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Q3 2019 Earnings Call
Nov 07, 2019, 5:00 p.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Ladies and gentlemen, thank you for standing by, and welcome to the SurveyMonkey's third- quarter 2019 earnings conference call. [Operator instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Whitney Kukulka, investor relations. Please go ahead.

Whitney Kukulka -- Investor Relations

Thank you. Good afternoon, and welcome to SurveyMonkey's third-quarter 2019 earnings call. Joining me on today's call are Zander Lurie, our CEO; Tom Hale, our president; and Debbie Clifford, our CFO. After our prepared remarks, we'd be happy to take your questions.

Prior to this call, we issued a press release and shareholder letter with our financial results and commentary for our third-quarter 2019. 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 and cash flow. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance.

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A discussion of risks and uncertainties related to our business is contained in our filings with the Securities and Exchange Commission, in particular 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. 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.

I'll now turn the call over to Zander. Zander?

Zander Lurie -- Chief Executive Officer

Thanks, Whitney. Good afternoon, everyone, and thank you for joining us on the call today. Q3 was a strong revenue quarter, reflecting successful execution across our business and continued momentum in our enterprise strategy. Revenue grew to $79.3 million for 22% year-over-year growth.

At the same time, we managed a 3% non-GAAP operating margin and generated $23.2 million in unlevered free cash flow. These results demonstrate our commitment to making disciplined investments and executing on our 3 strategic initiatives to accelerate revenue growth: by selling into enterprises, driving adoption of our self-serve teams' plans and expanding our business internationally. We are successfully executing on our enterprise strategy, and the numbers speak for themselves. Our customers are increasingly looking to SurveyMonkey for larger, more strategic deployments of our software products.

Enterprise sales grew 129% year-over-year to approximately 23% of total revenue in Q3, up from 20% last quarter and up from 12% just one year ago. Enterprise sales customers increased to 5,346, up 66% year-over-year and up 569 customers from Q2, inclusive of a onetime increase of approximately 65 net new enterprise customers from GetFeedback. These results reflect broad-based strength from increased sales of our SurveyMonkey enterprise product, our purpose-built solutions like Audience and our customer experience management acquisitions in Usabilla and GetFeedback. World-class companies are choosing SurveyMonkey enterprise, because we deliver on quality, cost and speed to insight.

Quicken is a shining example of a category leader that wanted to adopt a customer-first culture, where they could understand and act on every customer interaction. By integrating our platform with their customer relationship management software, they can deliver nearly one million surveys per year cost effectively and automatically. Today, Quicken considers SurveyMonkey a strategic partner in supporting their business-critical customer care goals and in driving the growth and market value of their brand. During the third quarter, we added new enterprise customers across dozens of industries, including financial services, e-commerce, travel, high tech, healthcare, retail, telecommunications and automotive.

New to our growing enterprise roster are best-in-class companies like Zoom, Thule Sweden, Apple, IBM, Alibaba, ChargePoint, just to name a few. Our investment in building the enterprise sales force also continues to pay dividends. At the start of the year, we had approximately 100 customer-facing sales reps, with a stated goal to double that number by the end of the year. We're ahead of plan to achieve our goal.

In addition, we added sales talent around the world via our acquisitions of both Usabilla and GetFeedback. Our enterprise selling efforts are exceeding the expectations we had when we went public last year. Our enterprise business now represents 23% of total revenue and momentum is growing. We will enter 2020 with a materially larger well-trained force of seasoned sales reps.

I look forward to significant productivity gains from this talented group. We continue to strengthen our strategic partnerships with industry leaders such as Salesforce and Microsoft. Our open platform approach of integrating SurveyMonkey into our customers' existing systems of record represents the fastest and optimal path to productivity for our enterprise customers. The acquisition of GetFeedback is evidence of our commitment to the strategy.

GetFeedback is a leading customer experience solution purpose-built for the Salesforce ecosystem. We are thrilled to welcome GetFeedback employees to the SurveyMonkey family. With GetFeedback, we now offer the No. 1 rated feedback solution in the Salesforce AppExchange, which opens new doors for growth by helping us expand our enterprise customer base.

A great example of a GetFeedback customer that understands the importance of acting on feedback to improve its bottom line is Sun Basket, a San Francisco-based meal delivery subscription service. By sending GetFeedback surveys to customers after support transactions, Sun Basket was able to identify and fix a major pain point. Customers weren't clear about what situations might qualify them for a refund. Based on survey insights, Sun Basket adjusted the language they used to explain compensation.

This reduced refund costs by 13%. Within the mass of Salesforce ecosystem, Canadian data encryption company, WinMagic, wanted to improve customer service and drive renewals, but wasn't able to connect the negative feedback they collected with actual customers who needed attention. Leveraging SurveyMonkey enterprise and the Salesforce integration, WinMagic improved retention and saw customer satisfaction rates increase from 64% to 93%. We are proud to be recognized as the industry leader in survey software by the most discerning review platforms.

The Fall 2019 G2 Grid Report rated SurveyMonkey No. 1 in the enterprise Feedback Management Software Category, No. 1 in the Survey Software Category and #1 in the Customer Satisfaction Category in North America. And Capterra's Top 20 Survey Software Report ranked SurveyMonkey as the No.

1 Survey Software Solution. G2 and Capterra are review platforms that empower business buying decisions, and these powerful industry proof points are a testament to the value we bring to our customers and organizations across every industry and geography. When customers go with SurveyMonkey, they are picking the platform that offers ease of use, powerful features and integrations and cost-effective time-to-value. Best of all, enterprise buyers are picking the solution that's already being used by the data-driven users inside their organization.

I'll now turn the call over to Tom and Debbie, who will shed more light on our Q3 performance. Tom?

Tom Hale -- President

Thanks, Zander. In Q3, we continued to deliver value for our customers and to build awareness for our enterprise offerings. We delivered Einstein Bots for Salesforce, enabling feedback collection as part of a Chatbot. We expanded the capabilities of Genius to help customers design the most effective surveys.

Surveymonkey enterprise added capabilities to improve sharing for large organizations. We earned ISO27001 certification, which is a rigorous security and data protection standard for the enterprise. And we launched SurveyMonkey Audience Premium, a bundle of enhanced support and services for our market research customers. And we closed the quarter strong with our second annual virtual Curiosity Conference, which attracted over 9,000 registrants.

We're hard at work preparing the next wave of innovation, and we look forward to sharing more details in future calls. In the meantime, we're continuing to invest in go-to-market capabilities to support our enterprise sales efforts and to maximize the value of recent acquisitions. Two weeks from now, we'll be exhibiting at Dreamforce with a significantly expanded footprint, including 10-plus speaker slots, and we will be the only Salesforce Service Cloud partner with a presence in the highly trafficked Service Lodge. We're taking a big step forward to reach the Salesforce ecosystem with our differentiated solution and offerings.

Turning to surveys. We are pleased with the performance of our self-serve business in Q3. Driven primarily by teams, total paying users grew 15% year-over-year to more than 713,000, with approximately 21,000 net adds during the quarter. The vast majority of our 713,000 paying users are on annual plans sourced from our self-serve channel, which demonstrates that our focus on driving a higher annual mix is working.

At the end of Q3, 82% of our total paying users were on annual plans, up from 80% last quarter and 76% a year ago. Shifting the mix of our self-serve business to annual versus monthly plans is great for long-term value creation, because annual subscribers have a dramatically higher LTV than monthly subscribers. While we completed the rollout of account verification in Q3, we still see a significant opportunity for teams in our installed base. We have marketing, policy and user experience levers to pull to drive continued teams conversion, and we are driving net new teams adoption via merchandising and pricing.

For example, in Q3, we adjusted monthly pricing to make teams a much more attractive offer relative to individual monthly subscriptions. We also see opportunity to experiment with our policies and processes around accounts, where account verification has been enabled, but account sharing continues. Our marketing and product teams are focused on using the in-product experience to expand the number of users in each team and to drive engagement and renewals from team administrators or ambassadors. And though it's early days, renewal rates for teams are higher than they are for individual users, which is in line with our expectations and will be a tailwind for 2020.

Now turning to our third pillar of our growth strategy, international expansion. Our sales efforts in the EU are scaling nicely. In the seasonally soft Q3, we doubled the EU sales-driven bookings over Q2 and closed more than 100 deals. We are gaining traction with our sales and marketing capabilities in the EU, optimizing performance with a new paid marketing agency, building up localized SEO content and increasing the velocity of our international experiments.

We also recently hosted 400 enterprise customers and prospects at our Global Exchange Conference in Amsterdam, demonstrating our international customers' appetite to share best practices and to engage in our community. As we look ahead to 2020, we're excited by the new vistas of growth that we're opening up through our acquisitions and our new products in the pipeline. I'll now hand it over to Debbie to talk about our Q3 financial performance. Debbie?

Debbie Clifford -- Chief Financial Officer

Thanks, Tom. I'll provide a recap of our Q3 results and then walk through our Q4 and full-year outlook. Q3 revenue was $79.3 million, reflecting 22% year-over-year growth and above the high end of our guidance. Revenue growth was driven primarily by our success in enterprise sales, which grew 129% year-over-year.

Our revenue outperformance versus guidance was driven in part by the recognition of approximately $1 million in consumption-based Audience revenue during Q3, which we had forecasted in Q4. The earlier-than-expected revenue is a direct reflection of our customers using our agile market research product at a higher velocity than anticipated. Finally, our acquisitions of Usabilla and GetFeedback contributed approximately 5% of total revenue for the quarter. Before moving on to expenses, I want to clarify, that unless otherwise noted, all income statement and cash flow measures that follow are non-GAAP.

You'll find a reconciliation of GAAP to non-GAAP results in our earnings release and shareholder letter on the IR website, which we have provided with our 8-K filed today with the SEC. Q3 gross margin was 78% versus 75% in the prior year, driven primarily by year-over-year revenue growth. Total operating expenses in Q3 were $59.6 million, an increase of $17 million year-over-year, driven by the ongoing investments we are making to execute on our growth strategy. Investments were primarily in sales and marketing with a specific focus on the ongoing build-out of our enterprise sales team, as well as in R&D to drive enterprise product innovation.

In addition, we continue to make the G&A investments required as a relatively new public company. Operating margin was 3%, which exceeded our prior guidance. The operating margin outperformance was driven primarily by better-than-expected revenue growth and lower-than-expected onetime acquisition-related costs. Q3 operating margin was down from 10% in the same period last year due to the investments we are making to drive growth in our business.

Turning to the balance sheet. We ended the quarter with $116.2 million in cash and cash equivalents. We had $216 million in total debt for net debt of $99.8 million. And we continue to generate healthy cash flow, with free cash flow of $19.8 million and unlevered free cash flow of $23.2 million.

Our free cash flow and unlevered free cash flow results reflect the operating margin outperformance, as well as improvements in working capital management. While we have increased our focus on working capital management, we expect to see some normalization in Q4. Now I'll cover our outlook. We're in the final lap of 2019 and continue to be pleased with our progress.

In Q4, we expect revenue to be in the range of $83 million to $84 million for 23% year-over-year growth at the midpoint. We expect operating margin to be in the range of negative 3% to negative 1% for the quarter. The expected decline in operating margin versus Q3 is primarily a result of the fact that we will realize a full-quarter's worth of costs from the GetFeedback acquisition during Q4. For our full-year 2019 revenue, we are reiterating our guidance, adjusted after the close of the GetFeedback acquisition.

We expect revenue to be in the range of $306 million to $307 million for 21% year-over-year growth at the midpoint. As I mentioned before, our Q3 revenue beat versus guidance reflects earlier-than-expected consumption-based Audience revenue, which we had forecasted would occur in Q4. We expect our acquisitions of Usabilla and GetFeedback to represent approximately 4% of total revenue for the full-year 2019. By 2020, these acquisitions will be more broadly integrated into our portfolio.

We do not operate the acquisitions as autonomous business units. And as a result, I want to set the expectation that I will not provide specifics about contribution from these deals when we guide in 2020 and beyond. We are raising our guidance for operating margin and unlevered free cash flow, adjusted after the close of the GetFeedback acquisition. We expect operating margin for the full-year 2019 to be in the range of 0% to 1%.

And we expect unlevered free cash flow to be in the range of $48 million to $51 million. I now want to turn the discussion to our metrics strategy. You'll note that earlier on the call, when commenting on our success in enterprise sales this quarter, Zander focused his discussions primarily on enterprise sales revenue and the number of enterprise sales customers. We believe that the number of enterprise sales customers is a better gauge of business performance for our enterprise business than paying users.

As a result, we intend to focus more on the enterprise sales customer count when we talk about enterprise sales performance going forward. My goal is to provide concise and transparent disclosures that align with how we are actively managing our business and how we measure success. I'll now turn the call back over to Zander. Zander?

Zander Lurie -- Chief Executive Officer

Thanks, Debbie. Yesterday, November 6, marked the 20th anniversary of the registration of the SurveyMonkey.com domain. The market for subscription business models and enterprise SaaS has evolved significantly in the last two decades. SurveyMonkey has innovated and evolved with our customer base.

What started as a domestic self-serve transactional business is now a robust international SaaS platform, equipped to serve the largest, most discerning software buyers in the world, as demonstrated by the 129% growth of our enterprise sales revenue in Q3. For me, it's been quite a journey. In my first 18 months as CEO, we focused on building a world-class management team and upgrading our core survey product to be enterprise-ready. During the next 12 months, we added sales and marketing leadership and built up our enterprise go-to-market capabilities.

And now after one year as a public company, we've accelerated revenue growth by delivering more robust solutions for our customers, enhancing our platform, expanding our market reach and adding compelling new products via acquisitions. As we look forward, I have strong conviction, we will create long-term value for our customers and shareholders. We'll do this by innovating to deliver higher-value purpose-built solutions for enterprises, leveraging our significant base of customers as we move upmarket and being the best software solution in the customer feedback category for the Salesforce and Microsoft ecosystems. We are aiming at multibillion dollar markets like customer experience management and market research.

GetFeedback and Usabilla enable us to punch above our weight by delivering deeper value for our customers at disruptive price points. These companies were beating the competition on their own. Combined with SurveyMonkey, we are a hugely disruptive challenger in the experience management category. We have an ambitious agenda in market research, which is to replace expensive time-consuming services with software and agile research.

And our engines of innovation are turning. In 2020 and beyond, we will double down on these big adjacent markets. We will use our footprint in our surveys business as a springboard for our purpose-built solutions, which will in turn enable our growing sales force to land even bigger opportunities. At the same time, we will execute with an eye on operating leverage, because we believe driving profitable growth is also critical to our success.

For companies with healthy free cash flow margins like ours, we welcome the heightened discipline that public market investors are demanding. SurveyMonkey's future is brighter than at any point in our 20-year history. This week, we are launching a video to celebrate our anniversary. In it, our Board member, Serena Williams, shines the spotlight on our customers, who are changing the world by harnessing their own curiosity to drive growth and innovation.

There are a million things to love about Serena Williams, but one of my favorites is the grit she demonstrates in everything she does. Her commitment to excellence, to winning, to overcoming huge challenges, she inspires us here at SurveyMonkey every day. We need to deliver world-class products and services to our customers. We also aim to deliver top decile performance for our shareholders.

As Marc Benioff recently reminded us in his New York Times Op-Ed, companies have to deliver for all stakeholders, customers, employees, shareholders, communities in the world. Feedback is critical to enabling companies to understand their stakeholders. And SurveyMonkey, especially our employees, are on a mission to do our part. In closing, I'd like to thank all of our SurveyMonkey employees, customers, Board members, shareholders, present and past, for their support over the last 20 years.

Thank you for your time today. We are now open and available for Q&A. Operator?

Questions & Answers:


[Operator instructions] Our first question comes from the line of Brad Sills from Bank of America. Your question please.

Brad Sills -- Bank of America Merrill Lynch -- Analyst

Hey, guys. Great. Thanks for taking my question. I wanted to ask about some of the enterprise renewals.

Now that it's been just over a year, you're getting some of these first wave of enterprise agreements coming in for renewal. I just wanted to ask about the kind of upsell and cross-sell you've seen in that base as we start to lapse that -- some of these agreements?

Zander Lurie -- Chief Executive Officer

Hey, Brad. Thanks for the question. It's Zander. The first wave of enterprise deals really started about two years ago.

So we've seen consistent uptick in revenue retention. We don't disclose specifically enterprise net revenue retention. We disclose the organizational net revenue retention, which is over 100%, as you know. It's fair to say we're doing quite well in the enterprise space, and really we lead with SurveyMonkey enterprise.

As you know, there are over 335,000 domains where we have paying customers. So we utilize our proprietary Customer 360 to target companies that have big footprints, sometimes hundreds, sometimes even thousands of active users. They all need to be on enterprise plans. So we lead with the enterprise SurveyMonkey product, and that provide then opportunities to upsell purpose-built solutions around CX, Audience, etc.

So we don't have a specific net revenue retention number that we disclose for the enterprise sector. Fair to say, that's why we're in that business. The SaaS model for net revenue retention of our products is excellent, and the profitability associated with those renewals is even better. And I'm thrilled with the performance we've had over the last 12 months.

Brad Sills -- Bank of America Merrill Lynch -- Analyst

That's great. Thanks, Zandr. And then I wanted to ask a follow on GetFeedback. What does this bring you into the Salesforce channel? What does it do to that business to perhaps accelerate your momentum in the Salesforce channel?

Zander Lurie -- Chief Executive Officer

Yeah. So if you look back at the history, Brad, of our relationship with Salesforce, I think they invested in the IPO 13 months ago. We had a productive integration that we sold. But really GetFeedback was the beast in the sector.

They were the No. 1 in the AppExchange. It was founded by and led by Salesforce account execs, folks that had really dialed into the networking that is Salesforce. They work in the shadow of the Salesforce tower.

And bringing onboard this GetFeedback team, it's a high integrity group with a native solution built for Salesforce and may have relationships with the sales engineers, the account execs and are really teaching us how to thrive in that ecosystem. So there are hundreds of thousands of Salesforce customers, who spend significant dollars to better understand their customers. Every single one of those customers needs enterprise survey software. And that should be us.

And if it's not us, it's going to be one of our competitors. So we want to be best positioned with better products, better relationships, better go-to market. So we love the partnership with Salesforce. We're going to continue to invest in that partnership.

We think we can deliver huge growth by just doubling down and overserving that customer base, because that's where the CRM customers are. They have a much bigger market share than SAP, and so we know we can thrive in that ecosystem.

Brad Sills -- Bank of America Merrill Lynch -- Analyst

Great. Thanks, Zander.


Thank you. Our next question comes from the line of Mark Murphy from J.P. Morgan. Your question please.

Pinjalim Bora -- J.P. Morgan -- Analyst

Hey. Thanks. This is Pinjalim, on behalf of Mark. I wanted to -- and congrats on the quarter, by the way.

I wanted to just drill a little bit on the price changes that you made on the individual side? And what did you learn about price elasticity from that change? Was there any elevated churn? Or did more people opt for the annual billing option? Any color would be great.

Zander Lurie -- Chief Executive Officer

Sure, Benjamin. Thanks for the question. I think one of the most heartening things about the quarter and, frankly, the continuation of the year is that our paid user number is increasingly annual. I cannot underscore the importance of looking at the growth in our annual user base.

It's now 82% of our total paid user base. And so if you look at the annual net user growth, it was 24%. Obviously, that means we're losing monthly subscribers, and we're doing that prescriptively with our pricing, packaging, features. And I'm going to let Tom speak to what we're doing in product, in marketing with teams.

We're taking a very active approach to managing that, because the LTVs are so rich with our annual customers and it gives us such a great opportunity to engage and renew those subscribers.

Tom Hale -- President

So as you probably noticed, we raised our monthly price to $99 in a few key markets, primarily the English-speaking markets, and we started that rollout kind of mid-quarter. There was some price elasticity that we observed, but more importantly, what we observed was a massive mix shift toward the annual SKUs. A way to think about that is that if you are looking at the number of months that you get for free by shifting to annual, it's a dramatic improvement. You're saving money, if you will, by shifting to annual.

So that really worked well. It's also really important to note that our existing customers on the monthly subscriptions, they renew at their existing price points. So they didn't experience any change to their pricing. What really we observed -- and we have a tremendous test-and-learn operation.

We are constantly optimizing in every market, and we do this sort of day-in and day-out. We saw this pretty dramatic shift toward annual. That actually, in a funny way, is an impact on our revenue, because the revenue recognition of a monthly is better than an annual, but the impact of bookings was really dramatic. And so we think it's a very, very good trade.

We're very optimistic about it. And we know that there are lots of levers like that we can pull, particularly around teams as we go into 2020.

Pinjalim Bora -- J.P. Morgan -- Analyst

Fantastic. Thank you for that answer. One quick follow-up. As you -- I guess you're wrapping out -- wrapping up the account verification now in Q3.

Can you help us understand what percentage of your base -- user base that were sharing accounts have signed up for it? What is the further opportunity to basically engage with the ones that have not signed up? And how to nudge them further? What else can you do?

Tom Hale -- President

Yeah. So look, this is the first year in a multiyear strategic play that we have. I think Zander characterized it as act two in a 42-act play. We are just at the beginning of this and to roughly characterize the sort of scope of the opportunity in front of us.

We think we've penetrated something like less than 10% of the overall opportunity. We can see this in the cohorts. Even from last year this time are still being productive for us in terms of producing new teams. So we're super-pleased with teams.

It's been a big driver for growth for us this year, and it really sets us up well for 2020. We think it's a compelling opportunity going forward, because we see opportunities for new teams acquisition to expand the size of existing teams, and that kind of happened a little bit organically and we can drive that with merchandising and engagement and marketing. And then to continue to pull on the sort of policy marketing and product levers that can drive upgrades into teams from our installed base. So look, we know this is a big portion of our new unit volume today, but we still see a big opportunity for us going forward into 2020.

And honestly, there's so many levers for us to pull here, there's pricing, there's packaging, changing the functionality, adjusting our go-to-market like the configuration of our pricing page. And while we've been so pleased and surprised with the positive impact of teams this year, we see the ability to keep driving on this in 2020, and we feel like it's a good strong tailwind for us as we go into next year.

Pinjalim Bora -- J.P. Morgan -- Analyst

Understood. Thank you for taking our questions.


Thank you. Our next question comes from the line of James Rutherford from Stephens, Inc. Your question please.

James Rutherford -- Stephens Inc. -- Analyst

Hey. Congrats on a good quarter. A couple of questions here. First one for you, Zander.

As you push into the enterprise, it seems like these companies -- these large companies have a couple of options when it comes to feedback. They can buy a large comprehensive system of record, a Medallia or Qualtrics or the like where they can rely on their existing system and just have tools like SurveyMonkey to collect feedback. I mean, with all the enterprise engagements you have today, is there a profile of the kind of company that wants to go sort of the lightweight, high functionality SurveyMonkey versus a big comprehensive system install? I'm just kind of curious what observations you've seen in your enterprise base? Or is it not mutually exclusive, that they can go both kind of both directions at the same time?

Zander Lurie -- Chief Executive Officer

Thanks, James, for the nice words and for the question. So the short answer is we can play both ends of the spectrum. If you take the smaller business, mid-sized business, we have users in those companies who are using SurveyMonkey very effectively for measuring employee retention, for driving CX or doing market research. And as they want to move on to our more robust feature-rich plans with security and integrations, we have a product for them that they can get up and going that week.

And that is a material difference from our competitors. That said, some of those 569 new logos in the quarter are at the very high end, right? The multi-hundred thousand dollar multiyear deals with the most discerning IT buyers at banks and healthcare institutions. And we have reached feature parity largely with Qualtrics and Medallia. Qualtrics, you mentioned, we'll go to -- toe-to-toe with them every day.

It's a division of SAP. And that positions us really well to fight and win in the Microsoft and Salesforce ecosystem. Medallia, we compete with them less frequently. It's a very different software deployment that is pushed together with a lot of professional services and the time-to-value is significantly longer than ours as is the expense much higher.

So we have super-powerful products, as evidenced by the logos we're winning. We know how we win. We win on value. We win on time-to-value.

We win on integrations. And frankly, we win on hearts and minds, because in every large company, there are dozens, if not hundreds, of users who already have a really great experience with our software.

James Rutherford -- Stephens Inc. -- Analyst

OK. That's actually really helpful. And then a follow-up for Debbie, if I may, on organic growth. I think that in the letter, you're saying Usabilla and GetFeedback will drive 4% of total revenue for 2019 -- implies around $12 million.

I believe you previously had said that GetFeedback would be $2 million to $3 million for the year and Usabilla would drive around 2% of growth. That implies around $5 million. So combination -- the math I was doing was that acquisitions were maybe $7 million to $8 million of contribution for the year. So correct me if I'm wrong there.

But with now saying around, where I'm calculating at $12 million, just curious, why the change in sort of the implication there to organic growth in the back half? And can you just walk me through that math? It'd be super helpful. Thank you.

Debbie Clifford -- Chief Financial Officer

Sure. So the contribution from the acquisitions we said would be 4% of total revenue for the year. That's in line with our plans. And we're pleased with the performance that we're seeing there.

Ultimately, the acquisitions that we're doing are part of our overall M&A strategy. We're trying to position ourselves better in the enterprise space. And they're giving us more compelling and robust offerings for that customer base.

Zander Lurie -- Chief Executive Officer

Yeah. I mean I'll just -- I'll pile on there, James. We're thrilled, frankly, with the integration. Tom and I, Debbie, we've done a lot of M&A in our history, and a lot of M&A doesn't work well.

But we bought really purpose-built products that complement our portfolio, super-high integrity teams that do what they say they're going to do. And they provide us really elegant entry points. And so Usabilla -- we talked about GetFeedback, but Usabilla, for example, so big companies that need to measure feedback on their app, on their website, it's a really elegant high entry point for us and it provides for cross-selling opportunities. So I think we may be a tiny bit ahead of where we guided in terms of the contribution for the acquisitions, but we still think there's a ton of runway to go in terms of the integration.

But we're pleased where we are thus far.

James Rutherford -- Stephens Inc. -- Analyst

Got it. Thanks so much for the help. Congratulations again.

Zander Lurie -- Chief Executive Officer

Thanks again, Jame.


Thank you. Our next question comes from the line of Ron Josey from JMP Securities. Your question please.

Ron Josey -- JMP Securities -- Analyst

Great. Thanks for taking the question. Maybe I just wanted to ask -- a great quarter, by the way. I wanted to ask a little bit more just about the product, Zander.

I know most of the business is driven from existing user base. And you just had a comment around going to toe-to-toe with competitors and whatnot. But you've invested quite a bit on the product over the past several years. And so just as you look out and you see where the market is heading -- headed, is there -- are there any products or areas that you're seeing high demand for that you'd like to invest in or build out now? And maybe another way of asking the question, you highlighted strategic partnerships with Salesforce and Microsoft on the call and maybe just talk about how those partnerships are helping to build the business as well.

So product, road map, and then strategic partnerships. Thank you.

Zander Lurie -- Chief Executive Officer

Thank you, Ron. Yeah. On the product, we did -- we invested significant time and money in the '16 to '18 time frame to ready that product for selling into significant IT buyers. And if you look today, where we are, we lose occasionally, but we're not losing for any specific reason.

So it's all about sales execution, marketing execution, and I think the numbers speak for themselves. I'm thrilled with how we're performing, selling up markets, now 23% of our business and growing 129% year-over-year revenue growth. And frankly, the team is doubling in size this year, which means there are a whole lot of talented folks who are really just learning our products. And so I'm speaking to them now as much as I'm speaking to you.

Productivity is going up in 2020, and I look forward to see what we can do there. On the road map, I think we've stated pretty clearly, we have big ambitions in market research. It's a $45 billion TAM. A ton of companies are spending a lot of money on inelegant, time consuming, expensive market research, and they can do better with software.

We love calling out Allbirds, because it's a favorite customer of ours as it is to many others. Nike, the IBM, there's a ton of companies that are using our market research product in a really elegant way to discover new markets, new media campaign, concept testing, pricing. And we just think this is early days in terms of penetrating a larger and larger share of that market. And then in the CX space, just find a company today that doesn't talk about customer centricity, employee culture, really understanding customers that matter to your business and to your organization.

That was really the strategic initiative behind the acquisitions in Usabilla and GetFeedback. We've had significant product efforts there. And so I can speak for the entire product and marketing sales team at SurveyMonkey, we are all lined up to deliver a more holistic, more robust, higher AOV CX solution next year. And you know who we're coming after, and we're going to be targeting, really customers in that Salesforce and Microsoft ecosystem.

And then lastly, you asked about partnership, I think I addressed the productivity. We're engaged in with Salesforce, and you'll see a lot more of us at Dreamforce if you're in San Francisco in a couple of weeks. Microsoft, our team is just in Orlando. You saw Satya Nadella present SurveyMonkey at the Build Conference earlier this year, our integrations with teams, Outlook, Power BI.

This is a company in Microsoft that has a couple of hundred million users and millions of customers. And we know that starting with the integrations is the first and most important part to insert SurveyMonkey into that ecosystem. We're really excited about a new feedback collection in Outlook that we'll be rolling out in January for the [Inaudible] conference in May. So we know those two partnerships are ones that can drive significant growth in the years to come.

Ron Josey -- JMP Securities -- Analyst

Great. Thank you very much.


Thank you. [Operator instructions] Our next question comes from the line of Eric Sheridan from UBS. Your question please.

Eric Sheridan -- UBS -- Analyst

Thanks so much for taking the question. Maybe I know it's a little early looking out over the next one to two years, but, Zander, just broadly as you see a combination of sort of efficiency gains, scale and pricing benefits that run through the business and you think about these are sort of allowing them to drop to the bottom line versus reinvesting against all the opportunities you have on growth, what's the conversation like between management and the Board about how to sort of strike the right balance on that, just sort of capture the market opportunity, but also continue to sort of scale the return benefits you see as the business continues to build the scale you want to see? Thanks so much.

Zander Lurie -- Chief Executive Officer

Hey, Eric. It's a great question and a timely one in this environment. I'll kick it off with -- I think the best decision I made this year was hiring Debbie Clifford from Autodesk, and she brought a new level of accountability and focus to our organization. I know the board is appreciative.

And as you know, from our leadership page and our board page, we have three ex-public company CFOs, CEO, COO on our board. So your question around the balanced investments between driving growth and profitability are key. As I said before, this is a massive multibillion dollar global category. It is early days.

If you look at what's going on with companies in the front page of papers today and what's going on in the financing market and what you all are covering in the IPO market, time and again, we at SurveyMonkey look and see where could they have been more customer-centric, where could their HR group have been asking better questions, where could they have used structured data and scalable software to get to better insights. And we're still early in terms of going after this market. We've talked about the competitors. We go toe-to-toe with them every day.

But in all likelihood, we're all going to thrive, because the overall market is growing. So we are going after revenue growth. In our IPO last year, we stated 17% to 20% revenue growth. We've already exceeded that.

And we are focused on delivering 25% revenue growth in the years to come. But we're going to do that with healthy margins. We have a close to 80% gross margin business. So I'll be damned if we aren't driving operating leverage as we scale.

And that's going to come from -- as Tom stated, we've got awesome opportunities in growth testing our self-serve product. International, we've doubled bookings in Q3 over Q2, but that's not going to contribute to revenue until 2020. And then, of course, on the enterprise side, productivity in our enterprise sales force is going to drive higher AOVs and really good renewals. So I think you're going to see us drive operating leverage, and we'll have a Board discussion as we do quarterly about the relationship between our investments, productivity.

And Debbie and Tom and I are accountable for driving that level of -- that balance to meet the needs of the market opportunities and to meet the shareholder demands as well.

Eric Sheridan -- UBS -- Analyst

Great. Thank you.


Thank you. Our next question comes from the line of Chad Bennett from Craig-Hallum. Your question please.

Chad Bennett -- Craig-Hallum Capital Group LLC -- Analyst

Great. Thanks for taking my questions. Great job on the quarter. So maybe one thing here around the pricing change mid-quarter.

Obviously, it makes all the economic sense in the world long term. Is there any way to quantify maybe the revenue headwind of that pricing change, whether it was in the third quarter and maybe what you anticipate in the fourth quarter, even better? Kind of what you anticipate the next 12 months as we annualize or before we annualize on it?

Tom Hale -- President

Hey, Chad. Thanks for the nice words. Is there -- the question, I just want to -- I want to make sure I answer it specifically, is the headwinds from the pricing change for revenue as it relates to bookings?

Chad Bennett -- Craig-Hallum Capital Group LLC -- Analyst

Correct. So obviously, you're incentivizing people to sign up to annual deals, and they're getting a good deal. If those people were -- if you normalize those users per month, I assume you're giving up some near-term revenue.

Zander Lurie -- Chief Executive Officer

Yeah. So I'm not going to give you a specific number, but you're exactly right. The price point on our monthly package, if everybody signed up for monthly and renewed in perpetuity, it would drive more revenue, because we do offer a discount for annual. That said, as Tom articulated, the LTVs associated with our annual users are a multiple of our monthly users.

So we will continue through our product, through our merchandising, through the feature packaging and through pricing drive more folks into annual. I think it's fair to say that everybody who has followed SurveyMonkey for a while, this is not breaking news. We have under-monetized significantly. So we are trying to strike the right balance of customer centricity, but also extracting fair value for the products we're delivering.

And that really is the goal of the annual merchandising is to try and move up that mix shift into annual. And there is a near-term headwind, I can't quantify it exactly, we're like a month and a half in, but I think you'll see it -- you'll see us harvest that revenue in 2020.

Chad Bennett -- Craig-Hallum Capital Group LLC -- Analyst

Maybe a easier way to ask it is, have your expectations for, Zander, for non-enterprise revenue growth changed?

Zander Lurie -- Chief Executive Officer

Our goal on self-serve -- look, the self-serve SurveyMonkey product, specifically our teams product, is one of the most profitable products on the Internet. We don't pay any commissions, and we get paid upfront for a product, where we have almost zero variable cost associated with it. So we are in the business of driving growth in self-serve in perpetuity. We're doing that through international expansion, through really innovative growth testing, where we've upped our game significantly in 2019, and then through product feature investments to drive more and more folks into our annual and teams plan.

So you see us leading with our teams' plans today. It's a better collaborative shared experience between users inside of the company. All the while, it seals the opportunities for us to upsell enterprise when we see a lot of red dots on a map. So look for us to continue really low double-digit self-serve revenue growth.

And if we can do that, the profit margins it delivers enables us to invest and move upmarket into the enterprise categories.

Chad Bennett -- Craig-Hallum Capital Group LLC -- Analyst

OK. One last one for me real quick. So have you received any, I know it's early, but any feedback from your existing enterprise base on Usabilla and GetFeedback? And then in terms of how we should think about, and it probably pertains more to Usabilla than GetFeedback, should we think about Usabilla really driving deal size higher and enterprise ARPU higher over the next 12 months? Thanks for taking my questions.

Zander Lurie -- Chief Executive Officer

Thank you. Yeah. Chad, you're right. I mean, the Paris-Saint Germain is a soccer club that is driving revenue by collecting feedback on the app.

We're seeing Vodafone found 250 bugs. That's where Usabilla comes in. It's for your app and for your website, where you can find out why are users abandoning the shopping carts. What -- if there are bugs found, having a really elegant interstitial in a way to collect feedback in whatever different emojis starring you can, and that enables us to price really based on volume as opposed to per seat.

So the traditional SurveyMonkey seat model has driven revenue based on seats. It's a pretty linear model. You're seeing us start to introduce some more elegant kind of volume-based ways to drive revenue, and Usabilla has done a great job of that. I think I talked a bit about GetFeedback as well, but they're both really oriented around the CX space, help me understand my users better, help me get a better experience for my users in a really competitive environment, and they're willing to pay up significant AOVs from where historically we've been in SurveyMonkey.


Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to you, Zander, for any further remarks.

Zander Lurie -- Chief Executive Officer

Thank you all. I appreciate your continued interest and support of SurveyMonkey. We said it in the prepared remarks, and we launched a video with Serena yesterday. I just want to reiterate my appreciation for the global employee base that's with us today and that has been with us in the past, and of course, for all of our customers.

I'm really proud of the Q3 performance and reiterate our focus to deliver in market research, in surveys category, and of course, in CX. I think we're poised to deliver 25% revenue growth in years to come with really healthy operating margins. And you'll see us continuing to move upmarket in enterprise and capitalizing on the strength of our existing products, as well as our acquisitions. So we look forward to your feedback.

We are a feedback company. We want to hear where you think we can do better, where you want more transparency. We're here to serve our customers, but our shareholders as well. So thank you for your time today, and we look forward to seeing you in the months to come.

Duration: 49 minutes

Call participants:

Whitney Kukulka -- Investor Relations

Zander Lurie -- Chief Executive Officer

Tom Hale -- President

Debbie Clifford -- Chief Financial Officer

Brad Sills -- Bank of America Merrill Lynch -- Analyst

Pinjalim Bora -- J.P. Morgan -- Analyst

James Rutherford -- Stephens Inc. -- Analyst

Ron Josey -- JMP Securities -- Analyst

Eric Sheridan -- UBS -- Analyst

Chad Bennett -- Craig-Hallum Capital Group LLC -- Analyst

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