Not sure if this has been discussed yet, didn’t see anything from a cursory search, if it has already been discussed my apologies.
Zoom is a company that specializes in video conferencing software, which a lot of our SAAS company uses. The founder had been VP of Engineering at Webex before it was sold to Cisco back in 2007. He left Cisco after 4 years after acquisition to create zoom. I believe the founder already being financially comfortable from a prior sale is an advantage for common shareholders since he is motivated and will continue to be active in the business (he has said in some interviews that he is taking the company public because he did not want to sell again, after experiencing how Cisco treated Webex after acquisition). He will have 22% of common shares.
Revenue has gone from $61m in 2017, to $151m in 2018, to $331m in 2019, so growing at more than 100% each year or at about the rate of some of the portfolios on this board. TAM estimated at $43.1b (page 5). NPS is over 70 (page 2) and TTM Net dollar expansion rate is 140% (page 56)
Gross margins are about 80%. R&D at 10% of revenue, S&M 55%, G&A at 13%.
They are GAAP profitable before distributions to preferred convertible stockholders in 2019 (depending on how you look at it, either they will be diluted by 153m shares due to the convertibles, or they will distribute a portion of their $7.6m in earnings to their preferred stockholders). They are cash flow positive (+$30m) in 2019, with 51m cash from operations.
Balance sheet is liquid at $175m in cash/marketable securities
IPO should hit within the next month (suggested ticker is ZM), it will be interesting to see where the opening valuation sets - my guess is much richer than ZS/MDB with the 100%+ growth rate and 80% gross margins, perhaps in excess of 35x sales
Zoom is a company that specializes in video conferencing software, which a lot of our SAAS company uses.
I think it is a mistake to think of them as video conferencing software. Most users are not likely to actually use the video feature but use them as the main location for all meetings. Users at home, their desk or in conference room joining meetings over their devises to listen or participate in meetings with content sharing.
We use a similar software at my company and as almost every meeting I have is with people in different countries, they are all done over the collaboration software. The majority of users don’t turn on their video but if you use a conference room, the video will turn on by default though you can always turn it off.
Not just SAAS companies will be using this type of application but likely almost every company out there but there are lots of choices so it is highly competetive space.
There’s lots of warnings in the S-1 regarding competition (page 89 has a nice listing), and as both you and jds have pointed out, it will be a highly contested space. But then again… so is cloud security (ZS), communication API (TWLO), and online storefronts (SHOP). Generally the companies this board hold in its portfolios all operate in highly competitive spaces but have been able to shine because of great execution. None of the companies discussed here are set and forget type businesses. You’ll have to watch like a hawk from quarter to quarter to avoid getting sucked into a company like NTNX.
I can spend some paragraphs citing how much users love Zoom because of accessibility and reliability (same reason TWLO has been a winner so far), and the story could always change, but 100%+ growth year over year seems like great execution to me. At least so far
Aphalite, thanks for posting that. Those numbers are amazing. We’ve used all kinds of different video-conf technology across our company offices and Zoom is incredible. By far the best. It seemingly always works. And for conference rooms, you can make them “zoom enabled” and have video meetings started w a one-touch button. Think of all those meetings where you need to get IT in the room to get things setup. Or a bunch of different folks all over the world connected separately ---- Zoom just works w a click.
We’ve used Skype, Teams, Globalmeet, GoToMeeting. They all pretty much suck (is that a technical term)?!
As a business, we pretty much demand the use of Zoom. The techies can have their experimental tools and laboratory experiments ---- while we conduct real biz over Zoom.
There moat is that it’s simple and it works…and works well.
We’ve used Skype, Teams, Globalmeet, GoToMeeting. They all pretty much suck (is that a technical term)?! As a business, we pretty much demand the use of Zoom. The techies can have their experimental tools and laboratory experiments ---- while we conduct real biz over Zoom.
I concur with JKB2016. I was turned on to Zoom last May…and was floored with how EASY it was to use. I have staff for my business in 3 cities…and 60 independent contractors We pull together at a moments notice. We can use any device…laptop, desktop, iphone, android, ipad…etc. VERY SEAMLESS…
Anyone can share a document…the system switches video to the person speaking. The COORDINATOR pays a subscription…but the other users access for free…we can easily record meetings…
I have some representatives that have used ZOOM to record their sales/phone presentations, then forward the recording for review/critique.
Those are just some incredible numbers. I’ve been excited about this one since that Okta report on Business at Work 2019 showed Zoom just skyrocketing in adoption. Here’s that report again.
I’ve used all the conference services. In particular I’ve used Webex and GotoMeeting extensively. In my view, Zoom has them all beat. Its so easy to use. The video conferencing is higher performing.
I would do calls throughout my commute on my mobile phone. It was so easy (just click on the meeting and bam, you are in).
In my last company, when we switched from Webex to zoom, we paid a third the price and it felt like you had 2x the functionality (it isn’t 2x, but it feels that way because it was so reliable and easy to use).
There are third party integrators that develop conference room systems for zoom. With Webex, we could never make them work consistently. With zoom, it was perfect. Seamless.
Multi-national companies will quickly migrate to make every meeting a zoom meeting. Every employee that collaborates with others (who doesn’t) will need access.
I’ve been waiting for this IPO. I tried to buy shares on the private market. I am a buyer on day-1 unless valuation is just insane (it will be high obviously…)
I went through the S-1 filing and there is plenty to like.
Triple digit revenue growth is sure exciting, as is the stellar retention rate the last 3 quarters: 138%, 139%, 140% (company started tracking this metric in August of 2017)
Also the growth in 100K accounts is terrific:
54 as of 1/31/17
143 as of 1/31/18
344 as of 1/31/19
No single customer accounts for greater than 5% of revenues through 1/31/19.
RPO/deferred revenue of $311.7 mln thru 1/31/19
Founder and CEO Eric Yuan holds 22% of the shares, and executives and directors hold 36.7% of shares.
Despite the hypergrowth, the company has been cash flow positive (and growing the last 3 years)
1/31/17: 9.3mln
1/31/18: 19.4mln
1/31/19: 51.3mln
APAC and EMEA contributed 17% and 18% of revenues in 2018 and 2019 and the company is investing in staff and offices for future growth in international sales.
Customers sure seem to love the easy to use tech and the reliability of it.
I’ll be keeping an eye out for this IPO - it looks too good for me to pass up.
- Despite the hypergrowth, the company has been cash flow positive (and growing the last 3 years)
…I’m wondering, with this astounding organic growth, ‘why go public?’…
…what plans are anticipated for the proceeds from the sale to the public?..we’ve seen, over the past several decades, a massive shrinking of the public markets in terms of publicly traded companies…some of that is due to smaller companies being snatched up before going public, and some of it is due to the regulations required to play in the public sphere…
…FB held out until the number of investors forced them public…others use to the cash to fund expansion, necessary for capital intensive businesses…
…but I always question the motivations of companies taking their companies public…
Eric Yuan, CEO of San Jose-based Zoom Video Communications, was named the top CEO of a large U.S. company in Glassdoor’s 2018 list of Highest Rated CEOs.
Glassdoor, a popular job listings and ratings website, based the ranking entirely on employee feedback and classified large companies as those with at least 1,000 employees. As with last year, Bay Area CEOs were heavily represented on Glassdoor’s list. Yuan was ranked No. 1 on the list this year — nationally and for the Bay Area — and is the first person of color to ever take the No. 1 spot among Glassdoor’s top CEO winners of U.S. companies.
I’ve used Zoom, GoToMeeting, Webex, Skype and maybe a few others.
Probably several thousand times in the last 8 or 10 years (5 or 10 times per week)
90% are audio only or include powerpoint or other presentations, etc.
Most of my meetings recently have been with Skype. This is not the consumer Skype product, which I’ve used a few dozen times. It is the Microsoft business Skype. It integrates seemlessly into Outlook. One click when setting up any meeting makes it a Skype meeting.
When I walk into a conference room, it is one tap on a Polycom phone or an in-room tablet to connect audio and/or video to the meeting…plus cell phones and laptops can connect in to share content, etc.
Some companies send invites with their system and it is always a bit of a pain to setup, download an app, etc. I’m sure if you use these all the time it is much easier.
I don’t know who has how much market share. But there is a lot of competition and there are numerous improvements being made.
I had a Zoom meeting last week. Went perfectly…the other company said we needed to use it because they needed to run Linux for a live demo and Skype doesn’t support this.
In regards to a moat, wouldn’t their superior functionality be considered a kind of moat? I haven’t used Zoom per se, but my experience with videoconferencing software as a whole is that it’s consistently buggy at best, and non-functional at worst, especially when dealing with large groups in multiple locations.
In regards to a moat, wouldn’t their superior functionality be considered a kind of moat? I haven’t used Zoom per se, but my experience with videoconferencing software as a whole is that it’s consistently buggy at best, and non-functional at worst, especially when dealing with large groups in multiple locations.
That’s a good point - and we have had many folks who are users tell us just that. Also, immediately dismissing a company because it’s “just videoconferencing”, is akin to dismissing Chipotle when McDonald’s spun them out back in 2007/08 because they “just make tacos/burritos”, or Starbucks 20 years ago because they make “overpriced coffee” and so forth.
It’s fine to be skeptical, but when you look at the numbers, it sure seems like they are doing something right.
replying from my phone while my wife drives and trying to avoid her getting mad at me for being on my phone which is why half my post didn’t make sense.
