Enterprise software company Workiva (NYSE: WK) announced its second-quarter results after the market closed on August 3. Workiva beat its own guidance, much like it did during the first quarter, and both GAAP and non-GAAP losses shrank on year-over-year basis. The company does expect revenue growth to slow during the third quarter, in part due to its platform strategy and its push to win enterprisewide contracts. Here's what investors need to know about Workiva's second-quarter results.
Workiva results: The raw numbers
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What happened with Workiva this quarter?
- Workiva had 2,908 customers at the end of the second quarter, gaining 286 customers over the past year and 83 customers since the end of the first quarter.
- Subscription and support revenue rose 17.2% year over year to $41.0 million, while professional services revenue jumped 4.6% to $8.4 million.
- Workiva's revenue retention rate was 96.1% excluding add-on revenue, and 106% including add-on revenue. This compares to 95.1% and 106.6%, respectively, during the first quarter. Change in seats purchased and seat prices for existing customers is considered add-on revenue.
- GAAP operating expenses grew by 7.8% year over year, with a 15.6% increase in research and development spending partially offset by a slight decline in sales and marketing spending.
- Operating cash flow was $4.0 million, up from a loss of $4.0 million during the prior-year period.
Workiva provided the following guidance for the third quarter and the full year:
- Third-quarter revenue is expected between $50.4 million and $50.8 million, up from $44.7 million in the prior-year period.
- Third-quarter non-GAAP net loss between $0.29 and $0.30 per share.
- Full-year revenue between $205.0 million and $206.0 million, up from $178.6 million in 2016.
- Full-year non-GAAP net loss between $0.62 and $0.64 per share.
What management had to say
Workiva CEO Matt Rizai emphasized the company's platform strategy:
Workiva's revenue growth slowed down a bit during the second quarter compared to the first quarter, but revenue still came in above the company's guidance. Workiva boosted its full-year guidance slightly as well, adding $1 million to the low-end of its revenue guidance and reducing its expectations for non-GAAP net loss from a previous range of $0.64 to $0.69 per share.
Workiva's platform strategy and push to win enterprisewide contracts is slowing down growth in the short-term. The company recently announced data integration between Wdesk and more than 100 cloud and on-premise application, broadening the appeal of its platform. The company is betting that this platform push will pay dividends in the future, even if it means lackluster growth in the present.
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