424B4 1 workivafinalprospectus.htm 424B4 Workiva Final Prospectus


PROSPECTUS

7,200,000 Shares

Class A Common Stock
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This is an initial public offering of shares of Class A common stock of Workiva Inc. We are selling 7,200,000 shares of our Class A common stock in this offering. Currently, no public market exists for the shares. Our Class A common stock is approved for listing on the New York Stock Exchange under the symbol “WK”.
We have two classes of authorized common stock: Class A common stock and Class B common stock. The rights of the holders of our Class A common stock and our Class B common stock are identical, except with respect to voting and conversion. Each share of our Class A common stock is entitled to one vote per share and is not convertible into any other shares of our capital stock. Each share of our Class B common stock is entitled to ten votes per share and is convertible into one share of our Class A common stock at any time. Our Class B common stock also will automatically convert into shares of our Class A common stock upon certain transfers. The beneficial owners of our Class B common stock are our executive officers who were our managing directors immediately prior to our conversion into a corporation. The holders of our Class B common stock will hold approximately 82.1% of the voting power of our outstanding capital stock following this offering.
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We are an “emerging growth company” under applicable Securities and Exchange Commission rules and are subject to reduced public company disclosure requirements. Investing in our Class A common stock involves risks that are described in the ‘‘Risk Factors’’ section beginning on page 16 of this prospectus.
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PRICE $14.00 A SHARE
___________________________________
 
 
 
Price to Public
 
Underwriting Discounts and Commissions(1)
 
Proceeds to
Workiva Inc.
Per Class A Share
 
$
14.00

 
$
0.98

 
$
13.02

Total
 
$
100,800,000

 
$
7,056,000

 
$
93,744,000

 
 
 
 
 
 
 
 
(1) See the section titled “Underwriting” for a description of the compensation payable to the underwriters.
The underwriters may also exercise their option to purchase up to an additional 1,080,000 shares of Class A common stock from us at the public offering price, less underwriting discounts and commissions, within 30 days from the date of this prospectus to cover over-allotments, if any.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares of our Class A common stock to purchasers on December 17, 2014.
___________________________________
MORGAN STANLEY
 
CREDIT SUISSE
 
 
 
 
 
BAIRD
RAYMOND JAMES
STIFEL
___________________________________
December 11, 2014













TABLE OF CONTENTS
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You should rely only on the information contained in this document and any free writing prospectus we provide to you. Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.
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For investors outside the United States: We have not and the underwriters have not done anything that would permit this offering, or possession or distribution of this prospectus, in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of Class A common stock and the distribution of this prospectus outside of the United States.
DEALER PROSPECTUS DELIVERY OBLIGATION
Through and including January 5, 2015 (25 days after the date of this prospectus), all dealers that effect transactions in our Class A common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.





PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our Class A common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes thereto and the information set forth in this prospectus under the sections “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Some of the statements in this prospectus constitute forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements.” On December 10, 2014, we completed a corporate conversion transaction, pursuant to which we converted from a Delaware limited liability company into a Delaware corporation and changed our name from Workiva LLC to Workiva Inc. In conjunction with the corporate conversion, all of our outstanding equity units were automatically converted into shares of our common stock and the members of Workiva LLC became stockholders of Workiva Inc.
WORKIVA INC.
Overview
Workiva has pioneered a cloud-based and mobile-enabled platform for enterprises to collaboratively collect, manage, report and analyze critical business data in real time. Our secure software platform, Wdesk, allows users to integrate and control all of their business data, regardless of format or location, with innovative live-linking technology. Our proprietary, integrated word processing, spreadsheet and presentation applications, built upon our data engine, allow thousands of users to collaborate simultaneously on data-linked reports and documents. Wdesk empowers our customers to dynamically define their business processes and optimize workflows so that critical data can be reported and analyzed more efficiently. Our customers can gain insights based on their trusted data, which enables better real-time decision-making. Additionally, our customers deploy our solutions to serve as a single system of record for critical data, to reduce risk and operational costs, and to increase efficiency in business reporting. As of September 30, 2014, we provided our solutions to more than 2,100 enterprise customers, including over 60% of both the Fortune 500 and Fortune 100.
Enterprises struggle to manage, report, analyze and understand their ever-expanding volume of data. Executives need to leverage this data to make real-time decisions to improve performance and reduce risk. In addition, many businesses are required to report an increasing amount of disparate information to a variety of regulators, further straining their ability to produce meaningful and consistent data and reports on a timely basis. The explosion of data within enterprises has rendered existing processes and legacy technologies inefficient at helping users find, understand and report the most critical and relevant information on a timely basis. To create business reports, many organizations rely on manual processes, large teams and a variety of point solutions, such as business productivity, email and general-purpose collaboration software. Exacerbating these challenges is the continued growth in size and complexity of many enterprises, which results in employees and data spread around the world. The stakes for enterprises are high; reporting incorrect, incomplete or untimely information exposes organizations to potential liability, reputational risk and a weakened competitive position.
Workiva empowers organizations to address these challenges by providing a cloud-based and mobile-enabled platform that we believe is fundamentally changing the way people work. Our Wdesk product platform allows multiple users to simultaneously create, review and publish data-linked documents and reports with greater control, accuracy and productivity than ever before. We offer our customers solutions for compliance, risk, sustainability and management reporting, as well as enterprise risk management. Underlying these solutions is our scalable, enterprise-grade data engine that collects, aggregates and manages our customers’ unstructured and structured data.


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Wdesk allows users to work anytime from anywhere with an internet connection, enabling them to:
Create trusted datasets that are linked and aggregated throughout Wdesk documents, spreadsheets, presentations and reports.
Control access to datasets, reports and workflows throughout the organization and beyond.
Collaborate among thousands of users working in real time in a cloud-based workspace.
Present critical data and reports to internal and external constituents.
Decide with confidence based on trusted data and reports, enabling better and faster decision-making.
Wdesk allows users to define, automate and change their business processes in real time for what they need, when they need it, with little or no involvement from IT personnel. Our proprietary data engine includes live-linking technology that enables users to automatically propagate any changes to data, including numbers, text, charts and graphics, across every instance in which that data appears in the Wdesk workspace. Live-linking allows customers to use trusted data to more quickly and accurately produce and update business reports. Wdesk provides accountability and transparency through a detailed audit trail that tracks every change made by any user over time. Control is robust, with customized permissions for each user to read, write and edit specific sections of documents.
In March 2013, we launched our Wdesk platform, under which we currently offer solutions for compliance, risk, sustainability and management reporting, as well as enterprise risk management. We developed these solutions to address our customers’ immediate challenges. Our first solution was focused on reports filed with the U.S. Securities and Exchange Commission (SEC). SEC filings, such as Form 10‑K, Form 10‑Q and proxy statements, are lengthy and complex documents that require significant collaboration across multiple business functions and external constituents, including auditors and lawyers. Our SEC solution enables customers to automate and improve their regulatory filing process. We have continued to add solutions to the Wdesk platform over time by identifying markets where Wdesk can address a wide range of critical business challenges for our customers. We employ a rigorous process to validate and prioritize new solution areas based on the number of customers that could benefit from a new solution and our assessment of Wdesk’s ability to address that challenge.
Our technology is enterprise grade and developed to perform at scale. Wdesk utilizes the Google Cloud Platform, which enables us to scale our compute and storage capacity on an as-needed basis. We can deploy incremental changes to our customers on a daily basis by employing a continuous delivery process supported by Agile software development methodologies and a proprietary quality assurance process. As a result, all of our customers operate on the latest version of our platform, and upgrades are applied with minimal disruption to ongoing operations. In addition, in order to keep our customers’ data secure, we have developed advanced data security protocols that augment the standard security of the Google Cloud Platform. Our architecture has proven scalability for global enterprises, as well as advantages in reliability and cloud delivery.
Our “land-and-expand” sales strategy focuses on acquiring new customers and growing our existing customer relationships. We seek to “land” new customers by using a direct-sales model. Our customer success and professional services teams help our account managers “expand” our existing customer relationships by providing advice and best practices that enable users to harness the full power of Wdesk. We believe our sales strategy positions us to build relationships over time as we add new users and solutions and expand to additional markets and geographies.
Many of the largest and most demanding enterprises in the world are our customers. Our customers span a variety of industries and include Philip Morris International Inc., Kinder Morgan, Inc., Viacom Inc.,


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JPMorgan Chase & Co., Eli Lilly and Company, The Boeing Company, Tyco International Ltd., CenturyLink, Inc., Avis Budget Group, Inc., Wal-Mart Stores, Inc., and AR Capital, LLC.
We have a broadly diversified customer base; our largest customer represented less than 2% of total revenue in 2013. We believe that we have exceptional customer satisfaction, as evidenced by our subscription and support revenue retention rate of 97.3% (excluding add-on seats) for the twelve months ended September 30, 2014.
We have experienced high revenue growth since the release of our first solution in March 2010. Our revenue increased from $14.9 million in 2011 to $52.9 million in 2012 and $85.2 million in 2013, representing a 139.3% compound annual growth rate. We incurred a net loss of $13.6 million in 2011, $30.4 million in 2012 and $28.0 million in 2013. For the nine months ended September 30, 2013 and 2014, our revenue grew 34.1% from $61.6 million to $82.6 million. We incurred a net loss of $22.5 million and $28.4 million for the nine months ended September 30, 2013 and 2014, respectively. Approximately 77% of our revenue in 2013 was derived from subscription and support fees, with the remainder from professional services.
Our Industry
Key Industry Trends are Driving a Fundamental Shift in How Enterprises Collect, Manage, Report and Analyze Critical Data.
Explosion of Data. According to International Data Corporation (IDC), the data universe will double every two years from 2013 to 2020. Data is often spread across hundreds of different sources and stored in conflicting formats.While many enterprises maintain data in a structured enterprise resource planning (ERP) system, IDC estimates that more than 90% of the data created is “unstructured” data, which is defined as unorganized data that resides far outside the realms of ERP systems. This massive increase in the amount of data available to enterprises has complicated the decision-making process.
Increasing Regulatory Requirements. Legislation, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and the Sarbanes-Oxley Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes-Oxley Act), has driven new reporting mandates. Governmental agencies, such as the SEC, charged with implementing these legislative mandates and others continue to issue regulations that implement new and increase existing reporting requirements. Regulators are also implementing new, industry-specific reporting requirements. For example, in recent years financial institutions have been required to produce reports for comprehensive capital analysis and review (CCAR), stress testing and resolution and recovery plans (RRP).
Regulators are also demanding greater standardization and structure in the data that companies report. For example, the SEC requires that public companies include “interactive data” in filed annual and quarterly reports so that an investor can immediately extract specific information and compare it to performance in past years, information from other companies and industry averages. The SEC implemented its interactive data mandate by requiring companies to tag the financial data in their filings using XBRL (eXtensible Business Reporting Language), which is a royalty-free, international information format designed specifically for business information.
Increasing Management Oversight. Enterprises are under increasing pressure to report a growing amount of information to internal management teams, boards of directors and external constituents. We believe that data needs to be collected, reported and analyzed more rapidly than ever before. Management teams are increasingly focused on leveraging data to support critical decisions. At the same time, boards of directors are pressing organizations to improve transparency in order to better fulfill their fiduciary duties.
Structural Shifts in Workforce Organization. Market dynamics and the globalization of enterprises have forced companies to change the way their employees work. Organizations are becoming increasingly


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global, with employees geographically distributed to support strategic and business needs. Workforce flexibility initiatives have resulted in more employees working remotely. According to Forrester, employees working at home at least once a week rose from 18% in 2010 to 27% in 2012.
Consumerization of Enterprise IT. Technical advancements in the capability of smart phones and tablets have enabled the proliferation of mobile devices across the enterprise. According to IDC, the worldwide mobile worker population will be 1.3 billion by 2015, accounting for 37.2% of the workforce. Enterprise cloud-based solutions are becoming increasingly common and are enabling employees to work from anywhere with an internet connection, often from a mobile device.
Existing Business Processes and Solutions Are Insufficient for the Requirements of Modern Enterprises.
For many enterprises, compiling, reporting and analyzing critical data has been manual, iterative and error-prone. Modern enterprises require a level of real-time collaboration, security and control that we believe business productivity software and point solutions do not deliver. Shortcomings of existing business processes and solutions include the following:
Access to resources is restricted. Traditional solutions require employees to be physically present at, or remotely logged into, a machine with the required technology and access permissions. These impediments restrict productivity as employees attempt to complete work at home and while traveling and often lead to unapproved workarounds that may expose sensitive data.
Collaboration is inefficient and risky. Traditional office software requires one person to work on one version of a presentation or report at one time. This rigidity creates versioning challenges as concurrent versions lead to a tedious and time-consuming reconciliation process.
Workflows are rigid and serial. Workflows for presentation and report production operate as a series of dependent events, with workers being unable to advance sections they are responsible for while they wait for their turn in the document-production process.
Dataset creation is highly manual. Traditional dataset creation relies on ad-hoc processes and loosely defined protocols to consolidate a patchwork of disparate data sources with different owners and storage locations across the enterprise.
Edits are error prone and lack audit trails. Traditional software does not provide for linking references to a single source, so when a change is made it does not flow throughout the document. The integrity of a group of related presentations and reports is at risk every time a number is edited, and worker productivity is lost in a cycle of implementing edits and reviewing for errors. Traditional solutions do not offer visibility into the lineage of changes to a document. Audit trails often consist of unsatisfactory solutions, such as tracked changes, which can be turned off, in-line comments, which are cumbersome to manage, and versioning, which leads to inefficient workflows and reconciliation.
Control is limited. Because multiple versions of a presentation or report may be stored in numerous locations across an enterprise, it is difficult to control who can review and edit, and even more difficult to adjust these roles as the creation process evolves.
Our Market Opportunity
Our cloud-based and mobile-enabled platform enables enterprises to collaboratively collect, manage, report and analyze critical data in real time.  A 2014 independent study conducted by Frost & Sullivan, which was commissioned by us, estimated that the market for data collaboration and reporting software in 2014 will be $15.8 billion in North America and $10.6 billion in Europe, Middle East and Africa (EMEA).  The data collaboration and reporting software market addresses a portion of four defined software markets.


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According to Frost & Sullivan, the 2014 data collaboration and reporting software market in North America and EMEA represents the following portions of each of these software markets: $8.6 billion in governance, risk and compliance; $5.8 billion in corporate performance management; $6.5 billion in business intelligence and data analytics; and $5.5 billion in business productivity. 
We currently offer solutions for compliance, risk, sustainability and management reporting, as well as enterprise risk management. Based on our internal analysis and industry experience, we estimate that the addressable market opportunity for our five existing solutions is approximately $6.7 billion annually for the U.S., Canada and Europe.
We believe that our Wdesk platform is flexible and extensible and has the potential to address a wide variety of additional business processes within the enterprise. Forrester estimates that information workers worldwide numbered 615 million in 2013 and are expected to reach 865 million by 2016. We believe that we have a substantial opportunity to offer our solution to enterprise information workers globally.
The Workiva Solution
We change the way enterprises and their employees work, enabling the redesign of risky and inefficient business processes through our cloud-based and mobile-enabled platform.
Widely Accessible Cloud-based Collaboration Platform. Our platform enables multiple users to draft, edit and comment within the same document, spreadsheet, presentation or report at the same time from any location with internet access.
Integrated Platform of Business Productivity Applications. We designed the Wdesk platform as an integrated suite of word processing, spreadsheet and presentation applications that enables users to leverage their structured and unstructured business data regardless of where it resides. Wdesk also provides a certification application that allows any Wdesk viewer to attest to the accuracy and completeness of reports. Users can create data collection and report certification workflows, assign and distribute them within their organization, and monitor the process with a real-time dashboard.
Trusted Ecosystem for Critical Business Data. Our platform captures a complete history of a document’s lineage, from the most granular edit to a spreadsheet cell formula to key document milestones. At the same time, Wdesk provides document owners the ability to manage document permissions down to a single section of a document.
Enterprise Grade and Built for Scale. Our cloud platform allows enterprises to implement and rapidly scale users and solutions within hours, regardless of how large or complex. Our customers can access and deploy our service without the need to install and maintain costly infrastructure hardware and software necessary for on-premise deployments.
Secure Architecture. An independent auditor other than our independent registered public accounting firm conducts an annual examination of our security controls using the widely recognized SSAE 16 SOC 1 Type 2 standard. This standard is designed to determine whether a company has reliable and suitably designed controls and safeguards as a host and processor of customer information. To protect our customers’ data we use advanced encryption and security techniques such as sharding, which partitions data to multiple servers.
Ability to Dynamically Define and Change Business Processes. Wdesk frees users from the confines of traditional business processes by allowing them to dynamically define processes on-demand to support evolving business needs. Wdesk enables multiple users to work in concert, allowing teams to redefine workflows and business processes without the traditional challenges of data integrity, personnel limitations and legacy software limitations.


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Benefits of Our Solution
The key benefits of using our software solutions are recognized by a wide range of decision-makers and other users across our customers’ organizational structures.
Benefits to Our Customers Who Are Decision-Makers
Reduce Risk. Managers rely on Wdesk to help them make better decisions. Through the use of linked data, decision-makers can trust that Wdesk presentations and reports are up to date and consistent, reducing the risk of making decisions based on incorrect data and reporting incorrect data externally.
Improve Data Transparency. Numbers, text, charts and graphics in presentations and reports can be intelligently linked to an organization’s central repository for critical data, or “single source of truth,” within Wdesk, and each data point has its own history of changes, or data lineage. Decision-makers at our customers benefit from the ability to drill down into each discrete data point, which increases data transparency, visibility and, therefore, trust of critical business data across an organization.
Report with Greater Frequency. Many critical presentations and reports are published infrequently due to the difficulties associated with collecting data, compiling inputs across teams and iterating revisions. Within the Wdesk platform, documents, data and graphics remain intelligently linked, allowing presentations and reports to be easily updated and synchronized and published with greater frequency.
Enable Real-time Decision-Making. Wdesk’s live-linking and data-auditing capabilities significantly enhance data integrity, such that Wdesk can become the centralized, trusted data repository within our customers’ critical business data ecosystem. The use of verified data from trusted sources to compile timely reports with less risk and greater transparency and frequency allows decision-makers to make better informed, real-time decisions.
Benefits to Our Customers Who Are End Users
Ubiquitous Access. Users can access our platform through a web-based interface and our mobile application anywhere an internet connection is available.
Faster Time to Value. Wdesk is designed to be deployed in hours or days with little or no involvement from a customer’s IT organization.
Better Collaboration with Internal and External Constituents. Our platform enables multiple users to draft, edit and comment within the same document, spreadsheet, presentation or report at the same time from any location with internet access.
Higher Job Satisfaction. Wdesk helps end users be more efficient and flexible, which we believe leads to greater job satisfaction, employee retention, cross-role training and career mobility.
Greater Efficiency through Data Linking. Because the Wdesk platform acts as an organization’s “single source of truth,” users save time by avoiding the need to input, update and cross-check the same data referenced in multiple, disparate presentations and reports.
Our Growth Strategy
We strive to change the way businesses collect, manage, report and analyze critical business data. Key elements of our growth strategy include:
Pursue New Customers. Our primary growth strategy is to sell the Wdesk platform to new customers. Our first solution was focused on SEC reporting and enabled customers to automate and improve their regulatory filing process. In March 2013, we launched our Wdesk platform, under which we have expanded our offerings to five solutions. We continue to attract the majority of our new customers with our compliance


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reporting solutions, and we believe we can continue to take market share from our competitors in this market. We intend to build our sales and marketing organization and leverage our brand equity to attract new customers. We have customers in multiple end markets, and we intend to seek attractive new markets.
Generate Growth From Existing Customers. Wdesk exhibits a powerful network effect within an enterprise, whereby the usefulness of our platform increases as the number of users and the data that resides in it grows. As more employees of our customers use Wdesk, additional opportunities for collaboration drive demand among their co-workers for add-on seats of existing solutions. We intend to expand within current customers by adding new users for existing solutions as well as adding more solutions per customer.
Grow Our International Footprint. For the nine months ended September 30, 2014, we generated approximately 95% of our revenue in the United States. However, the growth drivers for our solution are similar in other parts of the world, including the need to reduce errors and risk, improve efficiency and respond to increasing regulatory requirements. For example, corporate sustainability reporting is mandatory for large companies in Europe. The European Commission has estimated its mandate will impact over 6,000 companies. Accordingly, we plan to increase our sales presence in Europe.
Extend Our Suite of Solutions. We intend to introduce new solutions to continue to meet growing demand for the creation, collaboration, presentation and analysis of critical business data. Our close and trusted relationships with our current customers are a source of new use cases, features and solutions for our solution roadmap.
Develop New Data Solutions. We believe we are the first integrated platform technology company to build a secure data ecosystem to manage structured and unstructured critical business data that spans data collection, reporting and decision-making. Because of the strength of our platform, our customers are increasingly using Wdesk as their central repository for critical data, and often regard Wdesk as their organization’s “single source of truth.” We believe this provides us the opportunity to develop new data solutions, including data warehousing and analysis, semantic linking and tagging of data and real-time risk management.
Selected Risks Related to Our Business
Investing in our Class A common stock involves risk. You should carefully consider all the information in this prospectus prior to investing in our Class A common stock. These risks are discussed more fully in the section entitled “Risk Factors” immediately following this prospectus summary. These risks and uncertainties include, but are not limited to, the following:
We have a limited operating history, which makes it difficult to predict our future operating results.
We have experienced significant growth and organizational change in recent periods and expect continued growth. If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service or address competitive challenges adequately.
The markets in which we participate are intensely competitive, and if we do not compete effectively, our operating results could be adversely affected.
We are substantially dependent upon customer renewals, the addition of new customers and the continued growth of the market for cloud-based business and financial reporting solutions.
If we are not able to provide successful enhancements, new features and modifications, our business could be adversely affected.
We depend on our senior management team and other key employees. If we are unable to attract and retain qualified personnel, we may be unable to execute our growth plan.


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Our long-term success depends, in part, on our ability to expand the sales of our solutions to customers located outside of the United States.
If we fail to keep our customers’ information confidential, our business and reputation could be significantly and adversely affected.
Claims by third parties that we infringe upon their intellectual property rights could result in significant costs and have a material adverse effect on our business or operating results.
Corporate Conversion
On December 10, 2014, we converted from a Delaware limited liability company into a Delaware corporation and changed our name from Workiva LLC to Workiva Inc. In conjunction with the corporate conversion, all of our outstanding equity units were automatically converted into 19,897,876 shares of our Class A common stock and 12,426,947 shares of our Class B common stock (based on the equity units outstanding as of September 30, 2014). The beneficial owners of our Class B common stock are Matthew M. Rizai, Ph.D., Martin J. Vanderploeg, Ph.D., Jeffrey D. Trom, Ph.D., Michael S. Sellberg, and Joseph H. Howell, who are our executive officers who were our managing directors immediately prior to our conversion into a corporation. See “Description of Capital Stock” for additional information regarding a description of the terms of our common stock and the terms of our certificate of incorporation and bylaws. While as a limited liability company our outstanding equity was referred to as “equity units,” in this prospectus, for ease of comparison, we refer to these equity units as our common stock for periods prior to the corporate conversion, unless otherwise indicated or the context requires otherwise. Similarly, unless otherwise indicated, we refer to members’ equity as stockholders’ equity. In this prospectus, we refer to all of the transactions related to our conversion to a corporation as the corporate conversion. See “Certain Relationships and Related Party Transactions—Conversion to a Corporation.”
Implications of Being an Emerging Growth Company
As a company with less than $1 billion in revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act). For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from specified disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:
being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;
not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
reduced disclosure obligations regarding executive compensation; and
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We may take advantage of these provisions for up to five years or such earlier time when we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1 billion in annual revenue, have more than $700 million in market value of our capital stock held by non-affiliates or issue more than $1 billion of non-convertible debt over a three-year period. We may choose


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to take advantage of some, but not all, of the available exemptions. We have taken advantage of some reduced reporting burdens in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.
The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. However, we are irrevocably choosing to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption is required for non-emerging growth companies.
Corporate Information
WebFilings LLC was formed in California in August 2008. In July 2014, we changed our name to Workiva LLC, and we converted into a Delaware limited liability company in September 2014. On December 10, 2014, Workiva LLC was converted into a Delaware corporation and renamed Workiva Inc. Our principal executive offices are located at 2900 University Boulevard, Ames, Iowa 50010, and our telephone number is (888) 275-3125. Our website address is www.workiva.com. Information contained on or accessible through our website is not incorporated by reference into this prospectus and should not be considered a part of this prospectus. Unless the context requires otherwise, the words “we,” “us,” “our” and “Workiva” refer to Workiva LLC and its consolidated subsidiaries for periods prior to the corporate conversion, and to Workiva Inc. and its consolidated subsidiaries for periods after the corporate conversion. Except as disclosed in this prospectus, the consolidated financial statements and selected historical financial data and other financial information included in this prospectus are those of Workiva LLC and its subsidiaries and do not give effect to the corporate conversion.
Trademarks, Service Marks and Trade Names
We own or have rights to trademarks, service marks or trade names that we use in connection with the operation of our business. In addition, our names, logos and website names and addresses are owned by us or licensed by us. We also own or have the rights to copyrights that protect the content of our solutions. Solely for convenience, the trademarks, service marks, trade names and copyrights referred to in this prospectus are listed without the ©, ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks, trade names and copyrights.
This prospectus may include trademarks, service marks or trade names of other companies. Our use or display of other parties’ trademarks, service marks, trade names or products is not intended to, and does not imply a relationship with, or endorsement or sponsorship of us by, the trademark, service mark or trade name owners.
Market and Industry Data
We obtained the industry, market and competitive position data throughout this prospectus from our own internal estimates and research as well as from industry publications and studies conducted by third parties, including a 2014 independent study conducted by Frost & Sullivan, which was commissioned by us. Frost & Sullivan has consented to the references to their study and the use of their name in this prospectus. The industry publications and third-party studies generally state that the information that they contain has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that these publications and third-party studies and our internal data are reliable as of their respective dates, the industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors.” These


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and other factors could cause results to differ materially from those expressed in these publications.


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THE OFFERING
Issuer...................................................................Workiva Inc.
Class A common stock offered by us..................7,200,000 shares
Common stock to be outstanding after
this offering:
Class A common stock..............................27,097,876 shares
Class B common stock..............................12,426,947 shares
Total....................................................................39,524,823 shares
Over-allotment option of
Class A common stock........................................1,080,000 shares
Voting rights........................................................Each share of our Class A common stock is entitled to one vote per share and is not convertible into any other shares of our capital stock. Each share of our Class B common stock is entitled to ten votes per share and is convertible into one share of our Class A common stock at any time. Our Class B common stock also will automatically convert into shares of our Class A common stock upon certain transfers. Holders of our Class A common stock and Class B common stock will generally vote together as a single class, unless otherwise required by our certificate of incorporation or law.
The shares of our Class B common stock outstanding after this offering will represent approximately 31.4% of the total number of shares of our Class A and Class B common stock outstanding after this offering and 82.1% of the combined voting power of our Class A and Class B common stock outstanding after this offering. See “Description of Capital Stock.”
Use of proceeds...................................................We intend to use the net proceeds received by us from this offering for working capital and general corporate purposes. We may also use a portion of the net proceeds to acquire or invest in complementary businesses, products, services, technologies or other assets. See “Use of Proceeds.”
Proposed NYSE Symbol.....................................“WK”


11


The number of shares of our Class A and Class B common stock to be outstanding after this offering is based upon 19,897,876 shares of Class A common stock and 12,426,947 shares of Class B common stock outstanding as of September 30, 2014 after giving effect to the corporate conversion, and excludes:
5,977,709 shares of Class A common stock issuable upon exercise of outstanding options to purchase shares of Class A common stock as of September 30, 2014 at a weighted-average exercise price of $9.36 per share;
207,009 shares of Class A common stock issuable upon exercise of outstanding options to purchase shares of Class A common stock that were granted after September 30, 2014 at a weighted-average exercise price of $15.83 per share; and
3,960,000 shares of Class A common stock reserved for future issuance under our 2014 Equity Incentive Plan.
For a summary of the rates at which each class of outstanding equity was converted into shares of our common stock in the corporate conversion, see Note 1—“Unaudited Pro Forma Loss and Per Share Information” to both the Consolidated Financial Statements and Unaudited Condensed Consolidated Financial Statements.    
Except as otherwise indicated, all information in this prospectus assumes:
no exercise of the underwriters’ over-allotment option to purchase additional shares; and
the conversion upon completion of this offering of a convertible promissory note issued in July 2014 in an aggregate principal amount of $5.0 million plus accrued interest into 407,183 shares of Class A common stock. For a description of the note, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”


 



12



SUMMARY CONSOLIDATED FINANCIAL DATA
In the following tables, we provide our summary consolidated historical financial data and pro forma financial data for the periods presented. We have derived the summary consolidated statement of operations data for the years ended December 31, 2012 and 2013 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the summary consolidated statement of operations data for the year ended December 31, 2011 from our audited consolidated financial statements not included in this prospectus. We have derived the summary consolidated statement of operations data for the nine months ended September 30, 2013 and 2014, and the consolidated balance sheet data as of September 30, 2014, from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated financial data for the nine months ended September 30, 2013 and 2014 and as of September 30, 2014 include all adjustments, consisting only of normal recurring accruals, that are necessary in the opinion of our management for a fair presentation of our financial position and results of operations for these periods.
Our historical results are not necessarily indicative of the results to be expected in the future, and our operating results for the nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the entire year ended December 31, 2014. When you read this summary consolidated financial data, it is important that you read it together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in conjunction with the consolidated financial statements, related notes, and other financial information included elsewhere in this prospectus.
Consolidated Statement of Operations Data
 
Year ended December 31,
 
Nine months ended September 30,
 
2011
 
2012
 
2013 (Restated)(4)
 
2013
 
2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited)
 
(in thousands)
Revenue
 
 
 
 
 
 
 
 
 
Subscription and support
$
10,925

 
$
34,702

 
$
65,164

 
$
46,015

 
$
66,306

Professional services
3,939

 
18,236

 
19,987

 
15,567

 
16,259

Total revenue
14,864

 
52,938

 
85,151

 
61,582

 
82,565

Cost of revenue
 
 
 
 
 
 
 
 
 
Subscription and support(1)
3,069

 
9,222

 
14,881

 
10,724

 
15,078

Professional services(1)
2,916

 
9,777

 
9,406

 
7,106

 
8,826

Total cost of revenue
5,985

 
18,999

 
24,287

 
17,830

 
23,904

Gross profit
8,879

 
33,939

 
60,864

 
43,752

 
58,661

Operating expenses
 
 
 
 
 
 
 
 
 
Research and development(1)
6,611

 
18,342

 
33,400

 
24,991

 
32,142

Sales and marketing(1)
10,471

 
27,506

 
40,824

 
30,381

 
39,391

General and administrative(1)(2)
5,112

 
16,146

 
14,402

 
10,612

 
13,941

Total operating expenses
22,194

 
61,994

 
88,626

 
65,984

 
85,474

Loss from operations
(13,315
)
 
(28,055
)
 
(27,762
)
 
(22,232
)
 
(26,813
)
Interest expense
(268
)
 
(1,521
)
 
(366
)
 
(359
)
 
(1,281
)
Other income and (expense), net
18

 
(861
)
 
104

 
70

 
(260
)
Net loss
$
(13,565
)
 
$
(30,437
)
 
$
(28,024
)
 
$
(22,521
)
 
$
(28,354
)


13



 
Year ended December 31,
 
Nine months ended September 30,
 
2011
 
2012
 
2013 (Restated)(4)
 
2013
 
2014
 
 
 
 
 
 
 
 
 
 
 
(in thousands, except per share amounts)
Pro forma net loss and per share information (unaudited):(3)
 
 
 
 
 
 
 
 
 
Pro forma provision (benefit) for income taxes
 
 
 
 

 
 
 

Pro forma net loss
 
 
 
 
$
(28,024
)
 
 
 
$
(28,354
)
Pro forma basic and diluted net loss per share
 
 
 
 
$
(0.88
)
 
 
 
$
(0.88
)
Pro forma weighted average shares outstanding - basic and diluted
 
 
 
 
31,746,911

 
 
 
32,203,344

(1)
Equity-based compensation expense included in these line items is as follows:
 
Year ended December 31,
 
Nine months ended September 30,
 
2011
 
2012
 
2013
 
2013
 
2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited)
 
(in thousands)
Cost of revenue
 
 
 
 
 
 
 
 
 
Subscription and support
$
64

 
$
80

 
$
200

 
$
159

 
$
403

Professional services
96

 
144

 
171

 
139

 
264

Operating expenses
 
 
 
 
 
 
 
 
 
Research and development
188

 
194

 
762

 
627

 
1,443

Sales and marketing
213

 
293

 
799

 
544

 
889

General and
administrative(2)
767

 
7,418

 
1,438

 
1,181

 
2,540

Total equity-based compensation expense
$
1,328

 
$
8,129

 
$
3,370

 
$
2,650

 
$
5,539

(2)
One-time grants of immediately vested appreciation units to two managing directors significantly increased general and administrative expense in the year ended December 31, 2012.
(3)
Unaudited pro forma net loss and per share information gives effect to the corporate conversion and the conversion of a convertible promissory note issued in July 2014 in an aggregate principal amount of $5.0 million plus accrued interest into 407,183 shares of Class A common stock. In conjunction with the corporate conversion, all of our outstanding equity units and options to purchase equity units were automatically converted into shares of our common stock or options to purchase common stock.
(4)
The Consolidated Financial Statements have been restated to properly account for a February 1, 2011 $2.3 million forgivable loan from the Iowa Department of Economic Development (IDED) in accordance with ASC 450 “Contingencies” as a gain contingency. The benefit of the forgivable loan, which was originally recorded as contra expense in 2013, has been reversed as a result of this restatement and application of ASC 450. See Note 2, Restatement of Previously Issued Financial Statements, to both the Consolidated Financial Statements and Unaudited Condensed Consolidated Financial Statements.


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Consolidated Balance Sheet Data
The following table presents summary consolidated balance sheet data as of September 30, 2014:
on an actual basis;
on a pro forma basis after giving effect to (i) the corporate conversion, (ii) the conversion of a convertible promissory note issued in July 2014 in an aggregate principal amount of $5.0 million plus accrued interest into 407,183 shares of Class A common stock, and (iii) the reclassification of the compound embedded derivative liability related to the convertible note to additional paid-in capital; and
on a pro forma as adjusted basis after giving effect to (i) the corporate conversion, (ii) the conversion of the $5.0 million convertible promissory note issued in July 2014 as described above, (iii) the reclassification of the compound embedded derivative liability as described above, and (iv) the sale and issuance of 7,200,000 shares of our Class A common stock by us in this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
 
September 30, 2014
 
Actual
   (Restated)(1)
 
Pro forma
 
Pro forma as adjusted
 
 
 
 
 
 
 
(in thousands, unaudited)
Cash and cash equivalents
$
20,275

 
$
20,275

 
$
111,076

Working capital, excluding deferred revenue
14,296

 
14,296

 
106,344

Total assets
82,556

 
82,556

 
172,052

Deferred revenue, current and long term
51,877

 
51,877

 
51,877

Total current liabilities
57,949

 
57,949

 
56,702

Total non-current liabilities
50,270

 
45,031

 
45,031

Total members’ deficit
(25,663
)
 

 

Total stockholders’ equity (deficit)

 
(20,424
)
 
70,320

(1)
The Consolidated Financial Statements have been restated to properly account for a February 1, 2011 $2.3 million forgivable loan from the Iowa Department of Economic Development (IDED) in accordance with ASC 450 “Contingencies” as a gain contingency. The benefit of the forgivable loan, which was originally recorded as contra expense in 2013, has been reversed as a result of this restatement and application of ASC 450. See Note 2, Restatement of Previously Issued Financial Statements, to both the Consolidated Financial Statements and Unaudited Condensed Consolidated Financial Statements.



15



RISK FACTORS
Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this prospectus, including the consolidated financial statements and the related notes, before deciding whether to invest in shares of our Class A common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks, or other risks and uncertainties that are not yet identified or that we currently think are immaterial, actually occur, our business, financial condition, results of operations and future prospects could be materially and adversely affected. In that event, the market price of our Class A common stock could decline, and you could lose part or all of your investment.
Risks Related to Our Business and Industry
We have a limited operating history, which makes it difficult to predict our future operating results.
We were founded in 2008 and have a limited operating history. We began offering our first solution in March 2010 and launched Wdesk in March 2013. As a result of our brief operating history, our ability to forecast our future operating results is limited and subject to a number of uncertainties, including our ability to plan for and model future growth. We have encountered and will encounter risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as the risks and uncertainties described herein. If our assumptions regarding these risks and uncertainties (which we use to plan our business) are incorrect or change due to changes in our markets, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations and our business could suffer.
We have not been profitable historically and may not achieve or maintain profitability in the future.
We have posted a net loss in each fiscal year since we began operations in 2008, including net losses of approximately $30 million in fiscal 2012, $28 million in fiscal 2013 and $28 million for the nine months ended September 30, 2014. While we have experienced significant revenue growth in recent periods, we are not certain whether or when we will obtain a high enough volume of subscriptions to sustain or increase our growth or achieve or maintain profitability in the future. In addition, we plan to continue to invest in our infrastructure, new solutions, research and development and sales and marketing, and as a result, we cannot assure you that we will achieve or maintain profitability. Because we intend to continue spending in anticipation of the revenue we expect to receive from these efforts, our expenses will be greater than the expenses we would incur if we developed our business more slowly. In addition, we may find that these efforts are more expensive than we currently anticipate, which would further impact our profitability.
In addition, as a public company, we will incur significant accounting, legal and other expenses that we did not incur as a private company. As a result of these increased expenditures, we will have to generate and sustain increased revenue to achieve future profitability. We may incur losses in the future for a number of reasons, including the other risks and uncertainties described in this prospectus. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays and other unknown factors that may result in losses in future periods. If our revenue growth does not meet our expectations in future periods, our financial performance may be harmed, and we may not achieve or maintain profitability in the future.
Our revenue growth rate in recent periods may not be indicative of our future performance.
We experienced revenue growth rates of 256%, 61% and 34% in fiscal 2012, fiscal 2013 and the nine months ended September 30, 2014, respectively. Our historical revenue growth rates are not indicative


16



of future growth, and we may not achieve similar revenue growth rates in future periods. You should not rely on our revenue for any prior quarterly or annual periods as any indication of our future revenue or revenue growth. If we are unable to maintain consistent revenue or revenue growth, our stock price could be volatile, and it may be difficult to achieve and maintain profitability.
Failure to manage our growth may adversely affect our business or operations.
Since 2010, we have experienced significant growth in our business, customer base, employee headcount and operations, and we expect to continue to grow our business rapidly over the next several years. This growth places a significant strain on our management team and employees and on our operating and financial systems. To manage our future growth we must continue to scale our business functions, improve our financial and management controls and our reporting systems and procedures and expand and train our work force. In particular, we grew from 109 employees as of December 31, 2010 to more than 940 employees as of September 30, 2014. We anticipate that additional investments in sales personnel, infrastructure and research and development spending will be required to:
scale our operations and increase productivity;
address the needs of our customers;
further develop and enhance our existing solutions and offerings;
develop new technology; and
expand our markets and opportunity under management, including into new solutions and geographic areas.
We cannot assure you that our controls, systems and procedures will be adequate to support our future operations or that we will be able to manage our growth effectively. We also cannot assure you that we will be able to continue to expand our market presence in the United States and other current markets or successfully establish our presence in other markets. Failure to effectively manage growth could result in difficulty or delays in deploying customers, declines in quality or customer satisfaction, increases in costs, difficulties in introducing new features or other operational difficulties, and any of these difficulties could adversely impact our business performance and results of operations.
Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.
Our quarterly results of operations, including the levels of our revenue, gross margin, profitability, cash flow and deferred revenue, may vary significantly in the future, and period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control, and therefore, may not fully reflect the underlying performance of our business. Fluctuations in quarterly results may negatively impact the value of our Class A common stock. Factors that may cause fluctuations in our quarterly financial results include, without limitation, those listed below:
our ability to attract new customers in multiple regions around the world;
the addition or loss of large customers, including through acquisitions or consolidations;
the timing of recognition of revenue;
the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure;


17



network outages, security breaches, technical difficulties or interruptions with our services;
general economic, industry and market conditions;
customer renewal rates and the extent to which customers subscribe for additional seats or solutions;
pricing changes upon any renewals of customer agreements;
changes in our pricing policies or those of our competitors;
the mix of solutions sold during a period;
seasonal variations in sales of our solutions;
the timing and success of new product and service introductions by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, customers or strategic partners;
the announcement or adoption of new regulations and policy mandates or changes to existing regulations and policy mandates;
changes in foreign currency exchange rates;
future accounting pronouncements or changes in our accounting policies;
general economic conditions, both domestically and in the foreign markets in which we sell our solutions;
the timing of expenses related to the development or acquisition of technologies or businesses and potential future charges for impairment of goodwill from acquired companies; and
unforeseen litigation and intellectual property infringement.
To date, we have derived a substantial majority of our revenue from customers using our Wdesk platform for SEC filings. Our efforts to increase use of our Wdesk platform and other applications may not succeed and may reduce our revenue growth rate.
To date, we have derived a substantial majority of our revenue from customers using our Wdesk platform for SEC filings. Our sales and marketing of Wdesk for risk, sustainability and management reporting, and enterprise risk management is relatively new, and it is uncertain whether these areas will achieve the level of market acceptance we have achieved in the SEC filing market. Further, the introduction of new solutions beyond these markets may not be successful. Because it is our policy not to view actual customer data unless specifically invited by a customer to do so, we are unable to determine with any certainty how customers are using our platform and may not be able to determine with certainty the extent to which our new solutions are being utilized by customers. Any factor adversely affecting sales of our platform or solutions, including release cycles, market acceptance, competition, performance and reliability, reputation and economic and market conditions, could adversely affect our business and operating results.
Our solutions face intense competition in the marketplace. If we are unable to compete effectively, our operating results could be adversely affected.
The market for our solutions is increasingly competitive, rapidly evolving and fragmented, and is subject to changing technology and shifting customer needs. Although we believe that our Wdesk platform and the solutions that it offers are unique, many vendors develop and market products and services that compete to varying extents with our offerings, and we expect competition in our market to continue to intensify. Moreover, industry consolidation may increase competition. In addition, many companies have


18



chosen to invest in their own internal reporting solutions and therefore may be reluctant to switch to solutions such as ours.
We compete with many types of companies, including diversified enterprise software providers; providers of professional services, such as consultants and business and financial printers; governance, risk and compliance software providers; and business intelligence/corporate performance management software providers. Many of our existing competitors, as well as a number of potential new competitors, have longer operating histories, greater name recognition, more established customer bases and significantly greater financial, technical, marketing and other resources than we do. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. We could lose customers if our competitors introduce new competitive products, add new features, acquire competitive products, reduce prices, form strategic alliances with other companies or are acquired by third parties with greater available resources. We also face competition from a variety of vendors of cloud-based and on-premise software applications that address only a portion of one of our solutions. We may also face increasing competition from open source software initiatives, in which competitors may provide software and intellectual property for free. In addition, if a prospective customer is currently using a competing solution, the customer may be unwilling to switch to our solutions without access to setup support services. If we are unable to provide those services on terms attractive to the customer, the prospective customer may be unwilling to utilize our solutions. If our competitors’ products, services or technologies become more accepted than our solutions, if they are successful in bringing their products or services to market earlier than ours, or if their products or services are more technologically capable than ours, then our revenue could be adversely affected. In addition, some of our competitors may offer their products and services at a lower price. If we are unable to achieve our target pricing levels, our operating results would be negatively affected. Pricing pressures and increased competition could result in reduced sales, reduced margins, losses or a failure to maintain or improve our competitive market position, any of which would adversely affect our business.
If we do not keep pace with technological changes, our solutions may become less competitive and our business may suffer.
Our market is characterized by rapid technological change, frequent product and service innovation and evolving industry standards. If we are unable to provide enhancements and new features for our existing solutions or new solutions that achieve market acceptance or that keep pace with these technological developments, our business could be adversely affected. For example, we are focused on enhancing the features of our non-SEC reporting solutions to enhance their utility to larger customers with complex, dynamic and global operations. The success of enhancements, new features and solutions depends on several factors, including the timely completion, introduction and market acceptance of the enhancements or new features or solutions. Failure in this regard may significantly impair our revenue growth. In addition, because our solutions are designed to operate on a variety of systems, we will need to continuously modify and enhance our solutions to keep pace with changes in internet-related hardware, software, communication, browser and database technologies. We may not be successful in either developing these modifications and enhancements or in bringing them to market in a timely fashion. Furthermore, uncertainties about the timing and nature of new network platforms or technologies, or modifications to existing platforms or technologies, could increase our research and development expenses. Any failure of our solutions to keep pace with technological changes or operate effectively with future network platforms and technologies could reduce the demand for our solutions, result in customer dissatisfaction and adversely affect our business.


19



If we fail to manage our technical operations infrastructure, our existing customers may experience service outages, and our new customers may experience delays in the deployment of our solutions.
We have experienced significant growth in the number of users, projects and data that our operations infrastructure supports. We seek to maintain sufficient excess capacity in our operations infrastructure to meet the needs of all of our customers. We also seek to maintain excess capacity to facilitate the rapid provision of new customer deployments and the expansion of existing customer deployments. In addition, we need to properly manage our technological operations infrastructure in order to support changes in hardware and software parameters and the evolution of our solutions, all of which require significant lead time. Our Wdesk platform interacts with technology provided by Google and other third-party providers, and our technological infrastructure depends on this technology. We have experienced, and may in the future experience, website disruptions, outages and other performance problems. These problems may be caused by a variety of factors, including infrastructure changes, human or software errors, viruses, security attacks, fraud, spikes in customer usage and denial of service issues. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. If we do not accurately predict our infrastructure requirements, our existing customers may experience service outages that may subject us to financial penalties, financial liabilities and customer losses. If our operations infrastructure fails to keep pace with increased sales, customers may experience delays as we seek to obtain additional capacity, which could adversely affect our reputation and our revenue.
As a provider of cloud-based software, we rely on the services of third-party data center hosting facilities. Interruptions or delays in those services could impair the delivery of our service and harm our business.
Our Wdesk platform has been developed with, and is based on, cloud computing technology. It is hosted pursuant to service agreements on servers by third-party service providers, including those with Google and Amazon. We do not control the operation of these providers or their facilities, and the facilities are vulnerable to damage, interruption or misconduct. Unanticipated problems at these facilities could result in lengthy interruptions in our services. If the services of one or more of these providers are terminated, disrupted, interrupted or suspended for any reason, we could experience disruption in our ability to offer our solutions, or we could be required to retain the services of replacement providers, which could increase our operating costs and harm our business and reputation. In addition, as we grow, we may move or transfer our data and our customers’ data to other cloud hosting providers. Despite precautions taken during this process, any unsuccessful data transfers may impair the delivery of our service. Further, any damage to, or failure of, the cloud servers that we use could result in interruptions in our services. Interruptions in our service may damage our reputation, reduce our revenue, cause us to issue credits or pay penalties, cause customers to terminate their subscriptions and adversely affect our renewal rates and our ability to attract new customers. Our business would be harmed if our customers and potential customers believe our service is unreliable.
Any failure or interruptions in the internet infrastructure, bandwidth providers, data center providers, other third parties or our own systems for providing our solutions to customers could negatively impact our business.
Our ability to deliver our solutions is dependent on the development and maintenance of the internet and other telecommunications services by third parties. Such services include maintenance of a reliable network backbone with the necessary speed, data capacity and security for providing reliable internet access and services and reliable telecommunications systems that connect our operations. While our solutions are designed to operate without interruption, we may experience interruptions and delays in services and availability from time to time. We rely on systems as well as third-party vendors, including data center, bandwidth, and telecommunications equipment providers, to provide our solutions. We do not maintain redundant systems or facilities for some of these services. In the event of a catastrophic event with respect


20



to one or more of these systems or facilities, we may experience an extended period of system unavailability, which could negatively impact our relationship with our customers.
Any failure to offer high-quality technical support services may adversely affect our relationships with our customers and our financial results.
Once our solutions are deployed, our customers depend on our customer success organization to resolve technical issues relating to our solutions. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for support services. We also may be unable to modify the format of our support services to compete with changes in support services provided by our competitors. Increased customer demand for these services, without corresponding revenue, could increase costs and adversely affect our operating results. In addition, our sales process is highly dependent on our solutions and business reputation and on positive recommendations from our existing customers. Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality support, could adversely affect our reputation, our ability to sell our solutions to existing and prospective customers, and our business, operating results and financial position.
Because our Wdesk platform is offered on a subscription basis, we are required to recognize revenue for it over the term of the subscription. As a result, downturns or upturns in sales may not be immediately reflected in our operating results.
We generally recognize subscription and support revenue from customers ratably over the terms of their subscription agreements, which are typically on a quarterly or annual cycle and automatically renew for additional periods. As a result, a substantial portion of the revenue we report in each quarter will be derived from the recognition of deferred revenue relating to subscription agreements entered into during previous quarters. Consequently, a decline in new or renewed subscriptions in any one quarter may not be immediately reflected in our revenue results for that quarter. This decline, however, will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our solutions and potential changes in our rate of renewals may not be fully reflected in our results of operations until future periods. Our subscription model also makes it difficult for us to rapidly increase our subscription revenue through additional sales in any period, as revenue from new customers must be recognized over the applicable subscription term. In addition, we may be unable to adjust our cost structure to reflect the changes in revenue, which could adversely affect our operating results.
We cannot accurately predict subscription renewal or upgrade rates and the impact these rates may have on our future revenue and operating results.
Our business depends substantially on customers renewing their subscriptions with us and expanding their use of our services. Our customers have no obligation to renew their subscriptions for our services after the expiration of their initial subscription period. While we have historically maintained a subscription and support revenue retention rate of greater than 95%, we may be unable to maintain this historical rate. Given our limited operating history, we may be unable to accurately predict our subscription and support revenue retention rate. In addition, our customers may renew for shorter contract lengths, lower prices or fewer users. We cannot accurately predict new subscription or expansion rates and the impact these rates may have on our future revenue and operating results. Our renewal rates may decline or fluctuate as a result of a number of factors, including customer dissatisfaction with our service, customers’ ability to continue their operations and spending levels and deteriorating general economic conditions. If our customers do not renew their subscriptions for our service or reduce the number of solutions they purchase at the time of renewal, or if they negotiate a lower price upon renewal, our revenue will decline and our business will suffer. Our future success also depends in part on our ability to sell additional solutions and services, more subscriptions or enhanced editions of our services to our current customers, which may also require increasingly sophisticated


21



and costly sales efforts that are targeted at senior management. If our efforts to sell additional solutions and services to our customers are not successful, our growth and operations may be impeded. In addition, any decline in our customer renewals or failure to convince our customers to broaden their use of our services would harm our future operating results.
Adverse economic conditions or reduced technology spending may adversely impact our business.
Our business depends on the overall demand for technology and on the economic health of our current and prospective customers. In general, worldwide economic conditions remain unstable, and these conditions make it difficult for our customers, prospective customers and us to forecast and plan future business activities accurately, and they could cause our customers or prospective customers to reevaluate their decision to purchase our solutions. Weak global economic conditions, or a reduction in technology spending even if economic conditions improve, could adversely impact our business, financial condition and results of operations in a number of ways, including longer sales cycles, lower prices for our solutions, reduced bookings and lower or no growth.
If we cannot maintain our corporate culture as we grow, we could lose the innovation, teamwork, passion and focus on execution that we believe contribute to our success, and our business may be harmed.
We believe our corporate culture is a critical component to our success. We have invested substantial time and resources in building our team. As we grow and develop the infrastructure of a public company, we may find it difficult to maintain our corporate culture. Any failure to preserve our culture could negatively affect our future success, including our ability to retain and recruit personnel and effectively focus on and pursue our corporate objectives.
We depend on our senior management team and other key employees, and the loss of one or more key employees could adversely affect our business.
Our success depends largely upon the continued services of our key executive officers. We also rely on our leadership team and other mission-critical individuals in the areas of research and development, marketing, sales, services and general and administrative functions. From time to time, there may be changes in our management team resulting from the hiring or departure of executives or other key employees, which could disrupt our business. Our senior management and key employees are generally employed on an at-will basis, which means that they could terminate their employment with us at any time. The loss of one or more of our executive officers or key employees could have a material adverse effect on our business.
Our ability to attract, train and retain qualified employees is crucial to our results of operations and any future growth.
To execute our growth plan, we must attract and retain highly qualified personnel. Competition for these individuals is intense, especially for engineers with high levels of experience in designing and developing software and internet-related services, senior sales executives and professional services personnel with appropriate financial reporting experience. We have, from time to time, experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources than we have. If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees have breached their legal obligations or that we have induced such breaches, resulting in a diversion of our time and resources. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be adversely affected.


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Our workforce is our primary operating expense and subjects us to risks associated with increases in the cost of labor as a result of increased competition for employees, higher employee turnover rates and required wage increases and health benefit coverage, lawsuits or labor union activity.
Labor is our primary operating expense. As of September 30, 2014, we employed 949 full-time employees. For the fiscal year ended December 31, 2013 and the nine months ended September 30, 2014, labor-related expense accounted for approximately 64% and 65% of our total operating expense, respectively. We may face labor shortages or increased labor costs because of increased competition for employees, higher employee turnover rates, or increases in employee benefit costs. If labor-related expenses increase, our operating expense could increase, which would adversely affect our business, financial condition and results of operations.
We are subject to the Fair Labor Standards Act (FLSA) and various federal and state laws governing such matters as minimum wage requirements, overtime compensation and other working conditions, citizenship requirements, discrimination and family and medical leave. In recent years, a number of companies have been subject to lawsuits, including class action lawsuits, alleging violations of federal and state law regarding workplace and employment matters, overtime wage policies, discrimination and similar matters. A number of these lawsuits have resulted in the payment of substantial damages by the defendants. Similar lawsuits may be threatened or instituted against us from time to time, and we may incur substantial damages and expenses resulting from lawsuits of this type, which could have a material adverse effect on our business, financial condition or results of operations.
There may be adverse tax and employment law consequences if the independent contractor status of our consultants or the exempt status of our employees is successfully challenged.
We retain consultants from time to time as independent contractors. Although we believe that we have properly classified these individuals as independent contractors, there is nevertheless a risk that the Internal Revenue Service (IRS) or another federal, state, provincial or foreign authority will take a different view. Furthermore, the tests governing the determination of whether an individual is considered to be an independent contractor or an employee are typically fact sensitive and vary from jurisdiction to jurisdiction. Laws and regulations that govern the status and misclassification of independent contractors are subject to change or interpretation by various authorities. If a federal, state or foreign authority or court enacts legislation or adopts regulations that change the manner in which employees and independent contractors are classified or makes any adverse determination with respect to some or all of our independent contractors, we could incur significant costs under such laws and regulations, including for prior periods, in respect of tax withholding, social security taxes or payments, workers’ compensation and unemployment contributions, and recordkeeping, or we may be required to modify our business model, any of which could materially adversely affect our business, financial condition and results of operations. There is also a risk that we may be subject to significant monetary liabilities arising from fines or judgments as a result of any such actual or alleged non-compliance with federal, state or foreign tax laws. Further, if it were determined that any of our independent contractors should be treated as employees, we could incur additional liabilities under our applicable employee benefit plans.
In addition, we have classified many of our U.S. employees as “exempt” under the FLSA. If it were determined that any of our U.S. employees who we have classified as “exempt” should be classified as “non-exempt” under the FLSA, we may incur costs and liabilities for back wages, unpaid overtime, fines or penalties and be subject to employee litigation.


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Fixed-fee engagements with customers may not meet our expectations if we underestimate the cost of these engagements.
We provide certain professional services on a fixed-fee basis. When making proposals for fixed-fee engagements, we estimate the costs and timing for completing the engagements. We are beginning to provide professional services on new solutions, including our Sarbanes-Oxley compliance solution, which may involve a different mix of subscription, support and services than we have experienced to date. The contribution of this new revenue mix may impact our gross margins in ways that we cannot predict. If we are required to spend more hours than planned to perform these services, our cost of services revenue could exceed the fees charged to our customers on certain engagements and could cause us to recognize a loss on a contract, which would adversely affect our operating results. In addition, if we are unable to provide these professional services, we may lose sales or incur customer dissatisfaction, and our business and operating results could be significantly harmed.
Our sales cycle is unpredictable. As more of our sales efforts are targeted at larger enterprise customers, our sales cycle may become more time-consuming and expensive, and we may encounter pricing pressure, which could harm our business and operating results.
The cost and length of our sales cycle varies by customer and is unpredictable. As we target more of our sales efforts at selling additional solutions to larger enterprise customers, we may face greater costs, longer sales cycles and less predictability in completing some of our sales. These types of sales often require us to provide greater levels of education regarding the use and benefits of our service. In addition, larger customers may demand more document setup services, training and other professional services. As a result of these factors, these sales opportunities may require us to devote greater sales support and professional services resources to individual customers, driving up costs and time required to complete sales and diverting sales and professional services resources to a smaller number of larger transactions.
Our quarterly results reflect seasonality in revenue from professional services, which makes it difficult to predict our future operating results.
We have historically experienced seasonal variations in our revenue from professional services as many of our customers employ our professional services just before they file their Form 10-K in the first calendar quarter. As of September 30, 2014, approximately 76% of our SEC customers report their financials on a calendar year basis. While we expect our professional services revenue to become less seasonal as our non-SEC offerings grow, a significant portion of our revenue may continue to reflect seasonality, which makes it difficult to predict our future operating results. As a result, our operating and financial results could differ materially from our expectations and our business could suffer.
If the market for our technology delivery model and cloud-based software develops more slowly than we expect, our business could be harmed.
The market for cloud-based software is not as mature as the market for packaged software, and it is uncertain whether these services will sustain high levels of demand and market acceptance. Our success will depend to a substantial extent on the willingness of companies to increase their use of cloud-based services in general, and of our solutions in particular. Many companies have invested substantial personnel and financial resources to integrate traditional software into their businesses, and therefore may be reluctant or unwilling to migrate to a cloud-based service. Furthermore, some companies may be reluctant or unwilling to use cloud-based services because they have concerns regarding the risks associated with security capabilities, among other things, of the technology delivery model associated with these services. If companies do not perceive the benefits of cloud-based software, then the market for our solutions may develop more slowly than we expect, or the market for our new solutions may not develop at all, either of


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which would significantly adversely affect our operating results. We may not be able to adjust our spending quickly enough if market growth falls short of our expectations or we may make errors in predicting and reacting to relevant business trends, either of which could harm our business. If the market for our cloud solutions does not evolve in the way we anticipate, or if customers do not recognize the benefits of our cloud solutions over traditional on-premise enterprise software products, and as a result we are unable to increase sales of subscriptions to our solutions, then our revenue may not grow or may decline, and our operating results would be harmed.
The success of our cloud-based software largely depends on our ability to provide reliable solutions to our customers. If a customer were to experience a product defect, a disruption in its ability to use our solutions or a security flaw, demand for our solutions could be diminished, we could be subject to substantial liability and our business could suffer.
Because our solutions are complex and we continually release new features, our solutions could have errors, defects, viruses or security flaws that could result in unanticipated downtime for our subscribers and harm our reputation and our business. Internet-based software frequently contains undetected errors or security flaws when first introduced or when new versions or enhancements are released. We might from time to time find such defects in our solutions, the detection and correction of which could be time consuming and costly. Since our customers use our solutions for important aspects of their business, any errors, defects, disruptions in access, security flaws, viruses, data corruption or other performance problems with our solutions could hurt our reputation and may damage our customers’ businesses. If that occurs, customers could elect not to renew, could delay or withhold payment to us or may make warranty or other claims against us, which could result in an increase in our provision for doubtful accounts, an increase in collection cycles for accounts receivable or the expense and risk of litigation. We could also lose future sales. In addition, if the public becomes aware of security breaches of our solutions, our future business prospects could be adversely impacted.
We employ third-party licensed software for use in or with our solutions, and the inability to maintain these licenses or the existence of errors in the software we license could result in increased costs or reduced service levels, which would adversely affect our business.
Our solutions incorporate certain third-party software, including the Google Cloud Platform, that may be licensed to or hosted by or on behalf of Workiva, or may be hosted by a licensor and accessed by Workiva on a software-as-a-service basis. We anticipate that we will continue to rely on third-party software and development tools from third parties in the future. There may not be commercially reasonable alternatives to the third-party software we currently use, or it may be difficult or costly to replace. In addition, integration of the software used in our solutions with new third-party software may require significant work and require substantial investment of our time and resources. Also, to the extent that our solutions depend upon the successful operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software could prevent the deployment or impair the functionality of our solutions, delay new solution introductions, result in a failure of our solutions and injure our reputation. Our use of additional or alternative third-party software would require us to enter into license agreements with third parties. Any inability to maintain or acquire third-party licensed software for use in our solutions could result in increased costs or reduced service levels, which would adversely affect our business.
Changes in laws and regulations related to the internet or changes in the internet infrastructure itself may diminish the demand for our solutions and could have a negative impact on our business.
The future success of our business depends upon the continued use of the internet as a primary medium for commerce, communication and business solutions. Federal, state or foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of


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the internet as a commercial medium. Changes in these laws or regulations could require us to modify our solutions in order to comply with these changes. In addition, government agencies or private organizations may begin to impose taxes, fees or other charges for accessing the internet or commerce conducted via the internet. These laws or charges could limit the growth of internet-related commerce or communications generally or result in reductions in the demand for internet-based solutions such as ours.
In addition, the use of the internet as a business tool could be adversely affected due to delays in the development or adoption of new standards and protocols to handle increased demands of internet activity, security, reliability, cost, ease of use, accessibility and quality of service. The performance of the internet and its acceptance as a business tool has been adversely affected by “viruses,” “worms” and similar malicious programs, and the internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure. If the use of the internet is adversely affected by these issues, demand for our solutions could suffer.
Data security concerns and laws or other domestic or foreign regulations may reduce the effectiveness of our solutions and adversely affect our business.
We manage private and confidential information and documentation related to our customers’ finances and transactions, often prior to public dissemination. The use of insider information is highly regulated in the United States and abroad, and violations of securities laws and regulations may result in civil and criminal penalties. Privacy and data security are rapidly evolving areas of regulation, and additional regulation in those areas, some of it potentially difficult and costly for us to accommodate, is frequently proposed and occasionally adopted. Changes in laws restricting or otherwise governing data and transfer thereof could result in increased costs and delay operations.
In addition to government activity, the technology industry and other industries are considering various new, additional or different self-regulatory standards that may place additional burdens on us. If the processing of private and confidential information were to be curtailed in this manner, our software solutions may be less effective, which may reduce demand for our solutions and adversely affect our business. Furthermore, government agencies may seek to access sensitive information that our customers upload to our service providers or restrict customers’ access to our service providers. Laws and regulations relating to government access and restrictions are evolving, and compliance with such laws and regulations could limit adoption of our services by customers and create burdens on our business. Moreover, regulatory investigations into our compliance with privacy-related laws and regulations could increase our costs and divert management attention.
If we or our service providers fail to keep our customers’ information confidential or otherwise handle their information improperly, our business and reputation could be significantly and adversely affected.
If we fail to keep customers’ proprietary information and documentation confidential, we may lose existing customers and potential new customers and may expose them to significant loss of revenue based on the premature release of confidential information. While we have security measures in place to protect customer information and prevent data loss and other security breaches, these measures may be breached as a result of third-party action, employee error, malfeasance or otherwise. Because the techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.
In addition, our service providers (including, without limitation, hosting facilities, disaster recovery providers and software providers) may have access to our customers’ data and could suffer security breaches or data losses that affect our customers’ information.


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If an actual or perceived security breach or premature release occurs, our reputation could be damaged and we may lose future sales and customers. We may also become subject to civil claims, including indemnity or damage claims in certain customer contracts, or criminal investigations by appropriate authorities, any of which could harm our business and operating results. Furthermore, while our errors and omissions insurance policies include liability coverage for these matters, if we experienced a widespread security breach that impacted a significant number of our customers for whom we have these indemnity obligations, we could be subject to indemnity claims that exceed such coverage.
Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand.
Our success substantially depends upon our proprietary methodologies and other intellectual property rights. Unauthorized use of our intellectual property by third parties may damage our brand and our reputation. As of September 30, 2014, we had 5 issued patents and 13 patent applications pending in the United States, and we expect to seek additional patents in the future. In addition, we rely on a combination of copyright, trademark and trade secret laws, employee and third-party non-disclosure and non-competition agreements and other methods to protect our intellectual property. However, unauthorized parties may attempt to copy or obtain and use our technology to develop products with the same functionality as our solutions. We cannot assure you that the steps we take to protect our intellectual property will be adequate to deter misappropriation of our proprietary information or that we will be able to detect unauthorized use and take appropriate steps to protect our intellectual property. United States federal and state intellectual property laws offer limited protection, and the laws of some countries provide even less protection. Moreover, changes in intellectual property laws, such as changes in the law regarding the patentability of software, could also impact our ability to obtain protection for our solutions. In addition, patents may not be issued with respect to our pending or future patent applications. Those patents that are issued may not be upheld as valid, may be contested or circumvented, or may not prevent the development of competitive solutions.
We might be required to spend significant resources and divert the efforts of our technical and management personnel to monitor and protect our intellectual property. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Any failure to secure, protect and enforce our intellectual property rights could seriously adversely affect our brand and adversely impact our business.
Assertions by third parties of infringement or other violations by us of their intellectual property rights could result in significant costs and harm our business and operating results.    
Patent and other intellectual property disputes are common in our industry. Our success depends upon our ability to refrain from infringing upon the intellectual property rights of others. Some companies, including some of our competitors, own large numbers of patents, copyrights and trademarks, which they may use to assert claims against us. As we grow and enter new markets, we will face a growing number of competitors. As the number of competitors in our industry grows and the functionality of products in different industry segments overlaps, we expect that software and other solutions in our industry may be subject to such claims by third parties. Third parties may in the future assert claims of infringement, misappropriation or other violations of intellectual property rights against us. We cannot assure you that infringement claims will not be asserted against us in the future, or that, if asserted, any infringement claim will be successfully defended. A successful claim against us could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our services, or require that we comply with other unfavorable terms. We may also be obligated to indemnify our customers or business partners or pay substantial settlement costs, including royalty payments, in connection with any such claim or litigation and to obtain licenses,


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modify applications or refund fees, which could be costly. Even if we were to prevail in such a dispute, any litigation regarding our intellectual property could be costly and time-consuming and divert the attention of our management and key personnel from our business operations.
Some of our solutions utilize open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.
Some of our solutions include software covered by open source licenses, which may include, by way of example, GNU General Public License and the Apache License. The terms of various open source licenses have not been interpreted by United States courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our solutions. By the terms of certain open source licenses, we could be required to release the source code of our proprietary software, and to make our proprietary software available under open source licenses, if we combine our proprietary software with open source software in a certain manner. In the event that portions of our proprietary software are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, reengineer all or a portion of our technologies, or otherwise be limited in the licensing of our technologies, each of which could reduce or eliminate the value of our technologies and services. In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software. Many of the risks associated with usage of open source software cannot be eliminated and could negatively affect our business.
If we fail to continue to develop our brand, our business may suffer.
We believe that continuing to develop and maintain awareness of our brand is critical to achieving widespread acceptance of our solution and is an important element in attracting and retaining customers. Efforts to build our brand may involve significant expense and may not generate customer awareness or increase revenue at all, or in an amount sufficient to offset expenses we incur in building our brand. In addition, we changed our trade name from “WebFilings” to “Workiva” in July 2014. New and existing customers may be confused by or may not accept, or may be slow to accept, our new trade name. In addition, local authorities may refuse to register, or third parties may object to the use of, the new trade name or other trademarks in one or more of the jurisdictions in which we currently operate or may in the future operate. Any such refusal or objection may be costly or time-consuming or limit our ability to build and develop our brand portfolio, which could adversely affect our business and impede our growth.
Promotion and enhancement of our new name and the brand names of our solutions will depend largely on our success in being able to provide high quality, reliable and cost-effective solutions. If customers do not perceive our solutions as meeting their needs, or if we fail to market our solutions effectively, we will likely be unsuccessful in creating the brand awareness that is critical for broad customer adoption of our solutions. That failure could result in a material adverse effect on our business, financial condition and operating results.
Demand for our solutions is subject to legislative or regulatory changes and volatility in demand, which could adversely affect our business.
The market for our solutions depends in part on the requirements of the SEC and other regulatory bodies. Any legislation or rulemaking substantially affecting the content or method of delivery of documents to be filed with these regulatory bodies could have an adverse effect on our business. In addition, evolving market practices in light of regulatory developments could adversely affect the demand for our solutions.


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We may need to raise additional capital, which may not be available to us.
We will require substantial funds to support the implementation of our business plan. Our future liquidity and capital requirements are difficult to predict as they depend upon many factors, including the success of our solutions and competing technological and market developments. In the future, we may require additional capital to respond to business opportunities, challenges, acquisitions, a decline in the level of customer prepayments or unforeseen circumstances and may determine to engage in equity or debt financings or enter into credit facilities for other reasons, and we may not be able to timely secure additional debt or equity financing on favorable terms, or at all. Any debt financing obtained by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our Class A common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.
Our credit facility contains restrictive covenants that may limit our operating flexibility.
Our credit facility contains certain restrictive covenants that limit our ability to transfer or dispose of assets, merge with other companies or consummate certain changes of control, acquire other companies, pay dividends, incur additional indebtedness and liens, experience changes in management and enter into new businesses. We therefore may not be able to engage in any of the foregoing transactions unless we obtain the consent of the lender or terminate the credit facility, which may limit our operating flexibility. In addition, our credit facility is secured by all of our assets, has first priority over our other debt obligations and requires us to satisfy certain financial covenants, including the maintenance of at least $5.0 million of cash on hand or unused borrowing capacity. There is no guarantee that we will be able to generate sufficient cash flow or sales to meet these financial covenants or pay the principal and interest on any such debt. Furthermore, there is no guarantee that future working capital, borrowings or equity financing will be available to repay or refinance any such debt. Any inability to make scheduled payments or meet the financial covenants on our credit facility would adversely affect our business.
Determining our income tax rate is complex and subject to uncertainty.
The computation of provision for income tax is complex, as it is based on the laws of numerous taxing jurisdictions and requires significant judgment on the application of complicated rules governing accounting for tax provisions under U.S. generally accepted accounting principles. Provision for income tax for interim quarters is based on a forecast of our U.S and non-U.S. effective tax rates for the year, which includes forward-looking financial projections, including the expectations of profit and loss by jurisdiction, and contains numerous assumptions. Various items cannot be accurately forecasted and future events may be treated as discrete to the period in which they occur. Our provision for income tax can be materially impacted, for example, by the geographical mix of our profits and losses, changes in our business, such as internal restructuring and acquisitions, changes in tax laws and accounting guidance and other regulatory, legislative or judicial developments, tax audit determinations, changes in our uncertain tax positions, changes in our intent and capacity to permanently reinvest foreign earnings, changes to our transfer pricing practices, tax deductions attributed to equity compensation and changes in our need for a valuation allowance for deferred tax assets. For these reasons, our actual income taxes may be materially different than our provision for income tax.


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Adverse tax laws or regulations could be enacted or existing laws could be applied to us or our customers, which could increase the costs of our services and adversely impact our business.
The application of federal, state, local and international tax laws to services provided electronically is evolving. New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time (possibly with retroactive effect), and could be applied solely or disproportionately to services provided over the internet. These enactments could adversely affect our sales activity due to the inherent cost increase the taxes would represent and ultimately result in a negative impact on our operating results.
In addition, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us (possibly with retroactive effect), which could require us or our customers to pay additional tax amounts, as well as require us or our customers to pay fines or penalties and interest for past amounts. If we are unsuccessful in collecting such taxes from our customers, we could be held liable for such costs, thereby adversely impacting our operating results.
We operate and offer our services in many jurisdictions and, therefore, may be subject to federal, state, local and foreign taxes that could harm our business.
As an organization that operates in many jurisdictions in the United States and around the world, we may be subject to taxation in several jurisdictions with increasingly complex tax laws, the application of which can be uncertain. The authorities in these jurisdictions, including state and local taxing authorities in the United States, could successfully assert that we are obligated to pay additional taxes, interest and penalties. In addition, the amount of taxes we pay could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents, which could have a material adverse effect on our liquidity and operating results. The authorities could also claim that various withholding requirements apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries, any of which could have a material impact on us and the results of our operations. In addition, we may lose sales or incur significant costs should various tax jurisdictions impose taxes on either a broader range of services or services that we have performed in the past. We may be subject to audits of the taxing authorities in any such jurisdictions that would require us to incur costs in responding to such audits. Imposition of such taxes on our services could result in substantially unplanned costs, would effectively increase the cost of such services to our customers and could adversely affect our ability to retain existing customers or to gain new customers in the areas in which such taxes are imposed.
We operate service sales centers in multiple locations. Some of the jurisdictions in which we operate may give us the benefit of either relatively low tax rates, tax holidays or government grants, in each case that are dependent on how we operate or how many jobs we create and employees we retain. We plan on utilizing such tax incentives in the future as opportunities are made available to us. Any failure on our part to operate in conformity with applicable requirements to remain qualified for any such tax incentives or grants may result in an increase in our taxes. In addition, jurisdictions may choose to increase rates at any time due to economic or other factors. Any such rate increase could harm our results of operations.
In addition, changes to U.S. tax laws that may be enacted in the future could impact the tax treatment of our foreign earnings. Due to expansion of our international business activities, any changes in the U.S. taxation of such activities could increase our worldwide effective tax rate and adversely affect our financial position and results of operations.


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We may have additional tax liabilities, which could harm our business, results of operations or financial position.
Significant judgments and estimates are required in determining the provision for income taxes and other tax liabilities. Our tax expense may be impacted if our intercompany transactions, which are required to be computed on an arm’s-length basis, are challenged and successfully disputed by the tax authorities. Also, our tax expense could be impacted depending on the applicability of withholding taxes and indirect tax on software licenses and related intercompany transactions in certain jurisdictions. In determining the adequacy of income taxes, we assess the likelihood of adverse outcomes that could result if our tax positions were challenged by the IRS and other tax authorities. The tax authorities in the United States and other countries where we do business regularly examine our income and other tax returns. The ultimate outcome of these examinations cannot be predicted with certainty. Should the IRS or other tax authorities assess additional taxes as a result of examinations, we may be required to record charges to operations that could have a material impact on our results of operations, or financial position.
Sales to customers outside the United States expose us to risks inherent in international sales.
A key element of our growth strategy is to expand our international operations and develop a worldwide customer base. To date, we have not realized a significant portion of our revenue from customers headquartered outside the United States. Operating in international markets requires significant resources and management attention and will subject us to regulatory, economic and political risks that are different from those in the United States. Because of our limited experience with international operations, our international expansion efforts may not be successful in creating demand for our solutions outside of the United States or in effectively selling subscriptions to our solutions in all of the international markets we enter. In addition, we will face risks in doing business internationally that could adversely affect our business, including:
the need to localize and adapt our solutions for specific countries, including translation into foreign languages and associated expenses;
data privacy laws that require customer data to be stored and processed in a designated territory;
difficulties in staffing and managing foreign operations;
different pricing environments, longer sales cycles and longer accounts receivable payment cycles and collections issues;
new and different sources of competition;
weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights outside of the United States;
laws and business practices favoring local competitors;
compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including employment, tax, privacy and data protection laws and regulations;
increased financial accounting and reporting burdens and complexities;
restrictions on the transfer of funds;
adverse tax consequences; and
unstable regional and economic political conditions.
Currently, our international contracts are only occasionally denominated in local currencies; however, the majority of our local costs are denominated in local currencies. We anticipate that over time,


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an increasing portion of our international contracts may be denominated in local currencies. Therefore, fluctuations in the value of the United States dollar and foreign currencies may impact our operating results when translated into United States dollars. We do not currently engage in currency hedging activities to limit the risk of exchange rate fluctuations.
We may acquire other companies or technologies, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and adversely affect our operating results.
We may in the future seek to acquire or invest in businesses, applications or technologies that we believe could complement or expand our solutions, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated.
In addition, we have limited experience in acquiring other businesses. If we acquire additional businesses, we may not be able to integrate the acquired personnel, operations and technologies successfully or effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including:
inability to integrate or benefit from acquired technologies or services in a profitable manner;
unanticipated costs or liabilities associated with the acquisition;
incurrence of acquisition-related costs;
difficulty integrating the accounting systems, operations and personnel of the acquired business;
difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business;
difficulty converting the customers of the acquired business onto our solutions and contract terms, including disparities in the revenue, licensing, support or professional services model of the acquired company;
diversion of management’s attention from other business concerns;
adverse effects to our existing business relationships with business partners and customers as a result of the acquisition;
the potential loss of key employees;
use of resources that are needed in other parts of our business; and
use of substantial portions of our available cash to consummate the acquisition.
In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our results of operations.
Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. In addition, if an acquired business fails to meet our expectations, our operating results, business and financial position could suffer.


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We are subject to general litigation that may materially adversely affect us.
From time to time, we may be involved in disputes or regulatory inquiries that arise in the ordinary course of business. We expect that the number and significance of these potential disputes may increase as our business expands and our company grows larger. While our agreements with customers limit our liability for damages arising from our solutions, we cannot assure you that these contractual provisions will protect us from liability for damages in the event we are sued. Although we carry general liability insurance coverage, our insurance may not cover all potential claims to which we are exposed or may not be adequate to indemnify us for all liability that may be imposed. Any claims against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time, and result in the diversion of significant operational resources. Because litigation is inherently unpredictable, we cannot assure you that the results of any of these actions will not have a material adverse effect on our business, financial condition, results of operations and prospects.
Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.
Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board (FASB), the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results and could affect the reporting of transactions completed before the announcement of a change.
Risks Related to the Offering
Our share price may be volatile, and you may be unable to sell your shares at or above the offering price, if at all. Market volatility may affect the value of an investment in our Class A common stock and could subject us to litigation.
Technology stocks have historically experienced high levels of volatility. There has been no public market for our Class A common stock prior to this offering. The initial public offering price for the shares of our Class A common stock was determined by negotiations between us and representatives of the underwriters and may not be indicative of prices that will prevail in the trading market. The market price of our Class A common stock could be subject to wide fluctuations in response to many risk factors listed in this section, and others beyond our control, including:
actual or anticipated fluctuations in our financial condition and operating results;
changes in projected operational and financial results;
addition or loss of significant customers;
changes in laws or regulations applicable to our solutions;
actual or anticipated changes in our growth rate relative to our competitors;
announcements of technological innovations or new offerings by us or our competitors;
announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital-raising activities or commitments;
additions or departures of key personnel;
changes in our financial guidance or securities analysts’ estimates of our financial performance;
discussion of us or our stock price by the financial press and in online investor communities;


33



changes in accounting principles;
announcements related to litigation;
fluctuations in the valuation of companies perceived by investors to be comparable to us;
sales of our Class A or Class B common stock by us or our stockholders;
share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;
the expiration of the lock-up period set forth in our certificate of incorporation and any contractual lock-up periods; and
general economic and market conditions.
Furthermore, the stock markets recently have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies, and technology companies in particular. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of our Class A common stock. If the market price of our Class A common stock after this offering does not exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could harm our business.
Substantial blocks of our total outstanding shares may be sold into the market when the lock-up period ends. If there are substantial sales of shares of our Class A common stock, the price of our Class A common stock could decline.
The price of our Class A common stock could decline if there are substantial sales of our Class A common stock, particularly sales by our directors, executive officers and significant stockholders, or if there is a large number of shares of our Class A common stock available for sale. After this offering, we will have outstanding 27,097,876 shares of our Class A common stock and 12,426,947 shares of our Class B common stock (after giving effect to the corporate conversion and based on shares outstanding as of September 30, 2014). All of the shares of Class A common stock sold in this offering will be freely tradeable without restrictions or further registration under the Securities Act of 1933, as amended (Securities Act), except for any shares held by our affiliates as defined in Rule 144 under the Securities Act. All shares of Class A common stock and Class B common stock other than shares of Class A common stock issued in this offering are currently restricted from resale as a result of the “lock-up” restriction in our certificate of incorporation. These shares will become available to be sold 181 days after the date of this prospectus, with earlier sales permitted at the discretion of the representatives of the underwriters. In addition, our directors, executive officers and substantially all of our other stockholders have agreed pursuant to lock-up agreements with the representatives not to sell their shares for 180 days following the date of this prospectus without the consent of the representatives. The lock-up restrictions in our certificate of incorporation and in the lock-up agreements are more fully described in “Shares Eligible for Future Sale” and “Underwriting.” Shares held by directors, executive officers and other affiliates will be subject to volume limitations under Rule 144 under the Securities Act. In addition, the shares of Class A common stock subject to outstanding options under our equity incentive plans and the shares reserved for future issuance under our equity incentive plans may become eligible for sale to the public, subject to certain legal and contractual limitations. The market price of the shares of our Class A common stock could decline as a result of the sale of a substantial number


34



of our shares of common stock in the public market or the perception in the market that the holders of a large number of shares intend to sell their shares.
The dual class structure of our common stock has the effect of concentrating voting control with our executives and their affiliates.
Our Class B common stock has ten votes per share, and our Class A common stock, which is the stock we are offering in this offering, has one vote per share. The beneficial owners of our Class B common stock, consisting of our executive officers who were our managing directors immediately prior to the corporate conversion, will together hold approximately 82.1% of the voting power of our outstanding capital stock following this offering (giving effect to the conversion of a convertible promissory note in an aggregate principal amount of $5.0 million issued in July 2014). Because of the ten-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively will continue to control a majority of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval so long as the shares of Class B common stock represent at least 9.1% of all outstanding shares of our Class A and Class B common stock. This concentrated control will limit your ability to influence corporate matters for the foreseeable future and may have the effect of delaying, deferring or preventing a change in control, impeding a merger, consolidation, takeover or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our business, even if such a transaction would benefit other stockholders. The holders of Class B common stock may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests.
Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions, such as certain transfers to family members and transfers effected for estate planning purposes. The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term. If, for example, certain holders of Class B common stock retain a significant portion of their holdings of Class B common stock for an extended period of time, and a significant portion of the Class B common stock initially held by other executives is converted to Class A common stock, the remaining holders of Class B common stock could, as a result, acquire control of a majority of the combined voting power. As directors and executive officers, the initial beneficial owners of Class B common stock owe a fiduciary duty to our stockholders and must act in good faith in a manner they reasonably believe to be in the best interests of our stockholders. As stockholders, even if one of them becomes a controlling stockholder, each beneficial owner of Class B common stock is entitled to vote his shares in his own interests, which may not always be in the interests of our stockholders generally. For a description of the dual class structure, see “Description of Capital Stock—Anti-Takeover Provisions.”
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and may negatively affect the market price of our Class A common stock.
Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our certificate of incorporation and bylaws include provisions that:
establish that our board of directors is divided into three classes, with each class serving three-year staggered terms;
provide that our directors may be removed only for cause;


35



provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;
require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;
specify that special meetings of our stockholders can be called only by our board of directors, the chairman of our board of directors or our chief executive officer or president (in the absence of a chief executive officer);
establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors;
authorize our board of directors to issue, without further action by the stockholders, up to 100,000,000 shares of undesignated preferred stock;
require the approval of our board of directors or the holders of a supermajority of our outstanding shares of capital stock to amend our bylaws and certain provisions of our certificate of incorporation; and
reflect two classes of common stock, as discussed above.    
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, we are a Delaware corporation and governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder, in particular those owning 15% or more of our outstanding voting stock, for a period of three years following the date on which the stockholder became an “interested” stockholder. See “Description of Capital Stock.”
If you purchase shares of our Class A common stock in this offering, you will suffer immediate dilution of your investment.
The initial public offering price of our Class A common stock is substantially higher than the net tangible book value per share of our Class A common stock. Therefore, if you purchase shares of our Class A common stock in this offering, you will pay a price per share that substantially exceeds our pro forma net tangible book value per share after this offering, and you will experience immediate dilution of $12.23 per share, representing the difference between our pro forma as adjusted net tangible book value per share as of September 30, 2014, after giving effect to this offering. In addition, following this offering, purchasers who bought shares from us in this offering will have contributed 58.5% of the total consideration paid to us by our stockholders to purchase shares of Class A and Class B common stock, in exchange for acquiring approximately 18.2% of our total outstanding shares as of September 30, 2014, after giving effect to this offering. The exercise of outstanding options under our equity incentive plans and the issuance of shares reserved for future issuance under our equity incentive plans will result in further dilution.
Future sales and issuances of our capital stock or rights to purchase capital stock could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to decline.
We may issue additional securities following the completion of this offering. Our certificate of incorporation authorizes us to issue up to 1,000,000,000 shares of Class A common stock. Future sales and issuances of our capital stock or rights to purchase our capital stock could result in substantial dilution to our existing stockholders. We may sell Class A common stock, convertible securities and other equity securities in one or more transactions at prices and in a manner as we may determine from time to time. If


36



we sell any such securities in subsequent transactions, investors may be materially diluted. New investors in subsequent transactions could gain rights, preferences and privileges senior to those of holders of our Class A common stock.
We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.
We cannot specify with any certainty the particular uses of the net proceeds that we will receive from this offering. We will have broad discretion in the application of the net proceeds and intend to use the net proceeds received by us from this offering for working capital and general corporate purposes. We may also use a portion of the net proceeds to acquire or invest in complementary businesses, products, services, technologies or other assets. We may spend or invest these proceeds in a way with which our stockholders disagree. The failure by our management to apply these funds effectively could adversely affect our business and financial condition. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value. These investments may not yield a favorable return to our investors.
We will incur significantly increased costs and devote substantial management time as a result of operating as a public company.
As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. For example, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (Exchange Act), and will be required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Act, as well as rules and regulations subsequently implemented by the SEC and the New York Stock Exchange, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. We expect that compliance with these requirements will increase our legal and financial compliance costs and will make some activities more time consuming and costly. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. We expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, which will increase when we are no longer an “emerging growth company,” as defined by the JOBS Act. We may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs. As a result, management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as regulatory and governing bodies provide new guidance. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We will continue to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business could be adversely affected.
As a result of disclosure of information as a public company, our business and financial condition have become more visible, which we believe may result in threatened or actual litigation, including by


37



competitors and other third parties. If the claims are successful, our business operations and financial results could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business operations and financial results. These factors could also make it more difficult for us to attract and retain qualified employees, executive officers and members of our board of directors.
We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance on the terms that we would like. As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers.
We have previously identified a material weakness in our internal control over financial reporting, and any inability to maintain effective internal control over financial reporting could have a material adverse effect on our business.
During the course of preparing for this offering, we determined that it was appropriate to restate our audited consolidated financial statements for the year ended December 31, 2013 to revise our method of accounting for a forgivable loan arrangement. In connection with this restatement, we, in conjunction with our independent registered public accounting firm, concluded that a lack of adequate controls surrounding the review and recognition of forgivable loan arrangements constituted a material weakness in our internal control over financial reporting. During the current fiscal year, we have implemented measures designed to improve our internal control over financial reporting, including hiring a new chief financial officer, a general counsel and additional accounting and finance personnel. These additional resources have enabled us to broaden the scope and quality of our internal review of underlying information related to financial reporting and to formalize and enhance our financial control procedures. We cannot be certain that these efforts will be sufficient to remediate or prevent future material weaknesses or significant deficiencies from occurring.
A failure to maintain adequate internal controls over our financial and management systems could cause errors in our financial reporting, which could cause a loss of investor confidence and result in a decline in the price of our Class A common stock.
Our public company reporting obligations and our anticipated growth will likely strain our financial and management systems, internal controls and employees. In addition, we will be required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act when we cease to be an emerging growth company.
We are currently taking the necessary steps to comply with Section 404. If, during this process, we identify one or more material weaknesses in our internal controls, it is possible that our management may be unable to certify that our internal controls are effective by the certification deadline. We cannot be certain we will be able to successfully complete the implementation and certification requirements of Section 404 within the time period allowed.
Moreover, the Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. If we have a material weaknesses or deficiency in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. Effective internal controls are necessary for us to produce reliable financial reports and are important to prevent fraud. As a result, our failure to satisfy the requirements of Section 404 on a timely basis could result in us being subject to regulatory action and


38



a loss of investor confidence in the reliability of our financial statements, both of which in turn could cause the market value of our Class A common stock to decline and affect our ability to raise capital.
We are an “emerging growth company,” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Class A common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We will cease to be an “emerging growth company” upon the earliest of (i) December 31, 2019, (ii) the last day of the first fiscal year in which our annual gross revenue are $1 billion or more, (iii) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in nonconvertible debt securities or (iv) the date on which we qualify as a “large accelerated filer” with at least $700 million of equity securities held by non-affiliates. We cannot predict if investors will find our Class A common stock less attractive or our company less comparable to certain other public companies because we will rely on these exemptions.
We do not intend to pay dividends for the foreseeable future.
We may not declare or pay cash dividends on our capital stock in the near future. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. Consequently, stockholders must rely on sales of their Class A common stock after price appreciation as the only way to realize any future gains on their investment.
If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our stock adversely, or if our actual results differ significantly from our guidance, our stock price and trading volume could decline.
The trading market for our Class A common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, the trading price for our Class A common stock would be negatively affected. If one or more of the analysts who cover us downgrade our Class A common stock or publish inaccurate or unfavorable research about our business, the price of our Class A common stock would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our Class A common stock could decrease, which might cause our Class A common stock price and trading volume to decline.
In addition, from time to time, we may release earnings guidance or other forward-looking statements in our earnings releases, earnings conference calls or otherwise regarding our future performance that represent our management’s estimates as of the date of release. Some or all of the assumptions of any future guidance that we furnish may not materialize or may vary significantly from actual future results. Any failure to meet guidance or analysts’ expectations could have a material adverse effect on the trading price or trading volume of our Class A common stock.



39



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. All statements contained in this prospectus other than statements of historical facts, including statements regarding our future results of operations and financial position, our business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements or events and circumstances reflected in the forward-looking statements will occur. We are under no duty to update any of these forward-looking statements after the date of this prospectus to conform these statements to actual results or revised expectations.


40



USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of the shares of the Class A common stock offered by us will be approximately $90.7 million after deducting underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters’ over-allotment option to purchase additional shares in this offering is exercised in full, we estimate that our net proceeds will be approximately $104.8 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
The principal purposes of this offering are to create a public market for our Class A common stock, obtain additional capital, facilitate our future access to the public equity markets, increase awareness of our company among potential customers, and improve our competitive position.
Although we have not yet determined with certainty the manner in which we will allocate the net proceeds of this offering, we intend to use the net proceeds of the offering for working capital and for other general corporate purposes, including investments in sales and marketing in North America and Europe (among other things, the hiring of additional quota carrying sales people) and in research and development. We also anticipate using the additional working capital to offset a decrease in our cash flow from operations that we expect as a result of a planned reduction in incentives for annual and multi-year contracts. This reduction is not expected to adversely affect revenue.
Additionally, we may choose to expand our current business through acquisitions of, or investments in, complementary businesses, products, services, technologies or other assets, using cash or shares of our Class A common stock. However, we have no commitments with respect to any such acquisitions or investments at this time.
Pending other uses, we intend to invest the proceeds in interest-bearing, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government, or hold them as cash. We cannot predict whether the proceeds invested will yield a favorable return. Our management will have broad discretion in the application of the net proceeds we receive from this offering, and investors will be relying on the judgment of our management regarding the application of the net proceeds.
DIVIDEND POLICY
We currently intend to retain any future earnings and do not expect to pay any dividends on our capital stock in the foreseeable future. Any future determination to pay dividends on our capital stock will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements and other factors that our board of directors considers relevant. In addition, our credit facility with Silicon Valley Bank restricts our ability to pay dividends. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for a summary of the material terms of our credit facility.


41



CAPITALIZATION
The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2014 on:
an actual basis;
a pro forma basis after giving effect to (i) the corporate conversion, (ii) the conversion of a convertible promissory note issued in July 2014 in an aggregate principal amount of $5.0 million plus accrued interest into 407,183 shares of Class A common stock, and (iii) the reclassification of the compound embedded derivative liability related to the convertible note to additional paid-in capital; and
a pro forma as adjusted basis giving effect to (i) the corporate conversion, (ii) the conversion of the $5.0 million convertible promissory note issued in July 2014 as described above, (iii) the reclassification of the compound embedded derivative liability as described above, and (iv) the sale and issuance of 7,200,000 shares of our Class A common stock by us in this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
You should read this table together with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.


42



 
As of September 30, 2014
 
Actual (Restated)(1)
 
Pro forma
 
Pro forma as adjusted
 
 
 
 
 
 
 
(unaudited; in thousands, except share and per share data)
Cash and cash equivalents
$
20,275

 
$
20,275

 
$
111,076

Debt:
 
 
 
 
 
Current portion of long-term debt
351

 
351

 
351

Long-term debt, less current portion
7,250

 
7,250

 
7,250

Convertible note and embedded derivative
5,239

 

 

Total debt
12,840

 
7,601

 
7,601

Members’ equity (deficit):
 
 
 
 
 
Series A preferred units (21,050,000 issued and outstanding, actual; none issued and outstanding, pro forma and pro forma as adjusted)
(14,382
)
 

 

Series B preferred units (15,665,525 issued and outstanding, actual; none issued and outstanding, pro forma and pro forma as adjusted)
(9,927
)
 

 

Series C preferred units (10,486,387 issued and outstanding, actual; none issued and outstanding, pro form and pro forma as adjusted)
(2,303
)
 

 

Common units (19,169,737 issued and outstanding, actual; none issued and outstanding, pro forma and pro forma as adjusted)
1,812

 

 

Appreciation and participation units (21,982,220 issued and outstanding, actual; none issued and outstanding, pro forma and pro forma as adjusted)
(955
)
 

 

Accumulated other comprehensive income
92

 

 

Total members’ equity (deficit)
(25,663
)
 

 

Stockholders’ equity (deficit):
 
 
 
 
 
Class A common stock, $0.001 par value per share (no shares authorized, issued and outstanding, actual; 1,000,000,000 shares authorized, 19,897,876 shares issued and outstanding, pro forma; 1,000,000,000 shares authorized, 27,097,876 shares issued and outstanding, pro forma as adjusted)

 
20

 
27

Class B common stock, $0.001 par value per share (no shares authorized, issued and outstanding, actual; 500,000,000 shares authorized, 12,426,947 shares issued and outstanding, pro forma and pro forma as adjusted)

 
12

 
12

Preferred stock, $0.001 par value per share (no shares authorized, issued and outstanding, actual; 100,000,000 shares authorized, none issued and outstanding, pro forma and pro forma as adjusted)

 

 

Additional paid-in capital

 
96,793

 
187,530

Accumulated deficit

 
(117,341
)
 
(117,341
)
Accumulated other comprehensive income

 
92

 
92

Total stockholders’ equity (deficit)

 
(20,424
)
 
70,320

Total capitalization
$
(12,823
)
 
$
(12,823
)
 
$
77,921

(1)
The Consolidated Financial Statements have been restated to properly account for a February 1, 2011 $2.3 million forgivable loan from the IDED in accordance with ASC 450 “Contingencies” as a gain contingency. The benefit of the forgivable loan, which was originally recorded as contra expense in 2013, has been reversed as a result of this restatement and application of ASC 450. See Note 2, Restatement of Previously Issued Financial Statements, to both the Consolidated Financial Statements and Unaudited Condensed Consolidated Financial Statements.
The foregoing table excludes, after giving effect to the corporate conversion:
5,977,709 shares of Class A common stock issuable upon exercise of outstanding options to purchase shares of Class A common stock as of September 30, 2014, at a weighted-average exercise price of $9.36 per share;
207,009 shares of Class A common stock issuable upon exercise of outstanding options to purchase shares of Class A common stock that were granted after September 30, 2014 at a weighted-average exercise price of $15.83 per share; and
an additional 3,960,000 shares of Class A common stock reserved for future issuance under our 2014 Equity Incentive Plan.



43



DILUTION
If you invest in our Class A common stock in this offering, your interest will be diluted immediately to the extent of the difference between the initial public offering price per share of our Class A common stock (as set forth on the cover of this prospectus) and the pro forma as-adjusted net tangible book value per share of our Class A and Class B common stock after this offering.
Investors participating in this offering will incur immediate, substantial dilution. Pro forma net tangible book value per share represents the amount of our total tangible assets, less our total liabilities, divided by the number of shares of Class A and Class B common stock outstanding as of September 30, 2014, after giving effect to (i) the corporate conversion, (ii) the conversion of a convertible promissory note issued in July 2014 in an aggregate principal amount of $5.0 million plus accrued interest into 407,183 shares of Class A common stock, and (iii) the reclassification of the compound embedded derivative liability related to the convertible note to additional paid-in capital. Our pro forma net tangible book value (deficit) as of September 30, 2014 was $(20.8) million, or $(0.64) per share of common stock.
After giving effect to (i) the corporate conversion, (ii) the conversion of a convertible promissory note issued in July 2014 as described above, (iii) the reclassification of the compound embedded derivative liability as described above, and (iv) the sale and issuance of 7,200,000 shares of our Class A common stock by us in this offering, after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us, our pro forma as-adjusted net tangible book value as of September 30, 2014, would be $69.9 million, or $1.77 per share. This represents an immediate increase in the pro forma as-adjusted net tangible book value of $2.41 per share to existing stockholders and an immediate dilution of $12.23 per share to new investors purchasing Class A common stock in this offering.
The following table illustrates this per share dilution:
Initial public offering price
 
$
14.00

Pro forma net tangible book value per share as of September 30, 2014
$
(0.64
)
 
Increase in pro forma net tangible book value per share attributable to this offering
2.41

 
Pro forma as-adjusted net tangible book value per share after this offering
 
1.77

Dilution in pro forma net tangible book value per share to new investors in this offering
 
$
12.23

If the underwriters exercise their over-allotment option in full, the pro forma as-adjusted net tangible book value per share of our common stock immediately after this offering would be $2.07 per share, and the dilution in pro forma net tangible book value per share to new investors in this offering would be $11.93 per share.
The following table shows, as of September 30, 2014, the difference between the number of shares of our Class A and Class B common stock purchased from us, the total consideration paid to us and the average price paid per share by existing stockholders (including 407,183 Class A shares issued upon the assumed conversion of the $5.0 million convertible promissory note issued in July 2014 as described below) and by new investors purchasing shares of our Class A common stock in this offering:


44



 
Shares Purchased
 
Total Consideration
 
Average Price per Share
 
Number
 
Percentage
 
Amount
 
Percentage
 
Existing stockholders
32,324,823

 
81.8
%
 
$
71,512,000

 
41.5
%
 
$
2.21

New investors
7,200,000

 
18.2

 
100,800,000

 
58.5

 
14.00

Total
39,524,823

 
100.0
%
 
$
172,312,000

 
100.0
%
 
$
4.36

Sales by us in this offering will reduce the percentage of shares held by such existing stockholders to 81.8% and will increase the number of shares held by new investors to 7,200,000, or 18.2%.
The above tables and discussion are based on 19,897,876 shares of our Class A common stock and 12,426,947 shares of our Class B common stock outstanding as of September 30, 2014, after giving effect to (i) the corporate conversion, and (ii) the conversion of a convertible promissory note issued in July 2014 in an aggregate principal amount of $5.0 million plus accrued interest into 407,183 shares of Class A common stock.
The foregoing table excludes, after giving effect to the corporate conversion:
5,977,709 shares of Class A common stock issuable upon exercise of outstanding options to purchase shares of Class A common stock as of September 30, 2014, at a weighted-average exercise price of $9.36 per share;
207,009 shares of Class A common stock issuable upon exercise of outstanding options to purchase shares of Class A common stock that were granted after September 30, 2014 at a weighted-average exercise price of $15.83 per share; and
an additional 3,960,000 shares of Class A common stock reserved for future issuance under our 2014 Equity Incentive Plan.



45



SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the years ended December 31, 2012 and 2013 and the selected consolidated balance sheet data as of December 31, 2012 and 2013 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The following selected consolidated financial data for the year ended December 31, 2011, and the selected consolidated balance sheet data as of December 31, 2011 are derived from our audited consolidated financial statements not included in this prospectus. The following selected consolidated statement of operations data for the nine months ended September 30, 2013 and 2014 and selected consolidated balance sheet data as of September 30, 2014 are derived from our unaudited consolidated interim financial statements appearing elsewhere in this prospectus. The unaudited consolidated financial data for the nine months ended September 30, 2013 and 2014 and as of September 30, 2014 include all adjustments, consisting only of normal recurring accruals, that are necessary in the opinion of our management for a fair presentation of our financial position and results of operations for these periods. Our historical results are not necessarily indicative of the results to be expected in the future, and our operating results for the nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the entire year ended December 31, 2014.
Consolidated Statement of Operations Data
 
Year ended December 31,
 
Nine months ended September 30,
 
2011
 
2012
 
2013 (Restated)(4)
 
2013
 
2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited)
 
(in thousands, except per share information)
Revenue
 
 
 
 
 
 
 
 
 
Subscription and support
$
10,925

 
$
34,702

 
$
65,164

 
$
46,015

 
$
66,306

Professional services
3,939

 
18,236

 
19,987

 
15,567

 
16,259

Total revenue
14,864

 
52,938

 
85,151

 
61,582

 
82,565

Cost of revenue
 
 
 
 
 
 

 

Subscription and support(1)
3,069

 
9,222

 
14,881

 
10,724

 
15,078

Professional services(1)
2,916

 
9,777

 
9,406

 
7,106

 
8,826

Total cost of revenue
5,985

 
18,999

 
24,287

 
17,830

 
23,904

Gross profit
8,879

 
33,939

 
60,864

 
43,752

 
58,661

Operating expenses
 
 
 
 
 
 
 
 
 
Research and development(1)
6,611

 
18,342

 
33,400

 
24,991

 
32,142

Sales and marketing(1)
10,471

 
27,506

 
40,824

 
30,381

 
39,391

General and administrative(1)(2)
5,112

 
16,146

 
14,402

 
10,612

 
13,941

Total operating expenses
22,194

 
61,994

 
88,626

 
65,984

 
85,474

Loss from operations
(13,315
)
 
(28,055
)
 
(27,762
)
 
(22,232
)
 
(26,813
)
Interest expense
(268
)
 
(1,521
)
 
(366
)
 
(359
)
 
(1,281
)
Other income and (expense), net
18

 
(861
)
 
104

 
70

 
(260
)
Net loss
$
(13,565
)
 
$
(30,437
)
 
$
(28,024
)
 
$
(22,521
)
 
$
(28,354
)
Pro forma net loss and per share information (unaudited):(3)
 
 
 
 
 
 
 
 
 
Pro forma provision for income
taxes
 
 
 
 

 
 
 

Pro forma net loss
 
 
 
 
$
(28,024
)
 
 
 
$
(28,354
)
Pro forma basic and diluted net loss per share
 
 
 
 
(0.88
)
 
 
 
(0.88
)
Pro forma weighted average shares outstanding - basic and diluted
 
 
 
 
31,746,911

 
 
 
32,203,344



46



(1)
Equity-based compensation expense included in these line items is as follows:
 
Year ended December 31,
 
Nine months ended September 30,
 
2011
 
2012
 
2013
 
2013
 
2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited)
 
(in thousands)
Cost of revenue
 
 
 
 
 
 
 
 
 
Subscription and support
$
64

 
$
80

 
$
200

 
$
159

 
$
403

Professional services
96

 
144

 
171

 
139

 
264

Operating expenses
 
 
 
 
 
 
 
 
 
Research and development
188

 
194

 
762

 
627

 
1,443

Sales and marketing
213

 
293

 
799

 
544

 
889

General and administrative(2)
767

 
7,418

 
1,438

 
1,181

 
2,540

Total equity-based compensation expense
$
1,328

 
$
8,129

 
$
3,370

 
$
2,650

 
$
5,539

(2)
One-time grants of immediately vested appreciation units to two managing directors significantly increased general and administrative cost in the year ended December 31, 2012.
(3)
Unaudited pro forma net loss and per share information gives effect to the corporate conversion and the conversion of a convertible promissory note issued in July 2014 in an aggregate principal amount of $5.0 million plus accrued interest into 407,183 shares of Class A common stock. In conjunction with the corporate conversion, all of our outstanding equity units and options to purchase equity units were automatically converted into shares of our common stock or options to purchase common stock.
(4)
The Consolidated Financial Statements have been restated to properly account for a February 1, 2011 $2.3 million forgivable loan from the IDED in accordance with ASC 450 “Contingencies” as a gain contingency. The benefit of the forgivable loan, which was originally recorded as contra expense in 2013, has been reversed as a result of this restatement and application of ASC 450. See Note 2, Restatement of Previously Issued Financial Statements, to both the Consolidated Financial Statements and Unaudited Condensed Consolidated Financial Statements.


47



Consolidated Balance Sheet Data
 
December 31,
 
September 30,
 
2011
 
2012
 
2013 (Restated)(1)
 
2013
 
2014 (Restated)(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited)
 
(in thousands)
Cash and cash equivalents
$
10,029

 
$
24,979

 
$
15,515

 
$
13,134

 
$
20,275

Working capital, excluding deferred revenue
12,255

 
28,063

 
19,926

 
10,904

 
14,296

Total assets
19,554

 
53,522

 
73,944

 
56,841

 
82,556

Deferred revenue, current and long term
9,428

 
18,165

 
36,385

 
24,394

 
51,877

Total current liabilities
14,485

 
26,404

 
43,325

 
36,257

 
57,949

Total non-current liabilities
13,673

 
13,098

 
34,013

 
19,389

 
50,270

Total members’ equity (deficit)
(8,604
)
 
14,020

 
(3,394
)
 
1,195

 
(25,663
)
(1)
The Consolidated Financial Statements have been restated to properly account for a February 1, 2011 $2.3 million forgivable loan from the IDED in accordance with ASC 450 “Contingencies” as a gain contingency. The benefit of the forgivable loan, which was originally recorded as contra expense in 2013, has been reversed as a result of this restatement and application of ASC 450. See Note 2, Restatement of Previously Issued Financial Statements, to both the Consolidated Financial Statements and Unaudited Condensed Consolidated Financial Statements.


48



MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this prospectus. In addition to historical consolidated financial information, this discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to these differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this prospectus.
Overview
Workiva has pioneered a cloud-based and mobile-enabled platform for enterprises to collaboratively collect, manage, report and analyze critical business data in real time. Our secure software platform, Wdesk, allows users to integrate and control all of their business data, regardless of format or location, with innovative live-linking technology. Our proprietary, integrated word processing, spreadsheet and presentation applications, built upon our data engine, allow thousands of users to collaborate simultaneously on data-linked reports and documents. Wdesk empowers our customers to dynamically define their business processes and optimize workflows so that critical data can be reported and analyzed more efficiently. Our customers can gain insights based on their trusted data, which enables better real-time decision-making. Additionally, our customers deploy our solutions to serve as a single system of record for critical data, to reduce risk and operational costs, and to increase efficiency in business reporting. As of September 30, 2014, we provided our solutions to more than 2,100 enterprise customers, including over 60% of both the Fortune 500 and Fortune 100.
Our Wdesk product platform allows multiple users to simultaneously create, review and publish data-linked documents and reports with greater control, accuracy and productivity than ever before. We offer our customers solutions for compliance, risk, sustainability and management reporting, and enterprise risk management. Underlying these solutions is our scalable, enterprise-grade data engine that collects, aggregates and manages our customers’ unstructured and structured data.
We operate our business on a software-as-a-service (SaaS) model. Customers enter into quarterly, annual and multi-year subscription contracts to utilize Wdesk. Our subscription fee includes the use of our service and technical support. Our pricing is based primarily on the number of corporate entities, number of users, level of customer support, and length of contract. Our pricing model is scaled to the number of users, so the subscription price per user typically decreases as the number of users increases. We charge customers additional fees primarily for document setup and XBRL tagging services. We generate sales primarily through our direct sales force and, to a lesser extent, customer success and professional services teams.
Our integrated platform, subscription-based model, and exceptional customer support have contributed to a low rate of customer turnover while achieving strong revenue growth. Our subscription and support revenue retention rate exceeded 97% for the twelve months ended September 30, 2014.
We were founded in 2008 and entered into our first commercial contract in 2010. We have funded our business with cash flow from operations and external financing. From inception in 2008 through September 30, 2014, we received gross proceeds of $71.5 million from private placements of equity and debt that converted into equity and option exercises, as well as $7.0 million of forgivable government grants and loans and job training reimbursement dollars. In addition, we issued a $5.0 million convertible subordinated note in July 2014.
We continue to invest in the development of our solutions, infrastructure and sales and marketing to drive long-term growth. Our full-time employee headcount expanded 30.7% from 726 at September 30, 2013 to 949 at September 30, 2014.


49



We have achieved significant revenue growth in recent periods. Our revenue grew 60.9% from $52.9 million in 2012 to $85.2 million in 2013. We incurred net losses of $30.4 million and $28.0 million in 2012 and 2013, respectively. For the nine months ended September 30, 2013 and 2014, our revenue grew 34.1% from $61.6 million to $82.6 million. We incurred net losses of $22.5 million and $28.4 million for the nine months ended September 30, 2013 and 2014, respectively.
Key Factors Affecting Our Performance
New customers. We employ a “land-and-expand” sales strategy that focuses on acquiring new customers through our direct sales model and growing our relationships with existing customers over time. Acquiring new customers is a key component of our continued success in the marketplace, growth opportunity and future revenue. We have aggressively invested in and intend to continue to invest in our direct sales force. For the twelve months ended September 30, 2014, we signed 446 new customers.
Further penetration of existing customers. Our account management teams seek to generate additional revenue from our customers by adding seats to existing subscriptions and by signing new subscriptions for additional business solutions on our platform. We believe a significant opportunity exists for us to sell additional subscriptions to current customers as they become more familiar with our platform and adopt our solutions to address additional business use cases.
Investment in growth. We are expanding our operations, increasing our headcount and developing software to both enhance our current offerings and build new features. We expect our total operating expenses to increase, particularly as we continue to expand our sales operations, marketing activities and development staff. We continue to invest in our sales, marketing and customer success organizations to drive additional revenue and support the growth of our customer base. Investments we make in our sales and marketing and research and development organizations will occur in advance of experiencing any benefits from such investments. In the seven fiscal quarters ended September 30, 2014, we focused our investment in sales and marketing on building processes and content to address new use cases for Wdesk, while maintaining the size of our quota-carrying sales force. For example, we assembled teams of subject matter experts, product marketers and solutions architects and expanded our sales operations team. In 2015, we plan to shift our investments toward hiring more quota-carrying sales people.
Key Performance Indicators
 
Year ended December 31,
 
Nine months ended September 30,
 
2011
 
2012
 
2013
 
2013
 
2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited)
 
(dollars in thousands)
Financial metrics
 
 
 
 
 
 
 
 
 
Revenue
$
14,864

 
$
52,938

 
$
85,151

 
$
61,582

 
$
82,565

Year-over-year percentage increase
 
 
256.1
%
 
60.9
%
 
72.8
%
 
34.1
%
Subscription and support revenue
$
10,925

 
$
34,702

 
$
65,164

 
$
46,015

 
$
66,306

Subscription and support as a percent of revenue
73.5
%
 
65.6
%
 
76.5
%
 
74.7
%
 
80.3
%



50



 
As of December 31,
 
As of September 30,
 
2011
 
2012
 
2013
 
2013
 
2014
Operating metrics
 
 
 
 
 
 
 
 
 
Number of customers
676

 
1,421

 
1,927

 
1,808

 
2,176

Subscription and support revenue retention rate
 
 
97.7
%
 
97.8
%
 
97.6
%
 
97.3
%
Subscription and support revenue retention rate including add-ons
 
 
108.4
%
 
114.4
%
 
113.1
%
 
108.4
%
Total customers. We believe total number of customers is a key indicator of our financial success and future revenue potential. We define a customer as an entity with an active subscription contract as of the measurement date. Our customer is typically a parent company or, in a few cases, a significant subsidiary that works with us directly. Companies with publicly-listed securities account for a substantial majority of our customers.
Subscription and support revenue retention rate. We calculate our subscription and support revenue retention rate by annualizing the subscription and support revenue recorded in the first month of the measurement period for only those customers in place throughout the entire measurement period, thereby excluding any attrition. We divide the result by the annualized subscription and support revenue in the first month of the measurement period for all customers in place at the beginning of the measurement period. The measurement period is based on the trailing twelve months. Merger and acquisition activity involving customers has accounted for most of our attrition.
Subscription and support revenue retention rate including add-ons. Add-on revenue includes additional seats purchased by existing customers. We calculate our subscription and support revenue retention rate including add-ons by annualizing the subscription and support revenue recorded in the last month of the measurement period for only those customers in place throughout the entire measurement period. We divide the result by the annualized subscription and support revenue in the first month of the measurement period for all customers in place at the beginning of the measurement period. The measurement period is based on the trailing twelve months.
Components of Results of Operations
Revenue
We generate revenue through the sale of subscriptions to our cloud-based software and the delivery of professional services. We serve a wide range of customers in many industries, and our revenue is not concentrated with any single customer or small group of customers. For each of the years ended December 31, 2012 and 2013, and for the nine months ended September 30, 2014, no single customer represented more than 2% of our revenue, and our largest ten customers accounted for less than 5% of our revenue in the aggregate.
We generate sales directly through our sales force. We also identify some sales opportunities with existing customers through our customer success and professional services teams.
Our customer contracts typically range in length from 3 to 36 months. Our arrangements do not contain general rights of return. We typically invoice our customers for subscription fees in advance on a quarterly, annual, two-year or three-year basis, with payment due at the start of the subscription term. Unpaid invoice amounts for services starting in future periods are excluded from accounts receivable and deferred revenue. Invoiced amounts are reflected as accounts receivable once we have initiated services with an offset to deferred revenue or revenue depending on whether the revenue recognition criteria have been met. At December 31, 2013, deferred revenue was $36.4 million. Estimated future recognition from deferred


51



revenue at December 31, 2013 was $27.4 million in 2014, $5.5 million in 2015, $3.4 million in 2016 and $118,000 thereafter. 
We have continued to expand our customer base, and recently more of our clients have requested annual, instead of quarterly, billing terms. The proportion of aggregate contract value reflected on our balance sheet as deferred revenue may continue to increase if this trend continues.
Subscription and Support Revenue. We recognize the aggregate minimum subscription and support fees ratably on a straight-line basis over the subscription term, provided that an enforceable contract has been signed by both parties, access to our SaaS solutions has been granted to the customer, the fee for the subscription and support is fixed or determinable, and collection is reasonably assured.
Professional Services Revenue. We believe our professional services facilitate the sale of our subscription service to certain customers. To date, most of our professional services relate to document set up and XBRL tagging, which are activities that we have undertaken hundreds of times. When requested by our new or existing customers, we will set up their documents by importing a prior version and formatting the document using best practice methods in our solution. Our XBRL tagging services include applying XBRL tagging to a customer filing document using Wdesk XBRL tools, reviewing existing tags for correctness, identifying any necessary revisions to be consistent with newly provided requirements or guidance from the SEC or FASB, as well as rolling forward XBRL tags from a prior filing to a current filing document.
Our professional services are not required for customers to utilize our solution. Our pricing for professional services has been predominantly on a fixed-fee basis, and we recognize revenue after the services have been performed. Document set up services are typically completed in less than two weeks. XBRL tagging services are offered for each filing document, and revenue is recognized upon a successful submission to the SEC.
We are beginning to provide professional services on new solutions, including our Sarbanes-Oxley compliance solution, which may involve a different mix of subscription, support and services than we have experienced to date. The contribution of this new revenue mix may impact our gross margins in ways that we cannot predict.
Cost of Revenue
Cost of revenue consists primarily of personnel and related costs directly associated with our professional services and customer success teams, and training personnel, including salaries, benefits, bonuses, and equity-based compensation; the costs of contracted third-party vendors; the costs of server usage by our customers; information technology costs; and facility costs. Costs of server usage are comprised primarily of fees paid to Google Cloud Platform and Amazon Web Services.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of personnel and related costs, including salaries, benefits, bonuses, commissions, and equity-based compensation. Other costs included in this expense are marketing and promotional events, our annual user conference, online marketing, product marketing, information technology costs, and facility costs. We capitalize and amortize sales commissions that are directly attributable to a contract over the lesser of twelve months or the non-cancelable term of the customer contract based on the terms of our commission arrangements.


52



Research and Development Expenses
Research and development expenses consist primarily of personnel and related costs, including salaries, benefits, bonuses, and equity-based compensation; costs of server usage by our developers; information technology costs; and facility costs.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel and related costs for our executive, finance, legal, human resources, and administrative personnel, including salaries, benefits, bonuses, and equity-based compensation; legal, accounting, and other professional service fees; other corporate expenses; information technology costs; and facility costs.
Income Taxes
Prior to the corporate conversion, we were organized as a limited liability company, and therefore, as a pass-through entity for income tax purposes. Certain of our foreign subsidiaries have been subject to income tax. As of December 31, 2013, we had approximately $398,000 of net operating losses in foreign jurisdictions that expire in 2032 and 2033 and are covered by a full valuation allowance. Upon the corporate conversion, we became a corporation subject to federal, state and foreign income taxes.
Cohort Analysis
We endeavor to maximize the lifetime value of each customer relationship. We make significant investments in acquiring new customers and expect to achieve a favorable return on these investments by developing our relationships over time and ensuring that we maintain a high level of customer retention. To illustrate the economics of our customer relationships, we are providing an analysis of the customers we acquired in 2011, which we refer to as the 2011 Cohort. We selected the 2011 Cohort as a representative set of customers for this analysis because 2011 is the first year since our inception with a material number of customers and revenue.
The 2011 Cohort comprised 506 customers from a variety of industries. As of December 31, 2013, 466 of the 506 customers we initially acquired in 2011, or 92.1%, were still active customers. As of September 30, 2014, 454 of the 506 customers we initially acquired in 2011, or 89.7%, were still active customers.
We incur and recognize significant upfront costs in connection with acquiring new customers, including sales commission expenses that are recognized fully in the period in which we execute a customer contract. However, we recognize subscription and support revenue ratably over the entire term of those contracts, with recognition commencing only when the customer is able to begin using our solution.
We expect each customer to be profitable for us over the duration of our relationship, but the costs we incur with respect to any customer relationship typically exceed revenue in the early stages of the relationship because we recognize those costs in advance of the recognition of revenue. Some customers pay in advance of the recognition of revenue and, as a result, our cash flow from those customers may exceed the amount of revenue recognized for those customers in earlier periods of our relationship.
We have measured the 2011 Cohort performance with respect to subscription and support revenue. In 2011, we recognized subscription and support revenue of $10.9 million, of which $6.8 million related to the 2011 Cohort. In 2012, we recognized subscription and support revenue of $34.7 million, of which $17.8 million related to the 2011 Cohort. In 2013, we recognized subscription and support revenue of $65.2 million, of which $20.2 million related to the 2011 Cohort. For the nine months ended September 30, 2014, we recognized subscription and support revenue of $66.3 million, $16.5 million of which related to the 2011 Cohort.


53



We have also measured the 2011 Cohort performance with respect to contribution margin. We define contribution margin for a period as the ratio of (a) the excess of the subscription and support revenue for a group of customers over the estimated selling and related costs with respect to the same customer group to (b) the total subscription and support revenue for the customer group. Selling expenses allocated to the customer include estimates for personnel costs associated with the sales teams that support that customer, such as salaries, commissions, and allocated corporate overhead. Related expenses include the ongoing expenses allocated to the customer, such as personnel costs and associated overhead for our customer success team, as well as marketing costs associated with our user conference. Personnel costs exclude equity-based compensation for purposes of this calculation. Depreciation and amortization have also been excluded from the calculation. In addition, we exclude all research and development and general and administrative expenses from this analysis because these expenses support the overall growth of our business.
In 2011, we recognized $6.8 million in subscription and support revenue from the 2011 Cohort and incurred $12.3 million in costs for these customers, creating a negative contribution margin. In 2012, the 2011 Cohort began to provide a positive contribution margin. In 2012, 2013, and for the nine months ended September 30, 2014, we recognized $17.8 million, $20.2 million, and $16.5 million in subscription and support revenue from the 2011 Cohort, and our costs related to these customers were approximately $5.7 million, $6.8 million, and $6.1 million, respectively. As of December 31, 2013, we estimate that we generated aggregate cumulative subscription and support revenue and cumulative costs for the 2011 Cohort of approximately $44.8 million and $24.8 million, respectively, resulting in a cumulative contribution margin of 44.6% since the beginning of 2011. As of September 30, 2014, we estimate that we generated aggregate cumulative subscription and support revenue and cumulative costs for the 2011 Cohort of approximately $61.3 million and $30.9 million, respectively, resulting in a cumulative contribution margin of 49.6% since the beginning of 2011.
We also measure our performance with respect to the 2011 Cohort based on the multiple of subscription and support revenue recognized relative to the sales and marketing costs we incurred over the life of our customer relationships from 2011 through the nine months ended September 30, 2014. In 2011, we incurred sales and marketing expenses of $10.5 million. We excluded equity-based compensation, depreciation and amortization of $0.3 million. We allocated the remaining $10.2 million to the 2011 Cohort, as we were focused primarily on acquiring new customers during that year. In 2012 and 2013, we allocated our marketing user conference costs to existing customers proportionately, equating to $1.3 million for the 2011 Cohort. In the nine months ended September 30, 2014, we allocated $0.8 million of our marketing user conference costs to the 2011 Cohort. We generally consider most other marketing costs we incur in any year to be a cost of acquiring new customers in that year. In 2012 and 2013, we allocated a total of $4.7 million of sales expense, related to the portion of the sales organization focused on expanding existing customer revenue. In the nine months ended September 30, 2014, we allocated a total of $2.3 million of sales expense, related to the portion of the sales organization focused on expanding existing customer revenue. For the 2011 Cohort, from 2011 through 2013, we recognized $44.8 million in subscription and support revenue and allocated $16.2 million in sales and marketing costs based on the above estimates and assumptions, which equates to a multiple of 2.8 times. For the 2011 Cohort, from 2011 through the nine months ended September 30, 2014, we recognized $61.3 million in subscription and support revenue and allocated $19.3 million in sales and marketing costs based on the methodology discussed above, equating to a multiple of 3.2 times.
We cannot assure you that we will experience similar financial outcomes from customers added in other years or in future periods. We believe the estimates and assumptions we used to allocate costs are reasonable, but the allocated costs could have varied significantly from the amounts disclosed above had we used different estimates and assumptions. You should not rely on the allocated expenses or relationship of expenses to subscription and support revenue as being indicative of our current or future performance. Because we are still in the early stages of our development, we do not yet have enough operating history to measure the lifetime of our customer relationships. Therefore, we cannot predict the average lifetime of a


54



customer relationship for the 2011 Cohort or for customers acquired in other fiscal years. We also cannot predict whether subscription and support revenue for the 2011 Cohort will continue to grow at the rate of growth experienced through the nine months ended September 30, 2014, or whether the growth rate of other cohorts will be similar to that of the 2011 Cohort. Moreover, we cannot assure you that we will experience similar results in terms of the relationship between subscription and support revenue and costs for customer acquired in other years or in future periods. We may not achieve profitability even if our subscription and support revenue exceeds our customer acquisition and related costs over time. We encourage you to read our consolidated financial statements that are included in this prospectus.
Results of Operations
The following table sets forth selected consolidated statement of operations data for each of the periods indicated:
 
Year ended December 31,
 
Nine months ended September 30,
 
2012
 
2013 (Restated)(2)
 
2013
 
2014
 
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited)
 
(in thousands)
Revenue
 
 
 
 
 
 
 
Subscription and support
$
34,702

 
$
65,164

 
$
46,015

 
$
66,306

Professional services
18,236

 
19,987

 
15,567

 
16,259

Total revenue
52,938

 
85,151

 
61,582

 
82,565

Cost of revenue
 
 
 
 
 
 
 
Subscription and support(1)
9,222

 
14,881

 
10,724

 
15,078

Professional services(1)
9,777

 
9,406

 
7,106

 
8,826

Total cost of revenue
18,999

 
24,287

 
17,830

 
23,904

Gross profit
33,939

 
60,864

 
43,752

 
58,661

Operating expenses
 
 
 
 
 
 
 
Research and development(1)
18,342

 
33,400

 
24,991

 
32,142

Sales and marketing(1)
27,506

 
40,824

 
30,381

 
39,391

General and administrative(1)
16,146

 
14,402

 
10,612

 
13,941

Total operating expenses
61,994

 
88,626

 
65,984

 
85,474

Loss from operations
(28,055
)
 
(27,762
)
 
(22,232
)
 
(26,813
)
Interest expense
(1,521
)
 
(366
)
 
(359
)
 
(1,281
)
Other income and (expense), net
(861
)
 
104

 
70

 
(260
)
Net loss
$
(30,437
)
 
$
(28,024
)
 
$
(22,521
)
 
$
(28,354
)
(1)
Equity-based compensation expense included in these line items was as follows:
 
Year ended December 31,
 
Nine months ended September 30,
 
2012
 
2013
 
2013
 
2014
 
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited)
 
(in thousands)
Cost of revenue
 
 
 
 
 
 
 
Subscription and support
$
80

 
$
200

 
$
159

 
$
403

Professional services
144

 
171

 
139

 
264

Operating expenses
 
 
 
 
 
 
 
Research and development
194

 
762

 
627

 
1,443

Sales and marketing
293

 
799

 
544

 
889

General and administrative
7,418

 
1,438

 
1,181

 
2,540

Total equity-based compensation expense
$
8,129

 
$
3,370

 
$
2,650

 
$
5,539

(2)
The Consolidated Financial Statements have been restated to properly account for a February 1, 2011 $2.3 million forgivable loan from the IDED in accordance with ASC 450 “Contingencies” as a gain contingency. The benefit of the forgivable loan, which was originally recorded as contra expense in 2013, has been reversed as a result of this restatement and application of ASC 450. See Note 2, Restatement of Previously Issued Financial Statements, to both the Consolidated Financial Statements and Unaudited Condensed Consolidated Financial Statements.
The following table sets forth our consolidated statement of operations data as a percentage of revenue for each of the periods indicated:


55



 
Year ended December 31,
 
Nine months ended September 30,
 
2012
 
2013 (Restated)
 
2013
 
2014
 
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited)
Revenue
 
 
 
 
 
 
 
Subscription and support
65.6
 %
 
76.5
 %
 
74.7
 %
 
80.3
 %
Professional services
34.4

 
23.5

 
25.3

 
19.7

Total revenue
100.0

 
100.0

 
100.0

 
100.0

Cost of revenue
 
 
 
 
 
 
 
Subscription and support
17.4

 
17.5

 
17.4

 
18.3

Professional services
18.5

 
11.0

 
11.5

 
10.7

Total cost of revenue
35.9

 
28.5

 
28.9

 
29.0

Gross profit
64.1

 
71.5

 
71.1

 
71.0

Operating expenses
 
 
 
 
 
 
 
Research and development
34.6

 
39.2

 
40.6

 
38.9

Sales and marketing
52.0

 
47.9

 
49.3

 
47.7

General and administrative
30.5

 
16.9

 
17.2

 
16.9

Total operating expenses
117.1

 
104.0

 
107.1

 
103.5

Loss from operations
(53.0
)
 
(32.5
)
 
(36.0
)
 
(32.5
)
Interest expense
(2.9
)
 
(0.4
)
 
(0.6
)
 
(1.6
)
Other income and (expense), net
(1.6
)
 
0.1

 
0.1

 
(0.3
)
Loss from operations before income tax expense
(57.5
)
 
(32.8
)
 
(36.5
)
 
(34.4
)
Provision (benefit) for income taxes

 

 

 

Net loss
(57.5
)%
 
(32.8
)%
 
(36.5
)%
 
(34.4
)%
Comparison of the Nine Months Ended September 30, 2013 and 2014
Revenue
 
Nine months ended September 30,
 
Period-to-period change
 
2013
 
2014
 
Amount
 
% Change
 
 
 
 
 
 
 
 
 
(in thousands, unaudited)
 
 
Revenue
 
 
 
 
 
 
 
Subscription and support
$
46,015

 
$
66,306

 
$
20,291

 
44.1%
Professional services
15,567

 
16,259

 
692

 
4.4%
Total revenue
$
61,582

 
$
82,565

 
$
20,983

 
34.1%
Total revenue increased during the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 due primarily to a $20.3 million increase in subscription and support revenue. Of the total increase in subscription and support revenue, 36.0% represented revenue from new customers acquired after September 30, 2013, and 64.0% represented revenue from existing customers as of September 30, 2013. Our total number of customers increased 20.4% from September 30, 2013 to September 30, 2014. Price changes did not have a material impact on the year-over-year increase in revenue.


56



Cost of Revenue
 
Nine months ended September 30,
 
Period-to-period change
 
2013
 
2014
 
Amount
 
% Change
 
 
 
 
 
 
 
 
 
(in thousands, unaudited)
 
 
Cost of revenue
 
 
 
 
 
 
 
Subscription and support
$
10,724

 
$
15,078

 
$
4,354

 
40.6%
Professional services
7,106

 
8,826

 
1,720

 
24.2%
Total cost of revenue
$
17,830

 
$
23,904

 
$
6,074

 
34.1%
Cost of revenue increased $6.1 million during the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013, which was attributable primarily to an increase personnel-related costs of $4.3 million, consisting of an increase in employee compensation, benefits, and travel costs of $4.0 million, and additional equity-based compensation of $0.4 million. These personnel-related cost increases were driven by headcount growth in the customer success and professional services teams. In addition, the cost of our server usage increased $1.0 million during the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 as customer usage of our platform grew.
Operating Expenses
 
Nine months ended September 30,
 
Period-to-period change
 
2013
 
2014
 
Amount
 
% Change
 
 
 
 
 
 
 
 
 
(in thousands, unaudited)
 
 
Operating expenses
 
 
 
 
 
 
 
Research and development
$
24,991

 
$
32,142

 
$
7,151

 
28.6%
Sales and marketing
30,381

 
39,391

 
9,010