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spk00: Thank you for standing by. Your conference call should begin momentarily. Again, thank you for standing by. Your conference call should begin momentarily. Thank you.
spk07: Thank you for standing by and welcome to the Qualtrics first quarter fiscal year 2022 earnings conference call.
spk00: At this time, all participants are on listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question at that time, please press star then 1 on your touch-tone telephone. As a reminder, today's conference call is being recorded. I would now turn the call to our chief host, Mr. Stephen Wu, head of FP&A and investor relations. Please go ahead, sir.
spk11: Thank you, and welcome to Qualtrics' first quarter fiscal year 2022 earnings conference call. On the call, we have Zig Serafin, CEO, Chris Beckstead, President, and Rob Bachman, CFO. Following prepared remarks, we will open the lineup to answer questions. Our results, press release, and a replay of today's call can be found on the Qualtrics Investor Relations website. During today's call, we will make statements that represent our expectations and beliefs concerning future events that may be considered for looking under federal security laws. These statements reflect our views only as of today and should not be relied upon as representative of our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For further discussion of the material risks and other important factors that could affect our financial results, please refer to our filing with the SEC. including our annual report on Form 10-K for the fiscal year ended December 31st, 2021, and our quarterly report on Form 10-Q for the quarter ended March 31st, 2022. That will be filed with the SEC. With that, I will turn it over to Zig.
spk13: Well, thanks, Stephen, and thank you all for joining us today. Before we get to the numbers, I'm going to take a moment just to talk about how saddened we are about the invasion of Ukraine. and the conflict that's there. Our team in Poland has been incredible first responders helping refugees evacuate, and I'm immensely proud of the work the whole company has done to support relief efforts, both in terms of philanthropy and product innovation. In a matter of days, our team set up new solutions on our XM platform that are already being used by 25 regional Red Cross teams and other agencies. And because of this work, nearly 20,000 refugees have connected with shelter, support, and medicine. You know, our hearts go out to everyone that's affected by the war, and we're going to keep working with them to support them. Now let's turn to the quarter. So as you can see in the numbers, Q1 was another outstanding quarter. This is our biggest Q1 in the history of the company. and it builds on robust growth in FY21. Revenue for the quarter was $336 million, representing 41% year-over-year growth, and subscription revenue was $281 million, up 50% year-over-year. And I'm particularly pleased that we have delivered another quarter of positive operating margin while continuing to invest in our growth. We have significant momentum, and we're raising our Q2 revenue guidance to $345 million at the midpoint of the range, representing 38% year-over-year growth. Our Q1 net retention rate was 128%, matching our all-time high from last quarter. And we now have more than 2,000 customers spending more than $100,000 annually, which is a 41% jump since last year. This all highlights the critical need for experience management. It's the category that we pioneered and that we continue to lead. Every CEO that I speak with has customer and employee experiences in their top priorities. They're trying to figure out how to find, how to keep customers, and then retain their best employees. And we give them the ultimate advantage by helping them build deep personal relationships. With Qualtrics, They can uncover unmet needs and build the product, services, and experiences that people want. And we help them do that with empathy, speed, and scale. In our two decades as a company, we've seen that in uncertain times, experience management is more important than ever. In fact, happy customers spend 37% more than unhappy customers. An engaged employee... who trust their manager, is 60% more likely to stay in their job for the long term. Take Chipotle, which has more than 90,000 employees who are navigating dine-in and pickup options, third-party drivers, and mobile app users. In Q1, they chose Qualtrics Employee Experience Management to deliver a more seamless hiring and onboarding process and to drive better employee retention. And as a result, their teams will deliver better customer experiences that increase loyalty. Only Qualtrics can manage the full lifecycle of customer and employee experiences on a single platform with our XM operating system. And a central element that brings us to life is experience ID, which captures every form of feedback and brings in operational data from CRM, CDP, and HRS systems. And we now have more than 5 billion experience IDs on the XM operating system. And every new innovation that we deliver strengthens the power of experience IDs. We were busy in Q1. We launched new innovations across our platform. We made important investments in our category leadership. We integrated Clarabridge's operations, engineering, and sales teams into Qualtrics. And we launched XM Discoverer. which is an incredibly powerful new layer of our platform. We now have the only platform that enables companies to proactively engage, to find out how it's going, and then tune in and discover all of the other things that people are saying in the contact center, on social media, on review sites, and dozens of other places. And we're seeing significant momentum of new and existing customers, Kroger is a great example. In the pandemic, Kroger led the way in connecting with their shoppers through new digital initiatives, and they used Qualtrics to improve their experiences. In Q1, they added XM Discover to get a single view of all customer feedback, both structured and unstructured, to understand what's important to customers based upon what they're saying on social media. And this is just another way that Kroger is deepening their relationships, and we're proud to be able to partner with them. We also significantly expanded an XM Discover deal with one of the world's largest communication companies who recognize the value of having all of their experience data on a single platform with Qualtrics. In employee experience, we launched a new workplace safety and well-being solution. Every company is trying to balance workloads and then take care of their people. We're giving them an inside view of their employees' mental and physical health to help them mitigate burnout, retain their best employees, and to reopen safely. And in customer experience, we released the new digital experience metrics, which uses scientific methodology and industry benchmarks to connect experience improvements directly to financial impact right within the product. Our growth continues to be fueled by a relentless focus on customer success, and this is a critical time to extend our category leadership. And we continue to invest with discipline and attractive market opportunities. In Q1, we grew our workforce approximately 10%, hiring more than 500 full-time employees, including top software engineers and scientists, in an incredibly tight labor market. Internationally, we expanded our or form new relationships with iconic brands, including NTT Docomo, Hyundai, ING Group, Mizuno, and the Royal Mail. We also expanded our London office to better serve our rapidly growing customer base throughout Europe, and we launched the Center for XM Innovation in Asia with SAP and the Singapore Economic Development Board to extend our innovation and leadership in the regions. We continue to make great inroads in industries, and particularly in healthcare. In Q1, we formed a new relationship with Providence. They chose Qualtrics to understand their patient satisfaction with the price of their healthcare services, the billing experience, and cash collection at their 52 hospitals and more than 1,000 clinics. Using Qualtrics Customer XM and XM Discover across their contact center, digital and in-person channels, Providence will improve their patients' financial experiences and increase the value they receive. One of the ways that we scale the power of our platform is through our ecosystem, which has never been stronger. We're deepening our relationships with key partners, including EY, which recently launched an experience management practice built on Qualtrics. In Q1, they chose to deploy XM Discover internally across their organization. This investment builds on the success that they're seeing with Qualtrics, and it enhances their ability to deliver even better outcomes for their clients. And Infosys, another great partner, launched a new Qualtrics Center of Excellence to help IT buyers around the world improve employee experiences with IT and HR. Now, before I close, I'd like to invite all of you to watch X4 on our new streaming service, XM+, which launches on April 27th. We've got a phenomenal lineup of speakers with Michelle Obama, Reese Witherspoon, and executives from the world's leading experience brands. I want to congratulate our employees and thank our partners and our customers for another outstanding quarter. And with that, I'll hand it over to Rob.
spk12: Thanks, Zig. Good afternoon, everyone. Q1 was another outstanding quarter across the board during a time of economic and geopolitical uncertainty. It is our fifth quarter in a row of robust growth as a public company. As Zig said, total revenue was $335.6 million in the first quarter, up 41% year over year. Subscription revenue in the first quarter was $280.8 million, up 50% year-over-year. Professional services and other revenue was $54.8 million for the first quarter, representing 6% growth year-over-year. Our remaining performance obligations, representing all future revenue under contract, ended the quarter at $1.767 billion, up 48% year-over-year. This metric includes both new and renewal software contracts along with our professional services business. Current remaining performance obligations, which is all future revenue under contract that is expected to be recognized as revenue in the next 12 months, was $1.032 billion, up 52% year over year. We delivered strong expansion across our customer base, as our dollar-based net retention rate remained at 128% for the second quarter in a row. Customers spending more than $100,000 in annual recurring revenue grew 41%, year-over-year to 2,060 customers. Turning to margins, our Q1 non-GAAP gross margin was 76.7%, consistent with the prior quarter. Our non-GAAP operating profit for the first quarter was $4.1 million, resulting in a non-GAAP operating margin of 1.2%, compared to 2.8% in Q1 of 2021. Consistent with our plan, we returned to more in-person meetings, and our colleagues began to travel more frequently for business in Q1. The increase in travel contributed to an approximately 200 basis point reduction in operating margins compared to the prior year period. Additionally, we were pleased to achieve a seasonally higher percentage of our annual hiring during Q1, allowing these new employees to have a significant impact in the current year. Operating cash flow for Q1 was $23.1 million compared to negative $70.1 million in the year-ago period. Free cash flow in the quarter was $9.9 million compared to negative $81.2 million in Q1 of 2021 due to significantly lower cash payouts relating to SAP equity-based awards. $2.7 million of cash outflows in Q1 was related to the cash settlement of stock-based payment liabilities compared to $72 million in the year-ago period. As a reminder, Free cash flow may fluctuate on a quarterly basis due to the timing of cash collections, and we believe it's best to assess our cash flow performance over a longer term. During Q1, we paid $209 million of cash for taxes related to net share settlement of equity awards in the quarter. This amount will fluctuate quarter to quarter depending on if we sell to cover or use cash to cover the taxes related to the vesting of equity awards. Tax related to equity awards peaked in Q1 due to the one-year anniversary of our IPO, which triggered a one-year vesting cliff that exists in the majority of our outstanding equity awards. We ended the quarter in a strong cash position with approximately $836.4 million in cash and cash equivalents. Moving now to our Q2 and fiscal year 2022 business outlook, we expect total revenue for the second quarter to be $344 million to $346 million, representing 38% growth year over year at the midpoint. Within this, we expect subscription revenue to be in the range of $291 million to $293 million, representing 43% growth year over year at the midpoint. We expect non-GAAP operating margin in the range of 1.5% to 2.5%, and non-GAAP net loss per share of $0.01 to net profit per share of $0.01 assuming 585 million weighted shares outstanding. For fiscal year 2022, we expect total revenue in the range of $1.428 billion to $1.432 billion and subscription revenue in the range of $1.202 billion to $1.206 billion. At the midpoint of the ranges, this represents a subscription revenue growth of 38% year over year and total revenue growth of 33%, year-over-year respectively. We expect non-GAAP operating margin in the range of 1% to 3%. We expect a non-GAAP net income per share between 0 cents and 2 cents, assuming 595 million weighted shares outstanding. As we scale our revenue beyond 1 billion, we will continue to be disciplined in how we invest for growth while working toward our long-term financial targets of over 20% operating margin and over 25% free cash flow margin. With that, Zig, Chris, and I are happy to take your questions.
spk00: Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star then 1 on your touchtone telephone. Again, to ask a question, please press star then 1. One moment for our first question. Our first question comes from Ron Peterson of Raymond James. Your line is open.
spk04: Hey, gentlemen, congrats on the quarter. So I just wanted to start out with the NRR dynamics. That has been strong, 128 again this quarter. Can you help us kind of dissect that a little bit in terms of cross-sell, up-sell, and maybe what products are really resonating on top of the base? Sure.
spk13: I'll start here. This is Dick. And then I'll ask Rob or Chris to just jump in and add more color. I mean, look, first of all, I think it's important to step back and just look at power of the technology and how we've built it with a very rich application suite, one that actually is highly relevant to many different budget centers inside of a company, but also there's the speed at which we are able to innovate on the system and how that translates into new value and use cases that customers can turn on quickly. That's the core of how we operate this business. You're landing, you're enabling new use cases, and you're expanding, and that importantly contributes to how we think about long-term durable growth at scale. You know, and that's partly what's reflected in the context behind the NRR number, but I'm going to let Rob or Chris add into this.
spk12: Yeah, I won't add much to it, Zig. What I would say, and this is Rob, it continues to be balanced. It's something that we watch closely, and that balance is something that we obviously appreciate and like to see. And then, as you've heard us talk about in the past, we continue to see consolidations. As our customers look at the variety of point solutions that exist within the technology and their spend, they find that they can consolidate onto Qualtrics and gain more value by having all that data in the same place and running off of the power of our experience manager operating system.
spk04: Understood. And, Rob, maybe a follow-up just on Europe. I know that's been a big conversation point for investors. It's an investment area for you guys. What have you guys seen internationally, particularly in Europe, and has there been any impact from the conflict in Ukraine? Thanks, guys.
spk13: First off, I'll start off and let Chris comment a little more on this one. Just like you guys, we've all been watching what's been happening in Europe, and I've got to tell you, first off and foremost, I'm dang proud of our team and the way that we've been operating across the company, and particularly in Europe, to be able to serve our customers well. and still be able to create high performance as we're going through it. And I think, frankly, the company is naturally advantaged, especially in times of uncertainty, to be able to create highly relevant product and capability that helps people to navigate their markets, right, whether it's navigating inflation, whether it's navigating the war for talent. And part of the idea of experience management is we help organizations get closer to to the customers and the workforce that they're dependent on in order to be able to run their businesses. And that's an important part, something that we've been at for 20 years and that we've only got better and better at in the way that we ended up delivering. That's an important part of it. But I'll let Chris expand here a little bit more specifically relative to any other color on Europe in particular. Yeah.
spk15: So, first of all, really encouraged by the stability of our business as reflected in our overall performance and the guidance we gave. in this type of uncertainty in terms of the performance that we experienced in the quarter. From a go-to-market perspective, there was a few customers in Europe who were hesitant to pull the trigger off some deals and delayed into the following quarter. That's fully reflected in the results and our guidance that we're providing. And overall, just pleased globally with the results that we had this quarter and the stability of the business. Roughly about 20% of our business is in Europe overall. And as far as the question about Russia and Ukraine, less than 1% of our business is in that specific area, so relatively small.
spk13: I think the biggest thing here is that we continue to see long-term growth all over the international front. I think we're just in early days of what we see as potential, given the relatively smaller percentage of our overall business that is international today. And that's why you see us investing. And it's my remarks earlier as well about what we're doing on the international front and what we've accomplished in Q1. Good to hear. Thank you.
spk00: Thank you. Our next question comes from Keith Wise of Morgan Stanley. Your line is open.
spk06: Hi. Thanks so much. This is Elizabeth Porter on for Keith Wise. Congratulations on a really strong quarter. I wanted to touch on the vertical strategy. In the past, you guys have talked about going after the public and healthcare sectors. And I wanted to get an update on where do you see the biggest opportunity next and how we should think about the benefits to the P&L of a verticalization strategy, whether it's higher ASPs for customers or lower retention. Any color there would be helpful. Thank you.
spk13: First and foremost, and Elizabeth, thank you, and good to hear you. First and foremost, I think it's really, really important that the way that we've designed this company and the way that we've designed our technology, it scales horizontally. And it has the ability to make an effect and an impact across many different industries. I mean, we are tuned into helping companies understand consumers, helping companies understand their workforce, and also businesses that they end up serving. And that's an important technology design point. It's also an important design point of the go-to-market systems that we have in this company. We're building a platform. It's designed for scale. And there's an ecosystem that's building around it. Now, that said, when it comes to specific industries, they create unique points of extending on that value and getting deep and rich specific to the markets that we're playing in. You know, healthcare is one of several examples that we're in. You know, we tie into very specific business problems in those industries, unique, urgent things that companies are looking or organizations are looking to solve, and then we can tie in also because of the nature of our platform with systems that, you know, operate in those industries. As an example, you know, the integration we have with health records management platforms in healthcare and the way that we end up tying in with the patient life cycles. and then how that nicely tunes into and much more authentically tunes into the way that the patient experience evolves. In fact, before a person even becomes a patient and the way that providers end up interacting with their customers and, frankly, the health and well-being of the provider as well. And so these factors are multidimensional. The beauty of everything I just described is you're building on the core kernel that scales horizontally. It's a really important part because I've been around and, If you're building a business only to be able to operate on a specific industry level, you will have a very hard time scaling across multiple industries, and that will negatively reflect in the growth of a company. We've designed for the opposite. We want to be able to scale horizontally, but also give us the option to go in more deeply and vertically. Chris? Nothing to add, Dave.
spk15: All right. Great answer.
spk06: And then just a quick follow-up on the margin side. It looks like margin came on the lower side of the guidance. and just wanted to see if there were any drivers to call out that limited some of the margin upside despite revenue coming in above the range. Now, you mentioned some of the bigger headcount, but any other drivers to be aware of there?
spk12: Yeah, it's a great question. Appreciate it. Consistent with what I shared in the prepared remarks, we saw about 200 basis point from the travel of that return, something that we're very pleased to see as we move into this world that is a hybrid world going forward, focused on both digital experiences and in-person experiences. So that opportunity to travel and be with customers is something that we're pleased to see return. And then, as we've talked about in the past, we're making important investments as we continue to integrate the Clarabridge business and move forward, and then also still seeing some margin pressure from the purchase price accounting on Clarabridge.
spk15: This is Chris. The one thing I just add to that is as we make these investments that we've made this year in travel and integration, we're feeling really good about the return on those investments and opportunity for it to provide its leverage as we go into 2023 and beyond and see tremendous opportunity there to get leverage out of our business model and to be able to continue to have return on that investment in our go-to-market.
spk13: Yeah, I was going to highlight your last comment on this one is it's the discipline of the company to go after attractive markets and make sure we're positioned that we're investing in the right way. But at the same time, we also have a track record for going in with discipline, being nimble, making pivots where necessary because our interest is long-term durable growth and doing that in a way we're also creating good margins as part of that. So that's part of the philosophy and what we hold ourselves accountable to.
spk06: Great, thank you so much.
spk00: Thank you. Our next question comes from Brett Braisling of Piper Stanley. Your line is open.
spk08: Good afternoon. Global risk factors are clearly increasing here, Zig, and I really wanted to better understand how the experience management area holds up in an environment where there are more challenges Can you help us understand how you're positioning the business, how we should think about this category in an increasingly risky environment? Are you going to lean in on new products? Is it really about consolidating competing products? Just help us understand how you're thinking about navigating an environment that clearly is very different than it was a year ago.
spk13: Sure. You know, first off, I'm going to highlight something that's really important. You know, this is a company, Qualtrics is a company that's been around for two decades. And we've seen many different cycles. And, you know, throughout those cycles, this is a company that has been a consistently growing performer that has the discipline to understand how to engage in different markets, but also happens to be responsible for a technology industry. that helps to be able to capture and understand all the different human variables that are in play as uncertainty goes through its ebbs and flows, right? We're obviously in a market today where we all see, you know, inflation. We see, you know, geopolitical situations. We see a war for talent, many other factors, right? Macroeconomic, microeconomic, depending upon where you are. What makes our technology special in the solutions that we build on them? is that we help companies to get closer to the markets that they serve in a much more timely way, be able to make the proper pivots, decisions, pricing, packaging reorientations, how they serve their customers, which markets they're going after, where they may need to go after other markets and opportunities, where they've got an opportunity to be able to do wallet share expansion. I mean, that is the core of experience management, is to get closer to and put in a deeper lens around how you end up building relationships with the people and stakeholders that you serve. It's why this is such an important category. And it's why this technology is so well positioned, given the different ebbs and flows that we are seeing in the marketplace. And it is why CEOs and other leaders and companies are coming to Qualtrics and are saying, look, we want to run our companies differently. The timing of the decisions that we're making are so vitally important that we've got to be able to operate our companies from an outside-in perspective and make decisions where we're calling our shots more effectively time and time and time again. This is an extremely important part of how you think about the role of our technology, the way that we've been building our platform. Now, as a company, in the way that we run the company internally, look, our discipline is be highly focused on customers. Be obsessed around how we operate with customers. And part of that philosophy also means that We're going after where we see the attractive market opportunities. But we also have a discipline of being nimble. One of the core values of this company is being scrappy. We have tacos, right? And tacos, the last of the letters is the S. And being scrappy means being resourceful, being creative, and operating in a world of constraints and being able to pivot and make the adjustments and go after nailing the opportunities as we see them in the market, but also learning quickly and and, you know, reestablishing position wherever. And that's an important philosophy. Now, everything I just said about the internal part of that would be difficult to do if we didn't have a technology system that accommodates that. Look, if we were a company that was stitching together a whole bunch of different technology stacks, forget it. We're a company that has a really important philosophy around single platform, the operating systems. We're building applications on top of that. We share data across the different components of applications. It enables our customers to move quickly, but it also enables our engineers to build new solutions like the ones I mentioned in the remarks that are very relevant in a timely way, given where the market is headed. And today, look, not any one market is all the same. We see different things happening in Europe. We see different things happening in the U.S. Some are common, some are different. And so that's a really important factor of how the technology helps us to actually accommodate a lot of the philosophies and values we have in how we're running the company. So hopefully that gives you additional color and context on how we think about these things.
spk00: Thank you. Our next question comes from Mark Murphy of JP Morgan. Your line is open.
spk01: Yes, thank you very much. So, Zig, I'm wondering how pronounced was the trend of customers unplugging other products and consolidating onto Qualtrics and Q1 and just, you know, as they do that, are they viewing Qualtrics as the main system of record for customer data, kind of over and above, you know, CDPs and CRM systems? And I have a quick follow-up.
spk13: One of the unique advantages that we have is companies can move off of point solutions and like social media monitoring flight solutions, as an example, like a call center analytics system that's truly not an analytics, but they've been trying to analyze, but they're not developed and designed for scale. And so we make it very easy for companies to be able to bring their data over to our platform. We can assimilate those programs and systems on our platform, but more importantly, like the telecom vendor that I mentioned in our remarks, helping them to bring all of that data together To the heart of your question, we are seeing a continued trend of companies standardizing on our system. That's an important part. Now, the other part of your question is around things like CDPs and other platforms. One of the other attributes of our technology is that it's an ecosystem platform. We make it very easy for companies to connect the data that they have. Let's say it's inside of a CRM. Let's say it's inside of an HRS system. Let's say it's inside of one of 80 different CDPs that are in the market. We support 19 of the more relevant ones today. And bringing that data in to populate that information inside of our experience idea, which we've got 5 billion plus profiles in, and then augmenting it with a very rich kernel of new information around human factors, which they can't do in those other systems. So we're not competing with those systems. We're complementing them. And we're gracefully coming in, connecting, and we light up a whole new value set of capability for companies, which speeds the rate at which companies can end up adopting our system. And that partly reflects in the way that you see not only new logos coming under our system, but it also supports the NRR rate that you also see.
spk01: Understood. Oh, I'm sorry. Go ahead.
spk15: Yeah, I was going to add, we integrated ClaraBridge into our platform and the people there, and As we did that and added the layer of XM Discover into our platform, that just furthered this trend that we saw in terms of consolidation as we're now able to couple the platform organizations out there that have historically been using the service technology now have an opportunity to consolidate on the Qualtrics platform and vice versa. And so I'd say that if anything has accelerated the trend we're seeing on consolidation as we continue to innovate and, you know, enhance our leadership. And part of that is also tapping into new budget pools.
spk13: Yes. Like in the call center.
spk01: Okay. Okay. Understood. Thank you for that color. The other question I had was, you know, you're delivering solid results. It's despite the comment about a few customers in Europe, I think you said delaying into the following quarter. What is it safe to assume that that was isolated to, to just a few customers in Europe or, You know, is there any sign of any sporadic hesitancy in North America, for instance, because I think the guidance seems to convey, you know, pretty good business confidence out there.
spk15: Yeah, so to the question, you know, the overall kind of macro factors we've seen to date have been relatively isolated. It has not really changed our annual outlook. We've reflected anything that we've seen into our current view of the overall business overall. And we didn't see those organizations necessarily moving away from the technology. We didn't lose any of those deals. They just kind of got delayed into the following quarters. And not seeing anything spreading systematically at this point. And what we have seen is adequately reflected in our guidance.
spk13: Look, and I'm just going to highlight really importantly is that our scale is we're very happy to be guiding the 38% subscription growth year over year, right? And that just indicates, you know, what we're seeing for growth, what we're seeing for demand. It, you know, kind of reflects also how we look at the different markets that we're in. And that's really important because there's fewer and fewer companies that at this scale are actually being able to prove out the ability to perform. And, you know, we factor in these different dynamics, but With all of that said and put into the picture, it reflects the guidance that we're providing.
spk01: Excellent. Thank you.
spk00: Thank you. Our next question comes from Terry Tillman of Truist Securities. Your line is open.
spk10: Yeah, thank you, Zig, Chris, and Rob, and strong results for the first quarter. I had two questions. I guess the first question is, you know, based on kind of where we are with Color Bridge, I know we're not going to get updates every quarter like Pinpoint would have contributed to But you do have a very large go-to-market team. And so how would you rate how they're doing in terms of getting exposed to this technology and starting to cross-sell and up-sell the solution? Just kind of a report card. You know, what are you surprised by positively? What could you be doing better with? And then I had a follow-up.
spk15: Yeah, in a word, I'd be very, very pleased with what we've seen in terms of how the go-to-market teams are coming together. We've had the teams on-site together building relationships, working well together. One comment that I received just within the last week from the CEO of Claire Bridgewater is that it's one team now. Anyone who's saying we're not working together and passionate together has been that we've come together well. I'd say it's all on track with what we expected to happen. And so far, so good. And we're seeing a great amount of pipeline build to help us to go execute and take these solutions to our broad customers.
spk13: I'm going to say really importantly here is, It's not separate companies. And a lot of times when people bring companies together, they waste time for a year. We meant fast, quick, specific, focused on our customers. There is no word called Clarabridge anymore. It's called XM Discover. XM Discover is a powerful element of our overall platform, and it expands our market opportunity. And to your point about the sales organization, these are some of the world's best conversational analytics, contact center, customer care, solution specialists, and they're now connected in with the larger Qualtrics sales organization, and it works both ways. Their opportunities are actually expanding, and the Qualtrics team, who has been serving many, many customers, are also able to now bring in the power and the value of the conversation analytics system, the power and the value of the social media monitoring part of that system, and several other solutions that we're building around employee experience and others. So that helps you, gives you a context. But the most important part of it is it's one company, and it's one product solution set that we're delivering to the marketplace, and it's part of the philosophy of how we expect to execute and operate, and that's part of the playbook that we were expecting to sign up to as we were bringing the two companies together.
spk10: That's great. Thanks, Zig. And I promise I won't say Clarebridge again. It'll be Discover. Just a follow-up question. The markets were obviously turbulent in November and December, and they continue through this year. I don't think you all got much play on this November 15th press release related to the partnership with AWS. I think there was a lot in there. I would love it if you could unpack a little bit more, because part of this is taking your platform technologies, importing it to AWS. They're becoming an incremental customer on the CX side, I think. And I'm just curious if they could become an influencer on helping win business in the market. Just anything more you can share about what looked like a pretty important press release back then. Thank you.
spk13: It's noteworthy and very important. I mean, here you have the world leaders in what leading and running a company based on customer experience looks like. And they pick Qualtrics, right? And this is really important because, you know, it effectively shows a lot of other companies that, you know, what the potential pathway could be for them and other industries. A lot of people look up to the way that, you know, the way that Amazon has been running the company from the beginning as being customer experience centered. And, you know, that's really one part of that announcement that we made. The other part of it is, as you know as well, we are innovating on AWS Stack. And, you know, if you think about other customers who are also doing so, it naturally, you know, introduces customers both platform and commercial synergies that they have, as well as in some places, solutions that are built on the same platform with data can flow between the platforms, for example. So, yes, everything that you said plus a little more.
spk15: Thank you. Thank you.
spk00: Our next question comes from Gabriela Borges of Goldman Sachs. Your line is open. Okay.
spk05: Great. Good afternoon. Thank you for taking the question. I'd love to follow up on Discover a little bit. So either for Chris or for Zig, tell us a little bit more about how Discover is priced. And when you see customers in the pipeline engage on both Engage and Discover, how do those deal sizes typically break out? Do you see, for example, half the deal on Engage, half the deal on Discover? What does that mix look like, and how do you think it will evolve over time?
spk13: Hi, Gabriella. So I'll answer the first part like Chris answered the second part. Pricing is pretty straightforward. It's a natural extension of the platform pricing that we have for customers. So there's both a product utility-based license as well as a consumption-based license that actually ends up existing based upon number of conversations. and response, you know, thanks to the conversations or data flows that run through the system. That's how to think about that in a simplistic way. But I'll let Chris answer the second part.
spk15: Yeah, related to the relative side, it really does depend upon the use case. If you think about a call center-centric solution where you're analyzing, you know, hundreds of thousands or millions of calls, that can be a significant engagement along there or a industry, which is heavy in terms of online reviews or other channels like that can be heavy on there. And as you know, and as we've shared, the industry trend is to more and more unstructured data and unstructured feedback. And that's the power and why we're so excited about having the XM Discover layer added to it, given the trends that we're facing. And the reality is the technology of Clarabridge also helps us analyze both the unstructured data as well as the structured data that you get through our layer of the platform. So it really does kind of all come together. as Vic mentioned, as an overall solution that we are integrating seamlessly to give customers what they need across the board so they can analyze all experience data and take action in real time.
spk13: Yeah, let me elaborate on that, really, because maybe not everybody on the call understands XM Discover. This is an incredibly powerful new addition, and that's because we're helping companies to tune into any form of unstructured feedback that's coming through a company, such as support conversations in an IT department, call center interactions, both on the employee and the customer side, chat, social media posts, review sites, and other sources. And then what we do is we help companies not just pull that data together, all of these different channels of information, but we analyze it in a highly sophisticated way. There's over 150 different industry models that we end up applying that data through. And then we automate manual and time-intensive processes that people typically have had to go through, especially in things like call centers, in order to be able to improve the efficiency and then save key customers, improve loyalty, deepen their relationships. And so these themes are partly what are also adding to some of the momentum that we have in the company, both in net new logos as well as existing customers that we're seeing, and some of which I mentioned in the remarks.
spk05: Thank you, Gabriela. Chris, one follow-up for you on Europe. The dynamic that you saw that was isolated to a few customers delaying, has that persisted into April? How is the trend? Is it worsening or getting better?
spk15: Yeah, I would say it's relatively consistent, but it continues to persist in terms of what we're seeing overall in terms of the market dynamic in Europe where there is a degree of hesitancy. amongst some customers. At the same time, we have seen stability overall in our business as reflected by the fact that Qualtrics is never more relevant in uncertain times. And so with that, I think that's one of the drivers behind why it's been relatively isolated in terms of where we've seen it. Because experience management is never more relevant when customers are facing uncertainty.
spk13: You know, what's interesting about this is they may go from one part of our product and then they have the option to go to another product area, like leveraging, for example, DesignXM or CoreXM to be able to go and do research on a part of the market and understand how to better position themselves. And then they may go back to another part of our product suite. So that helps, notwithstanding the comments that, you know, Chris just made a bit ago.
spk00: Understood. Thank you. Thank you. Our next question comes from Devin Shaw of Deutsche Bank. Your line is open.
spk09: Great. Thanks for taking my question. Junior Chris, this is definitely another question that was brought up. As customers continue to adopt and leverage CDPs, can you maybe elaborate on how usage of Qualtrics changes when customers go through this transformation? Are there certain products that become more prioritized and maybe others that maybe become a little bit less prioritized as customers look to ingest, segment, and activate all the data that they now have?
spk13: Well, look, I'm going to pop up to a larger important theme, and that is that there's very few industries out there that are not in a race to become more digitally connected with the business or the end customer that they end up interacting with. And often this is for convenience factors, it's for efficiency factors, but a very important parallel theme that's taking place is to be more directly connected connected from a relationship standpoint with that end customer. And this is where Qualtrics is beautifully designed, you know, where we get brought in and people will end up interlacing the use of Qualtrics to start to collect and pull in information that the customer is telling you that you're, you know, you have to ask them for and then be able to start to populate the experience ID with really important human factors like, you know, personas and segments that are going to be influential around how you navigate your business, trends that you have to pay attention to. And then, very powerfully, you can start to orchestrate the way that you operate your business. So, for example, you might need to engage differently through the customer care lifecycle, or you might need to do a better job with the products or features that you're recommending to someone. And so these are dynamics and capabilities that we can provide in a scalable fashion. There's a lot of one-off point solutions that you can spend a lot of engineering money on to go and sit something together. And you'll notice that the businesses that are doing that are fairly low growth and they're not very interesting businesses. What we're doing is we're helping companies to actually break through this idea of bring it all together, one data system. Secondly, create a workflow to create automation or semi-automation to more efficiently and more urgently connect with people in a more personalized way. If you step up and you look at that big picture, at the end of the day, what we're doing is we're helping to build much more deeper, personalized relationships for companies between who they are as an organization and the stakeholder that they're serving, which can be the end customer, it can be the patient, or it can be a business. And so if you think about the other systems of record, like a CRM or a CDP or some marketing automation system, those are important. They play their role. But what happens is we integrate with them, and then we help to orchestrate the way that those systems both publish data into our platform, and then the way that they end up automating behavior that is much more closely tailing or enabling an outcome, a business outcome. It might be not just finding and keeping a customer, but building your business with a customer, as an example. So that's how these things come together. The big trend is the role of digital and how relevant we are to it.
spk09: Super helpful. And just a quick follow-up for Rob, just on the guidance, just given that you've seen some of the European impact persist into 2Q, why not embed additional conservatism into the guide, or is it just that you guys remain confident in the impact becoming fairly isolated?
spk12: Yeah, here's what I would comment on the guidance. As we've done historically, our philosophy is consistent here. We are tuning into the factors, both the macro and the company-level factors, and we set our guidance. at a level that we are comfortable with. So it's taken into account, and I think that's why you hear the tone that we're talking about and where we're taking this business, the relevance of Qualtrics in times of uncertainty. You're seeing that come to pass.
spk13: Look, I mean, at the end of the day, I'm going to keep repeating this. This is really important. A mindset of building a business for long-term durable growth at scale. That is how we're operating. And look, the reality is you've got to pay attention to a lot of different factors in the market. We're fortunate to have a technology system that actually helps us with that. But at the end of the day, we're not thinking just quarter to quarter. That's important. We're also thinking two, three years out in the type of company we want, which is reflected in the closing remarks that Rob made at the end of the type of economics that we want in this business as we grow it.
spk09: Super helpful. Thanks for the call, Eric.
spk00: Thank you. Our next question comes from Kirk Matthews of EverQuest. Your line is open.
spk02: Yeah, thanks very much and congrats on the quarter. I was wondering if you could talk about, or maybe Chris might want to chime in here too as well, but can you just talk about sort of the partner engagement you've seen maybe year to date thus far and how you're kind of thinking about partners helping to influence deal or selection or deals, especially when you get up into some of your bigger customers where, there might be more organizational change required to take on the technology?
spk13: Yeah, great question, Kirk, and thanks for asking. So, first off, you know, I can't overemphasize how important it is that we have a platform built for an open platform ecosystem and what that does in the type of innovation that is enabled and, frankly, new value use cases. And It's really important because sometimes people talk about partner ecosystem and they think of one class of partner. You might think of a systems integration company and go, hey, we have a partner ecosystem. Ours is multidimensional. It's extremely important. One dimension is we have companies who build solutions on our system who are practitioners and they're experts in their craft. They use IO psychology. They might be coming from the HR industry or they might be coming from customer experience industries, companies like Bain, McKinsey, and many others, like Korn Ferry as an example. But then there's another class of partners, which are software companies, companies like ServiceNow, companies like SAP, companies like Microsoft, and companies like Adobe, Google, right? And that's a whole other category. We have over 275 different types of integrations that exist with our system and the applications and tools that our customers are using, and that list is only growing. A lot of those, by the way, are driven by customers. They want to use our platform. They want to tie it in with the applications and systems and tools that they're already using today. Another class of partner are companies who are the solution builders. They help create leverage for us. They take on the delivery expertise. We partner with them hand in hand. We stay closely engaged with them. They're companies who are also experts on strategy. They're experts on consulting. EY, I think, is an excellent example of this. Accenture is another example. Deloitte's another example. PWC is an excellent example of this. And I mentioned Infosys as well on the call. And so these types of companies, also the other ones I've mentioned too, are all playing their parts in bringing their customers along. And one of the unique advantages that we have, because we have such an open platform, is that companies like these find that they have existing applications or practices that You know, you might have a whole practice that's, for example, focused on HIRS as an example. And so that company will then bring in Qualtrics on top of that HIRS system, and they'll create unique new value that expands the capability that opens up the door to experience on top of that system of engagement or system of record or the workflow system that that company might be using. So that might then, you know, turn out to be something that layers on top of what an Oracle HRS system has, or an SAP SuccessFactor has, or a, for example, a Salesforce CRM system implementation, or a Microsoft Dynamics system. So companies that have practices around those applications now bring in an experience management layer in order to better understand the human factors in the experiences that are associated with the business or operating outcomes that are associated with those systems. This then drives new inbound opportunity. It drives expansion, right? And it partly contributes to the flywheel effects of how we run the business. So hopefully that gives you more color.
spk02: Yeah, it's helpful. And if I could just ask one follow-up. Chris, you mentioned, obviously, a couple of those deals that slipped in the quarter. You guys can't control always the conversion. There's a customer element to that. When you think about the pipeline building you've seen, has anything changed? I mean, it seems like you're at the very early days of this opportunity to Ziggs, you know, comment earlier about sort of building a long-term business. Has pipeline generation changed at all for you from the beginning of the year because of the sort of geopolitical, or is that still on track with what you would have thought meant the conversion rate that obviously might have a little bit more of a customer hesitation aspect to it?
spk15: Yeah, so always the lifeblood of our business is driving pipe generation and getting out there. We recognize just the magnitude of this opportunity, and our sales force is engaged on going and capturing this opportunity globally. And so kind of business as usual on that front in terms of a major focus on pipe generation. We're focused on it. We know that's a leading indicator of our future success and a lot of focus on driving pipeline in the new XM Discover layer and A lot of focus on driving pipeline in our employee experience category given the relevance and importance and current situation it's facing of driving employee retention among what we're hearing among our customers. The digital transition that's going on, a lot of focus on type gen there. So it's the lifeblood of our organization. We're focused on it. We're on track. Our guidance reflects the progress we've made on type gen and continuing to drive that.
spk13: Look, and I'm going to say, you know, clearly macro trends in Europe, for example, because of the war, they are what they are, right? But that doesn't change the fundamentals of how we end up earning our way into the right opportunities, going after the right use cases. So those fundamentals are what they are. We continue to operate on them. We do see sustained demand going into this quarter and the following quarters. And, you know, like any quarter, we've got our work to do. That's always been the case.
spk02: Sounds good. Thank you all very much.
spk00: Thank you. Our next question comes from Arjun Bhatia of William Blair. Your line is open.
spk03: Thanks. This is Chris on for Arjun. So I want to build on the first part of the last question. So you mentioned in the prepared remarks kind of the importance of the growing ecosystem. And if I remember correctly, you noted around the time of the IPO that about 60% of your customers were using integrations. I was curious if you could give us an update on where that stands today and any call you could provide on how that might differ among your largest customers.
spk13: Yeah, I don't have an update on what statistics have been shared before, but what I will tell you is that we did publish publicly, and maybe Chris or Rob can remind me, the number of actions that have been executed on our system list last year. So that's a public statement that we provided. That's a really important statement. part of how to think about the outcomes that we're enabling companies to create off of our system that are results-oriented. It's not just number of insights that you end up getting, but it's actually having to do with the end result. So I think there was a – we actually published this last year, which is 1.5 billion actions in 2021. And the way you think about the actions is it's effectively the workflow – that ends up being orchestrated through our system as a result of an insight that's been created on our platform that our customers end up enabling both internally facing with their employees or in conjunction with interacting with a customer. And this is an important statistic that we look at because it is not just saying, oh, we have X amount of integrations on the system. It's what's happening in the actual usage flow, consumption, impact that's being generated through the platform. And it's one of several statistics, but that's one of the ones that we do look at and that we share.
spk03: Great. Thank you. And you've got some quarter. Thank you.
spk00: Thank you. I'm showing no further questions at this time. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.
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