☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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26-4411091
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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1019 Market Street
San Francisco, CA
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94103
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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x
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Accelerated filer
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☐
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Non-accelerated filer
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☐
(do not check if a smaller reporting company)
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Smaller reporting company
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☐
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Emerging growth company
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☐
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Item 1
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Item 2
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Item 3
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Item 4
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PART II — OTHER INFORMATION
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Item 1
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Item 1A
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Item 6
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•
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our future financial performance, including our revenue, cost of revenue, gross profit, operating expenses, ability to generate positive cash flow, and ability to achieve and maintain profitability;
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•
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the sufficiency of our cash and cash equivalents and marketable securities to meet our liquidity needs;
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•
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our ability to attract and retain customers to use our products, and our ability to optimize the pricing for such products;
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•
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the evolution of technology affecting our products, services, and markets;
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•
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our ability to innovate and provide a superior customer experience;
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•
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our ability to successfully expand in our existing markets and into new markets;
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•
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the attraction and retention of qualified employees and key personnel;
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•
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worldwide economic conditions and their impact on information technology spending;
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•
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our ability to effectively manage our growth and future expenses;
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•
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our ability to introduce and market new products and to integrate such products into our infrastructure;
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•
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our ability to maintain, protect, and enhance our intellectual property;
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•
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our ability to comply with modified or new laws and regulations applying to our business, including privacy and data security regulations;
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•
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our ability to securely maintain customer data;
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•
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our ability to maintain and enhance our brand; and
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•
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the increased expenses and administrative workload associated with being a public company.
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September 30,
2017 |
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December 31,
2016 |
||||
(Unaudited)
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|||||
Assets
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|
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|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
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$
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92,603
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$
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93,677
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Marketable securities
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133,959
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|
|
131,190
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Accounts receivable, net of allowance for doubtful accounts of $751 and $1,269 as of September 30, 2017 and December 31, 2016, respectively
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51,465
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|
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37,343
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||
Prepaid expenses and other current assets
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24,318
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|
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17,608
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Total current assets
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302,345
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279,818
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Marketable securities, noncurrent
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90,263
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75,168
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Property and equipment, net
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59,600
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62,731
|
|
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Goodwill and intangible assets, net
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67,779
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53,296
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Other assets
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9,350
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|
|
4,272
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Total assets
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$
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529,337
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$
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475,285
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Liabilities and stockholders’ equity
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|
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||||
Current liabilities:
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||||
Accounts payable
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$
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11,212
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$
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4,555
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Accrued liabilities
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21,588
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|
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19,106
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Accrued compensation and related benefits
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26,325
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20,281
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Deferred revenue
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154,163
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123,276
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Total current liabilities
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213,288
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|
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167,218
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Deferred revenue, noncurrent
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1,727
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|
|
1,257
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Other liabilities
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8,152
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|
|
7,382
|
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Total liabilities
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223,167
|
|
|
175,857
|
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Commitments and contingencies (Note 6)
|
|
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|
||||
Stockholders’ equity:
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|
|
||||
Preferred stock
|
—
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|
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—
|
|
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Common stock
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1,010
|
|
|
971
|
|
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Additional paid-in capital
|
711,301
|
|
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624,026
|
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Accumulated other comprehensive loss
|
(2,205
|
)
|
|
(5,197
|
)
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Accumulated deficit
|
(403,936
|
)
|
|
(319,720
|
)
|
||
Treasury stock, at cost (none and 0.5 million shares as of September 30, 2017 and December 31, 2016, respectively)
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—
|
|
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(652
|
)
|
||
Total stockholders’ equity
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306,170
|
|
|
299,428
|
|
||
Total liabilities and stockholders’ equity
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$
|
529,337
|
|
|
$
|
475,285
|
|
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Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
2017
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|
2016
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2017
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2016
|
|||||||||
Revenue
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$
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112,786
|
|
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$
|
80,717
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|
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$
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307,066
|
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$
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223,376
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Cost of revenue
(1)
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33,693
|
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23,866
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92,464
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|
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68,318
|
|
||||
Gross profit
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79,093
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56,851
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214,602
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155,058
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|
||||
Operating expenses (1):
|
|
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|
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||||||||
Research and development
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29,358
|
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22,953
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84,512
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66,683
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||||
Sales and marketing
|
56,778
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|
|
43,899
|
|
|
156,707
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119,421
|
|
||||
General and administrative
|
21,398
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16,212
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59,502
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48,149
|
|
||||
Total operating expenses
|
107,534
|
|
|
83,064
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|
|
300,721
|
|
|
234,253
|
|
||||
Operating loss
|
(28,441
|
)
|
|
(26,213
|
)
|
|
(86,119
|
)
|
|
(79,195
|
)
|
||||
Other income, net
|
619
|
|
|
681
|
|
|
1,345
|
|
|
745
|
|
||||
Loss before provision for (benefit from) income taxes
|
(27,822
|
)
|
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(25,532
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)
|
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(84,774
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)
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(78,450
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)
|
||||
Provision for (benefit from) income taxes
|
(133
|
)
|
|
294
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|
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(786
|
)
|
|
800
|
|
||||
Net loss
|
$
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(27,689
|
)
|
|
$
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(25,826
|
)
|
|
$
|
(83,988
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)
|
|
$
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(79,250
|
)
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Net loss per share, basic and diluted
|
$
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(0.28
|
)
|
|
$
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(0.27
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)
|
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$
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(0.85
|
)
|
|
$
|
(0.86
|
)
|
Weighted-average shares used to compute net loss per
share, basic and diluted
|
100,659
|
|
|
94,085
|
|
|
99,203
|
|
|
92,274
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
2017
|
|
2016
|
|
2017
|
|
2016
|
|||||||||
Cost of revenue
|
$
|
2,408
|
|
|
$
|
1,919
|
|
|
$
|
6,668
|
|
|
$
|
5,355
|
|
Research and development
|
7,776
|
|
|
7,172
|
|
|
22,273
|
|
|
20,548
|
|
||||
Sales and marketing
|
6,716
|
|
|
6,657
|
|
|
18,362
|
|
|
17,780
|
|
||||
General and administrative
|
5,619
|
|
|
4,247
|
|
|
15,502
|
|
|
12,654
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
2017
|
|
2016
|
|
2017
|
|
2016
|
|||||||||
Net loss
|
$
|
(27,689
|
)
|
|
$
|
(25,826
|
)
|
|
$
|
(83,988
|
)
|
|
$
|
(79,250
|
)
|
Other comprehensive gain, before tax:
|
|
|
|
|
|
|
|
||||||||
Net change in unrealized gain (loss) on available-for-sale investments
|
80
|
|
|
(35
|
)
|
|
213
|
|
|
80
|
|
||||
Foreign currency translation gain (loss)
|
—
|
|
|
(227
|
)
|
|
824
|
|
|
570
|
|
||||
Net change in unrealized gain (loss) on derivative instruments
|
344
|
|
|
416
|
|
|
3,692
|
|
|
139
|
|
||||
Other comprehensive gain, before tax
|
424
|
|
|
154
|
|
|
4,729
|
|
|
789
|
|
||||
Tax effect
|
(156
|
)
|
|
(61
|
)
|
|
(1,737
|
)
|
|
(295
|
)
|
||||
Other comprehensive gain, net of tax
|
268
|
|
|
93
|
|
|
2,992
|
|
|
494
|
|
||||
Comprehensive loss
|
$
|
(27,421
|
)
|
|
$
|
(25,733
|
)
|
|
$
|
(80,996
|
)
|
|
$
|
(78,756
|
)
|
|
Nine Months Ended September 30,
|
||||||
2017
|
|
2016
|
|||||
Cash flows from operating activities
|
|
|
|
|
|||
Net loss
|
$
|
(83,988
|
)
|
|
$
|
(79,250
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities
|
|
|
|
|
|||
Depreciation and amortization
|
24,263
|
|
|
20,000
|
|
||
Share-based compensation
|
62,805
|
|
|
56,337
|
|
||
Excess tax benefit from share-based award activity
|
—
|
|
|
(133
|
)
|
||
Other
|
380
|
|
|
1,219
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(15,039
|
)
|
|
(11,782
|
)
|
||
Prepaid expenses and other current assets
|
(5,109
|
)
|
|
(7,401
|
)
|
||
Other assets and liabilities
|
(5,513
|
)
|
|
(1,829
|
)
|
||
Accounts payable
|
7,237
|
|
|
(2,220
|
)
|
||
Accrued liabilities
|
6,843
|
|
|
2,645
|
|
||
Accrued compensation and related benefits
|
1,503
|
|
|
812
|
|
||
Deferred revenue
|
31,357
|
|
|
25,596
|
|
||
Net cash provided by operating activities
|
24,739
|
|
|
3,994
|
|
||
Cash flows from investing activities
|
|
|
|
||||
Purchases of property and equipment
|
(13,334
|
)
|
|
(12,494
|
)
|
||
Internal-use software development costs
|
(5,237
|
)
|
|
(4,313
|
)
|
||
Purchases of marketable securities
|
(135,279
|
)
|
|
(216,640
|
)
|
||
Proceeds from maturities of marketable securities
|
88,960
|
|
|
23,971
|
|
||
Proceeds from sale of marketable securities
|
28,144
|
|
|
39,244
|
|
||
Cash paid for the acquisition of Outbound, net of cash acquired
|
(16,470
|
)
|
|
—
|
|
||
Net cash used in investing activities
|
(53,216
|
)
|
|
(170,232
|
)
|
||
Cash flows from financing activities
|
|
|
|
||||
Proceeds from exercise of employee stock options
|
18,550
|
|
|
19,886
|
|
||
Proceeds from employee stock purchase plan
|
10,980
|
|
|
8,704
|
|
||
Taxes paid related to net share settlement of share-based awards
|
(2,415
|
)
|
|
(626
|
)
|
||
Principal payment on debt
|
—
|
|
|
(323
|
)
|
||
Excess tax benefit from share-based award activity
|
—
|
|
|
133
|
|
||
Net cash provided by financing activities
|
27,115
|
|
|
27,774
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
288
|
|
|
(173
|
)
|
||
Net decrease in cash and cash equivalents
|
(1,074
|
)
|
|
(138,637
|
)
|
||
Cash and cash equivalents at beginning of period
|
93,677
|
|
|
216,226
|
|
||
Cash and cash equivalents at end of period
|
$
|
92,603
|
|
|
$
|
77,589
|
|
Supplemental cash flow data:
|
|
|
|
||||
Cash paid for income taxes and interest
|
$
|
1,532
|
|
|
$
|
968
|
|
Non-cash investing and financing activities:
|
|
|
|
||||
Share-based compensation capitalized in internal-use software development costs
|
$
|
1,984
|
|
|
$
|
1,761
|
|
Balance of property and equipment in accounts payable and accrued expenses
|
$
|
1,384
|
|
|
$
|
2,466
|
|
Property and equipment acquired through tenant improvement allowances
|
$
|
437
|
|
|
$
|
64
|
|
Vesting of early exercised stock options
|
$
|
317
|
|
|
$
|
509
|
|
Net tangible assets acquired
|
$
|
96
|
|
Net deferred tax liability recognized
|
(492
|
)
|
|
Identifiable intangible assets:
|
|
||
Developed technology
|
3,200
|
|
|
Customer relationships
|
410
|
|
|
Goodwill
|
13,350
|
|
|
Total purchase price
|
$
|
16,564
|
|
|
Fair Value Measurement at
September 30, 2017 |
||||||||||
Level 1
|
|
Level 2
|
|
Total
|
|||||||
Description
|
|
|
|
|
|
||||||
Corporate bonds
|
$
|
—
|
|
|
$
|
152,888
|
|
|
152,888
|
|
|
U.S. treasury securities
|
—
|
|
|
28,434
|
|
|
28,434
|
|
|||
Asset-backed securities
|
—
|
|
|
24,471
|
|
|
24,471
|
|
|||
Commercial paper
|
—
|
|
|
15,397
|
|
|
15,397
|
|
|||
Money market funds
|
12,354
|
|
|
—
|
|
|
12,354
|
|
|||
Agency securities
|
—
|
|
|
8,532
|
|
|
8,532
|
|
|||
Total
|
$
|
12,354
|
|
|
$
|
229,722
|
|
|
$
|
242,076
|
|
Included in cash and cash equivalents
|
|
|
|
|
$
|
17,854
|
|
||||
Included in marketable securities
|
|
|
|
|
$
|
224,222
|
|
|
Fair Value Measurement at
December 31, 2016 |
||||||||||
Level 1
|
|
Level 2
|
|
Total
|
|||||||
Description
|
|
|
|
|
|
||||||
Corporate bonds
|
$
|
—
|
|
|
$
|
124,930
|
|
|
$
|
124,930
|
|
Asset-backed securities
|
—
|
|
|
32,567
|
|
|
32,567
|
|
|||
U.S. treasury securities
|
—
|
|
|
30,585
|
|
|
30,585
|
|
|||
Commercial paper
|
—
|
|
|
9,787
|
|
|
9,787
|
|
|||
Agency securities
|
—
|
|
|
8,489
|
|
|
8,489
|
|
|||
Money market funds
|
3,545
|
|
|
$
|
—
|
|
|
$
|
3,545
|
|
|
Total
|
$
|
3,545
|
|
|
$
|
206,358
|
|
|
$
|
209,903
|
|
Included in cash and cash equivalents
|
|
|
|
|
$
|
3,545
|
|
||||
Included in marketable securities
|
|
|
|
|
$
|
206,358
|
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Due in one year or less
|
$
|
133,959
|
|
|
$
|
131,190
|
|
Due after one year
|
90,263
|
|
|
75,168
|
|
||
Total
|
$
|
224,222
|
|
|
$
|
206,358
|
|
|
September 30, 2017
|
||||||||||
Asset Derivatives
|
|
Liability Derivatives
|
|||||||||
Derivative Instrument
|
Balance Sheet Location
|
|
Fair Value
(Level 2)
|
|
Balance Sheet Location
|
|
Fair Value
(Level 2)
|
||||
Foreign currency forward contracts
|
Other current assets
|
|
$
|
2,459
|
|
|
Accrued liabilities
|
|
$
|
1,873
|
|
Total
|
|
|
$
|
2,459
|
|
|
|
|
$
|
1,873
|
|
|
December 31, 2016
|
||||||||||
Asset Derivatives
|
|
Liability Derivatives
|
|||||||||
Derivative Instrument
|
Balance Sheet Location
|
|
Fair Value
(Level 2)
|
|
Balance Sheet Location
|
|
Fair Value
(Level 2)
|
||||
Foreign currency forward contracts
|
Other current assets
|
|
$
|
868
|
|
|
Accrued liabilities
|
|
$
|
4,280
|
|
Total
|
|
|
$
|
868
|
|
|
|
|
$
|
4,280
|
|
|
|
|
Three Months Ended September 30, 2017
|
|
Nine Months Ended September 30, 2017
|
||||||||||||
Hedging Instrument
|
Location of Gain (Loss) Reclassified into Earnings
|
|
Gain Recognized in AOCI
|
|
Gain Reclassified from AOCI into Earnings
|
|
Gain Recognized in AOCI
|
|
Loss Reclassified from AOCI into Earnings
|
||||||||
Foreign currency forward contracts
|
Revenue, cost of revenue, operating expenses
|
|
$
|
629
|
|
|
$
|
285
|
|
|
$
|
3,117
|
|
|
$
|
(575
|
)
|
Total
|
|
|
$
|
629
|
|
|
$
|
285
|
|
|
$
|
3,117
|
|
|
$
|
(575
|
)
|
|
|
|
Three Months Ended September 30, 2016
|
|
Nine Months Ended September 30, 2016
|
||||||||||||
Hedging Instrument
|
Location of Loss Reclassified into Earnings
|
|
Gain Recognized in AOCI
|
|
Loss Reclassified from AOCI into Earnings
|
|
Loss Recognized in AOCI
|
|
Loss Reclassified from AOCI into Earnings
|
||||||||
Foreign currency forward contracts
|
Revenue, cost of revenue, operating expenses
|
|
$
|
207
|
|
|
$
|
(209
|
)
|
|
$
|
(218
|
)
|
|
$
|
(357
|
)
|
Total
|
|
|
$
|
207
|
|
|
$
|
(209
|
)
|
|
$
|
(218
|
)
|
|
$
|
(357
|
)
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Hosting equipment
|
$
|
37,423
|
|
|
$
|
35,018
|
|
Capitalized internal-use software
|
30,449
|
|
|
25,773
|
|
||
Leasehold improvements
|
28,117
|
|
|
25,396
|
|
||
Computer equipment and licensed software and patents
|
15,122
|
|
|
11,879
|
|
||
Furniture and fixtures
|
9,496
|
|
|
8,014
|
|
||
Construction in progress
|
7,070
|
|
|
7,993
|
|
||
Total
|
127,677
|
|
|
114,073
|
|
||
Less: accumulated depreciation and amortization
|
(68,077
|
)
|
|
(51,342
|
)
|
||
Property and equipment, net
|
$
|
59,600
|
|
|
$
|
62,731
|
|
Balance as of December 31, 2016
|
$
|
45,347
|
|
Goodwill acquired
|
13,350
|
|
|
Foreign currency translation adjustments
|
434
|
|
|
Balance as of September 30, 2017
|
$
|
59,131
|
|
|
As of September 30, 2017
|
||||||||||||||||
Cost
|
|
Accumulated
Amortization
|
|
Foreign
Currency Translation Adjustments
|
|
Net
|
|
Weighted Average Remaining Useful Life
|
|||||||||
|
|
|
|
|
|
|
|
(In years)
|
|||||||||
Developed technology
|
$
|
17,200
|
|
|
$
|
(9,225
|
)
|
|
$
|
(93
|
)
|
|
$
|
7,882
|
|
|
3.9
|
Customer relationships
|
2,210
|
|
|
(1,414
|
)
|
|
(30
|
)
|
|
766
|
|
|
2.4
|
||||
|
$
|
19,410
|
|
|
$
|
(10,639
|
)
|
|
$
|
(123
|
)
|
|
$
|
8,648
|
|
|
|
|
As of December 31, 2016
|
||||||||||||||||
Cost
|
|
Accumulated
Amortization
|
|
Foreign
Currency Translation Adjustments
|
|
Net
|
|
Weighted Average Remaining Useful Life
|
|||||||||
|
|
|
|
|
|
|
|
(In years)
|
|||||||||
Developed technology
|
$
|
14,000
|
|
|
$
|
(6,584
|
)
|
|
$
|
(169
|
)
|
|
$
|
7,247
|
|
|
2.9
|
Customer relationships
|
1,800
|
|
|
(1,044
|
)
|
|
(53
|
)
|
|
703
|
|
|
2.3
|
||||
|
$
|
15,800
|
|
|
$
|
(7,628
|
)
|
|
$
|
(222
|
)
|
|
$
|
7,950
|
|
|
|
Remainder of 2017
|
$
|
741
|
|
2018
|
2,735
|
|
|
2019
|
2,676
|
|
|
2020
|
1,102
|
|
|
2021
|
492
|
|
|
Thereafter
|
902
|
|
|
|
$
|
8,648
|
|
|
Total
|
|
Less than 1
Year
|
|
1 to 3 Years
|
|
3 to 5 Years
|
|
More than 5
Years
|
||||||||||
Operating lease obligations
|
$
|
76,909
|
|
|
$
|
1,477
|
|
|
$
|
18,131
|
|
|
$
|
19,409
|
|
|
$
|
37,892
|
|
Purchase obligations
|
$
|
15,559
|
|
|
8,392
|
|
|
7,167
|
|
|
—
|
|
|
—
|
|
|
|
|
Options Outstanding
|
|
RSUs Outstanding
|
|||||||||||||||||
Shares
Available
for Grant
|
|
Number of
Shares
|
|
Weighted
Average
Exercise Price
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding
RSUs
|
|
Weighted
Average
Grant Date
Fair Value
|
||||||||||
|
|
|
|
|
|
(In years)
|
|
|
|
|
|
|
||||||||||
Outstanding — January 1, 2017
|
6,039
|
|
|
8,479
|
|
|
$
|
14.52
|
|
|
7.49
|
|
$
|
66,449
|
|
|
6,936
|
|
|
$
|
20.81
|
|
Increase in authorized shares
|
4,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Stock options granted
|
(998
|
)
|
|
998
|
|
|
27.03
|
|
|
|
|
|
|
|
|
|
||||||
RSUs granted
|
(3,068
|
)
|
|
|
|
|
|
|
|
|
|
3,068
|
|
|
27.69
|
|
||||||
Stock options exercised
|
|
|
(1,771
|
)
|
|
10.47
|
|
|
|
|
|
|
|
|
|
|||||||
RSUs vested
|
|
|
|
|
|
|
|
|
|
|
(2,343
|
)
|
|
20.11
|
|
|||||||
Stock options forfeited or canceled
|
288
|
|
|
(288
|
)
|
|
23.81
|
|
|
|
|
|
|
|
|
|
||||||
RSUs forfeited or canceled
|
995
|
|
|
|
|
|
|
|
|
|
|
(995
|
)
|
|
22.11
|
|
||||||
RSUs forfeited or canceled and unavailable for grant
|
|
|
|
|
|
|
|
|
|
|
(202
|
)
|
|
23.44
|
|
|||||||
Stock options forfeited or canceled and unavailable for grant
|
|
|
(200
|
)
|
|
23.44
|
|
|
|
|
|
|
|
|
|
|||||||
Outstanding — September 30, 2017
|
8,089
|
|
|
7,218
|
|
|
$
|
16.63
|
|
|
7.21
|
|
$
|
90,199
|
|
|
6,464
|
|
|
$
|
24.05
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
2017
|
|
2016
|
|
2017
|
|
2016
|
|||||||||
Net loss
|
$
|
(27,689
|
)
|
|
$
|
(25,826
|
)
|
|
$
|
(83,988
|
)
|
|
$
|
(79,250
|
)
|
Weighted-average shares used to compute basic and diluted net loss per share
|
100,659
|
|
|
94,085
|
|
|
99,203
|
|
|
92,274
|
|
||||
Net loss per share, basic and diluted
|
$
|
(0.28
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.85
|
)
|
|
$
|
(0.86
|
)
|
|
As of September 30,
|
||||
2017
|
|
2016
|
|||
Shares subject to outstanding common stock options and employee stock purchase plan
|
7,488
|
|
|
9,753
|
|
Restricted stock units
|
6,464
|
|
|
7,565
|
|
|
13,952
|
|
|
17,318
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
2017
|
|
2016
|
|
2017
|
|
2016
|
|||||||||
United States
|
$
|
59,455
|
|
|
$
|
43,587
|
|
|
$
|
163,971
|
|
|
$
|
121,222
|
|
EMEA
|
32,447
|
|
|
22,601
|
|
|
87,338
|
|
|
62,208
|
|
||||
Other
|
20,884
|
|
|
14,529
|
|
|
55,757
|
|
|
39,946
|
|
||||
Total
|
$
|
112,786
|
|
|
$
|
80,717
|
|
|
$
|
307,066
|
|
|
$
|
223,376
|
|
|
As of
September 30, 2017 |
|
As of
December 31, 2016 |
||||
United States
|
$
|
25,395
|
|
|
$
|
26,372
|
|
EMEA:
|
|
|
|
||||
Republic of Ireland
|
4,788
|
|
|
5,703
|
|
||
Other EMEA
|
5,423
|
|
|
6,834
|
|
||
Total EMEA
|
10,211
|
|
|
12,537
|
|
||
APAC
|
7,486
|
|
|
8,357
|
|
||
Total
|
$
|
43,092
|
|
|
$
|
47,266
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
2017
|
|
2016
|
|
2017
|
|
2016
|
|||||||||
Revenue
|
$
|
112,786
|
|
|
$
|
80,717
|
|
|
$
|
307,066
|
|
|
$
|
223,376
|
|
Cost of revenue
(1)
|
33,693
|
|
|
23,866
|
|
|
92,464
|
|
|
68,318
|
|
||||
Gross profit
|
79,093
|
|
|
56,851
|
|
|
214,602
|
|
|
155,058
|
|
||||
Operating expenses
(1)
:
|
|
|
|
|
|
|
|
|
|
||||||
Research and development
|
29,358
|
|
|
22,953
|
|
|
84,512
|
|
|
66,683
|
|
||||
Sales and marketing
|
56,778
|
|
|
43,899
|
|
|
156,707
|
|
|
119,421
|
|
||||
General and administrative
|
21,398
|
|
|
16,212
|
|
|
59,502
|
|
|
48,149
|
|
||||
Total operating expenses
|
107,534
|
|
|
83,064
|
|
|
300,721
|
|
|
234,253
|
|
||||
Operating loss
|
(28,441
|
)
|
|
(26,213
|
)
|
|
(86,119
|
)
|
|
(79,195
|
)
|
||||
Other income, net
|
619
|
|
|
681
|
|
|
1,345
|
|
|
745
|
|
||||
Loss before provision for (benefit from) income taxes
|
(27,822
|
)
|
|
(25,532
|
)
|
|
(84,774
|
)
|
|
(78,450
|
)
|
||||
Provision for (benefit from) income taxes
|
(133
|
)
|
|
294
|
|
|
(786
|
)
|
|
800
|
|
||||
Net loss
|
$
|
(27,689
|
)
|
|
$
|
(25,826
|
)
|
|
$
|
(83,988
|
)
|
|
$
|
(79,250
|
)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
2017
|
|
2016
|
|
2017
|
|
2016
|
|||||||||
Cost of revenue
|
$
|
2,408
|
|
|
$
|
1,919
|
|
|
$
|
6,668
|
|
|
$
|
5,355
|
|
Research and development
|
7,776
|
|
|
7,172
|
|
|
22,273
|
|
|
20,548
|
|
||||
Sales and marketing
|
6,716
|
|
|
6,657
|
|
|
18,362
|
|
|
17,780
|
|
||||
General and administrative
|
5,619
|
|
|
4,247
|
|
|
15,502
|
|
|
12,654
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
2017
|
|
2016
|
|
2017
|
|
2016
|
|||||
Cost of revenue
|
2.1
|
%
|
|
2.4
|
%
|
|
2.2
|
%
|
|
2.4
|
%
|
Research and development
|
6.9
|
|
|
8.9
|
|
|
7.3
|
|
|
9.2
|
|
Sales and marketing
|
6.0
|
|
|
8.2
|
|
|
6.0
|
|
|
8.0
|
|
General and administrative
|
5.0
|
|
|
5.3
|
|
|
5.0
|
|
|
5.7
|
|
|
Three Months Ended September 30,
|
|
|
|
Nine Months Ended September 30,
|
|
|
||||||||||||||
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
|||||||||||
(In thousands, except percentages)
|
|||||||||||||||||||||
Revenue
|
$
|
112,786
|
|
|
$
|
80,717
|
|
|
40
|
%
|
|
$
|
307,066
|
|
|
$
|
223,376
|
|
|
37
|
%
|
|
Three Months Ended September 30,
|
|
|
|
Nine Months Ended September 30,
|
|
|
||||||||||||||
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
|||||||||||
(In thousands, except percentages)
|
|||||||||||||||||||||
Cost of revenue
|
$
|
33,693
|
|
|
$
|
23,866
|
|
|
41
|
%
|
|
$
|
92,464
|
|
|
$
|
68,318
|
|
|
35
|
%
|
Gross margin
|
70.1
|
%
|
|
70.4
|
%
|
|
|
|
69.9
|
%
|
|
69.4
|
%
|
|
|
|
Three Months Ended September 30,
|
|
|
|
Nine Months Ended September 30,
|
|
|
||||||||||||||
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
|||||||||||
(In thousands, except percentages)
|
|||||||||||||||||||||
Research and development
|
$
|
29,358
|
|
|
$
|
22,953
|
|
|
28
|
%
|
|
$
|
84,512
|
|
|
$
|
66,683
|
|
|
27
|
%
|
|
Three Months Ended September 30,
|
|
|
|
Nine Months Ended September 30,
|
|
|
||||||||||||||
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
|||||||||||
(In thousands, except percentages)
|
|||||||||||||||||||||
Sales and marketing
|
$
|
56,778
|
|
|
$
|
43,899
|
|
|
29
|
%
|
|
$
|
156,707
|
|
|
$
|
119,421
|
|
|
31
|
%
|
|
Three Months Ended September 30,
|
|
|
|
Nine Months Ended September 30,
|
|
|
||||||||||||||
2017
|
|
2016
|
|
% Change
|
|
2017
|
|
2016
|
|
% Change
|
|||||||||||
(In thousands, except percentages)
|
|||||||||||||||||||||
General and administrative
|
$
|
21,398
|
|
|
$
|
16,212
|
|
|
32
|
%
|
|
$
|
59,502
|
|
|
$
|
48,149
|
|
|
24
|
%
|
|
Nine Months Ended September 30,
|
||||||
2017
|
|
2016
|
|||||
Net cash provided by operating activities
|
$
|
24,739
|
|
|
$
|
3,994
|
|
Net cash used in investing activities
|
(53,216
|
)
|
|
(170,232
|
)
|
||
Net cash provided by financing activities
|
27,115
|
|
|
27,774
|
|
•
|
development of our family of products, including investments in our research and development team, the development or acquisition of new products, features, and functionality, and improvements to the scalability, availability, and security of our products;
|
•
|
our technology infrastructure, including investments in our hosting capabilities, enhancements to our network operations and infrastructure, and hiring of additional employees for our operations team;
|
•
|
sales and marketing, including an expansion of our direct sales organization;
|
•
|
additional international expansion in an effort to increase our customer base and sales; and
|
•
|
general administration, including legal, accounting, and other expenses related to being a public company.
|
•
|
the need to educate prospective customers about the uses and benefits of our products;
|
•
|
the discretionary nature of purchasing and budget cycles and decisions;
|
•
|
the competitive nature of evaluation and purchasing processes;
|
•
|
announcements or planned introductions of new products, features, or functionality by us or our competitors; and
|
•
|
lengthy purchasing approval processes.
|
•
|
our ability to attract new customers, retain and increase sales to existing customers, and satisfy our customers’ requirements;
|
•
|
the number of new employees added to our company in a given period;
|
•
|
the rate of expansion and productivity of our sales force;
|
•
|
changes in our or our competitors’ pricing policies;
|
•
|
the amount and timing of operating costs and capital expenditures related to the operations and expansion of our business;
|
•
|
new products, features, or functionalities introduced by our competitors;
|
•
|
significant security breaches, technical difficulties, or interruptions to our products;
|
•
|
the timing of customer payments and payment defaults by customers;
|
•
|
general economic conditions that may adversely affect either our customers’ ability or willingness to purchase additional subscriptions, delay a prospective customer’s purchasing decision, reduce the value of new subscription contracts, or affect customer retention;
|
•
|
changes in the relative and absolute levels of professional services we provide;
|
•
|
changes in foreign currency exchange rates;
|
•
|
extraordinary expenses such as litigation or other dispute-related settlement payments;
|
•
|
the impact of new accounting pronouncements; and
|
•
|
the timing of the grant or vesting of equity awards to employees.
|
•
|
increased management, travel, infrastructure, and legal compliance costs associated with having multiple international operations;
|
•
|
longer payment cycles and difficulties in enforcing contracts, collecting accounts receivable, or satisfying revenue recognition criteria, especially in emerging markets;
|
•
|
increased financial accounting and reporting burdens and complexities;
|
•
|
requirements or preferences for domestic products;
|
•
|
differing technical standards, existing or future regulatory and certification requirements, and required features and functionality;
|
•
|
economic conditions in each country or region and general economic uncertainty around the world;
|
•
|
compliance with foreign privacy and security laws and regulations and the risks and costs of non-compliance;
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•
|
compliance with laws and regulations for foreign operations, including anti-bribery laws (such as the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. Travel Act, and the U.K. Bribery Act 2010), import and export controls laws, tariffs, trade barriers, economic sanctions, and other regulatory or contractual limitations on our ability to sell our products in certain foreign markets, and the risks and costs of non-compliance;
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•
|
heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact our financial results and result in restatements of our consolidated financial statements;
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•
|
fluctuations in foreign currency exchange rates and the related effect on our operating results;
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•
|
difficulties in repatriating or transferring funds from or converting currencies in certain countries;
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•
|
communication and integration problems related to entering new markets with different languages, cultures, and political systems;
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•
|
differing labor standards, including restrictions related to, and the increased cost of, terminating employees in some countries;
|
•
|
the need for localized software and licensing programs;
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•
|
the need for localized language support;
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•
|
reduced protection for intellectual property rights in some countries and practical difficulties of enforcing rights abroad; and
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•
|
compliance with the laws of numerous foreign taxing jurisdictions, including withholding obligations, and overlapping of different tax regimes.
|
•
|
discontinues or limits our access to its APIs;
|
•
|
modifies its terms of service or other policies, including fees charged to, or other restrictions on us or other application developers;
|
•
|
changes how customer information is accessed by us or our customers;
|
•
|
establishes more favorable relationships with one or more of our competitors; or
|
•
|
otherwise favors its own competitive offerings over ours.
|
•
|
issue additional equity securities that would dilute our existing stockholders;
|
•
|
use cash that we may need in the future to operate our business;
|
•
|
incur large charges or substantial liabilities;
|
•
|
incur debt on terms unfavorable to us or that we are unable to repay;
|
•
|
encounter difficulties retaining key employees of the acquired company or integrating diverse software codes or business cultures; and
|
•
|
become subject to adverse tax consequences, substantial depreciation, or deferred compensation charges.
|
•
|
actual or anticipated fluctuations in our operating results;
|
•
|
the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections;
|
•
|
failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates, and publication of other news by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;
|
•
|
ratings changes by any securities analysts who follow our company;
|
•
|
announcements by us or our competitors of significant technical innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;
|
•
|
changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;
|
•
|
price and volume fluctuations in the overall stock market from time to time, including as a result of trends in the economy as a whole;
|
•
|
changes in accounting standards, policies, guidelines, interpretations, or principles;
|
•
|
actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;
|
•
|
developments or disputes concerning our intellectual property or our products, or third-party proprietary rights;
|
•
|
announced or completed acquisitions of businesses or technologies by us or our competitors;
|
•
|
new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
|
•
|
any major change in our board of directors or management;
|
•
|
sales of shares of our common stock by us or our stockholders;
|
•
|
lawsuits threatened or filed against us; and
|
•
|
other events or factors, including those resulting from war, incidents of terrorism, or responses to these events.
|
•
|
authorize our board of directors to issue, without further action by our stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock;
|
•
|
require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;
|
•
|
specify that special meetings of our stockholders can be called only by our board of directors, the Chair of our board of directors, or our Chief Executive Officer;
|
•
|
establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors;
|
•
|
establish that our board of directors is divided into three classes, Class I, Class II, and Class III, with each class serving three-year staggered terms;
|
•
|
prohibit cumulative voting in the election of directors;
|
•
|
provide that our directors may be removed only for cause;
|
•
|
provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; and
|
•
|
require the approval of our board of directors or the holders of at least 75% of our outstanding shares of capital stock to amend our bylaws and certain provisions of our certificate of incorporation.
|
|
|
|
|
Incorporated by Reference
|
||||||
Exhibit Number
|
|
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
10.1
|
|
|
Filed herewith
|
|
|
|
|
|
|
|
31.1
|
|
|
Filed herewith
|
|
|
|
|
|
|
|
31.2
|
|
|
Filed herewith
|
|
|
|
|
|
|
|
32.1*
|
|
|
Furnished herewith
|
|
|
|
|
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
Filed herewith
|
|
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
Filed herewith
|
|
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
Filed herewith
|
|
|
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
Filed herewith
|
|
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
Filed herewith
|
|
|
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
Filed herewith
|
|
|
|
|
|
|
|
|
*
|
The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.
|
|
|
Zendesk, Inc.
|
|
Date: November 3, 2017
|
|
By:
|
/s/ Elena Gomez
|
|
|
|
Elena Gomez
|
|
|
|
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
Expansion Lease Year
|
Rent Per RSF
|
Monthly Base Rent
|
||||
1
|
|
$73.00
|
|
|
$315,177.50
|
|
2
|
|
$75.19
|
|
|
$324,632.83
|
|
3
|
|
$77.45
|
|
|
$334,390.38
|
|
4
|
|
$79.77
|
|
|
$344,406.98
|
|
5
|
|
$82.16
|
|
|
$354,725.80
|
|
6 - Expansion Expiration Date
|
|
$84.63
|
|
|
$365,390.03
|
|
|
LANDLORD:
|
|
|
|
|
|
ASB 989 MARKET, LLC
,
a Delaware limited liability company
|
|
|
|
|
|
By:
|
/s/ David T. Quigley
|
|
Name:
|
David T. Quigley
|
|
Title:
|
Senior Vice President
|
|
|
|
|
|
|
|
|
|
|
TENANT:
|
|
|
|
|
|
ZENDESK, INC.
,
a Delaware corporation
|
|
|
|
|
|
By:
|
/s/ John Geschke
|
|
Name:
|
John Geschke
|
|
Title:
|
CLO and SVP, Administration
|
|
|
|
|
|
|
|
|
|
Date:
|
November 3, 2017
|
By:
|
|
/s/ Mikkel Svane
|
|
|
|
|
Mikkel Svane
|
|
|
|
|
Chief Executive Officer
(Principal Executive Officer)
|
Date:
|
November 3, 2017
|
By:
|
|
/s/ Elena Gomez
|
|
|
|
|
Elena Gomez
|
|
|
|
|
Chief Financial Officer
(Principal Financial Officer)
|
/s/ Mikkel Svane
|
|
Mikkel Svane
Chair of the Board of Directors and Chief Executive Officer
(Principal Executive Officer)
|
|
November 3, 2017
|
|
/s/ Elena Gomez
|
|
Elena Gomez
Chief Financial Officer
(Principal Financial Officer)
|
|
November 3, 2017
|
|