Workiva Inc. (WK) Q3 2022 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen. My name is Abby and I will be your host operator on this call. After the prepared comments, we will conduct a question-and-answer session. Instructions will be provided at that time. [Operator Instructions] Please note that this call is being recorded on November 2, 2022 at 5:00 PM Eastern Time. 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.

Good afternoon. And thank you for joining us for Workiva's third quarter conference call. During today's call, we will review our third quarter 2022 results and discuss our guidance for the third quarter and full year 2022. Today’s call has been pre-recorded and will include comments from our Chief Executive Officer, Marty Vanderploeg; followed by our Chief Financial Officer, Jill Klindt. We will then open the call up for a live Q&A Session. Julie Iskow, our President and Chief Operating Officer, is also on the call. A replay of this webcast will be available until November 11, 2022. Information to access the replay is listed in today's press release, which is available on our website under the Investor Relations section. Before we begin, I would like to remind everyone that during today's call, we will be making forward-looking statements regarding future events and financial performance, including guidance for the fourth quarter and full fiscal year 2022. These forward-looking statements are subject to known and unknown risks and uncertainties. Workiva cautions that these statements are not guarantees of future performance. All forward-looking statements made today reflect our current expectations only. And we undertake no obligation to update any statement to reflect the events that occur after this call. Please refer to the Company's annual report on Form 10-K and subsequent filings for factors that could cause our actual results to differ materially from any forward-looking statements. Also, during the course of today's call, we will refer to certain non-GAAP financial measures. Reconciliations of non-GAAP to GAAP measures and certain additional information are also included in today's press release. With that, we'll begin by turning the call over to our CEO, Marty Vanderploeg.

Hello and thank you for joining today's call. We are pleased with our Q3 results delivering revenue growth near the high-end of our quarterly guidance. Q3 subscription and support revenue grew by 19.9%. Total revenue grew 17.9% even after a 1.9% negative impact from foreign currency. For the full year 2022, we are targeting a total revenue growth of 20%. The strategic investments we've made in our platform and solutions over the past year are paying off. For the quarter, we showed continued bookings growth in multiple solution areas led by ESG. Global stat delivered a strong quarter with the signing of both new logos and account expansion deals. GRC also continued to deliver on year-over-year growth. Demand for our ESG solution exceeded expectations. The market is investing in ESG well ahead of regulations to manage the disclosures for multiple stakeholders. During the quarter, we signed several landmark ESG accounts. A big three auto company purchased our ESG solution to complement their current SEC and management reporting solutions. This opportunity was sourced by a big four advisory firm. A big box retailer expanded their use of our platform to modernize their ESG disclosure. This opportunity was sourced by a top 10 accounting firm, it was influenced and will be delivered by one of the big four. And one of the world's largest energy companies added our ESG solution with the influence from both an ESG technology partner and a big four advisory firm. The advisory firm will be doing the implementation. We were also pleased with the continued growth in GRC. We have seen significant wins as customers recognize the value of our platform. As an example, our European based global telecommunications company purchased our audit and controls management solutions. This opportunity was influenced and will be implemented by a global technology consulting partner and a global investment management firm purchased the Workiva platform for operational risk management to address expanded GRC requirements. The addition of operas complements their existing use of the Workiva GRC platform. The continued focus on driving multi-solution adoption has propelled our growth. As organizations face increased macro uncertainty and cost challenges, the relevance of our platform becomes increasingly important. Our 5,500 customers trust that we will provide an innovative cloud platform fit for purpose solutions, and customer support to solve their most complex reporting and assurance challenges. Market demand and customer loyalty continued to improve in Q3. Our organic revenue retention rate remains best in class at 98.1%. We continue to capitalize on our substantial growth opportunity outside of North America. In EMEA, our centralization efforts and focus on multi-solution selling produce strong bookings growth in the third quarter, building off the momentum report and in Q2. Last month, we hosted our first ever hybrid customer user conference. We welcome to Workiva amplify over 5,500 virtual and 1,700 in person attendees. It was great to spend time in person with our customers and partners. Over 2,500 companies participated in this year's event, many of them new prospects. During the event we showcase Workiva's innovative platform and solutions. We also shared the stage with many of our customers who spoke about their successes with our platform and the value we bring to their organizations. 39 partners participated as session speakers and 20 partners were conference sponsors. We also held another successful partner summit and recognized our 2022 Workiva Partner Award winners. Deloitte was recognized as our global partner of the year for their innovation, solution extensions and delivery of clients reporting transformation. PWC U.S. was recognized with the Partner Innovation Award. PWC continually invest in new platform innovations and accelerate the success of their global customers. And in managed services, KPMG was recognized as the America's Managed Service Partner of the Year. KPMG has built and delivered industry-leading service lines leveraging the Workiva platform. It was also nice to see many of you who joined us in-person at our Investor Day. We appreciate you taking the time to attend and learn from our customers, partners and employees. Some of the key themes that were communicated at our Investor Day include that, we believe that, the demand for regulatory software is consistent and durable. We continue to invest in key platform capabilities and our growth solutions. We have entered into a new phase in our operating lifecycle, increasing our focus on operating leverage. Our investment thesis is stronger than ever. Our TAM is intact and significant. Our platform is ready for these times. Our strategy is driving clear results. Our customer base is right for expansion and our partner ecosystem is expanding and strengthening. Julie and I are aligned that achieving the proper balance between growth and operating leverage will lead to future margin improvement. We expect to return to a quarterly operating profit on a non-GAAP basis in the latter half of 2023. We remain confident that we will become a $1 billion revenue company and have the platform and the team to deliver on that goal. In closing, I'd like to thank our global team of dedicated employees, who continue to execute on our strategy, take care of our customers and each other and live by our company values. With that, I will now turn the call over to Jill.

Thank you, Marty. Today, I will review our Q3 operating results and provide Q4 and full year 2022 guidance, before opening the line for questions. As Marty discussed, we have delivered another solid quarter, highlighted by a healthy beat on our operating margin. We beat Q3 2022 revenue guidance at the midpoint and we would have exceeded the top-end of guidance if exchange rates had stayed constant. We beat guidance on Q3 operating results at the midpoint by $4.1 million. Now let's go through some key results and highlights for Q3. We generated total revenue in the third quarter of $132.8 million, showing growth of 17.9% from Q3 2021. Subscription and support revenue was $118.6 million, up 19.9% Q3 2021. New logos and new solutions both helped to drive strong revenue growth in Q3 2022. 66% of the increase in SMS revenue in Q3 came from new customers added in the last 12 months. Professional services revenue was $14.3 million in Q3 2022 up 3.5% from the same quarter last year. The increase was driven by higher XBRL services revenue. We added 160 net new customers in Q3 for a total customer count of 5,541, a growth of 1,395 customers from Q3 2021. Our total customer count includes 895 ParsePort customers. As Marty mentioned, our subscription and support revenue retention rate was a best-in-class 98.1% for the third quarter of 2022, an increase compared to 96.5% for the same period last year. With add ons, our subscription and support revenue retention rate declined to 107% for the third quarter of 2022 Compared to 111.1% in Q3 2021. As we discussed during our Q2 call, this metric is being impacted by the lifecycle of our customers who purchased our capital markets solution during 2021. But have transitioned to a lower costs ongoing ACB and the Q3 2022 calculation. Excluding the impact of capital markets, this metric would be about three points higher this quarter. Please note the ParsePort customers will not be included in our retention calculation until we have a full year at comparable data. The number of larger subscription contracts continues to show growth. In the third quarter of 2022, we had 1,257 contracts valued at over $100,000 per year up 21% from Q3 the prior year. The number of contracts valued at over $150,000 totaled 676 customers in the third quarter, up 25% from Q3 2021. The number of contracts valued over $300,000 total 214 up 21% from Q3 2021. Gross profit totaled $101.8 million in Q3, up 16.5% from the same quarter a year ago. Consolidated gross margin was 76.6% in the latest quarter versus 77.6% in Q3 2021, a net decline of 100 basis points. Operating expenses increased 33.7% from Q3 2021, due to investment in hiring return to travel and impact from amplify, which was held 100% virtual in 2021 due to COVID. We posted an operating loss of $8.4 million in Q3 2022, compared to an operating profit of $5 million in Q3 2021. At September 30, 2022 cash, cash equivalents and marketable securities totaled $433 million, an increase of $4 million compared to the balance at June 30, 2022. Cash flows from operating activities in Q3, 2022 totaled $4.9 million, compared with an increase in cash of $16.3 million in the same quarter a year ago. Now turning to our guidance. Our current 2022 guidance assumptions are dependent on a variety of factors that are subject to change, including the challenging macro environment. We continue to believe our assumptions are appropriately prudent for the current conditions. For the fourth quarter of 2022, we expect total revenue to range from $139 million to $140 million. We expect non-GAAP operating loss to range from $5.7 million to $4.7 million, a net loss of $0.10 to $0.08 on a per share basis. Our share count will be approximately 53.3 million weighted average shares. We expect operating cash flow to be negative in Q4 due to the timing of the payment of certain annual cash bonuses. For the full year 2022, we expect total revenue to range from $533 million to $534 million. We are improving our guidance for non-GAAP operating loss to range from $23.5 million to $22.5 million, or a net loss of $0.47 to $0.45 on a per share basis. Our share count will be approximately 53 million weighted average shares. And for the full year 2022, we expect to post positive free cash flow for the sixth consecutive year. In summary, Workiva posted another strong quarter. Even with the challenges that we are seeing in the world today, we are confident in the opportunity ahead. We continue to experience broad based demand for our solutions. And we remain committed to our strategy and are focused on capitalizing on our market opportunity. We will now take your questions. Operator, we are ready to begin the Q&A session.

Thank you. [Operator Instructions] And we will take our first question from Andrew DeGasperi with Berenberg. Your line is open.

I guess completely understandable in terms of the guidance for the year. I was just wondering, if you can maybe elaborate a little more what you're seeing in the fourth quarter, so far? And I might be mistaken. But if I remember last year, you did issue a soft guidance for the next year. I was just wondering, is it the macro environment still relatively uncertain? Is that why one hasn't been issued?

Yes, thanks for that question. And that's always the elephant in the room these days. First off, what we're seeing in Q4, you asked about, and I mean, Q4 is going well. We're seeing better performance in Q3 at this point in time. And we feel very good about the numbers we put out there. So all things considered, especially since cap markets, which represent some of our growth each quarter is pretty much dead right now. And the creation of new companies is pretty much there. So I'm really pleased with where we're at in Q4, all our other solutions are picking up the pace and keeping us in a good place. So I'm happy about that. We are seeing some macro things going on still in Q4. Every once a week I hear about some place that's clamped down on new spend. And so we're seeing some of that, and that plays into why we're being cautious on 2023. We're going to give that soft guidance next quarter, but we just want to see when well you're in tune with it all too, right, what inflation is going to be, what the fed is going to say over the next couple of months. And I think that once things turn it'll, who knows when that'll be, but we'll see some firming up in the markets and spend luckily, we're in a compliance area. And we're a solution that is still a center on what people do. It's still very, very important and they really can't do it. But we have seen some tightening of budgets that slows decision processes and things like that. We haven't lost deals because of lack of budgets. It's just been a slowing. So relatively speaking, we are in a really good place being sort of mission-critical compliance platform for all different types of reporting. So we remain optimistic and as soon as we feel things have solidified and we are starting to -- we're at the bottom so to speak and we are starting up, then I think we will be able to give a lot more pertinent guidance. My rule of thumb is, we give guidance and we miss it at all. You guys cut our heads off and rightly so. So we are just going to be real careful, and give guidance when we are confident and not give guidance when we just can't tell what's going on. It's not anything internally that it's all macro stuff. So sorry for the long answer. But I knew that would that would be one of the biggest questions of the day.

And just to clarify, Andrew, so we did reiterate the guidance on profit that we do expect, as Marty had said earlier, that we expect to return to that quarterly operating profit on a non-GAAP basis later half 2023. So we are reiterating that from what we talked about at our Analyst Day.

That's helpful. And Jill, maybe in terms of the non-current part, I noticed a sequential uptick. I was just wondering is this just a function of more longer-term contracts being signed? Or is there anything else that we should be aware of?

For billings, is that what you're asking about?

Yes. The non-current deferred.

Deferred, okay, to RPO. Yes. So that one is just related to exactly like you are saying. We have been moving towards more of those long-term contracts, three, three ones, we've talked about this quite a bit, where we're signing three year deals that are annual pay, that does impact that long-term RPO number.

And we'll take our next question from Alex Sklar with Raymond James. Your line is open.

Great, thanks. Julie or Marty, a lot of talking to partner influence deals in prepared remarks. I'm curious about that backdrop, if there is any opportunity to scale your own sales and marketing faster than you previously anticipated?

Alex, I didn't quite get the question. You said a lot of talk about partners, but are we also going to scale our direct team? Is that what you asked?

Yes, sorry. I'm losing my voice a little bit here. But yes, all the wins you mentioned that had seemed to have a high level of partner influence. So, I was asking if there is any opportunity to scale your own sales and marketing costs faster?

So, scale them back?

Yes, or grow them by a slower amount than kind of what I've been...

I see. Well, I mean, I think when you get to the scale, and you try to look for operating leverage, partners become a very important part of it. And when partners bring leads, the cost to secure new customer goes down and the size of the deal goes up. We are definitely putting more focus on partners that was the whole intent of those examples. And yes, I think overtime, we will see a trend where we see more and more coming from partners and less and less from our direct sales force. I will say this I've never seen a real successful SaaS company to date in a way where partners could do it all alone. You always have to have a balance and we're making great progress, we're still going to get a lot more out of our partners. And we are now, so there is some leverage to be had there, for sure. And we're seeing that, so we're very optimistic. And the partners' thing that excites me is the partners can see the opportunity now. They can really see the opportunity, they get two or three bucks, at least from every dollar we get, usually more than that. And so, that's the real encouraging thing. And we're seeing a lot of uptick from them. And Julie has done a fantastic job of pushing that. So I think you will see a lot more leverage.

And I appreciate the comments about the strong ESG bookings, even without the formal rules. And I'm curious kind of, so are you seeing any pause from kind of customer behavior with kind of the SEC going back to comment period or any color broadly on what you're hearing as far as timeline for formal rules around ESG?

When formal rules come out, it's going to be the way we look at and how we model and look at the world is going to be an upside for us, so to speak. But that being said, as I sort of said in the first question, I mean, we're continuing to see solid interest and demand for our ESG tool. It's surprised me after just one year of selling how well we're doing in that product line. And the resolve of customers is coming from different places. I think regulation is going to be the last driving factor. Frankly, I think, they realize that customers who buy their products care now, the capital flow obviously cares, the flow of capital and the owners of their company, ultimately, and the board. So the board's care, and I can't tell you how many times I've heard someone say, well, our board said we have to do X, Y, Z. So, I think that regulation will sort of be the cherry on top when that comes for us. But I really see most of that demand being driven out of the different constituents, I just mentioned, the customers who actually buy the products, the capital flow, and then ultimately, the boards. And I mean, my purchases are based a lot on corporate behavior now. And I think that's only going to accelerate. And I think most companies agree with that. That is going to be what happens.

We'll take our next question from Joe Meares with Truist. Your line is open.

I'm curious if you guys are seeing any benefit from vendor consolidation in the current environment given the breadth of your platform, and with budgets coming under some pressure here?

Joe, when you say any benefits from vendor consolidation, tell me what you mean by that?

Just buyers going from using a bunch of different individual [indiscernible]

Yes, I'm sorry. Yes, absolutely. I mean, we live that every day. I think we've picked out over 200 SaaS apps and our small company and so we're really trying to choose the winners in terms of providing platforms and I don't know exactly what the drive is. I think that's one of them, because I feel it in colleagues I talked to feel it too, but we're seeing a lot of resonating with platform and we're transitioning everything we do to platform selling now. We've been an application or solution seller for quite a while and we're in the midst of that, and it's resonating. Customers want to have one platform to do reporting and assurance, and all sorts of reporting financial, ESG, multiple entity, which is the GSR, and then they want to assure all those and make sure that, they have all the different assurance controls management audit, all those on the same platform and that is definitely resonating. Is it partially because of the vendor consolidation? Probably I can't tie it to that for sure. But we're definitely seeing, more interest in platform, less interest in buying apps. That's how we're behaving to. So, I see it internally in our own company.

That’s really helpful. And then just from the product side, I think you guys had launched a mobile solution somewhat recently, and some of the customers who spoke with an amplifier were pretty excited about that, because C suite, they come into a meeting, and they want to look at stuff on their on their iPad. So, I'm just curious if you're seeing any initial traction from the moment?

I'll let Julie answer that.

We had a mobile app over the years and it wasn't something that our customer base really embraced and utilized. But we did do a reboot of it. And we showed it at amplify, and we're putting in the hands of the customer so little early on the reception, but we do see the demand for it and requirements for it coming in far stronger than they had in past year. So we're very, very enthusiastic that rolling it out and the capabilities that they'll have, and the uptake with customers.

And I would just say, Julie's really pushed that with the product team to, we're so proud of our modern platform and a modern platform better have a better have that component. So, she's done a great job of getting that product to a really good place.

And we'll take our next question from Patrick Schulz with Baird. Your line is open.

You touched on the multi-solution strength quite a bit in your opening remarks? Could you just provide some additional color on the trends we're seeing in light of the current macro environment? Are you seeing a better uptake in multi-solution deals from your larger customer cohorts? Or is this pretty broad based across all customers? And then in relation to the partner channel, are you seeing these partner lead deals have an impact on the mix of multi-solution deals?

I'll let Julie answer that one, too. She's right in the thick of it every day so.

On the multi-solutions, there are some patterns. I mean, we tend to see certainly, with our GRC suite of solutions, we see multi-solutions there we have a number of capabilities there controls audit risk and so forth. So we do see multi-solution there. And then the trend in the market around controls GRC with other capabilities, like ESG is something we're working towards. So we do see those in the market. And certainly one of the compelling reasons to work so tightly with our partners is to go higher in organizations, go broader in organizations. They bring us in their digital and financial transformation journeys with their customers. So absolutely, that is the goal of getting sourced deals and continued to sell broader multi-solutions with our partners.

And then just regarding year of ParsePort a little bit, can you just talk about the current demand environment thing in Europe and if there are any notable inter quarter trends you want to call out? And then just ParsePort specifically, can you just provide some additional color on the cross sell and up sell opportunity you have, especially in light of the current macro?

Well, the first off, the ParsePort acquisition, there were three primary drivers. One you referenced that is the cross sell, and we are just starting to ramp that now. And we have had some success already moving some of those accounts. And in terms of macro in Europe, the word on everyone talking is, it's worse in Europe and here inflation, higher all that stuff. We have not seen a larger downturn there than we have in the states and one in the states is not that great yet. 2023 will be interesting to see how the budgets look. But we are seeing similar, not widespread, but some slowing down of deals in both markets and it's roughly the same. We don't see it any harsher. But like I said earlier, we are mission critical and we are regulatory. And Europe, they are even more regulatory than us. So I think we are sort of being -- we're a little immune from that in some ways, but so not a lot of difference there. And then ParsePort, the European mandate for ESEF is an annual mandate. So we haven't really seen a lot of uptick in new selling there. We are just getting into that season now. It's just starting. So I'll be able to report back later. But we have done a nice job of dealing with our existing customers there, because they need new capabilities for the new requirements. There is new requirements for the next several years. And so, we are seeing a lot of goodness there in terms of dealing with partners to sell them new capabilities, and we're starting to the beginning of the cross sell. So, we are still very pleased with that acquisition. Great team, great product, and it's going to broadly serve the low-end anytime someone has to tag a PDF. It's the perfect thing to just grab it and tag it. And for all the ESG reports, small companies will have to do, and it's really got a long, long tail on the benefits for us.

[Operator Instructions] And we will take our next question from George Kurosawa with Citibank. Your line is open.

Hi, thank you. This is George on for Steve. First question, you talked about kind of slowing deal cycles that echoes some comps that you gave last quarter. Curious, if you could just compare and contrast what you're seeing in terms of trend, would you say things have deteriorated slightly or is this kind of more of the same?

Hi, George. Yes, I mean, I know you're trying to compile a view from talking to a lot of people, and I'll say this, it's really anecdotal so far and it's here and there. If it's gotten worse between Q3 and Q4, it's just marginal, isn't a big change. I think people's budgets they have intact now and some are being pulled back a little bit, but I think the real test will be in 2023 when we see what the new budgets look like for our customers. And when we do our job selling and we explain and convince customers who actually save money using our solution, they just have to get up that transition hump of buying, implementing then see the return a little later. So, we are still optimistic in 2023, but between Q3 and Q4, not a ton of difference, no.

And then a quick follow-up on the FX impact and we start getting 2% headwind, presumably you had some headwinds built into the guide already. So I guess what's more is kind of the amount of that that was incrementally surprising?

Yes. So we did have, we always have to plan for some amount. But I think that you're hearing this probably from a lot of other companies that Q3 did have a pretty significant impact. And so as we talked about on the call, we would have repealed like we would have beaten the high end of our guidance, had it not been for the currency impact.

And we will take our next question from Adam Hotchkiss with Goldman Sachs. Your line is open.

Good afternoon and thanks very much for the questions. Marty great to see the progress on ESG. Could you give us a sense for how your thinking has evolved around the go-to-market for the product given your early demand signals? Just wanted to get a sense for channel performance across new lands versus cross sell as well as partner channel versus direct? And also to that point, what the profile of customers who are moving more quickly on this typically look like?

Okay, I'll try to get all those. If I forget one, Adam, let me know. I would say that the deal sizes are coming in larger than we anticipated. And that's been in there's partners involved in a lot of these deals. The partners, you've heard all the public announcements from the partners about, jumping headfirst into the ESG arena. And they view us as really a premier starting point. So we're getting a lot of selling from partners. I would also say initially, we've really targeted our customer base, because, we want to get the biggest footprint as quickly as we could, since we really view this as a land grab, a local grab, and I think we're being successful there. We're getting a lot of deals in our customer base. And we're going to be able to use those references and those numbers as we expand into other areas to be the justifiably be the number one leader of ESG reporting, which we believe we already are, but that'll only continue. And then, I think you asked geographic, but we're heading North America, just because it takes longer to hire in Europe takes a lot longer to hire sellers there. But they're coming up to speed. And we're starting to see a lot more activity this quarter in Europe, actually, and getting some nice deals out of there, too. So it's really a mix of direct and partner. We're a few months ahead in North America just because of what I alluded to, but we're seeing -- Europe is going to be a stronger market as U.S. just based on the fact that the EU is taking this whole thing a lot, a lot more seriously.

And then just a quick follow up for Jill. When you think about the margin ramp and how that's progressing, I think our profit was a little bit better this quarter than we expected. What were the drivers there? Is there any impact on hiring or expense plans given the current macro?

Sure. So when we came into this year, we talked about the fact that we were making these investments specifically around execution on our strategy, but that we were doing this year. And so coming into the end of the year, we are slowing on hiring and listening to the market. As we shift. Have you all care more about of course the margins as opposed to just focusing on growth we still are, we're balancing that growth to margin picture, and making sure that we're making decisions now that will allow us to be successful in reaching and achieving the guidance that we've given already for 2023 around getting that quarterly profitability towards the end of next year.

I would just add that I realized communication takes a lot of repetition. But to echo what Jill said, this has been our plan all along. Invest in 2022 and we were clear that mainly for ESG, but also some for cap markets, the cap markets investment, even though it didn't, hasn't shown a return yet. We're making great strides and in law firms and companies that will go public someday. So, we're building backlog already with that investment. These were things and we've also said way back then that we would shift back to leverage in 2023. So we really haven't changed much, except we did, at the end of this years, reduce a little of the investment. We did sort of cut the end of it off a little bit, because of the pressures in the market. I am still a big believer in growth, because in SaaS companies, you can cut the cash flow and margin anytime you want. But I'd rather do that when we're bigger. So we're still focused primarily on growth, but we're going to be very, very thoughtful on our ability to perform and also maintain improve margin as we go forward. That's why we've made the commitment for the end of the year so.

And we will take our next question from Brad Reback with Stifel. Your line is open.

Marty maybe following up on that last series of commentary. What, if anything, would make you move faster on the profitability side?

You mean, externally or internally?

What, if anything? It's your choice.

Well, I mean, if the macro got a lot, lot worse, but our retention is very high. When we see a downturn like this, we see a reduction in growth, we don't see our revenue shrink. And so we're still going to post a healthy increase in revenues this year, and next year. And so, that's our main focus. We do think it's a net, we're a natural size. Now with some of the things I've alluded to partners maturing of the platform, there's a whole bunch of things going on in our lifecycle that is going to make creating leverage, very feasible, very attainable, and at the right time, in our growth cycle. The ESG is what, like I've always said, is a generational opportunity for this company, we had to bite the bullet one year and spend money, and I would not change that decision at all. But in general, from our quarters before that, we were always showing profit and reinvesting a lot of it, but some of the profit put into the bottom-line. And that's the way we'll move forward over time. But we will be focused on operational leverage. And but our still our primary focus is growth, we want to get to a billion as quick as we can, because then if someone wants cash flow, we can produce a lot of cash flow in short order, twice what we could produce now, so to speak so any way.

And then maybe a more strategic question, obviously, late in the quarter, there was a Bloomberg story that you potentially had been approached by some PE firms. How do you balance the need to stay public versus potential optionality that you could have been private?

Well, this is my GC answering now. We really can't comment on rumors. But I'll say this, we are a great company. And I think in general, we think we are on the upswing. We don't think we are broken. And typically, PEs to make their model, they have to buy companies cheaper than what the really good companies are trading for. So we think we have a ton of upside as a public company especially where we're trading now. We're going to continue to grow around that plus or minus 20% mark and that in and of itself provide a hefty return for investors. And then if our multiple increases, there is more there. So we are really bullish on our future. And it doesn't surprise me. PEs are all over. We talk to them all the time. I learned a lot of good stuff from PEs, but I don't -- rumors are going to certainly when the prices are down on SaaS companies and we have seen a lot getting taken out. But we think we are a very healthy company with a lot of upside. So that gives us our optimism and our drive to continue.

And we will take our next question from Matt Stotler with William Blair. Your line is open.

Hi there. Thank you for taking the questions. Maybe first question here on how you are seeing, I guess, the renewal pipeline for the next 12, 18 months. If we go back 2019, 2020 at the time when you were moving people to the new pricing model, you're moving customers to the platform. We'd love to get some color on kind of the average duration of those contracts. And as you think about anyone on a three to five year contract renewing in the coming years, any thoughts on ability to adjust pricing or up sell or do different things that you could see as a potential opportunity, as you kind of move through that period?

Well, again, I'm a big lifecycle of company guy. If you do things when you mature enough and good at it and certainly, renewals have never been hard for us, but then we have never really taken advantage of them as we should. And I think this year one of the initiatives we have is to always engage renewals sooner than later and have us very structured program in terms of how you price things, even what the price increase would look like compared to adding a new solution for instance. And giving them leverage in that decision. And we start doing that in a limited basis and we have had some success. So, we are going to roll it out and really as we mature as a company, keep bringing in these types of programs. So, I'm optimistic that renewals, is going to be a driver for us, now that we've sort of taking a different approach to it. And we most of -- well, I think roughly half of our contracts are three year contracts and that's going up every year. And so, we prefer three year contracts, just because of workload and the lack of buying decision opportunity for customers and then engage them early and help them to get more value out of our platform. So yes, we are getting in a good place on using that as a lever.

Got it. That's helpful. And then maybe just another follow-up on the international markets. Obviously, you guys have talked about some of the sales changes you are making there. Any updates in terms of how that's progressing forward, whether that's, I guess what you're seeing is resonating with customers in terms of the approach and kind of how you expect that to progress going into 2023?

Yes, I'm really bullish out on me in 2023. Obviously, we have to fight the macro issue. So that might slow it down some but huge opportunity there. The centralization efforts Julie did have really paid off. We've really got a good strategy, good execution cadence there. And we have a lot of, well shouldn't say a lot, we have several very significant solutions. We're going to market there with IR solution, also our financial reporting solution, and ESEF, and so -- and ESG. So, it's not just the ESEF, but there's almost as much opportunity there as in the states and it's more Greenfield ton of whitespace there. So we're very optimistic with the internal changes we've made, and I just see that as just a one of our bigger opportunities moving forward, frankly.

And we will take our next question from Mike Grondahl with Northland Capital Market. Your line is open.

This is [indiscernible] for Mike Grondahl. Thanks for taking the question. Maybe first, just on ParsePort, I think last quarter, you mentioned it was 1.7 million in revenue and 500,000 services. Do you have those numbers where this quarter?

So for Q3 ParsePort revenue was $1.4 million for those 895 customers. They do have fewer services in Q3 compared to Q2, so that's the split quarter-over-quarter.

Got it. Just a reminder on that it's going to be more seasonally strong fourth quarter, first quarter that for the customers and that kind of ramping?

Certainly, they tend to have more activity around filings. So, as companies are thinking about doing those filings and for the ESEF filings into Q4 and then as the actual activity is happening Q1, Q2 timeframe. There's some seasonality there to their numbers.

Ladies and gentlemen, this concludes today's conference call and we thank you for your participation. You may now disconnect.