We are not looking to become more of a software-type company.
A firm statement of intent from Zig Serafin, CEO of Experience Management specialist Qualtrics, as the firm turned in a strong first quarter’s numbers.
Total revenue for Q1 was $238.6 million, up 36% from last year’s comparable $176.1 million. Subscription revenue for the first quarter was $186.9 million, up 46% year-on-year from $128.3 million. First quarter GAAP net loss was $199.9 million, although after stripping out a number of costs, the non-GAAP profit was $5.3 million.
The number of customers now spending more than $100,0000 rose by 119, a 35% year-on-year increase, bringing total customer headcount to 1,457. Among customer successes from Q1, Serafin cites Bank of Montreal, Singapore Post, Stanford Health Care, DocuSign, the UK Department of Health and Social Care as examples. Two were highlighted for particular mention, Royal Caribbean and UPS:
Very few industries were hit by the pandemic as hard as travel and hospitality and Royal Caribbean had to re-write their playbook. Rather than pulling back like some of their competitors, what Royal Caribbean did is they chose to lean in and invest. With Qualtrics, they can now understand how their current and prospective customers are thinking and feeling and then they can design the right offerings to get them back on cruises.
UPS is focused on customer-first, people-led and innovation-driven strategy and we're proud that they chose Qualtrics in Q1. Qualtrics will be their Experience Management platform, enabling them to listen across the company, take action to lead on critical customer and employee experiences globally. With Qualtrics, UPS is able to understand their customers and their employees at scale and take action to deliver what matters.
Experience Management is becoming as critical as any CRM or HR system, says Serafin, re-iterating what's becoming a familiar mantra for the firm:
Organizations around the world are in the middle of an important shift and it's bigger than digital transformation. In fact, an experience transformation is what we're seeing. In 2020, 82% of all businesses had to design a remote work experience….In today's digital world, where it's easier than ever for employees to switch jobs or customers to change service providers, every business leader I talk to is trying to figure out how to better retain and engage their employees and to more consistently find new customers and strengthen the relationships to keep the ones that they already have.
You hear a lot about digital transformation…but the reality of it is that what people are really trying to figure out is what's the customer experience that helps to drive growth, helps them lead in their market? What's the employee experience? How do those two things come together? How does that affect the products that you need to design [and] the speed at which you need to be able to do so? And once you do so, how do you activate the entire company and organization to operate differently?
It isn't just about looking at data, he explained, it's about workflow:
It's about the way that you end up operationalizing the tools that you've already invested in as a company…Frankly, I've heard words from a recent conversation with a CEO where he said, ‘Your system is becoming indispensable to the way that we run our business’. And that's because they're taking advantage of the workflow part of our platform, not generically, but in tune with the insights and statistical analysis that our platform helps to surface up, based upon different customer segments, and connecting that with employees.
That brings us back to the “not looking to be more of a software company” pitch. What people call digital transformation is only the beginning, he argued:
When they get into it, they start to realize. ‘What we're really doing is we're re-imagining the experience for our employees, our workforce'. When the pandemic hit, people rapidly started saying, 'What does this mean for how we're going to operate, because it's going to be a requirement to re-write the playbook?'. Then on the customer side [it is the need to] re-imagine the experience….So what happens really is they're focused on experience transformation and that's a theme that we're seeing constantly across almost every major industry. What's important as part of that is you've got to be able to call your shop, have the right data available, have it become a part of the way that you re-tool your operations, the way that you think about how you engage with your customers - that changes the culture of the company.
He pointed to a couple of leaders in the application of this in practice:
Bank of Montreal is a good example of how they're standardizing on our enterprise platform. They're one of North America's biggest banks, and they added Qualtrics EmployeeXM to their existing CX platform. And they're continuing to create customer and employee experience as a key competitive differentiator in how they're leading in their market. Then you go over to tech, for example, with DocuSign and they're expanding Qualtrics to use both BrandXM and CustomerXM. They’re doing that to be able to better connect with their customers and ensure that they're staying ahead of and addressing their needs in a much more connected fashion.
Expanding Qualtrics partner ecosystem is something we’ll likely hear more of in the coming months. With SAP still a majority shareholder in the firm, there’s a danger of the firm being classed as a sub-set of the ERP giant, but there’s a wider game in play. Most recently the company signed a partnership deal with ServiceNow, strengthening the emphasis on the importance of workflow. Expect more to come, says Serafin:
We had meetings here in Utah recently, just this week, with a major ecosystem company that came in and we spent a whole day with them. The way they're looking at Qualtrics is not as part of a portfolio of a company, but rather a technology system that sits among the most important technology platforms in the industry. So, for example, among the top-level CRM systems, the top-level HRIS systems, the top-level workflow systems, the top-level marketing automation systems. They have practices that are built around these other companies' technologies and they look at Qualtrics and they say, ‘Hey, Qualtrics, from a CIO level and the CMO level, is an asset that is now clearly going to continue to be able to hold its own among some of these other capabilities', and then a value unlocking takes place.
The trend that we're seeing is people consolidating their point solutions onto the Qualtrics platform. The way we've designed this technology and how the ecosystem plugs in is playing to our advantage. It's just validation of that. The ecosystem is coming out and saying, ‘OK, we get it’…People look at Qualtrics as its own entity and the investments we're making are ones that will span an entire ecosystem of other technology providers, as opposed to just being a subset of saying, ‘Well, you're just part of the SAP portfolio, right?’. It's a different ball game now.
A strong quarter with impressive growth on multiple fronts, not least an increasing number of powerful customer references. The ServiceNow relationship is another indicator of the long game that’s being played here in a market space that’s got so much potential for expansion. The claim to be much more than just “part of the SAP portfolio” is looking very sound.