Document and Entity Information

9 Months Ended

Sep. 30, 2016

Oct. 31, 2016

Document And Entity Information [Abstract]

Document Type

10-Q

Amendment Flag

false

Document Period End Date

Sep. 30, 2016

Document Fiscal Year Focus

2016

Document Fiscal Period Focus

Q3

Trading Symbol

ZEN

Entity Registrant Name

Zendesk, Inc.

Entity Central Index Key

0001463172

Current Fiscal Year End Date

--12-31

Entity Filer Category

Large Accelerated Filer

Entity Common Stock, Shares Outstanding

95,338,742

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)

In Thousands, unless otherwise specified

Sep. 30, 2016

Dec. 31, 2015

Current Assets:

Cash and cash equivalents

$ 77,589

$ 216,226

Marketable securities

133,758

29,414

Accounts receivable, net of allowance for doubtful accounts of $1,213 and $763 as of September 30, 2016 and December 31, 2015, respectively

37,645

26,168

Prepaid expenses and other current assets

19,437

11,423

Total current assets

268,429

283,231

Marketable securities, noncurrent

71,139

22,336

Property and equipment, net

57,507

56,540

Goodwill and intangible assets, net

54,848

57,050

Other assets

4,504

3,529

Total assets

456,427

422,686

Current liabilities:

Accounts payable

5,491

9,332

Accrued liabilities

12,839

9,742

Accrued compensation and related benefits

17,929

14,115

Deferred revenue

110,174

84,210

Total current liabilities

146,433

117,399

Deferred revenue, noncurrent

1,538

1,405

Other liabilities

9,922

10,592

Total liabilities

157,893

129,396

Commitments and contingencies

Stockholders’ equity:

Preferred stock

0

Common stock

953

905

Additional paid-in capital

595,135

511,183

Accumulated other comprehensive loss

(1,730)

(2,225)

Accumulated deficit

(295,172)

(215,921)

Treasury stock at cost (0.5 million shares as of September 30, 2016 and December 31, 2015)

(652)

Total stockholders’ equity

298,534

293,290

Total liabilities and stockholders’ equity

$ 456,427

$ 422,686

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)

In Thousands, except Share data in Millions, unless otherwise specified

Sep. 30, 2016

Dec. 31, 2015

Statement of Financial Position [Abstract]

Allowance for doubtful accounts

$ 1,213

$ 763

Treasury stock, shares (in shares)

0.5

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)

In Thousands, except Per Share data, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2016

Sep. 30, 2015

Sep. 30, 2016

Sep. 30, 2015

Income Statement [Abstract]

Revenue

$ 80,717

$ 55,661

$ 223,376

$ 146,122

Cost of revenue

23,866 ¹

17,039 ¹

68,318 ¹

47,491 ¹

Gross profit

56,851

38,622

155,058

98,631

Operating expenses:

Research and development

22,953 ¹

16,031 ¹

66,683 ¹

43,517 ¹

Sales and marketing

43,899 ¹

29,079 ¹

119,421 ¹

79,725 ¹

General and administrative

16,212 ¹

12,319 ¹

48,149 ¹

33,982 ¹

Total operating expenses

83,064

57,429 ¹

234,253

157,224 ¹

Operating loss

(26,213)

(18,807)

(79,195)

(58,593)

Other income (expense), net

681

145

745

(428)

Loss before provision for income taxes

(25,532)

(18,662)

(78,450)

(59,021)

Provision for income taxes

294

262

800

554

Net loss

$ (25,826)

$ (18,924)

$ (79,250)

$ (59,575)

Net loss per share, basic and diluted (usd per share)

$ (0.27)

$ (0.22)

$ (0.86)

$ (0.71)

Weighted-average shares used to compute net loss per basic and diluted share (in shares)

94,085

87,777

92,274

83,536

[1] (1) Includes share-based compensation expense as follows: Three Months EndedSeptember 30, Nine Months EndedSeptember 30,2016 2015 2016 2015Cost of revenue$1,919 $1,131 $5,355 $3,136Research and development7,172 4,974 20,548 13,484Sales and marketing6,657 3,786 17,780 10,154General and administrative4,247 3,551 12,654 10,283

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) (USD $)

In Thousands, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2016

Sep. 30, 2015

Sep. 30, 2016

Sep. 30, 2015

Share-based compensation expense

$ 56,337

$ 37,057

Cost of revenue

Share-based compensation expense

1,919

1,131

5,355

3,136

Research and development

Share-based compensation expense

7,172

4,974

20,548

13,484

Sales and marketing

Share-based compensation expense

6,657

3,786

17,780

10,154

General and administrative

Share-based compensation expense

$ 4,247

$ 3,551

$ 12,654

$ 10,283

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $)

In Thousands, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2016

Sep. 30, 2015

Sep. 30, 2016

Sep. 30, 2015

Statement of Comprehensive Income [Abstract]

Net loss

$ (25,826)

$ (18,924)

$ (79,250)

$ (59,575)

Other comprehensive gain (loss), before tax:

Net change in unrealized gain (loss) on available-for-sale investments

(35)

39

80

70

Foreign currency translation gain (loss)

(227)

(781)

570

(1,019)

Net change in unrealized gain (loss) on derivative instruments

416

(101)

139

(101)

Other comprehensive gain (loss), before tax

154

(843)

789

(1,050)

Tax effect

(61)

0

(295)

0

Other comprehensive gain (loss), net of tax

93

(843)

494

(1,050)

Comprehensive loss

$ (25,733)

$ (19,767)

$ (78,756)

$ (60,625)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)

In Thousands, unless otherwise specified

9 Months Ended

Sep. 30, 2016

Sep. 30, 2015

Cash flows from operating activities

Net loss

$ (79,250)

$ (59,575)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

20,000

13,672

Share-based compensation

56,337

37,057

Other

1,219

525

Excess tax benefit from share-based award activity

(133)

(124)

Changes in operating assets and liabilities:

Accounts receivable

(11,782)

(13,082)

Prepaid expenses and other current assets

(7,401)

(4,161)

Other assets and liabilities

(1,829)

(1,622)

Accounts payable

(2,220)

(1,919)

Accrued liabilities

2,645

2,261

Accrued compensation and related benefits

812

(2,355)

Deferred revenue

25,596

24,372

Net cash provided by (used in) operating activities

3,994

(4,951)

Cash flows from investing activities

Purchases of property and equipment

(12,494)

(14,231)

Internal-use software development costs

(4,313)

(3,548)

Purchases of marketable securities

(216,640)

(56,991)

Proceeds from maturities of marketable securities

23,971

30,425

Proceeds from sale of marketable securities

39,244

29,650

Cash paid for the acquisition of Zopim, net of cash acquired

0

(1,099)

Net cash used in investing activities

(170,232)

(15,794)

Cash flows from financing activities

Proceeds from follow-on public offering, net of issuance costs

0

190,110

Proceeds from exercise of employee stock options

19,886

5,773

Taxes paid related to net share settlement of equity awards

(626)

(481)

Proceeds from employee stock purchase plan

8,704

7,243

Excess tax benefit from share-based award activity

133

124

Principal payments on debt

(323)

(6,952)

Principal payments on capital lease obligations

0

(10)

Net cash provided by financing activities

27,774

195,807

Effect of exchange rate changes on cash and cash equivalents

(173)

59

Net increase (decrease) in cash and cash equivalents

(138,637)

175,121

Cash and cash equivalents at the beginning of period

216,226

80,265

Cash and cash equivalents at the end of period

77,589

255,386

Supplemental cash flow data:

Cash paid for interest and income taxes

968

710

Non-cash investing and financing activities:

Balance of property and equipment in accounts payable and accrued expenses

2,466

4,250

Share-based compensation capitalized in internal-use software development costs

1,761

1,674

Vesting of early exercised stock options

509

815

Property and equipment acquired through tenant improvement allowances

$ 64

$ 174

Overview and Basis of Presentation

Note 1. Overview and Basis of Presentation

Company and Background

Zendesk was founded in Denmark in 2007 and reincorporated in Delaware in April 2009.

Our mission is to help organizations and their customers build better relationships. We are a software development company that provides a SaaS customer service platform that enables our customers to provide tailored support through multiple channels, establish effective self-service support resources, proactively serve customers through customer engagement capabilities, integrate with other applications, and consolidate and analyze data from customer interactions. We also provide SaaS live chat software that can be utilized independently to facilitate proactive communications between organizations and their customers or integrated easily into our platform.

In October 2015, we completed the acquisition of We Are Cloud SAS, or WAC, the maker of BIME Analytics software. With the acquisition, we added technology that we anticipate will allow our customers to understand the ever-increasing diversity of data about their end customers. Over time, we expect this analytics software to become a core technology within our customer service platform, enabling us to further integrate data analytics capabilities across our products. We also continue to sell our analytics software on a standalone basis.

References to Zendesk, the “Company”, “our”, or “we” in these notes refer to Zendesk, Inc. and its subsidiaries on a consolidated basis.

Basis of Presentation

These unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, or GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2015, filed on February 26, 2016. There have been no changes to our significant accounting policies described in the Annual Report on Form 10-K that have had a material impact on our condensed consolidated financial statements and related notes.

The consolidated balance sheet as of December 31, 2015 included herein was derived from the audited financial statements as of that date. The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, our comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2016.

Follow-On Public Offering

In March 2015, we completed a follow-on public offering, in which we issued 8.8 million shares of our common stock at a public offering price of $22.75 per share. We received net proceeds of $190.1 million after deducting underwriting discounts and commissions of $8.7 million and other offering expenses of $0.9 million.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reported periods.

Significant items subject to such estimates and assumptions include the fair value of share-based awards, acquired intangible assets and goodwill, unrecognized tax benefits, the useful lives of acquired intangible assets and property and equipment, the capitalization and estimated useful life of capitalized internal-use software, and financial forecasts used in currency hedging.

These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from those estimates.

Concentrations of Risk

As of September 30, 2016, no customers represented 10% or greater of our total accounts receivable balance. There were no customers that individually exceeded 10% of our revenue during the three and nine months ended September 30, 2016 or 2015.

Recently Issued and Adopted Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board, or the FASB, issued new revenue guidance that provides principles for recognizing revenue to which an entity expects to be entitled for the transfer of promised goods or services to customers. In August 2015, the FASB deferred the effective date of adoption by one year. As currently issued and amended, the new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, though early adoption is permitted for annual reporting periods beginning after December 15, 2016. The amendment may be applied retrospectively to each prior period presented, or with the cumulative effect recognized as of the date of initial adoption. We have not yet selected a transition method and continue to evaluate the effect of the standard on our consolidated financial statements, including revenue and commissions.

In February 2016, the FASB issued Accounting Standards Update, or ASU, 2016-2 regarding Accounting Standards Codification, or ASC, Topic 842 "Leases." This new standard requires lessees to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use assets and eliminates certain real estate-specific provisions. The new guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We are currently evaluating the effect of this standard on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-9 regarding ASC Topic 718 "Compensation - Stock Compensation." This amendment changes certain aspects of accounting for share-based compensation to employees, including the recognition of income tax effects of awards when the awards vest or are settled, requirements on net share settlement to cover tax withholding, and accounting for forfeitures. The new guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. We do not expect the adoption of this standard to have a significant effect on our consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, regarding ASC Topic 230 "Statement of Cash Flows." This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted. We do not expect the adoption of this standard to have a significant effect on our consolidated financial statements.

Business Combination

Note 2. Business Combination

On October 13, 2015, we completed the acquisition of WAC, the maker of BIME Analytics software. We acquired 100 percent of the outstanding shares of WAC in exchange for purchase consideration of $46.4 million in cash, including working capital adjustments. As partial security for standard indemnification obligations, $7.0 million of the consideration will be held in escrow for a period of up to 18 months, with a portion released 12 months following the closing of the acquisition. We incurred transaction costs of $1.0 million in connection with the acquisition. The transaction costs were expensed as incurred and recognized within general and administrative expenses.

As of September 30, 2016, we finalized our purchase accounting for the acquisition. The total purchase price was allocated to the assets acquired and liabilities assumed as set forth below (in thousands). The excess of the purchase price over the net assets acquired was recorded as goodwill. Goodwill generated from the acquisition is primarily attributable to expected synergies, including cost savings from integrating the analytics technology with our customer service platform and the opportunity to sell the analytics software alongside our existing products. Goodwill is not expected to be deductible for income tax purposes. Goodwill will not be amortized but instead will be tested for impairment at least annually and more frequently if certain indicators of impairment are present.



Net tangible assets acquired	$	2,140
Net deferred tax liability recognized	(1,979		)
Identifiable intangible assets:
Developed technology	8,800
Customer relationships	500
Goodwill	36,896
Total purchase price	$	46,357

The developed technology and customer relationship intangible assets were each assigned useful lives of 4.5 years.

In connection with the acquisition, we entered into retention arrangements with certain employees of WAC, pursuant to which we issued RSUs for approximately 0.5 million shares of our common stock, most of which vest in three annual installments from the date of acquisition. The expense related to the RSUs is accounted for as share-based compensation expense over the required service periods and was not included in the purchase consideration.

The results of operations of WAC have been included in our consolidated financial statements from the date of the acquisition.

Financial Instruments

Note 3. Financial Instruments

Investments

The following tables present information about our cash equivalents and marketable securities measured at fair value on a recurring basis as of September 30, 2016 and December 31, 2015 based on the three-tier fair value hierarchy (in thousands):



	Fair Value Measurement at September 30, 2016
	Level 1		Level 2		Total
Description
Corporate bonds	$	—	$	118,443	$	118,443
Asset-backed securities	—		28,458		28,458
U.S. treasury securities	—		28,256		28,256
Commercial paper	—		19,239		19,239
Agency securities	—		10,501		10,501
Money market funds	4,841		—		4,841
Total	$	4,841	$	204,897	$	209,738
Included in cash and cash equivalents					$	4,841
Included in marketable securities					$	204,897



	Fair Value Measurement at December 31, 2015
	Level 1		Level 2		Total
Description
Corporate bonds	$	—	$	31,761	$	31,761
Money market funds	21,338		—		21,338
Asset-backed securities	—		7,998		7,998
Commercial paper	—		5,992		5,992
U.S. treasury securities	—		4,001		4,001
Agency securities	—		1,998		1,998
Total	$	21,338	$	51,750	$	73,088
Included in cash and cash equivalents					$	21,338
Included in marketable securities					$	51,750

As of September 30, 2016 and December 31, 2015, there were no securities within Level 3 of the fair value hierarchy. There were no transfers between fair value measurement levels during the three and nine months ended September 30, 2016. Gross unrealized gains and losses for cash equivalents and marketable securities as of September 30, 2016 and December 31, 2015 were not material. As of September 30, 2016 and December 31, 2015, there were no securities that were in an unrealized loss position for more than 12 months.

The following table classifies our marketable securities by contractual maturity as of September 30, 2016 and December 31, 2015 (in thousands):



	September 30, 2016		December 31, 2015
Due in one year or less	$	133,758	$	29,414
Due after one year	71,139		22,336
Total	$	204,897	$	51,750

For certain other financial instruments, including accounts receivable, accounts payable and other current liabilities, the carrying amounts approximate their fair value due to the relatively short maturity of these balances.

Derivative Instruments and Hedging

Our foreign currency exposures typically arise from foreign operations and sales in foreign currencies for subscriptions to our customer service platform. In September 2015, we implemented a hedging program to mitigate the impact of foreign currency fluctuations on our future cash flows and earnings. We enter into foreign currency forward contracts with certain financial institutions and designate those contracts as cash flow hedges. Our foreign currency forward contracts generally have maturities of 15 months or less. As of September 30, 2016, the balance of accumulated other comprehensive loss included an unrealized loss of $0.6 million related to the effective portion of changes in the fair value of foreign currency forward contracts designated as cash flow hedges. We expect to reclassify $0.4 million from accumulated other comprehensive loss into earnings over the next 12 months associated with our cash flow hedges.

The following tables present information about derivative instruments on our consolidated balance sheets as of September 30, 2016 and December 31, 2015 (in thousands):



	September 30, 2016
	Asset Derivatives			Liability Derivatives
Derivative Instrument	Balance Sheet Location	Fair Value (Level 2)		Balance Sheet Location	Fair Value (Level 2)
Foreign currency forward contracts	Other current assets	$	1,215	Accrued liabilities	$	1,688
Foreign currency forward contracts	Other assets	79		Other liabilities	330
Total		$	1,294		$	2,018



	December 31, 2015
	Asset Derivatives			Liability Derivatives
Derivative Instrument	Balance Sheet Location	Fair Value (Level 2)		Balance Sheet Location	Fair Value (Level 2)
Foreign currency forward contracts	Other current assets	$	408	Accrued liabilities	$	1,081
Total		$	408		$	1,081

Our foreign currency forward contracts had a total notional value of $88.5 million and $60.8 million as of September 30, 2016 and December 31, 2015, respectively. We have a master netting agreement with certain counterparties, which permits net settlement of multiple, separate derivative contracts with a single payment. We have elected to present our derivative instruments on a gross basis in our consolidated financial statements. We may also be required to exchange cash collateral with certain of our counterparties on a regular basis. We have not exchanged cash collateral with any counterparties as of September 30, 2016 and December 31, 2015, respectively.

The following table presents information about our derivative instruments on the statement of operations for the three and nine months ended September 30, 2016 and 2015 (in thousands):



		Three Months Ended September 30, 2016					Nine Months Ended September 30, 2016
Hedging Instrument	Location of Loss Reclassified into Earnings	Gain Recognized in AOCI		Loss Reclassified from AOCI into Earnings			Loss Recognized in AOCI			Loss Reclassified from AOCI into Earnings
Foreign currency forward contracts	Revenue, cost of revenue, operating expenses	$	207	$	(209	)	$	(218	)	$	(357	)
Total		$	207	$	(209	)	$	(218	)	$	(357	)



		Three Months Ended September 30, 2015					Nine Months Ended September 30, 2015
Hedging Instrument	Location of Gain (Loss) Reclassified into Earnings	Loss Recognized in AOCI			Gain (Loss) Reclassified from AOCI into Earnings		Loss Recognized in AOCI			Gain(Loss) Reclassified from AOCI into Earnings
Foreign currency forward contracts	Revenue, cost of revenue, operating expenses	$	(101	)	$	—	$	(101	)	$	—
Total		$	(101	)	$	—	$	(101	)	$	—

All derivatives have been designated as hedging instruments. Amounts recognized in earnings related to excluded time value and hedge ineffectiveness for the three and nine months ended September 30, 2016 were not material.

Property and Equipment

Note 4. Property and Equipment

Property and equipment, net consists of the following (in thousands):



	September 30, 2016			December 31, 2015
Hosting equipment	$	31,514		$	26,920
Capitalized internal-use software	25,277			22,418
Leasehold improvements	23,167			19,577
Computer equipment and software	10,735			7,682
Furniture and fixtures	6,988			5,739
Construction in progress	5,937			4,157
Total	103,618			86,493
Less: accumulated depreciation and amortization	(46,111		)	(29,953		)
Property and equipment, net	$	57,507		$	56,540

Depreciation expense was $4.1 million and $2.8 million for the three months ended September 30, 2016 and 2015, respectively, and $11.8 million and $7.7 million for the nine months ended September 30, 2016 and 2015, respectively.

Amortization expense of capitalized internal-use software totaled $1.8 million and $1.6 million for the three months ended September 30, 2016 and 2015, respectively, and $5.2 million and $4.6 million for the nine months ended September 30, 2016 and 2015, respectively. The carrying value of capitalized internal-use software at September 30, 2016 and December 31, 2015 was $15.0 million and $14.1 million, respectively, including $4.1 million and $1.5 million in construction in progress, respectively.

Goodwill and Acquired Intangible Assets

Note 5. Goodwill and Acquired Intangible Assets

The changes in the carrying amount of goodwill for the nine months ended September 30, 2016 are as follows (in thousands):



Balance as of December 31, 2015	$	45,346
Goodwill adjustments	166
Foreign currency translation adjustments	359
Balance as of September 30, 2016	$	45,871

Acquired intangible assets subject to amortization as of September 30, 2016 and December 31, 2015 consist of the following (in thousands):



	As of September 30, 2016
	Cost		Accumulated Amortization			Foreign Currency Translation Adjustments			Net		Remaining Useful Life
											(In years)
Developed technology	$	14,000	$	(5,717	)	$	(135	)	$	8,148	3.1
Customer relationships	1,800		(934		)	(38		)	828		2.4
	$	15,800	$	(6,651	)	$	(173	)	$	8,976



	As of December 31, 2015
	Cost		Accumulated Amortization			Foreign Currency Translation Adjustments			Net		Remaining Useful Life
											(In years)
Developed technology	$	14,000	$	(3,133	)	$	(279	)	$	10,587	3.7
Customer relationships	1,800		(606		)	(78		)	1,117		3.1
	$	15,800	$	(3,739	)	$	(357	)	$	11,704

Amortization expense of purchased intangible assets for the three months ended September 30, 2016 and 2015 was $1.0 million and $0.4 million, respectively, and $2.9 million and $1.4 million for the nine months ended September 30, 2016 and 2015, respectively.

Estimated future amortization expense as of September 30, 2016 is as follows (in thousands):



Remainder of 2016	$	936
2017	3,330
2018	2,131
2019	2,067
2020	512
	$	8,976

Credit Facility

Note 6. Credit Facility

Until its termination in June 2015, we had a credit facility with Silicon Valley Bank consisting of a $20.0 million revolving line of credit and a $10.0 million equipment line of credit. The revolving line of credit bore interest at the prime rate plus 2.0% per annum prior to our initial public offering, or IPO, in May 2014 and was reduced to the prime rate upon the consummation of our IPO. Borrowings on the equipment line of credit bore interest of 2.5% per annum. In June 2014, we repaid all outstanding principal and accrued interest under the revolving line of credit. In June 2015, we repaid all outstanding principal and interest under the equipment line of credit and terminated the Silicon Valley Bank credit facility.

Commitments and Contingencies

Note 7. Commitments and Contingencies

Leases

We lease office space under noncancelable operating leases with various expiration dates. Certain of the office space lease agreements contain rent holidays or rent escalation provisions. Rent holiday and rent escalation provisions are considered in determining the straight-line expense to be recorded over the lease term. The lease term begins on the date of initial possession of the leased property for purposes of recognizing lease expense on a straight-line basis over the term of the lease. Rent expense was $2.6 million and $2.0 million for the three months ended September 30, 2016 and 2015, respectively, and $7.2 million and $5.4 million for the nine months ended September 30, 2016 and 2015, respectively.

In June 2016, we entered into an operating lease agreement for approximately 18,000 square feet of additional office space in San Francisco, CA. The lease began on July 11, 2016 and will expire on January 31, 2021. The total anticipated amount of rent to be paid over the initial term of the lease is approximately $4.6 million. In addition to monthly rent obligations, we are responsible for certain operating costs and taxes associated with the leased premises.

We leased computer equipment from various parties under capital lease agreements that expired in March 2015.

Litigation and Loss Contingencies

We accrue estimates for resolution of legal and other contingencies when losses are probable and estimable. From time to time, we may become a party to litigation and subject to claims incident to the ordinary course of business, including intellectual property claims, labor and employment claims, and threatened claims, breach of contract claims, tax, and other matters. We currently have no material pending litigation.

We are not currently aware of any litigation matters or loss contingencies that would be expected to have a material adverse effect on our business, consolidated financial position, results of operations, comprehensive loss, or cash flows.

Indemnifications

In the ordinary course of business, we enter into contractual arrangements under which we agree to provide indemnification of varying scope and terms to customers, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, intellectual property infringement claims made by third parties, and other liabilities relating to or arising from our customer service platform, live chat software, analytics software, or our acts or omissions. In these circumstances, payment may be conditional on the other party making a claim pursuant to the procedures specified in the particular contract. Further, our obligations under these agreements may be limited in terms of time and/or amount, and in some instances, we may have recourse against third parties for certain payments. In addition, we have indemnification agreements with our directors and executive officers that require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The terms of such obligations may vary. To date, we have not incurred any material costs, and we have not accrued any liabilities in the accompanying condensed consolidated financial statements, as a result of these obligations.

Certain of our product offerings include service-level agreements warranting defined levels of uptime reliability and performance and permitting those customers to receive credits for future services in the event that we fail to meet those levels. To date, we have not accrued for any significant liabilities in the accompanying condensed consolidated financial statements as a result of these service-level agreements.

Common Stock and Stockholders' Equity

Note 8. Common Stock and Stockholders’ Equity

Common Stock

As of each of September 30, 2016 and December 31, 2015, there were 400 million shares authorized for issuance with a par value of $0.01 per share. There were 95.4 million and 90.9 million shares of common stock issued and 94.9 million and 90.3 million shares outstanding as of September 30, 2016 and December 31, 2015, respectively. Included within the number of shares issued and outstanding were 0.1 million and 0.3 million shares of common stock subject to repurchase, as of September 30, 2016 and December 31, 2015, respectively.

Preferred Stock

As of each of September 30, 2016 and December 31, 2015, 10.0 million shares of preferred stock were authorized for issuance with a par value of $0.01 per share and no shares of preferred stock were issued or outstanding.

Employee Equity Plans

Employee Stock Purchase Plan

Under our Employee Stock Purchase Plan, or ESPP, eligible employees are granted options to purchase shares of our common stock through payroll deductions. The ESPP provides for eighteen-month offering periods, which include three six-month purchase periods. At the end of each purchase period, employees are able to purchase shares at 85% of the lower of the fair market value of our common stock at the beginning of an offering period or the fair market value of our common stock at the end of the purchase period. For the three and nine months ended September 30, 2016, 0.3 million shares of common stock were purchased under the ESPP. Pursuant to the terms of the ESPP, the number of shares reserved under the ESPP increased by 0.9 million shares on January 1, 2016. As of September 30, 2016, 3.5 million shares of common stock were available for issuance under the ESPP.

Stock Option and Incentive Plans

Our board of directors adopted the 2009 Stock Option and Grant Plan, or the 2009 Plan, in July 2009. The 2009 Plan was terminated in connection with our IPO in May 2014, and accordingly, no shares are available for issuance under this plan. The 2009 Plan continues to govern outstanding awards granted thereunder.

Our 2014 Stock Option and Incentive Plan, or the 2014 Plan, serves as the successor to our 2009 Plan. Pursuant to the terms of the 2014 Plan, the number of shares reserved for issuance under the 2014 Plan increased by 4.5 million shares on January 1, 2016. As of September 30, 2016, we had 5.8 million shares of common stock available for future grants under the 2014 Plan.

On May 6, 2016, the compensation committee of our board of directors granted equity awards representing 1.2 million shares. These awards were granted outside of the 2014 Plan pursuant to an exemption provided for “employment inducement awards” within the meaning of Section 303A.08 of the New York Stock Exchange Listed Manual and accordingly do not require approval from our stockholders.

The following table summarizes our stock option and RSU award activities for the nine months ended September 30, 2016 (in thousands, except per share information):



			Options Outstanding							RSUs Outstanding
	Shares Available for Grant		Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value		Outstanding RSUs		Weighted Average Grant Date Fair Value
							(In years)
Outstanding — January 1, 2016	4,323		10,778		$	11.94	7.96	$	156,262	6,417		$	19.54
Increase in authorized shares	5,716
Stock options granted	(1,363	)	1,363		23.82
RSUs granted	(3,719	)								3,719		20.41
Stock options exercised			(2,275	)	8.75
RSUs vested										(2,080	)	18.42
Unvested shares repurchased	38
Stock options forfeited or canceled	334		(334	)	16.70
RSUs forfeited or cancelled	491									(491	)	20.42
Outstanding — September 30, 2016	5,820		9,532		$	14.23	7.69	$	157,057	7,565		$	20.22

Aggregate intrinsic value for options outstanding represents the difference between the closing stock price of our common stock and the exercise price of outstanding, in-the-money options. Our closing stock price as reported on the New York Stock Exchange as of September 30, 2016 was $30.71.

As of September 30, 2016, we had a total of $188.9 million in future share-based compensation expense related to all equity awards, net of estimated forfeitures, to be recognized over a weighted average period of 2.8 years.

Early Exercise of Stock Options and Purchase of Unvested Stock Awards

Certain of our stock options permit early exercise. Common stock purchased pursuant to an early exercise of stock options or unvested stock awards is not deemed to be outstanding for financial reporting purposes until those shares vest. Therefore, cash received in exchange for unvested shares is recorded as a liability and is transferred into common stock and additional paid-in capital as the shares vest. Upon termination of service, we may, at our discretion, repurchase unvested shares acquired through early exercise of stock options or purchase of unvested stock awards at a price equal to the price per share paid upon the exercise of such options or the purchase of such unvested stock awards. As of September 30, 2016 and December 31, 2015, there were 0.1 million and 0.3 million shares, respectively, outstanding as a result of the early exercise of stock options and purchase of unvested stock awards by our employees and directors that were classified as accrued liabilities for an aggregated amount of $0.5 million and $1.0 million, respectively.

Net Loss Per Share

Note 9. Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential shares of common stock, including outstanding share-based awards, to the extent dilutive. Basic and diluted net loss per share were the same for each period presented as the inclusion of all potential common stock outstanding would have been anti-dilutive.

The following table presents the calculation of basic and diluted net loss per share for the periods presented (in thousands, except per share data):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Net loss	$	(25,826	)	$	(18,924	)	$	(79,250	)	$	(59,575	)
Weighted-average shares used to compute basic and diluted net loss per share	94,085			87,777			92,274			83,536
Net loss per share, basic and diluted	$	(0.27	)	$	(0.22	)	$	(0.86	)	$	(0.71	)

The anti-dilutive securities excluded from the shares used to calculate the diluted net loss per share are as follows (in thousands):



	As of September 30,
	2016	2015
Shares subject to outstanding common stock options and employee stock purchase plan	9,753	12,067
Restricted stock units	7,565	5,217
	17,318	17,284

Income Taxes

Note 10. Income Taxes

The effective tax rates for the three and nine months ended September 30, 2016 and 2015 were less than 2%. The effective tax rates differ from the statutory rate primarily as a result of not recognizing a deferred tax asset for U.S. losses due to having a full valuation allowance against U.S. deferred tax assets.

In April 2009, Zendesk’s entity in Denmark, or Zendesk Denmark, transferred certain assets to Zendesk’s U.S. entity. In April 2015, the Danish Tax Authority, or SKAT, issued a letter of intent in contemplation of adjusting the value of the reported asset transfer. We submitted a written rebuttal to SKAT’s proposal in August 2015. In March 2016, we received an assessment from SKAT that gave rise to a potential payment of $1.9 million, including income tax and interest. We further contested the assessment and reached a settlement with SKAT. In September 2016, we paid the amount due of $0.9 million, including income tax and interest, and released the associated reserve for the uncertain tax position.

Geographic Information

Note 11. Geographic Information

Our chief operating decision maker reviews the financial information presented on a consolidated basis for purposes of allocating resources and evaluating our financial performance. Accordingly, we have determined that we operate in a single reporting segment.

Revenue

The following table presents our revenue by geographic area, as determined based on the billing address of our customers (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
United States	$	43,587	$	31,388	$	121,222	$	81,094
EMEA	22,601		15,397		62,208		41,434
Other	14,529		8,876		39,946		23,594
Total	$	80,717	$	55,661	$	223,376	$	146,122

Long-Lived Assets

The following table presents our long-lived assets by geographic area (in thousands):



	As of September 30, 2016		As of December 31, 2015
United States	$	24,637	$	26,696
EMEA	10,420		10,351
APAC	7,460		5,332
Total	$	42,517	$	42,379

The carrying values of capitalized internal-use software and intangible assets are excluded from the balance of long-lived assets presented in the table above.

Overview and Basis of Presentation (Policies)

Basis of Presentation

These unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, or GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2015, filed on February 26, 2016. There have been no changes to our significant accounting policies described in the Annual Report on Form 10-K that have had a material impact on our condensed consolidated financial statements and related notes.

The consolidated balance sheet as of December 31, 2015 included herein was derived from the audited financial statements as of that date. The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, our comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2016.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reported periods.

Significant items subject to such estimates and assumptions include the fair value of share-based awards, acquired intangible assets and goodwill, unrecognized tax benefits, the useful lives of acquired intangible assets and property and equipment, the capitalization and estimated useful life of capitalized internal-use software, and financial forecasts used in currency hedging.

These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from those estimates.

Recently Issued and Adopted Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board, or the FASB, issued new revenue guidance that provides principles for recognizing revenue to which an entity expects to be entitled for the transfer of promised goods or services to customers. In August 2015, the FASB deferred the effective date of adoption by one year. As currently issued and amended, the new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, though early adoption is permitted for annual reporting periods beginning after December 15, 2016. The amendment may be applied retrospectively to each prior period presented, or with the cumulative effect recognized as of the date of initial adoption. We have not yet selected a transition method and continue to evaluate the effect of the standard on our consolidated financial statements, including revenue and commissions.

In February 2016, the FASB issued Accounting Standards Update, or ASU, 2016-2 regarding Accounting Standards Codification, or ASC, Topic 842 "Leases." This new standard requires lessees to recognize most leases on their balance sheets as lease liabilities with corresponding right-of-use assets and eliminates certain real estate-specific provisions. The new guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. We are currently evaluating the effect of this standard on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-9 regarding ASC Topic 718 "Compensation - Stock Compensation." This amendment changes certain aspects of accounting for share-based compensation to employees, including the recognition of income tax effects of awards when the awards vest or are settled, requirements on net share settlement to cover tax withholding, and accounting for forfeitures. The new guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. We do not expect the adoption of this standard to have a significant effect on our consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, regarding ASC Topic 230 "Statement of Cash Flows." This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted. We do not expect the adoption of this standard to have a significant effect on our consolidated financial statements.

Business Combination (Tables)

Schedule of Purchase Price Allocation for Acquisitions



Net tangible assets acquired	$	2,140
Net deferred tax liability recognized	(1,979		)
Identifiable intangible assets:
Developed technology	8,800
Customer relationships	500
Goodwill	36,896
Total purchase price	$	46,357

Financial Instruments (Tables)

Assets Measured at Fair Value on Recurring Basis

The following tables present information about our cash equivalents and marketable securities measured at fair value on a recurring basis as of September 30, 2016 and December 31, 2015 based on the three-tier fair value hierarchy (in thousands):



	Fair Value Measurement at September 30, 2016
	Level 1		Level 2		Total
Description
Corporate bonds	$	—	$	118,443	$	118,443
Asset-backed securities	—		28,458		28,458
U.S. treasury securities	—		28,256		28,256
Commercial paper	—		19,239		19,239
Agency securities	—		10,501		10,501
Money market funds	4,841		—		4,841
Total	$	4,841	$	204,897	$	209,738
Included in cash and cash equivalents					$	4,841
Included in marketable securities					$	204,897



	Fair Value Measurement at December 31, 2015
	Level 1		Level 2		Total
Description
Corporate bonds	$	—	$	31,761	$	31,761
Money market funds	21,338		—		21,338
Asset-backed securities	—		7,998		7,998
Commercial paper	—		5,992		5,992
U.S. treasury securities	—		4,001		4,001
Agency securities	—		1,998		1,998
Total	$	21,338	$	51,750	$	73,088
Included in cash and cash equivalents					$	21,338
Included in marketable securities					$	51,750

Schedule of Marketable Securities Classified by Contractual Maturity

The following table classifies our marketable securities by contractual maturity as of September 30, 2016 and December 31, 2015 (in thousands):



	September 30, 2016		December 31, 2015
Due in one year or less	$	133,758	$	29,414
Due after one year	71,139		22,336
Total	$	204,897	$	51,750

Schedule of Derivative Instruments on Consolidated Balance Sheets

The following tables present information about derivative instruments on our consolidated balance sheets as of September 30, 2016 and December 31, 2015 (in thousands):



	September 30, 2016
	Asset Derivatives			Liability Derivatives
Derivative Instrument	Balance Sheet Location	Fair Value (Level 2)		Balance Sheet Location	Fair Value (Level 2)
Foreign currency forward contracts	Other current assets	$	1,215	Accrued liabilities	$	1,688
Foreign currency forward contracts	Other assets	79		Other liabilities	330
Total		$	1,294		$	2,018



	December 31, 2015
	Asset Derivatives			Liability Derivatives
Derivative Instrument	Balance Sheet Location	Fair Value (Level 2)		Balance Sheet Location	Fair Value (Level 2)
Foreign currency forward contracts	Other current assets	$	408	Accrued liabilities	$	1,081
Total		$	408		$	1,081

Schedule of Derivative Instruments on Statement of Operations

The following table presents information about our derivative instruments on the statement of operations for the three and nine months ended September 30, 2016 and 2015 (in thousands):



		Three Months Ended September 30, 2016					Nine Months Ended September 30, 2016
Hedging Instrument	Location of Loss Reclassified into Earnings	Gain Recognized in AOCI		Loss Reclassified from AOCI into Earnings			Loss Recognized in AOCI			Loss Reclassified from AOCI into Earnings
Foreign currency forward contracts	Revenue, cost of revenue, operating expenses	$	207	$	(209	)	$	(218	)	$	(357	)
Total		$	207	$	(209	)	$	(218	)	$	(357	)



		Three Months Ended September 30, 2015					Nine Months Ended September 30, 2015
Hedging Instrument	Location of Gain (Loss) Reclassified into Earnings	Loss Recognized in AOCI			Gain (Loss) Reclassified from AOCI into Earnings		Loss Recognized in AOCI			Gain(Loss) Reclassified from AOCI into Earnings
Foreign currency forward contracts	Revenue, cost of revenue, operating expenses	$	(101	)	$	—	$	(101	)	$	—
Total		$	(101	)	$	—	$	(101	)	$	—

Property and Equipment (Tables)

Components of Property and Equipment

Property and equipment, net consists of the following (in thousands):



	September 30, 2016			December 31, 2015
Hosting equipment	$	31,514		$	26,920
Capitalized internal-use software	25,277			22,418
Leasehold improvements	23,167			19,577
Computer equipment and software	10,735			7,682
Furniture and fixtures	6,988			5,739
Construction in progress	5,937			4,157
Total	103,618			86,493
Less: accumulated depreciation and amortization	(46,111		)	(29,953		)
Property and equipment, net	$	57,507		$	56,540

Goodwill and Acquired Intangible Assets (Tables)

Summary of Changes in Carrying Amount of Goodwill

The changes in the carrying amount of goodwill for the nine months ended September 30, 2016 are as follows (in thousands):



Balance as of December 31, 2015	$	45,346
Goodwill adjustments	166
Foreign currency translation adjustments	359
Balance as of September 30, 2016	$	45,871

Summary of Intangible Assets Acquired

Acquired intangible assets subject to amortization as of September 30, 2016 and December 31, 2015 consist of the following (in thousands):



	As of September 30, 2016
	Cost		Accumulated Amortization			Foreign Currency Translation Adjustments			Net		Remaining Useful Life
											(In years)
Developed technology	$	14,000	$	(5,717	)	$	(135	)	$	8,148	3.1
Customer relationships	1,800		(934		)	(38		)	828		2.4
	$	15,800	$	(6,651	)	$	(173	)	$	8,976



	As of December 31, 2015
	Cost		Accumulated Amortization			Foreign Currency Translation Adjustments			Net		Remaining Useful Life
											(In years)
Developed technology	$	14,000	$	(3,133	)	$	(279	)	$	10,587	3.7
Customer relationships	1,800		(606		)	(78		)	1,117		3.1
	$	15,800	$	(3,739	)	$	(357	)	$	11,704

Summary of Estimated Future Amortization Expense

Estimated future amortization expense as of September 30, 2016 is as follows (in thousands):



Remainder of 2016	$	936
2017	3,330
2018	2,131
2019	2,067
2020	512
	$	8,976

Common Stock and Stockholders' Equity (Tables)

Summary of Stock Option and RSU Award Activity

The following table summarizes our stock option and RSU award activities for the nine months ended September 30, 2016 (in thousands, except per share information):



			Options Outstanding							RSUs Outstanding
	Shares Available for Grant		Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value		Outstanding RSUs		Weighted Average Grant Date Fair Value
							(In years)
Outstanding — January 1, 2016	4,323		10,778		$	11.94	7.96	$	156,262	6,417		$	19.54
Increase in authorized shares	5,716
Stock options granted	(1,363	)	1,363		23.82
RSUs granted	(3,719	)								3,719		20.41
Stock options exercised			(2,275	)	8.75
RSUs vested										(2,080	)	18.42
Unvested shares repurchased	38
Stock options forfeited or canceled	334		(334	)	16.70
RSUs forfeited or cancelled	491									(491	)	20.42
Outstanding — September 30, 2016	5,820		9,532		$	14.23	7.69	$	157,057	7,565		$	20.22

Net Loss Per Share (Tables)

Schedule of Computation of Basic and Diluted Net Loss per Share

The following table presents the calculation of basic and diluted net loss per share for the periods presented (in thousands, except per share data):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Net loss	$	(25,826	)	$	(18,924	)	$	(79,250	)	$	(59,575	)
Weighted-average shares used to compute basic and diluted net loss per share	94,085			87,777			92,274			83,536
Net loss per share, basic and diluted	$	(0.27	)	$	(0.22	)	$	(0.86	)	$	(0.71	)

Schedule of Anti-Dilutive Securities Excluded from the Diluted per Share Calculation

The anti-dilutive securities excluded from the shares used to calculate the diluted net loss per share are as follows (in thousands):



	As of September 30,
	2016	2015
Shares subject to outstanding common stock options and employee stock purchase plan	9,753	12,067
Restricted stock units	7,565	5,217
	17,318	17,284

Geographic Information (Tables)

Schedule of Revenue by Geographic Areas

The following table presents our revenue by geographic area, as determined based on the billing address of our customers (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
United States	$	43,587	$	31,388	$	121,222	$	81,094
EMEA	22,601		15,397		62,208		41,434
Other	14,529		8,876		39,946		23,594
Total	$	80,717	$	55,661	$	223,376	$	146,122

Schedule of Long-Lived Assets by Geographic Areas

The following table presents our long-lived assets by geographic area (in thousands):



	As of September 30, 2016		As of December 31, 2015
United States	$	24,637	$	26,696
EMEA	10,420		10,351
APAC	7,460		5,332
Total	$	42,517	$	42,379

Overview and Basis of Presentation - Additional Information (Details) (USD $)

Share data in Millions, except Per Share data, unless otherwise specified

9 Months Ended

3 Months Ended

9 Months Ended

1 Months Ended

Sep. 30, 2016

Sep. 30, 2015

Sep. 30, 2016

Customer Concentration Risk

Accounts Receivable

customer

Sep. 30, 2016

Customer Concentration Risk

Sales Revenue, Net

Customer

Sep. 30, 2015

Customer Concentration Risk

Sales Revenue, Net

Customer

Sep. 30, 2016

Customer Concentration Risk

Sales Revenue, Net

customer

Sep. 30, 2015

Customer Concentration Risk

Sales Revenue, Net

Customer

Mar. 31, 2015

Follow On Public Offering

Subsidiary, Sale of Stock [Line Items]

Year founded

2007

Reincorporated date

Apr. 30, 2009

Shares of common stock sold in initial public offering

8.8

Share price (usd per share)

$ 30.71

$ 22.75

Proceeds from follow-on public offering, net of issuance costs

$ 0

$ 190,110,000

$ 190,100,000

Underwriting discounts and commission on IPO

8,700,000

Offering expenses

$ 900,000

Number of customers

0

Percentage of total revenue or receivables, floor

10.00%

Business Combination - Additional Information (Details) (USD $)

In Millions, except Share data in Thousands, unless otherwise specified

0 Months Ended

9 Months Ended

Oct. 13, 2015

Sep. 30, 2016

RSUs Outstanding

Business Acquisition [Line Items]

RSUs issued pursuant to retention plan, in connection with the acquisition (in shares)

3,719

We Are Cloud, Inc

Business Acquisition [Line Items]

Percent of outstanding shares acquired

100.00%

Business acquisition, fair value of consideration transferred, cash

$ 46.4

Cash portion of fair value consideration transferred

7.0

Number of months consideration were held in escrow, up to

18 months

Number of months consideration held in escrow, to be released

12 months

Business acquisition, transaction costs incurred

1.0

Business acquisition, Increase to goodwill

$ 0.2

We Are Cloud, Inc |
RSUs Outstanding

Business Acquisition [Line Items]

RSUs issued pursuant to retention plan, in connection with the acquisition (in shares)

500

Vesting period

3 years

We Are Cloud, Inc |
Developed technology

Business Acquisition [Line Items]

Acquired intangible assets, useful lives

4 years 6 months

We Are Cloud, Inc |
Customer relationships

Business Acquisition [Line Items]

Acquired intangible assets, useful lives

4 years 6 months

Business Combination - Schedule of Purchase Price Allocation for Acquisitions (Details) (USD $)

In Thousands, unless otherwise specified

Sep. 30, 2016

Dec. 31, 2015

Oct. 13, 2015

We Are Cloud, Inc

Oct. 13, 2015

We Are Cloud, Inc

Developed technology

Oct. 13, 2015

We Are Cloud, Inc

Customer relationships

Business Acquisition [Line Items]

Net tangible assets acquired

$ 2,140

Net deferred tax liability recognized

(1,979)

Intangible assets

8,800

500

Goodwill

45,871

45,346

36,896

Total purchase price

$ 46,357

Financial Instruments - Financial Assets Measured at Fair Value on Recurring Basis (Details) (USD $)

In Thousands, unless otherwise specified

Sep. 30, 2016

Dec. 31, 2015

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Included in marketable securities

$ 204,897

$ 51,750

Fair Value Measurements, Recurring

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

209,738

73,088

Included in cash and cash equivalents

4,841

21,338

Included in marketable securities

204,897

51,750

Fair Value Measurements, Recurring |
Corporate bonds

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

118,443

31,761

Fair Value Measurements, Recurring |
Asset-backed securities

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

28,458

7,998

Fair Value Measurements, Recurring |
U.S. treasury securities

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

28,256

4,001

Fair Value Measurements, Recurring |
Commercial paper

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

19,239

5,992

Fair Value Measurements, Recurring |
Agency securities

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

10,501

1,998

Fair Value Measurements, Recurring |
Money market funds

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

4,841

21,338

Fair Value Measurements, Recurring |
Level 1

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

4,841

21,338

Fair Value Measurements, Recurring |
Level 1 |
Corporate bonds

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

0

Fair Value Measurements, Recurring |
Level 1 |
Asset-backed securities

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

0

Fair Value Measurements, Recurring |
Level 1 |
U.S. treasury securities

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

0

Fair Value Measurements, Recurring |
Level 1 |
Commercial paper

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

0

Fair Value Measurements, Recurring |
Level 1 |
Agency securities

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

0

Fair Value Measurements, Recurring |
Level 1 |
Money market funds

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

4,841

21,338

Fair Value Measurements, Recurring |
Level 2

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

204,897

51,750

Fair Value Measurements, Recurring |
Level 2 |
Corporate bonds

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

118,443

31,761

Fair Value Measurements, Recurring |
Level 2 |
Asset-backed securities

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

28,458

7,998

Fair Value Measurements, Recurring |
Level 2 |
U.S. treasury securities

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

28,256

4,001

Fair Value Measurements, Recurring |
Level 2 |
Commercial paper

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

19,239

5,992

Fair Value Measurements, Recurring |
Level 2 |
Agency securities

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

10,501

1,998

Fair Value Measurements, Recurring |
Level 2 |
Money market funds

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Total fair value of financial assets

$ 0

Financial Instruments - Additional Information (Details) (USD $)

9 Months Ended

12 Months Ended

Sep. 30, 2016

Dec. 31, 2015

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Transfer from fair value measurement level 1 to level 2

$ 0

Gross unrealized gains or losses for cash equivalent and marketable securities

0

Securities that were in an unrealized loss position for more than 12 months.

0

Foreign currency forward contracts

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Derivative, maturity

15 months

Unrealized gain related to effective portion of changes in fair value of foreign currency forward contracts

600,000

Reclassification from accumulated other comprehensive income into earnings over next 12 month

400,000

Notional value

88,500,000.0

60,800,000.0

Level 3

Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]

Securities within Level 3 of the fair value hierarchy

$ 0

Financial Instruments - Marketable Securities by Contractual Maturity (Details) (USD $)

In Thousands, unless otherwise specified

Sep. 30, 2016

Dec. 31, 2015

Fair Value Disclosures [Abstract]

Due in one year or less

$ 133,758

$ 29,414

Due after one year

71,139

22,336

Total

$ 204,897

$ 51,750

Financial Instruments - Schedule of Derivative Instruments on Consolidated Balance Sheets (Details) (Designated as Hedging Instrument, Level 2, USD $)

In Thousands, unless otherwise specified

Sep. 30, 2016

Dec. 31, 2015

Derivatives Fair Value [Line Items]

Asset Derivatives, Fair Value

$ 1,294

$ 408

Liability Derivatives, Fair Value

2,018

1,081

Foreign currency forward contracts |
Other current assets

Derivatives Fair Value [Line Items]

Asset Derivatives, Fair Value

1,215

408

Foreign currency forward contracts |
Other assets

Derivatives Fair Value [Line Items]

Asset Derivatives, Fair Value

79

Foreign currency forward contracts |
Accrued liabilities

Derivatives Fair Value [Line Items]

Liability Derivatives, Fair Value

1,688

1,081

Foreign currency forward contracts |
Other liabilities

Derivatives Fair Value [Line Items]

Liability Derivatives, Fair Value

$ 330

Financial Instruments - Schedule of Derivative Instruments on Statement of Operations (Details) (Designated as Hedging Instrument, USD $)

In Thousands, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2016

Sep. 30, 2015

Sep. 30, 2016

Sep. 30, 2015

Derivative Instruments Gain Loss [Line Items]

Gain Recognized in AOCI

$ 207

$ (101)

$ (218)

$ (101)

Loss Reclassified from AOCI into Earnings

(209)

0

(357)

0

Revenue, cost of revenue, operating expenses |
Foreign currency forward contracts

Derivative Instruments Gain Loss [Line Items]

Gain Recognized in AOCI

207

(101)

(218)

(101)

Loss Reclassified from AOCI into Earnings

$ (209)

$ 0

$ (357)

$ 0

Property and Equipment - Components of Property and Equipment (Details) (USD $)

In Thousands, unless otherwise specified

Sep. 30, 2016

Dec. 31, 2015

Property Plant And Equipment [Line Items]

Property and equipment, gross

$ 103,618

$ 86,493

Less: accumulated depreciation and amortization

(46,111)

(29,953)

Property and equipment, net

57,507

56,540

Hosting equipment

Property Plant And Equipment [Line Items]

Property and equipment, gross

31,514

26,920

Capitalized internal-use software

Property Plant And Equipment [Line Items]

Property and equipment, gross

25,277

22,418

Leasehold improvements

Property Plant And Equipment [Line Items]

Property and equipment, gross

23,167

19,577

Computer equipment and software

Property Plant And Equipment [Line Items]

Property and equipment, gross

10,735

7,682

Furniture and fixtures

Property Plant And Equipment [Line Items]

Property and equipment, gross

6,988

5,739

Construction in progress

Property Plant And Equipment [Line Items]

Property and equipment, gross

$ 5,937

$ 4,157

Property and Equipment - Additional Information (Details) (USD $)

In Millions, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2016

Sep. 30, 2015

Sep. 30, 2016

Sep. 30, 2015

Dec. 31, 2015

Property, Plant and Equipment [Abstract]

Depreciation expense

$ 4.1

$ 2.8

$ 11.8

$ 7.7

Amortization expense of capitalized internal-use software

1.8

1.6

5.2

4.6

Carrying value of capitalized internal-use software

15.0

14.1

Capitalized internal-use software included in construction in progress

$ 4.1

$ 1.5

Goodwill and Acquired Intangible Assets - Changes in Carrying Amount of Goodwill (Details) (USD $)

In Thousands, unless otherwise specified

9 Months Ended

Sep. 30, 2016

Goodwill [Roll Forward]

Balance as of December 31, 2015

$ 45,346

Goodwill adjustments

166

Foreign currency translation adjustments

359

Balance as of September 30, 2016

$ 45,871

Goodwill and Acquired Intangible Assets - Acquired Intangible Assets Subject to Amortization (Details) (USD $)

In Thousands, unless otherwise specified

9 Months Ended

12 Months Ended

Sep. 30, 2016

Dec. 31, 2015

Finite Lived Intangible Assets [Line Items]

Cost

$ 15,800

Accumulated Amortization

(6,651)

(3,739)

Foreign Currency Translation Adjustments

(173)

(357)

Net

8,976

11,704

Developed technology

Finite Lived Intangible Assets [Line Items]

Cost

14,000

Accumulated Amortization

(5,717)

(3,133)

Foreign Currency Translation Adjustments

(135)

(279)

Net

8,148

10,587

Remaining Useful Life

3 years 1 month 2 days

3 years 8 months 12 days

Customer relationships

Finite Lived Intangible Assets [Line Items]

Cost

1,800

Accumulated Amortization

(934)

(606)

Foreign Currency Translation Adjustments

(38)

(78)

Net

$ 828

$ 1,117

Remaining Useful Life

2 years 5 months 2 days

3 years 1 month 6 days

Goodwill and Acquired Intangible Assets - Additional Information (Details) (USD $)

In Millions, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2016

Sep. 30, 2015

Sep. 30, 2016

Sep. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Amortization expense

$ 1.0

$ 0.4

$ 2.9

$ 1.4

Goodwill and Acquired Intangible Assets - Estimated Future Amortization Expense (Details) (USD $)

In Thousands, unless otherwise specified

Sep. 30, 2016

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Remainder of 2016

$ 936

2017

3,330

2018

2,131

2019

2,067

2020

512

Net

$ 8,976

$ 11,704

Credit Facility - Additional Information (Details) (Silicon Valley Bank, USD $)

1 Months Ended

Jun. 30, 2015

Revolving Line of Credit

Line Of Credit Facility [Line Items]

Credit facility

$ 20,000,000.0

Percentage of interest rate above the prime rate

2.00%

Equipment Line of Credit

Line Of Credit Facility [Line Items]

Credit facility

$ 10,000,000.0

Credit facility interest rate

2.50%

Commitments and Contingencies - Additional Information (Details) (USD $)

In Millions, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2016

sqft

Sep. 30, 2015

Sep. 30, 2016

sqft

Sep. 30, 2015

Other Commitments [Line Items]

Rent expense

$ 2.6

$ 2.0

$ 7.2

$ 5.4

Square feet of additional office space

18,000

Total amount of rent to be paid

$ 4.6

Capital Lease Agreements

Other Commitments [Line Items]

Lease expiration date

Mar. 31, 2015

Common Stock and Stockholders' Equity - Additional Information (Details) (USD $)

In Millions, except Share data, unless otherwise specified

0 Months Ended

9 Months Ended

0 Months Ended

3 Months Ended

9 Months Ended

May 6, 2016

Sep. 30, 2016

Dec. 31, 2015

Sep. 30, 2016

2009 Stock Option and Grant Plan

Jan. 2, 2016

2014 Plan

Employee Stock Option

Sep. 30, 2016

2014 Plan

Employee Stock Option

Jan. 2, 2016

Employee Stock Purchase Plan

Sep. 30, 2016

Employee Stock Purchase Plan

Sep. 30, 2016

Employee Stock Purchase Plan

Class Of Stock [Line Items]

Common stock, shares authorized (in shares)

400,000,000

Common stock, par value (usd per share)

$ 0.01

Common stock, shares issued (in shares)

95,400,000

90,900,000

Common stock, shares outstanding (in shares)

94,900,000

90,300,000

Common stock shares outstanding, subject to repurchase (in shares)

100,000

300,000

Preferred stock, shares authorized (in shares)

10,000,000

Preferred stock, par value (usd per share)

$ 0.01

Preferred stock, shares issued (in shares)

0

Preferred stock, shares outstanding (in shares)

0

Percentage of purchase price of shares lower of the fair market value of common stock employees are able to purchase shares

85.00%

Common shares purchased (in shares)

300,000

Increase in authorized shares (in shares), shares

5,716,000

4,500,000

900,000

Shares of common stock available for issuance (in shares)

5,820,000

4,323,000

0

5,800,000

3,500,000

Stock options granted (in shares)

1,200,000

1,363,000

Share price (usd per share)

$ 30.71

Future period share-based compensation expense

$ 188.9

Future period share-based compensation expense, period to recognized

2 years 9 months 18 days

Shares outstanding as a result of early exercise of stock options and purchase of unvested stock awards (in shares)

100,000

300,000

Accrued liability for shares outstanding as a result of early exercise of stock options and purchase of unvested stock awards

$ 0.5

$ 1.0

Common Stock and Stockholders' Equity - Summary of Stock Option and RSU Award Activity (Details) (USD $)

In Thousands, except Share data, unless otherwise specified

0 Months Ended

9 Months Ended

12 Months Ended

May 6, 2016

Sep. 30, 2016

Dec. 31, 2015

Shares Available for Grant

Outstanding — January 1, 2016

4,323,000

Increase in authorized shares, shares

5,716,000

Stock options granted, shares

(1,363,000)

RSUs granted, shares

(3,719,000)

Unvested shares repurchased, shares

38,000

Stock options forfeited or canceled, shares

334,000

RSUs forfeited or canceled, shares

491,000

Outstanding — September 30, 2016

5,820,000

4,323,000

Number of Shares

Balance at the beginning of the period, shares

10,778,000

Stock options granted, shares

1,200,000

1,363,000

Stock options exercised, shares

(2,275,000)

Stock options forfeited or canceled, shares

(334,000)

Balance at the end of the period, shares

9,532,000

10,778,000

Weighted-Average Exercise Price

Balance at the beginning of the period (usd per share)

$ 11.94

Stock options granted (usd per share)

$ 23.82

Stock options exercised (usd per share)

$ 8.75

Stock options forfeited or canceled (usd per share)

$ 16.70

Balance at the end of the period (usd per share)

$ 14.23

$ 11.94

Weighted Average Remaining Contractual Term

7 years 8 months 9 days

7 years 11 months 16 days

Aggregate Intrinsic Value

Aggregate intrinsic value, beginning

$ 156,262

Aggregate intrinsic value, ending

$ 157,057

$ 156,262

RSUs Outstanding

Outstanding RSUs

Balance at the beginning of the period, shares

6,417,000

RSUs granted, shares

3,719,000

RSUs vested, shares

(2,080,000)

RSUs forfeited or canceled, shares

(491,000)

Balance at the end of the period, shares

7,565,000

Weighted-Average Grant Date Fair Value

Balance at the beginning of the period (usd per share)

$ 19.54

Weighted average grant date fair value, RSUs granted (usd per share)

$ 20.41

Weighted average grant date fair value, RSUs vested (usd per share)

$ 18.42

Weighted average grant date fair value, RSUs forfeited or canceled (usd per share)

$ 20.42

Balance at the end of the period (usd per share)

$ 20.22

Net Loss per Share - Computation of Basic and Diluted Net Loss per Share of Common Stock (Details) (USD $)

In Thousands, except Per Share data, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2016

Sep. 30, 2015

Sep. 30, 2016

Sep. 30, 2015

Earnings Per Share [Abstract]

Net loss

$ (25,826)

$ (18,924)

$ (79,250)

$ (59,575)

Weighted-average shares used to compute basic and diluted net loss per share

94,085

87,777

92,274

83,536

Net loss per share:

Basic and diluted (usd per share)

$ (0.27)

$ (0.22)

$ (0.86)

$ (0.71)

Net Loss per Share - Schedule of Anti-Dilutive Securities Excluded from the Diluted per Share Calculation (Details)

In Thousands, unless otherwise specified

9 Months Ended

Sep. 30, 2016

Sep. 30, 2015

Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]

Antidilutive securities excluded from computation of earnings per share amount (in shares)

17,318

17,284

Shares subject to outstanding common stock options and employee stock purchase plan

Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]

Antidilutive securities excluded from computation of earnings per share amount (in shares)

9,753

12,067

Restricted stock units

Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]

Antidilutive securities excluded from computation of earnings per share amount (in shares)

7,565

5,217

Income Taxes - Additional Information (Details) (USD $)

In Millions, unless otherwise specified

3 Months Ended

9 Months Ended

1 Months Ended

Sep. 30, 2016

Sep. 30, 2015

Sep. 30, 2016

Sep. 30, 2015

Mar. 31, 2016

Danish Tax Authority ("SKAT")

Sep. 30, 2016

Danish Tax Authority ("SKAT")

Income Tax Examination [Line Items]

Effective income tax rate, percent, less than

1.00%

2.00%

1.00%

Income tax examination, penalties and interest expense

$ 1.9

Income tax examination, liability from settlement

$ 0.9

Geographic Information - Additional Information (Details)

9 Months Ended

Sep. 30, 2016

segments

Segment Reporting [Abstract]

Number of reportable segments

1

Geographic Information - Schedule of Revenue by Geographic Areas (Details) (USD $)

In Thousands, unless otherwise specified

3 Months Ended

9 Months Ended

Sep. 30, 2016

Sep. 30, 2015

Sep. 30, 2016

Sep. 30, 2015

Revenues From External Customers And Long Lived Assets [Line Items]

Revenue

$ 80,717

$ 55,661

$ 223,376

$ 146,122

United States

Revenues From External Customers And Long Lived Assets [Line Items]

Revenue

43,587

31,388

121,222

81,094

EMEA

Revenues From External Customers And Long Lived Assets [Line Items]

Revenue

22,601

15,397

62,208

41,434

Other

Revenues From External Customers And Long Lived Assets [Line Items]

Revenue

$ 14,529

$ 8,876

$ 39,946

$ 23,594

Geographic Information - Schedule of Long-Lived Assets by Geographic Areas (Details) (USD $)

In Thousands, unless otherwise specified

Sep. 30, 2016

Dec. 31, 2015

Revenues From External Customers And Long Lived Assets [Line Items]

Long-lived assets

$ 42,517

$ 42,379

United States

Revenues From External Customers And Long Lived Assets [Line Items]

Long-lived assets

24,637

26,696

EMEA

Revenues From External Customers And Long Lived Assets [Line Items]

Long-lived assets

10,420

10,351

APAC

Revenues From External Customers And Long Lived Assets [Line Items]

Long-lived assets

$ 7,460

$ 5,332