Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
FORM 8-K
_________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 5, 2019
_________________________
Zoom Video Communications, Inc.
(Exact name of Registrant as Specified in Its Charter)
_________________________
Delaware001-3886561-1648780
(State or Other Jurisdiction
of Incorporation)
(Commission File Number)(IRS Employer
Identification No.)
55 Almaden Boulevard, 6th Floor
San Jose, California
95113
(Address of Principal Executive Offices)(Zip Code)
(888) 799-9666
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
_________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, $0.001 par value per shareZMThe Nasdaq Global Select Market
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒




Item 2.02 Results of Operations And Financial Condition
On December 5, 2019, Zoom Video Communications, Inc. (the “Company”) issued a press release announcing its financial results for the three months ended October 31, 2019.  A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated by reference.
The information contained in this report, including Exhibit 99.1 attached hereto, is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or subject to the liabilities of that section.  The information shall not be deemed incorporated by reference into any other filing with the Securities and Exchange Commission made by the Company regardless of any general incorporation language in such filing, except as shall be expressly set forth by specific reference in such filing.
ITEM 9.01 Financial Statements And Exhibits.
(d) Exhibits
Exhibit No.Description
99.1  




SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Zoom Video Communications, Inc.
Dated: December 5, 2019By:/s/ Aparna Bawa
Aparna Bawa
Chief Legal Officer


Document

Exhibit 99.1
Zoom Video Communications Reports Third Quarter Results for Fiscal Year 2020
Third quarter total revenue of $166.6 million, up 85% year-over-year
Number of customers contributing more than $100,000 in TTM revenue up 97% year-over-year
San Jose, California – December 5, 2019 – Zoom Video Communications, Inc. (NASDAQ: ZM), a provider of video-first unified communications, today announced financial results for the quarter ended October 31, 2019.

“Our third quarter was another strong performance for Zoom. Our execution helped drive revenue growth of 85% with increased non-GAAP profitability year-over-year and free cash flow of $54.7 million. This execution also drove 67% growth in the number of customers with more than 10 employees and 97% growth of in the number of customers contributing more than $100K of TTM revenue,” said Eric S. Yuan, founder and chief executive officer of Zoom.

Yuan added, “In Q3, we hosted our premier customer event, Zoomtopia, with more than 2,600 registered guests, up 80% year-over-year. During the event, our customers shared their stories of how frictionless Zoom experiences are driving productivity and delivering happiness with both internal and external stakeholders. Also, at Zoomtopia, we were proud to announce expansions to our platform including our new Zoom Rooms Appliance Program, expanded Zoom Phone service and capabilities, and the growth of our App Marketplace. Our customers tell us that Zoom ‘just works,’ and with these new innovations we empower teams to do even more with video communications.”
Third Quarter Fiscal 2020 Financial Highlights:
Revenue: Total revenue for the quarter was $166.6 million, up 85% year-over-year.
Income/Loss from Operations and Operating Margin: GAAP loss from operations for the quarter was $1.7 million, compared to GAAP loss from operations of $1.1 million in the third quarter of fiscal 2019. After adjusting for stock-based compensation expense and related payroll taxes, non-GAAP income from operations for the third quarter was $21.3 million, up from $1.6 million in the third quarter of fiscal 2019. For the third quarter, GAAP operating margin was (1.0)% and non-GAAP operating margin was 12.8%.
Net Income and Net Income Per Share: GAAP net income attributable to common stockholders for the quarter was $2.2 million, or $0.01 per share, compared to GAAP net loss attributable to common stockholders of $0.6 million, or $(0.01) per share in the third quarter of fiscal 2019.
Non-GAAP net income for the quarter was $25.2 million, after adjusting for stock-based compensation expense and related payroll taxes and undistributed earnings attributable to participating securities, and non-GAAP net income per share was $0.09. In the third quarter of fiscal 2019, non-GAAP net income was $2.1 million, or $0.01 per share. The non-GAAP weighted average share count has been adjusted to reflect the shares of Class A common stock issued in connection with the Initial Public Offering (IPO), including the concurrent private placement, that are outstanding as of the end of the period as if they were outstanding as of the beginning of the period for comparability.
Cash: Total cash, cash equivalents, and marketable securities as of October 31, 2019 was $811.4 million.
Cash Flow: Net cash provided by operating activities was $61.9 million for the quarter, compared to $18.2 million in the third quarter of fiscal 2019. Free cash flow was $54.7 million, compared to $10.1 million in the third quarter of fiscal 2019.
Customer Metrics: Drivers of total revenue include acquiring new customers and expanding across existing customers. At the end of the third quarter of fiscal 2020, Zoom had:
Approximately 74,100 customers with more than 10 employees, up approximately 67% from the same quarter last year.
546 customers contributing more than $100,000 in trailing 12 months revenue, up approximately 97% from the same quarter last year.



A trailing 12-month net dollar expansion rate in customers with more than 10 employees above 130% for the 6th consecutive quarter.
Financial Outlook: Zoom is providing the following guidance for its fourth quarter fiscal 2020 and its full year fiscal 2020.
Fourth Quarter Fiscal 2020: Total revenue is expected to be between $175.0 million and $176.0 million and non-GAAP income from operations is expected to be between $17.0 million and $18.0 million. Q4 non-GAAP EPS is expected to be approximately $0.07 with approximately 296 million non-GAAP weighted average shares outstanding.
Full Year Fiscal 2020: Total revenue is expected to be between $609.0 million and $610.0 million and non-GAAP income from operations is expected to be between $67.0 million and $68.0 million. Full year non-GAAP EPS is expected to be approximately $0.27 with approximately 293 million non-GAAP weighted average shares outstanding.
Additional information on Zoom's reported results, including a reconciliation of the non-GAAP results to their most comparable GAAP measures, are included in the financial tables below. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty of expenses that may be incurred in the future.
A supplemental financial presentation and other information can be accessed through Zoom’s investor relations website at investors.zoom.us.
Zoom Video Earnings Call
Zoom will host a Zoom Video Webinar for investors on December 5, 2019 at 2:30p.m. Pacific Time / 5:30 p.m. Eastern Time to discuss the company’s financial results and business highlights. Investors are invited to join the Zoom Video Webinar by visiting: https://investors.zoom.us/
About Zoom
Zoom Video Communications, Inc. (NASDAQ: ZM) brings teams together to get more done in a frictionless video environment. Our easy, reliable, and innovative video-first unified communications platform provides video meetings, voice, webinars, and chat across desktops, phones, mobile devices, and conference room systems. Zoom helps enterprises create elevated experiences with leading business app integrations and developer tools to create customized workflows. Founded in 2011, Zoom is headquartered in San Jose, California with offices around the world. Visit zoom.com.
Forward-Looking Statements
This press release contains express and implied “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “will,” “would,” “should,” “could,” “can,” “predict,” “potential,” “target,” “explore,” “continue,” or the negative of these terms, and similar expressions intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. These statements may relate to our market size and growth strategy, our estimated and projected costs, margins, revenue, expenditures and growth rates, our financial outlook, our plans and objectives for future operations, growth, initiatives, or strategies. By their nature, these statements are subject to numerous uncertainties and risks, including factors beyond our control, that could cause actual results, performance or achievement to differ materially and adversely from those anticipated or implied in the statements. These assumptions, uncertainties and risks include that, among others, our business would be harmed by any decline in new customers and hosts, renewals or upgrades, our limited operating history makes it difficult to evaluate our prospects and future results of operations, we operate in competitive markets, we may not be able to sustain our revenue growth rate in the future, our business would be harmed by any significant interruptions, delays or outages in services from our co-located data centers, and failures in internet infrastructure or interference with broadband access could cause current or potential users to believe that our systems are unreliable. Additional risks and uncertainties that could cause actual outcomes and results to differ materially from those contemplated by the forward-looking statements are included under the caption “Risk Factors” and elsewhere in our most recent filings with the Securities and Exchange Commission (the “SEC”), including our quarterly report on Form 10-Q for the quarter ended October 31, 2019.  Forward-looking statements speak only as of the date the statements are made and are based on information available to Zoom at the time those statements are made and/or management's good faith belief as of that time with respect to future events.  Zoom assumes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, except as required by law.



Non-GAAP Financial Measures
Zoom has provided in this press release financial information that has not been prepared in accordance with generally accepted accounting principles in the United States (GAAP). Zoom uses these non-GAAP financial measures internally in analyzing its financial results and believes that use of these non-GAAP financial measures is useful to investors as an additional tool to evaluate ongoing operating results and trends and in comparing Zoom’s financial results with other companies in its industry, many of which present similar non-GAAP financial measures.
Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures and should be read only in conjunction with Zoom’s condensed consolidated financial statements prepared in accordance with GAAP. A reconciliation of Zoom’s historical non-GAAP financial measures to the most directly comparable GAAP measures has been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliation.
Non-GAAP Income From Operations. Zoom defines non-GAAP income from operations as income from operations excluding stock-based compensation expense and related payroll taxes. Zoom excludes stock-based compensation expense because it is non-cash in nature and excluding this expense provides meaningful supplemental information regarding Zoom’s operational performance and allows investors the ability to make more meaningful comparisons between Zoom’s operating results and those of other companies. Zoom excludes the amount of employer payroll taxes related to employee stock plans, which is a cash expense, because we believe that excluding this item provides meaningful supplemental information regarding operational performance. In particular, this expense is dependent on the price of our common stock and other factors that are beyond our control and do not correlate to the operation of the business.
Non-GAAP Net Income and Non-GAAP Net Income Per Share, Basic and Diluted. Zoom defines non-GAAP net income and non-GAAP net income per share, basic and diluted, as GAAP net income attributable to common stockholders and GAAP net income per share attributable to common stockholders, basic and diluted, respectively, adjusted to exclude stock-based compensation expense and related payroll taxes, and undistributed earnings attributable to participating securities. Zoom excludes undistributed earnings attributable to participating securities because they are considered by management to be outside of Zoom’s core operating results, and excluding them provides investors and management with greater visibility to the underlying performance of Zoom’s business operations, facilitates comparison of its results with other periods and may also facilitate comparison with the results of other companies in the industry.
In order to calculate non-GAAP net income per share, basic and diluted, Zoom uses a non-GAAP weighted-average share count. Zoom defines non-GAAP weighted-average shares used to compute non-GAAP net income per share, basic and diluted, as GAAP weighted average shares used to compute net income per share attributable to common stockholders, basic and diluted, adjusted to reflect the common stock issued in connection with the IPO, including the concurrent private placement, that are outstanding as of the end of the period as if they were outstanding as of the beginning of the period for comparability.
Free Cash Flow. Zoom defines free cash flow as GAAP net cash provided by operating activities less purchases of property and equipment. Zoom considers free cash flow to be a liquidity measure that provides useful information to management and investors regarding net cash provided by operating activities and cash used for investments in property and equipment required to maintain and grow the business.
Customer Metrics
Zoom defines a customer as a separate and distinct buying entity, which can be a single paid host or an organization of any size (including a distinct unit of an organization) that has multiple paid hosts.
Zoom calculates net dollar expansion rate as of a period end by starting with the annual recurring revenue (ARR) from all customers with more than 10 employees as of 12 months prior (Prior Period ARR). Zoom defines ARR as the annualized revenue run rate of subscription agreements from all customers at a point in time. We then calculate the ARR from these customers as of the current period end (Current Period ARR), which includes any upsells, contraction, and attrition. Zoom divides the Current Period ARR by the Prior Period ARR to arrive at the net dollar expansion rate. For the trailing 12 months calculation, Zoom takes an average of the net dollar expansion rate over the trailing 12 months.
Press Relations
Priscilla Barolo
Manager, Communications for Zoom
press@zoom.us
Investor Relations
Tom McCallum



Head of Investor Relations for Zoom
408.675.6738
investors@zoom.us



Zoom Video Communications, Inc.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
As of
October 31,
2019
January 31,
2019
Assets
Current assets:
Cash and cash equivalents$230,874  $63,624  
Marketable securities580,526  112,777  
Accounts receivable, net95,770  63,613  
Deferred contract acquisition costs, current39,609  26,453  
Prepaid expenses and other current assets72,620  10,252  
Total current assets1,019,399  276,719  
Deferred contract acquisition costs, noncurrent40,792  29,063  
Property and equipment, net53,848  37,275  
Operating lease right-of-use assets53,308  —  
Other assets, noncurrent20,710  11,508  
Total assets$1,188,057  $354,565  
Liabilities, convertible preferred stock, and stockholders’ equity (deficit)
Current liabilities:
Accounts payable$3,202  $4,963  
Accrued expenses and other current liabilities128,064  32,256  
Deferred revenue, current186,537  115,122  
Total current liabilities317,803  152,341  
Deferred revenue, noncurrent15,062  10,651  
Operating lease liabilities, noncurrent50,132  —  
Other liabilities, noncurrent32,543  39,460  
Total liabilities415,540  202,452  
Convertible preferred stock—  159,552  
Stockholders’ equity (deficit):
Preferred stock—  —  
Common stock275  89  
Additional paid-in capital786,778  17,760  
Accumulated other comprehensive income (loss)651  (135) 
Accumulated deficit(15,187) (25,153) 
Total stockholders’ equity (deficit)772,517  (7,439) 
Total liabilities, convertible preferred stock, and stockholders’ equity (deficit)$1,188,057  $354,565  

Note: The amount of unbilled accounts receivable included within accounts receivable, net on the condensed consolidated balance sheets was $10.8 million and $7.2 million as of October 31, 2019 and January 31, 2019, respectively.



Zoom Video Communications, Inc.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except share and per share amounts)

Three Months Ended
October 31,
Nine Months Ended
October 31,
2019201820192018
Revenue$166,593  $90,121  $434,407  $224,717  
Cost of revenue30,845  16,843  82,849  41,476  
Gross profit135,748  73,278  351,558  183,241  
Operating expenses:
Research and development17,573  8,893  46,410  22,206  
Sales and marketing96,048  53,454  239,741  130,769  
General and administrative23,806  11,994  63,264  29,591  
Total operating expenses137,427  74,341  349,415  182,566  
(Loss) income from operations(1,679) (1,063) 2,143  675  
Interest income, net3,231  477  6,753  1,376  
Other income, net978  128  2,921  214  
Net income (loss) before provision for income taxes2,530  (458) 11,817  2,265  
Provision for income taxes319  140  1,851  378  
Net income (loss)2,211  (598) 9,966  1,887  
Undistributed earnings attributable to participating securities(4) —  (2,493) (1,887) 
Net income (loss) attributable to common stockholders$2,207  $(598) $7,473  $—  
Net income (loss) per share attributable to common stockholders:
Basic$0.01  $(0.01) $0.03  $0.00  
Diluted$0.01  $(0.01) $0.03  $0.00  
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders:
Basic273,316,850  85,645,323  219,295,445  83,198,339  
Diluted292,771,122  111,000,300  241,512,569  109,303,996  




Zoom Video Communications, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)

Three Months Ended
October 31,
Nine Months Ended
October 31,
2019201820192018
Cash flows from operating activities:
Net income (loss)$2,211  $(598) $9,966  $1,887  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock-based compensation expense21,795  2,652  46,532  4,627  
Amortization of deferred contract acquisition costs9,913  5,715  25,939  14,362  
Depreciation and amortization4,415  1,841  11,589  4,459  
Amortization of operating lease right-of-use assets1,724  —  4,840  —  
Provision for accounts receivable allowances1,283  437  3,976  1,493  
Other(1,063) (21) (1,577) 17  
Changes in operating assets and liabilities:
Accounts receivable(1,525) (5,175) (36,886) (27,775) 
Prepaid expenses and other assets1,158  (2,318) (22,439) (6,450) 
Deferred contract acquisition costs(17,124) (10,107) (50,824) (32,875) 
Accounts payable1,665  575  (1,118) 369  
Accrued expenses and other liabilities18,562  8,083  53,485  22,644  
Deferred revenue20,345  17,147  76,579  52,583  
Operating lease liabilities, net(1,429) —  (4,724) —  
Net cash provided by operating activities61,930  18,231  115,338  35,341  
Cash flows from investing activities:
Purchases of marketable securities(150,620) (18,883) (629,107) (49,159) 
Maturities of marketable securities113,200  19,792  164,140  43,547  
Purchases of property and equipment(7,195) (8,094) (28,132) (18,121) 
Purchase of equity investment(3,000) —  (3,000) —  
Net cash used in investing activities(47,615) (7,185) (496,099) (23,733) 
Cash flows from financing activities:
Proceeds from initial public offering and private placement, net of underwriting discounts and commissions and other offering costs(455) —  542,492  —  
Proceeds from international employee stock sales to be remitted to employees and tax authorities48,547  —  48,547  —  
Proceeds from exercise of stock options, net of repurchases3,393  2,138  5,584  2,714  
Proceeds from issuance of convertible promissory notes and derivatives—  15,000  —  15,000  
Principal payments on capital lease obligations—  —  —  (92) 
Net cash provided by financing activities51,485  17,138  596,623  17,622  
Net increase in cash, cash equivalents, and restricted cash65,800  28,184  215,862  29,230  
Cash, cash equivalents, and restricted cash – beginning of period216,030  37,867  65,968  36,821  
Cash, cash equivalents, and restricted cash – end of period$281,830  $66,051  $281,830  $66,051  




Zoom Video Communications, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(Unaudited, in thousands, except share and per share amounts)

Three Months Ended
October 31,
Nine Months Ended
October 31,
2019201820192018
GAAP (loss) income from operations$(1,679) $(1,063) $2,143  $675  
Add:
Stock-based compensation expense and related payroll taxes22,948  2,652  48,079  4,627  
Non-GAAP income from operations$21,269  $1,589  $50,222  $5,302  
GAAP net income (loss) attributable to common stockholders$2,207  $(598) $7,473  $—  
Add:
Stock-based compensation expense and related payroll taxes22,948  2,652  48,079  4,627  
Undistributed earnings attributable to participating securities —  2,493  1,887  
Non-GAAP net income$25,159  $2,054  $58,045  $6,514  
GAAP net income (loss) per share - basic and diluted:
GAAP net income (loss) per share - basic$0.01  $(0.01) $0.03  $0.00  
GAAP net income (loss) per share - diluted$0.01  $(0.01) $0.03  $0.00  
Non-GAAP net income per share - basic$0.09  $0.01  $0.22  $0.03  
Non-GAAP net income per share - diluted$0.09  $0.01  $0.20  $0.02  
GAAP weighted-average shares used to compute net income (loss) per share - basic273,316,850  85,645,323  219,295,445  83,198,339  
Add:
Non-GAAP unweighted adjustment for common stock issued in connection with IPO—  152,665,804  50,116,650  152,665,804  
Non-GAAP weighted-average shares used to compute net income per share - basic273,316,850  238,311,127  269,412,095  235,864,143  
GAAP weighted-average shares used to compute net income (loss) per share - diluted292,771,122  111,000,300  241,512,569  109,303,996  
Add:
Non-GAAP unweighted adjustment for common stock issued in connection with IPO—  152,665,804  50,116,650  152,665,804  
Non-GAAP weighted-average shares used to compute net income per share - diluted292,771,122  263,666,104  291,629,219  261,969,800  
Net cash provided by operating activities$61,930  $18,231  $115,338  $35,341  
Less:
Purchases of property and equipment(7,195) (8,094) (28,132) (18,121) 
Free cash flow (non-GAAP)$54,735  $10,137  $87,206  $17,220  
Net cash used in investing activities$(47,615) $(7,185) $(496,099) $(23,733) 
Net cash provided by financing activities$51,485  $17,138  $596,623  $17,622