Workiva(WK) - 2020 Q4 - Annual Report

Part I Business Workiva provides a cloud-based compliance and reporting platform, serving 3,723 organizations including 75% of Fortune 500 companies - Workiva is a leading provider of cloud-based compliance and regulatory reporting solutions, serving 3,723 organizations as of December 31, 2020, including 75% of Fortune 500 companies[16][17] Financial Performance (2018-2020) | Metric | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | | Revenue | $244.3M | - | $351.6M | | Net Loss | $50.1M | $47.5M | $48.4M | - The company's sales and marketing efforts are organized into four main solution groups: Regulatory Reporting, Non-Regulatory Reporting, Financial Services, and Integrated Risk[19] - Key growth vectors include expanding into international markets (EMEA and APAC), accelerating investments in global statutory reporting, broadening integrated risk solutions, targeting the U.S. government with FedRAMP authorization, and deepening partnerships with consulting and technology firms[29][30][31] - As of December 31, 2020, the company had 1,718 full-time employees, an 8.7% increase from 2019. Women represented 37% of the global workforce and 29% of leadership roles[87][89] Risk Factors The company faces risks from revenue concentration, intense competition, growth management, and technological vulnerabilities - A majority of revenue is derived from customers using the platform for SEC filings. While non-SEC solutions generated 77% of new bookings in 2020, their market acceptance is not guaranteed[103] - The business is subject to intense competition from diversified enterprise software providers, professional services firms, GRC software providers, and business intelligence software providers[112][113] - The COVID-19 pandemic has impacted the business by shifting operations to a remote model and may heighten other risks, with the ultimate financial impact remaining uncertain[122][123] - The dual-class stock structure concentrates voting control with certain executives. As of December 31, 2020, Class B common stock (10 votes per share) represented approximately 66% of the total voting power[181] - The company faces risks related to data privacy and protection laws, such as the GDPR in Europe. Changes in these regulations, like the invalidation of the EU-U.S. Privacy Shield, could affect service delivery and financial results[158][159] Unresolved Staff Comments The company reports no unresolved staff comments - None[190] Properties Corporate headquarters are in Ames, Iowa, with additional leased offices in nine U.S. cities and internationally - Corporate headquarters are located in Ames, Iowa, in a leased space of approximately 120,000 square feet[191] - The company leases additional offices in nine U.S. cities and internationally in Canada, the Netherlands, the UK, Germany, France, Hong Kong, Australia, and Singapore[191] Legal Proceedings The company is not a party to any legal proceedings expected to have a material adverse effect on its business - The company is not presently a party to any legal proceedings that management believes would have a material adverse effect on the business[192] Mine Safety Disclosures This section is not applicable to the company - Not applicable[193] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Workiva's Class A common stock trades on NYSE; no cash dividends paid, 179,948 shares repurchased in Q4 2020 for tax withholding - Class A common stock is traded on the NYSE under the symbol "WK". Class B common stock is not listed on any exchange[196] - The company has never declared or paid cash dividends and does not expect to in the foreseeable future[198] Issuer Purchases of Equity Securities (Q4 2020) | Month | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | October 2020 | 29,062 | $56.65 | | November 2020 | 72,578 | $55.31 | | December 2020 | 78,308 | $75.15 | | Total | 179,948 | $64.16 | Selected Consolidated Financial Data This section is not applicable - Not applicable[207] Management's Discussion and Analysis of Financial Condition and Results of Operations Workiva's 2020 revenue grew 18.0% to $351.6 million, with a $48.4 million net loss, maintaining strong liquidity and customer retention Key Financial Metrics (2019 vs 2020) | Metric | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $351.6M | $297.9M | 18.0% | | Subscription & Support Revenue | $295.9M | $245.8M | 20.4% | | Professional Services Revenue | $55.7M | $52.1M | 6.9% | | Gross Profit | $261.4M | $212.9M | 22.8% | | Loss from Operations | ($37.8M) | ($45.4M) | (16.7%) | | Net Loss | ($48.4M) | ($47.5M) | 1.9% | Key Operating Metrics (as of Dec 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Number of customers | 3,723 | 3,510 | | Subscription and support revenue retention rate | 95.0% | 94.7% | | Subscription and support revenue retention rate including add-ons | 109.5% | 113.0% | | Customers with ACV > $100k | 847 | 652 | | Customers with ACV > $150k | 419 | 285 | - The COVID-19 pandemic resulted in an expense reduction of approximately $16.7 million in 2020 due to travel restrictions and the conversion of marketing events to virtual formats[219] - Cash provided by operating activities was $33.2 million in 2020, an increase from $30.9 million in 2019. The company's principal sources of liquidity as of December 31, 2020, were cash, cash equivalents, and marketable securities totaling $530.0 million[257][259] Quantitative and Qualitative Disclosures about Market Risk Market risks include foreign currency, inflation, and interest rate sensitivity, with a $1.6 million impact from a 100-basis point rate increase - Primary market risks include foreign currency fluctuations, inflation, and interest rate changes[279] - Foreign currency transaction losses were $(329 thousand) in 2020, compared to $(609 thousand) in 2019. The company does not currently use derivatives for hedging[280] - As of December 31, 2020, an immediate 100-basis point increase in interest rates would cause a $1.6 million market value reduction in the company's investment portfolio[285] - The $345.0 million in convertible senior notes have a fixed annual interest rate of 1.125%, so there is no direct financial exposure to interest rate changes on this debt, though its fair value fluctuates with market rates[286] Financial Statements and Supplementary Data Audited consolidated financial statements for 2020 are presented, with an unqualified opinion from Ernst & Young LLP on financial statements and internal controls Consolidated Balance Sheet Highlights (As of Dec 31, 2020) | Category | Amount (in thousands) | | :--- | :--- | | Total Assets | $707,006 | | Cash and cash equivalents | $322,831 | | Marketable securities | $207,207 | | Total Liabilities | $642,729 | | Deferred revenue (current & non-current) | $244,884 | | Convertible senior notes, net | $289,490 | | Total Stockholders' Equity | $64,277 | Consolidated Statement of Operations (Year Ended Dec 31, 2020) | Metric | Amount (in thousands) | | :--- | :--- | | Total Revenue | $351,594 | | Gross Profit | $261,417 | | Loss from Operations | $(37,802) | | Net Loss | $(48,398) | | Net Loss per Share (Basic & Diluted) | $(1.00) | - The independent auditor, Ernst & Young LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of the company's internal control over financial reporting as of December 31, 2020[292][304] - The company identified and corrected immaterial misstatements in previously issued financial statements related to lease accounting under Topic 842, with revisions reflected in this report[334] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[449] Controls and Procedures Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2020 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[452] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2020, based on the COSO 2013 framework[453] - No changes in internal control over financial reporting occurred during the fourth quarter of 2020 that materially affected, or are reasonably likely to materially affect, these controls[454] Other Information The Compensation Committee approved the 2021 Short-Term Incentive Plan for executive officers, linking bonuses to performance metrics - The Compensation Committee approved the 2021 Short-Term Incentive Plan for executive officers on February 15, 2021[455] - The plan allows for cash bonuses based on performance metrics like revenue growth, operating cash flow, or operating loss, with target awards set as a percentage of base salary[455] Part III Directors, Executive Officers, Corporate Governance, Compensation, and Principal Accountant Fees Information on directors, executive officers, governance, compensation, and accountant fees is incorporated by reference from the 2021 Proxy Statement - Information required for Items 10, 11, 12, 13, and 14 is incorporated by reference from the Registrant's Proxy Statement for the 2021 Annual Meeting of Stockholders[9] - Biographical information for key executive officers, including CEO Martin J. Vanderploeg, COO Julie Iskow, and CFO J. Stuart Miller, is provided[459][460][462] Part IV Exhibits and Financial Statement Schedules This section lists all exhibits filed with the Form 10-K, including corporate governance documents and certifications - This section lists all exhibits filed with the Form 10-K, including corporate governance documents, material contracts, and SEC-required certifications[475] - Financial statement schedules have been omitted because they are either not required or the relevant information is already included in the consolidated financial statements or notes[475]