Momentive Global Inc.

Good afternoon and thank you for attending today's Momentive Q4 2022 earnings call. My name is Jason and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you'd like to ask a question, please press star followed by one in your telephone keypad. I would now like to pass the conference over to our host, Gary Fugis, Vice President of Investor Relations.

Thank you. Good afternoon and welcome to Momentum Global's fourth quarter and full year 2022 earnings call. Joining me on the call today are Priyanka Kaur, COO, Xander Lurie, CEO, and Rich Sullivan, CFO. After management's prepared remarks, we'll take your questions. Prior to this call, we issued a press release with our Q4 and full year 2022 financial results, which can be found on our investor relations website at investor.momentum.ai. 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, including the restructuring plan we just announced, financial outlook, investments, revenue, operating margin, and free 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 in our filings in 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, which is furnished with our 8-K file today with the SEC and may also be found on the Investor Relations website. Finally, please note that the growth rates cited in today's prepared remarks are on a year-over-year basis unless otherwise noted. With that, I'll now turn the call over to Xander. Xander?

Thank you, Gary, and thank you all for joining us today. I'm going to walk you through some of the important changes to the business we announced today, including a decision to reduce the size of our workforce and our continued effort to drive profitable growth. Rich, then, will discuss our Q4 financial results and outlook. For Momentum, 2022 was all about resilience. We began repositioning the company in late February and ran the business with more operating rigor in the face of a more challenging macroeconomic environment. We delivered meaningful operating leverage during the year, culminating in Q4 results that included 19% non-GAAP operating margin in Q4 on $122.4 million in revenue. Both metrics exceeded the high end of our guidance ranges. As part of our repositioning, we streamlined our sales organization in October to make our customer acquisition and expansion motions more efficient. We believed this would be sufficient to help us both navigate a more challenging selling environment and achieve our long-term goal of delivering more profitable growth. However, it's become abundantly clear that we need to take more strategic actions to succeed in 2023 and beyond. After a thorough review of our business, we've concluded that our best path forward is to, one, Further lower our cost structure across the organization. Two, focus our resources on the products that win, retain, and expand with customers most effectively. And three, standardize our most important offerings onto our core platform and one pricing model. Our go-forward plan includes the following. Reducing our workforce by approximately 14%, which impacts all major functions of the organization. Shifting our customer experience product focus away from Get Feedback and making SurveyMonkey Enterprise our CX solution for new and expansion customers. Transitioning our market research sales-assisted products to a subscription model. And prioritizing free user engagement and paid user growth in self-serve by providing more features in our free offering and more affordable options in our paid plan. These are significant changes, and we do not undertake them lightly, but these decisions are supported by data and customer feedback. Since combining the CX and SurveyMonkey Enterprise sales teams in early 2022, we validated that SurveyMonkey Enterprise is a very competitive offering for CX use cases, with consistently stronger overall win rates and renewal rates than GetFeedback. Going forward, SurveyMonkey Enterprise will become our CX solution and we plan to build additional functionality into our core survey platform to better support CX customers, including leveraging some of GetFeedback's strengths in analytics and Salesforce integrations. We plan to maintain GetFeedback for existing customers as we make this transition. Ultimately, we believe this move will enable us to drive more expansion opportunities with SurveyMonkey Enterprise customers, our largest sales-assisted customer base. and allow us to deliver more innovation and customer value through products run on a single core platform. In market research, we've delivered awesome products and won blue-chip logos, but we've sold these products primarily on a credits basis, which makes customer engagement more project-oriented and RevRec less SaaS-like. We began rolling out subscription-based products with the successful launch of brand tracking in 2021. demonstrating that the subscription model can work here. In Q3, we began piloting broader subscription-based selling, and in Q4, we hit our stride. We closed over two dozen subscription deals in the fourth quarter that would have been project-based engagements under the prior model. And we doubled the mix of subscription business in market research from approximately 20% in Q3 to more than 40% in Q4. We believe we now have the right selling and packaging formula to transition market research to subscriptions in 2023. We believe this will result in higher quality, more sustainable revenue from our market research solutions. And in self-serve, our work in 2022 validates that getting back to the basics of product-led growth is the way to fully reinvigorate that channel. We make further progress in Q4, including driving sequential growth in free plan science, improving survey deployment rates, and improving conversion rates from responsible pricing and packaging. From here, we'll work to improve our ability to engage more users and capture more value from those who are willing to pay for the value we deliver. As we focus on these three priorities, we expect to expand margins further in 2023. The changes to the cost structure we announced today put us on a path to double non-GAAP operating margin in full year 2023 versus full year 2022. I take full responsibility for the decisions that led to today's announcement. In short, the investments we've made over the last few years are not delivering returns sufficient to justify the costs. We believe the changes we've announced today are the right strategic steps to manage the business through a tougher short-term environment and position the company for more profitable growth over time. 2022 was a challenging year. The board executive team and I are incredibly grateful for the dedication and hard work the momentum team delivers for our customers and their colleagues. For those who are leaving us, we will do our best to help them succeed in their next steps. For those who are staying on, we are committed to partnering with you to win as a team. I'll now turn the call over to Rich, who I want to formally welcome to our executive team. I'm looking forward to you getting to spend time with him, and I am confident you'll appreciate his strength as our new finance leader. He's a great addition to our culture, and he's already adding value to how we run the business.