Workiva Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; filed February 17, 2021. Workiva provides cloud-based compliance, regulatory reporting and risk-management software. Results below are annual, not standalone fourth-quarter results.
Business context
The company served 3,723 organizations at year-end, including 75% of Fortune 500 companies. Subscription and support fees accounted for 84.2% of revenue. Management’s growth priorities include expanding existing customer use, adding solutions, international and statutory reporting, integrated risk, U.S. government sales and partnerships.
Key financial results
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Revenue | $351.6 million | $297.9 million | +18.0% |
| Subscription and support revenue | $295.9 million | $245.8 million | +20.4% |
| Professional services revenue | $55.7 million | $52.1 million | +6.9% |
| Gross profit / margin | $261.4 million / 74.3% | $212.9 million / 71.5% | Margin +2.8 percentage points |
| Operating loss | $37.8 million | $45.4 million | Loss narrowed $7.6 million |
| Net loss | $48.4 million | $47.5 million | Loss widened $0.9 million |
| Operating cash flow | $33.2 million | $30.9 million | +$2.3 million |
Gross margin improvement reflected revenue growth and lower professional-services costs. Operating expenses rose 15.8% to $299.2 million, including a 20.3% increase in sales and marketing. Higher interest expense—$14.0 million versus $6.0 million—contributed to the slightly larger net loss. Stock-based compensation was $45.8 million, up from $35.8 million.
Liquidity, debt and operating indicators
- Cash, cash equivalents and marketable securities totaled $530.0 million at year-end, compared with $488.0 million a year earlier. Cash and cash equivalents alone declined to $322.8 million from $381.7 million.
- Cash provided by investing activities was negative $103.8 million, primarily reflecting purchases of marketable securities; capital expenditures were $1.9 million. Financing cash flow was $11.1 million, versus $363.0 million in 2019, when the company issued convertible notes.
- The company had $345.0 million principal amount of 1.125% convertible senior notes due 2026; their net carrying amount was $289.5 million and disclosed fair value was $453.2 million. The notes were not convertible at December 31, 2020. Management said available liquidity and operating cash flow should fund operations for at least the next 12 months.
- Current deferred revenue was $209.0 million, up from $173.6 million. Remaining performance obligations for subscription contracts were approximately $402.5 million, of which $247.8 million was expected to be recognized over the following 12 months.
- Subscription and support revenue retention was 95.0%, up from 94.7%; including add-ons it was 109.5%, down from 113.0%. Customers with annual contract value of at least $100,000 increased to 847 from 652.
Material changes, outlook and risks
Management attributed subscription growth to demand and better pricing across SEC reporting, integrated risk, global statutory reporting, and management and performance reporting. International revenue remained under 8% of consolidated revenue. Non-SEC solutions generated 77% of new-solution and new-customer bookings in 2020, but management cautioned that acceptance of these offerings remains uncertain.
COVID-19 led to remote operations, travel restrictions and virtual events. Related travel and event changes reduced expenses by approximately $16.7 million versus 2019. Management reported that some customers and prospects delayed purchasing decisions and warned that reduced technology spending, contract renegotiations and remote-work productivity could affect future results. Regulatory delays, including optional postponement of the ESEF mandate, could also defer demand. The filing provides no quantified revenue or earnings guidance.
Key risks include continued losses, competition, reliance on SEC-reporting customers, renewal and expansion rates, growth execution, data security and privacy, third-party cloud-provider reliability, international expansion, and potential cash demands or dilution related to convertible notes. The company reported no pending legal proceedings expected by management to have a material adverse effect.
The filing revised previously issued financial statements to correct lease-accounting misstatements that management judged immaterial to prior periods; the affected 2019 net loss was reduced by approximately $655,000. The 2020 financial statements received an unqualified audit opinion, and management and the auditor concluded internal control over financial reporting was effective.
Important facts for investors to verify
- Whether subscription growth and customer expansion can offset slower add-on retention and possible COVID-related sales delays.
- How much growth and future margin depend on non-SEC offerings, international markets and regulatory mandates.
- The cash-flow impact and potential dilution or settlement obligations of the $345.0 million convertible notes, alongside their disclosed fair value.
- Whether operating-cost growth, especially sales and marketing and stock-based compensation, can be supported by improving profitability.
- The effects of lease-accounting corrections and the underlying quarterly results; the filing notes prior-period quarterly statements were revised.