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Medallia Reports Record Second Quarter Fiscal 2022 Revenue

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·21 min read
In this article:
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  • Q2 Subscription Revenue of $117.4 Million, up 26% Year-over-Year

  • Q2 Total Revenue of $144.1 Million, up 25% Year-over-Year

SAN FRANCISCO, September 02, 2021--(BUSINESS WIRE)--Medallia, Inc. (NYSE: MDLA), the global leader in customer and employee experience, today announced financial results for the quarter ended July 31, 2021.

"I was very pleased with our second quarter results," said Leslie Stretch, President and CEO of Medallia. "We had strong enterprise and mid-market new business execution as well as solid expansion performance. Our highly differentiated platform and focus on voice of customer and voice of employee in today's digital-first world positions us well for the future."

Financial Highlights for the Second Quarter of Fiscal 2022

  • Total revenue for the quarter was $144.1 million, an increase of 25% from the same period last year. Subscription revenue was $117.4 million, an increase of 26% from the same period last year.

  • Loss from operations for the quarter was $(59.8) million, compared to loss from operations of $(34.5) million in the same period last year. Non-GAAP loss from operations for the second quarter was $(12.2) million, compared to $2.5 million income from operations in the same period last year.

  • Net loss for the quarter was $(62.5) million, or $(0.39) per share, basic and diluted, compared to net loss of $(35.2) million, or $(0.25) per share, basic and diluted, in the same period last year. Non-GAAP net loss was $(14.1) million, or $(0.09) per share, basic and diluted, compared to non-GAAP net income of $1.0 million, or $0.01 per share, diluted, in the same period last year.

  • Cash, cash equivalents and marketable securities were $507.6 million as of July 31, 2021.

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.

Transaction with Thoma Bravo

Due to the Company’s pending acquisition by Thoma Bravo that was announced on July 26, 2021, there will not be a conference call or live webcast to discuss these financial results. In addition, the Company will not be providing financial guidance for the third quarter of fiscal year 2022 and is suspending its financial guidance for the full fiscal year 2022 as a result of the pending transaction.

About Medallia

Medallia (NYSE: MDLA) is the pioneer and market leader in customer, employee, citizen and patient experience. The company’s award-winning SaaS platform, Medallia Experience Cloud, is becoming the experience system of record that makes all other applications customer and employee aware. The platform captures billions of experience signals across interactions including all voice, video, digital, IoT, social media and corporate messaging tools. Medallia uses proprietary artificial intelligence and machine learning technology to automatically reveal predictive insights that drive powerful business actions and outcomes. Medallia customers reduce churn, turn detractors into promoters and buyers, create in-the-moment cross-sell and up-sell opportunities and drive revenue-impacting business decisions, 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, 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 weighted average basic and diluted shares. 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. 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 expense 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 transaction and integration related costs associated with acquisition activities.

Option acceleration payments related to acquisition. We exclude costs related to option acceleration payments from an acquisition from our non-GAAP financial measures. These costs include payments as part of the close of an acquisition.

Restructuring and other. We exclude restructuring and other from certain of our non-GAAP financial measures. Restructuring and other primarily consists of lease impairments and net expenses related to leased properties which we cease to occupy. Any losses and gains associated with these activities are generally unrelated to financial and operational performance in any particular period and we believe the exclusion of such losses and gains provides for a more useful comparison of operational performance in comparative periods that may or may not include such losses and gains.

Merger-related costs. We exclude merger-related costs from certain of our non-GAAP financial measures. Merger-related costs consist of costs incurred related to our pending acquisition by entities affiliated with Thoma Bravo.

Amortization of debt issuance costs. We exclude costs related to the amortization of debt issuance costs from certain of our non-GAAP financial measures. Under GAAP, we are required to amortize the issuance costs over the term of the debt. The amortization of the debt issuance costs is a non-cash item, and we believe the exclusion of this expense will provide for a more useful comparison of our operational performance in different periods.

Income tax benefits. We exclude 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 tax benefits related to our stock option exercise deductions and certain discrete and one-time events.

Non-GAAP Supplemental Financial Information

Subscription billings: We define subscription billings, a non-GAAP financial measure, as total subscription revenue plus the change in subscription deferred revenue and contract assets, excluding acquired contract assets.

Additional Information and Where to Find It

Medallia, Inc. ("Medallia"), its directors and certain executive officers are participants in the solicitation of proxies from shareholders in connection with the pending acquisition of Medallia (the "Transaction"). Medallia plans to file a proxy statement (the "Transaction Proxy Statement") with the Securities and Exchange Commission (the "SEC") in connection with the solicitation of proxies to approve the Transaction.

Robert Bernshteyn, Mitchell K. Dauerman, Borge Hald, Leslie J. Kilgore, Douglas M. Leone, Stanley J. Meresman, Amy E. Pressman, Leslie J. Stretch, Steven C. Walske and James D. White, all of whom are members of Medallia’s Board of Directors, and Roxanne M. Oulman, who is Medallia’s Chief Financial Officer, are participants in Medallia’s solicitation. Other than Ms. Pressman and Messrs. Hald and Leone, none of such participants owns in excess of 1% of Medallia’s common stock. Ms. Pressman and Mr. Hald may each be deemed to own approximately 2% of Medallia’s common stock. Mr. Leone may be deemed to own approximately 1% of Medallia’s common stock, and is affiliated with investment funds owning an additional approximately 28% of Medallia’s common stock. Additional information regarding such participants, including their direct or indirect interests, by security holdings or otherwise, will be included in the Transaction Proxy Statement and other relevant documents to be filed with the SEC in connection with the Transaction. Information relating to the foregoing can also be found in Medallia’s definitive proxy statement for its 2021 Annual Meeting of Shareholders (the "2021 Proxy Statement"), which was filed with the SEC on April 13, 2021. To the extent that holdings of Medallia’s securities have changed since the amounts printed in the 2021 Proxy Statement, such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC.

Promptly after filing the definitive Transaction Proxy Statement with the SEC, Medallia will mail the definitive Transaction Proxy Statement and a WHITE proxy card to each shareholder entitled to vote at the special meeting to consider the Transaction. SHAREHOLDERS ARE URGED TO READ THE TRANSACTION PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS THAT MEDALLIA WILL FILE WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Shareholders may obtain, free of charge, the preliminary and definitive versions of the Transaction Proxy Statement, any amendments or supplements thereto, and any other relevant documents filed by Medallia with the SEC in connection with the Transaction at the SEC’s website (http://www.sec.gov). Copies of Medallia’s definitive Transaction Proxy Statement, any amendments or supplements thereto, and any other relevant documents filed by Medallia with the SEC in connection with the Transaction will also be available, free of charge, at Medallia’s investor relations website (https://investor.medallia.com) or by writing to Medallia, Inc., Attention: Investor Relations, 575 Market Street, Suite 1850, San Francisco, California 94105.

Note on Forward-Looking Statements

The forward-looking statements included in this press release, including for example, the quotations of management, the statements regarding the Transaction, strategies, discussion of our commercial prospects, partnerships, and the impact of the ongoing COVID-19 pandemic and related public health measures 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, the possibility that the conditions to the closing of the Transaction are not satisfied, including the risk that required approvals from Medallia’s shareholders for the Transaction or required regulatory approvals to consummate the Transaction are not obtained; potential litigation relating to the Transaction; uncertainties as to the timing of the consummation of the Transaction; the ability of each party to consummate the Transaction; possible disruption related to the Transaction to Medallia’s current plans and operations, including through the loss of customers and employees; potential disruption of customer purchase decisions resulting from global economic conditions including from an economic downturn or recession in the United States or in other countries around the world, timing and size of orders, relative growth of our recurring revenue, potential decreases in customer spending, including as a result of the COVID-19 pandemic and related public health measures, uncertainty regarding purchasing trends in the cloud software market, customer cancellations or non-renewal of maintenance contracts or on-demand services, developments in and the duration of the COVID-19 pandemic and the resulting impact on our business and operations, and the business of our customers and partners, including the economic impact of safety measures to mitigate the impacts of COVID-19, our potential inability to manage effectively any growth we experience, our ability or inability 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 periodic reports we filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K filed with the SEC on March 22, 2021 and our Quarterly Report on Form 10-Q filed with the SEC on June 4, 2021, which may be obtained on the Investor Relations section of Medallia’s website (https://investor.medallia.com/financials/sec-filings/default.aspx). Additionally, these forward-looking statements involve risk, uncertainties, and assumptions, including those related to the impacts of COVID-19 on our business and global economic conditions. Many of these assumptions relate to matters that are beyond our control and are changing rapidly, including, but not limited to, the timeframes for and severity of social distancing and other mitigation requirements, the impact of COVID-19 on our customers’ purchasing decisions and the length of our sales cycles, particularly for customers in certain industries highly affected by COVID-19. Significant variation from the assumptions underlying our forward-looking statements could cause our actual results to vary, and the impact could be significant. All forward-looking statements in this press release are based on information available to us as of the date hereof. We undertake no obligation, and do not intend, to update the information contained in this press release, except as required by law.

© 2021 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)

July 31, 2021

January 31, 2021

Assets

Current assets:

Cash and cash equivalents

$

257,051

$

428,328

Marketable securities

250,528

254,061

Trade and other receivables, net

126,764

181,431

Deferred commissions, current

35,509

31,107

Prepaid expenses and other current assets

32,732

23,835

Total current assets

702,584

918,762

Property and equipment, net

40,903

40,668

Operating lease right-of-use assets

34,721

39,050

Deferred commissions, noncurrent

75,934

68,929

Goodwill

410,453

262,942

Intangible assets, net

77,575

60,623

Other noncurrent assets

16,683

10,675

Total assets

$

1,358,853

$

1,401,649

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

17,756

$

11,904

Accrued expenses and other current liabilities

50,730

39,756

Accrued compensation

49,861

42,292

Deferred revenue, current

262,794

293,231

Total current liabilities

381,141

387,183

Convertible senior notes, net

561,105

448,064

Deferred revenue, noncurrent

1,514

1,396

Lease liability, noncurrent

43,181

47,631

Other liabilities

15,182

9,134

Total liabilities

1,002,123

893,408

Stockholders' equity:

Common stock

153

150

Additional paid-in capital

1,094,280

1,136,534

Accumulated other comprehensive income (loss)

(440

)

1,186

Accumulated deficit

(737,263

)

(629,629

)

Total stockholders' equity

356,730

508,241

Total liabilities and stockholders' equity

$

1,358,853

$

1,401,649

Medallia, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

Three Months Ended July 31,

Six Months Ended July 31,

2021

2020

2021

2020

Revenue:

Subscription

$

117,392

$

92,831

$

223,463

$

181,823

Professional services

26,716

22,694

52,019

46,393

Total revenue

144,108

115,525

275,482

228,216

Cost of revenue:

Subscription

27,592

19,130

51,748

36,474

Professional services

26,931

22,042

50,473

44,261

Total cost of revenue

54,523

41,172

102,221

80,735

Gross profit

89,585

74,353

173,261

147,481

Operating expenses:

Research and development

35,363

27,790

66,000

60,169

Sales and marketing

80,150

51,942

153,130

103,957

General and administrative

33,909

29,137

64,022

50,635

Total operating expenses

149,422

108,869

283,152

214,761

Loss from operations

(59,837

)

(34,516

)

(109,891

)

(67,280

)

Other income (expense), net

(1,716

)

(448

)

(3,309

)

(273

)

Loss before provision for income taxes

(61,553

)

(34,964

)

(113,200

)

(67,553

)

Provision for income taxes

937

234

1,711

174

Net loss

$

(62,490

)

$

(35,198

)

$

(114,911

)

$

(67,727

)

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

$

(0.39

)

$

(0.25

)

$

(0.73

)

$

(0.49

)

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

159,068

142,479

157,738

139,272

GAAP to Non-GAAP adjustments include stock-based compensation expense and related employer payroll tax expense, amortization of acquired intangible assets, acquisition-related costs, amortization of debt issuance costs, option acceleration payments, restructuring and other, merger-related costs, and income tax benefits as follows:

Three Months Ended July 31,

Six Months Ended July 31,

2021

2020

2021

2020

Cost of revenue:

Subscription

$

4,374

$

2,411

$

7,958

$

4,372

Professional services

3,379

2,825

5,762

5,706

Operating expenses:

Research and development

6,470

5,101

11,328

17,412

Sales and marketing

14,682

10,002

27,047

20,538

General and administrative

18,685

16,673

35,025

25,266

Other income (expense), net

829

1,656

Benefits from income taxes

(34

)

(775

)

(57

)

(1,471

)

Total

$

48,385

$

36,237

$

88,719

$

71,823

Medallia, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Six Months Ended July 31,

2021

2020

Operating activities

Net loss

$

(114,911

)

$

(67,727

)

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

Depreciation and amortization

21,430

11,790

Amortization of deferred commissions

16,724

12,433

Non-cash lease expense

5,450

6,219

Stock-based compensation expense

53,298

56,438

Lease exit costs

8,392

Amortization of debt issuance costs

1,656

Other

6,196

2,099

Changes in assets and liabilities:

Trade and other receivables

58,775

63,310

Deferred commissions

(28,130

)

(19,983

)

Prepaid expenses and other current assets

(8,247

)

196

Other noncurrent assets

(1,172

)

(1,404

)

Accounts payable

4,193

(2,912

)

Deferred revenue

(39,002

)

(57,766

)

Accrued expenses and other current liabilities

9,577

(7,001

)

Other noncurrent liabilities

(2,628

)

(393

)

Net cash (used in) provided by operating activities

(16,791

)

3,691

Investing activities

Purchases of property, equipment and other

(12,844

)

(9,774

)

Purchase of marketable securities

(153,773

)

(139,196

)

Maturities of marketable securities

152,900

133,473

Proceeds from sale of marketable securities

3,500

1,100

Acquisitions, net of cash acquired

(163,762

)

(80,372

)

Net cash used in investing activities

(173,979

)

(94,769

)

Financing activities

Proceeds from revolving line of credit

43,000

Proceeds from exercise of stock options

14,802

41,032

Proceeds from share purchase plan

7,953

10,267

Principal payments on financing leases

(3,184

)

(2,117

)

Repayment of debt assumed in acquisitions and other

(200

)

(2,139

)

Net cash provided by financing activities

19,371

90,043

Effect of exchange rate changes on cash and cash equivalents

122

(49

)

Net decrease in cash and cash equivalents

(171,277

)

(1,084

)

Cash and cash equivalents at beginning of period

428,328

226,866

Cash and cash equivalents at end of period

$

257,051

$

225,782

Medallia, Inc.

GAAP to Non-GAAP Reconciliations

(in thousands, except percentages)

(unaudited)

Three Months Ended July 31,

Six Months Ended July 31,

2021

2020

2021

2020

Non-GAAP gross profit reconciliation:

GAAP gross profit

$

89,585

$

74,353

$

173,261

$

147,481

GAAP gross margin

62

%

64

%

63

%

65

%

Add:

Stock-based compensation

4,387

3,665

7,459

7,258

Employer payroll tax expense related to stock-based compensation

156

163

418

420

Amortization of acquired intangible assets

3,210

1,408

5,843

2,400

Non-GAAP gross profit

$

97,338

$

79,589

$

186,981

$

157,559

Non-GAAP gross margin

68

%

69

%

68

%

69

%

Three Months Ended July 31,

Six Months Ended July 31,

2021

2020

2021

2020

Non-GAAP subscription revenue gross profit reconciliation:

GAAP subscription revenue gross profit

$

89,800

$

73,701

$

171,715

$

145,349

GAAP subscription revenue gross margin

76

%

79

%

77

%

80

%

Add:

Stock-based compensation

1,104

946

1,958

1,855

Employer payroll tax expense related to stock-based compensation

60

57

157

117

Amortization of acquired intangible assets

3,210

1,408

5,843

2,400

Non-GAAP subscription revenue gross profit

$

94,174

$

76,112

$

179,673

$

149,721

Non-GAAP subscription revenue gross margin

80

%

82

%

80

%

82

%

Medallia, Inc.

GAAP to Non-GAAP Reconciliations

(in thousands, except percentages)

(unaudited)

Three Months Ended July 31,

Six Months Ended July 31,

2021

2020

2021

2020

Non-GAAP operating expense reconciliation:

GAAP operating expenses

$

149,422

$

108,869

$

283,152

$

214,761

GAAP operating expenses, as a % of total revenue

104

%

94

%

103

%

94

%

Subtract:

Stock-based compensation

(25,310

)

(20,969

)

(45,839

)

(49,180

)

Employer payroll tax expense related to stock-based compensation

(1,046

)

(1,606

)

(2,386

)

(3,565

)

Amortization of acquired intangible assets

(2,431

)

(688

)

(4,659

)

(1,107

)

Acquisition-related costs

(768

)

(797

)

(3,388

)

(1,648

)

Option acceleration payments

(5,396

)

Restructuring and other

(1,018

)

(7,716

)

(2,468

)

(7,716

)

Merger-related costs

(9,265

)

(9,265

)

Non-GAAP operating expenses

$

109,584

$

77,093

$

209,751

$

151,545

Non-GAAP operating expenses, as a % of total revenue

76

%

67

%

76

%

66

%

Three Months Ended July 31,

Six Months Ended July 31,

2021

2020

2021

2020

Non-GAAP income (loss) from operations reconciliation:

GAAP loss from operations

$

(59,837

)

$

(34,516

)

$

(109,891

)

$

(67,280

)

GAAP loss from operations, as a % of total revenue

(42

)%

(30

)%

(40

)%

(29

)%

Add:

Stock-based compensation

29,697

24,634

53,298

56,438

Employer payroll tax expense related to stock-based compensation

1,202

1,769

2,804

3,985

Amortization of acquired intangible assets

5,641

2,096

10,502

3,507

Acquisition-related costs

768

797

3,388

1,648

Option acceleration payments

5,396

Restructuring and other

1,018

7,716

2,468

7,716

Merger-related costs

9,265

9,265

Non-GAAP income (loss) from operations

$

(12,246

)

$

2,496

$

(22,770

)

$

6,014

Non-GAAP income (loss) from operations, as a % of total revenue

(8

)%

2

%

(8

)%

3

%

Medallia, Inc.

GAAP to Non-GAAP Reconciliations

(in thousands, except percentages)

(unaudited)

Three Months Ended July 31,

Six Months Ended July 31,

2021

2020

2021

2020

Non-GAAP net income (loss) reconciliation:

GAAP net loss

$

(62,490

)

$

(35,198

)

$

(114,911

)

$

(67,727

)

Add (subtract):

Stock-based compensation

29,697

24,634

53,298

56,438

Employer payroll tax expense related to stock-based compensation

1,202

1,769

2,804

3,985

Amortization of acquired intangible assets

5,641

2,096

10,502

3,507

Acquisition-related costs

768

797

3,388

1,648

Option acceleration payments

5,396

Restructuring and other

1,018

7,716

2,468

7,716

Merger-related costs

9,265

9,265

Amortization of debt issuance costs

829

1,656

Income tax benefits

(34

)

(775

)

(57

)

(1,471

)

Non-GAAP net income (loss)

$

(14,104

)

$

1,039

$

(26,191

)

$

4,096

Weighted average shares:

Basic

159,068

142,479

157,738

139,272

Diluted

159,068

173,335

157,738

171,498

Medallia, Inc.

Non-GAAP Supplemental Financial Information

(in thousands, except percentages)

(unaudited)

Trailing Twelve Months Ended July 31,

2021

2020

Subscription revenue

$

424,214

$

347,731

Increase in subscription deferred revenue

52,712

34,450

(Increase) in contract assets

(4,885

)

(2,448

)

Subscription billings

$

472,041

$

379,733

Subscription billings growth rate

24

%

20

%

View source version on businesswire.com: https://www.businesswire.com/news/home/20210902005700/en/

Contacts

Investor Relations:

Carolyn Bass
ir@medallia.com

Austin DeArman
press@medallia.com
202-341-9181