SurveyMonkey popped up 50% in its IPO - now its CFO explains the path ahead, as it works towards profitability and faster growth
- SurveyMonkey went public Tuesday and saw it stock jump as much as 50% in trading on Wednesday.
- The stock's big debut came despite the company's relatively slow revenue growth and ongoing losses.
- The company is actually doing much better than its financial statements might indicate, Tim Maly, SurveyMonkey's chief financial officer, told Business Insider.
- It's generating positive cash flow from operations, and its revenue is growing at a 19% pace, excluding a discontinued product line, he said.
- And it has big growth opportunities ahead, particularly in selling its service to corporations and other organizations, Maly said.
You may know SurveyMonkey as the company that allows you to take a poll of your friends about where to go for dinner tonight, or your classmates about where to hold your next reunion.
But if you ask Tim Maly, who serves as SurveyMonkey's chief financial and chief operating officer, the company's future is in catering to corporations.
Already, employees inside some 300,000 companies and other organizations are paying to use the company's service. SurveyMonkey, which went public on Tuesday, has already convinced 3,000 of those organizations to sign up for its enterprise-class service, and Maly and his colleagues think they've got plenty of room to sign up more.
"I think that will be a real growth driver for us," Maly told Business Insider on Wednesday. "One of the primary reasons we're going public is to tell that story."
At least for now, investors are buying it. SurveyMonkey priced its offering at $12 a share, which was above its initial range. And in its first day of trading on Wednesday, its stock jumped as much as 50%.
"We're thrilled with the reception of SurveyMonkey in the public markets," Maly said.
SurveyMonkey is targeting companies and other organizations
Organizations and their employees are using the company's service for lots of different purposes, Maly said. But mostly they're are using it for three specific ones - to get feedback from customers, to poll employees, and to do market research.
SurveyMonkey has integrated its service into Salesforce's platform. After a consumer interacts with a company's customer service department, the company can configure Salesforce's system to automatically send out a SurveyMonkey survey to get feedback from the customer.
That could be just the start of the company's relationship with Salesforce. Salesforce Ventures, the enterprise software giant's investment arm, bought a stake in SurveyMonkey in a funding round in 2013, according to Crunchbase. As part of SurveyMonkey's IPO, Salesforce Ventures bought $40 million worth of the former's stock at the offering price.
Maly declined to say whether the most recent investment might be the first step toward a possible acquisition by Salesforce. But he did say that the company plans to build on its existing relationship with the company.
"We're working to deep and expand that," he said. He continued: "That's a big growth opportunity for us."
Its sales have grown slowly compared to its peers
SurveyMonkey could use the boost. Its sales grew just 5.5% last year. Although its revenue growth reached 13.8% in the first half of this year, that's relatively slow compared with the growth rate of many of its peers in the enterprise software sector.
And the company can't balance that slow sales growth with talk of profits, because it's not making any. In fact, its loss in the first half of this year - $27.2 million - was $3 million wider than in all of last year.
Those kinds of results might stoke fears that SurveyMonkey's best days are behind it. After all, the company is 19 years old, which is quite long in the tooth for a tech firm that just debuted on the public markets, and it had already raised $1 billion in funding before its IPO.
But the company's finances are better than they might seem, Maly said. Despite its losses, SurveyMonkey is already generating positive cash flow from its operations, he noted. Its garnered $45 million in cash from its operations last year and another $22 million in the first half of this year.
The company's IPO should help its bottom line on its income statement, he said. SurveyMonkey plans to use about $100 million of the $180 million it raised to pay down its debt, which stood at $317.3 million at the end of June. That should help it reduce its interest expense, which has been weighing heavily on its income statement, he said. In the first half of this year, SurveyMonkey recorded $14.7 million in interest expenses, which represented more than half of its net loss.
"We have line of sight to hit net income profitability," Maly said. He continued: "The reduced [debt] helps."
The company sees opportunities abroad
In terms of sales, SurveyMonkey is also doing better than it might appear from a quick glance at its income statement, he said. The company used to put together market research panels for customers. But it started exiting that full-service business two years ago, encouraging companies to use its self-service tools instead.
Excluding revenue from that full-service product, SurveyMonkey's sales were up 11% last year and 19% in the first half of this year.
The company expects its enterprise push will be a boon for its sales, Maly said. SurveyMonkey also has lots of room to expand overseas, he said. Only about 36% of the company's revenue comes from outside the United States, he said. By contrast, many software companies see half or more of their sales coming from their international operations, he said.
"We see lot of opportunity to grow our revenue, and we're investing to do that," he said.