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Zoom reports 355% increase in revenue y-o-y in Q2 earnings report

Zoom Video Communications, the video conferencing company that has seen an exponential boom in popularity amid the coronavirus pandemic, has now released its financial results from Q2 2020, the quarter ending July 31, 2020.

Second quarter total revenue of $663.5 million Number of customers contributing more than $100,000 in TTM (trailing twelve months) revenue up 112% year-over-year Approximately 370,200 customers with more than 10 employees, up 458% year-over-year

Zoom Video Communications, the video conferencing company that has seen an exponential boom in popularity amid the coronavirus pandemic, has now released its financial results from Q2 2021, the quarter ending July 31, 2020. Note: Zoom’s FY 2020 ended on January 31, 2020.

Q2 proved an exceedingly lucrative one financially, way better than what analysts had expected. 

Even from an overview, Zoom’s overall success is reflected in its stock value performance, which is up 373% since the start of the year

Here’s how the company did compared to what analysts expected, as per CNBC

  • Earnings: 92 cents per share, adjusted, vs. 45 cents per share as expected by analysts, according to Refinitiv.
  • Revenue: $663.5 million, vs. $500.5 million as expected by analysts, according to Refinitiv.

Second Quarter Fiscal Year 2021 Financial Highlights:

  • RevenueTotal revenue for the quarter was $663.5 million, up 355% year-over-year.
  • Income from Operations and Operating Margin: GAAP income from operations for the quarter was $188.1 million, compared to $2.3 million in the second quarter of fiscal year 2020. Non-GAAP income from operations for the second quarter was $277.0 million, up from $20.7 million in the second quarter of fiscal year 2020. For the second quarter, GAAP operating margin was 28.3% and non-GAAP operating margin was 41.7%.
  • Net Income and Net Income Per Share: GAAP net income attributable to common stockholders for the quarter was $185.7 million, or $0.63 per share, compared to GAAP net income attributable to common stockholders of $5.5 million, or $0.02 per share in the second quarter of fiscal year 2020.

Non-GAAP net income for the quarter was $274.8 million. Non-GAAP net income per share was $0.92. In the second quarter of fiscal year 2021, non-GAAP net income was $24.0 million, or $0.08 per share.

  • Cash: Total cash, cash equivalents, and marketable securities as of July 31, 2020 was $1.5 billion.
  • Cash Flow: Net cash provided by operating activities was $401.3 million for the quarter, compared to $31.2 million in the second quarter of fiscal year 2020. Free cash flow was $373.4 million, compared to $17.1 million in the second quarter of fiscal year 2021.

Exclusive: Video-conferencing company Zoom talks privacy, user figures and more

Zoom’s ubiquity 

When your company’s name becomes the colloquial replacement for the word video conference, you know you’re doing something right. How often do you hear people say ‘let’s have a Zoom call,’ as opposed to ‘let’s have a video call’ or ‘video conference’? Consumer figures from the quarter support this.

Customer Metrics: Drivers of total revenue include acquiring new customers and expanding across existing customers. At the end of the second quarter of fiscal year 2021, Zoom had:

  • Approximately 370,200 customers with more than 10 employees, up approximately 458% from the same quarter last fiscal year.
  • 988 customers contributing more than $100,000 in trailing 12 months revenue, up approximately 112% from the same quarter last fiscal year.
  • A trailing 12-month net dollar expansion rate in customers with more than 10 employees above 130% for the 9th consecutive quarter.

Financial Outlook: Zoom is providing the following guidance for its third quarter fiscal year 2021 and its full fiscal year 2021.

  • Q3 2021: Total revenue is expected to be between $685.0 million and $690.0 million and non-GAAP income from operations is expected to be between $225.0 million and $230.0 million. Non-GAAP diluted EPS is expected to be between $0.73 and $0.74 with approximately 300 million non-GAAP weighted average shares outstanding.
  • Full Fiscal Year 2021: Total revenue is expected to be between $2.37 billion and $2.39 billion. This revenue outlook takes into consideration the demand for remote work solutions for businesses. It also assumed increased churn in the second half of the fiscal year when compared to historic churn levels due to a higher percentage of customers who purchased monthly subscriptions in the first quarter. Non-GAAP income from operations is expected to be between $730.0 million and $750.0 million. Non-GAAP diluted EPS is expected to be between $2.40 and $2.47 with approximately 300 million non-GAAP weighted average shares outstanding.

“Organizations are shifting from addressing their immediate business continuity needs to supporting a future of working anywhere, learning anywhere, and connecting anywhere on Zoom’s video-first platform. At Zoom, we strive to deliver a world-class, frictionless, and secure communication experience for our customers across locations, devices, and use cases,” said Zoom founder and CEO, Eric S. Yuan. “Our ability to keep people around the world connected, coupled with our strong execution, led to revenue growth of 355% year-over-year in Q2 and enabled us to increase our revenue outlook to approximately $2.37 billion to $2.39 billion for FY21, or 281% to 284% increase year-over-year.”

Dealing with privacy concerns

While 2020 has been smooth sailing for Zoom for the most part, they did face some scrutiny in regards to the fallibility of their services, from a security perspective. The company, while having gone public in 2019, was not expecting the popularity it would receive in 2020, and as such, many of its privacy features were not up to par with the industry standards Big Tech firms are expected to follow. After all, the company’s user base grew from around 10 million to over 300 million since the pandemic started, so the efforts to scale up their operations have been a real challenge. 

Everyone’s heard of “Zoom bombing” by now, where strangers pop into an ongoing Zoom meeting by using the meeting’s Zoom ID. This is easily solvable though by setting a password for the meeting. Additionally, Zoom introduced security updates back in April to address this common problem. 

Additionally, Zoom used to offer end-to-end encryption (E2EE) to paid customers only – something we know should be available to everyone at this point with most messaging and communication services. In June, they finally amended this practice and made E2EE available to all customers – both free and paid. WhatsApp, for example, introduced E2EE in 2016.  

Zoom also acquired startup Keybase, a secure messaging and file-sharing company, in May, to bolster their security protocols and improve upon their E2EE. 

Over the year, numerous security flaws have been identified with Zoom’s service, and the company is continually addressing issues as they arise. The good news is that their exceptional financial performance will now help them solve most of these issues.