Momentive Global Inc.

Ladies and gentlemen, thank you for standing by. My name is Chino and I'll be your conference operator for today. At this time, I would like to welcome everyone to the momentous second quarter of fiscal year 2021 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would 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 resolve your question, press the pound key. Thank you. I would now like to hand the conference over to your host, Vice President of Investor Relations, Gary Fugis. Sir, please go ahead.

Thank you. Good afternoon. Welcome to Momentum Global's second quarter 2021 earnings call. Joining me on the call today is Anne DeLaurie, CEO, Tom Hale, President, and Justin Columbia, CFO. After our prepared remarks, we'll take your questions. Prior to this call, we issued a press release and shareholder letter with our second quarter 2021 financial results and related commentary. These items are posted on our investor relations website at investor.momentum.ai. During the course of this call management, we'll 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 as a substitute for or in isolation from our GAAP results. The reconciliation of GAAP to non-GAAP results may be found in our earnings release and shareholder letter, which are furnished with our 8K filed today with the SEC and may also be found on our IR website. With that, I'll turn the call over to Xander. Thank you, Gary, and thank you all for joining us today. I'd also like to welcome Justin Comby, our new CFO. I'm thrilled to see Justin step into this critical leadership post where he is helping shape what's next for our employees, customers, and shareholders. Justin, welcome aboard. In June, after extensive research using our own solutions, we relaunched as Momentus, the agile experience management company. The move aligned our corporate positioning with the breadth of our agile experience management solutions for the enterprises. While the SurveyMonkey brand is synonymous with agile surveys, we've evolved significantly over the last few years as we've moved upmarket. Our enterprise is broader and deeper. Our go-to-market reach is greater and more diversified. The time was right to rebrand and tell an expanded story of how we're helping 9,400 enterprise customers shape their stakeholder experiences. Q2 was a strong execution quarter across the business. Revenue growth accelerated to 20% year-over-year. Our leading growth indicators, remaining performance obligation and deferred revenue, both grew at 24% year-over-year. And we delivered $24 million in free cash flow with solid non-GAAP operating margin performance. Our first half sets us up for continued strength in the second half of the year, as illustrated by our updated full-year revenue guidance. More importantly, we've laid the groundwork with various initiatives that will drive our enterprise growth profile for years to come. We've begun migrating existing enterprise survey customers to our new response-based pricing model, and we are at the starting line with our rebrand. Recent product innovations and our new customer expansion motion are driving momentum across our enterprise channel. We are poised for further enterprise revenue growth acceleration in the second half. SurveyMonkey Enterprise, GetFeedback, and our market research solutions are the product portfolio that underpin our five new experience management solution categories, marketing insights, brand insights, employee experience, customer experience, and product experience. This new position is aligned with the solutions-based selling evolution we've discussed on the prior calls. And our core principles are consistent, speed and agility, an AI-powered platform that improves feedback quality and services insights quickly across our products, and a foundational commitment to diversity, equity, and inclusion that benefits all our stakeholders and the community. Our goal was to show enterprise customers how our solutions address their specific needs while preserving the strength of the SurveyMonkey product brand, and the team nailed it. As one of our larger customers told us, our new brand is, quote, more compelling, more competitive, more professional, and more innovative. This is a massive project, and the entire company is excited to amplify our new positioning and help more customers shape what's next in their business. Q2 enterprise sales revenue grew 33% year-over-year as we continue to attract new customers across diverse industries and use cases, increase sales productivity, and improve retention rates. We ended the quarter with 9,400 enterprise customers, up 30% year-over-year. We added 550 new enterprise logos sequentially, including NBCUniversal, Daimler, Kellogg, The Container Store, Janssen Pharmaceuticals, and Benefit Cosmetics. We had another quarter of solid enterprise sales execution, with leading indicators of enterprise sales growth again increasing faster than enterprise revenue. Salesforce productivity continued to improve in the quarter, which reflects our product innovations we've delivered, the impact of response-based pricing for new Enterprise Survey customers, which continued to drive average contract values north of 25% relative to our legacy seats-only pricing model, and the benefits of the organizational changes we discussed in February. We're also pleased to see continued strength in retention and renewals, Organizational domain net revenue retention, which includes both enterprise and self-serve customers, again exceeded 100%. Further, enterprise customer renewal rates remain strong, improving sequentially for the fourth consecutive quarter, as customers continue to see the value in our solutions. We have a large untapped opportunity to expand our relationships with existing enterprise customers, and we are focused on two key areas. migrating our remaining seats-only contracted customers to a consumption-based pricing model, and upselling and cross-selling into our existing base. Consumption-based pricing is already in place for our customer experience, brand and marketing insight solutions, and in May, we began the work to migrate existing Enterprise Survey customers to our seats and completes response-based model. It's early, but we're seeing positive trends relative to the legacy model. We continue to view response-based pricing renewals as a long-term opportunity for ACV growth. On the cross-selling front, we have significant upside. Just over 550 enterprises, only about 5% of our enterprise customer base, use more than one of our products, which illustrates the potential we have within our existing customer base. To help accelerate our expansion strategy, Momenta's former survey sales executive, Linda Campbell, has been named our new SVP of customer success, reporting to Chief Customer Officer Ken Ewell. Linda brings a wealth of experience and expertise to her new role, which we believe will help execute on our response-based pricing and cross-selling initiatives. Given the strength of our products and our increased focus on doing more business with our largest customers, we're confident expansion will become an increasingly important long-term growth driver. In self-serve, Q2 revenue growth accelerated to 15% year-over-year. The Teams product, again, drove the majority of the growth. We continue to see benefits from our pricing and packaging strategy. Teams is our best product sold on the web. Customers derive more value from this collaborative package, and retention rates are demonstrably higher than our individual subscription package. Teams subscribers give us an early indicator of organizations that may become enterprise customers. Based on our broad-based execution in the first half of the year, we are increasingly optimistic about our ability to accelerate our long-term growth profile. Our products are delivering value to some of the most discerning customers in the world. We're tuning our go-to-market motions, and our corporate positioning is now aligned to help match customers with the right momentous solution. The experience management category is healthy, and we are well-positioned to capitalize on the market opportunities. 2021 is shaping up to be a great first chapter in our new segment of story. I'll now turn the call over to Tom. Thanks, Xander. This was another stellar quarter of product delivery as part of this year's super cycle of growth investment to support our agile experience management solutions. We're innovating quickly across our supporting products and underlying platforms to help our customers act with even greater agility. Our Get Feedback customer experience solution is more deeply integrated with Salesforce.

We're now enriching Salesforce data with feedback from digital consumer touchpoints, and our new app makes it easy to create Salesforce dashboards so the CX team can share customer insights more broadly within their organization's customer system of record.