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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-Q 
___________________________________
(Mark One)
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2018
OR
o 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)
___________________________________


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 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 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 o
Accelerated filer ý
Non-accelerated filer o (Do not check if a smaller reporting company)
Smaller reporting company o
Emerging growth company ý
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. ý
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes o No ý
As of August 3, 2018, there were approximately 33,526,550 shares of the registrant's Class A common stock and 9,786,484 shares of the registrant's Class B common stock outstanding.


WORKIVA INC.
TABLE OF CONTENTS

Page


i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical facts, including statements regarding our future results of operations and financial position, our business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2017, in “Item 1A. Risk Factors” in Part II of this Quarterly Report on Form 10-Q and in any subsequent filing we make with the SEC, as well as in any documents incorporated by reference that describe risks and factors that could cause results to differ materially from those projected in these forward-looking statements.
Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements or events and circumstances reflected in the forward-looking statements will occur. We are under no duty to update any of these forward-looking statements after completion of this Quarterly Report on Form 10-Q to conform these statements to actual results or revised expectations.
ii
Part I. Financial Information
Item 1.  Financial Statements

WORKIVA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts) 
As of June 30, 2018As of December 31, 2017 
(unaudited)
ASSETS
Current assets
Cash and cash equivalents$57,495 $60,333 
Marketable securities23,216 16,364 
Accounts receivable, net of allowance for doubtful accounts of $590 and $388 at June 30, 2018 and December 31, 2017, respectively39,088 28,800 
Deferred commissions4,844 2,376 
Other receivables 801 975 
Prepaid expenses
8,229 6,444 
Total current assets 133,673 115,292 
Property and equipment, net 39,338 40,444 
Deferred commissions, non-current6,462 — 
Intangible assets, net1,196 1,118 
Other assets 1,025 861 
Total assets $181,694 $157,715 
1
WORKIVA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(in thousands, except share and per share amounts)
As of June 30, 2018As of December 31, 2017 
(unaudited)
LIABILITIES AND STOCKHOLDERS’ DEFICIT 
Current liabilities
Accounts payable $4,688 $3,060 
Accrued expenses and other current liabilities 30,979 20,212 
Deferred revenue 118,490 104,684 
Deferred government grant obligation42 217 
Current portion of capital lease and financing obligations1,160 1,168 
Total current liabilities 155,359 129,341 
Deferred revenue, non-current21,835 22,709 
Deferred government grant obligation267 278 
Other long-term liabilities4,056 3,896 
Capital lease and financing obligations17,841 18,425 
Total liabilities 199,358 174,649 
Stockholders’ deficit 
Class A common stock, $0.001 par value per share, 1,000,000,000 shares authorized, 33,275,738 and 32,165,407 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively33 32 
Class B common stock, $0.001 par value per share, 500,000,000 shares authorized, 9,786,484 and 10,203,371 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively10 10 
Preferred stock, $0.001 par value per share, 100,000,000 shares authorized, no shares issued and outstanding— — 
Additional paid-in-capital270,560 248,289 
Accumulated deficit(288,342)(265,337)
Accumulated other comprehensive income75 72 
Total stockholders’ deficit (17,664)(16,934)
Total liabilities and stockholders’ deficit$181,694 $157,715 

See accompanying notes. 

2
WORKIVA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited) 
Three months ended June 30,Six months ended June 30,
2018201720182017
Revenue 
Subscription and support $48,837 $40,980 $95,307 $80,520 
Professional services 10,293 8,411 23,729 20,775 
Total revenue 59,130 49,391 119,036 101,295 
Cost of revenue 
Subscription and support 8,637 7,758 17,439 15,395 
Professional services 7,659 6,528 15,368 13,109 
Total cost of revenue 16,296 14,286 32,807 28,504 
Gross profit 42,834 35,105 86,229 72,791 
Operating expenses
Research and development 20,718 16,239 40,845 31,775 
Sales and marketing 22,252 19,787 43,258 38,500 
General and administrative 21,654 8,943 33,422 18,364 
Total operating expenses 64,624 44,969 117,525 88,639 
Loss from operations (21,790)(9,864)(31,296)(15,848)
Interest expense(449)(475)(899)(930)
Other income, net 492 176 835 788 
Loss before provision for income taxes (21,747)(10,163)(31,360)(15,990)
Provision for income taxes 21 33 26 42 
Net loss $(21,768)$(10,196)$(31,386)$(16,032)
Net loss per common share: 
Basic and diluted$(0.50)$(0.25)$(0.73)$(0.39)
Weighted-average common shares outstanding - basic and diluted43,234,655 41,429,691 43,048,110 41,270,038 

See accompanying notes. 


3
WORKIVA INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited) 
Three months ended June 30,Six months ended June 30,
2018201720182017
Net loss $(21,768)$(10,196)$(31,386)$(16,032)
Other comprehensive income (loss), net of tax 
Foreign currency translation adjustment, net of income tax benefit of $0 for both of the three months ended June 30, 2018 and 2017, and net of income tax benefit of $0 and $2 for the six months ended June 30, 2018 and 2017, respectively
42 (52)31 (86)
Unrealized gain (loss) on available-for-sale securities, net of income tax benefit (expense) of $0 for both of the three months ended June 30, 2018 and 2017, and net of income tax (expense) of $0 and ($2) for the six months ended June 30, 2018 and 2017, respectively
17 (2)(28)— 
Other comprehensive income (loss), net of tax 59 (54)3 (86)
Comprehensive loss $(21,709)$(10,250)$(31,383)$(16,118)

See accompanying notes.


4
WORKIVA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

Three months ended June 30,Six months ended June 30,
2018201720182017
Cash flows from operating activities
Net loss $(21,768)$(10,196)$(31,386)$(16,032)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities 
Depreciation and amortization876 867 1,748 1,758 
Stock-based compensation expense10,465 4,397 16,370 8,536 
Provision for doubtful accounts 139 146 183 432 
(Accretion) amortization of premiums and discounts on marketable securities, net (15)28 3 59 
Recognition of deferred government grant obligation(100)(198)(208)(736)
Changes in assets and liabilities:
Accounts receivable(236)(3,228)6,306 (542)
Deferred commissions(2,020)(149)(3,669)(151)
Other receivables148 (865)175 (25)
Prepaid expenses and other(2,020)(2,830)(1,789)(2,026)
Other assets(110)36 (168)13 
Accounts payable(1,294)(678)1,383 339 
Deferred revenue8,747 14,398 6,402 18,494 
Accrued expenses and other liabilities4,642 2,254 3,887 (3,557)
Net cash (used in) provided by operating activities (2,546)3,982 (763)6,562 
Cash flows from investing activities
Purchase of property and equipment(210)(26)(219)(147)
Purchase of marketable securities(11,283)(2,259)(11,283)(6,350)
Maturities of marketable securities3,900 1,850 4,400 4,851 
Purchase of intangible assets(64)(58)(128)(89)
Net cash used in investing activities (7,657)(493)(7,230)(1,735)
5
WORKIVA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
(unaudited)

Three months ended June 30,Six months ended June 30,
2018201720182017
Cash flows from financing activities
Proceeds from option exercises3,318 4,709 6,393 5,515 
Taxes paid related to net share settlements of stock-based compensation awards(519)— (1,861)(936)
Proceeds from shares issued in connection with employee stock purchase plan— — 1,370 — 
Repayment of other long-term debt— (20)— (20)
Principal payments on capital lease and financing obligations(294)(490)(592)(787)
Proceeds from government grants22 22 22 22 
Deferred financing costs— (10)— (10)
Net cash provided by financing activities 2,527 4,211 5,332 3,784 
Effect of foreign exchange rates on cash(85)82 (177)94 
Net (decrease) increase in cash and cash equivalents (7,761)7,782 (2,838)8,705 
Cash and cash equivalents at beginning of period65,256 52,204 60,333 51,281 
Cash and cash equivalents at end of period$57,495 $59,986 $57,495 $59,986 
Supplemental cash flow disclosure
Cash paid for interest$435 $448 $868 $747 
Cash paid for income taxes, net of refunds$54 $27 $56 $40 
Supplemental disclosure of noncash investing and financing activities
Allowance for tenant improvements$105 $— $127 $— 
Purchases of property and equipment, accrued but not paid$254 $— $254 $— 

See accompanying notes.


6

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”) created Wdesk, an intuitive cloud platform that modernizes how people work within thousands of organizations. Wdesk is built on a data management engine, offering controlled collaboration, data connections, granular permissions and a full audit trail. We offer Wdesk solutions for a wide range of use cases in the following markets: finance and accounting, audit and internal controls, risk and compliance, and performance and management reporting. Our operational headquarters are located in Ames, Iowa, with additional offices located in the United States, Europe, and Canada.
We updated our accounting policies on the use of estimates, revenue recognition, deferred revenue, and deferred commissions as a result of our adopting Financial Accounting Standards Board (FASB) guidance issued in accounting standards codification (ASC) 606, Revenue Recognition - Revenue from Contracts with Customers, under the Accounting Standards Update (ASU) 2014-09 (collectively the new revenue standard). Otherwise, there have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on February 22, 2018, that have had a material impact on our condensed consolidated financial statements and related notes.
Basis of Presentation and Principles of Consolidation
The financial information presented in the accompanying unaudited condensed consolidated financial statements has been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and in accordance with rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, the financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The condensed consolidated balance sheet data as of December 31, 2017 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 six months ended June 30, 2018 are not necessarily indicative of the results expected for the full year ending December 31, 2018.
Seasonality has affected our revenue, expenses and cash flows from operations. Revenue from professional services has been higher in the first quarter as many of our customers file their Form 10-K in the first calendar quarter. Sales and marketing expense has been higher in the third quarter due to our annual user conference in September. In addition, the timing of the payments of cash bonuses to employees during the first and fourth calendar quarters may result in some seasonality in operating cash flow. The condensed consolidated financial information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this report and the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed with the SEC on February 22, 2018.
The unaudited condensed consolidated financial statements include the accounts of Workiva Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
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Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and various other assumptions believed to be reasonable. These estimates include, but are not limited to, the allowance for doubtful accounts, the determination of the relative selling prices of our services, the measurement of material rights, health insurance claims incurred but not yet reported, valuation of available-for-sale marketable securities, useful lives of deferred contract costs, intangible assets and property and equipment, income taxes 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.
Revenue Recognition
We generate revenue through the sale of subscriptions to our cloud-based software and the delivery of professional services. We recognize revenue when control of these services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those services.
We determine revenue recognition through the following steps:
• Identification of the contract, or contracts, with a customer
• Identification of the performance obligations in the contract
• Determination of the transaction price
• Allocation of the transaction price to the performance obligations in the contract
• Recognition of revenue when, or as, we satisfy a performance obligation
We report revenue net of sales and other taxes collected from customers to be remitted to government authorities.
Subscription and Support Revenue 
We recognize subscription and support revenue on a ratable basis over the contract term beginning on the date that our service is made available to the customer. Our subscription contracts are generally three to 36 months in duration, are billed in advance and are non-cancelable. We consider the access to Wdesk and related support services in a customer contract to be a series of distinct services which comprise a single performance obligation because they are substantially the same and have the same pattern of transfer.
Professional Services Revenue and Customer Options
Professional services revenues primarily consist of fees for document set up, XBRL tagging, and consulting with our customers on business processes and best practices for using Wdesk. We have determined that an agreement to purchase these professional services constitutes an option to purchase services in accordance with ASC 606 rather than an agreement that creates enforceable rights and obligations because of the customer's contractual right to cancel services that have not yet been used. In the limited case of agreements where we determined that the option provides the customer with a material right, we allocate a portion of the transaction price to the material right. Professional service agreements that do not contain a material right are accounted for when the customer exercises its option to purchase additional services.
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Revenue is recognized for document set ups when the service is complete and control has transferred to the customer. Revenues from XBRL tagging and consulting services are recognized as the services are performed.
Contracts with Multiple Performance Obligations
Some of our contracts with customers contain multiple performance obligations in the event that we determine a material right exists. For these contracts, we account for the individual performance obligations separately when they are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. If these criteria are not met, the promised services are accounted for as a combined performance obligation. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. We determine the standalone selling prices based on our overall pricing objectives, taking into consideration market conditions and entity-specific factors, including the size of our arrangements, length of term, customer demographics and the numbers and types of users within our arrangements. 
Deferred Revenue
We typically invoice our customers for subscription and support 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 non-cancelable services starting in future periods are included in accounts receivable and deferred revenue. 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.
Customer Deposits
As an agreement to purchase professional services constitutes a customer option, fees received in advance of these services being performed are considered customer deposits and are included in accrued expenses and other current liabilities on the condensed consolidated balance sheet. Unpaid invoice amounts for these professional services starting in future periods are excluded from accounts receivable and accrued expenses and other current liabilities.
Deferred Commissions
Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions paid where the amortization period is one year or less are expensed as incurred. All other sales commissions are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be three years. We determined the period of benefit by taking into consideration our standard contract terms and conditions, rate of technological change and other factors. Amortization expense is included in sales and marketing expense in the accompanying condensed consolidated statements of operations.
Income Taxes
On December 22, 2017, the U.S. federal government enacted legislation commonly referred to as the “Tax Cuts and Jobs Act” (the “TCJA”). The TCJA makes widespread changes to the Internal Revenue Code, including, among other items, the introduction of a new international “Global Intangible Low-Taxed Income” (“GILTI”) regime effective January 1, 2018. Companies may adopt one of two views in regards to establishing deferred taxes in accordance with the new (“GILTI”) regime under ASC 740.  Companies may account for the effects of GILTI either (1) in the period the entity becomes subject to GILTI, or (2) establish deferred taxes (similar to the guidance that currently exists with respect to basis
9
differences that will reverse under current Subpart F rules) for basis differences that upon reversal will be subject to GILTI. We have elected to account for the effects of GILTI in the period incurred and expect to incur an adjustment related to GILTI for the year ended December 31, 2018. This adjustment is offset by a corresponding reduction to the valuation allowance and as a result has zero impact on our effective tax rate. We will continue to refine our calculations as additional guidance is released during the measurement period as permitted by SEC Staff Accounting Bulletin 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act.
Recently Adopted Accounting Pronouncements
In May 2014, FASB issued ASU 2014-09, which amends the guidance in former ASC 605, Revenue Recognition. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.
Effective January 1, 2018, we adopted ASU 2014-09 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of our accumulated deficit. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.
The primary impact on accounts receivables and deferred revenue of adopting the new standard relates to recording deferred revenue when payments are due in advance of our performance of subscription based contracts. This recording has resulted in an offsetting increase in accounts receivable and deferred revenue.
The effect of adopting the new standard on accrued expenses and other current liabilities relates to the reclassification of amounts collected in advance related to the purchase of professional services from deferred revenue to accrued expenses and other current liabilities as these agreements to purchase professional services constitute a customer option.
The primary impact of adopting the new standard on our sales and marketing expense relates to the deferral of incremental commission costs of obtaining subscription contracts. Under the previous guidance, we deferred only direct and incremental commission costs to obtain a contract and amortized those costs on a straight-line basis over the lesser of 12 months or the non-cancelable term of the customer contract based on the terms of our commission arrangements. Under the new standard, we defer all incremental commission costs to obtain the contract. We amortize these costs on a straight-line basis over a period of benefit that we have determined to be three years.
The adoption of ASC 606 primarily resulted in an acceleration of revenue as of December 31, 2017, which in turn reduced our existing deferred tax asset for amounts that had previously been included in deferred revenue. Additionally, the amortization of the costs of obtaining a contract has generated additional deferred tax liabilities that ultimately reduced our net deferred tax asset position. As we have provided a full valuation allowance against our net deferred tax assets in the jurisdictions impacted by the adoption of ASC 606, this aggregate impact was offset by a corresponding reduction to the valuation allowance.

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The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of ASU 2014-09 were as follows (in thousands):
As of December 31, 2017Adjustments Due to ASU 2014-09As of January 1, 2018
Assets
Accounts receivable, net$28,800 $16,900 $45,700 
Deferred commissions2,376 650 3,026 
Deferred commissions, non-current— 4,655 4,655 
Liabilities 
Accrued expenses and other current liabilities20,212 6,956 27,168 
Deferred revenue104,684 6,625 111,309 
Deferred revenue, non-current22,709 243 22,952 
Equity 
Accumulated deficit$(265,337)$8,381 $(256,956)

In accordance with the new revenue standard requirements, the impact of adoption on our condensed consolidated balance sheet as of June 30, 2018 and statement of operations for the three and six months ended June 30, 2018 was as follows (in thousands, except per share data):
As of June 30, 2018
As ReportedBalances Without Adoption of ASC 606Effect of Change
Assets
Accounts receivable, net$39,088 $27,029 $12,059 
Deferred commissions4,844 2,686 2,158 
Deferred commissions, non-current6,462 — 6,462 
Liabilities 
Accrued expenses and other current liabilities30,979 24,256 6,723 
Deferred revenue118,490 116,949 1,541 
Deferred revenue, non-current21,835 19,877 1,958 
Equity 
Accumulated deficit$(288,342)$(298,799)$10,457 


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Three months ended June 30, 2018Six months ended June 30, 2018
As ReportedBalances Without Adoption of ASC 606Effect of ChangeAs ReportedBalances Without Adoption of ASC 606Effect of Change
Revenues
Subscription and support$48,837 $48,469 $368 $95,307 $94,706 $601 
Professional services10,293 10,418 (125)23,729 25,548 (1,819)
Operating expenses
Sales and marketing22,252 23,930 (1,678)43,258 46,552 (3,294)
Net loss $(21,768)$(23,689)$1,921 $(31,386)$(33,462)$2,076 
Net loss per common share 
Basic and diluted$(0.50)$(0.55)$0.05 $(0.73)$(0.78)$0.05 

The adoption of ASC 606 had no impact on our total cash flows from operations.
In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The ASU is effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods. Effective January 1, 2018, we adopted this standard. The adoption of this new guidance did not have a material impact on our consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This ASU simplifies the accounting for nonemployee share-based payment transactions. Under the new guidance, equity-classified share-based payment awards issued to nonemployees will now be measured on the grant date, instead of the previous requirement to remeasure the awards through performance completion date. Awards that include performance conditions will recognize compensation cost when the achievement of the performance condition is probable, rather than upon achievement of the performance condition. Finally, the current requirement to reassess the classification (equity or liability) for nonemployee awards upon vesting will be eliminated, except for awards in the form of convertible instruments. The ASU is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods. Early adoption is permitted, including interim periods, but no earlier than the adoption of ASC 606. Effective June 20, 2018, we adopted this standard. The adoption of this new guidance did not have a material impact on our consolidated financial statements.
New Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued guidance codified in ASC 842, Leases, which supersedes the guidance in former ASC 840, Leases, to increase transparency and comparability among organizations by requiring recognition of right-of-use assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements. The standard will become effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. In July 2018, the FASB issued
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ASU 2018-11, Leases (Topic 842): Targeted Improvements that allows entities to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We plan to elect this new transition guidance when we adopt this standard on January 1, 2019. We have formed a team to identify and analyze our existing lease agreements and have begun assessing our lease population for the new standard and evaluating the impact to our consolidated financial statements. We anticipate the standard will have a material impact on our balance sheet. 
2. Supplemental Consolidated Balance Sheet and Statement of Operations Information
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of (in thousands):
June 30, 2018December 31, 2017
Accrued vacation $6,931 $6,087 
Accrued commissions 3,331 3,297 
Accrued bonuses6,309 4,419 
Estimated health insurance claims1,120 1,090 
ESPP employee contributions1,853 1,419 
Customer deposits6,723 — 
Accrued other liabilities 4,712 3,900 
$30,979 $20,212 
Other Income, net
Other income, net for the three and six months ended June 30, 2018 and 2017 consisted of (in thousands):
Three months ended June 30,Six months ended June 30,
2018201720182017
Interest income$279 $129 $502 $220 
Income from training reimbursement program100 198 208 736 
Other113 (151)125 (168)
$492 $176 $835 $788 


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3. Cash Equivalents and Marketable Securities
At June 30, 2018, marketable securities consisted of the following (in thousands):
Amortized CostUnrealized GainsUnrealized LossesAggregate Fair Value
Money market funds$36,517 $— $— $36,517 
Commercial paper9,508 — — 9,508 
U.S. treasury debt securities1,993 — (6)1,987 
U.S. corporate debt securities11,812 — (91)11,721 
$59,830 $— $(97)$59,733 
Included in cash and cash equivalents$36,517 $— $— $36,517 
Included in marketable securities$23,313 $— $(97)$23,216 

At December 31, 2017, marketable securities consisted of the following (in thousands):
Amortized CostUnrealized GainsUnrealized LossesAggregate Fair Value
Money market funds$49,452 $— $— $49,452 
U.S. treasury debt securities3,083 — (8)3,075 
U.S. corporate debt securities13,350 — (61)13,289 
$65,885 $— $(69)$65,816 
Included in cash and cash equivalents$49,452 $— $— $49,452 
Included in marketable securities$16,433 $— $(69)$16,364 

The following table presents gross unrealized losses and fair values for those marketable securities that were in an unrealized loss position as of June 30, 2018, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in thousands):
As of June 30, 2018
Less than 12 months12 months or greater
Fair ValueUnrealized LossFair ValueUnrealized Loss
U.S. treasury debt securities$1,987 $(6)$— $— 
U.S. corporate debt securities11,721 (91)— — 
Total$13,708 $(97)$— $— 

We do not believe any of the unrealized losses represented an other-than-temporary impairment based on our evaluation of available evidence, which includes our intent as of June 30, 2018 to hold these investments until the cost basis is recovered.

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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 June 30, 2018, all of our marketable securities were valued using quoted prices for comparable instruments in active markets and are classified as Level 2.
Based on our valuation of our money market funds and marketable securities, we concluded that they are classified in either Level 1 or Level 2 and we have no financial assets measured using Level 3 inputs. The following table presents information about our assets that are measured at fair value on a recurring basis using the above input categories (in thousands):

Fair Value Measurements as of June 30, 2018Fair Value Measurements as of December 31, 2017
DescriptionTotalLevel 1Level 2TotalLevel 1Level 2
Money market funds$36,517 $36,517 $— $49,452 $49,452 $— 
Commercial paper9,508 — 9,508 — — — 
U.S. treasury debt securities1,987 — 1,987 3,075 — 3,075 
U.S. corporate debt securities11,721 — 11,721 13,289 — 13,289 
$59,733 $36,517 $23,216 $65,816 $49,452 $16,364 
Included in cash and cash equivalents$36,517 $49,452 
Included in marketable securities$23,216 $16,364 

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5. Deferred Costs
Deferred costs, which primarily consist of costs to obtain contracts with customers, were $11.3 million as of June 30, 2018. Amortization expense for the deferred costs was $2.4 million and $4.4 million for the three and six months ended June 30, 2018, respectively. There was no significant impairment loss in relation to the costs capitalized for the periods presented.
6. Commitments and Contingencies
Lease Commitments
As of June 30, 2018, future estimated minimum lease payments under non-cancelable operating leases were as follows (in thousands):
Operating Leases
Remainder of 2018$2,131 
20193,517 
20203,270 
20213,211 
20222,931 
Thereafter13,287 
Total minimum lease payments$28,347 

There have been no material changes in our future estimated minimum lease payments under non-cancelable capital and financing leases, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017.
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. 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 awards, restricted stock units, options to purchase Class A common stock and Employee Stock Purchase Plan (“ESPP”) purchase rights.
As of June 30, 2018, awards outstanding under the 2009 Plan consisted of stock options, and awards outstanding under the 2014 Plan consisted of stock options and restricted stock units.
In June 2018, stockholders approved an amendment to the 2014 Plan that increased the number of shares available for grant by 3,000,000. As of June 30, 2018, 3,273,124 shares of Class A common stock were available for grant under the 2014 Plan.
Our ESPP became effective on June 13, 2017. Under the ESPP, eligible employees are granted options to purchase shares of Class A common stock at the lower of 85% of the fair market value of the stock at the time of grant or 85% of the fair market value at the time of exercise. Options to purchase
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shares are granted twice yearly on or about January 15 and July 15 and are exercisable on or about the succeeding July 14 and January 14, respectively, of each year. As of June 30, 2018, 4,920,003 shares of Class A common stock were available for issuance under the ESPP. No participant may purchase more than $12,500 worth of common stock in a six-month offering period.
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 June 30,Six months ended June 30,
2018201720182017
Cost of revenue
Subscription and support$228 $178 $399 $318 
Professional services146 100 296 200 
Operating expenses
Research and development1,495 472 2,516 965 
Sales and marketing1,440 694 2,553 1,353 
General and administrative7,156 2,953 10,606 5,700 
Total$10,465 $4,397 $16,370 $8,536 

The fair value of each option grant and each share issued under the ESPP is estimated on the date of grant using the Black-Scholes option-pricing model. For stock options, expected volatility is based on the historical volatility of our common stock and historical volatilities for publicly traded stock of comparable companies over the estimated expected life of the options. For the ESPP purchase rights, expected volatility is based on the historical volatility of our common stock. The expected term represents the period of time the options and the ESPP purchase rights are expected to be outstanding. For stock options, the expected term is based on the “simplified method” as defined by SEC Staff Accounting Bulletin No. 110 (Topic 14.D.2). 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 expected term for the ESPP purchase rights approximates the offering period. The risk-free interest rate is based on yields on U.S. Treasury STRIPS (Separate Trading of Registered Interest and Principal of Securities) with a maturity similar to the estimated expected term of the options and ESPP purchase rights.

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The fair value of our stock options and ESPP purchase rights was estimated assuming no expected dividends and the following weighted-average assumptions:

Three months ended June 30,Six months ended June 30,
2018201720182017
Stock Options
Expected term (in years)— 6.1— 6.0 - 6.1
Risk-free interest rate —%  1.9% - 2.0% —%  1.9% - 2.1%
Expected volatility —%  39.3% - 39.6% —%  39.3% - 43.8%
ESPP
Expected term (in years)— — 0.5— 
Risk-free interest rate—%  —%  1.8%  —%  
Expected volatility—%  —%  22.2%  —%  

Stock Options
The following table summarizes the option activity under the Plans for the six months ended June 30, 2018:




Options 

Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate Intrinsic Value
(in thousands)
Outstanding at December 31, 20178,145,777 $13.33 7.0$65,913 
Granted— — 
Forfeited(105,977)16.95 
Exercised(624,388)10.24 
Outstanding at June 30, 20187,415,412 $13.54 6.6$80,539 
Exercisable at June 30, 20185,237,069 $12.36 5.8$63,072 

Options to purchase Class A common stock generally vest over a three- or four-year period and are generally granted for a term of ten years. The total intrinsic value of options exercised during the six months ended June 30, 2018 and 2017 was $8.7 million and $4.2 million, respectively.
The weighted-average grant-date fair value of options granted during the six months ended June 30, 2017 was $6.05. No options were granted during the six months ended June 30, 2018. The total fair value of options vested during the six months ended June 30, 2018 and 2017 was approximately $8.4 million and $5.2 million, respectively. Total unrecognized compensation expense of $13.0 million related to options will be recognized over a weighted-average period of 2.3 years.
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Restricted Stock Awards
We have granted restricted stock awards to our executive officers that vest in three equal annual installments from the date of grant. The recipient of an award of restricted stock under the Plan may vote and receive dividends on the shares of restricted stock covered by the award. The fair value for restricted stock awards is calculated based on the stock price on the date of grant. The total fair value of restricted stock awards vested during the six months ended June 30, 2018 and 2017 was approximately $2.2 million and $2.4 million, respectively.
The following table summarizes the restricted stock award activity under the Plan for the six months ended June 30, 2018:




Number of Shares
Weighted-
Average Grant Date Fair Value
Unvested at December 31, 2017163,332 $13.40 
Granted— — 
Forfeited— — 
Vested(163,332)13.40 
Unvested at June 30, 2018— $— 

Compensation expense associated with unvested restricted stock awards is recognized on a straight-line basis over the vesting period. At June 30, 2018, there was no unrecognized compensation expense related to restricted stock awards.
Restricted Stock Units
Restricted stock units granted to employees generally vest over a three- or four-year period in equal, annual installments or with three-year cliff vesting. Restricted stock units granted to non-employee members of our Board of Directors generally have one-year cliff vesting from the date of grant. The recipient of a restricted stock unit award under the Plan will have no rights as a stockholder until share certificates are issued by us, but, at the discretion of our Compensation Committee, has the right to receive a dividend equivalent payment in the form of additional restricted stock units. Additionally, until the shares are issued, they have no voting rights and may not be bought or sold. The fair value for restricted stock units is calculated based on the stock price on the date of grant. The total fair value of restricted stock units vested during the six months ended June 30, 2018 and 2017 was approximately $7.2 million and $2.5 million, respectively.

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The following table summarizes the restricted stock unit activity under the Plan for the six months ended June 30, 2018:




Number of Shares
Weighted-
Average Grant Date Fair Value
Unvested at December 31, 2017574,072 $14.51 
Granted1,933,643 22.96 
Forfeited(22,004)22.23 
Vested(1)
(439,436)16.46 
Unvested at June 30, 20182,046,275 $22.00 

(1) As of June 30, 2018, recipients of 554,621 shares had elected to defer settlement of the vested restricted stock units in accordance with our Nonqualified Deferred Compensation Plan. 
Compensation expense associated with unvested restricted stock units is recognized on a straight-line basis over the vesting period. At June 30, 2018, there was approximately $39.4 million of total unrecognized compensation expense related to restricted stock units, which is expected to be recognized over a weighted-average period of 2.6 years.
Employee Stock Purchase Plan
During the six months ended June 30, 2018, 79,997 shares of common stock were purchased under the ESPP at a weighted-average price of $17.13 per share, resulting in cash proceeds of $1.4 million.
Compensation expense associated with ESPP purchase rights is recognized on a straight-line basis over the vesting period. At June 30, 2018, there was approximately $35,000 of total unrecognized compensation expense related to the ESPP, which is expected to be recognized over a weighted-average period of 0.04 years. 
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8. Revenue Recognition
Disaggregation of Revenue
The following table presents our revenues disaggregated by industry (in thousands):
Three months ended June 30, 2018Six months ended June 30, 2018
Information technology$7,584 $14,854 
Consumer discretionary6,882 13,775 
Industrials6,511 13,258 
Diversified financials6,053 12,343 
Banks5,787 11,836 
Healthcare5,104 10,454 
Energy4,709 9,604 
Other16,500 32,912 
Total revenues$59,130 $119,036 

The following table presents our revenues disaggregated by type of good or service (in thousands):
Three months ended June 30, 2018Six months ended June 30, 2018
Subscription and support$48,837 $95,307 
XBRL professional services6,916 16,768 
Other services3,377 6,961 
Total revenues$59,130 $119,036 

Deferred Revenue
During the three months ended June 30, 2018, we recognized $43.3 million of revenue that was included in the deferred revenue balance at the beginning of the period. During the six months ended June 30, 2018, we recognized $77.0 million of revenue that was included in the deferred revenue balance at the beginning of the period. 
Transaction Price Allocated to the Remaining Performance Obligations
As of June 30, 2018, revenue of approximately $140.3 million is expected to be recognized from remaining performance obligations for subscription contracts. We expect to recognize approximately $118.5 million of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.

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9. Net Loss Per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including our outstanding stock options, stock related to unvested restricted stock awards, and common stock issuable pursuant to the ESPP to the extent dilutive.
The net loss per share is allocated based on the participation rights of the Class A and Class B common shares as if the loss for the year has been distributed. As the liquidation and dividend rights are identical, the net loss is allocated on a proportionate basis.
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):
Three months ended
June 30, 2018June 30, 2017
Class AClass BClass AClass B
Numerator
Net loss$(16,755)$(5,013)$(7,527)$(2,669)
Denominator
Weighted-average common shares outstanding - basic and diluted33,278,982 9,955,673 30,585,012 10,844,679 
Basic and diluted net loss per share$(0.50)$(0.50)$(0.25)$(0.25)

Six months ended
June 30, 2018June 30, 2017
Class AClass BClass AClass B
Numerator
Net loss$(24,040)$(7,346)$(11,814)$(4,218)
Denominator
Weighted-average common shares outstanding - basic and diluted32,972,720 10,075,390 30,413,156 10,856,882 
Basic and diluted net loss per share$(0.73)$(0.73)$(0.39)$(0.39)
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
June 30, 2018June 30, 2017
Shares subject to outstanding common stock options7,415,412 8,139,151 
Shares subject to unvested restricted stock awards— 176,665 
Shares issuable pursuant to the ESPP102,756 — 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this report and in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 22, 2018. In addition to historical consolidated financial information, this discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to these differences include, but are not limited to, those identified below, and those discussed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2017, in “Item 1A. Risk Factors” in Part II of this Quarterly Report on Form 10-Q and in any subsequent filing we make with the SEC.
Overview
Workiva provides Wdesk, an intuitive cloud platform that modernizes how customers work with business data at thousands of organizations. Wdesk is built on a data management engine, offering controlled collaboration, data connections, granular permissions and a full audit trail. Wdesk helps mitigate risk, improves productivity and gives users confidence in their data-driven decisions. As of June 30, 2018, we provided our solutions to more than 3,200 enterprise customers, including more than 75% of FORTUNE 500® companies(1).
(1) Claim not confirmed by FORTUNE or Time Inc. FORTUNE 500 is a registered trademark of Time Inc. and is used under license. FORTUNE and Time Inc. are not affiliated with, and do not endorse products or services of, Workiva Inc.
Our scalable, enterprise-grade data engine enables users to collect, aggregate and manage their unstructured and structured data in Wdesk. Although our Wdesk platform is used for hundreds of different use cases across public and private companies, state and local governments and universities, we are currently focusing our sales and marketing resources to expand the use of Wdesk in four areas: finance and accounting, audit and internal controls, risk and compliance, and performance and management reporting.
We operate our business on a software-as-a-service (SaaS) model. Customers enter into quarterly, annual and multi-year subscription contracts to gain access to Wdesk. Our subscription fee includes the use of our software 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, our customer success and professional services teams. In addition, we augment our direct-sales channel with partnerships. Our advisory and service partners offer a wider range of domain and functional expertise that broadens the capabilities of Wdesk, bringing scale and support to customers and prospects. Our technology partners enable more data and process integrations to help customers connect critical transactional systems directly to Wdesk, which becomes a central repository of trusted data, with powerful linking, auditability and control features.
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 95.6% (excluding add-on seats) for the twelve months ended June 30, 2018.
We continue to invest in the development of our solutions, infrastructure and sales and marketing to drive long-term growth. Our full-time employee headcount expanded to 1,287 at June 30, 2018 from 1,195 at June 30, 2017, an increase of 7.7%.
We have achieved significant revenue growth in recent periods. Our revenue grew to $59.1 million and $119.0 million during the three and six months ended June 30, 2018, respectively, from $49.4 million and $101.3 million during the three and six months ended June 30, 2017, respectively. We
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incurred net losses of $21.8 million and $31.4 million during the three and six months ended June 30, 2018, respectively, compared to $10.2 million and $16.0 million during the three and six months ended June 30, 2017, respectively.
As an “emerging growth company,” the Jumpstart Our Business Startups Act allows us to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We will no longer be able to take advantage of this exemption beginning on December 31, 2018, when we will be deemed a large accelerated filer and, as a result, cease to be an “emerging growth company.”
Key Factors Affecting Our Performance
Generate Growth From Existing Customers. Wdesk can exhibit a powerful network effect within an enterprise, meaning that the usefulness of our platform attracts additional users and more data. As more employees in an enterprise use Wdesk, additional opportunities for collaboration and automation drive demand among their colleagues for add-on seats. Expansion within current customers includes adding users for both existing solutions and new use cases.
Pursue New Customers. Our first software solution enabled customers to streamline and automate their SEC regulatory filing process. In 2013, we began expanding into additional markets that were faced with managing large, complex processes with many contributors and disparate sets of business data. We now sell to new customers in the areas of finance and accounting, risk and compliance, audit and internal controls, and performance and management reporting. We intend to continue to build our sales and marketing organization and leverage our brand equity to attract new customers.
Offer More Solutions. We intend to introduce new solutions to continue to meet growing demand for our Wdesk platform. Our close and trusted relationships with our customers are a source for new use cases, features and solutions. We have a disciplined process for tracking, developing and releasing new solutions that are designed to have immediate, broad applicability; a strong value proposition; and a high return on investment for both Workiva and our customers. Our advance planning team assesses customer needs, conducts industry-based research and defines new markets. This vetting process involves our sales, product marketing, customer success, professional services, research and development, finance and senior management teams.
Expand Across Enterprises. Our success in delivering multiple solutions has created demand from customers for a broader-based, enterprise-wide Wdesk platform. In response, we have been improving our technology and realigning sales and marketing to capitalize on our growing enterprise-wide opportunities. We believe this expansion will add seats and revenue and continue to support our high revenue retention rates. However, we expect that enterprise-wide deals will be larger and more complex, which tend to lengthen the sales cycle.
Add Partners. We continue to add partners. Our consulting and accounting partners offer a broader range of services that leverage the capabilities of Wdesk. Our technology partners enable data connections and process integrations to further streamline critical business functions as we capitalize on growing Wdesk demand for broader-based, enterprise-wide opportunities.
Investment in growth. We plan to continue to invest in the development of our Wdesk platform to enhance our current offerings and build new features. In addition, we expect to continue to invest in our sales, marketing, professional services and customer success organizations to drive additional revenue and support the needs of our growing customer base. Investments we make in our sales and marketing and research and development organizations will occur in advance of experiencing any benefits from such investments. As a result, we expect our total operating expenses to continue to increase.
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Seasonality. Our revenue from professional services has some degree of seasonality. Many of our customers employ our professional services just before they file their Form 10-K, often in the first calendar quarter. As our non-SEC offerings continue to grow, we expect our professional services revenue to continue to become less seasonal. Our sales and marketing expense also has some degree of seasonality. Sales and marketing expense is generally higher in the third quarter since we hold our annual user conference in September. In addition, the timing of the payments of cash bonuses to employees during the first and fourth calendar quarters may result in some seasonality in operating cash flow.
Key Performance Indicators
Three months ended June 30,Six months ended June 30,
2018201720182017
(dollars in thousands)
Financial metrics
Total revenue$59,130 $49,391 $119,036 $101,295 
Percentage increase in total revenue19.7 %14.8 %17.5 %15.7 %
Subscription and support revenue$48,837 $40,980 $95,307 $80,520 
Percentage increase in subscription and support revenue19.2 %17.2 %18.4 %17.5 %
Subscription and support as a percent of total revenue82.6 %83.0 %80.1 %79.5 %

As of June 30,
20182017
Operating metrics
Number of customers3,222 2,908 
Subscription and support revenue retention rate95.6%  96.1%  
Subscription and support revenue retention rate including add-ons106.9%  106.0%  
Annual contract value $100k+366 275 
Annual contract value $150k+161 121 

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.
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Our subscription and support revenue retention rate was 95.6% at the June 2018 measurement date, down from 96.1% as of June 2017. 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 106.9% at the June 2018 measurement date, up from 106.0% as of June 2017. The larger transactions pursued by our enterprise sales team involve longer and more complex sales cycles.
Revenue retention rates have been calculated based on ASC 605. See Note 1 to our condensed consolidated financial statements for additional information.
Annual contract value. Our annual contract value (“ACV”) for each customer is calculated by annualizing the subscription and support revenue recognized during each quarter.
Components of Results of Operations
Revenue
We generate revenue through the sale of subscriptions to our cloud-based software and the delivery of professional services. We serve a wide range of customers in many industries, and our revenue is not concentrated with any single customer or small group of customers. For the six months ended June 30, 2018 and 2017, no single customer represented more than 1% 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 and partners. We also identify some sales opportunities with existing customers through our customer success and professional services teams.
Our customer contracts typically range in length from 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. We plan to convert a substantial majority of our remaining quarterly contracts to annual terms over the next nine months. In addition, we continue to offer limited incentives for customers to enter into contract terms of more than one year, typically for terms of two or three years.
Subscription and Support Revenue. We recognize subscription and support revenue on a ratable basis over the contract term beginning on the date that our service is made available to the customer. Amounts that are invoiced are initially recorded as deferred revenue.
Professional Services Revenue. We believe our professional services facilitate the sale of our subscription service to certain customers. To date, most of our professional services have consisted of document set up, XBRL tagging, and consulting with our customers on business processes and best practices for using Wdesk.  Our professional services are not required for customers to utilize our solution. We recognize revenue for document set ups when the service is complete and control has transferred to the customer. Revenues from XBRL tagging and consulting services are recognized as the services are performed.
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Cost of Revenue
Cost of revenue consists primarily of personnel and related costs directly associated with our professional services, customer success teams and training personnel, including salaries, benefits, bonuses and stock-based compensation; the costs of contracted third-party vendors; the costs of cloud infrastructure services by our customers; and information technology costs and facility costs. Costs of cloud infrastructure services 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 stock-based compensation. Other costs included in this expense are marketing and promotional events, our annual user conference, online marketing, product marketing, information technology costs and facility costs. Sales commissions paid where the amortization period is one year or less are expensed as incurred. All other sales commissions are considered incremental costs of obtaining a contract with a customer and are deferred and amortized on a straight-line basis over a period of benefit that we have determined to be three years.
Research and Development Expenses
Research and development expenses consist primarily of personnel and related costs, including salaries, benefits, bonuses, and stock-based compensation; costs of cloud infrastructure services by our developers; information technology costs; and facility costs.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel and related costs for our executive, finance and accounting, legal, human resources, and administrative personnel, including salaries, benefits, bonuses, and stock-based compensation; legal, accounting, and other professional service fees; other corporate expenses; information technology costs; and facility costs.
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Results of Operations
The following table sets forth selected consolidated statement of operations data for each of the periods indicated:
Three months ended June 30,Six months ended June 30,
2018201720182017
(in thousands)
Revenue
Subscription and support$48,837 $40,980 $95,307 $80,520 
Professional services10,293 8,411 23,729 20,775 
Total revenue59,130 49,391 119,036 101,295 
Cost of revenue
Subscription and support(1)
8,637 7,758 17,439 15,395 
Professional services(1)
7,659 6,528 15,368 13,109 
Total cost of revenue16,296 14,286 32,807 28,504 
Gross profit42,834 35,105 86,229 72,791 
Operating expenses
Research and development(1)
20,718 16,239 40,845 31,775 
Sales and marketing(1)
22,252 19,787 43,258 38,500 
General and administrative(1)
21,654 8,943 33,422 18,364 
Total operating expenses64,624 44,969 117,525 88,639 
Loss from operations(21,790)(9,864)(31,296)(15,848)
Interest expense(449)(475)(899)(930)
Other income, net 492 176 835 788 
Loss before provision for income taxes(21,747)(10,163)(31,360)(15,990)
Provision for income taxes 21 33 26 42 
Net loss$(21,768)$(10,196)$(31,386)$(16,032)

(1)  Stock-based compensation expense included in these line items was as follows:
Three months ended June 30,Six months ended June 30,
2018201720182017
(in thousands) 
Cost of revenue
Subscription and support$228 $178 $399 $318 
Professional services146 100 296 200 
Operating expenses
Research and development1,495 472 2,516 965 
Sales and marketing1,440 694 2,553 1,353 
General and administrative7,156 2,953 10,606 5,700 
Total stock-based compensation expense$10,465 $4,397 $16,370 $8,536 

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The following table sets forth our consolidated statement of operations data as a percentage of revenue for each of the periods indicated:
Three months ended June 30,Six months ended June 30,
2018201720182017
Revenue
Subscription and support82.6 %83.0 %80.1 %79.5 %
Professional services17.4  17.0  19.9  20.5  
Total revenue100.0  100.0  100.0  100.0  
Cost of revenue
Subscription and support14.6  15.7  14.7  15.2  
Professional services13.0  13.2  12.9  12.9  
Total cost of revenue27.6  28.9  27.6  28.1  
Gross profit72.4  71.1  72.4  71.9  
Operating expenses
Research and development35.0  32.9  34.3  31.4  
Sales and marketing37.6  40.1  36.3  38.0  
General and administrative36.6  18.1  28.1  18.1  
Total operating expenses109.2  91.1  98.7  87.5  
Loss from operations(36.8) (20.0) (26.3) (15.6) 
Interest expense(0.8) (1.0) (0.8) (0.9) 
Other income, net 0.8  0.4  0.7  0.8  
Loss before provision for income taxes(36.8) (20.6) (26.4) (15.7) 
Provision (benefit) for income taxes —  0.1  —  —  
Net loss(36.8)%(20.7)%(26.4)%(15.7)%

Comparison of Three and Six Months Ended June 30, 2018 and 2017 
Revenue
Three months ended June 30,Six months ended June 30,
20182017% Change20182017% Change
(dollars in thousands)
Revenue
Subscription and support$48,837 $40,980 19.2%  $95,307 $80,520 18.4%  
Professional services10,293 8,411 22.4%  23,729 20,775 14.2%  
Total revenue$59,130 $49,391 19.7%  $119,036 $101,295 17.5%  

Total revenue increased $9.7 million for the three months ended June 30, 2018 compared to the same quarter a year ago due primarily to a $7.9 million increase in subscription and support revenue. Of the total gain in subscription and support revenue, 50.6% represented revenue from new customers acquired after June 30, 2017 and 49.4% represented revenue from existing customers at or prior to June 30, 2017. The total number of our customers expanded 10.8% from June 30, 2017 to June 30, 2018.
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Growth in professional services revenue was attributable primarily to an increase in XBRL tagging services for both new and existing customers.
Total revenue increased $17.7 million for the six months ended June 30, 2018 compared to the same period a year ago due primarily to a $14.8 million increase in subscription and support revenue. Of the total gain in subscription and support revenue, 44.7% represented revenue from new customers acquired after December 31, 2017 and 55.3% represented revenue from existing customers at or prior to June 30, 2018. Growth in professional services revenue was attributable primarily to an increase in XBRL tagging services. Professional services revenue increased at a slower rate than subscription and support revenue for the six months ended June 30, 2018 compared to the same period a year ago. As our customers become familiar with our platform, they typically become more self sufficient and require fewer professional services. We expect the revenue growth rate from subscription and support to continue to outpace revenue growth from professional services on an annual basis.
Adoption of ASC 606 caused recognition of professional services revenue to be $1.8 million lower for the first six months of 2018 than what would have been recognized under the legacy standard. Under ASC 605, revenue from subscription and support and professional services for the first six months of 2018 would have been $94.7 million and $25.5 million, respectively, which represents increases of 17.6% and 23.0%, respectively, over the same period a year ago. The adoption of ASC 606 did not have a significant impact on revenue recognized during the quarter ended June 30, 2018. See Note 1 to our condensed consolidated financial statements for a breakdown of revenue for the current period under ASC 605.
Cost of Revenue
Three months ended June 30,Six months ended June 30,
20182017% Change20182017% Change
(dollars in thousands)
Cost of revenue
Subscription and support$8,637 $7,758 11.3%  $17,439 $15,395 13.3%  
Professional services7,659 6,528 17.3%  15,368 13,109 17.2%  
Total cost of revenue$16,296 $14,286 14.1%  $32,807 $28,504 15.1%  

Cost of revenue increased $2.0 million during the three months ended June 30, 2018 versus the same quarter a year ago, due primarily to an increase in headcount, employee compensation and benefits of $1.5 million and a $0.6 million rise in the cost of cloud infrastructure services to support our expanding customer base.
Cost of revenue increased $4.3 million during the six months ended June 30, 2018 compared to the same period a year ago, due primarily to an increase in headcount, employee compensation and benefits of $3.1 million and a $0.9 million rise in the cost of cloud infrastructure services to support our expanding customer base.
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Operating Expenses
Three months ended June 30,Six months ended June 30,
20182017% Change20182017% Change
(dollars in thousands)
Operating expenses
Research and development$20,718 $16,239 27.6%  $40,845 $31,775 28.5%  
Sales and marketing22,252 19,787 12.5%  43,258 38,500 12.4%  
General and administrative21,654 8,943 142.1%  33,422 18,364 82.0%  
Total operating expenses$64,624 $44,969 43.7%  $117,525 $88,639 32.6%  

Research and Development
Research and development expenses increased $4.5 million in the three months ended June 30, 2018 compared to the same quarter a year ago due primarily to $3.6 million in higher cash-based compensation, benefits, and travel costs and additional stock-based compensation of $1.0 million. We continue to dedicate resources to developing the next generation of Wdesk, which has resulted in higher headcount in research and development.
Research and development expenses increased $9.1 million in the six months ended June 30, 2018 compared to the same period a year ago due partially to higher cash-based compensation, benefits, and travel costs of $6.9 million and additional stock-based compensation of $1.6 million.
Sales and Marketing
Sales and marketing expenses increased $2.5 million during the three months ended June 30, 2018 compared to the three months ended June 30, 2017 due primarily to $1.6 million in higher cash-based compensation, benefits, and travel costs and additional stock-based compensation of $0.7 million.
Sales and marketing expenses increased $4.8 million during the six months ended June 30, 2018 compared to the same period a year ago due partially to higher cash-based compensation, benefits, and travel costs of $3.2 million and additional stock-based compensation of $1.2 million.
General and Administrative
General and administrative expenses increased $12.7 million during the three months ended June 30, 2018 compared to the same quarter a year ago due primarily to higher cash-based compensation, benefits, and travel costs of $8.3 million and additional stock-based compensation of $4.2 million. In the second quarter of 2018, we recorded an additional $5.9 million and $3.6 million of cash-based and equity-based compensation, respectively, pursuant to a separation agreement with our former CEO. The remaining increase in personnel-related costs was driven primarily by a rise in headcount to support the growth of our business and regulatory compliance. The remaining increase in stock-based compensation was driven primarily by restricted stock grants to certain executive officers in February 2018 that cliff vest after three years.
General and administrative expenses increased $15.1 million during the six months ended June 30, 2018 compared to the same period a year ago. This increase was due primarily to $10.0 million in higher cash-based compensation, benefits, and travel costs and $4.9 million in additional stock-based compensation. In the second quarter of 2018, we recorded an additional $5.9 million and $3.6 million of cash-based and equity-based compensation, respectively, pursuant to a separation agreement with our former CEO. The remaining increase in personnel-related costs was driven primarily by a rise in headcount to support the growth of our business and regulatory compliance. The remaining increase in
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stock-based compensation was driven primarily by restricted stock grants to certain executive officers in February 2018 that cliff vest after three years.
Non-Operating Income (Expenses)

Three months ended June 30,Six months ended June 30,
2018201720182017
(dollars in thousands)
Interest expense$(449)$(475)$(899)$(930)
Other income, net 492 176 835 788 

Interest Expense and Other Income, Net
Interest expense remained relatively flat during the three and six months ended June 30, 2018 compared to the same period a year ago.
Other income, net increased during the three months ended June 30, 2018 compared to the same period a year ago due primarily to gains on foreign currency transactions.
Other income, net increased during the six months ended June 30, 2018 compared to the same period a year ago due primarily to increases in interest income and gains on foreign currency transactions partially offset by a reduction of government grant income from a training reimbursement program.
Liquidity and Capital Resources
Three months ended June 30,Six months ended June 30,
2018201720182017
(in thousands)
Cash flow (used in) provided by operating activities $(2,546)$3,982 $(763)$6,562 
Cash flow used in investing activities (7,657)(493)(7,230)(1,735)
Cash flow provided by financing activities 2,527 4,211 5,332 3,784 
Net (decrease) increase in cash and cash equivalents, net of impact of exchange rates $(7,761)$7,782 $(2,838)$8,705 

As of June 30, 2018, our cash, cash equivalents and marketable securities totaled $80.7 million. To date, we have financed our operations primarily through the proceeds of our initial public offering, private placements of equity, debt that was settled in equity 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 in the future. As a result, we may require additional capital resources to continue to grow our business. We believe that current cash and cash equivalents, cash flows from operating activities, availability under our existing credit facility and the ability to offer and sell securities pursuant to our shelf registration statement will be sufficient to fund our operations for at least the next twelve months.
In August 2014, we entered into a $15.0 million credit facility with Silicon Valley Bank. 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. The credit facility is secured by all of our
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assets and has first priority over our other debt obligations. The credit facility contains financial and other covenants, including 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. The credit facility has a variable interest rate equal to the bank’s prime lending rate with interest payable monthly and the principal balance due at maturity. The credit facility matures in August 2020, and no amount was outstanding under the credit facility as of June 30, 2018.
We have filed a universal shelf registration statement on Form S-3 with the SEC, which became effective August 10, 2017. Under the shelf registration statement, we may offer and sell, from time to time in the future in one or more public offerings, our Class A common stock, preferred stock, debt securities, warrants, rights and units. The aggregate initial offering price of all securities sold by us under the shelf registration statement will not exceed $250.0 million.
Operating Activities
For the three months ended June 30, 2018, cash used in operating activities was $2.5 million. The primary factors affecting our operating cash flows during the period were our net loss of $21.8 million, adjusted for non-cash charges of $0.9 million for depreciation and amortization of our property and equipment and intangible assets, $10.5 million of stock-based compensation expense (including $3.6 million pursuant to a separation agreement with our former CEO), and a $7.9 million net change in operating assets and liabilities. Included in our net loss during the second quarter of 2018 was a $6.6 million cash payment made to our former CEO pursuant to a separation agreement. The primary drivers of the changes in operating assets and liabilities were a $8.7 million increase in deferred revenue, a $4.6 million increase in accrued expenses and other liabilities partially offset by a $2.0 million increase in deferred commissions, a $2.0 million increase in prepaid expenses and a $1.3 million decrease in accounts payable. Customer growth and contract renewals for longer terms accounted for most of the increase in deferred revenue. We offer limited incentives for customers to enter into contract terms for more than one year. Deferred commissions increased primarily due to additional payments made to our sales force related to the direct and incremental costs of obtaining a customer contract. The increase in accrued expenses and other liabilities and decrease in accounts payable were primarily attributable to the timing of our cash payments. The increase in prepaid expenses was attributable primarily to an upfront payment for our annual user conference.
For the three months ended June 30, 2017, cash provided by operating activities was $4.0 million. The primary factors affecting our operating cash flows during the period were our net loss of $10.2 million, adjusted for non-cash charges of $0.9 million for depreciation and amortization of our property and equipment and intangible assets and $4.4 million of stock-based compensation. The primary drivers of the changes in operating assets and liabilities were a $14.4 million increase in deferred revenue and a $2.3 million increase in accrued expenses and other liabilities partially offset by a $3.2 million increase in accounts receivable, a $0.9 million increase in other receivables, a $2.8 million increase in prepaid expenses and a $0.7 million decrease in accounts payable. Short-term deferred revenue from subscription and support contracts increased $12.2 million from March 31, 2017 to June 30, 2017. Long-term deferred revenue from subscription and support contracts increased by $1.6 million from March 31, 2017 to June 30, 2017. In addition, deferred revenue from professional services increased by $0.8 million from March 31, 2017 to June 30, 2017. New and existing customer sales along with contract renewals for longer terms accounted for most of the increase in deferred revenue. The conversion of quarterly contracts to annual terms positively impacts our operating cash flow. The increase in accrued expenses and other liabilities was attributable to the timing of our payment of annual bonuses resulting in an increase of $2.5 million partially offset by a payment of sales tax of $0.4 million. The increase in accounts receivable and decrease in accounts payable were primarily attributable to the timing of our billings, cash collections, and cash payments. The increase in other receivables was primarily due to advance payments of sales taxes. The
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increase in prepaid expenses was attributable primarily to an upfront payment for our annual user conference.
For the six months ended June 30, 2018, cash used in operating activities was $0.8 million. The primary factors affecting our operating cash flows during the period were our net loss of $31.4 million, adjusted for non-cash charges of $1.7 million for depreciation and amortization of our property and equipment and intangible assets, $16.4 million of stock-based compensation expense (including $3.6 million pursuant to a separation agreement with our former CEO), and a $12.5 million net change in operating assets and liabilities. Included in our net loss during the six months ended June 30, 2018 was a $6.6 million cash payment made to our former CEO pursuant to a separation agreement.  The primary drivers of the changes in operating assets and liabilities were a $6.4 million increase in deferred revenue, a $3.9 million increase in accrued expenses and other liabilities, a $1.4 million increase in accounts payable and a $6.3 million decrease in accounts receivable partially offset by a $3.7 million increase in deferred commissions and a $1.8 million increase in prepaid expenses. Customer growth and contract renewals for longer terms accounted for most of the increase in deferred revenue. We offer limited incentives for customers to enter into contract terms for more than one year. The increase in deferred commissions was primarily due to additional payments made to our sales force related to the direct and incremental costs of obtaining a customer contract. The increases in accounts payable and accrued expenses and other liabilities and decrease in accounts receivable were primarily attributable to the timing of our billings, cash collections, and cash payments. The increase in prepaid expenses was attributable primarily to an upfront payment for our annual user conference.
For the six months ended June 30, 2017, cash provided by operating activities was $6.6 million. The primary factors affecting our operating cash flows during the period were our net loss of $16.0 million, adjusted for non-cash charges of $1.8 million for depreciation and amortization of our property and equipment and intangible assets, $8.5 million of stock-based compensation, and $0.7 million for recognition of other income from government grants. The primary drivers of the changes in operating assets and liabilities were a $18.5 million increase in deferred revenue partially offset by a $0.5 million increase in accounts receivable, a $2.0 million increase in prepaid expenses and a $3.6 million decrease in accrued expenses and other liabilities. Short-term deferred revenue from subscription and support contracts increased $16.7 million from December 31, 2016 to June 30, 2017. Long-term deferred revenue from subscription and support contracts increased by $2.6 million from December 31, 2016 to June 30, 2017. Deferred revenue from professional services decreased by $0.5 million from December 31, 2016 to June 30, 2017. The increase in accounts receivable was attributable primarily to the timing of our billings and cash collections. The increase in prepaid expenses was attributable primarily to an upfront payment for our annual user conference. The decrease in accrued expenses and other liabilities was attributable primarily to the timing of our cash payments, including payment of annual bonuses.
Investing Activities
Cash used in investing activities of $7.7 million for the three months ended June 30, 2018 was due primarily to $11.3 million in purchases of marketable securities partially offset by proceeds of $3.9 million from maturities of marketable securities.
Cash used in investing activities of $0.5 million for the three months ended June 30, 2017 was due primarily to $2.3 million for the purchase of marketable securities partially offset by proceeds of $1.9 million from maturities of marketable securities.
Cash used in investing activities of $7.2 million for the six months ended June 30, 2018 was due primarily to $11.3 million in purchases of marketable securities partially offset by proceeds of $4.4 million from maturities of marketable securities.
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Cash used in investing activities of $1.7 million for the six months ended June 30, 2017 was due primarily to $6.4 million for the purchase of marketable securities partially offset by proceeds of $4.9 million from maturities of marketable securities.
Financing Activities
Cash provided by financing activities of $2.5 million for the three months ended June 30, 2018 was due primarily to $3.3 million in proceeds from option exercises partially offset by $0.5 million in taxes paid related to the net share settlements of stock-based compensation awards and $0.3 million in payments on capital lease and financing obligations.
Cash provided by financing activities of $4.2 million for the three months ended June 30, 2017 was due primarily to $4.7 million in proceeds from option exercises, partially offset by $0.5 million in payments on capital lease and financing obligations.
Cash provided by financing activities of $5.3 million for the six months ended June 30, 2018 was due primarily to $6.4 million in proceeds from option exercises and $1.4 million in proceeds from shares issued in connection with our employee stock purchase plan partially offset by $1.9 million in taxes paid related to the net share settlements of stock-based compensation awards and $0.6 million in payments on capital lease and financing obligations.
Cash provided by financing activities of $3.8 million for the six months ended June 30, 2017 was due primarily to $5.5 million in proceeds from option exercises, partially offset by $0.9 million in taxes paid related to the net share settlements of stock-based compensation awards and an aggregate $0.8 million in repayments on long-term debt and payments on capital lease and financing obligations.
Contractual Obligations and Commitments
There were no material changes in our contractual obligations and commitments from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on February 22, 2018 except those related to operating lease obligations.
The following table represents our contractual obligations as of June 30, 2018 for operating lease obligations:
Payments due by period
TotalLess than 1 year1-3 years3-5 yearsMore than 5 years
(in thousands)
Operating lease obligations relating to office facilities$28,347 $2,131 $6,787 $6,142 $13,287 

Off-Balance Sheet Arrangements
During all periods presented, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As a result, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in those types of relationships.
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Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, income taxes and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.
Except for the accounting policies for revenue recognition, deferred revenue, customer deposits and deferred commissions that were updated as a result of adopting ASU 2014-09, there have been no significant changes to our critical accounting policies and estimates as described in the financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on February 22, 2018, that have had a material impact on our condensed consolidated financial statements and related notes.
Revenue Recognition
We generate revenue through the sale of subscriptions to our cloud-based software and the delivery of professional services. Revenues are recognized when control of these services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.
We determine revenue recognition through the following steps:
• Identification of the contract, or contracts, with a customer
• Identification of the performance obligations in the contract
• Determination of the transaction price
• Allocation of the transaction price to the performance obligations in the contract
• Recognition of revenue when, or as, we satisfy a performance obligation
Revenue is reported net of sales and other taxes collected from customers to be remitted to government authorities.
Subscription and Support Revenue 
We recognize subscription and support revenue on a ratable basis over the contract term beginning on the date that our service is made available to the customer. Our subscription contracts are generally three to 36 months in duration, are billed in advance and are non-cancelable. We consider the access to Wdesk and related support services in a customer contract to be a series of distinct services which comprise a single performance obligation because they are substantially the same and have the same pattern of transfer.
Professional Services Revenue and Customer Options
Professional services revenues primarily consist of fees for document set up, XBRL tagging, and consulting with our customers on business processes and best practices for using Wdesk. We have determined that an agreement to purchase these professional services constitutes an option to purchase services in accordance with ASC 606 rather than an agreement that creates enforceable rights and obligations because of the customer's contractual right to cancel services that have not yet been used. In the limited case of agreements where we determined that the option provides the customer with a material right, we allocate a portion of the transaction price to the material right. Professional service agreements that do not contain a material right are accounted for when the customer exercises its option to purchase additional services.
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Revenue is recognized for document set ups when the service is complete and control has transferred to the customer. Revenues from XBRL tagging and consulting services are recognized as the services are performed.
Contracts with Multiple Performance Obligations
Some of our contracts with customers contain multiple performance obligations in the event that we determine a material right exists. For these contracts, we account for the individual performance obligations separately when they are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. If these criteria are not met, the promised services are accounted for as a combined performance obligation. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. We determine the standalone selling prices based on our overall pricing objectives, taking into consideration market conditions and entity-specific factors, including the size of our arrangements, length of term, customer demographics and the numbers and types of users within our arrangements. 
Deferred Revenue
We typically invoice our customers for subscription and support 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 non-cancelable services starting in future periods are included in accounts receivable and deferred revenue. 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.
Customer Deposits
As an agreement to purchase professional services constitutes a customer option, fees received in advance of these services being performed are considered customer deposits and are included in accrued expenses and other current liabilities on the condensed consolidated balance sheet. Unpaid invoice amounts for these professional services starting in future periods are excluded from accounts receivable and accrued expenses and other current liabilities.
Deferred Commissions
Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions paid where the amortization period is one year or less are expensed as incurred. All other sales commissions are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be three years. We determined the period of benefit by taking into consideration our standard contract terms and conditions, rate of technological change and other factors. Amortization expense is included in sales and marketing expenses in the accompanying condensed consolidated statements of operations.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk 
For quantitative and qualitative disclosures about market risk, see “Item 7A., Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the year ended December 31, 2017. Our exposures to market risk have not changed materially since December 31, 2017.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our principal executive officer and principal financial officer, our management conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. Our disclosure controls and procedures are intended to provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on management’s evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are designed to, and are effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our most recently completed fiscal quarter. Based on that evaluation, our principal executive officer and principal financial officer concluded that there has not been any material change in our internal control over financial reporting during the quarter covered by this report that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Part II. Other Information
Item 1. Legal Proceedings
From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that in the opinion of our management, if determined adversely to us, would have a material adverse effect on our business, financial condition, operating results or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our 2017 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. Other than the items noted below, there have been no material changes during fiscal 2018 to the risk factors that were included in the Form 10-K.
Risks Related to Our Business and Industry
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 have begun the process of transitioning customers to the next generation of Wdesk. In addition, we focus on enhancing the features of our Wdesk platform to improve its utility for 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, new features or solutions. If we fail to successfully complete the transition to the next generation of Wdesk or to complete and introduce platform enhancements, or if our customers experience difficulties using our platform as a result of the transition or of the implementation of these enhancements, our revenue retention and revenue growth may be adversely affected. 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.
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. In addition, in order to maintain our high levels of customer satisfaction and retention, we may need to provide additional support to customers as they transition to the next generation of Wdesk. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for support services without incurring additional expenses or at
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all. 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.
Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States, including those related to revenue recognition.
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.
In May 2014, the FASB issued guidance codified in ASC 606, Revenue Recognition - Revenue from Contracts with Customers (ASU 2014-09), which amends the guidance in former ASC 605, Revenue Recognition. We adopted this new standard on the effective date of January 1, 2018, utilizing the modified retrospective method. The application of this guidance resulted in timing and presentation changes affecting our consolidated balance sheet and statement of operations, including acceleration of our professional services revenue for certain contracts; longer deferral of the incremental costs of obtaining a contract; and increases in accounts receivable, deferred revenue and accrued expenses and other current liabilities. We have implemented changes to our accounting processes, internal controls and disclosures to support the new standard. See Note 1 to our accompanying condensed consolidated financial statements for information about ASU 2014-09.
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Item 2. Unregistered Sales of Securities and Use of Proceeds
Sales of Unregistered Securities
Not applicable.
Use of Proceeds from Public Offerings of Common Stock
There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act on December 12, 2014.
Issuer Purchases of Equity Securities
The following table provides information about purchases of shares of our Class A Common Stock during the three months ended June 30, 2018 related to shares withheld upon vesting of restricted stock awards and units for tax withholding obligations:
Date
Total Number of Shares Purchased (1)
Average Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced Program
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under Program
April 2018— — — — 
May 201823,232 $22.35 — — 
June 2018— — — — 
Total23,232 $22.35 — — 
(1) Total number of shares delivered to us by employees to satisfy the mandatory tax withholding requirement upon vesting of stock-based compensation awards.

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Item 6. Exhibits
The following exhibits are being filed herewith or incorporated by reference herein:
Exhibit
Number
Description
10.1
Separation Agreement and Release, dated June 12, 2018, between the Company and Matthew M. Rizai, incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 13, 2018.
10.2
Workiva Inc. Amended and Restated 2014 Equity Incentive Plan, incorporated by reference from Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 13, 2018.
12.1
31.1
31.2
32.1
32.2
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
101.LABXBRL Taxonomy Extension Label Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.


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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 7th day of August, 2018.
WORKIVA INC.
By:/s/ Martin J. Vanderploeg, Ph.D. 
Name:Martin J. Vanderploeg, Ph.D. 
Title:President and Chief Executive Officer
By:/s/ J. Stuart Miller
Name:J. Stuart Miller
Title:Executive Vice President and Chief Financial Officer
By:/s/ Jill Klindt
Name:Jill Klindt
Title:Senior Vice President, Treasurer and Chief Accounting Officer


S-1
Document

Exhibit 12.1
WORKIVA INC.

Computation of Ratio of Earnings to Fixed Charges
(in thousands)


Six months ended June 30,
Year ended December 31,
2018 2017 2016 2015 2014 2013 
Earnings
Loss before provision for income taxes
$(31,360)$(44,365)$(43,953)$(43,406)$(41,122)$(29,544)
Fixed charges1,836 3,414 3,176 3,257 3,106 1,211 
Total earnings as defined$(29,524)$(40,951)$(40,777)$(40,149)$(38,016)$(28,333)
Fixed charges
Interest expense (1)
$899 $1,845 $1,875 $2,025 $2,044 $366 
Estimated interest component of rental expense (2)
937 1,569 1,301 1,232 1,062 845 
Total fixed charges as defined
$1,836 $3,414 $3,176 $3,257 $3,106 $1,211 
Ratio of earnings to fixed charges— — — — — — 
Deficiency of earnings available to cover fixed charges$(31,360)$(44,365)$(43,953)$(43,406)$(41,122)$(29,544)


(1) Interest expense includes amortization expense for debt issuance costs.
(2) One-third of net rent expense is the portion deemed representative of the interest factor.


Document

CERTIFICATION UNDER SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Martin J. Vanderploeg, Ph.D., certify that:
1.  I have reviewed this Quarterly Report on Form 10-Q of Workiva Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state 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;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, 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.  The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a.  Designed such disclosure controls and procedures, or caused such disclosure controls and 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.  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.  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

d.  Disclosed in this report any change in the registrant's internal control over financial reporting that 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

5.  The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of 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):

a.  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date: August 7, 2018
/s/ Martin J. Vanderploeg, Ph.D.
Martin J. Vanderploeg, Ph.D.
President and Chief Executive Officer
(Principal Executive Officer)


Document

CERTIFICATION UNDER SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, J. Stuart Miller, certify that:
1.  I have reviewed this Quarterly Report on Form 10-Q of Workiva Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state 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;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, 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.  The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a.  Designed such disclosure controls and procedures, or caused such disclosure controls and 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.  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.  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

d.  Disclosed in this report any change in the registrant's internal control over financial reporting that 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

5.  The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of 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):

a.  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date: August 7, 2018
/s/ J. Stuart Miller
J. Stuart Miller
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)


Document

CERTIFICATION UNDER SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
I, Martin J. Vanderploeg, President 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 Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2018 (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: August 7, 2018
/s/ Martin J. Vanderploeg, Ph.D.
Martin J. Vanderploeg, Ph.D.
President and Chief Executive Officer
(Principal Executive Officer)


Document

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 Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2018 (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: August 7, 2018
/s/ J. Stuart Miller
J. Stuart Miller
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)