- Q1 2023 total revenue of $409.8M, up 22% year over
year
- Q1 2023 subscription revenue of$339.8M, up 21% year over
year
- Total remaining performance obligations1 of $2,135.1M, up
21% year over year
- Next 12 months remaining performance obligations of
$1,206.0M, up 17% year over year
Qualtrics (NASDAQ: XM), the leader and creator of the Experience
Management (XM) category, today announced financial results for the
first quarter ended March 31, 2023.
First Quarter 2023 Financial Highlights:
- Revenue: Total revenue for the first quarter was $409.8
million, up from $335.6 million one year ago, an increase of 22%
year over year. Subscription revenue for the first quarter was
$339.8 million, up from $280.8 million one year ago, an increase of
21% year over year.
- Operating Income (Loss) and Margin: First quarter
operating loss was $(253.8) million, compared to $(290.5) million
one year ago. Non-GAAP operating income (see discussion of non-GAAP
operating income and margin measures below) was $21.6 million,
compared to non-GAAP operating income of $4.1 million one year ago.
For the first quarter, GAAP operating margin was (62)% and non-GAAP
operating margin was 5%, compared to GAAP operating margin of (87)%
and non-GAAP operating margin of 1% one year ago.
- Net Income (Loss) and Net Income (Loss) Per Share: First
quarter net loss was $(259.0) million, or $(0.43) per share,
compared to $(292.3) million, or $(0.51) per share in the first
quarter of fiscal year 2022. Non-GAAP net income (see discussion of
the non-GAAP net income measure below) for the first quarter was
$14.3 million, or $0.02 per share, compared to non-GAAP net income
of $3.4 million, or $0.01 per share in the first quarter of fiscal
year 2022.
- Cash and Cash Equivalents: Total cash and cash
equivalents as of March 31, 2023 was $806.7 million.
Confirming Status of Definitive Merger Agreement
In March 2023, Qualtrics announced that it had reached a
definitive agreement to be acquired by Silver Lake Partners in
partnership with Canadian Pension Plan Investment Board (CPP
Investments) (“Merger”). The transaction is expected to close in
the second half of 2023, subject to the satisfaction of customary
closing conditions, including the receipt of the requisite
regulatory approvals.
Q1 Business Highlights
- Formed new relationships and expanded with global organizations
including DISH, LinkedIn, Banco Compartamos, Lumen Technologies,
ISS Worldwide, State Employees’ Credit Union, Dairy Queen and
PayPal.
- Launched 18 new products and major features, including:
- A set of purpose-built applications for the frontline—every
physical or digital intersection between a customer and a
company—including Customer Journey Optimizer and Digital Experience
Analytics
- Real-time Brand Intelligence and Research Hub, innovations that
leverage the power of Qualtrics’ advanced AI to provide 24/7
insights on how marketing activations are driving customer
acquisition and engagement.
- Expanded partnerships with Twilio, Five9 and Merkle to bring
Qualtrics experience data and operational data together and extend
the power of the XM Platform to drive critical business
decisions.
- Hosted X4, the Experience Management Summit, gathering in Salt
Lake City more than 10,000 attendees from 52 countries—with 120+
breakout sessions, more than 64 hours of streaming content and
business and celebrity speakers including Delta CEO Ed Bastian,
Martha Stewart and Malala Yousafzai.
1 Remaining performance obligations represent all contracted
future revenue that has not yet been recognized, including both
deferred revenue and non-cancelable contracted amounts that will be
invoiced and recognized as revenue in future periods.
Conference Call and Financial Outlook
Qualtrics will not be holding a conference call or providing a
financial outlook due to the company's pending transaction with
Silver Lake Partners in partnership with CPP Investments.
About Qualtrics
Qualtrics, the leader and creator of the experience management
category, is a cloud-native software provider that helps
organizations quickly identify and resolve points of friction
across all digital and human touchpoints in their business – so
they can retain their best customers and employees, protect their
revenue, and drive profitability. More than 18,750 organizations
around the world use Qualtrics’s advanced AI to listen, understand,
and take action. Qualtrics uses its vast universe of experience
data to form the largest database of human sentiment in the world.
Qualtrics is co-headquartered in Provo, Utah and Seattle, and
operates out of 28 offices globally. To learn more, please visit
qualtrics.com.
Forward-Looking Statements
This press release contains express and implied “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995, including statements regarding our financial
outlook for the full year 2023. In some cases, you can identify
forward-looking statements by terms such as “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,”
“project,” “will,” “would,” “should,” “could,” “can,” “predict,”
“potential,” “target,” “explore,” “continue,” or the negative of
these terms, and similar expressions intended to identify
forward-looking statements. By their nature, these statements are
subject to numerous uncertainties and risks, including factors
beyond our control, that could cause actual results, performance,
or achievement to differ materially and adversely from those
anticipated or implied in the statements, including: the ability of
the parties to consummate the Merger in a timely manner or at all;
the satisfaction (or waiver) of the closing conditions to the
consummation of the Merger; potential delays in consummating the
Merger; the ability of Qualtrics to timely and successfully achieve
the anticipated benefits of the Merger; the occurrence of any
event, change or other circumstance or condition that could give
rise to the termination of the Merger Agreement; Qualtrics’ ability
to implement its business strategy; significant transaction costs
associated with the Merger; the risk that disruptions from the
Merger will harm Qualtrics’ business, including current plans and
operations; potential adverse reactions or changes to business
relationships resulting from the announcement or completion of the
proposed Merger; potential business uncertainty, including changes
to existing business relationships, during the pendency of the
Merger that could affect Qualtrics’ financial performance;
restrictions during the pendency of the Merger that may impact
Qualtrics’ ability to pursue certain business opportunities or
strategic transaction; our future financial performance, including
our revenue, cost of revenue, gross profit, operating expenses,
ability to generate positive cash flow, and ability to be
profitable; our ability to grow at or near historical growth rates;
anticipated technology trends, such as the use of and demand for
experience management software; our ability to attract and retain
customers to use our products; our ability to address and overcome
challenges related to the current economic downturn; our ability to
attract enterprises and international organizations as customers
for our products; our ability to expand our network with content
consulting partners, delivery partners, and technology partners;
the evolution of technology affecting our products and markets; our
ability to introduce new products and enhance existing products and
to compete effectively with competitors; our ability to
successfully enter into new markets and manage our international
expansion; the attraction and retention of qualified employees and
key personnel; our ability to effectively manage our growth and
future expenses and maintain our corporate culture; our ability to
realize cost savings and achieve other benefits related to our
restructuring efforts; our anticipated investments in sales and
marketing and research and development; our ability to maintain,
protect, and enhance our intellectual property rights; our ability
to successfully defend litigation brought against us including
potential litigation relating to the Merger; our ability to
maintain data privacy and data security; the sufficiency of our
cash and cash equivalents to meet our liquidity needs; our ability
to comply with modified or new laws and regulations applying to our
business; the impact of geopolitical events, including the ongoing
conflict between Russia and Ukraine; our ability to respond to and
overcome challenges brought by the COVID-19 pandemic, including any
new variants of the virus; our reduced ability to leverage
resources at SAP as an independent company from SAP; the effects on
our business of recent volatility in capital markets and lower
market prices for our securities; our ability to meet investor and
customer expectations and evolving regulations regarding
environmental, social and governance issues; and the increased
expenses associated with being an independent public company, as
well as Qualtrics’ response to any of the aforementioned factors.
Additional risks and uncertainties that could cause actual results,
performance or outcomes to differ materially from those
contemplated by the forward-looking statements are and/or will be
included under the caption “Risk Factors” and elsewhere in
Qualtrics’ most recent Annual Report on Form 10-K and Quarterly
Reports on Form 10-Q filed with the Securities and Exchange
Commission and any subsequent public filings. Forward-looking
statements speak only as of the date the statements are made and
are based on information available to Qualtrics at the time those
statements are made and/or management's good faith belief as of
that time with respect to future events. Readers are cautioned not
to put undue reliance on forward-looking statements, and Qualtrics
assumes no obligation to update forward-looking statements, whether
to reflect new information, events or circumstances after the date
they were made or otherwise, except as required by law.
Non-GAAP Financial Measures
To supplement our financial results, which are prepared and
presented in accordance with US GAAP (“GAAP”), we use certain
non-GAAP financial measures, as described below, to understand and
evaluate our core operating performance. These non-GAAP financial
measures, which may be different than similarly-titled measures
used by other companies, are presented to enhance investors’
overall understanding of our financial performance and should not
be considered a substitute for, or superior to, the financial
information prepared and presented in accordance with GAAP.
We believe that these non-GAAP financial measures provide useful
information about our financial performance, enhance the overall
understanding of our past performance and future prospects, and
allow for greater transparency with respect to important metrics
used by our management for financial and operational
decision-making. We are presenting these non-GAAP measures to
assist investors in seeing our financial performance using a
management view, and because we believe that these measures provide
an additional tool for investors to use in comparing our core
financial performance over multiple periods with other companies in
our industry. You should consider non-GAAP results alongside other
financial performance measures and results presented in accordance
with GAAP. In addition, in evaluating non-GAAP results, you should
be aware that in the future we will incur expenses such as those
that are the subject of adjustments in deriving non-GAAP results
and you should not infer from our non-GAAP results that our future
results will not be affected by these expenses or any unusual or
non-recurring items.
Non-GAAP gross profit, non-GAAP gross margin, non-GAAP
operating income, non-GAAP operating margin, non-GAAP net income,
non-GAAP net income per share, free cash flow, free cash flow
margin: We define these non-GAAP financial measures as the
respective GAAP measures, excluding equity and cash settled
stock-based compensation expenses, including employer payroll tax
on employee stock transactions, amortization of acquired intangible
assets, expenses related to the pending Merger transaction,
restructuring expenses, acquisition related costs, changes in the
fair value of our distribution liability for our tax sharing
agreement with SAP, and the tax impact of the non-GAAP adjustments,
as applicable.
We revised our non-GAAP definitions during the current quarter
to exclude expenses related to the pending Merger transaction and
restructuring expenses. These expenses are believed to be
non-recurring and contain factors that are beyond our control and
do not correlate with the core operation of our business. The
revisions to these definitions had no impact on our reported
non-GAAP financial measures for periods prior to the three months
ended March 31, 2023.
When evaluating the performance of our business and making
operating plans, we do not consider the items excluded from our
non-GAAP definitions (for example, when considering the impact of
equity award grants, we place a greater emphasis on overall
stockholder dilution rather than the accounting charges associated
with such grants). We believe it is useful to exclude these items
in order to better understand the long-term performance of our core
business and to facilitate comparison of our results to those of
peer companies and over multiple periods.
Qualtrics International
Inc.
Consolidated Balance
Sheets
(Unaudited, in thousands,
except number of shares and par value)
As of March 31, 2023
As of December 31,
2022
Assets
Current assets:
Cash and cash equivalents
$
806,718
$
719,892
Accounts receivable, net of allowances
384,501
537,037
Deferred contract acquisition costs,
net
88,056
81,130
Prepaid expenses and other current
assets
78,015
68,224
Total current assets
1,357,290
1,406,283
Non-current assets:
Property and equipment, net
223,328
215,645
Right-of-use assets from operating
leases
213,616
216,514
Goodwill
1,117,915
1,117,915
Other intangible assets, net
199,734
210,415
Deferred contract acquisition costs, net
of current portion
189,578
183,741
Deferred tax assets
9,318
9,625
Other assets
36,872
35,713
Total assets
$
3,347,651
$
3,395,851
Liabilities and equity
Current liabilities:
Lease liabilities
$
17,564
$
17,081
Accounts payable
129,579
142,293
Accrued liabilities
130,383
155,291
Liability-classified, stock-based
awards
510
1,053
Deferred revenue
848,445
858,186
Total current liabilities
1,126,481
1,173,904
Non-current liabilities:
Lease liabilities, net of current
portion
259,855
261,097
Deferred revenue, net of current
portion
14,387
16,717
Deferred tax liabilities
11,228
12,447
Other liabilities
35,884
27,666
Total liabilities
$
1,447,835
$
1,491,831
Commitments and contingencies
Equity
Preferred stock, par value $0.0001 per
share; authorized 100,000,000 shares; no shares outstanding as of
March 31, 2023 and December 31, 2022
—
—
Class A common stock, par value $0.0001
per share; authorized 2,000,000,000 shares; issued and outstanding
183,127,510 and 170,687,065 shares as of March 31, 2023 and
December 31, 2022
18
17
Class B common stock, par value $0.0001
per share; authorized 1,000,000,000 shares; issued and outstanding
423,170,610 as of both March 31, 2023 and December 31, 2022
42
42
Additional paid-in capital
5,682,305
5,428,297
Accumulated other comprehensive loss
(4,194
)
(4,945
)
Accumulated deficit
(3,778,355
)
(3,519,391
)
Total equity
1,899,816
1,904,020
Total liabilities and equity
$
3,347,651
$
3,395,851
Qualtrics International
Inc.
Consolidated Statements of
Operations
(Unaudited, in thousands,
except share and per share data)
Three Months Ended March
31,
2023
2022
Revenue:
Subscription
$
339,803
$
280,808
Professional services and other
69,967
54,839
Total revenue
409,770
335,647
Cost of revenue:
Subscription
54,671
44,774
Professional services and other
68,511
54,493
Total cost of revenue
123,182
99,267
Gross profit
286,588
236,380
Operating expenses:
Research and development
108,975
105,999
Sales and marketing
252,772
218,330
General and administrative
178,672
202,589
Total operating expenses
540,419
526,918
Operating loss
(253,831
)
(290,538
)
Other non-operating income, net
1,655
674
Loss before income taxes
(252,176
)
(289,864
)
Provision for income taxes
6,788
2,461
Net loss
$
(258,964
)
$
(292,325
)
Net loss per share attributable to common
stockholders, basic and diluted
$
(0.43
)
$
(0.51
)
Weighted-average Class A and Class B
shares used in computing net loss per share attributable to common
stockholders, basic and diluted
599,314,127
575,700,568
Cost of revenue and operating expenses includes:
Stock-based compensation expense(a) as
follows:
Three Months Ended March
31,
in thousands
2023
2022
Cost of subscription revenue
$
5,063
$
4,544
Cost of professional services and other
revenue
8,593
8,066
Research and development
40,646
41,275
Sales and marketing
52,196
49,053
General and administrative
125,472
165,323
Total stock-based compensation expense,
including cash settled(a)
$
231,970
$
268,261
________________
(a) During the three months ended March 31, 2023 and 2022,
employer payroll tax on employee stock transactions reported in
cost of revenue was $0.6 million and $0.7 million, respectively,
and employer payroll tax reported in operating expenses was $6.1
million and $11.3 million, respectively.
Amortization of acquired intangible assets
as follows:
Three Months Ended March
31,
in thousands
2023
2022
Cost of revenue
$
7,358
$
7,572
Sales and marketing
5,531
5,527
General and administrative
42
318
Total amortization of acquired intangible
assets
$
12,931
$
13,417
Qualtrics International
Inc.
Consolidated Statements of
Cash Flows
(Unaudited, in
thousands)
Three Months Ended March
31,
2023
2022
Cash flows from operating
activities
Net loss
$
(258,964
)
$
(292,325
)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and amortization
26,368
23,355
Gain on disposal of property and
equipment
(25
)
(17
)
Change in fair value of distribution
liability for tax sharing agreement
5,432
(1,500
)
Reduction of right-of-use assets from
operating leases
6,626
7,501
Stock-based compensation expense,
including cash settled
231,970
268,261
Amortization of deferred contract
acquisition costs
22,439
15,812
Deferred income taxes
(971
)
(227
)
Changes in assets and liabilities,
excluding the effect of business combinations:
Accounts receivable, net of allowances
152,267
95,414
Prepaid expenses and other current
assets
(9,752
)
(7,259
)
Deferred contract acquisitions costs
(34,716
)
(26,809
)
Other assets
(1,149
)
(1,033
)
Lease liabilities
(4,598
)
(3,723
)
Accounts payable
5,540
(13,472
)
Accrued liabilities
(25,318
)
(40,146
)
Deferred revenue
(12,543
)
1,969
Other liabilities
2,667
(16
)
Settlement of stock-based payments
liabilities
(994
)
(2,682
)
Net cash flows provided by operating
activities
104,279
23,103
Cash flows from investing
activities
Purchases of property and equipment
(21,811
)
(13,173
)
Cash paid for intangible assets
(2,050
)
—
Net cash flows used in investing
activities
(23,861
)
(13,173
)
Cash flows from financing
activities
Payments of tax sharing liabilities to
SAP
(12,119
)
—
Payments for taxes related to net share
settlement of equity awards
(2,849
)
(208,920
)
Issuance of common stock of Employee Stock
Purchase Plan
19,965
20,380
Proceeds from exercise of stock
options
866
614
Net cash flows provided by (used in)
financing activities
5,863
(187,926
)
Effect of changes in exchange rates on
cash and cash equivalents
545
(67
)
Net increase (decrease) in cash and cash
equivalents
86,826
(178,063
)
Cash and cash equivalents as of 1
January
719,892
1,014,511
Cash and cash equivalents as of 31
March
$
806,718
$
836,448
Qualtrics International
Inc.
Reconciliation of GAAP to
Non-GAAP Measures
(Unaudited, in
thousands)
Non-GAAP Gross Profit and
Margin
Three Months Ended March
31,
2023
2022
(In thousands)
GAAP gross profit
$
286,588
$
236,380
Add: Stock-based compensation expense,
including cash settled and employer payroll tax on employee stock
transactions(1)(2)
14,247
13,357
Add: Amortization of acquired intangible
assets
7,358
7,572
Add: Restructuring expenses
204
—
Non-GAAP gross profit
$
308,397
$
257,309
Non-GAAP gross margin
75
%
77
%
We calculate non-GAAP gross profit as GAAP gross profit
excluding equity and cash settled stock-based compensation expense
allocated to cost of revenue, including employer payroll tax on
employee stock transactions, amortization of acquired intangible
assets allocated to cost of revenue and restructuring expenses.
Non-GAAP gross margin is calculated as non-GAAP gross profit
divided by total revenue.
Non-GAAP Operating Income and
Margin
Three Months Ended March
31,
2023
2022
(In thousands)
GAAP operating loss
$
(253,831
)
$
(290,538
)
Add: Stock-based compensation expense,
including cash settled and employer payroll tax on employee stock
transactions(1)(2)
238,704
280,333
Add: Amortization of acquired intangible
assets
12,931
13,417
Add: Expenses related to pending Merger
transaction
16,285
—
Add: Restructuring expenses
7,521
—
Add: Acquisition related costs
21
839
Non-GAAP operating income
$
21,631
$
4,051
Non-GAAP operating margin
5
%
1
%
We calculate non-GAAP operating income as GAAP operating loss
excluding equity and cash settled stock-based compensation expense,
including employer payroll tax on employee stock transactions,
amortization of acquired intangible assets, expenses incurred by
the Company related to the pending Merger transaction,
restructuring expenses and acquisition related costs. Non-GAAP
operating margin is calculated as non-GAAP operating loss divided
by total revenue.
Non-GAAP Net Income and Non-GAAP Net
Income Per Share
Three Months Ended March
31,
2023
2022
(In thousands, except share
and per share data)
GAAP net loss
$
(258,964
)
$
(292,325
)
Add: Stock-based compensation expense,
including cash settled and employer payroll tax on employee stock
transactions(1)(2)
238,704
280,333
Add: Amortization of acquired intangible
assets
12,931
13,417
Add: Expenses related to pending Merger
transaction
16,285
—
Add: Restructuring expenses
7,521
—
Add: Acquisition related costs
21
839
Add (less): Change in fair value of
distribution liability for tax sharing agreement
5,432
(1,500
)
(Less) add: Tax impact of the non-GAAP
adjustments
(7,631
)
2,685
Non-GAAP net income
$
14,299
$
3,449
Weighted-average Class A and Class B
shares used in computing non-GAAP net income per share attributable
to common stockholders, basic
599,314,127
575,700,568
Non-GAAP net income per share attributable
to common stockholders, basic
$
0.02
$
0.01
Weighted-average Class A and Class B
shares used in computing non-GAAP net income per share attributable
to common stockholders, diluted
599,552,141
576,606,156
Non-GAAP net income per share attributable
to common stockholders, diluted
$
0.02
$
0.01
We calculate non-GAAP net income as GAAP net loss excluding
equity and cash settled stock-based compensation expense, including
employer payroll tax on employee stock transactions, amortization
of acquired intangible assets, expenses incurred by the Company
related to the pending Merger transaction, restructuring expenses,
acquisition related costs, changes in the fair value of our
distribution liability for our tax sharing agreement with SAP and
the tax impact of the non-GAAP adjustments. Non-GAAP net income per
share is calculated as non-GAAP net income divided by the
weighted-average Class A and Class B shares attributable to common
stockholders.
Free Cash Flow and Margin
Three Months Ended March
31,
2023
2022
(In thousands)
Net cash provided by operating
activities
104,279
$
23,103
Less: Capital expenditures
(21,811
)
(13,173
)
Free cash flow
82,468
9,930
Free cash flow margin
20
%
3
%
We calculate free cash flow as net cash provided by operating
activities less capital expenditures. Free cash flow margin is
calculated as free cash flow divided by total revenue. We incurred
cash outflows in connection with the settlement of
liability-classified, stock-based awards in accordance with SAP’s
employee equity compensation programs. Our free cash flow for the
three months ended March 31, 2023 and 2022 includes $1.0 million
and $2.7 million, respectively, in cash outflows related to the
settlement of liability-classified, stock-based awards.
________________
(1) Our stock-based compensation expense reflects the
recognition of both equity-classified awards and
liability-classified awards. Liability-classified awards are
settled in cash in accordance with SAP’s employee equity
compensation programs. Liability-classified awards are recorded
according to mark-to-market accounting. On January 28, 2021, the
Company completed a voluntary exchange offer pursuant to which 5.4
million cash-settled legacy restricted stock awards, restricted
stock unit (RSU) awards, and options (together, Qualtrics Rights)
and 1.3 million cash-settled SAP RSU awards were exchanged into
12.8 million equity-settled Qualtrics RSU awards, representing 93%
of the outstanding Qualtrics Rights and SAP RSU awards. On
September 13, 2021, the Company completed an additional voluntary
exchange offer for certain employees in Australia who were not
eligible for the January 28, 2021 exchange, pursuant to which less
than 0.1 million cash-settled Qualtrics Rights and SAP RSU awards
were exchanged and modified into equity-settled Qualtrics RSU
awards.
(2) During the three months ended March 31, 2023 and 2022,
employer payroll tax on employee stock transactions reported in
cost of revenue was $0.6 million and $0.7 million, respectively,
and employer payroll tax reported in operating expenses was $6.1
million and $11.3 million, respectively. The amount of employer
payroll tax-related items on employee stock transactions is
dependent on our stock price and other factors that are beyond our
control and do not correlate with the operation of the business.
When evaluating the performance of our business and making
operating plans, we do not consider these items (for example, when
considering the impact of equity award grants, we place a greater
emphasis on overall stockholder dilution rather than the accounting
charges associated with such grants). We believe it is useful to
exclude these expenses in order to better understand the long-term
performance of our core business and to facilitate comparison of
our results to those of peer companies and over multiple
periods.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230420005777/en/
Investor Relations: Rodney Nelson Head of Investor
Relations investors@qualtrics.com
Public Relations: Gina Sheibley Chief Communications
Officer press@qualtrics.com
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