Business Wire | Aug 4, 2020 04:15PM EDT

Workiva Announces Second Quarter 2020 Financial Results

Aug. 04, 2020

AMES, Iowa--(BUSINESS WIRE)--Aug. 04, 2020--Workiva Inc. (NYSE:WK), provider of the world's leading connected reporting and compliance platform, today announced financial results for its second quarter ended June 30, 2020.

"Despite challenges from the COVID-19 pandemic, we are pleased with our second quarter 2020 financial results, which exceeded guidance for revenue and operating results," said Marty Vanderploeg, Chief Executive Officer.

"We are reinstating guidance for full year 2020 because we believe visibility on closing new business has substantially improved," said Stuart Miller, Chief Financial Officer.

"Our sales and marketing teams are succeeding in a virtual environment," said Vanderploeg. "In the second quarter, demand for our platform improved across all of our growth vectors, which include EMEA, Wdata and our platform solutions for Integrated Risk, Global Statutory Reporting and the U.S. Government."

"Our new platform increases flexibility and speed when developing new solutions, enabling us to enter more markets faster than before," said Vanderploeg. "Developing and delivering new solutions on our platform will continue to be key drivers to our success."

Second Quarter 2020 Financial Highlights

* Revenue: Total revenue for the second quarter of 2020 reached $83.9 million, an increase of 14.1% from $73.5 million in the second quarter of 2019. Subscription and support revenue contributed $70.7 million, up 16.9% versus the second quarter of 2019. Professional services revenue was $13.2 million, an increase of 1.2% compared to the same quarter in the prior year. * Gross Profit: GAAP gross profit for the second quarter of 2020 was $61.6 million compared with $52.8 million in the same quarter of 2019. GAAP gross margin was 73.5% versus 71.8% in the second quarter of 2019. Non-GAAP gross profit for the second quarter of 2020 was $62.4 million, an increase of 16.4% compared with the prior year's second quarter, and non-GAAP gross margin was 74.4% compared to 73.0% in the second quarter of 2019. * Results from Operations: GAAP loss from operations for the second quarter of 2020 was $16.8 million compared with a loss of $8.4 million in the prior year's second quarter. Non-GAAP loss from operations was $1.9 million, compared with non-GAAP income from operations of $0.1 million in the second quarter of 2019. * GAAP Net Loss: GAAP net loss for the second quarter of 2020 was $19.8 million compared with a net loss of $8.3 million for the prior year's second quarter. GAAP net loss per basic and diluted share was $0.41 compared with a net loss per basic and diluted share of $0.18 in the second quarter of 2019. * Non-GAAP Net Loss: Non-GAAP net loss for the second quarter of 2020 was $2.7 million compared with a net income of $0.2 million in the prior year's second quarter. Non-GAAP net loss per basic and diluted share was $0.06, compared with a net income per basic and diluted share of $0.00, in the second quarter of 2019. * Liquidity: As of June 30, 2020, Workiva had cash, cash equivalents and marketable securities totaling $508.6 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 2026 and other financing obligations totaled $16.6 million outstanding as of June 30, 2020.

Key Metrics and Recent Business Highlights

* Customers: Workiva had 3,512 customers as of June 30, 2020, a net increase of 91 customers from June 30, 2019. * Revenue Retention Rate: As of June 30, 2020, Workiva's revenue retention rate (excluding add-on revenue) was 94.5%, and the revenue retention rate including add-on revenue was 107.9%. Add-on revenue includes changes in both solutions and pricing for existing customers. * Large Contracts: As of June 30, 2020, Workiva had 716 customers with an annual contract value (ACV) of more than $100,000, up 28% from 558 customers at June 30, 2019. Workiva had 342 customers with an ACV of more than $150,000, up 44% from 238 customers in the second quarter of 2019.

Financial OutlookAs of August 4, 2020, Workiva is providing guidance as follows:

Third Quarter 2020 Guidance

* Total revenue is expected to be in the range of $84.3 million to $84.8 million. * GAAP loss from operations is expected to be in the range of $16.4 million to $16.9 million. * Non-GAAP loss from operations is expected to be in the range of $5.2 million to $5.7 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 48.9 million weighted-average shares outstanding.

Full Year 2020 Guidance:

* Total revenue is expected to be in the range of $341.5 million to $342.5 million. * GAAP loss from operations is expected to be in the range of $56.5 million to $58.0 million. * Non-GAAP loss from operation is expected to be in the range of $10.0 million to $11.5 million. * GAAP net loss per basic and diluted share is expected to be in the range of $1.37 to $1.40. * Non-GAAP net loss per basic and diluted share is expected to be in the range of $0.23 to $0.26. * Net loss per basic and diluted share is based on 48.5 million weighted-average shares outstanding.

We are reinstating our 2020 full year guidance based on increased visibility into deal closings. In our third quarter and full year 2020 guidance, we factor in the expected impacts of COVID-19 on our business and results of operations based on information available to us today. Significant variation from these assumptions could cause us to change our guidance, and we undertake no obligation to update our assumptions, expectations or our guidance. These statements are forward-looking, and actual results may differ materially, as further discussed below under the heading "Safe Harbor Statement."

Quarterly Conference CallWorkiva will host a conference call today at 5:00 p.m. ET to review the Company's financial results for the second quarter, in addition to discussing the Company's outlook for the third 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 1216459. 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 11, 2020 at 800-585-8367 (U.S. domestic) or 416-621-4642 (international). The replay pass code is 1216459. 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 WorkivaWorkiva, provider of the world's leading connected reporting and compliance platform, is used by thousands of enterprises across 180 countries, including over 75 percent of Fortune 500(r) 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 Follow Workiva on Twitter: www.twitter.com/workiva

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Non-GAAP Financial MeasuresThe 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.

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 StatementCertain statements in this press release are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. These statements relate to future events or the Company's future financial performance and involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of the Company or its industry to be materially different from those expressed or implied by any forward-looking statements. In particular, statements about the Company's expectations, beliefs, plans, objectives, assumptions, future events or future performance contained in this press release are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "could," "would," "should," "expect," "plan," "anticipate," "intend," "believe," "estimate," "predict," "potential," "outlook," "guidance" or the negative of those terms or other comparable terminology.

Please see the Company's documents filed or to be filed with the Securities and Exchange Commission, including the Company's annual reports filed on Form 10-K and quarterly reports on Form 10-Q, and any amendments thereto for a discussion of certain important risk factors that relate to forward-looking statements contained in this report. The Company has based these forward-looking statements on its current expectations, assumptions, estimates and projections. While the Company believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond the Company's control. These and other important factors may cause actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements. Any forward-looking statements are made only as of the date hereof, and unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

WORKIVA INC.

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

Three months ended June 30, Six months ended June 30,

2020 2019 2020 2019

(unaudited)

Revenue

Subscription and $ 70,696 $ 60,472 $ 139,057 $ 116,595 support

Professional services 13,164 13,012 30,604 26,852

Total revenue 83,860 73,484 169,661 143,447

Cost of revenue

Subscription and 12,098 10,202 24,251 20,011 support ^(1)

Professional services 10,146 10,475 20,389 20,202 ^(1)

Total cost of revenue 22,244 20,677 44,640 40,213

Gross profit 61,616 52,807 125,021 103,234

Operating expenses

Research and 23,508 21,795 46,502 43,806 development ^(1)

Sales and marketing ^ 35,270 28,213 71,387 53,578 (1)

General and 19,632 11,226 33,080 21,609 administrative ^(1)

Total operating 78,410 61,234 150,969 118,993 expenses

Loss from operations (16,794 ) (8,427 ) (25,948 ) (15,759 )

Interest income 655 641 2,361 1,133

Interest expense (3,563 ) (433 ) (7,117 ) (873 )

Other (expense) and (68 ) (111 ) 650 (283 ) income, net

Loss before (benefit)provision for income (19,770 ) (8,330 ) (30,054 ) (15,782 ) taxes

(Benefit) provision (5 ) (8 ) 284 3 for income taxes

Net loss $ (19,765 ) $ (8,322 ) $ (30,338 ) $ (15,785 )

Net loss per common share:

Basic and diluted $ (0.41 ) $ (0.18 ) $ (0.63 ) $ (0.35 )

Weighted-averagecommon shares 48,171,552 46,166,660 47,858,628 45,700,559 outstanding - basicand diluted

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

Three months ended June Six months ended June 30, 30,

2020 2019 2020 2019

(unaudited)

Cost of revenue

Subscription and support $ 436 $ 399 $ 867 $ 756

Professional services 365 431 790 840

Operating expenses

Research and development 2,040 1,851 3,623 3,751

Sales and marketing 2,944 2,032 5,680 3,996

General and 9,109 3,800 13,870 7,363 administrative

WORKIVA INC.

CONSOLIDATED BALANCE SHEETS(in thousands)

June 30, 2020 December 31, 2019

(unaudited)

Assets

Current assets

Cash and cash equivalents $ 402,121 $ 381,742

Marketable securities 106,451 106,214

Accounts receivable, net 41,470 60,228

Deferred commissions 15,650 14,108

Other receivables 2,630 2,432

Prepaid expenses and other 9,349 6,508

Total current assets 577,671 571,232

Property and equipment, net 38,913 39,745

Operating lease right-of-use assets 17,534 15,352

Deferred commissions, non-current 14,867 14,977

Intangible assets, net 1,622 1,651

Other assets 4,120 3,439

Total assets $ 654,727 $ 646,396

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable $ 3,813 $ 7,057

Accrued expenses and other current liabilities 56,387 49,930

Deferred revenue 171,378 173,617

Current portion of financing obligations 1,395 1,328

Total current liabilities 232,973 231,932

Convertible senior notes, net 285,011 280,601

Deferred revenue, non-current 29,294 32,569

Other long-term liabilities 1,778 1,498

Operating lease liabilities, non-current 19,274 18,564

Financing obligations, non-current 15,174 15,889

Total liabilities 583,504 581,053

Stockholders' equity

Common stock 47 47

Additional paid-in-capital 456,007 420,170

Accumulated deficit (385,499 ) (355,161 )

Accumulated other comprehensive income 668 287

Total stockholders' equity 71,223 65,343

Total liabilities and stockholders' equity $ 654,727 $ 646,396

WORKIVA INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)

Three months ended June 30, Six months ended June 30,

2020 2019 2020 2019

(unaudited)

Cash flows fromoperating activities

Net loss $ (19,765 ) $ (8,322 ) $ (30,338 ) $ (15,785 )

Adjustments toreconcile net lossto net cash provided byoperatingactivities:

Depreciation and 1,131 971 2,273 1,874 amortization

Stock-basedcompensation 14,894 8,513 24,830 16,706 expense

Provision for 319 233 359 46 doubtful accounts

Amortization(accretion) ofpremiums and 112 (23 ) 213 (104 ) discounts onmarketablesecurities, net

Amortization ofdebt discount and 2,213 - 4,410 - issuance costs

Deferred income (131 ) (28 ) (131 ) (46 ) tax

Changes in assets and liabilities:

Accounts 3,847 3,133 18,112 17,951 receivable

Deferred (2,166 ) (3,833 ) (1,563 ) (5,862 ) commissions

Operating lease 875 556 1,973 1,224 right-of-use asset

Other receivables 58 161 (195 ) (53 )

Prepaid expenses (890 ) (310 ) (2,845 ) (3,546 )

Other assets (609 ) 58 (683 ) (1,406 )

Accounts payable (1,692 ) 1,206 (3,074 ) (356 )

Deferred revenue (3,640 ) 8,295 (4,868 ) 10,282

Operating lease (1,178 ) (813 ) (2,323 ) (1,468 ) liability

Accrued expensesand other 13,735 8,966 5,712 4,425 liabilities

Net cash providedby operating 7,113 18,763 11,862 23,882 activities

Cash flows frominvesting activities

Purchase ofproperty and (696 ) (454 ) (1,384 ) (2,197 ) equipment

Purchase ofmarketable (16,457 ) (18,562 ) (37,289 ) (40,717 ) securities

Sale of marketable - - 11,423 - securities

Maturities ofmarketable 13,062 11,500 26,037 18,890 securities

Purchase of (74 ) (577 ) (151 ) (661 ) intangible assets

Net cash used ininvesting (4,165 ) (8,093 ) (1,364 ) (24,685 ) activities



Cash flows fromfinancing activities

Proceeds from 6,664 5,498 9,458 16,553 option exercises

Taxes paid relatedto net sharesettlements of (732 ) - (2,111 ) (390 ) stock-basedcompensationawards

Proceeds fromshares issued inconnection with - - 3,660 2,149 employee stockpurchase plan

Principal paymentson capital lease (328 ) (301 ) (648 ) (595 ) and financingobligations

Net cash providedby financing 5,604 5,197 10,359 17,717 activities

Effect of foreignexchange rates on 135 110 (478 ) 215 cash

Net increase incash and cash 8,687 15,977 20,379 17,129 equivalents

Cash and cashequivalents at 393,434 78,736 381,742 77,584 beginning ofperiod

Cash and cashequivalents at end $ 402,121 $ 94,713 $ 402,121 $ 94,713 of period

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

Three months ended June 30, Six months ended June 30,

2020 2019 2020 2019

Gross profit,subscription and $ 58,598 $ 50,270 $ 114,806 $ 96,584 support

Add back:Stock-based 436 399 867 756 compensation

Gross profit,subscription and $ 59,034 $ 50,669 $ 115,673 $ 97,340 support,non-GAAP

As a percentageof subscriptionand support 83.5 % 83.8 % 83.2 % 83.5 %revenue,non-GAAP



Gross profit,professional $ 3,018 $ 2,537 $ 10,215 $ 6,650 services

Add back:Stock-based 365 431 790 840 compensation

Gross profit,professional $ 3,383 $ 2,968 $ 11,005 $ 7,490 services,non-GAAP

As a percentageof professionalservices 25.7 % 22.8 % 36.0 % 27.9 %revenue,non-GAAP



Gross profit $ 61,616 $ 52,807 $ 125,021 $ 103,234

Add back:Stock-based 801 830 1,657 1,596 compensation

Gross profit, $ 62,417 $ 53,637 $ 126,678 $ 104,830 non-GAAP

As percentage ofrevenue, 74.4 % 73.0 % 74.7 % 73.1 %non-GAAP



Cost of revenue,subscription and $ 12,098 $ 10,202 $ 24,251 $ 20,011 support

Less:Stock-based 436 399 867 756 compensation

Cost of revenue,subscription and $ 11,662 $ 9,803 $ 23,384 $ 19,255 support,non-GAAP

As percentage ofrevenue, 13.9 % 13.3 % 13.8 % 13.4 %non-GAAP



Cost of revenue,professional $ 10,146 $ 10,475 $ 20,389 $ 20,202 services

Less:Stock-based 365 431 790 840 compensation

Cost of revenue,professional $ 9,781 $ 10,044 $ 19,599 $ 19,362 services,non-GAAP

As percentage ofrevenue, 11.7 % 13.7 % 11.6 % 13.5 %non-GAAP



Research and $ 23,508 $ 21,795 $ 46,502 $ 43,806 development

Less:Stock-based 2,040 1,851 3,623 3,751 compensation

Research anddevelopment, $ 21,468 $ 19,944 $ 42,879 $ 40,055 non-GAAP

As percentage ofrevenue, 25.6 % 27.1 % 25.3 % 27.9 %non-GAAP



Sales and $ 35,270 $ 28,213 $ 71,387 $ 53,578 marketing

Less:Stock-based 2,944 2,032 5,680 3,996 compensation

Sales andmarketing, $ 32,326 $ 26,181 $ 65,707 $ 49,582 non-GAAP

As percentage ofrevenue, 38.5 % 35.6 % 38.7 % 34.6 %non-GAAP



General and $ 19,632 $ 11,226 $ 33,080 $ 21,609 administrative

Less:Stock-based 9,109 3,800 13,870 7,363 compensation

General andadministrative, $ 10,523 $ 7,426 $ 19,210 $ 14,246 non-GAAP

As percentage ofrevenue, 12.5 % 10.1 % 11.3 % 9.9 %non-GAAP



Loss from $ (16,794 ) $ (8,427 ) $ (25,948 ) $ (15,759 ) operations

Add back:Stock-based 14,894 8,513 24,830 16,706 compensation

(Loss) incomefrom operations, $ (1,900 ) $ 86 $ (1,118 ) $ 947 non-GAAP

As percentage ofrevenue, (2.3 ) % 0.1 % (0.7 ) % 0.7 %non-GAAP



Net loss $ (19,765 ) $ (8,322 ) $ (30,338 ) $ (15,785 )

Add back:Stock-based 14,894 8,513 24,830 16,706 compensation

Add back:Non-cashinterest expense 2,213 - 4,410 - related toconvertiblesenior notes

Net (loss) $ (2,658 ) $ 191 $ (1,098 ) $ 921 income, non-GAAP

As percentage ofrevenue, (3.2 ) % 0.3 % (0.6 ) % 0.6 %non-GAAP



Net loss perbasic and $ (0.41 ) $ (0.18 ) $ (0.63 ) $ (0.35 ) diluted share:

Add back:Stock-based 0.30 0.18 0.52 0.37 compensation

Add back:Non-cashinterest expense 0.05 - 0.09 - related toconvertiblesenior notes

Net (loss)income per basic $ (0.06 ) $ - $ (0.02 ) $ 0.02 share, non-GAAP

Net (loss)income per $ (0.06 ) $ - $ (0.02 ) $ 0.02 diluted share,non-GAAP



Weighted-averagecommon shares 48,171,552 46,166,660 47,858,628 45,700,559 outstanding -basic, non-GAAP

Weighted-averagecommon sharesoutstanding - 48,171,552 51,540,253 47,858,628 51,061,575 diluted,non-GAAP

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

Three months ending September Year ending December 31, 2020 30, 2020



Loss fromoperations, GAAP $ (16,400 ) - $ (16,900 ) $ (56,500 ) - $ (58,000 ) range

Add back:Stock-based 11,200 11,200 46,500 46,500 compensation

Loss fromoperations, $ (5,200 ) - $ (5,700 ) $ (10,000 ) - $ (11,500 ) non-GAAP range



Net loss pershare, GAAP $ (0.39 ) - $ (0.40 ) $ (1.37 ) - $ (1.40 ) range

Add back:Stock-based 0.23 0.23 0.96 0.96 compensation

Add back:Non-cashinterest expense 0.04 0.04 0.18 0.18 related toconvertiblesenior notes

Net loss pershare, non-GAAP $ (0.12 ) - $ (0.13 ) $ (0.23 ) - $ (0.26 ) range



Weighted-averagecommon sharesoutstanding - 48,900,000 48,900,000 48,500,000 48,500,000 basic anddiluted

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