Workiva Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Workiva provides cloud-based compliance and regulatory reporting software and related professional services. Results are unaudited.
Financial performance
| Metric | Q2 2022 | Q2 2021 | First half 2022 | First half 2021 |
|---|---|---|---|---|
| Total revenue | $131.5 million | $105.6 million | $261.2 million | $209.8 million |
| Subscription and support revenue | $113.4 million | $91.2 million | $220.5 million | $176.1 million |
| Gross profit | $99.3 million | $81.0 million | $198.1 million | $161.5 million |
| Gross margin | 75.5% | 76.7% | 75.9% | 77.0% |
| Operating loss | $(28.2) million | $(5.7) million | $(45.4) million | $(9.9) million |
| Net loss | $(28.9) million | $(9.5) million | $(47.4) million | $(16.8) million |
| Operating cash flow | $8.7 million | $12.8 million | $7.7 million | $24.3 million |
Q2 revenue grew 24.6% year over year, driven primarily by subscription and support growth of 24.3%; professional services revenue rose 26.5%. Operating expenses grew 47.0% in Q2, substantially faster than revenue, reflecting investment in personnel, sales and marketing, product development, and infrastructure. Q2 net loss per share was $0.55, compared with $0.19 a year earlier. Stock-based compensation was $18.4 million in Q2 and $33.8 million for the first half.
Liquidity, debt and balance sheet
- Cash, cash equivalents and marketable securities totaled $429.0 million at June 30, 2022, down from $530.4 million at year-end 2021. Cash and cash equivalents alone were $226.3 million.
- First-half cash declined $74.1 million. Investing activities used $76.6 million, including $99.2 million for the ParsePort acquisition, partly offset by marketable-security maturities and sales.
- Convertible notes had $345.0 million principal and a $339.6 million net carrying value; they bear 1.125% interest and mature in 2026. The notes were classified as non-current because no holder conversion conditions were met in Q2. Fair value was $373.2 million.
- Deferred revenue was $306.8 million in total, including current and non-current balances. Stockholders’ equity was $7.9 million, compared with $73.0 million at December 31, 2021.
- Management stated current liquidity and operating cash flows should fund operations for at least the next 12 months, while expecting continued operating losses and possible negative operating cash flows.
Changes, outlook and risks
- On April 1, Workiva acquired ParsePort, a provider of European Single Electronic Format reporting solutions, for $100.7 million gross consideration ($99.2 million net of acquired cash). The preliminary allocation included $78.9 million goodwill and $23.3 million intangible assets; acquired revenue and net loss were insignificant in the reported period. Valuations remain subject to finalization.
- Customer count was 5,381, including 850 ParsePort customers, versus 3,949 a year earlier. Revenue retention was 97.9%, up from 96.0%; retention including add-ons was 108.0%, down from 111.6%. Management cited weaker IPO/SPAC activity and customers shifting from higher-priced capital-markets solutions as pressure on add-on retention.
- Management reported that U.S. IPO and SPAC market volatility had already adversely affected new sales of SEC and capital-markets solutions and expected continued pressure in the second half of 2022. The filing provides no quantified revenue or earnings guidance.
- Other cited uncertainties include higher interest rates, inflation, geopolitical instability and the Russia-Ukraine conflict, potential reductions in technology spending, longer sales cycles, and possible future COVID-19 disruption. Workiva said it had not experienced adverse business effects from COVID-19 to date.
- The company adopted ASU 2020-06 on January 1, 2022, reducing reported non-cash interest expense. It also approved an equity-plan amendment adding 3 million shares available for grants. The company reported no material change in contractual obligations, market-risk exposure, or internal controls; management said pending legal matters were not expected to have a material adverse effect.
Key investor verification points
- Track whether subscription growth and customer expansion can sustain revenue growth as IPO/SPAC-related demand remains weak.
- Assess expense growth, particularly sales and marketing, headcount, and stock-based compensation, against revenue growth and the widening operating loss.
- Monitor operating cash flow, the pace of cash use, and liquidity after the ParsePort acquisition.
- Review ParsePort’s final purchase-price allocation, goodwill and intangible-asset estimates, and its contribution to revenue and retention metrics.
- Check the notes’ conversion and settlement terms, maturity profile, and potential dilution; the filing reports approximately 4.3 million underlying shares excluded from diluted loss per share as anti-dilutive.