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February 28, 2019
Eric S. Yuan
President and Chief Executive Officer
Zoom Video Communications, Inc.
55 Almaden Boulevard, 6th Floor
San Jose, California 95113
Re: Zoom Video Communications, Inc.
Amendment No. 1 to Draft Registration Statement on Form S-1
Submitted February 15, 2019
CIK No. 0001585521
Dear Mr. Yuan:
We have reviewed your amended draft registration statement and have the
following
comments. In some of our comments, we may ask you to provide us with
information so we
may better understand your disclosure. Unless we note otherwise, our references
to prior
comments are to comments in our February 7, 2019 letter.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments.
Amendment No. 1 to Draft Registration Statement on Form S-1
Prospectus Summary, page 4
1. You state that you define monthly recurring revenue (MRR) as recurring
revenue for the
last month of the period from applicable customers under contract with
you for a recurring
subscription. Please clarify whether monthly subscription customers are
included in MRR
and, if so, explain your basis for annualizing revenue derived from such
customers.
2. We also note from your revised disclosure on page 77 that although
customers can cancel
their subscriptions at any time, any amounts owed under the contract
term remain due and
payable. If, for example, a customer with a three-year contract were to
cancel their
subscription in year one, please clarify for us whether they would be
required to pay all
Eric S. Yuan
FirstName LastNameEric S. Yuan
Zoom Video Communications, Inc.
Comapany NameZoom Video Communications, Inc.
February 28, 2019
February 28, 2019 Page 2
Page 2
FirstName LastName
amounts due for years two and three. To the extent they can cancel
without incurring such
penalties, tell us how you determined that annualizing monthly revenue
for cancellable
contracts is an appropriate measure for analyzing your business.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, page
55
3. Your response to prior comment 1 states that your metric disclosing
the percentage of
customers that started with at least one free host in the past 12
months with more than a
certain dollar amount of annual recurring revenue is intended to
illustrate the impact of
your free service model to drive future revenue. However, it remains
unclear why
providing this information for only a subset of your customer base is
useful to investors.
In this regard, it appears that disclosing the number of total free
hosts and total paying
customers would provide material insight, both historically and
prospectively, into your
ability to convert free hosts to paying customers. Please disclose
this information or
explain why you believe it is not material.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Key Factors Affecting Our Performance, page 57
4. Please provide the net dollar based expansion rate information for
each period
presented and include a discussion of any trends in this measure.
Key Business Metrics, page 58
5. We note your revised disclosures in response to prior comment 7. To
add context to these
measures, please revise to disclose the percentage of revenue
generated from both your
customers with greater than 10 employees and customers with greater
than $100,000 of
annual recurring revenue for each period presented. If true, revise to
clarify that the
customers with greater than $100,000 of annual recurring revenue are
also included in the
customer count and total revenue of customers with greater than 10
employees. Lastly,
explain further to us how the customer count information is used to
measure your
performance, identify trends, formulate financial projections and make
strategic decisions
and tell us whether there are any other measures used for such
purpose.
6. Your response to prior comment 8 states that customers with greater
than $100,000 annual
recurring revenue accounted for 25% and 27% of total ARR as of the
fiscal years ended
January 31, 2017 and 2018, respectively. As it appears that your
non-large enterprise
customers comprise the majority of ARR, please tell us and revise to
also disclose the
total number non-large enterprise customers as of the end of each
period presented in your
financial statements and the percentage of revenue attributable to
both your large
enterprise and non-large enterprise customers for these same periods.
If you believe the
percentage of total ARR is a more appropriate measure, please explain
the reasons for
your belief in your response.
Eric S. Yuan
Zoom Video Communications, Inc.
February 28, 2019
Page 3
Results of Operations
Revenue, page 61
7. We note your revised disclosures in response to prior comment 9. Please
further revise to
quantify the amount of revenue growth from new versus existing customers
so that readers
can assess the relative contribution of each of these factors.
Business
Our Customers, page 83
8. Your revised disclosure names certain of your customers and indicates
that your current
customer base spans numerous industries. While your disclosure appears
to indicate that
the named customers are representative of customers in a variety of
industry categories,
please revise to disclose whether these customers are representative of
your overall
customer base and to explain the criteria used to select these
customers.
You may contact David Edgar, Staff Accountant, at (202) 551-3459 or
Kathleen Collins,
Accounting Branch Chief, at (202) 551-3499 if you have questions regarding
comments on the
financial statements and related matters. Please contact Mitchell Austin, Staff
Attorney, at (202)
551-3574 or Jan Woo, Legal Branch Chief, at (202) 551-3453 with any other
questions.
Sincerely,
FirstName LastNameEric S. Yuan Division of
Corporation Finance
Office of
Information Technologies
Comapany NameZoom Video Communications, Inc.
and Services
February 28, 2019 Page 3
cc: Alex K. Kassai, Esq.
FirstName LastName