Zendesk Beats In Q4, Predicts Sustained Losses In 2015 On 45-50% Revenue Growth

Today following the bell, Zendesk reported its fourth-quarter performance. The company lost an adjusted $0.11 per share on revenue of $38.5 million. The street had expected the company to lose $0.12 per share on revenue of $36.74 million. The company's revenue grew 71 percent on a year-over-year basis, leading to an adjusted net income of negative $8 million and, employing normal accounting methods (GAAP), a net loss of $17.5 million. According to the firm, 45 percent of its total revenue came from non-domestic accounts. For the full year, Zendesk had revenue of $127 million, GAAP net income of negative $67.4 million, and GAAP earnings per share of negative $1.27. In the sequentially preceding quarter, the company reported revenue of $33.9 million, and an adjusted loss of $6.4 million. Using normal accounting methods for that third-quarter period, Zendesk lost a steeper $17.8 million. The company's full-year 2014 revenue growth rate was higher than its fourth-quarter tally, totaling 76 percent. Or put more simply, as Zendesk grows its aggregate top line, the percentage that expands its revenue is slowing. The company ended the quarter and year with $80.3 million in cash, and $51.4 million in marketable securities. Those sums imply that Zendesk has sufficient cash on hand to fund its growth for some time. Zendesk closed out the year with 51,721 customer accounts. The company, which charges for its products on a recurring basis, provided the following notes on the current health of its churn: 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. Down more than 1.5 percent in regular trading, Zendesk has yet to move materially in after-hours trading, following its earnings beat. The company is currently worth around $1.85 billion. It expects revenue in the current quarter to land between $39 million and $41 million, on which it will lose around $20 million using normal accounting measures and $10 million of which will come from share-based compensation. For the full calendar 2015, Zendesk expects to lose $76 million to $78 million on a GAAP basis, on revenue of $184 million to $190 million. That revenue range represents top line growth of between 45 and 50 percent for the year. Zendesk raised $100 million in its IPO last May. The company enjoyed a strong first day's trading, and has since shot north: Public at $9, Zendesk traded in the $25 range before reporting its earnings.
Alex Wilhelm

Alex Wilhelm is a Writer at Gigabuzz, focused on covering early-stage startups, especially those with a technology focus and great perks.

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