Profitability is cool

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Emailed on March 29, 2019 in The Friday Forward

Another notable soon-to-be-public company in the unicorn stampede is Zoom Video Communications, a video conference platform and crowd favorite among the Malartu team and customer base. 

What's particularly interesting about Zoom is their financial performance. It's impressive. 

Like really impressive. 

Eight years ago, Eric Yuan, former VP Engineering at WebEx left to create a business with a better video conferencing product. He and his team authored a new codec, which is far more resilient than others. The innovation results in higher quality calls. Focused on capital efficiency from the earliest days of the business, Eric has built a monster software business, with few comparisons in both scale and efficiency. The company filed their S-1 on Friday.

Here are a few notable stats:

  • The company grew from $61m to $331m in revenue in the past three years. At 119% growth rate one year before IPO, that tops the list for companies in its same account value cohort.

  • Zoom has grown profitably with 2% net income margin recorded last year, which tops their cohort for profitability.

  • Zoom benefits from a 1.8 sales efficiency, meaning one dollar of sales and marketing spend results in $1.80 of gross profit in the next year.

So all in all, Zoom is the fastest growing AND most profitable company in their cohort, and the time it takes to payback their cost to acquire a new customer is 7 months, 11 months less than the public median. 

Zoom is a juggernaut in the making. 


Sean SteigerwaldComment