Q1 FY2021 Earnings · 2020-06-02 · Q1 FY’19 Q2 FY’19 Q3 FY’19 Q4 FY’19 Q1 FY’20 Q2...

Q1 FY2021 EarningsJune 2020

Medallia © Copyright 2020 2

Forward-Looking Statements & Non-GAAP Financial MeasuresThis presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

Forward-looking statements generally relate to future events or Medallia's future financial or operating performance. In some cases, you can identify forward looking statements because they contain words

such as "may,“ “might,” "will," "should,” "expects," "plans," "anticipates,” “going to,” "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the

negative of these words or other similar terms or expressions that concern Medallia's expectations, strategy, priorities, plans or intentions. Forward-looking statements in this presentation include, but are

not limited to, statements regarding Medallia’s future financial and operating performance, including its outlook and guidance. To the extent possible, our forward-looking statements seek to take into

account the impact of COVID-19. However, the crisis that this pandemic has created is very fluid, and the situation is constantly evolving. If any of the risks or uncertainties related to the forward-looking

statements develop or if any of the assumptions related to the forward-looking statements prove incorrect, actual results could differ materially from those projected, expressed, or implied by our forward-

looking statements. The forward-looking statements contained in this presentation are also subject to other risks and uncertainties, including those more fully described in Medallia filings with the Securities

and Exchange Commission, including Medallia’s prospectus filed with the SEC pursuant to Rule 424(b)(4), dated July 18, 2019, and in our Annual Report on Form 10-K filed with the SEC on March 19,

2020. The forward-looking statements in this presentation are based on information available to Medallia as of the date hereof, and Medallia disclaims any obligation to update any forward-looking

statements, except as required by law. Actual results may differ materially from those presently reported. All forward-looking statements in this presentation are based on information available to us as of

the date hereof.

In addition to financial information presented in accordance with U.S. generally accepted accounting principles (“GAAP”), this presentation includes certain non-GAAP financial measures. These non-GAAP

measures are presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. 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 presentation 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.

This presentation contains statistical data, estimates and forecasts that are based on independent industry publications or other publicly available information, as well as other information based on our

internal sources. This information involves many assumptions and limitations, and you are cautioned not to give undue weight to such information. We have not independently verified the accuracy or

completeness of the information contained in the industry publications and other publicly available information. Accordingly, we make no representations as to the accuracy or completeness of that

information nor do we undertake to update such information after the date of this presentation.


Pervasive usage and daily habit3Broad vertical representation1

Medallia is the Market Leader in Experience Management

>780customers2

Experiences analyzed annually

of customers with 1,000+ users

Calculationsin a single day

Mobile dailyengagement4

Enterprise grade platform

Strong subscription revenue growth at scale

Note: Dollars in millions

1. Rankings are determined by last twelve months revenue; industry descriptions are based on Forbes Media LLC, or Forbes, Global 2000: The World’s Largest Public Companies, June 2018. Information excludes enterprises headquartered in China, a market that Medallia has not materially entered.2. For purposes of calculating our customer count, in situations where a customer has multiple subsidiaries or divisions, each entity that is invoiced as a separate entity is treated as a separate customer.3. Statistics provided as of January 31, 2020, 4. As of January 31, 2020. Represents mobile daily active users (DAU) divided by mobile monthly active users (MAU). We define a DAU as a user who logged in and accessed our platform via either of our primary mobile applications,

Medallia Mobile 2 or Medallia Mobile 3, any time in a single day. We define a mobile MAU as a user who logged in and accessed our platform via either of our primary mobile applications, Medallia Mobile 2 or Medallia Mobile 3, any time in the last 30 days as of the date of measurement.

$55.6

$60.1 $63.2

$67.9

$71.7 $74.5

$79.7

$86.2 $89.0

Q1 FY’19 Q4 FY’20Q2 FY’20Q1 FY’20Q2 FY’19 Q3 FY’20Q3 FY’19 Q4 FY’19 Q1 FY’21 Q2 FY’21 Guidance

Quarterly subscription revenue Est. $89.5-$90.5

8 of the Top 10Global communications and media companies1

5 of the Top 10Global automotive companies1

7 of the Top 10Global banks1

7 of the Top 10Global hospitality companies1

6 of the Top 10Global insurance companies1

50%+ ~45%

6.1B 8T


Go To Market Partner EcosystemGlobal SIs, Consulting

and Market ResearchGlobal ISVs

Vertical and Technology

PartnersRegional and Delivery

Partners


CRM POSERP

Operational Data

Observed Behavior

Solicited Feedback

Unstructured

Structured

Unsolicited Feedback

Messaging

Social

Voice

Employee

IOT signals Visit Patterns Event Data

AI and Machine Learning | Text Analytics In-

Memory Analytics | NLP | Journeys | Profiles

Dynamic Org Hierarchy

In-Memory Analytics

Personal Dashboards and Reports

Reply

Process Change

Product IdeaCongratulations

Escalate

HRIS

Capture Every Signal Analyze and Predict Behavior Operationalize and Drive Action

Video

AI-Powered Experience Management Drives ROI


15%Customer Engagement Systems Social Media

Employee Signals

Customers on Average Integrate with 25 SystemsEnterprise Operational/Transactional Data

MKTG/CRM ITSM/ERP HCM/HRMS OTHER

Other Signals >80%

Surveys<20%

25

Integrations on Average

eCommerce

Systems

Legacy

Systems

100s of sites

Contact

Centers


Consolidate Siloed Vendors Into Medallia Drives ROI

Capture Signals Analyze Drive Action

Videos

Surveys

Social Listening

CustomerCommunityMessaging

Platform

Web-basedChat Platforms

CustomerSuccessPlatforms

Voice

Employee Feedback

In Product Feedback


Connecting CX and EX Drives ROI

The Forrester WaveTM

Customer Feedback Management Platforms, Q1 2020

“Medallia reference clients praise the vendor for its

technology and ability to grow and scale with their

business. They are also fond of the vendor’s ability

to drive engagement in the platform at scale: Its

reference clients had upward of 50,000 dashboard

users — the most of any vendor in this evaluation.”

The Forrester Wave™ is copyrighted by Forrester Research, Inc. Forrester and Forrester Wave are trademarks of Forrester Research, Inc. The Forrester Wave is a graphical representation of Forrester's call on a market and is plotted using a detailed spreadsheet with exposed scores, weightings, and comments. Forrester does not endorse any company, product, or service depicted in the Forrester Wave. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.

Source: The Forrester Wave TM: Customer Feedback Management Platforms, Q1 2020 and The Forrester New Wave TM: EX Management Platforms for Large Enterprises

EX Management Platforms For LargeEnterprises, Q1 2020

The Forrester New WaveTM

“Medallia’s reference customers praised the solution

for its ability to perform analysis and focus attention in

the areas that matter most, the flexibility of the platform,

and the support and guidance they received from the

vendor.”


Medallia is Mission Critical…Driving High Financial Return

“Medallia has had a huge impact… from the time

of purchase of a Samsung product, to setup,

install it, use, it, need help with it, all the way

though that lifecycle, Medallia is there measuring the entire customer journey. It’s now become a

part of the DNA of the company.”

Maintaining a strong customer experience in crisis requires rapid research to understand changing dynamics and new pain points as well as agile innovation to

address them. Customer leaders who master that approach will create value for consumers . - McKinsey, April 2020 (1)

“Medallia has opened up a world of real

customer feedback and inspired us to

improve important processes that have a

quantifiable impact on our bottom

line.”

(1 )“Adapting customer experience in the time of coronavirus”

“Medallia’s tools have transformed our

focus on our customers’ needs. For us, the

verbatim customer feedback is gold”.

“We’ve reduced incoming customer calls

by several million. When you account for

the cost per call, the payback on our

investment in Medallia was realized within

one month.”

“We’ve tracked 40 million fewer

issues that customers have

experienced than last year.”

"Thanks to the voice of customer data

captured by Medallia, we are able to

identify and eliminate bottlenecks in our

digital customer journeys resulting in

increased conversion and lower exit

rates.”


6x ROI over 3 years

<6 monthpayback

Forrester believes the findings are relevant and

robust for both smaller and larger organizations.

Key findingsTotal economic impact of Medallia Experience Cloud

$36M3 yearimpact

Breakdown:

Based on six customer interviews

• $20 million from net income due to customer experience improvements

• $14 million from operational efficiencies

• $2 million from previous solution cost avoidance

Medallia Drives Proven Impact

Source: Forrester April 2018 report, “The Total Economic Impact TM of Medallia Experience Cloud," which we commissioned.


Top Global Brands Run on MedalliaBanking and

financial servicesEnergy, industrial and

services

Automotive and transportation

Retail and consumer goods

InsuranceTechnology,

telecommunications and media

Gap, Inc.

Hospitality and restaurants


Broad Vertical Representation

Cumulative ACV = SaaS + Managed Services as of January 31, 2020

Finance and Banking29%

Technology, Manufacturing and

Services17%

Communications, Media and Telecom

12%

Insurance6%

Hospitality9%

Retail and Auto20%

Other7%


Platform Provides Cross-Sell and Up-Sell Opportunities with Multiple Incremental Offerings

Employee Experience

Social Promote

Text Analytics (Theme

Explorer)

Digital Web

Medallia Athena

Predictions

Experience Data

Platform (XDP)

Conversations

Service Clouds

Sales Clouds

Customer Success

Loyalty

Point-of-Sale

Systems

Voice (Siri, Alexa)

Contact Centers

Operational Support Systems

IoT Systems

HCM Systems

ERP Systems

Marketing Clouds

1. Based on the average attach rate of a representative sample of our customers as of our fiscal year ended January 31, 2020.2. Based on our calculations of potential customer spend, determined based on assumptions regarding our customer base and its spending habits and potential, as well as the average customer spend on certain add-on

modules, all as of our fiscal year ended January 31, 2020.

Promoter

Integrations

Add-ons / Up-sell

Core Platform

System Integrations

ReportingMobile App

Medallia Voices

Pre-Packaged Solutions

Digital (IoT, in app)

Surveys

OrgSync

Analytics

CXProfiles

CX Journeys

Social

Cross-sell opportunities of at least $3 for every $1 spent on the platform2

Average attach rate today is only 3 modules1

13 modules with multiple SKUs

Zingle

Ideas

Video

MedalliaSpeech


Annual Customer Count Quarterly Customer Count

Customer Count

469 486

508 543

565

613

698

757782

Q2 FY’20Q3 FY’19 Q4 FY’19Q1 FY’19 Q2 FY’19 Q1 FY’21Q1 FY’20 Q3 FY’20 Q4 FY’20

+38%

452

543

757

FY’18 FY’19 FY’20

Note: Does not include small business customers from our partner ecosystem.


Annual Total Revenue(in millions)

Quarterly Total Revenue(in millions)

Total Revenue Growth at Scale

0

10

20

30

40

50

60

70

80

90

100

110

120

10% 10%

$110.1

10%

90%90%

91%

9%

$95.7

Q1 FY’19

92%

91%

8%

Q2 FY’19

90%

Q3 FY’19 Q2 FY’20

9%

Q4 FY’19

$86.4

11%

$112.7

Q1 FY’20

89%

90%

10%

Q4 FY’20

$75.4

91%

Q3 FY’20

$103.1

Q1 FY’21

$70.7

$81.2

$93.6

9%

0

50

100

150

200

250

300

350

400

450

90%

10%

FY’18

$402.5

91%

9% 10%

90%

FY’19 FY’20

$261.2

$313.6

+20%

+28%

*High visibility ~ 90% of total revenue is recurring

* Based on trailing twelve months

Subscription Revenue + Managed Services Revenue Professional Services Implementation Revenue


Annual Revenue(in millions)

Quarterly Revenue(in millions)

Compelling Subscription Revenue Growth at Scale

$55.6

$60.1 $63.2

$67.9

$71.7 $74.5

$79.7

$86.2 $89.0

Q3 FY’19 Q3 FY’20Q1 FY’19 Q2 FY’19 Q1 FY’20Q4 FY’19 Q2 FY’20 Q4 FY’20 Q2 FY’21 Guidance

Q1 FY’21

$201.8

$246.8

$312.2

FY’20FY’18 FY’19

+22%

+26%

Est.$89.5 - $90.5


Annual Non-GAAP Operating Margin

Quarterly Non-GAAP Operating Margin

Non-GAAP Operating Margin

Q1 FY’19

3%

Q2 FY’19 Q2 FY’20Q3 FY’19

-29%

Q4 FY’19 Q1 FY’21Q1 FY’20

0%

Q3 FY’20 Q4 FY’20 Q2 FY’21 Guidance

2%

-28%

-11%

-2% -2%

3%

FY’20FY’18 FY’19

-20%

-15%

-1%

Est. 2%


Annual SaaS Deferred Revenue(in millions)

Quarterly SaaS Deferred Revenue(in millions)

SaaS Deferred Revenue

$122.3

$109.1 $106.4

$175.4

$156.2

$145.4 $141.8

$222.9

$192.9

Q1 FY’19 Q3 FY’20Q3 FY’19Q2 FY’19 Q1 FY’20Q4 FY’19 Q1 FY’21Q2 FY’20 Q4 FY’20

+23%

$136.3

$175.4

$222.9

FY’18 FY’19 FY’20


Annual Cash Flow(in millions)

Quarterly Cash Flow(in millions)

Cash Flow from Operations

$20.8

$(34.6)

$(21.0)

$19.5 $18.2

$(20.9)$(18.4)

$19.5

$23.1

Q3 FY’20Q1 FY’19 Q2 FY’19 Q3 FY’19 Q4 FY’19 Q1 FY’21Q1 FY’20 Q2 FY’20 Q4 FY’20

$(15.2)

$(1.6)

FY’19 FY’20


Long-Term Margin Framework(1)

1. See appendix for a reconciliation of GAAP to Non-GAAP to financial measures. 2. Long-Term Target model is forward-looking, and subject to significant business, economic, regulatory and competitive uncertainties and contingencies, many of which are beyond the control of

the Company and its management, and are based upon assumptions with respect to future decisions, which are subject to change. Actual results will vary and those variations may be material. For discussion of some of the important factors that could cause these variations, please consult the “Risk Factors” section of our prospectus filed with the SEC pursuant to Rule 424(b)(4) dated July 18, 2019, and in our Annual Report on Form 10-K filed with the SEC on March 19, 2020, both of which may be obtained on the Investor Relations section of Medallia’s website (https://investor.medallia.com/financials/sec-filings/default.aspx). Nothing in this presentation should be regarded as a representation by any person that these goals will be achieved and the Company undertakes no duty to update its goals, except as required by law.

FY’19 FY’20 LT Target2

Subscription revenue $246.8M $312.2M

Subscription revenue growth 22% 26% 25% - 30%

Total revenue $313.6M $402.5M

Total revenue growth 20% 28%

Non-GAAP operating income ($47.7M) ($2.4M)

Non-GAAP operating margin (15%) (1%) 20% plus


Investor Relations

Address:

Contact:

Email:

Medallia, Inc.575 Market StreetSan Francisco, CA 94105

Carolyn BassMarket Street Partners

[email protected]


GAAP to Non-GAAP Reconciliation

Note: Totals may not sum due to rounding

$MM except where noted Q1 FY'19 Q2 FY'19 Q3 FY'19 Q4 FY'19 Q1 FY'20 Q2 FY'20 Q3 FY'20 Q4 FY'20 Q1 FY'21 FY'18 FY'19 FY'20

Subscription Gross Profit Reconciliation

Total Subscription Revenue 55.6 60.1 63.2 67.9 71.7 74.5 79.7 86.2 89.0 201.8 246.8 312.2

GAAP Subscription Gross Profit 44.1 48.1 51.3 55.3 58.3 59.8 63.5 69.2 71.6 165.4 198.8 250.8

(+) Stock-based compensation expense 0.3 0.3 0.3 0.2 0.3 0.9 0.9 1.0 0.9 0.4 1.1 3.1

(+) Employer payroll tax expense related to stock-based compensation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0

(+) Amortization of acquired intangibles assets 0.2 0.0 0.0 0.0 0.0 0.3 0.6 0.9 1.0 1.0 0.4 1.9

Non-GAAP Subscription Gross Profit 44.7 48.5 51.7 55.5 58.6 61.0 65.0 71.1 73.6 166.8 200.4 255.7

GAAP Subscription Gross Margin 79.4% 80.1% 81.1% 81.4% 81.2% 80.3% 79.6% 80.4% 80.5% 82.0% 80.6% 80.3%

(+) Stock-based compensation expense % 0.5% 0.5% 0.5% 0.3% 0.4% 1.2% 1.2% 1.1% 1.0% 0.2% 0.5% 1.0%

(+) Employer payroll tax expense related to stock-based compensation % 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0%

(+) Amortization of acquired intangibles assets % 0.4% 0.1% 0.1% 0.1% 0.1% 0.4% 0.8% 1.0% 1.1% 0.5% 0.1% 0.6%

Non-GAAP Subscription Gross Margin 80.4% 80.7% 81.7% 81.8% 81.7% 81.9% 81.5% 82.5% 82.7% 82.6% 81.2% 81.9%

Gross Profit Reconciliation

Total Revenue 70.7 75.4 81.2 86.4 93.6 95.7 103.1 110.1 112.7 261.2 313.6 402.5

GAAP Gross Profit 43.0 45.9 51.8 57.1 61.0 60.8 64.5 71.0 73.1 165.4 197.7 257.3




Non-GAAP Gross Profit 44.1 46.9 52.7 57.9 61.9 64.7 68.9 75.7 78.0 169.1 201.6 271.2

GAAP Gross Margin 60.9% 60.8% 63.8% 66.1% 65.2% 63.5% 62.6% 64.5% 64.9% 63.3% 63.0% 63.9%




Non-GAAP Gross Margin 62.4% 62.2% 64.9% 67.0% 66.1% 67.6% 66.8% 68.8% 69.2% 64.7% 64.3% 67.4%


GAAP to Non-GAAP Reconciliation

Note: Totals may not sum due to rounding

$MM except where noted Q1 FY'19 Q2 FY'19 Q3 FY'19 Q4 FY'19 Q1 FY'20 Q2 FY'20 Q3 FY'20 Q4 FY'20 Q1 FY'21 FY'18 FY'19 FY'20

R&D Expenses

GAAP R&D 23.2 22.4 21.0 19.7 19.6 22.7 26.3 27.3 32.4 86.4 86.3 96.0

(-) Stock-based compensation expense (2.4) (1.8) (1.7) (1.7) (1.6) (3.7) (6.3) (6.6) (11.5) (5.2) (7.6) (18.2)

(-) Employer payroll tax expense related to stock-based compensation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (0.2) (0.8) 0.0 0.0 (0.2)

(-) Acquisition-related costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (0.0) (0.0) 0.0 0.0 (0.0)

Non-GAAP R&D 20.8 20.7 19.3 18.0 18.0 19.0 20.0 20.5 20.1 81.2 78.7 77.6

Non-GAAP R&D % of Revenue 29.4% 27.4% 23.8% 20.8% 19.3% 19.9% 19.4% 18.6% 17.8% 31.1% 25.1% 19.3%

S&M Expenses

GAAP S&M 35.4 38.6 34.2 30.4 33.6 46.5 47.1 53.6 52.0 110.0 138.7 180.7


(-) Employer payroll tax expense related to stock-based compensation 0.0 0.0 0.0 0.0 0.0 0.0 (0.0) (0.3) (0.7) 0.0 0.0 (0.3)

(-) Amortization of acquired intangibles assets 0.0 0.0 0.0 0.0 0.0 0.0 (0.1) (0.3) (0.4) 0.0 0.0 (0.4)

(-) Acquisition-related costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (0.0) (0.1) 0.0 0.0 (0.0)

Non-GAAP S&M 33.9 36.7 32.7 28.6 32.1 38.0 38.0 43.3 41.5 105.1 131.9 151.4

Non-GAAP S&M % of Revenue 48.0% 48.7% 40.2% 33.1% 34.3% 39.7% 36.8% 39.3% 36.8% 40.2% 42.0% 37.6%

G&A Expenses

GAAP G&A 11.5 12.4 13.0 16.3 9.8 30.1 32.8 22.8 21.5 40.2 53.2 95.5


(-) Employer payroll tax expense related to stock-based compensation 0.0 0.0 0.0 0.0 0.0 0.0 (0.5) (0.3) (0.4) 0.0 0.0 (0.8)

(-) Restructuring and other 0.0 0.0 (1.1) (3.4) 4.1 0.0 0.0 (0.5) 0.0 0.0 (4.5) 3.5

(-) Acquisition-related costs 0.0 0.0 0.0 0.0 (0.1) (0.6) (1.1) (1.0) (0.8) 0.0 0.0 (2.8)

Non-GAAP G&A 9.6 10.6 9.6 8.9 9.8 10.0 12.9 11.9 12.9 34.7 38.8 44.6

Non-GAAP G&A % of Revenue 13.6% 14.1% 11.8% 10.4% 10.4% 10.5% 12.5% 10.8% 11.5% 13.3% 12.4% 11.1%

Operating Income Reconciliation

GAAP Operating Income (27.1) (27.6) (16.5) (9.3) (2.0) (38.5) (41.7) (32.8) (32.8) (71.1) (80.4) (114.9)




(+) Restructuring and other 0.0 0.0 1.1 3.4 (4.1) 0.0 0.0 0.5 0.0 0.0 4.5 (3.5)

(+) Acquisition-related costs 0.0 0.0 0.0 0.0 0.1 0.6 1.1 1.0 0.9 0.0 0.0 2.8

Non-GAAP Operating Income (20.2) (21.0) (8.8) 2.4 2.0 (2.4) (2.0) 0.0 3.5 (51.9) (47.7) (2.4)

GAAP Operating Margin -38.3% -36.6% -20.3% -10.8% -2.2% -40.2% -40.4% -29.8% -29.1% -27.2% -25.6% -28.6%




(+) Restructuring and other % 0.0% 0.0% 1.3% 4.0% -4.3% 0.0% 0.0% 0.5% 0.0% 0.0% 1.4% -0.9%

(+) Acquisition-related costs % 0.0% 0.0% 0.0% 0.0% 0.1% 0.6% 1.1% 0.9% 0.8% 0.0% 0.0% 0.7%

Non-GAAP Operating Margin -28.6% -27.9% -10.9% 2.7% 2.1% -2.5% -2.0% 0.0% 3.1% -19.9% -15.2% -0.6%

Thank You

Q1 FY2021 Earnings · 2020-06-02 · Q1 FY’19 Q2 FY’19 Q3 FY’19 Q4 FY’19 Q1 FY’20 Q2...

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