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Why Is Zoom Video (ZM) Up 2.8% Since Last Earnings Report?
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It has been about a month since the last earnings report for Zoom Video Communications (ZM - Free Report) . Shares have added about 2.8% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Zoom Video due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Zoom Video Q4 Earnings Beat Estimates, Revenues Up Y/Y
Zoom Video Communications reported fourth-quarter fiscal 2022 non-GAAP earnings of $1.29 per share, beating the Zacks Consensus Estimate by 20.56%.
Revenues, on a non-GAAP basis, improved 21% year over year to $1.07 billion and surpassed the consensus mark by 1.81%.
In the reported quarter, Zoom Video revenues benefited from growth in enterprise business.
Zoom’s shares have fallen 27.9% year to date, compared with the Zacks Internet Software industry’s decline of 28.9%. Meanwhile, the Computer & Technology sector has tumbled 12.9%.
Strong demand for Zoom phone impacted the growth of revenues positively. In the fiscal fourth quarter, Zoom phone added 550,000 new paid seats. The improvement in Zoom phone was primarily due to growth of large customers with ARR of $1000,000 reflecting growth of 149% year over year. Meanwhile, the number of paid seats were more than 10,000, highlighting a whopping increase of 122% year over year.
Quarter in Detail
Expanding customer base was a major contributor to the positive earnings in the reported quarter. In the fourth quarter, Zoom customers contributing more than $100,000 in revenues in trailing 12 month grew 66%. These customers accounted for 23% of revenues, up from 18% in the year-ago quarter.
Zoom customers with more than 10 employees increased 9% year over year to 509,800. These customers represented 67% of total revenues, up from 63% in the fourth quarter of fiscal 2021.
Enterprise customers grew 35% year over year to 191,000. With regard to contribution to revenues, enterprise customers grew 38%, representing 50% of total revenues.
However, growth in the Online business, which represents other half of revenues, has been slower than the enterprise business due to the impact of the pandemic.
This business is an attractive model from the view point of profitability and cash flow perspective, thus slower growth in this business model has slightly hampered bottom-line growth.
Growth in the international market was a contributor to the positive revenue growth. Revenues grew 21% in America, while in the international market revenues from APAC and EMEA grew 23% year over year.
Operating Details
Non-GAAP Gross Margin expanded by 699 bps to 78.3% year over year. Research and development expenses grew by 323 bps year over year to $72 million. Sales and Marketing expenses expanded by 539 bps to $251 million, while General and Administrative expenses increased by 4 bps to $95 million.
Non-GAAP operating income increased 16.3% to $420 million year over year. Non-GAAP operating margin contracted by 167 bps to 39.2%.
Balance Sheet and Cash Flow
As of January 31, 2022, cash, cash equivalents and marketable securities were $5.4 billion.
As of January 31, 2022, adjusted free cash flow was $274 million.
Guidance
Zoom expects first-quarter fiscal 2023 revenues in the range of $1.07 billion to $1.075 billion.
Non-GAAP earnings per share in the range of 86 cents to 88 cents.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -42.42% due to these changes.
VGM Scores
Currently, Zoom Video has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Zoom Video has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Why Is Zoom Video (ZM) Up 2.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Zoom Video Communications (ZM - Free Report) . Shares have added about 2.8% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Zoom Video due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Zoom Video Q4 Earnings Beat Estimates, Revenues Up Y/Y
Zoom Video Communications reported fourth-quarter fiscal 2022 non-GAAP earnings of $1.29 per share, beating the Zacks Consensus Estimate by 20.56%.
Revenues, on a non-GAAP basis, improved 21% year over year to $1.07 billion and surpassed the consensus mark by 1.81%.
In the reported quarter, Zoom Video revenues benefited from growth in enterprise business.
Zoom’s shares have fallen 27.9% year to date, compared with the Zacks Internet Software industry’s decline of 28.9%. Meanwhile, the Computer & Technology sector has tumbled 12.9%.
Strong demand for Zoom phone impacted the growth of revenues positively. In the fiscal fourth quarter, Zoom phone added 550,000 new paid seats. The improvement in Zoom phone was primarily due to growth of large customers with ARR of $1000,000 reflecting growth of 149% year over year. Meanwhile, the number of paid seats were more than 10,000, highlighting a whopping increase of 122% year over year.
Quarter in Detail
Expanding customer base was a major contributor to the positive earnings in the reported quarter. In the fourth quarter, Zoom customers contributing more than $100,000 in revenues in trailing 12 month grew 66%. These customers accounted for 23% of revenues, up from 18% in the year-ago quarter.
Zoom customers with more than 10 employees increased 9% year over year to 509,800. These customers represented 67% of total revenues, up from 63% in the fourth quarter of fiscal 2021.
Enterprise customers grew 35% year over year to 191,000. With regard to contribution to revenues, enterprise customers grew 38%, representing 50% of total revenues.
However, growth in the Online business, which represents other half of revenues, has been slower than the enterprise business due to the impact of the pandemic.
This business is an attractive model from the view point of profitability and cash flow perspective, thus slower growth in this business model has slightly hampered bottom-line growth.
Growth in the international market was a contributor to the positive revenue growth. Revenues grew 21% in America, while in the international market revenues from APAC and EMEA grew 23% year over year.
Operating Details
Non-GAAP Gross Margin expanded by 699 bps to 78.3% year over year.
Research and development expenses grew by 323 bps year over year to $72 million. Sales and Marketing expenses expanded by 539 bps to $251 million, while General and Administrative expenses increased by 4 bps to $95 million.
Non-GAAP operating income increased 16.3% to $420 million year over year. Non-GAAP operating margin contracted by 167 bps to 39.2%.
Balance Sheet and Cash Flow
As of January 31, 2022, cash, cash equivalents and marketable securities were $5.4 billion.
As of January 31, 2022, adjusted free cash flow was $274 million.
Guidance
Zoom expects first-quarter fiscal 2023 revenues in the range of $1.07 billion to $1.075 billion.
Non-GAAP earnings per share in the range of 86 cents to 88 cents.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -42.42% due to these changes.
VGM Scores
Currently, Zoom Video has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Zoom Video has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.