Zendesk (ZEN) 31 Jul 202020 Q2 Earnings call transcript

Company Profile

Participants

Marc Cabi	VP, Strategy & Head, IR
Mikkel Svane	Founder, Chairman & CEO
Elena Gomez	CFO
Kirk Materne	Evercore ISI
Jen Swanson Lowe	UBS
Drew Foster	Citi
Derrick Wood	Cowen and Company
Stan Zlotsky	Morgan Stanley
Jeff Van Rhee	Craig-Hallum Capital
Phil Winslow	Wells Fargo Securities
Samad Samana	Jefferies
Chris Merwin	Goldman Sachs
Mark Chen	JMP Securities
Ken Wong	Guggenheim Securities
Arjun Bhatia	William Blair
Tom Roderick	Stifel
Alex Zukin	RBC Capital Markets
Koji Ikeda	Oppenheimer
Brad Sills	Bank of America Merrill Lynch
DJ Hynes	Canaccord Genuity

Call transcript

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Marc Cabi

Okay. Good afternoon, everybody, and welcome to our Second Quarter 2020 Earnings Call. We're using a new technology today, so bear with us. I'm hoping we have this all set. We're pleased to report our results.

call the Mikkel, Chief Board; the and Co-Founder, Financial on of Chair and me today our are CEO Officer. Joining Elena, our interesting. in all video so should We're today, be that

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

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

and releases Those website. such financial call measures, With earnings investor release I'll earnings the find periods measures reconciliations measures, regarding comparable Mikkel. our available You and for are GAAP over for including press for financial press additional on the prior non-GAAP financial intro, periods. today's to non-GAAP that in disclosures prior turn all can shareholder letter, these in with

Mikkel Svane

much, so Marc. Thanks

this be is -- really people by are call. friends, most You also welcome spend and to earnings of we our days. course, to are a our excited this at screen Zoom, how natural. doing We're good Zoom. it's of Hi, everyone, but The

it's our world So everybody to here. invite to able great into be

We very quarter second we, through time. our uncertain pleased results of course, a managed are with as

the of region maybe during regions encouraged, mid-sized growth our in our pandemic-related customer business really the several well. actually surprising, deals. historical increased mostly saw expansions of of customers, real This of our was continue segments the confidence our business globally, and although as among our patterns. of greatest headwinds We largest and quarter who to we challenges. business below saw our Our Americas. new But not in course, we very segments the We see saw face it in slowed healthy were by we though, performed

with we year drive good growth well was SMB considering the the performed fast of COVID. Our this exceeding as expected saw customers beginning the large And as We levels. EMEA exceptionally performance time-to-value environment. before our our and deliver serve Regionally, customers quickly ability strength we customers pre-COVID believe current to with also really strength. with helped at real

our So big EMEA shout out team. to a

our and see on positive these to based normal that compared surpassing this that the trends business, churn our rates closer possibility contraction our expansion hopeful continue. We for We're are target billion XXXX of by $X will to they We hopeful bring bringing revenue levels -- and QX quarter. that. in ongoing still will our improvement reflecting

as here and we to in people winter I COVID and but Europe solid the a in expect the of wave for school navigating tremendously volatile. year, bring very in indoors. fall half have US personally worry the second remain markets about plan resumes We and second a both

too still and competitive position. continue with business only strong we the our foggy in a continue give in run XX-days we to discipline challenges, Despite extreme with guidance. are And climate, the we this So outlook prudence. to with

invest to and a stay their current critical now touch makes The more to digital-first in with the our need We to continue adapt environment for long-term. world businesses ever only the customers organizations for more than as before. need solutions

going company. I the And spent many member the and MongoDB. Agrawal. Chief nearly member, Airtable, a who over our our from the board Atlassian. call very very, with industry Marketing is to through Officer us Before years Elena, two at currently turn Previously, has she's the software for she a welcome newest also also wanted sexy board friends spent in will financials, I decades to Archana take to Archana

our excited we're it. very what So to see to can very, board about on having she and bring Archana

going So welcome, And over turn that, to I'm Elena. with to Archana.

Elena Gomez

I my muscle figure Mikkel. Zoom got to here. Thanks, out

As we work all our is COVID-XX customers, the and and changing way live know, partners employees, together. communities

environment continue ahead. We a to see dynamic

confident in are the back our ability execute year. we However, to in of half to continue the

the most global to see and creates. impact and we given the it of absorbed of signs response recovery, the pandemic we with of to promising and for proceed the potential continued that continue we've shock uncertainty of While uncertainty initial COVID-XX caution, believe the economic

support quarter, During XX% the the unprecedented revenue through challenging and light environment but the was undertook with we Growth in growth. delivered we times. quarter, was of to particularly customers uncertainty the with second we them entered macro impacted our which the solid, work the by

Specifically, for more their than subscription who terms. reached financial or us customers, invoicing to relief we adjusted assisted X,XXX and out

book reflects with and our elevated impact, revenue contraction. churn XX%, primary business across customer the Our and contraction guidance over from our coming of

solutions quickly to customers While we adapt COVID saw elevated we saw environment. levels of to new the our contraction, also implement

and its wellness employees were our and support we and in customer out excited journey with and as number using announced in-store Barrett, Services of knowledge online Recently, products platform the continue comprehensive converted customer establishing this partnership to agents deep flexibility know, early that Tata solutions. a partner engagement Consultancy of industry in combine TCS, & you we and journey, our I'm building with Zendesk. We're guys a also relationships. Holland TCS' giant, to scale to our able ecosystem. health contextual instance, building For

low XX is basis as gross consequences this Gross XX.X%, natural to consider experienced COVID the of for near elevated key margin a was continued was health we couple the view margin cloud expanded year-over-year. crisis Again, gross margin dynamics uncertain. the margin quarters was conditions, expense we market basis second operating impacted was subscription the year-over-year. by by to a our the as our these low we and conditions expansion non-GAAP by market remain end and Margin the conservatism and driven average stay customer conditions, believe expansion contributor next of contraction by the RPO end driven XX.X%, management. our rate strong, expect gross up business normal XXX Non-GAAP expanded operating in XXX driven the margin in we normal at Our the economic light GAAP largely reduction points of quarter. of in optimization revenue resources. for and quarter to it X by up of business -- was points, And term we long-term band improvement healthy margin was the improvement by in prudent what percentage year. GAAP a and QX, of net in churn largely in points. percentage points

collections sales first modify customers flow lower we out During in by XX-days. lower invoiced to or an areas. terms. including environment impacted international invest first flow had quarter. which cash of product $XX negative bookings procedure impacted rate We our second key the Free the of half challenging capacity the half flow XXXX. $XX pace leadership, in our in with cash leadership, Free efforts and was of moved XXXX million to impact Free in in our subscription our their continue estimate was this dates was work this cash cash free million macro approximate to the procedures, time, in billings half on invoicing first also by and many new new flow the given

half free and ongoing benefits are our positive efforts the in management of flow as cash expense mitigation decrease expect XXXX to We generation customer be second of realized.

will collections -- bookings, full-year, experience expense at we the to be positive. free we expect our ongoing flow as dependent well efforts as and our with management. neutral This be slightly ongoing For renewals as to cash on

guidance QX let's XXXX. on for to Now move

growth We to revenues expect the midpoint. $XXX year-over-year million, at between be XX% representing $XXX million and

We XXXX million income between QX $XX be expect operating non-GAAP million. to and $XX

greater reminder financial customer our Finally, value with long-term delivering long-term focus I'll decisions that Company the for remains with the and profitability. close for optimized managing and growth a strategically on

With that, We are Marc. we to they employees and provide pass a customers sheet, back are positioned it a unprecedented these to to balance we increased the our times. will invest for navigate long-term. continue well With strong competitive position, support strong confident to I'll as

Marc Cabi

Elena. Thanks,

to turn So today. are we going Q&A to

who to going our first right. try I'm I'm do Kirk going -- for to to Materne, this has have today. We question unmute

Kirk Materne

Okay. feel and provide in sense Thanks and Marc. to back? you we to snap levels? gradual guess, off guys to know maybe about it either little are seeing. you part realize a all business moving to bit improved a pace bit rate to environment can the month? about I environment as then everyone, two macro if secondly, along bigger over if on on the Hopefully, this curious trying congrats I hear has and maybe of relates the after run see your as build But we're of just as the quick continuing on or Or little a I quarter the obviously, I'm is just all I once expectations? And deals, gauge, Thanks. are back was spring. how the cycles pipeline deal for the not, very could don't hard And I are you mark they a to May just really get the it's to color related well? a some that I can are given wants -- currents. this and maybe which through but Or much, the the relative guess, be you -- getting you mark how demand for longer items build versus But they question the I pipeline, well. comment just wondering leveling of a on kind pipeline field cross we're June me question was of know you you're one. the last seems big one,

Elena Gomez

and take anything. if in it, Marc I'll please I and Mikkel, chime miss So

things signs really pipeline through there. comes the self-service we pipe And in of of who quick throughout our couple we come by lot time-to-value, a we're seeing were channels, and saw and quickly. So encouraging closes deals want a encouraged that quarter customers, those which as very

there's more started can't continue getting quarter, in obviously, think of which bit I into I about the be So we good to as a think as cautious, quarter. but signs. quarter, some our the in Mikkel environment, more But people of of that. settled toward reflected bit our some deals, bit we're a confidence pause. guide. his think really we in in more demand we of of little -- just seeing in saw, a It that little doesn't the part But conservatism, feel more I noted script, the latter early seeing a more quarter we the Obviously, larger definitely, earnings the part the healthy as and was mean

Mikkel Svane

pipeline. the pipeline a pre-COVID Yes. there's what little more don't bit bit that. a Customers leads to pipeline more add are they Like Like little urgency. definitely to have behaving differently. little want, much are bit have is know determined, I -- post-COVID that and a

of behind also very course, be a compare. now, we market. lot a so customers to struggling, us. We will of pipeline side. -- So in think behavior, lot and -- and concern still hard the new continue business even so we I a -- don't also the right of more we we different correction that our of is though a may to It's have can activity that lot -- a the customers that see be be may uncertain But see be on struggling, biggest have

Marc Cabi

Yes.

and a are on a I those question, close good car industries, some recall to that of and if talked recovery. hospitality-related, would slower point last this quarter, sharing-related industries be those travel, is you think that seeing are impacted we about for the

should business opportunity So forward. keep our going about think context we we as in and the that

Kirk Materne

you Thank all.

Marc Cabi

next from going come is Our question Lowe. to Jen

you. me Let unmute

Jen Lowe

me? hear you Can Great.

Marc Cabi

Yes.

right video want You now.

Jen Lowe

some message. the of It's like was right terms to thing Great, and by long-term a QX, the come status impacted. how as point we Clearly, where six flow there potentially dynamics a as customers you the right billings a sort part on month it. uptick out with in even contractions then the I and into starts short-term get have message maybe the RPO much deferred do what at out what's start the there. an normal, is able those as And try a revenue? And we're been you look haven't cash I think back and is preserve forgiveness normal, come that is is touch would the to hopefully value Just value now? customer point you of new world, got starts in there doing preserve bit of a and the to and how it dealing of the but economy model? those of if about more as possible customer collections much managed coming to and might sort as even to see the wanted of still get for some -- flexibility if more -- preserve of of in payment business think But and I the we to

Elena Gomez

Jen. Yes,

I right. concession, you extent in the some giving the the principle extending the our do cases, can we preserve and And you're was, think if total contract of right term guiding mean, to In meant meant some short-term I will. by obviously, value. customer that it them a contract. cases, So

the is little small more contraction, we'll so collection of some small very already COVID, bit but out amount, going this And that of seen come say of not should that a sustainable, to already of a see, come of very sort some completely And hopefully, contracted, I'm that a whenever is. we've patterns. back. we so Obviously, customers normalized amount have

we're definitely consider to So something trend bank of again, on, forecast. we going a our but that's long-term kind not that in it's

Jen Lowe

Great. That's you. fine. Thank

Marc Cabi

Jen. Thanks,

one Drew at from Citi, is question hold Foster here, next Our on Drew. second

Drew Foster

Great. Can you guys hear me?

Marc Cabi

you we fine. Yes, hear can

Drew Foster

for the taking questions. Thanks awesome. Okay,

to your for an wanted you quarter you that ask was aggressively I terms marketing So hires, as you've and investments. ramped headcount just those the about and you're been investments think transparent the sales large investments QX making. very And But around relative last year. about in your especially of to at pipeline in you that your place, what months now it have or XX hiring Or in put in when sort people overshot that will demand are volume near-term? you've ago those were you six versus might confidence those been worried right gives plans least be the all of productive? what at

Elena Gomez

about that actually. all, I'm not at worried

for And on. a I think position some the when key coming seeing, are have us, ready is growth and customers right, wouldn't comes so they Zendesk new to that back. come we to because have to be in in cases, need

receive come term I business. we that think and does back. I so also want to enough to able quota business And to think demand, street on capture want be but don't to want short-term to that only the longer when really have that for

about So that overshot I'm at thinking sales and term I've marketing obviously, longer but we're hires not hires being worried and our in thoughtful is important, my and all. surgical

Marc Cabi

All right.

is from question next Derrick Our Wood.

Derrick Wood

customers you made and for continue enterprise see and do position this so larger I move mode. faster, I And to business different more you Nice cost at your Zoom want big that as large impressive competitors. and beginning seeing they in mean an like that guys. value you innovation I if was to want remark be guys. Great. traditional something would to Mikkel, a you expected at mentioned a to that And in release I feat. versus suspect, relative the that's market. with efficiencies, your that's levels, and compelling press prop more lead know pre-COVID I look the to wondering customer in just in I'm you're your environment, you

that enterprise So opportunities business, I'm positioning? improve you away of to win curious, take should as comment? you your what from rates, increase look we at seeing your Or are kind

Mikkel Svane

see see of as this like, bit many their to it's that enterprise is orientation software level, up and our there this a things this of and stay think approach customers calls, customer -- you the going a they incredibly And for how of, previous earnings high they and agility like on IT And Well, digital to addressed long-lasting doing I the think crisp the in result shifting And as market. have a up the kind to customers changing -- very a focus, is a that about is effect very to Businesses fixing manually. point with and to them so engagement. with about, think think you lot of this we now. software manual are we I on lot landscape keep in, compensate at think keep to a this what investments. -- a your processes have it are can't very, with for like your and important kind little

So are as empowering this ruthlessly transparent, where customers. most of important very, And here Like that our of kind what it's expect we businesses. front to your volatile very we computer environment. are because is today stay think of effect in is business in business software, terms customer software in software, kind in amplified, general. service think on this not where is how we this customer about is of I -- just more are customer it responsive hurting have that they with long-lasting you the going just is are seeing general, software the and their customers tremendously, close the have businesses businesses It to be in to dealing we think, to but because sit in and -- not software like

will enterprise long this software So business very, I time. impact for market a that very the is trend think a we see bigger

Derrick Wood

you. Thank

Marc Cabi

camera, thanks for Derrick. putting And on the

Derrick Wood

you. to same Yes,

Elena Gomez

Marc. mute, on are You

Marc Cabi

and are let's Okay. you you up, mute I'm mute. you're on, if for all are are on Stan, right, see. Stan you looking Stan so on

Stan Zlotsky

right. There go, we all

Marc Cabi

you you us. and show can you There go like the video if to join would

Stan Zlotsky

video. can the you so much [Technical got taking my for background. Difficulty] we We Thank questions. Sure, Morgan Stanley

So of products, a seeing at -- experiment suite Sell well starting with year? to more as Zendesk have far have a traction as right? follow-up. with very Sunshine, potentially I maybe customers associated far from and been at this -- the looking on level What the guys you thus then a quick as that high the And as

Mikkel Svane

choose the options becoming stay the want to definitely is with for customer want customers. don't kind channels. suite our to -- Like Like they de they of to facto product Yes. customers, up our current

of suite the demand, see massive So course.

Our Sunshine part platform, happening it, high of that. bit. think customer little a very we Sell demand. put in engagement lot powering of especially the I of Conversations of Sunshine the communications, messaging world and There's And right now, a very, we lot are a

easy are much how We our But for it big simply that course, center things and now simple plans for that future. put kind to and customers. Makes of we deprioritizing right in sense? too we have of keep front the

Stan Zlotsky

Yes. And what Sunshine? about

Mikkel Svane

Sunshine Yes, to closer applications moving our and kind enabling for in and SunCo core Sunshine services, messaging new we're our of especially Conversations part, product Conversations, the new products.

So that's it platform. wanting more customers extending of now. seeing we're are becomes what a evolution the natural right And

Stan Zlotsky

question impact RPO? Was that And perhaps if all moving just at materially as on impacted very contracts from concessions to and a of customers to there maybe a month-to-month more part any it. from Got annual RPO of their meaningful tactical RPO.

Elena Gomez

both. little was say it. Stan, in of it bit we've that other up. some the got was It brought cases, No, In cases, RPO wouldn't In Yes. some impact. what changes a drove extended RPO it short-term I material

RPO. change nothing driving -- was material that concessions are but that no So there in

Stan Zlotsky

Got you it. All Thank much, guys. right. so

Elena Gomez

Sure.

Marc Cabi

Stan. Thanks,

question from Rhee. Lee next our see, Van Jeffrey Let's is

around my You here. window guys mute. on are are scattered Jeff, you all

Jeff Van Rhee

is How that? Yes.

Marc Cabi

you're the twice on other -- why muting you are the one. on I'm That's you here. There in

Jeff Van Rhee

up here. appreciate Doubling I it.

Marc Cabi

you. Thank

Jeff Van Rhee

on Thanks, you to I'll video there, jump for too.

questions. So A the thanks just, guess I for for me, taking couple guess, two. I

pivot. you've the of in quite the know last sales six in Just a terms leadership, I made months,

What made some a in you you the the where achieve? last us tell leadership in just a to You you of was goals there geographies. Can really lot you've were you the letter What shareholder of are? commented revisit in senior And trying added are with you've lot kind and that ultimately it were in migration? where And pivot? that year. changes that of

Elena Gomez

miss start, in I'll and sure. Yes, Mikkel, if chime anything. I

make in with only regions. leadership start that One, sales So the in I it and one hired our something one announce leadership. there's with a to is leaders. leaders, think felt are And And they've getting both in that to We're a see we've soon, early the investment APAC intentional And we really things. for I the for regions, EMEA, where time. In for making days scale believe of similar sure that we we still in we in in important two the it already idea encouraged think so of regions, looking our able hire we EMEA. already, those to of hopefully at the but a we're really, in couple in opportunity, is us a leadership an our did what the we been And by on short and we we be -- starts will need We regions. of We're have COO. there. also that amplify APAC. board and we're lot to right opportunity

to So very hopefully, and questions the have contributions. by But they're say. encouraged more asking their some we'll already of

Jeff Van Rhee

kind If one of Great. sneak there. in Got it. second quick I one could

what What the pipe measure watching. dashboard other your a Just success? some you're Certainly, the program. influence know been numbers. just does and terms robust in your like I really there partners, you in terms talk on more there are you've watching are But about of enable you partner to to of and look what where partner pushing hard

Elena Gomez

Yes, sure.

to started earnest our building in we So leader with partner in of a hired more the kind XXXX. programs part we latter in And remind out XXXX. everyone, of just that,

etc. GSIs, really market ecosystem, would with BPOs, I we're, that. And we've providers, XX-months program and in. routes our to solution broaden So goal enable was And that's multiple whether done say, technology the our to

just encouraged, QX, with BPOs. We I'm repeat quarter, we have. won't have in opportunity and example, the five this and I but every an large to this speaks And as very contracts

five have over We million. partner contracts wins $X with

of -- it to focus, speaks but deliver bit effort of been it's with to that we've just kind early, on just little that. So and able

to the that And just partners on and in of that speaks of they'll business also frankly, attention by to it what pipe watching, pipe incremental So partners bring us ahead. terms to and we're that number the quality rates, etc, paying close seeing the of opportunity watching the generated and it's the and pipe.

Jeff Van Rhee

Good. Thank you.

Marc Cabi

Thanks, Jeff. We're going to Phil Winslow next.

Phil Winslow

for of of Great. Is market, businesses, Is Mikkel, some if something out And my taking small sort you doing? on that that the businesses, of strength Or at you improvement strength that for seats the enterprises, there? driven particularly at Thanks, what's the it us, of products then guys is Explore the by end question. you're strength what's is that's there a could as one there? was but the of large it like impacting large called the Conversations? small that enterprise. higher-level that sort things Wonder driving unpack trend the low barbell with the Or similarly, well, more attach and volume? small business? also

Mikkel Svane

stable, and especially customers, less, like, little in So more for with They levels. expansion I you acquire accordance them and will. we've products, contraction usage more like if their be be rates how predictable are more are in seen them seen use they the a and think we've larger historical

kind on think little conditions change, lower trying exactly hard new deal a their seen and to it think quickly online businesses it's see finger of mid-sized And quickly said, a it's quickly we've like to like as we I kind the bit different more businesses think out most then, there's to of businesses like, reconfigure things data struggling world. that the I that. lot have because much -- activity that do that, on just contractions. overall, you to end. -- I And is flurry a any think where with on to of the points be know, the and figure I put driving -- of Elena, for of here? how seen like other many the I businesses do be enterprises the the could kind to how adapt large a I of activity larger largest a interesting could customers

Elena Gomez

to or... contraction, I it, covered With you respect think

Mikkel Svane

the more Thinking more than of are part rest. why a perspective our of is kind -- from larger why of customers like business our that predictable

Elena Gomez

meaning I -- business the I enterprise are sorry. business, mean asking think missed sorry, is -- My enterprise predictable? you the Yes. it's bad. more I if that,

Mikkel Svane

This a What are way you three Phil? great it, in you Sorry. are still is conversation. --

Elena Gomez

I I got question just right. sure want make to the

Mikkel Svane

Phil now. muted We

Phil Winslow

was The Yes, driving know. strength yes, unmuted. wondering back barbell enterprise. -- yes. I'm the I large what's so I the that of on

You learn, you about try to talked buy have small, in-product upsells.

end something drove like some you low segment it did the So seems the on that of of -- that that.

On covered the high end, you also -- Explore. you Conversations, have

described usual usual? sort the sort business -- of sort business as Is of as upsell more on upsell stuff more it or high I of or the wondering is -- was what Mikkel seats? So end, a it

Elena Gomez

has even in as No. COVID. well, typically more expansion the is it. be it more what to what Typically, cases, obviously products drives continues through pattern that In some business with growth leads it kind adding of but it's been

So...

Marc Cabi

like external. I went that use saw companies, internally think us with our built they some were that remote might using a might employee cases be There some of we have base. internal work-from-home to like, larger support, companies

So our a and to different doing flexible customers with lot quick because larger are of there are implement. it's the product, Zendesk things that

quickly. what that large to kind offers take help company are that were And And and them fast. say them lot a actually on of end us. where there's seven remote-capable the they of those factors to would I doing of companies a had become in examples, and So again, the option Zendesk letter, shareholder

So that's been I think helpful.

Phil Winslow

right. Great. Thank you. All

Marc Cabi

Yes. Thank you.

up Samad. is Next

here, Let's Samad. All Where Samad right. my, there, on find you you is got are.

Samad Samana

a EMEA haircut see levels. was questions. that on sales just what's and shareholder positive between pretty about in. and going question, taking wanted Housekeeping we same than two Thanks again there trended EMEA larger everybody. comment the maybe XQ, to that's in see Or in the that my up? maybe squeeze for to being glad I ask over to the better Mikkel, you think about thanks. smaller right, better that? can I letter through customers All what's just how Good I COVID. your customers of I'm playing how curious pre-COVID maybe Elena, catch have mean comment. the driving net quarter. I expansion do if -- get a sense about to

Elena Gomez

there leader helped. in we EMEA, I on I think general, new that, there. think, So just obviously, that has we've a rigor had have operational

in always -- they're also, having -- all there different place. new around very that leadership, COVID think, we're strong the underneath and as the just there's if experiencing down having actually even fort, you leader bench leader have that differently. a we in, did our world, a But definitely that new leadership we're I Every will, the holding emerge. leader though been underneath not even

I that's been think positive. So

In And of customers, a the of question COVID-related needs. I between and expansion saw terms the your really difference of earlier, think that say, segments segments, little were lot about who the rate, had pipeline it I quickly these I of bit in talked net in -- a quickly. close lot quarter, really on smaller during would a the we come

isn't We also is cautious more time-to-value with end naturally use of But COVID-related that segments conservatism high bit in I would there are some we like just seeing some quarter a the than as wildly because that on other cases. just end, are in I I is there's moving the of would well. in obviously everyone the urgency see did terms that we're through think say anything being. say these higher the people different

we'll comes And back. that when see so

Marc Cabi

analysts you that left to nine reminded being I'm go. And have

So a question. your bit for I'm going try kind Thank little here. tighten up Samad, to you, the of to call

see Next my up is are on Chris you screen continually. Merwin, My let's Chris, screen you where here. around us? can hear moves

Chris Merwin

see Yes. Thanks question. in so guys. I Good person. taking much can the hear you, for all to

business billings the me been Just through the three when quarter. mix. looks you what that's at that said like I for enterprise a question further fairly model first what as flow steady row would the on Is see we're on terms the enterprise mean in maybe XX%. in all wondering percentage revenue some going mix. or about heard it be seeing? boosting to that you're So more obviously, for But is in of that quarters strength in in like of so It now the that a RPO?

Marc Cabi

So a mix metric. that's

And balances wins so that low of around the some and that commentary the at the movement quick that with companies, smaller we're end with getting number. SMB of

what we that in So forward. quarter. points return saying. to here doing continue to right. the I would as We're strong X of our last return business was opportunities, gradually moving we small over will expect with expect I the normal more normalcy move the would still kind be times. to time, year were up but a that extremely in trajectory well to That's at as that we extremely large X All

Pat Next up is Walravens, saw I earlier. here

Mark Chen

Pat. Hi, taking Mark Thank for for you on so much is this questions. my

months. on Thank I in pandemic? past you I update the you. the if So if the couple by changed of dynamic just and to competitive of in is see terms just want to the that have any dynamics ask want

Marc Cabi

to too consistent any in competitive changes of big us has good -- can't working the fairly think our this remained element many dynamics the this a period. today. have I time-to-value the we quickly. I some haven't large move competitors have throughout industry as across competitors way are competitive If for think relative But that I anything, been seen

Mikkel Svane

that's I relevant, don't think there's anything no.

Marc Cabi

right. All

coming Wong. next Ken you Ken? question Where Our is from are

Ken Wong

guys. question my taking for thanks Perfect,

sort in of is Phil's this the barbell filling So of question.

there So experiencing softness? sense from of you the revenue side. any what particular headwinds of of expansion customers, area as that out root us the Can cause And of the think the your might kind rough some be help about customers? contribution you guys about mid-sized on we talked mid-sized

Mikkel Svane

I want of just points have now. of some like everything because data volatile we a lot is so course, it right -- but is conflicting data,

a it's I -- point now it's like, where think most, we're So at theories. right

of, of like things, lot We good activity And have I for the see a do big large with and like, example, smaller we see Like, to of where maybe have organizations. organizations, to like, where have a instances pull see some that's let's new little back a segment theories larger just think really things we -- our and it's base. OK, where there's also try We new because money. then they to there. mid-market, why, businesses -- kind businesses segment a can customer have bit. save most lot that mean the of -- some I a

Let's slow down little a bit.

like, the also there's would to noise. too pattern in said like, from different new the a all it. say, is lot these things. lot we like, about have I the activities doing the And we about opening try there of quarter exactly different of, businesses worry like being market, right extending see hope our That's of other. our just think a Whereas -- kind it is things businesses feel plug also confident of on worried we that a as that market to going a because is to through but than and of it's in in we how in a trends I understandable. So the But, pulling these the very flurry see day that. lot see more like, one in points. are -- confidence, that's in predictability And my about I I script, the maybe SMB now mid-market, just, the volatility. things, very a I -- OK, what's characterize like, that, I the there's of confidence are actually

Ken Wong

that of of fair and of Yes. sense kind small softness, kind versus your any like That's your the of, what And mid-market I exposure percent large? in rough guess, the terms is enough.

Marc Cabi

back industry to go the categories. rather characterizing would I

revenue our that have travel, around focused hospitality. recurring of is on XX% We that

companies those midsized companies of actually. Some are

a of for kind within just stay rather would on that I viewpoint you framework So that. from

seen XX%. So companies business XX%, lot their travel-related by a cut of have

are those but travel that So example. the will today, returns, for type of making companies investments aren't as

Ken Wong

Thanks, guys. it. Got

Marc Cabi

Thank you.

is unmute. should Arjun, if up we Next

Arjun Bhatia

Hey, for guys. questions. my taking Thanks

discussion noticed in and one asynchronous the for messaging. was there Smooch lot letter, about shareholder a of I Just me.

that industry about plan maybe an where drive environment from you you're talk product if adoption target the there. perspective, can to curious demand that Just traction to you're seeing you and there or where, getting quarter this

Mikkel Svane

Yes.

we demand very all all it's across and in different -- sitting are it's amplified very, our businesses homes, That's of and communicating also are like, by all through And all in our broad. a sitting definitely and, and segments. see or messaging. definitely these sectors it's with really, vendors services thinking. now wherever kitchens So think that. lot influencing I We're people how We

I the has for access a continues been be a to while, focus for So Like platform. we're it demand here the to these our for of lot while, a things. seeing to think and SunCo democratize

So customers with really your making for it type to crisp super organization of simple way. that any of, and kind start, engaging

everybody has that then people times. like, for for we when like, angry a and went And to we I phase, COVID weapon five choice the of up set phone think And were businesses, minutes, a I of about hotline, think lot to wait no, works a first first of like, number, weapon of oh, think like, about, gets this into the X-XXX. the a messaging. need be, lot choice

world. world democratizing kind on customer of we're really customer your really So and your engagement whole focusing service in messaging

see So you're a us that. from lot going more around to

Marc Cabi

Arjun. Thanks, right. All

from Tom comes question next Roderick. Our

Tom Roderick

Hey.

Marc Cabi

Tom. Hi,

Tom Roderick

question. to Thanks, the a chance appreciate Marc, ask

in couple a newsletter on of product. the Explore the So call to the references and

it product. their more it's customers some really across on Explore of $XX, lot discussion a bundle, typically into just end-to-end out Explore that Would pushed professional of is at being as that the purchased hear the some of attractive see the reporting. your Is $X talk So it how sort organization? around a Maybe a consumed seems there month, are part of love how and traction like part suite, how analytics consuming and the to nice Even broader and typical of and to cases being use customers a from add-on? lot point. being at widely price demand, that take level

Mikkel Svane

Yes.

So not there's need here. definitely what's with the Like need it's to understand anything, operations bundled some and, on better -- actually opportunity currently first my to customers, going they but there. like, I just is like always

all an easy all like my it's the data, like, that and and oh, is my for just them It's Explore years, over instantaneous. is it's over opener. affordable the has pre-populated So it's build it's how we eye practices and, like just best God, up things It -- magic. like,

But still lot a So still we've feel productization of we do sets in I a got we've more foreign opportunity, so with a that real-time, on. that. more. many lot got monetization there's more do with to do think and in Explore. data go of both easier to We've as for I of lot to for and And ways, characterize demand with job across make like, strong but, our our And we the -- better lot a and customers definitely would a market, just I customers experience power. just a the it do it could could lot to a very

Tom Roderick

on you tighter through the when say do better Just integration of that? you product, Mikkel, can

Mikkel Svane

more just, feel they about it's make of it see think I just it. and like, sure the discovery, just power

Tom Roderick

Thank much. you very Wonderful. That's great.

Marc Cabi

go next. Zukin We Tom. to Thanks, Alex

Alex Zukin

my thanks guys, taking question. Hey for

So a maybe quick just financial questions. few

on way in -- billings. about And just what to First, us volatility for give just impact quarter, on this next the it invoicing the calculated was calculated a that? for duration? think then Elena, billings from given quarter

Elena Gomez

we can mean, billings timing it thing. on I a don't because think -- we it's don't focus, it's lot a just know, -- Yes. as you

So to our the the answer had $XX in on roughly the change a that of question your invoicing, first in around year, impact the invoicing, half million. first

So that impact. that's

I letter. the think my also that in was it earnings script the was in -- in and shareholder

of also In a would has in timing more embedded RPO of there in to etc. our proxy monthly, a terms to lot monthly customers larger have you bunch and billings, pay evaluate for as And of billings I billings, business as pivot it, a than thinking know. better that about -- customers we you because

So a metric of that's at. not good for us as to look

Alex Zukin

of I down just of of that staying year-over-year. go new current that level. expansion sequentially dollar-based customer implies substantially, the net would kind you'd with that, substantially. It they kind Between at kind that for the then anything Okay. call DSOs, at expanded I quarter X revenue next the out X.X and the guess maybe appear look pretty to guidance both and of They look is like also representation there? I more. And XXX% between if

what the So in commentary -- just be the would strength, help for new the case the QX? customer given around me why understand script was that

Elena Gomez

as couple think we a had you we know. Well, One elevated also and I things. of churn there's -- Yes. contraction, is

our contraction by the of talked some we that It's fact -- offset of and churn that So embedded that contraction we numbers, despite in some deal new that more by see flow. about.

own of an So you think but in, without buying customers may that, which encouraged We it see lot that's on agent, a encouraging. not that. by their A we're was self-service sign. healthy it, that's coming so

not first you I'm the seeing trends Your question on are. was same DSOs.

on. can we really you off-line, if ping you look, follow-up to like want that's maybe that's after something So me steady. But, take think feel that

Okay?

Alex Zukin

Will do.

Elena Gomez

Okay.

Marc Cabi

Thanks, Alex.

is up Koji. Next

Koji Ikeda

Can hear you me, guys OK?

Marc Cabi

you. can We hear

Koji Ikeda

right. All

my is video like off Sounds a little bit.

you over so Hey, that. frame million. the about thank wins, five can scale what the big helps channel, Sorry the partner to. $X channel partner the disclosure on for That us really partner the

that that it So drive it the of really and And if was launch in those any of deals, those Sunshine was involved? events was of deals, part deal? helped profiles

Elena Gomez

But we're platform you, days. not still say Sunshine our early of encouraged that, I and just by definitely is it's Definitely, but a part like it. would definitely it's But Sunshine. it,

tight, super the BPO the and partnerships but starting GSI to we're hang just build so in we're well. world encouraged as world And by

Koji Ikeda

the into year the became remind us FedRAMP Thanks, should quarter, that FedRAMP how questions. the you authorized Zendesk be And government that. there And for spending sponsor program? about just congratulations Okay. coming Could quick Elena. the vertical? And the saw you the so then what also in who on your the in about Thank one thinking government we're letter contributions opportunity follow-up. was is I thinking shareholder taking the near-term fiscal end longer-term we in for for cycle, any really, now there?

Elena Gomez

FedRAMP, have pursued. I don't I on so obviously, think, the -- opportunity we wouldn't So of terms in

guys you know, to As there's FedRAMP-certified. lengthy process a get

opportunity. think we was didn't obviously, have there it So an we wouldn't pursued if

Yes. Marc as sponsor, Mikkel, As or do you our far guys?

Marc Cabi

being the Fed and state So they on were get have also don't pre of we've say that I us FedRAMP, path. actually. if had I ones couple a that couple disclose we a with were They business. we helped that FedRAMP-compliant would can -- also relationships. us them know helps

vendor. look at states a valuable actually that in selecting Some component as a

excited We're We pretty development very situation. a very works. international we're about it. so our had And in unique

some there become us for hurdles were FedRAMP-ready. required to So

really we're there proud fact we're of the So now. that

additional And Koji, a good open it your us. journey for we it's an us for questions. does forward.Thanks, for as up TAM go So been

Next up you are. Hey, is Brad.

Brad Sills

there industries then guys Hey being there can new saw guys, where industries anything if early pandemic you Zendesk? that of in is Maybe up? think color Were picking industries scenarios where you actually more on a back thanks a you for taking some any last that there's noticed, on some catalyst the quarter, seeing disruption any that I this question. maybe provide, my for there. certain a more actually now? were are catalyst. or quarter all where Thank you this some either trends just recovery And this signs some that industries, dislocation, Any harder-hit those give creating -- color you. little you're happening are In of

Mikkel Svane

I honestly. on try talk what's to think extrapolate of now, trends right really dangerous going and to about it's out

we entered it's as I think a like enter think, have -- that phase such very I almost a And it's as wall. you still like volatile. such

we a doesn't there's I a that. of shock are mean correction beyond think we're that And know, kind out But of initial You and that that happens. the wall.

it ambulance means And trends forward. like, we've used think get new we is that chase each trend, a this that first. where, I to everybody shift like, early the that lot huge of far a a to is so there's And it's about, acceleration online about world to seen fact -- will this with engage And we're think other I has huge too going of of that. digital And that a going talking course, I in happening, But, what and -- like, to there, is a how course, is of more wouldn't are, course. but that.

we're going a I think that's of headline sense? what Makes just through. bigger

Brad Sills

see Good Mikkel. guys. Thanks, Understood, yes. you to

Marc Cabi

DJ. last Brad. question Thanks, And from comes our

DJ Hynes

lottery, I I either. won but Okay. Awesome. lost the ever one don't I think ever don't think I've

not but last So least.

messaging monetizing ask wanted how you to in about suite. I support So about think core do the

getting of lot You which into about it, sense. right, and ton makes of democratizing folks' product a talked a hands,

raise of I think then year, environment. sense which was of the forewent this we'll given prices. obviously, strategy And that strategy part makes you the kind

forward, we you getting the thinking that go value Just you're product how capture for folks' incremental as into all do strategically hands?

Mikkel Svane

focusing are And think we I that's think that, I a what like, lot of much we -- what we getting have into hands done. businesses. historically more it on more the that's

manage things of On make market, how ultra-simple, like expanded have a and in like, these lot we really have with, for Just it. we everything engagements, messaging. where kind just online, gaming, like we Facebook we page, on did the your can like for have the by address are your can for ultra-easy all email, like earlier market. have all such sites, all we it We can here with marketplace businesses it how really to these can use things YouTube you it to manage that that, who a they did that like, with the that product. you you going a that sophisticated things, -- making you of -- Suddenly, top That's so customer doing that's certainly comments did really, they expand how for you relationship. did the foundation want review of are what things. we And

to pricing whole for all to things. many together. Makes in services have ton these opportunity And platform our of They They sense? And have of they like like, like, opportunities customers. through need a there's that. sell. a parties or, -- the things capability they they different have that's so conversation payment, kind and, sophisticated So do different a that's products to bring need

DJ Hynes

Yes, yes.

Okay, color. thanks for the

Marc Cabi

thank on, quarter forward available available all joining questions shortly. a look our for us quarter. to of as you be and here replay take healthy earnings be call. to on I will Again, will There we we safe. this And and DJ. for Stay website second Thanks, you to our carry speak next

Elena Gomez

Goodbye.

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