Workiva (NYSE:WK) Surprises With Q4 Sales But Customer Growth Slows Down

Full Report / February 21, 2023
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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.

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

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 platform automatically gathers and updates data from various internal company sources like accounting software or spreadsheets and joins it together in the cloud, removing the need for accounting teams to do it manually. Workiva users can then connect the data directly to financial, regulatory, and performance reports and presentations and know that they are always using the correct, approved and most up-to-date, version of it. Workiva's target market is enterprises and big institutions that have large volumes of data distributed across various sources and a lot of reporting requirements at the same time.

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.

Other providers of financial management software solutions include Blackline (NASDAQ:BL), and Oracle (NYSE:ORCL).

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.

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

Product Success

One of the best things about software as a service businesses (and a reason why they trade at such high multiples) is that customers tend to spend more with the company over time.

Workiva Net Revenue Retention Rate

Workiva's net revenue retention rate, an important measure of how much customers from a year ago were spending at the end of the quarter, was at 109% in Q4. That means even if they didn't win any new customers, Workiva would have grown its revenue 8.5% year on year. Significantly up from the last quarter, this a decent retention rate and it shows us that not only Workiva's customers stick around but at least some of them get increasing value from its software over time.


What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Workiva's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 76.1% in Q4.

Workiva Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.76 left to spend on developing new products, marketing & sales and the general administrative overhead. This is a good gross margin that allows companies like Workiva to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity. It is good to see that the gross margin is staying stable which indicates that Workiva is doing a good job controlling costs and is not under pressure from competition to lower prices.

Cash Is King

If you have followed StockStory for a while, you know that we put an emphasis on cash flow. Why, you ask? We believe that in the end cash is king, as you can't use accounting profits to pay the bills. Workiva burned through $2.5 million in Q4, with cash flow turning negative year on year.

Workiva Free Cash Flow

Workiva has generated $7.88 million in free cash flow over the last twelve months, 1.46% of revenues. This FCF margin is a result of Workiva asset lite business model, and provides it with at least some cash to invest in the business without depending on capital markets.

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 give us confidence that Workiva has the resources it needs to pursue a high growth business strategy.

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, this quarter's results were mixed but generally fine. The company is flat on the results and currently trades at $85.2 per share.

Is Now The Time?

When considering Workiva, investors should take into account its valuation and business qualities, as well as what happened in the latest quarter. Although Workiva is not a bad business, it probably wouldn't be one of our picks. Its revenue growth has been solid, though we don't expect it to maintain historical growth rates.

The market is certainly expecting long term growth from Workiva given its price to sales ratio based on the next twelve months is 7.3x. We don't really see a big opportunity in the stock at the moment, but in the end beauty is in the eye of the beholder. And if you like the company, it seems that Workiva doesn't trade at a completely unreasonable price point.

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