WalkMe Ltd.

Good morning, and thank you for joining the WalkMe fourth quarter and full year 2023 earnings call. I'm John Strepa, investor relations for WalkMe, and today I'm joined by Dan Adika, CEO and co-founder, Scott Little, our chief revenue officer, and Hageet Yanan, our chief financial officer. Before we begin, a few housekeeping items. First, we're continuing to incorporate a video element to help showcase our technology and some of the great things we're achieving here at WalkMe. And I encourage you to go to our IR website, ir.walkme.com, to watch live or replay, which will be available following the conclusion of our presentation. Second, for the Q&A portion of the call following our prepared remarks, if you would like to ask a question, please raise your hand in the application or press star 9 on your phone. I will call on each person and unmute your line. At that time, you will also be prompted to unmute yourself either through the application or by pressing star six on your phone. 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 14, 2023, and other documents filed with or furnished to the SEC. See our press release dated February 21, 2024, 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 will provide a number of key performance indicators used by our management and often used by competitors in our industry. For more information on the non-GAAP financial measures and key performance indicators, including the reconciliation tables, see our press release dated February 21st, 2024. Now, before Dan kicks off our regular prepared remarks, we wanted to share a brief clip from our sales kickoff event earlier this year, where we debuted a new company narrative to the organization. We trust you'll come away with a solid understanding of the broader market forces we are connecting ourselves to, how we're adding more specificity into the business problems we're solving, and helping companies prepare for the wave of change AI transformation is about to unleash. Please enjoy.

After two decades of digital transformation, we find ourselves with a paradox. On one side, we have more and more powerful technology than ever. Yet, most digital transformation projects fail to meet their goals. There is a gap between the rate at which we've introduced these technologies and the value that we're getting. what we hear time and time again from customers is that their people aren't using the tools they have access to. And when they are, they're not using them to their full potential. And that's because we've been thinking about this problem the wrong way. We thought we had a technology problem. What we actually have is a change management problem. We've underestimated the amount of change all this new technology would mean for our people. And as a result, we've introduced an unsustainable level of friction into our organizations. Friction that is hiding where your technology and your people meet in the workflows that you've built to support your key business processes. Your HR workflows, like employee onboarding and performance appraisals. Your sales workflows, like lead management and sales reporting. Access management, in IT, purchase order creation, in finance, and the thousands of other workflows you might be running. And they're breaking. They're breaking. They're breaking from the weight of all of this technology change that you're asking your people to take on. Some workflows aren't being adopted at all. Others are being adopted incompletely or improperly. And even when your people are adopting those workflows correctly, it's simply taking too much time away from high-value activities. the consequences are getting in the way of you achieving your goals. Change fatigue has set in with your existing people, and it's taking way too long to ramp new employees, so you're not getting the productivity gains that you expected. Risks are increasing, as some of these workflows have key compliance and legal implications. Poor adoption means your money is tied up on software that's not used, or is taking way too long to realize value from those investments. And all of this technology that was supposed to help you be more agile is actually getting in the way of your ability to adapt quickly as market conditions change, to remain competitive, and to execute on strategic shifts. Imagine that. More change is coming. The average enterprise is already using 44 generative AI applications. This is going to explode as your existing applications introduce new AI capabilities and new AI native tools enter the market. But just like we saw with digital transformation, success from AI transformation is not guaranteed. Last fall, Boston Consulting Group studied the impact of Gen AI on their consultants. They found that consultants who use AI performed way better in certain kinds of tasks. But here's the rub. They also found a reduction in performance when generative AI was used on other kinds of tasks. Change has always been with us. Our job as leaders has always been to help people use new technologies the right way for the right activities. But AI transformation represents the biggest change to how we work in our lifetime. And it will be the biggest change management challenge organizations face in the next one to two years. And the same legacy approaches that were already failing us in digital transformation, like over-relying on traditional training or trying to manage change incrementally, aren't going to help you in a world where your applications, your workflows, and the people using them are constantly changing. That's because these legacy approaches are based on the flawed belief that change is a zero-to-one exercise. Change has no finish line. There is a better way to deal with it, and it requires three things. First, you can't solve a problem you can't see. You need a single watchtower that pinpoints all the friction in your organization, workflow by workflow, task by task, and across any number of applications. Second, you need to create experiences with people at the center. Experiences that eliminate friction, automate mundane tasks, are consistent across your organizations, and optimized for the jobs your team needs to get done. Lastly, this is not just about your existing technology. You need a tool that will help you manage through the surge of change that technologies like generative AI are about to unleash. One that helps you make better choices about what technology you're going to buy in the future and how it's adopted consistently across your company. You cannot do this on your own. You need a system to help you manage the change brought on by technology. That system is called the digital adoption platform. WalkMe is the undisputed leader in that. We pioneered this category, and many of the biggest companies in the world rely on us because we are required equipment for navigating constant change. WalkMe's app sits on top of your tech stack, giving you information about the applications deployed across your company, who's using them, what workflows they're associated with, and where friction is preventing them from being executed as intended. We then give you tools to automate routine tasks and deliver personalized guidance to people when and where they need it most. Your people get interactive in-app guidance at the moment of need, a conversational interface to kick off tasks and get answers through natural language, and helpful notifications to stay informed and remain compliant all in the flow of work. The WalkMe platform is powered by DeepUI, our proprietary AI technology that understands software the way a human does. So it automatically adjusts to the constant change in your underlying applications and can make recommendations for eliminating friction before it becomes a problem. It's delivered via web, desktop, and mobile. And prepackaged to support the key workflows where friction is most often hiding. whether that be in one application or, more commonly, workflows that span multiple apps. So you know exactly where to get started. And when you're ready, you can pick the workflows that you want to optimize next. These and 2,000 other global customers have turned to us Because we have an unmatched data-first approach that lets you see all your biggest friction points, workflow by workflow, across applications. You can customize KPIs and dashboards so that you and your leadership can keep track of how you're progressing against goals that you can define. Every year, we process over 7 billion transactions for our customers. Our security is enterprise-grade. In fact, we are the only FedRAMP-certified app. And we have world-class professional services and support that enterprises like you demand. We've solved problems for almost every workflow and application out there. So when you come to us, you can be confident we've seen it before, and we know how to get you to value quickly. We have the strongest partnerships, from the largest systems integrators in the world to regional partners you can work with. And we have the largest community of DAP professionals. So you'll always be supported. This is why we're consistently rated the number one digital adoption platform among industry analysts, and why our customers see close to 5x return when they choose Block.me. Change is a constant, folks. WalkMe can be the consistent partner to help you navigate through it.

Good morning, everyone. I hope you enjoyed Adriel's short clip from a recent SKO event. It really demonstrates how WalkMe is solving a mission-critical problem for the largest enterprise companies in the world. With that, I would like to begin. 2023 was a transformational year for us. We concluded revenue with $267 million consistent with our guidance last quarter, We ended 2023 with an ARR of $276 million. Although this was below our expectation in the beginning of the year, it was in line with our updated forecast. The macroeconomic headwinds put pressure both on renewals and new deals, mainly in the first half, and we needed to adapt fast. We made a strategic decision to focus on operational excellence and become a profitable company while investing in future growth drivers, customer value, and our foundation. I'm super happy with how fast we were able to accomplish this transformation, and I'm happy to share some of the highlights today. We shifted our business from burning $54 million in cash in 2022 to generating over $11 million in 2023. This is a $65 million improvement in our cash flow. Outstanding achievement all around, and we did it within few quarters. We've been a profitable company since Q3 2023, way ahead of our original plan. We optimized our internal structure and strengthened our executive leadership team. We added Sunil Nagdev as our chief customer officer, and we are laser-focused on delivering customer value fast. We continue to invest in our growth driver in order to accelerate our revenue growth in the upcoming years. We obtained FedRAMP certification, allowing us to sell deep into federal organization and increasing our time. It's already proving a significant contribution to our ARR. We signed a new global partnerships and expanded our relationships with some of our top partners, including Deloitte, Accenture, Tech Mahindra, among others. We launched a new partner program, Propel, which is already showing signs of early success. And we became an official AWS marketplace seller, offering our customers the opportunity to buy WalkMe through their AWS budgets. On the product side, we launched WalkMe Discovery for enterprises to unlock full visibility into their tech stack and have seen tremendous success now, covering over 7 million employees worldwide, growing more than 75% in Q4 over Q3. We continued to distribute WalkMe Workstation to our top customers while utilizing it for their everyday enterprise workflow needs. we launch our unique AI offering focused on tracking shadow AI visibility and adopting new AI technologies. We are giving enterprises organizations the foundation they need to take immediate action and achieve change management at scale while ensuring safety and privacy. We continue to invest deeply in our advanced proprietary DeepUI AI technology. DeepUI learns and understands every user interface like a human. It is the foundation of our existing product lines and our vision of a powerful AI text-to-action solution. On our market category, we saw the release of market guides from all the major analyst firms, including Gartner, IDC, and Forrester. This was a huge testament to the growing demand and DAP inquiries coming from enterprises. We were named leaders and star performers in the Everest Peak metrics and leader of the Forrester New Wave. We saw DAP featuring over seven different Gartner hype cycles, which demonstrates the depth of our technology use cases and its influence across the digital workplace. We're entering 2024 stronger than ever. We are better as a team, profitable, and generating cash with a very strong balance sheet. We have a better product with a wider offering, and we're leading the Dapp market. These changes are felt in our Q4 result. We ended the year with a strong Q4, surpassing our expectation, generating $4.8 million in operating profit and $8.4 million in free cash flow on a non-GAAP basis. another record high profitability milestone. We grew our subscription revenue by 8% year over year to over 63 million, and we reached a new high of 199 Dapp customers and 41 customers paying us over $1 million in ARR. We've proven in 2023 that with the required measure and the right processes in place, the WalkMe engine can produce cash at scale. Q4 marks the end of our transformational phase, and now we turn to accelerating net ARR growth in 2024. Our path ahead is very clear as we aim to double the 2023 net new ARR in 2024 to a double digit ARR growth, which will drive a revenue growth acceleration in 2025. We continue to invest in our strategic growth drivers, driving expansion opportunities from G2K enterprise companies, accelerating our DAB business, which showed its true strengths in our GTM consistently throughout the last two years. delivering value faster for our customers by focusing on key enterprise workflows and on our partner ecosystem as a growing source of revenue. I'm excited about our upcoming product roadmap. We will focus on delivering greater value to our customer base with the launch of workflow accelerators. Workflow accelerators is positioned to be a game changer in how we sell and deliver the WalkMe value. This will also be a big contributor to ensure faster customer value, which will result in higher customer retention and faster expansions. Another exciting product is our new version of our workstation product that is evolving into a true enterprise workflow co-pilot for employees. We have many more exciting announcements coming up in the next few months regarding AI in the workplace and how the next generation of DAP will play a key role in enterprise technology adoption. To summarize, 2024 will be a very exciting year for us. I'm thrilled for the upcoming innovations and the execution of the team aiming to accelerate ARR growth and deliver the DAB value to our customers at scale. I want to take a moment and thank our employees for their amazing execution in 2023. And to all of our partners, customers, and investors, thank you for your continued support and belief in our vision and mission. We are shaping the future of digital workplace, and we will continue to innovate and scale our business. Now, I'll hand it over to Scott, our CRO. Scott, over to you.