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Workiva (NYSE:WK) Posts Better-Than-Expected Sales In Q2 But Quarterly Guidance Underwhelms


Adam Hejl /
2022/08/09 4:25 pm EDT

Financial and compliance reporting software company Workiva (NYSE:WK) announced better-than-expected results in the Q2 FY2022 quarter, with revenue up 24.5% year on year to $131.5 million. Guidance for the full year also exceeded estimates, however the guidance for the next quarter was less impressive, coming in at $132.5 million, 0.66% below analyst estimates. Workiva made a GAAP loss of $28.8 million, down on its loss of $9.51 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) Q2 FY2022 Highlights:

  • Revenue: $131.5 million vs analyst estimates of $126 million (4.36% beat)
  • EPS (non-GAAP): -$0.17 vs analyst estimates of -$0.26
  • Revenue guidance for Q3 2022 is $132.5 million at the midpoint, below analyst estimates of $133.4 million
  • The company reconfirmed revenue guidance for the full year, at $535 million at the midpoint
  • Free cash flow of $8.01 million, up from negative free cash flow of $1.46 million in previous quarter
  • Net Revenue Retention Rate: 108%, in line with previous quarter
  • Customers: 5,381 (including approximately 850 ParsePort ESEF customers), up from 4,408 in previous quarter
  • Gross Margin (GAAP): 75.4%, down from 76.7% same quarter last year

"Our second quarter subscription & support and total revenue exceeded market expectations and we once again beat the high end of our guidance in revenue and operating results," 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 $105.5 million, to $131.5 million.

Workiva Total Revenue

This quarter, Workiva's quarterly revenue was once again up a very solid 24.5% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $1.87 million in Q2, compared to $8.89 million in Q1 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates Workiva is expecting revenue to grow 17.5% year on year to $132.5 million, slowing down from the 27.9% 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 17.8% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Customer Growth

You can see below that Workiva reported 5,381 customers (including approximately 850 ParsePort ESEF customers) at the end of the quarter, an increase of 973 on last quarter. That is quite a bit better customer growth than last quarter and quite a bit above the typical customer growth we have seen lately, demonstrating that the business itself has good sales momentum. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is working very well.

Workiva Customers

Key Takeaways from Workiva's Q2 Results

With a market capitalization of $3.75 billion Workiva is among smaller companies, but its more than $428.9 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.

We were very impressed by Workiva’s very strong acceleration in customer growth this quarter. And we were also excited to see that it outperformed Wall St’s revenue expectations. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations and the revenue retention rate deteriorated a little. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company is flat on the results and currently trades at $68.52 per share.

Should you invest in Workiva 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.

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