Highlights:
- Fourth quarter revenue increased 32% year-over-year to $375.4 million
- Fourth quarter GAAP operating loss of $48.1 million and non-GAAP operating income of $27.2 million
- Full year 2021 revenue increased 30% year-over-year to $1.339 billion
- Full year 2021 GAAP operating loss of $166.7 million and non-GAAP operating income of $100.7 million
SAN FRANCISCO–(BUSINESS WIRE)–Zendesk, Inc. (NYSE: ZEN) today reported financial results for the quarter and fiscal year ended December 31, 2021, and released a Shareholder Letter on its investor relations website at https://investor.zendesk.com.
Results for the Fourth Quarter 2021
Revenue was $375.4 million for the quarter ended December 31, 2021, an increase of 32% over the prior year period. GAAP net loss for the quarter ended December 31, 2021 was $61.9 million, and GAAP net loss per share (basic and diluted) was $0.51. Non-GAAP net income was $20.1 million, and non-GAAP net income per share was $0.17 (basic) and $0.16 (diluted). Non-GAAP net income excludes approximately $64.0 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), $13.0 million of amortization of debt discount and issuance costs, $9.2 million of acquisition-related expenses, $1.8 million of amortization of purchased intangibles, $0.2 million of real estate impairments, and non-GAAP income tax effects and adjustments of $6.3 million. GAAP net loss per share for the quarter ended December 31, 2021 was based on 121.1 million weighted average shares outstanding (basic and diluted), and non-GAAP net income per share for the quarter ended December 31, 2021 was based on 121.1 million weighted average shares outstanding (basic) and 124.9 million weighted average shares outstanding (diluted).
Results for the Full Fiscal Year 2021
Revenue was $1.339 billion for the year ended December 31, 2021, an increase of 30% over the prior year period. GAAP net loss for the year ended December 31, 2021 was $223.6 million, and GAAP net loss per share (basic and diluted) was $1.87. Non-GAAP net income was $80.3 million, and non-GAAP net income per share was $0.67 (basic) and $0.63 (diluted). Non-GAAP net income excludes approximately $244.9 million in share-based compensation and related expenses (including $13.1 million of employer tax related to employee stock transactions and $1.6 million of amortization of share-based compensation capitalized in internal-use software), $51.1 million of amortization of debt discount and issuance costs, $13.9 million of acquisition-related expenses, $7.2 million of amortization of purchased intangibles, $1.3 million of real estate impairments, and non-GAAP income tax effects and adjustments of $14.5 million. GAAP net loss per share for the year ended December 31, 2021 was based on 119.6 million weighted average shares outstanding (basic and diluted), and non-GAAP net income per share for the year ended December 31, 2021 was based on 119.6 million weighted average shares outstanding (basic) and 126.8 million weighted average shares outstanding (diluted).
Outlook
As of February 10, 2022, Zendesk provided guidance for the quarter ending March 31, 2022 and for the year ending December 31, 2022.
For the quarter ending March 31, 2022, Zendesk expects to report:
- Revenue in the range of $381 – 387 million
- GAAP operating income (loss) in the range of $(65) – (59) million, which includes share-based compensation and related expenses of approximately $72 million, acquisition-related expenses of approximately $11 million, and amortization of purchased intangibles of approximately $2 million
- Non-GAAP operating income in the range of $20 – 26 million, which excludes share-based compensation and related expenses of approximately $72 million, acquisition-related expenses of approximately $11 million, and amortization of purchased intangibles of approximately $2 million
- Approximately 122 million weighted average shares outstanding (basic)
- Approximately 135 million weighted average shares outstanding (diluted), which is impacted by the adoption of a new accounting standard related to the treatment of convertible debt
For the full year ending December 31, 2022, Zendesk expects to report:
- Revenue in the range of $1.675 – 1.705 billion
- GAAP operating income (loss) in the range of $(221) – (201) million, which includes share-based compensation and related expenses of approximately $317 million, acquisition-related expenses of approximately $14 million, and amortization of purchased intangibles of approximately $7 million
- Non-GAAP operating income in the range of $117 – 137 million, which excludes share-based compensation and related expenses of approximately $317 million, acquisition-related expenses of approximately $14 million, and amortization of purchased intangibles of approximately $7 million
- Approximately 124 million weighted average shares outstanding (basic)
- Approximately 137 million weighted average shares outstanding (diluted), which is impacted by the adoption of a new accounting standard related to the treatment of convertible debt
- Free cash flow in the range of $165 – 195 million
This free cash flow guidance includes expected transaction costs of $14 – 17 million related to the proposed merger with Momentive Global Inc. (“Momentive”). We expect to incur additional transaction costs if the proposed merger closes, which would reduce the free cash flow and GAAP operating income (loss) guidance provided above.
We have not reconciled free cash flow guidance to net cash from operating activities for the full year 2022 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 2022 is not available without unreasonable effort.
This guidance for diluted shares outstanding reflects the adoption of a new accounting standard in Q1 2022, which will increase the amount of diluted shares related to our convertible debt. Please refer to “About Non-GAAP Financial Measures” below for further details.
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 live video webcast at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) on Thursday, February 10, 2022 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 started the customer experience revolution in 2007 by enabling any business around the world to take their customer service online. Today, Zendesk is the champion of great service everywhere for everyone, and powers billions of conversations, connecting more than 100,000 brands with hundreds of millions of customers over telephony, chat, email, messaging, social channels, communities, review sites and help centers. Zendesk products are built with love to be loved. The company was conceived in Copenhagen, Denmark, built and grown in California, taken public in New York City, and today employs more than 5,000 people across the world. Learn more at www.zendesk.com.
References to Zendesk, the “Company,” “our,” or “we” in this press release refer to Zendesk, Inc. and its subsidiaries on a consolidated basis.
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) Zendesk’s ability to adapt its products to changing market dynamics and customer preferences or achieve increased market acceptance of its products; (ii) the intensely competitive market in which Zendesk operates; (iii) the development of the market for software as a service business software applications; (iv) Zendesk’s substantial reliance on its customers renewing their subscriptions and purchasing additional subscriptions; (v) Zendesk’s ability to effectively market and sell its products to larger enterprises; (vi) Zendesk’s ability to develop or acquire and market new products and to support its products on a unified, reliable shared services platform; (vii) Zendesk’s reliance on third-party services, including services for hosting, email, and messaging; (viii) Zendesk’s ability to retain key employees and attract qualified personnel, particularly in the primary regions Zendesk operates; (ix) Zendesk’s ability to effectively manage its growth and organizational change, including its international expansion strategy; (x) 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; (xi) Zendesk’s ability to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions; (xii) real or perceived errors, failures, or bugs in Zendesk’s products; (xiii) potential service interruptions or performance problems associated with Zendesk’s technology and infrastructure; (xiv) Zendesk’s ability to securely maintain customer data and prevent, mitigate, and respond effectively to both historical and future data breaches; (xv) Zendesk’s ability to comply with privacy and data security regulations; (xvi) Zendesk’s ability to optimize the pricing for its solutions; (xvii) the risk that uncertainty about the proposed transaction with Momentive may adversely affect relationships with Zendesk’s customers, partners, suppliers, and employees, whether or not the transaction is completed; (xviii) the effect of the announcement of the proposed transaction on the ability of Zendesk to retain and hire key personnel; (xix) the risk that disruptions from the proposed transaction will harm Zendesk’s business, including current plans and operations; (xx) the risk of a potentially adverse reaction by Zendesk stockholders that oppose the proposed transaction; (xxi) potential litigation related to the proposed transaction and the resulting expense or delay; (xxii) the occurrence of any event, change or other circumstances that could give rise to the right to terminate the proposed transaction; (xxiii) the diversion of the attention of the management teams of Zendesk from their ongoing business operations; (xxiv) risks relating to the market value of Zendesk’s common stock to be issued in the proposed transaction; (xxv) the effect of uncertainties related to the COVID-19 pandemic on U.S. and global markets, Zendesk’s business, operations, revenue, cash flow, operating expenses, hiring, demand for their respective solutions, sales cycles, customer retention, and their respective customers’ businesses and industries; (xxvi) the failure to obtain stockholder or regulatory approvals in a timely manner or otherwise; (xxvii) the ability of Zendesk to successfully integrate Momentive’s operations and technologies; (xxviii) the ability of Zendesk to implement its plans, forecasts and other expectations with respect to its business after the completion of the transaction and realize expected synergies; (xxix) the ability to complete the proposed transaction within the time frame anticipated or at all; (xxx) the failure to realize the anticipated benefits of the proposed transaction or those benefits taking longer than anticipated to be realized; and (xxxi) other adverse changes in general economic or market conditions.
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, 2021. 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, 2021.
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 |
||||||||||||||||
|
|
|
Three Months Ended |
|
Year Ended |
||||||||||||
|
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
|
Revenue |
|
$ |
375,365 |
|
|
$ |
283,498 |
|
|
$ |
1,338,603 |
|
|
$ |
1,029,564 |
|
|
Cost of revenue |
|
|
77,020 |
|
|
|
67,219 |
|
|
|
274,883 |
|
|
|
251,255 |
|
|
Gross profit |
|
|
298,345 |
|
|
|
216,279 |
|
|
|
1,063,720 |
|
|
|
778,309 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
||||||||
|
Research and development |
|
|
103,328 |
|
|
|
71,134 |
|
|
|
352,049 |
|
|
|
255,400 |
|
|
Sales and marketing |
|
|
184,205 |
|
|
|
142,897 |
|
|
|
679,801 |
|
|
|
512,339 |
|
|
General and administrative |
|
|
58,887 |
|
|
|
57,041 |
|
|
|
198,554 |
|
|
|
166,469 |
|
|
Total operating expenses |
|
|
346,420 |
|
|
|
271,072 |
|
|
|
1,230,404 |
|
|
|
934,208 |
|
|
Operating loss |
|
|
(48,075 |
) |
|
|
(54,793 |
) |
|
|
(166,684 |
) |
|
|
(155,899 |
) |
|
Other income (expense), net: |
|
|
|
|
|
|
|
|
||||||||
|
Interest expense |
|
|
(14,953 |
) |
|
|
(14,258 |
) |
|
|
(58,721 |
) |
|
|
(43,319 |
) |
|
Loss on early extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(25,950 |
) |
|
Interest and other income (expense), net |
|
|
207 |
|
|
|
(1 |
) |
|
|
8,637 |
|
|
|
12,751 |
|
|
Total other income (expense), net |
|
|
(14,746 |
) |
|
|
(14,259 |
) |
|
|
(50,084 |
) |
|
|
(56,518 |
) |
|
Loss before (benefit from) provision for income taxes |
|
|
(62,821 |
) |
|
|
(69,052 |
) |
|
|
(216,768 |
) |
|
|
(212,417 |
) |
|
(Benefit from) provision for income taxes |
|
|
(966 |
) |
|
|
984 |
|
|
|
6,876 |
|
|
|
5,761 |
|
|
Net loss |
|
$ |
(61,855 |
) |
|
$ |
(70,036 |
) |
|
$ |
(223,644 |
) |
|
$ |
(218,178 |
) |
|
Net loss per share, basic and diluted |
|
$ |
(0.51 |
) |
|
$ |
(0.60 |
) |
|
$ |
(1.87 |
) |
|
$ |
(1.89 |
) |
|
Weighted-average shares used to compute net loss per share, basic and diluted |
|
|
121,124 |
|
|
|
116,986 |
|
|
|
119,573 |
|
|
|
115,240 |
|
|
Condensed Consolidated Balance Sheets |
|||||||
|
|
December 31, |
|
December 31, |
||||
|
Assets |
|
|
|
||||
|
Current assets: |
|
|
|
||||
|
Cash and cash equivalents |
$ |
476,103 |
|
|
$ |
405,430 |
|
|
Marketable securities |
|
539,780 |
|
|
|
565,593 |
|
|
Accounts receivable, net of allowance for credit losses of $6,190 and $5,787 as of December 31, 2021 |
|
273,898 |
|
|
|
199,243 |
|
|
Deferred costs |
|
72,042 |
|
|
|
51,878 |
|
|
Prepaid expenses and other current assets |
|
56,809 |
|
|
|
53,829 |
|
|
Total current assets |
|
1,418,632 |
|
|
|
1,275,973 |
|
|
Marketable securities, noncurrent |
|
559,652 |
|
|
|
428,678 |
|
|
Property and equipment, net |
|
97,815 |
|
|
|
94,208 |
|
|
Deferred costs, noncurrent |
|
72,553 |
|
|
|
52,731 |
|
|
Lease right-of-use assets |
|
69,936 |
|
|
|
84,013 |
|
|
Goodwill and intangible assets, net |
|
197,098 |
|
|
|
196,218 |
|
|
Other assets |
|
35,593 |
|
|
|
25,458 |
|
|
Total assets |
$ |
2,451,279 |
|
|
$ |
2,157,279 |
|
|
|
|
|
|
||||
|
Liabilities and stockholders’ equity |
|
|
|
||||
|
Current liabilities: |
|
|
|
||||
|
Accounts payable |
$ |
49,213 |
|
|
$ |
15,428 |
|
|
Accrued liabilities |
|
50,075 |
|
|
|
38,921 |
|
|
Accrued compensation and related benefits |
|
138,127 |
|
|
|
103,437 |
|
|
Deferred revenue |
|
512,933 |
|
|
|
378,935 |
|
|
Lease liabilities |
|
21,253 |
|
|
|
23,533 |
|
|
Current portion of convertible senior notes, net |
|
139,738 |
|
|
|
132,388 |
|
|
Total current liabilities |
|
911,339 |
|
|
|
692,642 |
|
|
Convertible senior notes, net |
|
979,350 |
|
|
|
935,576 |
|
|
Deferred revenue, noncurrent |
|
4,277 |
|
|
|
4,423 |
|
|
Lease liabilities, noncurrent |
|
63,212 |
|
|
|
85,275 |
|
|
Other liabilities |
|
3,883 |
|
|
|
7,532 |
|
|
Total liabilities |
|
1,962,061 |
|
|
|
1,725,448 |
|
|
Stockholders’ equity: |
|
|
|
||||
|
Preferred stock, par value $0.01 per share |
|
— |
|
|
|
— |
|
|
Common stock, par value $0.01 per share |
|
1,215 |
|
|
|
1,174 |
|
|
Additional paid-in capital |
|
1,637,157 |
|
|
|
1,344,337 |
|
|
Accumulated other comprehensive (loss) income |
|
(8,911 |
) |
|
|
3,203 |
|
|
Accumulated deficit |
|
(1,140,243 |
) |
|
|
(916,883 |
) |
|
Total stockholders’ equity |
|
489,218 |
|
|
|
431,831 |
|
|
Total liabilities and stockholders’ equity |
$ |
2,451,279 |
|
|
$ |
2,157,279 |
|
|
Condensed Consolidated Statements of Cash Flows |
||||||||||||||||
|
|
|
Three Months Ended |
|
Year Ended |
||||||||||||
|
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
||||||||
|
Net loss |
|
$ |
(61,855 |
) |
|
$ |
(70,036 |
) |
|
$ |
(223,644 |
) |
|
$ |
(218,178 |
) |
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
||||||||
|
Depreciation and amortization |
|
|
9,657 |
|
|
|
9,645 |
|
|
|
37,610 |
|
|
|
42,247 |
|
|
Share-based compensation |
|
|
61,584 |
|
|
|
50,147 |
|
|
|
230,185 |
|
|
|
182,204 |
|
|
Amortization of deferred costs |
|
|
18,997 |
|
|
|
13,036 |
|
|
|
67,736 |
|
|
|
45,426 |
|
|
Amortization of debt discount and issuance costs |
|
|
13,039 |
|
|
|
12,358 |
|
|
|
51,124 |
|
|
|
38,588 |
|
|
Loss on early extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
25,950 |
|
|
Real estate impairment |
|
|
— |
|
|
|
14,975 |
|
|
|
— |
|
|
|
14,975 |
|
|
Allowance for credit losses on accounts receivable |
|
|
659 |
|
|
|
1,686 |
|
|
|
6,858 |
|
|
|
10,136 |
|
|
Repayment of convertible senior notes attributable to debt discount |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(38,637 |
) |
|
Other, net |
|
|
3,440 |
|
|
|
7,909 |
|
|
|
4,681 |
|
|
|
5,602 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
||||||||
|
Accounts receivable |
|
|
(91,205 |
) |
|
|
(47,910 |
) |
|
|
(87,472 |
) |
|
|
(80,945 |
) |
|
Prepaid expenses and other current assets |
|
|
7,586 |
|
|
|
1,207 |
|
|
|
(1,799 |
) |
|
|
(1,909 |
) |
|
Deferred costs |
|
|
(29,327 |
) |
|
|
(30,088 |
) |
|
|
(105,173 |
) |
|
|
(77,380 |
) |
|
Lease right-of-use assets |
|
|
4,548 |
|
|
|
4,900 |
|
|
|
17,424 |
|
|
|
20,372 |
|
|
Other assets and liabilities |
|
|
(5,613 |
) |
|
|
1,821 |
|
|
|
(9,501 |
) |
|
|
799 |
|
|
Accounts payable |
|
|
14,399 |
|
|
|
5,404 |
|
|
|
32,703 |
|
|
|
(20,804 |
) |
|
Accrued liabilities |
|
|
4,078 |
|
|
|
3,231 |
|
|
|
5,427 |
|
|
|
4,800 |
|
|
Accrued compensation and related benefits |
|
|
18,396 |
|
|
|
20,206 |
|
|
|
34,455 |
|
|
|
38,458 |
|
|
Deferred revenue |
|
|
71,754 |
|
|
|
55,028 |
|
|
|
136,464 |
|
|
|
59,397 |
|
|
Lease liabilities |
|
|
(4,658 |
) |
|
|
(7,170 |
) |
|
|
(27,316 |
) |
|
|
(24,673 |
) |
|
Net cash provided by operating activities |
|
|
35,479 |
|
|
|
46,349 |
|
|
|
169,762 |
|
|
|
26,428 |
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
||||||||
|
Purchases of property and equipment |
|
|
(4,117 |
) |
|
|
(3,388 |
) |
|
|
(15,147 |
) |
|
|
(22,877 |
) |
|
Internal-use software development costs |
|
|
(3,088 |
) |
|
|
(4,745 |
) |
|
|
(13,925 |
) |
|
|
(15,646 |
) |
|
Purchases of marketable securities |
|
|
(244,986 |
) |
|
|
(148,289 |
) |
|
|
(963,622 |
) |
|
|
(849,656 |
) |
|
Proceeds from maturities of marketable securities |
|
|
126,850 |
|
|
|
94,210 |
|
|
|
717,438 |
|
|
|
375,686 |
|
|
Proceeds from sales of marketable securities |
|
|
25,612 |
|
|
|
24,581 |
|
|
|
127,607 |
|
|
|
130,087 |
|
|
Business combinations, net of cash acquired |
|
|
— |
|
|
|
— |
|
|
|
(7,811 |
) |
|
|
— |
|
|
Purchases of strategic investments |
|
|
(4,000 |
) |
|
|
— |
|
|
|
(5,000 |
) |
|
|
(1,500 |
) |
|
Proceeds from sales of strategic investments |
|
|
— |
|
|
|
— |
|
|
|
1,008 |
|
|
|
1,577 |
|
|
Net cash used in investing activities |
|
|
(103,729 |
) |
|
|
(37,631 |
) |
|
|
(159,452 |
) |
|
|
(382,329 |
) |
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
||||||||
|
Proceeds from issuance of 2025 convertible senior notes, net of issuance |
|
|
— |
|
|
|
(20 |
) |
|
|
— |
|
|
|
1,128,970 |
|
|
Purchase of capped calls related to 2025 convertible senior notes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(129,950 |
) |
|
Payments for 2023 convertible senior notes partial repurchase |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(578,973 |
) |
|
Proceeds from capped calls related to 2023 convertible senior notes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
83,040 |
|
|
Proceeds from exercises of employee stock options |
|
|
3,169 |
|
|
|
4,532 |
|
|
|
22,058 |
|
|
|
29,123 |
|
|
Proceeds from employee stock purchase plan |
|
|
11,373 |
|
|
|
11,541 |
|
|
|
48,509 |
|
|
|
40,454 |
|
|
Taxes paid related to net share settlement of share-based awards |
|
|
(2,402 |
) |
|
|
(2,720 |
) |
|
|
(11,342 |
) |
|
|
(8,847 |
) |
|
Net cash provided by financing activities |
|
|
12,140 |
|
|
|
13,333 |
|
|
|
59,225 |
|
|
|
563,817 |
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted |
|
|
(11 |
) |
|
|
(191 |
) |
|
|
(44 |
) |
|
|
46 |
|
|
Net (decrease) increase in cash, cash equivalents and restricted cash |
|
|
(56,121 |
) |
|
|
21,860 |
|
|
|
69,491 |
|
|
|
207,962 |
|
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
533,471 |
|
|
|
385,999 |
|
|
|
407,859 |
|
|
|
199,897 |
|
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
477,350 |
|
|
$ |
407,859 |
|
|
$ |
477,350 |
|
|
$ |
407,859 |
|
|
Non-GAAP Results |
||||||||||||||||
|
|
|
Three Months Ended |
|
Year Ended |
||||||||||||
|
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
|
Reconciliation of gross profit and gross margin |
|
|
|
|
|
|
|
|
||||||||
|
GAAP gross profit |
|
$ |
298,345 |
|
|
$ |
216,279 |
|
|
$ |
1,063,720 |
|
|
$ |
778,309 |
|
|
Plus: Share-based compensation |
|
|
5,957 |
|
|
|
4,990 |
|
|
|
21,004 |
|
|
|
20,068 |
|
|
Plus: Employer tax related to employee stock transactions |
|
|
203 |
|
|
|
279 |
|
|
|
1,170 |
|
|
|
1,242 |
|
|
Plus: Amortization of purchased intangibles |
|
|
1,205 |
|
|
|
2,737 |
|
|
|
4,655 |
|
|
|
7,987 |
|
|
Plus: Acquisition-related expenses |
|
|
— |
|
|
|
54 |
|
|
|
161 |
|
|
|
346 |
|
|
Plus: Amortization of share-based compensation capitalized in |
|
|
411 |
|
|
|
700 |
|
|
|
1,555 |
|
|
|
2,075 |
|
|
Non-GAAP gross profit |
|
$ |
306,121 |
|
|
$ |
225,039 |
|
|
$ |
1,092,265 |
|
|
$ |
810,027 |
|
|
GAAP gross margin |
|
|
79 |
% |
|
|
76 |
% |
|
|
79 |
% |
|
|
76 |
% |
|
Non-GAAP adjustments |
|
|
3 |
% |
|
|
3 |
% |
|
|
3 |
% |
|
|
3 |
% |
|
Non-GAAP gross margin |
|
|
82 |
% |
|
|
79 |
% |
|
|
82 |
% |
|
|
79 |
% |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Reconciliation of operating expenses |
|
|
|
|
|
|
|
|
||||||||
|
GAAP research and development |
|
$ |
103,328 |
|
|
$ |
71,134 |
|
|
$ |
352,049 |
|
|
$ |
255,400 |
|
|
Less: Share-based compensation |
|
|
(18,311 |
) |
|
|
(14,892 |
) |
|
|
(68,197 |
) |
|
|
(53,967 |
) |
|
Less: Employer tax related to employee stock transactions |
|
|
(541 |
) |
|
|
(606 |
) |
|
|
(3,667 |
) |
|
|
(2,687 |
) |
|
Less: Acquisition-related expenses |
|
|
(1,343 |
) |
|
|
(947 |
) |
|
|
(4,419 |
) |
|
|
(4,329 |
) |
|
Less: Amortization of share-based compensation capitalized in |
|
|
(17 |
) |
|
|
— |
|
|
|
(68 |
) |
|
|
— |
|
|
Non-GAAP research and development |
|
$ |
83,116 |
|
|
$ |
54,689 |
|
|
$ |
275,698 |
|
|
$ |
194,417 |
|
|
GAAP research and development as percentage of revenue |
|
|
28 |
% |
|
|
25 |
% |
|
|
26 |
% |
|
|
25 |
% |
|
Non-GAAP research and development as percentage of revenue |
|
|
22 |
% |
|
|
19 |
% |
|
|
21 |
% |
|
|
19 |
% |
|
|
|
|
|
|
|
|
|
|
||||||||
|
GAAP sales and marketing |
|
$ |
184,205 |
|
|
$ |
142,897 |
|
|
$ |
679,801 |
|
|
$ |
512,339 |
|
|
Less: Share-based compensation |
|
|
(26,040 |
) |
|
|
(21,329 |
) |
|
|
(98,688 |
) |
|
|
(74,796 |
) |
|
Less: Employer tax related to employee stock transactions |
|
|
(645 |
) |
|
|
(764 |
) |
|
|
(4,838 |
) |
|
|
(3,687 |
) |
|
Less: Amortization of purchased intangibles |
|
|
(642 |
) |
|
|
(652 |
) |
|
|
(2,568 |
) |
|
|
(2,692 |
) |
|
Less: Acquisition-related expenses |
|
|
(33 |
) |
|
|
(87 |
) |
|
|
(407 |
) |
|
|
(1,233 |
) |
|
Non-GAAP sales and marketing |
|
$ |
156,845 |
|
|
$ |
120,065 |
|
|
$ |
573,300 |
|
|
$ |
429,931 |
|
|
GAAP sales and marketing as percentage of revenue |
|
|
49 |
% |
|
|
50 |
% |
|
|
51 |
% |
|
|
50 |
% |
|
Non-GAAP sales and marketing as percentage of revenue |
|
|
42 |
% |
|
|
42 |
% |
|
|
43 |
% |
|
|
42 |
% |
|
|
|
|
|
|
|
|
|
|
||||||||
|
GAAP general and administrative |
|
$ |
58,887 |
|
|
$ |
57,041 |
|
|
$ |
198,554 |
|
|
$ |
166,469 |
|
|
Less: Share-based compensation |
|
|
(11,276 |
) |
|
|
(8,936 |
) |
|
|
(42,296 |
) |
|
|
(33,373 |
) |
|
Less: Employer tax related to employee stock transactions |
|
|
(587 |
) |
|
|
(440 |
) |
|
|
(3,385 |
) |
|
|
(2,354 |
) |
|
Less: Acquisition-related expenses |
|
|
(7,860 |
) |
|
|
(876 |
) |
|
|
(8,959 |
) |
|
|
(1,814 |
) |
|
Less: Real estate impairments |
|
|
(201 |
) |
|
|
(15,003 |
) |
|
|
(1,312 |
) |
|
|
(15,003 |
) |
|
Non-GAAP general and administrative |
|
$ |
38,963 |
|
|
$ |
31,786 |
|
|
$ |
142,602 |
|
|
$ |
113,925 |
|
|
GAAP general and administrative as percentage of revenue |
|
|
16 |
% |
|
|
20 |
% |
|
|
15 |
% |
|
|
16 |
% |
|
Non-GAAP general and administrative as percentage of revenue |
|
|
10 |
% |
|
|
11 |
% |
|
|
11 |
% |
|
|
11 |
% |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Reconciliation of operating income (loss) and operating margin |
|
|
|
|
|
|
|
|
||||||||
|
GAAP operating loss |
|
$ |
(48,075 |
) |
|
$ |
(54,793 |
) |
|
$ |
(166,684 |
) |
|
$ |
(155,899 |
) |
|
Plus: Share-based compensation |
|
|
61,584 |
|
|
|
50,147 |
|
|
|
230,185 |
|
|
|
182,204 |
|
|
Plus: Employer tax related to employee stock transactions |
|
|
1,976 |
|
|
|
2,089 |
|
|
|
13,060 |
|
|
|
9,970 |
|
|
Plus: Amortization of purchased intangibles |
|
|
1,847 |
|
|
|
3,389 |
|
|
|
7,223 |
|
|
|
10,679 |
|
|
Plus: Acquisition-related expenses |
|
|
9,236 |
|
|
|
1,964 |
|
|
|
13,946 |
|
|
|
7,722 |
|
|
Plus: Amortization of share-based compensation capitalized in |
|
|
428 |
|
|
|
700 |
|
|
|
1,623 |
|
|
|
2,075 |
|
|
Plus: Real estate impairments |
|
|
201 |
|
|
|
15,003 |
|
|
|
1,312 |
|
|
|
15,003 |
|
|
Non-GAAP operating income |
|
$ |
27,197 |
|
|
$ |
18,499 |
|
|
$ |
100,665 |
|
|
$ |
71,754 |
|
|
GAAP operating margin |
|
|
(13 |
) % |
|
|
(19 |
) % |
|
|
(12 |
) % |
|
|
(15 |
) % |
|
Non-GAAP adjustments |
|
|
20 |
% |
|
|
26 |
% |
|
|
20 |
% |
|
|
22 |
% |
|
Non-GAAP operating margin |
|
|
7 |
% |
|
|
7 |
% |
|
|
8 |
% |
|
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Reconciliation of net income (loss) |
|
|
|
|
|
|
|
|
||||||||
|
GAAP net loss |
|
$ |
(61,855 |
) |
|
$ |
(70,036 |
) |
|
$ |
(223,644 |
) |
|
$ |
(218,178 |
) |
|
Plus: Share-based compensation |
|
|
61,584 |
|
|
|
50,147 |
|
|
|
230,185 |
|
|
|
182,204 |
|
|
Plus: Employer tax related to employee stock transactions |
|
|
1,976 |
|
|
|
2,089 |
|
|
|
13,060 |
|
|
|
9,970 |
|
|
Plus: Amortization of purchased intangibles |
|
|
1,847 |
|
|
|
3,389 |
|
|
|
7,223 |
|
|
|
10,679 |
|
|
Plus: Acquisition-related expenses |
|
|
9,236 |
|
|
|
1,964 |
|
|
|
13,946 |
|
|
|
7,722 |
|
|
Plus: Amortization of share-based compensation capitalized in |
|
|
428 |
|
|
|
700 |
|
|
|
1,623 |
|
|
|
2,075 |
|
|
Plus: Real estate impairments |
|
|
201 |
|
|
|
15,003 |
|
|
|
1,312 |
|
|
|
15,003 |
|
|
Plus: Amortization of debt discount and issuance costs |
|
|
13,039 |
|
|
|
12,358 |
|
|
|
51,124 |
|
|
|
38,588 |
|
|
Plus: Loss on early extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
25,950 |
|
|
Less: Income tax effects and adjustments |
|
|
(6,318 |
) |
|
|
(2,501 |
) |
|
|
(14,481 |
) |
|
|
(10,993 |
) |
|
Non-GAAP net income |
|
$ |
20,138 |
|
|
$ |
13,113 |
|
|
$ |
80,348 |
|
|
$ |
63,020 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Reconciliation of net income (loss) per share, basic |
|
|
|
|
|
|
|
|
||||||||
|
GAAP net loss per share, basic |
|
$ |
(0.51 |
) |
|
$ |
(0.60 |
) |
|
$ |
(1.87 |
) |
|
$ |
(1.89 |
) |
|
Non-GAAP adjustments to net loss |
|
|
0.68 |
|
|
|
0.71 |
|
|
|
2.54 |
|
|
|
2.44 |
|
|
Non-GAAP net income per share, basic |
|
$ |
0.17 |
|
|
$ |
0.11 |
|
|
$ |
0.67 |
|
|
$ |
0.55 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Reconciliation of net income (loss) per share, diluted |
|
|
|
|
|
|
|
|
||||||||
|
GAAP net loss per share, diluted |
|
$ |
(0.51 |
) |
|
$ |
(0.60 |
) |
|
$ |
(1.87 |
) |
|
$ |
(1.89 |
) |
|
Non-GAAP adjustments to net loss |
|
|
0.67 |
|
|
|
0.71 |
|
|
|
2.50 |
|
|
|
2.41 |
|
|
Non-GAAP net income per share, diluted |
|
$ |
0.16 |
|
|
$ |
0.11 |
|
|
$ |
0.63 |
|
|
$ |
0.52 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Weighted-average shares used in GAAP per share calculation, |
|
|
121,124 |
|
|
|
116,986 |
|
|
|
119,573 |
|
|
|
115,240 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Weighted-average shares used in non-GAAP per share calculation |
|
|
|
|
|
|
|
|
||||||||
|
Basic |
|
|
121,124 |
|
|
|
116,986 |
|
|
|
119,573 |
|
|
|
115,240 |
|
|
Diluted |
|
|
124,939 |
|
|
|
124,781 |
|
|
|
126,780 |
|
|
|
121,301 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Computation of free cash flow |
|
|
|
|
|
|
|
|
||||||||
|
Net cash provided by operating activities |
|
$ |
35,479 |
|
|
$ |
46,349 |
|
|
$ |
169,762 |
|
|
$ |
26,428 |
|
|
Plus: Repayment of convertible senior notes attributable to debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
38,637 |
|
|
Less: Purchases of property and equipment |
|
|
(4,117 |
) |
|
|
(3,388 |
) |
|
|
(15,147 |
) |
|
|
(22,877 |
) |
|
Less: Internal-use software development costs |
|
|
(3,088 |
) |
|
|
(4,745 |
) |
|
|
(13,925 |
) |
|
|
(15,646 |
) |
|
Free cash flow |
|
$ |
28,274 |
|
|
$ |
38,216 |
|
|
$ |
140,690 |
|
|
$ |
26,542 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Net cash provided by operating activities margin |
|
|
9 |
% |
|
|
16 |
% |
|
|
13 |
% |
|
|
3 |
% |
|
Non-GAAP adjustments |
|
|
(1 |
) % |
|
|
(3 |
) % |
|
|
(2 |
) % |
|
|
— |
% |
|
Free cash flow margin |
|
|
8 |
% |
|
|
13 |
% |
|
|
11 |
% |
|
|
3 |
% |
Contacts
Zendesk, Inc.
Investor Contact:
Jason Tsai, +1 415-997-8882
ir@zendesk.com
or
Media Contact:
Stephanie Barnes, +1 415-722-0883
press@zendesk.com
