Q4 2020 Zendesk Inc Earnings Call
Sent up three percentage points two percentage points year over year non-GAAP gross margin was 79, 4% up two points seven points year over year gross margin improvement was driven largely by our revenue scale and increased optimization of our personnel costs in our product support organization and efficiency from our hosting.
Infrastructure GAAP operating margin declined by five two percentage points year over year, primarily due to a $15 million impairment related to office space consolidation non-GAAP operating margin expanded by one four percentage points driven largely by revenue outperformance gross margin expansion and prudent expense management.
Margin also benefited from lower travel and events costs due to the pandemic free cash flow was $38 million in the fourth quarter.
Now moving onto guidance as Mikkel indicated earlier every business needs to be online being online business first.
Simplicity, and agility are more important than ever and will become even more and more important we believe Zen desk is well positioned for this new reality and in 2021, we are investing to reaccelerate to Reaccelerate our growth. We expect revenue in the range of $1. Two 8 billion to $1 305 billion, which reflects approximately.
26% year over year revenue growth at the midpoint, while our 2021 strategy is defined by growth. We will continue to scale. This business. We expect non-GAAP operating income in the range of $90 million to $105 million, we expect free cash flow for the full year of 2021 in the range of $85 million to $100 million, which includes expect.
It accelerated rent payments of up to $12 million related to our real estate changes in San Francisco.
Longer term, we're looking looking to more than triple our revenues as Mikkel said over the next five years as we continue to pursue our goal to be the easiest company to do business with we are fortunate to be in a large and growing market. We believe that we are well positioned to achieve our five year revenue goal as we continue to invest in simplifying our product off.
<unk> and differentiating our go to Marc emotions to serve our customers of all sizes as Mikkel mentioned I made a personal difficult decision to leaves on dusk over the next several months I'm incredibly grateful to have been part of this team over the last five years their journey to a billion has been hard work, mostly fund, though and.
I look forward to watching the company accomplished so much more many so many more milestones over the next several years and finally I'll be here for a little while longer as Mikkel said, so no goodbyes for now and with that I'll turn it over to Marc.
Thanks Elena.
We're going to open it up for Q&A as we've done the last three quarters.
We have put all of our analysts through a randomized <unk> and today, we will open up the call with Phil Winslow with the first question.
Great. Thanks for taking my question I wish I had one mega millions, but I don't think.
Hello.
Hey, Greg a question for Michael and then.
Yes, Michael when you think about the $3 billion target sort of a tripling target that you're talking about over the next five years. How do you think about the growth algorithm. There how much comes from moving up market the newest index suite.
Sunshine et cetera, and then just a follow up for Elena.
That's what we've we've across of course been analyzing all the different growth dimensions to our business.
And I'm not going to I'm not going to share.
Details about that model, but we believe that we both have like additional geographic expansion at trauma as farm.
Given a metric ton of other market opportunities that we can that we are getting.
Very strong indicators on.
Already in our current business.
And just like.
A lot of attention from additional offerings in the market that we see and where we see so we feel we feel we feel confident we feel good about it as a good target our confidence as we approach that fog is going to increase over time I feel confident and we will of course update you.
Got it and then Atlanta, just a follow up on that obviously the <unk> is about 25% of refiners day Tripling, where do you think about just the margin versus growth framework there versus maybe what you all talk about non pass any changes about August two 2021 being investing year.
Yeah, No I think for.
First of all yes, we did have a framework, which frankly when you when you step back and see the world has changed over the last year.
It was a good opportunity for us to rethink that framework and <unk>.
Make no mistake, we're investing for growth and that's our priority and of course it does not mean that over time, we will not scale of this organization because that's always on our mind, but right now the opportunity is great and we've got momentum in the business. So we want to lean into investing alright ill say goodbye for the next quarter, but it's really been a pleasure.
I'm just going to add one other thing our languages more than triple our revenues from <unk>.
Five years so.
Language I'd like to make sure everybody I'm, sorry more than words.
Alright, our next question comes from Vijay Canaccord.
Hey, guys.
So.
Maybe first in personal line of congrats.
For you on.
Our stellar five years.
Maybe first question I'll point to you just in terms of the 'twenty. One guidance can you talk about like what's contemplated in there in terms of recapturing some of that partial churn that we saw as a as an effect of COVID-19.
Yeah sure I mean I think.
Guidance.
The framework, we typically follow.
It hasnt changed that much but there is one exception, which is now we are.
Coming out of the pandemic. So we have to put that lens on top of everything we do so I would say there is cash.
This optimism to answer your question, specifically, what we've seen from the customers who have churned.
Our contracted I should say in Q2, you guys from number that was a tough quarter, we've seen about a third of them come back. So I'm actually optimistic still that we've got some of that to come back into 'twenty and 'twenty one yes.
Okay. That's helpful data point and then maybe.
One for you maybe more strategic I guess.
Does the increase in messaging as a channel in any way change the profile of the data that you have access to.
You know look messaging is obviously like a far more persistent channel and I think about all these businesses that are trying to capture.
Experience data right and I think you guys are right at the heart of that I'm. Just wondering if there's any implications in terms of how the platform might evolve over time.
There's definitely some dimension to that because we were going to have a view into a more kind of instantaneous kind of behavior.
More kind of real time.
Among customers.
Like top of our price right now is those kind of democratize access to these tools, we've done that before for E. Mail, we've done that for Chad, making it available for everyone of them Ive, just exploding the demand and the year.
Usage of these type of applications and that's really our priority for from this thing first and foremost.
Yeah Okay.
That's on the results thanks, guys.
Thanks P J.
Next question comes from Brad Sills.
Yeah.
Hey, Brad you're muted.
Oh, great sorry about that guys can you hear me.
Now we get we can hear you alright, yes, I tried to try to enable the video here as well anyway.
Congrats on a nice quarter. Thanks, Thanks, guys for taking the question.
Question on Sunshine.
I wanted to ask where the focus is there now what day what are your ear from customers I think last year.
You mentioned <unk>.
During the pandemic a lot of those projects for kind of table understandably, our customers coming back to these more strategic kind of projects, where they're thinking about you know sunshine to embed service into the digital fabric of.
Of application. Some what are you hearing from customers on Sunshine to where is the focus.
Well our focus this year is going to be to make it a lot easier for the majority of our customers to use these tools and and line. We still have a big mission, we still have a.
Are we seeing some really interesting things, but like short term for this year I really focus is to make all of these components. All of these tools incredibly easy to use and no code low growth environments and that's our priority for this year.
Great. Thanks, Michael and then one more if I may just on the global Si channel and the move up market. How critical is that channel and where are you in terms of development of that channel and where is the focus there as well. Please. Thank you so much.
I think as we think about the partner channel It is an evolution.
And we've done some really good things with regional and mid tier partners that help us quite a bit with both our existing customers as well as bringing in new customers, but there's a lot more to do there over time.
There are tradeoffs, obviously doing businesses and us we're easy to implement but then there is an opportunity to expand your of your expanded their use cases over time, where partners can become very helpful. But we think about it as a journey rather than a one year kind of investment return.
We think about how we're going to work with partners, but we do have very well established partner teams now in each of the regions, including the U S, which was kind of our latest market share kind of begin using partners more directly.
So you'll hear more about over the next year or two.
Okay, great. Thanks, so much Marc.
Thanks Brent.
Alright next question comes from Brent over at Piper.
Hello. This is Hannah on for Brent today, I'll keep my questions.
First a short term RPI rose by $67 million sequentially to 627 million could you provide some additional color on what drove the strength in the new contract signings this quarter and if it was specific to geography or vertical that stood out.
I'll take that.
So I would say we saw strength in.
In all of our segments and regions for the quarter, which were really encouraged by as I mentioned on the script, we definitely saw some new business and we've been pretty intentional about focusing on making sure. We we are.
Taking the friction out of doing business with <unk> like we are trying to make it super simple and we've seen some payoffs in that both in our existing customers, making it easier for them to add agents and to add product, but also as we're acquiring new customers, making it easy. So that's one reason and then in terms of our Poe broadly.
The sales team kudos to them for you know really thinking about engaging with customers longer term, what's encouraging for us to see and so we're pretty proud about that.
Great. That's helpful. And then could you compare and contrast to interest in Sunshine conversations you've seen pre and post COVID-19 are noticing more and more customer service engagements or any other through social channels and messaging channels.
And any color on how channels to provide the best customers per quarter have changed and how your cash.
<unk> on that would be helpful.
Yes, we have definitely seen a big.
Big surge in demand and a big surge in these synchronous and halfway ex synchronous messaging channels.
Like we just released a report on the state of kind of CX doing.
The core with you here and there's no doubt debt the messaging channels took the brunt of this surge in and channels. What we have done with the reason sweep releases that we have tried to take the best of the Sunshine conversations platform.
And really made it available for everybody for everybody can use these channels without any development.
And we expect we expect that to be very very popular in the market. So that everybody can gave for their customers in a really scalable way in a really efficient way of really getting a lot of instance, insights over whatsapp Facebook messenger over.
Line in Japan, and all these other channels around the world that are so important for how we engage with each other but more and more especially now with businesses, where we are that are helping us run our lives and run our businesses.
Okay. Our next question Stan.
From Morgan Stanley.
Alright perfect.
Good evening.
Afternoon, everybody.
Mikkel, Marc Juliana will definitely will Miss you Elena.
But.
Thank you guys for a for reporting very nice very nice results a couple of questions from my end.
Just maybe on on Sunshine CRM, what are you guys seeing as far as like adoption and momentum as far as.
Monetization of Sunshine CRM as we head into 2021.
Well just to repeat what I also to arrive there for like I'll focus for 'twenty, one is really to make the sunshine capabilities available for all of our across the most in a low code no code way and just like that democratization capabilities that we have so normally so good at in the company and we still see a lot of of Avalon.
Like opportunities and a lot of the more advanced use cases, but making a lot of these capabilities more easily available for a larger group of our customers is really on our priority for this year.
And.
Well you know like I think the monetization of the Sunshine platform per se is kind of.
It's off a lower priority than getting more usage on the platform. If you will.
Relative got it got it.
Got it and then just on the.
On the pricing packaging you guys noted in your shareholder letter and also I think it came out a few days ago, you kind of talk.
It's around a little bit of packaging and pricing.
Maybe just walk us through how you thought about that and what prompted the changes.
So if I start with that like a lot of it is driven by the behavior, we saw in the market out there.
By customer if they want to be able to hit the ground running they want some of these things that have always been very very important for them to sandisk bike. The the ease of use the instantaneous resolves like this time from kind of get up and running all of these things via tendency of how you could quickly kind of change you set up how you don't need.
A hoard of developers to kind of adapt true kind of changing conditions like and I think it's one of these things that have really been true for business. This year is like change has been the only constant you know right and so we are trying to make all of these things Marc easier trying to make all the decisions around what you need.
And when you don't need to try to make take that all of that off the table make pricing and packaging much more transparent and NBC and we believe very much also based on the initial reaction for this this is what businesses once a day.
Got it got it and then just.
One very last one for Atlanta.
Rob you in.
For you before you see that at all.
Just if we when we look at billings.
It looks like billings grew about 30% and if we look at kind of the change in current RP O plus revenue that was growth was a little bit closer to 23% was there anything to highlight on the billing side, maybe it was was there any duration.
Extension or maybe maybe the invoicing change wasn't as big as what you initially expected just kind of.
Help us close that gap, a little bit yeah, no I think effectively.
You know as we're signing more and more longer term contracts and as you know that revenue is going to to layer in over time, So it's going to sharpen our RPM won't show up in the current billings wasn't necessarily so I think that's the primary difference there.
Okay, Alright, Okay, we'll follow up on call. It. Thank you guys and happy to follow up Tim. Thanks, Okay Awesome all right. Thank you.
Thanks, Dan.
Next up is Jonathan Kees from summit.
Okay.
Can you guys hear me.
Yep, Okay, Sir my video and there we go okay.
Hope you guys will see me so.
I'll add my kudos to the results and the guidance and also the sentiment for Julina, it's been a pleasure working with you and.
Best regards we will Miss you.
My questions are I guess for the.
International revenues it looks like that's about two and a half year high in terms of the percentage of our revenues from outside the U S. Just curious I'm, assuming that's a direct result of all the senior management that you've backfill.
Backfill that you've installed it's like EMEA and stuff like that are you done in terms of the senior management filling in or are you just now growing the sales force for like EMEA and in those other regions and one other question after that.
Well I want to say that.
Since 2019, we've gone down a path of wanting to be more.
Be more prescriptive about being a global company and that also means that we want to revolt descriptive about having leadership, which is just outside of our San Francisco.
ESCO office I'm kidding, a little echo here sorry.
And that also means we want to have more leadership on the ground in out in the regions outside of the U S and so far have been very successful debt, but that also means. This is just the beginning of a journey of a truly becoming a more global company, but more leadership and more executive presence around the world We are global company.
We have half of revenue outside of the U S.
And we are seeing we are working with some really really interesting companies both in.
All other APAC, which is a massive region that we always feel we are just beginning with in Europe and in all of Latam. So like we believe that like this room for a much more global presence also for more leadership in the region.
Oh, sorry, you're muted.
Sorry, Okay and one other question if I may here I know, you're not an AD driven model your seats.
And the new products.
For the monetization, but I guess, especially with Sunshine where you.
Clicked up other you can post a customer's other apps and you are also.
You build user profile you collect.
At the BTC you collect a lot of data on the consumers does.
I O S 14 have any impact on you guys or is it more the asset your customers we're reloading on Sunshine.
No. We don't we don't foresee that have any have any impact for us directly for that is of course customers that have too.
Think about how that affects the AD based business model from a button across okay, just making sure. Thank you.
Thanks, Jonathan.
All right next up is Jim Foster from Citi.
Hey, guys from here.
We can hear you yes.
Great. Thanks for taking the question congrats on the $1 billion Mark in two Atlanta on on your new endeavors.
I also had a follow up on the CRP metric Elena or Marc.
Just kind of triangulate the top line indicators share between billings and CRP low growth and so forth.
So as it relates to the CRP metric, specifically I mean that metric sort of continues to.
Outpace the overall business and I think I understand the burden of caveats on on that metric and that it doesn't include contracts less than a year and so forth, but given that the pace I'm wondering if there's anything driving that growth rate higher than your actual sort of bookings growth specifically as it relates to staying maybe potential benefits from smaller customers.
Signing on for longer contracts with you, but maybe not longer larger ACB.
So I just want to make sure I'm aware of other pieces as it pertains to using that metric is a leading indicator of revenue growth any color would be helpful. Thanks.
Yes.
At this level.
True, it's really timing you know we have been focused on signing multiyear deals and so youre not going to see that in the current billings and revenue unless they do annual billing, which we're definitely moving more and more as we can to annual billing, but more importantly, we're getting longer term commitments, which will sharpen our appeal that may not show up in the <unk>.
Current billing cycle our revenue.
Okay, and then one follow up on the guide for next year Elena.
As it relates to the margin guide and just your spend profile.
Wondering if you could put some color around your assumptions that you've made for continued.
G&A savings next year, how much of a benefit maybe that was in that line item in and maybe how much you're reinvesting that back in the business just help us sort of parse that please.
I think a lot of my in place, we'd love to travel, but the world has changed and so we're being I would say conservative with that because we are going to do business in a different way and we're going to have a more virtual first.
Tone to to how we operate and that said we did have roughly I think $15 million of <unk> savings in 2020, and not all of that will come back I, just don't see us doing the same level of travel as we have in the past and frankly the way we approach our field advance our customer events.
And over time that will change too we've had success doing those virtually we're going to continue some level of that and of course.
There will be some in person events at the right time I know our marketing team is working through the new strategy there, but at the highest level I don't see travel coming back the way it was last year.
Okay. Thanks very frequently.
Thank you it's true.
Stuff is just Jeff Henry from Craig Hallum.
Hey, guys can you hear me.
Hey, Jeff Alright, good good hey, congrats so so much here to be proud of guys really congrats on.
On everything you're accomplishing this is a heck of a free.
I have two questions, where one mikkel on messaging it sounds like messaging messaging is exploding and I'm wondering what the appetite is and your base for automated messaging and bots.
And are you still using your own AI to power those responses and then maybe if I could just sneak my second day right upfront the.
The second part on power I know in early January you shut down service and I was wondering if you're setting yourself up for a blow back.
And the reason I think that the Zen policy, if youre going to cancel all platforms that service people, who ride and destroyed property and attack police I mean, then that list has gotten very long in this last year and it seems like a very long road for you and I think now I guess, if you don't shut these others down your risk your risk appearing political agenda driven.
So I guess the question is you know you don't want obviously alienate half for customers and prospects you see things differently at the end of the day I Wonder if it's worth the risk and if it is consistent with the goal of maximizing shareholder value. So to those two thoughts on those two would be great.
Yeah, so starting with the latter here we have a we have a rigorous we have a pretty intense process for evaluating.
When we get complains about customers using our service so.
And I can't share all the details, but like we have customers and the customers and the customer you're talking about here we've had been in review over several.
Iterations based on very specific complaints about.
What they were doing with their platform.
And we really try to we really try to ensure that nobody uses our product for anything that hurts anyone.
And once once we get once we get surf with specific evidence for that we have to have a process that deals with that and figure out what is the right thing to do so that's that's how I wanted precision how we do that is this simple and easy node for us.
This is simply that it's not it's very complicated, but that's also why we have a.
Price.
A very well documented process for how we deal with these things.
For.
As for the first question with our new messaging capabilities and the product we have a new or we have a new true for all for kind of.
The the the automation of the basic kind of conversation cold flow builder, which is a little bit like in advance.
IV our system, if you will.
And that is that can solve a lot of the basic needs for a lot of our customers, but beyond that if you can today plus any of the bot providers and we have a whole block marketplace and work with these.
<unk> bought provide us to put the kind of the box set of them works best for you into the streets. So feel very good about our strategy to date both of solving.
The no automation use cases, the little automation use cases, and the very automated use cases.
Very helpful. Thanks, so much I appreciate it.
Sure mixed up.
Have some month from Jefferies.
Hi, good evening.
Echo everybody else's sentiments as well, especially Atlanta congrats on that on the next step and we'll Miss working with you over here. So yeah, maybe since I said, the nice part I mean, given annoying question just to stick with the spirit of everybody else one less tough question on the way out.
When I think about the bookings growth I like the additional disclosure that we saw in the shareholder letter and it's been quite nice from the end of <unk> to for you about a 60% increase but I just wanted maybe triangulate how that compares to the prior year and the reason why I asked that is because whether we use billings.
Or CRP, Oh that typically goes up by like 40 45 per cent from <unk> to for you just back testing those numbers. The last couple of years. So how should we contextualize that 60% increase from <unk> to <unk> do you have new bookings and I think the best the easiest way is that this how should we think about new bookings growth year over year in the fourth quarter.
Yeah.
So a new so.
I'll agree with you that when did you say an annoying question.
[laughter] Oh, I think the key is and new bookings, if you're talking about Q4 of 2020.
We're really proud of the bookings number bookings growth, we had and the one thing you have to remember is as we give the guide for the year, we have to still remember we are in a pandemic.
We don't have all the visibility, but we are confident in our ability to navigate so.
You know if youre trying to compare billings to RPM again, it's just timing that's true it's really boils down to that we've been doing a great job and I commend. The sales team is getting more longer term contracts, especially up in the enterprise.
I guess I guess I kind of I was trying to you either I was trying to understand is that bookings chart debt that was in the shareholder letter. It shows a 60% increase from <unk> to <unk>, what I guess, what I'm trying to understand is what would the year over year increase in the fourth quarter. It looked like for that for those bookings both for new and expansion yeah, but we don't we don't see momentum right now.
The intention of this chart, it's not to show that it is what it is to show is that after we sold like almost a halt in the beginning of the year radical slowdown as the pandemic hit us in the head and everybody's stood still for a while like things have accelerated.
Noticeably for that is the intention of that chart and you shouldnt try to pull other.
Other data out of it that makes sense.
Yeah, Okay great.
Again, we have to ask sometimes.
And maybe if I step back and ask a more strategic question for you Michael as we think about the slew of new products that came out early last year, obviously COVID-19 changed some priorities for for your customers and you guys executed well do that but how should we think about maybe refocusing on sow and.
How should we think about maybe expansion of the suite as we think about outside of maybe just core service as we get back into 2021 and through into next year.
Later this year sorry.
So.
We've done a lot of work around our sales product last year, especially about.
The ease of adoption and the ease off the purchase and the ease of using it with other systems from centers that has worked really really well. So we're very excited about that and that's going to continue to be part of our for.
Focus for 'twenty, one as we are working on a road map to really get some synergies out of the sales and customer service process. So we're very confident both about our short and long term opportunity with the sales product great.
Great. Thanks for taking my questions guys I appreciate it.
Thanks Ahmad.
From Evercore.
Hi, Hi, everybody thanks for taking the questions.
I'd just like to start maybe on the quarter.
Have you guys seen some of the impacted industries come back over the last couple of quarters I'm just kind of curious you obviously have some great customers in places like airlines or are they still on sort of demand and then there's sort of a rebound in 'twenty, one or do you start to see them you have to look a little bit past, the near term and start making some plans for.
For the next day 12 months or so.
So if you look at the cohort of customers that contracted in Q2, and there was a large amount of construction in Q2, if you recall.
About 30, just about a third of debt businesses return. So there is still two thirds that has potential for us to regain as these customers come back. If you look at airlines Thats today, they're operating somewhere around 40% on average of capacity of last year same thing for rideshare companies for.
For other companies in the hospitality industry. So those guys are slowly recovering, but we have a lot of opportunity as they recover fully.
Post pandemic and vaccines are here now so maybe things will change by the summer, but what's interesting is despite that we've been able to grow we've seen new customer activity at a very healthy rate actually one of the best rates, we've ever seen as well as the fact that some of these more traditional companies have been looking for ways to get better at being.
Online first and so we're really encouraged that we were growing at the rates. We were in the second half of the year. Despite kind of that line and that also plays into the kind of the current <unk> and all those other things are those companies and the value of their future revenue or at.
At lower rates that does have a slight drag on current RPI until some of those contracts return into bigger size, Okay, and Nick I'll, just I want to ask a question about sort of your longer term.
But more than tripling of having here in the next five years, what does that incorporate in terms of your thinking about Zen desk place within the higher end of the market, meaning there is no doubt that customer service has expanded across every tier of the enterprise, but what do you all need to do that you know I guess, how much do you need to also be success.
For maybe more upmarket than you have been historically.
To get to those goals and how do you feel about your positioning around that yeah.
Yeah. Mike. This is of course something that is that is there.
The question that we have heard for many years and debt across with constantly addressing in the business. How can we continue to become more and more relevant for like a large enterprise customers and that's definitely like a journey. We started in five six years ago with building out the teams, making sure that we have kind of the coverage, making sure that we had a.
Pricing of legal model it security model and all these things that works for large enterprises and we have across succeeded with.
Like our enterprise proxy has gone up every single year. Since we started that since we started that journey and we feel confident in our journey towards the largest enterprises. We also know that there's a lot of things that once we get out into various industries that they would like us to work on capabilities and so on and we have all of those things in our roadmap.
And we feel confident about that we will get there, but that's as many wise people habit.
It's a journey.
And if we just keep just keep.
Getting added the compounded return all of our impact on all of our investment in and building the teams investing in the capabilities and building the foundation. It will all come in we feel very confident about that.
And then a good journey, thus far so congrats on the quarter. Thank you for sure.
Next up is koji.
Thanks for taking my questions Congrats on a great quarter.
Sorry to ask and other bookings question here, but I did kind of want to talk about.
Or asked about where the strength in the bookings was coming from it and what I mean by that is was that strong bookings performance in the fourth quarter really driven by by catch up from earlier in this year or are you really beginning to see or maybe have more strategic conversations with your customers, where youre beginning to see some pull forward of future spend.
Coming through in the bookings today and I have just one follow up for you.
Yeah, I can start and nickel or Marc chime in but you know clearly there has been an increase in demand that we're seeing through and we're seeing it everywhere in our business you can't really point to one.
Segment, one which is for us a good time right. That's that's.
That tells me, it's it's a broad based demand for our products as opposed to execution in any one part of our business. So.
It's really coming from both new customers from our existing customers expanding from all of our segments and frankly all of our regions.
Nicolas do you want to pick up on that.
No we alluded to it in our in our shareholder letter true you know all of them.
Ed we are seeing we are seeing a lot of customers really.
Pivoting for this new economy for this new Embraer for this new reality for this online first module that we're living in right now and we're definitely seeing growth from that segment like we definitely still have segment of customers that are suffering and then we have a lot of new businesses and a lot of new activity and a lot of also cross.
For most of that are just killing it in this in this economy, you know and like.
So it's a combination of all of those things.
Thank you and for my follow up Alan I wanted to ask you a question on the unity partnership.
Saw it come through on the press release I think it was in December had asked the question being at pretty avid gamers in the past you know reading that I got excited I'm like Wow and games for it I wish I had that back in the days. So my question is really trying to size up the opportunity maybe from a Tam perspective, you know what could this mean for many new customers that you may be.
It wouldn't have been able to talk in the past or or messaging transactions without potential over the next several years and maybe you could talk a little bit about how that that partnership conversations started with unity. Thank you for that.
I really enjoy that question like gaming is such an interesting industry and like we I think we are on an incredibly inspire what you're seeing in the gaming industry in the community in the way of engaging in communicating and just building very strong communities along these games. So we're very excited about this we've been working of course with unity.
We know these guys across from the good old days in Denmark, et cetera, and but.
Like what we've done now is really really making it easy for game developers to put these capabilities into their products. So we are of course working with a long number of game game providers.
Around these capabilities are not getting all the feedback for life, New cool stuff, we can do and like just very excited about that journey, we've always been big with gaming, but I would definitely hope to take that for the next level and I just want to thank all the gaming provided about the air for helping us through this pandemic like my kids are so so grateful and also just one other offensive.
<unk> Love you guys you know this is Ben.
But on behalf of all my case, Thank you [laughter].
Thanks, guys.
Thanks Cody.
Let's see who's now Tom Roderick next Stifel.
Hey, it's actually Parker Lane on for David.
David well, thanks for Mikkel, you talked about making sunshine easier in 'twenty, 'twenty, one and that being one of the big priorities for the company can you talk about the role that partners could have been doing that in a bit more about the development of new use cases, the configuration work what exactly are the debt.
Elements that you need to improve to make that more useful for customers.
Well I think that I think that like our fourth is a company. That's always been the democratization of those things that everybody can kind of figure out using it like even like all like our App framework that he could use a day too.
Inc to grid applications custom applications down applications into your workflows is something where we really made an effort just to make that as easy and painless. So that you don't have to be at available to do these things and that's a little bit the same as what we are doing here, we can see like how making these things.
<unk> for us so like using no code low code tools, just accelerates the adoption.
And of course, a part of play a big role in this you know they do especially with the more advanced use cases, and like just I'll add framework. So they have their like more than a thousand.
<unk> custom apps that other companies are built to provide.
Capabilities or areas.
Various.
Scopes and that is what we're trying to do here to really make it easy for the whole partner ecosystem. The whole partner network to help customers with these things because they can extend integrated and customized and get further out into all the different places where customers meet businesses today.
Got it and then Elena you guys highlighted a lot of.
The contraction in those sort of elements that are playing into the model throughout 2020, but as we think about the coat the cohort of customers that Mikkel. Just mentioned that are sort of killing it are actually benefiting from the pandemic what happens to them sort of as they reenter.
The World again are they going to have a meaningful step down are they going to have to use cases emerge. They keep their demand levels sort of where they were just help me walk through some of the puts and takes with that cohort.
I mean, I think so you can't look at one unique cohort because they.
Think of it as a portfolio of customers. Some will continue to have and new use cases that that evolve because of the pandemic. We are seeing a lot of that.
Some will come back to their normal rate and then some other ones that contracted like Marc talked about earlier.
We have yet to see them come back. So that's part of the reason why when.
When we approach our guidance and everything we do it cautiously because theres still a lot of unknown, but we're optimistic that some of the trends. We're seeing are durable trends. These are things that will not change and we will not go back to what we saw before.
Got it thanks for you.
A further net.
Next up is.
Walgreens.
JMP.
Okay.
We are.
Uh huh.
So Atlanta two for you.
First stop.
Or anything you can share with us about your future plans and why now.
And then secondly, I just wanted to be more fun.
What are the characteristics that you think Zen desk, you should look for in your successor.
She asked my boss that.
So why now.
I mean, it's a personal family decision really to be honest I've.
Been here five years and two.
2020 gave me the opportunity to sort of reflect on a lot of things and so personal just a personal choice and loves and ask I should have a tattoo and send us somewhere you know my risk here.
Management team and I couldn't be more proud of where the company is actually so.
As far as my successor, I feel I'm, leaving the company in great shape for this person.
That's what I would say.
Come on as cool as me I don't know if nickel.
[laughter], alright, and nickel if I can ask for your follow up.
I know as an organization. This is something where we're having a hard time figuring out what is your policy is going to be for back to work because I really don't think virtual for everyone is the right solution, particularly not for younger people, who are trying to develop so where are you guys on that.
Right now we've told the team that nobody should expect to be back in the offices for real until like September of this year. We do have a few offices around the world will be start kind of pilots and getting things back in with all kinds of restrictions and regulations to kind of minimize.
Any risk we see there.
We like we know already that a lot of our employees have been embracing the freedom and the opportunity that comes with not having to commute into the office every day and we expect up to half of the SKU is not going to be in office workers going forward, but of course, we still need to do a lot of things together.
For me to get together and have a card sales and some time.
Like like we used to do and we also need to celebrate and we need to get together, sometimes for mortgage other in the eyes and learn things about each other and we need to do a lot of like Wi boarding its or some of these things. So we will always we will need to app usage citizens for kind of.
Collaborating like that then we also have cost situations, where like you know working from home may not work always by everybody and all like may not bargain periods for everybody. So we definitely also need office space for people that don't have that luxury adult really.
Don't can't function of debt in that setup too. So it's going to be a combination, but I think what really matters here is less about how you know how the actual office space configuration gotta be and how many to come back. It is that this how we communicate today and I can see your pad and I'm pretty sure you're sitting in your underwear, but like U S.
I am.
But like this way of engaging this way of communicating and this way of collaborating is gonna be the dominant way for regardless of where you sit in that office or elsewhere and I think this is going to this with this we can really do some amazing things and like we would have to be really really good at this and this is why we ask.
Our employees, but that little square, you're sitting in today like dominate that live that embraced that.
Because this is by being the best at this we can get we can we can we can unlock some future potential because that makes sense debt.
Yeah, I think it's I think it's.
And it gets tricky I don't I don't love the idea of a little square going on forever honestly.
Is that why you don't have your camera on no I'm trying to turn it on it.
Your hosts has stopped.
Uh huh.
Alright, we got.
[laughter] for Murphy.
Yes.
Yes.
Alright.
We have for Marc.
<unk> and only eight minutes I'm going to ask each to just do one sorry goes sorry, we're not managing time as well as usual here Ken here.
Okay great.
I guess I'll share my question towards Elena then.
So billings question I know you guys don't typically talk about next year, but this this year is a bit of a weird year from a billings growth and next year will be a weird youre from a billing comps perspective, how should we think about what that growth rate could look like relative to the revenue growth number you guys put out there of 26% is it going to generally track.
And then thoughts on seasonality would be great as well, Ken I'm going to step in real quickly, we don't want to guide for billings, but remember that in Q1.
We did size for billings impact last year of about just over $25 million from that change in invoice cadence. So think about we missed just over $25 million in billings last year. So as we go into 2021, we will invoice for 12 months, whereas last year, we own.
We invoice for 11th so I don't really want to ever guide to billings because of the way kind of we have a large number of monthly customers. So sorry to step in for you going on that one thank you love it.
Next up is Derrick from Cowen.
Yeah.
Great. Thanks for taking my question. So you guys have a new metric percentage of IRR generated from 100 K contracts and.
When you showed that chart in the shareholder letter it shows a steeper curve than the old metric and in terms of upwards to the right and I think what that tells US is you know stronger enterprise traction than the old metric and so first can you share anything around large deal wins in Q4 and kind of what sectors, maybe you're seeing greater strength in the enterprise.
And then and then help us understand some of the key catalysts that are helping you drive traction up Marc I mean, I think of just pure sales execution I think it may be maturity and Sunshine I think of acceleration of digital initiatives. How are some of those factors playing into the success youre, having up market share.
Perfect for almost and allow me to brought in here Marc Yes to the last questions all of the above I. Neither all vectors that drive our further penetration into the market alongside the fact that like also enterprises are starting to look for much more agility in their business solutions like nobody can do a nine months project today of even I think.
About this year nobody could do like a six month project forget about it that's not how the world other rates anymore. So like really like speed agility is it's like it's a real currency today, so with that the other thing this is not a new metric.
As we say in Atlanta. This is an illustration of some of the issues, we have with our old metric or without current metric in that it only measures the percentage of our revenue from the one very specific product and the one very specific piece of that and that is why we want to show that that over time.
Time that metric has become less and less precise for as a proxy for our enterprise.
Progress and that's why we wanted to show this other metric for comparison as we figure out what is a probably off relating this in the future.
No that makes sense.
Yeah, well it looks good.
I think those closed.
We are continuously one of our imperatives are to move up market. So hopefully that's representative of that so that's kind of why it was place there.
We're going to move on because I have four minutes left here.
Merwin Goldman.
Okay. Thank you very much congrats Joe on the quarter just a quick one for me I was just wondering if you can help us think through some of the ACB uplift you're getting from from Sunshine I know I think in net.
Analyst day around a year ago, you sort of gave an illustrative example of just just curious if anything you can share with us on benefit to deal sizes, you're seeing from that thanks.
First and foremost our priority in 'twenty, one is really to make the sunshine capabilities much more available that will grow the partner ecosystem that will grow the adoption and the and the acceleration of the usage of the product and that is our key priority over any monetization of the platform.
And that's how we think about that have always been the centers DNA and that's how we think about Sunshine.
Understood Thanks very much.
Thanks, Chris.
Close off with origin from William Blair.
Hey, guys.
Ex for taking the question.
Quick one for me on the upmarket traction in large deal flow. It seems like for 2020 conversation a little bit more focused on quicker.
Quicker.
Time to value deals at the expense of maybe some of these larger transformational projects just give us a sense for what you saw in Q4 and what the pipeline for those deals looks like going into 'twenty one.
Yeah.
I just wanted to say that high level, we see speed and agility.
As an increasingly per.
In fact of the transformational projects too.
Like we this year, we have seen low.
Large projects that we participated in with in Credibly quick turnarounds.
Something we hope to speak more about that's something we hope to.
<unk>.
Help other companies learn from and it's something we expect to see a lot more from.
Okay. Thank.
Thank you and congrats on the quarter. Thank you. Thanks, Arjun with debt. We are out of time I appreciate everybody's interest in Zen desk, and we will see you again next quarter.
Have a great afternoon take care.