Qualtrics International Inc.‘s stock rose more than 4% in extended trading today after the company posted strong fiscal first-quarter revenue that topped expectations, adding strong guidance for the next quarter as well.
The company reported a net loss for the quarter of $292.3 million, or 51 cents a share, and a loss before certain costs of $5.3 million, or a penny a share. Revenue for the period jumped 41%, to $335.6 million, up from just $238.6 million one year ago. Wall Street analysts had forecast an adjusted loss of a penny a share on slightly lower revenue of $326 million.
The encouraging results helped Qualtric’s stock erase a decline of almost 5% during the regular trading session today.
Qualtrics Chief Executive Zig Serafin (pictured) hailed the results as “outstanding,” saying the company had just delivered the strongest first quarter in its history. “These results highlight the demand for experience management as companies of every size and in every industry navigate an uncertain environment,” Serafin said. “I’m particularly pleased to deliver another quarter of positive non-GAAP operating margin while continuing to invest in long-term, durable growth.”
Qualtrics is a subsidiary of German enterprise software giant SAP SE. It sells a cloud-based platform that companies can use to collect feedback from stakeholders such as their employees and customers. Human resources departments especially like Qualtrics’ software because they can use it to get feedback from employees on things such as the effectiveness of their new hiring onboarding process. Product teams can use Qualtrics to assess customer satisfaction and identify new market opportunities.
Qualtrics sees itself as the leader of an emerging “experience management” industry and it believes it’s a segment that’s becoming more important to more enterprises.
The company’s latest results make it hard to argue with that assessment. During the quarter, Qualtrics saw its subscription sales rise 50%, to $280.8 million, on the back of expanded deals with customers such as Kroger Co. and Chipotle Mexican Grill Inc.
Holger Mueller of Constellation Research Inc. told SiliconANGLE that Qualtrics is indeed showing impressive growth. The problem, he said, is that its growth is coming at the cost of increased expenditures, which are actually rising faster than its revenues. “The cost of subscriptions is up more than 100%, while R&D costs grew 60% and sales costs rose by 50%, all faster than its revenue growth,” Mueller said.
The analyst said this suggests Qualtrics will be unable to simply keep growing until it becomes profitable, at least not with its current strategy in place.
“With just $830 million in cash and equivalents on its books the company will have to rely on less liquid assets to stay afloat at the current rate, because it showed almost $300 million in losses in the previous quarter alone,” Mueller explained. “Its net loss of 51 cents per share is not a good sign. Nevertheless, the management is guiding for breakeven earnings in the next quarter, so it will be interesting to see what the company does and how things pan out.”
For the second quarter, the company is looking at revenue in a range of $344 million to $346 million, a strong forecast that easily topped Wall Street’s estimate of $338 million in sales. The company is also aiming for earnings of between a penny-a-share loss and a penny-a-share profit, which is in line with Wall Street’s forecast.
Qualtrics also updated its end-of-year forecast, saying it’s now shooting for full-year revenue of between $1.428 billion and $1.432 billion, up from an earlier range of $1.402 billion to $1.406 billion. Wall Street’s current consensus is for full-year revenue of $1.41 billion.