Workiva Announces Third Quarter 2015 Financial Results

November 5, 2015

Total Quarterly Revenue of $36 million, up 30% from Q3 of 2014

AMES, Iowa, Nov. 5, 2015 /PRNewswire/ -- Workiva Inc. (NYSE: WK), creator of the Wdesk cloud-based productivity platform for enterprises, today announced financial results for its third quarter ended September 30, 2015 and increased its full-year 2015 guidance.

"We had a strong third quarter with 30% revenue growth over the same quarter last year," said Matt Rizai, Chairman and Chief Executive Officer of Workiva. "We continued to add Wdesk customers and seats across our customers' organizations for Sarbanes-Oxley (SOX) and SEC compliance, risk processes and management reporting."

"The efficiency of the Wdesk platform allows us to leverage new products into adjacent markets," said Rizai. "For example, advancements in our data platform for the SOX market are attracting users in the much larger Governance, Risk and Compliance (GRC) market."

The non-GAAP adjustments referenced herein relate to the exclusion of stock-based compensation.

Third Quarter 2015 Financial Highlights

 

  • Revenue: Total revenue for the quarter ended September 30, 2015 was $36.3 million, an increase of 29.9% from $27.9 million in the third quarter of 2014. Subscription and support revenue was $29.8 million, an increase of 25.9% versus results in the third quarter of 2014. Professional services revenue was $6.4 million, an increase of 52.2% compared to the same quarter in the prior year.
  • Gross Profit: GAAP gross profit for the quarter ended September 30, 2015 was $26.5 million compared with $19.4 million in the same quarter of the prior year. GAAP gross margin was 73.0% in the third quarter of 2015 versus 69.4% in the third quarter of 2014. Non-GAAP gross profit for the quarter ended September 30, 2015 was $26.7 million, an increase of 36.7% compared with the prior year's third quarter, and non-GAAP gross margin was 73.5% compared to 69.9% in the third quarter of 2014.
  • Loss from Operations: GAAP loss from operations for the quarter ended September 30, 2015 was $14.3 million compared with a loss of $12.6 million in the prior year's third quarter. Non-GAAP loss from operations for the quarter ended September 30, 2015 was $11.2 million, compared with non-GAAP loss from operations of $11.2 million in the third quarter of 2014.
  • Net Loss: GAAP net loss for the quarter ended September 30, 2015 was $14.6 million compared with a net loss of $13.4 million for the prior year's third quarter. GAAP net loss per basic and diluted share for the quarter ended September 30, 2015 was $0.37, based on 40.0 million weighted-average shares outstanding, compared with a net loss per basic and diluted share of $0.42, based on 31.9 million weighted-average shares outstanding in the third quarter of 2014.
  • Non-GAAP net loss for the quarter ended September 30, 2015 was $11.5 million compared with a net loss of $12.0 million in the prior year's third quarter. Non-GAAP net loss per basic and diluted share for the quarter ended September 30, 2015 was $0.29, based on 40.0 million weighted-average shares outstanding, compared with a net loss per basic and diluted share of $0.38, based on 31.9 million weighted-average shares outstanding in the third quarter of 2014.
  • Balance Sheet: As of September 30, 2015, Workiva had cash, cash equivalents and marketable securities totaling $81.8 million, compared with $86.4 million as of June 30, 2015. Debt, including capital lease and financing obligations, totaled $23.6 million as of September 30, 2015.
  • Cash Flow: Net cash used in operating activities was $4.7 million for the three months ended September 30, 2015, compared to net cash used in operating activities of $4.6 million for the three months ended September 30, 2014.

Operating Metrics

 

  • Customers: Workiva had 2,468 customers as of September 30, 2015, a net increase of 292 customers from September 30, 2014.
  • Revenue Retention Rate: As of September 30, 2015, Workiva's revenue retention rate (excluding add-on revenue) was 96.4%, and the revenue retention rate including add-on revenue was 107.7%. Add-on revenue includes the change in both seats purchased and seat pricing for existing customers.

Financial Outlook

As of November 5, 2015, Workiva is providing guidance for its fourth quarter 2015 and raising guidance for the full year 2015, as follows:

Fourth Quarter 2015 Guidance:

 

  • Total revenue is expected to be in the range of $37.6 million to $38.1 million.
  • Non-GAAP loss from operations is expected to be in the range of $10.8 million to $11.3 million.
  • GAAP loss from operations is expected to be in the range of $14.0 million to $14.5 million.
  • Non-GAAP net loss per basic and diluted share is expected to be in the range of $0.24 to $0.25.
  • GAAP net loss per basic and diluted share is expected to be in the range of $0.32 to $0.33.
  • Net loss per basic and diluted share is based on 40 million weighted-average shares outstanding.

Full Year 2015 Guidance:

 

  • Total revenue is expected to be in the range of $143.0 million to $143.5 million, compared with the prior outlook for revenue of $141.5 million to $143.0 million.
  • Non-GAAP loss from operations is expected to be in the range of $34.8 million to $35.3 million, compared with the prior outlook for non-GAAP loss from operations of $36.0 million to $38.0 million.
  • GAAP loss from operations is expected to be in the range of $45.9 million to $46.4 million, compared with the prior outlook for GAAP loss from operations of $47.0 million to $49.0 million.
  • Non-GAAP net loss per basic and diluted share is expected to be in the range of $0.87 to $0.88, compared with the prior outlook for non-GAAP net loss per basic and diluted share of $0.90 to $0.95.
  • GAAP net loss per basic and diluted share is expected to be in the range of $1.15 to $1.16, compared with the prior outlook for GAAP net loss per basic and diluted share of $1.17 to $1.22.
  • Net loss per basic and diluted share continues to be based on 40 million weighted-average shares outstanding.

Quarterly Conference Call

Workiva will host a conference call today at 5:00 p.m. ET to review the Company's financial results for the third quarter of 2015, in addition to discussing the Company's outlook for the fourth quarter and full year 2015. To access this call, dial 877-201-0168 (domestic) or 647-788-4901 (international). The conference ID is 50167406. A live webcast of the conference call will be accessible in the "Investor Relations" section of Workiva's website at www.workiva.com. A replay of this conference call can also be accessed through November 12, 2015 at 855-859-2056 (domestic) or 404-537-3406 (international). The replay pass code is 50167406. An archived webcast of this conference call will also be available an hour after the completion of the call in the "Investor Relations" section of the Company's website at www.workiva.com.

About Workiva

Workiva created Wdesk, a cloud-based productivity platform for enterprises to collect, link, report and analyze business data with control and accountability. Thousands of organizations, including over 65% of the Fortune 500, use Wdesk for risk, compliance or management reporting. Wdesk proprietary word processing, spreadsheet and presentation applications are integrated and built upon a data management engine, offering synchronized data, controlled collaboration, granular permissions and a full audit trail. Wdesk helps mitigate enterprise risk, improve productivity and give users confidence to make decisions with real-time data. Workiva employs more than 1,000 people with offices in 15 cities. The Company is headquartered in Ames, Iowa. For more information, visit workiva.com.

Non-GAAP Financial Measures

The non-GAAP adjustments referenced herein relate to the exclusion of stock-based compensation. A reconciliation of GAAP to non-GAAP historical financial measures has been provided in Table I at the end of this press release. A reconciliation of GAAP to non-GAAP guidance has been provided in Table II at the end of this press release.

Workiva believes that the use of non-GAAP gross profit and gross margin, non-GAAP loss from operations, non-GAAP net loss and non-GAAP net loss per share is helpful to its investors. These measures, which are referred to as non-GAAP financial measures, are not prepared in accordance with generally accepted accounting principles in the United States, or GAAP. Non-GAAP gross profit is calculated by excluding stock-based compensation expense attributable to cost of revenues from gross profit. Non-GAAP gross margin is the ratio calculated by dividing non-GAAP gross profit by revenues. Non-GAAP loss from operations is calculated by excluding stock-based compensation expense from loss from operations. Non-GAAP net loss is calculated by excluding stock-based compensation expense, net of tax, from net loss. Non-GAAP net loss per share is calculated by dividing non-GAAP net loss by the weighted- average shares outstanding as presented in the calculation of GAAP net loss per share. Because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact a company's non-cash expenses, Workiva believes that providing non-GAAP financial measures that exclude stock-based compensation expense allows for more meaningful comparisons between its operating results from period to period. Workiva's management uses these non-GAAP financial measures as tools for financial and operational decision making and for evaluating Workiva's own operating results over different periods of time.

Non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in Workiva's industry, as other companies in the industry may calculate non-GAAP financial results differently. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact on Workiva's reported financial results. Further, stock-based compensation expense has been and will continue to be for the foreseeable future a significant recurring expense in Workiva's business and an important part of the compensation provided to its employees. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. Investors should review the reconciliation of non-GAAP financial measures to the comparable GAAP financial measures included below, and not rely on any single financial measure to evaluate Workiva's business.

Safe Harbor Statement

Certain statements in this press release are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. These statements relate to future events or the Company's future financial performance and involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of the Company or its industry to be materially different from those expressed or implied by any forward-looking statements. In particular, statements about the Company's expectations, beliefs, plans, objectives, assumptions, future events or future performance contained in this press release are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "could," "would," "should," "expect," "plan," "anticipate," "intend," "believe," "estimate," "predict," "potential," "outlook," "guidance" or the negative of those terms or other comparable terminology.

Please see the Company's documents filed or to be filed with the Securities and Exchange Commission, including the Company's annual reports filed on Form 10-K and quarterly reports on Form 10-Q, and any amendments thereto for a discussion of certain important risk factors that relate to forward-looking statements contained in this report. The Company has based these forward-looking statements on its current expectations, assumptions, estimates and projections. While the Company believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond the Company's control. These and other important factors may cause actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. Any forward-looking statements are made only as of the date hereof, and unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


Investor Contact:


Media Contact:



Adam Rogers


Kevin McCarthy



Workiva Inc.


Workiva Inc.



investor@workiva.com


press@workiva.com



(515) 663-4493


(515) 663-4471


 

WORKIVA INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)


















Three months ended September 30,


Nine months ended September 30,


2015


2014


2015


2014

Revenue








Subscription and support

$

29,832



$

23,690



$

84,186



$

66,306


Professional services

6,436



4,229



21,204



16,259


Total revenue

36,268



27,919



105,390



82,565


Cost of revenue








Subscription and support (1)

5,319



5,387



16,768



15,085


Professional services (1)

4,457



3,152



12,423



8,832


Total cost of revenue

9,776



8,539



29,191



23,917


Gross profit

26,492



19,380



76,199



58,648


Operating expenses








Research and development (1)

12,766



11,175



36,970



32,234


Sales and marketing (1)

20,903



16,248



50,937



39,435


General and administrative (1)

7,153



4,572



20,178



13,986


Total operating expenses

40,822



31,995



108,085



85,655


Loss from operations

(14,330)



(12,615)



(31,886)



(27,007)


Interest expense

(494)



(700)



(1,517)



(1,281)


Other income and (expense), net

163



(67)



288



(209)


Loss before income tax benefit

(14,661)



(13,382)



(33,115)



(28,497)


Income tax benefit

(31)





(9)




Net loss

$

(14,630)



$

(13,382)



$

(33,106)



$

(28,497)


Net loss per common share:








Basic and diluted

$

(0.37)



$

(0.42)



$

(0.83)



$

(0.90)


Weighted average common shares outstanding - basic and diluted

39,980,308



31,889,795



39,735,393



31,836,479



(1) Includes stock-based compensation expense as follows:

 


Three months ended September 30,


Nine months ended September 30,


2015


2014


2015


2014

Cost of revenue








Subscription and support

$

92



$

88



$

275



$

403


Professional services

90



47



251



264


Operating expenses








Research and development

586



341



1,289



1,443


Sales and marketing

461



288



1,243



889


General and administrative

1,853



649



4,818



2,540


 

 

WORKIVA INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(in thousands)










September 30, 2015


December 31, 2014


(unaudited)



Assets




Current assets




Cash and cash equivalents

$

69,094



$

101,131


Marketable securities

12,659




Accounts receivable, net

12,133



11,120


Deferred commissions

953



852


Other receivables

951



295


Prepaid expenses and other current assets

3,282



3,143


Total current assets

99,072



116,541


Restricted cash



401


Property and equipment, net

45,754



46,265


Intangible assets, net

868



549


Other assets

626



795


Total assets

$

146,320



$

164,551


Liabilities and Stockholders' Equity

Current liabilities




Accounts payable

$

4,730



$

3,011


Accrued expenses and other current liabilities

17,228



16,765


Deferred revenue

51,047



42,605


Deferred government grant obligation

2,637



2,324


Current portion of capital lease and financing obligations

1,985



1,941


Current portion of long-term debt

18



84


Total current liabilities

77,645



66,730


Deferred revenue

8,584



13,671


Deferred government grant obligation

3,151



3,424


Other long-term liabilities

3,208



2,069


Capital lease and financing obligations

21,505



22,747


Long-term debt

73



91


Total liabilities

114,166



108,732


Stockholders' equity




Common stock

41



39


Additional paid-in-capital

198,499



189,168


Accumulated deficit

(166,641)



(133,535)


Accumulated other comprehensive income

255



147


Total stockholders' equity

32,154



55,819


Total liabilities and stockholders' equity

$

146,320



$

164,551


 

 

WORKIVA INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)


















Three months ended September 30,


Nine months ended September 30,


2015


2014


2015


2014

Cash flows from operating activities








Net loss

$

(14,630)



$

(13,382)



$

(33,106)



$

(28,497)


Adjustments to reconcile net loss to net cash (used in) provided by operating activities








Depreciation and amortization

1,058



1,132



3,354



2,752


Stock-based compensation expense

3,082



1,413



7,876



5,539


Provision for doubtful accounts

222



104



348



128


Accretion of discount on convertible notes



133





133


Paid-in-kind interest on convertible note



58





58


Change in fair value of derivative liability



48





48


Realized (gain) loss on sale of available-for-sale securities

(7)





(7)



136


Amortization (accretion) of premiums and discounts on marketable securities, net

32





32




Recognition of deferred government grant obligation

(236)



(39)



(508)



(51)


Changes in assets and liabilities:








Accounts receivable

47



(1,794)



(1,448)



2,584


Deferred commissions

(217)



(201)



(104)



(411)


Other receivables

(44)



108



(656)



240


Prepaid expenses and other

(218)



231



(139)



(942)


Other assets

72



(201)



166



(165)


Accounts payable

857



1,727



2,276



371


Deferred revenue

1,686



3,211



3,528



15,517


Accrued expenses and other liabilities

3,578



2,826



1,732



3,608


Change in restricted cash





101



54


Net cash (used in) provided by operating activities

(4,718)



(4,626)



(16,555)



1,102


Cash flows from investing activities








Purchase of property and equipment

(629)



(2,768)



(1,659)



(8,044)


Purchase of marketable securities

(15,692)





(15,692)




Sale of marketable securities

3,012





3,012



4,864


Purchase of intangible assets

(66)



(121)



(344)



(237)


Net cash used in investing activities

(13,375)



(2,889)



(14,683)



(3,417)


Cash flows from financing activities








Payment of equity issuance costs



(57)



(1,346)



(57)


Proceeds from issuance of convertible notes



5,000





5,000


Proceeds from option exercises

1,062



158



1,495



363


Changes in restricted cash





300



(300)


Repayment of other long-term debt

(17)



(96)



(84)



(198)


Principal payments on capital lease and financing obligations

(522)



(316)



(1,683)



(781)


Distributions to members



(17)



(35)



(51)


Proceeds from borrowings on line of credit



3,000





3,020


Proceeds from government for training reimbursement



56





194


Payments of issuance costs on line of credit



(99)





(99)


Repayment of line of credit







(2,038)


Government grant awards

235





548



2,000


Net cash provided by (used in) financing activities

758



7,629



(805)



7,053


Effect of foreign exchange rates on cash

(3)



26



6



22


Net (decrease) increase in cash and cash equivalents

(17,338)



140



(32,037)



4,760


Cash and cash equivalents at beginning of period

86,432



20,135



101,131



15,515


Cash and cash equivalents at end of period

$

69,094



$

20,275



$

69,094



$

20,275


 

 

TABLE I
WORKIVA INC.
RECONCILIATION OF NON-GAAP INFORMATION
(in thousands, except share and per share data)


















Three months ended September 30,


Nine months ended September 30,


2015


2014


2015


2014

Gross profit, subscription and support

$

24,513



$

18,303



$

67,418



$

51,221


Add back: Stock-based compensation

92



88



275



403


Gross profit, subscription and support, non-GAAP

$

24,605



$

18,391



$

67,693



$

51,624


As a percentage of subscription and support revenue

82.5

%


77.6

%


80.4

%


77.9

%









Gross profit, professional services

$

1,979



$

1,077



$

8,781



$

7,427


Add back: Stock-based compensation

90



47



251



264


Gross profit, professional services, non-GAAP

$

2,069



$

1,124



$

9,032



$

7,691


As a percentage of professional services revenue

32.1

%


26.6

%


42.6

%


47.3

%









Gross profit, as reported

$

26,492



$

19,380



$

76,199



$

58,648


Add back: Stock-based compensation

182



135



526



667


Gross profit, non-GAAP

$

26,674



$

19,515



$

76,725



$

59,315


As percentage of revenue, non-GAAP

73.5

%


69.9

%


72.8

%


71.8

%









Research and development, as reported

$

12,766



$

11,175



$

36,970



$

32,234


Less: Stock-based compensation

586



341



1,289



1,443


Research and development, non-GAAP

$

12,180



$

10,834



$

35,681



$

30,791


As percentage of revenue, non-GAAP

33.6

%


38.8

%


33.9

%


37.3

%









Sales and marketing, as reported

$

20,903



$

16,248



$

50,937



$

39,435


Less: Stock-based compensation

461



288



1,243



889


Sales and marketing, non-GAAP

$

20,442



$

15,960



$

49,694



$

38,546


As percentage of revenue, non-GAAP

56.4

%


57.2

%


47.2

%


46.7

%









General and administrative, as reported

$

7,153



$

4,572



$

20,178



$

13,986


Less: Stock-based compensation

1,853



649



4,818



2,540


General and administrative, non-GAAP

$

5,300



$

3,923



$

15,360



$

11,446


As percentage of revenue, non-GAAP

14.6

%


14.1

%


14.6

%


13.9

%









Loss from operations

$

(14,330)



$

(12,615)



$

(31,886)



$

(27,007)


Add back: Stock-based compensation

3,082



1,413



7,876



5,539


Operating loss, non-GAAP

$

(11,248)



$

(11,202)



$

(24,010)



$

(21,468)


As percentage of revenue, non-GAAP

(31.0)%



(40.1)%



(22.8)%



(26.0)%










Net loss

$

(14,630)



$

(13,382)



$

(33,106)



$

(28,497)


Add back: Stock-based compensation

3,082



1,413



7,876



5,539


Net loss, non-GAAP

$

(11,548)



$

(11,969)



$

(25,230)



$

(22,958)


As percentage of revenue, non-GAAP

(31.8)%



(42.9)%



(23.9)%



(27.8)%










Net loss per share, non-GAAP:








Basic and diluted, non-GAAP

$

(0.29)



$

(0.38)



$

(0.63)



$

(0.72)


Weighted average common shares outstanding - basic and diluted

39,980,308



31,889,795



39,735,393



31,836,479


 

 

TABLE II
WORKIVA INC.
RECONCILIATION OF NON-GAAP GUIDANCE
(in thousands, except share and per share data)


















Three months ending December 31, 2015


Year ending December 31, 2015









Loss from operations, GAAP range

$

(14,000)


-

$

(14,500)



$

(45,900)


-

$

(46,400)


Add back: Stock-based compensation

3,200



3,200



11,100



11,100


Loss from operations, non-GAAP range

$

(10,800)


-

$

(11,300)



$

(34,800)


-

$

(35,300)










Net loss per share, GAAP range

$

(0.32)


-

$

(0.33)



$

(1.15)


-

$

(1.16)


Add back: Stock-based compensation

0.08



0.08



0.28



0.28


Net loss per share, non-GAAP range

$

(0.24)


-

$

(0.25)



$

(0.87)


-

$

(0.88)










Weighted average common shares outstanding - basic and diluted

40,000,000



40,000,000



40,000,000



40,000,000


 

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SOURCE Workiva Inc.

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