Zoom Performs Better Than Expected as COVID-19 Keeps Workers Home
COVID-19 and China
Remote working. Image credit: Thomas Lefebvre/Unsplash

The coronavirus pandemic is exposing the dichotomy of the world’s tech economy. Thousands of businesses with outsized footprints in the real economy are being exposed to a huge rift while businesses such as Zoom (ZM:NASDAQ) ride a surge in remote working.

On March 4, 2020, Zoom announced its financial results for the quarter ended January 31, 2020.

“We strive to empower our customers to accomplish more with our video-first unified communications platform. This is evidenced by our strong performance in the fourth quarter as we delivered a unique combination of high total revenue growth of 78% at a scale of USD 188 million, GAAP income from operations of USD 11 million, non-GAAP income from operations of USD 38 million, and operating cash flow of USD 37 million. Our execution also drove 61% growth in the number of customers with more than 10 employees and 86% growth in the number of customers contributing more than USD 100K of TTM revenue,” said Eric S. Yuan, Founder and Chief Executive Officer of Zoom.


The total revenue for the fiscal year was USD 622.7 million, up 88% year-over-year. GAAP income from operations for the fiscal year was USD 12.7 million, compared to GAAP income from operations of USD 6.2 million for the fiscal year 2019. After adjusting for stock-based compensation expense and related payroll taxes, non-GAAP income from operations for the fiscal year was USD 88.7 million, up from USD 15.1 million for the fiscal year 2019. For the fiscal year, GAAP operating margin was 2.0% and non-GAAP operating margin was 14.2%.

Zoom’s GAAP net income attributable to common stockholders for the fiscal year was USD 21.7 million, or USD 0.09 per share, Non-GAAP net income for the fiscal year was USD 101.3 million. The non-GAAP weighted average share count has been adjusted to reflect the shares of Class A common stock issued in connection with the IPO, including the concurrent private placement, that is outstanding as of the end of the period as if they were outstanding as of the beginning of the period for comparability.

Cash Flow: 

Net cash provided by operating activities was USD 151.9 million for the fiscal year, compared to USD 51.3 million for the fiscal year 2019. Free cash flow was USD 113.8 million for the fiscal year, compared to USD 22.9 million for the fiscal year 2019.

Customer Metrics: 

Drivers of total revenue include acquiring new customers and expanding across existing customers. At the end of the fourth quarter of the fiscal year 2020, Zoom had:

  • Approximately 81,900 customers with more than 10 employees, up approximately 61% from the same quarter last fiscal year.
  • 641 customers contributing more than USD 100,000 in TTM revenue, up approximately 86% from the same quarter last fiscal year.
  • A TTM net dollar expansion rate in customers with more than 10 employees above 130% for the 7th consecutive quarter.

Zoom First Quarter Fiscal Year 2021: Total revenue is expected to be between USD 199.0 million and USD 201.0 million and non-GAAP income from operations is expected to be between USD 25.0 million and USD 27.0 million. Q1 non-GAAP diluted EPS is expected to be approximately USD 0.10 with approximately 297 million non-GAAP weighted average shares outstanding.

However, those financial outlooks were as of January 31, at which the COVID-19 had not yet evolved into pandemic worldwide.

As the outbreak of the COVID-19, people’s behavior has been reshaped, demand for software explodes as the virus keeps workers home. It could also accelerate business and government investments in digital initiatives.

During the US stock market meltdown on the 16th, the market value of Zoom was as high as USD 31.587 billion, compared with the beginning of the year, it had gone up 67.88% in three months.

However, some people in the industry are also cautious about Zoom ’s skyrocketing remote working concept and believe that, even according to the most optimistic expectations, the current market value still corresponds to 60 PE multiples and the valuation is too high.

In recent years, we have seen the emergence of newcomers in the domestic video conferencing market – DingTalk from Alibaba, Tencent Conference, FeiShu, and Welink of Huawei Cloud have all gradually entered the market. Although Zoom entered the domestic market as early as 2013, domestic and foreign countries have different software payment and usage habits, and the market share has not come out on top.

Therefore, from the perspective of industry customers, in the future, SMEs will become an important market for various SaaS video conference providers. From the perspective of the product model, many industry insiders believe that the current video conferences used by Chinese government bodies and large and medium-sized enterprises are still more traditional, so they rely more on hardware devices. However, with the cloudification of video conferencing, whether it is government, medium and large enterprises, or small enterprises, the future product model will also be an integration of software and hardware, and more inclined to be cloud-based.

Editor: Luke Sheehan

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