Q4 2020 SVMK Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by my name is Rob and I will be your conference operator today at this time I'd like to welcome everyone to the survey Monkey is fourth quarter and fiscal year 2020 earnings call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question press the pound key.
I'd like to hand, the conference over to your host Vice President of Investor Relations.
Sir Please go ahead.
Thank you good afternoon, and welcome to survey Monkey is fourth quarter and full year 2020 earnings call. Joining me on today's call are Zander Lurie, CEO, Tom Hale, our president and Debbie Clifford CFO. After our prepared remarks, we'll take your questions. Prior to this call we issued a press release and shareholder letter.
Our Q4 and full year 2020 financial results and related commentary. These items are posted on our Investor Relations website at Investor Day Survey Monkey Dot com.
In 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 cash flow actual results may differ materially from the results predicted and reported results should not be considered an indication of future performance a discussion of the risks and uncertainties related to our business is contained in our filings from the secured.
He is an exchange commission in particular in the section entitled Risk factors in 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 in 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 SEC and May also be found on.
Our IR website.
I'll now turn the call over Xander Gander.
Thank you Gary and thank you all for joining us today in a year that no one saw coming the survey monkey team kept our focus and served our stakeholders in 2020 in the face of a pandemic, Rachel and justice and heightened political uncertainty our team came together in a remote work environment to deliver for our customers our shareholders and our community.
Ship compelling new products, and our emerging customer experience and market research pillars, we develop new survey templates and use case solutions to help businesses educators nonprofit to collect feedback to better navigate a volatile health crisis.
We added new partners like Zoom and service now and deepened integrations with Microsoft and Salesforce to help our customers better leveraged feedback data in their core software stacks and.
And we found alternative paths to growth in 2020, we grew revenue 22 per cent to $376 million and generated over $45 million of free cash flow with topline meeting and cash generation exceeding the full year guidance range as we said before COVID-19 hit our.
Our 2020 performance is a testament to our team's agility, we problem solve for our customers. We are accountable for our commitments with continued innovation and product delivery and our go to market motion. We believe we can continue to expand our enterprise customer base and market share in 'twenty 'twenty, one and beyond.
We sell software that helps customers listen learn and take action.
Employing a growth mindset also helps us plan and execute our own strategy more effectively there were a lot of learnings across the board in 2020.
Our Q4 performance illustrated sustained enterprise adoption of our feedback oriented software.
In our enterprise channel our products are resonating with customers because they integrate well with other systems and they do so with agility.
We ended the year with approximately 8200 enterprise customers up 24% year over year, we added over 500, new logos in Q4, including well known companies like Avon care for Evernote, Headspace Mulberry and the monument crisis Center, which we are supporting through our partnership with listen for good.
Q4 enterprise revenue accounted for 29% of total revenue compared to 25 per cent in the year ago period.
The book of business remains strong with survey monkey enterprise renewal rates improving sequentially in Q4 as they did in Q3.
I'm also excited about early traction in our newly launched integrated CX offering they get feedback platform in.
Our self serve channel year over year revenue growth accelerated to 13% tier.
Teams again was the primary growth driver and its customers are great candidates for Upselling to survey Monkey enterprise.
With our massive customer base valuable products and experiencing growth marketing. We believe we can continue to drive a low double digit revenue growth in self serve which generates healthy free cash flow and helps drive the top of the funnel for our high growth Enterprise channel.
We had a good 2020 in the face of a really tough market, we ran harder than the results give us credit for it.
In a year, where our offices were closed from mid March on I wouldn't have predicted we would launch compelling new products accelerate our enterprise logo wins and increase our self serve growth rate, but we did.
And we need to do it again, but better.
Our Q4 2020 enterprise results didn't reach the heights, we set our sights on specifically in winning new business at the higher end of the market.
As we deliver more value to our customers, we believe our deal sizes will increase.
Work will not be an excuse the environment. We compete in the environment. We were winning we've assessed our strengths and opportunities for improvement and we've taken the following actions. We think will further improve sales efficiency and productivity and surveys. We're steering further into high value use cases, offering packaged solutions to help customers achieve business outcomes.
<unk> go to market, we hired Tom Murdoch the former head of digital sales at hotspot to lead our new high velocity sales team. We believe this will help us capture more quick close deals that slip between self serve and sales equally importantly, this change an org design will enable our account executive leadership and team to focus on larger customers whose deal.
<unk> and retention rates justify the investment.
In CX and market research, where deal sizes are higher than in surveys, we're adding sales leadership and talent.
See ex we added the former head of Oracle Europe sales Graham Douglas to lead our EU sales team out of Dublin.
In market research, we've aligned our sales initiatives around three key verticals consumer b to B technology and financial services.
Leaders in place, including new hires from market research firms like Kantar and done that.
We believe these hires will help convert our product investments in the sales momentum over the course of the year and we plan to continue hiring in CX and market research sales as each pillar represents a huge addressable market where early traction gives us confidence we can build valuable businesses. Finally, we've added an executive to drive growth from within our 8000.
Plus enterprise customer base.
In December we announced Ken you will as our first ever Chief customer Officer, Ken brings 20, plus years of experience and customer success leadership at companies like IBM AT&T in new store.
We now have experienced leaders in both the land and expand categories of enterprise sales and I'm optimistic that Ken will help us maximize value for our customers and help drive growth across our enterprise business put simply Ken raises the bar at survey monkey.
We made these go to market changes prior to our January annual sales kickoff meeting so we could hit the ground running in 'twenty and 'twenty one.
The strength of our book of business is a clear and strong signal that our products deliver value our products are increasingly relevant and clearly differentiated in terms of their agility price to value and integrations with systems of record like Microsoft sales Force and service now.
'twenty 'twenty was a year of grit determination and execution, we found alternative paths to growth while delivering on key product and go to market deliverables. We're confident we will continue winning and we're looking forward to proven out yet again in 2021.
Remain committed to our longer term goal of driving 25 plus percent revenue growth at survey monkey.
Even if COVID-19 pushed out the timeline.
I'll now turn the call over to Tom who will discuss our traction in our key product and partnership initiatives Tom.
Thanks, Andrew I'm, so proud of what our team accomplished in 2020, we had an exceptional year of product delivery and we'll build on it in 'twenty and 'twenty, one with a super cycle of investment to support our journey upmarket and our long term growth goals.
Q4 capped a year of innovation and surveys we enhanced our Microsoft team's functionality and announced integration with zoom video communication helped drive incremental platform usage and top of the funnel activity. We introduced a response cap in our free product that drove incremental monetization.
Teams, we launched contributor seats for survey data analysis and made it easier to manage large installations for enterprises. He responded to urgent post COVID-19 customer needs with solutions for use cases like contact tracing remote employee engagements and returned to work.
We also completed the work to support response based pricing per survey Monkey enterprise, which we rolled out a new enterprise customers in Q2.
While it's early the seeking complete model continued to drive a 25% off net and deal sizes per new enterprise customers with no impact on the selling cycle in Q4.
And we're seeing the green shoot from the new model driving improved monetization for example on our last call I shared a story about car, let's class a new enterprise customer deploying daily surveys with 1800 employees to track Covid risk factors in January the value of the Karl ex relationship increased buybacks after a true up.
So on response volume, it's a win win Carl ex is getting great value that enables them to keep their factories productive and we're seeing economics that better tie that customer usage.
In our newer pillars, we launched new products that we believe will help increase our mix of enterprise business as they scale and see ex we ship our b one of our integrated offering to get feedback platform.
Agile price disruptive solution that helps new customers like car for headspace and mulberry better leverage their existing systems of record to deliver the best experiences for their customers. We also announced our commerce cloud integration, which I'm proud to say we shifts per day in March.
Research, we introduced our export solution to enable companies to rapidly make critical marketing decisions companies like Verizon Communications are already using our agile research solutions to do more of their AD creative packaging and messaging research in house at a fraction of the cost of full service agencies. These new products in CX and market research open up new opera.
Tenets that are adjacent and incremental to our survey market opportunity.
As we look ahead to 'twenty 'twenty, one our promise is to deliver solutions that make it easier faster more cost effective more agile fulfill experience gaps it to better understand customers and employees.
We are aggressively ramping our investments in machine learning our customers have seen great benefits already features like automated insights day time, while survey monkey genius enables users to get answers with confidence, but we are just getting started.
In surveys, we're investing to deliver new guided solutions that target specific use cases to increase the time to value for our customers. Our new returned to work solution shipping. This month helps C suite leaders and organizations big and small navigate the evolution of the employee work experience and in addition to delivering value. Our agile survey solution will add a new arrow in.
River of our enterprise go to market motion.
And see ex we will continue to build out to get feedback platform with prebuilt programs for key CX elements like N. P. S VSAT and cart abandonment will introduce enhanced analytics and richer functionality to generate a 360 degree view of the customer and more precise customer segmentation and targeting.
From 2021 to get feedback platform will integrate wind survey monkey enterprise, so customers can more easily graduate to our always on multi channel agile CX platform.
And for market research in 'twenty 'twenty, one it's all about expanding the breadth of our market. We serve solutions as we discussed in our December Investor Webinar. We're building on the success of expert solutions and launching new software modules to other market research use cases, such as brand tracking industry tracking and pricing optimization the market opportunity here.
Is massive and we believe our strategy will allow us to take share from legacy services led offerings and to expand our share of wallet.
There's a lot to get done this year, but the team is up to the task, we're investing to deliver more customer value with the goals of new logos and more expansion and we're excited to make 'twenty 'twenty one another great year of innovation and service from our strategy to move further up market.
I will turn the call over to Debbie.
Thanks, Tom.
The fourth quarter was a solid finish to a year highlighted by healthy revenue growth.
Non-GAAP operating profitability and free cash flow generation.
Start with a review of our Q4 results and then summarize the financial performance for full year 'twenty funny.
And then review our outlook for Q1, and full year 'twenty and 'twenty one.
Unless otherwise noted all comparisons are year over year.
Revenue in Q4 was approximately $101 million an increase from 20%.
This was our first quarter, where year over year growth rate.
Were not affected by acquisition, so Q4 revenue growth.
Yes.
Revenue from our enterprise sales channel increased 39%.
Growth in all three product pillars.
Enterprise revenue accounted for 29% of total revenue compared to 25 per cent and the year ago period.
Revenue from our self serve channel.
Per cent in Q4, driven again by team and strong free to paid conversion.
Our pricing and packaging.
Deferred revenue increased 21 per cent pill.
$171 million.
Remaining performance obligation or are.
Which is the sum of deferred revenue and backlog.
$188 million, reflecting 17% growth.
As we've mentioned previously in addition to overall bookings growth.
And added contributor for growth in deferred revenue that's been our strategy.
From monthly to annual plan.
With 88 per cent of our paid users.
Annual plans.
The deferred revenue.
And revenue growth will converge.
Non-GAAP gross margin was 82% versus 79 per cent and a year ago period.
Narrowly for revenue growth.
Volume based costs associated with our market research offering.
We expect non-GAAP gross margins to normalize.
That range overtime.
Non-GAAP operating margin was seven two per cent compared to negative one two per cent for 2019, and 2.2% in Q3, 'twenty 'twenty due to revenue and gross margin performance and disciplined expense management.
As seen in our outlook, we expect nominal operating leverage in 'twenty 'twenty, one versus 'twenty 'twenty as we continue to invest to execute on our long term growth strategy.
We generated $11 6 million in operating cash flow of $9 5 million in free cash flow.
We've been able to diligently manage cash while also investing to realize our strategy and drive revenue growth.
Against a challenging macroeconomic backdrop.
For full year 'twenty 'twenty, we increased revenue 22 per cent to approve.
Ultimately $376 million.
The enterprise channel eclipsed 100 million annual revenue for the first time in the company's history growing 65 per cent year over year to approximately $108 million.
In 2020, we produced a two seven per cent non-GAAP operating margin and generated free cash flow of approximately $46 million.
Total revenue was in line with an operating margin and free cash flow exceeded the full year guidance ranges, we provided in February 'twenty 'twenty.
We ended the year with $224 million in cash and cash equivalents.
Increase of approximately 93 million year over year, and we are now in a net positive cash position.
Our 'twenty 'twenty performance illustrates the agility of our products and team as well as the resilience of our business model.
Turning to our outlook for Q1, we expect revenue to be in the range of $99 five to one and $1 5 million or approximately 14% growth at the midpoint.
Recall that we had 2 million of nonrecurring revenue from one market research enterprise customer in Q1, 'twenty 'twenty that has a dampening effect on Q1, 'twenty 'twenty one growth rate.
Normalizing for this nonrecurring revenue in the year ago period year over year growth would be approximately 17% for total revenue and in the low 30 per cent range for enterprise revenue at the midpoint of guidance.
We expect non-GAAP operating margins to be in the range.
It's a breakeven to negative, 2%, which reflects higher G&A expense seasonality as well as increased product and go to market investments as Tom and standard discussed.
For full year 'twenty 'twenty, one we expect revenue to be in the range of $436 million to $443 million or approximately 16% 18 per cent year over year growth, which reflects the impact of headwinds and new enterprise sales as we exited 2020.
Our revenue guidance assumes that self serve revenue will grow similar to the growth rate in full year 'twenty 'twenty and.
In the enterprise revenue growth rate will be in the 30.
We expect non-GAAP operating margins to be in the range of Super sense of 4% and free cash flow to be in the range of $43 million to $48 million.
Which both reflect a continuation of our balanced approach of driving incremental operating margin and generating cash while investing for long term growth.
In summary, 'twenty 'twenty was a year, where we drove solid topline growth operating leverage and free cash flow, while managing through the market dynamics and remote work challenges associated with Covid. We are committed to our long term strategy and our laser focus on execution as we enter a 'twenty 'twenty one.
Our strategy is sound, we have a strong book of business and we are well positioned to invest to move further up market and drive long term growth.
I'll now turn the call back from Sandler.
Thank you Debbie 2020 was a big year for us in terms of product innovation and go to market execution, but we also made huge strides in strengthening our famous competitive advantage per employee culture.
The core of any world class Enterprise SaaS business is its people never has corporate culture been as important as it is today when so many employees count on their colleagues to learn and grow but also to find support and empathy.
We redoubled our commitment to diversity equity and inclusion in 2020, you don't win this race in a quarter or a year, but our sustained multi year effort will make our business and community stronger.
We plan to keep you posted on our progress in this arena just like we update you on our product and financial achievements, it's that important.
In January we announced an 20 Andrews as our chief diversity and social impact officer.
This newly created role Antoine will lead the company's diversity equity inclusion and social impact functions to accelerate our initiatives and positively influence our communities.
With two decades of experience at organizations like Europe Gap, Inc. Nike and Symantec Antoine will help hold us accountable to our goals to hire retain and develop a more diverse team as well as foster an inclusive culture.
He will also work with me to evolve our supplier diversity initiatives and developed D E benchmarks to help our customers and our business I'm thrilled to welcome me into onto the team and I'm confident he will drive excellence in this arena.
In December we published our first sustainability report that formerly outlines our commitment to create a more sustainable equitable and just society.
We made further progress on our 2020 diversity hiring goals in Q4, approximately 41 per cent of our hires identified as women and 43% identified as people of color and we added diversity at all levels of the company.
As a result of our focus hiring and retention efforts across all four quarters in 2020 representation at the company today sits at 17% for underrepresented minorities and <unk> 44 per cent for women.
Finally, we're so pleased to see customers using our products for their own dei initiatives Women's March global a global network of 100, plus chapters advancing women's rights as you can survey monkey and software expertise and audience to run global count one of the largest global mapping surveys ever undertaken to document the cultural economic.
And social barriers to women's progress.
Loud to support women's March global and other organizations through our feedback software.
We strive to be world class in D E and I'm confident we'll gain even more momentum in this mission critical initiative over the course of 2021 its good for our culture, our customers our community and our shareholders. I believe we began 2021 in the strongest position we've ever been in to accelerate our move up more.
Our products and team are stronger today than a year ago as is our conviction and our strategy. Thank.
Thank you to all our stakeholders for their support in 2020, it's time to find more ways to win in 'twenty 'twenty. One we'll now take your questions.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
And your first question comes from the line of Mark Murphy from J P. Morgan Your line is open.
Oh, Great Hey, everyone. This is a pendulum sitting in for Mark. Thank you for taking our questions.
Linda first firstly I just heard something I think you said.
25 per cent deal uplifts on something called seats and complete model.
And to understand a little bit better.
Is that basically the response based pricing along with seat based pricing kind of a mixture model.
It is yes that is a core component of our strategy. We debuted at <unk> in April to all of our New survey Monkey enterprise customers and this year, we will go back to our installed base of 7000 plus customers. What they think the completes model and a blended <unk> uplift is 25% and we believe.
That as our customers use these solutions and use more.
Survey responses and you can see that increase from that.
I see so you're you're not really moving a customer to completely respond space, but it's going to be a mix.
Yeah, it's a it's a blended plan whereby you buy a basket of seats and then a basket of responses in the initial ATB comes up to about 25% uplift upon contract but the.
Uplift from of course be variable based on the utilization of responses.
Understood got it and then the next question is I mean is there.
We to understand the enterprise business weakness I mean is there.
Primary reason that you'd circle.
That that is hindering the enterprise business at the high end I mean people would probably talk about competition are you seeing more competition at that level is there is that mainly a sales.
Execution related or product related any color would be helpful.
Sure a pendulum I mean, if I if I could just step back for a moment we've been on this journey for three years, we got into the enterprise sales business from 2017. When we believed we had a product that reached feature parity and could deliver world class.
Due to our customers I mean, I couldn't be more proud of our sales team for landing over 500, new logos in 2020, including 500, new logos in Q4 alone across our three pillars across the world and companies the biggest companies in the world.
Care for and others to digital first companies to technology services business services financial services CPG you name it and we're winning in all three categories.
What's important to remember is that you know COVID-19 did have a hit for a company of our size as our sales team is maturing and benefiting from the Mentorship in the office the enablement the tooling and so we have such an inbound volume of leads that come in for folks who don't want to transact on the web but want to buy a deployment and so we hit some really.
Great goals in terms of new customer acquisition, what we need to do a better job of what I need to do a better job of helping us drive deeper deployment deeper deployment per software further expansion and cross sell so we can deliver more value to our customers and our business model is going to reap more value.
So you know as Debbie said, we didn't reach the heights that we had set out for ourselves in Q4. It doesn't matter. If it was COVID-19 related. The fact is we've taken from really tactical moves that we think are going to put us in a much stronger position in 'twenty and 'twenty. One what are the first we hired Tom Murdoch World class sales that are out of pocket stand up this high velocity.
But really to put in place a team that is much more cost efficient to help us win a quick close to three called deal.
That also frees up our enterprise account executives to go after the larger bigger more strategic high value point.
Howard Graham Douglas out of Oracle leader in Europe to really help us flow out of our business.
Third we hired Ken your Chief customer Officer World class to really help us expand our footprint of those 200 customers and then today as Tom mentioned, we dropped the press release from the Salesforce Commerce cloud partnership with we are really excited about.
Given the quarter million plus customers across Salesforce cloud, we see a huge opportunity to attach the ex.
Software or get feedback platform, which is the deepest and mercury eyeball integration and sales force ecosystem. So these are a handful of tactical moves that we think are going to deliver value in 'twenty, one and help us accelerate growth.
Understood. Thank you.
Thank you.
Your next question comes from the line of Eric Sheridan from UBS. Your line is open.
Hey, Thanks for taking the question guys hope everyone is well on the team maybe just following up on that last point by US Andrew I want to go a little deeper if we can on how to translate excited about early traction and get feedback platform. How we should be thinking about a multiple year view, what that does for growth and end.
<unk> spend the customer retention and then maybe flipping a second question backwards margins can we just better get a sense from some of the investments you want to make through 'twenty, one and I know, we're not maybe you're going to get as much granularity as people would like but just some sense of how margins evolved through the year at a better sense of how people should think about full year margins against sort of.
Early in the year margins thanks, guys.
Yeah, I'll kick it off and then I'll pass it to Tom and Debbie if they wanted to elaborate for me I look at the category. We really entered in earnest in 2019 with the acquisitions of Isabella and get feedback and could I just get feedback platform now we have two offerings that our integrated you're going to see some really big platform launches and announcements at <unk>.
Hence this offering in the first half of the year, but we are out there really world class customers like more Berry and care for and headspace and doing things that we think are helping customers, especially ones in the salesforce ecosystem on this digital transformation and the best companies. The most inspiring companies the companies that Jeff.
Pull a rabbit out of a hat in 2020, we're the ones that took.
Business models that were not well constructed for a world where everybody is working from home and staying at home.
And they pivoted and you've got to think about your website as the first place that all customers are coming in and that's where get feedback and so value, especially if you are in the sales force ecosystem. So again.
Look at culture from private markets today, we have 20000 enterprise customers in Korea.
The other thing per quarter million customers in the sales force cloud plus service now plus Microsoft. This is a really really early early category, where we see huge tailwind we've got more platform development product development to do but its not holding us back from winning the most discerning it buyers except buyers in the world how long do you want to share anymore.
On a from Novartis.
As you saw at the day, we released our integration with Salesforce Commerce cloud and that's just a great opportunity and example of our going deep strategy. We are the only vendor in this space with an integration with the commerce cloud and that just as our strategy to go deep as well as go broad we want to move across clouds I think the most important thing to point out here is that we are winning big top of the market.
CX customers I'd cite car for an Avon one of which was a quadrex displacement. We have are firms that are looking at us to solve their CX problems. When there are problems require agility, meaning you know time to market time to solution. We win when their problems are our pending on a us a CRM solution or a sales force loose.
We win so we have a great opportunity to take our products straight into the heart of that Salesforce ecosystem and we've got the investment behind it this year super cycle to really deliver for our customers.
And then I can chime in on margin and ultimately what Tom talked about the Super cycle of investment and product is what is it.
Impacting the trend that you see with our operating margin over time. So if you look at our Q1 operating margin guidance. It was breakeven to negative 2% and we do in Q1.
Net of certain G&A expenses like payroll taxes and employee benefits, but the biggest driver. There is that we are embarking on this super cycle of investment to drive innovation and product and what you'll see over the course of the year in order for us to achieve our annual operating margin guidance from 2% to 4%, we're going to be gradually improving and driving operating leverage.
Our next question comes from the line of Brad Sills from Bank of America. Your line is open.
Great Hey, guys. Thanks for taking my question.
I wanted to ask a little bit zander about some of the comments you made on on the enterprise business.
Perhaps being a little bit weaker than expected in your mind is this is this more pipeline oriented or do you think it's just a.
Go to market.
Changes that need to be made it sounds like some of the new hires that obviously, that's going to be a focus with CX for Graham and expand for Ken.
So I guess my question is how would you classify the shortfall this year was it pipeline.
Versus versus some go to market areas that need to be changed.
Hey, Brad Thanks for the question totally fair and I think.
We got into this business the enterprise business are really catering to large companies midsize companies around the world.
We went from a seltzer business from 15 years, where people turned back on the web to one where we were building outbound demand driving demand generation, and then really interfacing with customers and delivering value.
And to be free Covid hit at a tough time.
We were really getting our kind of sales Academy humming in March with all the enablement Mentorship and now our chief revenue officer, John telling signs an incredible culture carrier and so going through a remote environment was challenging and our sales team demonstrated a lot of grid winning deals larger range.
And so we've got a Chris and sharpen up our go to market our demands and our marquee merchant I think we took the tactical move Theres no.
No. There's no burning fire. This is just about us not achieving the highest that I know are possible in our markets is healthy and so we saw some weakness in Q4, we took from prescriptive measures become Big leader you know we've got some exciting new marketing demand Gen. I was had been in place and we learned a lot. In 2020, you know you kind of have to flex your your <unk>.
Growth mindset and recognize this environment isn't going away anytime soon so we've made from pivot I'm really hopeful we're going to drive from acceleration, but I also got to take accountability for what was not our final quarter.
Starts with me.
Got it thanks I appreciate that.
And.
Wanted to ask about the commerce cloud solution. This is interesting and just curious on more details there what is the solution exactly how is it integrated any use cases, you could point out.
Thank you.
Yes, and I'll, let Tom elaborate on this but you know we acquired get feedback.
Year, and a half ago brought on a leader in Craig's rolled with the CEO gets you back to near net of a general manager of the step you back platform is really help work.
With his product leader, who was the CEO of usability to transform their card green two products together and add a bunch of functionality and it's become increasingly interest in airports and we're super proud of this partnership we do believe it can scale to offer customers a concept of all shapes and sizes that are prioritizing agility.
<unk> is the key factor, we are not targeting customers that need huge army of professional services. That's the time intensive usually expensive motion that we see is.
As a bit of yesteryear, so we're really focusing on customers that need the agility and want to be responsive to customers and their behavior on the web take that action and get all that data into the sales force. So they can make the retina.
Thanks, Andrew.
Yeah, I just want to give it some use case color I mean, we already have a lot of joint customers here Crocs, Yeti, Deckers Puma and its really Orient around this kind of in the moment of an E commerce transaction for things like card abandonment poach per post purchase surveys you know being able to understand what's going on so you can test and learn which is the heart of any E commerce strategy and the key here.
There is a two way data interchange, it's not just about collecting some data and then figure out what's wrong and then trying to change it it's actually showing up in your commerce cloud to see the data that you're collecting and it's across male across browser and this is just part of our strategy to go deep with each one of the sales cloud because we think that there are a lot of customers who need this and our commerce cloud is one of the hottest and <unk>.
Fast growing areas of the of the sales force business and so it's just another great reason for us to be able to call call into those customers and say Hey, we've got a solution for you. If you want to collect feedback in a moment and take action on it we've got a great solution. So we're we're super pleased with this we announced the 90 days ago and shipped at this quarter. This is the kind of agility that we're able to demonstrate in the face of the market.
And your next question comes from the line of Youssef Squali from Truest. Your line is open.
Awesome. Thank you so much so a couple of questions Zander I don't want to beat a dead horse on this enterprise sales, but I'm trying to just reconcile.
The the the 39% growth that you guys just achieving enterprise sales channel in the fourth quarter in the middle of Covid, which is great would your comment about Covid, having hit you guys hard and being the reason for the kind of the the softer guide for enterprise New enterprise sales in Q1 and Q2.
Q1 interest of the.
Of the year and if it's just a sales efficiency issue I'm trying to understand the the the investment a increase or the new investment cycle that you guys alluded to in the letter is there anything structural in the way you're looking at the investments needed in 'twenty two.
We want to maybe change your long term margin outlook for the business.
Thanks.
Thank you Sir.
I don't think we're going to have any update on long term margin outlook, here's what I can say about the category.
A huge category.
But when we went public two and a half years ago, you are seeing more companies compress the cycle for digital transformation. Your business starts on the web your ability to react and respond to understand what's important to customers as Tom said some of the key attributes we're focusing on this is what every company we have incredible testimonial from trucking companies.
And retail companies and doctors' offices and state government. I mean this is this is the way business gets done today in CX is at the heart of that surveys are at the heart of that.
We love the category we.
We have taken the tactical move we are redoubling, our commitment to this strategy. There's nothing about this strategy. If there is any if there is any criticism of our performance its execution. Nathan I think we have taken the prescriptive measures that put us in a position to accelerate growth.
Is any of the Q1 numbers that book a light on revenue. The result of 90 plus percent of our businesses some production basin.
Some of the diet from castle already so we've taken the moves we believe are necessary to accelerate and to reach our aspirations and I'll, let debbie elaborate on margins, but right. Now we know this is a competitive environment we want to.
Moving to stay at the bleeding edge of World class products, and marketing and sales and.
It's a hyper competitive environment for people. So we know what it takes to win.
And you said if I would just highlight that we look at RPM growth as a leading indicator.
So from an RPM.
Growth rate was 17% and if you were trying to reconcile the trajectory of enterprise growth from Q4 into Q1.
Normalize our revenue guide for the 2 million nonrecurring market research revenue that we had in the year ago period that growth rate would be about 17%. That's in line with Rps. So I encourage you to look at.
The indicator of our performance that's what we're most focused on.
Okay sounds good thank you.
Your next question comes from the line of Chad Bennett from Craig Hallum. Your line is open.
Thanks for taking my question. So just can you give any more color just I know it's fairly early just on the CX pipeline.
And in what Youre seeing there and in sales cycles related to the CX product.
And then also again, it's early but relative deal sizes of CX deals in the pipeline to to your average enterprise deals and in the fall you know kind of the last.
On to that question is you know when you look at your your outlook for this year for enterprise growth and I think he said in the thirties.
You know.
Can you at least qualitatively talk about how much of a CX impact.
Ached into that growth.
Jeff. Thank you for the question.
No CX and market research our boats are smaller businesses for us in hyper growth New general managers, new sales leaders in place.
Is the ex specifically, we are targeting customers that prioritize agility customers that have big challenges need to solve business outcome, primarily they are sales force shop and these are customers that we see as right for opportunity to help them on all things survey based integration with Salesforce as well as help them on understanding what's going on.
On their website with issues around cart abandonment design et cetera. So the deal sizes are demonstrably bigger than R. R.
Neither our pack for the overall business because you know these are 30 40 $50000 deal size relative to the survey, where the median or mean are quite smaller so.
This is a business that is not only significant relative deal size, but has room for expansion as theres more utility of that the ex integration.
The deal cycles can be 30 days can be 90 day, it's really about our ability to generate high quality demand.
The ideal buyer.
How cute there are challenges in their own business.
And then just following on in terms of the impact to the diet into the overall growth rate.
'twenty 'twenty one.
I would say is that customer experience is a small business for us today, but we anticipate it's going to drive growth in the future. It's a single digit contributor to our total revenue number today.
As stated in the past, we don't expect it's going to be a big driver of revenue growth in 'twenty and 'twenty. One we think it will accelerate bookings growth in the back half of the year, but given the recurring nature of our business model those bookings will manifest as much into revenue until 2022 and beyond but we are very bullish about this opportunity great and then maybe one.
Quick follow up for me. So just in terms of I know you've made a lot of leadership changes in and it looks like high quality ads for sure on the enterprise side of the business, but just in terms of you know the the feet on the street, so to speak and in the ability to sell <unk>.
Yes, I mean, it's Andrew I think you've talked about getting better at driving deeper deployments on the enterprise side. You know you doubled the sales force the enterprise sales force and 19 I'm sure you added it added to it decently in in 'twenty also.
I understand the leadership training changes, but.
Do you have an enterprise grade sales force right now.
I mean, what I will say about this.
Is it punches way above its current revenue number so it's Brad Gilbert and Graham Douglas or listening.
We have staffed up to build $100 million business you know in a relatively short timeframe. Because we believe this product is world class. We believe the opportunity is massive and we know the difference.
They're world class sales people can make and we're giving them all the support and resources and marketing they need and when we tee up the right buyer.
Help her with her knee, whether she's in health care or thin serve or TPG or any of them.
Businesses.
We can meet the moment and this team is in a position to accelerate growth as Debbie said in the back half of this year, but you know we'll take our Lincoln for Q4, but we believe this is a multi multiyear growth opportunity and we are set up for success over the long term got.
Got it thanks, so much.
Your next question comes from the line of Brian Fitzgerald from Wells Fargo. Your line is open.
Thanks, guys, maybe two kind of follow ups from the first one is on seats and completes.
Date on when you may implement that in renewals and do you think you can drive similar uplift in renewals as you have a new enterprise sales and then.
It looks like a bit of a slower start to the year in terms of reported revenue growth. The guide implies that acceleration just wondering if you had any thoughts on how that plays out over the course of the year and the revenue growth trajectory as we exit 'twenty one into 'twenty two.
Yeah, I'll, let debbie elaborate more on the shape of the year, it's annoying to bring up the one time $2 million customer in Q1 of last year, but we told you all it was an anomaly given that the name of the customer and we meant it so.
Play the point per revenue growth in Q1 and 17%.
It's a complete there's absolutely critical we sold over a thousand serve a marquee enterprise deals between April and December 31st we seek to complete buyers understand the model our team did a nice job of landing the messaging and.
And clearly the value proposition is there to warrant the higher price of 25 plus percent higher ltvs. So we've got a big job to deal with going back to our 7000 enterprise logos from your installed base, we couldn't have a better leader and can y'all and Geoff Coleman and team to go back, but clearly we are going to be going back with a message of value and.
Solutions going to value that Tom discussed around how we are helping customers with business outcome. We've got a pretty exciting returned to work from.
Coming up every C suite officer in the World thinking about how she's going to bring the company back to work and those kinds of packaged solution for what's going to drive more value, but also help.
On these renewals.
Great.
It's important to remember seats complete doesn't always the P&L. This year, it's really about your longer term, we pumped based pricing and utilization of those responses, which drive that uplift.
I would just add in terms of the revenue growth trajectory throughout the year in Q1, our guidance is 14% growth at the midpoint and for the full year, we guided to 16% to 18% as a range and so our goal is to accelerate revenue growth throughout the year. So that we can have a strong exit rate and that we're hitting that.
<unk> 18 per cent aggregate annual guidance.
Thanks, Debbie Thanks, Andrew.
Thank you.
Your next question comes from the line of Ron Josey from JMP Securities. Your line is open great.
Great. Thanks for taking the question. This one is probably relatively short one but you know we've spoken a lot about sales force execution I wanted to maybe Debbie you made a comment on the super cycle of investment and talking about where margins are going for <unk> and the full year.
You talked about increased product and go to market investments and so I wanted to start to unpack that Commonwealth more on the product side, just now that you've got to get feedback, Sweden, a slew of new products can you just talk a little bit more about the product focus and where where these investments might be focused on thank you.
Sure I can start and then I'll turn it over two times from ride more specifics.
But ultimately with this super cycle of investment in product, we're looking to invest across all three pillars. We are excited about the opportunity that we have across these three pillars in surveys we're investing in the further development of use cases, and the ability to give our sales reps.
More targeted selling motion with the product to back it up.
We have more work to continue to make that an end to end platform to tackle that category and in market Research I think this is just the beginning we've done some great work over the past year with the rollout of concept testing and some other new ideas that we have enough.
And I think that we have even more so that we are going to be investing in as we head into 2021.
True.
Yeah, you nailed it Debbie I'd I'd add that our integrations with partners like zoom and Microsoft teams I think we're super excited about what we're doing and then of course, one of the big areas that I mentioned on the call is AI and ml and that's really about automating insights to save time and that really fits with our agile market positioning and value proposition, we want to make users.
As effective at finding the signal and the noise and pulling that out and that comes with improved data quality and it improves as your gathering data from a wide range of sources and mapping that with data inside your enterprise. So AI and ml is going to be a big part of the Super cycle of investment and we're Super excited about the competitive advantage that gives us and our agile positioning.
Super helpful. Thank you.
Your next question comes from the line of Joshua Reilly from Needham and company. Your line is open.
Hey, guys. This is Josh on for Ryan a couple of questions here.
First off you know self self service was strong in the quarter I know, we haven't talked about that much share yet but.
We know earlier in 2020 you discussed.
The sign ups are really strong to the platform do you believe the fourth quarter reserve results here, where we.
Reflection of those sign ups earlier in the year upgrading to paid subscriptions or is this cohort are converting more quickly.
Paid after signing up more recently to the platform and then secondly.
On the self service side, what are you seeing in terms of trends after lowering the paywall on free responses from 140 <unk> earlier this year.
Hey, Josh you sound like somebody who might be interesting working on our growth marketing team. These are all the kinds of.
Important experimentation, we think about that balance.
Delivery of value with the the.
The pricing recharged.
On your first question no the.
The enterprise relationship with self serve here.
We have such a large cohort of customers who sign up for free accounts every day 40, or 50000 people that the funnel is pretty well tuned and we have very good visibility in terms of the you know what.
The cycle of conversion from free to pay it so not much of a not much connectivity between the early COVID-19 sign ups with force.
So it's a much shorter.
Cycle. Your second question. It's important we continue to experiment across engineering marketing product.
Pricing.
The optimal presentation of our Skus.
You've seen new features we've offered in the platform.
Jean teams has obviously been an important contributor we loved the retention rates associated with teams because we had multiple users honesty multiple credit cards less churn more sharing of the data.
But we just continue to get better and better and as we launch new features and new capabilities that presents new variables for our growth marketing team to evaluate this.
This is an evergreen area that for us to continue to drive low double digit rate growth.
Okay, Great and then maybe just a second question here. If you look at the recent quad strength IPO I think.
Really good part of the story there obviously is the opportunity for market research.
That area of the CX market from some work that we've done maybe a bit less competitive.
What youre seeing in the market and then how should we think about the uptake of the product within the base of enterprise survey customers versus net new customers coming to the platform.
It's a great. It's a great question, let me take it in several different ways first off.
Market research is a massive tam and it's only going to be bigger in a post COVID-19 world as companies need to do more research to understand their target market their targeted campaigns specific products backed employee benefits et cetera, one of our favorite new customers in the last year's chime really.
Got you know mobile banking kind of financial services company. They did a big Jersey sponsorship with the Dallas Mavericks and use our market research platform to evaluate the efficacy of that.
We think theres going to be huge disruption in this market, we want to be a player in that we're already seeing really good results. We put a woman named Priyanka car in the general manager surrounded her with a really fine team that going after a much much higher <unk> than you've seen particularly in our survey very because in fin serve autos TPG health care.
Huge dollars are spent by the insights from market research folks who understand those core variables. It helps you get success out of the.
Whatever investment you're making so we think this is a big market, it's competitive, but it's largely competitive with legacy players professional services expenses and we're disrupting that software the pumps that we continue to rollout new solutions around brand tracking concept testing, which give specific buyers are real helpful solution for whatever business outcome that Tracy.
Thank you operator, we'll take one more question. Thank you certainly and your final question comes from the line of Parker Lane from Stifel. Your line is open.
Yeah. Thank you. Thanks for taking my question. So vendor you briefly touched on in our return to work as a.
Catalysts going forward, but I'm wondering if you could talk more broadly around the demand trends youre seeing for sort of employee facing surveys and I guess, even the engage tool that you have is that an area of the business that they can play a much more significant.
Roll in 'twenty, 'twenty, one and beyond when we think about more distributed workforces and some of the announcements we've seen from.
A large tech companies in your neck of the Woods recently.
Absolutely I mean, if you look at this issue today the longer we're in Covid. The more you have to go back to first principles and ask how everything's going to work and I never thought Ceos and others would be discussing things like elevator protocols and bathroom protocols and how youre going to feed employees and plexiglass between tubes, and why are we going to the office.
But we are all being forced to ask ourselves is really fundamental questions. I mean, the days of asking somebody to commute 60 minutes three office to come and do email and meet me room to talk to people on zoom and deal with latency with half the people in the room and half from them.
Yeah. Those days are over we have got to be more prescriptive prescriptive about what collaboration design session sales railroads are going to happen and why you're bringing people back to your office every C. Suite leader is doing survey today and asking critical question day measuring those cohorts across the world and understanding the longitudinal analysis. The HR role has been elevated to the most important position.
And the company, we're seeing a ton of engagement utility across every month and we've really adjusted a lot of engage attributes into the core survey monkey platform and putting package solutions in that core platform to help our customers. So youre going to see us rollout more functionality here, you'll see us talk about it in marketing and it'll be a big pivotal driver of sales as it is.
Top of mind issue for some of these C suite leaders across every geo in every vertical.
Yes.
Chime in with the Telehealth health care patient experience this used to be simply the domain of like a subset of the health care industry. It is the entire healthcare industry now that is a huge space for us to steer into and then in some sense every company has become conscious of health care issues and needs to really manage and track that and so these are some of the solution areas.
But we find just are huge opportunities for us to steer into and our customers and our prospects are dragging us in that direction. So it's a great opportunity then throw in zoom and like remote work, we've got giant spaces to step into and our brand name and our ease of use and our accessibility are just huge assets there.
Instead, it all changed who you are actually targeting inside of organizations from a go to market perspective. It would strike me that theres more HR leadership that would be involved there and maybe even elevating all the way up to the C suite and event in cases, where you are not already having those conversations.
How do we think.
We're working with consultants as well I was on a zoom call with our head of HR. This week the.
The HR buyer, if he or she was ever asking for budget.
This year, they're getting because there is no more critical issue for the since we'd even the board in terms of how do we provide a safe and inclusive environment for our employees to do their best work. We are all totally reliant on our people and we want to make sure we give them the kind of environment in a new world, where we're also learning there's a lot left to do.
Yes, thanks again for taking the questions.
Thank you.
And we have reached the allotted time for Q&A I'd like to turn the call back over to CEO Zander Lurie for closing remarks, Sir.
Well. Thank you so much we definitely appreciate all of your continued interest in survey Monkey frankly, I Miss seeing you all at conferences I Miss seeing.
Continue on bus tours to our office, we're going to compete and try and win in.
Zoom environment, but it does make some of these are these calls a little lesson connect we began this year in a position of strength across our team with our products and we are committed to the strategy to further move up market drive long term growth.
We've got 25 plus percent revenue growth. We believe is possible. We look forward to connecting with you all this quarter at JMP Bahrenburg and true.
Wish you all and your families.
The recovery during this COVID-19 period, and thank you and have a good day.
This concludes today's conference call you may now disconnect.
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