Qualtrics Outlines New Risk Factors After Clarabridge Acquisition

Qualtrics International (XM) is an American experience management solutions company. It helps businesses manage and improve the way they engage with customers, employees, products, and brands. The company serves more than 13,500 clients globally. (See Top Smart Score Stocks on TipRanks)

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Let’s take a look at Qualtrics’ latest financial performance, corporate updates, and newly added risk factors.

Q3 Financial Results

Qualtrics reported revenue of $271.6 million for Q3 2021. That increased from $192.8 million in the same quarter last year and surpassed the consensus estimate of $258.19 million. The company derives most of its revenue from subscription sales, which increased 49% year-over-year to $220.3 million in Q3.

Adjusted EPS of $0.01 beat the consensus estimate of a loss per share of $0.02. Qualtrics ended Q3 with $589.9 million in cash. (See Qualtrics International stock charts on TipRanks).

For Q4, the company anticipates revenue in the band of $296 million to $298 million, and an adjusted loss per share of between $0.04 and $0.02. For full-year 2021, the company anticipates revenue in the range of $1.056 billion to $1.058 billion with adjusted EPS in the band of $0.02 to $0.04. However, the company cautions that its performance outlook is subject to a number of risks.

Corporate Updates

Qualtrics has completed the acquisition of Clarabridge, whose artificial intelligence-powered platform enables companies to analyze customer feedback from a variety of sources. Clarabridge technology is used by companies such as General Motors (GM), Bank of America (BAC), United Airlines (UAL), and Expedia (EXPE). Qualtrics acquired Clarabridge for $1.125 billion in an all-stock transaction. With the addition of Clarabridge, Qualtrics says it will be able to let clients listen to, analyze, and act on employee and customer comments, wherever they’re saying it.

Qualtrics has teamed up with EY on an experience management competency program. They look to help clients across industries understand how employees and customers feel about their brands and how to build trust. Qualtrics and EY teams will also collaborate to develop new experience management solutions.

Risk Factors

Qualtrics carries 73 risk factors, according to the new TipRanks Risk Factors tool. Since September 2021, the company has updated its risk profile with three new risk factors.

Qualtrics tells investors that integrating the newly acquired Clarabridge into its system may be more difficult or expensive than anticipated. As a result, it may not achieve all of the expected benefits of the acquisition. It goes on to warn that failure to achieve the anticipated benefits of the Clarabridge acquisition may have an unfavorable effect on its business and financial condition.

Qualtrics says that Clarabridge may carry liabilities that were not discovered in the course of due diligence investigations. The company cautions that its business and operating results may be adversely affected if previously unknown Clarabridge liabilities are discovered.

As it turns to acquisitions to enhance its capabilities, Qualtrics tells investors that the way it accounts for acquisitions may have a material impact on its earnings and financial condition.

The majority of Qualtrics’ risk factors fall under the Finance and Corporate category, with 38% of the total risks. That is below the sector average of 49%. Qualtrics’ stock price is relatively flat year-to-date.

Analysts’ Take

Following Qualtrics’ Q3 report, Morgan Stanley analyst Keith Weiss reiterated a Hold rating on Qualtrics stock and raised the price target to $54 from $47. Weiss’ new price target suggests 18.32% upside potential.

Consensus among analysts is a Moderate Buy based on 10 Buys and 4 Holds. The average Qualtrics International price target of $53.25 implies 16.67% upside potential to current levels.