ZM Grows by 265,400 customers w +10 seats

?Reading through the many ZM posts on the board since ZM announced earnings on Tuesday, June 2, including the notes from the earnings call that I posted, I did not see the following number quoted by any of us that documents the growth in customers with more than 10 seats (customers).

Thinking about the exponential growth impact the company will likely experience going forward from the network effect alone is, well…mind boggling.
?
“…Zoom’s customer numbers were similarly sharp, with the firm reporting that it had 265,400 customers with more than 10 seats (employees) at the end of the quarter, which was up 354% from the year-ago period…”

https://techcrunch-com.cdn.ampproject.org/c/s/techcrunch.com…

Vetting the 265,400 number further from 3 additional sources…
https://zephyrnet.com/daily-crunch-zoom-reports-spectacular-…

https://www.theverge.com/2020/6/2/21277006/zoom-q1-2021-earn…

https://www.engadget.com/zoom-earnings-214253721.html

sjo

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Vetting the 265,400 number further from 3 additional sources…

Well, how about from the horse’s mouth (aka earnings announcement):

Approximately 265,400 customers with more than 10 employees, up 354% year-over-year
https://investors.zoom.us/news-releases/news-release-details…

So, to be clear, Zoom exited Q1 with that many 11+ seat customers, they actually “only” grew that segment by 183,000:

We continue to see expansion in the up-market as we ended Q1 at 769 customers with greater than $100,000 in trailing 12 months revenue, up 90% year-over-year. This is an increase of 128 customers over Q4, a record number of adds in a quarter. Further demonstrating the strength in the up-market was the addition of over 500 customers with greater than $100,000 in annual recurring revenue in Q1. This is a one-time metric that we are sharing to provide more insight to our Q1 results. For customers with more than 10 employees, we added over 183,000 in Q1, exiting with a total of approximately 265,000 customers in this segment. Year-over-year, we added over 206,000 new customers, growing 354%.
https://www.fool.com/earnings/call-transcripts/2020/06/03/zo…

Of the 265,400 customers (each with 11 or more users) they had at the end of April (Q1 end), 183,000 were new. YoY they added 206,000 customers in this 11+ segment.
Math says:
End of Jan 2019: 59,400 customers with 11+ seats
End of Jan 2020: 82,400 customers with 11+ seats (added 23,000 customers during FY2020)
End of Apr 2020: 265,400 customers with 11+ seats (added 206,000 customers during Q1 FY2021!)

That’s absolutely amazing growth in customers in Q1, almost 9X the whole prior year in one quarter! Wow!

They shared a “one-time metric” (meaning we’ll not hear this number again) of adding 500 customers who each spend $100K+ annually during Q1. They exited the quarter with 769 of them (assuming the “trailing” qualifier doesn’t change things), so they only had 269 at the end of Jan 2020. So, they grew by almost 200% in the “big whale” enterprise segment during Q1. This is astounding and really great to see, as it must mean they’re taking business away from the 800-lb gorillas Cisco and Microsoft.

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They shared a “one-time metric” (meaning we’ll not hear this number again) of adding 500 customers who each spend $100K+ annually during Q1. They exited the quarter with 769 of them (assuming the “trailing” qualifier doesn’t change things), so they only had 269 at the end of Jan 2020. So, they grew by almost 200% in the “big whale” enterprise segment during Q1. This is astounding and really great to see, as it must mean they’re taking business away from the 800-lb gorillas Cisco and Microsoft.

I could be wrong, but I’m reading this differently. Your 269 number is definitely incorrect. The metric they provide is the number of customers spending $100K+ in ARR on a TTM basis. As you mention, they exited this quarter with 769. That number was 641 last quarter (end of January, 2020) and 405 last year. I interpret the 500+ customer adds in this category as signing up at $100k+ right off the bat but not yet reported because they haven’t been on board for 12 months yet. That means this number could jump significantly in future quarters.

The details are on slide 9 here: https://investors.zoom.us/static-files/32469119-f0a2-4e77-a2…. How are others interpreting this?

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The metric they provide is the number of customers spending $100K+ in ARR on a TTM basis. As you mention, they exited this quarter with 769. That number was 641 last quarter (end of January, 2020) and 405 last year.

Thanks for the correction - that slide deck makes that clear (thanks for the pointer!).

I interpret the 500+ customer adds in this category as signing up at $100k+ right off the bat but not yet reported because they haven’t been on board for 12 months yet.

OK, so that “trailing” qualifier does change things. Why would they separate out customer numbers like this? They’re not talking revenue recognition in these things.

That means this number could jump significantly in future quarters.

I guess you’re saying the number Customers with >$100K in Trailing 12-Month Revenue will grow thanks to that 500+ customer adds. OK.

OK, so that “trailing” qualifier does change things. Why would they separate out customer numbers like this? They’re not talking revenue recognition in these things.

They said it’s to “provide more insight to our Q1 results.”

My takeaway is that the added customers were not all or even primarily individuals or small companies just sharing one account. Companies adding $100k worth of users right off the bat are probably sticking with them. But they would just show up as any other individual customer in this report if they didn’t mention it specifically. One could argue they could have just kept it to themselves, but in the interest of providing a picture of the company to investors, it’s certainly welcome information.

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