Medallia Inc (NYSE:MDLA) Q2 2020 Earnings Conference Call Transcript

Sep 05, 2019 • 01:30 pm ET

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Medallia Inc (NYSE:MDLA) Q2 2020 Earnings Conference Call Transcript

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Presentation
Executive
Roxanne Oulman

this in mind, you can expect us to continue to invest in productive sales capacity to support fiscal 2020 and beyond as we see continued market momentum.

R&D expense was $19 million for the quarter or 20% of revenue. R&D remains an important investment area as we expand our platform with new features and capabilities each quarter. G&A expenses were $10 million or 10% of revenue in the quarter, while we made investments to be IPO ready, we believe there will be incremental expenses associated with being a public company. However, we expect additional leverage on the G&A line over the longer-term. Non-GAAP operating margin in the quarter was negative 2%, a dramatic improvement from the negative 28% in the year ago. We're pleased that our more disciplined approach has driven a meaningful uptick in operating margins.

Similarly, non-GAAP operating loss in the second quarter was $2.4 million compared to a loss of $21 million in Q2 of fiscal 2019, an improvement of over $18 million. Non-GAAP net loss was $2.6 million. During the quarter, we generated $431,000 in other income and incurred $678,000 in non-GAAP income tax expenses. GAAP income tax expense of $263,000 included a one-time benefit of $416,000 related to an acquisitions. During the quarter, our weighted average basic share count was 44 million shares, because we had a net loss on a GAAP basis. Our diluted share count was the same as the basic share count for both GAAP and non-GAAP EPS calculations.

Now turning to the balance sheet. We ended the second quarter with $417.4 million in cash and cash equivalents, up $285 million from the end of our first quarter, driven primarily by the net proceeds from the IPO and private placements.

Now let's move to SaaS calculated billings, which we define as SaaS revenue plus change in sequential SaaS deferred revenue and contract assets. As you know, there are a wide variety of factors that influence this metric. Therefore quarter-to-quarter fluctuations in calculated billings should not be taken as an indication of changes in future revenue. For example, billings will fluctuate quarter-to-quarter due to the timing of renewals and annual contracted billings. As a result, we believe that the 12-month trailing SaaS billings growth rate is a more meaningful measure of our performance. For Q2 fiscal 2020, trailing 12 month SaaS billings growth rate was 33%. Our remaining performance obligations or RPO, totaled approximately $548 million. We expect to recognize approximately 52% of the RPO over the next 12 months.

RPO in Q2 benefited from a handful of large multi-year renewals that we closed in the quarter. Please note that the RPO metric may be impacted by contract duration and extensions as well as timing of renewals of large multi-year contracts. So while RPO provides strong visibility, it may fluctuate from quarter-to-quarter. We generated a loss of $20.9 million in cash flow from operations for the quarter. From a cash flow perspective, our operating cash flow fluctuates based on seasonal patterns, that we've