Zendesk, Inc.
Q1 2016 Earnings Call Transcript

Published: 4 May 2016

[Operator:]

Welcome to the First Quarter 2016 Zendesk's Earnings Conference Call. During the call, all participants will be in a listen-only mode. After the presentation, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, and will be available for replay from the Investor Relations section of Zendesk's website following this call. I will now turn the call over to Marc Cabi, Vice President of Investor Relations. Thank you, Mr. Cabi. You may now begin.

[Marc Cabi:]

Thanks you, Mike and good afternoon everyone. Welcome you to our first quarter 2016 earnings call. We're pleased to report another solid quarter. This is our eight quarter as a public company. Joining me on the call today are Mikkel Svane, Founder, CEO and Chairman of the Board; Alan Black, our outgoing CFO; and I'm pleased to have our incoming CFO Ileana Gomez in the room with us today. Mikkel will address our transition of the CFO shortly. But before we get into results, let me just pass along a few reminders. With this report we're starting a new way of disseminating our earnings. Our shareholder letter is available at investor.zendesk.com which, details our full results and commentary. During the course of today's call, we may make forward-looking statements such as statements regarding our future financial performance, product development, growth prospects, ability to attract and retain customers and our ability to compete effectively. The assumptions, risks and factors that could affect our actual results is contained in our earnings press release and the risk factors in our prior and subsequent filings with the Securities and Exchange Commission, including our most recent Annual Report and our upcoming Form 10-Q. We undertake no obligation to update these statements after today's presentation, or to conform these statements to actual results or to changes in our expectations except as required by law. 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 measures should be considered in addition to, not as a substitute for, or in isolation from our GAAP financial information. You could find additional disclosures regarding these non-GAAP financial measures, including reconciliations with the comparable GAAP financial measures in today's earnings press release for such prior periods, both of which are available on our investor website. And finally, I do want to remind everyone we have our first Investor Day coming up on Tuesday, May 10th, here at our Headquarters in San Francisco. Please refer to our press release we put out February 9 for more information. Our preliminary agenda can be found on our investor website later today and details on the webcast will become available prior to the event. With that brief introduction, I would like to turn the call over to Mikkel.

[Mikkel Svane:]

Right, excellent, thank you Marc and I'll try to keep it short with the investors around, so we have more room for your questions. Of course very proud to report strong financial results, and of course some great business accomplishments from the first quarter of 2016. As Marc said, this is our eighth quarter as a public company. Time flies. Let me just highlight few key results that we reported in our shareholder letter. First and foremost, revenue grew 62% year-over-year and growth remained strong across all regions. We also crossed 75,000 paid customer accounts worldwide. And of those accounts, those accounts with 100 seats or more grew to 33% of our monthly recurring revenue in Q1 compared to 25% in Q1 last year. The Q1 operating margin narrowed to minus 9.9%, compared to minus 17.7% in Q1 of 2015, even as we invested in on the new product areas. And again this shows our disciplined approach in scaling the business. As you know, we have set an ambitious goal to reach $1 billion in revenues by 2020 and expect to reach profitability on the way to that goal. To get there we are focused this year on three things, elevating our brand, developing or becoming a multiproduct company and further growing our reach into the enterprise. We saw key accomplishments across all these three products using Q1 and in the recent months. We have rolled out our first brand awareness campaign under the new relationship, the complicated theme and we are so far seeing very promising results. We also announced Zendesk Message a dedicated standalone product for businesses to engage with customers on messaging platform, especially Facebook Messenger. And as part of our work with Facebook at its F8 Developer Conference, we integrated human customers who talk with bots on messenger. Thirdly, I want to point out that LAN airlines and TAM airlines, members of LATAM Airlines Group are among our new enterprise customers. They selected Zendesk for its global call center and customer care operations and already now 10,000 LATAM agents are using Zendesk. We are proud of and we've built a world-class management team here at Zendesk. I'm very honored to welcome three new leaders who will bring proven experience from multibillion revenue companies to our leadership and help us build for the future. Bryan Cox joins us as our first Chief Revenue Officer. As we evolve to become a multiproduct company, it became very clear that we wanted a seasoned professional in this role. Bryan will lead all revenue generating teams at Zendesk and help grow additional markets and segments. He has done it before at VMware, where he served as Senior Vice President of Global Customer Operations. Tom Keiser joins us as our first Chief Information Officer. Tom will help scale our IT, security and data systems and architecture across our worldwide offices as well as serve as an external executive champion. He most recently served as CIO and Executive Vice President of product operations at Gap Incorporative. And finally Ileana Gomez joins us as our new Chief Financial Officer, replacing Alan Black. In Ileana, we found a rare finance leader who combines unparalleled knowledge of the SaaS business model with a proven ability to build teams and deliver on results. She most recently was Senior Vice President of Finance and Strategy at Salesforce. Before I turn the call over to Marc and begin our Q&A, I wanted to acknowledge Alan. You will all have a chance to meet Alan at the upcoming Investor Day on May 10, and I'm hoping to see all of you. As you know, Alan played critical role in building this company and taking us through the IPO and lecturing us make me looks smart from time to time. And I just wanted to thank you. And thank you for being so helpful also in the transition here, really being a fantastic team player. I'm going to miss you and thanks for everything. I love you.

[Alan Black:]

My pleasure. Thanks very much. And I look back in the five years, it's been an incredible journey, and as I pass the ring to Ileana, who in the room is sitting to my right, you know what I'll say about Ileana is I'm very confident that she's going to make a great CFO for this company. We who have been here the last few years have seen the Company grow and it's become more complex yet. Five years from now, I think we're all going to look back [indiscernible]. The experience Ileana brings to the Company in terms of having worked at large businesses, and same could be said I think both for both Tom and Bryan. They all have multiple billion-dollar revenue companies in their background. So welcome to you Ileana. delighted to have you, and looking forward to helping you through your transition. I'd like just one last moment to put out a shout out for my team. I wouldn't have had an easy job but it's actually been -- you've made me look good over the last five years. So a shout out to both the finance and security teams that I've managed most recently and all those who have worked for me in the years prior to that. So, with that, enough pontificating from me. Let's get the call going into the next section.

[Mikkel Svane:]

Alright, thank you guys, Mike will just open it up for Q&A please.

[Operator:]

[Operator Instructions] Your first question is from Stan Zlotsky from Morgan Stanley.

[Stan Zlotsky:]

Alan I will -- we will certainly miss having you on these calls.

[Alan Black:]

Thanks very much.

[Stan Zlotsky:]

So, maybe just diving right in, the number that really stood out to us is the 6,500 ads quarter-on-quarter, and on customer count. What's going on there and maybe just walk us through what drove such a big acceleration in customer acquisition? And then I have a quick follow-up.

[Mikkel Svane:]

Stan, as you know we use that as a good proxy for our progress throughout the markets that we serve. And you also know that we made some adjustments in pricing, especially with making sure that we had a friction free adoption at the low end for SMBs looking to join Zendesk. And so, I think a combination of factors have really led to that. As you know we still have a long tail of small customers. S, although we provide this as a metric to measure our progress, we measure our progress along lines of generating MRR and revenues as a much more important metric we watch from quarter-to-quarter and from month-to-month.

[Stan Zlotsky:]

And just a quick follow-up, the employment of Bryan Cox as Chief Revenue Officer, how does that fit in with your goal to reach $1 billion in revenue? And what is the corporate structure going to be like underneath him? Where does Marcus Bragg fit it in, and the rest of the marketing and sales organization? That's it for me.

[Mikkel Svane:]

We always -- we have three go-to-market teams right now. We have our enterprise of our C&R [ph] emerging businesses go-to-market teams, and there's no doubt that as we've seen this play out we can -- we will definitely see more teams in the future and we'll see more complexity, we'll see more markets, we'll see more products. And so like it became very clear to me, especially not to everybody else, that to kind of tighten that structure and to kind of future proof the organization, getting somebody in who could only focus on the revenue generating part of the business was the right thing to do and we started talking to a bunch of people, ran into Bryan, and it was just a phenomenal match. And he's a fantastic guy, and I'm really looking forward to working with him.

[Operator:]

Your next question is from Jesse Hulsing from Goldman Sachs.

[Jesse Hulsing:]

I guess turning to your newer products, advanced voice, I'm curious if you can give us an update on early cross sell and if there's any metrics you can provide on how successful you've been with that product?

[Mikkel Svane:]

Let me just kind of go over a few of those. And so as you know we introduced our first subscription on voice in December of last year, and our second subscription plan which is a lower price plan late in the quarter this -- in the first quarter of 2016. And our sales teams have been going out and beginning to cross sell the product and we're getting very good feedback from customers that are using it, that the quality and the capabilities of this product are working well for them. It's really designed right now for SMB kind of use cases and larger or smaller maybe corporate used cases, but over time we are going to continue to evolve that product to address a larger call center capability. So we have two subscription plans today. We will add others as we build features which we'll be doing. And finally we have noted in our shareholder letter that have -- we did a survey of our customer base today, 78% -- over 75% of those customers currently used phones for support, but they're not integrated to any software solutions that they point to. So we think the opportunity is great for voice over time.

[Jesse Hulsing:]

And just a quick follow-up on that. Are you embedding any expectations in your full year revenue guidance around voice or do you expect this to be a contributor in 2017 and beyond?

[Mikkel Svane:]

So, if you were to look at our expectations, it is outperforming our first quarter of expectations but from a very small base and so we would expect that over time it will become a meaningful business. But we are rolling it out at a measured pace is probably the best way to describe it.

[Operator:]

The next question is from Bhavan Suri from William Blair.

[Bhavan Suri:]

Just a quick question here on the sales investment. You should have done a couple of those investments you talked about -- the investments this year, but it feels like the enterprise -- feel that it's gaining more and more momentum. Are you seeing an inflection there and do you think those sales investments continue or do you think got sort of got enough built into this year to address for some of the growth and the momentum you're seeing in that space.

[Mikkel Svane:]

Well, I think that we've previously did some step up investments in building out our enterprise sales capabilities. I think it's more in accordance with our growth now, than step up functions and that's what we've seen over the past year. And that's what we plan to -- that's what we are foreseeing for 2016 too.

[Alan Black:]

Yes, just to put that into context, Bhavan, 2014 was a step up year, and our investment in expanding that sales capability has really been in line with our growth expectations. We don't expect to be making any step up investments like we did in 2014.

[Bhavan Suri:]

Got it. And then a quick follow up. You've seen productivity improve. It takes a while for the sales guys, especially enterprise business to ramp and everything else. And you look at the productivity now, now sort of four quarters out or so vis-à-vis what it was then. So do you think there's still room for productivity with those set of reps that you've hired or do you think you've sort of hit a stead state for that cohort from '14

[Mikkel Svane:]

I think that's a function of not only the sales organization, but like how well the machine overall is oiled from product to onboarding experience to our services, to our partners et cetera. And so we definitely see. And I think that's very much in our DNA that we constantly want to challenge our efficiency and continue to show efficiency gains.

[Bhavan Suri:]

Okay. And then quick last one for me. Just any competition or pricing pressure from some of the guys who were starting to play a little bit in the peripheral [ph] space. So they don't still have the customer experience piece, but folks like Twitter or Apple for example might be using it to ask customer questions, complaints. Any sense or any pressure or any competitive challenge there? Or is that just very peripheral the core customer experience that you guys do?

[Mikkel Svane:]

I think that -- all the places where like -- the world is so reach on customer engagement through all these new channels and I think this just is amazing and it really shows a new paradigm for companies and businesses and hunger and thirst on engaging with their customers and like we are working hard to embrace all these different channels, incorporate them into our product, and I think it's a fantastic time to be Zendesk.

[Alan Black:]

I mean, the activity we saw at Facebook Messenger, the F8 was I thought pretty telling. We had an opportunity for a year to work with Facebook early on. So we have a really good feel for how that messaging paradigm or that messaging channel can be served with a combination of bot and human touch. And I think we're learning a lot through that and we announced an early access program for our products there to serve some of the customers that want to join Facebook Messenger for business. So we feel good about our opportunities.

[Operator:]

The next question is from Kash Rangan from Merrill Lynch.

[Kash Rangan:]

Give us a little color on the key enterprise wins in the quarter. What were some of the competitive dynamics besides these deployments? What allows them to [indiscernible]. And secondly also, it would be good if you can quantify how much of your billings, growth rate came from some of the newer areas such as predictive analytics and voice.

[Mikkel Svane:]

Okay. Partly with model wins, I think that yes of course like when you are out of the field, there's many different dynamics to enterprise wins. I think that the big headline is still that a lot of our prospective customers are thinking about us as innovators they can help them innovate, help them embrace a new world of customer experiences for customer engagement. I think that's a big thing. But also we represent new generation of software where total cost of ownership is so different from traditional world of enterprise software. I think the example we mentioned with LATAM Airlines is a fantastic example where -- and already in very short time, they already have 1,000 agents employed on the new platform, few months after the contract was signed. And I think that talks to kind of the low total cost of ownership of adopting new platforms like Zendesk, and I think that kind of the same story we see with some of these new big wins like Lending Club and a bunch of these other companies

[Alan Black:]

And the second part of your question, Kash was related to how much the growth came from our new products. We started the year, as you recall, voice was brand new at the end of last year. So set pretty modest targets. We oversee those, and so we're encouraged. I think if you looked across the new offerings that we've introduced recently, but early days. So we've got -- I think we've got a lot of the growth as you would expect in the period coming from the Zendesk customer service platform.

[Operator:]

The next question is from Ross MacMillan from RBC Capital Markets.

[Ross MacMillan:]

I guess my question, just curious, Mikkel, when we think about your -- the landscape of your customers and especially in the private tech world -- I noticed some interesting wins this quarter that you talked about and I'm just curious. Are you continuing to see good expansion of agent count across that tech landscape, just given the kind of backdrop of funding and I guess questions to be continued to receive about that? And then I'd also love as a second follow-up to get your view on bots. There seems to have been a lot of industry announcements around automation, using software bots, whether it's in the service function or in the e-commerce transaction function. I'd just love to kind of you get your early thoughts on that and whether that's a functional piece that you think you might need to offer as part of the suite?

[Mikkel Svane:]

Well, I think that one of the really cool things that we showed at F8 was like how you can combine bots and human interactions in your customer service on Messenger and bots are still in its early stage. I'm pretty sure that that will develop more and become more and more interesting. It's kind of like self-service for the conversational challenge or for the conversational generation. And I think that's incredibly cool. I think we're in very early days of it, but I think we'll see a lot more there and we're really happy to be part of that early. I think we continue to see healthy net expansion rate, and we don't have data for different industries, how they perform in our customer base per say, but across the board we still see very, very decent expansion rates. We can only be very happy with that. And we are diligent about what's going on in the different markets and run our company diligently and specifically paying attention.

[Alan Black:]

One of the things you will recall, we have very well diversified across kind of the industries and in the last quarter call, we kind of pointed out kind of our exposure to some of the tech companies that are [indiscernible] small percentage of the total revenue. So we're continuing to see those [indiscernible].

[Operator:]

And your next question is from Patrick Walravens from JMP Securities.

[Patrick Walravens:]

Always good to mute your line when you're in the airport. Ileana's there right? Okay, great. So it's great when someone like you takes this role, because we can pick your brain a little bit about why you did. So I would to hear why you -- I'm sure you had a ton of options. Why you decided to take this particular opportunity? And then maybe what you've learned in your last five years at FFBC [ph] that you think you might be able to apply to Zendesk?

[Ileana Gomez:]

So first of all, I was super excited to meet Mikkel and the team, and clearly they've been successful so far and they're at a pivotal point and I feel like my experience speaking of what I've learned at Salesforce -- my experience at Salesforce will really help me as we -- on the path to $1 billion. So I think that learning about growing a company infrastructure, all those things, you have to think about as you're growing, I think will really help me in this role.

[Patrick Walravens:]

Great and then Mikkel, I am guessing from these three new announcements that you've spent a lot of your time lately recruiting. What's your primary thought now going forward? So what's your main focus now? Now that you’ve got these three new leaders onboard, what's your main area of focus?

[Mikkel Svane:]

So I promised my three girls that I'll take them to Hawaii. So that's a big priority, but no we have a lot of flight. I think we're busy with a lot of really interesting things. Just like next week we have a Reddit live conference here in San Francisco. We have a lot of people coming and it's just going to be a great conference. I'm very much looking forward to that. And we're working hard on our new products and it's incredibly interesting to see what we can do with some of these things. The reaction we get from our early customers from the early uses of the products pretty amazing and I think we have so much work still to do in building a broad portfolio of products, and really helping customers adopting -- helping also big enterprises adopting these new technologies with very low friction at very low cost. So we're focused on that.

[Operator:]

Your next question is from Brendan Barnicle from Pacific Crest.

[Brendan Barnicle:]

Mikkel, now that you've got advanced voice out -- for a while you got the Facebook Messenger deal out and done. What do we look at as the next product categories that are going to be incremental at this point?

[Mikkel Svane:]

I think we've been talking about this, this fall. I think that we believe very much that anything that touches the customer, like how we think about the traditional silos, of traditional enterprise software disciplines, the lines between those silos will start to blur and we'll see a much more conversational engagement between businesses and customers where you -- whether you are in a sales, in a service or in a marketing kind of situation is less clear and also less relevant. And I think we're really setting ourselves up for that world, and with all the proactive stuff that we can see our customers are using our products. And then a lot of the proactive stuffs that are coming with our new offerings, it's really going to be a very different type of engagement we can help our customers with. So I'm very-very excited about that.

[Brendan Barnicle:]

So, when you think about inbound favors as outbound, I think originally the vast majority of what people were using Zendesk for was for inbound customer care, and now we're starting to use it for outbound. Has that ratio started to shift at all?

[Mikkel Svane:]

But I think especially like, we always said about some of our most forward looking companies are definitely using Zendesk for much more proactive stuff, and very interestingly because I have three companies that I use in my personal life that all use Zendesk, and I've realized how they're actually using Zendesk for a lot of their proactive outreach to me. So I think we can see that people are thinking differently about what they could do with the product, but also some of our new capabilities, some of our new products and new features like chat for example. There's no doubt that our customers are using that as much in kind of other disciplines, for sales etc., that they are using it for customer service, and that's incredibly interesting. And embeddables is of course another example of this. We've been investing in embeddables for a while now and it completely changes how our customers are engaging with their customers especially on mobile; and are planning really contextual kind of interactions with their customers that it's hard to say whether this is -- this is service interaction or are you basically upselling our marketing to me right now. And I think that's pretty cool.

[Brendan Barnicle:]

And following up on Ross's early question about Facebook Messenger and bots, some people looked at that and said, with the way they're using bots at Facebook, maybe Facebook is trying to position itself to be attuned to sort of automated customer service piece, which you alluded to a bit? How do you see that relationship developing? Does this become competition at some point?

[Mikkel Svane:]

I think -- Facebook is a platform and they're building a great framework and a great platform for these bots. And a lot of what's going to happen with these bots are kind of driven by customers and by customers like us. They are kind of making it a fantastic channel for us to embrace and for customers to use. And so we see that as a big interesting opportunity and like we have absolutely no fear that that's something that Facebook will try to monopolize like that. It's not in the interest of them or of the customers that they're trying to monetize.

[Alan Black:]

Hey, Brendan, one thing we're hearing about that channel they opened up is that you have a persistence of the customers that you know the customer on the other end, which really changes the customer conversation completely. And that's really what I think allows that channel to potentially be a very important communication channel. And they own the channel and there will be services that plug into that to create customer value.

[Operator:]

Your next question is from Philip Winslow from Credit Suisse.

[Philip Winslow:]

An earlier question on this call focused on obviously just your strong customer caveat this quarter, but we also just a metric of deals with seats north of a 100 you continue to increase. Why don’t you just double click on that, just what are you seeing there? What are some of your goals sort of over the next call it 12-18 months here in terms of that part of the business?

[Mikkel Svane:]

Thanks for bringing up the metric comparison on that. We are each successive quarter have been winning more deals of annualized value of $50,000 ACV, annualized contract value versus a year ago comparable quarter. We think that there are a couple of things happening there. First our product has substantially evolved over time to enterprise more -- to address more and more of large organizations needs around security, compliance. We now have datacenters in EMEA and other -- in the EU, two data centers in the EU. So we have a capability now, a global capability to address larger organizations with the services they require. And then the second thing is we have Salesforce that is learning to sell where we sell well and I think, over a period of time they will continue to become even more productive, understanding deals where they have higher opportunities to win and focusing their efforts on those all result in good returns for us

[Philip Winslow:]

Yes, maybe just one quick follow up, just from a competitive perspective. Any change that you're seeing as you intend to move upstream? Any responses, be it functionality or pricing?

[Mikkel Svane:]

I don't think we've seen any competitive changes. We believe often times that we're innovating in certain categories and we're always going to try to innovate in those categories, especially when you think about new channels opening up like Facebook Messenger, you look at some other things we're doing around chat and online chat, things we're doing around embeddables where we're beginning to acquire a lot of knowledge about customer activities, so that we could provide proactive predictive engagement opportunities for our customers with their end customers. Those are things that we're always working on, that differentiate our offering.

[Operator:]

Your next question is from Jeff Van Rhee from Craig-Hallum.

[Jeff Van Rhee:]

Thanks, just a couple for me, maybe just circle back to the LAN and TAM Airlines win. In particular, who did you compete with there and what did you displace?

[Alan Black:]

We're not going to name our competitors there but it was a process that went through a typical very competitive RFP process per se. I think that we offered a very quick time to first ticket, total cost of ownership option for them to evaluate. And like Mikkel said, we had 1,000 agents up and running pretty quickly, and similar competitors would have taken many more months even get to their first agent.

[Jeff Van Rhee:]

Okay and on the voice side, in terms of the environments that you're seeing a success in early there, can you give a little more color about initial deals, fee sizes, size of enterprises that seem to be adopting and if you are seeing people are -- it sounded like it's a lot of Greenfield where they're not plugging into software, but just again, trying to understand competitive landscape there and the appropriate -- at least the initial target customer and target size.

[Alan Black:]

Well, think of the initial implementations, do tens of agents to hundreds of agents, small hundreds of agents in our first pro round, probably mostly in the tens, right now, like mid double-digits. And as we harden the product and we add some more features, it will scale up over time, but again like we said, we're moving into it in a very measured way, make sure that the customers are satisfied as we roll out these new features and the capabilities of our advanced voice platform.

[Jeff Van Rhee:]

And is there any enough own up of sample size that already get a sense of who you see in those mid double-digit account type deals or competition?

[Mikkel Svane:]

It's been one quarter. So I think we could probably a little bit more information on that going forward, but a lot of our current customers have been selecting voice as an add on.

[Alan Black:]

Jeff, that's an important point. The focus we have for the product is to sell it to existing customers as well as to perspective ones that are buying not only our voice offering, but our customer service platform as well. So it is not something that we're necessarily going to market, trying to sell directly as a standalone product offering.

[Jeff Van Rhee:]

Sure, understood. And last one for me then just with respect to chat, I know, initially after this opened, the vision was to run the two product sets in parallel without a lot of emphasis on the cross selling, cross monetization. And then you had crossed the threshold and drawn a blank on the date, but my recollection was that you had now moved into trying to drive a little cross selling between the basis. Can you just update us on what kind of -- if you can quantify in any respect what kind of success you've seeing there?

[Alan Black:]

So, the day you are looking for is April of 2015, we introduced premium chat. That's a subscription plan that lists for $44 an agent. And our customers both sold directly to new customers with its own funnel, as well as to our existing customers through cross sale. And the cross sell has been -- we've been very pleased with the cross sell activities to customers of all sizes at Zendesk using our platform, a combined platform.

[Operator:]

[Operator Instructions] The next question is from the line of Jonathan Kees from Summit Research.

[Jonathan Kees:]

I wanted to I guess ask for little more elaboration in terms of -- earlier about evolving large call center capabilities. In the past Zendesk has integrated with premised based call center capabilities from Cisco and Avaya. Are you still looking to do that in terms of your comments, in terms of your product offering, or are you looking to start offering more advanced call center capabilities, in terms of your product plan?

[Mikkel Svane:]

Well, there's no doubt, we still had very, very strong partnerships, we still have, what is it, more than 20

[Alan Black:]

More than 30

[Mikkel Svane:]

More than 30 partnerships with telephony providers, call center providers, and we really think that this is the customer's choice. If they have a use case where it makes a lot of sense to use one of these providers, we really want to support that and give like a smooth experience. That said though, like over time, markets will change, products will change, dynamics will change and I'm pretty sure of all of these vendors, their offerings will start to change and our offerings will evolve too. Right now it's like it's giving -- I think step one like really giving customers awareness around the Zendesk product, and once they start using it and see how easy it is, they adopt it really quickly, and we're very happy about that strategy and think there's still tremendous amount of potential here.

[Jonathan Kees:]

So when you see over time, more of what; in a couple of years, way on down the road, that kind of timeframe?

[Mikkel Svane:]

I think we will think continue to evolve year-over-year as will other vendors in this space will continue to evolve and like so much innovation is happening in this space. So I don't worry about anybody running out of market.

[Jonathan Kees:]

And then I also wanted to ask in terms of your core market, obviously you have greater sales this quarter to 100 seats plus. Less than 100 seats are still majority of that metric and you're cross selling with the new products you're rolling out. I guess, am I making fair assumption, especially the new leadership being on board who have enterprise experience, you're leaving more of your core SMB market behind, your bread and butter market that you started out with and you're happy with that and leaving that to more the price leaders like Freshdesk and focusing on more midmarket and enterprise going forward? And then whoever was left of that, who would take your products, you would have cross sell that? Can you give an idea in terms of how you're seeing to maintain your core market going forward?

[Mikkel Svane:]

Absolutely not likely. We have no plans whatsoever give up on that market. And I just want to remind you that possibly 75,000 paid customers' accounts, we have -- how may -- 125,000 premium accounts, a lot of them very small businesses, a lot of them small startups and like we continue to invest, we continue to innovate for that market because it's interesting and as a lot of interesting things are happening and we learn tremendously from it. And I think it also sets us up for like these incredibly smooth product adoptions from product on boarding that is so critical for us as we go into the enterprise, really being be able to simplify these things. So we're definitely not giving up on that market and we really find a lot of our kind of keys to disruption in serving those markets, key disruption enterprise market, we find serving small businesses and growing businesses. And that has been such a big part of DNA, and something we won't give up on.

[Alan Black:]

And Jonathan, you'll see that in our shareholder letter, there is a whole section on our low touch no touch, business because that allows us to really keep a lot of the relatively positive metrics around customer acquisition and other activities in play for us. And so we will continue to focus on that as one of our key growth categories.

[Operator:]

There are no further questions at this time. I will turn the call back over to the presenters.

[Marc Cabi:]

We thank you for participating today. We hope that you found this new format a better use of our time together so that we could address the questions that are topical to you. And as always I take suggestions on either the shareholder format or the call format. Thanks again for joining us and we'll see you next quarter.

[Operator:]

This concludes today's conference call. You may now disconnect.