Earnings Transcript for MNTV - Q3 Fiscal Year 2020

Operator: Ladies and gentlemen, thank you for standing by. My name is Josh, and I will be your conference operator today. At this time, I would like to welcome everyone to SurveyMonkey's Third Quarter 2020 Earnings Call. [Operator Instructions] Thank you. I would now like to hand the conference over to your host, Vice President of Investor Relations, Gary Fuges. Sir, please go ahead.

Gary Fuges: Thank you. Good morning, and welcome to SurveyMonkey's third quarter 2020 earnings call. Joining me on today's call are Zander Lurie, CEO; Tom Hale, 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 with our Q3 2020 financial results and related commentary. Those items were posted on our Investor Relations website at investor.surveymonkey.com. During the course of this call, management will make forward-looking statements, which are subject to various risks and uncertainties, including statements relating to our strategy, investments, revenue, operating margin and cash flow. Actual results may differ materially from the results 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 with the Securities and 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. With that, I'll now turn the call over to Zander.

Zander Lurie: Thank you for joining us today. Q3 was another strong quarter of execution as the SurveyMonkey team delivered once again on both our short-term financial goals and long-term strategic initiatives. We increased revenue 20% year-over-year, added nearly 450 enterprise customers, launched our first unified customer experience offering, the GetFeedback platform and generated more than $16 million in free cash flow. Organizations increasingly need stakeholder feedback to make better management decisions. Better investments, better strategic calls. 75% of companies we’ve surveyed recently say they are finding it necessary to accelerate their digital transformation due to COVID, and 87% say customer feedback has become more important compared to pre-pandemic days. In our view, the urgent need for feedback and the acceleration of digital transformation are secular growth trends that play to our strengths. Agile software, seamless integrations, disruptive pricing. As a result, our powerful, easy-to-use feedback software is resonating with more organizations across both of our go-to-market channels. And our strategy is working

Tom Hale: Thanks, Zander. The team posted another great quarter of product delivery and innovation. Remote work through digital channels is the new normal, making engagement and in-the-moment feedback critical capabilities. In Q3, we expanded our integrations with leading virtual communications and collaboration platforms. In September, we shipped our latest Microsoft Teams app. With expert-built survey templates, sharable analytics and enterprise controls, we are ahead of the curve on the rapidly scaling Teams platform. In October, we announced we’re partnering with Zoom Video Communications to deliver an unparalleled experience for pulse checks, post-meeting feedback, and virtual event engagement. And in August, we shipped our technology ecosystem program STEP to expand our support for 17 top-tier partners like Zendesk, HubSpot, and Gainsight from our base of over 130 other integration partners. This was a banner quarter for our enterprise integrations which are a core piece of our value proposition and differentiation. In Q3, we also delivered key innovations across our core platform to capitalize on our broad footprint inside of enterprises. Our recently announced COVID symptom tracking solution builds our new templates, analytics and automation capabilities, and our HIPAA compliant platform to provide specific value and sharpen our go-to-market. Automotive glass provider Carlex leverages SurveyMonkey Enterprise to deploy daily surveys to its 1,800 employees to track coronavirus risk factors, which resulted in safer work sites and an estimated daily savings of $9,000 in overtime costs. We're excited to bring symptom tracking to market and we look forward to updating you on further solutions efforts as we continue to invest in our products. Turning to market research, we’re innovating rapidly on our platform by expanding on our expert solutions for concept testing. In Q3, we added to our analytics capabilities, enabling customers with, cross tabs, statistical significance, and benchmarks. Our agile research strategy is getting attention from the most discriminating CPG, retail, financial services, and technology customers. For example, Mentholatum, a global health wellness company, used market research solutions to test packaging and messaging concepts with potential customers to get results in days, not months. Today, Mentholatum is one of dozens of early adopters using our expert solutions. It’s early days, but we are seeing increasing traction and velocity as we replace expensive, time consuming services with agile, powerful, and cost-effective software and data. Finally, the team delivered our most exciting product launch of the year, the GetFeedback platform. At our CX Impact Summit, we had more people register than some of our competitors have customers, highlighting the midmarket opportunity and our broad customer footprint. Our message is simple. Customer expectations are changing faster than ever, and companies must be agile to keep up. However, legacy CX offerings aren’t built to help IT resource-constrained CX Teams move quickly or to engage their customers and leverage existing systems of record to drive action. The GetFeedback platform flips the script on CX, enabling underserved companies to realize the value of agile CX and this means providing insights and data in the systems where the work happens, not locking data away in a CX ivory tower. With a new look and feel, new Salesforce-focused capabilities, and the deep feature set from the GetFeedback and Usabilla acquisitions, the GetFeedback platform includes

Debbie Clifford: Thanks, Tom. We continue to execute on the financial strategy we first shared with you in Q1, investing for long-term growth, while balancing for near-term free cash flow. In Q3, we delivered another quarter of strong revenue growth, non-GAAP operating profit, and free cash flow. Unless otherwise noted, all comparisons are year-over-year. Revenue in Q3 was $95.4 million, an increase of 20%. In our enterprise sales channel, revenue grew 53% and accounted for 29% of total revenue compared to 23% in the year ago period and 28% in Q2. The growth in enterprise sales revenue was due to strength in our SurveyMonkey Enterprise, Audience, and Customer Experience offerings. Revenue from our self-serve channel grew 11% in Q3, driven by Teams and continued strong free to paid plan conversion, which was a result of our ongoing refinement of pricing and packaging. Deferred revenue increased 24% to $165 million. Remaining performance obligations, or RPO, which is the sum of deferred revenue and backlog, were $183 million, reflecting 20% growth. As we’ve mentioned previously, in addition to overall bookings growth, an added contributor to growth in both deferred revenue and RPO has been our strategy to migrate our user base from monthly to annual plans. With 87% of our paid users now on annual plans, we anticipate that deferred revenue and RPO growth will continue to normalize toward our revenue growth rate. Non-GAAP gross margin was 80% versus 78% in the year ago period due primarily to revenue growth. Non-GAAP operating margin was 2.2% compared to 3% in Q3 2019 and 2.5% in Q2 2020 due to revenue performance, offset in part by continued investments in R&D and sales and marketing to support our product and go-to-market initiatives. We generated $17.9 million in operating cash flow and $16.2 million in free cash flow, which reflects the revenue growth, the impact of the proactive expense measures we took earlier in the year, and continued optimization of working capital. Our business uniquely drives both strong revenue growth and cash generation. For the year-to-date, we’ve posted free cash flow of $36 million and our cash balance has increased by $75 million. We’ve been able to diligently manage cash while also investing to realize our strategy and drive revenue growth, all against a challenging macroeconomic backdrop. We ended the quarter with $206 million in cash and cash equivalents, an increase of approximately $30 million quarter-over-quarter. We’ve made significant progress in achieving a net neutral debt position. Our total potential liquidity stands at approximately $276 million, which includes capacity of $70 million on our revolving credit facility. Our 2020 financial performance to date is a testament to our growth strategy and the resilience of our business model, which is enabling us to continue to drive revenue growth and free cash flow, while also investing for the long-term. Turning to our outlook. For Q4, we expect revenue to be in the range of $99 million to $101 million or 19% year-over-year growth at the midpoint. We expect non-GAAP operating margin to be in the range of 2% to 4%. Although we have suspended full year guidance due to uncertainty surrounding the pandemic, the midpoints of our Q4 guidance ranges imply full year 2020 revenue of approximately $375 million and full year non-GAAP operating margin of 1.6%, which would put us within the full year revenue and operating margin guidance ranges that we issued before the onset of COVID in February of this year. Our year-to-date financial performance exemplifies the resilience of our model, and our ability to drive sustainable growth and bottom line results, despite the unexpected macroeconomic headwinds brought on by COVID. In summary, our Q3 results show continued execution. Our opportunity is significant, our strategy is sound, and we’re investing prudently to drive durable long-term growth as well as free cash flow. Now I will turn the call back over to Zander.

Zander Lurie: Thanks, Debbie. We have redoubled our commitment to diversity, equity, and inclusion, or DEI, at SurveyMonkey. Throughout the organization, we treat DEI with the same importance as the products we launch and the sales targets we set. Being world-class in this arena enables us to serve our massive global customer base, foster a dynamic employee culture, and deliver for shareholders. Make no mistake, investing in DEI is not only good for our business, it’s the only path to building a long-term winning organization. We are on a journey to make SurveyMonkey and its business relationships more diverse, more equitable, and more inclusive. To that end, I’d like to update you on the progress we’ve made in DEI since our last call. We made further progress on our 2020 diversity goals. Approximately 53% of our Q3 hires identified as women and 27% identified as people of color. We also increased diversity in positions at the Director+ level and invested in new tools and technologies to further help ensure our recruiting processes are inclusive. Additionally, we stood up a team of diversity sourcers to help identify and connect with under-represented talent. Secondly, we kicked off team-wide employee training on racial equity, led by the Justice Collective, a 100% woman-of-color-owned social impact consultancy that centers its work around racial and social equity. These webinars are designed to increase our team’s exposure to important context on the history and ongoing impact of racial injustice; help us develop shared language for DEI concepts; and cultivate agency and competence that will help the team prioritize DEI in our work and in our workplace. Thirdly, our vendor coalition. 23 companies, including Slack, Zoom, Intuit, the Golden State Warriors, representing billions of dollars in aggregate non-employee spending is working to extend our DEI principles to our suppliers. Coalition members are requesting that suppliers complete our survey to identify where they are in their DEI journey. I’ve reached out to 30 suppliers, and we’ve collectively sent our SurveyMonkey DEI survey to about 150 of the coalition’s top vendors. Our goals are simple. To learn about our vendors’ DEI commitments and partner with them to make progress. We want to work with vendors who share our values and steer business away from those who are misaligned. And then lastly, in September we became charter members of The Board Challenge, a movement to increase the representation of Black directors in corporate U.S. boardrooms. True racial representation at the Board level is in the best interest of companies, employees, customers, and communities, and helps to advance and support a more equitable society. We are a Charter Pledge Partner of The Board Challenge in recognition of the existing diversity on our Board. We are honored to have had two Black women on our board since 2018, Erika James, Dean of the Wharton School, and Serena Williams, activist, marketer, brand builder, and one of the greatest athletes of our time. We are still very early on our own DEI journey, but each step forward is important. It’s for the good of our team, our community, and our business. Thank you. We will now take your questions.

Operator: [Operator Instructions] Your first question comes from the line of Brad Sills with Bank of America Securities. Please go ahead.

Bradley Sills: Oh, great. Hey guys. Thanks for taking my question.

Zander Lurie: Hi, Brad.

Bradley Sills: Yes. Hey, Zander. Wanted to ask about GetFeedback. It sounds like you've made some real progress there. Obviously, product has been launched. Now fully integrated with Salesforce. Can you remind us of any go-to-market efforts there with Salesforce? It's obviously the product level integration, but any color on how you guys are going to get to market jointly for SurveyMonkey sold in the installed base? Any, any color there? And then any color on just progress with GetFeedback this quarter? Thank you.

Zander Lurie: Yes. As Tom said, Brad, we are super proud of this unified platform launch really benefiting from the strong assets that we acquired in 2019 and the integration of those assets in 2020. First off, on the market demand for a product like this, you heard in our survey results 87% of companies saying they are more focused on customer feedback during the pandemic. So there is just a huge tailwind for a purpose-built solution like this one. How do we generate demand for it? We've built a strong stable of account executives and BDRs that are reaching out. And as we said, we're really targeting that mid market ecosystem in Salesforce where tens of thousands of customers have a Salesforce instance, but don't have software built to help them collect feedback and take action. So we're partnering with Salesforce in many ways, not only building the integration to be the number one in the AppExchange, but also we've trained over a thousand AEs and go-to-market folks in Salesforce on how to refer, get feedback. So we see continued opportunities to make the product more integrated, to make their team smarter on how to attach that. And you're going to just see more and more product delivery as well as more go-to-market motions aligned and focused on delivering for Salesforce customers.

Bradley Sills: That's great. Thanks, Zander. And then I wanted to also ask about CX. Debbie had mentioned in her comments that it was one of the areas of upside and strength this quarter. Any color on some wins there with CX use cases. And should we take this to mean that you guys are seeing more traction there in the pipeline and perhaps some of these early deals might lead to other wins in the future?

Zander Lurie: Well, I think CX is going to be a flagstone of our growth in the future. I think it is part of the transformation of this company to the enterprise sales and product led company. We've made prolific progress in this area. It's a $10 billion category and growing quickly. And I think if there's any takeaway from the sector in the pandemic, it's the digital transformation is all about companies redefining how they connect with their customers. And we've seen some incredibly inspiring stories from our customers. Tom mentioned a couple. The Carrefour deal in particular, when you're seeing grocery stores just getting much more focused on how do we meet our customer, where she needs all products and how do we collect feedback from our website, how do we integrate it back into our systems of record to be more focused. So this is the area where we're seeing more and more six-figure deals. We're seeing sales cycles compress. We know there's a global market opportunity. And again, if you look at how are we leveraging our base of customers, we have close to 20 million active users on SurveyMonkey, once every month, over 800,000 paying subscribers. The number one use case of SurveyMonkey is help me do better by my customers. What does my customer need? Do they like to campaign? What service delivery is going to be important to them? So that activity is really what was the catalyst for us to move more aggressively into a purpose-built solution for CX. And so we have this incredible opportunity to mine the base of customers who are using SurveyMonkey to introduce them to the new capabilities in the solution, as well as targeting that Salesforce ecosystem. So this is going to be a multi-year run where you will continue to see us ship better products, deliver more value to our customers, and obviously build out that go-to-market motion to become a bigger player in the space. It's very early days.

Bradley Sills: Got it. Great. Thanks so much, Zander.

Operator: Your next question comes from the line of Ryan McDonald with Needham. Please go ahead.

Ryan MacDonald: Great. Thanks for taking my question. Congrats on a nice quarter. Would love to focus a bit on the self-service side of the business. Obviously, a nice strong performance there. Zander, to the extent that you've seen, what sort of mix of benefits are you seeing? Is it more sort of flow of larger amount of free users that are starting to convert to paid? Or are we seeing sort of the response limits that you're putting in place having a impact on driving better conversion rates? Would love some color there. Thanks.

Zander Lurie: Sure, Ryan. Thanks for the question. Yes, the self-serve business we've been in this market for 20 years and SurveyMonkey is one of the early pioneers on the internet with subscription business model and a freemium business model. And we have incredible cohort analysis and data to have a lot of visibility on the sector. So we've demonstrated the ability to post low double-digit growth rates across our self-serve products. And what is one of the more profitable products on the internet where we have very, very low variable costs. How do we grow it? The answer is myriad ways. So first and foremost, you've seen a tailwind of top of the funnel demand for self-serve internet products to help people collect feedback this year. We're all living in this Zoom world and needing to connect with our stakeholders, our customers, our employees, our students, our patients our voters and people are coming to SurveyMonkey, the market leader where we have monstrous SEO, and finding our product, finding our templates, we've used AI to make our products simpler to use, we know from our customers our response rates and our mobile engagement is better than any of our competitors. So the top of the funnel demand for our products has been terrific and we've seen really good uptick in our active user numbers every month this year. Then we are converting that to higher and higher conversion and paid usage. And so how do we do that? Well, first we make our best features are paid features. We're using the response on it to test and understand how better to drive those into our paid plans. And being a scaled internet company like we are, we have a world-class growth marketing team with product marketing engineering folks who are just constantly finding the renewable source of growth to continue to drive numbers as well as geographic expansion. There really are just a number of ways for us to continue to drive that self-serve business. And we see no end in sight to our ability to post that low double-digit growth rate.

Ryan MacDonald: Excellent. And then, I guess as a follow-up, with the new products, obviously that you've launched throughout the course of the year and culminating with the new GetFeedback CX suite in October. How are you feeling in terms of sales capacity at current levels, given sort of the new product that you have to offer and investing to drive growth in those new initiatives into 2021? Thanks.

Zander Lurie: Yes. Thank you, Ryan. We said at the outset of the year before the pandemic the Salesforce productivity was going to be a big factor in driving growth this year. And I'm quite pleased with our success there, even amidst this challenging macro environment. We're seeing added revenue per enterprise customer as well as AOV is up in the high 20s. Why is that happening? Again, multiple factors. One, we've hired and trained account reps that are better at selling enterprise software. Our enablement is better. Our products are more valuable for our customers. And then in April, the outset of Q2, we launched response based pricing, which was a pretty material departure from a seats only legacy pricing model. That was a bold change that we had tested for months. And what I've seen has been thrilling. I mean, the fact that we were able to sign 449 new customers in Q3 [indiscernible] quarter in software sales land. We saw that our response rate -- response based pricing deals actually compressed our close period. We were closing deals faster at 25% plus higher. Ryan, I don't think you've seen the bulk of the upside yet. So response rate -- response based pricing is really going to drive future growth as people use our products more to drive more value from it. And obviously, we garner incremental revenue from the higher responses they're collecting. So we're really thrilled with this new model. As Tom and I have said for -- since 2018, it really aligns with our march to increase monetization and capture more value as our customers derive more value from the products.

Operator: Your next question comes from the line of Mark Murphy with JPMorgan. Please go ahead.

Mark Murphy: Yes. Thank you, Tom. I was wondering if you could comment on the financial significance of the Zoom partnership on -- curious on that, because if SurveyMonkey is conducting those pulse checks and the post-meeting feedback, there's such a tremendous volume of Zoom sessions occurring every day. I'm just wondering how that opportunity might stack up for you.

Tom Hale: Yes. Thanks, Mark. It's a great question. As we said on the call, this was a really important quarter for us in terms of those enterprise integrations. And the way we think about Zoom and also partners like Microsoft is it's a way for us to get top of funnel awareness and usage, to drive folks into our conversion funnel online for a low friction conversion. So in many ways, the incredible volume that we're seeing with Zoom or the incredible increase in adoption around Microsoft teams is a great way for us to both get awareness and get into the usage profile of individual users who click, convert and then ultimately become customers of ours. So we think of it as that top of the funnel expander, and we're really pleased with the results on the Microsoft front. And we look forward to what we're going to do with them.

Mark Murphy: Okay, great. As a follow-up, Debbie, I’m interested in what indicators you might be watching for or waiting for to go ahead and conclude that we're basically out of the woods on the demand environment, and what would prompt you to therefore begin to reengage on some of the investments? And converge back on that investment profile that you had pre-COVID.

Debbie Clifford: Yes. Mark, we are watching things closely. It's hard to know. I mean, at this point we don't have a President of the United States. So I think the uncertainty is more pronounced than perhaps it's been in any time in my career. But we are watching all of the leading indicators in our business. So the number of paid users that we see, the number of users that get onto our platform, the number of customers that we're lining up in our enterprise sales channel. I think despite all of that, we're feeling really good about the business right now. The fact that we posted 20% revenue growth in Q3 near the high-end of our guidance range in a challenging macro environment, I think is really positive. Also the fact that the trend throughout 2020 has been that we've been aligned with our guidance expectations, despite COVID, if you take the midpoint of our Q4 revenue guidance, and our strategy is working with self-serve growing 11% year-over-year and enterprise growing more than 50% year-over-year. We're also monitoring the overall quality of our business. The net revenue retention rate remains greater than 100%. And even more encouraging in Q3, we saw a net renewal rate improved slightly quarter-over-quarter. So Zander mentioned this on the last call, and I'd say it again that we continue to believe that headwinds in our business are transient, but the tailwinds are durable. And we feel like that the strategy that we have in place sets us up well. We will continue to invest in order to drive this strategy. And I've said for several calls now that our focus is on making sure that we continue to invest to drive that growth. That's our first priority, while also balancing for some form of free cash flow in the immediate term. So to answer your question, we are absolutely monitoring indicators, but our strategy to continue to invest for growth while balancing for free cash flow continues to be the path that we're going to focus on going forward.

Mark Murphy: Okay. Very cool. One final one. Zander, I was wondering you touched on it very briefly, but could you click a bit deeper on the response based pricing initiative in terms of just how you envision implementing it, rolling it out, and then any financial impact, when would we begin to feel that in the future?

Zander Lurie: Sure. Yes. April -- early April was the launch date for a response based pricing. And that was a hold your breath moment as you remember, two or three weeks into COVID and work-from-home and all of our sales account reps around the world calling customers. And this was a pretty material team from selling a legacy seats only model. So we are now 100% on response based pricing model, which our customers have very deep understanding, given other SaaS based businesses that have this model. And to my point earlier, we're signing up a record number of logos. 449 new sales deals in the quarter, the highest we've ever had. And our average revenue per account for enterprise customer was up in the high 20s. So as we said, there was concern that might -- this might lower the initial deal that didn't happen. And there's a lot of confidence going into 2021. As our customers use our templates, use our products more drive higher responses, you're going to see incremental flow through from these new pricing model. It also bears repeating, I just have a ton of confidence that this new cohort of enterprise customers we've signed up in 2020 are going to be very sticky and have better renewal rates and expansion opportunities in 2021 and beyond. If you think about the world we're operating in today, where we've seen record numbers of unemployment and dislocations in the economy, folks that are kind of in this digital transformation in FinServ, CPG, health care that are spending on feedback oriented software. These are not customers that are going away. So as long as we execute and our products deliver, I'm quite confident that we'll continue to see really helping that revenue retention rates.

Operator: Your next question comes from Eric Sheridan with UBS. Please go ahead.

Eric Sheridan: Thanks so much for taking the question and hope all is well with everyone on the team. Maybe zooming out for a minute, Zander, as we start to think about exiting '20 and moving into '21, can you just sort of help investors better understand with all the product innovation you've introduced in the last 12, 18, 24 months, how you think about what the core investment priorities now are going forward, either in driving more economic activity to the platform among existing clients, continue to grow the client base or what we should be watching for from the outside in on continued product innovation going forward, just to sort of frame the -- turning the page on one year to the next, probably as you're around the time of thinking about your budgeting process for next year. Thanks.

Zander Lurie: Yes. Hey, good morning, Eric, and thanks for the well-wishes. I'll kick it off and then I'll hand it over to Tom. I think our strategy has just crystallized over the last year and half as we communicate, we're in these three pillars. We think these are three massive markets with a ton of upside for growth in surveys, market research, and CX. And our investment priorities are different by pillar. And so, as we've said before, CX, we're a challenger brand. We think we bring a super agile solution that is price disruptive, that is focused on the Salesforce ecosystem and leverage this massive customer base we have at SurveyMonkey. We are not yet done on product delivery, but the quality of logos that we are seeing and adding to the platform is phenomenal. I mean, these are Fortune 500 global brands that are using this product and they're coming back and giving us incredible feedback about how it's helping their customer connectivity, helping drive pricing, helping increase their CSAT score. So, CX, I think you're going to see us continue to invest in R&D and we've got a terrific team led by Craig Shull there. Market research is largely about go-to-market and introducing this product. Starting with all of the equity analysts on the call, many of you are using this product and deriving great value. It's on us to make sure that our sales and marketing efforts disrupt more of this $45 billion legacy offline, very expensive market. We know we have a killer solution to drive more customer value. And then surveys is really about continued excellence across the business model, building out more use cases, driving more integrations with Zoom and others, pricing, packaging, segmentation, geographic expansion. So ton of R&D work on the analytics layer and AI, and I'll kick it over to Tom, if you want to expand a bit on where you see our priorities in '21.

Tom Hale: I think you nailed it Zander. On surveys, the expansion of use case is just like what we announced with the COVID return to work use cases, a great opportunity for us to support our response based pricing efforts. So adding value into the product allows us to sort of pull those monetization levers a little bit better. On the MRX side, the TAM is so huge. And I think the thing that we're doing here is disrupting services offerings with software. And so we just want to continue to add kind of, if you will, modules and solutions in that direction that allow us to sort of target discrete market research use cases and replace services, expensive time consuming services with software. And on the CX side, it's really about deepening our relationship with Salesforce and the points of integration and other CRM solutions as well as broader surfaces of value. Underneath all of it is I think we want to have a really big and strong effort against automated insights in the machine learning efforts that can take advantage of the huge data set that we got. That's a differentiator unique asset in our space. We've got a really great opportunity. We're going to -- I think '20 was a great year for product delivery, and '21 I think is going to be even better. So super excited for what's coming.

Operator: [Operator Instructions] Your next question comes from Brian Fitzgerald with Wells Fargo. Please go ahead.

Brian Fitzgerald: Thanks guys. Maybe follow-up on GetFeedback. You talked about the new analytics capabilities there. What do you think you are today and where do you want to be in terms of development of the analytics suite? Maybe more importantly, what do you feel most of your customers are looking for integrated analytics capabilities or more the strength of your integration with platforms like Salesforce? Thanks.

Tom Hale: That's a great question. I think the answer is both. It really depends on the customer. We feel very strongly that having omni-channel data collection is something that we do probably as well or better than anyone else in the space. On the analytics side, I think the opportunities are around

Operator: Your next question comes from the line of Ron Josey with JMP Securities. Your line is open.

Ronald Josey: Great. Thanks for taking the question. Maybe two, please. I want to ask on just the self-serve rates. I think, Debbie, you talked about improving conversion rates due in part due to pricing changes and the launch of flexible team plans recently might be part of that. But can you just talk about those pricing changes and perhaps the plans the newer subscribers are adopting as you see improving conversion rates? And then Zander, I totally get renewal rates improving. You talked about stickiness of the platform into '21. Can you just talk about maybe what you're seeing specifically in more recent months, if you will, just on that stickiness because as renewal rates improve and companies are more focused on customer feedback than ever, then visibility should improve going forward into '21. And so just wanted to double click a little bit more on your comments onto the stickiness of the platform. Thank you.

Zander Lurie: Hey, Ron, thanks for the question. Yes, I'll -- I can probably get on both and then Debbie or Tom can clean up any areas that need more detail. First on the enterprise side, we did see improvement in Q3 over Q2 in terms of net revenue retention. So that was a big win, especially on SurveyMonkey Enterprise, which is our biggest product. And so that -- that’s the combination of either company finding more security in our product, getting more value from our product or that maybe we had just turned out the weakest customers, but it was pleasing to see and what is traditionally the quietest quarter to see a healthy renewal rate. So kudos to our customer success team. That's helping our customers derive more value there. And as I said in '21, I just -- we had just more and more tip of the spear focused this year on really healthy verticals, like TAC [ph] and FinServ and CPG, health care. And so seeing customers that are buying our Enterprise product this year, we know these are customers that are set up to renew as long as we deliver on the value that they committed. In self-serve, we're just getting better and better at taking what was a massive horizontal survey platform where we used to just charge people by month or by year, and moving people on dynamically into the plans best suited for their needs. And so, as Tom mentioned in the script, the Teams offering has been a massive success. We launched this the same month that we went public in September of 2018. We're now seeing a significant share of our customers sign up for these multi user plans, these collaborative plans, and this really capitalizes on what the value prop of SurveyMonkey has been for many years. People confer on the survey creation process, and then they collaborate on the results. And for us, this is just a huge opportunity to both expand Teams inside of this footprint, and also minimizes the likelihood of churn as people move on to other companies, or if they're on parental leave, we're not relying upon just one person's credit card. We have other team members to reach out to. So the fact that 87% of our paid subs are now on annual plans is a huge win and gives us more and more opportunities to engage with our customers to get for them to get value. So I do see our prescriptive efforts around both our self-serve and sales efforts driving better retention. And if the macro environment improves next year and a vaccine enables more people go to work and people have larger marketing budgets or customer success budgets, or IT budgets, I think we will be the beneficiary.

Ronald Josey: Okay. Thank you.

Operator: Your next question comes from the line of Chad Bennett with Craig-Hallum Capital. Please go ahead.

Chad Bennett: Great. Thanks for taking my questions. So just in terms of thinking about ACV, you're obviously showing really strong growth for a number of reasons there. I think you talked about 25% growth year-over-year. As we look into kind of the tailwinds going forward through that ACV, I can't imagine market research, which is fairly new solution there and obviously feedback -- get feedback CX is really, really new, is really impacting or accelerating that figure. I guess, if I'm wrong, correct me on that, but is there any way Zander, you can just speak to that the average deal size around market research and maybe what you at least are early days seeing on the average deal size on GetFeedback CX on? What the delta would be in terms of ACV on those deals relative to the traditional enterprise business, and should that ACV number continue to accelerate at least directionally, if you care to comment on that. Thanks.

Zander Lurie: Sure. Chad, it's a good question. And across three pillars, I would say there is a vigilant focus on driving higher ACV. And that is both a reaction to our products are delivering more value. And as we have invested more in that sales and marketing motion, that's obviously a costly investment that we committed to and I committed to with the Board. So we are going to be driving higher ACV out of all three pillars. I will say the market research deals are demonstrably bigger. We have a fraction of enterprise customers and market research relative to our SurveyMonkey Enterprise pillar, but the deals are materially bigger. And you're talking about Hershey's and Colgate and IBM and JPMorgan. These are massive customers that spend billions of dollars in market research to get to the right answer. And they look at us with this very agile solution and frankly, a more liquid and diverse respondent base than any company in the world. So we believe we can offer significant value. And it's just about getting our foot in the door, delivering value, being a trusted partner, and then expanding those relationships. So in market research, our sales customers are much, much bigger than the average deal size. Then you have GetFeedback platform, again, these deals can range anywhere from 15,000 to six figure deals like the Carrefour deal I just mentioned. These deals can scale up based on the size of the customer, based on the number of responses and actions that it take and the integrations they have with Salesforce, et cetera. But you can see mid-market deal is anywhere from the $20,000 to $50,000 range. And then SurveyMonkey Enterprise, it's all based on the size of the customer, the size of the footprint they need. You can have $10,000 deals and you can have six figure deals as well. So we don't break out average deal size by pillar, but the net-net of the three initiatives is I think you will see a continued higher RPAC [ph] as the quarters roll off.

Chad Bennett: Got it. Thanks for the color there. And then just maybe one follow-up. I think this was one of the prior questions. Just on the improvement in renewal rates, you talked about sequentially, Zander. And I don't know if you addressed this in the last question, but specifically churn, it just seems like, I guess commentary wise relative to last quarter whether it's you or Debbie, you certainly seem more bullish about the overall business, but just renewal rates, churn, execution, traction, just any kind of commentary qualitatively there on kind of what the last few months have looked like relative to where you were a quarter ago. Thank you.

Zander Lurie: Yes. Thank you, Chad. I heard Melody Hobson speak yesterday, she's on Jamie Dimon's Board. And Mark, you can correct me, if I'm wrong here, but I think Jamie Dimon's said we've taken the emergency response test and we have passed. And I think 8 months into COVID, I feel the same. I haven't been in our office since March. I've only seen a handful of colleagues in person. I haven't visited any customers. I haven't obviously sat down with any of our shareholders in person. So the fact that we're 8 months into this pandemic and work-from-home and economic volatility and electoral uncertainty, and our business is growing 20% year-over-year, and we signed up 440 new -- 449 new enterprise customers and ACVs are up in the high 20s and we've launched response based pricing and the new GetFeedback platform. I have more confidence than ever than our business. We are exiting 2020 healthier than we entered 2020. It gives me a lot of confidence that 2021 is going to be stronger. And as Debbie said, many times, we aspire to be a consistent 25% compounding revenue grower with really healthy free cash flow margins. And were working really hard on the bridge from 20 to 25. So I've seen a stronger sentiment from our Enterprise customers. They understand what digital transformation can mean to the business. They know what their mandate is to navigate through this pandemic. And they are looking at SurveyMonkey, our surveys product, our market research product and GetFeedback product to help them stay healthy, get healthy, expand, deliver better marketing campaigns, better services to their customer. So the renewal rate rebound has been a pleasing one and gives me a lot of confidence, especially as we move into the biggest quarter of the year that we're set up to win.

Debbie Clifford: I will just add, I definitely feel more encouraged by the signs that we're seeing. I think the fact that the net renewal rate improved sequentially is an important time in this environment because it still remains a very challenging macroeconomic backdrop. And I think it's a testament also to the fact that we've really learned how to execute in this environment. I mean, at the beginning, it was very difficult for everybody when the pandemic set in and now I think we have the machine going, we know how to operate in this environment. We know how better to connect with our customers and make sure that they are getting the value that we deliver to make sure that they're renewing, and I think that that's a really positive sign.

Operator: And your last question comes from the line of Brett Knoblauch with Berenberg Capital. Please go ahead.

Brett Knoblauch: Hi, guys. Thanks for taking my question. Hope all is well. I mean, in Q2, I think you talked a little bit about reducing the response rate of your free issues before they hit the paywall. Could you kind of talk about that a little bit and how that's impacted maybe that or improved conversion that you guys talked about? Thank you.

Tom Hale: Yes. Thanks, Brett. This is Tom. As you know, we lowered the number of responses that we provided for the paywall, and that just continues to be a driver of self-serve conversion. It's a steady impact that we observed first in Q2 and it carried into Q3. So it's one of the factors that's driving kind of the elevated conversion on the self-serve side.

Operator: There are no further questions in the queue. I'd like to turn the call back over to the CEO, Zander Lurie for closing remarks.

Zander Lurie: Thank you all for your continued interest in SurveyMonkey. I'm proud of how our team has supported our stakeholders and our colleagues throughout the year, which has been just a kaleidoscope of uncertainty. We look forward to connecting with you all this quarter at virtual investor conferences, hosted by Needham, Credit Suisse, Wells Fargo and UBS, and at our mid November investor webinar on our market research offerings. Stay healthy everyone. We look forward to talking to you again this quarter and next.

Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.