Company: Workiva (WK)
Business: Work is a provider of cloud-based reporting solutions with which financial and non-financial business challenges at the interface of data, process and people are to be solved. The company offers its uniform software-as-a-service or SaaS platform, which brings the financial reporting of customers. Environment, Social and Governance (ESG); and governance, risk and compliance (GRC) together in a controlled, safe, ready -to -test platform. The Workiva platform is a multi-tenant cloud software, which is used in several regions worldwide for insured reporting. The company's platform is mainly based on Amazon web services and consists of both proprietaries and open source technologies. His Workiva platform helps customers to combine and transform data from hundreds of company planning, human capital management and customer relationship management systems as well as other cloud driven providers and on-premises applications.
Market value: 4.92 billion US dollars ($ 87.46 per share)
Activist: Irenic Capital Management
Property: ~ 2.0%
Average costs: n/a
Activist comment: Irenic Capital was founded in October 2021 by Adam Katz, a former portfolio manager at Elliott Investment Management, and Andy Dodge, a former investment partner at Indaba Capital Management. Irenic is investing in public companies and working together with corporate management. So far, their activism has focused on strategic activism, spin -off recommendations and the sale of companies.
What happens
On September 29, Irenic announced that you have taken up a position of around 2% in Workiva and to request the company to improve its operational efficiency, to review strategic alternatives with the surveillance of the board, including a potential sale of the company, and to improve the governance practices of the companies, including the collapse of its stock structure of the dual classes. Irenic also asked the company to add two new board members, including Irenic Executive Krishna Korupolu, the board, and found that they did not exclude nomination directors if the two sides cannot reach an agreement.
Behind the scenes
Workiva is the leading provider of cloud-based report solutions, integrating financial reporting, sustainability management as well as governance, risk and compliance into a shared, data-integrated and testing environment. Over 40% of the company's income comes from the SEC registration service, which simplifies the regulatory submissions and other disclosures for public companies. This is a great business that serves some of the world's largest companies. 95% of the Fortune 100, 89% of the Fortune 500 and 85% of the Fortune 1000, which uses its platform, supported by around 97% customer loyalty, which has made a consistent medium growth with medium teenagers.
However, the problem for Workiva is not the quality of its business, but in its lack of profitability. Although Workiva made a profit by 2026 by 2026 and over 10 years on sales of more than 1 billion US dollars by 2026 and over 10 years. As a result, Workiva shares are currently a discount of around 25% on application software competitors such as working day And Service.
This discount and these operational challenges have attracted the attention of Irenic Capital, which disclosed a position of approx. 2% in the company and published a presentation before the Workiva Board of Directors, in which the improvement of governance, operational changes and a review of strategic alternatives are required.
Governance is a real problem with Workiva and an obvious reason for the reduced share price. Workiva is still managed like a private company, with its three founders control the company with two shares through the class structure. This has led to a staggered board with little relevant experiences and five of seven directors that have been serving since the 2014 IPO.
Irenic would like to see that the structure of the dual-class stock structure collapses and the board of directors with qualified directors, including Irenic Executive Krishna Korupolu, was disintegrated and restored. In the world of shareholder activism, this is generally synonymous with the request of a country like North Korea to convert into a democracy, but Irenic's prospects are not hopeless (more on this later).
Operatively, you will receive what you would expect from a company controlled by founders-a greatly bloated SG & A. A large part of the marginal back can be attributed to inefficiency in the company's operating model, in particular within its sales staff, since sales and marketing currently make up 43% of sales, compared to 31% on average for colleagues. This has created an estimated operating range for the calendar year 2025 of 7%, even though they had 80% gross profit margins. Saa's companies of this caliber should be able to achieve “rule of 40” goals (operational margins plus sales growth equal or over 40), an efficiency level that would be extremely accelerated for the shareholders, which Irenic has achieved according to FJ 2027.
Workiva currently has a sales growth rate of 18%, but issues an excessive amount of money to obtain the last percentage points. It should be able to maintain a double -digit sales growth with far less sales outputs, which could change the company's margin profile in itself. The combination with the extremely strong price -performance of the company proposes space for considerable profitability improvements.
Irenic explains that the board (preferably revised) should carry out a strategic review in order to pursue a sale of the company in order to determine the best risk -controlled path for the shareholders.
Workiva is a market leader in a growing company with a huge blue chip customer and without a real number two when it comes to the SEC registration service. The quality of the Workiva business should not be a lack of private and strategic interest. In fact, reports appeared in 2022 that PE companies Thoma Bravo and TPG was interested in a potential acquisition. Logical strategic acquirers include similar financial management platforms such as IntuitBörsen operator (NasdaqLSEG, Deutsche Börse), as well as software Behemoths Search as SalesforcePresent oracle And IBMEveryone could see meaningful synergies.
Comparable transactions – Smartsheet/Vista's own capital (7x returned), Cut/Thoma Bravo (8x), Aspentech/Emerson Electric (14x) and Altairengineering/Siemens (14x) – propose a 7- to 8 -fold forward turnover for financial purchasers who would be in the foreground with 1 billion US dollar sales for 2026 40% to 60%, whereby the potential for even higher bonuses in a strategic transaction would mean even higher premiums in a strategic transaction in view of the potential for significant synergies.
While Irenic's public presence in Workiva has probably aroused the interest of potential buyers, the end result can control the three founders as an effective controlled company without the consent of the controlling parties, which through a double -class structure control around 44% of the voice performance – by a two -class structure.
While such factors can often suffocate an activist campaign, there are some reasons why this situation can be different. First, this is not a founder family, but three different founders who are not necessarily aligned and may have grown apart.
Matthew Rizai resigned in June 2018 as chairman and CEO with a nice severance payment package. This and the fact that he was replaced by the co -founder Martin Vanderploeg as a CEO and did not even remain on the board shows that this may not have been as mutual as the company's press release. Jeffrey Trom reduced his tasks in the company in 2022, returned in 2023 and ended a consulting relationship in 2024. In addition, all three founders are over 65 years old and slowly sold shares. Of the three founders, only Vanderploeg is actively involved in the company as a non -managing chairman, and he has 10.6% of the total agency compared to 24.6% for Rizai and 9.2% for Trom. At the price that Irenic believes that this company could get a sale, it is hard to believe that they would not be able to receive the support of Rizai and/or Trom.
In addition, Irenic has explained that you have not ruled out the nomination directors if the two sides cannot achieve an agreement, and if this comes, we would not necessarily assume that the three founders are aligned.
Ken Squire is the founder and president of 13D monitor, an institutional research service for shareholders, and the founder and portfolio manager of the 13D Activist Fund, an investment fund that invests in an activist 13D investment.