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Workiva Announces Third Quarter 2017 Financial Results

November 7, 2017 4:15 PM

Q3 Revenue of $52.1 million, Up 16.5% from Q3 of 2016

Q3 Subscription and Support Revenue of $43.2 million, Up 19.3% from Q3 of 2016

AMES, Iowa--(BUSINESS WIRE)-- Workiva Inc. (NYSE: WK), a leading provider of solutions for enterprise productivity, today announced financial results for its third quarter ended September 30, 2017.

“We posted strong results in the third quarter, highlighted by 16.5% revenue growth over the same quarter last year,” said Matt Rizai, Chairman and Chief Executive Officer of Workiva. “We outperformed our guidance for quarterly revenue, operating loss and loss per share.”

“We continue to invest in the evolution of our Wdesk platform as part of a larger ecosystem that includes data integrations, partnerships and enterprise-wide opportunities where we see great long-term potential for broad-based adoption,” said Rizai. “Our investments are focused on improving user management, enhancing products and features and targeting sales and marketing to capitalize on our expanded total addressable market (TAM).”

“In the third quarter, we hosted our largest annual user conference to date,” said Rizai. “Our conference helps us maintain our high customer satisfaction rate and allows us to test new products and features while showcasing a wide range of Wdesk use cases to current customers and prospects.”

Third Quarter 2017 Financial Highlights

Operating Metrics

Financial Outlook

As of November 7, 2017, Workiva is providing guidance for the fourth quarter and full year 2017 as follows:

Fourth Quarter 2017 Guidance:

Full Year 2017 Guidance:

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 2017, in addition to discussing the Company’s outlook for the fourth quarter and full year 2017. To access this call, dial 866-393-4306 (domestic) or 734-385-2616 (international). The conference ID is 93468973. 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 14, 2017 at 855-859-2056 (domestic) or 404-537-3406 (international). The replay pass code is 93468973. 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 WorkivaWorkiva (NYSE: WK) delivers Wdesk, an intuitive cloud platform that modernizes how people work within thousands of organizations, including over 70 percent of the FORTUNE 500®. Wdesk is built upon a data management engine, offering controlled collaboration, data integration, granular permissions and a full audit trail. Wdesk helps mitigate risk, improves productivity and gives users confidence in their data-driven decisions. Workiva employs more than 1,200 people with offices in 16 cities. The company is headquartered in Ames, Iowa. For more information, visit workiva.com.

Read the Workiva blog: www.workiva.com/blogFollow Workiva on LinkedIn: www.linkedin.com/company/workivaLike Workiva on Facebook: www.facebook.com/workivaFollow Workiva on Twitter: www.twitter.com/workiva

Claim not confirmed by FORTUNE or Time Inc. FORTUNE 500® is a registered trademark of Time Inc. and is used under license. FORTUNE and Time Inc. are not affiliated with, and do not endorse products or services of, Workiva Inc.

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.

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

Three months endedSeptember 30,

Nine months endedSeptember 30,

2017 2016 2017 2016
Revenue
Subscription and support $ 43,214 $ 36,237 $ 123,734 $ 104,791
Professional services 8,854 8,473 29,629 27,481
Total revenue 52,068 44,710 153,363 132,272
Cost of revenue
Subscription and support (1) 8,472 6,694 23,867 20,651
Professional services (1) 7,180 6,040 20,289 17,766
Total cost of revenue 15,652 12,734 44,156 38,417
Gross profit 36,416 31,976 109,207 93,855
Operating expenses
Research and development (1) 17,527 14,342 49,302 42,905
Sales and marketing (1) 23,712 22,354 62,212 62,270
General and administrative (1) 8,959 8,015 27,323 24,850
Total operating expenses 50,198 44,711 138,837 130,025
Loss from operations (13,782 ) (12,735 ) (29,630 ) (36,170 )
Interest expense (464 ) (462 ) (1,394 ) (1,420 )
Other income, net 198 298 986 1,152
Loss before provision (benefit) for income taxes (14,048 ) (12,899 ) (30,038 ) (36,438 )
Provision (benefit) for income taxes 25 (8 ) 67 23
Net loss $ (14,073 ) $ (12,891 ) $ (30,105 ) $ (36,461 )
Net loss per common share:
Basic and diluted $ (0.34 ) $ (0.32 ) $ (0.73 ) $ (0.90 )
Weighted-average common shares outstanding - basic and diluted 41,815,139 40,762,960 41,453,736 40,603,430

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

Three months endedSeptember 30,

Nine months endedSeptember 30,

2017 2016 2017 2016
Cost of revenue
Subscription and support $ 204 $ 122 $ 522 $ 365
Professional services 129 100 329 315
Operating expenses
Research and development 601 594 1,566 1,787
Sales and marketing 788 567 2,141 1,471
General and administrative 2,942 2,287 8,642 6,624
WORKIVA INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, 2017 December 31, 2016
(unaudited)
Assets
Current assets
Cash and cash equivalents $ 62,718 $ 51,281
Marketable securities 15,033 11,435
Accounts receivable, net 24,283 22,535
Deferred commissions 2,208 1,864
Other receivables 1,109 1,545
Prepaid expenses 6,298 9,382
Total current assets 111,649 98,042
Property and equipment, net 41,300 42,590
Intangible assets, net 1,088 1,012
Other assets 1,553 1,499
Total assets $ 155,590 $ 143,143
Liabilities and Stockholders’ Deficit
Current liabilities
Accounts payable $ 1,861 $ 849
Accrued expenses and other current liabilities 20,771 20,695
Deferred revenue 99,149 76,016
Deferred government grant obligation 813 1,022
Current portion of capital lease and financing obligations 1,184 1,285
Current portion of long-term debt — 20
Total current liabilities 123,778 99,887
Deferred revenue 23,278 21,485
Deferred government grant obligation 289 1,000
Other long-term liabilities 4,008 4,100
Capital lease and financing obligations 18,709 19,743
Long-term debt — 53
Total liabilities 170,062 146,268
Stockholders’ deficit
Common stock 42 41
Additional paid-in-capital 236,386 217,454
Accumulated deficit (251,016 ) (220,911 )
Accumulated other comprehensive income 116 291
Total stockholders’ deficit (14,472 ) (3,125 )
Total liabilities and stockholders’ deficit $ 155,590 $ 143,143
WORKIVA INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Three months endedSeptember 30,

Nine months endedSeptember 30,

2017 2016 2017 2016
Cash flows from operating activities
Net loss $ (14,073 ) $ (12,891 ) $ (30,105 ) $ (36,461 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation and amortization 854 944 2,612 2,916
Stock-based compensation expense 4,664 3,670 13,200 10,562
(Recovery of) provision for doubtful accounts (691 ) (92 ) (259 ) 78
Realized gain on sale of available-for-sale securities, net — — — (6 )
Amortization of premiums and discounts on marketable securities, net 24 36 83 111
Recognition of deferred government grant obligation (207 ) (247 ) (943 ) (910 )
Deferred income tax — 5 — (7 )
Changes in assets and liabilities:
Accounts receivable (757 ) (4,009 ) (1,299 ) (6,734 )
Deferred commissions (179 ) (135 ) (330 ) (264 )
Other receivables 468 (365 ) 443 (447 )
Prepaid expenses 5,123 415 3,097 (1,098 )
Other assets (87 ) (455 ) (74 ) (841 )
Accounts payable 669 279 1,008 380
Deferred revenue 5,904 13,228 24,398 15,412
Accrued expenses and other liabilities 3,474 2,410 (83 ) (3,012 )
Net cash provided by (used in) operating activities 5,186 2,793 11,748 (20,321 )
Cash flows from investing activities
Purchase of property and equipment (987 ) (91 ) (1,134 ) (1,100 )
Purchase of marketable securities (5,017 ) — (11,367 ) (802 )
Maturities of marketable securities 2,830 — 7,681 —
Sale of marketable securities — — — 7,197
Purchase of intangible assets (55 ) (38 ) (144 ) (152 )
Net cash (used in) provided by investing activities (3,229 ) (129 ) (4,964 ) 5,143
Cash flows from financing activities
Proceeds from option exercises 1,154 840 6,669 1,360
Taxes paid related to net share settlements of stock-based compensation awards — — (936 ) (761 )
Repayment of other long-term debt (53 ) — (73 ) (18 )
Principal payments on capital lease and financing obligations (348 ) (538 ) (1,135 ) (1,446 )
Proceeds from government grants — — 22 183
Payments of issuance costs on line of credit (71 ) — (81 ) (33 )
Net cash provided by (used in) financing activities 682 302 4,466 (715 )
Effect of foreign exchange rates on cash 93 (9 ) 187 (15 )
Net increase (decrease) in cash and cash equivalents 2,732 2,957 11,437 (15,908 )
Cash and cash equivalents at beginning of period 59,986 39,885 51,281 58,750
Cash and cash equivalents at end of period $ 62,718 $ 42,842 $ 62,718 $ 42,842

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

Three months endedSeptember 30,

Nine months endedSeptember 30,

2017 2016 2017 2016
Gross profit, subscription and support $ 34,742 $ 29,543 $ 99,867 $ 84,140
Add back: Stock-based compensation 204 122 522 365
Gross profit, subscription and support, non-GAAP $ 34,946 $ 29,665 $ 100,389 $ 84,505
As a percentage of subscription and support revenue, non-GAAP 80.9 % 81.9 % 81.1 % 80.6 %
Gross profit, professional services $ 1,674 $ 2,433 $ 9,340 $ 9,715
Add back: Stock-based compensation 129 100 329 315
Gross profit, professional services, non-GAAP $ 1,803 $ 2,533 $ 9,669 $ 10,030
As a percentage of professional services revenue, non-GAAP 20.4 % 29.9 % 32.6 % 36.5 %
Gross profit, as reported $ 36,416 $ 31,976 $ 109,207 $ 93,855
Add back: Stock-based compensation 333 222 851 680
Gross profit, non-GAAP $ 36,749 $ 32,198 $ 110,058 $ 94,535
As percentage of revenue, non-GAAP 70.6 % 72.0 % 71.8 % 71.5 %
Research and development, as reported $ 17,527 $ 14,342 $ 49,302 $ 42,905
Less: Stock-based compensation 601 594 1,566 1,787
Research and development, non-GAAP $ 16,926 $ 13,748 $ 47,736 $ 41,118
As percentage of revenue, non-GAAP 32.5 % 30.7 % 31.1 % 31.1 %
Sales and marketing, as reported $ 23,712 $ 22,354 $ 62,212 $ 62,270
Less: Stock-based compensation 788 567 2,141 1,471
Sales and marketing, non-GAAP $ 22,924 $ 21,787 $ 60,071 $ 60,799
As percentage of revenue, non-GAAP 44.0 % 48.7 % 39.2 % 46.0 %
General and administrative, as reported $ 8,959 $ 8,015 $ 27,323 $ 24,850
Less: Stock-based compensation 2,942 2,287 8,642 6,624
General and administrative, non-GAAP $ 6,017 $ 5,728 $ 18,681 $ 18,226
As percentage of revenue, non-GAAP 11.6 % 12.8 % 12.2 % 13.8 %
Loss from operations $ (13,782 ) $ (12,735 ) $ (29,630 ) $ (36,170 )
Add back: Stock-based compensation 4,664 3,670 13,200 10,562
Loss from operations, non-GAAP $ (9,118 ) $ (9,065 ) $ (16,430 ) $ (25,608 )
As percentage of revenue, non-GAAP (17.5 )% (20.3 )% (10.7 )% (19.4 )%
Net loss $ (14,073 ) $ (12,891 ) $ (30,105 ) $ (36,461 )
Add back: Stock-based compensation 4,664 3,670 13,200 10,562
Net loss, non-GAAP $ (9,409 ) $ (9,221 ) $ (16,905 ) $ (25,899 )
As percentage of revenue, non-GAAP (18.1 )% (20.6 )% (11.0 )% (19.6 )%
Net loss per basic and diluted share: $ (0.34 ) $ (0.32 ) $ (0.73 ) $ (0.90 )
Add back: Stock-based compensation 0.11 0.09 0.32 0.26
Net loss per basic and diluted share, non-GAAP $ (0.23 ) $ (0.23 ) $ (0.41 ) $ (0.64 )
Weighted-average common shares outstanding - basic and diluted, non-GAAP 41,815,139 40,762,960 41,453,736 40,603,430

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

Three months endingDecember 31, 2017

Year ending December 31,2017

Loss from operations, GAAP range $ (15,600 ) - $ (16,000 ) $ (45,200 ) - $ (45,600 )
Add back: Stock-based compensation 6,800 6,800 20,000 20,000
Loss from operations, non-GAAP range $ (8,800 ) - $ (9,200 ) $ (25,200 ) - $ (25,600 )
Net loss per share, GAAP range $ (0.38 ) - $ (0.39 ) $ (1.11 ) - $ (1.12 )
Add back: Stock-based compensation 0.16 0.16 0.48 0.48
Net loss per share, non-GAAP range $ (0.22 ) - $ (0.23 ) $ (0.63 ) - $ (0.64 )
Weighted-average common shares outstanding - basic and diluted 42,000,000 42,000,000 41,600,000 41,600,000

Investor Contact:

Workiva Inc.

Adam Rogers, 515-663-4493

[email protected]

or

Media Contact:

Workiva Inc.

Kevin McCarthy, 515-663-4471

[email protected]

Source: Workiva Inc.

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