Medallia, Inc.
Q2 2021 Earnings Call Transcript

Published: 4 Sep 2020

Operator:

Good afternoon and welcome to Medallia’s Second Quarter of Fiscal 2021 Earnings Conference Call. Joining us today for today’s call are Medallia’s CEO, Leslie Stretch and CFO, Roxanne Oulman. With that, I would like to turn the call over to Roxanne Oulman for introductory remarks. Roxanne?
Roxanne Oulman:

Thank you, Jassi. Welcome to Medallia’s second quarter fiscal 2021 earnings conference call. We issued our earnings release a short time ago and furnished the related 8-K to the SEC. To access the press release, please see the Investor Relations sections of our website. With me on the call today is Leslie Stretch, President and CEO of Medallia.
Leslie Stretch:

Thank you, Roxanne. Good afternoon, everyone. I hope you are all staying safe and healthy. Before I begin, I would like to thank each and every Medallian for their hard work and commitment so far in 2020. I was pleased with our progress in Q2. We saw our company operate successfully as a virtual business. We have record SaaS revenues up 25% year-over-year, record total revenue up 21% year-over-year. We added 57 enterprise customers in Q2, ending the quarter with 839 enterprise customers. We had a record 146 customer go-lives versus 100 in Q1, all executed virtually. As we indicated in our last earnings call, we executed a $40 million total contract value renewal in the quarter in Q2 and a $17 million total contract value renewal quarter again in Q2 both in financial services. Additionally in Q2, we signed a $9 million total contract value outlook for a major U.S. manufacturer and expanded a major retailer’s voice of employee program to 700,000 per year and uplifted a major healthcare provider at over $10 million of total contract value. These large multiyear commitments are evidence of the land-and-expand opportunities we have and the stickiness of our solution set when implemented enterprise-wide.
Roxanne Oulman:

Thank you, Leslie and good afternoon everyone. We reported strong financial results in Q2, including record total revenue and record SaaS revenue. As a quick reminder, unless otherwise noted, all numbers except revenue mentioned during my remarks today are non-GAAP. You can find a reconciliation from GAAP to non-GAAP results in today’s press release.
Operator:

Thank you. Your first question comes from Rob Oliver with Baird. Your line is open.
Rob Oliver:

Great, thank you guys very much for taking my question. Hi, Leslie, hello, hi Roxanne. I just wanted to ask on partnerships, Leslie, when you laid out your proposed strategic plan as you guys were coming public it was a bunch of things it was increasing the signals revamping the go to market and also the partnerships being a part of that go to market and you signed some really meaningful partnerships along the way and a bunch more this quarter really impressive. Just wanted to get a sense for your feeling as to where you are now which partnerships are driving both lead gen and deals for you, and which excite you going forward. And then I just had a quick follow up.
Leslie Stretch:

Yes, thanks, Rob. So, I really like the whole play. I like the launch scale cloud founders like Adobe and Salesforce and ServiceNow very much. I like the vertical plays that we are developing also with Veeva that we did in the prior quarter are not Guidewire I like that. And I like it so often the market research or market research leader. They’re turning out be a super partner their really broad spectrum. We’re still early days here, but very broad spectrum partner contribution to our business and us to theirs, and great cooperation in the field. And virtually it seems to be like the customer world, easier to have more meaningful dialogues and create meaningful go to market deals, which we have done, and I like the geographic side of it, too. We got two new GSI’s systems integrators in Japan, and the quarter and Japan. I think it’s a very interesting early stage market for us and also, again, in the public sector. I like that one too. So there’s not like I didn’t like about it. I think it’s developing really well. I’m really pleased. I think it’s a very special part of our business and it’s doing well.
Rob Oliver:

Okay, great and that’s really helpful. Thanks, Leslie. And then Roxanne just a quick follow up for you on just two issues. One was I think you said $2.5 million headwind to subscription billings, can you just maybe touch on that a little bit? And then, you I think there was a $7 million plus exit cost on lease and leases. And I just wanted to know if there was anything you guys were considering relative to office space. I know. You guys have had we work in the past? Are you are you reconsidering your commitment to office space given the pandemic? Appreciate it, guys. Thank you very much.
Roxanne Oulman:

Perfect. Thanks for the question, Rob. So first of all, on the billings, as I shared in the prepared remarks, we did enter into a contract with rent bill billings. So these billings have lower invoicing in the first year and then the invoicing increases as the years go on. And these are multiyear, irrevocable contracts. So I just wanted to highlight for you that we are being flexible and we are working with customers and it did have an impact and if I wish to adjust our trailing 12 month billings growth rate, it would be 21% for these items in regards to your question for the $7.6 million of exiting facilities, so we have two facilities. The first is our San Mateo facility. You are right we were formerly in a WeWork space there. And we have been so successful working virtually. And we have obviously been working very closely with our employee base to understand how they intend to work in the future. And as a result, we see our San Mateo space would be more of a collaboration space. Therefore, we are looking to sublease that space now in Pleasanton. We did sublease a portion of our office space that we signed recently here over the last couple of weeks. So that’s the charge that you see in the income statement on a cash basis.
Rob Oliver:

Great. Thank you guys both very much. I appreciate it.
Roxanne Oulman:

Thank you, Rob.
Operator:

Your next question comes from Brad Zelnick with Credit Suisse. Your line is open.
Brad Zelnick:

Excellent. Thank you so much for taking the questions. First, maybe, I guess for Leslie, if we look to the strength in customer ads since last quarter, really, nice improvement. It just, digging into that a little bit wanting to understand I imagine some of this is the success that you are having down market. But beyond that, is it fair to say that you are trying to land smaller deals and enterprise as well? And if so, how should we think about the progression of expansions?
Leslie Stretch:

Great question, and first of all, I just want to say and repeat what I said in prior quarters. I still think these are small beer numbers. I think we have got much more exciting numbers ahead of us in terms of customer ads, because we have really just begun the mid market business. So it’s important for quantify that. Having said that, it is the quality of the ads that I really like in this quarter. Q1 was a tough period for us. April was a tough period. We are now in Q2, where we run the business virtually. It’s been an exciting quarter. There is no doubt about it. And so it’s the quality of the ads, I rattled off some of the names in the prepared remarks. But I think the main point to make is the agility of the platform, the land points that we can make, the partner land points that we can make are very different than Medallia several years ago, where it was very monolithic. We have multiple modules to land with. I gave some examples of the video module. We have got voice command. I gave you Medallia Speech example. And so that’s really exciting for – if you have got a hungry sales force plenty to sell, plenty of latitude and deal dimension and size that we are not religious about that and we are going after the mediocre kind of legacy survey players that are really serving out kind of poor response rates, poor net promoter score outcomes for their customers, poor analytics and no action. Those are great opportunities and our sales force are hungry. We have got sales people who will eat their quota by chunks or do big deals. We have got that capability. So I am really pleased about where we are getting to.
Brad Zelnick:

Thanks, Leslie. And I don’t know if this is better for you or Roxanne, but just as we think about the pipeline, I appreciate that you are guiding us only to Q3, I think the entire world lacks visibility with all the uncertainty that lies ahead, but anything that you can share with us real time as you think about visibility into the pipeline and even the cadence of business coming off of last quarter and into the current quarter and as you see it possibly playing out into the end of the year?
Leslie Stretch:

Well, I think I will let Roxanne comment in a minute, because you give us the balance here, but we gave some clues, gave some insight. We had a good start here to Q3. I mean, I talked about the significant 7-figure Speech deal that we just said that really validates that story beautifully for us. And I think I am looking forward to a good second half, but it’s – we are still in the pandemic. We are still living this way. And I think for the foreseeable future, the exciting thing about that is there is longer a work-from-home world it’s a work from anywhere world. That’s really important or not as important when it comes to look at this acquisition that we have announced today, Stella Connect. That is going to further enable work from anywhere for huge working populations that were hitherto trapped in the contact center. Roxanne?
Roxanne Oulman:

So, we have seen not only improvements in our pipeline. We were very clear on the Q1 call about what we had seen in the April timeframe. We have also seen and we have proven this previously, we have proven this in the pandemic that we are absolutely able to land and expand and we do that successful with our new customers in addition to adding new logos. However, it is unclear – we don’t know what is going to happen in the future from a broader economic perspective, but what we do see promising is that we have seen a continual progression of improvement in not only the pipeline, but the activities of deals that we are closing on a monthly basis. So, we had a very strong Q1 revenue growth rate. We had a strong Q2 revenue growth rate. We are optimistic about the future. However, we are still in the pandemic, which has had broad economic impact on the entire world.
Brad Zelnick:

Congrats on all the strong execution amidst the uncertainty and thanks for taking the questions.
Roxanne Oulman:

Thank you, Brad.
Leslie Stretch:

Thank you.
Operator:

Your next question is from Phil Winslow with Wells Fargo. Your line is open.
Phil Winslow:

Hey, thanks for taking my question. Congrats on a strong SaaS billings quarter, particularly despite those headwinds you mentioned in addition to the tough comp. One of the metrics that really stood out to me was the EX customer account growth, obviously, supercharged growth year-over-year. I guess question for you, Leslie and maybe, Roxanne, you can chime in, too, I mean how much is called the reopening trend playing into upselling EX through that CX customers or the sort of the full view of the experience across a few? And is that one I think that’s driving acceleration here and this is the sort of opportunity as we kind of go forward?
Leslie Stretch:

I think it’s a great question. I think – so I wouldn’t characterize it as reopening, I would characterize it as adjustment to work from anywhere. And when you think about that connection, deep connection with your employees and your team is really important and traditional HR spectrum, feedback platforms, 360 platforms were built for the old world, which is built for the in-the-moment connectivity that we have enjoyed in the customer experience world and I attribute that to the growth. I think there is still a long way to go. I think there is many more opportunities, but the ability to use voice to use video to connect them that way. And now to add in a coaching dimension to the current activity, it’s so important deep connective tissue at this time for employees, it’s vital. And we have also we are investing we are adding great skills as I mentioned in the prepared remarks.
Phil Winslow:

Got it. And then just also a follow-up I mean, you mentioned video voice, conversations. So these multiple channels that Medallia now offers as part of the platform. Yes, just with the pandemic and some of the change in customer behavior is something I have heard from service desk vendors you have more messaging, more chat, etcetera. How is sort of your voice platform resonating and positioning yourself competitively versus others out there?
Leslie Stretch:

Yes, so I think that every single customer and employee journey patient journey citizen journey has changed and changed in some cases for the better low emotion transactions would become high emotion, simple transactions would become sophisticated and complicated. And so waypoints on journeys with multiplied so feedback is more important than ever understanding how you are designing ideal customer journeys and how you are making it work. And also taking action on its feedback, feedback is pointless without action. And so there is really nobody doing the platform play and doing the understanding the customer intelligence play that we are working on their survey businesses, they can say one thing that they are doing enough of their survey as market research and some of them with markets that are, really challenged academia and so on. We are in a different place we are about understanding we are about, signal capture. We will go into survey situations, massively improve response rates, through additional signals or just through understanding customer journeys and in a better way, I think those things are all playing into the growth for the business and so on. pipeline and opportunity set.
Phil Winslow:

Okay great. Good work.
Leslie Stretch:

Thank you.
Operator:

Your next question comes from Scott Berg with Needham. Your line is open.
Scott Berg:

Hey, Leslie and Roxanne, congrats on a good quarter. I guess. Yes, let’s start on some of your mid market traction. You have talked about 400 plus customers a year, you are really after starting those initiatives? Are you seeing those customers purchase anything materially different than the large enterprise customers? Whether it’s a module or what that cadence looks like, at any color on maybe the attraction? That would be great.
Leslie Stretch:

Yes, that’s a great question and it is actually surprising the number of mid market customers that have gone from Medallia Experience Cloud, we normally think they go for simple survey or digital or one module. But why can’t small businesses have that same three dimensional radar scope of the customer or the employee and so we are making it as easy as we can for any size of business to get the full power of the platform. So it’s really exciting. But we are seeing great traction and the ideas to increase the traction and video, obviously. And we have had our first significant transaction when Medallia Speech, the voice technology combined with our text analytics solution that we already have. So it’s across the board and the field are agile and they can play if a customer who is ready for one capture technology or for text analytics or for the understanding platform, they can take another and so there is plenty in the bag for a virtual agile sales force.
Scott Berg:

Great, quite helpful. And then from a follow up perspective, you are obviously adding on more partners. You mentioned some of the geographic focus partners outside of the U.S. when you look at those partnerships in areas with maybe different languages or different requirements there is does that pose a challenge to the platform longer term? Or do you think language is really not an inhibitor to just the most international customer usage?
Leslie Stretch:

Well, again that’s pretty insightful, because we have just been looking, I actually just did last week gearing up the current environment is I can do customer tours around the world on the plane. And last week was a week before last, excuse me, will be Asia Pacific, where actually we are beginning to open up Japan. Now, Medallia is available in a massive language library, but there is always another language, there is always another opportunity. And so technically that doesn’t present any challenges. What’s interesting is the communication. And actually I have to say we have been using video technology with simultaneous translation and some of our called foreign language interactions that have been going on with customers and prospects. And that’s turned out to be much more successful actually than I expected. And more successful and more potent than a traveling roadshow in a region, which is counter to everyone’s intuition. So – and I think we do have a big language initiative for all of the modules to be available in every major language, dialect, usage, idiom around the world, it’s very important to us. There are new markets to open up, Portuguese and Brazil, of course, it would be a great business area for us and we have started to do some transactions in that country.
Scott Berg:

Great. That’s all guys. Congrats again.
Leslie Stretch:

Thanks so much.
Operator:

Your next question comes from Tom Roderick with Stifel. Your line is open.
Tom Roderick:

Hi, Leslie. Hi, Roxanne. Thank you for taking my questions. So, well, Leslie, if we go back 90 days ago, you were really emphasizing that the nature of your sales team sort of had to be adaptive and flexible to the time that we ran at – the time you are really emphasizing more midsize deals and land and focus on the expand later and yet here we are in early September, it sounds like you had a number of pretty substantial key 7-figure, 8-figure TCV-type of wins. Has your approach to managing and coaching the sales team changed at all from that desire to see them going after some of them, perhaps shorter sales cycle midsized opportunities? Is it more of a green light to go elephant hunting again, just tell me a little bit more about how you and your sales leaders are thinking about the construction of that pipeline and the go-to-market?
Leslie Stretch:

Yes. That’s a very well put question. I think that the – for us, we never said to the big game hunters, I will put it that way, stop doing that. We just kept adding agile virtual sellers. So, those guys were still motoring. They are still going for it. That never changed. But for sure, in Q1, especially and in April, people were in some state of shock in some industries. And so we are stopping the big deal traction across the board, not with us exclusively. So, we never cauterized that. And in fact, we have as many big deal – big game hunters or more than we had before, but we have expanded to your question, the mid-market capability. But we have also said look, there is no shame in eating your quota in bite-sized chunks. And also, there is a very, very lucrative market in the low-end, if I call it that, it’s been served by legacy survey companies by the say they do one thing, but they actually do another. They do survey, they do market research, they sell to academia, they have a lot of services, right. And those businesses, in my opinion, aren’t getting good value for money for those customers and we now have self-service agility, who can do that. So, we are letting our people sell that and go after it.
Tom Roderick:

Yes, that’s really helpful. Thank you, Leslie. I mean, Roxanne just with respect to the Stella acquisition totally understand that this will be a quarter of integration. So, the minimal – the context on minimal revenue and billings contribution this quarter is helpful. Can you provide any sense as to what they were looking at an annual run-rate? Obviously, $100 million is not an insignificant chunk of money to spend on something. So, it seems like they perhaps had a some sort of run-rate, but could you provide us with just maybe any historicals on the revenue side, number of employees, the idea of how much this will sort of add to the operating expenses on a annual or quarterly basis. If anything else you can think you can help us with there would be wonderful? Thank you.
Roxanne Oulman:

Okay, thank you, Tom. So overall, we bought Stella for the technology, there is about 15 employees today and we are very focused on what the technology is that we can bring to our customer base, especially when we combine this with speech and we think we can really virtualize the contact center. So yes, we paid $100 million. The multiple we paid was significantly less than our multiple. And keep in mind that the contact center space is a very attractive base at this point in time from an acquisition perspective. So, I don’t say that this is going to have a significant impact for this year. But what I am excited about is our opportunity to turn this into something much bigger than it is today, because we absolutely believe that this coupled with our Experience Cloud, coupled with our Speech, we will have a whole new entrant into the contact center that as the contact center is virtual and as we go through the new world that we are in that we can really continue to expand and as Leslie stated in his prepared remarks, we – this is something that we get specifically in response to discussions we have had with our customer base. Now from our operating income perspective sharing the view that it’s not that big my estimate is that the impact the drag that it will have on your operating income is about $1 million a quarter.
Tom Roderick:

That’s really, really helpful. Thank you, Roxanne. Thank you, Leslie. That’s great.
Leslie Stretch:

Thank you.
Operator:

Your next question comes from Brian Schwartz from Oppenheimer & Co. Your line is open.
Brian Schwartz:

Yes hi, thanks for taking my questions this afternoon and good job on the bookings in the quarter. Got a couple of questions on that. The first for you Leslie, I believe even when you started you were bringing you were going to bring into the sales force kind of in upselling motion and I think when COVID-19 hit you even pivoted, even in a more stronger way to relay on, looking to the install base, to off-sell them. So I am just wondering the speed at which these ad ideals are coming in if you are seeing a compression in them, or maybe even compression from your initial new customer sale and when they come back for add-on expansions, those, maybe before the start of this year and before?
Leslie Stretch:

I see I gave some examples at the start of the prepared remarks of really quite significant renewals which had expansion and so, I think people that use our products for use the solutions and understand the value that’s being generated, or looking for more from us, which is really exciting when they are well engaged and trench they are looking for more. So maybe that’s what I am seeing, but also, there is new business opportunity. There’s nice new business. There is people we have been using survey there’s survey is not customer experience, you can say it as often as you like, it is not a customer experience market research is not customer experience. That’s something different we are about intelligence. The intelligence play is becoming more and more significant. And so as taking us into these new lands and may be landed a good chunk of new logos. We’ve got the mid market really underway now a real, real business real contributing business with big opportunity and you so it’s neither one nor the other, we have to do both. But I like the land and expand motion that’s been created for it’s fair to say it’s been neutral Medallia, the sales team has taken it and run with it. And I’m happy with the progress that we are making so far.
Brian Schwartz:

Thank you. And then Leslie in the your highlight in your introductory commentary that you had a seven figure, speech win in August now just wondering if that was a new customer, or if that was an up-sell deal?
Leslie Stretch:

Well, it was an up-sell actually and what’s interesting about it, is that the traditional voice players they are in contact center are not giving the customer the facility to deeply analyze, transcribe voice to text and deeply analyze customer sentiment and those goals in that data. There is billions of minutes of data that can be analyzed by combining our clean exploration text analytics technology, with Voci, which is the technology we now call Medallia speech. And so I’m very excited about the prospects for that business.
Brian Schwartz:

And then my last question, I just want to ask you on the acquisition with Stella Connect, connect, so I think we are all aware, messaging has been one of the big beneficiaries with COVID-19 in the market. We have been hearing that from a lot of companies out there. And the interesting is, we are hearing about that development being reported by the customer service vendors in the contact center. So, clearly there’s a big opportunity there, but how do you think this plays out between, say, more of the marketing core focus buyers, versus those customer service buyers. And do you think from a competition standpoint that, in the future, you could run up against them more as you look to further penetrate the context? Thank you.
Leslie Stretch:

Thank you. That’s a great question. I think that actually we are doing something new. We are taking all of that data. And we are putting it into the feedback platform, and creating the opportunity for deep analysis on a very rich data set that was further to not mind at all. That’s what we are doing and so, but that space at the moment in terms of speech, in terms of recording in terms of transcription is quite fragmented, actually. And bringing it together with feedback it is creating something new and new innovation. And then when we add it in Stellar, we have the ability to create in the moment alternated coaching, on the fly to turn the contact center agent into a smart service professional, which is what they all really want to be. And I think that’s transformational and customers have been trying to do that themselves. I think that our industry needs to do it and that’s why we are combining these technologies.
Brian Schwartz:

Thank you very much.
Leslie Stretch:

Thank you.
Operator:

Thank you. Your next question comes from Bhavan Suri with William Blair. Your line is open.
Bhavan Suri:

Great. Thank you, guys. Thanks for taking my question and congrats on really nice job there, Leslie, Roxanne and team. I wanted to touch really quickly on one of the solutions we launched in Q1 is QuickStart. Obviously, quick implementations are like critical. Have you seen traction with that and then which markets and use cases are you seeing some of the early adoption with QuickStart? I would love to – and then I have a quick follow-up on some of the ROI related topics?
Roxanne Oulman:

So, we have seen – when you look at the overall QuickStart, we have offered QuickStart in various industries. We have offered QuickStart, some of them have been really focused about returning to the new economy. So, first is the Employee Experience QuickStart, we have a Fulfillment QuickStart, which is focused on pickup and delivery. We have under our employee experience QuickStart, we have a QuickStart that is focused on how you interact with furloughed employees or how do you handle employees when they are returning to the workplace after they have been furloughed? And those are just some of the examples of the QuickStart. We also have really expanded the new economy in telehealth. And so we really think that the ability to implement some of these items in 3 to 7 days maximum and the ability to expand your overall footprint over time if you so choose has really helped and we have seen an increase in the pipeline, not only from our QuickStart, but we have also seen an increase in our pipeline from the trials that we have put out there that you heard us talk about earlier, when we refer to them as COVID trials and then we have some other specific trials that we have started.
Bhavan Suri:

That’s really helpful. And then one quick one here, when we look at competition, if we take out sort of that the typical ones, I think the question I have is, you have seen a number of folks say, okay, well, we will purchase from the data angle. So, let’s build a data warehouse type offering and let’s pull together lot of data, survey data, social data, maybe even some sentiment data and then create dashboards and things like that. I guess, have you seen any of those guys impacted business or is that just so full of sort of like consulting approach customer approach and it’s not a product or too difficult to productize in the way you have, that you don’t see them, I would love to have some sense of what you are seeing that’s based on guys approaching from the data angle?
Leslie Stretch:

I think that’s a really important discussion. I think that’s where the market moves, especially in the new economy and the work from anywhere economy. The business as usual survey approach doesn’t cut it. We look at the world as capture understanding create action and reaction to the person that can take it. And in the capture space, which is actually pretty straightforward, if you are just doing a couple of capture technologies, you can’t deliver response rates that customers need, you can’t deliver the understanding. You absolutely have to do not just survey, but digital, social media listening at massive scale. You have to add in video, you have to do voice, you have to be able to do conversations, text, WhatsApp, WeChat with full spectrum and that is now taken for granted. And then the understanding platform that combines all of that data and looks at trends and customer cohorts can produce million and billion dollar decisions for companies, clearly not inventory decisions, but the market decisions and now real estate decisions based on that feedback and then the reaching of action based on feedback is non-trivial, I don’t believe any of the survey vendors can touch it. I just don’t believe they can do it. It’s non-trivial dealing with complex hierarchies in the workplace, dealing with massive scale is a non-trivial technical problem that Medallia has solved. So, that’s the way we look at this.
Bhavan Suri:

Got it. Great. Thanks for taking the questions, guys. Really appreciate you getting me in.
Leslie Stretch:

Thank you.
Operator:

Your next question comes from Drew Foster with Citi. Your line is open.
Drew Foster:

Hi, guys. Thanks for taking the question. I have a follow-up on M&A and so you have acquired 8 or 9 companies over the last year and a half and have done a nice job sort of integrating so far considering the volume and should we assume that you are sort of in integration mode and we will focus more on organic growth here for at least the next few quarters, Leslie and are there other signals that you are sort of keen on bringing into the platform. Do you think you have what you need to kind of execute on the market opportunity now or how do we think about what else you need to satisfy the appetizer?
Leslie Stretch:

Well, look, it’s a great question. We are always looking at – we are acquisitive and we are always looking at great technologies. But an interesting thing about this domain is it lends itself to this, because we can see our experience platform surrounded by other signals that some we would like to partner with, and go to market with some we would like to own and so we are always doing that analysis to be pointed and answer to your question. We are very interested in the whole realm of unsolicited feedback as very important to us and has relevance today more than ever across all industries. And there are some machine learning and other technology, integrated capture technologies that interest us, but we have been a technical document specialist for the most part and I think yes, I mean, it’s these aren’t these integrations are not heavy workloads is what I am trying to say. And that you should expect us to continue to look at some small traction as we go through the rest of this year.
Drew Foster:

Okay, that’s really helpful. Thanks. And just one follow up at the outset of when COVID came into the fray here, you said you had relatively small exposure to impact the industry is just given your comments on linearity, change between the pace of business at the end of April versus what you saw at the end of this quarter. Are you continuing to see conservatism from those impacted verticals and for sales and marketing resources where you have dedicated people that are focused have you have you had to shift people away from focusing on those verticals and focus on where opportunity lies here today?
Leslie Stretch:

Yes, I think that’s a great discussion. So if we start with bricks-and-mortar retail, that is a really important segment because the pivot is really going fiercely, the e commerce, and we have been to some degree are a bit of a beneficiary of that. So we have stayed connected. And I could give you some really steady examples, but we stayed connected. And that’s really worked well for us and travel and transport. We have small exposure, we have, less than a dozen airlines out of the 700 in the world, or so today using the platform. And I think there are opportunities and I think the consumer blinds actually leave way because corporate is where, the big players are and where there are still challenges in hospitality, we have actually seen feedback volumes coming back and as I mentioned that my prepared remarks. And so actually, for me, personally, I stayed in touch with a lot of that those segments and so some of our account management teams, and top sellers because we believe that they will come back in different forms and there is great opportunity there for but right now we are having our growth without much contribution from those segments, which is very significant, they just need to come back in a small way for us to benefit so we are staying in touch we are supporting and helping them and being flexible as they go through this journey.
Drew Foster:

Super helpful. Thanks a lot.
Leslie Stretch:

Thank you
Operator:

The next question comes from Brett Knoblauch with Berenberg. Your line is open.
Brett Knoblauch:

Hi, guys. Thanks for taking my question. I really appreciate it. In terms of the mid market expansion, obviously, it was a strong quarter with a mid market net adds. I guess what are you seeing in terms of sales cycles relative to the enterprise? We’re seeing shorter sales cycles there and there’s been any change in that process. And I was not sure if you said this or not, but maybe what percentage of new deals are coming from this kind of expanding partner ecosystem that you guys are building?
Leslie Stretch:

Well, we haven’t given up percent bookings or something like that for partner yet where we hope to get, specifically, 50% to 60% of our bookings influenced or touched by our of our ecosystem that we are building, we are a year into building it. And I feel very successfully under the speed and agility. You know, a lot of the smaller deals happen fairly quickly, needs are quite urgent we just did a, a messaging using our single technology, just a messaging deal a couple of weeks ago, and just literally a few days six figure deal, because of the urgency of the situation that was related to, interaction of people because of interaction with people in a business. So it was very important. We just did it actually for our part question or we actually just did a new customer in APAC, an airline that rolled out one of the QuickStart programs that Roxanne was talking about pretty quickly. So we have a manufacturer a Midwest manufacturer who moved very quickly for a contactless solution for employee interaction. We have got curbside pickup deals going very quickly, fulfillment deals going quickly, employer return to work, that doesn’t mean return to physical places, that means return to work through the work for anywhere world that we believed in. And so you can see it in the mid-market expansion, there are small quick deals, quick lines that we then want to expand later on.
Brett Knoblauch:

Alright. Thanks.
Operator:

The next question comes from Richard Baldry with ROTH Capital. Your line is open. And please limit yourself to one question in the interest of time.
Richard Baldry:

Thanks. Maybe focus on the sales and marketing side, just from a high level, how hard has it been to try to find new channels to redirect spending away from some of the effective things in the past that obviously you can’t do right now like shows, events conferences, etcetera? Are you finding good new avenues to deploy it into, that you think will be effective sort of as they pickup some experience in them? Thanks.
Leslie Stretch:

Yes, sorry about the limit, Rich for the question. Look, I think the question is what channels and mediums in marketing. This is really an interesting unprecedented phenomenon. But our ability to travel the world virtually is I am doing 2x to 3x as many customer and prospect interactions, which I love, I enjoy very much and I think it’s very important in some of the strategic deals for our C-level execs to be engaged with our customer’s C-level execs. The level of contact is higher. It’s C-level. It’s I believe in top-down selling get in at the top and then help the teams that want to actually get something done to the support of their executives and that’s turning out to be a lot better. We are seeing – we have more attendees at our virtual conference than ever. We are running master classes with our customers constantly that I am not sure if I see any other software company running as many master classes, where customers as we are, I think we are doing a great job with that. We are really exploiting digital medium. We are doing low cost advertising, even low cost television. We are doing some – about to do some new outbound deals as highly creative and we are putting the Medallia brand in front of as many CEOs as we can and there is a lot more to do.
Operator:

Your next question comes from Jacqueline Cheong with Bank of America. Your line is open.
Jacqueline Cheong:

Hi, thanks for taking my question. You added an impressive number of quarters of customers this quarter. Can you comment on the trends that you are seeing in June, July and even August? And are you seeing any change in tone from customers as well?
Leslie Stretch:

Yes, great question. I think people have adjusted. We have still got challenged sectors, obviously, hospitality and travel, but actually there is opportunity in those sectors, which is very significant. I just gave an example, a question or two ago about a new airline that we signed. So there is opportunity, but I gave some color on the prepared remarks on how I feel we have started in August and actually called out one of the 7-figure deals that we did. So, I feel good about the business, I feel bullish and you just got to temper that with the pandemic presents us with unknowns, so I don’t know what the future holds. I know that our solution set is resonating, but it facilitates work from anywhere. The deep connective tissue of feedback for employee and customer was vital. And you can see that in the very large renewal and up-sells that we have been able to do was just so much to go for that we are investing still in sales and marketing, we are growing nicely. And so that’s how I am looking at things.
Jacqueline Cheong:

Got it. That makes sense. Thank you.
Operator:

And your last question comes from Terry Tillman with Truist Securities. Your line is open.
Nick Negulic:

Hey, this is actually Nick on for Terry. Thanks for taking our question. I was wondering could you dig a bit deeper on the strategic value in some of the recent acquisitions. It seems like they are definitely driving some meaningful upside activity considering the Medallia Speech deal you called out earlier. So is it better to say these acquisitions are more so helping on the expansions there or are they bringing in meaningful new customers as well?
Leslie Stretch:

It’s both. They are bringing customers, customer, they buy video or may buy ideas and then discover at Medallia’s, they have a chance to replace oftentimes in a fairly tepid sort of survey technology with Medallia Experience Cloud, which is very exciting for them and they have the chance to go from one type of signal capture survey, add digital, add conversations, add social listening, add voice, add video, and that’s exciting for customer experience and employee experience, patient experience, students and experienced professionals. So, it’s really across the spectrum.
Nick Negulic:

Got it. Thanks, guys.
Operator:

So with that, I will turn the call back to the presenters for any closing remarks.
Leslie Stretch:

Well, thanks very much for joining us. Stay safe, look forward to talking to you in few months’ time.
Operator:

This concludes today’s conference call. You may now disconnect.

Medallia, Inc. Q2 2021 Earnings Call Transcript

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Medallia, Inc.
Q2 2021 Earnings Call Transcript