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%
