WalkMe (NASDAQ:WKME) Posts Q4 Sales In Line With Estimates But Full-Year Guidance Underwhelms

Anthony Lee /
2024/02/21 7:04 am EST

User support software provider WalkMe (NASDAQ: WKME) reported results in line with analysts' expectations in Q4 FY2023, with revenue up 4.7% year on year to $67.89 million. On the other hand, next quarter's revenue guidance of $68.1 million was less impressive, coming in 1.4% below analysts' estimates. It made a non-GAAP profit of $0.07 per share, improving from its loss of $0.11 per share in the same quarter last year.

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WalkMe (WKME) Q4 FY2023 Highlights:

  • Revenue: $67.89 million vs analyst estimates of $67.59 million (small beat)
  • EPS (non-GAAP): $0.07 vs analyst estimates of $0.03 ($0.04 beat)
  • Revenue Guidance for Q1 2024 is $68.1 million at the midpoint, below analyst estimates of $69.07 million
  • Management's revenue guidance for the upcoming financial year 2024 is $281 million at the midpoint, missing analyst estimates by 1.9% and implying 5.3% growth (vs 9.2% in FY2023)
  • Free Cash Flow of $8.36 million, up 34% from the previous quarter
  • Gross Margin (GAAP): 85.3%, up from 80.8% in the same quarter last year
  • Market Capitalization: $896.6 million

“2023 was a transformational year for WalkMe. We’ve optimized our foundations and proven that with the right processes in place the WalkMe engine can produce cash at scale. We are now a profitable company and turn our focus with the aim to double our net new ARR in 2024 in order to drive double digit ARR growth in 2024 and accelerate revenue growth in 2025. Large enterprise companies will experience the true value of how Digital Adoption accelerates their most mission critical workflows,” 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.

Customer Support

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 integrates data analytics with sales and marketing functions.

Sales Growth

As you can see below, WalkMe's revenue growth has been mediocre over the last two years, growing from $53.26 million in Q4 FY2021 to $67.89 million this quarter.

WalkMe Total Revenue

WalkMe's quarterly revenue was only up 4.7% year on year, which might disappoint some shareholders. We can see that revenue increased by $874,000 in Q4, which was roughly the same as in Q3 2023.

Next quarter's guidance suggests that WalkMe is expecting revenue to grow 3.4% year on year to $68.1 million, slowing down from the 15.9% year-on-year increase it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to be $281 million at the midpoint, growing 5.3% year on year compared to the 9% increase in FY2023.

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Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. WalkMe's free cash flow came in at $8.36 million in Q4, turning positive over the last year.

WalkMe Free Cash Flow

WalkMe has generated $11.49 million of cash over the last 12 months, resulting in a 4.3% free cash flow margin. This is poor for a SaaS business.

Key Takeaways from WalkMe's Q4 Results

We struggled to find many strong positives in these results. Although its revenue and adjusted EPS beat this quarter, its full-year revenue guidance was below expectations, suggesting a slowdown in demand. It does, however, go into 2024 as a free cash flow positive company, a step in the right direction. Overall, this was a mediocre quarter for WalkMe. The stock is flat after reporting and currently trades at $10.16 per share.

WalkMe may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.