Zendesk (ZEN 73.17, +4.57, +6.66%) is trading nicely higher today after reporting Q4
results last night. The company is modernizing the call centers for companies.
Instead of customers just calling in on a 1-800 number, ZEN's cloud platform
allows companies to communicate with customers using email, chat, voice, social
media, and websites.
ZEN posted yet another strong result, wrapping up 2018 on a positive note. Non-GAAP EPS jumped to $0.10 from $0.01 in the prior year period. This was a good bit better than expected. Revenue rose 41.3% yr/yr to $172.3 mln, which was nicely above prior guidance of $164-166 mln. Looking ahead, ZEN has guided to Q1 revenue of $178-180 mln, which is also above expectations.
One of the main things ZEN has done to drive growth is to focus more on larger customers. During Q4, ZEN saw a nice increase in the percentage of monthly recurring revenue from 100+ seat customers, also known as its enterprise proxy. On the call, ZEN explained that the $50,000 annual contract deal size is now kind of a regular deal size for ZEN. That was not the case before. ZEN is definitely moving up to larger customers and larger deal sizes.
A key way that ZEN has been attracting larger customers is to launch new products that cater to them. For example, in Q4, ZEN launched a new CRM platform, Zendesk Sunshine. Sunshine represents an entirely new approach to CRM platforms. Zendesk built it on top of AWS and the public cloud and made it open and flexible, so companies can build new customer apps quickly and developers can use the tools they already know.
ZEN is already seeing the Sunshine platform change the kind of conversations ZEN has with customers and potential customers. Sunshine solves more of their problems and more of their use cases and also goes deeper into their business, allowing Zendesk to be a true partner for them.
Sunshine sets us up to further accelerate ZEN's enterprise
momentum in 2019 and beyond.
Sunshine is a door opener and a conversation changer as ZEN has not seen before. For example, ZEN is moving from having conversations with customers about how they think about customer service, customer engagement to really having a conversation about how to architect the customer experience across the customer lifetime, across the customer lifecycle, across all the divisions within the organization.
In sum, this was another good quarter for Zendesk. The company consistently beats EPS expectations, as the company has done for 12 quarters in a row. One metric that sort of says it all is that ZEN posted strong growth in 2018 than it did in 2017, which is pretty impressive considering it's working off a larger base. After pulling back in Oct/Nov, the stock has been making a nice comeback since then. ZEN's business is solid, they have moved into profitability, and their business seems to be in an attractive and growing market. ZEN is also signing up larger customers, which is a good sign.