Qualtrics shares jump 7%: Q3 results top expectations, forecast higher; 'We're on a roll,' says CEO Serafin

CEO Zig Serafin says companies are consolidating legacy brand management and customer experience management software, and doing away with legacy consulting services in some cases.
Written by Tiernan Ray, Senior Contributing Writer

Qualtrics, the subsidiary of SAP AG that brands itself as "a business operating system for Experience Management," this afternoon reported Q3 revenue that topped Wall Street's expectations, and a surprise profit per share where a loss had been expected, and an outlook that was higher than consensus for both revenue and profit. 

The report sent Qualtrics shares jumped 7% in late trading. 

"It was an outstanding quarter," said CEO Zig Serafin in an interview with ZDNet via Zoom. "We're on a roll, that's showing up in the momentum of this business."

"And what's driving this is we are helping organizations analyze and act on the data they just can't get anywhere else."

"The information we end up enabling is like gold," added Serafin.

Serafin said he was "really proud," in particular, of the company's 49% subscription revenue growth rate in the quarter, and the 125% net dollar retention rate. 

Qualtrics is known as a program for managing the interaction with customers, from first attracting customers to maintaining the relationship. Amidst what Serafin called "The Great Resignation," Qualtrics is helping companies to attract talent.

"More and more organizations are prioritizing an investment in an experience transformation for their business, and they're doing it on Qualtrics," Serafin told ZDNet. A strong driving factor is that "switching costs are close to zero," he said, both for customers as well as for employees. 

Revenue in the three months ended in September rose 41%, year over year, to $271.6 million, yielding a net profit of a penny a share.

Analysts had been modeling $258 million in revenue and a net loss of 2 cents per share.

Qualtrics's remaining performance obligation, a measure of backlog, rose 67%, year over year, to $1.362 billion. Current RPO, for the next twelve months, rose 58% to $781.5 million.

Qualtrics's net dollar retention rate, how much it makes from customers, on average, versus the prior-year period, was 125%. That was up from 122% in the prior quarter. 

Also: Qualtrics Q2 surprise profit blows away expectations, forecast higher as well


Customers of Qualtrics are consolidating front-office software, says CEO Zig Serafin, "migrating away from legacy technologies or point solution vendors or even consulting solutions that have existed," which is contributing to Qualtrics's dollar-based expansion rate, he says.


Asked about the increasing retention rate, Serafin told ZDNet that the key is the company being able to let a company manage in one product "all four core experiences of the business," meaning, "your product experience, your employee experience, the way brand shows up in the market, and how that actually is all embodied in how your customers end up interacting with the business."

Said Serafin, "Companies are realizing the power of what happens when you bring together these core experiences of the business onto a single system, and so they're migrating away from legacy technologies or point solution vendors or even consulting solutions that have existed, and that's also contributing."

Serafin gave an example of a financial services firm that is standardizing on the Qualtrics software. "This is a company that had a whole variety of different vendors they're using and they consolidated a number of legacy brand experience, customer experience vendors onto our platform."

For the current quarter, the company sees revenue of $296 million to $298 million, and net loss in a range of 2 cents to 4 cents. That compares to consensus for $264  million and a 4-cent loss per share.

For the full year, the company raised its outlook for revenue to a range of $1.056 billion to $1.058 billion, and EPS of 2 cents to 4 cents. That is up from a forecast offered back in July for revenue of $1.007 billion to $1.011 billion, and EPS from breakeven to negative 2 cents per share. 

It is also higher than consensus of $1.012 billion and a 1-cent loss per share.

Asked about the surprise profit and higher-than expected profit view, CFO Rob Bachman said it was "driven by the strong performance on the top line, the outperformance there, that's flowing to the bottom line in the current quarter." 

"When you look at the guidance we provided last quarter, it was zero to 1% on the non-GAAP operating margin," he added, but, "we'll come in around 5%." However, Qualtrics is focused on "investing and capturing the growth," said Bachman, noting the company hired 485 employees during Q3.


Better-than-expected profit was a product of the top-line beat, says Qualtrics CFO Rob Bachman. However, the company is not proritizing profit. "There is a continued focus on investing and capturing the growth," says Bachman.

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