ir supplemental deck q2-fy20 9.5.19 final · microsoft powerpoint - ir supplemental deck q2-fy20...

Medallia © Copyright 2019 1

Q2 FY2020 Earnings September 2019


Forward-Looking Statements & Non-GAAP Financial MeasuresThis presentation includes 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. Medallia’s expectations and beliefs regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. 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 Quarterly Report on Form 10-Q that will be filed following the second quarter fiscal 2020 earnings release. 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 toours.

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.


8 of the Top 10Global communications and media companies1

5 of the Top 10Global automotive companies1

6 of the Top 10Global banks1

Pervasive usage and daily habit3

7 of the Top 10Global hospitality companies1

Broad vertical representation1

Medallia is the Market Leader in Experience Management

6 of the Top 10Global insurance companies1

600+customers2

Experiences analyzed annually

of customers with 1,000+ users

Calculationsin a single day

Mobile dailyengagement4

Enterprise grade platform

50%

8T4.9B

Strong subscription revenue growth at scale

Note: Fiscal year ends January 31st. Last twelve months as of July 31, 2019. 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. 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 April 30, 2019, unless otherwise indicated.4. As of May 31, 2019. 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.

Partner Ecosystem

50%+

$55.6

$60.1 $63.2

$67.9

$71.7 $74.5

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

Quarterly subscription revenue Est. $76.0-$77.0


Accelerating Go-To-Market Strategy

market opportunity in 20191

$68B

market penetration

< 1%

Historical Go-to-Market FocusReference customers

Global 2000

Large enterprises ($1.5B+ revenue, excl. Global 2000)

Mid-sized enterprises($150M-$1.5B revenue)

16k+ companies

90k+ companies

2k companies

1. For market opportunity calculation, please refer to our prospectus.


Top Ranked in Current Offering and StrategyMarket Leaders Buy from Market Leaders

The Forrester WaveTM

Customer Feedback Management Platforms, Q4 2018

“Medallia drives CX improvement from the top down and the bottom up. Medallia clients rave about the way the vendor enables a culture of CX, democratizing insights by bringing the VoC to the frontlines and incorporating the voice of the employee.”

Source: The Forrester Wave TM: Customer Feedback Management Platforms, Q4 2018.


6x ROI over 3 years

<6 month payback

Forrester believes the findings are relevant and robust for both smaller and larger organizations.

Key findingsTotal economic impact of Medallia Experience Cloud

$36M 3 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.


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 (Service

Now)

Sales Clouds(SFDC)

Customer Success

Loyalty

Point-of-Sale

Systems

Voice (Siri, Alexa)

Contact Centers

Operational Support Systems

IoTSystems

HCM Systems

ERP Systems

Marketing Clouds(Adobe)

1. Based on the average attach rate of a representative sample of our customers as of January 31, 2019.2. 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 January 31, 2019.

Promoter

Integrations

Add-ons / Up-sell

Core Platform

System Integrations

ReportingMobile App

Medallia Voices

Pre-Packaged Solutions

Digital (IoT, in app)

Surveys

OrgSync

Analytics

CX 360 Profiles

JourneyAnalytics

Social

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

Average attach rate today is only 2 modules1

9 modules with multiple SKUs


Top Global Brands Run on MedalliaBanking and

financial services HospitalityAutomotive and transportation Insurance Retail and

consumer goodsEnergy, industrial

and services

Technology, telecommunications

and media

Gap, Inc.


Annual Customer Count Quarterly Customer Count

Customer Count

469 486

508

543 565

613

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

452

543

FY’18 FY’19

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

$70.7

$75.4

$81.2

$86.4

$93.6 $95.7

Q1 FY’19 Q2 FY’19 Q3 FY’20 Guidance

Q1 FY’20Q3 FY’19 Q4 FY’19 Q2 FY’20

$261.2

$313.6

$386.5

FY’18 FY’19 FY’20 Guidance

+20%

+23%-24%

Est. $385.0 - $388.0

Est. $95.0 -$97.0

*High visibility ~ 90% of total revenue is recurring

* Based on trailing twelve months


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

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

Q2 FY’20

$201.8

$246.8

$304.0

FY’20 GuidanceFY’18 FY’19

+22%

+23%-24%

Est. $303.0 - $305.0

Est. $76.0 -$77.0


Annual Non-GAAP Operating Margin

Quarterly Non-GAAP Operating Margin

Non-GAAP Operating Margin

2.1%

Q2 FY’19Q1 FY’19 Q3 FY’19 Q4 FY’19-28.6%

Q1 FY’20 Q3 FY’20 Guidance

Q2 FY’20

-27.9%

-10.9%

2.7%

-2.5%

-2.5

FY’18 FY’20 GuidanceFY’19-19.9%

-15.2%

Est. -2.3% to – 2.7%Est. -3.6% to -4.7%


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

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

+33%

$136.3

$175.4

FY’18 FY’19


Cash Flow from Operations(in millions)

$20.8

$(34.6)

$(21.0)

$19.5 $18.2

$(20.9)

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


Long-Term Margin Framework(1)

1. See appendix for a reconciliation of GAAP to Non-GAAP to financial measures for fiscal year 2019 and fiscal year 2020.2. 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 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’19A FY’20 Guidance LT Target 2

Subscription revenue $246.8M $303.0M - $305.0M

Subscription revenue growth 22% 23% - 24% 25% - 30%

Total revenue $313.6M $385.0M - $388.0M

Total revenue growth 20% 23% - 24%

Non-GAAP operating income 1 ($47.7M) ($9.0M) – ($10.5M)

Non-GAAP operating margin 1 (15%) (2.3%) - (2.7%) 20% plus


Investor Relations

Address:

Contact:

Email:

Medallia, Inc.575 Market StreetSan Francisco, CA 94105

Carolyn BassMarket Street Partners

[email protected]


Appendix


GAAP to Non-GAAP Reconciliation

Note: Totals may not sum due to rounding

$MM except where noted Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY20 FY18 FY19Subscription Gross Profit ReconciliationTotal Subscription Revenue 55.6 60.1 63.2 67.9 71.7 74.5 201.8 246.8

GAAP Subscription Gross Profit 44.1 48.1 51.3 55.3 58.3 59.8 165.4 198.8(+) Stock Based Compensation 0.3 0.3 0.3 0.2 0.3 0.9 0.4 1.1(+) Amortization of acquired intangibles assets 0.2 0.0 0.0 0.0 0.0 0.3 1.0 0.4

Non-GAAP Subscription Gross Profit 44.7 48.5 51.7 55.5 58.6 61.0 166.8 200.4

GAAP Subscription Gross Margin 79.4% 80.1% 81.1% 81.4% 81.2% 80.3% 82.0% 80.6%(+) Stock Based Compensation % 0.5% 0.5% 0.5% 0.3% 0.4% 1.2% 0.2% 0.5%(+) Amortization of acquired intangibles assets % 0.5% 0.1% 0.1% 0.1% 0.1% 0.5% 0.6% 0.2%

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

Gross Profit ReconciliationTotal Revenue 70.7 75.4 81.2 86.4 93.6 95.7 261.2 313.6

GAAP Gross Profit 43.0 45.9 51.8 57.1 61.0 60.8 165.4 197.7(+) Stock Based Compensation 0.8 1.0 0.9 0.8 0.8 3.6 2.7 3.5(+) Amortization of acquired intangibles assets 0.2 0.0 0.0 0.0 0.0 0.3 1.0 0.4

Non-GAAP Gross Profit 44.1 46.9 52.7 57.9 61.9 64.7 169.1 201.6

GAAP Gross Margin 60.9% 60.8% 63.8% 66.1% 65.2% 63.5% 63.3% 63.0%(+) Stock Based Compensation % 1.1% 1.4% 1.1% 0.9% 0.9% 3.7% 1.0% 1.1%(+) Amortization of acquired intangibles assets % 0.3% 0.1% 0.1% 0.0% 0.0% 0.3% 0.4% 0.1%

Non-GAAP Gross Margin 62.4% 62.2% 64.9% 67.0% 66.1% 67.6% 64.7% 64.3%


GAAP to Non-GAAP Reconciliation

Note: Totals may not sum due to rounding

$MM except where noted Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20 Q2 FY20 FY18 FY19R&D ExpensesGAAP R&D 23.2 22.4 21.0 19.7 19.6 22.7 86.4 86.3

(-) Stock Based Compensation (2.4) (1.8) (1.7) (1.7) (1.6) (3.7) (5.2) (7.6)Non-GAAP R&D 20.8 20.7 19.3 18.0 18.0 19.0 81.2 78.7Non-GAAP R&D % of Revenue 29.4% 27.4% 23.8% 20.8% 19.3% 19.9% 31.1% 25.1%

S&M ExpensesGAAP S&M 35.4 38.6 34.2 30.4 33.6 46.5 110.0 138.7

(-) Stock Based Compensation & Other (1.5) (1.9) (1.6) (1.8) (1.5) (8.5) (4.9) (6.8)Non-GAAP S&M 33.9 36.7 32.6 28.6 32.1 38.0 105.1 131.9Non-GAAP S&M % of Revenue 48.0% 48.7% 40.2% 33.1% 34.3% 39.7% 40.2% 42.0%

G&A ExpensesGAAP G&A 11.5 12.4 13.0 16.3 9.8 30.1 40.2 53.2

(-) Stock Based Compensation (1.9) (1.8) (2.4) (3.9) (4.0) (19.5) (5.5) (10.0)(-) Amortization of acquired intangibles assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0(-) Restructuring & Other 0.0 0.0 (1.1) (3.4) 4.0 (0.6) 0.0 (4.5)

Non-GAAP G&A 9.6 10.6 9.6 8.9 9.8 10.0 34.7 38.8Non-GAAP G&A % of Revenue 13.6% 14.1% 11.8% 10.4% 10.4% 10.5% 13.3% 12.4%

Operating Income ReconciliationGAAP Operating Income (27.1) (27.6) (16.5) (9.3) (2.0) (38.5) (71.1) (80.4)

(+) Stock Based Compensation 6.6 6.5 6.5 8.2 8.0 35.2 18.2 27.9(+) Amortization of acquired intangibles assets 0.2 0.0 0.0 0.0 0.0 0.3 1.0 0.4(+) Restructuring & Other 0.0 0.0 1.1 3.4 (4.0) 0.6 0.0 4.5

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

GAAP Operating Margin -38.3% -36.6% -20.3% -10.8% -2.2% -40.2% -27.2% -25.6%(+) Stock Based Compensation % 9.4% 8.6% 8.0% 9.5% 8.5% 36.8% 7.0% 8.9%(+) Amort of acquired intangibles assets % 0.3% 0.1% 0.1% 0.0% 0.0% 0.3% 0.4% 0.1%(+) Restructuring & Other % 0.0% 0.0% 1.3% 4.0% -4.2% 0.6% 0.0% 1.4%

Non-GAAP Operating Margin -28.6% -27.9% -10.9% 2.7% 2.1% -2.5% -19.9% -15.2%


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