Photo Credit: Petr Machá?ek on Unsplash

Zendesk (NYSE: ZEN) has had a tumultuous year so far. The company had backed away from its $4.1 billion Survey Monkey acquisition earlier this year, and rejected a buy-out offer, before finally giving into an offer to be bought out by a private equity firm. After nearly 8 years of going public, the company will go private again by the end of this fiscal year.
 

Zendesk’s Financials

Zendesk’s second-quarter revenues grew 28% to $407.2 million, ahead of the market’s estimate by 0.81%. GAAP net loss was $95.1 million. Adjusted EPS of $0.14 was ahead of the Street’s estimates of $0.11.

Zendesk did not provide an outlook for the year or the quarter. The market is looking for revenues of $430.5 million and an EPS of $0.19 for the quarter and revenues of $1.68 billion and an EPS of $0.69 for the year.
 

Zendesk’s Acquisition Saga

Recently, Zendesk announced that it was acquired by an investor group led by Permira and Hellman & Friedman for $10.2 billion. In February, Zendesk received an offer from another consortium of private equity investors who were interested in acquiring them for an estimated $17 billion. At the time, Zendesk refused the offer citing it to have significantly undervalued them. Since then, the economic conditions coupled with the dropping valuations for tech companies appear to have changed that perception. The acquisition will allow Zendesk to continue to execute its long-term strategy with its customers as its top priority, taking full advantage of visible opportunities to help businesses navigate the constantly changing expectations and demands of customers.
 

Zendesk’s Conversational CRM Offerings

Meanwhile, Zendesk continued to improve its product offerings. It recently announced its approach to Conversational CRM that connects and integrates front and back offices to not only enable the front office to provide support but also to provide a full range of intelligent, real-time data and services for customer engagement.

As part of this focus, Zendesk now offers conversational automation with more sophisticated bots. It enables businesses to expand automation to messaging apps and omnichannel routing in order to adapt to changing conditions, staff support teams appropriately, and make changes based on customer demand in real-time. It also enables conversational data orchestration so that businesses can create convenient customer conversations at scale by connecting processes, event data, and custom logic. It provides analytics to help businesses turn conversations into revenue with data-driven insights and allows sales teams to capture every interaction automatically.

It is interesting to compare Zendesk with Freshworks. For the recently reported quarter, Freshworks had recorded revenues of $121.4 million and a net loss of $0.06 per share. It forecast revenues of $493-$497 million for the current fiscal year and is trading at a market capitalization of $4.7 billion. Compare that with Zendesk’s estimated revenues of $1.7 billion for the year with the sale price of $10.2 billion. For now, Freshworks is still independent. But, I wonder if Zendesk’s sale signals that it too may be getting evaluated by another PE consortium for a possible acquisition.

Zendesk’s stock is currently trading at $76.51 with a market capitalization of $9.44 billion. It touched a 52-week high of $136.30 in October last year. The stock had fallen to a 52-week low of $54.16 in June.

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