UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-K
___________________________________
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
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-
___________________________________
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
Class A common stock, par value $.001
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act:
None
___________________________________
Indicate by a check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
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
No
No
No
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted 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 and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
The aggregate market value of voting stock held by non-affiliates of the Registrant on December 31, 2014, based on the closing price of
$13.40 for shares of the Registrant’s Class A common stock as reported by the New York Stock Exchange, was approximately $300.5 million. The
Registrant has elected to use December 31, 2014 as the calculation date, because on June 30, 2014 (the last business day of the Registrant’s second fiscal
quarter), the Registrant was a privately-held company. Shares of common stock beneficially owned by each executive officer, director, and holder of
more than 10% of our common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
No
As of March 2, 2015, there were approximately 27,756,572 shares of the registrant's Class A common stock and 12,426,947 shares of the
registrant's Class B common stock outstanding.
Information required in response to Part III of Form 10-K (Items 10, 11, 12, 13 and 14) is hereby incorporated by reference to portions of the
Registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held in 2015. The Proxy Statement will be filed by the Registrant with the
Securities and Exchange Commission no later than 120 days after the end of the Registrant’s fiscal year ended December 31, 2014.
DOCUMENTS INCORPORATED BY REFERENCE
EXPLANATORY NOTE
On December 10, 2014, Workiva LLC was converted into a Delaware corporation and renamed
Workiva Inc. For convenience, except as the context otherwise requires, all information included in this
Annual Report on Form 10-K is presented giving effect to the conversion of the company into a corporation.
WORKIVA INC.
FORM 10-K
For the Year Ended December 31, 2014
TABLE OF CONTENTS
Part I
Item 1
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Item 15.
Business .............................................................................................................................................
Risk Factors .......................................................................................................................................
Unresolved Staff Comments ..............................................................................................................
Properties ...........................................................................................................................................
Legal Proceedings..............................................................................................................................
Mine Safety Disclosures ....................................................................................................................
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities ................................................................................................................................
Selected Consolidated Financial Data ...............................................................................................
Management’s Discussion and Analysis of Financial Condition and Results of Operations ............
Quantitative and Qualitative Disclosure About Market Risk ............................................................
Financial Statements and Supplementary Data..................................................................................
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ............
Page
1
15
39
39
39
39
40
41
44
61
62
103
Controls and Procedures ....................................................................................................................
103
Other Information ..............................................................................................................................
103
Directors, Executive Officers and Corporate Governance.................................................................
104
Executive Compensation ...................................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters ...............................................................................................................................................
Certain Relationships and Related Transactions and Director Independence ...................................
106
106
106
Principal Accounting Fees and Services ............................................................................................
106
Exhibits, Financial Statement Schedules ...........................................................................................
107
SIGNATURES .......................................................................................................................................................
S-1
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-K 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 Annual Report on Form 10-K 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.”
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 Annual Report on Form 10-K
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 Annual Report on Form 10-K to conform these statements to
actual results or revised expectations.
Part I.
Item 1. Business
Overview
Workiva created Wdesk, a cloud-based platform for enterprises to collect, manage, report and analyze
business data in real time. Our secure software platform, Wdesk allows users to integrate and control all of
their business data, regardless of format or location, with innovative live-linking technology. Our proprietary
word processing, spreadsheet and presentation applications are fully integrated and built upon the Workiva
data management engine, allowing thousands of users to collaborate simultaneously on data-linked reports
and documents. Wdesk empowers our customers to dynamically define their business processes and optimize
workflows so that critical data can be reported and analyzed more efficiently. Our customers can gain insights
based on their trusted data, which enables better real-time decision-making. Additionally, our customers
deploy our solutions to serve as a single system of record for critical data, to reduce risk and operational
costs, and to increase efficiency in business reporting. As of December 31, 2014, we provided our solutions
to more than 2,200 enterprise customers, including more than 65% of both the Fortune 500 and Fortune 100.
Enterprises struggle to manage, report, analyze and understand their ever-expanding volume of data.
Executives need to leverage this data to make real-time decisions to improve performance and reduce risk.
In addition, many businesses are required to report an increasing amount of disparate information to a variety
of regulators, further straining their ability to produce meaningful and consistent data and reports on a timely
basis. The explosion of data within enterprises has rendered existing processes and legacy technologies
inefficient at helping users find, understand and report the most critical and relevant information on a timely
basis. To create business reports, many organizations rely on manual processes, large teams and a variety of
point solutions, such as business productivity, email and general-purpose collaboration software.
Exacerbating these challenges is the continued growth in size and complexity of many enterprises, which
results in employees and data spread around the world. The stakes for enterprises are high; reporting incorrect,
incomplete or untimely information exposes organizations to potential liability, reputational risk and a
weakened competitive position.
Workiva empowers organizations to address these challenges by providing a cloud-based and mobile-
enabled platform that we believe is fundamentally changing the way people work. Our Wdesk product
platform allows multiple users to simultaneously create, review and publish data-linked documents and
reports with greater control, accuracy and productivity than ever before. We offer our customers solutions
for compliance, risk, sustainability and management reporting, as well as enterprise risk management.
Underlying these solutions is our scalable, enterprise-grade data engine that collects, aggregates and manages
our customers’ unstructured and structured data. Wdesk allows users to work anytime from anywhere with
an internet connection, enabling them to:
• Create trusted datasets that are linked and aggregated throughout Wdesk documents, spreadsheets,
presentations and reports.
• Control access to datasets, reports and workflows throughout the organization and beyond.
• Collaborate among thousands of users working in real time in a cloud-based workspace.
• Present critical data and reports to internal and external constituents.
• Decide with confidence based on trusted data and reports, enabling better and faster decision-making.
Wdesk allows users to define, automate and change their business processes in real time for what
they need, when they need it, with little or no involvement from IT personnel. Our proprietary data engine
includes live-linking technology that enables users to automatically propagate any changes to data, including
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numbers, text, charts and graphics, across every instance in which that data appears in the Wdesk workspace.
Live-linking allows customers to use trusted data to more quickly and accurately produce and update business
reports. Wdesk provides accountability and transparency through a detailed audit trail that tracks every
change made by any user over time. Control is robust, with customized permissions for each user to read,
write and edit specific sections of documents.
In March 2013, we launched our Wdesk platform, under which we currently offer solutions for
compliance, risk, sustainability and management reporting, as well as enterprise risk management. We
developed these solutions to address our customers’ immediate challenges. Our first solution was focused
on SEC reporting. SEC filings, such as Form 10-K, Form 10-Q and proxy statements, are lengthy and complex
documents that require significant collaboration across multiple business functions and external constituents,
including auditors and lawyers. Our SEC solution enables customers to automate and improve their regulatory
filing process. We have continued to add solutions to the Wdesk platform over time by identifying markets
where Wdesk can address a wide range of critical business challenges for our customers. We employ a
rigorous process to validate and prioritize new solution areas based on the number of customers that could
benefit from a new solution and our assessment of Wdesk’s ability to address that challenge.
Our technology is enterprise grade and developed to perform at scale. Wdesk utilizes the Google
Cloud Platform, which enables us to scale our compute and storage capacity on an as-needed basis. We can
deploy incremental changes to our customers on a daily basis by employing a continuous delivery process
supported by Agile software development methodologies and a proprietary quality assurance process. As a
result, all of our customers operate on the latest version of our platform, and upgrades are applied with
minimal disruption to ongoing operations. In addition, in order to keep our customers’ data secure, we have
developed advanced data security protocols that augment the standard security of the Google Cloud Platform.
Our architecture has proven scalability for global enterprises, as well as advantages in reliability and cloud
delivery.
Our “land-and-expand” sales strategy focuses on acquiring new customers and growing our existing
customer relationships. We seek to “land” new customers by using a direct-sales model. Our customer success
and professional services teams help our account managers “expand” our existing customer relationships by
providing advice and best practices that enable users to harness the full power of Wdesk. We believe our
sales strategy positions us to build relationships over time as we add new users and solutions and expand to
additional markets and geographies.
Many of the largest and most demanding enterprises in the world are our customers. We have a
broadly diversified customer base; our largest customer represented less than 2% of our revenue in 2014.
We believe that we have exceptional customer satisfaction, as evidenced by our subscription and support
revenue retention rate of 97.0% (excluding add-on seats) for the twelve months ended December 31, 2014.
We have experienced high revenue growth since the release of our first solution in March 2010. Our
revenue increased from $14.9 million in 2011 to $52.9 million in 2012, $85.2 million in 2013 and $112.7
million in 2014, representing a 96% compound annual growth rate. We incurred a net loss of $30.6 million
in 2012, $29.5 million in 2013 and $41.2 million in 2014. Approximately 81% of our revenue in 2014 was
derived from subscription and support fees, with the remainder from professional services.
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Our Industry
Key Industry Trends are Driving a Fundamental Shift in How Enterprises Collect, Manage, Report
and Analyze Critical Data.
Explosion of Data. According to IDC, the data universe will double every two years from 2013 to
2020. Data is often spread across hundreds of different sources and stored in conflicting formats.While many
enterprises maintain data in a structured enterprise resource planning (ERP) system, IDC estimates that more
than 90% of the data created is “unstructured” data, which is defined as unorganized data that resides far
outside the realms of ERP. This massive increase in the amount of data available to enterprises has complicated
the decision-making process.
Increasing Regulatory Requirements. Legislation, such as the Dodd-Frank Act and the Sarbanes-
Oxley Act, has driven new reporting mandates. Governmental agencies charged with implementing these
legislative mandates and others, such as the SEC, the Canadian Securities Administrators, the Federal Reserve
System, the Federal Deposit Insurance Corporation, the U.S. Department of Energy and the U.S.
Environmental Protection Agency, continue to issue regulations that implement new and increase existing
reporting requirements. Regulators are also implementing new, industry-specific reporting requirements.
For example, in recent years financial institutions have been required to produce reports for comprehensive
capital analysis and review (CCAR), stress testing and resolution and recovery plans (RRP).
Regulators are also demanding greater standardization and structure in the data that companies report.
For example, the SEC requires that public companies include “interactive data” in filed annual and quarterly
reports so that an investor can immediately extract specific information and compare it to performance in
past years, information from other companies and industry averages. The SEC implemented its interactive
data mandate by requiring companies to tag the financial data in their filings using XBRL (eXtensible
Business Reporting Language), which is a royalty-free, international information format designed
specifically for business information. XBRL provides a unique, electronically readable tag for each individual
disclosure item within business reports. We expect the use of XBRL in the United States to continue to grow,
as the Digital Accountability and Transparency Act of 2014 (DATA Act) mandates a common format for
data reported to the U.S. Department of Treasury and Office of Management and Budget (OMB). In addition,
XBRL tagging of filings is now required by a number of regulatory agencies outside the United States,
including the Committee of European Banking Supervisors (CEBS), the United Kingdom’s HM Revenue
& Customs (HMRC), and Companies House in Singapore.
Increasing Management Oversight. Enterprises are under increasing pressure to report a growing
amount of information to internal management teams, boards of directors and external constituents. We
believe that data needs to be collected, reported and analyzed more rapidly than ever before. Management
teams are increasingly focused on leveraging data to support critical decisions. At the same time, boards of
directors are pressing organizations to improve transparency in order to better fulfill their fiduciary duties.
Structural Shifts in Workforce Organization. Market dynamics and the globalization of enterprises
have forced companies to change the way their employees work. Organizations are becoming increasingly
global, with employees geographically distributed to support strategic and business needs. Workforce
flexibility initiatives have resulted in more employees working remotely.
Consumerization of Enterprise IT. Technical advancements in the capability of smart phones and
tablets have enabled the proliferation of mobile devices across the enterprise. Enterprise cloud-based solutions
are becoming increasingly common and are enabling employees to work from anywhere with an internet
connection, often from a mobile device. The rapid advancement of consumer applications, particularly social
media, have raised expectations for enterprise technology, as employees expect their workplace technology
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to achieve the same level of functionality, performance and ease of use as the consumer technology that
permeates their daily lives.
Existing Business Processes and Solutions Are Insufficient for the Requirements of Modern
Enterprises.
For many enterprises, the process of compiling, reporting and analyzing critical data has been manual,
iterative and error-prone. Large enterprises often employ hundreds or even thousands of people to manually
collect data and to create and update rolling versions of draft documents and underlying spreadsheets using
legacy business productivity software and niche point solutions. Modern enterprises require a level of real-
time collaboration, security and control that we believe business productivity software and point solutions
do not deliver. Shortcomings of existing business processes and solutions include the following:
Access to resources is restricted. Traditional solutions require employees to be physically present
at, or remotely logged into, a machine with the required technology and access permissions. Enterprise
remote networks are plagued by connection and performance challenges. These impediments restrict
productivity as employees attempt to complete work at home and while traveling and often lead to unapproved
workarounds that may expose sensitive data.
Collaboration is inefficient and risky. Traditional office software requires one person to work on
one version of a presentation or report at one time. This rigidity creates versioning challenges as concurrent
versions lead to a tedious and time-consuming reconciliation process. Collaboration requires opening and
closing, saving and sending, and communicating outside the document rather than inside the document, all
of which add time to document creation and risk to document integrity.
Workflows are rigid and serial. Workflows for presentation and report production operate as a series
of dependent events, with workers being unable to advance sections they are responsible for while they wait
for their turn in the document-production process. Any section completed out of order risks data integrity
and has the potential to lengthen, rather than reduce, production timelines. Unanticipated events at any step
in the workflow may slow down the entire process.
Dataset creation is highly manual. Traditional dataset creation relies on ad-hoc processes and loosely
defined protocols to consolidate a patchwork of disparate data sources with different owners and storage
locations across the enterprise. Enterprise databases are typically controlled by IT personnel, requiring
additional resources and time to query, access and manipulate data. Compiling the same dataset in future
periods often requires the same amount of time as the initial effort as enterprises are unable to leverage prior
work to roll forward datasets.
Edits are error prone and lack audit trails. Traditional software does not provide for linking
references to a single source, so when a change is made it does not flow throughout the document. The
integrity of a group of related presentations and reports is at risk every time a number is edited, and worker
productivity is lost in a cycle of implementing edits and reviewing for errors. Traditional solutions do not
offer visibility into the lineage of changes to a document. Audit trails often consist of unsatisfactory solutions,
such as tracked changes, which can be turned off, in-line comments, which are cumbersome to manage, and
versioning, which leads to inefficient workflows and reconciliation.
Control is limited. Because multiple versions of a presentation or report may be stored in numerous
locations across an enterprise, it is difficult to control who can review and edit, and even more difficult to
adjust these roles as the creation process evolves.
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The Workiva Solution
We change the way enterprises and their employees work, enabling the redesign of risky and
inefficient business processes through our Wdesk cloud-based productivity platform.
Widely Accessible Cloud-based Collaboration Platform. Our platform enables multiple users to
draft, edit and comment within the same document, spreadsheet, presentation or report at the same time from
any location with internet access. Our suite of intuitive applications provides users with an experience that
builds on familiar business productivity applications. Users are able to edit, comment and respond, allowing
collaboration in real time. Users are also empowered with a complete picture of progress in real time, helping
managers to track completion and users to synchronize sections assigned to them with sections assigned to
others.
Integrated Platform of Business Productivity Applications. We designed the Wdesk platform as an
integrated suite of word processing, spreadsheet and presentation applications that enables users to leverage
their structured and unstructured business data regardless of where it resides. Wdesk also provides a
certification application that allows any Wdesk viewer to attest to the accuracy and completeness of reports.
Users can create data collection and report certification workflows, assign and distribute them within their
organization, and monitor the process with a real-time dashboard.
Trusted Ecosystem for Critical Business Data. Our platform captures a complete history of a
document’s lineage, from the most granular edit to a spreadsheet cell formula to key document milestones.
At the same time, Wdesk provides document owners the ability to manage document permissions down to
a single section of a document. The ability to control access and user permissions with this level of granularity
enables document owners to respond to evolutions in team composition and collaboration requirements.
Ultimately, the robust audit and access control capabilities create transparency, accountability, integrity and
confidence in the data creation and report generation workflows.
Enterprise Grade and Built for Scale. Our cloud platform allows enterprises to implement and rapidly
scale users and solutions within hours, regardless of how large or complex. Our customers can access and
5
deploy our service without the need to install and maintain costly infrastructure hardware and software
necessary for on-premise deployments.
Secure Architecture. An independent auditor other than our independent registered public accounting
firm conducts an annual examination of our security controls using the widely recognized SSAE 16 SOC 1
Type 2 standard. This standard is designed to determine whether a company has reliable and suitably designed
controls and safeguards as a host and processor of customer information. To protect our customers’ data we
use enterprise-grade security measures, including sharding (which partitions data to multiple servers), multi-
factor authentication, encryption in transit and encryption at rest. Our platform undergoes regular security
audits by our customers and independent security firms.
Ability to Dynamically Define and Change Business Processes. Wdesk frees users from the confines
of traditional business processes by allowing them to dynamically define processes on-demand to support
evolving business needs. Wdesk enables multiple users to work in concert, allowing teams to redefine
workflows and business processes without the traditional challenges of data integrity, personnel limitations
and legacy software limitations. Users can make progress on different sections at different paces, and redefine
the workflow as needed to adapt to circumstances specific to the production of a single document or report.
At the same time, managers gain an added level of insight into organizational dependencies, enabling them
to reassign workflow and resources to further increase efficiency and reduce operational cost.
Benefits of Our Solution
The key benefits of using our software solutions are recognized by a wide range of decision-makers
and other users across our customers’ organizational structures.
Benefits to Our Customers Who Are Decision-Makers
Reduce Risk. Managers rely on Wdesk to help them make better decisions. Through the use of linked
data, decision-makers can trust that Wdesk presentations and reports are up to date and consistent, reducing
the risk of making decisions based on incorrect data and reporting incorrect data externally. Wdesk ensures
that presentations and reports are published using the correct business rules, formats and XBRL protocols.
Improve Data Transparency. Numbers, text, charts and graphics in presentations and reports can be
intelligently linked to an organization’s central repository for critical data, or “single source of truth,” within
Wdesk, and each data point has its own history of changes, or data lineage. Decision-makers at our customers
benefit from the ability to drill down into each discrete data point, which increases data transparency, visibility
and, therefore, trust of critical business data across an organization.
Report with Greater Frequency. Many critical presentations and reports are published infrequently
due to the difficulties associated with collecting data, compiling inputs across teams, and iterating revisions.
Within the Wdesk platform, documents, data and graphics remain intelligently linked, allowing presentations
and reports to be easily updated and synchronized and published with greater frequency.
Enable Real-time Decision-Making. Wdesk’s
live-linking and data-auditing capabilities
significantly enhance data integrity, such that Wdesk can become the centralized, trusted data repository
within our customers’ critical business data ecosystem. The use of verified data from trusted sources to
compile timely reports with less risk and greater transparency and frequency allows decision-makers to make
better informed, real-time decisions.
Benefits to Our Customers Who Are End Users
Ubiquitous Access. Users can access our platform through a web-based interface and our mobile
application anywhere an internet connection is available. By providing flexible access to our solutions, end
users can be productive at their workplace, in their homes or on-the-go.
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Faster Time to Value. Wdesk is designed to be deployed in hours or days with little or no involvement
from a customer’s IT organization. Wdesk’s user interface is highly intuitive and can be learned by end users
quickly, enabling new users to make immediate contributions to presentations and reports.
Better Collaboration with Internal and External Constituents. Our platform enables multiple users
to draft, edit and comment within the same document, spreadsheet, presentation or report at the same time
from any location with internet access. Users are able to comment and respond, allowing interactive
collaboration in real time.
Higher Job Satisfaction. Wdesk helps end users be more efficient and flexible, which we believe
leads to greater job satisfaction, employee retention, cross-role training and career mobility.
Greater Productivity through Data Linking. Because the Wdesk platform acts as an organization’s
“single source of truth,” users save time by avoiding the need to input, update and cross-check the same data
referenced in multiple, disparate presentations and reports.
Our Growth Strategy
We strive to change the way businesses collect, manage, report and analyze critical business data.
Key elements of our growth strategy include:
Pursue New Customers. Our primary growth strategy is to sell the Wdesk platform to new customers.
Our first solution was focused on SEC reporting and enabled customers to automate and improve their
regulatory filing process. In March 2013, we launched our Wdesk platform, under which we have expanded
our offerings to five solutions. We continue to attract the majority of our new customers with our compliance
reporting solutions, and we believe we can continue to take market share from our competitors in this market.
We intend to build our sales and marketing organization and leverage our brand equity to attract new
customers. We have customers in multiple end markets, and we intend to seek attractive new markets.
Generate Growth From Existing Customers. Wdesk exhibits a powerful network effect within an
enterprise, whereby the usefulness of our platform increases as the number of users, and the data that resides
in it grows. As more employees of our customers use Wdesk, additional opportunities for collaboration drive
demand among their co-workers for add-on seats of existing solutions. We intend to expand within current
customers by adding new users for existing solutions as well as adding more solutions per customer. For
example, in 2014 we began targeted efforts to market additional seats to existing customers for two additional
use cases: (i) data collection and (ii) compliance reporting related to the Sarbanes-Oxley Act (SOX). Wdesk’s
data collection capabilities allow customers to securely gather, aggregate and manage unstructured and
structured business data from across the enterprise. By using Wdesk, customers can better manage the
complicated SOX documentation and reporting process, which typically requires collaboration across several
departments and often involves hundreds of coworkers.
Grow Our International Footprint. For the year ended December 31, 2014, we generated
approximately 95% of our revenue in the United States. However, the growth drivers for our solution are
similar in other parts of the world, including the need to reduce errors and risk, improve efficiency and
respond to increasing regulatory requirements. For example, corporate sustainability reporting is mandatory
for large companies in Europe. The European Commission has estimated its mandate will impact over 6,000
companies. In addition, European public companies are also subject to regulation similar to SOX.
Accordingly, we plan to increase our sales presence in Europe.
Extend Our Suite of Solutions. We intend to introduce new solutions to continue to meet growing
demand for the creation, collaboration, presentation and analysis of critical business data. Our close and
trusted relationships with our current customers are a source of new use cases, features and solutions for our
solution roadmap. We have a disciplined process for tracking, developing and releasing new solutions that
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are designed to have immediate, broad applicability, a strong value proposition and a high return on investment
for both Workiva and our customers. Our solution strategy and advance planning groups assess customer
needs and conduct industry-based research, market and domain analysis and prototype development. This
process involves our sales and product marketing, customer success, professional services, research and
development, finance and senior management teams.
Develop New Data Solutions. We believe we are the first integrated platform technology company
to build a secure data ecosystem to manage structured and unstructured critical business data that spans data
collection, reporting and decision-making. Because of the strength of our platform, our customers
increasingly use Wdesk as their central repository for “as reported data” and often regard Wdesk as their
organization’s “single source of truth.” We believe this provides us with the following opportunities to
develop new data solutions:
• Data warehousing and analysis - We may choose to provide solutions that allow users to compare
historical trends in their data over time, which may result in improved analysis of historical data and
better decision-making processes for our users.
• Real-time risk management - Many companies report risk on an annual, semi-annual or quarterly
basis; however, using the Wdesk platform, organizations can manage based on current risk levels,
rather than report on historical risk levels. In the future, we may choose to market the ability for
organizations to utilize Wdesk to manage real-time risk decisions.
Wdesk Product Platform
Our Wdesk product platform includes solutions that enable enterprises to collect, manage, report
and analyze their critical data. Each solution is marketed for a specific use case and shares the same underlying
Wdesk technology. Our solutions include:
Compliance Reporting
We market our compliance reporting solution primarily to public companies that use it to prepare
and file regulatory reports, to create investor communications and to design and manage internal control
processes. We developed our integrated compliance reporting solution to give customers control over the
entire SEC reporting process, from data collection to document drafting through filing. Our SEC reporting
solution allows our customers to prepare and file all major SEC reports, such as Form 10-K, Form 10-Q and
Form 8-K, as well as registration statements, proxy statements and Section 16 reports. Features tailored to
the SEC reporting process include the capability to concurrently create reports in the HTML format required
for filing on the SEC’s Electronic Data Gathering, Analysis and Retrieval (EDGAR) system and the ability
to perform XBRL tagging. Canadian issuers can use our compliance reporting solution to draft and file
reports on Canada’s System for Electronic Document Analysis and Retrieval (SEDAR). Our compliance
reporting solution also enables customers to create press releases, slide presentations and other investor
relations materials with data linked to the corresponding filing. In addition, customers can use our compliance
reporting solution to create and track process narratives and flows, matrices, and other documentation required
to implement the assessment and audit of internal controls over financial reporting required by the Sarbanes-
Oxley Act (SOX) and similar legislation in Canada and Europe. Implementing our compliance reporting
solution allows customers to create a fully integrated, parallel process across each of these areas, thereby
saving time, increasing accuracy and reducing costs.
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Risk Reporting
An evolving regulatory environment and ever-changing mandates are driving significant complexity
in risk reporting, which is often carried out by teams scattered across different departments and geographies.
Examples of regulations driving the need for our risk reporting solution include the Dodd-Frank Act, Basel
III, Capital Requirements Regulation (CRR) and Capital Requirements Directive (CRD). We market our
risk reporting solution primarily to financial services customers for the following use cases:
• Resolution and recovery plans;
• Comprehensive capital analysis and review (CCAR);
• Stress testing;
• Enterprise risk; and
• Own risk and solvency assessment (ORSA).
With our solutions, risk management practices can be integrated throughout the organization while
maintaining information privacy, audit trails and security resulting in highly efficient and transparent
regulatory compliance.
Sustainability Reporting
Our sustainability reporting solution is designed to address evolving global standards of corporate
sustainability reporting. Our solutions are tailored to meet the requirements of common frameworks, such
as the Carbon Disclosure Project (CDP), Dow Jones Sustainability Indices (DJSI), and Global Reporting
Initiative (GRI). We market our sustainability reporting solution primarily for the following use cases:
• Sustainability risk;
• Environment, health and safety (EHS) data management;
• Supplier data management; and
• Supplier assessments.
Each organization has a unique approach to sustainability, and our Wdesk platform provides the
flexibility to gather data from disparate sources, optimize workflows and develop custom, iterative and
repeatable reports.
Management Reporting
Teams across enterprises are increasingly being asked to create complex financial and managerial
reports to better drive real-time business decisions. Our management reporting solution is designed to improve
the integrity and accuracy of management reports and the productivity of employees engaged in these
reporting workflows. Our management reporting solution may be suitable for public, private, governmental
and non-profit enterprises, primarily for the following use cases:
• Strategic planning budget and forecasting;
• Board committee and quarterly reporting;
• C-Suite reporting;
• Monthly operation and flash reports; and
• Annual audit reports.
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Our management reporting solution improves transparency by seamlessly connecting data to all
desired locations and increases efficiency by eliminating manual, monthly roll forwards.
Enterprise Risk Management
We have begun to market our enterprise risk management solution as a tool for executives to identify
systemic risks, determine risk probabilities, assess risk magnitude and plan strategic responses. This solution
is designed to help executives analyze the data collected and aggregated by Wdesk and make real-time
enterprise risk management decisions.
Our Platform Technology
Wdesk is the cloud-based, multi-tenant technology platform upon which all Workiva software
solutions run. Wdesk is built upon the Google Cloud Platform and Amazon Web Services and is composed
of proprietary and open-source technologies. Users can access all Wdesk solutions via any standard web
browser, mobile web browsers and iPad and Android applications. We believe that the following
characteristics make our platform technology one of our key competitive advantages:
Easy to Deploy and Configure. The Wdesk platform can be deployed enterprise-wide within hours
for new customers and can be seamlessly configured by the customer for individual employees or entire
teams. Because our solutions are browser-based, customers avoid costly, time-intensive deployments
typically associated with enterprise software.
High Performance. The performance of the Wdesk technology platform has been tested and proven
by some of the largest, most demanding enterprises in the world. Our platform is built for organizations of
all sizes. The architecture, design, deployment and management of our solutions are focused on enterprise-
grade scalability, availability and security. Our underlying code base of approximately 10 million lines of
code is continually optimized in order to ensure high performance for our users.
Always On. Our customers are highly dependent on our solutions for their reporting and performance
management needs. As a result, Wdesk is designed as an “always on” service. Additionally, constant customer
collaboration and development iteration allows us to release a new version of Wdesk nearly every day,
without the need for our customers to use costly IT resources.
Scales Rapidly. Wdesk is designed to support concurrent user sessions within a global enterprise,
managing hundreds of millions of data elements while continuing to deliver rapid processing performance.
A number of our enterprise customers have reported millions of links to single sources of data, among multiple
documents, spreadsheets and presentations, without any noticeable negative effects on performance. Wdesk
is designed to support millions of end users as a result of its scalability and our relationship with the Google
Cloud Platform and Amazon Web Services.
Secure. Many of the largest enterprises in the world trust us with their most sensitive data. Wdesk
employs stringent data security, reliability, integrity and privacy practices. In addition to our continuous
customer security audits, we aggressively test the security of our operations by subjecting it to ongoing
penetration and vulnerability testing. The quality of our data security efforts is validated by our annual
completion of an independent audit process using the SSAE 16 SOC 1 Type 2 standard. In addition to the
physical, operational and infrastructure security precautions provided by our technology partners, Google
and Amazon, we also employ additional security layers to protect our customers’ data, including methods
for storing user data in separate discreet encrypted storage entities as well as multi-factor authentication,
encryption in transit and encryption at rest.
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Research and Development
Our research and development team is distributed among nine office locations in North America,
including our headquarters in Ames, Iowa.
Our research and development efforts are focused on improving the Wdesk platform for broad use
across all of our solutions, rather than developing custom use cases or vertically focused features. Our
development teams can deploy incremental changes to our platform for our customers on a daily basis. We
employ a continuous delivery process supported by Agile software development methodologies and a
proprietary quality assurance process. Our spending on research and development reached $44.1 million in
2014, up 29.4% from $34.1 million in 2013 due mainly to higher headcount to support the continued addition
of features to our platform.
To ensure new features are intuitive and efficient, each development team has a dedicated user
interface designer who is focused on delivering an optimized user experience. Additionally, we continuously
test our software code using a combination of quality assurance personnel and a proprietary automated testing
suite. We believe our focus on user experience and our rigorous quality assurance culture are key
differentiators that contribute to the success of our Wdesk platform.
Our Customers
Workiva is trusted by thousands of organizations, including global enterprises with hundreds of
thousands of employees. As of December 31, 2014, we had more than 2,200 customers, including over 65%
of both the Fortune 500 and Fortune 100 companies. Our solutions change and optimize the way our customers
do their work. Our customers are passionate, loyal supporters of our solutions, as demonstrated by our
subscription and support revenue retention rate of 97.0% (excluding add-on seats) for the twelve months
ended December 31, 2014.
Our Competition
The intensity and nature of our competition varies significantly across our different solutions, as
changes in regulation and market trends result in evolving customer requirements for enterprise software.
Our primary competition includes:
• Manual business processes that rely on legacy business productivity tools;
• Diversified enterprise software providers;
• Niche software providers that provide point solutions;
• Providers of professional services, including consultants and business and financial printers;
• Governance, risk and compliance software providers; and
• Business intelligence / corporate performance management software providers.
As our market grows, we expect it will attract more highly specialized software vendors as well as
larger vendors that may continue to acquire or bundle their products more effectively.
The principal competitive factors in our market include: product features, reliability, performance
and effectiveness; product line breadth, diversity and applicability; product extensibility and ability to
integrate with other technology infrastructures; price and total cost of ownership; adherence to industry
standards and certifications; strength of sales and marketing efforts; and brand awareness and reputation.
We believe that our cloud-based and mobile-enabled platform is, and will continue to be, an advantage that
helps us compete favorably.
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Sales and Marketing
Our “land-and-expand” sales strategy focuses on acquiring new customers and growing our existing
customer relationships. We believe that we have penetrated only a small fraction of our market opportunity,
and we intend to invest in sales and marketing to drive growth.
Sales
Our sales organization is responsible for generating new customer opportunities and managing add-
on sales. We believe our direct-sales approach allows us to most efficiently reach our prospects and customers.
Our sales organization comprises business development managers, new account managers and current
account managers, all of whom are responsible for achieving quotas.
Our business development managers generate high-quality, cost-effective leads and meetings for
our new account managers. Our new account managers are segmented by solution, industry and geography
to best meet the needs of prospective customers. Our current account managers focus on helping existing
customers expand the use of Wdesk solutions into new use cases and across functional areas within their
organizations.
We expect to continue to build our sales headcount in our current markets, as well as expand our
sales footprint into countries where we currently do not have a direct-sales presence. To achieve this growth,
we plan to continue to hire energetic and motivated sales people with experience in large enterprise software
sales organizations. We believe that our approach to hiring sales people will allow us to retain sales talent
and continue to drive growth.
Marketing
Our marketing organization comprises three segments: advance planning, product marketing and
outbound marketing. Our advance planning team assesses customer needs, conducts industry-based research
and defines new markets. Our product marketing team creates and packages our marketing message and
develops marketing and sales strategies. Our outbound marketing team focuses on organic demand generation
by building market awareness of our platform and solutions, generating customer leads, and managing our
brand equity and customer loyalty. This team is also responsible for industry analyst relationships, digital
and print campaigns, and sponsoring events and professional organizations, including the SEC Professionals
Group. Additionally, the outbound marketing team hosts our annual user conference, The Exchange
Community (TEC). TEC brings our customers together with our developers, professional services and
customer success managers to learn and collaborate. TEC is our largest user event each year and features
sessions with industry thought leaders, business networking events and opportunities to share ideas for
enhancements and use cases.
Customer Success and Professional Services
We believe our customer success and professional services teams are essential elements of our long-
term success and differentiate our service from our competitors. The performance of these teams contributed
to a 95% customer satisfaction rating on a survey that we conducted as of June 30, 2014.
Our customer success team provides support to our customers with in-depth knowledge and
continuity for each customer’s processes and the Wdesk solutions used by them. Our customer success
managers provide 24/7 live customer support via phone, digital messaging and web conferencing. A customer
success manager is assigned to each customer and is accountable for that customer’s satisfaction with our
solutions. We carefully train our customer success employees and segment them for each solution and market
focus. As part of our knowledge commitment, we created the Workiva employee university, featuring an in-
house, e-learning curriculum. This is designed to help customer success and other employees keep current
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with industry and technology issues. We also pay for employees to maintain professional certifications and
licenses that are important to our customers, and we host regular employee education sessions on business,
industry, technology and workplace topics.
Our professional services team performs XBRL mapping, tagging and review for our customers and
also provides training and other services. We typically require our professional services managers to have
prior accounting or financial reporting experience.
Intellectual Property
Our intellectual property and proprietary rights are important to our business. To safeguard these
rights, we rely on a combination of patent, trademark, copyright and trade secret laws and contractual
protections in the United States and other jurisdictions.
As of December 31, 2014, we had 6 issued patents and 14 patent applications pending in the United
States relating to our platform. We cannot assure you whether any of our patent applications will result in
the issuance of a patent or whether the examination process will require us to narrow or otherwise limit our
claims. Any patents issued may be contested, designed around, found unenforceable, or invalidated, and we
may not be able to prevent third parties from infringing them. We also license software from third parties
for integration into our solutions, including open source software and other software available on
commercially reasonable terms. We cannot assure you that such third parties will maintain such software or
continue to make it available.
We control access to and use of our proprietary software and other confidential information through
the use of internal and external controls, including contractual protections with employees, contractors, end-
customers, and partners, and our software is protected by U.S. and international copyright laws. Despite our
efforts to protect our trade secrets and proprietary rights through intellectual property rights, licenses, and
confidentiality agreements, unauthorized parties may still copy or otherwise obtain and use our software and
technology. In addition, we intend to expand our international operations, and effective patent, copyright,
trademark, and trade-secret protection may not be available or may be limited in foreign countries.
If we become more successful, we believe that competitors will be more likely to try to develop
solutions and services that are similar to ours and that may infringe our proprietary rights. It may also be
more likely that competitors or other third parties will claim that our platform infringes their proprietary
rights.
Our industry is characterized by the existence of a large number of patents and frequent claims and
related litigation regarding patent and other intellectual property rights. In particular, leading companies in
the enterprise software industry have extensive patent portfolios and are regularly involved in both offensive
and defensive litigation. From time to time, third parties, including certain of these leading companies, may
assert claims of infringement, misappropriation or other violations of intellectual property rights against us,
and our standard license and other agreements obligate us to indemnify our customers against such claims.
Successful claims of infringement by a third party could prevent us from distributing certain solutions or
performing certain services, require us to expend time and money to develop non-infringing solutions, or
force us to pay substantial damages (including enhanced damages if we are found to have willfully infringed
patents or copyrights), royalties or other fees. In addition, to the extent that we gain greater visibility and
market exposure as a public company, we face a higher risk of being the subject of intellectual property
infringement claims from third parties. We cannot assure you that we do not currently infringe, or that we
will not in the future infringe, upon any third-party patents, copyrights or other proprietary rights.
We have registered the “Workiva,” “Wdesk” and “WebFilings” trademarks and logos with the United
States Patent and Trademark Office and in several jurisdictions outside the United States. We have also
registered other trademarks in the United States and in other jurisdictions outside the United States. In
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addition, we intend to expand our international operations, and we cannot assure you that these names will
be available for use in all such jurisdictions.
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. 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.
Employees
As of December 31, 2014, we had 953 full-time employees. Our headcount as of December 31, 2014
increased 23% from our headcount as of December 31, 2013. None of our employees is represented by a
labor organization or is a party to any collective bargaining arrangement. We have never experienced a strike
or similar work stoppage, and we consider our relations with our employees to be good.
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Item 1A. Risk Factors
Our operations and financial results are subject to various risk and uncertainties, including those
described below. You should carefully consider the following risks and all of the other information contained
in this report, including our consolidated financial statements and related notes, before investing in any of
our securities. The risks and uncertainties described below are not the only ones we face. Additional risks
and uncertainties that we are unaware of, or that we currently believe are not material, may also become
important factors that adversely affect our business. If any of the following risks, or other risks and
uncertainties that are not yet identified or that we currently think are immaterial, actually occur, our business,
financial condition, results of operations and future prospects could be materially and adversely affected.
In that event, the market price of our Class A common stock could decline. We may amend, supplement or
add to the risk factors described below from time to time in future reports filed with the SEC.
Risks Related to Our Business and Industry
We have a limited operating history, which makes it difficult to predict our future operating results.
We were founded in 2008 and have a limited operating history. We began offering our first solution
in March 2010 and launched Wdesk in March 2013. As a result of our brief operating history, our ability to
forecast our future operating results is limited and subject to a number of uncertainties, including our ability
to plan for and model future growth. We have encountered and will encounter risks and uncertainties
frequently experienced by growing companies in rapidly changing industries, such as the risks and
uncertainties described herein. If our assumptions regarding these risks and uncertainties (which we use to
plan our business) are incorrect or change due to changes in our markets, or if we do not address these risks
successfully, our operating and financial results could differ materially from our expectations and our business
could suffer.
We have not been profitable historically and may not achieve or maintain profitability in the future.
We have posted a net loss in each fiscal year since we began operations in 2008, including net losses
of approximately $41.2 million in fiscal 2014, $29.5 million in fiscal 2013 and $30.6 million in fiscal 2012.
While we have experienced significant revenue growth in recent periods, we are not certain whether or when
we will obtain a high enough volume of subscriptions to sustain or increase our growth or achieve or maintain
profitability in the future. In addition, we plan to continue to invest in our infrastructure, new solutions,
research and development and sales and marketing, and as a result, we cannot assure you that we will achieve
or maintain profitability. Because we intend to continue spending in anticipation of the revenue we expect
to receive from these efforts, our expenses will be greater than the expenses we would incur if we developed
our business more slowly. In addition, we may find that these efforts are more expensive than we currently
anticipate, which would further impact our profitability.
In addition, as a public company, we will incur significant accounting, legal and other expenses that
we did not incur as a private company. As a result of these increased expenditures, we will have to generate
and sustain increased revenue to achieve future profitability. We may incur losses in the future for a number
of reasons, including the other risks and uncertainties described in this annual report. Additionally, we may
encounter unforeseen operating expenses, difficulties, complications, delays and other unknown factors that
may result in losses in future periods. If our revenue growth does not meet our expectations in future periods,
our financial performance may be harmed, and we may not achieve or maintain profitability in the future.
Our revenue growth rate in recent periods may not be indicative of our future performance.
We experienced revenue growth rates of 32%, 61% and 256% in fiscal 2014, 2013 and 2012,
respectively. Our historical revenue growth rates are not indicative of future growth, and we may not achieve
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similar revenue growth rates in future periods. You should not rely on our revenue for any prior quarterly or
annual periods as any indication of our future revenue or revenue growth. If we are unable to maintain
consistent revenue or revenue growth, our stock price could be volatile, and it may be difficult to achieve
and maintain profitability.
Failure to manage our growth may adversely affect our business or operations.
Since 2010, we have experienced significant growth in our business, customer base, employee
headcount and operations, and we expect to continue to grow our business rapidly over the next several
years. This growth places a significant strain on our management team and employees and on our operating
and financial systems. To manage our future growth we must continue to scale our business functions,
improve our financial and management controls and our reporting systems and procedures and expand and
train our work force. In particular, we grew from 109 employees as of December 31, 2010 to more than 950
employees as of December 31, 2014. We anticipate that additional investments in sales personnel,
infrastructure and research and development spending will be required to:
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•
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scale our operations and increase productivity;
address the needs of our customers;
further develop and enhance our existing solutions and offerings;
develop new technology; and
expand our markets and opportunity under management, including into new solutions and geographic
areas.
We cannot assure you that our controls, systems and procedures will be adequate to support our
future operations or that we will be able to manage our growth effectively. We also cannot assure you that
we will be able to continue to expand our market presence in the United States and other current markets or
successfully establish our presence in other markets. Failure to effectively manage growth could result in
difficulty or delays in deploying customers, declines in quality or customer satisfaction, increases in costs,
difficulties in introducing new features or other operational difficulties, and any of these difficulties could
adversely impact our business performance and results of operations.
Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance
of our business.
Our quarterly results of operations, including the levels of our revenue, gross margin, profitability,
cash flow and deferred revenue, may vary significantly in the future, and period-to-period comparisons of
our operating results may not be meaningful. Accordingly, the results of any one quarter should not be relied
upon as an indication of future performance. Our quarterly financial results may fluctuate as a result of a
variety of factors, many of which are outside of our control, and therefore, may not fully reflect the underlying
performance of our business. Fluctuations in quarterly results may negatively impact the value of our Class
A common stock. Factors that may cause fluctuations in our quarterly financial results include, without
limitation, those listed below:
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•
our ability to attract new customers in multiple regions around the world;
the addition or loss of large customers, including through acquisitions or consolidations;
the timing of recognition of revenue;
the amount and timing of operating expenses related to the maintenance and expansion of our
business, operations and infrastructure;
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•
•
•
•
•
•
•
•
•
•
•
•
•
network outages, security breaches, technical difficulties or interruptions with our services;
general economic, industry and market conditions;
customer renewal rates and the extent to which customers subscribe for additional seats or solutions;
pricing changes upon any renewals of customer agreements;
changes in our pricing policies or those of our competitors;
the mix of solutions sold during a period;
seasonal variations in sales of our solutions;
the timing and success of new product and service introductions by us or our competitors or any
other change in the competitive dynamics of our industry, including consolidation among
competitors, customers or strategic partners;
the announcement or adoption of new regulations and policy mandates or changes to existing
regulations and policy mandates;
changes in foreign currency exchange rates;
future accounting pronouncements or changes in our accounting policies;
general economic conditions, both domestically and in the foreign markets in which we sell our
solutions;
the timing of expenses related to the development or acquisition of technologies or businesses and
potential future charges for impairment of goodwill from acquired companies; and
•
unforeseen litigation and intellectual property infringement.
To date, we have derived a substantial majority of our revenue from customers using our Wdesk platform
for SEC filings. Our efforts to increase use of our Wdesk platform and other applications may not succeed
and may reduce our revenue growth rate.
To date, we have derived a substantial majority of our revenue from customers using our Wdesk
platform for SEC filings. Our sales and marketing of Wdesk for risk, sustainability, compliance and
management reporting, enterprise risk management and data collection is relatively new, and it is uncertain
whether these areas will achieve the level of market acceptance we have achieved in the SEC filing market.
Further, the introduction of new solutions beyond these markets may not be successful. Because it is our
policy not to view actual customer data unless specifically invited by a customer to do so, we are unable to
determine with any certainty how customers are using our platform and may not be able to determine with
certainty the extent to which our new solutions are being utilized by customers. Any factor adversely affecting
sales of our platform or solutions, including release cycles, market acceptance, competition, performance
and reliability, reputation and economic and market conditions, could adversely affect our business and
operating results.
Our solutions face intense competition in the marketplace. If we are unable to compete effectively, our
operating results could be adversely affected.
The market for our solutions is increasingly competitive, rapidly evolving and fragmented, and is
subject to changing technology and shifting customer needs. Although we believe that our Wdesk platform
and the solutions that it offers are unique, many vendors develop and market products and services that
compete to varying extents with our offerings, and we expect competition in our market to continue to
intensify. Moreover, industry consolidation may increase competition. In addition, many companies have
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chosen to invest in their own internal reporting solutions and therefore may be reluctant to switch to solutions
such as ours.
We compete with many types of companies, including diversified enterprise software providers;
providers of professional services, such as consultants and business and financial printers; governance, risk
and compliance software providers; and business intelligence/corporate performance management software
providers. Many of our existing competitors, as well as a number of potential new competitors, have longer
operating histories, greater name recognition, more established customer bases and significantly greater
financial, technical, marketing and other resources than we do. As a result, our competitors may be able to
respond more quickly and effectively than we can to new or changing opportunities, technologies, standards
or customer requirements. We could lose customers if our competitors introduce new competitive products,
add new features, acquire competitive products, reduce prices, form strategic alliances with other companies
or are acquired by third parties with greater available resources. We also face competition from a variety of
vendors of cloud-based and on-premise software applications that address only a portion of one of our
solutions. We may also face increasing competition from open source software initiatives, in which
competitors may provide software and intellectual property for free. In addition, if a prospective customer
is currently using a competing solution, the customer may be unwilling to switch to our solutions without
access to setup support services. If we are unable to provide those services on terms attractive to the customer,
the prospective customer may be unwilling to utilize our solutions. If our competitors’ products, services or
technologies become more accepted than our solutions, if they are successful in bringing their products or
services to market earlier than ours, or if their products or services are more technologically capable than
ours, then our revenue could be adversely affected. In addition, some of our competitors may offer their
products and services at a lower price. If we are unable to achieve our target pricing levels, our operating
results would be negatively affected. Pricing pressures and increased competition could result in reduced
sales, reduced margins, losses or a failure to maintain or improve our competitive market position, any of
which would adversely affect our business.
If we do not keep pace with technological changes, our solutions may become less competitive and our
business may suffer.
Our market is characterized by rapid technological change, frequent product and service innovation
and evolving industry standards. If we are unable to provide enhancements and new features for our existing
solutions or new solutions that achieve market acceptance or that keep pace with these technological
developments, our business could be adversely affected. For example, we are focused on enhancing the
features of our non-SEC reporting solutions to enhance their utility to larger customers with complex, dynamic
and global operations. The success of enhancements, new features and solutions depends on several factors,
including the timely completion, introduction and market acceptance of the enhancements or new features
or solutions. Failure in this regard may significantly impair our revenue growth. In addition, because our
solutions are designed to operate on a variety of systems, we will need to continuously modify and enhance
our solutions to keep pace with changes in internet-related hardware, software, communication, browser and
database technologies. We may not be successful in either developing these modifications and enhancements
or in bringing them to market in a timely fashion. Furthermore, uncertainties about the timing and nature of
new network platforms or technologies, or modifications to existing platforms or technologies, could increase
our research and development expenses. Any failure of our solutions to keep pace with technological changes
or operate effectively with future network platforms and technologies could reduce the demand for our
solutions, result in customer dissatisfaction and adversely affect our business.
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If we fail to manage our technical operations infrastructure, our existing customers may experience
service outages, and our new customers may experience delays in the deployment of our solutions.
We have experienced significant growth in the number of users, projects and data that our operations
infrastructure supports. We seek to maintain sufficient excess capacity in our operations infrastructure to
meet the needs of all of our customers. We also seek to maintain excess capacity to facilitate the rapid
provision of new customer deployments and the expansion of existing customer deployments. In addition,
we need to properly manage our technological operations infrastructure in order to support changes in
hardware and software parameters and the evolution of our solutions, all of which require significant lead
time. Our Wdesk platform interacts with technology provided by Google and other third-party providers,
and our technological infrastructure depends on this technology. We have experienced, and may in the future
experience, website disruptions, outages and other performance problems. These problems may be caused
by a variety of factors, including infrastructure changes, human or software errors, viruses, security attacks,
fraud, spikes in customer usage and denial of service issues. In some instances, we may not be able to identify
the cause or causes of these performance problems within an acceptable period of time. If we do not accurately
predict our infrastructure requirements, our existing customers may experience service outages that may
subject us to financial penalties, financial liabilities and customer losses. If our operations infrastructure fails
to keep pace with increased sales, customers may experience delays as we seek to obtain additional capacity,
which could adversely affect our reputation and our revenue.
As a provider of cloud-based software, we rely on the services of third-party data center hosting facilities.
Interruptions or delays in those services could impair the delivery of our service and harm our business.
Our Wdesk platform has been developed with, and is based on, cloud computing technology. It is
hosted pursuant to service agreements on servers by third-party service providers, including those with
Google and Amazon. We do not control the operation of these providers or their facilities, and the facilities
are vulnerable to damage, interruption or misconduct. Unanticipated problems at these facilities could result
in lengthy interruptions in our services. If the services of one or more of these providers are terminated,
disrupted, interrupted or suspended for any reason, we could experience disruption in our ability to offer our
solutions, or we could be required to retain the services of replacement providers, which could increase our
operating costs and harm our business and reputation. In addition, as we grow, we may move or transfer our
data and our customers’ data to other cloud hosting providers. Despite precautions taken during this process,
any unsuccessful data transfers may impair the delivery of our service. Further, any damage to, or failure
of, the cloud servers that we use could result in interruptions in our services. Interruptions in our service
may damage our reputation, reduce our revenue, cause us to issue credits or pay penalties, cause customers
to terminate their subscriptions and adversely affect our renewal rates and our ability to attract new customers.
Our business would be harmed if our customers and potential customers believe our service is unreliable.
Any failure or interruptions in the internet infrastructure, bandwidth providers, data center providers,
other third parties or our own systems for providing our solutions to customers could negatively impact
our business.
Our ability to deliver our solutions is dependent on the development and maintenance of the internet
and other telecommunications services by third parties. Such services include maintenance of a reliable
network backbone with the necessary speed, data capacity and security for providing reliable internet access
and services and reliable telecommunications systems that connect our operations. While our solutions are
designed to operate without interruption, we may experience interruptions and delays in services and
availability from time to time. We rely on systems as well as third-party vendors, including data center,
bandwidth, and telecommunications equipment providers, to provide our solutions. We do not maintain
redundant systems or facilities for some of these services. In the event of a catastrophic event with respect
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to one or more of these systems or facilities, we may experience an extended period of system unavailability,
which could negatively impact our relationship with our customers.
Any failure to offer high-quality technical support services may adversely affect our relationships with
our customers and our financial results.
Once our solutions are deployed, our customers depend on our customer success organization to
resolve technical issues relating to our solutions. We may be unable to respond quickly enough to
accommodate short-term increases in customer demand for support services. We also may be unable to
modify the format of our support services to compete with changes in support services provided by our
competitors. Increased customer demand for these services, without corresponding revenue, could increase
costs and adversely affect our operating results. In addition, our sales process is highly dependent on our
solutions and business reputation and on positive recommendations from our existing customers. Any failure
to maintain high-quality technical support, or a market perception that we do not maintain high-quality
support, could adversely affect our reputation, our ability to sell our solutions to existing and prospective
customers, and our business, operating results and financial position.
Because our Wdesk platform is offered on a subscription basis, we are required to recognize revenue for
it over the term of the subscription. As a result, downturns or upturns in sales may not be immediately
reflected in our operating results.
We generally recognize subscription and support revenue from customers ratably over the terms of
their subscription agreements, which are typically on a quarterly or annual cycle and automatically renew
for additional periods. As a result, a substantial portion of the revenue we report in each quarter will be
derived from the recognition of deferred revenue relating to subscription agreements entered into during
previous quarters. Consequently, a decline in new or renewed subscriptions in any one quarter may not be
immediately reflected in our revenue results for that quarter. This decline, however, will negatively affect
our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance
of our solutions and potential changes in our rate of renewals may not be fully reflected in our results of
operations until future periods. Our subscription model also makes it difficult for us to rapidly increase our
subscription revenue through additional sales in any period, as revenue from new customers must be
recognized over the applicable subscription term. In addition, we may be unable to adjust our cost structure
to reflect the changes in revenue, which could adversely affect our operating results.
We cannot accurately predict subscription renewal or upgrade rates and the impact these rates may have
on our future revenue and operating results.
Our business depends substantially on customers renewing their subscriptions with us and expanding
their use of our services. Our customers have no obligation to renew their subscriptions for our services after
the expiration of their initial subscription period. While we have historically maintained a subscription and
support revenue retention rate of greater than 95%, we may be unable to maintain this historical rate. Given
our limited operating history, we may be unable to accurately predict our subscription and support revenue
retention rate. In addition, our customers may renew for shorter contract lengths, lower prices or fewer users.
We cannot accurately predict new subscription or expansion rates and the impact these rates may have on
our future revenue and operating results. Our renewal rates may decline or fluctuate as a result of a number
of factors, including customer dissatisfaction with our service, customers’ ability to continue their operations
and spending levels and deteriorating general economic conditions. If our customers do not renew their
subscriptions for our service or reduce the number of solutions they purchase at the time of renewal, or if
they negotiate a lower price upon renewal, our revenue will decline and our business will suffer. Our future
success also depends in part on our ability to sell additional solutions and services, more subscriptions or
enhanced editions of our services to our current customers, which may also require increasingly sophisticated
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and costly sales efforts that are targeted at senior management. If our efforts to sell additional solutions and
services to our customers are not successful, our growth and operations may be impeded. In addition, any
decline in our customer renewals or failure to convince our customers to broaden their use of our services
would harm our future operating results.
Adverse economic conditions or reduced technology spending may adversely impact our business.
Our business depends on the overall demand for technology and on the economic health of our
current and prospective customers. In general, worldwide economic conditions remain unstable, and these
conditions make it difficult for our customers, prospective customers and us to forecast and plan future
business activities accurately, and they could cause our customers or prospective customers to reevaluate
their decision to purchase our solutions. Weak global economic conditions, or a reduction in technology
spending even if economic conditions improve, could adversely impact our business, financial condition
and results of operations in a number of ways, including longer sales cycles, lower prices for our solutions,
reduced bookings and lower or no growth.
If we cannot maintain our corporate culture as we grow, we could lose the innovation, teamwork, passion
and focus on execution that we believe contribute to our success, and our business may be harmed.
We believe our corporate culture is a critical component to our success. We have invested substantial
time and resources in building our team. As we grow and develop the infrastructure of a public company,
we may find it difficult to maintain our corporate culture. Any failure to preserve our culture could negatively
affect our future success, including our ability to retain and recruit personnel and effectively focus on and
pursue our corporate objectives.
We depend on our senior management team and other key employees, and the loss of one or more key
employees could adversely affect our business.
Our success depends largely upon the continued services of our key executive officers. We also rely
on our leadership team and other mission-critical individuals in the areas of research and development,
marketing, sales, services and general and administrative functions. From time to time, there may be changes
in our management team resulting from the hiring or departure of executives or other key employees, which
could disrupt our business. Our senior management and key employees are generally employed on an at-
will basis, which means that they could terminate their employment with us at any time. The loss of one or
more of our executive officers or key employees could have a material adverse effect on our business.
Our ability to attract, train and retain qualified employees is crucial to our results of operations and any
future growth.
To execute our growth plan, we must attract and retain highly qualified personnel. Competition for
these individuals is intense, especially for engineers with high levels of experience in designing and
developing software and internet-related services, senior sales executives and professional services personnel
with appropriate financial reporting experience. We have, from time to time, experienced, and we expect to
continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. Many
of the companies with which we compete for experienced personnel have greater resources than we have.
If we hire employees from competitors or other companies, their former employers may attempt to assert
that these employees have breached their legal obligations or that we have induced such breaches, resulting
in a diversion of our time and resources. If we fail to attract new personnel or fail to retain and motivate our
current personnel, our business and future growth prospects could be adversely affected.
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Our workforce is our primary operating expense and subjects us to risks associated with increases in the
cost of labor as a result of increased competition for employees, higher employee turnover rates and
required wage increases and health benefit coverage, lawsuits or labor union activity.
Labor is our primary operating expense. As of December 31, 2014, we employed 953 full-time
employees. For the fiscal year ended December 31, 2014, labor-related expense accounted for approximately
66% of our total operating expense. We may face labor shortages or increased labor costs because of increased
competition for employees, higher employee turnover rates, or increases in employee benefit costs. If labor-
related expenses increase, our operating expense could increase, which would adversely affect our business,
financial condition and results of operations.
We are subject to the Fair Labor Standards Act (FLSA) and various federal and state laws governing
such matters as minimum wage requirements, overtime compensation and other working conditions,
citizenship requirements, discrimination and family and medical leave. In recent years, a number of
companies have been subject to lawsuits, including class action lawsuits, alleging violations of federal and
state law regarding workplace and employment matters, overtime wage policies, discrimination and similar
matters. A number of these lawsuits have resulted in the payment of substantial damages by the defendants.
Similar lawsuits may be threatened or instituted against us from time to time, and we may incur substantial
damages and expenses resulting from lawsuits of this type, which could have a material adverse effect on
our business, financial condition or results of operations.
There may be adverse tax and employment law consequences if the independent contractor status of our
consultants or the exempt status of our employees is successfully challenged.
We retain consultants from time to time as independent contractors. Although we believe that we
have properly classified these individuals as independent contractors, there is nevertheless a risk that the
Internal Revenue Service (IRS) or another federal, state, provincial or foreign authority will take a different
view. Furthermore, the tests governing the determination of whether an individual is considered to be an
independent contractor or an employee are typically fact sensitive and vary from jurisdiction to jurisdiction.
Laws and regulations that govern the status and misclassification of independent contractors are subject to
change or interpretation by various authorities. If a federal, state or foreign authority or court enacts legislation
or adopts regulations that change the manner in which employees and independent contractors are classified
or makes any adverse determination with respect to some or all of our independent contractors, we could
incur significant costs under such laws and regulations, including for prior periods, in respect of tax
withholding, social security taxes or payments, workers’ compensation and unemployment contributions,
and recordkeeping, or we may be required to modify our business model, any of which could materially
adversely affect our business, financial condition and results of operations. There is also a risk that we may
be subject to significant monetary liabilities arising from fines or judgments as a result of any such actual
or alleged non-compliance with federal, state or foreign tax laws. Further, if it were determined that any of
our independent contractors should be treated as employees, we could incur additional liabilities under our
applicable employee benefit plans.
In addition, we have classified many of our U.S. employees as “exempt” under the FLSA. If it were
determined that any of our U.S. employees who we have classified as “exempt” should be classified as “non-
exempt” under the FLSA, we may incur costs and liabilities for back wages, unpaid overtime, fines or
penalties and be subject to employee litigation.
Fixed-fee engagements with customers may not meet our expectations if we underestimate the cost of
these engagements.
We provide certain professional services on a fixed-fee basis. When making proposals for fixed-fee
engagements, we estimate the costs and timing for completing the engagements. We are beginning to provide
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professional services on new solutions, including our data collection and Sarbanes-Oxley compliance
solutions, which may involve a different mix of subscription, support and services than we have experienced
to date. The contribution of this new revenue mix may impact our gross margins in ways that we cannot
predict. If we are required to spend more hours than planned to perform these services, our cost of services
revenue could exceed the fees charged to our customers on certain engagements and could cause us to
recognize a loss on a contract, which would adversely affect our operating results. In addition, if we are
unable to provide these professional services, we may lose sales or incur customer dissatisfaction, and our
business and operating results could be significantly harmed.
Our sales cycle is unpredictable. As more of our sales efforts are targeted at larger enterprise customers,
our sales cycle may become more time-consuming and expensive, and we may encounter pricing pressure,
which could harm our business and operating results.
The cost and length of our sales cycle varies by customer and is unpredictable. As we target more
of our sales efforts at selling additional solutions to larger enterprise customers, we may face greater costs,
longer sales cycles and less predictability in completing some of our sales. These types of sales often require
us to provide greater levels of education regarding the use and benefits of our service. In addition, larger
customers may demand more document setup services, training and other professional services. As a result
of these factors, these sales opportunities may require us to devote greater sales support and professional
services resources to individual customers, driving up costs and time required to complete sales and diverting
sales and professional services resources to a smaller number of larger transactions.
Our quarterly results reflect seasonality in revenue from professional services, which makes it difficult
to predict our future operating results.
We have historically experienced seasonal variations in our revenue from professional services as
many of our customers employ our professional services just before they file their Form 10-K in the first
calendar quarter. As of December 31, 2014, approximately 79% of our SEC customers report their financials
on a calendar year basis. While we expect our professional services revenue to become less seasonal as our
non-SEC offerings grow, a significant portion of our revenue may continue to reflect seasonality, which
makes it difficult to predict our future operating results. As a result, our operating and financial results could
differ materially from our expectations and our business could suffer.
If the market for our technology delivery model and cloud-based software develops more slowly than we
expect, our business could be harmed.
The market for cloud-based software is not as mature as the market for packaged software, and it is
uncertain whether these services will sustain high levels of demand and market acceptance. Our success will
depend to a substantial extent on the willingness of companies to increase their use of cloud-based services
in general, and of our solutions in particular. Many companies have invested substantial personnel and
financial resources to integrate traditional software into their businesses, and therefore may be reluctant or
unwilling to migrate to a cloud-based service. Furthermore, some companies may be reluctant or unwilling
to use cloud-based services because they have concerns regarding the risks associated with security
capabilities, among other things, of the technology delivery model associated with these services. If
companies do not perceive the benefits of cloud-based software, then the market for our solutions may
develop more slowly than we expect, or the market for our new solutions may not develop at all, either of
which would significantly adversely affect our operating results. We may not be able to adjust our spending
quickly enough if market growth falls short of our expectations or we may make errors in predicting and
reacting to relevant business trends, either of which could harm our business. If the market for our cloud
solutions does not evolve in the way we anticipate, or if customers do not recognize the benefits of our cloud
solutions over traditional on-premise enterprise software products, and as a result we are unable to increase
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sales of subscriptions to our solutions, then our revenue may not grow or may decline, and our operating
results would be harmed.
The success of our cloud-based software largely depends on our ability to provide reliable solutions to
our customers. If a customer were to experience a product defect, a disruption in its ability to use our
solutions or a security flaw, demand for our solutions could be diminished, we could be subject to
substantial liability and our business could suffer.
Because our solutions are complex and we continually release new features, our solutions could
have errors, defects, viruses or security flaws that could result in unanticipated downtime for our subscribers
and harm our reputation and our business. Internet-based software frequently contains undetected errors or
security flaws when first introduced or when new versions or enhancements are released. We might from
time to time find such defects in our solutions, the detection and correction of which could be time consuming
and costly. Since our customers use our solutions for important aspects of their business, any errors, defects,
disruptions in access, security flaws, viruses, data corruption or other performance problems with our
solutions could hurt our reputation and may damage our customers’ businesses. If that occurs, customers
could elect not to renew, could delay or withhold payment to us or may make warranty or other claims against
us, which could result in an increase in our provision for doubtful accounts, an increase in collection cycles
for accounts receivable or the expense and risk of litigation. We could also lose future sales. In addition, if
the public becomes aware of security breaches of our solutions, our future business prospects could be
adversely impacted.
We employ third-party licensed software for use in or with our solutions, and the inability to maintain
these licenses or the existence of errors in the software we license could result in increased costs or reduced
service levels, which would adversely affect our business.
Our solutions incorporate certain third-party software, including the Google Cloud Platform, that
may be licensed to or hosted by or on behalf of Workiva, or may be hosted by a licensor and accessed by
Workiva on a software-as-a-service basis. We anticipate that we will continue to rely on third-party software
and development tools from third parties in the future. There may not be commercially reasonable alternatives
to the third-party software we currently use, or it may be difficult or costly to replace. In addition, integration
of the software used in our solutions with new third-party software may require significant work and require
substantial investment of our time and resources. Also, to the extent that our solutions depend upon the
successful operation of third-party software in conjunction with our software, any undetected errors or defects
in this third-party software could prevent the deployment or impair the functionality of our solutions, delay
new solution introductions, result in a failure of our solutions and injure our reputation. Our use of additional
or alternative third-party software would require us to enter into license agreements with third parties. Any
inability to maintain or acquire third-party licensed software for use in our solutions could result in increased
costs or reduced service levels, which would adversely affect our business.
Changes in laws and regulations related to the internet or changes in the internet infrastructure itself
may diminish the demand for our solutions and could have a negative impact on our business.
The future success of our business depends upon the continued use of the internet as a primary
medium for commerce, communication and business solutions. Federal, state or foreign government bodies
or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of
the internet as a commercial medium. Changes in these laws or regulations could require us to modify our
solutions in order to comply with these changes. In addition, government agencies or private organizations
may begin to impose taxes, fees or other charges for accessing the internet or commerce conducted via the
internet. These laws or charges could limit the growth of internet-related commerce or communications
generally or result in reductions in the demand for internet-based solutions such as ours.
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In addition, the use of the internet as a business tool could be adversely affected due to delays in the
development or adoption of new standards and protocols to handle increased demands of internet activity,
security, reliability, cost, ease of use, accessibility and quality of service. The performance of the internet
and its acceptance as a business tool has been adversely affected by “viruses,” “worms” and similar malicious
programs, and the internet has experienced a variety of outages and other delays as a result of damage to
portions of its infrastructure. If the use of the internet is adversely affected by these issues, demand for our
solutions could suffer.
Data security concerns and laws or other domestic or foreign regulations may reduce the effectiveness
of our solutions and adversely affect our business.
We manage private and confidential information and documentation related to our customers’
finances and transactions, often prior to public dissemination. The use of insider information is highly
regulated in the United States and abroad, and violations of securities laws and regulations may result in
civil and criminal penalties. Privacy and data security are rapidly evolving areas of regulation, and additional
regulation in those areas, some of it potentially difficult and costly for us to accommodate, is frequently
proposed and occasionally adopted. Changes in laws restricting or otherwise governing data and transfer
thereof could result in increased costs and delay operations.
In addition to government activity, the technology industry and other industries are considering
various new, additional or different self-regulatory standards that may place additional burdens on us. If the
processing of private and confidential information were to be curtailed in this manner, our software solutions
may be less effective, which may reduce demand for our solutions and adversely affect our business.
Furthermore, government agencies may seek to access sensitive information that our customers upload to
our service providers or restrict customers’ access to our service providers. Laws and regulations relating to
government access and restrictions are evolving, and compliance with such laws and regulations could limit
adoption of our services by customers and create burdens on our business. Moreover, regulatory investigations
into our compliance with privacy-related laws and regulations could increase our costs and divert management
attention.
If we or our service providers fail to keep our customers’ information confidential or otherwise handle
their information improperly, our business and reputation could be significantly and adversely affected.
If we fail to keep customers’ proprietary information and documentation confidential, we may lose
existing customers and potential new customers and may expose them to significant loss of revenue based
on the premature release of confidential information. While we have security measures in place to protect
customer information and prevent data loss and other security breaches, these measures may be breached as
a result of third-party action, employee error, malfeasance or otherwise. Because the techniques used to
obtain unauthorized access or sabotage systems change frequently and generally are not identified until they
are launched against a target, we may be unable to anticipate these techniques or to implement adequate
preventative measures.
In addition, our service providers (including, without limitation, hosting facilities, disaster recovery
providers and software providers) may have access to our customers’ data and could suffer security breaches
or data losses that affect our customers’ information.
If an actual or perceived security breach or premature release occurs, our reputation could be damaged
and we may lose future sales and customers. We may also become subject to civil claims, including indemnity
or damage claims in certain customer contracts, or criminal investigations by appropriate authorities, any of
which could harm our business and operating results. Furthermore, while our errors and omissions insurance
policies include liability coverage for these matters, if we experienced a widespread security breach that
25
impacted a significant number of our customers for whom we have these indemnity obligations, we could
be subject to indemnity claims that exceed such coverage.
Any failure to protect our intellectual property rights could impair our ability to protect our proprietary
technology and our brand.
Our success substantially depends upon our proprietary methodologies and other intellectual property
rights. Unauthorized use of our intellectual property by third parties may damage our brand and our reputation.
As of December 31, 2014, we had 6 issued patents and 14 patent applications pending in the United States,
and we expect to seek additional patents in the future. In addition, we rely on a combination of copyright,
trademark and trade secret laws, employee and third-party non-disclosure and non-competition agreements
and other methods to protect our intellectual property. However, unauthorized parties may attempt to copy
or obtain and use our technology to develop products with the same functionality as our solutions. We cannot
assure you that the steps we take to protect our intellectual property will be adequate to deter misappropriation
of our proprietary information or that we will be able to detect unauthorized use and take appropriate steps
to protect our intellectual property. United States federal and state intellectual property laws offer limited
protection, and the laws of some countries provide even less protection. Moreover, changes in intellectual
property laws, such as changes in the law regarding the patentability of software, could also impact our
ability to obtain protection for our solutions. In addition, patents may not be issued with respect to our pending
or future patent applications. Those patents that are issued may not be upheld as valid, may be contested or
circumvented, or may not prevent the development of competitive solutions.
We might be required to spend significant resources and divert the efforts of our technical and
management personnel to monitor and protect our intellectual property. Litigation brought to protect and
enforce our intellectual property rights could be costly, time-consuming and distracting to management and
could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to
enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking
the validity and enforceability of our intellectual property rights. Any failure to secure, protect and enforce
our intellectual property rights could seriously adversely affect our brand and adversely impact our business.
Assertions by third parties of infringement or other violations by us of their intellectual property rights
could result in significant costs and harm our business and operating results.
Patent and other intellectual property disputes are common in our industry. Our success depends
upon our ability to refrain from infringing upon the intellectual property rights of others. Some companies,
including some of our competitors, own large numbers of patents, copyrights and trademarks, which they
may use to assert claims against us. As we grow and enter new markets, we will face a growing number of
competitors. As the number of competitors in our industry grows and the functionality of products in different
industry segments overlaps, we expect that software and other solutions in our industry may be subject to
such claims by third parties. Third parties may in the future assert claims of infringement, misappropriation
or other violations of intellectual property rights against us. We cannot assure you that infringement claims
will not be asserted against us in the future, or that, if asserted, any infringement claim will be successfully
defended. A successful claim against us could require that we pay substantial damages or ongoing royalty
payments, prevent us from offering our services, or require that we comply with other unfavorable terms.
We may also be obligated to indemnify our customers or business partners or pay substantial settlement
costs, including royalty payments, in connection with any such claim or litigation and to obtain licenses,
modify applications or refund fees, which could be costly. Even if we were to prevail in such a dispute, any
litigation regarding our intellectual property could be costly and time-consuming and divert the attention of
our management and key personnel from our business operations.
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Some of our solutions utilize open source software, and any failure to comply with the terms of one or
more of these open source licenses could negatively affect our business.
Some of our solutions include software covered by open source licenses, which may include, by
way of example, GNU General Public License and the Apache License. The terms of various open source
licenses have not been interpreted by United States courts, and there is a risk that such licenses could be
construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our
solutions. By the terms of certain open source licenses, we could be required to release the source code of
our proprietary software, and to make our proprietary software available under open source licenses, if we
combine our proprietary software with open source software in a certain manner. In the event that portions
of our proprietary software are determined to be subject to an open source license, we could be required to
publicly release the affected portions of our source code, reengineer all or a portion of our technologies, or
otherwise be limited in the licensing of our technologies, each of which could reduce or eliminate the value
of our technologies and services. In addition to risks related to license requirements, usage of open source
software can lead to greater risks than use of third-party commercial software, as open source licensors
generally do not provide warranties or controls on the origin of the software. Many of the risks associated
with usage of open source software cannot be eliminated and could negatively affect our business.
If we fail to continue to develop our brand, our business may suffer.
We believe that continuing to develop and maintain awareness of our brand is critical to achieving
widespread acceptance of our solution and is an important element in attracting and retaining customers.
Efforts to build our brand may involve significant expense and may not generate customer awareness or
increase revenue at all, or in an amount sufficient to offset expenses we incur in building our brand. In
addition, we changed our trade name from “WebFilings” to “Workiva” in July 2014. New and existing
customers may be confused by or may not accept, or may be slow to accept, our new trade name. In addition,
local authorities may refuse to register, or third parties may object to the use of, the new trade name or other
trademarks in one or more of the jurisdictions in which we currently operate or may in the future operate.
Any such refusal or objection may be costly or time-consuming or limit our ability to build and develop our
brand portfolio, which could adversely affect our business and impede our growth.
Promotion and enhancement of our new name and the brand names of our solutions will depend
largely on our success in being able to provide high quality, reliable and cost-effective solutions. If customers
do not perceive our solutions as meeting their needs, or if we fail to market our solutions effectively, we will
likely be unsuccessful in creating the brand awareness that is critical for broad customer adoption of our
solutions. That failure could result in a material adverse effect on our business, financial condition and
operating results.
Demand for our solutions is subject to legislative or regulatory changes and volatility in demand, which
could adversely affect our business.
The market for our solutions depends in part on the requirements of the SEC and other regulatory
bodies. Any legislation or rulemaking substantially affecting the content or method of delivery of documents
to be filed with these regulatory bodies could have an adverse effect on our business. In addition, evolving
market practices in light of regulatory developments could adversely affect the demand for our solutions.
We may need to raise additional capital, which may not be available to us.
We will require substantial funds to support the implementation of our business plan. Our future
liquidity and capital requirements are difficult to predict as they depend upon many factors, including the
success of our solutions and competing technological and market developments. In the future, we may require
additional capital to respond to business opportunities, challenges, acquisitions, a decline in the level of
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customer prepayments or unforeseen circumstances and may determine to engage in equity or debt financings
or enter into credit facilities for other reasons, and we may not be able to timely secure additional debt or
equity financing on favorable terms, or at all. Any debt financing obtained by us in the future could involve
restrictive covenants relating to our capital raising activities and other financial and operational matters,
which may make it more difficult for us to obtain additional capital and to pursue business opportunities,
including potential acquisitions. If we raise additional funds through further issuances of equity, convertible
debt securities or other securities convertible into equity, our existing stockholders could suffer significant
dilution in their percentage ownership of our company, and any new equity securities we issue could have
rights, preferences and privileges senior to those of holders of our Class A common stock. If we are unable
to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue
to grow or support our business and to respond to business challenges could be significantly limited.
Our credit facility contains restrictive covenants that may limit our operating flexibility.
Our credit facility contains certain restrictive covenants that limit our ability to transfer or dispose
of assets, merge with other companies or consummate certain changes of control, acquire other companies,
pay dividends, incur additional indebtedness and liens, experience changes in management and enter into
new businesses. We therefore may not be able to engage in any of the foregoing transactions unless we obtain
the consent of the lender or terminate the credit facility, which may limit our operating flexibility. In addition,
our credit facility is secured by all of our assets, has first priority over our other debt obligations and requires
us to satisfy certain financial covenants, including the maintenance of at least $5.0 million of cash on hand
or unused borrowing capacity. There is no guarantee that we will be able to generate sufficient cash flow or
sales to meet these financial covenants or pay the principal and interest on any such debt. Furthermore, there
is no guarantee that future working capital, borrowings or equity financing will be available to repay or
refinance any such debt. Any inability to make scheduled payments or meet the financial covenants on our
credit facility would adversely affect our business.
Determining our income tax rate is complex and subject to uncertainty.
The computation of provision for income tax is complex, as it is based on the laws of numerous
taxing jurisdictions and requires significant judgment on the application of complicated rules governing
accounting for tax provisions under U.S. generally accepted accounting principles. Provision for income tax
for interim quarters is based on a forecast of our U.S and non-U.S. effective tax rates for the year, which
includes forward-looking financial projections, including the expectations of profit and loss by jurisdiction,
and contains numerous assumptions. Various items cannot be accurately forecasted and future events may
be treated as discrete to the period in which they occur. Our provision for income tax can be materially
impacted, for example, by the geographical mix of our profits and losses, changes in our business, such as
internal restructuring and acquisitions, changes in tax laws and accounting guidance and other regulatory,
legislative or judicial developments, tax audit determinations, changes in our uncertain tax positions, changes
in our intent and capacity to permanently reinvest foreign earnings, changes to our transfer pricing practices,
tax deductions attributed to equity compensation and changes in our need for a valuation allowance for
deferred tax assets. For these reasons, our actual income taxes may be materially different than our provision
for income tax.
Adverse tax laws or regulations could be enacted or existing laws could be applied to us or our customers,
which could increase the costs of our services and adversely impact our business.
The application of federal, state, local and international tax laws to services provided electronically
is evolving. New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be
enacted at any time (possibly with retroactive effect), and could be applied solely or disproportionately to
services provided over the internet. These enactments could adversely affect our sales activity due to the
28
inherent cost increase the taxes would represent and ultimately result in a negative impact on our operating
results.
In addition, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed,
modified or applied adversely to us (possibly with retroactive effect), which could require us or our customers
to pay additional tax amounts, as well as require us or our customers to pay fines or penalties and interest
for past amounts. If we are unsuccessful in collecting such taxes from our customers, we could be held liable
for such costs, thereby adversely impacting our operating results.
We operate and offer our services in many jurisdictions and, therefore, may be subject to federal, state,
local and foreign taxes that could harm our business.
As an organization that operates in many jurisdictions in the United States and around the world,
we may be subject to taxation in several jurisdictions with increasingly complex tax laws, the application
of which can be uncertain. The authorities in these jurisdictions, including state and local taxing authorities
in the United States, could successfully assert that we are obligated to pay additional taxes, interest and
penalties. In addition, the amount of taxes we pay could increase substantially as a result of changes in the
applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing
tax laws and precedents, which could have a material adverse effect on our liquidity and operating results.
The authorities could also claim that various withholding requirements apply to us or our subsidiaries or
assert that benefits of tax treaties are not available to us or our subsidiaries, any of which could have a material
impact on us and the results of our operations. In addition, we may lose sales or incur significant costs should
various tax jurisdictions impose taxes on either a broader range of services or services that we have performed
in the past. We may be subject to audits of the taxing authorities in any such jurisdictions that would require
us to incur costs in responding to such audits. Imposition of such taxes on our services could result in
substantially unplanned costs, would effectively increase the cost of such services to our customers and could
adversely affect our ability to retain existing customers or to gain new customers in the areas in which such
taxes are imposed.
We operate service sales centers in multiple locations. Some of the jurisdictions in which we operate
may give us the benefit of either relatively low tax rates, tax holidays or government grants, in each case
that are dependent on how we operate or how many jobs we create and employees we retain. We plan on
utilizing such tax incentives in the future as opportunities are made available to us. Any failure on our part
to operate in conformity with applicable requirements to remain qualified for any such tax incentives or
grants may result in an increase in our taxes. In addition, jurisdictions may choose to increase rates at any
time due to economic or other factors. Any such rate increase could harm our results of operations.
In addition, changes to U.S. tax laws that may be enacted in the future could impact the tax treatment
of our foreign earnings. Due to expansion of our international business activities, any changes in the U.S.
taxation of such activities could increase our worldwide effective tax rate and adversely affect our financial
position and results of operations.
We may have additional tax liabilities, which could harm our business, results of operations or financial
position.
Significant judgments and estimates are required in determining the provision for income taxes and
other tax liabilities. Our tax expense may be impacted if our intercompany transactions, which are required
to be computed on an arm’s-length basis, are challenged and successfully disputed by the tax authorities.
Also, our tax expense could be impacted depending on the applicability of withholding taxes and indirect
tax on software licenses and related intercompany transactions in certain jurisdictions. In determining the
adequacy of income taxes, we assess the likelihood of adverse outcomes that could result if our tax positions
were challenged by the IRS and other tax authorities. The tax authorities in the United States and other
29
countries where we do business regularly examine our income and other tax returns. The ultimate outcome
of these examinations cannot be predicted with certainty. Should the IRS or other tax authorities assess
additional taxes as a result of examinations, we may be required to record charges to operations that could
have a material impact on our results of operations, or financial position.
Sales to customers outside the United States expose us to risks inherent in international sales.
A key element of our growth strategy is to expand our international operations and develop a
worldwide customer base. To date, we have not realized a significant portion of our revenue from customers
headquartered outside the United States. Operating in international markets requires significant resources
and management attention and will subject us to regulatory, economic and political risks that are different
from those in the United States. Because of our limited experience with international operations, our
international expansion efforts may not be successful in creating demand for our solutions outside of the
United States or in effectively selling subscriptions to our solutions in all of the international markets we
enter. In addition, we will face risks in doing business internationally that could adversely affect our business,
including:
•
•
•
•
the need to localize and adapt our solutions for specific countries, including translation into foreign
languages and associated expenses;
data privacy laws that require customer data to be stored and processed in a designated territory;
difficulties in staffing and managing foreign operations;
different pricing environments, longer sales cycles and longer accounts receivable payment cycles
and collections issues;
•
new and different sources of competition;
• weaker protection for intellectual property and other legal rights than in the United States and practical
difficulties in enforcing intellectual property and other rights outside of the United States;
•
•
•
•
•
•
laws and business practices favoring local competitors;
compliance challenges related to the complexity of multiple, conflicting and changing governmental
laws and regulations, including employment, tax, privacy and data protection laws and regulations;
increased financial accounting and reporting burdens and complexities;
restrictions on the transfer of funds;
adverse tax consequences; and
unstable regional and economic political conditions.
Currently, our international contracts are only occasionally denominated in local currencies;
however, the majority of our local costs are denominated in local currencies. We anticipate that over time,
an increasing portion of our international contracts may be denominated in local currencies. Therefore,
fluctuations in the value of the United States dollar and foreign currencies may impact our operating results
when translated into United States dollars. We do not currently engage in currency hedging activities to limit
the risk of exchange rate fluctuations.
30
We may acquire other companies or technologies, which could divert our management’s attention, result
in additional dilution to our stockholders and otherwise disrupt our operations and adversely affect our
operating results.
We may in the future seek to acquire or invest in businesses, applications or technologies that we
believe could complement or expand our solutions, enhance our technical capabilities or otherwise offer
growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause
us to incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not
they are consummated.
In addition, we have limited experience in acquiring other businesses. If we acquire additional
businesses, we may not be able to integrate the acquired personnel, operations and technologies successfully
or effectively manage the combined business following the acquisition. We also may not achieve the
anticipated benefits from the acquired business due to a number of factors, including:
•
•
•
•
•
•
•
•
•
•
•
inability to integrate or benefit from acquired technologies or services in a profitable manner;
unanticipated costs or liabilities associated with the acquisition;
incurrence of acquisition-related costs;
difficulty integrating the accounting systems, operations and personnel of the acquired business;
difficulties and additional expenses associated with supporting legacy products and hosting
infrastructure of the acquired business;
difficulty converting the customers of the acquired business onto our solutions and contract terms,
including disparities in the revenue, licensing, support or professional services model of the acquired
company;
diversion of management’s attention from other business concerns;
adverse effects to our existing business relationships with business partners and customers as a result
of the acquisition;
the potential loss of key employees;
use of resources that are needed in other parts of our business; and
use of substantial portions of our available cash to consummate the acquisition.
In addition, a significant portion of the purchase price of companies we acquire may be allocated to
acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In
the future, if our acquisitions do not yield expected returns, we may be required to take charges to our
operating results based on this impairment assessment process, which could adversely affect our results of
operations.
Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt,
which could adversely affect our operating results. In addition, if an acquired business fails to meet our
expectations, our operating results, business and financial position could suffer.
We are subject to general litigation that may materially adversely affect us.
From time to time, we may be involved in disputes or regulatory inquiries that arise in the ordinary
course of business. We expect that the number and significance of these potential disputes may increase as
our business expands and our company grows larger. While our agreements with customers limit our liability
for damages arising from our solutions, we cannot assure you that these contractual provisions will protect
us from liability for damages in the event we are sued. Although we carry general liability insurance coverage,
31
our insurance may not cover all potential claims to which we are exposed or may not be adequate to indemnify
us for all liability that may be imposed. Any claims against us, whether meritorious or not, could be time
consuming, result in costly litigation, require significant amounts of management time, and result in the
diversion of significant operational resources. Because litigation is inherently unpredictable, we cannot
assure you that the results of any of these actions will not have a material adverse effect on our business,
financial condition, results of operations and prospects.
Our reported financial results may be adversely affected by changes in accounting principles generally
accepted in the United States.
Generally accepted accounting principles in the United States are subject to interpretation by the
Financial Accounting Standards Board (FASB), the SEC, and various bodies formed to promulgate and
interpret appropriate accounting principles. A change in these principles or interpretations could have a
significant effect on our reported financial results and could affect the reporting of transactions completed
before the announcement of a change.
We have broad discretion in the use of the net proceeds from our initial public offering and may not
use them effectively.
We cannot specify with any certainty the particular uses of the net proceeds that we have received
from our initial public offering. We have broad discretion in the application of the net proceeds, including
working capital, possible acquisitions, and other general corporate purposes, and we may spend or invest
these proceeds in a way with which our stockholders disagree. A failure by our management to apply
these funds effectively could adversely affect our business and financial condition. The net proceeds may
be invested with a view towards long-term benefits for our stockholders, and this may not increase our
operating results or market value. Pending their use, we may invest the net proceeds from our initial
public offering in a manner that does not produce income or that loses value. These investments may not
yield a favorable return to our investors.
Risks Related to Ownership of Our Class A Common Stock
Our stock price has been and will likely continue to be volatile or may decline regardless of our operating
performance, resulting in substantial losses for our investors.
The trading price for shares of our Class A common stock has been, and is likely to continue to be,
volatile for the foreseeable future. For example, since shares of our Class A common stock were sold in our
initial public offering in December 2014 at a price of $14.00 per share, our Class A common stock’s daily
closing price on the New York Stock Exchange has ranged from $12.28 to $15.96 through March 10, 2015.
The market price of our Class A common stock may fluctuate in response to many risk factors listed
in this section, and others beyond our control, including:
•
•
•
•
•
•
actual or anticipated fluctuations in our financial condition and operating results;
changes in projected operational and financial results;
addition or loss of significant customers;
changes in laws or regulations applicable to our solutions;
actual or anticipated changes in our growth rate relative to our competitors;
announcements of technological innovations or new offerings by us or our competitors;
32
•
•
•
•
•
•
•
•
•
•
announcements by us or our competitors of significant acquisitions, strategic partnerships, joint
ventures or capital-raising activities or commitments;
additions or departures of key personnel;
changes in our financial guidance or securities analysts’ estimates of our financial performance;
discussion of us or our stock price by the financial press and in online investor communities;
changes in accounting principles;
announcements related to litigation;
fluctuations in the valuation of companies perceived by investors to be comparable to us;
sales of our Class A or Class B common stock by us or our stockholders;
share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;
the expiration of the lock-up period set forth in our certificate of incorporation and any contractual
lock-up periods; and
•
general economic and market conditions.
Furthermore, the stock markets recently have experienced extreme price and volume fluctuations
that have affected and continue to affect the market prices of equity securities of many companies, and
technology companies in particular. These fluctuations often have been unrelated or disproportionate to the
operating performance of those companies. These broad market and industry fluctuations, as well as general
economic, political and market conditions such as recessions, interest rate changes or international currency
fluctuations, may negatively impact the market price of our Class A common stock. In the past, companies
that have experienced volatility in the market price of their stock have been subject to securities class action
litigation. We may be the target of this type of litigation in the future. Securities litigation against us could
result in substantial costs and divert our management’s attention from other business concerns, which could
harm our business.
Substantial blocks of our total outstanding shares may be sold into the market when the lock-up period
ends. If there are substantial sales of shares of our Class A common stock, the price of our Class A common
stock could decline.
The price of our Class A common stock could decline if there are substantial sales of our Class A
common stock, particularly sales by our directors, executive officers and significant stockholders, or if there
is a large number of shares of our Class A common stock available for sale. All of the shares of Class A
common stock sold in our initial public offering are freely tradeable without restrictions or further registration
under the Securities Act of 1933, as amended (Securities Act), except for any shares held by our affiliates
as defined in Rule 144 under the Securities Act. All shares of Class A common stock and Class B common
stock other than shares of Class A common stock issued in this offering are currently restricted from resale
as a result of the “lock-up” restriction in our certificate of incorporation. These shares will become available
to be sold starting on June 10, 2015, with earlier sales permitted at the discretion of the representatives of
the underwriters. In addition, in connection with our initial public offering our directors, executive officers
and substantially all of our other stockholders agreed pursuant to lock-up agreements not to sell their shares
until June 10, 2015. Shares held by directors, executive officers and other affiliates will be subject to volume
limitations under Rule 144 under the Securities Act. In addition, the shares of Class A common stock subject
to outstanding options under our equity incentive plans and the shares reserved for future issuance under
our equity incentive plans are eligible for sale to the public, subject to certain legal and contractual limitations.
The market price of the shares of our Class A common stock could decline as a result of the sale of a substantial
33
number of our shares of common stock in the public market or the perception in the market that the holders
of a large number of shares intend to sell their shares.
The dual class structure of our common stock has the effect of concentrating voting control with our
executives and their affiliates.
Our Class B common stock has ten votes per share, and our Class A common stock has one vote per
share. As of December 31, 2014, the holders of shares of our Class B common stock collectively beneficially
owned shares representing approximately 82% of the voting power of our outstanding capital stock. Our
executive offers collectively beneficially owned shares representing a substantial majority of the voting
power of our outstanding capital stock as of that date. Because of the ten-to-one voting ratio between our
Class B and Class A common stock, the holders of our Class B common stock collectively will continue to
control a majority of the combined voting power of our common stock and therefore be able to control all
matters submitted to our stockholders for approval so long as the shares of Class B common stock represent
at least 9.1% of all outstanding shares of our Class A and Class B common stock. This concentrated control
will limit your ability to influence corporate matters for the foreseeable future and may have the effect of
delaying, deferring or preventing a change in control, impeding a merger, consolidation, takeover or other
business combination involving us, or discouraging a potential acquirer from making a tender offer or
otherwise attempting to obtain control of our business, even if such a transaction would benefit other
stockholders. The holders of Class B common stock may also have interests that differ from yours and may
vote in a way with which you disagree and which may be adverse to your interests.
Future transfers by holders of Class B common stock will generally result in those shares converting
to Class A common stock, subject to limited exceptions, such as certain transfers to family members and
transfers effected for estate planning purposes. The conversion of Class B common stock to Class A common
stock will have the effect, over time, of increasing the relative voting power of those holders of Class B
common stock who retain their shares in the long term. If, for example, certain holders of Class B common
stock retain a significant portion of their holdings of Class B common stock for an extended period of time,
and a significant portion of the Class B common stock initially held by other executives is converted to Class
A common stock, the remaining holders of Class B common stock could, as a result, acquire control of a
majority of the combined voting power. As directors and executive officers, the initial beneficial owners of
Class B common stock owe a fiduciary duty to our stockholders and must act in good faith in a manner they
reasonably believe to be in the best interests of our stockholders. As stockholders, even if one of them
becomes a controlling stockholder, each beneficial owner of Class B common stock is entitled to vote his
shares in his own interests, which may not always be in the interests of our stockholders generally.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition
of us more difficult, limit attempts by our stockholders to replace or remove our current management and
may negatively affect the market price of our Class A common stock.
Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing
a change of control or changes in our management. Our certificate of incorporation and bylaws include
provisions that:
•
•
•
establish that our board of directors is divided into three classes, with each class serving three-year
staggered terms;
provide that our directors may be removed only for cause;
provide that vacancies on our board of directors may be filled only by a majority of directors then
in office, even though less than a quorum;
34
•
•
•
•
•
require that any action to be taken by our stockholders be effected at a duly called annual or special
meeting and not by written consent;
specify that special meetings of our stockholders can be called only by our board of directors, the
chairman of our board of directors or our chief executive officer or president (in the absence of a
chief executive officer);
establish an advance notice procedure for stockholder proposals to be brought before an annual
meeting, including proposed nominations of persons for election to our board of directors;
authorize our board of directors to issue, without further action by the stockholders, up to 100,000,000
shares of undesignated preferred stock;
require the approval of our board of directors or the holders of a supermajority of our outstanding
shares of capital stock to amend our bylaws and certain provisions of our certificate of incorporation;
and
•
reflect two classes of common stock, as discussed above.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove
our current management by making it more difficult for stockholders to replace members of our board of
directors, which is responsible for appointing the members of our management. In addition, we are a Delaware
corporation and governed by the provisions of Section 203 of the Delaware General Corporation Law, which
generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations
with any “interested” stockholder, in particular those owning 15% or more of our outstanding voting stock,
for a period of three years following the date on which the stockholder became an “interested” stockholder.
Future sales and issuances of our capital stock or rights to purchase capital stock could result in additional
dilution of the percentage ownership of our stockholders and could cause our stock price to decline.
Our certificate of incorporation authorizes us to issue up to 1,000,000,000 shares of Class A common
stock. Future sales and issuances of our capital stock or rights to purchase our capital stock could result in
substantial dilution to our existing stockholders. We may sell Class A common stock, convertible securities
and other equity securities in one or more transactions at prices and in a manner as we may determine from
time to time. If we sell any such securities in subsequent transactions, investors may be materially diluted.
New investors in subsequent transactions could gain rights, preferences and privileges senior to those of
holders of our Class A common stock.
We will continue to incur significantly increased costs and devote substantial management time as a result
of operating as a public company.
As a public company, we incur significant legal, accounting and other expenses that we did not incur
as a private company. For example, we are subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (Exchange Act), and are required to comply with the applicable requirements of
the Sarbanes-Oxley Act and the Dodd-Frank Act, as well as rules and regulations subsequently implemented
by the SEC and the New York Stock Exchange, including the establishment and maintenance of effective
disclosure and financial controls and changes in corporate governance practices. We expect that compliance
with these requirements will increase our legal and financial compliance costs and will make some activities
more time consuming and costly. We expect to incur significant expenses and devote substantial management
effort toward ensuring compliance with the auditor attestation requirements of Section 404 of the Sarbanes-
Oxley Act, which will increase when we are no longer an “emerging growth company,” as defined by the
JOBS Act. We may need to hire additional accounting and financial staff with appropriate public company
experience and technical accounting knowledge. We cannot predict or estimate the amount of additional
35
costs we may incur as a result of becoming a public company or the timing of such costs. As a result,
management’s attention may be diverted from other business concerns, which could adversely affect our
business and operating results.
In addition, changing laws, regulations and standards relating to corporate governance and public
disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs
and making some activities more time consuming. These laws, regulations and standards are subject to
varying interpretations, in many cases due to their lack of specificity, and as a result, their application in
practice may evolve over time as regulatory and governing bodies provide new guidance. This could result
in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions
to disclosure and governance practices. We will continue to invest resources to comply with evolving laws,
regulations and standards, and this investment may result in increased general and administrative expenses
and a diversion of management’s time and attention from revenue-generating activities to compliance
activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended
by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory
authorities may initiate legal proceedings against us and our business could be adversely affected.
As a result of disclosure of information as a public company, our business and financial condition
have become more visible, which we believe may result in threatened or actual litigation, including by
competitors and other third parties. If the claims are successful, our business operations and financial results
could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor,
these claims, and the time and resources necessary to resolve them, could divert the resources of our
management and adversely affect our business operations and financial results. These factors could also
make it more difficult for us to attract and retain qualified employees, executive officers and members of
our board of directors.
Operating as a public company makes it more difficult and more expensive for us to obtain director
and officer liability insurance on the terms that we would like. As a result, it may be more difficult for us to
attract and retain qualified people to serve on our board of directors, our board committees or as executive
officers.
We have previously identified material weaknesses in our internal control over financial reporting, and
any inability to maintain effective internal control over financial reporting could have a material adverse
effect on our business.
During the course of preparing for our initial public offering, we determined that it was appropriate
to restate our audited consolidated financial statements for the year ended December 31, 2013 to revise our
method of accounting for a forgivable loan arrangement. In connection with this restatement, we, in
conjunction with our independent registered public accounting firm, concluded that a lack of adequate
controls surrounding the review and recognition of forgivable loan arrangements constituted a material
weakness in our internal control over financial reporting. Subsequently, during the course of preparing our
audited consolidated financial statements for the year ended December 31, 2014, we identified and corrected
an immaterial error in our prior period accounting for reimbursements received pursuant to a government
jobs training program. In connection with the correction of this immaterial error, we, in conjunction with
our independent registered public accounting firm, concluded that a lack of adequate controls surrounding
the review and evaluation of accounting for government grant arrangements constituted a material weakness
in our internal control over financial reporting. As a result of the identification of these material weaknesses,
we have implemented measures designed to improve our internal control over financial reporting. We cannot
be certain that these efforts will be sufficient to remediate or prevent future material weaknesses or significant
deficiencies from occurring.
36
A failure to maintain adequate internal controls over our financial and management systems could cause
errors in our financial reporting, which could cause a loss of investor confidence and result in a decline
in the price of our Class A common stock.
Our public company reporting obligations and our anticipated growth will likely strain our financial
and management systems, internal controls and employees. In addition, we will be required to comply with
the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act when we cease to be an
emerging growth company.
We are currently taking the necessary steps to comply with Section 404. If, during this process, we
identify one or more material weaknesses in our internal controls, it is possible that our management may
be unable to certify that our internal controls are effective by the certification deadline. We cannot be certain
we will be able to successfully complete the implementation and certification requirements of Section 404
within the time period allowed.
Moreover, the Sarbanes-Oxley Act requires, among other things, that we maintain effective
disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if
required, improve our disclosure controls and procedures and internal control over financial reporting to
meet this standard, significant resources and management oversight may be required. If we have a material
weaknesses or deficiency in our internal control over financial reporting, we may not detect errors on a timely
basis and our financial statements may be materially misstated. Effective internal controls are necessary for
us to produce reliable financial reports and are important to prevent fraud. As a result, our failure to satisfy
the requirements of Section 404 on a timely basis could result in us being subject to regulatory action and
a loss of investor confidence in the reliability of our financial statements, both of which in turn could cause
the market value of our Class A common stock to decline and affect our ability to raise capital.
We are an “emerging growth company,” and we cannot be certain if the reduced disclosure requirements
applicable to emerging growth companies will make our Class A common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and we are taking advantage
of certain exemptions from various reporting requirements that are applicable to other public companies that
are not “emerging growth companies” including, but not limited to, not being required to comply with the
auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations
regarding executive compensation in our periodic reports and proxy statements, and exemptions from the
requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval
of any golden parachute payments not previously approved. We will cease to be an “emerging growth
company” upon the earliest of (i) December 31, 2019, (ii) the last day of the first fiscal year in which our
annual gross revenue are $1 billion or more, (iii) the date on which we have, during the previous rolling
three-year period, issued more than $1 billion in nonconvertible debt securities or (iv) the date on which we
qualify as a “large accelerated filer” with at least $700 million of equity securities held by non-affiliates. We
cannot predict if investors will find our Class A common stock less attractive or our company less comparable
to certain other public companies because we will rely on these exemptions.
We do not intend to pay dividends for the foreseeable future.
We may not declare or pay cash dividends on our capital stock in the near future. We currently intend
to retain any future earnings to finance the operation and expansion of our business, and we do not expect
to declare or pay any dividends in the foreseeable future. Consequently, stockholders must rely on sales of
their Class A common stock after price appreciation as the only way to realize any future gains on their
investment.
37
If securities or industry analysts do not publish or cease publishing research or reports about us, our
business or our market, or if they change their recommendations regarding our stock adversely, or if our
actual results differ significantly from our guidance, our stock price and trading volume could decline.
The trading market for our Class A common stock will depend in part on the research and reports
that securities or industry analysts publish about us or our business. If few securities analysts commence
coverage of us, or if industry analysts cease coverage of us, the trading price for our Class A common stock
would be negatively affected. If one or more of the analysts who cover us downgrade our Class A common
stock or publish inaccurate or unfavorable research about our business, the price of our Class A common
stock would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports
on us regularly, demand for our Class A common stock could decrease, which might cause our Class A
common stock price and trading volume to decline.
In addition, from time to time, we may release earnings guidance or other forward-looking statements
in our earnings releases, earnings conference calls or otherwise regarding our future performance that
represent our management’s estimates as of the date of release. Some or all of the assumptions of any future
guidance that we furnish may not materialize or may vary significantly from actual future results. Any failure
to meet guidance or analysts’ expectations could have a material adverse effect on the trading price or trading
volume of our Class A common stock.
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Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our corporate headquarters is located in Ames, Iowa, where we lease approximately 120,000
square feet of office space. We also lease office facilities in eleven U.S. cities located in Arizona,
California, Colorado, Georgia, Illinois, Montana, New York, Texas and Washington. Internationally, we
lease offices in Ontario and Saskatchewan, Canada and the Netherlands. We believe that our properties
are generally suitable to meet our needs for the foreseeable future. In addition, to the extent we require
additional space in the future, we believe that it would be readily available on commercially reasonable
terms.
Item 3. 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 4. Mine Safety Disclosure
Not applicable.
39
Part II.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
Our Class A common stock has been listed on the NYSE under the symbol “WK” since December
12, 2014. Prior to that time, there was no public market for our stock. The following table sets forth the range
of high and low per share sales prices for our common stock as reported on the NYSE for the periods indicated.
Year ended December 31, 2014
Fourth quarter (from December 12, 2014).............................. $
High
Low
14.74 $
13.04
Prices
Our Class B common stock is not listed or traded on any stock exchange.
Stockholders
As of December 31, 2014 there were approximately 360 stockholders of record of our Class A
common stock as well as 13 stockholders of record of our Class B common stock.
Dividends
We have never declared or paid cash dividends on our capital stock. We currently intend to retain
any future earnings and do not expect to pay any dividends on our capital stock. Any future determination
to pay dividends on our capital stock will be at the discretion of our board of directors and will depend on
our financial condition, results of operations, capital requirements and other factors that our board of directors
considers relevant. In addition, our credit facility with Silicon Valley Bank restricts our ability to pay
dividends. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations
—Liquidity and Capital Resources” for a summary of the material terms of our credit facility.
Stock Performance Graph
Not applicable.
Sales of Unregistered Securities
From January 1, 2014 through December 17, 2014, the date of completion of our initial public
offering, or IPO, we granted to employees and consultants options to purchase an aggregate of 2,973,368
shares of Class A common stock pursuant to our 2009 Equity Incentive Plan having exercise prices ranging
from $15.83 to $15.86 per share.
During this period, we also issued and sold to employees and consultants an aggregate of 144,289
shares of Class A common stock upon the exercise of options under our 2009 Equity Incentive Plan at exercise
prices ranging from $0.77 to $15.86 per share, for an aggregate amount of approximately $566,000.
The offers, sales and issuances of these securities were exempt from registration under the Securities
Act in reliance upon Rule 701 promulgated under the Securities Act as transactions under compensatory
benefit plans and contracts relating to compensation in compliance with Rule 701, or in reliance upon Section
4(a)(2) of the Securities Act or Rule 504 of Regulation D promulgated under the Securities Act as transactions
by an issuer not involving any public offering.
On July 31, 2014, we issued a 7% convertible note in the original amount of $5.0 million due January
31, 2016 to an accredited investor. The note contained an option to convert the principal amount plus accrued
and unpaid interest of the convertible note upon the closing of an initial public offering into a number of
shares of our Class A common stock equal to the quotient obtained by dividing the unpaid principal amount
40
of the convertible note plus interest accrued but unpaid thereon, by 90% of the initial public offering price.
On December 16, 2014, in conjunction with the closing of our initial public offering, the note holder elected
to convert the note. Upon conversion, we issued 407,480 shares of our Class A common stock at a price of
$12.60 per share. The offer, sale and issuance of the convertible note, as well as the issuance of shares of
Class A common stock upon conversion, were exempt from registration under the Securities Act in reliance
upon Section 4(a)(2) of the Securities Act as transactions by an issuer not involving any public offering.
The recipients of the securities in each of these transactions represented their intentions to acquire
the securities for investment only and not with a view to or for sale in connection with any distribution
thereof, and either received or had adequate access, through employment, business or other relationships,
to information about us. The sales of these securities were made without general solicitation or advertising
and without the involvement of any underwriter.
Use of Proceeds from Public Offerings of Common Stock
On December 17, 2014, we closed our initial public offering of 7,200,000 shares of Class A common
stock at a price to the public of $14.00 per share. The offer and sale of all of the shares in the initial public
offering were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No.
333-199459), which was declared effective by the SEC on December 11, 2014. The offering commenced
on December 12, 2014 and closed on December 17, 2014. Morgan Stanley & Co. LLC, Credit Suisse
Securities (USA) LLC, Robert W. Baird & Co. Incorporated, Raymond James & Associates, Inc. and Stifel,
Nicolaus & Company, Incorporated acted as the underwriters. The aggregate offering price for shares sold
in the offering was approximately $100.8 million. We raised approximately $90.4 million in net proceeds
from the offering, after deducting underwriter discounts and commissions of approximately $7.1 million and
other offering expenses of approximately $3.3 million.
There has been no material change in the planned use of proceeds from our IPO as described in our
final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act on December 12, 2014.
Pending the uses described, we have invested the net proceeds in money market funds.
Item 6. Selected Consolidated Financial Data
The selected consolidated financial data below has been revised to reflect the correction of an
immaterial error in previously reported financial results. See Note 2 of the consolidated financial statements
included in this annual report for a detailed discussion. The net loss impact of the revisions was an increase
in net loss of $1.5 million, $148,000 and $1.0 million for the years ended December 31, 2013, 2012 and
2011, respectively.
The following selected consolidated financial data for the years ended December 31, 2014, 2013
and 2012 and the selected consolidated balance sheet data as of December 31, 2014 and 2013 are derived
from our audited consolidated financial statements included elsewhere in this Form 10-K. The following
selected consolidated financial data for the year ended December 31, 2011, and the selected consolidated
balance sheet data as of December 31, 2012 and 2011 are derived from our audited consolidated financial
statements not included in this Form 10-K. Our historical results are not necessarily indicative of the results
to be expected in the future.
41
Consolidated Statement of Operations Data
Revenue
Subscription and support ................................. $
Professional services .......................................
Total revenue......................................................
Cost of revenue
Subscription and support(1) ..............................
Professional services(1) ....................................
Total cost of revenue..........................................
Gross profit ........................................................
Operating expenses
Research and development(1) ...........................
Sales and marketing(1)......................................
General and administrative(1)(2)........................
Total operating expenses....................................
Loss from operations..........................................
Interest expense..................................................
Other income and (expense), net .......................
Loss before provision for income taxes
Provision for income taxes.................................
Net loss............................................................... $
Net loss per common share:...............................
Basic and diluted ............................................. $
Weighted average common shares
outstanding - basic and diluted ........................
Year ended December 31,
2014
2013
2012
2011
(in thousands, except per share information)
91,317
$
65,164
$
34,702
$
21,377
112,694
21,182
12,696
33,878
78,816
44,145
53,498
19,783
19,987
85,151
15,129
9,520
24,649
60,502
34,116
41,067
14,601
18,236
52,938
9,262
9,780
19,042
33,896
18,385
27,537
16,177
117,426
(38,610)
(2,044)
(468)
(41,122)
32
(41,154) $
89,784
(29,282)
(366)
104
(29,544)
—
(29,544) $
62,099
(28,203)
(1,521)
(861)
(30,585)
—
(30,585) $
10,925
3,939
14,864
3,332
3,063
6,395
8,469
6,865
10,657
5,306
22,828
(14,359)
(268)
18
(14,609)
—
(14,609)
(1.28) $
(0.94) $
(1.16) $
(0.60)
32,156,060
31,376,603
26,390,099
24,516,706
42
(1) Stock-based compensation expense included in these line items is as follows:
Year ended December 31,
2014
2013
2012
2011
(in thousands)
Cost of revenue
Subscription and support................... $
Professional services .........................
$
502
337
$
200
171
80
$
144
Operating expenses
Research and development................
Sales and marketing ..........................
General and administrative(2) ............
Total stock-based compensation
expense ........................................... $
1,757
1,241
3,548
762
799
1,438
194
293
7,418
7,385
$
3,370
$
8,129
$
1,328
64
96
188
213
767
(2) One-time grants of immediately vested appreciation units to two managing directors significantly increased
general and administrative cost in the year ended December 31, 2012.
Consolidated Balance Sheet Data
Cash and cash equivalents ................................. $
Working capital, excluding deferred revenue
and deferred government grant obligation.........
Total assets.........................................................
Deferred revenue, current and long term ...........
Total current liabilities.......................................
Total non-current liabilities................................
Total stockholders’ equity..................................
Total members’ equity (deficit)..........................
2014
2013
2012
2011
December 31,
(in thousands)
101,131
$
15,515
$
24,979
$
10,029
94,740
164,551
56,276
66,730
42,002
55,819
—
19,926
73,944
36,385
43,425
37,306
—
(6,787)
28,063
53,522
18,165
26,404
14,971
—
12,147
12,046
19,345
9,428
14,485
15,189
—
(10,329)
43
Item 7. 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 consolidated financial statements and related notes included elsewhere in this Annual Report.
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 “Section 1A. Risk Factors” included elsewhere in this Annual Report.
Overview
Workiva created Wdesk, a cloud-based platform for enterprises to collect, manage, report and analyze
business data in real time. Our secure software platform, Wdesk, allows users to integrate and control all of
their business data, regardless of format or location, with innovative live-linking technology. Our proprietary
word processing, spreadsheet and presentation applications are fully integrated and built upon the Workiva
data management engine, allowing thousands of users to collaborate simultaneously on data-linked reports
and documents. Wdesk empowers our customers to dynamically define their business processes and optimize
workflows so that critical data can be reported and analyzed more efficiently. Our customers can gain insights
based on their trusted data, which enables better real-time decision-making. Additionally, our customers
deploy our solutions to serve as a single system of record for critical data, to reduce risk and operational
costs, and to increase efficiency in business reporting. As of December 31, 2014, we provided our solutions
to more than 2,200 enterprise customers, including more than 65% of both the Fortune 500 and Fortune 100.
Our Wdesk product platform allows multiple users to simultaneously create, review and publish
data-linked documents and reports with greater control, accuracy and productivity than ever before. We offer
our customers solutions for compliance, risk, sustainability and management reporting, and enterprise risk
management. Underlying these solutions is our scalable, enterprise-grade data engine that collects, aggregates
and manages our customers’ unstructured and structured data.
We operate our business on a software-as-a-service (SaaS) model. Customers enter into quarterly,
annual and multi-year subscription contracts to utilize Wdesk. Our subscription fee includes the use of our
service and technical support. Our pricing is based primarily on the number of corporate entities, number of
users, level of customer support, and length of contract. Our pricing model is scaled to the number of users,
so the subscription price per user typically decreases as the number of users increases. 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, customer success and professional services teams.
Our integrated platform, subscription-based model, and exceptional customer support have
contributed to a low rate of customer turnover while achieving strong revenue growth. Our subscription and
support revenue retention rate was 97.0% for the twelve months ended December 31, 2014.
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 953 at December 31, 2014 from
775 at December 31, 2013, an increase of 23.0%.
We have achieved significant revenue growth in recent periods. Our revenue grew to $112.7 million
in 2014 from $85.2 million in 2013, an increase of 32.3%. We incurred net losses of $41.2 million and $29.5
million in 2014 and 2013, respectively.
44
Key Factors Affecting Our Performance
New customers. We employ a “land-and-expand” sales strategy that focuses on acquiring new
customers through our direct sales model and building our relationships with existing customers over time.
Acquiring new customers is a key component of our continued success in the marketplace, growth opportunity
and future revenue. We have aggressively invested in and intend to continue to invest in our direct sales
force.
Further penetration of existing customers. Our account management teams seek to generate
additional revenue from our customers by adding seats to existing subscriptions and by signing new
subscriptions for additional business solutions on our platform. We believe a significant opportunity exists
for us to sell additional subscriptions to current customers as they become more familiar with our platform
and adopt our solutions to address additional business use cases.
Investment in growth. We are expanding our operations, increasing our headcount and developing
software to both enhance our current offerings and build new features. We expect our total operating expenses
to increase, particularly as we continue to expand our sales operations, marketing activities and development
staff. We continue to invest in our sales, marketing and customer success organizations to drive additional
revenue and support the growth of our customer base. Investments we make in our sales and marketing and
research and development organizations will occur in advance of experiencing any benefits from such
investments. In the quarter ended December 31, 2014, we increased our hiring of quota-carrying sales people
following seven fiscal quarters of focusing our investment in sales and marketing on building processes and
content to address new use cases for Wdesk, while maintaining the size of our quota-carrying sales force.
For example, we assembled teams of subject matter experts, product marketers and solutions architects and
expanded our sales operations team. In 2015, we plan to continue to invest in hiring more quota-carrying
sales people.
Key Performance Indicators
Year ended December 31,
2013
2012
2014
(dollars in thousands)
Financial metrics
Total revenue..................................................................................... $
Year-over-year percentage increase in total revenue......................
Subscription and support revenue ..................................................... $
112,694
32.3%
91,317
$
$
85,151
60.9%
65,164
$
$
52,938
256.1%
34,702
Year-over-year percentage increase in subscription and support
revenue............................................................................................
Subscription and support as a percent of total revenue ..................
40.1%
81.0%
87.8%
76.5%
217.6%
65.6%
Operating metrics
Number of customers ........................................................................
Subscription and support revenue retention rate...............................
Subscription and support revenue retention rate including add-ons .
2,261
97.0%
104.1%
1,927
97.8%
114.4%
1,421
97.7%
108.4%
As of December 31,
2013
2012
2014
45
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 by annualizing the subscription and support revenue recorded in the first month of the
measurement period for only those customers in place throughout the entire measurement period, thereby
excluding any attrition. We divide the result by the annualized subscription and support revenue in the first
month of the measurement period for all customers in place at the beginning of the measurement period.
The measurement period is based on the trailing twelve months.
Our subscription and support revenue retention rate was 97.0% at the December 2014 measurement
date, down slightly from December 2013. 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
being acquired or ceasing to file SEC reports has been the largest contributing factor to our revenue attrition.
Subscription and support revenue retention rate including add-ons. Add-on revenue includes the
change in both seats purchased and seat 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 last month of the measurement period for only those customers in place throughout the entire
measurement period. We divide the result by the annualized subscription and support revenue in the first
month of the measurement period for all customers in place at the beginning of the measurement period.
The measurement period is based on the trailing twelve months.
Our subscription and support revenue retention rate including add-ons was 104.1% at the December
2014 measurement date, down from 114.4% as of December 2013. The launch of our Wdesk platform in
March 2013 had a positive impact on add-on revenue in 2013. In 2014, we shifted the focus of our existing
customer sales team towards new use cases with larger target deal sizes. As we expected, the time devoted
to training and the redirection of the team's attention toward new decision-makers at our customers impacted
add-on revenue in 2014.
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 each of the years ended December 31,
2014, 2013 and 2012, no single customer represented more than 2% of our revenue, and our largest ten
customers accounted for less than 5% of our revenue in the aggregate.
We generate sales directly through our sales force. 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 three to 36 months. Our arrangements do not
contain general rights of return. We typically invoice our customers for subscription fees in advance on a
quarterly, annual, two-year or three-year basis, with payment due at the start of the subscription term. Unpaid
invoice amounts for services starting in future periods are excluded from accounts receivable and deferred
revenue. Invoiced amounts are reflected as accounts receivable once we have initiated services with an offset
to deferred revenue or revenue depending on whether the revenue recognition criteria have been met. At
December 31, 2014, deferred revenue was $56.3 million. Estimated future recognition from deferred
46
revenue at December 31, 2014 was $42.6 million in 2015, $11.1 million in 2016, $2.5 million in 2017 and
$36,000 thereafter.
Subscription and Support Revenue. We recognize the aggregate minimum subscription and support
fees ratably on a straight-line basis over the subscription term, provided that an enforceable contract has
been signed by both parties, access to our SaaS solutions has been granted to the customer, the fee for the
subscription and support is fixed or determinable, and collection is reasonably assured.
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 relate to document set
up and XBRL tagging, which are activities that we have undertaken hundreds of times. When requested by
our new or existing customers, we typically set up their documents by importing a prior version and formatting
the document using best practice methods in our solution. Our XBRL tagging services include applying
XBRL tagging to a customer filing document using Wdesk XBRL tools, reviewing existing tags for
correctness, identifying any necessary revisions to be consistent with newly provided requirements or
guidance from the SEC or FASB, as well as rolling forward XBRL tags from a prior filing to a current filing
document.
Our professional services are not required for customers to utilize our solution. Our pricing for
professional services has been predominantly on a fixed-fee basis, and we recognize revenue after the services
have been performed. Document set up services are typically completed in less than two weeks. XBRL
tagging services are offered for each filing document, and revenue is recognized upon a successful submission
to the SEC.
We are beginning to provide professional services on new solutions, including our risk reporting,
data collection and Sarbanes-Oxley compliance solutions, which may involve a different mix of subscription,
support and services than we have experienced to date. The contribution of this new revenue mix may impact
our gross margins in ways that we cannot predict.
Cost of Revenue
Cost of revenue consists primarily of personnel and related costs directly associated with our
professional services and customer success teams, and training personnel, including salaries, benefits,
bonuses, and equity-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 Google Cloud Platform and Amazon Web Services.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of personnel and related costs, including salaries,
benefits, bonuses, commissions, travel, and equity-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 capitalize and amortize sales commissions that are
directly attributable to a contract over the lesser of twelve months or the non-cancelable term of the customer
contract based on the terms of our commission arrangements.
Research and Development Expenses
Research and development expenses consist primarily of personnel and related costs, including
salaries, benefits, bonuses, and equity-based compensation; costs of server usage by our developers;
information technology costs; and facility costs.
47
General and Administrative Expenses
General and administrative expenses consist primarily of personnel and related costs for our
executive, finance, legal, human resources, and administrative personnel, including salaries, benefits,
bonuses, and equity-based compensation; legal, accounting, and other professional service fees; other
corporate expenses; information technology costs; and facility costs.
Income Taxes
Prior to our conversion to a corporation on December 10, 2014, we were organized as a limited
liability company, and therefore, as a pass-through entity for income tax purposes. Effective upon the
corporate conversion, we became a corporation subject to federal, state and foreign income taxes.
Results of Operations
The following table sets forth selected consolidated statement of operations data for each of the
periods indicated:
Year ended December 31,
2013
2012
2014
Revenue
Subscription and support................................................................... $
Professional services .........................................................................
Total revenue .......................................................................................
Cost of revenue
Subscription and support(1)................................................................
Professional services(1) ......................................................................
Total cost of revenue............................................................................
Gross profit..........................................................................................
Operating expenses
Research and development(1).............................................................
Sales and marketing(1) .......................................................................
General and administrative(1) ............................................................
Total operating expenses .....................................................................
Loss from operations ...........................................................................
Interest expense ...................................................................................
Other income and (expense), net .........................................................
Loss before provision for income taxes
Provision for income taxes ..................................................................
Net loss ................................................................................................ $
(in thousands)
91,317
$
65,164
$
21,377
112,694
21,182
12,696
33,878
78,816
44,145
53,498
19,783
19,987
85,151
15,129
9,520
24,649
60,502
34,116
41,067
14,601
117,426
(38,610)
(2,044)
(468)
(41,122)
32
(41,154) $
89,784
(29,282)
(366)
104
(29,544)
—
(29,544) $
34,702
18,236
52,938
9,262
9,780
19,042
33,896
18,385
27,537
16,177
62,099
(28,203)
(1,521)
(861)
(30,585)
—
(30,585)
48
(1) Equity-based compensation expense included in these line items was as follows:
Year ended December 31,
2013
2012
2014
Cost of revenue .....................................................................
Subscription and support .................................................... $
Professional services...........................................................
Operating expenses ...............................................................
Research and development .................................................
Sales and marketing............................................................
General and administrative .................................................
Total equity-based compensation expense....................... $
(in thousands)
$
502
337
$
200
171
1,757
1,241
3,548
7,385
$
762
799
1,438
3,370
$
80
144
194
293
7,418
8,129
The following table sets forth our consolidated statement of operations data as a percentage of
revenue for each of the periods indicated:
Year ended December 31,
2013
2012
2014
Revenue
Subscription and support...................................................................
Professional services .........................................................................
Total revenue .......................................................................................
Cost of revenue
Subscription and support...................................................................
Professional services .........................................................................
Total cost of revenue............................................................................
Gross profit..........................................................................................
Operating expenses
Research and development................................................................
Sales and marketing ..........................................................................
General and administrative ...............................................................
Total operating expenses .....................................................................
Loss from operations ...........................................................................
Interest expense ...................................................................................
Other income and (expense), net .........................................................
Loss before provision for income taxes
Provision for income taxes ..................................................................
Net loss ................................................................................................
81.0 %
19.0
100.0
76.5 %
23.5
100.0
65.6 %
34.4
100.0
18.8
11.3
30.1
69.9
39.2
47.5
17.6
104.3
(34.4)
(1.8)
(0.4)
(36.6)
—
(36.6)%
17.8
11.2
29.0
71.0
40.1
48.2
17.1
105.4
(34.4)
(0.4)
0.1
(34.7)
—
(34.7)%
17.5
18.5
36.0
64.0
34.7
52.0
30.6
117.3
(53.3)
(2.9)
(1.6)
(57.8)
—
(57.8)%
49
Revenue
Comparison of Years Ended December 31, 2014 and 2013
Year ended December 31,
Period-to-period change
2014
2013
Amount
% Change
(dollars in thousands)
Revenue
Subscription and support ......................................... $
Professional services ...............................................
91,317
21,377
Total revenue......................................................... $
112,694
$
$
65,164
19,987
85,151
$
$
26,153
1,390
27,543
40.1%
7.0%
32.3%
Total revenue increased $27.5 million in 2014 compared to 2013 due primarily to the increase in
subscription and support revenue of $26.2 million. Of the total increase in subscription and support revenue,
28.6% represented revenue from new customers acquired after December 31, 2013 and 71.4% represented
revenue from existing customers at or prior to December 31, 2013. The total number of our customers
increased 17.3% from December 31, 2013 to December 31, 2014.
Comparison of Years Ended December 31, 2013 and 2012
Year ended December 31,
Period-to-period change
2013
2012
Amount
% Change
(dollars in thousands)
Revenue
Subscription and support ......................................... $
Professional services ...............................................
Total revenue......................................................... $
65,164
19,987
85,151
$
$
34,702
18,236
52,938
$
$
30,462
1,751
32,213
87.8%
9.6%
60.9%
Total revenue increased $32.2 million in 2013 compared to 2012 due primarily to the increase in
subscription and support revenue of $30.5 million. Of the total increase in subscription and support revenue,
29.9% represented revenue from new customers acquired after December 31, 2012, and 70.1% represented
revenue from existing customers at or prior to December 31, 2012. The total number of our customers
increased 35.6% from December 31, 2012 to December 31, 2013.
Cost of Revenue
Comparison of Years Ended December 31, 2014 and 2013
Year ended December 31,
2014
2013
Period-to-period change
% Change
Amount
(dollars in thousands)
Cost of revenue
Subscription and support ......................................... $
Professional services ...............................................
Total cost of revenue............................................. $
21,182
12,696
33,878
$
$
15,129
9,520
24,649
$
$
6,053
3,176
9,229
40.0%
33.4%
37.4%
50
Cost of revenue increased $9.2 million in 2014 compared to 2013, attributable primarily to increased
employee compensation, benefits, and travel costs of $7.1 million, and additional equity-based compensation
of $0.5 million. Headcount growth in the customer success and professional services teams was the primary
driver of these personnel-related costs. In anticipation of seasonal demand for professional services in the
first quarter of 2015, we increased hiring and training in the second half of 2014 with the goal of maintaining
a more sustainable utilization rate. In addition, the cost of server usage increased $1.1 million during 2014
compared to 2013 as customer usage of our platform grew.
Comparison of Years Ended December 31, 2013 and 2012
Year ended December 31,
2013
2012
Period-to-period change
% Change
Amount
(dollars in thousands)
Cost of revenue
Subscription and support ......................................... $
Professional services ...............................................
Total cost of revenue............................................. $
15,129
9,520
24,649
$
$
9,262
9,780
19,042
$
$
5,867
(260)
5,607
63.3%
(2.7)%
29.4%
Cost of revenue increased $5.6 million in 2013 compared to 2012, attributable primarily to increased
employee compensation, benefits, and travel costs of $3.1 million, and additional equity-based compensation
of $0.1 million. Headcount growth in our customer success team was the primary driver of these personnel-
related costs. In addition, the cost of server usage increased $1.0 million during 2013 compared to 2012 as
customer usage of our platform grew.
Operating Expenses
Comparison of Years Ended December 31, 2014 and 2013
Year ended December 31,
2014
2013
Period-to-period change
% Change
Amount
(dollars in thousands)
Operating expenses
Research and development ...................................... $
Sales and marketing.................................................
General and administrative......................................
44,145
$
34,116
$
53,498
19,783
41,067
14,601
Total operating expenses....................................... $
117,426
$
89,784
$
10,029
12,431
5,182
27,642
29.4%
30.3%
35.5%
30.8%
Research and Development
Research and development expenses increased $10.0 million in 2014 compared to 2013 due primarily
to increased employee compensation, benefits, and travel costs of $8.7 million, and additional equity-based
compensation of $1.2 million. The increase in personnel-related costs was driven primarily by an increase
in total headcount in research and development.
51
Sales and Marketing
Sales and marketing expenses increased $12.4 million in 2014 compared to 2013 due primarily to
the expansion of sales and marketing team and increases in marketing programs. Employee compensation,
benefits, and travel costs rose $5.7 million, while equity-based compensation increased by $0.6 million, due
primarily to higher headcount in sales and marketing. Costs relating to our annual user conference increased
by $1.3 million. Professional service fees increased approximately $1.1 million due primarily to an increased
number of consultants to assist in expanding our sales internationally. Advertising costs increased $1.6
million related to our name change and new solutions. Depreciation, rent, and other support costs included
in sales and marketing increased $1.9 million in 2014 to support the growth of our sales force.
General and Administrative
General and administrative expenses increased $5.2 million in 2014 compared to 2013 due primarily
to an increase in employee compensation, benefits, and travel costs of $2.7 million, and additional equity-
based compensation of $1.4 million. The increase in personnel-related costs was driven primarily by a rise
in total headcount in general and administrative to support the growth of our business. In addition, equity-
based compensation to consultants increased $0.7 million, due primarily to a one-time grant with immediate
vesting terms to a consultant.
Comparison of Years Ended December 31, 2013 and 2012
Year ended December 31,
2013
2012
Period-to-period change
% Change
Amount
(dollars in thousands)
Operating expenses
Research and development ...................................... $
Sales and marketing.................................................
General and administrative......................................
34,116
$
18,385
$
41,067
14,601
27,537
16,177
Total operating expenses....................................... $
89,784
$
62,099
$
15,731
13,530
(1,576)
27,685
85.6%
49.1%
(9.7)%
44.6%
Research and Development
Research and development expenses increased $15.7 million in 2013 compared to 2012 due primarily
to increased employee compensation, benefits, and travel costs of $10.6 million, and additional equity-based
compensation of $0.3 million. Rising headcount in research and development to support the continued
addition of features to our platform drove our costs higher. In addition, the cost of server usage included in
research and development increased $0.8 million during 2013 compared to 2012. An increase in depreciation,
rent, and other support costs contributed an additional $2.7 million of expense. Fees paid to consultants
increased $1.3 million, consisting of $1.0 million in cash and $0.3 million in equity-based compensation.
Sales and Marketing
Sales and marketing expenses increased $13.5 million in 2013 compared to 2012 due primarily to
the expansion of our sales force and increases in marketing programs. Employee compensation, benefits,
and travel costs rose $10.7 million, while equity-based compensation increased by $0.4 million, due primarily
to higher headcount in sales and marketing. Depreciation, rent, and other support costs rose $1.7 million to
support the growth of our sales force.
52
General and Administrative
General and administrative expenses decreased $1.6 million in 2013 compared to 2012 due primarily
to reduced equity grants in 2013 offset by increased personnel related costs. Total equity-based compensation
relating to personnel decreased $6.5 million while other personnel-related costs increased $3.5 million,
consisting of increased employee compensation, benefits, and travel costs. The increase in other personnel-
related costs was driven primarily by a rise in total headcount. Professional service fees increased by $1.8
million, related primarily to the administration of our health insurance plan, legal and accounting fees.
Quarterly Results of Operations
See “Unaudited Quarterly Results of Operations” included in Note 14 of this Annual Report on Form
10-K for the unaudited quarterly results of operations for the years ended December 31, 2014 and 2013.
Liquidity and Capital Resources
Year ended December 31,
2013
2012
2014
Cash flow used in operating activities................................................. $
Cash flow used in investing activities .................................................
Cash flow provided by financing activities .........................................
Net increase (decrease) in cash and equivalents, net of impact on
exchange rates ..................................................................................... $
(in thousands)
(3,505) $
(4,096)
93,155
(10,452) $
(9,432)
10,370
(5,763)
(10,925)
31,639
85,616
$
(9,464) $
14,950
As of December 31, 2014, we had cash and cash equivalents of $101.1 million. To date, we have
financed our operations primarily through the proceeds of our initial public offering, private placements of
preferred units, debt that was settled in preferred units 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. We expect to continue to incur operating losses and negative
cash flows from operations in the future and may require additional capital resources to continue to grow
our business. We believe that current cash and cash equivalents, cash to be received from existing and new
customers, and availability under our credit facility will be sufficient to fund our operations for at least the
next twelve months.
In October 2013, we received a grant from the Iowa Economic Development Authority (IEDA) in
the form of forgivable loans up to $2.5 million and non-interest bearing loans up to $2.5 million available
to us based on qualified job growth. Through the date of our initial public offering, total financing provided
by IEDA under this grant consisted of $2.0 million in non-interest bearing and forgivable loans. In connection
with our initial public offering, the loans became due and were repaid in full in December 2014.
In July 2014, we issued a subordinated promissory note totaling $5.0 million with a 7% coupon rate
and maturing January 31, 2016. The note contained an option to convert outstanding principal and paid-in-
kind interest into our Class A common stock upon successful completion of an initial public offering at a
10% discount to the offering price. Certain of the embedded features of the note were bifurcated and accounted
for as a compound derivative. On December 16, 2014, in conjunction with the completion of our initial
public offering, the holder elected to exercise the option to convert the Note. We settled the $5.1 million of
outstanding principal and interest with 407,480 shares of our Class A common stock at a price of $12.60 per
share, which represented 90% of the initial public offering price of our Class A common stock. This settlement
resulted in a loss of $111,000, which is reported in “Other income and (expense), net” on the consolidated
statement of operations.
53
In August 2014, we entered into a $15.0 million credit facility with Silicon Valley Bank, which was
subsequently amended. Borrowing capacity is equal to the most recent month’s subscription and support
revenue multiplied by a percentage that adjusts based on the prior quarter’s customer retention rate. The
credit facility can be used to fund working capital and general business requirements and matures in August
2016. The credit facility is secured by all of our assets, has first priority over our other debt obligations, and
requires us to maintain certain financial covenants, including the maintenance of at least $5.0 million of cash
on hand or unused borrowing capacity. The credit facility contains certain restrictive covenants that limit
our ability to transfer or dispose of assets, merge with other companies or consummate certain changes of
control, acquire other companies, pay dividends, incur additional indebtedness and liens, experience changes
in management and enter into new businesses. Amounts borrowed under the credit facility accrue interest
at a variable interest rate of prime plus 1.0%, with interest payable monthly and the principal balance due
at maturity. No amounts were outstanding under the credit facility as of December 31, 2014.
Pursuant to the credit facility, letters of credit totaling $4.3 million were outstanding at December 31,
2014. These letters of credit, which do not reduce availability under the credit facility, were issued as security
for certain forgivable loans. We expect $2.0 million of the letters of credit to be canceled in 2015 as one of
the forgivable loans was repaid with the proceeds of our initial public offering.
In December 2014, we completed our initial public offering and sold 7,200,000 shares of Class A
common stock at a public offering price of $14.00 per share. We received net proceeds of $90.4 million after
deducting underwriting discounts and commissions of $7.1 million and other offering expenses of $3.3
million.
Operating Activities
For the year ended December 31, 2014, cash used in operating activities was $3.5 million. The
primary factors affecting our operating cash flows during the period were our net loss of $41.2 million,
adjusted for non-cash charges of $3.9 million for depreciation and amortization of our property and equipment
and intangible assets and $7.4 million of equity-based compensation. The primary drivers of the changes in
operating assets and liabilities were a $20.0 million increase in deferred revenue, a $7.1 million increase in
accrued expenses and other current liabilities and a $2.6 million decrease in accounts receivable, partially
offset by a $2.3 million increase in prepaid expenses and other and a $1.5 million decrease in accounts
payable. The increase in deferred revenue was attributable primarily to an increase in annual and multi-year
contracts. The decrease in accounts receivable was primarily attributable primarily to the timing of our
billings and cash collections, and the decrease in accounts payable was attributable primarily to the timing
of our cash payments. The increase in prepaid expenses and other was due to increased prepaid insurance
amounts due to operating as a public company as well as purchasing additional subscriptions to cloud-based
software to support business growth.
For the year ended December 31, 2013, cash used in operating activities was $10.5 million. The
primary factors affecting our operating cash flows during this period were our net loss of $29.5 million,
adjusted for non-cash charges of $2.4 million for depreciation and amortization of our property and equipment
and intangible assets and $3.4 million of equity-based compensation. The primary drivers of the changes in
operating assets and liabilities were a $18.2 million increase in deferred revenue, a $2.5 million increase in
accrued expenses and other current liabilities and a $1.6 million increase in accounts payable, partially offset
by a $8.6 million increase in accounts receivable. The increase in accounts receivable and corresponding
increase in deferred revenue were attributable primarily to overall increases in the average length of our
customer contracts. The increase in accounts payable was attributable primarily to the timing of our cash
payments.
54
Investing Activities
Cash used in investing activities of $4.1 million for the year ended December 31, 2014 was due
primarily to $8.6 million of capital expenditures partially offset by proceeds of $4.9 million from the sale
of marketable securities. Our capital expenditures were associated primarily with leasehold improvements,
building costs under our build-to-suit lease arrangement, computer equipment, and furniture and fixtures in
support of expanding our infrastructure and work force.
Cash used in investing activities of $9.4 million for the year ended December 31, 2013 was due
primarily to $9.5 million of capital expenditures and $0.9 million for the purchase of marketable securities
partially offset by proceeds of $1.2 million from the sale of marketable securities. Our capital expenditures
were associated primarily with leasehold improvements, building costs under our build-to-suit lease
arrangement, computer equipment, and furniture and fixtures in support of expanding our infrastructure and
work force.
Financing Activities
Cash provided by financing activities of $93.2 million for the year ended December 31, 2014 was
due primarily to $91.8 million in net proceeds from our initial public offering of Class A common stock in
December 2014, $2.0 million in proceeds from a government grant awarded in December 2013, $5.0 million
in proceeds from the issuance of a convertible note and $3.0 million in borrowings on our line of credit
partially offset by $8.7 million in repayments on the line of credit and long-term debt and payments on capital
lease and financing obligations.
Cash provided by financing activities of $10.4 million for the year ended December 31, 2013 was
due primarily to proceeds of $7.2 million relating to our Series C preferred financing and $1.5 million in
proceeds from the government for our training reimbursement program partially offset by $0.5 million in
payments on long-term debt and capital lease and financing obligations.
55
Contractual Obligations and Commitments
The following table represents our contractual obligations as of December 31, 2014, aggregated by
type:
Total
Less than 1
year
1-3 years
3-5 years
More than 5
years
Payments due by period
$
67
$
67
$
— $
— $
—
(in thousands)
20,933
2,432
5,415
4,038
9,048
2,542
1,291
1,233
18
—
45,598
69,140
$
$
2,541
6,331
$
5,362
12,010
$
5,362
9,418
$
32,333
41,381
Debt ...............................................
Operating lease obligations
relating to office facilities .............
Capital lease obligations,
including interest for technology
and equipment ...............................
Financing obligations, including
interest for building .......................
Total contractual obligations.......
We have entered into a lease agreement for land and an office building in Ames, Iowa, which was
constructed in two phases. The lease term includes an initial 15-year term and three five-year extensions at
our option because renewal was determined to be reasonably assured at the inception of the lease. As part
of the lease agreement, the landlord was responsible for constructing the building in accordance with our
specifications and agreed to fund $11.8 million for the first phase and $11.1 million for the second phase of
construction. We were the developer of the project and responsible for construction costs in excess of these
amounts. As a result of this involvement, we were required to capitalize the construction costs associated
with the office building. The construction liability of $11.8 million was reclassified to a financing obligation
and $17.1 million of costs capitalized during construction were placed in service during June 2013 for the
first phase. Upon completion of the second phase of the project, the construction liability of $11.1 million
was reclassified to a financing obligation, and $19.9 million of costs capitalized during construction were
placed in service during 2014.
The lease contains purchase options to acquire the landlord’s interest in the land lease and building
at any time beginning three years from June 2014 (the commencement date of the second phase of the lease).
In addition, the lease requires us to purchase the building from the landlord upon certain events, such as a
change in control. The purchase options were deemed to be fair value at the inception of the lease.
Off-Balance Sheet Arrangements
During the years ended December 31, 2014, 2013 and 2012, 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.
56
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these consolidated financial statements requires
us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs
and expenses, provision for 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.
We believe that of our significant accounting policies, which are described in Note 1 to our
consolidated financial statements, the following accounting policies involve a greater degree of judgment
and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully
understanding and evaluating our consolidated financial condition and results of our operations.
Revenue Recognition
We commence revenue recognition for subscriptions to our cloud solutions and professional services
when all of the following criteria are met:
• Persuasive evidence of an arrangement exists;
• The service has been or is being provided to the customer;
• Collection of the fees is reasonably assured; and
• The amount of fees to be paid by the customer is fixed or determinable.
Collectability is assessed based on a number of factors, including past transaction history with the
customer and the creditworthiness of the customer. Collateral is not requested from the customer. If it is
determined that the collection of a fee is not probable, the revenue is recognized at the time the collection
becomes probable, which is generally upon the receipt of cash.
Subscription and Support Revenue
We recognize the aggregate minimum subscription and support fees ratably on a straight-line basis
over the subscription term, provided that an enforceable contract has been signed by both parties, access to
our SaaS solutions has been granted to the customer, the fee for the subscription and support is fixed or
determinable, and collection is reasonably assured.
Professional Services Revenue
Our professional services are not required for customers to utilize our solution. Our pricing for
professional services has been predominantly on a fixed-fee basis, and we recognize revenue after the services
have been performed. Document set up services are typically completed in less than two weeks. XBRL
tagging services are offered for each filing document and revenue is recognized upon a successful submission
to the SEC.
Our professional services revenue is higher in the first calendar quarter because many of our
customers employ our professional services just before they file their Form 10-K. As of December 31, 2014,
approximately 79% of our SEC customers report their financials on a calendar year basis.
57
Multiple Deliverable Arrangements
For arrangements with multiple deliverables, we evaluate whether the individual deliverables qualify
as separate units of accounting. In order to treat deliverables in a multiple deliverable arrangement as separate
units of accounting, the deliverables must have standalone value upon delivery. For deliverables that have
standalone value upon delivery, we account for each deliverable separately and recognize revenue for the
respective deliverables as they are delivered.
Subscription contracts have standalone value as we sell the subscriptions separately. In determining
whether professional services can be accounted for separately from subscription services, we consider the
availability of the professional services from other vendors, the nature of our professional services and
whether we sell our solutions to new customers without professional services. We have determined that we
have established standalone value for the professional services related to document set up and XBRL tagging.
This determination was made due primarily to the ability of the customer to complete these tasks without
assistance and the sale of XBRL services separate from the initial subscription order. Because we established
standalone value for our professional services, such service arrangements are being accounted for separately
from subscription services.
When multiple deliverables included in an arrangement are separable into different units of
accounting, the arrangement consideration is allocated to the identified separate units of accounting based
on their relative selling price. Multiple deliverable arrangements accounting guidance provides a hierarchy
to use when determining the relative selling price for each unit of accounting. Vendor-specific objective
evidence (VSOE) of selling price, based on the price at which the item is regularly sold by the vendor on a
standalone basis, should be used if it exists. If VSOE of selling price is not available, third-party evidence
(TPE) of selling price is used to establish the selling price if it exists. VSOE and TPE do not currently exist
for any of our deliverables. Accordingly, for arrangements with multiple deliverables that can be separated
into different units of accounting, we allocate the arrangement fee to the separate units of accounting based
on our best estimate of selling price. The amount of arrangement fee allocated is limited by contingent
revenue, if any.
We determine our best estimate of selling price for our deliverables based on our overall pricing
objectives, taking into consideration market conditions and entity-specific factors. We evaluate our best
estimate of selling price by reviewing historical data related to sales of our deliverables, including comparing
the percentages of our contract prices to our list prices. We also may consider several other data points in
our evaluation, including the size of our arrangements, length of term, the cloud solutions sold, customer
demographics and the numbers and types of users within our arrangements.
While changes in assumptions or judgments or changes to the elements of the arrangement could
cause an increase or decrease in the amount of revenue that we report in a particular period, these changes
have not historically been significant because our recurring revenue is primarily subscription and support
revenue.
Stock-Based Compensation
We measure and recognize compensation expense for all stock-based awards granted to our
employees, non-employee directors, and other service providers based on the estimated fair value of the
award on the grant date or reporting date, if required to be remeasured under the guidance. Prior to our
corporate conversion, we utilized equity-based compensation in the form of restricted participation units,
appreciation units and options to purchase common units. Subsequent to our corporate conversion, we utilize
stock-based compensation in the form of restricted stock and options to purchase Class A common stock.
The fair value of each stock option award, restricted participation units, appreciation units and options to
purchase common units is determined at the date of grant by applying the Black-Scholes option pricing
58
model. The fair value of each restricted stock award is based on the number of shares granted and the closing
price of our Class A common stock as reported on the New York Stock Exchange on the date of grant. The
fair value of these awards is recognized as an expense, net of estimated forfeitures, on a straight line basis
over the requisite service period.
All stock-based awards made since the date of our initial public offering have been for Class A
common stock. All references to common stock in this “Stock-Based Compensation” section are to our Class
A common stock and Class B common stock, as applicable.
Our option pricing model requires the input of highly subjective assumptions, including the fair
value of the underlying common stock (for periods prior to our IPO), the expected term of the option, the
expected volatility of the price of our common stock, risk-free interest rates, and the expected dividend yield
of our common stock. The assumptions used in our option-pricing model represent management’s best
estimates. These estimates involve inherent uncertainties and the application of management’s judgment. If
factors change and different assumptions are used, our stock-based compensation expense could be materially
different in the future.
These assumptions are estimated as follows:
• Fair Value of Our Common Stock: Prior to our initial public offering in December 2014, because
our stock was not publicly traded, we estimated the fair value of our common stock. Our board of
directors considered numerous objective and subjective factors to determine the fair value of our
common stock at each award date. The factors included, but were not limited to: (i) contemporaneous
third-party valuations of our common stock; (ii) the prices, rights, preferences and privileges of our
preferred stock that was then outstanding relative to those of our common stock; (iii) the lack of
marketability of our common stock; (iv) our actual operating and financial results; (v) current
business conditions and projections; and (vi) the likelihood of achieving a liquidity event, such as
an initial public offering or merger or acquisition, given prevailing market conditions. After the
completion of our initial public offering, our common stock has been valued by reference to the
closing price of our Class A common stock on the New York Stock Exchange.
• Risk-Free Interest Rate: We base the risk-free interest rate used in the Black-Scholes option pricing
model on the implied yield available on U.S. Treasury STRIPS with remaining terms similar to the
expected term on the options.
• Expected Term: We estimate the expected term using the simplified method due to the lack of
historical exercise activity for our company. The simplified method calculates the expected term as
the mid-point between the vesting date and the contractual expiration date of the award.
• Volatility: Prior to our initial public offering in December 2014, there was no market for our common
stock. Therefore, we estimated volatility for option grants by evaluating the average historical
volatility of a peer group of companies for the period immediately preceding the option grant for a
term that is approximately equal to the options’ expected life. We have continued to use this method
subsequent to our IPO because of the limited trading history of our common stock.
• Dividend yield: We have never declared or paid any cash dividends and do not presently plan to pay
cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero.
59
The following table presents the weighted-average assumptions used to estimate the fair value of
our unvested restricted stock and options granted during each of the periods indicated below:
Year ended December 31,
2014
2013
2012
Expected term (in years)........................................
Risk-free interest rate ............................................
Expected volatility.................................................
Expected dividend yield ........................................
5.0 - 10.0
6.1 - 10.0
6.1 - 10.0
1.52% - 2.80%
1.00% - 2.89%
0.75% - 1.78%
45.84% - 52.50%
51.09% - 53.84%
51.35% - 53.09%
—%
—%
—%
As of December 31, 2014, total unrecognized stock-based compensation expense, adjusted for
estimated forfeitures, related to stock option awards was approximately $18.0 million, which is expected to
be recognized over a period of 3.23 years. At December 31, 2014, unrecognized compensation expense
related to restricted stock totaled approximately $719,000, which is expected to be recognized over a
weighted-average period of 0.96 years.
60
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
Market risk represents the risk of loss that may impact our financial position due to adverse changes
in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in foreign
currency rates, although we also have some exposure due to potential changes in inflation or interest rates.
We do not hold financial instruments for trading purposes.
Foreign Currency Risk
Our sales contracts are denominated predominantly in U.S. dollars and, to a lesser extent, Canadian
dollars. Consequently, our customer billings denominated in foreign currency are subject to foreign currency
exchange risk. A portion of our operating expenses is incurred outside the United States and is denominated
in foreign currencies. These operating expenses are also subject to fluctuations due to changes in foreign
currency exchange rates, particularly changes in the Canadian dollar, Euro, and British pound. Additionally,
fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in
our statement of operations. To date, we have not entered into derivatives or hedging transactions as our
exposure to foreign currency exchange rates has not been material to our historical operating results, but we
may do so in the future if our exposure to foreign currency should become more significant. Realized foreign
currency transaction losses are included in net loss and were $141,000, $108,000 and and $32,000 in the
years ended December 31, 2014, 2013 and 2012, respectively.
Inflation Risk
Inflationary factors, such as increases in our operating expenses, may adversely affect our results
of operations, as our customers typically purchase services from us on a subscription basis over a period of
time. Although we do not believe that inflation has had a material impact on our financial position or results
of operations to date, an increase in the rate of inflation in the future may have an adverse effect on our levels
of operating expenses as a percentage of revenue if we are unable to increase the prices for our subscription-
based solutions to keep pace with these increased expenses.
Interest Rate Risk
As part of our build-to-suit lease arrangement, in addition to the base rent amount, we are responsible
for the underlying mortgage held by the lessor, which is subject to a variable interest rate equal to the prime
lending rate plus 1%. In addition, in August 2014, we entered into a $15.0 million credit facility. The credit
facility is denominated in U.S. dollars and borrowings are subject to a variable interest rate equal to the
prime lending rate plus 1.0%. A hypothetical 10% increase or decrease in interest rates after December 31,
2014 would not have a material impact on our results of operations, our cash flows or the fair values of our
outstanding debt or financing obligations.
61
Item 8. Consolidated Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm .................................................................................
Consolidated Balance Sheets ................................................................................................................................
Consolidated Statements of Operations ................................................................................................................
Consolidated Statements of Comprehensive Loss ................................................................................................
Consolidated Statements of Members' Equity (Deficit) and Stockholders’ Equity ..............................................
Consolidated Statements of Cash Flows ...............................................................................................................
Notes to Consolidated Financial Statements.........................................................................................................
Page
63
64
66
67
68
72
74
62
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Workiva Inc.
We have audited the accompanying consolidated balance sheets of Workiva Inc. (Workiva) and
subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of operations,
comprehensive loss, stockholders’ equity and members’ deficit and cash flows for each of the three years in
the period ended December 31, 2014. These financial statements are the responsibility of Workiva’s
management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. We were not
engaged to perform an audit of Workiva’s internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
Workiva’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Workiva Inc. and subsidiaries at December 31, 2014 and 2013, and the
consolidated results of its operations and its cash flows for each of the three years in the period ended
December 31, 2014, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Chicago, Illinois
March 11, 2015
63
WORKIVA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
As of December 31,
2014
2013
ASSETS
Current assets
Cash and cash equivalents............................................................................ $
Marketable securities....................................................................................
Accounts receivable, net of allowance for doubtful accounts of $274 and
$111 in 2014 and 2013, respectively............................................................
Deferred commissions..................................................................................
Other receivables..........................................................................................
Prepaid expenses and other current assets....................................................
Total current assets............................................................................................
Restricted cash ................................................................................................
Restricted marketable securities .....................................................................
Property and equipment, net ...........................................................................
Intangible assets, net.......................................................................................
Other assets.....................................................................................................
Total assets ........................................................................................................ $
LIABILITIES, STOCKHOLDERS’ EQUITY AND MEMBERS’ DEFICIT
Current liabilities
Accounts payable ......................................................................................... $
Accrued expenses and other current liabilities.............................................
Deferred revenue ..........................................................................................
Deferred government grant obligation .........................................................
Current portion of capital lease and financing obligations ..........................
Current portion of long-term debt ................................................................
Total current liabilities ......................................................................................
Deferred revenue ............................................................................................
Deferred government grant obligation............................................................
Other long-term liabilities...............................................................................
Capital lease and financing obligations ..........................................................
Long-term debt ...............................................................................................
Construction liability ......................................................................................
Total liabilities...................................................................................................
64
101,131
$
—
11,120
852
295
3,143
116,541
401
—
46,265
549
795
15,515
2,436
13,885
301
2,856
891
35,884
179
2,368
34,715
167
631
164,551
$
73,944
3,011
$
16,765
42,605
2,324
1,941
84
66,730
13,671
3,424
2,069
22,747
91
—
108,732
3,993
8,939
27,367
100
723
2,303
43,425
9,018
5,552
335
12,511
2,254
7,636
80,731
WORKIVA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(in thousands, except share amounts)
As of December 31,
2014
2013
Commitments and contingencies ......................................................................
Stockholders’ equity..........................................................................................
Class A common stock, $0.001 par value per share, 1,000,000,000 shares
authorized, 27,213,791 shares issued and outstanding ...................................
Class B common stock, $0.001 par value per share, 500,000,000 shares
authorized, 12,426,947 shares issued and outstanding ...................................
Preferred stock, $0.001 par value per share, 100,000,000 shares authorized,
no shares issued and outstanding....................................................................
Additional paid-in-capital...............................................................................
Accumulated deficit........................................................................................
Accumulated other comprehensive income....................................................
Total stockholders’ equity.................................................................................
—
27
12
—
189,168
(133,535)
147
55,819
—
—
—
—
—
—
—
—
Members’ deficit ...............................................................................................
Series A preferred units, 21,050,000 units issued and outstanding ................
Series B preferred units, 15,665,525 units issued and outstanding ................
Series C preferred units, 10,486,387 units issued and outstanding ................
Common units, 18,954,806 units issued and outstanding ..............................
Appreciation and participation units, 21,679,094 units issued and
outstanding......................................................................................................
Accumulated other comprehensive loss .........................................................
Total members’ deficit.......................................................................................
Total liabilities, stockholders’ equity and members’ deficit.............................. $
—
—
—
—
—
—
—
164,551
$
(10,602)
(6,910)
7,070
160
3,637
(142)
(6,787)
73,944
See accompanying notes.
65
WORKIVA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Year ended December 31,
2013
2012
2014
Revenue
Subscription and support .......................................................... $
Professional services.................................................................
Total revenue .................................................................................
Cost of revenue
$
91,317
21,377
112,694
$
65,164
19,987
85,151
15,129
9,520
24,649
60,502
34,116
41,067
14,601
89,784
(29,282)
(366)
104
(29,544)
—
(29,544) $
34,702
18,236
52,938
9,262
9,780
19,042
33,896
18,385
27,537
16,177
62,099
(28,203)
(1,521)
(861)
(30,585)
—
(30,585)
21,182
12,696
33,878
78,816
44,145
53,498
19,783
117,426
(38,610)
(2,044)
(468)
(41,122)
32
(41,154) $
(1.28) $
(0.94) $
(1.16)
32,156,060
31,376,603
26,390,099
Subscription and support ..........................................................
Professional services.................................................................
Total cost of revenue......................................................................
Gross profit....................................................................................
Operating expenses
Research and development .......................................................
Sales and marketing..................................................................
General and administrative .......................................................
Total operating expenses ...............................................................
Loss from operations .....................................................................
Interest expense .............................................................................
Other income and (expense), net ...................................................
Loss before provision for income taxes.........................................
Provision for income taxes ............................................................
Net loss .......................................................................................... $
Net loss per common share:
Basic and diluted ......................................................................... $
Weighted average common shares outstanding - basic and
diluted..........................................................................................
See accompanying notes.
66
WORKIVA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
Net loss .......................................................................................... $
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustment, net of tax....................
Unrealized gain (loss) on available-for-sale securities ...............
Reclassification of realized net losses on available-for-sale
securities to net loss ....................................................................
Available-for-sale securities .....................................................
Year ended December 31,
2013
2012
2014
(41,154) $
(29,544) $
(30,585)
93
60
136
196
56
(156)
—
(156)
(2)
(40)
—
(40)
Other comprehensive (loss) income, net of tax .............................
Comprehensive loss....................................................................... $
289
(40,865) $
(100)
(29,644) $
(42)
(30,627)
See accompanying notes.
67
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1
7
WORKIVA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities
Net loss .......................................................................................... $
Adjustments to reconcile net loss to net cash used in operating
activities
Depreciation and amortization..................................................
Equity-based compensation expense ........................................
Provision for (recovery of) doubtful accounts..........................
Accretion of discount on convertible note................................
Paid-in-kind interest on convertible note..................................
Change in fair value of derivative liability ...............................
Loss on early extinguishment of convertible note....................
Realized losses on sale of available-for-sale securities ............
Recognition of deferred government grant obligation..............
Changes in assets and liabilities:
Accounts receivable .............................................................
Deferred commissions .........................................................
Other receivables .................................................................
Prepaid expenses and other..................................................
Other assets ..........................................................................
Accounts payable .................................................................
Deferred revenue..................................................................
Accrued expenses and other liabilities.................................
Change in restricted cash .....................................................
Net cash used in operating activities .............................................
Cash flows from investing activities
Purchase of property and equipment ........................................
Purchase of marketable securities.............................................
Sale of marketable securities ....................................................
Purchase of intangible assets ....................................................
Net cash used in investing activities..............................................
Cash flows from financing activities
Proceeds from issuance of Series C preferred units .................
Payment of equity issuance costs .............................................
Proceeds from public offering, net of underwriters' discount
and offering costs......................................................................
72
Year ended December 31,
2013
2012
2014
(41,154) $
(29,544) $
(30,585)
3,877
7,385
123
266
134
193
111
136
(99)
2,602
(553)
155
(2,251)
(52)
(1,530)
19,961
7,137
54
(3,505)
(8,566)
—
4,864
(394)
(4,096)
—
—
91,769
2,373
3,370
(83)
—
—
—
—
—
—
(8,647)
244
(686)
394
(216)
1,598
18,237
2,508
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(9,503)
(920)
1,160
(169)
(9,432)
7,165
(20)
—
1,039
8,129
183
550
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4,206
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1,014
(43)
(33)
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827
8,737
4,988
(154)
(5,763)
(5,685)
(5,240)
—
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(10,925)
30,234
(315)
—
WORKIVA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
Year ended December 31,
2013
2012
2014
Proceeds from issuance of convertible notes............................
Repayment of convertible debt.................................................
Proceeds from option exercises ................................................
Repayment of debt to related party...........................................
Changes in restricted cash ........................................................
Repayment of other long-term debt..........................................
Principal payments on capital lease and financing obligations
Distributions to members..........................................................
Proceeds from borrowings on line of credit .............................
Proceeds from government for training reimbursement...........
Payments of issuance costs on line of credit ............................
Repayment of line of credit ......................................................
Government loan award............................................................
Net cash provided by financing activities .....................................
Effect of foreign exchange rates on cash.......................................
Net increase (decrease) in cash and cash equivalents ...................
Cash and cash equivalents at beginning of year............................
Cash and cash equivalents at end of year ...................................... $
5,000
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(2,365)
(1,338)
(279)
3,020
194
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(5,038)
2,000
93,155
62
85,616
15,515
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(346)
(61)
2,017
1,520
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50
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24,979
101,131
$
15,515
$
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71
(1,000)
20
(158)
—
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357
—
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31,639
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14,950
10,029
24,979
Supplemental cash flow disclosure
Cash paid for interest ................................................................ $
1,678
$
488
$
74
Supplemental disclosure of noncash investing and financing
activities
Fixed assets acquired through notes payable............................ $
Fixed assets acquired through financing obligations................ $
Fixed assets acquired through capital lease arrangements ....... $
Government loan awarded but not yet received ....................... $
Derivative liability reclassified upon settlement of
convertible notes....................................................................... $
Conversion of convertible notes and accrued interest into
Class A common stock and Series C preferred units in 2014
and 2012, respectively .............................................................. $
Accrued distributions to members ............................................ $
Initial public offering cost accruals .......................................... $
See accompanying notes.
73
— $
4,779
1,677
$
$
— $
— $
10,278
1,749
2,000
$
$
$
85
8,933
—
—
1,392
$
— $
1,484
4,312
346
1,342
$
$
$
— $
— $
— $
13,500
—
—
WORKIVA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies
Organization
WebFilings LLC was formed in California in August 2008. In the third quarter of 2014, we changed
our name to Workiva LLC and converted from a California limited liability company to a Delaware limited
liability company. In December 2014, we converted from a Delaware limited liability company to a Delaware
corporation and changed our name to Workiva Inc. We created Wdesk, a cloud-based platform for enterprises
to collect, manage, report and analyze data in real time. Our secure software platform, Wdesk, allows users
to integrate and control all of their business data, regardless of format or location, with innovative live-
linking technology. We offer our customers solutions for compliance, risk, sustainability, management
reporting, data collection, and enterprise risk management that are delivered through our Wdesk platform.
Our operational headquarters are located in Ames, Iowa, with additional offices located in the United States,
Europe and Canada.
Basis of Presentation and Principles of Consolidation
The consolidated financial statements have been prepared in accordance with U.S. generally accepted
accounting principles and include the accounts of Workiva Inc. and its wholly owned subsidiaries. All
intercompany accounts and transactions have been eliminated in consolidation.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current year presentation.
Such reclassifications had no effect on reported totals for assets, liabilities, shareholders’ equity, members’
equity, cash flows or net loss. We are separately presenting amounts as a deferred government grant obligation
at December 31, 2014 on the consolidated balance sheet and have reclassified the corresponding amount in
the prior year.
Initial Public Offering
In December 2014, we completed our initial public offering (IPO) and sold 7,200,000 shares of
Class A common stock at a public offering price of $14.00 per share. We received net proceeds of $90.4
million after deducting underwriting discounts and commissions of $7.1 million and other offering expenses
of $3.3 million.
Corporate Conversion
On December 10, 2014, prior to the issuance of any of our shares of Class A common stock in our
IPO, we converted from a Delaware limited liability company to a Delaware corporation. In conjunction
with the corporate conversion, all of our outstanding Series A, B and C preferred units, common units, capped
common units, appreciation units, participation units, and options to purchase common units were
automatically converted into shares of our common stock or options to purchase common stock. The ratio
at which each class of outstanding equity units and options was converted into shares of our common stock
or options was determined using a formula based on the midpoint of the price range of our Class A common
stock set forth on the cover of the last preliminary prospectus prior to the completion of the corporate
conversion. The conversion rates are set forth below:
74
Preferred units - Series A.........................................................................................................
Preferred units - Series B.........................................................................................................
Preferred units - Series C.........................................................................................................
Common units .........................................................................................................................
Capped common units ($.20 cap)............................................................................................
Capped common units ($1.00 cap)..........................................................................................
Capped common units ($4.00 cap)..........................................................................................
Appreciation units ($.20 threshold price)................................................................................
Appreciation units ($.30 threshold price)................................................................................
Appreciation units ($3.36 threshold price)..............................................................................
Participation units ($1.00 threshold price) ..............................................................................
Participation units ($4.00 threshold price) ..............................................................................
Rate of conversion
0.396
0.453
0.396
0.396
0.014
0.071
0.286
0.382
0.375
0.156
0.325
0.111
All of our outstanding Series A, B and C preferred units, common units, capped common units,
appreciation units, participation units, and options to purchase common units for all periods presented have
been adjusted retroactively to reflect the conversion to a corporation for purposes of calculating basic and
diluted net loss per common share and our stock-based compensation disclosures.
Foreign Currency
We translate the financial statements of our foreign subsidiaries, which have a functional currency
in the respective country’s local currency, to U.S. dollars using month-end exchange rates for assets and
liabilities and average exchange rates for revenue, costs and expenses. Translation gains and losses are
recorded in accumulated other comprehensive income as a component of stockholders’ equity. Gains and
losses resulting from foreign currency transactions that are denominated in currencies other than the entity's
functional currency, including intercompany foreign currency transactions that are not of a long-term
investment nature, are included within “Other income and (expense), net” on the consolidated statements of
operations. We recorded $141,000, $108,000 and $32,000 of transaction losses during the years ended
December 31, 2014, 2013 and 2012, respectively.
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 determination of the relative selling prices of our services, self-insurance reserves for claims
incurred but not yet reported, collectability of accounts receivable, useful lives of intangible assets and
property and equipment, income taxes 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.
75
Cash and Cash Equivalents
Cash consists of cash on deposit with banks that is stated at cost, which approximates fair value. We
invest our excess cash primarily in highly liquid certificates of deposit, money market funds and marketable
securities. We classify all highly liquid investments with stated maturities of three months or less from date
of purchase as cash equivalents and all highly liquid investments with stated maturities of greater than three
months as marketable securities.
Marketable Securities
We determine the appropriate classification of our investments at the time of purchase and reevaluate
such designation at each balance sheet date. We have classified and accounted for our investments as available-
for-sale. Available-for-sale securities are recorded at fair value each reporting period. Unrealized gains and
losses are excluded from earnings and recorded as a separate component within “Accumulated other
comprehensive income (loss)” on the consolidated balance sheets until realized. Dividend income is reported
within “Other income and expense, net” on the consolidated statements of operations. We evaluate our
investments to assess whether those with unrealized loss positions are other than temporarily impaired. We
consider impairments to be other than temporary if they are related to deterioration in credit risk or if it is
likely we will sell the securities before the recovery of their cost basis. Realized gains and losses and declines
in value judged to be other than temporary are determined based on the specific identification method and
are reported in “Other income and (expense), net” in the consolidated statements of operations.
Fair Value of Financial Instruments
Our financial assets, which include cash equivalents and marketable securities, are measured and
recorded at fair value on a recurring basis. Our other current financial assets and our other current financial
liabilities have fair values that approximate their carrying value due to their short-term maturities.
Concentration of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist principally
of cash and cash equivalents and accounts receivable. We place our cash and cash equivalents with high
credit-quality financial institutions. Such deposits may be in excess of federally insured limits. To date, we
have not experienced any losses on our cash and cash equivalents. We perform periodic evaluations of the
relative credit standing of the financial institutions.
Our accounts receivable are derived primarily from customers located in North America. We perform
ongoing credit evaluations of our customers’ financial condition and require no collateral from our customers.
We maintain an allowance for doubtful accounts receivable based upon the expected collectability of accounts
receivable balances. We did not have a significant concentration of accounts receivable from any single
customer or from customers in any single country outside of the United States at December 31, 2014 or
2013.
Property and Equipment, net
Property and equipment is stated at cost, net of accumulated depreciation and amortization.
Depreciation is computed using the straight-line method over the estimated useful lives of the respective
assets, generally three to ten years. We amortize leasehold improvements and assets under capital leases or
financing arrangements over the lesser of the term of the lease including renewal options that are reasonably
assured or the estimated useful life of the assets. Depreciation and amortization expense totaled $3.9 million,
$2.4 million and $1.0 million for the years ended December 31, 2014, 2013 and 2012, respectively, and
included $1.9 million and $607,000 of amortization of assets recorded under capital leases during the years
ended December 31, 2014 and 2013, respectively. There were no assets under capital leases in 2012.
76
Revenue Recognition
We generate revenue through the sale of subscriptions to our cloud-based software and the delivery
of professional services. Our customer contracts typically range in length from three to 36 months. Our
arrangements do not contain general rights of return. Our subscription contracts do not provide customers
with the right to take possession of the software supporting the applications and, as a result, are accounted
for as service contracts.
We commence revenue recognition for subscriptions to our cloud applications and professional
services when all of the following criteria are met:
• There is persuasive evidence of an arrangement;
• The service has been or is being provided to the customer;
• Collection of the fees is reasonably assured; and
• The amount of fees to be paid by the customer is fixed or determinable.
Collectability is assessed based on a number of factors, including past transaction history with the
customer and the creditworthiness of the customer. Collateral is not requested from the customer. If it is
determined that the collection of a fee is not probable, the revenue is recognized at the time the collection
becomes probable, which is generally upon the receipt of cash.
Revenue is reported net of sales and other taxes collected from customers to be remitted to government
authorities.
Subscription and Support Revenue
We recognize the aggregate minimum subscription and support fees ratably on a straight-line basis
over the subscription term, provided that an enforceable contract has been signed by both parties, access to
our SaaS solutions has been granted to the customer, the fee for the subscription and support is fixed or
determinable, and collection is reasonably assured.
Professional Services Revenue
Our professional services relate primarily to document set up and XBRL tagging. When requested
by our new or existing customers, we will set up their documents by importing a prior version and formating
the document using best practice methods in our solution. Our XBRL tagging services include applying
XBRL tagging to a customer filing document using Wdesk XBRL tools, reviewing existing tags for
correctness, identifying any necessary revisions to be consistent with newly provided requirements or
guidance from the SEC or FASB, as well as rolling forward XBRL tags from a prior filing to a current filing
document.
Our professional services are not required for customers to utilize our solution. Our pricing for
professional services has been predominantly on a fixed-fee basis, and we recognize revenue after the services
have been performed. Document set up services are typically completed in less than two weeks. XBRL
tagging services are offered for each filing document and revenue is recognized upon a successful submission
to the SEC.
Multiple Deliverable Arrangements
For arrangements with multiple deliverables, we evaluate whether the individual deliverables qualify
as separate units of accounting. In order to treat deliverables in a multiple deliverable arrangement as separate
units of accounting, the deliverables must have standalone value upon delivery. For deliverables that have
standalone value upon delivery, we account for each deliverable separately and recognize revenue for the
respective deliverables as they are delivered.
77
Subscription contracts have standalone value as we sell the subscriptions separately. In determining
whether professional services can be accounted for separately from subscription services, we consider the
availability of the professional services from other vendors, the nature of our professional services and
whether we sell our applications to new customers without professional services. In the years ended
December 31, 2014, 2013 and 2012, we determined that we had established standalone value for the
professional services related to document set up and XBRL tagging. This determination was made due
primarily to the ability of the customer to complete these tasks without assistance and the sale of XBRL
services separate from the initial subscription order. Because we established standalone value for our
professional services in the years ended December 31, 2014, 2013 and 2012, such service arrangements are
being accounted for separately from subscription services.
When multiple deliverables included in an arrangement are separable into different units of
accounting, the arrangement consideration is allocated to the identified separate units of accounting based
on their relative selling price. Multiple deliverable arrangements accounting guidance provides a hierarchy
to use when determining the relative selling price for each unit of accounting. Vendor-specific objective
evidence (VSOE) of selling price, based on the price at which the item is regularly sold by the vendor on a
standalone basis, should be used if it exists. If VSOE of selling price is not available, third-party evidence
(TPE) of selling price is used to establish the selling price if it exists. VSOE and TPE do not currently exist
for any of our deliverables. Accordingly, for arrangements with multiple deliverables that can be separated
into different units of accounting, we allocate the arrangement fee to the separate units of accounting based
on our best estimate of selling price. The amount of arrangement fee allocated is limited by contingent
revenue, if any.
We determine our best estimate of selling price for our deliverables based on our overall pricing
objectives, taking into consideration market conditions and entity-specific factors. We evaluate our best
estimate of selling price by reviewing historical data related to sales of our deliverables, including comparing
the percentages of our contract prices to our list prices. We also may consider several other data points in
our evaluation, including the size of our arrangements, length of term, the cloud applications sold, customer
demographics and the numbers and types of users within our arrangements.
Deferred Revenue
We typically invoice our customers for subscription fees in advance on a quarterly, annual, two- or
three-year basis, with payment due at the start of the subscription term. Unpaid invoice amounts for services
starting in future periods are excluded from accounts receivable and deferred revenue. Invoiced amounts are
reflected as accounts receivable once we have initiated services with an offset to deferred revenue or revenue
depending on whether the revenue recognition criteria have been met. Deferred revenue also includes certain
deferred professional service fees that are recognized upon completion of the service. The portion of deferred
revenue that we anticipate will be recognized after the succeeding twelve-month period is recorded as non-
current deferred revenue, and the remaining portion is recorded as current deferred revenue.
Cost of Revenue
Cost of revenue consists primarily of personnel and related costs directly associated with the
professional services and customer success teams and training personnel, including salaries, benefits,
bonuses, and equity-based compensation; the costs of contracted third-party vendors; the costs of server
usage by our customers; information technology costs; and facility costs.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of personnel and related costs, including salaries,
benefits, bonuses, commissions, travel, and equity-based compensation. Other costs included in this expense
78
are marketing and promotional events, our annual user conference, online marketing, product marketing,
information technology costs, and facility costs. We amortize sales commissions that are directly attributable
to a contract over the lesser of 12 months or the non-cancelable term of the customer contract based on the
terms of our commission arrangements.
Advertising costs are charged to sales and marketing expense as incurred. Advertising expense totaled
$1.8 million, $454,000 and $464,000 for the years ended December 31, 2014, 2013 and 2012, respectively.
Research and Development Expenses
Research and development expenses consist primarily of personnel and related costs, including
salaries, benefits, bonuses, and equity-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, legal, human resources, and administrative personnel, including salaries, benefits,
bonuses, and equity-based compensation; legal, accounting, and other professional service fees; other
corporate expenses; information technology costs; and facility costs.
Leases
We categorize leases at their inception as either operating or capital leases and may receive renewal
or expansion options, rent holidays, and leasehold improvement and other incentives on certain lease
agreements. We recognize lease costs on a straight-line basis, taking into account adjustments for free or
escalating rental payments, renewals at our option that are reasonably assured and deferred payment terms.
Additionally, lease incentives are accounted for as a reduction of lease costs over the term of the agreement.
Leasehold improvements are capitalized at cost and amortized over the shorter of their useful life or the term
of the lease.
Government Grants
Government grants received are recorded as a liability on the balance sheet until all contingencies
are resolved and the grant is determined to be realized.
Intangible Assets
We account for intangible assets under Accounting Standards Codification (ASC) 350, Goodwill
and Other Intangibles—30 General Intangibles Other than Goodwill. Intangible assets consist of legal fees
incurred for patents and are recorded at cost and amortized over the useful lives of the assets of ten years,
using the straight-line method. Certain patents are in the legal application process and therefore are not
currently being amortized.
Accumulated amortization of patents as of December 31, 2014 and 2013 was approximately $14,800
and $2,000, respectively. Future amortization expense for legally approved patents is estimated at $25,000
per year through 2019 and approximately $108,000 thereafter.
79
Impairment of Long-Lived Assets
Long-lived assets, such as property, equipment and software and intangible assets are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or
asset group may not be recoverable. If circumstances require that a long-lived asset or asset group be tested
for possible impairment, we first compared the undiscounted cash flows expected to be generated by that
long-lived asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset
group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that
the carrying amount exceeds its fair value.
Stock-Based Compensation
We measure all share-based payments, including grants of options to purchase common stock,
unvested stock and the issuance of restricted stock to employees, service providers and board members,
using a fair-value based method. The cost of services received from employees and non-employees in
exchange for awards of equity instruments is recognized in the consolidated statement of operations based
on the estimated fair value of those awards on the grant date or reporting date, if required to be remeasured,
and amortized on a straight-line basis over the requisite service period. We use the Black-Scholes option-
pricing model to determine the fair values of stock option awards and also used the Black-Scholes option-
pricing model for appreciation units and participation units granted prior to our corporate conversion. For
restricted stock awards, fair value is based on the closing price of our common stock on the grant date.
Income Taxes
We record current income taxes based on our estimates of current taxable income and provide for
deferred income taxes to reflect estimated future income tax payments and receipts. We are subject to U.S.
federal income taxes as well as state taxes. In addition, we are subject to taxes in the foreign jurisdictions
where we operate.
Prior to our corporate conversion in December 2014, we were a Delaware limited liability company
that passed through income and losses to our members for U.S. federal and state income tax purposes. As a
result, we were not subject to any U.S. federal or state income taxes as our taxable income was reported by
our individual members.
Effective upon our corporate conversion, we account for income taxes using the asset and liability
method, which requires the recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements. Under this method, we determine
deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases
of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected
to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income
in the period that includes the enactment rate.
We recognize deferred tax assets to the extent that we believe that these assets are more likely than
not to be realized. In making such a determination, we consider all available positive and negative evidence,
including future reversals of existing taxable temporary differences, projected future taxable income, tax
planning strategies and results of recent operations. If we determine that we would be able to realize our
deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the
deferred tax asset valuation allowance, which would reduce the provision for income taxes.
We record uncertain tax positions in accordance with ASC 740, Income Taxes, on the basis of a two-
step process in which (1) we determine whether it is more likely than not that the tax positions will be
sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the
80
more-likely-than-not threshold, we recognize the largest amount of tax benefit that is more than 50 percent
likely to be realized upon ultimate settlement with the related tax authority.
We recognize interest and penalties related to unrecognized tax benefits on the income tax expense
line in the accompanying consolidated statement of operations. Accrued interest and penalties are included
on the related tax liability line in the consolidated balance sheet.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount net of an allowance for doubtful accounts.
The allowance for doubtful accounts is based on our assessment of the collectability of customer accounts.
We regularly review our receivables that remain outstanding past their applicable payment terms and
established an allowance for potential write-offs by considering factors such as historical experience, credit
quality, age of the accounts receivable balances, and current economic conditions that may affect a customer’s
ability to pay. Accounts receivable deemed uncollectible are charged against the allowance once collection
efforts have been exhausted.
Subsequent events
We have evaluated subsequent events through the date the financial statements were issued and filed
with the U.S. Securities and Exchange Commission ("SEC"). There were no subsequent events that required
recognition or disclosure.
New Accounting Pronouncements
In May 2014, the FASB issued guidance codified in ASC 606, Revenue Recognition - Revenue from
Contracts with Customers, which amends the guidance in former ASC 605, Revenue Recognition. We are
currently evaluating the impact of the provisions of ASC 606.
81
2. Revision of Prior Period Financial Statements
We have identified and corrected an error in our prior period financial statements for reimbursements
received pursuant to government job training programs. We receive reimbursement from the programs after
we have incurred the training expenses for employees and submitted requests for reimbursement. The
programs are funded primarily through the diversion of employee withholding taxes otherwise payable to
the state. If we do not maintain sufficient employment levels to generate the employee withholding taxes
necessary to fully fund the programs, we would be required to fund the shortfall directly. The reimbursement
benefit was originally recorded as an offset to the related training expenses incurred at the time the
reimbursements were approved, as we believe the probability that we will need to fund the contingent
obligation directly is remote. However, consistent with our treatment of other government grants, we have
now concluded that the recognition of the benefit of these reimbursements should be deferred in accordance
with ASC 450-30, Gain Contingencies (“ASC 450”), and recorded in other income as the amount of our
remaining contingent funding obligation is reduced.
We evaluated the effects of this error and concluded it was immaterial to any of our previously issued
annual financial statements. However, the cumulative error would be material in the year ended December 31,
2014 if the entire correction was recorded in 2014, and would have impacted comparisons to prior periods.
Accordingly, we have revised our consolidated financial statements as of and for the years ended December
31, 2013 and 2012.
The following table summarizes the changes to each of the line items on the consolidated financial
statements as a result of the revision described above (in thousands):
Revised consolidated balance sheet amounts
As of December 31, 2013
Previously
reported
Current period
adjustment
(in thousands)
Adjusted
balance
Deferred government grant obligation ................................................................. $
— $
Total current liabilities.............................................................................................
Deferred government grant obligation .................................................................
Total liabilities.........................................................................................................
Series A preferred units........................................................................................
Series B preferred units ........................................................................................
Series C preferred units ........................................................................................
Common units ......................................................................................................
Appreciation and participation units ....................................................................
Total members' equity (deficit)................................................................................
43,325
2,259
77,338
(9,711)
(6,485)
8,590
482
3,872
(3,394)
$
100
100
3,293
3,393
(891)
(425)
(1,520)
(322)
(235)
(3,393)
100
43,425
5,552
80,731
(10,602)
(6,910)
7,070
160
3,637
(6,787)
82
Revised consolidated statements of operations amounts
Year ended December 31, 2013
Year ended December 31, 2012
Previously
reported
Adjustment
As revised
Previously
reported
Adjustment
As revised
(in thousands)
Revenue
Subscription and support.................................. $
65,164
$
— $
65,164
$
34,702
$
— $
34,702
Professional services........................................
Total revenue.......................................................
Cost of revenue
Subscription and support..................................
Professional services........................................
Total cost of revenue...........................................
Gross profit .........................................................
Operating expenses
Research and development ..............................
Sales and marketing .........................................
General and administrative ..............................
Total operating expenses.....................................
19,987
85,151
14,881
9,406
24,287
60,864
33,400
40,824
14,402
88,626
—
—
248
114
362
(362)
716
243
199
1,158
19,987
85,151
15,129
9,520
24,649
60,502
34,116
41,067
14,601
89,784
18,236
52,938
9,222
9,777
18,999
33,939
18,342
27,506
16,146
61,994
Loss from operations...........................................
(27,762)
(1,520)
(29,282)
(28,055)
Interest expense...................................................
Other income and (expense), net ........................
(366)
104
—
—
(366)
104
(1,521)
(861)
Loss before provision for income taxes ..............
(28,024)
(1,520)
(29,544)
(30,437)
Provision for income taxes..................................
—
—
—
—
—
—
40
3
43
(43)
43
31
31
105
(148)
—
—
(148)
—
18,236
52,938
9,262
9,780
19,042
33,896
18,385
27,537
16,177
62,099
(28,203)
(1,521)
(861)
(30,585)
—
Net loss................................................................ $
(28,024) $
(1,520) $
(29,544) $
(30,437) $
(148) $
(30,585)
Revised consolidated statements of cash flow amounts
Year ended December 31, 2013
Year ended December 31, 2012
Previously
reported
Adjustment
As revised
Previously
reported
Adjustment
As revised
(in thousands)
Net loss................................................................ $
(28,024) $
(1,520) $
(29,544) $
(30,437) $
(148) $
(30,585)
Other receivables .............................................
Net cash used in operating activities ...............
Proceeds from government for training
reimbursement..................................................
Net cash provided by financing activities .......
(686)
(8,932)
—
8,850
—
(686)
(1,520)
(10,452)
1,520
1,520
1,520
10,370
176
(5,406)
—
31,282
(209)
(357)
357
357
(33)
(5,763)
357
31,639
83
3. Marketable Securities
At December 31, 2014, we reported money market funds with an amortized cost and aggregate fair
value of $97.1 million in cash and cash equivalents.
At December 31, 2013, marketable securities consisted of the following (in thousands):
Domestic debt mutual funds.....................................
Money market funds.................................................
Included in cash and cash equivalents......................
Included in marketable securities .............................
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Aggregate
Fair Value
$
$
$
$
5,000
13,923
18,923
13,923
5,000
$
$
$
$
— $
—
— $
— $
— $
(196) $
—
(196) $
— $
(196) $
4,804
13,923
18,727
13,923
4,804
As of December 31, 2014, we did not have any marketable securities in an unrealized loss position.
The following table presents gross unrealized losses and fair values for those marketable securities that were
in an unrealized loss position as of December 31, 2013, aggregated by investment category and the length
of time that individual securities have been in a continuous loss position (in thousands):
As of December 31, 2013
Less than 12 months
12 months or greater
Fair Value
Unrealized
Loss
Fair Value
Unrealized
Loss
Domestic debt mutual funds.....................................
Total..........................................................................
$
$
— $
— $
— $
— $
4,804
4,804
$
$
(196)
(196)
We did not believe any of the unrealized losses represented an other-than-temporary impairment
based on our evaluation of available evidence at December 31, 2013. In April 2014, management made a
decision to change our investment strategy, and we sold our domestic debt mutual funds, resulting in a
realized loss of $136,000 reported in other income and (expense), net during the year ended December 31,
2014.
4. Supplemental Consolidated Balance Sheet and Statement of Operations Information
Other Receivables
Other receivables as of December 31, 2014 and 2013 consisted of (in thousands):
Government loan award (Note 7)...................................................................... $
Other receivables...............................................................................................
$
As of December 31,
2014
2013
— $
295
295
$
2,000
856
2,856
84
Restricted Cash
We had $101,000 and $154,000 of restricted cash associated with an irrevocable letter of credit in
place as collateral for a lease on a building at December 31, 2014 and 2013, respectively. As of December 31,
2014, we also had $300,000 of restricted cash serving as collateral for an irrevocable letter of credit with
Morgan Stanley (see Note 7). In addition, at December 31, 2013, we had $25,000 of restricted cash associated
with an irrevocable letter of credit in place as collateral for a loan from the Iowa Economic Development
Authority (IEDA).
Property and Equipment, net
Property and equipment, net as of December 31, 2014 and 2013 consisted of (in thousands):
Buildings ........................................................................................................... $
Computers, equipment and software.................................................................
Furniture and fixtures........................................................................................
Vehicles.............................................................................................................
Leasehold improvements ..................................................................................
Construction in process .....................................................................................
Less: accumulated depreciation and amortization ............................................
$
As of December 31,
2014
2013
37,380
6,773
7,024
148
1,105
1,520
53,950
(7,685)
46,265
$
$
17,056
4,934
4,470
97
523
11,676
38,756
(4,041)
34,715
The following assets included in property and equipment, net were acquired under capital and
financing leases (see Note 6) (in thousands):
Buildings ........................................................................................................... $
Computers and equipment ................................................................................
Furniture and fixtures........................................................................................
Less: accumulated amortization........................................................................
$
As of December 31,
2014
2013
37,380
$
3,034
392
40,806
(2,477)
38,329
$
17,056
1,356
392
18,804
(607)
18,197
85
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities as of December 31, 2014 and 2013 consisted of (in
thousands):
Accrued vacation............................................................................................... $
Accrued commissions .......................................................................................
Accrued bonuses ...............................................................................................
Self-insurance reserves .....................................................................................
Accrued other liabilities ....................................................................................
$
As of December 31,
2014
2013
2,949
1,649
6,336
800
5,031
16,765
$
$
2,175
1,118
3,101
692
1,853
8,939
Other Income and (Expense), net
Other income and (expense), net for the years ended December 31, 2014, 2013 and 2012 consisted
of (in thousands):
Interest income .................................................................................... $
Change in fair value of derivative .......................................................
Loss on early extinguishment of convertible note...............................
Other ....................................................................................................
$
5. Fair Value Measurements
For the year ended December 31,
2014
2013
2012
$
73
(193)
(111)
(237)
(468) $
220
$
—
—
(116)
104
$
98
3,271
(4,206)
(24)
(861)
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.
86
The following tables present financial assets and liabilities measured and recorded at fair value on
a recurring basis (in thousands):
Fair Value Measurements at December 31, 2014 using:
Significant Other
Significant Other
Quoted Prices in
Unobservable
Observable
Active Markets
Remaining
Remaining
for Identical
Inputs
Inputs
Assets
Level 3
Level 2
Level 1
Total
Description
Assets
Cash equivalents
Money market funds ..................
Total assets measured at fair
value .............................................
$
$
97,085
97,085
$
$
97,085
97,085
$
$
— $
— $
—
—
Fair Value Measurements at December 31, 2013 using:
Significant Other
Significant Other
Quoted Prices in
Unobservable
Observable
Active Markets
Remaining
Remaining
for Identical
Inputs
Assets
Inputs
Level 3
Level 2
Level 1
Total
Description
Assets
Cash equivalents
Money market funds ..................
$
13,923
$
13,923
$
Marketable securities
Domestic debt mutual funds ......
4,804
4,804
Total assets measured at fair
value .............................................
$
18,727
$
18,727
$
— $
—
— $
—
—
—
During 2014, there was an embedded derivative liability associated with a convertible note that was
issued in July 2014 (see Note 7). To derive the fair value of the embedded derivative, we estimated the fair
value of the convertible note “with” and “without” the embedded derivative using a discounted cash-flow
approach. The difference between the “with” and “without” note prices was determined to be the fair value
of the embedded derivative at inception. Key inputs for this valuation model were the stated interest rate of
the convertible note, our assumed cost of debt, assessment of the likelihood of conversion, timing and the
stated value of the discount upon conversion of the notes into our equity. The derivative liability was re-
measured at fair value each reporting period through December 16, 2014 when the note was settled in shares
of our Class A common stock. Changes in the fair value measurement of the embedded derivative were
reported in “Other income and expense, net” on the consolidated statement of operations.
We classified the derivative liability as Level 3 due to the lack of relevant observable market data
over fair value inputs such as the probability-weighting of the various scenarios in the arrangement. The
following table represents a rollforward of the fair value of Level 3 instruments (significant unobservable
inputs):
87
Liabilities
Balance at beginning of period ..................................................................... $
Convertible notes - embedded derivative ...................................................
Change in fair value of derivative ..............................................................
Share settlement of convertible debt...........................................................
Balance at end of period................................................................................ $
As of December 31,
2014
2013
— $
1,199
193
(1,392)
— $
—
—
—
—
—
Other Fair Value Measurements
At December 31, 2014, the fair value of our debt obligations approximated the carrying amount of
$0.2 million. The estimated fair value was based in part on our consideration of incremental borrowing rates
for similar types of borrowing arrangements. We have generally classified the fair value of our debt obligations
as Level 3 due to the lack of relevant observable market data over fair value inputs.
6. Commitments and Contingencies
Lease Commitments
We lease certain office and residential space under non-cancelable operating leases with various
lease terms through June 2043. Rent expense for the years ended December 31, 2014, 2013 and 2012 was
$3.2 million, $2.5 million and $1.2 million, respectively.
We lease computer equipment and furniture from various parties under capital lease agreements that
expire through March 2018. The total amount financed under these capital leases was $1.7 million and $1.7
million during the years ended December 31, 2014 and 2013, respectively.
Build to Suit
We entered into a lease agreement for land and an office building in Ames, Iowa, which was
constructed in two phases. As part of the lease agreement, the landlord was responsible for constructing the
building in accordance with our specifications and agreed to fund $11.8 million for the first phase and $11.1
million for the second phase of construction. We were the developer of the project and responsible for
construction costs in excess of these amounts. As a result of this involvement, we were deemed the “owner”
for accounting purposes during the construction period and were required to capitalize the construction costs
associated with the office building. Upon completion of each phase of the project, we performed a sale-
leaseback analysis pursuant to ASC 840, Leases, to determine if the building could be removed from the
balance sheet. We determined there was continuing involvement, which precluded derecognition of the
building. The construction liability of $11.8 million was reclassified to a financing obligation, and $17.1
million of costs capitalized during construction was placed in service during June 2013 for the initial phase.
Upon completion of the second phase of the project, the construction liability of $11.1 million was reclassified
to a financing obligation, and $19.9 million of costs capitalized during construction was placed in service
during 2014.
Total cash payments due under the arrangement were allocated on a relative fair value basis between
rent related to the land lease and debt service payments related to the financing obligation. The portion of
the lease payments allocated to the land is expensed straight-line over the term of the lease from the point
we took possession of the land and including renewal periods where renewal was deemed reasonably assured
at the inception of the lease. The lease contains purchase options to acquire the landlord’s interest in the land
88
lease and building at any time beginning three years from the commencement date of the lease. In addition,
the lease requires us upon certain events, such as a change in control, to purchase the building from the
landlord. The purchase options were deemed to be fair value at the inception of the lease.
As of December 31, 2014, future estimated minimum lease payments under non-cancelable
operating, capital and financing leases were as follows (in thousands):
Operating
Leases
Capital
Leases
Financing
Obligations
2015..............................................................................................
2016..............................................................................................
2017..............................................................................................
2018..............................................................................................
2019..............................................................................................
Thereafter.....................................................................................
Total minimum lease payments ...................................................
Less: Amount representing interest..............................................
Present value of capital lease and financing obligations .............
$
2,432
$
1,291
$
2,714
2,701
2,446
1,592
9,048
$
20,933
900
333
18
—
—
2,542
214
$
2,328
$
2,541
2,681
2,681
2,681
2,681
32,333
45,598
23,238
22,360
Government Grants
Since 2009, we have participated in a program with a local area community college, enlisted by the
state of Iowa, that provides reimbursement of training dollars spent on employees hired in Iowa. The
community college funds training through the sale of certificates for the amount of anticipated training
expenses to be incurred and an estimate of the costs to administer the program. At each payroll date, the
state allows us to divert a specified portion of employee state income tax withholdings for the qualified
employees to the community college. The community college uses the funds to pay for the program and
principal and interest on the certificates. In the event that the funds generated from withholding taxes are
insufficient to pay the principal and interest on the certificates, we would be liable for any shortfall. To date,
we have entered into three agreements under this program and have been reimbursed for training costs
incurred for a total of 378 employees.
During the years ended December 31, 2014, 2013 and 2012, we were reimbursed $194,000, $1.5
million and $357,000, respectively. We have concluded that the realization of these amounts is contingent
on continuing employment levels. Therefore, in accordance with ASC 450, the amounts received are recorded
on the balance sheet as a liability until all contingencies have been resolved. We release the liability to “Other
income and (expense), net” on our statement of operations once the amounts diverted and paid to the
community college have reduced the total principal and interest due on the certificates to a level below the
amounts reimbursed to date. The amount recognized in other income is measured as the excess of the
reimbursements received as of each balance sheet date over the total principal and interest due on the
certificates, net of amounts diverted. To the extent we have not diverted amounts sufficient to reduce the
principal and interest on the certificates to a level below the reimbursements received for each of the programs,
there is no benefit recorded in the statement of operations.
During the year ended December 31, 2014, the total benefit recorded on the statement of operations
was $99,000. There was no benefit recorded in 2013 and 2012. At December 31, 2014 and 2013, there was
$3.5 million and $3.4 million included in “Deferred government grant obligation” on the consolidated balance
sheet, respectively. The deferred liability is classified as current or non-current based on the estimated timing
89
of when the amounts will be recorded as income. At December 31, 2014 and 2013, there was $697,000 and
$100,000 classified as a current liability, respectively.
On February 1, 2011, we received financing from IDED that provides for a grant in the form of a
forgivable loan of $2.3 million. The note matures in five years, and in the event of default, bears interest at
6%. Under the terms of the loan, we must complete and maintain the project performance obligation, including
the creation of 251 qualified jobs by December 16, 2013, and the retention of six previously created qualified
jobs through December 16, 2015. The Company and IDED also agreed to a $31.6 million development plan
that was required to be invested by December 16, 2013. The job creation obligation was met and the $31.6
million development plan was complete as of December 16, 2013. The jobs must be maintained through
December 16, 2015. In the event that such condition is not met, we must repay $8,799 per job not maintained.
The financing is secured by a letter of credit issued pursuant to our credit facility with Silicon Valley Bank.
As the project plan was completed in 2013, which included the creation of 251 qualified jobs, and any failure
to maintain these qualified jobs during the maintenance period would not give rise to a requirement to accrue
or repay interest on the loan, interest expense of $260,000 that had been previously accrued was offset against
“Interest expense” on the consolidated statement of operations.
At December 31, 2014 and 2013, there was $2.3 million related to the forgivable loan included in
“Deferred government grant obligation” on the consolidated balance sheet. The deferred liability is classified
as current or non-current based on the estimated timing of when the amount will be recognized as income.
At December 31, 2014, there was $1,627,000 classified as a current liability because we expect to meet the
job maintenance requirement ending in December 2015. The $632,000 presented as a non-current liability
at December 31, 2014 is the amount we anticipate offsetting against the carrying value of our property and
equipment. The amount is based on an allocation of the funds received to all the components of the project,
a portion of which was to incur certain capital expenditures as part of the $31.6 million project plan.
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. 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.
7. Debt
Convertible Notes
In December 2011, we issued convertible promissory notes (the 2011 Notes) totaling $10.1 million
and bearing interest at 7% per annum. We received net proceeds of $10.1 million after deducting issuance
costs of $38,000. The notes were due December 2016 and could be extended at our option for an additional
two years. If equity interests of greater than $12.0 million were sold to new investors, the 2011 Notes and
accrued unpaid interest were, for 30 days, convertible at the option of the holder into the same type of
membership interests as the equity financing at 90% of the price per unit of the equity financing.
In March 2012, we issued convertible promissory notes (the 2012 Notes) totaling $2.5 million with
substantially the same terms as the 2011 Notes. We received net proceeds of $2.5 million after deducting
issuance costs of $10,000.
We concluded that our ability to extend the term and the right of the holder to convert the 2011 and
2012 Notes into another security at the discounted price qualified as features that should be bifurcated as a
90
compound embedded derivative. The fair values of the derivatives at issuance of the 2011 and 2012 Notes
were $3.8 million and $922,000, respectively. The impact of the change in fair value of the derivatives of
$3.3 million for 2012 was reported in “Other income and (expense), net” on the consolidated statement of
operations.
We recorded interest expense of $762,000 during the year ended December 31, 2012 related to the
2011 and 2012 Notes.
During 2012, in conjunction with the issuance of Series C preferred units, we settled the $13.5
million of outstanding principal and interest with 3,006,442 Series C preferred units resulting in a loss of
$4.2 million, which is reported in “Other income and (expense), net” on the consolidated statement of
operations.
In July 2014, we issued a subordinated promissory note (the 2014 Note) totaling $5.0 million with
a 7% coupon rate and maturing January 31, 2016. The note contained an option to convert outstanding
principal and paid-in-kind interest into our Class A common stock upon successful completion of an initial
public offering at a 10% discount to the offering price.
We evaluated the convertible debt instrument under ASC 480, Distinguishing Liabilities from Equity
and concluded it would be accounted for as a liability. We concluded the holder’s redemption rights upon a
new equity financing or change of control event and the holder’s options to either convert the note into shares
in the event of an initial public offering or to continue receiving simple interest at a 10% paid-in-kind coupon
rate were embedded features of the note that were required to be bifurcated and accounted for as a compound
derivative in accordance with ASC 815-15, Derivatives and Hedging. We recorded $1.2 million as the fair
value of the embedded derivative liability upon issuance of the convertible note as of July 31, 2014, with a
corresponding amount recorded as a debt discount. The discount was being accreted to interest expense
over the term of the note.
On December 16, 2014, in conjunction with the close of our initial public offering, the holder elected
to exercise the option to convert the 2014 Note. We settled the $5.1 million of outstanding principal and
interest with 407,480 shares of our Class A common stock at a price of $12.60 per share, which represents
90% of the initial public offering price of our Class A common stock. This settlement resulted in a loss of
$111,000, which is reported in “Other income and (expense), net” on the consolidated statement of operations.
The change in fair value of the derivative resulted in expense of $193,000 through conversion and is reported
in “Other income and (expense), net” on the consolidated statement of operations. We recorded $400,000
of interest related to the convertible note through conversion. These shares are subject to a lock-up agreement
for 180 days after the consummation of our IPO.
Other Long-Term Debt
On August 31, 2009, we received financing from the Iowa Department of Economic Development
(IDED) that provides for a loan of $100,000, accruing interest at 5%, due in monthly installments maturing
on August 31, 2014. The loan was paid in full during the year ended December 31, 2014.
In addition, we received a loan of $150,000 from IDED on August 31, 2009. We are required to pay
the lesser of 2% of prior year total gross revenue or $25,000 per year until $225,000 has been remitted. We
expect to pay $25,000 in 2015, and therefore, the principal portion of $17,000 and $91,000 have been reflected
in the current and long-term portion of debt on our balance sheet, respectively. Interest will be accreted over
the estimated period of repayment. Under the terms of both IDED notes, we were required to create 20 jobs
in Iowa by May 2012 and maintain them through May 2014, which we did. In the event such conditions
were not met, $150,000 of the loan amount would have been immediately due and payable. We recorded
interest expense of $6,800, $11,000 and $11,000 for the years ended December 31, 2014, 2013 and 2012,
respectively, related to such 2009 debt agreements.
91
On February 15, 2010, we received financing from IDED that provides for a forgivable grant of
$150,000. The grant is forgivable after 10 years unless any of the following events occur: we complete an
initial public offering, our operations and development center move out of Iowa, or we sell 51% or more of
our assets or the company. We recorded interest expense of $9,000, $11,000 and $9,000 for the years ended
December 31, 2014, 2013 and 2012, respectively, related to such debt agreement. In connection with our
initial public offering in December 2014, the grant became due and payable including accrued interest at a
rate of 6%. The outstanding principal and interest was paid in full during December 2014.
On April 30, 2010, we received a loan of $100,000 from the City of Ames accruing interest at 1.625%
per annum, due in monthly installments. The loan was secured by furniture located in Ames, Iowa. The terms
of the loan included a requirement to create 62 jobs by January 2015, which was met. We recorded interest
expense of $300, $1,000 and $1,000 for the years ended December 31, 2014, 2013 and 2012, respectively,
related to such debt agreements. This loan was paid in full during December 2014.
On May 20, 2010, we received a non-interest bearing loan of $500,000 from IDED, which is due in
monthly installments from September 2010 through August 2015. Under the terms of the loan, we were
required to create 62 jobs by January 2013 and maintain them through January 2015. In the event that such
condition is not met, the remaining unpaid principal is immediately due and payable. We have met this
requirement. The loan is secured by a personal guaranty from a founder and managing director.
On July 14, 2011, we obtained a $1.0 million line of credit with Bankers Trust. The line of credit
has a variable interest rate of the bank’s prime lending rate plus 1.5%. We recorded interest expense of $0
for the years ended December 31, 2014, 2013 and 2012 related to such debt agreement. No amounts were
outstanding as of December 31, 2013. The line of credit matured during 2014 and was not renewed.
During 2012, we entered into various vehicle financing arrangements totaling $85,000. The loans
accrued interest at 8.35% per annum and were due in monthly installments maturing August 2015. We
recorded interest expense of $3,200, $5,400 and $2,000 for the years ended December 31, 2014, 2013 and
2012, respectively related to such debt agreements. These debt agreements were paid in full during the year
ended December 31, 2014.
On March 6, 2013, we obtained a line of credit with Morgan Stanley providing for maximum
borrowings of $20.8 million. The availability on the line of credit is limited to the value of our cash and
marketable securities held in the associated account at Morgan Stanley of $530,000 at December 31, 2014.
As of December 31, 2014, the maximum amount available on the line of credit was $230,000, due to an
irrevocable letter of credit to support our outstanding furniture lease in the amount of $300,000. The line of
credit bears interest at a tiered variable rate, is collateralized by our cash and marketable securities and is
payable on demand. The line’s interest rate as of December 31, 2014 was 2.25%, and we recorded interest
expense of $16,000 and $27,000 for the years ended December 31, 2014 and 2013 related to such debt
agreement.
In October 2013, we received a grant from the Iowa Economic Development Authority (IEDA) in
the form of forgivable loans up to $2.5 million and non-interest bearing loans up to $2.5 million available
to us based on qualified job growth. On December 20, 2013, the initial disbursement was awarded consisting
of $2.0 million in non-interest bearing and forgivable loans. This disbursement was not received by us until
after year end and was recorded in “Other receivables” on the consolidated balance sheet as of December
31, 2013. In connection with our initial public offering, the outstanding balance of the loans became due and
payable and were repaid in full during December 2014.
In August 2014, we entered into a $15.0 million credit facility with Silicon Valley Bank, which was
subsequently amended. The credit facility is secured by all of our assets, has first priority over our other debt
obligations, and requires us to maintain certain financial covenants, including the maintenance of at least
$5.0 million of cash on hand or unused borrowing capacity. The credit facility contains certain restrictive
92
covenants that limit our ability to transfer or dispose of assets, merge with other companies or consummate
certain changes of control, acquire other companies, pay dividends, incur additional indebtedness and liens,
experience changes in management and enter into new businesses. Amounts borrowed under the credit facility
in 2014 accrued interest at a variable interest rate of prime plus 1.0%, with interest payable monthly and the
principal balance due at maturity. In connection with the credit facility, at December 31, 2014 the following
letters of credit issued by the bank were outstanding: (i) in the amount of $2.3 million as security against a
February 2011 forgivable loan, with fulfilled job growth requirements, that will continue in a maintenance
period through December 2015; and (ii) in the amount of $2.0 million as security against the December 2013
IEDA non-interest bearing loan and forgivable loan. These letters of credit do not reduce availability under
the credit facility. We recorded interest expense of $28,000 for the year ended December 31, 2014 related
to such debt agreement. No amounts were outstanding under the credit facility as of December 31, 2014.
The following table summarizes the outstanding principal balance of each loan at December 31,
2014 (in thousands):
IDED - August 2009.................................... $
IDED - May 2010........................................
$
Original
Principal
Short-Term
Long-Term
Outstanding
Principal
150
500
650
$
$
17
67
84
$
$
91
—
91
$
$
108
67
175
8. Stockholders’ Equity and Members’ Equity (Deficit)
In December 2014, we converted from a limited liability corporation to a C-corporation (see Note
1). Subsequent to our corporate conversion, we have two classes of authorized common stock: Class A
common stock and Class B common stock. The rights of the holders of our Class A common stock and our
Class B common stock are identical, except with respect to voting and conversion. Each share of our Class
A common stock is entitled to one vote per share and is not convertible into any other shares of our capital
stock. Each share of our Class B common stock is entitled to ten votes per share and is convertible into one
share of our Class A common stock at any time. Our Class B common stock also will automatically convert
into shares of our Class A common stock upon certain transfers and other events.
Prior to our corporate conversion, our Operating Agreement, as amended and restated, provided for
classes of units, allocation of profits and losses, distribution preferences, and other member rights. The
Operating Agreement allowed for preferred units, common units, capped common units, appreciation units
and participation units. Capped common units were interests that entitled the holder to receive distributions
up to a stated threshold amount. Appreciation units and participation units were interests that entitled a
holder to receive distributions in excess of a stated threshold amount. Members were limited in their liability
to their capital contributions.
In 2012, we issued 6,046,830 Series C preferred units at $5.00 per unit for proceeds of $29.9 million
net of issuance costs of $315,000. In 2013, we issued an additional 1,433,115 Series C preferred units at
$5.00 per unit for proceeds of $7.1 million net of issuance costs of $20,000.
93
Distributions from the LLC
Our Amended and Restated Operating Agreement provided that any distributions, other than tax
distributions, would be made according to the following priority:
• First, to each holder of Series B preferred units and Series C preferred units until the cumulative
distributions received (including any tax distributions) by holders of Series B preferred units equal
$1.00 per Series B unit and the cumulative distribution received (including any tax distributions) by
holders of Series C preferred units equal $5.00 per Series C preferred unit, provided that if the amount
of distributable cash and property is insufficient to make such distribution in full, then all distributable
cash and property shall be distributed to the holders of the Series B preferred and Series C preferred
pro rata on the basis of their respective distribution preferences.
• Second, to each holder of Series A preferred units until the cumulative distributions received
(including any tax distributions) by each holder of a Series A preferred unit equal $0.20 per Series
A preferred unit held.
• Third, to each holder of common units or capped common units in proportion to the number of units
held until the cumulative distributions received (including tax distributions) by each holder of a
common unit or capped common unit equals $0.20 per common unit or capped common unit held.
• Fourth, pro rata based on the number of units held to the holders of all units other than Series C
preferred units based on the number of units held until the cumulative distributions received by each
holder of common units and Series A preferred units equals the amount distributed to holders of
Series C units, provided that holders of appreciation units or participation units will only receive
distributions to the extent that pro rata distributions to all holders exceed the threshold levels of the
applicable appreciation or participation units.
• Fifth, pro rata to the holders of all units, provided that holders of appreciation units or participation
units will only receive distributions to the extent that pro rata distributions to all holders exceed the
threshold levels of the appreciation units or participation units.
Allocation of Profits and Losses from the LLC
Profits and losses were allocated among the members so that the balance in each member’s capital
account equaled or was as close as possible to the amount such member would receive upon our hypothetical
sale and liquidation, assuming that our assets were sold for an amount equal to their book value, all our
liabilities were paid and any remaining proceeds were distributed to the members in accordance with the
terms of the Operating Agreement.
Losses were allocated first to members with positive capital accounts until such capital account
balances are reduced to zero, in the reverse order of the priority the members have to receive a return of their
capital, as noted above, and then in proportion to the number of units held. Specifically, losses were first
allocated to reduce any proceeds from common unit holders to zero, then to offset gross proceeds from Series
A preferred unit holders and finally to offset gross proceeds from Series B and C preferred unit holders pro
rata based on the number of units held. Once all contributed capital has been reduced to zero, the losses were
then allocated pro rata based on the number of units held by each class of member units. Profits were allocated
first to offset losses previously allocated, in the reverse order that such losses were allocated, and then in
accordance with the members’ rights to receive distributions of profits, as noted above.
94
During 2014 and 2013, losses offset proceeds from option exercises during the year and the gross
proceeds from the 2012 and 2013 issuances of Series C preferred units to bring those positive capital accounts
to zero. During 2014, the remaining losses incurred through the corporate conversion were then allocated
pro rata to all classes of units. During 2012, losses incurred prior to the issuance of Series C preferred units
were allocated to offset proceeds from option exercises during the year and then to the outstanding classes
of member units pro rata because the capital contributed had been offset entirely by losses in prior periods.
The losses incurred subsequent to the issuance of Series C preferred units in 2012 were allocated to offset
the gross proceeds of this financing.
9. Stock-Based Compensation
We grant equity-based incentive awards to attract, motivate and retain qualified employees, non-
employee directors and consultants, and to align their financial interests with those of our stockholders. Prior
to our corporate conversion in December 2014, awards were provided under the 2009 Unit Incentive Plan
(the “2009 Plan”). We utilized equity-based compensation in the form of restricted participation units,
appreciation units and options to purchase common units. We determined these forms of equity-based
compensation were substantive classes of equity for accounting purposes. All outstanding options to purchase
common units under the 2009 Plan automatically converted into options to purchase shares of Class A
common stock following the corporate conversion. There were no other unvested award types outstanding
at the time of our corporate conversion.
Immediately prior to our IPO, the 2009 Plan was amended to provide that no further awards will be
issued thereunder, and our board of directors and stockholders adopted and approved our 2014 Equity
Incentive Plan (the “2014 Plan” and, together with the 2009 Plan, the “Plans”).
Subsequent to our corporate conversion, we utilize stock-based compensation in the form of restricted
stock and options to purchase Class A common stock. Options to purchase Class A common stock generally
vest over a four-year period and are generally granted for a term of ten years.
As of December 31, 2014, awards granted under the 2009 Plan consisted of stock options and awards
granted under the 2014 Plan consisted of restricted stock awards. There were no other grants of any other
award types under the Plans.
At December 31, 2014, there were 3,905,650 shares available for grant under the 2014 Plan.
Stock-based compensation expense for the year ended December 31, 2014 was $50,000, $7.3 million
and $31,000 for restricted participation and appreciation units that vested prior to the corporate conversion,
options to purchase common stock and restricted stock, respectively. Equity-based compensation expense
for the year ended December 31, 2013 was $224,000 and $3.1 million for restricted participation and
appreciation units and options to purchase common units, respectively. Equity-based compensation expense
for the year ended December 31, 2012, was $6.9 million and $1.2 million for restricted participation units
and options to purchase common units, respectively.
95
Stock-based compensation expense associated with restricted participation and appreciation units,
stock options and restricted stock was recorded in the following cost and expense categories consistent with
the respective employee or service provider’s related cash compensation (in thousands):
Year ended December 31,
2014
2013
2012
Cost of revenue............................................................
Subscription and support........................................... $
Professional services .................................................
Operating expenses......................................................
Research and development........................................
Sales and marketing ..................................................
General and administrative .......................................
$
502
337
$
200
171
1,757
1,241
3,548
762
799
1,438
Total........................................................................ $
7,385
$
3,370
$
80
144
194
293
7,418
8,129
The fair value of each option, participation and appreciation unit grant is estimated on the date of
grant using the Black-Scholes option-pricing model. Expected volatility is based on historical volatilities
for publicly traded stock options of comparable companies over the estimated expected life of the options.
The expected term represents the period of time the options are expected to be outstanding and is based on
the “simplified method.” We use the “simplified method” due to the lack of sufficient historical exercise
data to provide a reasonable basis upon which to otherwise estimate the expected life of the options. The
risk-free interest rate is based on yields on U.S. Treasury STRIPS with a maturity similar to the estimated
expected term of the options. The fair value of our participation and appreciation units and options was
estimated assuming no expected dividends and the following weighted-average assumptions:
Year ended December 31,
2013
2012
2014
Expected term (in years)..............................................
Risk-free interest rate ..................................................
0.75% - 1.78%
Expected volatility....................................................... 45.84% - 52.50% 51.09% - 53.84% 51.35% - 53.09%
Forfeiture rate ..............................................................
1.52% - 2.80%
1.00% - 2.89%
0% - 6.02%
0% - 6.76%
6.1 - 10.0
5.0 - 10.0
6.1 - 10.0
0.89%
96
Stock Options
Options to purchase common units have been adjusted to reflect the corporate conversion for
purposes of the 2014 stock option disclosures. The following table summarizes the option activity under the
Plans for the year ended December 31, 2014:
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (Years)
Options
Aggregate
Intrinsic Value
(in thousands)
Outstanding at December 31, 2013 ...
Granted ..............................................
Forfeited ............................................
Exercised ...........................................
3,411,237
$
2,973,368
147,885
146,782
Outstanding at December 31, 2014 ...
6,089,938
Exercisable at December 31, 2014 ....
2,934,720
$
$
4.00
15.85
10.43
3.96
9.63
4.47
7.5
$
40,449
7.8
6.5
$
$
30,066
26,869
The total intrinsic value of options exercised during the years ended December 31, 2014, 2013 and
2012 was $1.7 million, $638,000 and $73,000, respectively.
The weighted-average grant-date fair value of options granted during the years ended December 31,
2014, 2013 and 2012 was $7.85, $6.24 and $3.69, respectively. The total fair value of options vested during
the years ended December 31, 2014, 2013 and 2012 was approximately $5.1 million, $2.3 million and
$795,000, respectively. Total unrecognized compensation expense of $18.0 million related to options will
be recognized over a weighted-average period of 3.23 years. Total compensation expense recognized during
the years ended December 31, 2014, 2013 and 2012 for outstanding options granted to service providers
was $1.8 million, $1.6 million and $676,000, respectively, based on the fair value on the vesting date or the
fair value on the reporting date if unvested.
Restricted Stock
During 2014, we granted 54,350 shares of restricted stock to non-employee members of our Board
of Directors with one-year cliff vesting from the date of grant. The fair value for restricted stock awards is
calculated based on the stock price on the date of grant. The weighted average grant-date fair value of
restricted stock granted during 2014 was $13.80.
Compensation expense associated with unvested restricted stock is recognized on a straight-line
basis over the vesting period. The expense recognized each period is dependent upon our estimate of the
number of shares that will ultimately be issued. At December 31, 2014, there was approximately $719,000
of total unrecognized compensation expense related to restricted stock, which is expected to be recognized
over a weighted average period of 0.96 years.
97
Restricted participation and appreciation units
At December 31, 2013, there were 108,975 outstanding participation and appreciation units under
the 2009 Plan that vested during 2014 prior to the corporate conversion.
The weighted average grant-date fair value of participation and appreciation units granted in 2012
was $9.87. The total fair value of participation and appreciation units vested during the years ended
December 31, 2014, 2013 and 2012 was approximately $77,000, $242,000 and $7.0 million, respectively.
At December 10, 2014, all participation and appreciation units converted into Class A common stock as part
of the corporate conversion.
10. Accumulated Other Comprehensive Income (Loss)
The following table summarizes the activity of accumulated other comprehensive income (loss)
during the years ended December 31, 2014, 2013 and 2012 (in thousands):
Accumulated
translation
adjustment
Accumulated
unrealized holding
losses on available-
for-sale securities
Accumulated other
comprehensive
income (loss)
— $
(2)
(2)
56
54
93
—
147
$
— $
(40)
(40)
(156)
(196)
60
136
— $
—
(42)
(42)
(100)
(142)
153
136
147
Balance at December 31, 2011........
Other comprehensive loss................
Balance at December 31, 2012........
Other comprehensive income (loss)
Balance at December 31, 2013........
Other comprehensive income ..........
Reclassification of realized loss ......
Balance at December 31, 2014........
$
$
11. Segments
Our chief operating decision maker reviews financial information presented on a consolidated basis
for purposes of allocating resources and evaluating financial performance. There are no segment managers
who are held accountable by the chief operating decision maker, or anyone else, for operations, operating
results and planning for levels or components below the consolidated unit level. Accordingly, we determined
we have a single operating segment. During the years ended December 31, 2014, 2013 and 2012, 94.7%,
95.8% and 98.3% of our revenue, respectively, and substantially all of our long-lived assets were attributable
to operations in the United States.
12. Income Taxes
As a result of our corporate conversion from an LLC to a corporation, we are now subject to U.S.
federal and state income taxes. We recognized a net deferred tax asset of $29.9 million as of December 10,
2014 due to the change in tax status. This amount was offset by a full valuation allowance. We recognized
a $32,000 current state income tax provision for the year ended December 31, 2014.
98
Loss before income tax provision consisted of the following (in thousands):
For the year ended December 31,
2014
2013
2012
United States ................................................ $
Foreign .........................................................
Total........................................................... $
(40,363) $
(759)
(41,122) $
(29,202) $
(342)
(29,544) $
(30,003)
(582)
(30,585)
The items accounting for the difference between income taxes computed at the federal statutory
income tax rate and the provision for income taxes consisted of the following (in thousands):
Federal statutory rate...............................................................................................
Effect of:
Tax benefit at federal statutory rate ...................................................................... $
State taxes, net of federal benefit..........................................................................
Non-taxable flow-through earnings......................................................................
Foreign..................................................................................................................
Recognition of deferred tax assets........................................................................
Valuation allowance..............................................................................................
Other .....................................................................................................................
Total income tax provision...................................................................................... $
Year ended December 31,
2014
35.0%
(14,393)
(347)
12,336
(130)
(29,870)
32,440
(4)
32
No provision or benefit for U.S. federal or state income taxes was included in the accompanying
consolidated statements of operations prior to our conversion to a corporation because our results of operations
were allocated to our members for inclusion in their respective income tax returns. Certain of our foreign
subsidiaries were subject to income tax in 2013 and 2012. As of December 31, 2013, we had approximately
$398,000 of net operating losses in foreign jurisdictions that were offset by a full valuation allowance.
99
The components of deferred tax assets and liabilities were as follows (in thousands):
As of December 31, 2014
Deferred tax assets:
Property and equipment........................................................................................ $
Accruals and reserves ...........................................................................................
Deferred rent.........................................................................................................
Compensation and benefits...................................................................................
Deferred revenue ..................................................................................................
Net operating loss and credits...............................................................................
Other .....................................................................................................................
Total deferred tax assets .....................................................................................
Valuation allowance..............................................................................................
Total deferred tax assets .....................................................................................
Deferred tax liabilities:
Other deferred tax liabilities .................................................................................
Deferred tax liabilities........................................................................................
Total......................................................................................................................... $
56
1,523
354
8,056
17,779
4,786
17
32,571
(32,514)
57
(57)
(57)
—
Deferred tax assets and liabilities were not material as of December 31, 2013.
Management assesses the available positive and negative evidence to estimate whether sufficient
future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece
of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended
December 31, 2014. Such objective evidence limits the ability to consider other subjective evidence, such
as our projections for future growth. On the basis of this evaluation, we recognized a full valuation allowance
against our net deferred tax asset at December 31, 2014, because we believe it is more likely than not that
these benefits will not be realized.
As of December 31, 2014, we have federal and state net operating loss carryforwards of
approximately $11.5 million and $8.8 million, respectively, available to reduce any future taxable income.
The federal and state net operating loss carryforwards will expire in various years between 2021 and 2034.
Additionally, we have total net operating loss carryforwards from international operations of $0.9 million
that will expire in various years between 2023 and 2034.
We have analyzed our inventory of tax positions taken with respect to all applicable income tax
issues for all open tax years and have concluded that no uncertain tax positions are required to be recognized
in our consolidated financial statements.
We are subject to taxation in the United States and various states and foreign jurisdictions. As of
December 31, 2014, tax years for 2011 through 2014 are subject to examination by the tax authorities. With
few exceptions, as of December 31, 2014, we are no longer subject to U.S. federal, state, local or foreign
examinations by tax authorities for years before 2011.
100
13. Net Loss Per Share
Basic net loss per share attributable to common stockholders is computed by dividing the net loss
attributable to common stockholders 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 our outstanding stock options and stock related to unvested restricted stock awards to the
extent dilutive. All historical share counts used in the calculation have been adjusted for the corporate
conversion.
The net loss per share attributable to common stockholders is allocated based on the contractual
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 attributable to common stockholders is
allocated on a proportionate basis.
We consider unvested restricted stock awards granted under the 2014 Equity Incentive Plan to be
participating securities because holders of such shares have non-forfeitable dividend rights in the event of
our declaration of a dividend for common shares. In future periods to the extent we are profitable, we will
subtract earnings allocated to these participating securities from net income to determine net income
attributable to common stockholders.
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):
December 31, 2014
December 31, 2013
December 31, 2012
Class A
Class B
Class A
Class B
Class A
Class B
Year ended
Numerator
Net loss ............................................. $
(25,259) $
(15,895) $
(18,016) $
(11,528) $
(17,696) $
(12,889)
Denominator
Weighted-average common shares
outstanding - basic and diluted .........
19,736,342
12,419,718
19,133,028
12,243,575
15,268,739
11,121,360
Basic and diluted net loss per share.. $
(1.28) $
(1.28) $
(0.94) $
(0.94) $
(1.16) $
(1.16)
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 December 31,
2014
2013
2012
Shares subject to outstanding common stock options .
2,383,188
2,289,560
1,338,432
Shares subject to unvested appreciation units and
participation units ........................................................
Shares subject to unvested restricted stock awards .....
—
54,350
108,975
—
552,342
—
14. Unaudited Quarterly Results of Operations
The following tables set forth selected unaudited quarterly consolidated statement of operations data
for each of the quarters indicated as well as the percentage of total revenue for each line item shown. The
unaudited information should be read in conjunction with our financial statements and related notes included
elsewhere in this report. We believe that the following unaudited information reflects all normal recurring
adjustments necessary for a fair presentation of the information for the periods presented. The operating
101
results for any quarter are not necessarily indicative of results for any future period. We have revised the
following quarterly amounts to correct for an immaterial error in our prior period accounting for government
job training programs (see Note 2).
Dec 31,
2014
Sept 30,
2014
Jun 30,
2014
Mar 31,
2014
Dec 31,
2013
Sept 30,
2013
Jun 30,
2013
Mar 31,
2013
Three months ended
(in thousands)
Revenue
Subscription and support...................... $ 25,011
$ 23,690
$ 21,968
$ 20,648
$ 19,149
$ 17,333
$ 15,233
$ 13,449
Professional services............................
5,118
Total revenue...........................................
30,129
4,229
27,919
4,546
26,514
7,484
28,132
4,420
23,569
3,923
21,256
3,794
19,027
7,850
21,299
Cost of revenue
Subscription and support......................
Professional services............................
Total cost of revenue...............................
6,097
3,864
9,961
5,387
3,152
8,539
5,029
2,882
7,911
4,669
2,798
7,467
4,179
2,309
6,488
3,951
2,065
6,016
3,607
2,267
5,874
3,392
2,879
6,271
Gross profit .............................................
20,168
19,380
18,603
20,665
17,081
15,240
13,153
15,028
Operating expenses
Research and development ..................
Sales and marketing .............................
General and administrative ..................
11,911
14,063
5,797
Total operating expenses.........................
31,771
11,175
16,248
4,572
31,995
10,772
12,747
5,186
28,705
10,287
10,440
4,228
24,955
8,669
10,482
3,826
22,977
8,830
11,743
4,023
24,596
8,522
9,628
2,982
8,095
9,214
3,770
21,132
21,079
Loss from operations...............................
(11,603)
(12,615)
(10,102)
(4,290)
(5,896)
(9,356)
(7,979)
(6,051)
Interest expense.......................................
Other income and (expense), net ............
(763)
(259)
(700)
(67)
(316)
(145)
(265)
3
(7)
34
(255)
59
(94)
(23)
(10)
34
Loss before provision for income taxes ..
(12,625)
(13,382)
(10,563)
(4,552)
(5,869)
(9,552)
(8,096)
(6,027)
Provision for income taxes......................
32
—
—
—
—
—
—
—
Net loss.................................................... $ (12,657) $ (13,382) $ (10,563) $ (4,552) $ (5,869) $ (9,552) $ (8,096) $ (6,027)
102
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. 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 were ineffective due to a material weakness in our
internal control over financial reporting related to our accounting for government grants.
Management’s Annual Report on Internal Control Over Financial Reporting
This Annual Report on Form 10-K does not include a report of management’s assessment regarding
internal control over financial reporting or an attestation report of our registered public accounting firm due
to a transition period established by the rules of the SEC for newly public companies.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with
the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three
months ended December 31, 2014 that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting, other than the addition of personnel resources and changes in
procedures with respect to the review of and accounting for government grants.
Item 9B. Other Information
None.
103
Item 10. Directors, Executive Officers and Corporate Governance
a)
Directors of the company.
Part III.
This information is included in our definitive proxy statement for the 2015 Annual Meeting of Stockholders
under the heading “Election of Directors” and is incorporated herein by reference.
b)
Executive Officers of the company.
Matthew M. Rizai, Ph.D. 58, has served as our Chairman and Chief Executive Officer since December
2014 and served as the Chief Executive Officer and a Managing Director of Workiva LLC from 2009 to
December 2014. He has over 20 years of experience as a Mechanical Engineer and nearly 15 years of
experience leading technology companies. Prior to founding Workiva, Mr. Rizai was the Chairman and Chief
Executive Officer of Engineering Animation, Inc. (NASDAQ: EAII) (EAI) from 1990 to 2000, when it was
acquired by Unigraphics Solutions (now part of Siemens USA). Prior to EAI, Mr. Rizai was a senior research
engineer at General Motors Research Laboratories, an analyst at Arch Development Corporation, and a
development engineer at Ford Motor Company. He also co-founded Computer Aided Design Software, Inc.
From 2003 to 2013, Mr. Rizai was a board member of Stafford Development Company, a real estate,
hospitality, restaurant and health care services company based in Tifton, GA. Mr. Rizai earned a B.S., M.S.
and Ph.D. in Mechanical Engineering from Michigan State University and an M.B.A. from the University
of Chicago Booth School of Business.
Martin J. Vanderploeg, Ph.D., 58, has served as our President and Chief Operating Officer since December
2014 and served as the Chief Operating Officer and a Managing Director of Workiva LLC from 2008 to
December 2014. He has over 20 years of experience in mechanical engineering and advising early stage
technology companies. Prior to founding Workiva in 2008, Mr. Vanderploeg was a founder of EAI and served
as EAI’s Executive Vice President from 1993 until EAI was acquired by Unigraphics Solutions in 2000. Mr.
Vanderploeg served as Chief Technology Officer of EAI from 1989 to 1999. Following the acquisition of
EAI, Mr. Vanderploeg continued to be an advisor to various technology start-up companies. Prior to EAI,
Mr. Vanderploeg was a tenured professor of mechanical engineering at Iowa State University from 1985 to
1993 and was the founder and director of the Iowa State University Visualization Laboratory. Mr. Vanderploeg
earned a B.S., M.S. and Ph.D. in mechanical engineering from Michigan State University.
Jeffrey D. Trom, Ph.D., 54, has served as Executive Vice President and Chief Technology Officer since
December 2014 and served as a Managing Director and Chief Technology Officer of Workiva LLC from
2008 to December 2014. He has over 20 years of experience working with information technology and
development. Prior to founding Workiva, Mr. Trom was a founder of EAI and served as EAI’s Vice President
from 1990 and as Chief Technology Officer in charge of software architecture, development and deployment
from 1999 until EAI was acquired by Unigraphics Solutions in 2000. Thereafter, Mr. Trom served as a
technical consultant for various technology companies, including Electronic Data Systems from 2000 to
2002. He is president of the board of Middle Creek Montessori, a non-profit school in Bozeman, Montana.
Mr. Trom earned a B.S. and M.S. in Mechanical Engineering from University of Iowa and a Ph.D. in
Mechanical Engineering from Iowa State University.
Michael S. Sellberg, 48, has served as Executive Vice President and Chief Product Officer since December
2014 and served as Workiva LLC’s Chief Marketing Officer and Managing Director from 2009 to August
2014, and Chief Product Officer and Managing Director from September 2014 to December 2014. He has
over 20 years of experience in software development, product marketing and operations management. From
2005 to 2009, Mr. Sellberg was Executive Vice President of Operations and Chief Technology Officer of
iMed Studios, a digital agency and web studio owned by the Publicis Healthcare Communications Group.
From 1998 to 2000, he was Divisional General Manager at EAI and Executive Director of Operations for
104
EAI’s online collaboration solution, eVis. After EAI was acquired by Unigraphics Solutions in 2000 and
until 2005, Mr. Sellberg led the Teamcenter product management team for Unigraphics. Mr. Sellberg earned
a B.S. in Mechanical Engineering from University of Missouri-Rolla and an M.S. in Engineering Mechanics
from Iowa State University.
Joseph H. Howell, 62, has served as our Executive Vice President for Strategic Initiatives since December
2014 and served as a Managing Director of Workiva LLC from 2008 to December 2014. He has over 25
years of experience in senior financial management and SEC reporting experience, including with early stage
companies. Prior to founding Workiva in 2008, Mr. Howell was the Managing Director of Financial
Intelligence, LLC from 2007 until 2008. From 2002 to 2004, Mr. Howell served as Chief Financial Officer
of Eid Passport, and, from 2000 to 2002, he was the Chief Financial Officer of Webridge, Inc., which was
acquired by Click Commerce. He was also the Chief Financial Officer from 1998 to 2000 of EMusic.com
(NASDAQ: EMUS), which was acquired by Universal Music Group. In addition, Mr. Howell served as the
Chief Financial Officer of Merix Corporation (NASDAQ: MERX) from 1995 to 1998, Acting Chief Financial
Officer for Borland Software (NASDAQ: BORL) from 1994 to 1995, and the Chief Accounting Officer for
BORL from 1988 to 1995. Mr. Howell is a certified public accountant (inactive), and he earned a B.A. from
the University of Michigan and an M.S. in Accounting from Eastern Michigan University.
J. Stuart Miller, 54, has served as our Executive Vice President, Treasurer and Chief Financial Officer since
December 2014 and served as Chief Financial Officer of Workiva LLC from April 2014 to December 2014.
He has over 25 years of experience advising on mergers and acquisitions and capital raising for various
companies. Prior to joining Workiva in April 2014, Mr. Miller was a Managing Director of Colonnade
Advisors, a mergers and acquisitions advisory firm that he founded in 1999. Previously, he was a Managing
Director in the Investment Banking Department of J.P. Morgan. Mr. Miller joined J.P. Morgan from Credit
Suisse First Boston, where he had worked in the Investment Banking Department. He earned a B.A. from
Washington & Lee University and an M.B.A. from Harvard Business School.
Troy M. Calkins, 48, Mr. Calkins has served as our Executive Vice President, Secretary and General Counsel
since December 2014 and served as General Counsel of Workiva LLC from February 2014 to December
2014. Prior to Workiva, he was a partner at Drinker Biddle & Reath LLP, where he spent 19 years in the
firm’s Corporate and Securities Practice Group. His practice focused on counseling both private and public
companies on legal strategy, corporate compliance and governance, and private and public securities
offerings. He earned a B.A. from Michigan State University and a J.D. from the University of Michigan Law
School.
c)
Section 16(a) Beneficial Ownership Reporting Compliance.
This information is included in our definitive proxy statement for the 2015 Annual Meeting of Stockholders
under the heading “Section16(a) Beneficial Ownership Reporting Compliance” and is incorporated herein
by reference.
d)
Code of Ethics.
This information is included in our definitive proxy statement for the 2015 Annual Meeting of
Stockholders under the heading “Corporate Governance” and is incorporated herein by reference.
Information regarding our Audit Committee and Nominating and Governance Committee is set
e)
forth in our definitive proxy statement for the 2015 Annual Meeting of Stockholders under the headings
“Corporate Governance” and “Board Committees” and is incorporated herein by reference.
105
Item 11. Executive Compensation
This information is included in our definitive proxy statement for the 2015 Annual Meeting of
Stockholders under the headings “Executive Compensation” and “Director Compensation” and is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
This information is included in our definitive proxy statement for the 2015 Annual Meeting of
Stockholders under the headings “Ownership of Common Stock” and “Equity Compensation Plan
Information” and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions and Director Independence
This information is included in our definitive proxy statement for the 2015 Annual Meeting of
Stockholders under the heading “Corporate Governance” and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
This information is included in our definitive proxy statement for the 2015 Annual Meeting of
Stockholders under the heading “Ratification of the Appointment of Independent Public Accountants” and
is incorporated herein by reference.
106
Item 15. Exhibits and Financial Statement Schedules
The following documents are filed as part of this Form 10-K:
Part IV.
1. All financial statements. See Index to Consolidated Financial Statements on page 62 of this
Form 10-K.
2. Financial Statement Schedules. Financial statement schedules are omitted as they are either not
required or the information is otherwise included in the consolidated financial statements.
3. Exhibits. See Exhibit Index.
107
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 11th day of March, 2015.
WORKIVA INC.
/s/ Matthew M. Rizai, Ph.D.
By:
Name: Matthew M. Rizai, Ph.D.
Title:
Chairman and Chief Executive
Officer
POWER OF ATTORNEY
The undersigned officers and directors of Workiva Inc. hereby severally constitute Matthew M. Rizai
our true and lawful attorneys, with full power to him, to sign for us in our names in the capacities indicated
below the Annual Report on Form 10-K filed herewith and any and all amendments thereto, and generally
do all such things in our name and on our behalf in our capacities as officers and directors to enable Workiva
Inc. to comply with the provisions of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys, or any one of them on the Annual
Report on Form 10-K and any and all amendments thereto.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities indicated and on the dates
indicated.
Signature
Title
/s/ Matthew M. Rizai, Ph.D.
Matthew M. Rizai, Ph.D.
Chairman of the board and Chief Executive Officer
(Principal Executive Officer)
/s/ J. Stuart Miller
J. Stuart Miller
/s/ Jill Klindt
Jill Klindt
/s/ Eugene S. Katz
Eugene S. Katz
/s/ Michael M. Crow, Ph.D.
Michael M. Crow, Ph.D.
/s/ Robert H. Herz
Robert H. Herz
/s/ David S. Mulcahy
David S. Mulcahy
/s/ Suku Radia
Suku Radia
/s/ Martin J. Vanderploeg
Martin J. Vanderploeg
Executive Vice President, Treasurer and Chief Financial Officer
(Principal Financial Officer)
Vice President and Chief Accounting Officer
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
S-1
Date
March 11, 2015
March 11, 2015
March 11, 2015
March 11, 2015
March 11, 2015
March 11, 2015
March 11, 2015
March 11, 2015
March 11, 2015
EXHIBIT INDEX
Exhibit
Number
Description
3.1
3.2
4.1
10.1*
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
10.8
10.9
10.10
10.11
21.1
23.1
31.1
31.2
32.1#
32.2#
101.INS
Certificate of Incorporation of Workiva Inc., incorporated by reference from Exhibit 3.1 to the
Company’s Current Report on Form 8-K filed on December 16, 2014.
Bylaws of Workiva Inc., incorporated by reference from Exhibit 3.2 to the Company’s Current
Report on Form 8-K filed on December 16, 2014.
Form of the Company’s Class A common stock certificate, incorporated by reference from Exhibit
4.1 to the Company’s Registration Statement on Form S-1 filed on November 17, 2014.
Amended and Restated Workiva Inc. 2009 Unit Incentive Plan, incorporated by reference from
Exhibit 4.4 to the Company’s Registration Statement on Form S-8 filed on December 16, 2014.
Workiva Inc. 2014 Equity Incentive Plan, incorporated by reference from Exhibit 4.5 to the
Company’s Registration Statement on Form S-8 filed on December 16, 2014.
Form of Nonqualified Stock Option Grant for Executive Officers under 2014 Equity Incentive Plan,
incorporated by reference from Exhibit 10.3 to the Company’s Registration Statement on Form
S-1 filed on October 17, 2014.
Form of Restricted Stock Grant for Executive Officers under 2014 Equity Incentive Plan,
incorporated by reference from Exhibit 10.4 to the Company’s Registration Statement on Form
S-1 filed on October 17, 2014.
Form of Restricted Stock Grant for Non-Employee Directors under 2014 Equity Incentive Plan,
incorporated by reference from Exhibit 10.5 to the Company’s Registration Statement on Form
S-1 filed on October 17, 2014.
Form of Employment Agreement, incorporated by reference from Exhibit 10.6 to the Company’s
Registration Statement on Form S-1 filed on November 17, 2014.
Form of Indemnification Agreement, incorporated by reference from Exhibit 10.7 to the Company’s
Registration Statement on Form S-1 filed on November 17, 2014.
Sublease Agreement, dated December 19, 2011, as amended October 2, 2013, between the Company
and 2900 University, LLC, incorporated by reference from Exhibit 10.8 to the Company’s
Registration Statement on Form S-1 filed on October 17, 2014.
Loan and Security Agreement, dated August 22, 2014, as amended effective as of September 20,
2014 and November 25, 2014, by and among the Company, Workiva International LLC and Silicon
Valley Bank, incorporated by reference from Exhibit 10.9 to the Company’s Registration Statement
Google Cloud Platform License Agreement, dated July 24, 2014, between the Company and Google
Inc., incorporated by reference from Exhibit 10.10 to the Company’s Registration Statement on
Form S-1 filed on October 17, 2014.
Series 2014 Convertible Promissory Note issued to Bluestem Capital Appreciation Fund, LLC,
dated July 31, 2014, incorporated by reference from Exhibit 10.11 to the Company’s Registration
Statement on Form S-1 filed on November 17, 2014.
List of Subsidiaries of the Company.
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
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.
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.
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.
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.
XBRL Instance Document.
101.SCH
XBRL Taxonomy Extension Schema Document.
E-1
101.CAL
101.DEF
101.LAB
101.PRE
XBRL Taxonomy Extension Calculation Linkbase Document.
XBRL Taxonomy Extension Definition Linkbase Document.
XBRL Taxonomy Extension Label Linkbase Document.
XBRL Taxonomy Extension Presentation Linkbase Document.
* Indicates a management contract or compensatory plan.
# As contemplated by SEC Release No. 33-8212, these exhibits are furnished with this Annual Report on Form 10-K
and are not deemed filed with the Securities and Exchange Commission and are not incorporated by reference in any
filing of Workiva Inc. under the Securities Act of 1933 or the Exchange Act of 1934, whether made before or after the
date hereof and irrespective of any general incorporation language in such filings.
E-2
CERTIFICATION UNDER SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Matthew M. Rizai, Ph.D., certify that:
1.
I have reviewed this Annual Report on Form 10-K of Workiva Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
2.
a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report,
3.
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4.
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure
Designed such disclosure controls and procedures, or caused such disclosure controls and
a.
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that
c.
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of
5.
internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control
a.
over financial reporting which are reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b.
significant role in the registrant's internal control over financial reporting.
Any fraud, whether or not material, that involves management or other employees who have a
Date: March 11, 2015
/s/ Matthew M. Rizai, Ph.D.
Matthew M. Rizai, Ph.D.
Chairman and Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION UNDER SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, J. Stuart Miller, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Workiva Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
2.
a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report,
3.
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4.
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure
Designed such disclosure controls and procedures, or caused such disclosure controls and
a.
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that
c.
occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of
5.
internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control
a.
over financial reporting which are reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b.
significant role in the registrant's internal control over financial reporting.
Any fraud, whether or not material, that involves management or other employees who have a
Date: March 11, 2015
/s/ J. Stuart Miller
Executive Vice President, Treasurer
and Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION UNDER SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
I, Matthew M. Rizai, Chairman and Chief Executive Officer of Workiva Inc. (the “Company”), do hereby certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the
best of my knowledge:
1.
the Annual Report on Form 10-K of the Company for the year ended December 31, 2014 (the “Report”) fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;
and
2.
the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company for the periods presented therein.
Date: March 11, 2015
/s/ Matthew M. Rizai, Ph.D.
Matthew M. Rizai, Ph.D.
Chairman and Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION UNDER SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
I, J. Stuart Miller, Chief Financial Officer of Workiva Inc. (the “Company”), do hereby certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
1.
the Annual Report on Form 10-K of the Company for the year ended December 31, 2014 (the “Report”) fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;
and
2.
the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company for the periods presented therein.
Date: March 11, 2015
/s/ J. Stuart Miller
J. Stuart Miller
Executive Vice President, Treasurer
and Chief Financial Officer
(Principal Financial Officer)