Seeking Alpha • Aug 29
Momentive Global Sees Slowing Growth As Operating Losses Remain High
Summary
Momentive Global recently reported Q2 2022 financial results.
The firm provides an array of customer and stakeholder feedback tools to organizations worldwide.
Momentive Global's revenue has largely plateaued and operating losses remain high.
This unhappy combination is a big reason for poor stock performance, so I'm on Hold for Momentive Global in the near term.
A Quick Take On Momentive Global
Momentive Global Inc. (MNTV) recently reported its Q2 2022 financial results on August 6, 2022, slightly missing expected revenue and EPS estimates.
The company provides software technologies to companies seeking customer and stakeholder feedback at scale.
With Momentive producing low revenue growth and making no progress toward operating breakeven, my outlook on the stock is on Hold for the near term.
Momentive Global Overview
San Mateo, California-based Momentive Global was founded in 1999 as Survey Monkey to provide companies with a way to better understand their customers.
Management is headed by CEO Zander Lurie, who has been CEO of the firm since January 2016 and was previously SVP Entertainment at GoPro (GPRO).
The company provides a number of functionalities as part of its modular system:
Surveys
Market Research
Online Payments
Tech Promoter Score
Marketing Creation
Apps and Plugins Marketplace
Momentive Global’s Market & Competition
According to a 2017 market research report from ResearchandMarkets, the global online survey market is expected to grow from $4.1 billion in 2017 to $6.9 billion by 2022.
This represents a significant CAGR of 11.25% during the forecast period, although from a relatively small baseline.
Key elements driving this expected growth include the increase in adoption of digitalization solutions among organizations, the growth of e-commerce function within companies and the need to communicate directly with customers to constantly improve service offerings.
Major competitive vendors that provide online survey services include:
Google
Zendesk
Qualtrics
Medallia
Confirmit
Inqwise
Campaign Monitor
Zoho
Momentive’s Recent Financial Performance
Total revenue by quarter has grown moderately over the past five quarters:
5 Quarter Total Revenue (Seeking Alpha)
Gross profit by quarter has followed a similar trajectory as that of total revenue:
5 Quarter Gross Profit (Seeking Alpha)
Selling, G&A expenses as a percentage of total revenue by quarter have remained elevated and within a fairly narrow range in the past five quarters:
5 Quarter Selling, G&A % Of Revenue (Seeking Alpha)
Operating income by quarter had remained materially negative in recent reporting periods:
5 Quarter Operating Income (Seeking Alpha)
Earnings per share (Diluted) have also remained substantially negative, as the chart shows below:
5 Quarter Earnings Per Share (Seeking Alpha)
(All data in above charts is GAAP)
In the past 12 months, MNTV’s stock price has dropped 63.7% vs. the U.S. S&P 500 index’ fall of around 10.5%, as the chart below indicates:
52 Week Stock Price (Seeking Alpha)
Valuation And Other Metrics For Momentive Global
Below is a table of relevant capitalization and valuation figures for the company:
Measure [TTM]
Amount
Enterprise Value / Sales
2.31
Revenue Growth Rate
15.0%
Net Income Margin
-27.8%
GAAP EBITDA %
-0.14%
Market Capitalization
$1,060,000,000
Enterprise Value
$1,090,000,000
Operating Cash Flow
$12,960,000
Earnings Per Share (Fully Diluted)
-$0.87
(Source - Seeking Alpha)
As a reference, a relevant partial public comparable would be Qualtrics (XM); shown below is a comparison of their primary valuation metrics:
Metric
Qualtrics
Momentive Global
Variance
Net Income Margin
-91.2%
-27.77%
-69.6%
Revenue Growth Rate
43.1%
-0.1%
-100.3%
Operating Cash Flow
$37,240,000
$12,960,000
-65.2%
Enterprise Value / Sales
5.2
2.3
-55.2%
(Source - Seeking Alpha)
A full comparison of the two companies’ performance metrics may be viewed here.
The Rule of 40 is a software industry rule of thumb that says that as long as the combined revenue growth rate and EBITDA percentage rate equal or exceed 40%, the firm is on an acceptable growth/EBITDA trajectory.
MNTV’s most recent GAAP Rule of 40 calculation was only 14.8% as of Q2 2022, so the firm needs improvement in this regard, per the table below:
Rule of 40 - GAAP
Calculation
Recent Rev. Growth %
15.0%
GAAP EBITDA %
-0.1%
Total
14.8%
(Source - Seeking Alpha)
Commentary On Momentive Global
In its last earnings call (Source - Seeking Alpha), covering Q2 2022’s results, management highlighted revenue growth within guidance despite a number of economic headwinds including inflation, currency volatility and late quarter demand softness.