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Zoom Reports Financial Results for the Third Quarter of Fiscal Year 2022

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Zoom Video Communications reported a strong third quarter for fiscal year 2022, with total revenue reaching $1,050.8 million, up 35% year-over-year. The number of customers generating over $100,000 in trailing twelve-month revenue surged 94%. Operating margins stood at 27.7% (GAAP) and 39.1% (non-GAAP). The company expects fourth quarter revenue between $1.051 billion and $1.053 billion, with full year forecasted revenue of $4.079 billion to $4.081 billion, signaling a potential 54% growth year-over-year.

Positive
  • Total revenue of $1,050.8 million, up 35% year-over-year.
  • Number of customers contributing more than $100,000 in TTM revenue increased 94%.
  • GAAP operating margin of 27.7% and non-GAAP operating margin of 39.1%.
  • Strong guidance with expected full fiscal year 2022 revenue between $4.079 billion and $4.081 billion.
Negative
  • Net cash provided by operating activities decreased to $394.6 million from $411.5 million year-over-year.
  • Free cash flow decreased to $374.8 million compared to $388.2 million year-over-year.
  • Third quarter total revenue of $1,050.8 million, up 35% year over year
  • Number of customers contributing more than $100,000 in TTM revenue up 94% year over year
  • Third quarter GAAP operating margin of 27.7% and non-GAAP operating margin of 39.1%

SAN JOSE, Calif., Nov. 22, 2021 (GLOBE NEWSWIRE) -- Zoom Video Communications, Inc. (NASDAQ: ZM) today announced financial results for the third fiscal quarter ended October 31, 2021.

“In Q3, we held our premier user event, Zoomtopia, on our Zoom Events service. During this immersive, multi-track conference, we showcased how Zoom is placing people at the center of our communications platform, connecting their disparate work streams into our technology, moving beyond enterprises’ ability to collaborate internally, and empowering them to communicate face-to-face with their customers through Zoom Events and our upcoming Video Engagement Center. We also showcased innovations such as hot desking, whiteboarding, and smart gallery, all designed to empower both co-located and remote hybrid workforces as some companies test return to office programs,” said Zoom founder and CEO, Eric S. Yuan. “Through innovation and dedication, we will continue to deliver happiness to our customers. Looking forward, we expect to close the year between $4.079 to $4.081 billion in total revenue, representing approximately 54% year-over-year growth, alongside strong profitability and operating cash flow growth. We are well on our way to becoming an indispensable platform for enterprises, individuals, and developers to connect, collaborate, and build in the flexible hybrid world of work. We believe our global brand, innovative technologies, and large customer base position us well for the future.”

Third Quarter Fiscal Year 2022 Financial Highlights:

  • Revenue: Total revenue for the third quarter was $1,050.8 million, up 35% year over year.
  • Income from Operations and Operating Margin: GAAP income from operations for the third quarter was $290.9 million, up from $192.2 million in the third quarter of fiscal year 2021. After adjusting for stock-based compensation expense and related payroll taxes, and acquisition-related expenses, non-GAAP income from operations for the third quarter was $411.3 million, up from $290.8 million in the third quarter of fiscal year 2021. For the third quarter, GAAP operating margin was 27.7% and non-GAAP operating margin was 39.1%.
  • Net Income and Diluted Net Income Per Share: GAAP net income attributable to common stockholders for the third quarter was $340.3 million, or $1.11 per share, up from $198.4 million, or $0.66 per share in the third quarter of fiscal year 2021.

    Non-GAAP net income for the third quarter was $338.4 million, after adjusting for stock-based compensation expense and related payroll taxes, acquisition-related expenses, gains on strategic investments, net, and undistributed earnings attributable to participating securities. Non-GAAP net income per share was $1.11. In the third quarter of fiscal year 2021, non-GAAP net income was $297.2 million, or $0.99 per share.
  • Cash and Marketable Securities: Total cash, cash equivalents, and marketable securities, excluding restricted cash, as of October 31, 2021 was $5.4 billion.
  • Cash Flow: Net cash provided by operating activities was $394.6 million for the third quarter, compared to $411.5 million in the third quarter of fiscal year 2021. Free cash flow, which is net cash provided by operating activities less purchases of property and equipment, was $374.8 million, compared to $388.2 million in the third quarter of fiscal year 2021.

Customer Metrics: Drivers of total revenue included acquiring new customers and expanding across existing customers. At the end of the third quarter of fiscal year 2022, Zoom had:

  • 2,507 customers contributing more than $100,000 in trailing 12 months revenue, up approximately 94% from the same quarter last fiscal year.
  • Approximately 512,100 customers with more than 10 employees, up approximately 18% from the same quarter last fiscal year.
  • A trailing 12-month net dollar expansion rate in customers with more than 10 employees above 130% for the 14th consecutive quarter.

Financial Outlook: Zoom is providing the following guidance for its fourth quarter fiscal year 2022 and its full fiscal year 2022.

  • Fourth Quarter Fiscal Year 2022: Total revenue is expected to be between $1.051 billion and $1.053 billion and non-GAAP income from operations is expected to be between $361.0 million and $363.0 million. Non-GAAP diluted EPS is expected to be between $1.06 and $1.07 with approximately 307 million non-GAAP weighted average shares outstanding.
  • Full Fiscal Year 2022: Total revenue is expected to be between $4.079 billion and $4.081 billion. Non-GAAP income from operations is expected to be between $1.598 billion and $1.600 billion. Non-GAAP diluted EPS is expected to be between $4.84 and $4.85 with approximately 306 million non-GAAP weighted average shares outstanding.

Additional information on Zoom's reported results, including a reconciliation of the non-GAAP results to their most comparable GAAP measures, is included in the financial tables below. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty of expenses that may be incurred in the future, although it is important to note that these factors could be material to Zoom's results computed in accordance with GAAP.

A supplemental financial presentation and other information can be accessed through Zoom’s investor relations website at investors.zoom.us.

Zoom Video Earnings Call

Zoom will host a Zoom Video Webinar for investors on November 22, 2021 at 2:00 p.m. Pacific Time / 5:00 p.m. Eastern Time to discuss the company’s financial results, outlook and business highlights. Investors are invited to join the Zoom Video Webinar by visiting: https://investors.zoom.us/

About Zoom

Zoom is for you. We help you express ideas, connect to others, and build toward a future limited only by your imagination. Our frictionless communications platform is the only one that started with video as its foundation, and we have set the standard for innovation ever since. That is why we are an intuitive, scalable, and secure choice for large enterprises, small businesses, and individuals alike. Founded in 2011, Zoom is publicly traded (NASDAQ:ZM) and headquartered in San Jose, California. Visit zoom.com and follow @zoom.

Forward-Looking Statements
This press release contains express and implied “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial outlook for the fourth quarter of fiscal year 2022 and full fiscal year 2022, Zoom’s market position, and Zoom’s growth strategy and business aspirations to become an indispensable platform for individuals, enterprises, and developers to connect, collaborate and build in the hybrid world. In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “will,” “would,” “should,” “could,” “can,” “predict,” “potential,” “target,” “explore,” “continue,” or the negative of these terms, and similar expressions intended to identify forward-looking statements. By their nature, these statements are subject to numerous uncertainties and risks, including factors beyond our control, that could cause actual results, performance or achievement to differ materially and adversely from those anticipated or implied in the statements, including: declines in new customers and hosts, renewals or upgrades, difficulties in evaluating our prospects and future results of operations given our limited operating history, competition from other providers of communications platforms, continued uncertainty regarding the extent and duration of the impact of COVID-19 and the responses of government and private industry thereto, including the potential effect on our user growth rate once the impact of the COVID-19 pandemic tapers, particularly as vaccines become widely available and distributed, and users return to work or school or are otherwise no longer subject to limitations on in-person meetings, as well as the impact of COVID-19 on the overall economic environment, any or all of which will have an impact on demand for remote work solutions for businesses as well as overall distributed, face-to-face interactions and collaboration using Zoom, delays or outages in services from our co-located data centers, and failures in internet infrastructure or interference with broadband access which could cause current or potential users to believe that our systems are unreliable. Additional risks and uncertainties that could cause actual outcomes and results to differ materially from those contemplated by the forward-looking statements are included under the caption “Risk Factors” and elsewhere in our most recent filings with the Securities and Exchange Commission (the “SEC”), including our quarterly report on Form 10-Q for the fiscal quarter ended July 31, 2021. Forward-looking statements speak only as of the date the statements are made and are based on information available to Zoom at the time those statements are made and/or management's good faith belief as of that time with respect to future events.  Zoom assumes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, except as required by law.

Non-GAAP Financial Measures

Zoom has provided in this press release financial information that has not been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). Zoom uses these non-GAAP financial measures internally in analyzing its financial results and believes that use of these non-GAAP financial measures is useful to investors as an additional tool to evaluate ongoing operating results and trends and in comparing Zoom’s financial results with other companies in its industry, many of which present similar non-GAAP financial measures.

Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures and should be read only in conjunction with Zoom’s condensed consolidated financial statements prepared in accordance with GAAP. A reconciliation of Zoom’s historical non-GAAP financial measures to the most directly comparable GAAP measures has been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliation.

Non-GAAP Income From Operations and Non-GAAP Operating Margins. Zoom defines non-GAAP income from operations as income from operations excluding stock-based compensation expense and related payroll taxes, expenses related to charitable donation of common stock, acquisition-related expenses, and litigation settlements, net. Zoom excludes stock-based compensation expense and expenses related to charitable donation of common stock because they are non-cash in nature and excluding these expenses provides meaningful supplemental information regarding Zoom’s operational performance and allows investors the ability to make more meaningful comparisons between Zoom’s operating results and those of other companies. Zoom excludes the amount of employer payroll taxes related to employee stock plans, which is a cash expense, in order for investors to see the full effect that excluding stock-based compensation expense had on Zoom's operating results. In particular, this expense is dependent on the price of our common stock and other factors that are beyond our control and do not correlate to the operation of the business. Zoom views acquisition-related expenses when applicable, such as amortization of acquired intangible assets, transaction costs, and acquisition-related retention payments that are directly related to business combinations as events that are not necessarily reflective of operational performance during a period. Zoom excludes significant litigation settlements, net of amounts covered by insurance, that we deem not to be in the ordinary course of our business. In particular, Zoom believes the consideration of measures that exclude such expenses can assist in the comparison of operational performance in different periods which may or may not include such expenses and assist in the comparison with the results of other companies in the industry.

Non-GAAP Net Income and Non-GAAP Net Income Per Share, Basic and Diluted. Zoom defines non-GAAP net income and non-GAAP net income per share, basic and diluted, as GAAP net income attributable to common stockholders and GAAP net income per share attributable to common stockholders, basic and diluted, respectively, adjusted to exclude stock-based compensation expense and related payroll taxes, expenses related to charitable donation of common stock, acquisition-related expenses, litigation settlements, net, gains on strategic investments, net, and undistributed earnings attributable to participating securities. Zoom excludes gains on strategic investments, net because given the size and volatility in the ongoing adjustments to the valuation of our strategic investments, we believe that excluding these gains or losses facilitates a more meaningful evaluation of our operational performance. Zoom excludes undistributed earnings attributable to participating securities because they are considered by management to be outside of Zoom’s core operating results, and excluding them provides investors and management with greater visibility to the underlying performance of Zoom’s business operations, facilitates comparison of its results with other periods and may also facilitate comparison with the results of other companies in the industry.

In order to calculate non-GAAP net income per share, basic and diluted, Zoom uses a non-GAAP weighted-average share count. Zoom defines non-GAAP weighted-average shares used to compute non-GAAP net income per share, basic and diluted, as GAAP weighted average shares used to compute net income per share attributable to common stockholders, basic and diluted, adjusted to reflect the common stock issued in connection with the IPO, including the concurrent private placement, that are outstanding as of the end of the period as if they were outstanding as of the beginning of the period for comparability.

Free Cash Flow. Zoom defines free cash flow as GAAP net cash provided by operating activities less purchases of property and equipment. Zoom considers free cash flow to be a liquidity measure that provides useful information to management and investors regarding net cash provided by operating activities and cash used for investments in property and equipment required to maintain and grow the business.

Customer Metrics

Zoom defines a customer as a separate and distinct buying entity, which can be a single paid host or an organization of any size (including a distinct unit of an organization) that has multiple paid hosts.

Zoom calculates net dollar expansion rate as of a period end by starting with the annual recurring revenue (“ARR”) from all customers with more than 10 employees as of 12 months prior (“Prior Period ARR”). Zoom defines ARR as the annualized revenue run rate of subscription agreements from all customers at a point in time. We then calculate the ARR from these customers as of the current period end (“Current Period ARR”), which includes any upsells, contraction, and attrition. Zoom divides the Current Period ARR by the Prior Period ARR to arrive at the net dollar expansion rate. For the trailing 12 months calculation, Zoom takes an average of the net dollar expansion rate over the trailing 12 months.

Press Relations

Colleen Rodriguez
Global Public Relations Lead for Zoom
press@zoom.us

Investor Relations

Tom McCallum
Head of Investor Relations for Zoom
investors@zoom.us

Zoom Video Communications, Inc.
Condensed Consolidated Balance Sheets
(In thousands)

  As of
  October 31,
2021
 January 31,
2021
Assets (unaudited)  
Current assets:    
Cash and cash equivalents $1,322,435   $2,240,303 
Marketable securities 4,095,520   2,004,410 
Accounts receivable, net 377,874   294,703 
Deferred contract acquisition costs, current 177,966   136,630 
Prepaid expenses and other current assets 138,921   116,819 
Total current assets 6,112,716   4,792,865 
Deferred contract acquisition costs, noncurrent 155,541   157,262 
Property and equipment, net 212,655   149,924 
Operating lease right-of-use assets 88,335   97,649 
Strategic investments 299,750   18,668 
Goodwill 26,247   24,340 
Other assets, noncurrent 83,727   57,285 
Total assets $6,978,971   $5,297,993 
Liabilities and stockholders’ equity    
Current liabilities:    
Accounts payable $20,064   $8,664 
Accrued expenses and other current liabilities 509,874   393,018 
Deferred revenue, current 1,161,442   858,284 
Total current liabilities 1,691,380   1,259,966 
Deferred revenue, noncurrent 24,677   25,211 
Operating lease liabilities, noncurrent 79,319   90,415 
Other liabilities, noncurrent 69,910   61,634 
Total liabilities 1,865,286   1,437,226 
     
Stockholders’ equity:    
Preferred stock     
Common stock 297   292 
Additional paid-in capital 3,561,050   3,187,168 
Accumulated other comprehensive (loss) income (5,128)  839 
Retained earnings 1,557,466   672,468 
Total stockholders’ equity 5,113,685   3,860,767 
Total liabilities and stockholders’ equity $6,978,971   $5,297,993 

Note: The amount of unbilled accounts receivable included within accounts receivable, net on the condensed consolidated balance sheets was $48.6 million and $24.6 million as of October 31, 2021 and January 31, 2021, respectively.

Zoom Video Communications, Inc.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except share and per share amounts)

  Three Months Ended October 31, Nine Months Ended October 31,
  2021 2020 2021 2020
Revenue $1,050,756   $777,196   $3,028,488   $1,768,883  
Cost of revenue 270,957   258,727   797,207   554,705  
Gross profit 779,799   518,469   2,231,281   1,214,178  
Operating expenses:        
Research and development 98,508   42,582   245,994   111,705  
Sales and marketing 293,698   190,157   810,544   470,886  
General and administrative 96,736   93,488   362,971   227,856  
Total operating expenses 488,942   326,227   1,419,509   810,447  
Income from operations 290,857   192,242   811,772   403,731  
Gains on strategic investments, net 122,421      154,497   2,538  
Interest income and other, net (2,995)  1,779   (3,171)  7,112  
Income before provision for (benefit from) income taxes 410,283   194,021   963,098   413,381  
Provision for (benefit from) income taxes 69,900   (4,621)  78,100   1,675  
Net income 340,383   198,642   884,998   411,706  
Undistributed earnings attributable to participating securities (112)  (202)  (430)  (531) 
Net income attributable to common stockholders $340,271   $198,440   $884,568   $411,175  
         
Net income per share attributable to common stockholders:        
Basic $1.14   $0.70   $2.99   $1.46  
Diluted $1.11   $0.66   $2.89   $1.38  
Weighted-average shares used in computing net income per share attributable to common stockholders:        
Basic 297,375,011   284,783,006   295,647,626   282,564,481  
Diluted 305,939,624   299,258,765   305,726,733   297,605,941  

Zoom Video Communications, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)

  Three Months Ended October 31, Nine Months Ended October 31,
  2021 2020 2021 2020
Cash flows from operating activities:        
Net income $340,383   $198,642   $884,998   $411,706  
Adjustments to reconcile net income to net cash provided by operating activities:        
Stock-based compensation expense 114,801   93,925   315,912   179,557  
Amortization of deferred contract acquisition costs 46,299   30,500   125,691   71,281  
Gains on strategic investments, net (122,421)     (154,497)  (2,538) 
Charitable donation of common stock          23,312  
Provision for accounts receivable allowances 8,890   5,259   23,482   20,218  
Depreciation and amortization 12,584   7,587   35,275   19,401  
Non-cash operating lease cost 4,498   2,585   13,131   7,182  
Amortization on marketable securities 6,909   1,597   19,546   2,787  
Other 1,863   92   2,127   930  
Changes in operating assets and liabilities:        
Accounts receivable 8,718   6,809   (108,541)  (190,117) 
Prepaid expenses and other assets (14,628)  5,471   (71,998)  (48,258) 
Deferred contract acquisition costs (62,708)  (52,504)  (165,305)  (266,294) 
Accounts payable (31,898)  (2,098)  12,062   8,773  
Accrued expenses and other liabilities 78,105   1,853   171,914   203,919  
Deferred revenue 7,877   114,451   304,513   633,600  
Operating lease liabilities, net (4,716)  (2,699)  (12,440)  (3,678) 
Net cash provided by operating activities 394,556   411,470   1,395,870   1,071,781  
Cash flows from investing activities:        
Purchases of marketable securities (1,351,726)  (531,227)  (3,446,313)  (1,016,109) 
Maturities of marketable securities 255,639   119,269   1,047,545   406,607  
Sales of marketable securities 162,013      281,582   36,897  
Purchases of property and equipment (19,767)  (23,264)  (111,816)  (58,517) 
Purchases of strategic investments (39,449)     (126,349)  (13,000) 
Cash paid for acquisition, net of cash acquired       (2,121)  (26,486) 
Purchase of intangible assets (9,626)  (2,891)  (9,626)  (4,385) 
Other    297      1,616  
Net cash used in investing activities (1,002,916)  (437,816)  (2,367,098)  (673,377) 
Cash flows from financing activities:        
Proceeds from issuance of common stock for employee stock purchase plan       37,846   20,760  
Proceeds from employee equity transactions (remitted) to be remitted to employees and tax authorities, net (47,242)  17,176   (28,342)  251,641  
Proceeds from exercise of stock options 3,023   6,424   11,044   23,841  
Other       337     
Net cash (used in) provided by financing activities (44,219)  23,600   20,885   296,242  
Net (decrease) increase in cash, cash equivalents, and restricted cash (652,579)  (2,746)  (950,343)  694,646  
Cash, cash equivalents, and restricted cash – beginning of period 1,995,352   1,031,474   2,293,116   334,082  
Cash, cash equivalents, and restricted cash – end of period $1,342,773   $1,028,728   $1,342,773   $1,028,728  

Zoom Video Communications, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(Unaudited, in thousands, except share and per share amounts)

  Three Months Ended October 31, Nine Months Ended October 31,
  2021 2020 2021 2020
GAAP income from operations $290,857   $192,242   $811,772   $403,731  
Adjustments:        
Stock-based compensation expense and related payroll taxes 118,708   97,131   339,825   188,979  
Litigation settlements, net       66,916     
Acquisition-related expenses 1,713   1,398   18,317   6,340  
Charitable donation of common stock          23,312  
Non-GAAP income from operations $411,278   $290,771   $1,236,830   $622,362  
         
GAAP net income attributable to common stockholders $340,271   $198,440   $884,568   $411,175  
Adjustments:        
Stock-based compensation expense and related payroll taxes 118,708   97,131   339,825   188,979  
Litigation settlements, net       66,916     
Gains on strategic investments, net (122,421)     (154,497)    
Acquisition-related expenses 1,713   1,398   18,317   6,340  
Charitable donation of common stock          23,312  
Undistributed earnings attributable to participating securities 112   202   430   531  
Non-GAAP net income $338,383   $297,171   $1,155,559   $630,337  
         
Net income per share - basic and diluted:        
GAAP net income per share - basic $1.14   $0.70   $2.99   $1.46  
Non-GAAP net income per share - basic $1.14   $1.04   $3.91   $2.23  
GAAP net income per share - diluted $1.11   $0.66   $2.89   $1.38  
Non-GAAP net income per share - diluted $1.11   $0.99   $3.78   $2.12  
         
GAAP and non-GAAP weighted-average shares used to compute net income per share - basic 297,375,011   284,783,006   295,647,626   282,564,481  
GAAP and non-GAAP weighted-average shares used to compute net income per share - diluted 305,939,624   299,258,765   305,726,733   297,605,941  
         
Net cash provided by operating activities $394,556   $411,470   $1,395,870   $1,071,781  
Less:        
Purchases of property and equipment (19,767)  (23,264)  (111,816)  (58,517) 
Free cash flow (non-GAAP) $374,789   $388,206   $1,284,054   $1,013,264  
Net cash used in investing activities $(1,002,916)  $(437,816)  $(2,367,098)  $(673,377) 
Net cash (used in) provided by financing activities $(44,219)  $23,600   $20,885   $296,242  


FAQ

What are Zoom's Q3 fiscal year 2022 earnings results?

Zoom reported total revenue of $1,050.8 million for Q3 fiscal year 2022, a 35% increase year-over-year.

What is Zoom's financial outlook for Q4 and FY 2022?

For Q4 FY 2022, Zoom expects total revenue between $1.051 billion and $1.053 billion, and for FY 2022, revenue is expected between $4.079 billion and $4.081 billion.

How many customers does Zoom have contributing over $100,000 in TTM revenue?

Zoom has 2,507 customers contributing more than $100,000 in trailing twelve-month revenue, up 94% year-over-year.

What was Zoom's operating margin for Q3 fiscal year 2022?

Zoom's GAAP operating margin was 27.7% and non-GAAP operating margin was 39.1% for Q3 fiscal year 2022.

Zoom Video Communications, Inc.

NASDAQ:ZM

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ZM Stock Data

24.94B
262.13M
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67.21%
2.82%
Software - Application
Services-computer Programming, Data Processing, Etc.
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United States of America
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