Workiva Announces Fourth Quarter and Full Year 2016 Financial Results

Full Year 2016 Revenue of $178.6 million, Up 23.0% from 2015. Q4 Subscription and Support Revenue of $38.3 million, Up 19.4% from Q4 of 2015. Q4 Revenue of $46.4 million, Up 16.3% from Q4 of 2015

AMES, Iowa--February 23, 2016--Workiva Inc. (NYSE: WK), a leading provider of enterprise cloud solutions for improving productivity, accountability and insight into business data, today announced financial results for its fourth quarter and full year ended December 31, 2016.

“We posted strong results for the fourth quarter and full-year 2016,” said Matt Rizai, Chairman and Chief Executive Officer of Workiva. “Total revenue for the year ended December 31, 2016 was $178.6 million, an increase of 23.0% over full-year 2015. Subscription and support revenue in the fourth quarter was $38.3 million, up 19.4% from the fourth quarter of 2015, and total revenue in the fourth quarter was $46.4 million, up 16.3% over the same quarter last year. ”

“We are pleased to have generated positive operating cash flow of nearly $10 million in the fourth quarter,” said Rizai. “We expect operating cash flow to be at break-even or better for the full year 2017 and annually thereafter.”

“Customer demand for a broader-based, enterprise-wide Wdesk solution continues to grow,” said Rizai. “In response, we have been evolving our business model, enhancing user management and improving our technology to capitalize on these enterprise-wide opportunities.”

“Our brand recognition and market penetration are also generating partnership opportunities with technology companies, consultants, service providers and accounting firms. We expect that our partners will support our sales efforts through referrals and co-selling arrangements, as well as expand Wdesk use through integrated technology offerings,” said Rizai.

Fourth Quarter 2016 Financial Highlights

  • Revenue: Total revenue for the quarter ended December 31, 2016 was $46.4 million, an increase of 16.3% from $39.9 million in the fourth quarter of 2015. Subscription and support revenue was $38.3 million, an increase of 19.4% versus results in the fourth quarter of 2015. Professional services revenue was $8.0 million, an increase of 3.4% compared to the same quarter in the prior year.
  • Gross Profit: GAAP gross profit for the quarter ended December 31, 2016 was $33.2 million compared with $28.9 million in the same quarter of the prior year. GAAP gross margin was 71.5% in the fourth quarter of 2016 versus 72.4% in the fourth quarter of 2015. Non-GAAP gross profit for the quarter ended December 31, 2016 was $33.4 million, an increase of 14.9% compared with the prior year's fourth quarter, and non-GAAP gross margin was 72.0% compared to 72.9% in the fourth quarter of 2015.
  • Loss from Operations: GAAP loss from operations for the quarter ended December 31, 2016 was $7.4 million compared with a loss of $11.8 million in the prior year's fourth quarter. Non-GAAP loss from operations for the quarter ended December 31, 2016 was $3.7 million, compared with non-GAAP loss from operations of $8.7 million in the fourth quarter of 2015. Non-GAAP loss from operations as a percentage of revenue improved 1,370 basis points for the quarter ended December 31, 2016 compared to the fourth quarter of 2015.
  • Net Loss: GAAP net loss for the quarter ended December 31, 2016 was $7.5 million compared with a net loss of $10.3 million for the prior year's fourth quarter. GAAP net loss per basic and diluted share for the quarter ended December 31, 2016 was $0.18, based on 40.9 million weighted-average shares outstanding, compared with a net loss per basic and diluted share of $0.26, based on 40.2 million weighted-average shares outstanding in the fourth quarter of 2015.
  • Non-GAAP net loss for the quarter ended December 31, 2016 was $3.8 million compared with a net loss of $7.2 million in the prior year's fourth quarter. Non-GAAP net loss per basic and diluted share for the quarter ended December 31, 2016 was $0.09, based on 40.9 million weighted-average shares outstanding, compared with a net loss per basic and diluted share of $0.18, based on 40.2 million weighted-average shares outstanding in the fourth quarter of 2015.

Full Year 2016 Financial Highlights

  • Revenue: Total revenue for the year ended December 31, 2016 was $178.6 million, an increase of 23.0% compared with $145.3 million in the prior year. Subscription and support revenue was $143.1 million, an increase of 23.1% on a year-over-year basis. Professional services revenue was $35.5 million, an increase of 22.6% on a year-over-year basis.
  • Gross Profit: GAAP gross profit for the year ended December 31, 2016 was $127.0 million compared with $105.1 million in the prior year, and GAAP gross margin was 71.1%. Non-GAAP gross profit for the year ended December 31, 2016 was $127.9 million, an increase of 20.9% compared with the prior year, and non-GAAP gross margin was 71.6%.
  • Loss from Operations: GAAP loss from operations for the year ended December 31, 2016 was $43.6 million compared with a loss of $43.7 million in the prior year. Non-GAAP loss from operations for the year ended December 31, 2016 was $29.3 million compared with a loss of $32.7 million in the prior year.
  • Net Loss: GAAP net loss for the year ended December 31, 2016 was $44.0 million compared with a net loss of $43.4 million in the prior year. GAAP net loss per share for the year ended December 31, 2016 was $1.08 based on 40.7 million weighted-average shares outstanding compared with a loss per share of $1.09 based on 39.9 million weighted-average shares outstanding in the prior year.
  • Non-GAAP net loss for the year ended December 31, 2016 was $29.7 million compared with a net loss of $32.4 million in the prior year. Non-GAAP net loss per share for the year ended December 31, 2016 was $0.73 based on 40.7 million weighted-average shares outstanding compared with a non-GAAP net loss per share of $0.81 based on 39.9 million weighted-average shares in the prior year.
  • Balance Sheet: As of December 31, 2016, Workiva had cash, cash equivalents and marketable securities totaling $62.7 million, compared with $53.8 million as of September 30, 2016. Debt, including capital lease and financing obligations, totaled $21.1 million as of December 31, 2016.
  • Cash Flow: Net cash used in operating activities was $10.4 million in 2016, compared to cash used in operating activities of $21.6 million in 2015.

Operating Metrics

  • Customers: Workiva had 2,772 customers as of December 31, 2016, a net increase of 248 customers from December 31, 2015.
  • Revenue Retention Rate: As of December 31, 2016, Workiva's revenue retention rate (excluding add-on revenue) was 95.4%, and the revenue retention rate including add-on revenue was 107.4%. Add-on revenue includes the change in both seats purchased and seat pricing for existing customers.

Financial Outlook

As of February 23, 2017, Workiva is providing guidance for its first quarter 2017 and full year 2017 as follows:

First Quarter 2017 Guidance:

  • Total revenue is expected to be in the range of $50.3 million to $50.7 million.
  • GAAP loss from operations is expected to be in the range of $10.1 million to $10.5 million.
  • Non-GAAP loss from operations is expected to be in the range of $5.8 million to $6.2 million.
  • GAAP net loss per basic and diluted share is expected to be in the range of $0.25 to $0.26.
  • 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 41.1 million weighted-average shares outstanding.

Full Year 2017 Guidance:

  • Total revenue is expected to be in the range of $203.0 million to $206.0 million.
  • GAAP loss from operations is expected to be in the range of $47.7 million to $50.7 million.
  • Non-GAAP loss from operations is expected to be in the range of $29.0 million to $32.0 million.
  • GAAP net loss per basic and diluted share is expected to be in the range of $1.18 to $1.26.
  • Non-GAAP net loss per basic and diluted share is expected to be in the range of $0.72 to $0.80.
  • Net loss per basic and diluted share is based on 41.3 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 fourth quarter and full year 2016, in addition to discussing the Company’s outlook for the first quarter and full year 2017. To access this call, dial 877-201-0168 (domestic) or 647-788-4901 (international). The conference ID is 49684296. 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 March 2, 2017 at 855-859-2056 (domestic) or 404-537-3406 (international). The replay pass code is 49684296. 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 collaborative work management platform for enterprises to collect, link, report and analyze business data with control and accountability. Thousands of organizations, including over 70 percent 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.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)

Three months ended
December 31,

Year ended December 31,
2016 2015 2016 2015
(unaudited)
Revenue
Subscription and support $ 38,329 $ 32,102 $ 143,120 $ 116,288
Professional services 8,045 7,780 35,526 28,984
Total revenue 46,374 39,882 178,646 145,272
Cost of revenue
Subscription and support (1) 7,244 5,791 27,895 22,559
Professional services (1) 5,964 5,222 23,730 17,645
Total cost of revenue 13,208 11,013 51,625 40,204
Gross profit 33,166 28,869 127,021 105,068
Operating expenses
Research and development (1) 14,533 13,496 57,438 50,466
Sales and marketing (1) 18,196 18,632 80,466 69,569
General and administrative (1) 7,845 8,538 32,695 28,716
Total operating expenses 40,574 40,666 170,599 148,751
Loss from operations (7,408 ) (11,797 ) (43,578 ) (43,683 )
Interest expense (455 ) (508 ) (1,875 ) (2,025 )
Other income and (expense), net 348 2,014 1,500 2,302
Loss before provision for income taxes (7,515 ) (10,291 ) (43,953 ) (43,406 )
Provision for income taxes 1 2 24 (7 )
Net loss $ (7,516 ) $ (10,293 ) $ (43,977 ) $ (43,399 )
Net loss per common share:
Basic and diluted $ (0.18 ) $ (0.26 ) $ (1.08 ) $ (1.09 )
Weighted average common shares outstanding - basic and diluted 40,872,772 40,204,367 40,671,133 39,852,624

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

Three months ended
December 31,

Year ended December 31,
2016 2015 2016 2015
(unaudited)
Cost of revenue
Subscription and support $ 128 $ 88 $ 493 $ 363
Professional services 96 98 411 349
Operating expenses
Research and development 578 635 2,365 1,924
Sales and marketing 604 484 2,075 1,727
General and administrative 2,279 1,819 8,903 6,637
WORKIVA INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
As of December 31,
2016 2015
Assets
Current assets
Cash and cash equivalents $ 51,281 $ 58,750
Marketable securities 11,435 17,420
Accounts receivable, net 22,535 15,647
Deferred commissions 1,864 1,368
Other receivables 1,545 818
Prepaid expenses 9,382 3,875
Total current assets 98,042 97,878
Property and equipment, net 42,590 44,410
Intangible assets, net 1,012 896
Other assets 1,499 711
Total assets $ 143,143 $ 143,895
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities
Accounts payable $ 849 $ 5,138
Accrued expenses and other current liabilities 20,695 20,394
Deferred revenue 76,016 55,741
Deferred government grant obligation 1,022 985
Current portion of capital lease and financing obligations 1,285 1,808
Current portion of long-term debt 20 18
Total current liabilities 99,887 84,084
Deferred revenue 21,485 7,597
Deferred government grant obligation 1,000 1,996
Other long-term liabilities 4,100 3,343
Capital lease and financing obligations 19,743 21,083
Long-term debt 53 73
Total liabilities 146,268 118,176
Stockholders’ (deficit) equity
Common stock 41 41
Additional paid-in-capital 217,454 202,371
Accumulated deficit (220,911 ) (176,934 )
Accumulated other comprehensive income 291 241
Total stockholders’ (deficit) equity (3,125 ) 25,719
Total liabilities and stockholders’ (deficit) equity $ 143,143 $ 143,895
WORKIVA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Three months ended
December 31,

Year ended December 31,
2016 2015 2016 2015
(unaudited)
Cash flows from operating activities
Net loss $ (7,516 ) $ (10,293 ) $ (43,977 ) $ (43,399 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation and amortization 904 1,056 3,820 4,410
Stock-based compensation expense 3,685 3,124 14,247 11,000
Provision for doubtful accounts 107 101 185 449
Realized gain on sale of available-for-sale securities, net (6 ) (6 ) (13 )
Amortization of premiums and discounts on marketable securities, net 36 45 147 77
Recognition of deferred government grant obligation (231 ) (1,875 ) (1,141 ) (2,383 )
Deferred income tax (25 ) (76 ) (32 ) (76 )
Changes in assets and liabilities:
Accounts receivable (367 ) (3,632 ) (7,101 ) (5,080 )
Deferred commissions (233 ) (416 ) (497 ) (520 )
Other receivables (285 ) 133 (732 ) (523 )
Prepaid expenses (4,415 ) (595 ) (5,513 ) (734 )
Other assets 187 (85 ) (654 ) 81
Accounts payable (4,310 ) 55 (3,930 ) 2,331
Deferred revenue 18,799 3,769 34,211 7,297
Accrued expenses and other liabilities 3,616 3,658 604 5,390
Change in restricted cash 101
Net cash provided by (used in) operating activities 9,952 (5,037 ) (10,369 ) (21,592 )
Cash flows from investing activities
Purchase of property and equipment (801 ) (184 ) (1,901 ) (1,843 )
Purchase of marketable securities (499 ) (8,377 ) (1,301 ) (24,069 )
Sale of marketable securities 3,509 7,197 6,521
Purchase of intangible assets (38 ) (42 ) (190 ) (386 )
Net cash (used in) provided by investing activities (1,338 ) (5,094 ) 3,805 (19,777 )
Cash flows from financing activities
Payment of equity issuance costs (1,346 )
Proceeds from option exercises 237 749 1,597 2,244
Taxes paid related to net share settlements of stock-based compensation awards (761 )
Changes in restricted cash 300
Repayment of other long-term debt (18 ) (84 )
Principal payments on capital lease and financing obligations (417 ) (599 ) (1,863 ) (2,282 )
Distributions to members (346 ) (381 )
Proceeds from government grants 183 548
Payments of issuance costs on line of credit (33 )
Repayment of government grant (101 ) (101 )
Net cash used in financing activities (180 ) (297 ) (895 ) (1,102 )
Effect of foreign exchange rates on cash 5 84 (10 ) 90
Net increase (decrease) in cash and cash equivalents 8,439 (10,344 ) (7,469 ) (42,381 )
Cash and cash equivalents at beginning of period 42,842 69,094 58,750 101,131
Cash and cash equivalents at end of period $ 51,281 $ 58,750 $ 51,281 $ 58,750
TABLE I
WORKIVA INC.
RECONCILIATION OF NON-GAAP INFORMATION
(in thousands, except share and per share)

Three months ended
December 31,

Year ended December 31,
2016 2015 2016 2015
Gross profit, subscription and support $ 31,085 $ 26,311 $ 115,225 $ 93,729
Add back: Stock-based compensation 128 88 493 363
Gross profit, subscription and support, non-GAAP $ 31,213 $ 26,399 $ 115,718 $ 94,092
As a percentage of subscription and support revenue, non-GAAP 81.4 % 82.2 % 80.9 % 80.9 %
Gross profit, professional services $ 2,081 $ 2,558 $ 11,796 $ 11,339
Add back: Stock-based compensation 96 98 411 349
Gross profit, professional services, non-GAAP $ 2,177 $ 2,656 $ 12,207 $ 11,688
As a percentage of professional services revenue, non-GAAP 27.1 % 34.1 % 34.4 % 40.3 %
Gross profit, as reported $ 33,166 $ 28,869 $ 127,021 $ 105,068
Add back: Stock-based compensation 224 186 904 712
Gross profit, non-GAAP $ 33,390 $ 29,055 $ 127,925 $ 105,780
As percentage of revenue, non-GAAP 72.0 % 72.9 % 71.6 % 72.8 %
Research and development, as reported $ 14,533 $ 13,496 $ 57,438 $ 50,466
Less: Stock-based compensation 578 635 2,365 1,924
Research and development, non-GAAP $ 13,955 $ 12,861 $ 55,073 $ 48,542
As percentage of revenue, non-GAAP 30.1 % 32.2 % 30.8 % 33.4 %
Sales and marketing, as reported $ 18,196 $ 18,632 $ 80,466 $ 69,569
Less: Stock-based compensation 604 484 2,075 1,727
Sales and marketing, non-GAAP $ 17,592 $ 18,148 $ 78,391 $ 67,842
As percentage of revenue, non-GAAP 37.9 % 45.5 % 43.9 % 46.7 %
General and administrative, as reported $ 7,845 $ 8,538 $ 32,695 $ 28,716
Less: Stock-based compensation 2,279 1,819 8,903 6,637
General and administrative, non-GAAP $ 5,566 $ 6,719 $ 23,792 $ 22,079
As percentage of revenue, non-GAAP 12.0 % 16.8 % 13.3 % 15.2 %
Loss from operations $ (7,408 ) $ (11,797 ) $ (43,578 ) $ (43,683 )
Add back: Stock-based compensation 3,685 3,124 14,247 11,000
Loss from operations, non-GAAP $ (3,723 ) $ (8,673 ) $ (29,331 ) $ (32,683 )
As percentage of revenue, non-GAAP (8.0 )% (21.7 )% (16.4 )% (22.5 )%
Net loss $ (7,516 ) $ (10,293 ) $ (43,977 ) $ (43,399 )
Add back: Stock-based compensation 3,685 3,124 14,247 11,000
Net loss, non-GAAP $ (3,831 ) $ (7,169 ) $ (29,730 ) $ (32,399 )
As percentage of revenue, non-GAAP (8.3 )% (18.0 )% (16.6 )% (22.3 )%
Net loss per basic and diluted share: $ (0.18 ) $ (0.26 ) $ (1.08 ) $ (1.09 )
Add back: Stock-based compensation 0.09 0.08 0.35 0.28
Net loss per basic and diluted share, non-GAAP $ (0.09 ) $ (0.18 ) $ (0.73 ) $ (0.81 )
Weighted average common shares outstanding - basic and diluted, non-GAAP 40,872,772 40,204,367 40,671,133 39,852,624
TABLE II
WORKIVA INC.
RECONCILIATION OF NON-GAAP GUIDANCE
(in thousands, except share and per share data)

Three months ending March
31, 2017

Year ending December 31,
2017

Loss from operations, GAAP range $ (10,100 ) - $ (10,500 ) $ (47,700 ) - $ (50,700 )
Add back: Stock-based compensation 4,300 4,300 18,700 18,700
Loss from operations, non-GAAP range $ (5,800 ) - $ (6,200 ) $ (29,000 ) - $ (32,000 )
Net loss per share, GAAP range $ (0.25 ) - $ (0.26 ) $ (1.18 ) - $ (1.26 )
Add back: Stock-based compensation 0.11 0.11 0.46 0.46
Net loss per share, non-GAAP range $ (0.14 ) - $ (0.15 ) $ (0.72 ) - $ (0.80 )
Weighted average common shares outstanding - basic and diluted 41,100,000 41,100,000 41,300,000 41,300,000


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