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Zoom (ZM) Q3 Earnings Beat, Expanding Clientele Aids Top Line
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Zoom’s (ZM - Free Report) third-quarter fiscal 2023 adjusted earnings of $1.07 per share beat the Zacks Consensus Estimate by 27.38% but decreased 3.6% year over year.
Revenues of $1.10 billion increased 5% year over year (7% in constant currency) and beat the consensus mark by 0.41%.
Quarter Details
Revenues from Enterprise customers grew 20% year over year and represented 56% of total revenues, up from 49% in third-quarter fiscal 2022. The number of Enterprise customers grew 14% year over year to over 209,300. The company reported a trailing 12-month net dollar expansion rate for Enterprise customers of 117%.
In the fiscal third quarter, customers contributing more than $100,000 in revenues in the trailing 12 months grew 31% to 3,286. These customers accounted for 27% of revenues, up from 22% in the year-ago quarter.
Zoom Video Communications, Inc. Price, Consensus and EPS Surprise
Online average monthly churn in the reported quarter improved to 3.1% from 3.7% reported in the year-ago quarter and 3.6% in the previous quarter.
Revenues grew 11% in America, while international market revenues from APAC declined 3% year over year. EMEA revenues declined 9% year over year due to the stronger dollar and the Russia-Ukraine war.
Operating Details
Non-GAAP gross margin expanded 360 basis points (bps) to 79.5% in the fiscal third quarter of 2023 and 60 bps sequentially.
The sequential improvement was primarily due to optimizing usage across the public cloud and Zoom’s increasing number of co-located data centers.
Research and development expenses increased 59.4% year over year to $107.8 million. Sales and marketing expenses increased 26.6% to $300.6 million, while general and administrative expenses increased 6.1% to $86.9 million.
Non-GAAP operating income decreased 7.4% to $380.9 million year over year. Non-GAAP operating margin contracted 460 bps to 34.6%.
Balance Sheet and Cash Flow
Total cash, cash equivalents, and marketable securities as of Oct 31, 2022, was $5.17 billion. As of Jul 31, 2022, cash, cash equivalents and marketable securities were $5.5 billion.
Adjusted free cash flow was $222.1 million.
Guidance
Zoom expects fourth-quarter fiscal 2023 revenues in the range of $1.095-$1.1105 billion, which at the midpoint represents roughly 3% year-over-year growth or 5% in constant currency.
Non-GAAP operating income is expected between $316 million and $326 million. Non-GAAP earnings are expected in the range of 75 cents to 78 cents per share.
For fiscal 2023, Zoom expects revenues in the range of $4.37-$4.38 billion. At the midpoint, this represents a decrease of over $15 million compared with the previous full-year guidance. Of this decrease, nearly $14 million is due to the stronger dollar.
Zoom expects its gross margin in fiscal 2023 to be roughly 79%.
Non-GAAP operating income is expected between $1.49 billion and $1.5 billion, representing a non-GAAP operating margin of approximately 34%.
Non-GAAP earnings are expected in the range of $3.91-$3.94 per share.
Image: Shutterstock
Zoom (ZM) Q3 Earnings Beat, Expanding Clientele Aids Top Line
Zoom’s (ZM - Free Report) third-quarter fiscal 2023 adjusted earnings of $1.07 per share beat the Zacks Consensus Estimate by 27.38% but decreased 3.6% year over year.
Revenues of $1.10 billion increased 5% year over year (7% in constant currency) and beat the consensus mark by 0.41%.
Quarter Details
Revenues from Enterprise customers grew 20% year over year and represented 56% of total revenues, up from 49% in third-quarter fiscal 2022. The number of Enterprise customers grew 14% year over year to over 209,300. The company reported a trailing 12-month net dollar expansion rate for Enterprise customers of 117%.
In the fiscal third quarter, customers contributing more than $100,000 in revenues in the trailing 12 months grew 31% to 3,286. These customers accounted for 27% of revenues, up from 22% in the year-ago quarter.
Zoom Video Communications, Inc. Price, Consensus and EPS Surprise
Zoom Video Communications, Inc. price-consensus-eps-surprise-chart | Zoom Video Communications, Inc. Quote
Online average monthly churn in the reported quarter improved to 3.1% from 3.7% reported in the year-ago quarter and 3.6% in the previous quarter.
Revenues grew 11% in America, while international market revenues from APAC declined 3% year over year. EMEA revenues declined 9% year over year due to the stronger dollar and the Russia-Ukraine war.
Operating Details
Non-GAAP gross margin expanded 360 basis points (bps) to 79.5% in the fiscal third quarter of 2023 and 60 bps sequentially.
The sequential improvement was primarily due to optimizing usage across the public cloud and Zoom’s increasing number of co-located data centers.
Research and development expenses increased 59.4% year over year to $107.8 million. Sales and marketing expenses increased 26.6% to $300.6 million, while general and administrative expenses increased 6.1% to $86.9 million.
Non-GAAP operating income decreased 7.4% to $380.9 million year over year. Non-GAAP operating margin contracted 460 bps to 34.6%.
Balance Sheet and Cash Flow
Total cash, cash equivalents, and marketable securities as of Oct 31, 2022, was $5.17 billion. As of Jul 31, 2022, cash, cash equivalents and marketable securities were $5.5 billion.
Adjusted free cash flow was $222.1 million.
Guidance
Zoom expects fourth-quarter fiscal 2023 revenues in the range of $1.095-$1.1105 billion, which at the midpoint represents roughly 3% year-over-year growth or 5% in constant currency.
Non-GAAP operating income is expected between $316 million and $326 million. Non-GAAP earnings are expected in the range of 75 cents to 78 cents per share.
For fiscal 2023, Zoom expects revenues in the range of $4.37-$4.38 billion. At the midpoint, this represents a decrease of over $15 million compared with the previous full-year guidance. Of this decrease, nearly $14 million is due to the stronger dollar.
Zoom expects its gross margin in fiscal 2023 to be roughly 79%.
Non-GAAP operating income is expected between $1.49 billion and $1.5 billion, representing a non-GAAP operating margin of approximately 34%.
Non-GAAP earnings are expected in the range of $3.91-$3.94 per share.
Zacks Rank & Key Picks
Currently, Zoom carries a Zacks Rank #3 (Hold).
Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Jabil (JBL - Free Report) , Guidewire (GWRE - Free Report) and Mitek Systems (MITK - Free Report) . While Jabil sports a Zacks Rank #1 (Strong Buy), Guidewire and Mitek carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Jabil, Guidewire and Mitek have been down 1.6%, 49.6% and 40.7%, respectively.