WalkMe Ltd.

WalkMe reported Q1 2024 revenue of $68.6 million, up versus the prior-year period implied in the call, and said it was the high end of guidance. Subscription revenue grew 6% year over year, subscription gross margin was 90.7%, total gross margin was 86.5% versus 82.8% in Q1 last year, gross profit was $59.3 million, operating income was $4.4 million or 6.4% of revenue versus a loss of $8.8 million in Q1 last year, net income was $6.9 million, and EPS was $0.07. Free cash flow was $16.6 million, with $340 million in cash, cash equivalents, short-term deposits and marketable securities. For Q2, guidance is revenue of $69 million to $70 million and non-GAAP operating income of $2.3 million to $3.3 million. For full-year 2024, revenue guidance is $279 million to $283 million and non-GAAP operating income guidance was raised to $12.5 million to $15 million.

Dan Adika emphasized that WalkMe is seeing strong execution across strategic priorities, with growth being driven by customer expansions, better renewals, and a larger enterprise footprint. He framed WalkMeX and broader AI transformation as the next major opportunity, saying the product makes GenAI contextual and usable in the flow of work. His tone was upbeat and confident, repeatedly saying the company is on track to double net new ARR in 2024 and that WalkMe is investing in AI talent and functionality.

Hagit Ynon focused on the improved financial profile: $68.6 million of Q1 revenue, 90.7% subscription gross margin, 86.5% total gross margin, $4.4 million of operating income, and $16.6 million of free cash flow. She said Q1 benefited from seasonality and strong collections, but free cash flow should not stay at that level, while still expecting improvement versus the original full-year plan. She also noted Q1 was likely the low point for year-over-year revenue growth, said subscription revenue should be higher in the rest of the year than in Q1, and raised full-year operating income guidance to $12.5 million to $15 million.

Analysts pressed on the composition of ARR growth, net revenue retention, WalkMeX competition and monetization, public sector timing, margin sustainability, and whether the company might pursue strategic alternatives. Management said ARR growth is still mainly expansion-led, renewal rates hit their best level in six quarters, and the DAP customer-count decline was mostly due to account consolidation rather than lost business. On WalkMeX, they said early feedback is very strong, they see little direct competition, and monetization will likely mix consumption-based and seat-based approaches; on capital allocation, Dan said the strong cash balance means the board is discussing multiple options but had nothing to announce.