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Qualtrics (NASDAQ:XM) Surprises With Q4 Sales, Stock Soars


Kayode Omotosho /
2022/01/26 4:13 pm EST
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Online survey software provider Qualtrics (NASDAQ:XM) reported Q4 FY2021 results topping analyst expectations, with revenue up 47.9% year on year to $316 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $325 million at the midpoint, 3.27% above what analysts were expecting. Qualtrics made a GAAP loss of $309.7 million, down on its loss of $14.4 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) Q4 FY2021 Highlights:

  • Revenue: $316 million vs analyst estimates of $297.6 million (6.18% beat)
  • EPS (non-GAAP): -$0.07 vs analyst estimates of -$0.02 (-$0.05 miss)
  • Revenue guidance for Q1 2022 is $325 million at the midpoint, above analyst estimates of $314.6 million
  • Management's revenue guidance for upcoming financial year 2022 is $1.4 billion at the midpoint, predicting 30.5% growth (vs 35.4% in FY2021)
  • Free cash flow was negative $60.4 million, compared to negative free cash flow of $13 million in previous quarter
  • Gross Margin (GAAP): 70.9%, down from 75.9% same quarter last year

"Q4 was an outstanding quarter, capping off a record year of growth for Qualtrics,” 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.

Sales Growth

As you can see below, Qualtrics's revenue growth has been impressive over the last year, growing from quarterly revenue of $213.5 million, to $316 million.

Qualtrics Total Revenue

And unsurprisingly, this was another great quarter for Qualtrics with revenue up 47.9% year on year. On top of that, revenue increased $44.4 million quarter on quarter, a very strong improvement on the $22.2 million increase in Q3 2021, and a sign of re-acceleration of growth.

Analysts covering the company are expecting the revenues to grow 26.2% over the next twelve months, although estimates are likely to change post earnings.

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 400% since the IPO in 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 70.9% in Q4.

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 Q4 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on Qualtrics’s balance sheet, but we note that with a market capitalization of $14 billion and more than $1.01 billion in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by the exceptional revenue growth Qualtrics delivered this quarter. And we were also excited to see that it outperformed Wall St’s revenue expectations. On the other hand, it was less good to see the pretty significant deterioration in gross margin. Overall, we think this was a strong quarter, that should leave shareholders feeling very positive. The company is up 5.48% on the results and currently trades at $25.58 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.