Zendesk ($ZEN) offers a platform that helps people find answers on their own through knowledge bases and communities. It is headquartered in San Francisco, CA.

Five other companies are scheduled for the week of May 12, 2014. The complete IPO calendar is available at IPOpremium.

The manager and joint managers are Goldman Sachs, Morgan Stanley, and Credit Suisse. The co-managers are Pacific Crest Securities and Canaccord Genuity.

ZEN scheduled a $100 million IPO with a market capitalization of $632 million at a price range midpoint of $9 for Thursday, May 15, 2014 on the NYSE. SEC filings

Overview

ZEN‘s platform helps people find answers on their own through knowledge bases and communities, capitalizing on the increasing customer preference for self-service.

2013 revenue vs 2012 increased 88% to $72 million.  Losses increased to -$22.5 million from -$7 million.

Q1' 14 revenue vs Q1 '13 increased 78% to $25 million.  Respective losses increased to -$10 million from -$5 million.

For the 12 months ended March '14 revenue was $83 million and losses were -27 million.

The gross profit percentage of revenue is declining, marginally.

Valuation

Glossary

Valuation Ratios

Mrkt

Price /

Price /

Price /

Price /

% offered

 

Cap (mm)

Sls

Erngs

BkVlue

TanBV

in IPO

Zendesk (ZEN)

$632

7.6

-23.4

5.4

6.9

16%

Conclusion

The rating on ZEN is neutral+.  Good top line revenue increases.  Breakeven isn't in sight.

Business

ZEN believes the fundamental relationship between organizations and their customers is changing, and a new customer service philosophy is emerging.

ZEN was formed to help organizations capitalize on this profound shift. ZEN is a software development company that provides a software-as-a-service, or SaaS, customer service platform. ZEN‘s beautifully simple platform helps organizations engage with people in new ways that foster long-term customer loyalty and satisfaction.

ZEN empowers organizations to better answer customers’ questions, and to solve their problems through the channels that people use every day when seeking help, such as email, chat, voice, social media, and websites.

Platform and engagement

ZEN‘s platform also helps people find answers on their own through knowledge bases and communities, capitalizing on the increasing customer preference for self-service.

ZEN‘s customer engagement capabilities allow organizations to proactively serve their customers, reaching out to those who may need help and soliciting feedback about their experience.

The openness of the ZEN customer service platform makes it easy for organizations to integrate with their other applications.

ZEN’s platform consolidates the data from customer interactions and provides organizations with powerful analytics and performance benchmarking.

ZEN’s business model is designed to drive organic growth, leverage positive word-of-mouth, and remove friction from the evaluation and purchasing process.

The majority of ZEN customers find ZEN online and subscribe to its customer service platform directly from its website.

Exemplifying the success of ZEN sales and marketing strategy, during the three months ended March 31, 2014, 70% of ZEN’s qualified sales leads, which are largely comprised of prospects that commence a free trial of its customer service platform, came from organic search, customer referrals, and other unpaid sources.

For larger organizations, ZEN’s sales team focuses on a land and expand strategy, which leverages this grassroots adoption and seeks to expand its footprint within organizations.

ZEN currently has more than 42,000 customer accounts on its customer service platform, which represent organizations across a broad array of sizes, industries, and geographies. ZEN customers are in over 140 countries and provide customer service through its platform in over 40 languages.

Dividend Policy

No dividends are planned.

Intellectual Property

ZEN actively pursues registration of its trademarks, logos, service marks, and domain names in the United States and in other key jurisdictions. ZEN is the registered holder of a variety of United States and international domain names that include the term Zendesk and similar variations. ZEN uses several trademarks for its products and services, including “Zendesk,” “Zopim,” and several logos and images.

Competition

For small to medium-sized organizations, ZEN often competes with general use computer applications and other tools that organizations have adapted for customer service, including shared accounts for email communication, phone banks for voice communication, and pen and paper, text editors, and spreadsheets for tracking and management.

For larger organizations, ZEN competes with custom software systems and large enterprise software vendors, including salesforce.com, Inc., Oracle Corporation, Verint Systems, Inc., and Microsoft Corp.

Additionally, for organizations seeking software to support employee service and other internal use cases, ZEN competes with companies such as ServiceNow, Inc., BMC Software, Inc., and Hewlett-Packard Company.

In addition, ZEN competes with a number of smaller SaaS providers with focused customer service applications, including desk.com (a salesforce.com service), Kayako Helpdesk Pvt. Ltd., Freshdesk, Inc., Brightwurks, Inc. (Help Scout), SupportBee, Inc., and Tenmiles Technologies Pvt. Ltd. (Happy Fox).

5% stockholders

MikkelSvane 10.1%

DevduttYellurkar   23.8%

Entities associated with Charles River Ventures 23,8%

Benchmark Capital Partners VI, LP 18.2%

Matrix Partners IX LP 8.5%

Alexander Aghassipour 7.8%

Use of proceeds

ZEN expects to net $90 million from its IPO. Proceeds are allocated as follows:

satisfy the anticipated tax withholding and remittance obligations related to the initial settlement of ZEN’soutstanding restricted stock units, which ZENexpects to be $0.5 million, based on the number of restricted stock units for which service conditions have been satisfied as of March 31, 2014 and an assumed initial public offering price of $9 per share, which is the midpoint of the estimated offering price range set forth;

satisfy all or a portion of anticipated tax withholding and remittance obligations with respect to future settlement of outstanding restricted stock units, the amount of which will depend on the value of ZEN’s common stock at the time of settlement;

repay all or some of the outstanding principal and accrued interest on the equipment line of credit or the revolving line of credit under ZEN’sexisting credit facility with its lender; and

acquire complementary businesses, products, services, or technologies.