Stock to watch: Medallia Inc (NYSE: MDLA)

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Medallia Inc (NYSE: MDLA) stock plunged 16.65% on September 9th, 2019 (Source: Google finance) after investors are concerned over Medallia’s deceleration. The company in the second quarter of FY 20 has reported the Non-GAAP loss from operations for the second quarter was $2.4 million, compared to a non-GAAP loss from operations of $21.0 million in the same period last year. Non-GAAP net loss was $2.6 million, or ($0.06) per share, basic and diluted, compared to non-GAAP net loss of $21.6 million, or ($0.83) per share, basic and diluted, in the same period last year. The shares of Medallia have dropped to new post-IPO lows after reporting Q2 results. Total revenue for the quarter was $95.7 million, an increase of 27% from the same period last year. Subscription revenue was $74.5 million, an increase of 24% from the same period last year.

Moreover, the company ended the quarter with 613 customers, an increase of 26% year-over-year. SaaS revenue was $74.5 million, an increase of $14.4 million or 24% year-over-year. Professional services revenue was $21.1 million for the quarter which grew 38% year-over-year. During the quarter, the services revenue benefited from the recent change in leadership in the services organization in fiscal Q1 where the company have seen solid improvement in utilization. Revenue in Q2 generated outside of North America contributed approximately 25% of total revenue. In Q2, professional services gross margins was 17%. Sales and marketing expenses were $38 million or 40% of revenue in Q2. R&D expense was $19 million for the quarter or 20% of revenue. G&A expenses were $10 million or 10% of revenue in the quarter. Non-GAAP operating margin in the quarter was negative 2%, a dramatic improvement from the negative 28% in the year ago. During the quarter, the company has generated $431,000 in other income and incurred $678,000 in non-GAAP income tax expenses. MDLA has ended the second quarter with $417.4 million in cash and cash equivalents, up $285 million from the end of the first quarter, driven primarily by the net proceeds from the IPO and private placement.

Additionally, MDLA for Q3, are projecting total revenue to be between $95 million and $97 million, representing a 17% to 20% growth over last year. For Q3, the company is projecting SaaS revenue to be between $76 million and $77 million, representing a 20% to 22% growth over last year. For Q3, the company expect non-GAAP operating loss to be in the range of $3.5 million to $4.5 million.

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