Zendesk Announces First Quarter 2019 Results

April 30, 2019

Highlights

• First quarter revenue increased 40% year over year to $181.5 million

• First quarter GAAP operating loss of $43.9 million and non-GAAP operating income of $0.6 million

• Michael Curtis, former Airbnb, Inc. vice president of engineering, joins board of directors

SAN FRANCISCO – April 30, 2019 – Zendesk, Inc. (NYSE: ZEN) today reported financial results for the fiscal quarter ended March 31, 2019, and released a Shareholder Letter on its investor relations website at https://investor.zendesk.com.

Results for the First Quarter 2019

Revenue was $181.5 million for the quarter ended March 31, 2019, an increase of 40% over the prior year period. GAAP net loss for the quarter ended March 31, 2019 was $44.7 million, and GAAP net loss per share (basic and diluted) was $0.41. Non-GAAP net income was $5.1 million, and non-GAAP net income per share (basic) was $0.05, and non-GAAP net income per share (diluted) was $0.04. Non-GAAP net income excludes approximately $40.6 million in share-based compensation and related expenses (including $3.5 million of employer tax related to employee stock transactions and $0.4 million of amortization of share-based compensation capitalized in internal-use software), $6.2 million of amortization of debt discount and issuance costs, $2.2 million of amortization of purchased intangibles, $1.7 million of acquisition-related expenses, and non-GAAP income tax effects of $0.9 million. GAAP net loss per share for the quarter ended March 31, 2019 was based on 108.6 million weighted average shares outstanding (basic and diluted), and non-GAAP net income per share for the quarter ended March 31, 2019 was based on 108.6 million weighted average shares outstanding (basic) and 117.0 million weighted average shares outstanding (diluted).

Appointment of Michael Curtis to Board of Directors

Zendesk appointed Michael Curtis to its board of directors, effective April 24, 2019. Mike has more than 15 years of experience in leading engineering organizations and product innovation. He most recently served as the vice president of engineering of Airbnb, Inc., an online marketplace and hospitality company, from February 2013 to March 2019.Prior to that, he was a director of engineering at Facebook, Inc. from August 2011 to February 2013 and a vice president of engineering at Yahoo! from January 2004 to August 2011. Mike currently serves as a Trustee on the board of Harvey Mudd College.

“Mike has driven product innovation and scaled technology at some of the world’s fastest growing companies,” said Mikkel Svane, Zendesk chief executive officer, chairman and founder. “His history of pushing boundaries and advancing bold ideas will help us continue to build our product innovation and scaled technology.”

“Zendesk has reached a level of scale and ubiquity that is rare in enterprise software,” Curtis said. “I’m excited to join the board at such a pivotal time in the company’s growth and support its fast pace of innovation and its moves into new markets.”

Outlook

As of April 30, 2019, Zendesk provided guidance for the quarter ending June 30, 2019 and updated its guidance for the year ending December 31, 2019.

For the quarter ending June 30, 2019, Zendesk expects to report:

For the full year ending December 31, 2019, Zendesk expects to report:

We have not reconciled free cash flow guidance to net cash from operating activities for the full year 2019 because we do not provide guidance on the reconciling items between net cash from operating activities and free cash flow, as a result of the uncertainty regarding, and the potential variability of, these items. The actual amount of such reconciling items will have a significant impact on our free cash flow and, accordingly, a reconciliation of net cash from operating activities to free cash flow for the full year 2019 is not available without unreasonable effort.

Zendesk’s estimates of share-based compensation and related expenses, amortization of purchased intangibles, acquisition-related expenses, weighted average shares outstanding, and free cash flow in future periods assume, among other things, the occurrence of no additional acquisitions, investments or restructurings, and no further revisions to share-based compensation and related expenses.

Revised Non-GAAP Net Income Calculation

In our presentations of non-GAAP net income (which is a non-GAAP financial measure) in our earnings release and shareholder letter for each of the quarters ending June 30, 2018, September 30, 2018, and December 31, 2018, and the year ended December 31, 2018, we inaccurately determined our hypothetical income tax effect, which was one of the adjustments in the calculation of non-GAAP net income and its reconciliation to GAAP net loss. We have now revised our non-GAAP net income calculations (and our reconciliations to GAAP net loss) and non-GAAP net income per share for each of such quarters and the year ended December 31, 2018 and such revised information is provided below. No revisions have been made to any other adjustments in the calculation of each of non-GAAP net income or non-GAAP net income per share for such periods, and our consolidated financial results as calculated under GAAP are not affected.

Shareholder Letter and Conference Call Information

The detailed Shareholder Letter is available at https://investor.zendesk.com and Zendesk will host a conference call to answer questions today, April 30, 2019, at 2:00 p.m. Pacific Time, 5:00 p.m. Eastern Time. A live webcast of the conference call will be available at https://investor.zendesk.com. The conference call can also be accessed by dialing 833-287-0801, or +1 647-689-4460 (outside the U.S. and Canada). The conference ID is 9699254. A replay of the call via webcast will be available at https://investor.zendesk.com or by dialing 800-585-8367 or +1 416-621-4642 (outside the U.S. and Canada) and entering passcode 9699254. The dial-in replay will be available until the end of day May 2, 2019. The webcast replay will be available for 12 months.

About Zendesk

The best customer experiences are built with Zendesk. Zendesk’s powerful and flexible customer service and engagement platform scales to meet the needs of any business, from startups and small businesses to growth companies and enterprises. Zendesk serves businesses across a multitude of industries, with more than 125,000 paid customer accounts offering service and support in more than 30 languages. Headquartered in San Francisco, Zendesk operates worldwide with 16 offices in North America, Europe, Asia, Australia, and South America. Learn more at www.zendesk.com.

Click here for full supporting financial details on our Investors site