SurveyMonkey (NASDAQ:SVMK) is an immensely popular platform, but its numbers don't scream success. In this clip from Industry Focus: Tech, host Dylan Lewis and Motley Fool contributor Evan Niu dive into the books and explain which trends are so alarming, just how much debt the company is in, and how SurveyMonkey thinks going public will help.

A full transcript follows the video.

This video was recorded on Oct. 5, 2018.

Dylan Lewis: Looking at the books, there's a lot going on. You think, OK, this company's going public, they must be showing some pretty gaudy growth rates. Not necessarily the case. You have to take a step back and remember, this business has been around for 19 years.

Evan Niu: [laughs] Right. Last year, in 2017, revenue only grew about 5-6%, somewhere around $220 million. One thing that stands out to me is that while growth is slowing, their costs are rising even faster. For example, if you ignore some of these restructuring costs they had over the past few years, a lot of their operating expenses are jumping. R&D was up 40% last year. Sales and marketing about flat, but general & administrative was up 30%. When you compare that against 6% revenue growth, obviously, you're getting pinched on the bottom line. In this case, they're posting net losses still. And it's like, what are you spending $50 million in R&D on? How complicated should the platform be? I mean, I just don't know what they're spending the money on.

Lewis: Yeah. For a company that posts 70% gross margins, they post operating losses because their costs are currently outstripping their revenue growth. There was some slight revenue acceleration that we saw with this business. In the first half of 2018, they put up 14% year over year growth over the first half of 2017. That's still not very blistering, though. This company is losing money, it looks like it's going to continue to lose money for quite some time. A big part of that is the fact that they have some pretty hefty interest payments, as well.

Niu: That's another thing that jumped out at me, too. This company is very deep in debt. For example, before the IPO, at the end of the second quarter, they had about $40 million in cash on hand, and they had $320 million in net debt. Most of that would be in these credit facilities, like a term loan, as well as revolvers, with some of these big banks who, interestingly, were also underwriters into the IPO.

They did say they're going to put $100 million of the IPO proceeds toward paying down some of this debt. After the IPO, now they have about $125 million or so in cash, and $220 million in net debt. That certainly improves their financial condition. But if that's the reason why they went public, that's not really inspiring to me as an investor. I mean, I understand if you want to swap out some of this debt capital for equity capital. You do save a lot of money, because these interest payments and the interest expense is huge. Interest expense is over 10% of revenue every quarter. They're already operating at a loss, and then on top of that, having to pay out tens of millions of dollars of interest every quarter, it's just a tough position to be in.

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