New York City-based Eminence Capital increased its stake in Workiva (WK 0.48%) 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 (WK 0.48%) 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

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.