Enterprise software company Workiva (NYSE: WK) announced its first-quarter results after the market closed on May 4. Workiva beat its guidance for both revenue and earnings, producing a much smaller loss compared to the prior-year period. But the company's guidance called for a slowdown in growth, driven, in part, by its push to win enterprise-wide contracts. Here's what investors need to know about Workiva's first-quarter results.
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Workiva results: The raw numbers
Data source: Workiva.
Image source: Workiva.
What happened with Workiva this quarter?
Workiva produced more revenue and a smaller loss than its guidance called for.
- Workiva had 2,825 customers at the end of the quarter, gaining 268 customers over the past year.
- Subscription and support revenue rose 17.7% year over year, to $39.5 million, while professional services revenue jumped 12.7%, to $12.4 million.
- Workiva's revenue retention rate was 95.1% excluding add-on revenue, and 106.6% including add-on revenue. Change in seats purchased and seat prices for existing customers is considered add-on revenue.
- GAAP operating expenses were flat year over year, with higher research and development (R&D) spending offset by lower sales and marketing spending. This, along with higher revenue, drove the improvement in Workiva's bottom line.
- Operating cash flow was $2.58 million, up from a loss of $19.08 million in the prior-year period.
Workiva provided the following guidance for the second quarter and full year:
- Second-quarter revenue between $48.1 million and $48.6 million compared to $43 million in the prior-year period.
- Second-quarter non-GAAP earnings per share (EPS) loss between $0.20 and $0.21.
- Full-year revenue between $204 million and $206 million compared to $179 million in 2016.
- Full-year non-GAAP EPS loss between $0.64 and $0.69.
What management had to say
Workiva CEO Matt Rizai pointed to the company's guidance-beating performance: "We posted strong results in the first quarter, highlighted by 16.5% revenue growth over the same quarter last year. We outperformed our guidance for quarterly revenue, operating loss and loss per share."
Rizai emphasized the company's platform strategy:
Workiva outperformed its guidance during the first quarter, but its outlook for the second quarter calls for a slowdown in growth and a fairly large non-GAAP loss. Workiva expects revenue to grow by about 12.5% year over year at the midpoint of its guidance range.
Workiva is working to win more enterprise-wide contracts for its Wdesk product, and the slowing revenue growth is partly a reflection of that shift. Investors won't accept slowing revenue growth forever, though, so the company will need to pick up the pace at some point down the road.
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