Qualtrics International (XM), the leader and creator of the experience management (XM) category, reported better-than-expected third-quarter 2022 results after the market close on Monday.
Shares gained 10.7% in Monday's after-hours trading session. The market's positive initial reaction can be attributed to the quarter's revenue and earnings beating Wall Street's consensus estimates, to fourth-quarter guidance for both the top and bottom lines coming in higher than analysts had been expecting, and to management raising its full-year outlook for both revenue and earnings.
Qualtrics is probably a new name to many investors. In January 2021, it held its initial public offering, which was a partial spinoff from German software giant SAP. SAP maintained a controlling stake.
Qualtrics' key numbers
| Metric | Q3 2022 Result | Q3 2021 Result | Change |
|---|---|---|---|
|
Revenue |
$377.5 million | $271.6 million | 39% |
|
Operating income |
($239.9 million) | ($277.5 million) | N/A. Loss narrowed 14%.* |
|
Adjusted operating income |
$22.6 million | $13.3 million | 70%* |
|
Net income |
($233.5 million) | ($286.0 million) | N/A. Loss narrowed 18%.* |
|
Adjusted net income |
$26.4 million | $5.9 million | 347%* |
|
Earnings per share (EPS) |
($0.40) | ($0.56) | N/A. Loss narrowed 29%.* |
|
Adjusted EPS |
$0.04 | $0.01 | 300%* |
Data sources: Qualtrics International. *Calculations by author.
Revenue growth was driven by a 43% surge in subscription revenue to $314.8 million. In its earnings presentation, the company said the number of customers spending more than $100,000 in annual recurring revenue grew 32% year over year to 2,199 customers.
Qualtrics' dollar-based net retention rate for its subscription business was 124%, which is a solid result. This means that existing subscribers increased their spending on the company's offerings by an average of 24% over the year-ago period.
Wall Street was looking for an adjusted loss per share of $0.02 on revenue of $358.6 million. So Qualtrics easily exceeded both expectations. The company also beat its own guidance, which was for an adjusted loss per share of $0.04 to $0.02 and revenue of $358 million to $360 million.
For the first nine months of 2022, Qualtrics used cash of $6 million in running its operations, compared to $10.9 million in the year-ago period. It ended the quarter with cash and cash equivalents of $731.7 million.
For context, in the second quarter, total sales grew 43% year over year to $356.4 million, driven by a 47% jump in subscription revenue to $300.6 million. Adjusted loss was $0.04 per share, compared to adjusted earnings of $0.04 per share in the year-ago period.
Full-year guidance raised
For the fourth quarter of 2022, management expects:
- Revenue between $380 million and $382 million, which would represent growth of 20% to 21%.
- Adjusted earnings per share of $0.02 to $0.03, compared to an adjusted loss per share of $0.07 in the year-ago period.
Going into the report, Wall Street was modeling for Q4 revenue of $373.1 million and an adjusted loss per share of $0.01. So the company's outlook surpassed both of these expectations.
Management raised its full-year 2022 outlook:
|
Metric |
Current 2022 Guidance |
Prior 2022 Guidance |
Annual Growth Implied by Current Guidance* |
|---|---|---|---|
| Total revenue | $1.450 billion to $1.452 billion | $1.422 billion to $1.426 billion | 35% |
| Subscription revenue | $1.219 billion to $1.221 billion | $1.202 billion to $1.206 billion | 40% |
| Adjusted EPS | $0.04 to $0.05 | ($0.09) to ($0.07) | N/A. Result was ($0.01) in year-ago period. |
Data source: Qualtrics. *Calculations by author.
Worth watching
Qualtrics stock is worth putting on your watch list. The company is rapidly growing revenue and now expects to be profitable on an adjusted basis in 2022. A big positive feature of software-as-a-service (SaaS) businesses is that they generate recurring revenue streams.
