Zoom Communications, Inc 10-Q for FY2021 Q2

Zoom Communications, Inc. (ZM)

10-Q 2020-09-03 For: 2020-07-31

Added on April 07, 2026

About this 10-Q

Zoom Communications, Inc filed this 10-Q on September 3, 2020, covering the quarter ended July 31, 2020 (FY2021 Q2).

Headline figures

Quarter ended July 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $663.52M; up 355.0% from $145.83M a year earlier
Net income: $185.99M; up 3256.6% from net income of $5.54M a year earlier
Diluted EPS: $0.63; up 3050.0% from $0.02 a year earlier

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Delaware			61-1648780
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)


		Page
	PART I – Financial Information	4

Item 1.	Financial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets as of July 31, 2020 and January 31, 2020	4
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended July 31, 2020 and 2019	5
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended July 31, 2020 and 2019	6
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Three and Six Months Ended July 31, 2020 and 2019	7
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 31, 2020 and 2019	10
	Notes to Condensed Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	37

	PART II – Other Information	38

Item 1.	Legal Proceedings	38
Item 1A	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 3.	Defaults Upon Senior Securities	67
Item 4.	Mine Safety Disclosures	67
Item 5.	Other Information	67
Item 6.	Exhibits	68
	Signatures	70


	As of
	July 31, 2020		January 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	748,944	$	283,134
Marketable securities	732,995		572,060
Accounts receivable, net of allowances of $26,161 and $7,634 as of July 31, 2020 and January 31, 2020, respectively	295,330		120,435
Deferred contract acquisition costs, current	111,545		44,885
Prepaid expenses and other current assets	343,288		75,008
Total current assets	2,232,102		1,095,522
Deferred contract acquisition costs, noncurrent	152,595		46,245
Property and equipment, net	91,291		57,138
Operating lease right-of-use assets	65,295		68,608
Goodwill	24,340		—
Other assets, noncurrent	59,318		22,332
Total assets	$	2,624,941	$	1,289,845
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	12,615	$	1,596
Accrued expenses and other current liabilities	560,188		122,692
Deferred revenue, current	714,523		209,542
Total current liabilities	1,287,326		333,830
Deferred revenue, noncurrent	28,090		20,994
Operating lease liabilities, noncurrent	63,105		64,792
Other liabilities, noncurrent	47,608		36,286
Total liabilities	1,426,129		455,902
Commitments and contingencies (Note 7)

Stockholders’ equity:
Preferred stock, $0.001 par value per share, 200,000,000 shares authorized as of July 31, 2020 and January 31, 2020; zero shares issued and outstanding as of July 31, 2020 and January 31, 2020	—		—
Common stock, $0.001 par value per share, 2,000,000,000 Class A shares authorized as of July 31, 2020 and January 31, 2020; 194,145,480 and 123,391,114 shares issued and outstanding as of July 31, 2020 and January 31, 2020, respectively; 300,000,000 Class B shares authorized as of July 31, 2020 and January 31, 2020; 90,197,239 and 155,336,747 shares issued and outstanding as of July 31, 2020 and January 31, 2020, respectively	283		277
Additional paid-in capital	982,541		832,705
Accumulated other comprehensive income	2,772		809
Retained earnings	213,216		152
Total stockholders’ equity	1,198,812		833,943
Total liabilities and stockholders’ equity	$	2,624,941	$	1,289,845


	Three Months Ended July 31,						Six Months Ended July 31,
	2020		2019		2020		2019
Revenue	$	663,520	$	145,826	$	991,687	$	267,814
Cost of revenue	192,271		27,900		295,978		52,004
Gross profit	471,249		117,926		695,709		215,810
Operating expenses:
Research and development	42,734		15,054		69,123		28,837
Sales and marketing	159,173		79,652		280,729		143,693
General and administrative	81,238		20,955		134,368		39,458
Total operating expenses	283,145		115,661		484,220		211,988
Income from operations	188,104		2,265		211,489		3,822
Interest income and other, net	2,081		4,492		7,871		5,465

Net income before provision for income taxes	190,185		6,757		219,360		9,287
Provision for income taxes	4,196		1,216		6,296		1,532
Net income	185,989		5,541		213,064		7,755
Undistributed earnings attributable to participating securities	(247)		(20)		(305)		(2,794)
Net income attributable to common stockholders	$	185,742	$	5,521	$	212,759	$	4,961
Net income per share attributable to common stockholders:
Basic	$	0.66	$	0.02	$	0.76	$	0.03
Diluted	$	0.63	$	0.02	$	0.72	$	0.02
Weighted-average shares used in computing net income per share attributable to common stockholders:
Basic	282,850,805		271,813,141		281,394,901		192,130,510
Diluted	297,162,309		292,185,665		296,408,229		215,774,619


	Three Months Ended July 31,						Six Months Ended July 31,
	2020		2019		2020		2019
Net income	$	185,989	$	5,541	$	213,064	$	7,755
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale marketable securities, net of tax	885		(76)		1,963		67
Comprehensive income	$	186,874	$	5,465	$	215,027	$	7,822


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Three Months Ended July 31, 2020
	Convertible Preferred Stock				Common Stock						Additional Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings	Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance as of April 30, 2020	—	$	—	281,992,011	$	280	$	872,237	$	1,887	$	27,227	$	901,631
Issuance of common stock upon exercise of stock options	—	—		1,597,761	2		7,954		—		—		7,956
Issuance of common stock upon release of restricted stock units	—	—		147,023	—		—		—		—		—
Charitable donation of common stock	—	—		—	—		22,312		—		—		22,312
Issuance of common stock for employee stock purchase plan	—	—		605,924	1		20,759		—		—		20,760
Stock-based compensation expense	—	—		—	—		59,279		—		—		59,279
Other comprehensive income	—	—		—	—		—		885		—		885
Net income	—	—		—	—		—		—		185,989		185,989
Balance as of July 31, 2020	—	$	—	284,342,719	$	283	$	982,541	$	2,772	$	213,216	$	1,198,812


	Three Months Ended July 31, 2019
	Convertible Preferred Stock				Common Stock						Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit	Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance as of April 30, 2019	—	$	—	272,336,862	$	271	$	742,388	$	8	$	(22,939)	$	719,728
Issuance of common stock upon exercise of stock options	—	—		649,305	1		420		—		—		421
Issuance of common stock reserved for charitable donation	—	—		500,000	—		—		—		—		—
Stock-based compensation expense	—	—		—	—		18,182		—		—		18,182
Other comprehensive loss	—	—		—	—		—		(76)		—		(76)
Net income	—	—		—	—		—		—		5,541		5,541
Balance as of July 31, 2019	—	$	—	273,486,167	$	272	$	760,990	$	(68)	$	(17,398)	$	743,796


	Six Months Ended July 31, 2020
	Convertible Preferred Stock				Common Stock						Additional Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings	Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance as of January 31, 2020	—	$	—	278,731,143	$	277	$	832,705	$	809	$	152	$	833,943
Issuance of common stock upon exercise of stock options	—	—		4,830,752	5		17,676		—		—		17,681
Issuance of common stock upon release of restricted stock units	—	—		174,900	—		—		—		—		—
Charitable donation of common stock	—	—		—	—		23,312		—		—		23,312
Issuance of common stock for employee stock purchase plan	—	—		605,924	1		20,759		—		—		20,760
Stock-based compensation expense	—	—		—	—		88,089		—		—		88,089
Other comprehensive income	—	—		—	—		—		1,963		—		1,963
Net income	—	—		—	—		—		—		213,064		213,064
Balance as of July 31, 2020	—	$	—	284,342,719	$	283	$	982,541	$	2,772	$	213,216	$	1,198,812


	Six Months Ended July 31, 2019
	Convertible Preferred Stock				Common Stock						Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit	Total Stockholders’ (Deficit) Equity
	Shares	Amount		Shares	Amount
Balance as of January 31, 2019	152,665,804	$	159,552	90,327,435	$	89	$	17,760	$	(135)	$	(25,153)	$	(7,439)
Conversion of convertible preferred stock to common stock upon initial public offering	(152,665,804)	(159,552)		152,665,804	153		159,399		—		—		159,552
Conversion of convertible promissory notes and accrued interest to common stock upon initial public offering	—	—		426,223	—		15,344		—		—		15,344
Issuance of common stock upon initial public offering and private placement, net of underwriting discounts and commissions and other offering costs	—	—		15,819,646	16		541,483		—		—		541,499
Issuance of common stock upon exercise of stock options, net of repurchases	—	—		13,747,059	14		2,160		—		—		2,174
Issuance of common stock reserved for charitable donation	—	—		500,000	—		—		—		—		—
Stock-based compensation expense	—	—		—	—		24,844		—		—		24,844
Other comprehensive income	—	—		—	—		—		67		—		67
Net income	—	—		—	—		—		—		7,755		7,755
Balance as of July 31, 2019	—	$	—	273,486,167	$	272	$	760,990	$	(68)	$	(17,398)	$	743,796


Reconciliation of cash, cash equivalents, and restricted cash within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows above:
Cash and cash equivalents	$	748,944	$	213,886
Restricted cash, current included in prepaid expenses and other current assets	280,309		100
Restricted cash, noncurrent included in other assets, noncurrent	2,221		2,044
Total cash, cash equivalents, and restricted cash	$	1,031,474	$	216,030



	As of July 31, 2020

	(in thousands)
Accounts receivable, gross	$	321,491
Less: Allowance for credit losses	(17,500)
Less: Allowance for returns	(8,661)
Accounts receivable, net	$	295,330




	(in thousands)
Balance as of January 31, 2020	$	5,150
Provision for credit losses	13,723
Write-offs	(1,373)
Balance as of July 31, 2020	$	17,500


	As of July 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value

	(in thousands)





Commercial paper	$	6,990	$	—	$	—	$	6,990
Agency bonds	302,221		193		(45)		302,369
Corporate and other debt securities	362,539		2,571		(28)		365,082
U.S. government agency securities	43,479		81		—		43,560
Treasury bills	14,994		—		—		14,994
Marketable securities	$	730,223	$	2,845	$	(73)	$	732,995


	Stock Options
	Outstanding Stock Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value

	(in thousands, except share, life, and per share data)
Balance as of January 31, 2020	16,833,009	$	5.73	7.6	$	1,191,881
Granted	—	$	—
Exercised	(4,830,752)	$	3.61
Canceled/forfeited/expired	(132,739)	$	5.92
Balance as of July 31, 2020	11,869,518	$	6.59	7.4	$	2,935,477
Vested and exercisable as of July 31, 2020	5,021,067	$	3.28	6.8	$	1,258,445


	RSUs
	Unvested RSUs	Weighted- Average Grant Date Fair Value Per Share
Unvested as of January 31, 2020	1,964,668	$	79.11
Granted	2,617,599	$	202.30

Vested	(166,366)	$	88.53
Canceled/forfeited	(45,290)	$	98.34
Unvested as of July 31, 2020	4,370,611	$	152.33


	Six Months Ended July 31,
	2020		2019

	(in thousands)
Net cash provided by operating activities	$	660,311	$	53,408

Less: Purchases of property and equipment	(35,253)		(20,937)


Free cash flow (non-GAAP)	$	625,058	$	32,471
Net cash used in investing activities	$	(235,561)	$	(448,484)
Net cash provided by financing activities	$	272,642	$	545,138


	As of January 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value

	(in thousands)


Commercial paper	$	37,894	$	—	$	—	$	37,894
Agency bonds	141,157		49		(43)		141,163
Corporate and other debt securities	320,407		775		(16)		321,166
U.S. government agency securities	71,794		45		(2)		71,837

Marketable securities	$	571,252	$	869	$	(61)	$	572,060


	As of
	July 31, 2020		January 31, 2020

	(in thousands)
Less than one year	$	400,094	$	315,900
Due in one to five years	332,901		256,160
Total	$	732,995	$	572,060


	As of July 31, 2020
	Fair Value		Level 1		Level 2		Level 3

	(in thousands)
Financial Assets:
Money market funds	$	157,220	$	157,220	$	—	$	—



Cash equivalents	157,220		157,220		—		—
Commercial paper	6,990		—		6,990		—
Agency bonds	302,369		—		302,369		—
Corporate and other debt securities	365,082		—		365,082		—
U.S. government agency securities	43,560		—		43,560		—
Treasury bills	14,994		—		14,994		—
Marketable securities	732,995		—		732,995		—
Certificate of deposit included in prepaid expenses and other current assets	100		—		100		—

Certificates of deposit included in other assets, noncurrent	2,221		—		2,221		—

Convertible Note included in other assets, noncurrent	5,000		—		—		5,000
Total financial assets	$	897,536	$	157,220	$	735,316	$	5,000


	ZOOM VIDEO COMMUNICATIONS, INC.

Date: September 3, 2020	By:	/s/ Eric S. Yuan
		Eric S. Yuan
		President and Chief Executive Officer
		(Principal Executive Officer)

Date: September 3, 2020	By:	/s/ Kelly Steckelberg
		Kelly Steckelberg
		Chief Financial Officer
		(Principal Financial Officer)


Zoom Video Communications, Inc.			Participant:
By: __________________________________			_____________________________
Signature			Signature
Title: ________________________________
Date: ________________________________