01—Abstract
Summary
Summary of the 10-K filed March 3, 2023. Cited figures are marked; the original filing is the authoritative source.
Zoom Video Communications, Inc. (now Zoom Communications, Inc.) reported revenue of $4,393.0 milliona for the fiscal year ended January 31, 2023, up from $4,099.9 million in fiscal 2022, a 7% increase.
Net income fell to $103.7 millionb from $1,375.6 million, and income from operations was $245.4 million, compared with $1,063.6 million a year earlier. The filing attributes the revenue growth to a 23.6% increase in Enterprise subscription revenue, partly offset by a 7.7% decline in Online revenue. Operating expenses rose sharply, with sales and marketing up 49.4% and research and development up 113.2%, and stock-based compensation totaled $1,285.8 million.
Management says revenue growth has declined as the COVID-19 pandemic tapered and expects it to continue to decline relative to prior periods. The company also cited a $69.1 millionc negative foreign currency impact on revenue from a stronger U.S. dollar. The balance sheet remained strong, with cash, cash equivalents, and marketable securities of $5.4 billion as of January 31, 2023.
Operating cash flow was $1,290.3 milliond and free cash flow, a non-GAAP measure, was $1,186.4 million. The company repurchased $1.0 billion of Class A common stock during the year, completing a program authorized in February 2022. In February 2023, after year end, Zoom announced a restructuring plan to cut roughly 15% of its workforce, with estimated charges of $50 million to $68 million, to reduce operating costs and pursue profitable growth.
Investors should also weigh the legal and regulatory exposure described in the filing, including ongoing U.S. Department of Justice and SEC subpoenas tied to privacy, security, and China-related matters, as well as securities class actions. The dual-class structure gives Class B holders 65.4% of voting power, and founder Eric S. Yuan's affiliates control approximately 31.6% of voting power while holding about 7.7% of outstanding capital stock.
02—Key points
Key Highlights
- Revenue of $4,393.0 million for fiscal 2023, up from $4,099.9 million, with the filing stating growth of 7%.
- Net income declined to $103.7 million from $1,375.6 million, and income from operations was $245.4 million versus $1,063.6 million in fiscal 2022.
- Stock-based compensation expense rose to $1,285.8 million from $477.3 million, and sales and marketing expense increased 49.4% to $1,696.6 million.
- Enterprise customers reached approximately 213,000 as of January 31, 2023, up from 191,000, and customers contributing more than $100,000 of trailing 12-month revenue rose to 3,471 from 2,725.
- Trailing 12-month net dollar expansion rate for Enterprise customers was 115%, down from 130% in the prior year.
- Cash, cash equivalents, and marketable securities totaled $5.4 billion, with free cash flow of $1,186.4 million and $1.0 billion in share repurchases completed in fiscal 2023.
- In February 2023 the company announced a restructuring plan to reduce its workforce by approximately 15%, with estimated charges of $50 million to $68 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Zoom Communications kept $0.02.
- Revenue$4.39B100.0%
- Cost of revenue−$1.10B25.1%
- Gross profit$3.29B74.9%
- Operating costs−$3.05B69.4%
- Operating income$245.4M5.6%
- Interest, other & tax−$141.7M3.2%
- Net income$103.7M2.4%
Where FY2023 revenue went
$4.39B- Other operating costs: $2.27B, 52% of revenue
- Cost of revenue: $1.10B, 25% of revenue
- R&D: $774.1M, 18% of revenue
- Net income: $103.7M, 2.4% of revenue
- Interest, other & tax: $141.7M, 3.2% of revenue
Kept 2.4% as net incomeNet income $103.7M · 2.4%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed March 3, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $4.39B$4.10B | +7.1% |
| Cost of Revenue | $1.10B$1.05B | +4.4% |
| Gross Profit | $3.29B$3.05B | +8.1% |
| R&D Expenses | $774.06M$362.99M | +113.2% |
| Operating Expenses | $3.05B$1.98B | +53.8% |
| Operating Income | $245.43M$1.06B | −76.9% |
| Net Income | $103.71M$1.38B | −92.5% |
| EPS (Basic) | $0.35$4.64 | −92.5% |
| EPS (Diluted) | $0.34$4.50 | −92.4% |
| Shares Outstanding (Basic) | 296.56M296.33M | +0.1% |
| Shares Outstanding (Diluted) | 304.23M305.83M | −0.5% |
05—Questions
Frequently Asked Questions
How did Zoom's revenue and profitability change in fiscal 2023?
Revenue increased to $4,393.0 million from $4,099.9 million, a 7% increase. Net income fell to $103.7 million from $1,375.6 million, and income from operations fell to $245.4 million from $1,063.6 million. The filing attributes the decline mainly to higher operating expenses, especially stock-based compensation and sales and marketing costs.
What is driving the change in revenue growth?
Revenue from Enterprise customers rose 23.6% and was 54.8% of total revenue, while revenue from Online customers declined 7.7%. Management said the COVID-19 pandemic's tapering, macroeconomic conditions, and market maturation are contributing to slower growth, and that revenue growth is expected to decline compared with prior periods.
What is the restructuring plan announced in February 2023?
On February 7, 2023, Zoom announced a plan to reduce its current workforce by approximately 15% to reduce operating costs and pursue profitable growth. The company estimates $50 million to $68 million in charges, primarily for employee transition, severance, benefits, and stock-based compensation, with most costs expected in the first quarter of fiscal 2024.
How concentrated is voting control at Zoom?
Class B common stock carries 10 votes per share and held 65.4% of voting power as of January 31, 2023. Directors, executive officers, and 5% stockholders together held 57.9% of voting power. Founder Eric S. Yuan and affiliates held approximately 7.7% of outstanding capital stock but about 31.6% of voting power.
What legal and regulatory matters could affect Zoom?
The company is cooperating with ongoing investigations by the U.S. Attorney's Offices for the Eastern District of New York and the Northern District of California, and an SEC subpoena, relating to privacy, security, encryption, and interactions with the Chinese government. It is also defending securities class actions, shareholder derivative suits, and U.S. privacy class actions. The filing says it cannot predict the outcome or estimate reasonably possible losses for these matters.
06—Continue