Workiva (WK)

Cloud reporting platform Workiva (NYSE:WK) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 20.8% year on year to $224.2 million. Guidance for next quarter’s revenue was better than expected at $235 million at the midpoint, 1.6% above analysts’ estimates. Its non-GAAP profit of $0.55 per share was 42.7% above analysts’ consensus estimates.

Company Overview

Nicknamed "the Excel killer" by some finance professionals for its ability to eliminate spreadsheet chaos, Workiva (NYSE:WK) provides a cloud-based platform that enables organizations to streamline financial reporting, ESG, and compliance processes with connected data and automation.

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.

Workiva competes with various software providers depending on the solution area, including financial reporting tools from Donnelley Financial Solutions (NYSE:DFIN) and Toppan Merrill, ESG reporting platforms like Enablon and Sphera, and GRC solutions from ServiceNow (NYSE:NOW), Diligent, and IBM (NYSE:IBM).

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Workiva grew its sales at a decent 20.1% compounded annual growth rate. Its growth was slightly above the average software company and shows its offerings resonate with customers.

Long-term growth is the most important, but within software, a half-decade historical view may miss new innovations or demand cycles. Workiva’s annualized revenue growth of 18% over the last two years is below its five-year trend, but we still think the results were good.

This quarter, Workiva reported robust year-on-year revenue growth of 20.8%, and its $224.2 million of revenue topped Wall Street estimates by 2.4%. Company management is currently guiding for a 17.6% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 14.9% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and suggests its products and services will see some demand headwinds.

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Workiva’s billings punched in at $260 million in Q3, and over the last four quarters, its growth was impressive as it averaged 21.2% year-on-year increases. This performance aligned with its total sales growth, indicating robust customer demand. The high level of cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth.

Workiva reported 6,541 customers at the end of the quarter, a sequential increase of 74. That’s roughly in line with what we’ve observed over the last year, confirming that the company is maintaining its sales momentum.

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

Workiva is efficient at acquiring new customers, and its CAC payback period checked in at 41.7 months this quarter. The company’s relatively fast recovery of its customer acquisition costs gives it the option to accelerate growth by increasing its sales and marketing investments.

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

Workiva’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 113% in Q3. This means Workiva would’ve grown its revenue by 12.5% even if it didn’t win any new customers over the last 12 months.

Trending up over the last year, Workiva has a good net retention rate, proving that customers are satisfied with its software and getting more value from it over time, which is always great to see.

For software companies like Workiva, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.

Workiva’s robust unit economics are better than the broader software industry, an output of its asset-lite business model and pricing power. They also enable the company to fund large investments in new products and sales during periods of rapid growth to achieve outsized profits at scale. As you can see below, it averaged an excellent 77.5% gross margin over the last year. That means Workiva only paid its providers $22.47 for every $100 in revenue.

The market not only cares about gross margin levels but also how they change over time because expansion creates firepower for profitability and free cash generation. Workiva has seen gross margins improve by 2.4 percentage points over the last 2 year, which is solid in the software space.

This quarter, Workiva’s gross profit margin was 79.3%, marking a 2.8 percentage point increase from 76.5% in the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs have been stable and it isn’t under pressure to lower prices.

Workiva’s expensive cost structure has contributed to an average operating margin of negative 7.5% over the last year. Unprofitable, high-growth software companies require extra attention because they spend heaps of money to capture market share. As seen in its fast historical revenue growth, this strategy seems to have worked so far, but it’s unclear what would happen if Workiva reeled back its investments. Wall Street seems to think it will face some obstacles, and we tend to agree.

Over the last two years, Workiva’s expanding sales gave it operating leverage as its margin rose by 2.8 percentage points. Still, it will take much more for the company to reach long-term profitability.

In Q3, Workiva generated a negative 1.5% operating margin.

If you’ve followed StockStory for a while, you know 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 has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 15.4% over the last year, slightly better than the broader software sector.

Workiva’s free cash flow clocked in at $46.06 million in Q3, equivalent to a 20.5% margin. This result was good as its margin was 10.5 percentage points higher than in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends are more important.

Over the next year, analysts predict Workiva’s cash conversion will fall. Their consensus estimates imply its free cash flow margin of 15.4% for the last 12 months will decrease to 12.5%.

One of the best ways to mitigate bankruptcy risk is to hold more cash than debt.

Workiva is a well-capitalized company with $856.8 million of cash and $788.3 million of debt on its balance sheet. This $68.52 million net cash position gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We were impressed by how significantly Workiva blew past analysts’ billings expectations this quarter. We were also glad its EPS guidance for next quarter trumped Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 7.1% to $88.02 immediately after reporting.

Updated: December 4, 2025 at 9:12 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Workiva.

Workiva has a few positive attributes, but it doesn’t top our wishlist. First off, its revenue growth was solid over the last five years. And while Workiva’s expanding operating margin shows it’s becoming more efficient at building and selling its software, its splendid ARR growth shows it’s securing more long-term contracts and becoming a more predictable business.

Workiva’s price-to-sales ratio based on the next 12 months is 5.5x. This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $106.90 on the company (compared to the current share price of $92.16).