Q3 2021 Zendesk Inc Earnings Call
Incredible insights into how customers think what they want while you likely know our core business survey monkey over the last few years, we've invested in product innovation and go to market resources to expand our product portfolio and move up market and today momentum leads in five core areas customer experience employee.
Experienced enterprise service market insights and brand insights, we provide 345000 organizations worldwide, including IBM Johnson <unk> Johnson, LG, Toyota and Verizon just to name a few with intuitive people centric solutions that enable them to create valuable relationships with their customers.
Through our expansive set of customers. We've generated $5 5 billion survey responses to date and $9 million daily AI predictions to help our customers make decisions quickly and confidently to achieve tangible results.
We've been pursuing a strategy to expand our enterprise customer base and now with vendors. We believe we have an opportunity to accelerate this growth as we leverage our combined global footprint, our partners and relationships with the world's leading companies and brands by.
By joining Zen desk, we believe the best days are ahead for us and that together, we are ideally positioned to deliver the customer intelligence company, our customers want and deserve.
Great to be here.
Awesome.
Thank you so much and with that.
Of course, we're excited to welcome to you and your team, but for an hour kind of turn it over to Sheila who will share more details about of course, our strong quarter and this transaction negotiation.
And you're muted.
Yeah.
Sorry about that.
I need it now.
Thank you, Michael and Zander I Echo <unk> sentiment, we look for leverage level, New and then the length of fall into this index family as nickel Sharon Zen desk had a truly exceptional quarter, we generated $347 million in revenue this quarter, our third consecutive quarter of revenue growth our strong momentum.
Driven by the success of enterprise strategy and increased suite adoption suite now accounts for 25% of our a R. R up from 16% last quarter suite customers stay with us longer have higher.
<unk> and upgrade at higher price points driving stronger expansion long term enterprise customers. This quarter accounted for 37% of our air are up from 35% last quarter and 30% a year ago.
Enterprise and suite customers account for more of our era, we expect the average length of our contracts the increase in churn and contraction to remain lower than what we had seen typically our net expansion rate for this quarter was 122% from 120% last quarter.
Above our long term target of 110% to 120% now, let's turn to margins operating income and cash flow. Our GAAP margin. This quarter was 79, 8%. Our non-GAAP gross margin was 81, 8% an increase of more than three points as compared to last year given law.
By revenue scale increase the optimization of our product support organization and efficiencies from our hosting infrastructure, our GAAP operating loss of $38 9 million and GAAP operating margin was negative 11, 2% our non-GAAP operating income of $27 million grew 8% year over year.
While non-GAAP operating margin declined by one seven points the decline in margin was driven by higher sales marketing R&D expenses as we continue to invest in growth.
Operating cash flow in the third quarter was $73 8 million and free cash flow was $65 4 million now, let's discuss guidance. We are increasing our full year 2021 guidance to $1 329 billion to $1 335 billion growing 29% at the mid <unk>.
Compared to last year up from our previous guidance of $1. Three 1 billion to $1 318 billion given our strong results this quarter and continued business momentum our fourth quarter revenue is expected to grow 30% year over year at the midpoint and be in the range of 366.
<unk> million dollars to $372 million, we expect our fourth quarter GAAP operating loss to be in the range of 43 million to 49 million and non-GAAP operating income to be in the range of 22 million to $28 million, we expect full year free cash flow to be in the range of 140 million.
To $150 million, an increase from our prior estimate of 120 million to $130 million.
Our strong financial performance.
And outlook in second half with growth rate of 31% coupled with our intent to acquire momentum means we are operating from a position of strength and the best is yet to come let me take you through some of the details of the transaction and our opportunity ahead. The terms of the transaction provided for momentum stockholders to risk.
0.225 shares of <unk>.
Index for each share of the matches our ratio, which represents a value of approximately $28 per outstanding share of momentous stock based on the 15 day volume weighted average price of Zen desk common stock up to and including October 26 2021.
Closing this transaction momentum stockholders will own approximately 22% of the combined company.
We expect the transaction to close in the first half of 2022 subject to Zen desk in the matter of shareholders' approvals and other customary and regulatory approvals.
<unk> continues to lead in the customer service industry and combined with momentum.
Uh huh.
Hello, guys my computer screen like Blake.
And then just can see continues to lead in the computer service industry and combined with momentum product offerings and survey feedback and market research, we will create a powerful new customer intelligence company, where our addressable market nearly doubled to 165 billion, providing a significant runway for sustained growth Nick.
<unk> has touched on the growth potentials for this transaction and I want to provide more context on why we believe it will be growth accretive in 2023, our first full year as a unified company.
We believe there are significant areas of revenue synergy that will be unlocked by this transaction as we were able to accelerate momentum enterprise motion bring added capabilities and a complete customer intelligence platform to existing and prospective customers, we intend to reinvest expense.
Synergy savings back into the business to further accelerate growth taken together this transaction accelerates our path to approximately $3 5 billion in revenue in 2020 for a full year earlier and 500 million more than our previous target.
And we expect to reach approximately $4 5 billion in revenue by 2025 about 50% higher than we had previously targeted following the close of the transaction. We will work jointly with Xander and his strong leadership team and deeper integration of our teams delivering on the shared vision of customer intelligence will come.
More details on the triad of infection during our in person Investor Day on November 18th in New York City, you can find details on our IR website. We look forward to seeing you there with that I'll turn it back over to Jason for Q&A.
Great. Thank you and as we've done in the last few quarters. We've put all the analysts who are randomized the first analyst to ask a question will be origin of William Blair. Please go.
Go ahead.
Alright, Thanks, Jason and congrats on the.
Announcements to the team.
Nick I'll, maybe start off with can you just walk us through the decision to build versus buy versus partner right. What are you getting.
With no matter from from the acquisition that may not have been.
Beneficial if you were to partner with them.
If somebody is taking you away [laughter] no like you know.
<unk> been as iconic survey Monkey platform has is ubiquitous in the market today. It is the world's largest feedback platform and like you like you can you may be able to build some similar technology you can navigate the experience you can never get the DNA you can never get there Shouldnt is a quad is in there.
And first and foremost of course, a fantastic brand.
There is a level of experience that we will never be able to match in such a product and this is like it's like we've always been partners in many different ways and we have.
Of course, a big overlap in customers.
That's.
Really putting these things together and really executing on this vision of providing additional kind of.
A different depth and richness on your customer pictures by overlapping but kind of what they see and do with what the with the how they how they think and field.
Is incredibly powerful and we believe that that it would create a whole new dimension on understanding in a whole new reach a picture of your customers and that is the vision there very very intrigued to execute on together.
Yeah.
Very helpful.
If you're available for a question I.
F Q1.
For for maybe those that are a little bit less familiar with the story can you maybe just walk us through I think Nick Montreal touched on the move up market into the enterprise can you maybe just walk us through how you differentiate in the market versus some of the.
You have competitors that are playing in the mid market enterprise space and how the combination of that.
Plus momentum Mike.
Accelerate the competitive differentiation of automotive, yes, sure RJ. It's a great question, we started as a product led growth company in all of our customers.
90% of our customers are on subscription contracts are annual contracts and what we have done with that large footprint, where we have millions of millions of active users 850000 paying customers has moved up market to build enterprise products and I mapped out those five categories, where we play with CX and play experience market brand insights et cetera.
So today, a third of our business or enterprise contracts, and we have world class product market fit.
We have the most discerning demanding customers and fin serve CPG auto direct to consumer buying a product with Zen desk. We are plugging into this much more mature go to market and that really just accelerates our enterprise strategy. So as I think about their global footprint in Latam and APAC in parts of Europe, where we don't compete we build these.
Products that are going to plug in that we can now sell a market to their 115000 enterprise customers and so the go to market synergies here are proximate and compelling and frankly, just obvious mikkel and I have talked about it at length, but to Michael's point around customer intelligence can be we bring products that just deliver a lot more value to customers we have over us.
<unk> quarterly sales calls, where then does it comes out.
We've had hundreds of requests for integrations with our CX product presenter. So we're really excited to redouble, our R&D efforts to to build those integrations and just feel like there's a ton more value to offer our shared customers.
Thanks Arjun.
Move to the next question next one will be Jeff Van <unk> with Craig Hallum. Please.
Please turn on your camera and <unk>.
There we go we should be good congrats guys and just a couple for me I guess.
Congrats on the announcement today and I am curious maybe nickel in your installed base. When you look at the base how many what percent of your base is your initial impression have customer feedback solutions, how much of it is greenfield and how much youre going to have to go in and potentially displace with the solution.
Like I think like a.
A lot of our customers has something to some extent, but I think that the level of integration, we will be able to provide them the ease of use.
Basically like just making these things incredibly simple for our customers I think we will have a big impact on how we can together can provide a bunch of offering that makes a lot more sense of our current customers.
So more details on these kind of specifics with regards to our customer base and so on of course in our November analyst meeting yes.
Fair enough.
Sheila just a question.
Last quarter in the core business I think enterprise without a front and center topic and you called out different literate linearity in the quarter than what you had seen previously and I think you've tried to reset the guide to get a little more cautious there as well as usage, but I think most of that or just talk about what you saw in linearity on the enterprise, but any more color around cycles, and how that played out versus experts.
Patients.
So thanks for the question and good to hear from you, Jeff So definitely as we have.
I have been moving up market for quite some time and we saw pretty dramatic shift as we moved into Q2 and so in the forecast.
That's really how we're we're driving herself now I continue to see very strong month. Three so that's kind of typical I think an enterprise business that you see strong one three but when we really saw throughout the quarters just strength across all segments of the market. So it's a very strong Q3 for us and.
Do anticipate that enterprise continues to be month, three heavy and that's really how we're kind of planning our workflow and planning on our go to market function, but across the board just you know outstanding quarter really in all segments of our business.
Sounds good I'll leave it there. Thanks, Frank. Thank you. The next question comes from Ryan Macwilliams of Barclays. Please turn onto our camera and under your Mic.
Thanks for taking the question so interesting combination.
Because they're an individual customer vertical or customer type, where you're most excited about potential combined momentum than desktop.
Yeah.
<unk> you're on mute.
Sorry about that.
Well I think like.
Of course, there's different things, we can do for different segments in different industries and like that's something of course, we can talk more about also later I think like the ubiquitous newness of like these products is what really.
So.
<unk> <unk>.
Everybody in the world have been used have been responding to a survey.
Survey monkey at some point sooner or later and and like just the amount of customers that have been using those these parts or it is mind blowing. So I think there's so many different types of use cases, both internally and externally.
And Taylor of different conversations at the same way that we see in our customer base at the types of use cases are so broad. So we look forward to kind of serving the entire market over time.
We one of the things Ryan Thats been so compelling for me is we've got to spend more time with our respective organizations as our customer it looks like the S&P 500 displaced by vertical. It's every vertical and then we have products from annual subscription to team all the way up to seven figure contract and as I think about Sheila at 150000 custom.
Base, we have a product that every single one of those customers will use because if youre, if youre pretty neat Zen desk, you need to collect feedback about how your customer feels you want to understand how she's engaging with your platform and that's what we do to Michael's point better than any company in the world over 3 million active users on our platform every day sharing $25 million to $30 million responses about how.
They feel about your product.
<unk> Youre nonprofit youre pricing your campaigns et cetera, So it's our job to integrate and when Sheila showed US the chart of just how big that suite component of that business has become it's just obvious that their customers will benefit from that integration. So we'll be excited to execute on that next year.
Great I really appreciate the color there definitely more actionable customer insights.
Sheila as you think about the deal can you just talk about the decision between all stock versus cash and then maybe how should we think about the timing for the shareholder votes between endoscopy momentum.
Certainly thanks, Brian.
We thought about it as nickel and Xander have laid out we think there's enormous value to be created for our customers our shareholders our employees and really that became.
The most.
Straightforward mechanism to do that with was all stock because to that extent.
We are all participating in that value creation. So that was really the straightforward in terms of timing. We're anticipating first half of 2022, we would anticipate them in the Q1 timeframe, we would have the shareholder vote.
And certainly we want to move as quickly as possible.
So that'll be the focus across all teams.
Moving onto the next question will be coming from Derrick wood over at Cowen Derek Please turn on your camera on your Mic. Please.
Yes.
Yes.
Yep.
Thanks, well congrats on a strong quarter I wanted to really touch on the enterprise business I look at.
You guys did 40% billings growth last quarter, 30%.
This quarter on a much tougher comp seems like the enterprise business is doing quite well. So can we just get a little bit more color in terms of where youre seeing strength geographically how your large deal activity is sales productivity and higher and just get a sense for what's really you know, what's really working and coming together there.
Yes.
Because of that.
All of the things like <unk>.
Like what.
What we've really seen is like post kind of update on the on our way out of this pandemic is that like us doubling down on simplifying the packaging, making it very easy to bring a lot of powerful functionality in a very simple to use package.
It works for our customers, it's easy as transparent and they want to execute on and at the same time, everybody everybody in the industry, who deals with customers.
Or anything how this whole behaviors changing like as I said in my opening.
Script here like everything is online today and like all these experience a little points in time that collectively are compounded creates leica user experience.
Customers they really need this we see that for the small business, we're seeing that for the enterprise and we are really benefiting from our continued investment in the enterprise our continue investment in the product.
And our worldwide presence, we're very excited about the progress we see everywhere in the world.
Okay.
The.
<unk> slide deck.
They are pitched that.
Talks about customer intelligence vision and how.
The combination of you guys. You know you can collect data from customer interactions you can build context around it and then you can take action on it on these insights.
Could you just give us little more stats on how all those pieces are going to work what products do what how are you going to integrate everything.
And really where you see the lowest kind of hanging fruit for cross selling.
Is it just a little bit of details on how are we going to integrate all of the things.
<unk>.
We got to talk a lot more about this on November 18, the yoga and I hope to see you there if there'll be a lot more details, but it's obvious that even customers that are using both our products and not <unk>.
Creating.
Rich a picture of the customers like too many too many data store lifts in different silos and what we really want to do is to bring these things together and create a much richer picture and like we have the ability to do that.
It's within our reach and we want to execute that on very quickly and help our customers with a much of a true picture and that's the ambition.
Great. Thank you Derrick the next question will be coming from Parker Lane over at Stifel. Please turn on your camera and meet your Mic. Please.
Yes, hi, everyone. Thanks for taking my question.
Can you hear me now.
Yes perfect.
The customer conversations you've had out there over the last year or two years, obviously everyone's taking this digital first approach to customer engagement and can you talk a little bit more about how customers. Prior to this deal were gathering feedback on their customer service interactions and I guess.
Why was now the right time why was now the time that you needed to bring these two parties together and really accelerates what both of you are done on an individual basis.
Yes, starting with your first starting with your first question. That's like we of course build provided basic functionality to our customers for years, we've provided integrations with great products like the momentum survey monkey products and other products too.
I think this is a little bit more about just the operational stuff and kind of.
Connecting the dots. This is really about helping our customers use the data much much better and thats the whole ambition here, creating a much richer fuller picture of the customers. The timing is right because like so there's so many shifts in the market right now and everybody understands that they can't they can't.
It's fully execute on their business and like leader in a digital first online for US economy. If they don't if they don't become much better at creating much better pictures offset customer base on the data they have and we are executing on this and we look very much forward to creating like quick quick wins.
Customers as we close this transaction.
Yeah very helpful. And then I think Thats important services case, it's pretty straightforward, but do anticipate that ultimately this holds you more into the sales use case, where you have a product today and maybe even though adjacent categories like marketing more fully.
Well I think I think you Shouldnt think about this as like customer service is not there just to be customer service customer services that you provide feedback to the entire organization about the product with sales size the pricing the packaging the reactions. The experience all of these things and like how what they communicate that overlaid with like the.
The feedback that gives our customers and create this much better pizza that is not just serving one constituent but serves the business and how those might be HSR.
That.
Alright.
Rebuilding my picture here.
Jason do you want to do.
The next question.
Parker I'll chime in Michael if you don't I mean, just the way we use then desk at momentum our customer operations team feeds us so much Intel and data about how our customers are engaging with our products, where theyre getting insights and that feeds our R&D effort that feeds our go to market effort. So.
To Michael's point like over the last 18 months, especially during Covid is the whole world is kind of going through this digital transformation I think we've seen how much our business is do talk to each other and how complementary our products aren't.
Across hybrid makes sense.
Okay great.
Great.
Thank you the.
Our next question comes from some odd Simona over Jefferies. Please turn on your camera in your mind.
Hi, good evening, Thanks for taking my questions. So I want to unpack, maybe some some of the numbers that the targets for $3 5 billion and $4 5 billion. When you say growth accretive if I think about.
The.
The acquired company was growing high teens do we expect growth to accelerate as.
As a result of that.
Yes.
Consolidation or can you just help us understand what Zen desk should be growing.
To get to this three and a half in four and $5 billion and what the assumptions are around the acquisition just so we understand what growth accretive means.
Sure.
I have a lot more detail in our November investor meeting, obviously or where are looking forward to seeing everybody. There, but you know what the what the real goal is the ambition that we just talked through that I think that nickel lines. Andrew just talked through is the ability to very quickly start to cross sell products.
We've got a global footprint.
That can immediately on offer offer revenue synergies in Q.
And then we've got the move up market, which we think we can immediately start to expand revenue synergies into so we think the first full year, which will be 2023, because obviously 2022, well just see.
The close year in their initial integration that we would think by 2023 that the combined company and can really start to have.
Accelerated combined growth. So that's what we're looking for them and as you pointed out we have slightly different growth rates to begin with but as we start to combine ourselves if that combined growth rate.
Okay. So just to make sure for the sake of clarity.
Youre, assuming that the companies will grow faster individually, even as a combined company and accelerate the growth of both companies is that a fair conclusion based on what you just said no. It's the growth rate of the new combined company. So it's.
It's growth accretive to what our long term growth plan as you recall, our target had been to get to $3 billion by 2025, that's the target that we had put out there.
So as we look at this new opportunity as we bring momentum and dividend S family. We're now looking at $3 5 billion a year earlier, so an absolute figure growth target and pulling it in 12 months.
Okay, Great and then maybe just a follow up on the two businesses, how should we think and maybe Zander you can chat.
Chime in here in my call as well, but just the.
Are we going to be expanding who is Zen desk is selling into so is it is this expanding the wallet share that you're potentially pressed up against beyond just call. It customer service departments to more marketing oriented use cases, just help us think about what how you see some of the maybe synergies that develop here.
Yes, no doubt and I think there is a big push in kind of getting these different parts of the organization to works much more seamlessly together. So you are not operating in silos and you don't have this very kind of.
Broken up the common customer experience. So we expect we already of course serve different constituents and we continue that we definitely expect that to be accelerated over this acquisition.
Thanks, moving onto the next question, Ken Wong with Guggenheim. Please turn on your camera on your mind.
Hey, great.
Building off of some odd question just now so really appreciate the update on the three five and four five I believe kind of when you guys introduced those numbers the expectations were for the CAGR over that time for a mid twenties. So should we think about this kind of accretive commentary to mean that that that mid twenty's as kind of marginally higher.
Here or what's the right way to think about it.
Yeah, I think that's the right way to think about it.
And again, we'll lay out a lot more details as we get together with everybody in a few weeks in New York.
Okay.
Then second just as far as momentum is the idea to run it more standalone because it does seem like a fairly distinct product from what was then desk is currently selling or do we envision a scenario down. The line. We're this is part of the suite bundle, what's the right way to think about that.
There's definitely opportunities for kind of.
Lincoln packaging these products and just integrating them much more tightly at the coal, but that also separate businesses and we can talk about more about that in November.
Great. Thank you Ken.
The next question comes from Natalie how and Brad Sills over a bank of America.
Oh, Great Hey, guys.
Thanks for taking my question here.
Karen on your camera.
Oh.
Yes, sorry, I think I'm, having video issues haircut.
But anyway, it's good to see you guys.
I wanted to ask about.
Think about survey monkey, they have obviously, a big freemium motion.
Mining that free base and getting customers onto paid could this signify an opportunity for us than depth to potentially start down there more and create kind of moved down market more and then.
Embark on kind of a similar strategy over time kind of moving down market. This company has been moving up market.
This also kind of bringing that into the market more so for just the core business.
Well.
This is Ben.
A question we've been asked before like freemium models. Unlike like we're going to do what works best for the business and like I think that the further momentum survey monkey brands like there is something to kind of putting that in the hands of people that has been incredibly powerful, especially also because there's a lot of there's a big constituents out there like individual users.
I can see.
Tremendous benefit of this and where there is kind of a huge value to a kind of a brand awareness that players can be translate that to the sandoz business like that.
I don't want to.
I don't think I can comment on that right now.
Got it okay. Thanks.
Thanks for that and then just.
The other aspect of survey monkey is that it's not just customer.
That experience about the employee experience.
Do you see potential for Zen desk to kind of move into that end of the market as well more aggressively.
And I'll ask my camera again, sorry about that.
I think.
Anyway.
We already have a big footprint in the kind of in employee use cases.
Like this is definitely something especially within HR and shared service centers and so on and this is definitely something where we will this is definitely an area, where we will see.
Uptake of this joint offering to no doubt about it.
Great. Thanks, Michael Greg. Thank you. The next question comes from DJ Hynes over of Canaccord. Please turn on your camera.
Hey, guys congrats on the transaction and Standalone results.
Nicole you alluded to customer overlap.
At one point so is there any way to put a finer point on just how much customer overlap there is in the two customer base today.
Not at this point, but it's something we can talk more about it in November in New York.
Okay.
And I'll ask one for Sheila as well, which is probably going to be deferred in November as well, but so the new targets that are out there right.
I think it implies like 'twenty eight 'twenty, 9% growth.
For 2025, alright that three and a half.
One 5 billion when you ran that math like how are you thinking about combined net revenue retention rate.
The profile of the two businesses is very different today I mean, you guys are north of one.
On <unk> there at 100.
Do you think you can keep that combined net revenue retention kind of in the historic ranges you've been talking about like what what was the thinking there.
Yes, so and Youre right I am going to answer your question DJ and say, we'll provide a lot more detail in November.
But certainly as we look at both companies.
We both have really strong offerings that customers frankly love.
So.
We operate on a slightly different basis.
It kind of the motions are slightly different so.
We've tried to we tried to really contemplate how the products are purchased and therefore, how they're used by customers in our estimates certainly over time as the prior question thinking about new products that we may offer and combining things and that's something we we havent actually yet.
But being able to map out and so that'd be opportunity on top of that we're already talking about.
Got it. Thank you. Thank you and the next question comes from Kirk maturity over at Evercore. Please turn on your camera.
Alright, okay.
Sami.
Thanks.
I guess first Mikkel for you could you just talk about you know this is your first really big deal can you just talk about how to make sure that the momentum youre seeing this quarter doesn't get sort of slow down in any way as you bring on another.
As you bring on momentum into the business over the next year.
How do you make sure that that this doesn't become a distraction to the business as it is.
It's been accelerating in the last couple of quarters.
Well.
This quarter first of all most of this is of course already off to the races and like be like Big Trust and our continued execution throughout this quarter as we look into next year I think we're much more focused on the opportunities and the excitement that this creates this is a conversation that is very natural to us to our prospects.
So our customers like we have and I. Appreciate we have a sales force that all pumped up to go out and have this conversation and like there's so many things we can do and are joined kind of online activities, where we can really help our customers.
With bringing like this.
The basic concept of just like opening data and it gives them much more richer customer picture that is that is so basic but so important like we can really make that easy for our customers. So we're very excited about that.
Okay, and then <unk>, just remind us that aren't as familiar just about your international sort of exposure, maybe relative to zander would seem to be one area. Maybe you have some EC uplift.
Between the two companies, yes, sure about 36% of our business is generated outside the United States that includes Canada. Our primary sales operations are here in the U S with a nice sized footprint in half dozen countries in Europe, and then we have a very small team.
Australia, So we intend to benefit from the the footprint that the nickel and team have in Latam and APAC in other countries.
Europe I think this is a big opportunity. Some of you are old enough to remember where kind of everything happened in the U S and it took a decade or 15 years for the rest of the world to catch up those days are over a lot of the rest of the world is there there are millions of organizations that need our software.
<unk> already has 115000 of them and growing faster. So this is just a huge opportunity to accelerate our channel building. Our product strategy is ahead of our demand generation and that is going to be a big accelerant. Once this deal closes in the first half of 'twenty two alright.
Alright, thank you.
Great. Thanks, Kurt The next question comes from Taylor Mcginness over of UBS. Please turn on your camera.
Yeah.
Okay, we will move to the next one.
Next caller, Brian Swartz over at Oppenheimer. Please turn on again.
Okay.
Right.
I think we just answered all the questions.
Alright next one of those stands lawsky over a Morgan Stanley when you're here with us.
Yeah.
Yeah.
Okay.
Alex Zukin over a wolf.
Are you there.
This is strecker on browse can you hear me.
Yep great.
First question for Zander.
I saw that a little bit earlier with <unk> question, but can you dig in a little deeper into some of your product beyond survey that may not be familiar with that you think will fit in really well with thunder.
Yes, I mean, we have a handful of solutions that attack. These big markets customer experience, obviously folks are familiar with CX leaders. These are purpose built software solutions for a buyer or whether its the chief product officer or Chief experience officer somebody who is really tasked with understanding the sentiment of their key customers and then what acts.
One is to take a lot of those folks who are looking for a solution that integrates with Zen desk or looking for a solution that integrates with with Salesforce or Microsoft.
In dynamics those are our we call our product get feedback we've seen a ton of success. Here. This is a business. That's in hyper growth ACB is demonstrably higher than our core service product the market research product that Brad asked about a moment ago is really you know this is a $50 billion Tam. We're increasingly people are using software to understand the needs of a surge.
Cohort of customers and so if you're looking to reach a cohort of customers about a product launch or a campaign youre going to launch you really want to understand.
That takes a panel we have the largest most liquid panel in the United States take software. We built 50 solutions and then some professional services. So this is a really high ATB market for us growing quickly and then as I mentioned of course, there's employee experience.
That is a big market brand metrics tracking the health of the brand et cetera. So it's a handful solutions that frankly every industry every size company in every geo that's the market we're going after and then that becomes really going help us accelerate that.
Thank you.
Yeah.
Great. The next question comes from Patrick Wall Ravens JMP.
Patrick.
Either.
Yeah.
Patrick its name again, I'm, sorry, Jason Patric logarithms.
One second.
Patrick do you want to can you on mute and turn on your camera. Please.
But one thing I've got to promote them.
You'll be able to know.
Patrick in Utah.
Alright, sorry can you hear me now there we go.
What's going on by the way is that it takes a minute for us to get promoted as panelists. So that's why there's a delay congrats on your promotion.
Right.
Yes, Nicole.
I Love the idea Xander of you being part of the Zen desk and helping move this forward and I think we're seeing and a lot of other parts of software but.
The demand for getting this kind of feedback into other solutions I think the concern a lot of investors are going to have on this call is that we all just lived through zoom five nine.
Which was an all stock deal.
With a modest premium.
Yeah.
So when the stock went down ISS recommended against it five nine didn't get enough shareholders. The deal fell apart.
And you know six or seven months, where we were last so I and if you look at what Zen desktop is doing in the aftermarket now it's you know.
Hello, 100, and momentum as you know very accurately tracking like 20% to 30 now.
The question is why is Andrew how are you going to be able to convince why should why should your shareholders vote in favor of this deal at this price that's number one and then Mikkel how committed the Zen desk to doing this right and you know in the end, obviously zoom wasn't that committed to it because they werent willing to they werent willing to pay more so I think it's.
Direct question, but that's the big question, Yes, I'm going to try and make the lawyers as nervous as possible here already.
Here's what I can say, we ran a thorough process and the board enthusiastically support this transaction and many reasons because of what we've just been discussing we see a compelling combination I don't think it takes a lot of squinting to understand the power of our combined product offering.
And so I don't care what happens in the short term movements. This team and me in particular.
Is super Super committed to executing this transaction closing this transaction and then serving the hundreds of thousands of customers. We're excited to bring a better product offering to nickels vision for our customer intelligence company I believe is super compelling and enhances the value for our shareholders. Our employees are going to have incredible opportunities and we're going to serve customers. So.
I can't speak to the zoom five nine transaction I think a lot of different attributes here I've got a lot of confidence we're going to be able to close this transaction, but make it a success for shareholders on both sides.
I can't add much more to that like we are very committed to doing this no doubt about it.
Don't want to comment on like short term kind of market reactions. I think this everybody who takes a look at this and of course, our investors of course, we'll take a look at this we will see the synergies. It's very kind of it's very straightforward. These are two companies that can work really well together and provide a lot of value to customer.
And in many ways, we've already proven that we can do that with.
With how we operate over the last couple of years. So I feel very confident about this and we're very committed to see it through.
Great. Thank you for that perspective.
Thanks, Patrick I think we're going to circle back to a couple of folks that.
We didn't get through yet so Taylor Mcguinness are you are you on now can you turn on your camera.
Yeah can you hear me, yes, we can hear you.
Okay, perfect awesome, yeah, a little bit of technical difficulties on my end, but.
Just.
When looking at the <unk> guide of 31% at the high end Sheila can you maybe talk about the assumptions embedded in the guide I know you mentioned earlier <unk> being strong and so just in the context of last quarter being backend loaded were there any deals that were pushed that ended up like closing this quarter and how we should think about you know.
Seasonality between <unk> and <unk> in.
In the context of some of what's happened the last couple of quarters.
Thanks Taylor for the question. So I anticipate that this is this is our new reality as we've moved upmarket that month three is a big month.
So clearly.
Q4 is a huge quarter for us.
And that Theres quite a bit of renewals and then there's quite a bit of.
New customer momentum that we would have and I do anticipate that again will have a heavy month three and obviously that's ollie's army.
I'll add kind of have a race to the yearend started in December so I would anticipate that and then you know it.
All hands on deck. So I think the teams are excited we had such a strong Q3 that were coming into Q4 with a lot of momentum.
Got it awesome. Thank you.
Yes.
Great and our last question will come from Stan Watzke over a Morgan Stanley Stan.
Hey, guys.
Alright, good I think we're I think we're all set.
Little bit of technical issues, there as well.
So just actually I just wanted to ask specifically on.
<unk> I mean, obviously from a year on year perspective.
Very strong 40% year on year growth, but if we kind of look at it changes <unk> sequentially a bus revenue.
And if we use that as a proxy right there it's about.
20% year on year growth in that ACB, alright, ACB bookings metric question your billings metric.
Is there anything that we need to be mindful of as far as like the growth of <unk> in the quarter or was there anything one off or one time that we need to be mindful of.
So I think theres, some Q3 seasonality, it's hard to compare anything into 2020, just because there were so many different.
Different factors going on but over time, we've seen a Q3 seasonality and certainly I think as we continue to move upmarket, we're going to see more seasonality in Q3.
Got it and.
What about the obviously in Q2, we heard some moms meshes with the tav product in it.
That impacted the results there.
How did that track in Q3, and how are you thinking about that Sheila for for for Q4 now.
So Q3, I think I had mentioned in Q2 that I had you know really look to de risk that so we saw good results in Q3, and inline with expectations and I'm continuing to sort of.
And manage that.
Pretty closely to make sure that we've got a goodbye in a site for the numbers. There. So I think it's it's it's are responding well to start as the new motion like that in place.
Okay perfect. Thank you guys.
Great well, that's all the questions we have for today.
As Michael and Sheila both talked about and feel free to sign up for our November 18th Investor Day, there'll be a limited in person event in New York and Youll get to be able to speak with nickel and Sheila as well zander as well as the broader.
And as a management team. So we look forward to seeing you there and speaking to you again then thank you.
Thank you.
Yeah.