Zoom Video Communications, Inc. [ZM] Filings

10-Q 1 zm-20231031.htm 10-Q zm-20231031

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________________________

FORM 10-Q

___________________________________________________________________

(Mark One)


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

For the quarterly period ended October 31, 2023


☐			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 of incorporation or organization)			(I.R.S. Employer Identification No.)

55 Almaden Boulevard, 6th Floor

San Jose, California 95113

(Address of principal executive offices and Zip Code)

(888) 799-9666

(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

The Nasdaq Global Select Market

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 10, 2023, the number of shares of the registrant’s Class A common stock outstanding was 257,786,492 and the number of shares of the registrant’s Class B common stock outstanding was 46,637,009.

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Zoom Video Communications, Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended October 31, 2023

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		Page
	Special Note Regarding Forward-Looking Statements	3
	Summary Risk Factors	4

	PART I – Financial Information	6

Item 1.	Financial Statements (Unaudited)	6
	Condensed Consolidated Balance Sheets as of October 31, 2023 and January 31, 2023	6
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended October 31, 2023 and 2022	7
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended October 31, 2023 and 2022	8
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended October 31, 2023 and 2022	9
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 2023 and 2022	11
	Notes to Condensed Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37

	PART II – Other Information	39

Item 1.	Legal Proceedings	39
Item 1A	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	73
Item 3.	Defaults Upon Senior Securities	73
Item 4.	Mine Safety Disclosures	73
Item 5.	Other Information	73
Item 6.	Exhibits	74
	Signatures	75

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q, 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 Quarterly Report on Form 10-Q 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 growth under evolving macroeconomic conditions, such as high inflation, recessionary environments and fluctuations in foreign currency exchange rates; our ability to become the ubiquitous platform for communications; 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 unaudited condensed 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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the Securities and Exchange Commission as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

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SUMMARY RISK FACTORS

Investing in our Class A common stock involves numerous risks, including the risks described in “Part II—Other Information, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q. 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 hosts to 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 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 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 hosts 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 privacy, data protection, and information security laws, regulations, standards, policies, and contractual obligations 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—Financial Information

Item 1. FINANCIAL STATEMENTS

ZOOM VIDEO COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


	As of
	October 31, 2023		January 31, 2023
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	1,492,910	$	1,086,830
Marketable securities	5,001,507		4,325,836
Accounts receivable, net of allowances of $39,652 and $33,206 as of October 31, 2023 and January 31, 2023, respectively	514,045		557,404
Deferred contract acquisition costs, current	205,169		223,250
Prepaid expenses and other current assets	271,128		163,092
Total current assets	7,484,759		6,356,412
Deferred contract acquisition costs, noncurrent	140,518		179,991
Property and equipment, net	291,844		252,821
Operating lease right-of-use assets	65,065		80,906
Strategic investments	353,022		398,992
Goodwill	307,295		122,641
Deferred tax assets	531,677		558,428
Other assets, noncurrent	143,292		177,874
Total assets	$	9,317,472	$	8,128,065
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	14,431	$	14,414
Accrued expenses and other current liabilities	441,472		457,716
Deferred revenue, current	1,297,102		1,266,514
Total current liabilities	1,753,005		1,738,644
Deferred revenue, noncurrent	18,796		41,932
Operating lease liabilities, noncurrent	55,409		73,687
Other liabilities, noncurrent	76,861		67,195
Total liabilities	1,904,071		1,921,458
Commitments and contingencies (Note 7)

Stockholders’ equity:
Preferred stock, $0.001 par value per share, 200,000,000 shares authorized as of October 31, 2023 and January 31, 2023; zero shares issued and outstanding as of October 31, 2023 and January 31, 2023	—		—
Common stock, $0.001 par value per share, 2,000,000,000 Class A shares authorized as of October 31, 2023 and January 31, 2023; 257,699,235 and 247,151,956 shares issued and outstanding as of October 31, 2023 and January 31, 2023, respectively; 300,000,000 Class B shares authorized as of October 31, 2023 and January 31, 2023; 46,638,730 and 46,670,894 shares issued and outstanding as of October 31, 2023 and January 31, 2023, respectively	305		294
Additional paid-in capital	4,949,757		4,104,880
Accumulated other comprehensive loss	(27,109)		(50,385)
Retained earnings	2,490,448		2,151,818
Total stockholders’ equity	7,413,401		6,206,607
Total liabilities and stockholders’ equity	$	9,317,472	$	8,128,065

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ZOOM VIDEO COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Revenue	$	1,136,727	$	1,101,899	$	3,380,767	$	3,275,157
Cost of revenue	270,988		270,665		801,494		806,097
Gross profit	865,739		831,234		2,579,273		2,469,060
Operating expenses:
Research and development	196,832		195,946		597,905		512,801
Sales and marketing	374,378		427,747		1,170,255		1,191,004
General and administrative	125,140		141,033		454,364		389,939
Total operating expenses	696,350		764,726		2,222,524		2,093,744
Income from operations	169,389		66,508		356,749		375,316
(Losses) gains on strategic investments, net	(25,471)		(6,898)		8,474		(78,014)
Other income (expense), net	41,908		(4,861)		114,206		(8,482)

Income before provision for income taxes	185,826		54,749		479,429		288,820
Provision for income taxes	44,614		6,396		140,799		81,059
Net income	141,212		48,353		338,630		207,761
Undistributed earnings attributable to participating securities	—		—		—		(17)
Net income attributable to common stockholders	$	141,212	$	48,353	$	338,630	$	207,744
Net income per share attributable to common stockholders:
Basic	$	0.47	$	0.16	$	1.13	$	0.70
Diluted	$	0.45	$	0.16	$	1.10	$	0.68
Weighted-average shares used in computing net income per share attributable to common stockholders:
Basic	302,493,182		295,537,026		299,037,999		297,765,848
Diluted	310,389,905		301,986,341		306,852,190		305,273,812

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ZOOM VIDEO COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022
Net income	$	141,212	$	48,353	$	338,630	$	207,761
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale marketable securities, net of income tax (expense) benefit of $(2,892) and $7,802 for the three months ended October 31, 2023 and 2022, respectively, and $(7,013) and $17,417 for the nine months ended October 31, 2023 and 2022, respectively	9,598		(24,555)		23,276		(54,814)
Comprehensive income	$	150,810	$	23,798	$	361,906	$	152,947

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ZOOM VIDEO COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)


		Three Months Ended October 31, 2023
	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders’ Equity
		Shares									Amount
Balance as of July 31, 2023		300,956,027	$	302	$	4,689,521	$	(36,707)	$	2,349,236	$	7,002,352
Issuance of common stock upon exercise of stock options		169,610	—		650		—		—		650
Issuance of common stock upon release of restricted stock units		3,212,328	3		(3)		—		—		—
Issuance of common stock for employee stock purchase plan		—	—		—		—		—		—

Stock-based compensation expense		—	—		259,589		—		—		259,589
Other comprehensive loss		—	—		—		9,598		—		9,598
Net income		—	—		—		—		141,212		141,212
Balance as of October 31, 2023		304,337,965	$	305	$	4,949,757	$	(27,109)	$	2,490,448	$	7,413,401


		Three Months Ended October 31, 2022
	Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders’ Equity
		Shares			Amount
Balance as of July 31, 2022		298,086,507	$	298		$	3,830,745	$	(48,161)	$	2,207,515	$	5,990,397
Issuance of common stock upon exercise of stock options		229,183	—			1,809		—		—		1,809
Issuance of common stock upon release of restricted stock units		959,192	1			(1)		—		—		—

Repurchases of common stock		(6,955,529)	(7)			(564,825)		—		—		(564,832)
Stock-based compensation expense		—	—			304,640		—		—		304,640
Other comprehensive loss		—	—			—		(24,555)		—		(24,555)
Net income		—	—			—		—		48,353		48,353
Balance as of October 31, 2022		292,319,353	$	292		$	3,572,368	$	(72,716)	$	2,255,868	$	5,755,812

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ZOOM VIDEO COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)


		Nine Months Ended October 31, 2023
	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders’ Equity
		Shares									Amount
Balance as of January 31, 2023		293,822,850	$	294	$	4,104,880	$	(50,385)	$	2,151,818	$	6,206,607
Issuance of common stock upon exercise of stock options		1,214,532	1		8,335		—		—		8,336
Issuance of common stock upon release of restricted stock units		8,747,679	9		(9)		—		—		—
Issuance of common stock for employee stock purchase plan		552,904	1		32,512		—		—		32,513

Stock-based compensation expense		—	—		804,039		—		—		804,039
Other comprehensive income		—	—		—		23,276		—		23,276
Net income		—	—		—		—		338,630		338,630
Balance as of October 31, 2023		304,337,965	$	305	$	4,949,757	$	(27,109)	$	2,490,448	$	7,413,401


		Nine Months Ended October 31, 2022
	Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders’ Equity
		Shares			Amount
Balance as of January 31, 2022		299,037,805	$	299		$	3,749,514	$	(17,902)	$	2,048,107	$	5,780,018
Issuance of common stock upon exercise of stock options		1,087,238	1			7,051		—		—		7,052
Issuance of common stock upon release of restricted stock units		2,865,551	3			(3)		—		—		—
Issuance of common stock for employee stock purchase plan		373,259	—			34,604		—		—		34,604
Repurchases of common stock		(11,044,500)	(11)			(990,767)		—		—		(990,778)
Stock-based compensation expense		—	—			771,969		—		—		771,969
Other comprehensive loss		—	—			—		(54,814)		—		(54,814)
Net income		—	—			—		—		207,761		207,761
Balance as of October 31, 2022		292,319,353	$	292		$	3,572,368	$	(72,716)	$	2,255,868	$	5,755,812

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ZOOM VIDEO COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Nine Months Ended October 31,
	2023		2022
Cash flows from operating activities:
Net income	$	338,630	$	207,761
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense	802,788		767,693
Amortization of deferred contract acquisition costs	203,908		186,626
Depreciation and amortization	77,179		57,921
Deferred income taxes	20,056		—
(Gains) losses on strategic investments, net	(8,474)		78,014
Provision for accounts receivable allowances	29,062		39,580
Unrealized foreign exchange losses	23,281		40,884
Non-cash operating lease cost	15,841		16,949

Amortization of discount/premium on marketable securities	(33,307)		4,156
Other	(5,251)		1,044
Changes in operating assets and liabilities:
Accounts receivable	71,993		(238,020)
Prepaid expenses and other assets	(124,455)		(163,721)
Deferred contract acquisition costs	(146,354)		(217,822)
Accounts payable	(2,258)		24,561
Accrued expenses and other liabilities	(15)		116,391
Deferred revenue	1,918		174,325
Operating lease liabilities, net	(16,931)		(17,668)

Net cash provided by operating activities	1,247,611		1,078,674
Cash flows from investing activities:
Purchases of marketable securities	(2,963,597)		(1,927,049)
Maturities of marketable securities	2,358,078		2,137,875

Purchases of property and equipment	(108,413)		(75,568)
Purchases of strategic investments	(52,800)		(65,050)
Proceeds from strategic investments	107,244		300

Cash paid for acquisition, net of cash acquired	(204,918)		(120,553)
Purchases of intangible assets	—		(10,568)
Net cash used in investing activities	(864,406)		(60,613)
Cash flows from financing activities:
Proceeds from exercise of stock options	8,336		6,815
Proceeds from issuance of common stock for employee stock purchase plan	32,513		34,605
Proceeds from employee equity transactions (remitted) to be remitted to employees and tax authorities, net	(4,897)		671
Cash paid for repurchases of common stock	—		(990,778)




Net cash provided by (used in) financing activities	35,952		(948,687)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(21,273)		(36,639)
Net increase (decrease) in cash, cash equivalents, and restricted cash	397,884		32,735
Cash, cash equivalents, and restricted cash – beginning of period	1,100,243		1,073,353
Cash, cash equivalents, and restricted cash – end of period	$	1,498,127	$	1,106,088

Reconciliation of cash, cash equivalents, and restricted cash within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows above:
Cash and cash equivalents	$	1,492,910	$	1,096,174
Restricted cash, current included in prepaid expenses and other current assets	4,972		9,668
Restricted cash, noncurrent included in other assets, noncurrent	245		246
Total cash, cash equivalents, and restricted cash	$	1,498,127	$	1,106,088

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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ZOOM VIDEO COMMUNICATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1.Summary of Business and Significant Accounting Policies

Description of Business

Zoom Video Communications, Inc. and its subsidiaries (collectively, “Zoom,” the “Company,” “we,” “us,” or “our”) connect people through our core unified communications and collaboration platform, which frictionlessly brings together video, phone, chat, webinars events, and contact center, and enables meaningful experiences across disparate devices and locations. We were incorporated in the state of Delaware in April 2011, and are headquartered in San Jose, California.

Fiscal Year

Our fiscal year ends on January 31. References to fiscal year 2024, for example, refer to the fiscal year ending January 31, 2024.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and applicable regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting, and include the accounts of Zoom Video Communications, Inc., its subsidiaries, and variable interest entities for which we are the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated balance sheet as of January 31, 2023 included herein was derived from the audited financial statements as of that date, but does not include all disclosures, including certain notes required by GAAP on an annual reporting basis. The unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the balance sheets, statements of operations, statements of comprehensive income, statements of stockholders’ equity, and statements of cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year or any future period.

The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended January 31, 2023, filed with the SEC on March 3, 2023.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates and assumptions include, but are not limited to, the estimated expected benefit period for deferred contract acquisition costs, stock-based compensation expense, the fair value of marketable securities, acquired intangible assets and goodwill, the valuation of deferred income tax assets and uncertain tax positions, and accruals and contingencies. Actual results could materially differ from those estimates.

Summary of Significant Accounting Policies

Our significant accounting policies are discussed in Note 1. “Summary of Business and Significant Accounting Policies” in the notes to consolidated financial statements included in our Annual Report on Form 10-K for the year ended January 31, 2023, filed with the SEC on March 3, 2023. There have been no significant changes to these policies during the nine months ended October 31, 2023.

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2. Revenue Recognition

Disaggregation of Revenue

The following table summarizes revenue by region based on the billing address of customers:


	Three Months Ended October 31,								Nine Months Ended October 31,
	2023				2022				2023				2022
	Amount		Percentage of Revenue		Amount		Percentage of Revenue		Amount		Percentage of Revenue		Amount		Percentage of Revenue

	(in thousands, except percentages)
Americas	$	814,311	71.6	%	$	773,576	70.2	%	$	2,407,333	71.2	%	$	2,264,647	69.1	%
Asia Pacific (“APAC”)	143,917		12.7		146,196		13.3		429,703		12.7		444,372		13.6
Europe, Middle East, and Africa (“EMEA”)	178,499		15.7		182,127		16.5		543,731		16.1		566,138		17.3
Total	$	1,136,727	100.0	%	$	1,101,899	100.0	%	$	3,380,767	100.0	%	$	3,275,157	100.0	%

Contract Balances

We receive payments from customers based on a billing schedule as established in our customer contracts. Accounts receivable are recorded when we contractually have the right to consideration. In some arrangements, a right to consideration for our performance under the customer contract may occur before invoicing to the customer, resulting in an unbilled accounts receivable. The amount of unbilled accounts receivable included within accounts receivable, net was $132.3 million and $91.6 million as of October 31, 2023 and January 31, 2023, respectively, and the amount of unbilled accounts receivable included within other assets, noncurrent was immaterial as of October 31, 2023 and January 31, 2023.

Contract liabilities consist of deferred revenue. Revenue is deferred when we have the right to invoice in advance of performance under a customer contract. The current portion of deferred revenue balances is recognized over the next 12 months. The amount of revenue recognized during the three months ended October 31, 2023 and 2022 that was included in deferred revenue at the beginning of each period was $600.8 million and $586.1 million, respectively, and $1,159.6 million and $1,058.7 million during the nine months ended October 31, 2023 and 2022, respectively.

Remaining Performance Obligations

The terms of our subscription agreements are monthly, annual, and multiyear, and we may bill for the full term in advance or on an annual, quarterly, or monthly basis, depending on the billing terms with customers. As of October 31, 2023, the aggregate amount of the transaction price allocated to our remaining performance obligations was $3,571.7 million, which consists of both billed consideration in the amount of $1,315.9 million and unbilled consideration in the amount of $2,255.8 million that we expect to recognize as revenue. We expect to recognize 58% of our remaining performance obligations as revenue over the next 12 months and the remainder thereafter.

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3. Investments

Marketable Securities

As of October 31, 2023 and January 31, 2023, our marketable securities consisted of the following:


	As of October 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value

	(in thousands)





Commercial paper	$	56,098	$	—	$	—	$	56,098
Agency bonds	1,608,658		4		(11,879)		1,596,783
Corporate and other debt securities	590,977		41		(4,231)		586,787
U.S. government agency securities	2,731,636		19		(19,879)		2,711,776
Treasury bills	50,068		—		(5)		50,063
Marketable securities	$	5,037,437	$	64	$	(35,994)	$	5,001,507


	As of January 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value

	(in thousands)


Commercial paper	$	77,701	$	—	$	—	$	77,701
Agency bonds	823,027		63		(12,440)		810,650
Corporate and other debt securities	555,354		385		(4,845)		550,894
U.S. government agency securities	2,910,572		150		(49,507)		2,861,215
Treasury bills	25,404		1		(29)		25,376
Marketable securities	$	4,392,058	$	599	$	(66,821)	$	4,325,836

Unrealized losses for securities that have been in an unrealized loss position for less than 12 months were $22.1 million and $24.8 million as of October 31, 2023 and January 31, 2023, respectively. Unrealized losses for securities that have been in an unrealized loss position for 12 months or longer were $13.9 million and $42.0 million as of October 31, 2023 and January 31, 2023, respectively. We review the individual securities that have unrealized losses on a regular basis to evaluate whether or not any security has experienced, or is expected to experience, credit losses resulting in the decline in fair value. We evaluate, among other factors, whether we have the intention to sell any of these marketable securities and whether it is more likely than not that we will be required to sell any of them before recovery of the amortized cost basis. We have not recorded an allowance for credit losses, as we believe any such losses would be immaterial based on the high-grade credit rating for each of our marketable securities as of the end of each period. There were no material realized gains or losses from available-for-sale securities that were reclassified out of accumulated other comprehensive loss for the three and nine months ended October 31, 2023 and 2022.

The following table presents the contractual maturities of our marketable securities as of October 31, 2023 and January 31, 2023:


	As of
	October 31, 2023		January 31, 2023

	(in thousands)
Less than one year	$	2,774,308	$	2,743,677
Due in one to five years	2,227,199		1,582,159
Total	$	5,001,507	$	4,325,836

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Strategic Investments

Strategic investments by form and measurement category as of October 31, 2023 were as follows:


	Measurement Category
	Fair Value		Measurement Alternative		Equity Method		Total

	(in thousands)
Equity securities	$	65,724	$	187,532	$	95,975	$	349,231
Debt securities	3,791		—		—		3,791
Strategic investments	$	69,515	$	187,532	$	95,975	$	353,022

Strategic investments by form and measurement category as of January 31, 2023 were as follows:


	Measurement Category
	Fair Value		Measurement Alternative		Equity Method		Total

	(in thousands)
Equity securities	$	171,975	$	118,763	$	93,854	$	384,592
Debt securities	14,400		—		—		14,400
Strategic investments	$	186,375	$	118,763	$	93,854	$	398,992

During the nine months ended October 31, 2023, we made a total of $52.8 million of strategic investments in equity securities of private companies. Based on the terms of these privately-held securities, we determined that we do not have a controlling interest nor the ability to exercise significant influence over the operating and financial policies of the investees. Therefore these investments are currently accounted for under the measurement alternative method.

In the second quarter of fiscal year 2024, we sold a total of $107.2 million of strategic investments in equity securities of public companies. The gains on sale, which were not material, were recorded through gains (losses) on strategic investments, net in the condensed consolidated statements of operations.

4. Fair Value Measurements

The following tables present information about our financial instruments that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value:


	As of October 31, 2023
	Fair Value		Level 1		Level 2		Level 3

	(in thousands)
Financial Assets:
Money market funds	$	865,017	$	865,017	$	—	$	—
Treasury bills	164,958		—		164,958		—


Cash equivalents	1,029,975		865,017		164,958		—
Commercial paper	56,098		—		56,098		—
Agency bonds	1,596,783		—		1,596,783		—
Corporate and other debt securities	586,787		—		586,787		—
U.S. government agency securities	2,711,776		—		2,711,776		—
Treasury bills	50,063		—		50,063		—
Marketable securities	5,001,507		—		5,001,507		—


Certificates of deposit included in other assets, noncurrent	245		—		245		—
Publicly held equity securities included in strategic investments	65,724		65,724		—		—
Privately held debt securities included in strategic investments	3,791		—		—		3,791
Total financial assets	$	6,101,242	$	930,741	$	5,166,710	$	3,791

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	As of January 31, 2023
	Fair Value		Level 1		Level 2		Level 3

	(in thousands)
Financial Assets:
Money market funds	$	310,571	$	310,571	$	—	$	—



Cash equivalents	310,571		310,571		—		—
Commercial paper	77,701		—		77,701		—
Agency bonds	810,650		—		810,650		—
Corporate and other debt securities	550,894		—		550,894		—
U.S. government agency securities	2,861,215		—		2,861,215		—
Treasury bills	25,376		—		25,376		—
Marketable securities	4,325,836		—		4,325,836		—


Certificates of deposit included in other assets, noncurrent	272		—		272		—
Publicly held equity securities included in strategic investments	171,975		171,975		—		—
Privately held debt securities included in strategic investments	14,400		—		—		14,400
Total financial assets	$	4,823,054	$	482,546	$	4,326,108	$	14,400

We classify our highly liquid money market funds and publicly held equity securities within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. We classify our commercial paper, agency bonds, corporate and other debt securities, U.S. government agency securities, treasury bills, and certificates of deposit within Level 2 because they are valued using inputs other than quoted prices that are directly or indirectly observable in the market, including readily available pricing sources for the identical underlying security, which may not be actively traded. We classify our privately held debt securities as Level 3 due to the lack of relevant observable market data over fair value inputs, such as the probability weighting of the various scenarios that can impact settlement of the arrangement.

5. Business Combinations

Solvvy, Inc.

On May 19, 2022, we acquired 100% of the issued and outstanding share capital of Solvvy, Inc., a private technology company specializing in customer support automation, for an all-cash purchase consideration of $121.2 million. The acquisition adds to our customer service capabilities and enhances our integrated platform by providing conversational AI capabilities. The acquisition has been accounted for as a business combination.

In allocating the purchase consideration, $95.0 million was attributed to goodwill, $26.7 million to intangible assets (consisting of $12.0 million to developed technology and $14.7 million to customer relationships), and $0.5 million to other net liabilities acquired. The goodwill amount represents synergies related to our existing products expected to be realized from the acquisition and assembled workforce. The associated goodwill is not deductible for tax purposes.

At the date of the acquisition, the developed technology and customer relationships both had an estimated useful life of 5.0 years, and both are amortized using the straight-line method over their respective estimated useful lives. As of October 31, 2023, the developed technology and customer relationships both had a remaining useful life of 3.5 years.

Transaction costs incurred in connection with the acquisition were immaterial. The results of operations of Solvvy, Inc., which are not material, have been included in our condensed consolidated financial statements from the date of the acquisition. Pro forma and historical results of operations of the company have not been presented, as the results do not have a material effect on any of the periods presented in our condensed consolidated statements of operations.

Workvivo Limited

On April 21, 2023, we acquired 100% of the issued and outstanding share capital of Workvivo Limited (“Workvivo”), a private technology company that provides an employee experience platform, for an all-cash purchase consideration of $221.8 million. The acquisition extends our platform and offers our customers new ways to keep employees informed, engaged, and connected. The acquisition has been accounted for as a business combination.

In allocating the purchase consideration, $184.7 million was attributed to goodwill, $28.0 million to intangible assets (primarily consisting of $10.8 million to developed technology and $17.0 million to customer relationships), and $9.1 million to other net assets acquired. The goodwill amount represents synergies related to our existing products expected to be realized from the acquisition and assembled workforce. The associated goodwill is not deductible for tax purposes.

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Transaction costs incurred in connection with the acquisition were immaterial. The results of operations of Workvivo, which are not material, have been included in our condensed consolidated financial statements from the date of the acquisition. Pro forma and historical results of operations of the company have not been presented, as the results do not have a material effect on any of the periods presented in our condensed consolidated statements of operations.

Uncertain tax positions are initially established in connection with the acquisition as of the acquisition date. We continue to collect information and reevaluate these estimates and assumptions quarterly. We will record any adjustments to our preliminary estimates to goodwill, provided that it is within the one-year measurement period.

6. Balance Sheet Components

Accounts Receivable, Net

Accounts receivable are recorded for invoiced amounts and amounts for which revenue has been recognized, but not invoiced, net of allowances. Our short-term accounts receivable consist of the following:


	As of
	October 31, 2023		January 31, 2023

	(in thousands)
Accounts receivable, gross	$	553,697	$	590,610
Less: allowance for credit losses	(33,329)		(24,900)
Less: allowance for returns	(6,323)		(8,306)
Accounts receivable, net	$	514,045	$	557,404

Below is a rollforward of our allowance for credit losses for the nine months ended October 31, 2023 and 2022:




	2023		2022
	(in thousands)
Balance as of January 31	$	24,900	$	17,000
Provision for credit losses	39,397		34,610
Write-offs	(30,968)		(27,265)
Balance as of October 31	$	33,329	$	24,345

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Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:


	As of
	October 31, 2023		January 31, 2023

	(in thousands)
Prepaid expenses	$	233,494	$	123,493
Other receivables	23,531		17,142
Restricted cash from international employee stock sales	4,972		13,141
Other	9,131		9,316
Prepaid expenses and other current assets	$	271,128	$	163,092

Property and Equipment, Net

Property and equipment consisted of the following:


	As of
	October 31, 2023		January 31, 2023

	(in thousands)
Servers	$	333,665	$	249,776
Software	92,055		84,082
Computer and office equipment	43,869		48,325
Leasehold improvements	35,785		25,948
Furniture and fixtures	3,335		4,372
Property and equipment, gross	508,709		412,503
Less: accumulated depreciation and amortization	(216,865)		(159,682)
Property and equipment, net	$	291,844	$	252,821

Depreciation and amortization expense was $23.5 million and $19.9 million for the three months ended October 31, 2023 and 2022, respectively, and $68.1 million and $54.6 million for the nine months ended October 31, 2023 and 2022, respectively.

Other Assets, Noncurrent

Other assets, noncurrent consisted of the following:


	As of
	October 31, 2023		January 31, 2023

	(in thousands)
Accounts receivable, noncurrent	$	31,025	$	92,031

Intangible assets subject to amortization, net	50,335		31,420
Indefinite-lived intangible assets	25,239		25,239
Prepaid expenses, noncurrent	24,445		9,695


Other	12,248		19,489
Other assets, noncurrent	$	143,292	$	177,874

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Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:


	As of
	October 31, 2023		January 31, 2023

	(in thousands)

Accrued expenses	$	154,121	$	160,189
Accrued compensation and benefits	163,768		139,105
Income tax liabilities	17,333		46,441
Sales and other non-income tax liabilities	28,226		33,859
Customer deposit liabilities	40,733		33,640
Operating lease liabilities, current	23,904		22,790


Other	13,387		21,692
Accrued expenses and other current liabilities	$	441,472	$	457,716

Other Liabilities, Noncurrent

Other liabilities, noncurrent consisted of the following:


	As of
	October 31, 2023		January 31, 2023

	(in thousands)
Sales and other non-income tax liabilities	$	44,412	$	42,321



Other	32,449		24,874
Other liabilities, noncurrent	$	76,861	$	67,195

7. Commitments and Contingencies

Non-cancelable Purchase Obligations

As of October 31, 2023, we had outstanding non-cancelable purchase obligations with a term of 12 months or longer of approximately $520.0 million in addition to the corresponding amount disclosed in our Annual Report on Form 10-K for the year ended January 31, 2023 filed with the SEC on March 3, 2023, mainly related to third-party cloud hosting.

Other Contingencies

In June 2020, we received a grand jury subpoena from the Department of Justice’s U.S. Attorney’s Office for Eastern District of New York (“EDNY”), which requested information regarding our interactions with foreign governments and foreign political parties, including the Chinese government, as well as information regarding storage of and access to user data, the development and implementation of Zoom’s privacy policies, and the actions we took responding to law enforcement requests from the Chinese government. In July 2020, we received subpoenas from the Department of Justice’s U.S. Attorney’s Office for the Northern District of California (“NDCA”) and the SEC. Both subpoenas seek documents and information relating to various security, data protection and privacy matters, including our encryption, and our statements relating thereto, as well as calculation of usage metrics and related public statements. In addition, the NDCA subpoena seeks information relating to any contacts between our employees and representatives of the Chinese government, and any attempted or successful influence by any foreign government in our policies, procedures, practices, and actions as they relate to users in the United States. We have since received additional subpoenas from EDNY and NDCA seeking related information. We are fully cooperating with all of these investigations and have been conducting our own thorough internal investigation. These investigations are ongoing, and we do not know when they will be completed, which facts we will ultimately discover as a result of the investigations, or what actions the government may or may not take. We cannot predict the outcome of these investigations, and a negative outcome in any or all of these matters could cause us to incur substantial fines, penalties, or other financial exposure, as well as reputational harm.

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Legal Proceedings

On June 11, 2020 and July 30, 2020, purported shareholder derivative complaints were filed in the United States District Court for the District of Delaware. The first complaint names as defendants nine of our officers and directors, and the second complaint names eight of our officers and directors. The lawsuits assert state and federal claims and are based on the same alleged misstatements as the shareholder class action complaint. The lawsuits accuse our board of directors of failing to exercise reasonable and prudent supervision over our management, policies, practices, and internal controls. The plaintiffs seek unspecified monetary damages on behalf of us as well as governance reforms. On September 25, 2020, the derivative cases were consolidated. On October 27, 2021, a third substantially identical lawsuit was filed in the same court against the same defendants, seeking unspecified monetary damages and governance reforms. On November 17, 2021, all three derivative lawsuits were consolidated. The consolidated case was stayed pending resolution of the motion to dismiss the securities class action. On April 11, 2023, the court entered a stipulated order that requires defendants to answer, move, or otherwise respond to the operative complaint by June 12, 2023. On June 12, 2023, defendants filed a motion to dismiss the consolidated case. On August 11, 2023, the plaintiff in the consolidated case filed an amended complaint. On October 18, 2023, defendants filed their motion to dismiss the amended complaint.

We are vigorously defending ourselves against these lawsuits. Given the uncertainty of litigation, the preliminary stage of the cases, and the legal standards that must be met for, among other things, class certification and success on the merits, we cannot estimate the reasonably possible loss or range of loss that may result from these actions.

Beginning on March 30, 2020, multiple putative class actions were filed against us in various U.S. federal district courts and state courts relating to our alleged privacy and security practices, including alleged data sharing with third parties (the “U.S. Privacy Class Actions”). The plaintiffs claim violations of a variety of state consumer protection and privacy laws, and also assert state constitutional and common law claims, such as negligence and unjust enrichment. The U.S. Privacy Class Actions seek to certify both nationwide and state-specific classes of individuals using our services in certain time periods. The plaintiffs seek various forms of injunctive and monetary relief, including restitution, statutory and actual damages, punitive damages, and attorneys’ fees. The federal cases have been transferred to and consolidated in the NDCA with our consent; lead plaintiffs’ counsel have been appointed; and plaintiffs filed their first amended consolidated class action complaint on October 28, 2020. On March 11, 2021, the court granted in part, and denied in part, our motion to dismiss, and gave plaintiffs leave to amend. On July 30, 2021, we entered into a settlement agreement with plaintiffs to settle the action on a classwide basis, and plaintiffs filed a motion for preliminary approval of the settlement with the court on July 31, 2021. On October 21, 2021, the Court preliminarily approved the settlement. Under the terms of the settlement, we have paid $85.0 million into an escrow account that will be used to pay claims filed by settlement class members, attorneys’ fees and expenses, administrative costs, and service payments to plaintiffs. On April 21, 2022, the Court granted final approval of the settlement. On May 19, 2022, two objectors to the settlement appealed the Court's final approval order. On May 20, 2022, a third objector appealed the Court’s final approval order. On October 17, 2022, we, plaintiffs, and all three objector-appellants agreed to settle the appeals, and on October 27, 2022, we and plaintiffs initiated proceedings in the district court to obtain Court approval of the settlements, which the district court approved on December 16, 2022. On January 13, 2023, a new objector appealed the court’s December 16, 2022 approval of the settlements of the prior appeals, and on March 31, 2023, the Ninth Circuit dismissed the new appeal. With the appeals resolved, the class action settlement is final and the settlement administrator is in the process of making payments to claimants.

On April 7, 2020 and April 8, 2020, securities class action complaints were filed against us and two of our officers in the United States District Court for the NDCA. The plaintiffs are purported stockholders of ours. The complaints allege, among other things, that we violated Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 by making false and misleading statements and omissions of material fact about our data privacy and security measures. The complaints seek unspecified damages, interest, fees, and costs. On May 18, 2020, the actions were consolidated. On November 4, 2020, the court appointed a lead plaintiff. On December 23, 2020, the lead plaintiff filed a consolidated complaint. We filed a motion to dismiss the consolidated complaint on May 20, 2021. Plaintiff filed an opposition to our motion to dismiss on July 9, 2021. Our reply in support of the motion to dismiss was filed on August 9, 2021. On February 16, 2022, the court granted in part, and denied in part, our motion to dismiss. On March 14, 2022, we moved for reconsideration of the court’s ruling on the motion to dismiss. On March 22, 2022, the court ordered plaintiff to respond to our motion, which plaintiff did on March 29, 2022. On April 22, 2022, we answered the complaint. On March 8, 2023, the court denied our motion for reconsideration. On April 6, 2023, the court entered a scheduling order. On July 17, 2023, the parties entered into a stipulation and agreement of settlement (the “Stipulation”) to resolve this matter. Under the terms of the stipulation, in exchange for the release and dismissal with prejudice of all claims against all defendants in the matter, we have agreed to pay and/or cause our insurance carriers to pay a total of $150.0 million. The Stipulation and settlement remain subject to preliminary and final approval by the court. On July 25, 2023, the court entered an order staying further proceedings in the matter pending the filing of a motion for preliminary approval of the settlement. On October 17, 2023, lead plaintiff filed a motion for preliminary approval of the settlement. A hearing on the motion for preliminary approval of the settlement has been scheduled for December 7, 2023. As a result of the settlement, we made net payments of $60.0 million ($150.0 million for the settlement net of $90.0 million covered by insurance) during the

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three months ended July 31, 2023, of which $7.5 million had been accrued during the year ended January 31, 2023 and $52.5 million was recorded as a general and administrative expense in our condensed consolidated statement of operations for the nine months ended October 31, 2023. No additional legal settlement charges were recorded for the three months ended October 31, 2023.

In addition, from time to time, we are involved in various other legal proceedings arising from the normal course of business activities. We are not presently a party to any other such litigation the outcome of which, we believe, if determined adversely to us, would individually, or taken together, have a material adverse effect on our business, operating results, cash flows, or financial condition. Defending such proceedings is costly and can impose a significant burden on management and employees. We may receive unfavorable preliminary or interim rulings in the course of litigation, and there can be no assurances that favorable final outcomes will be obtained.

8. Stockholders’ Equity and Equity Incentive Plans

Common Stock

Our amended and restated certificate of incorporation authorizes the issuance of 2,000,000,000 shares of Class A common stock, $0.001 par value per share, and 300,000,000 shares of Class B common stock, $0.001 par value per share. Class A and Class B common stock are referred to as common stock throughout the notes to the condensed consolidated financial statements, unless otherwise noted.

Stock Repurchase Plan

In February 2022, our Board of Directors authorized a stock repurchase program of up to $1.0 billion of our Class A common stock, which was completed in December 2022. During the three and nine months ended October 31, 2022, we repurchased and subsequently retired 6,955,529 and 11,044,500 shares of our Class A common stock, respectively, for an aggregate amount of $564.8 million and $990.8 million, respectively.

Equity Incentive Plans

We have two equity incentive plans: the 2011 Global Share Plan (“2011 Plan”) and the 2019 Equity Incentive Plan (“2019 Plan”). All shares that remain available for future grants are under the 2019 Plan.

Stock Options

A summary of stock option activity under our equity incentive plan and related information is as follows:


	Stock Options
	Outstanding Stock Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value

	(in thousands, except share, life, and per share data)
Balance as of January 31, 2023	4,800,616	$	8.22	4.9	$	322,929
Exercised	(1,214,532)	$	6.86		$	75,266
Canceled/forfeited/expired	(22,230)	$	92.95
Outstanding and exercisable as of October 31, 2023	3,563,854	$	8.16	4.1	$	188,163

As of October 31, 2023, all options have vested and there is no unrecognized stock-based compensation expense remaining.

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Restricted Stock Units

A summary of restricted stock unit (“RSU”) activity under our equity incentive plan and related information is as follows:


	RSUs
	RSUs	Weighted- Average Grant Date Fair Value Per Share
Unvested as of January 31, 2023	21,868,533	$	109.31
Granted	17,141,593	$	69.01

Vested	(8,747,679)	$	105.71
Canceled/forfeited	(3,772,653)	$	102.10
Unvested as of October 31, 2023	26,489,794	$	85.46

As of October 31, 2023, unrecognized stock-based compensation expense related to RSUs was $1,927.5 million, which is expected to be recognized over a weighted-average period of 2.6 years.

2019 Employee Stock Purchase Plan

In April 2019, we adopted the 2019 Employee Stock Purchase Plan (“ESPP”). As of October 31, 2023, unrecognized stock-based compensation expense related to the ESPP was $46.9 million, which is expected to be recognized over a weighted-average period of 1.2 years.

Stock-Based Compensation

The stock-based compensation expense by line item in the accompanying condensed consolidated statements of operations is summarized as follows:


	Three Months Ended October 31,				Nine Months Ended October 31,
	2023		2022		2023		2022

	(in thousands)
Cost of revenue	$	35,514	$	41,449	$	111,138	$	109,776
Research and development	86,662		83,202		250,165		208,654
Sales and marketing	86,593		125,144		293,104		329,100
General and administrative	50,165		53,020		148,381		120,163
Total stock-based compensation expense	$	258,934	$	302,815	$	802,788	$	767,693
Benefit from income taxes	(48,646)		(53,995)		(147,089)		(151,027)
Total stock-based compensation expense recorded to net income	$	210,288	$	248,820	$	655,699	$	616,666

9. Restructuring Activities

On February 7, 2023, we announced a restructuring plan (the “Plan”) intended to reduce operating costs and continue advancing our ongoing commitment to profitable growth. The Plan included a reduction of our then-current workforce by approximately 15%.

The execution of the Plan was completed as of July 31, 2023, and therefore no restructuring expense was recorded for the three months ended October 31, 2023. For the nine months ended October 31, 2023, we recorded net restructuring costs of $73.0 million, which consisted of $54.4 million related to employee transition, severance payments, and employee benefits; $17.3 million related to stock-based compensation awards; and $1.3 million for other related expenses.

The following table summarizes our restructuring expenses that were recorded as an operating expense in the condensed consolidated statement of operations for the nine months ended October 31, 2023:

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	Nine Months Ended October 31, 2023
	(in thousands)
Cost of revenue	$	7,119
Research and development	19,629
Sales and marketing	32,930
General and administrative	13,315
Total restructuring expenses	$	72,993

The following table summarizes our restructuring liability that is included in accrued expenses and other current liabilities on the condensed consolidated balance sheet:


	Severance and termination benefits		Other
	(in thousands)
Balance as of January 31, 2023	$	—	$	—
Restructuring expenses	54,361		1,339
Cash payments	(54,361)		(1,339)
Balance as of October 31, 2023	$	—	$	—

10. Income Taxes

We compute our provision for income taxes by applying the estimated annual effective tax rate to year-to-date ordinary income and adjust the provision for discrete tax items recorded in the period. In each quarter, we update the estimated annual effective tax rate and make a year-to-date adjustment to the provision.

The following table provides details of the provision for income taxes:


	Three Months Ended October 31,						Nine Months Ended October 31,
	2023			2022			2023			2022

	(in thousands, except percentages)
Income before provision for income taxes	$	185,826		$	54,749		$	479,429		$	288,820
Provision for income taxes	44,614			6,396			140,799			81,059
Effective tax rate	24.0		%	11.7		%	29.4		%	28.1		%

The year-over-year change in effective tax rate for the three and nine months ended October 31, 2023 was due primarily to changes in the valuation allowance, tax shortfalls and windfalls on stock-based compensation, and the foreign-derived intangible income deduction. For both the three and nine months ended October 31, 2023 and October 31, 2022, the effective tax rate differed from the U.S. federal statutory rate due primarily to the foreign-derived intangible income deduction and research credits, offset by tax shortfalls on stock-based compensation, the valuation allowance recorded on certain deferred tax assets, and other compensation-related permanent differences.

As required by the 2017 Tax Cuts and Jobs Act, we started capitalizing research and development expenses incurred beginning in fiscal year 2023. These expenses are capitalized and amortized over five years for domestic research and fifteen years for international research. The mandatory capitalization requirement increases our cash tax liabilities but also decreases our effective tax rate due to increasing the foreign-derived intangible income deduction. The cash flow impact will decrease over time as capitalized research and development expenditures continue to amortize.

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11. Net Income Per Share Attributable to Common Stockholders

The following table sets forth the computation of basic and diluted net income per share attributable to common stockholders for the periods presented:

Three Months Ended October 31,

Nine Months Ended October 31,

2023

2022

2023

2022

Class A

Class B

Class A

Class B

Class A

Class B

Class A

Zoom Video Communications, Inc. [ZM] Filings
10-Q	[2023-11-21]
10-Q	[2023-08-23]
10-Q	[2023-05-25]
10-K	[2023-03-03]
10-Q	[2022-11-23]
10-Q	[2022-08-24]
10-Q	[2022-05-25]
10-K	[2022-03-07]
10-Q	[2021-11-23]
10-Q	[2021-08-31]
10-Q	[2021-06-02]
10-K	[2021-03-18]
10-Q	[2020-12-04]
10-Q	[2020-09-03]
10-Q	[2020-06-05]
10-K	[2020-03-20]
10-Q	[2019-12-09]
10-Q	[2019-09-13]
10-Q	[2019-06-07]
S-1	[2019-03-22]