EX-99.1 2 mntv-ex99_1.htm EX-99.1 EX-99.1

 

Exhibit 99.1

img159822242_0.jpg 

Momentive Announces Third Quarter 2021 Financial Results

Total Revenue Increases 20% Year-over-Year

Enterprise Sales Revenue Increases 37% Year-over-Year

 

SAN MATEO, Calif. — November 09, 2021 — Momentive (NASDAQ: MNTV), an agile experience management company (formerly SurveyMonkey), today reported third quarter results for the period ended September 30, 2021.

 

Q3 2021 Key Results

Total revenue was $114.8 million, an increase of 20% year-over-year.
Enterprise sales revenue was $37.6 million, an increase of 37% year-over year. Enterprise sales revenue accounted for approximately 33% of total revenue, up from approximately 29% in Q3 2020. We ended the quarter with approximately 10,500 enterprise sales customers, up 37% from approximately 7,700 in Q3 2020.
Self-serve revenue was $77.1 million, an increase of 13% year-over-year.
Leading Growth Indicators: Deferred revenue was $197.6 million, an increase of 20% year-over-year. Remaining performance obligations were $222.6 million, an increase of 21% year-over-year.
Paying users totaled approximately 883,100, an increase of approximately 79,900, or 10% from approximately 803,200 in Q3 2020. Approximately 90% of our paying users were on annual plans, up from 87% a year ago.
Average revenue per user was $522, up approximately 9% from $478 in Q3 2020.
GAAP operating margin was negative 17.1% and non-GAAP operating margin was 6.5%.
GAAP net loss was $22.9 million and GAAP diluted net loss per share was $0.15. Non-GAAP net income was $4.3 million and non-GAAP diluted net income per share was $0.03.
Net cash provided by operating activities was $16.7 million and free cash flow was $14.7 million for 14.6% and 12.8% margin, respectively.
Cash and cash equivalents totaled $300.7 million and total debt was $212.2 million for net cash of $88.5 million as of September 30, 2021.

 

Due to the Company’s pending acquisition by Zendesk, the Company has cancelled its November 9 conference call and webcast to discuss these financial results. Additionally, the Company will not be providing financial guidance for Q4 2021 and has suspended its financial guidance for the full year 2021.

 

Q3 2021 Business and Product Highlights

Held GetFeedback's Second Annual Customer Experience (CX) Summit, where the industry's top experts and innovators shared best practices and expert insights to help GetFeedback users prepare to take on the future of customer experience with confidence

1


 

Released new GetFeedback integrations for Slack and Salesforce, and announced Christofle and Barceló Hotel Group as new GetFeedback customers
Launched Workplace Equity IQ to help companies go beyond merely tracking representation to truly understand the beliefs and experiences of employees
Expanded the Momentive market research panel to better target B2B and healthcare audiences in order to meet the growing demand from B2B customers
Announced that Cover Genius selected Momentive to power its global market research to uncover opportunities in the financial services industry
Recognized as a top-rated company for work-life balance and employee happiness in the Comparably Workplace Culture Awards

 

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.

 

 

 

2


 

MOMENTIVE GLOBAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

 

(in thousands)

 

September 30, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

300,695

 

 

$

224,390

 

Accounts receivable, net

 

 

25,587

 

 

 

24,177

 

Deferred commissions, current

 

 

7,381

 

 

 

5,429

 

Prepaid expenses and other current assets

 

 

10,614

 

 

 

10,520

 

Total current assets

 

 

344,277

 

 

 

264,516

 

Property and equipment, net

 

 

8,196

 

 

 

18,924

 

Operating lease right-of-use assets

 

 

54,328

 

 

 

56,986

 

Capitalized internal-use software, net

 

 

28,569

 

 

 

29,462

 

Acquisition intangible assets, net

 

 

13,242

 

 

 

21,207

 

Goodwill

 

 

465,076

 

 

 

468,764

 

Deferred commissions, non-current

 

 

12,661

 

 

 

10,018

 

Other assets

 

 

8,300

 

 

 

7,940

 

Total assets

 

$

934,649

 

 

$

877,817

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

6,205

 

 

$

3,348

 

Accrued expenses and other current liabilities

 

 

26,002

 

 

 

15,198

 

Accrued compensation

 

 

38,895

 

 

 

32,149

 

Deferred revenue, current

 

 

196,729

 

 

 

169,872

 

Operating lease liabilities, current

 

 

9,428

 

 

 

8,318

 

Debt, current

 

 

1,900

 

 

 

1,900

 

Total current liabilities

 

 

279,159

 

 

 

230,785

 

Deferred revenue, non-current

 

 

877

 

 

 

760

 

Deferred tax liabilities

 

 

5,437

 

 

 

5,153

 

Debt, non-current

 

 

210,291

 

 

 

211,716

 

Operating lease liabilities, non-current

 

 

69,226

 

 

 

74,487

 

Other non-current liabilities

 

 

7,824

 

 

 

8,560

 

Total liabilities

 

 

572,814

 

 

 

531,461

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

Common stock

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

936,280

 

 

 

835,444

 

Accumulated other comprehensive income

 

 

1,638

 

 

 

5,208

 

Accumulated deficit

 

 

(576,084

)

 

 

(494,297

)

Total stockholders’ equity

 

 

361,835

 

 

 

346,356

 

Total liabilities and stockholders’ equity

 

$

934,649

 

 

$

877,817

 

 

 

 

3


 

MOMENTIVE GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

(in thousands, except per share amounts)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue

 

$

114,754

 

 

$

95,429

 

 

$

326,444

 

 

$

274,635

 

Cost of revenue (1)(2)

 

 

22,161

 

 

 

21,899

 

 

 

64,621

 

 

 

62,852

 

Gross profit

 

 

92,593

 

 

 

73,530

 

 

 

261,823

 

 

 

211,783

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development (1)

 

 

33,671

 

 

 

30,068

 

 

 

100,879

 

 

 

83,196

 

Sales and marketing (1)(2)

 

 

54,118

 

 

 

43,875

 

 

 

162,179

 

 

 

128,544

 

General and administrative (1)

 

 

24,466

 

 

 

22,181

 

 

 

71,958

 

 

 

65,452

 

Total operating expenses

 

 

112,255

 

 

 

96,124

 

 

 

335,016

 

 

 

277,192

 

Loss from operations

 

 

(19,662

)

 

 

(22,594

)

 

 

(73,193

)

 

 

(65,409

)

Interest expense

 

 

2,337

 

 

 

2,379

 

 

 

6,940

 

 

 

7,887

 

Other non-operating (income) expense, net

 

 

543

 

 

 

(143

)

 

 

739

 

 

 

(1,277

)

Loss before income taxes

 

 

(22,542

)

 

 

(24,830

)

 

 

(80,872

)

 

 

(72,019

)

Provision for income taxes

 

 

361

 

 

 

1,289

 

 

 

915

 

 

 

1,274

 

Net loss

 

$

(22,903

)

 

$

(26,119

)

 

$

(81,787

)

 

$

(73,293

)

Net loss per share, basic and diluted

 

$

(0.15

)

 

$

(0.19

)

 

$

(0.56

)

 

$

(0.53

)

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

 

 

147,877

 

 

 

141,034

 

 

 

146,270

 

 

 

138,907

 

 

 

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

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

(in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Cost of revenue

 

$

1,639

 

 

$

1,222

 

 

$

4,701

 

 

$

3,229

 

Research and development

 

 

10,081

 

 

 

8,322

 

 

 

29,891

 

 

 

22,275

 

Sales and marketing

 

 

5,672

 

 

 

5,912

 

 

 

17,864

 

 

 

15,096

 

General and administrative

 

 

7,202

 

 

 

6,150

 

 

 

21,310

 

 

 

17,979

 

Stock-based compensation, net of amounts capitalized

 

$

24,594

 

 

$

21,606

 

 

$

73,766

 

 

$

58,579

 

 

(2) Includes amortization of acquisition intangible assets as follows:

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

(in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Cost of revenue

 

$

1,465

 

 

$

1,800

 

 

$

4,432

 

 

$

5,813

 

Sales and marketing

 

 

1,035

 

 

 

1,270

 

 

 

3,285

 

 

 

3,983

 

Amortization of acquisition intangible assets

 

$

2,500

 

 

$

3,070

 

 

$

7,717

 

 

$

9,796

 

 

 

4


 

MOMENTIVE GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

 

 

 

Nine Months Ended September 30,

 

(in thousands)

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(81,787

)

 

$

(73,293

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

32,349

 

 

 

36,328

 

Non-cash leases expense

 

 

9,824

 

 

 

9,958

 

Stock-based compensation expense, net of amounts capitalized

 

 

73,766

 

 

 

58,579

 

Deferred income taxes

 

 

293

 

 

 

608

 

Bad debt expense

 

 

898

 

 

 

1,156

 

Gain on sale of a private company investment

 

 

 

 

 

(1,001

)

Other

 

 

1,048

 

 

 

1,834

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(2,654

)

 

 

(3,929

)

Prepaid expenses and other assets

 

 

(9,872

)

 

 

(6,900

)

Accounts payable and accrued liabilities

 

 

13,585

 

 

 

5,851

 

Accrued compensation

 

 

7,089

 

 

 

1,689

 

Deferred revenue

 

 

27,013

 

 

 

24,242

 

Operating lease liabilities

 

 

(11,244

)

 

 

(11,135

)

Net cash provided by operating activities

 

 

60,308

 

 

 

43,987

 

Cash flows from investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(387

)

 

 

(772

)

Capitalized internal-use software

 

 

(6,450

)

 

 

(7,051

)

Proceeds from sale of a private company investment and other

 

 

85

 

 

 

1,095

 

Net cash used in investing activities

 

 

(6,752

)

 

 

(6,728

)

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from stock option exercises

 

 

21,334

 

 

 

37,301

 

Proceeds from employee stock purchase plan

 

 

3,873

 

 

 

3,082

 

Repayment of debt

 

 

(1,650

)

 

 

(1,650

)

Net cash provided by financing activities

 

 

23,557

 

 

 

38,733

 

Effect of exchange rate changes on cash

 

 

(293

)

 

 

(957

)

Net increase in cash, cash equivalents and restricted cash

 

 

76,820

 

 

 

75,035

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

224,614

 

 

 

131,683

 

Cash, cash equivalents and restricted cash at end of period

 

$

301,434

 

 

$

206,718

 

Supplemental cash flow data:

 

 

 

 

 

 

Interest paid for term debt

 

$

6,416

 

 

$

7,386

 

Income taxes paid

 

$

732

 

 

$

709

 

Non-cash investing and financing transactions:

 

 

 

 

 

 

Stock compensation included in capitalized software costs

 

$

1,666

 

 

$

1,692

 

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

 

$

2,676

 

 

$

 

 

 

 

 

 

 

 

 

5


 

MOMENTIVE GLOBAL INC.

SUPPLEMENTAL DISAGGREGATED REVENUE DATA (unaudited)

 

Quarterly Disaggregated Revenue

 

 

Three Months Ended

 

(in thousands)

 

Sep. 30, 2021

 

Jun. 30, 2021

 

Mar. 31, 2021

 

Dec. 31, 2020

 

Sep. 30, 2020

 

Jun. 30, 2020

 

Mar. 31, 2020

 

Self-serve revenue

 

$

77,134

 

$

75,462

 

$

71,112

 

$

71,197

 

$

68,001

 

$

65,398

 

$

63,107

 

Enterprise revenue

 

 

37,620

 

 

33,930

 

 

31,186

 

 

29,778

 

 

27,428

 

 

25,543

 

 

25,158

 

Revenue

 

$

114,754

 

$

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.

 

 

 

 

6


 

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
September 30,

 

 

Nine Months Ended
September 30,

 

(in thousands, except percentages)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

GAAP Loss from operations

 

$

(19,662

)

 

$

(22,594

)

 

$

(73,193

)

 

$

(65,409

)

GAAP Operating margin

 

 

(17

)%

 

 

(24

)%

 

 

(22

)%

 

 

(24

)%

Stock-based compensation, net

 

 

24,594

 

 

 

21,606

 

 

 

73,766

 

 

 

58,579

 

Amortization of acquisition intangible assets

 

 

2,500

 

 

 

3,070

 

 

 

7,717

 

 

 

9,796

 

Non-GAAP Income from operations

 

$

7,432

 

 

$

2,082

 

 

$

8,290

 

 

$

2,966

 

Non-GAAP Operating margin

 

 

6

%

 

 

2

%

 

 

3

%

 

 

1

%

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

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

(in thousands, except per share amounts)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

GAAP Net Loss

 

$

(22,903

)

 

$

(26,119

)

 

$

(81,787

)

 

$

(73,293

)

GAAP Net Loss per diluted share

 

$

(0.15

)

 

$

(0.19

)

 

$

(0.56

)

 

$

(0.53

)

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

 

 

147,877

 

 

 

141,034

 

 

 

146,270

 

 

 

138,907

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation, net

 

 

24,594

 

 

 

21,606

 

 

 

73,766

 

 

 

58,579

 

Amortization of acquisition intangible assets

 

 

2,500

 

 

 

3,070

 

 

 

7,717

 

 

 

9,796

 

Gain on sale of a private company investment

 

 

 

 

 

 

 

 

 

 

 

(1,001

)

Income tax effect on Non-GAAP adjustments (2)

 

 

96

 

 

 

97

 

 

 

509

 

 

 

72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Net (Loss) Income

 

$

4,287

 

 

$

(1,346

)

 

$

205

 

 

$

(5,847

)

Non-GAAP Net (Loss) Income per diluted share

 

$

0.03

 

 

$

(0.01

)

 

$

 

 

$

(0.04

)

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

 

 

151,558

 

 

 

141,034

 

 

 

150,855

 

 

 

138,907

 

 

(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
September 30,

 

 

Nine Months Ended
September 30,

 

(in thousands)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net cash provided by operating activities

 

$

16,747

 

 

$

17,892

 

 

$

60,308

 

 

$

43,987

 

Purchases of property and equipment

 

 

(65

)

 

 

 

 

 

(387

)

 

 

(772

)

Capitalized internal-use software

 

 

(2,032

)

 

 

(1,679

)

 

 

(6,450

)

 

 

(7,051

)

Free cash flow

 

$

14,650

 

 

$

16,213

 

 

$

53,471

 

 

$

36,164

 

 

 

 

 

 

 

 

7


 

MOMENTIVE GLOBAL INC.

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

 

Supplemental GAAP and Non-GAAP Information

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

(in thousands, except percentages)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

GAAP Gross profit

 

$

92,593

 

 

$

73,530

 

 

$

261,823

 

 

$

211,783

 

GAAP Gross margin

 

 

81

%

 

 

77

%

 

 

80

%

 

 

77

%

Stock-based compensation, net

 

 

1,639

 

 

 

1,222

 

 

 

4,701

 

 

 

3,229

 

Amortization of acquisition intangible assets

 

 

1,465

 

 

 

1,800

 

 

 

4,432

 

 

 

5,813

 

Non-GAAP Gross profit

 

$

95,697

 

 

$

76,552

 

 

$

270,956

 

 

$

220,825

 

Non-GAAP Gross margin

 

 

83

%

 

 

80

%

 

 

83

%

 

 

80

%

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Research and development

 

$

33,671

 

 

$

30,068

 

 

$

100,879

 

 

$

83,196

 

GAAP Research and development margin

 

 

29

%

 

 

32

%

 

 

31

%

 

 

30

%

Stock-based compensation, net

 

 

10,081

 

 

 

8,322

 

 

 

29,891

 

 

 

22,275

 

Non-GAAP Research and development

 

$

23,590

 

 

$

21,746

 

 

$

70,988

 

 

$

60,921

 

Non-GAAP Research and development margin

 

 

21

%

 

 

23

%

 

 

22

%

 

 

22

%

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Sales and marketing

 

$

54,118

 

 

$

43,875

 

 

$

162,179

 

 

$

128,544

 

GAAP Sales and marketing margin

 

 

47

%

 

 

46

%

 

 

50

%

 

 

47

%

Stock-based compensation, net

 

 

5,672

 

 

 

5,912

 

 

 

17,864

 

 

 

15,096

 

Amortization of acquisition intangible assets

 

 

1,035

 

 

 

1,270

 

 

 

3,285

 

 

 

3,983

 

Non-GAAP Sales and marketing

 

$

47,411

 

 

$

36,693

 

 

$

141,030

 

 

$

109,465

 

Non-GAAP Sales and marketing margin

 

 

41

%

 

 

38

%

 

 

43

%

 

 

40

%

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP General and administrative

 

$

24,466

 

 

$

22,181

 

 

$

71,958

 

 

$

65,452

 

GAAP General and administrative margin

 

 

21

%

 

 

23

%

 

 

22

%

 

 

24

%

Stock-based compensation, net

 

 

7,202

 

 

 

6,150

 

 

 

21,310

 

 

 

17,979

 

Non-GAAP General and administrative

 

$

17,264

 

 

$

16,031

 

 

$

50,648

 

 

$

47,473

 

Non-GAAP General and administrative margin

 

 

15

%

 

 

17

%

 

 

16

%

 

 

17

%

 

(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 our pending acquisition by Zendesk; 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.

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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” in the Quarterly Report on Form 10-Q that will be filed for the quarter ended September 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 November 9, 2021, and we undertake no obligation to update this information.

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