Qualtrics Announces Fourth Quarter and Full Year 2022 Financial Results

Rhea-AI Summary

Qualtrics (NASDAQ: XM) announced financial results for Q4 and FY 2022, showcasing robust growth. Total revenue reached $1,458.6 million, up 36% YoY, while Q4 revenue was $389.1 million, a 23% increase YoY. Subscription revenue for FY 2022 hit $1,223.7 million, rising 41% YoY, with Q4 subscription revenue at $327.6 million, up 26% YoY. Non-GAAP operating income for Q4 was $23.9 million, improving from $0.3 million last year. The company expects Q1 2023 revenue of $392-$394 million and FY 2023 revenue of $1,661-$1,669 million. The operating margin guidance for FY 2023 is between 10% and 11%.

Positive

• Total revenue for FY 2022 reached $1,458.6 million, up 36% YoY.
• Subscription revenue increased to $1,223.7 million for FY 2022, up 41% YoY.
• Non-GAAP operating income for Q4 2022 was $23.9 million, a significant improvement.
• Guidance for Q1 2023 revenue is set between $392 and $394 million.
• FY 2023 revenue guidance ranges from $1,661 to $1,669 million, indicating expected growth.

Negative

• Q4 operating loss of $(246.6) million, though improved from $(306.1) million YoY.
• Net loss for FY 2022 was $(1,061.5) million, slightly elevated from $(1,059.1) million in FY 2021.
• Total cash and cash equivalents decreased to $719.9 million from $1,014.5 million YoY.

• Full Year 2022 total revenue of $1,458.6M, up 36% year over year
• Q4 2022 total revenue of $389.1M, up 23% year over year
• Full Year 2022 subscription revenue of $1,223.7M, up 41% year over year
• Q4 2022 subscription revenue of $327.6M, up 26% year over year
• Total remaining performance obligations¹ of $2,174.6M, up 25% year over year
• Next 12 months remaining performance obligations of $1,202.3M, up 19% year over year

PROVO, Utah & SEATTLE--(BUSINESS WIRE)-- Qualtrics (NASDAQ: XM), the leader and creator of the experience management (XM) category, today announced financial results for the fourth quarter and fiscal year ended December 31, 2022.

"Qualtrics delivered solid results in Q4, capping off a very strong year of growth and significant operating margin expansion,” said Qualtrics CEO Zig Serafin. “Qualtrics continues to be critical to helping companies build deeper relationships with their employees and customers to increase revenue and operate more efficiently in a challenging market.”

Fourth Quarter 2022 Financial Highlights:

• Revenue: Total revenue for the fourth quarter was $389.1 million, up from $316.0 million one year ago, an increase of 23% year over year. Subscription revenue for the fourth quarter was $327.6 million, up from $259.0 million one year ago, an increase of 26% year over year.
• Operating Income (Loss) and Margin: Fourth quarter operating loss was $(246.6) million, compared to $(306.1) million one year ago. Non-GAAP operating income for the fourth quarter (see discussion of non-GAAP operating income and margin measures below) was $23.9 million, compared to non-GAAP operating income of $0.3 million one year ago. For the fourth quarter, GAAP operating margin was (63)% and non-GAAP operating margin was 6.1%, compared to GAAP operating margin of (97)% and non-GAAP operating margin of 0.1% one year ago.
• Net Income (Loss) and Net Income (Loss) Per Share: Fourth quarter net loss was $(256.4) million, or $(0.43) per share, compared to $(309.8) million, or $(0.56) per share in the fourth quarter of fiscal year 2021. Non-GAAP net income (see discussion of the non-GAAP net income (loss) measure below) for the fourth quarter was $16.0 million, or $0.03 per share, compared to non-GAAP net loss of $(39.4) million, or $(0.07) per share in the fourth quarter of fiscal year 2021.
• Cash and Cash Equivalents: Total cash and cash equivalents as of December 31, 2022 and 2021 were $719.9 million and $1,014.5 million, respectively.

Full Year 2022 Financial Highlights:

• Revenue: Total revenue for the fiscal year ended December 31, 2022 was $1,458.6 million, up from $1,075.7 million one year ago, an increase of 36% year over year. Subscription revenue was $1,223.7 million, up from $870.7 million one year ago, an increase of 41% year over year.
• Operating Income (Loss) and Margin: Operating loss for the year was $(1,049.0) million, compared to operating loss of $(1,053.8) million in 2021. Non-GAAP operating income for the year was $57.8 million, compared to $31.9 million in fiscal year 2021. For the fiscal year 2022, GAAP operating margin was (72)% and non-GAAP operating margin was 4%, compared to GAAP operating margin of (98)% and non-GAAP operating margin of 3% one year ago.
• Net Income (Loss) and Net Income (Loss) Per Share: Fiscal year 2022 net loss was $(1,061.5) million, or $(1.82) per share, compared to $(1,059.1) million in fiscal year 2021, or $(2.05) per share. Non-GAAP net income for the year was $25.0 million, or $0.04 per share, compared to non-GAAP net loss of $(6.0) million in fiscal year 2021, or $(0.01) per share.

Financial Outlook:

Qualtrics is providing guidance for its first quarter ending March 31, 2023 as follows:

• Total revenue between $392 and $394 million.
• Subscription revenue between $333 and $335 million.
• Non-GAAP operating margin between 4% and 5%.
• Non-GAAP net income per share between $0.01 and $0.02 assuming 605 million weighted shares outstanding.

Qualtrics is providing its guidance for its full year ending December 31, 2023 as follows:

• Total revenue between $1,661 and $1,669 million.
• Subscription revenue between $1,406 and $1,414 million.
• Non-GAAP operating margin between 10% and 11%.
• Non-GAAP net income per share between $0.20 and $0.24 assuming 625 million weighted shares outstanding.

The guidance provided above constitutes forward-looking statements and actual results may differ materially. Refer to the “Forward-Looking Statements” safe harbor section below for information on the factors that could cause our actual results to differ materially from these forward-looking statements.

Non-GAAP operating income, non-GAAP operating margin, non-GAAP net income (loss), and non-GAAP net income (loss) per share are non-GAAP financial measures. Additional information on Qualtrics' reported results, including a reconciliation of the non-GAAP financial measures to their most comparable GAAP measures, is included in the financial tables below. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty of expenses that may be incurred in the future, although it is important to note that these factors could be material to Qualtrics’ results computed in accordance with GAAP.

A supplemental financial presentation and other information can be accessed through Qualtrics’ investor relations website at https://www.qualtrics.com/investors/.

¹ Remaining performance obligations represent all contracted future revenue that has not yet been recognized, including both deferred revenue and non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods.

Qualtrics Earnings Call

Qualtrics plans to host a conference call today to review its fiscal fourth quarter and full year 2022 financial results and to discuss its financial outlook. The call is scheduled to begin at 3:00 p.m. MT/5:00 p.m. ET. Investors are invited to join the webcast by visiting: https://qualtrics.com/investors/events. The webcast will be available live, and a replay will be available following completion of the live broadcast for approximately 90 days.

About Qualtrics

Qualtrics, the leader and creator of the experience management (XM) category, is changing the way organizations manage and improve the four core experiences of business, customer, employee, product and brand. Over 18,750 organizations around the world use Qualtrics to listen, understand and take action on experience data (X-data)—the beliefs, emotions and intentions that tell you why things are happening, and what to do about it. The Qualtrics XM Platform is a system of action that helps businesses attract customers who stay longer and buy more, engage employees who build a positive culture, develop breakthrough products people love and build a brand people are passionate about.

Forward-Looking Statements

This press release contains express and implied “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial outlook for the first quarter of 2023 and full year 2023. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “will,” “would,” “should,” “could,” “can,” “predict,” “potential,” “target,” “explore,” “continue,” or the negative of these terms, and similar expressions intended to identify forward-looking statements. By their nature, these statements are subject to numerous uncertainties and risks, including factors beyond our control, that could cause actual results, performance, or achievement to differ materially and adversely from those anticipated or implied in the statements, including: 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 address and overcome challenges related to the current economic downturn; 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 ability to realize cost savings and achieve other benefits related to our restructuring efforts; 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 ability to respond to and overcome challenges brought by the COVID-19 pandemic, including any new variants of the virus; our reduced ability to leverage resources at SAP as an independent company from SAP; the effects on our business of recent volatility in capital markets and lower market prices for our securities; our ability to meet investor and customer expectations and evolving regulations regarding environmental, social and governance issues; and the increased expenses associated with being an independent public company. Additional risks and uncertainties that could cause actual outcomes and results to differ materially from those contemplated by the forward-looking statements are and/or will be included under the caption “Risk Factors” and elsewhere in Qualtrics’ Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission and any subsequent public filings. Forward-looking statements speak only as of the date the statements are made and are based on information available to Qualtrics at the time those statements are made and/or management's good faith belief as of that time with respect to future events. Qualtrics assumes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, except as required by law.

Non-GAAP Financial Measures

To supplement our financial results, which are prepared and presented in accordance with US GAAP (“GAAP”), we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different than similarly-titled measures used by other companies, are presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We believe that these non-GAAP financial measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to important metrics used by our management for financial and operational decision-making. We are presenting these non-GAAP measures to assist investors in seeing our financial performance using a management view, and because we believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry. You should consider non-GAAP results alongside other financial performance measures and results presented in accordance with GAAP. In addition, in evaluating non-GAAP results, you should be aware that in the future we will incur expenses such as those that are the subject of adjustments in deriving non-GAAP results and you should not infer from our non-GAAP results that our future results will not be affected by these expenses or any unusual or non-recurring items.

Non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per share, free cash flow, free cash flow margin: We define these non-GAAP financial measures as the respective GAAP measures, excluding equity and cash settled stock-based compensation expenses, including employer payroll tax on employee stock transactions, amortization of acquired intangible assets, acquisition related costs, changes in the fair value of our distribution liability for our tax sharing agreement with SAP, and the tax impact of the non-GAAP adjustments, as applicable.

We revised our non-GAAP definitions during 2022 to exclude employer payroll taxes on employee stock transactions. The amount of employer payroll tax on employee stock transactions is dependent on our stock price and other factors that are beyond our control and do not correlate with the core operation of our business. Going forward, we expect these expenses to increase relative to prior periods as a result of the vesting of restricted stock units (RSUs), and we believe it is useful to exclude these expenses in order to help investors better understand the long-term performance of our core business. The revisions to these definitions had no material impact on our reported non-GAAP financial measures for periods prior to 2022.

When evaluating the performance of our business and making operating plans, we do not consider the items excluded from our non-GAAP definitions (for example, when considering the impact of equity award grants, we place a greater emphasis on overall stockholder dilution rather than the accounting charges associated with such grants). We believe it is useful to exclude these items in order to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies and over multiple periods.

Qualtrics International Inc. Consolidated Balance Sheets (Unaudited, in thousands, except share and par value)
	As of December 31,
	2022				2021
Assets
Current assets:
Cash and cash equivalents	$	719,892			$	1,014,511
Accounts receivable, net of allowances		537,037				461,830
Deferred contract acquisition costs, net		81,130				60,455
Prepaid expenses and other current assets		68,224				68,887
Total current assets		1,406,283				1,605,683
Non-current assets:
Property and equipment, net		215,645				192,327
Right-of-use assets from operating leases		216,514				227,320
Goodwill		1,117,915				1,118,768
Other intangible assets, net		210,415				264,500
Deferred contract acquisition costs, net of current portion		183,741				145,952
Deferred tax assets		9,625				96
Other assets		35,713				27,577
Total assets	$	3,395,851			$	3,582,223
Liabilities and equity
Current liabilities:
Lease liabilities	$	17,081			$	18,898
Accounts payable		142,293				84,053
Accrued liabilities		155,291				167,402
Liability-classified, stock-based awards		1,053				4,519
Deferred revenue		858,186				748,145
Total current liabilities		1,173,904				1,023,017
Non-current liabilities:
Lease liabilities, net of current portion		261,097				263,307
Deferred revenue, net of current portion		16,717				6,698
Deferred tax liabilities		12,447				23,653
Other liabilities		27,666				78,848
Total liabilities	$	1,491,831			$	1,395,523
Commitments and contingencies
Equity
Preferred stock, par value $0.0001 per share; authorized 100,000,000 shares; no shares outstanding as of December 31, 2022 and 2021		—				—
Class A common stock, par value $0.0001 per share; authorized 2,000,000,000 shares; issued and outstanding 170,687,065 and 147,309,254 shares as of December 31, 2022 and 2021		17				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 both December 31, 2022 and 2021		42				42
Additional paid-in capital		5,428,297				4,645,800
Accumulated other comprehensive loss		(4,945	)			(1,244	)
Accumulated deficit		(3,519,391	)			(2,457,913	)
Total equity		1,904,020				2,186,700
Total liabilities and equity	$	3,395,851			$	3,582,223

Qualtrics International Inc. Consolidated Statements of Operations (Unaudited, in thousands, except share and per share data)
	Three Months Ended December 31,								Year Ended December 31,
	2022				2021				2022				2021
Revenue:
Subscription	$	327,574			$	258,957			$	1,223,725			$	870,705
Professional services and other		61,511				57,085				234,903				204,959
Total revenue		389,085				316,042				1,458,628				1,075,664
Cost of revenue:
Subscription		53,417				39,971				196,871				105,836
Professional services and other		61,154				51,914				233,079				179,436
Total cost of revenue		114,571				91,885				429,950				285,272
Gross profit		274,514				224,157				1,028,678				790,392
Operating expenses:
Research and development		106,691				97,606				427,179				324,158
Sales and marketing		228,924				193,887				892,022				643,333
General and administrative		185,498				238,790				758,452				876,734
Total operating expenses		521,113				530,283				2,077,653				1,844,225
Operating loss		(246,599	)			(306,126	)			(1,048,975	)			(1,053,833	)
Other non-operating income, net		4,159				12,743				8,398				6,652
Loss before income taxes		(242,440	)			(293,383	)			(1,040,577	)			(1,047,181	)
Provision for income taxes		13,920				16,389				20,901				11,965
Net loss	$	(256,360	)		$	(309,772	)		$	(1,061,478	)		$	(1,059,146	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.43	)		$	(0.56	)		$	(1.82	)		$	(2.05	)
Weighted-average Class A and Class B shares used in computing net loss per share attributable to common stockholders, basic and diluted		592,063,675				555,708,307				584,285,678				516,869,588

Cost of revenue and operating expenses includes:
Stock-based compensation expense(a) as follows:
	Three Months Ended December 31,						Year Ended December 31,
in thousands	2022			2021			2022			2021
Cost of subscription revenue	$	5,015		$	3,626		$	18,798		$	12,148
Cost of professional services and other revenue		8,268			7,138			34,022			25,299
Research and development		39,419			39,369			154,972			128,779
Sales and marketing		53,418			41,615			208,958			136,532
General and administrative		149,462			200,800			617,424			754,382
Total stock-based compensation expense, including cash settled(a)	$	255,582		$	292,548		$	1,034,174		$	1,057,140

________________

(a) During the three months ended December 31, 2022, employer payroll tax on employee stock transactions reported in cost of revenue was $0.1 million and employer payroll tax reported in operating expenses was $1.5 million. During the year ended December 31, 2022, employer payroll tax on employee stock transactions reported in cost of revenue was $1.3 million and employer payroll tax reported in operating expenses was $17.1 million. Employer payroll tax on employee stock transactions was not material during the three months and year ended December 31, 2021.

Amortization of acquired intangible assets as follows:

	Three Months Ended December 31,						Year Ended December 31,
in thousands	2022			2021			2022			2021
Cost of revenue	$	7,385		$	7,270		$	29,914		$	8,243
Sales and marketing		5,532			5,265			22,121			5,441
General and administrative		312			305			1,270			446
Total amortization of acquired intangible assets	$	13,229		$	12,840		$	53,305		$	14,130

Qualtrics International Inc. Consolidated Statements of Cash Flows (Unaudited, in thousands)
	Year Ended December 31,
	2022				2021
Cash flows from operating activities
Net loss	$	(1,061,478	)		$	(1,059,146	)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization		97,540				46,009
Loss on disposal of property and equipment		787				1,498
Change in fair value of distribution liability for tax sharing agreement		(6,500	)			(13,500	)
Reduction of right-of-use assets from operating leases		29,280				23,078
Stock-based compensation expense, including cash settled		1,034,174				1,057,140
Amortization of deferred contract acquisition costs		71,623				50,038
Deferred income taxes		(18,482	)			(11,654	)
Changes in assets and liabilities, excluding the effect of business combinations:
Accounts receivable, net of allowances		(77,247	)			(146,966	)
Prepaid expenses and other current assets		(554	)			(20,975	)
Deferred contract acquisitions costs		(133,234	)			(99,869	)
Other assets		(6,941	)			(18,308	)
Lease liabilities		(22,516	)			(15,528	)
Accounts payable		50,182				24,333
Accrued liabilities		(10,031	)			55,316
Deferred revenue		121,647				215,444
Other liabilities		(45,003	)			(4,712	)
Settlement of stock-based payments liabilities		(5,344	)			(79,397	)
Net cash flows provided by operating activities		17,903				2,801
Cash flows from investing activities
Purchases of property and equipment		(51,200	)			(103,823	)
Cash paid for business combinations, net of cash acquired		—				(141,792	)
Net cash flows used in investing activities		(51,200	)			(245,615	)
Cash flows from financing activities
Proceeds from capital contributions from SAP		—				115,000
Proceeds from issuance of class A common stock, net of underwriting discounts and commissions		—				3,359,822
Payment of costs related to issuance of class A common stock		—				(3,351	)
Repayment of promissory note		—				(2,392,280	)
Payments for taxes related to net share settlement of equity awards		(293,123	)			(47,783	)
Issuance of class A common stock through Employee Stock Purchase Plan		32,521				16,586
Proceeds from exercise of stock options		1,701				5,649
Net cash flows provided by (used in) financing activities		(258,901	)			1,053,643
Effect of changes in exchange rates on cash and cash equivalents		(2,421	)			(209	)
Net increase (decrease) in cash and cash equivalents		(294,619	)			810,620
Cash and cash equivalents at the beginning of the period		1,014,511				203,891
Cash and cash equivalents at the end of the period	$	719,892			$	1,014,511

Qualtrics International Inc. Reconciliation of GAAP to Non-GAAP Measures (Unaudited, in thousands)
Non-GAAP Gross Profit and Margin
	Three Months Ended December 31,								Year Ended December 31,
	2022				2021				2022				2021
	(In thousands)
GAAP gross profit	$	274,514			$	224,157			$	1,028,678			$	790,392
Add: Stock-based compensation expense, including cash settled and employer payroll tax on employee stock transactions(1)(2)		13,402				10,764				54,114				37,447
Add: Amortization of acquired intangible assets		7,385				7,270				29,914				8,243
Non-GAAP gross profit	$	295,301			$	242,191			$	1,112,706			$	836,082
Non-GAAP gross margin		75.9	%			76.6	%			76.3	%			77.7	%

We calculate non-GAAP gross profit as GAAP gross profit excluding equity and cash settled stock-based compensation expense allocated to cost of revenue, including employer payroll tax on employee stock transactions, and amortization of acquired intangible assets allocated to cost of revenue. Non-GAAP gross margin is calculated as non-GAAP gross profit divided by total revenue.

Non-GAAP Operating Income and Margin
	Three Months Ended December 31,								Year Ended December 31,
	2022				2021				2022				2021
	(In thousands)
GAAP operating loss	$	(246,599	)		$	(306,126	)		$	(1,048,975	)		$	(1,053,833	)
Add: Stock-based compensation expense, including cash settled and employer payroll tax on employee stock transactions(1)(2)		257,224				292,548				1,052,595				1,057,140
Add: Amortization of acquired intangible assets		13,229				12,840				53,305				14,130
Add: Acquisition related costs		—				1,059				866				14,489
Non-GAAP operating income	$	23,854			$	321			$	57,791			$	31,926
Non-GAAP operating margin		6.1	%			(0.2	) %			4.0	%			3.0	%

We calculate non-GAAP operating income as GAAP operating loss excluding equity and cash settled stock-based compensation expense, including employer payroll tax on employee stock transactions, amortization of acquired intangible assets, and acquisition related costs. Non-GAAP operating margin is calculated as non-GAAP operating income divided by total revenue.

Non-GAAP Net Income (Loss) and Non-GAAP Net Income (Loss) Per Share
	Three Months Ended December 31,								Year Ended December 31,
	2022				2021				2022				2021
	(In thousands, except share and per share data)
GAAP net loss	$	(256,360	)		$	(309,772	)		$	(1,061,478	)		$	(1,059,146	)
Add: Stock-based compensation expense, including cash settled and employer payroll tax on employee stock transactions(1)(2)		257,224				292,548				1,052,595				1,057,140
Add: Amortization of acquired intangible assets		13,229				12,840				53,305				14,130
Add: Acquisition related costs		—				1,059				866				14,489
Add (less): Change in fair value of distribution liability for tax sharing agreement		4,000				(13,500	)			(6,500	)			(13,500	)
Less: Tax impact of the non-GAAP adjustments		(2,082	)			(22,613	)			(13,816	)			(19,132	)
Non-GAAP net income (loss)	$	16,011			$	(39,438	)		$	24,972			$	(6,019	)
Weighted-average Class A and Class B shares used in computing non-GAAP net income (loss) per share attributable to common stockholders, basic		592,063,675				555,708,307				584,285,678				516,869,588
Non-GAAP net income (loss) per share attributable to common stockholders, basic	$	0.03			$	(0.07	)		$	0.04			$	(0.01	)
Weighted-average Class A and Class B shares used in computing non-GAAP net income (loss) per share attributable to common stockholders, diluted		592,063,675				555,708,307				584,962,603				516,869,588
Non-GAAP net income (loss) per share attributable to common stockholders, diluted	$	0.03			$	(0.07	)		$	0.04			$	(0.01	)

We calculate non-GAAP net income (loss) as GAAP net loss excluding equity and cash settled stock-based compensation expense, including employer payroll tax on employee stock transactions, amortization of acquired intangible assets, acquisition related costs, changes in the fair value of our distribution liability for our tax sharing agreement with SAP, and the tax impact of the non-GAAP adjustments. Non-GAAP net income (loss) per share is calculated as non-GAAP net income (loss) divided by the weighted-average Class A and Class B shares attributable to common stockholders.

Free Cash Flow and Margin
	Three Months Ended December 31,								Year Ended December 31,
	2022				2021				2022				2021
	(In thousands)
Net cash provided by operating activities	$	23,897			$	13,664			$	17,903			$	2,801
Less: Capital expenditures		(14,997	)			(74,112	)			(51,200	)			(103,823	)
Free cash flow		8,900				(60,448	)			(33,297	)			(101,022	)
Free cash flow margin		2	%			(19	) %			(2	) %			(9	) %

We calculate free cash flow as net cash provided by operating activities less capital expenditures. Free cash flow margin is calculated as free cash flow divided by total revenue. We incurred significant cash outflows in connection with the settlement of liability-classified, stock-based awards in accordance with SAP’s employee equity compensation programs. Our free cash flow for the three months ended December 31, 2022 and 2021 includes $0.6 million and $2.5 million, respectively, in cash outflows related to the settlement of liability-classified, stock-based awards. Our free cash flow for the year ended December 31, 2022 and 2021 includes $5.3 million and $79.4 million, respectively, in cash outflows related to the settlement of liability-classified, stock-based awards.

________________
(1)		Our stock-based compensation expense reflects the recognition of both equity-classified awards and liability-classified awards. Liability-classified awards are settled in cash in accordance with SAP’s employee equity compensation programs. Liability-classified awards are recorded according to mark-to-market accounting. On January 28, 2021, the Company completed a voluntary exchange offer pursuant to which 5.4 million cash-settled legacy restricted stock awards, restricted stock unit (RSU) awards, and options (together, Qualtrics Rights) and 1.3 million cash-settled SAP RSU awards were exchanged into 12.8 million equity-settled Qualtrics RSU awards, representing 93% of the outstanding Qualtrics Rights and SAP RSU awards. On September 13, 2021, the Company completed an additional voluntary exchange offer for certain employees in Australia who were not eligible for the January 28, 2021 exchange, pursuant to which less than 0.1 million cash-settled Qualtrics Rights and SAP RSU awards were exchanged and modified into equity-settled Qualtrics RSU awards.
(2)		During the three months ended December 31, 2022, employer payroll tax on employee stock transactions reported in cost of revenue was $0.1 million and employer payroll tax reported in operating expenses was $1.5 million. During the year ended December 31, 2022, employer payroll tax on employee stock transactions reported in cost of revenue was $1.3 million and employer payroll tax reported in operating expenses was $17.1 million. Employer payroll tax on employee stock transactions was not material during the three months and year ended December 31, 2021. The amount of employer payroll tax-related items on employee stock transactions is dependent on our stock price and other factors that are beyond our control and do not correlate with the operation of the business. When evaluating the performance of our business and making operating plans, we do not consider these items (for example, when considering the impact of equity award grants, we place a greater emphasis on overall stockholder dilution rather than the accounting charges associated with such grants). We believe it is useful to exclude these expenses in order to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies and over multiple periods.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230125005708/en/

Investor Relations:

Rodney Nelson

Head of Investor Relations

investors@qualtrics.com

Public Relations:

Gina Sheibley

Chief Communications Officer

press@qualtrics.com

Source: Qualtrics

FAQ

What were Qualtrics' total revenues for FY 2022?

Qualtrics reported total revenues of $1,458.6 million for FY 2022, a 36% increase year over year.

What is the subscription revenue for Q4 2022 for XM?

The subscription revenue for Q4 2022 was $327.6 million, representing a 26% increase year over year.

What guidance did Qualtrics provide for Q1 2023?

Qualtrics expects Q1 2023 revenue between $392 million and $394 million.

What is the expected non-GAAP net income per share for FY 2023?

The expected non-GAAP net income per share for FY 2023 is between $0.20 and $0.24.

How much was Qualtrics' net loss for FY 2022?

Qualtrics reported a net loss of $1,061.5 million for FY 2022, which is slightly higher than the previous year.