Zoom Video Communications Shares Down After 3Q Results
November 23 2021 - 12:55PM
Dow Jones News
By Michael Dabaie
Zoom Video Communications Inc. shares were down 18% to $197.91
following the release of third-quarter results.
The video communications platform company after the bell Monday
reported third-quarter revenue of $1.05 billion, up 35% and beating
the FactSet consensus for $1.02 billion. Earnings per share were
$1.11, beating the FactSet consensus of $1.09.
"The growth was primarily driven by strength in our direct and
channel businesses, which grew at twice the rate of our online
business, as well as improved churn in both online and direct
segments," Chief Financial Officer Kelly Steckelberg said during
the company's conference call.
Zoom guided for fourth-quarter revenue of $1.051 billion to
$1.053 billion and adjusted EPS between $1.06 and $1.07.
J.P. Morgan noted that the stock in after-hours trading Monday
was reacting to metrics like billings "that have not been a good
indicator of business health for Zoom."
J.P. Morgan said in its analyst note that revenue for the third
quarter and guidance for fourth quarter came in above its
expectations "even as the expected fade of revenue from under 10
employee and personal use customers continued. We believe this is
the setup that points to bottoming in growth and re-acceleration as
we head through next fiscal year."
"In Q3, customers with more than 10 employees represented 66% of
revenue, up from 64% last quarter and 62% in Q3 of last year. These
trends suggest that our customers with more than 10 employees are
expanding their use of our platform, adding more products and
seats, aligned with our go-to-market strategy," Ms. Steckelberg
said during the conference call.
J.P. Morgan noted fewer customer additions than expected and
low-end customer revenue decline. "Total customers with over 10
employees increased to 512,100 in the quarter, up 18%, below our
expectation of 518,785," J.P. Morgan said. "Customers with 10 or
fewer employees declined as a percentage of total revenue, down to
34% from 38% one year ago and 36% last quarter," the firm said in
an analyst note.
Needham pointed to churn and slowing revenue growth in the
company's fewer-than 10 employee cohort. "We suspect headwinds in
this segment could persist into F1Q22, potentially beyond,
overshadowing solid progress in enterprise," Needham said in a
note.
"With topline growth still weighed down by weakening trends in
the micro segment from pull-forward and temporary pandemic
business, we look for a clear line of sight to the growth trough,"
Needham said. Needham said it suspects Zoom could face additional
quarters of high churn in this micro segment before the more
attractive growth rate in its more-than 10 employee and enterprise
segments becomes more evident.
Mizuho Securities USA reiterated its Buy rating. "Although the
company's post-pandemic durable growth profile remains somewhat
unclear, the company's multiple growth levers (Zoom Phone, Zoom
Rooms, Video Engagement Center) remain integral to hybrid work
environments for the foreseeable future," Mizuho said.
Zoom said that at the end of the third quarter it had 2,507
customers contributing more than $100,000 in trailing 12 months
revenue, up about 94% from the same quarter last fiscal year.
"We expect larger company contributions to be the key to growth,
not the under 10 employee and personal use, so this is a positive
signal," J.P. Morgan said.
Write to Michael Dabaie at michael.dabaie@wsj.com
(END) Dow Jones Newswires
November 23, 2021 12:40 ET (17:40 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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