Zoom Video Communications : 2024 Annual Report

Annual Report

Fiscal 2024

Fellow Shareholders,

In last year's letter I expressed

optimism amid strong macroeconomic headwinds. As I reflect on the last twelve months, I can confidently say we have gained even stronger footing

despite similar economic conditions. In FY24, we took proactive steps to cement our transition from a video conferencing app to an AI-powered open workplace platform, and advanced towards our vision of "one platform delivering limitless human connection." I'll highlight some of the themes in our business that took flight in FY24 and continue to move us forward:

Reimagining collaboration and customer experience infused with AI from the ground up

When generative AI took center stage in late 2022, we were not caught off guard. AI has been a key part of our product portfolio from the early days and in FY24 we built upon our strong AI positioning by attracting some of the best and brightest talent in this space such as our CTO Xuedong "XD" Huang, who joined us after a seasoned career spearheading AI innovation at Microsoft. Last September, we launched Zoom AI Companion at no additional cost to paid customers. In only five months, 510,000 accounts enabled it and 7.2 million meeting summaries were created. We further set ourselves apart in the market by adopting a federated approach to AI that untethers us from any one model and allows us to drive both quality and efficiency in our AI solutions.

We strongly believe that technology should advance trust, not erode it, which led us to take the additional step in FY24 of explicitly stating that Zoom does not and will not use customer content to train our AI models or third-party AI models. Putting trust first has been a feature of how we do business from the very beginning. In the age of generative AI, it elevates our position as a trusted partner of global enterprises seeking to transform their businesses.

In Customer Experience, we are reimagining a legacy technology by modernizing it 100% in the cloud and infusing it with AI from the ground up, as evidenced by the roughly 90 features or enhancements we have released per quarter since launching the product in early FY23. All Zoom Contact Center customers are equipped with AI Companion, and our newly-launched

tiered pricing allows power users to lean further into AI with AI Expert Assist, Workforce Management, Quality Management, and Zoom Virtual Agent. In FY24, we tripled Contact Center licenses, and exited the year with growing ASPs buoyed by the tiered pricing. Armed with these expanding features, we are steadily marching up market and beginning to win head to head against both on-prem and cloud-based incumbents for new deals and displacements of mid and enterprise-gradecustomer-facing contact centers. What's more, the product is competing on its own merits with customers completely new to Zoom - broadening the funnel for the entire Zoom platform.

Our AI roadmap is guided by driving customer value. We partner with customers to better understand their pain points and then deploy some of the brightest minds in the space to develop and launch new AI capabilities that address those pain points. Our recent Zoom Workplace platform launch is a major step towards our vision. It puts AI front and center and allows customers to use AI Companion across modalities to boost productivity and streamline communications. Ask AI Companion allows users to gather, synthesize, and share critical information from multiple sources across the Zoom platform and from select third-party applications. It can complete routine tasks such as creating meeting preparation materials, drafting agendas, and brainstorming ideas using a variety of inputs like meeting summaries and chat threads. And this is only the beginning.

Offering a unified solution at a compelling TCO

The macro environment has changed since the days of near zero interest rates. Customers are more cost-conscious, which means that offering the best technology in isolation is no longer enough. Total cost of ownership, interoperability and eliminating redundancy are as important as the technology itself. Because of our deliberate efforts building a platform over many years, we are well prepared for these trends. Zoom Phone, Zoom Rooms, Zoom Team Chat, Zoom Events and more recently Whiteboard, Scheduler, Visitor Management, Email, and Calendar all form an expanding mosaic that empowers our customers to do more within Zoom and reduce costs. Even amid a tough spending environment and strong FX headwinds, our platform strategy played out well with Enterprises as evidenced by our FY24 Enterprise Revenue growing 9% year over year. Offering access to AI Companion at no additional cost to paid users further strengthens our value proposition. The days of

(continued on back cover)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________________________

FORM 10-K

___________________________________________________________________

(Mark One)

• ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 31, 2024

OR

• TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM		TO
Commission File Number 001-38865

___________________________________________________________________

Zoom Video Communications, Inc.

(Exact name of registrant as specified in its Charter)

___________________________________________________________________

Delaware	61-1648780
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)

55 Almaden Boulevard, 6th Floor

San Jose, California 95113

(Address of principal executive offices and Zip Code)

[phone]

(Registrant's telephone number, including area code)

___________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol(s)		Name of each exchange on which registered
Class A Common Stock, $0.001 par value per share	ZM		The Nasdaq Global Select Market
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.	Yes ☒	No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.	Yes ☐	No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the registrant's Class A common stock held by non-affiliates of the registrant, based on the closing price of a share of the registrant's Class A common stock on July 31, 2023 as reported by the Nasdaq Global Select Market on such date was approximately $18.6 billion. This calculation does not reflect a determination that certain persons are affiliates of the registrant for any other purpose.

As of February 16, 2024, the number of shares of the registrant's Class A common stock outstanding was 260,899,571 and the number of shares of the registrant's Class B common stock outstanding was 46,660,091.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive Proxy Statement relating to the 2024 Annual Meeting of Stockholders are incorporated herein by references in Part III of this Annual Report on Form 10-K to the extent stated herein. Such Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the registrant's fiscal year ended January 31, 2024.

Auditor Name: KPMG LLP

Auditor Location: San Francisco, California

Auditor Firm ID: 185

	TABLE OF CONTENTS
	Part I	Page
Item 1.	Business	6
Item 1A.	Risk Factors	14
Item 1B.	Unresolved Staff Comments	47
Item 1C.	Cybersecurity	48
Item 2.	Properties	48
Item 3.	Legal Proceedings	48
Item 4.	Mine Safety Disclosures	49
	Part II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases	49
of Equity Securities
Item 6.	[Reserved]	50
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	50
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	62
Item 8.	Financial Statements and Supplementary Data	64
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	99
Item 9A.	Controls and Procedures	99
Item 9B.	Other Information	100
Item 9C.	Disclosure Regarding Foreign Jurisdictions That Prevent Inspections	100
	Part III
Item 10.	Directors, Executive Officers and Corporate Governance	100
Item 11.	Executive Compensation	100
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related	100
Stockholder Matters
Item 13.	Certain Relationships and Related Transactions, and Director Independence	100
Item 14.	Principal Accountant Fees and Services	100
	Part IV
Item 15.	Exhibits, Financial Statement Schedules	101
Item 16.	Form 10-K Summary	103
	Signatures	104

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which statements involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Annual Report on Form 10-K, including statements regarding our future results of operations or financial condition; business strategy and plans; and objectives of management for future operations, including our statements regarding the benefits and timing of the roll out of new technology, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "target," "will," or "would" or the negative of these words or other similar terms or expressions. Forward-looking statements contained in this Annual Report on Form 10-K include, but are not limited to, statements about: our future financial performance, including our revenue, cost of revenue, gross profit, margins, and operating expenses; trends in our key business metrics; the sufficiency of our cash and cash equivalents, investments, and cash provided by sales of our products and services to meet our liquidity needs; market trends; our market position and opportunity; our growth strategy and business aspirations for our communications and collaboration platform; our product strategy; our efforts to enhance the security and privacy of our platform; our ability to operate our business and effectively manage our scale under evolving macroeconomic conditions, such as high inflation, recessionary or uncertain environments and fluctuations in foreign currency exchange rates; our ability to become the ubiquitous platform for communications and collaboration; our ability to attract new customers and retain existing customers; our ability to successfully expand into our existing markets and into new markets; our ability to effectively manage our growth and future expenses; and the impact of recent accounting pronouncements on our consolidated financial statements.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Annual Report on Form 10-K primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled "Risk Factors" and elsewhere in this Annual Report on Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Annual Report on Form 10-K. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Annual Report on Form 10-K. While we believe that such information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Annual Report on Form 10-K relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Annual Report on Form 10-K to reflect events or circumstances after the date of this Annual Report on Form 10-K or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.

You should read this Annual Report on Form 10-K and the documents that we reference in this Annual Report on Form 10-K and have filed with the Securities and Exchange Commission as exhibits to this Annual Report on Form 10-K with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

3

SUMMARY RISK FACTORS

Investing in our Class A common stock involves numerous risks, including the risks described in "Part I-Item 1A. Risk Factors" of this Annual Report on Form 10-K. Below are some of these risks, any one of which could materially adversely affect our business, financial condition, results of operations, and prospects.

• Our business depends on our ability to attract new customers, retain and upsell additional products and new product categories to existing customers, and upgrade free users to one of our paid offerings. Any decline in new customers, renewals, or upgrades would harm our business.
• Our revenue growth rate has fluctuated in prior periods, and may continue to decline in future periods.
• Interruptions, delays, or outages in service from our co-located data centers and a variety of other factors, would impair the delivery of our services, require us to issue credits or pay penalties, and harm our business.
• We operate in competitive markets, and we must continue to compete effectively. Many of our actual and potential competitors benefit from competitive advantages over us, such as greater name recognition; longer operating histories; more varied products and services; larger marketing budgets; more established marketing relationships; more third- party integration; greater accessibility across devices or applications; greater access to larger user bases; major distribution agreements with hardware manufacturers and resellers; and greater financial, technical, and other resources. In addition, as we introduce new products and services to our platform, and with the introduction of new technologies and market entrants, we expect competition to intensify in the future.
• Our business may be significantly affected by changes in the economy, including any resulting effect on consumer or business spending.
• As we increase sales to large organizations, our sales cycles have and could continue to lengthen, and we could experience greater deployment challenges.
• We generate revenue from sales of subscriptions to our platform, and any decline in demand for our platform or for communications and collaboration technologies in general would harm our business.
• We have incurred net losses in the past and there are no assurances we will be able to maintain or increase profitability in the future.
• We may not be able to respond to rapid technological changes, extend our platform or develop new features.
• Our security measures, and those of the third parties upon which we rely, have been compromised in the past and may be compromised in the future. If our security measures are compromised in the future or if our information technology fails, this could harm our reputation, expose us to significant fines and liability, impair our sales, and harm our business. In addition, our products and services may be perceived as not being secure. This perception may result in customers and users curtailing or ceasing their use of our products, our incurring significant liabilities, and our business being harmed.
• We have a limited operating history at the current scale of our business, which makes it difficult to evaluate our prospects and future results of operations.
• The actual or perceived failure by us, our customers, partners, or vendors to comply with stringent and evolving laws and regulations, industry standards, policies, and contractual obligations relating to privacy, data protection, information security laws, and other matters could harm our reputation and business or subject us to significant fines and liability.
• If we were to lose the services of our Chief Executive Officer or other members of our senior management team, we may not be able to execute our business strategy.
• We have significant and expanding operations outside the United States, which may subject us to increased business, regulatory, and economic risks that could harm our business.
• We may be subject to, or respond to requests from law enforcement in connection with enforcement of, a variety of U.S. and international laws that could result in claims, increase the cost of operations, or otherwise harm our business due to changes in the laws, changes in the interpretations of the laws, greater enforcement of the laws, or investigations into compliance with the laws.
• Zoom Phone is subject to U.S. federal and international regulation, and other products we may introduce in the future may also be subject to U.S. federal, state, or international laws, rules, and regulations. Any failure to comply with such laws, rules, and regulations could harm our business and expose us to liability.

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• The dual class structure of our common stock as contained in our amended and restated certificate of incorporation has the effect of concentrating voting control with those stockholders who held our stock prior to our initial public offering, including our executive officers, employees, and directors and their affiliates, limiting your ability to influence corporate matters.

If we are unable to adequately address these and other risks we face, our business may be harmed.

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PART I

Item 1. BUSINESS

Overview

Our mission is to provide one platform that delivers limitless human connection. Our culture of delivering happiness drives our mission and values and is fundamental to everything we do at Zoom.

Zoom is an intelligent, secure collaboration platform that makes connecting easier, more immersive, and more dynamic for businesses and individuals. We're committed to evolving our platform in ways that empower limitless human connection and solve real business problems. All of our product innovation has a unified goal: to help streamline the workday through effective communication and collaboration tools. The Zoom platform makes teamwork more meaningful, drives impact with intelligence, strengthens customer relationships, and enables seamless workflows. Additionally, trust is a cornerstone of the Zoom platform. We equip users with a comprehensive set of tools to make their interactions safe, secure, and private. We believe that strong security should never compromise a great user experience.

Businesses of all sizes and individuals alike choose Zoom over other industry players for several reasons:

• We care for customers at Zoom speed: Zoom puts customers first. We are committed to providing a platform and products that people love. We put innovation in customers' hands quickly to serve their needs.
• Designed for hybrid work: Zoom is the only platform designed for hybrid communication and today's unique hybrid work needs.
• Zoom just works: Ease of use is a core design principle, along with quality and reliability.
• Enterprise readiness: Zoom is built to meet the needs of enterprises, with robust reliability, security, compliance, and privacy capabilities and policies.
• Cost-effectiveand value-focused: The total cost of ownership of the Zoom platform, across the employee experience and customer experience, is less than that of our competitors.
• Open platform: The Zoom developer ecosystem enables customers to choose the apps and integrations they prefer. We offer more than 2,500 integrations, including with major software vendors.

We're on a mission to reimagine the way we communicate and collaborate in a hybrid working world. Zoom brings employee and customer experience together into one platform that people love to use. Flagship products like Zoom Meetings, Zoom Phone, and Zoom Team Chat are among the core products on the platform that are critical to business communication and collaboration needs. We strive to continue building a platform that helps people work smarter, be more engaged with work, and better connect with each other. Artificial Intelligence ("AI") has been core to Zoom's product DNA over many years, grounded in our conviction that AI can make work more human by strengthening collaboration, productivity, and inclusivity.

In fiscal year 2024, Zoom continued to invest in AI and focused on three key areas regarding AI innovation: supporting individual productivity, powering better collaboration, and helping customer-facing teams delight their customers. We recently launched Zoom AI Companion, our smart assistant that is designed to empower workers to increase productivity, improve team effectiveness, and enhance skills. Additionally, we introduced our federated approach to AI, which enables us to make Zoom's AI capabilities accessible and affordable so that more people can incorporate them in their day-to-day workflows. In line with our commitment to responsible AI, Zoom does not use customer audio, video, chat, screen sharing, attachments, or other communications (such as poll results, whiteboard, and reactions) to train Zoom's or third-party AI models.

Zoom continues to be at the center of hybrid work. Our continued product innovation is laser-focused on supporting a hybrid work environment, with new innovations in areas such as document collaboration, hybrid workspaces, and employee communication. Our acquisition of Workvivo, an employee experience platform, deepened our commitment to creating a platform that is focused on connecting and engaging employees.

Unlike most Contact Center as a Service ("CCaaS") solutions that are only optimized for voice, Zoom Contact Center is an omnichannel cloud contact center platform that is optimized for video and intentionally supports a robust suite of channels, such as voice and video, SMS, and webchat. The result is a one-stop shop designed for customer experience leaders to deliver excellence to their customers and to strengthen workforce engagement.

The happiness we deliver is recognized by our customers. Zoom has consistently earned high scores across customer review sites, Gartner Peer Insights, TrustRadius, and G2, including being recognized as a 2023 Top Rated Vendor in Unified Communications as a Service ("UCaaS") by TrustRadius, and Leader badge for Zoom Contact Center by G2. Industry analysts also recognize our market leadership across our platform and products: Gartner has named Zoom a leader in the Magic Quadrant for UCaaS for the fourth year in a row, and Workvivo was named a leader in the Magic Quadrant for Intranet

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