Q4 2021 Zendesk Inc Earnings Call

Speaker 1: section of our prior and subsequent followings with the Securities and Exchange Commission including our upcoming annual report on form 10k for the year ended December 31st 2021. We undertake no obligation to update these statements after today's presentation or to conform these statements to actual results or to the changes in our expectations except as required by law.

Of our prior and subsequent filings with the Securities and Exchange Commission, including our upcoming annual report on Form 10-K for the year ended December 31, 2021, we undertake no obligation to update these statements after today's presentation or to conform these statements to actual results or to the changes in our expectations, except as required by law.

Speaker 1: Please refer to today's earnings release for more information regarding forward-looking statements. During this call, we'll present both GAAP and-

Sure.

Please refer to today's earnings release for more information regarding forward looking statements.

During this call we will present, both GAAP and non-GAAP financial measures. The non-GAAP financial measures should be considered in addition to not as a substitute for or in isolation from our GAAP financial information.

Speaker 1: The non-GAAP financial measure should be considered in addition to not as a substitute for, or in isolation from our GAAP financial information.

Speaker 1: You can find additional disclosures regarding these non-GAAP financial measures, including reconciliations with the compatible GAAP financial measures in today's earnings press release and shareholder letter, and for certain non-GAAP financial measures for prior periods and the earnings press release for such prior periods, all of which are available on our Investor Relations website.

You can find additional disclosures regarding these non-GAAP financial measures, including reconciliations with the comparable GAAP financial measures in today's earnings press release and shareholder letter and for certain non-GAAP financial measures for prior periods in the earnings press release for such prior periods all of which are available on our Investor Relations website.

Speaker 1: Lastly, this presentation may contain information regarding the business, operations, and financial results of Momentive and its subsidiaries. Such information has been prepared by Momentive, and Zendesk does not represent or warrant the accuracy of such information. With this brief introduction, I would turn the call over to Mikkel for opening comments.

Lastly, this presentation may contain information regarding the business operations and financial results of momentum and its subsidiaries such information has been prepared by momentum and <unk> does not represent or warrant the accuracy of such information with this brief introduction I will turn the call over to Michael for opening comments.

Speaker 2: Thanks so much, Jason, and welcome everyone to our fourth quarter 2021 earnings call. First, as some of you may have seen in a separate press release that we issued this afternoon, our board of directors received an unsolicited, non-binding proposal from a consortium of private equity firms to acquire senders for between $127 and $132 per share.

Thanks, So much Jason and welcome everyone to our fourth quarter 2021 earnings call.

First as some of you may have seen in a separate press release that we issued this afternoon. Our board of directors received an unsolicited non binding proposal from a consortium of private equity firms to acquire centers for between.

$127 $132 per share.

Speaker 2: With the assistance of independent legal and financial advisors, our board thoroughly reviewed the proposal and concluded that the offer significantly undervalues the company and is not in the best interest of our shareholders.

With the assistance of independent legal and financial Advisors, Our board thoroughly reviewed the proposal and concluded that the offer significantly undervalues the company and its not in the best interest of our shareholders.

Speaker 2: The board continues to believe strongly that the continued execution of a strategic plan, including the proposed acquisition of momentum, will generate substantial additional long term value for shareholders.

Board continues to believe strongly that the continued execution of its strategic plan, including the proposed acquisition of momentum will generate substantial additional long term value for shareholders.

Speaker 2: The board unanimously recommends a vote for its proposal to approve the issuance of sender stock in connection with the transaction at the shareholder meeting on February 25. We will not be commenting further or taking any Q&A related to the unsolicited proposal. And instead, we've got to focus on our strong quarterly and full year results, which we're very excited.

Bought in non unanimously recommends a vote for a proposal to approve the issuance of Cintas stock in connection with the transaction at the shareholder meeting on February 25th we will not be commenting further or taking any Q&A related any Q&A related to the <unk>.

Solicited proposal and instead, we're going to focus on our strong quarterly and full year results, which were very excited about.

Speaker 2: 2021 was a great year for our business. We finished with a strong fourth quarter with revenue of $2.5 million.

2021 was a great GFR business, we finished with a strong fourth quarter with revenue of $375 million, we growing growing that 32% year over year for.

Speaker 2: $375 million. We're growing that 32% year over year.

Speaker 2: For the full year 21, revenue grew 30% to $1.34 billion, exceeding the outlook that we gave at the start of the year. Sheila is going to share much more details on our performance with you shortly.

For the full year 'twenty, one revenue <unk> revenue grew 30% to $1.34 billion exceeding the outlook that we gave at the start of the year Sheila is going to share much more details on our performance with you shortly.

Speaker 2: As a company, we were rewarded with strong growth throughout the year after being focused on putting customers first during 2020, during the onset of the pandemic. The ongoing shift to a digital-first economy amplified this growth. Brands around the world are choosing centers to evolve how they engage with their customers.

As a company we were rewarded with strong growth throughout the year after being focused on putting customers first during 2020 doing the onset of the pandemic.

The ongoing shift to a digital first economy amplified this growth brands around the world are choosing centers to evolve how they engage with their customers. This is evidenced by the fantastic adoption, we've seen with the <unk> suite and our continued success moving upmarket.

Speaker 2: This is evident by the fantastic adoption we've seen with the Zendesk suite and our continued success moving up to the next level.

Speaker 2: In just 11 months since we launched the sender suite, it has grown to 35% of our annual recurring revenue. That's a $500 million annual business from customers that stay longer and expand at higher rates.

And just 11 months.

We launched the center suite it has grown to 35% of our annual recurring revenue.

$500 million.

Annual business from customers that stay longer and expand at higher rates, new and renewing customers are using suite because it has powerful functionality.

Speaker 2: New and renewing customers are using Suite because it has powerful functionality that is easy to see.

It is easy to implement.

Speaker 2: 90% of our bookings are from new customers on the SWEET product, and SWEET accounted for nearly 60% of our total bookings during the fall.

90% of our bookings.

From new customers on the suite products and suite accounted for nearly 60% of our total bookings during the fourth quarter.

Speaker 2: In 2021, we also scaled our success with enterprise customers driven by the adoption of the suite combined with our maturing go-to-market motions. Customer accounts that generate over $250,000 in annual recurring revenue now account for 38% of our total annual recurring.

In 'twenty one we also scaled our success with enterprise customers driven by the adoption of the suite combined with our maturing go to market motions customer accounts that generate over $250000 in annual recurring revenue now accounts for 38% of our total annual recurring revenue.

Speaker 2: Throughout the year and especially in Q4, financial services became another great example of an industry where disruptors and established brands turned to spend this for a time.

Throughout the year and especially in Q4, our financial services became another Great example of an industry, where disruptors and established brands trying to sensitive time to value.

Speaker 2: Our ease of adoption helps them acquire new customers faster and cross-sell earlier in their release.

Our ease of adoption helps them acquire new customers faster and cross sell earlier in their relationships our financial services book of business grew more than 50% in 'twenty, one and annual recurring revenue from financial services is now more than $100 million.

Speaker 2: Our financial services build-up business grew more than 50% in 2021, and annual recurring revenue from financial services is now more than $100 million.

Speaker 2: Overall, our ability to retain and expand our existing customers has never been stronger. And that, alongside the compelling adoption of SWEET and our momentum in the enterprise, means we have an extremely strong foundation for continued long-term growth.

Overall, our ability to retain and expand our existing customers has never been stronger and that alongside the compelling adoption of suites and our momentum in the enterprise means we have an extremely strong foundation for continued long term growth asset.

Speaker 2: As a business, we are excited for what comes next and well positioned to continue it.

As a business. We are excited for what comes next and well positioned for continued execution 'twenty. One we saw record talent acquisition across all levels and a very competitive market and our employee base grew by 41%.

Speaker 2: In 2021, we saw record talent acquisition across all levels in a very competitive market, and our employee base grew by 41%.

Speaker 2: Across the board, 21 was a strong year and we are keeping the momentum going into 22.

Across the board 21 was a strong year and we are keeping the momentum going into 'twenty two.

Speaker 2: I want to close up by saying that we look forward to the upcoming shareholder vote on our proposed acquisition of Memento.

I want to close out by saying that we look forward to the upcoming shareholder vote on a proposed acquisition of momentum.

Speaker 2: In addition to the information that we provided at our investor date, we also published two presentations to provide further insight on the rationale and the merits of the transaction, which we encourage investors to review. We are committed to the acquisition and are excited about the outlook for the combined complex data.

In addition to the information that we provided at our Investor Day. We also published two presentations to provide further insight on the rationale and the merits of the transaction, which we encourage investors to review we are committed to the acquisition and are excited about the outlook.

The combined company.

Speaker 2: We've had a lot of conversations with our investor community over the last few weeks.

We've had a lot of all we've had a lot of conversations with our investor community over the last few weeks they've been really good to have even if they weren't always super comfortable.

Speaker 2: They've been really good to have, even if they weren't always super comfortable. We appreciate everyone's willingness to dig in and to engage.

We appreciate everyone's willingness to dig in and to engage.

Speaker 2: Open discourse is how we really get clear about perspectives and expectations. It's how we correct any misconceptions out.

Golden discourse is how we really get clear about perspective of expectations. It's how we correct any misconceptions out there and most importantly is how we make sure everyone knows exactly why we are so committed to the vision and the plan we have outlined.

Speaker 2: And most importantly, is how we make sure everyone knows exactly why we are so committed to the vision and the plan we have outlined, percent us and moment.

And momentum.

Speaker 2: That vision is to build a leader in customer intelligence.

That vision is to build a data and customer intelligence center policy billions of customer interactions everyday good momentum, we can turn that into something much more powerful for our customers.

Speaker 2: Send us powers billions of customer interactions every day. With momentum we can turn that into something much more powerful for our customers.

Speaker 2: real customer intelligence that will help redefine how to strategically run a business. And that is a future that we are ridiculously excited about. We feel strongly.

Real customer intelligence that will help redefine how to strategically run our business and that is a future that CR ridiculously excited about we feel strongly about this opportunity and the plan that we have in place to make it a reality and we hope our <unk>.

Speaker 2: and the plan that we have in place to make it a reality. And we hope our investors do as well. We're going to build a business with a $5 billion run rate by 25 with improved margins and a stronger growth rate. And we believe that is in everybody's best interest.

Vessels as well.

We're going to build a business with a $5 billion run rate by 25 with improved margins and a stronger growth rate and we believe that is in everybody's best interest.

Speaker 2: And with that, I'm going to turn it over to Sheila to discuss our financial results for the quarter and for the year in more detail.

And with that.

Turn it over to Sheila.

Discuss our financial results for the quarter and for the year in more detail.

Speaker 3: Take it away, Sheila. Great. Mikkel, thank you, and thank you everyone for your time today. We generated $375 million in revenue this quarter, 32% year-over-year growth, which was ahead of our expectations.

Taken away Sheila great.

Well, thank you and thank you everyone for your time today.

Generated 375 million in revenue, that's quite a 32% year over year growth, which was ahead of our expectation for the full year revenue growth, 30% CAD, one 3 billion and significantly better than the outlook. We provided at the start of the year as.

Speaker 3: For the full year, revenue grew 30% to $1.34 billion, significantly better than the outlook we provided at the start of the year.

Speaker 3: As Mikkel pointed out, our strength in the fourth quarter, as well as for all of 2021, was driven by the success we've seen in growing our enterprise customer base in the introduction of the Zendesk suite.

As Michael pointed out our strength in the fourth quarter as well as for all of 2021 was driven by the success, we've seen in growing our enterprise customer base and the introduction of this endeavor as.

Speaker 3: As more of our ARR comes from enterprise customers and customers on suite, we've seen meaningful improvements in the fundamentals of our business. In the fourth quarter, our average deal size, as well as our average length of contracts with our customers, both increased compared to last year, and our ability to retain and expand these customers are at all-time highs.

As more of our <unk> comes from enterprise customers and customers landscape, we've seen meaningful improvements in the fundamentals of our business in the fourth quarter, our average deal size as well as our average length of contracts with our customers.

Increased compared to last year, and our ability to retain and expand these customers are at all time high.

Speaker 3: New customers this quarter continue to generate 10X the ARR as compared to the ones that are turned off on our discontinued plan.

New customers this quarter continue to generate 10 X the IRR as compared to the ones that are turned off or discontinued plants.

Speaker 3: All of this leads to a more predictable business that is well positioned for continuing strong growth over the long term.

All of this leads to a more predictable business that is well positioned for continuing strong growth over the long term.

Speaker 3: We introduced SWEET in early 2021, and it now accounts for over $500 million in ARR and 35% of our total ARR. While we are only a year into SWEET, we are encouraged by the initial data that we are seeing from SWEET customers. They have higher gross expansion rates, longer contract terms, and use more of our products.

We introduced suite in early 2021, and it now accounts for over 500 million air and 35% of our total air while we are only a year into suite. We are encouraged by the initial data that we are seeing principally customers. They have higher gross expansion rates longer contract terms and.

We use more of our products our net expansion rate. This quarter was 122% similar to last quarter and above our long term target range of one to one 5%. The majority of our NAR continues to come from seat expansion over time, we believe NAR will converge back to the target range.

Speaker 3: Our net expansion rate this quarter was 122%, similar to last quarter and above our long-term target range of 110 to 120.

Speaker 3: The majority of our NER continues to come from seed expansion. Over time, we believe NER will converge back to the target range, though it may remain above 120% in the near term. Our NER continues to benefit from more of our customers signing on with longer engagements and churn and contraction remaining at near all-time lows.

So it may remain above 120% in the near term.

<unk> continues to benefit from more of our customers signing on with longer engagements and churn and contraction remaining at near time near all time lows.

Speaker 3: Customer accounts with over 250K ARR now generate 38% of our ARR, up from 37% last quarter and 32% a year ago.

Customer accounts with over 250, K IRR now generate 38% of our IRR up from 37% last quarter and 32% a year ago.

Speaker 3: Turning to our margins, our fourth quarter non-GAAP gross margin was 81.6% up 220 basis points year over year. Gross margin has continued to improve over time, largely driven by revenue scale, increased optimization of our product support personnel and efficiencies in our hosting infrastructure.

Turning to our margins our fourth quarter non-GAAP gross margin was 81, 6% up 220 basis points year over year.

Gross margin has continued to improve over time, largely driven by revenue scale increased optimization of our product support personnel and efficiencies in our hosting infrastructure.

Speaker 3: During this quarter, we had 27 million operating profit on a non-GAAP basis.

This quarter, we had 27 million operating profit on a non-GAAP basis.

Speaker 3: Our non-GAAP operating income grew 47% year over year, while our non-GAAP operating margin improved 70 basis point year over year.

non-GAAP operating income grew 47% year over year, while our non-GAAP operating margin improved 70 basis points year over year.

Speaker 3: We generated $28 million in free cash flow in the quarter. For the full year 2021, we generated $140 million free cash flow, up 430% year over year. Our fourth quarter free cash flow was impacted by a systems update issue that temporarily impacted our collections in the quarter. That has now been fully resolved. As well, we had expenses related to our proposed moment of acquisition. Finally, let me.

We generated $28 million in free cash flow in a quarter for.

For the full year 2021, and we generated 140 million free cash flow up 430% year over year.

Our fourth quarter free cash flow was impacted by a systems update issue that temporarily impacted our collections in the quarter that has now been fully resolved as well we had expenses related to our proposed.

Acquisition.

Finally, let me cover our guidance, we are confirming our full year 2022 revenue and operating income guidance that we shared at our November Investor meeting, we expect revenue in the range of $1 $6 75 billion to $1 seven O 5 billion or approximately <unk> <unk>.

Speaker 3: We are confirming our full year 2022 revenue and operating income guidance that we shared at our November investor meeting. We expect revenue in the range of 1.675 billion to 1.705 billion or approximately 26% year over year growth at the mid.

26% year over year growth at the midpoint.

Speaker 3: We expect our operating margin for full year 2022 to be 7.5% on a non-GAAP basis, in line with our operating margin in 2021 and aligned to our November guidance as we continue to invest in our growth.

We expect our operating margin for full year 2022 to be seven 5% on a non-GAAP basis in line with our operating margin in 2021 and aligned to our November guidance as we continue to invest in aircraft.

Speaker 3: non-GAAP operating income is expected to be in the range of $117 million to $137 million for the year.

non-GAAP operating income is expected to be in the range of $117 million to $137 million for the year, we expect free cash flow for the full year to be in the range of $165 million to $195 million.

Speaker 3: We expect free cash flow for the full year to be in the range of $165 million to $195 million.

Speaker 3: For the first quarter of 2022, we expect to generate 381 million to 387 million in revenue, or approximately 29% year year growth at the mid-year.

For the first quarter of 2022, we expect to generate 381 million to $387 million in revenue.

Or approximately 29% year over year growth at the midpoint.

Speaker 3: We expect non-GAF operating income of $20 million to $26 million.

We expect non-GAAP operating income of 20 million to $26 million.

Speaker 3: I want to share a bit more detail on Q1 operating margin and free cash.

I wanted to share a bit more detail on Q1 operating margin and free cash flow.

Speaker 3: For Q1, our gap and non-gap operating margins are seasonally lower due to the normal reset of payroll taxes and benefit costs. It is compounded this year due to increased investment and compensation for all employees as we focus on growing, attracting, and retaining Zendesk towers.

For Q1, our GAAP and non-GAAP operating margins are seasonally lower due to the normal reset of payroll taxes and benefit costs. It is compounded this year due to increased investment in compensation for all employees as we focus on growing attracting and retaining than desktop.

Speaker 3: On free cash flow, consistent with our practice in previous periods, we continue to only provide free cash flow guidance for the year as we believe it's best to assess cash flow performance over the longer term.

Our free cash flow consistent with our practice in previous periods. We continue to only provide free cash flow guidance for the year as we believe it's best to assess cash flow performance over the longer term.

Speaker 3: However, I want to provide additional color since we expect our free cash flow in the quarter to be slightly negative.

However, I want to provide additional color since we expect our free cash flow in the quarter to be slightly negative. This is primarily due to the 14% to $17 million and pre close expenses related to the proposed acquisition of related that we expect to incur.

Speaker 3: This is primarily due to the $14 to $17 million in pre-close expenses related to the proposed acquisition of momentum that we expect to incur.

Speaker 3: We expect free cash flow to rebound to normalize levels in the second quarter. Additionally, our full year guidance for free cash flow is to grow 28% of the mid-term.

We expect free cash flow to rebound to normalized levels in the second quarter.

Additionally, our full year guidance for free cash flow is to grow 28% at the midpoint.

Speaker 3: Based on the above factors, we expect our operating income and free cash flow to improve substantially over the course of the year, particularly in the second half as investments that we are making today translate to both top and bottom line.

Based on the above factors, we expect our operating income and free cash flow to improve substantially over the course of the year, particularly in the second half is investments that we're making today translate to both top and bottom line growth.

Speaker 3: In closing, as Mikkel said, Q4 and 2021 were outstanding results driven by our team's continued strong execution. Zendesk is well positioned with strong leadership foundation in the market and our 2021 strong performance builds our confidence in our 22 growth. With that, I will turn it over to Jason for Q&A. Jason?

In closing as Mikkel said Q4, and 2021 were outstanding results driven by our team's continued strong execution.

<unk> is well positioned with strong leadership foundation in the market.

And our 2021 strong performance builds our confidence in our 'twenty two growth with that I will turn it over to Jason for Q&A Jason.

Speaker 1: Thank you, Sheila. As we've done in past quarters, everybody was put through a randomizer. And the first question is coming from Stan Zlotzky at Morgan Stanley . Stan, please turn on the camera and unmute your line.

Thank you Sheila as we've done in past quarters, everybody was put through a randomized <unk> and the first question is coming from Stan <unk> of Morgan Stanley 's stand. Please turn on the camera on your line.

Speaker 4: Perfect. Thank you. Good afternoon, everybody. Thanks, guys. So a couple of questions from my end. Maybe just for Sheila, as we think about the very strong results that you guys put up in Q4, why not bump up the guidance for 2022?

Alright. Thank.

Thank you good afternoon everybody.

Thanks, guys.

So a couple of questions from me.

Maybe just.

For Sheila.

As we think about the very strong results you guys put up in Q4.

Why not bump up the guidance for 2022.

Speaker 3: So, Stan, nice to see you. Thanks for the question. So I think as we've done in the past, what we really want to do is build our confidence through the year because obviously there's a lot more year left. And so what we want to do is, you know, we get together with you every 90 days. So each 90 days build our confidence as we move through the year.

Okay.

Dan Nice to see you. Thanks for the question.

So I think as as we've done in the past what we really want to do is build our confidence through the year, because obviously, there's a lot more year left.

And so what we wanted to do as we get together with you every 90 days. So each 90 days build our confidence as we as we move through the year and so we're obviously, giving your very strong guidance for Q1, we feel really good about that and then throughout the course of the year just just as we did in prior years, just the confidence each quarter.

Speaker 3: And so we're, you know, obviously giving you very strong guidance for Q1. We feel really good about that. And then throughout the course of the year, just as we did in prior years, just build confidence each quarter.

Speaker 4: And then just as a follow up on net revenue retention, once again, you have very strong 122%. And our R and Q4 with so much of the selling happening from suites, right? And those are coming as much bigger chunks.

Understood and then just.

A follow up on net revenue retention once again, a very strong 122%.

<unk> in Q4.

With.

So much of a selling happening from suites right.

Those are coming as much bigger chunk.

Speaker 4: How much did Sweet adoption help Net Revenue Retention this year? And with so many customers already on Suite, what can happen to Net Revenue Retention as we move into 2022 and beyond?

Chunks.

How much help us think through how much of that suite adoption health net revenue retention this year and with so many customers waiting on suites, what can happen to net revenue retention as we move into 2022 and beyond.

Speaker 3: Yeah, it's a good question. We obviously haven't yet fully anniversaryed suite. We'll do that in the Q1 timeframe, Q122 timeframe. But as you point out, because we're really getting a lot of stickiness with suite.

Yeah. It's a good question, we obviously haven't yet fully anniversaried suite will do that.

The Q1 timeframe Q1, 'twenty two time frame, but as you point out because we're really getting a lot of stickiness with suite.

Speaker 3: And a lot of this week customers then still do have seed expansion. It may change those dynamics over time. I just don't think we fully played through because we've not yet anniversaryed many customers on suite. But I think to your point, we're seeing a lot of stickiness with suite.

And a lot of the suite customers and still do have seat expansion. It may change those dynamics over time I. Just don't think we fully played through because we've not yet anniversaried mini.

Many customers I'm suite, but I think to your point, we're seeing a lot of stickiness with wheat.

Speaker 1: Thank you so much. Thanks, Dan. The next question is coming from Arjun Bhatia at William Blair. Arjun, please turn on your camera and unmute your line.

Got it thank you so much.

Thanks, Dan. The next question is coming from Arjun Bhatia.

William Blair Arjun Please turn on your camera in New York City.

Speaker 5: Hello, Emical, I should go. The congrats on the quarter. One thing that stuck out is the enterprise adoption. I'm curious if you can maybe just elaborate on the success that you're having upmarket. Are those larger customers that are driving that strength? Are we seeing it with some customers just buy more, upsell, move to higher price and tiers? We'd just love to hear a little bit more detail about market traction.

Oh, Hey, Michael I forgot.

Congrats on the quarter.

One thing that stuck out.

The enterprise adoption of.

I was curious if you can just maybe just elaborate I'm a successful you had an up market are those larger customers that are driving that.

Frank are you seeing it in some customers buy more upsell that moved to higher pricing tiers would just love to hear a little bit more detail at our park attraction.

Speaker 2: Well, I can talk to a few points that may give you a little bit additional color. We mentioned this example of the financial services. It's also in our shareholder letter. And I think there's, like we see a bunch of industries where like you see the established enterprises are trying to keep up with the change of the disruptors. That it's very visible here in a digital-first economy. And that definitely boosts interest incentives.

Well I can talk to a few points to make it gave you a little bit of additional color like we mentioned this example of financial services.

It's also in our shareholder letter and I think there's like we see a bunch of industries, where like you see with the established enterprises trying to keep up with the changes of the Disruptors that it's very visible here in a digital first economy and that definitely boost interest post incentives.

Speaker 2: We also see, because like in many industries we kind of consider kind of the disruptive choice.

We also see because like in many in many in many industries, we kind of consider kind of the Disruptors choice.

Speaker 2: And I think what we're also seeing is that there is a trend which we spent most of 2020 and beginning of 2021 on. It's just like simplifying the usage of our suite so that it's not only have everything together, but it's also like elegantly integrated so you can roll it out elegantly without a lot of overhead and very, very quickly. And we believe that's a major IT trend that we see in the enterprise today.

I think what we're also seeing is that like there is that there is a trend, which we spent most of 'twenty 2020, and beginning of 'twenty. One on is just like simplifying the usage of our suite. So that it's not only it's not only not only have everything together, but it also is like elegantly.

So you can roll it out elegantly without a lot of overhead and very very quickly and we believe that's a major trend that.

We see in the enterprise today. So these are two two.

Speaker 2: points I would...

Points I would I would.

Speaker 5: sense? Yes, very helpful. And then a quick follow-up for Sheila. I know we're seeing FX headwinds play into guidance for a lot of companies. Can you just remind us of your FX exposure and billing practices and what impact is any of that having on the guidance?

I would emphasize it makes sense.

Very helpful.

And then a quick follow up for sure I know what we're seeing.

Headwinds play into guidance a lot of companies can you just remind us of your FX exposure in our billing practices.

In fact, if any of that having on the guidance.

Speaker 3: So certainly we have FX exposure, so that's a part of how we're thinking about things. We have only a kind of EU type currency, so Europe , and then we are introducing the Real.

So certainly we have FX exposure. So that's a part of how we're thinking about things.

We have.

We have only.

Kind of.

EU type currency so.

Europe and then we are introducing the reality.

Speaker 3: That's early days, so we don't have a lot of business on that. So it's not a material part of our revenue, I would say. But certainly we're watching that and putting hedging in and making sure that we're well protected. All right,

That's early days. So we don't have a lot of business on that so it's not a it's not a material part of our revenue I would say, but certainly we're watching that and putting hedging in and making sure that we're well protected but.

Speaker 3: It's something we think about in our forecast, but it's not a major headwind for us.

It's something we think about in our forecast, but it's not a major headwind for us.

Speaker 1: OK, I just thank you very much. Thanks, Arjun. Thanks, Arjun. The next question comes from Samad Samana over at Jeffries. Please.

Okay understood. Thank you very much.

Surgeon, Thanks, George and the next question comes from some odd Simona over at Jefferies. Please.

Speaker 6: There you go. Great. Thank you for taking my questions. Maybe first one for Mikkel. Hiring is in focus for a lot of the companies that we cover right now. It's obviously a tight labor market. I'm just curious if you could give us any kind of color on where Zen is in terms of recruiting and retaining sales headcount and whether you ended up at plan, ahead of plan in the fourth quarter, just trying to triangulate as we think about 2022.

Okay.

Thank you for taking my questions, maybe first one for Michael.

Hiring is in focus for a lot of the companies that we cover right now it's obviously a tight labor market. Just curious if you could give us any kind of color on.

Where is that as in terms of recruiting and retaining sales head count and whether you ended up at plan ahead of plan in the fourth quarter, just trying to triangulate it as we think about 2022.

Speaker 2: There's no doubt the employee market is very, very fluid right now. We see that. I think all our peers are seeing that.

There's no doubt the employee market is very very fluid right now we see that I think all our peers are seeing that.

Speaker 2: Despite that, we had a very strong recruiting year. We grew the team with 41% year over year. So our recruiting machine is really harming.

Despite that we had a very strong recruiting year.

We grew the team with 41% year over year. So our recruiting machine is really humming.

Speaker 2: But it is a very fluid market and we appreciate that and are doing everything we can to engage with our employees and kind of set them up for success. And like how we get back to reality and start meeting each other and getting together again and building that company culture where this is such a big element is of course something that we spend a lot of time.

But it is a very fluid market and B. We appreciate that and are doing everything we can to engage with our employees that kind of set them up for success and like how do we get back to reality.

Stop beating each other like getting together again in building that company culture that we're this is such a big element is of course, something that we spend a lot of time on.

Speaker 6: Great. And maybe just a quick follow up for Sheila. When I look at the RPO, both short term and total, the seasonal uplift from 3Q to 4Q was just around 10%. That's a little bit more muted than the last several years from 3Q to 4Q. Just anything that we need to be aware of that would have impacted the normal seasonality for RPO from 3Q to 4Q.

Great and then maybe just a quick follow up for Sheila.

When I look at the RPM.

But short term in total the seasonal uplift from <unk> to <unk>.

Around 10%, that's a little bit more muted than the last several years from <unk> to <unk>, just anything that we need to be aware of that would've impacted kind of the normal seasonality for RPM from <unk> to <unk>.

Speaker 3: Well, I guess it's a little bit, you know, 2020 was such a strange year. So it's probably is always a hard to compare. But no, there wasn't anything that we saw, we actually feel really good about both our short term and long term RPO. We feel like, again, we're signing customers with, you know, longer and longer contracts, and we feel really good about that. So there's an anything specific to note there. Great, thanks for taking my questions.

Well I guess, just a little bit on 2020 with such a strange here. So it's probably.

As always a hard compare but there wasn't anything that we saw we actually feel really good about both our short term and long term, we feel like again, we're signing customers with <unk>.

Langer contracts and we feel really good about that so there isn't anything specific to note there.

Great. Thanks for taking my questions, thanks for making money.

Speaker 1: The next question comes from Hannah Rudolph over at Piper Jaffa.

The next question comes from Hana Rudolph over at Piper Jaffray.

Speaker 7: Hi all, thanks for taking my questions today. This first one kind of to follow up on the last question. I guess Sheila, did you guys see any impacts from O'Macron in the fourth quarter?

Hi, all thanks for taking my questions. Today, just first one kind of follow up on the last question I guess, Sheila did you guys see any impacts from <unk> in the fourth quarter.

Speaker 3: So certainly I think everybody was, towards the end of the year, everybody was starting to either be impacted by it or somebody in their family member. I know that happened on my team, that probably happened on everybody's team. So we saw a bit of that, but I think we've got a pretty rapid motion for customer wins. So it really didn't impact the results for us.

So certainly I think everybody.

Everybody was.

Towards the end of the year, everybody was starting to either be impacted by it or somebody in their family member I know that happened on 19 that probably happened on everybody's team. So we saw a bit of that.

But I think we've got a pretty pretty.

Rapid motion for customer wins, so it really didn't impact the results for us, but certainly we saw.

Speaker 3: But certainly we saw some team members be impacted by it and then also some things in the customer. But I wouldn't say it was any significant impact for our business.

17 members be impacted by it and then also some sort.

Thanks on the customer, but I wouldn't say it with any significant impact for our business.

Speaker 7: Okay, that's helpful. And then it's nice to see that you guys are gaining strong traction within this suite, I guess what kind of expectations are you guys having for sweet this year and then what does the path kind of look like to get sweet to more of 40% or 50% of ARR

Alright, that's helpful. And then if it's nice to hear you guys are gaining strong traction with NSX suite I guess, what kind of expectations are you guys having for suite. This year and then what does the path kind of look like to get suite to more of a 40% or 50% of IRR look like.

Speaker 3: Do you want I'll take that 1 so we, we expect continued strong growth on suite. We are we are anticipating that we're going to anniversary. So we're gonna learn a lot about those customers. So we're excited about that. As I mentioned, early early indications of those customers are that they have more expansion and.

I'll take that one so we expect continued strong growth I'm sweet.

We are.

We are anticipating that we're going to anniversary. So we're going to learn a lot about those customers that were excited about that as I mentioned early early indications of those customers are that they have more expansion and.

Speaker 3: They stay with us, so we're interested to see that, but we expect strong growth throughout the year, continued growth on sweet and we expect that that continues into 2023.

They stay with us so we're interested to see that but we expect.

<unk> strong growth throughout the year continued growth on suite and we expect that that continues into 2023.

Speaker 1: All right, thank you. Thanks, Hannah. The next question comes from Max Osnowitz from Stifel.

Alright, thank you.

Thank you Panna.

The next question comes from Max <unk> from Stifel.

Speaker 8: Hi, thanks, Jason. Just staying on suite for a second. 90% of new customer bookings is obviously great, and 60% of total bookings. What is it? Is there like a common trend that you're seeing for the customers that aren't adopting suite right now that are maybe, you know, hesitant? And is there a path to get them on the suite eventually?

Hi, Thanks, Jason just staying on suite for a second.

90% of new customer bookings has obviously created a 60% of total bookings what is is there a common trend that youre seeing from the customers that arent.

Adopting suite right now that are maybe.

And is there a path to get them on the sweep eventually.

Speaker 2: I would say it's all natural behavior. We have customers that know and are very specific about what they want and don't have a suite in their plans right now. We also, of course, working with a lot of the customers about the proper timing of moving to the suite because there's a little bit of slight bit of change management of the organization. But there's no other big issues that are preventing customers from moving.

I would say, it's all natural behavior.

We have customers that are less.

No in a very specific about what they want.

And don't have Sweden their plans right now.

Also of course, working with a lot of the customers.

Sorry about that about the proper timing of.

Moving to the suite, because theres, a little bit of a slide with a change management of the organization.

But there's no other kind of there's no other big issues that have prevented customers from moving to Sweden.

Speaker 8: Got it. And then just thinking about kind of the impact of COVID, I know some investors are thinking that there's been a demand pull forward across different industries. Have you noticed anything like that in the customer service and support industry? And can you maybe talk about how customer conversations have shifted over the last four to six months?

Got it and then just thinking about kind of the impact of Covid I know some investors are thinking that there has been a demand pull forward across different industries have you noticed anything like that.

Customer service and support industry and can you maybe talk about how customer conversations have shifted over the last four to six months.

Speaker 2: I wouldn't describe us as a company that saw a big pull in during the pandemic. We had a, as we kind of was very transparent about, we had a lot of customers in the sharing economy, in the transportation industry, in the...

I wouldn't describe us as a company, but saw a big pull in during the pandemic.

We had as we.

It kind of is very.

Transparent about we had a lot of customers in the sharing economy in the transportation industry and the.

Speaker 2: you know, entertainment industry and travel and so on that was highly impacted by COVID. And what we did during that transition was to focus on our customers and kind of...

Entertainment industry and travel it so long that was highly impacted by by Covid and what we did during that transition was to focus on our customers and it kind of helped.

Speaker 2: helping them as much we can for the long term relationship. We also, of course, saw a lot of customers that saw a tremendous amount of demand, you know, suddenly for one day to the other, suddenly serving all of the US solutions. And suddenly, like some of our customers within like a couple of quarters suddenly had a 50 million more customers to serve. So it's like we saw some, we definitely saw a lot with our customers. But I do believe we have.

Helping them as much we can for the long term relationship. We also have cost a lot of customers that saw a tremendous amount of demand.

For one day to the other side, we are serving all of the U S salute.

Solutions and suddenly like some of our customers are in and I cover the quarter suddenly at 50.

$50 million.

So it's like we saw some some we definitely saw an up at all with our customers, but I do believe we are.

Speaker 2: We think much more about the long-term implications to demand in the market. And that goes both for digital engagement going forward, but especially around how the enterprise are buying IT going forward, which is much more focused on agility, fast time to results, and keeping up with customer expectations. And we believe these are not like short-term COVID blips. These are two long-term mega trends.

We think much more about kind of the long term implications to demand in the market and that goes both for kind of like digital engagement going forward, but especially around kind of how the enterprises are buying it going forward, which is much more focused on agility.

Hydro results.

And keeping up with customer expectations and Thats. We believe these are these are not like short term COVID-19 blips.

Two long term mega trends.

Speaker 1: Thanks, Max. The next question comes from Stryker back from Wolf. Go ahead, please.

Got it thanks, that's it for me.

Thanks Max.

Next question comes from Stryker back for more go ahead. Please.

Speaker 9: Hi, so Sheila, you noted in your preferred remarks that your net expansion rates have been primarily driven by seats. So can you give us any color into or insights or figures around, you know, how much room you still have left and what kind of opportunity that was that represents? And then beyond just seats, you know, what levers are you moving with right now that will help drive this metric higher in 0.22? Thanks.

Hi.

So Sheila you noted in your prepared remarks that your net expansion rate has been primarily driven by <unk>.

So can you give us any color into our insights our figures around how much room, you still have left and what kind of opportunity that was that represents and then beyond just seats.

What levers are you with right now that will help drive this metric of iron.

Speaker 3: So I would quote Norm. Norm would say we're not sold out in any customer. So I think as we continue to do kind of our land and expand motion with customers, I don't, I don't think we're tapped out at any specific customer that we have and certainly as they add agents.

Yes.

And so I would quote norm normal, let's say, we're not sold out in any customer. So I think as we continue to do kind of our land and expand motion with customers.

I don't think we're tapped out at any specific customer that we have and certainly as they add agents and theyre going to want to get those agents are important to the tools. So that as Michael said there were some impacted.

Speaker 3: You know, they're going to want to get those agents to imported to the tools. So, as Michael said, you know, there were some impacted kind of organizations that are kind of coming back with, you know, a bit of the waning coven. So that's an opportunity for us as they bring agents back in.

Kind of organizations that are kind of coming back with.

The waning COVID-19 , so that's an opportunity for us because they bring agents back in and then <unk>.

Speaker 3: And then certainly, you know, moving customers to suite is always an opportunity. Not all customers are on suite. So that movement to suite, we've talked about it in prior quarters. And we saw that this time, this quarter too, that that's on average about 20% increase as people move to the suite product. So, you know, we can kind of get some pricing improvement with that. And then there's obviously different tiers of suite.

Certainly.

Moving customers to suite is always an opportunity not all customers are on suite, so that movement to suite and we've talked about it in <unk>.

Prior quarters, and we saw that this time this quarter to that.

On average about 20% increase as people move to the suite product. So you can kind of get some pricing improvement with that and then theres, obviously different tiers of suite. So we still do think long term that the range is 110% to 120% but.

Speaker 3: So we still do think long term that the range is 110 to 120%, but we're not in any way capping that opportunity.

We're not we're not in any way capping.

Capping that opportunity.

Speaker 1: Thanks. And the next question comes from Kirk Matern over at everything. Kurt.

Thank you.

Thanks Victor.

Thanks, and the next question comes from Kirk mature over at Evercore Kirk.

Speaker 10: OK, there we go. Thanks. Thanks for taking the question. She'll keep talk just a little bit about the investments for next year. I know you went over this a little bit at the analyst day, but, you know, given the high net retention rate right now, you know, it seems like you get a little bit more operating leverage just off the off the growth you're seeing. And you just talk maybe a little bit more specifically, like where you're making investments and sort of how you think about the payback on some of those.

Okay.

Thanks, Thanks for taking the question.

Can you talk to us a little bit about.

The investments for next year I know you went over this a little bit at the analyst day, but given.

Given the high net retention rate right now.

It seems like you'd get a little bit more operating leverage just off the off the growth Youre seeing and can you just talk maybe a little bit more specifically like where you're making investments and sort of how youre thinking about the payback on some of those.

Speaker 3: Certainly. So I think one of the biggest things we're investing is that enterprise motion that Norm talked a lot about at the investor day. We think the opportunity there is tremendous. And if you look at the kind of the progress we've already made, we think we can accelerate that progress. So we're making the investments and as Norm talked about an investor day, it's not just the feet on the street, it's all the supporting cash.

Certainly so I think.

One of the biggest things we're investing is that enterprise motion that norm talked a lot about at the Investor day, we think that the opportunity there is tremendous and if you look at the the.

The kind of the progress we've already made we think we can accelerate that progress so we're making the investments.

And as norm talked about in Investor day, it's not just the feet on the street, it's all the supporting cast to make sure that there is.

Speaker 3: to make sure that there's, you know, you win an enterprise deal every day. So you need to make sure that you're fully supporting that customer once they onboard our capability. So we're making, you know, investments in that. That's a big investment area. And again, we think the time is right.

You win an enterprise deal every day, so you need to make sure that you are fully supporting that customer once they onboard.

Capability, so we're making.

Investments and not that's a big investment area and again, we think the time is ripe for us, making the investment that acceleration of our already seen we really want to capitalize on that.

Speaker 3: for us making the investment. That acceleration we're already seeing, we really want to capitalize on that. We're obviously investing, you know, and continuing to improve our products.

Obviously investing and continuing to.

Speaker 3: for the enterprise because they have, you know, they have a lot of specifics that they need. So we're putting investments in place.

Improve our products for the enterprise because they have you know.

They have a lot of specifics that they need to we're putting investments in place.

Speaker 3: that will adhere to sort of the standards that enterprises want to have. We're making large investments in our reliability. That's across the board for every customer, but obviously even more important for enterprises is we're helping serve our consequential workflow for them.

That will well.

We will adhere to the standards that enterprise is going to have.

Large investments in our reliability that's across the board for every customer, but obviously, even more important for enterprises as well.

Speaker 3: And then we're obviously doing investment. I mentioned even putting some investment into compensation because as some of the earlier questions, it's a competitive market. We want to make sure that we're properly investing in our.

We're helping serve a consequential workflow for them and then we're obviously doing it.

Investment I mentioned he then.

Putting some investment into compensation because.

Some of the earlier questions. It's a competitive market, we want to make sure that we're appropriately investing in our talent.

Speaker 10: That's helpful. And then Nicholas, one quick one for you, obviously, a lot of discussion on your end about shareholder value and things like that. Regardless of what happens in a few weeks on the vote, if you and the board talked about...

That's helpful. And then maybe just one quick one for you obviously a lot of discussion on your end about shareholder value and things like that regardless of what happens.

Speaker 10: buybacks and leveraging your balance sheet and things like that in a little bit different way. I realize you have a lot of balls in there right now, so maybe that's at the bottom of the list of discussion points, but it is your generating cash. There's other...

In a few weeks on the on the boat you view the board talked about buybacks and leveraging your balance sheet and things like that and a little bit different way I realize you have a lot of balls in there right now so maybe that's at the bottom of the list of discussion points, but yes. It is yes. It is you are generating cash here there there's other things.

Speaker 2: you know, things you could potentially do on that front. So I was just curious if that's come up or if you want to punt that question, I'll give you that option to totally want to punt that. We are very, very focused on the upcoming transaction here and getting the vote. And this is that's definitely how we believe we can create the most shareholder value building a five billion dollar.

You could potentially doing that on that front I was just curious if that's come up for if you want to put that question I'll give you that option.

Totally want to fund that we are very very focused on the upcoming transaction here and getting the boat and this is that's definitely how we believe we can create the most shareholder value building a $5 billion.

Speaker 2: Run rate company by 25, proved margins, higher growth rate. We think that's going to be great for everyone.

Run rate company about 25% prove margins higher growth rate, we think thats going to be great for everyone.

Speaker 1: Thanks, Kirk. The next question comes from Ken Wong over at Guggenheim.

Thanks.

Thanks Kurt.

Thanks for the next question comes from Ken Wong of our Guggenheim.

Speaker 6: Great, thanks for taking my question. Sheila, you mentioned bringing agents back as a source of growth. And it does seem like a lot of these customers are still aiming to ramp back up. How much of that rebound is possibly being held back by either their own business dynamics, or is it more labor bottlenecks, shortages? How should we think about what helps move service reps back into your customers?

Great. Thanks for taking my question, Sheila you mentioned, bringing agents back.

A source of growth.

And it does seem like a lot of these customers are still aiming to ramp back up how much of that rebound as possibly being held back by their own business dynamics or is it more labor bottlenecks shortages, how should we think about kind of what what guests.

What helps move service reps kind of back into back into your customers.

Speaker 3: Well, I think both those things are at play. I don't know that I know the, you know, balancing act between them, but certainly.

Well I think both of those things are at play I don't know that I know that balancing act between them, but certainly.

Speaker 3: We know that everybody who is impacted in COVID hasn't been able to fully come back. We see that in our daily lives that some things are still not all the way back. So certainly that ability to come back and bring people back is part of it. But to your point, the labor market is pretty tight. So there's lots of competition for talent. So I would say it's probably a combination of that. I don't know which side of the balance any one particular company is on.

We know that everybody who was impacted in COVID-19 hasn't been able to fully come back we will see that in our daily lives, but some things are still not all the way back so certainly.

<unk> ability to come back and bring people back as part of it but to your point.

The labor market is pretty tight so there's lots of competition for talent. So I would say, it's probably a combination of that I don't know where which side of the balance any one particular companies on.

Speaker 6: Got it. And then maybe just touching on customer logos. I know you guys have already messaged that that should kind of continue to go down. Can you remind us when we should see that dynamic stabilize and then possibly.

Got it.

And then maybe just touching on customer logos I know you guys have already messaged that should kind of continue to go down can you remind us when we should see that dynamic stabilize and possibly improve.

Speaker 3: Yeah, so so I think I mentioned also in my prepared remarks that the new customers were adding our 10 X more error than some of those.

Yes, so so I think I mentioned also in my prepared remarks.

Speaker 3: low end kind of discontinued marketed plans.

New customers, we're adding our tenex more <unk> than some of those low end kind of disk.

Speaker 3: So we expect that's going to continue through this year. Our expectation was that we may get through that in 2022.

Discontinued.

Marketing plans. So we expect that's going to continue through this year.

Our expectation was that we may get through that in 2022.

Speaker 3: But, you know, obviously that's something we'll monitor every quarter. And so, as we've said before, this is really a strategy.

But obviously, that's something we'll monitor every quarter and so as we've said before as it was really a strategy to make sure that we were focusing on those high impact high return customers.

Speaker 3: to make sure that we were focusing on those high impact, high return customers.

Speaker 1: Thanks, Ken. Next question comes from Ryan McWilliams over at nevertheless was available to

Got it great. Thank you very much.

Thanks, Scott next question comes from Ryan Macwilliams of our brokerage firm.

Speaker 1: Hey guys, thanks for the question. Nicholas, in your remarks, you mentioned conversations with investors the last few months on the pending momentum deal. So what's feedback to the mic so far with some pain points or some positives that people focus on?

Yes.

Thanks.

Hey, guys. Thanks for taking question.

Nicola in prepared remarks, you mentioned conversations with investors over the last few months on the pending momentum deal. So what's the feedback been like so far with some pinpoints for some positives that people focus on.

Speaker 2: I just want to repeat what I said in my prepared remarks here that we, like a lot of these, like it's, we really appreciate our investors digging in and engaging in these conversations and like that's going to continue over the next couple of weeks.

Tim.

I just want to repeat what I said in my prepared remarks here that we like a lot of these.

We really appreciate our own vessels.

Digging in any engaging in these conversations and like that.

Speaker 2: We realized that we surprised some of our investors with this acquisition. So giving them time to dig in and understand it better and really engaging with these conversations has been very rewarding and we believe it's very productive and we believe that's going to continue over the next couple of weeks.

That's going to continue over the next couple of weeks.

We realize that we surprised some of our investors with this acquisition, so giving them time to dig in and understand it better and really.

<unk>.

Engaging with us in these kind of things has been very rewarding and we believe is very productive and we believe that's going to continue over the next couple of weeks.

Speaker 10: So perfect. I like hearing about Send Us Opportunity and the customer intelligence strategy over the last few presentations. But, you know, just one more on the deal. I know you're fully committed to getting this acquisition passed over the next two weeks. But, you know, in the event it doesn't go through, have you thought about potential next steps and, you know, what comes next for Send Us?

No perfect I'm hearing about.

And thats opportunity and the customer intelligence strategy over the last two presentations, but just one more on the deal I know you are fully committed to getting this acquisition passed over the next few weeks, but.

In the event. It doesn't go through have you thought about potential next steps in <unk>.

Speaker 2: We have a strong operating plan for 2022 and we've got to continue to execute on that. That's for certain. And if for one reason or the other the deal doesn't go through, we're going to continue to execute on a vision about building customer intelligence, but the path is going to be different. And we'll have to kind of revisit some of our strategies there. But we're very, very committed to a vision. We believe we can build strong, strong.

<unk>.

Thanks, Tim.

A strong operating plans for 'twenty two when we got to continue to execute on that.

And.

If for one reason or the other the deal doesn't go through and we're going to continue to execute on our vision about building customer intelligence, but the path is going up.

As Todd is going to be different.

We will have to kind of revisit some of our strategies there, but like we're very very committed to our vision. We believe we can bring.

Speaker 2: shareholder value with that and we believe that momentum acquisition fits very, very deeply into that.

<unk> strong.

Shareholder value with that and we believe that momentum <unk> fits very very deeply into that.

Okay.

Speaker 1: Michael Fonks over at Bank of America, please turn on your camera.

Thanks, Ryan next question comes from.

Michael Funk of Bank of America, Please turn on the tumor.

Michael.

Okay.

Speaker 10: Yeah, apologies, my camera is not functioning until I apologize for that. Just know your earlier comments about the unsolicited offer. Understand you're not going to comment on the offer specifically, but you did say that, you know, you view your ability to generate excess value, you know, in addition to where the offer came in. So maybe if you just go back and quantify for us, you know, the benefits of the momentum transaction and some of the metrics that may actually benefit from that deal..

Yes, Hi can you hear me now yeah.

Yes, I apologize my camera is not functioning so I apologize for that obviously your earlier comments about the unsolicited offer I understand youre not going to comment on the offer of specifically, but you did say that you view your ability to generate excess value.

In addition to where where the offer came AD. So maybe you can just go back and quantify for us.

The benefits of the moment of transaction and some of the metrics that may actually benefit from that deal.

Speaker 2: I want to keep it high level here. We have produced a lot of material that lays out our path over the next couple of years towards building a company with an almost $5 billion run rate by 25.

I want to I'm wondering keep at a high level here, we have produced a lot of material that kind of lays out a path over the next couple of years towards building a company with a five year almost $5 billion run rate by 25 with a higher growth rate than we are an independent company.

Speaker 2: with a higher growth rate than we as an independent company have a better margin to. We believe that there's a tremendous amount of shareholder value creation from building that. And we believe it's going to be responded to very, very well by our customers.

Our margins, we believe that there is a tremendous amount of shareholder value shareholder creation shareholder value creation from building that and we believe it's going to be responded very very well customers.

Speaker 2: can become a new category and us as a category leader there. So we believe that we have laid out that in our various presentations that are available for us. We're very focused.

It can become a new category of spend as a category leader. There. So we are very we believe that we have laid out that in our various presentations that are available for us and we're very focused on that.

Speaker 10: Sure, no, I appreciate it. Are there near-term metrics we can look to in say 12 months after the close, for example, the cross-sell opportunity, which you've highlighted in your presentations in your prior remarks, obviously the combination of the products, metrics we can look to post-close that should improve and prove that point you made earlier about excess value creation.

Sure I appreciate it or there are other near term metrics weekend, we can look to and say 12 months. After the close for example, the cross sell opportunity, which you've highlighted in your presentation and your prior remarks.

Really the combination of the products.

We can walk to post close that that should improve improve that point you made earlier about excess value creation.

Speaker 2: Yep. And like we are committed to our shareholders in our conversations that we will be very, very transparent about the synergies that we're creating and help them understand quarter by quarter our improvements on those on those metrics. And we're very appreciative for our shareholders.

And like we are committed to our shareholders in all conversations that we will be very very transparent about the synergies that we are creating and help them understand quarter by quarter, our improvements on those on those metrics and we're very appreciative of our.

Speaker 2: interest in monitoring that and working with us on that.

Shareholders' interests in monitoring that and working with us on that journey.

Speaker 10: Great. Thank you so much for the time. I apologize again for the camera. No worries. Thank you so much.

Great. Thank you so much for the time I apologize I apologize again for the camera.

Speaker 1: Thanks. And the next question comes from Derek Wood over at Callan. Derek, please turn on your camera.

Thank you so much.

Thanks, and the next question comes from Derrick Wood over at Cowen Derek Who's your longer term.

Speaker 11: Oh, great. Thanks, guys. First question on the you know, we've talked a lot about the enterprise business wanted to ask about the velocity business and just kind of how that growth curve has been tracking. You know, small business certainly got hit harder during COVID that had a nice bounce back. And now we've kind of moved more into a normalized environment. How would you characterize the trend line on on velocity and maybe how that growth compares to the enterprise?

Oh, great. Thanks, guys first question on the.

A lot about the enterprise business wanted to ask about the velocity business.

And just kind of how that growth curve has been tracking small business certainly got hit harder.

I covered that had a nice bounce back and now we've kind of moved more into a normalized environment.

Or would you characterize the trend line on on velocity and maybe how that growth compares to the enterprise.

Speaker 3: Do you want to start out, Hishita? Yeah, so we saw exactly what you just said, Derek, that sort of journey that you laid out. Obviously, as we're coming into more nominal times, we still see good growth there. And we think it's back to somewhat more normal growth trends than maybe that more kind of other side of that COVID decline. But we see kind of a normal growth plan happening.

Do you want to start out here Sheila yeah. So we saw exactly what you just said Derek and that sort of what.

Journey that you laid out obviously.

As we're coming into more non my clients, we still see good growth there and we think it's back to somewhat more normal growth trends than maybe that more.

Kind of other side of that covenant decline, but we see kind of a normal growth plan happening there.

Speaker 2: We are very excited about our continued relevance and winning strategy in both the SMB mid-market and enterprise market. And we're very excited we can continue to execute on all free markets at the same time. It gives a lot of stability and strength to our business. And that is the strategy that we've been pursuing over the last six, seven, eight years that we can move up into the enterprise without sacrificing our growth in the other sector.

We are very excited about our continued relevance and like winning strategy in both the SMB Midmarket and enterprise market and we're very excited that we can continue to execute on all free market at markets at the same time. It gives a lot of stability and strength to our business and that is the strategy that we've been.

Pursuing over the last 678 years that we can move up into the enterprise without sacrificing our growth in the other.

Speaker 11: Got it. And maybe just kind of double clicking on the enterprise go to market side. And it sounds like you'll continue to focus on the sweet sales. Any other changes to be aware of that you're thinking about going into 2022? Maybe, you know, thinking about how to bring Sunshine more into the fold or anything, any other new playbooks to highlight?

Segments.

Got it.

Maybe just kind of double clicking on the enterprise go to market side and it sounds like you will continue to focus on the suite sales.

Any other changes to be aware of that you're thinking about going into 2022, maybe.

Thinking about how to bring sunshine more into the fold or or anything any other new playbooks to highlight.

Speaker 2: We emphasize here that the biggest trend we're seeing is enterprises.

I would.

We emphasize here that the biggest trend we are seeing is enterprises.

Speaker 2: and being attracted more to easier yet powerful solutions.

Being attracted more to E C.

Speaker 2: that they can roll out really, really quickly, that they can scale with really, really quickly, that are very, very agile, that doesn't take years to change, that is very responsive to their needs and to their customer needs, that provides this transparency and empowerment of everybody involved. And so it's almost at a point where they don't have to think about it as an IT solution, but truly live up to the promise of that.

<unk> solutions that they can roll out really really quickly that they can scale with really really quickly that I'm very very agile that doesn't take years to change that is very responsive to their needs and to their customer needs that provides this transparency and empowerment of everybody involved and where they are so.

Is almost at a point, where they don't have to think about it as an it solution, but truly live off to kind of the promise of <unk> SaaS and.

Speaker 2: And we're very excited about I think this is one of the mega trends coming out of the coming out of the pandemic and that's a major driver.

And we're very excited about it I think this is one of the mega trends coming out of the coming out of the pandemic and Thats.

Speaker 3: Yeah, and if I might add the only other, sorry, I got a frog in my throat. This one I was talking.

Major driver of our business right now.

And if I'm wrong.

The only other.

Alright got a frog in my throat.

Speaker 3: Pardon me. The only other thing I would mention is one other thing that we're putting further investment in in 2022 as our partner.

This one I was talking.

Pardon me.

The other thing I would mention is one other thing that we're putting further investment in 2022 is our partner.

Speaker 3: Building out our partner relationships that's been that's been a growth area for us and we think there's more opportunity so in addition to everything that I just add you know kind of further building out that partner relationship.

Building out our partner relationships that's been.

That's been a growth area for us and we think there's more opportunity. So in addition to everything Michael said I'd, just add kind of <unk>.

Further building up that partner relationships.

Speaker 1: Thanks, Eric. Next question comes from Jeff Henry over at Craig House.

Alright, thanks, guys.

Yes.

Thanks, Eric next question comes from Jeff Van <unk>, Craig Hallum.

Speaker 12: There we go. Hey, guys. So a couple questions for me. I'd like to maybe zoom way out. I remember late 18, early 19. You had given a target model that discussed, hey, looking for 30% grower or sub, we'll give you 500 basis points of margin per year. And I think since then, the actual gives been about a quarter of that. And then to your point, Sheila, I think we're guiding roughly flattish minimal operating margin. Here's the question is, since that view back then as to what it would take to drive a 30% growth business versus now what it takes to drive 30% Can you put your finger on exactly what changed you touched on the move to enterprise? Maybe that's a little more expensive. Labor's certainly a little more expensive, particularly recently, but maybe just a zoom out and anything in perspective, you can give their

Hey, guys. So a couple of questions from me I, just want to maybe zoom way out I remember late 18, or 19, you had given a target model that discussed looking for 30% or so we'll give you 500 basis points of margin per year.

And I think since then the actual give spent about a quarter of that and then to your point Sheila I think we are guiding roughly flattish minimal operating margin as your question is.

Since that view back then as to what it would take to drive a 30% growth business versus now what it takes to drive 30% can.

Can you put your finger on exactly what's changed you've touched on the move to enterprise, maybe that's a little more expensive.

Labor certainly from a little more expense, particularly recently, but let me just zoom out and have you seen any perspective, you can give there.

Speaker 3: Yeah, so I think as we move forward and I kind of laid out our our standalone Zendesk model at investor day and then our long term ambition is to get to the 20% operating margin.

Yeah. So I think as we move forward and I kind of laid out our.

Our Standalone Zen desk model at Investor Day, and then our long term ambition is to get to the 20%.

Speaker 3: Investing in enterprise really requires a lot of upfront capability because obviously we need to build out our products such that enterprise is so confident in adopting it. We need to build out the sales motion and then all the supporting tasks.

Operating.

Operating margin.

Investing in enterprise really requires a lot of upfront and upfront capability, because obviously, we need to build out our products such that enterprises for companies adopting it we need to build out our sales motion and then all of a supporting cast and we see.

Speaker 3: And we see, and it's always been the company's philosophy to balance growth and profit, you know, making sure that we have an eye on both.

And it's always been the Companys philosophy, the balanced growth and profit, making sure that we have an eye on both and making sure that we're putting the right investments that were growing the top so that we then have the scale to grow the bottom line.

Speaker 3: and making sure that we're putting the right investment in so that we're growing the top so that we then have the scale to grow the bottom line.

Speaker 3: So we kind of laid out, you know, the line term ambition is the 20%.

Speaker 3: And, you know, as we drove into this year, what we were really struck by was the progress we made in 21 and Enterprise, which was

So we've kind of laid out the long term ambition is that 20%.

And as we drove into this year, what we were really struck by was the progress we made in 'twenty, one and enterprise which was.

Speaker 3: I think quite remarkable and we felt like the opportunity is really there. As Michael pointed out, for the customers that we've won, what they really appreciate about us is the time to value, rapid ability for them to bring their agents on, and TCO. And we think that's a big opportunity. So we want to make sure to take full advantage of that opportunity.

I think quite quite remarkable and we felt like the opportunity is really there as Michael pointed out for the customers that we've won what they really appreciate that that's just the time to value.

Rapid ability for them to bring their agents on <unk> and Tcl and we think thats the big opportunities, we want to make sure to take full advantage of that opportunity.

Speaker 12: On the suite, one question on suite. So if you look at.

Okay.

<unk>.

Speaker 12: you know, obviously great adoption. What have you learned about the adoption of increment? Obviously, you get more seats, you get all kinds of things, but what have you seen? Can you quantify the adoption of incremental features and the pace at which people do that on the suite versus previously?

On the suite one question on suite. So if you look at.

Obviously, great adoption, what have you learned about the adoption of income obviously get more strategically all kinds of things, but what have you seen can you quantify the adoption of incremental features and the pace at which people do that suite versus previously.

Speaker 2: Yeah, yeah, definitely. Like, and all the signs that we're looking at and all the things that you're asking about here, the things that we've also said, like, it all looks positive. We do want to have like a full year and like prefer a little bit more before we say these things with the highest degree of confidence.

Yes, yes.

Definitely the leg of night and all of the signs that we're looking at and all the things that you are asking about the things that we've also said like it all looks positive we do want to have like a full year and like portfolio a little bit more before we see these things with the highest degree of confidence, but both like the adoption of capabilities the expansion.

Speaker 2: But both like the adoption of capabilities, the expansion within an organization, and the adoption of more agents on the solution, all these things point to positive, as we can see today.

<unk> within an organization and the adoption of more agents on the solution like all these things points too.

Speaker 12: Yeah. Um, last one, I'll let somebody else jump here or get, get to the order. Um, uh, Sheila on the seasonality. Um, I remember the messaging last quarter around our POs. Was that because of the move to the enterprise you're seeing particularly, um, um, back and loaded two, four centric, uh, business.

Points positive as we can see the data right now.

Last one and I'll, let somebody else jump here for Capes the order.

On the seasonality I remember domestic and last quarter around our pls was that because of the move to enterprise Youre seeing particularly.

Speaker 12: if I look at the sequential growth of RPOs Q3 to Q4, kind of in line, maybe a little less than what you've seen historically. So I guess there's two questions embedded in there. Was the seasonality what you expected or asked differently? Were the bookings what you expected in the quarter? Did you hit your bookings number in the quarter? Yeah, we were largely in line with our expectations. It is a big quarter, as you mentioned. It's a big renewal quarter for us. So yeah, we didn't see any significant change from what our expectation was.

Back end loaded Q4 centric business.

Business, if I look at the sequential growth of our fuels Q3 to Q4 kind of online video a little less than what you've seen historically, so I guess, there's two questions embedded in there was the seasonality what you expected or asked differently, where the bookings what you expect to be ported you hit your bookings numbers, Yeah, we were largely in line.

With our expectations. It is a big quarter as you mentioned is a big renewal quarter for us. So yeah. We we didn't we didn't see any any significant change from what our expectation was.

Speaker 1: Next question comes from Pat Walravens from

Thanks for taking my questions guys. Thanks, Jeff.

Speaker 4: Go ahead. Great. Thank you and congratulations on the quarter. So, Michael, you know, there's.

Thanks, Chuck next question comes from Pavel <unk> from.

Go ahead.

Speaker 10: With sort of multiple balls in the air here for you, momentum, these third parties who are approaching you, the core business.

Great. Thank you and congratulations on the quarter.

So Nicole.

<unk>.

What sort of multiple balls in the air here for you.

Momentum these third parties order protein you the core business.

Speaker 9: I'm just curious, I think shareholders might find it helpful too. What are your, you know, as CEO , what are your top one or two priorities right now? What do you think are the most important things for you to be focusing on and getting done?

I'm just curious I think shareholders might find helpful to what are your CEO what are your top one or two priorities right now what what do you think are the most important things for you to be focusing.

Speaker 2: So we had two puppies yesterday. Oh, yeah. And a bunch of kids losing their mind. So that's a big priority in the house. Oh, yeah. That's huge. No, I think like, you know, our investors want to see us execute. And like I'm very happy about having built a team that can just ensure that we can continue to execute that strong operational discipline.

Focusing on getting done.

So we had to.

We had two puppies yesterday.

Yeah.

And in a bunch of kids, losing their minds, so that's and that's a big priority in the high <unk>.

No I think.

Harvest just wanted to see us execute and I am very happy about having built a team that can ensure that we can continue to execute the strong operational discipline strong execution discipline.

Speaker 2: strong execution discipline, you know, that is the foundation of whatever we want to do. So that's, I think that's one thing. And then of course, we need to get to the boat and get the acquisition done with. And I think that's the key.

That is the foundation of whatever we want to do it. So that's I think that's one thing and then of course, we have to get to the boat and get the acquisition done with and I think thats the.

Speaker 10: Okay, great. And then if I can add just a follow up, it's only somewhat related, but you know, you're closing these really big deals in big companies that supposedly are standardized on like Salesforce software, and I'm just curious, how does that work? How do you get in and

Keith.

Some things for everybody to think about right now.

Okay, Great and then if I could add just as a follow up it's only somewhat related but you are closing these really big deals.

In big companies that supposedly are standardized unlike salesforce of software and I'm just curious how does that work.

Speaker 2: And do such big deals in companies that are supposedly standardized on other customer engagement solutions. And I think this standardized on a specific vendor is like that's a term from the 90s. Like nobody does that anymore. Like nobody wants to put on those handcuffs voluntarily. So like no, I think that's like that's the promise of fast software. And I see we like actually the early promises of fast software. We see that some of that realization right now. And we are good at playing with others. We've always been very good at playing with others.

Did you get in and.

And do such big deals and companies that are supposedly standardized on other customer engagement solution.

And I think this standardized on a specific vendor is like Thats, a turn from the nineties.

Does that anymore like nobody.

Nobody wants to put on those handcuffs voluntarily so like no I think that that's the promise of Dassault <unk>.

The early promises of that so where we see that some of that realization right now and we are good at playing with all of those we've always been very good at playing with others.

Speaker 2: And like, I think businesses today are much more focused on what they can get out of the solutions that all are kind of that, you know, like

And like I think businesses today are much more focused on what they can get out of the solutions that all kind of that.

Speaker 2: usually kind of focus on the technical innovation and whatever back end choice they had because us, the public cloud and so on, have taken care of a lot of those things. So they're not really top of mind for businesses anymore.

Like.

Usually kind of focus on the technical integration and the whatever back when Jo Burg and choice they had because.

As the public cloud and so on has taken care of a lot of those things so they're not really top of mind for businesses anymore.

Speaker 1: Great. And our last question comes from Taylor McGinnis over at UBS. Taylor.

Great. Thank you.

Speaker 7: Yeah, hi. Thanks so much for taking my question. I just wanted to focus on on sweet. So the sequential growth and uptake that you guys

Great and our last question comes from Taylor Mcginnis of where UBS Taylor.

Yeah, Hi, thanks, so much for taking my question I just wanted to focus on on suite. So the sequential growth in uptake that you guys.

The experience has been really solid, but I guess with sweet <unk> now at over 500 million that means the non sweet part of the business of course has been declining year over year. So can you maybe just provide color on where we stand in terms of migrating the existing install base <unk> suite and the runway left are just in the context of when we.

Speaker 7: and declining year over year. So can you maybe just provide color on where we stand in terms of migrating the existing install base to suite and the runway left there just in the context of when we start to lap that, how we should think about that next year? And then maybe as like a second part to that question, you know, you've talked a lot about the new logo adoption and that being strong with suite, so maybe you can talk about the opportunity still there. Sure. So we still feel like we're early days in suite. We've got a lot of runway and we.

Start to lap that how we should start how we should think about that next year and then maybe it's like a second part to that question you've talked a lot about the new logo adoption and not being strong with suites. So maybe you can talk about the opportunity is still there.

Speaker 3: Sure, so we still feel like we're early days in suite. We've got a lot of runway and we expect continued growth on suite in 2022. I know we've said that we think there's a certain set of our customers who might not adopt suite. I think as Mikkel said, we're not even one year anniversary done suite. So I don't know if we feel as.

Yeah.

Sure so.

So we still feel like we're early days since we've got a lot of runway and we expect continued growth fund suite in.

2022, I know, we've said that we think.

There's a certain set of our customers who might not adopt suite I think as Michael said, we're not even one year anniversary dime suite. So I don't know if we feel as as declared if about that we think a lot of customers are finding suite.

Speaker 3: As declarative about that, we think a lot of customers are finding sweet.

Speaker 3: suite fits their needs, right? And solves a lot of problems for them. So we're very open for every customer adopting suite over time. But, you know, 2022 is still another really strong year of growth in suite and we think 2023 is. And to your point, over time, as suite grows, obviously it becomes our largest line of business, if you will, which I think we're very happy to have happen because we think that that gives customer solutions that bring them great value. And we always want to be providing a lot of value to our customers.

Sweet.

That fits their needs right and solves a lot of problems for them. So we're very open for every customer adopting suite overtime, but 2022 is still another really strong year of growth in suite and we think 2023 is and to your point.

Over time this week grows obviously.

It becomes our largest line.

Your line of business, if you will.

<unk>.

Well I think we are.

We're very happy to have happened because we think that that gives customer solutions that bring them great value and we always want to be providing a lot of value to our customers.

Speaker 7: Got it. And then my second question is just when looking at the guide for 2022 for the full year at 27. So it's only, you know, a modest.

Got it and then my second question is just when looking at the guide for 2022 for the full year at 27. So it's only a modest T cell. So in thinking about suite and some of these other variables that contribute to that growth any color that you can provide on some of the assumptions.

Speaker 7: So, in thinking about, you know, sweet and some of these other variables that contribute to that growth, any color that you can provide on some of the assumptions embedded there. And I know you talked about earlier, hey, you have to lap sweet, right, in order to see some of like the impact or what that could look like. So, is there any risk to the guide from that perspective?

Embedded there and I know you talked about earlier, Hey, you have to lap suite right in order to see some sort of like the impact or what that what that could look like so is there any risk to the guide from that perspective.

Speaker 3: So, I mean, you know, we feel really comfortable with the guide that we're providing. And obviously execution is very important to us always. So, we feel like we've got good strong line of sight for the guide. To your question on Sweet Tweed, it certainly, continued Sweet adoption is certainly one of the key assumptions in the guide. And then also this continued move in enterprise along with our traditional strength and SMB and the mid-market.

So I mean, we.

Feel really comfortable with the guidance that we're providing and obviously execution is very important to us always so we feel like we've got good strong line of sight for the guide to your question on Sweet Suite has certainly continued suite adoption is certainly one of the key assumptions.

In the guide and then also this continued move in enterprise aligns with our.

Speaker 3: There isn't any one business that doesn't have opportunity to continue to grow in the guide that we have.

Traditional strength in SMB and mid market there isn't any there isn't any one business that debt that doesn't have.

Speaker 3: And yeah, we feel we feel a good strong line of sight. And like I said, I think was the first question that I got asked. You know, our expectation is we get to be with you every 90 days.

Opportunity to continue to grow in the guide that we have and yes, we feel we feel good strong line of sight and like I said I think this is the first question that I got asked.

Speaker 3: And then we use, you know, the performance of the last 90 days to help build the confidence going forward, similar to what we did in 2021.

Our expectation is we get to be with you every 90 days and then we use the pharmacy. The last 90 days to help build the confidence going forward similar to what we did in 2021.

Speaker 7: Awesome progress in the corner. Thanks. Thank you. Taylor. Great. Thank you everybody.

Also congrats on the quarter. Thanks, Thank you Taylor.

Speaker 2: I don't have so much more to say. Again, we appreciate everybody leaning in and engaging with us.

Great. Thank you everybody I'll turn the call back over to Michael.

Yeah.

[laughter].

I don't have so much more to say again like we appreciate everybody leaning in and engaging with us on both like a quarter here, but also the strong metrics going forward and of course, the upcoming transactions via the acquisition of momentum you look very much forward to complete so thanks everybody for.

Speaker 2: on both a quarter here, but also the strong metrics going forward and of course,

Speaker 2: the upcoming transaction here, the acquisition of Memento that we look very much forward to complete. So thanks, everybody, for joining us today. Very proud about our quarter. Congratulations, teams, and this. This was a fantastic Q4 and a tough Q4 in many parts of the world where we were all affected by Omicron. And we will see you in the future. Fromidia, New York,ogan Lannistersville, frost, etc Ah Boss

Joining us today very proud about our Florida congratulations.

This was this was a fantastic Q4, and a tough Q4 in many parts of the world, where we were all affected by omicron in.

Speaker 2: had families and friends and children sick.

Speaker 2: So thanks so much team, you did a great job. Thank you.

Families and friends and.

Children sick.

So thanks, so much team does a great job. Thank you.

Thanks, everybody. Thank you.

Hi.

Yeah.