WK Workiva Inc

Q2 Subscription and Support Revenue of $60.5 Million, up 23.8% from Q2 2018

Q2 Total Revenue of $73.5 Million, up 24.3% from Q2 2018

Workiva (NYSE:WK), the leading cloud provider of connected reporting and compliance solutions, today announced financial results for its second quarter ended June 30, 2019.

"Once again, we posted strong quarterly results,” said Marty Vanderploeg, Chief Executive Officer of Workiva. "We exceeded quarterly guidance for revenue and operating results, and we are raising our full year 2019 guidance."

"This past year we improved operational efficiencies, focused our growth strategy and invested in key growth opportunities. Based on our success to date, we plan to continue to accelerate investments in expanding across Europe, increasing adoption for global statutory reporting and integrated risk and building more data integrations," said Vanderploeg.

"As we continue to expand into new markets and countries, we are even more confident of the broader global demand for our platform. Workiva is the only cloud platform for connected reporting and compliance with the scale and sophistication that corporations and governments need and trust," added Vanderploeg.

Second Quarter 2019 Financial Highlights

• Revenue: Total revenue for the second quarter of 2019 reached $73.5 million, an increase of 24.3% from $59.1 million in the second quarter of 2018. Subscription and support revenue contributed $60.5 million, up 23.8% versus the second quarter of 2018. Professional services revenue was $13.0 million, an increase of 26.4% compared to the same quarter in the prior year.
• Gross Profit: GAAP gross profit for the second quarter of 2019 was $52.8 million compared with $42.8 million in the same quarter of 2018. GAAP gross margin was 71.8% versus 72.4% in the second quarter of 2018. Non-GAAP gross profit for the second quarter of 2019 was $53.6 million, an increase of 24.1% compared with the prior year's second quarter, and non-GAAP gross margin was 73.0% compared to 73.1% in the second quarter of 2018.
• Loss from Operations: GAAP loss from operations for the second quarter of 2019 was $8.4 million compared with a loss of $21.8 million in the prior year's second quarter. Non-GAAP income from operations was $86 thousand, compared with non-GAAP loss from operations of $5.4 million in the second quarter of 2018.
• Net Loss: GAAP net loss for the second quarter of 2019 was $8.3 million compared with a net loss of $21.8 million for the prior year's second quarter. GAAP net loss per basic and diluted share was $0.18 compared with a net loss per basic and diluted share of $0.50 in the second quarter of 2018.
• Non-GAAP net income for the second quarter of 2019 was $0.2 million compared with a net loss of $5.4 million in the prior year's second quarter. Non-GAAP net income per basic and diluted share were both $0.00, compared with a net loss per basic and diluted share of $0.12 in the second quarter of 2018.
• Balance Sheet: As of June 30, 2019, Workiva had cash, cash equivalents and marketable securities totaling $137.6 million, compared with $98.3 million as of December 31, 2018. Financing obligations totaled $17.8 million as of June 30, 2019.

Key Metrics

• Customers: Workiva had 3,421 customers as of June 30, 2019, a net increase of 199 customers from June 30, 2018.
• Revenue Retention Rate: As of June 30, 2019, Workiva's revenue retention rate (excluding add-on revenue) was 95.4%, and the revenue retention rate including add-on revenue was 114.5%. Add-on revenue includes changes for existing customers in new solutions, new seats and pricing.
• Large Contracts: As of June 30, 2019, Workiva had 558 customers with an annual contract value (ACV) of more than $100,000, up 52.5% from 366 customers at June 30, 2018. Workiva had 238 customers with an ACV of more than $150,000, up 47.8% from 161 customers in the second quarter of 2018.

Financial Outlook As of August 6, 2019, Workiva is providing guidance for its third quarter 2019 and full year 2019 as follows:

Third Quarter 2019 Guidance:

• Total revenue is expected to be in the range of $72.0 million to $72.5 million.
• GAAP loss from operations is expected to be in the range of $16.4 million to $16.9 million.
• Non-GAAP loss from operations is expected to be in the range of $7.5 million to $8.0 million.
• GAAP net loss per basic and diluted share is expected to be in the range of $0.35 to $0.36.
• Non-GAAP net loss per basic and diluted share is expected to be in the range of $0.16 to $0.17.
• Net loss per basic and diluted share is based on 46.9 million weighted-average shares outstanding.

Full Year 2019 Guidance:

• Total revenue is expected to be in the range of $290.0 million to $291.0 million.
• GAAP loss from operations is expected to be in the range of $47.0 million to $49.0 million.
• Non-GAAP loss from operations is expected to be in the range of $12.0 million to $14.0 million.
• Net cash provided by operating activities is expected to be approximately $32 million.
• GAAP net loss per basic and diluted share is expected to be in the range of $1.03 to $1.07.
• Non-GAAP net loss per basic and diluted share is expected to be in the range of $0.27 to $0.31.
• Net loss per basic and diluted share is based on 46.4 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 second quarter 2019, in addition to discussing the Company’s outlook for the third quarter and full year 2019. To access this call, dial 833-287-0800 (domestic) or 647-689-4459 (international). The conference ID is 4857095. 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 August 13, 2019 at 800-585-8367 (domestic) or 416-621-4642 (international). The replay pass code is 4857095. 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, the leading cloud provider of connected reporting and compliance solutions, is used by thousands of enterprises across 180 countries, including more than 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.

Read the Workiva blog: www.workiva.com/blog Follow Workiva on LinkedIn: www.linkedin.com/company/workiva Like Workiva on Facebook: www.facebook.com/workiva Follow Workiva on Twitter: www.twitter.com/workiva

FORTUNE® and FORTUNE 500® are registered trademarks of Fortune Media IP Limited and are used under license. FORTUNE and Fortune Media IP Limited are not affiliated with, and do not endorse products or services of, Workiva Inc. Note: Claim not confirmed by FORTUNE® or Fortune Media IP Limited.

Non-GAAP Financial Measures The non-GAAP adjustments referenced herein relate to the exclusion of stock-based compensation and CEO separation 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 income (loss) from operations, non-GAAP net income (loss) and non-GAAP net income (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 income (loss) from operations is calculated by excluding stock-based compensation expense and CEO separation expense from loss from operations. Non-GAAP net income (loss) is calculated by excluding stock-based compensation expense, net of tax, and CEO separation expense from net loss. Non-GAAP net income (loss) per share is calculated by dividing non-GAAP net income (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. Because of the non-recurring nature of CEO separation expense, Workiva believes this expense is not representative of ongoing operating costs. Workiva’s management excludes CEO separation expense when evaluating its ongoing performance and/or predicting its operating trends and believes that its investors should have access to the same set of tools that we use in analyzing results. 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 June 30,

 

Six months ended June 30,

 

2019

 

2018

 

2019

 

2018

 

(unaudited)

Revenue

 

 

 

 

 

 

 

Subscription and support

$

60,472

 

$

48,837

 

$

116,595

 

$

95,307

Professional services

13,012

 

10,293

 

26,852

 

23,729

Total revenue

73,484

 

59,130

 

143,447

 

119,036

Cost of revenue

 

 

 

 

 

 

 

Subscription and support (1)

10,202

 

8,637

 

20,011

 

17,439

Professional services (1)

10,475

 

7,659

 

20,202

 

15,368

Total cost of revenue

20,677

 

16,296

 

40,213

 

32,807

Gross profit

52,807

 

42,834

 

103,234

 

86,229

Operating expenses

 

 

 

 

 

 

 

Research and development (1)

21,795

 

20,718

 

43,806

 

40,845

Sales and marketing (1)

28,213

 

22,252

 

53,578

 

43,258

General and administrative (1)

11,226

 

21,654

 

21,609

 

33,422

Total operating expenses

61,234

 

64,624

 

118,993

 

117,525

Loss from operations

(8,427)

 

(21,790)

 

(15,759)

 

(31,296)

Interest expense

(433)

 

(449)

 

(873)

 

(899)

Other income, net

530

 

492

 

850

 

835

Loss before (benefit) provision for income taxes

(8,330)

 

(21,747)

 

(15,782)

 

(31,360)

(Benefit) provision for income taxes

(8)

 

21

 

3

 

26

Net loss

$

(8,322)

 

$

(21,768)

 

$

(15,785)

 

$

(31,386)

Net loss per common share:

 

 

 

 

 

 

 

Basic and diluted

$

(0.18)

 

$

(0.50)

 

$

(0.35)

 

$

(0.73)

Weighted-average common shares outstanding - basic and diluted

46,166,660

 

43,234,655

 

45,700,559

 

43,048,110

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

 

Three months ended June 30,

 

Six months ended June 30,

 

2019

 

2018

 

2019

 

2018

 

(unaudited)

Cost of revenue

 

 

 

 

 

 

 

Subscription and support

$

399

 

$

228

 

$

756

 

$

399

Professional services

431

 

146

 

840

 

296

Operating expenses

 

 

 

 

 

 

 

Research and development

1,851

 

1,495

 

3,751

 

2,516

Sales and marketing

2,032

 

1,440

 

3,996

 

2,553

General and administrative

3,800

 

7,156

 

7,363

 

10,606

WORKIVA INC. CONSOLIDATED BALANCE SHEETS (in thousands)

 

June 30, 2019

 

December 31, 2018

 

(unaudited)

 

 

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

94,713

 

$

77,584

Marketable securities

42,855

 

20,764

Accounts receivable, net

47,206

 

65,107

Deferred commissions

11,380

 

8,178

Other receivables

1,236

 

1,181

Prepaid expenses and other

7,963

 

4,417

Total current assets

205,353

 

177,231

Property and equipment, net

41,046

 

41,468

Operating lease right-of-use assets

16,510

 

—

Deferred commissions, non-current

13,259

 

10,569

Intangible assets, net

1,832

 

1,266

Other assets

1,982

 

577

Total assets

$

279,982

 

$

231,111

Liabilities and Stockholders’ Equity (Deficit)

 

 

 

Current liabilities

 

 

 

Accounts payable

$

4,768

 

$

5,461

Accrued expenses and other current liabilities

42,147

 

36,353

Deferred revenue

156,234

 

148,545

Current portion of financing obligations

1,285

 

1,222

Total current liabilities

204,434

 

191,581

Deferred revenue, non-current

28,049

 

25,171

Other long-term liabilities

1,284

 

6,891

Operating lease liabilities, non-current

20,038

 

—

Financing obligations, non-current

16,550

 

17,208

Total liabilities

270,355

 

240,851

Stockholders’ equity (deficit)

 

 

 

Common stock

46

 

44

Additional paid-in-capital

332,161

 

297,145

Accumulated deficit

(322,812)

 

(307,027)

Accumulated other comprehensive income

232

 

98

Total stockholders’ equity (deficit)

9,627

 

(9,740)

Total liabilities and stockholders’ equity (deficit)

$

279,982

 

$

231,111

WORKIVA INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

 

Three months ended June 30,

 

Six months ended June 30,

 

2019

 

2018

 

2019

 

2018

 

(unaudited)

Cash flows from operating activities

 

 

 

 

 

 

 

Net loss

$

(8,322)

 

$

(21,768)

 

$

(15,785)

 

$

(31,386)

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

 

 

 

 

 

 

 

Depreciation and amortization

971

 

876

 

1,874

 

1,748

Stock-based compensation expense

8,513

 

10,465

 

16,706

 

16,370

Provision for doubtful accounts

233

 

139

 

46

 

183

(Accretion) amortization of premiums and discounts on marketable securities, net

(23)

 

(15)

 

(104)

 

3

Deferred income tax

(28)

 

—

 

(46)

 

—

Changes in assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

3,133

 

(236)

 

17,951

 

6,306

Deferred commissions

(3,833)

 

(2,020)

 

(5,862)

 

(3,669)

Operating lease right-of-use asset

556

 

—

 

1,224

 

—

Other receivables

161

 

148

 

(53)

 

175

Prepaid expenses

(310)

 

(2,020)

 

(3,546)

 

(1,789)

Other assets

58

 

(110)

 

(1,406)

 

(168)

Accounts payable

1,206

 

(1,294)

 

(356)

 

1,383

Deferred revenue

8,295

 

8,747

 

10,282

 

6,402

Operating lease liability

(813)

 

—

 

(1,468)

 

—

Accrued expenses and other liabilities

8,966

 

4,542

 

4,425

 

3,679

Net cash provided by (used in) operating activities

18,763

 

(2,546)

 

23,882

 

(763)

Cash flows from investing activities

 

 

 

 

 

 

 

Purchase of property and equipment

(454)

 

(210)

 

(2,197)

 

(219)

Purchase of marketable securities

(18,562)

 

(11,283)

 

(40,717)

 

(11,283)

Maturities of marketable securities

11,500

 

3,900

 

18,890

 

4,400

Purchase of intangible assets

(577)

 

(64)

 

(661)

 

(128)

Net cash used in investing activities

(8,093)

 

(7,657)

 

(24,685)

 

(7,230)

Cash flows from financing activities

 

 

 

 

 

 

 

Proceeds from option exercises

5,498

 

3,318

 

16,553

 

6,393

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

—

 

(519)

 

(390)

 

(1,861)

Proceeds from shares issued in connection with employee stock purchase plan

—

 

—

 

2,149

 

1,370

Principal payments on capital lease and financing obligations

(301)

 

(294)

 

(595)

 

(592)

Proceeds from government grants

—

 

22

 

—

 

22

Net cash provided by financing activities

5,197

 

2,527

 

17,717

 

5,332

Effect of foreign exchange rates on cash

110

 

(85)

 

215

 

(177)

Net increase (decrease) in cash and cash equivalents

15,977

 

(7,761)

 

17,129

 

(2,838)

Cash and cash equivalents at beginning of period

78,736

 

65,256

 

77,584

 

60,333

Cash and cash equivalents at end of period

$

94,713

 

$

57,495

 

$

94,713

 

$

57,495

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

 

Three months ended June 30,

 

Six months ended June 30,

 

2019

 

2018

 

2019

 

2018

Gross profit, subscription and support

$

50,270

 

$

40,200

 

$

96,584

 

$

77,868

Add back: Stock-based compensation

399

 

228

 

756

 

399

Gross profit, subscription and support, non-GAAP

$

50,669

 

$

40,428

 

$

97,340

 

$

78,267

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

83.8%

 

82.8%

 

83.5%

 

82.1%

 

 

 

 

 

 

 

 

Gross profit, professional services

$

2,537

 

$

2,634

 

$

6,650

 

$

8,361

Add back: Stock-based compensation

431

 

146

 

840

 

296

Gross profit, professional services, non-GAAP

$

2,968

 

$

2,780

 

$

7,490

 

$

8,657

As a percentage of professional services revenue, non-GAAP

22.8%

 

27.0%

 

27.9%

 

36.5%

 

 

 

 

 

 

 

 

Gross profit

$

52,807

 

$

42,834

 

$

103,234

 

$

86,229

Add back: Stock-based compensation

830

 

374

 

1,596

 

695

Gross profit, non-GAAP

$

53,637

 

$

43,208

 

$

104,830

 

$

86,924

As percentage of revenue, non-GAAP

73.0%

 

73.1%

 

73.1%

 

73.0%

 

 

 

 

 

 

 

 

Research and development

$

21,795

 

$

20,718

 

$

43,806

 

$

40,845

Less: Stock-based compensation

1,851

 

1,495

 

3,751

 

2,516

Research and development, non-GAAP

$

19,944

 

$

19,223

 

$

40,055

 

$

38,329

As percentage of revenue, non-GAAP

27.1%

 

32.5%

 

27.9%

 

32.2%

 

 

 

 

 

 

 

 

Sales and marketing

$

28,213

 

$

22,252

 

$

53,578

 

$

43,258

Less: Stock-based compensation

2,032

 

1,440

 

3,996

 

2,553

Sales and marketing, non-GAAP

$

26,181

 

$

20,812

 

$

49,582

 

$

40,705

As percentage of revenue, non-GAAP

35.6%

 

35.2%

 

34.6%

 

34.2%

 

 

 

 

 

 

 

 

General and administrative

$

11,226

 

$

21,654

 

$

21,609

 

$

33,422

Less: Stock-based compensation

3,800

 

3,535

 

7,363

 

6,985

Less: CEO separation expense(1)

—

 

9,527

 

—

 

9,527

General and administrative, non-GAAP

$

7,426

 

$

8,592

 

$

14,246

 

$

16,910

As percentage of revenue, non-GAAP

10.1%

 

14.5%

 

9.9%

 

14.2%

 

 

 

 

 

 

 

 

Loss from operations

$

(8,427)

 

$

(21,790)

 

$

(15,759)

 

$

(31,296)

Add back: Stock-based compensation

8,513

 

6,844

 

16,706

 

12,749

Add back: CEO separation expense(1)

—

 

9,527

 

—

 

9,527

Income (loss) from operations, non-GAAP

$

86

 

$

(5,419)

 

$

947

 

$

(9,020)

As percentage of revenue, non-GAAP

0.1%

 

(9.2)%

 

0.7%

 

(7.6)%

 

 

 

 

 

 

 

 

Net loss

$

(8,322)

 

$

(21,768)

 

$

(15,785)

 

$

(31,386)

Add back: Stock-based compensation

8,513

 

6,844

 

16,706

 

12,749

Add back: CEO separation expense(1)

—

 

9,527

 

—

 

9,527

Net income (loss), non-GAAP

$

191

 

$

(5,397)

 

$

921

 

$

(9,110)

As percentage of revenue, non-GAAP

0.3%

 

(9.1)%

 

0.6%

 

(7.7)%

 

 

 

 

 

 

 

 

Net loss per basic and diluted share:

$

(0.18)

 

$

(0.50)

 

$

(0.35)

 

$

(0.73)

Add back: Stock-based compensation

0.18

 

0.16

 

0.37

 

0.30

Add back: CEO separation expense(1)

—

 

0.22

 

—

 

0.22

Net income (loss) per basic share, non-GAAP

$

0.00

 

$

(0.12)

 

$

0.02

 

$

(0.21)

Net income (loss) per diluted share, non-GAAP

$

0.00

 

$

(0.12)

 

$

0.02

 

$

(0.21)

 

 

 

 

 

 

 

 

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

46,166,660

 

43,234,655

 

45,700,559

 

43,048,110

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

51,540,253

 

43,234,655

 

51,061,575

 

43,048,110

(1) CEO separation expense in the three and six months ended June 30, 2018 includes stock-based compensation of $3.6 million related to the acceleration of eligible stock awards and separation payment expense of $5.9 million pursuant to the former CEO’s employment agreement. Included as separation payment expense are cash payments made in excess of the related bonus accrual recorded through the date of separation.

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

 

Three months ending September 30, 2019

 

Year ending December 31, 2019

 

 

 

 

 

 

 

 

Loss from operations, GAAP range

$

(16,400)

-

$

(16,900)

 

$

(47,000)

-

$

(49,000)

Add back: Stock-based compensation

8,900

 

8,900

 

35,000

 

35,000

Loss from operations, non-GAAP range

$

(7,500)

-

$

(8,000)

 

$

(12,000)

-

$

(14,000)

 

 

 

 

 

 

 

 

Net loss per share, GAAP range

$

(0.35)

-

$

(0.36)

 

$

(1.03)

-

$

(1.07)

Add back: Stock-based compensation

0.19

 

0.19

 

0.76

 

0.76

Net loss per share, non-GAAP range

$

(0.16)

-

$

(0.17)

 

$

(0.27)

-

$

(0.31)

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding - basic and diluted

46,900,000

 

46,900,000

 

46,400,000

 

46,400,000

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20190806005845/en/

Investor Contact: Adam Rogers Workiva Inc. investor@workiva.com (515) 663-4493 Media Contact: Kevin McCarthy Workiva Inc. press@workiva.com (515) 663-4471