2343

Workiva (NYSE:WK) Exceeds Q1 Expectations But Stock Drops 10.8%


Kayode Omotosho /
2022/05/03 4:41 pm EDT
Add to Watchlist

Financial and compliance reporting software company Workiva (NYSE:WK) reported results ahead of analyst expectations in the Q1 FY2022 quarter, with revenue up 24.4% year on year to $129.6 million. Guidance for the full year also exceeded estimates, however the guidance for the next quarter was less impressive, coming in at $126 million, 1.36% below analyst estimates. Workiva made a GAAP loss of $18.4 million, down on its loss of $7.32 million, in the same quarter last year.

Is now the time to buy Workiva? Access our full analysis of the earnings results here, it's free.

Workiva (WK) Q1 FY2022 Highlights:

  • Revenue: $129.6 million vs analyst estimates of $127.4 million (1.76% beat)
  • EPS (non-GAAP): -$0.05 vs analyst estimates of -$0.15 ($0.10 beat)
  • Revenue guidance for Q2 2022 is $126 million at the midpoint, below analyst estimates of $127.7 million
  • The company reconfirmed revenue guidance for the full year, at $535 million at the midpoint
  • Free cash flow was negative $1.46 million, down from positive free cash flow of $8.16 million in previous quarter
  • Net Revenue Retention Rate: 109%, in line with previous quarter
  • Customers: 4,408, up from 4,315 in previous quarter
  • Gross Margin (GAAP): 76.1%, down from 77.2% same quarter last year

"The Workiva team generated strong revenue for the first quarter which resulted in growth of 26.1% in subscription & support revenue and 24.4% in total revenue," said Marty Vanderploeg, Chief Executive Officer.

Founded in 2010, Workiva (NYSE:WK) offers software as a service product that makes financial and compliance reporting easier, especially for publicly traded corporations.

The demand for software platforms that automate compliances processes is rising as keeping up with the latest financial reporting regulations and standards is difficult and expensive, especially as companies increasingly operate across several geographical regions with varying rules.

Sales Growth

As you can see below, Workiva's revenue growth has been strong over the last year, growing from quarterly revenue of $104.2 million, to $129.6 million.

Workiva Total Revenue

This quarter, Workiva's quarterly revenue was once again up a very solid 24.4% year on year. On top of that, revenue increased $8.89 million quarter on quarter, a solid improvement on the $8.09 million increase in Q4 2021. Happily, that's a slight re-acceleration of growth.

Guidance for the next quarter indicates Workiva is expecting revenue to grow 19.3% year on year to $126 million, slowing down from the 25.9% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 18.6% over the next twelve months.

There are others doing even better than Workiva. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 150% since the IPO last December. You can find it on our platform for free.

Customer Growth

You can see below that Workiva reported 4,408 customers at the end of the quarter, an increase of 93 on last quarter. That is a little slower customer growth than what we are used to seeing lately, suggesting that the customer acquisition momentum is slowing a little bit.

Workiva Customers

Key Takeaways from Workiva's Q1 Results

With a market capitalization of $5.02 billion Workiva is among smaller companies, but its more than $523.5 million in cash and positive free cash flow over the last twelve months give us confidence that Workiva has the resources it needs to pursue a high growth business strategy.

Workiva topped analysts’ revenue expectations this quarter, even if just narrowly. And we were also glad to see good revenue growth. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations and there was a slowdown in customer growth. Overall, this quarter's results could have been better. The company is down 10.8% on the results and currently trades at $84 per share.

Workiva may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.