SVMK Inc.
Q3 2018 Earnings Call Transcript

Published: 14 Nov 2018

[Operator:]

Good day, ladies and gentlemen. And welcome to the SurveyMonkey's Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder this conference call is being recorded. I would now like to introduce your host for today's conference Mr. Karim Damji, Vice President of Investor Relations. Sir, you may begin.

[Karim Damji:]

Thank you, good afternoon. And welcome to SurveyMonkey's third quarter 2018 earnings conference call. On the call today we have SurveyMonkey's CEO Zander Lurie; our Chief Financial Officer and Chief Operating Officer Tim Maly; and our President, Tom Hale. As this is our first earnings call as a public company, I'll provide the format for today's call. Zander will begin by providing an overview of our business, philosophy and strategy, Tom will discuss our technology, product and marketing initiatives, and Tim will review our Q3 financial results and discuss guidance for Q4 and for the full 2018 fiscal year. Following our prepared remarks, we will have a question-and-answer session. The press release with our results for the third quarter was issued today and is posted on our Investor Relations Web site at investor.surveymonkey.com along with an accompanying shareholder letter. Before we get started, I would like to let everyone know that we will be presenting at the Credit Suisse TMT Conference on November 27 in Scottsdale, Arizona. We will provide update as we add other events to the schedule. I would like to remind you that during the course of this call, management will make forward-looking statements, which are subject to various risks and uncertainties. Those include statements relating to our products and strategy, including investments in technology and sales growth revenue and cash flow. Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance. A discussion of risks and uncertainties related to our business is contained in our filings with the Securities and Exchange Commission, in particular, the section entitled risk factors in our quarterly and annual reports and we refer you to use filings. On our discussion today, we will include non-GAAP Financial measures. 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 their 8-K filed today with the SEC, and may also be found on our IR Web site. I would like to now turn the call over to Zander.

[Zander Lurie:]

Thank you, Karim. Good afternoon, everyone. We are excited to share our results. But first, I would like to start by thanking our employees, customers, partners and investors for their support during our IPO and the start of a new chapter. I'm pleased to report that we delivered a strong third-quarter, our first as a public company, with $65.2 million in revenue for 18% year-over-year growth, $12 million in operating cash flow and $11.4 million in unlevered free cash flow. The combination of healthy top line growth and robust cash flow generation is reflective of our steady march of increased monetization. And that, combined with strong visibility from our business model, makes SurveyMonkey unique among many of the new issuers today. For those who may not be as familiar with SurveyMonkey, I'll start with some context on our history and the opportunity ahead. SurveyMonkey's mission is to power curious individuals and organizations to measure, benchmark and act on the opinions that drive success. More detail is provided in our shareholder letter, which I encourage you to read. SurveyMonkey has transformed the way many organizations gather feedback. To compete effectively in an environment where more and more people have access to data, organizations need to understand the underlying sentiment of their customers, employees and the markets they are going after. While most organizations rely on operational data, which is great at determining the what, it doesn't help explain the why driving the data. Understanding the why unlock insights that companies can act that action might be a product launch, a new marketing campaign, adding an employee benefit or altering your approach to customer success. That's exactly what our products do. We help people and their companies collect mission-critical data so they can better serve the people who matter to them, and we do this across every function, in every industry, in every region. We call this people, power, data, and we are a leader in this growing category. Our products and solutions address three principle global multibillion-dollar markets; customer experience management, talent management and market research. Our competitive advantage starts with our highly viral and popular self-serve SurveyMonkey platform. Over the past two years, we've expanded our platform to serve organizations with enterprise grade features and privacy, security and compliance and delivered integrations with Salesforce, Marketo, Oracle, Microsoft, Google, Slack and Tableau. Tom will provide more specifics here. Our category defining brand and the inherent virility of our product enable us to build a massive footprint that stands at more than 16 million active users and 621,000 paying users across more than 300,000 organizations, including paying users in 98% of the Fortune 500. Our dollar based net retention from customers in those 300,000 organizations has consistently been above 95%. We have one business and two channels in which we go to market. We have a powerful capital efficient self serve channel where individuals within organizations purchase our products online with our online pricing in terms of service and pay through credit card or other online payment methods. This is the business that many of you are very familiar with and have likely used, such as our SurveyMonkey self-serve product or our self-serve audience product. On top of that, we have a targeted sales assisted channel, which is earlier in its evolution but growing fast. This is where we sell our products directly to organizations through our sales team via negotiated pricing and agreements. Our sales assisted revenue in Q3 was approximately 12% of total revenue. We grew our sales assisted customers to 3,200 in Q3, a 10% quarter-over-quarter increase. We saw a strong traction this quarter in our sales assisted channel, signing-up companies like LinkedIn, NASDAQ, Sky, Intercom. While we are growing the number of sales assisted customers, we only have 1% penetration across the more than 300,000 organizations where we have paying users. Over the next few years, we intend to cultivate sales relationships with the top 10% of organizations where we see significant usage of our self-serve product. Through our unique sales assisted strategy, we believe we will cost-effectively scale and drive further disruption in this market. When we sell SurveyMonkey enterprise to an organization, we see on average an immediate 4x increase in our annualized revenue as free seats are paid seats, and that’s just on the initial upsell. When the customer implements single sign on, we see with footprint scale. When we have a master service agreement in place with the customer, we have the ability to expand deployment across departments and cross-sell our purpose-built software solutions. It's worth noting that the vast majority of our sales assisted deals are proprietary. They do not go through the RFP process. When we do go head to head with our competitors we win more than our fair share. We believe the flexible nature of our platform and the partner oriented approach we've adopted with Salesforce, Microsoft, Oracle, Google and others, will contribute to more success with organizations who are not looking for yet another system of record with its heavy cost and need for services. As revenue from our sales assisted channel grows, so will our visibility, predictability and net retention across our business. We are capitalizing on our extensive footprint and leading brand to drive growth across three major initiatives. We are going to update you on our progress in these three areas plus other developments each quarter. First, we are selling SurveyMonkey Enterprise and our purpose-built software solutions directly to companies whose employees are already using SurveyMonkey with individual accounts. It's highly unlikely we will ever call an organization where we don't already have a footprint of healthy usage, we just don't have to. Here in lies the competitive advantage for our sales team as we leverage our brand and large footprint to upsell our enterprise offerings. Second, we are enabling smaller teams to collaborate and drive account proliferation within organizations with our recently launched self-serve teams plan. Third, we are improving the user experience and investing to drive increased adoption and usage in key international markets. These three growth initiatives open up large new opportunities for us to drive increased penetration in organizations, deeper monetization of our existing customer base, extending our footprint and delivering accelerated revenue growth. Our IPO was an important step for SurveyMonkey, the clarity and focus of our growth strategy inspires us for the journey ahead. Thank you again for your time. And now I will turn it over to our President, Tom Hale, to discuss some of the initiatives underpinning our growth levers.

[Tom Hale:]

Thanks Zander. In Q3, we made good headway on the key initiatives that will drive our growth in Q4 and in 2019, enterprise sales teams and international. I'll start with teams. At the beginning of Q3, we started testing our teams' plans, which bundles multiple seats into a single package and enables users to securely collaborate in small groups, replacing a group of users sharing a single login. Team strives user growth in our core installed base. And when a large customer purchases the teams plan, it signals an opportunity for an enterprise upsell. Its early days but we are encouraged by the accelerating pace of adoption. In Q3, 41 Fortune 500 companies purchased teams plans. At the end of Q3, we started testing account verification, verification drives demand for teams by improving account security and discouraging account sharing. To-date, we rolled verification to about 10% of our paying user base. Our goal is to provide a great customer experience, while driving teams' adoption and stimulating sales conversations. We will rollout verification to the balance of our customers in the coming quarters. In Q3, we also delivered on several capabilities in support of our sales go-to-market. First, at the Dreamforce conference, we extended our integration with Salesforce to include our SurveyMonkey customer experience solution and demonstrated the lightening version of our Salesforce connector. Over the course of Q3, we deepened our partnership with Salesforce, leading to them investing in SurveyMonkey alongside the IPO. Second, early in the quarter, we launched analyzed results dashboards. Dashboards enable our users to customize and automate the presentation of the data that they collect and share it to drive insight and action. Dashboards serve a wide range of used cases and extend the value of our platform across an organization. We also shipped new versions of our higher average order value solutions for the employee engagement and customer experience use cases. SurveyMonkey engage introduced team view, enabling managers at every level of an organization to analyze employee sentiment, while SurveyMonkey CX, added interactive automated reports and alerts to enable organization wide usage of customer experience data. We also launched SurveyMonkey Anywhere, which is a mobile app that allows users to collect, store and sync data from trade shows, conferences, in the field, or anywhere with a spotty or non-existent Internet connection. Off-line data collection is a top requested capability for market researchers and is now available for our enterprise customers. In the quarter, we started implementation of our international datacenter in the cloud. While we are GDPR compliant today, our cloud datacenter is a key part of our international growth strategy. And in Q3, we shift Answer Genius, our latest artificial intelligence innovation that leverages our massive data set, our survey expertise and the power of machine learning. Answer Genius helps survey creators construct methodologically sound surveys with minimal effort. These new innovations added to our existing enterprise grade capabilities around account provisioning, security, encryption and our market-leading integrations with the systems of record from enterprise and SaaS leaders, enable us to sale to the most discerning technology buyers from around the world. We, along with our customers, believe that companies do not need another system of record. Companies get more value when they bring people, power, data closer to the user in the systems they already use. For example, customer satisfaction data collected in SurveyMonkey can appear in a customer record or in the next best action in Salesforce. SurveyMonkey data from prospects consider marketing campaigns or segmentation in Adobe Marcato. Customer sentiment data can flow into IBM marketing cloud or into rich visualizations and Tableau, and users can quickly collaborate on data collected for faster decision making in Google apps, Slack or Microsoft teams and so on. These integrations support our sales go-to-market, increase retention and provide value to our customers and partners alike. In Q3, we also shift new capabilities in customer 360, our proprietary signal based system that triggers leads and surfaces opportunities to our sales team. Customer 360 now makes predictions about the likelihood for a given account to up-sell and cross-sell, further refining our ability to efficiently target our Salesforce at the prospects most likely to convert. And on the marketing front, we continued to invest in increasing awareness for our suite of enterprise grade offerings. We had a strong presence at Dreamforce and at the HR Technology Conference, among other events. And our IPO marketing campaign at the beginning of Q3 really made a difference by featuring globally admired leaders like Serena Williams, Draymond Green, Arianna Huffington and Jeff Weiner to boost awareness for our platform and strategy. And tomorrow, we are hosting our first ever Virtual Curiosity Conference at 10 AM Pacific. We'll have sessions with Julia Hartz, the CEO and Co-founder of Eventbrite, our CEO Zander, as well as speaker from Box, Atlassian, NASDAQ, Salesforce and others. We hope you will all tune in along with the other thousands of virtual attendees to learn more about how innovative organizations are creating value with people, powered, data. I'll now turn it over to Tim to walk through our financial performance.

[Tim Maly:]

Thanks, Tom. Let me add my welcome to everyone and express how excited I'm to report our third quarter results. I'll start by sharing our financial principles and then go into more detail on Q3 performance and our outlook for Q4 and the full year. Our financial principles are based on three pillars. First, we aspire to the rule of 40, which we measure as revenue growth rate plus unlevered free cash flow margin. We approach this by vigilantly pursuing profitable revenue growth and robust cash flow generation. Second, we allocate capital to the highest ROI opportunities that primarily involves investments in product, sales and marketing to drive organic growth. We may augment organic growth with strategic M&A and we may evaluate opportunistic share repurchases to drive incremental returns for shareholders. And third, we plan to maintain a strategic balance sheet, including a strong global cash position and opportunistically utilizing our borrowing capacity, which is possible due to our robust cash flow. These principles have been our North Star to-date and will continue to guide us as we invest to create further shareholder value. Now, onto our business. I love our business model. Our products are inherently viral and this underpins a powerful and capital efficient self-serve subscription business where 80% of our individual paying users come to us through organic channels. In addition, it has led to broad distribution of our products to over 16 million active users around the world. We then capitalize on this large footprint and drive deeper monetization with targeted upsell and crosssell activities from our sales team. Our business is highly predictable with over 90% of our revenue coming from subscriptions. Our Q3 results reflect healthy top line growth and disciplined cash flow generation. Total revenue for the quarter was up 18% year-over-year to $65.2 million. Core revenue, which excludes $400,000 in revenue related to the non-self-serve portion of SurveyMonkey audience in Q3 2017, the final quarter with this revenue, increased 19% year-over-year. A robust performance in the quarter was driven by strength across the business. We ended the quarter with 621,000 paying users, up 3.5% year-over-year and $418 in annualized ARPU, up approximately 15% year-over-year. We continue to see the topline benefit from the pricing and packaging changes we made last year to our self-serve SurveyMonkey product, supported by the enhanced functionality and value we deliver to our customers. As expected, the pricing changes created a short-term headwind to paying user growth but provided a much stronger tailwind to ARPU growth. Over the next several quarters, we expect paying user growth and ARPU growth to return to more normalized levels with paying user growth outpacing ARPU growth. Before moving on, I want to note that unless otherwise indicated, all income statement measures that follow are non-GAAP. You'll find the reconciliation of GAAP to non-GAAP results in our earnings release and shareholder letter which we provided with our 8-K filed today with the SEC, and also may be found on our IR Web site. Gross margin for the quarter was 75% compared to 73% in the same period last year. The 2 percentage point expansion was primarily driven by a decrease in the amortization of capitalized software. Total operating expenses, including R&D, sales and marketing and G&A were $42.5 million for the quarter for 65% of revenue, consistent with the same period last year. We're investing in headcount across the business, specifically in R&D to continue to enhance our products and sales and marketing to build out our sales channel. We continue to invest in marketing efforts to support our self-serve products, as well as increasing the investment in marketing programs to support our sales team. Overall, we earned $6.6 million in operating profit for the third quarter for a 10% margin compared to $3.6 million or 7% margin in Q3 2017. Adjusted EBITDA was $17 million in Q3 2018 versus $13.3 million in Q3 of 2017. Net loss per share in Q3 was $0.01 compared to $0.02 in the same period last year based on 103.1 million weighted average shares outstanding as at Q3. Before moving to the balance sheet, I want to mention the large stock based compensation charge we recorded in Q3 related to our IPO. Prior to our offering, certain of our restricted stock units or RSUs were subject to both a service based vesting condition and a liquidity vesting condition. Upon the IPO, the liquidity condition for those RSUs was satisfied, and as a result, we incurred and $89.9 million stock-based compensation charge in the period. In addition, we incurred a $1.2 million charge in employer payroll tax expenses related and specifically associated with those RSUs. Moving on to our cash balance and cash flow. We ended the quarter with $257.1 million in cash and cash equivalents, which include the net proceeds from the IPO. Operating cash flow for the quarter was $12 million for an 18% margin and unlevered free cash flow was $11.4 million for a 17% margin. We used a portion of the net proceeds from the IPO to pay $21.4 million in employee payroll tax withholding obligations, and $1.2 million in employer payroll taxes, both as associated with the RSUs. We ended the quarter with $316.8 million in total debt with net-debt totaling $59.7 million. In October, we refinanced our credit facility and paid down $101.3 million in outstanding debt using a portion of the net proceeds from our IPO. You'll see this amount reclassified to short-term debt in the balance sheet as of September 30, 2018. We established more favorable terms in the refinancing our credit facility, saved 75 basis points on the interest rate and extended the maturity through October 2025, and we were able to get this done at par. We also maintained our $75 million revolver with improved terms. Turning to guidance; for Q4 2018, we expect revenue to be in the range of $64.8 million to $66.8 million; non-GAAP operating margin to be in the range of 2% to 3%; and diluted weighted average shares outstanding to be in the range of 123 million to 227 million. For the full year 2018, we expect revenue to be in the range of $251.1 million to $253.2 million; non-GAAP operating margin to be approximately 6%; and unlevered free cash flow margin or unlevered free cash flow to be in the range of $43 million $45 million. We expect 2018 fully diluted weighted average shares outstanding to be in the range of $106 million to $110 million. I'll now turn it back to Zander for his closing remarks.

[Zander Lurie:]

Thanks Tim. Your customers, employees and prospects, these are the people whose feedback and opinions matter to your organization. To wining business, you need to inspire the trust and loyalty of your customers, employees, prospects and anyone else who shapes your organization. I'm confident in our plan to extend our market share in this multibillion dollar global market, building out our sales team, driving teams' plans, extending our international footprint. That strategy can yield many years of healthy revenue growth and robust cash flow generation. A big part of that confidence comes from how we operate as a company and how we build our culture. We continually use our own products to recruit and retain the best and brightest and extremely competitive markets. We believe the curiosity is the underlying power that our products unlock, and it helps shape our mission and our belief in how building a culture of curiosity has far-reaching impact. Some of our most innovative programs stem from our own surveys, and helped us to be recognized as one of fortunes great places to work. Some of our most innovative technologies, such as SurveyMonkey Genius, are results of our teams' asking how can we make this better, how can we sell this differently. We don't have all the answers, but we are curious and constantly asking questions of our teams and customers to learn how we can serve them better. In the spirit of relentless self improvement, we want to hear your opinions and feedback. At the end of our shareholder letter, we have included a survey QR code where you can provide us with your feedback. And with that, I'll turn it over to Q&A. Operator?

[Operator:]

Thank you [Operator Instructions] Our first question comes from Mark Murphy with JP Morgan. Your line is now open.

[Mark Murphy:]

Zander, the press release mentions acceleration in the sales assisted channel. And I think you also recently announced that you have hired a new VP of Global Enterprise Sales, and presumably that person will complement and amplify John Schoenstein's team. I was just wondering if you can elaborate on the acceleration that you saw in that channel and just the state of the pipeline within that enterprise segment.

[Zander Lurie:]

We are super excited about our enterprise sales strategy. It really bears fruit from a couple years of investments in our enterprise platform, and fueling the confidence that we have a product that the most discerning IT buyers in the world are ready to buy. And we have seen that play out with some really terrific customer wins over the last few quarters. John Schoenstein who come from Adobe has been with us for just over a year and really built out a world-class leadership team, recruiting folks like Luke from Google Cloud and Salesforce and Workday and other places where leaders who brought in really terrific talent. That pipeline continues to build. You see our footprint now has 3200 enterprise clients, that was up 10% quarter over quarter. So we are really growing like leading software SaaS business there in that side of the business. And I think you are just going to continue to see us really put up steady momentum in that 12% of our revenue that comes from sales will increase year-over-year.

[Mark Murphy:]

And as a follow-up, I did want to take your poll from the Qualtrics acquisition, and obviously we understand the models are different. And you didn’t run into each other all too frequently. But just considering the history of how companies sometimes degrade and then they will suffer a challenge and sometimes higher attrition when they get acquired by the large ERP vendors. And I guess considering SurveyMonkey has the alignment with Salesforce, which is a very strong partner. Do you think that this is going create any new opportunities that you can capitalize on, or is there any chance in your mind that it would incrementally open-up that lower end of the enterprise market?

[Zander Lurie:]

There is lots of there, Mark. We are thrilled with our competitive position in the category today more than we were even a week-ago. So finishing the IPO obviously introduced a great opportunity for us to tell our story. This is a multibillion dollar global market. We created the category. Our brand is synonymous with helping people to collect feedback and opinions. I think SAP's acquisition further validates. This is a huge market that hundreds of thousands of companies need to buy this software to collect these insights. I think being more division of SAP will obviously align them well with SAP Salesforce. As you said, our open strategy we believe provides for huge selling opportunities to companies that are more closely aligned with the leaders in this category like Microsoft, Salesforce, Oracle, et cetera. So we believe that our open strategy and enabling people to merry that SurveyMonkey people, power, data inside their systems of record, like Microsoft and Salesforce, is a winning strategy. We don’t hear from customers that they are eager for another expensive consulting centric system of record. And on the recruiting front, we are creating sales talent and tech talent to a pure play leader with a culture like ours, we think is a real competitive advantage and I like our chances of both selling against and recruiting against Qualtrics.

[Operator:]

Thank you. Our next question comes from Brad Sills with Bank of America Merrill Lynch. Your line is now open.

[Sherry Guo:]

This is Sherry Guo calling on behalf of Brad Sills. Congratulations again. So could you just provide us some color on the cross-selling deals amongst not just the older customers but also the newer customers? Are you seeing any sooner than expected upselling opportunities? Is there -- what interest level like in that upselling activity?

[Zander Lurie:]

The most important thing we can do on the enterprise sales strategy front is first recognize that we have paying customers inside of 300,000 organizations. And in every one of those organizations, there is a multiple of free users who are accessing SurveyMonkey. So we leverage our customer 360, which is truly a proprietary tool to have govern where we spend our time and we have proprietary sales opportunities that other SaaS companies don't have. So by converting a basket or desperate group of self serve users into the enterprise account, we thereby have a relationship with another human being at that customer. They turn on single sign on, deploy SurveyMonkey inside their company or department, you see expansion. And as people get more and more wedded to the data that they are able to get from SurveyMonkey that provides rich opportunities for up-sell and cross-sell. So we're seeing our new solution that CX Engage, audience get real traction inside of companies that are already on enterprise accounts. And I think we'll just continue to disclose more. But as you see that 12% of our revenue grow overtime, you'll see both our seed expansion as well as cross-sell and up-sells bear fruit.

[Operator:]

Thank you. Our next question comes from Steven Ju with Credit Suisse. Your line is now open.

[Stephen Ju:]

I guess stepping back and looking bigger picture, the 4x lift in annualized revenue as you move to sell to enterprise sales gives some indication of the value being assigned to a data that you are helping companies generate. But given that this is actionable data that helps folks makes decisions and it seems like there is further value that you can unlock overtime. So can you help frame what the total market opportunity can be over the longer term, especially as your clients continue to assign higher values for data that you hope generate? And why is 4x the right number and how can you get that to 5x or even higher? Thanks.

[Zander Lurie:]

I think one of the themes that you will hear Tim and Tom and I reiterate on earnings calls and at Investor Summits is just this steady march of monetization. When you look at the sheer number of people who are using SurveyMonkey inside their organizations to collect mission-critical data, about diversity and inclusion, about NPS, which campaigns to launch, which employee benefits to offer, there is just no doubt that core nature of how people are collecting this data and glinting insights to do better by their company, their organization, their educational institutions, governmental body, non-profits et cetera. So there is couple of big themes of how we drive monetization. The first as we discussed is this teams' plan. We know there is ramp in account sharing. There are millions of people who are accessing the 621,000 paid subscribers account. So as we provide a better collaborative end user experience with our new products, we are able to collect for each end user and that is going to be a significant driver of revenue in the quarters to come. The second of course is turning those big baskets of self-serve users into organizational accounts. Every single company you guys cover needs to have enterprise platform products like ours to understand these really important drivers inside a company or around their customers, their employees, their market research. Having that data siloed in an individual account and that person might leave the company walk out the door with that data, it doesn't provide for the holistic access to data that’s important to this company. So to these big companies we desperately are pushing ahead to turn these into enterprise accounts that 4x is the initial uplift in revenue. And from there we believe we are going to see healthy net revenue retention above 100%, because of seed expansion as well as cross selling upsell opportunities that I mentioned we Sherry. So we think the 4x is the first initial upsell. We believe the net revenue retention and the visibility that is derived from having a single organizational customer as opposed to a basket of credit cards is the important driver for driving that subscription revenue higher and higher in the future.

[Operator:]

Thank you. Our next question comes from Eric Sheridan with UBS. Your line is now open.

[Eric Sheridan:]

I wanted to focus on international you called that out in the shareholder letter. I wanted to just get a little more granularity or color on what drove the strength of international and how we should be thinking about that opportunity continue to evolve in the next couple of years? Thanks guys.

[Zander Lurie:]

We are fortunate that we compete in a category that is global in nature. There is nothing inherently domestic about the products that SurveyMonkey offers. Companies, multinational organizations, small businesses, non-profits in Europe and Latin America and Asia, need to collect feedback from their customers from their employees, to get the insights they need to take actions to do better. So we believe this business is inherently global. Today, 36% of our business is derived outside of the United States. We believe that should accelerate in the years to come. We do see an opportunity here to have that number eclipse 50% in the next five years, and we are taking prescriptive actions to accelerate that international growth, starting with an international data center, in Europe, which we'll launch in the first half of next year. We recently put product and engineering marketing talent in Dublin, our international HQ, to localize our sites and deliver better customer experience for our customers outside the U.S. And then we do plan to launch sales on the ground team in Europe to capitalize on the big opportunity there. So we believe that 36% is going higher. And when you look at world class SaaS software companies, Internet, large consumer platforms, you see traditionally business 50%, above 50% outside of the United States and we should get there as well.

[Operator:]

Thank you. Our next question comes from Ivy Kong with Wells Fargo Securities. Your line is now open.

[Ivy Kong:]

My question is about collaboration with Salesforce, which you mentioned a little bit in your shareholder letter, about collaboration in products and different features. I was just wondering if you could provide the additional color there. And whether it would help you with product distribution and also category expansion? Thank you.

[Zander Lurie:]

We love our partnership with Salesforce. They wrote a book on how to sell software in the cloud. And we are going to school on how they serve their hundreds of thousands of customers. We've been selling a really healthy Salesforce integration, and bringing Salesforce on our IPO is going to help to drive that partnership further. I am going to ask Tom to talk to some of the specifics that make that partnership so powerful.

[Tom Hale:]

Yes, so we sell the Salesforce connector today for our own Salesforce, and it's also discoverable on the Salesforce app exchange. This is a great part of our business. It's a great reason to get customers to upgrade to the enterprise addition of our platform. In addition, we're looking ahead at making sure that people, power, data can flow directly into the Salesforce platform and could be presented in their presentation layer, which is called lightning, to make the user experience and interacting with that data and the actions you can take on that data really front and center with users. It's part of our philosophy of driving data directly with the user in the system of record, so that the user can take action on it. So we're super excited. We've got great relationships with the Salesforce executive team. And over the course of the year, I think you'll see lots of exciting stuff emerge from partners like Salesforce and others as well.

[Operator:]

Thank you. Our next question comes from Youssef Squali with SunTrust. Your line is now open.

[Youssef Squali:]

Just following up on that prior question. Maybe just can you -- was there any contribution from Salesforce this quarter, that's one? And the other is -- and maybe just Tom, I think you answered part of this question. But maybe help us just understand the integration required with Salesforce and how we should see that from a timing perspective? And then I have a quick follow-up.

[Tom Hale:]

So the first part of the question, which is about did we see any impact from it in the quarter. We made the announcement late in the quarter, obviously, at Dreamforce. However -- in the portion of the quarter, we sold several of the Salesforce integrations to Salesforce customers and to our customers as well who already use Salesforce. So that's the first answer. The second question, which is about if you think about what Salesforce can do for us as a partner, clearly, they can teach us how to drive into the market with sales driven go-to-market and also significantly, they represent a huge part of the marketplace for CRM and that's a great embedded opportunity for us.

[Youssef Squali:]

And then maybe -- if you can maybe just speak a little bit about the hiring cadence for enterprise versus your expectations so far, and I suspect it's a not too dissimilar from what you guys said on the road. But considering the recent Qualtrics deal, how do think that may impact your ability to attract talent? Thanks.

[Tom Hale:]

I think if SAP did anything, it was corroborate our thesis -- this is in fact multi, multibillion dollar opportunity. Qualtrics disclosed they had 1,800 employees. You can imagine maybe half of those are sales people. We have dozens of sales people, that number will be 2x a year from now. I think it's just important to remember, we're just not a traditional enterprise software company that has to hire super expensive people to bring a book of business to sell into accounts where they have no brand-name and no recognition. Every single one of our sales folks is calling into companies where there is ubiquitous usage of SurveyMonkey today. And companies that need to pull that data up into the enterprise level up into the sea suite, so they can have a holistic view of how that data is impacting their customer success, their HR group, their market research. So we really have a proprietary opportunity. We have paying customers in 300,000 organizations. Qualtrics has paying customers inside of 9,000 organizations. I would venture to guess we have paying users inside of every single Qualtrics account. So we believe there is a huge opportunity to move up market and if Qualtrics moves up market with SAP that probably just further opens a field for us to go after.

[Operator:]

Your final question comes from Ron Josey with JMP Securities. Your line is now open.

[Ron Josey:]

Maybe I'll take advantage and ask two, if possible. So, great quarter. But I want to ask about teams and international. On team specifically, your comment Zander around, I think or it was a turnaround teams' product with 41 of the Fortune 500 purchasing packages. Can you just talk about how teams may help lead the more enterprise opportunities down the road? And specifically, you talked about 10% of the paying base having rolled out to teams. Why only 10%, can you go faster, or is there anything that we should know around the rollout process? That’s the first question. And then the second question maybe follow up to Zander, you talked about international as a big opportunity. Just can you lay out the benefits that are expected by having that data center in Europe, perhaps the timing around the Salesforce additions here as well, only that in the context of trying to understand 50% of revenue in next five years that’s pretty big increase? Thank you.

[Zander Lurie:]

Your first question around teams, it was so important to recognizing how SurveyMonkey has been so integral to the business for many years despite the fact that we had a brand name that was almost synonymous with consumer, is that people collaborate on surveys, because it’s a high stakes moment. When we send the survey to 100 customers or 300 employees, you want to get input and you want to collaborate with other stakeholders. And so that is why people have been sharing SurveyMonkey usernames and passwords for many years. And so now that we have delivered the collaborative features and functionality to enable people to have their own user accounts, we turned on this account verification, as Tom mentioned, to start to let people know, hey, you know we now have a teams' plan, you can get your own account. That is similarly in a more consultative Q&A with our customer operations group. And so we are walking into this and making sure that we phase this in an approach where our most prolific shares are the first ones we offer these teams plans to and that we are able to service them, and give them the world-class customer service that our customer operations group is famous for. So given the size of our 400,000 annual users, we know we need to phase this in and we believe we will be able to fulfill on that goal of phasing this into all of our annual subs over the next couple quarters. We don't have any guidance in terms of just how big the paying user growth will be, but we are super excited about getting all the people who access SurveyMonkey to have their own account. As far as the IDC, we know data sovereignty is super important for our European customers. We know site feed is important to anybody who is on the web. And we know it’s a global opportunity that is bigger than the domestic opportunity. So just the fact that our site translation and currencies have enabled us to scale the 36% of our business internationally, we want to capitalize on the much bigger opportunity and we are targeting biggest developed countries where Internet usage and the ability and need to gather feedback is most prolific and those will be the countries where we put most of our efforts on localization, PR, business development, et cetera.

[Operator:]

Thank you. Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. And you may all disconnect. Everyone have a great day.