Medallia, Inc. provides customer experience management software. Its products include B2C Customer, B2B Customer, Employee and Product Experiences. The company was founded by Borge Hald and Amy Pressman in 2001 and is headquartered in San Francisco, CA.
We derive, have derived and expect to continue to derive, the substantial majority of our revenue from subscriptions to our platform. Any failure of our platform to satisfy customer demands, achieve increased market acceptance or adapt to changing market dynamics would adversely affect our business, results of operations, financial condition and growth prospects.
If we fail to effectively manage our growth and organizational change, our business and results of operations could be harmed.
The market for experience management solutions is new and rapidly evolving, and if this market develops more slowly than we expect or declines, or develops in a way that we do not expect, our business could be adversely affected.
If we are unable to attract new customers in a manner that is cost-effective and assures customer success, then our business, results of operations and financial condition would be adversely affected.
Our business depends on our customers renewing their subscriptions and expanding their use of our platform. Any decline in our customer renewals or expansion would harm our business, results of operations and financial condition.
The market in which we participate is new and rapidly evolving, and if we do not compete effectively, our results of operations and financial condition could be harmed.
If we are not able to effectively develop platform enhancements, introduce new products or keep pace with technological developments, our business, results of operations and financial condition could be adversely affected.
Any failure by us or our partners to offer high-quality customer service and support may adversely affect our relationships with our existing and prospective customers, and in turn adversely affect our business reputation, results of operations and financial condition.
The majority of our customer base consists of large and mid-sized enterprises, and we currently generate a significant portion of our revenue from a relatively small number of enterprises, the loss of any of which could harm our business, results of operations and financial condition.
Our business and growth depend in part on the success of our strategic relationships with third parties, as well as on the continued availability and quality of feedback data from third parties over whom we do not have control.
We rely on our infrastructure and third-party data centers, and any interruption or delay in service from these facilities could impair the delivery of our platform and harm our business.
Real or perceived defects or errors on our platform could harm our reputation, result in significant costs to us, and impair our ability to sell subscriptions to our platform and related services.
We depend on our management team and key employees, and the loss of one or more of these employees or an inability to attract and retain highly skilled employees could adversely affect our business.
Privacy concerns and laws or other domestic or foreign regulations may reduce the effectiveness of our platform and adversely affect our business.
Our revenue growth rate has fluctuated in prior periods and may decline again in the future.
We may fail to accurately predict the optimal pricing strategies necessary to attract new customers, retain existing customers and respond to changing market conditions.
If our investments to increase adoption of our platform by small and medium-sized businesses are not successful, our business, results of operations and financial condition may be adversely affected.
Failure to effectively expand our sales and marketing capabilities could harm our ability to increase our customer base and achieve broader market acceptance of our platform.
Our sales cycle with enterprise and international clients can be long and unpredictable.
If we are unable to effectively operate on or capture data from mobile devices, our business could be adversely affected.
If we are unable to develop and maintain successful relationships with channel partners, our business, results of operations, and financial condition could be adversely affected.
We recognize revenue over the term of our customers’ contracts. Consequently, increases or decreases in new sales may not be immediately reflected in our results of operations and may be difficult to discern.
Our customers may fail to pay us in accordance with the terms of their agreements, at times necessitating action by us to attempt to compel payment.
Certain of our results of operations and financial metrics may be difficult to predict.
Our results of operations may be difficult to predict as a result of seasonality.
We anticipate spending substantial funds in connection with the tax liabilities that arise upon the settlement of RSUs in the future.
We may be sued by third parties for alleged infringement of their proprietary rights.
Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses.
Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand.
We may acquire or invest in companies, which may divert our management’s attention and result in additional dilution to our stockholders. We may be unable to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions.
We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.
Our international sales and operations subject us to additional risks and challenges that can adversely affect our business, results of operations and financial condition.
We believe our success depends on continuing to invest in the growth of our worldwide operations by entering new geographic markets. If our investments in these markets are greater than anticipated, or if our customer growth or sales in these markets do not meet our expectations, our results of operations and financial condition may be adversely affected.
We are subject to governmental export and import controls and economic sanctions laws and regulations that could impair our ability to compete in international markets and subject us to liability if we are not in full compliance with applicable laws.
Disputes with our customers and other third parties could be costly, time-consuming and harm our business and reputation.
We depend and rely upon SaaS technologies from third parties to operate our business, and interruptions or performance problems with these technologies may adversely affect our business and results of operations.
We face exposure to foreign currency exchange rate fluctuations, and if foreign currency exchange rates fluctuate substantially in the future, our results of operations and financial condition, which are reported in U.S. dollars, could be adversely affected.
Taxing authorities may successfully assert that we should have collected or in the future should collect sales and use, value added or similar taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our results of operations.
Our international operations subject us to potentially adverse tax consequences.
Changes in, or interpretations of, tax rules and regulations may adversely affect our effective tax rates.
We are subject to tax examinations of our tax returns by the Internal Revenue Service (the IRS), and other domestic and foreign tax authorities. An adverse outcome of any such audit or examination by the IRS or other tax authority could have a material adverse effect on our results of operations and financial condition.
Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.
The terms of the SVB Credit Facility require us to meet certain operating and financial covenants and place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business.
Unfavorable conditions in our industry or the economy more generally or reductions in information technology spending could limit our ability to grow our business and adversely affect our results of operations and financial condition.
Our business could be adversely impacted by changes in laws and regulations related to the Internet or changes in access to the Internet generally.
Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and teamwork fostered by our culture, which could harm our business.
Risks associated with operating in Argentina could have an impact on our results of operations.
The nature of our business requires the application of complex accounting rules, and any significant changes in current rules could affect our financial statements and results of operations.
If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
We are an “emerging growth company,” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
Our directors, executive officers and holders of 5% or more of our common stock beneficially own approximately 55% of our common stock and are able to exert significant control over us, which limits your ability to influence the outcome of important transactions, including a change of control.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about us, our business or our market, or if they change their recommendations regarding our common stock adversely, the market price and trading volume of our common stock could decline.
We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our business, results of operations and financial condition.
Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the market price of our common stock.
Our amended and restated bylaws designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers or employees.
We could be subject to securities class action litigation.
Total revenue was $95.7 million for the three months ended July 31, 2019, compared to $75.4 million for the three months ended July 31, 2018, which is an increase of $20.2 million, or 27%. Total revenue was $189.3 million for the six months ended July 31, 2019, compared to $146.1 million for the six months ended July 31, 2018, which is an increase of $43.2 million, or 30%.
Subscription revenue accounted for 78% and 80% of our revenue for the three months ended July 31, 2019 and 2018, respectively. Subscription revenue increased by $14.4 million, or 24%, for the three months ended July 31, 2019, compared to the three months ended July 31, 2018. Subscription revenue accounted for 77% and 79% of our revenue for the six months ended July 31, 2019 and 2018, respectively. Subscription revenue increased by $30.6 million, or 26% for the six months ended July 31, 2019 compared to the six months ended July 31, 2018. The increase in subscription revenues was due primarily to a higher number of customer contracts as compared to the same six-month period in 2018.
Professional services revenue increased by $5.8 million, or 38% for the three months ended July 31, 2019, compared to the three months ended July 31, 2018. Professional services revenue increased by $12.6 million or 41% for the six months ended July 31, 2019 as compared to the six months ended July 31, 2018. The increase in professional services revenues was primarily driven by more implementation services.