Zoom Q121 recap

Investment Analysis Clubs Saul’s Investing Discussions
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ZM - Q121

PR: https://investors.zoom.us/news-releases/news-release-details…
Fool recap (Sparks): https://www.fool.com/investing/2020/06/04/zoom-stock-keeps-s…
CC transcript: https://www.fool.com/earnings/call-transcripts/2020/06/03/zo…
CC Q&A recap (sjo): https://discussion.fool.com/zoom-quarterly-earnings-call-questio…
CC recap (Sparks): https://www.fool.com/investing/2020/06/05/zoom-management-ta…
CC recap (sarksnz): https://discussion.fool.com/zm-q1-2021-cc-notes-34525824.aspx
Bear take: https://discussion.fool.com/zm-q1-what39s-better-than-perfect-34…
MajorFool ferrets out details on custs >100K: https://discussion.fool.com/darth-you-wrote-bolding-mine-number-…
BroadwayDan on the fantastic CEO: https://discussion.fool.com/zoom-ceo-eric-yuan-hero-34519852.asp…
Saul looks at next Q’s possibilities: https://discussion.fool.com/zoom-future-expectations-34525214.as…

Revenue 328.2M +169% !!!

  • Americas +150%
  • APAC + EMEA +246% !!! (25% of rev)
    Deferred Rev 552M +270% !!!
    RPO 1.1B +184% !!!
  • Current RPO 772M +222% !!!
    Adj Op Inc 54.6M +565.9% !!!
    … margin 16.6% (vs 6.7%)
    Adj Gross Margin 69.4% -1150bps, -1480bps seq
    Adj Inc 58.3M +555.1%
    Adj EPS 0.20 +566.7%
    Opex 201.1M +108.7%
    CFFO 259.0M +1066.7% !!!
    FCF 251.7M +1545.1% !!!
    … margin 76.7% (vs 12.5%) +6516bps !!!
    Cash 1.1B
    Enterprise Custs 265.4K +354%, +224% seq !!!
  • Custs >100K (TTM) 769 +90%
  • Global 200 custs +200% seq !!!
    $NER >130%

COVID-19 impacts:

  • supported 100K K-12 schools for free, across 25 countries

  • corporate donations to COVID-19 focused charities

  • also launched Zoom Cares philanthropic arm, to focus on education, climate change & social equity

  • huge explosion in customers, especially international

  • had major focus on security & privacy betterment, with multiple updates to app [see Saul’s sum up: https://discussion.fool.com/what-a-three-day-blitz-by-zoom-34497… ]

  • acquired Keybase to accelerate integrating end-to-end (E2E) encryption https://investors.zoom.us/news-releases/news-release-details…

  • partnered with Secure Code Warrior for improving its developers’ best practices in security & privacy

  • several major schools have removed their restrictions in using Zoom after security/privacy improvements

  • will be opening multiple R&D centers in US, with ~500 empl expected https://investors.zoom.us/news-releases/news-release-details… [EXCITING! I pontificate more on R&D below.]

  • 71% of growth is new custs, 29% of growth in existing custs expanding

  • NOTE: custs >100K figures were in TTM (actual spend) not ARR (annualized out)

  • 500 new lands at ARR > 100K (so will show up in Custs >100K over next 1-3Qs)

  • peaked at >300M daily meeting participants in April, compared to 10M last December

  • 20x increase in annualized meeting minutes run rate (100B in Jan to >2T in April)

  • had to lean on AWS heavily to help scale, and now Oracle cloud

  • new banking customer deployed 175K licenses this Q

  • non-enterprise custs (<10 empl) ramped up to 30% of revenue (+1000bps seq!)

  • will continue to expand into education, telemedicine, and telehealth markets

  • assuring consistent video experience was #1 focus - opportunities to up-sell & monetize will flow from that

  • company and CEO have always taken full responsibility for lack of focus on security, and for not tailoring Zoom for consumer users w/o IT depts

First analyst in Q&A: “You just delivered one of, if not the, greatest all-time quarter in enterprise software history.”

My stance: The already successful Zoom is… way way more successful now. It just about went up sequentially what it went up YoY last earnings report… meaning we just fast-forwarded a year of growth into 1/2 a quarter. Customers and usage exploded over the prior Q, into 20 times the usage by 30 times the participants. All those new customers means cash, blowing up FCF yield to ~77%. That is not a typo. It rose 65 percentage points YoY, and 62.5 of that was sequentially. Saul pointed out that this won’t continue, as a lot of upfront payments came in from all these new customers, and the higher ratio of monthly subs (now 30%, from 20% last Q). But that is a lot of cash to put to good use now. Add in the full effect they’ll get from this next upcoming Q, and their entire business has been fast-forwarded >2 years in a quarter and a half. I am in shock after reading this report, it is that astounding. The fact we haven’t yet seen a full quarter of The New Zoom is… a word that is more than astounding.

Let’s look at things Q over Q (Q4 to Q1), as YoY is pretty meaningless given how rapid this has taken place.

  • Revenue growth +78% to +169% (2.17x).
  • Adj Op inc growth +292% to +555% (1.9x).
  • Gross margin 84.2% to 69.4%.
  • Adj Op margin 20.4% to 16.6%.
  • Adj EPS 0.15 to 0.20.
  • FCF margin 14.1% to 76.7%.
  • Customers 81.9K to 265.4K (3.24x)
  • Customer growth +61% to +354% (5.8x).
  • Customer >100K growth +86% to +90%.
(°o°)

Revenue growth rate more than doubled in a half a quarter. Saul, quite simply, nailed this number in his estimate here: https://discussion.fool.com/zoom-expectations-34523974.aspx . Revenue nearly rose as much sequentially (+74.3%) as it did YoY in the prior earnings report (+78%).

Operating income, of course, couldn’t keep up with that. They had lots of expanded infrastructure to support the massive increase in traffic, and huge number of new accounts they supported for free (like those 100K schools). So while revenue growth rate grew 2.17x, op inc growth rate grew 1.9x. Hence the op margins retreating a bit, from 20.4% to 16.6%.

FCF yield, on the other hand, is just eye-poppingly insane. This company, founded in 2011, and IPOing just over a year ago, has 77% FCF yield from revenues growing 169%. This company is now flush with cash.

Customer growth rate more than quintupled YoY. Let that sink in – the GROWTH RATE… quintupled. Zoom more than tripled its customer base sequentially. We expected a huge increase, but that is a massive influx of new customers. They may continue to trickle in from here, depending on how long stay-at-home lasts. Yes, not all these customers will stay beyond the pandemic, especially those in that 10% chunk of revenue after small custs (<10 empl) grew from 20% to 30% of the mix. But as things ease, the subsidized free users are as well, so income will then ratchet back up.

Custs >100K growth Q to Q looks disappointing compared to overall customers, but it is not; do not let it deceive you. It is customers spending 100K over TTM, not using an estimated annual run rate (ARR), so all that massive cust growth in the last month of the Q isn’t represented in that metric at all. They then mentioned 500+ of new custs will have ARR >100K, so that TTM-based growth rate should explode as those customers reach that amount over the coming Qs.

Let’s go back to Saul’s estimate. He not only nailed this Q’s actual, but he also nailed next Q’s estimate. He guessed next quarter might see 250% revenue gain after Zoom has had 3 full months of this stay-at-home, instead of only a month and a half. Well, guidance for next Q was $495-500M, more than DOUBLE Wall St’s expectations. At the high end, that means ~243% rev growth YoY next Q. (Last few Qs of revenue = 122M, 146M, 167M, 188M, 328M.) A little bit of a beat and you hit Saul’s initial stab on the nose. Well done, sir! A toast to you!

Zoom is, quite simply, one of the most interesting public companies I think we will see in our lifetime of investing. The entire globe ran straight into a world-wide pandemic, but Zoom ran headlong into the opportunity of a lifetime. They stepped up and their platform delivered – outside of a few brief outages, which is typical (and which the competition sure suffered from as well). From here, they (or outside partners building it on their underlying tech) can easily develop highly-tailored video tools from here to address specific market verticals and needs. Picture anything that enterprises or consumers need around person-to-person video communications or live interactive broadcasting. Earnings calls. Contract agreements. College classes. Live sporting events. Remote evaluations. Couples counseling. Town hall meetings. Court room proceedings. Board meetings. One-on-one consultations. Job interviews. Family gatherings. Company-wide meetings. Speeches. Virtual conferences. Virtual concerts. The list goes on and on. Anywhere your voice is, Zoom wants to be there. Zoom just aced the land. Now comes the expand.

This pandemic brought them a lot of immediate customers, a intense amount of increased traffic, and a lot of scrutiny. They executed superbly. They built their platform to scale, and it did just that (20x the usage! 30x the users! In a month and a half!). And from there, they nimbly addressed & corrected most of the many many flaws that all that scrutiny uncovered… some of them minor (zoombooming, due to uneducated users not using security features - a sign of poorly designed UX); some of them major (lack of end-to-end encryption, issues in how they installed on Macs, routing some calls through China accidentally, secretly sending user tracking data to Facebook - all signs of a very lackadaisical approach to security and privacy). They ultimately responded to the majority of those challenges and calls to action perfectly. Competition always existed, and the rising tide of the situation rose all boats. New competing products are appearing – but there is no way Facebook or Google are going to be trusted video platforms for enterprises. Consumers? Sure, those that don’t care about privacy will use those free platforms, knowing their data is sold. Enterprises? Only to reach their Facebook-using customers.

CEO: “In terms of opportunity, I do not think we needed to have a specific consumer strategy. Our strategy is, offer one service. No matter where you are, no matter what you do, no matter which device, we just help you to stay connected. … That’s a huge opportunity.”

One important unsolved issue that remains is that Zoom needs to start offering true E2E encryption. That’s still a bit up in the air, as they may only offer it to paid customers, in the guise of preventing criminal activity. (We’ll have to see how it is implemented from here.) But Zoom just more than tripled its customers in a single Q, so the customers clearly don’t care about that right now. The sensational headlines weren’t enough to deter very many from their platform, since it is so easy to use and just works. (And, let’s be fair, if it was for E2E, customers cannot get solid E2E capabilities in the competitors’ platforms either - not at the scale of attendees that Zoom normally handles.) If you want more technical details, see this Wired article on where things stand as of June 3: https://www.wired.com/story/zoom-end-to-end-encryption-paid-…

CFO: “Our global brand awareness has spread more quickly and we have expanded into more countries than we had originally planned for FY '21.”

They have clearly won against the competition thus far, and have built the premier video conferencing platform, with a brand name becoming synonymous with video conferencing. The brand boost to Zoom during this pandemic is immeasurable! This, in turn, allowed them to capture the lion’s share of the massive influx of new customers that were suddenly stampeding to web video conferencing. From here, there are several revenue impacts easily visible on the immediate horizon. Higher education appears poised to heavily adopt remote learning this fall. Zoom Phones and Zoom Rooms are just getting started (though Rooms may not be that attractive as long as stay-at-home lasts). And they have a lot of run-way internationally, which is only 25% of rev.

Let’s look past all that, as it’s way more exciting to think about where it can all go from there, beyond the immediacy of this pandemic and the visible growth yet remaining. [Hey, I’m a technologist, and cannot help but be thinking about where the underlying technologies in our hypergrowth stories are going next.] One of the things that intrigues me most about modern web communications providers like Zoom is … Where does it all goes from here? What are these web communication platforms going to look like in 10 years? I think the absolute highest benefit of the pandemic and how it fast-forwarded Zoom is that they are now flush with a lot of cash, to use in developing whatever the next generation of video communications is, and then the generation after that (and so on, and so on). With all that FCF flowing to R&D starting now (especially into those 2 new USA-based R&D centers), imagine what can be coming next: Expanding to new devices! [Zoom for vehicles! Zoom for Roku and Amazon Fire and SmartTVs!] Holographic 3D projection of the person in AR! Simulated attendees appearing in VR! A real-life Sims environment via VR, where you can virtually shake hands with someone! Take anything you’ve seen in sci-fi movies around communication, then picture Zoom at the forefront, getting us there. (Ok, maybe not “beam us up, Scotty” from Star Trek - not sure Zoom will be splitting us into particles and be instantaneously shooting us from location to location.)

Anyhow, enough dreaming. Zoom. Just… wow. I’ve never seen a company just leapfrog a year of growth like that before, and it’ll be MORE than a year of growth this coming Q. And not sure I ever will again. There is a reason Zoom is up 224% YTD. Sure wish I would have caught on sooner, but I have little to complain about, being up 80% across all purchases over past 3 months.

What a ride. WOOO. https://www.youtube.com/watch?v=eyTz46SKv8s

-muji
long ZM

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Hi muji,

Thanks for this wonderful post. Many of us here read your posts with a lot of interest.

It is very clear from your post that you believe Q2 will be lot better than Q1 in terms of revenue. Do you see a significant increase in stock price as well, or is majority of upside already baked in the current price?

Thanks,
FoolFan

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Simulated attendees appearing in VR! A real-life Sims environment via VR, where you can virtually shake hands with someone! Take anything you’ve seen in sci-fi movies around communication, then picture Zoom at the forefront, getting us there. (Ok, maybe not “beam us up, Scotty” from Star Trek - not sure Zoom will be splitting us into particles and be instantaneously shooting us from location to location.)

Every day I come across new and inventive uses for Zoom. The latest one of interest is ‘Eschaton’ Its a night club. Its a new genre of live entertainment. Every week entertainers and performers , each in separate rooms put on a wide variety of night club acts. Audience tunes in from around the world. There is a $10 ticket charge per performance although from the report it wasn’t clear how that is collected.

The audience is invited to dress up and pour a few drinks. And the show changes from week to week. New material, new ideas and new performances. Strictly adult entertainment.

I would rush right out and buy more Zoom tomorrow except I think I have more than enough.

Cheers

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Let’s go back to Saul’s estimate. He not only nailed this Q’s actual, but he also nailed next Q’s estimate. He guessed next quarter might see 250% revenue gain after Zoom has had 3 full months of this stay-at-home, instead of only a month and a half. Well, guidance for next Q was $495-500M, more than DOUBLE Wall St’s expectations. At the high end, that means ~243% rev growth YoY next Q. (Last few Qs of revenue = 122M, 146M, 167M, 188M, 328M.) A little bit of a beat and you hit Saul’s initial stab on the nose. Well done, sir! A toast to you!

I have no clue how Saul nailed this number. I am trying to become a better investor, but I have zero insight into how get came up with 250%. Is it obvious? Can someone help me out?

Thanks so much!
Oli

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company and CEO have always taken full responsibility for lack of focus on security
Emphasis added because that’s only been true recently, less than half a year. In the past, Zoom had been not only sluggish to fix issues, but actually pushed back on reported issues. And, it wasn’t a lack of focus on security, it was their previous mindset that security didn’t matter. It wasn’t “poorly designed UX” that enabled Zoombombing, it was Zoom trying to make getting meetings going as frictionless as possible and intentionally not enabling security or putting options front and center. Zoom actively went out of their way to by-pass security in order to reduce clicks, and in one case got themselves into a situation where they couldn’t fix what they had done and Apple had to step in to fix it for them.

But, that’s in the past. CEO Yuan has now seen the light (yeah for the press) and the company appears to be going all-in on security. I believe that the security missteps, and the company’s resulting change in attitude, may turn out to be the best thing for the company in the longer run.

One important unsolved issue that remains is that Zoom needs to start offering true E2E encryption.

They do, but only because Zoom said they had it already when they weren’t even close. I’ve worked at some trade secret aware companies and none of them had ever turned on end-to-end encryption in meetings. Maybe people here with government clearances can provide their experience, but while WebEx has had the ability for awhile, they didn’t tout it much. It’s not the easiest thing to setup and use and does restrict what you can do (no phone only, no central recordings available to participants, etc.). E2E isn’t a feature customers are demanding or really need (for the most part), but since Zoom said they supported it, they now need to support it. And it’ll get a ton of scrutiny, not only in the press, but in the “white hat” hacker circles, and so Yuan knows they need to do it right. He has hired expertise, bought companies, and is setting up two engineering offices that seem primarily dedicated to security, which frankly seems a bit of overkill, but better safe than sorry as Yuan wisely realizes they can’t have a Chiptole like recurrence of multiple unforced errors.

Well, guidance for next Q was $495-500M, more than DOUBLE Wall St’s expectations.

Yes. Wall St was basing their expectations on Zoom’s previous guidance, given before the lockdowns were widespread. And while we don’t play the game of anticipating or even trying to explain Wall St., it is, I think, important to note that despite the much higher guidance for next quarter, the stock is actually down from where it was before earnings. That’s almost certainly because guidance for Q3 and Q4 is completely flat.

I had some problems with this, which you can read about in past threads here. But, I did eventually buy back in, because, as Saul pointed out, the color commentary in the call is that Zoom management is being (in the CFO’s words) “very conservative.” They’re preparing for a much higher multiple of monthly users to cancel their subscriptions as the lockdowns ease than have canceled in the past. In other words, everyone flocked to Zoom because they couldn’t drive a mile to see their mom and dad, but when they can drive they won’t need Zoom. While some will cancel, of course, it may not be as bad as management is anticipating. Saul’s very bullish on lack of cancelations. Anyway, while Zoom could have done as other companies have done (looking at you, Roku!) and not given guidance at all, Zoom did, but it seems certain they’re sandbagging because things are unpredictable right now.

I’m reminded of Amazon back in the 1990’s, when an analyst Henry Blodget predicted a huge future for Amazon and the stock popped and everyone thought he was crazy, yet people were buying up Amazon like they weren’t just a bookseller. Yeah. Well, turns out the CFO of Amazon called Blodget up to complain. On the call he got her to admit that he wasn’t wrong, but she didn’t want all the hype to get ahead of itself. She said Amazon employees were spending too much time watching the stock price instead of writing code. It was a major distraction for a company that really needed to focus on execution to achieve that promise. I wonder if Zoom keeping expectations down is similar - the stock has already tripled in half a year and the hype around it is huge (and overblown IMHO), so why feed into that? They don’t need to raise capital, so they don’t need to raise the stock price any more at this time. Feels very smart to me to underpromise and overdeliver, for both internal and external reasons.

Luck favors the foolish, and my sell before earnings and subsequent seeing the light buy back in actually resulted in a little profit. Better lucky than smart, eh?

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I have no clue how Saul nailed this number. I am trying to become a better investor, but I have zero insight into how get came up with 250%. Is it obvious? Can someone help me out?

Saul’s post just before Zoom’s earnings call about what to expect, explained very simply how he got the numbers he did. And like always, after reading it, it sounds completely obvious and common sense, yet I certainly didn’t come up with those estimates.

Continually learning here, thanks all!

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I’ve seen a bunch of comments like the following:

the stock has already tripled in half a year and the hype around it is huge…

or

…is majority of upside already baked in the current price?

Nobody knows for sure the answer to the second question, but anchoring on what has happened so far may not be the best plan, either.

I own a stock called Tandem Diabetes(TNDM), who ran into a situation 2 years ago that is similar (yet different) than what has happened to Zoom. Zoom has benefited by being the right company, with the right product, in the right space, when the Covid pandemic hit, to give it phenomenal growth and tailwinds. TNDM had very similar things happen to it 2 years ago. It’s product is an insulin pump with a user friendly interface that improved diabetic’s medical results. Then, a competitor left the market garnering huge tailwinds as many of that competitor’s users moved over to TNDM. This prompted a stock price movement from under $3 to over $70 in just over a year. Yes, two completely different companies that can’t really be compared, except the peak YOY rev growth from TNDM during this time was around 175% IIRC. And the highest QoQ results were around 67%, I think. So ZM has/will surpass those growth rates in the current environment. There are of course other differences, TNDM was NOT highly valued before the massive growth (like ZM was).

But my main point is, being concerned that ZM’s (the stock) best days are behind it, and because it’s already tripled, that it can’t go higher, could be a mistake. TNDM went up more than 20X in about a year, I’m definitely NOT saying ZM will do that, but thinking a stock can’t increase from a triple, can be a mistake, it’s going to depend on Zoom’s continued business performance, during, and beyond this pandemic.

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supported 100K K-12 schools for free, across 25 countries

The company is less than a decade old and has only been publicly traded for just over a year. Most people had never heard of it until this year, but it can afford to provide its service free to that many schools. That is impressive.

In the past, there were companies that offered discounted rates on products (such as software) to schools or students and teachers, but not free.

Google did offer its basic G-Suite for free to schools about 8 years after their official start. They began developing lots of free apps for education several years after that and became a dominant player in the education market over Apple and Microsoft. For much of the 1980’s and ‘90’s, schools debated whether to go with Apple or Windows. Now many go with Google and Chromebooks.

Other than Google, I can’t think of another major company that has offered such a core product for free to that many institutions.

In addition to the massive goodwill generated by Zoom’s decision to provide free accounts to schools (and their ability to make it work so quickly with relatively few glitches), when students use it now, they are more inclined to continue using it in the future. They will come up with new uses and applications as well.

All the best,

Raymond

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“when students use it now, they are more inclined to continue using it in the future.”

I’ve spoken to a grade 3 teacher recently who’s began using Zoom to teach her class and she feels as though it’s torture for her students. This has nothing to do with the Zoom platform but rather the difficulties that come with teaching and coordinating a virtual class filled with young students. Personally, I don’t see Zoom classes - especially for younger students - catching on once Covid has passed. I may be wrong as this is just anecdotal evidence but I suspect that other teachers feel the same.

Zoom may have greater staying power with the universities its partnered with though as I believe virtual classes are far better suited to older, more mature students.

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I believe virtual classes are far better suited to older, more mature students.

I am inclined to agree with you as far as it goes. But, of course, given that these are free licenses, it doesn’t impact Zoom revenue. I also think there may be a role beyond the current emergency replacement of classroom instruction. E.g., out of class exchanges with students and/or parents which might be hard to arrange in person, but which could be arranged for brief on-line connections in off hours.

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I’ve seen a bunch of comments like the following:

the stock has already tripled in half a year and the hype around it is huge…

Context matters. Here’s what I actually said:

She said Amazon employees were spending too much time watching the stock price instead of writing code. It was a major distraction for a company that really needed to focus on execution to achieve that promise. I wonder if Zoom keeping expectations down is similar - the stock has already tripled in half a year and the hype around it is huge (and overblown IMHO), so why feed into that? They don’t need to raise capital, so they don’t need to raise the stock price any more at this time. Feels very smart to me to underpromise and overdeliver, for both internal and external reasons.

I know you’re trying to make a point, and it may be a valid point, but it’s definitely not valid relative to what I actually said.

And the othjer quote from another person was actually constructed as a question, to which the best answer is not a comparison to some unrelated medical company, but to directly discuss ZM’s future potential.

What is the TAM for video conferencing? What is Zoom’s market share of that and what are the market cap and market share of the competition? What adjacent markets can Zoom expand into? Are Zoom’s investments in itself properly strategic, and what’s the cost/benefit and timing of that? Discussing this data, and similar, will help us all answer the question as to what Zoom’s future is likely to be.

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What is the TAM for video conferencing?

But, the point isn’t what it is now, but rather what it will become. Just the last few months have seen a mushrooming of that TAM to a degree that no one would have believed at the start of the year.

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Anywhere your voice is, Zoom wants to be there. Zoom just aced the land. Now comes the expand.

I was captivated by the above gem, within a post you should read all of, from Muji.

I also keep considering (as Saul has: https://discussion.fool.com/do-you-remember-all-the-people-on-ou…) Zoom’s 500+ new customers with $100,000+ ARR. We haven’t seen much revenue impact from them yet, as they were only with Zoom for a few weeks of Q1. We’ll see a huge impact from them in Q2 of course, and that’s why Zoom guided for 500m revenue (although I think that’s just the starting point). But also, we know how NER works – sign up a company for a certain number of licenses, then the company wants to use it more so they buy more licenses, Zoom Rooms, maybe Zoom Phone…this won’t simply be a one-time hit. This “expand” will be huge for them. Don’t get me wrong – churn will take a bite into it, but I think it will be minimal. (Anecdote: I just took advantage of their latest offer and signed up for a year, myself.)

But don’t think just because of all this “expand” talk that they won’t keep “landing” like crazy! All this publicity will not go for naught. They won’t triple their >10 employee customers again like they did from 81,900 at the end of January to 265,400 at the end of April, but Zoom is a verb now – they’ll be adding plenty of customers the next few quarters.

“But guidance…” Zoom had a rather impossible task: to predict how the avalanche shakes out. They’re not lying or sandbagging per se…they just have no clue how growth looks from here. They’re confident (because they know what May looked like), but they’re going to be as conservative as they can reasonably be (arguably more than is reasonable). Companies don’t guess when they provide guidance. They guide to what they think is practically guaranteed, and they expect to beat and raise.

Predicting the future is always difficult, but with ZM in the middle of a shift like this, it’s impossible. But if you believe this world-beater company has made it to $500m in quarterly revenue and is now going to declare victory, pop the champagne, and stop growing, I have some ocean front property in Arizona with your name on it.

Bear

PS - Oh, and they are about to drop some serious coin to the bottom line, as I mentioned here: https://discussion.fool.com/zm-q1-what39s-better-than-perfect-34…

PPS - Does anyone really believe the trend for Zoom looks like this?


Month       Quarterly Actual Revenue     Possible Monthly Revenue (I made these up to total the Q numbers)

Aug 2019  	                                 53.5	
Sep 2019                          	         55.5	
Oct 2019	     167m                        58
Nov 2019	                                 60	
Dec 2019	                                 62.5	
Jan 2020	     188m                        65.5
Feb 2020	                                 68	
Mar 2020	                                 110	
Apr 2020	     328m                        150
May 2020                                         167
Jun 2020                                         167
Jul 2020                                         167
Aug 2020                                         167
Sep 2020                                         167
Oct 2020                                         167
Nov 2020                                         167
Dec 2020                                         167
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Zoom was growing customers (>10 employees) at about 8K/Q or 30k/y. So, in the past they had about 50% growth in the number of customers and with their 130+ NDER they could hit 90%+ revenue growth rates. Suddenly, last Q they pretty much had 5 years of customer growth squeezed into 1 Q. Going forward can they grow their customer numbers? Even if they did will that create a dent? Adding 31K customers in a year on top of 58K is 53% growth in customer count - this was their rate pre covid. Now they have 265K customers. If they add 31K customers/year that is only 12% growth in customer #s. It seems to me revenue growth in 2021 and beyond due to new customer number additions would be harder to come by purely due to law of large numbers. So, growth would have to be in NDER which includes zoom phones and zoom rooms. Is that sufficient for zoom to put up 50%+ revenue growth rates in 2021 and beyond?

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If they add 31K customers/year that is only 12% growth in customer #s.

They added 183,500 customers in 90 days…I think they’ll add more than 31,000 per year going forward.

It seems to me revenue growth in 2021 and beyond due to new customer number additions would be harder to come by purely due to law of large numbers. So, growth would have to be in NDER which includes zoom phones and zoom rooms. Is that sufficient for zoom to put up 50%+ revenue growth rates in 2021 and beyond?

I agree. I don’t foresee 50%+ revenue growth after this year. It’s not impossible, but it would be really, really hard with their large numbers. But if they’re as profitable as I think they’re going to be, the stock can do fantastically on just 30% or 40% growth. Zoom is a large company now. 30% growth is amazing.

Bear

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This might be relevant:
https://www.statista.com/statistics/487741/number-of-firms-i…

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Why Zoom compared to other competitors?

https://apple.news/Ar7yX7gPBT5a1LFj2CI0jgQ

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