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Qualtrics (NASDAQ:XM) Q1 Sales Beat Estimates, Provides Optimistic Full Year Guidance


Kayode Omotosho /
2022/04/21 4:14 pm EDT
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Online survey software provider Qualtrics (NASDAQ:XM) announced better-than-expected results in the Q1 FY2022 quarter, with revenue up 40.6% year on year to $335.6 million. Guidance for next quarter's revenue was $345 million at the midpoint, 2.2% above the average of analyst estimates. Qualtrics made a GAAP loss of $292.3 million, down on its loss of $199.8 million, in the same quarter last year.

Is now the time to buy Qualtrics? Access our full analysis of the earnings results here, it's free.

Qualtrics (XM) Q1 FY2022 Highlights:

  • Revenue: $335.6 million vs analyst estimates of $325.6 million (3.06% beat)
  • EPS (non-GAAP): $0.01 vs analyst estimates of -$0.01 ($0.02 beat)
  • Revenue guidance for Q2 2022 is $345 million at the midpoint, above analyst estimates of $337.5 million
  • The company lifted revenue guidance for the full year, from $1.4 billion to $1.43 billion at the midpoint, a 1.85% increase
  • Free cash flow of $9.93 million, up from negative free cash flow of $60.4 million in previous quarter
  • Gross Margin (GAAP): 70.4%, down from 74.1% same quarter last year

“Q1 was an outstanding quarter for Qualtrics – in fact, it was the biggest Q1 in our history,” said Qualtrics CEO Zig Serafin.

Founded in 2002 by Utah-based entrepreneur Ryan Smith, along with his father and brother, Qualtrics (NASDAQ:XM) provides organizations with software to collect and analyze feedback from customers and employees.

The Internet has given customers more choice on whom to conduct business with and has also given them the power to easily share their experiences with other customers. These twin dynamics effectively have increased pressure on companies to both improve their customer service and also monitor their brand reputation online, driving the need for customer experience software offerings.

Sales Growth

As you can see below, Qualtrics's revenue growth has been impressive over the last year, growing from quarterly revenue of $238.6 million, to $335.6 million.

Qualtrics Total Revenue

And unsurprisingly, this was another great quarter for Qualtrics with revenue up 40.6% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $19.6 million in Q1, compared to $44.4 million in Q4 2021. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates Qualtrics is expecting revenue to grow 38.3% year on year to $345 million, in line with the 37.7% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 26.9% over the next twelve months.

There are others doing even better than Qualtrics. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 150% since the IPO last December. You can find it on our platform for free.

Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Qualtrics's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 70.4% in Q1.

Qualtrics Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.70 left to spend on developing new products, marketing & sales and the general administrative overhead. Despite it going down over the last year, this is still around the lower average of what we typically see in SaaS businesses. Gross margin has a major impact on a company’s ability to invest in developing new products and sales & marketing, which may ultimately determine the winner in a competitive market so it is important to track.

Key Takeaways from Qualtrics's Q1 Results

With a market capitalization of $14.8 billion, more than $836.4 million in cash and the fact it is operating close to free cash flow break-even, we're confident that Qualtrics has the resources it needs to pursue a high growth business strategy.

We enjoyed seeing Qualtrics’s impressive revenue growth this quarter. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. The company is up 4.31% on the results and currently trades at $25.4 per share.

Should you invest in Qualtrics right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.