Q2 2020 SVMK Inc Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to survey monkeys second quarter 2020 earnings call. At this time, all participants are any listen only mode.
After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone please be advised that today's conference maybe recorded.
If you require any further assistance. Please press star Zero I would now like to end the conference over to your hosts Vice President of Investor Relations Gary Fuges. Sir. Please go ahead.
Thank you good afternoon, welcome to serving monkeys second quarter 2020 earnings call joining me on todays call or Gander, Laurie CEO, Tom Hail, President and Debbie Clifford CFO.
After our prepared remarks, we'll take your questions.
After this call we issued a press release and shareholder letter with our Q2 2020 financial results and related commentary.
Those items were posted on our Investor Relations website at Investor got Severally Monkey Dotcom. During the course of this call management will make forward looking statements, which are subject to various risks and uncertainties, including statements relating to our strategy investments revenue operating margin and cash flow.
Actual results may differ materially from the results predictive and reported results should not be considered an indication future performance a discussion of the risks and uncertainties related to our business is contained in our filings with Securities and Exchange Commission in particular in his section entitled risk factors, and our quarterly and annual reports and we refer you to these filings.
Our discussion today will include non-GAAP financial measures unless otherwise stated these non-GAAP measures should be considered in addition to and not a substitute for or an isolation from our GAAP results. A reconciliation of GAAP to non-GAAP results may be found in our earnings release and shareholder letter, which are furnished with our 8-K filed today with the FCC and they also be found on our IR.
With that I'll now turn the call over standard standard.
Thanks, Gary and thank you for joining us today against the backdrop of a global health crisis and heightened macroeconomic uncertainty we delivered strong Q2 financial performance exceeding our revenue and profitability guidance and generating $19 million in free cash flow.
With corporate America, working from home protests and our cities and racial of Justice initiatives on every C suite agenda. Our team continues to rise to the occasion.
This quarter's results further validate that our business is resilient and our software is critical as organizations accelerate their digital transformation.
Based on our first half performance I'm highly confident we can execute on our long term strategy, while managing through the macro headwinds affecting all companies today.
Digital transformation was a clear tailwind in the quarter.
More organizations are turning to survey monkey together feedback and take action in a time when data on your employees wellbeing and your customers' needs are particularly valuable.
We added 35000 net paid users in Q2 and acceleration from prior quarters.
We were successful in converting more of our user base into paying customers, 86% of whom are now on annual contracts.
With our massive user base. We believe there is still considerable runway for further monetization game as we continue to launch new features an experiment with package segmentation.
In the enterprise sales channel, we added more than 380, net new logos sequentially and the increased our enterprise customer count more than 50% year over year.
We continue to improve our sales productivity through better enablement stronger products and improved processes and tools.
Annualized revenue per enterprise customer increased more than 25% year over year.
We have more rigor measuring qualifying and prioritizing opportunities.
Standardized sales Onboarding and enablement are helping reps closed their first deals faster.
We also pivoted our demand gen product packaging and selling motion to target industries, where there is acute need for our products.
This combination of process and flexibility enabled us to win deals and deepen relationships with organizations like Big Brothers Big Sisters of America get hub, Korn ferry stitch fix threat up and zoom into.
As I've said, many times since our IPO, our enterprise products and marketing and sales motion get a little bit stronger every single quarter I see no change in this trajectory looking forward.
Our software also continues to help fight covert 19, we believe we can help every usdeight and municipality fight the pandemic as well as help large companies navigate the complexity of returning to safe office spaces.
Sending daily serving monkey surveys via SMS and integrating with large systems of record like Salesforce was a winning strategy for the state of Rhode Island and will be from many other entities.
We are actively engage with salesforce executives systems integrators and solutions engineers with the intent of expanding the use of serving monkey alongside work Dot com.
You will likely here more from Salesforce answering monkey about the Rhode Island testimonial because governor Rimando has been so successful at flattening the disease curve by successfully implementing our software solution.
Additionally, we gain further ground with our customer experience and market research software products, which we believe will be light houses for new customers as well as drive meaningful cross selling opportunities for our thousands of surgery monkey software customers.
Our integrated CX offering the get feedback suite is on track to launch this year to serve the salesforce ecosystem with an agile price disruptive solution.
We've built on our challenger position in Q2, and we have a great opportunity to grow CX by addressing mid market companies, who prioritize value.
Speed and integration with Salesforce.
Market research had a phenomenal Q2 that included multiple six figure deals we are winning based on the power of our new solutions, the liquidity of our panels and the disruptive pricing and value we offer.
This industry has a massive tam and expensive services based incumbents are prime for disruption.
I'd like our chances in a world where digital transformation is a theme as important as stretching your marketing budget, we can and will help agile customers when in that environment.
So those are the Q2 tailwinds weather headwinds in Q2, absolutely.
We continue to see two to three percentage points of higher churn in seltzer and longer enterprise sales cycles in certain industries consistent with what we discussed on the May call.
We also lost some enterprise customers, primarily from industries acutely impacted by the economic crisis. Nevertheless, we delivered solid enterprise execution through salesforce productivity gains targeted prospecting and product packaging.
As expected the business looks different today than it did pre cobot the top of funnel is broader and busier, but the bucket is leak year in targeted industries.
We believe our enterprise business would be stronger in a more normalized quarter and will be stronger in a more robust macro environment.
The pandemic will create economic wreckage for many but we believe we are positioned to thrive in this period of accelerated digital transformation.
Today's headwinds are transitory for us, but our tailwinds are durable.
The last two quarters, our unlike anything we've seen in serving monkeys history, and we believe our first half results demonstrate that our business model is resilient our products are more relevant than ever and our strategy of sound. Our team continues to execute on behalf of all of our stakeholders camp. Thank them enough for their dedication to our mission to power the curious.
Yeah.
With that I'll turn the call over to Tom.
Thanks Center the team took a huge leap into the cloud in Q2, while continuing to innovate for our customers on July 3rd we completed the migration of our us on premise datacenter and cloud now 100% of our production traffic is hosted on nine cloud based data centers being in the cloud is.
Already driving improved site speed uptime, resiliency and greater developer productivity.
Google is taken notice after the migration, we saw 10 x., increasing the number of pages rank perfect for site speed, which is great for users and so you.
Our us migration was an 18 month journey and the team executed flawlessly.
In surveys, we continued evolving our packages to better align our pricing with the value we deliver in self serve we implemented new response limits in our free basic product. This was a carefully planned and tested initiative and a key driver of Q2 paid user growth.
We will continue to test and learn here as we see a big opportunity to monetize the 97% of our users who don't pay us today.
In enterprise our sales team launched our response based pricing model for New Enterprise survey customers starting on April Onest.
We have been piloting the new model since late last year. So Q2 was our first full quarter.
This new pricing model with scales based on usage allows us to better match monetization to the value we deliver.
While it's early days were very excited by the results. We've increased the average deal size for New survey deals, while seeing similar when rates days to close and deal volumes as in the old clearly seek based model.
This will be a multi quarter journey and we expect response based pricing to pay dividends for years to come.
[noise] in customer experience, we remain on track for the 2020 release of our end to end CX operating to get feedback suite, which combines our get feedback and usability products, we have a great opportunity to grow in CX by selling into our customer base and addressing them in market.
Rationale for this business is simple.
CX is a major use case for our surveys product and our goal is to up sell the always on multichannel get feedback suite.
Even without our new product in the market, our CX solutions are winning customers like court and some space.
And market research our strategy is gaining momentum.
Customers Love, our new expert solutions for creative and concept testing its AI generated insights quick turnarounds automatic analysis and cost savings relative to services are pulling us into opportunities at the world's best consumer brands, we're seeing many new proof of concept engagements. While our early adopters are already started to purchase additional.
Yes credits.
Vanguard charitable and Dole food are great examples of customer wins in the quarter and we expect to see a steady flow up new projects from them as we roll forward. We're just getting started adding software solutions to our market research business and we look forward to updating you next quarter.
And finally, we are continuing to amplify our reach within our ecosystem of partners on loyal users. We added four salesforce integration partners in Q2, doubling our number from Q1 and continued to deepen our integrations with Microsoft we saw installations of the survey monkey App for Microsoft teams more than doubled sequentially in Q.
Too and the App has been a driver of new survey monkey users from the Microsoft ecosystem.
This month, we're launching the survey monkey technology ecosystem program or step to unlock mutual value for survey monkey and our key integration partners, including companies like Hubspot Zendesk and Freshworks.
This program is good for our business when our customers deploy integrations, we see higher retention.
And it may many of our partners and customers participated in our online curiosity conference, where our live attendees doubled over our 2019 event.
Virtual conferences are a key part of our strategy to build a following among enterprise buyers and our next conference will be the CX impact conference in mid October I.
I'm proud of our team we continue to rise vacation in a challenging environment to deliver for our customers and our strategy I'll now turn the call over to Debbie.
Thanks, Tom once again, our Q2 results exceeded our expectation about revenue non-GAAP operating margin.
And then during times of Scott, we saw strong demand for our feedback solutions in the quarter, which we believe validates our strategy and demonstrates the resilience of our business.
Consistent with the financial strategy, we outlined last quarter, we are focused on optimizing for free cash flow in the near term while at the same time investing in our strategic initiative.
Position us for long term growth.
Turning to our Q2 financial results.
Unless otherwise noted all comparisons are year over year.
As a reminder April 1st marks the one year anniversary of our acquisition of use abella.
In addition to use abella, our Q2 plenty plenty result include the impact of the get feedback acquisition, which closed in the third quarter of 2019.
Revenue in Q2 was 90.9 million an increase of 21%.
Revenue from ourselves our channel grew 9%. Thank you to driven by a combination of demand arising from covered related you paper as well as ongoing refinement of our pay while that is driven in increasing customers upgrading into paid plan.
As Tom mentioned earlier in Q2, we reduced the number of responses within our fleet plan, which drove more conversion into paid plan.
And our enterprise sales channel revenue grew 70% and accounted for 28% of total revenue compared to 20% in a year ago period and 29% in Q1.
Excluding the 2 million nonrecurring market research revenue in Q1, which we discussed on the last call enterprise sales revenue accounted for 27% of revenue in that period versus 28% in Q2, reflecting a sequential increase.
The growth in enterprise sales revenue was due to strength in our survey 90 enterprise.
Ian and customer experience offering as well the benefit we are realizing from our sales productivity initiatives.
Deferred revenue increased 28% to 160 million.
Remaining performance obligation or IPO, which is the sum of deferred revenue in backlog were 178 million, reflecting 27% growth.
As mentioned previously in addition to overall bookings growth and added contributor to growth in both deferred revenue and RPM has been our strategy to migrate our user base from monthly or annual plan.
With annual plans now accounting for 86% of paid users, we anticipate that deferred revenue and RPL growth will continue to normalize toward our revenue growth rate.
Non-GAAP gross margin with 80% versus 78% in a year ago period, due primarily to revenue growth.
Non-GAAP operating margin of 2.5% up from 2.1% in Q2 2019, a negative 1.6% in Q1 2020 due to revenue performance and discipline spend management.
Total non-GAAP operating expenses declined sequentially on a dollar basis.
Nearly to the actions we described on our previous Oh, that's just the reduction in our hiring pace and lower variable costs, resulting from the remote work environment.
Counter to that we held non-GAAP sales and marketing expenses, approximately steady quarter over quarter isn't that to maintain our investment level to maximize demand creation dense omar challenging economic backdrop.
In particular paid digital marketing continues to be an efficient demands and channel for us is less competitive pressure coupled with ongoing optimization work across digital channel.
We generated 21.9 million and operating cash flow and approximately 19.1 million in free cash flow, which reflects the revenue beat the impact of the proactive expense measures, we outlined on our Q1 call, including lower facilities Buildout costs and continued optimization of working capital.
We ended the quarter with 177 million in cash cash equivalents, an increase of 32 million quarter over quarter, bringing us closer to a net neutral debt position.
Our total potential liquidity stands at approximately 247 million, which includes capacity of 70 million on our revolving credit facility.
We are pleased with the resilience we're seeing.
While there remains a great deal of macro uncertainty regarding how the covert 19 pandemic will impact the economy, our market and our customer.
Our recurring revenue model isn't assets.
Which provides us with near term visibility.
We are gathering more data points every day.
While we have a better understanding of what the impact from so that maybe in the near term we're continuously evaluating various scenarios the financial performance in the mid to long term to help us understand a variety of potential outcome, depending on the depth and duration of the economic downturn.
With so many unknowns, we will limit our guidance to one quarter out at this time.
For Q3, we expect revenue to be in the range of 90 396 million or 19% year over year growth at the midpoint.
We expect non-GAAP operating margin to be in the range of 1% to 3%.
We intend to continue to invest in strategic opportunities to drive growth industry leadership and competitive differentiation, while balancing for free cash flow immediate term now I'll turn the call back over to vendor.
Thanks, Debbie depend dynamic and economic downturn alone presents significant challenges, but recent social justice issues have made an already difficult situation even more acute.
June serving Monkey CNBC race Relations survey identified race the single biggest source of division in the United States at 35%.
Beating out intense partisanship in 26% ideology at 16% and class a 10%.
For Black Americans race is by far the dominant divide 67% said races. The biggest problem facing America today. The perception that racism is a major problem is up significantly among black and White Americans and to May 2018, NBC news serving monkey Paul.
It's certainly monkey, we've never allowed our products and services to be used to promote hate intolerant and bigotry.
Now we are redoubling, our efforts to promote diversity equity and inclusion we're taking action on prescriptive plans laid out by our racial Justin's task Force a group of server Monkey leaders with a mission to further original justice at serving Lucky and in our community.
Internally, we're hosting programs to support the wellbeing of our black and Brown employees, we're expanding our and amplifying our d. I policies regarding recruiting including having candidate Sourcers focus on identifying candidates from underrepresented background.
And we are initiating training to educate our team on systemic racism in how we can be decidedly anti races.
Currently we are doing two organizations working to support black lives and adding organizations that are fighting for social justice to the survey monkey contribute program.
And we recently launched the landing page featuring free racial equity resources, including certainly tablets research from our team and a statement rerouting our commitment to his costs.
We are taking action on Monday, we announced our initiative with 15 other major technology companies to use our new D. I survey template to track the representation of women racial minority and LGBTQ indeed individuals within our vendors employees leadership teams and boards of directors our goal.
As to partner with our vendors suppliers and consultants to provide opportunities to people who are underrepresented in marginalized.
Together, we can make our organization stronger and create lasting change within our broader community.
And we're proud to be working with companies like box event bright intuit patron duty Upwork chime in zoom. This is an important first step and we are in the process of connecting with our 20 largest vendors to inform them that investing in the will be a requirement for doing business with serving monkey.
Improving the I will take sustained effort, but we are committed to measurable time sensitive goals to make servier monkey more diverse more equitable and more inclusive.
We encourage the financial community to join US in this all important fight.
Thank you we now look forward to your questions.
As a reminder to ask a question you will need to press star one on your telephone.
To withdraw your question press the pound King.
Please standby, while we compile the QNX roster.
Our first question come from a line of Chad Bennett of Craig Hallum.
Your line is okay.
Great. Thanks for taking my question and nice job again in a in a challenging environment to say the lease on the quarter.
So I guess a few few things on the enterprise side of the business I'm trying to.
Correlate here so you spoke about.
Enterprise Pena, HCV, I guess I'd call it.
Growing 25% year over year.
Per customer.
Hey, I guess, if I look at that.
I don't know if that includes enterprise churn, but if I I just look at kind of how.
Revenue per customer showed up based on my model.
I think it was up like 12% year over year. So is there.
I know, there's probably something I'm missing in that equation, but just kind of help me attached those two data points.
Hey, Chad.
I think we'll have to work with you individually on the model. We just spent the last few weeks, but the auditors me audit committee, so I'm quite sure the 27% year over year growth in our average revenue per enterprise customer is accurate and that reflects the total net new logos as well as revenue that was generated in the quarter.
Okay, and then just maybe on the on how you spoke zander about.
The enterprise.
Little bit longer sales cycles, there and then I don't know how you phrased it a handful of customers that that dropped out of the base can you just give us a sense.
What you're seeing on the sales cycle side and also you know.
Relative size of the customers that dropped off and maybe vertical exposure there.
Absolutely, yes, so I can't say enough about my enthusiasm for the growth in our enterprise business. We we charted out a plan this year, which included a lot of focus on sales productivity after doubling the salesforce last year and we've been successful on that albeit with a little different path to growth.
In Q2 than we had planned so we really focused our efforts on the strongest verticals you can imagine healthcare technology fin serve government CPG.
Shying away from industries that have been particularly impacted by cobot 19, which for US is about 5% of our enterprise domain base. So we thought frankly de minimis churn, but it was time Buck in those verticals that were acutely impacted and really redoubled, our efforts around demand Jan and selling motions into that.
Because it had strength. So we saw really excellent demand Jan in the quarter and then a lot of success in converting that into bookings so really nice job by the team and it's a testament to the fact that our products are incredibly relevant and needed in a time when people need to connect with their stakeholders in every geography in every industry in every kind.
Of entity large businesses small businesses government education healthcare, serving monkey has been there to really support during the secure period.
And I'd just add on that our net revenue retention rate remains over 100% and has been consistently over the last several quarters and we added more than 380, net new enterprise customers during the quarter, which reflect strong growth.
Right. Okay. Thanks for thanks for the answers.
Thanks, Jeff.
Thank you. Our next question comes from Eric Sheridan of you vs. Your question. Please.
Thanks for taking the question propose well with some everyone on the team maybe two questions about self serve just wanted to understand you called out some of the changes you made in the product is being the driver of paid user growth how should we be thinking about those changes maybe additional changes you part of making self serve as having a broader impact as you move through the back part of the year.
Sure.
The number one and then number two was everything you're doing to take advantage of some of the marketing dynamics that are playing out the world sort of programmatic pricing or cpms are quite low that might be able to amplify some of your all wise to push people in front of copper your funnel, especially with respect to the self serve product on the consumer side. Thanks, so much.
Sure I'll start and then maybe Tom can add some more color I've been associated with certain monkey now over 10 years in our 20 year history and with an active user base that is approaching 20 million active users were still only monetizing about 3% of that active user base at a time when we seen record levels of intent.
Interest surveys responses on the platform. So we know, particularly around all the something period. We're living in people are interested in collecting feedback from their stakeholders. We are constantly building new features and capabilities integrations across not only our service platform, but in our market research products as well as they get feedback suite. So it's really a.
Organic longitudinal constant muscle that we're building to growth test we launched new features we experiment we test in different markets we are constantly.
Using segmentation and pricing and packaging to maximize the value that we deliver our customers, but also to make sure. We're monetizing their fair share. So Tom's team has done a terrific job across marketing growth and experiment to help drive that paid user number and frankly, that's a muscle Eric you know covering some of the internet companies.
That's a that is a home grown muscle that is a competitive advantage and we'll continue to be given that there is no. Other surveyor CX company with the scale. These are base and global platform like we have Tom you want to share a bit about some of our marketing initiatives.
Yes, obviously, the lower Cpcs and some of the opportunities that presents to us. It's something we're taking advantage of and I think we can continue to spend as we go forward to drive the top of the funnel I mean, we have seen really elevated kind of top of funnel numbers based on the crisis itself I mean.
Zander talks about the sort of metrics of usage that are really kind of in a non linear way.
Kind of.
And at levels, we've not seen before.
So we will continue to spend to drive the top of funnel I take it does present, an opportunity for us and I think we've been pleased with the results turning got your first question. The only thing I want to just call out you had asked about sort of the durability of the benefit.
From the response limits and the thing is it affects us in two ways one it shortens the time to conversion because people reach that limit faster and secondly, it it pulls more of the 97% of our base that do not pay us today into our paid base. So it's kind of a a great double impact and we see lots of other opportunities along those lines around the world as we look ahead.
Great. Thank you so much.
Thank you. Our next question comes from Mark Murphy of JP Morgan. Please go ahead.
Hey, everyone Hope everyone has held lead us into them sitting in for Mark. Thanks for taking my questions and congrats on the quarter.
Zehnder could you maybe talk about the trajectory of bookings cadence in the enterprise business in Q2, and so far in Q3, I think you had mentioned that you had record pipeline pipelines generate in April.
What did you see in terms of those rates and how's the pipeline looking forward going forward into the second half.
Sure. Thanks for the question.
Again, a lot of the growth that we're seeing right now some of it is attributed to the cobot environment. Some of it is attributed to these new use cases and solutions like the one I mentioned in Rhode Island and for some of our health care customers specifically designed to purpose built solution, specifically designed to help companies and organizations.
On contact Tracy units into monitoring, but a lot of the growth we're seeing today in our enterprise business across surveys and CX and market research is really a testament to.
Three to four years of hard work in product in marketing and building up this sales motion.
So we saw record levels of demand as I mentioned in April and we said we had a lot of work to do on converting I'm very pleased to say that our conversion rates both in terms of times to for sale.
Dates upper sale as well as quota team and our teams did not see a falloff from Q1 before we entered this coveted environment. So really nice job on our teams shifting the focus into industries and companies and Steve that would be good buyers for our products and in fact, they delivered so our demands in environment, it's partly it back.
That we have stronger products. This year than we did last year, it's partly a response to the excellent work that our sales team has done we've hired a gentleman they make 30 wallet who's leading up our market research team.
It's a testament to the marketing team that has really brought all be a world class enterprise sales and marketing capabilities to serve in monkeys. So it so happens to be we have this concurrent dynamic a tailwind from digital transformation, coupled with a much better stronger team at serving monkey selling much better stronger products and that is netting out to be a.
Demand funnel that leads us to the guidance that that'd be presented in the call.
I'd also just add on that her that our bookings linear already has been consistent with historical average pattern, which we see as a real positive against this challenging economic backdrop.
Got it.
Got it Okay and secondly, this response based pricing kind of caught my attention can you maybe talk a little bit more about that why.
Larry group going that we how is it beneficial for the customers other customers asking for them.
Is it mainly for new customers or will you start nudging, so the existing enterprise customers as well.
Sure. It's a great question as I mentioned I have a long history with this company and traditionally we built one survey product that would be charged by the month or by the year.
And it was purely things based leaving no room for incremental monetization based on usage.
The fact is there's a lot of history in enterprise software to have a usage base model. So we are now pursuing this dual model with both they see component as well the usage component we introduced it in April our teams did a great job getting trained them enable we feel really good receptivity from our customers who are accustomed to.
Being charged for this and being charge based on usage, we think it's appropriate given all the product development, we've done to to be able to generate more value associated with the value we're delivering so.
As you know from companies with large scale like we have you kind of start with impact you test you learn to make sure. The motion is working in that you're getting good customer receptivity and we will scale. This out to all new customers and eventually existing customers, but we are super customer centric and we'll do this in a responsible way with a lot of.
But as to our customers were not surprised that we are always competing on value and we have been a price disruptor for a long time.
Couple of time to value and integrations. We offer. So this is one component, but we think it's an important would help us drive incremental monetization.
Understood thank as much.
Thank you. Our next question comes from Bryan Mcdonald of Needham Your line is open.
Hi, Thanks for taking my questions, Andrew I guess, the first one for you.
As I'm asking about the CX suite here in the progress being made.
Clearly are unifying under the get feedback brand deepening the integrations with the Salesforce ecosystem, just would love to hear what you're hearing about sort of demand for the solution. As you continue to progress along that progress for process and then as we look at sort of ahead of the unification of the prior to full integration coming later this year you seeing as.
Any.
Pent up demand or or customers that are perhaps holding often to you to you launch that fully integrated product later this year before making a purchase decision. Thanks.
Hey, Ryan. Thanks for the question you know this is an area that we are Super Super focused on the reason we're in CX I think it's important to remember when you look at this massive scale of users we have across every monkey the number one use case.
Our non izeax.
People are coming to sort of monkey to the web buying the product buying the enterprise product to help do better by their customers customer satisfaction NPS really trying to understand my delivering the right level of product services satisfaction to my customers to win any competitive environment. So that led us to a strategic vision to build a purpose built offer solution.
At a much higher LTV and let it down the path to acquire usability last April and get feedback last September we are bringing those two platforms together I'm going to ask Tom to talk about some the capabilities the team.
Has shipped this year and we'll continue ship, but I think it's fair to say that both products are winning in the market today.
Bill are really focused on App web email you have to get feedback really cater to the salesforce ecosystem. So both of these products were continuing our vision is much broader is really to deliver a more holistic omni channel solution focused on the salesforce ecosystem I can't say that enough that salesforce.
With hundreds of thousands of customers is laser focus on customer threesixty and doing right by the customer and we believe that Rcs solution, which will will hook and better than anybody else and offer value quicker at a better price is going to be a fundamental growth driver for 21 going forward, but Tom maybe you can add a bit about the product we're delivering.
Yes. So thanks Senator Ryan I think is a key point here is to recognize that what the CX market requires is an omnichannel data collection, which means that your gathering feedback on all the digital touch points that you have with your customers all the personal cut cut touch points with a sales or service or your call Center and you want to have a single view of that you want to be.
Able to analyze and take action when I say that is what acetic solution is and the combination of our get feedback suite products actually delivers on that and that's what will be shipping. Later later this year, that's really the heart of the offerings, we're doing things to sort of unify the product and bring the data together and to add the analytics as well, but one of the places that will be really most excited to rollout what we're doing with salesforce, that's going to be so.
Some very interesting stuff.
You had asked kind of like ours is anyone holding any demand back based on the expected ship in the answer is no. What we're doing is selling the current products that we have today as a step pathway to to the ultimate get feedback suite. So we have a nice path for those customers existing and future to get to get feedback suite. So no no a shortage in demand there.
Okay.
Excellent and then just as a follow up or Debbie.
You talked about in the prepared remarks about the completion of the migration.
To cloud data centers from an on premise datacenter is there any potential gross margin tailwinds or expansion opportunity now that you're you're sort of off of a two different systems and have completed that migration. Thanks.
The short answer is that overtime, yes, we'll be able to get more leverage in gross margin as we fully migrate out of our data centers, but I would say that overtime. We are targeting approximately 80% gross there's margin, which is where we are today and the reason why is because there are some puts and takes and that match and of course gross margin will scale.
Positively with revenue as it grows and as I mentioned, we will get some leverage from the cloud investments over time, but there are also some clos.
That will scale with revenue well, including things like credit card transaction fees customer support cost.
Third party panel cost center market research business in cases, where we can't leverage our proprietary panel all the puts and takes net out to about 80% gross margin over the long term.
Excellent. Thank you very much.
Thank you once again, ladies and gentlemen to ask a question. Please press star one on your Touchstone telephone again Thats star one on your touched on telephone task and question.
Next question.
From a line of Brett level up.
Aaron Berg capital your line is open.
Hi, guys. Thanks for taking my question I Hope you are all well.
Just a touch a little bit further on the get feedback seats I guess trying on launching.
Theres, obviously, some some bigger CX names out there competing in both segments the enterprise level and mid market could you just maybe to how you plan to differentiate yourself when you do see them, maybe when competing for new business. Thank you so much.
Sure. Thanks, Brett for the question. Thanks for the good wishes everybody.
Because the for the whole management team that our families are strong and healthy and focused.
Specifically on CX.
Brett the close you get to our business you recognize we are pursuing three pillars, we call them surveys, where we are a market leader on the web in the enterprise market market research, where we've really built a disruptive software oriented product and we're starting to win much bigger six figure deals we close the awesome deal this quarter with the company called China, which is really the.
Leading Fintech bank you will see their logo on the Mabs Jersey, and we've really been helpful and helping them understand different cohorts and.
Who they're trying to reach in the different sentiments around the marketing campaigns. So we're winning some big logos in the market research base, a massive Tam and then see acts as I mentioned as these two acquisitions, bringing them together in a surgery monkey environment, leveraging that massive base of users and 350000 domain and really targeting that salesforce ecosystem, where we have deep partnership.
15 relationships and equity relationship are constantly thinking through product marketing business development go to market opportunity. So we're quite bullish there there are some other players in this space.
We think we've got a real shot at disrupting some of the.
More professional services oriented nature of those businesses time, devalue takes quite a bit longer and costs are significantly higher to the tune of multiple so when we come in where pitching ease of use serving monkey wins there every day.
Price disruption, which we think is critical and especially in the mid market and then time to value. When you have these integrations that we plug in well I don't see a lot of CX companies, displacing salesforce and Microsoft as the CRM systems of record Luckily for US we're not trying to we want to add a ton of value help make those products stickier for for those systems of record if we.
To that well, we think we can play in that environment I'd be really great channel partners.
Perfect. Thanks, so much.
Thank you next question comes from Brian Fitzgerald of Wells Fargo Securities. Your question. Please.
Hi, This is will on for Brian.
On head Count can you tell us how you are adapting recruiting and onboarding efforts in the given environment and what sort of dynamic seasoning in the current market.
And then second one could you talk to the efficiency of your teams.
During shelter in place and whether you're giving you thought to work from home or any flexibility there longer term. Thank you.
Yeah. It's a great question, it's one that super important to our employees.
So as far as head count we are at about 1300 employees today, we've come through three years of very rapid employee head count growth two acquisitions, which brought about 200 employees to the server multifamily we've been investing significantly in products in marketing and sales. So I believe we've done a really good job of investing significant.
Dollars into the company that are going to yield significant new revenue in the years to come anywhere in the very early innings of harvest and those investments in product and sales and marketing.
You know like everybody else, whose under the age of 120 years old. This cobot pure it has been unlike anything else. We went work from home full time on March 12 around the world we've been running the company from Slacking Zoom since then.
In that period Weve continue to post really significant.
Revenue growth, we did the lift and shift to a wf last month, we launched new product and we hired significant numbers of new people in in Q2. So we are onboarding.
Vice president of product marketing and sales new senior engineers, we have some exciting new.
Additions to the team that we will be discussing soon we've made some significant investments in our diversity and inclusion recruiting efforts and we are rethinking the way we work like every other tech company is when you see the kind of record productivity from our engineers and continued productivity from our sales teams you'd be foolish not to think through how can we lean into that flexible.
Realty and adaptability and cost savings Debbie discuss some of the Capex head count say or facilities savings that we've we've made this year and to see no lapse in our productivity and delivery and shipment gives me a lot of hope that this is a company that can continue to adapt and thats non culture will help us drive for long.
Can become so yes, we're absolutely are reimagine work and our Serbia monkey template, they're helping hundreds and thousands of other companies do the same.
We know that Ceos, and THR Rosen cfos are connecting with their stakeholders and principally their employees to understand.
How are you doing what can we do differently, what kind of benefits are going to help you.
Thrive in this period mental health Ben benefits, so while our templates and our data access we think is a key driver and helping everybody get back to an office environment, no more flexible and productive way in the future whenever that might be.
Great. Thank you.
Thank you. Our next question comes from Brad Sills of Bank of America. Your line is open.
Hey, Brad Hi. This is Oh this is Jerry on for Brad and I feel very well hi.
How are you going.
So were good very good [laughter], yeah, I just wanted to see if you could comment on any trends that you're seeing internationally or if there's any geography in the relative strength are assigned a temporary.
Thank you.
[laughter].
Thanks, Jerry International continues to represent about 35% of our revenue and obviously that concentrated in Canada, Australia, New Zealand than than a handful of countries in Europe.
The usability team we acquired last year is headquartered in Amsterdam. So that field sales team continues to deliver and then we put a sales team for surveys in Dublin, and our Dublin Office last spring. So may of 2019, and they continue to deliver for so I would say that the international growth trajectory looks on par with the U.S.
Growth trajectory I think everybody with starting in the back half of March in early part of April and May have recovered.
On a similar trajectory as the U.S. So we continue to track around that 35% level and I think you'll see continued investments localization.
Initiatives that will help that international business grow faster in future.
Great. Thanks, taking my question.
Thanks Jerry.
Apologies once again to ask a question. Please press star one of your Touchtone telephone.
And if there could be no further questions in queue I like to turn the call back over the CEO sand alert for closing remarks, Sir.
Well, thank you Steve and thank you for all of our analysts to continue to be interesting curious about sort of market developments. It's been a it's been a fascinating couple of years as a public company and.
Obviously 2020 has been a year. Unlike any other I'm super impressed and proud of our team and our ability to continue to deliver for our customers and.
Post the kind of results, we've been able to posts in an environment, where there's just a lot pulling at our our employees and our partners and we are all truly in this together. So I wish you all a great healthy summer hope you get out there.
Get some pressure Rosa marshmallows with your kids do something that you wouldn't have done in another summer and then you have a happy healthy a happy healthy restful summer, we look forward to catching up with you on our Q3 call and not in three months and wish you continued success and good health. Thank you.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
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