Workiva Announces Third Quarter 2015 Financial Results

Total Quarterly Revenue of $36 million, up 30% from Q3 of 2014

Ames, IA - November 5, 2015 - Workiva Inc. (NYSE: WK), creator of the Wdesk cloud-based productivity platform for enterprises, today announced financial results for its third quarter ended September 30, 2015 and increased its full-year 2015 guidance.

“We had a strong third quarter with 30% revenue growth over the same quarter last year,” said Matt Rizai, Chairman and Chief Executive Officer of Workiva. “We continued to add Wdesk customers and seats across our customers’ organizations for Sarbanes-Oxley (SOX) and SEC compliance, risk processes and management reporting.”

“The efficiency of the Wdesk platform allows us to leverage new products into adjacent markets,” said Rizai. “For example, advancements in our data platform for the SOX market are attracting users in the much larger Governance, Risk and Compliance (GRC) market.”

The non-GAAP adjustments referenced herein relate to the exclusion of stock-based compensation.

Third Quarter 2015 Financial Highlights
Revenue: Total revenue for the quarter ended September 30, 2015 was $36.3 million, an increase of 29.9% from $27.9 million in the third quarter of 2014. Subscription and support revenue was $29.8 million, an increase of 25.9% versus results in the third quarter of 2014. Professional services revenue was $6.4 million, an increase of 52.2% compared to the same quarter in the prior year.

Gross Profit: GAAP gross profit for the quarter ended September 30, 2015 was $26.5 million compared with $19.4 million in the same quarter of the prior year. GAAP gross margin was 73.0% in the third quarter of 2015 versus 69.4% in the third quarter of 2014. Non-GAAP gross profit for the quarter ended September 30, 2015 was $26.7 million, an increase of 36.7% compared with the prior year's third quarter, and non-GAAP gross margin was 73.5% compared to 69.9% in the third quarter of 2014.

Loss from Operations: GAAP loss from operations for the quarter ended September 30, 2015 was $14.3 million compared with a loss of $12.6 million in the prior year's third quarter. Non-GAAP loss from operations for the quarter ended September 30, 2015 was $11.2 million, compared with non-GAAP loss from operations of $11.2 million in the third quarter of 2014.

Net Loss: GAAP net loss for the quarter ended September 30, 2015 was $14.6 million compared with a net loss of $13.4 million for the prior year's third quarter. GAAP net loss per basic and diluted share for the quarter ended September 30, 2015 was $0.37, based on 40.0 million weighted-average shares outstanding, compared with a net loss per basic and diluted share of $0.42, based on 31.9 million weighted-average shares outstanding in the third quarter of 2014.

Non-GAAP net loss for the quarter ended September 30, 2015 was $11.5 million compared with a net loss of $12.0 million in the prior year's third quarter. Non-GAAP net loss per basic and diluted share for the quarter ended September 30, 2015 was $0.29, based on 40.0 million weighted-average shares outstanding, compared with a net loss per basic and diluted share of $0.38, based on 31.9 million weighted-average shares outstanding in the third quarter of 2014.


Balance Sheet: As of September 30, 2015, Workiva had cash, cash equivalents and marketable securities totaling $81.8 million, compared with $86.4 million as of June 30, 2015. Debt, including capital lease and financing obligations, totaled $23.6 million as of September 30, 2015.

Cash Flow: Net cash used in operating activities was $4.7 million for the three months ended September 30, 2015, compared to net cash used in operating activities of $4.6 million for the three months ended September 30, 2014.

Operating Metrics
Customers: Workiva had 2,468 customers as of September 30, 2015, a net increase of 292 customers from September 30, 2014.

Revenue Retention Rate: As of September 30, 2015, Workiva's revenue retention rate (excluding add-on revenue) was 96.4%, and the revenue retention rate including add-on revenue was 107.7%. Add-on revenue includes the change in both seats purchased and seat pricing for existing customers.

Financial Outlook
As of November 5, 2015, Workiva is providing guidance for its fourth quarter 2015 and raising guidance for the full year 2015, as follows:

Fourth Quarter 2015 Guidance:
Total revenue is expected to be in the range of $37.6 million to $38.1 million.
Non-GAAP loss from operations is expected to be in the range of $10.8 million to $11.3 million.
GAAP loss from operations is expected to be in the range of $14.0 million to $14.5 million.
Non-GAAP net loss per basic and diluted share is expected to be in the range of $0.24 to $0.25.
GAAP net loss per basic and diluted share is expected to be in the range of $0.32 to $0.33.
Net loss per basic and diluted share is based on 40 million weighted-average shares outstanding.

Full Year 2015 Guidance:
Total revenue is expected to be in the range of $143.0 million to $143.5 million, compared with the prior outlook for revenue of $141.5 million to $143.0 million.
Non-GAAP loss from operations is expected to be in the range of $34.8 million to $35.3 million, compared with the prior outlook for non-GAAP loss from operations of $36.0 million to $38.0 million.
GAAP loss from operations is expected to be in the range of $45.9 million to $46.4 million, compared with the prior outlook for GAAP loss from operations of $47.0 million to $49.0 million.
Non-GAAP net loss per basic and diluted share is expected to be in the range of $0.87 to $0.88, compared with the prior outlook for non-GAAP net loss per basic and diluted share of $0.90 to $0.95.
GAAP net loss per basic and diluted share is expected to be in the range of $1.15 to $1.16, compared with the prior outlook for GAAP net loss per basic and diluted share of $1.17 to $1.22.
Net loss per basic and diluted share continues to be based on 40 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 third quarter of 2015, in addition to discussing the Company’s outlook for the fourth quarter and full year 2015. To access this call, dial 877-201-0168 (domestic) or 647-788-4901 (international). The conference ID is 50167406. 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 November 12, 2015 at 855-859-2056 (domestic) or 404-537-3406 (international). The replay pass code is 50167406. 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 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 for risk, compliance or management reporting. Wdesk 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 1,000 people with offices in 15 cities. The Company is headquartered in Ames, Iowa. For more information, visit workiva.com.

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. AND SUBSIDIARIES

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

 
Three months ended September 30,
 
Nine months ended September 30,
 
2015
 
2014
 
2015
 
2014
Revenue
 
 
 
 
 
 
 
Subscription and support
$
29,832

 
$
23,690

 
$
84,186

 
$
66,306

Professional services
6,436

 
4,229

 
21,204

 
16,259

Total revenue
36,268

 
27,919

 
105,390

 
82,565

Cost of revenue
 
 
 
 
 
 
 
Subscription and support (1)
5,319

 
5,387

 
16,768

 
15,085

Professional services (1)
4,457

 
3,152

 
12,423

 
8,832

Total cost of revenue
9,776

 
8,539

 
29,191

 
23,917

Gross profit
26,492

 
19,380

 
76,199

 
58,648

Operating expenses
 
 
 
 
 
 
 
Research and development (1)
12,766

 
11,175

 
36,970

 
32,234

Sales and marketing (1)
20,903

 
16,248

 
50,937

 
39,435

General and administrative (1)
7,153

 
4,572

 
20,178

 
13,986

Total operating expenses
40,822

 
31,995

 
108,085

 
85,655

Loss from operations
(14,330
)
 
(12,615
)
 
(31,886
)
 
(27,007
)
Interest expense
(494
)
 
(700
)
 
(1,517
)
 
(1,281
)
Other income and (expense), net
163

 
(67
)
 
288

 
(209
)
Loss before income tax benefit
(14,661
)
 
(13,382
)
 
(33,115
)
 
(28,497
)
Income tax benefit
(31
)
 

 
(9
)
 

Net loss
$
(14,630
)
 
$
(13,382
)
 
$
(33,106
)
 
$
(28,497
)
Net loss per common share:
 
 
 
 
 
 
 
Basic and diluted
$
(0.37
)
 
$
(0.42
)
 
$
(0.83
)
 
$
(0.90
)
Weighted average common shares outstanding - basic and diluted
39,980,308

 
31,889,795

 
39,735,393

 
31,836,479


(1) Includes stock-based compensation expense as follows:
 
Three months ended September 30,
 
Nine months ended September 30,
 
2015
 
2014
 
2015
 
2014
Cost of revenue
 
 
 
 
 
 
 
Subscription and support
$
92

 
$
88

 
$
275

 
$
403

Professional services
90

 
47

 
251

 
264

Operating expenses
 
 
 
 
 
 
 
Research and development
586

 
341

 
1,289

 
1,443

Sales and marketing
461

 
288

 
1,243

 
889

General and administrative
1,853

 
649

 
4,818

 
2,540





WORKIVA INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(in thousands)
 
September 30, 2015
 
December 31, 2014
 
(unaudited)
 
 
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
69,094

 
$
101,131

Marketable securities
12,659

 

Accounts receivable, net
12,133

 
11,120

Deferred commissions
953

 
852

Other receivables
951

 
295

Prepaid expenses and other current assets
3,282

 
3,143

Total current assets
99,072

 
116,541

Restricted cash

 
401

Property and equipment, net
45,754

 
46,265

Intangible assets, net
868

 
549

Other assets
626

 
795

Total assets
$
146,320

 
$
164,551

Liabilities and Stockholders’ Equity
Current liabilities
 
 
 
Accounts payable
$
4,730

 
$
3,011

Accrued expenses and other current liabilities
17,228

 
16,765

Deferred revenue
51,047

 
42,605

Deferred government grant obligation
2,637

 
2,324

Current portion of capital lease and financing obligations
1,985

 
1,941

Current portion of long-term debt
18

 
84

Total current liabilities
77,645

 
66,730

Deferred revenue
8,584

 
13,671

Deferred government grant obligation
3,151

 
3,424

Other long-term liabilities
3,208

 
2,069

Capital lease and financing obligations
21,505

 
22,747

Long-term debt
73

 
91

Total liabilities
114,166

 
108,732

Stockholders’ equity
 
 
 
Common stock
41

 
39

Additional paid-in-capital
198,499

 
189,168

Accumulated deficit
(166,641
)
 
(133,535
)
Accumulated other comprehensive income
255

 
147

Total stockholders’ equity
32,154

 
55,819

Total liabilities and stockholders’ equity
$
146,320

 
$
164,551





WORKIVA INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

 
Three months ended September 30,
 
Nine months ended September 30,
 
2015
 
2014
 
2015
 
2014
Cash flows from operating activities
 
 
 
 
 
 
 
Net loss
$
(14,630
)
 
$
(13,382
)
 
$
(33,106
)
 
$
(28,497
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
 
 
 
 
 
 
 
Depreciation and amortization
1,058

 
1,132

 
3,354

 
2,752

Stock-based compensation expense
3,082

 
1,413

 
7,876

 
5,539

Provision for doubtful accounts
222

 
104

 
348

 
128

Accretion of discount on convertible notes

 
133

 

 
133

Paid-in-kind interest on convertible note

 
58

 

 
58

Change in fair value of derivative liability

 
48

 

 
48

Realized (gain) loss on sale of available-for-sale securities
(7
)
 

 
(7
)
 
136

Amortization (accretion) of premiums and discounts on marketable securities, net
32

 

 
32

 

Recognition of deferred government grant obligation
(236
)
 
(39
)
 
(508
)
 
(51
)
Changes in assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
47

 
(1,794
)
 
(1,448
)
 
2,584

Deferred commissions
(217
)
 
(201
)
 
(104
)
 
(411
)
Other receivables
(44
)
 
108

 
(656
)
 
240

Prepaid expenses and other
(218
)
 
231

 
(139
)
 
(942
)
Other assets
72

 
(201
)
 
166

 
(165
)
Accounts payable
857

 
1,727

 
2,276

 
371

Deferred revenue
1,686

 
3,211

 
3,528

 
15,517

Accrued expenses and other liabilities
3,578

 
2,826

 
1,732

 
3,608

Change in restricted cash

 

 
101

 
54

Net cash (used in) provided by operating activities
(4,718
)
 
(4,626
)
 
(16,555
)
 
1,102

Cash flows from investing activities
 
 
 
 
 
 
 
Purchase of property and equipment
(629
)
 
(2,768
)
 
(1,659
)
 
(8,044
)
Purchase of marketable securities
(15,692
)
 

 
(15,692
)
 

Sale of marketable securities
3,012

 

 
3,012

 
4,864

Purchase of intangible assets
(66
)
 
(121
)
 
(344
)
 
(237
)
Net cash used in investing activities
(13,375
)
 
(2,889
)
 
(14,683
)
 
(3,417
)
Cash flows from financing activities
 
 
 
 
 
 
 
Payment of equity issuance costs

 
(57
)
 
(1,346
)
 
(57
)
Proceeds from issuance of convertible notes

 
5,000

 

 
5,000

Proceeds from option exercises
1,062

 
158

 
1,495

 
363

Changes in restricted cash

 

 
300

 
(300
)
Repayment of other long-term debt
(17
)
 
(96
)
 
(84
)
 
(198
)
Principal payments on capital lease and financing obligations
(522
)
 
(316
)
 
(1,683
)
 
(781
)
Distributions to members

 
(17
)
 
(35
)
 
(51
)
Proceeds from borrowings on line of credit

 
3,000

 

 
3,020

Proceeds from government for training reimbursement

 
56

 

 
194

Payments of issuance costs on line of credit

 
(99
)
 

 
(99
)
Repayment of line of credit

 

 

 
(2,038
)
Government grant awards
235

 

 
548

 
2,000

Net cash provided by (used in) financing activities
758

 
7,629

 
(805
)
 
7,053

Effect of foreign exchange rates on cash
(3
)
 
26

 
6

 
22

Net (decrease) increase in cash and cash equivalents
(17,338
)
 
140

 
(32,037
)
 
4,760

Cash and cash equivalents at beginning of period
86,432

 
20,135

 
101,131

 
15,515

Cash and cash equivalents at end of period
$
69,094

 
$
20,275

 
$
69,094

 
$
20,275




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

 
Three months ended September 30,
 
Nine months ended September 30,
 
2015
 
2014
 
2015
 
2014
Gross profit, subscription and support
$
24,513

 
$
18,303

 
$
67,418

 
$
51,221

Add back: Stock-based compensation
92

 
88

 
275

 
403

Gross profit, subscription and support, non-GAAP
$
24,605

 
$
18,391

 
$
67,693

 
$
51,624

As a percentage of subscription and support revenue
82.5
 %
 
77.6
 %
 
80.4
 %
 
77.9
 %
 
 
 
 
 
 
 
 
Gross profit, professional services
$
1,979

 
$
1,077

 
$
8,781

 
$
7,427

Add back: Stock-based compensation
90

 
47

 
251

 
264

Gross profit, professional services, non-GAAP
$
2,069

 
$
1,124

 
$
9,032

 
$
7,691

As a percentage of professional services revenue
32.1
 %
 
26.6
 %
 
42.6
 %
 
47.3
 %
 
 
 
 
 
 
 
 
Gross profit, as reported
$
26,492

 
$
19,380

 
$
76,199

 
$
58,648

Add back: Stock-based compensation
182

 
135

 
526

 
667

Gross profit, non-GAAP
$
26,674

 
$
19,515

 
$
76,725

 
$
59,315

As percentage of revenue, non-GAAP
73.5
 %
 
69.9
 %
 
72.8
 %
 
71.8
 %
 
 
 
 
 
 
 
 
Research and development, as reported
$
12,766

 
$
11,175

 
$
36,970

 
$
32,234

Less: Stock-based compensation
586

 
341

 
1,289

 
1,443

Research and development, non-GAAP
$
12,180

 
$
10,834

 
$
35,681

 
$
30,791

As percentage of revenue, non-GAAP
33.6
 %
 
38.8
 %
 
33.9
 %
 
37.3
 %
 
 
 
 
 
 
 
 
Sales and marketing, as reported
$
20,903

 
$
16,248

 
$
50,937

 
$
39,435

Less: Stock-based compensation
461

 
288

 
1,243

 
889

Sales and marketing, non-GAAP
$
20,442

 
$
15,960

 
$
49,694

 
$
38,546

As percentage of revenue, non-GAAP
56.4
 %
 
57.2
 %
 
47.2
 %
 
46.7
 %
 
 
 
 
 
 
 
 
General and administrative, as reported
$
7,153

 
$
4,572

 
$
20,178

 
$
13,986

Less: Stock-based compensation
1,853

 
649

 
4,818

 
2,540

General and administrative, non-GAAP
$
5,300

 
$
3,923

 
$
15,360

 
$
11,446

As percentage of revenue, non-GAAP
14.6
 %
 
14.1
 %
 
14.6
 %
 
13.9
 %
 
 
 
 
 
 
 
 
Loss from operations
$
(14,330
)
 
$
(12,615
)
 
$
(31,886
)
 
$
(27,007
)
Add back: Stock-based compensation
3,082

 
1,413

 
7,876

 
5,539

Operating loss, non-GAAP
$
(11,248
)
 
$
(11,202
)
 
$
(24,010
)
 
$
(21,468
)
As percentage of revenue, non-GAAP
(31.0
)%
 
(40.1
)%
 
(22.8
)%
 
(26.0
)%
 
 
 
 
 
 
 
 
Net loss
$
(14,630
)
 
$
(13,382
)
 
$
(33,106
)
 
$
(28,497
)
Add back: Stock-based compensation
3,082

 
1,413

 
7,876

 
5,539

Net loss, non-GAAP
$
(11,548
)
 
$
(11,969
)
 
$
(25,230
)
 
$
(22,958
)
As percentage of revenue, non-GAAP
(31.8
)%
 
(42.9
)%
 
(23.9
)%
 
(27.8
)%
 
 
 
 
 
 
 
 
Net loss per share, non-GAAP:
 
 
 
 
 
 
 
Basic and diluted, non-GAAP
$
(0.29
)
 
$
(0.38
)
 
$
(0.63
)
 
$
(0.72
)
Weighted average common shares outstanding - basic and diluted
39,980,308

 
31,889,795

 
39,735,393

 
31,836,479





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

 
Three months ending December 31, 2015
 
Year ending December 31, 2015
 
 
 
 
 
 
 
 
Loss from operations, GAAP range
$
(14,000
)
-
$
(14,500
)
 
$
(45,900
)
-
$
(46,400
)
Add back: Stock-based compensation
3,200

 
3,200

 
11,100

 
11,100

Loss from operations, non-GAAP range
$
(10,800
)
-
$
(11,300
)
 
$
(34,800
)
-
$
(35,300
)
 
 
 
 
 
 
 
 
Net loss per share, GAAP range
$
(0.32
)
-
$
(0.33
)
 
$
(1.15
)
-
$
(1.16
)
Add back: Stock-based compensation
0.08

 
0.08

 
0.28

 
0.28

Net loss per share, non-GAAP range
$
(0.24
)
-
$
(0.25
)
 
$
(0.87
)
-
$
(0.88
)
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic and diluted
40,000,000

 
40,000,000

 
40,000,000

 
40,000,000

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