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Zoom Video Communications Reports Financial Results for the Second Quarter of Fiscal Year 2025

SAN JOSE, Calif., Aug. 21, 2024 (GLOBE NEWSWIRE) — Zoom Video Communications, Inc. (NASDAQ: ZM), today announced financial results for the second fiscal quarter ended July 31, 2024.

“In Q2, we outperformed our guidance across the board and grew operating cash flow and free cash flow by 33.7% and 26.2% year over year, respectively, demonstrating our continued commitment to efficient growth. We also saw strength in large accounts, with customers contributing more than $100,000 in trailing 12 months revenue increasing by 7.1% year over year, and resilience in our Online business, with Online average monthly churn reaching its lowest ever rate,” said Eric S. Yuan, Zoom founder, and CEO. “Zoom Contact Center racked up several marquee customers, including its largest single order deal to-date, highlighting our ability to win competitive deals for full scale, customer-facing deployments with our higher-end packages that utilize advanced AI features to enhance agent performance.”

Second Quarter Fiscal Year 2025 Financial Highlights:

Customer Metrics: Drivers of total revenue included acquiring new customers. At the end of the second quarter of fiscal year 2025, Zoom had:

Financial Outlook: Zoom is providing the following guidance for its third quarter of fiscal year 2025 and its full fiscal year 2025.

The EPS and share count figures do not include the impact from $1.062 billion of authorized share repurchase remaining as of July 31, 2024.

Additional information on Zoom’s reported results, including a reconciliation of the non-GAAP results to their most comparable GAAP measures, is 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, although it is important to note that these factors could be material to Zoom’s results computed in accordance with GAAP.

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

Zoom Video Earnings Call

Zoom will host a Zoom Video Webinar for investors on August 21, 2024 at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to discuss the company’s financial results, business highlights and financial outlook. Investors are invited to join the Zoom Video Webinar by visiting: https://investors.zoom.us/

About Zoom

Zoom’s mission is to provide one platform that delivers limitless human connection. Reimagine teamwork with Zoom Workplace — Zoom’s open collaboration platform with AI Companion empowers teams to be more productive. Together with Zoom Workplace, Zoom’s Business Services for sales, marketing, and customer care teams, including Zoom Contact Center, strengthen customer relationships throughout the customer lifecycle. Founded in 2011, Zoom is publicly traded (NASDAQ:ZM) and headquartered in San Jose, California. Get more information at zoom.com.

Forward-Looking Statements

This press release contains express and implied “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding Zoom’s financial outlook for the third quarter of fiscal year 2025 and full fiscal year 2025, Zoom’s market position, opportunities, and growth strategy, product initiatives, go-to-market motions and the expected benefits resulting from the same, market trends, and Zoom’s stock repurchase program. 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. 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, including: declines in new customers, renewals or upgrades, or decline in demand for our platform, difficulties in evaluating our prospects and future results of operations given our limited operating history, competition from other providers of communications platforms, the effect of macroeconomic conditions on our business, including inflation and market volatility, lengthened sales cycles with large organizations, delays or outages in services from our co-located data centers, failures in internet infrastructure or interference with broadband access, compromised security measures, including ours and those of the third parties upon which we rely, and global security concerns and their potential impact on regional and global economies and supply chains. 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 quarterly report on Form 10-Q for the fiscal quarter ended April 30, 2024. 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.

Non-GAAP Financial Measures

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 from Operations and Non-GAAP Operating Margin. Zoom defines non-GAAP income from operations as income from operations excluding stock-based compensation expense and related payroll taxes, acquisition-related expenses, restructuring expenses, and litigation settlements, net. 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. Zoom excludes the amount of employer payroll taxes related to employee stock plans, which is a cash expense, in order for investors to see the full effect that excluding stock-based compensation expense had on Zoom’s operating results. In particular, this expense is dependent on the price of our common stock and other factors that are beyond our control and do not correlate to the operation of the business. Zoom views acquisition-related expenses when applicable, such as amortization of acquired intangible assets, transaction costs, and acquisition-related retention payments that are directly related to business combinations as events that are not necessarily reflective of operational performance during a period. Restructuring expenses are expenses associated with a formal restructuring plan and may include employee notice period costs, severance payments, and other related expenses. Zoom excludes these restructuring expenses because they are distinct from ongoing operational costs and Zoom does not believe they are reflective of current and expected future business performance and operating results. Zoom excludes significant litigation settlements, net of amounts covered by insurance, that we deem not to be in the ordinary course of our business. In fact, Zoom believes the consideration of measures that exclude such expenses can assist in the comparison of operational performance in different periods that may or may not include such expenses and assist in the comparison with the results of other companies in the industry.

Non-GAAP Net Income and Non-GAAP Net Income Per Share, Basic and Diluted. Zoom defines non-GAAP net income and non-GAAP net income per share, basic and diluted, as GAAP net income and GAAP net income per share, basic and diluted, respectively, adjusted to exclude stock-based compensation expense and related payroll taxes, acquisition-related expenses, restructuring expenses, gains/losses on strategic investments, net, litigation settlements, net, and the tax effects of all non-GAAP adjustments. Zoom excludes these items because they are considered by management to be outside of Zoom’s core operating results. These adjustments are intended to provide investors and management with greater visibility to the underlying performance of Zoom’s business operations, facilitate comparison of its results with other periods, and may also facilitate comparison with the results of other companies in the industry.

Free Cash Flow and Free Cash Flow Margin. 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.

Revenue in Constant Currency. Zoom defines revenue in constant currency as GAAP revenue adjusted for revenue reported in currencies other than United States dollars as if they were converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the respective periods. Zoom provides revenue in constant currency information as a framework for assessing how Zoom’s underlying businesses performed period to period, excluding the effects of foreign currency fluctuations.

Customer Metrics

Zoom defines a customer as a separate and distinct buying entity, which can be a single paid user or an organization of any size (including a distinct unit of an organization) that has multiple users. Zoom defines Enterprise customers as distinct business units that have been engaged by either our direct sales team, resellers, or strategic partners. All other customers that subscribe to our services directly through our website are referred to as Online customers.

Zoom calculates net dollar expansion rate as of a period end by starting with the annual recurring revenue (“ARR”) from Enterprise customers 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. Zoom calculates ARR by taking the monthly recurring revenue (“MRR”) and multiplying it by 12. MRR is defined as the recurring revenue run-rate of subscription agreements from all Enterprise customers for the last month of the period, including revenue from monthly subscribers who have not provided any indication that they intend to cancel their subscriptions. Zoom then calculates the ARR from these Enterprise 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.

Zoom calculates online average monthly churn by starting with the Online customer MRR as of the beginning of the applicable quarter (“Entry MRR”). Zoom defines Entry MRR as the recurring revenue run-rate of subscription agreements from all Online customers except for subscriptions that Zoom recorded as churn in a previous quarter based on the customers’ earlier indication to us of their intention to cancel that subscription. Zoom then determines the MRR related to customers who canceled or downgraded their subscription or notified us of that intention during the applicable quarter (“Applicable Quarter MRR Churn”) and divides the Applicable Quarter MRR Churn by the applicable quarter Entry MRR to arrive at the MRR churn rate for Online Customers for the applicable quarter. Zoom then divides that amount by three to calculate the online average monthly churn.

Public Relations

Colleen Rodriguez
Head of Global Public Relations
press@zoom.us

Investor Relations

Charles Eveslage
Head of Investor Relations
investors@zoom.us

Zoom Video Communications, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
 
  As of
  July 31,
2024
  January 31,
2024
Assets (unaudited)    
Current assets:      
Cash and cash equivalents $ 1,539,457     $ 1,558,252  
Marketable securities   5,980,575       5,404,233  
Accounts receivable, net   528,237       536,078  
Deferred contract acquisition costs, current   197,502       208,474  
Prepaid expenses and other current assets   149,374       219,182  
Total current assets   8,395,145       7,926,219  
Deferred contract acquisition costs, noncurrent   120,603       138,724  
Property and equipment, net   347,714       293,704  
Operating lease right-of-use assets   53,045       58,975  
Strategic investments   438,529       409,222  
Goodwill   307,295       307,295  
Deferred tax assets   718,066       662,177  
Other assets, noncurrent   126,795       133,477  
Total assets $ 10,507,192     $ 9,929,793  
Liabilities and stockholders’ equity      
Current liabilities:      
Accounts payable $ 10,611     $ 10,175  
Accrued expenses and other current liabilities   439,459       500,164  
Deferred revenue, current   1,391,278       1,251,848  
Total current liabilities   1,841,348       1,762,187  
Deferred revenue, noncurrent   15,416       18,514  
Operating lease liabilities, noncurrent   36,052       48,308  
Other liabilities, noncurrent   89,129       81,378  
Total liabilities   1,981,945       1,910,387  
       
Stockholders’ equity:      
Common stock   308       307  
Additional paid-in capital   5,298,145       5,228,756  
Accumulated other comprehensive (loss) income   2,191       1,063  
Retained earnings   3,224,603       2,789,280  
Total stockholders’ equity   8,525,247       8,019,406  
Total liabilities and stockholders’ equity $ 10,507,192     $ 9,929,793  
               

Note: The amount of unbilled accounts receivable included within accounts receivable, net on the condensed consolidated balance sheets was $119.9 million and $124.8 million as of July 31, 2024 and January 31, 2024, respectively.

Zoom Video Communications, Inc.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except share and per share amounts)
 
  Three Months Ended July 31,   Six Months Ended July 31,
    2024       2023       2024       2023  
Revenue $ 1,162,520     $ 1,138,676     $ 2,303,754     $ 2,244,040  
Cost of revenue   285,089       266,559       558,391       530,506  
Gross profit   877,431       872,117       1,745,363       1,713,534  
Operating expenses:              
Research and development   206,756       191,802       412,314       401,073  
Sales and marketing   358,770       373,373       706,778       795,877  
General and administrative   109,535       129,324       220,879       329,224  
Total operating expenses   675,061       694,499       1,339,971       1,526,174  
Income from operations   202,370       177,618       405,392       187,360  
Gains on strategic investments, net   3,107       31,670       20,461       33,945  
Other income, net   87,412       41,085       159,000       72,298  
Income before provision for income taxes   292,889       250,373       584,853       293,603  
Provision for income taxes   73,874       68,399       149,530       96,185  
Net income   219,015       181,974       435,323       197,418  
               
Net income per share:              
Basic $ 0.71     $ 0.61     $ 1.41     $ 0.66  
Diluted $ 0.70     $ 0.59     $ 1.38     $ 0.65  
Weighted-average shares used in computing net income per share:              
Basic   309,137,807       299,093,452       308,921,610       297,281,846  
Diluted   314,027,192       305,932,596       314,696,351       305,054,771  
                               
Zoom Video Communications, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
 
  Three Months Ended July 31,   Six Months Ended July 31,
    2024       2023       2024       2023  
Cash flows from operating activities:              
Net income $ 219,015     $ 181,974     $ 435,323     $ 197,418  
Adjustments to reconcile net income to net cash provided by operating activities:              
Stock-based compensation expense   237,950       261,509       467,375       543,854  
Amortization of deferred contract acquisition costs   71,688       65,514       139,813       138,744  
Depreciation and amortization   29,084       26,126       55,751       50,202  
Deferred income taxes   (49,914 )     (7,536 )     (57,866 )     13,975  
Gains on strategic investments, net   (3,107 )     (31,670 )     (20,461 )     (33,945 )
Provision for accounts receivable allowances   5,736       6,771       12,518       22,204  
Unrealized foreign exchange (gains) losses   (8 )     1,367       7,229       4,683  
Non-cash operating lease cost   6,589       5,276       11,957       10,657  
Amortization of discount/premium on marketable securities   (18,172 )     (11,249 )     (35,840 )     (18,014 )
Other   (1,323 )     2,056       (1,225 )     (3,415 )
Changes in operating assets and liabilities:              
Accounts receivable   (4,623 )     42,732       7,637       13,631  
Prepaid expenses and other assets   25,196       (77,229 )     61,035       (83,888 )
Deferred contract acquisition costs   (70,591 )     (46,589 )     (110,719 )     (92,927 )
Accounts payable   (7,009 )     3,118       267       4,999  
Accrued expenses and other liabilities   (39,025 )     (83,591 )     (53,967 )     (58,951 )
Deferred revenue   55,665       2,992       133,629       56,332  
Operating lease liabilities, net   (7,817 )     (5,600 )     (14,931 )     (11,101 )
Net cash provided by operating activities   449,334       335,971       1,037,525       754,458  
Cash flows from investing activities:              
Purchases of marketable securities   (1,313,404 )     (1,057,936 )     (2,181,315 )     (1,826,166 )
Maturities of marketable securities   867,228       983,434       1,644,169       1,543,120  
Purchases of property and equipment   (84,234 )     (46,600 )     (102,742 )     (68,426 )
Purchases of strategic investments   (10,500 )           (13,500 )     (51,000 )
Proceeds from strategic investments         107,244       4,654       107,244  
Cash paid for acquisition, net of cash acquired         (5,502 )           (204,918 )
Net cash used in investing activities   (540,910 )     (19,360 )     (648,734 )     (500,146 )
Cash flows from financing activities:              
Proceeds from exercise of stock options   839       3,418       1,855       7,686  
Proceeds from issuance of common stock for employee stock purchase plan   34,263       32,513       34,263       32,513  
Proceeds from employee equity transactions (remitted) to be remitted to employees and tax authorities, net   (3,722 )     (1,492 )     2,859       1,259  
Cash paid for repurchases of common stock   (287,645 )           (437,693 )      
Net cash (used in) provided by financing activities   (256,265 )     34,439       (398,716 )     41,458  
Effect of exchange rate changes on cash, cash equivalents, and restricted cash   706       (1,228 )     (6,146 )     (3,781 )
Net (decrease) increase in cash, cash equivalents, and restricted cash   (347,135 )     349,822       (16,071 )     291,989  
Cash, cash equivalents, and restricted cash – beginning of period   1,896,444       1,042,410       1,565,380       1,100,243  
Cash, cash equivalents, and restricted cash – end of period $ 1,549,309     $ 1,392,232     $ 1,549,309     $ 1,392,232  
                               
Zoom Video Communications, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(Unaudited, in thousands, except share and per share amounts)
 
  Three Months Ended July 31,   Six Months Ended July 31,
    2024       2023       2024       2023  
GAAP income from operations $ 202,370     $ 177,618     $ 405,392     $ 187,360  
Add:              
Stock-based compensation expense and related payroll taxes   244,111       269,320       486,985       547,368  
Litigation settlements, net   (1,750 )           (1,750 )     52,500  
Acquisition-related expenses   10,811       14,928       21,512       23,779  
Restructuring expenses         (187 )           72,993  
Non-GAAP income from operations $ 455,542     $ 461,679     $ 912,139     $ 884,000  
GAAP operating margin   17.4 %     15.6 %     17.6 %     8.3 %
Non-GAAP operating margin   39.2 %     40.5 %     39.6 %     39.4 %
               
GAAP net income $ 219,015     $ 181,974     $ 435,323     $ 197,418  
Add:              
Stock-based compensation expense and related payroll taxes   244,111       269,320       486,985       547,368  
Litigation settlements, net   (1,750 )           (1,750 )     52,500  
Gains on strategic investments, net   (3,107 )     (31,670 )     (20,461 )     (33,945 )
Acquisition-related expenses   10,811       14,928       21,512       23,779  
Restructuring expenses         (187 )           72,993  
Tax effects on non-GAAP adjustments   (32,659 )     (24,800 )     (58,870 )     (97,297 )
Non-GAAP net income $ 436,421     $ 409,565     $ 862,739     $ 762,816  
               
Net income per share – basic and diluted:              
GAAP net income per share – basic $ 0.71     $ 0.61     $ 1.41     $ 0.66  
Non-GAAP net income per share – basic $ 1.41     $ 1.37     $ 2.79     $ 2.57  
GAAP net income per share – diluted $ 0.70     $ 0.59     $ 1.38     $ 0.65  
Non-GAAP net income per share – diluted $ 1.39     $ 1.34     $ 2.74     $ 2.50  
               
GAAP and non-GAAP weighted-average shares used to compute net income per share – basic   309,137,807       299,093,452       308,921,610       297,281,846  
GAAP and non-GAAP weighted-average shares used to compute net income per share – diluted   314,027,192       305,932,596       314,696,351       305,054,771  
               
Net cash provided by operating activities $ 449,334     $ 335,971     $ 1,037,525     $ 754,458  
Less: Purchases of property and equipment   (84,234 )     (46,600 )     (102,742 )     (68,426 )
Free cash flow (non-GAAP) $ 365,100     $ 289,371     $ 934,783     $ 686,032  
Net cash used in investing activities $ (540,910 )   $ (19,360 )   $ (648,734 )   $ (500,146 )
Net cash (used in) provided by financing activities $ (256,265 )   $ 34,439     $ (398,716 )   $ 41,458  
Operating cash flow margin (GAAP)   38.7 %     29.5 %     45.0 %     33.6 %
Free cash flow margin (non-GAAP)   31.4 %     25.4 %     40.6 %     30.6 %
               
  Three Months Ended July 31,   Six Months Ended July 31,
    2024       2024  
  Revenue   YoY Revenue Growth (%)   Revenue   YoY Revenue Growth (%)
GAAP revenue $ 1,162,520       2.1 %   $ 2,303,754       2.7 %
Add: Constant currency impact   3,573       0.3 %     5,923       0.2 %
Revenue in constant currency (non-GAAP)   1,166,093       2.4 %     2,309,677       2.9 %
                               


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