WalkMe (NASDAQ:WKME) Posts Q1 Sales In Line With Estimates

Full Report / May 22, 2024

User support software provider WalkMe (NASDAQ: WKME) reported results in line with analysts' expectations in Q1 CY2024, with revenue up 4.1% year on year to $68.57 million. The company expects next quarter's revenue to be around $69.5 million, in line with analysts' estimates. It made a non-GAAP profit of $0.07 per share, improving from its loss of $0.08 per share in the same quarter last year.

WalkMe (WKME) Q1 CY2024 Highlights:

  • Revenue: $68.57 million vs analyst estimates of $68.11 million (small beat)
  • Operating profit (non-GAAP): $4.4 million vs analyst estimates of $1.1 million (beat)
  • EPS (non-GAAP): $0.07 vs analyst estimates of $0.02 ($0.05 beat)
  • Revenue Guidance for Q2 CY2024 is $69.5 million at the midpoint, roughly in line with what analysts were expecting
  • The company reconfirmed its revenue guidance for the full year of $281 million at the midpoint
  • The company raised its operating profit (non-GAAP) guidance for the full year of $13.8 million at the midpoint (above estimates)
  • Gross Margin (GAAP): 85.6%, up from 81.5% in the same quarter last year
  • Free Cash Flow of $16.64 million, up 99.1% from the previous quarter
  • Market Capitalization: $718.9 million

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

WalkMe allows businesses to get more out of their technology investments through elearning. Its Digital Adoption Platform visual cues inside applications so that users can navigate around them more easily and is essentially a turn by turn GPS for learning how to use new tools or services. It also provides management insight into what tools are being used the most throughout an organization.

In many large organizations there is a constant drumbeat of new SaaS applications meant to streamline business processes or save time and money through some undefined “efficiency-savings” but yet many new apps never achieve the desired outcome because it's difficult to change user behavior. Or even if a new software program has a good user interface and good customer support, it still might be unable to explain to a user how to use the new tool with different apps.

WalkMe acts as a force multiplier for digital investments by teaching employees how to get more out of systems they already use – one example might be a salesperson who has used Salesforce for years, but never utilized all the features that could’ve improved her productivity. By making new tech easier to use in an enterprise, it can improve employee retention, and reduce support costs.

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.

WalkMe competes within the automation niche within the broader business productivity tools segment characterized by providers like UiPath (NASDAQ: PATH), ServiceNow (NYSE:NOW), and Appian (NASDAQ:APPN).

Sales Growth

As you can see below, WalkMe's revenue growth has been solid over the last three years, growing from $42.65 million in Q1 2021 to $68.57 million this quarter.

WalkMe Total Revenue

WalkMe's quarterly revenue was only up 4.1% year on year, which might disappoint some shareholders. Additionally, its growth did slow down compared to last quarter as the company's revenue increased by just $685,000 in Q1 compared to $874,000 in Q4 CY2023. While we'd like to see revenue increase by a greater amount each quarter, a one-off fluctuation is usually not concerning.

Next quarter's guidance suggests that WalkMe is expecting revenue to grow 5.1% year on year to $69.5 million, slowing down from the 10.4% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 6.4% over the next 12 months before the earnings results announcement.


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's left after paying for servers, licenses, technical support, and other necessary running expenses, was 85.6% in Q1.

WalkMe Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.86 left to spend on developing new products, sales and marketing, and general administrative overhead. Trending up over the last year, WalkMe's excellent gross margin allows it to fund large investments in product and sales during periods of rapid growth and achieve profitability when reaching maturity.

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 $16.64 million in Q1, turning positive over the last year.

WalkMe Free Cash Flow

WalkMe has generated $36.4 million in free cash flow over the last 12 months, a decent 13.5% of revenue. This FCF margin stems from its asset-lite business model and gives it a decent amount of cash to reinvest in its business.

Key Takeaways from WalkMe's Q1 Results

We enjoyed seeing WalkMe exceed analysts' billings expectations this quarter, which led to a small revenue beat. Operating profit and EPS beat by more convincing amounts. Additionally, while full year revenue guidance was maintained, full year operating profit guidance was raised, showing that the company is growing more efficiently. Overall, this quarter's results were solid and shareholders should feel optimistic. The stock is up 1.3% after reporting and currently trades at $7.93 per share.

Is Now The Time?

When considering an investment in WalkMe, investors should take into account its valuation and business qualities as well as what's happened in the latest quarter.

We cheer for everyone who's making the lives of others easier through technology, but in case of WalkMe, we'll be cheering from the sidelines. Its revenue growth has been mediocre over the last three years, and analysts expect growth to deteriorate from here.

WalkMe's price-to-sales ratio based on the next 12 months is 2.5x, suggesting the market has lower expectations for the business relative to the hottest tech stocks. While there are some things to like about WalkMe and its valuation is reasonable, we think there are better opportunities elsewhere in the market right now.

Wall Street analysts covering the company had a one-year price target of $13.13 right before these results (compared to the current share price of $7.93).

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