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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-Q
___________________________________ | | | | | |
(Mark One) |
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the quarterly period ended September 30, 2024 |
OR |
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For transition period from to |
Commission File Number 001-36773 |
___________________________________
WORKIVA INC.
(Exact name of registrant as specified in its charter)
___________________________________ | | | | | | | | | | | |
Delaware (State or other jurisdiction of incorporation or organization) | | 47-2509828 (I.R.S. Employer Identification Number) |
2900 University Blvd Ames, IA 50010 (888) 275-3125 |
(Address of principal executive offices and zip code) |
(888) 275-3125 |
(Registrant's telephone number, including area code) |
___________________________________
|
| | | | | | | | |
Securities registered pursuant to Section 12(b) of the Act: |
Title of each class | Trading Symbol | Name of each exchange on which registered |
Class A common stock, par value $.001 | WK | New York Stock Exchange |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. | | | | | |
Large accelerated filer ý | Accelerated filer o |
| |
Non-accelerated filer o | Smaller reporting company ☐ |
| |
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ý
As of November 1, 2024, there were approximately 51,545,404 shares of the registrant's Class A common stock and 3,845,583 shares of the registrant's Class B common stock outstanding.
WORKIVA INC.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical facts, including statements regarding our future results of operations and financial position, our business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023, in “Item 1A. Risk Factors” in Part II of this Quarterly Report on Form 10-Q and in any subsequent filing we make with the SEC, as well as in any documents incorporated by reference that describe risks and factors that could cause results to differ materially from those projected in these forward-looking statements.
Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements or events and circumstances reflected in the forward-looking statements will occur. We are under no duty to update any of these forward-looking statements after completion of this Quarterly Report on Form 10-Q to conform these statements to actual results or revised expectations.
Part I. Financial Information
Item 1. Financial Statements
| | | | | | | | | | | |
WORKIVA INC.
CONDENSED CONSOLIDATED BALANCE SHEETS |
(in thousands, except share and per share amounts) |
| As of September 30, 2024 | | As of December 31, 2023 |
| (unaudited) | | |
ASSETS | | | |
Current assets | | | |
Cash and cash equivalents | $ | 248,239 | | | $ | 256,100 | |
Marketable securities | 528,115 | | | 557,622 | |
Accounts receivable, net of allowance for doubtful accounts of $1,157 and $1,163 at September 30, 2024 and December 31, 2023, respectively | 137,921 | | | 125,193 | |
Deferred costs | 44,726 | | | 39,023 | |
Other receivables | 8,646 | | | 7,367 | |
Prepaid expenses and other | 21,055 | | | 23,631 | |
Total current assets | 988,702 | | | 1,008,936 | |
| | | |
Property and equipment, net | 21,757 | | | 24,282 | |
Operating lease right-of-use assets | 9,485 | | | 12,642 | |
Deferred costs, non-current | 43,557 | | | 33,346 | |
Goodwill | 202,133 | | | 112,097 | |
Intangible assets, net | 30,278 | | | 22,892 | |
Other assets | 6,174 | | | 4,665 | |
Total assets | $ | 1,302,086 | | | $ | 1,218,860 | |
| | | |
| | | | | | | | | | | |
WORKIVA INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (continued) |
(in thousands, except share and per share amounts) |
| | | |
| As of September 30, 2024 | | As of December 31, 2023 |
| (unaudited) | | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | | | |
Current liabilities | | | |
Accounts payable | $ | 13,346 | | | $ | 5,204 | |
Accrued expenses and other current liabilities | 111,029 | | | 97,921 | |
Deferred revenue | 414,229 | | | 380,843 | |
| | | |
Finance lease obligations | 555 | | | 532 | |
Total current liabilities | 539,159 | | | 484,500 | |
| | | |
Convertible senior notes, non-current | 764,281 | | | 762,455 | |
Deferred revenue, non-current | 27,527 | | | 36,177 | |
Other long-term liabilities | 236 | | | 178 | |
Operating lease liabilities, non-current | 8,062 | | | 10,890 | |
Finance lease obligations, non-current | 13,631 | | | 14,050 | |
Total liabilities | 1,352,896 | | | 1,308,250 | |
| | | |
Stockholders’ deficit | | | |
Class A common stock, $0.001 par value per share, 1,000,000,000 shares authorized, 51,526,990 and 50,333,435 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively | 52 | | | 50 | |
Class B common stock, $0.001 par value per share, 500,000,000 shares authorized, 3,845,583 and 3,845,583 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively | 4 | | | 4 | |
Preferred stock, $0.001 par value per share, 100,000,000 shares authorized, no shares issued and outstanding | — | | | — | |
Additional paid-in-capital | 645,083 | | | 562,942 | |
Accumulated deficit | (698,868) | | | (652,641) | |
Accumulated other comprehensive income | 2,919 | | | 255 | |
Total stockholders’ deficit | (50,810) | | | (89,390) | |
Total liabilities and stockholders’ deficit | $ | 1,302,086 | | | $ | 1,218,860 | |
| | | |
See accompanying notes.
| | | | | | | | | | | | | | | | | | | | | | | |
WORKIVA INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) (unaudited) |
| Three months ended September 30, | | Nine months ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Revenue | | | | | | | |
Subscription and support | $ | 171,035 | | | $ | 143,421 | | | $ | 486,749 | | | $ | 409,857 | |
Professional services | 14,586 | | | 14,754 | | | 52,042 | | | 53,529 | |
Total revenue | 185,621 | | | 158,175 | | | 538,791 | | | 463,386 | |
Cost of revenue | | | | | | | |
Subscription and support | 30,621 | | | 24,864 | | | 86,493 | | | 74,080 | |
Professional services | 13,050 | | | 13,491 | | | 39,873 | | | 42,297 | |
Total cost of revenue | 43,671 | | | 38,355 | | | 126,366 | | | 116,377 | |
Gross profit | 141,950 | | | 119,820 | | | 412,425 | | | 347,009 | |
Operating expenses | | | | | | | |
Research and development | 48,425 | | | 41,747 | | | 142,328 | | | 130,235 | |
Sales and marketing | 89,756 | | | 72,576 | | | 257,086 | | | 215,168 | |
General and administrative | 25,551 | | | 21,022 | | | 76,225 | | | 86,660 | |
Total operating expenses | 163,732 | | | 135,345 | | | 475,639 | | | 432,063 | |
Loss from operations | (21,782) | | | (15,525) | | | (63,214) | | | (85,054) | |
Interest income | 9,298 | | | 7,294 | | | 30,089 | | | 15,546 | |
Interest expense | (3,199) | | | (47,437) | | | (9,668) | | | (50,437) | |
Other expense, net | (350) | | | (71) | | | (309) | | | (1,450) | |
Loss before provision for income taxes | (16,033) | | | (55,739) | | | (43,102) | | | (121,395) | |
Provision for income taxes | 959 | | | 530 | | | 3,125 | | | 1,934 | |
Net loss | $ | (16,992) | | | $ | (56,269) | | | $ | (46,227) | | | $ | (123,329) | |
Net loss per common share: | | | | | | | |
Basic and diluted | $ | (0.31) | | | $ | (1.04) | | | $ | (0.84) | | | $ | (2.28) | |
Weighted-average common shares outstanding - basic and diluted | 55,581,841 | | | 54,256,941 | | | 55,226,254 | | | 53,987,791 | |
See accompanying notes.
| | | | | | | | | | | | | | | | | | | | | | | |
WORKIVA INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) (unaudited) |
| Three months ended September 30, | | Nine months ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Net loss | $ | (16,992) | | | $ | (56,269) | | | $ | (46,227) | | | $ | (123,329) | |
Other comprehensive income (loss) | | | | | | | |
Foreign currency translation adjustment | 4,657 | | | (3,189) | | | 1,446 | | | (1,180) | |
Unrealized gain on available-for-sale securities | 2,992 | | | 208 | | | 1,218 | | | 1,471 | |
Other comprehensive income (loss) | 7,649 | | | (2,981) | | | 2,664 | | | 291 | |
Comprehensive loss | $ | (9,343) | | | $ | (59,250) | | | $ | (43,563) | | | $ | (123,038) | |
See accompanying notes.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
WORKIVA INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) |
(in thousands) (unaudited) |
| | | | | | | | | | | |
Nine Months Ended September 30, 2024 |
| Common Stock (Class A and B) | | | | | | | | |
| Shares | | Amount | | Additional Paid-in-Capital | | Accumulated Other Comprehensive Income (Loss) | | Accumulated Deficit | | Total Stockholders' Deficit |
Balances at December 31, 2023 | 54,179 | | | $ | 54 | | | $ | 562,942 | | | $ | 255 | | | $ | (652,641) | | | $ | (89,390) | |
Stock-based compensation expense | — | | | — | | | 23,007 | | | — | | | — | | | 23,007 | |
Issuance of common stock upon exercise of stock options | 19 | | | 1 | | | 301 | | | — | | | — | | | 302 | |
Issuance of common stock under employee stock purchase plan | 88 | | | — | | | 7,113 | | | — | | | — | | | 7,113 | |
Issuance of restricted stock units | 590 | | | — | | | — | | | — | | | — | | | — | |
Tax withholding related to net share settlements of stock-based compensation awards | (91) | | | — | | | (8,611) | | | — | | | — | | | (8,611) | |
Net loss | — | | | — | | | — | | | — | | | (11,687) | | | (11,687) | |
Other comprehensive loss | — | | | — | | | — | | | (3,890) | | | — | | | (3,890) | |
Balances at March 31, 2024 | 54,785 | | | $ | 55 | | | $ | 584,752 | | | $ | (3,635) | | | $ | (664,328) | | | $ | (83,156) | |
Stock-based compensation expense | — | | | — | | | 25,402 | | | — | | | — | | | 25,402 | |
Issuance of common stock upon exercise of stock options | 18 | | | — | | | 290 | | | — | | | — | | | 290 | |
Issuance of restricted stock units | 131 | | | — | | | — | | | — | | | — | | | — | |
Tax withholding related to net share settlements of stock-based compensation awards | (20) | | | — | | | (1,640) | | | — | | | — | | | (1,640) | |
Net loss | — | | | — | | | — | | | — | | | (17,548) | | | (17,548) | |
Other comprehensive loss | — | | | — | | | — | | | (1,095) | | | — | | | (1,095) | |
Balances at June 30, 2024 | 54,914 | | | $ | 55 | | | $ | 608,804 | | | $ | (4,730) | | | $ | (681,876) | | | $ | (77,747) | |
Stock-based compensation expense | — | | — | | 27,470 | | — | | — | | 27,470 | |
Issuance of common stock upon exercise of stock options | 208 | | 1 | | 3,273 | | — | | — | | 3,274 | |
Issuance of common stock under employee stock purchase plan | 106 | | — | | 6,709 | | — | | — | | 6,709 | |
Issuance of restricted stock units | 160 | | — | | — | | — | | — | | — | |
Tax withholding related to net share settlements of stock-based compensation awards | (15) | | — | | (1,173) | | — | | — | | (1,173) | |
Net loss | — | | — | | — | | — | | (16,992) | | (16,992) | |
Other comprehensive income | — | | — | | — | | 7,649 | | — | | 7,649 | |
Balances at September 30, 2024 | 55,373 | | $ | 56 | | | $ | 645,083 | | | $ | 2,919 | | | $ | (698,868) | | | $ | (50,810) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
WORKIVA INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (continued) |
(in thousands) (unaudited) |
Nine Months Ended September 30, 2023 |
| Common Stock (Class A and B) | | | | | | | | |
| Shares | | Amount | | Additional Paid-in-Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total Stockholders' Equity (Deficit) |
Balances at December 31, 2022 | 52,652 | | | $ | 53 | | | $ | 537,732 | | | $ | (6,686) | | | $ | (525,116) | | | $ | 5,983 | |
Stock-based compensation expense | — | | | — | | | 38,042 | | | — | | | — | | | 38,042 | |
Issuance of common stock upon exercise of stock options | 102 | | | — | | | 1,457 | | | — | | | — | | | 1,457 | |
Issuance of common stock under employee stock purchase plan | 107 | | | — | | | 5,546 | | | — | | | — | | | 5,546 | |
Issuance of restricted stock units | 449 | | | — | | | — | | | — | | | — | | | — | |
Tax withholding related to net share settlements of stock-based compensation awards | (78) | | | — | | | (7,228) | | | — | | | — | | | (7,228) | |
Net loss | — | | | — | | | — | | | — | | | (46,150) | | | (46,150) | |
Other comprehensive income | — | | | — | | | — | | | 3,280 | | | — | | | 3,280 | |
Balances at March 31, 2023 | 53,232 | | | $ | 53 | | | $ | 575,549 | | | $ | (3,406) | | | $ | (571,266) | | | $ | 930 | |
Stock-based compensation expense | — | | | — | | | 20,610 | | | — | | | — | | | 20,610 | |
Issuance of common stock upon exercise of stock options | 47 | | | 1 | | | 746 | | | — | | | — | | | 747 | |
Issuance of restricted stock units | 266 | | | — | | | — | | | — | | | — | | | — | |
Tax withholding related to net share settlements of stock-based compensation awards | (12) | | | — | | | (1,212) | | | — | | | — | | | (1,212) | |
Net loss | — | | | — | | | — | | | — | | | (20,910) | | | (20,910) | |
Other comprehensive loss | — | | | — | | | — | | | (8) | | | — | | | (8) | |
Balances at June 30, 2023 | 53,533 | | | $ | 54 | | | $ | 595,693 | | | $ | (3,414) | | | $ | (592,176) | | | $ | 157 | |
Stock-based compensation expense | — | | | — | | | 19,377 | | | — | | | — | | | 19,377 | |
Issuance of common stock upon exercise of stock options | 70 | | | — | | | 1,120 | | | — | | | — | | | 1,120 | |
Issuance of common stock under employee stock purchase plan | 93 | | | — | | | 6,967 | | | — | | | — | | | 6,967 | |
Issuance of restricted stock units | 332 | | | — | | | — | | | — | | | — | | | — | |
Tax withholding related to net share settlements of stock-based compensation awards | (9) | | | — | | | (984) | | | — | | | — | | | (984) | |
Induced conversion of convertible senior notes | — | | — | | (81,080) | | — | | — | | (81,080) | |
Net loss | — | | | — | | | — | | | — | | | (56,269) | | | (56,269) | |
Other comprehensive loss | — | | | — | | | — | | | (2,981) | | | — | | | (2,981) | |
Balances at September 30, 2023 | 54,019 | | | $ | 54 | | | $ | 541,093 | | | $ | (6,395) | | | $ | (648,445) | | | $ | (113,693) | |
See accompanying notes.
| | | | | | | | | | | | | | | | | | | | | | | |
WORKIVA INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(in thousands) (unaudited) |
| Three months ended September 30, | | Nine months ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Cash flows from operating activities | | | | | | | |
Net loss | $ | (16,992) | | | $ | (56,269) | | | $ | (46,227) | | | $ | (123,329) | |
Adjustments to reconcile net loss to net cash provided by operating activities | | | | | | | |
Depreciation and amortization | 3,006 | | | 2,686 | | | 8,092 | | | 8,353 | |
Stock-based compensation expense | 27,470 | | | 19,377 | | | 75,879 | | | 78,029 | |
Provision for (recovery of) doubtful accounts | 57 | | | 8 | | | (46) | | | 57 | |
Accretion of premiums and discounts on marketable securities, net | (2,638) | | | (1,930) | | | (9,543) | | | (4,530) | |
Amortization of debt discount and issuance costs | 609 | | | 472 | | | 1,826 | | | 1,122 | |
Induced conversion expense | — | | | 45,144 | | | — | | | 45,144 | |
Realized loss on sale of available-for-sale securities, net | — | | | — | | | — | | | 708 | |
| | | | | | | |
Deferred income tax | (1) | | | (14) | | | (292) | | | (17) | |
Changes in assets and liabilities: | | | | | | | |
Accounts receivable | (15,187) | | | (15,234) | | | (11,507) | | | 7,243 | |
Deferred costs | (4,946) | | | 3,116 | | | (15,140) | | | 6,248 | |
Operating lease right-of-use asset | 1,210 | | | 1,244 | | | 3,808 | | | 3,807 | |
Other receivables | (1,745) | | | (1,556) | | | 2,796 | | | (1,842) | |
Prepaid expenses and other | 344 | | | 3,452 | | | 2,764 | | | (3,985) | |
Other assets | 464 | | | 1,043 | | | (1,191) | | | 1,479 | |
Accounts payable | 4,788 | | | (386) | | | 7,630 | | | (1,267) | |
Deferred revenue | 26,606 | | | 11,120 | | | 22,159 | | | 22,225 | |
Operating lease liability | (878) | | | (750) | | | (2,831) | | | (3,129) | |
Accrued expenses and other liabilities | (3,261) | | | 3,468 | | | 5,559 | | | 10,217 | |
Net cash provided by operating activities | 18,906 | | | 14,991 | | | 43,736 | | | 46,533 | |
| | | | | | | |
Cash flows from investing activities | | | | | | | |
Purchase of property and equipment | (243) | | | (895) | | | (554) | | | (1,732) | |
Purchase of marketable securities | (158,522) | | | (144,989) | | | (310,075) | | | (322,008) | |
Maturities of marketable securities | 108,993 | | | 36,906 | | | 345,733 | | | 76,811 | |
Sale of marketable securities | — | | | — | | | 4,609 | | | 65,052 | |
Acquisitions, net of cash acquired | 187 | | | — | | | (98,093) | | | — | |
Purchase of intangible assets | (44) | | | (48) | | | (116) | | | (167) | |
| | | | | | | |
Net cash used in investing activities | (49,629) | | | (109,026) | | | (58,496) | | | (182,044) | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
WORKIVA INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) |
(in thousands) (unaudited) |
| Three months ended September 30, | | Nine months ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Cash flows from financing activities | | | | | | | |
Proceeds from option exercises | 3,273 | | | 1,120 | | | 3,865 | | | 3,324 | |
Taxes paid related to net share settlements of stock-based compensation awards | (1,173) | | | (984) | | | (11,424) | | | (9,424) | |
Proceeds from shares issued in connection with employee stock purchase plan | 6,709 | | | 6,967 | | | 13,822 | | | 12,513 | |
Proceeds from the issuance of convertible senior notes, net of issuance costs | — | | | 691,113 | | | — | | | 691,113 | |
Payments for repurchase of convertible senior notes | — | | | (396,869) | | | — | | | (396,869) | |
Principal payments on finance lease obligations | (134) | | | (127) | | | (395) | | | (376) | |
Net cash provided by financing activities | 8,675 | | | 301,220 | | | 5,868 | | | 300,281 | |
Effect of foreign exchange rates on cash | 2,390 | | | (1,239) | | | 925 | | | (82) | |
| | | | | | | |
Net (decrease) increase in cash, cash equivalents, and restricted cash | (19,658) | | | 205,946 | | | (7,967) | | | 164,688 | |
Cash, cash equivalents, and restricted cash at beginning of period | 268,412 | | | 198,939 | | | 256,721 | | | 240,197 | |
Cash, cash equivalents, and restricted cash at end of period | $ | 248,754 | | | $ | 404,885 | | | $ | 248,754 | | | $ | 404,885 | |
| | | | | | | |
Supplemental cash flow disclosure | | | | | | | |
Cash paid for interest | $ | 4,983 | | | $ | 2,160 | | | $ | 10,085 | | | $ | 4,509 | |
Cash paid for income taxes, net of refunds | $ | 1,387 | | | $ | 604 | | | $ | 4,520 | | | $ | 2,126 | |
| | | | | | | |
Noncash investing and financing activities | | | | | | | |
| | | | | | | |
Purchases of property and equipment, accrued but not paid | $ | 259 | | | $ | — | | | $ | 259 | | | $ | — | |
| | | | | | | |
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets | | | | | | | |
Cash and cash equivalents at end of period | $ | 248,239 | | | $ | 404,885 | | | $ | 248,239 | | | $ | 404,885 | |
Restricted cash included within prepaid expenses and other at end of period | 515 | | | — | | | 515 | | | — | |
Total cash, cash equivalents, and restricted cash at end of period shown in the consolidated statements of cash flows | $ | 248,754 | | | $ | 404,885 | | | $ | 248,754 | | | $ | 404,885 | |
See accompanying notes.
WORKIVA INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies
Organization
Workiva Inc., a Delaware corporation, and its wholly-owned subsidiaries (the “Company” or “we” or “us”) provides software solutions to bring customers’ financial reporting, Governance, Risk, and Compliance (“GRC”) and Environmental, Social, and Governance (“ESG”) data together in a controlled, secure, audit-ready platform. Our platform simplifies the most complex reporting and disclosure challenges by streamlining processes, connecting data and teams, and ensuring consistency. Our operational headquarters are located in Ames, Iowa, with additional offices located in the United States, Europe, the Asia-Pacific region and Canada.
Basis of Presentation and Principles of Consolidation
The financial information presented in the accompanying unaudited condensed consolidated financial statements has been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and in accordance with rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The condensed consolidated balance sheet data as of December 31, 2023 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting primarily of normal recurring accruals, necessary for a fair presentation of our financial position and results of operations. The operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results expected for the full year ending December 31, 2024.
Seasonality affects our revenue, expenses and cash flows from operations. Revenue from professional services is generally higher in the first quarter as many of our customers file their 10-K in the first calendar quarter. Our sales and marketing expense also has some degree of seasonality. Sales and marketing expenses have historically been higher in the third quarter due to our annual user conference in September. In addition, the timing of cash bonus payments to employees during the first and fourth calendar quarters may result in some seasonality in operating cash flow. The condensed consolidated financial information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this report and the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on February 20, 2024.
The unaudited condensed consolidated financial statements include the accounts of Workiva Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and various other assumptions believed to be reasonable. These estimates include, but are not limited to, the allowance for doubtful accounts, the determination of the relative selling prices of our services, the measurement of material rights, health insurance claims incurred but not yet reported, valuation of available-for-sale marketable securities, useful lives of deferred contract costs, intangible assets and property and equipment, goodwill, income taxes, discount rates used in the valuation of right-of-use assets and lease liabilities, and certain assumptions used in the valuation of equity awards. While these estimates are based on our best knowledge of current events and actions that may affect us in the future, actual results may differ materially from these estimates.
Recently Adopted Accounting Pronouncements
None.
New Accounting Pronouncements Not Yet Adopted
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands disclosures about a public entity’s reportable segments and requires more enhanced information about a reportable segment’s expenses, interim segment profit or loss, and how a public entity’s chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources. The standard is effective for annual periods beginning after December 15, 2023, with early adoption permitted. We do not believe the adoption of this standard will have a material impact on our consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. The standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are assessing the effect of adopting this standard on our consolidated financial statements and related disclosures.
2. Supplemental Consolidated Balance Sheet Information
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
| | | | | | | | | | | |
| As of September 30, 2024 | | As of December 31, 2023 |
Accrued vacation | $ | 18,889 | | | $ | 15,356 | |
Accrued commissions | 11,211 | | | 11,969 | |
Accrued bonuses | 23,195 | | | 6,825 | |
Accrued payroll | 6,604 | | | 7,206 | |
Estimated health insurance claims | 2,417 | | | 3,462 | |
Accrued interest | 1,197 | | | 3,510 | |
ESPP employee contributions | 4,287 | | | 7,540 | |
Customer deposits | 25,720 | | | 24,763 | |
Operating lease liabilities | 4,001 | | | 5,256 | |
Accrued other liabilities | 13,508 | | | 12,034 | |
| $ | 111,029 | | | $ | 97,921 | |
3. Cash Equivalents and Marketable Securities
At September 30, 2024, cash equivalents and marketable securities consisted of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Aggregate Fair Value |
Money market funds | $ | 99,716 | | | $ | — | | | $ | — | | | $ | 99,716 | |
Commercial paper | 5,953 | | | — | | | — | | | 5,953 | |
U.S. treasury debt securities | 255,229 | | | 989 | | | (34) | | | 256,184 | |
U.S. government agency debt securities | 92,849 | | | 401 | | | (2) | | | 93,248 | |
Corporate debt securities | 181,850 | | | 874 | | | (14) | | | 182,710 | |
| | | | | | | |
| $ | 635,597 | | | $ | 2,264 | | | $ | (50) | | | $ | 637,811 | |
Included in cash and cash equivalents | $ | 109,694 | | | $ | 2 | | | $ | — | | | $ | 109,696 | |
Included in marketable securities | $ | 525,903 | | | $ | 2,262 | | | $ | (50) | | | $ | 528,115 | |
At December 31, 2023, cash equivalents and marketable securities consisted of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Amortized Cost | | Unrealized Gains | | Unrealized Losses | | Aggregate Fair Value |
Money market funds | $ | 108,826 | | | $ | — | | | $ | — | | | $ | 108,826 | |
Commercial paper | 56,115 | | | — | | | — | | | 56,115 | |
U.S. treasury debt securities | 224,136 | | | 531 | | | (80) | | | 224,587 | |
U.S. government agency debt securities | 110,036 | | | 256 | | | (15) | | | 110,277 | |
Corporate debt securities | 165,341 | | | 497 | | | (187) | | | 165,651 | |
Foreign government debt securities | 999 | | | — | | | (7) | | | 992 | |
| $ | 665,453 | | | $ | 1,284 | | | $ | (289) | | | $ | 666,448 | |
Included in cash and cash equivalents | $ | 108,826 | | | $ | — | | | $ | — | | | $ | 108,826 | |
Included in marketable securities | $ | 556,627 | | | $ | 1,284 | | | $ | (289) | | | $ | 557,622 | |
The contractual maturities of the investments classified as marketable securities are as follows (in thousands):
| | | | | |
| As of September 30, 2024 |
Due within one year | $ | 348,502 | |
Due in one to two years | 179,613 | |
| |
| $ | 528,115 | |
The following table presents gross unrealized losses and fair values for those cash equivalents and marketable securities that were in an unrealized loss position as of September 30, 2024, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| As of September 30, 2024 |
| Less than 12 months | | 12 months or greater |
| Fair Value | | Unrealized Loss | | Fair Value | | Unrealized Loss |
U.S. treasury debt securities | $ | 39,627 | | | $ | (30) | | | $ | 7,490 | | | $ | (4) | |
U.S. government agency debt securities | 957 | | | (2) | | | — | | | — | |
Corporate debt securities | 17,183 | | | (9) | | | 5,842 | | | (5) | |
| | | | | | | |
Total | $ | 57,767 | | | $ | (41) | | | $ | 13,332 | | | $ | (9) | |
We do not believe the unrealized losses represent credit losses based on our evaluation of available evidence as of September 30, 2024, which includes an assessment of whether it is more likely than not we will be required to sell the investment before recovery of the investment's amortized cost basis.
4. Fair Value Measurements
We determine the fair values of our financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value assumes that the transaction to sell the asset or transfer the liability occurs in the principal
or most advantageous market for the asset or liability and establishes that the fair value of an asset or liability shall be determined based on the assumptions that market participants would use in pricing the asset or liability. The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement. The fair value hierarchy prioritizes the inputs into three levels that may be used to measure fair value:
Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
Level 3 - Inputs are unobservable inputs based on our assumptions.
Financial Assets
Cash equivalents primarily consist of AAA-rated money market funds with overnight liquidity and no stated maturities. We classified cash equivalents as Level 1 due to the short-term nature of these instruments and measured the fair value based on quoted prices in active markets for identical assets.
When available, our marketable securities are valued using quoted prices for identical instruments in active markets. If we are unable to value our marketable securities using quoted prices for identical instruments in active markets, we value our investments using broker reports that utilize quoted market prices for comparable instruments. We validate, on a sample basis, the derived prices provided by the brokers by comparing their assessment of the fair values of our investments against the fair values of the portfolio balances of another third-party professional pricing service. As of September 30, 2024, all of our marketable securities were valued using quoted prices for comparable instruments in active markets and are classified as Level 2.
Based on our valuation of our money market funds and marketable securities, we concluded that they are classified in either Level 1 or Level 2, and we have no financial assets measured using Level 3 inputs on a recurring basis. The following table presents information about our assets that are measured at fair value on a recurring basis using the above input categories (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fair Value Measurements as of September 30, 2024 | | Fair Value Measurements as of December 31, 2023 |
Description | | Total | | Level 1 | | Level 2 | | Total | | Level 1 | | Level 2 |
Money market funds | | $ | 99,716 | | | $ | 99,716 | | | $ | — | | | $ | 108,826 | | | $ | 108,826 | | | $ | — | |
Commercial paper | | 5,953 | | | — | | | 5,953 | | | 56,115 | | | — | | | 56,115 | |
U.S. treasury debt securities | | 256,184 | | | — | | | 256,184 | | | 224,587 | | | — | | | 224,587 | |
U.S. government agency debt securities | | 93,248 | | | — | | | 93,248 | | | 110,277 | | | — | | | 110,277 | |
Corporate debt securities | | 182,710 | | | — | | | 182,710 | | | 165,651 | | | — | | | 165,651 | |
Foreign government debt securities | | — | | | — | | | — | | | 992 | | | — | | | 992 | |
| | $ | 637,811 | | | $ | 99,716 | | | $ | 538,095 | | | $ | 666,448 | | | $ | 108,826 | | | $ | 557,622 | |
| | | | | | | | | | | | |
Included in cash and cash equivalents | | $ | 109,696 | | | | | | | $ | 108,826 | | | | | |
Included in marketable securities | | $ | 528,115 | | | | | | | $ | 557,622 | | | | | |
Convertible Senior Notes
As of September 30, 2024, the fair value of our convertible senior notes due in 2026 and 2028 was $82.4 million and $659.7 million, respectively. The fair value was determined based on the quoted price of the convertible senior notes in an over-the-counter market on the last trading day of the reporting period and has been classified as Level 2 in the fair value hierarchy. See Note 5 to the condensed consolidated financial statements for more information.
5. Convertible Senior Notes
The following table presents details of our convertible senior notes, which are further discussed below (original principal in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Month Issued | | Maturity Date | | Free Convertibility Date | | Redemption Date | | Original Principal (including overallotment) | | Initial Conversion Rate per $1,000 Principal | | Initial Conversion Price |
2026 Notes | | August 2019 | | August 15, 2026 | | May 15, 2026 | | August 21, 2023 | | $ | 345,000 | | | 12.4756 | | $ | 80.16 | |
2028 Notes | | August 2023 | | August 15, 2028 | | May 15, 2028 | | August 21, 2026 | | $ | 702,000 | | | 7.4690 | | $ | 133.89 | |
In August 2019, we issued $345.0 million aggregate principal amount of 1.125% convertible senior notes due 2026 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, including the exercise in full by the initial purchasers of their option to purchase an additional $45.0 million principal amount (the "2026 Notes”). The 2026 Notes bear interest at a fixed rate of 1.125% per annum, payable semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15, 2020. Proceeds from the issuance of the 2026 Notes totaled $335.9 million, net of initial purchaser discounts and issuance costs.
In August 2023, we issued $702.0 million aggregate principal amount of 1.250% convertible senior notes due 2028 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, including the partial exercise of 77.0 million principal amount by the initial purchasers of their option to purchase up to an additional $100 million principal amount (the "2028 Notes”). The 2028 Notes bear interest at a fixed rate of 1.250% per annum, payable semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15, 2024. Proceeds from the issuance of the 2028 Notes totaled $691.1 million, net of initial purchaser discounts and issuance costs.
The 2026 Notes and the 2028 Notes are together referred to as the "Notes".
The Notes were issued pursuant to an indenture and are senior, unsecured obligations of the Company. The 2028 Notes will rank equally with all of the Company’s existing and future senior unsecured indebtedness, including the Company’s outstanding 2026 Notes.
Holders of the Notes may convert all or a portion of their Notes prior to the close of business on their respective Free Convertibility dates, in multiples of $1,000 principal amount, only under the following circumstances:
•during any calendar quarter commencing after the calendar quarter in which the respective Notes were issued (and only during such calendar quarter), if the last reported sale price of our Class A common stock, par value $0.001 per share, for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including,
the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;
•during the five consecutive business day period immediately following any ten consecutive trading day period (the “measurement period”) in which the trading price (as defined below) per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our Class A common stock and the conversion rate on each such trading day;
•if we call any or all of the Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or
•upon the occurrence of certain specified corporate events as set forth in the relevant indenture.
On or after the relevant Free Convertibility Date, holders of the Notes may convert their Notes at any time until the close of business on the second scheduled trading day immediately preceding the maturity date of the Notes.
Upon conversion, we will pay or deliver, as the case may be, cash, shares of our Class A common stock or a combination of cash and shares of our Class A common stock, at our election, in the manner and subject to the terms and conditions provided in the indenture.
The Company may redeem for cash all or any portion of the Notes, at its option, on or after the respective Redemption Date, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus any accrued and unpaid interest to, but excluding, the respective Redemption Date.
During the third quarter of 2024 none of the conversion conditions were met and therefore the Notes are not convertible at the option of the holders. As a result, the Notes were classified as non-current liabilities on the condensed consolidated balance sheet as of September 30, 2024.
Interest expense representing the amortization of issuance costs as well as contractual interest expense is amortized to interest expense at an effective interest rate of 1.5% and 1.6% over the term of the 2026 Notes and 2028 Notes, respectively.
As of September 30, 2024, the remaining life of the 2026 Notes and 2028 Notes were approximately 1.8 years and 3.8 years, respectively.
The net carrying amount of the Notes was as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2024 | | December 31, 2023 |
| 2026 Notes | | 2028 Notes | | 2026 Notes | | 2028 Notes |
Principal | $ | 71,242 | | | $ | 702,000 | | | $ | 71,242 | | | $ | 702,000 | |
Unamortized issuance costs | (508) | | | (8,453) | | | (711) | | | (10,076) | |
Net carrying amount | $ | 70,734 | | | $ | 693,547 | | | $ | 70,531 | | | $ | 691,924 | |
| | | | | | | |
| | | | | | | |
Interest expense related to the Notes was as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Contractual interest expense | $ | 2,394 | | | $ | 1,618 | | | $ | 7,182 | | | $ | 3,558 | |
Amortization of issuance costs | 609 | | | 472 | | | 1,826 | | | 1,122 | |
Total interest expense | $ | 3,003 | | | $ | 2,090 | | | $ | 9,008 | | | $ | 4,680 | |
6. Commitments and Contingencies
Litigation
From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We evaluate the development of legal matters on a regular basis and accrue a liability when we believe a loss is probable and the amount can be reasonably estimated. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of any currently pending legal proceedings to which we are a party will not have a material adverse effect on our business, operating results, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
7. Stock-Based Compensation
We grant stock-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. We utilize stock-based compensation in the form of restricted stock units, performance restricted stock units, options to purchase Class A common stock and Employee Stock Purchase Plan ("ESPP") purchase rights. Prior to our corporate conversion in December 2014, awards were provided under the 2009 Unit Incentive Plan (“the 2009 Plan”). 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”).
On May 30, 2024, stockholders approved an amendment to the 2014 Plan that increased the number of shares available for grant by 3,900,000. As of September 30, 2024, 4,920,079 shares of Class A common stock were available for grant under the 2014 Plan.
Stock-Based Compensation Expense
Stock-based compensation expense was recorded in the following cost and expense categories consistent with the respective employee or service provider’s related cash compensation (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Cost of revenue | | | | | | | |
Subscription and support | $ | 2,164 | | | $ | 1,247 | | | $ | 5,708 | | | $ | 3,732 | |
Professional services | 858 | | | 623 | | | 2,348 | | | 1,923 | |
Operating expenses | | | | | | | |
Research and development | 5,681 | | | 4,155 | | | 15,474 | | | 13,677 | |
Sales and marketing | 9,942 | | | 7,108 | | | 26,470 | | | 20,769 | |
General and administrative | 8,825 | | | 6,244 | | | 25,879 | | | 37,928 | |
Total | $ | 27,470 | | | $ | 19,377 | | | $ | 75,879 | | | $ | 78,029 | |
Stock Options
The following table summarizes the option activity under the Plans for the nine months ended September 30, 2024:
| | | | | | | | | | | | | | | | | | | |
| Options | |
Weighted- Average Exercise Price | | Weighted- Average Remaining Contractual Term (Years) | | |
| | | | | | | |
Outstanding at December 31, 2023 | 1,211,619 | | | $ | 14.46 | | | 2.3 | | |
Granted | — | | | — | | | | | |
Forfeited | — | | | — | | | | | |
Expired | — | | | — | | | | | |
Exercised | (245,202) | | | 15.76 | | | | | |
Outstanding at September 30, 2024 | 966,417 | | | $ | 14.13 | | | 1.9 | | |
| | | | | | | |
Exercisable at September 30, 2024 | 966,417 | | | $ | 14.13 | | | 1.9 | | |
Restricted Stock Units and Performance Restricted Stock Units
The following table summarizes the restricted stock unit and performance restricted stock unit activity under the Plans for the nine months ended September 30, 2024:
| | | | | | | | | | | |
| Number of Shares | | Weighted- Average Grant Date Fair Value |
| | | |
Unvested at December 31, 2023 | 2,198,411 | | | $ | 97.17 | |
Granted | 1,490,197 | | | 87.53 | |
Forfeited | (166,120) | | | 95.04 | |
Vested(1) | (864,693) | | | 95.97 | |
Unvested at September 30, 2024 | 2,657,795 | | | $ | 92.34 | |
(1) During the nine months ended September 30, 2024, in accordance with our Nonqualified Deferred Compensation Plan, recipients of 3,325 shares elected to defer settlement of their vested restricted stock units and 18,919 shares were released from deferral.
Employee Stock Purchase Plan
During the nine months ended September 30, 2024, 194,239 shares of common stock were purchased under the ESPP at a weighted-average price of $71.16 per share, resulting in cash proceeds of $13.8 million.
Compensation expense associated with ESPP purchase rights is recognized on a straight-line basis over the vesting period. At September 30, 2024, there was approximately $1.4 million of total unrecognized compensation expense related to the ESPP, which is expected to be recognized over a weighted-average period of 0.3 years.
8. Revenue Recognition
Disaggregation of Revenue
The following table presents our revenues disaggregated by type of good or service (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Subscription and support | $ | 171,035 | | | $ | 143,421 | | | $ | 486,749 | | | $ | 409,857 | |
XBRL professional services | 11,704 | | | 11,555 | | | 43,324 | | | 42,719 | |
Other services | 2,882 | | | 3,199 | | | 8,718 | | | 10,810 | |
Total revenues | $ | 185,621 | | | $ | 158,175 | | | $ | 538,791 | | | $ | 463,386 | |
Deferred Revenue
We recognized $153.0 million and $129.9 million of revenue during the three months ended September 30, 2024 and 2023, respectively, that was included in the deferred revenue balances at the beginning of the respective periods. We recognized $331.2 million and $277.8 million of revenue during the nine months ended September 30, 2024 and 2023, respectively, that was included in the deferred revenue balances at the beginning of the respective periods.
Transaction Price Allocated to the Remaining Performance Obligations
As of September 30, 2024, we expect revenue of approximately $1,076.1 million to be recognized from remaining performance obligations for subscription contracts. We expect to recognize approximately $586.0 million of these remaining performance obligations over the next 12 months with the balance substantially recognized in the 24 months thereafter.
9. Intangible Assets and Goodwill
The following table presents the components of net intangible assets (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of September 30, 2024 | | As of December 31, 2023 |
| Weighted Average Useful Life (Years) | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
Acquired technology | 4.7 | | $ | 26,591 | | | $ | (10,811) | | | $ | 15,780 | | | $ | 15,949 | | | $ | (7,471) | | | $ | 8,478 | |
Acquired customer-related | 9.7 | | 16,940 | | | (4,020) | | | 12,920 | | | 15,427 | | | (2,769) | | | 12,658 | |
Acquired trade names | 3.0 | | 2,180 | | | (1,829) | | | 351 | | | 2,172 | | | (1,721) | | | 451 | |
Patents | 10.0 | | 3,267 | | | (2,040) | | | 1,227 | | | 3,150 | | | (1,845) | | | 1,305 | |
Total | 6.7 | | $ | 48,978 | | | $ | (18,700) | | | $ | 30,278 | | | $ | 36,698 | | | $ | (13,806) | | | $ | 22,892 | |
Amortization expense related to intangible assets was $2.0 million and $1.5 million for the three months ended September 30, 2024 and 2023, respectively, and $4.8 million and $4.6 million for the nine months ended September 30, 2024 and 2023, respectively.
As of September 30, 2024, expected remaining amortization expense of intangible assets by fiscal year is as follows (in thousands):
| | | | | |
Remainder of 2024 | $ | 1,958 | |
2025 | 7,121 | |
2026 | 5,801 | |
2027 | 4,460 | |
2028 | 4,008 | |
Thereafter | 6,930 | |
Total expected amortization expense | $ | 30,278 | |
The changes in the carrying amount of goodwill were as follows (in thousands):
| | | | | |
December 31, 2023 | $ | 112,097 | |
Acquisition | 89,146 | |
Foreign currency translation adjustments | 890 | |
September 30, 2024 | $ | 202,133 | |
10. Net Loss Per Share
Net loss per share 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 is allocated on a proportionate basis.
A reconciliation of the denominator used in the calculation of basic and diluted loss per share is as follows (in thousands, except share and per share data):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended |
| September 30, 2024 | | September 30, 2023 |
| Class A | | Class B | | Class A | | Class B |
Numerator | | | | | | | |
Net loss | $ | (15,816) | | | $ | (1,176) | | | $ | (52,281) | | | $ | (3,988) | |
| | | | | | | |
Denominator | | | | | | | |
Weighted-average common shares outstanding - basic and diluted | 51,736,258 | | | 3,845,583 | | | 50,411,358 | | | 3,845,583 | |
Basic and diluted net loss per share | $ | (0.31) | | | $ | (0.31) | | | $ | (1.04) | | | $ | (1.04) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine months ended |
| September 30, 2024 | | September 30, 2023 |
| Class A | | Class B | | Class A | | Class B |
Numerator | | | | | | | |
Net loss | $ | (43,008) | | | $ | (3,219) | | | $ | (114,522) | | | $ | (8,807) | |
| | | | | | | |
Denominator | | | | | | | |
Weighted-average common shares outstanding - basic and diluted | 51,380,671 | | | 3,845,583 | | | 50,132,483 | | | 3,855,308 | |
Basic and diluted net loss per share | $ | (0.84) | | | $ | (0.84) | | | $ | (2.28) | | | $ | (2.28) | |
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 |
| September 30, 2024 | | September 30, 2023 |
Shares subject to outstanding common stock options | 966,417 | | | 1,289,808 | |
Shares subject to unvested restricted stock units and performance restricted stock units | 2,657,795 | | | 2,273,719 | |
Shares issuable pursuant to the ESPP | 125,951 | | | 86,000 | |
Shares underlying our convertible senior notes | 6,132,025 | | | 9,547,320 | |
11. Acquisitions
On June 17, 2024, we acquired all of the issued and outstanding equity interests in Sustain.Life, Inc. (“Sustain.Life”), a leading provider of carbon accounting solutions, for $98.1 million net of cash acquired of $0.3 million to launch Workiva Carbon. Workiva Carbon is an audit-ready carbon accounting solution that helps organizations measure, manage, track, and report carbon emissions, including data from third-party supply chain partners. Coupled with Workiva's ESG reporting solution, companies can now collect key business data, calculate critical metrics, set data-driven ESG strategy, measure progress, and report results all in the Workiva platform.
The transaction was accounted for as a business combination. The purchase price has been preliminarily allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The fair values of goodwill and definite-lived intangible assets acquired in the acquisition were externally estimated primarily based on the replacement cost approach. The fair values of assets acquired and liabilities assumed may change over the measurement period as additional information is received. The primary area subject to change includes our review of the valuation of intangible assets. We expect to finalize the valuation as soon as practicable, but not later than one year from the acquisition date. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill. The goodwill recognized was primarily attributable to the assembled workforce, operational synergies, and strategic benefits that are expected to be achieved and is not deductible for income tax purposes.
The following table presents a preliminary allocation of the purchase price to the assets acquired and liabilities assumed at the date of acquisition (in thousands):
| | | | | |
Cash consideration | $ | 98,343 | |
Total consideration | $ | 98,343 | |
| |
Cash | $ | 251 | |
Accounts receivable, net | 488 | |
Other receivables | 4,066 | |
Prepaid expenses and other | 239 | |
Intangible assets | 11,890 | |
Goodwill | 89,146 | |
Accounts payable | (211) | |
Accrued liabilities | (5,223) | |
Deferred revenue | (1,042) | |
Other long-term liabilities | (1,261) | |
Fair value of assets and liabilities | $ | 98,343 | |
We incurred costs related to the acquisition of approximately $1.1 million during the nine months ended September 30, 2024. All acquisition related costs were expensed as incurred and have been recorded in general and administrative expenses in our condensed consolidated statements of operations.
The amount of revenues and net loss from the acquisition included in our condensed consolidated statements of operations for the three and nine months ended September 30, 2024 were not material.