QUALTRICS INTERNATIONAL: Administration report and evaluation of the monetary state of affairs and working outcomes (kind 10-Q)

The next dialogue and evaluation of our monetary situation and outcomes of
operations needs to be learn along side the condensed consolidated
monetary statements and associated notes thereto included elsewhere on this
Quarterly Report on Type 10-Q. This dialogue accommodates forward-looking
statements that contain dangers and uncertainties. Our precise outcomes might differ
materially from these mentioned beneath. You need to evaluate the sections titled
"Particular Observe Relating to Ahead-Trying Statements" and "Danger Elements" for a
dialogue of forward-looking statements and necessary components that might trigger
precise outcomes to vary materially from the outcomes described in or implied by
the forward-looking statements contained within the following dialogue and
evaluation.
Overview
We created the primary expertise administration platform to handle buyer,
worker, product, and model experiences. Our platform serves as a enterprise
working system for Expertise Administration. The Qualtrics Expertise Administration
Platform, or Qualtrics XM, is a system of motion that helps firms design and
enhance the experiences they supply to their many constituents throughout these
4 core experiences.
Our income was $271.6 million and $192.8 million for the three months ended
September 30, 2021 and 2020, respectively, representing year-over-year development of
41%. Our income was $759.6 million and $550.0 million for the 9 months ended
September 30, 2021 and 2020, respectively, representing year-over-year development of
38%. For the three months ended September 30, 2021 and 2020, our internet loss was
$286.0 million and $85.7 million, respectively, and $749.4 million and
$258.0 million for the 9 months ended September 30, 2021 and 2020,
respectively. The outcomes of our operations for the three and 9 months ended
September 30, 2021 and 2020 had been impacted by fairness and money settled stock-based
compensation expense.
We generate income by promoting subscriptions to our XM Platform and built-in
options, in addition to skilled companies. Over 99% of our contracts have a
subscription interval of 1 yr or longer, and we primarily invoice yearly in
advance. Subscription income comprised 81% of our whole income for every of the
three and 9 months ended September 30, 2021. We've got a diversified buyer
base consisting of organizations of varied sizes throughout nearly all
industries. Our largest buyer accounted for lower than 3% of income throughout
the three and 9 months ended September 30, 2021, and our largest industries
by annual recurring income, or ARR, as of September 30, 2021 had been monetary
companies, skilled and enterprise companies, training, know-how, authorities,
and healthcare. ARR is calculated by annualizing subscription income within the
final month of a interval.
We value and bundle our software program subscriptions options based mostly on the capability,
use case, and performance wants of our clients. This pricing and packaging
contains quantity of anticipated responses, variety of customers accessing our platform,
variety of staff, and stage of performance supplied, similar to dashboards, iQ
performance, and integrations. We've got additionally just lately begun to supply use case
pricing that simplifies pricing for purchasers searching for to deal with particular wants.
Our clients typically develop their subscriptions as they improve quantity of
responses, add options and integrations, develop customers and staff, and
improve options and workflows inside every answer.
Our skilled companies consist primarily of analysis companies, by our
DesignXM providing, which permits clients to achieve market intelligence by
procuring a curated group of respondents and returning actionable outcomes, whereas
conforming to best-practice design and methodology, in addition to implementations,
configurations, and integration and engineering companies to assist clients
deploy our XM Platform. Different skilled companies income consists of
consulting and coaching charges.
Acquisition of Clarabridge
On October 1, 2021, we accomplished our beforehand introduced acquisition of
Clarabridge, Inc., or Clarabridge, a buyer expertise administration software program
firm headquartered in Reston, Virginia, or the Clarabridge Acquisition,
pursuant to an Settlement and Plan of Reorganization and Merger, or the Merger
Settlement. Pursuant to the phrases of the Merger Settlement, all excellent shares
of Clarabridge capital inventory had been cancelled in alternate for combination
consideration of $1,125.0 million, topic to sure changes, within the kind
of shares of our Class A standard inventory and money, as supplied by the Merger
Settlement. We issued a complete of 25,038,955 shares of
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Class A standard inventory, or Acquisition Shares. Pursuant to the phrases of the Merger
Settlement, we agreed to register the Acquisition Shares for resale on a
registration assertion inside fifteen days from closing of the Clarabrdige
Acquisition and preserve effectiveness for 12 months from closing, or such
earlier time as the entire Acquisition Shares have been offered or are not
excellent. Pursuant to joinder and lockup agreements signed by Clarabridge's
stockholders, they comply with solely promote as much as one-third of their shares when the
registration assertion is asserted efficient, or the First Lockup Interval, as much as
an extra one-third thirty calendar days after the First Lockup Interval, or
the Second Lockup Interval, and as much as the ultimate one-third thirty calendar days
after the Second Lockup Interval, all topic to adjustment for sure blackout
intervals that will happen below the Merger Settlement.
As well as, pursuant to the phrases of the Merger Settlement, (i) the Clarabridge
inventory plans have been assumed, amended and restated by us, (ii) the choices to
buy shares of Clarabridge inventory excellent below the Clarabridge inventory
plans have been assumed by us and transformed into corresponding Qualtrics choices
to buy, within the combination, 3,203,885 shares of our Class A Widespread Inventory, and
(iii) we are going to grant fairness incentive awards to sure persevering with staff of
Clarabridge and its subsidiaries below the 2021 Qualtrics Worldwide Inc.
Inducement Fairness Plan, at our sole discretion.
We count on to proceed to accumulate or spend money on companies, folks, or
applied sciences that we imagine might complement, develop, or improve our XM
Platform or in any other case provide development alternatives.
Key Elements Affecting Our Efficiency
We imagine that the expansion and future success of our enterprise will depend on many
components. Whereas every of those components presents vital alternatives for our
enterprise, in addition they pose necessary challenges that we should efficiently handle
to be able to maintain our development and enhance our outcomes of operations.
Buyer Acquisition and Growth
We're targeted on persevering with to accumulate new clients to help our long-term
development. We've got invested, and count on to proceed to take a position, closely in our gross sales
and advertising efforts to drive buyer acquisition. Our clients embody
companies of all sizes, tutorial establishments, and authorities organizations. We
outline the variety of clients on the finish of any specific interval because the quantity
of events or particular person authorized entities which have entered right into a separate
subscription contract with us. For avoidance of doubt, worldwide
subsidiaries of father or mother entities aren't individually counted, however enterprise items,
manufacturers, and tutorial establishments are counted if they're distinct authorized
entities. A single group or buyer could have a number of paid enterprise
accounts.
Our enterprise mannequin depends on quickly and effectively touchdown new clients and
increasing our relationship with them over time. We've got a historical past of attracting
new clients, driving expanded use by upselling our XM Platform throughout the
enterprise, and cross-selling by the following deployment of extra
options all through the enterprise. Our relationship with SAP has resulted in
larger entry to enterprise clients and elevated cross-sell alternatives
by SAP's buyer base.
Investing for Development
Our funding for development encompasses a number of important areas, together with
worldwide development, enterprise gross sales, and product enlargement.
Our income outdoors of the USA represented 29% of our whole income in
every of the three months ended September 30, 2021 and 2020 and 29% and 28% of
our whole income within the 9 months ended September 30, 2021 and 2020,
respectively. We initially began our enlargement outdoors of the USA in
English-speaking nations, similar to Eire, the United Kingdom, Canada, and
Australia, as we had been capable of leverage our core applied sciences and go-to-market
movement. Since opening our first worldwide workplace in Dublin, Eire in 2013,
we now have over 30 gross sales workplaces in nations across the globe.
We proceed to evolve our know-how to make sure that we're finest serving our
clients' wants. We imagine this may result in continued elevated retention and
optimistic buyer referrals that can proceed to generate enlargement inside
present buyer organizations and enterprise from new clients. Since 2015, we
have established workplaces in
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Seattle and Poland to develop our engineering headcount. We proceed to spend money on
analysis and growth to drive product innovation and growth.
Strategic Partnerships
In 2018, we introduced the launch of QPN. Since then, we now have constructed out our
associate community to incorporate over 200 world member firms partnering with us
on our platform to assist drive breakthrough enterprise outcomes for joint
clients. Because the SAP Acquisition in 2019, we now have additionally developed joint
go-to-market and product integrations with SAP. We count on our partnerships to
lengthen our gross sales attain and supply implementation leverage each domestically and
internationally, in addition to product and know-how integrations that can
speed up our product roadmap.
Key Enterprise Metrics
We evaluate various working and monetary metrics, together with the next
key metrics to judge our enterprise, measure our efficiency, determine traits
affecting our enterprise, formulate enterprise plans, and make strategic selections.
Giant Clients
We outline our massive clients as these spending greater than $100,000 in ARR on our
XM Platform. We imagine that our potential to extend the variety of massive
clients is an indicator of our market penetration, strategic demand for our
platform, the expansion of our enterprise, and our potential future enterprise
alternatives. Rising consciousness of our platform and its broad vary of
capabilities, coupled with the mainstream adoption of cloud-based know-how,
has expanded the variety of our massive buyer base to incorporate organizations
of various sizes throughout nearly all industries.
We proceed to extend the variety of clients who've entered into bigger
subscriptions with us. We had 1,668 clients with ARR of $100,000 or extra as of
September 30, 2021, up from 1,338 as of December 31, 2020. The variety of
clients with ARR of $100,000 or extra signifies the strategic significance of our
platform for enterprise clients and our potential to each initially land
vital accounts and develop them over time.
Internet Retention Fee
We calculate our dollar-based internet retention fee to measure our potential to
retain and develop subscription income from our present clients and is an
indicator of the worth our platform delivers to clients and our future
enterprise alternatives. Our internet retention fee compares our subscription income
from the identical set of consumers throughout comparable intervals and displays buyer
renewals, enlargement, contraction and churn.
We calculate our internet retention fee on a trailing four-quarter foundation. As of
September 30, 2021, our internet retention fee was 125%. Our internet retention fee was
120% as of December 31, 2020.
To calculate our internet retention fee, we first calculate the subscription income
in a single quarter from a cohort of consumers that had been clients initially
of the identical quarter within the prior fiscal yr, or cohort clients. We repeat
this calculation for every quarter within the trailing four-quarter interval. The
numerator for internet retention fee is the sum of subscription income from cohort
clients for the 4 most up-to-date quarters, or numerator interval, and the
denominator is the sum of subscription income from cohort clients for the
4 quarters previous the numerator interval.
SAP Acquisition
Because the SAP Acquisition in January 2019 and till the sale of 6,000,000 shares
of our Class A standard inventory to Q II in December 2020, we operated as an entirely
owned subsidiary of SAP. Accordingly, our monetary outcomes for the three and
9 months ended September 30, 2021 differ compared to the three and 9
months ended
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September 30, 2020 primarily with respect to gross sales and advertising bills and
fairness and money settled stock-based compensation expense.
The outcomes of our operations embody all income and prices immediately
attributable and/or allocable to the Firm, together with prices for amenities,
features, and companies utilized by Qualtrics. Our outcomes additionally embody bills of
SAP immediately charged to Qualtrics for sure features supplied by SAP,
together with, however not restricted to, gross sales group prices, insurance coverage, worker
advantages, human assets and utilization of information facilities. We count on the income and
cross prices between us and SAP to proceed within the close to future. These quantities
could fluctuate from interval to interval based mostly on the character and extent of the
oblique advantages acquired and supplied. See Observe 15 "Associated Celebration
Transactions" for additional particulars in our condensed consolidated monetary
statements included elsewhere on this Quarterly Report on Type 10-Q.
On January 28, 2021, we accomplished a voluntary alternate provide pursuant to which
5.4 million cash-settled Qualtrics Rights and 1.3 million cash-settled SAP RSU
awards had been exchanged into 12.8 million equity-settled Qualtrics RSU awards,
representing 93% of the excellent Qualtrics Rights and SAP RSU awards. Throughout
the three months ended September 30, 2021 and 2020, we recorded $276.8 million
and $84.1 million, respectively, in fairness and money settled stock-based
compensation expense. The rise was primarily as a result of issuance of RSU
awards in reference to our preliminary public providing. In the course of the three months
ended September 30, 2021 and 2020, we settled $2.9 million and $96.9 million,
respectively, of liability-classified awards. In the course of the 9 months ended
September 30, 2021 and 2020, we recorded $764.6 million and $218.0 million,
respectively, in fairness and money settled stock-based compensation expense. The
improve was primarily as a result of issuance of RSU awards in reference to our
preliminary public providing. In the course of the 9 months ended September 30, 2021 and
2020, we settled $76.9 million and $284.0 million, respectively, of
liability-classified awards.
On account of this improve in fairness and money settled stock-based
compensation, our price of income, analysis and growth, gross sales and
advertising, and basic and administrative prices elevated considerably in
absolute {dollars} and as a proportion of income throughout the three and 9 months
ended September 30, 2021 in comparison with the three and 9 months ended
September 30, 2020. These modifications are described in extra element inside our
outcomes of operations.
SAP Section Reporting
Because the SAP Acquisition, sure of our monetary outcomes have been introduced
as an working phase inside SAP's publicly reported monetary outcomes. These
Euro-reported monetary outcomes are ready below Worldwide Monetary
Reporting Requirements, or IFRS, and introduced on a non-IFRS foundation. The SAP phase
outcomes differ from our standalone monetary outcomes primarily as a consequence of:
variations in reporting foreign money, variations between IFRS and GAAP,
variations within the reporting of sure associated occasion transactions between
Qualtrics and SAP, SAP's reporting of bills associated to sure company
overhead features, and variations within the reporting associated to the SAP
Acquisition.
Response to COVID-19
In response to the COVID-19 pandemic, we took broad actions to mitigate the
impression of this public well being disaster on our enterprise. We carried out, amongst different
measures, a COVID-19 process pressure, a short lived earn a living from home coverage throughout all
workplaces globally, new working pointers for our workplaces based mostly on native
situations, restrictions on work-related journey, and extra wellness
advantages for workers, all of which have the potential to end in a
vital disruption to how we function our enterprise. We've got begun stress-free
a few of these measures in sure workplaces the place potential in compliance with
native restrictions and orders, however a lot of them are ongoing. Our staff'
well being and security is our prime precedence, and we proceed to watch native
restrictions the world over, the administration of vaccines, and the variety of
new instances, in addition to the evolving and competing authorized necessities round
COVID-19 protocols and vaccine mandates in the USA and elsewhere. Our
clients and companions have equally been impacted. Our XM Platform permits
clients to concentrate on managing their buyer, worker, product, and model
experiences, which is more and more necessary in a digitally linked world.
Though we imagine our enterprise is well-suited to navigate the present
atmosphere, the final word period and extent of the COVID-19 pandemic can't be
precisely predicted at the moment, and the direct and oblique impression on our
enterprise, outcomes of
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operations, and monetary situation will depend upon future developments which are
extremely unsure. We've got skilled, and will proceed to expertise, an
antagonistic impression on sure components of our enterprise. The situations attributable to the
pandemic have adversely affected or could sooner or later adversely have an effect on, amongst
different issues, demand, spending by new clients, renewal and retention charges of
present clients, the size of our gross sales cycles, gross sales productiveness, the
worth and period of subscriptions, provide of products and companies supplied by
third events, collections of accounts receivable, our IT and different bills,
our potential to focus time and a focus on our core enterprise, our potential to
recruit, and the flexibility of our staff to journey, all of which might
adversely have an effect on our enterprise, outcomes of operations, and monetary situation.
We've got additionally skilled, and will proceed to expertise, sure optimistic
impacts on different facets of our enterprise, together with a rise in gross sales of our
platform to state, native, and federal governments and non-profit organizations
to assist them navigate by the pandemic in addition to gross sales of vaccine
verification options on our XM Platform. Furthermore, we now have seen a discount in
sure working bills as a consequence of decreased enterprise journey, deferred hiring for
some positions, and the virtualization or cancellation of buyer and worker
occasions. At our digital occasion this yr, titled Work Totally different, we explored how
profitable organizations are listening to and taking motion on the suggestions from
their clients and staff to reimagine the way forward for work. Moreover, we
imagine that the COVID-19 pandemic might additionally speed up buyer transformation
into digital companies, which we count on will generate extra alternatives
for us sooner or later.
The worldwide impression of COVID-19 continues to quickly evolve, together with because of this
of recent variants of the virus and the quickly altering authorized panorama, and we
will proceed to watch the state of affairs and the results on our enterprise and
operations carefully. We don't but know the total extent of potential impacts on
our enterprise or operations. Specifically, as a consequence of our subscription-based
enterprise mannequin, the impact of the COVID-19 pandemic will not be absolutely mirrored
in our income till future intervals. Given the uncertainty, we can not fairly
estimate the impression on our future outcomes of operations, money flows, or
monetary situation. For added particulars, see "Danger Elements."
Parts of Our Outcomes of Operations
Income
We generate income from gross sales of subscriptions to our XM Platform and associated
skilled companies.
Subscription income is acknowledged ratably over the associated contractual time period,
usually starting on the date that our XM Platform is made obtainable to our
buyer. Our subscription agreements usually have annual contractual phrases,
with a rising quantity having multi-year contractual phrases. Our agreements
usually can't be canceled with refund. We primarily invoice upfront for our
annual contracts and yearly upfront for our multi-year contracts. Quantities
which were billed are initially recorded as deferred income till the
income is acknowledged. Subscription income as a proportion of whole income could
fluctuate interval to interval.
Skilled companies and different income consists primarily of analysis companies,
implementation companies, and engineering companies. Analysis companies income is
acknowledged upon completion of the undertaking. Our agreements usually can't be
canceled with refund. We usually invoice upfront for analysis companies
tasks, with various clients buying annual retainers to fund future
tasks. Quantities which were billed are initially recorded as deferred
income till the income is acknowledged. Implementation companies and engineering
companies embody charges related to new and increasing clients requesting
implementation, integration, customization, consulting, and different companies. We
value these companies on a set payment foundation. Our agreements usually can't be
canceled for a refund. We usually invoice upfront for skilled companies
and different income. Quantities which were billed are initially recorded as
deferred income till the income is acknowledged. We proceed to extend
deployment of companions to meet sure of those companies, particularly
implementation companies, and we usually count on skilled companies and different
income to lower as a proportion of whole income in the long run, though
this proportion could fluctuate from interval to interval.
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Price of income and gross margin
Price of income. Our price of subscription income contains bills associated to
working our XM Platform in knowledge facilities, depreciation of our knowledge heart
gear, and the amortization of our capitalized internal-use software program and
acquired know-how. Subscription price of income additionally contains employee-related
prices related to our buyer help and XM Platform operations
organizations. Our price {of professional} companies and different income contains
vendor prices and employee-related prices related to the supply of those
companies. Moreover, we make allocations of sure overhead prices, primarily
based mostly on headcount, to every of those prices of income. Allotted overhead
contains prices similar to amenities, together with lease expense, utilities,
depreciation on leasehold enhancements, and shared data know-how prices.
We count on our price of income will improve in absolute {dollars} in future
intervals as we proceed to spend money on our enterprise.
Gross margin. Gross margin is gross revenue expressed as a proportion of income.
Our gross margin could fluctuate from interval to interval based mostly on the timing of
capital expenditures and the associated depreciation expense, or different modifications in
fairness and money settled stock-based compensation, employee-related prices,
infrastructure prices, income combine, timing of completion {of professional} companies
tasks, in addition to income fluctuations. Excluding the impression of fairness and
money settled stock-based compensation expense, we usually count on our gross
margin to stay comparatively constant within the close to time period and to extend modestly
in the long run, though our gross margin could fluctuate from interval to interval
relying on the interaction of all of those components.
Working bills
Analysis and growth. Our analysis and growth bills consist
primarily of employee-related prices for our engineering, product, and design
groups, and allotted overhead.
We plan to proceed to rent staff for our engineering, product, and design
groups to help our efforts to boost the performance and enhance the
reliability, availability, and scalability of our XM Platform. Excluding the
impression of fairness and money settled stock-based compensation expense, we count on
our analysis and growth bills to extend in absolute {dollars} in future
intervals, to stay comparatively constant as a proportion of our income within the
close to time period, and to lower as a proportion of our income over the long run,
though our analysis and growth bills could fluctuate as a proportion of
our income from interval to interval as a result of timing and extent of those
bills.
Gross sales and advertising. Our gross sales and advertising bills relate to each inside and
outbound gross sales actions, in addition to enlargement efforts with our present
clients. The bills consist primarily of employee-related prices, advertising
applications and occasions, lead technology charges, oblique advantages acquired from SAP
internet of oblique advantages we offer to SAP, and allotted overhead. Gross sales
commissions earned by our gross sales workforce and the associated payroll taxes, that we
think about to be incremental and recoverable prices of acquiring a contract with an
group, are deferred and amortized over an estimated interval of advantage of
5 years.
We plan to proceed to spend money on gross sales and advertising to develop our buyer base
and improve our model consciousness. The pattern and timing of gross sales and advertising
bills will rely partially on the timing of promoting campaigns. Excluding the
impression of fairness and money settled stock-based compensation expense, we count on
that gross sales and advertising bills will improve in absolute {dollars} in future
intervals; nonetheless, we count on our gross sales and advertising bills to lower as a
proportion of our income over the long run, though our gross sales and advertising
bills could fluctuate as a proportion of our income from interval to interval due
to the timing and extent of those bills.
Common and administrative. Our basic and administrative bills consist
primarily of employee-related prices for our finance, authorized, folks operations,
and different administrative groups, in addition to sure executives. As well as,
basic and administrative bills embody allotted overhead, outdoors authorized,
accounting and different skilled charges, and non-income based mostly taxes.
We count on to incur extra basic and administrative bills to help our
development in addition to our transition to being a publicly traded firm. Excluding
the impression of fairness and money settled stock-based compensation expense, we
count on that basic and administrative bills will improve in absolute
{dollars} in future
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intervals. Our basic and administrative bills could fluctuate as a proportion
of our income from interval to interval as a result of timing and extent of those
bills.
Different non-operating expense, internet
Different non-operating expense, internet consists of different non-operating beneficial properties or
losses, together with these associated to curiosity revenue and expense and international
foreign money transaction beneficial properties and losses.
Provision for revenue taxes
Provision for revenue taxes consists primarily of revenue taxes associated to the
U.S. and different international jurisdictions through which we conduct enterprise. We preserve a
full valuation allowance in opposition to our U.S. deferred tax belongings as we now have
concluded that it isn't extra seemingly than not that the deferred tax belongings will
be realized. Our efficient tax fee is affected by tax charges in international
jurisdictions and the relative quantities of revenue we earn in these jurisdictions,
in addition to non-deductible bills, similar to share-based compensation, and
modifications in our valuation allowance.
Revenue taxes as introduced in our condensed consolidated monetary statements
attribute present and deferred revenue taxes of SAP to our standalone monetary
statements in a fashion that's systematic, rational and in line with the
asset and legal responsibility methodology prescribed by FASB ASC Matter 740: Revenue Taxes, or
ASC 740. Accordingly, our revenue tax provision was ready following the
separate return methodology. The separate return methodology applies ASC 740 to the
standalone monetary statements of every member of the consolidated group as if
the group members had been a separate taxpayer and a standalone enterprise. As a
outcome, precise transactions included within the consolidated monetary statements of
SAP will not be included in our separate condensed consolidated monetary
statements. Equally, the tax remedy of sure objects mirrored in our
condensed consolidated monetary statements will not be mirrored within the
consolidated monetary statements and tax returns of SAP. Subsequently, such objects
as internet working losses, credit score carry-forwards and valuation allowances could
exist within the standalone monetary statements that will or could not exist in SAP's
consolidated monetary statements. As such, our revenue taxes as introduced in
these condensed consolidated monetary statements will not be indicative of the
revenue taxes that we'll generate sooner or later.
As described above, we now have calculated the revenue taxes in our condensed
consolidated monetary statements on a separate return foundation. Nevertheless, we had been
truly included within the consolidated, mixed or unitary U.S. federal and
state revenue tax returns with SAP America and its associates. Because of this, a
portion of our internet working losses and credit score carryforwards wouldn't be
obtainable for our use in future tax intervals as the web working losses, or
underlying deductions, and credit have already been partially absorbed by SAP
America.
On account of the Clarabridge Acquisition, described in Observe 16 to our
condensed consolidated monetary statements included elsewhere on this Quarterly
Report on Type 10-Q, SAP America not holds 80% of the worth of our
excellent inventory, and as such, we are going to not be a member of SAP America's
consolidated group for U.S. federal revenue tax functions, which we discuss with as a
U.S. Consolidated Group, as of October 1, 2021. We are going to proceed to be part of
the U.S. Consolidated Group for different tax jurisdictions. The tax attributes that
had been utilized by U.S. Consolidated Group, and aren't obtainable to be used by
Qualtrics Worldwide Inc., will not be mirrored in our consolidated
monetary statements starting within the fourth quarter of 2021, leading to an
anticipated discount in each our deferred tax belongings and valuation allowance.
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Outcomes of operations The next desk presents our outcomes of operations for the intervals introduced:

                                          Three Months Ended September 30,            9 Months Ended September 30,
                                              2021                2020                   2021                   2020
                                                                          (In 1000's)
Income:
Subscription                             $   220,314          $  148,259          $        611,748          $  415,000
Skilled companies and different               51,320              44,590                   147,874             134,956
Whole income                                271,634             192,849                   759,622             549,956
Price of income(1)(2):
Subscription                                  23,802              16,362                    65,865              46,974
Skilled companies and different               43,041              32,674                   127,522             100,060
Whole price of income                         66,843              49,036                   193,387             147,034
Gross revenue                                 204,791             143,813                   566,235             402,922
Working bills(1)(2):
Analysis and growth                      83,875              62,065                   226,552             168,985
Gross sales and advertising                          161,570             103,008                   449,446             322,775
Common and administrative                   236,810              60,731                   637,944             155,225
Whole working bills                     482,255             225,804                 1,313,942             646,985
Working loss                              (277,464)            (81,991)                 (747,707)           (244,063)
Different non-operating expense, internet              (3,160)               (556)                   (6,091)               (483)
Loss earlier than revenue taxes                    (280,624)            (82,547)                 (753,798)           (244,546)
Provision (profit) for revenue taxes           5,409               3,141                    (4,424)             13,481
Internet loss                                 $  (286,033)         $  (85,688)         $       (749,374)         $ (258,027)


________________

(1) Contains stock-based compensation expense settled in each inventory and money, as follows:

                                         Three Months Ended September 30,            9 Months Ended September 30,
                                             2021                2020                   2021                   2020
                                                                         (In 1000's)
Price of subscription income            $     2,516          $      725          $          8,522          $    3,809
Price {of professional} companies and different
income                                       6,977               2,582                    18,161               6,193
Analysis and growth                     33,697              23,919                    89,410              63,165
Gross sales and advertising                          36,651              12,086                    94,917              34,933
Common and administrative                  196,979              44,810                   553,582             109,949
Whole stock-based compensation,
together with money settled                  $   276,820          $   84,122          $        764,592          $  218,049



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(2) Contains amortization of intangible belongings acquired as follows:

                                            Three Months Ended September 30,               9 Months Ended September 30,
                                                2021                   2020                    2021                   2020
                                                                            (In 1000's)
Price of subscription income            $             442          $      265          $             973          $      797
Gross sales and advertising                                       74                  51                        176                 153
Common and administrative                                47                  47                        141                 141
Whole amortization of acquired
intangible belongings                       $             563          $      363          $           1,290          $    1,091


The next desk presents our working outcomes for the intervals introduced as a proportion of our whole gross sales for these intervals:

                                             Three Months Ended September 30,                 9 Months Ended September 30,
                                               2021                     2020                    2021                     2020
                                                                            (as a % of income)
Income:
Subscription                                          81                     77                        81                     75
Skilled companies and different                       19                     23                        19                     25
Whole income                                        100  %                 100  %                    100  %                 100  %
Price of income:
Subscription                                           9                      8                         9                      9
Skilled companies and different                       16                     17                        17                     18
Whole price of income                                 25                     25                        26                     27
Gross revenue                                          75                     75                        74                     73
Working bills:
Analysis and growth                              31                     32                        30                     31
Gross sales and advertising                                   59                     53                        59                     59
Common and administrative                            87                     31                        84                     28
Whole working bills                             177                    116                       173                    118
Working loss                                      (102)                   (41)                      (99)                   (45)
Different non-operating expense, internet                      (1)                     -                        (1)                     -
Loss earlier than revenue taxes                            (103)                   (41)                     (100)                   (45)
Provision (profit) for revenue taxes                   2                      2                        (1)                     2
Internet loss                                            (105) %                 (43) %                    (99) %                 (47) %


Comparability of the three months ended September 30, 2021 and 2020
Income
                                        Three Months Ended September 30,
                                            2021                2020              $ Change               % Change
                                                           (In 1000's)
Subscription income                   $   220,314          $  148,259          $   72,055                        49  %
Skilled companies and different
income                                     51,320              44,590               6,730                        15  %
Whole income                          $   271,634          $  192,849          $   78,785                        41  %


Subscription income elevated by $72.1 million, or 49%, for the three months
ended September 30, 2021 as in comparison with the three months ended September 30,
2020. This improve was due primarily to elevated demand for our options from
new and present clients. Of the rise in subscription income for the
three months ended
                                       34
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September 30, 2021 in comparison with the three months ended September 30, 2020,
roughly $48.9 million was attributable to present clients and
roughly $23.2 million was attributable to new clients. The rise in
income from present clients was pushed by upgrades of present subscription
options and the acquisition of extra options inside our platform. Pricing
modifications weren't materials to the rise in income. Skilled companies and
different income elevated $6.7 million, or 15%, for the three months ended
September 30, 2021 in comparison with the three months ended September 30, 2020. This
improve was primarily as a consequence of a rise in income from massive clients, who
usually require extra companies.
Price of income, gross revenue, and gross margin
                                          Three Months Ended September 30,
                                              2021                   2020              $ Change               % Change
                                                             (In 1000's)
Price of subscription income           $        23,802           $   16,362          $    7,440                        45  %
Price {of professional} companies and
different income                                   43,041               32,674              10,367                        32  %
Whole price of income                           66,843               49,036              17,807                        36  %

Subscription gross revenue                      196,512              131,897              64,615                        49  %
Skilled companies and different gross
revenue                                           8,279               11,916              (3,637)                      (31) %
Whole gross revenue                     $       204,791           $  143,813          $   60,978                        42  %

Subscription gross margin                           89   %               89  %
Skilled companies and different gross
margin                                              16   %               27  %
Whole gross margin                                  75   %               75  %


Price of subscription income elevated $7.4 million, or 45%, for the three
months ended September 30, 2021, as in comparison with the three months ended September
30, 2020, in line with the rise in subscription income development over the
similar interval. This improve was pushed by a $3.0 million improve in
employee-related prices from headcount development, a $2.0 million improve in server
prices, a $1.8 million improve in stock-based compensation expense, and a $0.6
million improve in amortization of inner use software program. Price {of professional}
companies and different income elevated $10.4 million, or 32%, for the three months
ended September 30, 2021, as in comparison with the three months ended September 30,
2020. This improve was pushed by a $4.4 million improve in stock-based
compensation expense, a $3.8 million improve in skilled companies vendor
prices, and a $2.2 million improve in employee-related prices from headcount
development.
Our gross margins had been 75% throughout the three months ended September 30, 2020 and
the three months ended September 30, 2021, due primarily to continued robust
subscription gross margins, partially offset by a lower in skilled
companies and different gross margins based mostly on the modifications mentioned above.
Working Bills
Analysis and growth
                                                  Three Months Ended September 30,
                                                      2021                   2020              $ Change               % Change
                                                                     (In 1000's)
Analysis and growth                       $         83,875          $   62,065          $   21,810                        35  %


Analysis and growth bills elevated $21.8 million, or 35%, for the three
months ended September 30, 2021, as in comparison with the three months ended September
30, 2020. This improve was pushed by an $11.2 million improve in
employee-related prices from headcount development as we proceed so as to add to and
improve our merchandise, a $9.8 million improve in stock-based compensation
expense, and a $0.7 million improve outdoors vendor prices.
                                       35

————————————————– ——————————

Gross sales and advertising
                                Three Months Ended September 30,
                                      2021                      2020         $ Change      % Change
                                                (In 1000's)
Gross sales and advertising     $         161,570                    $ 103,008      $ 58,562           57  %


Gross sales and advertising bills elevated $58.6 million, or 57%, for the three
months ended September 30, 2021, as in comparison with the three months ended September
30, 2020. The rise in gross sales and advertising was primarily pushed by a $24.7
million improve in employee-related prices from headcount development, a $24.6
million improve in stock-based compensation expense, an $8.0 million improve
in advertising spend, and a $1.3 million improve in travel-related bills.
Common and administrative
                                                  Three Months Ended September 30,
                                                      2021                2020              $ Change               % Change
                                                                     (In 1000's)
Common and administrative                       $   236,810          $   60,731          $  176,079                       290  %


Common and administrative bills elevated $176.1 million, or 290%, for the
three months ended September 30, 2021, as in comparison with the three months ended
September 30, 2020. The rise usually and administrative bills was
primarily pushed by a $152.2 million improve in stock-based compensation
expense, a $13.4 million improve in acquisition associated prices, and a rise
in employee-related prices from headcount development.
Different non-operating expense, internet
Different non-operating expense, internet decreased $2.6 million for the three months
ended September 30, 2021, as in comparison with the three months ended September 30,
2020. This variation for the intervals was primarily pushed by a $1.7 million
improve in curiosity expense, the outcomes of modifications in curiosity revenue as a consequence of
variations in common money balances and rates of interest, and immaterial modifications
in international foreign money transactions beneficial properties and losses.
Provision for revenue taxes
Provision for revenue taxes elevated $2.3 million for the three months ended
September 30, 2021, as in comparison with the three months ended September 30, 2020,
and our efficient tax fee was (1.9)% for the three months ended September 30,
2021, as in comparison with (3.8)% for the three months ended September 30, 2020. The
change was primarily as a result of recording of an unsure tax legal responsibility,
partially offset by tax advantages associated to the finalization of tax returns in
varied international jurisdictions, each recorded as discrete objects within the three
months ended September 30, 2021.
The distinction between the U.S. statutory fee of 21% and our efficient tax fee
is primarily pushed by fee changes as a consequence of tax reserves, international taxes, and
the impression of valuation allowances recorded in opposition to present yr losses in the
United States.
Comparability of the 9 months ended September 30, 2021 and 2020
Income
                                           9 Months Ended September 30,
                                              2021                   2020              $ Change               % Change
                                                             (In 1000's)
Subscription income                   $        611,748          $  415,000          $  196,748                        47  %
Skilled companies and different
income                                         147,874             134,956              12,918                        10  %
Whole income                          $        759,622          $  549,956          $  209,666                        38  %


                                       36
--------------------------------------------------------------------------------
Subscription income elevated by $196.7 million, or 47%, for the 9 months
ended September 30, 2021 as in comparison with the 9 months ended September 30,
2020. This improve was due primarily to elevated demand for our options from
new and present clients. Of the rise in subscription income for the 9
months ended September 30, 2021 in comparison with the 9 months ended September 30,
2020, roughly $127.0 million was attributable to present clients and
roughly $69.7 million was attributable to new clients. The rise in
income from present clients was pushed by upgrades of present subscription
options and the acquisition of extra options inside our platform. Pricing
modifications weren't materials to the rise in income. Skilled companies and
different income elevated $12.9 million, or 10%, for the 9 months ended
September 30, 2021 in comparison with the 9 months ended September 30, 2020. This
improve was primarily as a consequence of a rise in income from massive clients, who
usually require extra companies.
Price of income, gross revenue, and gross margin
                                           9 Months Ended September 30,
                                              2021                   2020              $ Change               % Change
                                                             (In 1000's)
Price of subscription income           $        65,865           $   46,974          $   18,891                        40  %
Price {of professional} companies and
different income                                  127,522              100,060              27,462                        27  %
Whole price of income                          193,387              147,034              46,353                        32  %

Subscription gross revenue                      545,883              368,026             177,857                        48  %
Skilled companies and different gross
revenue                                          20,352               34,896             (14,544)                      (42) %
Whole gross revenue                     $       566,235           $  402,922          $  163,313                        41  %

Subscription gross margin                           89   %               89  %
Skilled companies and different gross
margin                                              14   %               26  %
Whole gross margin                                  75   %               73  %


Price of subscription income elevated $18.9 million, or 40%, for the 9
months ended September 30, 2021, as in comparison with the 9 months ended September
30, 2020, in line with the rise in subscription income development over the
similar interval. This improve was pushed by a $6.3 million improve in
employee-related prices from headcount development, a $4.7 million improve in
stock-based compensation expense, a $4.7 million improve in server prices, and a
$3.2 million improve in amortization of inner use software program. Price of
skilled companies and different income elevated $27.5 million, or 27%, for the
9 months ended September 30, 2021, as in comparison with the 9 months ended
September 30, 2020. This improve was pushed by a $12.0 million improve in
stock-based compensation expense, a $10.1 million improve in skilled
companies vendor prices, and a $5.9 million improve in employee-related prices
from headcount development, partially offset by a $0.5 million lower in
travel-related bills.
Our gross margins elevated from 73% throughout the 9 months ended September 30,
2020 to 75% throughout the 9 months ended September 30, 2021, due primarily to an
improve in subscription gross margins, partially offset by a lower in
skilled companies and different gross margins based mostly on the modifications mentioned
above.
Working Bills
Analysis and growth
                                  9 Months Ended September 30,
                                        2021                     2020         $ Change      % Change
                                                  (In 1000's)
Analysis and growth   $        226,552                   $ 168,985      $ 57,567           34  %


Analysis and growth bills elevated $57.6 million, or 34%, for the 9
months ended September 30, 2021, as in comparison with the 9 months ended September
30, 2020. This improve was pushed by a $29.1 million
                                       37

————————————————– ——————————

improve in employee-related prices from headcount development as we proceed so as to add
to and improve our merchandise, a $26.2 million improve in stock-based
compensation expense, and a $2.1 million improve outdoors vendor prices.
Gross sales and advertising
                               9 Months Ended September 30,
                                     2021                     2020         $ Change       % Change
                                               (In 1000's)
Gross sales and advertising     $        449,446                   $ 322,775      $ 126,671           39  %


Gross sales and advertising bills elevated $126.7 million, or 39%, for the 9
months ended September 30, 2021, as in comparison with the 9 months ended September
30, 2020. The rise in gross sales and advertising was primarily pushed by a $63.5
million improve in employee-related prices from headcount development, a
$60.0 million improve in stock-based compensation expense, and a $7.3 million
improve in advertising spend, partially offset by a $4.1 million lower in
travel-related bills.
Common and administrative
                                                     9 Months Ended September 30,
                                                        2021                   2020              $ Change               % Change
                                                                       (In 1000's)
Common and administrative                       $        637,944          $  155,225          $  482,719                       311  %


Common and administrative bills elevated $482.7 million, or 311%, for the
9 months ended September 30, 2021, as in comparison with the 9 months ended
September 30, 2020. The rise usually and administrative bills was
primarily pushed by a $443.6 million improve in stock-based compensation
expense, a $13.4 million improve in acquisition associated prices, and a rise
in employee-related prices from headcount development.
Different non-operating expense, internet
Different non-operating expense, internet decreased $5.6 million for the 9 months
ended September 30, 2021, as in comparison with the 9 months ended September 30,
2020. This variation for the intervals was primarily pushed by a $4.6 million
improve in curiosity expense, the outcomes of modifications in curiosity revenue as a consequence of
variations in common money balances and rates of interest, and immaterial modifications
in international foreign money transactions beneficial properties and losses.
Provision (profit) for revenue taxes
Provision (profit) for revenue taxes decreased $17.9 million for the 9 months
ended September 30, 2021, as in comparison with the 9 months ended September 30,
2020, and our efficient tax fee was 0.6% for the 9 months ended September
30, 2021, as in comparison with (5.5)% for the 9 months ended September 30, 2020.
The change was primarily as a result of internet profit associated to the change in
unsure tax liabilities and tax advantages associated to the finalization of tax
returns in varied international jurisdictions, each recorded throughout the 9 months
ended September 30, 2021.
Liquidity and Capital Sources
As of September 30, 2021 we had money and money equivalents of $589.9 million. Our
money and money equivalents consist primarily of money and cash market funds. As
of September 30, 2021, we had $16.3 million of our money and money equivalents
held by our international subsidiaries.
We've got financed our operations primarily by money generated from our
operations, fairness issuances, and proceeds from capital contributions acquired
from SAP along side the SAP Acquisition and funding of money settled
stock-based compensation expense. Our principal makes use of of money in current intervals
have been funding our operations, making capital expenditures, and settling
liability-classified stock-based awards.
                                       38

————————————————– ——————————

We imagine our present money and money equivalents, along with money supplied
by operations, can be adequate to fulfill our wants for a minimum of the following 12
months. Our future capital necessities will depend upon many components, together with
our income development fee, subscription renewal exercise, the timing and extent of
spending to help additional infrastructure growth and analysis and
growth efforts, the timing and extent of extra capital expenditures to
spend money on present and new workplace areas, the satisfaction of tax withholding
obligations for the settlement of future share-based awards, the enlargement of
gross sales and advertising and worldwide operation actions, the introduction of
new product capabilities and enhancement of our XM Platform, and the persevering with
market acceptance of our platform. On January 28, 2021, we accomplished a voluntary
alternate provide pursuant to which 5.4 million cash-settled Qualtrics Rights and
1.3 million cash-settled SAP RSU awards had been exchanged into 12.8 million
equity-settled Qualtrics RSU awards, representing 93% of the excellent
Qualtrics Rights and SAP RSU awards, considerably decreasing our stock-based
awards legal responsibility. On September 13, 2021, we accomplished an extra voluntary
alternate provide for sure staff in Australia that weren't eligible for the
January 28, 2021 alternate, pursuant to which much less that 0.1 million cash-settled
Qualtrics Rights and SAP RSU awards had been exchanged and modified into
equity-settled Qualtrics RSU awards. We could sooner or later enter into
preparations to accumulate or spend money on complementary companies, companies, and
applied sciences, together with mental property rights. We could also be required to hunt
extra fairness or debt financing. Within the occasion that extra financing is
required from outdoors sources, we could not have the ability to elevate it on phrases
acceptable to us or in any respect. If we're unable to lift extra capital when
desired, our enterprise, outcomes of operations, and monetary situation can be
materially and adversely affected.
Our money movement actions had been as follows for the intervals introduced:

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