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News Release

SurveyMonkey Announces Third Quarter 2018 Financial Results

November 13, 2018 at 4:05 PM EST

SAN MATEO, Calif., Nov. 13, 2018 (GLOBE NEWSWIRE) -- SurveyMonkey Inc. (SurveyMonkey), a leading global survey software company, today announced that its parent company, SVMK Inc. (Nasdaq: SVMK, and collectively with SurveyMonkey referred to as "SVMK," "we" or "us"), reported financial results for the third quarter ended September 30, 2018, and posted a shareholder letter with complete third quarter 2018 financial results and management commentary on its investor relations website.

Q3 2018 Financial Highlights

  • Revenue of $65.2 million, an increase of 18% year over year. Core revenue, which excludes $0.4 million in revenue related to the non-self-serve portion of SurveyMonkey Audience in Q3 2017 (the final quarter with reported revenue), increased 19% year over year. Strength across the business drove our results.
     
  • GAAP operating margin of (145%) and non-GAAP operating margin of 10%.
     
  • GAAP operating margin and net loss for Q3 2018 included $89.9 million in stock-based compensation expense related to the achievement of the liquidity event-related performance condition in connection with our initial public offering (IPO) for certain restricted stock units that met their service-based vesting condition as of the end of Q3 2018 and $1.2 million in employer payroll tax expense related to these restricted stock units.
     
  • Q3 2018 net loss was ($102.4) million, largely due to the IPO-related stock-compensation charge. Adjusted EBITDA was $17.0 million.
     
  • Net cash provided by operating activities of $12.0 million and unlevered free cash flow of $11.4 million.

"We are off to a great start as a public company resulting from our strong execution and focus," said SurveyMonkey CEO, Zander Lurie. "SurveyMonkey was built on the belief that empowering individuals across organizations to engage with their key constituents is paramount to success. The importance of organizations understanding the voices and opinions of their customers and employees is more acute than ever. I'm confident in our strategy, our competitive position and the team we have to execute against our global opportunity."

"We delivered healthy revenue growth and robust cash flow in the third quarter," said SurveyMonkey CFO & COO, Tim Maly. "We see continued momentum in our core self-serve channel and acceleration in our sales-assisted channel with our enterprise-grade survey platform and suite of purpose-built software solutions. We see a steady path to higher monetization selling our new products into our large footprint of organizations with active SurveyMonkey usage."

Q4 2018 and FY 2018 Financial Outlook

Q4 2018
Revenue $64.8 million - $66.8 million 14% - 17% YoY growth
Non-GAAP operating margin 2% - 3%  

 

FY 2018
Revenue $251.2 million - $253.2 million 17% - 18% YoY growth*
Non-GAAP operating margin 6%  
Unlevered free cash flow $43 million - $45 million 17% - 18% margin

*YoY growth rate for FY 2018 reflects Core revenue growth

Initial Public Offering and Concurrent Private Placement with Salesforce Ventures LLC

On September 28, 2018, we completed our IPO and a concurrent private placement with Salesforce Ventures LLC, in which we issued and sold an aggregate of 20,583,333 shares of our common stock at $12 per share. Proceeds from the IPO and concurrent private placement, net of underwriters' discounts, commissions, and offering costs totaled $225.3 million.

Debt Refinancing

In October 2018, we refinanced our 2017 Credit Facility and paid down $101.3 million of our existing debt.

Conference Call Information

We will host a conference call today to review our third quarter financial results and to discuss our business results and financial outlook. This call is scheduled to begin at 2:00 p.m. PT / 5:00 p.m. ET and can be accessed by dialing (866) 417-2046 from the United States or (409) 217-8231 internationally with reference to the company name and conference title, and a live webcast and replay of the conference call can be accessed from the SurveyMonkey investor relations website at investor.surveymonkey.com. Following the completion of the call, a telephonic replay will be available through 11:59 PM ET on November 20, 2018 at (855) 859-2056 from the United States or (404) 537-3406 internationally with recording access code 9976356#.

Upcoming Events

Zander Lurie, CEO, will be presenting at the 2018 Credit Suisse Technology, Media & Telecom Conference in Scottsdale, AZ, on Tuesday, November 27, 2018. A live webcast will be accessible from the SurveyMonkey investor relations website. Following the event, a replay will be made available at the same location.

About SurveyMonkey

Founded in 1999, SurveyMonkey changed the way people gather feedback by making it easy for anyone to create their own online surveys. Our mission is to power curious individuals and organizations around the globe to measure, benchmark and act on the opinions that drive success. Our People Powered Data platform enables organizations of any size to have conversations at scale to deliver impactful customer, employee and market insights. Our 750+ employees are dedicated to fueling the curiosity of over 16 million active users globally.

Source: SurveyMonkey Inc.

Investor Relations Contact:
SurveyMonkey
Karim Damji
investors@surveymonkey.com

Media Contact:
SurveyMonkey
Irina Efremova
irinae@surveymonkey.com

or

Brunswick Group
Darren McDermott
surveymonkey@brunswickgroup.com

 

   
SVMK INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
 
   
 (in thousands)   September 30, 2018     December 31, 2017  
Assets                
Current assets:                
Cash and cash equivalents   $ 257,120     $ 35,345  
Accounts receivable, net of allowance     7,251       5,429  
Deferred commissions, current     1,749       1,225  
Prepaid expenses and other current assets     8,049       5,056  
Total current assets     274,169       47,055  
Property and equipment, net     124,750       131,331  
Capitalized internal-use software, net     34,889       41,493  
Acquisition intangible assets, net     10,357       13,594  
Goodwill, net     336,861       336,861  
Deferred commissions, non-current     2,814       2,006  
Other assets     6,471       5,749  
Total assets   $ 790,311     $ 578,089  
Liabilities and stockholders' equity                
Current liabilities:                
Accounts payable   $ 6,262     $ 3,380  
Accrued expenses and other current liabilities     14,442       10,173  
Accrued compensation     15,499       14,910  
Deferred revenue     101,097       84,818  
Debt, current     103,282       2,032  
Total current liabilities     240,582       115,313  
Deferred tax liabilities     4,599       4,168  
Debt, non-current     213,514       316,289  
Financing obligation on leased facility     92,349       93,385  
Other non-current liabilities     11,788       8,891  
Total liabilities     562,832       538,046  
Commitments and contingencies                
Stockholders' equity:                
Preferred stock            
Common stock     1       1  
Additional paid-in capital     534,863       217,594  
Accumulated other comprehensive income (loss)     (315 )     19  
Accumulated deficit     (307,070 )     (177,571 )
Total stockholders' equity     227,479       40,043  
Total liabilities and stockholders' equity   $ 790,311     $ 578,089  


 

   
SVMK INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
 
   
    Three Months Ended September 30,     Nine Months Ended September 30,  
(in thousands, except per share amounts)   2018     2017     2018     2017  
Revenue   $ 65,205     $ 55,309     $ 186,392     $ 161,761  
Cost of revenue(1)(2)     23,213       16,241       58,967       47,083  
Gross profit     41,992       39,068       127,425       114,678  
Operating expenses:                                
Research and development(1)     51,765       14,910       85,997       39,890  
Sales and marketing (1)(2)     34,309       18,878       71,609       55,791  
General and administrative(1)     50,391       11,169       76,809       35,298  
Restructuring           2       33       147  
Total operating expenses     136,465       44,959       234,448       131,126  
Loss from operations     (94,473 )     (5,891 )     (107,023 )     (16,448 )
Interest expense     7,496       6,714       22,181       20,030  
Other non-operating income (expense), net     (219 )     774       132       7,950  
Loss before income taxes     (102,188 )     (11,831 )     (129,072 )     (28,528 )
Provision for income taxes     174       1,151       470       3,551  
Net loss   $ (102,362 )   $ (12,982 )   $ (129,542 )   $ (32,079 )
Net loss per share, basic and diluted   $ (0.99 )   $ (0.13 )   $ (1.27 )   $ (0.32 )
Weighted-average shares used in computing basic and diluted net loss per share     103,096       100,584       101,984       100,056  

(1) Includes stock-based compensation, net of amounts capitalized as follows:

    Three Months Ended September 30,     Nine Months Ended September 30,  
(in thousands)   2018     2017     2018     2017  
Cost of revenue   $ 6,472     $ 634     $ 7,776     $ 1,870  
Research and development     37,490       2,799       43,903       7,065  
Sales and marketing     14,496       1,322       16,411       6,622  
General and administrative     40,354       3,667       48,014       10,806  
Stock-based compensation, net of amounts capitalized   $ 98,812     $ 8,422     $ 116,104     $ 26,363  

(2) Includes amortization of acquisition intangible assets as follows:

    Three Months Ended September 30,     Nine Months Ended September 30,  
(in thousands)   2018     2017     2018     2017  
Cost of revenue   $ 488     $ 488     $ 1,464     $ 1,552  
Sales and marketing     565       604       1,773       1,817  
Amortization of acquisition intangible assets   $ 1,053     $ 1,092     $ 3,237     $ 3,369  


 

   
SVMK INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
 
   
    Nine Months Ended September 30,  
(in thousands)   2018     2017  
Cash flows from operating activities                
Net loss   $ (129,542 )   $ (32,079 )
Adjustments to reconcile net loss to net cash provided by operating activities:                
Depreciation and amortization     34,013       30,048  
Stock-based compensation expense, net of amounts capitalized     116,104       26,363  
Amortization of deferred commissions     1,107       688  
Recovery of long-term note receivable           (1,000 )
Amortization of debt discount and issuance costs     726       635  
Deferred income taxes     431       3,023  
Gain on sale of a private company investment and other     (765 )     (6,444 )
Changes in assets and liabilities:                
Accounts receivable     (1,822 )     1,497  
Prepaid expenses and other assets     (5,451 )     (1,098 )
Accounts payable and accrued liabilities     4,596       (2,189 )
Accrued interest on financing lease obligation, net of payments     (1,036 )     4,894  
Accrued compensation     (648 )     (730 )
Deferred revenue     16,269       7,317  
Net cash provided by operating activities     33,982       30,925  
Cash flows from investing activities                
Purchases of property and equipment     (8,811 )     (26,158 )
Capitalized internal-use software     (8,857 )     (11,771 )
Proceeds from sale of a private company investment and other     999       15,453  
Net cash used in investing activities     (16,669 )     (22,476 )
Cash flows from financing activities                
Proceeds from initial public offering, net of underwriters' discounts and concurrent private placement     232,509        
Payments of deferred offering costs     (1,487 )      
Proceeds from stock option exercises     440       128  
Employee payroll taxes paid related to net share settlement of restricted stock units     (24,566 )     (5,431 )
Payments to repurchase common stock     (16 )     (144 )
Proceeds from term and revolving debt issuance           298,500  
Repayment of debt     (2,250 )     (298,133 )
Payment of debt issuance costs and other           (1,666 )
Proceeds from tenant improvement allowances under lease financing obligation           8,281  
Net cash provided by financing activities     204,630       1,535  
Net increase in cash, cash equivalents and restricted cash     221,943       9,984  
Cash, cash equivalents and restricted cash at beginning of period     35,345       23,287  
Cash, cash equivalents and restricted cash at end of period   $ 257,288     $ 33,271  
Supplemental cash flow data:                
Interest paid for term debt   $ 16,445     $ 14,951  
Interest paid for financing obligation on leased facility   $ 6,114     $  
Income taxes paid   $ 246     $ 357  
Non-cash investing and financing transactions:                
Stock compensation included in capitalized software costs   $ 1,251     $ 2,510  
Accrued unpaid capital expenditures and capitalized software development costs   $ 600     $ 5,862  
Accrued unpaid payroll taxes related to net share settlement and offering costs   $ 6,924     $  
Reconciliation of cash, cash equivalents and restricted cash:                
Cash and cash equivalents   $ 257,120     $ 33,271  
Restricted cash (included in other assets)   $ 168     $  
Total cash, cash equivalents and restricted cash at end of period   $ 257,288     $ 33,271  

 

 

   
SVMK INC.
RECONCILIATION OF GAAP TO NON-GAAP DATA (unaudited) (1)
 
   
    Three Months Ended September 30, 2018  
(in thousands, except percentages and per share amounts)   GAAP   GAAP
% of Revenue(3)
    Stock-based compensation,
net
    Amortization
of
intangible assets
    Employer
payroll taxes
on
Performance RSUs
    Non-GAAP   Non-GAAP
% of Revenue(3)
 
Revenue   $ 65,205     100.0 %   $     $     $     $ 65,205     100.0 %
Cost of revenue     23,213     35.6 %     (6,472 )     (488 )     (103 )     16,150     24.8 %
Gross profit     41,992     64.4 %     6,472       488       103       49,055     75.2 %
Operating expenses:                                                    
Research and development     51,765     79.4 %     (37,490 )           (456 )     13,819     21.2 %
Sales and marketing     34,309     52.6 %     (14,496 )     (565 )     (228 )     19,020     29.2 %
General and administrative     50,391     77.3 %     (40,354 )           (396 )     9,641     14.8 %
Total operating expenses     136,465     209.3 %     (92,340 )     (565 )     (1,080 )     42,480     65.1 %
(Loss) Income from operations     (94,473 )   (144.9 )%     98,812       1,053       1,183       6,575     10.1 %
Interest expense     7,496     11.5 %                       7,496     11.5 %
Other non-operating income (expense), net     (219 )   (0.3 )%                       (219 )   (0.3 )%
Loss before income taxes     (102,188 )   (156.7 )%     98,812       1,053       1,183       (1,140 )   (1.7 )%
Provision for income taxes(2)     174     0.3 %           (139 )           35     0.1 %
Net loss   $ (102,362 )   (157.0 )%   $ 98,812     $ 1,192     $ 1,183     $ (1,175 )   (1.8 )%
Net loss per share, basic and diluted   $ (0.99 )                                 $ (0.01 )      
Weighted-average shares used in computing basic and diluted net loss per share     103,096                                     103,096        

(1)  Please see Appendix A for explanation of non-GAAP measures used.
(2)  Due to the full valuation allowance on our US deferred tax assets, there were no tax effects associated with the Non-GAAP adjustments for stock-based compensation, net, employer payroll taxes on Performance RSUs. Non-GAAP adjustments to our provision for income taxes pertains to deferred tax expense related to amortization of acquisition intangible assets.
(3)  Percentages may not sum due to rounding.

      

   
SVMK INC.
RECONCILIATION OF GAAP TO NON-GAAP DATA (unaudited) (1)
 
   
    Three Months Ended September 30, 2017  
(in thousands, except percentages and per share amounts)   GAAP   GAAP
% of Revenue(3)
    Stock-based
compensation, net
    Amortization
of
intangible assets
    Restructuring     Non-GAAP   Non-GAAP
% of Revenue(3)
 
Revenue   $ 55,309     100.0 %   $     $     $     $ 55,309     100.0 %
Cost of revenue     16,241     29.4 %     (634 )     (488 )           15,119     27.3 %
Gross profit     39,068     70.6 %     634       488             40,190     72.7 %
Operating expenses:                                                    
Research and development     14,910     27.0 %     (2,799 )                 12,111     21.9 %
Sales and marketing     18,878     34.1 %     (1,322 )     (604 )           16,952     30.6 %
General and administrative     11,169     20.2 %     (3,667 )                 7,502     13.6 %
Restructuring     2     %                 (2 )         %
Total operating expenses     44,959     81.3 %     (7,788 )     (604 )     (2 )     36,565     66.1 %
(Loss) Income from operations     (5,891 )   (10.7 )%     8,422       1,092       2       3,625     6.6 %
Interest expense     6,714     12.1 %                       6,714     12.1 %
Other non-operating income (expense), net     774     1.4 %                       774     1.4 %
Loss before income taxes     (11,831 )   (21.4 )%     8,422       1,092       2       (2,315 )   (4.2 )%
Provision for income taxes(2)     1,151     2.1 %           (1,091 )           60     0.1 %
Net loss   $ (12,982 )   (23.5 )%   $ 8,422     $ 2,183     $ 2     $ (2,375 )   (4.3 )%
Net loss per share, basic and diluted   $ (0.13 )                                 $ (0.02 )      
Weighted-average shares used in computing basic and diluted net loss per share     100,584                                     100,584        

(1)  Please see Appendix A for explanation of non-GAAP measures used.
(2)  Due to the full valuation allowance on our US deferred tax assets, there were no tax effects associated with the Non-GAAP adjustments for stock-based compensation, net, and restructuring. Non-GAAP adjustments to our provision for income taxes pertains to deferred tax expense related to amortization of acquisition intangible assets.
(3)  Percentages may not sum due to rounding.

 

   
SVMK INC.
RECONCILIATION OF GAAP TO NON-GAAP DATA (unaudited) (1)
 
   
    Nine Months Ended September 30, 2018  
(in thousands, except percentages and per share amounts)   GAAP   GAAP
% of Revenue(3)
    Stock-based compensation,
net
    Amortization
of intangible assets
    Restructuring     Gain on sale
of a private company investment
    Employer payroll taxes
on Performance RSUs
    Non-GAAP   Non-GAAP
% of Revenue(3)
 
Revenue   $ 186,392     100.0 %   $     $     $     $     $     $ 186,392     100.0 %
Cost of revenue     58,967     31.6 %     (7,776 )     (1,464 )                 (103 )     49,624     26.6 %
Gross profit     127,425     68.4 %     7,776       1,464                   103       136,768     73.4 %
Operating expenses:                                                                    
Research and development     85,997     46.1 %     (43,903 )                       (456 )     41,638     22.3 %
Sales and marketing     71,609     38.4 %     (16,411 )     (1,773 )                 (228 )     53,197     28.5 %
General and administrative     76,809     41.2 %     (48,014 )                       (396 )     28,399     15.2 %
Restructuring     33     %                 (33 )                     %
Total operating expenses     234,448     125.8 %     (108,328 )     (1,773 )     (33 )           (1,080 )     123,234     66.1 %
(Loss) Income from operations     (107,023 )   (57.4 )%     116,104       3,237       33             1,183       13,534     7.3 %
Interest expense     22,181     11.9 %                                   22,181     11.9 %
Other non-operating income (expense), net     132     0.1 %                       (999 )           (867 )   (0.5 )%
Loss before income taxes     (129,072 )   (69.2 )%     116,104       3,237       33       (999 )     1,183       (9,514 )   (5.1 )%
Provision for income taxes(2)     470     0.3 %           (417 )                       53     %
Net loss   $ (129,542 )   (69.5 )%   $ 116,104     $ 3,654     $ 33     $ (999 )   $ 1,183     $ (9,567 )   (5.1 )%
Net loss per share, basic and diluted   $ (1.27 )                                                 $ (0.09 )      
Weighted-average shares used in computing basic and diluted net loss per share     101,984                                                     101,984        

(1)  Please see Appendix A for explanation of non-GAAP measures used.
(2)  Due to the full valuation allowance on our US deferred tax assets, there were no tax effects associated with the Non-GAAP adjustments for stock-based compensation, net, restructuring, gain on sale of a private company investment, and employer payroll taxes on Performance RSUs. Non-GAAP adjustments to our provision for income taxes pertains to deferred tax expense related to amortization of acquisition intangible assets.   
(3)  Percentages may not sum due to rounding.
        
       

   
SVMK INC.
RECONCILIATION OF GAAP TO NON-GAAP DATA (unaudited) (1)
 
   
    Nine Months Ended September 30, 2017  
(in thousands, except percentages and per share amounts)   GAAP   GAAP
% of Revenue(3)
    Stock-based compensation, net     Amortization of intangible assets     Restructuring     Gain on sale of a private company investment     Loss on debt extinguishment     Acquisition-related costs     Financing costs     Non-GAAP   Non-GAAP
% of Revenue(3)
 
Revenue   $ 161,761     100.0 %   $     $     $     $     $     $     $     $ 161,761     100.0 %
Cost of revenue     47,083     29.1 %     (1,870 )     (1,552 )                                   43,661     27.0 %
Gross profit     114,678     70.9 %     1,870       1,552                                     118,100     73.0 %
Operating expenses:                                                                                    
Research and development     39,890     24.7 %     (7,065 )                                         32,825     20.3 %
Sales and marketing     55,791     34.5 %     (6,622 )     (1,817 )                                   47,352     29.3 %
General and administrative     35,298     21.8 %     (10,806 )                             (347 )     (3,175 )     20,970     13.0 %
Restructuring     147     0.1 %                 (147 )                                 %
Total operating expenses     131,126     81.1 %     (24,493 )     (1,817 )     (147 )                 (347 )     (3,175 )     101,147     62.5 %
(Loss) Income from operations     (16,448 )   (10.2 )%     26,363       3,369       147                   347       3,175       16,953     10.5 %
Interest expense     20,030     12.4 %                                               20,030     12.4 %
Other non-operating income (expense), net     7,950     4.9 %                       (6,750 )     194                   1,394     0.9 %
Loss before income taxes     (28,528 )   (17.6 )%     26,363       3,369       147       (6,750 )     194       347       3,175       (1,683 )   (1.0 )%
Provision for income taxes(2)     3,551     2.2 %           (3,274 )                                   277     0.2 %
Net loss   $ (32,079 )   (19.8 )%   $ 26,363     $ 6,643     $ 147     $ (6,750 )   $ 194     $ 347     $ 3,175     $ (1,960 )   (1.2 )%
Net loss per share, basic and diluted   $ (0.32 )                                                                 $ (0.02 )      
Weighted-average shares used in computing basic and diluted net loss per share     100,056                                                                     100,056        

(1)  Please see Appendix A for explanation of non-GAAP measures used.
(2)  Due to the full valuation allowance on our US deferred tax assets, there were no tax effects associated with the Non-GAAP adjustments for stock-based compensation, net, restructuring, gain on sale of a private company investment, loss on debt extinguishment, acquisition-related costs and financing costs. Non-GAAP adjustments to our provision for income taxes pertains to deferred tax expense related to amortization of acquisition intangible assets.
(3)  Percentages may not sum due to rounding.

 

 

   
SVMK INC.
RECONCILIATION OF GAAP TO NON-GAAP DATA (unaudited) (1)
 
   
Calculation of Core Revenue  
   
    Three Months Ended     Nine Months Ended  
(in thousands)   September 30,
2018
    September 30,
2017
    September 30,
2018
    September 30,
2017
 
Revenue   $ 65,205     $ 55,309     $ 186,392     $ 161,761  
Non-self-serve SurveyMonkey Audience revenue           (399 )           (4,789 )
Core revenue   $ 65,205     $ 54,910     $ 186,392     $ 156,972  

Calculation of Unlevered Free Cash Flow

    Three Months Ended     Nine Months Ended  
(in thousands)   September 30,
2018
    September 30,
2017
    September 30,
2018
    September 30,
2017
 
Net cash provided by operating activities   $ 11,951     $ 16,160     $ 33,982     $ 30,925  
Purchases of property and equipment, net(2)     (4,002 )     (4,925 )     (8,811 )     (17,877 )
Capitalized internal-use software     (3,390 )     (3,240 )     (8,857 )     (11,771 )
Interest paid for term debt     5,632       4,912       16,445       14,951  
Deferred acquisition related payment                       7,700  
Third-party fees related to credit facility refinancing                       4,314  
Employer payroll taxes on Performance RSUs     1,183             1,183        
Unlevered free cash flow   $ 11,374     $ 12,907     $ 33,942     $ 28,242  

Calculation of Adjusted EBITDA

    Three Months Ended     Nine Months Ended  
(in thousands)   September 30,
2018
    September 30,
2017
    September 30,
2018
    September 30,
2017
 
Net loss   $ (102,362 )   $ (12,982 )   $ (129,542 )   $ (32,079 )
Provision for income taxes     174       1,151       470       3,551  
Other non-operating expenses (income), net     219       (774 )     (132 )     (7,950 )
Interest expense(3)     7,496       6,714       22,181       20,030  
Depreciation & amortization(4)     11,468       10,727       35,120       30,736  
Stock-based compensation, net     98,812       8,422       116,104       26,363  
Restructuring costs           2       33       147  
Acquisition-related costs                       347  
Financing costs                       3,175  
Employer payroll taxes on Performance RSUs     1,183             1,183        
Adjusted EBITDA   $ 16,990     $ 13,260     $ 45,417     $ 44,320  

(1)  Please see Appendix A for explanation of non-GAAP measures used.
(2)  Includes reimbursement of tenant improvement allowances under our lease financing obligation of $1.9 million for the three months September 30, 2017 and $8.3 million for the nine months September 30, 2017.
(3)  Includes interest expense on our credit facilities and financing lease obligations related to our corporate headquarters.
(4)  Includes amortization of deferred commissions.

 

APPENDIX A

SVMK INC.
EXPLANATION OF NON-GAAP MEASURES

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with US GAAP ("GAAP"), we use the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating loss, non-GAAP net loss, non-GAAP net loss per share, adjusted EBITDA and unlevered free cash flow. Our definition for each non-GAAP measure used is provided below, however a limitation of non-GAAP financial measures are that they do not have uniform definitions. Accordingly, our definitions for non-GAAP measures used will likely differ from similarly titled non-GAAP measures used by other companies thereby limiting comparability.

With regards to the Non-GAAP guidance provided above, a reconciliation to the corresponding GAAP amounts are not provided as the quantification of certain items excluded from each respective non-GAAP measure, which may be significant, cannot be reasonably calculated or predicted at this time without unreasonable efforts.  For example, the non-GAAP adjustment for stock-based compensation expense, net, requires additional inputs such as number of shares granted and market price that are not currently ascertainable.

Non-GAAP gross profit, non-GAAP gross margin: We define non-GAAP gross profit as GAAP gross profit less stock-based compensation, net, less amortization of intangible assets, and less employer payroll taxes on Performance RSUs. Non-GAAP gross margin is defined as non-GAAP gross profit divided by revenue.

Non-GAAP operating loss: We define non-GAAP operating loss as GAAP operating loss less stock-based compensation, net, less amortization of intangible assets, less restructuring, less acquisition-related costs, less financing costs, and less employer payroll taxes on Performance RSUs.

Non-GAAP net loss, non-GAAP net loss per share: We define non-GAAP net loss as GAAP net loss less stock-based compensation, net, less amortization of intangible assets, less restructuring, less gain on sale of a private company investment, less loss on debt extinguishment, less acquisition-related costs, less financing costs and less employer payroll taxes on Performance RSUs. Non-GAAP net loss per share is defined as non-GAAP net loss divided by the weighted-average shares outstanding.

We use these non-GAAP measures to compare and evaluate our operating results across periods in order to manage our business, for purposes of determining executive and senior management incentive compensation, and for budgeting and developing our strategic operating plans. We believe that these non-GAAP measures provide useful information about our operating results, enhance the overall understanding of our past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by our management in evaluating our financial performance and for operational decision making, but they are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.

We have excluded the effect of the following items from the aforementioned non-GAAP measures because they are non-cash and/or are non-recurring in nature and because we believe that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance and liquidity. We further believe this measure is useful to investors in that it allows for greater transparency to certain line items in our financial statements and facilitates comparisons to historical operating results and comparisons to peer operating results. A description of the non-GAAP adjustments for the above measures is as follows:

  • Stock-based compensation, net: We incur stock based-compensation expense on a GAAP basis resulting from equity awards granted to our employees. Although stock-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to the revenues earned during the periods presented and also believe it will contribute to the generation of future period revenues, we continue to evaluate our business performance excluding stock-based compensation expenses. Stock-based compensation expenses will recur in future periods.
     
  • Amortization of intangible assets: We incur amortization expense on intangible assets on a GAAP basis resulting from prior acquisitions. Amortization of acquired intangible assets is inconsistent in amount and frequency and is significantly affected by the timing and size of any acquisitions. Investors should note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of acquired intangible assets will recur in future periods.
     
  • Restructuring: Restructuring expenses consist of employee severance and other exit costs. We believe it is useful for investors to understand the effects of these items on our total operating expenses. We expect that restructuring costs will generally diminish over time with respect to past acquisitions and/or strategic initiatives. However, we may incur these expenses in future periods in connection with any new acquisitions and/or strategic initiatives.
     
  • Gain on sale of a private company investment: Gain on sale of a private company investment because it was recognized on a GAAP basis resulting from the sale of certain corporate assets. We expect that such transactions will be infrequent in occurrence and are therefore excluded from our Non-GAAP results as they do not otherwise relate to our core business operations.
     
  • Loss on debt extinguishment: Loss on debt extinguishment was recognized on a GAAP basis resulting from the refinancing of our credit facilities. We expect that such transactions will be infrequent in occurrence and are therefore excluded from our Non-GAAP results as they do not otherwise relate to our core business operations. However, we may incur these expenses in future periods in connection with any new debt refinancing.
     
  • Acquisition-related costs: Acquisition-related costs recognized on a GAAP basis relate to retention payments made to certain employees of acquired companies. We expect that such acquisition-related costs will be inconsistent in amount and frequency and is significantly affected by the timing and size of any acquisitions are therefore excluded from our Non-GAAP results as they do not otherwise relate to our core business operations. However, we may incur these expenses in future periods in connection with any new acquisitions.
     
  • Financing costs: Certain financing costs were incurred on a GAAP basis resulting from the refinancing of our credit refinancing of our credit facilities. We expect that such transactions will be infrequent in occurrence and are therefore the incremental expenses incurred are excluded from our Non-GAAP results as they do not otherwise relate to our core business operations. However, we may incur these expenses in future periods in connection with any new debt refinancing.
     
  • Employer payroll taxes on Performance RSUs: We incurred incremental employer payroll taxes on Performance RSUs during the third quarter of 2018 as a result of our initial public offering. Employer payroll taxes on Performance RSUs are excluded from our Non-GAAP results as we currently do not expect to incur expenses of a similar nature in future periods because we will no longer grant Performance RSUs where a vesting condition is our initial public offering.

For more information on the non-GAAP financial measures, please see the "Reconciliation of GAAP to Non-GAAP Data" section of this press release. The accompanying tables provide details on the GAAP financial measures that are most directly comparable to the non-GAAP financial measures and the related reconciliations between those financial measures.

Core revenue: We define core revenue as revenue from our survey platform, form-based application and purpose-built solutions, excluding the non-self-serve portion of SurveyMonkey Audience, which we generally ceased offering at the end of the second quarter of 2017. We consider core revenue to be an important measure because it excludes revenue from an offering that we generally no longer provide, and so provides a better understanding of our current business and provides comparability of our results of operations over time. Core revenue has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as revenue. Some of the limitations of core revenue are that it does not reflect all of our revenue in the periods presented and that our results of operations for the periods presented reflect expenses that we incurred to generate revenue that is excluded from core revenue.

Adjusted EBITDA: We define adjusted EBITDA as net loss excluding provision for income taxes, other non-operating expenses (income), net, interest expense, depreciation and amortization, stock-based compensation, net, restructuring, acquisition-related costs, financing costs and employer payroll taxes on Performance RSUs. We consider adjusted EBITDA to be an important measure because it helps illustrate underlying trends in our business that could otherwise be masked by the effect of the income or expenses that are not indicative of the core operating performance of our business that are excluded from adjusted EBITDA. Adjusted EBITDA has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of other GAAP financial measures. Some of the limitations of adjusted EBITDA are that it excludes recurring expenses for interest payments, does not reflect the dilution that results from stock-based compensation, and does not reflect the cost to replace depreciated property and equipment. It may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure.

Unlevered free cash flow: Unlevered free cash flow is a liquidity measure used by management in evaluating the cash generated by our operations after purchases of property and equipment and capitalized internal-use software but prior to the impact of our capital structure, the timing of cash payments for certain acquisition and debt related transactions and employer payroll taxes on Performance RSUs. The usefulness of unlevered free cash flow as an analytical tool is limited because it excludes certain items which are settled in cash, does not represent residual cash flow available for discretionary expenses, does not reflect our future contractual commitments, and is calculated differently by other companies in our industry. Accordingly, it should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash provided by operating activities.

Safe Harbor Statement

"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: This press release may contain forward-looking statements about our products, including our investments in products, technology and other key strategic areas. The achievement of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. If any of these risks or uncertainties materialize or if any of the assumptions prove incorrect, the company's results could differ materially from the results expressed or implied by the forward-looking statements the company makes.

The risks and uncertainties referred to above include - but are not limited to - risks related to our ability to retain and upgrade customers; our revenue growth rate; our brand; our marketing strategies; our self-serve business model; the length of our sales cycles; the growth and development of our salesforce; security measures; expectations regarding our ability to timely and effectively scale and adapt existing technology and network infrastructure to ensure that our products and services are accessible at all times; competition; our debt; revenue recognition; our ability to manage our growth; our culture and talent; our data centers;  privacy, security and data transfer concerns, as well as changes in regulations, which could impact our ability to serve our customers or curtail our monetization efforts; litigation and regulatory issues; expectations regarding the return on our strategic investments; execution of our plans and strategies, including with respect to mobile products and features and expansion into new areas and businesses; our international operations; intellectual property; the application of U.S. and international tax laws on our tax structure and any changes to such tax laws; acquisitions we have made or may make in the future; the price volatility of our common stock; and general economic conditions.

Further information on these and other factors that could affect our financial results is included in filings it makes with the Securities and Exchange Commission from time to time, including the section entitled "Risk Factors" in the Form 10-Q that will be filed for the quarter ended September 30, 2018, which should be read in conjunction with these financial results. These documents are or will be available on the SEC Filings section of our Investor Relations website page at investor.surveymonkey.com. All information provided in this release and in the attachments is as of November 13, 2018, and we undertake no obligation to update this information.

 

SVMK logo.png

 

Source: SurveyMonkey Inc.