Workiva (NYSE:WK) Surprises With Q4 Sales But Full-Year Guidance Underwhelms

Full Report / February 20, 2024

Financial and compliance reporting software company Workiva (NYSE:WK) beat analysts' expectations in Q4 FY2023, with revenue up 15.9% year on year to $166.7 million. The company expects next quarter's revenue to be around $174 million, in line with analysts' estimates. It made a non-GAAP profit of $0.30 per share, improving from its profit of $0.08 per share in the same quarter last year.

Workiva (WK) Q4 FY2023 Highlights:

  • Revenue: $166.7 million vs analyst estimates of $164.3 million (1.5% beat)
  • EPS (non-GAAP): $0.30 vs analyst estimates of $0.21 (40.3% beat)
  • Revenue Guidance for Q1 2024 is $174 million at the midpoint, roughly in line with what analysts were expecting
  • Management's revenue guidance for the upcoming financial year 2024 is $720 million at the midpoint, missing analyst estimates by 1.5% and implying 14.3% growth (vs 17.2% in FY2023)
  • Free Cash Flow of $23.95 million, up 69.9% from the previous quarter
  • Net Revenue Retention Rate: 110%, in line with the previous quarter
  • Customers: 6,034, up from 5,945 in the previous quarter
  • Gross Margin (GAAP): 77.3%, up from 76.1% in the same quarter last year
  • Market Capitalization: $5.07 billion

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.

Compliance Software

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 solid over the last two years, growing from $120.8 million in Q4 FY2021 to $166.7 million this quarter.

Workiva Total Revenue

This quarter, Workiva's quarterly revenue was once again up 15.9% year on year. We can see that Workiva's revenue increased by $8.48 million quarter on quarter, which is a solid improvement from the $3.15 million increase in Q3 2023. Shareholders should applaud the acceleration of growth.

Next quarter's guidance suggests that Workiva is expecting revenue to grow 15.9% year on year to $174 million, in line with the 15.8% year-on-year increase it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to be $720 million at the midpoint, growing 14.3% year on year compared to the 17.1% increase in FY2023.

Customer Growth

Workiva reported 6,034 customers at the end of the quarter, an increase of 89 from the previous quarter. That's in line with the customer growth we've observed over the last couple of quarters, suggesting that the company can maintain its current sales momentum.

Workiva Customers

Product Success

One of the best parts about the software-as-a-service business model (and a reason why SaaS companies trade at such high valuation multiples) is that customers typically spend more on a company's products and services over time.

Workiva Net Revenue Retention Rate

Workiva's net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 110% in Q4. This means that even if Workiva didn't win any new customers over the last 12 months, it would've grown its revenue by 10%.

Despite its recent drop, Workiva still has a decent net retention rate, showing us that its customers not only tend to stick around but also 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's left after paying for servers, licenses, technical support, and other necessary running expenses, was 77.3% in Q4.

Workiva Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.77 left to spend on developing new products, sales and marketing, and general administrative overhead. Significantly up from the last quarter, Workiva's impressive gross margin allows it to fund large investments in product and sales during periods of rapid growth and achieve profitability when reaching maturity.

Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Workiva's free cash flow came in at $23.95 million in Q4, turning positive over the last year.

Workiva Free Cash Flow

Workiva has generated $68.75 million in free cash flow over the last 12 months, or 10.9% of revenue. This FCF margin stems from its asset-lite business model and enables it to reinvest in its business without depending on the capital markets.

Key Takeaways from Workiva's Q4 Results

It was great to see Workiva improve its gross margin this quarter. We were also happy its revenue narrowly outperformed Wall Street's estimates. On the other hand, its full-year revenue guidance was below expectations and its net revenue retention decreased. Overall, this was a mixed quarter for Workiva. The stock is flat after reporting and currently trades at $94.19 per share.

Is Now The Time?

When considering an investment in Workiva, investors should take into account its valuation and business qualities as well as what's happened in the latest quarter.

We think Workiva is a solid business. We'd expect growth rates to moderate from here, but its . On top of that, its customers spend noticeably more each year, which is great to see and its strong gross margins suggest it can operate profitably and sustainably.

The market is certainly expecting long-term growth from Workiva given its price-to-sales ratio based on the next 12 months is 7.0x. There are definitely things to like about Workiva and there's no doubt it's a bit of a market darling, at least for some. But when considering the company against the backdrop of the software landscape, it seems there's a lot of optimism already priced in. We wonder whether there might be better opportunities elsewhere right now.

Wall Street analysts covering the company had a one-year price target of $115.85 per share right before these results (compared to the current share price of $94.19).

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