01—Abstract
Summary
Summary of the 10-K filed March 7, 2022. Cited figures are marked; the original filing is the authoritative source.
Zoom Video Communications, Inc. (now Zoom Communications, Inc.) reported fiscal year 2022 (ended January 31, 2022) revenue of $4.10 billiona, up 55% from $2.65 billion in fiscal 2021, and net income of $1,375.6 million, which includes a non-recurring $328.0 million tax benefit from releasing the valuation allowance on U.S. federal and state deferred tax assets.
Net cash provided by operating activities was $1,605.3 millionb, and free cash flow was $1,472.7 million. The company ended the year with cash, cash equivalents, and marketable securities of $5.4 billion and said it expects existing cash and operating cash flow to meet its needs for at least the next 12 months. The filing repeatedly warns that revenue growth has begun to decline and is expected to decline further, as the COVID-19 pandemic usage surge tapers.
Much of the increased usage came from free Basic accounts that generate no revenue, and management expects user growth to slow or decline as vaccines become widely available. Trailing 12-month net dollar expansion for customers with more than 10 employees was 129% at January 31, 2022, and the company also disclosed 2,725 customers contributing more than $100,000c of trailing 12-month revenue. Legal and regulatory overhang remains significant.
The company disclosed ongoing U.S. Department of Justice and SEC subpoenas concerning privacy, encryption, and China-related matters, a $85.0 milliond escrow payment and $66.9 million net settlement charge tied to a privacy class action, and a pending securities class action. A dual-class structure gives Class B holders 67.8% of voting power, and founder Eric S.
Yuan controls approximately 29.8% of voting power with about 7.6% of capital stock. The company also authorized a $1.0 billion share repurchase program in February 2022.
02—Key points
Key Highlights
- Revenue of $4,099.9 million for fiscal 2022, up 55% from $2,651.4 million in fiscal 2021, with gross margin improving to 74% from 69%.
- Net income of $1,375.6 million, including a non-recurring $328.0 million tax benefit from the release of the U.S. federal and state deferred tax asset valuation allowance.
- Net cash provided by operating activities of $1,605.3 million and free cash flow of $1,472.7 million for fiscal 2022.
- Cash, cash equivalents, and marketable securities totaled $5.4 billion at January 31, 2022.
- The company states revenue growth has begun to decline and expects it to generally decline further as COVID-19-driven usage tapers; much of the usage surge came from free Basic accounts that generate no revenue.
- Remaining performance obligations were $2,647.6 million, with 63% expected to be recognized as revenue over the next 12 months.
- A $1.0 billion stock repurchase program was authorized in February 2022, with $997.1 million remaining available as of March 6, 2022.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Zoom Communications kept $0.34.
- Revenue$4.10B100.0%
- Cost of revenue−$1.05B25.7%
- Gross profit$3.05B74.3%
- Operating costs−$1.98B48.3%
- Operating income$1.06B25.9%
- Interest, other & tax$312.0M7.6%
- Net income$1.38B33.6%
Where FY2022 revenue went
$4.10B- Other operating costs: $1.62B, 39% of revenue
- Operating income: $1.06B, 26% of revenue
- Cost of revenue: $1.05B, 26% of revenue
- R&D: $363.0M, 8.9% of revenue
Kept 26% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed March 7, 2022Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $4.10B$2.65B | +54.6% |
| Cost of Revenue | $1.05B$821.99M | +28.3% |
| Gross Profit | $3.05B$1.83B | +66.5% |
| R&D Expenses | $362.99M$164.08M | +121.2% |
| Operating Expenses | $1.98B$1.17B | +69.4% |
| Operating Income | $1.06B$659.85M | +61.2% |
| Net Income | $1.38B$671.53M | +104.9% |
| EPS (Basic) | $4.64$2.37 | +95.8% |
| EPS (Diluted) | $4.50$2.25 | +100.0% |
| Shares Outstanding (Basic) | 296.33M283.85M | +4.4% |
| Shares Outstanding (Diluted) | 305.83M298.13M | +2.6% |
05—Questions
Frequently Asked Questions
What drove revenue growth in fiscal 2022?
Revenue rose $1,448.5 million, or 55%, to $4,099.9 million. The filing attributes about 70% of the increase to subscription services for existing customers and about 30% to new customers, with usage expansion tied to the COVID-19 pandemic.
Is the company's growth expected to continue at this pace?
No. The filing states that the revenue growth rate has begun to decline and is expected to generally decline in future periods, and that user growth is expected to slow or decline as the pandemic impact tapers and vaccines become widely available.
Why was fiscal 2022 net income so high relative to operations?
Net income of $1,375.6 million included a $274.0 million income tax benefit, driven by a non-recurring $328.0 million release of the valuation allowance on U.S. federal and state deferred tax assets. Income from operations was $1,063.6 million.
What legal and regulatory risks does the filing highlight?
The filing discloses ongoing DOJ and SEC subpoenas about privacy, encryption, and China-related matters, a $85.0 million settlement payment into escrow for a privacy class action, a pending securities class action, and an FTC settlement finalized in January 2021. It states the company cannot predict the outcome of the government investigations.
How concentrated is voting control at the company?
Class B common stock, with 10 votes per share, held 67.8% of voting power as of January 31, 2022. Founder Eric S. Yuan and affiliates held about 7.6% of capital stock but about 29.8% of voting power.
06—Continue