SurveyMonkey Learns Lessons of Rapid Executive Departure So Soon After an IPO

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Is it bad luck to have an animal name as part of your corporate name or product? Maybe not if it’s a tiger, a lion or some other predator. But a monkey? Enter the case of SurveyMonkey, or SVMK Inc. (NASDAQ: SVMK). Its unfortunate timing for an initial public offering late in the third quarter of 2018 is followed by decent fourth-quarter earnings, but with a cautious surprise for its new shareholders.

The company reported a loss of $0.03 per share, which met expectations, and revenue was $67.9 million. It might be impressive, on the surface, that it could generate that much in revenues, beating the consensus estimate of $65.9 million, with the business model, but then came news that Chief Financial Officer Tim Maly is stepping down from the company. He is said to be retiring in the second quarter for personal reasons.

Investors hate when CFOs leave, because they know the financial ins-and-outs better than almost anyone. Maly said of his views and departure:

SurveyMonkey is an incredible company that helped create – and then revolutionized – the category of survey software. My ten-year journey with the company has been a true privilege and I am honored to have worked with such an amazing team. SurveyMonkey’s world-class products, inspiring culture of talented employees and proven business model ensure many years of growth and leadership will continue. I am confident in the company’s long-term vision and look forward to seeing Zander and team achieve even greater success in the years to come.

One issue to consider is that SVMK posted a net loss for the quarter of $25 million on a GAAP basis, which is considerably worse than the $8 million net income it made in the fourth quarter of 2017. And for the year-over-year comparisons, the net loss for all of 2018 of $155 million compared with a net loss of $24 million in 2017. While some of those costs are tied to IPO expenses and perhaps to other stock options, that is a number that went wildly in the wrong direction.

For all of 2019, SVMK is targeting revenues in a range of $290 million to $295 million (or 14% to 16% growth), with its non-GAAP operating margin coming in between 1.0% and 3.5%. Its first-quarter guidance was for revenues of $67.5 million to $68.5 million (15% to 17% annualized growth), with non-GAAP operating margin at 0% to 1%.

SVMK priced its September 2018 IPO at $12 per share, above the $9 to $11 range. Its shares closed up at $17.00 on the first day of trading. Even before Thursday’s drop, the shares were at $14.06.

Thursday’s post-earnings and CFO departure news had the stock down another 14% at $12.05. SVMK has a post-IPO trading range of $10.05 to $20.00.

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