Workiva's (NYSE:WK) Q1 Earnings Results: Revenue In Line With Expectations, Next Quarter Growth Looks Optimistic

Petr Huřťák /
2023/05/02 4:22 pm EDT

Financial and compliance reporting software company Workiva (NYSE:WK) reported results in line with analyst expectations in Q1 FY2023 quarter, with revenue up 15.8% year on year to $150.2 million. The company expects that next quarter's revenue would be around $153.5 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. Workiva made a GAAP loss of $46.2 million, down on its loss of $18.5 million, in the same quarter last year.

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Workiva (WK) Q1 FY2023 Highlights:

  • Revenue: $150.2 million vs analyst estimates of $149.5 million (small beat)
  • EPS (non-GAAP): -$0.12 vs analyst estimates of -$0.22 (45% beat)
  • Revenue guidance for Q2 2023 is $153.5 million at the midpoint, above analyst estimates of $152.5 million
  • The company reconfirmed revenue guidance for the full year, at $627 million at the midpoint
  • Free cash flow of $5.37 million, up from negative free cash flow of $2.5 million in previous quarter
  • Net Revenue Retention Rate: 109%, in line with previous quarter
  • Customers: 5,754, up from 5,664 in previous quarter
  • Gross Margin (GAAP): 74.4%, down from 76.2% same quarter last year

"The Workiva team delivered a solid quarter and continued to execute at a high level, resulting in subscription revenue growth of 21%," said Julie Iskow, President & 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 $104.2 million in Q1 FY2021, to $150.2 million.

Workiva Total Revenue

This quarter, Workiva's quarterly revenue was once again up 15.8% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $6.39 million in Q1, compared to $11 million in Q4 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 16.7% year on year to $153.5 million, slowing down from the 24.6% 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 16.4% over the next twelve months.

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Customer Growth

You can see below that Workiva reported 5,754 customers at the end of the quarter, an increase of 90 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 down.

Workiva Customers

Key Takeaways from Workiva's Q1 Results

With a market capitalization of $4.99 billion Workiva is among smaller companies, but its more than $439.8 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 provide next quarter revenue outlook exceeding analysts’ expectations. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see the slowdown in customer growth and gross margin deteriorated a little. Overall, it seems to us that this was a mixed quarter for Workiva. The company is flat on the results and currently trades at $91.02 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.