Workiva Announces First Quarter 2016 Financial Results

Q1 Revenue of $44.6 million, Up 27% from Q1 of 2015

Ames, IA - May 4, 2016 - Workiva Inc. (NYSE: WK), creator of the Wdesk cloud-based productivity platform for enterprises, today announced financial results for its first quarter ended March 31, 2016 and increased its full-year 2016 guidance.
“We had a strong start to 2016, highlighted by 27% 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 sign new Wdesk customers as well as add seats at existing customers in our non-SEC markets, including Sarbanes-Oxley (SOX), management reporting, risk processes and internal auditing,” said Rizai. “Growth in these expanded markets supports our expectation that non-SEC use cases will contribute more than 50% of our subscription bookings for the full year 2016.”
“We continue to anticipate annual cash usage from operations to improve for the full year 2016, as compared to full year 2015,” said Rizai. “We also expect annual cash usage from operations to improve further in 2017.”
First Quarter 2016 Financial Highlights
Revenue: Total revenue for the quarter ended March 31, 2016 was $44.6 million, an increase of 26.7% from $35.2 million in the first quarter of 2015. Subscription and support revenue was $33.6 million, an increase of 27.9% versus results in the first quarter of 2015. Professional services revenue was $11.0 million, an increase of 23.4% compared to the same quarter in the prior year.
Gross Profit: GAAP gross profit for the quarter ended March 31, 2016 was $31.4 million compared with $25.5 million in the same quarter of the prior year. GAAP gross margin was 70.6% in the first quarter of 2016 versus 72.5% in the first quarter of 2015. Non-GAAP gross profit for the quarter ended March 31, 2016 was $31.7 million, an increase of 23.5% compared with the prior year's first quarter, and non-GAAP gross margin was 71.1% compared to 73.0% in the first quarter of 2015.
Loss from Operations: GAAP loss from operations for the quarter ended March 31, 2016 was $12.1 million compared with a loss of $7.0 million in the prior year's first quarter. Non-GAAP loss from operations for the quarter ended March 31, 2016 was $8.7 million, compared with non-GAAP loss from operations of $4.8 million in the first quarter of 2015.
Net Loss: GAAP net loss for the quarter ended March 31, 2016 was $12.0 million compared with a net loss of $7.4 million for the prior year's first quarter. GAAP net loss per basic and diluted share for the quarter ended March 31, 2016 was $0.30, based on 40.5 million weighted-average shares outstanding, compared with a net loss per basic and diluted share of $0.19, based on 39.6 million weighted-average shares outstanding in the first quarter of 2015.
Non-GAAP net loss for the quarter ended March 31, 2016 was $8.7 million compared with a net loss of $5.3 million in the prior year's first quarter. Non-GAAP net loss per basic and diluted share for the quarter ended March 31, 2016 was $0.21, based on 40.5 million weighted-average shares outstanding, compared with a net loss per basic and diluted share of $0.13, based on 39.6 million weighted-average shares outstanding in the first quarter of 2015.




Operating Metrics
Customers: Workiva had 2,557 customers as of March 31, 2016, a net increase of 267 customers from March 31, 2015.
Revenue Retention Rate: As of March 31, 2016, Workiva's revenue retention rate (excluding add-on revenue) was 96.1%, and the revenue retention rate including add-on revenue was 112.1%. Add-on revenue includes the change in both seats purchased and seat pricing for existing customers.

Financial Outlook
As of May 4, 2016, Workiva is providing guidance for its second quarter 2016 and raising guidance for the full year 2016 as follows:

Second Quarter 2016 Guidance:
Total revenue is expected to be in the range of $41.7 million to $42.2 million.
Non-GAAP loss from operations is expected to be in the range of $13.5 million to $14.0 million.
GAAP loss from operations is expected to be in the range of $17.2 million to $17.7 million.
Non-GAAP net loss per basic and diluted share is expected to be in the range of $0.34 to $0.35.
GAAP net loss per basic and diluted share is expected to be in the range of $0.43 to $0.44.
Net loss per basic and diluted share is based on 40.8 million weighted-average shares outstanding.

Full Year 2016 Guidance:
Total revenue is expected to be in the range of $179.2 million to $181.2 million.
Non-GAAP loss from operations is expected to be in the range of $45.5 million to $47.5 million.
GAAP loss from operations is expected to be in the range of $60.2 million to $62.2 million.
Non-GAAP net loss per basic and diluted share is expected to be in the range of $1.13 to $1.18.
GAAP net loss per basic and diluted share is expected to be in the range of $1.49 to $1.54.
Net loss per basic and diluted share is based on 41.0 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 first quarter 2016, in addition to discussing the Company’s outlook for the second quarter and full year 2016. To access this call, dial 877-201-0168 (domestic) or 647-788-4901 (international). The conference ID is 81192754. 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 11, 2016 at 855-859-2056 (domestic) or 404-537-3406 (international). The replay pass code is 81192754. 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 (NYSE:WK) 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. The platform’s 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 1,200 people with offices in 16 cities. The company is headquartered in Ames, Iowa. For more information, visit workiva.com.

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 ended March 31,
 
2016
 
2015
Revenue
 
 
 
Subscription and support
$
33,585

 
$
26,269

Professional services
10,966

 
8,885

Total revenue
44,551

 
35,154

Cost of revenue
 
 
 
Subscription and support (1)
6,918

 
5,885

Professional services (1)
6,188

 
3,777

Total cost of revenue
13,106

 
9,662

Gross profit
31,445

 
25,492

Operating expenses
 
 
 
Research and development (1)
14,516

 
12,008

Sales and marketing (1)
20,088

 
13,705

General and administrative (1)
8,953

 
6,734

Total operating expenses
43,557

 
32,447

Loss from operations
(12,112
)
 
(6,955
)
Interest expense
(490
)
 
(510
)
Other income and (expense), net
576

 
(66
)
Loss before provision for income taxes
(12,026
)
 
(7,531
)
Provision (benefit) for income taxes
19

 
(84
)
Net loss
$
(12,045
)
 
$
(7,447
)
Net loss per common share:
 
 
 
Basic and diluted
$
(0.30
)
 
$
(0.19
)
Weighted average common shares outstanding - basic and diluted
40,451,668

 
39,593,700


(1) Includes stock-based compensation expense as follows:
 
Three months ended March 31,
 
2016
 
2015
Cost of revenue
 
 
 
Subscription and support
$
118

 
$
96

Professional services
122

 
72

Operating expenses
 
 
 
Research and development
584

 
334

Sales and marketing
455

 
350

General and administrative
2,111

 
1,322





WORKIVA INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
March 31, 2016
 
December 31, 2015
 
(unaudited)
 
 
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
43,226

 
$
58,750

Marketable securities
12,665

 
17,420

Accounts receivable, net
16,470

 
15,647

Deferred commissions
1,383

 
1,368

Other receivables
1,042

 
818

Prepaid expenses and other current assets
4,063

 
3,875

Total current assets
78,849

 
97,878

Property and equipment, net
43,747

 
44,410

Intangible assets, net
936

 
896

Other assets
774

 
711

Total assets
$
124,306

 
$
143,895

Liabilities and Stockholders’ Equity
Current liabilities
 
 
 
Accounts payable
$
4,156

 
$
5,138

Accrued expenses and other current liabilities
14,578

 
20,394

Deferred revenue
53,101

 
55,741

Deferred government grant obligation
1,023

 
985

Current portion of capital lease and financing obligations
1,732

 
1,808

Current portion of long-term debt
18

 
18

Total current liabilities
74,608

 
84,084

Deferred revenue
7,138

 
7,597

Deferred government grant obligation
1,708

 
1,996

Other long-term liabilities
3,491

 
3,343

Capital lease and financing obligations
20,727

 
21,083

Long-term debt
73

 
73

Total liabilities
107,745

 
118,176

Stockholders’ equity
 
 
 
Common stock
41

 
41

Additional paid-in-capital
205,284

 
202,371

Accumulated deficit
(188,979
)
 
(176,934
)
Accumulated other comprehensive income
215

 
241

Total stockholders’ equity
16,561

 
25,719

Total liabilities and stockholders’ equity
$
124,306

 
$
143,895





WORKIVA INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

 
Three months ended March 31,
 
2016
 
2015
Cash flows from operating activities
 
 
 
Net loss
$
(12,045
)
 
$
(7,447
)
Adjustments to reconcile net loss to net cash used in operating activities
 
 
 
Depreciation and amortization
997

 
1,169

Stock-based compensation expense
3,390

 
2,174

Provision for doubtful accounts
122

 
74

Realized gain on sale of available-for-sale securities
(2
)
 

Amortization (accretion) of premiums and discounts on marketable securities, net
39

 

Recognition of deferred government grant obligation
(433
)
 
(66
)
Changes in assets and liabilities:
 
 
 
Accounts receivable
(881
)
 
(911
)
Deferred commissions
(12
)
 
145

Other receivables
(224
)
 
(188
)
Prepaid expenses and other
(186
)
 
144

Other assets
(63
)
 
56

Accounts payable
(696
)
 
157

Deferred revenue
(3,215
)
 
(672
)
Accrued expenses and other liabilities
(5,869
)
 
(3,892
)
Change in restricted cash

 
28

Net cash used in operating activities
(19,078
)
 
(9,229
)
Cash flows from investing activities
 
 
 
Purchase of property and equipment
(412
)
 
(871
)
Sale of marketable securities
4,793

 

Purchase of intangible assets
(55
)
 
(83
)
Net cash provided by (used in) investing activities
4,326

 
(954
)
Cash flows from financing activities
 
 
 
Payment of equity issuance costs

 
(1,073
)
Proceeds from option exercises
284

 
80

Taxes paid related to net share settlements of stock-based compensation awards
(761
)
 

Changes in restricted cash

 
300

Repayment of other long-term debt

 
(25
)
Principal payments on capital lease and financing obligations
(432
)
 
(678
)
Proceeds from government grants
183

 
313

Net cash used in financing activities
(726
)
 
(1,083
)
Effect of foreign exchange rates on cash
(46
)
 
28

Net decrease in cash and cash equivalents
(15,524
)
 
(11,238
)
Cash and cash equivalents at beginning of period
58,750

 
101,131

Cash and cash equivalents at end of period
$
43,226

 
$
89,893




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


Three months ended March 31,

2016

2015
Gross profit, subscription and support
$
26,667


$
20,384

Add back: Stock-based compensation
118


96

Gross profit, subscription and support, non-GAAP
$
26,785


$
20,480

As a percentage of subscription and support revenue, non-GAAP
79.8
 %

78.0
 %
 



Gross profit, professional services
$
4,778


$
5,108

Add back: Stock-based compensation
122


72

Gross profit, professional services, non-GAAP
$
4,900


$
5,180

As a percentage of professional services revenue, non-GAAP
44.7
 %

58.3
 %
 



Gross profit, as reported
$
31,445


$
25,492

Add back: Stock-based compensation
240


168

Gross profit, non-GAAP
$
31,685


$
25,660

As percentage of revenue, non-GAAP
71.1
 %

73.0
 %
 



Research and development, as reported
$
14,516


$
12,008

Less: Stock-based compensation
584


334

Research and development, non-GAAP
$
13,932


$
11,674

As percentage of revenue, non-GAAP
31.3
 %

33.2
 %
 
 
 
 
Sales and marketing, as reported
$
20,088


$
13,705

Less: Stock-based compensation
455


350

Sales and marketing, non-GAAP
$
19,633


$
13,355

As percentage of revenue, non-GAAP
44.1
 %

38.0
 %
 
 
 
 
General and administrative, as reported
$
8,953


$
6,734

Less: Stock-based compensation
2,111


1,322

General and administrative, non-GAAP
$
6,842


$
5,412

As percentage of revenue, non-GAAP
15.4
 %

15.4
 %
 
 
 
 
Loss from operations
$
(12,112
)

$
(6,955
)
Add back: Stock-based compensation
3,390


2,174

Loss from operations, non-GAAP
$
(8,722
)

$
(4,781
)
As percentage of revenue, non-GAAP
(19.6
)%

(13.6
)%
 
 
 
 
Net loss
$
(12,045
)

$
(7,447
)
Add back: Stock-based compensation
3,390


2,174

Net loss, non-GAAP
$
(8,655
)

$
(5,273
)
As percentage of revenue, non-GAAP
(19.4
)%

(15.0
)%
 
 
 
 
Net loss per basic and diluted share:
$
(0.30
)
 
$
(0.19
)
Add back: Stock-based compensation per basic and diluted share
$
0.09


$
0.06

Net loss per basic and diluted share, non-GAAP
$
(0.21
)
 
$
(0.13
)
Weighted average common shares outstanding - basic and diluted, non-GAAP
40,451,668

 
39,593,700





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

 
Three months ending June 30, 2016
 
Year ending December 31, 2016
 
 
 
 
 
 
 
 
Loss from operations, GAAP range
$
(17,200
)
-
$
(17,700
)
 
$
(60,200
)
-
$
(62,200
)
Add back: Stock-based compensation
3,700

 
3,700

 
14,700

 
14,700

Loss from operations, non-GAAP range
$
(13,500
)
-
$
(14,000
)
 
$
(45,500
)
-
$
(47,500
)
 
 
 
 
 
 
 
 
Net loss per share, GAAP range
$
(0.43
)
-
$
(0.44
)
 
$
(1.49
)
-
$
(1.54
)
Add back: Stock-based compensation
0.09

 
0.09

 
0.36

 
0.36

Net loss per share, non-GAAP range
$
(0.34
)
-
$
(0.35
)
 
$
(1.13
)
-
$
(1.18
)
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic and diluted
40,800,000

 
40,800,000

 
41,000,000

 
41,000,000


9
Investor Relations Contact 
Adam Rogers
Workiva Inc.
investor@workiva.com
1.515.663.4471
Media Contact 
Kevin McCarthy
Workiva Inc.
press@workiva.com
1.515.663.4471