Zendesk (ZEN) 30 Oct 182018 Q3 Earnings call transcript

Company Profile

Participants

Marc Cabi	Vice President, Investor Relations
Mikkel Svane	Founder and Chief Executive Officer
Elena Gomez	Chief Financial Officer
Philip Winslow	Wells Fargo Securities
Derrick Wood	Cowen and Company
Samad Samana	Jefferies
Arjun Bhatia	William Blair & Company
Alex Zukin	Piper Jaffray
Daniel Greenfield	Evercore ISI
Tom Roderick	Stifel Nicolaus
Stan Zlotsky	Morgan Stanley
Michael Turrin	Deutsche Bank Securities
Jennifer Swanson Lowe	UBS
Ross MacMillan	RBC Capital Markets
Brad Sills	Bank of America Merrill Lynch
Jeff Van Rhee	Craig-Hallum Capital Group
Brent Bracelin	KeyBanc Capital Markets Inc.
David Hynes	Canaccord Genuity
Patrick Walravens	JMP Securities

Call transcript

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Operator

Good afternoon. My name is Jesse, and I will be your conference operator today. At this time, I’d like to welcome everyone to Zendesk’s Third Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers�� remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator may conference. you begin Cabi, your Marc

Marc Cabi

Thank our third and good Welcome to afternoon, everyone. quarter you, Jesse, XXXX earnings call.

report to pleased our results. quarter We’re third

Joining Chief Financial Founder, Mikkel the me call Officer. and and Board; our Chair of today Svane, Gomez, Elena the on CEO are

get reminders. the a into we let me Before along pass results, few

results available is Letter Investor Shareholder commentary. investor.zendesk.com, or website, and which Our at details our full

forward-looking adopted XXX all reconciliation we on reminder, standard. the are and effective results X, a recognition recognition ASC Investor new our with As standard, for accordance and January XXXX, today revenue resides the guidance in revenue website. ASC new XXX full A

results or actual press prospects, by affect regarding statements to changes of statements. Securities Annual release after law. XX, ability to earnings Risk no the obligation ended Form on to in the factors such to these results XXXX our call, to our our performance, undertake refer more XXXX, Report could The regarding year compete XX-Q ability for earnings subsequent Quarterly release the today’s these the expectations, XX-K may for Report make or update growth today’s our information with XX-Q effectively. or and that as Form financial of Please today’s December retain the and our upcoming customers Form XX, September presentation in quarter We to as XXXX. on course forward-looking XX, statements press to June for actual except including required contained assumptions, conform for Report ended attract and our and our and Quarterly Exchange quarter statements ended prior Commission, forward-looking statements risks filings section future are Factors During development, on in we our and the product

substitute both measures addition for should but not non-GAAP The be GAAP a this will financial information. as to, from GAAP isolation During and our measures. in considered we financial present or call, in non-GAAP financial

prior periods measures, including find earnings I You which can and additional GAAP With comparable all the press disclosures the measures like for for Mikkel. in today’s to periods, available such Shareholder of website. certain measures with financial are for reconciliations and Investor Letter call press release that over non-GAAP prior financial these non-GAAP financial on our regarding earnings would the releases introduction, turn to in

Mikkel Svane

more All therefore, right, and quarter Marc. so you perfect. Thank growth in success another even set future. afternoon, much, really we everyone. believe finished strong Good the are for We up with

Because and year-to-date revenue our expectations able initiatives sooner. of growth growth Our XX% are grew to exceeded in year-over-year. this, invest we more

our growth. with tremendous driving experienced We’re a engage our change and is experience modern customers. software new The ways few seeing to strong as for customer factors adopt companies and demand

moving also many solid us Suite, and companies our Our channels. are adapt two opened with in new larger-sized customers, time, multiple built upmarket has put new perform off that landing to across omnichannel new We products start We’ve customers us. of deals quick our the to gotten stronger our interactions enterprise even a to and help didn’t consumers continued competitive we today’s accelerating momentum position expectations. maturing believe and our communicate and with we Zendesk it doors At same our omnichannel the major potential an offerings continues upmarket. progress our with who made easy year, priorities move before. see for ahead key with The on has expect to and the and expand to opportunities bundle in

the our advancing our seeing enterprise We upmarket product of and from features efforts go-to-market are the benefits teams.

new continues drive improve their business Our and productivity. and expansion teams to sales

experience customer company behind the offering in in automation acquired software. here September, force Additionally, It our with we sales Base. broadens

an long-term strategic to investment we for us. While products, have a cross-sell our also is opportunity this immediate

growth a integrate for the customers. investing for and product complete and plan development current so to we have more We sales future Base’s our offering software in and are market product deeply family, into

of when confidence progress And Our to lot Relate, our our being progress company in of continues in meeting San to I’m global a Zendesk more user with year you increase our so sharing very over our conference to And billion-dollar couple the XXXX made a far exciting feel proud a being Personally, and turn to sales. weeks a dollar Francisco. going company with of thank multibillion goal announcements objective Elena. long-term call you, this forward look with everybody. we revenue in of here and the host I that, we’ve

Elena Gomez

you, Thank QX. for FutureSimple about the talk couple guidance, of minutes to a of acquisition I’d Mikkel. given like in

$XXX results We expect impact QX Because for in our approximately we core the and up We now on XXXX seeing we’re momentum revenue operating year-over-year. loss FutureSimple. our QX between related expand range and in impact minimal increased on more our million a these guidance business, XX% now. on $XXX revenue revenue the our a meaningful I’ll of and million, expect the for for full-year year. in to

development for dynamics, expectations, our our opportunity leadership and and a market been experience growth we our share high customer expansion. to continues continued market see and favorable big our revenue pulling go-to-market initiatives. forward As investments in exceed we’ve product in With

Our we objective improving achieve profitability. is our with and while to balance cash and growth operating high flow performance growth,

operating XXXX, full-year results GAAP benefit For significant to we loss our compared non-GAAP expect improvement and scale. XXXX, as loss operating in we the from

the and reduced operating our previous loss compared loss to our we operating income – non-GAAP guidance. However, full-year we see slightly guidance for slightly reduced GAAP XXXX have

margins behind impacts has Zendesk. as Base, our results it Our the than of acquisition lower FutureSimple, company

in Therefore, and XXXX. FutureSimple XXXX we Additionally, in on consistent quarter margin standard gross negative with the have deferred a margin purchase contribution revenues impact our FutureSimple’s from consolidated accounting, fourth the of practice value. will will to fair the gross of account

believe that our Additionally, pulled higher share. quarter, market revenue will third and we revenue growth the in given some outperformance drive forward we investments

flow cash for year remains free unchanged. Our the guidance

for We flow cash of $XX flow compares cash $XX to of million million to free up expect of the XX%. million for XXXX, $XX full-year approximately This free XXXX.

QX a over in QX. Marc. will it our be I’ll call requirement now, QX As turn like looking the you. in Thank did reminder, CapEx to more And

Marc Cabi

Thanks, Elena.

Before accounts. your questions, cover would we and we item that I take like our how to customer to relates one paid housekeeping disclose

as products Zendesk product for As purchase we call, discussed they customer are at each innings purchase. a that on our la customers last two a counted carte multiple

Chat, four accounts. paid a Support, For count instance, as Talk they if would and a customer customer carte, purchases la Guide

customers with products multiple introduction recall, you’ll may Zendesk in SKU. buy one the As of now Suite, the

the reflecting by account, one customer paid of instead Suite Zendesk We products purchase as the the multiple multiple are only included with of a for paid SKU. accounts customer

including we provide the products and currently Zendesk investors count of the way the activities customer are other how other the to our our match We you, in Suite anticipate the to Zendesk change in and all Suite in products category. insight to bundled paid disclose accounts introduction of customer which the we evolving future, We business. about customer evolve working we’re our

out XXXX as share expect the year. close in more to we We

account, Base excluded reporting we as our have We customer reframing customers account, overall our anticipate also current beginning customer in XXXX. in

Relate and or to to on from either of We Finally, will briefing our XX, user host in. in Investor on you Analyst an there November tune have day. a hope be as Francisco. that A X:XX PM this available website reminder, event will see X:XX our part Briefing you we San Zendesk webcast via of investor

period. back We Jesse to begin our call will now Q&A to over turn the

Operator

The first Instructions] [Operator Philip with question you. Thank Wells Winslow comes Fargo. from

Your open. is line

Philip Winslow

that selling versus, would more color the there I is the you of And continue that Just of see wanted to this good color driving, sort commentary focus terms net you’re based Why it the be first on existing shareholder sort it, just in Obviously, and customers Is Suite. Base to new great? uptake it’s installed selling of of letter that. full in suite what upfront. whether been on your to that into any of quarter seeing on call the the don’t in guess, provide seems you market. sort

Elena Gomez

chime you guys I’ll start in. and can

it’s performance conversation. also conversations all of higher seeing And, existing we one two seeing on We’re or Obviously, taken from as about new have thrilled strong customers conversations we’re would that, ASP and into suite more upfront three bring bringing both customers. course, because our we’re that customers.

have future So we we’re by even, for today. one it’s encouraged we’re where but are still with with thrilled is us it’s the early days quarter-end, But what super still but that, conclude we on Suite. to

Philip Winslow

agree. I Yes,

Operator

Wood Derrick from and comes question with Cowen Company. next Your

open. is line Your

Derrick Wood

on Thanks. It of – the that it up the to of came know a incremental in where have guys looks then Can looks that, to here you an Any the even channels. you Great. going? want strategy? hired basis. color QX. lot from but was playbook was Obviously, lot a new excluding is us from give some a you organic acquisition, channel investments a it like like as what on And sense Thanks. the head with resource I are shed you

Elena Gomez

Yes.

our functions and our sales organization, organization. was within hiring our well across as across several engineering So success, as

group ourselves on wouldn’t for the I any than and of strong frankly the one having prepared are So a for was the say, was to there that But the start year for capacity positioning Street we QX. actually other. second-half the particularly getting higher

question question? was or terms second second In of – the what so, the

Derrick Wood

Channel?

Elena Gomez

Channel. Oh, yes, did. we

But excited still. our excited VP time, and channel he we’re wealth hired experience brings we excited, very going of that for actually and early conference with partner days of excited year a a it’s the first just overall about here year we’re, We’re coming so to that channel strategy. at November, in our start the and have we’re next to partner summit up

regions, But know, more leveraging in extending strategy have a our our those as we’re and we reach have channel we about far in already XX as you days. can. so partners As information those we’ll and

Derrick Wood

to sounds sneak you when as Great. fold Some it in, And Thanks. kind separate you’re you FutureSimple, a be be integrated there? could fully specialist other organization. color do sense – it going everyone? Any in. how a is long keep if then do as and or with I going like plan that with have – good to would one of The it one to model, time it to

Marc Cabi

in respective early the cross-sell many days, of in But there our continue already observe customers. of So organization to to beginning referrals Base independent is between are go-to-market to vendors. there run opportunities the we’re terms plan the

the as set broad So over experience we’ll plays time, of out deliver to see you that next two. products. want quarter know, or we how customer a Over

next more So, say the over we’ll on to have that period.

Operator

next Jefferies. with Your comes Samad question from Samana

Your line is open.

Samad Samana

then And would guys Hi. Base’s there. and/or how already existing Thanks Have a customer ideal customer as how Zendesk’s much your you you maybe announcements in for of an well Maybe questions. my have Base customers early FutureSimple. a do the much question potential base? for on in be identified follow-up taking maybe customer overlap

Mikkel Svane

Well, some segment, our as opportunity majority they we in for for the lot customers, our the there’s BXC believe part, but as kind vast business. in all customer of have also a actually big of first sales the of automation somewhere BXB a

we believe So a there’s opportunity. huge

also and that learn we that future more is fruits less That We’re know low-hanging the ourselves on on so all very things. in low and opportunity focusing But overlap in to there kind doing interested base. initial got other customer for definitely kind focused the long-term really in each the like like the And to fruits, focusing much and opportunity. it’s got overlap of the it’s on. these phase, about of up is we’re the some how setting about

Samad Samana

Elena. Great. for And then maybe one

look fourth expenses the forward expenses year. I pull the due operating you to the the how could us from FutureSimple was number that for much that updated incremental the as understand maybe guidance the versus and mentioned? help Just you at of income quarter for

Elena Gomez

Sure.

out So But and I get committed we those to we don’t guidance want details for that year. our into to the core set tell the specifically. can you necessarily were I business

our as guide. An operating – right for we opportunistically had into than so to what margin that at had setting now profiles we’re ourselves can a looking in a Zendesk. XXXX. consideration is and But lower strong start you up So take definitely, with Base imagine,

Samad Samana

my Great. and the questions Thanks for again quarter. helpful. congrats That’s taking on

Marc Cabi

Thank you.

Operator

from question Suri. Bhavan comes next Your

open. is line Your

Arjun Bhatia

it’s for on actually guys, Hey, Arjun Bhavan. Bhatia

before Just down need that wanted what happen I – to targeting functionality bit larger or more. sales you’ve on the just the you marketing talked to little wondering, either product key know future. some product about focus But of moving perspective start with here? are customers this that to a Base in things enterprise need from a and upmarket you

Mikkel Svane

in with today core is our move kind do upmarket. support scalable in mean, break don’t that day and offering, and different But of understand right the our kind to like, the That’s full one, but a with the to also organization. on to – it way better us. a familiar answer. There’s has and terms slowly work things feature getting even route is going makes then business. for to in lot different want have of We from to be we’re this don’t we get definitely wise, want moving multifaceted MO perspective with. functionality neck here seamlessly to want a take we upmarket, And also We are want in enterprise we And thinking patient together. the things future. to with want like patient want of enterprise about we And we implement sense more the we of the products been products just Base that doesn’t always our to there’s that way for

We there there’s proper way. and – in we’re businesses our I have but going business, in in businesses. huge the opportunity the mid-sized enterprise smaller meantime, the to take big And getting the just time a

I already that think, and with to we’ve really what going our we’re that’s focus model on. proved today,

Arjun Bhatia

customers are just still broader new out what tools about it you customers Are net in Okay, are thinking of adopt seeing or Is out any And recent replacing onboard, that vendors? or are as come you change larger coming from from legacy they they then especially of are suites that’s customers other placing other seeing when helpful. terms these we’re still? Zendesk? customers,

Marc Cabi

on-prem that activity disruptive by basis. and approach that they’ve augment up disrupted come legacy much. category siloed the to the more they seeing pipeline approach the a really company to of enterprise our trying from. allow some lot good their some activities. progress newcomer because or some either And about regular of of in story that modern generally changed throughout the many year, to hasn’t large customers they’re probably, type to to the that systems to more they dependence see themselves free beginning And talked why think those we with replace in operate. year And can legacy we them we around companies customer around bit that industries how speaking been we a continue a on the customers A become Zendesk at with traditional we’re modern meet category, of we’re in We looking little have more dependence,

Arjun Bhatia

for my questions. Thanks taking Great.

Operator

with next question Jaffray. Piper Zukin Your from comes Alex

Your line open. is

Alex Zukin

Hey, my guys, thanks for question. taking

So ones. two quick

the First, in and you talked shareholder about increased enterprise pipeline letter. traction the prepared remarks and

in quick detail, full-year and I I’ve how year? wanted a pipeline of performed quarter period the sales bit you versus kind this more So new kind to if about and also describe And given expectations of versus got of a enterprise could the ask follow-up. manager? last little the the And

Marc Cabi

So ago for quickly strong was let year quarter. really me everyone quarter that a pretty just remind us a a tougher second third after quarter

I think, basis. quarter-to-quarter were said, That our we well. year-over-year So performed difficult a comparisons on extremely

don’t other the we look are around their that at productivity by, activities that them we kinds attainment, direction. of things we salespeople If right internally those look that and disclose moving all you in at judge

Alex Zukin

I if mentioned think then oriented being and durability And about pulling Base you forward investment the – Perfect. acquisition growth some an investments. growth guys

be we of provide in suite have seem Given robust Maybe online asking given target? coming any color guidance, on confidence given you of of would next pipeline, increased macro kind the depend that the but the next some environment? year, billion-dollar I’m continued kind IT product how great? not be increasing to XXXX can the you for year’s enterprise thinking of spending kind success the fiscal in and much target should of Base increasing of how about kind

Elena Gomez

a execute. to and the I things. look that onboard after of It’s of a going we pipeline resilience both encouraged. with. It’s the was team. confidence by any Yes. not metric traction. – the answer going the execution to my have force coming continue it’s single of continued sales suite I’m time to guidance. start think share up, seeing, team to is XXXX five having early confidence same one I of It’s consistent I’m sort I and combination But has this My we’re at. over quarters the not we

all X,XXX we’ve a field the it’s things, of over with So and customers all marketing host success those our really hosting had events year.

So of it’s really me combination a all of that the the those give confidence in things goal. billion-dollar

Alex Zukin

you, Great. Thank guys.

Operator

Your with next from Kirk ISI. question Evercore comes Materne

open. is line Your

Daniel Greenfield

question for this taking congrats Thanks for He, my on guys, quarter. Kirk. the is on I’ve Daniel got actually and two.

first is in on one strength the So, geos. just

quarters strong and We’re geos. seeing some performance in multiple EMEA other from

ramps speak just you’ve up is ramped see new you can I that to opened – and offices. getting – getting there, So reps

So could great. quick, real that? of down comment But XXK deals then this is a bit it’s up growth worth on And from couple if XX% over which XX% quarter, you a were just last quarters.

there So takes Thanks. be and would really any puts helpful?

Marc Cabi

And maybe travelling Let me start been with Mikkel the world. that. has then

we’ll answer the let geo question. So him

customers an metric, of our is disclosed, expect And X we points. key Do by revenue talk to over year-over-year that in want time size generated recurring up evolutionary about that agents comparisons average or us by of our the look tougher help were the has of progress, XX% you really kind and for that embedded that larger, to positive on and to growth which up if nicely That’s the is deals continuing those moved which geos? again, us year-over-year again, for move of more to expand within But to deal from deal and at we and average percent is So you XXK the number continue impacted manner. been XXX size comparisons. MRR support.

Mikkel Svane

think doing like, because organization also both than in a to our from and markets. not here. also wrong of of like, product, complicated – am many a our the and of we in to kind that’s different big aware the have our internationally to support deal business with. we at early outside everywhere penetrated including everywhere is – product to as I more if to support it’s business the the just our market climates have the U.S., you very many business in half investments solid of organization smaller, we But single about smaller the think that continue growth that strength like U.S. lot also the And localizing I of development, we U.S., And and very business Well, product, in the many documentation, that know And of strength our huge these cultures, different our are of it’s very modestly opportunity the D&A of have front we’re outside still, some same still and regions, time, we’re see in very, us. we really have Sure.

So international in as invest we opportunity to huge. business, because continue our see our there we growth

all we every in regions go knowing opportunity to in So really our and to continue the have brands just into corner these to deeper everything markets. doing fantastic expand loyal business exciting have the it’s of those customers, we’re talks and that we country

Daniel Greenfield

Thanks. Great.

Operator

with question Your comes from Stifel. Tom next Roderick

is open. line Your

Tom Roderick

Hi, thanks guys, Yes. for taking my question.

you that hitting would kind that that it does forward? also coming over the from X enterprise customers prior the as just this to we curious so hitting SMB you. that the number in suite? we what MRR XXX I were seeing the impact suggested there. mean, and next above attractive commentary with So suite the customer seats year-on-year. think up hitting but of back the And the look it’s the sale know from quarter, with from on of retention in you’re the you And that few at newsletter number nice of feedback Marc, into want sort out was sale, I seats, up quarters. questions XX% about and yet I mid-market. to and get and going look suggest of to dollar as and impacting early that’s points sort suite XX% really suite how XXX from any impact number I’m Curious one to the know number retention Thank of you sort I how with

Marc Cabi

a questions question of into Those built lot there. were one

start Let and wants else see just I’ll me where then everyone jump to in.

allow the allowed all really SMB purchase conversation So to One, us two has Suite suite to at What Zendesk mid-market designed with customers. as frictionless messaging around the have SKU a our Zendesk omnichannel and is of a the a has products really customers. by things. done

or products, we’re they across to of omnichannel that long-term they what so seeing messaging really what we that’s in around customers size tend really buy whether And deal us around customer. product want stickier, And as is over an know SKU because engaging up more helping products. our value move one is we more Suite that to customers Zendesk the buy to the we multiple be tend to than with as time see, much engage also a have combination

to omnichannel still it’s but early, think the about and It’s I things demonstrate. internally the demonstrating the So externally wanted around all we really both experience. dynamic, excited we’re

Mikkel Svane

the Yes. product. engagement have It conversations with it improves they these our improves customers, with the

So, it improves I so, does we – wait It contract we them? with see. customers. the also of these relationship let’s have long-term have and impact that impact the kind believe value does with

So good these things. and the early does kind overall, real quarter extrapolate of Yes. one like, Yes. like also suite? impact? to positive it’s But an But impact of too that have full business

Elena Gomez

it really we’re not obviously, to would that It getting the it’s that of which to trend. – year add. that expansion early expansion. we’re there’s Yes, again, really and months know because see about too or – at for it’s cohort it’s I metric – a too net to our deal really But change see upfront, it’s if looks would the tell but XX at is a The dynamics could, just one into us carefully extension prior, rate, dynamics? bigger looking early

Daniel Greenfield

expect bit? sales a to at prep make of quick Maybe you. sort And as also you something seven-part a cycle, impact do a just you sort of But that? of would of and question. elongate the you naturally sales just little how manage Thank for cycle the look that follow-up. is won’t this I sort Excellent. the the that

Marc Cabi

with seeing we’re exact shortened the opposite It our has think, suite. I the sales cycles.

Elena Gomez

that – making out it’s taking an customers. our it’s of It’s Yes, with conversation. discussion easier of most friction

Daniel Greenfield

great. it. Thank you, I Perfect. That’s really guys. appreciate

Marc Cabi

Thank you.

Operator

Stan Morgan Your next with from Zlotsky Stanley. question comes

open. is line Your

Stan Zlotsky

the afternoon, to A Perfect. we end. We my you paid A can couple us or were metrics? Thank Base they inclusive. profitable end. that the you saw was questions help just want just being close you just ladies characterize how Maybe quick of that be of Base quickly so from on And much. for profitability their the and But profile so assets. follow-up. Good growing? million all from couple than And yours. gentlemen. On I questions realized on acquisition, worse – $XX any to is a my then

Elena Gomez

Yes.

long-term not you the necessarily. were would not I’m much here company as going lower, with that’s ours. But But much our us. they is. this to for lower is between companies specifics really So, two operating what lower hope of get and do – expect, a operating a we synergies into fully expect margins than the see again, to play sort but But

so not of that’s our caution would lion’s Base, have try the a to you I just focus So again, because core business business. just on necessarily we share to much

definitely we’ll gross our dynamics days, just and that, dynamics XX margin I would year more operating different guidance but – in next know than for margin we have. share So say we’ll different about

Stan Zlotsky

the on you to lapping the billings, are Got guys going of it. billings. And be comp about and thinking year QX toughest just

coming how bit you you in guys of you. want to us a it of to kind for That’s about dynamics little QX? guidance Thank Any want mind? me. us keep to into maybe Just billings think

Marc Cabi

QX from last perspective, and Again, good quarters. were year comp’s QX a Yes.

of into QX that probably remnants some – QX. the slippage think was had QX I

was QX comparison also perspective. big year. is heavy quarter of a large operating quarter I that What say that enterprise last a a like-to-like is is and is more deals. would probably on a that, So normal QX from level

we we that we we comes will pipeline we go So in as if a great believe quarter. place. have execute, and of be kind through good a together But the

Stan Zlotsky

you. Thank

Operator

Your next from question Turrin with Deutsche comes Michael Bank.

is line Your open.

Michael Turrin

first-half some just tale that that you the the could wanted with next year. Good longer how factors there the might of and want confidence start. on customers on the to an extend the sounds us be of It afternoon. I extending have around of just if Thanks. see you into there? migration to to touch revised cloud And much update timeline like provide might

Elena Gomez

Yes.

are our moved XX% customers very at we’re cautious moving of busy that year-end with a right of large in we confident if will. trying to season, when now. making timeline. time So We’ve customers over you as we’re a it’s and that not be And sure

about confident feel I So that.

basically. I think learning sure it’s downtime make to a that we limited to go been these as with want we quarter, no really through but move the we customer

it up the next so first move And year it wrap that, the by to customers in part order first-half of of next in do felt we to year. was prudent to some of the

Marc Cabi

want moved was very I a data that by that And customers our cloud got everybody just appreciated they bar. planned customers. downtime infrastructure I There from very our provider. own for remind set a when think reminder, of any high no our we And our was centers much to to

Michael Turrin

at customers. customer Got more be customer I there? letter quarter, shareholder noticed then you slide the this there might time? there logos experience I’m feel it. couple the to verticals over Is anything looking was And receptive of certain And a your on that just expectations? solutions within are financials new wondering, becoming

Marc Cabi

– we’re a very think, horizontal very I horizontal product. we’re

all categories. of different industry by be can it used So kinds

can financials a – there. finance and organizations of lot I around in capabilities, we’re consumer-facing them are help conversations that trying traditional think, I see are more we to create

the We all again, category. market strategy their we approach industry But customer win market And point. in play allow so, this we next don’t really at the can to verticalization these of horizontally have in customers that well. a space us today. very But

Michael Turrin

It’s great. Thanks.

Operator

with Your comes Jennifer next UBS. Lowe from question

open. is line Your

Jennifer Swanson Lowe

Great. I so Thank on in actually you. them maybe of follow-up the two pick succession. to just want earlier questions, I’ll

purchase accounting can that, Stan’s that into to about carrying cost revenue regard materially just a deferred. start that to of back impacts, off perspective? recognition following – something year But the I next should the the up will side question roll we of thinking full with see from us in to come be maybe impact Base. we with just Is give value QX. revenue equation, sense and the as year on that a that that, you understand First, I on next the Base certainly growth

Elena Gomez

don’t impact see I business. a for Base No, having our

–we’ll view view our obviously, to the material next about having combined plan line. share a top impact in it of year we we But think a I more the I report don’t and that, guidance. on business,

Jennifer Swanson Lowe

Okay. And on Michael’s transition. then following just AWS the about question up

I timing, think you the would maybe an think, as the a how margin anticipated? we relative or we and shift you sort given of originally see been that letter, wind just there legacy But first-half in taking about gross gross was with assets. that expectation we I had of longer complete once should in the center the that data a completed. the for little than the migration a people it margin be outlook there’s reflecting know down to that that mentioned existing improvement already had shareholder

Elena Gomez

Yes.

question. good a it’s So

the the to basis talked about We committed delay. we’re XXX committed are points despite continue to we that –

across organizations that So scale COGS we’re really our the impact focused line. on gaining

So won’t that change. commitment

Jennifer Swanson Lowe

me, I whether there for your trajectory you’re sort that days that you I’m the the coming to around sales as enterprise starting amount, half you’re that curious sort that now you’re And they’re on tougher more to maybe it at the following had you off just maybe now by perspective past in into stabilize. people. productivity those even with other commentary and that year trajectory thought two comps? comps or has tougher productivity quick team? the get challenges some Okay. think, those of of just on up fully a was of you’re seeing that stable one see are Is been of positive the the improvements just then those to some past because outset starts the metrics And get good you’re pretty and questions questions

Elena Gomez

answer say, would I your question. Yes, I’ll full

sales we’re I from definitely pushing constantly to, greater productivity. I and strong sales we have for compares, So, to gains think position we first year. as for that we seen we’re continued yes, next exit I see But part XXXX and QX that the the think still of yes, exited think, and a But QX. tougher alluded ourselves Marc definitely our I we’ve a productivity think, org with stability from team and attainment going

Jennifer Swanson Lowe

you. Thank Okay.

Operator

Your next question comes Markets. Capital from with Ross MacMillan RBC

Your line open. is

Ross MacMillan

and for taking I of couple you a actually too. my Well, thank much quick clarifications thanks had as questions so well.

billing Base Base QX, really is and assume we not impacted when I way think, our in material math it just would then… So QX? right about a impact its to calculated that by in be Elena, think on And

Elena Gomez

Correct.

Ross MacMillan

guidance a the way income Op of …the you outlook Is about acquisition-related upside other correct. made impact more of right had to the think, question invest – invest acquisition. And the a and were sort incrementally you think QX, QX. spend allowed the for then I basis most I you allowing because most just in and other organically, is impact had on is it of the prior committed going profit from comment rev the you the raising back really that is QX? underlying that was revenue to the then you’re really to guidance revenue, the in still that while raise to on

Elena Gomez

way That’s it. absolutely. think to exactly about Yes, how the right

Ross MacMillan

that’s suite. then on just one great. had I And Okay,

just was for consumed also not net I it new the customers. think, obviously full was customers allowed sort that my by quarter it in And to you QX. be available of sense existing

moderate there’s naturally sort And your of so go something just expect the of to sort gate it outperforming kind just bit go sounds progress star fast right, forward? would wondered if as we then we how – it’s words, you sort start And I really those from at a here? expectation. that still moderates forward, a was other that in a two as kind would assumptions like But of of a rapid that of of Thanks. are

Marc Cabi

Zendesk at look Suite it this to that in in mid-August May. if the introduced became available think, move of within to I was to were customers suite, The then Zendesk for self-service you of year. kind

mid the describe third quarter, So is it. I way into the way of – the a guess, I about

of to days as mix it, will our I raise from around the really its healthy to continue in the or the what can in new lot around exceeded suite the expectations What say activity. we both has activity customer and that, growth future new a our two well early quarters a in we customers. is around having is existing suite, performance. say expectations we’re now especially a continue row and customers see So And were looking now as are at of the that

Ross MacMillan

Great. Thank you. Congratulations.

Operator

with America question Sills Lynch. of from next Your Bank comes Brad Merrill

is line open. Your

Brad Sills

Hey, guys, thanks taking question. my for

you’re a that Just customers, on, base? say, there commentary noticed for you’re bigger there. These business base one surprised renewal large that year into Any the I’d installed seeing in or of now add-on change first the year two? acceleration the adding about just Have up-sell the even you more activity certain trend are they’re on installed within any kind the a on enterprise? products enterprise year within

Mikkel Svane

represents the Bot find more further operations. picture, of changes – big big acquire. macro they better like I area. overall automation in better more ways invested more product. an customer it in self-service, Answer don’t investments in experiences, Like of utilize time, things is trends I the like they’re like big like like scaling and we how same – don’t any interest in But trying I think to get also see that These have that at that our the there

if and a trend, change like probably you major So evolution it’s very a natural will. not in

Brad Sills

I more may, please…. thanks. if And Great, then one

Mikkel Svane

Thank you.

Brad Sills

expectations ahead. new that how are – for your Connect? Yes, is one is Since go Connect if and trending offering, Sorry I newer what the more from on just may Connect. here

Marc Cabi

of customer how and Connect in is that. investment different We’re from change really like the more on much to it’s moving increasing with support more bit the interesting change world with and that the And customers cycle in It so service to leading way existing of not the a in kind get cases proactive doing we product used a the using Connect. world. sales But deeper And some like that of overnight, with is and it. involved going we different kind happen really a means get the future little but a an a is of Connect world involved stuff a Connect. is it’s very also reactive

Brad Sills

Great. Mikkel. Thanks,

Mikkel Svane

Thank you.

Operator

next Your Craig-Hallum. Jeff Van from with Rhee question comes

line open. Your is

Jeff Van Rhee

for then some, customers Thanks say, on, I and similarly taking in Great. quantification at bounce here new And question. QX any you follow-up. my look to any guess, as bundle? to And questions. FutureSimple, Back some share A other you percent at with QX, can implied the the to one bundling, you business shots taking one respect give I have are there around the couple can quantification that is? of revenue for what put some that underlying for

Marc Cabi

Yes.

me start first. with SimpleFuture let the So

million SimpleFuture QX, QX, total. And in somewhere contribution the revenue $X So no million. $X for from less but than more in was million, it between will than $X be

Jeff Van Rhee

on the bundling, can And Okay. you share? qualification any

Marc Cabi

under more offering. hood. really from across that, the products customer work reporting did These bundling across been those Zendesk, going elevating also the of products is capabilities do the data created around that the a common the to work they’re when suite It’s the board just positive Remember well of And now we together. much the we platform, lot perspective. a

well just so not think, We’ve that that’s And leading putting we around to lot seen is to really, done products far. we’re hood four haven’t and additional what under at make adoption these the I suite. it’s the the a So success it selling together. together products work

Mikkel Svane

point. Yes, good

Jeff Van Rhee

a it. of XXX-plus look look you it And XXXX? seats/enterprise, on How as guess, percent coming does there. What services What go does I a lastly, Okay, from wanted to then, we about thinking I progress revenues? that nice mix the are professional services professional just into second. got – touch Obviously, deal just enterprise the like? organization like as

Elena Gomez

Yes.

So talked you lot. on about definitely something we hit a

up we’re moving market, services us more definitely of we’re customers our seeing professional into As pull engagement.

definitely traction. So seeing upward we’re

building investing that We’re out and function.

that roughly so X% time or but And of to percentage we customers key want X%, professional engagement obviously service from implementation And professional revenue a related because we move upfront the we it’s upfront. that haven’t our services, up, onboarding successfully. and will than is customers to disclosed high successful a know to we and believe our less benefit want adoption over we

definitely from see on we it. customers So general some our traction

Jeff Van Rhee

Thank Okay. you.

Operator

next question Bracelin KeyBanc. with Brent comes Your from

Your open. line is

Brent Bracelin

time. crossed if you just market seat Thank over, were metric start at X.X I you. in ago, think, XX% support for Two the I I move-up could. of the compares, out with revenue That XX%. think, first to enterprise, years One questions, this XXX-plus to the

But about large kind So enterprise. I this in did shift here new progressive. with know of ambitions talk it’s happening, mix big you

And winning So you the in that, why that reason competitive there? one you walk think do why versus of set solution us enterprises? number there certainly through success what’s the are the larger you’re the existing exists having kind today

Marc Cabi

all we’re answer question. want Elena, to you start? Well, to fighting that

Mikkel Svane

Well, quickly. thing customer one complexity these really the them the choices and drove the I just that results quickly. Like Zendesk taking for making get think the lot and and of just a like of – when and years getting ago, taking us started so making out service, – was of I – key like the taking software, of like out complexity just the use I a really, things helping running ease up like many, think of that many think

the and customers up I think things. seek we’re changing customization enterprise the trend to these motion with time traditional new that day. more and over enterprises market, and more the where on of seek initially, a years is full a that is customers things all complexity, the are we’ve and agility, hit different to seen to the to ground running like are and single seek the million the seeing five, opposite, focused expectations keeping last the to because running is XX But have and the customers, are and over customers configure kind every like

of of it. Then, tools another execution Zendesk success. them to talks that and quicker. because a I So they execution, where I are our with gives enterprises, trend of big generation in customer for part that the a good is represents think And a of a big results execution, technology course, enterprises, easier, Zendesk faster lot to demands, keep Zendesk the just adopt up think, new of example

Brent Bracelin

Got it.

little you’ve is, certainly So conversations talking economy I sometime. service into customer me interest the macro, for question a in the guess, sort second and philosophical that for change we’re does execution, you far as how about the but that to get guess, simplicity, a of ease you to I ease quite which if higher higher point? October? engagement use, does a category? been seeing customer question, around some that combination of investors a from little of bit any sensitive in question that is so category How of use, tariffs, rates. my Are about more relative which parlays around the narrative play is economically of at think starting slow

Mikkel Svane

out that Well, up like up many I in is advantages think our that launched with. the to product solutions it’s running cheap surprise to Francisco – is in one the Zendesk in things of one there traditional of XXXX. years were Zendesk to ease part that? we compared XXXX. is please. us down – agility, ridiculously And set so have think Does Those product, appreciate is And to made I and San We that are kept set that I of the that the up think shop we’re resilient the use, dial you turn as the it, throughout it that blind customers of macroeconomic can means that N, but that elasticity the the you we that thrive and of trends. through we not. times, relatively and interesting different And that. get us

we future. feel set that in the We’re also for are business things But the well for up we market. prepares a that happening

Brent Bracelin

you. Thank

Operator

comes question with next Hynes Canaccord. Your David from

Your line is open.

David Hynes

guys. thanks, Hey,

question, there from. is guys CRM clearly why essentially which but vendors out I ask partnership, of a choose lot had a high-level know you So a are preceding to Base? I to there want Mikkel,

for right them and the So what team Zendesk? that about product was it Base made

Mikkel Svane

team for actually we customer want It like finding we things requesting actually feels is product, adoption whole is of It’s fundamental every dynamic we a sales that be think is and has know just this like kind around a of team has them a we product. differentiator, very single to from products. And pleasure magic starts that that. process. how that a great customer has Again, the work people course, think of that how different we we has go – sales our where helpful for the from but quickly product. there’s, product early think our competitive And very through alignment dynamic customer of to your makes and checklist for them. I synchronous base those that is something like Base to a that use solves, things been to that That sign things there to that, like this our raving of when just of team go that requesting moment are And experience. it’s start customer is kind that a it’s the the incredibly the huge But that own about on like use up, a one – competitive is super said – been then ridiculously very, set great focused product. the This this easy a huge and that a their know with. customers

So sets within organization. we believe within the of tremendously kind product of up that adoption up-sell seamless that for the adoption organization great our organic sales our and great

and key the of in So I would that I forward product one product. that’s team look the say, things that

David Hynes

momentum And direct one’s helpful. side, the carrying seeing the versus other? difference more between early there? suite on you’re what than then self-serve Yes, the any that’s Curious of business the if

Mikkel Svane

conversation say peg work tool. a our they seamlessly too it’s and That go to shopping the things It’s customers sales it way experience suite the and have through to have time, their these at that, tool powerful trial But that for to a great the out we have. to together. just our through early people – their cart, fantastic super same like could be would sales on

different motions. it’s been across think sales strong our equally So I working

David Hynes

Yes, perfect.

guys. thanks, Okay,

Mikkel Svane

Thank you.

Operator

Pat Securities. question next JMP with Your from comes Walravens

Your open. line is

Patrick Walravens

much And a Thank Hey, you Mikkel, Oh, do you of these for days? how do great. you. how challenge it? is retention

Mikkel Svane

Retention customers? of us. not Marc So is leaving

Patrick Walravens

All of them for you.

Marc Cabi

think have what regular any them… these kind we’ve I and like of different, – we like, don’t would call do surveys we I think we seen do of

Mikkel Svane

Self-survey.

Marc Cabi

to …surveys appreciates internally. like we transparent feel information, the we to how we lot And we of process and where there I having. people staff have the we’re implement think improve a do time, like and that improvements same that. made I we’re this our At that initiatives fun, be very is think about

things, involved and We’re and bunch engaged to interesting of going to many a working more customers that getting event. – made looking forward stuff we’re like employees the customers. been our that’s very on things of and more be more had are much all so going are to with, with or we’re more involved And getting great

very and very of X,XXX with time exciting. of though still a kind kind to I appetite how of far kind – it’s it’s a the of a working this. we’ve be employees, at see want think Zendesk, big that even have now very think, we’re we It’s I because people and can interesting company just to at beginning opportunity, drive

fun a think have now. time I So people right

Elena Gomez

I add, would Pat. just

We too. a distributed have workforce,

where talent will, fortunate have we if lot tech some we’re position of Francisco-based offices a around experience, wars, globe. you and that San of workforce the in distributed a several the companies a So

that out at here dynamics balance So see any the of that we help competitive does headquarters.

Patrick Walravens

there on to Congratulations you’re other could question. still the ask if filling that related of executive looking fill? any I of sort And role. sort one roles senior Great. Are just CMO

Elena Gomez

Yes.

the looking one the are roles key Chief that We are probably for actively open two those only actually a Customer moment. CIO, the Officer. and a are That’s at

Patrick Walravens

you. great. Yes, Thank

Marc Cabi

everyone quarter in earnings today, we’re you. about All Jesse, I you to three thank call Thank February. right. months third want I on believe our joining us forward speaking look questions. in out and to to of for

Operator

This concludes call. today’s conference

now disconnect. You may

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