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Workiva Announces Fourth Quarter and Full Year 2019 Financial Results

 

Q4 Subscription and Support Revenue of $66.1 Million, up 23.0% from Q4 2018

Q4 Total Revenue of $80.3 Million, up 24.6% from Q4 2018

Full Year 2019 Total Revenue of $297.9 Million, up 21.9% from 2018

AMES, Iowa - February 20, 2020  – Workiva (NYSE:WK), provider of the world’s leading connected reporting and compliance platform, today announced financial results for its fourth quarter and full year ended December 31, 2019.

"We are pleased with our fourth quarter and full year 2019 results that beat guidance for revenue, operating loss and loss per share," said Marty Vanderploeg, Chief Executive Officer of Workiva.

"We are encouraged by our progress in bookings and pipeline from our growth vectors: Europe, Wdata and our platform solutions for integrated risk and global statutory reporting," said Stuart Miller, Chief Financial Officer of Workiva. "Our Q4 results and 2020 guidance reflect our investments in these vectors."

"One of our top priorities this year is upgrading customers to the next generation of our technology, which is an end-to-end platform," said Vanderploeg. "Our customers now have the power to connect and manage all of their data – from initial systems of record to final reports – in our secure, cloud platform."

"Our advisory and service partners can also combine their domain expertise with our new, more open platform to create higher-value solutions for their clients," said Vanderploeg. "We see our partners as a catalyst for growth in 2020."

Fourth Quarter 2019 Financial Highlights

  • Revenue: Total revenue for the fourth quarter of 2019 reached $80.3 million, an increase of 24.6% from $64.4 million in the fourth quarter of 2018. Subscription and support revenue contributed $66.1 million, up 23.0% versus the fourth quarter of 2018. Professional services revenue was $14.1 million, an increase of 32.5% compared to the same quarter in the prior year.
  • Gross Profit: GAAP gross profit for the fourth quarter of 2019 was $57.2 million compared with $47.0 million in the same quarter of 2018. GAAP gross margin was 71.3% versus 73.0% in the fourth quarter of 2018. Non-GAAP gross profit for the fourth quarter of 2019 was $58.1 million, an increase of 22.6% compared with the prior year's fourth quarter, and non-GAAP gross margin was 72.3% compared to 73.5% in the fourth quarter of 2018.
  • Loss from Operations: GAAP loss from operations for the fourth quarter of 2019 was $14.5 million compared with a loss of $7.8 million in the prior year's fourth quarter. Non-GAAP loss from operations was $4.6 million, compared with non-GAAP loss from operations of $0.3 million in the fourth quarter of 2018.
  • Net Loss: GAAP net loss for the fourth quarter of 2019 was $16.3 million compared with a net loss of $7.7 million for the prior year's fourth quarter. GAAP net loss per basic and diluted share was $0.35 compared with a net loss per basic and diluted share of $0.17 in the fourth quarter of 2018.
  • Non-GAAP net loss for the fourth quarter of 2019 was $4.3 million compared with a net loss of $0.2 million in the prior year's fourth quarter. Non-GAAP net loss per basic and diluted share was $0.09, compared with a net loss per basic and diluted share of $0.00 in the fourth quarter of 2018.
  • Liquidity: As of December 31, 2019, Workiva had cash, cash equivalents and marketable securities totaling $488.0 million, compared with $98.3 million as of December 31, 2018. In August 2019, we issued $345.0 million aggregate principal amount of 1.125% convertible senior notes due 2026. In addition, financing obligations totaled $17.2 million as of December 31, 2019.

Key Metrics and Recent Business Highlights

  • Customers: Workiva had 3,510 customers as of December 31, 2019, a net increase of 170 customers from December 31, 2018.
  • Revenue Retention Rate: As of December 31, 2019, Workiva's revenue retention rate (excluding add-on revenue) was 94.7%, and the revenue retention rate including add-on revenue was 113.0%. Add-on revenue includes changes in both solutions and pricing for existing customers.
  • Large Contracts: As of December 31, 2019, Workiva had 652 customers with an annual contract value (ACV) of more than $100,000, up 47.2% from 443 customers at December 31, 2018. Workiva had 285 customers with an ACV of more than $150,000, up 50.0% from 190 customers in the fourth quarter of 2018.
  • Fortune's Best 100 Workplaces: Workiva was named one of the FORTUNE 100 Best Companies to Work For® in 2020 by research firm Great Place to Work and FORTUNE magazine. This is the second consecutive year Workiva has been named to this list.

Full Year 2019 Financial Highlights

  • Revenue: Total revenue for the full year 2019 was $297.9 million, an increase of 21.9% compared with $244.3 million in the prior year. Subscription and support revenue was $245.8 million, an increase of 22.6% on a year-over-year basis.
  • Gross Profit: GAAP gross profit for 2019 was $212.9 million compared with $178.5 million in the prior year. GAAP gross margin was 71.5% in 2019. Non-GAAP gross profit was $216.2 million, an increase of 20.2% compared with the prior year, and non-GAAP gross margin was 72.6%.
  • Loss from Operations: GAAP loss from operations for the full year 2019 was $48.0 million compared with a loss of $49.8 million in the prior year. Non-GAAP loss from operations was $9.9 million compared with a loss of $13.0 million in 2018.
  • Net Loss: GAAP net loss for 2019 was $48.1 million compared with a net loss of $50.1 million in the prior year. GAAP net loss per share was $1.04 based on 46.3 million weighted-average shares outstanding compared with a loss per share of $1.15 based on 43.6 million weighted-average shares outstanding in 2018.
  • Non-GAAP net loss for 2019 was $9.1 million compared with a net loss of $13.3 million in the prior year. Non-GAAP net loss per share was $0.20 based on 46.3 million weighted-average shares outstanding compared with a non-GAAP net loss per share of $0.31 based on 43.6 million weighted-average shares in 2018.
  • Cash Flow: Net cash provided by operating activities was $30.6 million in 2019, compared to cash provided by operating activities of $6.4 million in 2018.

Financial Outlook

As of February 20, 2020, Workiva is providing guidance for its first quarter 2020 and full year 2020 as follows:

First Quarter 2020 Guidance:

  • Total revenue is expected to be in the range of $82.8 million to $83.3 million.
  • GAAP loss from operations is expected to be in the range of $17.6 million to $18.1 million.
  • Non-GAAP loss from operations is expected to be in the range of $7.0 million to $7.5 million.
  • GAAP net loss per basic and diluted share is expected to be in the range of $0.39 to $0.40.
  • Non-GAAP net loss per basic and diluted share is expected to be in the range of $0.12 to $0.13.
  • Net loss per basic and diluted share is based on 47.8 million weighted-average shares outstanding.

Full Year 2020 Guidance:

  • Total revenue is expected to be in the range of $341.5 million to $343.5 million.
  • GAAP loss from operations is expected to be in the range of $79.7 million to $81.7 million.
  • Non-GAAP loss from operations is expected to be in the range of $36.0 million to $38.0 million.
  • GAAP net loss per basic and diluted share is expected to be in the range of $1.72 to $1.76.
  • Non-GAAP net loss per basic and diluted share is expected to be in the range of $0.63 to $0.67.
  • Net loss per basic and diluted share is based on 48.9 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 2019, in addition to discussing the Company’s outlook for the first quarter and full year 2020. To access this call, dial 833-287-0800 (U.S. domestic) or 647-689-4459 (international). The conference ID is 9066012. 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 February 27, 2020 at 800-585-8367 (U.S. domestic) or 416-621-4642  (international). The replay pass code is 9066012. 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.

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

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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, non-cash interest expense 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 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 and CEO separation expense from loss from operations. Non-GAAP net loss is calculated by excluding stock-based compensation expense, net of tax, CEO separation expense, 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. 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.

 

For the latest news and information, visit the Workiva Newsroom.

WORKIVA INC.

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

Three months ended December 31,

Year ended December 31,

2019

2018

2019

2018

(unaudited)

Revenue

Subscription and support

$

66,148 

$

53,779 

$

245,765 

$

200,392 

Professional services

14,117 

10,656 

52,126 

43,952 

Total revenue

80,265 

64,435 

297,891 

244,344 

Cost of revenue

Subscription and support (1)

11,946 

8,637 

42,881 

34,215 

Professional services (1)

11,102 

8,757 

42,131 

31,645 

Total cost of revenue

23,048 

17,394 

85,012 

65,860 

Gross profit

57,217 

47,041 

212,879 

178,484 

Operating expenses

Research and development (1)

23,216 

20,773 

89,921 

81,602 

Sales and marketing (1)

33,732 

23,011 

120,300 

90,337 

General and administrative (1)

14,754 

11,047 

48,380 

56,333 

Total operating expenses

71,702 

54,831 

258,601 

228,272 

Loss from operations

(14,485)

(7,790)

(45,722)

(49,788)

Interest income

2,064 

435 

4,657 

1,278 

Interest expense

(3,534)

(480)

(6,366)

(1,827)

Other (expense) and income, net

(305)

318 

(564)

513 

Loss before provision for income taxes

(16,260)

(7,517)

(47,995)

(49,824)

Provision for income taxes

38 

204 

139 

247 

Net loss

$

(16,298)

$

(7,721)

$

(48,134)

$

(50,071)

Net loss per common share:

Basic and diluted

$

(0.35)

$

(0.17)

$

(1.04)

$

(1.15)

Weighted-average common shares outstanding - basic and diluted

47,058,209 

44,472,672 

46,302,656 

43,640,408 

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

Three months ended December 31,

Year ended December 31,

2019

2018

2019

2018

(unaudited)

Cost of revenue

Subscription and support

$

412 

$

140 

$

1,554 

$

700 

Professional services

429 

170 

1,725 

619 

Operating expenses

Research and development

1,990 

1,702 

8,006 

5,842 

Sales and marketing

2,593 

1,466 

8,792 

5,416 

General and administrative

4,431 

4,044 

15,707 

18,264 

WORKIVA INC.

CONSOLIDATED BALANCE SHEETS
(in thousands)

As of December 31,

2019

2018

Assets

Current assets

Cash and cash equivalents

$

381,742 

$

77,584 

Marketable securities

106,214 

20,764 

Accounts receivable, net

60,228 

65,107 

Deferred commissions

14,108 

8,178 

Other receivables

2,432 

1,181 

Prepaid expenses and other

6,508 

4,417 

Total current assets

571,232 

177,231 

Property and equipment, net

39,745 

41,468 

Operating lease right-of-use assets

15,352 

— 

Deferred commissions, non-current

14,977 

10,569 

Intangible assets, net

1,651 

1,266 

Other assets

3,439 

577 

Total assets

$

646,396 

$

231,111 

Liabilities and Stockholders’ Equity (Deficit)

Current liabilities

Accounts payable

$

7,057 

$

5,461 

Accrued expenses and other current liabilities

49,930 

36,353 

Deferred revenue

173,617 

148,545 

Current portion of financing obligations

1,328 

1,222 

Total current liabilities

231,932 

191,581 

Convertible senior notes, net

280,601 

— 

Deferred revenue, non-current

32,569 

25,171 

Other long-term liabilities

1,498 

6,891 

Operating lease liabilities, non-current

18,564 

— 

Financing obligations, non-current

15,889 

17,208 

Total liabilities

581,053 

240,851 

Stockholders’ equity (deficit)

Common stock

47 

44 

Additional paid-in-capital

420,170 

297,145 

Accumulated deficit

(355,161)

(307,027)

Accumulated other comprehensive income

287 

98 

Total stockholders’ equity (deficit)

65,343 

(9,740)

Total liabilities and stockholders’ equity (deficit)

$

646,396 

$

231,111 

WORKIVA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Three months ended December 31,

Year ended December 31,

2019

2018

2019

2018

(unaudited)

Cash flows from operating activities

Net loss

$

(16,298)

$

(7,721)

$

(48,134)

$

(50,071)

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

Depreciation and amortization

1,228 

900 

4,160 

3,781 

Stock-based compensation expense

9,855 

7,522 

35,784 

30,841 

(Recovery of) provision for doubtful accounts

(34)

239 

(92)

550 

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

102 

(78)

13 

(141)

Amortization of debt discount and issuance costs

2,179 

— 

3,262 

— 

Deferred income tax

(5)

(65)

(9)

Changes in assets and liabilities:

Accounts receivable

(16,364)

(24,831)

5,166 

(20,216)

Deferred commissions

(2,300)

(5,547)

(10,268)

(11,155)

Operating lease right-of-use asset

747 

— 

2,552 

— 

Other receivables

(780)

211 

(1,250)

(205)

Prepaid expenses

1,653 

1,308 

(2,084)

2,020 

Other assets

489 

833 

(1,860)

276 

Accounts payable

1,993 

(300)

2,153 

1,699 

Deferred revenue

17,927 

25,112 

32,039 

40,144 

Operating lease liability

(809)

— 

(3,035)

— 

Accrued expenses and other liabilities

2,397 

1,938 

12,225 

8,886 

Net cash provided by (used in) operating activities

1,987 

(419)

30,566 

6,400 

Cash flows from investing activities

Purchase of property and equipment

(244)

(380)

(3,104)

(1,122)

Purchase of marketable securities

(17,099)

(6,935)

(112,565)

(24,659)

Maturities of marketable securities

6,450 

11,400 

26,840 

20,400 

Sale of marketable securities

— 

— 

498 

— 

Purchase of intangible assets

(22)

(77)

(734)

(251)

Other

— 

— 

(1,000)

— 

Net cash (used in) provided by investing activities

(10,915)

4,008 

(90,065)

(5,632)

Cash flows from financing activities

Proceeds from option exercises

1,659 

2,735 

24,152 

16,662 

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

— 

— 

(390)

(1,861)

Proceeds from shares issued in connection with employee stock purchase plan

— 

— 

4,922 

3,216 

Proceeds from the issuance of convertible senior notes, net of issuance costs

— 

— 

335,899 

— 

Principal payments on capital lease and financing obligations

(312)

(284)

(1,213)

(1,163)

Proceeds from government grants

— 

— 

— 

22 

Net cash provided by financing activities

1,347 

2,451 

363,370 

16,876 

Effect of foreign exchange rates on cash

199 

(299)

287 

(393)

Net (decrease) increase in cash and cash equivalents

(7,382)

5,741 

304,158 

17,251 

Cash and cash equivalents at beginning of period

389,124 

71,843 

77,584 

60,333 

Cash and cash equivalents at end of period

$

381,742 

$

77,584 

$

381,742 

$

77,584 

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,

2019

2018

2019

2018

Gross profit, subscription and support

$

54,202 

$

45,142 

$

202,884 

$

166,177 

Add back: Stock-based compensation

412 

140 

1,554 

700 

Gross profit, subscription and support, non-GAAP

$

54,614 

$

45,282 

$

204,438 

$

166,877 

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

82.6 

%

84.2 

%

83.2 

%

83.3 

%

Gross profit, professional services

$

3,015 

$

1,899 

$

9,995 

$

12,307 

Add back: Stock-based compensation

429 

170 

1,725 

619 

Gross profit, professional services, non-GAAP

$

3,444 

$

2,069 

$

11,720 

$

12,926 

As a percentage of professional services revenue, non-GAAP

24.4 

%

19.4 

%

22.5 

%

29.4 

%

Gross profit

$

57,217 

$

47,041 

$

212,879 

$

178,484 

Add back: Stock-based compensation

841 

310 

3,279 

1,319 

Gross profit, non-GAAP

$

58,058 

$

47,351 

$

216,158 

$

179,803 

As percentage of revenue, non-GAAP

72.3 

%

73.5 

%

72.6 

%

73.6 

%

Cost of revenue, subscription and support

$

11,946 

$

8,637 

$

42,881 

$

34,215 

Less: Stock-based compensation

412 

140 

1,554 

700 

Cost of revenue, subscription and support, non-GAAP

$

11,534 

$

8,497 

$

41,327 

$

33,515 

As percentage of revenue, non-GAAP

14.4 

%

13.2 

%

13.9 

%

13.7 

%

Cost of revenue, professional services

$

11,102 

$

8,757 

$

42,131 

$

31,645 

Less: Stock-based compensation

429 

170 

1,725 

619 

Cost of revenue, professional services, non-GAAP

$

10,673 

$

8,587 

$

40,406 

$

31,026 

As percentage of revenue, non-GAAP

13.3 

%

13.3 

%

13.6 

%

12.7 

%

Research and development

$

23,216 

$

20,773 

$

89,921 

$

81,602 

Less: Stock-based compensation

1,990 

1,702 

8,006 

5,842 

Research and development, non-GAAP

$

21,226 

$

19,071 

$

81,915 

$

75,760 

As percentage of revenue, non-GAAP

26.4 

%

29.6 

%

27.5 

%

31.0 

%

Sales and marketing

$

33,732 

$

23,011 

$

120,300 

$

90,337 

Less: Stock-based compensation

2,593 

1,466 

8,792 

5,416 

Sales and marketing, non-GAAP

$

31,139 

$

21,545 

$

111,508 

$

84,921 

As percentage of revenue, non-GAAP

38.8 

%

33.4 

%

37.4 

%

34.8 

%

General and administrative

$

14,754 

$

11,047 

$

48,380 

$

56,333 

Less: Stock-based compensation

4,431 

4,044 

15,707 

14,643 

Less: CEO separation expense(1)

— 

— 

— 

9,527 

General and administrative, non-GAAP

$

10,323 

$

7,003 

$

32,673 

$

32,163 

As percentage of revenue, non-GAAP

12.9 

%

10.9 

%

11.0 

%

13.2 

%

Loss from operations

$

(14,485)

$

(7,790)

$

(45,722)

$

(49,788)

Add back: Stock-based compensation

9,855 

7,522 

35,784