Zendesk turns in 36% revenue growth with $1 billion run-rate in sight as new products gain traction
- Zendesk turns in strong year-on-year revenue growth as Sunshine adoption builds momentum.
Thirty-six percent year-on-year growth has put Zendesk on track to pass a $1 billion run-rate this year, says founder and CEO Mikkel Svane. The customer service company turned in its Q4 and full year numbers yesterday.For Q4, revenue was $229.9 million with a loss of $36.2 million, while full year revenue was $816.4 million with a loss of $169.7 million.
It’s now over a year since Zendesk launched Sunshine, its open CRM platform built completely in the public cloud on AWS, as well as its sales force automation tool, Zendesk Sell, and data analytics offerings, Zendesk Explore. Marc Cabi, VP, Strategy, said that adoption is encouraging:
What we're seeing is that our products are mature to a point where we're seeing acceptance by both enterprise customers as well as interest from partners to do work with us, especially as we create the platform capabilities behind Sunshine where you can build natively on some of the Zendesk capabilities to create those better customer experiences. We've seen growing interest there and we're very pleased with that. We made our acquisition of Smooch last year. And we think we're at the forefront of a new messaging paradigm. Our Sunshine Conversations messaging platform capabilities are being highly demanded. And also within our existing products, messaging capabilities are being instituted, which our customers are reacting positively to.
Regarding that reference to partners, there will be more to say later in the year, he predicted:
I will say that we've already made some progress with channel partners and with SIs, including the big ones like Accenture. Those relationships take some time to build. They have more things that they can use as part of their offerings to their customers now that we have platform capabilities to offer people like Accenture and Wipro and others to build on. So we're pretty excited about the early interest they've shown….this is a year where, by the fourth quarter, we would expect to see some contribution from the partners.
As for Explore and Sell, Svane said:
We're very, very satisfied with both the adoption and kind of the attachment to deals for our analytics product Explore. Explore is a true differentiator for us in the market. The ease of use for this product is unprecedented and is making a huge difference for our customers while being an incredibly powerful platform. So we're very excited about the adoption of Explore and you can expect to see more on that front this year as we have continued to invest in that product.
Our initial kind of year here with Sell has been really, really fun and interesting, I would say. We've done a lot of different things while, of course, working on all the back-end integration. So that sets us up for building even more cool stuff across the sales and customer service organizations, and we are just very excited about that.
A lot of our differentiation is in the agility and the ease of use of the product here, that we can help our customers get results really, really quick, that we can help them change really, really quick, that [there’s] nothing that they put in front of themselves that we cannot solve and help them get results. I think that's still incredibly important to our customers because they all live in an area where customer expectations are changing so quickly.
So the agility, the maturity of the platform, [the fact] that the new platform, Sunshine, lives in AWS where they're already moving, re-platforming for where they use all the other developer tools that are natively accessible there…these are really strong arguments for the modern CIO [and] for the modern enterprise today that want to move fast, that don't want the boat anchor of the big legacy enterprise system that slows them down and makes every change take forever. So that's a big part of our DNA, that's a big part of what we are and that's a big part of why we're winning in the enterprise.
There will be more to talk about on the product front at the firm’s Relate conference in Miami next month, he said. Another topic of conversation at that gathering may well be a change to how customers are invoiced. Cabi explained:
From the early days of Zendesk, we invoiced our customers 30 days prior to the end of their subscription renewal, which has, in our view, created friction with customers around exactly when they renew. To create a better customer experience, we will be notifying our customers at 30 days that their subscription will renew and then actually invoice them on the day of their renewal. And so that will slide our collections presumably by up to 30 days as a result of that. This is kind of consistent with industry practice and what most people are used to when they subscribe to SaaS types of software.
One of the most common elements of the post-results conference call yesterday was some iteration or other of ‘We’ll be talking about this in Miami’. That’s fair enough - Relate is Zendesk’s biggest gathering of customers and it’s absolutely the appropriate forum to talk product roadmaps and focus on use case exemplars. We’ll be reporting back from there in more detail next month.