Highlights
- Third quarter revenue increased 36% year over year to $210.5 million
- Third quarter GAAP operating loss of $35.4 million and non-GAAP operating income of $10.6 million
SAN FRANCISCO--(BUSINESS WIRE)--Zendesk, Inc. (NYSE: ZEN) today reported financial results for the third quarter ended September 30, 2019, and released a Shareholder Letter on its investor relations website at https://investor.zendesk.com.
Results for the Third Quarter 2019
Revenue was $210.5 million for the quarter ended September 30, 2019, an increase of 36% over the prior year period. GAAP net loss for the quarter ended September 30, 2019 was $34.2 million, and GAAP net loss per share (basic and diluted) was $0.31. Non-GAAP net income was $14.0 million, and non-GAAP net income per share (basic) was $0.13, and non-GAAP net income per share (diluted) was $0.12. Non-GAAP net income excludes approximately $41.1 million in share-based compensation and related expenses (including $2.0 million of employer tax related to employee stock transactions and $0.4 million of amortization of share-based compensation capitalized in internal-use software), $6.4 million of amortization of debt discount and issuance costs, $2.8 million of amortization of purchased intangibles, $2.2 million of acquisition-related expenses, and non-GAAP income tax effects and adjustments of $4.1 million. GAAP net loss per share for the quarter ended September 30, 2019 was based on 111.3 million weighted average shares outstanding (basic and diluted), and non-GAAP net income per share for the quarter ended September 30, 2019 was based on 111.3 million weighted average shares outstanding (basic) and 119.7 million weighted average shares outstanding (diluted).
Outlook
As of October 29, 2019, Zendesk provided guidance for the quarter ending December 31, 2019 and updated its guidance for the year ending December 31, 2019.
For the quarter ending December 31, 2019, Zendesk expects to report:
- Revenue in the range of $226 - 228 million
- GAAP operating income (loss) in the range of $(37) - (35) million, which includes share-based compensation and related expenses of approximately $40 million, amortization of purchased intangibles of approximately $3 million, and acquisition-related expenses of approximately $2 million
- Non-GAAP operating income (loss) in the range of $8 - 10 million, which excludes share-based compensation and related expenses of approximately $40 million, amortization of purchased intangibles of approximately $3 million, and acquisition-related expenses of approximately $2 million
- Approximately 112 million weighted average shares outstanding (basic)
- Approximately 117 million weighted average shares outstanding (diluted)
For the full year ending December 31, 2019, Zendesk expects to report:
- Revenue in the range of $813 - 815 million
- GAAP operating income (loss) in the range of $(167) - (165) million, which includes share-based compensation and related expenses of approximately $168 million, amortization of purchased intangibles of approximately $10 million, and acquisition-related expenses of approximately $12 million
- Non-GAAP operating income (loss) in the range of $23 - 25 million, which excludes share-based compensation and related expenses of approximately $168 million, amortization of purchased intangibles of approximately $10 million, and acquisition-related expenses of approximately $12 million
- Approximately 111 million weighted average shares outstanding (basic)
- Approximately 119 million weighted average shares outstanding (diluted)
- Free cash flow in the range of $35 - 45 million
We have not reconciled free cash flow guidance to net cash from operating activities for the full year 2019 because we do not provide guidance on the reconciling items between net cash from operating activities and free cash flow, as a result of the uncertainty regarding, and the potential variability of, these items. The actual amount of such reconciling items will have a significant impact on our free cash flow and, accordingly, a reconciliation of net cash from operating activities to free cash flow for the full year 2019 is not available without unreasonable effort.
Zendesk’s estimates of share-based compensation and related expenses, amortization of purchased intangibles, acquisition-related expenses, weighted average shares outstanding, and free cash flow 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.
Shareholder Letter and Conference Call Information
The detailed Shareholder Letter is available at https://investor.zendesk.com and Zendesk will host a conference call to answer questions today, October 29, 2019, 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 833-287-0801, or +1 647-689-4460 (outside the U.S. and Canada). The conference ID is 3987256. A replay of the call via webcast will be available at https://investor.zendesk.com or by dialing 800-585-8367 or +1 416-621-4642 (outside the U.S. and Canada) and entering passcode 3987256. The dial-in replay will be available until the end of day November 1, 2019. The webcast replay will be available for 12 months.
About Zendesk
The best customer experiences are built with Zendesk. Our customer service and engagement products are powerful and flexible, and scale to meet the needs of any business. Zendesk serves businesses across a multitude of industries, with more than 150,000 paid customer accounts offering service and support in over 30 languages. Zendesk is headquartered in San Francisco, and operates worldwide with 17 offices in North America, 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 toward its long-term financial objectives. 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 products to changing market dynamics and customer preferences or achieve increased market acceptance of its products; (iii) Zendesk’s ability to effectively expand its sales capabilities; (iv) Zendesk’s ability to effectively market and sell its products to larger enterprises; (v) 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; (vi) the intensely competitive market in which Zendesk operates and the difficulty that Zendesk may have in competing effectively; (vii) Zendesk’s ability to introduce and market new products and to support its products on a shared services platform; (viii) Zendesk’s ability to maintain and develop its strategic relationships with third parties; (ix) Zendesk's ability to prevent, mitigate, and respond effectively to both historical and future data breaches and to securely maintain customer data; (x) Zendesk’s ability to effectively manage its growth and organizational change, including its international expansion strategy; (xi) Zendesk’s ability to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions; (xii) Zendesk's ability to comply with privacy and data security regulations; (xiii) the development of the market for software as a service business software applications; (xiv) potential service interruptions or performance problems associated with Zendesk’s technology and infrastructure; (xv) real or perceived errors, failures, or bugs in its products; (xvi) Zendesk’s substantial reliance on its customers renewing their subscriptions and purchasing additional subscriptions; and (xvii) Zendesk’s ability to accurately forecast expenditures on third-party managed hosting services.
The forward-looking statements contained in this shareholder letter 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 June 30, 2019. 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2019.
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 shareholder letter to reflect events or circumstances after the date of this shareholder letter 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 September 30, |
|
Nine Months Ended September 30, |
||||||||||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
Revenue |
|
$ |
210,477 |
|
|
$ |
154,828 |
|
|
$ |
586,545 |
|
|
$ |
426,501 |
|
Cost of revenue |
|
59,210 |
|
|
46,992 |
|
|
172,534 |
|
|
130,207 |
|
||||
Gross profit |
|
151,267 |
|
|
107,836 |
|
|
414,011 |
|
|
296,294 |
|
||||
Operating expenses: |
|
|
|
|
|
|
|
|
||||||||
Research and development |
|
54,528 |
|
|
40,410 |
|
|
151,829 |
|
|
115,118 |
|
||||
Sales and marketing |
|
99,303 |
|
|
74,270 |
|
|
285,750 |
|
|
208,778 |
|
||||
General and administrative |
|
32,864 |
|
|
27,357 |
|
|
107,135 |
|
|
73,809 |
|
||||
Total operating expenses |
|
186,695 |
|
|
142,037 |
|
|
544,714 |
|
|
397,705 |
|
||||
Operating loss |
|
(35,428 |
) |
|
(34,201 |
) |
|
(130,703 |
) |
|
(101,411 |
) |
||||
Other income (expense), net |
|
|
|
|
|
|
|
|
||||||||
Interest income |
|
4,986 |
|
|
4,561 |
|
|
15,752 |
|
|
9,906 |
|
||||
Interest expense |
|
(6,727 |
) |
|
(6,375 |
) |
|
(19,885 |
) |
|
(13,427 |
) |
||||
Other income (expense), net |
|
2,581 |
|
|
(463 |
) |
|
2,012 |
|
|
(194 |
) |
||||
Total other income (expense), net |
|
840 |
|
|
(2,277 |
) |
|
(2,121 |
) |
|
(3,715 |
) |
||||
Loss before provision for (benefit from) income taxes |
|
(34,588 |
) |
|
(36,478 |
) |
|
(132,824 |
) |
|
(105,126 |
) |
||||
Provision for (benefit from) income taxes |
|
(364 |
) |
|
(2,334 |
) |
|
661 |
|
|
(7,291 |
) |
||||
Net loss |
|
$ |
(34,224 |
) |
|
$ |
(34,144 |
) |
|
$ |
(133,485 |
) |
|
$ |
(97,835 |
) |
Net loss per share, basic and diluted |
|
$ |
(0.31 |
) |
|
$ |
(0.32 |
) |
|
$ |
(1.21 |
) |
|
$ |
(0.93 |
) |
Weighted-average shares used to compute net loss per share, basic and diluted |
|
111,261 |
|
|
106,143 |
|
|
109,969 |
|
|
104,954 |
|
||||
Condensed Consolidated Balance Sheets |
|||||||
(In thousands, except par value; unaudited) |
|||||||
|
September 30,
|
|
December 31,
|
||||
Assets |
|
|
|
||||
Current assets: |
|
|
|
||||
Cash and cash equivalents |
$ |
190,892 |
|
|
$ |
126,518 |
|
Marketable securities |
243,846 |
|
|
300,213 |
|
||
Accounts receivable, net of allowance for doubtful accounts of $2,715 and $2,571 as of September 30, 2019 and December 31, 2018, respectively |
101,440 |
|
|
85,280 |
|
||
Deferred costs |
32,406 |
|
|
24,712 |
|
||
Prepaid expenses and other current assets |
48,124 |
|
|
35,873 |
|
||
Total current assets |
616,708 |
|
|
572,596 |
|
||
Marketable securities, noncurrent |
384,527 |
|
|
393,671 |
|
||
Property and equipment, net |
94,851 |
|
|
75,654 |
|
||
Deferred costs, noncurrent |
32,516 |
|
|
26,914 |
|
||
Lease right-of-use assets |
95,098 |
|
|
— |
|
||
Goodwill and intangible assets, net |
209,516 |
|
|
146,327 |
|
||
Other assets |
26,242 |
|
|
22,717 |
|
||
Total assets |
$ |
1,459,458 |
|
|
$ |
1,237,879 |
|
Liabilities and stockholders’ equity |
|
|
|
||||
Current liabilities: |
|
|
|
||||
Accounts payable |
$ |
43,206 |
|
|
$ |
16,820 |
|
Accrued liabilities |
36,531 |
|
|
34,097 |
|
||
Accrued compensation and related benefits |
58,544 |
|
|
46,603 |
|
||
Deferred revenue |
290,285 |
|
|
245,243 |
|
||
Lease liabilities |
21,398 |
|
|
— |
|
||
Total current liabilities |
449,964 |
|
|
342,763 |
|
||
Convertible senior notes, net |
477,007 |
|
|
458,176 |
|
||
Deferred revenue, noncurrent |
2,662 |
|
|
2,719 |
|
||
Lease liabilities, noncurrent |
87,926 |
|
|
— |
|
||
Other liabilities |
4,710 |
|
|
17,300 |
|
||
Total liabilities |
1,022,269 |
|
|
820,958 |
|
||
|
|
|
|
||||
Stockholders’ equity: |
|
|
|
||||
Preferred stock, par value $0.01 per share |
— |
|
|
— |
|
||
Common stock, par value $0.01 per share |
1,119 |
|
|
1,080 |
|
||
Additional paid-in capital |
1,099,730 |
|
|
950,693 |
|
||
Accumulated other comprehensive loss |
(1,047 |
) |
|
(5,724 |
) |
||
Accumulated deficit |
(662,613 |
) |
|
(529,128 |
) |
||
Total stockholders’ equity |
437,189 |
|
|
416,921 |
|
||
Total liabilities and stockholders’ equity |
$ |
1,459,458 |
|
|
$ |
1,237,879 |
|
Condensed Consolidated Statements of Cash Flows |
||||||||
(In thousands; unaudited) |
||||||||
|
|
Three Months Ended September 30, |
||||||
|
|
2019 |
|
2018 |
||||
Cash flows from operating activities |
|
|
|
|
||||
Net loss |
|
$ |
(34,224 |
) |
|
$ |
(34,144 |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
||||
Depreciation and amortization |
|
10,091 |
|
|
8,530 |
|
||
Share-based compensation |
|
38,650 |
|
|
31,446 |
|
||
Amortization of deferred costs |
|
8,443 |
|
|
5,594 |
|
||
Amortization of debt discount and issuance costs |
|
6,366 |
|
|
6,015 |
|
||
Other |
|
112 |
|
|
566 |
|
||
Changes in operating assets and liabilities: |
|
|
|
|
||||
Accounts receivable |
|
3,035 |
|
|
(12,825 |
) |
||
Prepaid expenses and other current assets |
|
(1,843 |
) |
|
(2,742 |
) |
||
Deferred costs |
|
(10,944 |
) |
|
(9,137 |
) |
||
Lease right-of-use assets |
|
4,915 |
|
|
— |
|
||
Other assets and liabilities |
|
(2,401 |
) |
|
1,285 |
|
||
Accounts payable |
|
1,258 |
|
|
10,341 |
|
||
Accrued liabilities |
|
65 |
|
|
(4,503 |
) |
||
Accrued compensation and related benefits |
|
(909 |
) |
|
(1,633 |
) |
||
Deferred revenue |
|
6,240 |
|
|
16,951 |
|
||
Lease liabilities |
|
(8,631 |
) |
|
— |
|
||
Net cash provided by operating activities |
|
20,223 |
|
|
15,744 |
|
||
Cash flows from investing activities |
|
|
|
|
||||
Purchases of property and equipment |
|
(11,474 |
) |
|
(7,096 |
) |
||
Internal-use software development costs |
|
(2,041 |
) |
|
(1,389 |
) |
||
Purchases of marketable securities |
|
(103,883 |
) |
|
(342,415 |
) |
||
Proceeds from maturities of marketable securities |
|
45,875 |
|
|
37,239 |
|
||
Proceeds from sales of marketable securities |
|
57,520 |
|
|
31,927 |
|
||
Cash paid for the acquisition of FutureSimple, net of cash acquired |
|
— |
|
|
(79,363 |
) |
||
Net cash used in investing activities |
|
(14,003 |
) |
|
(361,097 |
) |
||
Cash flows from financing activities |
|
|
|
|
||||
Issuance costs related to convertible senior notes |
|
— |
|
|
(54 |
) |
||
Proceeds from exercises of employee stock options |
|
8,767 |
|
|
3,507 |
|
||
Proceeds from employee stock purchase plan |
|
7,747 |
|
|
6,050 |
|
||
Taxes paid related to net share settlement of share-based awards |
|
(2,323 |
) |
|
(1,620 |
) |
||
Other |
|
— |
|
|
1,675 |
|
||
Net cash provided by financing activities |
|
14,191 |
|
|
9,558 |
|
||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
19 |
|
|
(19 |
) |
||
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
20,430 |
|
|
(335,814 |
) |
||
Cash, cash equivalents and restricted cash at beginning of period |
|
173,381 |
|
|
494,397 |
|
||
Cash, cash equivalents and restricted cash at end of period |
|
$ |
193,811 |
|
|
$ |
158,583 |
|
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 September 30, |
|
Nine Months Ended September 30, |
||||||||||||
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
Reconciliation of gross profit and gross margin |
|
|
|
|
|
|
|
||||||||
GAAP gross profit |
$ |
151,267 |
|
|
$ |
107,836 |
|
|
$ |
414,011 |
|
|
$ |
296,294 |
|
Plus: Share-based compensation |
5,397 |
|
|
3,929 |
|
|
15,580 |
|
|
10,500 |
|
||||
Plus: Employer tax related to employee stock transactions |
310 |
|
|
238 |
|
|
1,149 |
|
|
794 |
|
||||
Plus: Amortization of purchased intangibles |
2,065 |
|
|
918 |
|
|
5,626 |
|
|
2,142 |
|
||||
Plus: Amortization of share-based compensation capitalized in internal-use software |
438 |
|
|
366 |
|
|
1,272 |
|
|
1,084 |
|
||||
Plus: Acquisition-related expenses |
185 |
|
|
38 |
|
|
$ |
459 |
|
|
$ |
38 |
|
||
Non-GAAP gross profit |
$ |
159,662 |
|
|
$ |
113,325 |
|
|
$ |
438,097 |
|
|
$ |
310,852 |
|
GAAP gross margin |
72 |
% |
|
70 |
% |
|
71 |
% |
|
69 |
% |
||||
Non-GAAP adjustments |
4 |
% |
|
3 |
% |
|
4 |
% |
|
4 |
% |
||||
Non-GAAP gross margin |
76 |
% |
|
73 |
% |
|
75 |
% |
|
73 |
% |
||||
|
|
|
|
|
|
|
|
||||||||
Reconciliation of operating expenses |
|
|
|
|
|
|
|
||||||||
GAAP research and development |
$ |
54,528 |
|
|
$ |
40,410 |
|
|
$ |
151,829 |
|
|
$ |
115,118 |
|
Less: Share-based compensation |
(12,169 |
) |
|
(10,677 |
) |
|
(35,717 |
) |
|
(30,436 |
) |
||||
Less: Employer tax related to employee stock transactions |
(634 |
) |
|
(673 |
) |
|
(2,856 |
) |
|
(2,057 |
) |
||||
Less: Acquisition-related expenses |
(973 |
) |
|
(1,006 |
) |
|
(2,404 |
) |
|
(1,793 |
) |
||||
Non-GAAP research and development |
$ |
40,752 |
|
|
$ |
28,054 |
|
|
$ |
110,852 |
|
|
$ |
80,832 |
|
GAAP research and development as percentage of revenue |
26 |
% |
|
26 |
% |
|
26 |
% |
|
27 |
% |
||||
Non-GAAP research and development as percentage of revenue |
19 |
% |
|
18 |
% |
|
19 |
% |
|
19 |
% |
||||
|
|
|
|
|
|
|
|
||||||||
GAAP sales and marketing |
$ |
99,303 |
|
|
$ |
74,270 |
|
|
$ |
285,750 |
|
|
$ |
208,778 |
|
Less: Share-based compensation |
(13,839 |
) |
|
(10,261 |
) |
|
(39,813 |
) |
|
(27,447 |
) |
||||
Less: Employer tax related to employee stock transactions |
(562 |
) |
|
(561 |
) |
|
(2,352 |
) |
|
(1,635 |
) |
||||
Less: Amortization of purchased intangibles |
(699 |
) |
|
(237 |
) |
|
(1,934 |
) |
|
(404 |
) |
||||
Less: Acquisition-related expenses |
(390 |
) |
|
(307 |
) |
|
(1,161 |
) |
|
(870 |
) |
||||
Non-GAAP sales and marketing |
$ |
83,813 |
|
|
$ |
62,904 |
|
|
$ |
240,490 |
|
|
$ |
178,422 |
|
GAAP sales and marketing as percentage of revenue |
47 |
% |
|
48 |
% |
|
49 |
% |
|
49 |
% |
||||
Non-GAAP sales and marketing as percentage of revenue |
40 |
% |
|
41 |
% |
|
41 |
% |
|
42 |
% |
||||
|
|
|
|
|
|
|
|
||||||||
GAAP general and administrative |
$ |
32,864 |
|
|
$ |
27,357 |
|
|
$ |
107,135 |
|
|
$ |
73,809 |
|
Less: Share-based compensation |
(7,244 |
) |
|
(6,579 |
) |
|
(27,948 |
) |
|
(18,198 |
) |
||||
Less: Employer tax related to employee stock transactions |
(470 |
) |
|
(283 |
) |
|
(1,788 |
) |
|
(872 |
) |
||||
Less: Acquisition-related expenses |
(628 |
) |
|
(1,908 |
) |
|
(5,618 |
) |
|
(1,908 |
) |
||||
Non-GAAP general and administrative |
$ |
24,522 |
|
|
$ |
18,587 |
|
|
$ |
71,781 |
|
|
$ |
52,831 |
|
GAAP general and administrative as percentage of revenue |
16 |
% |
|
18 |
% |
|
18 |
% |
|
17 |
% |
||||
Non-GAAP general and administrative as percentage of revenue |
12 |
% |
|
12 |
% |
|
12 |
% |
|
12 |
% |
||||
|
|
|
|
|
|
|
|
||||||||
Reconciliation of operating income (loss) and operating margin |
|
|
|
|
|
|
|
||||||||
GAAP operating loss |
$ |
(35,428 |
) |
|
$ |
(34,201 |
) |
|
$ |
(130,703 |
) |
|
$ |
(101,411 |
) |
Plus: Share-based compensation |
38,649 |
|
|
31,446 |
|
|
119,058 |
|
|
86,581 |
|
||||
Plus: Employer tax related to employee stock transactions |
1,976 |
|
|
1,755 |
|
|
8,145 |
|
|
5,358 |
|
||||
Plus: Amortization of purchased intangibles |
2,764 |
|
|
1,155 |
|
|
7,560 |
|
|
2,546 |
|
||||
Plus: Acquisition-related expenses |
2,176 |
|
|
3,259 |
|
|
9,642 |
|
|
4,609 |
|
||||
Plus: Amortization of share-based compensation capitalized in internal-use software |
438 |
|
|
366 |
|
|
1,272 |
|
|
1,084 |
|
||||
Non-GAAP operating income (loss) |
$ |
10,575 |
|
|
$ |
3,780 |
|
|
$ |
14,974 |
|
|
$ |
(1,233 |
) |
GAAP operating margin |
(17 |
)% |
|
(22 |
)% |
|
(22 |
)% |
|
(24 |
)% |
||||
Non-GAAP adjustments |
22 |
% |
|
24 |
% |
|
25 |
% |
|
24 |
% |
||||
Non-GAAP operating margin |
5 |
% |
|
2 |
% |
|
3 |
% |
|
— |
% |
||||
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
Reconciliation of net income (loss) |
|
|
|
|
|
|
|
||||||||
GAAP net loss |
$ |
(34,224 |
) |
|
$ |
(34,144 |
) |
|
$ |
(133,485 |
) |
|
$ |
(97,835 |
) |
Plus: Share-based compensation |
38,649 |
|
|
31,446 |
|
|
119,058 |
|
|
86,581 |
|
||||
Plus: Employer tax related to employee stock transactions |
1,976 |
|
|
1,755 |
|
|
8,145 |
|
|
5,358 |
|
||||
Plus: Amortization of purchased intangibles |
2,764 |
|
|
1,155 |
|
|
7,560 |
|
|
2,546 |
|
||||
Plus: Acquisition-related expenses |
2,176 |
|
|
3,259 |
|
|
9,642 |
|
|
4,609 |
|
||||
Plus: Amortization of share-based compensation capitalized in internal-use software |
438 |
|
|
366 |
|
|
1,272 |
|
|
1,084 |
|
||||
Plus: Amortization of debt discount and issuance costs |
6,366 |
|
|
6,015 |
|
|
18,831 |
|
|
12,665 |
|
||||
Less: Income tax effects and adjustments |
(4,098 |
) |
|
(3,913 |
) |
|
(5,994 |
) |
|
(5,890 |
) |
||||
Non-GAAP net income |
$ |
14,047 |
|
|
$ |
5,939 |
|
|
$ |
25,029 |
|
|
$ |
9,118 |
|
|
|
|
|
|
|
|
|
||||||||
Reconciliation of net income (loss) per share, basic |
|
|
|
|
|
|
|
||||||||
GAAP net loss per share, basic |
$ |
(0.31 |
) |
|
$ |
(0.32 |
) |
|
$ |
(1.21 |
) |
|
$ |
(0.93 |
) |
Non-GAAP adjustments to net loss |
0.44 |
|
|
0.38 |
|
|
1.44 |
|
|
1.02 |
|
||||
Non-GAAP net income per share, basic |
$ |
0.13 |
|
|
$ |
0.06 |
|
|
$ |
0.23 |
|
|
$ |
0.09 |
|
|
|
|
|
|
|
|
|
||||||||
Reconciliation of net income (loss) per share, diluted |
|
|
|
|
|
|
|
||||||||
GAAP net loss per share, diluted |
$ |
(0.31 |
) |
|
$ |
(0.32 |
) |
|
$ |
(1.21 |
) |
|
$ |
(0.93 |
) |
Non-GAAP adjustments to net loss |
0.43 |
|
|
0.37 |
|
|
1.42 |
|
|
1.01 |
|
||||
Non-GAAP net income per share, diluted |
$ |
0.12 |
|
|
$ |
0.05 |
|
|
$ |
0.21 |
|
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares used in GAAP per share calculation, basic and diluted |
111,261 |
|
|
106,143 |
|
|
109,969 |
|
|
104,954 |
|
||||
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares used in non-GAAP per share calculation |
|
|
|
|
|
|
|
||||||||
Basic |
111,261 |
|
|
106,143 |
|
|
109,969 |
|
|
104,954 |
|
||||
Diluted |
119,689 |
|
|
113,752 |
|
|
118,750 |
|
|
111,413 |
|
||||
|
|
|
|
|
|
|
|
||||||||
Computation of free cash flow |
|
|
|
|
|
|
|
||||||||
Net cash provided by operating activities |
$ |
20,223 |
|
|
$ |
15,744 |
|
|
$ |
57,050 |
|
|
$ |
55,682 |
|
Less: purchases of property and equipment |
(11,474 |
) |
|
(7,096 |
) |
|
(25,628 |
) |
|
(27,132 |
) |
||||
Less: internal-use software development costs |
(2,041 |
) |
|
(1,389 |
) |
|
(5,007 |
) |
|
(5,550 |
) |
||||
Free cash flow |
$ |
6,708 |
|
|
$ |
7,259 |
|
|
$ |
26,415 |
|
|
$ |
23,000 |
|
|
|
|
|
|
|
|
|
||||||||
Net cash provided by operating activities margin |
10 |
% |
|
10 |
% |
|
10 |
% |
|
13 |
% |
||||
Non-GAAP adjustments |
(7 |
)% |
|
(5 |
)% |
|
(5 |
)% |
|
(8 |
)% |
||||
Free cash flow margin |
3 |
% |
|
5 |
% |
|
5 |
% |
|
5 |
% |
||||
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 income (loss) and operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per share, basic and diluted, free cash flow, and free cash flow margin.
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: 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.
Acquisition-Related Expenses: Zendesk views acquisition-related expenses, such as transaction costs, integration costs, restructuring costs, and acquisition-related retention payments, including amortization of acquisition-related retention payments capitalized in internal-use software, as events that are not necessarily reflective of operational performance during a period.
Contacts
Zendesk, Inc.
Investor Contact:
Karen Sansot, +1 415-852-3877
ir@zendesk.com
or
Media Contact:
Tian Lee, +1 415-231-0847
press@zendesk.com
Read full story here
