Zendesk Announces Third Quarter 2021 Results

October 28, 2021

Highlights

• Third quarter revenue increased 32% year over year to $347.0 million

• Third quarter GAAP operating loss of $38.9 million and non-GAAP operating income of $27.0 million

SAN FRANCISCO – October 28, 2021 – Zendesk, Inc. today reported financial results for the third quarter ended September 30, 2021, and released a Shareholder Letter on its investor relations website at https://investor.zendesk.com.

Results for the Third Quarter 2021

Revenue was $347.0 million for the quarter ended September 30, 2021, an increase of 32% over the prior year period. GAAP net loss for the quarter ended September 30, 2021 was $54.4 million, and GAAP net loss per share (basic and diluted) was $0.45. Non-GAAP net income was $21.7 million, and non-GAAP net income per share was $0.18 (basic) and $0.17 (diluted). Non-GAAP net income excludes approximately $62.0 million in share-based compensation and related expenses (including $2.1 million of employer tax related to employee stock transactions and $0.4 million of amortization of share-based compensation capitalized in internal-use software), $12.9 million of amortization of debt discount and issuance costs, $2.2 million of acquisition-related expenses, $1.7 million of amortization of purchased intangibles, $(0.1) million of real estate impairments, and non-GAAP income tax effects and adjustments of $2.6 million. GAAP net loss per share for the quarter ended September 30, 2021 was based on 120.2 million weighted average shares outstanding (basic and diluted), and non-GAAP net income per share for the quarter ended September 30, 2021 was based on 120.2 million weighted average shares outstanding (basic) and 126.9 million weighted average shares outstanding (diluted).

Outlook

As of October 28, 2021, Zendesk provided guidance for the quarter and full year ending December 31, 2021.

For the quarter ending December 31, 2021, Zendesk expects to report:

• Revenue in the range of $366 – 372 million

• GAAP operating income (loss) in the range of $(49) – (43) million, which includes share-based compensation and related expenses of approximately $68 million, amortization of purchased intangibles of approximately $2 million, and acquisition-related expenses of approximately $1 million

• Non-GAAP operating income in the range of $22 – 28 million, which excludes share-based compensation and related expenses of approximately $68 million, amortization of purchased intangibles of approximately $2 million, and acquisition-related expenses of approximately $1 million

• Approximately 121 million weighted average shares outstanding (basic)

• Approximately 127 million weighted average shares outstanding (diluted)

For the full year ending December 31, 2021, Zendesk expects to report:

• Revenue in the range of $1.329 – 1.335 billion

• GAAP operating income (loss) in the range of $(166) – (160) million, which includes share-based compensation and related expenses of approximately $248 million, amortization of purchased intangibles of approximately $7 million, acquisition-related expenses of approximately $6 million, and real estate impairments of approximately $1 million

• Non-GAAP operating income in the range of $96 – 102 million, which excludes share-based compensation and related expenses of approximately $248 million, amortization of purchased intangibles of approximately $7 million, acquisition-related expenses of approximately $6 million, and real estate impairments of approximately $1 million

• Approximately 120 million weighted average shares outstanding (basic)

• Approximately 128 million weighted average shares outstanding (diluted)

• Free cash flow in the range of $140 – 150 million, which includes the impact of a lease termination payment of approximately $7 million paid in the second quarter of 2021 related to our real estate changes in San Francisco

We have not reconciled free cash flow guidance to net cash from operating activities for the full year 2021 because we do not provide guidance on the reconciling items between net cash from operating activities and free cash flow, as a result of the uncertainty regarding, and the potential variability of, these items. The actual amount of such reconciling items will have a significant impact on our free cash flow and, accordingly, a reconciliation of net cash from operating activities to free cash flow for the full year 2021 is not available without unreasonable effort.

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

Shareholder Letter and Conference Call Information

The detailed Shareholder Letter is available at https://investor.zendesk.com and Zendesk will host a live video webcast at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) on Thursday, October 28, 2021 to discuss the results. The live video webcast can be accessed through Zendesk’s investor relations website at https://investor.zendesk.com. A replay of the webcast will be available for 12 months.

About Zendesk

Zendesk started the customer experience revolution in 2007 by enabling any business around the world to take their customer service online. Today, Zendesk is the champion of great service everywhere for everyone, and powers billions of conversations, connecting more than 100,000 brands with hundreds of millions of customers over telephony, chat, email, messaging, social channels, communities, review sites and help centers. Zendesk products are built with love to be loved. The company was conceived in Copenhagen, Denmark, built and grown in California, taken public in New York City, and today employs more than 5,000 people across the world. Learn more at www.zendesk.com.