Zoom Video Communications Inc’s third-quarter revenue growth rate slowed to 35 percent as demand for its video-conferencing tools eased from the pandemic-fuelled heights last year, sending its shares down about 6 percent on Monday.
Zoom reported better-than-expected quarterly earnings on Monday while warning investors of a revenue slowdown at the video-chat company as the pandemic come to an end.
The stock, a pandemic winner, fell to $227.5 in extended trading, after having lost about 28% this year.
Third Quarter Fiscal Year 2022 Financial Highlights:
Revenue
Revenue was at $1.05 billion (roughly Rs. 7,830 crores) in the quarter ended October 31, Zoom said, after rising 54 percent in the previous quarter and surging 360 percent a year earlier.
Income from Operations and Operating Margin
GAAP income from operations for the third quarter was $290.9 million, up from $192.2 million in the third quarter of the fiscal year 2021. After adjusting for stock-based compensation expense and related payroll taxes, and acquisition-related expenses. Non-GAAP income from operations for the third quarter was $411.3 million, up from $290.8 million in the third quarter of the fiscal year 2021. For the third quarter, GAAP operating margin was 27.7% and the non-GAAP operating margin was 39.1%.
Net Income and Diluted Net Income Per Share
GAAP net income attributable to common stockholders for the third quarter was $340.3 million, up from $198.4 million in the third quarter of the fiscal year 2021.
Non-GAAP net income for the third quarter was $338.4 million, after adjusting for stock-based compensation expense and related payroll taxes, acquisition-related expenses, gains on strategic investments, net, and undistributed earnings attributable to participating securities. Non-GAAP net income per share was $1.11. In the third quarter of the fiscal year 2021, non-GAAP net income was $297.2 million, or $0.99 per share.
Cash and Marketable Securities
Total cash, cash equivalents, and marketable securities, excluding restricted cash, as of October 31, 2021, were $5.4 billion.
Cash Flow
Net cash provided by operating activities was $394.6 million for the third quarter, compared to $411.5 million in the third quarter of the fiscal year 2021. Free cash flow, which is net cash provided by operating activities fewer purchases of property and equipment, was $374.8 million, compared to $388.2 million in the third quarter of the fiscal year 2021.
Customer Metrics
Drivers of total revenue included acquiring new customers and expanding across existing customers. At the end of the third quarter of the fiscal year 2022, Zoom had:
2,507 customers contributed more than $100,000 in trailing 12 months revenue, up approximately 94% from the same quarter last fiscal year.
Approximately 512,100 customers with more than 10 employees, up approximately 18% 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 14th consecutive quarter.
Moreover, the stiff competition posed by Cisco’s conferencing tool Webex and Microsoft’s Teams has made it challenging for Zoom to win over enterprise customers.
To retain its users, the company launched a variety of new offerings such as the Events platform, where businesses can host large-scale conferences, cloud-calling service Zoom Phone, and in-office meetings feature Zoom Rooms.
“Their Rooms and Phone businesses are 5 percent penetrated or below and that seems to imply plenty of remaining runway for growth even within their existing capabilities only,” said Joe McCormack, senior analyst at Third Bridge said.
Financial Statement :
Zoom Video Communications, Inc.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except share and per share amounts)
| Three Months Ended October 31, | Nine Months Ended October 31, | |||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||
| Revenue | $ | 1,050,756 | $ | 777,196 | $ | 3,028,488 | $ | 1,768,883 | ||||||||||||
| Cost of revenue | 270,957 | 258,727 | 797,207 | 554,705 | ||||||||||||||||
| Gross profit | 779,799 | 518,469 | 2,231,281 | 1,214,178 | ||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Research and development | 98,508 | 42,582 | 245,994 | 111,705 | ||||||||||||||||
| Sales and marketing | 293,698 | 190,157 | 810,544 | 470,886 | ||||||||||||||||
| General and administrative | 96,736 | 93,488 | 362,971 | 227,856 | ||||||||||||||||
| Total operating expenses | 488,942 | 326,227 | 1,419,509 | 810,447 | ||||||||||||||||
| Income from operations | 290,857 | 192,242 | 811,772 | 403,731 | ||||||||||||||||
| Gains on strategic investments, net | 122,421 | — | 154,497 | 2,538 | ||||||||||||||||
| Interest income and other, net | (2,995 | ) | 1,779 | (3,171 | ) | 7,112 | ||||||||||||||
| Income before provision for (benefit from) income taxes | 410,283 | 194,021 | 963,098 | 413,381 | ||||||||||||||||
| Provision for (benefit from) income taxes | 69,900 | (4,621 | ) | 78,100 | 1,675 | |||||||||||||||
| Net income | 340,383 | 198,642 | 884,998 | 411,706 | ||||||||||||||||
| Undistributed earnings attributable to participating securities | (112 | ) | (202 | ) | (430 | ) | (531 | ) | ||||||||||||
| Net income attributable to common stockholders | $ | 340,271 | $ | 198,440 | $ | 884,568 | $ | 411,175 | ||||||||||||
| Net income per share attributable to common stockholders: | ||||||||||||||||||||
| Basic | $ | 1.14 | $ | 0.70 | $ | 2.99 | $ | 1.46 | ||||||||||||
| Diluted | $ | 1.11 | $ | 0.66 | $ | 2.89 | $ | 1.38 | ||||||||||||
| Weighted-average shares used in computing net income per share attributable to common stockholders: | ||||||||||||||||||||
| Basic | 297,375,011 | 284,783,006 | 295,647,626 | 282,564,481 | ||||||||||||||||
| Diluted | 305,939,624 | 299,258,765 | 305,726,7 | |||||||||||||||||