Company Quick10K Filing
Zendesk
Price73.40 EPS-1
Shares111 P/E-61
MCap8,167 P/FCF143
Net Debt283 EBIT-133
TEV8,450 TEV/EBIT-64
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-10-30
10-Q 2020-06-30 Filed 2020-07-31
10-Q 2020-03-31 Filed 2020-05-04
10-K 2019-12-31 Filed 2020-02-13
10-Q 2019-09-30 Filed 2019-11-01
10-Q 2019-06-30 Filed 2019-08-02
10-Q 2019-03-31 Filed 2019-05-02
10-K 2018-12-31 Filed 2019-02-14
10-Q 2018-09-30 Filed 2018-11-05
10-Q 2018-06-30 Filed 2018-08-03
10-Q 2018-03-31 Filed 2018-05-04
10-K 2017-12-31 Filed 2018-02-22
10-Q 2017-09-30 Filed 2017-11-03
10-Q 2017-06-30 Filed 2017-08-07
10-K 2016-12-31 Filed 2017-02-27
10-Q 2016-09-30 Filed 2016-11-03
10-Q 2016-06-30 Filed 2016-08-04
10-Q 2016-03-31 Filed 2016-05-05
10-K 2015-12-31 Filed 2016-02-26
10-Q 2015-09-30 Filed 2015-11-06
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-07
10-K 2014-12-31 Filed 2015-02-17
10-Q 2014-09-30 Filed 2014-11-06
10-Q 2014-06-30 Filed 2014-08-07
8-K 2020-10-27
8-K 2020-07-30
8-K 2020-07-27
8-K 2020-06-11
8-K 2020-06-10
8-K 2020-06-09
8-K 2020-05-19
8-K 2020-04-30
8-K 2020-02-06
8-K 2019-11-11
8-K 2019-10-24
8-K 2019-07-25
8-K 2019-05-29
8-K 2019-04-24
8-K 2019-04-02
8-K 2019-01-31
8-K 2018-10-30
8-K 2018-07-31
8-K 2018-05-22
8-K 2018-04-30
8-K 2018-04-03
8-K 2018-03-15
8-K 2018-03-14
8-K 2018-02-01

ZEN 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1. Overview and Basis of Presentation
Note 2. Business Combinations
Note 3. Financial Instruments
Note 4. Costs To Obtain Customer Contracts
Note 5. Property and Equipment
Note 6. Leases
Note 7. Goodwill and Acquired Intangible Assets
Note 8. Convertible Senior Notes
Note 9. Commitments and Contingencies
Note 10. Common Stock and Stockholders' Equity
Note 11. Deferred Revenue and Performance Obligations
Note 12. Net Loss per Share
Note 13. Income Taxes
Note 14. Geographic Information
Note 15. Subsequent Event
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors.
Item 6. Exhibits
EX-31.1 zen10-qq32020exhibit311.htm
EX-31.2 zen10-qq32020exhibit312.htm
EX-32.1 zen10-qq32020exhibit321.htm

Zendesk Earnings 2020-09-30

Balance SheetIncome StatementCash Flow
1.51.20.90.60.30.02014201620182020
Assets, Equity
0.30.20.10.1-0.0-0.12014201620182020
Rev, G Profit, Net Income
0.60.40.30.1-0.0-0.22014201620182020
Ops, Inv, Fin

zen-20200930
FALSE2020Q30001463172December 31P5DP5D.0158554.0091944P6M1one00014631722020-01-012020-09-300001463172dei:FormerAddressMember2020-01-012020-09-30xbrli:shares00014631722020-10-29iso4217:USD00014631722020-09-3000014631722019-12-3100014631722020-07-012020-09-3000014631722019-07-012019-09-3000014631722019-01-012019-09-30iso4217:USDxbrli:shares0001463172us-gaap:CostOfSalesMember2020-07-012020-09-300001463172us-gaap:CostOfSalesMember2019-07-012019-09-300001463172us-gaap:CostOfSalesMember2020-01-012020-09-300001463172us-gaap:CostOfSalesMember2019-01-012019-09-300001463172us-gaap:ResearchAndDevelopmentExpenseMember2020-07-012020-09-300001463172us-gaap:ResearchAndDevelopmentExpenseMember2019-07-012019-09-300001463172us-gaap:ResearchAndDevelopmentExpenseMember2020-01-012020-09-300001463172us-gaap:ResearchAndDevelopmentExpenseMember2019-01-012019-09-300001463172us-gaap:SellingAndMarketingExpenseMember2020-07-012020-09-300001463172us-gaap:SellingAndMarketingExpenseMember2019-07-012019-09-300001463172us-gaap:SellingAndMarketingExpenseMember2020-01-012020-09-300001463172us-gaap:SellingAndMarketingExpenseMember2019-01-012019-09-300001463172us-gaap:GeneralAndAdministrativeExpenseMember2020-07-012020-09-300001463172us-gaap:GeneralAndAdministrativeExpenseMember2019-07-012019-09-300001463172us-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-09-300001463172us-gaap:GeneralAndAdministrativeExpenseMember2019-01-012019-09-300001463172us-gaap:CommonStockMember2020-06-300001463172us-gaap:AdditionalPaidInCapitalMember2020-06-300001463172us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300001463172us-gaap:RetainedEarningsMember2020-06-3000014631722020-06-300001463172us-gaap:CommonStockMember2019-06-300001463172us-gaap:AdditionalPaidInCapitalMember2019-06-300001463172us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-300001463172us-gaap:RetainedEarningsMember2019-06-3000014631722019-06-300001463172us-gaap:CommonStockMember2020-07-012020-09-300001463172us-gaap:AdditionalPaidInCapitalMember2020-07-012020-09-300001463172us-gaap:CommonStockMember2019-07-012019-09-300001463172us-gaap:AdditionalPaidInCapitalMember2019-07-012019-09-300001463172us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-07-012020-09-300001463172us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-07-012019-09-300001463172us-gaap:RetainedEarningsMember2020-07-012020-09-300001463172us-gaap:RetainedEarningsMember2019-07-012019-09-300001463172us-gaap:CommonStockMember2020-09-300001463172us-gaap:AdditionalPaidInCapitalMember2020-09-300001463172us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-09-300001463172us-gaap:RetainedEarningsMember2020-09-300001463172us-gaap:CommonStockMember2019-09-300001463172us-gaap:AdditionalPaidInCapitalMember2019-09-300001463172us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-09-300001463172us-gaap:RetainedEarningsMember2019-09-3000014631722019-09-300001463172us-gaap:CommonStockMember2019-12-310001463172us-gaap:AdditionalPaidInCapitalMember2019-12-310001463172us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001463172us-gaap:RetainedEarningsMember2019-12-310001463172us-gaap:CommonStockMember2018-12-310001463172us-gaap:AdditionalPaidInCapitalMember2018-12-310001463172us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310001463172us-gaap:RetainedEarningsMember2018-12-3100014631722018-12-310001463172us-gaap:CommonStockMember2020-01-012020-09-300001463172us-gaap:AdditionalPaidInCapitalMember2020-01-012020-09-300001463172us-gaap:CommonStockMember2019-01-012019-09-300001463172us-gaap:AdditionalPaidInCapitalMember2019-01-012019-09-300001463172us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-09-300001463172us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-09-300001463172us-gaap:RetainedEarningsMember2020-01-012020-09-300001463172us-gaap:RetainedEarningsMember2019-01-012019-09-300001463172zen:GoodwillAndIntangibleAssetsNetMember2020-01-012020-09-300001463172zen:GoodwillAndIntangibleAssetsNetMember2019-01-012019-09-300001463172us-gaap:OtherAssetsMember2020-01-012020-09-300001463172us-gaap:OtherAssetsMember2019-01-012019-09-300001463172zen:SmoochTechnologiesHoldingsULCMember2019-05-142019-05-140001463172zen:SmoochTechnologiesHoldingsULCMember2019-06-300001463172zen:SmoochTechnologiesHoldingsULCMember2019-05-140001463172us-gaap:DevelopedTechnologyRightsMemberzen:SmoochTechnologiesHoldingsULCMember2019-05-140001463172zen:SmoochTechnologiesHoldingsULCMemberus-gaap:CustomerRelationshipsMember2019-05-140001463172us-gaap:OrderOrProductionBacklogMemberzen:SmoochTechnologiesHoldingsULCMember2019-05-140001463172us-gaap:DevelopedTechnologyRightsMemberzen:SmoochTechnologiesHoldingsULCMember2019-05-142019-05-140001463172zen:SmoochTechnologiesHoldingsULCMemberus-gaap:CustomerRelationshipsMember2019-05-142019-05-140001463172us-gaap:OrderOrProductionBacklogMemberzen:SmoochTechnologiesHoldingsULCMember2019-05-142019-05-140001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel1Member2020-09-300001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:USTreasurySecuritiesMember2020-09-300001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2020-09-300001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:CorporateDebtSecuritiesMember2020-09-300001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:CorporateDebtSecuritiesMember2020-09-300001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2020-09-300001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Member2020-09-300001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel2Member2020-09-300001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2020-09-300001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMemberus-gaap:FairValueInputsLevel1Member2020-09-300001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:AssetBackedSecuritiesMember2020-09-300001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2020-09-300001463172us-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2020-09-300001463172us-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2020-09-300001463172us-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Member2020-09-300001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2020-09-300001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2020-09-300001463172us-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2020-09-300001463172us-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2020-09-300001463172us-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2020-09-300001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2020-09-300001463172us-gaap:FairValueMeasurementsRecurringMember2020-09-300001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Memberus-gaap:CorporateDebtSecuritiesMember2019-12-310001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:CorporateDebtSecuritiesMember2019-12-310001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CorporateDebtSecuritiesMember2019-12-310001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMemberus-gaap:FairValueInputsLevel1Member2019-12-310001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:AssetBackedSecuritiesMember2019-12-310001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:AssetBackedSecuritiesMember2019-12-310001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel1Member2019-12-310001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:USTreasurySecuritiesMember2019-12-310001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USTreasurySecuritiesMember2019-12-310001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Member2019-12-310001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel2Member2019-12-310001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:MoneyMarketFundsMember2019-12-310001463172us-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2019-12-310001463172us-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2019-12-310001463172us-gaap:CommercialPaperMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001463172us-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2019-12-310001463172us-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2019-12-310001463172us-gaap:CertificatesOfDepositMemberus-gaap:FairValueMeasurementsRecurringMember2019-12-310001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMemberus-gaap:FairValueInputsLevel1Member2019-12-310001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Memberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2019-12-310001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2019-12-310001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2019-12-310001463172us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2019-12-310001463172us-gaap:FairValueMeasurementsRecurringMember2019-12-310001463172us-gaap:FairValueInputsLevel3Member2020-09-300001463172us-gaap:FairValueInputsLevel3Member2019-12-3100014631722019-01-012019-12-310001463172us-gaap:ForeignExchangeForwardMembersrt:MaximumMember2020-01-012020-09-300001463172us-gaap:OtherCurrentAssetsMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:ForeignExchangeForwardMemberus-gaap:FairValueInputsLevel2Member2020-09-300001463172us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:ForeignExchangeForwardMemberus-gaap:AccountsPayableAndAccruedLiabilitiesMemberus-gaap:FairValueInputsLevel2Member2020-09-300001463172us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:FairValueInputsLevel2Member2020-09-300001463172us-gaap:OtherCurrentAssetsMemberus-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:ForeignExchangeForwardMemberus-gaap:FairValueInputsLevel2Member2019-12-310001463172us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:ForeignExchangeForwardMemberus-gaap:AccountsPayableAndAccruedLiabilitiesMemberus-gaap:FairValueInputsLevel2Member2019-12-310001463172us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:FairValueInputsLevel2Member2019-12-310001463172us-gaap:ForeignExchangeForwardMember2020-09-300001463172us-gaap:ForeignExchangeForwardMember2019-12-310001463172us-gaap:ForeignExchangeForwardMemberus-gaap:SalesMember2020-07-012020-09-300001463172us-gaap:ForeignExchangeForwardMemberus-gaap:SalesMember2019-07-012019-09-300001463172us-gaap:ForeignExchangeForwardMemberus-gaap:SalesMember2020-01-012020-09-300001463172us-gaap:ForeignExchangeForwardMemberus-gaap:SalesMember2019-01-012019-09-300001463172us-gaap:CostOfSalesMemberus-gaap:ForeignExchangeForwardMember2020-07-012020-09-300001463172us-gaap:CostOfSalesMemberus-gaap:ForeignExchangeForwardMember2019-07-012019-09-300001463172us-gaap:CostOfSalesMemberus-gaap:ForeignExchangeForwardMember2020-01-012020-09-300001463172us-gaap:CostOfSalesMemberus-gaap:ForeignExchangeForwardMember2019-01-012019-09-300001463172us-gaap:ForeignExchangeForwardMemberzen:ResearchAndDevelopmentMember2020-07-012020-09-300001463172us-gaap:ForeignExchangeForwardMemberzen:ResearchAndDevelopmentMember2019-07-012019-09-300001463172us-gaap:ForeignExchangeForwardMemberzen:ResearchAndDevelopmentMember2020-01-012020-09-300001463172us-gaap:ForeignExchangeForwardMemberzen:ResearchAndDevelopmentMember2019-01-012019-09-300001463172us-gaap:ForeignExchangeForwardMemberus-gaap:SellingAndMarketingExpenseMember2020-07-012020-09-300001463172us-gaap:ForeignExchangeForwardMemberus-gaap:SellingAndMarketingExpenseMember2019-07-012019-09-300001463172us-gaap:ForeignExchangeForwardMemberus-gaap:SellingAndMarketingExpenseMember2020-01-012020-09-300001463172us-gaap:ForeignExchangeForwardMemberus-gaap:SellingAndMarketingExpenseMember2019-01-012019-09-300001463172us-gaap:ForeignExchangeForwardMemberus-gaap:GeneralAndAdministrativeExpenseMember2020-07-012020-09-300001463172us-gaap:ForeignExchangeForwardMemberus-gaap:GeneralAndAdministrativeExpenseMember2019-07-012019-09-300001463172us-gaap:ForeignExchangeForwardMemberus-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-09-300001463172us-gaap:ForeignExchangeForwardMemberus-gaap:GeneralAndAdministrativeExpenseMember2019-01-012019-09-300001463172us-gaap:ForeignExchangeForwardMember2020-07-012020-09-300001463172us-gaap:ForeignExchangeForwardMember2019-07-012019-09-300001463172us-gaap:ForeignExchangeForwardMember2020-01-012020-09-300001463172us-gaap:ForeignExchangeForwardMember2019-01-012019-09-30xbrli:pure0001463172us-gaap:ConvertibleDebtMemberzen:ConvertibleSeniorNotesDue2023Member2020-06-300001463172us-gaap:ConvertibleDebtMemberzen:ConvertibleSeniorNotesDue2025Member2020-06-300001463172us-gaap:ConvertibleDebtMemberus-gaap:FairValueInputsLevel2Memberzen:ConvertibleSeniorNotesDue2025Member2020-09-300001463172us-gaap:ConvertibleDebtMemberus-gaap:FairValueInputsLevel2Memberzen:ConvertibleSeniorNotesDue2023Member2020-09-300001463172us-gaap:ConvertibleDebtMemberzen:ConvertibleSeniorNotesDue2025Member2020-09-300001463172us-gaap:ConvertibleDebtMemberzen:ConvertibleSeniorNotesDue2023Member2020-09-300001463172us-gaap:LeaseholdImprovementsMember2020-09-300001463172us-gaap:LeaseholdImprovementsMember2019-12-310001463172us-gaap:SoftwareDevelopmentMember2020-09-300001463172us-gaap:SoftwareDevelopmentMember2019-12-310001463172zen:ComputerEquipmentLicensedSoftwareAndPatentsMember2020-09-300001463172zen:ComputerEquipmentLicensedSoftwareAndPatentsMember2019-12-310001463172us-gaap:FurnitureAndFixturesMember2020-09-300001463172us-gaap:FurnitureAndFixturesMember2019-12-310001463172us-gaap:ConstructionInProgressMember2020-09-300001463172us-gaap:ConstructionInProgressMember2019-12-310001463172us-gaap:DevelopedTechnologyRightsMember2020-09-300001463172us-gaap:DevelopedTechnologyRightsMember2020-01-012020-09-300001463172us-gaap:CustomerRelationshipsMember2020-09-300001463172us-gaap:CustomerRelationshipsMember2020-01-012020-09-300001463172us-gaap:OrderOrProductionBacklogMember2020-09-300001463172us-gaap:OrderOrProductionBacklogMember2020-01-012020-09-300001463172us-gaap:DevelopedTechnologyRightsMember2019-12-310001463172us-gaap:DevelopedTechnologyRightsMember2019-01-012019-12-310001463172us-gaap:CustomerRelationshipsMember2019-12-310001463172us-gaap:CustomerRelationshipsMember2019-01-012019-12-310001463172us-gaap:OrderOrProductionBacklogMember2019-12-310001463172us-gaap:OrderOrProductionBacklogMember2019-01-012019-12-310001463172us-gaap:ConvertibleDebtMemberzen:ConvertibleSeniorNotesDue2025Member2020-06-012020-06-30zen:day0001463172us-gaap:ConvertibleDebtMemberzen:ConvertibleSeniorNotesDue2025Member2019-12-310001463172us-gaap:ConvertibleDebtMemberzen:ConvertibleSeniorNotesDue2025Member2020-07-012020-09-300001463172us-gaap:ConvertibleDebtMemberzen:ConvertibleSeniorNotesDue2025Member2019-07-012019-09-300001463172us-gaap:ConvertibleDebtMemberzen:ConvertibleSeniorNotesDue2025Member2020-01-012020-09-300001463172us-gaap:ConvertibleDebtMemberzen:ConvertibleSeniorNotesDue2025Member2019-01-012019-09-300001463172srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2019-12-310001463172us-gaap:ConvertibleDebtMemberzen:ConvertibleSeniorNotesDue2023Member2018-03-310001463172us-gaap:ConvertibleDebtMemberzen:ConvertibleSeniorNotesDue2023Member2018-03-012018-03-310001463172us-gaap:ConvertibleDebtMemberzen:ConvertibleSeniorNotesDue2023Member2019-12-310001463172us-gaap:ConvertibleDebtMemberzen:ConvertibleSeniorNotesDue2023Member2020-07-012020-09-300001463172us-gaap:ConvertibleDebtMemberzen:ConvertibleSeniorNotesDue2023Member2019-07-012019-09-300001463172us-gaap:ConvertibleDebtMemberzen:ConvertibleSeniorNotesDue2023Member2020-01-012020-09-300001463172us-gaap:ConvertibleDebtMemberzen:ConvertibleSeniorNotesDue2023Member2019-01-012019-09-300001463172us-gaap:ConvertibleDebtMemberzen:ConvertibleSeniorNotesDue2023Member2020-06-012020-06-300001463172us-gaap:ConvertibleDebtMember2020-06-300001463172us-gaap:ConvertibleDebtMember2020-06-012020-06-300001463172us-gaap:EmployeeStockOptionMember2020-01-012020-09-30zen:offeringPeriod0001463172us-gaap:EmployeeStockMember2020-01-012020-09-300001463172us-gaap:EmployeeStockMember2020-07-012020-09-300001463172us-gaap:EmployeeStockMember2020-01-012020-01-010001463172us-gaap:EmployeeStockMember2020-09-300001463172zen:TwoThousandNineStockOptionAndGrantPlanMember2020-09-300001463172us-gaap:EmployeeStockOptionMemberzen:TwoThousandFourteenPlanMember2020-01-012020-01-010001463172us-gaap:EmployeeStockOptionMemberzen:TwoThousandFourteenPlanMember2020-09-3000014631722016-05-062016-05-060001463172us-gaap:RestrictedStockUnitsRSUMember2019-12-310001463172us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-09-300001463172us-gaap:PerformanceSharesMember2020-01-012020-09-300001463172us-gaap:RestrictedStockUnitsRSUMember2020-09-300001463172us-gaap:RestrictedStockUnitsRSUMember2019-01-012019-09-300001463172zen:PSURetentionPlanMemberus-gaap:PerformanceSharesMember2018-07-012018-09-30zen:semi-annualTranche0001463172us-gaap:PerformanceSharesMember2020-07-012020-09-300001463172zen:PSURetentionPlanMemberus-gaap:PerformanceSharesMember2020-07-012020-09-300001463172zen:PSURetentionPlanMemberus-gaap:PerformanceSharesMember2020-01-012020-09-300001463172zen:PSURetentionPlanMemberus-gaap:PerformanceSharesMember2019-07-012019-09-300001463172zen:PSURetentionPlanMemberus-gaap:PerformanceSharesMember2019-01-012019-09-3000014631722020-10-012020-09-300001463172zen:CommonStockOptionsAndEmployeeStockPurchasePlanMember2020-01-012020-09-300001463172zen:CommonStockOptionsAndEmployeeStockPurchasePlanMember2019-01-012019-09-300001463172us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-09-300001463172us-gaap:RestrictedStockUnitsRSUMember2019-01-012019-09-300001463172zen:ConvertibleSeniorNotesMember2020-01-012020-09-300001463172zen:ConvertibleSeniorNotesMember2019-01-012019-09-300001463172zen:ConvertibleSeniorNotesDue2023Member2020-01-012020-09-300001463172zen:ConvertibleSeniorNotesDue2025Member2020-01-012020-09-300001463172country:US2020-07-012020-09-300001463172country:US2019-07-012019-09-300001463172country:US2020-01-012020-09-300001463172country:US2019-01-012019-09-300001463172us-gaap:EMEAMember2020-07-012020-09-300001463172us-gaap:EMEAMember2019-07-012019-09-300001463172us-gaap:EMEAMember2020-01-012020-09-300001463172us-gaap:EMEAMember2019-01-012019-09-300001463172zen:APACMember2020-07-012020-09-300001463172zen:APACMember2019-07-012019-09-300001463172zen:APACMember2020-01-012020-09-300001463172zen:APACMember2019-01-012019-09-300001463172zen:OtherCountriesMember2020-07-012020-09-300001463172zen:OtherCountriesMember2019-07-012019-09-300001463172zen:OtherCountriesMember2020-01-012020-09-300001463172zen:OtherCountriesMember2019-01-012019-09-300001463172country:US2020-09-300001463172country:US2019-12-310001463172country:IE2020-09-300001463172country:IE2019-12-310001463172zen:OtherEMEACountriesMember2020-09-300001463172zen:OtherEMEACountriesMember2019-12-310001463172us-gaap:EMEAMember2020-09-300001463172us-gaap:EMEAMember2019-12-310001463172country:SG2020-09-300001463172country:SG2019-12-310001463172zen:OtherAPACCountriesMember2020-09-300001463172zen:OtherAPACCountriesMember2019-12-310001463172zen:APACMember2020-09-300001463172zen:APACMember2019-12-310001463172zen:OtherCountriesMember2020-09-300001463172zen:OtherCountriesMember2019-12-31zen:segment0001463172srt:MinimumMembersrt:ScenarioForecastMember2020-10-012021-03-310001463172srt:ScenarioForecastMembersrt:MaximumMember2020-10-012021-03-310001463172srt:ScenarioForecastMember2020-10-012021-03-31
Table of Contents
UNITED STATES  
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from       to       
Commission File Number: 001-36456
 
ZENDESK, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 26-4411091
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
  
989 Market StreetSan FranciscoCalifornia94103
(Address of principal executive offices) (Zip Code)
 
 
Registrant’s telephone number, including area code: (415418-7506

1019 Market Street, San Francisco, California 94103
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareZENNew York Stock Exchange
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.


Table of Contents
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YesNo
As of October 29, 2020, there were 116,676,682 shares of the registrant’s common stock outstanding.



ZENDESK, INC.
TABLE OF CONTENTS
 
PART I — FINANCIAL INFORMATION
 
Item 1
 
 
 
 
 
Item 2
Item 3
Item 4
PART II — OTHER INFORMATION 
Item 1
Item 1A
Item 6
3

Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “might,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

worldwide economic conditions and their impact on information technology spending;
the effect of uncertainties related to the novel coronavirus and resulting COVID-19 disease pandemic on U.S. and global markets, our business, operations, revenue results, cash flow, operating expenses, demand for our solutions, sales cycles, customer retention, and our customers’ businesses;
our ability to attract and retain customers to use our product and platform solutions;
our ability to optimize the pricing for our solutions;
our future financial performance, including our revenue, cost of revenue, gross profit, operating expenses, ability to generate positive cash flow, and ability to achieve and maintain profitability;
our ability to understand how changes in worldwide economic conditions may affect businesses of organizations of varying sizes differently;
our ability to forecast retention of customers on contracts with monthly terms and customers who are small to midsized organizations;
the attraction and retention of qualified employees and key personnel;
our ability to effectively manage our growth and future expenses;
the evolution of technology affecting our product and platform solutions, services, and markets;
our ability to securely maintain customer data;
our ability to prevent, mitigate, and respond effectively to both historical and future data breaches;
our ability to innovate and provide a superior customer experience;
our ability to successfully expand in our existing markets and into new markets;
the expenses and administrative workload associated with being a public company;
our ability to introduce and market new solutions and to integrate such solutions into our infrastructure;
our ability to comply with modified or new laws and regulations applying to our business, including privacy and data security regulations;
the sufficiency of our cash and cash equivalents and marketable securities to meet our liquidity needs;
our ability to service the interest on our convertible notes and repay such notes, if required;
our ability to maintain, protect, and enhance our intellectual property;
our ability to successfully integrate people, solutions, technology, and services following completion of acquisitions;
our ability to maintain and enhance our brand; and
our ability to adapt to and comply with upcoming and newly effective tax regulations.
We caution you that the foregoing list does not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, operating results, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.
4

Table of Contents
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
5

Table of Contents
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
ZENDESK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and shares)
 
 September 30,
2020
December 31,
2019
(Unaudited)
Assets  
Current assets:  
Cash and cash equivalents$383,318 $196,591 
Marketable securities559,682 286,958 
Accounts receivable, net of allowance for doubtful accounts of $9,322 and $2,846 as of September 30, 2020 and December 31, 2019, respectively
151,160 127,808 
Deferred costs44,722 35,619 
Prepaid expenses and other current assets50,047 45,847 
Total current assets1,188,929 692,823 
Marketable securities, noncurrent407,141 361,948 
Property and equipment, net102,098 102,090 
Deferred costs, noncurrent42,256 35,230 
Lease right-of-use assets89,477 89,983 
Goodwill and intangible assets, net199,607 206,883 
Other assets24,731 25,632 
Total assets$2,054,239 $1,514,589 
Liabilities and stockholders’ equity  
Current liabilities:  
Accounts payable$10,237 $38,376 
Accrued liabilities33,720 36,347 
Accrued compensation and related benefits89,179 61,512 
Deferred revenue324,766 320,642 
Lease liabilities22,300 21,804 
Convertible senior notes, net130,615  
Total current liabilities610,817 478,681 
Convertible senior notes, net925,007 483,464 
Deferred revenue, noncurrent2,885 3,320 
Lease liabilities, noncurrent80,507 83,478 
Other liabilities4,904 7,662 
Total liabilities1,624,120 1,056,605 
Commitments and contingencies (Note 9)
Stockholders’ equity:  
Preferred stock  
Common stock1,164 1,130 
Additional paid-in capital1,273,242 1,155,044 
Accumulated other comprehensive income2,560 591 
Accumulated deficit(846,847)(698,781)
Total stockholders’ equity430,119 457,984 
Total liabilities and stockholders’ equity$2,054,239 $1,514,589 
See Notes to Condensed Consolidated Financial Statements.
6

Table of Contents
ZENDESK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
 Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Revenue$261,926 $210,477 $746,066 $586,545 
Cost of revenue (1)
62,819 59,210 184,036 172,534 
Gross profit199,107 151,267 562,030 414,011 
Operating expenses (1):     
Research and development64,842 54,528 184,266 151,829 
Sales and marketing123,737 99,303 369,442 285,750 
General and administrative38,854 32,864 109,427 107,135 
Total operating expenses227,433 186,695 663,135 544,714 
Operating loss(28,326)(35,428)(101,105)(130,703)
Other income (expense), net:
Interest expense(14,087)(6,727)(29,060)(19,885)
Loss on early extinguishment of debt  (25,950) 
Interest and other income, net3,683 7,567 12,750 17,764 
Total other income (expense), net(10,404)840 (42,260)(2,121)
Loss before provision for (benefit from) income taxes(38,730)(34,588)(143,365)(132,824)
Provision for (benefit from) income taxes1,973 (364)4,777 661 
Net loss$(40,703)$(34,224)$(148,142)$(133,485)
Net loss per share, basic and diluted$(0.35)$(0.31)$(1.29)$(1.21)
Weighted-average shares used to compute net loss per share, basic and diluted115,809 111,261 114,653 109,969 
(1) Includes share-based compensation expense as follows:
 
 Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Cost of revenue$4,831 $5,397 $15,077 $15,580 
Research and development13,921 12,169 39,076 35,717 
Sales and marketing19,335 13,839 53,467 39,813 
General and administrative8,176 7,244 24,437 27,948 
 

See Notes to Condensed Consolidated Financial Statements.

7

Table of Contents
ZENDESK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
 
 Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Net loss$(40,703)$(34,224)$(148,142)$(133,485)
Other comprehensive income (loss), before tax:    
Net unrealized gain (loss) on available-for-sale investments(1,361)161 2,817 5,794 
Net unrealized gain (loss) on derivative instruments388 (2,216)(848)360 
Other comprehensive income (loss), before tax(973)(2,055)1,969 6,154 
Tax effect699 236  (1,477)
Other comprehensive income (loss), net of tax(274)(1,819)1,969 4,677 
Comprehensive loss$(40,977)$(36,043)$(146,173)$(128,808)

See Notes to Condensed Consolidated Financial Statements.

8

Table of Contents
ZENDESK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
 Three Months Ended September 30, 2020Three Months Ended September 30, 2019
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive Income
Accumulated
Deficit
Total
Stockholders’
Equity
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive Income (Loss)
Accumulated DeficitTotal
Stockholders’
Equity
SharesAmountSharesAmount
Balances at beginning of period115,186 $1,150 $1,212,471 $2,834 $(806,145)$410,310 110,698 $1,106 $1,053,488 $772 $(628,389)$426,977 
Issuance of common stock upon exercise of stock options577 6 15,483 — — 15,489 433 4 8,763 — — 8,767 
Issuance of common stock for settlement of RSUs and PRSUs700 8 (1,998)— — (1,990)786 9 (2,330)— — (2,321)
Share-based compensation— — 47,271 — — 47,271 — — 39,809 — — 39,809 
Other comprehensive loss, net of tax— — — (274)— (274)— — — (1,819)— (1,819)
Net loss— — — — (40,703)(40,703)— — — — (34,224)(34,224)
Other— — 15 — 15 — — — — — — 
Balances at end of period116,463 $1,164 $1,273,242 $2,560 $(846,848)$430,119 111,917 $1,119 $1,099,730 $(1,047)$(662,613)$437,189 


Nine Months Ended September 30, 2020Nine Months Ended September 30, 2019
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive Income
Accumulated
Deficit
Total
Stockholders’
Equity
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive Loss
Accumulated DeficitTotal
Stockholders’
Equity
SharesAmountSharesAmount
Balances at beginning of period113,081 $1,130 $1,155,044 $591 $(698,781)$457,984 108,037 $1,080 $950,693 $(5,724)$(529,128)$416,921 
Issuance of common stock upon exercise of stock options911 9 24,582 — — 24,591 1,060 11 21,966 — — 21,977 
Issuance of common stock for settlement of RSUs and PRSUs2,118 21 (6,150)— — (6,129)2,446 24 (7,426)— — (7,402)
Issuance of common stock in connection with employee stock purchase plan353 4 19,948 — — 19,952 374 4 15,308 — — 15,312 
Share-based compensation— — 135,326 — — 135,326 — — 119,189 — — 119,189 
Equity component of 2025 convertible senior notes— — 216,026 — — 216,026 — — — — — — 
Purchase of capped calls related to 2025 convertible senior notes— — (129,950)— — (129,950)— — — — — — 
Equity component of partial repurchase of 2023 convertible senior notes— — (224,639)— — (224,639)— — — — — — 
Proceeds from capped calls related to 2023 convertible senior notes— — 83,040 — — 83,040 — — — — — — 
Other comprehensive income, net of tax— — — 1,969 — 1,969 — — — 4,677 — 4,677 
Net loss— — — — (148,142)(148,142)— — — — (133,485)(133,485)
Other— — 15 — 75 90 — — — — — — 
Balances at end of period116,463 1,164 1,273,242 2,560 (846,848)430,119 111,917 1,119 1,099,730 (1,047)(662,613)437,189 
See Notes to Consolidated Financial Statements.

9

Table of Contents
ZENDESK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Nine Months Ended September 30,
20202019
Cash flows from operating activities  
Net loss$(148,142)$(133,485)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:  
Depreciation and amortization32,602 27,792 
Share-based compensation132,057 119,058 
Amortization of deferred costs32,390 22,983 
Amortization of debt discount and issuance costs26,230 18,831 
Loss on early extinguishment of debt25,950  
Repayment of convertible senior notes attributable to debt discount(38,637) 
Other6,135 958 
Changes in operating assets and liabilities:
Accounts receivable(33,035)(19,832)
Prepaid expenses and other current assets(3,116)(10,997)
Deferred costs(47,292)(35,257)
Lease right-of-use assets15,472 14,022 
Other assets and liabilities(1,022)(4,141)
Accounts payable(26,208)22,591 
Accrued liabilities1,569 520 
Accrued compensation and related benefits18,252 3,349 
Deferred revenue4,369 45,683 
Lease liabilities(17,503)(15,025)
Net cash provided by (used in) operating activities(19,929)57,050 
Cash flows from investing activities  
Purchases of property and equipment(19,489)(25,628)
Internal-use software development costs(10,901)(5,007)
Purchases of marketable securities(701,367)(374,706)
Proceeds from maturities of marketable securities281,476 146,171 
Proceeds from sales of marketable securities105,506 300,632 
Business combinations, net of cash acquired (70,794)
Purchases of strategic investments(1,500)(500)
Sales of strategic investments1,577  
Net cash used in investing activities(344,698)(29,832)
Cash flows from financing activities  
Proceeds from issuance of convertible senior notes, net of issuance costs paid of $21,010
1,128,990  
Purchase of capped calls related to 2025 convertible senior notes(129,950) 
Payments for 2023 convertible senior notes partial repurchase(578,973) 
Proceeds from capped calls related to 2023 convertible senior notes83,040  
Proceeds from exercises of employee stock options24,591 21,977 
Proceeds from employee stock purchase plan28,913 23,057 
Taxes paid related to net share settlement of share-based awards(6,127)(7,402)
Net cash provided by financing activities550,484 37,632 
Effect of exchange rate changes on cash, cash equivalents and restricted cash237 85 
Net increase in cash, cash equivalents and restricted cash186,094 64,935 
Cash, cash equivalents and restricted cash at beginning of period199,905 128,876 
Cash, cash equivalents and restricted cash at end of period$385,999 $193,811 
Reconciliation of cash, cash equivalents and restricted cash to condensed consolidated balance sheets
Cash and cash equivalents$383,318 $190,892 
Restricted cash included in prepaid expenses and other current assets1,957 2,197 
Restricted cash included in other assets724 722 
Total cash, cash equivalents and restricted cash$385,999 $193,811 
Supplemental cash flow data  
Cash paid for interest$1,174 $1,438 
Cash paid for taxes$3,093 $4,013 
Non-cash investing and financing activities  
Balance of property and equipment in accounts payable and accrued expenses$1,642 $12,467 
Share-based compensation capitalized in internal-use software development costs$2,536 $1,379 
Share-based compensation capitalized in deferred costs$1,229 $1,023 
Property and equipment acquired through tenant improvement allowances$110 $414 
Asset retirement obligations incurred$ $1,196 
See Notes to Condensed Consolidated Financial Statements.
10

Table of Contents

ZENDESK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
Note 1. Overview and Basis of Presentation
Company and Background
Zendesk was founded in Denmark in 2007 and reincorporated in Delaware in April 2009.
We are a software development company that provides software as a service, or SaaS, solutions that are intended to help organizations and their customers build better experiences. Our customer experience solutions are built upon a modern architecture that enables us and our customers to rapidly innovate, adapt our technology in novel ways, and easily integrate with other products and applications. With our origins in customer service, we have evolved our offerings over time to product and platform solutions that work together to help organizations understand the broader customer journey, improve communications across all channels, and engage where and when it’s needed most.
References to Zendesk, the “Company,” “our,” or “we” in these notes refer to Zendesk, Inc. and its subsidiaries on a consolidated basis.
Basis of Presentation
These unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, or GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K, for the year ended December 31, 2019, filed with the SEC on February 13, 2020. Other than described below, there have been no changes to our significant accounting policies described in the Annual Report on Form 10-K that have had a material impact on our condensed consolidated financial statements and related notes.
The consolidated balance sheet as of December 31, 2019 included herein was derived from the audited financial statements as of that date. The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly our financial position, results of operations, comprehensive loss, stockholders’ equity, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2020.
Use of Estimates
The preparation of our consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reported periods.
Significant items subject to such estimates and assumptions include:
the estimate of variable consideration related to revenue recognition;
the estimate of credit losses for accounts receivable and marketable securities;
the fair value and useful lives of acquired intangible assets;
the capitalization and useful life of capitalized costs to obtain customer contracts;
the valuation of strategic investments;
the useful lives of property and equipment;
the capitalization and useful lives of internal-use software;
the lease term and incremental borrowing rate for lease liabilities;
11

Table of Contents
the fair value of our convertible senior notes;
the fair value of asset retirement obligations;
the fair value and expense recognition for certain share-based awards;
the preparation of financial forecasts used in currency hedging;
the recognition and measurement of legal contingencies; and
the recognition of tax benefits and forecasts used to determine our effective tax rate.

In December 2019, the novel coronavirus and resulting disease (“COVID-19”) was reported and in March 2020 the World Health Organization declared it a pandemic. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, impact on our customers and our sales cycles, and impact on our employees, as discussed in more detail in the Overview section. During fiscal year 2020, this uncertainty has resulted in a higher level of judgment related to our estimates and assumptions concerning variable consideration related to revenue recognition, the estimate of credit losses for accounts receivable, and impairment of strategic investments. For example, the uncertainty around our customers who have faced continued cash flow pressure and decreased demand for their products and services had a variable impact on our revenue from variable consideration and the allowance for credit losses. As of the date of issuance of the financial statements, we are not aware of any specific events or circumstances that would require us to update our estimates, judgments, or to revise the carrying values of our assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to our financial statements.
Concentrations of Risk
As of September 30, 2020 and December 31, 2019, no customers represented 10% or greater of our total accounts receivable balance. There were no customers that individually exceeded 10% of our revenue during the three and nine months ended September 30, 2020 or 2019.
Recently Issued Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board, or FASB, issued ASU 2020-06, regarding ASC Topic 470 “Debt” and ASC Topic 815 “Derivatives and Hedging,” which reduces the number of accounting models for convertible instruments and amends the calculation of diluted earnings per share for convertible instruments, among other changes. The guidance is effective for annual reporting periods beginning after December 15, 2021, including interim periods within that reporting period. Early adoption is permitted. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB, issued ASU 2016-13, including subsequent amendments, regarding ASC Topic 326 “Measurement of Credit Losses on Financial Instruments,” which modifies the accounting methodology for most financial instruments. The guidance establishes a new “expected loss model” that requires entities to estimate current expected credit losses on financial instruments by using all practical and relevant information, including reasonable and supportable forecasts of future economic conditions. Additionally, any expected credit losses are to be reflected as allowances rather than reductions in the amortized cost of available-for-sale debt securities. We adopted this standard in the first quarter of 2020. The adoption did not have a material effect on our consolidated financial statements.
In connection with the adoption, for purposes of identifying and measuring impairment, the policy election was made to exclude accrued interest from both the fair value and amortized cost basis of our available-for-sale debt securities. Such accrued interest is recorded in prepaid expenses and other current assets.

In January 2017, the FASB issued ASU 2017-04, regarding ASC Topic 350 “Simplifying the Test for Goodwill Impairment,” which simplifies the required methodology to calculate an impairment charge for goodwill. We adopted this standard in the first quarter of 2020. The adoption did not have an effect on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, regarding ASC Topic 820 “Fair Value Measurement,” which modifies the disclosure requirements for fair value measurements for certain types of investments. We adopted this standard in the first quarter of 2020. The adoption did not have an effect on our consolidated financial statements.

12

Table of Contents
In December 2019, the FASB issued ASU 2019-12 “Simplifying the Accounting for Income Taxes,” which simplifies certain aspects of accounting for income taxes. ASU 2019-12 removes certain exceptions related to the approach for intraperiod tax allocation and clarifies the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The guidance is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We early adopted ASU 2019-12 in the second quarter of 2020 on a prospective basis. As a result of the adoption, we did not record an income tax benefit from the release of our valuation allowance due to the issuance of our 2025 convertible senior notes.

Note 2. Business Combinations
Smooch Technologies Holdings ULC
On May 14, 2019, we completed the acquisition of Smooch Technologies Holdings ULC, or Smooch, a developer of messaging technology. We acquired Smooch for purchase consideration of $72 million in cash. In connection with the acquisition in the second quarter of 2019, we incurred transaction costs of $3 million within general and administrative expenses and share-based compensation expense of $5 million, primarily within general and administrative expenses, resulting from the accelerated vesting of certain unvested Smooch stock options because post-combination service requirements were eliminated.
As of June 30, 2020, we finalized our purchase accounting for the acquisition. The total purchase consideration was allocated to the assets acquired and liabilities assumed as set forth below (in thousands).
The excess of the purchase price over the net assets acquired was recorded as goodwill. Goodwill generated from the acquisition is primarily attributable to assembled workforce and expected growth from the expansion of the scope of and market opportunity for our products. Goodwill will not be amortized but instead will be tested for impairment at least annually and more frequently if certain indicators of impairment are present. As a result of the structure of the transaction, the balance of goodwill is deductible in the U.S. over 15 years for income tax purposes.
Net tangible assets$1,974 
Net deferred tax liability(1,194)
Identifiable intangible assets:
Developed technology8,000 
Customer relationships3,900 
Backlog1,000 
Goodwill58,317 
Total purchase consideration$71,997 

The developed technology, customer relationships, and backlog intangible assets were assigned useful lives of 5.5, 8.0, and 2.0 years, respectively.

In connection with the acquisition, we granted cash-based retention awards to certain employees of Smooch, which vest over a required service period. The awards will be recorded as expense and were not included in the total purchase consideration.
From the date of the acquisition, the results of operations of Smooch have been included in and are immaterial to our consolidated financial statements. Pro forma revenue and results of operations have not been presented because the historical results of Smooch are not material to our consolidated financial statements in any period presented.
Note 3. Financial Instruments

Investments
The following tables present information about our financial assets measured at fair value on a recurring basis based on the three-tier fair value hierarchy (in thousands):
13

Table of Contents
Fair Value Measurement at
September 30, 2020
Level 1Level 2Total
Description   
U.S. Treasury securities$ $414,594 $414,594 
Corporate bonds 368,935 368,935 
Money market funds175,750  175,750 
Asset-backed securities 92,099 92,099 
Commercial paper 49,786 49,786 
Agency securities 81,003 81,003 
Certificates of deposit 5,500 5,500 
Total$175,750 $1,011,917 $1,187,667 
Included in cash and cash equivalents  $220,844 
Included in marketable securities  $966,823 
 Fair Value Measurement at
December 31, 2019
Level 1Level 2Total
Description   
Corporate bonds$ $418,005 $418,005 
Asset-backed securities 124,046 124,046 
U.S. Treasury securities 94,731 94,731 
Money market funds70,455  70,455 
Commercial paper 13,548 13,548 
Certificates of deposit and time deposits 1,144 1,144 
Agency securities 920 920 
Total$70,455 $652,394 $722,849 
Included in cash and cash equivalents  $73,943 
Included in marketable securities  $648,906 
 
As of September 30, 2020 and December 31, 2019, there were no securities within Level 3 of the fair value hierarchy. There were no transfers between fair value measurement levels during the three and nine months ended September 30, 2020.
As of September 30, 2020, gross unrealized gains and losses for marketable securities were $7 million and not material, respectively. The aggregate amortized cost basis for cash equivalents and marketable securities was $1,181 million and excludes accrued interest of $3 million. The aggregate fair value of securities with unrealized losses was $147 million.
As of December 31, 2019, gross unrealized gains and losses for marketable securities were $4 million and not material, respectively. The aggregate amortized cost basis for cash equivalents and marketable securities was $719 million and excludes accrued interest of $4 million. The aggregate fair value of securities with unrealized losses was $45 million.
Unrealized losses for securities that have been in an unrealized loss position for more than 12 months as of September 30, 2020 and