Last year, a double-digit number of Israeli technology firms listed on Wall Street, and most of them have posted large negative returns. One of these is WalkMe (Nasdaq: WKME), which held its IPO on Nasdaq in June 2021, at a valuation of $2.6 billion.
The share price was $31 in the offering, and, after a period of marking time under that level, in September it jumped to a peak of $33.5. Since then, however, it has weakened by 59%, to a current level of $13.8, giving the company a market cap of $1.14 billion.
WalkMe was founded in 2011 by Dan Adika (CEO), Rafael Sweary (president) and Eyal Cohen. The company has developed software that simplifies the use of complex enterprise systems. In the fourth quarter of 2021 it reported 37% growth in revenue to $53.3 million, and in 2021 as a whole revenue grew 30% to $193 million, slightly more than the average analysts' estimate.
WalkMe also reported growth of 34% in ARR (annualized recurring revenue) to $220 million in December. Nevertheless, like many growth companies that reached Wall Street last year, WalkMe is still not profitable.
CEO: "We expect accelerated growth in 2022"
For the fourth quarter, the company reported a net loss on a GAAP basis of $26.5 million, which compares with a net loss of $17.8 million in the corresponding quarter of 2020. The annual net loss was 78% higher than in 2020, at $95.8 million.
Excluding various accounting items, chiefly stock-based employee compensation, the net loss on a non-GAAP basis was $51.5 million in 2021, which compares with $29.7 million in 2020. The non-GAAP net loss in the fourth quarter was $19 million, or $0.23 per share, slightly worse than the average analysts' estimate.
WalkMe had negative cash flow from operations last year of $34.2 million. At the end of the year, after the offering held in the course of it, it had $342 million cash (which now represents about 30% of its market cap).
In its guidance, the company says that revenue in the first quarter of 2022 is expected to be up 30-32% year-on-year at $55.5-56.5 million, and that it will post a net loss on a non-GAAP basis of $19.4-20.4 million. For the full year, the company forecasts revenue of $251-255 million, representing growth of 30-32%, with an operating loss of $75-81 million, which compares with an operating loss of $50.2 million in 2021.
"We completed 2021 with great momentum by accelerating our subscription revenue landing some great new logos and expanding within some of the largest organizations in the world," Adika said. "We expect to accelerate our revenue growth in 2022 driven by our strong technology position."
As mentioned, WalkMe is one of a large number of fast-growing but non-profitable technology companies that came to Wall Street in 2021 through IPOs or mergers with SPACs.
The market welcomed these companies with open arms, and to some extent even preferred non-profitable companies, as that was seen as a sign of a company investing heavily in its future and thereby securing for itself rapid growth that in the end would yield profits. But towards the end of 2021 and in early 2022 market perceptions changed.
Against a background of high inflation and expectations of interest rate hikes, many investors now tend to prefer longstanding companies in more traditional sectors. Like WalkMe, many other Israeli technology companies are currently traded at below their IPO prices: Riskified, for example, has lost 67% of its value; Palytika has lost 33%; SimilarWeb has lost 42%; and Kaltura has lost 69%.
There are also companies with positive returns, but that have fallen a long way from their peaks following their IPOs: Global-e has given positive return of 59%; Monday.com has 26%; and SentinelOne has 11%.
The largest shareholder in WalkMe is Insight Partners, a US investment fund that has been prominent in recent years in the Israeli technology sector. It holds 28.9% of the company, a stake currently worth $329 million, versus $741 million in the IPO, giving a loss on paper of over $400 million.
Venture capital firms Scale Venture Partners, Gemini, and Mangrove Capital Partners are also substantial shareholders in WalkMe. They and Insight invested in WalkMe before the IPO, so that even after the recent decline in the company's share price, they can be presumed still to have large gains on paper on their investments.
Published by Globes, Israel business news - en.globes.co.il - on February 22, 2022.
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