Zoom filed to go public

Here are a few notable points I got from reading the S-1 by Zoom today:

  • Revenue grew more than 5 times from fiscal year ending 31 Jan 2017 (FY2017) to fiscal year ending 31 Jan 2019 (FY2019). Top line grew by more than 118% from FY2018 to FY2019. Gross profit was 81% in FY2019. Cost of Revenue as % of Rev continued to decline from 20.5% in FY2017 to 18.5% in FY2019
  • Operating income was positive for the first time in FY19 and made up 1.9% of revenue
  • As of January 31, 2019, remaining performance obligations was $311.7 million, with billed consideration of $125.8 million and unbilled consideration of $185.9 million. Zoom expected to recognize 67% of the remaining performance obligations (equivalent to roughly $209 million) in 2020. The average term for multi-year contracts is 2.4 years.
  • Customers that contribute more than $100,000 in annual revenue make up 30% of Zoom’s revenue in FY19 (about $99 million). There are 344 customers in this bucket as of January 31, 2019, compared to 143 a year before. On average, a customer in this bucket brought $288,000 in annual revenue to Zoom
  • Regarding customers with more than 10 employees, this segment made up 78% of Zoom’s revenue in FY19 or $257 million. With approximately 50,800 customers in this segment, each contributed on average $507 to Zoom. Customers with more than $100,000 in annual revenue contribution are a subset of customers with more than 10 employees
  • For the fiscal year ended January 31, 2019, greater than 50% of the Fortune 500 had at least one paid Zoom host, compared to only 4% that contributed more than $100,000 of revenue.
  • New customers accounted for 44% of the increase in revenue in FY19
  • 74% of FY19 revenue came from annual and multi-year subscriptions
  • Zoom operates in the Hosted / Cloud Voice and Unified Communications, Collaborative Applications and IP Telephony Lines markets. Estimated Total Addressable Market is $43.1 billion (by IDC)
  • 18% of FY19 revenue came from EMEA and APAC

A few notable customers:

  • Chan Zuckerberg Initiative: 100 Zoom Rooms
  • F5 Networks: 190 Zoom Rooms
  • National Australia Bank: 33,000+ users
  • Uber: 2,000 Zoom Rooms, 14 million Zoom minutes/month in 2018 (20,000 employees) and CAST >= 95
  • VMWare: 19,000 Zoom users and 41 million meeting minutes in January 2019 alone, by a million attendees, CSAT: 96%
  • Prior to 2014, BAYADA Home Health Care averaged 100 meetings a week. In 2018, the figure rose to 2,000 Zoom meetings a week

I have used the product extensively during my 2.5 years in the US, either in an academic or professional capacity. It’s great and easy to use. Zoom’s high CAST and impressive revenue growth indicate that my assessment of the tool is shared by a lot of users. That is a great sign for a growth business. In addition to the numbers, it’s crucial to have a great product that users love and trust.

Regarding the numbers, impressive revenue growth! Plus, only 18% of Zoom’s revenue came outside of the US and there is a lot of TAM to gain more ($330 million in revenue in a $43bn market). I won’t be surprised if Zoom continues its hot streak of revenue growth in the next 2-3 years and generate a lot of profit now that the company is already profitable. Further than that, I have no clue. The market Zoom is in is competitive with whales such as Cisco and Microsoft, in addition to many other competitors. I wish they had disclosed their total number of customers as it would have shed more light on the business.

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