Qualtrics International (NASDAQ:XM), which describes itself as "the leader and creator of the experience management (XM) category," is slated to report its third-quarter 2021 results after the market close on Wednesday, Oct. 20. An analyst conference call is scheduled to follow at 5 p.m. EDT.

Investors will probably be approaching the Utah-based software company's report with tempered optimism. Qualtrics, which held its initial public offering in late January, has beaten Wall Street's earnings estimates in all three of the quarters it's reported since going public. Moreover, year-over-year revenue growth has been solid: 36% and 38% in the first and second quarters, respectively.

The Qualtrics IPO represented a partial spinoff from parent company SAP (NYSE:SAP), the Germany-based software giant, which maintains a majority stake. Since its late January IPO at $30 per share, Qualtrics stock is up 46% through Friday, when it closed at $43.93. However, this statistic is somewhat misleading because the stock opened at $41.85 on the IPO day. In other words, investors who bought at the opening price on IPO day are up just 5% as of Friday.  

Here's what to watch in Qualtrics' upcoming Q3 report.

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Image source: Getty Images.

Qualtrics' key numbers 

Qualtrics wasn't a publicly traded company in the year-ago period, so that period's numbers can't be presented in the table below, as is customary. Rather, last quarter's numbers are used.

Metric Q2 2021 Result Qualtrics' Q3 2021 Guidance Wall Street's Q3 2021 Consensus Estimate Wall Street's Projected Sequential Change

Revenue

$249.3 million

$257 million to $259 million

$258.2 million

3.6%

Adjusted earnings per share

$0.04

($0.03) to ($0.01)

($0.02) N/A. Result expected to flip from positive to negative.

Data sources: Qualtrics International and Yahoo! Finance. 

For context, in the second quarter, the company's total sales grew 38% year over year to $249.3 million, driven by a 48% surge in subscription revenue to $204.5 million.

For the second quarter, net loss according to generally accepted accounting principles (GAAP) was $263.5 million, or $0.51 per share, compared with a net loss of $127.5 million, or $0.30 per share, in the year-ago period. Adjusted for one-time items, net income was $22.3 million, or $0.04 per share, compared to a net loss of $5.6 million, or $0.01 per share, in the second quarter of 2020. That result sped by the adjusted loss per share of $0.02 analysts had been expecting.

Notably, in the second quarter, Qualtrics began generating positive operating cash flow. It generated cash of $58.8 million running its operations.

Guidance

Last quarter, management raised its full-year 2021 guidance. It now expects the following:

  • Total revenue between $1.007 billion and $1.011 billion, up from prior guidance of between $980 million and $984 million.
  • Adjusted net loss per share between $0.02 and $0. This was a big increase as the prior outlook was for a loss per share between $0.13 and $0.11. 

The market looks ahead, so its reaction to Qualtrics' Wednesday earnings release will probably hinge more on guidance than on Q3 results. 

Investors can expect that management will increase its full-year outlook to incorporate the expected contributions from Clarabridge in the fourth quarter. On Oct. 1, Qualtrics closed on its approximately $1.1 billion acquisition of Clarabridge, described in the press release as the leader in omnichannel conversational analytics.

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