Highlights:
- Third quarter revenue increased 32% year over year to $347.0 million
- Third quarter GAAP operating loss of $38.9 million and non-GAAP operating income of $27.0 million
SAN FRANCISCO–(BUSINESS WIRE)–Zendesk, Inc. (NYSE: ZEN) today reported financial results for the third quarter ended 30 Settembre 2021, and released a Shareholder Letter on its investor relations website at https://investor.zendesk.com.
Results for the Third Quarter 2021
Revenue was $347.0 million for the quarter ended 30 Settembre 2021, an increase of 32% over the prior year period. GAAP net loss for the quarter ended 30 Settembre 2021 was $54.4 million, and GAAP net loss per share (basic and diluted) was $0.45. Non-GAAP net income was $21.7 million, and non-GAAP net income per share was $0.18 (basic) and $0.17 (diluted). Non-GAAP net income excludes approximately $62.0 million in share-based compensation and related expenses (including $2.1 million of employer tax related to employee stock transactions and $0.4 million of amortization of share-based compensation capitalized in internal-use software), $12.9 million of amortization of debt discount and issuance costs, $2.2 million of acquisition-related expenses, $1.7 million of amortization of purchased intangibles, $(0.1) million of real estate impairments, and non-GAAP income tax effects and adjustments of $2.6 million. GAAP net loss per share for the quarter ended 30 Settembre 2021 was based on 120.2 million weighted average shares outstanding (basic and diluted), and non-GAAP net income per share for the quarter ended 30 Settembre 2021 was based on 120.2 million weighted average shares outstanding (basic) and 126.9 million weighted average shares outstanding (diluted).
Outlook
As of 28 Ottobre 2021, Zendesk provided guidance for the quarter and full year ending 31 Dicembre 2021.
For the quarter ending 31 Dicembre 2021, Zendesk expects to report:
Revenue in the range of $366 – 372 million
- GAAP operating income (loss) in the range of $(49) – (43) million, which includes share-based compensation and related expenses of approximately $68 million, amortization of purchased intangibles of approximately $2 million, and acquisition-related expenses of approximately $1 million
- Non-GAAP operating income in the range of $22 – 28 million, which excludes share-based compensation and related expenses of approximately $68 million, amortization of purchased intangibles of approximately $2 million, and acquisition-related expenses of approximately $1 million
- Approximately 121 million weighted average shares outstanding (basic)
- Approximately 127 million weighted average shares outstanding (diluted)
For the full year ending 31 Dicembre 2021, Zendesk expects to report:
Revenue in the range of $1.329 – 1.335 billion
- GAAP operating income (loss) in the range of $(166) – (160) million, which includes share-based compensation and related expenses of approximately $248 million, amortization of purchased intangibles of approximately $7 million, acquisition-related expenses of approximately $6 million, and real estate impairments of approximately $1 million
- Non-GAAP operating income in the range of $96 – 102 million, which excludes share-based compensation and related expenses of approximately $248 million, amortization of purchased intangibles of approximately $7 million, acquisition-related expenses of approximately $6 million, and real estate impairments of approximately $1 million
- Approximately 120 million weighted average shares outstanding (basic)
- Approximately 128 million weighted average shares outstanding (diluted)
- Free cash flow in the range of $140 – 150 million, which includes the impact of a lease termination payment of approximately $7 million paid in the second quarter of 2021 related to our real estate changes in San Francisco
We have not reconciled free cash flow guidance to net cash from operating activities for the full year 2021 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 2021 is not available without unreasonable effort.
Zendesk’s estimates of share-based compensation and related expenses, amortization of purchased intangibles, acquisition-related expenses, real estate impairments, 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, 28 Ottobre 2021 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; and (xvii) 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 Annual Report on Form 10-K for the year ended 31 Dicembre 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 30 Settembre 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 |
|||||||||||||||||||
|
(In thousands, except per share data; unaudited) |
|||||||||||||||||||
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||||||
|
Revenue |
$ |
346,974 |
|
|
|
$ |
261,926 |
|
|
|
$ |
963,238 |
|
|
|
$ |
746,066 |
|
|
|
Cost of revenue |
70,226 |
|
|
|
62,819 |
|
|
|
197,863 |
|
|
|
184,036 |
|
|
||||
|
Gross profit |
276,748 |
|
|
|
199,107 |
|
|
|
765,375 |
|
|
|
562,030 |
|
|
||||
|
Operating expenses: |
|
|
|
|
|
|
|
||||||||||||
|
Research and development |
92,112 |
|
|
|
64,842 |
|
|
|
248,721 |
|
|
|
184,266 |
|
|
||||
|
Sales and marketing |
172,828 |
|
|
|
123,737 |
|
|
|
495,596 |
|
|
|
369,442 |
|
|
||||
|
General and administrative |
50,716 |
|
|
|
38,854 |
|
|
|
139,667 |
|
|
|
109,427 |
|
|
||||
|
Total operating expenses |
315,656 |
|
|
|
227,433 |
|
|
|
883,984 |
|
|
|
663,135 |
|
|
||||
|
Operating loss |
(38,908 |
) |
|
|
(28,326 |
) |
|
|
(118,609 |
) |
|
|
(101,105 |
) |
|
||||
|
Other income (expense), net: |
|
|
|
|
|
|
|
||||||||||||
|
Interest expense |
(14,762 |
) |
|
|
(14,087 |
) |
|
|
(43,768 |
) |
|
|
(29,060 |
) |
|
||||
|
Loss on early extinguishment of debt |
— |
|
|
|
— |
|
|
|
— |
|
|
|
(25,950 |
) |
|
||||
|
Interest and other income (expense), net |
2,386 |
|
|
|
3,683 |
|
|
|
8,430 |
|
|
|
12,750 |
|
|
||||
|
Total other income (expense), net |
(12,376 |
) |
|
|
(10,404 |
) |
|
|
(35,338 |
) |
|
|
(42,260 |
) |
|
||||
|
Loss before provision for income taxes |
(51,284 |
) |
|
|
(38,730 |
) |
|
|
(153,947 |
) |
|
|
(143,365 |
) |
|
||||
|
Provision for income taxes |
3,133 |
|
|
|
1,973 |
|
|
|
7,842 |
|
|
|
4,777 |
|
|
||||
|
Net loss |
$ |
(54,417 |
) |
|
|
$ |
(40,703 |
) |
|
|
$ |
(161,789 |
) |
|
|
$ |
(148,142 |
) |
|
|
Net loss per share, basic and diluted |
$ |
(0.45 |
) |
|
|
$ |
(0.35 |
) |
|
|
$ |
(1.36 |
) |
|
|
$ |
(1.29 |
) |
|
|
Weighted-average shares used to compute net loss per share, basic and diluted |
120,164 |
|
|
|
115,809 |
|
|
|
119,050 |
|
|
|
114,653 |
|
|
||||
|
Condensed Consolidated Balance Sheets |
|||||||||
|
(In thousands, except par value; unaudited) |
|||||||||
|
|
September 30, |
|
December 31, |
||||||
|
Assets |
|
|
|
||||||
|
Current assets: |
|
|
|
||||||
|
Cash and cash equivalents |
$ |
532,517 |
|
|
|
$ |
405,430 |
|
|
|
Marketable securities |
421,328 |
|
|
|
565,593 |
|
|
||
|
Accounts receivable, net of allowance for credit losses of $4,702 and $5,787 as of 30 Settembre 2021 and 31 Dicembre 2020, respectively |
187,460 |
|
|
|
199,243 |
|
|
||
|
Deferred costs |
66,282 |
|
|
|
51,878 |
|
|
||
|
Prepaid expenses and other current assets |
61,769 |
|
|
|
53,829 |
|
|
||
|
Total current assets |
1,269,356 |
|
|
|
1,275,973 |
|
|
||
|
Marketable securities, noncurrent |
591,153 |
|
|
|
428,678 |
|
|
||
|
Property and equipment, net |
93,523 |
|
|
|
94,208 |
|
|
||
|
Deferred costs, noncurrent |
67,448 |
|
|
|
52,731 |
|
|
||
|
Lease right-of-use assets |
73,094 |
|
|
|
84,013 |
|
|
||
|
Goodwill and intangible assets, net |
198,946 |
|
|
|
196,218 |
|
|
||
|
Other assets |
27,720 |
|
|
|
25,458 |
|
|
||
|
Total assets |
$ |
2,321,240 |
|
|
|
$ |
2,157,279 |
|
|
|
|
|
|
|
||||||
|
Liabilities and stockholders’ equity |
|
|
|
||||||
|
Current liabilities: |
|
|
|
||||||
|
Accounts payable |
$ |
33,535 |
|
|
|
$ |
15,428 |
|
|
|
Accrued liabilities |
45,401 |
|
|
|
38,921 |
|
|
||
|
Accrued compensation and related benefits |
128,280 |
|
|
|
103,437 |
|
|
||
|
Deferred revenue |
444,373 |
|
|
|
378,935 |
|
|
||
|
Lease liabilities |
20,201 |
|
|
|
23,533 |
|
|
||
|
Current portion of convertible senior notes, net |
137,861 |
|
|
|
132,388 |
|
|
||
|
Total current liabilities |
809,651 |
|
|
|
692,642 |
|
|
||
|
Convertible senior notes, net |
968,188 |
|
|
|
935,576 |
|
|
||
|
Deferred revenue, noncurrent |
3,696 |
|
|
|
4,423 |
|
|
||
|
Lease liabilities, noncurrent |
66,733 |
|
|
|
85,275 |
|
|
||
|
Other liabilities |
4,696 |
|
|
|
7,532 |
|
|
||
|
Total liabilities |
1,852,964 |
|
|
|
1,725,448 |
|
|
||
|
|
|
|
|
||||||
|
Stockholders’ equity: |
|
|
|
||||||
|
Preferred stock, par value $0.01 per share |
— |
|
|
|
— |
|
|
||
|
Common stock, par value $0.01 per share |
1,204 |
|
|
|
1,174 |
|
|
||
|
Additional paid-in capital |
1,553,846 |
|
|
|
1,344,337 |
|
|
||
|
Accumulated other comprehensive (loss) income |
(8,385 |
) |
|
|
3,203 |
|
|
||
|
Accumulated deficit |
(1,078,389 |
) |
|
|
(916,883 |
) |
|
||
|
Total stockholders’ equity |
468,276 |
|
|
|
431,831 |
|
|
||
|
Total liabilities and stockholders’ equity |
$ |
2,321,240 |
|
|
|
$ |
2,157,279 |
|
|
|
Condensed Consolidated Statements of Cash Flows |
|||||||||
|
(In thousands; unaudited) |
|||||||||
|
|
Three Months Ended September 30, |
||||||||
|
|
2021 |
|
|
2020 |
|
||||
|
Cash flows from operating activities |
|
|
|
||||||
|
Net loss |
$ |
(54,417 |
) |
|
|
$ |
(40,703 |
) |
|
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
||||||
|
Depreciation and amortization |
9,330 |
|
|
|
10,613 |
|
|
||
|
Share-based compensation |
59,533 |
|
|
|
46,263 |
|
|
||
|
Amortization of deferred costs |
17,797 |
|
|
|
11,660 |
|
|
||
|
Amortization of debt discount and issuance costs |
12,866 |
|
|
|
12,194 |
|
|
||
|
Allowance for credit losses on accounts receivable |
1,704 |
|
|
|
2,836 |
|
|
||
|
Other, net |
1,118 |
|
|
|
(1,848 |
) |
|
||
|
Changes in operating assets and liabilities: |
|
|
|
||||||
|
Accounts receivable |
15,231 |
|
|
|
(12,392 |
) |
|
||
|
Prepaid expenses and other current assets |
(7,646 |
) |
|
|
100 |
|
|
||
|
Deferred costs |
(22,595 |
) |
|
|
(18,976 |
) |
|
||
|
Lease right-of-use assets |
4,058 |
|
|
|
5,225 |
|
|
||
|
Other assets and liabilities |
(2,038 |
) |
|
|
(482 |
) |
|
||
|
Accounts payable |
12,927 |
|
|
|
(3,193 |
) |
|
||
|
Accrued liabilities |
3,910 |
|
|
|
593 |
|
|
||
|
Accrued compensation and related benefits |
22,020 |
|
|
|
14,463 |
|
|
||
|
Deferred revenue |
5,571 |
|
|
|
12,217 |
|
|
||
|
Lease liabilities |
(5,559 |
) |
|
|
(5,175 |
) |
|
||
|
Net cash provided by operating activities |
73,810 |
|
|
|
33,395 |
|
|
||
|
Cash flows from investing activities |
|
|
|
||||||
|
Purchases of property and equipment |
(5,073 |
) |
|
|
(3,931 |
) |
|
||
|
Internal-use software development costs |
(3,299 |
) |
|
|
(4,618 |
) |
|
||
|
Purchases of marketable securities |
(213,786 |
) |
|
|
(468,032 |
) |
|
||
|
Proceeds from maturities of marketable securities |
209,980 |
|
|
|
89,493 |
|
|
||
|
Proceeds from sales of marketable securities |
44,934 |
|
|
|
10,908 |
|
|
||
|
Business combinations, net of cash acquired |
(7,811 |
) |
|
|
— |
|
|
||
|
Purchases of strategic investments |
(1,000 |
) |
|
|
— |
|
|
||
|
Proceeds from sales of strategic investments |
1,008 |
|
|
|
1,577 |
|
|
||
|
Net cash provided by (used in) investing activities |
24,953 |
|
|
|
(374,603 |
) |
|
||
|
Cash flows from financing activities |
|
|
|
||||||
|
Proceeds from exercises of employee stock options |
3,754 |
|
|
|
15,489 |
|
|
||
|
Proceeds from employee stock purchase plan |
10,358 |
|
|
|
9,996 |
|
|
||
|
Taxes paid related to net share settlement of share-based awards |
(2,638 |
) |
|
|
(1,990 |
) |
|
||
|
Other |
— |
|
|
|
(610 |
) |
|
||
|
Net cash provided by financing activities |
11,474 |
|
|
|
22,885 |
|
|
||
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
(14 |
) |
|
|
206 |
|
|
||
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
110,223 |
|
|
|
(318,117 |
) |
|
||
|
Cash, cash equivalents and restricted cash at beginning of period |
423,248 |
|
|
|
704,116 |
|
|
||
|
Cash, cash equivalents and restricted cash at end of period |
$ |
533,471 |
|
|
|
$ |
385,999 |
|
|
|
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, |
||||||||||||||
|
|
2021 |
|
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|||||
|
Reconciliation of gross profit and gross margin |
|
|
|
|
|
|
|
||||||||||
|
GAAP gross profit |
$ |
276,748 |
|
|
$ |
199,107 |
|
|
$ |
765,375 |
|
|
$ |
562,030 |
|
||
|
Plus: Share-based compensation |
5,343 |
|
|
4,831 |
|
|
15,047 |
|
|
15,077 |
|
||||||
|
Plus: Employer tax related to employee stock transactions |
187 |
|
|
247 |
|
|
967 |
|
|
963 |
|
||||||
|
Plus: Amortization of purchased intangibles |
1,095 |
|
|
1,525 |
|
|
3,450 |
|
|
5,249 |
|
||||||
|
Plus: Acquisition-related expenses |
37 |
|
|
85 |
|
|
161 |
|
|
292 |
|
||||||
|
Plus: Amortization of share-based compensation capitalized in internal-use software |
373 |
|
|
460 |
|
|
1,144 |
|
|
1,375 |
|
||||||
|
Non-GAAP gross profit |
$ |
283,783 |
|
|
$ |
206,255 |
|
|
$ |
786,144 |
|
|
$ |
584,986 |
|
||
|
GAAP gross margin |
80 |
% |
|
76 |
% |
|
79 |
% |
|
75 |
% |
||||||
|
Non-GAAP adjustments |
2 |
% |
|
3 |
% |
|
3 |
% |
|
3 |
% |
||||||
|
Non-GAAP gross margin |
82 |
% |
|
79 |
% |
|
82 |
% |
|
78 |
% |
||||||
|
|
|
|
|
|
|
|
|
||||||||||
|
Reconciliation of operating expenses |
|
|
|
|
|
|
|
||||||||||
|
GAAP research and development |
$ |
92,112 |
|
|
$ |
64,842 |
|
|
$ |
248,721 |
|
|
$ |
184,266 |
|
||
|
Less: Share-based compensation |
(17,189 |
) |
|
(13,921 |
) |
|
(49,886 |
) |
|
(39,076 |
) |
||||||
|
Less: Employer tax related to employee stock transactions |
(617 |
) |
|
(495 |
) |
|
(3,126 |
) |
|
(2,081 |
) |
||||||
|
Less: Acquisition-related expenses |
(1,297 |
) |
|
(1,204 |
) |
|
(3,076 |
) |
|
(3,382 |
) |
||||||
|
Less: Amortization of share-based compensation capitalized in internal-use software |
(17 |
) |
|
— |
|
|
(51 |
) |
|
— |
|
||||||
|
Non-GAAP research and development |
$ |
72,992 |
|
|
$ |
49,222 |
|
|
$ |
192,582 |
|
|
$ |
139,727 |
|
||
|
GAAP research and development as percentage of revenue |
27 |
% |
|
25 |
% |
|
26 |
% |
|
25 |
% |
||||||
|
Non-GAAP research and development as percentage of revenue |
21 |
% |
|
19 |
% |
|
20 |
% |
|
19 |
% |
||||||
|
|
|
|
|
|
|
|
|
||||||||||
|
GAAP sales and marketing |
$ |
172,828 |
|
|
$ |
123,737 |
|
|
$ |
495,596 |
|
|
$ |
369,442 |
|
||
|
Less: Share-based compensation |
(24,915 |
) |
|
(19,335 |
) |
|
(72,648 |
) |
|
(53,467 |
) |
||||||
|
Less: Employer tax related to employee stock transactions |
(739 |
) |
|
(860 |
) |
|
(4,193 |
) |
|
(2,923 |
) |
||||||
|
Less: Amortization of purchased intangibles |
(642 |
) |
|
(671 |
) |
|
(1,926 |
) |
|
(2,041 |
) |
||||||
|
Less: Acquisition-related expenses |
(262 |
) |
|
(55 |
) |
|
(374 |
) |
|
(1,146 |
) |
||||||
|
Non-GAAP sales and marketing |
$ |
146,270 |
|
|
$ |
102,816 |
|
|
$ |
416,455 |
|
|
$ |
309,865 |
|
||
|
GAAP sales and marketing as percentage of revenue |
50 |
% |
|
47 |
% |
|
51 |
% |
|
50 |
% |
||||||
|
Non-GAAP sales and marketing as percentage of revenue |
42 |
% |
|
39 |
% |
|
43 |
% |
|
42 |
% |
||||||
|
|
|
|
|
|
|
|
|
||||||||||
|
GAAP general and administrative |
$ |
50,716 |
|
|
$ |
38,854 |
|
|
$ |
139,667 |
|
|
$ |
109,427 |
|
||
|
Less: Share-based compensation |
(12,086 |
) |
|
(8,176 |
) |
|
(31,020 |
) |
|
(24,437 |
) |
||||||
|
Less: Employer tax related to employee stock transactions |
(510 |
) |
|
(689 |
) |
|
(2,798 |
) |
|
(1,914 |
) |
||||||
|
Less: Acquisition-related expenses |
(636 |
) |
|
(699 |
) |
|
(1,099 |
) |
|
(937 |
) |
||||||
|
Less: Real estate impairments |
65 |
|
|
— |
|
|
(1,111 |
) |
|
— |
|
||||||
|
Non-GAAP general and administrative |
$ |
37,549 |
|
|
$ |
29,290 |
|
|
$ |
103,639 |
|
|
$ |
82,139 |
|
||
|
GAAP general and administrative as percentage of revenue |
15 |
% |
|
15 |
% |
|
14 |
% |
|
15 |
% |
||||||
|
Non-GAAP general and administrative as percentage of revenue |
11 |
% |
|
11 |
% |
|
11 |
% |
|
11 |
% |
||||||
|
|
|
|
|
|
|
|
|
||||||||||
|
Reconciliation of operating income (loss) and operating margin |
|
|
|
|
|
|
|
||||||||||
|
GAAP operating loss |
$ |
(38,908 |
) |
|
$ |
(28,326 |
) |
|
$ |
(118,609 |
) |
|
$ |
(101,105 |
) |
||
|
Plus: Share-based compensation |
59,533 |
|
|
46,263 |
|
|
168,601 |
|
|
132,057 |
|
||||||
|
Plus: Employer tax related to employee stock transactions |
2,053 |
|
|
2,291 |
|
|
11,084 |
|
|
7,881 |
|
||||||
|
Plus: Amortization of purchased intangibles |
1,737 |
|
|
2,196 |
|
|
5,376 |
|
|
7,290 |
|
||||||
|
Plus: Acquisition-related expenses |
2,232 |
|
|
2,043 |
|
|
4,710 |
|
|
5,757 |
|
||||||
|
Plus: Amortization of share-based compensation capitalized in internal-use software |
390 |
|
|
460 |
|
|
1,195 |
|
|
1,375 |
|
||||||
|
Plus: Real estate impairments |
(65 |
) |
|
— |
|
|
1,111 |
|
|
— |
|
||||||
|
Non-GAAP operating income |
$ |
26,972 |
|
|
$ |
24,927 |
|
|
$ |
73,468 |
|
|
$ |
53,255 |
|
||
|
GAAP operating margin |
(11 |
)% |
|
(11 |
)% |
|
(12 |
)% |
|
(14 |
)% |
||||||
|
Non-GAAP adjustments |
19 |
% |
|
21 |
% |
|
20 |
% |
|
21 |
% |
||||||
|
Non-GAAP operating margin |
8 |
% |
|
10 |
% |
|
8 |
% |
|
7 |
% |
||||||
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
||||||||||||||
|
|
2021 |
|
2020 |
|
2021 |
|
|
2020 |
|
||||||||
|
Reconciliation of net income (loss) |
|
|
|
|
|
|
|
||||||||||
|
GAAP net loss |
$ |
(54,417 |
) |
|
$ |
(40,703 |
) |
|
$ |
(161,789 |
) |
|
$ |
(148,142 |
) |
||
|
Plus: Share-based compensation |
59,533 |
|
|
46,263 |
|
|
168,601 |
|
|
132,057 |
|
||||||
|
Plus: Employer tax related to employee stock transactions |
2,053 |
|
|
2,291 |
|
|
11,084 |
|
|
7,881 |
|
||||||
|
Plus: Amortization of purchased intangibles |
1,737 |
|
|
2,196 |
|
|
5,376 |
|
|
7,290 |
|
||||||
|
Plus: Acquisition-related expenses |
2,232 |
|
|
2,043 |
|
|
4,710 |
|
|
5,757 |
|
||||||
|
Plus: Amortization of share-based compensation capitalized in internal-use software |
390 |
|
|
460 |
|
|
1,195 |
|
|
1,375 |
|
||||||
|
Plus: Real estate impairments |
(65 |
) |
|
— |
|
|
1,111 |
|
|
— |
|
||||||
|
Plus: Amortization of debt discount and issuance costs |
12,865 |
|
|
12,194 |
|
|
38,085 |
|
|
26,230 |
|
||||||
|
Plus: Loss on early extinguishment of debt |
— |
|
|
— |
|
|
— |
|
|
25,950 |
|
||||||
|
Less: Income tax effects and adjustments |
(2,634 |
) |
|
(3,638 |
) |
|
(8,163 |
) |
|
(8,490 |
) |
||||||
|
Non-GAAP net income |
$ |
21,694 |
|
|
$ |
21,106 |
|
|
$ |
60,210 |
|
|
$ |
49,908 |
|
||
|
|
|
|
|
|
|
|
|
||||||||||
|
Reconciliation of net income (loss) per share, basic |
|
|
|
|
|
|
|
||||||||||
|
GAAP net loss per share, basic |
$ |
(0.45 |
) |
|
$ |
(0.35 |
) |
|
$ |
(1.36 |
) |
|
$ |
(1.29 |
) |
||
|
Non-GAAP adjustments to net loss |
0.63 |
|
|
0.53 |
|
|
1.87 |
|
|
1.73 |
|
||||||
|
Non-GAAP net income per share, basic |
$ |
0.18 |
|
|
$ |
0.18 |
|
|
$ |
0.51 |
|
|
$ |
0.44 |
|
||
|
|
|
|
|
|
|
|
|
||||||||||
|
Reconciliation of net income (loss) per share, diluted |
|
|
|
|
|
|
|
||||||||||
|
GAAP net loss per share, diluted |
$ |
(0.45 |
) |
|
$ |
(0.35 |
) |
|
$ |
(1.36 |
) |
|
$ |
(1.29 |
) |
||
|
Non-GAAP adjustments to net loss |
0.62 |
|
|
0.52 |
|
|
1.83 |
|
|
1.70 |
|
||||||
|
Non-GAAP net income per share, diluted |
$ |
0.17 |
|
|
$ |
0.17 |
|
|
$ |
0.47 |
|
|
$ |
0.41 |
|
||
|
|
|
|
|
|
|
|
|
||||||||||
|
Weighted-average shares used in GAAP per share calculation, basic and diluted |
120,164 |
|
|
115,809 |
|
|
119,050 |
|
|
114,653 |
|
||||||
|
|
|
|
|
|
|
|
|
||||||||||
|
Weighted-average shares used in non-GAAP per share calculation |
|
|
|
|
|
|
|
||||||||||
|
Basic |
120,164 |
|
|
115,809 |
|
|
119,050 |
|
|
114,653 |
|
||||||
|
Diluted |
126,887 |
|
|
121,369 |
|
|
127,234 |
|
|
120,635 |
|
||||||
|
|
|
|
|
|
|
|
|
||||||||||
|
Computation of free cash flow |
|
|
|
|
|
|
|
||||||||||
|
Net cash provided by (used in) operating activities |
$ |
73,810 |
|
|
$ |
33,395 |
|
|
$ |
134,283 |
|
|
$ |
(19,929 |
) |
||
|
Plus: Repayment of convertible senior notes attributable to debt discount |
— |
|
|
— |
|
|
— |
|
|
38,637 |
|
||||||
|
Less: Purchases of property and equipment |
(5,073 |
) |
|
(3,931 |
) |
|
(11,030 |
) |
|
(19,489 |
) |
||||||
|
Less: Internal-use software development costs |
(3,299 |
) |
|
(4,618 |
) |
|
(10,837 |
) |
|
(10,901 |
) |
||||||
|
Free cash flow |
$ |
65,438 |
|
|
$ |
24,846 |
|
|
$ |
112,416 |
|
|
$ |
(11,682 |
) |
||
|
|
|
|
|
|
|
|
|
||||||||||
|
Net cash provided by (used in) operating activities margin |
21 |
% |
|
13 |
% |
|
14 |
% |
|
(3 |
)% |
||||||
|
Non-GAAP adjustments |
(2 |
)% |
|
(4 |
)% |
|
(2 |
)% |
|
1 |
% |
||||||
|
Free cash flow margin |
19 |
% |
|
9 |
% |
|
12 |
% |
|
(2 |
)% |
||||||
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.
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
