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Qualtrics Stock Surges on Revenue Beat and Strong Top-Line Guidance

Qualtrics International (NASDAQ: XM), the leader and creator of the experience-management (XM) category, reported fourth-quarter and full-year 2021 results after the market close on Wednesday.

Shares gained 11.8% in Wednesday's after-hours trading session. The market's positive reaction is attributable to revenue easily beating Wall Street's consensus estimate and top-line guidance for both the first-quarter and full-year 2022 coming in significantly higher than analysts had been expecting.

The company's bottom-line result for the fourth quarter fell short of the consensus estimate, while its bottom-line guidance for both the first-quarter and full-year 2022 was in line with expectations.

Investors clearly put more importance on Qualtrics' result and guidance for revenue than on earnings, which is often the case for newly public companies in the tech realm. Qualtrics held its initial public offering in late January 2021. The IPO was a partial spinoff from German software-giant SAP, which maintained a controlling stake.

Image source: Getty Images.

Qualtrics' key quarterly numbers

Metric Q4 2021 Result Q4 2020 Result Change

Revenue

$316.0 million $213.6 million 48%

Operating income

($306.1 million) ($11.0 million) N/A. Loss widened 2,683%.

Adjusted operating income

$0.3 million ($4.7 million) N/A. Result flipped to positive from negative.

Net income

($309.8 million) ($14.5 million) N/A. Loss widened 2,037%.

Adjusted net income

($39.4 million) ($8.1 million) N/A. Loss widened 386%.

Earnings per share (EPS)

($0.56) ($0.03) N/A. Loss widened 1,767%.

Adjusted EPS

($0.07) ($0.02) N/A. Loss widened 250%.

Data sources: Qualtrics International and Yahoo! Finance.

Revenue growth was driven by a 61% surge in subscription revenue to $259 million. In the earnings presentation, the company said the number of customers spending more than $100,000 in annual recurring revenue grew 45% year over year to 1,940 customers, its best quarterly growth since going public.

Its dollar-based net retention rate was 128%, which was also its highest quarterly result since going public. This means that existing customers increased their spending on the company's offerings by an average of 28% over the year-ago period.

Wall Street was looking for an adjusted loss of $0.02 per share on revenue of $297.6 million, as outlined in my earnings preview. So Qualtrics easily surpassed the top-line expectation but considerably missed on the bottom line.

For the full-year 2021, the company generated operating cash flow of $2.8 million, compared to using $410.7 million running its operations in 2020. It ended the period with cash and cash equivalents of $1.01 billion.

For context, in the third quarter, Qualtrics' total sales grew 41% year over year to $271.6 million, driven by a 49% jump in subscription revenue to $220.3 million. Adjusted for one-time items, net income was $5.9 million, or $0.01 per share, up from a net loss of $0.4 million, or $0 (breakeven) per share, in the year-ago period.

Guidance

For the first quarter of 2022, management expects:

  • Revenue between $324 million and $326 million
  • Adjusted loss per share of $0.02 to $0 (breakeven)

Going into the report, in the first quarter, Wall Street was modeling for revenue of $314.7 million and an adjusted loss of $0.01 per share. So the company's top-line outlook easily exceeded the Street's expectation, while the bottom-line guidance was in line with the consensus estimate.

For full-year 2022, management expects:

  • Revenue between $1.402 billion and $1.406 billion
  • Adjusted loss per share of $0.02 to $0.00 (breakeven)

Going into the report, in 2022, analysts were expecting revenue of $1.36 billion and an adjusted loss of $0.01 per share. So the top-line outlook comfortably beat the Street's expectation, while the bottom-line guidance was in line with the consensus estimate.

A stock worth putting on your watch list

Qualtrics stock is worth putting on your watch list. The company is rapidly growing revenue, and expects to at least come close to breakeven from an adjusted basis in 2022. Subscription-based businesses tend to be attractive because they generate recurring revenue.

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Beth McKenna has no position in any of the stocks mentioned. The Motley Fool recommends SAP SE. The Motley Fool has a disclosure policy.


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