Highlights:
-
Fourth quarter revenue increased 63% year-over-year to $62.6 million
-
Fourth quarter GAAP operating loss of $24.4 million and non-GAAP
operating loss of $6.6 million
-
Autodesk President and CEO Carl Bass appointed to the Board of
Directors
SAN FRANCISCO--(BUSINESS WIRE)--
Zendesk, Inc. (NYSE: ZEN) today reported financial results for the
fiscal quarter and full fiscal year ended December 31, 2015, and
announced the appointment of Autodesk President and CEO Carl Bass to the
Board of Directors.
“2015 was a breakout year for the growth of our enterprise business and
solidified our leadership with emerging and small businesses,” said
Mikkel Svane, Zendesk Founder, CEO and Chair of the Board of Directors.
“Building on strong momentum across our business, we’ve set an ambitious
goal to reach $1 billion in revenue in 2020. We are aggressively
developing products and markets that move us beyond our core in customer
support and into emerging opportunities around customer relationships.”
Results for the Fourth Quarter 2015
Revenue was $62.6 million for the quarter ended December 31, 2015, an
increase of 63% over the prior year period. GAAP net loss for the
quarter ended December 31, 2015 was $24.5 million, and GAAP net loss per
share was $0.27. Non-GAAP net loss was $6.7 million, and non-GAAP net
loss per share was $0.07. Non-GAAP net loss excludes approximately $16.2
million in share-based compensation related expenses (including $0.4
million of employer tax related to employee stock transactions and $0.3
million of amortized share-based compensation capitalized in
internal-use software), $0.9 million of amortization of purchased
intangibles and $0.7 million of transaction costs related to the
acquisition of We Are Cloud SAS completed in October 2015. GAAP and
non-GAAP net loss per share for the quarter ended December 31, 2015 were
based on 89.1 million weighted average shares outstanding.
Results for the Full Fiscal Year 2015
Revenue was $208.8 million for the year ended December 31, 2015, an
increase of 64% over the prior year period. GAAP net loss for the year
ended December 31, 2015 was $84.1 million, and GAAP net loss per share
was $0.99. Non-GAAP net loss was $25.7 million, and non-GAAP net loss
per share was $0.30. Non-GAAP net loss excludes approximately $55.2
million in share-based compensation related expenses (including $1.6
million of employer tax related to employee stock transactions and $1.1
million of amortized share-based compensation capitalized in
internal-use software), $2.2 million of amortization of purchased
intangibles and $1.0 million of transaction costs related to the
acquisition of We Are Cloud SAS completed in October 2015. GAAP and
non-GAAP net loss per share for the year ended December 31, 2015 were
based on 84.9 million weighted average shares outstanding.
Board of Directors Appointment
Carl Bass, President and CEO of Autodesk, Inc., was appointed to the
Zendesk Board of Directors effective February 9, 2016. Bass brings to
the board his deep experience in building and leading a multi-product
company with billions in revenue that serves both enterprises and small
organizations.
“Carl is a maker and tinkerer at heart, and shares our belief in the
importance of the product experience and a robust developer platform,”
Svane said. “His product passion and proven business leadership will
serve us well.”
Bass has held several executive positions, including chief technology
officer and chief operations officer, during his time at Autodesk, a
maker of professional 3D design software and consumer applications. He
joined the company in 1993 after Autodesk acquired Ithaca Software,
which he co-founded.
“I’m honored to be joining the board at a time when Zendesk is charting
an ambitious future to be a multi-product company serving a wider
market,” Bass said.
Outlook
As of February 16, 2016, Zendesk provided guidance for its expected
revenue, GAAP operating loss and non-GAAP operating loss for the quarter
ending March 31, 2016 and for the year ending December 31, 2016.
For the quarter ending March 31, 2016, Zendesk expects to report:
-
Revenue in the range of $65.0 - 67.0 million
-
GAAP operating loss of $28.0 - 29.0 million, which includes
share-based compensation and related expenses of approximately $19.0
million and amortization of intangibles of approximately $1.0 million
-
Non-GAAP operating loss of $8.0 - 9.0 million, which excludes
share-based compensation and related expenses of approximately $19.0
million and amortization of intangibles of approximately $1.0 million
For the full year 2016, Zendesk expects to report:
-
Revenue to grow 40 - 45%, in the range of $290.0 - 300.0 million
-
GAAP operating loss of $120.0 - 122.0 million, which includes
share-based compensation and related expenses of approximately $88.0
million and amortization of intangibles of approximately $4.0 million
-
Non-GAAP operating loss of $28.0 - 30.0 million, which excludes
share-based compensation and related expenses of approximately $88.0
million and amortization of intangibles of approximately $4.0 million
Zendesk’s estimates of share-based compensation and acquisition related
expenses in future periods assume, among other things, the occurrence of
no additional acquisitions, investments or restructurings and no further
revisions to share-based compensation and related expenses.
Conference Call Information
Zendesk will host a conference call today, February 16, 2016, to discuss
financial results at 2:00 p.m. Pacific Time, 5:00 p.m. Eastern Time. A
live webcast of the conference call will be available at https://investor.zendesk.com.
The conference call can also be accessed by dialing 877-201-0168, or +1
647-788-4901 (outside the U.S. and Canada). The conference ID is
21383226. A replay of the call via webcast will be available at https://investor.zendesk.com
or by dialing 855-859-2056 or +1 404-537-3406 (outside the U.S. and
Canada) and entering passcode 21383226. The dial-in replay will be
available until the end of day February 18, 2016. The webcast replay
will be available for 12 months.
About Zendesk
Zendesk provides a customer service platform designed to bring
organizations and their customers closer together. With more than 69,000
paid customer accounts, Zendesk’s products are used by organizations in
150 countries and territories to provide support in more than 40
languages. Founded in 2007 and headquartered in San Francisco, Zendesk
has operations in the United States, Europe, Asia, Australia and South
America. Learn more at www.zendesk.com.
Forward-Looking Statements
This press release contains forward-looking statements, including, among
other things, statements regarding Zendesk’s future financial
performance, its continued investment to grow its business, and progress
towards its long-term financial objectives. The words such as “may,”
“should,” “will,” “believe,” “expect,” “anticipate,” “target,”
“project,” and similar phrases that denote future expectation or intent
regarding Zendesk’s financial results, operations and other matters are
intended to identify forward-looking statements. You should not rely
upon forward-looking statements as predictions of future events.
The outcome of the events described in these forward-looking statements
is subject to known and unknown risks, uncertainties, and other factors
that may cause Zendesk’s actual results, performance, or achievements to
differ materially, including (i) adverse changes in general economic or
market conditions; (ii) Zendesk’s ability to adapt its customer service
platform to changing market dynamics and customer preferences or achieve
increased market acceptance of its platform; (iii) Zendesk’s expectation
that the future growth rate of its revenues will decline, and that as
its costs increase, Zendesk may not be able to generate sufficient
revenues to achieve or sustain profitability; (iv) Zendesk’s limited
operating history, which makes it difficult to evaluate its prospects
and future operating results; (v) Zendesk’s ability to effectively
manage its growth and organizational change; (vi) the market in which
Zendesk operates is intensely competitive, and Zendesk may not compete
effectively; (vii) the development of the market for software as a
service business software applications; (viii) Zendesk’s ability to sell
its live chat software as a standalone service and more fully integrate
its live chat software with its customer service platform; (ix)
Zendesk’s ability to sell its analytics software as a standalone service
and to integrate its analytics software with its customer service
platform; (x) breaches in Zendesk’s security measures or unauthorized
access to its customers’ data; (xi) service interruptions or performance
problems associated with Zendesk’s technology and infrastructure; (xii)
real or perceived errors, failures, or bugs in its products; (xiii)
Zendesk’s substantial reliance on its customers renewing their
subscriptions and purchasing additional subscriptions; and (xiv)
Zendesk’s ability to effectively expand its sales capabilities.
The forward-looking statements contained in this press release are also
subject to additional risks, uncertainties, and factors, including those
more fully described in Zendesk’s filings with the Securities and
Exchange Commission, including its Quarterly Report on Form 10-Q for the
quarter ended September 30, 2015. Further information on potential risks
that could affect actual results will be included in the subsequent
periodic and current reports and other filings that Zendesk makes with
the Securities and Exchange Commission from time to time, including its
Annual Report on Form 10-K for the year ended December 31, 2015.
Forward-looking statements represent Zendesk’s management’s beliefs and
assumptions only as of the date such statements are made. Zendesk
undertakes no obligation to update any forward-looking statements made
in this press release to reflect events or circumstances after the date
of this press release or to reflect new information or the occurrence of
unanticipated events, except as required by law.
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statements of Operations
(In thousands, except per share data; unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
|
Year Ended
December 31,
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
62,646
|
|
|
$
|
38,541
|
|
|
$
|
208,768
|
|
|
$
|
127,049
|
|
|
Cost of revenue
|
|
|
19,693
|
|
|
|
13,637
|
|
|
|
67,184
|
|
|
|
46,047
|
|
|
Gross profit
|
|
|
42,954
|
|
|
|
24,904
|
|
|
|
141,584
|
|
|
|
81,002
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
19,098
|
|
|
|
11,176
|
|
|
|
62,615
|
|
|
|
36,403
|
|
|
Sales and marketing
|
|
|
34,328
|
|
|
|
21,701
|
|
|
|
114,052
|
|
|
|
77,875
|
|
|
General and administrative
|
|
|
13,920
|
|
|
|
9,230
|
|
|
|
47,902
|
|
|
|
32,869
|
|
|
Total operating expenses
|
|
|
67,346
|
|
|
|
42,107
|
|
|
|
224,569
|
|
|
|
147,147
|
|
|
Operating loss
|
|
|
(24,393
|
)
|
|
|
(17,203
|
)
|
|
|
(82,985
|
)
|
|
|
(66,145
|
)
|
|
Other expense, net
|
|
|
(302
|
)
|
|
|
(282
|
)
|
|
|
(729
|
)
|
|
|
(1,533
|
)
|
|
Loss before provision for (benefit from) income taxes
|
|
|
(24,694
|
)
|
|
|
(17,485
|
)
|
|
|
(83,714
|
)
|
|
|
(67,678
|
)
|
|
Provision for (benefit from) income taxes
|
|
|
(216
|
)
|
|
|
9
|
|
|
|
338
|
|
|
|
(263
|
)
|
|
Net loss
|
|
|
(24,478
|
)
|
|
|
(17,494
|
)
|
|
|
(84,052
|
)
|
|
|
(67,415
|
)
|
|
Accretion of redeemable convertible preferred stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(18
|
)
|
|
Net loss attributable to common stockholders
|
|
$
|
(24,478
|
)
|
|
$
|
(17,494
|
)
|
|
$
|
(84,052
|
)
|
|
$
|
(67,433
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share attributable to common stockholders, basic and
diluted
|
|
$
|
(0.27
|
)
|
|
$
|
(0.24
|
)
|
|
$
|
(0.99
|
)
|
|
$
|
(1.26
|
)
|
|
Weighted-average shares used to compute net loss per share
attributable to common stockholders, basic and diluted
|
|
|
89,073
|
|
|
|
73,295
|
|
|
|
84,926
|
|
|
|
53,571
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Balance Sheets
(In thousands, except par value; unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2015
|
|
|
December 31,
2014
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
216,226
|
|
|
$
|
80,265
|
|
|
Marketable securities
|
|
|
29,414
|
|
|
|
42,204
|
|
|
Accounts receivable, net of allowance for doubtful accounts of $763
and $264, respectively
|
|
|
26,168
|
|
|
|
11,523
|
|
|
Prepaid expenses and other current assets
|
|
|
11,423
|
|
|
|
5,013
|
|
|
Total current assets
|
|
|
283,231
|
|
|
|
139,005
|
|
|
Marketable securities, noncurrent
|
|
|
22,336
|
|
|
|
9,205
|
|
|
Property and equipment, net
|
|
|
56,540
|
|
|
|
41,895
|
|
|
Goodwill and intangible assets, net
|
|
|
57,050
|
|
|
|
14,152
|
|
|
Other assets
|
|
|
3,529
|
|
|
|
1,531
|
|
|
Total assets
|
|
$
|
422,686
|
|
|
$
|
205,788
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders’ equity
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
9,332
|
|
|
$
|
4,763
|
|
|
Accrued liabilities
|
|
|
9,742
|
|
|
|
7,689
|
|
|
Accrued compensation and related benefits
|
|
|
14,115
|
|
|
|
11,738
|
|
|
Deferred revenue
|
|
|
84,210
|
|
|
|
50,908
|
|
|
Current portion of credit facility
|
|
|
—
|
|
|
|
3,041
|
|
|
Current portion of capital leases
|
|
|
—
|
|
|
|
10
|
|
|
Total current liabilities
|
|
|
117,399
|
|
|
|
78,149
|
|
|
Deferred revenue, noncurrent
|
|
|
1,405
|
|
|
|
823
|
|
|
Credit facility, noncurrent
|
|
|
—
|
|
|
|
3,911
|
|
|
Other liabilities
|
|
|
10,592
|
|
|
|
9,199
|
|
|
Total liabilities
|
|
|
129,396
|
|
|
|
92,082
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
Common stock, par value $0.01 per share
|
|
|
905
|
|
|
|
755
|
|
|
Additional paid-in capital
|
|
|
511,183
|
|
|
|
246,000
|
|
|
Accumulated other comprehensive loss
|
|
|
(2,225
|
)
|
|
|
(528
|
)
|
|
Accumulated deficit
|
|
|
(215,921
|
)
|
|
|
(131,869
|
)
|
|
Treasury stock at cost
|
|
|
(652
|
)
|
|
|
(652
|
)
|
|
Total stockholders’ equity
|
|
|
293,290
|
|
|
|
113,706
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
422,686
|
|
|
$
|
205,788
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statements of Cash Flows
(In thousands; unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
|
Year Ended
December 31,
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(24,478
|
)
|
|
$
|
(17,494
|
)
|
|
$
|
(84,052
|
)
|
|
$
|
(67,415
|
)
|
|
Adjustments to reconcile net loss to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
6,072
|
|
|
|
3,783
|
|
|
|
19,744
|
|
|
|
11,456
|
|
|
Share-based compensation
|
|
|
15,497
|
|
|
|
8,514
|
|
|
|
52,556
|
|
|
|
32,139
|
|
|
Excess tax benefit from share-based award activity
|
|
|
(325
|
)
|
|
|
(334
|
)
|
|
|
(449
|
)
|
|
|
(334
|
)
|
|
Other
|
|
|
932
|
|
|
|
6
|
|
|
|
1,457
|
|
|
|
337
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(1,908
|
)
|
|
|
1,258
|
|
|
|
(14,989
|
)
|
|
|
(3,846
|
)
|
|
Prepaid expenses and other current assets
|
|
|
(1,349
|
)
|
|
|
516
|
|
|
|
(5,510
|
)
|
|
|
(1,444
|
)
|
|
Other assets and liabilities
|
|
|
(1,582
|
)
|
|
|
421
|
|
|
|
(3,204
|
)
|
|
|
1,742
|
|
|
Accounts payable
|
|
|
3,936
|
|
|
|
356
|
|
|
|
2,017
|
|
|
|
947
|
|
|
Accrued liabilities
|
|
|
(57
|
)
|
|
|
(571
|
)
|
|
|
2,204
|
|
|
|
351
|
|
|
Accrued compensation and related benefits
|
|
|
4,061
|
|
|
|
552
|
|
|
|
1,706
|
|
|
|
5,767
|
|
|
Deferred revenue
|
|
|
9,482
|
|
|
|
5,100
|
|
|
|
33,853
|
|
|
|
22,390
|
|
|
Net cash provided by operating activities
|
|
|
10,281
|
|
|
|
2,107
|
|
|
|
5,333
|
|
|
|
2,090
|
|
|
Cash flows used in investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(8,758
|
)
|
|
|
(2,544
|
)
|
|
|
(22,989
|
)
|
|
|
(21,665
|
)
|
|
Internal-use software development costs
|
|
|
(1,157
|
)
|
|
|
(1,745
|
)
|
|
|
(4,705
|
)
|
|
|
(8,013
|
)
|
|
Purchases of marketable securities
|
|
|
(13,312
|
)
|
|
|
(11,324
|
)
|
|
|
(70,303
|
)
|
|
|
(54,330
|
)
|
|
Proceeds from maturities of marketable securities
|
|
|
6,557
|
|
|
|
3,500
|
|
|
|
36,982
|
|
|
|
10,450
|
|
|
Proceeds from sale of marketable securities
|
|
|
2,501
|
|
|
|
4,004
|
|
|
|
32,152
|
|
|
|
4,004
|
|
|
Cash paid for the acquisition of WAC, net of cash acquired
|
|
|
(42,758
|
)
|
|
|
—
|
|
|
|
(42,758
|
)
|
|
|
—
|
|
|
Cash paid for the acquisition of Zopim, net of cash acquired
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,100
|
)
|
|
|
(1,896
|
)
|
|
Decrease to restricted cash
|
|
|
—
|
|
|
|
153
|
|
|
|
—
|
|
|
|
153
|
|
|
Net cash used in investing activities
|
|
|
(56,927
|
)
|
|
|
(7,956
|
)
|
|
|
(72,721
|
)
|
|
|
(71,297
|
)
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from initial public offering, net of issuance costs
|
|
|
—
|
|
|
|
(20
|
)
|
|
|
—
|
|
|
|
103,090
|
|
|
Proceeds from follow-on public offering, net of issuance costs
|
|
|
(16
|
)
|
|
|
—
|
|
|
|
190,094
|
|
|
|
—
|
|
|
Proceeds from exercise of employee stock options
|
|
|
4,836
|
|
|
|
4,484
|
|
|
|
10,609
|
|
|
|
7,229
|
|
|
Taxes paid related to net share settlement of equity awards
|
|
|
(128
|
)
|
|
|
(367
|
)
|
|
|
(609
|
)
|
|
|
(2,117
|
)
|
|
Proceeds from employee stock purchase plan
|
|
|
2,283
|
|
|
|
2,058
|
|
|
|
9,526
|
|
|
|
4,404
|
|
|
Excess tax benefit from share-based award activity
|
|
|
325
|
|
|
|
334
|
|
|
|
449
|
|
|
|
334
|
|
|
Proceeds from issuance of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,940
|
|
|
Principal payments on debt
|
|
|
—
|
|
|
|
(748
|
)
|
|
|
(6,952
|
)
|
|
|
(20,748
|
)
|
|
Principal payments on capital lease obligations
|
|
|
—
|
|
|
|
(93
|
)
|
|
|
(10
|
)
|
|
|
(364
|
)
|
|
Net cash provided by financing activities
|
|
|
7,300
|
|
|
|
5,648
|
|
|
|
203,107
|
|
|
|
95,768
|
|
|
Effect of exchange rates changes on cash and cash equivalents
|
|
|
187
|
|
|
|
30
|
|
|
|
242
|
|
|
|
(21
|
)
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(39,159
|
)
|
|
|
(171
|
)
|
|
|
135,961
|
|
|
|
26,540
|
|
|
Cash and cash equivalents at the beginning of period
|
|
|
255,385
|
|
|
|
80,436
|
|
|
|
80,265
|
|
|
|
53,725
|
|
|
Cash and cash equivalents at the end of period
|
|
$
|
216,226
|
|
|
$
|
80,265
|
|
|
$
|
216,226
|
|
|
$
|
80,265
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Results
(In thousands, except per share data)
The following table shows Zendesk’s GAAP results reconciled to
non-GAAP results included in this release.
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
|
Year Ended
December 31,
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
Reconciliation of gross profit and gross margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP gross profit
|
|
$
|
42,954
|
|
|
$
|
24,904
|
|
|
$
|
141,584
|
|
|
$
|
81,002
|
|
|
Plus: Share-based compensation
|
|
|
1,405
|
|
|
|
773
|
|
|
|
4,541
|
|
|
|
2,464
|
|
|
Plus: Employer tax related to employee stock transactions
|
|
|
31
|
|
|
|
10
|
|
|
|
175
|
|
|
|
29
|
|
|
Plus: Amortization of share-based compensation capitalized in
internal-use software
|
|
|
312
|
|
|
|
132
|
|
|
|
1,065
|
|
|
|
402
|
|
|
Plus: Amortization of purchased intangibles
|
|
|
832
|
|
|
|
369
|
|
|
|
1,890
|
|
|
|
1,167
|
|
|
Non-GAAP gross profit
|
|
$
|
45,534
|
|
|
$
|
26,188
|
|
|
$
|
149,255
|
|
|
$
|
85,064
|
|
|
GAAP gross margin
|
|
|
69
|
%
|
|
|
65
|
%
|
|
|
68
|
%
|
|
|
64
|
%
|
|
Non-GAAP adjustments
|
|
|
4
|
%
|
|
|
3
|
%
|
|
|
3
|
%
|
|
|
3
|
%
|
|
Non-GAAP gross margin
|
|
|
73
|
%
|
|
|
68
|
%
|
|
|
71
|
%
|
|
|
67
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP research and development
|
|
$
|
19,098
|
|
|
$
|
11,176
|
|
|
$
|
62,615
|
|
|
$
|
36,403
|
|
|
Less: Share-based compensation
|
|
|
(5,930
|
)
|
|
|
(3,388
|
)
|
|
|
(19,414
|
)
|
|
|
(10,918
|
)
|
|
Less: Employer tax related to employee stock transactions
|
|
|
(69
|
)
|
|
|
(28
|
)
|
|
|
(415
|
)
|
|
|
(129
|
)
|
|
Non-GAAP research and development
|
|
$
|
13,099
|
|
|
$
|
7,760
|
|
|
$
|
42,786
|
|
|
$
|
25,356
|
|
|
GAAP research and development as percentage of revenue
|
|
|
30
|
%
|
|
|
29
|
%
|
|
|
30
|
%
|
|
|
29
|
%
|
|
Non-GAAP research and development as percentage of revenue
|
|
|
21
|
%
|
|
|
20
|
%
|
|
|
20
|
%
|
|
|
20
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP sales and marketing
|
|
$
|
34,328
|
|
|
$
|
21,701
|
|
|
$
|
114,052
|
|
|
$
|
77,875
|
|
|
Less: Share-based compensation
|
|
|
(4,604
|
)
|
|
|
(2,045
|
)
|
|
|
(14,759
|
)
|
|
|
(10,680
|
)
|
|
Less: Employer tax related to employee stock transactions
|
|
|
(174
|
)
|
|
|
(245
|
)
|
|
|
(474
|
)
|
|
|
(314
|
)
|
|
Less: Amortization of purchased intangibles
|
|
|
(103
|
)
|
|
|
(96
|
)
|
|
|
(346
|
)
|
|
|
(303
|
)
|
|
Non-GAAP sales and marketing
|
|
$
|
29,447
|
|
|
$
|
19,315
|
|
|
$
|
98,473
|
|
|
$
|
66,578
|
|
|
GAAP sales and marketing as percentage of revenue
|
|
|
55
|
%
|
|
|
56
|
%
|
|
|
55
|
%
|
|
|
61
|
%
|
|
Non-GAAP sales and marketing as percentage of revenue
|
|
|
47
|
%
|
|
|
50
|
%
|
|
|
47
|
%
|
|
|
52
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP general and administrative
|
|
$
|
13,920
|
|
|
$
|
9,230
|
|
|
$
|
47,902
|
|
|
$
|
32,869
|
|
|
Less: Share-based compensation
|
|
|
(3,559
|
)
|
|
|
(2,308
|
)
|
|
|
(13,842
|
)
|
|
|
(8,077
|
)
|
|
Less: Employer tax related to employee stock transactions
|
|
|
(73
|
)
|
|
|
(65
|
)
|
|
|
(387
|
)
|
|
|
(113
|
)
|
|
Less: Transaction costs related to acquisition
|
|
|
(708
|
)
|
|
|
—
|
|
|
|
(998
|
)
|
|
|
(649
|
)
|
|
Non-GAAP general and administrative
|
|
$
|
9,580
|
|
|
$
|
6,857
|
|
|
$
|
32,675
|
|
|
$
|
24,030
|
|
|
GAAP general and administrative as percentage of revenue
|
|
|
22
|
%
|
|
|
24
|
%
|
|
|
23
|
%
|
|
|
26
|
%
|
|
Non-GAAP general and administrative as percentage of revenue
|
|
|
15
|
%
|
|
|
18
|
%
|
|
|
16
|
%
|
|
|
19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of operating loss and operating margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating loss
|
|
$
|
(24,393
|
)
|
|
$
|
(17,203
|
)
|
|
$
|
(82,985
|
)
|
|
$
|
(66,145
|
)
|
|
Plus: Share-based compensation
|
|
|
15,498
|
|
|
|
8,514
|
|
|
|
52,556
|
|
|
|
32,139
|
|
|
Plus: Employer tax related to employee stock transactions
|
|
|
347
|
|
|
|
348
|
|
|
|
1,451
|
|
|
|
585
|
|
|
Plus: Amortization of share-based compensation capitalized in
internal-use software
|
|
|
312
|
|
|
|
132
|
|
|
|
1,065
|
|
|
|
402
|
|
|
Plus: Amortization of purchased intangibles
|
|
|
935
|
|
|
|
465
|
|
|
|
2,236
|
|
|
|
1,470
|
|
|
Plus: Transaction costs related to acquisition
|
|
|
708
|
|
|
|
—
|
|
|
|
998
|
|
|
|
649
|
|
|
Non-GAAP operating loss
|
|
$
|
(6,593
|
)
|
|
$
|
(7,744
|
)
|
|
$
|
(24,679
|
)
|
|
$
|
(30,900
|
)
|
|
GAAP operating margin
|
|
|
(39
|
%)
|
|
|
(45
|
%)
|
|
|
(40
|
%)
|
|
|
(52
|
%)
|
|
Non-GAAP adjustments
|
|
|
28
|
%
|
|
|
25
|
%
|
|
|
28
|
%
|
|
|
28
|
%
|
|
Non-GAAP operating margin
|
|
|
(11
|
%)
|
|
|
(20
|
%)
|
|
|
(12
|
%)
|
|
|
(24
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net loss attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net loss attributable to common stockholders
|
|
$
|
(24,478
|
)
|
|
$
|
(17,494
|
)
|
|
$
|
(84,052
|
)
|
|
$
|
(67,433
|
)
|
|
Plus: Share-based compensation
|
|
|
15,498
|
|
|
|
8,514
|
|
|
|
52,556
|
|
|
|
32,139
|
|
|
Plus: Employer tax related to employee stock transactions
|
|
|
347
|
|
|
|
348
|
|
|
|
1,451
|
|
|
|
585
|
|
|
Plus: Amortization of share-based compensation capitalized in
internal-use software
|
|
|
312
|
|
|
|
132
|
|
|
|
1,065
|
|
|
|
402
|
|
|
Plus: Amortization of purchased intangibles
|
|
|
935
|
|
|
|
465
|
|
|
|
2,236
|
|
|
|
1,470
|
|
|
Plus: Transaction costs related to acquisition
|
|
|
708
|
|
|
|
—
|
|
|
|
998
|
|
|
|
649
|
|
|
Non-GAAP net loss attributable to common stockholders
|
|
$
|
(6,678
|
)
|
|
$
|
(8,035
|
)
|
|
$
|
(25,746
|
)
|
|
$
|
(32,188
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net loss per share attributable to common
stockholders, basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net loss per share attributable to common stockholders, basic
and diluted
|
|
$
|
(0.27
|
)
|
|
$
|
(0.24
|
)
|
|
$
|
(0.99
|
)
|
|
$
|
(1.26
|
)
|
|
Non-GAAP adjustments to net loss
|
|
|
0.20
|
|
|
|
0.13
|
|
|
|
0.69
|
|
|
|
0.66
|
|
|
Non-GAAP adjustment to weighted-average shares used to compute net
loss per share
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.12
|
|
|
Non-GAAP net loss per share attributable to common stockholders,
basic and diluted
|
|
$
|
(0.07
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
(0.30
|
)
|
|
$
|
(0.48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of weighted-average shares used to compute net
loss per share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP weighted-average shares used to compute net loss per share
attributable to common stockholders, basic and diluted
|
|
|
89,073
|
|
|
|
73,295
|
|
|
|
84,926
|
|
|
|
53,571
|
|
|
Conversion of preferred stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,071
|
|
|
Non-GAAP weighted-average shares used to compute net loss per
share attributable to common stockholders, basic and diluted
|
|
|
89,073
|
|
|
|
73,295
|
|
|
|
84,926
|
|
|
|
66,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computation of free cash flow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
10,281
|
|
|
$
|
2,107
|
|
|
$
|
5,333
|
|
|
$
|
2,090
|
|
|
Less: purchases of property and equipment
|
|
|
(8,758
|
)
|
|
|
(2,544
|
)
|
|
|
(22,989
|
)
|
|
|
(21,665
|
)
|
|
Less: internal-use software development costs
|
|
|
(1,157
|
)
|
|
|
(1,745
|
)
|
|
|
(4,705
|
)
|
|
|
(8,013
|
)
|
|
Free cash flow
|
|
$
|
366
|
|
|
$
|
(2,182
|
)
|
|
$
|
(22,361
|
)
|
|
$
|
(27,588
|
)
|
About Non-GAAP Financial Measures
To provide investors and others with additional information regarding
Zendesk’s results, the following non-GAAP financial measures were
disclosed: non-GAAP gross profit and gross margin, non-GAAP operating
expenses, non-GAAP operating loss and operating margin, non-GAAP net
loss attributable to common stockholders, non-GAAP net loss per share
attributable to common stockholders, basic and diluted, non-GAAP
weighted-average shares used to compute net loss per share attributable
to common stockholders, basic and diluted, and free cash flow.
Specifically, Zendesk excludes the following from its historical and
prospective non-GAAP financial measures, as applicable:
Share-based Compensation and Amortization of Share-based Compensation
Capitalized in Internal-use Software: Zendesk utilizes share-based
compensation to attract and retain employees. It is principally aimed at
aligning their interests with those of its stockholders and at long-term
retention, rather than to address operational performance for any
particular period. As a result, share-based compensation expenses vary
for reasons that are generally unrelated to financial and operational
performance in any particular period.
Employer Tax Related to Employee Stock Transactions: Zendesk
views the amount of employer taxes related to its employee stock
transactions as an expense that is dependent on its stock price,
employee exercise and other award disposition activity, and other
factors that are beyond Zendesk’s control. As a result, employer taxes
related to its employee stock transactions vary for reasons that are
generally unrelated to financial and operational performance in any
particular period.
Amortization of Purchased Intangibles and Acquisition Related Expenses:
Zendesk views amortization of purchased intangible assets, including the
amortization of the cost associated with an acquired entity’s developed
technology, as items arising from pre-acquisition activities determined
at the time of an acquisition. While these intangible assets are
evaluated for impairment regularly, amortization of the cost of
purchased intangibles is an expense that is not typically affected by
operations during any particular period. Zendesk views acquisition
related expenses as events that are not necessarily reflective of
operational performance during a period. In particular, Zendesk believes
the consideration of measures that exclude such expenses can assist in
the comparison of operational performance in different periods which may
or may not include such expenses.
Zendesk provides disclosures regarding its free cash flow, which is
defined as net cash from operating activities, less purchases of
property and equipment and internal-use software development costs.
Zendesk uses free cash flow, among other measures, to evaluate the
ability of its operations to generate cash that is available for
purposes other than capital expenditures and capitalized software
development costs. Zendesk believes that information regarding free cash
flow provides investors with an important perspective on the cash
available to fund ongoing operations.
As a result of Zendesk’s initial public offering, all outstanding shares
of redeemable convertible preferred stock were automatically converted
into shares of common stock. Consequently, the non-GAAP weighted-average
shares outstanding used to compute non-GAAP net loss per share assumes
that the conversion of Zendesk's redeemable convertible preferred stock
that occurred in connection with its initial public offering occurred at
the beginning of the relevant period. Zendesk believes this facilitates
comparison with prior periods.
Zendesk uses non-GAAP financial information to evaluate its ongoing
operations and for internal planning and forecasting purposes. Zendesk's
management does not itself, nor does it suggest that investors should,
consider such non-GAAP financial measures in isolation from, or as a
substitute for, financial information prepared in accordance with GAAP.
Zendesk presents such non-GAAP financial measures in reporting its
financial results to provide investors with an additional tool to
evaluate Zendesk's operating results. Zendesk believes these non-GAAP
financial measures are useful because they allow for greater
transparency with respect to key metrics used by management in its
financial and operational decision-making. This allows investors and
others to better understand and evaluate Zendesk’s operating results and
future prospects in the same manner as management.
Zendesk's management believes it is useful for itself and investors to
review, as applicable, both GAAP information that may include items such
as share-based compensation expense, amortization of share-based
compensation capitalized in internal-use software, amortization of
purchased intangibles, transaction costs related to acquisitions, and
the non-GAAP measures that exclude such information in order to assess
the performance of Zendesk's business and for planning and forecasting
in subsequent periods. When Zendesk uses such a non-GAAP financial
measure, it provides, when determinable without unreasonable effort, a
reconciliation of the non-GAAP financial measure to the most closely
comparable GAAP financial measure. When such reconciliation is not
determinable without unreasonable effort, Zendesk provides the
reconciling information that is determinable without unreasonable effort
and identifies the information that would need to be added or subtracted
from the non-GAAP measure to arrive at the most directly comparable GAAP
measure. Investors are encouraged to review the related GAAP financial
measures and the reconciliation of these non-GAAP financial measures to
their most directly comparable GAAP financial measure as detailed above.
About Operating Metrics
Zendesk reviews a number of operating metrics to evaluate its business,
measure performance, identify trends, formulate business plans, and make
strategic decisions. These include the number of paid customer accounts
for its customer service platform and live chat software, dollar-based
net expansion rate, monthly recurring revenue represented by its churned
customers, and the percentage of its monthly recurring revenue
originating from customers with more than 100 agents.
Zendesk defines the number of paid customer accounts at the end of any
particular period as the sum of the number of accounts on its customer
service platform, exclusive of its Starter plan, free trials or other
free services, and the number of accounts using its live chat software,
exclusive of free trials or other free services, each as of the end of
the period and as identified by a unique account identifier. Use of
Zendesk’s customer service platform and live chat software requires
separate subscriptions and each of these accounts are treated as a
separate paid customer account. A single consolidated organization or
customers may have multiple accounts across each of Zendesk’s customer
service platform and live chat software to service separate
subsidiaries, divisions, or work processes. Each of these accounts is
also treated as a separate paid customer account.
In the quarter ended December 31, 2015, Zendesk introduced the Essential
plan for its customer service platform. This plan replaced Zendesk’s
Starter plan as the least expensive plan on Zendesk’s customer service
platform. Following the introduction of the Essential plan, Zendesk no
longer made its Starter plan available for new accounts. Accounts that
subscribe to the Essential plan are included in the determination of the
number of paid customer accounts.
Zendesk’s dollar-based net expansion rate provides a measurement of its
ability to increase revenue across its existing customer base through
expansion of authorized agents associated with a paid customer account,
and upgrades in subscription plan, as offset by churn, contraction in
authorized agents associated with a paid customer account, and
downgrades in subscription plans. Zendesk’s dollar-based net expansion
rate is based upon “monthly recurring revenue” for a set of paid
customer accounts. Monthly recurring revenue or “MRR” for a paid
customer account is a legal and contractual determination made by
assessing the contractual terms of each paid customer account, as of the
date of determination, as to the revenue Zendesk expects to generate in
the next monthly period for that paid customer account, assuming no
changes to the subscription and without taking into account any one-time
discounts or any platform usage above the subscription base, if any,
that may be applicable to such subscription. Monthly recurring revenue
is not determined by reference to historical revenue, deferred revenue
or any other United States generally accepted accounting principles, or
GAAP, financial measure over any period. It is forward-looking and
contractually derived as of the date of determination.
Zendesk calculates its dollar-based net expansion rate by dividing the
retained revenue net of contraction and churn by Zendesk’s base revenue.
Zendesk defines its base revenue as the aggregate monthly recurring
revenue of the paid customer accounts on Zendesk’s customer service
platform as of the date one year prior to the date of calculation.
Zendesk defines the retained revenue net of contraction and churn as the
aggregate monthly recurring revenue of the same customer base included
in the measure of base revenue at the end of the annual period being
measured. The dollar-based net expansion rate is also adjusted to
eliminate the effect of certain activities that we identify involving
the transfer of agents between paid customer accounts, consolidation of
customer accounts, or the split of a single paid customer account into
multiple paid customer accounts. In addition, the dollar-based net
expansion rate is adjusted to include paid customer accounts in the
customer base used to determine retained revenue net of contraction and
churn that share common corporate information with customers in the
customer base that is used to determine the base revenue. Giving effect
to this consolidation results in Zendesk’s dollar-based net expansion
rate being calculated across approximately 32,300 customers, as compared
to the approximately 35,700 total paid customer accounts as of December
31, 2015. To the extent that Zendesk can determine that the underlying
customers do not share common corporate information, Zendesk does not
aggregate paid customer accounts associated with reseller and other
similar channel arrangements for the purposes of determining its
dollar-based net expansion rate. While not material, Zendesk believes
the failure to account for these activities would otherwise skew the
dollar-based net expansion metrics associated with customers that
maintain multiple paid customer accounts on its customer service
platform and paid customer accounts associated with reseller and other
similar channel arrangements.
For a more detailed description of how Zendesk calculates its
dollar-based net expansion rate, please refer to Zendesk’s periodic
reports as filed with the Securities and Exchange Commission.
Zendesk calculates its monthly recurring revenue represented by its
churned customers on an annualized basis by dividing base revenue
associated with paid customer accounts on Zendesk’s customer service
platform that churn, either by termination of the subscription or
failure to renew, during the annual period being measured, by Zendesk’s
base revenue. Zendesk’s monthly recurring revenue represented by its
churned customers excludes expansion or contraction associated with paid
customer accounts on Zendesk’s customer service platform and the effect
of upgrades or downgrades in subscription plan. The monthly recurring
revenue represented by its churned customers is adjusted to exclude paid
customer accounts that churned from the customer base used that share
common corporate information with customer accounts that did not churn
from the customer base during the annual period being measured. While
not material, Zendesk believes the failure to make this adjustment could
otherwise skew the monthly recurring revenue represented by its churned
customers as a result of customers that maintain multiple paid customer
accounts on its customer service platform.
Zendesk’s percentage of monthly recurring revenue that is generated by
customers with 100 or more agents is determined by dividing the monthly
recurring revenue for paid customer accounts with more than 100 agents
on its customer service platform as of the measurement date by the
monthly recurring revenue for all paid customer accounts on its customer
service platform as of the measurement date. Zendesk determines the
customers with 100 or more agents as of the measurement date based on
the number of activated agents at the measurement date and includes
adjustments to aggregate paid customer accounts that share common
corporate information.
Zendesk determines the annualized value of a contract by annualizing the
monthly recurring revenue for such contract.
Zendesk does not currently incorporate operating metrics associated with
its live chat software, analytics software, or advanced voice software
into its measurement of dollar-based net expansion rate, monthly
recurring revenue represented by its churned customers, or percentage of
monthly recurring revenue that is generated by customers with 100 or
more agents.
Zendesk’s freemium plans include its Starter plan for its customer
service platform, its Lite plan for its live chat software, and its
Inbox service for facilitating and simplifying email collaboration on
group email aliases. Zendesk believes these services provide exposure to
its brand and establish a relationship that can facilitate further
adoption of its customer service platform and live chat software as
organizations grow in size and their service needs grow more complex. A
customer account on Zendesk’s freemium plans is considered active based
on whether functionality of the service has been utilized within the
90-day period preceding the measurement date. A single consolidated
organization or customer may have multiple freemium customer accounts
across each of Zendesk’s customer service platform, live chat software,
Inbox service. Each of these accounts is treated as a separate customer
account on Zendesk’s freemium products.
Source: Zendesk, Inc.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160216006646/en/
Source: Zendesk, Inc.