Q3 2020 Zendesk Inc Earnings Call
For the full year. This is of course the journey we've been on since 2016, when we first that said that inspiration.
And while we are very pleased with our results. We also remain cautious our customers in general industries are still recovering and we know that a resurgence in cases and the return of restrictions can very well make the situation worse from many of them.
Through all of the challenges this year Youre, though it has been very gratifying to see how our products how our solutions are helping customers, helping businesses adapt and react so quickly to the very quickly changing conditions. We see so many examples of companies quickly.
Opting in and working through this crisis, using our tools to with grit and Petrobras. So a big thank you to all our customers for trusting us as their partner us through this we will continue to do everything we can to keep your vascular agile and keep your smart and your customer engagement.
And before I turn also in China with all the numbers I'm going to say a big Thank you to all our employees for thousands of than sitting at home I know many of you are listening to this call. This want to use this opportunity to say thank you for your sacrifice and everything you do in your grid in this in this and they make and Thats were working away through this so thanks everyone.
And with that bodes julina.
Thanks, Michael.
Thank you everyone for spending time with us uncommitted for my basement that Internet reception anyway, a in this dynamic pandemic environment, the momentum and resilience of our business is shine. We're on track to exceed our objective to be a billion dollar company and provide full year guidance that reflects 25% year.
Three aircraft at the midpoint, which demonstrates the strength of our business model now more than ever we are seeing companies want solutions with quick time to value, which we are well positioned to deliver.
Third quarter revenue increased 24% year over year and exceeded our expectations revenue outperformance was driven by strong demand for our solutions and improved turning contraction rate during the quarter.
We see signs that the initial shock at the pandemic is behind US. Although we continue to proceed with caution given the continued uncertainty around the pandemic and economic climate.
Customer churn rate returned to normal levels in the third quarter contraction rate significantly improved but remains elevated compared to historical trends. We're encouraged that some of the customers that contracted with us in the second quarter expanded in the third quarter.
Our net expansion rate improved to 112% in Q3 up from 111% in Q2 and continue to be in the healthy range of 110 to 120.
Air are from 100, plus agency to remain flat at 43% in Q3 compared to prior quarter, given the very strong performance of our SMB business.
Tell our PEO increased 43% year over year short term RPL increased 39% and long term RPL increased 56% year over year. The increase in RPL demonstrates our customer's commitment to partner with us for the long term, we saw an elevated number of multiyear contracts this quarter compared to.
Earlier this year.
Now turning to gross margin GAAP gross margin for the third quarter was 76% up 4.1 percentage points year over year non-GAAP gross margin was 78.7% up 2.8 points year over year gross margin improvement was driven largely by revenue scale and increased optimization of our personnel costs.
In our product support organization and efficiency from our hosting infrastructure gap.
GAAP operating margin expanded by six percentage points and non-GAAP operating margin expanded by 4.5 percentage points.
Second improvement was driven largely by revenue outperformance gross margin expansion and prudent expense management margin also benefited from lower travel and event cost due to the pandemic.
Free cash flow was $25 million in the third quarter.
Now, let's move on to guidance for Q4.
We expect revenues between 274 in $279 million, representing 20% year over year growth at the midpoint, we expect non-GAAP operating income between 16 million and $20 million for the full year. We expect revenue between 1.02 billion and 1.025 billion, we expect non-GAAP operating in.
Come between 69 and $73 million.
We expect free cash flow for the full year 2020 to be approximately $15 million or higher free cash flow could be impacted by real estate changes, we plan to make to no longer occupied two of our leased office buildings in San Francisco we.
We have remaining contractual rent payments of approximately $12 million and additional operating costs related to these buildings, which we may accelerate before March 30, Onest 2021.
The impact from these changes has not been included in this guidance since the timing and the amount are unknown.
Over the last six months, we have spent a lot of time re imagining how we work a big part of that conversation focuses on our physical spaces.
Our employees have adapted well to remote work and we when we do return to the office, we intend to we intend for many of our employees to remain were about we are determining how we can optimize our real estate globally globally.
Finally, as Mikkel said and I'll close with saying that our outperformance or during this quarter could not be possible with the great teams across the organization. Our focus remains on strategically managing the company for the long term with decisions optimized for delivering greater customer value and long term financial growth and profitability.
City with a strong balance sheet and a competitive position, we are well positioned to invest for the long term growth of this company marked.
Mark back to you.
Thanks, Linda and we're going to turn it over to acuity, though.
As we did last quarter, we put all of our analyst days into randomized.
And we will be using that random.
Randomly selected order for todays call soon our first analyst.
Today is as Jen Lowe from US if you commute yourselves and if you'd like to turn on your video we're happy to see you as well. Thank you guys.
Okay.
Great and thanks to the random either for putting me in first.
Maybe just to start on that last point Alina you mentioned rethinking.
Exiting the San Francisco, we became the footprint globally I'm sure you're not the only ones at this point in time as you think about what that might look like in terms of margin.
Going forward I know, it's early but if the aspiration is that you would be a bit more cost efficient as well around your head count with that new real estate footprint or would that be reinvested how should we think about what that ultimately means for the business.
Yes, no I think that's a fair question.
We're going to continue to balance our investments focused on growth and so to the extent that we have.
Savings if you will I think thats. The question from real estate will we be investing not in the business. We will if it makes sense and will continue to position us for growth, but at the same time, we're constantly looking at ways to scale solo definitely be some benefits in our in our operating.
Income as a result.
Maybe just one for nickel.
Uhm. Thanks, guys for taking my question you know I just I wanted to ask about do the comments you made earlier on the expansion and some of the industries, where you seem contraction I know in the past you've talked about how you you. There's a decent amount of goodwill. It's been building there where you can pick provided us.
Concessions customers <unk> will remember this and come back are there is there any color you can provide as to how that's gone within some of those hard it industry's kind of where are we with some of that uhm.
You know business kind of coming back and and you've been thinking about expansion.
Yeah, I mean, I'll I'll sarin and marker Michael feel free to chime in but we're we're definitely not back to pre covered levels and these aren't hit industries uhm, but we are seen some some of that expansion come back, but I would definitely say, we're not <unk>. We're.
We are not close to print Kevin level, but overall I mean, the good news is is our businesses pretty broad and diverse and so there isn't any one particular industry or segment that is really drumming up at the overall financial picture for us.
Coverage right now Uhm, if you look at the car sure Airlines and and just travel related industries. Those are probably the hardest stood of our customers, but if you look outside of those impacted industries, there where there was definitely a returned some more normal patterns that completely normal, but they returned to much more normal patterns and.
Two three Q2 got.
Great. Thank you and then any color you guys can provide on kind of progress with some of these bigger expansion deals in the <unk> in large organizations you know the great result, this quarter on the billings and backlog. It so any kind of color on kind of the the bigger expansion deals maybe even.
Sunshine are you see somebody's bigger larger firms committing more to the platform and going wider with was in desks or.
You know reflected in our R. P M. Brad you saw uhm and I mentioned it on the script Nissan elevated instead of customers in terms of committing longer to also I'm really encouraged by by that Uhm I wouldn't call out any single product. If you will but just commitment to to descender.
Family of products Uhm Mccollough to China in there too.
But I think in general you can look at like S. We also put in the Seattle. They're then it's me repeat if you like I'll I'll I'll expansion business is returning strunk gross that'd be very optimistic about.
Great. Thanks, guys.
Thanks bread. So next step we have drew foster from city.
<unk> can you guys hear me Yep. Just go ahead, okay, great great. Thanks, a lot <unk> I just wanted to double click on some of the.
Uhm bladder comments that you've made their around to our P. O. So you know both current total R. P. O growth Mcwhorter was was really strong looks just sugary accelerated from Q2 and I know that you just mentioned there you had some multi your deals in the corner, but are there any other benefits that that metric saw in the corner in terms of.
Maybe somebody a larger deals lending and and whether there were any big renewals and a quarter as well.
And we we we don't comment on specifics customers true.
But I can tell you and looking back at our R. P O and the contract terms over the last few corners within this here, we definitely saw really good momentum and keep three and it's broad based I can't point to any one segment, but it's broadbase. So there's there's no nothing more to say other than you know more commitment from these customers and.
And actually encouraging to see this level of commitment and the backdrop that one.
Sure I'd just like to add their you know we do thousands of transactions per quarter. Because you know we have 170000 customers. So sure we're not dependent on any one customer to to swing that results in any direction.
Understood helpful. Thanks, a lot and then just a another follow up alannah in the queue for God's sort of implies a little bit lower of a growth rate than we're senior in Q3. So I'm just wondering if there's any areas of the business, where you're sort of taking an outsize uhm level of conservatism there maybe maybe.
Q for where there's more a large deals than normal.
That's a fair question you know I I, we we approached guidance at the same generally the same approach, but we are in a different order in a totally different environment. So I think for me. It was really prudent to just put out of a guidance on you know we've got an election year. We've got a pandemic I just felt like it was put into.
Be measured about that guidance.
And you know we're not out of the words as as we just talked about in Europe et cetera. So that's what that guidance reflects.
Okay. Thanks, so much.
Fixture mixed up let me make sure you're right Tom Roderick isn't it.
Yeah, I'm I'm on Mark can you up I think the video that Rosemary here we go.
Okay. Okay excellent. Thanks, Thanks for taking my question so.
<unk> always been I mean, your business was very strong and relevant in Europe and international early on probably you know earlier than most companies for for your size as you're growing up so you've always had a great view with what's going on internationally I think you call that European weakness you know last year ahead of what a lot of companies saw it so you've got a pretty good feel for that.
Would love to hear what you're seeing in real time in particular, you know <unk>. It sounds like a a offered a little bit of you know caution relative to cases are on the rise Europe is starting to see perhaps a little bit of a check down but anything beyond those sort of broader cautionary comments with what you're seeing internationally or hearing from customers I'd love to hear what the X.
Will you know customer feedback is right now.
I'm I'm not sure I can provide so much in size that doesn't exist already you know that it's definitely gone like Oh. It just over the last month thing somebody's accelerating quickly in Europe, and you know that's definitely affecting the move there on the other hand like there is.
You know S. The other questions before like there is a kind of a readiness for it like we know what we're going into we've we've kinda up there with as we all know there's light at the end of the tunnel just have to get through the snakes bike very important months.
So I don't have any other insights about we see we see we see great strengths around the world even in places, where we shouldn't see great spring. So I think that takes a little bit more to the fact that everybody is a little bit more prepared for what we're going through them. They were six months ago.
I'm talking about just remind you for <unk>, maybe maybe <unk>.
Last year, we did reorganize how we approach the S. M B category of our business and that has had some pay off uhm, where we enabled ourself service capabilities and improved on our customers being able to join US in itself service environment and I've just been very helpful for us through this period.
Yeah. That's a good reminder, thanks for that quick quick follow up just more on the product side anything you can offer relative to the the the trend line of Sweet sales over the last 90 days hundred and 80 days, what what's happening with the demand for the sweet and what's happening with deal sizes as a function of that.
I'll take that so we've been seeing some really good demand for our support Street.
Uhm within that support Sweet there's conversational messaging capability, that's being built in as we very more messaging channels natively and so we feel that are bundled offers that around the support sweet, especially had been showing some really good demand.
And actually outperform your stand alone kind of demand for support only products.
Outstanding. Thank you I'll jump back and I appreciate it. Thank you Tom mixed up as Alex <unk> from our B C.
Hey, Mark I think you disable at my video I.
But I'm gonna try to turn it back out for Ya There you go [laughter].
Thank you guys for taking my question I guess, maybe the first one four or whoever wants to take it. If you think about the business from an enterprise perspective versus velocity talk to talk about you know where you saw most most of the outperformance was it an deals that were kind of held up.
It last quarter that that got done and then also maybe just talk about the pipeline for both businesses and where you're kind of building confidence in stripes.
Yeah, I can start and and you guys can chime in so Alex the the business you know if I look at the strong performance in Q3, it's really across all of our segment. So then I just I just share that with the board a couple of days ago that that one of the things that we really were encouraged by is that we did.
<unk> broad based return if you will the business <unk>, we don't want to make one corner a trend and so we're we're cautiously optimistic that yeah. I do think there are certain deals that in queue to worry you know maybe put on pause. If you will that that came back but I don't want to point to anyone deal I think the.
<unk> three was really broadbased in terms of pipeline you don't Wanna encourage while falling.
<unk>, two three and and again one quarters now to transfer alone we don't like to talk about pipeline specifically anyway.
I'll, let my I'll, Let me go ahead, and Mark add more color if they want.
I don't have anything else that to that one.
Mmm, maybe just them to follow up given this was you know kind of a unique order you know given to put some takes from last quarter to this quarter and the unique year ago compare.
You know I know, you're not you don't guide to it but you know there's quite a dispersion between you know what your billings growth is what your current R. P. O growth is what your current R. P. O billings grow this and so I just do we think about cute for as we think about growth going forward. You know I know you guys don't want to make a trend out of a quarter, but we we that's what.
We do and so what what is what would you point is two on some of those forward looking what would your caution us remind us in terms of seasonality and then also what's the right way to think about you know you're kind of growth outlook are you a second order a beneficiary you know from a fan of the demand environment you figured out how to sell you know what you express.
Et cetera, or what what's the right way to kind of put it into perspective.
So I think I got like five questions and one that well played so I think the first thing is this is not a normal ear. So like <unk> and we all know that uhm. So while typically and we talk about seasonality you know I'm paying attention to that but I'm not I'm expecting you know everything's gonna be exactly the same now.
Encouraged by what we did in key tree and of course and I'm not Gonna Guide obviously, two next year about what I will tell you is the initial shock of the pandemic and kind of it was in Q2 N. As time goes by that impact on our financials is less and less.
Yeah, Alex I think it's really important to remember that some of that contraction. We took on in queue to from the travel for those categories. They can we continue to carry that until those companies bring back to their employees and bring it back there and J agents and so that has an impact here near term and as we kind of see her.
February and those categories that will help us.
Understood. Thank you guys.
Next up is Chrismer Winslow.
Chris or you want.
Sorry about that can you guys hear me okay Yep.
Yep, we're getting ready to yet.
Okay, Uhm I wanted to ask.
Oh, sorry, I think I'm, having trouble with my video, but how about if you can hear me I'll I'll go ahead and ask her I think last quarter, you talked about the customer segments of bed and it sounded like there was some relative strengthen and S. M. B N and the enterprise segment little what's a mid market curious this quarter you know given the broad based recovery saw pretty much all your <unk>.
<unk> in particular are P. O can you talk a bit about what you saw my customer segment did you see some stronger mid market performance, particularly with with larger and longer duration deals just curious anything you'd be co out there. Thanks.
Yeah of course, I would just repeat what I said earlier, which is we really didn't see the performance and all of our segments. This Carter, which were encouraged by US. It's obviously not a trend in the backdrop that we have in the macro environment that.
Definitely the mid market and all of our segments had strength in Q3.
Great and then maybe just one follow up and it sure hold a letter there was a number mentioned with Sunshine conversation.
Email is part of of some of the the deals that you called out I guess, what we think about Sunshine you know being utilized more of of course here in platform for your customers anything else you can share their N is the expectation still for that to be kind of a more material contributor next year. Thanks.
Yeah, So maybe I could just no doubt that the.
Messaging and the capabilities, we both offer and use for the Sunshine conversation pencil is a big part of our future are we gonna talk a lot more about that in the coming months and Nexia and that's something we are very excited about it is it is what it is it is one of the twins are going.
Okay. Thank you.
Thanks, Chris up next is stanislavski for Morgan Stanley.
Alright, alright.
Hi, guys. Thank you so much for taking my question.
A couple I wanted to do a double clicking too first one on on current R. P. O a specific right out of starting to to elude to it was very meaningful shifting customers going from.
Monthly two L contracting that that because of that or was it just you know just pure.
More bookings.
Yeah, I don't think that I observed a very big shifted our shorter than 12 month business mix. So I think that was just more of an indicator of the strength of our you know kind of our momentum other business and a quarter.
Okay, that's great and then just.
I'll never forget some of the questions were at.
Since you for a big enterprise selling cycle, how are you thinking about that part of the business, just usually really strong uhm and a quarter.
Yeah, I mean, I think you know our guidance definitely you know when he was done with the backdrop in mind stand and so we've just got to kind of see this through I'm Super incursion proud of the team for what happened in key three across all segments assistance, We said uhm and cute for typically is.
Our our big enterprise corner as you know, but this is a different year. So we're just trying to be cautiously optimistic about that and I get ahead of our skis.
Got a new sofa for that for that particular segment.
Did you is it fair to say that you apply that Guy you know an extra layer of conservatism for that segment versus what you may have done in prior years.
I wouldn't say that I don't think <unk> I think we'd be falsely precise to be honest. It. So I wouldn't I wouldn't go there I would just say our guidance reflects you know pre prudent and do you have the business right now.
Alright, Thank you guys.
Thanks, and I don't see <unk> on the call. So we're gonna move to some mud.
From Jeffries.
Mm you too.
<unk>.
Okay, It looks like it.
I need I need I need him Mark it'll snow there, yes, hey can you <unk> can you hear me now yeah, Yeah, sorry, 2020, <unk> do it everything started like can you hear me now <unk>. Thank.
Thank you for taking the question. It's good to see you and I Hope you are all doing well. So you know I wanted to ask maybe more of a high level question as we think about some of that strengthen your bookings and as we think about the source of new customer adds how should we think about that in relation to you you know we're hearing from companies whether.
It's shopify or big commerce, it as their adding more new merchants won't be seen record new business formation actually in the U S. During the third quarter can you maybe help us think about the the mix of your new customers added in three Q in relation to you maybe the source of some of these other companies that would be adjacent to <unk>.
For the third quarter.
I'll start this so I think that you know we saw a lot of good demand from new customers and a lot of it has to do with working with customers differently, but in customer interactions are evolving whether it's messaging channels, whether it's for pick up any other kind of.
<unk> companies eats employed I think were important.
Eco provider for that ecosystem. So I do think we benefit from that I'm not gonna say that that's like the only thing that we benefited from the overall health of the business was much better to three then in Q1 or two two of this year. So I think we saw a nice general recovery. So I don't want a tribute all of our.
Upside to that.
And I guess, maybe just as a follow up to that you know did you think about your customer base. When you think about where they are in terms of different pieces of technology.
How long after somebody maybe either of <unk> and whether it's starting an online store if they're moving to buy online pick up or you know curbside pick up I guess, how quickly do they can they can they set up something like send us to support that I guess, we're just trying to triangulate on on whether some of the success with somebody the other companies as a leading indicator or a <unk>.
Lagging indicator for for future customer breath.
It's it's really speculation you know like an AD like I wouldn't make any correlation between these businesses. We do like we do believe that we Yana time right now let me see that replaces our own business too short cycles crickets relations very quick deployment Lord of activities lot of traffic on the platform.
All those people need speed of cheeses TNI Smartness, you know they don't want to spend yes and E. As in big massive projects. They Wanna move fast, especially in our category Wednesday about engaging my customers and like that's that's really busy right now it has implications to all business and we believe it has long term implications to how we think about T. M I.
Spending a makes many many years.
Great I'll turn it over to the next day, and thanks, again and and get to see alright. Thanks for markets to you mixed up is so low.
Alright.
Thanks for taking my my question, they're gonna, they're somebody else to be a.
Of course for America, one of them is a call to Atlanta Your medical somebody your research as a benchmark data shows the ticket volumes are off significantly a year over year I think of a high teams. Your 16 70 per cent of it has it really been going down. The question for you is what are your customers during to deal with that sort of a new kind of resolution doesn't go up is that what's driving the interesting thing.
Like Sunshine conversations chat just different types of channels that are maybe asynchronous versus for a second incident. You want later if that is maybe what's driving some of those who knows how do you think about penetration of those add ons into the customer base and how do you spell that too all right.
Immediately now maybe I can find here, but no the outfield it'll be a seeing a flurry of activity and like a lot of traffic on our platform.
I'm in a lot of that is because it's moving from other channels that we were you don't have the option today like I'm moving a lot from offline to online and it becomes it becomes natural something like this is where you engage with your customers. Your customer engagement is now online primarily there's no doubt that like as business with thinking about like how can we provide a fantastic customer experienced.
This way you know in life, especially for a lot of the new ones cause I'm seeing a.
Economy, one room that you're thinking about like how can we increasingly automated this give our customers much more self service and that's what caused also where we help them with all of these tools are providing a great self service experience, but that's all the traffic on our platform. So we were gonna continues to see a lot ton of traffic final product a sofa coffee was very excited [laughter].
Yeah.
Yeah, So I'm just gonna add from.
Penetration point of view from our customers.
<unk> messaging channels are all fairly new so we're in you know in the first couple of innings of this but definitely consumer demand to message with companies rather than wait on hold for you yesterday I called Delta Airlines 58 minutes. That's you know not acceptable this day and age I also those the customers are also look you using our explore products.
They understand more of the data behind those customer conversations and like Michael said, you know the help centre the ability to Seltzer is very critical in the in this world. So I think we're seeing a lot of that demand out there and we have a nice portfolio products and serve that so we're pretty excited.
Oh wait and all that and a ton of add onto the model actually right [laughter].
Be careful number the be careful [laughter] whole number though you know we also offer a lot of bundled support you know sweet offerings that raise the average selling price on its own. So as you think about building. Your models you know a lot of our customers are coming to us with a more bundled mentality around the support Sweet for example.
Other products other bundles that we might create in the future.
Great. Thanks, a lot.
Yeah.
Alright up next is Koji the modem Oppenheimer, let me.
Orange you on my screen here.
[laughter] <unk> [laughter], Yeah, I Gotta I Gotta get the does go Dodgers. He just real real quick one question from me on the dollar based on that expansion rate extending by a point to 112% that's really fantastic and I think that should mean that the trough number of the last quarter hopefully behind the business.
So I I guess can you walk us through the mechanics of the expansion with a seat expansion more products, maybe a combination of both of that and really thinking about the downside too I mean, what would it really take from here for that metric to get back to the 101%. We saw last part thank you.
Yeah. So could you you're right I mean, I think that the that number is obvious first of all I'll send a healthy range for us we we don't like to take any one corner and said this is a trend that that said I think it's it was impacted by the contraction. We saw early in the year and continue to have a little bit of a lag on that just remember that that's an annual matruk, where I can look.
Back a year so that dynamic is mark that earlier I was gonna continue with us for a little bit, but we're encouraged by the expansion we saw with some of those customers that contracted in queue to at least a corner of them are back now they're not back to pre covered levels in terms of expansion, but we'll keep in.
I on that <unk>.
For that to get you know to get to continue to decrease would mean another elevated level trying to contractions.
And we don't know that alright, what's your environment. We just don't know it's hard to predict Yep Yep, great. Thank you for taking my question appreciate it.
Oh, Thanks coaching next.
Is they're quick from Canada.
Great. Congrats good to see everyone [noise] wanted to ask my first question and on pricing and.
I know you know just kind of curious how you dealt with that through throughout the pandemic of thank you kind of have been more forgiving and and and giving concessions and yeah working to preserve P. C. B was some of the things you talked about early on how does that evolved to where we are today and <unk> are you. Unfortunately more pricing are you are you.
Are you less focus yeah. These these T C b flexibility contract how should we think about how that's all.
Yeah. So in you're writing queue to we had to do a lot more of that especially early on when Kevin head and there was a lot of uncertainty it's not to say that that that won't happen to an extent, we have customers, but it's account gone down significantly from the queue to levels Uhm and to the extent we could are approached.
Was to per year of the tall T. T V for those customers and do the right thing and we do believe that will pay off over time.
Great that maybe I'd, just just to kind of head on G. O performance, you talked about pretty broad base from.
A customer segment standpoint, and go to market sales motion standpoint, but how about how about G O I I look at.
Calculated growth across looks like a media and a pack accelerated a little bit U S decelerated, but those can be backward looking number and so so just curious from a booking standpoint, how do you characterize G O performance and <unk>.
Yeah, No I think we had we had good performance generally around the club I would say I mean, I definitely had a a strong you know we had uneven S. I think it was last year and we brought in some leaders there and we sound pretty strong performance in Q3 in my time, too, but I wouldn't say you know any outward.
<unk>, if you will I think all around we had globally strong performance from my region.
Great. Thanks.
Okay. Sir next let me see as.
D J <unk>.
Did you want my page here.
Hey, guys you got me there you are.
HM.
So <unk> you talked about customers, making longer term commitment and I guess I'm curious what the trade off is there are you having to.
Bundle more product or those relationships more back end loaded as a favorable pricing just like any any broad color on on how those contracts are structured to get longer term deals done in this environment.
You know, they're all a little bit different I don't know that if there's one thing to point too I think it's really the focus on improving our customer experience and moving quickly as opposed to the way we're setting up the contract terms. These are these are companies who are realizing that.
Urgency of of sort of the meeting their customers with the digital channels and things like that so there isn't any one trend and they're all a little different as you know when you get to larger customers. So there's nothing I would point out here that's unique.
Yeah, Okay, and then like maybe <unk>, maybe one for you Uhm curious what you're seeing on an answer but we had five nine tonight as well and you know they they talked about I'm interested in virtual agents I made an acquisition. The space you know customer is trying to do more with less are are you seeing the same kind of interests there and what's the <unk>.
Option was with answered that look like.
Yeah, I'd be very happy about aunts about adoption, we have a lot more coming up to improve in that field I love them, all that can help with automation and and and kind of improving for you know optimizing for the customer experience not all of that information gives a better customer experience would be very focused on providing.
That did across my stance I send it providing making a lot easier snappy of our customers to help themselves. So very happy about it. It's been you know for a lot of our customers when they see this massive spike in traffic that they see it's been a nice line for a lot of them.
That they have this extra level of help it gives a customer some kind of confidence that they're.
They're not just waiting, but I think they have an opportunity to help themselves so very happy about it.
Awesome Alright, guys. Thanks very much.
Oh. Thanks D. J next up is can work from <unk>.
Okay, great. So it's pretty clear that three Q as in a is it a better place than two Q would love to get a sense of what the shape of the improvement look like through the through the quarter, maybe even to the extent you can comment on October any any sense of what the.
In terms of the improvement with like.
I'm definitely not going to comment on October but in Q3, but that was a nice try in Q3, you know, we we had a I had a great car out of the gate and obviously pacing always is an important factor for us, but that was encouraging I think there was.
You know, it's almost like the D M. Our customers kind of got back to normal things settled in people got kind of used to working from home from their living room. So there was a little bit of we're not back to normal. So I don't want a signal that but definitely more more adjustment to the environment, where and people got more comfortable making decisions et cetera at least.
Spell that pretty much out of the gate.
Got it.
And then maybe just circling back.
The new paid customer dynamic I guess on on that metric how how close are we to normal in any sense of kind of when when we might get there.
Well I think it's always difficult to predict normal set a new customers, we bring it over time, especially since we're starting to some more of the sweet where we have multiple products being sold but we were very happy with new customer activity. In this quarter I think that we have an opportunity and a compelling story is customer service becomes with.
Much more integral part of the the demand environment. So I think we're well positioned this quarter, a new business was definitely a key contributor to our growth rate.
Alright, Thanks, a lot.
Thank you can next up is Brett from Piper.
Hi, Brett how are you so yeah, that's and I appreciate the randomize or is by the time <unk>.
Give on the back of the list here, maybe we should go alphabetical.
[laughter] that might not be sure to zukin, So uhm.
All all good two questions if I could I guess first uhm, yeah, Macau I'd love to get your view around larger brands, we're seeing larger brands embraced this whole direct to consumer wait here for the last six months Zen desk is the gold standard for a direct to consumer support for.
The digital natives. My question is are you seeing a change with some of these larger brands that are struggling to have maybe a greater need or want to modernize their support apps as they try to engage consumers with these new digital channels.
Well I think that we all see that I apologize for the noise, yeah, There's a U P S charter outside my window.
[laughter] sure.
Yeah, I think we all I think we all see that in the market if I cross across the.
Most of the spectrum here Black you'll read stories about me and home depot et cetera, et cetera that stand for.
Accelerating.
Kind of that decency that direct to consumer other types of consumer model they seen that across the board.
Fair enough will dive into that maybe offline Ah more it feels like it's a bigger opportunity here mother explore and then I guess alina as we just think about maybe the broader support business 2600 net adhere on the the support side, that's actually higher than we've seen in each of the last three quarters.
So as you think about the acceleration and just net support ads, what what drove that in Q3. It seems a little unusually strong here and love to get any color on what drove acceleration just across the support business.
Yeah, you know I don't know if I have any more color for Ya Brent other than we had you know uhm momentum in our business for for the corner across all of our segments and we're really pleased by a lot of them South service and investments, we're making a <unk> you know web try and buy motion Barry friction for.
Three et cetera, and that continues to be a really important part of our journey here. So other than that I don't know if there's anything I point out different other than we saw really strength across all of our segments in the corner. Okay. Great. That's all I have thank you so much yeah.
Extra in mixed up his origin from William Blair.
Hey, guys can you hear me.
Yep and if it's alright with you.
Area Okay.
Hey, Thanks for taking my question click on maybe maybe for <unk>. The you know it seems like the new customer activity has picked up just when you were looking at across these new customer adds to you get a sense for how much. These customers are making a new platform decision, where where they're saying you know with the desk as my customer service department of choice versus maybe.
<unk> trying to solve somewhat of a more immediate and an urgent digital problem that has just arisen because of the pandemic are you able to decipher that at all.
Yeah, if the agile I I, you know I'm not gonna sit here like and like well you know 10000 businesses decided we would be that platform of choice with you that that's not the climate. We live in today, you know I think that <unk> repeat that cause it was count to us because they trust us to be somebody who can give them and help them with quick resolves and really.
You know get up and running quickly and harvest the resolved and they believe in Allah agility and I'll fix a bit as you can fit you can take you to scale with them and that's that's been out for a minute since we used to have his business to kind of be a very agile too.
Customers and and that's all they're focusing on them and the the climate received today is a lot of activity and that goes all the way from small business to the loss of the prizes and you know we off we are good partner for.
Our customers on that task, but again like as I said before I believe this is not just <unk>.
A moment in time Pizza I think this is this is a trend for the future and that's how are we gonna think about a I T business going forward like nobody wants to do these via projects anymore.
A fair and and you know maybe I'm I'm Gonna last point between S. M. B market enterprise I know, we've talked about in the past about accelerating kind of the enterprise motion with your you know with your with your sales team an account based marketing things like that when when you were looking at the current environment have those resources.
Shifted at all are you focusing more on small businesses midmarket or is it still you know with a person to larger companies and in the enterprise.
Well I think we we are investing across the bullshit also because like we see a lot of we see a lot of activity Indian surprised that isn't like most people to characterize it's traditional it surprise activity. That's a lot of nice about a movement. That's an automated would you like that so we are continuing to.
Invest across the board I think you know where.
Where there's definitely like M O.
<unk> will be definitely kind of native for the small in the mid sized businesses like this that's that would always be things. We believe we can do better for the larger and surprises in and we will of course continue to invest in that.
Perfect. Thanks for taking my questions and Congress and a quarter a surgeon.
I think I didn't see anybody join that was on my list that we missed so.
At this point, we're gonna close this call just a reminder, a replay of this call will be available on our investor website. Shortly after this call and if you have any follow up questions. You can email I R. As in does dot com and Allison on our team will make sure that we get you.
On our calendar for a call back and thanks, again, and we'll see you next quarter.