- Achieved a record Non-GAAP operating income ahead of plan of
$1.6M compared to a loss of ($12.5M ) last year and GAAP operating loss of ($11.6M ) compared to ($26.4M ) last year. - Non-GAAP Net income Per Share of
$0.04 and GAAP Net Loss Per Share of ($0.10 ). - Continued positive Free Cash Flow of
$6.2M and 9% FCF margin.
Management Commentary
“Q3 was a milestone quarter as
"We are very pleased with the financial achievements, reaching non-GAAP profitability for the first time, reaching cash flow positive two quarters in a row and driving operational improvement despite lingering macro headwinds," said Hagit Ynon, CFO of
Third Quarter 2023 Financial Highlights:
- Revenue: Total revenue was
$67.0 million , an increase of 6% year-over-year. Subscription revenue was$62.3 million , an increase of 10% year-over-year. - Gross Margin: GAAP Gross margin was 85% compared to 79% in the third quarter of 2022 and Non-GAAP Gross margin was 85% compared to 80% in the third quarter of 2022.
- GAAP Operating Loss: was
$11.6 million , or 17% of total revenue, compared to$26.4 million , or 42% in the third quarter of 2022. - Non-GAAP Operating Income: was
$1.6 million or 2% of total revenue, compared to a loss of($12.5) million , or (20%) in the third quarter of 2022. - Earnings Per Share: Non-GAAP Net Income Per Share of
$0.04 and GAAP Net Loss Per Share of ($0.10 ) compared to a loss of ($0.14 ) and ($0.27 ) in the third quarter of 2022 respectively. - Operating Cash Flow: Net cash provided by operating activity was
$7.4 million , or 11% of total revenue, compared to($9.7) million used in operating activity or (15%) in the third quarter of 2022. - Free Cash Flow: was a positive
$6.2 million or 9% of total revenue, compared to negative($11.2) million , or (18%) in the third quarter of 2022. - Cash, Cash Equivalents,
Short-term Deposits and Long-Term Marketable Securities : were$311.5 million as ofSeptember 30, 2023 .
Third Quarter and Recent Business Highlights:
- Added 11 net new Enterprise-Wide DAP customers during the third quarter for a total of 194 DAP customers as of
September 30, 2023 , representing DAP customer count growth of 25% year-over-year. - Customers with over
$1 million in ARR grew 11% year-over-year to 39. Customers with over$100,000 in ARR grew 5% year-over-year to 539 customers as of the quarter end. - WalkMe Discovery and Data AI solutions showed continued momentum with the number of employees covered growing 85% quarter over quarter.
- Launched Propel, a program that provides partners the foundation to unlock enterprise-scale revenue streams by enhancing enablement and speeding go to market.
- Hosted Realize, the premier Digital Adoption Customer and Partner event with presentations from Nestlé, Cisco, Gap Inc., ServiceNow, and
Deloitte Consulting LLP , among others. - Launched its first ever ESG Report highlighting WalkMe’s commitment to the environment, a diverse and inclusive workforce, and governance best practices.
Financial Outlook:
For the fourth quarter of 2023, the Company currently expects:
- Revenue of
$67 to$68 million , representing a growth rate of 3% to 5% year-over-year - Non-GAAP Operating income of
$1.3 to$2.3 million
For the full year 2023, the Company currently expects:
- Revenue of
$266.1 to$267.1 million , representing a growth rate of 9% year-over-year - Non-GAAP Operating Loss of
$8.3 to$7.3 million
The section titled “Non-GAAP Financial Measures and Key Performance Indicators” below contains a description of the non-GAAP financial measures and Key Performance Indicators discussed in this press release and reconciliations between historical GAAP and non-GAAP information are contained in the tables below. The Company is unable to provide a reconciliation of non-GAAP Operating Income (Loss) to Operating Income (Loss), its most directly comparable GAAP financial measure, on a forward-looking basis without unreasonable effort, because items that impact this GAAP financial measure are not within the Company’s control and/or cannot be reasonably predicted. These items may include, but are not limited to, predicting forward-looking share-based compensation. Such information may have a significant, and potentially unpredictable, impact on the Company’s future financial results.
Throughout this press release, we provide a number of key performance indicators used by our management and often used by competitors in our industry. These and other key performance indicators are discussed in more detail in the section entitled “Non-GAAP Financial Measures and Key Performance Indicators” in this press release.
Conference Call Information:
A live webcast of the conference call will be accessible on the
Approximately one hour after completion of the live call and for at least 30 days thereafter, an archived version of the webcast will be available on the Company’s investor relations website at https://ir.walkme.com.
Supplemental Financial and Other Information:
We intend to announce material information to the public through the WalkMe Investor Relations website at ir.walkme.com,
Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page of our website.
Non-GAAP Financial Measures and Key Performance Indicators:
In addition to our financial results reported in accordance with GAAP, this press release and the accompanying tables and related presentation materials may contain one or more of the following non-GAAP financial measures: Non-GAAP Gross Profit, Non-GAAP Gross Margin, Non-GAAP Operating Income (Loss), Non-GAAP Operating Margin, Non-GAAP Net Income (Loss) attributable to
Non-GAAP Gross Profit and Non-GAAP Gross Margin. We define Non-GAAP Gross Profit as gross profit excluding share-based compensation, amortization of acquired intangibles and restructuring expenses. We exclude these items because they occur for reasons that may be unrelated to our core operating performance during the period, and because we believe that such items may obscure underlying business trends and make comparisons of long-term performance difficult. We use Non-GAAP Gross Profit with traditional GAAP measures to evaluate our financial performance. Non-GAAP Gross Margin is calculated as a percentage of revenues.
Non-GAAP Operating Income (Loss) and Non-GAAP Operating Margin. We define Non-GAAP Operating Income (Loss) as net income (loss) from operations excluding share-based compensation, amortization and impairment of acquired intangible assets and restructuring expenses. We exclude these items because they occur for reasons that may be unrelated to our core operating performance during the period, and because we believe that such items may obscure underlying business trends and make comparisons of long-term performance difficult. We use Non-GAAP Operating Income (Loss) with traditional GAAP measures to evaluate our financial performance. Non-GAAP Operating Margin is calculated as a percentage of revenues.
Non-GAAP Net Income (Loss) attributable to
Free Cash Flow. We define Free Cash Flow as net cash provided by (used in) operating activities, less cash used for purchases of property and equipment and capitalized internal-use software development costs. We believe that Free Cash Flow is a useful indicator of liquidity that provides information to management and investors, even if negative, about the amount of cash used in our business. Our Free Cash Flow may vary from period to period and be impacted as we continue to invest for growth in our business.
ARR. We define ARR as the annualized value of customer subscription contracts as of the measurement date, assuming any contract that expires during the next 12 months is renewed on its existing terms (including contracts for which we are negotiating a renewal). Our calculation of ARR is not adjusted for the impact of any known or projected future events (such as customer cancellations, upgrades or downgrades, or price increases or decreases) that may cause any such contract not to be renewed on its existing terms. In addition, the amount of actual revenue that we recognize over any 12-month period is likely to differ from ARR at the beginning of that period, sometimes significantly. This may occur due to new bookings, cancellations, upgrades, downgrades or other changes in pending renewals, as well as the effects of professional services revenue and acquisitions or divestitures. As a result, ARR should be viewed independently of, and not as a substitute for or forecast of, revenue and deferred revenue. Our calculation of ARR may differ from similarly titled metrics presented by other companies.
Enterprise-Wide DAP Customers: We define Enterprise-Wide DAP Customers as those who have purchased enterprise-wide subscriptions or who have department-wide usage of our Digital Adoption Platform across four or more applications. We believe these customers are an indication of the success of our customer acquisition and expansion strategy and demonstrate the strategic demand for our Digital Adoption Platform, the growth of our business and our potential future business opportunities.
For more information on the non-GAAP financial measures, please see the reconciliation tables provided in this press release. The accompanying reconciliation tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.
Special Note Regarding Forward-Looking Statements:
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All statements contained in this press release other than statements of historical fact, including, without limitation, statements regarding the ongoing impact of the conflict in
About
WalkMe’s cloud-based Digital Adoption Platform enables organizations to measure, drive and act to ultimately accelerate their digital transformations and better realize the value of their software investments. Our platform leverages proprietary technology to provide visibility to an organization’s Chief Information Officer and business leaders, while improving user experience, productivity and efficiency for employees and customers. Alongside walkthroughs and third-party integration capabilities, our platform can be customized to fit an organization’s needs.
Media Contact:
press@walkme.com
Investor Contact:
investors@walkme.com
Condensed Consolidated Statements of Operations | ||||||||||||||
(in thousands, except share and per share data; unaudited) | ||||||||||||||
Three months ended | Nine months ended | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||
Revenues | ||||||||||||||
Subscription | $ | 62,340 | $ | 56,681 | $ | 184,364 | $ | 162,270 | ||||||
Professional services | 4,675 | 6,672 | 14,701 | 17,873 | ||||||||||
Total revenues | 67,015 | 63,353 | 199,065 | 180,143 | ||||||||||
Cost of revenues | ||||||||||||||
Subscription(1)(2)(3) | 6,110 | 6,481 | 18,957 | 20,052 | ||||||||||
Professional services(1)(3) | 4,231 | 7,096 | 15,431 | 21,383 | ||||||||||
Total cost of revenues | 10,341 | 13,577 | 34,388 | 41,435 | ||||||||||
Gross profit | 56,674 | 49,776 | 164,677 | 138,708 | ||||||||||
Operating expenses | ||||||||||||||
Research and development(1)(3) | 13,259 | 13,909 | 41,743 | 45,504 | ||||||||||
Sales and marketing(1)(3) | 39,118 | 45,801 | 123,035 | 130,993 | ||||||||||
General and administrative(1)(2)(3) | 15,865 | 16,483 | 53,086 | 49,501 | ||||||||||
Total operating expenses | 68,242 | 76,193 | 217,864 | 225,998 | ||||||||||
Operating loss | (11,568) | (26,417) | (53,187) | (87,290) | ||||||||||
Financial income, net | 3,609 | 1,241 | 10,098 | 2,368 | ||||||||||
Loss before income taxes | (7,959) | (25,176) | (43,089) | (84,922) | ||||||||||
Income taxes | (1,420) | (942) | (3,917) | (2,100) | ||||||||||
Net loss | (9,379) | (26,118) | (47,006) | (87,022) | ||||||||||
Net loss attributable to non-controlling interest | (50) | (18) | (197) | (367) | ||||||||||
Adjustment attributable to non-controlling interest | (567) | (3,010) | 1,680 | (12,642) | ||||||||||
Net loss attributable to | $ | (8,762) | $ | (23,090) | $ | (48,489) | $ | (74,013) | ||||||
Net loss per share attributable to | $ | (0.10) | $ | (0.27) | $ | (0.55) | $ | (0.87) | ||||||
Weighted-average shares used in computing net loss per share attributable to ordinary shareholders, basic and diluted | 89,374,207 | 85,508,974 | 88,429,867 | 84,739,275 | ||||||||||
(1) Includes share-based compensation expense as follows: | ||||||||||||||
Three months ended | Nine months ended | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||
Cost of subscription revenues | $ | 183 | $ | 293 | $ | 782 | $ | 832 | ||||||
Cost of professional services | 306 | 782 | 1,279 | 2,054 | ||||||||||
Research and development | 3,030 | 1,756 | 7,948 | 5,396 | ||||||||||
Sales and marketing | 4,578 | 5,478 | 13,133 | 13,935 | ||||||||||
General and administrative | 4,992 | 5,505 | 18,817 | 15,891 | ||||||||||
Total share-based compensation expense | $ | 13,089 | $ | 13,814 | $ | 41,959 | $ | 38,108 | ||||||
(2) Includes amortization and impairment of acquired intangibles as follows: | ||||||||||||||
Three months ended | Nine months ended | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||
Cost of revenues | $ | 68 | $ | 68 | $ | 204 | $ | 420 | ||||||
General and administrative | - | - | - | 979 | ||||||||||
Total amortization and impairment | $ | 68 | $ | 68 | $ | 204 | $ | 1,399 | ||||||
(3) Includes restructuring expense as follows: | ||||||||||||||
Three months ended | Nine months ended | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||
Cost of subscription revenues | $ | - | $ | - | $ | 40 | $ | - | ||||||
Cost of professional services | - | - | 223 | - | ||||||||||
Research and development | - | - | 86 | - | ||||||||||
Sales and marketing | - | - | 964 | - | ||||||||||
General and administrative | - | - | 160 | - | ||||||||||
Total restructuring expense | $ | - | $ | - | $ | 1,473 | $ | - | ||||||
Condensed Consolidated Balance Sheets | ||||||
(in thousands; unaudited) | ||||||
2023 | 2022 | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 192,500 | $ | 94,105 | ||
Short-term deposits | 31,496 | 125,231 | ||||
Short-term marketable securities | 33,796 | 42,187 | ||||
Trade receivables, net | 38,242 | 45,024 | ||||
Deferred contract acquisition costs | 26,518 | 26,287 | ||||
Prepaid expenses and other current assets | 8,553 | 6,243 | ||||
Total current assets | 331,105 | 339,077 | ||||
Non-current assets: | ||||||
Long-term marketable securities | 53,747 | 43,334 | ||||
Deferred contract acquisition costs | 31,764 | 40,110 | ||||
Other assets | 486 | 584 | ||||
Property and equipment, net | 12,503 | 13,268 | ||||
Operating lease right-of-use assets | 13,180 | 7,003 | ||||
1,628 | 1,830 | |||||
Total non-current assets | 113,308 | 106,129 | ||||
Total assets | $ | 444,413 | $ | 445,206 | ||
Liabilities, redeemable non-controlling interest and shareholders’ equity | ||||||
Current liabilities: | ||||||
Trade payables | $ | 3,888 | $ | 5,957 | ||
Accrued expenses and other current liabilities | 42,235 | 53,414 | ||||
Deferred revenues | 112,722 | 108,097 | ||||
Total current liabilities | 158,845 | 167,468 | ||||
Long-term liabilities: | ||||||
Deferred revenues | 1,448 | 1,613 | ||||
Other long-term liabilities | 12,916 | 10,038 | ||||
Operating lease liabilities | 8,340 | 3,833 | ||||
Total long-term liabilities | 22,704 | 15,484 | ||||
Total liabilities | 181,549 | 182,952 | ||||
Redeemable non-controlling interest | 9,517 | 8,080 | ||||
Shareholders’ equity: | ||||||
Share capital and additional paid-in capital | 735,733 | 688,636 | ||||
Other comprehensive loss | (2,932) | (1,817) | ||||
Accumulated deficit | (479,454) | (432,645) | ||||
Total shareholders’ equity | 253,347 | 254,174 | ||||
Total Liabilities, redeemable non-controlling interest and shareholders’ equity | $ | 444,413 | $ | 445,206 | ||
Condensed Consolidated Statements of Cash Flow | ||||||||||||||
(in thousands; unaudited) | ||||||||||||||
Three months ended | Nine months ended | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||
Cash flows from operating activities: | ||||||||||||||
Net loss | $ | (9,379) | $ | (26,118) | $ | (47,006) | $ | (87,022) | ||||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||||||
Share-based compensation | 13,089 | 13,814 | 41,959 | 38,108 | ||||||||||
Depreciation, amortization and impairment | 1,760 | 2,690 | 4,583 | 6,663 | ||||||||||
Operating lease right-of-use assets and liabilities, net | (577) | (392) | (1,477) | (392) | ||||||||||
Finance income | 556 | (498) | 553 | (532) | ||||||||||
Amortization of premium and accretion of discount on marketable securities, net | (498) | - | (1,508) | - | ||||||||||
Decrease in trade receivables, net | 5,650 | 5,778 | 6,782 | 2,584 | ||||||||||
Decrease (increase) in prepaid expenses and other current and non-current assets | 371 | (568) | (1,803) | (709) | ||||||||||
Decrease (increase) in deferred contract acquisition costs | 2,406 | (630) | 8,115 | (3,805) | ||||||||||
Increase (decrease) in trade payables | 274 | 277 | (2,069) | (1,787) | ||||||||||
Decrease in accrued expenses and other current liabilities | (2,415) | (3,046) | (10,204) | (11,000) | ||||||||||
Increase (decrease) in deferred revenues | (3,894) | (1,925) | 5,273 | 17,873 | ||||||||||
Increase in other long-term liabilities | 79 | 921 | 2,926 | 2,010 | ||||||||||
Net cash provided by (used in) operating activities | 7,422 | (9,697) | 6,124 | (38,009) | ||||||||||
Cash flows from investing activities: | ||||||||||||||
Purchase of property and equipment | (182) | (635) | (511) | (2,673) | ||||||||||
Investment in short-term deposits | - | (97,000) | - | (140,500) | ||||||||||
Proceeds from short-term deposits | 20,000 | 35,000 | 93,500 | 92,257 | ||||||||||
Investment in marketable securities | (19,521) | - | (43,330) | - | ||||||||||
Proceeds from maturity of marketable securities | 14,881 | - | 41,464 | - | ||||||||||
Proceeds from restricted deposits | - | - | - | 295 | ||||||||||
Capitalization of software development costs | (1,005) | (879) | (2,483) | (3,064) | ||||||||||
Net cash provided by (used in) investing activities | 14,173 | (63,514) | 88,640 | (53,685) | ||||||||||
Cash flows from financing activities: | ||||||||||||||
Proceeds from exercise of options | 475 | 787 | 1,496 | 2,585 | ||||||||||
Proceeds from employees share purchase plan | 841 | 1,489 | 3,142 | 8,223 | ||||||||||
Net cash provided by financing activities | 1,316 | 2,276 | 4,638 | 10,808 | ||||||||||
Effect of foreign currency exchange rate changes on cash, cash equivalents, and restricted cash | (364) | (319) | (1,330) | (1,145) | ||||||||||
Increase (decrease) in cash, cash equivalents and restricted cash | 22,547 | (71,254) | 98,072 | (82,031) | ||||||||||
Cash, cash equivalents and restricted cash - Beginning of period | 169,953 | 266,474 | 94,428 | 277,251 | ||||||||||
Cash, cash equivalents and restricted cash - End of period | $ | 192,500 | $ | 195,220 | $ | 192,500 | $ | 195,220 | ||||||
Reconciliation from GAAP to Non-GAAP Results | ||||||||||||||
(in thousands, except share and per share data; unaudited) | ||||||||||||||
Three months ended | Nine months ended | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||
Reconciliation of gross profit and gross margin | ||||||||||||||
GAAP gross profit | $ | 56,674 | $ | 49,776 | $ | 164,677 | $ | 138,708 | ||||||
Plus: Share-based compensation expense | 489 | 1,075 | 2,061 | 2,886 | ||||||||||
Plus: Amortization of acquired intangibles | 68 | 68 | 204 | 420 | ||||||||||
Plus: Restructuring expense | - | - | 263 | - | ||||||||||
Non-GAAP gross profit | $ | 57,231 | $ | 50,919 | $ | 167,205 | $ | 142,014 | ||||||
GAAP gross margin | 85% | 79% | 83% | 77% | ||||||||||
Non-GAAP gross margin | 85% | 80% | 84% | 79% | ||||||||||
Reconciliation of operating expenses | ||||||||||||||
GAAP research and development | $ | 13,259 | $ | 13,909 | $ | 41,743 | $ | 45,504 | ||||||
Less: Share-based compensation expenses | (3,030) | (1,756) | (7,948) | (5,396) | ||||||||||
Less: Restructuring expense | - | - | (86) | - | ||||||||||
Non-GAAP research and development | $ | 10,229 | $ | 12,153 | $ | 33,709 | $ | 40,108 | ||||||
GAAP sales and marketing | $ | 39,118 | $ | 45,801 | $ | 123,035 | $ | 130,993 | ||||||
Less: Share-based compensation expenses | (4,578) | (5,478) | (13,133) | (13,935) | ||||||||||
Less: Restructuring expense | - | - | (964) | - | ||||||||||
Non-GAAP sales and marketing | $ | 34,540 | $ | 40,323 | $ | 108,938 | $ | 117,058 | ||||||
GAAP general and administrative | $ | 15,865 | $ | 16,483 | $ | 53,086 | $ | 49,501 | ||||||
Less: Share-based compensation expenses | (4,992) | (5,505) | (18,817) | (15,891) | ||||||||||
Less: impairment of acquired intangibles | - | - | - | (979) | ||||||||||
Less: Restructuring expense | - | - | (160) | - | ||||||||||
Non-GAAP general and administrative | $ | 10,873 | $ | 10,978 | $ | 34,109 | $ | 32,631 | ||||||
Reconciliation of operating loss and operating margin | ||||||||||||||
GAAP operating loss | $ | (11,568) | $ | (26,417) | $ | (53,187) | $ | (87,290) | ||||||
Plus: Share-based compensation expense | 13,089 | 13,814 | 41,959 | 38,108 | ||||||||||
Plus: Amortization and impairment of acquired intangibles | 68 | 68 | 204 | 1,399 | ||||||||||
Plus: Restructuring expense | - | - | 1,473 | - | ||||||||||
Non-GAAP operating income (loss) | $ | 1,589 | $ | (12,535) | $ | (9,551) | $ | (47,783) | ||||||
GAAP operating margin | (17)% | (42)% | (27)% | (48)% | ||||||||||
Non-GAAP operating margin | 2% | (20)% | (5)% | (27)% | ||||||||||
Reconciliation of net loss | ||||||||||||||
GAAP net loss attributable to | $ | (8,762) | $ | (23,090) | $ | (48,489) | $ | (74,013) | ||||||
Plus: Share-based compensation expense | 13,089 | 13,814 | 41,959 | 38,108 | ||||||||||
Plus: Amortization and impairment of acquired intangibles | 68 | 68 | 204 | 1,399 | ||||||||||
Plus: Restructuring expense | - | - | 1,473 | - | ||||||||||
Plus: Adjustment attributable to non-controlling interest | (567) | (3,010) | 1,680 | (12,642) | ||||||||||
Non-GAAP net income (loss) attributable to | $ | 3,828 | $ | (12,218) | $ | (3,173) | $ | (47,148) | ||||||
Non-GAAP net income (loss) per share attributable to | ||||||||||||||
Basic | $ | 0.04 | $ | (0.14) | $ | (0.04) | $ | (0.56) | ||||||
Diluted | $ | 0.04 | $ | (0.14) | $ | (0.04) | $ | (0.56) | ||||||
Shares used in non-GAAP per share calculations: | ||||||||||||||
Non-GAAP weighted-average shares used to compute net income (loss) per share | ||||||||||||||
Basic | 89,374,207 | 85,508,974 | 88,429,867 | 84,739,275 | ||||||||||
Diluted | 92,730,007 | 85,508,974 | 88,429,867 | 84,739,275 | ||||||||||
Reconciliation of GAAP Cash Flow from Operating Activities to Free Cash Flow | ||||||||||||||
(in thousands; unaudited) | ||||||||||||||
Three months ended | Nine months ended | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||
Net cash provided by (used in) operating activities | $ | 7,422 | $ | (9,697) | $ | 6,124 | $ | (38,009) | ||||||
Less: Purchases of property and equipment | (182) | (635) | (511) | (2,673) | ||||||||||
Less: Capitalized software development costs | (1,005) | (879) | (2,483) | (3,064) | ||||||||||
Free Cash Flow | $ | 6,235 | $ | (11,211) | $ | 3,130 | $ | (43,746) | ||||||
Source:
2023 GlobeNewswire, Inc., source