Business Wire | Jan 26, 2022 04:03PM EST

Qualtrics Announces Record Fourth Quarter and Full Year 2021 Financial Results

Jan. 26, 2022

PROVO, Utah & SEATTLE--(BUSINESS WIRE)--Jan. 26, 2022--Qualtrics (NASDAQ: XM), the leader and creator of the Experience Management (XM) category, today announced financial results for the fourth quarter and fiscal year ended December 31, 2021.

"Q4 was an outstanding quarter, capping off a record year of growth for Qualtrics," said Qualtrics CEO Zig Serafin. "Not only did we cross the $1 billion revenue milestone, but we're accelerating past it, as experience management becomes even more critical to business success."

Fourth Quarter 2021 Financial Highlights:

* Revenue: Total revenue for the fourth quarter was $316.0 million, up from $213.6 million one year ago, an increase of 48% year-over-year. Subscription revenue for the fourth quarter was $259.0 million, up from $160.4 million one year ago, an increase of 61% year over year. * Operating Income (Loss) and Margin: Fourth quarter operating loss was $(306.1) million, compared to $(11.0) million one year ago. Non-GAAP operating income (see discussion of non-GAAP operating income (loss) and margin measures below) was $0.3 million, compared to non-GAAP operating loss of $(4.7) million one year ago. For the fourth quarter, GAAP operating margin was (97)% and non-GAAP operating margin was 0.1%. * Net Loss and Net Loss Per Share: Fourth quarter net loss was $309.8 million, or $0.56 per share, compared to $14.5 million, or $0.03 per share in the fourth quarter of fiscal year 2020. Non-GAAP net loss (see discussion of the non-GAAP net income (loss) measure below) for the fourth quarter was $39.4 million, or $0.07 per share, compared to non-GAAP net loss of $8.1 million, or $0.02 per share in the fourth quarter of fiscal year 2020. * Cash and Cash Equivalents: Total cash and cash equivalents as of December 31, 2021 was $1,014.5 million.

Full Year 2021 Financial Highlights:

* Revenue: Total revenue for the fiscal year ended December 31, 2021 was $1,075.7 million, up from $763.5 million one year ago, an increase of 41% year-over-year. Subscription revenue was $870.7 million, up from $575.4 million one year ago, an increase of 51% year-over-year. * Operating Income (Loss) and Margin: Operating loss for the year was $(1,053.8) million, compared to operating loss of $(255.1) million in 2020. Non-GAAP operating income (loss) for the year was $31.9 million, compared to $(29.6) million in fiscal 2020. For the fiscal year 2021, operating margin was (98)% and non-GAAP operating margin was 3%. * Net Loss and Net Loss Per Share: Fiscal year 2021 net loss was $1,059.1 million, or $2.05 per share, compared to $272.5 million in fiscal year 2020, or $0.64 per share. Non-GAAP net loss for the year was $6.0 million, or $0.01 per share, compared to $46.0 million in fiscal year 2020, or $0.11 per share.

Financial Outlook:

Qualtrics is providing guidance for its first quarter ending March 31, 2022 as follows:

* Total revenue between $324 and $326 million. * Subscription revenue between $270 and $272 million. * Non-GAAP operating margin between 1% and 2%. * Non-GAAP net income (loss) per share/ between $(0.02) and $0.00 assuming 580 million weighted shares outstanding.

Qualtrics is providing its guidance for its full year ending December 31, 2022 as follows:

* Total revenue between $1,402 and $1,406 million. * Subscription revenue between $1,177 and $1,181 million. * Non-GAAP operating margin between 1% and 3%. * Non-GAAP net income (loss) per share between $(0.02) and $0.00 assuming 595 million weighted shares outstanding.

The guidance provided above constitutes 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 loss, and non-GAAP net 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 Call

Qualtrics plans to host a conference call today to review its fiscal fourth quarter and full year 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 Qualtrics

Qualtrics, the leader 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 16,750 organizations around the world use 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.

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 first quarter of 2022 and full year 2022. 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 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. 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 Measures

To 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 loss, non-GAAP net 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, 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. 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.

__________________

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.

Qualtrics International Inc.

Consolidated Balance Sheets

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

As of December 31,

2021 2020

Assets

Current assets:

Cash and cash equivalents $ 1,014,511 $ 203,891

Accounts receivable, net of allowances 461,830 296,148

Deferred contract acquisition costs, net 60,455 43,429

Prepaid expenses and other current assets 68,887 48,130

Total current assets 1,605,683 591,598

Non-current assets:

Property and equipment, net 192,327 116,120

Right-of-use assets from operating leases 227,320 195,372

Goodwill 1,118,768 6,709

Other intangible assets, net 264,500 3,959

Deferred contract acquisition costs, net of 145,952 115,837 current portion

Deferred tax assets 96 92

Other assets 27,577 9,368

Total assets $ 3,582,223 $ 1,039,055



Liabilities and equity (deficit)

Current liabilities:

Lease liabilities $ 18,898 $ 7,125

Accounts payable . 84,053 30,452

Accrued liabilities 167,402 225,046

Liability-classified, stock-based awards 4,519 209,286

Deferred revenue 748,145 495,638

Total current liabilities 1,023,017 967,547

Non-current liabilities:

Lease liabilities, net of current portion 263,307 235,620

Liability-classified, stock-based awards, net 52 76,627 of current portion

Deferred revenue, net of current portion 6,698 5,477

Deferred tax liabilities 23,653 5,970

Other liabilities 78,796 16,716

Total liabilities $ 1,395,523 $ 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 pershare; authorized 2,000,000,000 shares; issued 15 1 and outstanding 147,309,254 and 6,000,000shares as of December 31, 2021 and 2020

Class B common stock, par value $0.0001 pershare; authorized 1,000,000,000 shares; issued 42 42 and outstanding 423,170,610 and 423,170,610 asof December 31, 2021 and 2020

Additional paid in capital 4,645,800 1,126,631

Accumulated other comprehensive income (loss) (1,244 ) 3,191

Accumulated deficit (2,457,913 ) (1,398,767 )

Total equity (deficit) 2,186,700 (268,902 )

Total liabilities and equity (deficit) $ 3,582,223 $ 1,039,055

Qualtrics International Inc.

Consolidated Statements of Operations

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

Three Months Ended December 31,

Year Ended December 31,

2021

2020

2021

2020

Revenue:

Subscription

$

258,957

$

160,397

$

870,705

$

575,397

Professional services and other

57,085

53,169

204,959

188,125

Total revenue

316,042

213,566

1,075,664

763,522

Cost of revenue:

Subscription

39,971

15,697

105,836

62,671

Professional services and other

51,914

35,756

179,436

135,816

Total cost of revenue

91,885

51,453

285,272

198,487

Gross profit

224,157

162,113

790,392

565,035

Operating expenses:

Research and development

97,606

43,810

324,158

212,795

Sales and marketing

193,887

109,019

643,333

431,794

General and administrative

238,790

20,274

876,734

175,499

Total operating expenses

530,283

173,103

1,844,225

820,088

Operating loss

(306,126

)

(10,990

)

(1,053,833

)

(255,053

)

Other non-operating income (expense), net

12,743

(489

)

6,652

(972

)

Loss before income taxes

(293,383

)

(11,479

)

(1,047,181

)

(256,025

)

Provision for income taxes

16,389

2,996

11,965

16,477

Net loss

$

(309,772

)

$

(14,475

)

$

(1,059,146

)

$

(272,502

)

Net loss per share attributable to common stockholders, basic and diluted

$

(0.56

)

$

(0.03

)

$

(2.05

)

$

(0.64

)

Weighted-average Class A and Class B shares used in computing net loss per share attributable to common stockholders, basic and diluted

555,708,307

423,829,951

516,869,588

423,334,994

Cost of revenue and operating expenses includes:

Stock-based compensation expense as follows:

Qualtrics International Inc.

Consolidated Statements of Operations

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

Three Months Ended December 31, Year Ended December 31,

2021 2020 2021 2020

Revenue:

Subscription $ 258,957 $ 160,397 $ 870,705 $ 575,397

Professionalservices and 57,085 53,169 204,959 188,125 other

Total revenue 316,042 213,566 1,075,664 763,522

Cost of revenue:

Subscription 39,971 15,697 105,836 62,671

Professionalservices and 51,914 35,756 179,436 135,816 other

Total cost of 91,885 51,453 285,272 198,487 revenue

Gross profit 224,157 162,113 790,392 565,035

Operating expenses:

Research and 97,606 43,810 324,158 212,795 development

Sales and 193,887 109,019 643,333 431,794 marketing

General and 238,790 20,274 876,734 175,499 administrative

Total operating 530,283 173,103 1,844,225 820,088 expenses

Operating loss (306,126 ) (10,990 ) (1,053,833 ) (255,053 )

Othernon-operating 12,743 (489 ) 6,652 (972 )income(expense), net

Loss before (293,383 ) (11,479 ) (1,047,181 ) (256,025 )income taxes

Provision for 16,389 2,996 11,965 16,477 income taxes

Net loss $ (309,772 ) $ (14,475 ) $ (1,059,146 ) $ (272,502 )



Net loss pershareattributable tocommon $ (0.56 ) $ (0.03 ) $ (2.05 ) $ (0.64 )stockholders,basic anddiluted

Weighted-averageClass A andClass B sharesused incomputing netloss per share 555,708,307 423,829,951 516,869,588 423,334,994 attributable tocommonstockholders,basic anddiluted

Cost of revenue and operating expenses includes:

Stock-based compensation expense as follows:

Three Months Ended Year Ended December 31, December 31,

in thousands 2021 2020 2021 2020

Cost of subscription revenue . $ 3,626 $ 823 $ 12,148 $ 4,632

Cost of professional services 7,138 544 25,299 6,737and other revenue .

Research and development . 39,369 5,190 128,779 68,355

Sales and marketing . 41,615 2,944 136,532 37,877

General and administrative . 200,800 (3,537 ) 754,382 106,412

Total stock-based compensationexpense, including cash $ 292,548 $ 5,964 $ 1,057,140 $ 224,013settled^(a) .

________________

* As a result of the SAP Acquisition, 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. Our stock-based compensation expense for the three months ended December 31, 2021 and 2020 consisted of $292.5 million and $6.0 million, respectively, of liability-classified and equity-classified awards. During the three months ended December 31, 2021 and 2020, awards of $2.5 million and $104.6 million, respectively, were settled in cash. Our stock-based compensation expense for the year ended December 31, 2021 and 2020 consisted of $1,057.1 million and $224.0 million, respectively, of liability-classified and equity-classified awards. During the year ended December 31, 2021 and 2020, awards of $79.4 million and $388.6 million, respectively, were settled in cash. Liability-classified awards are recorded according to mark-to-market accounting. Amortization of acquired intangible assets as follows:

Three Months Ended Year Ended December 31, December 31,

in thousands 2021 2020 2021 2020

Cost of revenue $ 7,270 $ 265 $ 8,243 $ 1,062

Sales and marketing 5,265 51 5,441 204

General and administrative 305 47 446 188

Total amortization of acquired $ 12,840 $ 363 $ 14,130 $ 1,454intangible assets

Qualtrics International Inc.

Consolidated Statements of Cash Flows

(Unaudited, in thousands)

Year Ended December 31,

2021

2020

Cash flows from operating activities

Net loss

$

(1,059,146

)

$

(272,502

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities

Depreciation and amortization

46,009

26,457

Loss on disposal of property and equipment

1,498

-

Change in fair value of distribution liability for tax sharing agreement

(13,500

)

-

Reduction of right-of-use assets from operating leases

23,078

17,202

Stock-based compensation expense, including cash settled

1,057,140

224,013

Amortization of deferred contract acquisition costs

50,038

32,098

Deferred income taxes

(11,654

)

13,200

Changes in assets and liabilities, excluding the effect of business combinations:

Accounts receivable, net

(146,966

)

(103,692

)

Prepaid expenses and other current assets

(20,975

)

(10,773

)

Deferred contract acquisitions costs

(99,869

)

(111,686

)

Other assets

(18,308

)

(7,592

)

Lease liabilities

(15,528

)

24,741

Accounts payable

24,333

(282

)

Accrued liabilities

55,316

22,546

Deferred revenue

215,444

114,331

Other liabilities

(4,712

)

9,826

Settlement of stock-based payments liabilities

(79,397

)

(388,609

)

Net cash flows provided by (used in) operating activities

2,801

(410,722

)

Cash flows from investing activities

Purchases of property and equipment

(103,823

)

(89,518

)

Cash paid for business combinations, net of cash acquired

(141,792

)

-

Net cash flows used in investing activities

(245,615

)

(89,518

)

Cash flows from financing activities

Proceeds from capital contributions from SAP

115,000

540,000

Proceeds from issuance of class A common stock, net of underwriting discounts and commissions

3,359,822

120,000

Payment of costs related to issuance of class A common stock

(3,351

)

-

Repayment of promissory note

(2,392,280

)

-

Payments for taxes related to net share settlement of equity awards

(47,783

)

-

Proceeds from exercise of stock options

5,649

Issuance of class A common stock through Employee Stock Purchase Plan

16,586

-

Net cash flows provided by financing activities

1,053,643

660,000

Effect of changes in exchange rates on cash and cash equivalents

(209

)

1,664

Net increase in cash and cash equivalents

810,620

161,424

Cash and cash equivalents at the beginning of the period

203,891

42,467

Cash and cash equivalents at the end of the period

$

1,014,511

$

203,891

Qualtrics International Inc.

Consolidated Statements of Cash Flows

(Unaudited, in thousands)

Year Ended December 31,

2021 2020

Cash flows from operating activities

Net loss $ (1,059,146 ) $ (272,502 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities

Depreciation and amortization 46,009 26,457

Loss on disposal of property and equipment 1,498 -

Change in fair value of distribution liability (13,500 ) - for tax sharing agreement

Reduction of right-of-use assets from operating 23,078 17,202 leases

Stock-based compensation expense, including cash 1,057,140 224,013 settled

Amortization of deferred contract acquisition 50,038 32,098 costs

Deferred income taxes (11,654 ) 13,200

Changes in assets and liabilities, excluding the effect of business combinations:

Accounts receivable, net (146,966 ) (103,692 )

Prepaid expenses and other current assets (20,975 ) (10,773 )

Deferred contract acquisitions costs (99,869 ) (111,686 )

Other assets (18,308 ) (7,592 )

Lease liabilities (15,528 ) 24,741

Accounts payable 24,333 (282 )

Accrued liabilities 55,316 22,546

Deferred revenue 215,444 114,331

Other liabilities (4,712 ) 9,826

Settlement of stock-based payments liabilities (79,397 ) (388,609 )

Net cash flows provided by (used in) operating 2,801 (410,722 )activities



Cash flows from investing activities

Purchases of property and equipment (103,823 ) (89,518 )

Cash paid for business combinations, net of cash (141,792 ) - acquired

Net cash flows used in investing activities (245,615 ) (89,518 )



Cash flows from financing activities

Proceeds from capital contributions from SAP 115,000 540,000

Proceeds from issuance of class A common stock, 3,359,822 120,000 net of underwriting discounts and commissions

Payment of costs related to issuance of class A (3,351 ) - common stock

Repayment of promissory note (2,392,280 ) -

Payments for taxes related to net share (47,783 ) - settlement of equity awards

Proceeds from exercise of stock options 5,649

Issuance of class A common stock through Employee 16,586 - Stock Purchase Plan

Net cash flows provided by financing activities 1,053,643 660,000



Effect of changes in exchange rates on cash and (209 ) 1,664 cash equivalents

Net increase in cash and cash equivalents 810,620 161,424

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

Cash and cash equivalents at the end of the $ 1,014,511 $ 203,891 period

Qualtrics International Inc.

Reconciliation of GAAP to Non-GAAP Measures

(Unaudited, in thousands)

Non-GAAP Gross Profit and Margin

Three Months Ended December 31,

Year Ended December 31,

2021

2020

2021

2020

(In thousands)

GAAP gross profit .

$

224,157

$

162,113

$

790,392

$

565,035

Add: Stock-based compensation expense, including cash settled(1) .

10,764

1,367

37,447

11,369

Add: Amortization of acquired intangible assets .

7,270

265

8,243

1,062

Non-GAAP gross profit .

$

242,191

$

163,745

$

836,082

$

577,466

Non-GAAP gross margin .

77

%

77

%

78

%

76

%

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

Qualtrics International Inc.

Reconciliation of GAAP to Non-GAAP Measures

(Unaudited, in thousands)

Non-GAAP Gross Profit andMargin

Three Months Ended Year Ended December 31, December 31,

2021 2020 2021 2020

(In thousands)

GAAP gross profit . $ 224,157 $ 162,113 $ 790,392 $ 565,035

Add: Stock-basedcompensation expense, 10,764 1,367 37,447 11,369 including cash settled^(1) .

Add: Amortization ofacquired intangible 7,270 265 8,243 1,062 assets .

Non-GAAP gross profit . $ 242,191 $ 163,745 $ 836,082 $ 577,466

Non-GAAP gross margin . 77 % 77 % 78 % 76 %

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 Year Ended December 31, December 31,

2021 2020 2021 2020

(In thousands)

GAAP operating loss $ (306,126 ) $ (10,990 ) $ (1,053,833 ) $ (255,053 ).

Add: Stock-basedcompensation 292,548 5,964 1,057,140 224,013 expense, includingcash settled^(1) .

Add: Amortization ofacquired intangible 12,840 363 14,130 1,454 assets .

Add: Acquisition $ 1,059 $ - $ 14,489 $ - related costs .

Non-GAAP operating $ 321 $ (4,663 ) $ 31,926 $ (29,586 )income (loss) .

Non-GAAP operating - % (2 ) 3 % (4 )margin . % %

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

Non-GAAP Net Loss and Net Loss Per Share

Three Months Ended December 31, Year Ended December 31,

2021 2020 2021 2020

(In thousands, except share and per share data)

GAAP net loss . $ (309,772 ) $ (14,475 ) $ (1,059,146 ) $ (272,502 )

Add: Stock-basedcompensationexpense, 292,548 5,964 1,057,140 224,013 including cashsettled^(1) .

Add:Amortization ofacquired 12,840 363 14,130 1,454 intangibleassets .

Add: Acquisition 1,059 - 14,489 - related costs .

Add: Change infair value ofdistribution (13,500 ) - (13,500 ) - liability fortax sharingagreement .

Add: Tax impactof the non-GAAP (22,613 ) 29 (19,132 ) 1,075 adjustments .

Non-GAAP net $ (39,438 ) $ (8,119 ) $ (6,019 ) $ (45,960 )loss .



Weighted-averageClass A andClass B sharesused incomputingnon-GAAP net 555,708,307 423,829,951 516,869,588 423,334,994 loss per shareattributable tocommonstockholders,basic anddiluted .

Non-GAAP netloss per shareattributable tocommon $ (0.07 ) $ (0.02 ) $ (0.01 ) $ (0.11 )stockholders,basic anddiluted .

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

Free Cash Flow and Margin

Three Months Ended Year Ended December 31, December 31,

2021 2020 2021 2020

(In thousands) (In thousands)

Net cash provided by(used in) operating $ 13,664 $ (98,493 ) $ 2,801 $ (410,722 )activities .

Less: Capital (74,112 ) (46,464 ) (103,823 ) (89,518 )expenditures .

Free cash flow . (60,448 ) (144,957 ) (101,022 ) (500,240 )

Free cash flow margin (19 ) (68 ) (9 ) (66 ). % % % %

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 December 31, 2021 and 2020 includes $2.5 million and $104.6 million, respectively, in cash outflows related to the settlement of liability-classified, stock-based awards. Our free cash flow for the year ended December 31, 2021 and 2020 includes $79.4 million and $388.6 million, respectively, in cash outflows related to the settlement of liability-classified, stock-based awards.

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* 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 Australian that were not eligible for the January 28, 2021 exchange, pursuant to which less that 0.1 million cash-settled Qualtrics Rights and SAP RSU awards were exchanged and modified into equity-settled Qualtrics RSU awards. View source version on businesswire.com: https://www.businesswire.com/news/home/20220126005815/en/

CONTACT: Investor Relations: Steven Wu Head of FP&A and Investor Relations investors@qualtrics.com

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