Comparing the Gross and Operating Margins of UserTesting (USER)

Does small-cap Software company UserTesting have a sustainably profitable business model? By studying its gross margins and comparing them to its operating margins, we can gain insight into quality of its business. With gross margins at 74.8%, you might be telling yourself the UserTesting is profitable — but there is more to the story.

Date Reported Revenue ($) Cost of Revenue ($) Gross Margins (%) YoY Growth (%)
2021-12-31 147,398,000.0 37,160,000.0 74.79 5.23
2020-12-31 102,195,000.0 29,567,000.0 71.07 1.64
2019-12-31 76,633,000.0 23,051,000.0 69.92 n/a

UserTesting's cost of revenue is growing at an average 61.2% per year, while its total revenues are lagging with a 38.8% growth rate.

Date Reported Total Revenue ($) Operating Expenses ($) Operating Margins (%) YoY Growth (%)
2021-12-31 147,398,000.0 198,574,000.0 -34.72 -4.45
2020-12-31 102,195,000.0 136,161,000.0 -33.24 -29.34
2019-12-31 76,633,000.0 96,329,000.0 -25.7 n/a

The table above tells us that, on average, UserTesting has not been profitable over the last four years, which should be a warning sign to prospective investors. Indeed, the company's operating margins are sinking at rate of -16.9%

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.