Earnings

SurveyMonkey (SVMK) 1st Quarter Earnings: What to Expect

SVKM, Inc. (SVKM), parent of SurveyMonkey, will report first quarter fiscal 2019 earnings results after the closing bell Wednesday. The young company will look to bounce back from a tough Q4 report, which resulted in 17% drop in the stock price.

For the quarter that ended March, Wall Street expect the San Mateo-based company to post a per-share loss of 3 cents on revenue of $68.15 million. This compares to the fourth quarter when the loss was 3 cents per share on revenue of $67.93 million. For the full year, ending in December, the loss is expected to be 7 cents per share, while full-year revenue is expected to rise 15.4% year over year to $293.56 million.

Despite the stock’s post-Q4 result decline, it wasn’t all bad news. The company delivered a Q4 revenue beat, which rose 19% to $67.9 million, topping the Street's forecast of $65.9 million. The beat was driven by the Teams plan launch as well as the enterprise business, which is has shown growth momentum. What’s more, the company saw a 7% rise in paying users which rose to nearly 647,000 and further underscoring the payoff of its enterprise strategy.

Since the arrival of CEO Zander Lurie, the San Mateo-based company decided to shift its focus from acquiring single users off its free service to targeting the more lucrative enterprise customers. Launched in 2016, the enterprise version of its platform can easily integrate into enterprise applications from Salesforce (CRM), Microsoft (MSFT) and Slack, among others enterprise tools its customers are already familiar with where customers would only then need to insert the survey data.

Revenue of enterprise products as well as increased adoption of self-serve Team plans has been a major growth driver for the company, leading to 2018 revenue of $254.3 million, marking a 16% increase. What’s more, the company reported 646,727 paid users in the fourth quarter, up 7% year over year. Of that total, enterprise customers rose nearly 30% year over year. And there’s still tons of room for growth, given that only 13% of the company’s 2018 revenue comes from enterprise customers.

On Wednesday Wall Street will want to see if these positive growth trends can continue. James Rutherford, vice president and research analyst for financial services firm Stephens, expects the company’s enterprise customers to account for 20% of the company's revenue by the end of 2020. This is because SurveyMonkey's enterprise version, which integrates collaboration tools and enhanced security, also allows companies increased functionality to customize surveys to fit their brands.

Rutherford, who also cited an increase the company’s enterprise sales hiring, forecasts long-term enterprise revenue to account for 50% of SurveyMonkey’s total revenue. On Wednesday Wall Street will also want to know about the company’s recent acquisition of Amsterdam-based Usabilla for $80 million. The deal aims to serve two purposes: Increase the company’s enterprise business, while bolstering its international presence.

Usabilla’s 450 customers, which includes Lufthansa, Philips and Vodafone, immediately increases the stature of SurveyMonkey and the potential of its international reach. So while the Q4 numbers and guidance weren’t breathtaking, I believe SurveyMonkey is worth a bet here ahead of, let’s say, Wednesday’s survey results.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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