Workiva Inc (NYSE:WK) Plots To Cash In On Tightening Regulations

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When Workiva Inc (NYSE:WK) reported its 1Q2016 earnings, the results turned out better than internal guidance and now the management wants you to believe that the future is even better. According to a press release that Workiva sent out on July 14, several banks are turning to its Wdesk cloud to cope with the tightening regulatory environment.

Since the recession of 2008/9, regulators have increased their scrutiny of the financial sector. The idea is to ensure that companies that are systematically important to the economy, especially financial institutions, are capable of surviving even the roughest economic storms. It should be noted that what makes banks systemically important to the economy is the fact that they are allowed by regulators to loan out money they do not actually have, so any loan not paid back becomes a systemic danger.

In any case the heightened regulations have complicated matters for players in the financial sector with issues that include risk processes and reporting. For Workiva, the crisis has created a business opportunity. The company is telling banks and other financial institutions that their headache in trying to comply with numerous and often complex regulatory requirements is reduced when they use its Wdesk cloud.

According to Workiva, the banks that have put Wdesk to use have no regrets. For instance, they have seen remarkable improvement in how they deal with risk-related issues to ensure that they remain fully compliant with the regulations. Workiva’s Wdesk supports productivity, collaboration and a host of other enterprise functions.

Banks such as First Merit Corporation, Zions Bancorporation and Umpqua Holdings are already using Wdesk to streamline and automate their risk processes.

Financial performance

For investors, the focus is on how tapping into the growing regulatory environment can transform Workiva’s financial performance. The company provided a hint of what investors can expect from its efforts when it posted a double-digit topline growth in Q1.

Workiva generated revenue of $44.6 million in 1Q2016, an increase of 27% over the same period a year ago. Adjusted EPS loss in the latest quarter was $0.21 compared to EPS loss of $0.13 in the year-ago period. It is worth noting that there were more outstanding shares in the latest quarter than last year.

2Q2016 guidance

Workiva plans to release its 2Q2016 scorecard on August 3 after which it will hold a conference call with investors and analysts to discuss the results. At the release of Q1 results, the company guided Q2 revenue in the range of $41.7 to $42.2 million. Adjusted EPS loss was guided in the band of $0.34 to $0.35.

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