As companies pivot to virtual meetings and events during the pandemic, Zoom’s astronomical second quarter results should come as no surprise. The video communications company experienced triple-digit growth in the second fiscal quarter of 2021 compared to the same period last year. For the period ended July 31, 2020, Zoom reported total revenue of $663.5 million, a 355% increase year-over-year.

Zoom customer base

Zoom attributes this massive growth to new customer acquisitions and the expansion of services for existing customers as the demand for remote work solutions intensified. At the end of the second fiscal quarter, the video communications company had the following:

• 370,200 customers with more than 10 employees, a 458% increase over Q2 2019
• 988 customers contributing more than $100,000 in trailing 12 months revenue, an increase of approximately 112% year-over-year
• A trailing 12-month net dollar expansion rate in customers with more than 10 employees above 130% for the ninth consecutive quarter.
• Over 35,000 educators, school administrators and IT professionals joined the free virtual Zoom Summer Academy, a two-day educational event
• More than 100,000 K-12 schools have signed up to use the platform for free during the pandemic

“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 Eric S. Yuan, Zoom founder and CEO, in an August 31 news release.

“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,” added Yuan.

Key highlights

Other key highlights from Zoom’s second fiscal quarter include:

• The company had net cash from operating activities of $401.3 million, compared to $31.2 million for the same period last year.
• Zoom’s free cash flow was $373.4 million, compared to $17.1 million in the prior year period.
• GAAP income from operations was $188.1 million, compared to $2.3 million in the second fiscal quarter of 2020.
• GAAP net income for the quarter was $185.7 million, or $0.63 per share, compared to $5.5 million, or $0.02 per share, in the second fiscal quarter of 2020.
• Total cash, cash equivalents and marketable securities as of July 31 was $1.5 billion.

Outlook for Q3 and Full Fiscal Year 2021

Zoom offered the following guidance:

• Q3 FY2021: Total revenue is estimated to range between $685.0 million and $690.0 million, and non-GAAP income from operations is estimated to range between $225.0 million and $230.0 million. Non-GAAP diluted earnings per share will range between $0.73 and $0.74 with approximately 300 million non-GAAP weighted average shares outstanding.
• Full Fiscal Year 2021: Total revenue is estimated to be between $2.37 billion and $2.39 billion, assuming the demand for work-at-home solutions continues for businesses. The company is also expecting churn at higher than normal levels because of the number of customers who purchased monthly subscriptions in the first quarter. Non-GAAP income from operations is estimated to be between $730.0 million and $750.0 million. Non-GAAP diluted earnings per share is estimated to be between $2.40 and $2.47 with approximately 300 million non-GAA weighted average shares outstanding.

Earnings call highlights

During the earnings call, Yuan addressed security and privacy concerns that had occurred when Zoom hacking and Zoom “bombing” occurred this spring. The video communications company launched a 90-day initiative to address those concerns, and Zoom has shared protocols and tips with users to ensure their meetings and calls remain secure. Also during the quarter, Zoom launched a subscription-based Hardware-as-a-Service (HaaS) program which provides companies with scalable equipment that meets their needs.

“…we continued to scale and expand our business to meet the needs of our customers and the global community. And I’m very proud of our achievements and thank our more than 3,400 employees for another exceptional quarter,” said Yuan on the earnings call.

Freemium model

Zoom utilizes a freemium model. It offers a free personal meeting service for up to 100 participates. There is a 40-minute maximum for group meetings and unlimited 1:1 meetings. It also offers three subscription-based plans for businesses with monthly and annual payment options. Like the free plan, the subscription plans have their own benefits, features and limitations.

• Small teams – $149.90 per year per license
• Small and medium businesses – $199.90 per year per license
• Large enterprise-ready – $199.90 per year per license

Insider Take

Because of the pandemic, some companies have seen their businesses skyrocket. Zoom is among those who have done well, meeting the challenge of remote work and education. The company has some challenges but seems poised to address them. The video communications company is also capitalizing on the opportunity to address what they deem to be unmet needs amongst their customers – hardware. As we said when we first reported this story, leasing equipment to customers isn’t really a new idea, but if it works for Zoom and their customers, more power to them. Who knows what the remainder of the year will bring, with COVID cases continuing to invade our lives, but Zoom has become an invaluable tool and is not likely to go away anytime soon.