Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________

FORM 10-Q

___________________________________


(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For transition period from to
Commission File Number 001-36773

___________________________________

WORKIVA INC.

(Exact name of registrant as specified in its charter)

___________________________________

Delaware

(State or other jurisdiction of incorporation or organization)

47-2509828

(I.R.S. Employer Identification Number)

2900 University Blvd

Ames, IA 50010

(888) 275-3125

(Address of principal executive offices and zip code)

(888) 275-3125

(Registrant's telephone number, including area code)

___________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Class A common stock, par value $.001

New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ý			Accelerated filer o

Non-accelerated filer o			Smaller reporting company ☐

			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ý

As of November 4, 2019, there were approximately 37,820,028 shares of the registrant's Class A common stock and 8,640,596 shares of the registrant's Class B common stock outstanding.

WORKIVA INC.

TABLE OF CONTENTS


		Page
	Part I. Financial Information
Item 1.	Unaudited Consolidated Financial Statements:	1
	Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018	1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018	3
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2019 and 2018	4
	Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the Three and Nine Months Ended September 30, 2019 and 2018	5
	Condensed Consolidated Statements of Cash Flows for the Three and Nine Months Ended September 30, 2019 and 2018	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	38
Item 4.	Controls and Procedures	39

	Part II. Other Information
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 6.	Exhibits	44
	Signatures	S-1

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. All statements contained in this Quarterly Report on Form 10-Q 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 “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2018, in “Item 1A. Risk Factors” in Part II of this Quarterly Report on Form 10-Q and in any subsequent filing we make with the SEC, as well as in any documents incorporated by reference that describe risks and factors that could cause results to differ materially from those projected in these forward-looking statements.

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 Quarterly Report on Form 10-Q 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 completion of this Quarterly Report on Form 10-Q to conform these statements to actual results or revised expectations.

Table of Contents

Part I. Financial Information

Item 1. Financial Statements


WORKIVA INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
	As of September 30, 2019		As of December 31, 2018
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	389,124	$	77,584
Marketable securities	95,644		20,764
Accounts receivable, net of allowance for doubtful accounts of $890 and $956 at September 30, 2019 and December 31, 2018, respectively	43,590		65,107
Deferred commissions	12,740		8,178
Other receivables	1,651		1,181
Prepaid expenses	8,148		4,417
Total current assets	550,897		177,231

Property and equipment, net	40,292		41,468
Operating lease right-of-use assets	15,917		—
Deferred commissions, non-current	13,940		10,569
Intangible assets, net	1,795		1,266
Other assets	3,920		577
Total assets	$	626,761	$	231,111

Table of Contents


WORKIVA INC. CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(in thousands, except share and per share amounts)

	As of September 30, 2019		As of December 31, 2018
	(unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities
Accounts payable	$	4,895	$	5,461
Accrued expenses and other current liabilities	47,302		36,353
Deferred revenue	156,352		148,545
Current portion of financing obligations	1,295		1,222
Total current liabilities	209,844		191,581

Convertible senior notes, net	278,422		—
Deferred revenue, non-current	31,467		25,171
Other long-term liabilities	1,387		6,891
Operating lease liabilities, non-current	19,273		—
Financing obligations, non-current	16,234		17,208
Total liabilities	556,627		240,851

Stockholders’ equity (deficit)
Class A common stock, $0.001 par value per share, 1,000,000,000 shares authorized, 37,780,966 and 34,498,391 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively	38		34
Class B common stock, $0.001 par value per share, 500,000,000 shares authorized, 8,640,596 and 9,545,596 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively	9		10
Preferred stock, $0.001 par value per share, 100,000,000 shares authorized, no shares issued and outstanding	—		—
Additional paid-in-capital	408,656		297,145
Accumulated deficit	(338,863)		(307,027)
Accumulated other comprehensive income	294		98
Total stockholders’ equity (deficit)	70,134		(9,740)
Total liabilities and stockholders’ equity (deficit)	$	626,761	$	231,111

See accompanying notes.

Table of Contents


WORKIVA INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) (unaudited)
	Three months ended September 30,						Nine months ended September 30,
	2019		2018		2019		2018
Revenue
Subscription and support	$	63,022	$	51,306	$	179,617	$	146,613
Professional services	11,157		9,567		38,009		33,296
Total revenue	74,179		60,873		217,626		179,909
Cost of revenue
Subscription and support	10,924		8,139		30,935		25,578
Professional services	10,827		7,520		31,029		22,888
Total cost of revenue	21,751		15,659		61,964		48,466
Gross profit	52,428		45,214		155,662		131,443
Operating expenses
Research and development	22,899		19,984		66,705		60,829
Sales and marketing	32,990		24,068		86,568		67,326
General and administrative	12,017		11,864		33,626		45,286
Total operating expenses	67,906		55,916		186,899		173,441
Loss from operations	(15,478)		(10,702)		(31,237)		(41,998)
Interest income	1,460		341		2,593		843
Interest expense	(1,959)		(448)		(2,832)		(1,347)
Other income (expense), net	24		(138)		(259)		195
Loss before provision for income taxes	(15,953)		(10,947)		(31,735)		(42,307)
Provision for income taxes	98		17		101		43
Net loss	$	(16,051)	$	(10,964)	(31,836)		(42,350)
Net loss per common share:
Basic and diluted	$	(0.34)	$	(0.25)	$	(0.69)	$	(0.98)
Weighted-average common shares outstanding - basic and diluted	46,731,663		43,973,428		46,048,037		43,359,939

See accompanying notes.

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WORKIVA INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) (unaudited)
	Three months ended September 30,						Nine months ended September 30,
	2019		2018		2019		2018
Net loss	$	(16,051)	$	(10,964)	$	(31,836)	$	(42,350)
Other comprehensive income, net of tax
Foreign currency translation adjustment, net of income tax expense of $11 and $5 for the three months ended September 30, 2019 and 2018, respectively, and net of income tax expense of $16 and $5 for the nine months ended September 30, 2019 and 2018, respectively	19		(10)		34		21
Unrealized gain (loss) on available-for-sale securities, net of income tax benefit (expense) of $(10) and $1 for the three months ended September 30, 2019 and 2018, respectively, and net of income tax benefit (expense) of $(51) and $1 for the nine months ended September 30, 2019 and 2018, respectively	43		22		162		(6)
Other comprehensive income, net of tax	62		12		196		15
Comprehensive loss	$	(15,989)	$	(10,952)	$	(31,640)	$	(42,335)

See accompanying notes.

Table of Contents


WORKIVA INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands) (unaudited)
	Common Stock (Class A and B)
	Shares	Amount		Additional Paid-in-Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders' Equity (Deficit)
Balances at December 31, 2018	44,044	$	44	$	297,145	$	98	$	(307,027)	$	(9,740)
Stock-based compensation expense	—	—		8,193		—		—		8,193
Issuance of common stock upon exercise of stock options	961	1		11,054		—		—		11,055
Issuance of common stock under employee stock purchase plan	101	—		2,149		—		—		2,149
Issuance of restricted stock units	25	—		—		—		—		—
Tax withholding related to net share settlements of stock-based compensation awards	(10)	—		(390)		—		—		(390)
Net loss	—	—		—		—		(7,463)		(7,463)
Other comprehensive income	—	—		—		52		—		52
Balances at March 31, 2019	45,121	$	45	$	318,151	$	150	$	(314,490)	$	3,856
Stock-based compensation expense	—	—		8,513		—		—		8,513
Issuance of common stock upon exercise of stock options	455	1		5,497		—		—		5,498
Issuance of restricted stock units	323	—		—		—		—		—
Net loss	—	—		—		—		(8,322)		(8,322)
Other comprehensive income	—	—		—		82		—		82
Balances at June 30, 2019	45,899	$	46	$	332,161	$	232	$	(322,812)	$	9,627
Stock-based compensation expense	—	—		9,223		—		—		9,223
Issuance of common stock upon exercise of stock options	401	1		5,939		—		—		5,940
Issuance of common stock under employee stock purchase plan	87	—		2,773		—		—		2,773
Issuance of restricted stock units	35	—		—		—		—		—
Equity component of convertible senior notes, net	—	—		58,560		—		—		58,560
Net loss	—	—		—		—		(16,051)		(16,051)
Other comprehensive income	—	—		—		62		—		62
Balances at September 30, 2019	46,422	$	47	$	408,656	$	294	$	(338,863)	$	70,134

Table of Contents


WORKIVA INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)(continued)
(in thousands) (unaudited)
	Common Stock (Class A and B)
	Shares	Amount		Additional Paid-in-Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders' Deficit
Balances at December 31, 2017	42,369	$	42	$	248,289	$	72	$	(265,337)	$	(16,934)
Cumulative-effect adjustment in connection with the adoption of ASU 2014-09	—	—		—		—		8,381		8,381
Stock-based compensation expense	—	—		5,905		—		—		5,905
Issuance of common stock upon exercise of stock options	296	1		3,075		—		—		3,076
Issuance of common stock under employee stock purchase plan	80	—		1,370		—		—		1,370
Issuance of restricted stock units	9	—		—		—		—		—
Tax withholding related to net share settlements of stock-based compensation awards	(61)	—		(1,342)		—		—		(1,342)
Net loss	—	—		—		—		(9,618)		(9,618)
Other comprehensive loss	—	—		—		(56)		—		(56)
Balances at March 31, 2018	42,693	$	43	$	257,297	$	16	$	(266,574)	$	(9,218)
Stock-based compensation expense	—	—		10,465		—		—		10,465
Issuance of common stock upon exercise of stock options	328	—		3,317		—		—		3,317
Issuance of restricted stock units	64	—		—		—		—		—
Tax withholding related to net share settlements of stock-based compensation awards	(23)	—		(519)		—		—		(519)
Net loss	—	—		—		—		(21,768)		(21,768)
Other comprehensive income	—	—		—		59		—		59
Balances at June 30, 2018	43,062	$	43	$	270,560	$	75	$	(288,342)	$	(17,664)
Stock-based compensation expense	—	—		6,949		—		—		6,949
Issuance of common stock upon exercise of stock options	635	1		7,533		—		—		7,534
Issuance of common stock under employee stock purchase plan	99	—		1,846		—		—		1,846
Issuance of restricted stock units	4	—		—		—		—		—
Net loss	—	—		—		—		(10,964)		(10,964)
Other comprehensive income	—	—		—		12		—		12
Balances at September 30, 2018	43,800	$	44	$	286,888	$	87	$	(299,306)	$	(12,287)

See accompanying notes.

Table of Contents


WORKIVA INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
	Three months ended September 30,						Nine months ended September 30,
	2019		2018		2019		2018
Cash flows from operating activities
Net loss	$	(16,051)	$	(10,964)	$	(31,836)	$	(42,350)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	1,058		1,133		2,932		2,881
Stock-based compensation expense	9,223		6,949		25,929		23,319
(Recovery of) provision for doubtful accounts	(104)		128		(58)		311
Amortization (accretion) of premiums and discounts on marketable securities, net	15		(66)		(89)		(63)
Amortization of debt discount and issuance costs	1,083		—		1,083		—
Deferred income tax	(21)		(4)		(67)		(4)
Changes in assets and liabilities:
Accounts receivable	3,579		(1,691)		21,530		4,615
Deferred commissions	(2,106)		(1,939)		(7,968)		(5,608)
Operating lease right-of-use asset	581		—		1,805		—
Other receivables	(417)		(591)		(470)		(416)
Prepaid expenses and other	(191)		2,501		(3,737)		712
Other assets	(943)		(389)		(2,349)		(557)
Accounts payable	516		616		160		1,999
Deferred revenue	3,830		8,630		14,112		15,032
Operating lease liability	(758)		—		(2,226)		—
Accrued expenses and other liabilities	5,403		3,269		9,828		6,948
Net cash provided by operating activities	4,697		7,582		28,579		6,819

Cash flows from investing activities
Purchase of property and equipment	(663)		(523)		(2,860)		(742)
Purchase of marketable securities	(54,749)		(6,441)		(95,466)		(17,724)
Sale of marketable securities	498		—		498		—
Maturities of marketable securities	1,500		4,600		20,390		9,000
Purchase of intangible assets	(51)		(46)		(712)		(174)
Other investments	(1,000)		—		(1,000)		—
Net cash used in investing activities	(54,465)		(2,410)		(79,150)		(9,640)

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WORKIVA INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands) (unaudited)
	Three months ended September 30,						Nine months ended September 30,
	2019		2018		2019		2018

Cash flows from financing activities
Proceeds from option exercises	5,940		7,534		22,493		13,927
Taxes paid related to net share settlements of stock-based compensation awards	—		—		(390)		(1,861)
Proceeds from shares issued in connection with employee stock purchase plan	2,773		1,846		4,922		3,216
Proceeds from the issuance of convertible senior notes, net of issuance costs	335,899		—		335,899		—

Principal payments on capital lease and financing obligations	(306)		(287)		(901)		(879)
Proceeds from government grants	—		—		—		22


Net cash provided by financing activities	344,306		9,093		362,023		14,425
Effect of foreign exchange rates on cash	(127)		83		88		(94)

Net increase in cash and cash equivalents	294,411		14,348		311,540		11,510
Cash and cash equivalents at beginning of period	94,713		57,495		77,584		60,333
Cash and cash equivalents at end of period	$	389,124	$	71,843	$	389,124	$	71,843

Supplemental cash flow disclosure
Cash paid for interest	$	408	$	436	$	1,294	$	1,304
Cash paid for income taxes, net of refunds	$	80	$	—	$	341	$	56

Supplemental disclosure of noncash investing and financing activities
Allowance for tenant improvements	$	—	$	1,153	$	—	$	1,280
Purchases of property and equipment, accrued but not paid	$	—	$	105	$	—	$	105

See accompanying notes.

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WORKIVA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Significant Accounting Policies

Organization

Workiva Inc., a Delaware corporation, and its wholly-owned subsidiaries (the “Company” or “we” or “us”) is a leading provider of cloud-based solutions for connected reporting and compliance. Our platform, Wdesk, is used by thousands of public and private companies, government agencies and higher-education institutions. Wdesk offers controlled collaboration, data linking, data integrations, granular permissions, process management and a full audit trail. We sell to customers in the areas of: finance and accounting; risk and controls; regulatory reporting; financial close, management and performance reporting; and statutory and corporate tax reporting. Our operational headquarters are located in Ames, Iowa, with additional offices located in the United States, Europe, the Asia-Pacific region and Canada.

We updated our accounting policies on the use of estimates, impairment of long-lived assets and leases as a result of our adopting Financial Accounting Standards Board (FASB) guidance issued in accounting standards codification (ASC) 842, Leases, under the Accounting Standards Update (ASU) 2016-02 (collectively the new lease standard). Otherwise, there have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 20, 2019, that have had a material impact on our condensed consolidated financial statements and related notes.

Basis of Presentation and Principles of Consolidation