PR Newswire | Jul 20, 2021 04:10PM EDT

07/20 15:10 CDT

Qualtrics Reports Second Quarter 2021 Financial Results- Q2 2021 Total Revenue of $249.3M, up 38% Year-over-year- Q2 2021 Subscription Revenue of $204.5M, up 48% Year-over-year- Total Remaining Performance Obligations[1] of $1,296.1M, up 76% Year-over-year- Next 12 Months Remaining Performance Obligations of $754.8M, up 61% Year-over-year PROVO, Utah and SEATTLE, July 20, 2021

PROVO, Utah and SEATTLE, July 20, 2021 /PRNewswire/ -- Qualtrics (NASDAQ: XM), the world's No. 1 Experience Management (XM) provider and creator of the XM category, today announced financial results for the second quarter ended June 30, 2021.

"Today the experiences companies deliver are absolutely vital to staying competitive," said Zig Serafin, Qualtrics CEO. "Every company is going through an experience transformation, and they're turning to Qualtrics to help them deliver breakthrough experiences for their employees and customers. We've never been more relevant, which you can see in our strong Q2 results and our revenue guidance of more than $1 billion in 2021."

Second Quarter 2021 Financial Highlights:

* Revenue: Total revenue for the second quarter was $249.3 million, up from $181.0 million one year ago, an increase of 38% year-over-year. Subscription revenue for the second quarter was $204.5 million, up from $138.5 million one year ago, an increase of 48% year-over-year. * Operating Income (Loss) and Margin: Second quarter operating loss was $(273.7) million, compared to $(125.1) million one year ago. Non-GAAP operating income (see discussion of non-GAAP operating income (loss) and margin measures below) was $11.5 million, compared to non-GAAP operating loss of $(3.4) million one year ago. For the second quarter, GAAP operating margin was (110)% and non-GAAP operating margin was 5%. * Net Income (Loss) and Net Income (Loss) Per Share: Second quarter net loss was $(263.5) million, or $(0.51) per share, compared to $(127.5) million, or $(0.30) per share in the second quarter of fiscal year 2020. Non-GAAP net income (see discussion of the non-GAAP net income (loss) measure below) for the second quarter was $22.3 million, or $0.04 per share, compared to non-GAAP net loss of $(5.6) million, or $(0.01) per share in the second quarter of fiscal year 2020. * Cash and Cash Equivalents: Total cash and cash equivalents as of June 30, 2021 was $635.1 million.

Financial Outlook:

Qualtrics is providing guidance for its third quarter ending September 30, 2021 as follows:

* Total revenue between $257 and $259 million. * Subscription revenue between $209 and $211 million. * Non-GAAP operating margin between 0% and 1%. * Non-GAAP net loss per share between $(0.03) and $(0.01) assuming 515 million weighted shares outstanding.

Qualtrics is updating its guidance for its full year ending December 31, 2021 as follows:

* Total revenue between $1,007 and $1,011 million. * Subscription revenue between $813 and $817 million. * Non-GAAP operating margin between 0% and 1%. * Non-GAAP net loss per share between $(0.02) and $0.00 assuming 510 million weighted shares outstanding.

The guidance provided above are forward-looking statements and actual results may differ materially. Refer to the "Forward-Looking Statements" safe harbor section below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

Non-GAAP operating income (loss), non-GAAP operating margin, non-GAAP net income (loss), and non-GAAP net income (loss) per share are non-GAAP financial measures. Additional information on Qualtrics' reported results, including a reconciliation of the non-GAAP financial measures to their most comparable GAAP measures, is included in the financial tables below. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty of expenses that may be incurred in the future, although it is important to note that these factors could be material to Qualtrics' results computed in accordance with GAAP.

A supplemental financial presentation and other information can be accessed through Qualtrics' investor relations website at https://www.qualtrics.com/investors/.

Qualtrics Earnings CallQualtrics plans to host a conference call today to review its fiscal second quarter 2021 financial results and to discuss its financial outlook. The call is scheduled to begin at 3:00 p.m. MT/5:00 p.m. ET. Investors are invited to join the webcast by visiting: https://qualtrics.com/investors/events. The webcast will be available live, and a replay will be available following completion of the live broadcast for approximately 90 days.

About QualtricsQualtrics, the leader in customer experience and creator of the Experience Management (XM) category, is changing the way organizations manage and improve the four core experiences of business, customer, employee, product, and brand. Over 13,500 organizations around the world are using Qualtrics to listen, understand, and take action on experience data (X-data(tm)) the beliefs, emotions, and intentions that tell you why things are happening, and what to do about it. The Qualtrics XM Platform(tm) is a system of action that helps businesses attract customers who stay longer and buy more, engage employees who build a positive culture, develop breakthrough products people love, and build a brand people are passionate about. To learn more, please visit qualtrics.com.

Forward-Looking StatementsThis 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 third quarter of 2021 and full year 2021, Qualtrics' growth strategy and business aspirations, its market position, and the continued impact of COVID-19 on its business and operations. 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: 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 respond to and overcome challenges brought by the COVID-19 pandemic; 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 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; 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; and our reduced ability to leverage resources at SAP as an independent company from SAP. Additional risks and uncertainties that could cause actual outcomes and results 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' Annual Report on Form 10-K and most recent Quarterly Report 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. Qualtrics assumes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, except as required by law.

Non-GAAP Financial MeasuresTo supplement our financial results, which are prepared and presented in accordance with 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 (loss), non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) 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, amortization of acquired intangible assets, and the tax impact of the non-GAAP adjustments. 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.

Investor Relations:Steven WuHead of FP&A and Investor Relationsinvestors@qualtrics.com

Public Relations:Gina SheibleyChief Communications Officerpress@qualtrics.com

Qualtrics International Inc.

Consolidated Balance Sheets

(Unaudited, in thousands, except share and par value)



As of June 30,As of December 31, 2021 2020



Assets

Current assets:

Cash and cash equivalents $635,149 $203,891

Accounts receivable, net of allowance 242,515 296,148

Deferred contract acquisition costs, net 48,337 43,429

Prepaid expenses and other current assets 51,263 48,130

Total current assets 977,264 591,598

Non-current assets:

Property and equipment, net 119,102 116,120

Right-of-use assets from operating leases 187,050 195,372

Goodwill 6,709 6,709

Other intangible assets, net 3,232 3,959

Deferred contract acquisition costs, net 120,664 115,837 of current portion

Deferred tax assets 205 92

Other assets 19,850 9,368

Total assets $1,434,076 $1,039,055



Liabilities and equity (deficit)

Current liabilities:

Lease liabilities $13,441 $7,125

Accounts payable 39,517 30,452

Accrued liabilities 88,840 225,046

Liability-classified, stock-based awards 7,297 209,286

Deferred revenue 503,280 495,638

Total current liabilities 652,375 967,547

Non-current liabilities:

Lease liabilities, net of current portion 226,034 235,620

Liability-classified, stock-based awards, 731 76,627 net of current portion

Deferred revenue, net of current portion 6,048 5,477

Note payable 502,869 -

Deferred tax liabilities 6,060 5,970

Other liabilities 4,694 16,716

Total liabilities $1,398,811 $1,307,957

Commitments and contingencies

Equity (deficit)

Preferred stock, par value $0.0001 per share; authorized 100,000,000 shares; no - - shares outstanding

Class A common stock, par value $0.0001 per share; authorized 2,000,000,000 shares; issued and outstanding 91,035,764 9 1 and 6,000,000 shares as of June 30, 2021 and December 31, 2020

Class B common stock, par value $0.0001 per share; authorized 1,000,000,000 shares; issued and outstanding 423,170,61042 42 and 423,170,610 as of June 30, 2021 and December 31, 2020

Additional paid in capital 1,895,938 1,126,631

Accumulated other comprehensive income 1,384 3,191

Accumulated deficit (1,862,108) (1,398,767)

Total equity (deficit) 35,265 (268,902)

Total liabilities and equity (deficit) $1,434,076 $1,039,055

Qualtrics International Inc.

Consolidated Statements of Operations

(Unaudited, in thousands, except share and per share data)



Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Revenue:

Subscription $204,538 $138,476 $391,434 $266,741

Professional services44,807 42,567 96,554 90,366 and other

Total revenue 249,345 181,043 487,988 357,107

Cost of revenue:

Subscription 21,693 16,896 42,063 30,612

Professional services43,070 33,178 84,481 67,386 and other

Total cost of revenue64,763 50,074 126,544 97,998

Gross profit 184,582 130,969 361,444 259,109

Operating expenses:

Research and 79,871 71,431 142,677 106,920 development

Sales and marketing 151,695 112,672 287,876 219,767

General and 226,685 72,007 401,134 94,494 administrative

Total operating 458,251 256,110 831,687 421,181 expenses

Operating loss (273,669) (125,141) (470,243) (162,072)

Other non-operating (1,191) (412) (2,931) 73 income (expense), net

Loss before income (274,860) (125,553) (473,174) (161,999) taxes

(Benefit) provision (11,373) 1,951 (9,833) 10,340 for income taxes

Net loss $(263,487) $(127,504) $(463,341)$(172,339)



Net loss per share attributable to $(0.51) $(0.30) $(0.93) $(0.41) common stockholders, basic

Weighted-average Class A and Class B shares used in computing net loss 513,507,669 423,170,610 497,970,385423,170,610per share attributable to common stockholders, basic



Cost of revenue and operating expenses includes:



Stock-based compensation expense as follows:



Three Months Ended June 30,Six Months Ended June 30,

in thousands 2021 2020 2021 2020

Cost of subscription $ 3,382 $2,915 $6,006 $3,084 revenue

Cost of professional services and other 6,754 3,522 11,184 3,611 revenue

Research and 34,381 37,282 55,713 39,246 development

Sales and marketing 35,489 19,064 58,266 22,847

General and 204,767 58,642 356,603 65,139 administrative

Total stock-based compensation expense, $ 284,773 $121,425$487,772 $133,927including cash settled ^(a)

(a) As a result of the SAP Acquisition, our stock-based compensation expensereflects the recognition of both equity-classified awards andliability-classified awards. Liability-classified awards are settled in cashin accordance with SAP's employee equity compensation programs. Ourstock-based compensation expense for the three and six months ended June 30,2021 consisted of $284.8 million and $487.8 million, respectively, ofliability-classified and equity-classified awards. During the three and sixmonths ended June 30, 2021 awards of $2.0 million and $74.0 million,respectively, were settled in cash. Our stock-based compensation expense forthe three and six months ended June 30, 2020 consisted of $121.4 million and$133.9 million, respectively, of liability-classified awards. During thethree and six months ended June 30, 2020 awards of $88.8 million and $187.1million, respectively, were settled in cash. Liability-classified awards arerecorded according to mark-to-market accounting.



Amortization of acquired intangible assets as follows:



Three Months Ended June 30,Six Months Ended June 30,

in thousands 2021 2020 2021 2020

Cost of subscription revenue $ 265 $ 266 $ 531 $ 532

Sales and marketing 51 51 102 102

General and administrative 47 47 94 94

Total amortization of acquired $ 363 $ 364 $ 727 $ 728 intangible assets

Qualtrics International Inc.

Consolidated Statements of Cash Flows

(Unaudited, in thousands)



Six Months Ended June 30,

2021 2020

Cash flows from operating activities

Net loss $(463,341)$(172,339)

Adjustments to reconcile net loss to net cash used in operating activities

Depreciation and amortization 15,602 12,126

Loss on disposal of property and equipment 115 -

Reduction of right-of-use assets from operating 11,124 8,178 leases

Stock-based compensation expense, including cash 487,772 133,927 settled

Amortization of deferred contract acquisition costs23,173 14,197

Deferred income taxes 172 1,740

Changes in assets and liabilities:

Accounts receivable, net 53,396 47,078

Prepaid expenses and other current assets (4,900) (809)

Deferred contract acquisitions costs (33,892) (42,686)

Other assets (10,651) (4,751)

Lease liabilities (6,016) (2,925)

Accounts payable 7,121 (5,061)

Accrued liabilities (15,972) (10,467)

Deferred revenue 8,213 (18,424)

Other liabilities (9,225) 5,084

Settlement of stock-based payments liabilities (73,964) (187,090)

Net cash flows used in operating activities (11,273) (222,222)



Cash flows from investing activities

Purchases of property and equipment (16,247) (25,837)

Net cash flows used in investing activities (16,247) (25,837)



Cash flows from financing activities

Proceeds from capital contributions from SAP 115,000 280,000

Proceeds from issuance of class A common stock, net2,244,322 - of underwriting discounts and commissions

Payment of costs related to initial public offering(3,081) -

Repayment of promissory note (1,892,280)-

Payments for taxes related to net share settlement (4,832) - of equity awards

Net cash flows provided by financing activities 459,129 280,000



Effect of changes in exchange rates on cash and (351) 1,123 cash equivalents

Net increase in cash and cash equivalents 431,258 33,064

Cash and cash equivalents at the beginning of the 203,891 42,467 period

Cash and cash equivalents at the end of the period $635,149 $75,531

Qualtrics International Inc.

Reconciliation of GAAP to Non-GAAP Measures

(Unaudited, in thousands)



Non-GAAP Gross Profit and Margin



Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(In thousands)

GAAP gross profit $ 184,582 $ 130,969 $ 361,444 $ 259,109

Add: Stock-based compensation expense, 10,136 6,437 17,190 6,695 including cash settled ^(1)

Add: Amortization of acquired intangible 265 266 531 532 assets

Non-GAAP gross profit $ 194,983 $ 137,672 $ 379,165 $ 266,336

Non-GAAP gross margin 78 % 76 % 78 % 75 %

We calculate non-GAAP gross profit, as GAAP gross profit excluding equity and cash settled stock-based compensation expense allocated to cost of revenue and amortization of acquired intangible assets allocated to cost of revenue. Non-GAAP gross margin is calculated as non-GAAP gross profit divided by total revenue.

Non-GAAP Operating Income (Loss) and Margin



Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(In thousands)

GAAP operating $(273,669) $(125,141) $(470,243) $(162,072) loss

Add: Stock-based compensation 284,773 121,425 487,772 133,927 expense, including cash settled^(1)

Add: Amortization of acquired 363 364 727 728 intangible assets

Non-GAAP operating$11,467 $(3,352) $18,256 $(27,417) income (loss)

Non-GAAP operating5 %(2) %4 %(8) %margin

We calculate non-GAAP operating income (loss), as GAAP operating loss excluding equity and cash settled stock-based compensation expense and amortization of acquired intangible assets. Non-GAAP operating margin is calculated as non-GAAP operating income (loss) divided by total revenue.

Non-GAAP Net Income (Loss) and Net Income (Loss) Per Share



Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(In thousands, except share and per share data)

GAAP net loss $(263,487) $(127,504) $(463,341)$(172,339)

Add: Stock-based compensation expense,284,773 121,425 487,772 133,927 including cash settled^(1)

Add: Amortization of acquired intangible 363 364 727 728 assets

Add: Tax impact of the non-GAAP 624 106 2,387 225 adjustments

Non-GAAP net income $22,273 $(5,609) $27,545 $(37,459) (loss)



Weighted-average Class A and Class B shares used in computing non-GAAP 513,507,669 423,170,610 497,970,385423,170,610net income (loss) per share attributable to common stockholders, basic and diluted

Non-GAAP net income (loss) per share attributable to $0.04 $(0.01) $0.06 $(0.09) common stockholders, basic and diluted

We calculate non-GAAP net income (loss) as GAAP net loss excluding equity and cash settled stock-based compensation expense, amortization of acquired intangible assets, and the tax impact of the non-GAAP adjustments. Non-GAAP net income (loss) per share is calculated as non-GAAP net income (loss) divided by the weighted-average Class A and Class B shares attributable to common stockholders.

Free Cash Flow and Margin



Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(In thousands) (In thousands)

Net cash provided by (used in) operating $ 58,812 $ (90,466) $(11,273) $(222,222) activities

Less: Capital (5,098) (16,764) (16,247) (25,837) expenditures

Free cash flow 53,714 (107,230) (27,520) (248,059)

Free cash flow 22 % (59) % (6) %(69) %margin

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 significant 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 June 30, 2021 and 2020 includes $2.0 million and $88.8 million, respectively, in cash outflows related to the settlement of liability-classified, stock-based awards. Our free cash flow for the six months ended June 30, 2021 and 2020 includes $74.0 million and $187.1 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 bothequity-classified awards and liability-classified awards.Liability-classified awards are settled in cash in accordance with SAP'semployee equity compensation programs. Liability-classified awards arerecorded according to mark-to-market accounting. On January 28, 2021, theCompany completed a voluntary exchange offer pursuant to which 5.4 millioncash-settled legacy restricted stock awards, restricted stock unit (RSU)awards, and options (together, Qualtrics Rights) and 1.3 millioncash-settled SAP RSU awards were exchanged into 12.8 million equity-settledQualtrics RSU awards, representing 93% of the outstanding Qualtrics Rightsand SAP RSU awards.

^1 Remaining performance obligations represent all contracted future revenuethat has not yet been recognized, including both deferred revenue andnon-cancelable contracted amounts that will be invoiced and recognized asrevenue in future periods.

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SOURCE Qualtrics