TechDogs-"Qualtrics Announces First Quarter 2023 Financial Results"

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Qualtrics Announces First Quarter 2023 Financial Results

By Business Wire

Business Wire
Overall Rating
  • 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

PROVO, Utah & SEATTLE--(BUSINESS WIRE)--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


Contacts

Investor Relations:
Rodney Nelson
Head of Investor Relations
investors@qualtrics.com

Public Relations:
Gina Sheibley
Chief Communications Officer
press@qualtrics.com

Read full story here

First published on Fri, Apr 21, 2023

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