Zendesk Announces Third Quarter 2020 Results

Highlights

  • Third quarter revenue increased 24% year over year to $261.9 million
  • Third quarter GAAP operating loss of $28.3 million and non-GAAP operating income of $24.9 million
  • Zendesk achieved a significant milestone by crossing a billion-dollar annual revenue run rate during the third quarter

SAN FRANCISCO--(BUSINESS WIRE)--Zendesk, Inc. (NYSE: ZEN) today reported financial results for the third quarter ended September 30, 2020, and released a Shareholder Letter on its investor relations website at https://investor.zendesk.com.

Results for the Third Quarter 2020

Revenue was $261.9 million for the quarter ended September 30, 2020, an increase of 24% over the prior year period. GAAP net loss for the quarter ended September 30, 2020 was $40.7 million, and GAAP net loss per share (basic and diluted) was $0.35. Non-GAAP net income was $21.1 million, and non-GAAP net income was $0.18 per share (basic) and $0.17 per share (diluted). Non-GAAP net income excludes approximately $49.0 million in share-based compensation and related expenses (including $2.3 million of employer tax related to employee stock transactions and $0.5 million of amortization of share-based compensation capitalized in internal-use software), $12.2 million of amortization of debt discount and issuance costs, $2.2 million of amortization of purchased intangibles, $2.0 million of acquisition-related expenses, and non-GAAP income tax effects and adjustments of $3.6 million. GAAP net loss per share for the quarter ended September 30, 2020 was based on 115.8 million weighted average shares outstanding (basic and diluted), and non-GAAP net income per share for the quarter ended September 30, 2020 was based on 115.8 million weighted average shares outstanding (basic) and 121.4 million weighted average shares outstanding (diluted).

Outlook

As of October 29, 2020, Zendesk provided guidance for the quarter and full year ending December 31, 2020.

For the quarter ending December 31, 2020, Zendesk expects to report:

  • Revenue in the range of $274 - 279 million
  • GAAP operating income (loss) in the range of $(39) - (35) million, which includes share-based compensation and related expenses of approximately $51 million, amortization of purchased intangibles of approximately $2 million, and acquisition-related expenses of approximately $2 million. This guidance may be impacted by the real estate impairment discussed below, depending on the amount and timing of its determination, and such impact has not been included in this guidance.
  • Non-GAAP operating income (loss) in the range of $16 - 20 million, which excludes share-based compensation and related expenses of approximately $51 million, amortization of purchased intangibles of approximately $2 million, and acquisition-related expenses of approximately $2 million. We may additionally exclude a portion or all of the real estate impairment discussed below, depending the amount and timing of its determination, and such exclusions have not been included in this guidance.
  • Approximately 116 million weighted average shares outstanding (basic)
  • Approximately 122 million weighted average shares outstanding (diluted)

For the full year ending December 31, 2020, Zendesk expects to report:

  • Revenue in the range of $1.020 - 1.025 billion
  • GAAP operating income (loss) in the range of $(139) - (135) million, which includes share-based compensation and related expenses of approximately $192 million, amortization of purchased intangibles of approximately $9 million, and acquisition-related expenses of approximately $7 million. This guidance may be impacted by the real estate impairment discussed below, depending on the amount and timing of its determination, and such impact has not been included in this guidance.
  • Non-GAAP operating income (loss) in the range of $69 - 73 million, which excludes share-based compensation and related expenses of approximately $192 million, amortization of purchased intangibles of approximately $9 million, and acquisition-related expenses of approximately $7 million. We may additionally exclude a portion or all of the real estate impairment discussed below, depending the amount and timing of its determination, and such exclusions have not been included in this guidance.
  • Approximately 115 million weighted average shares outstanding (basic)
  • Approximately 121 million weighted average shares outstanding (diluted)
  • Free cash flow to be approximately $15 million or higher, which could be impacted by the real estate changes discussed below, and such impact has not been included in this guidance.

In the fourth quarter of 2020, we concluded that we will no longer occupy two of our leased office buildings in San Francisco. As a result, we estimate that before March 31, 2021, we expect to record an impairment charge of approximately $13 - 17 million related to these lease assets, which will impact our GAAP operating income. Additionally, we estimate that before March 31, 2021, we may accelerate remaining contractual rent payments, which total approximately $12 million, plus additional operating costs. Such costs, depending on the amount and timing of their determination, will impact our cash flow results. The actual amount and timing of the impairments and the cash outflows will depend on the outcome of negotiations with landlords and potential subtenants, and the timing of completion of lease decommission activities.

There are many factors that can affect our actual results which are discussed below and in the risk factors in our filings with the Securities and Exchange Commission. Some of the key risk factors include global macroeconomic conditions, the impact of the COVID-19 pandemic on our business, business conditions of customers in challenged industries, the effect on demand for our products from customers which can and has resulted in higher levels of contraction than historical levels, and the ability of our customers to manage the current severe economic downturn.

We have not reconciled free cash flow guidance to net cash from operating activities for the full year 2020 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 2020 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.

Annual revenue run rate was calculated by multiplying our revenue for the third quarter of 2020 by four. For more information about our revenue run rate, please see the “About Operating Metrics” section at the back of this press release.

Shareholder Letter and Conference Call Information

The detailed Shareholder Letter is available at https://investor.zendesk.com and Zendesk will host a live video webcast at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) on Thursday, October 29, 2020 to discuss the results. The live video webcast can be accessed through Zendesk’s investor relations website at https://investor.zendesk.com. A replay of the webcast will be available for 12 months.

About Zendesk

Zendesk is a service-first CRM company that builds support, sales, and customer engagement software designed to foster better customer relationships. From large enterprises to startups, we believe that powerful, innovative customer experiences should be within reach for every company, no matter the size, industry or ambition. Zendesk serves more than 160,000 customers across a multitude of industries in over 30 languages. Zendesk is headquartered in San Francisco, and operates offices worldwide. 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) the effect of uncertainties related to the COVID-19 pandemic on U.S. and global markets, Zendesk’s business, operations, revenue results, cash flow, operating expenses, hiring, demand for its solutions, sales cycles, customer retention, and its customers’ businesses and industries; (ii) other adverse changes in general economic or market conditions; (iii) Zendesk’s ability to adapt its products to changing market dynamics and customer preferences or achieve increased market acceptance of its products; (iv) Zendesk’s ability to effectively expand its sales capabilities; (v) Zendesk’s substantial reliance on its customers renewing their subscriptions and purchasing additional subscriptions; (vi) 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; (vii) the intensely competitive market in which Zendesk operates and the difficulty that Zendesk may have in competing effectively; (viii) Zendesk’s ability to effectively market and sell its products to larger enterprises; (ix) Zendesk’s ability to introduce and market new products and to support its products on a shared services platform; (x) Zendesk’s ability to maintain and develop its strategic relationships with third parties; (xi) Zendesk’s ability to prevent, mitigate, and respond effectively to both historical and future data breaches and to securely maintain customer data; (xii) Zendesk’s ability to effectively manage its growth and organizational change, including its international expansion strategy; (xiii) Zendesk’s ability to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions; (xiv) Zendesk's ability to comply with privacy and data security regulations; (xv) potential service interruptions or performance problems associated with Zendesk’s technology and infrastructure; (xvi) the development of the market for software as a service business software applications; (xvii) real or perceived errors, failures, or bugs in its products; (xviii) Zendesk’s ability to accurately forecast expenditures on third-party managed hosting services; and (xix) the amount and timing of any determination of real estate impairments relating to expected lease abandonment matters.

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 June 30, 2020. 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, 2020.

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 September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Revenue

$

261,926

 

 

$

210,477

 

 

$

746,066

 

 

$

586,545

 

Cost of revenue

 

62,819

 

 

 

59,210

 

 

 

184,036

 

 

 

172,534

 

Gross profit

 

199,107

 

 

 

151,267

 

 

 

562,030

 

 

 

414,011

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

64,842

 

 

 

54,528

 

 

 

184,266

 

 

 

151,829

 

Sales and marketing

 

123,737

 

 

 

99,303

 

 

 

369,442

 

 

 

285,750

 

General and administrative

 

38,854

 

 

 

32,864

 

 

 

109,427

 

 

 

107,135

 

Total operating expenses

 

227,433

 

 

 

186,695

 

 

 

663,135

 

 

 

544,714

 

Operating loss

 

(28,326

)

 

 

(35,428

)

 

 

(101,105

)

 

 

(130,703

)

Other income (expense), net:

 

 

 

 

 

 

 

Interest expense

 

(14,087

)

 

 

(6,727

)

 

 

(29,060

)

 

 

(19,885

)

Loss on early extinguishment of debt

 

 

 

 

 

 

 

(25,950

)

 

 

 

Interest and other income, net

 

3,683

 

 

 

7,567

 

 

 

12,750

 

 

 

17,764

 

Total other income (expense), net

 

(10,404

)

 

 

840

 

 

 

(42,260

)

 

 

(2,121

)

Loss before provision for (benefit from) income taxes

 

(38,730

)

 

 

(34,588

)

 

 

(143,365

)

 

 

(132,824

)

Provision for (benefit from) income taxes

 

1,973

 

 

 

(364

)

 

 

4,777

 

 

 

661

 

Net loss

$

(40,703

)

 

$

(34,224

)

 

$

(148,142

)

 

$

(133,485

)

Net loss per share, basic and diluted

$

(0.35

)

 

$

(0.31

)

 

$

(1.29

)

 

$

(1.21

)

Weighted-average shares used to compute net loss per share, basic and diluted

 

115,809

 

 

 

111,261

 

 

 

114,653

 

 

 

109,969

 

Condensed Consolidated Balance Sheets

(In thousands, except par value; unaudited)

 

 

September 30,
2020

 

December 31,
2019

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

383,318

 

 

$

196,591

 

Marketable securities

 

559,682

 

 

 

286,958

 

Accounts receivable, net of allowance for doubtful accounts of $9,322 and $2,846 as of September 30, 2020 and December 31, 2019, respectively

 

151,160

 

 

 

127,808

 

Deferred costs

 

44,722

 

 

 

35,619

 

Prepaid expenses and other current assets

 

50,047

 

 

 

45,847

 

Total current assets

 

1,188,929

 

 

 

692,823

 

Marketable securities, noncurrent

 

407,141

 

 

 

361,948

 

Property and equipment, net

 

102,098

 

 

 

102,090

 

Deferred costs, noncurrent

 

42,256

 

 

 

35,230

 

Lease right-of-use assets

 

89,477

 

 

 

89,983

 

Goodwill and intangible assets, net

 

199,607

 

 

 

206,883

 

Other assets

 

24,731

 

 

 

25,632

 

Total assets

$

2,054,239

 

 

$

1,514,589

 

Liabilities and stockholders’ equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

10,237

 

 

$

38,376

 

Accrued liabilities

 

33,720

 

 

 

36,347

 

Accrued compensation and related benefits

 

89,179

 

 

 

61,512

 

Deferred revenue

 

324,766

 

 

 

320,642

 

Lease liabilities

 

22,300

 

 

 

21,804

 

Convertible senior notes, net

 

130,615

 

 

 

 

Total current liabilities

 

610,817

 

 

 

478,681

 

Convertible senior notes, net

 

925,007

 

 

 

483,464

 

Deferred revenue, noncurrent

 

2,885

 

 

 

3,320

 

Lease liabilities, noncurrent

 

80,507

 

 

 

83,478

 

Other liabilities

 

4,904

 

 

 

7,662

 

Total liabilities

 

1,624,120

 

 

 

1,056,605

 

 

 

 

 

Stockholders’ equity:

 

 

 

Preferred stock, par value $0.01 per share

 

 

 

 

 

Common stock, par value $0.01 per share

 

1,164

 

 

 

1,130

 

Additional paid-in capital

 

1,273,242

 

 

 

1,155,044

 

Accumulated other comprehensive income

 

2,560

 

 

 

591

 

Accumulated deficit

 

(846,847

)

 

 

(698,781

)

Total stockholders’ equity

 

430,119

 

 

 

457,984

 

Total liabilities and stockholders’ equity

$

2,054,239

 

 

$

1,514,589

 

Condensed Consolidated Statements of Cash Flows

(In thousands; unaudited)

 

 

Three Months Ended September 30,

 

2020

 

2019

Cash flows from operating activities

 

 

 

Net loss

$

(40,703

)

 

$

(34,224

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

Depreciation and amortization

 

10,613

 

 

 

10,091

 

Share-based compensation

 

46,263

 

 

 

38,650

 

Amortization of deferred costs

 

11,660

 

 

 

8,443

 

Amortization of debt discount and issuance costs

 

12,194

 

 

 

6,366

 

Other

 

988

 

 

 

112

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

(12,392

)

 

 

3,035

 

Prepaid expenses and other current assets

 

100

 

 

 

(1,843

)

Deferred costs

 

(18,976

)

 

 

(10,944

)

Lease right-of-use assets

 

5,225

 

 

 

4,915

 

Other assets and liabilities

 

(482

)

 

 

(2,401

)

Accounts payable

 

(3,193

)

 

 

1,258

 

Accrued liabilities

 

593

 

 

 

65

 

Accrued compensation and related benefits

 

14,463

 

 

 

(909

)

Deferred revenue

 

12,217

 

 

 

6,240

 

Lease liabilities

 

(5,175

)

 

 

(8,631

)

Net cash provided by operating activities

 

33,395

 

 

 

20,223

 

Cash flows from investing activities

 

 

 

Purchases of property and equipment

 

(3,931

)

 

 

(11,474

)

Internal-use software development costs

 

(4,618

)

 

 

(2,041

)

Purchases of marketable securities

 

(468,032

)

 

 

(103,883

)

Proceeds from maturities of marketable securities

 

89,493

 

 

 

45,875

 

Proceeds from sales of marketable securities

 

10,908

 

 

 

57,520

 

Proceeds from sales of strategic investments

 

1,577

 

 

 

 

Net cash used in investing activities

 

(374,603

)

 

 

(14,003

)

Cash flows from financing activities

 

 

 

Proceeds from exercises of employee stock options

 

15,489

 

 

 

8,767

 

Proceeds from employee stock purchase plan

 

9,996

 

 

 

7,747

 

Taxes paid related to net share settlement of share-based awards

 

(1,990

)

 

 

(2,323

)

Other

 

(610

)

 

 

Net cash provided by financing activities

 

22,885

 

 

 

14,191

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

206

 

 

 

19

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

(318,117

)

 

 

20,430

 

Cash, cash equivalents and restricted cash at beginning of period

 

704,116

 

 

 

173,381

 

Cash, cash equivalents and restricted cash at end of period

$

385,999

 

 

$

193,811

 

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,

 

2020

 

2019

 

2020

 

2019

Reconciliation of gross profit and gross margin

 

 

 

 

 

 

 

GAAP gross profit

$

199,107

 

 

$

151,267

 

 

$

562,030

 

 

$

414,011

 

Plus: Share-based compensation

 

4,831

 

 

 

5,397

 

 

 

15,077

 

 

 

15,580

 

Plus: Employer tax related to employee stock transactions

 

247

 

 

 

310

 

 

 

963

 

 

 

1,149

 

Plus: Amortization of purchased intangibles

 

1,525

 

 

 

2,065

 

 

 

5,249

 

 

 

5,626

 

Plus: Amortization of share-based compensation capitalized in internal-use software

 

460

 

 

 

438

 

 

 

1,375

 

 

 

1,272

 

Plus: Acquisition-related expenses

 

85

 

 

 

185

 

 

$

292

 

 

$

459

 

Non-GAAP gross profit

$

206,255

 

 

$

159,662

 

 

$

584,986

 

 

$

438,097

 

GAAP gross margin

 

76

%

 

 

72

%

 

 

75

%

 

 

71

%

Non-GAAP adjustments

 

3

%

 

 

4

%

 

 

3

%

 

 

4

%

Non-GAAP gross margin

 

79

%

 

 

76

%

 

 

78

%

 

 

75

%

 

 

 

 

 

 

 

 

Reconciliation of operating expenses

 

 

 

 

 

 

 

GAAP research and development

$

64,842

 

 

$

54,528

 

 

$

184,266

 

 

$

151,829

 

Less: Share-based compensation

 

(13,921

)

 

 

(12,169

)

 

 

(39,076

)

 

 

(35,717

)

Less: Employer tax related to employee stock transactions

 

(495

)

 

 

(634

)

 

 

(2,081

)

 

 

(2,856

)

Less: Acquisition-related expenses

 

(1,204

)

 

 

(973

)

 

 

(3,382

)

 

 

(2,404

)

Non-GAAP research and development

$

49,222

 

 

$

40,752

 

 

$

139,727

 

 

$

110,852

 

GAAP research and development as percentage of revenue

 

25

%

 

 

26

%

 

 

25

%

 

 

26

%

Non-GAAP research and development as percentage of revenue

 

19

%

 

 

19

%

 

 

19

%

 

 

19

%

 

 

 

 

 

 

 

 

GAAP sales and marketing

$

123,737

 

 

$

99,303

 

 

$

369,442

 

 

$

285,750

 

Less: Share-based compensation

 

(19,335

)

 

 

(13,839

)

 

 

(53,467

)

 

 

(39,813

)

Less: Employer tax related to employee stock transactions

 

(860

)

 

 

(562

)

 

 

(2,923

)

 

 

(2,352

)

Less: Amortization of purchased intangibles

 

(671

)

 

 

(699

)

 

 

(2,041

)

 

 

(1,934

)

Less: Acquisition-related expenses

 

(55

)

 

 

(390

)

 

 

(1,146

)

 

 

(1,161

)

Non-GAAP sales and marketing

$

102,816

 

 

$

83,813

 

 

$

309,865

 

 

$

240,490

 

GAAP sales and marketing as percentage of revenue

 

47

%

 

 

47

%

 

 

50

%

 

 

49

%

Non-GAAP sales and marketing as percentage of revenue

 

39

%

 

 

40

%

 

 

42

%

 

 

41

%

 

 

 

 

 

 

 

 

GAAP general and administrative

$

38,854

 

 

$

32,864

 

 

$

109,427

 

 

$

107,135

 

Less: Share-based compensation

 

(8,176

)

 

 

(7,244

)

 

 

(24,437

)

 

 

(27,948

)

Less: Employer tax related to employee stock transactions

 

(689

)

 

 

(470

)

 

 

(1,914

)

 

 

(1,788

)

Less: Acquisition-related expenses

 

(699

)

 

 

(628

)

 

 

(937

)

 

 

(5,618

)

Non-GAAP general and administrative

$

29,290

 

 

$

24,522

 

 

$

82,139

 

 

$

71,781

 

GAAP general and administrative as percentage of revenue

 

15

%

 

 

16

%

 

 

15

%

 

 

18

%

Non-GAAP general and administrative as percentage of revenue

 

11

%

 

 

12

%

 

 

11

%

 

 

12

%

 

 

 

 

 

 

 

 

Reconciliation of operating income (loss) and operating margin

 

 

 

 

 

 

 

GAAP operating loss

$

(28,326

)

 

$

(35,428

)

 

$

(101,105

)

 

$

(130,703

)

Plus: Share-based compensation

 

46,263

 

 

 

38,649

 

 

 

132,057

 

 

 

119,058

 

Plus: Employer tax related to employee stock transactions

 

2,291

 

 

 

1,976

 

 

 

7,881

 

 

 

8,145

 

Plus: Amortization of purchased intangibles

 

2,196

 

 

 

2,764

 

 

 

7,290

 

 

 

7,560

 

Plus: Acquisition-related expenses

 

2,043

 

 

 

2,176

 

 

 

5,757

 

 

 

9,642

 

Plus: Amortization of share-based compensation capitalized in internal-use software

 

460

 

 

 

438

 

 

 

1,375

 

 

 

1,272

 

Non-GAAP operating income

$

24,927

 

 

$

10,575

 

 

$

53,255

 

 

$

14,974

 

GAAP operating margin

 

(11

)%

 

 

(17

)%

 

 

(14

)%

 

 

(22

)%

Non-GAAP adjustments

 

21

%

 

 

22

%

 

 

21

%

 

 

25

%

Non-GAAP operating margin

 

10

%

 

 

5

%

 

 

7

%

 

 

3

%

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Reconciliation of net income (loss)

 

 

 

 

 

 

 

GAAP net loss

$

(40,703

)

 

$

(34,224

)

 

$

(148,142

)

 

$

(133,485

)

Plus: Share-based compensation

 

46,263

 

 

 

38,649

 

 

 

132,057

 

 

 

119,058

 

Plus: Employer tax related to employee stock transactions

 

2,291

 

 

 

1,976

 

 

 

7,881

 

 

 

8,145

 

Plus: Amortization of purchased intangibles

 

2,196

 

 

 

2,764

 

 

 

7,290

 

 

 

7,560

 

Plus: Acquisition-related expenses

 

2,043

 

 

 

2,176

 

 

 

5,757

 

 

 

9,642

 

Plus: Amortization of share-based compensation capitalized in internal-use software

 

460

 

 

 

438

 

 

 

1,375

 

 

 

1,272

 

Plus: Amortization of debt discount and issuance costs

 

12,194

 

 

 

6,366

 

 

 

26,230

 

 

 

18,831

 

Plus: Loss on early extinguishment of debt

 

 

 

 

 

 

 

25,950

 

 

 

 

Less: Income tax effects and adjustments

 

(3,638

)

 

 

(4,098

)

 

 

(8,490

)

 

 

(5,594

)

Non-GAAP net income

$

21,106

 

 

$

14,047

 

 

$

49,908

 

 

$

25,429

 

 

 

 

 

 

 

 

 

Reconciliation of net income (loss) per share, basic

 

 

 

 

 

 

 

GAAP net loss per share, basic

$

(0.35

)

 

$

(0.31

)

 

$

(1.29

)

 

$

(1.21

)

Non-GAAP adjustments to net loss

 

0.53

 

 

 

0.44

 

 

 

1.73

 

 

 

1.44

 

Non-GAAP net income per share, basic

$

0.18

 

 

$

0.13

 

 

$

0.44

 

 

$

0.23

 

 

 

 

 

 

 

 

 

Reconciliation of net income (loss) per share, diluted

 

 

 

 

 

 

 

GAAP net loss per share, diluted

$

(0.35

)

 

$

(0.31

)

 

$

(1.29

)

 

$

(1.21

)

Non-GAAP adjustments to net loss

 

0.52

 

 

 

0.43

 

 

 

1.70

 

 

 

1.42

 

Non-GAAP net income per share, diluted

$

0.17

 

 

$

0.12

 

 

$

0.41

 

 

$

0.21

 

 

 

 

 

 

 

 

 

Weighted-average shares used in GAAP per share calculation, basic and diluted

 

115,809

 

 

 

111,261

 

 

 

114,653

 

 

 

109,969

 

 

 

 

 

 

 

 

 

Weighted-average shares used in non-GAAP per share calculation

 

 

 

 

 

 

 

Basic

 

115,809

 

 

 

111,261

 

 

 

114,653

 

 

 

109,969

 

Diluted

 

121,369

 

 

 

119,689

 

 

 

120,635

 

 

 

118,750

 

 

 

 

 

 

 

 

 

Computation of free cash flow

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

$

33,395

 

 

$

20,223

 

 

$

(19,929

)

 

$

57,050

 

Plus: repayment of convertible senior notes attributable to debt discount

 

 

 

 

 

 

 

38,637

 

 

 

 

Less: purchases of property and equipment

 

(3,931

)

 

 

(11,474

)

 

 

(19,489

)

 

 

(25,628

)

Less: internal-use software development costs

 

(4,618

)

 

 

(2,041

)

 

 

(10,901

)

 

 

(5,007

)

Free cash flow

$

24,846

 

 

$

6,708

 

 

$

(11,682

)

 

$

26,415

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities margin

 

13

%

 

 

10

%

 

 

(3

)%

 

 

10

%

Non-GAAP adjustments

 

(4

)%

 

 

(7

)%

 

 

1

%

 

 

(5

)%

Free cash flow margin

 

9

%

 

 

3

%

 

 

(2

)%

 

 

5

%


Contacts

Zendesk, Inc.
Investor Contact:
Karen Sansot, +1 415-852-3877
ir@zendesk.com
or
Media Contact:
Marissa Tree, +1 415-609-4510
press@zendesk.com


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