Related Party Transactions

3 Months Ended

Mar. 31, 2022

Related Party Transactions [Abstract]

Related Party Transactions

RELATED PARTY TRANSACTIONS

Since the SAP acquisition in 2019, SAP and its affiliates are related parties to the Company. The Company has entered into certain arrangements for services and products with SAP and its affiliates.

The consolidated statements of operations and comprehensive income statements include all revenue and costs directly attributable and/or allocable to the Company, including costs for facilities, functions, and services used by Qualtrics. The condensed consolidated statement of operations also includes expenses of SAP directly charged to Qualtrics for certain functions provided by SAP, including, but not limited to, sales organization costs, insurance, employee benefits, human resources and usage of data centers. The Company directly charges SAP for certain functions provided to SAP, including sales support. These charges were determined based on actual expenses incurred on Qualtrics’ or SAP’s behalf or by usage.

During the three months ended March 31, 2022 and 2021, the Company recognized revenue of $10.0 million and $5.2 million, respectively, from SAP and its affiliates in exchange for services and products. Total costs charged from SAP and its affiliates to the Company were $12.0 million and $11.9 million during the three months ended March 31, 2022 and 2021, respectively. Total costs charged from the Company to SAP and its affiliates were $4.8 million and $4.1 million during the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, the outstanding receivable and payable with SAP and its affiliates was $48.0 million and $11.3 million, respectively. As of December 31, 2021, the outstanding receivable and payable with SAP and its affiliates was $42.0 million and $13.3 million, respectively.

Because of the SAP Acquisition, we had been included in SAP America’s consolidated group for U.S. federal income tax purposes. In October 2021, we deconsolidated from the SAP Tax Group for U.S. federal tax purposes. We expect to remain a member of the SAP Tax Group for certain state filings. Pursuant to the tax sharing agreement with SAP, for taxable periods beginning after December 31, 2020, we will make certain tax sharing payments to SAP. As of March 31, 2022, the Company’s distribution liability for the tax sharing agreement with SAP totaled $87.0 million, consisting of $17.0 million based on our separate tax liability included on SAP Tax Group returns and $70.0 million based on an estimated fair value of the liability related to Pre-IPO Awards. As of December 31, 2021, the Company’s distribution liability for the tax sharing agreement with SAP totaled $88.5 million, consisting of $17.0 million based on our separate tax liability included on SAP Tax Group returns and $71.5 million based on an estimated fair value of the liability related to Pre-IPO Awards.

In January 2021, and in connection with the initial public offering, the Company declared a $2,392 million dividend in the form of two promissory notes payable from Qualtrics International Inc. to SAP AMERICA, INC. Promissory Note 1 was issued with a principal amount of $1,892 million and paid in full on February 1, 2021. Promissory Note 2 was issued with a principal amount of $500 million and interest rate of 1.35% compounded semi annually. The outstanding principal of $500 million and accrued interest related to Promissory Note 2 was paid in full on November 9, 2021.

Certain Board members of the Company and certain Supervisory Board and Executive Board members of SAP SE currently hold, or held within the last year, positions of significant responsibility with other entities. We have

relationships with certain of these entities in the ordinary course of business. During the three months ended March 31, 2022, and 2021, revenue and charges from these related parties were immaterial. In December 2020, Ryan Smith, our Founder and Executive Chair, acquired a majority interest in the Utah Jazz basketball franchise, the associated venue, and certain related sports teams and operations and business interests. In 2019, the Company entered into multi-year agreements with the Utah Jazz related to ticket purchases, advertising, sponsorships, and the Utah Jazz Five for the Fight Campaign, under which we were billed $1.2 million and $1.1 million during the three months ended March 31, 2022 and March 31, 2021, respectively.I