Workiva's (NYSE:WK) Q2 Sales Top Estimates

Max Juang /
2023/08/03 4:42 pm EDT

Financial and compliance reporting software company Workiva (NYSE:WK) announced better-than-expected results in Q2 FY2023, with revenue up 17.8% year on year to $155 million. The company also expects next quarter's revenue to be around $155.5 million, roughly in line with expectations. Workiva made a GAAP loss of $20.9 million, improving from its loss of $28.9 million in the same quarter last year.

Is now the time to buy Workiva? Find out by accessing our full research report free of charge.

Workiva (WK) Q2 FY2023 Highlights:

  • Revenue: $155 million vs analyst estimates of $153.4 million (1.05% beat)
  • EPS (non-GAAP): $0.02 vs analyst estimates of -$0.08 ($0.10 beat)
  • Revenue Guidance for Q3 2023 is $155.5 million at the midpoint, below analyst estimates of $156.5 million
  • The company reconfirmed revenue guidance for the full year of $627 million at the midpoint
  • Free Cash Flow of $25.3 million, up from $5.37 million in the previous quarter
  • Net Revenue Retention Rate: 111%, in line with the previous quarter
  • Customers: 5,860, up from 5,754 in the previous quarter
  • Gross Margin (GAAP): 74.5%, down from 75.5% in the same quarter last year

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 $105.6 million in Q2 FY2021 to $155 million this quarter.

Workiva Total Revenue

This quarter, Workiva's quarterly revenue was once again up 17.8% year on year. However, its growth did slow down compared to last quarter as the company's revenue increased by just $4.83 million in Q2 compared to $6.39 million in Q1 2023. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.

Next quarter's guidance suggests that Workiva is expecting revenue to grow 17.1% year on year to $155.5 million, in line with the 17.9% year-on-year increase it recorded in the same quarter last year. Ahead of the earnings results announcement, the analysts covering the company were expecting sales to grow 16.4% over the next 12 months.

While most things went back to how they were before the pandemic, a few consumer habits fundamentally changed. One founder-led company is benefiting massively from this shift and is set to beat the market for years to come. The business has grown astonishingly fast, with 40%+ free cash flow margins, and its fundamentals are undoubtedly best-in-class. Still, its total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Customer Growth

Workiva reported 5,860 customers at the end of the quarter, an increase of 106 from the previous quarter. That's a little better customer growth than last quarter but a bit below what we've typically seen over the last year, suggesting that the company may be reinvigorating growth.

Workiva Customers

Key Takeaways from Workiva's Q2 Results

Sporting a market capitalization of $5.44 billion, Workiva is among smaller companies, but its more than $466.3 million in cash on hand and positive free cash flow over the last 12 months puts it in an attractive position to invest in growth.

It was great to see Workiva improve its net revenue retention rate this quarter. We were also glad that its customer growth accelerated. On the other hand, its revenue guidance for next quarter slightly missed estimates. Overall, this was a mixed quarter for Workiva. The stock is flat after reporting and currently trades at $103.4 per share.

So should you invest in Workiva right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research 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 50% 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 in this report.