WalkMe (NASDAQ:WKME) Exceeds Q4 Expectations But Guidance Underwhelms

Jabin Bastian /
2023/02/15 7:08 am EST
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User support software provider WalkMe (NASDAQ: WKME) reported Q4 FY2022 results beating Wall St's expectations, with revenue up 21.8% year on year to $64.9 million. However, guidance for the next quarter was less impressive, coming in at $65.1 million at the midpoint, being 3.13% below analyst estimates. WalkMe made a GAAP loss of $21.3 million, improving on its loss of $29.5 million, in the same quarter last year.

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WalkMe (WKME) Q4 FY2022 Highlights:

  • Revenue: $64.9 million vs analyst estimates of $64 million (1.34% beat)
  • EPS (non-GAAP): -$0.10 vs analyst estimates of -$0.14
  • Revenue guidance for Q1 2023 is $65.1 million at the midpoint, below analyst estimates of $67.2 million
  • Management's revenue guidance for upcoming financial year 2023 is $272.5 million at the midpoint, missing analyst estimates by 5.6% and predicting 11.2% growth (vs 27.1% in FY2022)
  • Free cash flow was negative $10.2 million, compared to negative free cash flow of $11.2 million in previous quarter
  • Gross Margin (GAAP): 80.8%, up from 75.6% same quarter last year

“WalkMe continues to help the largest companies in the world identify and resolve the crippling digital friction that’s keeping them from achieving their digital transformation goals. They’re relying on us to regain control of their tech stack and finally turn it into a competitive advantage,” said Dan Adika, CEO of WalkMe.

Founded in Israel in 2011, WalkMe (NASDAQ:WKME) is software that teaches users how to get the most out of new applications.

Companies need to be able to interact with and sell to their customers as efficiently as possible. This reality, coupled with the ongoing migration of enterprises to the cloud drives demand for cloud-based customer relationship management (CRM) software that integrate data analytics with sales and marketing functions.

Sales Growth

As you can see below, WalkMe's revenue growth has been strong over the last two years, growing from quarterly revenue of $38.9 million in Q4 FY2020, to $64.9 million.

WalkMe Total Revenue

This quarter, WalkMe's quarterly revenue was once again up a very solid 21.8% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $1.51 million in Q4, compared to $3.41 million in Q3 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates WalkMe is expecting revenue to grow 14.5% year on year to $65.1 million, slowing down from the 33.3% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $272.5 million at the midpoint, growing 11.2% compared to 26.7% increase in FY2022.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.


What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. WalkMe's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 80.8% in Q4.

WalkMe Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.81 left to spend on developing new products, marketing & sales and the general administrative overhead. Significantly up from the last quarter, this is a great gross margin, that allows companies like WalkMe to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.

Key Takeaways from WalkMe's Q4 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on WalkMe’s balance sheet, but we note that with a market capitalization of $938 million and more than $261.5 million in cash, the company has the capacity to continue to prioritise growth over profitability.

It was good to see WalkMe improve their gross margin this quarter. And we were also happy to see it topped analysts’ revenue expectations, even if just narrowly. On the other hand, it was unfortunate to see that WalkMe's revenue guidance for the full year missed analysts' expectations and it indicates quite a significant slowdown in growth. Overall, this quarter's results were not the best we've seen from WalkMe. The company is up 4.57% in the pre-market and currently trades at $11.68 per share.

WalkMe may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.