Protocol | Workplace

Zoom gave employees stock to stay during the pandemic. It's turned into a windfall.

Zoom's skyrocketing share price turned into a great payday for the videoconferencing employees who stuck around.

Zoom home screen

In the U.S., Zoom gave out 450 RSUs, or restricted stock units, to employees.

Photo: Bloomberg/Getty Images

In June 2020, Zoom had just finished the craziest quarter of its business. While some companies had handed out office stipends or extra time off, Zoom took it a step further. Last summer it gave every employee a special stock grant, with the exception of Zoom's CEO Eric Yuan, who declined the award.

For U.S. employees, the value was worth roughly $63,000, according to an SEC filing. But thanks to Zoom's stock boom as the pandemic dragged on, the value of those shares has nearly tripled, and are worth around $171,000 today.

The goal of the special stock grant was to reward employees who had been under intense pressure during the pandemic, and also to convince them to stick around during a critical time for the business, the SEC filing states.

At the time, the value of the 450 shares granted to U.S. employees was around 60% of U.S. employees' average base salaries, the company said in filings. (Other Zoom geographies received different numbers of shares.)

But Zoom's stock has been on a tear as the videoconferencing company saw tremendous growth in 2020 and became a household name during the pandemic. Its stock price reached a peak of around $568 in October 2020 before settling around $380 for the last few weeks. And with the ballooning stock price, the retention award bonus has swelled too.

In the U.S., Zoom gave out 450 RSUs, or restricted stock units, to employees. Unlike options, which give employees a right to buy stock for a lower stock price, RSUs convert to shares whenever certain conditions are met. As part of the Zoom bonus terms, the stock vests over two years in two chunks, so employees had to have stayed through this past June to get the first half of the 450 shares, and will need to remain with Zoom until June 8, 2022 for the second half. So last month, U.S. employees at Zoom who had stuck around for a year received the first tranche of 225 shares from the award, valued on June 8 at around $76,000 — more than the entire award's initial target value.

It's a unique form of "golden handcuffs" to incentivize that workforce to stick around, while also being a tremendous reward for those who did. Retention bonuses aren't uncommon in the tech industry, but they're typically targeted at specific executives or toward employees after an acquisition so they stick around at the new company. For example, when Walmart bought Jet.com, Marc Lore reportedly received RSUs worth more than $250 million, but the five-year vesting schedule was backloaded so that it only vested 10% in the first year compared to 30% in five. (He lasted 4 and a half years before leaving in January 2021.) When Facebook executive Chris Cox rejoined as its chief product officer, the company awarded him an extra $4 million on top of his $69 million signing bonus to stick around for a year.

What makes the Zoom award unique is that it wasn't just about convincing employees to stay, but to reward them for keeping the world connected at the start of the pandemic. The bonus was meant as a thank you to the employees, and in the end, the Zoom bonus was worth a lot more than the average home office stipend or days off most tech companies gave out.

Image: Yuanxin

Yuanxin Technology doesn't hide its ambition. In the first line of its prospectus, the company says its mission is to be the "first choice for patients' healthcare and medication needs in China." But the road to winning the crowded China health tech race is a long one for this Tencent- and Sequoia-backed startup, even with a recent valuation of $4 billion, according to Chinese publication Lieyunwang. Here's everything you need to know about Yuanxin Technology's forthcoming IPO on the Hong Kong Stock Exchange.

What does Yuanxin do?

There are many ways startups can crack open the health care market in China, and Yuanxin has focused on one: prescription drugs. According to its prospectus, sales of prescription drugs outside hospitals account for only 23% of the total healthcare market in China, whereas that number is 70.2% in the United States.

Yuanxin started with physical stores. Since 2015, it has opened 217 pharmacies immediately outside Chinese hospitals. "A pharmacy has to be on the main road where a patient exits the hospital. It needs to be highly accessible," Yuanxin founder He Tao told Chinese media in August. Then, patients are encouraged to refill their prescriptions on Yuanxin's online platforms and to follow up with telehealth services instead of returning to a hospital.

From there, Yuanxin has built a large product portfolio that offers online doctor visits, pharmacies and private insurance plans. It also works with enterprise clients, designing office automation and prescription management systems for hospitals and selling digital ads for big pharma.

Yuanxin's Financials

Yuanxin's annual revenues have been steadily growing from $127 million in 2018 to $365 million in 2019 and $561 million in 2020. In each of those three years, over 97% of revenue came from "out-of-hospital comprehensive patient services," which include the company's physical pharmacies and telehealth services. More specifically, approximately 83% of its retail sales derived from prescription drugs.

But the company hasn't made a profit. Yuanxin's annual losses grew from $17 million in 2018 to $26 million in 2019 and $48 million in 2020. The losses are moderate considering the ever-growing revenues, but cast doubt on whether the company can become profitable any time soon. Apart from the cost of drug supplies, the biggest spend is marketing and sales.

What's next for Yuanxin

There are still abundant opportunities in the prescription drug market. In 2020, China's National Medical Products Administration started to explore lifting the ban on selling prescription drugs online. Although it's unclear when the change will take place, it looks like more purely-online platforms will be able to write prescriptions in the future. With its established market presence, Yuanxin is likely one of the players that can benefit greatly from such a policy change.

The enterprise and health insurance businesses of Yuanxin are still fairly small (accounting for less than 3% of annual revenue), but this is where the company sees an opportunity for future growth. Yuanxin is particularly hoping to power its growth with data and artificial intelligence. It boasts a database of 14 million prescriptions accumulated over years, and the company says the data can be used in many ways: designing private insurance plans, training doctors and offering chronic disease management services. The company says it currently employs 509 people on its R&D team, including 437 software engineers and 22 data engineers and scientists.

What Could Go Wrong?

The COVID-19 pandemic has helped sell the story of digital health care, but Yuanxin isn't the only company benefiting from this opportunity. 2020 has seen a slew of Chinese health tech companies rise. They either completed their IPO process before Yuanxin (like JD, Alibaba and Ping An's healthcare subsidiaries) or are close to it (WeDoctor and DXY). In this crowded sector, Yuanxin faces competition from both companies with Big Tech parent companies behind them and startups that have their own specialized advantages.

Like each of its competitors, Yuanxin needs to be careful with how it processes patient data — some of the most sensitive personal data online. Recent Chinese legislation around personal data has made it clear that it will be increasingly difficult to monetize user data. In the prospectus, Yuanxin elaborately explained how it anonymizes data and prevents data from being leaked or hacked, but it also admitted that it cannot foresee what future policies will be introduced.

Who Gets Rich

  • Yuanxin's founder and CEO He Tao and SVP He Weizhuang own 29.82% of the company's shares through a jointly controlled company. (It's unclear whether He Tao and He Weizhuang are related.)
  • Tencent owns 19.55% of the shares.
  • Sequoia owns 16.21% of the shares.
  • Other major investors include Qiming, Starquest Capital and Kunling, which respectively own 7.12%, 6.51% and 5.32% of the shares.

What People Are Saying

  • "The demands of patients, hospitals, insurance companies, pharmacies and pharmaceutical companies are all different. How to meet each individual demand and find a core profit model is the key to Yuanxin Technology's future growth." — Xu Yuchen, insurance industry analyst and member of China Association of Actuaries, in Chinese publication Lanjinger.
  • "The window of opportunity caused by the pandemic, as well as the high valuations of those companies that have gone public, brings hope to other medical services companies…[But] the window of opportunity is closing and the potential of Internet healthcare is yet to be explored with new ideas. Therefore, traditional, asset-heavy healthcare companies need to take this opportunity and go public as soon as possible." —Wang Hang, founder and CEO of online healthcare platform Haodf, in state media China.com.

Zeyi Yang
Zeyi Yang is a reporter with Protocol | China. Previously, he worked as a reporting fellow for the digital magazine Rest of World, covering the intersection of technology and culture in China and neighboring countries. He has also contributed to the South China Morning Post, Nikkei Asia, Columbia Journalism Review, among other publications. In his spare time, Zeyi co-founded a Mandarin podcast that tells LGBTQ stories in China. He has been playing Pokemon for 14 years and has a weird favorite pick.

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