 million. We expect services revenue to be flat compared to Q1 2023. This is a result of the shift I discussed, moving our low-margin setup and consulting services to our partners. We expect non-GAAP operating income to range from $4 million to $6 million, a net income of $0.15 to $0.19 on a per share basis. Our share count will be approximately 55 million weighted average shares.

As a reminder, Workiva has historically shown some seasonality in our numbers in Q1. On the new business side, Q1 is historically one of our lowest quarters for new bookings as many of our customers are heads down, working on year-end reporting. Q1 deferred revenue has historically been flat or declining compared to Q4 balances driven by the same seasonality of our bookings. Also, we have discussed in the past, Q1 has several front-loaded expense items, including the timing of employee raises and our 401(k) match.

For the full year 2024, we expect total revenue to be between $718 million and $722 million. We expect total services revenue to remain flat. We expect XBRL services revenue to continue to grow at a low single-digit rate. For setup and consulting revenue, we expect a similar rate of decline from what we saw in 2023. We expect our subscription revenue growth to be 16% at the midpoint.

We are setting our guidance for non-GAAP operating income to range from $17 million to $21 million or a net profit of $0.56 to $0.63 on a per share basis. Our share count will be approximately 55 million weighted average shares. We believe we will post positive free cash flow margin of 10% for the full year 2024.

Before we proceed to the Q&A session, I'd like to emphasize three important points. First, we are optimistic about the opportunities that lie ahead of us. We have a large and untapped TAM and our platform provides immense value to our customers. Second, we exceeded our Q4 guidance on revenue and operating margin and look to carry that momentum into 2024. And finally, we see opportunity to drive durable, profitable growth over the longer term.

In conclusion, I want to echo Julie's message of gratitude to our incredible Workiva team. It's an honor to work alongside you. And together, we can achieve great things. I'd also like to thank you, our shareholders, for your continued support of Workiva, and we look forward to speaking with you at our upcoming events.

With that said, we're now ready to take your questions. Operator, please begin the Q&A session.

[Operator]

[Operator Instructions] Our first question comes from the line of Rob Oliver with Baird.

[Robert Oliver, analyst]

Great. I will limit myself to one, although that will be difficult. But I guess my question will be on the 2024 guidance. And I'd love to get a little bit of a better sense from you, Julie or you, Jill, about some of the factors that you've considered in setting that guidance, specifically macro, which I know you touched on in your prepared remarks as well as continued ESG momentum and things like capital markets. And I think above all, and I think Jill, you may have mentioned it at the very end of your remarks about the subscription guidance, but just how to think about that breakout between subscription growth and services, which I know is in decline purposely.

[Julie Iskow, executive]

Sure. Rob, and not an unexpected question. I think you actually answered much of it. Multiple reasons for the guide. And the first one is, yes, even with our very strong Q4 and our value proposition resonating with our customers, we are still seeing that uncertainty in the market. And we call it this measured customer buying environment. And as I did highlight in my comments, still some softness in the IPO market there. So our response, of course, is to provide prudent guidance there.

So the second reason, and you touched on it, too. We've already communicated our intentional slowdown in our non-XBRL low-margin services revenue as we move that setup and consulting work to our partners. And of course, this is by design and it's part of our growth strategy. So we've talked about that quite a bit. So that plays in. And then finally, we're expecting lighter subscription revenue growth, which is driven by the softer bookings that we saw in 2023, and we were consistently communicating in 2023 as well that we faced the tough macro.

So having said all of that, of course, we are very pleased with our subscription revenue growth in Q4. As I mentioned in the comments, our value proposition is resonating with customers and our prospects. We absolutely remain optimistic about the long-term durable growth market and going after that large untapped TAM. And we have a differentiated platform as well as differentiated solutions, and it's a true platform that brings customers a significant value.

[Operator]

Our next question comes from the line of Matt Pfau with William Blair.

[Matthew Pfau, analyst]

I wanted to follow up with one more on the guidance and specifically on the margins. So you did a really nice job outperforming in Q4. I think that operating margin was about 8%. And then if I look at the guide, you said about 3% for Q1 and full year of '24. So what's driving that decline going into next year? What areas are you investing and that's causing that to be down from 4Q?

[Julie Iskow, executive]

We're pleased with the improvement we've shown in the margins, the non-GAAP operating profit. I think you might recall, Jill mentioned there's some seasonality to those expenses, so there'd be some fluctuation. But overall, we remain focused on both the growth and productivity. So as we enter the year, we do want to provide ourselves some flexibility with where we want to invest and where we can accelerate growth and go after our TAM. So we do think about some incremental investments across the key growth areas we have, while we're still delivering the margin expansion as we scale and optimize the business. So it really is that. And we do believe, over time, we'll continue to increase the non-GAAP operating margin, but just being thoughtful about hiring and efficiency and productivity. But we do intend to invest where we see growth opportunity and, again, accelerating our movement towards going after the TAM.

[Jill Klindt, executive]

And as Julie mentioned lightly around some seasonality related to Q1, so we do have seasonality related to some expenses in Q1 with all of our employees' annual raises take effect on the first of January. And so we do see some uptick in expenses, especially around compensation starting in Q1 as compared to Q4. So you will see that in the guide for the quarter as well.

[Operator]

Our next question comes from the line of Dan Jester with BMO Capital Markets.

[Daniel Jester, analyst]

Maybe we can spend a moment talking about sort of the international opportunity in Europe, specifically. I think in your prepared remarks, you said something like roughly -- 50% roughly growth in subscription revenue, international. I hope I caught the number right. But it sounds like you're making substantial progress in selling in Europe. And so maybe you could just expand about the momentum there and maybe compare and contrast to how you see the momentum in the U.S. if there's any differential there?

[Julie Iskow, executive]

Sure. I'll jump in on that one first, Jill. We executed well in Q4 in Europe. I mean it was our top bookings quarter. It was a record bookings quarter. For the full year 2023, we did improve to deliver 15% of our revenue from outside of the Americas. I think it's up from 11.5% in 2022. So we grew our revenue outside of the Americas by 50% for the full year and very pleased with the momentum, got some signature wins there, multi-solution, 6-figure deals, partners are strong and contributing to our bookings, value prop of assured integrated reporting is resonating there. And we're very optimistic about it. We've had some focused work streams there. We've been very intentional about it. As I've mentioned, leadership has been strengthened and the team is selling more platforms and multi-solution deals.

I will say, despite the progress, we are still very open about the need for improvement there. We made some fundamental ground-based changes there, but a lot of opportunity for us, and we are going to continue to go after the unaddressed TAM globally. So a lot of progress there.

[Operator]

Our next question comes from the line of Terry Tillman with Truist Securities.

[Unknown Analyst]

This is Dominique Madonsela on for Terry. Just wanted to go back to the international opportunity. Considering you all have entered APAC most recently, could you give us an update on how the part of strategy is progressing in that region? And how we should think about that growth relative to North America and Europe?

[Julie Iskow, executive]

Sure. That's a newer region for us. We also had record bookings quarter there as well. Our strategy there because we are so much less known there is through our partner network, another reason why our -- strengthening of our high-performing partner ecosystem is so important, and we are focused on that globally. So our go-to-market there relies very heavily on the partners and continuing on with strengthening those relationships. But again, new nascent area for us over the past few years, but growing strong and continue to do so.

[Operator]

Our next question comes from the line of Ryan Krieger with Wolf Research.

[Ryan Krieger, analyst]

So I just had a quick one on kind of the macro and the retention rate. So it is a little bit surprising to see NRR tick down 2 points in 4Q after trending up for 4 quarters in a row. So did you guys actually see the macro environment get more difficult in 4Q versus kind of 3Q? And then how should we kind of think about retention trending from here? And how has the macro trended through January and February?

[Jill Klindt, executive]

Thanks for asking the question. We're really actually pleased that year-over-year that NRR continued to increase. The -- we did not see the macro change from Q3 to Q4. We think it's staying pretty consistent with the similar challenges quarter-over-quarter. And related to NRR, it can move around quarter-to-quarter. It's something that we, of course, want to continue to drive forward. We're still focused and well, we've always as a company been focused on selling into our base, and it's -- you see progress in that with some of the metrics around our customers who spend greater than $100k, greater than $150k, greater than $300,000 with us.

And so I think that we're glad that it's continuing to increase year-over-year and do expect it to move around a little bit, but continue to make progress. And so yes, thanks for the question.

[Operator]

Our next question comes from the line of Steve Enders with Citi.

[George Kurosawa, analyst]

This is George Kurosawa on for Steve. Just one for me. On the -- you talked about some of these ESG regulations coming down the pipeline, CSRD, California and SEC's upcoming decision. I just -- I would just love to hear a little more about what you're seeing from an urgency of buying from customers at this point with these things now, clearly, on the doorstep. And if you expect 2024 to be really a step function year or more gradual pace of adoption?

[Julie Iskow, executive]

Sure. I think we continue our perspective, not a step function, hockey stick, but long durable growth. But thank you, it's a great question, a timely question. We get it a lot, particularly given the visibility of ESG in the media, and we do keep a close eye on legislation, have been monitoring the speed of adoption and the regulation -- of the regulation themselves. So for us and what we're seeing, I can tell you this that ESG remained one of our top solutions and bookings performance for Q4, and it's been in the top 3 booking solutions for several quarters now. We continue to add Fortune 500 clients to already elite roster of ESG account expansions and talked earlier about the partner strategy here. The partner first strategy is really driving results for us.

I would say vast majority of our ESG opportunities, particularly in the upmarket, continue to be either sourced or co-sold with Workiva advisory or a technology partner. So we're continuing to see strong demand for the Workiva ESG solution even without the regulation. Yes, political debate around the ESG acronyms and anti-ESG sentiments certainly, but we see stakeholder demand for the transparency and nonfinancial data increasing. So many of the U.S. companies are going to have to comply with CSRD as well. So we are seeing the stable demand for it and seeing that with even -- without the regulation passing in the U.S. But we definitely see, in some conversations in now CSRD surfacing more as a reason to buy.

[Operator]

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

[Alexander Sklar, analyst]

I'm going to try and squeeze in a 2-part follow-up here to Rob and Matt's questions. Just first, in terms of the prudence and the growth outlook that you've spoken to, did anything change in terms of how you approach the guide from a macro conservatism level versus the prior couple of quarters? And then second, on the profitability side, in terms of the comment about leaving yourselves some flexibility for growth investments. Is there anything you're watching in terms of execution or macro that would have you not make some of those growth investments for later in 2024? Or those are pretty much set at this point?

[Jill Klindt, executive]

So related to the prudence on the guide, there's no change to the way that we are operating as far as how we look at our -- where we're setting our models. We -- as you know, we're a company that will continue to beat our guidance. We're careful and prudent about how we set these numbers. We expect to be able to beat them. And so it's pretty -- it's very consistent with how these models were put in place.

Related to the profitability and the potential for investment in 2024, we're, of course, watching that top line. And we can and would adjust, based on different macro factors and if we had additional challenges above what we were expecting in bookings and revenue, it's -- but that's, again, no change to how we would have done this in other years. We're just careful about how we are managing the business. And as Julie talked about, really focused on growth and profitability. And -- so I think that you can expect us to continue to operate this year in a similar way to how we have in past years.

[Operator]

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

[Brad Reback, analyst]

Julie, if my math is correct, I think you've added 80 people over the last 5 quarters combined. Can you give us a sense of what the hiring plans are for '24?

[Julie Iskow, executive]

Sure. Again, our theme is where we see the opportunity to invest and increase growth and go after our TAM, we will do that. We're being very thoughtful about hiring. It's become easier to hire the right talent for the right roles. I was just looking at our numbers for last year, we had high north -- well north of 100,000 applications at Workiva last year. So the team is strong. We're being thoughtful about who we're putting in those roles, but we'll continue to hire where we see opportunity for investment.

[Jill Klindt, executive]

As you can see that, I would chime in, Brad, on the guide, that we implied within that guidance is that, of course, we will be hiring. We'll focus on, as Julie had talked about before, the best potential for growth and the best potential for success, whether it's a geography, whether it's solutions, and we're going to be really thoughtful about where we put those resources. And -- but you will -- as you can tell from the guide, you will see us hiring -- continuing to hire in 2024.

[Brad Reback, analyst]

That's great. And then, Julie, maybe higher level, if we think about the 16% sub guide, and I understand the conservatism there. But if we step away from the current period maybe look a little bit longer term. What do you think the normalized organic sub growth rate is of the business today?

[Julie Iskow, executive]

I guess you're asking will we be getting back to maybe that 20% growth. Our subscription guide, yes, 16%, growth guide of 16% at the midpoint for 2024, and we're focused on that. We do aspire to get back there. 16% is not the limit to our upside. Of course, therefore, we're not happy with it. We're hopeful to see return in cap markets, adoption of ESG software to address the new regulations, just overall improved software spending environment. So we, again, see the long-term durable growth market, significant TAM, and we're going to go after it.

[Operator]

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

[Adam Hotchkiss, analyst]

Julie, it's pretty clear you're making progress on the multisolution front, but I'd be curious if we could go a layer deeper. How should we think about what your solution penetration looks like in your average customer today? And how you think about how that white space evolves either this year or just over time broadly?

[Julie Iskow, executive]

Sure. I will say we have thousands of customers, and I don't have the number right in front of me, but we have a lot of white space there with adding additional solutions to the base that we have. I mean our base is -- our installed base is truly one of our most significant assets today. We just crossed over the 90% of the Fortune 100. We've got 85% of the Fortune 500. We have 80% of the Fortune 1000, and there is a lot of room there to have additional solution sales and platform sales to the base that we have. So very optimistic.

We highlighted a number of them on the call today. Our team is, again, getting strengthened when it comes to selling multi-solution and platform. So when we look at our growth opportunity, this is a huge growth factor for us. And again, that's how we're approaching the TAM.

[Operator]

This does conclude today's call. You may now disconnect.