To the extent that Zendesk can determine that the underlying customers do not share com- Customer Metrics mon corporate information, Zendesk does not aggregate paid customer accounts associated with reseller and other similar channel arrangements for the purposes of determining its dollar-based net expansion rate. While not material, Zendesk believes the failure to account December 31, March 31, June 30, September 30, December 31, for these activities would otherwise skew the dollar-based net expansion metrics associated 2016 2017 2017 2017 2017 with customers that maintain multiple paid customer accounts across its products and paid Paid customer accounts on 50,800 54,900 57,800 61,200 64,100 customer accounts associated with reseller and other similar channel arrangements. Zendesk Support (approx.) Zendesk does not currently incorporate operating metrics associated with its analytics prod- + Paid customer accounts on 41,300 44,000 45,300 46,600 47,000 Zendesk Chat (approx.) uct or its Outbound product into its measurement of dollar-based net expansion rate. + Paid customer accounts on For a more detailed description of how Zendesk calculates its dollar-based net expansion other Zendesk products (approx.) 2,200 2,900 4,300 6,100 7,800 rate, please refer to Zendesk’s periodic reports filed with the Securities and Exchange Com- = Approximate number of mission. paid customer accounts 94,300 101,800 107,400 113,900 118,900 Zendesk calculates its monthly recurring revenue represented by its churned customers on an annualized basis by dividing base revenue associated with paid customer accounts on Support that churn, either by termination of the subscription or failure to renew, during the Geographic Information annual period being measured, by Zendesk’s base revenue. Zendesk’s monthly recurring revenue represented by its churned customers excludes expansion or contraction associ- Revenue by geography: ated with paid customer accounts on Support and the effect of upgrades or downgrades Q4’17 FY’17 in subscription plan. The monthly recurring revenue represented by its churned customers is adjusted to exclude paid customer accounts that churned from the customer base used United States 53.2% 53.3% that share common corporate information with customer accounts that did not churn from EMEA 28.9% 28.6% the customer base during the annual period being measured. While not material, Zendesk Other believes the failure to make this adjustment could otherwise skew the monthly recurring rev- 17.9% 18.1% enue represented by its churned customers as a result of customers that maintain multiple paid customer accounts on Support. Zendesk’s percentage of monthly recurring revenue from Support that is generated by cus- Source: Zendesk, Inc. tomers with 100 or more agents on Support is determined by dividing the monthly recurring revenue from Support for paid customer accounts with 100 or more agents on Support as of Contact: the measurement date by the monthly recurring revenue from Support for all paid customer accounts on Support as of the measurement date. Zendesk determines the customers with Investor Contact Media Contact 100 or more agents on Support as of the measurement date based on the number of activat- Tian Lee, +1 415-231-0847 ed agents on Support at the measurement date and includes adjustments to aggregate paid Marc Cabi, +1 415-852-3877 customer accounts that share common corporate information. [email protected] [email protected] Zendesk determines the annualized value of a contract by annualizing the monthly recurring revenue for such contract. Zendesk does not currently incorporate operating metrics associated with products other than Support into its measurement of monthly recurring revenue represented by its churned customers or the percentage of monthly recurring revenue from Support that is generated by customers with 100 or more agents on Support. Zendesk Shareholder Letter Q4 2017 - 23