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 June 30, 2020

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	WK	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 July 31, 2020, there were approximately 39,278,455 shares of the registrant's Class A common stock and 8,475,596 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 June 30, 2020 and December 31, 2019	1
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019	3
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2020 and 2019	4
	Consolidated Statements of Changes in Stockholders' Equity for the Three and Six Months Ended June 30, 2020 and 2019	5
	Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2020 and 2019	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	33
Item 4.	Controls and Procedures	33
	Part II. Other Information
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 6.	Exhibits	41
	Signatures	S-1

i

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, 2019, 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.

ii

Part I. Financial Information

Item 1.  Financial Statements

WORKIVA INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
	As of June 30, 2020		As of December 31, 2019
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	402,121	$	381,742
Marketable securities	106,451		106,214
Accounts receivable, net of allowance for doubtful accounts of $1,210 and $866 at June 30, 2020 and December 31, 2019, respectively	41,470		60,228
Deferred commissions	15,650		14,108
Other receivables	2,630		2,432
Prepaid expenses and other	9,349		6,508
Total current assets	577,671		571,232
Property and equipment, net	38,913		39,745
Operating lease right-of-use assets	17,534		15,352
Deferred commissions, non-current	14,867		14,977
Intangible assets, net	1,622		1,651
Other assets	4,120		3,439
Total assets	$	654,727	$	646,396

1

WORKIVA INC. CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(in thousands, except share and per share amounts)
	As of June 30, 2020		As of December 31, 2019
	(unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	3,813	$	7,057
Accrued expenses and other current liabilities	56,387		49,930
Deferred revenue	171,378		173,617
Current portion of financing obligations	1,395		1,328
Total current liabilities	232,973		231,932
Convertible senior notes, net	285,011		280,601
Deferred revenue, non-current	29,294		32,569
Other long-term liabilities	1,778		1,498
Operating lease liabilities, non-current	19,274		18,564
Financing obligations, non-current	15,174		15,889
Total liabilities	583,504		581,053
Stockholders’ equity
Class A common stock, $0.001 par value per share, 1,000,000,000 shares authorized, 39,144,056 and 38,043,444 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	39		38
Class B common stock, $0.001 par value per share, 500,000,000 shares authorized, 8,475,596 and 8,595,596 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	8		9
Preferred stock, $0.001 par value per share, 100,000,000 shares authorized, no shares issued and outstanding	—		—
Additional paid-in-capital	456,007		420,170
Accumulated deficit	(385,499)		(355,161)
Accumulated other comprehensive income	668		287
Total stockholders’ equity	71,223		65,343
Total liabilities and stockholders’ equity	$	654,727	$	646,396

See accompanying notes.

2

WORKIVA INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) (unaudited)
	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Revenue
Subscription and support	$	70,696	$	60,472	$	139,057	$	116,595
Professional services	13,164		13,012		30,604		26,852
Total revenue	83,860		73,484		169,661		143,447
Cost of revenue
Subscription and support	12,098		10,202		24,251		20,011
Professional services	10,146		10,475		20,389		20,202
Total cost of revenue	22,244		20,677		44,640		40,213
Gross profit	61,616		52,807		125,021		103,234
Operating expenses
Research and development	23,508		21,795		46,502		43,806
Sales and marketing	35,270		28,213		71,387		53,578
General and administrative	19,632		11,226		33,080		21,609
Total operating expenses	78,410		61,234		150,969		118,993
Loss from operations	(16,794)		(8,427)		(25,948)		(15,759)
Interest income	655		641		2,361		1,133
Interest expense	(3,563)		(433)		(7,117)		(873)
Other (expense) income, net	(68)		(111)		650		(283)
Loss before (benefit) provision for income taxes	(19,770)		(8,330)		(30,054)		(15,782)
(Benefit) provision for income taxes	(5)		(8)		284		3
Net loss	$	(19,765)	$	(8,322)	$	(30,338)	$	(15,785)
Net loss per common share:
Basic and diluted	$	(0.41)	$	(0.18)	$	(0.63)	$	(0.35)
Weighted-average common shares outstanding - basic and diluted	48,171,552		46,166,660		47,858,628		45,700,559

See accompanying notes.

3

WORKIVA INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) (unaudited)
	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Net loss	$	(19,765)	$	(8,322)	$	(30,338)	$	(15,785)
Other comprehensive income, net of tax
Foreign currency translation adjustment, net of income tax benefit (expense) of $28 and $(2) for the three months ended June 30, 2020 and 2019, respectively, and net of income tax benefit (expense) of $28 and $(5) for the six months ended June 30, 2020 and 2019, respectively	(30)		6		(81)		15
Unrealized gain on available-for-sale securities, net of income tax benefit (expense) of $(159) and $(26) for the three months ended June 30, 2020 and 2019, respectively, and net of income tax benefit (expense) of $(159) and $(41) for the six months ended June 30, 2020 and 2019, respectively	420		76		462		119
Other comprehensive income, net of tax	390		82		381		134
Comprehensive loss	$	(19,375)	$	(8,240)	$	(29,957)	$	(15,651)

See accompanying notes.

4

WORKIVA INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands) (unaudited)
	Common Stock (Class A and B)
	Shares	Amount		Additional Paid-in-Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders' Equity
Balances at December 31, 2019	46,639	$	47	$	420,170	$	287	$	(355,161)	$	65,343
Stock-based compensation expense	—	—		9,936		—		—		9,936
Issuance of common stock upon exercise of stock options	225			2,794		—		—		2,794
Issuance of common stock under employee stock purchase plan	94	—		3,660		—		—		3,660
Issuance of restricted stock units	117	—		—		—		—		—
Tax withholding related to net share settlements of stock-based compensation awards	(30)	—		(1,379)		—		—		(1,379)
Net loss	—	—		—		—		(10,573)		(10,573)
Other comprehensive loss	—	—		—		(9)		—		(9)
Balances at March 31, 2020	47,045	$	47	$	435,181	$	278	$	(365,734)	$	69,772
Stock-based compensation expense	—	—		14,894		—		—		14,894
Issuance of common stock upon exercise of stock options	443	—		6,664		—		—		6,664
Issuance of restricted stock units	153	—		—		—		—		—
Tax withholding related to net share settlements of stock-based compensation awards	(21)	—		(732)		—		—		(732)
Net loss	—	—		—		—		(19,765)		(19,765)
Other comprehensive income	—	—		—		390		—		390
Balances at June 30, 2020	47,620	$	47	$	456,007	$	668	$	(385,499)	$	71,223

5

WORKIVA INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (continued)
(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

See accompanying notes.

6

WORKIVA INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Cash flows from operating activities
Net loss	$	(19,765)	$	(8,322)	$	(30,338)	$	(15,785)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	1,131		971		2,273		1,874
Stock-based compensation expense	14,894		8,513		24,830		16,706
Provision for doubtful accounts	319		233		359		46
Amortization (accretion) of premiums and discounts on marketable securities, net	112		(23)		213		(104)
Amortization of debt discount and issuance costs	2,213		—		4,410		—
Deferred income tax	(131)		(28)		(131)		(46)
Changes in assets and liabilities:
Accounts receivable	3,847		3,133		18,112		17,951
Deferred commissions	(2,166)		(3,833)		(1,563)		(5,862)
Operating lease right-of-use asset	875		556		1,973		1,224
Other receivables	58		161		(195)		(53)
Prepaid expenses and other	(890)		(310)		(2,845)		(3,546)
Other assets	(609)		58		(683)		(1,406)
Accounts payable	(1,692)		1,206		(3,074)		(356)
Deferred revenue	(3,640)		8,295		(4,868)		10,282
Operating lease liability	(1,178)		(813)		(2,323)		(1,468)
Accrued expenses and other liabilities	13,735		8,966		5,712		4,425
Net cash provided by operating activities	7,113		18,763		11,862		23,882
Cash flows from investing activities
Purchase of property and equipment	(696)		(454)		(1,384)		(2,197)
Purchase of marketable securities	(16,457)		(18,562)		(37,289)		(40,717)
Sale of marketable securities	—		—		11,423		—
Maturities of marketable securities	13,062		11,500		26,037		18,890
Purchase of intangible assets	(74)		(577)		(151)		(661)
Net cash used in investing activities	(4,165)		(8,093)		(1,364)		(24,685)

7

WORKIVA INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands) (unaudited)
	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Cash flows from financing activities
Proceeds from option exercises	6,664		5,498		9,458		16,553
Taxes paid related to net share settlements of stock-based compensation awards	(732)		—		(2,111)		(390)
Proceeds from shares issued in connection with employee stock purchase plan	—		—		3,660		2,149
Principal payments on financing obligations	(328)		(301)		(648)		(595)
Net cash provided by financing activities	5,604		5,197		10,359		17,717
Effect of foreign exchange rates on cash	135		110		(478)		215
Net increase in cash and cash equivalents	8,687		15,977		20,379		17,129
Cash and cash equivalents at beginning of period	393,434		78,736		381,742		77,584
Cash and cash equivalents at end of period	$	402,121	$	94,713	$	402,121	$	94,713
Supplemental cash flow disclosure
Cash paid for interest	$	382	$	422	$	2,702	$	886
Cash paid for income taxes, net of refunds	$	227	$	28	$	385	$	261
Supplemental disclosure of noncash investing and financing activities
Allowance for tenant improvements	$	25	$	—	$	149	$	—
Purchases of property and equipment, accrued but not paid	$	—	$	444	$	—	$	444

See accompanying notes.

8

WORKIVA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Significant Accounting Policies

Organization

Workiva Inc., a Delaware corporation (together with its wholly-owned subsidiaries, the “Company” or “we” or “us”), provides the world’s leading connected reporting and compliance platform, which is used by thousands of public and private companies, government agencies and higher-education institutions. The Workiva platform offers controlled collaboration, data linking, data integrations, granular permissions, process management and a full audit trail. Our operational headquarters are located in Ames, Iowa, with additional offices located in the United States, Europe, the Asia-Pacific region and Canada.

Basis of Presentation and Principles of Consolidation

The financial information presented in the accompanying unaudited condensed consolidated financial statements has been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and in accordance with rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, the financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The condensed consolidated balance sheet data as of December 31, 2019 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting primarily of normal recurring accruals, necessary for a fair presentation of our financial position and results of operations. The operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results expected for the full year ending December 31, 2020.

Seasonality has affected our revenue, expenses and cash flows from operations. Revenue from professional services has been higher in the first quarter as many of our customers file their Form 10-K in the first calendar quarter. Sales and marketing expense has historically been higher in the third quarter due to our annual user conference in September, although our transition to a virtual event in 2020 is expected to partially mitigate this trend. In addition, the timing of the payments of cash bonuses to employees during the first and fourth calendar quarters may result in some seasonality in operating cash flow. The condensed consolidated financial information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this report and the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on February 20, 2020.

The unaudited condensed consolidated financial statements include the accounts of Workiva Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Additionally, certain prior period amounts have been reclassified for consistency with the current year presentation. The reclassification of the prior period amounts were not material to the previously reported consolidated financial statements.

9

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and various other assumptions believed to be reasonable. These estimates include, but are not limited to, the allowance for doubtful accounts, the determination of the relative selling prices of our services, the measurement of material rights, health insurance claims incurred but not yet reported, valuation of available-for-sale marketable securities, useful lives of deferred contract costs, intangible assets and property and equipment, income taxes, discount rates used in the valuation of right-of-use assets and lease liabilities, the fair value of the liability and equity components of the convertible senior notes, and certain assumptions used in the valuation of equity awards. While these estimates are based on our best knowledge of current events and actions that may affect us in the future, actual results may differ materially from these estimates.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the current accounting guidance and requires the measurement of all expected losses based on historical experience, current conditions and reasonable and supportable forecasts. For trade receivables, loans, and other financial instruments, we are required to use a forward-looking expected loss model that reflects probable losses rather than the incurred loss model for recognizing credit losses. The standard became effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. Effective January 1, 2020, we adopted this standard. The adoption of this new standard did not have a material impact on our consolidated financial statements.

2. Supplemental Consolidated Balance Sheet Information

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

	As of June 30, 2020		As of December 31, 2019
Accrued vacation	$	10,824	$	8,353
Accrued commissions	5,570		5,561
Accrued bonuses	7,999		7,121
Estimated health insurance claims	1,076		1,040
ESPP employee contributions	3,862		3,734
Customer deposits	13,526		12,151
Operating lease liabilities	4,385		3,064
Accrued other liabilities	9,145		8,906
	$	56,387	$	49,930

10

3. Cash Equivalents and Marketable Securities

At June 30, 2020, cash equivalents and marketable securities consisted of the following (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses		Aggregate Fair Value
Money market funds	$	378,501	$	—	$	—	$	378,501
Commercial paper	8,959		—		—		8,959
U.S. treasury debt securities	20,860		190		—		21,050
U.S. corporate debt securities	75,844		599		(1)		76,442
	$	484,164	$	789	$	(1)	$	484,952
Included in cash and cash equivalents	$	378,501	$	—	$	—	$	378,501
Included in marketable securities	$	105,663