WalkMe Ltd.

Today, ladies and gentlemen, welcome to the WalkMe first quarter earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. John Strepa, head of investor relations. Please go ahead.

Hello, and thank you for joining our first quarter 2022 earnings call. I'm John Strepa, head of investor relations at WalkMe, and today I'm joined by Dana Dika, CEO and co-founder of Rafi Sweary, President and Co-Founder, and Andrew Casey, our Chief Financial Officer. Certain statements we make today may constitute forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 that relate to our current expectations and views of future events. These forward-looking statements are subject to risks, uncertainties, and assumptions, some of which are beyond our control. Actual outcomes may differ materially from the information contained in the forward-looking statements as a result of a number of factors, including those set forth in the section titled Risk Factors in our annual report on Form 20F filed with the Securities and Exchange Commission on March 24, 2022, and other documents filed with or furnished to the SEC. See our press release dated May 23, 2022 for additional information. In addition, certain metrics we will discuss today are non-GAAP metrics. The presentation of this financial information is not intended to be considered in isolation or as a substitute for or superior to the information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. We believe that these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. Further, throughout this call, we provide a number of key performance indicators used by our management and often used by competitors in our industry. For information on the non-GAAP financial measures and key performance indicators, including the reconciliation tables, see our press release dated May 23, 2022. And with that, I'd like to hand it off to Dan.

Thank you, John. Hi, everyone, and thank you for joining us today. I'm pleased to share that in the first quarter of the year, WalkMe grew subscription revenue 34% year-over-year to over $51 million. We continue to work on strategic deals with the leading organizations, utilizing our digital adoption platform to leverage data, to take action, and to simplify user experiences. We saw strength in the growth of Dapp customers, adding eight new Dapp customers in the first quarter, and the average ARR from Dapp customers grew to $650,000. Dapp customers are those who have embraced a data and outcome-driven approach to their digital transformation. While growing our revenue, we were also able to show operating efficiency with a non-GAAP operating margin of 33%, besting our initial guidance for the quarter. We are on a mission to fundamentally transform the productivity of humanity by unleashing the power of technology. We pioneered the digital adoption platform to guarantee that every user utilizes enterprise software to the fullest and that every organization maximizes the success of digital transformation how do we do it through the three key components of our platform data action and experience with our unique data capabilities what we provide organizations visibility into all of the digital touch points from existing workflows our deep proprietary technology understand any user interface like a human would unlocking every aspect of software and user interactions Using this data, our customers know what needs to be fixed in the digital journey and can utilize a no-code editor to enhance workflows and build beautiful experiences for the end users, delivering a best-in-class enterprise user experience through our web, desktop, mobile, and a new unified interface called Workstation. Workstation is a central hub for all employees' digital needs. The success of the end users to complete workflows has a direct impact on the business outcomes to drive the bottom line for enterprises, such as workforce improvement, risk reductions, compliance and productivity, providing a massive ROI. This is the value achieved by Walkmeet's platform. The Dapp Market category continues to receive greater market recognitions with two recent reports from Gartner Enforcers I will discuss later. Our ecosystem continues to grow This quarter, we had a record attendance at our user conference realized. In addition, we signed new partnerships, one with HCL and a technological partnership with Solonis that we will review later on. The evolution of the current macroeconomic and geopolitical environment has driven an accelerated mindset for efficiencies across the IT stack. Organizations are looking to drive more value from their existing application and empower users to make the most of these tools, instead of putting incremental budget dollars into these problems. Walkme's DApp is purpose-built to help businesses extract more value from their existing software, driving revenue and reducing costs. Our ongoing focus on global 2,000 enterprise and commercial customers with over 500 employees continues to drive our growth and validate our platform's values. As we deepen our focus on the larger customer segments, we are seeing some variability in timing of these deals, materializing in our ARR, which was the case at the end of Q1. Since then, we've seen great momentum in April and May and remain confident in our pipeline for the rest of the year. We believe that we are at the tipping point for our category, ecosystem, and demand, and see multiple levers that will give us the capability to grow more than 30% for the next three to five years as we continue to penetrate deeper into enterprise organizations. We intend to drive that growth with prudent investment as we strive to balance growth with scalability as we push towards the rule of 40. I would like to take this opportunity to invite everyone tomorrow to our first ever Investor Days in New York, where we'll outline our company vision for the future ahead, our product roadmap, detail our go-to-market focus, and how we believe we can build a scalable, durable business while delivering real ROI and value to our customers. You can join us virtually as well. Now, I'd like to dive deeper into our most important growth driver, which paved the path to scalable growth as highlighted in previous earning calls. We believe that we are at the tipping point for our category with greater recognition and rising demand for digital adoption platforms. Digital adoption is increasingly being highlighted as mission critical for driving employee productivity and adopting to changing work environments. These are crucial elements of success of digital transformation, change management, and operational efficiency. In April, Gartner published the Digital Workplace Innovation Impact Metrics. Application leaders can use this tool to streamline decision making according to business value, feasibility, and organizational ambition. Digital adoption solutions rank as the leading technology when classified by business value and feasibility. Digital adoption solutions are listed as a core ambition to digital workplace innovation strategy. Furthermore, last week, walking was recognized in the late stage vendor maturity segment in Forster's new tech digital adoption platforms Q2 2022 report, which is the first market landscape of the DAB category. According to the Forster report, global software decision makers reported that more than 40% of their organization's software spending in 2021 went to new software licenses and new custom software solutions. Dapps are emerging as catalysts for managing digital transformation with purpose-built features to enable users to do more with enterprise applications. We are thrilled with the recognition by leading analyst firms of the category that we created, and we expect more recognition to come over time as foreign-thinking CIOs and organizations focus on driving ROI with their software investments. As the world becomes increasingly connected, so do business processes and workflows. Digital adoption platforms are the way to align organizational goals, digital investment, and improving and enhancing the employee experience. Our customers are the foundation of our business and our top priority. We just concluded Realize, our annual user conference, with record-breaking attendance. I'm excited to share that over 4,000 professionals and global technology leaders registered to attend. Up 4X from our last event in 2020. During the event, we had a record number of customers and partners share their journey to digital adoption. We also shared three key product updates on our roadmap for 2022. We highlighted WalkMe Enterprise, our approach to enterprise-level digital adoption, where ADAPT is used in outcome-driven platform through data, action, and experience. WalkMe Enterprise is designed as a solution and methodology for digital adoption. Business processes and digital transformation cannot be viewed in isolation. They must have a platform on which to be deployed, measured, and iterated on. WalkMe Enterprise is that platform for our customers, and we're excited to continue to advance our platform offerings for our customers. We also introduced key enhancements that we're making throughout 2022 to WalkMe Workstation. Workstation amplifies digital transformation through the employee user experience. It enables WalkMe customers to accelerate their digital adoption strategies by enhancing employee productivity. Workstation is where employees can initiate workflows, simplify and personalize information, discovery, communication, and application usage data. Think of it as a search across the enterprise digital experience. This is where you start your journey and potentially get the job done. The new workstation enhance our existing offering to include capabilities such as enterprise search, new integration with enterprise software, which enables employees to initiate workflows and retrieve information without opening the underlying application. Employees can also complete processes through our natural language chat interface, complete personalized onboarding, and stay in the know through our desktop notification with personalized and segmented announcements. With Workstation, employees know exactly where to go to find the information and starting point for whatever they need to get their job done. Lastly, we introduce Digital Transformation Intelligence, DTI. DTI is designed for organizations to understand, manage, and measure the digital transformation initiatives. Through integration with various data sources and using WalkMe cutting-edge DPI technology, DTI unlocks visibility into the organization tech stack, from app discovery through deep usage insight across departments and users. With enhanced visibility and data, organizations can plan a successful digital adoption strategy or directly take action with WalkMe to create experiences that drive users to success. As our category and majority of our customers are early in their lifecycle journey to reach a full-dub deployment, we believe that speed to value and value realizations are critical. We invested in our customer-facing teams to support the build-out of a world-class enterprise sales force to better serve our customers and help them realize the value of WalkMeFaster. I'd like to take a moment to highlight how we partnered with a Fortune 500 auto parts retailer, achieving tangible After the deal was signed. In Q4, this customer was a new customer to WalkMe. We immediately understood the vision and strategic importance of WalkMe and signed as a DAF customer. They've invested millions in digital transformation and are now hyper-focused on accelerating and delivering on their promise of digital transformation investment, including creating a dynamic employee experience, especially important in highly competitive retail labor markets. We work with our executive leadership team to identify use cases that are projected to have meaningful impact to revenue and margins, either in time saving, first mover advantage, or upsell opportunities. In just 60 calendar days, the customer deployed their first implementation, which focused on solving a top of mind challenge, accelerating the time it takes to build, post, and fill a new job listing. Why does this matter? In today's labor market, speed is critical, especially for frontline retail employees, and even more so for this customer, who adds thousands of positions each year. To enable managers to act quickly and meet the increased volume, the customer decentralized hiring to the store labor. With this shift, store managers needed to post and fill their own roles, which was something they'd never done before. In other words, they needed to learn an entirely new, complicated, and time-consuming process during a mission-critical time. We worked hand-in-hand with our newly established dApp team to launch WalkMe on their HR system, and they've automated 60% of the steps, created a new job listing, and enabled managers to post recs 85% faster. The benefits of their Walkme implementations are twofold. Managers can now post roles and fill their hiring needs faster and focus on revenue-generating activities while increasing customer experience. And this is just the beginning for our partnership and their expected app journey. They are on track for the second release of their HR system within 45 days of their last deployment. Their next platform implementation will focus on driving in-store app sales, which are expected to generate additional higher margin revenue. We believe that if we partner on a strategic level with our customers, outcomes like this will continue to multiply as our customers advance in the lifecycle of digital adoption and realize value connecting data, action, and drive the employee experience. Let's shift to our growth drivers fueling our go-to-market and revenues. Our journey to add more experienced market leaders to lead our organization to the next level is underway. Today, I'm very excited to share that we have signed a new Chief Revenue Officer who will join us in July. Our new CRO is aligned with our focus on scaling an enterprise-class Salesforce and will help drive sales execution and higher efficiency as we strive to build deeper and more strategic relationships with our customers. We will continue to invest in our leadership team as we're going forward. As discussed in previous calls, we're focused on international expansion of our business. We continue to monitor and track the event unfolding in Ukraine. As a company, we support our fellow employees who have called Ukraine home. During the first quarter of 2022, we took a swift action to help our co-worker based in Kiev to evacuate the area if they wish to do so. Previously, we operated a small support engineering team out of Kiev. We saw no interruption in our ability to service our customers And most importantly, all of our co-workers are safe. We'll continue to support them and their families during this time. We have not seen a material impact or slowdown on our business in the Europe region. We do not have, nor do we plan to establish any relationship with organizations based in Russia or any other regions under U.S. sanctions. In the EMEA region in the first quarter, we had new and expansion deals with 59 customers and our pipeline remained robust. In our last earning call, we highlighted that we are investing in our global enterprise Salesforce and we continue to invest in building out the teams and capabilities to serve a global customer base. In the first quarter, my co-founder, Rafi Swery, opened our office in Singapore to better serve our customer base in that region.