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WK Workiva

Filed: 4 May 21, 4:22pm

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 classTrading SymbolName of each exchange on which registered
Class A common stock, par value $.001WKNew 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
i

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.
ii

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, 2021As of December 31, 2020
(unaudited)
ASSETS
Current assets
Cash and cash equivalents$331,173 $322,831 
Marketable securities209,446 207,207 
Accounts receivable, net of allowance for doubtful accounts of $599 and $717 at March 31, 2021 and December 31, 2020, respectively53,754 68,922 
Deferred commissions22,924 21,923 
Other receivables3,314 3,155 
Prepaid expenses and other12,758 9,047 
Total current assets633,369 633,085 
Property and equipment, net28,961 29,365 
Operating lease right-of-use assets16,501 15,844 
Deferred commissions, non-current23,422 23,421 
Intangible assets, net1,560 1,583 
Other assets4,610 3,708 
Total assets$708,423 $707,006 
1

WORKIVA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(in thousands, except share and per share amounts)
As of March 31, 2021As of December 31, 2020
(unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable$4,716 $2,843 
Accrued expenses and other current liabilities60,110 68,256 
Deferred revenue212,025 208,990 
Finance lease obligations1,728 1,705 
Total current liabilities278,579 281,794 
Convertible senior notes, net291,756 289,490 
Deferred revenue, non-current32,888 35,894 
Other long-term liabilities1,683 1,680 
Operating lease liabilities, non-current17,540 17,209 
Finance lease obligations, non-current16,221 16,662 
Total liabilities638,667 642,729 
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, respectively42 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
Preferred stock, $0.001 par value per share, 100,000,000 shares authorized, 0 shares issued and outstanding
Additional paid-in-capital491,549 478,698 
Accumulated deficit(422,024)(414,700)
Accumulated other comprehensive income181 230 
Total stockholders’ equity69,756 64,277 
Total liabilities and stockholders’ equity$708,423 $707,006 
See accompanying notes.
2

WORKIVA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
Three months ended March 31,
20212020
Revenue
Subscription and support$84,936 $68,361 
Professional services19,286 17,440 
Total revenue104,222 85,801 
Cost of revenue
Subscription and support13,202 12,153 
Professional services10,474 10,243 
Total cost of revenue23,676 22,396 
Gross profit80,546 63,405 
Operating expenses
Research and development26,634 22,994 
Sales and marketing41,035 36,117 
General and administrative17,021 13,369 
Total operating expenses84,690 72,480 
Loss from operations(4,144)(9,075)
Interest income360 1,706 
Interest expense(3,485)(3,478)
Other (expense) income, net(384)718 
Loss before (benefit) provision for income taxes(7,653)(10,129)
(Benefit) provision for income taxes(329)289 
Net loss$(7,324)$(10,418)
Net loss per common share:
Basic and diluted$(0.15)$(0.22)
Weighted-average common shares outstanding - basic and diluted50,244,120 47,545,703 

See accompanying notes.

3


WORKIVA INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
Three months ended March 31,
20212020
Net loss$(7,324)$(10,418)
Other comprehensive loss, net of tax
Foreign currency translation adjustment, net of tax156 (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.

4


WORKIVA INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
Three months ended March 31, 2021
Common Stock (Class A and B)
SharesAmountAdditional Paid-in-CapitalAccumulated Other Comprehensive IncomeAccumulated DeficitTotal Stockholders' Equity
Balances at December 31, 202048,789 $49 $478,698 $230 $(414,700)$64,277 
Stock-based compensation expense— — 11,623 — — 11,623 
Issuance of common stock upon exercise of stock options312 4,137 — — 4,138 
Issuance of common stock under employee stock purchase plan93 — 4,237 — — 4,237 
Issuance of restricted stock units803 — — — — — 
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, 202149,927 $50 $491,549 $181 $(422,024)$69,756 
Three months ended March 31, 2020
Common Stock (Class A and B)
SharesAmountAdditional Paid-in-CapitalAccumulated Other Comprehensive IncomeAccumulated DeficitTotal Stockholders' Equity
Balances at December 31, 201946,639 $47 $420,170 $287 $(366,302)$54,202 
Stock-based compensation expense— — 9,936 — — 9,936 
Issuance of common stock upon exercise of stock options225 02,794 — — 2,794 
Issuance of common stock under employee stock purchase plan94 — 3,660 — — 3,660 
Issuance of restricted stock units117 — — — — — 
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, 202047,045 $47 $435,181 $278 $(376,720)$58,786 

See accompanying notes.
5


WORKIVA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three months ended March 31,
20212020
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 amortization1,054 1,063 
Stock-based compensation expense11,623 9,936 
(Recovery of) provision for doubtful accounts(118)40 
Amortization of premiums and discounts on marketable securities, net625 101 
Amortization of debt discount and issuance costs2,266 2,197 
Deferred income tax(346)
Changes in assets and liabilities:
Accounts receivable15,265 14,265 
Deferred commissions(1,059)603 
Operating lease right-of-use asset944 1,098 
Other receivables(161)(253)
Prepaid expenses and other(3,747)(1,955)
Other assets(573)(74)
Accounts payable1,908 (1,382)
Deferred revenue179 (1,228)
Operating lease liability(1,076)(1,145)
Accrued expenses and other liabilities(7,957)(8,021)
Net cash provided by operating activities11,503 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 securities11,423 
Maturities of marketable securities40,586 12,975 
Purchase of intangible assets(71)(77)
Net cash (used in) provided by investing activities(3,989)2,801 
6

WORKIVA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
(unaudited)
Three months ended March 31,
20212020
Cash flows from financing activities
Proceeds from option exercises4,138 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 plan4,237 3,660 
Principal payments on finance lease obligations(417)(398)
Net cash provided by financing activities812 4,677 
Effect of foreign exchange rates on cash16 (613)
Net increase in cash and cash equivalents8,342 11,692 
Cash and cash equivalents at beginning of period322,831 381,742 
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.

7

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.
8

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.
9

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, 2021As of December 31, 2020
Accrued vacation$11,249 $10,294 
Accrued commissions6,161 12,678 
Accrued bonuses5,172 6,573 
Accrued payroll3,930 2,631 
Estimated health insurance claims1,347 1,224 
Accrued interest485 1,455 
ESPP employee contributions2,569 4,269 
Customer deposits18,604 18,283 
Operating lease liabilities4,558 4,541 
Accrued other liabilities6,035 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 CostUnrealized GainsUnrealized LossesAggregate Fair Value
Money market funds$287,509 $— $— $287,509 
Commercial paper10,989 10,989 
U.S. treasury debt securities48,502 35 (3)48,534 
Corporate debt securities144,831 90 (81)144,840 
Foreign government debt securities5,080 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 CostUnrealized GainsUnrealized LossesAggregate Fair Value
Money market funds$265,578 $— $— $265,578 
Commercial paper21,489 21,489 
U.S. treasury debt securities51,731 80 (2)51,809 
Corporate debt securities147,715 214 (47)147,882 
Foreign government debt securities1,025 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 
10

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 years82,482 
Due in three to five years2,015 
$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 months12 months or greater
Fair ValueUnrealized LossFair ValueUnrealized Loss
U.S. treasury debt securities$14,752 $(3)$$
Corporate debt securities81,966 (81)
Total$96,718 $(84)$$
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.
11

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, 2021Fair Value Measurements as of December 31, 2020
DescriptionTotalLevel 1Level 2TotalLevel 1Level 2
Money market funds$287,509 $287,509 $$265,578 $265,578 $
Commercial paper10,989 10,989 21,489 21,489 
U.S. treasury debt securities48,534 48,534 51,809 51,809 
Corporate debt securities144,840 144,840 147,882 147,882 
Foreign government debt securities5,083 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.
12

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, 2021December 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,
20212020
Contractual interest expense$971 $970 
Amortization of debt discount2,015 1,953 
Amortization of issuance costs251 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.
13

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,
20212020
Cost of revenue
Subscription and support$496 $431 
Professional services367 425 
Operating expenses
Research and development2,431 1,583 
Sales and marketing3,549 2,736 
General and administrative4,780 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, 20202,903,167 $14.48 4.7
Granted
Forfeited(2,249)21.55 
Exercised(312,352)13.25 
Outstanding at March 31, 20212,588,566 $14.63 4.6
Exercisable at March 31, 20212,523,979 $14.48 4.5
14

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, 20202,904,616 $35.72 
Granted614,099 100.93 
Forfeited(102,474)62.10 
Vested(1)
(1,178,379)28.96 
Unvested at March 31, 20212,237,862 $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,
20212020
Information technology$13,959 $11,090 
Diversified financials12,260 9,867 
Consumer discretionary10,977 9,437 
Healthcare10,882 8,420 
Industrials10,700 9,224 
Banks10,307 8,501 
Insurance7,073 5,941 
Energy6,831 6,424 
Utilities5,143 3,785 
Real estate4,760 4,352 
Materials4,397 3,540 
Other6,933 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,
20212020
Subscription and support$84,936 $68,361 
XBRL professional services14,486 13,432 
Other services4,800 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 $259.3 million of these remaining performance obligations over the next 12 months with the balance substantially recognized in the 24 months thereafter.
9. Net Loss Per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including convertible senior notes, outstanding stock options, stock related to unvested restricted stock units, and common stock issuable pursuant to the ESPP to the extent dilutive. Basic and diluted net loss per share was the same for each period presented, as the inclusion of all potential common shares outstanding would have been anti-dilutive.
The net loss per share is allocated based on the participation rights of the Class A and Class B common shares as if the loss for the year has been distributed. As the liquidation and dividend rights are identical, the net loss is allocated on a proportionate basis.
A reconciliation of the denominator used in the calculation of basic and diluted loss per share is as follows (in thousands, except share and per share data):
Three months ended
March 31, 2021March 31, 2020
Class AClass BClass AClass B
Numerator
Net loss$(6,161)$(1,163)$(8,535)$(1,883)
Denominator
Weighted-average common shares outstanding - basic and diluted42,264,288 7,979,832 38,952,305 8,593,398 
Basic and diluted net loss per share$(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, 2021March 31, 2020
Shares subject to outstanding common stock options2,588,566 4,106,122 
Shares subject to unvested restricted stock units2,237,862 3,335,671 
Shares issuable pursuant to the ESPP59,359 107,331 
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,
20212020
(dollars in thousands)
Financial metrics
Total revenue$104,222 $85,801 
Percentage increase in total revenue21.5 %22.6 %
Subscription and support revenue$84,936 $68,361 
Percentage increase in subscription and support revenue24.2 %21.8 %
Subscription and support as a percent of total revenue81.5 %79.7 %

As of March 31,
20212020
Operating metrics
Number of customers3,8003,507
Subscription and support revenue retention rate95.1%94.5%
Subscription and support revenue retention rate including add-ons111.2%110.9%
Number of customers with annual contract value $100k+884670
Number of customers with annual contract value $150k+457308
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,
20212020
(in thousands)
Revenue
Subscription and support$84,936 $68,361 
Professional services19,286 17,440 
Total revenue104,222 85,801 
Cost of revenue
Subscription and support(1)
13,202 12,153 
Professional services(1)
10,474 10,243 
Total cost of revenue23,676 22,396 
Gross profit80,546 63,405 
Operating expenses
Research and development(1)
26,634 22,994 
Sales and marketing(1)
41,035 36,117 
General and administrative(1)
17,021 13,369 
Total operating expenses84,690 72,480 
Loss from operations(4,144)(9,075)
Interest income360 1,706 
Interest expense(3,485)(3,478)
Other (expense) income, net(384)718 
Loss before provision for income taxes(7,653)(10,129)
(Benefit) provision for income taxes(329)289 
Net loss$(7,324)$(10,418)
(1)     Stock-based compensation expense included in these line items was as follows:
Three months ended March 31,
20212020
(in thousands)
Cost of revenue
Subscription and support$496 $431 
Professional services367 425 
Operating expenses
Research and development2,431 1,583 
Sales and marketing3,549 2,736 
General and administrative4,780 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,
20212020
Revenue
Subscription and support81.5 %79.7 %
Professional services18.5 20.3 
Total revenue100.0 100.0 
Cost of revenue
Subscription and support12.7 14.2 
Professional services10.0 11.9 
Total cost of revenue22.7 26.1 
Gross profit77.3 73.9 
Operating expenses
Research and development25.6 26.8 
Sales and marketing39.4 42.1 
General and administrative16.3 15.6 
Total operating expenses81.3 84.5 
Loss from operations(4.0)(10.6)
Interest income0.3 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,
20212020% Change
(dollars in thousands)
Revenue
Subscription and support$84,936 $68,361 24.2%
Professional services19,286 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,
20212020% Change
(dollars in thousands)
Cost of revenue
Subscription and support$13,202 $12,153 8.6%
Professional services10,474 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,
20212020% Change
(dollars in thousands)
Operating expenses
Research and development$26,634 $22,994 15.8%
Sales and marketing41,035 36,117 13.6%
General and administrative17,021 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,
20212020% 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,
20212020
(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 activities812 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 ShareTotal Number of Shares Purchased as Part of Publicly Announced ProgramMaximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under Program
January 2021— $— — — 
February 202166,976 102.04 — — 
March 20212,984 104.38 — — 
Total69,960 $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
31.1
31.2
32.1     
32.2     
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.
104Cover 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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