WORKIVA INC - Quarter Report: 2021 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________

FORM 10-Q

___________________________________


(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For transition period from to
Commission File Number 001-36773

___________________________________

WORKIVA INC.

(Exact name of registrant as specified in its charter)

___________________________________


Delaware (State or other jurisdiction of incorporation or organization)									47-2509828 (I.R.S. Employer Identification Number)
2900 University Blvd Ames, IA 50010 (888) 275-3125
(Address of principal executive offices and zip code)
(888) 275-3125
(Registrant's telephone number, including area code)
___________________________________


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol	Name of each exchange on which registered
Class A common stock, par value $.001	WK	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ý			Accelerated filer o

Non-accelerated filer o			Smaller reporting company ☐

			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ý

As of April 30, 2021, there were approximately 42,209,295 shares of the registrant's Class A common stock and 7,784,610 shares of the registrant's Class B common stock outstanding.

WORKIVA INC.

TABLE OF CONTENTS


		Page
	Part I. Financial Information
Item 1.	Unaudited Consolidated Financial Statements:	1
	Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	1
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020	3
	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2021 and 2020	4
	Consolidated Statements of Changes in Stockholders' Equity for the Three Months Ended March 31, 2021 and 2020	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020	6
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	30
Item 4.	Controls and Procedures	30

	Part II. Other Information
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 6.	Exhibits	32
	Signatures	S-1

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical facts, including statements regarding our future results of operations and financial position, our business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020, in “Item 1A. Risk Factors” in Part II of this Quarterly Report on Form 10-Q and in any subsequent filing we make with the SEC, as well as in any documents incorporated by reference that describe risks and factors that could cause results to differ materially from those projected in these forward-looking statements.

Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements or events and circumstances reflected in the forward-looking statements will occur. We are under no duty to update any of these forward-looking statements after completion of this Quarterly Report on Form 10-Q to conform these statements to actual results or revised expectations.

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Part I. Financial Information

Item 1. Financial Statements


WORKIVA INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
	As of March 31, 2021		As of December 31, 2020
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	331,173	$	322,831
Marketable securities	209,446		207,207
Accounts receivable, net of allowance for doubtful accounts of $599 and $717 at March 31, 2021 and December 31, 2020, respectively	53,754		68,922
Deferred commissions	22,924		21,923
Other receivables	3,314		3,155
Prepaid expenses and other	12,758		9,047
Total current assets	633,369		633,085

Property and equipment, net	28,961		29,365
Operating lease right-of-use assets	16,501		15,844
Deferred commissions, non-current	23,422		23,421
Intangible assets, net	1,560		1,583
Other assets	4,610		3,708
Total assets	$	708,423	$	707,006

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WORKIVA INC. CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(in thousands, except share and per share amounts)

	As of March 31, 2021		As of December 31, 2020
	(unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	4,716	$	2,843
Accrued expenses and other current liabilities	60,110		68,256
Deferred revenue	212,025		208,990
Finance lease obligations	1,728		1,705
Total current liabilities	278,579		281,794

Convertible senior notes, net	291,756		289,490
Deferred revenue, non-current	32,888		35,894
Other long-term liabilities	1,683		1,680
Operating lease liabilities, non-current	17,540		17,209
Finance lease obligations, non-current	16,221		16,662
Total liabilities	638,667		642,729

Stockholders’ equity
Class A common stock, $0.001 par value per share, 1,000,000,000 shares authorized, 42,102,011 and 40,719,189 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	42		41
Class B common stock, $0.001 par value per share, 500,000,000 shares authorized, 7,824,610 and 8,069,610 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	8		8
Preferred stock, $0.001 par value per share, 100,000,000 shares authorized, no shares issued and outstanding	—		—
Additional paid-in-capital	491,549		478,698
Accumulated deficit	(422,024)		(414,700)
Accumulated other comprehensive income	181		230
Total stockholders’ equity	69,756		64,277
Total liabilities and stockholders’ equity	$	708,423	$	707,006

See accompanying notes.

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WORKIVA INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) (unaudited)
	Three months ended March 31,
	2021		2020
Revenue
Subscription and support	$	84,936	$	68,361
Professional services	19,286		17,440
Total revenue	104,222		85,801
Cost of revenue
Subscription and support	13,202		12,153
Professional services	10,474		10,243
Total cost of revenue	23,676		22,396
Gross profit	80,546		63,405
Operating expenses
Research and development	26,634		22,994
Sales and marketing	41,035		36,117
General and administrative	17,021		13,369
Total operating expenses	84,690		72,480
Loss from operations	(4,144)		(9,075)
Interest income	360		1,706
Interest expense	(3,485)		(3,478)
Other (expense) income, net	(384)		718
Loss before (benefit) provision for income taxes	(7,653)		(10,129)
(Benefit) provision for income taxes	(329)		289
Net loss	$	(7,324)	$	(10,418)
Net loss per common share:
Basic and diluted	$	(0.15)	$	(0.22)
Weighted-average common shares outstanding - basic and diluted	50,244,120		47,545,703

See accompanying notes.

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WORKIVA INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) (unaudited)
	Three months ended March 31,
	2021		2020
Net loss	$	(7,324)	$	(10,418)
Other comprehensive loss, net of tax
Foreign currency translation adjustment, net of tax	156		(51)
Unrealized (loss) gain on available-for-sale securities, net of tax	(205)		42
Other comprehensive loss, net of tax	(49)		(9)
Comprehensive loss	$	(7,373)	$	(10,427)

See accompanying notes.

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WORKIVA INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands) (unaudited)

Three months ended March 31, 2021
	Common Stock (Class A and B)
	Shares	Amount		Additional Paid-in-Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders' Equity
Balances at December 31, 2020	48,789	$	49	$	478,698	$	230	$	(414,700)	$	64,277
Stock-based compensation expense	—	—		11,623		—		—		11,623
Issuance of common stock upon exercise of stock options	312	1		4,137		—		—		4,138
Issuance of common stock under employee stock purchase plan	93	—		4,237		—		—		4,237
Issuance of restricted stock units	803	—		—		—		—		—
Tax withholding related to net share settlements of stock-based compensation awards	(70)	—		(7,146)						(7,146)
Net loss	—	—		—		—		(7,324)		(7,324)
Other comprehensive loss	—	—		—		(49)		—		(49)
Balances at March 31, 2021	49,927	$	50	$	491,549	$	181	$	(422,024)	$	69,756















Three months ended March 31, 2020
	Common Stock (Class A and B)
	Shares	Amount		Additional Paid-in-Capital		Accumulated Other Comprehensive Income		Accumulated Deficit		Total Stockholders' Equity
Balances at December 31, 2019	46,639	$	47	$	420,170	$	287	$	(366,302)	$	54,202
Stock-based compensation expense	—	—		9,936		—		—		9,936
Issuance of common stock upon exercise of stock options	225			2,794		—		—		2,794
Issuance of common stock under employee stock purchase plan	94	—		3,660		—		—		3,660
Issuance of restricted stock units	117	—		—		—		—		—
Tax withholding related to net share settlements of stock-based compensation awards	(30)	—		(1,379)		—		—		(1,379)
Net loss	—	—		—		—		(10,418)		(10,418)
Other comprehensive loss	—	—		—		(9)		—		(9)
Balances at March 31, 2020	47,045	$	47	$	435,181	$	278	$	(376,720)	$	58,786

See accompanying notes.

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WORKIVA INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
	Three months ended March 31,
	2021		2020
Cash flows from operating activities
Net loss	$	(7,324)	$	(10,418)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	1,054		1,063
Stock-based compensation expense	11,623		9,936
(Recovery of) provision for doubtful accounts	(118)		40
Amortization of premiums and discounts on marketable securities, net	625		101
Amortization of debt discount and issuance costs	2,266		2,197
Deferred income tax	(346)		—
Changes in assets and liabilities:
Accounts receivable	15,265		14,265
Deferred commissions	(1,059)		603
Operating lease right-of-use asset	944		1,098
Other receivables	(161)		(253)
Prepaid expenses and other	(3,747)		(1,955)
Other assets	(573)		(74)
Accounts payable	1,908		(1,382)
Deferred revenue	179		(1,228)
Operating lease liability	(1,076)		(1,145)
Accrued expenses and other liabilities	(7,957)		(8,021)
Net cash provided by operating activities	11,503		4,827

Cash flows from investing activities
Purchase of property and equipment	(849)		(688)
Purchase of marketable securities	(43,655)		(20,832)
Sale of marketable securities	—		11,423
Maturities of marketable securities	40,586		12,975
Purchase of intangible assets	(71)		(77)

Net cash (used in) provided by investing activities	(3,989)		2,801

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WORKIVA INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands) (unaudited)
	Three months ended March 31,
	2021		2020

Cash flows from financing activities
Proceeds from option exercises	4,138		2,794
Taxes paid related to net share settlements of stock-based compensation awards	(7,146)		(1,379)
Proceeds from shares issued in connection with employee stock purchase plan	4,237		3,660


Principal payments on finance lease obligations	(417)		(398)



Net cash provided by financing activities	812		4,677
Effect of foreign exchange rates on cash	16		(613)

Net increase in cash and cash equivalents	8,342		11,692
Cash and cash equivalents at beginning of period	322,831		381,742
Cash and cash equivalents at end of period	$	331,173	$	393,434

Supplemental cash flow disclosure
Cash paid for interest	$	2,188	$	2,242
Cash paid for income taxes, net of refunds	$	20	$	159

Supplemental disclosure of noncash investing and financing activities
Allowance for tenant improvements	$	—	$	124

See accompanying notes.

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WORKIVA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Significant Accounting Policies

Organization

Workiva Inc., a Delaware corporation, and its wholly-owned subsidiaries (the “Company” or “we” or “us”) simplifies complex work for thousands of organizations worldwide. We are a leading provider of cloud-based compliance and regulatory reporting solutions that are designed to solve business challenges at the intersection of data, process and people. Our operational headquarters are located in Ames, Iowa, with additional offices located in the United States, Europe, the Asia-Pacific region and Canada.

Basis of Presentation and Principles of Consolidation

The financial information presented in the accompanying unaudited condensed consolidated financial statements has been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and in accordance with rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, the financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The condensed consolidated balance sheet data as of December 31, 2020 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting primarily of normal recurring accruals, necessary for a fair presentation of our financial position and results of operations. The operating results for the three months ended March 31, 2021 are not necessarily indicative of the results expected for the full year ending December 31, 2021.

Seasonality has affected our revenue, expenses and cash flows from operations. Revenue from professional services has been higher in the first quarter as many of our customers file their Form 10-K in the first calendar quarter. Our sales and marketing expense also has some degree of seasonality. Sales and marketing expense has historically been higher in the third quarter due to our annual user conference in September. Our transition to a virtual event in September 2020 has partially mitigated this trend, and we expect marketing expenses to continue to be offset by our virtual operations through 2021. In addition, the timing of the payments of cash bonuses to employees during the first and fourth calendar quarters may result in some seasonality in operating cash flow. The condensed consolidated financial information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this report and the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on February 17, 2021.

The unaudited condensed consolidated financial statements include the accounts of Workiva Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

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Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and various other assumptions believed to be reasonable. These estimates include, but are not limited to, the allowance for doubtful accounts, the determination of the relative selling prices of our services, the measurement of material rights, health insurance claims incurred but not yet reported, valuation of available-for-sale marketable securities, useful lives of deferred contract costs, intangible assets and property and equipment, income taxes, discount rates used in the valuation of right-of-use assets and lease liabilities, the fair value of the liability and equity components of the convertible senior notes, and certain assumptions used in the valuation of equity awards. While these estimates are based on our best knowledge of current events and actions that may affect us in the future, actual results may differ materially from these estimates.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which was issued to simplify the accounting for income taxes by removing certain exceptions for recognizing deferred taxes, performing intraperiod allocation, and calculating income taxes in interim periods. Further, ASU 2019-12 adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax basis goodwill and allocating taxes to members of a consolidated group. The standard became effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The standard provides different transition methods for the various provisions. Effective January 1, 2021, we adopted this standard. The adoption of this new standard did not have a material impact on our consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which simplifies the accounting for certain convertible instruments, amends guidance on derivative scope exceptions for contracts in an entity's own equity, and modifies the guidance on diluted earnings per share (EPS) calculations as a result of these changes. The standard will be effective for us beginning January 1, 2022 and can be applied on either a fully retrospective or modified retrospective basis. Early adoption is permitted for fiscal years beginning after December 15, 2020. We are currently evaluating the impact of this standard on our condensed consolidated financial statements.

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2. Supplemental Consolidated Balance Sheet Information

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):


	As of March 31, 2021		As of December 31, 2020
Accrued vacation	$	11,249	$	10,294
Accrued commissions	6,161		12,678
Accrued bonuses	5,172		6,573
Accrued payroll	3,930		2,631
Estimated health insurance claims	1,347		1,224
Accrued interest	485		1,455
ESPP employee contributions	2,569		4,269
Customer deposits	18,604		18,283
Operating lease liabilities	4,558		4,541
Accrued other liabilities	6,035		6,308
	$	60,110	$	68,256

3. Cash Equivalents and Marketable Securities

At March 31, 2021, cash equivalents and marketable securities consisted of the following (in thousands):


	Amortized Cost		Unrealized Gains		Unrealized Losses		Aggregate Fair Value
Money market funds	$	287,509	$	—	$	—	$	287,509
Commercial paper	10,989		—		—		10,989
U.S. treasury debt securities	48,502		35		(3)		48,534
Corporate debt securities	144,831		90		(81)		144,840
Foreign government debt securities	5,080		3		—		5,083
	$	496,911	$	128	$	(84)	$	496,955
Included in cash and cash equivalents	$	287,509	$	—	$	—	$	287,509
Included in marketable securities	$	209,402	$	128	$	(84)	$	209,446

At December 31, 2020, cash equivalents and marketable securities consisted of the following (in thousands):


	Amortized Cost		Unrealized Gains		Unrealized Losses		Aggregate Fair Value
Money market funds	$	265,578	$	—	$	—	$	265,578
Commercial paper	21,489		—		—		21,489
U.S. treasury debt securities	51,731		80		(2)		51,809
Corporate debt securities	147,715		214		(47)		147,882
Foreign government debt securities	1,025		2		—		1,027
	$	487,538	$	296	$	(49)	$	487,785
Included in cash and cash equivalents	$	280,578	$	—	$	—	$	280,578
Included in marketable securities	$	206,960	$	296	$	(49)	$	207,207

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The contractual maturities of the investments classified as marketable securities are as follows (in thousands):


	As of March 31, 2021
Due within one year	$	124,949
Due in on to two years	82,482
Due in three to five years	2,015
	$	209,446

The following table presents gross unrealized losses and fair values for those cash equivalents and marketable securities that were in an unrealized loss position as of March 31, 2021, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):


	As of March 31, 2021
	Less than 12 months				12 months or greater
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
U.S. treasury debt securities	$	14,752	$	(3)	$	—	$	—
Corporate debt securities	81,966		(81)		—		—
Total	$	96,718	$	(84)	$	—	$	—

We do not believe the unrealized losses represent credit losses based on our evaluation of available evidence as of March 31, 2021, which includes an assessment of whether it is more likely than not we will be required to sell the investment before recovery of the investment's amortized cost basis.

4. Fair Value Measurements

We determine the fair values of our financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value assumes that the transaction to sell the asset or transfer the liability occurs in the principal or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 - Inputs are unobservable inputs based on our assumptions.

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Financial Assets

Cash equivalents primarily consist of AAA-rated money market funds with overnight liquidity and no stated maturities. We classified cash equivalents as Level 1 due to the short-term nature of these instruments and measured the fair value based on quoted prices in active markets for identical assets.

When available, our marketable securities are valued using quoted prices for identical instruments in active markets. If we are unable to value our marketable securities using quoted prices for identical instruments in active markets, we value our investments using broker reports that utilize quoted market prices for comparable instruments. We validate, on a sample basis, the derived prices provided by the brokers by comparing their assessment of the fair values of our investments against the fair values of the portfolio balances of another third-party professional pricing service. As of March 31, 2021, all of our marketable securities were valued using quoted prices for comparable instruments in active markets and are classified as Level 2.

Based on our valuation of our money market funds and marketable securities, we concluded that they are classified in either Level 1 or Level 2, and we have no financial assets measured using Level 3 inputs. The following table presents information about our assets that are measured at fair value on a recurring basis using the above input categories (in thousands):


	Fair Value Measurements as of March 31, 2021						Fair Value Measurements as of December 31, 2020
Description	Total		Level 1		Level 2		Total		Level 1		Level 2
Money market funds	$	287,509	$	287,509	$	—	$	265,578	$	265,578	$	—
Commercial paper	10,989		—		10,989		21,489		—		21,489
U.S. treasury debt securities	48,534		—		48,534		51,809		—		51,809
Corporate debt securities	144,840		—		144,840		147,882		—		147,882
Foreign government debt securities	5,083		—		5,083		1,027		—		1,027
	$	496,955	$	287,509	$	209,446	$	487,785	$	265,578	$	222,207

Included in cash and cash equivalents	$	287,509					$	280,578
Included in marketable securities	$	209,446					$	207,207

Convertible Senior Notes

As of March 31, 2021, the fair value of our convertible senior notes was $440.8 million. The fair value was determined based on the quoted price of the convertible senior notes in an over-the-counter market on the last trading day of the reporting period and has been classified as Level 2 in the fair value hierarchy. See Note 5 to the condensed consolidated financial statements for more information.

5. Convertible Senior Notes

In August 2019, we issued $345.0 million aggregate principal amount of 1.125% convertible senior notes due 2026 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, including the exercise in full by the initial purchasers of their option to purchase an additional $45.0 million principal amount (the “Notes”). The Notes were issued pursuant to an indenture and are senior, unsecured obligations of the Company. The Notes bear interest at a fixed rate of 1.125% per annum, payable semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15, 2020. Proceeds from the issuance of the Notes totaled $335.9 million, net of initial purchaser discounts and issuance costs.

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The initial conversion rate is 12.4756 shares of our common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $80.16 per share, subject to adjustment upon the occurrence of specified events.

Interest expense representing the amortization of the debt discount and issuance costs as well as contractual interest expense is amortized to interest expense at an effective interest rate of 4.3% over the term of the Notes.

The net carrying amount of the liability and equity components of the Notes was as follows (in thousands):


	March 31, 2021		December 31, 2020
Liability component:
Principal	$	345,000	$	345,000
Unamortized discount	(47,331)		(49,346)
Unamortized issuance costs	(5,913)		(6,164)
Net carrying amount	$	291,756	$	289,490

Equity component, net of purchase discounts and issuance costs	$	58,560	$	58,560

Interest expense related to the Notes is as follows (in thousands):


	Three months ended March 31,
	2021		2020
Contractual interest expense	$	971	$	970
Amortization of debt discount	2,015		1,953
Amortization of issuance costs	251		244
Total interest expense	$	3,237	$	3,167

6. Commitments and Contingencies

Litigation

From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We evaluate the development of legal matters on a regular basis and accrue a liability when we believe a loss is probable and the amount can be reasonably estimated. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of any currently pending legal proceedings to which we are a party will not have a material adverse effect on our business, operating results, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

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7. Stock-Based Compensation

Stock-Based Compensation Expense

Stock-based compensation expense was recorded in the following cost and expense categories consistent with the respective employee or service provider’s related cash compensation (in thousands):


	Three months ended March 31,
	2021		2020
Cost of revenue
Subscription and support	$	496	$	431
Professional services	367		425
Operating expenses
Research and development	2,431		1,583
Sales and marketing	3,549		2,736
General and administrative	4,780		4,761
Total	$	11,623	$	9,936

Stock Options

The following table summarizes the option activity under the Plans for the three months ended March 31, 2021:


	Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)

Outstanding at December 31, 2020	2,903,167	$	14.48	4.7
Granted	—	—
Forfeited	(2,249)	21.55
Exercised	(312,352)	13.25
Outstanding at March 31, 2021	2,588,566	$	14.63	4.6

Exercisable at March 31, 2021	2,523,979	$	14.48	4.5

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Restricted Stock Units

The following table summarizes the restricted stock unit activity under the Plan for the three months ended March 31, 2021:


	Number of Shares	Weighted- Average Grant Date Fair Value

Unvested at December 31, 2020	2,904,616	$	35.72
Granted	614,099	100.93
Forfeited	(102,474)	62.10
Vested(1)	(1,178,379)	28.96
Unvested at March 31, 2021	2,237,862	$	56.25

(1) During the three months ended March 31, 2021, in accordance with our Nonqualified Deferred Compensation Plan, recipients of 382,698 shares had elected to defer settlement of the vested restricted stock units and 6,903 shares were released from deferral. This resulted in total deferred units of 939,399 as of March 31, 2021.

Employee Stock Purchase Plan

During the three months ended March 31, 2021, 92,846 shares of common stock were purchased under the ESPP at a weighted-average price of $45.63 per share, resulting in cash proceeds of $4.2 million.

Compensation expense associated with ESPP purchase rights is recognized on a straight-line basis over the vesting period. At March 31, 2021, there was approximately $930,000 of total unrecognized compensation expense related to the ESPP, which is expected to be recognized over a weighted-average period of 0.3 years.

8. Revenue Recognition

Disaggregation of Revenue

The following table presents our revenues disaggregated by industry (in thousands).


	Three months ended March 31,
	2021		2020
Information technology	$	13,959	$	11,090
Diversified financials	12,260		9,867
Consumer discretionary	10,977		9,437
Healthcare	10,882		8,420
Industrials	10,700		9,224
Banks	10,307		8,501
Insurance	7,073		5,941
Energy	6,831		6,424
Utilities	5,143		3,785
Real estate	4,760		4,352
Materials	4,397		3,540
Other	6,933		5,220
Total revenues	$	104,222	$	85,801

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The following table presents our revenues disaggregated by type of good or service (in thousands):


	Three months ended March 31,
	2021		2020
Subscription and support	$	84,936	$	68,361
XBRL professional services	14,486		13,432
Other services	4,800		4,008
Total revenues	$	104,222	$	85,801

Deferred Revenue

We recognized $79.3 million and $63.6 million of revenue during the three months ended March 31, 2021 and 2020, respectively, that was included in the deferred revenue balances at the beginning of the respective periods.

Transaction Price Allocated to the Remaining Performance Obligations

As of March 31, 2021, we expect revenue of approximately $421.0 million to be recognized from remaining performance obligations for subscription contracts. We expect to recognize approximately $259.3 million of these remaining performance obligations over the next 12 months with the balance substantially recognized in the 24 months thereafter.

9. Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including convertible senior notes, outstanding stock options, stock related to unvested restricted stock units, and common stock issuable pursuant to the ESPP to the extent dilutive. Basic and diluted net loss per share was the same for each period presented, as the inclusion of all potential common shares outstanding would have been anti-dilutive.

The net loss per share is allocated based on the participation rights of the Class A and Class B common shares as if the loss for the year has been distributed. As the liquidation and dividend rights are identical, the net loss is allocated on a proportionate basis.

A reconciliation of the denominator used in the calculation of basic and diluted loss per share is as follows (in thousands, except share and per share data):


	Three months ended
	March 31, 2021				March 31, 2020
	Class A		Class B		Class A		Class B
Numerator
Net loss	$	(6,161)	$	(1,163)	$	(8,535)	$	(1,883)

Denominator
Weighted-average common shares outstanding - basic and diluted	42,264,288		7,979,832		38,952,305		8,593,398
Basic and diluted net loss per share	$	(0.15)	$	(0.15)	$	(0.22)	$	(0.22)

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The anti-dilutive securities excluded from the weighted-average shares used to calculate the diluted net loss per common share were as follows:


	As of
	March 31, 2021	March 31, 2020
Shares subject to outstanding common stock options	2,588,566	4,106,122
Shares subject to unvested restricted stock units	2,237,862	3,335,671
Shares issuable pursuant to the ESPP	59,359	107,331

In addition, as of March 31, 2021, approximately 4.3 million shares of our Class A common stock underlying the conversion option in the Notes were excluded from the weighted-average shares used to calculate the diluted net loss per common share as they are considered anti-dilutive. We use the treasury stock method for calculating any potential dilutive effect of the conversion option on diluted net income per share, if applicable.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this report and in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 17, 2021. In addition to historical consolidated financial information, this discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to these differences include, but are not limited to, those identified below, and those discussed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020, in “Item 1A. Risk Factors” in Part II of this Quarterly Report on Form 10-Q and in any subsequent filing we make with the SEC.

Overview

Workiva simplifies complex work for thousands of organizations worldwide. We are a leading provider of cloud-based compliance and regulatory reporting solutions that are designed to solve business challenges at the intersection of data, process and people.

Workiva changes the way enterprises manage and report business data. Our open, intelligent and intuitive platform is based on single instance, multi-tenant software applications deployed in the cloud. Our platform connects data, documents and teams, which results in improved efficiency, greater transparency and reduced risk of errors. We offer customers controlled collaboration, data linking, data integrations, granular permissions, process management and a full audit trail on our proprietary platform. As of March 31, 2021, 3,800 organizations subscribed to our platform for at least one solution.

Customers use our platform to create, review and publish data-linked documents and reports with greater control, consistency, accuracy and productivity. Customers collaborate in the same document simultaneously, which improves efficiency and version control. Our platform is flexible and scalable, so customers can easily adapt it to define, automate and change their business processes in real time.

Our platform lets our customers connect data from Enterprise Resource Planning (ERP), Governance Risk and Compliance (GRC), Human Capital Management (HCM) and Customer Relationship Management (CRM) systems, as well as other third-party cloud and on-premise applications.

While our customers use our platform for dozens of different use cases, our sales and marketing resources are organized into four solution groups: Regulatory Reporting, Non-Regulatory Reporting, Financial Services and Integrated Risk.

We operate our business on a Software-as-a-Service (SaaS) model. Customers enter into annual and multi-year subscription contracts to gain access to our platform. Our subscription fee includes the use of our software and technical support. Prior to the third quarter of 2018, our subscription pricing was based primarily on the number of corporate entities, number of users, level of customer support and length of contract. Thereafter, we began converting existing customer orders to, and signing new orders primarily based on, a solution-based licensing model. Under this model, operating metrics related to a customer’s expected use of each solution determine the price. At March 31, 2021, over 80% of our subscription revenue was priced on a solution-based licensing model. We charge customers additional fees primarily for document setup and XBRL tagging services.

We generate sales primarily through our direct sales force and, to a lesser extent, our customer success and professional services teams. In addition, we augment our direct sales channel with partnerships. Our advisory and service partners offer a wider range of domain and functional expertise that broadens the capabilities of our platform, bringing scale and support to customers and prospects. Our technology partners enable more data and process integrations to help customers connect critical transactional systems directly to our platform.

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We continue to invest in the development of our solutions, infrastructure and sales and marketing to drive long-term growth. Our full-time employee headcount expanded to 1,751 at March 31, 2021 from 1,595 at March 31, 2020, an increase of 9.8%.

We have achieved significant revenue growth in recent periods. Our revenue grew to $104.2 million during the three months ended March 31, 2021, from $85.8 million during the three months ended March 31, 2020. We incurred a net loss of $7.3 million during the three months ended March 31, 2021, compared to $10.4 million during the three months ended March 31, 2020.

Impact of COVID-19

A pandemic of respiratory disease (abbreviated “COVID-19”) began to spread globally, including to the United States, in early 2020. The World Health Organization declared COVID-19 to be a public health emergency of international concern. The full impact of the COVID-19 outbreak continues to be inherently uncertain at the time of this report. The COVID-19 outbreak has resulted in travel restrictions, prohibitions of non-essential activities, disruption and shutdown of certain businesses and greater uncertainty in global financial markets.

We cannot fully predict the extent to which the ongoing COVID-19 outbreak will impact our business or operating results, which is highly dependent on inherently uncertain future developments, including the severity and duration of the COVID-19 outbreak and the actions taken by governments and businesses in relation to COVID-19 containment. We have adopted several measures in response to the COVID-19 outbreak, including advising employees to work from home, restricting non-critical business travel by our employees, and canceling in-person marketing events (including our annual user conference in September 2021) and replacing it with digital events. Notwithstanding these measures, we have been able to continue to meet the needs of our customers, keeping our platform fully operational and delivering the services contracted by our customers.

As a result of the work and travel restrictions relating to the ongoing COVID-19 outbreak, substantially all of our sales and operating activities are being conducted remotely. This global work-from-home operating environment may adversely impact the productivity of certain employees, and these conditions may persist and harm our business, including our future operating results. Additionally, we believe a number of customers and prospects have delayed purchasing decisions as result of the COVID-19 outbreak. Furthermore, in response to the COVID-19 outbreak existing and potential customers may ultimately choose to reduce technology spending or attempt to renegotiate contracts and obtain concessions, which could materially and negatively impact our operating results and financial condition. Because our platform is offered as a subscription-based service, the effects of the outbreak may not be fully reflected in our operating results until future periods.

Key Factors Affecting Our Performance

Generate Growth From Existing Customers. The Workiva platform can exhibit a powerful network effect within an enterprise, meaning that the usefulness of our platform attracts additional users. Since solution-based licensing offers our customers an unlimited number of seats for each solution purchased, we expect customers to add more seats over time. As more employees in an enterprise use our platform, additional opportunities for collaboration and automation drive demand among their colleagues for additional solutions. Furthermore, the conversion of most of our customer contracts to solution-based licensing generated a one-time increase in contract value for each solution converted.

Pursue New Customers. We sell to organizations that manage large, complex processes with many contributors and disparate sets of business data. We market our platform to professionals in the areas of: finance and accounting, regulatory reporting, management and performance reporting, integrated

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risk management, and global statutory reporting. We intend to continue to build our sales and marketing organization and leverage our brand equity to attract new customers.

Offer More Solutions. We intend to introduce new solutions to continue to meet growing demand for our platform. Our close and trusted relationships with our customers are a source for new use cases, features and solutions. We have a disciplined process for tracking, developing and releasing new solutions that are designed to have immediate, broad applicability; a strong value proposition; and a high return on investment for both Workiva and our customers. Our advance planning team assesses customer needs, conducts industry-based research and defines new markets. This vetting process involves our sales, product marketing, customer success, professional services, research and development, finance and senior management teams.

Expand Across Enterprises. Our success in delivering multiple solutions has created demand from customers for a broader-based, enterprise-wide Workiva platform. In response, we have been improving our technology and realigning sales and marketing to capitalize on our growing enterprise-wide opportunities. We believe this expansion will add seats and revenue and continue to support our high revenue retention rates. However, we expect that enterprise-wide deals will be larger and more complex, which tend to lengthen the sales cycle.

Add Partners. We continue to expand and deepen our relationships with global and regional partners, including consulting firms, system integrators, large and mid-sized independent software vendors, and implementation partners. Our advisory and service partners offer a wider range of domain and functional expertise that broadens our platform’s capabilities and promotes Workiva as part of the digital transformation projects they drive for their customers. Our technology partners enable powerful data and process integrations to help customers connect critical transactional systems directly to our platform, with powerful linking, auditability and control features. We believe that our partner ecosystem extends our global reach, accelerates the usage and adoption of our platform, and enables more efficient delivery of professional services.

Investment in growth. We plan to continue to invest in the development of our platform to enhance our current offerings and build new features. In addition, we expect to continue to invest in our sales, marketing, professional services and customer success organizations to drive additional revenue and support the needs of our growing customer base and to take advantage of opportunities that we have identified in Europe, Middle East, and Africa (EMEA), as well as use cases for integrated risk, global statutory reporting, and the U.S. government. As a result of the COVID-19 pandemic, regulatory authorities delayed the adoption of new regulations and policy mandates. For example, the Financial Conduct Authority in the United Kingdom (FCA) has postponed by one year the mandatory European Single Electronic Format (ESEF) requirements for annual financial reporting. Additionally, as part of a broader package designed to make it easier for capital markets to support economic recovery from the COVID-19 pandemic, the European Parliament and the Council of the European Union agreed to delay by one year the application of the ESEF requirements, allowing issuers to apply ESEF for financial years beginning on or after January 1, 2021. These delays could adversely impact our business in EMEA.

Seasonality. Our revenue from professional services has some degree of seasonality. Many of our customers employ our professional services just before they file their Form 10-K, often in the first calendar quarter. Sales and marketing expense has historically been higher in the third quarter due to our annual user conference in September. Our transition to a virtual event in 2020 and continuing in September 2021 has mostly mitigated this trend. In addition, the timing of the payments of cash bonuses to employees during the first and fourth calendar quarters may result in some seasonality in operating cash flow.

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Key Performance Indicators


	Three months ended March 31,
	2021			2020

	(dollars in thousands)
Financial metrics
Total revenue	$	104,222		$	85,801
Percentage increase in total revenue	21.5		%	22.6		%
Subscription and support revenue	$	84,936		$	68,361
Percentage increase in subscription and support revenue	24.2		%	21.8		%
Subscription and support as a percent of total revenue	81.5		%	79.7		%


	As of March 31,
	2021	2020
Operating metrics
Number of customers	3,800	3,507
Subscription and support revenue retention rate	95.1%	94.5%
Subscription and support revenue retention rate including add-ons	111.2%	110.9%
Number of customers with annual contract value $100k+	884	670
Number of customers with annual contract value $150k+	457	308

Total customers. We believe total number of customers is a key indicator of our financial success and future revenue potential. We define a customer as an entity with an active subscription contract as of the measurement date. Our customer is typically a parent company or, in a few cases, a significant subsidiary that works with us directly. Companies with publicly-listed securities account for a substantial majority of our customers.

Subscription and support revenue retention rate. We calculate our subscription and support revenue retention rate based on all customers that were active at the end of the same calendar quarter of the prior year (“base customers”). We begin by annualizing the subscription and support revenue recorded in the same calendar quarter of the prior year for those base customers who are still active at the end of the current quarter. We divide the result by the annualized subscription and support revenue in the same quarter of the prior year for all base customers.

Our subscription and support revenue retention rate was 95.1% as of March 31, 2021, up slightly from the rate as of March 31, 2020. We believe that our success in maintaining a high rate of revenue retention is attributable primarily to our robust technology platform and strong customer service. Customers whose securities were deregistered due to merger or acquisition or financial distress accounted for just over half of our revenue attrition in the latest quarter.

Subscription and support revenue retention rate including add-ons. Add-on revenue includes the change in both solutions and pricing for existing customers. We calculate our subscription and support revenue retention rate including add-ons by annualizing the subscription and support revenue recorded in the current quarter for our base customers that were active at the end of the current quarter. We divide the result by the annualized subscription and support revenue in the same quarter of the prior year for all base customers.

Our subscription and support revenue retention rate including add-ons was 111.2% as of the quarter ended March 31, 2021, up from 110.9% as of March 31, 2020.

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Annual contract value. Our annual contract value (ACV) for each customer is calculated by annualizing the subscription and support revenue recognized during each quarter. We believe the increase in the number of larger contracts shows our progress in expanding our customers’ adoption of our platform.

Components of Results of Operations

Revenue

We generate revenue through the sale of subscriptions to our cloud-based software and the delivery of professional services. We serve a wide range of customers in many industries, and our revenue is not concentrated with any single customer or small group of customers. For the three months ended March 31, 2021 and 2020, no single customer represented more than 1% of our revenue, and our largest 10 customers accounted for less than 6% of our revenue in the aggregate.

We generate sales directly through our sales force and partners. We also identify some sales opportunities with existing customers through our customer success and professional services teams.

Our customer contracts typically range in length from twelve to 36 months. We typically invoice our customers for subscription fees annually in advance. For contracts with a two or three year term, customers sometimes elect to pay the entire multi-year subscription term in advance. Our arrangements do not contain general rights of return.

Subscription and Support Revenue. We recognize subscription and support revenue on a ratable basis over the contract term beginning on the date that our service is made available to the customer. Amounts that are invoiced are initially recorded as deferred revenue.

Professional Services Revenue. We believe our professional services facilitate the sale of our subscription service to certain customers. To date, most of our professional services have consisted of document set up, XBRL tagging, and consulting to help our customers with business processes and best practices for using our platform. Our professional services are not required for customers to utilize our solution. We recognize revenue for document set ups when the service is complete and control has transferred to the customer. Revenues from XBRL tagging and consulting services are recognized as the services are performed.

Cost of Revenue

Cost of revenue consists primarily of personnel and related costs directly associated with our professional services, customer success teams and training personnel, including salaries, benefits, bonuses, and stock-based compensation; the costs of contracted third-party vendors; the costs of server usage by our customers; information technology costs; and facility costs. Costs of server usage are comprised primarily of fees paid to Amazon Web Services and Google Cloud Platform.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of personnel and related costs, including salaries, benefits, bonuses, commissions, travel, and stock-based compensation. Other costs included in this expense are marketing and promotional events, our annual user conference, online marketing, product marketing, information technology costs, and facility costs. We pay sales commissions for initial contracts and expansions of existing customer contracts. When the relevant amortization period is one year or less, we expense sales commissions as incurred. All other sales commissions are considered incremental costs of obtaining a contract with a customer and are deferred and amortized on a straight-line basis over a period of benefit that we have determined to be three years.

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Research and Development Expenses

Research and development expenses consist primarily of personnel and related costs, including salaries, benefits, bonuses, and stock-based compensation; costs of server usage by our developers; information technology costs; and facility costs.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel and related costs for our executive, finance and accounting, legal, human resources, and administrative personnel, including salaries, benefits, bonuses, and stock-based compensation; legal, accounting, and other professional service fees; other corporate expenses; information technology costs; and facility costs.

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Results of Operations

The following table sets forth selected consolidated statement of operations data for each of the periods indicated:


	Three months ended March 31,
	2021		2020

	(in thousands)
Revenue
Subscription and support	$	84,936	$	68,361
Professional services	19,286		17,440
Total revenue	104,222		85,801
Cost of revenue
Subscription and support(1)	13,202		12,153
Professional services(1)	10,474		10,243
Total cost of revenue	23,676		22,396
Gross profit	80,546		63,405
Operating expenses
Research and development(1)	26,634		22,994
Sales and marketing(1)	41,035		36,117
General and administrative(1)	17,021		13,369
Total operating expenses	84,690		72,480
Loss from operations	(4,144)		(9,075)
Interest income	360		1,706
Interest expense	(3,485)		(3,478)
Other (expense) income, net	(384)		718
Loss before provision for income taxes	(7,653)		(10,129)
(Benefit) provision for income taxes	(329)		289
Net loss	$	(7,324)	$	(10,418)

(1) Stock-based compensation expense included in these line items was as follows:


	Three months ended March 31,
	2021		2020

	(in thousands)
Cost of revenue
Subscription and support	$	496	$	431
Professional services	367		425
Operating expenses
Research and development	2,431		1,583
Sales and marketing	3,549		2,736
General and administrative	4,780		4,761
Total stock-based compensation expense	$	11,623	$	9,936

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The following table sets forth our consolidated statement of operations data as a percentage of revenue for each of the periods indicated:


	Three months ended March 31,
	2021		2020
Revenue
Subscription and support	81.5	%	79.7	%
Professional services	18.5		20.3
Total revenue	100.0		100.0
Cost of revenue
Subscription and support	12.7		14.2
Professional services	10.0		11.9
Total cost of revenue	22.7		26.1
Gross profit	77.3		73.9
Operating expenses
Research and development	25.6		26.8
Sales and marketing	39.4		42.1
General and administrative	16.3		15.6
Total operating expenses	81.3		84.5
Loss from operations	(4.0)		(10.6)
Interest income	0.3		2.0
Interest expense	(3.3)		(4.1)
Other (expense) income, net	(0.4)		0.8
Loss before provision for income taxes	(7.4)		(11.9)
(Benefit) provision for income taxes	(0.3)		0.3
Net loss	(7.1)	%	(12.2)	%

Comparison of Three Months Ended March 31, 2021 and 2020

Revenue


	Three months ended March 31,
	2021		2020		% Change

	(dollars in thousands)
Revenue
Subscription and support	$	84,936	$	68,361	24.2%
Professional services	19,286		17,440		10.6%
Total revenue	$	104,222	$	85,801	21.5%

Total revenue increased $18.4 million for the three months ended March 31, 2021 compared to the same quarter a year ago due primarily to a $16.6 million increase in subscription and support revenue. Growth in subscription and support revenue in the first quarter was attributable mainly to strong demand and better pricing for a broad range of use cases, including SEC and capital market reporting, integrated risk, global statutory reporting, banking, management and performance reporting, and FERC reporting. The total number of our customers increased 8.4% from March 31, 2020 to March 31, 2021. Professional services revenue increased $1.8 million for the three months ended March 31, 2021 compared to the same quarter a year ago due primarily to growth in revenue from XBRL professional services.

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Cost of Revenue


	Three months ended March 31,
	2021		2020		% Change

	(dollars in thousands)
Cost of revenue
Subscription and support	$	13,202	$	12,153	8.6%
Professional services	10,474		10,243		2.3%
Total cost of revenue	$	23,676	$	22,396	5.7%

Cost of revenue increased $1.3 million in the three months ended March 31, 2021 compared to the same quarter a year ago due primarily to $1.7 million in higher cash-based compensation and benefits due mostly to increased headcount resulting from our continued investment in and support of our platform and solutions. This increase was primarily offset by a $0.5 million decrease in travel costs due to the COVID-19 pandemic.

Operating Expenses


	Three months ended March 31,
	2021		2020		% Change

	(dollars in thousands)
Operating expenses
Research and development	$	26,634	$	22,994	15.8%
Sales and marketing	41,035		36,117		13.6%
General and administrative	17,021		13,369		27.3%
Total operating expenses	$	84,690	$	72,480	16.8%

Research and Development

Research and development expenses increased $3.6 million in the three months ended March 31, 2021 compared to the same quarter a year ago due primarily to $3.0 million in higher cash-based compensation and benefits as well as a $0.8 million increase in stock-based compensation. These increases were partially offset by a $0.5 million reduction in travel costs due to the COVID-19 pandemic. The increases in cash and stock-based compensation were the result of our continued investment in and support of our platform and solutions.

Sales and Marketing

Sales and marketing expenses increased $4.9 million during the three months ended March 31, 2021 compared to the three months ended March 31, 2020 due primarily to $5.8 million in higher cash-based compensation and benefits, an additional $0.8 million in stock-based compensation and a $0.5 million increase in advertising expense. These increases were partially offset by a $2.1 million reduction in travel costs due to the COVID-19 pandemic. Headcount in sales and marketing increased 9.4% in the quarter ended March 31, 2021 compared to the same quarter a year ago. We expect to continue to invest in sales and marketing to help drive revenue growth.

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General and Administrative

General and administrative expenses increased $3.7 million during the three months ended March 31, 2021 compared to the three months ended March 31, 2020 due primarily to $3.8 million in higher cash-based compensation and benefits. Headcount in general and administrative increased 9.5% compared to the same quarter a year ago.

Non-Operating Income (Expenses)


	Three months ended March 31,
	2021		2020		% Change

	(dollars in thousands)
Interest income	$	360	$	1,706	(78.9)%
Interest expense	(3,485)		(3,478)		0.2%
Other (expense) income, net	(384)		718		*

(*) Percentage is not meaningful.

Interest Income, Interest Expense and Other (Expense) Income, Net

During the three months ended March 31, 2021, interest expense remained relatively flat compared to the same time period in the prior year. Interest income decreased $1.3 million during the three months ended March 31, 2021 compared to the same period a year ago due primarily to lower interest rates on investments. Other expense increased $1.1 million compared to the same period a year ago due primarily to losses on foreign currency transactions.

Results of Operations for Fiscal 2020 Compared to 2019

For a comparison of our results of operations for the fiscal years ended December 31, 2020 and 2019, see "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our annual report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on February 17, 2021.

Liquidity and Capital Resources


	Three months ended March 31,
	2021		2020

	(in thousands)
Cash flow provided by operating activities	$	11,503	$	4,827
Cash flow (used in) provided by investing activities	(3,989)		2,801
Cash flow provided by financing activities	812		4,677
Net increase in cash and cash equivalents, net of impact of exchange rates	$	8,342	$	11,692

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As of March 31, 2021, our principal sources of liquidity were cash, cash equivalents and marketable securities totaling $540.6 million, which were held for working capital purposes. We have financed our operations primarily through the proceeds of offerings of equity, convertible debt, and cash from operating activities. We have generated significant operating losses and negative cash flows from operating activities as reflected in our accumulated deficit and consolidated statements of cash flows. While we expect to continue to incur operating losses and may incur negative cash flows from operations in the future, we believe that current cash and cash equivalents and cash flows from operating activities will be sufficient to fund our operations for at least the next twelve months.

In August 2019, we issued $345.0 million aggregate principal amount of 1.125% convertible senior notes due 2026 (the “Notes”). The Notes are senior, unsecured obligations and bear interest at a fixed rate of 1.125% per annum, payable semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15, 2020. Proceeds from the issuance of the Notes totaled $335.9 million, net of initial purchaser discounts and issuance costs.

Operating Activities

For the three months ended March 31, 2021, cash provided by operating activities was $11.5 million. The primary factors affecting our operating cash flows during the period were our net loss of $7.3 million, adjusted for non-cash charges of $1.1 million for depreciation and amortization of our property and equipment and intangible assets, $11.6 million of stock-based compensation expense, $2.3 million for the amortization of our debt discount and issuance costs and a $3.7 million net change in operating assets and liabilities. The primary drivers of the changes in operating assets and liabilities were a $8.0 million decrease in accrued expenses and other liabilities, a $3.7 million increase in prepaid expenses, a $1.1 million increase in deferred commissions and a $0.6 million increase in other assets offset by a $15.3 million decrease in accounts receivable and a $1.9 million increase in accounts payable. Deferred commissions increased due primarily to payments made to our sales force related to the direct and incremental costs of obtaining a customer contract. Increases in accounts payable and other assets as well as the decreases in accounts receivable and accrued expenses and other liabilities, were attributable primarily to the timing of our billings, cash collections, and cash payments. The increase in prepaid expenses was due primarily to timing of payments relating to cloud infrastructure services and subscriptions.

For the three months ended March 31, 2020, cash provided by operating activities was $4.8 million. The primary factors affecting our operating cash flows during the period were our net loss of $10.4 million, adjusted for non-cash charges of $1.1 million for depreciation and amortization of our property and equipment and intangible assets, $9.9 million of stock-based compensation expense, $2.2 million for the amortization of our debt discount and issuance costs and a $1.9 million net change in operating assets and liabilities. The primary drivers of the changes in operating assets and liabilities were a $14.3 million decrease in accounts receivable and a $0.6 million decrease in deferred commissions partially offset by a $2.0 million increase in prepaid expenses, a $1.4 million decrease in accounts payable, a $1.2 million decrease in deferred revenue, and a $8.0 million decrease in accrued expenses and other liabilities. The decrease in deferred revenue was due primarily to amounts excluded at March 31, 2020 related to contracts posing higher credit risk related to COVID-19. Deferred commissions decreased due to the sales cycle slowing at the end of the quarter from the effects of COVID-19. Decreases in accounts receivable and accounts payable were attributable primarily to the timing of our billings, cash collections, and cash payments. The increase in accrued expenses and other liabilities were attributable primarily to the timing of our payment of annual bonuses. The increase in prepaid expenses was due primarily to timing of payments relating to cloud infrastructure services and subscriptions.

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Investing Activities

Cash used in investing activities of $4.0 million for the three months ended March 31, 2021 was due primarily to $43.7 million in purchases of marketable securities and $0.8 million in purchases of fixed assets offset by $40.6 million from maturities of marketable securities. Our capital expenditures were associated primarily with computer equipment in support of expanding our infrastructure and work force.

Cash provided by investing activities of $2.8 million for the three months ended March 31, 2020 was due primarily to $13.0 million from maturities of marketable securities and $11.4 million from the sale of marketable securities, partially offset by $20.8 million in purchases of marketable securities and $0.7 million million of capital expenditures. Our capital expenditures were associated primarily with computer equipment in support of expanding our infrastructure and work force.

Financing Activities

Cash provided by financing activities of $0.8 million for the three months ended March 31, 2021 was due primarily to $4.1 million in proceeds from option exercises and $4.2 million in proceeds from shares issued in connection with our employee stock purchase plan partially offset by $7.1 million in taxes paid related to net share settlements of stock-based compensation awards.

Cash provided by financing activities of $4.7 million for the three months ended March 31, 2020 was due primarily to $2.8 million in proceeds from option exercises and $3.7 million in proceeds from shares issued in connection with our employee stock purchase plan partially offset by $1.4 million in taxes paid related to net share settlements of stock-based compensation awards.

Contractual Obligations and Commitments

There were no material changes in our contractual obligations and commitments from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 17, 2021.

Off-Balance Sheet Arrangements

During all periods presented, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As a result, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in those types of relationships.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, income taxes and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

During the three months ended March 31, 2021, there were no significant changes to our critical accounting policies and estimates as described in the financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 17, 2021.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

For quantitative and qualitative disclosures about market risk, see “Item 7A., Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the year ended December 31, 2020. Our exposures to market risk have not changed materially since December 31, 2020.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our principal executive officer and principal financial officer, our management conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. Our disclosure controls and procedures are intended to provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on management’s evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are designed to, and are effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our most recently completed fiscal quarter. Based on that evaluation, our principal executive officer and principal financial officer concluded that there has not been any material change in our internal control over financial reporting during the quarter covered by this report that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that in the opinion of our management, if determined adversely to us, would have a material adverse effect on our business, financial condition, operating results or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our 2020 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. There have been no material changes during fiscal 2021 to the risk factors that were included in the Form 10-K.

Item 2. Unregistered Sales of Securities and Use of Proceeds

Sales of Unregistered Securities

Not applicable.

Use of Proceeds from Public Offerings of Common Stock

There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act on December 12, 2014.

Issuer Purchases of Equity Securities

The following table provides information about purchases of shares of our Class A Common Stock during the three months ended March 31, 2021 related to shares withheld upon vesting of restricted stock units for tax withholding obligations:


Date	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under Program
January 2021	—	$	—	—	—
February 2021	66,976	102.04		—	—
March 2021	2,984	104.38		—	—
Total	69,960	$	102.14	—	—

(1) Total number of shares delivered to use by employees to satisfy the mandatory tax withholding requirement upon vesting of stock-based compensation awards.

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Item 6. Exhibits

The following exhibits are being filed herewith or incorporated by reference herein:


Exhibit Number						Description

10.1						Form of Employment Agreement.

31.1						Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of the Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101						The following financial information from Workiva Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Loss, (iv) the Consolidated Statements of Changes in Stockholders Equity (Deficit), (v) the Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements.

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 4th day of May, 2021.


WORKIVA INC.

By:			/s/ Martin J. Vanderploeg, Ph.D.
Name:			Martin J. Vanderploeg, Ph.D.
Title:			President and Chief Executive Officer

By:			/s/ Jill Klindt
Name:			Jill Klindt
Title:			Senior Vice President, Chief Financial Officer, Chief Accounting Officer and Treasurer

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