Workiva Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with Q1 2020 unless noted. Workiva provides cloud-based compliance and regulatory reporting software and reported 3,800 subscribed organizations at quarter-end.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Total revenue | $104.2 million | $85.8 million; up 21.5% |
| Subscription and support revenue | $84.9 million | $68.4 million; up 24.2% |
| Professional services revenue | $19.3 million | $17.4 million; up 10.6% |
| Gross profit and margin | $80.5 million; 77.3% | $63.4 million; 73.9% |
| Operating loss and margin | $4.1 million; (4.0%) | $9.1 million; (10.6%) |
| Net loss | $7.3 million; $0.15 per share | $10.4 million; $0.22 per share |
| Cash from operating activities | $11.5 million | $4.8 million |
Cash, cash equivalents and marketable securities totaled $540.6 million at March 31, 2021. Cash and cash equivalents were $331.2 million. Convertible notes had a $291.8 million net carrying amount and $345.0 million principal; their reported fair value was $440.8 million. The notes mature in 2026 and carry a 1.125% coupon. The company said available liquidity and operating cash flows should fund operations for at least 12 months, while noting it expects continued operating losses and may have negative operating cash flow in future periods.
Deferred revenue was $244.9 million, current and non-current combined. Remaining performance obligations for subscription contracts were approximately $421.0 million, of which about $259.3 million was expected to be recognized over the next 12 months. These are contracted obligations, not company revenue guidance.
Material changes and operating indicators
- Revenue growth was driven mainly by subscription demand and improved pricing across multiple use cases; customer count increased 8.4% year over year.
- Gross margin improved 3.4 percentage points, while operating expenses rose 16.8% to $84.7 million, reflecting investment and higher compensation. Headcount increased 9.8% year over year to 1,751.
- Subscription revenue retention was 95.1%; retention including add-ons was 111.2%. Customers with annual contract value above $100,000 increased to 884 from 670.
- Interest income fell to $0.4 million from $1.7 million, primarily due to lower investment rates. Other expense was $0.4 million, compared with $0.7 million of other income, primarily reflecting foreign-currency transaction losses.
- Stock-based compensation was $11.6 million, up from $9.9 million. The reported net loss per share was basic and diluted because potential shares were anti-dilutive.
Outlook, risks and other disclosures
The filing provides no specific quarterly or full-year revenue or earnings guidance. Management expects continued investment in product development, sales, marketing, professional services and customer success. It noted that larger enterprise deals may lengthen sales cycles.
COVID-19 continued to create uncertainty: substantially all sales and operating activities were remote, and management warned of possible employee productivity impacts, delayed purchasing decisions, reduced customer technology spending or requests for contract concessions. Delayed European ESEF requirements could adversely affect EMEA business. The company also cited seasonality in professional services, sales and marketing costs, and operating cash flow.
Management reported no material changes to the risk factors in the 2020 Form 10-K, no material changes in contractual obligations, and no pending legal proceeding it believed would have a material adverse effect. Disclosure controls were assessed as effective; no material change in internal control over financial reporting was reported.
Investor facts to verify
- Whether subscription growth and retention, particularly add-on expansion, continue in subsequent quarters.
- How much operating cash flow reflects recurring operations versus working-capital timing; Q1 cash flow benefited from lower receivables.
- The effect of ongoing operating expense and stock-based compensation growth on progress toward profitability.
- The convertible notes’ economic dilution and fair value relative to their carrying amount and conversion terms.
- Whether COVID-19 effects, customer spending decisions, or delayed ESEF adoption change demand or sales cycles.