WalkMe .(WKME) - 2022 Q4 - Annual Report

Financial Performance - WalkMe achieved an Annual Recurring Revenue (ARR) of $262 million, with a 63% year-over-year growth in ARR from Digital Adoption Platform (DAP) customers[28]. - The company reported a Dollar Based Net Retention Rate of 116% and a total revenue growth of 27%[20]. - Total revenues for the years ended December 31, 2021 and 2022 were $193.3 million and $245.0 million, respectively, representing year-over-year growth of 27%[66]. - Customer subscriptions to the Digital Adoption Platform accounted for approximately 91% and 90% of total revenue for the years ended December 31, 2021 and 2022, respectively[83]. - Revenue growth is expected to moderate for the fiscal year 2023 due to increased global economic uncertainty[66]. Customer Base and Market Demand - WalkMe has over 1,800 customers globally, with 514 customers generating more than $100K in ARR, reflecting a 13% year-over-year growth[20]. - The company has 39 customers with over $1 million in ARR, showing a 26% year-over-year growth[20]. - WalkMe's DAP ARR growth accounted for 63% of total ARR, indicating strong demand for its services[21]. - The ability to attract new customers is critical for revenue growth, but many enterprises may view digital adoption platforms as unproven[75]. - The markets for the company's products are new and evolving, making it difficult to predict customer adoption and demand[68]. Operational Strategy and Goals - WalkMe aims to achieve free cash flow positivity by Q4 2023 while focusing on improved operating efficiency[37]. - The company is committed to expanding its enterprise segment and enhancing product innovations in 2023[37]. - The company anticipates continued significant expenditures on sales and marketing efforts, as well as platform development, including obtaining FedRamp certification[65]. - The company plans to aggressively hire to support strategic priorities while maintaining corporate culture, which is crucial for innovation and growth[97]. Challenges and Risks - The company may face challenges in maintaining interoperability with third-party applications and devices, which could negatively impact customer demand[77]. - Historical growth rates may not be indicative of future performance, and the company may struggle to sustain its revenue growth rate[66]. - The company faces intense competition from established companies and new entrants, which may impact market share and pricing strategies[82]. - The company may experience volatility in share price if it fails to achieve consistent revenue growth or profitability[67]. - The company is exposed to significant risks from catastrophic events, including natural disasters and geopolitical issues, which could disrupt operations and impact financial targets[110]. Compliance and Regulatory Environment - The company is subject to stringent and evolving data privacy laws, including the GDPR and UK GDPR, which impose strict compliance requirements and potential penalties for violations[153]. - Noncompliance with data privacy regulations could result in fines of up to €20 million or 4% of global annual turnover for serious violations, impacting the company's financial health[155]. - The company faces challenges in selling to government entities, including competitive bidding processes and potential changes in government contracting requirements[119]. - Compliance with export control laws is critical, as violations could result in significant penalties and reputational harm[169]. Financial Position and Capital Needs - The company may need to raise additional funds for future capital needs, which could dilute existing shares and impact growth opportunities[114]. - As of December 31, 2022, the company reported net operating loss carryforwards of $320.9 million in Israel and $14.5 million in the United States, which may be limited in their future utilization[189]. - The company faces potential tax liabilities due to changes in tax laws and interpretations in various jurisdictions, which could increase its effective tax rate and harm its financial position[184]. Technology and Product Development - Significant investments in new product development and enhancements are necessary to remain competitive in a rapidly changing market[69]. - The complexity of the company's products may lead to defects or performance failures, potentially resulting in revenue loss and customer dissatisfaction[129]. - The company relies on third-party cloud providers, and any service interruptions could adversely affect business operations and financial condition[134]. Market and Shareholder Considerations - The market price of the company's ordinary shares has experienced significant volatility, influenced by operational results and market conditions[196]. - The company may be classified as a passive foreign investment company (PFIC), which could result in adverse U.S. federal income tax consequences for U.S. holders[213]. - The company is classified as an "emerging growth company" and is eligible for reduced disclosure requirements under the JOBS Act[202].