Workiva Announces First Quarter 2020 Financial Results

April 30, 2020

Q1 Subscription and Support Revenue of $68.4 Million, up 21.8% from Q1 2019

Q1 Total Revenue of $85.8 Million, up 22.6% from Q1 2019

AMES, Iowa--(BUSINESS WIRE)-- Workiva (NYSE:WK), provider of the world’s leading connected reporting and compliance platform, today announced financial results for its first quarter ended March 31, 2020.

"We are pleased with our first quarter 2020 financial results, which exceeded guidance for revenue and operating results," said Marty Vanderploeg, Chief Executive Officer of Workiva.

"Despite challenges from COVID-19, we believe we are in a stronger, more flexible financial position now than ever before, including nearly $500 million in unrestricted cash and short-term investments," said Vanderploeg.

"The depth and duration of the economic disruption from COVID-19 is unknown," said Stuart Miller, Chief Financial Officer of Workiva. "While we have a large pipeline of new deals, we have limited visibility on when the deals will close. We are providing guidance for the second quarter but suspending specific guidance for full year 2020. We are providing directional commentary for the remainder of the year."

"Working from anywhere in a safe and secure, online environment is becoming the new baseline," said Vanderploeg. "We believe that this shift to remote work will drive increased demand for our cloud platform for years to come."

"We are continuing to hire talent and focus investments on our growth vectors – Europe, Wdata, integrated risk, global statutory reporting and the U.S. government – as they provide enormous opportunities for us to grow and prosper," said Vanderploeg.

First Quarter 2020 Financial Highlights

  • Revenue: Total revenue for the first quarter of 2020 reached$85.8 million, an increase of 22.6% from $70.0 million in the first quarter of 2019. Subscription and support revenue contributed $68.4 million, up 21.8% versus the first quarter of 2019. Professional services revenue was $17.4 million, an increase of 26.0% compared to the same quarter in the prior year.
  • Gross Profit: GAAP gross profit for the first quarter of 2020 was $63.4 million compared with $50.4 million in the same quarter of 2019. GAAP gross margin was 73.9% versus 72.1% in the first quarter of 2019. Non-GAAP gross profit for the first quarter of 2020 was $64.3 million, an increase of 25.5% compared with the prior year's first quarter, and non-GAAP gross margin was 74.9% compared to 73.2% in the first quarter of 2019.
  • Results from Operations: GAAP loss from operations for the first quarter of 2020 was $9.2 million compared with a loss of $7.3 million in the prior year's first quarter. Non-GAAP income from operations was $0.8 million, compared with non-GAAP income from operations of $0.9 million in the first quarter of 2019.
  • GAAP Net Loss: GAAP net loss for the first quarter of 2020 was $10.6 million compared with a net loss of $7.5 million for the prior year's first quarter. GAAP net loss per basic and diluted share was $0.22 compared with a net loss per basic and diluted share of $0.17 in the first quarter of 2019.
  • Non-GAAP Net Income: Non-GAAP net income for the first quarter of 2020 was $1.6 million compared with a net income of $0.7 million in the prior year's first quarter. Non-GAAP net income per basic and diluted share was $0.03, compared with a net income per basic and diluted share of $0.02 and $0.01, respectively, in the first quarter of 2019.
  • Liquidity: As of March 31, 2020, Workiva had cash, cash equivalents and marketable securities totaling $496.0 million, compared with $488.0 million as of December 31, 2019. Workiva had $345.0 million aggregate principal amount of 1.125% convertible senior notes due 2026 and other financing obligations totaled $16.9 million outstanding as of March 31, 2020.

Key Metrics and Recent Business Highlights

  • Customers: Workiva had 3,507 customers as of March 31, 2020, a net increase of 141 customers from March 31, 2019.
  • Revenue Retention Rate: As of March 31, 2020, Workiva's revenue retention rate (excluding add-on revenue) was 94.5%, and the revenue retention rate including add-on revenue was 110.9%. Add-on revenue includes changes in both solutions and pricing for existing customers.
  • Large Contracts: As of March 31, 2020, Workiva had 670 customers with an annual contract value (ACV) of more than $100,000, up 36% from 493 customers at March 31, 2019. Workiva had 308 customers with an ACV of more than $150,000, up 49% from 207 customers in the first quarter of 2019.

Financial Outlook

As of April 30, 2020, Workiva is providing guidance as follows:

Second Quarter 2020 Guidance:

  • Total revenue is expected to be in the range of $80.3 million to $80.8 million.
  • GAAP loss from operations is expected to be in the range of $22.1 million to $22.6 million.
  • Non-GAAP loss from operations is expected to be in the range of $6.8 million to $7.3 million.
  • GAAP net loss per basic and diluted share is expected to be in the range of $0.50 to $0.51.
  • Non-GAAP net loss per basic and diluted share is expected to be in the range of $0.14 to $0.15.
  • Net loss per basic and diluted share is based on 48.2 million weighted-average shares outstanding.

Full Year 2020 Commentary

"Relative to the guidance that we provided in February, we now expect full year 2020 revenue to grow at a slower pace and operating margin to improve," said Miller.

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 first quarter, in addition to discussing the Company’s outlook for the second quarter 2020. To access this call, dial 833-287-0800 (U.S. domestic) or 647-689-4459 (international). The conference ID is 6672089. 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 May 7, 2020 at 800-585-8367 (U.S. domestic) or 416-621-4642 (international). The replay pass code is 6672089. 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, provider of the world's leading connected reporting and compliance platform, is used by thousands of enterprises across 180 countries, including nearly 75 percent of Fortune 500® companies, and by government agencies. Our customers have linked over five billion data elements to trust their data, reduce risk and save time. For more information about Workiva (NYSE:WK), please visit workiva.com.

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Non-GAAP Financial Measures

The non-GAAP adjustments referenced herein relate to the exclusion of stock-based compensation and non-cash interest expense. 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, and non-cash interest expense related to our convertible senior notes 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. Under GAAP, certain convertible debt instruments that may be settled in cash on conversion are required to be accounted for as separate liability and equity components in a manner that reflects our non-convertible debt borrowing rate. This results in the debt component being treated as though it was issued at a discount, with the debt discount being accreted as additional non-cash interest expense over the term of the notes using the effective interest method. As a result, we believe that excluding this non-cash interest expense attributable to the debt discount in calculating our non-GAAP measures is useful because this interest expense does not represent a cash outflow and is not indicative of our ongoing operational performance. 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.

 

WORKIVA INC.

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

 

Three months ended March 31,

 

2020

 

2019

 

(unaudited)

Revenue

 

 

 

Subscription and support

$

68,361

 

 

$

56,123

 

Professional services

17,440

 

 

13,840

 

Total revenue

85,801

 

 

69,963

 

Cost of revenue

 

 

 

Subscription and support (1)

12,153

 

 

9,809

 

Professional services (1)

10,243

 

 

9,727

 

Total cost of revenue

22,396

 

 

19,536

 

Gross profit

63,405

 

 

50,427

 

Operating expenses

 

 

 

Research and development (1)

22,994

 

 

22,011

 

Sales and marketing (1)

36,117

 

 

25,365

 

General and administrative (1)

13,448

 

 

10,383

 

Total operating expenses

72,559

 

 

57,759

 

Loss from operations

(9,154)

 

 

(7,332)

 

Interest income

1,706

 

 

492

 

Interest expense

(3,554)

 

 

(440)

 

Other income and (expense), net

718

 

 

(172)

 

Loss before provision for income taxes

(10,284)

 

 

(7,452)

 

Provision for income taxes

289

 

 

11

 

Net loss

$

(10,573)

 

 

$

(7,463)

 

Net loss per common share:

 

 

 

Basic and diluted

$

(0.22)

 

 

$

(0.17)

 

Weighted-average common shares outstanding - basic and diluted

47,545,703

 

 

45,229,279

 

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

 

Three months ended March 31,

 

2020

 

2019

 

(unaudited)

Cost of revenue

 

 

 

Subscription and support

$

431

 

 

$

357

 

Professional services

425

 

 

409

 

Operating expenses

 

 

 

Research and development

1,583

 

 

1,900

 

Sales and marketing

2,736

 

 

1,964

 

General and administrative

4,761

 

 

3,563

 

WORKIVA INC.

CONSOLIDATED BALANCE SHEETS
(in thousands)

 

March 31, 2020

 

December 31, 2019

 

(unaudited)

 

 

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

393,434

 

 

$

381,742

 

Marketable securities

102,589

 

 

106,214

 

Accounts receivable, net

45,522

 

 

60,228

 

Deferred commissions

12,554

 

 

14,108

 

Other receivables

2,683

 

 

2,432

 

Prepaid expenses and other

8,452

 

 

6,508

 

Total current assets

565,234

 

 

571,232

 

Property and equipment, net

39,231

 

 

39,745

 

Operating lease right-of-use assets

18,358

 

 

15,352

 

Deferred commissions, non-current

15,751

 

 

14,977

 

Intangible assets, net

1,639

 

 

1,651

 

Other assets

3,503

 

 

3,439

 

Total assets

$

643,716

 

 

$

646,396

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities

 

 

 

Accounts payable

$

5,501

 

 

$

7,057

 

Accrued expenses and other current liabilities

42,762

 

 

49,930

 

Deferred revenue

172,369

 

 

173,617

 

Current portion of financing obligations

1,361

 

 

1,328

 

Total current liabilities

221,993

 

 

231,932

 

Convertible senior notes, net

282,798

 

 

280,601

 

Deferred revenue, non-current

31,626

 

 

32,569

 

Other long-term liabilities

1,569

 

 

1,498

 

Operating lease liabilities, non-current

20,422

 

 

18,564

 

Financing obligations, non-current

15,536

 

 

15,889

 

Total liabilities

573,944

 

 

581,053

 

Stockholders’ equity

 

 

 

Common stock

47

 

 

47

 

Additional paid-in-capital

435,181

 

 

420,170

 

Accumulated deficit

(365,734)

 

 

(355,161)

 

Accumulated other comprehensive income

278

 

 

287

 

Total stockholders’ equity

69,772

 

 

65,343

 

Total liabilities and stockholders’ equity

$

643,716

 

 

$

646,396

 

WORKIVA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

 

Three months ended March 31,

 

2020

 

2019

 

(unaudited)

Cash flows from operating activities

 

 

 

Net loss

$

(10,573)

 

 

$

(7,463)

 

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Depreciation and amortization

1,142

 

 

903

 

Stock-based compensation expense

9,936

 

 

8,193

 

Provision for (recovery of) doubtful accounts

40

 

 

(187)

 

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

101

 

 

(81)

 

Amortization of debt discount and issuance costs

2,197

 

 

 

Deferred income tax

 

 

(18)

 

Changes in assets and liabilities:

 

 

 

Accounts receivable

14,265

 

 

14,818

 

Deferred commissions

603

 

 

(2,029)

 

Operating lease right-of-use asset

1,098

 

 

668

 

Other receivables

(253)

 

 

(214)

 

Prepaid expenses

(1,955)

 

 

(3,236)

 

Other assets

(74)

 

 

(1,464)

 

Accounts payable

(1,382)

 

 

(1,562)

 

Deferred revenue

(1,228)

 

 

1,987

 

Operating lease liability

(1,145)

 

 

(655)

 

Accrued expenses and other liabilities

(8,023)

 

 

(4,541)

 

Net cash provided by operating activities

4,749

 

 

5,119

 

Cash flows from investing activities

 

 

 

Purchase of property and equipment

(688)

 

 

(1,743)

 

Purchase of marketable securities

(20,832)

 

 

(22,155)

 

Maturities of marketable securities

12,975

 

 

7,390

 

Sale of marketable securities

11,423

 

 

 

Purchase of intangible assets

(77)

 

 

(84)

 

Net cash provided by (used in) investing activities

2,801

 

 

(16,592)

 

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from option exercises

2,794

 

 

11,055

 

Taxes paid related to net share settlements of stock-based compensation awards

(1,379)

 

 

(390)

 

Proceeds from shares issued in connection with employee stock purchase plan

3,660

 

 

2,149

 

Principal payments on capital lease and financing obligations

(320)

 

 

(294)

 

Net cash provided by financing activities

4,755

 

 

12,520

 

Effect of foreign exchange rates on cash

(613)

 

 

105

 

Net increase in cash and cash equivalents

11,692

 

 

1,152

 

Cash and cash equivalents at beginning of period

381,742

 

 

77,584

 

Cash and cash equivalents at end of period

$

393,434

 

 

$

78,736

 

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

 

Three months ended March 31,

 

2020

 

2019

Gross profit, subscription and support

$

56,208

 

 

$

46,314

 

Add back: Stock-based compensation

431

 

 

357

 

Gross profit, subscription and support, non-GAAP

$

56,639

 

 

$

46,671

 

As a percentage of subscription and support revenue, non-GAAP

82.9

%

 

83.2

%

 

 

 

 

Gross profit, professional services

$

7,197

 

 

$

4,113

 

Add back: Stock-based compensation

425

 

 

409

 

Gross profit, professional services, non-GAAP

$

7,622

 

 

$

4,522

 

As a percentage of professional services revenue, non-GAAP

43.7

%

 

32.7

%

 

 

 

 

Gross profit

$

63,405

 

 

$

50,427

 

Add back: Stock-based compensation

856

 

 

766

 

Gross profit, non-GAAP

$

64,261

 

 

$

51,193

 

As percentage of revenue, non-GAAP

74.9

%

 

73.2

%

 

 

 

 

Cost of revenue, subscription and support

$

12,153

 

 

$

9,809

 

Less: Stock-based compensation

431

 

 

357

 

Cost of revenue, subscription and support, non-GAAP

$

11,722

 

 

$

9,452

 

As percentage of revenue, non-GAAP

13.7

%

 

13.5

%

 

 

 

 

Cost of revenue, professional services

$

10,243

 

 

$

9,727

 

Less: Stock-based compensation

425

 

 

409

 

Cost of revenue, professional services, non-GAAP

$

9,818

 

 

$

9,318

 

As percentage of revenue, non-GAAP

11.4

%

 

13.3

%

 

 

 

 

Research and development

$

22,994

 

 

$

22,011

 

Less: Stock-based compensation

1,583

 

 

1,900

 

Research and development, non-GAAP

$

21,411

 

 

$

20,111

 

As percentage of revenue, non-GAAP

25.0

%

 

28.7

%

 

 

 

 

Sales and marketing

$

36,117

 

 

$

25,365

 

Less: Stock-based compensation

2,736

 

 

1,964

 

Sales and marketing, non-GAAP

$

33,381

 

 

$

23,401

 

As percentage of revenue, non-GAAP

38.9

%

 

33.4

%

 

 

 

 

General and administrative

$

13,448

 

 

$

10,383

 

Less: Stock-based compensation

4,761

 

 

3,563

 

General and administrative, non-GAAP

$

8,687

 

 

$

6,820

 

As percentage of revenue, non-GAAP

10.1

%

 

9.7

%

 

 

 

 

Loss from operations

$

(9,154)

 

 

$

(7,332)

 

Add back: Stock-based compensation

9,936

 

 

8,193

 

Income from operations, non-GAAP

$

782

 

 

$

861

 

As percentage of revenue, non-GAAP

0.9

%

 

1.2

%

 

 

 

 

Net loss

$

(10,573)

 

 

$

(7,463)

 

Add back: Stock-based compensation

9,936

 

 

8,193

 

Add back: Non-cash interest expense related to convertible senior notes

2,197

 

 

 

Net income, non-GAAP

$

1,560

 

 

$

730

 

As percentage of revenue, non-GAAP

1.8

%

 

1.0

%

 

 

 

 

Net loss per basic and diluted share:

$

(0.22)

 

 

$

(0.17)

 

Add back: Stock-based compensation

0.20

 

 

0.19

 

Add back: Non-cash interest expense related to convertible senior notes

0.05

 

 

 

Net income per basic share, non-GAAP

$

0.03

 

 

$

0.02

 

Net income per diluted share, non-GAAP

$

0.03

 

 

$

0.01

 

 

 

 

 

Weighted-average common shares outstanding - basic, non-GAAP

47,545,703

 

 

45,229,279

 

Weighted-average common shares outstanding - diluted, non-GAAP

51,749,547

 

 

50,550,143

 

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

 

Three months ending June 30, 2020

 

 

 

 

Loss from operations, GAAP range

$

(22,050)

 

-

$

(22,550)

 

Add back: Stock-based compensation

15,300

 

 

15,300

 

Loss from operations, non-GAAP range

$

(6,750)

 

-

$

(7,250)

 

 

 

 

 

Net loss per share, GAAP range

$

(0.50)

 

-

$

(0.51)

 

Add back: Stock-based compensation

0.32

 

 

0.32

 

Add back: Non-cash interest expense related to convertible senior notes

0.04

 

 

0.04

 

Net loss per share, non-GAAP range

$

(0.14)

 

-

$

(0.15)

 

 

 

 

 

Weighted-average common shares outstanding - basic and diluted

48,200,000

 

 

48,200,000

 

 

Investors:
Adam Terese
Workiva Inc.
investor@workiva.com
(515) 663-4493

Media:
Kevin McCarthy
Workiva Inc.
press@workiva.com
(515) 663-4471

Source: Workiva

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