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Workiva (WK) Posts Wider Loss in Q4, Wdesk Adoption Strong

Workiva Inc. WK reported fourth-quarter 2017 loss of 19 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 22 cents. However, the figure was significantly wider than the year-ago quarter’s loss of 9 cents.

Total revenues increased 17.5% year over year to $54.5 million, slightly better than the Zacks Consensus Estimate of $53.3 million. The company continued to add Wdesk users. Management stated that Non-SEC use cases now comprise 54% of its subscription bookings.

Subscription and support (S&S) revenues (83.6% of total revenues) increased 18.8% to $45.5 million. Almost 50% of the S&S revenue growth came from new customers, added in the last 12 months. The remaining 50% of the increase came from deeper penetration of the company’s products into existing customer base.

Professional services (16.4% of total revenues) revenues were up 11.3% to almost $9 million.
 

Workiva Inc. Price, Consensus and EPS Surprise

 

Workiva Inc. Price, Consensus and EPS Surprise | Workiva Inc. Quote

 

Workiva is spending heavily on developing its enterprise wide Wdesk platform. Investments are focused on additional functionality, greater scalability, data connectors, talent training, packaging, partnerships and other initiatives. These are expected to drive top-line growth in the long haul.

Expanding Customer Base Drives Growth

Workiva had 3,063 customers as of Dec 31, 2017, a net increase of 291 customers from Dec 31, 2016. Exiting the quarter, the company had 324 customers with an annual contract value (ACV) of more than $100,000, up 37% from 236 customers at the end of the year-ago quarter.

Moreover, the company had 146 customers with an ACV of more than $150,000, up 52% from 96 customers at the end of the year-ago quarter.

Further, Workiva's revenue-retention rate (excluding add-on revenues) was 96%. Including add-on revenues, retention rate was 107.6% as of Dec 31.

Operating Details

Non-GAAP gross margin contracted 90 basis points (bps) from the year-ago quarter to 71.1%.

S&S gross margin contracted 20 bps to 81.2%. This was primarily due to an increase in employee headcount and compensation to support initiatives in new markets. Professional services gross margin was 19.9%, down from 27.1% in the year-ago quarter.

Research & development (R&D) expenses as percentage of revenues increased 330 bps. Sales & marketing (S&M) expenses as percentage of revenues increased 80 bps. General & administrative (G&A) expenses as percentage of revenues increased 240 bps on a year-over-year basis.

The higher operating expenses reflected increases in compensation, travel and consulting expenses and continuing investment on developing the platform.

Operating loss was $8.4 million, wider than loss of $3.7 million reported in the year-ago quarter.

Balance Sheet & Cash Flow

Workiva exited the quarter with cash and cash equivalents of $76.7 million, a decrease of $1.1 million from the previous quarter. Net cash used by operating activities was $6.2 million, compared with cash provided of $5.2 million in the year-ago quarter.

Guidance

For first-quarter 2018, total revenues are anticipated between $57.3 million and $57.8 million. Management expects ASC 606 will have an unfavorable impact of approximately $2 million on professional services revenues in the first-quarter.

Non-GAAP operating loss is expected in the range of $7.8-$8.3 million. Non-GAAP net loss is expected in the range of 19-20 cents per share.

For 2018, Workiva forecasts total revenues between $234 million and $236 million. Non-GAAP operating loss is expected in the range of $32-$34 million.

Non-GAAP net loss is projected in the range of 77–82 per share.

Zacks Rank & Key Picks

Workiva carries a Zacks Rank #3 (Hold).

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