01—Abstract
Summary
Summary of the 10-K filed March 18, 2021. Cited figures are marked; the original filing is the authoritative source.
Zoom Video Communications, Inc. reported fiscal year 2021 (ended January 31, 2021) revenue of $2,651.4 milliona, up from $622.7 million in fiscal 2020, and net income of $672.3 million, compared with $25.3 million a year earlier.
Revenue growth was driven by the surge in platform usage during the COVID-19 pandemic. Gross margin fell to 69% from 81%, as the company relied more on third-party cloud hosting and served a higher share of free Basic accounts, which generate no revenue. Operating expenses rose sharply, with sales and marketing up $344.3 millionb and general and administrative up $233.7 million, though income from operations grew to $659.8 million from $12.7 million.
The filing cautions that the company expects user growth and revenue growth rates to slow or decline as the pandemic tapers, and that many new free hosts may never upgrade to paid plans. Customers with more than 10 employees reached approximately 467,100, up from 81,900. Cash, cash equivalents and marketable securities totaled $4.2 billionc at year-end, and the company completed a follow-on offering in January 2021 that netted $1,980.0 million.
The filing also details significant legal and regulatory exposure. Federal subpoenas from the EDNY, NDCA and the SEC relate to privacy, encryption and China-related matters, and multiple securities and privacy class actions are pending. The company settled with the FTC over its security representations without a fine.
Its dual-class structure gives founder Eric S. Yuan approximately 30.1%d of voting power on about 8.4% of outstanding capital stock.
02—Key points
Key Highlights
- Revenue rose to $2,651.4 million in fiscal 2021 from $622.7 million in fiscal 2020, a 326% increase driven by pandemic-related usage; about 73% of the increase came from new customers and 27% from existing customers.
- Gross margin declined to 69% from 81%, reflecting higher third-party cloud hosting costs and a greater share of usage from free Basic accounts.
- Net income was $672.3 million, versus $25.3 million in fiscal 2020, and income from operations was $659.8 million, versus $12.7 million.
- Operating cash flow was $1,471.2 million and free cash flow (non-GAAP) was $1,391.2 million, compared with $151.9 million and $113.8 million the prior year.
- Customers with more than 10 employees grew to approximately 467,100 from 81,900, and customers contributing over $100,000 in trailing 12-month revenue grew to 1,644 from 641.
- The company expects revenue growth to generally decline and user growth to slow or decline as the COVID-19 pandemic tapers, and it faces pending federal investigations and securities and privacy class actions.
- Dual-class structure gives Class B holders 71.3% of voting power as of March 9, 2021, with founder Eric S. Yuan controlling approximately 30.1% of voting power.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Zoom Communications kept $0.25.
- Revenue$2.65B100.0%
- Cost of revenue−$822.0M31.0%
- Gross profit$1.83B69.0%
- Operating costs−$1.17B44.1%
- Operating income$659.8M24.9%
- Interest, other & tax$11.7M0.4%
- Net income$671.5M25.3%
Where FY2021 revenue went
$2.65B- Other operating costs: $1.01B, 38% of revenue
- Cost of revenue: $822.0M, 31% of revenue
- Operating income: $659.8M, 25% of revenue
- R&D: $164.1M, 6.2% of revenue
Kept 25% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed March 18, 2021Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $2.65B$622.66M | +325.8% |
| Cost of Revenue | $821.99M$115.40M | +612.3% |
| Gross Profit | $1.83B$507.26M | +260.6% |
| R&D Expenses | $164.08M$67.08M | +144.6% |
| Operating Expenses | $1.17B$494.57M | +136.5% |
| Operating Income | $659.85M$12.70M | +5097.3% |
| Net Income | $671.53M$25.30M | +2553.7% |
| EPS (Basic) | $2.37$0.09 | +2533.3% |
| EPS (Diluted) | $2.25$0.09 | +2400.0% |
| Shares Outstanding (Basic) | 283.85M233.64M | +21.5% |
| Shares Outstanding (Diluted) | 298.13M254.30M | +17.2% |
05—Questions
Frequently Asked Questions
What drove Zoom's revenue growth in fiscal 2021?
Revenue grew to $2,651.4 million from $622.7 million, with the filing attributing the increase to heavier platform usage during the COVID-19 pandemic as organizations shifted to remote operations. Subscription services to new customers accounted for approximately 73% of the increase and subscriptions to existing customers for approximately 27%.
Why did gross margin decline?
Gross margin fell to 69% from 81%. The filing cites higher incremental costs from using third-party cloud hosting providers to meet the surge in usage, along with a higher percentage of usage from free users.
Will growth continue after the pandemic?
The filing states that the company expects its revenue growth rate to generally decline in future periods and its user growth rate to slow or decline once the pandemic tapers and users return to work or school. It also notes that a majority of new free hosts may never upgrade to a paid Zoom Meeting plan.
What legal and regulatory risks does the filing disclose?
The filing discloses ongoing investigations by the U.S. Attorney's Offices for the Eastern District of New York and the Northern District of California and by the SEC, covering privacy, encryption and China-related matters. It also describes pending putative securities and privacy class actions, and a settlement with the FTC that the company says it does not expect to have a material impact on its financial results. The company states it cannot predict the outcome of these matters.
How concentrated is voting control?
Class B common stock carries 10 votes per share, and as of March 9, 2021 the holders of Class B held 71.3% of voting power. Founder Eric S. Yuan and his affiliates held approximately 8.4% of outstanding capital stock but controlled approximately 30.1% of voting power, giving investors limited ability to influence corporate matters.
06—Continue