Good afternoon. My name is Chris, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Workiva Second Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. Mr. Adam Rogers, Director of Investor Relations, you may begin the conference.

Thank you and good afternoon everyone. Welcome to the Workiva Second Quarter 2018 Earnings Conference Call. This afternoon we'll begin with comments from our President and Chief Executive Officer, Marty Vanderploeg; followed by Executive Vice President and Chief Financial Officer, Stuart Miller, and then we'll turn the call over to questions. Also on the line today is Jill Klindt, Senior Vice President and Chief Accounting Officer. A replay of this call will be available until August 14, 2018. Information to access the replay is listed in today's press release which is 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 will be making forward-looking statements regarding future events and financial performance, including guidance for our third quarter and full fiscal year 2018. 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 President and CEO, Marty Vanderploeg.

Thank you Adam, and thanks to everyone for joining the Workiva Q2 2018 conference call. I would like to start my first conference call as Workiva CEO by saying that I am very proud of our progress. Because of the investments we have made in our Wdesk platform and our distribution organization, I believe we have never been in a better position to grow and I am excited about our future. Thousands of organization use Wdesk for a reason. We give them the tools they need for data control, transparency and accountability saving them time and money and most importantly reducing risk. We signed 103 net new customers in the second quarter and now have over 3200 customers. More than 75% of the Fortune 500 companies use Wdesk for at least one use case and we are just getting started. We continue to post world-class customer retention rates and our Net Promoter Score it is an all-time high of 81 which is remarkably high for any B2B SaaS company. Our subscription revenue per customer continues to increase quarter-over-quarter and we expect that trend to continue. The number of large customer contracts rose 33% over the second quarter last year. In June we began the roll-out of our value-based pricing which offers Wdesk subscriptions by solution rather than by our previous seat base model. Value-based pricing is easier to scale, delivers more value to our customers and opens more markets for Wdesk. We continue to hire top talent which in the past year included leaders in product marketing, sales, EMEA and APAC. Adoption of inline XBRL as a standard reporting format continues to spread worldwide. European Securities and Markets Authority known as ESMA requires inline XBRL for its European single electronic format taxonomy. More than 5,000 EU issuers will be required…

Thank You Marty. I'll review our second quarter results. Thereafter, I'll comment on third quarter and full year 2018 financial outlook. One note on accounting as discussed in our last call we adopted the new revenue recognition standard ASC 606 using the modified retrospective model method. Our Form 10-Q provides a reconciliation of the impact of the adoption of ASC 606 on our second quarter and year-to-date financial results. Now under revenue. So we have performed a revenue guidance for the quarter. We generated total revenue in the second quarter of $59.1 million an increase of 19.7% from Q2 2017. Breaking out revenue by reporting line item description and support revenue was $48.8 million up 19.2% from Q2 2017. 50.6% of the SNS revenue increase in Q2 came from new customers added in the last 12 months. The remainder of the increase came from deeper penetration of our existing customer base. Revenue growth accelerated in Q2 due to a higher volume of transactions both for new logos and add-on sales. SEC, internal controls, capital markets and internal reporting all showed strength. We believe some of the acceleration is related to investments we made in sales training in the last 12 months. Professional services revenue was $10.3 million in Q2 2018, an increase of 22.4% from the same quarter in 2017. Professional services revenue particularly XBRL tagging was above our expectation in Q2 due to a large number of new logos and more existing customers using our services. Turning to our supplemental metrics, we finished Q2 with 3222 customers a net increase of 314 customers from Q2 2017 and a net increase of 103 customers from Q1 2018. Our retention rates continue to be strong. Our subscription and support revenue retention rate was 95.6% for the month of June 2018. Customers…

Thank you. [Operator Instructions] Our first question comes from Terry Tillman with SunTrust Robinson Humphrey. Your line is open.

Hey guys. This is [Eric] on for Terry. Thanks for taking question and really nice job on the quarter across the board and specifically looking at profitability I think this is one of the largest beats that you've had since going public and so only thing about going forward is there any sort of philosophical change between the balance between growth and profitability?

Yes. Definitely we have taken a more focused view on our investments. We have gotten fairly good clarity on where to make investments and so moving forward we definitely will lean toward accelerating our journey to profitability. We believe we can do this without sacrificing growth and again anything from you Stuart?

No. I think it reflects where we are in building on the development side or on the product side and that's really underlying our confidence.

Okay. Thank you for that and then you mentioned the Gartner Magic Quadrant for the cloud financial cloud solutions and you guys performed really well in that Magic Quadrant, but looking at some of the other vendors in that report what do you guys fit into that space and are those vendors -- do you see overlap with those vendors in that Magic Quadrant like black line or Trendtec?

With black line clearly not. They focus on reconciliation. We focus on downstream on the reporting process and with Trendtec there's a slight overlap but not significant.

There's still a little bit of overlap with IBM.

Yes, in those two he referred to there's very little overlap. Some of the larger players have products but they really don't focus on it.

Okay. Great. Thanks guys. Nice job.

Thanks Eric.

Your next question comes from Tom [indiscernible] with Stifel. Your line is open.

Hey gentlemen thanks for the question. Marty, I will echo the sentiments on the quarter. Great job, great execution and congratulations on your appointment here as CEO. I want to double down on Eric's last question there just on the concept of profitable growth and I guess as it relates to some of the investments you were making more aggressively at the end of the last year, particularly remember there is a lot of sales and development efforts going into the financial CPM product and really just a broader push towards the enterprise. With that push in particular to the enterprise going after larger seats and within the context of financial CPM as a product line, how should we think about the ongoing commitment to that and the desire to push upstream going after larger deal sets in the enterprise?

Well, that's clearly still a big part of our growth strategy. Having such a large footprint in the Fortune 500 it gives us great access to those accounts and as I mentioned on the call we've really just getting the place. We've rounded out our platform. We have our sales team having gone through a lot of training and improving process, and messaging. We really feel we can focus and that's really the key.

And then maybe just sort of on the back of that question as you think about the trade-off and investments in R&D versus sales and marketing, Stuart this might be a better one for you but how would you encourage us collectively to think about where we should model a little bit more leverage in the model? Should it come on the sales and marketing side or should we model it on leverage and R&D going forward?

Yes. I think probably not to give -- we're not going to give guidance on 2019, but I would say you would probably expect to see more leverage on the R&D side beginning in 2019. A lot of [indiscernible] in there.

Okay perfect and Stuart last quick one from you I think this may have something to do with the push towards more annualized contracts and an upfront payments. Can you just help us understand what role that push has played in the context of rising DSOs and accounts receivables on the course of the balance sheet there?

Yes. So the biggest impact on DSOs as we talked about last time was the adoption of ASC 606 and there was a simultaneous increase in receivables, in deferred revenue, and also in customer deposits which shows up as different line item on the right hand side of the balance sheet. So there really was no actual change in DSOs. It was simply how ASC 606 requires us to show the receivable. Previously there was a gross down of the receivable. Now at the time when you actually issue the invoice a receivable shows up on the left-hand side of the balance sheet.

Perfect.

So yes.

Yes. Really helpful. That's great. I'll jump back in queue but thank you guys very much.

Your next question comes from Brian Peterson with Raymond James. Your line is open.

Thanks. This is [indiscernible] for Brian. I've had a quick question on the [net adds] in the quarter. It looks like it was the biggest quarter-over-quarter increase since 2014. I know you'd mentioned that there was some acceleration due to sales training but I know if you had seen any kind of change in the overall environment they wanted to point out?

So thanks for the question. So it was pretty broad-based I mean it wasn't just SEC it was internal controls. Some of that came from partners, from managed services, accounts. It was from private company reporting and also capital markets made a nice contribution. But you're right it was the largest add of net new logos actually since I think 2013.

And we really saw the demand across all of our markets in a very - there was not one that stood out and I think that really is a reflection of the improvement our sales organization and also getting the product where it is now that all those things are just coming together at the same time.

Okay. Great and then looking at the revenue by industry it looks like the information technology showed the most growth in the quarter is up 4% quarter-over-quarter and it looks like outside of the other bucket it's the largest bucket. Is there anything in that particular area that is worth pointing out? Obviously it's only two quarters of data but wanted to see what you think?

People like you read our footnotes. It's a beautiful thing. Yes, it is remarkable how broadly distributed our revenues are among industries. Information technology leads the way there in part because so many of those customers are sophisticated and comfortable using the cloud and have a real appreciation for the kind of productivity increases they can get from using Wdesk. They tend to be early adopters and so that's why you see them leading the way but it definitely it's been very broad across industry groups.

Perfect. Thank you.

Thank you.

Your next question comes from Mike Grondahl with Northland Capital Markets. Your line is open.

Thanks this is [indiscernible] for Mike Grondahl. Maybe first just on the value based rollout in June. Are there any initial feedback that you can give us and how customers are responding to that?

Sure. I think in general the customers have been very positive about it. The thing about value-based pricing is we let customers have as many seats as they want and that really simplifies the process of not only administering the account and also it also prevents them from trying to manage cost and leaving out important people in the process. The real strength of our platform is to get everybody in a process on. So by standardizing a value-based price that's based on other metrics it really simplifies it and in our back-office too it simplifies things. So it's been a real positive.

Yes. I would say just to clarify the customers are going to have as many seats as they want within that solution set and some of that has been enabled by the further development of the platform which allows workspaces and so it allows the SEC team to have unlimited number seats within the SEC workspace and the SOX team to have unlimited number of seats within SOX workspace for example. And it's a lot easier to track and it scales nicely.

And it also exposes just a lot more people in the organization to our platform and for us to get as much exposure in those organizations as possible will really drive the expansion within those accounts.

That's helpful. Then just on the pipeline and increased guidance. Are you thinking about the things that drove the second quarter? Are the capital markets internal controls [indiscernible] and sales? Was there anything else we should be paying attention to there?

I'm sorry did you say -- can you repeat the question. I didn't catch it exactly.

Yes. Just on the pipeline looks today and the increase guidance for the full year, is it the similar things that have driven the second quarter or is there anything else we should be paying attention to there?

No. I think it's very -- we think it's pretty broad-based. There might be a bit more in financial services in the back half of the year than we had in the second quarter but it's pretty broad-based.

Our last question comes from Stan Zlotsky with Morgan Stanley. Your line is open.

Hi, this is [Hamza] in for Stan Zlotsky. I want to dig in a little bit on the partnerships. We've heard a number of tech integrations recently and some announcements with the market partners. Has this been material to numbers yet and if not when could we start to see that?

So we definitely have seen visible contribution from partners on the number of logos and revenue contribution but I wouldn't say it's not -- it's still early days. It's not really driving the bus yet but they do help influence purchases and it's not always easy to track exactly which partner was influencing which sale, but we do think it's been well worth the effort as a force multiplier.

And certainly we've seen it even though it's not material it's growing rapidly and the other thing is it really simplifies the delivery process for us. So there's a lot of other advantages to that type of distribution.

Understood. That's all for me.

Thank you.

This does conclude the Q&A session and the conference. Thank you for your participation and you may now disconnect.