Zoom

Zoom, the video conferencing company which shot to fame as the covid pandemic   spread across the globe, reported fiscal second-quarter earnings that topped   analyst forecasts.

However, tailwinds from the demand for remote working solutions   began to slow. In the previous quarter revenue had grown 191%, and in this   period revenue was up by 54% year-over-year to $1.02 billion. Zoom also   guided for lower revenue ahead, expecting growth of 31% in the next quarter.   The company is facing tough year-over-year comparisons as live in-person   events return and offices reopen. Despite this the number of customers   contributing more than $100,000 in TTM revenue was up 131% year-over-year.

Gross margins expanded from 72.3% to 74.4%, boosted by the   availability of new data center capacity as well as the lower usage during   the summer, in part due to school vacations. Non-GAAP income from operations   for the second quarter was $424.7 million, up from $277.0 million in the   second quarter of fiscal year 2021. Non-GAAP net income for the quarter was   $415.1 million or $1.36 per share, a 51% improvement.

In terms of guidance, Zoom mentioned that travel is returning sooner   than they had expected. They now project next quarter’s guidance in the range   of $1.07 to $1.08 in adjusted earnings per share which is slightly below what   analysts were estimating. And they expect revenue to be between $1.015   billion and $1.020 billion slightly ahead of Wall Street forecasts. Zoom did   however increase its full-year earnings and revenue estimates to between   $4.75 to $4.79 per share and $4.005 billion to $4.015 billion both ahead of   consensus estimates. The improved guidance was due to an increase in   coronavirus infections as a result of the delta variant, as well as some   companies delaying plans to reopen offices, or even making permanent changes   to their operating models. It also expects gross margins to expand when   students return to school. The guidance assumes strong growth from Zoom’s   direct and channel businesses, as well as weakness in the online business   because of challenges among smaller customers and consumers.

Zoom has enjoyed a meteoric rise as a result of the change in workplace dynamics brought about by the coronavirus pandemic. Their offering so far appears superior to that of competitors such as Microsoft Teams. The company is profitable and generated free cash flows of $455.0 million, compared to $373.4 million in the second quarter of fiscal 2021. Zoom now has approximately 504,900 customers (each with over 10 employees), which is up approximately 36% year-over-year. Famed tech investor Cathie Wood added 157,233 Zoom shares to her ARK Innovation ETF and 36,847 shares to her Generation Internet ETF this week following a 17% plunge in the stock after the results were released. We do not own the share but continue to monitor it for opportunities.

Zoom