Medallia Reports Record Third Quarter Fiscal 2020 Financial Results

  • Record Total Revenue of $103.1 Million, Up 27% Year-over-Year
  • Record Subscription Revenue of $79.7 Million, Up 26% Year-over-Year

SAN FRANCISCO–(BUSINESS WIRE)–Medallia Inc. (NYSE: MDLA), the global leader in experience management, today announced financial results for the quarter ended October 31, 2019.

“I am very pleased with the momentum in our business that has carried into the fourth quarter. During the third quarter, we crossed the $100 million quarterly revenue milestone, added many more marquee customers and grew our year-over-year subscription and total revenue,” commented Leslie Stretch, president and CEO, Medallia. “New signings included Amadeus, American Axle & Manufacturing, Inc., Amtrak, Hard Rock Cafe, Pizza Hut and Softbank.”

Stretch continued, “We also expanded our ability to transform customer experience in real-time with the acquisition of Crowdicity, a crowdsourcing innovation and idea solution, and Zingle, a multi-channel mobile messaging technology, already in use in many of our hospitality customers. Our platform and signal story is resonating with customers and prospects alike, our scale and ability to out-innovate the market is being clearly recognized and this positions us well for the future.”

Financial Highlights for the Third Quarter of Fiscal 2020

  • Total revenue for the quarter was $103.1 million, an increase of 27% from the same period last year. Subscription revenue was $79.7 million, an increase of 26% from the same period last year.
  • Loss from operations for the quarter was $41.7 million, compared to loss from operations of $16.5 million in the same period last year. Non-GAAP loss from operations for the third quarter was $2.0 million, compared to a non-GAAP loss from operations of $8.8 million in the same period last year.
  • Net loss for the quarter was $39.6 million, or ($0.31) per share, basic and diluted, compared to net loss of $16.6 million, or ($0.60) per share, basic and diluted, in the same period last year. Non-GAAP net loss was $932,000, or ($0.01) per share, basic and diluted, compared to non-GAAP net loss of $9.0 million, or ($0.33) per share, basic and diluted, in the same period last year.
  • Cash, cash equivalents and marketable securities were $319.3 million as of October 31, 2019.

For information regarding the non-GAAP financial measures discussed in this press release, please see the section titled “Non-GAAP Financial Measures.” Reconciliations between GAAP and non-GAAP financial measures are provided in the tables of this press release.

Recent Highlights

  • Launched the Medallia City Tours, bringing the company’s annual Experience Conference to eleven cities around the globe.
  • At Dreamforce, Medallia was the official feedback partner at Salesforce’s Dreamfest, the main evening event, and an innovator sponsor for the conference.
  • Expanded our ServiceNow partnership providing certified integrations with ServiceNow’s Customer Service and IT Service Management on the ServiceNow store.
  • In conjunction with Workday, we showcased our Employee Experience product at Workday Rising, including our forthcoming integration with Workday’s Prism Analytics Suite.

Conference Call

Medallia will host a conference call at 1:30 p.m. PT (4:30 p.m. ET) today to discuss the third quarter of fiscal 2020, our outlook for the fourth quarter and the full fiscal year 2020, as well as a preliminary outlook for the full fiscal year 2021. The conference call will be available via live webcast and replay at the Investor Relations section of Medallia’s website: https://investor.medallia.com/events-and-presentations/default.aspx.

About Medallia

Medallia (NYSE: MDLA) is the pioneer and market leader in Experience Management. Medallia leads the market in the understanding and management of experience for customers, employees and citizens. Medallia captures experience signals created on daily journeys in person, digital and IoT interactions and applies proprietary AI technology to reveal personalized and predictive insights that can drive action with tremendous business results. Using the suite of experience management and innovation solutions offered by Medallia, customers can engage employees, reduce churn, turn detractors into promoters and buyers and create in-the-moment cross-sell and up-sell opportunities providing clear and potent returns on investment.

For more information, please visit www.medallia.com.

Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), this press release and the accompanying tables contain, and the conference call will contain, non- GAAP financial measures, including non-GAAP gross profit, non-GAAP subscription revenue gross profit, non- GAAP operating expenses, non-GAAP loss from operations, non-GAAP net loss and non-GAAP net loss per share, basic and diluted. Our management uses these non-GAAP financial measures internally in analyzing our financial results and believes they are useful to investors, as a supplement to the corresponding GAAP financial measures, in evaluating our ongoing operational performance and trends and in comparing our financial measures with other companies in the same industry, many of which present similar non-GAAP financial measures to help investors understand the operational performance of their businesses. However, it is important to note that the particular items we exclude from, or include in, our non-GAAP financial measures may differ from the items excluded from, or included in, similar non-GAAP financial measures used by other companies in the same industry. In addition, other companies may utilize metrics that are not similar to ours.

The non-GAAP financial information is presented for supplemental informational purposes only and is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. There are material limitations associated with the use of non-GAAP financial measures since they exclude significant expenses and income that are required by GAAP to be recorded in our financial statements. Please see the reconciliation tables at the end of this release for the reconciliation of GAAP and non-GAAP results. Management encourages investors and others to review Medallia’s financial information in its entirety and not rely on a single financial measure.

We adjust the following items from one or more of our non-GAAP financial measures:

Stock-based compensation expense. We exclude stock-based compensation expense, which is a non-cash expense, from certain of our non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance. In particular, companies calculate stock-based compensation expense using a variety of valuation methodologies and subjective assumptions. We also exclude cash expenses for employer payroll taxes related to employee stock plans, from certain of our non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance. In particular, this expense is tied to the exercise or vesting of underlying equity awards and the price of our common stock at the time of exercise or vesting, which may vary from period to period independent of the operating performance of our business.

Amortization of acquired intangible assets. We exclude amortization of acquired intangible assets, which is a non-cash expense, from certain of our non-GAAP financial measures. Our expenses for amortization of intangible assets are inconsistent in amount and frequency because they are significantly affected by the timing, size of acquisitions and the inherent subjective nature of purchase price allocations. We exclude these amortization expenses because we do not believe these expenses have a direct correlation to the operation of our business.

Acquisition-related costs. We exclude costs related to acquisitions from our non-GAAP financial measures. These costs include legal and transactional costs associated with acquisition activities.

Restructuring and other. We exclude restructuring and other from certain of our non-GAAP financial measures. Restructuring and other consists of exit costs related to our former headquarters in San Mateo.

Tax benefit related to acquisitions. We exclude tax benefits related to acquisitions from our non-GAAP financial measures. These tax benefits realized consist of the change in the valuation allowance resulting from acquisitions.

Note on Forward-Looking Statements

The forward-looking statements included in this press release and in the accompanying conference call, including for example, discussion of our commercial prospects, partnerships, estimates of future revenues, operating income/loss and expenses, stock-based compensation expense and related employer payroll tax expense, amortization of acquired intangible assets, acquisition-related costs, restructuring and other expenses, and acquisitions, reflect management’s best judgment based on factors currently known and involve risks and uncertainties. These risks and uncertainties include, but are not limited to, potential disruption of customer purchase decisions resulting from global economic conditions, timing and size of orders, relative growth of our recurring revenue, potential decreases in customer spending, uncertainty regarding purchasing trends in the cloud software market, customer cancellations or non-renewal of maintenance contracts or on-demand services, our potential inability to manage effectively any growth we experience, our ability to develop new products and services, increased competition or new entrants in the marketplace, potential impact of acquisitions and investments, changes in staffing levels, and other risks detailed in registration statements and periodic reports we file with the Securities and Exchange Commission, including our prospectus filed with the SEC pursuant to Rule 424(b)(4) dated July 18, 2019 and in our quarterly report on Form 10-Q dated September 12, 2019, both of which may be obtained on the Investor Relations section of Medallia’s website (https://investor.medallia.com/financials/sec-filings/default.aspx). Actual results may differ materially from those presently reported. All forward-looking statements in this press release are based on information available to us as of the date hereof. We assume no obligation to update the information contained in this press release or the accompanying conference call, except as required by law.

© 2019 Medallia, Inc. All rights reserved. Medallia®, the Medallia logo, and the names and marks associated with Medallia’s products are trademarks of Medallia. All other trademarks are the property of their respective owners.

Medallia, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
October 31, January 31,

 

2019

 

 

2019

 

Assets
Current assets:
Cash and cash equivalents

$

296,651

 

$

44,876

 

Marketable securities

 

22,646

 

Trade and other receivables, net of allowance for doubtful accounts of $609
and $253 as of October 31, 2019 and January 31, 2019, respectively

 

71,036

 

 

106,120

 

Deferred commissions, current

 

19,303

 

 

15,874

 

Prepaid expenses and other current assets

 

21,659

 

 

15,595

 

Total current assets

 

431,295

 

 

182,465

 

Property and equipment, net

 

31,363

 

 

42,989

 

Deferred commissions, noncurrent

 

42,710

 

 

35,727

 

Goodwill and intangible assets, net

 

101,139

 

 

17,050

 

Other noncurrent assets

 

4,602

 

 

1,953

 

Total assets

$

611,109

 

$

280,184

 

Liabilities, and stockholders’ equity (deficit)
Current liabilities:
Accounts payable

$

4,220

 

$

1,007

 

Accrued expenses and other current liabilities

 

21,569

 

 

12,840

 

Accrued compensation

 

27,741

 

 

19,708

 

Deferred revenue, current

 

163,554

 

 

210,666

 

Total current liabilities

 

217,084

 

 

244,221

 

Deferred revenue, noncurrent

 

1,194

 

 

1,151

 

Deferred rent, noncurrent

 

2,633

 

 

37,182

 

Other liabilities

 

5,854

 

 

4,188

 

Total liabilities

 

226,765

 

 

286,742

 

Stockholders’ equity (deficit):
Convertible preferred stock

 

72

 

Common stock, Class A

 

30

 

Common stock

 

127

 

Additional paid-in capital

 

834,079

 

 

363,076

 

Accumulated other comprehensive loss

 

(759

)

 

(1,096

)

Accumulated deficit

 

(449,103

)

 

(368,640

)

Total stockholders’ equity (deficit)

 

384,344

 

 

(6,558

)

Total liabilities and stockholders’ equity (deficit)

$

611,109

 

$

280,184

 

Medallia, Inc.
Condensed Consolidated Statements of Operations
(in thousands except per share data)
(unaudited)
   
Three Months Ended
October 31,
  Nine Months Ended
October 31,

 

2019

 

 

2018

 

 

 

2019

 

 

2018

 

Revenue:  
Subscription

$

79,749

 

$

63,241

 

 

$

226,008

 

$

178,923

 

Professional services

 

23,325

 

 

17,925

 

 

 

66,355

 

 

48,335

 

Total revenue

 

103,074

 

 

81,166

 

 

 

292,363

 

 

227,258

 

Cost of revenue:  
Subscription

 

16,296

 

 

11,942

 

 

 

44,456

 

 

35,345

 

Professional services

 

22,299

 

 

17,459

 

 

 

61,617

 

 

51,235

 

Total cost of revenue

 

38,595

 

 

29,401

 

 

 

106,073

 

 

86,580

 

Gross profit

 

64,479

 

 

51,765

 

 

 

186,290

 

 

140,678

 

Operating expenses:  
Research and development

 

26,321

 

 

20,995

 

 

 

68,630

 

 

66,580

 

Sales and marketing

 

47,067

 

 

34,243

 

 

 

127,152

 

 

108,296

 

General and administrative

 

32,758

 

 

13,020

 

 

 

72,672

 

 

36,940

 

Total operating expenses

 

106,146

 

 

68,258

 

 

 

268,454

 

 

211,816

 

Loss from operations

 

(41,667

)

 

(16,493

)

 

 

(82,164

)

 

(71,138

)

Interest income and other income (expense), net

 

2,001

 

 

205

 

 

 

2,574

 

 

223

 

Loss before provision for (benefits from) income taxes

 

(39,666

)

 

(16,288

)

 

 

(79,590

)

 

(70,915

)

Provision for (benefits from) income taxes

 

(46

)

 

323

 

 

 

873

 

 

1,371

 

Net loss

$

(39,620

)

$

(16,611

)

 

$

(80,463

)

$

(72,286

)

Net loss per share attributable to common stockholders, basic and
diluted

$

(0.31

)

$

(0.60

)

 

$

(1.19

)

$

(2.77

)

Weighted-average shares used in computing net loss per share
attributable to common stockholders, basic and diluted

 

127,715

 

 

27,482

 

 

 

67,735

 

 

26,065

 

Medallia, Inc.
GAAP to Non-GAAP Adjustment Summary
(in thousands)
(unaudited)
 
GAAP to Non-GAAP adjustments include stock-based compensation expense, amortization of acquired intangible assets, acquisition-related costs, restructuring and other and tax benefit related to acquisitions as follows:
Three Months Ended Nine Months Ended
October 31, October 31,

2019

2018

2019

2018

Cost of revenue:
Subscription

$

1,578

$

363

$

3,099

$

1,240

Professional services

2,820

580

6,067

1,822

Operating expenses:
Research and development

6,292

1,665

11,533

5,845

Sales and marketing

9,099

1,593

19,076

5,033

General and administrative

19,858

3,457

40,003

7,116

Tax benefit related to acquisitions

(959)

(1,375)

Total

$

38,688

$

7,658

$

78,403

$

21,056

Medallia, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
Nine Months Ended October 31,

 

2019

 

 

2018

 

Operating activities
Net loss

$

(80,463

)

$

(72,286

)

Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization

 

10,812

 

 

10,440

 

Amortization of deferred commissions

 

13,616

 

 

9,481

 

Stock-based compensation expense

 

80,296

 

 

19,653

 

Impairment (gain) on property and equipment and lease termination

 

(13,783

)

Other

 

(1,463

)

 

(430

)

Changes in assets and liabilities:
Accounts receivable

 

36,627

 

 

40,255

 

Deferred commissions

 

(24,108

)

 

(14,105

)

Prepaid expenses and other current assets

 

(5,849

)

 

4,452

 

Other noncurrent assets

 

92

 

 

(709

)

Accounts payable

 

2,655

 

 

1,835

 

Deferred revenue

 

(49,921

)

 

(37,130

)

Accrued expenses and other current liabilities

 

10,410

 

 

3,084

 

Other noncurrent liabilities

 

17

 

 

723

 

Net cash used in operating activities

 

(21,062

)

 

(34,737

)

Investing activities
Purchases of property, equipment and other

 

(14,250

)

 

(5,637

)

Purchase of marketable securities

 

(76,122

)

 

(18,684

)

Maturities of marketable securities

 

53,604

 

 

33,340

 

Proceeds from sale of marketable securities

 

511

 

 

1,296

 

Acquisitions, net of cash acquired

 

(75,238

)

Other

 

(1,500

)

Net cash (used in) provided by investing activities

 

(112,995

)

 

10,315

 

Financing activities
Proceeds from initial public offering, net of issuance costs, underwriters discounts and commissions, and concurrent private placement

 

319,972

 

Proceeds from Series F convertible preferred stock, net of issuance costs

 

69,848

 

Proceeds from exercise of stock options

 

16,451

 

 

7,831

 

Payments for employee taxes withheld upon vesting of restricted stock units

 

(15,592

)

Payment of capital leases

 

(2,505

)

 

(224

)

Repayment of debt assumed in acquisition

 

(2,297

)

Net cash provided by financing activities

 

385,877

 

 

7,607

 

Effect of exchange rate changes on cash and cash equivalents

 

(45

)

 

(222

)

Net increase (decrease) in cash and cash equivalents

 

251,775

 

 

(17,037

)

Cash and cash equivalents at beginning of period

 

44,876

 

 

42,699

 

Cash and cash equivalents at end of period

$

296,651

 

$

25,662

 

Medallia, Inc.
GAAP to Non-GAAP Reconciliations
(in thousands, except percentages)
(unaudited)
 
Three Months Ended Nine Months Ended
October 31, October 31,

2019

2018

2019

2018

Non-GAAP gross profit reconciliation:
 
GAAP gross profit

$

64,479

$

51,765

$

186,290

$

140,678

 
GAAP gross margin

63%

64%

64%

62%

Add (subtract):
Stock-based compensation

3,768

901

8,171

2,743

Amortization of acquired
intangible assets

630

42

995

319

Non-GAAP gross profit

$

68,877

$

52,708

$

195,456

$

143,740

 
Non- GAAP gross margin

67%

65%

67%

63%

 
Three Months Ended Nine Months Ended
October 31, October 31,

2019

2018

2019

2018

Non-GAAP subscription revenue gross profit reconciliation:
 
GAAP subscription revenue gross profit

$

63,453

$

51,299

$

181,552

$

143,578

 
GAAP subscription revenue gross margin

80%

81%

80%

80%

Add (subtract):
Stock-based compensation

948

321

2,104

921

Amortization of acquired
intangible assets

630

42

995

319

Non-GAAP subscription revenue gross profit

$

65,031

$

51,662

$

184,651

$

144,818

 
Non-GAAP subscription revenue gross margin

82%

82%

82%

81%

 
 
Three Months Ended Nine Months Ended
October 31, October 31,

2019

2018

2019

2018

Non-GAAP operating expense reconciliation:
 
GAAP operating expenses

$

106,146

$

68,258

$

268,454

$

211,816

GAAP operating expenses, as a % of total
revenue

103%

84%

92%

93%

Add (subtract):
Stock-based compensation

(34,046)

(5,631)

(72,784)

(16,910)

Amortization of acquired
intangible assets

(113)

(115)

Acquisition-related costs

(1,090)

(1,766)

Restructuring and other

(1,084)

4,053

(1,084)

Non-GAAP operating expenses

$

70,897

$

61,543

$

197,842

$

193,822

Non-GAAP operating expenses, as a %
of total revenue

69%

76%

68%

85%

Medallia, Inc.
GAAP to Non-GAAP Reconciliations
(in thousands, except percentages)
(unaudited)
   
Three Months Ended   Nine Months Ended
October 31,   October 31,

2019

2018

 

2019

2018

Non-GAAP loss from operations reconciliation:  
   
GAAP loss from operations

$

(41,667)

$

(16,493)

 

$

(82,164)

$

(71,138)

GAAP loss from operations, as a % of total  
revenue

(40)%

(20)%

 

(28)%

(31)%

Add (subtract):  
Stock-based compensation

37,814

6,532

 

80,955

19,653

Amortization of acquired  
intangible assets

743

42

 

1,110

319

Acquisition-related costs

1,090

 

1,766

Restructuring and other

1,084

 

(4,053)

1,084

Non-GAAP loss from operations

$

(2,020)

$

(8,835)

 

$

(2,386)

$

(50,082)

Non-GAAP loss from operations, as a %  
of total revenue

(2)%

(11)%

 

(1)%

(22)%

   
Three Months Ended   Nine Months Ended
October 31,   October 31,

2019

2018

 

2019

2018

Non-GAAP net loss reconciliation:  
   
GAAP net loss

$

(39,620)

$

(16,611)

 

$

(80,463)

$

(72,286)

GAAP net loss as a % of total revenue

(38)%

(20)%

 

(28)%

(32)%

Add (subtract):  
Stock-based compensation

37,814

6,532

 

80,955

19,653

Amortization of acquired  
intangible assets

743

42

 

1,110

319

Acquisition-related costs

1,090

 

1,766

Restructuring and other

1,084

 

(4,053)

1,084

Tax benefit related to acquisitions

(959)

 

(1,375)

Non-GAAP net loss

$

(932)

$

(8,953)

 

$

(2,060)

$

(51,230)

Non-GAAP net loss as a % of total revenue

(1)%

(11)%

 

(1)%

(23)%

   
   
Weighted average shares – basic and diluted

127,715

27,482

 

67,735

26,065

Medallia, Inc.
Non-GAAP Supplemental Financial Information
(In thousands, except for percentages)
(unaudited)
 
Trailing Twelve Months Ended
October 31,
Subscription Billings

2019

2018

Subscription revenue

$

293,882

$

232,931

 
Change in subscription deferred revenue and contract
assets (unbilled receivables)

36,818

34,640

Subscription billings

$

330,700

$

267,571

 
Subscription billings growth rate

24%

 

Contacts

Investor Relations Contact

Carolyn Bass

ir@medallia.com
Source: Medallia Inc.

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