Workiva Announces Second Quarter 2016 Financial Results

Q2 Revenue of $43.0 million, Up 27% from Q2 of 2015

Ames, IA - August 3, 2016 - Workiva Inc. (NYSE: WK), creator of the Wdesk cloud-based productivity platform for enterprises, today announced financial results for its second quarter ended June 30, 2016 and increased its full-year 2016 guidance.
“We posted strong results in the second quarter, 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 for a growing number of use cases that should position us well for the second half of 2016,” said Rizai.
“We are making good progress on our path to positive operating cash flow,” said Rizai. “We expect annual cash usage from operations to improve for the full year 2016, as compared to full year 2015. We also expect annual cash usage from operations to improve further in 2017.”
Second Quarter 2016 Financial Highlights
Revenue: Total revenue for the quarter ended June 30, 2016 was $43.0 million, an increase of 26.6% from $34.0 million in the second quarter of 2015. Subscription and support revenue was $35.0 million, an increase of 24.5% versus results in the second quarter of 2015. Professional services revenue was $8.0 million, an increase of 36.7% compared to the same quarter in the prior year.
Gross Profit: GAAP gross profit for the quarter ended June 30, 2016 was $30.4 million compared with $24.2 million in the same quarter of the prior year. GAAP gross margin was 70.8% in the second quarter of 2016 versus 71.3% in the second quarter of 2015. Non-GAAP gross profit for the quarter ended June 30, 2016 was $30.7 million, an increase of 25.7% compared with the prior year's second quarter, and non-GAAP gross margin was 71.3% compared to 71.8% in the second quarter of 2015.
Loss from Operations: GAAP loss from operations for the quarter ended June 30, 2016 was $11.3 million compared with a loss of $10.6 million in the prior year's second quarter. Non-GAAP loss from operations for the quarter ended June 30, 2016 was $7.8 million, compared with non-GAAP loss from operations of $8.0 million in the second quarter of 2015. Non-GAAP loss from operations as a percentage of revenue improved 530 basis points for the quarter ended June 30, 2016 compared to the second quarter of 2015.
Net Loss: GAAP net loss for the quarter ended June 30, 2016 was $11.5 million compared with a net loss of $11.0 million for the prior year's second quarter. GAAP net loss per basic and diluted share for the quarter ended June 30, 2016 was $0.28, based on 40.6 million weighted-average shares outstanding, compared with a net loss per basic and diluted share of $0.28, based on 39.6 million weighted-average shares outstanding in the second quarter of 2015.
Non-GAAP net loss for the quarter ended June 30, 2016 was $8.0 million compared with a net loss of $8.4 million in the prior year's second quarter. Non-GAAP net loss per basic and diluted share for the quarter ended June 30, 2016 was $0.20, based on 40.6 million weighted-average shares outstanding, compared with a net loss per basic and diluted share of $0.21, based on 39.6 million weighted-average shares outstanding in the second quarter of 2015.

Operating Metrics
Customers: Workiva had 2,622 customers as of June 30, 2016, a net increase of 232 customers from June 30, 2015.
Revenue Retention Rate: As of June 30, 2016, Workiva's revenue retention rate (excluding add-on revenue) was 95.1%, and the revenue retention rate including add-on revenue was 110.2%. Add-on revenue includes the change in both seats purchased and seat pricing for existing customers.

Financial Outlook
As of August 3, 2016, Workiva is providing guidance for its third quarter 2016 and raising guidance for the full year 2016 as follows:

Third Quarter 2016 Guidance:
Total revenue is expected to be in the range of $44.5 million to $45.0 million.
Non-GAAP loss from operations is expected to be in the range of $13.4 million to $13.9 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 $180.5 million to $181.5 million.
Non-GAAP loss from operations is expected to be in the range of $38.5 million to $39.5 million.
GAAP loss from operations is expected to be in the range of $52.9 million to $53.9 million.
Non-GAAP net loss per basic and diluted share is expected to be in the range of $0.96 to $0.99.
GAAP net loss per basic and diluted share is expected to be in the range of $1.31 to $1.34.
Net loss per basic and diluted share is based on 40.8 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 2016, in addition to discussing the Company’s outlook for the third quarter and full year 2016. To access this call, dial 877-201-0168 (domestic) or 647-788-4901 (international). The conference ID is 40734346. 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 10, 2016 at 855-859-2056 (domestic) or 404-537-3406 (international). The replay pass code is 40734346. 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 June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
Revenue
 
 
 
 
 
 
 
Subscription and support
$
34,969

 
$
28,085

 
$
68,554

 
$
54,354

Professional services
8,042

 
5,883

 
19,008

 
14,768

Total revenue
43,011

 
33,968

 
87,562

 
69,122

Cost of revenue
 
 
 
 
 
 
 
Subscription and support (1)
7,039

 
5,564

 
13,957

 
11,449

Professional services (1)
5,538

 
4,189

 
11,726

 
7,966

Total cost of revenue
12,577

 
9,753

 
25,683

 
19,415

Gross profit
30,434

 
24,215

 
61,879

 
49,707

Operating expenses
 
 
 
 
 
 
 
Research and development (1)
14,047

 
12,196

 
28,563

 
24,204

Sales and marketing (1)
19,828

 
16,329

 
39,916

 
30,034

General and administrative (1)
7,882

 
6,291

 
16,835

 
13,025

Total operating expenses
41,757

 
34,816

 
85,314

 
67,263

Loss from operations
(11,323
)
 
(10,601
)
 
(23,435
)
 
(17,556
)
Interest expense
(468
)
 
(513
)
 
(958
)
 
(1,023
)
Other income and (expense), net
278

 
191

 
854

 
125

Loss before provision for income taxes
(11,513
)
 
(10,923
)
 
(23,539
)
 
(18,454
)
Provision for income taxes
12

 
106

 
31

 
22

Net loss
$
(11,525
)
 
$
(11,029
)
 
$
(23,570
)
 
$
(18,476
)
Net loss per common share:
 
 
 
 
 
 
 
Basic and diluted
$
(0.28
)
 
$
(0.28
)
 
$
(0.58
)
 
$
(0.47
)
Weighted average common shares outstanding - basic and diluted
40,593,908

 
39,627,842

 
40,522,790

 
39,610,905


(1) Includes stock-based compensation expense as follows:
 
Three months ended June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
Cost of revenue
 
 
 
 
 
 
 
Subscription and support
$
125

 
$
87

 
$
243

 
$
183

Professional services
93

 
89

 
215

 
161

Operating expenses
 
 
 
 
 
 
 
Research and development
609

 
369

 
1,193

 
703

Sales and marketing
449

 
432

 
904

 
782

General and administrative
2,226

 
1,643

 
4,337

 
2,965




WORKIVA INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
June 30, 2016
 
December 31, 2015
 
(unaudited)
 
 
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
39,885

 
$
58,750

Marketable securities
11,044

 
17,420

Accounts receivable, net
18,260

 
15,647

Deferred commissions
1,500

 
1,368

Other receivables
897

 
818

Prepaid expenses and other current assets
5,387

 
3,875

Total current assets
76,973

 
97,878

Property and equipment, net
43,619

 
44,410

Intangible assets, net
978

 
896

Other assets
1,126

 
711

Total assets
$
122,696

 
$
143,895

Liabilities and Stockholders’ Equity
Current liabilities
 
 
 
Accounts payable
$
4,965

 
$
5,138

Accrued expenses and other current liabilities
14,697

 
20,394

Deferred revenue
57,291

 
55,741

Deferred government grant obligation
1,003

 
985

Current portion of capital lease and financing obligations
1,625

 
1,808

Current portion of long-term debt
20

 
18

Total current liabilities
79,601

 
84,084

Deferred revenue
8,340

 
7,597

Deferred government grant obligation
1,497

 
1,996

Other long-term liabilities
4,026

 
3,343

Capital lease and financing obligations
20,358

 
21,083

Long-term debt
53

 
73

Total liabilities
113,875

 
118,176

Stockholders’ equity
 
 
 
Common stock
41

 
41

Additional paid-in-capital
209,022

 
202,371

Accumulated deficit
(200,504
)
 
(176,934
)
Accumulated other comprehensive income
262

 
241

Total stockholders’ equity
8,821

 
25,719

Total liabilities and stockholders’ equity
$
122,696

 
$
143,895



WORKIVA INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

 
Three months ended June 30,
 
Six months ended June 30,
 
2016
 
2015
 
2016
 
2015
Cash flows from operating activities
 
 
 
 
 
 
 
Net loss
$
(11,525
)
 
$
(11,029
)
 
$
(23,570
)
 
$
(18,476
)
Adjustments to reconcile net loss to net cash used in operating activities
 
 
 
 
 
 
 
Depreciation and amortization
975

 
1,127

 
1,972

 
2,296

Stock-based compensation expense
3,502

 
2,620

 
6,892

 
4,794

Provision for doubtful accounts
48

 
52

 
170

 
126

Realized gain on sale of available-for-sale securities
(4
)
 

 
(6
)
 

Amortization (accretion) of premiums and discounts on marketable securities, net
36

 

 
75

 

Recognition of deferred government grant obligation
(230
)
 
(206
)
 
(663
)
 
(272
)
Deferred income tax
(12
)
 

 
(12
)
 

Changes in assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
(1,844
)
 
(584
)
 
(2,725
)
 
(1,495
)
Deferred commissions
(117
)
 
(32
)
 
(129
)
 
113

Other receivables
142

 
(424
)
 
(82
)
 
(612
)
Prepaid expenses and other
(1,327
)
 
(65
)
 
(1,513
)
 
79

Other assets
(323
)
 
38

 
(386
)
 
94

Accounts payable
797

 
1,262

 
101

 
1,419

Deferred revenue
5,399

 
2,514

 
2,184

 
1,842

Accrued expenses and other liabilities
447

 
2,046

 
(5,422
)
 
(1,846
)
Change in restricted cash

 
73

 

 
101

Net cash used in operating activities
(4,036
)
 
(2,608
)
 
(23,114
)
 
(11,837
)
Cash flows from investing activities
 
 
 
 
 
 
 
Purchase of property and equipment
(597
)
 
(159
)
 
(1,009
)
 
(1,030
)
Purchase of marketable securities
(802
)
 

 
(802
)
 

Sale of marketable securities
2,404

 

 
7,197

 

Purchase of intangible assets
(59
)
 
(195
)
 
(114
)
 
(278
)
Net cash provided by (used in) investing activities
946

 
(354
)
 
5,272

 
(1,308
)
Cash flows from financing activities
 
 
 
 
 
 
 
Payment of equity issuance costs

 
(273
)
 

 
(1,346
)
Proceeds from option exercises
236

 
353

 
520

 
433

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
)
 
(42
)
 
(18
)
 
(67
)
Principal payments on capital lease and financing obligations
(476
)
 
(483
)
 
(908
)
 
(1,161
)
Distributions to members

 
(35
)
 

 
(35
)
Proceeds from government grants

 

 
183

 
313

Payments of issuance costs on line of credit
(33
)
 

 
(33
)
 

Net cash used in financing activities
(291
)
 
(480
)
 
(1,017
)
 
(1,563
)
Effect of foreign exchange rates on cash
40

 
(19
)
 
(6
)
 
9

Net decrease in cash and cash equivalents
(3,341
)
 
(3,461
)
 
(18,865
)
 
(14,699
)
Cash and cash equivalents at beginning of period
43,226

 
89,893

 
58,750

 
101,131

Cash and cash equivalents at end of period
$
39,885

 
$
86,432

 
$
39,885

 
$
86,432




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,

2016

2015

2016

2015
Gross profit, subscription and support
$
27,930


$
22,521


$
54,597

 
$
42,905

Add back: Stock-based compensation
125


87


243

 
183

Gross profit, subscription and support, non-GAAP
$
28,055


$
22,608


$
54,840

 
$
43,088

As a percentage of subscription and support revenue, non-GAAP
80.2
 %

80.5
 %

80.0
 %
 
79.3
 %
 




 
 
 
Gross profit, professional services
$
2,504


$
1,694


$
7,282

 
$
6,802

Add back: Stock-based compensation
93


89


215

 
161

Gross profit, professional services, non-GAAP
$
2,597


$
1,783


$
7,497

 
$
6,963

As a percentage of professional services revenue, non-GAAP
32.3
 %

30.3
 %

39.4
 %
 
47.1
 %
 




 
 
 
Gross profit, as reported
$
30,434


$
24,215


$
61,879

 
$
49,707

Add back: Stock-based compensation
218


176


458

 
344

Gross profit, non-GAAP
$
30,652


$
24,391


$
62,337

 
$
50,051

As percentage of revenue, non-GAAP
71.3
 %

71.8
 %

71.2
 %
 
72.4
 %
 




 
 
 
Research and development, as reported
$
14,047


$
12,196


$
28,563

 
$
24,204

Less: Stock-based compensation
609


369


1,193

 
703

Research and development, non-GAAP
$
13,438


$
11,827


$
27,370

 
$
23,501

As percentage of revenue, non-GAAP
31.2
 %

34.8
 %

31.3
 %
 
34.0
 %
 
 
 
 
 
 
 
 
Sales and marketing, as reported
$
19,828


$
16,329


$
39,916

 
$
30,034

Less: Stock-based compensation
449


432


904

 
782

Sales and marketing, non-GAAP
$
19,379


$
15,897


$
39,012

 
$
29,252

As percentage of revenue, non-GAAP
45.1
 %

46.8
 %

44.6
 %
 
42.3
 %
 
 
 
 
 
 
 
 
General and administrative, as reported
$
7,882


$
6,291


$
16,835

 
$
13,025

Less: Stock-based compensation
2,226


1,643


4,337

 
2,965

General and administrative, non-GAAP
$
5,656


$
4,648


$
12,498

 
$
10,060

As percentage of revenue, non-GAAP
13.2
 %

13.7
 %

14.3
 %
 
14.6
 %
 
 
 
 
 
 
 
 
Loss from operations
$
(11,323
)

$
(10,601
)

$
(23,435
)
 
$
(17,556
)
Add back: Stock-based compensation
3,502


2,620


6,892

 
4,794

Loss from operations, non-GAAP
$
(7,821
)

$
(7,981
)

$
(16,543
)
 
$
(12,762
)
As percentage of revenue, non-GAAP
(18.2
)%

(23.5
)%

(18.9
)%
 
(18.5
)%
 
 
 
 
 
 
 
 
Net loss
$
(11,525
)

$
(11,029
)

$
(23,570
)
 
$
(18,476
)
Add back: Stock-based compensation
3,502


2,620


6,892

 
4,794

Net loss, non-GAAP
$
(8,023
)

$
(8,409
)

$
(16,678
)
 
$
(13,682
)
As percentage of revenue, non-GAAP
(18.7
)%

(24.8
)%

(19.0
)%
 
(19.8
)%
 
 
 
 
 
 
 
 
Net loss per basic and diluted share:
$
(0.28
)
 
$
(0.28
)
 
$
(0.58
)
 
$
(0.47
)
Add back: Stock-based compensation
0.08


0.07

 
0.17

 
0.12

Net loss per basic and diluted share, non-GAAP
$
(0.20
)
 
$
(0.21
)
 
$
(0.41
)
 
$
(0.35
)
Weighted average common shares outstanding - basic and diluted, non-GAAP
40,593,908

 
39,627,842

 
40,522,790

 
39,610,905

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

 
Three months ending September 30, 2016
 
Year ending December 31, 2016
 
 
 
 
 
 
 
 
Loss from operations, GAAP range
$
(17,200
)
-
$
(17,700
)
 
$
(52,900
)
-
$
(53,900
)
Add back: Stock-based compensation
3,800

 
3,800

 
14,400

 
14,400

Loss from operations, non-GAAP range
$
(13,400
)
-
$
(13,900
)
 
$
(38,500
)
-
$
(39,500
)
 
 
 
 
 
 
 
 
Net loss per share, GAAP range
$
(0.43
)
-
$
(0.44
)
 
$
(1.31
)
-
$
(1.34
)
Add back: Stock-based compensation
0.09

 
0.09

 
0.35

 
0.35

Net loss per share, non-GAAP range
$
(0.34
)
-
$
(0.35
)
 
$
(0.96
)
-
$
(0.99
)
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic and diluted
40,800,000

 
40,800,000

 
40,800,000

 
40,800,000


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