Why One Fund Has a $320 Million Bet on Workiva Stock Despite a 21% Share Slide
Key Points
New York City-based Eminence Capital added 1.08 million shares of Workiva in the third quarter.
The overall position value increased by $139.35 million from the previous period.
As of September 30, the fund reported holding 3.72 million shares valued at $320.52 million, making it the third-largest portfolio position.
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New York City-based Eminence Capital increased its stake in Workiva (NYSE:WK) by 1.08 million shares in the third quarter, contributing to a position value shift of about $139.35 million.
What Happened
According to a filing with the Securities and Exchange Commission dated November 14, Eminence Capital reported buying 1.08 million additional shares of Workiva (NYSE:WK) in the third quarter. This raised the fund's position to 3.72 million shares, with the stake valued at $320.52 million as of September 30, the close of the reporting period.
What Else to Know
Workiva represents 3.89% of Eminence Capital’s reportable U.S. equity AUM after the transaction, making it the fund's third-largest holding.
Top holdings after the filing:
- NASDAQ:AMZN: $340.09 million (5.0% of AUM)
- NASDAQ:GTLB: $324.92 million (4.8% of AUM)
- NYSE:WK: $320.52 million (4.7% of AUM)
- NYSE:CPNG: $303.79 million (4.5% of AUM)
- NYSE:ATMU: $294.10 million (4.3% of AUM)
As of Tuesday, Workiva shares were priced at $86.28, down 21% over the past year and well underperforming the S&P 500, which is instead up about 17%.
Company Overview
| Metric | Value |
|---|---|
| Price (as of Tuesday) | $86.28 |
| Market Capitalization | $4.84 billion |
| Revenue (TTM) | $845.52 million |
| Net Income (TTM) | ($46.80 million) |
Company Snapshot
- Workiva provides a cloud-based platform for compliance, regulatory reporting, data integration, and audit trail solutions.
- The business serves public and private companies, government agencies, and higher education institutions globally.
- It operates a subscription-based business model, generating recurring revenue from its software platform.
Workiva operates at scale within the technology sector, specializing in cloud-based software for regulatory and compliance reporting. The company leverages its robust platform to address complex data integration and collaboration needs for enterprise and institutional clients.
Foolish Take
When a fund known for concentrated, long-duration bets builds Workiva into a top-three holding while profitability improves, it’s usually worth paying attention to what the income statement is doing rather than what the stock chart has already done.
Workiva just posted third-quarter revenue of $224 million, up 21% year over year, driven by a 23% jump in subscription and support revenue. More importantly, operating leverage is finally showing up. Non-GAAP operating margin expanded to 12.7%, up sharply from 4.1% a year ago, while free cash flow margin reached roughly 20%, compared to 10% one year ago. Meanwhile, customers spending more than $500,000 annually grew 42%, a reminder that Workiva’s growth isn’t coming from small accounts churning in and out.
Against Eminence’s other large positions like Amazon and GitLab, this looks less like a speculative swing and more like a durability bet on recurring revenue and expanding margins. The stock is down about 21% over the past year, but the business fundamentals are moving in the opposite direction.
Glossary
Stake: The ownership interest or investment a fund or individual holds in a company.
Position value: The total market value of a specific investment held by an investor or fund.
Assets under management (AUM): The total market value of investments managed on behalf of clients by a fund or firm.
Reporting period: The specific time frame covered by a financial or regulatory report.
Buy (trade classification): A transaction in which an investor purchases additional shares of a security.
Holding: The amount of a particular security owned by an investor or fund.
Cloud-based platform: Software and services delivered over the internet, rather than installed locally on computers.
Regulatory reporting: The process of submitting required financial and operational information to government agencies.
Data integration: Combining data from different sources into a unified view for analysis or reporting.
Audit trail: A record that shows the sequence of activities or changes made to data or documents.
Institutional clients: Organizations such as funds, banks, or governments that invest large sums, as opposed to individual investors.
TTM: The 12-month period ending with the most recent quarterly report.
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Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, GitLab, and Workiva. The Motley Fool recommends Coupang. The Motley Fool has a disclosure policy.
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