Workiva Inc. — Q2 2023 Form 10-Q
Business context and period. Workiva provides cloud software for financial, ESG, governance, risk and compliance reporting, plus professional services. This unaudited filing covers the quarter and six months ended June 30, 2023; comparisons are with the corresponding 2022 periods. Amounts below are in U.S. dollars.
Financial performance and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $155.0m | $131.5m | $305.2m | $261.2m |
| Subscription and support revenue | $136.8m | $113.4m | $266.4m | $220.5m |
| Gross profit / margin | $115.5m / 74.5% | $99.3m / 75.5% | $227.2m / 74.5% | $198.1m / 75.9% |
| Operating loss | $(22.7)m | $(28.2)m | $(69.5)m | $(45.4)m |
| Net loss | $(20.9)m | $(28.9)m | $(67.1)m | $(47.4)m |
| Diluted loss per share | $(0.39) | $(0.55) | $(1.25) | $(0.90) |
| Cash from operating activities | $26.0m | $8.7m | $31.5m | $7.7m |
- Revenue grew 17.8% in Q2 and 16.8% year to date. Subscription and support revenue grew 20.7% and 20.8%, respectively; professional services revenue was nearly flat in Q2 and down 4.8% for the first half.
- At June 30, cash and cash equivalents were $198.9m and marketable securities were $267.3m, totaling $466.3m in cash, equivalents and securities. Current assets were $619.9m versus current liabilities of $424.3m.
- Convertible senior notes had a $340.9m carrying value and $345.0m principal, due 2026, at a 1.125% coupon. They were classified as non-current; Q2 holder conversion conditions were not met. The company reported $157,000 of stockholders’ equity and a $592.2m accumulated deficit.
- Deferred revenue totaled $367.2m, current and non-current combined. Subscription-contract remaining performance obligations were approximately $817.4m, with about $454.7m expected to be recognized over the next 12 months.
Material changes versus prior period
- Q2 revenue growth slowed to 17.8% from 24.6% a year earlier; first-half growth slowed to 16.8% from 24.5%. Subscription and support growth also moderated.
- Q2 net loss narrowed year over year, but first-half net loss widened. First-half operating expenses rose 21.9%, faster than revenue, and gross margin declined 1.4 percentage points.
- Operating cash flow improved in both comparison periods. First-half cash and cash equivalents decreased $41.3m, principally reflecting net purchases of marketable securities and other investing activity; investing cash outflow was $73.0m.
- Customer count rose to 5,860 from 5,381. Revenue retention excluding add-ons was 97.6% versus 97.9%; including add-ons it increased to 111.1% from 108.0%. Customers with ACV of at least $100,000 increased to 1,470 from 1,186.
Outlook, commentary and risks
- No specific revenue or earnings guidance is provided in the supplied filing text. Management expects continued operating losses and says available cash, equivalents and operating cash flows should fund operations for at least the next 12 months.
- Management attributes subscription growth to demand and solution expansion, and plans to invest in its platform, sales and marketing, partners, international expansion and fit-for-purpose solutions. It expects subscription revenue growth to outpace professional services growth annually.
- Management says volatility and reduced valuations in IPO and SPAC markets continue to pressure new sales of SEC and capital-markets solutions. Larger enterprise deals may also lengthen sales cycles. The company notes seasonality in professional services, sales and marketing costs, and operating cash flow.
- First-half stock-based compensation was $58.7m, including $18.1m tied to transition agreements with former executives. Q2 included $0.6m of one-time event-cancellation fees. A goods-and-services-tax refund reduced first-half expense and is not expected to recur.
- The company added financial-services-industry disruption as a risk following the closures of Silicon Valley Bank and Signature Bank. It had no material deposits at either bank, but customer liquidity and broader market instability could affect results. Management reported no pending legal proceedings expected to have a material adverse effect and no material changes to other risk factors.
Investor facts to verify
- Whether subscription growth and customer expansion sustain or further slow, and how retention trends develop.
- How operating expenses, gross margin and substantial stock-based compensation affect progress toward profitability.
- Cash generation and liquidity, including the use and value of the marketable-securities portfolio and the 2026 convertible notes.
- How IPO/SPAC market weakness, customer financial-sector exposure and longer enterprise sales cycles affect bookings and collections.
- Whether the $817.4m remaining performance obligations convert to revenue on the stated schedule and whether any updated guidance is issued.