xm-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File Number: 001-39952

QUALTRICS INTERNATIONAL INC.

(Exact name of Registrant as specified in its charter)


Delaware						47-1754215
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

333 West River Park Drive

Provo, Utah 84604

(Address, including zip code of principal executive offices)

385-203-4999

(Telephone number, including area code, of principal executive offices)


Title of each class	Trading Symbol	Name of each exchange on which registered
Class A Common Stock, $0.0001 par value per share	XM	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐

As of April 25, 2022, the registrant had 582,325,127 shares of common stock outstanding, consisting of 159,154,517 shares of Class A common stock and 423,170,610 shares of Class B common stock.

TABLE OF CONTENTS


		Page
Part I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021	1
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021	2
	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2022 and 2021	4
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2022 and 2021	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	36
Item 4.	Controls and Procedures	37
Part II. OTHER INFORMATION
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	40
Item 6.	Exhibits	45

SIGNATURES		46

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•our future financial performance, including our revenue, cost of revenue, gross profit, operating expenses, ability to generate positive cash flow, and ability to be profitable;

•our ability to grow at or near historical growth rates;

•anticipated technology trends, such as the use of and demand for experience management software;

•our ability to attract and retain customers to use our products;

•our ability to respond to and overcome challenges brought by the COVID-19 pandemic;

•our ability to attract enterprises and international organizations as customers for our products;

•our ability to expand our network with content consulting partners, delivery partners, and technology partners;

•the evolution of technology affecting our products and markets;

•our ability to introduce new products and enhance existing products and to compete effectively with competitors;

•our ability to successfully enter into new markets and manage our international expansion;

•the attraction and retention of qualified employees and key personnel;

•our ability to effectively manage our growth and future expenses and maintain our corporate culture;

•our anticipated investments in sales and marketing and research and development;

•our ability to maintain, protect, and enhance our intellectual property rights;

•our ability to successfully defend litigation brought against us;

•our ability to maintain data privacy and data security;

•the sufficiency of our cash and cash equivalents to meet our liquidity needs;

•our ability to comply with modified or new laws and regulations applying to our business;

•the impact of geopolitical events, including the ongoing conflict between Russia and Ukraine;

•our reduced ability to leverage resources at SAP as an independent company from SAP; and

•the increased expenses associated with being an independent public company.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in our Annual Report on Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

You should read this Quarterly Report on Form 10-Q and exhibits with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

Qualtrics International Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and par value)

(Unaudited)


	As of March 31,		As of December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	836,448	$	1,014,511
Accounts receivable, net of allowance (1)	366,314		461,830
Deferred contract acquisition costs, net	64,876		60,455
Prepaid expenses and other current assets	76,082		68,887
Total current assets	1,343,720		1,605,683
Non-current assets:
Property and equipment, net	199,392		192,327
Right-of-use assets from operating leases	236,344		227,320
Goodwill	1,119,548		1,118,768
Other intangible assets, net	250,303		264,500
Deferred contract acquisition costs, net of current portion	151,956		145,952
Deferred tax assets	1,301		96
Other assets	28,414		27,577
Total assets	$	3,330,978	$	3,582,223

Liabilities and equity (deficit)
Current liabilities:
Lease liabilities	$	20,870	$	18,898
Accounts payable (1)	70,865		84,053
Accrued liabilities	127,417		167,402
Liability-classified, stock-based awards	2,249		4,519
Deferred revenue	746,328		748,145
Total current liabilities	967,729		1,023,017
Non-current liabilities:
Lease liabilities, net of current portion	274,131		263,307
Liability-classified, stock-based awards, net of current portion	—		52
Deferred revenue, net of current portion	9,978		6,698
Deferred tax liabilities	24,539		23,653
Other liabilities (1)	78,511		78,796
Total liabilities	$	1,354,888	$	1,395,523
Commitments and contingencies
Equity (deficit)
Preferred stock, par value $0.0001 per share; authorized 100,000,000 shares; no shares outstanding	—		—
Class A common stock, par value $0.0001 per share; authorized 2,000,000,000 shares; issued and outstanding 158,862,119 and 147,309,254 shares as of March 31, 2022 and December 31, 2021	16		15
Class B common stock, par value $0.0001 per share; authorized 1,000,000,000 shares; issued and outstanding 423,170,610 as of March 31, 2022 and December 31, 2021	42		42
Additional paid in capital	4,727,962		4,645,800
Accumulated other comprehensive loss	(1,692)		(1,244)
Accumulated deficit	(2,750,238)		(2,457,913)
Total equity (deficit)	1,976,090		2,186,700
Total liabilities and equity (deficit)	$	3,330,978	$	3,582,223

________________

(1) Includes amounts from related parties. See Note 13 for further details

The accompanying notes are an integral part of these condensed consolidated financial statements.

Qualtrics International Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data)

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Revenue:
Subscription	$	280,808	$	186,896
Professional services and other	54,839		51,747
Total revenue	335,647		238,643
Cost of revenue:
Subscription	44,774		20,370
Professional services and other	54,493		41,411
Total cost of revenue	99,267		61,781
Gross profit	236,380		176,862
Operating expenses:
Research and development	105,999		62,806
Sales and marketing	218,330		136,181
General and administrative	202,589		174,449
Total operating expenses	526,918		373,436
Operating loss	(290,538)		(196,574)
Other non-operating income (expense), net	674		(1,740)
Loss before income taxes	(289,864)		(198,314)
Provision for income taxes	2,461		1,540
Net loss	$	(292,325)	$	(199,854)

Net loss per share attributable to common stockholder, basic and diluted	$	(0.51)	$	(0.41)
Weighted-average Class A and Class B shares used in computing net loss per share attributable to common stockholder, basic and diluted	575,700,568		482,260,465

The accompanying notes are an integral part of these condensed consolidated financial statements.

Operating expenses includes:

Stock-based compensation expense(1) as follows:


	Three Months Ended March 31,
in thousands	2022		2021
Cost of subscription revenue	$	4,544	$	2,624
Cost of professional services and other revenue	8,066		4,430
Research and development	41,275		21,332
Sales and marketing	49,053		22,777
General and administrative	165,323		151,836
Total stock-based compensation expense, including cash settled	$	268,261	$	202,999

________________

(1) During the three months ended March 31, 2022, employer payroll tax on employee stock transactions reported in cost of subscription revenue, cost of professional services and other revenue, research and development, sales and marketing, and general and administrative expense was $0.3 million, $0.4 million, $3.2 million, $2.1 million, and $6.0 million, respectively. Employer payroll tax on employee stock transactions was not material during the three months ended March 31, 2021.

Amortization of acquired intangible assets as follows:


	Three Months Ended March 31,
in thousands	2022		2021
Cost of revenue	$	7,572	$	266
Sales and marketing	5,527		51
General and administrative	318		47
Total amortization of acquired intangible assets	$	13,417	$	364

Qualtrics International Inc.

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Net loss	$	(292,325)	$	(199,854)
Other comprehensive income (loss):
Foreign currency translation gain (loss)	(448)		(1,786)
Comprehensive loss	$	(292,773)	$	(201,640)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Qualtrics International Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(In thousands, except share amounts)

(Unaudited)


	Three Months Ended March 31, 2022
	Class A common stock			Class B common stock			Additional paid-in capital		Accumulated other comprehensive loss		Accumulated deficit		Total equity (deficit)
	Shares	Amount		Shares	Amount
Balance, December 31, 2021	147,309,254	$	15	423,170,610	$	42	$	4,645,800	$	(1,244)	$	(2,457,913)	$	2,186,700
Stock-based compensation	—	—		—	—		270,089		—		—		270,089
Issuance of common stock upon settlement of restricted stock units (RSUs)	10,658,728	1		—	—		(1)		—		—		—
Issuance of common stock upon exercise of stock options	123,171	—		—	—		614		—		—		614
Issuance of common stock for employee stock purchase plan	770,966	—		—	—		20,380		—		—		20,380
Common stock withheld related to net share settlement of equity awards	—	—		—	—		(208,920)		—		—		(208,920)
Net loss	—	—		—	—		—		—		(

SEC Form 10-Q filed by Qualtrics International Inc.