February 11, 2015 Last Updated 3:36 pm

Zendesk reports year end earnings: revenue grows 71%, losses nearly triple

Forecast for 2015 is for revenue growth of around 45 to 50%, but losses to grow to $76.0 – 78.0 million

Press Release:

SAN FRANCISCO, Calif. – February 11, 2015 — Zendesk, Inc. today reported financial results for its fourth fiscal quarter and full fiscal year ended December 31, 2014.

“2014 was a defining year for Zendesk. We became a public company and advanced our product, global operations and financial position to be able to tackle even bigger opportunities in the year ahead,” said Mikkel Svane, Founder, CEO and Chair of the Board of Directors of Zendesk. “Our launch of Embeddables in the fourth quarter demonstrates that customer service is becoming core to the ever-growing number of mobile apps, devices and online experiences we all use. We also continued to expand our enterprise customer base, while solidifying our position as the platform of choice among small- and medium-sized businesses and fast-growing startups.”

Results for the Fourth Quarter 2014

Revenue was $38.5 million for the quarter ended December 31, 2014, an increase of 71% over the prior year period. GAAP net loss for the quarter ended December 31, 2014 was $17.5 million, and GAAP net loss per share was $0.24. Non-GAAP net loss was $8.0 million, and non-GAAP net loss per share was $0.11. Non-GAAP net loss excludes approximately $9.0 million in share-based compensation related expenses (including $0.1 million of amortized share-based compensation capitalized in internal-use software and $0.3 million of employer tax related to employee stock transactions) and $0.5 million of amortization of purchased intangibles. GAAP and non-GAAP net loss per share for the quarter ended December 31, 2014 were based on 73.3 million weighted average shares outstanding.

Results for the Full Fiscal Year 2014

Revenue was $127.0 million for the year ended December 31, 2014, an increase of 76% over the year ended December 31, 2013. GAAP net loss for the year ended December 31, 2014 was $67.4 million, and GAAP net loss per share was $1.26. Non-GAAP net loss was $32.2 million and non-GAAP net loss per share was $0.48. Non-GAAP net loss excludes approximately $33.1 million in share-based compensation related expenses (including $0.4 million of amortized share-based compensation capitalized in internal-use software and $0.6 million of employer tax related to employee stock transactions), $1.5 million of amortization of purchased intangibles, and $0.6 million of transaction costs related to an acquisition. GAAP and non-GAAP net loss per share for the year ended December 31, 2014 were based on 53.6 million and 66.6 million weighted average shares outstanding, respectively. Cash and cash equivalents were $80.3 million and marketable securities were $51.4 million as of December 31, 2014.

Key Operating Metrics

Zendesk had 51,721 customer accounts on its customer service platform as of December 31, 2014, including approximately 27,600 customer accounts on subscription plans other than its entry level Starter plan. Zendesk also reported approximately 24,900 customer accounts on the revenue generating subscription plans for its Zopim live chat service. Active accounts on Zendesk’s Starter plan, Zopim’s Lite plan and other “freemium” services totaled nearly 100,000 as of December 31, 2014.

Beginning with the quarter ended December 31, 2014, Zendesk adjusted its calculation of annualized dollar-based net expansion rate to exclude customer accounts on its Starter plan. On this basis, Zendesk’s annualized dollar-based net expansion rate was 120% as of December 31, 2014, as compared to 121% as of September 30, 2014 when calculated in the same manner. Using the prior method of calculating this metric, Zendesk’s annualized dollar-based net expansion rate was 122% as of December 31, 2014, as compared to 123% as of September 30, 2014.

Outlook

As of February 11, 2015, Zendesk provided guidance for its expected revenue, GAAP operating loss and non-GAAP operating loss for the quarter ending March 31, 2015 and the year ending December 31, 2015.

For the quarter ending March 31, 2015, Zendesk expects to report:

  • Revenue in the range of $39.0 – 41.0 million
  • GAAP operating loss of $20.0 – 21.0 million, which includes share-based compensation related expenses of approximately $10.0 million and amortization of intangibles of approximately $0.5 million
  • Non-GAAP operating loss of $9.5 – 10.5 million, which excludes share-based compensation related expenses of approximately $10.0 million and amortization of intangibles of approximately $0.5 million

For the year ending December 31, 2015, Zendesk expects to report:

  • Revenue to grow 45 – 50%, in the range of $184 – 190 million
  • GAAP operating loss of $76.0 – 78.0 million, which includes share-based compensation related expenses of approximately $40.3 million and amortization of intangibles of approximately $1.7 million
  • Non-GAAP operating loss of $34.0 – 36.0 million, which excludes share-based compensation related expenses of approximately $40.3 million and amortization of intangibles of approximately $1.7 million

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