The News: WalkMe announced earnings for the second quarter of 2023 that ended on June 30, 2023. The company’s revenues for the quarter were $66.2 million versus $59.9 million in the year-ago period, or an increase of 10%. Read the full Q2 2023 earnings release on WalkMe’s website for more information.
By the Numbers for Q2 2023:
- Q2 2023 revenue of $66.2 million, up 10% year-over-year (YoY). Subscription revenue grew 13% YoY to $61.4 million
- Q2 2023 Non-GAAP gross margin of 84%, up from 78% in the same quarter a year ago
- Q2 2023 Non-GAAP operating loss of $2.3 million versus $16.7 million in the year-ago quarter.
- Q2 2023 Non-GAAP operating margin improved to (3.5%) from (27.8%) last year
- Q2 2023 non-GAAP net loss per share of $0.00 per share, compared to a net loss of $0.19 per share one year ago
- Q2 2023 free cash flow (FCF) of $5.2 million, or 8% of total revenue, compared to negative $12.2 million, or 20% of total revenue in Q2 2022
29% year-over-year growth in enterprise-wide digital adoption platform (DAP) customer count
WalkMe Achieves Record Positive Free Cash Flow in Q2 2023
Analyst Take: WalkMe saw strong progress for Q2 2023, reaching an important milestone of positive FCF two quarters ahead of plan. Additionally, the company reported 10% revenue growth, hitting $66.2 million. WalkMe continues to execute well on its financial goals, focusing on internal efficiencies across its business, keeping a keen eye on cost management, growing its customer base, and enhancing its platform.
WalkMe has helped shape the digital adoption platform category, a segment that focuses on providing enterprises a view of all the software being used across the company. WalkMe’s DAP platform offers a comprehensive way to smooth out internal processes, identify usage patterns, and find cost savings. These are all factors that are important to every company looking to squeeze out ROI for their software investments, but it is also important to the experience of employees, helping to find points of friction and remove roadblocks.
Customer Growth, Partnerships, and Customer Success Efforts Yield Results
WalkMe’s focus on reaching its financial targets has caused no lack of action on the company’s part, with WalkMe successfully growing its customer base, forming partnerships, introducing product enhancements, and focusing on customer success.
In Q2 2023, the company added three net new enterprise-wide DAP customers for a total of count of 183, representing a 29% count increase from the prior year quarter. WalkMe grew its customer base with annual recurring revenue (ARR) greater than $100,000 by 8% YoY, with that customer category consisting of 527 companies. The total number of customer relationships with greater than $1 million in ARR grew 23% YoY to 38 companies. WalkMe noted that its deal with the United States Army has expanded, and that one of the largest US retailers with both physical and digital footprints deployed WalkMe with its call center agents.
The company has shown solid strategy regarding partnership development, taking both a global and regional approach, which has helped impact WalkMe’s reach and deepen customer relationships. This past quarter, the company added Deloitte India, Deloitte New Zealand, and Tech Mahindra to its partner roster.
WalkMe is doubling down on its customer success efforts, with Chief Customer Officer, Sunil Nagdev leading a major transformation effort, the effects of which will still be trickling into 2024. The company also introduced new pricing and packaging that is designed to accelerate customer landing and allow customers to scaffold up to full DAP deployment. It is a more flexible approach and one that makes it easier for customers to take a leap with the technology, but in a more targeted way, with one or two applications instead of multiple applications all at once. WalkMe Essentials was launched fairly recently and is a pared-down version of the platform that handles the most popular and important workflows on specific target applications. Again, this offering serves as a bridge to a potentially deeper investment.
Product Enhancements Focus on AI
WalkMe is no stranger to artificial intelligence, with AI powering many components of its platform. The WalkMe Discovery launch last quarter is showing strong results, with Data AI solutions growing 100% quarter-over-quarter on the number of employees covered.
In Q2 2023, the company launched Shadow AI as a part of WalkMe Discovery. Shadow AI gives a view into how AI is being used within an organization with a focus on compliance and security. The enhancement can help companies take immediate actions to alert employees about relevant company policies, averting issues. WalkMe alluded to many forthcoming AI announcements, including some in the area of data validation and hygiene, as well as the next version of Enterprise Search, which will be using large language models (LLMs).
Looking Ahead
WalkMe provided fairly muted revenue guidance for Q3 2023 in the range of $66 million to $68 million. This reflects challenges the company has been having with Professional Services, which the company feels will improve once its customer organization’s transformation is complete. The company expects a non-GAAP operating loss of $2-3 million.
For the full year 2023, WalkMe is projecting revenue of $266 to $270 million and a non-GAAP operating loss of $16 to $14 million. WalkMe plans to be profitable and FCF positive for the full year of 2024 on a non-GAAP basis.
DAP is still a maturing market sector, but WalkMe is well-situated to grow its position. The company has had success not just in adding large accounts, but also in cultivating the accounts they have. This experience will hopefully yield even more results once the company’s revamped pricing and packaging have been in place for a longer period of time.
WalkMe’s introduction of the Shadow AI functionality is also coming at the right time, as companies want to embrace the productivity and cost savings of AI but are hesitant about how it will be used internally and worried about possible security and compliance issues.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Other Insights from The Futurum Group:
WalkMe’s Digital Adoption Platform Helps Remove EX Friction Points
WalkMe Q1 2023 Revenues up 16% Year-over-Year
WalkMe Launches WalkMe Discovery, Real-Time Visibility for Digital Adoption
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
As a detail-oriented researcher, Sherril is expert at discovering, gathering and compiling industry and market data to create clear, actionable market and competitive intelligence. With deep experience in market analysis and segmentation she is a consummate collaborator with strong communication skills adept at supporting and forming relationships with cross-functional teams in all levels of organizations.
Sherril holds a Master of Business Administration in Marketing from University of Colorado, Boulder and a Bachelor of Arts in Psychology from Rutgers University.
