Bearish stock to watch: Medallia Inc (NYSE: MDLA)

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Medallia Inc (NYSE: MDLA) stock lost over 7% on 3rd June, 2020 (as of 10:03 am GMT-4 ; Source: Google finance) after the company posted better than expected results for the first quarter of FY 21. The company has ended the first quarter with 782 enterprise customers, which represents an increase of 38% year-over-year. The company has reported the Non-GAAP net income of $3.1 million for the first quarter of FY 21 compared to $1.5 million in Q1 of last year. The company has ended Q1 with $407.5 million in cash and equivalent, an increase of $63.8 million from the prior quarter, driven by cash generated from operations and the company drew $43 million from the line of credit in expectation of funding the acquisition of Voci that the company subsequently closed in Q2. The company has generated a positive $23.1 million cash flow from operations for the first quarter, representing an operating cash flow margin of 21%, which represents an expansion from the 19% the company generated in Q1 of the prior year.

MDLA in the first quarter of FY 21 has reported the adjusted earnings per share of 2 cents, beating the analysts’ estimates for the adjusted loss per share of 2 cents, according to Refinitiv Ibes Data. The company had reported the adjusted revenue growth of 21 percent to $112.7 million in the first quarter of FY 20, beating the analysts’ estimates for revenue of $109.2 million. In Q1, subs revenue grew 24% to $89 million year-over-year. Recurring revenue consisting of subs and managed services continues to be at 9% of total revenue. Professional services revenue rose 8% to $23.7 million per quarter. Recurring managed services revenue accounts for more than 50% of the total professional services revenue, which has been consistent. SaaS deferred revenue was $192.9 million, which represents an increase of 23% over SaaS deferred revenue in Q1 of the prior year.

Moreover, during the period, the company posted the Subs revenue gross margin of 83% compared to 82% in the year ago quarter. Q1 professional services gross margin expanded to 18% compared to 15% in Q1 of last year due to higher than expected utilization rate. The company has delivered the Non-GAAP operating income in the first quarter of $3.5 million compared to $2 million in Q1 of fiscal 2020. Similarly, non-GAAP operating margin in the quarter has expanded to 3.1% compared to 2.13% in the year ago quarter.

The company expects professional services gross margin to range between 10% to 15% for the remainder of the year.

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