EX-99.1 2 q32016exhibit991.htm EXHIBIT 99.1 Exhibit



workivalogodigitalandweba07.jpg

FOR IMMEDIATE RELEASE

Workiva Announces Third Quarter 2016 Financial Results
Q3 Revenue of $44.7 million, Up 23% from Q3 of 2015

Ames, IA - November 9, 2016 -- Workiva Inc. (NYSE: WK), a leading provider of enterprise cloud solutions for improving productivity, accountability and insight into business data, today announced financial results for its third quarter ended September 30, 2016.
“We posted strong results in the third quarter, highlighted by 23% revenue growth over the same quarter last year and better than expected operating margin,” said Matt Rizai, Chairman and Chief Executive Officer of Workiva. “We are pleased to have generated positive operating cash flow in the third quarter, and we expect to post positive operating cash flow again in the fourth quarter as we make progress toward sustained positive operating cash flow.”

“Our success in delivering multiple solutions has created demand from numerous customers for a broader-based, enterprise-wide Wdesk solution,” said Rizai. “In response, we have been evolving our business model, enhancing user management and improving our technology to capitalize on our growing enterprise-wide opportunities, even as we continue to focus on improving operating cash flow.”

“Our brand recognition and market penetration are also generating opportunities for us to develop partnerships with subject-matter experts and consultants, as well as with distribution and technology firms,” said Rizai.

Third Quarter 2016 Financial Highlights
•
Revenue: Total revenue for the quarter ended September 30, 2016 was $44.7 million, an increase of 23.3% from $36.3 million in the third quarter of 2015. Subscription and support revenue was $36.2 million, an increase of 21.5% versus results in the third quarter of 2015. Professional services revenue was $8.5 million, an increase of 31.7% compared to the same quarter in the prior year.
•
Gross Profit: GAAP gross profit for the quarter ended September 30, 2016 was $32.0 million compared with $26.5 million in the same quarter of the prior year. GAAP gross margin was 71.5% in the third quarter of 2016 versus 73.0% in the third quarter of 2015. Non-GAAP gross profit for the quarter ended September 30, 2016 was $32.2 million, an increase of 20.7% compared with the prior year's third quarter, and non-GAAP gross margin was 72.0% compared to 73.5% in the third quarter of 2015.
•
Loss from Operations: GAAP loss from operations for the quarter ended September 30, 2016 was $12.7 million compared with a loss of $14.3 million in the prior year's third quarter. Non-GAAP loss from operations for the quarter ended September 30, 2016 was $9.1 million, compared with non-GAAP loss from operations of $11.2 million in the third quarter of 2015. Non-GAAP loss from operations as a percentage of revenue improved 1,070 basis points for the quarter ended September 30, 2016 compared to the third quarter of 2015.
•
Net Loss: GAAP net loss for the quarter ended September 30, 2016 was $12.9 million compared with a net loss of $14.6 million for the prior year's third quarter. GAAP net loss per basic and diluted share for the quarter ended September 30, 2016 was $0.32, based on 40.8 million weighted-average shares outstanding, compared with a net loss per basic and diluted share of $0.37, based on 40.0 million weighted-average shares outstanding in the third quarter of 2015.
•
Non-GAAP net loss for the quarter ended September 30, 2016 was $9.2 million compared with a net loss of $11.5 million in the prior year's third quarter. Non-GAAP net loss per basic and diluted share for the quarter

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ended September 30, 2016 was $0.23, based on 40.8 million weighted-average shares outstanding, compared with a net loss per basic and diluted share of $0.29, based on 40.0 million weighted-average shares outstanding in the third quarter of 2015.

Operating Metrics
•
Customers: Workiva had 2,696 customers as of September 30, 2016, a net increase of 228 customers from September 30, 2015.
•
Revenue Retention Rate: As of September 30, 2016, Workiva's revenue retention rate (excluding add-on revenue) was 95.0%, and the revenue retention rate including add-on revenue was 108.7%. Add-on revenue includes the change in both seats purchased and seat pricing for existing customers.

Financial Outlook
As of November 9, 2016, Workiva is providing guidance for its fourth quarter 2016 and full year 2016 as follows:

Fourth Quarter 2016 Guidance:
•
Total revenue is expected to be in the range of $45.2 million to $45.7 million.
•
GAAP loss from operations is expected to be in the range of $11.8 million to $12.3 million.
•
Non-GAAP loss from operations is expected to be in the range of $8.0 million to $8.5 million.
•
GAAP net loss per basic and diluted share is expected to be in the range of $0.30 to $0.31.
•
Non-GAAP net loss per basic and diluted share is expected to be in the range of $0.20 to $0.21.
•
Net loss per basic and diluted share is based on 41.0 million weighted-average shares outstanding.

Full Year 2016 Guidance:
•
Total revenue is expected to be in the range of $177.5 million to $178.0 million.
•
GAAP loss from operations is expected to be in the range of $48.0 million to $48.5 million.
•
Non-GAAP loss from operations is expected to be in the range of $33.6 million to $34.1 million.
•
GAAP net loss per basic and diluted share is expected to be in the range of $1.19 to $1.20.
•
Non-GAAP net loss per basic and diluted share is expected to be in the range of $0.84 to $0.85.
•
Net loss per basic and diluted share is based on 40.7 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 2016, in addition to discussing the Company’s outlook for the fourth quarter and full year 2016. To access this call, dial 877-201-0168 (domestic) or 647-788-4901 (international). The conference ID is 87125969. 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 16, 2016 at 855-859-2056 (domestic) or 404-537-3406 (international). The replay pass code is 87125969. 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 percent 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. 


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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

3



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 Rogers
 
Kevin McCarthy
 
 
Workiva Inc.
 
Workiva Inc.
 
 
investor@workiva.com
 
press@workiva.com
 
 
(515) 663-4493
 
(515) 663-4471
 

4



WORKIVA INC.

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

 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
Revenue
 
 
 
 
 
 
 
Subscription and support
$
36,237

 
$
29,832

 
$
104,791

 
$
84,186

Professional services
8,473

 
6,436

 
27,481

 
21,204

Total revenue
44,710

 
36,268

 
132,272

 
105,390

Cost of revenue
 
 
 
 
 
 
 
Subscription and support (1)
6,694

 
5,319

 
20,651

 
16,768

Professional services (1)
6,040

 
4,457

 
17,766

 
12,423

Total cost of revenue
12,734

 
9,776

 
38,417

 
29,191

Gross profit
31,976

 
26,492

 
93,855

 
76,199

Operating expenses
 
 
 
 
 
 
 
Research and development (1)
14,342

 
12,766

 
42,905

 
36,970

Sales and marketing (1)
22,354

 
20,903

 
62,270

 
50,937

General and administrative (1)
8,015

 
7,153

 
24,850

 
20,178

Total operating expenses
44,711

 
40,822

 
130,025

 
108,085

Loss from operations
(12,735
)
 
(14,330
)
 
(36,170
)
 
(31,886
)
Interest expense
(462
)
 
(494
)
 
(1,420
)
 
(1,517
)
Other income and (expense), net
298

 
163

 
1,152

 
288

Loss before provision for income taxes
(12,899
)
 
(14,661
)
 
(36,438
)
 
(33,115
)
Provision for income taxes
(8
)
 
(31
)
 
23

 
(9
)
Net loss
$
(12,891
)
 
$
(14,630
)
 
$
(36,461
)
 
$
(33,106
)
Net loss per common share:
 
 
 
 
 
 
 
Basic and diluted
$
(0.32
)
 
$
(0.37
)
 
$
(0.90
)
 
$
(0.83
)
Weighted average common shares outstanding - basic and diluted
40,762,960

 
39,980,308

 
40,603,430

 
39,735,393


(1) Includes stock-based compensation expense as follows:
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
Cost of revenue
 
 
 
 
 
 
 
Subscription and support
$
122

 
$
92

 
$
365

 
$
275

Professional services
100

 
90

 
315

 
251

Operating expenses
 
 
 
 
 
 
 
Research and development
594

 
586

 
1,787

 
1,289

Sales and marketing
567

 
461

 
1,471

 
1,243

General and administrative
2,287

 
1,853

 
6,624

 
4,818



5



WORKIVA INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
September 30, 2016
 
December 31, 2015
 
(unaudited)
 
 
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
42,842

 
$
58,750

Marketable securities
10,995

 
17,420

Accounts receivable, net
22,353

 
15,647

Deferred commissions
1,634

 
1,368

Other receivables
1,261

 
818

Prepaid expenses and other current assets
4,972

 
3,875

Total current assets
84,057

 
97,878

Property and equipment, net
43,287

 
44,410

Intangible assets, net
995

 
896

Other assets
1,583

 
711

Total assets
$
129,922

 
$
143,895

Liabilities and Stockholders’ Equity
Current liabilities
 
 
 
Accounts payable
$
5,637

 
$
5,138

Accrued expenses and other current liabilities
17,177

 
20,394

Deferred revenue
63,629

 
55,741

Deferred government grant obligation
1,164

 
985

Current portion of capital lease and financing obligations
1,432

 
1,808

Current portion of long-term debt
20

 
18

Total current liabilities
89,059

 
84,084

Deferred revenue
15,216

 
7,597

Deferred government grant obligation
1,089

 
1,996

Other long-term liabilities
4,064

 
3,343

Capital lease and financing obligations
20,013

 
21,083

Long-term debt
53

 
73

Total liabilities
129,494

 
118,176

Stockholders’ equity
 
 
 
Common stock
41

 
41

Additional paid-in-capital
213,532

 
202,371

Accumulated deficit
(213,395
)
 
(176,934
)
Accumulated other comprehensive income
250

 
241

Total stockholders’ equity
428

 
25,719

Total liabilities and stockholders’ equity
$
129,922

 
$
143,895



6



WORKIVA INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
Cash flows from operating activities
 
 
 
 
 
 
 
Net loss
$
(12,891
)
 
$
(14,630
)
 
$
(36,461
)
 
$
(33,106
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
 
 
 
 
 
 
 
Depreciation and amortization
944

 
1,058

 
2,916

 
3,354

Stock-based compensation expense
3,670

 
3,082

 
10,562

 
7,876

(Recovery of) provision for doubtful accounts
(92
)
 
222

 
78

 
348

Realized gain on sale of available-for-sale securities
—

 
(7
)
 
(6
)
 
(7
)
Amortization (accretion) of premiums and discounts on marketable securities, net
36

 
32

 
111

 
32

Recognition of deferred government grant obligation
(247
)
 
(236
)
 
(910
)
 
(508
)
Deferred income tax
5

 
—

 
(7
)
 
—

Changes in assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
(4,009
)
 
47

 
(6,734
)
 
(1,448
)
Deferred commissions
(135
)
 
(217
)
 
(264
)
 
(104
)
Other receivables
(365
)
 
(44
)
 
(447
)
 
(656
)
Prepaid expenses and other
415

 
(218
)
 
(1,098
)
 
(139
)
Other assets
(455
)
 
72

 
(841
)
 
166

Accounts payable
279

 
857

 
380

 
2,276

Deferred revenue
13,228

 
1,686

 
15,412

 
3,528

Accrued expenses and other liabilities
2,410

 
3,578

 
(3,012
)
 
1,732

Change in restricted cash
—

 
—

 
—

 
101

Net cash provided by (used in) operating activities
2,793

 
(4,718
)
 
(20,321
)
 
(16,555
)
Cash flows from investing activities
 
 
 
 
 
 
 
Purchase of property and equipment
(91
)
 
(629
)
 
(1,100
)
 
(1,659
)
Purchase of marketable securities
—

 
(15,692
)
 
(802
)
 
(15,692
)
Sale of marketable securities
—

 
3,012

 
7,197

 
3,012

Purchase of intangible assets
(38
)
 
(66
)
 
(152
)
 
(344
)
Net cash (used in) provided by investing activities
(129
)
 
(13,375
)
 
5,143

 
(14,683
)
Cash flows from financing activities
 
 
 
 
 
 
 
Payment of equity issuance costs
—

 
—

 
—

 
(1,346
)
Proceeds from option exercises
840

 
1,062

 
1,360

 
1,495

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

 
—

 
(761
)
 
—

Changes in restricted cash
—

 
—

 
—

 
300

Repayment of other long-term debt
—

 
(17
)
 
(18
)
 
(84
)
Principal payments on capital lease and financing obligations
(538
)
 
(522
)
 
(1,446
)
 
(1,683
)
Distributions to members
—

 
—

 
—

 
(35
)
Proceeds from government grants
—

 
235

 
183

 
548

Payments of issuance costs on line of credit
—

 
—

 
(33
)
 
—

Net cash provided by (used in) financing activities
302

 
758

 
(715
)
 
(805
)
Effect of foreign exchange rates on cash
(9
)
 
(3
)
 
(15
)
 
6

Net increase (decrease) in cash and cash equivalents
2,957

 
(17,338
)
 
(15,908
)
 
(32,037
)
Cash and cash equivalents at beginning of period
39,885

 
86,432

 
58,750

 
101,131

Cash and cash equivalents at end of period
$
42,842

 
$
69,094

 
$
42,842

 
$
69,094


7



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,

2016

2015

2016

2015
Gross profit, subscription and support
$
29,543


$
24,513


$
84,140

 
$
67,418

Add back: Stock-based compensation
122


92


365

 
275

Gross profit, subscription and support, non-GAAP
$
29,665


$
24,605


$
84,505

 
$
67,693

As a percentage of subscription and support revenue, non-GAAP
81.9
 %

82.5
 %

80.6
 %
 
80.4
 %
 




 
 
 
Gross profit, professional services
$
2,433


$
1,979


$
9,715

 
$
8,781

Add back: Stock-based compensation
100


90


315

 
251

Gross profit, professional services, non-GAAP
$
2,533


$
2,069


$
10,030

 
$
9,032

As a percentage of professional services revenue, non-GAAP
29.9
 %

32.1
 %

36.5
 %
 
42.6
 %
 




 
 
 
Gross profit, as reported
$
31,976


$
26,492


$
93,855

 
$
76,199

Add back: Stock-based compensation
222


182


680

 
526

Gross profit, non-GAAP
$
32,198


$
26,674


$
94,535

 
$
76,725

As percentage of revenue, non-GAAP
72.0
 %

73.5
 %

71.5
 %
 
72.8
 %
 




 
 
 
Research and development, as reported
$
14,342


$
12,766


$
42,905

 
$
36,970

Less: Stock-based compensation
594


586


1,787

 
1,289

Research and development, non-GAAP
$
13,748


$
12,180


$
41,118

 
$
35,681

As percentage of revenue, non-GAAP
30.7
 %

33.6
 %

31.1
 %
 
33.9
 %
 
 
 
 
 
 
 
 
Sales and marketing, as reported
$
22,354


$
20,903


$
62,270

 
$
50,937

Less: Stock-based compensation
567


461


1,471

 
1,243

Sales and marketing, non-GAAP
$
21,787


$
20,442


$
60,799

 
$
49,694

As percentage of revenue, non-GAAP
48.7
 %

56.4
 %

46.0
 %
 
47.2
 %
 
 
 
 
 
 
 
 
General and administrative, as reported
$
8,015


$
7,153


$
24,850

 
$
20,178

Less: Stock-based compensation
2,287


1,853


6,624

 
4,818

General and administrative, non-GAAP
$
5,728


$
5,300


$
18,226

 
$
15,360

As percentage of revenue, non-GAAP
12.8
 %

14.6
 %

13.8
 %
 
14.6
 %
 
 
 
 
 
 
 
 
Loss from operations
$
(12,735
)

$
(14,330
)

$
(36,170
)
 
$
(31,886
)
Add back: Stock-based compensation
3,670


3,082


10,562

 
7,876

Loss from operations, non-GAAP
$
(9,065
)

$
(11,248
)

$
(25,608
)
 
$
(24,010
)
As percentage of revenue, non-GAAP
(20.3
)%

(31.0
)%

(19.4
)%
 
(22.8
)%
 
 
 
 
 
 
 
 
Net loss
$
(12,891
)

$
(14,630
)

$
(36,461
)
 
$
(33,106
)
Add back: Stock-based compensation
3,670


3,082


10,562

 
7,876

Net loss, non-GAAP
$
(9,221
)

$
(11,548
)

$
(25,899
)
 
$
(25,230
)
As percentage of revenue, non-GAAP
(20.6
)%

(31.8
)%

(19.6
)%
 
(23.9
)%
 
 
 
 
 
 
 
 
Net loss per basic and diluted share:
$
(0.32
)
 
$
(0.37
)
 
$
(0.90
)
 
$
(0.83
)
Add back: Stock-based compensation
0.09


0.08

 
0.26

 
0.20

Net loss per basic and diluted share, non-GAAP
$
(0.23
)
 
$
(0.29
)
 
$
(0.64
)
 
$
(0.63
)
Weighted average common shares outstanding - basic and diluted, non-GAAP
40,762,960

 
39,980,308

 
40,603,430

 
39,735,393


8



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

 
Three months ending December 31, 2016
 
Year ending December 31, 2016
 
 
 
 
 
 
 
 
Loss from operations, GAAP range
$
(11,800
)
-
$
(12,300
)
 
$
(48,000
)
-
$
(48,500
)
Add back: Stock-based compensation
3,800

 
3,800

 
14,400

 
14,400

Loss from operations, non-GAAP range
$
(8,000
)
-
$
(8,500
)
 
$
(33,600
)
-
$
(34,100
)
 
 
 
 
 
 
 
 
Net loss per share, GAAP range
$
(0.30
)
-
$
(0.31
)
 
$
(1.19
)
-
$
(1.20
)
Add back: Stock-based compensation
0.10

 
0.10

 
0.35

 
0.35

Net loss per share, non-GAAP range
$
(0.20
)
-
$
(0.21
)
 
$
(0.84
)
-
$
(0.85
)
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic and diluted
41,000,000

 
41,000,000

 
40,700,000

 
40,700,000



9