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Zoom Video (ZM) Down 9.5% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Zoom Video Communications (ZM - Free Report) . Shares have lost about 9.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Zoom Video due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Zoom’s Q2 Earnings Top Estimates, Revenues Jump Y/Y
Zoom’s second-quarter fiscal 2022 adjusted earnings of $1.36 per share beat the Zacks Consensus Estimate by 17.24% and increased 47.8% year over year.
Moreover, revenues of $1.02 billion surpassed the consensus mark by 3.16% and increased 54% year over year. The top-line result exceeded the high end of its guidance of $990 million.
This outperformance was driven by a healthy mix of new and existing customers, where new customers accounted for around 74% of the incremental revenues, and existing customers accounted for 26% of the incremental revenues.
Revenues from Americas (66.7% of revenues) jumped 50% year over year to $681 million. Revenues from EMEA (20.1% of revenues) soared 60.2% from the year-ago quarter to $205 million. Revenues from APAC (13.2% of revenues) were $135 million, up 66.7% year over year.
The company saw strength in direct and channel businesses, which grew at twice the rate of online business. Zoom Phone, Zoom Rooms and Asia Pacific growth also accelerated in the fiscal second quarter.
ZM stock tumbled 10.8% to $309.75 in after-hours trading, fuelled by a tepid forecast for third-quarter earnings. The company is entering a time of tough comparisons with its performance last year when businesses were looking for ways to quickly build out their video chat capabilities amid the coronavirus-induced lockdown.
User Base Jumps in Q2
At the end of the fiscal second quarter, Zoom had roughly 504,900 customers (with more than 10 employees), up 36% year over year. Its trailing 12-month net dollar-expansion rate in customers with more than 10 employees was above 130% for the 13th consecutive quarter.
Moreover, the company had 2,278 customers with more than $100,000 in trailing 12-month revenues, up roughly 131% year over year.
In the fiscal second quarter, the company closed a strategic channel partnership with Telkomsel, the largest cellular operator in Indonesia, which is the world’s fourth-largest country by population. They will be leveraging the power of Zoom’s Developer Platform and ISV Partner Program to deliver a fully integrated solution through their CloudX offering for the enterprise segment and Zoom native apps for the consumer segment.
Operating Details
Non-GAAP gross margin in the quarter under review expanded 400 basis points (bps) on a year-over-year basis to 76.2%.
Non-GAAP research & development (R&D) expenses as a percentage of revenues expanded 100 basis points (bps) on a year-over-year basis to 5.3%. Further, non-GAAP general & administrative (G&A) expenses increased 100 bps on a year-over-year basis to 8.7%.
Moreover, non-GAAP sales & marketing (S&M) expenses as a percentage of revenues expanded 220 bps on a year-over-year basis to 20.7%.
Non-GAAP operating income surged 53.3% year over year to $424.7 million. Operating margin contracted 200 bps on a year-over-year basis to 41.6% from 16.7%.
Balance Sheet & Cash Flow
As of Jul 31, 2021, cash and cash equivalents and marketable securities were $5.1 billion compared with $4.7 billion as of Apr 30, 2021.
Non-GAAP free cash flow was $455 million in the quarter under review compared with $454.2 million in the previous quarter and $373.4 million in the year-ago quarter.
Remaining performance obligation was $2.34 billion, up 66% year over year.
Guidance
For third-quarter fiscal 2022, Zoom expects revenues between $1.015 billion and $1.020 billion. Non-GAAP income from operations is expected between $340 million and $345 million. Moreover, non-GAAP earnings are expected in the $1.07-$1.08 per share range.
For fiscal 2022, Zoom now expects revenues between $4.005 billion and $4.015 billion.
Non-GAAP income from operations is expected between $1.5 billion and $1.51 billion. Moreover, non-GAAP earnings are expected in the $4.75-$4.79 per share range.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, Zoom Video has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Zoom Video has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Zoom Video (ZM) Down 9.5% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Zoom Video Communications (ZM - Free Report) . Shares have lost about 9.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Zoom Video due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Zoom’s Q2 Earnings Top Estimates, Revenues Jump Y/Y
Zoom’s second-quarter fiscal 2022 adjusted earnings of $1.36 per share beat the Zacks Consensus Estimate by 17.24% and increased 47.8% year over year.
Moreover, revenues of $1.02 billion surpassed the consensus mark by 3.16% and increased 54% year over year. The top-line result exceeded the high end of its guidance of $990 million.
This outperformance was driven by a healthy mix of new and existing customers, where new customers accounted for around 74% of the incremental revenues, and existing customers accounted for 26% of the incremental revenues.
Revenues from Americas (66.7% of revenues) jumped 50% year over year to $681 million. Revenues from EMEA (20.1% of revenues) soared 60.2% from the year-ago quarter to $205 million. Revenues from APAC (13.2% of revenues) were $135 million, up 66.7% year over year.
The company saw strength in direct and channel businesses, which grew at twice the rate of online business. Zoom Phone, Zoom Rooms and Asia Pacific growth also accelerated in the fiscal second quarter.
ZM stock tumbled 10.8% to $309.75 in after-hours trading, fuelled by a tepid forecast for third-quarter earnings. The company is entering a time of tough comparisons with its performance last year when businesses were looking for ways to quickly build out their video chat capabilities amid the coronavirus-induced lockdown.
User Base Jumps in Q2
At the end of the fiscal second quarter, Zoom had roughly 504,900 customers (with more than 10 employees), up 36% year over year. Its trailing 12-month net dollar-expansion rate in customers with more than 10 employees was above 130% for the 13th consecutive quarter.
Moreover, the company had 2,278 customers with more than $100,000 in trailing 12-month revenues, up roughly 131% year over year.
In the fiscal second quarter, the company closed a strategic channel partnership with Telkomsel, the largest cellular operator in Indonesia, which is the world’s fourth-largest country by population. They will be leveraging the power of Zoom’s Developer Platform and ISV Partner Program to deliver a fully integrated solution through their CloudX offering for the enterprise segment and Zoom native apps for the consumer segment.
Operating Details
Non-GAAP gross margin in the quarter under review expanded 400 basis points (bps) on a year-over-year basis to 76.2%.
Non-GAAP research & development (R&D) expenses as a percentage of revenues expanded 100 basis points (bps) on a year-over-year basis to 5.3%. Further, non-GAAP general & administrative (G&A) expenses increased 100 bps on a year-over-year basis to 8.7%.
Moreover, non-GAAP sales & marketing (S&M) expenses as a percentage of revenues expanded 220 bps on a year-over-year basis to 20.7%.
Non-GAAP operating income surged 53.3% year over year to $424.7 million. Operating margin contracted 200 bps on a year-over-year basis to 41.6% from 16.7%.
Balance Sheet & Cash Flow
As of Jul 31, 2021, cash and cash equivalents and marketable securities were $5.1 billion compared with $4.7 billion as of Apr 30, 2021.
Non-GAAP free cash flow was $455 million in the quarter under review compared with $454.2 million in the previous quarter and $373.4 million in the year-ago quarter.
Remaining performance obligation was $2.34 billion, up 66% year over year.
Guidance
For third-quarter fiscal 2022, Zoom expects revenues between $1.015 billion and $1.020 billion. Non-GAAP income from operations is expected between $340 million and $345 million. Moreover, non-GAAP earnings are expected in the $1.07-$1.08 per share range.
For fiscal 2022, Zoom now expects revenues between $4.005 billion and $4.015 billion.
Non-GAAP income from operations is expected between $1.5 billion and $1.51 billion. Moreover, non-GAAP earnings are expected in the $4.75-$4.79 per share range.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, Zoom Video has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Zoom Video has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.