Q1 2024 WalkMe Ltd Earnings Call

John Lewis Streppa: I'm John Streppa, Investor Relations for Walkme, and today I'm joined by Dan Adika, CEO and co-founder, Scott Little, Chief Revenue Officer, and Hagit Ynon, our Chief Financial Officer. Before we begin, a few housekeeping items.

<unk> Investor Relations for walk me and today I'm joined by Dan <unk>, CEO and cofounder, Scott Little Chief revenue Officer, and again, our Chief Financial Officer before we begin a few housekeeping items first we are continuing to incorporate a video element to help showcase our technology and some of the great things. We're achieving here at walk me I encourage you to go to our <unk>.

John Lewis Streppa: First, we are continuing to incorporate a video element to help showcase our technology and some of the great things we're achieving here at Walkme. I encourage you to go to our IR website, ir.walkme.com, to watch it live or to replay it, 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'll 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 6 on your phone.

I our website IR Dot walk me Dot com to watch live or replay, which will be available following the conclusion of our presentation.

Speaker Change: Second for the Q&A portion of the call. Following our prepared remarks, he would like to ask a question. Please raise your hand, and the application or press star nine on your phone all call on each person in a mute. Your line at that time, you will also be prompted the unmeet yourself either through the application or by pressing star six on your phone.

John Lewis Streppa: 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. Such forward-looking statements are subject to risks, uncertainties, and assumptions, some of which are beyond our control.

Certain statements we make today may constitute forward looking statements and information within the meaning of section 27, a of the Securities Act of 1933 section 21 E 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 <unk>.

John Lewis Streppa: Financial 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 20-F filed with the Securities and Exchange Commission on March 18, 2024, and other documents filed with or furnished to the SEC. See our press release dated May 22, 2024, for additional information.

Speaker Change: 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 20-F.

Speaker Change: Filled with the Securities and Exchange Commission on March 18th 2024, and other documents filed with or furnished to the SEC see our press release dated may 22nd 'twenty 'twenty four for additional information.

John Lewis Streppa: 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 our 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 and its financial and operational decision-making.

Speaker Change: 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 private prayers and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision made.

Speaker Change: And as a means to evaluate period to period comparisons. We believe that these measures provide useful information about our 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.

John Lewis Streppa: Furthermore, 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 May 22, 2024. With that, I'll hand it over to Dan.

Speaker Change: 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 non-GAAP financial measures and key performance indicators, including the reconciliation tables see our press release dated may 22nd 2024.

Speaker Change: With that I'll hand, it over to Dan.

Dan Adika: Thank you, John. And good morning, everyone.

Dan: Thank you John and good morning, everyone. We're off to a great start in 2024, we're seeing strong execution across our strategic priorities to accelerate our top line growth.

Dan Adika: We're off to a great start in 2024. We're seeing strong execution across our strategic priorities to accelerate our top line growth. We ended the first quarter with revenue of $68.6 million, which is the high end of our guidance range, and strong expense management with a non-GAAP operating margin of 6%. We generated nearly $17 million in free cash flow in the first quarter alone, which was more than all of 2023 combined and nearly doubled what we generated in the fourth quarter.

Dan: We ended the first quarter with revenue of $68 6 million, which would be I end of our guidance range and strong expense management within non-GAAP operating margin of 6%.

Dan: We generated nearly $17 million in free cash flow in the first quarter alone, which was more than all of 2020 through combined and nearly doubled what we generated in the fourth quarter.

Dan Adika: We laser focus on delivering the best experience to our customers, and we're seeing a very positive trend on all aspects of our customer journey. The first quarter marked the biggest renewal quarter in terms of ARR up for renewal, and I'm happy to share that we had our best renewal rate in the past six quarters. We have improved our quality of service in every aspect, from support to service quality, through our customer success organization. And this also shows in our large customers.

Dan: We laser focused on delivering the best experience to our customers, we're seeing a very positive trends on all aspects and their customer journey. The first quarter Mark the biggest renewal quarters in terms of a or are up for renewal and I'm happy to share that we had their best renewal rate in the past six quarters.

We improved our quality of service in every aspect from support to service quality through our customer success organization.

Dan: And this also shows in our large customers base.

Dan Adika: We now have 42 customers paying us over $1 million in ARR, and we're seeing customers in that cohort expanding with us, are DAP, and over 100k ARR customers. Although we did not demonstrate an increase in the number of customers, and some of it was due to account consolidation in our system and some app consolidation on their side, but overall, the total ARR for both segments grew as we continue to see big expansion. We are accelerating growth, and we are on track to double Net New ARR by the end of the year.

Dan: We now have 42 customers paying us over $1 million or anything or are and we're seeing customers in that cohort is expanding with us.

Dan: Our adopt and over 100 K a our customers are.

Dan: Although we did not demonstrate an increasing number of customers and some of it was due to account consolidation in our system and some art consolidations on their side, but overall the total IRR for both segments grew as we continue to see big expansion.

Dan: We are accelerating growth and we are on track to double nephew, a our or by the end of the year.

Dan Adika: I am very pleased with our performance this quarter as we are continuing on our path to delivering on our promise. In addition, GenAI has created a huge growth opportunity for Walkme. As innovators, we're strengthening our position as a critical platform for organizations to successfully implement Gen AI into their most critical work. I spent the last few months speaking with our leading customers and learning their approach to Gen AI. They recognized the huge opportunity and change in the market.

Jenny I: I am very pleased with our performance this quarter as we're continuing on our path to delivering on our plan. In addition, Jenny I has created a huge growth opportunity for walking.

Jenny I: <unk>, we're strengthening our position as a critical platform for organizations to successfully implement and AI into their most critical workflows I spend the last few months speaking with our leading customers and learning their approach to Jenny I, they recognize the huge opportunity and change in the market.

Dan Adika: Enterprises are rushing to infuse Gen AI into every aspect of every worker. The success and scale of AI transformation will be the success of inserting Gen AI capabilities into the daily processes of every single employee right in the flow. BCG is telling their clients that 70% of their AI efforts need to go into change management and processes related to people. Think about it for a second.

Jenny I: Enterprises are rushing to infuse Jenny I in every junction of every workflow the success and scale of air transformation will be the success of inserting Jenner Yang capabilities into the daily processes of every single employee writing the floor for <unk>.

Speaker Change: C. G is telling their clients that 70% of their AI airports need to go into change management and process related to people.

Speaker Change: Think about it for a second in order to truly make Jenny I work for employees. They have to know what AI can do for them and its capabilities how to build the right prompt to get what they need and they have to know when and where to use it and how it feeds to their daily workflows. This is just too complex.

Dan Adika: In order to truly make Gen AI work for employees, they have to know what AI can do for them and its capabilities, how to build the right prompt to get what they need, and they have to know when and where to use it. This is just too complicated. If an organization wants to get Gen AI in front of all of their employees, they must find the path to success.

Speaker Change: If organization wants to get journey in front of all of their employees. The must find the path to success and that path is to be contextual Interflora fork and make AI seamless for the employees.

Dan Adika: And that path is to be contextual in the flow of work and make AI seamless for the employees. With that, I'm very proud to introduce Walkme, Walkme's new Gen-AI contextual co-pilot. It's a completely new experience for the employee in the enterprise.

Speaker Change: With that I'm very proud to introduce walk me X y.

Speaker Change: Walking these new Gen AI contextual copilot, it's a completely new experience for the employee and the enterprise Woken me ex allowed them to use gene AI capabilities in the flow of work on top of any workflows. We combined the power of general purpose Llm's with our proprietary <unk> technology.

Dan Adika: X allows them to use JNI capabilities in the flow of work on top of any workflow. We combined the power of general-purpose LLMs with our proprietary DeepUI technology that understands visual interfaces like a human does. And we created a new kind of co-pilot, an always-on co-pilot that offers proactive AI assistance contextually in the flow of work. We're basically making AI real for everyone. Walkme X offers AI power capabilities, such as AI answers, assistant reading, generative writing, form validation, and text to action automations that only Walkme can deliver across any application. Walkme X can also work with any other co-pilot service.

Speaker Change: That understand the visual interface like a human dialogue and we created a new kind of copilot and always on copilot that offers proactive AI assistant contextually in the flow of work, we basically making AI room for everyone.

Speaker Change: Falcon X offer AI powered capabilities, such as AI answers assistant reading generating writing formality Asian index to action automation that only walk me can deliver across any application walk me X can also work with any other copilot service.

Dan Adika: We believe that every company in the world needs Walkme X to ensure the success of their Gen AI strategy. We've started using Walkme X internally, and it's showing improvement in our support and IT departments. We're now exposing it to select few customers and exploring endless use cases together. As you can hear, I'm very excited about Walkme X and about the future of Walkme.

Speaker Change: We believe that every company in the World need Walk me X to ensure the success of their journey ice strategy.

Speaker Change: We've started using walk me ask internally and it's showing improvement in our support and ITT Parkman, we're now exposing it to select few customers and exploring endless use cases together.

Speaker Change: As you can hear I'm very excited about welcoming X and about the future of walking for 12 years, we've been building thousands of copilot experiences on top of the best Enterprise application and now Jenny I has opened so many new use cases in so many new possibilities for US walk me X and they are transformation.

Dan Adika: For 12 years, we've been building thousands of co-pilot experiences on top of the best enterprise applications. And now, GenAI has opened so many new use cases and so many new possibilities for us. WalkmeX and AI Transformation will be huge expansion growth drivers for our business in the coming quarters. We're officially launching WalkmeX at Realize, our annual customer and partner event, on June 18. But we're not stopping here.

Speaker Change: Will be huge expansion growth drivers for our business in the future quarters. We were officially launching walk me exits realized our annual customer and partner event on June 18.

Speaker Change: But we're not stopping here.

Dan Adika: For years, we've had the best attendant contextual automation thanks to our deep UI technology. And now we're adding backend automation as well. Walkme will be the only dApp in the market to offer full attendant and unattendant automation baked right into the platform. This opens up a completely new dimension of use cases for our customers. They can now create workflows that will trigger backend actions aside from UI actions, a full automation experience.

Speaker Change: For years, we've had the best attendance contextual automation, thanks to our <unk> technology and now we're adding backend automation as one walk me will be the only docked in the market to offer full attended and unattended automation baked right into the platform.

Speaker Change: These open up a completely new dimension of used cases for our customers. They can now create workflows that will trigger backend action aside with you I actions.

Speaker Change: Full automation experience.

Dan Adika: With our focus on people first, our contextual DPI technology, Gen-AI capabilities, and now backend automation, we are strongly positioned to disrupt the hyperautomation and RPA market. Stay tuned for upcoming releases as we start incorporating these capabilities into our platform.

Speaker Change: With our focus on people first our contextual DPI technology Gen AI capabilities and now backend automation, we are strongly positioned to disrupt the hyper automation and RBA market stay tuned for upcoming releases as we start incorporating these capabilities into our platform.

Dan Adika: Overall, Q1 has been the perfect kickoff to what will be a very important year for Walkme. We have so much innovation rolling out now, and with a very strong balance sheet, we are making strategic investments, and I'm sure our powerful technology will forever change the way Gen AI and automation are operated in the enterprise. From quarter to quarter, it's becoming much more clear to me that the opportunities for Walkme are endless.

Speaker Change: Overall Q1 has been the perfect kickoff to what will be a very important year for walking.

Speaker Change: We have so much innovation rolling out now and with a very strong balance sheet, we're making strategic investment and I'm sure. Our powerful technology will forever change the Wade Jurney iron automation are operated in the enterprises.

Speaker Change: From quarter to quarter is becoming much more clear to me that the opportunities for walk me are endless we are driving the adoption of new technologies and powering them with automation data and new experiences. We're laser focused on accelerating growth and doubling net and we are in 2024 that is our main kpis.

Dan Adika: We are driving the adoption of new technologies and powering them with automation, data, and new experiences. We're laser focused on accelerating growth and doubling net new ARR in 2024. That is our main KPI for 2024.

Speaker Change: 2024, the company is producing cash and committing to making the necessary investment needed to accelerate performance.

Dan Adika: The company is producing cash and committing to making the necessary investment needed to accelerate performance. We have already moved 25% of R&D to focus on our AI products and will be investing in the acquisition of additional AI talent and functionality. These past few quarters have been a big transformation journey for Walkme. We have tackled every process and every challenge and proved that we are a strong and resilient company that is highly adaptable to change. I want to take this opportunity to thank our employees for all their hard work and amazing execution. We are truly one Walkme. And with that, I'll hand it over to Scott to discuss our go-to market.

Speaker Change: We already moved 25% of R&D to focus on our AI product and we'll be investing in acquisition of additional AI talent and functionality. These past few quarters have been a big transformation journey for walking me. We've tackled every process and every challenge and prove that we are strong and resilient company that is highly adaptable.

Speaker Change: To change I want to take this opportunity to thank our employees for all their hard work and amazing execution were truly one walk me and with that I'll hand, it over to Scott to discuss our go to market.

Scott: Thanks, Dan and good morning, everyone I am pleased with the progress we made in the first quarter executing against our plan and making another step towards our goal to double net new <unk> in 2024, we had a good quarter across the organization with strengthen our partner public sector and enterprise businesses as plan.

Scott Little: We had a good quarter across the organization, with strength in our partner, public sector, and enterprise businesses, as planned. Last quarter, we highlighted the change in our go-to-market approach by leading with workflows and bringing the ROI that our platform delivers into the conversation across the lifecycle of our customers, from pre-sales to implementation to customer success. Customer value and ROI are the common themes as we focus on the processes that organizations use to execute their business.

Speaker Change: <unk> <unk>.

Speaker Change: Last quarter, we highlighted the change in our go to market approach by leading with workflows and bringing the ROI that our platform delivers into the conversation across the lifecycle of our customers from pre sales to implementation to customer success customer value and ROI are the common themes as we focus on the workflows.

Speaker Change: That organizations used to execute the business.

Scott Little: Our sales force is engaged and enthusiastic about how this is responding to our customers and performing throughout the sales cycle. We are very excited about the expansion opportunities we have in front of us as we're increasing the reach of our platform and meeting our customers where they are seeing the biggest friction within their organization. Walkme X is a fantastic opportunity as workflows are increasingly reengineered to include AI in the updated tech stack.

Speaker Change: Our sales force is engaged and enthusiastic about how this is resonating with our customers and performing throughout the sales cycle.

Speaker Change: We are very excited about the expansion opportunities we have in front of us as we're increasing the reach of our platform and meeting our customers where they are seeing the biggest friction within their organizations walk me acts as a fantastic opportunity as workflows are increasingly reengineer to include AI and the updated tech stack our capability.

Scott Little: Our capability to deliver context for a customer across their application environments is unique to Walkme. This innovative approach to UI recognition using our patented DeepUI technology is amazing, and I've never been more excited about the opportunity in front of us.

Speaker Change: To deliver context for our customer across their application environments is unique to walk me. This innovative approach to you I recognition using our patented <unk> technology is amazing and I've never been more excited about the opportunity in front of us.

Scott Little: On the partner front, the Alliance and Channels team continues to improve and impress. I'm pleased to share that we've added Cognizant as a certified Walkme partner. With their global reach, I'm confident this partnership will yield fast results and value. We continue to see growth in the number of our partner employees that are being trained to sell and deliver our platform, which is a great leading indicator of the demand that they are seeing in the market.

On the partner front, the alliance and channels team continues to improve and impress I'm pleased to share that we've added cognizant as a certified walk me partner with their global reach I'm confident this partnership will yield fast results and value.

Speaker Change: We continue to see growth in the number of our partner employees that are being trained to sell and deliver our platform, which is a great leading indicator of the demand that they are seeing in the market.

Scott Little: To highlight this point, we recently learned from one of our Global SIs that nearly one-third of all RFPs they are now receiving include a digital adoption platform as part of the requirement. On the public sector side, we had a great quarter, which included a number of expansions, as well as a very important partnership with the State of California DMV, likely a welcome sign for those of you who drive a vehicle in California.

Speaker Change: To highlight this point, we recently learned from one of our global <unk> that nearly one third of all Rfps. They are now receiving include a digital adoption platform as part of their requirement.

Speaker Change: On the public sector side, we had a great quarter, which included a number of expansions as well as a very important land with the state of California, DMV likely a welcome sign for those of you who drive a vehicle in California.

Scott Little: We continue to grow our pipeline from both new business and existing expansions, and we're well positioned to execute on our growth goals in 2024. In the quarter, we added new customers such as Ithaca Harbors, Aptian, and Shift for Payments, while expanding our relationships with great customers like the Department of Veteran Affairs, the National Marrow Donor Program, and TPG Telecom Limited, as they continue to see the value and ROI of our platform directly impacting their business and driving the adoption of their workflow. I'm incredibly proud of the team and the progress we've made. With that, I'll hand it over to Hagit to review our financials. Thank you, Scott, and good morning, everyone.

Speaker Change: We continue to grow our pipeline from both new business and existing expansions and we're well positioned to execute on our growth goals in 2024 in the quarter, we added new customers such as Ithaca, harbors App Tien and ship for payments, while expanding our relationships with great customers like the department of veteran affairs National marrow donor.

Speaker Change: Program and TPG Telecom limited as they continue to see the value and ROI of our platform directly impacting their business and driving the adoption of their workflows.

Incredibly proud of the team and the progress we've made with that I'll hand, it over to <unk> to review our financials.

Hagit Ynon: Thank you, Scott, and good morning, everyone. I'm pleased with the result of the first quarter as we continue to improve our business model, generating nearly $17 million in free cash flow and a non-GAAP operating margin of 6% while achieving the high end of our revenue guidance range. We continue to focus on growth drivers as we move ahead into the year and make the necessary investment necessary. We expect Q1 to be the low point of our revenue growth on a year-over-year basis as we focus on accelerating our net new ARR throughout 2024 into 2025.

Speaker Change: Thank you Scott and good morning, everyone and please be the result of the first quarter as we continue to improve our business model generating nearly $17 million in free cash flow and a non-GAAP operating margin of 6%, while achieving the high end of our revenue guidance range.

Speaker Change: We continue to focus on growth drivers as we move ahead into the year and make necessary investments required. We expect Q1 to be the low point of our revenue growth on a year over year basis, as we focus on accelerating our net new a O L. Throughout 2020 full into 2025.

Hagit Ynon: Our innovations in AI will be a catalyst for future growth opportunities over time. Gen AI continues to attract increased IT investment within our enterprise customer base. And with Walkme X, they can ensure ROI from the technology investment. With that, let's turn to the numbers.

Speaker Change: Our innovations in AI will be a catalyst for future growth opportunities overtime, Jenny I continues to attract increase I T investment within our enterprise customer base and with what can the X. They can ensure all iPhone technology investments.

Speaker Change: With that let's turn to the numbers.

Hagit Ynon: I would like to note that when discussing gross margin, operating expenses, operating income, net income, and free cash flow, I will be referring to non-GAAP numbers. Our total revenue for the first quarter was $68.6 million, at the high end of our guidance range. We grew subscription revenue for the quarter by 6% year-over-year, with a subscription gross margin of 90.7%, a new high. Our professional services revenue for Q1 was $4.1 million, slightly below our plan, but in line with our internal partner strategy and the shift to outcome-based projects. We are forecasting a similar level of PS revenue in the coming quarter.

Speaker Change: I would like to know did when discussing gross margin operating expenses operating income net income and free cash flow I will be referring to non-GAAP numbers our total.

Speaker Change: Total revenue for the first quarter was $68 6 million.

Speaker Change: High end of our guidance range, we grew subscription revenue for the quarter by 6% year over year with subscription gross margin of 97% and you Hi, we are pleased with this best in class gross margin level.

Speaker Change: Professional services revenue for Q1 was 4.1 million slightly below our plan, but in line with our internal part of the strategy and the shift to outcome based project. We are forecasting a similar level of PS revenue in the coming quarters.

Hagit Ynon: Gross Margin was 20% in Q1, a significant improvement from nearly breaking-even in the first quarter last year, driven by better workforce utilization. Our total gross margin for Q1 was 86.5%, up from 82.8% in Q1 of last year. Gross profit was $59.3 million, up 9% year-over-year.

Speaker Change: P. S. Gross margin was 20% in Q1, a significant improvement from a nearly breakeven in the first quarter last year, driven by better work force utilization.

Speaker Change: Our total gross margin for Q1 was 86, 5% up from 82, 8% in Q1 of last year gross ball fleet was $59 3 million up 9% year over year.

Hagit Ynon: For Q1 OPEX, we outperformed our initial plan, largely driven by employee-related costs, additional efficiencies, and a one-time saving in GNA that we expect will not occur again in the second quarter. We are committed to investing in our future growth opportunities as we balance our profitability with accelerating growth opportunities. R&D expenses were $10.2 million, representing 15% of revenue, in line with last week's budget.

Speaker Change: For Q1, Opex, we outperformed our initial planned largely driven by employee related costs additional efficiencies and a onetime savings in G&A that we expect will not occur again in second quarter, we are committed to investing in our future growth opportunities as we balance that with profitability.

Speaker Change: Accelerating growth opportunities.

Speaker Change: R&D expenses were $10 2 million, representing 15% of revenue in line with last quarter, we continue to invest in our core platform strategic data products and AI capabilities, including additional talent to support our AI initiatives.

Hagit Ynon: We continue to invest in our core platform, strategic data products, and AI capabilities, including additional talent to support our AI initiatives. Sales and marketing expenses were $36 million, or 53% of revenue, an improvement from 60% in Q1 of last year. We believe that we are well-resourced for the near-term growth opportunities, and we look to add additional headcounts in the coming quarter. GNI expenses were $8.7 million, or 13% of revenue, down from 14% in Q4 and below 18% in Q1 last year.

Speaker Change: Sales and marketing expenses were 36 million or 53% of revenue an improvement from 60% in Q1 of last year. We believed that we are aware of the source for the near term growth opportunities and we look to add additional headcount in the coming quarters.

Speaker Change: G&A expenses were $8 7 million or 13% of revenue down from 14% in Q4 and below the 18% in Q1 last year, we believe that our G&A expenses will be turned to a similar level of Q4, as we benefited from better than anticipated collections and other one time saving.

Hagit Ynon: We believe that our GNA expenses will return to a similar level of Q4 as we benefited from better than anticipated collections and other one-time savings that we do not expect to repeat going forward. Q1 operating income was $4.4 million, or 6.4% of revenue, an improvement from a loss of $8.8 million, or a negative 13%, in Q1 last year. Net income for the quarter attributed to Walkme was $6.9 million, or 10% of revenues, compared to a loss of $6.7 million, or a negative 10% of revenue, in Q1 last year. Net income per share for the quarter was $0.07 using 96.6 million fully diluted weighted average shares outstanding, compared to a loss of $0.08 in Q1 last year.

Speaker Change: Instead, we do not expect to repeat going forward.

Speaker Change: Q1, operating income was $4 4 million or six 4% of revenue an improvement from a loss of $8 8 million or a negative 13% in Q1 last year net.

Speaker Change: Net income for the quarter attributed to walk me was $6 9 million or 10% of revenues compared to a loss of $6 7 million or a negative 10% of revenue in Q1 last year net.

Speaker Change: Net income per share for the quarter was seven cents using $96 6 million fully diluted weighted average shares outstanding compared to a loss of eight cents in Q1 of last year in.

Hagit Ynon: In Q1, we generated $16.6 million in free cash flow, an improvement from the cash burn of $8.3 million in Q1 last year. Our free cash flow margin for the quarter was 24% compared to a negative 13% last year. On Free Cash Flow, we benefited from seasonality and strong collections that were well ahead of our expectations. Going forward, we will continue to generate cash, but not at this level. For the full year, including our result for the first quarter, we expect to be ahead of our original plan. We ended the quarter with $340 million in cash equivalents, short-term deposits, and marketable securities. We continue to explore opportunities to deploy our capital in ways that can help to accelerate our growth.

Speaker Change: In Q1, we generated $16 6 million in free cash flow an improvement from the cash burn of $8 3 million in Q1 last year, our free cash flow margin for the quarter was 24% compared to a negative 13% last year.

Speaker Change: Free cash flow, we benefited from seasonality installed collections that were well ahead of our expectations going forward, we will continue to generate cash but not at these levels.

Speaker Change: For the full year, including all is all for the first quarter, we expect to be ahead of our original plan.

Speaker Change: We ended the quarter with $340 million in cash cash equivalent short term deposits and marketable securities. We continue to explore opportunities to deploy our capital in ways that can help to accelerate our growth.

Speaker Change: Turning now to guidance, we are pleased with the pull this in the first quarter and we believe we have turned the corner on our year over year revenue growth.

Hagit Ynon: We are pleased with the progress in the first quarter, and we believe we have turned the corner on our year-over-year revenue growth. We remain committed to increasing growth throughout 2024 and expect our subscription revenue to be higher for the remainder of the year compared to what we saw in the first quarter. Given our outperformance in the first quarter and the expectation that we will see some improvement in operating levels throughout the year, we are raising our full-year operating income guide.

Speaker Change: We remain committed to increase growth throughout 2020, full and expect our subscription revenue to be higher for the remainder of the year compared to what we saw in the first quarter.

Speaker Change: Given our outperformance in the first quarter was an expectation that we will see some improvement in operating leverage throughout the year, we are raising our full year operating income guidance.

Hagit Ynon: For the second quarter, we expect revenue in a range of $69 million to $70 million and a non-GAAP operating income in a range of $2.3 million to $3.3 million. For the full year of 2024, we expect revenue in a range of $279 to $283 million, and we are raising our non-GAAP operating income guidance to a range of $12.5 million to $15 million. Thank you, and now we will take your questions.

Speaker Change: For the second quarter, we expect revenue in the range of 69 million to 70 million and a non-GAAP operating income in the range of $2 3 million to $3 3 million.

Speaker Change: For the full year of 2024, we expect revenue in the range of 279 to 283 million and we are raising our non-GAAP operating income guidance to a range of $12 5 million to 15 million.

Speaker Change: And now we will take your questions.

John Lewis Streppa: We will now turn to the Q&A portion of the call. As a reminder, when called upon, I'll unmute your line, and you'll be prompted to unmute yourself. Our first question will be from Scott Berg from Needham, followed by Josh Baer from Morgan Stanley. Scott, your line is now open.

Speaker Change: We will now turn to the Q&A portion of the call.

Speaker Change: As a reminder, one called upon all on mute your line and you'll be prompted to on mute yourself.

Our first question will be from Scott Berg from Needham followed by Josh Baer from Morgan Stanley.

Scott Randolph Berg: Hi everyone, thanks for taking my questions. I guess I have a question for either Dan or Scott.

Speaker Change: Your line is now open.

Speaker Change: Hey, everyone nice quarter. Thanks for taking my questions I guess, a question for either Dan or Scott.

Speaker Change: End of the year, and certainly selling more positive or at least more convicted on your ability to.

Speaker Change: You get to your ALR goals to double that on a year over year basis, I guess, how do we think of the composition of that they are this year versus maybe prior years is it more balanced towards new customers.

Dan Adika: At the end of the quarter, you certainly sound more positive or at least more convicted on your ability to get to your ARR goals to double that on a year-over-year basis. I guess how do we think of the composition of that ARR this year versus maybe prior years? Is it more balanced towards new customers, you know, cross-sells expansion? Is it, I guess, customers in the above 100k cohort or maybe the million K cohort? Any, any, you know, maybe additional color on what that looks like this year would be helpful. Thank you.

Speaker Change: Cross sells expansion is it I guess customers on the 100, K cohort or maybe a million or at any any maybe additional color on what that looks like this year would be helpful.

Dan Adika: So I want to start, and Scott's been free to add, so I think it's keeping similar, I would say, trends. Mainly, we're seeing expansions, big expansions with Dapp customers and with existing customers. We do have, obviously, new logos that we're adding in, but with the new offerings that we're adding and, obviously, with the promise of Dapp, we are focusing a lot on our existing customers, and we're focusing on large enterprises. So that's the result that we're seeing. And obviously, as Scott mentioned, partners and the Fed, this is another engine that we're starting to see coming in in the past few quarters.

Speaker Change: I will start.

Speaker Change: Please go ahead.

Speaker Change: So I think.

Brian: Thanks, Brian.

Speaker Change: Mainly we're seeing expansion.

Brian: Thanks.

Brian: We've got customers.

Speaker Change: We do.

New logos that we're adding in.

Speaker Change: The new offerings.

Speaker Change: It was a problem.

Speaker Change: We are focusing a lot.

Speaker Change: Customers.

Speaker Change: Large enterprises so.

Speaker Change: The results that we're seeing.

Speaker Change: Obviously as Scott mentioned Martin.

Speaker Change: Another engine.

Speaker Change: Coming to England.

Speaker Change: Sure.

Scott Little: Yeah, here's my comment. We are executing against the plan that we put in place, and the plan is working. So, for me, we're an upmarket enterprise play, and I think the tenor of the revenue will be in line with what we've been saying for the last year or so. Heavy on expansions, but we are not walking away from a new client acquisition.

Speaker Change: Yeah, Here's my comment.

Speaker Change: We are executing against the plan that we put in place and the plan is working so for me, we're not market enterprise.

Speaker Change: And I think the tenor of the revenue will be in line with what we've been saying for the last year or so.

Speaker Change: On expansions.

Speaker Change: But we are not walking away from a new client.

Scott Little: Look at what we did in the State of California. That was a big win for us in a big state. And in the public sector business, I tend to talk a lot about Fed, and I'm very proud of the Fed business. But gosh, we've had a nice uptick in the last couple of quarters in the other portion of our public sector business, for state and local. And that's really encouraging for us. So, we will get new logos, but they'll come in the areas that we've been planning. And most of the revenue and most of the strength has been in expansions.

Speaker Change: Acquisition.

Speaker Change: What we did at the state of California that was a big win for us and a big state and.

Speaker Change: Public sector business I tend to talk a lot about that and I'm very proud of the pet business, but gosh, we had.

Speaker Change: A nice uptick in the last couple of quarters and the other portion of our public sector for state and local and that's really encouraging for us. So we will get new logos, the uptime and the areas that we've been planning and most of the revenue.

Speaker Change: Most of the strength has been in expansions.

Hagit Ynon: Very good, helpful. And then, Geet, I know your net revenue retention number is a trailing 12-month metric. Take down one more point in the quarter.

Speaker Change: Very good helpful. He Keith I know your.

Speaker Change: Net revenue retention number is a trailing 12 month metric ticked down one four points in the quarter.

Speaker Change: Does it trough out here in Q1, Q2, or how do we think about that metric here.

The balance of the year.

Dan Adika: Yeah, I will take it. So, as I said, we had our best renewal rate quarter, and, obviously, we're showing four trading quarters. So yes, we think it's going to start ticking up. As Hagit mentioned, we feel that we have turned the corner on almost every metric. And that's something that we'll see. As you know, and we said in the previous quarter, Q1-23 was our lowest quarter in terms of renewals. And it was our best quarter in terms of renewal, not just percentage-wise.

Speaker Change: Yes.

Speaker Change: So as I said, we had our best renewal rate quarter.

Speaker Change: We're showing.

Speaker Change: For the quarter so yes.

Speaker Change: Picking up.

Speaker Change: You mentioned.

Speaker Change: And as we turn the corner on almost every metric.

Speaker Change: Something that we will see as you know.

Speaker Change: We said in previous quarter Q1.

He was our lowest quarter in terms of renewal and this was our best quarter in terms of.

Jeff: No Jeff that's why.

Jeff: Also.

Speaker Change: <unk> upheld.

Speaker Change: And one of them.

Speaker Change: By far the biggest that we have so far in the company.

Speaker Change: Don.

Scott Randolph Berg: Excellent. Thank you. Congratulations again.

Speaker Change: Excellent. Thank you congrats again.

Scott: Thanks Scott.

John Lewis Streppa: Thank you, Scott. Our next question will be from Josh Baer from Morgan Stanley, followed by Pat Walravens from JMP. Josh, your line is now open.

Speaker Change: Thank you Scott. Our next question will be from Josh Baer from Morgan Stanley followed by Pat Walraven from JMP.

Speaker Change: Josh Your line is now open.

Joshua Phillip Baer: Okay, great. One for Dan and then a follow-up for Hagit. Dan, I was just hoping you could talk a little bit about the competitive landscape, specifically for Walkme X, for the co-pilot of co-pilots, like what else are you seeing out there and how is Walkme positioned.

Okay, Great one for Dan and then a follow up Rod.

Joshua Phillip Baer: And I was just hoping you could talk a little bit about the competitive landscape.

Speaker Change: Specifically for walk me ask further copilot of Copilots like what else are you seeing out there in house walk me position.

Dan Adika: Yeah, so obviously this is a new product, as I said, we're launching it. From our research, we didn't see anything that comes close to it.

Speaker Change: Yes.

Speaker Change: New products that we're launching.

Dan Adika: It's a new approach that basically, I would say, combines the Walkme capabilities with the general LLM. So this is something new. As we said, we're not going to be the LLM, even though we are offering our own AI Answers product. We come from a different perspective, which is how we can make it contextual in the flow of work to the employee. And this is something that is very unique to Walkme.

Speaker Change: Our research would be done.

Speaker Change: Something.

Speaker Change: Thank you.

Speaker Change: The new approach.

Speaker Change: I would say combined the walking capability.

Speaker Change: So this is something new.

Speaker Change: As we said, we're not going to be.

Speaker Change: Even though we are offering our own <unk>.

There is a product we're coming from a different approach, which is how we can make it a contextual in the flow for to the employee and definitely something that is very unique.

Dan Adika: We didn't see anything like this in the market. And when I talk with our customers, and I talk with many people that are, you know, leading the AI and big enterprises, they are very excited about what we have. We have already rolled it out with new customers and ourselves internally. So this is why we're super excited. And currently, we didn't see anything like it in the market.

Speaker Change: Have you been seeing.

Speaker Change: The market and when I talk with our customers.

Speaker Change: Many people that you know, leaving.

Speaker Change: Enterprises. They are very excited with what we have already rolled out.

Speaker Change: And ourselves internally. So this is why we are super excited.

Speaker Change: The only thing tomorrow.

Joshua Phillip Baer: Great, thanks, Dan. And Hagit, obviously, great free cash flow generation, and you made some comments. Can you remind us of the seasonality of free cash flow, how to think about that for the rest of the year, but then also how free cash flow margins should trend generally relative to operating income margin? Thank you. Hi Josh.

Dan: Great. Thanks, Dan.

Speaker Change: Obviously, a great free cash flow generation and you made some comments.

Speaker Change: Can you remind us on the seasonality of free cash flow how to think about that for the rest of the year. But then also how free cash flow margins should trend generally relative to operating income Marvin. Thank you well I just said.

Hagit Ynon: Hi Josh. So free cash flow, yes, a very great free cash flow with 24% margin for the quarter. On seasonality perspective, Q1, we are actually enjoying the strength in collection in Q1, and also with our performance in operating income. We are not expecting to maintain the same level. In the coming quarters, we will continue to generate cash. But for the full year, I can tell you that we see an improvement in the free cash flow margin compared to our original forecast.

Hagit Ynon: So free cash flow, yes, very great free cash.

Speaker Change: Free cash flow.

Speaker Change: Free cash flow.

Speaker Change: Margin for the quarter.

Speaker Change: Seasonality perspective Q1.

Speaker Change: Actually enjoying.

Speaker Change: The whole collection in Q1.

Speaker Change: And also with the outperformance in the open.

Speaker Change: Welcome.

Speaker Change: We are not expecting to maintain the same level.

Speaker Change: <unk>.

James: James Degenerative case, but for the full year I can tell you that.

Speaker Change: If we get to the margin.

Speaker Change: Yes.

Joshua Phillip Baer: Great. Thank you. Thank you, Josh.

Speaker Change: Great. Thank you.

John Lewis Streppa: Great, thank you, Josh. Our next question will come from the line of Pat Walravens, followed by Michael Berg. Pat, your line is open.

Joshua Phillip Baer: Alright. Thank you Josh our next question will come from the line of Pat Wall Ravens, followed by Michael Berg Pat Your line is open.

Hey, there this is Austin on for Pat.

Austin: I was hoping maybe you could just touch on Dan the.

Speaker Change: Adoption of the discovery product in Shadow AI.

Speaker Change: And the interest that youre seeing in those products.

Patrick D. Walravens: Sure. So one, some of it is baked into our offering. And as we mentioned before, we're seeing more and more employees using it. So overall, it's a good progression. We're seeing it as part of DAP and not necessarily as a standalone, so we're happy with what we're seeing. Obviously, we're rolling out more and more and more features. But we don't have numbers for a specific product line, as this is something that is more baked into our pricing. But overall, we're very pleased with that.

Speaker Change: Sure. So one some of it is baked into our offering and.

Speaker Change: We mentioned before we're seeing more and more employees using it. So overall good progression, we're seeing it as part of that but not necessarily envelope. So we're happy with what we're seeing as we're rolling out more and more and more features.

Speaker Change: We don't have numbers for us.

Speaker Change: <unk> product line.

Speaker Change: More banks that the module into our pricing.

Speaker Change: Overall, we're vertically.

Speaker Change: With that.

Dan Adika: I remember this is a treasure map, right? For us and for our customers. When we roll out Discovery, we know where the opportunities are. So we see it as a great stepping stone, and it has been a great stepping stone for us in the enterprise space. It's been a nice uptake.

Speaker Change: And remember this is a treasure map right for us and for our customers when we rollout in discovery.

Speaker Change: Where the opportunities are so we see it as a great stepping stone and it has been a great stepping stone for us in the enterprise space, it's been a nice uptick.

Scott Little: And then maybe a quick follow-up for Scott as well. You touched on the federal business. Can you just give us a sense for how that business ramped up in Q2 versus Q1 and maybe what to expect for the rest of the year? [inaudible] In general, we're expecting Q2 to be in line with where Q1 was.

Speaker Change: Great and then just maybe a quick follow up for Scott as well you touched on the federal business can you just give us a sense for how that business has ramped in Q2 versus Q1, and maybe what you expect for the rest of the year.

Speaker Change: Yes.

Scott: In general we're expecting Q2 to be in line with where Q1 was I mean, the big quarter for US is always Q3 because of the end of the.

Scott Little: I mean, the big quarter for us is always Q3 because of the end of the federal government's fiscal year. The good news for us is that we got through all of the other federal businesses too. We got all the funding bills done. So, you know, we always wring our hands as we're waiting for funding and that to come through. So now we're waiting for the money to drop into the programs that we've been working on, and so far, so good. But the big money is typically for us.

Scott: Governments fiscal year, the good news for us as we got through all of the.

Scott: And all the other federal businesses do we got all the funding bills done so we always wring our hands as we're waiting for funding and and that to come through so now we're waiting for the money to drop into the programs that we've been working on them. So far so good but the big money is typically for us in Q3.

Speaker Change: Awesome. Thank you.

John Lewis Streppa: Great. Thank you, Austin. Appreciate the question. Our next question will come from the line of Michael Berg from Wells Fargo, followed by a question from Jackson Nader from KeyBank. Michael, your line is now open.

Speaker Change: Alright, Thank you Austin and I. Appreciate the question. Our next question will come from the line of Michael Berg from Wells Fargo, followed by a question from Jackson Ader from Keybanc. Michael Your line is now open.

Michael H. Berg: Hey there, congrats on the quarter. Thanks for taking my question. I just had a quick clarification on the large customer account trends. How can we think about how those trended when you account for normalization of the account roll-ups you mentioned on the call?

Michael H. Berg: Hey, congrats on the quarter. Thanks for taking my question.

Michael H. Berg: Quick clarification on the customer large customer account trends, how can we think about how those trended when you count towards normalization.

Speaker Change: <unk> you mentioned on the ball.

Speaker Change: No.

Dan Adika: Yeah, sure. So, as I mentioned, ARR for both cohorts grew as we were seeing big extensions. At the beginning of the year, we were obviously doing some account consolidations. Obviously, in our Salesforce, there were mergers and acquisitions, and we refreshed our database. So, that was one reason.

Speaker Change: Yes, sure so as I mentioned.

Speaker Change: For both cohorts grew as were being big expansion.

Speaker Change: At the beginning of the year were being done account consolidation.

Speaker Change: Alright, Thanks for your merger and acquisition.

Speaker Change: First of all the database so that was the one we then.

Dan Adika: The second piece that I mentioned, if there is application consolidation within our customers, that can move a customer between being a DApp or not being a DApp. So, overall, we're very pleased because the ARR grew in both segments, and we are seeing more and more G2Ks adding to that list, and we're seeing the average ARR and the ARR grow for those customers. So, overall, it's a very positive sign.

Speaker Change: Is that I mentioned is there is application consolidation within our customers that can move a customer between being a that we're not being at that so overall, we're very pleased because you are growing both segments and we arent seeing more and more <unk>.

Speaker Change: And we're seeing the average IRR on the AOR growth for those customers. So overall very positive.

Scott Little: Yeah, we're really pleased with the overall enterprise performance of the business, so that's where that cohort lives.

Speaker Change: That we're really pleased with the overall enterprise.

Speaker Change: The business, so and that's where that core lists.

Michael H. Berg: Got it. Very, very helpful. And then another follow up.

Speaker Change: Very very helpful.

Speaker Change: And then another follow up so you have to walk the Ax platform.

Dan Adika: So you have the WalkmeX platform coming out here next month. We saw a demo earlier, and it seemed very impressive and pretty differentiated from what else is out on the market today. I guess there are a couple of questions on that front. One, what can we think about the feedback from customers in the pilot so far? And B, anything to point to in terms of monetization or even how customers are willing to pay extra for this platform given the potential value it can deliver?

Speaker Change: Coming out here at Maxwell.

Speaker Change: You saw a demo at where we are in some very impressive.

What else is out in the market today.

Speaker Change: I guess a couple questions one how can we think about the feedback.

Speaker Change: And the pilots.

Speaker Change: And B.

Anything to point you in terms of monetization.

Speaker Change: Customers are willing to pay extra guar spot.

As possible given the potential value.

Speaker Change: Sure.

Dan Adika: Sure, sure. One, the feedback is amazing. This is why, and I mentioned in my script, there will be more and more headcounts to focus on those products. So people are telling us, Look, we have such a big mission to move more and more and more employees to use generative AI. And it's just not easy.

Speaker Change: Sure sure. So one of the feedbacks are enabling.

Speaker Change: This is why and I mentioned create there will be more and more time to focus on those products. So people are selling.

Dan Adika: And with WalkmeX, it just makes sense. So they want the WalkmeX functionality, and they want to see it being deployed. So we're very happy.

Speaker Change: Look we have such a big nation.

Speaker Change: More and more and more employees to use generate dji and jump in.

Speaker Change: And welcome yet.

Speaker Change: So they wanted to work more functionality they want to be.

Speaker Change: So we're very happy we actually have.

Speaker Change: And the customers that waiting for us to go on the question regarding <unk>.

Speaker Change: We already rollout you feature is a welcome yet.

Dan Adika: We actually have a list of customers that are waiting for us to go and push it. Regarding monetization, we have already rolled out a few features of WalkmeX, and not the full product, and we monetize it as a consumption-based model. In terms of WalkmeX, we're going to try a few approaches between fees-based and consumption. We're seeing more and more customers like the consumption model when you say, hey, we improved X amount of workloads for you.

Speaker Change: For the product and we monetize it.

Function based model in terms of walking actually going to thrive.

Speaker Change: And between each day and consumption.

Speaker Change: Being more and more customers live.

Function model was hey, we improve X amount of workload for you. So we would try it out and we're launching it in June.

Speaker Change: But there I would say huge demand, especially when companies already invested in.

Dan Adika: So we will try it out. Obviously, we're launching it on June 18th. But there are, I would say, huge demands, especially when companies have already invested a lot of money in generative AI and made it a top priority. WalkmeX just makes sense because, Again, we're a people-centric company, and all our products are around how we can empower people and connect them to such an amazing technology like generative AI. That's what every business wants, and every enterprise wants too.

Speaker Change: A lot of money and generated.

Speaker Change: Total priority walking yet.

Speaker Change: Because.

Dan Adika: So when they see it, and you saw the demo, it just makes sense to them. So we're super excited about what's coming. So obviously, in the upcoming quarter, we'll have more concrete data on that. But from the initial, I would say, demand and initial response were super.

Speaker Change: Again, we're a people centric company and all our product is around how we can empower people.

Speaker Change: And connecting them to such an amazing technology generations AI, that's what every business more than every enterprise one so when they use.

Speaker Change: You saw the demo.

Speaker Change: So we're super excited.

Speaker Change: So obviously in the upcoming quarter, we have more concrete data on that but from a new show.

Speaker Change: NAND in the nation.

Speaker Change: Go ahead.

Scott Little: And I would add to that, from my perspective, I'm coming up on two years at the company, and I've seen us bring out a lot of capabilities, a lot of functionality, but I have not seen the kind of uptake from our early adopter customers and our early customers that we've talked about with the product about, and certainly not what I've seen from my own sales force. So my sales team is over the moon about having this conversation to talk about because that's where the money is right now.

Speaker Change: And I would add to that.

Speaker Change: From my perspective, I'll comment upon two years at the company and I've seen us bring out a lot of capability is a lot of functionality, but I have not seen.

Speaker Change: Kind of uptake from our early early adopter customers on our early customer that we've talked to have talked about and certainly not what I've seen from my own Salesforce. So my sales team is over the moon about having this conversation to talk about because that's where the money is right now people in enterprises.

Scott Little: People in the enterprise are spending money on things related to AI, and we have the secret sauce to help them get value out of that. So, very exciting for me and very exciting for my sales team.

Speaker Change: Money around things related to AI, and we have the secret sauce to help them get value out of that so very exciting for me very exciting for myself.

John Lewis Streppa: Great. Thank you, Michael. Appreciate the questions. Our next question will come from the line of Jackson Ader from KeyBank, followed by Tyler Radke from Citi. Jackson, your line is open.

Speaker Change: Great. Thank you Michael appreciate the questions. Our next question will come from the line of Jackson Ader from Keybanc, followed by Tyler Radke from Citi Jack.

Speaker Change: Jackson Your line is open.

Jackson Ader: Great, thanks. This is Kyle Dealon for Jaxnator.

Kyle deal: Great. Thanks. This is Kyle deal on for Jackson Ader, maybe just a quick one on the sales and marketing I think we've seen it come down year over year on an absolute basis for a few quarters and it was it was called out that there might be some incremental head count or incremental spend possibly here, where would you guys be focusing that spend and is there an opportunity.

Jackson Ader: Maybe just a quick one on sales and marketing. I think we've seen it come down year-over-year on an absolute basis for a few quarters, and it was called out that there might be some incremental headcount or incremental spend possibly here. Where would you guys be focusing that spend, and is there an opportunity to accelerate that given the profitability improvement here for growth in the next couple quarters?

Kyle deal: To accelerate that.

Speaker Change: Given the profitability improvement here.

Speaker Change: For growth in the next couple of quarters.

Scott Little: Hey, this is Scott. I'll take it. I'm hiring. So from my perspective, I've got room in my plan to hire. I'm hiring both salespeople as well as pre-salespeople. So Peggy has graciously let me have some of that money, so I'm excited about it.

Scott: Hey, this is Scott I'll take it.

Speaker Change: I'm sorry.

Speaker Change: So from my perspective, I'm, a I've got room in my plan to hire them hiring salespeople as well as pre salespeople. So.

Scott: I think he has great. So let me let me have some of that money. So I'm excited about it.

Dan Adika: Okay, great. And then maybe a quick follow up just on the overall macro. Has there been any improvement that you guys have seen compared to the fourth quarter? I know that you guys have called out some of the best renewal here in the last couple of quarters. What's driving that? Is there any macro within there? And then how do you guys see that playing out for the remainder of the year in terms of refactoring?

Speaker Change: Okay, Great and then maybe a quick follow up just on the overall macro as there been any improvement that you guys have seen versus the fourth quarter. I know that you guys have called out some of the best renewal here in the last couple of quarters, what's driving that is there any macro within there and then how do you guys see that playing out for the remainder of the year.

Speaker Change: Here in terms of the factory in Shanghai.

Scott Little: So I will start. Obviously, we're still conservative, and everything that relates to macro, but specifically regarding the renewal rate, I will take all the credit and give it to our team. It has nothing to do with macro, it's just us doing a better job and better processes. As I said, Sonia Langley joined last year. You really transformed the organization, and it shows in the numbers. And if there was an uptick and improvement in macro, great; it would be a better improvement.

So obviously, we're still conservative in everything that is related to macro.

Speaker Change: Regarding the renewal rates today, I wouldn't take all the credit and given to our team.

Speaker Change: Nothing to do with my books are.

A better job.

Speaker Change: Better processes.

Speaker Change: John last year, you really transformed our organization and it shows in the number.

Speaker Change: If there wouldn't be an uptick in improvement in macro Greg.

Scott Little: But we went into this quarter, and we're doing the renewals well ahead of time, the teams are working together, we added so much functionality and focused on service and support, and I can be proud of the way we're putting our customers or support teams into world class. And just looking at the numbers, we know what we needed to fix, and so we're going to take the credit for that and give it Yeah, and I would add

Speaker Change: E better improvement.

Speaker Change: But we went into this quarter.

Speaker Change: We're doing the renewals well ahead of time. The teams are working together we ended so much functionality and focused on service and support.

Speaker Change: And I can I'm proud of the way, we're building our customer support and by the board.

Speaker Change: And just seeing in the numbers. So we know what we needed to see.

Speaker Change: So I think the credit on that and not give it.

Scott Little: Yeah, and I would add to that, you know, we've had conversations before on this call in the past, end of 22, first half of 23, where we did not anticipate the pressure, the competitive pressure on price, and we lost some deals. We're not making that mistake anymore.

Speaker Change #100: Yeah, and I would add to that we've had conversations before on this call on the path.

Speaker Change #101: And a 22% with 23, where we did not anticipate the pressure the competitive pressure on price and we lost some deals we're not making that mistake anymore and I would argue that part of the reason we had such a good renewal quarter is where we did see competitive pressure, we were able to blunted.

Scott Little: And I would argue that part of the reason we've had such a good renewal quarter is that where we did see competitive pressure, we were able to blunt it with good performance and better service, and we've renewed those customers rather than having to churn them. So I get two wins out of that, right? I keep a happy client, and I've got an opportunity to then take that client and grow them in the second half of 2024. So it's a double win for us.

Speaker Change #101: A form.

Speaker Change #101: And better service and we believe those customers rather than having to turn so I get two wins out of that right I keep a happy client and I've got an opportunity to then take that Fiat and expand them in the second half of 2024. So it's a it's a double win for us.

John Lewis Streppa: Great, thank you for the question. Our next question will be from Tyler Radke from Citi, followed by Kevin Kumar from Goldman Sachs. Tyler, your line is now open.

Matt <unk>: Great. Thank you for the question. Our next question will be from Tyler Radke from Citi, followed by Kevin Kumar from Goldman Sachs. Tyler. Your line is now open Hi, This is Matt <unk> from Citi.

Tyler Maverick Radke: Hi, this is Matt Pryde from Citi. You know, curious if you made it if you've made any operational changes that drove the margin expansion during the quarter, and curious on, on, on, your confidence level about future, on, on, future margin expansion, and if it's sustainable given the investments in Walkmex.

Matt <unk>: Curious if you made it if if you've made any operational changes that drove the margin expansion during the quarter and.

Matt <unk>: I'm.

Matt <unk>: Curious on on on your confidence level, if I have an eye on on future.

Speaker Change #103: And future margin expansion and if it's sustainable given investments in.

Speaker Change #104: Walk Me X.

Dan Adika: Yeah, so yeah, we did, I wouldn't say big changes from an operational standpoint in terms of headcount or moving people around, but we are using our own products. Like, for example, we're using Walkme Enter as part of Walkme X, and we put it on our support site, and we drove support tickets by 16%. Obviously, that shows in our numbers.

Speaker Change #105: Yes, so yes, it would be into.

Speaker Change #106: I wouldn't say big changes from operational standpoint in terms of those islands are moving people around but we are using along product lines. For example, we are using walk me answer.

Speaker Change #106: Walk me accident, we put it on our support side, then we drove supported by 16%.

Dan Adika: Our engineering team, obviously, is using AI, they're much more productive, and they're writing code faster. So we're obviously a technology company, and we're leveraging our own tools and, obviously, other tools to just be much, much better. So we prove that we can improve the margins while hitting the high end of our guidance and obviously providing the best results in terms of renewal. So we're using technology the right way, and it shows in our numbers. Regarding sustainability on those margins, yes, we think we can keep them. Obviously, we can go in and invest when we need to, but overall, we're going to meet the expectations and the guidance that we're providing.

Speaker Change #106: So our number our engineering team is either using AI and they're much more productive and deriving the writing code faster. So we're obviously a technology company and we're leveraging our own tools I noticed the other tool to just be much much better. So we prove that we can improve the margin why that is.

Speaker Change #106: In the end of our guidance, obviously, providing the best result in terms of renewal. So we're using technology the right way.

Speaker Change #106: Chosen a number regarding sustainability on those margin yes.

Speaker Change #106: We can keep it obviously, we can go in and invest when we need it but overall, we're going to meet the expectations and the guidance that we're providing I think.

Hagit Ynon: I think, as Wandan said, we do have a plan in place, and we will continue to invest in our people and headcounts and in our growth drivers. We will continue to increase our headcount for the upcoming quarters as well. We haven't done anything specifically within the quarter; we haven't done anything, we haven't gone through a rip or something similar or the opposite. We have been able to enjoy some outperformance in Q1 as indicated in my script, and we see some additional benefits of operating leverage in the coming quarters as well.

Speaker Change #106: That said, we do have a plan in place.

Speaker Change #106: We'll continue to invest in.

Speaker Change #106: Head count in our go to the liver.

Speaker Change #106: Continued to weigh please go ahead Carol.

Speaker Change #106: For the in the coming quarters as well.

Speaker Change #107: You Havent done something.

Speaker Change #107: We haven't done we haven't.

Speaker Change #107: Okay.

Speaker Change #107: We do.

Speaker Change #107: And being able to enjoy some of the outperformance in Q1 as indicated today.

Speaker Change #107: And we see some additional benefit.

Speaker Change #107: The operating leveraging.

Speaker Change #108: Well, that's why we actually earn.

Hagit Ynon: That's why we actually increased our guidance on operating income for the year. On office expenses, I can tell you that we will see more or less the same level as you saw in Q1, and we are very much focused on investing in our R&D and in our go-to-market organization.

Speaker Change #109: Please tell the guidance.

Speaker Change #109: Net income for the year on August expenses I can tell you that we will see.

Speaker Change #110: More or less the same level.

Speaker Change #110: In Q1, and we are very much on it.

Speaker Change #110: Investing in R&D and in our go to market.

Speaker Change #110: Okay.

Dan Adika: Got it. And one more, shifting gears a little bit, has your willingness to consider strategic alternatives (M&A) changed at all over the last three to six months? So, obviously, we

Speaker Change #111: Got it and one more ship.

Speaker Change #112: Shifting gears, a little bit has your willingness to consider strategic alternatives M&A changed at all over the last three to six months.

Dan Adika: So obviously, with such a strong cash balance that we have, we're considering all options. We're actively discussing many different options with our board. Nothing to report yet, but obviously, our board and our team is super happy with the results. 16.6 million of cash flow in Q1, as I mentioned, more than the entire 2023. Obviously, give us the staff that's involved.

Speaker Change #113: So obviously with such a strong cash balance that we have.

Speaker Change #114: We're considering all options.

Speaker Change #114: We're actively discussing about the navy and onboard nothing to report yet.

Speaker Change #114: Lastly, our board and our team is Super happy with the result.

Speaker Change #114: Yeah.

Speaker Change #114: Cash flow in Q1, as I mentioned more than the entire 2023.

Speaker Change #114: Yes.

Speaker Change #115: Thanks, Bob.

Speaker Change #116: Got it thank you guys.

John Lewis Streppa: Great, thank you, Matt. Our next question will come from the line of Kevin Kumar from Goldman Sachs, followed by Rymel Lenshao of Barclays. Kevin, your line's open.

Matt <unk>: Great. Thank you Matt. Our next question will come from the line of Kevin Kumar from Goldman Sachs, followed by Ron My lunch hour of Barclays. Kevin Your line is open.

Kevin Kumar: Hi, thanks for taking my question. I wanted to ask a follow-up to the margin question. I think the operating income guidance for next quarter is down a bit sequentially. Is that a function of Dan? I think your comments on shifting more

Kevin Kumar: Hi, Thanks for taking my question I wanted to ask a follow up to the margin question I think the operating income guidance for next quarter is down a bit sequentially is that a function of Dan your comments on shifting more R&D resources to AI and I guess in general over the next couple of quarters.

Kevin Kumar: Where are the kind of the maybe the sources for for operating leverage.

Kevin Kumar: And in line with kind of the full year guide that today. Thanks.

Hagit Ynon: I think that we shared this with you last quarter, but we are very much focused on accelerating our growth and probably less focused on operational efficiency and less on operating income. We have raised the guidance for the year, and we do anticipate that we will continue to invest, as indicated, in our business, in our headcount, and in additional areas of growth.

Speaker Change #118: I think we are.

Speaker Change #119: So that with you last quarter, we are very much a focus on accelerating our growth and finally lithium operation.

Speaker Change #118: Net.

Speaker Change #118: Income.

Speaker Change #118: Currently we have today the guidance for the year and we do anticipate to continue to innovate.

Speaker Change #118: As indicated.

Speaker Change #118: In our vehicles in our head count.

Speaker Change #118: And he has of course also taking to account with some seasonality.

Hagit Ynon: Also, take into account that there are some seasonalities that need to be taken into account. For example, in Q2, we had several marketing events. We had a very successful annuity day in May.

Speaker Change #118: I think can be taken into account in Q2, we had several marketing events.

Speaker Change #118: Yes.

Speaker Change #120: He may have.

Speaker Change #118: President.

Speaker Change #122: Customer of theirs.

Speaker Change #121: Or has it been.

Speaker Change #121: So yes, we are very much on it.

Speaker Change #121: <unk> and continue to leverage the <unk>.

Speaker Change #121: <unk> that overall.

Speaker Change #121: But as I mentioned also the best in class.

Speaker Change #121: <unk> prediction.

Speaker Change #121: We're very much focused on continuing to invest.

Speaker Change #121: Yes.

Kevin Kumar: That's helpful. Thanks.

Speaker Change #123: That's helpful. Thanks, and then we're asked about partners walk we added cognizant.

Kevin Kumar: And then we're asked about partners. Walkme added Cognizant to that list. And so Scott, maybe you can talk a bit about the traction you're seeing from the partner ecosystem and you know how they're contributing to new ARR and kind of how that kind of is faring in comparison to your expectations. It is in line with my expectations. In fact, it's a little better.

Scott: That list and Scott maybe can you talk a bit about the traction you're seeing from the partner ecosystem and you know how they are contributing to the new <unk> and kind of how that kind of visit fee.

Speaker Change #124: Bearing in comparison to your expectations.

Scott Little: It is in line with my expectations. In fact, it's a little better.

Scott: It is in line with my expectations in fact, it's a little better. So we put a lot of wood behind the arrow in terms of spend with our partner group.

Scott Little: So we put a lot of wood behind the arrow in terms of spend with our partner group. As Hagit said, that's an area where we did not make significant changes in 23 in terms of our spend profile. In fact, we grew it a little bit.

Gates: Has the gates said, that's an area, where we did not make significant changes in 'twenty three in terms of our spend profile and in fact, we grew a little bit so.

Scott Little: So I'm very excited about what we're doing there. If you look at our top GSI partners, Deloitte, KPMG, and Accenture, all of them have done well for us in the quarter, and we're expecting them to do well for us in the second half. Remember, we are attached to their change management business. That's where we get involved. They come in and do a big change. Program in support of an SAP HANA update or an update for Oracle or an update for Workday, then it's that group that comes in and brings us to the table.

Gates: I'm very excited about what we're doing now you look at our top our top.

Gates: GSI partners, Deloitte KPMG Accenture all of them have done well for us in the quarter and we're expecting them to do well for us in the second half remember we attached to their change management.

Gates: So that's where we get what we get and they come in and do a big change.

Gates: Program in support of SAP.

Gates: Hum upgrade update or an update for Oracle on uptake for Workday then.

Scott Little: So the more we see those coming down, the more we see those involving an opportunity for us to include WalkmeX. It's just going to accelerate for us, so a long-winded way of saying very pleased with our overall performance and super glad to add another high-end GSI to the space.

Gates: It's that group that comes in and brings us to the brings us to the table. So the more we see those coming down the more we see those involving an opportunity for us to include walk Me X.

Gates: It's just going to accelerate for us so.

Gates: Long winded way of saying very pleased with our overall performance and Super glad to add another high end GSI to the space.

Speaker Change #126: Got it thank you.

Kevin Kumar: Great. Thank you for the question, Kevin. I appreciate it. Our next question will come from Rymel Linchow from Barclays, followed by Keith Bachman from BMO. Rymel, your line is open.

Speaker Change #127: Alright. Thank you for the question Kevin appreciate it. Our next question will come from Raimo <unk> from Barclays followed by Keith Bachman from BMO, primarily your line is open.

Thank you.

Raimo Lenschow: Hey, two quick questions from my end. Dan, if I think about Walkme X, obviously, it's your technology and Gen AI combined. How much of a domain advantage do you have that you understand the space already? And the nature of the question is, historically, everyone was, oh, like, Gen AI can solve all world problems, and you guys have a problem, but you kind of understand the space so much better. So can you talk a little bit about that marriage of your domain knowledge of how to solve this problem and then, you know, how Gen AI then kind of makes it more powerful?

Speaker Change #129: Hey, two quick questions from my end.

Speaker Change #128: If I think about walk walk me X.

Raimo <unk>: Obviously, it's your technology and Gen AI combined like how much of the how how much of a domain.

Jennifer: Jennifer do you have that you understand the space already.

Speaker Change #132: The nature of your question historically, everyone.

Speaker Change #132: Like any I can solve all world problems and you guys have a problem, but you kind of understand the space. So much better. So can you talk a bit about that marriage of euro domain knowledge of how to solve this problem and then how Jenny I then kind of makes it more powerful and then one maybe more number of questions on that.

Raimo Lenschow: And then one, maybe more number questions on the Adapt customer numbers. I don't know if you've mentioned it before. I think in Q4, we were at 199, and now we're at 195. Does that mean we had like four attritions? Can you speak to that? Maybe that's for Hagit.

Speaker Change #133: Adapt customer numbers.

Speaker Change #134: I don't know if you've mentioned it before I think in Q4, we were at 199 and now we're at 195 does that mean, we have like four attrition can you speak to that maybe for Rajiv. Thank you.

Dan Adika: I would start with that because it's a shorter answer. As I said, there was some account consolidation, so we had two DApp customers. One acquired another, for example, or we consolidated accounts, so the number went down.

Speaker Change #135: Sure I'll start with that because of the shorter answer is I.

Speaker Change #136: Third is the one account consolidation so you get to that customer. That's one acquired another four fundamental the consolidated accounts of the number went down.

Speaker Change #135: It's not that we lost.

A lot of customers.

Speaker Change #135: What we're seeing we're seeing the VA are growing so I explained it.

Speaker Change #135: Alright.

Speaker Change #135: Comedy and stuff like that.

Speaker Change #135: Moving to the AI.

Dan Adika: But it's not that we lost a lot of customers. The opposite of what we're seeing; we're seeing that the ARR is growing. So I explained it, the majority of it was technicality and stuff like that. And moving to AI, and what we're seeing today, if you're using AI, and obviously I invite you to come to our Realize to see it in action; we showed it at our Analyst Day, but you need to know how to prompt it.

Speaker Change #135: And what we're seeing today, if youre using AI.

Speaker Change #137: You too.

Speaker Change #137: Our realized.

Speaker Change #137: Action, who showed that in our analyst day, but you need to know how two pronged if I would drive a certain product and you will <unk> and I will do is much better for you we get much better results. There is a concept in AI and generated of AI called you.

Dan Adika: If I wrote a certain prompt, and you would write a certain prompt, and I would do it much better for you, I would get much better results. There is a concept in AI, in generative AI, called content. You need to have the right content.

Speaker Change #137: You need to have the right comp.

Speaker Change #137: If you are telling the AI.

Dan Adika: If you're telling the AI, and pretend that you are a sales rep in Walkme, and you need to do X, Y, Z, and you give it all the context, you will get a much better answer. And in order for people to maximize the value of generative AI, they need to know how to prompt it to get the right results. They need to know the context, and they need to know when and where to use it. Those three things are things that are context-based.

Speaker Change #137: Pretend that you are at Sempra being welcoming you need to do X Y Z and give it all the content you will get a much better answer and in order for people to maximize the value of generating data they need to know how to prompt to get get the right result, they need to know the content and they need to know where and when and where to use those.

Speaker Change #137: Are we seeing or something that our context and this is where our proprietary technologies coming in we are basically dealing with the user and we know exactly what we need to do the walk walk me X.

Dan Adika: And this is where our proprietary technology is coming in. We are basically sitting with the user, and we know exactly what they need to do. So, what Walkme X does, it basically allows every employee to use AI, Gen AI, in their flow of work, and they don't even know they're using it. We're doing it for them. We're prompting for them. Why?

Speaker Change #137: Basically a lot every employee to use <unk> in their flow of work and they don't even know they are using it we're doing it for them were promptly for them why because we know exactly what they are trying to do we're setting the right context, we're setting the right.

Dan Adika: Because we know exactly what they're trying to do. We're setting the right context. We're setting the right prompt. So, they're getting the best out of generative AI without thinking about how to use it. That's one.

Speaker Change #137: So they are getting the best out of generating the eye.

Speaker Change #137: Without thinking how to use that's one the second piece is.

Dan Adika: The second piece is that using AI today is a very disjointed experience. You go to one tool, you have their own AI. You go to another tool, you have their own AI. Each one is different.

Speaker Change #137: Using AI today is a very much disjointed experience you go to want to have their own AI go to another tool when you have the wrong one each one different do you need to know the difference.

Dan Adika: You need to know the differences and the nuances. Walkme X solved it. Very similar to what we're doing. We're basically making it one very simple experience for the user. As I said, we're all focused on the people element and the human element. And that's what brings the power of Walkme X. And you can't do it without our engine that, one, sits on top of every application, contextual, and can be triggered all the time. So, I'm setting up the script, and you need to see it in order to fully understand it, but we're calling it an always-on co-file.

Speaker Change #138: Walk Me Act, so very similar to what we're doing we're basically making a one very simple experience for the user and they said, we're all focused about the people element in the human element and depth what brings the power of walked me yet and you can do it without our engine.

Speaker Change #138: And that one seats on top of every application context, Chihuahua and Kennedy triggered all the time, so I think you need to.

Speaker Change #138: In order to fully understand it but we're calling it an always on co pilot, it's something that is accounting.

Dan Adika: It's something that is coming to you. You don't need to go and ask for it. So, one way to think about it, and this is a quote from our customer, today's gen AI is a pool model. You go, you ask questions, and you get the result. With Walkme X, it's a push model. We're pushing it to you. We know what you're trying to do.

Speaker Change #138: Coming to you you don't need to go and ask for it. So one way to think about it in the quarter from our customer today. Gen. AI is the pool model Yugo U S answered and you get the result with walking at the push model, we're pushing into year, we know what youre trying to do let's say you are at <unk>.

Dan Adika: Let's say you're a sales rep, and you're doing something in Salesforce. We can use AI to understand that you're doing something wrong now, that you're filling that field incorrectly, and so on. You don't need to go and open AI and say, "If that answer is accurate, can I improve it, and so on, and so on." So, that difference of bringing AI to people and making it real for them is why our customers are super excited with Walkme X, because it actually makes AI real and boosts the adoption of AI within the organization. And it's proprietary to what we do, as I said in the past. Yeah, okay.

Raimo Lenschow: Yeah, okay, that's clear. Thank you.

Speaker Change #138: Revenue is doing something and so forth, we can use AI to understand if youre doing now something wrong that you were feeling that in correctly and so on you don't need to go and open a I can say is that the answer is accurate can improve it and so on and so on so that difference of bringing people in.

Making it real for them, that's why our customers are super excited to welcome yet because actually make AI real and boost the adoption of AI within the organization and its proprietary to what we do.

Speaker Change #138: Bob.

Speaker Change #139: Yeah, Okay, let's see if I can thank you.

John Lewis Streppa: Thank you for the question. I appreciate it. Our last question for the day will come from the line of Keith Bachman from BMO. Keith, your line is now open.

Speaker Change #140: Thank you for the question appreciate it our last question for the day will come from the line of Keith Bachman from BMO.

Speaker Change #141: Keith Your line is now open.

Keith Bachman: Hi, this is Brad Corrigan on behalf of Keith Bachman. Thanks for taking my question. Um, as you set out on your goal to double net new ARRs for the year and progress toward that, and what that implies for ARR growth, how do you think about the convergence of your ARR growth and your subscription revenue growth over time, particularly as we're thinking about beyond this year, you know, without providing any exact context, how should we just think about sort of the path to those two metrics? Sure, great question. Thank you.

Speaker Change #142: Oh, My God quiet on for Keith Bachman.

Keith Bachman: My question.

Speaker Change #144: As you shut up on your goal to double not new.

Keith Bachman: Yeah.

Speaker Change #145: Progression toward that and what that implies for <unk>.

Speaker Change #146: How do you think about the <unk>.

Speaker Change #147: Our growth and subscription revenue growth over time, particularly thinking about beyond next year without providing any of that.

Contact how should we just think about.

Speaker Change #148: Thanks to matrix.

Dan Adika: Sure. Sure. Great question.

Speaker Change #149: Sure Great question. Thank you. So as we said we're on a path on basically he's our targets in Q1, and we're on a path to double than they are.

Dan Adika: Thank you. So, as we said, we're on our path, and basically, we hit our targets in Q1, and we're on a path to double the net UAR for the year. So, as I said, we're happy with the first quarter and the start of the year. Obviously, if we do that and the AUR growth is double digits, obviously, that's a lagging indicator. So that means that subscription revenue will be double digits the following year.

Speaker Change #149: For the year, so as I said, we're happy with the first.

Speaker Change #149: Quarter on the start of the year, obviously, if we will do that in the AOR growth will be double digit obviously that the lagging indicators. So that means that subscription revenue will be double digits. Following year. So whatever AOR growth will end of 2024, that's probably going to be.

Dan Adika: So whatever the AUR growth will be at the end of 2024, that's probably going to be the subscription revenue growth for 2025. So obviously, our subscription revenue growth slowed down mainly because of the performance of 2022 and 2023. But obviously, if we accelerate it in 2024, we will see a subscription revenue acceleration in 2025. And obviously, if we continue to increase our net new AUR in 2025, the same pattern will follow in 2026.

Speaker Change #149: Their revenue is subscription revenue growth for 2025, so obviously, our subscription revenue growth slowed down maybe the performance of 2022 and <unk> three but obviously you are accelerating into 2024.

Speaker Change #149: <unk> revenue generation in 2025, and obviously it will continue to increase our net <unk> in.

Speaker Change #149: 2025, the same pattern will follow.

Great. Thank you.

Speaker Change #149: Great.

John Lewis Streppa: Thank you, Brad, for the question. That concludes our question and answer session. I'll now hand it back to Dan Adika, our CEO and co-founder. For closing remarks, Dan, the floor is yours.

Speaker Change #150: Thank you Brian for the question that concludes our question and answer session I'll now hand, it back to Dan <unk>, our CEO and co founder for closing remarks, Dan the floor is yours.

Dan Adika: Sure. Thanks, John. So one, everyone, thank you for joining us. Obviously, we're very excited about all the innovation, especially with Walkme Act. And so we're welcoming everyone to join us in Realize on June 18th to see it live and hear from our customers. And we're very excited about the opportunities there. And, of course, like always, I want to thank our amazing employees for all their hard work and our customers and partners. So, thank you so much for your time.

Sure. Thanks, John So on everyone. Thank you for joining obviously, we're very excited with all the innovation, especially with Wozniak and so we're welcoming everyone to join US and realized on June 18 to see it live hearing from our customers and we're very excited with the opportunity there and of course like.

Speaker Change #150: Well the way I want to thank our amazing employees for all their hard work and our customers and partner. So thank you so much further down.