Qualtrics International Inc.

Ladies and gentlemen, thank you for standing by. Welcome to Qualtrics' third quarter fiscal year 2022 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Rodney Nelson, head of investor relations. Please go ahead.

Thank you, operator. Welcome to Qualtrics' third quarter 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 forward-looking under federal securities 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 a further discussion of the material risks and other important factors that could affect our financial results, please refer to our filings with the SEC, including our quarterly report on Form 10-Q for the quarter ended September 30, 2022 that will be filed with the SEC. With that, I'll hand the call over to Vic.

Well, thank you all for joining us and welcome Rodney. We're grateful to have you on the Qualtrics team. So as you saw in the numbers, we delivered strong revenue growth and operating margin improvement in the quarter. This shows the critical role Qualtrics plays for our customers in this macroeconomic environment and the discipline our team is bringing to this moment. Revenue for the quarter grew 39% year over year to $378 million. Subscription revenue was up 43% year-over-year to $315 million. And our current remaining performance obligations rose to $1.05 billion, a 34% year-over-year increase. Coming off of this strong quarter, we are raising our revenue guidance for our fiscal year to $1.451 billion at the midpoint. Our customer relationships remain extremely strong, and they continue to grow, which is highlighted in the 32% year-over-year growth in customer spending more than $100,000 annually. Our Q3 non-GAAP operating margin rose to 6%, up 400 basis points from Q2. This is our third consecutive quarter of operating margin improvement. We've been investing with discipline, as we continue to deliver top-line growth. Against the backdrop of macroeconomic and geopolitical uncertainty, we are seeing a more measured buying environment and increased executive scrutiny on purchase decisions, particularly with new customers. Our current expectation that this challenging macroeconomic environment will persist through 2023. At the same time, we see compelling opportunities to deepen relationships with our customers and expand the ways that we support them. Our existing customers are continuing to invest more deeply with Qualtrics, even with constrained budgets. And you can see that in our 124% net retention rate. I was out on the road again in Q3, meeting with executives all over the world. And while everyone has a slightly different view of where the economy is headed, one thing is universal. They're all focused on making the right investments across their business to win in this downturn. They cannot afford customer churn or low employee productivity. Knowing what matters most to their customers and employees is mission critical. Globally, $4.3 trillion in customer spending is at risk each year due to poor customer experiences. And it costs an organization six to nine months of an employee's salary to replace them. The impact of losing a high performer is far greater, but knowing how to avoid these types of risks can be difficult, especially with competing priorities and intense pressure. And that's where Qualtrics gives organizations the ultimate advantage. Our platform helps them quickly identify and resolve points of friction across the customer journey from the website to the contact center. We also help organizations understand exactly why employees are frustrated. and what's preventing them from being successful so they can take real-time action to reduce unwanted attrition and increase productivity. And we help our customers do it with empathy, speed, and scale. In Q3, global leaders like Domino's, L.L. Bean, KB Bank in Korea, U.S. Centers for Medicare and Medicaid, City Football Group, Intermountain Healthcare, and the state of Missouri all chose Qualtrics to improve their most critical employee and customer experiences. We expanded our relationship with one of the world's largest financial services companies to transform the way that they deliver care to their millions of customers worldwide. Qualtrics XM discovers advanced AI capabilities, will analyze every customer care conversation, with a focus on resolving issues faster and with more empathy. Qualtrics will help them boost agent productivity, increase customer satisfaction, and reduce compliance risk, all at incredible scale. We also formed a new relationship with Ascension, one of the nation's leading health systems. They selected Qualtrics Customer XM, including Engage and Discover to get a single view of their patients and optimize their experiences across every digital touchpoint. We're proud to help Ascension deliver personalized and compassionate care to the diverse communities that they serve. And in the quarter, we expanded with the U.S. Census Bureau, the nation's leading provider of quality data about its people and the economy. They added new capabilities in DesignXM and CHOS EmployeeXM to increase their workforce productivity. Stronger engagement from census employees and external audiences will help the Bureau better understand how the economy, employment, health, and education impact the United States and all its residents. Being the leader in XM gives us and our customers a competitive advantage. We have more experienced data than anyone else. our platform brings together all of the feedback people have provided over time, billions of data points, and combines it with operational data such as digital click streams, call center frequency, and customer churn, as well as intelligence data like effort, emotion, and intent. And then we use sophisticated AI and automation to help our customers take the right action at the right time. For instance, We help them discover and take action on things like which service to offer a customer next or when to intervene with a frustrated caller. The actions that customers take with Qualtrics are critical to improving the experiences that they deliver. Let me give you an example. When a flight is delayed, one leading global airline uses Xflow to automatically inform flight attendants when a passenger on their flight will miss the connection. That allows them to be able to help rebook and offer drinks for miles before the passenger leaves their plane. They use hundreds of thousands of these automated actions every month to deliver a superior customer experience. I mentioned before that companies can't afford to make the wrong decision right now. They have to be right. we've been innovating to unlock data across our platform to help our customers make smarter decisions across their business our new products reflect this we've been focused on customer driven innovations critical to our key buyers with launches like the following xm benchmarks which allows customers to uncover their biggest risks and opportunities based on the xm platform's billions of data points another example is real-time agent assist, which uses AI and automation to deliver real-time coaching to contact center agents so they can quickly take the next best action to solve customer issues. We also launched video feedback, which helps organizations capture customer, prospect, and survey respondent feedback in their own words. And we launched CrossXM, which enabled leaders to see how their employee, customer, and brand experiences impact one another so they can take action to drive the business forward. A leading global retailer is already using CrossXM to powerfully correlate how employees drive customer experiences and simplify complex decisions. With CrossXM, they discovered that when retail employees felt they had training to do their jobs, and they knew what was expected of them and received regular feedback from their manager, those employees' stores saw higher performance and better customer satisfaction. Be sure to watch our XM Innovation event this week. You'll see that there's going to be a powerhouse lineup of new products that are especially relevant to what customers are needing today. Our partner ecosystem. is a powerful driver of customer success, and it continues to grow in both breadth and depth. We've deepened our partnership with Amazon. Since launching in the AWS marketplace in February, Qualtrics has become one of their fastest-growing ISV partners in the horizontal business application space and a top-five seller in the AWS marketplace. And the XM platform becomes even more powerful as we grow our ecosystem and increase our automations and workflows. Those connections with leading CRM, CDP, and HRS systems bring more operational data onto the XM platform and enrich experience ID across our thousands of customers. Experience ID captures customers' feedback from call center transcripts, social media posts, product reviews, and more, and it connects it with the operational data from companies like SAP, Salesforce, ServiceNow, and Genesys. And this helps companies take the right action in the context of their business across each customer's journey with a company. In Q3, we reached 8.8 billion experience IDs in the Qualtrics XM directory. This is the largest database of human sentiment. Now, before I close, I wanted to let you know that X4, the premier gathering of experience management professionals in the world, is coming back in March in 2023, and you're all invited. This will be our first large in-person event since COVID, and you don't want to miss this one. X4 is our most powerful moment to launch products and to bring customers and partners together, and I look forward to seeing you there. Now, to close, our results continue to demonstrate the durability of our business. and the value of our platform in solving our customers' most critical challenges. We're the only company that brings together employee, customer, product, and brand experience management together on a single platform. And we remain well positioned to extend our market leadership through this cycle. As we embark on the last few months of 2022, we will continue to be nimble and disciplined in how we invest for growth. while working toward our long-term financial targets of over 20% operating margin and over 20% free cash flow margin. I'd like to thank our customers and our partners for putting their trust in Qualtrics. In the midst of uncertain times, they're investing more deeply with us. And finally, I'm grateful for our employees all over the world who bring that customer obsession to the work that we do every day. Now over to you, Rob.