Qualtrics International Inc.
Q2 2021 Earnings Call Transcript

Published: 20 Jul 2021

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to the Qualtrics' Second Quarter Fiscal Year 2021 Earnings Conference Call. I would now like to hand the conference over to your host Mr. Steven Wu, Head of FP&A and Investor Relations. Please go ahead.

[Steven Wu:]

Thank you. Welcome to Qualtrics' Second Quarter Fiscal Year 2021 Earnings Conference Call. On the call we have Zig Serafin, CEO; Chris Beckstead, President and Rob Bachman, CFO. Following prepared remarks, we will open the line up to answer questions. Our results, press release, and a replay of today's call can be found on the Qualtrics Investor Relations website.

[Zig Serafin:]

Well, thank you, Steven. And thank you everyone here for joining us for today. Q2 was an outstanding quarter and it extends our momentum into this fiscal year. Revenue in the quarter rose to $249.3 million, which is up 38% year-over-year, and subscription revenue rose 204.5 million, which is up 48% year-over-year. And we ended the quarter with more than 754.8 million in current remaining performance obligations, which is up 61% year-over-year. And as you can see from our guidance, we're now on track to surpass $1 billion in revenue in 2021, which is an incredible milestone. Building on our strong growth in the first quarter, Q2 demonstrates accelerating demand for experience management, which is the category that we've created. The experiences that companies deliver has never been more critical to their success and increasingly, experience management is a seat on a board level conversation. When it's easier than ever for employees to change jobs or for people to go to switch products or brands. They know that the experiences that they deliver are absolutely vital to their ability to compete and win. That's why experience management is becoming as critical as CRM, or HR systems. And many of the world's largest and most respected companies are investing in XM. And they're transforming with Qualtrics. In fact, this quarter the number of customers spending more than $100,000 annually, with Qualtrics increased by 38% year-over-year. In Q2, we formed new relationships with industry leaders that include American Honda Motors, they include Urban, Urban Outfitters, Circle K Stores, DXC, Mitsubishi Heavy Industries and the Financial Times. One of our great relationships from the quarter is M&T Bank. It's a fortune 500 bank with deep community roots in the U.S. M&T will use our technology to simplify and enhance critical touchpoints like the branch, the contact center, and especially digital channels for personal and business services. Nine out of 10 deposits are completed digitally, and nearly half of total sales are now happening over digital channels and M&T Bank is designing and improving experiences at each digital touch point. They chose Qualtrics to more deeply understand their customers so that they can personalize everyday journeys with the bank and as well as offer products that are tailored to the individual needs at any moment in time.

[Rob Bachman:]

Thanks, Zig, and thank you everyone for joining us today. We are very excited to report another great quarter with outstanding and accelerating financial results. Continued customer demand for our Experience Management Suite led to notable top line growth at scale. We also demonstrated significant leverage in our business model with robust non-GAAP operating margin and record free cash flow in the second quarter. Subscription revenue in the second quarter was $204.5 million, up 48% year-over-year, driven by both strong new business sales and expansions favorable in quarter linearity and strong customer renewals. Professional services and other revenue was $44.8 million for the second quarter representing 5% growth year-over-year. Total revenue was $249.3 million in the second quarter, up 38% year-over-year. Our remaining performance obligations representing all future revenue under contract ended the quarter at $1.296 billion, up 76% year-over-year. This metric includes both new and renewal software contracts along with our professional services business. Current remaining performance obligations, which is all future revenue under contract that is expected to be recognized as revenue in the next 12 months, with $754.8 million, up to 61% year-over-year.

[Operator:]

Thank you, sir. We have your first question from Mark Murphy with JPMorgan.

[Mark Murphy:]

Thank you very much and congratulations on a fantastic quarter. Zig, I wanted to ask you what do you see your most advanced forward-thinking customer is doing with the Qualtrics platform that's maybe driving more of a complete experience transformation and might kind of light the pathway for some of the earlier stage customers? And I'm wondering if it's more of the operationalizing with xFlow or maybe getting into Design XM or Product XM side or perhaps something else that you're seeing?

[Zig Serafin:]

Yes, great question. So first off, if you look at some of the customers that are, I would say forward-thinking, they realize how important experiences to the very essence of the way that they connect with their customers, as well as their employees. It's the combination and then of course as they do that, then how they express what they do about it through not only how they operate, from the customer experience perspective, the channels that they use to engage, but also the way they end up innovating around product in the way that that shows up in their brand. And so, there's a trend that we continue to see where people are consolidating and standardizing on Qualtrics XM as a platform in order to drive the four core experiences of their business. And as they do, so they end up taking advantage of products, functionality, solutions, for many different departments across the company. And the beautiful thing about the way we've designed our system is that it allows them to be able to use the data that they've learned about customers to then operationalize, how they make decisions in product, how they make decisions in their brand, how to inform the way that they engage with their employees, how to make sure that they've got the right employees within the company, how to attract and recruit employees, it's all a connected system. And we're uniquely differentiated in the ability to do that, because we're not piecemealing different components, we've got a native system, we've got a native architecture the design to be able to bring that into connected decision-making and actioning system. Now that leads to the second part of your point, which is actioning. What's very unique about our platform is, we've designed workflow, right into the epicenter of our operating system. So you have the ability to make time sensitive decisions and actions that sometimes are fully automated, instead of a company. And they end up integrating with applications, tools that are already running inside of a company, this isn't about going and learning a whole new tool. This is about plugging in to what's already running with your help desk, what's already running with your HR, or front of line, workforce kiosk, for example. And then, you end up seeing the results of that on a daily, sometimes hourly, sometimes weekly level, depending upon where someone is inside of an organization. There's also semi automation, which is you're better enabling the employee to do something that would have taken a long time to go do. So that's what we're seeing people do is the combination of the four core experiences, shared data and a workflow engine that helps companies to develop a culture of action. And that was never possible before with individual systems of record that people might be using. And as a result, we're really uniquely positioned and why people are starting to standardize around our system.

[Mark Murphy:]

Thank you, that's very helpful. If I may sneak in a quick one for Rob or Chris. I’m looking at the strength of Q2, where you have acceleration of subscription revenue, and also the current RPO or backlog. And I don't know if you can ever discern, what's company specific versus category specific or macro driven? But would you say that the demand environment and budget environment is getting back to pre-COVID levels or even pushing beyond that, or is that yet to come in the back half?

[Chris Beckstead:]

Hey, Mark. Chris, here. I'll take that one. When you look at the quarter’s performance in terms of subscription growth, I think you're seeing a couple of things. One, really pleased with the broad based demand environment that we're seeing from our customers, both from an international perspective, we thought really strong performance from our U.S. corporate business and saw a continuation from -- the enterprise held up more during the deep parts of the pandemic. And it was great to see customers that are smaller, step up and invest more than we'd seen in previous quarters. So that was another positive trend that we saw. And then, finally, so experiences mattering more than ever. Zig highlighted the employee experience and the current environment we're in from an employee perspective, that's a product that we've seen accelerate, even though we've seen the good demand across all of our products, that's one that really stood out in the quarter, as it's becoming more important than ever in this competitive environment for companies to pay attention to attracting, retaining and motivating their employees. And then, finally, in that overall growth, you are seeing the impact from a more normal year this year. And last year seasonality wise was backwards cues, as we covered in the past, where the first half of the year was lower from a CRPO and a calculated billings perspective as we had some of the billings pushed to the second half of the year. So you're also seeing some impact in the first half results on those metrics on an enhanced basis. Because this year is more normal, last year was more backend loaded than we'd expect this year.

[Operator:]

We have your next question from Brent Bracelin with Piper Sandler.

[Brent Bracelin:]

I guess this is for Rob or Zig, the subscription growth outlook for the full year was raised. I think 42%, I think entering the year was actually looking at less than just a little bit under 30%. Could you just rank order as you think about what surprised you the most in the first two quarters of the year, that's driving the optimism. I think you mentioned international a little bit, but any color there from a rank perspective, would be super helpful, just given the acceleration you're seeing.

[Rob Bachman:]

Thanks, Brent, I'll jump in and take that. This is Rob. I wouldn't necessarily rank the -- we really did get strength across a handful of categories. There is strength in the new business and there are strength in the customer renewal base. And you see that in the net retention rate uptick to 122%, this quarter. And as Chris talked about, there's a strength internationally, there's strength in our EX and other CX products. So all up, what we're seeing is continued momentum and growth in the business. And coming back to what Zig said as experiences matter more so than ever, and customers are standardizing and consolidating on the Qualtrics platform.

[Brent Bracelin:]

Great. Well, certainly encouraging to see and then maybe as a follow up for Zig, obviously, we're all looking at a return back to work, you employee experience as one of the areas that kind of really stood out. What's the adoption rate of existing customers that have fully embraced experience -- the employee experience product? Is it broadly adopted? Is there a lot of cross sell opportunity, any sort of insights you could share around just the pipeline, the interests, the value add of employee experience would be super helpful? Thanks.

[Zig Serafin:]

Well, this is obviously one of several major areas of our business that continues to differentiate what we provide. We've got a purpose built system that is around understand how to authentically engage with employees. It's a system that's connected to the lifecycle of what happens in and around the way that you recruit new candidates into a company to the way that you end up driving further engagement. Instead of, some of the most important decisions that are made along the lifecycle of an employee, which is a multi-factor, decision-making, sort of spectrum of things that people have to deal with from how leaders are engaging to bear with what best in class looks like, and the data that used to be able to do that, and the decision-making that comes along with it. And then, of course, actioning around that. And we're seeing all around the world, people referring out the old playbook around, what the future of the work experience looks like. And that means that people are in the midst of redesigning the physical work experience, they're in the midst of being more intentional about what the digital experience needs to look like, IT leaders are getting involved in that. They're partnering up with HR leaders, you've got conversations happening right now more than ever, around the intersection between highly engaged employees and the impact that that actually has on the customer experience. So it's no longer less the case where people look at things in silos and you can see the relationship between that. So we're being brought in to help on the experience design side. But it's also, sort of an indispensable part of the way that people think about the employee system altogether, and entirely complimentary to the HRIS platform with which many companies, a large enterprise is still running variety of different types of HRIS systems, we can plug in with combination. And then, of course, in the mid-market, they may standardize on one, but they need the employee experience apart in order to make some of the most critical decisions. So those are the macro things that we're seeing in the employee experience area. And we're extremely well positioned there, given the innovation that we've had there, over the last four to five years, very intentional. We saw the future of where this was going to go as part of overall experience management. And the beautiful thing about it, this is building on the platform, the underlying XM platform that we've got at least a 10-year advantage on at this point. So Chris, do you want to add to that?

[Chris Beckstead:]

Yes. The only other thing I'd say is, as reflected in some of the metrics we share, for example, the net retention rate, the number of customers spending over $100,000. We see the trend of customers that more fully adopt the platform are largest vendors and we're seeing good momentum growth of customers buying more and more products, but it's still a lot of runway ahead in terms of the opportunity we have for customers who adopt additional products and additional use cases within the platform, giving us a great opportunity to continue to expand our existing customers and feel like we're still early days.

[Operator:]

We have your next question from Keith Weiss with Morgan Stanley.

[Keith Weiss:]

Outstanding quarter, really nice to see the acceleration across a lot of these metrics. I want to dive into the Usermind acquisition a little bit, it seems super interesting. Can you, one, tell us a little bit about kind of where does this fit into the portfolio. It seems like a CDP and I kind of think about your guys is having a CDP at a certain extent. So what was like the net new functionality you're getting? Number one. Number two, it looks like these guys are very marketing focused and about sort of those marketing journeys. So does this get you into more direct competition with the likes of like an Adobe Experience cloud or the marketing suite from Salesforce. And number three, can you give us any details on the size and scale? The company seems like it’s been around for a while from like, 2013. So anything about purchase price, or the revenue run rates or expected impacts on financials on a go forward basis would be great. Thanks so much.

[Zig Serafin:]

Okay. Great series of questions there. Let me discuss this out the big themes here. Number one, just I want to reiterate something that we've said from the very beginning about our approach to M&A. You're going to see us be very disciplined, thoughtful and opportunistic, on where we see moves, that will further our lead in the market. And when we do it, you're going to see it be something that is accretive to our addressable market, or growth that further accelerates and builds on the strengths that we have. So that's a really important principle here. And when you take a look at our experience management OS, the work that we have been leading on with experience management directory, enabling customers to better understand their own customers far more authentically, far more, in a way where they can understand perceptions, emotions, and where things are going. What Usermind does is, it just simply accelerates some of the work that we've been doing there around journeys, around orchestration, but in a way that natively connects with a lot of the way that we've designed our platform. They're very unique company. They've built a technology architecture that is extremely different from anything that we've seen in the market. And we found it to be highly complementary, they're based in Seattle, we have a significant R&D workforce in Seattle. So it plugs right in. And we found this to be almost like picking up another development and engineering team that's been working inside of Qualtrics, that beautifully connects in with the way that we've designed our system. So what you should expect is that our ability to further the leadership and the advantage that we have, with the momentum around the experience management directory, the way the customers use that, in order to be able to create, think of it as a master record or on experience, that nicely complements what people are doing with CDPs in order to address some of the most critical decisions that take place in companies, what's going to drive an increase in customer retention. How do you think about that in the context of different stages in which a customer might be in their journey with that particular entity? How do you enable actioning in a timely manner, the way that they architected the system allows us to be able to nicely dovetail that in with our workflow engine. So there are small innovative companies, approximately 30 employees, think of it as mostly R&D and engineering that effectively will allow us to plug right in and accelerate our leadership and our advantage in the space.

[Keith Weiss:]

Got it. And in terms of competitive environments, this gets you more competitive with the core marketing suites?

[Zig Serafin:]

I don't really think that we don't look at the market we've never built this company in a way where we're trying to shape ourselves into anyone way in how the market is defined. I mean, as you very well know, we started and we defined experience management category. And we haven't been trying to read-off of any books of what people define a certain market spaces. Everything we do is customer led. And what we're hearing from customers is what to build on the unique architecture of our system, and this is where they see it going. And it'll actually end up affecting some of the most important decisions that they make for their own customers as well as their employees. And that, flexible informed marketing decisions that will inform customer facing operating decisions, a lot more product decisions, and so forth. So that's how we look at it.

[Operator:]

We have your next question from Keith Bachman with Bank of Montreal.

[Keith Bachman:]

I was wanting to start my first question and ask a little bit about the net retention rate, was it a good uptrend this quarter. A year ago, you're doing 124s, 125s, one of the puts and takes that we should be thinking about the net retention rate over the next couple of quarters. And to ask you a little bit differently. If you thought about some of the quartiles, if you will, of the net retention rate that is to say some of your more aggressive adopters of your technology. What would the net retention rate look like for some of those customers?

[Rob Bachman:]

I'll take the first part and Keith, this is Rob. I'll take this. And then, if Chris wants to add on, I will turn it over to him. What you're seeing is along the lines of what we indicated in prior quarters where we saw this stabilizing, and with a potential uptick, we realized that uptick. We see continued stability in this rate above 120% in the short to medium term, it speaks to some of what Chris talked about previously in terms of the runway to upsell, cross sell within our existing customer base. So we're incredibly pleased with where it's at and growing that existing customer base will continue to be a key focus for us as we continue to build that business.

[Chris Beckstead:]

Yes, Keith. Just to add a little more color. As we talked about during kind of the IPO process, there's multiple avenues, we have to expand customers across additional use cases within an individual product, or when they go across and add additional products and adopt the full XM platform. When you think about that net retention rate, the biggest impact is those customers that fully adopt the platform. So you get some increase for sure when a customer more fully expands within CX, but it is much more significant for those customers that truly capture the vision and see the value of the multiple pillars of experience and adopt the full platform. So that trend that’s emerged again of customers adopting the full platform that we've seen in recent quarters is definitely helped drive that rate and helping it to recover and increase like we've seen it of those full adopters of the platform really moved the needle on that.

[Keith Bachman:]

Okay. As my follow up, let me ask about seasonality. And I want to put it in the context of you actually had some upside relative to cash flow this quarter. And while not part of your guidance, just wanted to know if there's anything you want to call out from a seasonality perspective related to cash flow and understand that some of the issues behind SAP stock I think are largely behind you. So that should be a tailwind. Just anything you want to call out including the billings growth trajectory that you look at here in the September and December quarters, the comps are getting a little bit harder. But anything you wanted to call out from a seasonality perspective related to cash flow and/or billings would be helpful. Thank you.

[Rob Bachman:]

Yes. Happy to comment on that. So again, Keith, as we look at the cash flow, and as I said in my prepared remarks, we do believe looking at the cash flow results over a longer term horizon is more representative of the results that we're having, as we went in Q1, we mentioned that there were a handful of accounts that could have collected either in Q1 or Q2, they did collect in Q2. So when you look at the first half cash flow, what you'll see on that if you exclude the SAP equity awards, you'll see a relationship to the non-GAAP operating income where the free cash flow is a bit higher on a percentage basis. And that's a relationship that we would expect to exist again over the medium to long-term. I'm happy to reiterate at this point that you highlighted which is in 2020 with that uniquely impacted year by COVID. Each quarter sequentially got better for us as a business on a billing basis. And so as we move into 2021, the first half had more favorable comparable periods and our back half of 2021 has more challenging comparable periods on the calculated billings.

[Keith Bachman:]

Okay. Many thanks and congratulations to a solid quarter.

[Operator:]

We have your next question from DJ Hynes with Canaccord.

[DJ Hynes:]

Zig, you talked about employee experience in your response to Brent's question, I want to ask a slightly different question. It seems to me like there are more and more HR vendors getting into the game with productized efforts around employee experience. Can you just talk about what you see in terms of selling against them? Is there any incumbency advantage there in a sense that, XM decisions for employees are made out of the HR department, they probably have a close relationship already with our HR vendor, or there's a Qualtrics pitch around the innovation unified platform system of action, does that resonate with those folks? Maybe just walk through kind of the pros and cons of that dynamic with employee XM.

[Zig Serafin:]

Sure. So first off the word, employee experience, tech, those three words are sort of used in order to describe technology built for employees, right, and that people are referring to that terminology. But if you double click on that, and you say, okay, now let's look at the people that are focused on employee experience management. That's a uniquely sort of focused area that complements other employee experience tech. So like, take, for example, Slack, that's an employee experience technology tool that enables collaboration, communication, information call, et cetera, et cetera. With experience management, as a system comes into the equation is understanding people's intentions, emotions, what drives engagement? What drives a deeper connection to a brand? How well do employees feel they are set up to be successful within the organization that they join, are they likely to stay? Are they likely to leave? How is the leader actually affecting the way that a particular team or a workforce feels about the brand, that they're part of? How is the technology that they're using actually affecting the way that that employee feels? Where are they likely to be more engaged versus less engaged. And I could keep going on and on. The point is that, this is a very unique domain. It starts with research sciences that requires the type of platform that we built for 10 plus years, this is not about, a few templates that you send out a few question to someone once in a while. This is about making it possible for people to make some of the most important time critical, human oriented decisions that actually affect top line and bottom line results for companies. And we've designed this system based upon our experience management OS, to not only tune in, and listen, remember to the information that's coming in, through a variety of ways of connecting with employees, colleagues, teammates, providers, in healthcare, for example, teachers, academic leaders, but then, be able to separate the noise and the actually amplify the signal and do something in a time sensitive way. And you create this virtuous cycle, right? It's highly complimentary to employee experience tech, which is why companies in the employee experience tech space are partnering with us. And they want to be able to leverage Qualtrics in conjunction with what they're trying to do to make their tool sets relevant. So that's the difference here and it's an important distinction. We've been at this for years now. And we continue to see not only a lot of momentum, but we're actually seeing acceleration, because of how relevant our system is right now around the design of the employee experience. And then the continuous everyday improvement decisions that can be made, that span a variety of time critical things that people are focused on right now. As a result, the partnership between the people leader, the HR leader, and the customer experience leader in a company, or the Head of IT, or the CEO, has never been more relevant. And it's what puts us at the center of some of the most important decisions that companies and organizations are making because what they're doing is they're making XM Platform decisions. They're not looking at it and saying, oh, I want some one off tool to sort of work in a silo. Those that have, or might go that direction, as it starts to get real for them, realize that they run out of steam really fast, and they come back to us and that's where we're uniquely positioned. And we've got to this point by just partnering with our customers taking a long run attitude around how we design our system. And so people make multiyear decisions on our platform as a result. That's the context. So hopefully that helps you understand the dynamics.

[DJ Hynes:]

That is super helpful. And then, Rob, maybe my follow up question, can you just peel back the onion a bit more on what's happening in the services business? Is it, the products getting more intuitive that program design services are less required just help me understand like what's driving the change in the model?

[Rob Bachman:]

Yes. So I want to reiterate this point that I mentioned in my prepared remarks, which is, you are seeing that shift that mix shift to a higher percentage of our revenue in subscription. And that is consistent with, how we've talked about this. And that is a trend that we expect to continue. Along those same lines, you will get some variation, quarter-to-quarter in the services business. We've also indicated that and you'll see that in our historical results, the demand continues to be strong across our services. So what we saw is some variability here. And we've updated the model and our guidance, in accordance with that very variability that we experienced in the current quarter.

[Operator:]

We have your next question from Terrell Tillman with Truist Securities.

[Terrell Tillman:]

Yes. Good afternoon, Zig, Chris and Rob and congrats as well for me on the strong results. But I don't know who this question is for, I'll just throw it out there. But I'm really intrigued with the concept of digital experience solutions. Whether it's kind of improving the web experience or the in app experiences, there's a lot of product analytics vendors, there's a lot of companies that say they do digital experience, how much traction do you have at this point? How meaningful to the business is your digital experience solution use cases? And what do you see typically? Are you replacing something or nothing?

[Zig Serafin:]

Yes, great question. So first off, if you think about the role of digital, people are in a mode now where you've kind of gone beyond this idea of, hey, we want to digitally transformed, and people are focused on experience. So like the end destination is, have you defined an experience that differentiates you in your own market uniquely. And how does the role of digital play in your ability to redefine who you are as a brand, or further accentuate your differentiation, shape the way that you end up engaging with your customers, your employees, it's really important to keep that in mind. So it's not just about, hey, I'm going to give you the guts of the system, give me some pipe to implement, and then like, oh, I'm all good. What really matters now is, have you designed an experience that uniquely differentiate your position in the market. We've got brands that during the pandemic, have created an entirely new business, for instance, and they have used Qualtrics, to design the experience, and then they put it into the market, and they're tuning in every single day and continuously improving. There's a lot of companies out there that obviously are tracking operational data around experience, how many clicks, what's the replay of the session on the internet, on the web, with your app? What's the conversion effort data look like based upon an ad that you put out there? How effective is your campaign, et cetera, et cetera, et cetera. But where we come into the equation is, we bring in the human factor dimension. Why is this cohort? Why is the segment doing something, what's the propensity to do something or not? Why? How does that actually reflect on where your top line business might go with a particular cohort of customers you're trying to go after? Or customers you don't have? How does that same thing play out with respect to employees? And what is the intersection of the two because it's not like just running in an isolated way, with digital, usually, there's a relationship between digital and what happens in an offline experience where an employee or a colleague, or a flight attendant gets involved, for example, and affecting and shaping the experience. So it's a multi-dimensional system. Where we're uniquely positioned is, we're getting connected in with a lot of the other, call it, digital fabric that people are putting in place. And we end up being involved as part of a number one, understand the customer, their journeys, where are they likely to go? Who are they depending upon the segment that they're in? And how do you get a holistic view, not just digital? What are they doing when they call the call center? What are they doing when they walk into the store? What are they doing when they end up interacting with an employee? And so, that's really important because a lot of the rest of the -- let’s call it technology ecosystem is point specific solutions focused operationally. We can then help to be able to kind connect and view that entire experience for a human being, a customer an employee. And then given the workflow engine that we have, it enables you to be able to ingest the data from those digital collar operational systems, and then act on the data once you actually get better signal and Qualtrics is connected to it. And as a result, depending regardless of what technology vendor or companies that on whether it's Google, whether it's Adobe, whether it's XYZ startups, Qualtrics is very relevant. And all of that ties back to the XM LS, and the way that we end up enabling many different departments to leverage the combination of experiential and operational data. Hopefully that helps you and gives you some further context.

[Terrell Tillman:]

It does. I appreciate that. And just a real quick follow up for Rob is just the theme of longer contract durations and getting longer term commitments from your customers? Is this something that's got some legs, because it clearly does help in particular that total RPO? So like, where are we in terms of, are we going to continue to see some benefits from this lengthening of the contract duration? Thank you.

[Rob Bachman:]

I think we still have a little bit of legs here, as you look at the performance that we've had recently, it continues to show strongly, with significantly more new contracts this year, signing onto multiyear deals, as opposed to the prior year, I think we can still drive that up a bit more in the short to medium term. So a bit more to go.

[Operator:]

We have your next question from Daniel Bartus with Bank of America.

[Daniel Bartus:]

Maybe for Zig or Chris, I actually wanted to just ask more directly on CDPs, which seem to be getting more and more attention. How do you think about CDPs? Are they potential competitors or partners, and is Qualtrics becoming more of a CDP over time?

[Zig Serafin:]

Now, I'm going to play back what I said earlier, which is really important. I think that when we follow the path of where customers want us to go, we end up uniquely leading with and defining this category and this technology foundation, in the way that we have. And we started it years ago, we defined what experience management is about, we defined the properties of what we think is an operating system, or enabling a system of action inside of a company. And our conversations with customers usually are not about, hey, where do I kind of plug you in? And more about, wow, how do I use this system to become more connected to the way that our customers want to do business with us, and then end up shaping the operating environment of our company. So as it turns out, what's happening is people are connecting our system to, I would say, pockets of CDPs that might be running inside their company. When I say that pockets is, because if you look at that space, we've got the MarTech area that's building out, a holistic understanding of a customer, given the data they have in their environment. If you go to CRM space, they're doing their own thing. And if you go -- you just go keep going down through the list, while you've got a myriad of different, I would say fragments of understanding of customers, we’re coming in, and we're saying, look, let's just focus on the experience. Look at the entirety of the journey. Look at what made someone make a decision to want to engage with your business more or less, how did they get shaped by what your employees did? How did they get shaped by the way your brand shows up? And then that data can be going into, think of it as a data lake, or maybe a CDP repository, it varies substantially. And that's why you're seeing lots of fragments in that CDP area. Where Qualtrics comes in, is we're saying like we can help to master the experiential information and then you can plug it in. And it can coexist and/or help to further your better understanding of your customer. Many customers are actually plugging in their operational data around the customer, with wherever it might be coming from CDP, or just a data lake in which they're pulling that information together, and then plugging it into boardrooms. That's where it all shows up as part of our experience management directory. And it's why you've seen the momentum and I think we've shared some public data around the momentum or on the experience management directory. And it far exceeds that of any particular individual CDP player. And we're continuing to see high growth in that area because of the approach that we're taking.

[Daniel Bartus:]

That's great. Thanks for all that. And then, maybe as a follow up for Chris or any of you. Can you just give us the latest on how much of the strength you're seeing is from tapping into the SAP base? And how much more can you tap into it? Could that be upside going forward? Thanks.

[Chris Beckstead:]

Yes. Chris, I'll take that. One of the things we're excited about is that we've seen continued momentum with the support from SAP, I think one of the areas that's highlighted is the continued momentum, we've experienced internationally. It was a really strong international quarter. From a billing perspective, it was the highest percentage of billings, internationally versus the U.S. that we've had signifying continued momentum there, as well as great growth in internationally in terms of those $100,000 plus customers coming from international. So that's where we're seeing at the most is continued acceleration internationally, from an SAP support perspective, given their global customer base. And I'd say we anticipate that continue. We're also making investments in our own, global workforce to be able to then take those customers that we have to land them, but then also expand them and help them to be wildly successful as time goes on. And then, the other exciting part is the ability, we have to partner beyond SAP, like we announced last quarter with ServiceNow, and other partners that we can now tap into and leverage that experience we've had with SAP to other partners as well.

[Operator:]

We have your next question from Pat Walravens with JMP Securities.

[Pat Walravens:]

And I'll add my congratulations. Hey, Zig several times today, you've talked about, the role of data from Qualtrics to help companies make some of their most important decisions. So if you have a good example, I would love to hear what one of the most important decisions is that Qualtrics had to make recently, and how you would have maybe leveraged the data you get to make that.

[Zig Serafin:]

I will give you an example. Obviously, just like many other companies, employee experience matters more than ever. So how you recruit new candidates, we hired 400 new employees just in Q2, and then how you retain people in your company, during a time where it's an extremely competitive market, not just in tech, but across many different industries. And there's not a executive across many different industries I've spoken with, there's not a board that I've interacted with where this is at the top of mind topic. But within Qualtrics, we're using our own platform to tune in and listen to employees around what they need in order to be able to be successful in many different regions of the world today. We've got over 4000 employees as a company and the realities that people are quite different, depending upon the region and territory you're operating in the pandemic, actually having impact at different levels for people. It's not a boiler plate approach that you have to take. So using our system to design the experience for our workforce, both digitally, as well as in the physical office work environment that addresses the things that are top of mind for people. They're both personal, team-based things that actually resonate with the brand. Social factors that actually are top of mind for people that affect that they weigh, the kind of weigh that they work and engage and all of these things are not a one and done thing. It's a dynamic system. The decisions that we made in August of last year, are different than the decisions that we're having to make right now and where we want to be end of August where we want to be end of October, thankfully with new factors that people are dealing with. And they're different depending upon the region of the world that you're operating in. So we use our employee experience system to design the workplace experience, to make decisions on what drives performance, what are the needs that our leaders need to be able to best accommodate them, sometimes they are budget-oriented, at sometimes you are leadership oriented? There's infrastructure decisions that we're making, it’s a dynamic system. And all of these things actually end up affecting the way we engage with our customers, which is deeply important to us in the way that go up with our customers and how we operate and so we will connect that data with what we are learning and tuning into on the customer experience side. Often there's a deep intersection between the two highly engaged employees usually lead to happy customers, which leads to high retention rates and expansion rates. So that's a little bit of a sneak peek into the way it plays out et cetera.

[Operator:]

We have your next question from Kirk Materne with Evercore ISI.

[Kirk Materne:]

And I'll add my congrats on the quarter. Zig or Chris, can you guys just give us an idea of, you have many more stakeholders, I think interested in experience right now with investor big customers. When you're going into these bigger engagements or renewals, are you seeing that meaning? Are there more people at the table from both the HR organization, the sales service organizations? And if they make a decision on Qualtrics from a platform perspective? Do they attack it all at once, I mean, do they try to do experience in states customer at the same time? Or is that stage now it's just kind of curious, you how that that sort of dynamic is playing out right now. Because in your NRR numbers, it would seem that you're obviously being able to go after more stakeholders across the organization. So I just want a few comment on that. Thanks.

[Chris Beckstead:]

Yes. Good question, Kirk. I think this will be our last question for today. So what we're seeing in terms of customers is, number one, while they're typically is a member of the executive team, who drives the decision, whether it's employee experience, oftentimes it's your Chief People Officer, if it's on the marketing side will be or your CMO or otherwise. Couple things we're saying number one, CEOs are involved more and more in the decision-making and care about what's happening. They're not fully delegating, they're caring about the experience, whether that's across your customer, your brand, or your employee, so their involvement is happening. And then the second one is that, while you may not see the deployments happening simultaneously, they're definitely talking to each other and thinking about the value and benefits of being on a single platform. And so, when they're making a decision in one area, whether it's on the employee experience side, they're paying attention to what they have deployed, and understanding the benefits that they can have, from one area to the other. And that consolidation trend and the benefit they're seeing of a single platform from a technology, IT being involved. They're wanting to consolidate and seeing the value of having a single platform overall. So I'd say sometimes you're seeing companies that are deploying across the board, sometimes they have multiple initiatives going on that they're talking to each other. And it's definitely helping us when they're thinking about, hey, I want to make a decision here but I also want to be able to leverage the cross benefits of a single platform as I'm making a decision for my or what's being used in other areas of the company and gives us a leg up.

[Operator:]

I'm showing no further questions at this time. I would now like to turn the conference back to Mr. Zig Serafin, CEO for any closing remarks.

[Zig Serafin:]

Well, thank you all for joining us today. We appreciate your time and we look forward to talking with you soon.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.