Workiva(WK) - 2024 Q2 - Quarterly Report

Part I. Financial Information Item 1. Unaudited Consolidated Financial Statements Workiva Inc.'s Q2 2024 unaudited financials show asset growth, 14.5% revenue increase, and a narrowed net loss Condensed Consolidated Balance Sheets Total assets increased to $1.24 billion by June 30, 2024, primarily due to goodwill, with total liabilities rising to $1.32 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $267,897 | $256,100 | | Marketable securities | $472,956 | $557,622 | | Goodwill | $199,202 | $112,097 | | Total Assets | $1,242,689 | $1,218,860 | | Liabilities & Stockholders' Deficit | | | | Deferred revenue (Current) | $384,105 | $380,843 | | Convertible senior notes, non-current | $763,672 | $762,455 | | Total Liabilities | $1,320,436 | $1,308,250 | | Total stockholders' deficit | $(77,747) | $(89,390) | Condensed Consolidated Statements of Operations Q2 2024 total revenue increased 14.5% to $177.5 million, with the net loss narrowing to $(17.5) million, reflecting improved financial performance Q2 2024 Statement of Operations Highlights (in thousands, except per share data) | Metric | Q2 2024 | Q2 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $177,503 | $155,022 | +14.5% | | Subscription & Support Revenue | $160,735 | $136,772 | +17.5% | | Gross Profit | $136,331 | $115,518 | +18.0% | | Loss from Operations | $(23,149) | $(22,688) | +2.0% | | Net Loss | $(17,548) | $(20,910) | -16.1% | | Net Loss Per Share (Basic & Diluted) | $(0.32) | $(0.39) | -17.9% | H1 2024 Statement of Operations Highlights (in thousands, except per share data) | Metric | H1 2024 | H1 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $353,170 | $305,211 | +15.7% | | Subscription & Support Revenue | $315,714 | $266,436 | +18.5% | | Gross Profit | $270,475 | $227,189 | +19.1% | | Loss from Operations | $(41,432) | $(69,529) | -40.4% | | Net Loss | $(29,235) | $(67,060) | -56.4% | | Net Loss Per Share (Basic & Diluted) | $(0.53) | $(1.25) | -57.6% | Condensed Consolidated Statements of Cash Flows H1 2024 net cash from operations was $24.8 million, with $8.9 million used in investing activities for an acquisition, resulting in an $11.8 million increase in cash Six Months Ended June 30, Cash Flow Summary (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $24,830 | $31,542 | | Net cash used in investing activities | $(8,867) | $(73,018) | | Net cash used in financing activities | $(2,807) | $(939) | | Net increase (decrease) in cash | $11,691 | $(41,258) | - A significant use of cash in investing activities for Q2 2024 was the $98.3 million acquisition of Sustain.Life, net of cash acquired[22] Notes to Condensed Consolidated Financial Statements Key financial notes detail the $98.3 million Sustain.Life acquisition, $763.7 million in convertible notes, and a subsequent $100 million share repurchase program - On June 17, 2024, the company acquired Sustain.Life, Inc. for $98.3 million net of cash acquired, intended to launch Workiva Carbon[77] Preliminary Purchase Price Allocation for Sustain.Life Acquisition (in thousands) | Item | Amount | | :--- | :--- | | Cash consideration | $98,532 | | Intangible assets | $11,890 | | Goodwill | $89,410 | | Fair value of assets and liabilities | $98,532 | - As of June 30, 2024, the company has two series of convertible senior notes: the 2026 Notes with a net carrying amount of $70.7 million and the 2028 Notes with a net carrying amount of $693.0 million[54] - Total remaining performance obligations for subscription contracts are approximately $994.6 million, with $543.7 million expected to be recognized as revenue over the next 12 months[68] - Subsequent to the quarter end, on July 30, 2024, the board of directors authorized a share repurchase program for up to $100.0 million of the company's Class A common stock[81] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes 14.5% Q2 revenue growth to strong demand, maintains high retention, invests in growth, and achieved a narrowed net loss with strong liquidity Overview and Key Performance Indicators Workiva provides a SaaS platform for integrated reporting, serving over 6,100 organizations, with steady customer growth and strong revenue retention - The company's strategy focuses on multi-solution adoption, partner program development, international expansion, and fit-for-purpose solutions[91] Key Operating Metrics as of June 30, | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Number of customers | 6,147 | 5,860 | | Subscription and support revenue retention rate | 97.6% | 97.6% | | Subscription and support revenue retention rate including add-ons | 109.2% | 111.1% | | Number of customers with ACV $100k+ | 1,768 | 1,470 | | Number of customers with ACV $150k+ | 1,015 | 823 | | Number of customers with ACV $300k+ | 356 | 272 | Results of Operations Q2 2024 total revenue grew 14.5% to $177.5 million, gross profit margin improved to 76.8%, and total operating expenses increased 15.4% to $159.5 million Revenue Comparison (in thousands) | Revenue Type | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Subscription and support | $160,735 | $136,772 | +17.5% | | Professional services | $16,768 | $18,250 | -8.1% | | Total revenue | $177,503 | $155,022 | +14.5% | Operating Expenses Comparison (in thousands) | Expense Category | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Research and development | $48,408 | $42,697 | +13.4% | | Sales and marketing | $84,697 | $71,882 | +17.8% | | General and administrative | $26,375 | $23,627 | +11.6% | | Total operating expenses | $159,480 | $138,206 | +15.4% | - The decrease in General and Administrative expenses for the six-month period was primarily due to the non-recurrence of $19.5 million in compensation related to transition agreements with former executives in Q1 2023[135] Liquidity and Capital Resources As of June 30, 2024, liquidity totaled $740.9 million, with $24.8 million from H1 operations, and a new $100 million share repurchase program authorized - Principal sources of liquidity as of June 30, 2024, totaled $740.9 million, consisting of cash, cash equivalents, and marketable securities[142] - The company has outstanding convertible senior notes due in 2026 and 2028 with net carrying amounts of $70.7 million and $693.0 million, respectively[143] - On July 30, 2024, the board authorized a new share repurchase program for up to $100.0 million of the company's Class A common stock[156] Item 3. Quantitative and Qualitative Disclosure About Market Risk The company's market risk exposures have not materially changed since December 31, 2023, as detailed in its Annual Report on Form 10-K - There have been no material changes in the company's market risk exposures since December 31, 2023[159] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting - The principal executive officer and principal financial officer concluded that as of June 30, 2024, the company's disclosure controls and procedures were effective at a reasonable assurance level[162] - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[163] Part II. Other Information Item 1. Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business or financial condition - Workiva is not presently a party to any legal proceedings that management believes would have a material adverse effect on the company[166] Item 1A. Risk Factors No material changes to risk factors, except for a new risk regarding the share repurchase program, which could impact stock price volatility and cash reserves - A new risk factor has been added concerning the company's share repurchase program, noting that its execution is not guaranteed and could increase stock price volatility and reduce cash reserves[168][169][170] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or issuer purchases of equity securities during the period - There were no unregistered sales of securities or issuer purchases of equity securities in the reported period[171] Item 6. Exhibits The report lists several exhibits filed, including the Sustain.Life merger agreement, the amended 2014 Equity Incentive Plan, and CEO/CFO certifications - Key exhibits filed include the Agreement and Plan of Merger for Sustain.Life and the amended Workiva Inc. 2014 Equity Incentive Plan[176]