Medallia Reports Record Fourth Quarter Fiscal 2020 Financial Results

Fiscal Year 2020 Total Revenue of $402.5 Million, up 28% Year-over-Year; Q4 Total Revenue of $110.1 Million, Up 27% Year-over-Year
Fiscal Year 2020 Subscription Revenue of $312.2 Million, up 26% Year-over-Year; Q4 Subscription Revenue of $86.2 Million, Up 27% Year-over-Year

Medallia, Inc. (NYSE: MDLA), the global leader in experience management, today announced financial results for the quarter and year ended January 31, 2020.

“We capped off our first year as a public company with accelerated annual subscription revenue growth while extending our innovative and unique experience platform,” commented Leslie Stretch, president and CEO, Medallia. “Recent wins include AkzoNobel, Cloudera, Freddie Mac, Freshii, Luigi Lavazza, Mazda Canada, Ryder, Samsung U.K., Smashburger and XP Investimentos, among others.”

Stretch continued, “We plan to generate positive cash flow from operations for the full fiscal 2021 year. In addition, we plan to be break-even on a non-GAAP basis in fiscal 2021. With a healthy cash balance, disciplined financial management and a phenomenal and growing customer base, I believe we are well positioned to lead the customer experience domain.”

Financial Highlights for the Fourth Quarter of Fiscal 2020

Total revenue for the quarter was $110.1 million, an increase of 27% from the same period last year. Subscription revenue was $86.2 million, an increase of 27% from the same period last year.
Loss from operations for the quarter was $32.8 million, compared to loss from operations of $9.3 million in the same period last year. Non-GAAP income from operations for the fourth quarter was $3,000, compared to $2.4 million in the same period last year.
Net loss for the quarter was $31.9 million, or $(0.25) per share, basic and diluted, compared to net loss of $9.9 million, or $(0.34) per share, basic and diluted, in the same period last year. Non-GAAP net income was $0.5 million, or $0.00 per share, diluted, compared to non-GAAP net income of $1.7 million, or $0.02 per share, diluted, in the same period last year.
Cash, cash equivalents and marketable securities were $343.7 million as of January 31, 2020.

Financial Highlights for the Full Fiscal 2020

Total revenue for fiscal year 2020 was $402.5 million, an increase of 28% from the prior year. Subscription revenue was $312.2 million, an increase of 26% from the prior year.
Loss from operations for the fiscal year 2020 was $114.9 million, compared to loss from operations of $80.4 million in fiscal year 2019. Non-GAAP loss from operations for the fiscal year 2020 was $2.4 million, compared to $47.7 million in the same period last year.
Net loss for the fiscal year 2020 was $112.3 million, or $(1.35) per share, basic and diluted, compared to net loss of $82.2 million, or $(3.07) per share, basic and diluted, in the same period last year. Non-GAAP net loss was $1.6 million, or $(0.02) per share, basic and diluted, compared to non-GAAP net loss of $49.5 million, or $(1.85) per share, basic and diluted, in the prior year.

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 Company Highlights

Achieved Federal Risk and Authorization Management Program (FedRAMP) certification, further validating the company’s depth in delivering highly secure, leading solutions for consumer, employee and government experience management.
Launched the Medallia Sales and Service Experience App, available on Salesforce AppExchange.
Named a leader in The Forrester Wave™: Customer Feedback Management Platforms, Q1 2020.
Recognized as the most advanced employee experience platform in the guiding analytics category of the People Analytics Technology report by research firm RedThread Research.
Acquired LivingLens, a video feedback platform, to humanize feedback and bring the voice of the customer and employee to life.
Announced three new innovative capabilities at NRF 2020, arming retailers with powerful insights to create world-class customer experiences, including Rival Intelligence for Medallia Social, Medallia pre-configured retail applications and Medallia’s Retail Theme Analytics.

Conference Call

Medallia will host a conference call at 1:30 p.m. PT (4:30 p.m. ET) today to discuss the fourth quarter and fiscal 2020 results and outlook for the first quarter and 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’s award-winning SaaS platform, the Medallia Experience Cloud, 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 Internet of Things (IoT) interactions and applies proprietary AI technology to reveal personalized and predictive insights that can drive action with tremendous business results. Using Medallia Experience Cloud, customers can 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 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 and gross margin, non-GAAP subscription revenue gross profit and gross margin, non-GAAP operating expenses, non-GAAP income (loss) from operations, non-GAAP net income (loss) and non-GAAP net income (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.

Employer payroll tax related to stock-based compensation. We exclude cash expenses for employer payroll taxes related to stock-based compensation, 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 facility exit costs.

Income tax benefits. We exclude income 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. In addition, we exclude income tax benefits related to our stock option exercise deductions.

Trailing twelve month subscription billings. We calculate subscription billings as total subscription revenue plus the change in subscription deferred revenue and contract assets (unbilled receivables) in the period. We measure subscription billings on a trailing twelve month basis because subscription billings vary from quarter to quarter due to invoice timing.

Note on Forward-Looking Statements

The forward-looking statements included in this press release and in the accompanying conference call, including for example, the quotations of management and the “Financial Outlook” section, 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, income tax benefits 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 filed 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 December 11, 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.

© 2020 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)

January 31,2020 January 31,2019 Assets Current assets: Cash and cash equivalents

226,866

44,876

Marketable securities

116,833

Trade and other receivables, net of allowance for doubtful accounts of $982 and $253 as of January 31, 2020 and 2019, respectively

150,661

106,120

Deferred commissions, current

22,455

15,874

Prepaid expenses and other current assets

22,492

15,595

Total current assets

539,307

182,465

Property and equipment, net

34,879

42,989

Deferred commissions, noncurrent

51,540

35,727

Intangible assets, net

21,306

305

Goodwill

79,324

16,745

Other noncurrent assets

5,293

1,953

Total assets

731,649

280,184

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

3,608

1,007

Accrued expenses and other current liabilities

20,268

12,840

Accrued compensation

37,160

19,708

Deferred revenue, current

263,115

210,666

Total current liabilities

324,151

244,221

Deferred revenue, noncurrent

1,407

1,151

Deferred rent, noncurrent

2,799

37,182

Other liabilities

5,496

4,188

Total liabilities

333,853

286,742

Stockholders’ equity (deficit): Convertible preferred stock

Common stock, Class A

Common stock

132

Additional paid-in capital

878,843

363,076

Accumulated other comprehensive loss

(206

)

(1,096

)

Accumulated deficit

(480,973

)

(368,640

)

Total stockholders’ equity (deficit)

397,796

(6,558

)

Total liabilities and stockholders’ equity (deficit)

731,649

280,184

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

2020

2019

2020

2019

Revenue: Subscription

86,160

67,874

312,168

246,797

Professional services

23,940

18,510

90,295

66,845

Total revenue

110,100

86,384

402,463

313,642

Cost of revenue: Subscription

16,913

12,603

61,369

47,948

Professional services

22,203

16,718

83,820

67,953

Total cost of revenue

39,116

29,321

145,189

115,901

Gross profit

70,984

57,063

257,274

197,741

Operating expenses: Research and development

27,348

19,692

95,978

86,272

Sales and marketing

53,559

30,378

180,711

138,674

General and administrative

22,843

16,299

95,515

53,239

Total operating expenses

103,750

66,369

372,204

278,185

Loss from operations

(32,766)

(9,306)

(114,930)

(80,444)

Interest income and other income (expense), net

555

(234)

3,129

(11)

Loss before provision for (benefits from) income taxes

(32,211)

(9,540)

(111,801)

(80,455)

Provision for (benefits from) income taxes

(341)

408

532

1,779

Net loss

(31,870)

(9,948)

(112,333)

(82,234)

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

(0.25)

(0.34)

(1.35)

(3.07)

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

129,365

28,861

83,269

26,770

Medallia, Inc. GAAP to Non-GAAP Adjustment Summary (in thousands) (unaudited) GAAP to Non-GAAP adjustments include stock-based compensation expense and related employer payroll tax expense, amortization of acquired intangible assets, acquisition-related costs, restructuring and other, and income tax benefits as follows: Three Months EndedJanuary 31, Twelve Months EndedJanuary 31,

2020

2019

2020

2019

Cost of revenue: Subscription

$ 1,834

$ 264

$ 4,933

$ 1,504

Professional services

2,876

557

8,943

2,379

Operating expenses: Research and development

6,889

1,718

18,422

7,563

Sales and marketing

10,251

1,780

29,327

6,813

General and administrative

10,919

7,356

50,922

14,472

Income tax expense

(408)

(1,783)

Total

$ 32,361

$ 11,675

$ 110,764

$ 32,731

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

2020

2019

Operating activities Net loss

(112,333)

(82,234)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization

15,611

13,856

Amortization of deferred commissions

19,030

13,201

Stock-based compensation expense

109,456

27,858

Impairment (gain) on property and equipment, and lease termination

(13,783)

3,398

Other

(698)

(417)

Changes in assets and liabilities: Trade and other receivable

(43,268)

(16,383)

Deferred commissions

(41,424)

(27,218)

Prepaid expenses and other current assets

(6,198)

2,176

Lease incentives receivable

635

Other noncurrent assets

(252)

(853)

Accounts payable

2,097

877

Deferred revenue

49,749

42,935

Accrued expenses and other current liabilities

20,282

6,809

Other noncurrent liabilities

137

163

Net cash used in operating activities

(1,594)

(15,197)

Investing activities Purchases of property, equipment, and other

(22,009)

(11,259)

Purchase of marketable securities

(182,389)

(18,684)

Maturities of marketable securities

65,853

34,840

Proceeds from sale of marketable securities

511

1,296

Acquisitions, net of cash acquired

(76,532)

Other

(1,500)

Net cash provided by (used in) investing activities

(216,066)

6,193

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

319,572

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

69,848

Payment of employee taxes withheld upon vesting of restricted stock units

(17,907)

Proceeds from exercise of stock options

34,009

12,093

Payment of capital leases

(3,540)

(708)

Repayment of debt assumed in acquisition

(2,297)

Net cash provided by financing activities

399,685

11,385

Effect of exchange rate changes on cash and cash equivalents

(35)

(204)

Net increase in cash and cash equivalents

181,990

2,177

Cash and cash equivalents at beginning of period

44,876

42,699

Cash and cash equivalents at end of period

226,866

44,876

Medallia, Inc. GAAP to Non-GAAP Reconciliations (in thousands, except percentages) (unaudited) Three Months EndedJanuary 31, Twelve Months EndedJanuary 31,

2020

2019

2020

2019

Non-GAAP gross profit reconciliation: GAAP gross profit

70,984

57,063

257,274

197,741

GAAP gross margin

Add (subtract): Stock-based compensation

3,823

779

11,882

3,522

Employer payroll tax expense related to stock-based compensation

119

Amortization of acquired intangible assets

880

1,875

361

Non-GAAP gross profit

75,694

57,884

271,150

201,624

Non-GAAP gross margin

Three Months EndedJanuary 31, Twelve Months EndedJanuary 31,

2020

2019

2020

2019

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

69,247

55,271

250,799

198,849

GAAP subscription revenue gross margin

Add (subtract): Stock-based compensation

954

222

3,058

1,143

Amortization of acquired intangible assets

880

1,875

361

Non-GAAP subscription revenue gross profit

71,081

55,535

255,732

200,353

Non-GAAP subscription revenue gross margin

Three Months EndedJanuary 31, Twelve Months EndedJanuary 31,

2020

2019

2020

2019

Non-GAAP operating expense reconciliation: GAAP operating expenses

103,750

66,369

372,204

278,185

Add (subtract): Stock-based compensation

(25,336

)

(7,426

)

(97,574

)

(24,336

)

Employer payroll tax expense related to stock-based compensation

(823

)

(1,369

)

Amortization of acquired intangible assets

(326

)

(441

)

Acquisition-related costs

(1,027

)

(2,793

)

Restructuring and other

(547

)

(3,428

)

3,506

(4,512

)

Non-GAAP operating expenses

75,691

55,515

273,533

249,337

Three Months EndedJanuary 31, Twelve Months EndedJanuary 31,

2020

2019

2020

2019

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

(32,766

)

(9,306

)

(114,930

)

(80,444

)

Add: Stock-based compensation

29,159

8,205

109,456

27,858

Employer payroll tax expense related to stock-based compensation

830

1,488

Amortization of acquired intangible assets

1,206

2,316

361

Acquisition-related costs

1,027

2,793

Restructuring and other

547

3,428

(3,506

)

4,512

Non-GAAP income (loss) from operations

2,369

(2,383

)

(47,713

)

Three Months EndedJanuary 31, Twelve Months EndedJanuary 31,

2020

2019

2020

2019

Non-GAAP net loss reconciliation: GAAP net loss

(31,870

)

(9,948

)

(112,333

)

(82,234

)

Add (subtract): Stock-based compensation

29,159

8,205

109,456

27,858

Employer payroll tax expense related to stock-based compensation

830

1,488

Amortization of acquired intangible assets

1,206

2,316

361

Acquisition-related costs

1,027

2,793

Restructuring and other

547

3,428

(3,506

)

4,512

Income tax benefits

(408

)

(1,783

)

Non-GAAP net income (loss)

491

1,727

(1,569

)

(49,503

)

Weighted average shares: Basic

129,365

28,861

83,269

26,770

Diluted

171,436

112,996

83,269

26,770

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

2020

2019

Subscription revenue

312,168

246,797

Increase in subscription deferred revenue

47,549

39,095

Decrease in contract assets (unbilled receivables)

1,052

3,575

Subscription billings