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x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2016
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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Delaware | 26-4411091 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
1019 Market Street San Francisco, CA | 94103 | |
(Address of principal executive offices) | (Zip Code) |
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ¨x NO x☐
Large accelerated filer | x | Accelerated filer |
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Non-accelerated filer | Smaller reporting company |
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Zendesk believes
Zendesk was formedwe have evolved our offerings over time to a family of products that work together to help organizations capitalize on this profound shift. understand their customers, improve communications, and engage where and when it’s needed most. Our product family is built upon a modern architecture that enables us and our customers to rapidly innovate, adapt our technology in novel ways, and easily integrate with other products and applications.
Our business model is designed to drive organic growth, leverage positive word-of-mouth, and remove friction from the evaluation and purchasing process. We enable and encourage customers to try our products through free trials and subscribe to them directly through our website. Our sales team largely focuses on a land and expand strategy, which leverages this grassroots adoption and seeks to expand our footprint within organizations.
As of December 31, 2015, we had approximately 69,100 paid customer accounts for our customer service platform and live chat software in the aggregate. This includes approximately 35,700 customer accounts for paid subscription plans on our customer service platform (other than our low-cost Starter plan) and approximately 33,400 customer accounts for paid subscription plans of our live chat software. Organizations are able to access “freemium” plans on our customer service platform and live chat software, as well as email collaboration software, that are provided by us free of charge or at very low cost. As of December 31, 2015, we had more than 121,100 active accounts using these services. Our customers represent organizations across a broad array of sizes, industries, and geographies. They are located in 150 countries and territories and provide service through our customer service platform in over 40 languages.
In October 2015, we completed the acquisition of We Are Cloud SAS, or WAC, a maker of analytics software. Over time, we expect to integrate our analytics software across our products to become a core technology within our customer service platform and to enable us to enhance the data analytics capabilities across our products. We also expect to continue to sell our analytics software on a standalone basis.
Our financial performance reflects our significant customer growth and strong customer retention and expansion. For the years ended December 31, 2015, 2014, and 2013, our revenue was $208.8 million, $127.0 million, and $72.0 million, respectively, representing a 64% growth rate from 2014 to 2015 and a 76% growth rate from 2013 to 2014. For the years ended December 31, 2015, 2014, and 2013 we derived $92.5 million, or 44%, $54.8 million, or 43%, and $29.6 million, or 41%, respectively, of our revenue from customers located outside of the United States.
We were founded in Copenhagen, Denmark in 2007. We reincorporated in Delaware in 2009. Our principal executive offices are located at 1019 Market Street, San Francisco, California 94103, and our telephone number is (415) 418-7506. Our website address is www.zendesk.com.www.zendesk.com. Information contained on or that can be accessed through our website does not constitute part of this Annual Report on Form 10-K, and inclusions of our website address in this Annual Report on Form 10-K are inactive textual references only. Unless expressly indicated or the context requires otherwise, the terms “Zendesk,” “company,” “we,” “us,” and “our” in this Annual Report on Form 10-K refer to Zendesk, Inc., a Delaware corporation, and its consolidated subsidiaries.
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Zendesk’s mission
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Customer ServiceFamily of Products and Developer Platformservicesupport tickets across multiple channels, bringing customer information and interactions into one place.focusextend the functionality of our family of products and customize the experience for their employees and customers. Key components of Zendesk’s developer platform include:customer service experienceweb and within an environment designed for ease-of-usemobile applications.efficiency. We offer a range of subscription plansbuilt on open standards, allowing users to meet the needs of SMBsbuild custom integrations and larger organizationsinteract with the appropriate level of advanced features and product support.Customer SupportOur platform provides organizations with a single customer service interface to manage all their one-on-one customer interactions, no matter where those conversations start or who needs to be involved to resolve them. Our platform facilitates customer service in an efficient way through application of business rules and automations. This allows for both a reduction in ticket backlog and scaling up to accommodate growing organizations with large global audiences. Our platform is currently available in 14 languages for customer service agents. Key features include:·Single Omni-Channel Interface. Our customer service platform pulls in customer questions—from email, chat, voice, and social media—and brings them into our beautifully simple interface.·Email. Consolidate customer emails from multiple customer accounts into one interface for routing, assignments, and a single system of record for all conversations.·Chat. Communicate live with one on one chat sessions, which allow customers to initiate real-time support from employees through a web interface. All chat conversations are automatically transcribed into a ticket. We offer our live chat software on a standalone basis and provide a seamless integration of this software as the primary means through which we offer chat functionality on our customer service platform.·Voice. Make or receive calls through our customer service platform. Organizations can natively create support phone numbers or use existing telephony systems through our open API. Voicemails are automatically transcribed into a ticket and employees can record key information from calls in tickets. Through our Advanced Voice service, we offer organizations upgraded features for communicating with their customers, including interactive voice response capabilities, the ability to provide additional context when transferring voice conversations between agents, and advanced features to analyze these voice interactions at an additional cost per enabled agent.·Social Media. Convert Tweets and Facebook posts into tickets and reply through our customer service platform to keep a record of all conversations in one interface.·Business Rules. Initiate workflows triggered by ticket field changes or time-based conditions. Our customer service platform comes with pre-configured business rules that we recommend as best practices.·Add-on Features. For Professional and Enterprise plan subscribers, choose to add additional features that are important to support critical business needs. These add-ons include features such as data encryption at rest, the ability to specify the region in which account data is stored, enhanced disaster recovery, priority support, the ability to allow non-support employees to collaborate internally, and the ability to provide support for multiple business units from a single instance of our customer service platform.·Mobile Apps. View and respond to requests through our native agent mobile apps for the iPhone, iPad, Android devices, Windows Phone, and Kindle Fire. Our channel agnostic SaaS architecture ensures the same information and product functionality is available regardless of the device used.Customer Self-Service Help CenterOur customer service platform helps organizations track and predict common questions and provides a seamless path to answers. This allows customers to help themselves, find what they need, and minimize their frustration. Available in more than 40 languages for end-users, help centers can be formatted with our self-service optimized themes and customized with organization-specific functionality. Key features include:·Knowledge Base. Create a repository of articles, support documents, and how-to-guides that answers customers’ most popular questions. Sections within the knowledge base can be restricted to certain groups of customers or internal employees. Moderators can easily manage multi-lingual content in one place.·Community. Provide customers an opportunity to engage with one another along with the organization through the community. Customers can start a discussion, ask a question, or suggest an idea. Posts can be organized by topic and followed by customers.·Customer Portal. Allow customers to view their customer service history, track outstanding requests, and manage community subscriptions through the customer portal.7With customer engagement, customer service becomes less about the ticket and more about people. Our customer service platform lets organizations gather customer data and proactively engage with customers based on the insights the data provides. This turns interactions into proactive conversations and makes them more meaningful, personal, and productive. Key features include:·Custom User and Organization Fields. Create custom user and organization fields to provide context for proactive customer service and set customer-centric workflows around these fields.·Customer Lists. Organize customers into lists based on tags and user fields to enable proactive engagement with those customers.·Customer Satisfaction Ratings. Automatically send a customer satisfaction survey after a customer service request is solved to collect feedback.·Net Promoter Score. Send a simple, single question survey to customers to measure willingness to recommend a product or service and enable organizations to easily identify vocal promoters and detractors as well as customers most likely to spread positive or negative sentiment.·Apps and Integrations. Provide full context for customer interactions through third-party apps and integrations that allow our customer service platform to plug into other important sources of customer and employee data, such as third-party applications for CRM, time tracking, bug tracking, and e-commerce.Leveraging Strategic AnalyticsOur customer service platform offers unique tools for organizations to understand their customers and track the efficiency and effectiveness of their customer service. Key features include:·Reporting and Analytics. Track real-time key performance indicators at the customer interaction, agent, or department level through customer service dashboards that are built into our interface. Metrics included cover customer satisfaction, first response time, ticket volume, and usage of self-service features. Through Zendesk Insights, organizations with advanced plans can create custom reports and filter data, as well as compute and display advanced analytics based on their raw data that is updated as frequently as every hour. As we integrate our analytics software across our products, we expect that such software will enable us to provide additional analytics capabilities within our customer service platform.·Zendesk Benchmark. Compare customer service performance against similarly-sized organizations in the same industry and geographic region with the Zendesk Benchmark. Aggregating data to create relevant indices, performance metrics are shown on managers’ interfaces for real-time feedback and published in a quarterly report on our website.Zendesk EmbeddablesThrough Zendesk Embeddables, we make it simple to extend our customer service platform and live chat software and integrate critical functionality natively into an organization’s website or mobile application. Key features include:·Web Widgets. Easily incorporate contact forms, knowledge base search, and our live chat software directly into websites to allow customers to seek and obtain support at the point of interaction with an organization. Our web widgets are optimized for mobile browsing and tuned to customer browser settings to ensure fidelity in language settings.·Mobile SDK. Build support natively and intuitively directly into mobile applications on both the iOS and Android platforms. Using our SDK, native support in applications is highly customizable, allowing organizations to better maintain their brand in the support environment and highly contextual, enabling organizations to capture and collect information about device and application usage to improve the customer experience.·Zendesk APIs. Through custom development, tie together our customer support, customer self-service, and customer engagement elements in even more advanced customizations. We construct our own software from the same APIs that we make available, demonstrating our commitment to the Zendesk developer community and up-to-date code.8We currently offer a number of subscription plans for our customer service platform that vary based on the level of advanced features and dedicated product support. After a free trial, our customers use a credit card or execute a service order to purchase a subscription plan, typically for a monthly or annual subscription term. Our packaging and pricing philosophy is centered in transparency and simplicity, with all information publicly available on our website. Our subscription plans include:·Essential. The Essential plan provides access to our customer service platform for employees to customer communications gathered through email, social media, and websites, as well as performance analytics comparisons with the Zendesk Benchmark. ·Team. Well-suited for small organizations and enterprise departments, the Team plan provides organizations more control over workflow, including options for group views and customer business rules, and allows employees to engage with customers through more channels, including community forums. Team plan subscribers also have the ability to use our public apps with their subscription, to receive email-based product support and to track performance with customer satisfaction metrics and dashboards.·Professional. To upgrade customer service for organizations of all sizes, extra features in the Professional plan include custom analytics through Zendesk Insights, multi-lingual content management, and internal knowledge base for employees. Professional plan subscribers have the ability to develop their own private apps for use on our customer support platform. In addition to email, customers on our Professional plan receive product support from our dedicated customer advocates via phone.·Enterprise. As our deployments grow across departments to be the primary customer service software solution, the Enterprise plan incorporates tools to share customer interactions with the whole organization including unlimited light agents. In addition, we provide 24/7 email, phone and chat support to drive customer success during deployment and ongoing use.Live Chat SoftwareThrough our live chat software we enable organizations to communicatecustomize Zendesk product interfaces and optimize workflow through powerful plug-ins. Our customers can build custom apps or select from over 500 pre-built apps on the Zendesk App Marketplace.
Subscription Plans
reliability, performance, and cost. We currently offer three subscription plans forprovide our live chat software that vary based on the level of advanced features provided. As with the subscription plans for our customer service platform, we provide all prospective customers a free trial. Following this free trial, our customers may use a credit card or execute a service order to purchase a subscription plan, typically for a monthly or annual subscription term. Customers that do not purchase a paid subscription plan, or who terminate a paid subscription plan, are defaulted into the Lite plan. Our subscription plans include the following:
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Through our analytics software, we enable organizations to analyze and visualize data from a diverse set of applications. Our analytics software allows subscribers to connect and build queries across multiple data sources and analyze resultsservices through a varietycombination of co-located managed data visualizations. Over time, we expectcenters and cloud infrastructure providers such as Amazon Web Services (AWS) and Google Cloud Platform. This hybrid approach to integratehosting our analytics software across our productsgives us flexibility and elasticity to become a core technology within ourmeet spikes in demand and satisfy customer service platform and to enable us to enhance the data analytics capabilities across our products.
Subscription Plans
We currently offer two subscription plans for our analytics software that are based on the level of advanced features provided. As with the subscription plans for our other products, we provide prospective customers with a free trial. Following this free trial, our customers may use a credit card or execute a service order to purchase a subscription plan, typically for a monthly or annual subscription term. Our subscription plans include the following:
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Our freemium plans includeother products, collectively, as of December 31, 2016.
Our customersover 150 countries and territories and represent organizations across a broad array of sizes, industries, and geographies. Our customers are located in 150 countries and territories and provide service through our customer service platform in over 40 languages.
Sales and Marketing
Subscriptions to our customer service platform and live chat software are designed to be easy to purchase. A substantial number of our customers subscribe to our customer service platform or live chat software with limited or no direct interaction with our sales team.
We also deploy a direct sales approach, which includes an inside sales team based in three regional hubs: the Americas, EMEA (Europe, Middle East, and Africa), and APAC (Asia-Pacific). This team qualifies and manages prospective and current customers, aiming to initiate, retain, and expand their use of our customer service platform and live chat software over time. Our inside sales team partners with technical sales and product engineers to provide pre-sales technical support and is also responsible for driving renewals of existing contracts.
We are developing and expanding our field sales and marketing teams responsible for discovery, qualification, and account management for larger organizations. We expect to increase penetration into larger organizations through a land and expand strategy whereby we attempt to capitalize on the limited use of our customer service platform and live chat software by a functional or geographic department to expand the use of our solutions throughout other parts of the organization.
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Our marketing efforts are focused on generating awareness of our products, creating sales leads, establishing and promoting our brand, and cultivating a community of successful and vocal customers. Based on our belief that the best method to sell subscriptions to our platform is to actively use and explore their capabilities, one focus of the marketing team is to drive and encourage free trials and the successful conversion of trials to paid subscriptions. At any time during this limited-time trial, the prospective customer may elect to subscribe to simply-priced plans by providing their credit card information. We utilize both online and offline marketing initiatives, including search engine and email marketing, display and video advertising, blogs, corporate communications, whitepapers, case studies, user events, conferences and webinars.
As of December 31, 2015, we had 511 employees in our sales and marketing organization. Our sales and marketing expenses were $114.1 million, $77.9 million and $37.6 million for the years ended December 31, 2015, 2014, and 2013, respectively.
Product Support and Professional Services
We strive to exemplify the great customer service that organizations of all sizes can provide with our customer service platform and live chat software by offering multi-channel service from our product support team, a rich self-help knowledge center with detailed product guides, and active community forums for agents, managers, and developers.
We offer different levels of product support for our platform based upon the subscription plans purchased by our customers. Essential and Starter plan customers rely exclusively on our knowledge base and community forums for support. Support from our product support team is offered to all other subscribers, with 24/7 email, voice, and chat support available for our Enterprise plan subscribers. Regardless of the plan purchased, our customer service platform provides an intuitive interface, connectivity to our self-help knowledge base and community forums, and step-by-step tutorials to help employees learn, use and deploy our platform effectively.
Along with our global partners, our professional services team assists our customers in implementing more complex deployments of our customer service platform. These services include mapping our customer service platform to new and existing business processes, data migration, and integration with existing systems. Service engagements are typically scoped on a time and materials or project milestone basis and billed separately from the subscription to our customer service platform.
Through Zen U, our training platform, we offer courses to help our customers quickly learn how to effectively use our customer service platform as well as implement customer service best practices. Courses are available online, in-person at events, and, as requested by certain customers, on-site. Zen U sessions are typically targeted at specific levels of employee seniority and product experience, such as agent essentials or administrator expert, to more effectively tailor training to intended audiences.
We maintain separate dedicated product support teams for our live chat software and our analytics software. In the future, we intend to integrate the separate dedicated product support team for our live chat software into our support organization.
Technology
The technology infrastructure used for our customer service platform and live chat software is designed to provide an available and scalable multi-tenant cloud-based platform with industry-standard security measures. We utilize industry leading hardware and software components to provide for and enable the rapid growth of our business. We employ virtualization to maximize utilization where appropriate. Maintaining the integrity and security of our technology infrastructure is critical to our business, and as such we leverage industry-standard security and monitoring tools to ensure performance across our network.
The architecture and deployment of our customer service platform and live chat software are described and guided by the key characteristics below:
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We originally utilized third-party managed hosting facilities located in the United States exclusively for hosting our customer service platform. Beginning in 2012, we added use of third-party data centers in which we lease space and where we manage our own hosting and network equipment, or self-managed colocation data centers. We currently operate out of four third-party data centers in which we lease space and where we manage our own hosting and network equipment, or self-managed colocation data centers, located in California, Virginia, Ireland, and Germany. We intend to increase capacity in self-managed colocation data centers and/or with third-party managed hosting services over time to support our growth.
Our self-managed and third-party managed hosting services utilized for our platform provide both physical security measures, including year-round manned security, biometric access controls and video surveillance systems, and systems security measures, including firewalls, environmental controls, and redundant power and Internet connectivity. These facilities have SSAE16 or ISO 27001 attestations or equivalent certifications with respect to service availability and information security management.
We utilize managed hosting facilities located in the United States to host our analytics software. In the future, we intend to conform our analytics software to the technical and other operational and security measures applicable to our customer service platform and live chat software.
Research and Development
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breach to affected individuals and public officials or amending existing laws to expand compliance obligations. In the European Union, where U.S. companies must meet specified privacy and security standards, such as the Directive 95/46/EC, onor the Directive, which governs the protection of individuals with regard to the processing of personal datapersonally identifiable information, or PII, and on the free movement of such data established in the European Union orto certain non-EU countries, such as the Data Protection Directive, andUnited States. Additionally, the data protection laws of each of the European Member countries require comprehensive information privacy and security protections for consumers with respect to PII collected about them. We have in the past relied on adherence to the U.S. Department of Commerce’s Safe Harbor Privacy Principles and compliance with the U.S.-EU and U.S.-Swiss Safe Harbor Frameworks as agreed to and set forth by the U.S. Department of Commerce, and theOn February 2, 2016, European Union and Switzerland, which establishedU.S. officials announced an agreement, the EU-U.S. Privacy Shield, or the Privacy Shield, as a means for legitimating the transfer of personally identifiable information, or PII by U.S. companies doing business in Europe from the European Economic Area to the U.S. As a result of a recent opinion of the European Union Court of Justice regarding the adequacy of the U.S.-EU Safe Harbor Framework, the U.S.-EU Safe Harbor Framework is no longer deemed to be a valid method to ensureWe have certified compliance with restrictions set forth in the Data Protection Directive and data protection legislation of individual member states restricting the transfer of data outside of the European Economic Area. On February 2, 2016, European Union and U.S. officials announced an agreement on a new framework, the EU-U.S. Privacy Shield, to replace the U.S.-EU Safe Harbor Framework. Details regarding the new EU-U.S. Privacy Shield have not been finalized, published, or interpreted.Shield. We have and expect to continue to engage in efforts to ensure that data transfers from the European Economic Area comply with the Data Protection Directive, the Privacy Shield, and the data protection legislation of individual member states.
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Geographic Information
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Technologies Pvt. Ltd. (Happy Fox), many of which offer free or significantly discounted prices for their services. For organizations seeking software to support employee service and other internal use cases, we that compete with companies such as ServiceNow, Inc., BMC Software, Inc., Atlassian Pty Ltd, and Hewlett-Packard Company. We compete with a number of providers of live chat software, including Live Person, Inc., BoldChat (a LogMeIn, Inc. service), Velaro, Inc. Snap Engage, LLC, Habla, Inc. (Olark), and LiveChat, Inc. and a number of providers of analytics software, includingTableau Software, Inc., Looker Data Sciences, Inc., and Domo, Inc.Support. Further, other established SaaS providers not currently focused on customer support, live chat software, or analytics softwarethe functionality that our products provide may expand their services to compete with us. Many of our current and potential competitors have established marketing relationships, access to larger customer bases, pre-existing customer relationships, and major distribution agreements with consultants, system integrators, and resellers. Additionally, some existing and potential customers, particularly large organizations, have elected, and may in the future elect, to develop their own internal customer support software system. Certain of our competitors have partnered with, or have acquired, and may in the future partner with or acquire, other competitors to offer services, leveraging their collective competitive positions, which makes, or would make, it more difficult for us to compete with them. For all of these reasons, we may not be able to compete successfully against our current and future competitors or retain existing customers, which would harm our business.
As Furthermore, the success of our new products will depend on market demand, and there is a resultrisk that new products and services we introduce will not deliver expected results, which could negatively impact our future sales and results of the acquisitions of Zopim and WAC, we now sell our live chat software and analytics software as standalone services. Our live chat software can also be integrated with our customer service platform as a means to enable live chat functionality for agents and this integration is now the primary means by which we offer chat functionality on our customer service platform. We expect to integrate our analytics software with our customer service platform and other products as a component of these services.
We have limited experience selling separate products in general, and both live chat software and analytics software in particular, and as a result, our live chat software and analytics software may not gain acceptance with our customers and potential customers.
Our reliance on our live chat software as a primary means of enabling chat functionality in connection with our customer service platform may not be successful. In particular, we currently charge a separate subscription fee per chat-enabled agent. If our customers do not purchase our live chat software as a standalone service or as integrated with our customer service platform, our business, revenue, and operating results could be harmed.
Our plans to integrate our analytics software with our customer service platform, our live chat software, and our other products may not be successful. If our customers do not purchase our analytics software as a standalone service or as integrated with our customer service platform, or our other products, our business, revenue, and operating results could be harmed.
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We have only been offering our live chat software since the completion of our acquisition of Zopim in March 2014
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products, our failure to train customers on how to efficiently and effectively use our customer service platform,products, or our failure to provide adequate product support to our customers, may result in negative publicity or legal claims against us. Also, as we continue to expand our customer base, any failure by us to properly provide these services will likely result in lost opportunities for additional subscriptions to our customer service platform, live chat software, and analytics software.
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would require us to invest more time educating these potential customers.customers on the benefits of our products. In addition, larger organizations may demand more features and integration services. We have limited experience in developing and managing sales channels and distribution arrangements for larger organizations. As a result of these factors, these sales opportunities may require us to devote greater research and development, sales, product support, and professional services resources to individual customers, resulting in increased costs and reduced profitability, and would likely lengthen our typical sales cycle, which could strain our resources. Additionally, we may be required to increase our investments in our field sales and marketing efforts in order to target these larger organizations, increasing the costs associated with sales. Moreover, these transactions may require us to delay recognizing the associated revenue we derive from these customers until any technical or implementation requirements have been met, and larger customers may demand discounts to the subscription prices they pay for our customer service platform, live chat software, or analytics software.products. Furthermore, because we have limited experience selling to larger organizations, our investment in marketing our customer service platform, live chat software, and analytics softwareproducts to these potential customers may not be successful, which could harm our results of operations and our overall ability to grow our customer base. Following sales to larger organizations, we may have fewer opportunities to expand usage of our customer service platform, live chat software, and analytics softwareproducts or to sell additional functionality, and we may experience increased subscription terminations as compared to our experience with smaller organizations, any of which could harm our results of operations.
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We separately charge for the use of our live chat software. Historically, Additionally, we provided limited chat functionality within our customer service platform for no additional charge. With the integration of our live-chat software into our customer service platform, we now generally require a separate subscription to enable chatthe functionality in connection withof each of our customer service platform.products. We do not know whether our current and potential customers or the market in general will accept this change in our pricing model and, if it fails to gain acceptance, our business and results of operations could be harmed.
We sell our analytics software as a standalone service and generally charge our customers for their use of our analytics software based on the number and type of users they enable, as well as the features and functionality enabled. We do not know whether the current pricing model for our analytics software will result in our current and potential customers enabling a significant number of users to allow us to derive sufficient value from the provision of such software.
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Additionally, our future success is also substantially dependent on our ability to expand our existing customers' use of our products by expanding the number of products to which such customers subscribe. This may require increasingly sophisticated and costly sales efforts and may not result in additional sales.
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| increased management, travel, infrastructure, and legal compliance costs associated with having multiple international operations; |
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time to time. Failure to comply with these regulations could have adverse effects on our business. InAdditionally, in many foreign countries it is common for others to engage in business practices that are prohibited by our internal policies and procedures or U.S. or other regulations applicable to us. Although we have implemented policies and procedures designed to ensure compliance with these laws and policies, there can be no assurance that all of our employees, contractors, partners, and agents will comply with these laws and policies. Violations of laws or key control policies by our employees, contractors, partners, or agents could result in delays in revenue recognition, financial reporting misstatements, enforcement actions, disgorgement of profits, fines, civil and criminal penalties, damages, injunctions, other collateral consequences, or the prohibition of the importation or exportation of our platformproducts and services and could adversely affect our business and results of operations.
Prior to our acquisition of WAC, WAC’s service was provided from servers based in the United States to persons and organizations located in jurisdictions that are subject to U.S. economic sanctions. WAC also made available for download from the United States certain encryption-functionality software without first having obtained U.S. government authorization to export such software. In these instances, WAC may have acted in violation of U.S. export controls and sanctions laws. In connection with the acquisition, WAC terminated the subscriptions of any customers believed to be located in restricted jurisdictions, screened its customers against applicable U.S. government lists of prohibited persons, and obtained U.S. government authorization to export its software. WAC has also filed initial voluntary disclosures with OFAC and BIS to alert these agencies of the apparent violations, and will supplement those disclosures with final reports after completing its investigation.
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expose us to government investigations and penalties, which could have an adverse effect on our business, operating results, and financial condition.
Additionally, we do not have sufficient experience in selling certain of our products to determine if demand for these services are or will be subject to material seasonality.
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Furthermore, if we determine to no longer utilize our self-managed colocation data centers, we may be forced to accelerate expense recognition as a result of the shorter estimated life of such assets.
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are unable to respond to changes in a cost-effective manner, our platformproducts may become less marketable, less competitive, or obsolete and our operating results may be negatively impacted.
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interest, and released the associated reserve for the uncertain tax position.
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36
improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. We are required to disclose changes made in our internal control and procedures on a quarterly basis and we are required to furnish a report by management on, among other things, the effectiveness of our internal control over financial reportingreporting. As a result of the complexity involved in complying with the rules and regulations applicable to public companies, our management’smanagement’s attention may be diverted from other business concerns, which could adversely affect our business and operating results. Although we have already hired additional employees to assist us in complying with these requirements, we may need to hire more employees in the future or engage outside consultants, which will increase our operating expenses.
37
limit a stockholder’sstockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, and other employees. Alternatively, if a court were to find these provisions of our certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, or results of operations.
38
|
| High |
|
| Low |
| ||
Year ended December 31, 2014 |
|
|
|
|
|
|
|
|
Second quarter (from May 15, 2014) |
| $ | 18.75 |
|
| $ | 11.06 |
|
Third quarter |
| $ | 28.05 |
|
| $ | 15.50 |
|
Fourth quarter |
| $ | 28.20 |
|
| $ | 19.39 |
|
Year ended December 31, 2015 |
|
|
|
|
|
|
|
|
First quarter |
| $ | 26.08 |
|
| $ | 22.16 |
|
Second quarter |
| $ | 24.50 |
|
| $ | 20.57 |
|
Third quarter |
| $ | 23.24 |
|
| $ | 19.63 |
|
Fourth quarter |
| $ | 27.33 |
|
| $ | 19.15 |
|
High | Low | ||||||
Year ended December 31, 2015 | |||||||
First quarter | $ | 26.37 | $ | 21.27 | |||
Second quarter | $ | 24.68 | $ | 20.28 | |||
Third quarter | $ | 23.57 | $ | 17.93 | |||
Fourth quarter | $ | 27.54 | $ | 18.75 | |||
Year ended December 31, 2016 | |||||||
First quarter | $ | 26.28 | $ | 14.39 | |||
Second quarter | $ | 28.00 | $ | 20.26 | |||
Third quarter | $ | 31.88 | $ | 26.29 | |||
Fourth quarter | $ | 31.16 | $ | 19.77 |
| Base Period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Company / Index | 5/15/2014 |
|
| 6/30/2014 |
|
| 9/30/2014 |
|
| 12/31/2014 |
|
| 3/31/2015 |
|
| 6/30/2015 |
|
| 9/30/2015 |
|
| 12/31/2015 |
| ||||||||
Zendesk, Inc. |
| 100.00 |
|
|
| 129.41 |
|
|
| 160.76 |
|
|
| 181.46 |
|
|
| 168.95 |
|
|
| 165.38 |
|
|
| 146.76 |
|
|
| 196.87 |
|
S&P 500 Index |
| 100.00 |
|
|
| 104.78 |
|
|
| 105.42 |
|
|
| 110.05 |
|
|
| 110.53 |
|
|
| 110.28 |
|
|
| 102.63 |
|
|
| 109.25 |
|
S&P 500 Composite/Software |
| 100.00 |
|
|
| 105.09 |
|
|
| 109.57 |
|
|
| 115.84 |
|
|
| 110.53 |
|
|
| 115.11 |
|
|
| 111.50 |
|
|
| 129.28 |
|
39
2016.
40
| Year Ended December 31, |
| |||||||||||||||||||||||||||||||||
|
| 2015 |
|
| 2014 |
|
| 2013 |
|
| 2012 |
| Year Ended December 31, | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||
Revenue |
| $ | 208,768 |
|
| $ | 127,049 |
|
| $ | 72,045 |
|
| $ | 38,228 |
| $ | 311,999 | $ | 208,768 | $ | 127,049 | $ | 72,045 | $ | 38,228 | |||||||||
Cost of revenue (1) |
|
| 67,184 |
|
|
| 46,047 |
|
|
| 24,531 |
|
|
| 13,253 |
| 93,900 | 67,184 | 46,047 | 24,531 | 13,253 | ||||||||||||||
Gross profit |
|
| 141,584 |
|
|
| 81,002 |
|
|
| 47,514 |
|
|
| 24,975 |
| 218,099 | 141,584 | 81,002 | 47,514 | 24,975 | ||||||||||||||
Operating expenses (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Research and development |
|
| 62,615 |
|
|
| 36,403 |
|
|
| 15,288 |
|
|
| 14,816 |
| 91,067 | 62,615 | 36,403 | 15,288 | 14,816 | ||||||||||||||
Sales and marketing |
|
| 114,052 |
|
|
| 77,875 |
|
|
| 37,622 |
|
|
| 22,749 |
| 166,987 | 114,052 | 77,875 | 37,622 | 22,749 | ||||||||||||||
General and administrative |
|
| 47,902 |
|
|
| 32,869 |
|
|
| 16,437 |
|
|
| 11,558 |
| 64,371 | 47,902 | 32,869 | 16,437 | 11,558 | ||||||||||||||
Total operating expenses |
|
| 224,569 |
|
|
| 147,147 |
|
|
| 69,347 |
|
|
| 49,123 |
| 322,425 | 224,569 | 147,147 | 69,347 | 49,123 | ||||||||||||||
Operating loss |
|
| (82,985 | ) |
|
| (66,145 | ) |
|
| (21,833 | ) |
|
| (24,148 | ) | (104,326 | ) | (82,985 | ) | (66,145 | ) | (21,833 | ) | (24,148 | ) | |||||||||
Other expense, net |
|
| (729 | ) |
|
| (1,533 | ) |
|
| (517 | ) |
|
| (96 | ) | |||||||||||||||||||
Other income (expense), net | 1,520 | (729 | ) | (1,533 | ) | (517 | ) | (96 | ) | ||||||||||||||||||||||||||
Loss before provision for (benefit from) income taxes |
|
| (83,714 | ) |
|
| (67,678 | ) |
|
| (22,350 | ) |
|
| (24,244 | ) | (102,806 | ) | (83,714 | ) | (67,678 | ) | (22,350 | ) | (24,244 | ) | |||||||||
Provision for (benefit from) income taxes |
|
| 338 |
|
|
| (263 | ) |
|
| 221 |
|
|
| 121 |
| 993 | 338 | (263 | ) | 221 | 121 | |||||||||||||
Net loss |
|
| (84,052 | ) |
|
| (67,415 | ) |
|
| (22,571 | ) |
|
| (24,365 | ) | (103,799 | ) | (84,052 | ) | (67,415 | ) | (22,571 | ) | (24,365 | ) | |||||||||
Accretion of redeemable convertible preferred stock |
|
| — |
|
|
| (18 | ) |
|
| (49 | ) |
|
| (50 | ) | — | — | (18 | ) | (49 | ) | (50 | ) | |||||||||||
Deemed dividend to investors in relation to the tender offer |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,326 | ) | |||||||||||||||||||
Deemed dividend to investors in relation to tender offer | — | — | — | — | (8,326 | ) | |||||||||||||||||||||||||||||
Net loss attributable to common stockholders |
| $ | (84,052 | ) |
| $ | (67,433 | ) |
| $ | (22,620 | ) |
| $ | (32,741 | ) | $ | (103,799 | ) | $ | (84,052 | ) | $ | (67,433 | ) | $ | (22,620 | ) | $ | (32,741 | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net loss per share attributable to common stockholders, basic and diluted |
| $ | (0.99 | ) |
| $ | (1.26 | ) |
| $ | (1.04 | ) |
| $ | (1.67 | ) | $ | (1.11 | ) | $ | (0.99 | ) | $ | (1.26 | ) | $ | (1.04 | ) | $ | (1.67 | ) | ||||
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted |
|
| 84,926 |
|
|
| 53,571 |
|
|
| 21,674 |
|
|
| 19,629 |
| 93,161 | 84,926 | 53,571 | 21,674 | 19,629 | ||||||||||||||
__________ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
(1) Includes share-based compensation expense as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
|
| Year Ended December 31, |
| Year Ended December 31, | |||||||||||||||||||||||||||||||
|
| 2015 |
|
| 2014 |
|
| 2013 |
|
| 2012 |
| 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||
Cost of revenue |
| $ | 4,541 |
|
| $ | 2,464 |
|
| $ | 254 |
|
| $ | 129 |
| 7,045 | 4,541 | 2,464 | 254 | 129 | ||||||||||||||
Research and development |
|
| 19,414 |
|
|
| 10,918 |
|
|
| 635 |
|
|
| 4,117 |
| 27,083 | 19,414 | 10,918 | 635 | 4,117 | ||||||||||||||
Sales and marketing |
|
| 14,759 |
|
|
| 10,680 |
|
|
| 1,210 |
|
|
| 1,313 |
| 23,043 | 14,759 | 10,680 | 1,210 | 1,313 | ||||||||||||||
General and administrative |
|
| 13,842 |
|
|
| 8,077 |
|
|
| 2,755 |
|
|
| 4,081 |
| 16,608 | 13,842 | 8,077 | 2,755 | 4,081 |
|
| As of December 31, |
| |||||||||||||
Consolidated Balance Sheet Data: |
| 2015 |
|
| 2014 |
|
| 2013 |
|
| 2012 |
| ||||
Cash and cash equivalents |
| $ | 216,226 |
|
| $ | 80,265 |
|
| $ | 53,725 |
|
| $ | 48,668 |
|
Marketable securities |
|
| 29,414 |
|
|
| 42,204 |
|
|
| 12,114 |
|
|
| — |
|
Working Capital |
|
| 165,832 |
|
|
| 60,856 |
|
|
| 31,706 |
|
|
| 33,524 |
|
Property and equipment, net |
|
| 56,540 |
|
|
| 41,895 |
|
|
| 15,431 |
|
|
| 8,472 |
|
Goodwill and intangible assets, net |
|
| 57,050 |
|
|
| 14,152 |
|
|
| — |
|
|
| — |
|
Total assets |
|
| 422,686 |
|
|
| 205,788 |
|
|
| 92,736 |
|
|
| 64,058 |
|
Deferred Revenue |
|
| 85,615 |
|
|
| 51,731 |
|
|
| 29,048 |
|
|
| 15,130 |
|
Credit facility |
|
| — |
|
|
| 6,952 |
|
|
| 23,760 |
|
|
| — |
|
Total liabilities |
|
| 129,396 |
|
|
| 92,082 |
|
|
| 67,643 |
|
|
| 22,943 |
|
Stockholders' equity |
|
| 293,290 |
|
|
| 113,706 |
|
|
| (46,276 | ) |
|
| (30,205 | ) |
41
As of December 31, | |||||||||||||||||||
Consolidated Balance Sheet Data: | 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||
Cash and cash equivalents | $ | 93,677 | $ | 216,226 | $ | 80,265 | $ | 53,725 | $ | 48,688 | |||||||||
Marketable securities | 131,190 | 29,414 | 42,204 | 9,889 | — | ||||||||||||||
Working capital | 112,600 | 165,832 | 60,856 | 31,706 | 33,524 | ||||||||||||||
Property and equipment, net | 62,731 | 56,540 | 41,895 | 15,431 | 8,472 | ||||||||||||||
Goodwill and intangible assets, net | 53,296 | 57,050 | 14,152 | — | — | ||||||||||||||
Total assets | 475,285 | 422,686 | 205,788 | 92,736 | 64,058 | ||||||||||||||
Deferred revenue | 124,533 | 85,615 | 51,731 | 29,048 | 15,130 | ||||||||||||||
Credit facility | — | — | 6,952 | 23,760 | — | ||||||||||||||
Total liabilities | 175,857 | 129,396 | 92,082 | 67,643 | 22,943 | ||||||||||||||
Redeemable convertible preferred stock | — | — | — | 71,369 | 71,320 | ||||||||||||||
Stockholders' equity (deficit) | 299,428 | 293,290 | 113,706 | (46,276 | ) | (30,205 | ) |
their subscriptions. We calculate our dollar-based net expansion rate by dividing our retained revenue net of contraction and churn by our base revenue. We define our base revenue as the aggregate monthly recurring revenue time. Sales and Marketing. Sales and marketing expenses consist of personnel costs (including salaries, commissions, share-based compensation, and benefits) for employees associated with our sales and marketing organizations, costs of marketing activities, and allocated shared costs. Marketing activities include online lead generation, advertising, promotional events, and public and community relations. Sales commissions and other incremental costs to acquire contracts are expensed as incurred. General and Administrative. General and administrative expenses consist primarily of personnel costs (including salaries, share-based compensation, and benefits) for our executive, finance, legal, human resources, and other administrative employees. In addition, general and administrative expenses include fees for third-party professional services, including legal, accounting, and tax . 2014 Year Ended December 31, 2015 2014 2013 (In thousands) Revenue $ 208,768 $ 127,049 $ 72,045 Cost of revenue (1) 67,184 46,047 24,531 Gross profit 141,584 81,002 47,514 Operating expenses (1): Research and development 62,615 36,403 15,288 Sales and marketing 114,052 77,875 37,622 General and administrative 47,902 32,869 16,437 Total operating expenses 224,569 147,147 69,347 Operating loss (82,985 ) (66,145 ) (21,833 ) Other expense, net (729 ) (1,533 ) (517 ) Loss before provision for (benefit from) income taxes (83,714 ) (67,678 ) (22,350 ) Provision for (benefit from) income taxes 338 (263 ) 221 Net loss $ (84,052 ) $ (67,415 ) $ (22,571 ) Year Ended December 31, 2015 2014 2013 (In thousands) Cost of revenue $ 4,541 $ 2,464 $ 254 Research and development 19,414 10,918 635 Sales and marketing 14,759 10,680 1,210 General and administrative 13,842 8,077 2,755 Year Ended December 31, 2015 2014 2013 (As a percentage of revenue) Revenue 100.0 % 100.0 % 100.0 % Cost of revenue (1) 32.2 36.2 34.0 Gross profit 67.8 63.8 66.0 Operating expenses (1): Research and development 30.0 28.7 21.2 Sales and marketing 54.6 61.3 52.2 General and administrative 22.9 25.9 22.8 Total operating expenses 107.6 115.8 96.3 Operating loss (39.7 ) (52.1 ) (30.3 ) Other expense, net (0.3 ) (1.2 ) (0.7 ) Loss before provision for (benefit from) income taxes (40.1 ) (53.3 ) (31.0 ) Provision for (benefit from) income taxes 0.2 (0.2 ) 0.3 Net loss (40.3 %) (53.1 %) (31.3 %) Includes share-based compensation expense as follows: Year Ended December 31, 2015 2014 2013 (As a percentage of revenue) Cost of revenue 2.2 % 1.9 % 0.4 % Research and development 9.3 8.6 0.9 Sales and marketing 7.1 8.4 1.7 General and administrative 6.6 6.4 3.8 ItemZendesk’s mission isWe are a software development company that provides a SaaSWith our origins in customer service, platformwe have evolved our offerings over time to a family of products that work together to help organizations understand their customers, improve communications, and engage where and when it’s needed most. Our product family is built upon a modern architecture that enables us and our customers to provide tailored support through multiple channels, establish effective self-service support resources, proactively serve customers through customer engagement capabilities,rapidly innovate, adapt our technology in novel ways, and easily integrate with other applications,products and consolidateapplications.analyze data fromacross all industries. The flagship product in our family, Zendesk Support, provides organizations with the ability to track, prioritize, and solve customer interactions. We also provide SaaSsupport tickets across multiple channels, bringing customer information and interactions into one place. Our other widely available products integrate with Support and include Zendesk Chat, Zendesk Talk, and Zendesk Help Center. Chat is live chat software that can be utilized independentlyprovides a fast and responsive way for organizations to facilitate proactive communicationsconnect with their customers in the moment. Talk is cloud-based call center software that facilitates personal and productive phone support conversations between organizations and their customers. Help Center is a self-service destination that organizations can use to provide articles, interactive forums, and a community that help an organization's customers or integrated easily into our platform.Our business model is designed to drive organic growth, leverage positive word-of-mouth, and remove friction from the evaluation and purchasing process.help themselves. We offer a range of subscription account plans for our customer service platform, live chat software, and analytics softwareproducts that vary in pricingprice based on functionality, the type, and, for our customer service platform,Support and Chat, the amount of product support we offer and service-level guarantees.Our largest source of qualified sales leads is free trials of our customer service platform commenced by prospects. For larger organizations, our sales team focuses on a land and expand strategy, which leverages this grassroots adoption and seeks to expand our footprint within organizations. More recently we are developing and expanding our field sales and marketing teams primarily responsible for lead discovery, qualification, and account management for larger organizations. Many of our existing customers to date have been small to medium sized organizations that make purchasing decisions with limited interaction with our sales or other personnel; as we continue to focus on and become more dependent on sales to larger organizations and increase our investment in paid sources of qualified leads, we expect the percentage of qualified leads that come unpaid sources, such as organic search and customer referrals, to decrease and our sales cycles to lengthen and become less predictable.In October 2015, we completed the acquisition of WAC. With the acquisition, we added technology that we anticipate will allow our customers to understand the ever-increasing diversity of data about their end customers. Over time, we expect this analytics software to become a core technology within our customer service platform, enabling us to further integrate data analytics capabilities across our products.offer. We also expectoffer a range of additional features that customers can purchase and add to continue to sell our analytics software on a standalone basis.yearyears ended December 31, 2016, 2015, 2014, and 2013,2014, our revenue was $312.0 million, $208.8 million, $127.0 million, and $72.0$127.0 million, respectively, representing a 49% growth rate from 2015 to 2016 and a 64% growth rate from 2014 to 2015 and 76% growth rate from 2013 to 2014.2015. For the years ended December 31, 2016, 2015, 2014, and 20132014 we derived $143.5 million, or 46%, $92.5 million, or 44%, and $54.8 million, or 43%, and $29.6 million, or 41%, respectively, of our revenue from customers located outside of the United States. We expect that the rate of growth in our revenue will decline as our business scales, even if our revenue continues to grow in absolute terms. For the years ended December 31, 2016, 2015, 2014, and 2013,2014, we generated net losses of $103.8 million, $84.1 million, and $67.4 million, and $22.6 million, respectively. We intend to invest aggressively to drive continued growth and market leadership.dependsdepend on many factors, including our ability to continue to innovate, maintain our leadership in the small and medium-sized business, or SMB, market, expand our enterprise customer base, and increase our global customer footprint. While these areas represent significant opportunities for us, we also face significant risks and challenges that we must successfully address in order to sustain the growth of our business and improve our operating results. We anticipate that we will continue to expand our operations and headcount in the near term. The expected addition of new personnel and the investmentsexpenditures that we anticipate will be necessary to manage our anticipated growth, including investments in additionalexpenditures relating to hosting capacity, in data centers, leasehold improvements, and related fixed assets, will make it more difficult for us to achieve profitability.profitability in the near term. Many of these investments will occur in advance of us experiencing any direct benefit and will make it difficult to determine if we are allocating our resources efficiently.42investdevelop our hosting capabilities through investments in additionalour self-managed colocation data center capacitycenters and personnel to support our growth.incur expenditures for third-party managed hosting services. The amount and timing of these investmentsdisbursements will vary based on our estimates of projected growth.growth and planned use of hosting resources. Over time, we anticipate that we will continue to gain economies of scale by efficiently utilizing our hosting and personnel resources to support the growth in our number of customers. We also expect to continue to grow our customer support organization, including expanding our product support and professional services teams. While we have moved significant portions of the hosting for our core platform to self-managed colocation data centers, improvements to our gross margin from such move have been partially offset by other hosting expenses, primarily related to the support of our platform infrastructure. Over time, we anticipate that we will continue to gain economies of scale by utilizing capacity within our self-managed colocation data centers, efficient use of other hosting resources, and reducing the need for direct incremental personnel costs resulting from growth in our number of customers. As a result, we expect our gross margin to improve in the future,long-term, although our gross margin may fluctuatedecrease in the near-term and may vary from period to period as our revenue fluctuates and as a result of the timing and amount of investments to expand our product support team, investments in additional personnel, equipment, and facilities to support our platform architecture, increased share-based compensation expenses,expense, as well as amortization costs associated with acquired intangible assets and capitalized internal-use software.customer service platform, our live chat software, and our analytics softwareexisting products, and to further integrate these products and services. We plan to continue to expand our sales and marketing organizations, particularly in connection with our efforts to expand our enterprise customer base. We also expect to continue to incur additional general and administrative costs in order to support the growth of our business and the infrastructure required to comply with our obligations as a public company.onusing our customer service platform and live chat softwareproducts is an indicator of our market penetration, the growth of our business, and our potential future business opportunities. We define the number of paid customer accounts as the sum of the number of accounts on our customer service platform,Zendesk Support, exclusive of our legacy Starter plan, free trials or other free services, the number of accounts on Chat, exclusive of free trials or other free services, and the number of accounts usingon all of our live chat software,other products, exclusive of free trials orand other free services, each as of the end of the period and as identified by a unique account identifier. Use of Support, Chat, and our customer service platform and live chat softwareother products requires separate subscriptions and each of these accounts are treated as a separate paid customer account. Existing customers may also expand their utilization of our customer service platform or live chat softwareproducts by adding new accounts and a single consolidated organization or customer may have multiple accounts across each of our customer service platform and live chat softwareproducts to service separate subsidiaries, divisions, or work processes. Each of these accounts is also treated as a separate paid customer account. An increase in the number of paid customer accounts generally correlates to an increase in the number of authorized agents licensed to use our platform,products, which directly affects our revenue and results of operations. We view growth in this metric as a measure of our success in converting new sales opportunities. We do not currently incorporate accounts using our analytics software into determination of the number of paid customer accounts. We had approximately 69,10094,300 paid customer accounts as of December 31, 2015,2016, including approximately 35,70050,800 paid customer accounts on Support, approximately 41,300 paid customer accounts on Chat, and approximately 2,200 paid customer accounts on our customer service platform and approximately 33,400 paid customer accounts using our live chat software.other products. As the total number of paid customer accounts increases, we expect the rate of growth in the number of paid customer accounts to decline.In the quarter ended December 31, 2015, we introduced our Essential plan for our customer service platform. This plan replaced our Starter plan as the least expensive paid plan on our customer service platform. Following the introduction of our Essential plan, we no longer made our Starter plan available for new accounts. Accounts that subscribe to our Essential plan are included in the determination of the number of paid customer accounts.customer service platform.products. We believe we can achieve this by focusing on delivering value and functionality that retains our existing customers, expands the number of authorized agents associated with an existing paid customer account, on our customer service platform, and results in upgrades to higher-priced subscription plans.plans and the purchase of additional products. Maintaining customer relationships allows us to sustain and increase revenue to the extent customers maintain or increase the number of authorized agents licensed to use our customer service platform.products. We assess our performance in this area by measuring our dollar-based net expansion rate. Our dollar-based net expansion rate provides a measurement of our ability to increase revenue across our existing customer base through expansion of authorized agents associated with a paid customer account on our customer service platform, andaccounts, upgrades in subscription plan,plans, and the purchase of additional products as offset by churn, contraction in authorized agents associated with a paid customer account on our customer service platform,accounts, and downgrades in subscription plans. We do not currently incorporate operating metrics associated with our live chat software or our analytics softwareproduct into our measurement of dollar-based net expansion rate.43customer service platform.products. Monthly recurring revenue for a paid customer account is a legal and contractual determination made by assessing the contractual terms of each paid customer account, as of the date of determination, as to the revenue we expect to generate in the next monthly period for that paid customer account, assuming no changes to the subscription and without taking into account any one-time discounts or any platform usage above the subscription base, if any, that may be applicable to such subscription. Monthly recurring revenue is not determined by reference to historical revenue, deferred revenue, or any other United States generally accepted accounting principles, or GAAP, financial measure over any period. It is forward-looking and contractually derived as of the date of determination.ofacross our products from the paid customer accounts on our customer service platformSupport and Chat as of the date one year prior to the date of calculation. We define our retained revenue net of contraction and churn as the aggregate monthly recurring revenue ofacross our products from the same customer base included in our measure of base revenue at the end of the annual period being measured. Our dollar-based net expansion rate is also adjusted to eliminate the effect of certain activities that we identify involving the transfer of agents between paid customer accounts, consolidation of customer accounts, or the split of a single paid customer account into multiple paid customer accounts. In addition, our dollar-based net expansion rate is adjusted to include paid customer accounts in the customer base used to determine retained revenue net of contraction and churn that share common corporate information with customers in the customer base that is used to determine our base revenue. Giving effect to this consolidation results in our dollar-based net expansion rate being calculated across approximately 32,30079,600 customers, as compared to the approximately 35,70094,300 total paid customer accounts as of December 31, 2015. 2016.To the extent that we can determine that the underlying customers do not share common corporate information, we do not aggregate paid customer accounts associated with reseller and other similar channel arrangements for the purposes of determining our dollar-based net expansion rate. While not material, we believe the failure to account for these activities would otherwise skew our dollar-based net expansion metrics associated with customers that maintain multiple paid customer accounts on our customer service platformacross their products, and paid customer accounts associated with reseller and other similar channel arrangements.123%115% as of December 31, 2015.2016. We expect that, among other factors, our continued focus on adding larger paid customer accounts at the time of addition and the growth in our revenue will result in an overall decline in our dollar-based net expansion rate to decline over time as our aggregate monthly recurring revenue grows.our customer service platformZendesk Support and, to a lesser extent, live chatChat and analytics software.Talk. Each subscription may have multiple authorized users, and we refer to each such user as an “agent.” The number of agents ranges from one to thousands for various customer accounts. Our pricing is generally established on a per agent basis. We offer a range of subscription account plans for our products that vary in pricingprice based on functionality, type and, for our customer service platform,Zendesk Support and Chat, the type and amount of product support we offer. We also offer a range of additional features that customers can purchase and service-level commitments.add to their subscriptions. Certain arrangements provide for unlimited usage for a fixed fee or incremental fees above a fixed maximum number of monthly agents during the subscription term. We sell subscription services under contractual agreements that vary in length, ranging between one month and multiple years, with the majority of subscriptions having a term of either one month or one year. contractual term of the arrangement beginning on the date that our services are made available to our customers. Subscription services purchased online are typically paid for via a credit card on the date of purchase while subscription services purchased through our internal sales organization are generally billed with monthly, quarterly, or annual payment frequencies. Due to our mixed contract lengths and billing frequencies, the annualized value of the arrangements we enter into with our customers may not be fully reflected in deferred revenue at any single point in time. Accordingly, we do not believe that the change in deferred revenue for any period is an accurate indicator of future revenue for a given period of time. Additionally, because of the mix of payment frequencies and contract lengths, we do not believe that backlog is a meaningful performance metric.voiceTalk usage, and training services, for which we recognize revenue upon completion.44platform infrastructure, product support, and professional service organizations, and expenses for data center capacity, primarily including depreciation hosting, and other expenses associated with our data centers,hosting. Cost of revenue also includes amortization expense associated with capitalized internal-use software, payment processing fees, third party license fees, amortization expense associated with acquired intangible assets, third party license fees, and allocated shared costs. We allocate shared costs such as facilities, shared information technology and security costs to all departments based on headcount. As such, allocated shared costs are reflected in cost of revenue and each operating expense category.Currently, we primarilyOur live chat software was originally hosted in a managed hosting facility in Florida and in January 2015, we migrated all accounts to our self-managed colocation facility in Ireland. In addition, we utilize third-party managed hosting facilities located in North America, Europe, and Asia to host our services, support our platform infrastructure, forand support certain research and development purposes, and to host our analytics software.functions. We currently intend to increase capacity incontinue to operate our self-managed colocation data centers and/or withand incur expenditures for third-party managed hosting services over time to support our growth. platform infrastructure, product support, and professional service organizations, through acquisitions and organically. We expect that recent and future business acquisitions will result in increased amortization expense of intangible assets such as acquired technology. As we continue to invest in technology innovation, we expect to continue to incur ongoing capitalized internal-use software costs and related amortization. We expect these investments in technology to not only expand the capabilitycapabilities of our customer service platform, live chat software, and analytics softwareproducts but also increase the efficiency of how we deliver these services, enabling us to improve our gross margin over time. The level and timing of investment in these areas could affect our cost of revenue in the future. To the extent that we continue to rely on third-party technology to provide certain functionality within our products or for certain subscription plans or integrations, we expect third- partythird-party license fees for technology that is incorporated in such products and subscription plans to remain significant over time as we increase the number of customers using such products and subscription plans.platform architecture,infrastructure, increased share-based compensation expenses,expense, as well as the amortization of certain acquired intangible assets, and costs associated with capitalized internal-use software. Although we expect that certain third- party technologysoftware, and third-party license fees will remain significant, we expect these costs to decrease over time as we take steps necessary to secure long term access to such technology.fees.customer service platform, live chat software, and analytics software,products, including the development and deployment of new features and functionality and enhancements to our software architecture and integration across our products. We expect that, in the future, research and development expenses will increase in absolute dollars. However, we expect our research and development expenses to decrease modestly as a percentage of our revenue in the long-term, although this may fluctuate from period to period depending on fluctuations in revenue and the timing and the extent of our research and development expenses.In particular, these expenses are sensitive to the impact of share-based compensation which may cause these expenses to fluctuate from period to period.45direct sales employees, developing our field sales and marketing teams, expanding our indirect sales channels, building brand awareness, and sponsoring additional marketing events, which we believe will enable us to add new customers and increase penetration within our existing customer base. Because we do not have a long history of undertaking or growing many of these activities, we cannot predict whether, or to what extent, our revenue will increase as we invest in these strategies. We expect our sales and marketing expenses to continue to increase in absolute dollars and continue to be our largest operating expense category for the foreseeable future. Our sales and marketing expenses as a percentage of our revenue over time may fluctuate from period to period depending on fluctuations in revenue and the timing and extent of our sales and marketing expenses.In particular, these expenses are sensitive to the impact of share-based compensation which may cause these expenses to fluctuate from period to period.and accountingrelated services, and other corporate expenses, and allocated shared costs.accountingcompliance-related services fees, insurance costs, board of directors’ compensation and costs of achieving and maintaining compliance with Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, executing significant transactions, including business acquisitions, and other costs associated with being a public company. As a result, we expect our general and administrative expenses to continue to increase in absolute dollars for the foreseeable future. However, we expect our general and administrative expenses to decrease modestly as a percentage of our revenue in the long-term, although this may fluctuate from period to period depending on fluctuations in revenue and the timing and extent of our general and administrative expenses.In particular, these expenses are sensitive to the impact of share-based compensation which may cause these expenses to fluctuate from period to period.Expense,Income (Expense), Netexpense,income (expense), net consists primarily of interest income from marketable securities and foreign currency gains (losses) and losses, offset by interest expense associated with our credit facility (terminated in June 2015), offset by interest income from marketable securities. See Note 11 of the Notes to our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.2014, and 201346 Year Ended December 31, 2016 2015 2014 (In thousands) Revenue $ 311,999 $ 208,768 $ 127,049 Cost of revenue (1) 93,900 67,184 46,047 Gross profit 218,099 141,584 81,002 Operating expenses (1): Research and development 91,067 62,615 36,403 Sales and marketing 166,987 114,052 77,875 General and administrative 64,371 47,902 32,869 Total operating expenses 322,425 224,569 147,147 Operating loss (104,326 ) (82,985 ) (66,145 ) Other income (expense), net 1,520 (729 ) (1,533 ) Loss before provision for (benefit from) income taxes (102,806 ) (83,714 ) (67,678 ) Provision for (benefit from) income taxes 993 338 (263 ) Net loss $ (103,799 ) $ (84,052 ) $ (67,415 ) Year Ended December 31, 2016 2015 2014 (In thousands) Cost of revenue $ 7,045 $ 4,541 $ 2,464 Research and development 27,083 19,414 10,918 Sales and marketing 23,043 14,759 10,680 General and administrative 16,608 13,842 8,077 Year Ended December 31, 2016 2015 2014 (As a percentage of revenue) Revenue 100.0 % 100.0 % 100.0 % Cost of revenue (1) 30.1 32.2 36.2 Gross profit 69.9 67.8 63.8 Operating expenses (1): Research and development 29.2 30.0 28.7 Sales and marketing 53.5 54.6 61.3 General and administrative 20.6 22.9 25.9 Total operating expenses 103.3 107.6 115.8 Operating loss (33.4 ) (39.7 ) (52.1 ) Other income (expense), net 0.5 (0.3 ) (1.2 ) Loss before provision for (benefit from) income taxes (32.9 ) (40.1 ) (53.3 ) Provision for (benefit from) income taxes 0.3 0.2 (0.2 ) Net loss (33.2 )% (40.3 )% (53.1 )% (1) Year Ended December 31, 2016 2015 2014 (As a percentage of revenue) 2.3 % 2.2 % 1.9 % 8.7 9.3 8.6 7.4 7.1 8.4 5.3 6.6 6.4
|
| Year Ended December 31, |
|
| 2014 to 2015 |
|
| 2013 to 2014 |
| |||||||||||
|
| 2015 |
|
| 2014 |
|
| 2013 |
|
| % Change |
|
| % Change |
| |||||
|
| (In thousands, except percentages) |
| |||||||||||||||||
Revenue |
| $ | 208,768 |
|
| $ | 127,049 |
|
| $ | 72,045 |
|
|
| 64 | % |
|
| 76 | % |
47
Year Ended December 31, | 2015 to 2016 | 2014 to 2015 | |||||||||||||||
2016 | 2015 | 2014 | % Change | % Change | |||||||||||||
(In thousands, except percentages) | |||||||||||||||||
Revenue | $ | 311,999 | $ | 208,768 | $ | 127,049 | 49 | % | 64 | % |
Revenue increased $55.0 million, or 76%, in 2014 compared to 2013. Of the total increase in revenue, $44.2 million, or 35%, was attributable to revenue from new accounts acquired from January 1, 2014 through December 31, 2014, net of churn and contraction, and $82.8 million, or 65%, was attributable to revenue from accounts existing on or before December 31, 2013, net of churn and contraction.
Historically, we had determined the acquisition date of a customer account based on the date when the account was established. Starting in the quarter ended March 31, 2015, we adjusted the acquisition date of customer accounts to eliminate the effect of certain activities that we identify as involving the transfer of agents from an existing customer account to a new customer account, or the split of an existing customer account into multiple customer accounts. In addition, revenue from customer accounts that share common corporate information is treated as being generated from a single customer account. The acquisition date of customer accounts that share common corporate information is determined using the establishment date of the earliest customer account. The increases in revenue attributable to new and existing accounts from 2013 to 2014 have been retrospectively adjusted to apply the revised customer acquisition date methodology.
|
| Year Ended December 31, |
|
| 2014 to 2015 |
|
| 2013 to 2014 |
| |||||||||||
|
| 2015 |
|
| 2014 |
|
| 2013 |
|
| % Change |
|
| % Change |
| |||||
|
| (In thousands, except percentages) |
| |||||||||||||||||
Cost of Revenue |
| $ | 67,184 |
|
| $ | 46,047 |
|
| $ | 24,531 |
|
|
| 46 | % |
|
| 88 | % |
Gross Margin |
|
| 67.8 | % |
|
| 63.8 | % |
|
| 66.0 | % |
|
|
|
|
|
|
|
|
Year Ended December 31, | 2015 to 2016 | 2014 to 2015 | |||||||||||||||
2016 | 2015 | 2014 | % Change | % Change | |||||||||||||
(In thousands, except percentages) | |||||||||||||||||
Cost of Revenue | $ | 93,900 | $ | 67,184 | $ | 46,047 | 40 | % | 46 | % | |||||||
Gross Margin | 69.9 | % | 67.8 | % | 63.8 | % |
costs of $2.3 million.
Year Ended December 31, | 2015 to 2016 | 2014 to 2015 | |||||||||||||||
2016 | 2015 | 2014 | % Change | % Change | |||||||||||||
(In thousands, except percentages) | |||||||||||||||||
Research and Development | $ | 91,067 | $ | 62,615 | $ | 36,403 | 45 | % | 72 | % |
Cost of revenue increased $21.5$28.5 million, or 88%45%, in 20142016 compared to 2013.2015. The overall increase was primarily due to increased employee compensation-related costs of $9.5 million associated with our substantial increase in headcount, share-based compensation expense related to the Performance Awards described above, increased depreciation expense and other costs associated with our self-managed colocation data centers of $2.9$23.5 million, driven by our investments in building outheadcount growth, and increasing capacity within our self-managed colocation data centers, and increased amortization expense associated with capitalized internal-use software of $1.5 million as we continue to develop additional features and functionalities of our platform. Further contributing to the increase was $1.2 million in hosting fees as we increased data center capacity to support our growth, an increase of $1.2 million in amortization expense of acquired intangibles in connection with our acquisition of Zopim, and an increase of $3.4 million in allocated shared costs primarily due to increased facilities expenses.
Our gross margin decreased by 2.2 percentage points in 2014 compared to 2013. The decrease was primarily due to a 2.6 percentage point increase in employee-related compensation costs, driven by increased share-based compensation expense, and a 1.1 percentage point increase in allocated shared costs as a percentage of revenue,$4.2 million. The overall increase was partially offset by a 1.7 percentage point decreasereduction of $2.3 million in hosting fees as a percentage of revenue driven by efficiency realized from our investments in building out our self-managed colocation data centers.
48
Research and Development Expenses
|
| Year Ended December 31, |
|
| 2014 to 2015 |
|
| 2013 to 2014 |
| |||||||||||
|
| 2015 |
|
| 2014 |
|
| 2013 |
|
| % Change |
|
| % Change |
| |||||
|
| (In thousands, except percentages) |
| |||||||||||||||||
Research and Development |
| $ | 62,615 |
|
| $ | 36,403 |
|
| $ | 15,288 |
|
|
| 72 | % |
|
| 138 | % |
Research and development expenses increased $26.2 million, or 72%, in 2015 compared to 2014. The overall increase was primarily due to an increaseincreased employee compensation-related costs of $25.3 million, in employee compensation-related costs, driven by our headcount growth, and an increase of $3.0 million in allocated shared costs. These increases werecosts of $3.0 million. The overall increase was partially offset by a reduction of $3.5 million in share-based compensation expense associated with the Performance Awards described above.
Research
Year Ended December 31, | 2015 to 2016 | 2014 to 2015 | |||||||||||||||
2016 | 2015 | 2014 | % Change | % Change | |||||||||||||
(In thousands, except percentages) | |||||||||||||||||
Sales and Marketing | $ | 166,987 | $ | 114,052 | $ | 77,875 | 46 | % | 46 | % |
Sales and Marketing Expenses
|
| Year Ended December 31, |
|
| 2014 to 2015 |
|
| 2013 to 2014 |
| |||||||||||
|
| 2015 |
|
| 2014 |
|
| 2013 |
|
| % Change |
|
| % Change |
| |||||
|
| (In thousands, except percentages) |
| |||||||||||||||||
Sales and Marketing |
| $ | 114,052 |
|
| $ | 77,875 |
|
| $ | 37,622 |
|
|
| 46 | % |
|
| 107 | % |
Sales and marketing expenses increased $36.2 million, or 46%, in 2015 compared to 2014. The overall increase was primarily due to increased employee compensation-related costs of $27.0 million, driven by headcount growth. This increase was partially offset by a decline of $4.1 million in share-based compensation expense related to the accelerated vesting of certain stock options in 2014 and a reduction of $1.4 million in share-based compensation associated with the Performance Awards described above. The overall increase was also driven by increased marketing program costs of $6.9 million and increased travel expenses of $2.3 million. The increase in marketing program costs was primarily related to internet-based advertising to drive the adoption of our platform and tradeshow events that we sponsor. Additionally, allocated shared costs increased $3.3 million.
Sales
Year Ended December 31, | 2015 to 2016 | 2014 to 2015 | |||||||||||||||
2016 | 2015 | 2014 | % Change | % Change | |||||||||||||
(In thousands, except percentages) | |||||||||||||||||
General and Administrative | $ | 64,371 | $ | 47,902 | $ | 32,869 | 34 | % | 46 | % |
General and Administrative Expenses
|
| Year Ended December 31, |
|
| 2014 to 2015 |
|
| 2013 to 2014 |
| |||||||||||
|
| 2015 |
|
| 2014 |
|
| 2013 |
|
| % Change |
|
| % Change |
| |||||
|
| (In thousands, except percentages) |
| |||||||||||||||||
General and Administrative |
| $ | 47,902 |
|
| $ | 32,869 |
|
| $ | 16,437 |
|
|
| 46 | % |
|
| 100 | % |
General and administrative expenses increased $15.0 million, or 46%, in 2015 compared to 2014. The overall increase was primarily due to increased employee compensation-related costs of $9.8 million, driven by headcount growth, and an increase in professional and outside services costs of $2.1 million. The increase in employee compensation-related costs was driven by our headcount growth. The increase in professional and outside services costs was driven by increased levellevels of business activities and increased costs of being a public company.
49
| Three Months Ended |
| |||||||||||||||||||||||||||||
| Dec 31, |
|
| Sept 30, |
|
| June 30, |
|
| Mar 31, |
|
| Dec 31, |
|
| Sep 30, |
|
| Jun 30, |
|
| Mar 31, |
| ||||||||
| 2015 |
|
| 2015 |
|
| 2015 |
|
| 2015 |
|
| 2014 |
|
| 2014 |
|
| 2014 |
|
| 2014 |
| ||||||||
Consolidated Statement of Operations Data: |
|
| |||||||||||||||||||||||||||||
Revenue | $ | 62,646 |
|
| $ | 55,661 |
|
| $ | 48,227 |
|
| $ | 42,234 |
|
| $ | 38,541 |
|
| $ | 33,910 |
|
| $ | 29,506 |
|
| $ | 25,092 |
|
Cost of revenue (1) |
| 19,693 |
|
|
| 17,039 |
|
|
| 16,162 |
|
|
| 14,290 |
|
|
| 13,637 |
|
|
| 11,684 |
|
|
| 11,731 |
|
|
| 8,995 |
|
Gross profit |
| 42,954 |
|
|
| 38,622 |
|
|
| 32,064 |
|
|
| 27,944 |
|
|
| 24,904 |
|
|
| 22,226 |
|
|
| 17,775 |
|
|
| 16,097 |
|
Operating expenses (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
| 19,098 |
|
|
| 16,031 |
|
|
| 14,227 |
|
|
| 13,259 |
|
|
| 11,176 |
|
|
| 9,550 |
|
|
| 10,499 |
|
|
| 5,178 |
|
Sales and marketing |
| 34,328 |
|
|
| 29,079 |
|
|
| 27,242 |
|
|
| 23,403 |
|
|
| 21,701 |
|
|
| 21,548 |
|
|
| 20,339 |
|
|
| 14,287 |
|
General and administrative |
| 13,920 |
|
|
| 12,319 |
|
|
| 11,536 |
|
|
| 10,127 |
|
|
| 9,230 |
|
|
| 8,940 |
|
|
| 8,315 |
|
|
| 6,384 |
|
Total operating expenses |
| 67,346 |
|
|
| 57,429 |
|
|
| 53,005 |
|
|
| 46,789 |
|
|
| 42,107 |
|
|
| 40,038 |
|
|
| 39,153 |
|
|
| 25,849 |
|
Operating loss |
| (24,393 | ) |
|
| (18,807 | ) |
|
| (20,940 | ) |
|
| (18,845 | ) |
|
| (17,203 | ) |
|
| (17,812 | ) |
|
| (21,378 | ) |
|
| (9,752 | ) |
Other expense, net |
| (302 | ) |
|
| 145 |
|
|
| (342 | ) |
|
| (230 | ) |
|
| (282 | ) |
|
| (343 | ) |
|
| (450 | ) |
|
| (458 | ) |
Loss before provision for (benefit from) income taxes |
| (24,694 | ) |
|
| (18,662 | ) |
|
| (21,283 | ) |
|
| (19,075 | ) |
|
| (17,485 | ) |
|
| (18,155 | ) |
|
| (21,828 | ) |
|
| (10,210 | ) |
Provision for (benefit from) income taxes |
| (216 | ) |
|
| 262 |
|
|
| 199 |
|
|
| 93 |
|
|
| 9 |
|
|
| (236 | ) |
|
| (85 | ) |
|
| 49 |
|
Net loss | $ | (24,478 | ) |
| $ | (18,924 | ) |
| $ | (21,482 | ) |
| $ | (19,168 | ) |
| $ | (17,494 | ) |
| $ | (17,919 | ) |
| $ | (21,743 | ) |
| $ | (10,259 | ) |
Three Months Ended | |||||||||||||||||||||||||||||||
Dec 31, | Sept 30, | June 30, | Mar 31, | Dec 31, | Sept 30, | June 30, | Mar 31, | ||||||||||||||||||||||||
2016 | 2016 | 2016 | 2016 | 2015 | 2015 | 2015 | 2015 | ||||||||||||||||||||||||
Consolidated Statement of Operations Data: | |||||||||||||||||||||||||||||||
Revenue | $ | 88,623 | $ | 80,717 | $ | 74,200 | $ | 68,459 | $ | 62,646 | $ | 55,661 | $ | 48,227 | $ | 42,234 | |||||||||||||||
Cost of revenue (1) | 25,582 | 23,866 | 22,936 | 21,516 | 19,693 | 17,039 | 16,162 | 14,290 | |||||||||||||||||||||||
Gross profit | 63,041 | 56,851 | 51,264 | 46,943 | 42,954 | 38,622 | 32,064 | 27,944 | |||||||||||||||||||||||
Operating expenses (1): | |||||||||||||||||||||||||||||||
Research and development | 24,383 | 22,953 | 22,134 | 21,597 | 19,098 | 16,031 | 14,227 | 13,259 | |||||||||||||||||||||||
Sales and marketing | 47,566 | 43,899 | 39,350 | 36,172 | 34,328 | 29,079 | 27,242 | 23,403 | |||||||||||||||||||||||
General and administrative | 16,222 | 16,212 | 16,076 | 15,861 | 13,920 | 12,319 | 11,536 | 10,127 | |||||||||||||||||||||||
Total operating expenses | 88,171 | 83,064 | 77,560 | 73,630 | 67,346 | 57,429 | 53,005 | 46,789 | |||||||||||||||||||||||
Operating loss | (25,130 | ) | (26,213 | ) | (26,296 | ) | (26,687 | ) | (24,393 | ) | (18,807 | ) | (20,940 | ) | (18,845 | ) | |||||||||||||||
Other income (expense), net | 775 | 681 | 134 | (70 | ) | (302 | ) | 145 | (342 | ) | (230 | ) | |||||||||||||||||||
Loss before provision for (benefit from) income taxes | (24,355 | ) | (25,532 | ) | (26,162 | ) | (26,757 | ) | (24,694 | ) | (18,662 | ) | (21,283 | ) | (19,075 | ) | |||||||||||||||
Provision for (benefit from) income taxes | 193 | 294 | 92 | 414 | (216 | ) | 262 | 199 | 93 | ||||||||||||||||||||||
Net loss | $ | (24,548 | ) | $ | (25,826 | ) | $ | (26,254 | ) | $ | (27,171 | ) | $ | (24,478 | ) | $ | (18,924 | ) | $ | (21,482 | ) | $ | (19,168 | ) |
(1) | Share-based compensation expense was allocated as follows: |
| Three Months Ended |
| |||||||||||||||||||||||||||||
| Dec 31, |
|
| Sept 30, |
|
| June 30, |
|
| Mar 31, |
|
| Dec 31, |
|
| Sep 30, |
|
| Jun 30, |
|
| Mar 31, |
| ||||||||
| 2015 |
|
| 2015 |
|
| 2015 |
|
| 2015 |
|
| 2014 |
|
| 2014 |
|
| 2014 |
|
| 2014 |
| ||||||||
|
|
| |||||||||||||||||||||||||||||
Cost of revenue | $ | 1,405 |
|
| $ | 1,131 |
|
| $ | 1,114 |
|
| $ | 891 |
|
| $ | 773 |
|
| $ | 591 |
|
| $ | 1,010 |
|
| $ | 90 |
|
Research and development |
| 5,930 |
|
|
| 4,974 |
|
|
| 4,446 |
|
|
| 4,064 |
|
|
| 3,388 |
|
|
| 3,052 |
|
|
| 4,168 |
|
|
| 310 |
|
Sales and marketing |
| 4,604 |
|
|
| 3,786 |
|
|
| 3,937 |
|
|
| 2,432 |
|
|
| 2,045 |
|
|
| 4,877 |
|
|
| 3,268 |
|
|
| 490 |
|
General and administrative |
| 3,559 |
|
|
| 3,551 |
|
|
| 3,890 |
|
|
| 2,842 |
|
|
| 2,308 |
|
|
| 2,298 |
|
|
| 2,537 |
|
|
| 934 |
|
50
| Three Months Ended |
| |||||||||||||||||||||||||||||
| Dec 31, |
|
| Sept 30, |
|
| June 30, |
|
| Mar 31, |
|
| Dec 31, |
|
| Sep 30, |
|
| Jun 30, |
|
| Mar 31, |
| ||||||||
| 2015 |
|
| 2015 |
|
| 2015 |
|
| 2015 |
|
| 2014 |
|
| 2014 |
|
| 2014 |
|
| 2014 |
| ||||||||
Consolidated Statement of Operations Data: |
|
| |||||||||||||||||||||||||||||
Revenue |
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
Cost of revenue (1) |
| 31.4 |
|
|
| 30.6 |
|
|
| 33.5 |
|
|
| 33.8 |
|
|
| 35.4 |
|
|
| 34.5 |
|
|
| 39.8 |
|
|
| 35.8 |
|
Gross profit |
| 68.6 |
|
|
| 69.4 |
|
|
| 66.5 |
|
|
| 66.2 |
|
|
| 64.6 |
|
|
| 65.5 |
|
|
| 60.2 |
|
|
| 64.2 |
|
Operating expenses (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
| 30.5 |
|
|
| 28.8 |
|
|
| 29.5 |
|
|
| 31.4 |
|
|
| 29.0 |
|
|
| 28.2 |
|
|
| 35.6 |
|
|
| 20.6 |
|
Sales and marketing |
| 54.8 |
|
|
| 52.2 |
|
|
| 56.5 |
|
|
| 55.4 |
|
|
| 56.3 |
|
|
| 63.5 |
|
|
| 68.9 |
|
|
| 56.9 |
|
General and administrative |
| 22.2 |
|
|
| 22.1 |
|
|
| 23.9 |
|
|
| 24.0 |
|
|
| 23.9 |
|
|
| 26.4 |
|
|
| 28.2 |
|
|
| 25.4 |
|
Total operating expenses |
| 107.5 |
|
|
| 103.2 |
|
|
| 109.9 |
|
|
| 110.8 |
|
|
| 109.3 |
|
|
| 118.1 |
|
|
| 132.7 |
|
|
| 103.0 |
|
Operating loss |
| (38.9 | ) |
|
| (33.8 | ) |
|
| (43.4 | ) |
|
| (44.6 | ) |
|
| (44.6 | ) |
|
| (52.5 | ) |
|
| (72.5 | ) |
|
| (38.9 | ) |
Other expense, net |
| (0.5 | ) |
|
| 0.3 |
|
|
| (0.7 | ) |
|
| (0.5 | ) |
|
| (0.7 | ) |
|
| (1.0 | ) |
|
| (1.5 | ) |
|
| (1.8 | ) |
Loss before provision for (benefit from) income taxes |
| (39.4 | ) |
|
| (33.5 | ) |
|
| (44.1 | ) |
|
| (45.2 | ) |
|
| (45.4 | ) |
|
| (53.5 | ) |
|
| (74.0 | ) |
|
| (40.7 | ) |
Provision for (benefit from) income taxes |
| (0.3 | ) |
|
| 0.5 |
|
|
| 0.4 |
|
|
| 0.2 |
|
|
| 0.0 |
|
|
| (0.7 | ) |
|
| (0.3 | ) |
|
| 0.2 |
|
Net loss |
| (39.1 | %) |
|
| (34.0 | %) |
|
| (44.5 | %) |
|
| (45.4 | %) |
|
| (45.4 | %) |
|
| (52.8 | %) |
|
| (73.7 | %) |
|
| (40.9 | %) |
Three Months Ended | |||||||||||||||||||||||
Dec 31, | Sept 30, | June 30, | Mar 31, | Dec 31, | Sept 30, | June 30, | Mar 31, | ||||||||||||||||
2016 | 2016 | 2016 | 2016 | 2015 | 2015 | 2015 | 2015 | ||||||||||||||||
Cost of revenue | 1,691 | 1,919 | 1,802 | 1,633 | 1,405 | 1,131 | 1,114 | 891 | |||||||||||||||
Research and development | 6,535 | 7,172 | 6,749 | 6,627 | 5,930 | 4,974 | 4,446 | 4,064 | |||||||||||||||
Sales and marketing | 5,263 | 6,657 | 5,684 | 5,439 | 4,604 | 3,786 | 3,937 | 2,432 | |||||||||||||||
General and administrative | 3,955 | 4,247 | 4,410 | 3,996 | 3,559 | 3,551 | 3,890 | 2,842 |
Three Months Ended | |||||||||||||||||||||||
Dec 31, | Sept 30, | June 30, | Mar 31, | Dec 31, | Sept 30, | June 30, | Mar 31, | ||||||||||||||||
2016 | 2016 | 2016 | 2016 | 2015 | 2015 | 2015 | 2015 | ||||||||||||||||
Consolidated Statement of Operations Data: | |||||||||||||||||||||||
Revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||
Cost of revenue (1) | 28.9 | 29.6 | 30.9 | 31.4 | 31.4 | 30.6 | 33.5 | 33.8 | |||||||||||||||
Gross profit | 71.1 | 70.4 | 69.1 | 68.6 | 68.6 | 69.4 | 66.5 | 66.2 | |||||||||||||||
Operating expenses (1): | |||||||||||||||||||||||
Research and development | 27.5 | 28.4 | 29.8 | 31.5 | 30.5 | 28.8 | 29.5 | 31.4 | |||||||||||||||
Sales and marketing | 53.7 | 54.4 | 53.0 | 52.8 | 54.8 | 52.2 | 56.5 | 55.4 | |||||||||||||||
General and administrative | 18.3 | 20.1 | 21.7 | 23.2 | 22.2 | 22.1 | 23.9 | 24.0 | |||||||||||||||
Total operating expenses | 99.5 | 102.9 | 104.5 | 107.6 | 107.5 | 103.2 | 109.9 | 110.8 | |||||||||||||||
Operating loss | (28.4 | ) | (32.5 | ) | (35.4 | ) | (39.0 | ) | (39.8 | ) | (33.8 | ) | (43.4 | ) | (44.6 | ) | |||||||
Other income (expense), net | 0.9 | 0.8 | 0.2 | (0.1 | ) | (0.5 | ) | 0.3 | (0.7 | ) | (0.5 | ) | |||||||||||
Loss before provision for (benefit from) income taxes | (27.5 | ) | (31.7 | ) | (35.2 | ) | (39.1 | ) | (39.4 | ) | (33.5 | ) | (44.1 | ) | (45.2 | ) | |||||||
Provision for (benefit from) income taxes | 0.2 | 0.4 | 0.1 | 0.6 | (0.3 | ) | 0.5 | 0.4 | 0.2 | ||||||||||||||
Net loss | (27.7 | )% | (32.1 | )% | (35.3 | )% | (39.7 | )% | (39.1 | )% | (34.0 | )% | (44.5 | )% | (45.4 | )% |
(1) | Includes share-based compensation expense as follows: |
| Three Months Ended |
| |||||||||||||||||||||||||||||
| Dec 31, |
|
| Sept 30, |
|
| June 30, |
|
| Mar 31, |
|
| Dec 31, |
|
| Sep 30, |
|
| Jun 30, |
|
| Mar 31, |
| ||||||||
| 2015 |
|
| 2015 |
|
| 2015 |
|
| 2015 |
|
| 2014 |
|
| 2014 |
|
| 2014 |
|
| 2014 |
| ||||||||
|
|
| |||||||||||||||||||||||||||||
Cost of revenue |
| 2.2 | % |
|
| 2.0 | % |
|
| 2.3 | % |
|
| 2.1 | % |
|
| 2.0 | % |
|
| 1.7 | % |
|
| 3.4 | % |
|
| 0.4 | % |
Research and development |
| 9.5 |
|
|
| 8.9 |
|
|
| 9.2 |
|
|
| 9.6 |
|
|
| 8.8 |
|
|
| 9.0 |
|
|
| 14.1 |
|
|
| 1.2 |
|
Sales and marketing |
| 7.3 |
|
|
| 6.8 |
|
|
| 8.2 |
|
|
| 5.8 |
|
|
| 5.3 |
|
|
| 14.4 |
|
|
| 11.1 |
|
|
| 2.0 |
|
General and administrative |
| 5.7 |
|
|
| 6.4 |
|
|
| 8.1 |
|
|
| 6.7 |
|
|
| 6.0 |
|
|
| 6.8 |
|
|
| 8.6 |
|
|
| 3.7 |
|
Three Months Ended | |||||||||||||||||||||||
Dec 31, | Sept 30, | June 30, | Mar 31, | Dec 31, | Sept 30, | June 30, | Mar 31, | ||||||||||||||||
2016 | 2016 | 2016 | 2016 | 2015 | 2015 | 2015 | 2015 | ||||||||||||||||
Cost of revenue | 1.9 | % | 2.4 | % | 2.4 | % | 2.4 | % | 2.2 | % | 2.0 | % | 2.3 | % | 2.1 | % | |||||||
Research and development | 7.4 | 8.9 | 9.1 | 9.7 | 9.5 | 8.9 | 9.2 | 9.6 | |||||||||||||||
Sales and marketing | 5.9 | 8.2 | 7.7 | 7.9 | 7.3 | 6.8 | 8.2 | 5.8 | |||||||||||||||
General and administrative | 4.5 | 5.3 | 5.9 | 5.8 | 5.7 | 6.4 | 8.1 | 6.7 |
following year. We believe that the seasonal trends that we have experienced in the past may continue for the foreseeable future.
51
money market funds.
|
| Year Ended December 31, |
| |||||||||
|
| 2015 |
|
| 2014 |
|
| 2013 |
| |||
Cash provided by operating activities |
| $ | 5,333 |
|
| $ | 2,090 |
|
| $ | 4,005 |
|
Cash used in investing activities |
|
| (72,721 | ) |
|
| (71,297 | ) |
|
| (24,186 | ) |
Cash provided by financing activities |
|
| 203,107 |
|
|
| 95,768 |
|
|
| 25,216 |
|
Year Ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Cash provided by operating activities | $ | 24,522 | $ | 5,333 | $ | 2,090 | |||||
Cash used in investing activities | (182,364 | ) | (72,721 | ) | (71,297 | ) | |||||
Cash provided by financing activities | 35,627 | 203,107 | 95,768 |
In October 2015, we completed the acquisition of WAC. We acquired 100 percent of the outstanding shares of WAC in exchange for purchase consideration of $46.3 million in cash, including working capital adjustments. As partial security for standard indemnification obligations, $7.0 million of the consideration is held in escrow for a period of up to 18 months, with a portion to be released 12 months following the closing of the acquisition. In connection with the acquisition of WAC, we have also entered into retention arrangements pursuant to which we have issued restricted stock unit awards for an aggregate of approximately 0.5 million shares of our common stock, subject to vesting based on continued employment.
In March 2014, we completed the acquisition of Zopim. The purchase price of approximately $15.8 million ($4.9 million of cash and $10.9 million of our common stock) includes $1.1 million of cash and $2.4 million of common stock consideration held back between 12 and 18 months as partial security for standard indemnification obligations and which are payable in the future under terms specified in the stock purchase agreement. In connection with the acquisition of Zopim, we established a retention plan pursuant to which we will pay up to $13.9 million in cash and equity consideration over two and three years, respectively, to Zopim employees in connection with their continued employment.
Prior to the expiration of the lock-up agreements in connection with our IPO, we had elected to net share settle our RSUs by withholding shares and remitting income tax on behalf of the applicable employees. Upon the expiration of the lock-up agreements in November 2014, we generally began requiring that employees sell a portion of the shares that they receive upon the vesting of RSUs in order to cover any required withholding taxes (sell-to-cover). This sell-to-cover approach reduced our cash outflows.
52
million.
million.
Investing Activities
functionality for our products.
maturities.
products.
Financing Activities
$11.0 million.
53
Net cash provided by financing activities in 2013 of $25.2 million was primarily attributable to proceeds from borrowings under our credit facility of $23.8 million and proceeds from exercise of stock options of $1.8 million, partially offset by principal payments on capital lease obligations of $0.3 million.
|
| Total |
|
| Less than 1 Year |
|
| 1 to 3 Years |
|
| 3 to 5 Years |
|
| More than 5 Years |
| |||||
Contractual Obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease obligations |
| $ | 45,280 |
|
| $ | 8,367 |
|
| $ | 17,660 |
|
| $ | 12,653 |
|
| $ | 6,600 |
|
Purchase obligations |
|
| 4,232 |
|
|
| 2,385 |
|
|
| 1,847 |
|
|
| — |
|
|
| — |
|
Total contractual obligations |
| $ | 49,512 |
|
| $ | 10,752 |
|
| $ | 19,507 |
|
| $ | 12,653 |
|
| $ | 6,600 |
|
Total | Less than 1 Year | 1 to 3 Years | 3 to 5 Years | More than 5 Years | |||||||||||||||
Contractual obligations: | |||||||||||||||||||
Operating lease obligations | $ | 44,904 | $ | 11,071 | $ | 20,340 | $ | 11,021 | $ | 2,472 | |||||||||
Purchase obligations | 4,393 | 3,875 | 518 | — | — | ||||||||||||||
Total contractual obligations | $ | 49,297 | $ | 14,946 | $ | 20,858 | $ | 11,021 | $ | 2,472 |
Foreign Currency Exchange Risk
We conduct transactions, particularly intercompany transactions, in foreign currencies, primarily the British Pound Sterling, Euro, Australian Dollar, Danish Krone, Singapore Dollar, Japanese Yen, Philippine peso, and Brazilian Real. While we have primarily transacted with customers in the U.S. dollar, we have also historically transacted in foreign currencies for subscriptions to our customer service platform and expect to significantly expand the number of transactions with customers that are denominated in foreign currencies in the near future. Except for our Singapore subsidiary, our international subsidiaries maintain certain monetary assets and current liability balances that are denominated in currencies other than the functional currencies of these entities, which is the U.S. dollar. Our Singapore subsidiary’s functional currency is the Singapore Dollar. Changes in the value of foreign currencies relative to the U.S. dollar can result in fluctuations in our total assets, liabilities, revenue, operating expenses, and cash flows.
Foreign currency gains and losses were not significant for the years ended December 31, 2015, 2014 and 2013. In September 2015, we implemented a hedging program to mitigate the impact of foreign currency fluctuations on our cash flows and earnings. For additional information, see Note 2 of the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Interest Rate Sensitivity
We had cash, cash equivalents and marketable securities totaling $268.0 million at December 31, 2015, of which $73.1 million was invested in corporate bonds, money market funds, asset-backed securities, commercial paper, U.S. treasury securities and agency securities. The cash and cash equivalents are held for working capital purposes. Our investments in marketable securities are made for capital preservation purposes. We do not enter into investments for trading or speculative purposes.
54
Our cash equivalents and our portfolio of marketable securities are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value adversely affected due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fluctuate due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. However because we classify our debt securities as “available for sale,” no gains or losses are recognized due to changes in interest rates unless such securities are sold prior to maturity or declines in fair value are determined to be other-than-temporary.
As of December 31, 2015, an immediate increase of 100-basis points in interest rates would have resulted in a decline in the fair value of our cash equivalents and portfolio of marketable securities of approximately $0.4 million. Fluctuations in the value of our cash equivalents and portfolio of marketable securities caused by a change in interest rates (gains or losses on the carrying value) are recorded in other comprehensive income, and are realized only if we sell the underlying securities prior to maturity or declines in fair value are determined to be other-than-temporary.
|
|
|
|
|
|
|
|
Certain customers have arrangements that provide for a maximum number of users over the contract term, with usage measured monthly. Revenue for these arrangements is recognized ratably over the contract terms.terms until such time as a better pattern of recognition is evident. Incremental fees are incurred when the maximum number of users is exceeded, and any incremental fees are recognized as revenue ratably over the remaining contractual term.
55
2014.
56
|
|
|
|
|
|
|
|
|
| Year Ended December 31, |
| |||||||||
|
| 2015 |
|
| 2014 |
|
| 2013 |
| |||
Expected volatility |
| 49% - 54% |
|
| 54% - 56% |
|
| 50% - 63% |
| |||
Dividend rate |
|
| 0% |
|
|
| 0% |
|
|
| 0% |
|
Risk-free interest rate |
| 1.4% - 2.0% |
|
| 1.75% - 2.02% |
|
| 0.63% - 2.02% |
| |||
Expected term (in years) |
| 6.02 - 6.08 |
|
| 6.02 - 6.50 |
|
| 4.47 - 6.27 |
|
Year Ended December 31, | |||||
2016 | 2015 | 2014 | |||
Expected volatility | 47% - 49% | 49% - 54% | 54% - 56% | ||
Dividend rate | 0% | 0% | 0% | ||
Risk-free interest rate | 1.1% - 2.0% | 1.4% - 2.0% | 1.75% - 2.02% | ||
Expected term (in years) | 6.02 - 6.08 | 6.02 - 6.08 | 6.02 - 6.50 |
Recently Issued and Adopted Accounting Pronouncements
In the first quarter of 2017, we intend to recognize forfeitures as they occur, rather than applying an estimated forfeiture rate, as permitted by ASU 2016-09. Refer to Note 2 of the notesNotes to our consolidated financial statementsConsolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for additional information regarding the adoption of this standard.
57
27, 2017 CA December 31, December 31, 2015 2014 Assets Current assets: Cash and cash equivalents $ 216,226 $ 80,265 Marketable securities 29,414 42,204 Accounts receivable, net of allowance for doubtful accounts of $763 and $264 as of December 31, 2015 and 2014, respectively 26,168 11,523 Prepaid expenses and other current assets 11,423 5,013 Total current assets 283,231 139,005 Marketable securities, noncurrent 22,336 9,205 Property and equipment, net 56,540 41,895 Goodwill and intangible assets, net 57,050 14,152 Other assets 3,529 1,531 Total assets $ 422,686 $ 205,788 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 9,332 $ 4,763 Accrued liabilities 9,742 7,689 Accrued compensation and related benefits 14,115 11,738 Deferred revenue 84,210 50,908 Current portion of credit facility — 3,041 Current portion of capital leases — 10 Total current liabilities 117,399 78,149 Deferred revenue, noncurrent 1,405 823 Credit facility, noncurrent — 3,911 Other liabilities 10,592 9,199 Total liabilities 129,396 92,082 Commitments and contingencies (Note 8) Stockholders’ equity: Preferred stock, par value $0.01 per share: no shares issued or outstanding; 10.0 million shares authorized as of December 31, 2015 and 2014 — — Common stock, par value $0.01 per share: 400.0 million shares authorized; 90.9 million and 76.1 million shares issued; 90.3 million and 75.5 million shares outstanding as of December 31, 2015 and 2014, respectively (including 0.3 million and 0.6 million shares subject to repurchase, legally issued and outstanding as of December 31, 2015 and 2014, respectively) 905 755 Additional paid-in capital 511,183 246,000 Accumulated other comprehensive loss (2,225 ) (528 ) Accumulated deficit (215,921 ) (131,869 ) Treasury stock at cost; 0.5 million shares as of December 31, 2015 and 2014 (652 ) (652 ) Total stockholders’ equity 293,290 113,706 Total liabilities and stockholders’ equity $ 422,686 $ 205,788 Year Ended December 31, 2015 2014 2013 Revenue $ 208,768 $ 127,049 $ 72,045 Cost of revenue (1) 67,184 46,047 24,531 Gross profit 141,584 81,002 47,514 Operating expenses (1): Research and development 62,615 36,403 15,288 Sales and marketing 114,052 77,875 37,622 General and administrative 47,902 32,869 16,437 Total operating expenses 224,569 147,147 69,347 Operating loss (82,985 ) (66,145 ) (21,833 ) Other expense, net (729 ) (1,533 ) (517 ) Loss before provision for (benefit from) income taxes (83,714 ) (67,678 ) (22,350 ) Provision for (benefit from) income taxes 338 (263 ) 221 Net loss (84,052 ) (67,415 ) (22,571 ) Accretion of redeemable convertible preferred stock — (18 ) (49 ) Net loss attributable to common stockholders $ (84,052 ) $ (67,433 ) $ (22,620 ) Net loss per share attributable to common stockholders, basic and diluted $ (0.99 ) $ (1.26 ) $ (1.04 ) Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted 84,926 53,571 21,674 __________ (1) Includes share-based compensation expense as follows: Year Ended December 31, 2015 2014 2013 Cost of revenue $ 4,541 $ 2,464 $ 254 Research and development 19,414 10,918 635 Sales and marketing 14,759 10,680 1,210 General and administrative 13,842 8,077 2,755 Year Ended December 31, 2015 2014 2013 Net loss $ (84,052 ) $ (67,415 ) $ (22,571 ) Other comprehensive loss, net of tax: Net change in unrealized gain (loss) on available-for-sale investments (44 ) (71 ) 10 Foreign currency translation loss (942 ) (467 ) — Net change in unrealized loss on derivative instruments (711 ) — — Comprehensive loss $ (85,749 ) $ (67,953 ) $ (22,561 ) Stockholders’ Equity (Deficit) Accumulated Redeemable Convertible Additional Other Total Preferred Stock Common Stock Paid-In Treasury Stock Comprehensive Accumulated Stockholders’ Shares Amount Shares Amount Capital Shares Amount Income (loss) Deficit Equity (Deficit) Balances as of December 31, 2012 23,598 71,320 23,238 212 12,118 (535 ) (652 ) — (41,883 ) (30,205 ) Issuance of common stock upon exercise of stock options — — 765 8 673 — — — — 681 Issuance of common stock upon early exercise of stock options — — 164 — — — — — — — Vesting of early exercised stock options — — — 9 852 — — — — 861 Repurchase of common stock — — (457 ) — — — — — — — Share-based compensation — — — — 4,997 — — — — 4,997 Accretion of redeemable convertible preferred stock — 49 — — (49 ) — — — — (49 ) Unrealized gain on investment — — — — — — — 10 — 10 Net loss — — — — — — — — (22,571 ) (22,571 ) Balances as of December 31, 2013 23,598 71,369 23,710 229 18,591 (535 ) (652 ) 10 (64,454 ) (46,276 ) Issuance of common stock upon initial public offering, net of issuance costs — — 12,778 128 102,962 — — — — 103,090 Accretion of redeemable convertible preferred stock — 18 — — (18 ) — — — — (18 ) Conversion of preferred stock to common stock upon initial public offering (23,598 ) (71,387 ) 34,323 343 71,044 — — — — 71,387 Issuance of common stock for acquisition of Zopim — — 902 9 10,883 — — — — 10,892 Issuance of common stock upon exercise of stock options — — 3,207 32 4,938 — — — — 4,970 Issuance of common stock for settlement of restricted stock units (RSUs) — — 517 5 (5 ) — — — — — Shares withheld related to net share settlement of RSUs — — (147 ) (1 ) (2,117 ) — — — — (2,118 ) Issuance of common stock upon early exercise of stock options — — 309 — — — — — — — Vesting of early exercised stock options — — — 5 1,507 — — — — 1,512 Issuance of common stock in connection with employee stock purchase plans — — 428 4 3,267 — — — — 3,271 Issuance of common stock upon exercise of warrants — — 111 1 (1 ) — — — — — Repurchase of common stock — — (4 ) — — — — — — — Share-based compensation — — — — 34,615 — — — — 34,615 Tax benefit from share-based award activity — — — — 334 — — — — 334 Other comprehensive loss, net of income taxes — — — — — — — (538 ) — (538 ) Net loss — — — — — — — — (67,415 ) (67,415 ) Balances as of December 31, 2014 — — 76,134 755 246,000 (535 ) (652 ) (528 ) (131,869 ) 113,706 Issuance of common stock from follow-on public offering, net of issuance costs — — 8,780 88 190,008 — — — — 190,096 Issuance of common stock upon exercise of stock options — — 3,275 33 10,580 — — — — 10,613 Issuance of common stock for settlement of RSUs — — 1,655 17 (626 ) — — — — (609 ) Vesting of early exercised stock options — — 1,046 1,046 Issuance of common stock in connection with employee stock purchase plans — — 1,019 12 9,363 — — — — 9,375 Repurchase of common stock — — (2 ) — — — — - Share-based compensation — — — — 54,363 — — — — 54,363 Tax benefit from share-based award activity — — — — 449 — — — — 449 Other comprehensive loss, net of income taxes — — — — — — — (1,697 ) — (1,697 ) Net loss — — — — — — — — (84,052 ) (84,052 ) Balances as of December 31, 2015 — — 90,861 905 511,183 (535 ) (652 ) (2,225 ) (215,921 ) 293,290 Year Ended December 31, 2015 2014 2013 Cash flows from operating activities Net loss $ (84,052 ) $ (67,415 ) $ (22,571 ) Adjustments to reconcile net loss to net cash provided by operating activities Depreciation and amortization 19,744 11,456 5,222 Share-based compensation 52,556 32,139 4,854 Excess tax benefit from share-based award activity (449 ) (334 ) — Other 1,457 337 179 Changes in operating assets and liabilities: Accounts receivable (14,989 ) (3,846 ) (3,594 ) Prepaid expenses and other current assets (5,510 ) (1,444 ) (482 ) Other assets and liabilities (3,204 ) 1,742 303 Accounts payable 2,017 947 2,409 Accrued liabilities 2,204 351 1,724 Accrued compensation and related benefits 1,706 5,767 2,043 Deferred revenue 33,853 22,390 13,918 Net cash provided by operating activities 5,333 2,090 4,005 Cash flows from investing activities Purchases of property and equipment (22,989 ) (21,665 ) (7,116 ) Internal-use software costs (4,705 ) (8,013 ) (4,661 ) Purchases of marketable securities (70,303 ) (54,330 ) (12,409 ) Proceeds from maturities of marketable securities 36,982 10,450 — Proceeds from sale of marketable securities 32,152 4,004 — Cash paid for the acquisition of WAC, net of cash acquired (42,758 ) — — Cash paid for the acquisition of Zopim, net of cash acquired (1,100 ) (1,896 ) — Decrease in restricted cash — 153 — Net cash used in investing activities (72,721 ) (71,297 ) (24,186 ) Cash flows from financing activities Proceeds from initial public offering, net of issuance costs — 103,090 — Proceeds from follow-on public offering, net of issuance costs 190,094 — — Proceeds from exercise of employee stock options 10,609 7,229 1,793 Proceeds from employee stock purchase plan 9,526 4,404 — Taxes paid related to net share settlement of equity awards (609 ) (2,117 ) — Excess tax benefit from share-based award activity 449 334 — Principal payments on debt (6,952 ) (20,748 ) — Proceeds from issuance of debt — 3,940 23,760 Principal payments on capital lease obligations (10 ) (364 ) (337 ) Net cash provided by financing activities 203,107 95,768 25,216 Effect of exchange rates changes on cash and cash equivalents 242 (21 ) 2 Net increase in cash and cash equivalents 135,961 26,540 5,037 Cash and cash equivalents at the beginning of period 80,265 53,725 48,688 Cash and cash equivalents at the end of period $ 216,226 $ 80,265 $ 53,725 Supplemental cash flow data: Cash paid for interest and income taxes $ 793 $ 1,056 $ 171 Non-cash investing and financing activities: Issuance of common stock for the acquisition of Zopim $ — $ 10,892 $ — Vesting of early exercised stock options $ 1,048 $ 1,512 $ 860 Purchases of property and equipment in accrued expenses $ 2,695 $ 374 $ 251 Property and equipment acquired through tenant improvement allowances $ 174 $ 3,932 $ — Share-based compensation capitalized in internal-use software costs $ 2,085 $ 2,476 $ 143 applications. 2015. Year Ended December 31, 2015 2014 Allowance for doubtful accounts, beginning balance $ 264 $ 282 Additions 1,281 843 Write-offs (782 ) (861 ) Allowance for doubtful accounts, ending balance $ 763 $ 264 5 years Hosting equipment 3 years Computer equipment and software 3 years Leasehold improvements Shorter of the lease term or estimated useful life regular basis. As of December 31, 2016. lives. in our consolidated statements of operations. We did not receive grant proceeds in 2015 or 2014. Foreign Currency Net tangible assets acquired $ 2,285 Net deferred tax liability recognized (1,979 ) Identifiable intangible assets: Developed technology 8,800 Customer relationships 500 Goodwill 36,730 Total purchase price $ 46,336 Fair Value Measurement at December 31, 2015 Level 1 Level 2 Total Description Corporate bonds $ — 31,761 $ 31,761 Money market funds 21,338 — 21,338 Asset-backed securities — 7,998 7,998 Commercial paper — 5,992 5,992 U.S. treasury securities — 4,001 4,001 Agency securities — 1,998 1,998 Total $ 21,338 $ 51,750 $ 73,088 Included in cash and cash equivalents $ 21,338 Included in marketable securities $ 51,750 Fair Value Measurement at December 31, 2014 Level 1 Level 2 Total Description Corporate bonds $ — $ 40,345 $ 40,345 Money market funds 21,382 — 21,382 Asset-backed securities — 5,080 5,080 Commercial paper — 3,993 3,993 U.S. treasury securities — 1,991 1,991 Total $ 21,382 $ 51,409 $ 72,791 Included in cash and cash equivalents $ 21,382 Included in marketable securities $ 51,409 2015. December 31, 2015 December 31, 2014 Due in one year or less $ 29,414 $ 42,204 Due after one year 22,336 9,205 Total $ 51,750 $ 51,409 December 31, 2015 Asset Derivatives Liability Derivatives Derivative Instrument Balance Sheet Location Fair Value (Level 2) Balance Sheet Location Fair Value (Level 2) Foreign currency forward contracts Other current assets 408 Accrued liabilities 1,081 Total $ 408 $ 1,081 2016 and 2015, respectively. Year Ended December 31, 2015 Derivative Instrument Location of Loss Reclassified into Earnings Loss Recognized in AOCI Loss Reclassified from AOCI into Earnings Foreign currency forward contracts Revenue, cost of revenue, operating expenses (794 ) (84 ) Total $ (794 ) $ (84 ) December 31, 2015 December 31, 2014 Capitalized internal-use software $ 22,418 $ 18,541 Hosting equipment 26,920 14,085 Leasehold improvements 19,577 15,144 Computer equipment and software 7,682 4,310 Furniture and fixtures 5,739 4,524 Construction in progress 4,157 3,546 Total 86,492 60,150 Less accumulated depreciation and amortization (29,952 ) (18,255 ) Property and equipment, net $ 56,540 $ 41,895 Balance as of December 31, 2013 $ — Goodwill acquired 9,373 Goodwill adjustments 221 Foreign currency translation adjustments (354 ) Balance as of December 31, 2014 9,240 Goodwill acquired 36,730 Goodwill adjustments — Foreign currency translation adjustments (624 ) Balance as of December 31, 2015 $ 45,346 As of December 31, 2015 Cost Accumulated Amortization Foreign Currency Translation Adjustments Net Remaining Useful Life (In years) Developed technology $ 14,000 $ (3,133 ) $ (279 ) $ 10,587 3.6 Customer relationships 1,800 (606 ) (78 ) 1,117 3.8 $ 15,800 $ (3,740 ) $ (356 ) $ 11,704 As of December 31, 2014 Cost Accumulated Amortization Foreign Currency Translation Adjustments Net Remaining Useful Life (In years) Developed technology $ 5,200 $ (1,118 ) $ (191 ) $ 3,891 2.7 Customer relationships 1,300 (244 ) (48 ) 1,008 3.2 Trade name 60 (45 ) (2 ) 13 0.2 $ 6,560 $ (1,407 ) $ (241 ) $ 4,912 2016 $ 3,692 2017 3,305 2018 2,129 2019 2,066 2020 512 $ 11,704 2016 $ 8,367 2017 8,870 2018 8,790 2019 8,019 2020 4,634 Thereafter 6,600 Total minimum lease payments $ 45,280 Convertible Preferred StockItemPagePage 5961626364656658ErnstErnst & Young LLP, Independent Registered Public Accounting Firm20152016 and 2014,2015, and the related consolidated statements of operations, comprehensive loss, redeemable convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2015.2016. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.20152016 and 2014,2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2015,2016, in conformity with U.S. generally accepted accounting principles.2015,2016, based on criteria established in Internal Control –- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 26, 201627, 2017 expressed an unqualified opinion thereon.26, 20162015,2016, based on criteria established in Internal Control—IntegratedControl-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (“the COSO criteria”). Zendesk, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.2015,2016, based on the COSO criteria.20152016 consolidated financial statements of Zendesk, Inc. and our report dated February 26, 201627, 2017 expressed an unqualified opinion thereon.California December 31,
2016 December 31,
2015Assets Current assets: Cash and cash equivalents $ 93,677 $ 216,226 Marketable securities 131,190 29,414 Accounts receivable, net of allowance for doubtful accounts of $1,269 and $763 as of December 31, 2016 and 2015, respectively 37,343 26,168 Prepaid expenses and other current assets 17,608 11,423 Total current assets 279,818 283,231 Marketable securities, noncurrent 75,168 22,336 Property and equipment, net 62,731 56,540 Goodwill and intangible assets, net 53,296 57,050 Other assets 4,272 3,529 Total assets $ 475,285 $ 422,686 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 4,555 $ 9,332 Accrued liabilities 19,106 9,742 Accrued compensation and related benefits 20,281 14,115 Deferred revenue 123,276 84,210 Total current liabilities 167,218 117,399 Deferred revenue, noncurrent 1,257 1,405 Other liabilities 7,382 10,592 Total liabilities 175,857 129,396 Commitments and contingencies (Note 8) Stockholders’ equity: Preferred stock, par value $0.01 per share: no shares issued or outstanding; 10.0 million shares authorized as of December 31, 2016 and 2015 — — Common stock, par value $0.01 per share: 400.0 million shares authorized; 97.2 million and 90.9 million shares issued; 96.7 million and 90.3 million shares outstanding as of December 31, 2016 and 2015, respectively (including 0.1 million and 0.3 million shares subject to repurchase, legally issued and outstanding as of December 31, 2016 and 2015, respectively) 971 905 Additional paid-in capital 624,026 511,183 Accumulated other comprehensive loss (5,197 ) (2,225 ) Accumulated deficit (319,720 ) (215,921 ) Treasury stock, at cost; 0.5 million shares as of December 31, 2016 and 2015 (652 ) (652 ) Total stockholders’ equity 299,428 293,290 Total liabilities and stockholders’ equity $ 475,285 $ 422,686 Year Ended December 31, 2016 2015 2014 Revenue $ 311,999 $ 208,768 $ 127,049 Cost of revenue (1) 93,900 67,184 46,047 Gross profit 218,099 141,584 81,002 Operating expenses (1): Research and development 91,067 62,615 36,403 Sales and marketing 166,987 114,052 77,875 General and administrative 64,371 47,902 32,869 Total operating expenses 322,425 224,569 147,147 Operating loss (104,326 ) (82,985 ) (66,145 ) Other income (expense), net 1,520 (729 ) (1,533 ) Loss before provision for (benefit from) income taxes (102,806 ) (83,714 ) (67,678 ) Provision for (benefit from) income taxes 993 338 (263 ) Net loss (103,799 ) (84,052 ) (67,415 ) Accretion of redeemable convertible preferred stock — — (18 ) Net loss attributable to common stockholders $ (103,799 ) $ (84,052 ) $ (67,433 ) Net loss per share attributable to common stockholders, basic and diluted $ (1.11 ) $ (0.99 ) $ (1.26 ) Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted 93,161 84,926 53,571 (1) Includes share-based compensation expense as follows: Year Ended December 31, 2016 2015 2014 Cost of revenue $ 7,045 $ 4,541 $ 2,464 Research and development 27,083 19,414 10,918 Sales and marketing 23,043 14,759 10,680 General and administrative 16,608 13,842 8,077 Year Ended December 31, 2016 2015 2014 Net loss $ (103,799 ) $ (84,052 ) $ (67,415 ) Other comprehensive loss, net of tax Net change in unrealized loss on available-for-sale investments (213 ) (44 ) (71 ) Foreign currency translation loss (488 ) (942 ) (467 ) Net change in unrealized loss on derivative instruments (2,271 ) (711 ) — Comprehensive loss $ (106,771 ) $ (85,749 ) $ (67,953 ) Stockholders’ Equity (Deficit) Common Stock Treasury Stock Shares Amount Shares Amount Shares Amount Balances as of December 31, 2013 23,598 $ 71,369 23,710 $ 229 $ 18,591 (535 ) $ (652 ) $ 10 $ (64,454 ) $ (46,276 ) Issuance of common stock upon initial public offering, net of issuance costs — — 12,778 128 102,962 — — — — 103,090 Accretion of redeemable convertible preferred stock — 18 — — (18 ) — — — — (18 ) Conversion of preferred stock to common stock upon initial public offering (23,598 ) (71,387 ) 34,323 343 71,044 — — — — 71,387 Issuance of common stock for acquisition of Zopim — — 902 9 10,883 — — — — 10,892 Issuance of common stock upon exercise of stock options — — 3,207 32 4,938 — — — — 4,970 Issuance of common stock for settlement of restricted stock units (RSUs) — — 517 5 (5 ) — — — — — Shares withheld related to net share settlement of RSUs — — (147 ) (1 ) (2,117 ) — — — — (2,118 ) Issuance of common stock upon early exercise of stock options — — 309 — — — — — — — Vesting of early exercised stock options — — — 5 1,507 — — — — 1,512 Issuance of common stock in connection with employee stock purchase plan — — 428 4 3,267 — — — — 3,271 Issuance of common stock upon exercise of warrants — — 111 1 (1 ) — — — — — Repurchase of common stock — — (4 ) — — — — — — — Share-based compensation — — — — 34,615 — — — — 34,615 Tax benefit from share-based award activity — — — — 334 — — — — 334 Other comprehensive loss, net of income taxes — — — — — — — (538 ) — (538 ) Net loss — — — — — — — — (67,415 ) (67,415 ) Balances as of December 31, 2014 — — 76,134 755 246,000 (535 ) (652 ) (528 ) (131,869 ) 113,706 Issuance of common stock from follow-on public offering, net of issuance costs — — 8,780 88 190,008 — — — — 190,096 Issuance of common stock upon exercise of stock options — — 3,275 33 10,580 — — — — 10,613 Issuance of common stock for settlement of RSUs — — 1,655 17 (626 ) — — — — (609 ) Vesting of early exercised stock options — — — — 1,046 — — — — 1,046 Issuance of common stock in connection with employee stock purchase plan — — 1,019 12 9,363 — — — — 9,375 Repurchase of common stock — — (2 ) — — — — — — — Share-based compensation — — — — 54,363 — — — — 54,363 Tax benefit from share-based award activity — — — — 449 — — — — 449 Other comprehensive loss, net of income taxes — — — — — — — (1,697 ) — (1,697 ) Net loss — — — — — — — — (84,052 ) (84,052 ) Balances as of December 31, 2015 — — 90,861 905 511,183 (535 ) (652 ) (2,225 ) (215,921 ) 293,290 Issuance of common stock upon exercise of stock options — — 2,924 29 25,406 — — — — 25,435 Issuance of common stock for settlement of RSUs — — 2,894 29 (832 ) — — — — (803 ) Vesting of early exercised stock options — — — 1 628 — — — — 629 Issuance of common stock in connection with employee stock purchase plan — — 554 7 10,885 — — — — 10,892 Repurchase of common stock — — (38 ) — — — — — — — Share-based compensation — — — — 76,419 — — — — 76,419 Tax benefit from share-based award activity — — — — 337 — — — — 337 Other comprehensive loss, net of income taxes — — — — — — — (2,972 ) — (2,972 ) Net loss — — — — — — — — (103,799 ) (103,799 ) Balances as of December 31, 2016 — $ — 97,195 $ 971 $ 624,026 (535 ) $ (652 ) $ (5,197 ) $ (319,720 ) $ 299,428 Year Ended December 31, 2016 2015 2014 Cash flows from operating activities Net loss $ (103,799 ) $ (84,052 ) $ (67,415 ) Adjustments to reconcile net loss to net cash provided by operating activities Depreciation and amortization 27,506 19,744 11,456 Share-based compensation 73,779 52,556 32,139 Excess tax benefit from share-based award activity (337 ) (449 ) (334 ) Other 3,106 1,457 337 Changes in operating assets and liabilities: Accounts receivable (11,808 ) (14,989 ) (3,846 ) Prepaid expenses and other current assets (6,286 ) (5,510 ) (1,444 ) Other assets and liabilities (3,887 ) (3,204 ) 1,742 Accounts payable (3,486 ) 2,017 947 Accrued liabilities 5,261 2,204 351 Accrued compensation and related benefits 6,055 1,706 5,767 Deferred revenue 38,418 33,853 22,390 Net cash provided by operating activities 24,522 5,333 2,090 Cash flows from investing activities Purchases of property and equipment (20,647 ) (22,989 ) (21,665 ) Internal-use software development costs (6,310 ) (4,705 ) (8,013 ) Purchases of marketable securities (249,048 ) (70,303 ) (54,330 ) Proceeds from maturities of marketable securities 39,690 36,982 10,450 Proceeds from sale of marketable securities 53,951 32,152 4,004 Cash paid for the acquisition of WAC, net of cash acquired — (42,758 ) — Cash paid for the acquisition of Zopim, net of cash acquired — (1,100 ) (1,896 ) Decrease in restricted cash — — 153 Net cash used in investing activities (182,364 ) (72,721 ) (71,297 ) Cash flows from financing activities Proceeds from initial public offering, net of issuance costs — — 103,090 Proceeds from follow-on public offering, net of issuance costs — 190,094 — Proceeds from exercise of employee stock options 25,412 10,609 7,229 Proceeds from employee stock purchase plan 11,004 9,526 4,404 Taxes paid related to net share settlement of equity awards (803 ) (609 ) (2,117 ) Excess tax benefit from share-based award activity 337 449 334 Principal payments on debt (323 ) (6,952 ) (20,748 ) Proceeds from issuance of debt — — 3,940 Principal payments on capital lease obligations — (10 ) (364 ) Net cash provided by financing activities 35,627 203,107 95,768 Effect of exchange rates changes on cash and cash equivalents (334 ) 242 (21 ) Net increase (decrease) in cash and cash equivalents (122,549 ) 135,961 26,540 Cash and cash equivalents at beginning of period 216,226 80,265 53,725 Cash and cash equivalents at end of period $ 93,677 $ 216,226 $ 80,265 Supplemental cash flow data: Cash paid for interest and income taxes $ 1,678 $ 793 $ 1,056 Non-cash investing and financing activities: Issuance of common stock for the acquisition of Zopim $ — $ — $ 10,892 Vesting of early exercised stock options $ 628 $ 1,048 $ 1,512 Balance of property and equipment in accounts payable and accrued expenses $ 3,610 $ 3,179 $ 484 Property and equipment acquired through tenant improvement allowances $ 237 $ 174 $ 3,932 Share-based compensation capitalized in internal-use software development costs $ 2,365 $ 2,085 $ 2,476 Our mission isWe are a software development company that provides a SaaSWith our origins in customer service, platformwe have evolved our offerings over time to a family of products that work together to help organizations understand their customers, improve communications, and engage where and when it’s needed most. Our product family is built upon a modern architecture that enables us and our customers to provide tailored support through multiple channels, establish effective self-service support resources, proactively serve customers through customer engagement capabilities,rapidly innovate, adapt our technology in novel ways, and easily integrate with other applications,products and consolidate and analyze data from customer interactions. We also provide SaaS live chat software that can be utilized independently to facilitate proactive communications between organizations and their customers or integrated easily into our platform.In October 2015, we completed the acquisition of We Are Cloud SAS, or WAC, the maker of BIME Analytics software. With the acquisition, we added technology that we anticipate will allow our customers to understand the ever-increasing diversity of data about their end customers. Over time, we expect this analytics software to become a core technology within our customer service platform, enabling us to further integrate data analytics capabilities across our products. We also expect to continue to sell our analytics software on a standalone basis. United States generally accepted accounting principles, or GAAP. The consolidated financial statements include the accounts of Zendesk, Inc. and its subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.and the capitalization and estimated useful life of our capitalized internal-use software.66our customer service platformZendesk Support and, to a lesser extent, live chat software,Chat and analytics software.Talk. In addition, we generate revenue by providing additional features to certain of our subscription plans for a fee that is incremental to the base subscription rate for such plan. Arrangements with customers do not provide the customer with the right to take possession of the software supporting our customer service platform or live chat softwareproducts at any time, and are therefore accounted for as service contracts. Subscription service arrangements are generally non-cancelable and do not provide for refunds to customers in the event of cancellations or any other right of return. We record revenue net of sales orand excise taxes.·There is persuasive evidence of an arrangement;
There is persuasive evidence of an arrangement;·The service has been or is being provided to the customer;
The service has been or is being provided to the customer;·The collection of the fees is reasonably assured; and
The collection of the fees is reasonably assured; and·The amount of fees to be paid by the customer is fixed or determinable.terms.terms until such time as a better pattern of recognition is evident. Incremental fees are incurred when the maximum number of users is exceeded, and any incremental fees are recognized as revenue ratably over the remaining contractual term.voiceTalk usage, and training services, for which we recognize revenue upon completion.customer service platform, live chat software, and analytics softwareproducts in monthly, quarterly, or annual installments. Deferred revenue that is anticipated to be recognized during the succeeding 12-month period is recorded as current deferred revenue and the remaining portion is recorded as noncurrent deferred revenue. Deferred revenue associated with implementation, voiceTalk usage, and training services was immaterial as of December 31, 20152016 and 2014. platform infrastructure and our product support organizations, depreciation, hosting, and other expenses associated with our data centers, amortization expense associated with capitalized internal-use software, payment processing fees, third party license fees, amortization expense associated with acquired intangible assets, third party license fees, and allocated shared costs, including facilities, shared information technology, and security costs.67There was no restricted cash as of December 31, 2014. Restricted cash is included within other assets on our consolidated balance sheet.asset backedasset-backed securities, U.S. Treasury securities, commercial paper, U.S. Treasuryagency securities, and agency securities.money market funds. We classify marketable securities as available-for-sale at the time of purchase and reevaluate such classification as of each balance sheet date. All marketable securities are recorded at their estimated fair value. Unrealized gains and losses for available-for-sale securities are recorded in other comprehensive loss. We evaluate our investments to assess whether those with unrealized loss positions are other than temporarily impaired. Impairments are considered other than temporary if they are related to deterioration in credit risk or if it is likely we will sell the securities before the recovery of their cost basis. Realized gains and losses and declines in value determined to be other than temporary are determined based on the specific identification method and are reported in other expense, net in the consolidated statements of operations. Year Ended December 31, 2016 2015 Allowance for doubtful accounts, beginning balance $ 763 $ 264 Additions 2,029 1,281 Write-offs (1,523 ) (782 ) Allowance for doubtful accounts, ending balance $ 1,269 $ 763 Furniture and fixtures 682015,2016, we have not exchangeda restricted cash balance of $1.1 million associated with cash collateral with any counterparties.exchanged. ASC 815 permits companies to present the fair value of derivative instruments on a net basis according to master netting arrangements. We have elected to present our derivative instruments on a gross basis in our consolidated financial statements. We do not enter into any hedgingderivative contracts for trading or speculative purposes.3.03.3 years as of December 31, 2015.20152016 and 2014.2015.69 lives following the pattern in which the economic benefits of the assets will be consumed, generally straight-line.20152016 and 2014.2015.Share Basedaward)award, which is typically 4 years). We estimate the fair value of stock options granted using the Black-Scholes option valuation model. We measure the fair value of restricted stock units, or RSUs, based on the fair value of the underlying shares on the date of grant. Compensation expense for awards with only service conditions is recognized over the vesting period of the applicable award using the straight-line method.theour IPO vest upon the satisfaction of both a service condition and a performance condition. These RSUs and stock options with both a service condition and performance condition are collectively referred to as “Performance Awards” in the following discussion. The service condition for substantially all of these awards is satisfied over four years. The performance condition was satisfied upon the occurrence of a qualifying liquidity event which occurred upon the effectiveness of the registration statement related to our IPO. No share-based compensation expense was recognized for the Performance Awards prior to the IPO as the performance condition had not been deemed probable to have been met. Upon the satisfaction of the performance condition in May 2014, we recognized a cumulative share-based compensation expense for the portion of the Performance Awards that had met the service condition. The remaining unrecognized share-based compensation expense was recorded over the remaining requisite service period using the accelerated attribution method, net of estimated forfeitures. For the years ended December 31, 2016, 2015, and 2014, share-based compensation expense related to the Performance Awards was $2.8 million, $6.1 million and $12.7 million, respectively.2015,2016, we had a total of $168.5$173.4 million in future period share-based compensation expense related to all equity awards, net of estimated forfeitures, to be recognized over a weighted average period of 3.02.7 years.2014, and 2013,2014, advertising expense was $23.9 million, $16.5 million, and $12.7 million, and $6.5respectively.respectively.20152016 and 2014,2015, there were no customers that represented more than 10% of our accounts receivable balance. There were no customers that individually exceeded 10% of our revenue in any of the periods presented.November 2015,May 2014, the Financial Accounting Standards Board, or the FASB, issued ASU 2015-17 “Balance Sheet Classification of Deferred Taxes,” requiring all deferred tax assets and liabilities, and any related valuation allowance,new revenue guidance that provides principles for recognizing revenue to which an entity expects to be classifiedentitled for the transfer of promised goods or services to customers. As currently issued and amended, the new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, though early adoption is permitted for annual reporting periods beginning after December 15, 2016. The guidance may be applied retrospectively to each prior period presented (full retrospective method), or with the cumulative effect recognized as noncurrentof the date of initial adoption (modified retrospective method).theour existing revenue arrangements. As a result of adoption, we also expect to capitalize a significant portion of our sales commissions and other incremental costs to acquire contracts, which we historically expensed as incurred, which will result in an increase in deferred costs recognized on our balance sheet. The purpose of this standard is to simplifyWe have not yet concluded the presentation of deferred liabilities and assets. We elected to prospectively adopt this standard in the beginninguseful life of our fourth quartercapitalized costs, which will affect the classification and magnitude of fiscal 2015. The impactthe deferred costs at each reporting period. We continue to our consolidated financial statements was not material and prior periods were not retrospectively adjusted.In September 2015,quantify the FASB issued ASU 2015-16 “Simplifying the Accounting for Measurement-Period Adjustments”, which requires that an acquirer in a business combination recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The new standard is required to be applied prospectively. We plan to adopt this guidance in our first quartereffect of 2016. The adoption of this new standard is not expected to have a material impactthese changes on our consolidated financial statements.2015-05“2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement”,Arrangement,” which amended the existing accounting standards for intangible assets. The amendments provide explicit guidance to customers in determining the accounting for fees paid in a cloud computing arrangement, wherein the arrangements that do not convey a software license to the customer are accounted for as service contracts. We plan to adoptadopted this guidance in our first quarter of 2016. The adoption of this new standard isdid not expected to have a material impacteffect on our consolidated financial statements.May 2014, the FASB issued ASU 2014-09 regarding ASC Topic 606 “Revenue from Contracts with Customers.” This standard provides principles for recognizing revenue to which an entity expects to be entitled for the transfer of promised goods or services to customers. In AugustSeptember 2015, the FASB issued ASU 2015-14,2015-16, “Simplifying the Accounting for Measurement-Period Adjustments,” which deferredrequires that an acquirer in a business combination recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The new standard is required to be adopted prospectively. We adopted this guidance in the first quarter of 2016. The adoption of this standard did not have a material effect on our consolidated financial statements.datefor annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We are currently evaluating the effect of this standard on our consolidated financial statements.2014-09 by one year. As currently2016-09, regarding ASC Topic 718 “Compensation - Stock Compensation.”This amendment changes certain aspects of accounting for share-based compensation to employees, including the recognition of income tax effects of awards when the awards vest or are settled, requirements on net share settlement to cover tax withholding, and accounting for forfeitures. The new guidance is effective for annual reporting periods beginning after December 15, 2016. We plan to adopt this standard in our first quarter of 2017. Under the new guidance, we intend to recognize forfeitures as they occur, rather than applying an estimated forfeiture rate. We do not expect the adoption of this standard to have a material effect on our consolidated financial statements.and amended, ASU 2014-092016-15, regarding ASC Topic 230 “Statement of Cash Flows.” This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, though earlyperiod. Early adoption is permittedpermitted. We do not expect the adoption of this standard to have a material effect on our consolidated financial statements.2016.2017. Early adoption is permitted as of the beginning of an annual reporting period. The amendment maynew standard must be applied retrospectively to each prior period presented, oradopted using a modified retrospective transition method, with the cumulative effect recognized as of the date of initial adoption. We plan to early adopt this standard in our first quarter of 2017. The adoption of this new guidance is not expected to have not yet selected a transition methodmaterial effect on our consolidated financial statements.continue to evaluaterestricted cash equivalents in the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2017, however early adoption is permitted. The new standard must be adopted retrospectively. We are currently evaluating the effect of thethis standard on our consolidated statements of cash flows.statements, including revenue and commissions.71
statements.$46.3$46.4 million in cash, including working capital adjustments. As partial security for standard indemnification obligations, $7.0 million of the consideration will bewas held in escrow for a period of up to 18 months, with a portion to beof which was released 12 months following the closing of the acquisition. We incurred transaction costs of $1.0 million in connection with the acquisition. The transaction costs were expensed as incurred and recognized within general and administrative expenses.The fair value of assets acquired and liabilities assumed was based on a preliminary valuation andprice, and our estimates and assumptions are subject to change withinaccounting for the measurement period. The primary areas that remain preliminary relate to working capital adjustments, the fair values of certain tangible assets and liabilities acquired, and residual goodwill.acquisition. The total purchase price was allocated to the assets acquired and liabilities assumed as set forth below (in thousands). The excess of the purchase price over the net assets acquired was recorded as goodwill. Goodwill generated from the acquisition is primarily attributable to expected synergies, including cost savings from integrating the analytics technology with our customer service platforminfrastructure and the opportunity to sell the analytics software alongside our existing products. Goodwill is not expected to be deductible for income tax purposes. Goodwill will not be amortized but instead will be tested for impairment at least annually and more frequently if certain indicators of impairment are present.Net tangible assets acquired $ 2,140 Net deferred tax liability recognized (1,979 ) Identifiable intangible assets: Developed technology 8,800 Customer relationships 500 Goodwill 36,896 Total purchase price $ 46,357 Year Ended December 31, 2015 2014 Revenue $ 210,647 $ 127,932 Net loss attributable to common stockholders (87,348 ) (74,670 ) 72 Zopim Technologies Pte Ltd., or Zopim, a software development company that provides a SaaS live chat service. As of December 31, 2014, we finalized our purchase accounting after adjustments were made to the preliminary purchase price allocation. The total adjusted acquisition date fair value of consideration transferred was $15.8 million, including $4.9 million of cash and $10.9 million of our common stock, all of which was issued on the acquisition date. Of the total consideration transferred, $1.1 million of cash and $2.4 million of common stock consideration was held back between 12 and 18 months as partial security for standard indemnification obligations. These hold back amounts were released in equal installments in March and September 2015. The total adjusted purchase price was allocated to assets acquired and liabilities assumed as set forth below (in thousands). The excess of the purchase price over the net assets acquired was recorded as goodwill. Goodwill generated from the acquisition is attributable to expected synergies from future growth and potential future monetization opportunities, and is not deductible for tax purposes.Net tangible liabilities assumed $ (385 ) Intangible assets 6,560 Goodwill 9,594 Total purchase price $ 15,769 For the year endedAs of December 31, 2015,2016, RSUs for 0.30.6 million shares of our common stock becamehave vested pursuant to the terms of the retention plan, and we have paid the first installment of the cash retention bonus in the amount of $1.5$3.0 million.20152016 and 20142015 based on the three-tier fair value hierarchy (in thousands): Fair Value Measurement at
December 31, 2016Level 1 Level 2 Total Description Corporate bonds $ — 124,930 $ 124,930 Asset-backed securities — 32,567 32,567 U.S. treasury securities — 30,585 30,585 Commercial paper — 9,787 9,787 Agency securities — 8,489 8,489 Money market funds $ 3,545 $ — $ 3,545 Total $ 3,545 $ 206,358 $ 209,903 Included in cash and cash equivalents $ 3,545 Included in marketable securities $ 206,358 73 Fair Value Measurement at
December 31, 2015Level 1 Level 2 Total Description Corporate bonds $ — $ 31,761 $ 31,761 Money market funds 21,338 — 21,338 Asset-backed securities — 7,998 7,998 Commercial paper — 5,992 5,992 U.S. treasury securities — 4,001 4,001 Agency securities $ — $ 1,998 $ 1,998 Total $ 21,338 $ 51,750 $ 73,088 Included in cash and cash equivalents $ 21,338 Included in marketable securities $ 51,750 20152016 or 2014.20152016 and 20142015 were not material. As of December 31, 20152016 and 2014,2015, there were no securities that were in an unrealized loss position for more than twelve months.maturitiesmaturity as of December 31, 20152016 and 20142015 (in thousands): December 31,
2016 December 31,
2015Due in one year or less $ 131,190 $ 29,414 Due after one year 75,168 22,336 Total $ 206,358 $ 51,750 impacteffect of foreign currency fluctuations on our future cash flows and earnings. We enteredenter into foreign currency forward contracts with certain financial institutions and designateddesignate those hedgescontracts as cash flow hedges. Our foreign currency forward contracts generally have maturities of 15 months or less. As of December 31, 2015, $0.72016, the balance of accumulated other comprehensive loss included an unrealized loss of $3.0 million of unrealized losses related to the effective portion of changes in the fair value of foreign currency forward contracts designated as cash flow hedges. As of December 31, 2016, we have posted cash collateral related to our cash flow hedges were included in the balance of other accumulated comprehensive loss.$1.1 million. We expect to reclassify $0.7$2.8 million from accumulated other comprehensive loss into earnings over the next twelve12 months associated with our cash flow hedges. December 31, 2016 Asset Derivatives Liability Derivatives Derivative Instrument Balance Sheet Location Fair Value
(Level 2) Balance Sheet Location Fair Value
(Level 2)Foreign currency forward contracts Other current assets $ 868 Accrued liabilities $ 4,280 Total $ 868 $ 4,280 December 31, 2015 Asset Derivatives Liability Derivatives Derivative Instrument Balance Sheet Location Fair Value
(Level 2) Balance Sheet Location Fair Value
(Level 2)Foreign currency forward contracts Other current assets $ 408 Accrued liabilities $ 1,081 Total $ 408 $ 1,081 2015. There were no derivative assets or liabilities on our consolidated balance sheet as of December 31, 2014. Year Ended December 31, 2016 Year Ended December 31, 2015 Derivative Instrument Location of Loss Reclassified into Earnings Loss Recognized in AOCI Loss Reclassified from AOCI into Earnings Loss Recognized in AOCI Loss Reclassified from AOCI into Earnings Foreign currency forward contracts Revenue, cost of revenue, operating expenses $ (3,174 ) $ (903 ) $ (794 ) $ (84 ) Total $ (3,174 ) $ (903 ) $ (794 ) $ (84 ) 2015. There were no gains or losses on derivative instruments for the years ended December 31, 2014 or 2013.2016. December 31, 2016 December 31, 2015 Hosting equipment $ 35,018 $ 26,920 Capitalized internal-use software 25,773 22,418 Leasehold improvements 25,396 19,577 Computer equipment and software 11,879 7,682 Furniture and fixtures 8,014 5,739 Construction in progress 7,993 4,157 Total 114,073 86,493 Less accumulated depreciation and amortization (51,342 ) (29,953 ) Property and equipment, net $ 62,731 $ 56,540 $6.1 million, and $2.9$6.1 million for the years ended December 31, 2016, 2015, and 2014, and 2013, respectively.$3.8 million, and $2.3$3.8 million during the years ended December 31, 2016, 2015, 2014, and 2013,2014, respectively. The carrying value of capitalized internal-use software at December 31, 2016 and 2015 and 2014 was $14.1$15.4 million and $13.6$14.1 million, respectively, including $1.5$5.4 million and $3.5$1.5 million in construction in progress, respectively.20152016 are as follows (in thousands):75Balance as of December 31, 2014 $ 9,240 Goodwill acquired 36,730 Goodwill adjustments — Foreign currency translation adjustments (624 ) Balance as of December 31, 2015 45,346 Goodwill acquired — Goodwill adjustments 166 Foreign currency translation adjustments (165 ) Balance as of December 31, 2016 $ 45,347 20152016 and 20142015 (in thousands):As of December 31, 2016 Cost Accumulated
Amortization Foreign Currency Translation Adjustments Net Remaining Useful Life (In years) $ 14,000 $ (6,584 ) $ (169 ) $ 7,247 2.9 1,800 (1,044 ) (53 ) 703 2.3 $ 15,800 $ (7,628 ) $ (222 ) $ 7,950 As of December 31, 2015 Cost Accumulated
Amortization Foreign Currency Translation Adjustments Net Remaining Useful Life (In years) Developed technology $ 14,000 $ (3,133 ) $ (279 ) $ 10,587 3.7 Customer relationships 1,800 (606 ) (78 ) 1,117 3.1 $ 15,800 $ (3,740 ) $ (356 ) $ 11,704 2014 was $2.3 million, and $1.4 million, respectively.20152016 is as follows (in thousands):2017 $ 3,241 2018 2,129 2019 2,068 2020 512 $ 7,950 2014, and 2013,2014, rent expense was $9.9 million, $7.5 million, and $6.8 million, and $2.3 million, $6.9$6.5 million and $7.2$6.9 million as of December 31, 20152016 and 2014,2015, respectively, is included in other liabilities.762015,2016, the future minimum lease payments by year under noncancelable operating leases are as follows for the years ending December 31 (in thousands):2017 $ 11,071 2018 10,582 2019 9,758 2020 6,450 2021 4,571 Thereafter 2,472 Total minimum lease payments $ 44,904 20152016 and 2014,2015, we had a total of $2.7 million and $3.7 million, respectively in unsecured letters of credit outstanding primarily related to our leased office space in San Francisco. These letters of credit renew annually and mature at various dates through October 31, 2022.customer service platform, live chat software, analytics software,products, or our acts or omissions. In these circumstances, payment may be conditional on the other party making a claim pursuant to the procedures specified in the particular contract. Further, our obligations under these agreements may be limited in terms of time and/or amount, and in some instances, we may have recourse against third parties for certain payments. In addition, we have indemnification agreements with our directors and executive officers that require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The terms of such obligations may vary. To date, we have not incurred any material costs, and we have not accrued any liabilities in the accompanying consolidated financial statements, as a result of these obligations. (Deficit)
78
|
|
|
|
|
| Options Outstanding |
|
| RSUs Outstanding |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average |
|
|
|
|
|
|
|
|
|
| Weighted |
| ||
|
| Shares |
|
|
|
|
|
| Weighted |
|
| Remaining |
|
| Aggregate |
|
|
|
|
|
| Average |
| |||||
|
| Available |
|
| Number of |
|
| Average |
|
| Contractual |
|
| Intrinsic |
|
| Outstanding |
|
| Grant Date |
| |||||||
|
| for Grant |
|
| Shares |
|
| Exercise Price |
|
| Term |
|
| Value |
|
| RSUs |
|
| Fair Value |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| (In years) |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Outstanding — January 1, 2015 |
|
| 7,559 |
|
|
| 12,043 |
|
| $ | 7.39 |
|
|
| 8.29 |
|
| $ | 204,467 |
|
|
| 3,064 |
|
| $ | 13.69 |
|
Increase in authorized shares |
|
| 3,779 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options granted |
|
| (2,079 | ) |
|
| 2,079 |
|
|
| 24.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs granted |
|
| (5,451 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 5,451 |
|
|
| 21.71 |
|
Stock options exercised |
|
|
|
|
|
| (3,275 | ) |
|
| 3.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs vested |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,655 | ) |
|
| 16.93 |
|
Unvested shares repurchased |
|
| 2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options forfeited or canceled |
|
| 70 |
|
|
| (70 | ) |
|
| 4.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs forfeited or cancelled |
|
| 443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (443 | ) |
|
| 18.91 |
|
Outstanding — December 31, 2015 |
|
| 4,323 |
|
|
| 10,778 |
|
| $ | 11.94 |
|
|
| 7.96 |
|
| $ | 156,262 |
|
|
| 6,417 |
|
| $ | 19.54 |
|
Options vested and expected to vest as of December 31, 2015 |
|
|
|
|
|
| 9,888 |
|
| $ | 11.65 |
|
|
| 7.91 |
|
| $ | 146,296 |
|
|
|
|
|
|
|
|
|
Options vested and exercisable as of December 31, 2015 |
|
|
|
|
|
| 3,983 |
|
| $ | 8.48 |
|
|
| 7.35 |
|
| $ | 71,521 |
|
|
|
|
|
|
|
|
|
Options Outstanding | RSUs Outstanding | |||||||||||||||||||||
Shares Available for Grant | Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | Outstanding RSUs | Weighted Average Grant Date Fair Value | ||||||||||||||||
(In years) | ||||||||||||||||||||||
Outstanding — January 1, 2016 | 4,323 | 10,778 | $ | 11.94 | 7.96 | $ | 156,262 | 6,417 | $ | 19.54 | ||||||||||||
Increase in authorized shares | 5,716 | |||||||||||||||||||||
Stock options granted | (1,413 | ) | 1,413 | 23.72 | ||||||||||||||||||
RSUs granted | (4,216 | ) | 4,216 | 21.05 | ||||||||||||||||||
Stock options exercised | (2,924 | ) | 8.70 | |||||||||||||||||||
RSUs vested | (2,894 | ) | 18.51 | |||||||||||||||||||
Unvested shares repurchased | 38 | |||||||||||||||||||||
Stock options forfeited or canceled | 788 | (788 | ) | 17.37 | ||||||||||||||||||
RSUs forfeited or canceled | 803 | (803 | ) | 20.18 | ||||||||||||||||||
Outstanding — December 31, 2016 | 6,039 | 8,479 | $ | 14.52 | 7.49 | $ | 66,449 | 6,936 | $ | 20.81 | ||||||||||||
Options vested and expected to vest as of December 31, 2016 | 8,001 | $ | 14.24 | 7.43 | $ | 64,639 | ||||||||||||||||
Options vested and exercisable as of December 31, 2016 | �� | 3,698 | $ | 11.47 | 6.91 | $ | 38,609 |
$21.20.
|
|
79
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|
|
| Year Ended December 31, |
| |||||||||
|
| 2015 |
|
| 2014 |
|
| 2013 |
| |||
Expected volatility |
| 49% - 54% |
|
| 54% - 56% |
|
| 50% - 63% |
| |||
Dividend rate |
|
| 0% |
|
|
| 0% |
|
|
| 0% |
|
Risk-free interest rate |
| 1.4% - 2.0% |
|
| 1.75% - 2.02% |
|
| 0.63% - 2.02% |
| |||
Expected term (in years) |
| 6.02 - 6.08 |
|
| 6.02 - 6.50 |
|
| 4.47 - 6.27 |
|
Year Ended December 31, | |||||
2016 | 2015 | 2014 | |||
Expected volatility | 47% - 49% | 49% - 54% | 54% - 56% | ||
Dividend rate | 0% | 0% | 0% | ||
Risk-free interest rate | 1.1% - 2.0% | 1.4% - 2.0% | 1.75% - 2.02% | ||
Expected term (in years) | 6.02 - 6.08 | 6.02 - 6.08 | 6.02 - 6.50 |
|
| Year Ended December 31, 2015 |
|
| Year Ended December 31, 2014 |
| ||
Expected volatility |
| 37% - 43% |
|
| 45% - 49% |
| ||
Dividend rate |
|
| 0% |
|
|
| 0% |
|
Risk-free interest rate |
| 0.09% - 0.69% |
|
| 0.05% - 0.35% |
| ||
Expected term (in years) |
| 0.50 - 1.50 |
|
| 0.50 - 1.50 |
|
·
Year Ended December 31, 2016 | Year Ended December 31, 2015 | ||
Expected volatility | 42% - 48% | 37% - 43% | |
Dividend rate | 0% | 0% | |
Risk-free interest rate | 0.38% - 0.90% | 0.09% - 0.69% | |
Expected term (in years) | 0.50 -1.50 | 0.50 -1.50 |
·
In the first quarter of 2017, we intend to recognize forfeitures as they occur, rather than applying an estimated forfeiture rate, as permitted by ASU 2016-09. Refer to Note 2 for additional information regarding the adoption of this standard.
80
Treasury Stock
We repurchased 0.5 million shares of common stock in the year ended December 31, 2011 and recorded the repurchased shares as treasury shares in the stockholders’ equity section of the balance sheet at cost.
|
| Year Ended December 31, | |||||||||||||||
|
| 2015 |
|
| 2014 |
|
| 2013 |
|
| |||||||
|
|
|
|
|
|
|
|
|
| Class A |
|
| Class B |
|
| ||
Net loss |
| $ | (84,052 | ) |
| $ | (67,415 | ) |
| $ | (10,290 | ) |
| $ | (12,281 | ) |
|
Less: Accretion of redeemable convertible preferred stock |
|
| — |
|
|
| (18 | ) |
|
| (22 | ) |
|
| (27 | ) |
|
Net loss attributable to common stockholders |
| $ | (84,052 | ) |
| $ | (67,433 | ) |
| $ | (10,312 | ) |
| $ | (12,308 | ) |
|
Basic shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding |
|
| 85,238 |
|
|
| 54,383 |
|
|
| 9,881 |
|
|
| 12,964 |
|
|
Less: Weighted-average common shares subject to repurchase |
|
| (312 | ) |
|
| (812 | ) |
|
| — |
|
|
| (1,171 | ) |
|
Weighted-average common shares used to compute basic net loss per share |
|
| 84,926 |
|
|
| 53,571 |
|
|
| 9,881 |
|
|
| 11,793 |
|
|
Diluted shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares used to compute diluted net loss per share |
|
| 84,926 |
|
|
| 53,571 |
|
|
| 9,881 |
|
|
| 11,793 |
|
|
Net loss per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
| $ | (0.99 | ) |
| $ | (1.26 | ) |
| $ | (1.04 | ) |
| $ | (1.04 | ) |
|
81
Year Ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Net loss | $ | (103,799 | ) | $ | (84,052 | ) | $ | (67,415 | ) | ||
Less: Accretion of redeemable convertible preferred stock | — | — | (18 | ) | |||||||
Net loss attributable to common stockholders | $ | (103,799 | ) | $ | (84,052 | ) | $ | (67,433 | ) | ||
Basic shares: | |||||||||||
Weighted-average common shares outstanding | 93,307 | 85,238 | 54,383 | ||||||||
Less: Weighted-average common shares subject to repurchase | (146 | ) | (312 | ) | (812 | ) | |||||
Weighted-average common shares used to compute basic net loss per share | 93,161 | 84,926 | 53,571 | ||||||||
Diluted shares: | |||||||||||
Weighted-average common shares used to compute diluted net loss per share | 93,161 | 84,926 | 53,571 | ||||||||
Net loss per share attributable to common stockholders: | |||||||||||
Basic and diluted | $ | (1.11 | ) | $ | (0.99 | ) | $ | (1.26 | ) |
|
| As of December 31, |
| |||||||||
|
| 2015 |
|
| 2014 |
|
| 2013 |
| |||
Redeemable convertible preferred stock |
|
| — |
|
|
| — |
|
|
| 34,323 |
|
Shares subject to outstanding common stock options and employee stock purchase plan |
|
| 10,844 |
|
|
| 12,178 |
|
|
| 10,134 |
|
Shares subject to common stock warrants |
|
| — |
|
|
| — |
|
|
| 125 |
|
Restricted stock units |
|
| 6,417 |
|
|
| 3,064 |
|
|
| 811 |
|
|
|
| 17,260 |
|
|
| 15,242 |
|
|
| 45,393 |
|
As of December 31, | ||||||||
2016 | 2015 | 2014 | ||||||
Shares subject to outstanding common stock options and employee stock purchase plan | 8,556 | 10,844 | 12,178 | |||||
Restricted stock units | 6,936 | 6,417 | 3,064 | |||||
15,492 | 17,260 | 15,242 |
|
| Year Ended December 31, |
| |||||||||
|
| 2015 |
|
| 2014 |
|
| 2013 |
| |||
U.S. |
| $ | (85,928 | ) |
| $ | (66,755 | ) |
| $ | (23,117 | ) |
Foreign |
|
| 2,214 |
|
|
| (923 | ) |
|
| 767 |
|
Total |
| $ | (83,714 | ) |
| $ | (67,678 | ) |
| $ | (22,350 | ) |
Year Ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
U.S. | $ | (107,685 | ) | $ | (85,928 | ) | $ | (66,755 | ) | ||
Foreign | 4,879 | 2,214 | (923 | ) | |||||||
Total | $ | (102,806 | ) | $ | (83,714 | ) | $ | (67,678 | ) |
|
| Year Ended December 31, |
| |||||||||
|
| 2015 |
|
| 2014 |
|
| 2013 |
| |||
Current tax provision: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
| $ | 1 |
|
| $ | 2 |
|
| $ | — |
|
State |
|
| (3 | ) |
|
| 1 |
|
|
| 37 |
|
Foreign |
|
| 1,693 |
|
|
| 567 |
|
|
| 189 |
|
|
|
| 1,691 |
|
|
| 570 |
|
|
| 226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax provision: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
| (16 | ) |
|
| — |
|
|
| — |
|
State |
|
| — |
|
|
| — |
|
|
| — |
|
Foreign |
|
| (1,337 | ) |
|
| (833 | ) |
|
| (5 | ) |
Total provision for (benefit from) income taxes |
| $ | 338 |
|
| $ | (263 | ) |
| $ | 221 |
|
Year Ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Current tax provision: | |||||||||||
Federal | $ | — | $ | 1 | $ | 2 | |||||
State | 74 | (3 | ) | 1 | |||||||
Foreign | 3,096 | 1,693 | 567 | ||||||||
3,170 | 1,691 | 570 | |||||||||
Deferred tax provision: | |||||||||||
Federal | (49 | ) | (16 | ) | — | ||||||
State | — | — | — | ||||||||
Foreign | (2,128 | ) | (1,337 | ) | (833 | ) | |||||
Total provision for (benefit from) income taxes | $ | 993 | $ | 338 | $ | (263 | ) |
|
| As of December 31, |
| |||||
|
| 2015 |
|
| 2014 |
| ||
Deferred tax assets: |
|
|
|
|
|
|
|
|
Tax credit carryforward |
| $ | 266 |
|
| $ | 197 |
|
Net operating loss carryforward |
|
| 53,237 |
|
|
| 33,878 |
|
Share-based compensation |
|
| 10,733 |
|
|
| 5,311 |
|
Accrued liabilities and reserves |
|
| 3,840 |
|
|
| 3,710 |
|
Other |
|
| 2,609 |
|
|
| 600 |
|
Total deferred tax assets |
|
| 70,685 |
|
|
| 43,696 |
|
Less: valuation allowance |
|
| (65,371 | ) |
|
| (39,496 | ) |
Deferred tax assets, net of valuation allowance |
|
| 5,314 |
|
|
| 4,200 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| (6,335 | ) |
|
| (4,597 | ) |
Net deferred tax assets (liabilities) |
| $ | (1,021 | ) |
| $ | (397 | ) |
82
As of December 31, | |||||||
2016 | 2015 | ||||||
Deferred tax assets: | |||||||
Tax credit carryforward | $ | 762 | $ | 266 | |||
Net operating loss carryforward | 73,611 | 53,237 | |||||
Share-based compensation | 13,306 | 10,733 | |||||
Accrued liabilities and reserves | 4,877 | 3,840 | |||||
Other | 5,325 | 2,609 | |||||
Total deferred tax assets | 97,881 | 70,685 | |||||
Less: valuation allowance | (92,125 | ) | (65,371 | ) | |||
Deferred tax assets, net of valuation allowance | 5,756 | 5,314 | |||||
Deferred tax liabilities: | |||||||
Depreciation and amortization | (4,474 | ) | (6,335 | ) | |||
Net deferred tax assets (liabilities) | $ | 1,282 | $ | (1,021 | ) |
|
| Year Ended December 31, |
| |||||||||
|
| 2015 |
|
| 2014 |
|
| 2013 |
| |||
Tax at federal statutory rate |
|
| 34.0 | % |
|
| 34.0 | % |
|
| 34.0 | % |
State tax provision, net of federal benefit |
|
| — |
|
|
| — |
|
|
| (0.2 | ) |
Share-based compensation |
|
| (5.5 | ) |
|
| (5.5 | ) |
|
| (4.4 | ) |
Valuation allowance |
|
| (29.2 | ) |
|
| (27.9 | ) |
|
| (30.4 | ) |
Other |
|
| 0.3 |
|
|
| (0.2 | ) |
|
| — |
|
Effective tax rate |
|
| (0.4 | %) |
|
| 0.4 | % |
|
| (1.0 | %) |
Year Ended December 31, | ||||||||
2016 | 2015 | 2014 | ||||||
Tax at federal statutory rate | 34.0 | % | 34.0 | % | 34.0 | % | ||
State tax provision, net of federal benefit | — | — | — | % | ||||
Share-based compensation | (6.1 | ) | (5.5 | ) | (5.5 | ) | ||
Valuation allowance | (23.3 | ) | (29.2 | ) | (27.9 | ) | ||
Intercompany dividend | (5.9 | ) | — | — | ||||
Other | 0.3 | 0.3 | (0.2 | ) | ||||
Effective tax rate | (1.0 | )% | (0.4 | )% | 0.4 | % |
As of December 31, 2015, we had research and development credit carryforwards of approximately, $3.8 million and $4.1 million for federal and state income taxes, respectively. If not utilized, the federal carryforwards will begin to expire in 2029. The state tax credit can be carried forward indefinitely.
83
Balance at December 31, 2013 |
| $ | 3,917 |
|
Additions for tax positions related to the prior year |
|
| (32 | ) |
Additions for tax positions related to the current year |
|
| 2,070 |
|
Lapse of statutes of limitations |
|
| — |
|
Balance at December 31, 2014 |
|
| 5,955 |
|
Additions for tax positions related to the prior year |
|
| (57 | ) |
Additions for tax positions related to the current year |
|
| 2,605 |
|
Lapse of statutes of limitations |
|
| — |
|
Balance at December 31, 2015 |
| $ | 8,503 |
|
Balance at December 31, 2014 | $ | 5,955 | |
Decrease from tax positions related to the prior year | (57 | ) | |
Additions from tax positions related to the current year | 2,605 | ||
Lapse of statutes of limitations | — | ||
Balance at December 31, 2015 | 8,503 | ||
Additions from tax positions related to the prior year | 279 | ||
Additions from tax positions related to the current year | 3,639 | ||
Decrease related to settlements with taxing authorities | (621 | ) | |
Lapse of statutes of limitations | (14 | ) | |
Balance at December 31, 2016 | $ | 11,786 |
|
| Year Ended December 31, |
| |||||||||
|
| 2015 |
|
| 2014 |
|
| 2013 |
| |||
United States |
| $ | 116,220 |
|
| $ | 72,217 |
|
| $ | 42,415 |
|
EMEA |
|
| 59,047 |
|
|
| 35,856 |
|
|
| 19,125 |
|
Other |
|
| 33,501 |
|
|
| 18,976 |
|
|
| 10,505 |
|
Total |
| $ | 208,768 |
|
| $ | 127,049 |
|
| $ | 72,045 |
|
Year Ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
United States | $ | 168,479 | $ | 116,220 | $ | 72,217 | |||||
EMEA | 87,360 | 59,047 | 35,856 | ||||||||
Other | 56,160 | 33,501 | 18,976 | ||||||||
Total | $ | 311,999 | $ | 208,768 | $ | 127,049 |
|
| As of |
|
| As of |
| ||
|
| December 31, 2015 |
|
| December 31, 2014 |
| ||
United States |
| $ | 26,696 |
|
| $ | 22,817 |
|
EMEA |
|
| 10,351 |
|
|
| 4,373 |
|
Other |
|
| 5,332 |
|
|
| 1,096 |
|
Total |
| $ | 42,379 |
|
| $ | 28,286 |
|
As of December 31, 2016 | As of December 31, 2015 | ||||||
United States | $ | 26,372 | $ | 26,696 | |||
EMEA: | |||||||
Republic of Ireland | 5,703 | 5,171 | |||||
Other EMEA | 6,834 | 5,180 | |||||
Total EMEA | 12,537 | 10,351 | |||||
APAC: | |||||||
Australia | 3,414 | 4,544 | |||||
Other APAC | 4,943 | 788 | |||||
Total APAC | 8,357 | 5,332 | |||||
Total | $ | 47,266 | $ | 42,379 |
85
86
(a) | The following documents are filed as part of this report: |
|
|
The financial statements filed as part of this report are listed on the Index to Consolidated Financial Statements in Item 8.
| (2) Financial Statement Schedules. |
| (3) Exhibits. |
87
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| |||||||
|
|
| |||||
| |||||||
Date: | February 27, 2017 | By: | /s/ Elena Gomez | ||||
| |||||||
Chief Financial Officer (Principal Financial and Accounting Officer) |
|
|
| ||||||
Signature | Title | Date | ||||||
/s/ Mikkel Svane
| Chief Executive Officer and Chair of the Board of Directors (Principal Executive Officer) | 2/ | ||||||
Mikkel Svane | ||||||||
/s/
|
| 2/ | ||||||
Elena Gomez | ||||||||
/s/ Carl Bass | Director |
| 2/ | |||||
Carl Bass | ||||||||
/s/ Peter Fenton
| Director |
| 2/ | |||||
Peter Fenton | ||||||||
/s/ Caryn Marooney
| Director |
| 2/ | |||||
Caryn Marooney | ||||||||
/s/ Elizabeth Nelson
| Director |
| 2/ | |||||
Elizabeth Nelson | ||||||||
/s/ Dana Stalder
| Director |
| 2/ | |||||
Dana Stalder | ||||||||
/s/ Michelle Wilson
| Director |
| 2/ | |||||
Michelle Wilson |
88
Exhibit |
| Exhibit Description |
| Incorporated by Reference | ||||||
|
| Form |
| File No. |
| Exhibit |
| Filing Date | ||
|
|
|
|
|
|
|
|
|
|
|
2.1 |
| Share Purchase and Sale Agreement by and among the Registrant, the sellers listed therein, the option holders listed therein, Zopim Technologies Pte Ltd., and the representative of the sellers and option holders listed therein, dated as of March 14, 2014. |
| S-1 |
| 333-195176 |
| 2.1 |
| April 10, 2014 |
|
|
|
|
|
|
|
|
|
|
|
2.2 |
| Stock Purchase Agreement by and among Zendesk, Inc., We Are Cloud SAS, the Sellers set forth therein, and Rachel Delacour and Alven Capital Partners, represented by Mr. Jérémy Uzan, as the Sellers’ Representatives, dated October 13, 2015. |
| 8-K |
| 001-36456 |
| 2.1 |
| October 13, 2015 |
|
|
|
|
|
|
|
|
|
|
|
2.3 |
| Stock Purchase Agreement by and among Zendesk, Inc., We Are Cloud SAS, and the Sellers set forth therein, dated October 13, 2015. |
| 8-K |
| 001-36456 |
| 2.2 |
| October 13, 2015 |
|
|
|
|
|
|
|
|
|
|
|
3.1 |
| Amended and Restated Certificate of Incorporation of the Registrant. |
| 10-Q |
| 001-36456 |
| 3.1 |
| August 7, 2014 |
|
|
|
|
|
|
|
|
|
|
|
3.2 |
| Amended and Restated By-laws of the Registrant. |
| 10-Q |
| 001-36456 |
| 3.2 |
| April 10, 2014 |
|
|
|
|
|
|
|
|
|
|
|
4.1 |
| Form of Common Stock Certificate of the Registrant. |
| S-1 |
| 333-195176 |
| 4.1 |
| May 5, 2014 |
|
|
|
|
|
|
|
|
|
|
|
10.1# |
| 2009 Stock Option and Grant Plan, as amended, and related form agreements. |
| S-1 |
| 333-195176 |
| 10.2 |
| April 10, 2014 |
|
|
|
|
|
|
|
|
|
|
|
10.2# |
| 2014 Stock Option and Incentive Plan, and related form agreements. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.3# |
| 2014 Employee Stock Purchase Plan, as amended. |
| 10-Q |
| 001-36456 |
| 10.2 |
| November 6, 2014 |
|
|
|
|
|
|
|
|
|
|
|
10.4# |
| Offer Letter between the Registrant and Alan Black, dated as of October 28, 2011. |
| S-1 |
| 333-195176 |
| 10.5 |
| April 10, 2014 |
|
|
|
|
|
|
|
|
|
|
|
10.5# |
| Offer Letter between the Registrant and Marcus Bragg, dated as of July 25, 2013. |
| S-1 |
| 333-195176 |
| 10.6 |
| April 10, 2014 |
|
|
|
|
|
|
|
|
|
|
|
10.6# |
| Offer Letter between the Registrant and Adrian McDermott, dated as of June 16, 2010. |
| S-1 |
| 333-195176 |
| 10.7 |
| April 10, 2014 |
|
|
|
|
|
|
|
|
|
|
|
10.7# |
| Offer Letter between the Registrant and Anne Raimondi, dated as of July 1, 2013. |
| S-1 |
| 333-202621 |
| 10.8 |
| March 9, 2015 |
|
|
|
|
|
|
|
|
|
|
|
10.8# |
| Offer Letter and Employment Agreement between the Registrant and Matt Price, dated as of May 9, 2011 and July 15, 2011, respectively. |
| S-1 |
| 333-202621 |
| 10.9 |
| March 9, 2015 |
|
|
|
|
|
|
|
|
|
|
|
10.9# |
| Offer Letter between the Registrant and John Geschke, dated as of May 30, 2012. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.10# |
| Offer Letter between the Registrant and Amanda Kleha, dated as of September 21, 2009. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.11 |
| Office Lease between the Registrant and 989 Market Street, LLC, dated as of April 29, 2011. |
| S-1 |
| 333-195176 |
| 10.8 |
| April 10, 2014 |
|
|
|
|
|
|
|
|
|
|
|
10.12 |
| First Amendment to Lease between the Registrant and 989 Market Street, LLC, dated as of June 28, 2011. |
| S-1 |
| 333-195176 |
| 10.9 |
| April 10, 2014 |
|
|
|
|
|
|
|
|
|
|
|
10.13 |
| Second Amendment to Lease between the Registrant and 989 Market Street, LLC, dated as of August 11, 2011. |
| S-1 |
| 333-195176 |
| 10.10 |
| April 10, 2014 |
|
|
|
|
|
|
|
|
|
|
|
89
Exhibit Number | Exhibit Description | Incorporated by Reference | ||||||||
Form | File No. | Exhibit | Filing Date | |||||||
2.1 | Share Purchase and Sale Agreement by and among the Registrant, the sellers listed therein, the option holders listed therein, Zopim Technologies Pte Ltd., and the representative of the sellers and option holders listed therein, dated as of March 14, 2014. | S-1 | 333-195176 | 2.1 | April 10, 2014 | |||||
2.2 | Stock Purchase Agreement by and among Zendesk, Inc., We Are Cloud SAS, the Sellers set forth therein, and Rachel Delacour and Alven Capital Partners, represented by Mr. Jérémy Uzan, as the Sellers’ Representatives, dated October 13, 2015. | 8-K | 001-36456 | 2.1 | October 19, 2015 | |||||
2.3 | Stock Purchase Agreement by and among Zendesk, Inc., We Are Cloud SAS, and the Sellers set forth therein, dated October 13, 2015. | 8-K | 001-36456 | 2.2 | October 19, 2015 | |||||
3.1 | Amended and Restated Certificate of Incorporation of the Registrant. | 10-Q | 001-36456 | 3.1 | August 7, 2014 | |||||
3.2 | Amended and Restated By-laws of the Registrant. | 8-K | 001-36456 | 3.1 | November 1, 2016 | |||||
4.1 | Form of Common Stock Certificate of the Registrant. | S-1 | 333-195176 | 4.1 | May 5, 2014 | |||||
10.1# | 2009 Stock Option and Grant Plan, as amended, and related form agreements. | S-1 | 333-195176 | 10.2 | April 10, 2014 | |||||
10.2# | 2014 Stock Option and Incentive Plan, and related form agreements. | |||||||||
10.3# | 2014 Employee Stock Purchase Plan, as amended. | 10-Q | 001-36456 | 10.2 | November 6, 2014 | |||||
10.4# | Form of Inducement Option Agreement. | 8-K | 001-36456 | 10.1 | May 6, 2016 | |||||
10.5# | Form of Inducement RSU Agreement. | 8-K | 001-36456 | 10.2 | May 6, 2016 | |||||
10.6# | Offer Letter between the Registrant and Alan Black, dated as of October 28, 2011. | S-1 | 333-195176 | 10.5 | April 10, 2014 | |||||
10.7# | Offer Letter between the Registrant and Adrian McDermott, dated as of June 16, 2010. | S-1 | 333-195176 | 10.7 | April 10, 2014 | |||||
10.8# | Offer Letter between the Registrant and John Geschke, dated as of May 30, 2012. | 10-K | 001-36456 | 10.9 | February 26, 2016 | |||||
10.9# | Offer Letter between the Registrant and Elena Gomez, dated as of April 6, 2016. | |||||||||
10.10# | Offer Letter between the Registrant and Tom Keiser, dated as of March 29, 2016. | |||||||||
10.11# | Offer Letter between the Registrant and Bryan Cox, dated as of March 24, 2016. | |||||||||
10.12 | Office Lease between the Registrant and 989 Market Street, LLC, dated as of April 29, 2011. | S-1 | 333-195176 | 10.8 | April 10, 2014 | |||||
10.13 | First Amendment to Lease between the Registrant and 989 Market Street, LLC, dated as of June 28, 2011. | S-1 | 333-195176 | 10.9 | April 10, 2014 | |||||
10.14 | Second Amendment to Lease between the Registrant and 989 Market Street, LLC, dated as of August 11, 2011. | S-1 | 333-195176 | 10.10 | April 10, 2014 |
Exhibit Number | Exhibit Description | Incorporated by Reference | ||||||||
Form | File No. | Exhibit | Filing Date | |||||||
10.15 | Third Amendment to Lease between the Registrant and HMC Mid-Market Ventures LLC, dated as of September 11, 2013. | S-1 | 333-195176 | 10.11 | April 10, 2014 | |||||
10.16 | Lease Agreement between the Registrant and 1019 Market St. Property, LLC, dated as of September 6, 2013, as amended. | 10-Q | 001-36456 | 10.1 | November 6, 2014 | |||||
10.17# | Amended and Restated Non-Employee Director Compensation Policy. | 8-K | 001-36456 | 10.4 | May 3, 2016 | |||||
10.18# | Amended and Restated Executive Incentive Bonus Plan. | 8-K | 001-36456 | 10.1 | February 11, 2015 | |||||
10.19# | Zendesk, Inc. Change in Control Acceleration Plan. | 8-K | 001-36456 | 10.1 | May 15, 2015 | |||||
10.20# | Forms of Indemnification Agreement. | S-1 | 333-195176 | 10.1 | April 10, 2014 | |||||
10.21 | Sublease between the Registrant and Zoosk, Inc., dated as of August 1, 2012. | S-1 | 333-195176 | 10.12 | April 10, 2014 | |||||
10.22 | Lease by and between Zendesk, Inc. and 1035 Market Street, LLC., dated June 22, 2016. | 8-K | 001-36456 | 10.1 | June 27, 2016 | |||||
21.1 | List of Subsidiaries of the Registrant. | |||||||||
23.1 | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. | |||||||||
24.1 | Power of Attorney (see page 92 of this Annual Report on Form 10-K). | |||||||||
31.1 | Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||||
31.2 | Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||||
32.1† | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||||||
101.INS | XBRL Instance Document. | |||||||||
101.SCH | XBRL Taxonomy Extension Schema Document. | |||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | |||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
| |
# | Indicates management contract or compensatory plan, contract, or agreement. |
| |
† | The certifications attached as Exhibit 32.1 that accompany this Annual Report on Form 10-K, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Zendesk, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing. |
91