zm-ex991_6.htm

San Jose, California – June 6, 2019 – Zoom Video Communications, Inc. (NASDAQ: ZM), a provider of video-first unified communications, today announced financial results for the three months ended April 30, 2019.

“In our first quarter as a public company, strong execution and expanding adoption of Zoom’s video-first unified communications platform drove total revenue growth of 103% year-over-year. While we remain focused on strong growth, we are also pleased that our highly efficient business model and disciplined investment approach contributed to positive non-GAAP profitability and free cash flow,” stated Eric S. Yuan, president and chief executive officer of Zoom.

Yuan added, “Delivering happiness to our customers is our number one priority. If we keep them happy, we believe we will succeed today and in the future. We also believe that customers continue to view Zoom as a trusted, strategic partner for high-quality, reliable, frictionless communications to build relationships, increase their speed of business, and grow team productivity and engagement. In turn, we view our customers as valued partners as they share their positive experience of Zoom with others.”

Non-GAAP net income for the quarter was $8.9 million, after adjusting for non-cash, stock-based compensation expense and undistributed earnings attributable to participating securities. Non-GAAP net income per share was $0.03, as compared to non-GAAP net loss of $0.5 million, or a loss of $0.00 per share in the year ago quarter. The non-GAAP weighted average share count has been adjusted to reflect the common stock issued in

connection with the Initial Public Offering (IPO), including the concurrent private placement, that are outstanding as of the end of the period as if they were outstanding as of the beginning of the period for comparability.

Customer Metrics: Drivers of total revenue include acquiring new customers and expanding across existing customers. At the end of the first quarter of fiscal 2020, Zoom had:

Financial Outlook: Zoom is providing the following guidance for its second quarter fiscal 2020 and its full year fiscal 2020.

Additional information on Zoom's reported results, including a reconciliation of the non-GAAP results to their most comparable GAAP measures, are included in the financial tables below. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty of expenses that may be incurred in the future.

A supplemental financial presentation and other information can be accessed through Zoom’s investor relations website at investors.zoom.us.

Zoom will host a Zoom Video Webinar for investors on June 6, 2019 at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to discuss the company’s financial results and business highlights. Investors are invited to join the Zoom Video Webinar by visiting: https://investors.zoom.us/

Zoom helps businesses and organizations bring their teams together in a frictionless environment to get more done. Our easy, reliable cloud platform for video, voice, content sharing, and chat runs across mobile devices, desktops, telephones, and room systems. Zoom is headquartered in San Jose, CA.

This press release contains express and implied “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “will,” “would,” “should,” “could,” “can,” “predict,” “potential,” “target,” “explore,” “continue,” or the negative of these terms, and similar expressions intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. These statements may relate to our market size and growth strategy, our reputation in the market, our estimated and projected costs, margins, revenue, expenditures and growth rates, our future results of operations or financial condition, our plans and objectives for future operations, growth, initiatives, or strategies. By their nature, these statements are subject to numerous uncertainties and risks, including factors beyond our control, that could cause actual results, performance or achievement to differ materially and adversely from those anticipated or implied in the statements. These assumptions, uncertainties and risks include that, among others, our business would be harmed by any decline in new customers and hosts, renewals or upgrades, our limited operating history makes it difficult to evaluate our prospects and future results of operations, we operate in competitive markets, we may not be able to sustain our revenue growth rate in the future, our business would be harmed by any significant interruptions, delays or outages in services from our co-located data centers, and failures in internet infrastructure or interference with broadband access could cause current or potential users to believe that our systems are unreliable. Additional risks and uncertainties that could cause actual outcomes and results to differ materially from those contemplated by the forward-looking statements are included under the caption “Risk Factors” and elsewhere in our most recent filings with the Securities and Exchange Commission (the “SEC”), including our

prospectus filed with the SEC pursuant to Rule 424(b)(4) dated April 17, 2019. Forward-looking statements speak only as of the date the statements are made and are based on information available to Zoom at the time those statements are made and/or management's good faith belief as of that time with respect to future events. Zoom assumes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, except as required by law.

Zoom has provided in this press release financial information that has not been prepared in accordance with generally accepted accounting principles in the United States (GAAP). Zoom uses these non-GAAP financial measures internally in analyzing its financial results and believes that use of these non-GAAP financial measures is useful to investors as an additional tool to evaluate ongoing operating results and trends and in comparing Zoom’s financial results with other companies in its industry, many of which present similar non-GAAP financial measures.

Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures and should be read only in conjunction with Zoom’s condensed consolidated financial statements prepared in accordance with GAAP. A reconciliation of Zoom’s historical non-GAAP financial measures to the most directly comparable GAAP measures has been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliation.

Non-GAAP Income (Loss) From Operations. Zoom defines non-GAAP income (loss) from operations as income (loss) from operations excluding stock-based compensation expense. Zoom excludes stock-based compensation expense because it is non-cash in nature and excluding this expense provides meaningful supplemental information regarding Zoom’s operational performance and allows investors the ability to make more meaningful comparisons between Zoom’s operating results and those of other companies.

Non-GAAP Net Income (Loss) and Non-GAAP Net Income (Loss) Per Share, Basic and Diluted. Zoom defines non-GAAP net income (loss) and non-GAAP net income (loss) per share, basic and diluted, as GAAP net income (loss) attributable to common stockholders and GAAP net income (loss) per share attributable to common stockholders, basic and diluted, respectively, adjusted to exclude stock-based compensation expense and undistributed earnings attributable to participating securities. Zoom excludes undistributed earnings attributable to participating securities because they are considered by management to be outside of Zoom’s core operating results, and excluding them provides investors and management with greater visibility to the underlying performance of Zoom’s business operations, facilitates comparison of its results with other periods and may also facilitate comparison with the results of other companies in the industry.

In order to calculate non-GAAP net income (loss) per share, basic and diluted, Zoom uses a non-GAAP weighted-average share count. Zoom defines non-GAAP weighted-average shares used to compute non-GAAP net income (loss) per share, basic and diluted, as GAAP weighted average shares used to compute net income (loss) per share attributable to common stockholders, basic and diluted, adjusted to reflect the common stock issued in connection with the IPO, including the concurrent private placement, that are outstanding as of the end of the period as if they were outstanding as of the beginning of the period for comparability.

Free Cash Flow. Zoom defines free cash flow as GAAP net cash provided by operating activities less purchases of property and equipment. Zoom considers free cash flow to be a liquidity measure that provides useful information to management and investors regarding net cash provided by operating activities and cash used for investments in property and equipment required to maintain and grow the business.

Zoom defines a customer as a separate and distinct buying entity, which can be a single paid host or an organization of any size (including a distinct unit of an organization) that has multiple paid hosts.

Zoom calculates net dollar expansion rate as of a period end by starting with the annual recurring revenue (ARR) from all customers with more than 10 employees as of 12 months prior (Prior Period ARR). Zoom defines ARR as the annualized revenue run-rate of subscription agreements from all customers at a point in time. We then calculate the ARR from these customers as of the current period end (Current Period ARR), which includes any upsells, contraction, and attrition. Zoom divides the Current Period ARR by the Prior Period ARR to arrive at the net dollar expansion rate. For the trailing 12 months calculation, Zoom takes an average of the net dollar expansion rate over the trailing 12 months.

	As of
	April 30, 2019			January 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	629,793		$	63,624
Marketable securities		107,389			112,777
Accounts receivable, net		78,888			63,613
Deferred contract acquisition costs, current		30,339			26,453
Prepaid expenses and other current assets		19,931			10,252
Total current assets		866,340			276,719
Deferred contract acquisition costs, non-current		32,192			29,063
Property and equipment, net		41,724			37,275
Operating lease right-of-use assets		48,957			—
Other assets, non-current		9,839			11,508
Total assets	$	999,052		$	354,565
Liabilities, convertible preferred stock, and stockholders’ equity (deficit)
Current liabilities:
Accounts payable	$	9,678		$	4,963
Accrued expenses and other current liabilities		47,410			32,256
Deferred revenue, current		137,337			115,122
Total current liabilities		194,425			152,341
Deferred revenue, non-current		11,993			10,651
Operating lease liabilities, non-current		46,056			—
Other liabilities, non-current		26,850			39,460
Total liabilities		279,324			202,452

Convertible preferred stock		—			159,552

Stockholders’ equity (deficit):
Preferred stock		—			—
Common stock		271			89
Additional paid-in capital		742,388			17,760
Accumulated other comprehensive income (loss)		8			(135	)
Accumulated deficit		(22,939	)		(25,153	)
Total stockholders’ equity (deficit)		719,728			(7,439	)
Total liabilities, convertible preferred stock, and stockholders’ equity (deficit)	$	999,052		$	354,565

	Three Months Ended April 30,
	2019			2018
Revenue	$	121,988		$	60,070
Cost of revenue		24,104			11,660
Gross profit		97,884			48,410
Operating expenses:
Research and development		13,783			6,264
Sales and marketing		64,041			36,261
General and administrative		18,503			7,569
Total operating expenses		96,327			50,094
Income (loss) from operations		1,557			(1,684	)
Interest income, net		658			436
Other income, net		315			5
Net income (loss) before provision for income taxes		2,530			(1,243	)
Provision for income taxes		(316	)		(97	)
Net income (loss)		2,214			(1,340	)
Undistributed earnings attributable to participating securities		(2,016	)		—
Net income (loss) attributable to common stockholders	$	198		$	(1,340	)

Net income (loss) per share attributable to common stockholders:
Basic	$	0.00		$	(0.02	)
Diluted	$	0.00		$	(0.02	)
Weighted-average shares used in computing net income (loss) per share attributable to common stockholders:
Basic		109,708,898			80,623,861
Diluted		136,428,379			80,623,861

	Three Months Ended April 30,
	2019			2018
Cash flows from operating activities:
Net income (loss)	$	2,214		$	(1,340	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		3,324			1,167
Amortization of deferred contract acquisition costs		7,419			3,917
Amortization of operating lease right-of-use asset		1,533			—
Stock-based compensation expense		6,662			849
Provision for accounts receivable allowances		828			419
Other		257			11
Changes in operating assets and liabilities:
Accounts receivable		(16,103	)		(13,359	)
Prepaid expenses and other assets		(8,617	)		(1,880	)
Deferred contract acquisition costs		(14,434	)		(9,121	)
Accounts payable		4,373			786
Accrued expenses and other liabilities		12,223			3,682
Deferred revenue		23,557			17,628
Operating lease liability, net		(1,000	)		—
Net cash provided by operating activities		22,236			2,759
Cash flows from investing activities:
Purchases of marketable securities		(23,312	)		(15,500	)
Maturities of marketable securities		28,890			11,820
Purchases of property and equipment		(6,897	)		(3,850	)
Net cash used in investing activities		(1,319	)		(7,530	)
Cash flows from financing activities:
Proceeds from initial public offering and private placement, net of underwriting discounts and commissions and other offering costs		543,471			—
Proceeds from exercise of stock options, net of repurchases		1,781			188
Principal payments on capital lease obligations		—			(53	)
Net cash provided by financing activities		545,252			135
Net increase (decrease) in cash, cash equivalents, and restricted cash		566,169			(4,636	)
Cash, cash equivalents, and restricted cash – beginning of period		65,968			36,821
Cash, cash equivalents, and restricted cash – end of period	$	632,137		$	32,185

	Three Months Ended April 30,
	2019			2018
GAAP income (loss) from operations	$	1,557		$	(1,684	)
Add:
Stock-based compensation expense		6,662			849
Non-GAAP income (loss) from operations	$	8,219		$	(835	)

GAAP net income (loss) attributable to common stockholders	$	198		$	(1,340	)
Add:
Stock-based compensation expense		6,662			849
Undistributed earnings attributable to participating securities		2,016			—
Non-GAAP net income (loss)	$	8,876		$	(491	)

GAAP net income (loss) per share - basic and diluted:
GAAP net income (loss) per share - basic	$	0.00		$	(0.02	)
GAAP net income (loss) per share - diluted	$	0.00		$	(0.02	)
Non-GAAP net income (loss) per share - basic	$	0.03		$	0.00
Non-GAAP net income (loss) per share - diluted	$	0.03		$	0.00

GAAP weighted-average shares used to compute net income (loss) per share - basic		109,708,898			80,623,861
Add:
Non-GAAP unweighted adjustment for common stock issued in connection with IPO		153,728,601			152,665,804
Non-GAAP weighted-average shares used to compute net income (loss) per share - basic		263,437,499			233,289,665

GAAP weighted-average shares used to compute net income (loss) per share - diluted		136,428,379			80,623,861
Add:
Non-GAAP unweighted adjustment for common stock issued in connection with IPO		153,728,601			152,665,804
Non-GAAP weighted-average shares used to compute net income (loss) per share - diluted		290,156,980			233,289,665

Net cash provided by operating activities	$	22,236		$	2,759
Less:
Purchases of property and equipment		(6,897	)		(3,850	)
Free cash flow (non-GAAP)	$	15,339		$	(1,091	)
Net cash used in investing activities	$	(1,319	)	$	(7,530	)
Net cash provided by financing activities	$	545,252		$	135