EX-99.2 3 mntv-ex992_6.htm EX-99.2 mntv-ex992_6.htm

Exhibit 99.2

Momentive Announces Second Quarter 2021 Financial Results

RPO Increases 24%, Deferred Revenue Increases 24% Year-over-Year

Revenue Increases 20% Year-over-Year

 

SAN MATEO, Calif. — August 4, 2021 — Momentive (NASDAQ: MNTV), an agile experience management company (formerly SurveyMonkey), today reported second quarter results for the period ended June 30, 2021.

“In Q2, we executed on our corporate rebrand to Momentive while delivering strong Q2 financial results: 20% year-over-year revenue growth, even faster expansion of our leading growth indicators, and a 22% free cash flow margin,” said Zander Lurie, chief executive officer of Momentive. “At Momentive, we’re launching and selling solutions to help enterprises like NBC Universal, Daimler, and Kellogg shape what’s next for their stakeholders.”

 

Q2 2021 Key Results

 

Total revenue was $109.4 million, an increase of 20% year-over-year.

 

Enterprise sales revenue was $33.9 million, an increase of 33% year-over year. Enterprise sales revenue accounted for approximately 31% of total revenue, up from approximately 28% in Q2 2020. We ended the quarter with approximately 9,400 enterprise sales customers, up 30% from approximately 7,200 in Q2 2020.

 

Self-serve revenue was $75.5 million, an increase of 15% year-over-year.

 

Leading Growth Indicators: Deferred revenue was $197.3 million, an increase of 24% year-over-year. Remaining performance obligations (RPO) were $221.6 million, an increase of 24% year-over-year.

 

Paying users totaled approximately 862,200, an increase of approximately 81,200, or 10% from approximately 781,000 in Q2 2020. Approximately 90% of our paying users were on annual plans, up from 86% a year ago.

 

Average revenue per user was $514, up approximately 8% from $478 in Q2 2020.

 

GAAP operating margin was negative 24.4% and non-GAAP operating margin was 1.3%.

 

GAAP net loss was $29.2 million and GAAP diluted net loss per share was $0.20. Non-GAAP net loss was $0.8 million and non-GAAP diluted net loss per share was $0.01.

 

Net cash provided by operating activities was $26.2 million and free cash flow was $23.8 million for 24.0% and 21.7% margin, respectively.

 

Cash and cash equivalents totaled $283.2 million and total debt was $212.7 million for net cash of $70.5 million as of June 30, 2021.

 

 

1


 

Q2 2021 Business and Product Updates

 

Relaunched as Momentive, an agile experience management company that helps organizations shape what’s next, and began trading on the Nasdaq under the ticker symbol MNTV.

 

Announced that GetFeedback has been recognized as a leader in Experience Management and Feedback Analytics in the G2 Grid Reports for Summer 2021. GetFeedback was also awarded the Easiest Setup and Easiest to Use badges for the enterprise market, and Best Estimated ROI badge for the mid-market.

 

Announced four new AI-powered market research solutions that improve audience targeting with advanced analytics and hosted its inaugural Market Research Summit, Fast Forward Live.

 

Launched the latest SurveyMonkey App for Zoom Video Communications, delivering an embedded feedback experience accessible within Zoom meetings and the desktop client.

 

Promoted Justin Coulombe to Chief Financial Officer.

 

Announced with Tableau the launch of a Path to a New Normal, a new year-long public opinion research initiative.

 

Momentive posted a shareholder letter with its second quarter 2021 financial results and management commentary on its investor relations website at investor.momentive.ai.

 

Financial Outlook

For the third quarter and full year of 2021, Momentive currently expects the following:

 

Q3 2021

FY 2021

Revenue

Y-o-Y growth at mid-point

$112.5 million - $114.5 million

19%

$443 million - $447 million

18%

Non-GAAP operating margin

2.0% to 4.0%

2.0% to 4.0%

Free cash flow

NA

$47 million - $52 million

 

For the third quarter of 2021, the company expects basic weighted average shares outstanding to be approximately 148 million and diluted weighted average shares outstanding to be approximately 152 million. For the full year 2021, the company expects basic weighted average shares outstanding to be approximately 147 million and dilutive weighted average shares outstanding to be approximately 154 million. For a detailed explanation of the company’s non-GAAP measures, please refer to the appendix section of this press release.

 

 

2


 

Conference Call Information

Momentive senior management will host a conference call today to discuss the company’s Q2 2021 financial results. This call is scheduled to begin at 2:00 pm PT / 5:00 pm ET and can be accessed by dialing (833) 900-1542 or (236) 712-2281 (ID: 5464802). An archived webcast of the conference call will be accessible on Momentive’s Investor Relations page, investor.momentive.ai. A telephonic replay of the conference call will be available until Wednesday, August 11, 2021, and can be accessed by dialing (800) 585-8367 or (416) 621-4642 and entering the passcode 5464802.

 

About Momentive

Momentive (NASDAQ: MNTV - formerly SurveyMonkey) is a leader in agile experience management, delivering powerful, purpose-built solutions that bring together the best parts of humanity and technology to redefine AI. Momentive products, including GetFeedback, SurveyMonkey, and Momentive brand and market insights solutions, empower ​decision-makers at 345,000 organizations worldwide to shape exceptional experiences. More than 20 million active users rely on Momentive to fuel market insights, brand insights, employee experience, customer experience, and product experience. Ultimately, the company’s vision is to raise the bar for human experiences by amplifying individual voices. Learn more at momentive.ai.

 

Investor Relations Contact:

Gary J. Fuges, CFA

investors@momentive.ai

 

Media Contact:

Katie Miserany

pr@momentive.ai

 

Source: Momentive Global Inc.

 


3


 

 

MOMENTIVE GLOBAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

 

(in thousands)

 

June 30, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

283,199

 

 

$

224,390

 

Accounts receivable, net

 

 

22,484

 

 

 

24,177

 

Deferred commissions, current

 

 

6,781

 

 

 

5,429

 

Prepaid expenses and other current assets

 

 

12,142

 

 

 

10,520

 

Total current assets

 

 

324,606

 

 

 

264,516

 

Property and equipment, net

 

 

12,016

 

 

 

18,924

 

Operating lease right-of-use assets

 

 

56,101

 

 

 

56,986

 

Capitalized internal-use software, net

 

 

29,151

 

 

 

29,462

 

Acquisition intangible assets, net

 

 

15,818

 

 

 

21,207

 

Goodwill

 

 

466,728

 

 

 

468,764

 

Deferred commissions, non-current

 

 

11,988

 

 

 

10,018

 

Other assets

 

 

8,187

 

 

 

7,940

 

Total assets

 

$

924,595

 

 

$

877,817

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

11,450

 

 

$

3,348

 

Accrued expenses and other current liabilities

 

 

19,653

 

 

 

15,198

 

Accrued compensation

 

 

30,807

 

 

 

32,149

 

Deferred revenue, current

 

 

196,656

 

 

 

169,872

 

Operating lease liabilities, current

 

 

9,380

 

 

 

8,318

 

Debt, current

 

 

1,900

 

 

 

1,900

 

Total current liabilities

 

 

269,846

 

 

 

230,785

 

Deferred revenue, non-current

 

 

681

 

 

 

760

 

Deferred tax liabilities

 

 

5,341

 

 

 

5,153

 

Debt, non-current

 

 

210,766

 

 

 

211,716

 

Operating lease liabilities, non-current

 

 

71,654

 

 

 

74,487

 

Other non-current liabilities

 

 

8,758

 

 

 

8,560

 

Total liabilities

 

 

567,046

 

 

 

531,461

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

Common stock

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

907,383

 

 

 

835,444

 

Accumulated other comprehensive income

 

 

3,346

 

 

 

5,208

 

Accumulated deficit

 

 

(553,181

)

 

 

(494,297

)

Total stockholders’ equity

 

 

357,549

 

 

 

346,356

 

Total liabilities and stockholders’ equity

 

$

924,595

 

 

$

877,817

 

 

 


4


 

 

MOMENTIVE GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

(in thousands, except per share amounts)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

$

109,392

 

 

$

90,941

 

 

$

211,690

 

 

$

179,206

 

Cost of revenue (1)(2)

 

 

21,688

 

 

 

21,009

 

 

 

42,460

 

 

 

40,953

 

Gross profit

 

 

87,704

 

 

 

69,932

 

 

 

169,230

 

 

 

138,253

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development (1)

 

 

34,225

 

 

 

26,571

 

 

 

67,208

 

 

 

53,128

 

Sales and marketing (1)(2)

 

 

56,025

 

 

 

42,578

 

 

 

108,061

 

 

 

84,669

 

General and administrative (1)

 

 

24,170

 

 

 

21,339

 

 

 

47,492

 

 

 

43,271

 

Total operating expenses

 

 

114,420

 

 

 

90,488

 

 

 

222,761

 

 

 

181,068

 

Loss from operations

 

 

(26,716

)

 

 

(20,556

)

 

 

(53,531

)

 

 

(42,815

)

Interest expense

 

 

2,304

 

 

 

2,422

 

 

 

4,603

 

 

 

5,508

 

Other non-operating (income) expense, net

 

 

(119

)

 

 

102

 

 

 

196

 

 

 

(1,134

)

Loss before income taxes

 

 

(28,901

)

 

 

(23,080

)

 

 

(58,330

)

 

 

(47,189

)

Provision for (benefit from) income taxes

 

 

336

 

 

 

(156

)

 

 

554

 

 

 

(15

)

Net loss

 

$

(29,237

)

 

$

(22,924

)

 

$

(58,884

)

 

$

(47,174

)

Net loss per share, basic and diluted

 

$

(0.20

)

 

$

(0.17

)

 

$

(0.40

)

 

$

(0.34

)

Weighted-average shares used in computing basic and diluted net loss per share

 

 

146,242

 

 

 

138,777

 

 

 

145,467

 

 

 

137,844

 

 

 

 

(1)

Includes stock-based compensation, net of amounts capitalized as follows:

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

(in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Cost of revenue

 

$

1,580

 

 

$

1,047

 

 

$

3,062

 

 

$

2,007

 

Research and development

 

 

10,313

 

 

 

7,496

 

 

 

19,810

 

 

 

13,953

 

Sales and marketing

 

 

6,414

 

 

 

4,841

 

 

 

12,192

 

 

 

9,184

 

General and administrative

 

 

7,266

 

 

 

6,087

 

 

 

14,108

 

 

 

11,829

 

Stock-based compensation, net of amounts capitalized

 

$

25,573

 

 

$

19,471

 

 

$

49,172

 

 

$

36,973

 

 

 

(2)

Includes amortization of acquisition intangible assets as follows:

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

(in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Cost of revenue

 

$

1,477

 

 

$

2,003

 

 

$

2,967

 

 

$

4,013

 

Sales and marketing

 

 

1,117

 

 

 

1,355

 

 

 

2,250

 

 

 

2,713

 

Amortization of acquisition intangible assets

 

$

2,594

 

 

$

3,358

 

 

$

5,217

 

 

$

6,726

 

 


5


 

 

MOMENTIVE GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

 

 

 

Six Months Ended June 30,

 

(in thousands)

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(58,884

)

 

$

(47,174

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

21,478

 

 

 

24,502

 

Non-cash leases expense

 

 

6,593

 

 

 

6,830

 

Stock-based compensation expense, net of amounts capitalized

 

 

49,172

 

 

 

36,973

 

Deferred income taxes

 

 

197

 

 

 

195

 

Provision for doubtful accounts

 

 

590

 

 

 

790

 

Gain on sale of a private company investment

 

 

 

 

 

(1,001

)

Other

 

 

310

 

 

 

888

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

840

 

 

 

(1,506

)

Prepaid expenses and other assets

 

 

(7,530

)

 

 

(6,714

)

Accounts payable and accrued liabilities

 

 

12,691

 

 

 

5,659

 

Accrued compensation

 

 

(1,052

)

 

 

(4,408

)

Deferred revenue

 

 

26,678

 

 

 

18,720

 

Operating lease liabilities

 

 

(7,522

)

 

 

(7,659

)

Net cash provided by operating activities

 

 

43,561

 

 

 

26,095

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(322

)

 

 

(772

)

Capitalized internal-use software

 

 

(4,418

)

 

 

(5,372

)

Proceeds from sale of a private company investment

 

 

 

 

 

1,001

 

Net cash used in investing activities

 

 

(4,740

)

 

 

(5,143

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from stock option exercises

 

 

17,703

 

 

 

24,279

 

Proceeds from employee stock purchase plan

 

 

3,873

 

 

 

3,082

 

Repayment of debt

 

 

(1,100

)

 

 

(1,100

)

Net cash provided by financing activities

 

 

20,476

 

 

 

26,261

 

Effect of exchange rate changes on cash

 

 

101

 

 

 

(1,090

)

Net increase in cash, cash equivalents and restricted cash

 

 

59,398

 

 

 

46,123

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

224,614

 

 

 

131,683

 

Cash, cash equivalents and restricted cash at end of period

 

$

284,012

 

 

$

177,806

 

Supplemental cash flow data:

 

 

 

 

 

 

 

 

Interest paid for term debt

 

$

4,267

 

 

$

5,198

 

Income taxes paid

 

$

618

 

 

$

394

 

Non-cash investing and financing transactions:

 

 

 

 

 

 

 

 

Stock compensation included in capitalized software costs

 

$

1,136

 

 

$

1,486

 

Lease liabilities arising from obtaining right-of-use assets, net

 

$

2,676

 

 

$

 

Proceeds receivable from stock option exercises

 

$

77

 

 

$

1,350

 

 

 

 

 

 

 

 


6


 

 

MOMENTIVE GLOBAL INC.

SUPPLEMENTAL DISAGGREGATED REVENUE DATA (unaudited)

 

Quarterly Disaggregated Revenue

 

 

Three Months Ended

 

(in thousands)

 

Jun. 30, 2021

 

Mar. 31, 2021

 

Dec. 31, 2020

 

Sep. 30, 2020

 

Jun. 30, 2020

 

Mar. 31, 2020

 

Self-serve revenue

 

$

75,462

 

$

71,112

 

$

71,197

 

$

68,001

 

$

65,398

 

$

63,107

 

Enterprise revenue

 

 

33,930

 

 

31,186

 

 

29,778

 

 

27,428

 

 

25,543

 

 

25,158

 

Revenue

 

$

109,392

 

$

102,298

 

$

100,975

 

$

95,429

 

$

90,941

 

$

88,265

 

 

Self-serve revenues are generated from products purchased independently through our website.

Enterprise revenues are generated from products sold to organizations through our sales team.

 

 

 


7


 

 

MOMENTIVE GLOBAL INC.

RECONCILIATION OF GAAP TO NON-GAAP DATA (unaudited) (1)

Reconciliation of GAAP to Non-GAAP (Loss) Income from operations

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

(in thousands, except percentages)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

GAAP Loss from operations

 

$

(26,716

)

 

$

(20,556

)

 

$

(53,531

)

 

$

(42,815

)

GAAP Operating margin

 

 

(24

)%

 

 

(23

)%

 

 

(25

)%

 

 

(24

)%

Stock-based compensation, net

 

 

25,573

 

 

 

19,471

 

 

 

49,172

 

 

 

36,973

 

Amortization of acquisition intangible assets

 

 

2,594

 

 

 

3,358

 

 

 

5,217

 

 

 

6,726

 

Non-GAAP Income from operations

 

$

1,451

 

 

$

2,273

 

 

$

858

 

 

$

884

 

Non-GAAP Operating margin

 

 

1

%

 

 

2

%

 

 

%

 

 

%

Reconciliation of GAAP to Non-GAAP (Loss) Income and (Loss) Income per diluted share

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

(in thousands, except per share amounts)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

GAAP Net Loss

 

$

(29,237

)

 

$

(22,924

)

 

$

(58,884

)

 

$

(47,174

)

GAAP Net Loss per diluted share

 

$

(0.20

)

 

$

(0.17

)

 

$

(0.40

)

 

$

(0.34

)

Weighted-average shares used to compute GAAP net loss per diluted share

 

 

146,242

 

 

 

138,777

 

 

 

145,467

 

 

 

137,844

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation, net

 

 

25,573

 

 

 

19,471

 

 

 

49,172

 

 

 

36,973

 

Amortization of acquisition intangible assets

 

 

2,594

 

 

 

3,358

 

 

 

5,217

 

 

 

6,726

 

Gain on sale of a private company investment

 

 

 

 

 

 

 

 

 

 

 

(1,001

)

Income tax effect on Non-GAAP adjustments (2)

 

 

317

 

 

 

(122

)

 

 

413

 

 

 

(25

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Net Loss

 

$

(753

)

 

$

(217

)

 

$

(4,082

)

 

$

(4,501

)

Non-GAAP Net Loss per diluted share

 

$

(0.01

)

 

$

 

 

$

(0.03

)

 

$

(0.03

)

Weighted-average shares used to compute Non-GAAP net loss per diluted share

 

 

146,242

 

 

 

138,777

 

 

 

145,467

 

 

 

137,844

 

 

(1)

Please see Appendix A for explanation of non-GAAP measures used.

(2)

Due to the full valuation allowance on our US deferred tax assets, there were no tax effects associated with the Non-GAAP adjustment for gain on sale of a private company investment. Non-GAAP adjustments pertain to the income tax effects of stock-based compensation, net, and amortization of acquisition-related intangible assets.

 

Calculation of Free Cash Flow

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

(in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net cash provided by operating activities

 

$

26,243

 

 

$

21,862

 

 

$

43,561

 

 

$

26,095

 

Purchases of property and equipment

 

 

(322

)

 

 

(366

)

 

 

(322

)

 

 

(772

)

Capitalized internal-use software

 

 

(2,150

)

 

 

(2,426

)

 

 

(4,418

)

 

 

(5,372

)

Free cash flow

 

$

23,771

 

 

$

19,070

 

 

$

38,821

 

 

$

19,951

 


8


 

 

MOMENTIVE GLOBAL INC.

RECONCILIATION OF GAAP TO NON-GAAP DATA (unaudited) (1)

 

Supplemental GAAP and Non-GAAP Information

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

(in thousands, except percentages)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

GAAP Gross profit

 

$

87,704

 

 

$

69,932

 

 

$

169,230

 

 

$

138,253

 

GAAP Gross margin

 

 

80

%

 

 

77

%

 

 

80

%

 

 

77

%

Stock-based compensation, net

 

 

1,580

 

 

 

1,047

 

 

 

3,062

 

 

 

2,007

 

Amortization of acquisition intangible assets

 

 

1,477

 

 

 

2,003

 

 

 

2,967

 

 

 

4,013

 

Non-GAAP Gross profit

 

$

90,761

 

 

$

72,982

 

 

$

175,259

 

 

$

144,273

 

Non-GAAP Gross margin

 

 

83

%

 

 

80

%

 

 

83

%

 

 

81

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Research and development

 

$

34,225

 

 

$

26,571

 

 

$

67,208

 

 

$

53,128

 

GAAP Research and development margin

 

 

31

%

 

 

29

%

 

 

32

%

 

 

30

%

Stock-based compensation, net

 

 

10,313

 

 

 

7,496

 

 

 

19,810

 

 

 

13,953

 

Non-GAAP Research and development

 

$

23,912

 

 

$

19,075

 

 

$

47,398

 

 

$

39,175

 

Non-GAAP Research and development margin

 

 

22

%

 

 

21

%

 

 

22

%

 

 

22

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Sales and marketing

 

$

56,025

 

 

$

42,578

 

 

$

108,061

 

 

$

84,669

 

GAAP Sales and marketing margin

 

 

51

%

 

 

47

%

 

 

51

%

 

 

47

%

Stock-based compensation, net

 

 

6,414

 

 

 

4,841

 

 

 

12,192

 

 

 

9,184

 

Amortization of acquisition intangible assets

 

 

1,117

 

 

 

1,355

 

 

 

2,250

 

 

 

2,713

 

Non-GAAP Sales and marketing

 

$

48,494

 

 

$

36,382

 

 

$

93,619

 

 

$

72,772

 

Non-GAAP Sales and marketing margin

 

 

44

%

 

 

40

%

 

 

44

%

 

 

41

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP General and administrative

 

$

24,170

 

 

$

21,339

 

 

$

47,492

 

 

$

43,271

 

GAAP General and administrative margin

 

 

22

%

 

 

23

%

 

 

22

%

 

 

24

%

Stock-based compensation, net

 

 

7,266

 

 

 

6,087

 

 

 

14,108

 

 

 

11,829

 

Non-GAAP General and administrative

 

$

16,904

 

 

$

15,252

 

 

$

33,384

 

 

$

31,442

 

Non-GAAP General and administrative margin

 

 

15

%

 

 

17

%

 

 

16

%

 

 

18

%

 

(1)

Please see Appendix A for explanation of non-GAAP measures used.


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APPENDIX A

MOMENTIVE GLOBAL INC.

EXPLANATION OF NON-GAAP MEASURES

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with US GAAP (“GAAP”), we use the following Non-GAAP financial measures: Non-GAAP (loss) income from operations, Non-GAAP operating margin, Non-GAAP net (loss) income, Non-GAAP net (loss) income per diluted share, Non-GAAP gross profit, Non-GAAP gross margin, Non-GAAP research and development, Non-GAAP research and development margin, Non-GAAP sales and marketing, Non-GAAP sales and marketing margin,  Non-GAAP general and administrative, Non-GAAP general and administrative margin, and free cash flow. Our definition for each Non-GAAP measure used is provided below, however a limitation of Non-GAAP financial measures is that they do not have uniform definitions. Accordingly, our definitions for Non-GAAP measures used will likely differ from similarly titled Non-GAAP measures used by other companies thereby limiting comparability.

With regards to the Non-GAAP guidance provided above, a reconciliation to the corresponding GAAP amounts is not provided as the quantification of certain items excluded from each respective Non-GAAP measure, which may be significant, cannot be reasonably calculated or predicted at this time without unreasonable efforts.  For example, the Non-GAAP adjustment for stock-based compensation expense, net, requires additional inputs such as number of shares granted and market price that are not currently ascertainable.

Non-GAAP (loss) income from operations, Non-GAAP operating margin: We define Non-GAAP (loss) income from operations as GAAP loss from operations excluding stock-based compensation, net, and amortization of acquisition intangible assets. Non-GAAP operating margin is defined as Non-GAAP (loss) income from operations divided by revenue.

Non-GAAP net (loss) income, Non-GAAP net (loss) income per diluted share: We define Non-GAAP net (loss) income as GAAP net loss excluding stock-based compensation, net, amortization of acquisition intangible assets, gain on sale of a private company investment, and including the income tax effect on Non-GAAP adjustments. Non-GAAP net (loss) income per diluted share is defined as Non-GAAP net (loss) income divided by the weighted-average shares outstanding.

Non-GAAP gross profit, Non-GAAP gross margin: We define Non-GAAP gross profit as GAAP gross profit excluding stock-based compensation, net and amortization of acquisition intangible assets. Non-GAAP gross margin is defined as Non-GAAP gross profit divided by revenue.

Non-GAAP research and development, Non-GAAP research and development margin: We define Non-GAAP research and development as GAAP research and development excluding stock-based compensation, net. Non-GAAP research and development margin is defined as Non-GAAP research and development divided by revenue.

Non-GAAP sales and marketing, Non-GAAP sales and marketing margin: We define Non-GAAP sales and marketing as GAAP sales and marketing excluding stock-based compensation, net and amortization of acquisition intangible assets. Non-GAAP sales and marketing margin is defined as Non-GAAP sales and marketing divided by revenue.

Non-GAAP general and administrative, Non-GAAP general and administrative margin: We define Non-GAAP general and administrative as GAAP general and administrative excluding stock-based compensation, net. Non-GAAP general and administrative margin is defined as Non-GAAP general and administrative divided by revenue.

We use these Non-GAAP measures to compare and evaluate our operating results across periods in order to manage our business, for purposes of determining executive and senior management incentive compensation, and for budgeting and developing our strategic operating plans. We believe that these Non-GAAP measures provide useful information about our operating results, enhance the overall understanding of our past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by our management in evaluating our financial performance and for operational decision making, but they are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP.

We have excluded the effect of the following items from the aforementioned Non-GAAP measures because they are non-cash and/or are non-recurring in nature and because we believe that the Non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance and liquidity. We further believe these measures are useful to investors in that it allows for greater transparency to certain line

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items in our financial statements and facilitates comparisons to historical operating results and comparisons to peer operating results. A description of the Non-GAAP adjustments for the above measures is as follows:

 

Stock-based compensation, net: We incur stock based-compensation expense on a GAAP basis resulting from equity awards granted to our employees. Although stock-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to the revenues earned during the periods presented and also believe it will contribute to the generation of future period revenues, we continue to evaluate our business performance excluding stock-based compensation expenses. Stock-based compensation expenses will recur in future periods.

 

 

Amortization of acquisition intangible assets: We incur amortization expense on intangible assets on a GAAP basis resulting from prior acquisitions. Amortization of acquired intangible assets is inconsistent in amount and frequency and is significantly affected by the timing and size of any acquisitions. Investors should note that the use of intangible assets contributed to our revenues earned during the periods presented and will contribute to our future period revenues as well. Amortization of acquisition intangible assets will recur in future periods.

 

 

Gain on sale of a private company investment: Gain on sale of a private company investment was recognized on a GAAP basis resulting from the sale of certain corporate assets. We expect that such transactions will be infrequent in occurrence and are therefore excluded from our Non-GAAP results as they do not otherwise relate to our core business operations.

 

For more information on the Non-GAAP financial measures, please see the “Reconciliation of GAAP to Non-GAAP Data” section of this press release. The accompanying tables provide details on the GAAP financial measures that are most directly comparable to the Non-GAAP financial measures and the related reconciliations between those financial measures.

Free cash flow: We define free cash flow as GAAP net cash provided by operating activities less purchases of property and equipment and capitalized internal-use software. We consider free cash flow to be an important measure because it measures our liquidity after deducting capital expenditures for purchases of property and equipment and capitalized software development costs, which we believe provides a more accurate view of our cash generation and cash available to grow our business. We expect to generate positive free cash flow over the long term. Free cash flow has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash provided by operating activities. Some of the limitations of free cash flow are that free cash flow does not reflect our future contractual commitments and may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure.

Safe Harbor Statement

“Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: This press release may contain forward-looking statements about our financial outlook, outstanding shares, products, including our investments in products, technology and other key strategic areas. The achievement of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. If any of these risks or uncertainties materialize or if any of the assumptions prove incorrect, the company’s results could differ materially from the results expressed or implied by the forward-looking statements the company makes.

The risks and uncertainties referred to above include - but are not limited to - risks related to the COVID-19 coronavirus pandemic; our ability to retain and upgrade customers; our revenue growth rate; our brand (including our recent rebranding); our marketing strategies; our self-serve business model; the length of our sales cycles; the growth and development of our salesforce; security measures; expectations regarding our ability to timely and effectively scale and adapt existing technology and network infrastructure to ensure that our products and services are accessible at all times; competition; our debt; revenue recognition; our ability to manage our growth; our culture and talent; our data centers;  privacy, security and data transfer concerns, as well as changes in regulations, which could impact our ability to serve our customers or curtail our monetization efforts; litigation and regulatory issues; expectations regarding the return on our strategic investments; execution of our plans and strategies, including with respect to mobile products and features and expansion into new areas and businesses; our international operations; intellectual property; the application of U.S. and international tax laws on our tax structure and any changes to such tax laws; acquisitions we have made or may make in the future; the price volatility of our common stock; and general economic conditions.

Further information on these and other factors that could affect our financial results are included in documents filed with the Securities and Exchange Commission from time to time, including the section entitled “Risk Factors”

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in the Quarterly Report on Form 10-Q that will be filed for the quarter ended June 30, 2021, which should be read in conjunction with these financial results. These documents are or will be available on the SEC Filings section of our Investor Relations website page at investor.momentive.ai. All information provided in this release and in the attachments is as of August 4, 2021, and we undertake no obligation to update this information.

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