SVMK Inc (SVMK) Q1 2020 Earnings Call Transcript

SVMK Inc (MNTV)
Q1 2020 Earnings Call
May 07, 2020, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the SurveyMonkey first-quarter 2020 earnings conference call. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to hand the conference over to your speaker today, Gary Fuges, vice president of investor relations. Please go ahead.

Gary Fuges -- Vice President of Investor Relations

Thank you. Good afternoon, and welcome to SurveyMonkey's first-quarter 2020 earnings call. Joining me on the call today are Zander Lurie, our CEO; Tom Hale, our president; and Debbie Clifford, our CFO. After our prepared remarks, we'll take your questions.

Prior to this call, we issued a press release and shareholder letter with our financial results and commentary on our first-quarter 2020. Those items were posted on our investor relations website at investor.surveymonkey.com. During the course of the call, management will make forward-looking statements, which are subject to various risks and uncertainties, including statements relating to our strategy, investments, revenue, operating margin and cash flow. Actual results may differ materially from the results predicted, and reported results should not be considered an indication of future performance.

A discussion of the risks and uncertainties related to our business is contained in the filings with the Securities and Exchange Commission, in particular, in the section entitled risk factors in our quarterly and annual reports, and we refer you to these filings. Our discussion today will include non-GAAP financial measures, unless otherwise stated. These non-GAAP measures should be considered in addition to and not a substitute for or in isolation from our GAAP results. A reconciliation of GAAP to non-GAAP results may be found in our earnings release and shareholder letter, which are furnished with our 8-K filed today with the SEC and may also be found on our IR website.

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

Zander Lurie -- Chief Executive Officer

Thanks, Gary, and thank you, everyone, for joining our call this afternoon. I hope all our shareholders and friends and the analysts and press community are staying healthy. To state the recent months have been tumultuous feels boiler plate at this point. But the COVID-19 healthcare crisis and global economic slowdown is dominating every aspect of our lives.

Companies, governments, communities and individuals are trying to navigate this new normal and stay connected with their stakeholders. If there was ever a doubt about the mission-critical nature of SurveyMonkey Software Solutions, our pipeline of enterprise customers over the last two months provide the definitive answer. The increase in new accounts on our website and interest in our COVID-19 survey data gives me confidence that SurveyMonkey's products deliver value, especially during a crisis. I have been associated with SurveyMonkey since 2009, and I have never seen a moment in time where we have been more relevant to our customers.

Every leader in every organization, in every country, is seeking feedback from their stakeholders in this volatile environment. SurveyMonkey employees are rising to meet the moment, delivering for customers in all industries around the world. We executed well in Q1, with solid financial performance driven by broad-based strength across our business. Our shareholder letter details our Q1 operating and financial results.

But Q1 was forever ago. We all are rallying to help our customers light up new solutions in a matter of days so they can meet the needs of their stakeholders throughout this crisis. Here are two key takeaways from our shareholder letter. First, new demand tailwinds are directly related to COVID-19 use cases and getting back to work.

And two, our subscription business model is resilient. First, on new tailwinds related to this crisis. There is no playbook for running a business in this environment. So, the best place to start is by asking questions.

It is critical that decision makers solicit feedback from their stakeholders. What do your employees care about in a distributed work environment? What technology solutions does your engineering team need to be more productive? How are your customers' expectations changing? How about their spending habits? What marketing campaign will strike the right tone in a recessionary environment? Are we being inclusive with our evolving HR policy? We are giving business leaders, educators, nonprofit and government entities the tools to collect feedback quickly so they can take action. Customers of all sizes in all industry verticals need to efficiently collect and analyze feedback in real time from their increasingly distributed stakeholders, companies like Darden Restaurants, Kraft Heinz, Unilever and Travix; and governments and nonprofits, such as the World Health Organization, the American Red Cross and the public health departments of California and Rhode Island. We highlight a number of these organizations in our shareholder letter, and there's one I'd like to call out.

Last week, we announced the collaboration with COVID Near You, a joint project of Boston Children's Hospital and the Harvard Medical School to accelerate coronavirus research. COVID Near You is using our platform to collect essential data that helps citizens and public health agencies identify current and potential C-19 hotspots. Aggregate data will be reported readily on the COVID Near You and SurveyMonkey website and made available to media outlets, public health officials and Centers for Disease Control. Large businesses are acting with urgency as well to accelerate the digital transformation of their businesses.

In Q1, we added over 240 net enterprise logos, and we're seeing customers continue to expand their SurveyMonkey relationship. For example, Informatica, a leader in enterprise cloud data software, signed as a Usabilla customer in Q4. In Q1, they added SurveyMonkey enterprise and GetFeedback to take advantage of our enterprise-grade data security and administrative functionality and drive higher, tighter integration with their system of record sales force. There is no question in my mind that our products are more important than ever.

Second, our business model is resilient. More than 90% of our revenue is recurring, and 85% of our users are on annual plans. For the third consecutive quarter, our annual plan user count increased more than 20% year over year. With over 746,000 paying users, we've never had customer concentration with a single company or even concentration within a single industry.

After doing a detailed analysis on our customers' domain, we estimate that approximately 5% of our 2019 bookings came from customers acutely impacted by C-19, such as hospitality, travel and retail. Our products deploy easily, integrate with other software systems, drive insights quickly and are priced to disrupt. And our hybrid go-to-market motion combines a large, highly cash-generative self-serve channel with an emerging enterprise channel that relies primarily on cost-efficient inside sales. In situations where we compete with enterprise software companies who rely on in-person sales pitches, heavy professional services and high-entry prices advantage SurveyMonkey.

Our strategy is to leverage our massive self-serve base, high velocity sales cycles and time to value for our customers. We are helping hybrid offline, online businesses make the transition to a cloud-based world. That transition will happen a lot faster because of this pandemic, small silver lining. Our resilience is playing out in the trends we've experienced since mid-March.

In the last week of April, we saw record enterprise pipeline creation and responses on our platform increased more than 25% year over year. And we are seeing accelerated selling cycles with healthcare and government agency customers. Our model is generating clear tailwind. Are there headwinds at SurveyMonkey based on the current economic prices? Of course, there are.

Given the size of our customer base, we know there will be incremental churn in specific segments of our broad portfolio, along with longer sales cycles in affected industries. On the flip side, we are seeing new customers with innovative use cases embracing our platform. Over the month of April, the heart of the pandemic, our volume of new paid annual seats grew more than 25% year over year, a clear testament to the importance of our software. Our net revenue retention rate was again over 100%.

And for customers whose budgets are being compressed, we are going to work with them on terms. Our actions today may not always drive near-term monetization, but will help spring load future quarters. These factors are reflected in our Q2 guidance. And our stress testing of the business indicates we will continue to grow our revenue, our bookings, our customer base and our market share in 2020.

We have taken prescriptive actions to reduce our cost structure and our capex outlay for the remainder of the year, ensuring continued positive free cash flow generation in 2020, even if the economic downturn persists through Q4. Most importantly, we believe today's challenges are highlighting our competitive advantage in the market. In times of change and disruption, leaders need to collect feedback and take action. Agility is the new superpower in business.

While most social and technological changes happen over years, cycles are now happening in weeks, and organizations need to adapt faster than ever before. We believe this accelerated trend plays to our product and pricing strengths, which, in combination with our resilient business model, gives us confidence we will emerge from today's challenges as a stronger company. There has never been a more important time for leaders to listen to your stakeholders so you can take actions to support the people who power your organization. We believe our Q1 financial results, our resilient business model and the actions we are taking to steer our business in the near-term position SurveyMonkey to thrive for many years to come.

With that, I'll turn the call over to Tom.

Tom Hale -- President

Thank you, Zander. In Q1, we continued to execute on the three pillars of our strategy. First, to deliver an enterprise-grade survey platform. Second, to deliver customer experience management for the Salesforce ecosystem.

And third, to enable agile market research with software. While the COVID crisis has created incremental opportunities, it's also amplified our conviction in our strategy. In times of disruptive change, organizations need feedback more than ever. We believe our disruptive pricing, ease of implementation and speed to insight are hitting a sweet spot in the market.

The crisis has created urgency and alacrity as organizations react to work from home, school from home and everything from home or check in with their customers, employees and stakeholders. In March and April, we observed a nonlinear increase in many leading indicators of our business, such as responses collected and basic accounts created. This increase in usage is correlated with a dramatic uptick in COVID-related surveys, and the engagement and usage illustrates the value we deliver. In Q1, paid users grew to 746,000, with annual users accounting for 85%, a new high, driven by continued strength in teams and enterprise survey plans.

In a quarter where we introduced lower cost monthly plans to support our nonprofit and academic customers, the continued shift to annuals is a strong signal of the resilience of our business. Q1 marked a strong start to the year for product delivery. Let's start with surveys where we continue to enable broader adoption within organizations. For teams, we introduced a new limited-use seat category, contributors, for team members who consume and analyze data.

Through contributors, team's customers can expand their work groups and extend the value of the data they collect. And on the enterprise side, we entered a limited release of divisions, which enables large organizations to customize their deployment, templates, questions, policies and assets department by department. These new capabilities will help us land large prospects and expand existing customer relationships more easily. Mid-quarter, we upgraded our Microsoft Teams integration significantly to enable polling, quizzing and feedback with a broader set of question types and the ability to view analytics directly from within the team's experience.

In a quarter where remote collaboration solutions like Microsoft Teams, Zoom and Slack are seeing rapid adoption, this innovation should drive usage and engagement as team members check in with each other. In Q1, we also began to monetize our Microsoft Power BI integration. It's early days, but we're excited about the value we can deliver to our shared Microsoft SurveyMonkey customers as we take this to market in Q2. Turning to customer experience management.

We hit a major milestone in Q1 with the launch of new CX-oriented capabilities in GetFeedback, including NPS driver analysis, a crosstab dashboard, tools to automate C,  as well as user interface enhancements. And under the covers, this release brings us closer to the full integration of Usabilla and GetFeedback into a single customer experience management suite. Building this unified offering to disrupt the expensive and service-heavy solutions on the market today remains on track for completion in the second half of this year. As companies have rushed to accelerate their e-commerce business motions because of COVID, we've seen an uptick in interest for our CX products for e-commerce.

Customers like YETI, DHL Parcel, Hibbett Sports, Puma and Build.com are taking advantage of our price-disruptive and easily deployed CX solutions. And as we march toward the second half of the year, we have increasing conviction that our strategy of anchoring on customer data, omnichannel data collection, automated actions and deep integration within the Salesforce ecosystem is on target. It's early days, but the digital transformations and the focus on cost-effective offerings brought by COVID may end up being a tailwind. At the same time, we are preparing our CX go-to-market muscle internally and in the broader Salesforce ecosystem.

Our sales team is building their fluency in CX, and while we sharpened our market messages for high ACV CX customers and started to build pipeline. In Q1, we ran training for nearly 1,000 Salesforce account executives and sales engineers, delivered a training module on GetFeedback into the Salesforce Trailhead platform and shipped a new partner website for system integrators. We've onboarded four Tier 1 partners to date, and we're just getting started. Turning to our market research pillar.

At the close of Q1, we shipped Expert Solutions, a suite of seven products that accelerate concept testing. Expert Solutions combines our audience market research panel, expert methodology, industry benchmarks and our AI-powered insights that use software to replace expensive and time-consuming research services. At the end of Q1, we shipped seven concept testing solutions, ad and video creative, product concepts, packaging, logos, messaging and brand names. Now, COVID has made it even more important for our customers to validate marketing strategy and spend, testing messages, visuals and products in order to quickly understand where they resonate with a target demographic and where they don't is key to making better decisions.

We've seen strong early interest in our Expert Solutions from insight professionals in industries such as healthcare, financial services and consumer packaged goods, and we look forward to updating you with our progress here in Q2. As companies are working to understand and track the impact COVID has on the broader economy, we're seeing increased usage of audience to gauge consumer sentiment and purchase behavior. Market research companies are working to help affected industry verticals, global investment firms are looking for signals to play the recovery, while multinational technology firms like Salesforce are spending significantly, tracking changes in the data every few weeks. The best leaders at the best companies are using audience to gather insights so that they can respond to disruptions and opportunities with agility.

In times of change and disruption, organizations must be agile and act with urgency and feedback provides critical input for organizations of every size and helps them course-correct quickly. Our mission is to enable organizations to turn feedback into action. And in the face of a global pandemic, I'm proud of the progress we're making across our three pillars in order to better serve our customers. I'll now turn the call over to Debbie, who will review our Q1 financial results and our outlook.

Debbie?

Debbie Clifford -- Chief Financial Officer

Thanks, Tom. Our Q1 results exceeded our prior expectations for both revenue and non-GAAP operating margins. We remain committed to our long-term strategy and are encouraged by the demand we're experiencing for our feedback solutions. These dynamics exemplify the resilience of our business, the quality of our overall customer base and our commitment to execute on our long-term strategy.

Unless otherwise noted, all comparisons are year over year. As a reminder, Q1 2020 results include the impact of the Usabilla acquisition, which closed on April 1, 2019, and the GetFeedback acquisition, which closed on September 3, 2019. Revenue was 88.3 million during Q1, reflecting 29% growth. Revenue growth was driven primarily by enterprise sales, which increased 128% and accounted for 29% of total revenue compared to 16% in the year ago period.

The enterprise customer count increased 75% to 6,800. Q1 revenue included approximately 2 million of nonrecurring revenue from a market research customer. If we exclude this customer from our Q1 results, our revenue performance still exceeded our guidance range. Deferred revenue increased 37% to 152 million.

Remaining performance obligations, or RPO, which is the sum of deferred revenue and backlog, was 169 million, reflecting 39% growth. These metrics continue to be solid indicators of the health of our business. Non-GAAP operating margin was negative 1.6%, down slightly from negative 0.2% due to the disciplined investments we continue to make to drive growth in our business. We generated 4 million in operating cash flow and approximately 1 million in free cash flow, net of annual bonus payments made in the first quarter and in line with our expectations.

We also have a solid cash position on our balance sheet, access to additional liquidity and modest annual debt servicing requirements. We ended the quarter with approximately 145 million in cash and cash equivalents, an increase of approximately 14 million quarter over quarter, and our total potential liquidity stands at approximately 215 million, with the inclusion of our 70 million untapped revolving line of credit. While Zander and Tom articulated the product and go-to-market initiatives designed to capitalize on new business opportunities, I want to highlight the defensive measures we are taking to efficiently manage the company if the economic downturn is sustained. While our business model is resilient, it is not immune to extended economic uncertainty.

As a result, we are taking a proactive and prudent approach to managing the business as we navigate the current economic climate. We have created several scenarios of financial performance to help us understand a variety of potential outcomes depending on how deep and elongated the economic downturn may be. We intend to optimize for free cash flow in the near term while investing in our growth initiatives to best position us to succeed in the long term. As we further understand what the potential revenue impact may be, we are taking proactive steps to drive efficiencies in our investments to optimize for cash flow.

Examples of proactive expense measures we have taken include a comprehensive review of our facilities landscape and related costs, a reduction in our hiring plans and a holistic review of variable expenses across our business. Some of the actions we've taken only impacts free cash flow, which aligns with our goal to optimize for cash flow in the near term. You may recall that on our last call, we highlighted that our free cash flow outlook reflected approximately 10 to 15 million in anticipated facilities build-outs during the year. We have evaluated our facilities plans carefully and will no longer proceed with a significant majority of the spend.

Other actions we've taken, like reducing the pace of our hiring for the remainder of the year, impact both our operating expenses and cash flow. As we look forward, we're committed to optimizing for free cash flow and have identified several additional levers at our disposal if the pace of the recovery extends over a long time period, including tighter restrictions on hiring and further reductions in our variable expenses. Having said that, we don't believe that this is the time to take more draconian action on spend. Our business is growing and our strategy is sound.

We believe that great companies leverage economic disruption to drive innovation and expedite strategic differentiation. So, our focus is to ensure that we invest smartly in our long-term strategic growth drivers while balancing for free cash flow in the immediate term. As we look ahead, our recurring revenue model provides us with near-term visibility. However, there remains a great deal of uncertainty regarding how the COVID-19 pandemic will impact the economy, our market and our customers.

While we are pleased with the resilience we're seeing, we have little visibility into the broader economic situation, specifically the depth and length of the recovery, which makes providing detailed financial guidance for the full year impractical at this time. As a result, we intend to continue to provide quarterly guidance, but are suspending our full-year outlook for the time being. For Q2, we expect revenues to be in the range of 87 to 90 million or 18% year-over-year growth at the midpoint. As we mentioned before, Q1 revenue included approximately 2 million of nonrecurring revenue from a market research customer.

Excluding this customer from Q1 revenue, our Q2 revenue guidance at the midpoint reflects a sequential increase. We expect non-GAAP operating margin to be in the range of breakeven to positive 2% for the quarter, reflecting operating leverage quarter over quarter and incorporating the cost efficiency actions we've already taken. Now, I'll turn the call back over to Zander.

Zander Lurie -- Chief Executive Officer

Thanks, Debbie. While the COVID-19 crisis is truly unprecedented in modern times, SurveyMonkey has a long history of delivering for our stakeholders amid turbulent macro events. For the past 20 years, not only have we been investing to solidify our position as a market leader, but we have been investing in our corporate culture. Today, these investments are paying off.

We established a companywide work-from-home policy in mid-March, and we didn't miss a beat. Our team is supporting millions of active users, developing and shipping new products and functionality and winning enterprise business. I am so proud of how everyone at SurveyMonkey has stepped up and supported our business and each other. We have plans in place to steer the business through multiple economic scenarios to set us up for long-term success, while upholding our commitment to prudent cash management.

We are managing our business to deliver in the near term and thrive in the long term. In the coming months, every organization on the planet will be charting their way back to some version of a new normal. New workplace practices and new ways of doing business will combine with health concerns in complex and novel ways. Leaders everywhere will be making decisions and rewiring their businesses with the highest of stakes, the health and safety of their employees and customers.

We stand at the ready to help organizations of every stripe, from state governments to businesses to schools and nonprofits, as the world reimagines the workplace in the aftermath of the COVID crisis. The pace of change is so rapid, and the urgency to find solutions is so great, there is no question in my mind that our products are more important than ever. Our team is inspired. SurveyMonkey is part of the solution.

And with that, I'll open the line to welcome your questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question comes from the line of Mark Murphy with JP Morgan. Your line is now open.

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

Hey. This is Pinjalim sitting in for Mark. Congrats, guys. It seems like a pretty strong quarter overall.

Zander, it seems like the ASP per customer in the enterprise business grew sequentially, if I'm doing the math right. Is that driven mainly by bigger seat deals or more solution selling? Anything in particular to highlight there?

Zander Lurie -- Chief Executive Officer

Hey, Pinjalim, thanks for the good words. Yes, our average contract value up about 35% year over year in the enterprise space. So, not only did we add several hundred customers, but you're seeing a meaningful increase. And it can be attributed to a handful of factors.

First, we have better sales folks who are better equipped, better training, better education about our products. Two, we have better products. If you look at the portfolio of software solutions we're selling in the market today, they just offer richer value to our customers. And then three, it's a combination of pricing and larger deployments of seats.

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

Understood. OK. And the other thing I had was in the shareholder letter, I think you mentioned about some dealing and deal closures. Did the close rates kind of comes back toward the end of April as the pipeline built kind of came back? Or are you seeing still kind of weird close rates? And have you seen any request for payment deferrals that could impact maybe cash flow next quarter?

Zander Lurie -- Chief Executive Officer

So I'll share a little bit more kind of leading business indicators, including Q2, what we saw in April, recognizing these are unique times. So, we're -- the quarter was really progressing along quite nicely in January and February, the leadership team and some customer success organization, landing deals right on pace with our expectations. In early to mid-March, we saw the initial shock as everybody was kind of addicted to the news and moving to work from home. In the last two weeks of March, we did see some pushes, but the enterprise demand gen that happened in April with some of those deals that had been pushed out was staggering.

So, record weeks, record months, highest demand gen we've ever seen at SurveyMonkey in the first few weeks of April. And I think, as we articulated on the call, is directly attributed to all these specific use cases to not only help government, enterprise, nonprofit education institutions kind of steer through the near-term crisis, but now it's evolving as they think through, coordinated with our stakeholders and customers and employees about what we return to. So, that enterprise demand gen has picked up significantly. A handful of missed deals and, of course, discussions with enterprise clients in affected industries.

But we've got a pretty agile organization, so we're able to pivot to really focusing in areas where we know we have strength and their businesses are strong. So, that would include services, business services, financial services, technology, e-commerce, specifically. All these enterprise businesses that have hybrid models are pivoting to an e-commerce storefront first. And that's where digital solutions are just so critical.

You've heard it from other enterprise companies, the entire world is screaming for cloud solutions to help them manage in this new world. And that digital transformation plays right into our sweet spot. Better value, integration with your other systems of record and time to value, get up and going quickly.

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

Understood. Just to put a finer point, the demand gen seems like is back, but what have you seen in close rates? Has that picked up -- picked back up as well?

Zander Lurie -- Chief Executive Officer

Yeah. So, recognizing that most enterprise software companies you all cover, you see the highest close rate in the third month of the quarter, and customers have been trained to expect that. We've been pretty strategic and agile about different incentives, as you can imagine, to get folks closed early. So, we had a strong -- very strong April on the enterprise demand gen side, and we are tracking according to plan on closures in the first, call it, seven weeks of the quarter, which informed the guidance that we provided on for Q2.

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

Understood. Thank you so much.

Zander Lurie -- Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Chad Bennett with Craig-Hallum. Your line is now open.

Zander Lurie -- Chief Executive Officer

Hey, Chad.

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

Just want to dig into the churn you cited, Zander, on the call. I assume for one that was mainly whatever churn you saw was on the self-serve, not the enterprise side. And within the self-serve segment, was that churn more of the monthly paying base? Or did you see some on the annual paying side of that?

Zander Lurie -- Chief Executive Officer

Chad, thanks for the questions. You're right to presume that the churn -- incremental churn was on self side and not in enterprise sales. Again, the growth rate in enterprise sales would mute any potential churn that we saw, but our customer success organization was really pleased with the renewal rates, and our customers continue to get a ton of value from our products on the enterprise side. We know given how competitive our pricing is that the churn in enterprise is quite rare.

On the self-serve side, given the fact that our total sub base is approaching 750,000, we did see incremental churn in the quarter to the tune of a few points on the self-serve side. It comes from both monthly and annual. But remember, over the last four quarters, we've done a really good job of moving more and more of our monthly user base into our annual plan. So, a combination of good work on the growth, marketing, pricing, packaging side.

We now have 85% of our users on annual plan. So, we did a very detailed analysis, as we said in the script, about 5% of our subscribers are in kind of highly impacted industries. And we feel for those customers, and we know their businesses have seen a real shortfall in revenue, and some of that has created incremental churn. I imagine it's a temporary hit during this crisis, and those customers will come back.

But on the positive side, we're seeing incredible uptick in new user demand on the self-serve side. So, we saw 25% new account growth in March as people rush to SurveyMonkey to find templates and SurveyMonkey data and new tools to help them collect feedback. In April, we saw our highest account sign-up ever with 50% year over year growth. So, it's fair to say that, in April, on the self-serve side, 50% year-over-year growth, and on the demand gen side and enterprise sales, our biggest month ever.

It just -- it emboldens my view that our products are more relevant than ever, and we're part of the solution for companies. In fact, I'll say one last thing on this note. Alan Murray, the editor of Fortune, did a Fortune 500 poll with CEOs who said -- 63% of them said this will increase and accelerate their digital transformation. Only 6% said they would slow their spend.

That was a SurveyMonkey study, of course. And I've never had better engagement with CEO peers out there who are looking at our product as mission-critical to help them as they are at home, in flip-flops, trying to manage thousands of people and work with hundreds of customers. And that's where SurveyMonkey plays right into this cloud digital transformation.

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

So just to understand, I mean -- and not to put words in your mouth. But I mean it seems to me by everything you guys have cited, the enterprise business, and I understand close rates in the first month of the quarter, all that stuff, but is actually accelerating potentially. And it seems like if you look at RPO or deferred revenue, it's growing much higher than overall revenue. Obviously, enterprise revenue is a little bit different.

And it's at the highest growth rate or above that it's been in the last few quarters. So, I guess in a roundabout way, it doesn't seem like and I understand the times are on in, but it doesn't seem like there's any change in your view about the prospects and potential growth rates of the enterprise business. Is that fair?

Zander Lurie -- Chief Executive Officer

So I would say a couple of things about our enterprise sales business, and I think I speak for my peers at other companies running enterprise sales teams. I was on the phone this morning with our global sales team. This is a difficult environment, right? Nobody is working in the office where we've created this incredible culture and connecting with customers in this time when there's a lot of volatility in the environment. These are definitely challenging times.

So, we are seeing more volatility in the model. That said, the industries that we're targeting, our solutions are more relevant than ever. So, I think you're seeing kind of a tale of two worlds. You're seeing one where we have significant opportunities the tailwinds are creating in certain industries for products that are more necessary and relevant now than ever.

But there are headwinds as well in terms of being productive, certain customers who may have budget constraints and pipeline make gets pushed. So, I think you heard Debbie say, like, just the responsible thing in a macro environment where there's more volatility, we obviously suspended our annual guidance. But I'm pounding the table and helping our sales team and customer success team every day getting deals closed for what I think should be real continuing momentum. Now, are there potential near-term hiccups on any 90-day given period? Of course, there are.

There's 33 million unemployed people. These are crazy times. But I'm heartened by the near-term and long-term opportunity. We just got to execute and deliver on it.

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

Got it. I appreciate the colors. Thanks so much.

Zander Lurie -- Chief Executive Officer

Thanks, Chad.

Operator

Thank you. Our next question comes from the line of Ron Josey with JMP Securities. Your line is now open.

Ron Josey -- JMP Securities -- Analyst

Great. Thanks for taking the question. Good to hear you all, and glad everyone's well. I wanted to ask maybe, Zander, a bigger picture on just the M&A strategy, just given all the changes in the marketplace and everything.

Has something like this -- has this accelerated or changed anything on how you view M&A going forward? Clearly, you're integrating Usabilla and GetFeedback. And then maybe another -- just a quick question on modeling. Net adds came in, and I know not all net adds are equal, but net adds came in higher than what we were expecting. And I didn't quite hear a specific reason as to why.

Maybe I missed it. But if you could highlight that, too, that'd be great.

Zander Lurie -- Chief Executive Officer

Ron, thanks for the kind words, and I hope you and your family are healthy as well. So, on the net adds quickly. We said this was a metric that was going to have quite a bit of noise. We're aggressive in terms of our growth marketing and making sure that we're delivering the right package for the right person in the moment.

And I'm quite pleased with the teams across product, marketing, engineering, in terms of making sure we're helping more of our active users get on to paid plans. We still have less than 3% of our -- 4% of our active users are paid users. But when we strike the right tone, we do see that net add growth. And obviously, all the productive deals in the enterprise space have helped drive that net user number as well.

On the macro environment, we know great companies are made during volatile times. We've seen it in the financial crisis of '08, '09. Obviously, you saw it part of the turn of the century. We want to be poised and ready.

I spent a lot of time assembling what I think is one of the top boards of directors on the NASDAQ, several ex-CFOs, several ex-CEOs, current COO of incredible companies. One of our board members is the Dean of Wharton. So, we spend a lot of time talking about long-term strategy, M&A, capital structure and want to be poised when the time is right. But it obviously has to be an incredible fit.

I think we have a full plate right now. If you look at the surveys opportunities, we're expanding globally. Our international team had 30% growth in the quarter as we build out that team. The market research space is a $30 billion sector, and we have a new set of solutions Tom talked about.

And then in CX, we made two targeted acquisitions that we believe are coming together to launch a holistic new suite this year for the Salesforce ecosystem. So, we are not looking around for more to do, but we will be ready if there's more dislocation, and we can acquire great teams and assets at attractive prices later in the year or next year.

Ron Josey -- JMP Securities -- Analyst

Terrific. Thank you.

Operator

Thank you. [Operator instructions] Our next question comes from the line of Eric Sheridan with UBS. Your line is now open.

Eric Sheridan -- UBS -- Analyst

Thanks so much for taking the questions, and similar to Ron, I hope all is well with everyone there on the team. Maybe two. One for Zander, maybe one for Debbie. Zander, what you're seeing in the current environment, is there any learnings you're taking away that would cause you to rethink some of the product development road maps or ways in which you might want to either go to market or which products you think could resonate in the market over the long term as you think about sort of the "new normal" that a lot of people talk about.

And then, Debbie, I understood sort of the broad messages on the cost side of the equation. But I guess I wanted to go one layer lower and just see if -- is there any efficiencies you think you're gaining now by reexamining the cost structure that could be more permanent than transient and less reactionary to the current environment and more a new normal as you think about margin structure for the business over the medium to long term. Really appreciate the color on both.

Zander Lurie -- Chief Executive Officer

Yeah. Eric, it's great to hear from you. I appreciate you joining the call. I know you've got a lot on your plate.

I feel, whether by luck or by smarts, our strategy is sound, and I love the three categories we're going after. We know that our massive user base and footprint inside of organizations positions us to get in there with enterprise offerings, with integrations with other systems of record, all the data security that the C-suites need. So, our sales team is more productive now than ever. And you saw that come through in the 35% growth in ACV.

On market research side, again, we have a brand-new suite of solutions. We talked about the big $2 million customer in Q1, whose name we can't share, unfortunately. But it just highlights when you can service the best companies and organizations in the world, you can do that at scale. So, I know we have more to do in building out the commercial little market to match the power of the product offering.

And then CX is such a gangbusters space. This is what everybody is talking right now, and we now have all the assets in place, we just need to deliver on the product road map. The only thing I might change, and we are going about doing this today, is reaching out to customers with more prescriptive solutions with services. And so, I've been very active, and maybe I'll ask Tom to talk a little bit about what we've done with Rhode Island and some of the other departments of health and other large organizations where we're not going out and pitching horizontal tools and use cases.

We are going out with the exact answer they need for the crisis at hand. Tom, over to you.

Tom Hale -- President

Yeah. So, I mean, if you think about CX, what people are using CX for right now is, let's say, they're an e-commerce firm, and they're trying to make sure they're delivering for their customers and in a surge of e-commerce, not letting their call centers get overwhelmed. So, in this case, Usabilla becomes a great solution because they're doing CX on their digital experience. And the example I would cite here is DHL.

DHL is implicated in everybody's e-commerce acceleration. Their call center was being overwhelmed as everyone's trying to check and see when is my package going to arrive. And so, they implemented Usabilla to be able to message their customers and collect feedback from their customers and to understand what the experience that they're delivering through their digital transformation of their service and product in this time of crisis. That's a great use case for us to target.

If it's something like market research, what we see is everybody is trying to figure out the pace of recovery and what the comeback looks like. And so, they're spending money on market research, trying to figure out how to best play that. So, for example, we see big companies like Salesforce spending many thousands of dollars, tens of thousands of dollars, trying to figure out every week, how is this changing, what's the recovery look like. Big multinational tech and service companies, big, big service provider companies that are doing payroll for every company on the planet are trying to figure out how is this going to play, and they're using primary research of end users to get that.

So, that's a use case that we can sell directly into. Financial services. Everyone wants to make a bet on the recovery, and they want to know what's going on. So, they're using financial services to do it.

Obviously, there's all these healthcare cases. Zander mentioned the Department of Health for Rhode Island. We've seen this in New Mexico. We've seen this in the state of California.

They're trying to do contact tracing, and they're trying to do symptom tracking and attestations of health as they assess what their response to the crisis needs to be and adjust to changing environment. For them, the fact that we have HIPAA-compliant solutions means that they can collect PHI, personal health information, and then use that to optimize the response to the pandemic and figure out how they're going to bring their services to bear. So, these specific use cases, in many way, they put a really fine point on our go to market. And it kind of it relates to some of the questions that were asked earlier about, hey, how is it out there right now? And I would say that, like, in March, we felt the shock and then we figured out what the sort of opportunities were.

And in April, we've seen the pipeline build. And in some cases, we've seen deals close faster because our value proposition of rapid deployment, get information quickly, low cost, easy to sell, easy to deploy is really resonating with the market. And as we sell these and market these specific use cases, we're finding that customers are responding with alacrity.

Debbie Clifford -- Chief Financial Officer

And Eric, I'll just -- excuse me, I'll just take your second question about the cost structure. I mean, as you can imagine, in this environment, we're doing a holistic review of all of our expenses, and we've started by going after the usual suspects. So, we've decreased the level and pace of hiring for FY '20, we've revisited the timing of our facilities investments. We've reduced variable expenses.

To your specific question about whether or not these expense reductions could be permanent. The short answer is it's too early to tell. Of course, if we don't hire anybody else, then that would be permanent. But I think one of the things that I'm most excited about is that we're really trying to take this as an opportunity to think differently.

So, one example is, should we be and are we reevaluating our facilities landscape in its entirety? Can we use this as an opportunity to think differently about work from home and, therefore, the cost of our facilities footprint? Early days, but we're definitely trying to use this unfortunate pandemic as an opportunity to just think differently and not do what we've done before.

Eric Sheridan -- UBS -- Analyst

Thanks for all the color.

Zander Lurie -- Chief Executive Officer

Thank you, Eric. Stay healthy.

Operator

Thank you. [Operator instructions] We have no further questions in the queue at this time. I would now like to turn the call back to management for closing remarks.

Gary Fuges -- Vice President of Investor Relations

Actually, operator -- this is Gary. I do see somebody just showing up in the queue. If we can accommodate that, we'd appreciate it.

Operator

Thank you. The line of Robert Coolbrith with Wells Fargo just joined the queue. Your line is now open.

Robert Coolbrith -- Wells Fargo Securities -- Analyst

Hi, good afternoon. Thank you for taking the question. Just wondering, I may have missed it, I've been hopping around this avenue, but just wondering if you have an update on international, how that's going. Any dislocation to the international rollout and development of the sales force? Or anything you can tell us about that if you haven't already? Thank you.

Zander Lurie -- Chief Executive Officer

Sure. Robert, I feel like I scheduled our party alongside eight other parties around the neighborhood. So, it's -- I know you all are trying to get to all these companies, but I appreciate the question. We touched on it a bit.

Our international business, again, we're in market with a sales team now less than 12 months, and I couldn't be happier with the leadership that Charley Longfellow and our team over there are producing. It's a high-velocity inside sales-driven model, targeting the highly industrialized countries, as you can imagine, where we have meaningful self-serve footprint. So, while we had surmised that it might take longer to get that team to be productive, we've found that they've really hit the ground running in France or maybe U.K. and the Netherlands quite successfully.

So, again, we're seeing about 30% year-over-year growth and just really good inside sales-driven deals that have transitioned quite seamlessly on the enterprise sales front. And we're just starting to experiment with new business development, marketing initiatives as we cater to those markets.

Tom Hale -- President

And just to add on to that, Zander. The thing that I would call out is that the dynamics that we're seeing in April, which is the growth in respondents and the increase in new basic sign-ups, actually is a global phenomenon. So, we're seeing kind of the same dynamics in Europe and around the rest of the world as we're seeing in the U.S., which is that our footprint of usage and the users who are using our solutions for gathering feedback is actually increasing around the globe. And I think that's a very good early indicator as we look ahead in international markets.

Robert Coolbrith -- Wells Fargo Securities -- Analyst

Great. Thank you again.

Zander Lurie -- Chief Executive Officer

Thank you. All right. Well, I just -- I want to thank you all for your continued interest and support in SurveyMonkey. Send my appreciation to the global SurveyMonkey team for a great Q1.

I think as we 40-some percent of our way through Q2 here, I believe wholeheartedly that our products are more relevant than ever to help enterprises and organizations steer through this crisis. We've demonstrated that our move up market with enterprise is working, and this is an incredibly resilient business model. So, we will continue to work hard for all of our stakeholders, and shareholders included, and appreciate your good questions, and wish you all continued health for you and your families and your teams. And we look forward to talking to you again in the coming days, weeks or next quarter.

Thank you.

Operator

[Operator signoff]

Duration: 51 minutes

Call participants:

Gary Fuges -- Vice President of Investor Relations

Zander Lurie -- Chief Executive Officer

Tom Hale -- President

Debbie Clifford -- Chief Financial Officer

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

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

Ron Josey -- JMP Securities -- Analyst

Eric Sheridan -- UBS -- Analyst

Robert Coolbrith -- Wells Fargo Securities -- Analyst

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