Zendesk And Freshworks Growing Steadily

Freshdesk, now called Freshworks, was originally founded as an affordable alternative to Zendesk. It recently crossed $100 million in annual recurring revenue while Zendesk recently surpassed a $500 million annual revenue run rate. Needless to say, the cloud-based help desk category is alive and well, and the companies are each exploring beyond their original product lines.

Zendesk’s Financials

First quarter revenue at Zendesk (NYSE: ZEN) increased 38% over the year to $129.8 million. GAAP net loss was $29.3 million, or $0.28 per share. Non-GAAP net income was $2.9 million or $0.02 per share. Analysts expected loss of $0.10 on revenue of $64 million.

Cash and cash equivalents at the end of the first quarter was $609.2 million.

By geography, revenue from the US was 52.7%, EMEA was 29.2% and Other was 18.1% of the total revenue.

At the end of the first quarter, Zendesk had 125,000 paid customer accounts, up 23%.

For the second quarter, Zendesk expects to report revenue in the range of $136 to $138 million, GAAP operating loss of $34 -$32 million, and non-GAAP operating loss of $2 to $0 million. Analysts expect loss of $0.08 on revenue of $72.38 million.

For the full year 2018, Zendesk expects to report revenue of $565-$572 million, GAAP operating loss of $132-127 million, and non-GAAP operating income of $0-$5 million. Analysts expect loss of $0.30 on revenue of $303.45 million. In fiscal 2017, annual revenue was up 38% to $430.5 million, GAAP net loss was $110.56 million or $1.11 per share and non-GAAP net loss was $13.1 million or $0.13 per share. GAAP gross margin increased to 70.4% in 2017 compared to 69.9% in 2016.

Zendesk’s Roadmap to Profitability and $1 billion Annual Revenue

Zendesk is targeting to reach $1 billion in annual revenue and profitability by 2020. To reach this goal, it is focusing on three things – elevating its brand, developing or becoming a multiproduct company, and further growing its reach into the enterprise. Towards achieving this goal, for 2017, it achieved strong revenue growth and positive full-year free cash flow by moving upmarket through larger deals with mid-market and enterprise companies and becoming a multiproduct company with new revenue opportunities. It also began to migrate its data center investments to cloud infrastructure to enable greater reliability, flexibility, and scale.

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