Workiva Management Implies Company Could See Positive Cash Flow In 2016

Baird reaffirmed its Outperform rating on Workiva Inc WK and raised the price target by $3 to $18, saying that company predicts less cash burn in 2016 versus 2015, implying that the second half of 2016 will be cash flow positive.

Workiva, which offers a cloud-based platform for creating complex documents and aggregating data and content, said it will be operating cash flow positive on a NTM basis by the fourth quarter of 2017.

"Travels with management reinforced our confidence in Workiva's ability to cultivate new avenues of growth as the company continues to ramp non-SEC use-cases, which are expected to account for more than half of Bookings this year (0 percent in 2013)," analyst Steven Ashley wrote in a note.

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"Non-SEC use cases continue to gain momentum, with some notable favorable dynamics," Ashley said, including "Sarbanes-Oxley (SOX) initial deal sizes about 2x that of SEC, and management estimates SOX total available market is 3x."

"Governance, Risk, and Compliance (GRC) is a broader market, and Workiva generally sells these solutions to the same buyer as SOX. GRC use cases include Audit Management, Operational Risk Management, and Vendor Risk Management," Ashley continued.

In addition, the analyst noted that State, Local, and Education (SLEd) may see a longer-term benefit from the passage of the DATA Act, which requires governmental agencies to report using XBRL. Sales cycles tend to be longer.

Further, Ashley pointed out to management's comments there has been nearly no attrition resulting from modest price increases of 3–5 percent they are passing through to 1,800 customers this year.

At time of writing, shares of Workiva were up 0.61 percent on the day at $16.62.

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