Workiva (NYSE:WK) Reports Q3 In Line With Expectations But Guidance Underwhelms

Kayode Omotosho /
2022/11/02 4:38 pm EDT

Financial and compliance reporting software company Workiva (NYSE:WK) reported results in line with analyst expectations in Q3 FY2022 quarter, with revenue up 17.8% year on year to $132.8 million. However, guidance for the next quarter was less impressive, coming in at $139.4 million at the midpoint, being 1.32% below analyst estimates. Workiva made a GAAP loss of $29.6 million, down on its loss of $6.56 million, in the same quarter last year.

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Workiva (WK) Q3 FY2022 Highlights:

  • Revenue: $132.8 million vs analyst estimates of $132.5 million (small beat)
  • EPS (non-GAAP): -$0.15 vs analyst estimates of -$0.26
  • Revenue guidance for Q4 2022 is $139.4 million at the midpoint, below analyst estimates of $141.2 million
  • Free cash flow of $3.83 million, down 52.1% from previous quarter
  • Net Revenue Retention Rate: 107%, in line with previous quarter
  • Customers: 5,541, up from 5,381 in previous quarter
  • Gross Margin (GAAP): 75.5%, down from 76.5% same quarter last year

"We are pleased with our third quarter 2022 results, delivering revenue growth near the high end of our quarterly guidance," 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 $88 million in Q3 FY2020, to $132.8 million.

Workiva Total Revenue

This quarter, Workiva's quarterly revenue was once again up 17.8% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $1.3 million in Q3, compared to $1.87 million in Q2 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 15.4% year on year to $139.4 million, slowing down from the 28.7% 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 17.4% over the next twelve months.

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Customer Growth

You can see below that Workiva reported 5,541 customers at the end of the quarter, an increase of 160 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 Q3 Results

With a market capitalization of $3.89 billion Workiva is among smaller companies, but its more than $433 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

This quarter's results were mostly in line with Wall St's expectations. On the other hand, it was unfortunate to see that the revenue guidance missed analysts' expectations and there was a slowdown in customer growth. Overall, it seems to us that this was a complicated quarter for Workiva. The company is down 3% on the results and currently trades at $65.77 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.

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