Workiva Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Workiva provides cloud-based reporting, ESG, and governance, risk, and compliance software through a subscription-led SaaS model. Results are unaudited.
Financial and operating performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $175.7 million | $150.2 million | +17.0% |
| Subscription and support revenue | $155.0 million | $129.7 million | +19.5% |
| Professional services revenue | $20.7 million | $20.5 million | +0.8% |
| Gross profit / margin | $134.1 million / 76.4% | $111.7 million / 74.3% | Margin +2.1 percentage points |
| Operating loss | $18.3 million | $46.8 million | Improved |
| Net loss / diluted loss per share | $11.7 million / $0.21 | $46.2 million / $0.86 | Improved |
| Operating cash flow | $24.8 million | $5.6 million | Increased |
Cash, cash equivalents, and marketable securities totaled $838.3 million at March 31, 2024. Total liabilities were $1.285 billion, including $763.1 million of non-current convertible notes on a net carrying-value basis. The notes have $773.2 million aggregate principal outstanding: $71.2 million due in 2026 and $702.0 million due in 2028. No holder conversion conditions were met in Q1. The company reported a stockholders’ deficit of $83.2 million.
Subscription and support revenue represented 88.2% of total revenue, up from 86.3%. Subscription and support revenue retention was 97.8% (97.9% prior year); including add-ons, it was 110.6% (109.2%). Customers totaled 6,074 versus 5,754, and customers with ACV of at least $100,000 totaled 1,696 versus 1,363.
Material changes versus the prior-year quarter
- Revenue growth was led by subscription and support, which increased $25.3 million; professional services revenue was nearly flat.
- Gross margin increased to 76.4% from 74.3%, while total operating expenses declined 3.8% to $152.4 million.
- General and administrative expense fell 42.2%, largely because Q1 2023 included executive-transition compensation that did not recur. Stock-based compensation declined to $23.0 million from $38.0 million, including a $16.7 million reduction in G&A stock-based compensation.
- Sales and marketing expense rose 16.9% as the company invested in headcount, commissions, and go-to-market activities. Research and development expense was roughly flat.
- Interest income rose to $10.5 million from $3.7 million, reflecting a larger investment balance and higher rates; interest expense increased to $3.2 million from $1.5 million, primarily following the 2028 notes issuance.
- Operating cash flow increased, but deferred revenue declined $17.5 million during the quarter. Management cited lower multi-year prepaid customer contracts and contract timing as contributing factors.
Outlook, commentary, and risks
- Management expects current cash, cash equivalents, and operating cash flows to be sufficient to fund operations for at least the next 12 months. The filing provides no specific full-year 2024 revenue or earnings guidance.
- Management expects subscription and support revenue growth to continue to outpace professional services growth annually, as services work transitions to partners.
- The company expects continued investment in its platform, sales, marketing, customer success, and international expansion. Larger enterprise deals may involve longer sales cycles.
- Management expects weakness in IPO and SPAC markets, associated with higher interest rates, inflation, and geopolitical instability, to continue to weigh on sales of SEC and capital-markets solutions in 2024.
- Seasonality affects professional services revenue, sales and marketing costs, and operating cash flow. Q1 professional services activity is often higher around customer Form 10-K filings.
- Remaining performance obligations for subscription contracts were approximately $931.8 million; about $515.0 million is expected to be recognized over the next 12 months.
- Management said pending litigation is not expected to have a material adverse effect. No material changes to the previously disclosed risk factors or contractual obligations were reported. Disclosure controls were judged effective, and no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- Whether subscription growth, customer expansion, and retention metrics persist, particularly given retention excluding add-ons was below 100%.
- How much operating cash flow reflects sustainable operating performance versus billing, collections, deferred revenue, and other working-capital timing.
- The degree to which the improved loss reflects lower non-recurring prior-year executive-transition and stock-based compensation, versus underlying operating leverage.
- Convertible-note repayment, conversion, dilution, and refinancing implications, including the $702.0 million 2028 principal balance.
- Progress against management’s growth priorities and the effect of IPO/SPAC market weakness, longer enterprise sales cycles, and planned spending.