First Notes As Zoom Files To Go Public With Quick Growth, Actual Profit

Today Zoom, a popular video conferencing company, filed to go public. The San Jose firm had raised $145.5 million while private. It joins Lyft, Pinterest, and a host of other highly-valued companies in going public this year.

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In recent quarters, Zoom has become well-known for its pervasive airport advertising.

The company’s revenue growth has been impressive in recent years, its filing indicates, and unlike most companies going public this year, Zoom has shown an ability to not lose nigh-infinite capital. It’s even posted some positive net income.

Let’s explore.

The Big Numbers

Zoom’s fiscal calendar ends on January 31 of each year. That’s a common setup among SaaS companies, giving salespeople a shot at closing their fourth quarter in stronger shape than could be managed with a calendar-year final month.

In its fiscal year ending January 31, 2017, Zoom posted $60.8 million in revenue, breaking effectively even in the process. The company grew more than 100 percent the following year, wrapping January 31, 2018, with $151.5 million in revenue, and a slimmer $3.8 million in net losses.

In its most recent fiscal year concluding January 31, 2019, Zoom more than doubled again to $330.5 million, generating $7.6 million in net income (before non-cash costs wiped the positive result to zero, but that’s a quibble).

So Zoom is a fast-growing company that loses very little money. In 2019, that makes it a true unicorn: something rare and valuable. Strip out share-based compensation costs and the company looks even healthier.

Turning to margins, in its most recent fiscal year, Zoom posted a gross margin of about 81.5 percent, a stellar figure for a company going public at Zoom’s size. Put another way, that fiscal year’s more than $330 million in revenue generated nearly $270 million in gross profit.

The company also generates cash. In its most-recent fiscal year, operating activities kicked out over $51 million for the firm. Accounting for its $39.7 million cash burn from investing activities, Zoom is still free cash-flow positive. Again, at its growth rate, that’s an impressive result.

It’s not clear what Zoom will value itself at during the IPO process; its $100 million raise figure listed on its S-1 is more than likely a slim placeholder. But for its investors, the company is getting to the finish line healthy, and at a time in which growth is hot.

Who Owns What

The company’s most recent round was a $100 million Series D led by Sequoia Capital. Other investors include Emergence Capital and Horizon Ventures.1 Let’s break down which investors own what, according to the S-1.

Sequoia Capital wound up with 11.4 percent of the company, Emergence owns 12.5 percent, and Digital Mobile Ventures has a 9.8 percent share in the firm.

Now onto the single entities with some power. Eric S. Yuan, the CEO and founder of Zoom, will own 22% of the company.Chinese billionaire Li Ka-shing has a reported 6.1 percent piece, owned through an affiliated fund called Bucantini Enterprises Limited. The current executives and directors own 36.7 percent of the company.

See our chart below for a visual break down.

A Fun Watch

In its most recent quarter, the three months ending on January 31, 2019, Zoom posted just under $106 million in revenue and net income of $5.7 million. It was the firm’s first quarter of more than $100 million in revenue, and was the most profitable quarter that the firm broke out.

That means Zoom is wrapping up its life as a private company in good form; how investors will value the company is now the only question I can summon. And if all the money-losing companies that have done well provide any context, pricing should be hella fun to watch.

More when Zoom drops some initial share-price guidance.

  1. Disclosure: Emergence Capital is an investor in Crunchbase, the parent company of Crunchbase News. Crunchbase’s investors are listed as part of its Crunchbase profile. For more about Crunchbase News’s editorial policies on disclosure, see the News team’s About page.

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