Cloud Support Software Providers Broadening To Include CRM And More

According to a Business Wire report published recently, the global cloud-based IT Service Management market is estimated to grow 8.8% annually over the next four years. Another report published by Market Research Future estimates the global help desk automation market to grow to $11 billion by 2023, recording an annualized growth rate of over 33% during the period 2017 through 2023. Freshdesk, now called Freshworks, and Zendesk (NYSE: ZEN) are both capitalizing on this growth trend.

Zendesk’s Financials

For the third quarter of the year, revenues for Zendesk grew 38% over the year to $154.8 million. It ended the quarter with a GAAP net loss of $34.1 million, compared with a loss of $25.9 million recorded a year ago. On an adjusted basis, EPS came in at $0.09 for the quarter. The Street was looking for revenues of $152.1 million and an EPS of $0.04.

Among key metrics, its paid customer accounts grew 3% sequentially and 17% over the year to 133,700. Zendesk Support now has 72,100 paid customer accounts, with 1,600 added during the third quarter. Zendesk Chat has 46,800 paid customer accounts after losing 800 during the quarter.

For the current quarter, Zendesk expects revenues of $164-$166 million with a GAAP operating loss of $39-$41 million. It expects to end the current year with revenues of $591-$593 million and a GAAP operating loss of $141-$143 million. It is targeting on delivering a break-even year on a non-GAAP basis. The Street was looking for revenues of $165.4 million for the quarter and of $591.7 million for the year.

Zendesk’s Acquisition

Zendesk is targeting to reach $1 billion in annual revenue and profitability by 2020. To help reach that goal, it has been adding several small players to its portfolio. Earlier this quarter, it announced the acquisition of FutureSimple, a provider of customer relationship management and sales productivity platform called Base. Terms of the deal were not disclosed.

Founded in 2009, Base provides integrated tools for communication, lead scoring, reporting, and other salesforce-focused activities. It is known for its mobile and user-friendly capabilities and was positioned by Gartner as a Visionary in the July 2018 Magic Quadrant for Sales Force Automation. The service is currently used by more than 5,000 customers globally across industries. Zendesk had already worked with Base in the past and launched an integration between its products. Released last year, the integrated offering brought together support and sales information about customers. Prior to the acquisition, Future Simple was privately held and had raised $53 million from investors including Hyde Park Angels, I2A Fund, OCA Ventures, and Index Ventures. Its valuation and other detailed financials are not known.

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