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SVMK Inc (NASDAQ:SVMK) Gets Ready to Rock or Be Rocked

SVMK Inc (NASDAQ:SVMK) is set to report after the close today. And we think this could be a very interesting stock to watch – one that is not tied to the larger hardware tech cycle issues that have been driving declines in the XLK and QQQ.

This is a cloud play, but it has been smacked lower since IPO-ing in late September. We put out a piece on October 22 suggesting that a possible bottom might be in sight given that the firms involved in the IPO had reached the end of their quiet period that day and would now be able to put out research and calls that could help to tell the positive side of the story. The stock’s downward momentum did come to end basically then, and we have seen sideways action over the past 15 days. Now, we will get the report card.

SVMK Inc (NASDAQ:SVMK) will be put out its first earnings report since going public on September 26.

We called this stock a “Silicon Valley exit play” – which is generally not a great thing for at least a period of rough going (and was likewise our concern for CLDR and HDP) – because it had been baked through most of its growth curve on Second Market before being let loose to the retail investing public.

However, at some point, most of those types of plays get the big VC share supply off their backs and start to run.

 

So, What’s on Tap?

For the quarter, analysts are expecting SVMK to report a loss per share of ($0.37) on revenue of $62.9 million. That would equate to year/year growth of 14%. That’s roughly inline with the company’s recent topline growth rates. Last quarter, revenue was up 17%, and the quarter before that, SVMK grew revenue by 11%. Those growth rates aren’t overly impressive, which could help explain why traders were eager to flip out of the IPO following the big initial gains.

The company will likely also provide an initial outlook for Q4, either in its earnings press release, or during its earnings call at 4:00 ET. In order to meet analysts’ expectations, SVMK will need to guide for EPS and revenue of ($0.09) and $64.8 million, respectively.

Other Key Metrics include Gross Margin, Adjusted EBITDA, Paying Users, and ARPU.

For the quarter, analysts are projecting SVMK to report Gross Margin of 70.7%. That is also broadly inline with its recent performance. For instance, last quarter SVMK’s gross margin was 72%, following 69% in 1Q18 and 73% in 4Q17.

Analysts are forecasting EBITDA of $13.8 million for Q3, after generating Adj. EBITDA of $28.4 million over the first six months of 2018.

SVMK defines Paying Users as an individual customer of its survey platform or form-based application, a seat within a SurveyMonkey Enterprise deployment, or a subscription to one of its purpose-built solutions. As of June 30, it had 616K paying users, up a mediocre 3% year/year.

SVMK defines ARPU as core revenue divided by the average number of paying users during the period. This has been one of SVMK’s strongest metrics as it has been steadily rising over the past several quarters: $364 in 3Q17 … $375 in 4Q17 … $390 in 1Q18 … and $410 in 2Q18.

We still think this could be well-supported even in the very tough tape we have in front of us on a broad market level. However, no company is going to get the benefit of the doubt in a blood red tape. So, they will need to impress, particularly to the extent the forward view on Q4 is something folks feel bucks the trend of sandbagging or slouching into year-end.

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