Qualtrics International Inc. (XM) Q1 2022 Earnings Call Transcript

Qualtrics International Inc. (XM)
Q1 2022 Earnings Call
Apr 21, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Thank you for standing by, and welcome to the Qualtrics first quarter fiscal year 2022 earnings conference call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session [Operator instructions] As a reminder, today's conference call is being recorded. I would now turn the conference over to your host, Mr.

Steven Wu, head of FP&A and investor relations. Please go ahead, sir.

Steven Wu -- Head of FP&A and Investor Relations

Thank you, and welcome to Qualtrics' first quarter fiscal year 2022 earnings conference call. On the call, we have Zig Serafin, CEO; Chris Beckstead, president; and Rob Bachman, CFO. Following prepared remarks, we will open the line up to answer questions. Our results, press release and a replay of today's call can be found on the Qualtrics investor relations website.

During today's call, we will make statements that represent our expectations and beliefs concerning future events that may be considered forward-looking under federal securities laws. These statements reflect our views only as of today and should not be relied upon as representative of our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations.

For a further discussion of the material risks and other important factors that could affect our financial results, please refer to our filings with the SEC, including our annual report on Form 10-K for the fiscal year ended December 31, 2021, and our quarterly report on Form 10-Q for the quarter ended March 31, 2022, that will be filed with the SEC. With that, I will turn it over to Zig.

Zig Serafin -- Chief Executive Officer

Well, thanks, Steven, and thank you all for joining us today. Before we get to the numbers, I'm going to take a moment just to talk about how saddened we are about the invasion of Ukraine and the conflict that's there. Our team in Poland have been incredible first responders helping refugees evacuate. And I'm immensely proud of the work the whole company has done to support relief efforts, both in terms of philanthropy and product innovation.

In a matter of days, our team stood up new solutions on our XM platform that are already being used by 25 regional Red Cross teams and other agencies. And because of this work, nearly 20,000 refugees have connected with shelter, support, and medicine. You know, and our hearts go out to everyone that's affected by the war, and we're going to keep working with them to support them. Now let's turn to the quarter.

So as you can see in the numbers, Q1 was another outstanding quarter. This is our biggest Q1 in the history of the company, and it builds on robust growth in FY '21. Revenue for the quarter was $336 million, representing 41% year-over-year growth. And subscription revenue was $281 million, up 50% year over year.

And I'm particularly pleased that we have delivered another quarter of positive operating margin while continuing to invest in our growth. We have significant momentum, and we're raising our Q2 revenue guidance to $345 million at the midpoint of the range, representing 38% year-over-year growth. Our Q1 net retention rate was 128%, matching our all-time high from last quarter. And we now have more than 2,000 customers spending more than $100,000 annually, which is a 41% jump since last year.

This all highlights the critical need for experience management. It's the category that we pioneer and that we continue to lead. Every CEO that I speak with has customer and employee experiences in their top priorities. They're trying to figure out how to find, how to keep customers and then retain their best employees.

And we give them the ultimate advantage by helping them build deep personal relationships. With Qualtrics, they can uncover unmet needs and build the products, services and experiences that people want. And we help them do that with empathy, speed and scale. In our two decades as a company, we've seen that in uncertain times, experience management is more important than ever.

In fact, happy customers spend 37% more than unhappy customers, and an engaged employee who trust their manager is 60% more likely to stay in their job for the long term. Take Chipotle, which has more than 90,000 employees who are navigating dine-in and pickup options, third-party drivers and mobile app users. In Q1, they chose Qualtrics' Employee Experience Management to deliver a more seamless hiring and onboarding process and to drive better employee retention. And as a result, their teams will deliver better customer experiences that increase loyalty.

Only Qualtrics to manage the full life cycle of customer and employee experiences on a single platform with our XM operating system. And a central element that brings us to light is Experience ID, which captures every form of feedback and brings in operational data from CRM, CDP, and HRIS systems. And we now have more than 5 billion Experience IDs on the XM operating system. And every new innovation that we deliver strengthens the power of Experience ID.

We were busy in Q1. We launched new innovations across our platform. We made important investments in our category leadership. We integrated Clarabridge's operations, engineering, and sales teams into Qualtrics.

And we launched XM Discover, which is an incredibly powerful new layer of our platform. We now have the only platform that enables companies to proactively engage, find out how it's going and then tune in and discover all of the other things that people are saying in the contact center, on social media, on review sites and dozens of other places. And we're seeing significant momentum with new and existing customers. Kroger is a great example.

In the pandemic, Kroger led the way in connecting with their shoppers through new digital initiatives, and they use Qualtrics to improve their experiences. In Q1, they added XM Discover to get a single view of all customer feedback, both structured and unstructured, to understand what's important to customers based upon what they're saying on social media. And this is just another way that Kroger is deepening their relationships, and we're proud to be able to partner with them. We also significantly expanded an XM Discover deal with one of the world's largest communication companies who recognize the value of having all of their experience data on a single platform with Qualtrics.

In employee experience, we launched a new workplace safety and well-being solution. Every company is trying to balance workloads and then take care of their people. We're giving them an inside view of their employees' mental and physical health to help them mitigate burn out, retain their best employees and to reopen safely. And in customer experience, we released the new digital experience metrics, which uses scientific methodology and industry benchmarks, to connect experience improvements directly to financial impact right within the product.

Our growth continues to be fueled by a relentless focus on customer success, and this is a critical time to extend our category leadership, and we continue to invest with discipline in attractive market opportunities. In Q1, we grew our workforce approximately 10%, hiring more than 500 full-time employees, including top software engineers and scientists in an incredibly tight labor market. Internationally, we expanded or formed new relationships with iconic brands, including NTT DOCOMO, Hyundai, ING Group, Mizuno, and the Royal Mail. We also expanded our London office to better serve our rapidly growing customer base throughout Europe, and we launched the Center for XM Innovation in Asia with SAP and the Singapore Economic Development Board to extend our innovation and leadership in the region.

We continue to make great inroads in industries and particularly in healthcare. In Q1, we formed a new relationship with Providence. They chose Qualtrics to understand their patient satisfaction with the price of their healthcare services, the billing experience, and cash collection at their 52 hospitals and more than 1,000 clinics. Using Qualtrics Customer XM and XM Discover across their contact center, digital and in-person channels, Providence will improve their patients' financial experiences and increase the value they receive.

One of the ways that we scale the power of our platform is through our ecosystem, which has never been stronger. We're deepening our relationships with key partners, including EY, which recently launched an experience management practice built on Qualtrics. In Q1, they chose to deploy XM Discover internally across the organization. This investment builds on the success that they're seeing with Qualtrics, and it enhances their ability to deliver even better outcomes for their clients.

And Infosys, another great partner, launched a new Qualtrics Center of Excellence to help IT buyers around the world improve employee experiences with IT and HR. Now before I close, I'd like to invite all of you to watch X4 on our new streaming service, XM+, which launches on April 27. We've got a phenomenal lineup of speakers with Michelle Obama, Reese Witherspoon, and executives from the world's leading experience brands. I want to congratulate our employees, I want to thank our partners, and our customers for another outstanding quarter.

And with that, I'll hand it over to Rob.

Rob Bachman -- Chief Financial Officer

Thanks, Zig. Good afternoon, everyone. Q1 was another outstanding quarter across the board during a time of economic and geopolitical uncertainty. It is our fifth quarter in a row of robust growth as a public company.

As Zig said, total revenue was $335.6 million in the first quarter, up 41% year over year. Subscription revenue in the first quarter was $280.8 million, up 50% year over year. Professional services and other revenue was $54.8 million for the first quarter, representing 6% growth year over year. Our remaining performance obligations representing all future revenue under contract ended the quarter at $1.767 billion, up 48% year over year.

This metric includes both new and renewal software contracts, along with our professional services business. Current remaining performance obligations, which is all future revenue under contract that is expected to be recognized as revenue in the next 12 months, was $1.032 billion, up 52% year over year. We delivered strong expansion across our customer base, as our dollar-based net retention rate remained at 128% for the second quarter in a row. Customers spending more than $100,000 in annual recurring revenue grew 41% year over year to 2,060 customers.

Turning to margins. Our Q1 non-GAAP gross margin was 76.7%, consistent with the prior quarter. Our non-GAAP operating profit for the first quarter was $4.1 million, resulting in a non-GAAP operating margin of 1.2% compared to 2.8% in Q1 of 2021. Consistent with our plan, we returned to more in-person meetings, and our colleagues began to travel more frequently for business in Q1.

The increase in travel contributed to an approximately 200 basis point reduction in operating margins compared to the prior-year period. Additionally, we were pleased to achieve a seasonally higher percentage of our annual hiring during Q1, allowing these new employees to have a significant impact in the current year. Operating cash flow for Q1 was $23.1 million compared to negative $70.1 million in the year-ago period. Free cash flow in the quarter was $9.9 million compared to negative $81.2 million in Q1 of 2021 due to significantly lower cash payouts relating to SAP equity-based awards.

$2.7 million of cash outflows in Q1 was related to the cash settlement of stock-based payment liabilities compared to $72 million in the year-ago period. As a reminder, free cash flow may fluctuate on a quarterly basis due to the timing of cash collections, and we believe it's best to assess our cash flow performance over a longer term. During Q1, we paid $209 million of cash for taxes related to net share settlement of equity awards in the quarter. This amount will fluctuate quarter to quarter depending on if we sell to cover or use cash to cover the taxes related to the vesting of equity awards.

Tax related to equity awards peaked in Q1 due to the one-year anniversary of our IPO, which triggered a one-year vesting cliff that exists in the majority of our outstanding equity awards. We ended the quarter in a strong cash position with approximately $836.4 million in cash and cash equivalents. Moving now to our Q2 and fiscal year 2022 business outlook. We expect total revenue for the second quarter to be $344 million to $346 million, representing 38% growth year over year at the midpoint.

Within this, we expect subscription revenue to be in the range of $291 million to $293 million, representing 43% growth year over year at the midpoint. We expect non-GAAP operating margin in the range of 1.5% to 2.5%, and non-GAAP net loss per share of $0.01 to net profit per share of $0.01, assuming 585 million weighted shares outstanding. For fiscal year 2022, we expect total revenue in the range of $1.428 billion to $1.432 billion, and subscription revenue in the range of $1.202 billion to $1.206 billion. At the midpoint of the ranges, this represents a subscription revenue growth of 38% year over year and total revenue growth of 33% year over year, respectively.

We expect non-GAAP operating margin in the range of 1% to 3%. We expect the non-GAAP net income per share between $0.00 and $0.02, assuming 595 million weighted shares outstanding. As we scale our revenue beyond $1 billion, we will continue to be disciplined in how we invest for growth while working toward our long-term financial targets of over 20% operating margin and over 25% free cash flow margin. With that, Zig, Chris, and I are happy to take your questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question comes from Brian Peterson of Raymond James. Your line is open.

Brian Peterson -- Raymond James -- Analyst

Hi, gentlemen. Congrats on the quarter. So I just wanted to start out with the NRR dynamics that was -- been strong, 128% again this quarter. Can you help us kind of dissect that a little bit in terms of cross-sell, upsell and maybe what products are really resonating on top of this?

Zig Serafin -- Chief Executive Officer

Sure. I'll start here. This is Zig. And then I'll ask Rob or Chris to just jump in and add more color.

I mean, look, first of all, I think it's important to step back and just look at the power of the technology and how we've built it with a very rich application suite, one that actually is highly relevant in many different budget centers inside of a company, but also is the speed at which we are able to innovate on the system and how that translates into new value and use cases that customers can turn on quickly. That's the core of how we operate this business. You're landing, you're enabling the use cases and you're expanding. And that, importantly, contributes to how we think about long-term durable growth at scale.

And that's partly what's reflected in the context behind the NRR number, but I'm going to let Rob or Chris add into this.

Rob Bachman -- Chief Financial Officer

Yeah. I won't add much to it, Zig. What I would say -- and this is Rob -- it continues to be balanced. It's something that we watch closely.

And that balance is something that we obviously appreciate and like to see. And then as you've heard us talk about in the past, we continue to see consolidation. As our customers look at the variety of point solutions that exist within the technology and their spend, they find that they can consolidate onto Qualtrics and gain more value by having all that data in the same place and running off of the power of our Experience Manager operating system.

Brian Peterson -- Raymond James -- Analyst

Understood. And Rob, maybe a follow-up just on Europe. I know that's been a big conversation point for investors. It's an investment area for you guys.

What have you guys seen internationally, particularly in Europe? And has there been any impact from the conflict in Ukraine? Thanks, guys.

Zig Serafin -- Chief Executive Officer

I mean, first off -- this is Zig here, I'll start off and let Chris comment a little more on this one. I mean, look -- I mean, just like you guys, we've all been watching what's been happening in Europe. And I got to tell you, first off and foremost, I'm again proud of our team in the way that we've been operating across the company and particularly in Europe, to be able to serve our customers and still be able to create high performance as we're going through it. And I think, frankly, the company is naturally advantaged, especially in times of uncertainty, to be able to create highly relevant product and capability that helps people to navigate their markets, right, whether it's navigating inflation, whether it's navigating the war for talent.

And part of the idea of experience management is we help organizations get closer to the customers and the workforce that they're dependent on and will be able to run their businesses. And that's an important part, something that we've been at for 20 years. And that we've only got better and better at in the way that we ended up delivering. That's an important part of it.

But I'll let Chris expand here a little bit more specifically relative to any other color on Europe, in particular.

Chris Beckstead -- President

Yeah. So first of all, really encouraged by the stability of our business as reflected in our overall performance and the guidance we gave in this type of uncertainty in terms of the performance that we experienced in the quarter. From a go-to-market perspective, there was a few customers in Europe who were hesitant to pull the trigger up in deals and delay it into the following quarter. That's fully reflected in the results and our guidance that we're providing.

And overall, just pleased globally with the results that we had this quarter and the stability of the business. Roughly about 20% of our business is in Europe overall. And as far as a question about Russia and Ukraine, less than 1% of our business is in that specific area. So relatively small.

Zig Serafin -- Chief Executive Officer

I think the biggest thing here is that we continue to see long-term growth all over the international front. I think we're just in the early days of what we see as potential, given the relatively smaller percentage of our overall business that is international today. And that's why you see us investing. And it's in my remarks earlier as well about what we're doing on the international front will be accomplished in Q1.

Brian Peterson -- Raymond James -- Analyst

Good to hear. Thank you.

Operator

Thank you. Our next question comes from Keith Weiss of Morgan Stanley. Your line is open.

Elizabeth Porter -- Morgan Stanley -- Analyst

Hi. Thanks so much. This is Elizabeth Porter on for Keith Weiss. Congratulations on a really strong quarter.

I wanted to touch on the vertical strategy. In the past, you guys have talked about going after the public and healthcare sectors. And I wanted to get an update on where do you see the biggest opportunity next? And how we should think about the benefits to the P&L of a verticalization strategy, whether it's higher ASPs per customers or lower retention? Any color there would be helpful. Thank you.

Zig Serafin -- Chief Executive Officer

First and foremost -- and Elizabeth, thank you and good to hear you. First and foremost, I think it's really, really important that the way that we've designed this company and the way that we've designed our technology, it scales horizontally. And it has the ability to make an effect and an impact across many different industries. I mean, we are tuned into helping companies understand consumers, helping companies understand their workforce and also businesses that they end up serving.

And that's an important technology design point. It's also an important design point of the go-to-market systems that we have in this company. We're building a platform that's designed for scale, and there's an ecosystem that's building around it. Now that said, when it comes to specific industries, they create unique points of extending on that value and getting deep and rich specific to the markets that we're playing in.

Healthcare is one of several examples that we're in. We tie in to very specific business problems in those industries, unique, urgent things that companies are looking -- or organizations are looking to solve, and that we can tie in also, because of the nature of our platform, with systems that operate in those industries. As an example, the integration we have with health records management platforms in healthcare and the way that we end up tying in with the patient life cycle and then how that nicely tunes in to -- much more authentically tunes into the way that the patient experience evolves. In fact, before a person even becomes a patient and the way that providers end up interacting with their customers and frankly, the health and well-being of the provider as well.

And so these factors are multidimensional. The beauty of everything I just described is you're building on the core kernel that scales horizontally. It's a really important part. Look, I've been around, and if you're bidding, building a business only to be able to operate on a specific industry level, you'll have a very hard time scaling across multiple industries, and that will negatively reflect in the growth of the company.

We've designed for the opposite. We want to be able to scale horizontally but also give us the option to go on more deeply and vertically. Chris?

Chris Beckstead -- President

Nothing to add, Zig.

Zig Serafin -- Chief Executive Officer

All right.

Chris Beckstead -- President

Great answer.

Elizabeth Porter -- Morgan Stanley -- Analyst

And then just a quick follow-up on the margin side. It looks like margin came on the lower side of the guidance. And just wanted to see if there were any drivers to call out that limited the margin upside despite revenue coming in above the range. I know you mentioned some of the bigger headcount, but any other drivers to just be aware of there?

Rob Bachman -- Chief Financial Officer

Yeah. It's a great question. Appreciate it. Consistent with what I shared in the prepared remarks, we saw about 200 basis points from the travel of that return, something that we're very pleased to see as we move into this world, that is a hybrid world going forward, focused on both digital experiences and in-person experiences.

So that opportunity to travel and be with customers is something that we were pleased to see return. And then as we've talked about in the past, we're making important investments as we continue to integrate the Clarabridge business and move forward. And then also still seeing some margin pressure from the purchase price accounting on Clarabridge.

Elizabeth Porter -- Morgan Stanley -- Analyst

Thank you.

Chris Beckstead -- President

This is Chris. Yeah, this is Chris. The one thing I'd just add to that is as we make these investments that we've made this year in travel and integration, we are feeling really good about the return on those investments and opportunity for it to provide us leverage as we go into 2023 and beyond, and see tremendous opportunity there to get leverage out of our business model and to be able to continue to have a return on that investment in our go-to-market.

Zig Serafin -- Chief Executive Officer

Yeah. I'm just going to highlight -- Zig here last comment on this one -- is it's the discipline of the company to go after attractive markets and make sure we're well-positioned and that we're investing in the right way. But at the same time, we also have a track record for going in with discipline, being nimble, making pivots where necessary because our interest is long-term durable growth and doing that in a way we're also creating good margins as part of that. So that's part of the philosophy and what we hold ourselves accountable to.

Elizabeth Porter -- Morgan Stanley -- Analyst

Great. Thank you so much.

Operator

Thank you. Our next question comes from Brent Bracelin of Piper Sandler. Your line is open.

Brent Bracelin -- Piper Sandler -- Analyst

Good afternoon. Global risk factors are clearly increasing here, Zig, and I really wanted to better understand how the Experience Management area holds up in an environment where there are more challenges. Can you help us understand how you positioned the business? How we should think about this category in an increasingly risky environment? Are you going to lean in on new products? Is it really about consolidating competing products? Just help us understand how you're thinking about navigating an environment that clearly is very different than it was a year ago.

Zig Serafin -- Chief Executive Officer

Sure. First off, I'm going to highlight something that's really important. This is a company -- Qualtrics is a company that's been around for two decades. And we've seen many different cycles.

And throughout those cycles, this is a company that has been a consistently growing performer that has the discipline to understand how to engage in different markets, but also happens to be responsible for a technology that helps to be able to capture and understand all the different human variables that are in play as uncertainty goes through it and ebbs and flows, right? We're obviously in a market today where we all see inflation. We see, you know, geopolitical situations. We see a war for talent, many other factors, right? Macroeconomic, microeconomic depending upon where you are. What makes our technology special and the solutions that we build on them is that we help companies to get closer to the markets that they serve in a much more timely way to be able to make the proper pivots, decisions, pricing, packaging reorientations, how they serve their customers, which markets they're going after, where they may need to go and go after other markets and opportunities, where they've got an opportunity to be able to do wallet share expansion.

I mean, that is the core of experience management is to get closer and put in a deeper lens around how you end up building relationships with the people and stakeholders that you serve. That's why this is such an important category. And it's why this technology is so well positioned given the different ebbs and flows that we are seeing in the marketplace. And it is why CEOs and other leaders in companies are coming to Qualtrics and are saying, "Look, we want to run our companies differently." The timing of the decisions that we're making are so vitally important that we've got to be able to operate our companies from an outside-in perspective and make decisions where we're calling our shots more effectively time and time and time again.

This is an extremely important part of how you think about the role of our technology, the way that we've been building our platform. Now as a company, and the way that we run the company internally. Look, our discipline is be highly focused on customers, be obsessed around how we operate with customers. And part of that philosophy also means that we're going after where we see the attractive market opportunities.

But we also have discipline of being nimble. One of the core values of this company is being scrappy. We have TACOS, right? And TACOS, the last of the letters is the S. And being scrappy means being resourceful, being creative and operating in a world of constraints and being able to pivot and make the adjustments and go after, nailing the opportunities as we see them in the market, but also learning quickly and reestablishing position wherever.

And that's an important philosophy. Now everything I just said about the internal part of that would be difficult to do if we didn't have a technology system that accommodates that. Look, if we were a company that was stitching together a whole bunch of different technology stacks, forget it. We're a company that has a really important philosophy around a single platform, the operating system.

We're building applications on top of that. We share data across the different components of applications. It enables our customers to move quickly, but it also enables our engineers to build new solutions like the ones I mentioned in the remarks, that are very relevant in a timely way, given where the market is headed. And today, look, not any one market is all the same.

We see different things happening in Europe. We see different things happening in the U.S., some are common, some are different. And so that's a really important factor of how the technology helps us to actually accommodate a lot of the philosophies and values we have in how we're running the company. So hopefully, that gives you additional color and context on how we think about these things.

Operator

Thank you. Our next question comes from Mark Murphy of J.P. Morgan. Your line is open.

Mark Murphy -- J.P. Morgan -- Analyst

Yes. Thank you very much. So, Zig, I'm wondering how pronounced was the trend of customers unplugging other products and consolidating onto Qualtrics in Q1? And just as they do that, are they viewing Qualtrics as the main system of record for customer data kind of over and above CDPs and CRM systems? And then I have a quick follow-up.

Zig Serafin -- Chief Executive Officer

Sure. First off, one of the unique advantages that we have is companies can move off of point solutions like social media monitoring type solutions as an example. Like a call center analytics system that's truly not an analytics, but they've been trying to analyze, but they're not developed and designed for scale. And so we make it very easy for companies to be able to bring their data over to our platform.

We can assimilate those programs and systems on our platform, but more importantly, like the telecom vendor that I mentioned in our remarks, helping them to bring all of that data together. And so to the heart of your question, we are seeing a continued trend of companies standardizing on our system. That's an important part. Now the other part of your question is around things like CDPs and other platforms.

I mean, one of the other attributes of our technology is that it's an ecosystem platform. So we make it very easy for companies to connect the data that they have. Let's say, it's inside of a CRM. Let's say, it's inside of an HRIS system.

Let's say it's inside of one of 80 different CDPs that are in the market. We support 19 of the more relevant ones today. And bringing that data in to populate that information inside of our Experience ID, which we've got 5 billion-plus profiles in, and then augmenting it with a very rich kernel of new information around human factors, which they can't do in those other systems. So we're not competing with those systems.

We're complementing them, and we're gracefully coming in, connecting, and we light up a whole new value set of capability for companies, which speeds the rate at which companies can end up adopting our system. And that partly reflects in the way that you see not only new logos coming on to our system, but it also supports the NRR rate that you also see.

Mark Murphy -- J.P. Morgan -- Analyst

Understood -- Oh, I'm sorry, go ahead.

Chris Beckstead -- President

Yeah. I was going to add, with -- we want to be integrated, Clarabridge, into our platform and the people there. And as we did that and added a layer of XM Discover into our platform, that just furthered this trend that we saw in terms of consolidation as we're now able to couple the layers of the platform. Organizations out there that have historically been using the service technology now have an opportunity to consolidate on the Qualtrics platform and vice versa.

And so I'd say that, if anything, has accelerated the trend we're seeing on consolidation as we continue to innovate and, you know, enhance our leadership.

Zig Serafin -- Chief Executive Officer

And part of that is also tapping into new budget pools, yes, like in the call center.

Mark Murphy -- J.P. Morgan -- Analyst

OK. OK. Understood. Thank you for that color.

The other question I had was, you're delivering solid results. It's despite the comment about a few customers in Europe, I think you said, delaying into the following quarter. Is it safe to assume that, that was isolated to just a few customers in Europe? or is there any sign of any sporadic hesitancy in North America, for instance? Because I think the guidance seems to convey pretty good business confidence out there.

Chris Beckstead -- President

Yeah. So to the question, the overall kind of macro factors we've seen to date have been relatively isolated. It has not really changed our annual outlook. We've reflected anything that we've seen into our current view of the overall -- business overall.

And we didn't see those organizations necessarily moving away from the technology. We didn't lose any of those deals. They just kind of got delayed into the following quarters. And not seeing anything spreading systematically at this point.

And what we have seen is adequately reflected in our guidance.

Zig Serafin -- Chief Executive Officer

Look, and I'm just going to highlight really importantly is that our scale, we're very happy to be guiding to 38% subscription growth year over year, right? And that just indicates what we're seeing for growth, what we're seeing for demand. It kind of reflects also how we look at the different markets that we're in. And that's really important because there's fewer and fewer companies that the scale are actually being able to prove out the ability to perform. And we factor in these different dynamics.

But with all of that said and put into the picture, it reflects the guidance that we're providing.

Mark Murphy -- J.P. Morgan -- Analyst

Excellent. Thank you.

Operator

Thank you. Our next question comes from Terry Tillman of Truist Securities. Your line is open.

Terry Tillman -- Truist Securities -- Analyst

Yeah. Thank you, Zig, Chris and Rob, strong results for the first quarter. I had two questions. I guess the first question is, based on kind of where we are with Clarabridge.

I know we're not going to get updates every quarter like pinpoint what they contributed, but you do have a very large go-to-market team. And so how would you rate how they're doing in terms of getting exposed to this technology and starting to cross-sell and upsell the solution? Just kind of a report card, what are you surprised by positively? What could you be doing better with? And then I had a follow-up.

Chris Beckstead -- President

Yeah. We're very, very pleased with what we've seen in terms of how the go-to-market teams are coming together. We've had the teams on-site together building relationships, working well together. One comment from -- that I received just within the last week from the CEO of Clarabridge, it's one team now.

Any when who's saying, we're not working together and passing together has been that we've come together well. I'd say it's all on track with what we expected to happen. And so far, so good, and we're seeing a great amount of pipeline build to help us to go execute and take these solutions to our customers.

Zig Serafin -- Chief Executive Officer

Well, like, I'm going to say, like, really importantly here is it's not separate companies. And a lot of times, when people bring companies together, they waste time for a year. We meant fast, quick, specific, focused on our customers. There is no word called Clarabridge anymore.

It's called XM Discover. XM Discover is a powerful element of our overall platform, and it expands our market opportunity. And to your point about the sales organization, these are some of the world's best conversational analytics, contact center, customer care solution specialists, and they're now connected in with the larger Qualtrics sales organization. And it works both ways.

Their opportunities are actually expanding. And the Qualtrics team, who has been serving many, many customers are also able to now bring in the power and the value of the conversational analytics system, the power and the value of the social media monitoring part of that system and several other solutions that we're building around employee experience and others. And so that helps you -- give you a kind of context. But the most important part of it is it's one company, and it's one product solution set that we're delivering to the marketplace.

And it's part of the philosophy of how we expect to execute and operate. And that's a part of the playbook that we were expecting to sign up to as we were bringing the two companies together.

Terry Tillman -- Truist Securities -- Analyst

That's great. And I promise I won't say Clarabridge again, it will be Discover. Just a follow-up question. The markets were obviously turbulent in November and December and continued through this year.

I don't think you all got much play on this November 15 press release related to the partnership with AWS. I think there was a lot in there. I would love it if you could unpack a little bit more. Maybe because part of this is taking your platform technologies importing at AWS, they're becoming an incremental customer on the CX side, I think.

And I'm just curious if they could become an influencer on helping win business in the market. Just anything more you can share about what looked like a pretty important press release back then? Thank you.

Zig Serafin -- Chief Executive Officer

Yeah. It's noteworthy and very important. I mean, here you have the world leaders in what leading and running a company based upon customer experience looks like, and they picked Qualtrics, right? And this is really important because it effectively shows a lot of other companies what the potential pathway could be for them in other industries. A lot of people look up to the way that Amazon has been running the company from the beginning as being customer experience centered.

And that's really one part of that announcement that we made. The other part of it is, as you know, as well, we are innovating on the AWS stack. And if you think about other customers who are also doing so, it naturally introduces both platform and commercial synergies that they have, as well as in some places, patient solutions that are built on the same platform plugging and connecting Qualtrics with data control between the platforms, for example. So yes, everything that you said plus a little more.

Terry Tillman -- Truist Securities -- Analyst

Thank you.

Operator

Thank you. Our next question comes from Gabriela Borges of Goldman Sachs. Your line is open.

Gabriela Borges -- Goldman Sachs -- Analyst

Great. Good afternoon. Thank you for taking the question. I'd love to follow up on Discover a little bit.

So either for Chris or for Zig, tell us a little bit more about how Discover is priced? And when you see customers in the pipeline engage on both Engage and Discover, how do those deal sizes typically break out? Do you see, for example, half the deal on Engage, half the deal on Discover? What does that mix look like? And how do you think it will evolve over time?

Zig Serafin -- Chief Executive Officer

Hi, Gabriela, so I'll answer the first part and let Chris answer the second part. Pricing is pretty straightforward. It's a natural extension of the platform pricing that we had for customers. So there's both a product utility-based license, as well as a consumption-based license that actually ends up existing based upon number of conversations and response or technically, conversations or data flows that run through the system.

That's how to think about that in a simplistic way. But I'll let Chris answer the second part.

Chris Beckstead -- President

Yeah. Related to the relative size, it really does depend upon the use case. If you think about a call center-centric solution, where you're analyzing hundreds of thousands or millions of calls, that can be a significant engagement along there or an industry, which is heavy in terms of online reviews or other channels like that, can be heavy on there. And as you know, and as we've shared, the industry trend is to more and more unstructured data and unstructured feedback, and that's the power and why we're so excited about having the XM Discover layer added to it given the trends that we're facing.

And the reality is the technology of Clarabridge also helps us analyze both the unstructured data, as well as the structured data that you get through our layer of the platform. So it really does kind of all come together, as Zig mentioned, as an overall solution that we are integrating seamlessly to give customers what they need across the board, so they can analyze all experience data and take action in real time.

Zig Serafin -- Chief Executive Officer

Yeah. Let me elaborate on that really because maybe not everybody on the call understands XM Discovery. This is an incredibly powerful new addition. And that's because we're helping companies to tune into any form of unstructured feedback that's coming through a company such as support conversations in an IT department; call center interactions, both on the employee and the customer side; chat; social media posts; review sites, and other sources.

And then what we do is we help companies not just pull that data together, OK, all of these different channels of information, but we analyze it in a highly sophisticated way. There's over 150 different industry models that we end up applying that data through. And then we automate manual and time-intensive processes that people typically have had to go through, especially in things like call centers, in order to be able to improve the efficiency and then save key customers, improve loyalty, deepen the relationships. And so, these themes are partly what are also adding to some of the momentum that we have in the company, both in net new logos, as well as existing customers that we're seeing, and some of which I've mentioned in the remarks.

Thank you, Gabriela.

Gabriela Borges -- Goldman Sachs -- Analyst

That color is helpful. Chris, one follow-up for you on Europe. The dynamic that you saw that was isolated to a few customers delaying, has that persisted into April? How is the trend? Is it worsening or getting better?

Chris Beckstead -- President

Yeah. I would say it's relatively consistent, but it continues to persist in terms of what we're seeing overall in terms of the market dynamic in Europe where there is a degree of hesitancy among some customers. At the same time, we have seen stability overall in our business as reflected by the fact that Qualtrics is never more relevant in uncertain times. And so with that, it's been -- I think that's one of the drivers behind why it's been relatively isolated in terms of where we've seen it because the experience management is never more relevant when customers are facing uncertainty.

Zig Serafin -- Chief Executive Officer

Yeah. What's interesting about this is they may go from one part of our product and then they have the option to go to another product area like leveraging, for example, Design XM or core XM to be able to go and do research on a part of the market and understand how to better position themselves, and then they may go back to another part of our product suite. So that helps, notwithstanding the comments that Chris just made a bit ago.

Gabriela Borges -- Goldman Sachs -- Analyst

Understood. Thank you.

Operator

Thank you. Our next question comes from Bhavin Shah of Deutsche Bank. Your line is open.

Bhavin Shah -- Deutsche Bank -- Analyst

Great. Thanks for taking my question. Zig or Chris, just back to another question that was brought up. As customers continue to adopt and leverage CDPs, can you maybe elaborate on how usage of Qualtrics changes when customers go through this transformation? Are there certain products that become more prioritized and maybe others that maybe become a little bit less prioritized as customers look to ingest, segment, and activate all the data that they now have?

Zig Serafin -- Chief Executive Officer

Well, look, I'm going to pop up to a larger important theme. And that is that there's very few industries out there that are not in a race to become more digitally connected with the business or the end customer that they end up interacting with. And often, this is for convenience factors, it's for efficiency factors. But a very important parallel theme that's taking place is to be more directly connected from a relationship standpoint with that end customer.

And this is where Qualtrics is beautifully designed where we get brought in and people will end up interlacing the use of Qualtrics to start to collect and pull in information that the customer is telling you that you're -- you have to ask them for. And then be able to start to populate the Experience ID with really important human factors like personas and segments that are going to be influential around how you navigate your business, trends that you have to pay attention to. And then very powerfully, you can start to orchestrate the way that you operate your business. So for example, you might need to engage differently through the customer care life cycle or you might need to do a better job with the products or features that you're recommending to someone.

And so, these are dynamics and capabilities that we can provide in a scalable fashion, OK? There's a lot of one-off point solutions that you can spend a lot of engineering money on to go and sit something together. And you'll notice that the businesses that are doing that are fairly low growth, and they're not very interesting businesses. What we're doing is we're helping companies to actually break through this idea of, bring it all together, one data system; secondly, create a workflow to create automation or semi-automation and more efficiently and more urgently connect with people in a more personalized way. If you step up and you look at that big picture, at the end of the day, what we're doing is we're helping to build much more deeper personalized relationships for companies between who they are as an organization and the stakeholder that they're serving, which can be the end customer, can be the patient or it can be a business, right? And so if you think about the other systems of record like a CRM or CDP or some marketing automation system, those are important, right? They play their role.

But what happens is we integrate with them and then we help to orchestrate the way that those systems both publish data into our platform and then the way that they end up automating behavior that is much more closely tailing or enabling an outcome, a business outcome. It might be not just finding and keeping a customer but building your business with a customer as an example. So that's how these things come together. The big trend is the role of digital and how relevant we are to it.

Bhavin Shah -- Deutsche Bank -- Analyst

Super helpful. And just a quick follow-up for Rob. Just on the guidance. Just given that you've seen some of this European impact persist into 2Q, why not embed additional conservatism into the guide? Or is it just that you guys remain confident in the impact becoming fairly isolated?

Rob Bachman -- Chief Financial Officer

Yeah. Here's what I would comment on the guidance. And as we've done historically, our philosophy is consistent here. We are tuning into the factors, both the macro and the company-level factors, and we set our guidance at a level that we are comfortable with.

So it's taken into account, and I think that's why you hear the tone that we're talking about and where we're taking this business, the relevance of Qualtrics in times of uncertainty is coming -- you're seeing that come to pass.

Zig Serafin -- Chief Executive Officer

Look, I mean, at the end of the day, I'm going to keep repeating this. This is really important. A mindset of building a business for long-term durable growth at scale, that is how we're operating. And look, the reality is you've got to pay attention to a lot of different factors in the market.

We're fortunate to have a technology system that actually helps us with that. But at the end of the day, we're not thinking just quarter to quarter. That's important. We're also thinking two, three years out in the type of company we want, which is reflected in the closing remarks that Rob made at the end, of the type of economics that we want in this business as we grow it.

Bhavin Shah -- Deutsche Bank -- Analyst

Super helpful. Thanks for the color.

Operator

Thank you. Our next question comes from Kirk Materne of Evercore ISI. Your line is open.

Kirk Materne -- Evercore ISI -- Analyst

Yeah. Thanks very much and congrats on the quarter. Zig, just wondering if you could talk about or maybe Chris might want to chime in here too as well. But can you just talk about sort of the partner engagement you've seen maybe year-to-date thus far, and how you're kind of thinking about partners helping to influence deal -- or selection or deals, especially when we get up into some of your bigger customers where there might be more organizational change required to take on the technology?

Zig Serafin -- Chief Executive Officer

Yeah. Great question, Kirk, and thanks for asking. So first off, I can't overemphasize how important it is that we have a platform built for an open platform ecosystem. And what that does in the type of innovation that is enabled and frankly, new value use cases.

And it's really important because sometimes people talk about partner ecosystem, and they think of one class of partner. You might think of a systems integration company go, "Hey, we have a partner ecosystem." Ours is multidimensional, it's extremely important. One dimension is we have companies who build solutions on our system who are practitioners and their experts in their craft that uses I/O psychology. They might be coming from the HR industry or they might be coming from customer experience industry.

It's companies like Bain, McKinsey, and many others, like Korn Ferry as an example. But then there's another class of partner, which are software companies, companies like ServiceNow, companies like SAP, companies like Microsoft, and companies like Adobe, Google, right? And that's the whole another category. We have over 275 different types of integrations that exist with our system and the applications and tools that our customers are using, and that list is only growing. A lot of those, by the way, are driven by customers.

They want to use our platform. They want to tie it in with the applications and systems and tools that they're already using today. Another class of partner are companies who are the solution builders. They help create leverage for us.

They take on the delivery expertise. We partner with them hand in hand. We stay closely engaged with them. There are companies who are also experts on strategy, they're experts on consulting.

UI is an excellent example of this. Accenture is another example. Deloitte is another example, PwC is an excellent example of this. And I mentioned Infosys as well on the call.

And so these types of companies, also the other ones I've mentioned, too, are all playing their parts in bringing their customers along. And one of the unique advantages that we have because we have such an open platform is that companies like these find that they have existing applications or practices. You might have a whole practice that's, for example, focused on HRIS as an example. And so that company will then bring in Qualtrics on top of that HRIS system, and they'll create unique new value that expands the capability, that opens up the door to experience on top of that system of engagement for a system of record or the workflow system that, that company might be using.

So that might then turn out to be something that layers on top of what an Oracle HRIS system has or an SAP SuccessFactors has or a -- for example, a Salesforce CRM system implementation or a Microsoft Dynamics system. So companies that have practices around those applications now bring in an experienced management layer in order to better understand the human factors and the experiences that are associated with the business or operating outcomes that are associated with those systems. This then drives new inbound opportunity. It drives expansion, right? And it partly contributes to the flywheel effects of how we run the business.

So hopefully, that gives you more color.

Kirk Materne -- Evercore ISI -- Analyst

Yeah, that's helpful. And then if I can just ask one follow-up. Chris, you mentioned, obviously, a couple of those deals that slipped a quarter. You guys can't control always the conversion, there's a customer element to that.

But when you think about the pipeline building you've seen, has anything changed? I mean, it seems like you're at the very early days of this opportunity, to Zig's comment earlier about sort of building a long-term business. Has pipeline generation changed at all for you from the beginning of the year because of the sort of geopolitical? or is that still on track with what you would have thought, the conversion rate that obviously might have a little bit more of a customer expectation to it?

Chris Beckstead -- President

Yeah. So always, the lifeblood of our business is driving pipe generation and getting out there. We recognize just the magnitude of this opportunity, and our sales force is engaged on going and capturing this opportunity globally. And so kind of business as usual on that front in terms of a major focus on pipe generation.

We're focused on it. We know that's a leading indicator of our future success. And a lot of focus on driving pipeline in the new XM Discover layer, a lot of focus on driving pipeline in our employee experience category, given the relevance and importance and current situation that's facing of driving employee retention among what we're hearing among our customers. The digital transition that's going on, a lot of focus on types in there.

So it's the lifeblood of our organization. We're focused on it. We're on track. Our guidance reflects the progress we've made on pipe gen, and continuing to drive that.

Zig Serafin -- Chief Executive Officer

Look, and I'm going to say, clearly, macro trends in Europe, for example, because of the war, they are what they are, right? But that doesn't change the fundamentals of how we end up earning our way into the right opportunities, going after the right use cases. So those fundamentals are what they are. We continue to operate on them. We do see sustained demand going into this quarter and the following quarters.

And like any quarter, we got our work to do. That's just -- that's always been the case.

Kirk Materne -- Evercore ISI -- Analyst

Sounds good. Thank you all very much.

Operator

Thank you. Our next question comes from Arjun Bhatia of William Blair. Your line is open.

Unknown speaker

Thanks. This is Chris on for Arjun. So I wanted to build on the first part of the last question. Zig, you mentioned in the prepared remarks kind of the importance of the growing ecosystem.

And if I remember it correctly, you mentioned around the time of the IPO that about 60% of your customers were using integrations. I was curious if you could give us an update on where that stands today? And any color you can provide on how that might differ among your largest customers?

Zig Serafin -- Chief Executive Officer

Yeah. I don't have an update on what statistics have been shared before. But what I will tell you is that we did publish publicly, and maybe Chris or Ron can remind me, the number of actions that have been executed on our system last year. So that's a public statement that we provided.

And that's a really important part of how to think about the outcomes that we're enabling companies to create off of our system that are results oriented. It's not just number of insights that you end up getting, but it's actually having to do with the end results. So I think there is a -- we actually published this last year, which is 1.5 billion actions in 2021. And the way you think about the actions is it's effectively the workflow that ends up being orchestrated through our system as a result of an insight that's been created on our platform, that our customers end up enabling both internally facing with their employees or in conjunction with interacting with a customer.

And this is an important statistic that we look at because it's not just saying, "Oh, we have X amount of integrations on the system." It's what's happening in the actual usage flow, consumption, impact that's being generated through the platform, and it's one of several statistics, but that's one of the ones that we look -- we do look at and that we share.

Unknown speaker

Great. Thank you and congrats on the quarter.

Zig Serafin -- Chief Executive Officer

Thank you.

Operator

Thank you. I'm showing no further questions at this time. [Operator signoff]

Duration: 59 minutes

Call participants:

Steven Wu -- Head of FP&A and Investor Relations

Zig Serafin -- Chief Executive Officer

Rob Bachman -- Chief Financial Officer

Brian Peterson -- Raymond James -- Analyst

Chris Beckstead -- President

Elizabeth Porter -- Morgan Stanley -- Analyst

Brent Bracelin -- Piper Sandler -- Analyst

Mark Murphy -- J.P. Morgan -- Analyst

Terry Tillman -- Truist Securities -- Analyst

Gabriela Borges -- Goldman Sachs -- Analyst

Bhavin Shah -- Deutsche Bank -- Analyst

Kirk Materne -- Evercore ISI -- Analyst

Unknown speaker

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