WORKIVA INC - FORM 8-K - EX-99.1 - November 4, 2020

Attached files

file filename
8-K - 8-K - WORKIVA INCwk-20201104.htm

image11a.jpg


Workiva Announces Third Quarter 2020 Financial Results
Q3 Subscription and Support Revenue of $75.9 Million, up 20.4% from Q3 2019
Q3 Total Revenue of $88.1 Million, up 18.8% from Q3 2019

AMES, Iowa - November 4, 2020 – Workiva Inc. (NYSE:WK), the company that simplifies complex work, today announced financial results for its third quarter ended September 30, 2020.
"We are pleased with our financial results, which beat guidance for revenue and operating income," said Marty Vanderploeg, Chief Executive Officer. "We executed on our initiatives, resulting in record bookings in the third quarter."
"Both transaction volume and average deal size exceeded our expectations in the third quarter," said Stuart Miller, Chief Financial Officer. "As a result, we are raising guidance for the fourth quarter."
"The global trends of online collaboration and remote work continue to benefit Workiva," said Vanderploeg. "In the third quarter, we saw broad demand across key solutions, particularly in global statutory reporting, management reporting and capital markets."
"We continued to make great progress upgrading customers to our next-generation platform during the third quarter," said Vanderploeg. "Customers accounting for over 90% of our Annual Contract Value have upgraded. The Workiva platform continues to be a key enabler of our growth strategy."
Third Quarter 2020 Financial Highlights
•Revenue: Total revenue for the third quarter of 2020 reached $88.1 million, an increase of 18.8% from $74.2 million in the third quarter of 2019. Subscription and support revenue contributed $75.9 million, up 20.4% versus the third quarter of 2019. Professional services revenue was $12.2 million, an increase of 9.8% compared to the same quarter in the prior year.
•Gross Profit: GAAP gross profit for the third quarter of 2020 was $66.2 million compared with $52.4 million in the same quarter of 2019. GAAP gross margin was 75.2% versus 70.7% in the third quarter of 2019. Non-GAAP gross profit for the third quarter of 2020 was $66.9 million, an increase of 25.6% compared with the prior year's third quarter, and non-GAAP gross margin was 75.9% compared to 71.8% in the third quarter of 2019.
•Results from Operations: GAAP loss from operations for the third quarter of 2020 was $7.0 million compared with a loss of $15.5 million in the prior year's third quarter. Non-GAAP income from operations was $3.6 million, compared with non-GAAP loss from operations of $6.3 million in the third quarter of 2019.
•GAAP Net Loss: GAAP net loss for the third quarter of 2020 was $10.5 million compared with a net loss of $16.1 million for the prior year's third quarter. GAAP net loss per basic and diluted share was $0.22 compared with a net loss per basic and diluted share of $0.34 in the third quarter of 2019.
•Non-GAAP Net Income/Loss: Non-GAAP net income for the third quarter of 2020 was $2.3 million compared with a net loss of $5.7 million in the prior year's third quarter. Non-GAAP net income per basic and diluted share was $0.05 and $0.04, respectively, compared with a net loss per basic and diluted share of $0.12, in the third quarter of 2019.
•Liquidity: As of September 30, 2020, Workiva had cash, cash equivalents and marketable securities totaling $523.9 million, compared with $488.0 million as of December 31, 2019. Workiva had $345.0 million aggregate principal amount of 1.125% convertible senior notes due in 2026 and $16.2 million of other financing obligations outstanding as of September 30, 2020.
Key Metrics and Recent Business Highlights
•Customers: Workiva had 3,583 customers as of September 30, 2020, a net increase of 129 customers from September 30, 2019.
•Revenue Retention Rate: As of September 30, 2020, Workiva's revenue retention rate (excluding add-on revenue) was 94.9%, and the revenue retention rate including add-on revenue was 110.0%. Add-on revenue includes changes in both solutions and pricing for existing customers.
•Large Contracts: As of September 30, 2020, Workiva had 785 customers with an annual contract value (ACV) of more than $100,000, up 28% from 611 customers at September 30, 2019. Workiva had 383 customers with an ACV of more than $150,000, up 47% from 261 customers in the third quarter of 2019.
Financial Outlook
As of November 4, 2020, Workiva is providing guidance as follows:
Fourth Quarter 2020 Guidance:
•Total revenue is expected to be in the range of $90.2 million to $90.7 million.
•GAAP loss from operations is expected to be in the range of $10.0 million to $9.5 million.
•Non-GAAP income from operations is expected to be in the range of $0.5 million to $1.0 million.
•GAAP net loss per basic and diluted share is expected to be in the range of $0.26 to $0.25.
•Non-GAAP net income per basic share is expected to be in the range of $0.00 to $0.01.
•Net income (loss) per basic share is based on 49.1 million weighted-average shares outstanding.
Full Year 2020 Guidance:
•Total revenue is expected to be in the range of $348.0 million to $348.5 million.
•GAAP loss from operations is expected to be in the range of $42.9 million to $42.4 million.
•Non-GAAP income from operations is expected to be in the range of $3.0 million to $3.5 million.
•GAAP net loss per basic and diluted share is expected to be in the range of $1.11 to $1.10.
•Non-GAAP net income per basic share is expected to be in the range of $0.02 to $0.03.
•Net income (loss) per basic share is based on 48.5 million weighted-average shares outstanding.
"On a preliminary basis, we expect total revenue to exceed $401 million in 2021. We expect the growth rate of revenue from subscription and support to exceed the growth rate of revenue from professional services. In addition, we expect non-GAAP operating loss as a percentage of revenue to be a low single digit in 2021," said Miller.
Workiva has factored into its guidance the expected impacts of COVID-19 on its business and results of operations based on currently available information. Significant variation from these assumptions could cause the company to change its guidance, and it undertakes no obligation to update its assumptions, expectations or guidance. These statements are forward-looking, and actual results may differ materially, as further discussed below under the heading "Safe Harbor Statement."

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, in addition to discussing the Company’s outlook for the fourth quarter and full year 2020. To access this call, dial 833-968-1977 (U.S. domestic) or 647-689-6649 (international). The conference ID is 4214167. 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 11, 2020, at 800-585-8367 (U.S. domestic) or 416-621-4642 (international). The replay pass code is 4214167. 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 Inc. (NYSE: WK) simplifies complex work for thousands of organizations worldwide. Customers trust Workiva’s open, intelligent and intuitive platform to connect data, documents and teams. The results: more efficiency, greater transparency and less risk. Learn more at 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
Follow Workiva on Twitter: www.twitter.com/workiva

Non-GAAP Financial Measures
The non-GAAP adjustments referenced herein relate to the exclusion of stock-based compensation and non-cash interest 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. As it relates to Non-GAAP loss from operations for 2021, described above, the Company has not provided guidance for GAAP measures or a quantitative reconciliation of forward-looking non-GAAP financial measures to the most directly comparable GAAP measure, because it is unable to predict with reasonable certainty the GAAP loss from operations and its components without unreasonable effort. These items are uncertain, depend on various factors, and could have a material impact on the GAAP reported results for 2021.

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, 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. 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.
###
Investor Contact:
Media Contact:
Adam Terese
Kevin McCarthy
Workiva Inc.
Workiva Inc.
investor@workiva.com
press@workiva.com
(515) 663-4493
(515) 663-4471

1


WORKIVA INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Three months ended September 30,Nine months ended September 30,
2020201920202019
(unaudited)
Revenue
Subscription and support$75,850 $63,022 $214,907 $179,617 
Professional services12,249 11,157 42,853 38,009 
Total revenue88,099 74,179 257,760 217,626 
Cost of revenue
Subscription and support (1)
12,013 10,924 36,264 30,935 
Professional services (1)
9,873 10,827 30,262 31,029 
Total cost of revenue21,886 21,751 66,526 61,964 
Gross profit66,213 52,428 191,234 155,662 
Operating expenses
Research and development (1)
23,956 22,899 70,458 66,705 
Sales and marketing (1)
35,487 32,990 106,874 86,568 
General and administrative (1)
13,722 12,017 46,802 33,626 
Total operating expenses73,165 67,906 224,134 186,899 
Loss from operations(6,952)(15,478)(32,900)(31,237)
Interest income471 1,460 2,832 2,593 
Interest expense(3,572)(1,959)(10,689)(2,832)
Other (expense) and income, net(387)24 263 (259)
Loss before provision for income taxes(10,440)(15,953)(40,494)(31,735)
Provision for income taxes67 98 351 101 
Net loss$(10,507)$(16,051)$(40,845)$(31,836)
Net loss per common share:
Basic and diluted$(0.22)$(0.34)$(0.85)$(0.69)
Weighted-average common shares outstanding - basic and diluted48,840,131 46,731,663 48,188,183 46,048,037 

(1) Includes stock-based compensation expense as follows:
Three months ended September 30,Nine months ended September 30,
2020201920202019
(unaudited)
Cost of revenue
Subscription and support$426 $386 $1,293 $1,142 
Professional services272 456 1,062 1,296 
Operating expenses
Research and development2,167 2,265 5,790 6,016 
Sales and marketing2,687 2,203 8,367 6,199 
General and administrative5,049 3,913 18,919 11,276 

2


WORKIVA INC.

CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, 2020December 31, 2019
(unaudited)
Assets
Current assets
Cash and cash equivalents$426,132 $381,742 
Marketable securities97,750 106,214 
Accounts receivable, net55,571 60,228 
Deferred commissions17,919 14,108 
Other receivables2,417 2,432 
Prepaid expenses and other9,587 6,508 
Total current assets609,376 571,232 
Property and equipment, net38,231 39,745 
Operating lease right-of-use assets16,631 15,352 
Deferred commissions, non-current17,572 14,977 
Intangible assets, net1,633 1,651 
Other assets4,059 3,439 
Total assets$687,502 $646,396 
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable$3,651 $7,057 
Accrued expenses and other current liabilities63,444 49,930 
Deferred revenue182,700 173,617 
Current portion of financing obligations1,429 1,328 
Total current liabilities251,224 231,932 
Convertible senior notes, net287,242 280,601 
Deferred revenue, non-current34,756 32,569 
Other long-term liabilities1,748 1,498 
Operating lease liabilities, non-current18,229 18,564 
Financing obligations, non-current14,805 15,889 
Total liabilities608,004 581,053 
Stockholders’ equity
Common stock48 47 
Additional paid-in-capital474,969 420,170 
Accumulated deficit(396,006)(355,161)
Accumulated other comprehensive income487 287 
Total stockholders’ equity79,498 65,343 
Total liabilities and stockholders’ equity$687,502 $646,396 

3


WORKIVA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three months ended September 30,Nine months ended September 30,
2020201920202019
(unaudited)
Cash flows from operating activities
Net loss$(10,507)$(16,051)$(40,845)$(31,836)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization1,160 1,058 3,433 2,932 
Stock-based compensation expense10,601 9,223 35,431 25,929 
Recovery of doubtful accounts(550)(104)(191)(58)
Amortization (accretion) of premiums and discounts on marketable securities, net106 15 319 (89)
Amortization of debt discount and issuance costs2,231 1,083 6,641 1,083 
Deferred income tax63 (21)(68)(67)
Changes in assets and liabilities:
Accounts receivable(13,307)3,579 4,805 21,530 
Deferred commissions(4,818)(2,106)(6,381)(7,968)
Operating lease right-of-use asset1,019 581 2,992 1,805 
Other receivables224 (417)29 (470)
Prepaid expenses(211)(191)(3,056)(3,737)
Other assets83 (943)(600)(2,349)
Accounts payable(181)516 (3,255)160 
Deferred revenue16,182 3,830 11,314 14,112 
Operating lease liability(1,115)(758)(3,438)(2,226)
Accrued expenses and other liabilities6,819 5,403 12,531 9,828 
Net cash provided by operating activities7,799 4,697 19,661 28,579 
Cash flows from investing activities
Purchase of property and equipment(379)(663)(1,763)(2,860)
Purchase of marketable securities(7,980)(54,749)(45,269)(95,466)
Sale of marketable securities— 498 11,423 498 
Maturities of marketable securities16,300 1,500 42,337 20,390 
Purchase of intangible assets(102)(51)(253)(712)
Other— (1,000)— (1,000)
Net cash provided by (used in) investing activities7,839 (54,465)6,475 (79,150)
4

WORKIVA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three months ended September 30,Nine months ended September 30,
2020201920202019
(unaudited)
Cash flows from financing activities
Proceeds from option exercises4,795 5,940 14,253 22,493 
Taxes paid related to net share settlements of stock-based compensation awards— — (2,111)(390)
Proceeds from shares issued in connection with employee stock purchase plan3,567 2,773 7,227 4,922 
Proceeds from the issuance of convertible senior notes, net of issuance costs— 335,899 — 335,899 
Principal payments on capital lease and financing obligations(335)(306)(983)(901)
Net cash provided by financing activities8,027 344,306 18,386 362,023 
Effect of foreign exchange rates on cash346 (127)(132)88 
Net increase in cash and cash equivalents24,011 294,411 44,390 311,540 
Cash and cash equivalents at beginning of period402,121 94,713 381,742 77,584 
Cash and cash equivalents at end of period$426,132 $389,124 $426,132 $389,124 

5


TABLE I
WORKIVA INC.
RECONCILIATION OF NON-GAAP INFORMATION
(in thousands, except share and per share)
Three months ended September 30,Nine months ended September 30,
2020201920202019
Gross profit, subscription and support$63,837 $52,098 $178,643 $148,682 
Add back: Stock-based compensation426 386 1,293 1,142 
Gross profit, subscription and support, non-GAAP$64,263 $52,484 $179,936 $149,824 
As a percentage of subscription and support revenue, non-GAAP84.7 %83.3 %83.7 %83.4 %
Gross profit, professional services$2,376 $330 $12,591 $6,980 
Add back: Stock-based compensation272 456 1,062 1,296 
Gross profit, professional services, non-GAAP$2,648 $786 $13,653 $8,276 
As a percentage of professional services revenue, non-GAAP21.6 %7.0 %31.9 %21.8 %
Gross profit$66,213 $52,428 $191,234 $155,662 
Add back: Stock-based compensation698 842 2,355 2,438 
Gross profit, non-GAAP$66,911 $53,270 $193,589 $158,100 
As percentage of revenue, non-GAAP75.9 %71.8 %75.1 %72.6 %
Cost of revenue, subscription and support$12,013 $10,924 $36,264 $30,935 
Less: Stock-based compensation426 386 1,293 1,142 
Cost of revenue, subscription and support, non-GAAP$11,587 $10,538 $34,971 $29,793 
As percentage of revenue, non-GAAP13.2 %14.2 %13.6 %13.7 %
Cost of revenue, professional services$9,873 $10,827 $30,262 $31,029 
Less: Stock-based compensation272 456 1,062 1,296 
Cost of revenue, professional services, non-GAAP$9,601 $10,371 $29,200 $29,733 
As percentage of revenue, non-GAAP10.9 %14.0 %11.3 %13.7 %
Research and development$23,956 $22,899 $70,458 $66,705 
Less: Stock-based compensation2,167 2,265 5,790 6,016 
Research and development, non-GAAP$21,789 $20,634 $64,668 $60,689 
As percentage of revenue, non-GAAP24.7 %27.8 %25.1 %27.9 %
Sales and marketing$35,487 $32,990 $106,874 $86,568 
Less: Stock-based compensation2,687 2,203 8,367 6,199 
Sales and marketing, non-GAAP$32,800 $30,787 $98,507 $80,369 
As percentage of revenue, non-GAAP37.2 %41.5 %38.2 %36.9 %
6

TABLE I
WORKIVA INC.
RECONCILIATION OF NON-GAAP INFORMATION
(in thousands, except share and per share)
Three months ended September 30,Nine months ended September 30,
2020201920202019
General and administrative$13,722 $12,017 $46,802 $33,626 
Less: Stock-based compensation5,049 3,913 18,919 11,276 
General and administrative, non-GAAP$8,673 $8,104 $27,883 $22,350 
As percentage of revenue, non-GAAP9.8 %10.9 %10.8 %10.3 %
Loss from operations$(6,952)$(15,478)$(32,900)$(31,237)
Add back: Stock-based compensation10,601 9,223 35,431 25,929 
Income (loss) from operations, non-GAAP$3,649 $(6,255)$2,531 $(5,308)
As percentage of revenue, non-GAAP4.1 %(8.4)%1.0 %(2.4)%
Net loss$(10,507)$(16,051)$(40,845)$(31,836)
Add back: Stock-based compensation10,601 9,223 35,431 25,929 
Add back: Non-cash interest expense related to convertible senior notes2,231 1,083 6,641 1,083 
Net income (loss), non-GAAP$2,325 $(5,745)$1,227 $(4,824)
As percentage of revenue, non-GAAP2.6 %(7.7)%0.5 %(2.2)%
Net loss per basic and diluted share:$(0.22)$(0.34)$(0.85)$(0.69)
Add back: Stock-based compensation0.22 0.20 0.74 0.57 
Add back: Non-cash interest expense related to convertible senior notes0.05 0.02 0.14 0.02 
Net income (loss) per basic share, non-GAAP$0.05 $(0.12)$0.03 $(0.10)
Net income (loss) per diluted share, non-GAAP$0.04 $(0.12)$0.02 $(0.10)
Weighted-average common shares outstanding - basic, non-GAAP48,840,131 46,731,663 48,188,183 46,048,037 
Weighted-average common shares outstanding - diluted, non-GAAP53,209,214 46,731,663 52,417,046 46,048,037 



7


TABLE II
WORKIVA INC.
RECONCILIATION OF NON-GAAP GUIDANCE
(in thousands, except share and per share data)
Three months ending December 31, 2020Year ending December 31, 2020
Loss from operations, GAAP range$(10,000)-$(9,500)$(42,900)-$(42,400)
Add back: Stock-based compensation
10,500 10,500 45,900 45,900 
Income from operations, non-GAAP range$500 -$1,000 $3,000 -$3,500 
Net loss per share, GAAP range$(0.26)-$(0.25)$(1.11)-$(1.10)
Add back: Stock-based compensation
0.21 0.21 0.95 0.95 
Add back: Non-cash interest expense related to convertible senior notes0.05 0.05 0.18 0.18 
Net income per share, basic, non-GAAP range$0.00 -$0.01 $0.02 -$0.03 
Weighted-average common shares outstanding - basic49,100,000 49,100,000 48,500,000 48,500,000 

8

WORKIVA INC Reports