WalkMe Ltd.

Good day and welcome to the WalkMe third quarter earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. John Strepper. Please go ahead, sir.

Hello, and thank you for joining our second quarter 2022 earnings call. I'm John Strepper, head of investor relations at WalkMe, and today I'm joined by Dan Adhika, CEO and co-founder, Rafi Swiri, president and co-founder, Scott Little, Chief Revenue Officer, 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 August 11, 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 financial 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 more information on the nine GAAP financial measures and key performance indicators, including the reconciliation tables, See our press release dated August 11th, 2022. And with that, I'd like to hand it off to Dan.

Thank you, John, and good morning, everyone. I'm proud to be here in our Tel Aviv office with all the global management team today. We're excited to share our second quarter results. We're executing against our strategy, delivering our full digital adoption platform to leading global enterprises. Our ARR from that customer is growing 60% year over year by driving expansion, use cases, and adding product lines like the newly launched workstation, our centralized digital employee hub. I'm thrilled with the progress we've made over the last two years, from selling single application use cases to now having 142 customers deploying WalkMe across four or more applications or with an ELA, now accounting for over 100 million of our ARR. This progress is what is driving us to move faster in our transition, focusing on larger enterprise with complex workflows. Overall, ARR has seen 29% growth year over year and surpassed 245 million. Our enterprise and large enterprise customers are seeing the value of DAP in this complex business environment and seeing growth expanding these accounts focusing on achieving digital transformation success with a focus on digital employee experience. I'm happy to share with you that in this quarter, we've closed our biggest deal in the company history and we've seen Three of our $1 million ARR accounts expand by a million dollars or more. This is a huge testament to the growing demand of digital adoption and value realization by our customers. Our biggest customers are getting bigger. These customers are the innovators that are driving digital strategies forward and focusing on new ways of work. As we continue to deliver value and expand within these accounts, We're also prioritizing our strategy, focusing on the right segment and the right product offering to lead our business to improve operational efficiency. We are driving our business to improve our efficiency and pushing to improve our margin and free cash flow from quarter to quarter. We improve our non-gap operating loss from Q1 by nearly $2 million, showing the underlying leverage in our operating model. We have moved fast in better prioritizing our strategic priorities, leading to this leverage and expect to see continued improvement in our margin going forward. We are growing the DAP market category and the transition of our customers to our complete digital adoption platform. We are better aligning our offering, including our products and data action and experience, with increased focus on our go-to market engine of enterprise and large enterprise customers. With our large customers, we are also moving our conversation to higher levels within the organization, driving more strategic discussions with CIOs. But in the near term, macro headwinds and budget consideration are lengthening the sales cycle. Longer-term strategic discussion with CIOs and business leaders is a positive for our business as we become more essential in our customer digital transformation effort. We are encouraged to see our pipelines continue to show robust growth. namely expansions with our enterprise and large enterprise customers and our partner ecosystems, which we believe will be more durable. On the operational side, we are prioritizing our investment spend with an intense focus on our strategic growth drivers of expanding our market category, driving growth in our partner ecosystem, and investing in areas of competitive advantage, such as our federal business. As a leadership team, we were pleased with the improvements we saw in the operating margins and free cash flow, and we'll continue to focus on profitability as we drive towards the rule of 40 that we laid out in our investor day in May. We believe that our technology and the ROI that we deliver position us well in a value-focused software spend environment. Our ability to deliver greater value has been driven by the flexibility of our digital adoption platform, which can be deployed across an entire organization to add employees in completing their unique workflows. As we work toward general availability for WorkStation, our newest product designed to be a central hub for employees to start their workflows, we are thrilled to see some of our largest customers deployed to their entire workforce. It's our first major product that complements our platform but also provides an additional revenue stream. A great example of deploying WorkStation at scale is with one of the largest U.S.-based property and casualty insurance providers. A Fortune 50 company with over 55,000 employees, will we have a strong expansion without this core? They've seen huge success using Working Workstation to drive a mission-critical change management initiative, streamlining processes, and ensuring team members completed specific regulatory requirements on a tight timeline, resulting in significant hard cost basings. They partner closely with WalkMe to establish a center of excellence that enables each business unit to develop solutions and design efficient user experiences across the enterprise's application ecosystem, from HR to sales. This customer digital adoption program has ushered in a new way to distribute information across the enterprise, changing how employees learn and work, and will continue to partner with them as they deploy on more systems. Proving value is important to us and to our customers. We invested in our pre-sales team to improve the efforts and demonstrate this value to our customers. But nothing can beat the live A-B testing by our customers. Metcash is Australia's leading wholesaler and distributor, supplying and supporting more than 100,000 businesses across a network of independent retailers and businesses in the food, liquor, and hardware industries. Medcash developed a self-service product management system for its supplier and internal team. Walk-in was deployed for its supplier-facing portal, compared to traditional change management and enablement approaches were used for its internal team. Medcash seamlessly migrated over 5,000 suppliers to the new system in less than 25% of the time it took to migrate their far smaller internal team of 140 users. With WalkMe guidance for the self-service portal, suppliers can add new products and update offering quickly. This enabled Medcash's network of independent grocers, liquor stores, and hardware stores to purchase goods and get them on their shelves and into customers' hands. As a result of this real-world A-B test experiment, Medcash introduced WalkMe to their internal users on the system. Medcash is now rolling out WalkMe enterprise-wide for their employee-facing application, as well as their customer and supplier-facing portals and websites. Another great example is WL Goran Associates, a global materials company which uses WalkMe to enable its global sales force of over 2,200 people, with cohesive, just-in-time training relevant to each user's role. Providing the right information and the right time with the proper context of each person's function has led to an 83% reduction in training time with faster feature adoption, resulting in sales leaders and sellers saving hundreds of hours a year. We continue to invest in our products. In our July product release, we released new functionalities and enhancements related to data, governance, multi-language, integration, security, and more. Notably, we introduced our newest version of Workstation to our customers. Workstation changes how employees interact with software through a desktop-based hub that brings workflow, automation, and enterprise search to the employees and simplifies employee interaction with software. In addition to Workstation, we introduced Digital Transformation Intelligence, DTI for short, to a select group of beta customers. DTI is our observability platform for digital transformation. allowing CIOs and executives to gain full insight into their software stack, including discovery and analytics. Not just on the usage level, but into the business processes and end-to-end workflows to truly measure how software is being used and how business processes are being completed. CIOs will be able to use DTI to focus their digital transformation efforts, and combined with our action and experience products, they will be able to target and deliver experiences that allow the employees to be more efficient, accurate, and happy. Now, transitioning to our category. Yesterday, WalkMe revealed the findings of a second annual State of Digital Adoption report in which we surveyed nearly 1,500 senior business leaders from enterprises across 10 countries. The research helps us take the pulse of organizations' digital transformation challenges and where the gaps still lie when it comes to digital adoptions. Some of the most compelling findings include 60% of decision makers are concerned about the effect of poor employee technology adoption on expected software ROI. This past year, on average, enterprises have only met 41% of their digital project KPI. 60% of enterprises say change management programs are no longer fit for purpose. 63% of enterprises say the one-size-fits-all approach to technology supports and training isn't applicable. So this is clearly a gap, and WalkMe can help these organizations solve these issues. According to the survey, the top five consequences of failed digital adoptions include increased security risk, operational inefficiencies and waste resources, poor employee retention, failing to adapt to industry changes, and losing a competitive edge. The survey shows that organizations increasingly realize that. Without effective digital adoption strategy, business processes improvements will fail. Another facet we'll include in the report was the growing community of WalkMeDAB professionals. The number of LinkedIn profiles that saved WalkMeAdmin grew by nearly 40% from 21 to 22, to more than 4,600. To honor the DAB profession, WalkMe recently registered the last Thursday of July as International DAB Professional Day. celebrating individuals who are advancing the use of digital technologies within the organization. In recognition of this day, we took the opportunity to officially announce the date of Telezake, our annual DAP professional event, which is taking place on October 25th to 27th, both virtually and in person. And just as DAP community continues to grow, we've also seen growth in the DAP category itself in terms of expanded application of technology, In the recent Gartner report titled Innovation Insights for Digitally Enabled Diversity, Equity, and Inclusion, DAP is cited as a DEI technology for the X equity use case, mentioning WalkMe as a sample provider. We believe this is more evidence of how DAP really levels the playing field for employees from all different backgrounds, generations, and experiences. Another example of category growth WalkMe was included in a recent Forrester report titled, Adopt Anywhere Work Strategy to Compete in the Future Tech Labor Market. The report mentioned WalkMe as an example for technology that can complement the current workforce to increase the productivity of the overall labor strategy. Our category continues to expand from our end users to that professional, and we've been working to scale our partner ecosystem to continue to drive this forward. In the past, we recognize our increased partnership with Deloitte, Accenture, HCL, and others. In this quarter, we continue to expand our relationship with these partners in geographies and executing against our combined go-to-market plan. As our efforts around the partner ecosystem continue to expand, we're seeing more significant deals being impacted by our partners. Our partner ecosystem contribution in the first half of 2022 has already eclipsed all of 2021. We saw numerous deals make a meaningful contribution to our net new ARR in Q2, including two global 2,000 customers with six-figure net new ARR deals, one a new customer and one an extension. Part of developing our partner ecosystem is delighting them as customers, and our partners are investing in their own talent to deliver WalkMe to their internal employees as well as your customers. Our partners already have hundreds of their employees certified of WalkMe or in the process. and we expect that the trend to continue to grow. As we outlined in our investor day, our partner ecosystem enabled us to expand the reach of our platform to some of the largest organizations undergoing digital transformation. We expect this focus to continue to contribute meaningfully in 2022 and scale further in 2023, as we laid out previously. Lastly, our work on FedRAMP certification continues to progress. We've invested in building out a team, capabilities, and technological infrastructure to support the public sector business. Last week, Georgia Secretary of State announced significant enhancement to Georgia's My Voter page, including the addition of WalkMe as part of a comprehensive plan to ensure voter access in the upcoming November election. In addition, we're in the process of pursuing FedRAMP and StateRAMP status and are pleased with the progress we've made so far. While undergoing the certification, we continue to gain new public sector customers, including the city of Chandler, Arizona, and large transportation customers. Our investment in our federal practice isn't just in our go-to-market strategy, but has helped us overall our entire technical infrastructure of our solution. This investment, driven by our goal of being able to serve the large federal segment, will drive greater efficiencies across our entire business, and a more nimble approach to the structure and deployment of our product going forward. Last quarter, we noted that we had assigned our new Chief Revenue Officer, and I'm pleased to be joined today by Scott Little, who started a few weeks ago. Additionally, earlier this week, we announced that we had hired Adriel Sanchez as Chief Marketing Officer. We're thrilled to reunite Scott and Adriel and have them join us to help drive greater focus on our strategic priorities and alignments. by driving increased focus on strong execution. I'd like to invite Scott to say a few words.