MNTV (2020 - Q2)

Ladies and gentlemen, thank you for standing by, and welcome to SurveyMonkey's Second Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference may be recorded. [Operator Instructions] I would like to hand the conference over to your host, Vice President of Investor Relations, Gary Fuges. Sir, please go ahead. Gary Fug

Thank you. Good afternoon, and welcome to SurveyMonkey's Second Quarter 2020 Earnings Call. Joining me on today's call are Zander Lurie, CEO; Tom Hale, President; and Debbie Clifford, CFO. After our prepared remarks, we'll take your questions. Prior to this call, we issued a press release and shareholder letter with our Q2 2020 financial results and related commentary. Those items were posted on our Investor Relations website at investor.surveymonkey.com. 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, investments, revenue, operating margin and 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 contained in our filings with 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 and shareholder letter, which are furnished with our 8-K filed today with the SEC and may also be found on our IR website. With that, I'll now turn the call over to Zander. Zander?

Thanks, Gary, and thank you for joining us today. Against the backdrop of a global health crisis and tightened macroeconomic uncertainty, we delivered strong Q2 financial performance, exceeding our revenue and profitability guidance and generating $19 million in free cash flow. With Corporate America working from home, protests in our cities and racial justice initiatives on every C-suite agenda, our team continues to rise to the occasion. This quarter's results further validate that our business is resilient, and our software is critical as organizations accelerate their digital transformation. Based on our first half performance, I am highly confident we can execute on our long-term strategy while managing through the macro headwinds affecting all companies today. Digital transformation was a clear tailwind in the quarter. More organizations are turning to SurveyMonkey to gather feedback and take action in a time when data on your employees well-being and your customers' needs are particularly valuable. We added 35,000 net paid users in Q2, an acceleration from prior quarters. We were successful in converting more of our user base into paying customers. 86% of whom are now on annual contracts. With our massive user base, we believe there is still considerable runway for further monetization gains as we continue to launch new features and experiment with package segmentation. In the enterprise sales channel, we added more than 380 net new logos sequentially and it increased our enterprise customer count more than 50% year-over-year. We continued to improve our sales productivity through better enablement, stronger products and improved processes and tools. Annualized revenue per enterprise customer increased more than 25% year-over-year. We have more rigor, measuring, qualifying and prioritizing opportunities. Standardized sales onboarding and enablement are helping reps close their first deals faster. We also pivoted our Demand Gen, product packaging and selling motion to target industries where there is acute need for our products. This combination of process and flexibility enabled us to win deals and deepen relationships with organizations like Big Brothers Big Sisters of America, Github, Korn Ferry, Stitch Fix, thredUP and ZoomInfo. As I've said many times since our IPO, our enterprise products and marketing and sales motion get a little bit stronger every single quarter. I see no change in this trajectory looking forward. Our software also continues to help fight COVID-19. We believe we can help every U.S. state and municipality fight the pandemic as well as help large companies navigate the complexity of returning to safe office spaces. Sending Daily SurveyMonkey surveys via SMS and integrating with large systems of record like Salesforce was a winning strategy for the state of Rhode Island and will be from many other entities. We are actively engaged with Salesforce executives, systems integrators and solutions engineers with the intent of expanding the use of SurveyMonkey alongside work.com. You will likely hear more from Salesforce and SurveyMonkey about the Rhode Island testimonial because Governor Raimondo has been so successful at flattening the disease curve by successfully implementing our software solution. Additionally, we gained further ground with our customer experience and market research software products, which we believe will be lighthouses for new customers as well as drive meaningful cross-selling opportunities for our thousands of SurveyMonkey software customers. Our integrated CX offering to GetFeedback Suite, is on track to launch this year to serve the Salesforce ecosystem with an agile, price disruptive solution. We've built on our challenger position in Q2, and we have a great opportunity to grow CX by addressing mid-market companies who prioritize value, speed and integration with Salesforce. Market research had a phenomenal Q2 that included multiple six figure deals. We are winning based on the power of our new solutions, the liquidity of our panels and the disruptive pricing and value we offer. This industry has a massive TAM and expensive-services-based incumbents are primed for disruption. I like our chances in a world where digital transformation is a theme as important as stretching your marketing budget. We can and will help agile customers win in that environment. So those are the Q2 tailwinds. Were there headwinds in Q2? Absolutely. We continue to see two to three percentage points of higher churn in self-serve and longer enterprise sales cycles in certain industries, consistent with what we discussed on the May call. We also lost some enterprise customers primarily from industries acutely impacted by the economic crisis. Nevertheless, we delivered solid enterprise execution through sales force productivity gains, targeted prospecting and product packaging. As expected, the business looks different today than it did pre-COVID. The top of the funnel is broader and busier, but the bucket is leakier in targeted industries. We believe our enterprise business would be stronger in a more normalized quarter and will be stronger in a more robust macro environment. The pandemic will create economic wreckage for many but we believe we are positioned to thrive in this period of accelerated digital transformation. Today's headwinds are transitory for us, but our tailwinds are durable. The last two quarters are unlike anything we've seen in SurveyMonkey's history, and we believe our first half results demonstrate that our business model is resilient, our products are more relevant than ever, and our strategy is sound. Our team continues to execute on behalf of all of our stakeholders. I can't thank them enough for their dedication to our mission to power the curious. With that, I'll turn the call over to Tom.

Thanks, Zander. The team took a huge leap into the cloud in Q2 while continuing to innovate for our customers. On July 3, we completed the migration of our U.S. on-premise data center to cloud. Now 100% of our production traffic is hosted on nine cloud-based data centers. Being in the cloud is already driving improved site speed, uptime, resiliency and greater developer productivity. Google has taken notice. After the migration, we saw a 10x increase in the number of pages ranked perfect for site speed, which is great for users and SEO. Our U.S. migration was an 18-month journey and the team executed flawlessly. In surveys, we continued evolving our packages to better align our pricing with the value we deliver. In self-serve, we implemented new response limits in our free basic product. This was a carefully planned and tested initiative and a key driver of Q2 paid user growth. We'll continue to test and learn here as we see a big opportunity to monetize the 97% of our users who don't pay us today. In enterprise, our sales team launched our response-based pricing model for new enterprise survey customers starting on April 1. We have been piloting the new model since late last year, so Q2 was our first full quarter. This new pricing model, which scales based on usage, allows us to better match monetization to the value we deliver. While it's early days, we're very excited by the results. We've increased the average deal size for new survey deals, while seeing similar win rates, days to close and deal volumes as in the old purely seat-based model. This will be a multi-quarter journey and we expect response-based pricing to pay dividends for years to come. In customer experience, we remain on track for the 2020 release of our end-to-end CX offering, the GetFeedback Suite, which combines our GetFeedback and Usabilla products. We have a great opportunity to grow in CX by selling into our customer base and addressing them in-market. The rationale for this business is simple. CX is a major use case for our surveys product, and our goal is to upsell the always on, multichannel GetFeedback Suite. Even without our new product in the market, our CX solutions are winning customers like CORT and SimSpace. In market research, our strategy is gaining momentum. Customers love our new expert solutions for creative and concept testing. It's AI-generated insights, quick turnarounds, automatic analysis and cost savings relative to services are pulling us into opportunities at the world's best consumer brands. We're seeing many new proof-of-concept engagements, while our early adopters are already starting to purchase additional audience credits. Vanguard Charitable and Dole Food are great examples of customer wins in the quarter, and we expect to see a steady flow of new projects from them as we roll forward. We're just getting started adding software solutions to our market research business, and we look forward to updating you next quarter. And finally, we are continuing to amplify our reach within our ecosystem of partners and loyal users. We added four Salesforce integration partners in Q2, doubling our number from Q1 and continued to deepen our integrations with Microsoft. We saw installations of the SurveyMonkey app for Microsoft Teams more than double sequentially in Q2, and the app has been a driver of new SurveyMonkey users from the Microsoft ecosystem. This month, we're launching the SurveyMonkey Technology Ecosystem Program or STEP to unlock mutual value for SurveyMonkey and our key integration partners, including companies like HubSpot, Zendesk and Freshworks. This program is good for our business. When our customers deploy integrations, we see higher retention. And in May, many of our partners and customers participated in our online Curiosity Conference, where our live attendees doubled over our 2019 event. Virtual conferences are a key part of our strategy to build a following among enterprise buyers, and our next conference will be the CX Impact Conference in mid-October. I'm proud of our team. We continue to rise to the occasion in a challenging environment to deliver for our customers and our strategy. I'll now turn the call over to Debbie.

Thanks, Tom. Once again, our Q2 results exceeded our expectations for both revenue and non-GAAP operating margin. As Zander and Tom discussed, we saw strong demand for our feedback solutions in the quarter, which we believe validates our strategy and demonstrates the resilience of our business. Consistent with the financial strategy we outlined last quarter, we are focused on optimizing for free cash flow in the near term while at the same time, investing in our strategic initiatives to best position us for long-term growth. Turning to our Q2 financial results. Unless otherwise noted, all comparisons are year-over-year. As a reminder, April 1 marked the 1-year anniversary of our acquisition of Usabilla. In addition to Usabilla, our Q2 2020 results include the impact of the GetFeedback acquisition which closed in the third quarter of 2019. Revenue in Q2 was $90.9 million, an increase of 21%. Revenue from our self-serve channel grew 9% in Q2, driven by a combination of demand arising from COVID-related use cases as well as ongoing refinement of our paywalls that has driven an increase in customers upgrading into paid plans. As Tom mentioned earlier, in Q2, we reduced the number of responses within our free plan, which drove more conversion into paid plans. In our enterprise sales channel, revenue grew 70% and accounted for 28% of total revenue compared to 20% in the year ago period and 29% in Q1. Excluding the $2 million nonrecurring market research revenue in Q1, which we discussed on the last call, enterprise sales revenue accounted for 27% of revenue in that period versus 28% in Q2, reflecting a sequential increase. The growth in enterprise sales revenue was due to strength in our SurveyMonkey enterprise, audience and customer experience offerings as well as the benefits we are realizing from our sales productivity initiatives. Deferred revenue increased 28% to $160 million. Remaining performance obligations, or RPO, which is the sum of deferred revenue and backlog, were $178 million, reflecting 27% growth. As we've mentioned previously, in addition to overall bookings growth, an added contributor to growth in both deferred revenue and RPO has been our strategy to migrate our user base from monthly to annual plans. With annual plans now accounting for 86% of paid users, we anticipate that deferred revenue and RPO growth will continue to normalize toward our revenue growth rate. Non-GAAP gross margin was 80% versus 78% in the year ago period due primarily to revenue growth. Non-GAAP operating margin was 2.5%, up from 2.1% in Q2 2019 and negative 1.6% in Q1 2020 due to revenue performance and disciplined spend management. Total non-GAAP operating expenses declined sequentially on a dollar basis due primarily to the actions we described on our previous calls, such as a reduction in our hiring pace and lower variable costs resulting from the remote work environment. Counter to that, we held non-GAAP sales and marketing expenses approximately steady quarter-over-quarter as we sought to maintain our investment levels to maximize demand creation against a more challenging economic backdrop. In particular, paid digital marketing continues to be an efficient Demand Gen channel for us due to less competitive pressure, coupled with ongoing optimization work across digital channels. We generated $21.9 million in operating cash flow and approximately $19.1 million in free cash flow, which reflects the revenue beat, the impact of the proactive expense measures we outlined on our Q1 call, including lower facilities build out costs and continued optimization of working capital. We ended the quarter with $177 million in cash and cash equivalents, an increase of $32 million quarter-over-quarter, bringing us closer to a net neutral debt position. Our total potential liquidity stands at approximately $247 million, which includes capacity of $70 million on our revolving credit facility. We are pleased with the resilience we're seeing. While there remains a great deal of macro uncertainty regarding how the COVID-19 pandemic will impact the economy, our markets and our customers, our recurring revenue model is an asset, which provides us with near term visibility. We are gathering more data points every day. While we have a better understanding of what the impacts from COVID may be in the near term, we are continuously evaluating various scenarios of financial performance in the mid to long-term to help us understand a variety of potential outcomes depending on the depth and duration of the economic downturn. With so many unknowns, we will limit our guidance to one quarter out at this time. For Q3, we expect revenues to be in the range of $93 million to $96 million or 19% year-over-year growth at the midpoint. We expect non-GAAP operating margin to be in the range of 1% to 3%. We intend to continue to invest in strategic opportunities to drive growth, industry leadership and competitive differentiation, while balancing for free cash flow in the immediate term. Now I'll turn the call back over to Zander.

Thanks, Debbie. The pandemic and economic downturn alone presents significant challenges, but recent social justice issues have made an already difficult situation even more acute. A June SurveyMonkey CNBC race relations survey identified race as the single biggest source of division in the United States at 35%, beating out intense partisanship at 26%, ideology at 16% and class at 10%. For Black Americans, race is by far the dominant divide. 67% said race is the biggest problem facing America today. And the perception that racism is a major problem is up significantly among black and white Americans since the May 2018 NBC News SurveyMonkey poll. At SurveyMonkey, we'd never allowed our products and services to be used to promote hate, intolerance and bigotry. Now we are redoubling our efforts to promote diversity, equity and inclusion. We're taking action on prescriptive plans laid out by our Racial Justice Task Force, a group of SurveyMonkey leaders with a mission to further racial justice at SurveyMonkey and in our community. Internally, we are hosting programs to support the well-being of our black and brown employees. We are expanding our – and amplifying our DEI policies regarding recruiting, including having candidate sources focused on identifying candidates from underrepresented backgrounds. And we are initiating training to educate our team on systemic racism and how we can be decidedly anti-racist. Externally, we are donated to organizations working to support black lives and adding organizations that are fighting for social justice to the SurveyMonkey Contribute program. And we've recently launched a landing page featuring free racial equity resources, including survey templates, research from our team and a statement reiterating our commitment to this cause. We are taking action. On Monday, we announced our initiative with 15 other major technology companies to use our new DEI survey template to track the representation of women, racial minority and LGBTQ individuals within our vendors, employees, leadership teams and boards of directors. Our goal is to partner with our vendors, suppliers and consultants to provide opportunity to people who are underrepresented and marginalized. Together, we can make our organization stronger and create lasting change within our broader community, and we are proud to be working with companies like Box, Eventbrite, Intuit, PagerDuty, Upwork, Chime and Zoom. This is an important first step, and we are in the process of connecting with our 20 largest vendors to inform them that investing in DEI will be a requirement for doing business with SurveyMonkey. Improving DEI will take sustained effort, but we are committed to measurable time-sensitive goals to make SurveyMonkey more diverse, more equitable and more inclusive. We encourage the financial communities to join us in this all-important fight. Thank you. We now look forward to your questions.

[Operator Instructions] Our first question comes from the line of Chad Bennett of Craig-Hallum. Your line is open.

Great. Thanks for taking my question and nice job, again, in a challenging environment to say the least on the quarter. So I guess, a few things on the enterprise side of the business, I'm trying to kind of correlate here. So you spoke about enterprise kind of ACV, I guess, I'd call it, growing 25% year-over-year per customer. I guess, and if I look at that, I don't know if that includes enterprise churn or not. But if I just look at kind of how revenue per customer showed up based on my model, I think it was up like 12% year-over-year. So is there – there's probably something I'm missing in that equation, but just kind of help me attach those two data points.

Hey Chad, I think we'll have to work with you individually on the model. We just spent the last few weeks with the auditors and the Audit Committee, so I'm quite sure that 27% year-over-year growth in our average revenue per enterprise customer is accurate, and that reflects the total net new logos as well as revenue that was generated in the quarter.

Okay. And then just maybe on how you spoke, Zander, about the enterprise – a little bit longer sales cycles there and then I don't know how you phrase it, a handful of customers that dropped out of the base. Can you just give us a sense what you're seeing on the sales cycle side? And also relative size of the customers that dropped off and maybe vertical exposure there?

Absolutely. Yes. So I can't say enough about my enthusiasm for the growth in our enterprise business. We charted out a plan this year, which included a lot of focus on sales productivity after doubling the sales force last year, and we have been successful on that, albeit with a little different path to growth in Q2 than we had planned. So we really focused our efforts on the strongest verticals, you can imagine, health care technology, FinServe, government, CPG, shying away from industries that have been particularly impacted by COVID-19, which for us is about 5% of our enterprise domain base. So we saw, frankly, de minimis churn, but it was time boxed in those verticals that were acutely impacted and really redoubled our efforts around Demand Gen and selling motions into the verticals that had strength. So we saw really excellent Demand Gen in the quarter and then a lot of success in converting that into bookings. So a really nice job by the team. And it's a testament to the fact that our products are incredibly relevant and needed in a time when people need to connect with their stakeholders in every geography, in every industry, in every kind of entity, large businesses, small businesses, government, education, healthcare, SurveyMonkey has been there to really support during this sensitive period.

And I'd just add on that our net revenue retention rate remains over 100%. And has been consistently over the last several quarters, and we added more than 380 net new enterprise customers during the quarter, which reflects strong growth.

Right. Okay. Thanks for the answers.

Thanks Chad.

Thank you. Our next question comes from Eric Sheridan of UBS. Your question, please.

Thanks for taking the question and hope all was well with everyone on the team. Maybe two questions around self-serve. Just wanted to understand. You called out some of the changes you made in the product as being the driver of paid user growth. How should we be thinking about those changes, maybe additional changes you plan on making to self-serve as having broader impact as you move through the back part of the year, that would be number 1. And then number two, is there anything you're doing to take advantage of some of the marketing dynamics that are playing out in the world. Sort of programmatic pricing or CPMs are quite low, they might be able to amplify some of your ROIs to push people into the top of your funnel especially with respect to the self-serve product on the consumer side?

Sure. I'll start and then maybe Tom can add some more color. I've been associated with SurveyMonkey now over 10 years in our 20-year history. And with an active user base that is approaching 20 million active users, we're still only monetizing about 3% of that active user base at a time when we've seen record levels of intent, interest, surveys, responses on the platform. So we know, particularly around all – the sensitive period we're living in, people are interested in collecting feedback from their stakeholders. We are constantly building new features and capabilities, integrations across not only our surveys platform, but in our market research products as well as the GetFeedback Suite. So it's really an organic longitudinal constant muscle that we're building to growth test. We launch new features, we experiment, we test in different markets. We're constantly using segmentation and pricing and packaging to maximize the value that we deliver our customers, but also to make sure we're monetizing the fair share. So Tom's team has done a terrific job across marketing growth and experiment to help drive that paid user number. And frankly, that's a muscle, Eric, you know covering so many Internet companies, that is a homegrown muscle that is a competitive advantage and will continue to be, given that there is no other survey or CX company with the scaled user base and global platform like we have. Tom, do you want to share a bit about some of our marketing initiatives?

Yes. Obviously, the lower CPCs and some of the opportunities that presents to us is something we're taking advantage of and I think we can continue to spend as we go forward to drive the top of the funnel. I mean, we have seen really elevated kind of top of funnel numbers based on the crisis itself, I mean, Zander talked about the sort of metrics of usage that are really kind of in a nonlinear way, kind of at levels we've not seen before. So we will continue to spend to drive the top of the funnel. I think it does present an opportunity for us and I think we've been pleased with the results. Turning back to your first question. The only thing I want to just call out, you had asked about sort of the durability of the benefit from the response limits. And I think it affects us in two ways. One, it shortens the time to conversion because people reach that limit faster. And secondly, it pulls more of the 97% of our base that do not pay us today into our paid base. So it's kind of a great double impact, and we see lots of other opportunities along those lines around the world as we look ahead.

Thank you so much.

Thank you. Our next question comes from Mark Murphy of JPMorgan. Please go ahead.

Hey everyone. This is Pinjalim sitting in for Mark. Thanks for taking questions and congrats on the quarter. Zander, could you maybe talk about the trajectory of bookings cadence in the enterprise business in Q2 and so far in Q3? I think you had mentioned that you had record pipelines generated in April. What did you see in terms of close rates and how is the pipeline looking forward – going forward into the second half?

Sure. Thanks for the question. Again, a lot of the growth that we're seeing right now, some of it is attributed to the COVID environment. Some of it is attributed to these new use cases and solutions, like the one I mentioned in Rhode Island and for some of our health care customers that is specifically designed, a purpose-built solution specifically designed to help companies and organizations on contact tracing and symptom monitoring. But a lot of the growth we're seeing today in our enterprise business across surveys and CX and market research is really a testament to three to four years of hard work in product, in marketing and building up this sales motion. So we saw record levels of demand, as I mentioned in April, and we said we had a lot of work to do on converting it. I'm very pleased to say that our conversion rates, both in terms of times to first sale, date to first sale as well as Phototainment, our teams did not see a falloff from Q1 before we reentered this COVID environment. So really nice job on our teams shifting the focus into industries and companies, entities that would be good buyers for our products and then in fact, they delivered. So our Demand Gen environment, it's partly the fact that we have stronger products this year than we did last year. It's partly a response to the excellent work that our sales team has done. We've hired a gentleman named Nik Daruwala, who's leading up our market research team. It's a testament to the marketing team that has really brought all of the world-class enterprise sales and marketing capabilities to SurveyMonkey. So it so happens to be – we have this concurrent dynamic of tailwind from digital transformation, coupled with a much better, stronger team at SurveyMonkey selling much better, stronger products. And that is netting out to be a demand funnel that leads us to the guidance that Debbie presented in the call.

I'd also just add on that our bookings linearity has been consistent with historical average patterns, which we see as a real positive against this challenging economic backdrop.

Got it. Okay. And secondly, this response-based pricing kind of caught my attention. Can you maybe talk a little bit more about that, why are you going that way? How is it beneficial for the customers? Are the customers asking for it? And is it mainly for new customers or will you start nudging some of the existing enterprise customers as well?

Sure. It's a great question. As I mentioned, I have a long history with this company. And traditionally, we've built one survey product that we charged you by the month or by the year. And it was purely fees based, leaving no room for incremental monetization based on usage. And the fact is there's a lot of history in enterprise software to have a usage-based model. So we are now pursuing this dual model with both the seat component as well as the usage component. We introduced it in April. Our teams did a great job getting trained and enabled. We've seen really good receptivity from our customers who are accustomed to being charged for this and being charged based on usage. We think it's appropriate given all the product development we've done to be able to generate more value associated with the value we're delivering. So as you know, from companies with large scale, like we have, you kind of start with impact, you test, you learn, you make sure the motion is working and that you're getting good customer receptivity. And we will scale this out to all new customers and eventually existing customers, but we are super customer-centric, and we will do this in a responsible way with a lot of impetus to our customers. We're not surprised by it. We are always competing on value, and we have been a price disruptor for a long time, coupled with time to value and the integrations we offer. So we know this is one component, but we think it's an important one to help us drive incremental monetization.

Understood. Thank you so much.

Thank you/ Our next question comes from Ryan MacDonald of Needham. Your line is open.

Hi, thanks for taking my questions. Zander, I guess, the first point for you. I'm asking about the CX suite here and the progress being made. Clearly, you're unifying under the GetFeedback brand, deepening the integrations with the Salesforce ecosystem. Just would love to hear what you're hearing about sort of demand for the solution as you continue to progress along that progress for process. And then as we look at sort of ahead of the unification of the product or full integration coming later this year, are you seeing any pent-up demand or customers that are perhaps holding off until launch that fully integrated product later this year before making a purchase decision? Thanks.

Hey Ryan, thanks for the question. You know this is an area that we are super, super focused on. The reason we're in CX, I think it's important to remember, when you look at this massive scale of users we have across SurveyMonkey, the number 1 use case bar none is CX. People are coming to SurveyMonkey to the web, buying the product, buying the enterprise product to help do better by their customers. Customer satisfaction, NPS, really trying to understand, am I delivering the right level of products, services satisfaction to my customers to win in a competitive environment. So that led us to a strategic vision to build a purpose-built software solution at a much higher AOV, it led us on the path to acquire Usabilla last April and GetFeedback last September. We're bringing those two platforms together. I'm going to ask Tom to talk about some of the capabilities of the team has shipped this year and will continue to ship. But I think it's fair to say that both products are winning in the market today. Usabilla really focused on app, web, e-mail, you have GetFeedback really catered to the Salesforce ecosystem. So both of these products were competing away, our vision is much broader, is really to deliver a more holistic omnichannel solution focused on the Salesforce ecosystem. And I can't say that enough that Salesforce, with hundreds of thousands of customers is laser-focused on Customer 360 and doing right by the customer, and we believe that our CX solution, which will hook you in better than anybody else and offer value quicker at a better price, is going to be a fundamental growth driver for 2021 going forward. But Tom, maybe you can add a bit about the product we're delivering.

Yes. Thanks, Zander. Ryan, I think the key point here is to recognize that what the CX market requires is an omnichannel data collection, which means that you're gathering feedback on all the digital touch points that you have with your customers, all the personal touch points, whether it's sales or service or your call center. And you want to have a single view of that and you want to be able to analyze and take action on that data. That is what a CX solution is. And the combination of our GetFeedback Suite products actually delivers on that. And that's what we'll be shipping later this year. That's really the heart of the offering. We're doing things to sort of unify the product and bring the data together and to add the analytics as well. But one of the places that we'll be really most excited is to roll out what we're doing with Salesforce. That's going to be some very interesting stuff. You would ask kind of like are – is anyone holding any demand back based on the expected ship? And the answer is no. What we are doing is selling the current products that we have today as a step pathway to the ultimate GetFeedback Suite. So we have a nice path for those customers existing in future to get to the GetFeedback Suite. So no shortage in demand there.

Excellent. And then just as a follow-up for Debbie. You talked about in the prepared remarks about the completion of the migration to cloud data centers from an on-premise data center. Is there any potential gross margin talent or expansion opportunity now that you're sort of off of two different systems and have completed that migration?

The short answer is that, over time, yes, we'll be able to get more leverage in gross margin as we fully migrate out of our data centers. But I would say that over time, we are targeting approximately 80% gross margin, which is where we are today. And the reason why is because there are some puts and takes in that math. Of course, gross margin will scale positively with revenue as it grows. And as I mentioned, we will get some leverage from those cloud investments over time, but there are also some costs that will scale with revenue as well, including things like credit card transaction fees, customer support costs, third-party, panel costs in our market research business in cases where we can't leverage our proprietary panel. All of these puts and takes net out to about 80% gross margin over the long term.

Excellent. Thank you very much.

Thank you. [Operator Instructions] Next question comes from the line of Brett Knoblauch of Berenberg Capital. Your line is open.

Hi guys. Thanks for taking my question. I hope you are all well. Just to touch a little bit further on the GetFeedback Suite that you guys plan on launching, and there's obviously some bigger CX names out there competing in both, I guess, the enterprise level and mid market. Could you just maybe detail how you plan to differentiate yourself when you do see them maybe when competing for new business?

Sure. Thanks, Brett, for the question. Thanks for the good wishes, everybody. I think I speak for the whole management team. Our families are strong and healthy and focused. Specifically on CX, Brett, the closer you get to our business, you recognize we are pursuing three pillars. We call them surveys, where we are a market leader on the web, in the enterprise market; market research, where we've really built a disruptive software-oriented product, and we're starting to win much bigger six figure deals. We closed a awesome deal this quarter with a company called Shine, which is really the leading fintech bank. You'll see their logo on the Mavs jersey, and we've really been helpful in helping them understand different cohorts and who they're trying to reach and the different sentiments around their marketing campaigns. So we're winning some big logos in the market research space and massive TAM. And then CX, as I mentioned, these two acquisitions, bringing them together in a SurveyMonkey environment, leveraging that massive base of users in 350,000 domains and really targeting that Salesforce ecosystem where we have deep partnerships and relationships – equity relationship and are constantly thinking through product marketing, business development, go-to-market opportunities. So we're quite bullish there. There are some other players in this space. We think we've got a real shot at disrupting some of the more professional services-oriented nature of those businesses, time to value takes quite a bit longer and costs are significantly higher to the tune of multiples. So when we come in, we're pitching ease of use, SurveyMonkey wins there every day, price disruption, which we think is critical at – especially in the mid-market. And then time to value. When you have these integrations that plug-in well, I don't see a lot of CX companies displacing Salesforce and Microsoft as the CRM systems of record. Luckily for us, we're not trying to. We want to add a ton of value, help make those products stickier for those systems of record. And if we do that well, we think we can play in that environment and be really great channel partners.

Perfect. Thanks so much.

Thank you/. Our next question comes from Brian Fitzgerald of Wells Fargo Securities. Your question please.

This is Will on for Brian. On headcount, can you tell us how you're adapting recruiting and onboarding efforts in the given environment? And what sort of dynamics are you seeing in the current market? And then a second one, could you talk to the efficiency of your teams during shelter-in-place and whether you're giving any thought to work from home or any flexibility there longer term? Thank you.

Yes, it's a great question. It's one that's super important to our employees. So as far as head count, we are at about 1,300 employees today. We've come through three years of very rapid employee headcount growth, two acquisitions, which brought about 200 employees to the SurveyMonkey family. We've been investing significantly in products in marketing and sales. So I believe we've done a really good job of investing significant dollars into the company that are going to yield significant new revenue in the years to come, and we're in the very early innings of harvesting those investments in product and sales and marketing. Like everybody else who's under the age of 120 years old, this COVID period has been unlike anything else. We went work from home full-time on March 12 around the world. We've been running the company from Slack and Zoom since then. In that period, we've continued to post really significant revenue growth. We did the lift and shift to AWS last month. We've launched new products, and we hired significant numbers of new people in Q2. So we are onboarding Vice President of Product Marketing and Sales, new senior engineers. We have some exciting new additions to the team that we will be discussing soon. We've made some significant investments in our diversity, inclusion and recruiting efforts. And we're rethinking the way we work, like every other tech company is. When you see the kind of record productivity from our engineers and continued productivity from our sales teams, you'd be foolish not to think through how can we lean into that flexibility and adaptability and cost savings. Debbie discussed some of the CapEx, headcount facilities – savings that we've made this year and to see no lapse in our productivity and delivery and shipment gives me a lot of hope that this is a company that can continue to adapt, and that strong culture will help us thrive for a long time to come. So yes, we're absolutely reimaging work and our SurveyMonkey templates are helping hundreds and thousands of other companies do the same. We know that CEOs and CHROs and CFOs are connecting with their stakeholders and principally their employees to understand how are you doing? What can we do differently? What kind of benefits are going to help you thrive in this period, mental health benefits? So our templates and our data access, we think, is a key driver in helping everybody get back to an office environment in a more flexible and productive way in the future, whenever that might be.

Great. Thank you.

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

Hey, Brad.

Hi. This is Sherry on for Brad.

Hi, Sherry.

Well. Hi.

How are you? How are your family?

Very good. Very good. Yes. I just wanted to see if you could comment on any trends that you're seeing internationally? Or if there's any geographies of relative strength or signs of recovery? Thank you.

Thanks, Sherry. Yes. International continues to represent about 35% of our revenue. And obviously, that's concentrated in Canada, Australia, New Zealand and then in a handful of countries in Europe. The Usabilla team we acquired last year is headquartered in Amsterdam. So that field sales team continues to deliver. And then we put a sales team for surveys in Dublin, in our Dublin office last spring to May of 2019, and they continue to deliver for us. So I would say that the international growth trajectory looks on par with the U.S. growth trajectory. I think everybody was stung in the back half of March and early part of April, and they have recovered on a similar trajectory as the U.S. So we continue to track around that 35% level. And I think you'll see continued investments, localization initiatives that will help that international business grow faster in the future.

Great. Thanks for taking my questions.

Thanks, Sherry.

[Operator Instructions] And as there appears to be no further questions in queue, I'd like to turn the call back over to CEO, Zander Lurie, for closing remarks. Sir?

Well, thank you, Latif, and thank you for all of our analysts that continue to be interested and curious about SurveyMonkey developments. It's been a fascinating in a couple of years as a public company and obviously, 2020 has been a year unlike any other. I'm super impressed and proud of our team and our ability to continue to deliver for our customers and post the kind of results we've been able to post in an environment where there's just a lot pulling at our employees and our partners, and we are all truly in this together. So I wish you all a great, healthy summer. I hope you get out there, get some fresh air, roast some marshmallows with your kids, do something that you wouldn't have done in another summer and may you have a happy, healthy rest of summer. We look forward to catching up with you on our Q3 call in three months and wish you continued success and good health. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.