Zendesk, Inc. revenue growth decelerated from 36.4% in 2019 to 26.1% in 2020
02/04/2021 • About Zendesk, Inc. (
$ZEN) • By InTwits
Zendesk, Inc. reported 2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Zendesk, Inc. is a fast growth stock: 2020 revenue growth was 26.1%, 5 year revenue CAGR was 37.6% at 2020 ROIC -11.2%
- The company operates at negative EBITDA Margin: -8.7%
- Zendesk, Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for 2016-2020 was 8.7% while average EBITDA Margin was -13.8% for the sames years
- Zendesk, Inc. has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.1%. At the same time it's in pair with industry average of 5.5%
- CAPEX is quite volatile: $26m in 2020, $45m in 2019, $5m in 2018, $9m in 2017, $14m in 2016
- The company has unprofitable business model: ROIC is -11.2%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Zendesk, Inc.'s Revenue jumped on 26.1%. Revenue growth showed slowdown in 20Q4 - it was 23.3% YoY. Revenue decline was accelerating on average at -4.9 pp per annum in the last 5 years. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 3.9 pp from -12.6% to -8.7% in 2020. EBITDA Margin stuck to a growing trend at 3.2 pp per annum in the last 5 years.
Gross Margin increased on 4.3 pp from 71.3% to 75.6% in 2020. SG&A as a % of Revenue showed almost no change in 2020. During the last 5 years SG&A as a % of Revenue bottomed in 2019 at 65.8%.
Net Income margin showed almost no change in 2020. During the last 5 years Net Income margin topped in 2019 at -20.8%.
Investments (CAPEX, working capital and M&A)
In 2020 Zendesk, Inc. had CAPEX/Revenue of 3.7%. Zendesk, Inc.'s CAPEX/Revenue decreased slightly on 1.8 pp from 5.6% in 2017 to 3.7% in 2020. Average CAPEX/Revenue for the last three years was 5.5%.
Return on investment
The company operates at negative ROIC (-11.2%) and ROE (-49.0%). ROIC increased on 5.1 pp from -16.3% to -11.2% in 2020. ROE dropped on 10.3 pp from -38.8% to -49.0% in 2020. ROIC followed a growing trend at 5.9 pp per annum in the last 5 years. ROE followed a declining trend at -4.0 pp per annum in the last 5 years.
Leverage (Debt)
Debt level is 1.3x Net Debt / EBITDA and Debt / EBITDA. Net Debt / EBITDA didn't change in 2020. Debt jumped on 99.9% while cash jumped on 106%.
Zendesk, Inc. has no short term refinancing risk: cash is higher than short term debt (260.0%).
Management team
Zendesk, Inc.'s CEO Mikkel Svane has spent 13 years with the company. Elena Gomez is a Zendesk, Inc.'s CFO. Elena Gomez has spent 4 years at the company.
Financial and operational results
FY ended 12/31/2020
Zendesk, Inc. ($ZEN) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 313 | 430 | 599 | 816 | 1,030 | 26.1% |
| Gross Profit | 219 | 303 | 417 | 582 | 778 | 33.7% |
| SG&A | 226 | 294 | 395 | 538 | 679 | 26.3% |
| EBITDA | -71 | -74 | -101 | -103 | -90 | |
| EBIT | -98 | -106 | -138 | | | |
| Tax | 1 | -2 | -12 | | | |
| Net Income | -98 | -102 | -131 | -170 | -218 | |
| Stock Based Compensation | 73 | 85 | 119 | | | |
Balance Sheet
|
|---|
| Cash | 94 | 109 | 127 | 197 | 405 | 106.2% |
| Accounts Receivable | 37 | 57 | 85 | | | |
| Accounts Payable | 5 | 5 | 17 | | | |
| Short Term Debt | 0 | 0 | 0 | 22 | 156 | 615.1% |
| Long Term Debt | 0 | 0 | 458 | 567 | 1,021 | 80.1% |
Cash flow
|
|---|
| Capex | 27 | 24 | 42 | 47 | 39 | -18.0% |
| Acquisitions | | 16 | 79 | | | |
Ratios
|
|---|
| Revenue growth | 49.9% | 37.5% | 39.2% | 36.4% | 26.1% | |
| EBITDA growth | 11.7% | 5.1% | 36.6% | 1.4% | -12.6% | |
|
|---|
| Gross Margin | 70.0% | 70.4% | 69.7% | 71.3% | 75.6% | 4.3% |
| EBITDA Margin | -22.6% | -17.3% | -16.9% | -12.6% | -8.7% | 3.9% |
| EBIT Margin | -31.4% | -24.7% | -23.0% | | |
| SG&A, % of revenue | 72.2% | 68.3% | 66.0% | 65.8% | 65.9% | 0.1% |
| SBC, % of revenue | 23.5% | 19.7% | 20.0% | | |
| Net Income Margin | -31.2% | -23.7% | -21.9% | -20.8% | -21.2% | -0.4% |
| CAPEX, % of revenue | 8.6% | 5.6% | 7.1% | 5.8% | 3.7% | -2.0% |
|
|---|
| ROIC | -32.9% | -32.2% | -22.3% | -16.3% | -11.2% | 5.1% |
| ROE | -32.9% | -31.3% | -34.0% | -38.8% | -49.0% | -10.3% |
People
|
|---|
| Insider ownership | 1.8% | 1.8% | 1.8% | | | |
| Employees | 1,630 | 2,060 | 2,740 | | | |
| Revenue/Employee, th. $ | 192 | 209 | 219 | | | |
Zendesk, Inc. ($ZEN) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 237 | 247 | 262 | 283 | | 30.9% | 26.8% | 24.4% | 23.3% |
| EBITDA | -24 | -14 | -12 | -7 | | - | - | - | - |
| Net Income | -43 | -65 | -41 | -70 | | - | - | - | - |
Balance Sheet
|
|---|
| Cash | 199 | 700 | 383 | 405 | | 39.8% | 309.1% | 100.8% | 106.2% |
| Short Term Debt | 21 | 23 | 153 | 156 | | 9.5% | -95.3% | 614.6% | 615.1% |
| Long Term Debt | 577 | 1,127 | 1,006 | 1,021 | | 3.1% | 1,051.5% | 78.0% | 80.1% |
Ratios
|
|---|
| Gross Margin | 74.9% | 75.1% | 76.0% | 76.3% | | 5.5% | 4.7% | 4.1% | 3.2% |
| EBITDA Margin | -10.2% | -5.9% | -4.4% | -2.5% | | 6.7% | 13.1% | 4.9% | 4.4% |
| Net Income Margin | -18.0% | -26.2% | -15.5% | -24.7% | | 6.6% | 1.8% | 0.7% | -9.0% |
Peers in Application Software
Below you can find Zendesk, Inc. benchmarking vs. other companies in Application Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | - | -0.2% | -95.9% | 34.9% | 355,942.4% |
| AudioEye, Inc. ($AEYE) | - | 175.5% | 106.6% | 90.2% | 90.2% |
| Cloudera, Inc. ($CLDR) | - | 57.2% | 42.6% | 28.9% | 65.5% |
| Integrated Ventures Inc ($INTV) | - | - | - | -8.9% | 62.7% |
| Smartsheet Inc. ($SMAR) | - | 64.3% | 66.1% | 59.7% | 52.4% |
| |
|---|
| Median (92 companies) | 12.0% | 14.8% | 15.1% | 19.4% | 14.5% |
|---|
| Zendesk, Inc. ($ZEN) | - | 37.5% | 39.2% | 36.4% | 26.1% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Aware, Inc. ($AWRE) | 90.3% | 94.6% | 92.3% | 89.7% | 92.8% |
| Alteryx, Inc. ($AYX) | 81.3% | 83.4% | 91.0% | 90.6% | 91.1% |
| Autodesk, Inc. ($ADSK) | 85.2% | 83.2% | 85.2% | 88.9% | 90.1% |
| Smith Micro Software, Inc. ($SMSI) | 73.2% | 77.9% | 83.5% | 90.9% | 89.9% |
| Cadence Design Systems, Inc. ($CDNS) | 85.9% | 87.8% | 87.9% | 88.6% | 88.6% |
| |
|---|
| Median (89 companies) | 63.8% | 64.4% | 65.3% | 67.9% | 69.4% |
|---|
| Zendesk, Inc. ($ZEN) | 70.0% | 70.4% | 69.7% | 71.3% | 75.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -1,837.2% | -1,118.0% | -40,379.4% | -23,127.1% | 52.2% |
| j2 Global, Inc. ($JCOM) | 41.7% | 36.5% | 35.7% | 38.6% | 40.5% |
| Intelligent Systems Corporation ($INS) | -5.4% | -12.8% | 33.6% | 43.6% | 40.4% |
| Adobe Inc. ($ADBE) | 31.2% | 34.2% | 35.3% | 35.8% | 39.7% |
| SS&C Technologies Holdings, Inc. ($SSNC) | 34.9% | 37.9% | 27.7% | 38.2% | 38.3% |
| |
|---|
| Median (89 companies) | -4.7% | -3.3% | -3.3% | 4.5% | 7.7% |
|---|
| Zendesk, Inc. ($ZEN) | -22.6% | -17.3% | -16.9% | -12.6% | -8.7% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| MicroStrategy Incorporated ($MSTR) | 0.5% | 0.8% | 1.4% | 2.1% | 234.8% |
| Integrated Ventures Inc ($INTV) | - | - | 199.9% | 15.2% | 27.2% |
| Intelligent Systems Corporation ($INS) | 3.8% | 9.7% | 4.3% | 4.9% | 19.2% |
| LivePerson, Inc. ($LPSN) | 5.5% | 7.9% | 8.8% | 16.3% | 11.4% |
| PROS Holdings, Inc. ($PRO) | 4.7% | 0.8% | 0.7% | 2.1% | 11.3% |
| |
|---|
| Median (87 companies) | 2.9% | 2.3% | 2.4% | 2.9% | 2.5% |
|---|
| Zendesk, Inc. ($ZEN) | 8.6% | 5.6% | 7.1% | 5.8% | 3.7% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -210.9% | -256.8% | -416.3% | -247.2% | 137.3% |
| Manhattan Associates, Inc. ($MANH) | 99.3% | 102.5% | 80.9% | 71.7% | 53.4% |
| Citrix Systems, Inc. ($CTXS) | 16.1% | 16.7% | 25.2% | 29.8% | 33.5% |
| Sonic Foundry, Inc. ($SOFO) | -18.1% | -50.6% | -786.4% | - | 31.3% |
| Paycom Software, Inc. ($PAYC) | 75.4% | 51.1% | 47.5% | 47.5% | 28.7% |
| |
|---|
| Median (92 companies) | -9.2% | -10.2% | -9.8% | -4.2% | -1.8% |
|---|
| Zendesk, Inc. ($ZEN) | -32.9% | -32.2% | -22.3% | -16.3% | -11.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Dropbox, Inc. ($DBX) | - | -3.8x | - | 2.4x | 1,341.0x |
| Avaya Holdings Corp. ($AVYA) | - | - | 7.4x | - | 77.9x |
| Alteryx, Inc. ($AYX) | - | - | 2.5x | 6.1x | 32.2x |
| Five9, Inc. ($FIVN) | -6.7x | -8.6x | 7.3x | 5.3x | 17.6x |
| Synchronoss Technologies, Inc. ($SNCR) | - | - | - | - | 11.6x |
| |
|---|
| Median (54 companies) | -0.9x | -0.8x | -0.7x | 0.4x | 0.2x |
|---|
