Feb 2019

SurveyMonkey Announces Fourth Quarter and Fiscal Year 2018 Financial Results

San Mateo, CA — SurveyMonkey Inc. (SurveyMonkey), a leading global survey software company, today announced that its parent company, SVMK Inc. (Nasdaq: SVMK, and collectively with SurveyMonkey referred to as “SVMK,” “we” or “us”), reported financial results for the fourth quarter and year ended December 31, 2018, and posted a shareholder letter with complete fourth quarter and fiscal year 2018 financial results and management commentary on its investor relations website at investor.surveymonkey.com.

Q4 2018 Key Results

  • Revenue was $67.9 million, an increase of 19% year-over-year.
  • Paying users totaled 646,727 compared to 606,077 in Q4 2017, for 7% year-over-year growth, and up 25,656 paying users over Q3 2018, for 4% quarter-over-quarter growth. Growth in paying users was primarily driven by sales of SurveyMonkey Enterprise and adoption of our self-serve Teams plans. Approximately 77% of our paying users were on annual plans, up from 76% a year ago.
  • Average revenue per user was $425 compared to $375 in Q4 2017 and $418 in Q3 2018, representing 13% year-over-year and 2% quarter-over-quarter growth, respectively.
  • Self-serve revenue was approximately 87% of total revenue with enterprise sales revenue comprising approximately 13% of total revenue. We ended the quarter with 3,566 enterprise sales customers up from 2,758 in Q4 2017 and 3,226 in Q3 2018, for 29% year-over-year and 11% quarter-over-quarter growth, respectively.
  • GAAP operating margin was (29%) and non-GAAP operating margin was 2%.
  • GAAP operating margin and GAAP net loss included a $3.5 million restructuring charge related to a previously vacated facility and $0.9 million in fees associated with the refinancing of our 2017 Credit Facility.
  • GAAP net loss was ($25.2) million and Adjusted EBITDA was $12.6 million. Net loss included a $0.9 million debt modification charge associated with the refinancing of our 2017 Credit Facility.
  • GAAP basic and diluted net loss per share was ($0.20). Non-GAAP basic and diluted net loss per share was ($0.03).
  • Net cash provided by operating activities was $11.4 million and unlevered free cash flow was $11.9 million for 17% and 18% margin, respectively.
  • Cash and cash equivalents totaled $153.8 million and total debt was $217.4 million for net debt of $63.6 million. In October 2018, we refinanced our 2017 Credit Facility, reduced the spread on the term loan by 75 basis points, extended the maturity date, and repaid $101.3 million of our existing debt.

FY 2018 Key Results

  • Revenue was $254.3 million, an increase of 16% year-over-year. Core revenue, which excludes $4.8 million in revenue related to the non-self-serve portion of SurveyMonkey Audience in Q1 2017 through Q3 2017, increased 19%.
  • GAAP operating margin was (50%) and non-GAAP operating margin was 6%.
  • GAAP operating margin and GAAP net loss included the recognition of $89.9 million in stock-based compensation expense and $1.2 million in employer related payroll taxes both in connection with the vesting of RSUs upon the effectiveness of our IPO, a $3.5 million restructuring charge related to a previously vacated facility, and $0.9 million in fees associated with the refinancing of our 2017 Credit Facility.
  • GAAP net loss was ($154.6) million and Adjusted EBITDA was $58.0 million. GAAP net loss also included a $0.9 million debt modification charge associated with the refinancing of our 2017 Credit Facility.
  • Net cash provided by operating activities was $45.4 million and unlevered free cash flow was $45.9 million, both for 18% margin.

“Our strong financial results cap off a transformative 2018 and highlight the traction that we are gaining in the marketplace,” said SurveyMonkey CEO Zander Lurie. “We are capitalizing on our strong brand, massive footprint and open integration architecture to move up market into larger enterprise relationships. Our strategy is working. Over the next few years we intend to execute on our plan to double our business by investing efficiently in new products, geographies, and enterprise sales. The survey software category is a multi-billion-dollar global market and being public has helped us share our vision with current and future customers.”

CFO Transition

SurveyMonkey also announced that its Chief Financial Officer, Tim Maly, is retiring during the second quarter of 2019 for personal reasons. He will continue to serve in his current role until March 31, 2019, and then plans to remain at the Company as a non-executive employee until June 30, 2019 to assist in the Company’s search for his successor, which is underway, and to advise and support the Company during this transitional period. Mr. Maly will participate on today’s earnings call.

“SurveyMonkey is an incredible company that helped create – and then revolutionized – the category of survey software. My ten-year journey with the company has been a true privilege and I am honored to have worked with such an amazing team,” said Mr. Maly. “SurveyMonkey’s world-class products, inspiring culture of talented employees and proven business model ensure many years of growth and leadership will continue. I am confident in the company’s long-term vision and look forward to seeing Zander and team achieve even greater success in the years to come.”

“Tim has been a high integrity leader whose business acumen, values and resilience helped us achieve critical milestones over the years, culminating in the IPO. Our operational and financial discipline is a testament, in part, to his many contributions,” said Zander Lurie. “On behalf of our entire management team and Board of Directors, we are grateful for Tim’s leadership and friendship over the last decade. We have a strong bench of talent in our finance and accounting organization and look forward to welcoming a new CFO in the coming months.”

Financial Outlook

Our growth investments are yielding strong results. In 2019, we will continue to invest in efforts that drive enterprise sales, fuel growth in our core self-serve channel, and expand our international business. We also expect to generate significant cash flow over the course of the year while investing to position the company for an even stronger 2020.

Our accelerated growth in the first half of 2018 was driven in part by the pricing changes we made to our SurveyMonkey self-serve plans in 2017, setting up a more difficult comparison from a year-over-year growth perspective in 2019. We expect our growth investments in enterprise sales and self-serve Teams to drive accelerating revenue growth in the second half of 2019. Our investments in international market expansion are expected to contribute to revenue growth towards the end of 2019.

We are adopting the new lease accounting guidance under ASC 8421, effective January 1, 2019. Under this guidance, lease payments associated with our San Mateo headquarters will be treated as operating expense in the income statement beginning in 2019. Prior to 2019, these lease payments were primarily treated as interest expense. We anticipate a headwind to non-GAAP operating income of approximately $6 million on a full-year basis, or approximately $1.5 million each quarter, as these lease payments move from interest expense to operating expense. There is no impact to free cash flow from this change.