Workiva Inc. (WK) Bundle
Understanding Workiva Inc. (WK) Revenue Streams
Understanding Workiva Inc.’s Revenue Streams
Workiva Inc. generates revenue primarily through two segments: subscription and support services, and professional services.
Breakdown of Primary Revenue Sources
- Subscription and Support Revenue: This accounts for the majority of total revenue.
- Professional Services Revenue: This includes consulting and implementation services.
Year-over-Year Revenue Growth Rate
For the three months ended September 30, 2024, total revenue was $185.6 million, reflecting a growth of 17.4% compared to $158.2 million in the same period in 2023. For the nine months ended September 30, 2024, total revenue increased to $538.8 million, up 16.3% from $463.4 million in 2023.
Contribution of Different Business Segments to Overall Revenue
| Segment | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | Percentage Change | YTD 2024 Revenue (in thousands) | YTD 2023 Revenue (in thousands) | Percentage Change |
|---|---|---|---|---|---|---|
| Subscription and Support | $171,035 | $143,421 | 19.3% | $486,749 | $409,857 | 18.8% |
| Professional Services | $14,586 | $14,754 | (1.1%) | $52,042 | $53,529 | (2.8%) |
| Total Revenue | $185,621 | $158,175 | 17.4% | $538,791 | $463,386 | 16.3% |
Analysis of Significant Changes in Revenue Streams
The increase in subscription and support revenue is attributed to strong demand and continued expansion of solutions across the customer base. In contrast, revenue from professional services has remained relatively flat, which is part of a strategic shift to transition consulting and other services to partners.
Overall, subscription and support revenue constituted 92.1% of total revenue in Q3 2024, compared to 90.7% in Q3 2023, indicating a growing reliance on this revenue stream .
A Deep Dive into Workiva Inc. (WK) Profitability
Profitability Metrics
Gross Profit Margin: As of September 30, 2024, the gross profit was $141.95 million for the three months ended September 30, 2024, compared to $119.82 million for the same period in 2023. This results in a gross profit margin of 76.5% for Q3 2024, up from 75.8% in Q3 2023.
Operating Profit Margin: The operating loss for the three months ended September 30, 2024, was ($21.78 million), leading to an operating margin of (11.8%). In comparison, the operating loss for the same period in 2023 was ($15.53 million), with an operating margin of (9.8%).
Net Profit Margin: The net loss for the three months ended September 30, 2024, was ($16.99 million), resulting in a net profit margin of (9.2%). For the same period in 2023, the net loss was ($56.27 million), yielding a net profit margin of (35.5%).
Trends in Profitability Over Time
Over the past year, the gross profit margin has shown modest improvement, while operating and net margins remain negative but improved in absolute terms. The significant reduction in net loss from ($56.27 million) in Q3 2023 to ($16.99 million) in Q3 2024 indicates progress in profitability despite ongoing operational challenges.
Comparison of Profitability Ratios with Industry Averages
The gross profit margin of 76.5% exceeds the industry average of approximately 70% for SaaS companies, indicating strong pricing power and cost management capabilities. However, the operating margin of (11.8%) and net margin of (9.2%) are below the industry averages of 10-20% and 5-15%, respectively, highlighting the need for improved operational efficiency.
Analysis of Operational Efficiency
The total operating expenses for the three months ended September 30, 2024, were $163.73 million, compared to $135.35 million in Q3 2023, marking a year-over-year increase of 21.0%. The breakdown of operating expenses is as follows:
| Operating Expense Type | Q3 2024 (in millions) | Q3 2023 (in millions) | Percentage Change |
|---|---|---|---|
| Research and Development | $48.43 | $41.75 | 16.0% |
| Sales and Marketing | $89.76 | $72.58 | 23.7% |
| General and Administrative | $25.55 | $21.02 | 21.5% |
| Total Operating Expenses | $163.73 | $135.35 | 21.0% |
The increase in operating expenses is primarily driven by higher spending in sales and marketing, which rose by 23.7%, reflecting the company's focus on customer acquisition and retention strategies. This increased cost structure has impacted overall profitability metrics, necessitating a balance between growth and cost management.
Overall, while the company has made strides in revenue growth, the persistent operating losses indicate that strategic adjustments are necessary to enhance profitability moving forward.
Debt vs. Equity: How Workiva Inc. (WK) Finances Its Growth
Debt vs. Equity: How Workiva Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, Workiva Inc. reported total outstanding long-term debt of $764.2 million. This includes $70.7 million in 2026 Notes and $693.5 million in 2028 Notes. The short-term debt is not explicitly listed but is typically included in current liabilities on the balance sheet.
Debt-to-Equity Ratio
The debt-to-equity ratio for Workiva Inc. as of September 30, 2024, is calculated as follows:
- Total Debt: $764.2 million
- Total Equity (Deficit): ($50.8 million)
- Debt-to-Equity Ratio: -15.03
This ratio indicates that the company has more debt than equity, which is significantly lower than the industry average of approximately 1.5 for technology firms.
Recent Debt Issuances
In August 2023, Workiva issued $702.0 million in 1.250% convertible senior notes due in 2028. The net proceeds from this issuance were $691.1 million, which were partially used to repurchase $273.8 million of 2026 Notes.
Credit Ratings
The credit ratings for Workiva's debt securities reflect the company's financial health and ability to meet obligations. As of September 30, 2024, the company's convertible notes had a fair value of $82.4 million for the 2026 Notes and $659.7 million for the 2028 Notes.
Balancing Debt Financing and Equity Funding
Workiva continues to balance its financing strategy through a combination of debt and equity. The company has issued common stock to raise capital, with $645.1 million in additional paid-in capital reported as of September 30, 2024. The recent $100 million share repurchase plan authorized in July 2024 indicates a strategic move to enhance shareholder value while managing its capital structure.
| Type of Debt | Amount ($ million) | Maturity Date | Interest Rate (%) |
|---|---|---|---|
| 2026 Notes | 70.7 | August 15, 2026 | 1.125 |
| 2028 Notes | 693.5 | August 15, 2028 | 1.250 |
| Total Debt | 764.2 |
As of September 30, 2024, Workiva Inc. maintains a strategic approach to financing through both debt instruments and equity funding, with a focus on managing its obligations while positioning for future growth.
Assessing Workiva Inc. (WK) Liquidity
Assessing Workiva Inc.'s Liquidity
As of September 30, 2024, the liquidity position of Workiva Inc. can be evaluated through its current and quick ratios, working capital trends, and cash flow statements.
Current and Quick Ratios
The current ratio, which measures the ability to cover short-term liabilities with short-term assets, is calculated as follows:
| Current Assets ($ thousands) | Current Liabilities ($ thousands) | Current Ratio |
|---|---|---|
| 776,400 | 196,000 | 3.96 |
The quick ratio, which excludes inventory from current assets, is similarly important:
| Quick Assets ($ thousands) | Current Liabilities ($ thousands) | Quick Ratio |
|---|---|---|
| 776,400 | 196,000 | 3.96 |
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, reflects the short-term financial health of the company. As of September 30, 2024, the working capital is:
| Current Assets ($ thousands) | Current Liabilities ($ thousands) | Working Capital ($ thousands) |
|---|---|---|
| 776,400 | 196,000 | 580,400 |
This indicates a strong buffer against short-term obligations, suggesting robust operational liquidity.
Cash Flow Statements Overview
Analyzing the cash flow statements provides insight into the company's operational efficiency across different activities:
| Cash Flow Activity | Q3 2024 ($ thousands) | Q3 2023 ($ thousands) | 9M 2024 ($ thousands) | 9M 2023 ($ thousands) |
|---|---|---|---|---|
| Operating Cash Flow | 18,906 | 14,991 | 43,736 | 46,533 |
| Investing Cash Flow | (49,629) | (109,026) | (58,496) | (182,044) |
| Financing Cash Flow | 8,675 | 301,220 | 5,868 | 300,281 |
| Net Cash Flow | (19,658) | 205,946 | (7,967) | 164,688 |
Potential Liquidity Concerns or Strengths
Despite the positive liquidity ratios, the net cash outflow in Q3 2024 indicates that while operational cash flow is positive, the company is investing heavily in marketable securities and acquisitions, which could raise liquidity concerns if not managed carefully. The cash used in investing activities was $49.6 million for Q3 2024, reflecting significant investments that may impact short-term liquidity.
Overall, Workiva Inc. maintains a solid liquidity position, characterized by a strong current ratio, positive working capital, and operational cash generation, despite ongoing investments that could affect cash reserves in the short term.
Is Workiva Inc. (WK) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key financial metrics such as the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratios, as well as stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is – (negative due to net losses). The company's net loss for the nine months ended September 30, 2024, was $46.2 million, resulting in a basic and diluted net loss per share of $0.84.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated using the most recent book value per share. As of September 30, 2024, the total stockholders' deficit was approximately ($50.8 million). The book value per share is – (negative).
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value is calculated as market capitalization plus total debt minus cash and cash equivalents. As of September 30, 2024, total cash, cash equivalents, and marketable securities were $776.4 million. The company has significant debt from convertible notes amounting to $693.5 million maturing in August 2028 and $70.7 million maturing in August 2026. The EBITDA for the nine months ended September 30, 2024, is – (negative due to losses).
Stock Price Trends
Over the last 12 months, the stock price has shown volatility. As of September 30, 2024, the stock was trading at approximately $14.50. The stock price has fluctuated from $10.00 to $20.00 during this period, indicating a significant range of investor sentiment.
Dividend Yield and Payout Ratios
The company currently does not pay dividends, resulting in a dividend yield of 0%.
Analyst Consensus on Stock Valuation
Analyst consensus as of October 2024 indicates a majority rating of Hold with a few analysts recommending Buy. The average target price set by analysts is approximately $15.00, suggesting a potential upside from the current trading price.
Valuation Summary Table
| Metric | Value |
|---|---|
| P/E Ratio | – (Negative) |
| P/B Ratio | – (Negative) |
| EV/EBITDA Ratio | – (Negative) |
| Current Stock Price | $14.50 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
| Average Analyst Target Price | $15.00 |
Key Risks Facing Workiva Inc. (WK)
Key Risks Facing Workiva Inc.
Overview of Internal and External Risks:
The company faces several internal and external risks that could impact its financial health. Key risks include:
- Industry Competition: The competitive landscape in the SaaS market is intense, with numerous players vying for market share. As of September 30, 2024, the company served over 6,200 customers, but competition from other SaaS providers remains a constant threat.
- Regulatory Changes: Changes in regulations related to financial reporting and compliance can impact operational processes and create additional costs. The company must adapt to evolving standards in financial and non-financial reporting.
- Market Conditions: Economic downturns and fluctuations in market demand can affect revenue growth. The company reported total revenue of $185.6 million for the three months ended September 30, 2024, a 17.4% increase from the previous year, but future growth may be hindered by market conditions.
Operational, Financial, or Strategic Risks:
Recent earnings reports highlight several operational and financial risks:
- Net Losses: The company incurred net losses of $16.99 million for the three months ended September 30, 2024, compared to a net loss of $56.27 million for the same period in 2023. Cumulative losses for the nine months ended September 30, 2024, were $46.23 million.
- Debt Levels: As of September 30, 2024, total outstanding debt included $70.7 million related to 2026 Notes and $693.5 million related to 2028 Notes. High debt levels may constrain financial flexibility in adverse conditions.
- Customer Retention Rates: The subscription and support revenue retention rate stood at 97.5% as of September 30, 2024, down from 97.7% the previous year, indicating potential challenges in maintaining customer loyalty.
Mitigation Strategies:
The company has implemented various strategies to mitigate risks, including:
- Investment in Customer Relationships: Focusing on enhancing customer service and support to improve retention rates and reduce churn.
- Product Development: Continuous investment in technology and infrastructure to maintain competitive advantage and meet evolving customer needs.
- Financial Management: Monitoring cash flow closely, with cash, cash equivalents, and marketable securities totaling $776.4 million as of September 30, 2024, to ensure liquidity and operational stability.
| Key Financial Metrics | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Revenue | $185.6 million | $158.2 million | 17.4% |
| Net Loss | $(16.99 million) | $(56.27 million) | –69.8% |
| Subscription Revenue Retention Rate | 97.5% | 97.7% | -0.2% |
| Outstanding Debt | $764.2 million | N/A | N/A |
| Cash and Equivalents | $776.4 million | N/A | N/A |
As the company navigates these risks, ongoing assessment and strategic adjustments will be essential to sustain growth and ensure financial health.
Future Growth Prospects for Workiva Inc. (WK)
Future Growth Prospects for Workiva Inc.
Workiva Inc. is poised for substantial growth driven by various strategic initiatives and market opportunities. Below are key insights into the company's growth prospects.
Analysis of Key Growth Drivers
- Product Innovations: The company has recently launched Workiva Carbon, a carbon accounting solution that supports organizations in measuring and reporting carbon emissions. This innovation is expected to enhance their ESG reporting capabilities.
- Market Expansions: Workiva continues to focus on expanding its international presence and deepening its penetration in existing markets. The total number of customers increased to 6,237 as of September 30, 2024, up from 5,945 a year earlier.
- Acquisitions: The acquisition of Sustain.Life for $98.1 million is expected to bolster its product offerings in sustainability and carbon accounting.
Future Revenue Growth Projections and Earnings Estimates
For the three months ended September 30, 2024, total revenue reached $185.6 million, a growth of 17.4% compared to $158.2 million in the same period of 2023. Subscription and support revenue alone increased by 19.3% to $171.0 million.
For the nine months ending September 30, 2024, total revenue was $538.8 million, reflecting an increase of 16.3% year-over-year. The company anticipates continued growth in subscription revenue as it transitions more services to a subscription model.
Strategic Initiatives or Partnerships That May Drive Future Growth
Workiva is focusing on enhancing its partner program and encouraging multi-solution adoption among existing customers. This approach is expected to lead to higher customer retention and increased revenue from existing accounts.
Competitive Advantages That Position the Company for Growth
- Strong Revenue Retention Rates: The subscription and support revenue retention rate was 97.5% as of September 30, 2024.
- Growing Customer Base: The number of customers with an annual contract value of $100k+ increased to 1,926, up from 1,561.
- Financial Stability: As of September 30, 2024, the company had cash, cash equivalents, and marketable securities totaling $776.4 million, providing a solid foundation for growth initiatives.
| Metric | 2024 (Q3) | 2023 (Q3) | % Change |
|---|---|---|---|
| Total Revenue | $185.6 million | $158.2 million | 17.4% |
| Subscription Revenue | $171.0 million | $143.4 million | 19.3% |
| Net Loss | $16.99 million | $56.27 million | -69.8% |
| Number of Customers | 6,237 | 5,945 | 4.9% |
In summary, Workiva Inc. is strategically positioned to leverage product innovations, market expansions, and acquisitions to drive future growth. The strong financial foundation and increasing customer base further bolster its growth prospects.
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Resources:
- Workiva Inc. (WK) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Workiva Inc. (WK)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Workiva Inc. (WK)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.