Workiva(WK) - 2024 Q4 - Annual Report

Part I Part I provides a comprehensive overview of Workiva's business, strategic initiatives, product solutions, customer base, human capital, and associated risks and cybersecurity practices Business Overview Workiva provides a unified SaaS platform for financial reporting, sustainability, and GRC, achieving $738.7 million in 2024 revenue, primarily from subscriptions, while expanding globally | Financial Metric | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | | Total Revenue | $537.9M | $630.0M | $738.7M | | Net Loss | $90.9M | $127.5M | $55.0M | - The company serves over 6,300 organizations, with a focus on the offices of the CFO, CSO, and CAE[18] - Approximately 90% of 2024 revenue was from subscription and support fees, with the remainder from professional services[19] - In 2024, revenue from EMEA and APAC constituted about 18% of consolidated revenue, with expectations for this to increase[34] 2024 Company Highlights and Milestones Workiva achieved key milestones in 2024, including new product launches, a share repurchase authorization, platform enhancements, and patent additions - Launched Workiva Carbon in June 2024 to support global climate regulations like CSRD[22] - Authorized a share repurchase program for up to $100 million of Class A common stock in July 2024[22] - Enhanced the core platform with features like linking entire tables, sharable content libraries, and generative AI prompt libraries[22] - Added 10 new innovation patents in 2024, bringing the total to 86[22] Growth Vectors The company's growth strategy focuses on platform expansion, multi-solution adoption, global reach, and leveraging its partner ecosystem, with sustainability identified as a key opportunity - The company's growth strategy is focused on four key areas: expanding the Workiva Platform, selling fit-for-purpose solutions (Financial Reporting, Sustainability, GRC), global expansion, and leveraging its partner ecosystem[30] - Sustainability is identified as a 'generational opportunity for growth,' with plans for accelerated investment in this area[35] - The partner ecosystem includes over 200 advisory, technology, and service partners that extend geographic reach and accelerate platform adoption[36] Fit-for-Purpose Solutions Workiva offers over 30 solutions across financial reporting, sustainability management, GRC, and industry verticals, including new carbon accounting capabilities - Workiva markets over 30 solutions categorized into four groups: financial reporting, sustainability management, GRC, and industry verticals[47] - Financial Reporting solutions include SEC/SEDAR reporting, Global Statutory Reporting, Capital Markets (IPO), Annual & Interim Reporting, and ESEF compliance for over 4,000 European issuers[48][50][51][53] - Sustainability Management solutions help organizations with disclosures for regulations like CSRD and California's climate acts, and support frameworks like GRI, SASB, and TCFD; Workiva Carbon was launched in 2024 for carbon accounting[56][58][60] - GRC solutions cover Controls Management (SOX), Internal Audit, Enterprise Risk Management (ERM), and Policy and Procedure Management[62][63][64][65] - Industry-specific solutions are tailored for Financial Services (banking, insurance, investment), Public Sector (government agencies), and the Energy & Utility Sector (FERC compliance)[67][70][71] Customers Workiva serves over 6,300 customers globally, including a significant portion of top companies, maintaining strong gross and net retention rates | Metric | As of Dec 31, 2024 | | :--- | :--- | | Total Customers | > 6,300 | | Gross Retention Rate | 97.4% | | Net Retention Rate | 111.9% | - Customer base includes over 85% of the top 500 companies and over 80% of the top 1,000 companies[73] Human Capital As of December 31, 2024, Workiva employed 2,828 full-time people globally, with specific representation targets for women and underrepresented groups in its workforce and leadership - As of December 31, 2024, Workiva employed approximately 2,828 full-time people worldwide, a 12.0% increase from 2,526 at the end of 2023[101] - As of December 31, 2024, women represented approximately 43% of the global workforce and 38% of leadership, while underrepresented racial/ethnic groups comprised 22% of the U.S. workforce and 16% of U.S. leadership[102] Risk Factors The company faces significant business, technological, and securities ownership risks, including customer concentration, profitability challenges, cybersecurity threats, and dual-class stock structure Business and Industry Risks Key business risks include reliance on SEC filing customers, historical net losses, intense competition, and regulatory uncertainties impacting revenue growth - Over 40% of total revenue is derived from customers using the platform for SEC filings, creating a concentration risk[114] - The company has a history of net losses, including $55.0 million in 2024, and may not achieve or maintain profitability in the future[120] - Intense competition exists from diversified enterprise software providers, niche solution providers, and legacy manual processes[128][130] - Uncertainty in regulatory environments, such as the EU's Corporate Sustainability Reporting Directive (CSRD), could affect buying decisions and negatively impact revenue growth[127] Technology and Intellectual Property Risks Technology risks encompass evolving cybersecurity threats, challenges with AI and machine learning adoption, reliance on third-party infrastructure, and complex data privacy compliance - The business faces continually evolving cybersecurity risks, which could lead to data loss, service disruption, and reputational damage[155] - The development and use of AI and machine learning technologies present risks related to performance, public acceptance, regulatory compliance, and data privacy[163][164] - The business relies on third-party infrastructure, primarily Amazon Web Services (AWS), and any interruptions could negatively impact service delivery[165][170] - Compliance with complex and evolving data privacy laws, such as GDPR in the E.U., imposes substantial burdens and costs[173][174] Securities Ownership Risks Risks related to securities ownership include concentrated voting power due to the dual-class stock structure and the company's policy of not paying dividends - The dual-class stock structure concentrates approximately 43% of voting power with holders of Class B common stock, potentially limiting the influence of Class A stockholders[196] - The company does not intend to pay dividends in the foreseeable future, meaning investors must rely on stock price appreciation for returns[202] Cybersecurity Workiva maintains a comprehensive cybersecurity program aligned with industry standards, overseen by the CISO and Board, with no material incidents reported to date - The cybersecurity program aligns with frameworks including FedRAMP Moderate authorization, ISO 27001, and SOC 1 and 2 Type 2 reports[208] - The Board of Directors, through its Audit Committee, oversees cybersecurity risks; the CISO provides briefings to the Audit Committee at least three times per year and to the full Board at least once per year[214] - The company has not encountered any cybersecurity threats to date that have materially affected its business strategy, results of operations, or financial condition[211] Part II Part II details Workiva's financial performance, including key operating metrics, results of operations, liquidity, capital resources, audited financial statements, and internal controls Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Workiva's 2024 revenue grew 17.2% to $738.7 million, driven by subscription growth, with a narrowed net loss and strong liquidity, reflecting increased operating expenses for growth Key Performance Indicators Key performance indicators show customer growth, strong gross and net retention rates, and an increasing number of customers with high annual contract values | Operating Metric | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | | Number of customers | 5,664 | 6,034 | 6,305 | | Gross retention rate | 97.8% | 97.9% | 97.4% | | Net retention rate | 108.5% | 110.3% | 111.9% | | Customers with ACV >$100k | 1,345 | 1,631 | 2,055 | | Customers with ACV >$300k | 236 | 311 | 416 | Results of Operations Workiva's 2024 results show significant revenue growth, particularly in subscriptions, and a reduced net loss, despite increased sales and marketing expenses | (in thousands) | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Subscription & Support Revenue | $667,646 | $558,645 | 19.5% | | Professional Services Revenue | $71,034 | $71,394 | (0.5)% | | Total Revenue | $738,680 | $630,039 | 17.2% | | Gross Profit | $566,625 | $475,817 | 19.1% | | Loss from Operations | $(76,534) | $(94,527) | (19.0)% | | Net Loss | $(55,042) | $(127,525) | (56.8)% | - Sales and marketing expenses increased by $60.2 million (21.0%) in 2024, driven by higher compensation, travel, and marketing costs to support go-to-market activities[272] - General and administrative expenses decreased by $7.5 million (6.8%) in 2024, primarily due to a $10.5 million decrease in stock-based compensation, as certain one-time executive transition costs from 2023 did not recur[273] Liquidity and Capital Resources As of December 31, 2024, Workiva maintained strong liquidity with $816.4 million in cash and marketable securities, supported by operating cash flow and convertible notes - As of December 31, 2024, principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $816.4 million[276] | Cash Flow (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $87,706 | $70,875 | | Net cash used in investing activities | $(45,249) | $(357,253) | | Net cash from financing activities | $6,741 | $301,265 | - In August 2023, the company issued $702.0 million of 1.250% convertible senior notes due 2028 and used a portion of the proceeds to repurchase $273.8 million of its 2026 notes[277] - A share repurchase program for up to $100.0 million was authorized in July 2024, but no repurchases were made as of December 31, 2024[278] Financial Statements and Supplementary Data The consolidated financial statements detail Workiva's financial position, operations, and cash flows, highlighting the Sustain.Life acquisition, convertible notes, stock-based compensation, and deferred tax assets Consolidated Balance Sheet Highlights (in thousands) | | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $1,368,469 | $1,218,860 | | Total Liabilities | $1,410,153 | $1,308,250 | | Total Stockholders' Deficit | $(41,684) | $(89,390) | - On June 17, 2024, the company acquired Sustain.Life, Inc. for $98.1 million net of cash acquired, resulting in the recognition of $89.1 million in goodwill and $11.9 million in intangible assets[448][449][450] - As of December 31, 2024, the company had outstanding convertible senior notes with a net carrying amount of $70.8 million (due 2026) and $694.1 million (due 2028)[432] - Total stock-based compensation expense was $102.2 million in 2024, up from $98.8 million in 2023; as of year-end, there was $173.9 million of unrecognized compensation expense related to unvested restricted stock units[437][443] - A full valuation allowance of $267.0 million was recorded against net U.S. deferred tax assets as of December 31, 2024, as management believes it is more likely than not that these benefits will not be realized[470][471] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2024, with an unqualified audit opinion - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2024[480] - Management's assessment concluded that internal control over financial reporting was effective as of December 31, 2024, and this assessment was audited by Ernst & Young LLP, who issued an unqualified opinion[481] Part III Part III incorporates by reference information on directors, executive officers, corporate governance, executive compensation, security ownership, and principal accounting fees - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the Registrant's Proxy Statement for the 2025 Annual Meeting of Stockholders[9][490][493]