Video Messaging is Becoming Better

Zoom Video

Earlier this week, Zoom Video Communications released earnings. And a lot of insight into the remote economy.

First, the company almost doubled its revenue guidance for the fiscal year!

For a high growth, the financial earnings were amazing. Total revenue for the quarter was $328.2 million, up 169% year-over-year. And free cash flow was $251.7 million, compared to $15.3 million in the first quarter of fiscal year 2020. $250m in free cash flow is a +76% margin! When done right, software businesses can be extremely profitable.

Today the company has over $1 billion in cash on the balance sheet. Zoom’s gross margin narrowed to 68.4%, from 82.7% in the previous quarter and 80.2% in the year-ago quarter, as it added computing capacity, including from Amazon Web Services, to handle the swell of new users. Below are more operating stats from the recent earnings release.

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

• Approximately 265,400 customers with more than 10 employees, up approximately 354% from the same quarter last fiscal year.
• 769 customers contributing more than $100,000 in trailing 12 months revenue, up approximately 90% 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 8th consecutive quarter.

Since the Covid crisis began, the user growth has +30x for Zoom Video. It is remarkable to see how quickly some companies can scale without sacrificing product quality.

The real opportunities from this growth will be the app market. Companies like ZMurl will allow guests to coordinate open events. This is Eventbrite for online parties. There are dozens of other ancillary businesses that will also grow from the remote work environment.

The IPO Mark is still Hot

ZoomInfo IPOs

No, you're not seeing double. When NY Governor Cuomo opened up the NYSE last month, the IPO market came roaring back. This week Zoominfo shares closed 60% higher than the IPO price. If you don't work in sales, you probably haven't heard of this company or its predecessor, DiscoverOrg.

ZoomInfo is a B2B database designed to sell information to sales, marketing, and recruiting professionals. Without in-person networking and live events, the online lead generation business is becoming red hot. Lead gen businesses have software-like economics and can produce +50% gross margins. Sales people will need to get creative to generate revenue even when the market in its current slump.

Slack joins the Chat

Personally, I don't use Slack too often but the messaging tool has infiltrated a large part of the enterprise market. This week the company mentioned that revenue broke $200 million for the first time. This is a 50% increase from last year! But unlike Zoom Video, the company posted a $74 million loss, mostly because of employee-based stock options.

With only 122,000 paying customers, Slack's user base doesn't hold a candle light when compared to Microsoft Teams or Zoom Video. Not every software product that can scale is necessarily profitable. On a positive note, the company licensed a deal with Amazon Web Services' Chime video-calling service to deliver better video calls for millions of Slack users. Zoom Video also uses AWS to handle cloud computing costs but I don't think this will be enough to compete with Microsoft Teams.

Loom Video

One of the challenges with video conferencing is the need to be available at the same time on a virtual schedule. The remote environment is very different from the normal corporate environment. Video fatigue is real and every meeting does not need to be a video call.

Fortunately, I came across a new video product that is quietly growing in the marketplace. Loom video can capture your screen and face to instantly share your video with colleagues. This will allow more employees to be working instead of being in meetings all day again.

Users can now communicate with speed and ease. It is no surprise that Loom Video is backed by both Instagram founders. The video product provides easy editing and fast recording to provide a seamless video experience. Similar to what users experience on Instagram and Facebook.

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