After the stock market closed Tuesday local time, Zoom, an online video conferencing software developer, reported its first-quarter results for the fiscal year ended April 30, 2020. Zoom reported total revenue of $328 million in the first quarter, up 169 percent from $122 million a year earlier, and net income attributable to the company’s common shareholders of $27 million, up 134 times from $200,000 a year earlier. Shares in Zoom fell more than 2 per cent after the results.
Here are the highlights of Zoom’s first-quarter results:
Zoom’s first-quarter revenue was $328.2 million, up 169 percent from $122 million a year earlier and beating analysts’ consensus estimates of $203 million.
Zoom’s net income attributable to the Company’s common shareholders for the first quarter was $27 million, compared with $200,000 in the same period last year;
Zoom’s first-quarter earnings per share of $0.09, in line with analysts’ consensus expectations, were zero compared with the same period last year.
Zoom’s first-quarter revenue cost was $104 million, up 330 percent from $24.1 million a year earlier.
Zoom’s first-quarter gross profit was $224 million, compared with $97.88 million a year earlier, and gross margin fell to 68.4 percent from 80.2 percent a year earlier.
Zoom also forecast second-quarter results for fiscal 2021, with total net revenue expected to be $495 million to $500 million, operating profit expected to be $130 million to $135 million, and earnings per share are expected to be $0.44 to $0.46. In fiscal 2021, Zoom’s total net revenue for the full year is expected to be $1.775 billion to $1.8 billion, while operating profit is expected to be $355 million to $380 million, and earnings per share are expected to be $1.21 to $1.29. In March, the company forecast earnings per share of $0.42 to $0.45 for the current fiscal year and revenue of $905 million to $915 million.
By the end of the first quarter, Zoom had 265,400 customers with more than 10 employees, an increase of 354 percent year-on-year. 769 customers contributed more than $100,000 in revenue in the past 12 months, up about 90 percent from a year earlier. Richard Valera, an analyst at Needham, said of Zoom’s performance, saying: “In my 20 years in technology reporting, I’ve never seen a business that’s growing so fast. “
As a result of the new coronavirus outbreak, more and more people are working from home and contacting friends online, prompting a surge in Zoom users. The company competes with Cisco Systems’ Webex, Microsoft Teams and Google’s Meet platforms to offer free versions to paying customers, especially businesses. Zoom has moved from a corporate-oriented teleconferencing tool to a global video hub, but it has also come under fire for privacy and security issues, prompting a major upgrade.
Zoom’s revenue and profits have soared, as has its cost of spending. Among them, the biggest expense is the bandwidth of the data center and managed phones. To serve a growing number of new users, the company is using Amazon’s AWS and Microsoft cloud computing services in addition to operating its own data centers, and in April listed Oracle as a service provider. This has also led to a narrowing of Zoom’s gross margin.
Kelly Steckelberg, Zoom’s chief financial officer, said on a earnings conference call with analysts that greater reliance on third-party cloud computing services has led to higher costs, but that it is critical for the company to meet user needs. “Looking ahead, as we build more capacity in our data centers, we expect to be more efficient and return gross margins to around 70 percent in the coming quarters,” Steckenberg said. He added that the company expects to increase capital expenditures on data center equipment.
In keeping with previous practice, Zoom did not disclose the number of active users. However, Bernstein analysts Zane Chrane and Michelle Isaacs, citing app analytics firm Apptopia, estimate that Zoom’s mobile app had 173 million monthly active users as of May 27, up from 14 million on March 4. The pair rated Zoom’s shares as “buy.”
As more and more people flock to Zoom, other companies are also taking note of the lucrative business. Facebook’s share price fell in April when it launched a video call feature called Messenger Rooms as a replacement for the free version of Zoom. Verizon also announced the acquisition of smaller rival Blue Jeans. However, Yuan Zheng, Zoom’s chief executive, said competition was good for consumers and the company would not introduce advertising into its services.
After the results were released, Zoom’s share price surged to a 52-week high of $212.69. However, its shares fell more than 2 per cent in trading after Zoom reported higher-than-expected cloud computing service costs in response to a surge in demand.