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WalkMe's (NASDAQ:WKME) Q3 Sales Top Estimates, Next Quarter Growth Guided In Line


Adam Hejl /
2021/11/10 4:14 pm EST
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User support software provider WalkMe (NASDAQ: WKME) reported strong growth in the Q3 FY2021 earnings announcement, with revenue up 30.7% year on year to $50.5 million. The company expects that next quarter's revenue would be around $52 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. WalkMe made a GAAP loss of $18.8 million, down on its loss of $6.6 million, in the same quarter last year.

Is now the time to buy WalkMe? Access our full analysis of the earnings results here, it's free.

WalkMe (WKME) Q3 FY2021 Highlights:

  • Revenue: $50.5 million vs analyst estimates of $49.3 million (2.53% beat)
  • EPS (non-GAAP): -$0.13 vs analyst estimates of -$0.20
  • Revenue guidance for Q4 2021 is $52 million at the midpoint, above analyst estimates of $51.6 million
  • Free cash flow was negative $7.43 million, compared to negative free cash flow of $7.43 million in previous quarter
  • Gross Margin (GAAP): 76.8%, up from 73.3% same quarter last year

“We are very pleased with the continued strength and execution across our business globally with our subscription revenue growth accelerating once again,” said Dan Adika, CEO and co-Founder of WalkMe.

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

WalkMe is linked to the consumerization of business technology, the idea that enterprise IT user interfaces should be as simple to use as an iPhone. It is also an adjacent beneficiary to the SaaS-ification of businesses, large and small, who much prefer the flexibility of cloud-based, web-browser delivered software paid for on a subscription basis than the hassle and expense of purchasing and managing on-premise enterprise software.

Sales Growth

As you can see below, WalkMe's revenue growth has been strong over the last year, growing from quarterly revenue of $38.7 million, to $50.5 million.

WalkMe Total Revenue

And unsurprisingly, this was another great quarter for WalkMe with revenue up 30.7% year on year. Quarter on quarter the revenue increased by $3.78 million in Q3, which was in line with Q2 2021. This steady quarter-on-quarter growth shows the company is able to maintain a strong growth trajectory.

Analysts covering the company are expecting the revenues to grow 28% over the next twelve months, although estimates are likely to change post earnings.

There are others doing even better than WalkMe. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. You can find it on our platform for free.

Profitability

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 76.8% in Q3.

WalkMe Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.76 left to spend on developing new products, marketing & sales and the general administrative overhead. Trending up over the last year, this is a good 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 Q3 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 $2.25 billion and more than $361.9 million in cash, the company has the capacity to continue to prioritise growth over profitability.

It was good to see WalkMe deliver strong revenue growth this quarter. And we were also excited to see that it outperformed analysts' revenue expectations. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is flat on the results and currently trades at $24.46 per share.

Should you invest in WalkMe 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.