Workiva (NYSE:WK) Q4 Sales Beat Estimates But Customer Growth Slows Down

Adam Hejl /
2023/02/21 4:18 pm EST

Financial and compliance reporting software company Workiva (NYSE:WK) reported results ahead of analyst expectations in the Q4 FY2022 quarter, with revenue up 19.1% year on year to $143.8 million. The company expects that next quarter's revenue would be around $149.5 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. Workiva made a GAAP loss of $13.9 million, improving on its loss of $14.3 million, in the same quarter last year.

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Workiva (WK) Q4 FY2022 Highlights:

  • Revenue: $143.8 million vs analyst estimates of $139.4 million (3.17% beat)
  • EPS (non-GAAP): $0.08 vs analyst estimates of -$0.10 ($0.18 beat)
  • Revenue guidance for Q1 2023 is $149.5 million at the midpoint, roughly in line with what analysts were expecting
  • Management's revenue guidance for upcoming financial year 2023 is $625 million at the midpoint, in line with analyst expectations and predicting 16.2% growth (vs 21.5% in FY2022)
  • Free cash flow was negative $2.5 million, down from positive free cash flow of $3.83 million in previous quarter
  • Net Revenue Retention Rate: 109%, in line with previous quarter
  • Customers: 5,664, up from 5,541 in previous quarter
  • Gross Margin (GAAP): 76.1%, in line with same quarter last year

"The Workiva team once again delivered strong financial results and outperformed against our key operating metrics. Our strong performance resulted in a 2022 revenue growth rate of 23% in Subscription & Support and 21% 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 two years, growing from quarterly revenue of $93.8 million in Q4 FY2020, to $143.8 million.

Workiva Total Revenue

This quarter, Workiva's quarterly revenue was once again up 19.1% year on year. We can see that the company increased revenue by $11 million quarter on quarter. That's a solid improvement on the $1.3 million increase in Q3 2022, so shareholders should appreciate the acceleration of growth.

Guidance for the next quarter indicates Workiva is expecting revenue to grow 15.3% year on year to $149.5 million, slowing down from the 24.4% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $625 million at the midpoint, growing 16.2% compared to 21.3% increase in FY2022.

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Customer Growth

You can see below that Workiva reported 5,664 customers at the end of the quarter, an increase of 123 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 Q4 Results

With a market capitalization of $4.64 billion Workiva is among smaller companies, but its more than $430.8 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

It was good to see Workiva outperform Wall St’s revenue expectations this quarter. And we were also glad to see the improvement in net revenue retention rate. On the other hand, it was unfortunate to see the slowdown in customer growth and the revenue guidance for next year indicated a bit of a slowdown. Overall, the results were mixed but generally fine. The company is flat on the results and currently trades at $85.2 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.