WalkMe Ltd. Announces Second Quarter 2024 Financial Results

 

 

Pending Acquisition by SAP:

 

The section titled “Non-GAAP Financial Measures” below contains a description of the non-GAAP financial measures discussed in this press release and reconciliations between historical GAAP and non-GAAP information are contained in the tables below.

 

 

We intend to announce material information to the public through the WalkMe investor relations website at ir.walkme.com, SEC filings, press releases, public conference calls, and public webcasts. We use these channels to communicate with our investors, customers, and the public about our company, our offerings, and other issues. As such, we encourage investors, the media, and others to follow the channels listed above, and to review the information disclosed through such channels.

 

Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page of our website.

 

 

 

 

 

 

 

 

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended.  All statements contained in this press release other than statements of historical fact, including, without limitation, statements regarding the pending transaction with SAP (the “Transaction”) are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “potential,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “target,” and similar expressions are intended to identify forward-looking statements, though not all forward-looking statements use these words or expressions. These forward-looking statements are subject to risks, uncertainties and assumptions, some of which are beyond our control. In addition, these forward-looking statements reflect our current views with respect to future events and are not a guarantee of future performance. Actual outcomes may differ materially from the information contained in the forward-looking statements as a result of a number of factors, including, without limitation, the following: risks associated with the Company’s ability to consummate the Transaction; the satisfaction of the conditions to the consummation of the Transaction, including the receipt of certain regulatory approvals, and the timing of the closing of the Transaction; the occurrence of any event, change or other circumstance that could give rise to the termination of the Transaction; the potential that the Company’s shareholders may not approve the Transaction; the ability to successfully integrate operations and employees; the ability to realize anticipated benefits and synergies of the Transaction as rapidly or to the extent anticipated by financial analysts or investors; unanticipated restructuring costs may be incurred or undisclosed liabilities assumed; actual or threatened legal proceedings that have been or may be instituted against the Company in connection with the Transaction or otherwise; the ability and costs related to retaining key personnel and clients; risks related to diverting management’s attention from ongoing business operations; delays, challenges, costs, fees, expenses and charges related to the Transaction;  our ability to manage our growth effectively, sustain our historical growth rate in the future or achieve or maintain profitability; the impact of adverse macro-economic changes on our business, financial condition and results of operations; the growth and expansion of the markets for our offerings and our ability to adapt and respond effectively to evolving market conditions; our estimates of, and future expectations regarding, our market opportunity; our ability to keep pace with technological and competitive developments and develop or otherwise introduce new products and solutions and enhancements to our existing offerings; our ability to maintain the interoperability of our offerings across devices, operating systems and third-party applications and to maintain and expand our relationships with third-party technology partners; the effects of increased competition in our target markets and our ability to compete effectively; our ability to attract and retain new customers and to expand within our existing customer base; the success of our sales and marketing operations, including our ability to realize efficiencies and reduce customer acquisition costs; risks related to the war in Israel and the related challenges to the political, economic and security conditions in Israel and its impact on our business, financial performance and our actions designed to mitigate such impact;  our ability to meet the service-level commitments under our customer agreements and the effects on our business if we are unable to do so; our relationships with, and dependence on, various third-party service providers; our ability to maintain and enhance awareness of our brand; our ability to offer high quality customer support; our ability to effectively develop and expand our marketing and sales capabilities; our ability to maintain the sales prices of our offerings and the effects of pricing fluctuations; the sustainability of, and fluctuations in, our gross margin; risks related to our international operations and our ability to expand our international business operations; the effects of currency exchange rate fluctuations on our results of operations, including recent declines in the value of the Israeli shekel following Hamas’ attacks against Israel; challenges and risks related to our sales to government entities; our ability to consummate acquisitions at our historical rate and at acceptable prices, to enter into other strategic transactions and relationships, and to manage the risks related to these transactions and arrangements; our ability to protect our proprietary technology, or to obtain, maintain, protect and enforce sufficiently broad intellectual property rights therein; our ability to maintain the security and availability of our platform, products and solutions; our ability to comply with current and future legislation and governmental regulations to which we are subject or may become subject in the future; changes in applicable tax law, the stability of effective tax rates and adverse outcomes resulting from examination of our income or other tax returns; the effects of unfavorable conditions in our industry or the global economy or reductions in information technology spending; factors that may affect the future trading prices of our ordinary shares; exposure to inflation and interest rate fluctuations; natural catastrophes, any pandemic, epidemic or outbreak of infectious disease, warfare, protest and riots, cybersecurity attack or ransomware request and terrorist attacks; and other risk factors set forth in the section titled “Risk Factors” in our Annual Report on form 20-F filed with the Securities and Exchange Commission on March 18, 2024, and other documents filed with or furnished to the SEC. These statements reflect management’s current expectations regarding future events and operating performance and speak only as of the date of this press release. You should not put undue reliance on any forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required by applicable law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

 

 

 

Melanie Pasch

 

John Streppa

 

WalkMe Ltd.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data; unaudited)

		Three months ended								Six months ended
		June 30,								June 30,
		2024				2023				2024				2023
Revenues
Subscription		$	65,707			$	61,395			$	130,151			$	122,024
Professional services			3,805				4,763				7,935				10,026
Total revenues			69,512				66,158				138,086				132,050
Cost of revenues
Subscription(1)(2)(3)			6,605				6,458				12,902				12,847
Professional services(1)(2)(3)			3,470				5,397				7,049				11,200
Total cost of revenues			10,075				11,855				19,951				24,047
Gross profit			59,437				54,303				118,135				108,003
Operating expenses
Research and development(1)(3)			11,880				14,212				24,626				28,484
Sales and marketing(1)(3)			40,127				39,459				81,555				83,917
General and administrative(1)(3)(4)			28,245				16,474				40,661				37,221
Total operating expenses			80,252				70,145				146,842				149,622
Operating loss			(20,815	)			(15,842	)			(28,707	)			(41,619	)
Financial income, net			4,160				3,246				7,830				6,489
Loss before income taxes			(16,655	)			(12,596	)			(20,877	)			(35,130	)
Income taxes			(1,324	)			(1,385	)			(2,588	)			(2,497	)
Net loss			(17,979	)			(13,981	)			(23,465	)			(37,627	)
Net income (loss) attributable to non-controlling interest			67				(124	)			27				(147	)
Adjustment attributable to non-controlling interest			1,591				(253	)			2,291				2,247
Net loss attributable to WalkMe Ltd.		$	(19,637	)		$	(13,604	)		$	(25,783	)		$	(39,727	)
Net loss per share attributable to WalkMe Ltd. basic and diluted		$	(0.21	)		$	(0.15	)		$	(0.28	)		$	(0.45	)
Weighted-average shares used in computing net loss per share attributable to ordinary shareholders, basic and diluted			92,777,911				88,604,385				92,053,119				87,949,871

		Three months ended								Six months ended
		June 30,								June 30,
		2024				2023				2024				2023
Cost of subscription revenues		$	268			$	313			$	535			$	599
Cost of professional services			266				436				544			$	973
Research and development			2,326				2,549				4,863			$	4,918
Sales and marketing			4,346				3,944				9,740			$	8,555
General and administrative			4,249				4,731				8,013			$	13,825
Total share-based compensation expense		$	11,455			$	11,973			$	23,695			$	28,870

		Three months ended								Six months ended
		June 30,								June 30,
		2024				2023				2024				2023
Cost of revenues		$	11			$	68			$	79			$	136

		Three months ended								Six months ended
		June 30,								June 30,
		2024				2023				2024				2023
Cost of subscription		$	-			$	40			$	-			$	40
Cost of professional services		$	-			$	223			$	-			$	223
Research and development		$	-			$	86			$	-			$	86
Sales and marketing		$	-			$	964			$	-			$	964
General and administrative		$	-			$	160			$	-			$	160
Total restructuring expense		$	-			$	1,473			$	-			$	1,473

		Three months ended								Six months ended
		June 30,								June 30,
		2024				2023				2024				2023
General and administrative		$	14,294			$	-			$	14,294			$	-

WalkMe Ltd.

Condensed Consolidated Balance Sheets

(in thousands; unaudited)

		June 30,				December 31,
		2024				2023
Assets
Current assets:
Cash and cash equivalents		$	220,673			$	177,223
Short-term deposits			12,351				28,027
Short-term marketable securities			65,977				60,290
Trade receivables, net			37,677				40,494
Deferred contract acquisition costs			27,296				26,793
Prepaid expenses and other current assets			7,769				8,739
Total current assets			371,743				341,566
Non-current assets:
Long-term marketable securities			55,485				56,282
Deferred contract acquisition costs			25,809				30,267
Other assets			832				317
Property and equipment, net			12,149				12,059
Operating lease right-of-use assets			9,864				12,005
Goodwill and Intangible assets, net			1,482				1,561
Total non-current assets			105,621				112,491
Total assets		$	477,364			$	454,057
Liabilities, redeemable non-controlling interest and shareholders’ equity
Current liabilities:
Trade payables		$	9,368			$	3,508
Accrued expenses and other current liabilities			59,216				47,772
Deferred revenues			113,360				110,701
Total current liabilities			181,944				161,981
Long-term liabilities:
Deferred revenues			492				894
Other long-term liabilities			12,723				12,384
Operating lease liabilities			7,202				8,222
Total long-term liabilities			20,417				21,500
Total liabilities			202,361				183,481
Redeemable non-controlling interest			12,722				10,429
Shareholders’ equity:
Share capital and additional paid-in capital			776,084				748,801
Other comprehensive income (loss)			(1,179	)			478
Accumulated deficit			(512,624	)			(489,132	)
Total shareholders’ equity			262,281				260,147
Total Liabilities, redeemable non-controlling interest and shareholders’ equity		$	477,364			$	454,057

WalkMe Ltd.

Condensed Consolidated Statements of Cash Flow

(in thousands; unaudited)

		Three months ended								Six months ended
		June 30,								June 30,
		2024				2023				2024				2023
Cash flows from operating activities:
Net loss		$	(17,979	)		$	(13,981	)		$	(23,465	)		$	(37,627	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Share-based compensation			11,455				11,973				23,695				28,870
Depreciation, amortization and impairment			1,329				1,468				2,775				2,823
Operating lease right-of-use assets and liabilities, net			(532	)			(497	)			(1,047	)			(900	)
Finance (income) expense			458				271				490				(3	)
Amortization of premium and accretion of discount on marketable securities, net			(726	)			(482	)			(1,498	)			(1,010	)
Decrease in trade receivables, net			4,657				4,852				2,817				1,132
Decrease (increase) in prepaid expenses and other current and non-current assets			222				(56	)			4				(2,174	)
Decrease in deferred contract acquisition costs			888				2,323				3,955				5,709
Increase (decrease) in trade payables			5,575				(1,649	)			5,822				(2,343	)
Increase (decrease) in accrued expenses and other current liabilities			15,991				153				13,473				(7,789	)
Increase (decrease) in deferred revenues			(8,943	)			611				2,759				9,167
Increase in other long-term liabilities			1				1,248				370				2,847
Net cash provided by (used in) operating activities			12,396				6,234				30,150				(1,298	)
Cash flows from investing activities:
Investment in equity securities			(140	)			-				(465	)			-
Purchase of property and equipment			(193	)			(149	)			(290	)			(329	)
Proceeds from short-term deposits			16,000				36,500				16,000				73,500
Investment in marketable securities			(16,332	)			(13,452	)			(30,459	)			(23,809	)
Proceeds from maturity of marketable securities			13,242				16,123				25,815				26,583
Proceeds from restricted deposits			-				-				170				-
Capitalization of software development costs			(1,055	)			(911	)			(2,075	)			(1,478	)
Net cash provided by investing activities			11,522				38,111				8,696				74,467
Cash flows from financing activities:
Proceeds from exercise of options			3,180				479				3,603				1,021
Proceeds from employees share purchase plan			903				1,107				1,782				2,301
Net cash provided by financing activities			4,083				1,586				5,385				3,322
Effect of foreign currency exchange rate changes on cash, cash equivalents, and restricted cash			(330	)			(775	)			(781	)			(966	)
Increase in cash, cash equivalents and restricted cash			27,671				45,156				43,450				75,525
Cash, cash equivalents and restricted cash - Beginning of period			193,002				124,797				177,223				94,428
Cash, cash equivalents and restricted cash - End of period		$	220,673			$	169,953			$	220,673			$	169,953

WalkMe Ltd.

Reconciliation from GAAP to Non-GAAP Results

(in thousands, except share and per share data; unaudited)

		Three months ended								Six months ended
		June 30,								June 30,
		2024				2023				2024				2023
Reconciliation of gross profit and gross margin
GAAP gross profit		$	59,437			$	54,303			$	118,135			$	108,003
Plus: Share-based compensation expense			534				749				1,079				1,572
Plus: Amortization of acquired intangibles			11				68				79				136
Plus: Restructuring expense			-				263				-				263
Non-GAAP gross profit		$	59,982			$	55,383			$	119,293			$	109,974
GAAP gross margin			86	%			82	%			86	%			82	%
Non-GAAP gross margin			86	%			84	%			86	%			83	%
Reconciliation of operating expenses
GAAP research and development		$	11,880			$	14,212			$	24,626			$	28,484
Less: Share-based compensation expenses			(2,326	)			(2,549	)			(4,863	)			(4,918	)
Less: Restructuring expense			-				(86	)			-				(86	)
Non-GAAP research and development		$	9,554			$	11,577			$	19,763			$	23,480
GAAP sales and marketing		$	40,127			$	39,459			$	81,555			$	83,917
Less: Share-based compensation expenses			(4,346	)			(3,944	)			(9,740	)			(8,555	)
Less: Restructuring expense			-				(964	)			-				(964	)
Non-GAAP sales and marketing		$	35,781			$	34,551			$	71,815			$	74,398
GAAP general and administrative		$	28,245			$	16,474			$	40,661			$	37,221
Less: Share-based compensation expenses			(4,249	)			(4,731	)			(8,013	)			(13,825	)
Less: Restructuring expense			-				(160	)			-				(160	)
Less: Merger transaction costs			(14,294	)			-				(14,294	)			-
Non-GAAP general and administrative		$	9,702			$	11,583			$	18,354			$	23,236
Reconciliation of operating income (loss) and operating margin
GAAP operating loss		$	(20,815	)		$	(15,842	)		$	(28,707	)		$	(41,619	)
Plus: Share-based compensation expense			11,455				11,973				23,695				28,870
Plus: Amortization of acquired intangibles			11				68				79				136
Plus: Restructuring expense			-				1,473				-				1,473
Plus: Merger transaction costs			14,294				-				14,294				-
Non-GAAP operating income (loss)		$	4,945			$	(2,328	)		$	9,361			$	(11,140	)
GAAP operating margin			(30	)%			(24	)%			(21	)%			(32	)%
Non-GAAP operating margin			7	%			(4	)%			7	%			(8	)%
Reconciliation of net income (loss)
GAAP net loss attributable to WalkMe Ltd.		$	(19,637	)		$	(13,604	)		$	(25,783	)		$	(39,727	)
Plus: Share-based compensation expense			11,455				11,973				23,695				28,870
Plus: Amortization of acquired intangibles			11				68				79				136
Plus: Restructuring expense			-				1,473				-				1,473
Plus: Merger transaction costs			14,294				-				14,294				-
Plus: Adjustment attributable to non-controlling interest			1,591				(253	)			2,291				2,247
Non-GAAP net income (loss) attributable to WalkMe Ltd.		$	7,714			$	(343	)		$	14,576			$	(7,001	)
Non-GAAP net income (loss) per share attributable to WalkMe Ltd.
Basic		$	0.08			$	(0.00	)		$	0.16			$	(0.08	)
Diluted		$	0.08			$	(0.00	)		$	0.15			$	(0.08	)
Shares used in non-GAAP per share calculations:
Non-GAAP weighted-average shares used to compute net income (loss) per share
Basic			92,777,911				88,604,385				92,053,119				87,949,871
Diluted			97,679,006				88,604,385				97,121,140				87,949,871

WalkMe Ltd.

Reconciliation of GAAP Cash Flow from Operating Activities to Free Cash Flow

(in thousands; unaudited)

		Three months ended								Six months ended
		June 30,								June 30,
		2024				2023				2024				2023
Net cash provided by (used in) operating activities		$	12,396			$	6,234			$	30,150			$	(1,298	)
Less: Purchases of property and equipment			(193	)			(149	)			(290	)			(329	)
Less: Capitalized software development costs			(1,055	)			(911	)			(2,075	)			(1,478	)
Free Cash Flow		$	11,148			$	5,174			$	27,785			$	(3,105	)
Plus: Merger transaction costs			207				-				207				-
Free Cash Flow excluding merger transaction costs		$	11,355			$	5,174			$	27,992			$	(3,105	)
Free Cash Flow margin			16	%			8	%			20	%			(2	)%

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