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Zendesk Inc (NYSE:ZEN)
Q4 2019 Earnings Call
Feb 6, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Zendesk Q4 and Full 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Marc Cabi. Thank you. Please go ahead, sir.

Marc Cabi -- Vice President Strategy, Head of Investor Relations

Thanks, Jason. Good afternoon everybody and thanks for joining us today. Welcome to our fourth quarter and full year 2019 earnings call. We are pleased to report our results. Joining me on the call today are Mikkel Svane, Founder, CEO and Chair of the Board and Elena Gomez, our Chief Financial Officer.

During the course of today's call, we may take [Phonetic] forward-looking statements such as statements regarding our future financial performance, product development, growth prospects, ability to attract and retain customers and ability to compete effectively. The assumptions, risks and factors that could affect our actual results are contained in our earnings press release and in the Risk Factors section of our prior subsequent filings with the Securities and Exchange Commission including our quarterly report on Form 10-Q for the quarter ended September 30, 2019 and our upcoming Annual Report on Form 10-K for the year ended December 31, 2019. 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 financial measures should be considered in addition to, not as a substitute for or in isolation from our GAAP financial information. You can find additional disclosures regarding these non-GAAP financial measures, including reconciliations with comparable GAAP financial measures in today's earnings press release, shareholder letter, and for certain non-GAAP financial measures for prior periods in the earnings press releases of those periods, all of which are available on our website.

With this brief introduction, I would like to turn the call over to Mikkel.

Mikkel Svane -- Chief Executive Officer, Founder

Thank you. Thank you for that introduction. All right. Thanks Marc and good afternoon everyone. We are entering 2020 in a strong position to become a multi-billion dollar revenue company. We ended the full year of 2019 with 36% revenue growth and we saw strong demand continue across our business. We are well on our way to crossing the $1 billion revenue mark this year.

We feel confident that our leadership in CRM innovation is fueling our growth globally. In 2019, we saw strong demand for the Zendesk Suite, which is our omnichannel customer service solution while we also grew our footprint in sales with our new Zendesk Sell product and in the broader CRM and customer experience market through our Sunshine platform.

We consider ourselves experts in making business software easy to try, easy to buy and easy to use. And we are bringing that expertise to the broader world of CRM and customer experience as we become a service first CRM company. In 2020, we plan to continue our investments in CRM innovation with a focus on powering every customer facing conversation and every customer facing touch point for our customers and helping businesses keep up with rapidly changing customer expectations. We are proud of our momentum in the enterprise and of our large business outside of the US. And our teams have celebrated great achievements in both areas, but we also believe we have an even bigger opportunity ahead of us. So thank you to all our customers, thank you to all our partners, thank you to the Zendesk teams for an amazing 2019. I am super-duper excited to share our biggest launches and all our new stuff for 2020 during our Zendesk Relate user conference in Miami next month under the sun. And I hope to see all of you there too.

So with that, Elena, over to you and share much more about our results.

Elena Gomez -- Chief Financial Officer

Sounds good. Thanks, Mikkel. We're entering 2020 with momentum, given our strong performance in 2019 and our accomplishments that extended our leadership in CRM innovation. For the full year 2019 we delivered $816 million of revenue, which reflects 36% growth year-over-year. We also delivered full year non-GAAP operating margin improvement of 270 basis points. These results reflect our commitment to driving high growth and scale, while investing in long-term growth initiatives.

Our growth over the past couple of years has been driven by favorable market dynamics, strong adoption of our omnichannel solutions and our continued move up market. At the end of 2019, our percentage of ARR from 100 seats -- from 100 plus agent seats, our proxy for enterprise, was 43%, up 3 points year-over-year. Our RPO at the end of 2019 was up 57% year-over-year with current RPO up 40% and long-term RPO up 132% year-over-year. These metrics highlight our success moving up market as we do larger, more strategic and longer-term engagements with our customers.

We expect market factors to continue to drive high demand for our customer experience solutions as organizations transform their businesses to serve their customers better. Over the past two years both enterprise companies and partners have been gravitating to work with us. We believe this is a part that -- we believe this is in part a result of our newly introduced platform capabilities which enable companies to build modern customer experience solutions natively on Zendesk.

In 2020 we are growing our investment to foster our move-up market with some key investments being made in our Sunshine CRM platform, Sunshine Conversations and Enterprise motions. In 2020, we intend to broaden our work with valued partners. These investments in turn should allow us to grow at sustained high growth rate over the next several years.

Now onto guidance. In 2020, we expect to exceed our previously stated goal of $1 billion of revenue. We're providing full-year 2020 guidance of $1.05 billion to $1.07 billion, which reflects 30% growth year-over-year at the midpoint. We're committed to delivering scale while investing for growth, with our guidance for full year 2020 non-GAAP operating income reflecting approximately 125 basis points of margin improvement year-over-year at the midpoint.

Longer term, as Mikkel said, we're building to be a multi-billion dollar revenue company and excited to be on this journey with you, our customers, our partners and all of our employees. Thank you. And now I'll turn the call back over to Marc.

Marc Cabi -- Vice President Strategy, Head of Investor Relations

Thanks, Elena. We're excited about our position as we enter 2020 with momentum. We're leading in CRM innovation as a service-first company -- CRM company and we're building Zendesk to become a multi-billion dollar revenue company over that long term.

March 4th in Miami, as Mikkel stated, we're hosting our investor and analyst event as part of Relate. It is our annual user conference. At this event, you'll be able to learn more about our customer experience solutions and our vision for the future. We hope you can make it. And please be sure to register for this event if you have not already or feel free to watch it -- watch out through our website if you can't make it.

I'd also like to spend a moment specifically talking about our full year 2020 free cash flow guidance. That range is $40 million to $50 million for the year. Embedded in this guidance is a plant to revise how we invoice our customers, the invoice cadence, that will have a one-time impact of delaying cash collections by up to one month and a similar impact to billings.

And with that, I'll turn the call back over to Jason who will set us up for Q&A.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Phil Winslow from Wells Fargo. Your line is open.

Philip Winslow -- Wells Fargo Securities -- Analyst

Oh, yeah, thanks guys for taking my question and congrats on the close of the year. Actually just wanted to focus on that last comment there that you made, Marc, about the change in, I guess, billings terms that's going to affect billings and I guess receivables too. Could you just sort of walk us through the mechanics of sort of what's changing, how that's going to affect items and just one follow-up to that?

Marc Cabi -- Vice President Strategy, Head of Investor Relations

So from the early days of Zendesk we invoice our customers 30 days prior to the end of their subscription renewal, which is -- has, in our view, created friction with customers around exactly when they renew. To create a better customer experience, we will be notifying our customers at 30 days that their subscription will renew and then actually invoice them on the day of their renewal. And so that will slide our collections presumably by up to 30 days as a result of that. And this is kind of consistent with industry practice and what most people are used to when they subscribe to SaaS types of software.

Philip Winslow -- Wells Fargo Securities -- Analyst

Got it. And then just one follow-up to that in terms of you clearly doubling down on some of the new -- the initiatives here, and it sounds like, particularly on the go-to-market side. Wondering if you could just walk us through sort of 2020 and sort of that growth versus incremental margin expansion framework that you talked about last May, sort of what's a little different about 2020 that [Indecipherable] quite doesn't fit in that old framework? Thanks.

Elena Gomez -- Chief Financial Officer

Yeah, I'll take that. So essentially as we -- so we always use our framework just, Phil, so you know as a starting point to begin the dialog. But we're constantly balancing growth and profitability as you know. And as we were reflecting on 2020 thinking about our launch of Sunshine last year more formally focusing on Enterprise, if you will, partners gravitating to us, we felt like this was an opportunity for us to lean in and invest. And so that's really why we departed from that. But there is no debate that we will continue to drive operating margin and always that's the starting point. So that's all I'd say about that.

Operator

Your next question comes from the line of Kirk Materne from Evercore ISI. Your line is open.

Kirk Materne -- Evercore ISI -- Analyst

Yes, thanks very much. I think each of you actually mentioned the word momentum in your prepared comments. So I was wondering if you could help maybe translate that into what you're seeing in the pipeline that makes you feel good about the momentum that is carrying through after a really solid fourth quarter whether that's the size and shape of deals, the nature of our multi-product deals. I don't know if there's anything you just want to call out on that front that might be helpful just to put some context around those comments. Thanks.

Marc Cabi -- Vice President Strategy, Head of Investor Relations

I'll start. I think what we're seeing is that our products are matured to a point where we're seeing acceptance by both enterprise customers, as well as interest from partners to do work with us, especially as we create the platform capabilities behind Sunshine where you can build natively on some of the Zendesk capabilities to create those better customer experience as we've seen growing interest there and we're very pleased with that. And then as you know, we made our acquisition of Smooch last year. And we think we're at the forefront of a new messaging paradigm. Our Sunshine Conversations messaging platform capabilities are being highly demanded. And also within our existing products messaging capabilities are being instituted which our customers are reacting positively to. I don't know if you want to add anything to that.

Mikkel Svane -- Chief Executive Officer, Founder

No -- definitely. We are seeing strong momentum across the board both [Indecipherable]. That's a lot of hedging around the world these days with different things going on in the macro economies, but like we saw a lot of -- we saw a lot of great commitments, great deals, great interest around our new platform initiatives, around our new products. And we feel that we are riding that -- riding that momentum of that interest into Q1 and 2020.

Kirk Materne -- Evercore ISI -- Analyst

Great. And then just one follow-up. Around Europe, you guys made some changes in leadership in Europe last year. As we head into 2020, I guess how do you see that market for you all shaping up just in terms of demand and then sort of the go-to-market operations that you have set up to kind of go after it? Thanks.

Mikkel Svane -- Chief Executive Officer, Founder

So I just want to say upfront here that I'm so proud of our team in Europe like they've done some amazing things, they had a great quarter and we can all really celebrate a lot of the achievements from the prior quarter. And like we talked last year about us identifying some unevenness in our regions and we started focusing on that and we feel a lot better about our progress there. We still feel that we have work to do, but I think that's also just an indicator of the opportunity that we have rather than anything else.

Kirk Materne -- Evercore ISI -- Analyst

Thanks very much.

Operator

Your next question comes from the line of Chris Merwin from Goldman Sachs. Your line is open.

Christopher Merwin -- Goldman Sachs -- Analyst

Hey. Thanks very much for taking my question. I know last quarter you called out some deals that slipped out of Q3. And I just wanted to ask, to the extent, all of those deals closed in the fourth quarter and it sounded like there were some pretty large enterprise deals as well. So anything you could say about order of magnitude there would be helpful. Thanks.

Elena Gomez -- Chief Financial Officer

Yeah, sure. Yeah. So we did talk about that and in fact those deals did close actually early in the quarter. So -- and you saw that through our billings reacceleration in Q4. So we're pleased to see that. Kudos to the sales team for really making that happen early in the quarter. As you know, that's important to us. So, yeah, really, really proud of the team.

Christopher Merwin -- Goldman Sachs -- Analyst

That's great. Thanks. And then maybe just a follow-up. I wanted to ask about explore and sell. I mean, as these products have been out in the market now a while and I know there's more of an enterprise focus now with these products, anything you can say about further traction there, to what degree that benefited net expansion? Looks like that metric was pretty stable in the quarter. But just curious any color you could share on those two products. Thanks.

Mikkel Svane -- Chief Executive Officer, Founder

Well, first of all we're [Phonetic] very, very -- very, very satisfied with both the adaptation and kind of the attachment to deals for our analytics product Explore. Like Explore is a true differentiator for us in the market. The ease of use for this product is unprecedented and is making a huge difference for our customers, while being an incredibly powerful platform. So we are very excited about our -- the adoption of Explore and you can expect to see more on that front next year -- this year, sorry, as we have continued to invest in that product.

Like our initial kind of year here which has been really, really fun and interesting, I would say we've done a lot of different things while of course working on all the back-end integration. So that sets us up for building even more cool stuff across the sales and customer service organizations and we're just very excited about that. Have a lot more to talk about it at Relate in March.

Elena Gomez -- Chief Financial Officer

Yeah. And with Sell, we've moved them into the main sales force now, so that was a new change we made starting this month, so that's good. I mean, that really gets more people selling Sell and more people selling our flagship products. So...

Christopher Merwin -- Goldman Sachs -- Analyst

Thank you.

Operator

Your next question comes from the line of Ken Wong from Guggenheim Securities. Your line is open.

Ken Wong -- Guggenheim Securities -- Analyst

Great. Thanks for taking my question, guys. The first question is for Elena. When I look at your revenue ranges I guess for the year and for Q1, it looks a little wider than I guess we're used to. Just wondering if there was kind of anything behind that that we should be aware of?

Elena Gomez -- Chief Financial Officer

No, I mean it was really just a reflection of us turning to the page to be a $1 billion company. If you sort of look at our size and scale now we just needed to widen that range. But our guidance philosophy hasn't changed in the way we think about, how we guide hasn't changed. It was just -- we felt like it was the right time to do it, given that we're a much larger scale now.

Ken Wong -- Guggenheim Securities -- Analyst

Got it. And then as a follow-up, as we think about billings next year, obviously there was a bit of a slip from three to -- Q3 to Q4. Should we expect that that returns to kind of maybe what we saw more in '18 or how -- any color there would be great.

Marc Cabi -- Vice President Strategy, Head of Investor Relations

Yeah, Ken, so calculated billings for us is a more difficult thing quarter to quarter because just only about half of our customers invoice annually. The rest are monthly or quarterly. And so, in any one quarter there will be variability. But in Q3 of last year, we specifically called out that some deals closed in early October. That's why we commented on billings. But normally within a range that will continue to occur.

Current RPO growth and long-term RPO growth are really good indicators of our contractual opportunities and obligations we enter into with our customers. So I'd really ask everyone to look at a combination of current RPO growth and calculated billings together, but not in isolation from each other.

Ken Wong -- Guggenheim Securities -- Analyst

Great. Thanks. Thanks for the help [Phonetic].

Marc Cabi -- Vice President Strategy, Head of Investor Relations

Sure.

Operator

Your next question comes from the line of Derrick Wood from Cowen and Company. Your line is open.

Derrick Wood -- Cowen and Company -- Analyst

Hey, everyone, and congrats on a good quarter. I guess, kind of a high-level question. I mean, given some of the unevenness you saw last year and some of the sales leadership structural changes you made, what signs have you seen for the impact on productivity as you went through Q4? I guess how are you feeling about how these structural changes set the stage for more consistent execution in 2020?

Elena Gomez -- Chief Financial Officer

Yeah. So I'm not sure the structural -- actually I guess that's right. We talked about the Velocity change and we're excited about that. Actually that's created a lot of focus. That's where the Sell team has been integrated. I think that's what you're referencing. So yeah, we're encouraged by the productivity out of the gate. So I think we feel good about that. I also think that along -- in addition to those changes, Mikkel talked about it just, we still have some work to do in terms of leadership and that's all around the globe. So we still got plenty of work to do, but we're encouraged by what we're seeing.

Derrick Wood -- Cowen and Company -- Analyst

Okay. And it does sound like part of the more aggressive investment in 2020 is leaning into the channel. Should we expect to see larger SIs start to formalize practices around Zendesk or is that something we can see in 2020 or is that something to think about more as a 2021 event.

Marc Cabi -- Vice President Strategy, Head of Investor Relations

I think we'll have more to say as we go through the year. I will say that we've already made some progress with our channel partners and with SIs, including the big ones like Accenture. We -- those relationships take some time to build. They have more things that they can use as part of their offerings to their customers. Now that we have platform capabilities to offer people like Accenture and Wipro and others to build on. So we're pretty excited about the early interest they've shown. And this year will be -- I think we've said this before, this is a year where by the fourth quarter, we would expect to see some contribution from the partners.

Derrick Wood -- Cowen and Company -- Analyst

Thank you.

Operator

Your next question comes from the line of Stan Zlotsky from Morgan Stanley. Your line is open.

Stan Zlotsky -- Morgan Stanley -- Analyst

Perfect. Thank you so much, guys. A couple of questions from my end. First one, and I've realized the imperfect nature of billings but for what it's worth, investors you focus on it. So when we do that -- when we think about the free cash flow overall the -- rather the changes to invoicing and especially that would presumably hit a little bit more in -- toward the back half of the year when you have a lot of the enterprise invoicing happening and cash collections, how should we think about the delta between revenue growth and billings growth next year as a result of these collection changes?

Marc Cabi -- Vice President Strategy, Head of Investor Relations

So I think you have to think about it as a 30-day delay in both our billings, as well as cash collections versus our book of business. That's kind of how I made my assumptions. Remember, we have some monthly customers in there. So those customers aren't impacted because they're on credit card. But that's kind of how you should think about building your model.

Stan Zlotsky -- Morgan Stanley -- Analyst

Got it. And when we look at net revenue retention, it stayed flat at 116%, which is slightly above your kind of the mid point of your expected range for net revenue retention of 110% to 120%. How are you thinking about that as we go through 2020?

Marc Cabi -- Vice President Strategy, Head of Investor Relations

That range is still valid for next year, 110% to 120%.

Stan Zlotsky -- Morgan Stanley -- Analyst

Okay, perfect. All right. Thanks guys.

Operator

Your next question comes from the line of Brent Bracelin from Piper Sandler. Your line is open.

Brent Bracelin -- Piper Sandler -- Analyst

Thank you. I had one question and one follow-up. The question really here is around the Zendesk Suite. If I look at that adoption, 6,000 plus customers in the first kind of 18 months here. That's still a relatively small portion of the installed base. Now that you kind of have some data behind you, what are the things you're doing in 2020 to try to accelerate kind of cross sell? Any color there? And then again, one quick follow-up.

Mikkel Svane -- Chief Executive Officer, Founder

I just want to say that I don't think -- I don't believe that's a relatively small part, like this is -- like these customers are going all in on the customer experience and like. That takes courage and it takes like -- it takes more effort than just like going in a single channel. So these are customers that are really forward-thinking, ahead of the curve and bringing all these channels into their customer service and customer experience operations. So we actually -- like we actually believe that we've been -- like the adoption has been -- we are very excited about the adoption. Let me put it like that. That doesn't mean we still have a tremendous amount of opportunity and this is also something where we believe we have a lot more innovation to bring to the table and where we will talk a lot more about it also in March under the sun in Miami, which we look very much forward to.

Elena Gomez -- Chief Financial Officer

Yeah, the only thing I would add is that we continue to start with that as our kind of opening. It's what the sales team to fall to first. And we're continuing to see a lot of just early -- early success in that. The average deal size, obviously, there is much higher. So even though it may appear like it's a small number, it is really driving some growth for us.

Brent Bracelin -- Piper Sandler -- Analyst

Good. And then just a follow-up, if I look at the growth trends by geo, certainly very encouraging to see the reacceleration in EMEA. But that said, APAC did get actually even softer this quarter than last quarter. Anything to call out there that could drive some improvement in 2020 and any color on APAC and what happened there would be helpful. Thanks.

Elena Gomez -- Chief Financial Officer

Yeah, I mean -- I think Mikkel said it earlier, there is nothing more to say there other than that we're going to continue to drive focus on getting the right leadership in both of our regions. And I think in both EMEA and APAC, there's always going to be in a portfolio of countries, some countries that do better than others. But there is nothing alarming there at the moment.

Mikkel Svane -- Chief Executive Officer, Founder

And I, maybe just want to add to that, like even though their numbers doesn't look maybe that great for the quarter, they did achieve some very important things for us that bode very well for how they set up for Q1 and 2020.

Brent Bracelin -- Piper Sandler -- Analyst

Okay, great. Thank you.

Operator

Your next question comes from the line of David Hynes from Canaccord. Your line is open.

DJ Hynes -- Canaccord Genuity -- Analyst

Hey. Thanks guys. Congrats on the results. I have two questions, one for Mikkel and one for Elena. So maybe first for Mikkel. When I think of these customer experience or voice of the customer platforms, right, firms like Medallia and Qualtrics and the like, it seems like a naturally adjacent effort to what you provide, right. You guys get access to tons of customer experience data. So a few quick questions there. So first, do you agree with that view? Second, what do those vendors do that you can't? And third is that an area that makes sense for Zendesk to have formalized products at some point?

Mikkel Svane -- Chief Executive Officer, Founder

Well, yeah, it's super interesting. I think that a big part of the customer experience and providing great customer experience is kind of getting all these data points about expectations and actual experience and sentiment and all these different things. And of course we're super interested in it. A lot of our customers are already kind of doing a lot of these things around the Zendesk platform to ensure that we help them get all these data points. And so -- and we do have integration with a lot of the providers in the market and working with a lot of them. So, yes, we are definitely -- it's definitely super interesting for us. And we do some things around these things, especially around measuring NPS et cetera, et cetera. So we have various components and various part of the solution. And -- but this is of course an area we continue to be to look into and then to invest in.

DJ Hynes -- Canaccord Genuity -- Analyst

Yeah. Okay, makes sense. And then, Elena, short-term IPO exiting 2018 gave you about 40% coverage into 2019 revenue. If I do the same math on the midpoint of 2020 guidance, I get about 43% coverage today, which leads me to believe there is some cushion in the guidance. What are the factors that would cause that ratio to change?

Elena Gomez -- Chief Financial Officer

We really haven't -- I would just start by saying we haven't really changed our guidance philosophy and we tend to be, as you know, back-end loaded on Enterprise. So we don't -- I use that as sort of my room for upside down the road.

DJ Hynes -- Canaccord Genuity -- Analyst

Yeah.

Elena Gomez -- Chief Financial Officer

And Q1 tends to be a more SMB oriented quarter. So nothing has really changed. I think it's really about just being thoughtful about the guidance there.

DJ Hynes -- Canaccord Genuity -- Analyst

Yeah. Perfect. Okay, thanks guys.

Operator

Your next question comes from the line of Brad Sills from Bank of America. Your line is open.

Brad Sills -- Bank of America Merrill Lynch -- Analyst

Hey guys. Thanks for taking my question. Just one on the focus on partners and go-to-market. Is this primarily -- if all goes well, and indications are that it will in developing the global SI channel, is this more of a play to kind of get those bigger expansion deals or is it more about Sunshine and getting partners to kind of build some pre-build solutions that could be repeatable? I assume it's probably both. But any color on just kind of where you could see some real success as you invest more in the partner channel.

Mikkel Svane -- Chief Executive Officer, Founder

[Indecipherable] I think about it from a number of different angles and top of mind for me is helping everybody who is part of the equation have been more successful, making sure they get the full value of the products, that they gated anchored [Phonetic] really well and really kind of get value from the product and work with us as we work with our customers on it. At the same time it's really about us getting our small bandwidth in the market rather than having to face all our customers ourselves and we can go into partners, it goes with tremendous amount of credibility. And especially in the markets where it's already working really well for us, like we have validation of that. It's a bit completely different play for us. So I would say from my perspective, these are the two things top of mind.

Elena Gomez -- Chief Financial Officer

Yeah. No -- I think you are right. I also think that they can bring us into deals that we may be otherwise won't have known because they are working with a bunch of customers. And with Sunshine, it just gives us an opportunity to extend or someone said it earlier, create a practice around Zendesk which is kind of where we're headed.

Brad Sills -- Bank of America Merrill Lynch -- Analyst

Got it, thanks. And then just to clarify on some of the comments on Europe and Asia and the international subsidiaries. It sounds like that's still a focus on getting some more senior folks in there. Could we see those geographies outpace North America if all goes well there or how are you thinking about that?

Elena Gomez -- Chief Financial Officer

I want to call the ball on that. So obviously we view international broadly as a tremendous opportunity and frankly as an advantage for us, right. Half of our footprint continues to be outside the US and continuing to grow. So I won't individually call that, but it is an opportunity for us.

Brad Sills -- Bank of America Merrill Lynch -- Analyst

Great. Thanks, guys.

Operator

Your next question comes from the line of Alex Zukin from RBC. Your line is open.

Alex Zukin -- RBC Capital Markets -- Analyst

Hey guys. Thanks for taking my question. So just maybe two quick ones for me. So you saw some really strong current RPO and current RPO bookings growth and those growth rates were both ahead of billings and revenue growth? So maybe can you talk about the performance in the quarter of the Velocity business versus the Enterprise business? And also if you stack -- if you could stack rank from a growth perspective, the biggest drivers you see for tailwinds in 2020 between call it Sell, Sunshine and Conversations.

Marc Cabi -- Vice President Strategy, Head of Investor Relations

Yes, I think if you were to look at the differential in growth rates for current RPO versus calculated billings, part of it comes from the fact that our SMB customers that may be month to month, our transactional customers that may be month to month, don't really participate in the RPO number. And so that there is a differential there between our accounts served by our territory model where their growth rates are a little bit faster than our SMB business. But that's not a huge difference, but there are differences in growth rates between those two businesses. And obviously the Enterprise has an opportunity to grow faster, as we continue to get larger and larger deals.

Then the second part of your question.

Elena Gomez -- Chief Financial Officer

Stack rank products.

Marc Cabi -- Vice President Strategy, Head of Investor Relations

Stack rank products, from my point of view, I think we have lots of opportunities around continuing to move our core products up market, but then platform and Sunshine Conversations are two big ones. Sunshine Conversations, the platform capabilities around messaging, I think are going to be an area of focus in 2020 for us. And lots of customer demand to learn more about how they incorporate messaging into their business models.

Alex Zukin -- RBC Capital Markets -- Analyst

Got it. And then maybe just on a financial question. Can you maybe just give us a quantification on the magnitude of impact on free cash flow from some of the changes in contracting terms? Is it a $20 million, $30 million kind of headwind in terms of the way that you give guidance for the year?

Marc Cabi -- Vice President Strategy, Head of Investor Relations

So I think that it's about -- we will lose about 30 days' worth -- at most 30 days' worth the collections. So I may ask you guys to do your math based on the book of business we have, but that's kind of how you should think about it.

Alex Zukin -- RBC Capital Markets -- Analyst

Got it. Thank you, guys.

Operator

Your next question comes from the line of Koji Ikeda from Oppenheimer. Your line is open.

Koji Ikeda -- Oppenheimer -- Analyst

Thanks for taking my questions and nice quarter. Had a question here on Sunshine. So it sounds like the platform is becoming more and more of the customer conversation, especially in the up market. I guess, could you talk a little bit about the customer referenceability of the Sunshine platform today versus maybe a year ago? And given that two of the four pieces of the Sunshine platform are still in early access, are you seeing some pent-up demand building for the full platform among the customers and prospects are just maybe just waiting for those last two pieces to become GA?

Mikkel Svane -- Chief Executive Officer, Founder

[Indecipherable] It's been an amazing year for us on our Sunshine journey and I think you're touching on something with everything you mentioned here. And that's also why we are very excited to talk a lot more about this when we get under the sun in Miami in March because we have more to talk about at that point around these things. But it's been -- I just want to say it's been a remarkable year. It's a true transition for the Company. It's a new chapter for us and we are excited to talk much more about it and all of the work we've been doing with customers over the last year.

Marc Cabi -- Vice President Strategy, Head of Investor Relations

I just want to put one emphasis on that comment you said where it's moving us up market. It's also serving our mid-market customers as well. And you'll see some of the examples of that at Relate. So companies in the mid-market size range are really finding value from our platform capabilities.

Koji Ikeda -- Oppenheimer -- Analyst

Great, thanks for taking my questions.

Operator

Your next question comes from the line of Steve Koenig from Wedbush Securities. Your line is open.

Steve Koenig -- Wedbush Securities -- Analyst

Great. Hey, thanks for taking my questions. I'll add my congratulations on the quarter as well. Just my first question. I realize the old metrics don't really work that well with Suite. I'm wondering with regards to Suite and Sell, are there any proof points or evidence you can give us to kind of gauge your progress in your journey to become the service for CRM provider?

Marc Cabi -- Vice President Strategy, Head of Investor Relations

I think our customer retention rates are a good example of why our efforts are successful. We've seen kind of customers that sign on what the Suite, customers that have adopted omnichannel become strong advocates of that method of doing business with their customers and they become sticky customers, as a result, to us. So I think that's the proof point for me is that if a customer is really interested in building a better customer experience, adopting omnichannel, making sure all these relevant channels are connected with their end consumer, we provide a really good outcome for them. And -- so that's kind of how I would view the proof point.

Mikkel Svane -- Chief Executive Officer, Founder

Yeah. I don't think we have kind of created data points there.

Marc Cabi -- Vice President Strategy, Head of Investor Relations

No data points, yeah.

Steve Koenig -- Wedbush Securities -- Analyst

Okay. Thanks. For the follow-up, maybe just can you give us some more specifics on how you're going to spend the ramp in investments to lean in that Elena was talking about?

Elena Gomez -- Chief Financial Officer

Yeah, I mean I think it's all the things that we outlined on the script. But it's really around Sunshine and Sunshine Conversations, investment in enterprise, investment in partners, continuing to innovate and you'll hear more about some of our products in Miami. But broadly speaking, definitely a big focus on go-to-market.

Steve Koenig -- Wedbush Securities -- Analyst

Okay, great. Well, thank you very much.

Operator

Your next question comes from the line of Jeff Van Rhee from Craig-Hallum. Your line is open.

Jeff Van Rhee -- Craig-Hallum Capital Group -- Analyst

Great. Thanks, guys. Just one, as you consider to move sort of the higher end of the market and the push-up market, what are the keys to improving your relevance and competitive positioning, specifically up-market? And I'm thinking of sort of how do you prioritize the things that are you think can be most impactful to improving your position up-market, whether it be the partners/distribution, whether it's product features, capabilities? Just specifically, maybe a little focus on up-market competitive positioning and where you're going to really push. I think you touched a little on Sunshine, but emphasized that wasn't just up-market. So I'm just specifically asking about up-market.

Mikkel Svane -- Chief Executive Officer, Founder

So, first and foremost, I think it's a lot of different things here. There is a lot of different areas of the business where our execution with partners, with our own services, with our innovation, etc., etc., our partner system where like -- where we need to execute well to continue our success in the enterprise.

I do want to say that like a lot of our differentiation is in the agility and the ease of use of the product here, that we can help our customers get results really, really quick, that we can help them change really, really quick, that we can -- there is nothing that they put in front -- that they put in front of themselves that we cannot solve and help them get results. I think that's still incredibly important for our customers because they all live in an area where customer expectations are changing so quickly. So the agility, the maternity [Phonetic] of the platform that the new platform Sunshine lives in AWS where they are already moving, replatforming for where they use all the other development tools that is natively accessible there lives all in there. These are very strong arguments for kind of the modern CIO, for the modern enterprise today that want to move fast, that don't want the boat anchor of the big legacy enterprise system that slows them down and make every change take forever. So that's a big part of our DNA, that's a big part of what we are and that's a big part of why we are leading in the enterprise.

Jeff Van Rhee -- Craig-Hallum Capital Group -- Analyst

Got it. Thank you.

Operator

Your next question comes from the line of Tom Roderick from Stifel. Your line is open.

Parker Lane -- Stifel -- Analyst

Hi. It's actually Parker Lane in for Tom. Thanks for taking my question. So, in your prepared remarks, you referenced a lot of the developments in your self service capabilities, whether it'd be Guide or Answer Bot or Gather. Just wondering if you could talk about the penetration rates of those self-service tools today and how the demand really compares among the SMB and mid-market customers versus enterprise customers for the solutions today? Thanks.

Mikkel Svane -- Chief Executive Officer, Founder

I don't have anything in my -- I don't have any data points of kind of enterprise versus mid-market versus -- and mid-SSD adoption of these things. I do want to say that like our self-service product or Guide product et cetera, the Answer Bot capabilities, all of these things are incredibly successful and like have become core tenants of what we're doing. It is -- and if we look at ourselves, it is how we want to be serviced ultimately by helping ourselves.

And so like thinking self service as a whole, as an equal citizen in your -- how you think about your customer experience is critically important for business today and they're doing really, really well.

Marc Cabi -- Vice President Strategy, Head of Investor Relations

Yeah, I mean I think the one way you might size it is two, three years ago we would have told you that 90% of our revenues or slightly above 90% of our revenues were coming from support. Today that's come down to the 70%s. And things like Guide and Answer Bot and some of the other products that we've launched have filled in that broader opportunity of revenue. So it's -- I would say that those product categories are growing faster than the average as a result.

Parker Lane -- Stifel -- Analyst

Thank you.

Operator

Your next question comes from the line of Jennifer Lowe from UBS. Your line is open.

Rakesh Kumar -- UBS -- Analyst

Hi, this is the Rakesh Kumar sitting in Jenn Lowe. It seems like there are a lot more new products that are being put in a sales rep's kitty from core Zendesk product as Sell, Explore, Sunshine Conversations platform. Do you think the sales teams are trained enough to carry a larger product basket? And also, do you have any specialists [Indecipherable] for some of the newer products?

Elena Gomez -- Chief Financial Officer

Yeah. So we definitely invest a lot in enablement of our sales reps every year. And you're right and Marc gave that data point about how we've evolved from a single-product company to a multi-product company. So with that comes a different level of enablement. And in some cases we will use a specialist, but it's not as common because we believe that with the right training and enablement we can penetrate and still have healthy expansion rates. But to the extent we find ourselves in situations where there is more complex use cases, we may consider that.

Rakesh Kumar -- UBS -- Analyst

Great. And then I have a follow-up. In 2020 there is a greater focus on broadening the platform and increasing the monetization of the platform. And, Marc just talked about around 30% of the revenue comes from other products outside of the floor. So should we expect any material contribution from the platform in 2020?

Elena Gomez -- Chief Financial Officer

We will talk more about the platform in Miami. But definitely, it's considered in our guidance here. So it will -- we will begin to monetize Sunshine in 2020.

Rakesh Kumar -- UBS -- Analyst

Got it. Thank you.

Operator

There are no further questions at this time. I'll now turn the call back to the presenters.

Marc Cabi -- Vice President Strategy, Head of Investor Relations

Well, we'd like to thank you for joining us for our 2019 Q4 call. Hopefully we'll see in Miami, if not, we'll see you on our next call in 90 days.

Mikkel Svane -- Chief Executive Officer, Founder

Thanks.

Marc Cabi -- Vice President Strategy, Head of Investor Relations

Thank you.

Operator

[Operator Closing Remarks]

Duration: 45 minutes

Call participants:

Marc Cabi -- Vice President Strategy, Head of Investor Relations

Mikkel Svane -- Chief Executive Officer, Founder

Elena Gomez -- Chief Financial Officer

Philip Winslow -- Wells Fargo Securities -- Analyst

Kirk Materne -- Evercore ISI -- Analyst

Christopher Merwin -- Goldman Sachs -- Analyst

Ken Wong -- Guggenheim Securities -- Analyst

Derrick Wood -- Cowen and Company -- Analyst

Stan Zlotsky -- Morgan Stanley -- Analyst

Brent Bracelin -- Piper Sandler -- Analyst

DJ Hynes -- Canaccord Genuity -- Analyst

Brad Sills -- Bank of America Merrill Lynch -- Analyst

Alex Zukin -- RBC Capital Markets -- Analyst

Koji Ikeda -- Oppenheimer -- Analyst

Steve Koenig -- Wedbush Securities -- Analyst

Jeff Van Rhee -- Craig-Hallum Capital Group -- Analyst

Parker Lane -- Stifel -- Analyst

Rakesh Kumar -- UBS -- Analyst

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