Zoom press releases today

https://investors.zoom.us/news-releases/news-release-details…

Doesn’t say what they are planning to do with the proceeds. They already have $1.9 B in cash. Should have done this a lot earlier.

https://investors.zoom.us/news-releases/news-release-details…

Wow. They said Zoom Phone is going to be a big grow driver this year.

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I notice the announcement as well. I was disappointed that my shares will be diluted.

However, does it mean ZM is preparing to have shares available for the S&P inclusion?

I think there may be many speculations on why they decide to add more shares at this point.

Would love to learn what people who still hold ZM think of this offering.

Once again, I want to thank this board for teaching me so much since 2020.

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  1. If I did the math right I think this works out to around 2% share dilution ($1.5B/current share price = 4.2M shares and the float is 196M according to a quick google search). I’m good with this if it grows the company more than 2%. …but I always get confused by the source of the offering. This says All of the shares in the proposed offering will be sold by Zoom. …so new shares are not being created, but rather released from Zoom’s holdings…is that dilution?

  2. Finally some insight in to Zoom Phone! Let me remind you all (in case you forgot) that Zoom is not calling itself a “video conferencing” company. They are a “unified communications platform…which also includes Zoom Meetings, Zoom Chat, Zoom Rooms, and Zoom Video Webinars.” That isn’t even the full list of offerings either as it ignores the app store and integrations and anything in the future they may develop. This is the reason I still very much believe Zoom can deliver top-quality growth for us. I have reduced my position, from around 20% to 13%, but that is still a very large piece of my 8-company pie. This is a piece of news I have been craving.

Also remember they are only in 44 countries and almost all of them have only been up and running for a couple of quarters!

This is a good bit of information (maybe it is known but it is clarifying to me):

“The one-click option to elevate calls to meetings allowed our users ease, and reduced time spent, alleviating the need to juggle multiple platforms. Zoom’s pricing plans made it easy to roll out a single solution across our offices around the world.”

Zoom Phone is available for customers at the Zoom Pro tier and above as an add-on. Zoom Phone is also included as part of Zoom United, which features Zoom Meetings and Chat in one package. Please visit zoom.com/phonesystem for more information.

…so this is a land-and-expand segment. I wonder how much phone drove some of these customers to Zoom as a gateway product and how many started with Zoom and then added this.

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  1. The percents of dilution are really small and we should not care. However, I suspect ZM is trying to get money for an acquisition. ZM has a lot of cash and a large operation margin now. The revenue is more than sufficient to cover all the costs. If not for one or several potential acquisitions, ZM should only worry about where to spend cash, instead of how to get more cash.

I am optimistic about this. ZM should have been doing this since a long time ago. It now has the opportunity to reach many enterprise clients and individual customers. Add another complimentary product utilizing the same sales channel seems to be an easy route to grow the revenue.

  1. Zoom Phone: I am actually a little disappointed. The 1 million seats of Zoom phone contribute to around $10-$15/Month (from different ZM pricing plan) * 1 million * 3 months/qtr = $30-45 million per quarter. If Zoom phone has a 100% year over year growth next year (like ZM video several years ago), it only contributes 4%-6% of revenue growth (30 to 45 vs 777 per quarter.) Will Zoom Phone be able to grow 200% or 300% per year? Given the existing sales relationship and Zoom’s reputation, it could be possible. But that will only be 8% to 18% annual growth rate contribution.

I have always been very bullish about Zoom, and thus feel disappointed that Zoom Phone only contributes to 8% to 18% of growth. But I guess this is still more than the market consensus, which values ZM as a 30% to 40% growth company.

  1. Overall: ZM stock price has been severely punished in the last two months. Hopefully, today’s news release gives the market some confidence in its future growth. The price shifting today (+5.66%) largely results from a 318k share purchase by ARK at around 1:26 PM. Since it is the behaviour of one institution rather than a large group of buyers, it is hard to figure out what is the rationale behind this purchase. – It may not be related to the news release at all. I learned from this board to focus on long term fundamentals, but to admit or not, short term momentum plays a role in growth stock (Tesla, I am looking at you!) Maybe today’s momentum can remind the market it’s time to re-evaluate ZM.
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Zoom Phone: I am actually a little disappointed. The 1 million seats of Zoom phone contribute to around $10-$15/Month (from different ZM pricing plan) * 1 million * 3 months/qtr = $30-45 million per quarter. If Zoom phone has a 100% year over year growth next year (like ZM video several years ago), it only contributes 4%-6% of revenue growth (30 to 45 vs 777 per quarter.) Will Zoom Phone be able to grow 200% or 300% per year? Given the existing sales relationship and Zoom’s reputation, it could be possible. But that will only be 8% to 18% annual growth rate contribution.
I have always been very bullish about Zoom, and thus feel disappointed that Zoom Phone only contributes to 8% to 18% of growth.

Far from being disappointed, I actually found this press release encouraging. I also think we have lots of tidbits of information about Zoom Phone which we can piece together to get a pretty complete picture. Here’s what we know about Zoom Phone, relevant to this press release:

  • In mid October Zoom announced they had sold 500k+ Phone seats trailing twelve months (Zoomtopia).
  • 3 months later and yesterday Zoom announced they had reached 1 million Phone seats.
  • 22% of Phone customers are new to Zoom (Zoomtopia).
  • Zoom is hiring for Phone exponentially, with new openings rising dramatically in December: https://twitter.com/AznWeng/status/1349011412606189573/photo…

So what is this telling us? Well Zoom has DOUBLED the number of Phone seats in the last 3 months and while it was already Zoom’s fastest growing product in Q3, it is continuing to accelerate. Perhaps this is not surprising, as we already knew that Zoom Phone was being rolled out from 8 to 44 countries.

Now we wouldn’t expect Zoom Phone to continue to double sequentially every quarter, but if we use the 500k Zoom Phone seats gained in Q4 as a benchmark we might expect Zoom to add a minimum of 500k of Phone Seats per quarter in 2021, bringing total Zoom Phone seats to >3 million by the end of next financial year (FY22) - representing +200% growth YoY.

Also consider the pace of hiring for Phone, focus on international expansion for Phone, TAM for Phone, ample pipeline of customers for Phone, slow sales cycle and migration for Phone, demand for Phone when offices reopen - and we begin to get more of a sense of why management say that ‘absolutely it will be a key growth driver for next year’.

So what does ‘key’ actually mean? Let’s say the assumption of $10-15 revenue contribution per month is correct for a Phone seat (not taking into account the incremental revenue from the 22% of new customers & for the unified plan & cross-sell opportunity):


                              **Q1 	             Q2 	   Q3 	           Q4               Total FY22**             
Phone Seats                             1,500,000 	2,000,000 	2,500,000       3,000,000 	
Revenue contribution ($) @$10        	45,000,000 	60,000,000 	75,000,000	90,000,000     **270,000,000**  
Revenue contribution ($) @$15        	67,500,000 	90,000,000 	112,500,000 	135,000,000        **405,000,000**  

Phone contribution of $270m-405m would represent +10%-16% growth on the FY21 likely exit rate of $2.6bn. The Q4 exit rate annualised would represent $360m-$540m Phone contribution.

All in all, I don’t think anyone can realistically expect Phone alone to shift Zoom from (for example) a 50% grower to a 100% grower in 2021 (FY22), because it is a new product growing from a smaller base of revenue. However, if it were to contribute 10-15% revenue growth at 200% growth YoY, this is moving the dial and creates a substantial base going into FY23 for the market opportunity.

This along with the other monetisation opportunities, might mean Zoom exceeds lowered expectations in 2021. Again, I come back to: how much is enough…
https://discussion.fool.com/zoom-how-much-is-enough-34713078.asp…

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