Zoom Communications, Inc 10-Q for FY2021 Q3

Zoom Communications, Inc. (ZM)

10-Q 2020-12-04 For: 2020-10-31

Added on April 07, 2026

About this 10-Q

Zoom Communications, Inc filed this 10-Q on December 4, 2020, covering the quarter ended October 31, 2020 (FY2021 Q3).

Headline figures

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

Revenue: $777.2M; up 366.5% from $166.59M a year earlier
Net income: $198.64M; up 8884.3% from net income of $2.21M a year earlier
Diluted EPS: $0.66; up 6500.0% from $0.01 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	5

Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets as of October 31, 2020 and January 31, 2020	5
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended October 31, 2020 and 2019	6
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended October 31, 2020 and 2019	7
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Three and Nine Months Ended October 31, 2020 and 2019	8
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 2020 and 2019	11
	Notes to Condensed Consolidated Financial Statements	13
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39

	PART II – Other Information	40

Item 1.	Legal Proceedings	40
Item 1A	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	70
Item 3.	Defaults Upon Senior Securities	70
Item 4.	Mine Safety Disclosures	70
Item 5.	Other Information	70
Item 6.	Exhibits	71
	Signatures	72


	As of
	October 31, 2020		January 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	730,506	$	283,134
Marketable securities	1,141,425		572,060
Accounts receivable, net of allowances of $27,689 and $7,634 as of October 31, 2020 and January 31, 2020, respectively	280,896		120,435
Deferred contract acquisition costs, current	126,001		44,885
Prepaid expenses and other current assets	345,448		75,008
Total current assets	2,624,276		1,095,522
Deferred contract acquisition costs, noncurrent	160,142		46,245
Property and equipment, net	108,077		57,138
Operating lease right-of-use assets	63,008		68,608
Goodwill	24,340		—
Other assets, noncurrent	70,468		22,332
Total assets	$	3,050,311	$	1,289,845
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	12,666	$	1,596
Accrued expenses and other current liabilities	565,520		122,692
Deferred revenue, current	835,762		209,542
Total current liabilities	1,413,948		333,830
Deferred revenue, noncurrent	18,935		20,994
Operating lease liabilities, noncurrent	60,522		64,792
Other liabilities, noncurrent	56,988		36,286
Total liabilities	1,550,393		455,902
Commitments and contingencies (Note 7)

Stockholders’ equity:
Preferred stock, $0.001 par value per share, 200,000,000 shares authorized as of October 31, 2020 and January 31, 2020; zero shares issued and outstanding as of October 31, 2020 and January 31, 2020	—		—
Common stock, $0.001 par value per share, 2,000,000,000 Class A shares authorized as of October 31, 2020 and January 31, 2020; 198,179,809 and 123,391,114 shares issued and outstanding as of October 31, 2020 and January 31, 2020, respectively; 300,000,000 Class B shares authorized as of October 31, 2020 and January 31, 2020; 87,765,770 and 155,336,747 shares issued and outstanding as of October 31, 2020 and January 31, 2020, respectively	284		277
Additional paid-in capital	1,086,459		832,705
Accumulated other comprehensive income	1,317		809
Retained earnings	411,858		152
Total stockholders’ equity	1,499,918		833,943
Total liabilities and stockholders’ equity	$	3,050,311	$	1,289,845


	Three Months Ended October 31,				Nine Months Ended October 31,
	2020		2019		2020		2019
Revenue	$	777,196	$	166,593	$	1,768,883	$	434,407
Cost of revenue	258,727		30,845		554,705		82,849
Gross profit	518,469		135,748		1,214,178		351,558
Operating expenses:
Research and development	42,582		17,573		111,705		46,410
Sales and marketing	190,157		96,048		470,886		239,741
General and administrative	93,488		23,806		227,856		63,264
Total operating expenses	326,227		137,427		810,447		349,415
Income (loss) from operations	192,242		(1,679)		403,731		2,143
Interest income and other, net	1,779		4,209		9,650		9,674

Net income before (benefit from) provision for income taxes	194,021		2,530		413,381		11,817
(Benefit from) provision for income taxes	(4,621)		319		1,675		1,851
Net income	198,642		2,211		411,706		9,966
Undistributed earnings attributable to participating securities	(202)		(4)		(531)		(2,493)
Net income attributable to common stockholders	$	198,440	$	2,207	$	411,175	$	7,473
Net income per share attributable to common stockholders:
Basic	$	0.70	$	0.01	$	1.46	$	0.03
Diluted	$	0.66	$	0.01	$	1.38	$	0.03
Weighted-average shares used in computing net income per share attributable to common stockholders:
Basic	284,783,006		273,316,850		282,564,481		219,295,445
Diluted	299,258,765		292,771,122		297,605,941		241,512,569


	Three Months Ended October 31,				Nine Months Ended October 31,
	2020		2019		2020		2019
Net income	$	198,642	$	2,211	$	411,706	$	9,966
Other comprehensive (loss) income:
Unrealized (loss) gain on available-for-sale marketable securities, net of tax	(1,455)		719		508		786
Comprehensive income	$	197,187	$	2,930	$	412,214	$	10,752


☒			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 October 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 July 31, 2020	—	$	—	284,342,719	$	283	$	982,541	$	2,772	$	213,216	$	1,198,812
Issuance of common stock upon exercise of stock options	—	—		1,333,924	1		6,609		—		—		6,610
Issuance of common stock upon release of restricted stock units	—	—		268,936	—		—		—		—		—
Stock-based compensation expense	—	—		—	—		97,309		—		—		97,309
Other comprehensive loss	—	—		—	—		—		(1,455)		—		(1,455)
Net income	—	—		—	—		—		—		198,642		198,642
Balance as of October 31, 2020	—	$	—	285,945,579	$	284	$	1,086,459	$	1,317	$	411,858	$	1,499,918


	Three Months Ended October 31, 2019
	Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive (Loss) Income		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance as of July 31, 2019	—	$	—	273,486,167	$	272	$	760,990	$	(68)	$	(17,398)	$	743,796
Issuance of common stock upon exercise of stock options	—	—		2,740,291	3		3,842		—		—		3,845

Stock-based compensation expense	—	—		—	—		21,946		—		—		21,946
Other comprehensive income	—	—		—	—		—		719		—		719
Net income	—	—		—	—		—		—		2,211		2,211
Balance as of October 31, 2019	—	$	—	276,226,458	$	275	$	786,778	$	651	$	(15,187)	$	772,517


	Nine Months Ended October 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	—	—		6,164,676	6		24,285		—		—		24,291
Issuance of common stock upon release of restricted stock units	—	—		443,836	—		—		—		—		—
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	—	—		—	—		185,398		—		—		185,398
Other comprehensive income	—	—		—	—		—		508		—		508
Net income	—	—		—	—		—		—		411,706		411,706
Balance as of October 31, 2020	—	$	—	285,945,579	$	284	$	1,086,459	$	1,317	$	411,858	$	1,499,918


	Nine Months Ended October 31, 2019
	Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive (Loss) Income		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	—	—		16,487,350	17		6,002		—		—		6,019
Issuance of common stock reserved for charitable donation	—	—		500,000	—		—		—		—		—
Stock-based compensation expense	—	—		—	—		46,790		—		—		46,790
Other comprehensive income	—	—		—	—		—		786		—		786
Net income	—	—		—	—		—		—		9,966		9,966
Balance as of October 31, 2019	—	$	—	276,226,458	$	275	$	786,778	$	651	$	(15,187)	$	772,517


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	$	730,506	$	230,874
Restricted cash, current included in prepaid expenses and other current assets	296,007		48,647
Restricted cash, noncurrent included in other assets, noncurrent	2,215		2,309
Total cash, cash equivalents, and restricted cash	$	1,028,728	$	281,830



	As of October 31, 2020

	(in thousands)
Accounts receivable, gross	$	308,585
Less: Allowance for credit losses	(16,500)
Less: Allowance for returns	(11,189)
Accounts receivable, net	$	280,896




	(in thousands)
Balance as of January 31, 2020	$	5,150
Provision for credit losses	17,070
Write-offs	(5,720)
Balance as of October 31, 2020	$	16,500


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

	(in thousands)





Commercial paper	$	6,244	$	—	$	—	$	6,244
Agency bonds	409,695		75		(297)		409,473
Corporate and other debt securities	465,399		1,727		(180)		466,946
U.S. government agency securities	144,361		19		(26)		144,354
Treasury bills	114,409		3		(4)		114,408
Marketable securities	$	1,140,108	$	1,824	$	(507)	$	1,141,425


	Three Months Ended October 31,								Nine Months Ended October 31,
	2020				2019				2020				2019
	Amount		Percentage of Revenue		Amount		Percentage of Revenue		Amount		Percentage of Revenue		Amount		Percentage of Revenue

	(in thousands, except percentages)
Americas	$	538,504	69	%	$	133,864	81	%	$	1,238,298	70	%	$	349,122	81	%
Asia Pacific (“APAC”)	103,458		13		13,661		8		215,099		12		36,189		8
Europe, Middle East, and Africa (“EMEA”)	135,234		18		19,068		11		315,486		18		49,096		11
Total	$	777,196	100	%	$	166,593	100	%	$	1,768,883	100	%	$	434,407	100	%


	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	(6,164,676)	$	3.87
Canceled/forfeited/expired	(190,164)	$	6.14
Balance as of October 31, 2020	10,478,169	$	6.81	7.1	$	4,757,980
Vested and exercisable as of October 31, 2020	4,811,474	$	3.49	6.5	$	2,200,842


	RSUs
	Unvested RSUs	Weighted- Average Grant Date Fair Value Per Share
Unvested as of January 31, 2020	1,964,668	$	79.11
Granted	3,091,931	$	228.82

Vested	(435,302)	$	86.39
Canceled/forfeited	(155,751)	$	165.09
Unvested as of October 31, 2020	4,465,546	$	179.06


	Nine Months Ended October 31,
	2020		2019

	(in thousands)
Net cash provided by operating activities	$	1,071,781	$	115,338

Less: Purchases of property and equipment	(58,517)		(28,132)


Free cash flow (non-GAAP)	$	1,013,264	$	87,206
Net cash used in investing activities	$	(673,377)	$	(496,099)
Net cash provided by financing activities	$	296,242	$	596,623


	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
	October 31, 2020		January 31, 2020

	(in thousands)
Less than one year	$	602,222	$	315,900
Due in one to five years	539,203		256,160
Total	$	1,141,425	$	572,060


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

	(in thousands)
Financial Assets:
Money market funds	$	224,349	$	224,349	$	—	$	—
Treasury bills	17,419		—		17,419		—
Corporate debt securities	1,012		—		1,012		—

Cash equivalents	242,780		224,349		18,431		—
Commercial paper	6,244		—		6,244		—
Agency bonds	409,473		—		409,473		—
Corporate and other debt securities	466,946		—		466,946		—
U.S. government agency securities	144,354		—		144,354		—
Treasury bills	114,408		—		114,408		—
Marketable securities	1,141,425		—		1,141,425		—
Certificate of deposit included in prepaid expenses and other current assets	100		—		100		—

Certificates of deposit included in other assets, noncurrent	2,215		—		2,215		—

Convertible Note included in other assets, noncurrent	5,092		—		—		5,092
Total financial assets	$	1,391,612	$	224,349	$	1,162,171	$	5,092


	ZOOM VIDEO COMMUNICATIONS, INC.

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

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