2433

Momentive (NASDAQ:MNTV) Posts Better-Than-Expected Sales In Q2 But Customer Growth Slows Down


Full Report / August 04, 2021
Add to Watchlist

Online survey platform Momentive (NASDAQ:MNTV) announced better-than-expected results in the Q2 FY2021 quarter, with revenue up 20.2% year on year to $109.3 million. Momentive made a GAAP loss of $29.2 million, down on its loss of $22.9 million, in the same quarter last year.

Momentive (MNTV) Q2 FY2021 Highlights:

  • Revenue: $109.3 million vs analyst estimates of $107.4 million (1.82% beat)
  • EPS (non-GAAP): -$0.01
  • Revenue guidance for Q3 2021 is $113.5 million at the midpoint, roughly in line with what analysts were expecting
  • The company reconfirmed revenue guidance for the full year, at $445 million at the midpoint
  • Free cash flow of $23.7 million, up 57.9% from previous quarter
  • Customers: 862,200, up from 845,800 in previous quarter
  • Gross Margin (GAAP): 80.1%, in line with previous quarter

Founded in 1999, Momentive (NASDAQ:MNTV) offers software as a service that makes it easy for users create, manage and distribute online surveys.

The story of Momentive (formerly SurveyMonkey) starts in the the '90s when the co-founder Ryan Finley got tasked by the marketing department of the company he was working for to create a survey and send it to their customers. The frustrating experience of using the tools then available led him to quit his job and start a new company.

Is the software we are building something people actually want? How will customers respond to our new marketing campaign? Are my employees satisfied? Answers to questions like these are critical to success of many businesses and SurveyMonkey makes it easy for people to get feedback by enabling them to create surveys, quizzes, and polls and automatically analyze the results. The company offers hundreds of templates with focus on product, market and employee feedback and also allows customers to design their own survey. SurveyMonkey can source the survey respondents and provide guidance with research methodology to make sure that the results will be useful.

Surveys are naturally a viral product and SurveyMonkey actively leverages that as a part of their customer acquisition strategy. The company adds its branding into the surveys, with the aim of turning some of the survey respondents into SurveyMonkey customers themselves.

A lot of research used to be done in person using pen and paper, so Momentive might somewhat benefit from an environment where work is done remotely. But the biggest driver of the business is an increased pressure on efficiency of marketing budgets, as more teams now do the research in-house using do-it-yourself tools rather than hiring an outside agency to do it.

Momentive competes with Qualtrics (NASDAQ:XM), Medallia, Google Forms and a range of smaller companies like Typeform.

Sales Growth

As you can see below, Momentive's revenue growth has been decent over the last year, growing from quarterly revenue of $90.9 million, to $109.3 million.

Momentive Total Revenue

This quarter, Momentive's quarterly revenue was once again up a very solid 20.2% year on year. On top of that, revenue increased $7.09 million quarter on quarter, a very strong improvement on the $1.32 million increase in Q1 2021, which shows acceleration of growth, and is great to see.

Analysts covering the company are expecting the revenues to grow 19.3% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

Customer Growth

You can see below that Momentive reported 862,200 customers at the end of the quarter, an increase of 16,400 on last quarter. That is a bit slower customer growth than what we are used to seeing lately, suggesting that the customer acquisition momentum is slowing a little bit.

Momentive Customers

Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Momentive's gross profit margin, an important metric measuring how much money there is left after paying for servers, licences, technical support and other necessary running expenses was at 80.1% in Q2.

Momentive Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.80 left to spend on developing new products, marketing & sales and the general administrative overhead. Trending up over the last year this is a great gross margin, that allows companies like Momentive to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.

Key Takeaways from Momentive's Q2 Results

With market capitalisation of $3.04 billion Momentive is among smaller companies, but its more than $283.1 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

It was good to see Momentive outperform Wall St’s revenue expectations this quarter. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see the slowdown in customer growth. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company is flat on the results and currently trades at $20.74 per share.

Is Now The Time?

When considering Momentive, investors should take into account its valuation and business qualities, as well as what happened in the latest quarter. We think Momentive is a good business. Its revenue growth has been solid, and analysts believe that sort of growth is sustainable for now. On top of that, its impressive gross margins are indicative of excellent business economics, and its bountiful generation of free cash flow empowers it to invest in growth initiatives.

Momentive's price to sales ratio based on the next twelve months is 6.2, suggesting that the market is expecting more moderate growth, relative to the hottest tech stocks. There is definitely a lot of things to like about Momentive and looking at the tech landscape right now, it seems that the company trades at a pretty interesting price point.

The Wall St analysts covering the company had a one year price target of $26.9 per share right before these results, implying that they saw upside in buying Momentive even in short term.