Workiva(WK) - 2023 Q4 - Annual Report

Part I Item 1. Business Workiva Inc. is a leading cloud platform provider for assured integrated reporting, offering SaaS solutions for financial reporting, ESG, and GRC, achieving $630.0 million revenue in 2023 with 19% CAGR since 2021 - Workiva's mission is to power transparent reporting for a better world through its cloud platform for assured integrated reporting, covering financial, ESG, and GRC needs[16] Revenue Growth (2021-2023) | Metric | 2021 (Millions) | 2022 (Millions) | 2023 (Millions) | CAGR (2021-2023) | | :----------------------- | :-------------- | :-------------- | :-------------- | :--------------- | | Total Revenue | $443.3 | $537.9 | $630.0 | 19% | | Net Loss | $(37.7) | $(90.9) | $(127.5) | - | | Subscription & Support % | - | - | 89% | - | - In April 2023, Julie Iskow succeeded Marty Vanderploeg as CEO, with Vanderploeg transitioning to Non-Executive Chair of the Board[22] - Workiva launched enhancements to its ESG solution, including expanded data collection, integration with CDP, and support for ESRS[22] - In August 2023, Generative AI (Gen-AI) capabilities were released on the Workiva platform, allowing customers to choose industry-leading large language models like Google Cloud and Microsoft Azure[22] - Workiva issued $702 million of 1.250% convertible senior notes due 2028, using $396.9 million of net proceeds to repurchase $273.8 million of 1.125% convertible senior notes due 2026[22] - The company added 8 new innovation patents in 2023, bringing its total to 76[22] Item 1A. Risk Factors Workiva faces diverse risks including reliance on SEC filings, market competition, technological changes, cybersecurity threats, and financial challenges like unprofitability and stock price volatility - Over 40% of Workiva's total revenue is derived from customers using its platform for SEC filings, making the company susceptible to factors affecting this market[111] Subscription and Support Revenue Retention Rate | Metric | 2023 | 2022 | 2021 | | :------------------------------------------ | :------ | :------ | :------ | | Subscription and support revenue retention rate | 97.9% | 97.8% | 97.0% | - The company has historically incurred net losses, with $127.5 million in fiscal 2023, and may not achieve or maintain profitability in the future due to continued investments in infrastructure, solutions, R&D, and sales and marketing[117] - Workiva faces continually evolving cybersecurity risks, including data loss, theft, misuse, unauthorized disclosure, and disruption of solutions, which could damage its brand, reputation, and customer relationships[150] - Issues related to the development and use of AI, machine learning, and other technological capabilities in its solutions may result in reputational harm, liability, and adverse financial results, especially concerning data privacy and security[158][159] - The dual-class common stock structure concentrates voting control with certain executives (approximately 43% as of December 31, 2023), potentially limiting the influence of Class A common stockholders[191] Item 1B. Unresolved Staff Comments Workiva Inc. reported no unresolved staff comments from the SEC - There are no unresolved staff comments[198] Item 1C. Cybersecurity Workiva maintains a comprehensive cybersecurity program aligned with industry standards, overseen by the Board, and has not experienced material incidents to date - Workiva's information security program incorporates data encryption, access control, multi-factor authentication, vulnerability management, and malware protection, aligning with FedRAMP Moderate authorization, ISO 27001, and SOC 1 and 2 Type 2 reports[199] - The company engages external cybersecurity experts for regular audits, threat assessments, and security enhancements, and conducts risk-based security assessments for all third-party vendors with access to sensitive information[200][201] - To date, Workiva has not experienced any cybersecurity incidents that have materially affected its business strategy, results of operations, or financial condition[202] - The Board of Directors, with diverse expertise, oversees cybersecurity risks, receiving regular briefings (minimum three times annually to Audit Committee, once annually to full Board) from the CISO on threats, initiatives, incidents, and compliance[204][205] Item 2. Properties Workiva's corporate headquarters is in Ames, Iowa, occupying approximately 120,000 square feet, with additional leased offices globally - Workiva's corporate headquarters is in Ames, Iowa (120,000 sq ft), with additional leased offices in six U.S. cities and internationally across Canada, Europe (Netherlands, UK, Germany, France, Denmark, Sweden), and Asia-Pacific (Hong Kong, Australia, Japan, Singapore)[208] Item 3. Legal Proceedings Workiva is not currently a party to any legal proceedings expected to have a material adverse effect on its business or financial condition - Workiva is not currently involved in any legal proceedings that are expected to have a material adverse effect on its business, financial condition, operating results, or cash flows[209] Item 4. Mine Safety Disclosure This item is not applicable to Workiva Inc Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Workiva's Class A common stock trades on the NYSE, while Class B is not publicly traded, and the company has never paid cash dividends, prioritizing reinvestment - Workiva's Class A common stock trades on the NYSE under 'WK'; Class B common stock is not listed[212] - As of December 31, 2023, there were approximately 63 stockholders of record for Class A common stock and 10 for Class B common stock[213] - Workiva has never declared or paid cash dividends and plans to retain future earnings for business operations and expansion[214] Cumulative Total Stockholder Return (2018-2023) | Company/Index | 12/31/2018 | 12/31/2019 | 12/31/2020 | 12/31/2021 | 12/31/2022 | 12/31/2023 | | :-------------------- | :--------- | :--------- | :--------- | :--------- | :--------- | :--------- | | Workiva Inc. | $100.00 | $108.57 | $232.63 | $282.29 | $206.52 | $222.51 | | S&P 500 Index | $100.00 | $131.54 | $155.85 | $200.68 | $164.39 | $207.63 | | NASDAQ Computer Index | $100.00 | $151.95 | $229.98 | $318.81 | $206.17 | $345.27 | - There were no issuer purchases of equity securities during the period[220] Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Workiva's 2023 revenue grew 17.1% to $630.0 million, driven by subscription services, yet incurred a $127.5 million net loss due to investments and a significant loss on convertible note conversion Key Financial Metrics (2021-2023) | Metric | 2023 (Thousands) | 2022 (Thousands) | 2021 (Thousands) | | :------------------------------------------ | :--------------- | :--------------- | :--------------- | | Total revenue | $630,039 | $537,875 | $443,285 | | Year-over-year % increase in total revenue | 17.1% | 21.3% | 26.1% | | Subscription and support revenue | $558,645 | $464,935 | $379,340 | | Year-over-year % increase in subscription and support revenue | 20.2% | 22.6% | 28.2% | | Subscription and support as a % of total revenue | 88.7% | 86.4% | 85.6% | | Net loss | $(127,525) | $(90,947) | $(37,730) | Operating Metrics (as of December 31) | Metric | 2023 | 2022 | 2021 | | :------------------------------------------ | :------ | :------ | :------ | | Number of customers | 6,034 | 5,664 | 4,315 | | Subscription and support revenue retention rate | 97.9% | 97.8% | 97.0% | | Subscription and support revenue retention rate including add-ons | 110.3% | 108.5% | 110.0% | | Number of customers with ACV $100k+ | 1,631 | 1,345 | 1,121 | | Number of customers with ACV $150k+ | 915 | 718 | 578 | | Number of customers with ACV $300k+ | 311 | 236 | 183 | - Total operating expenses increased by $73.6 million (14.8%) in 2023 compared to 2022, primarily due to higher cash-based and stock-based compensation across R&D, sales & marketing, and G&A[260][261][262][263] - Interest expense significantly increased in 2023 due to a $45.1 million loss on induced conversion from the partial repurchase of 2026 convertible senior notes[264] Cash Flow Summary (2021-2023) | Cash Flow Activity | 2023 (Thousands) | 2022 (Thousands) | 2021 (Thousands) | | :-------------------------------------- | :--------------- | :--------------- | :--------------- | | Cash flow provided by operating activities | $70,875 | $11,334 | $49,844 | | Cash flow used in investing activities | $(357,253) | $(68,012) | $(68,631) | | Cash flow provided by (used in) financing activities | $301,265 | $(1,587) | $(3,388) | | Net increase (decrease) in cash and cash equivalents | $16,524 | $(60,189) | $(22,445) | - As of December 31, 2023, Workiva had $813.7 million in cash, cash equivalents, and marketable securities, which are expected to be sufficient to fund operations for at least the next twelve months[266] Item 7A. Quantitative and Qualitative Disclosures about Market Risk Workiva's market risks primarily involve foreign currency, inflation, and interest rate fluctuations, with limited direct interest rate exposure due to fixed-rate convertible notes - Workiva's primary market risk exposures are foreign currency rates, inflation, and interest rates[292] Foreign Currency Transaction Gains (Losses) | Year Ended December 31 | Amount (Thousands) | | :--------------------- | :----------------- | | 2023 | $1,154 | | 2022 | $835 | | 2021 | $(503) | - An immediate 100-basis point increase in interest rates would result in a $4.0 million market value reduction in Workiva's investment portfolio as of December 31, 2023[298] - The 2026 and 2028 convertible senior notes have fixed annual interest rates (1.125% and 1.250% respectively), meaning no direct financial exposure to changes in interest rates, though fair value can fluctuate[299] Item 8. Financial Statements and Supplementary Data This section presents Workiva's audited consolidated financial statements for 2021-2023, prepared under U.S. GAAP, highlighting a $127.5 million net loss in 2023 and significant debt issuance - The consolidated financial statements for Workiva Inc. and its subsidiaries are prepared in accordance with U.S. GAAP[305][346] Consolidated Balance Sheet Highlights (as of December 31, 2023 and 2022) | Metric | 2023 (Thousands) | 2022 (Thousands) | | :---------------------- | :--------------- | :--------------- | | Total Assets | $1,218,860 | $819,620 | | Total Liabilities | $1,308,250 | $813,637 | | Total Stockholders' (Deficit) Equity | $(89,390) | $5,983 | | Cash and cash equivalents | $256,100 | $240,197 | | Marketable securities | $557,622 | $190,595 | | Convertible senior notes, non-current | $762,455 | $340,257 | Consolidated Statements of Operations Highlights (Years Ended December 31) | Metric | 2023 (Thousands) | 2022 (Thousands) | 2021 (Thousands) | | :---------------------- | :--------------- | :--------------- | :--------------- | | Total revenue | $630,039 | $537,875 | $443,285 | | Gross profit | $475,817 | $407,990 | $339,452 | | Total operating expenses | $570,344 | $496,754 | $368,807 | | Loss from operations | $(94,527) | $(88,764) | $(29,355) | | Net loss | $(127,525) | $(90,947) | $(37,730) | | Basic and diluted net loss per common share | $(2.36) | $(1.72) | $(0.74) | Consolidated Statements of Cash Flows Highlights (Years Ended December 31) | Cash Flow Activity | 2023 (Thousands) | 2022 (Thousands) | 2021 (Thousands) | | :-------------------------------------- | :--------------- | :--------------- | :--------------- | | Net cash provided by operating activities | $70,875 | $11,334 | $49,844 | | Net cash used in investing activities | $(357,253) | $(68,012) | $(68,631) | | Net cash provided by (used in) financing activities | $301,265 | $(1,587) | $(3,388) | - Workiva issued $702.0 million in 1.250% convertible senior notes due 2028 in August 2023, using $396.9 million of proceeds to repurchase $273.8 million of 1.125% convertible senior notes due 2026[267][416][425] - Total stock-based compensation expense was $98.8 million in 2023, up from $70.7 million in 2022 and $48.6 million in 2021[256][431] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Workiva Inc. reported no changes in or disagreements with its accountants on accounting and financial disclosure matters - There were no changes in or disagreements with accountants on accounting and financial disclosure[482] Item 9A. Controls and Procedures Workiva's management concluded its disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with no material changes identified - Management concluded that Workiva's disclosure controls and procedures were effective as of December 31, 2023, providing reasonable assurance for timely and accurate reporting[485] - Workiva maintained effective internal control over financial reporting as of December 31, 2023, based on the COSO 2013 framework, with an unqualified audit opinion from Ernst & Young LLP[486] - No material changes in internal control over financial reporting occurred during the three months ended December 31, 2023[487] Item 9B. Other Information Workiva approved its 2024 Short-Term Incentive Plan for executives, updated the CFO's employment agreement with a $412,000 base salary and 75% target bonus, and reported no Rule 10b5-1 trading arrangement changes - The 2024 Short-Term Incentive Plan for executive officers was approved, with cash bonuses tied to performance metrics such as revenue growth, operating cash flow, or operating loss (excluding stock compensation and amortization of acquisition-related intangible assets)[488] - No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended December 31, 2023[489] - CFO Jill E. Klindt's new employment agreement sets her 2024 annual base salary at $412,000 and target bonus opportunity at 75%[491] - The CFO's agreement includes non-competition and non-solicitation restrictions for 12 months post-termination and specifies severance payments and accelerated equity vesting under various termination scenarios, including death, disability, or termination without cause/for good reason (especially around a change in control)[492][493] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to Workiva Inc Part III Item 10. Directors, Executive Officers and Corporate Governance Information on Workiva's directors, executive officers, corporate governance, and Section 16(a) reports is incorporated by reference from the 2024 Proxy Statement - Information on directors, executive officers, corporate governance, and Section 16(a) reports is incorporated by reference from the 2024 Proxy Statement[498][499] Item 11. Executive Compensation Details on executive and director compensation are incorporated by reference from Workiva's definitive proxy statement for the 2024 Annual Meeting of Stockholders - Executive and director compensation information is incorporated by reference from the 2024 Proxy Statement[500] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership and equity compensation plans is incorporated by reference from Workiva's definitive proxy statement for the 2024 Annual Meeting of Stockholders - Security ownership and equity compensation plan information is incorporated by reference from the 2024 Proxy Statement[501] Item 13. Certain Relationships and Related Transactions and Director Independence Information concerning certain relationships, related-party transactions, and director independence is incorporated by reference from Workiva's definitive proxy statement for the 2024 Annual Meeting of Stockholders - Information on certain relationships, related-party transactions, and director independence is incorporated by reference from the 2024 Proxy Statement[502] Item 14. Principal Accounting Fees and Services Ernst & Young LLP serves as Workiva's independent registered public accounting firm, with details on accounting fees and services incorporated by reference from the 2024 Proxy Statement - Ernst & Young LLP is Workiva's independent registered public accounting firm[503] - Information on principal accounting fees and services is incorporated by reference from the 2024 Proxy Statement[503] Part IV Item 15. Exhibits and Financial Statement Schedules This section lists all documents filed as part of the Form 10-K, including financial statements, corporate documents, debt instruments, compensatory plans, CEO/CFO certifications, and the Clawback Policy - The section includes all financial statements, corporate governance documents, debt instruments, and compensatory plans[505] - Certifications from the Chief Executive Officer and Chief Financial Officer, pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, are furnished as exhibits[508][509] - Workiva Inc.'s Clawback Policy is included as Exhibit 97.1[508] SIGNATURES The Form 10-K report is duly signed on behalf of Workiva Inc. by its President and Chief Executive Officer, Julie Iskow, and other officers and directors, including the Principal Financial Officer, Jill Klindt, as of February 20, 2024 - The report is signed by Julie Iskow (President and CEO) and Jill Klindt (Executive Vice President, CFO and Treasurer), along with other directors, on February 20, 2024[513][517]