Zoom Posts Strong Results, but Warns of a Slowdown Ahead

Earnings and revenue surpassed projections and were up year over year

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Jun 02, 2021
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On June 1 after the market closed, Zoom Video Communications, Inc. (ZM, Financial) released its earnings for its first quarter of fiscal 2022. The video conferencing company reported stronger-than-expected earnings and revenue during the quarter. Zoom's shares were up 1% in premarket trading on Wednesday to $331 per share.

Key metrics

Zoom recorded net income of $227.4 million, translating to GAAP earnings of 74 cents per share. That compares with net income of $27 million, or $0.09 per share, reported in the year-ago quarter. The company posted adjusted earnings of $1.32 per share, up from $0.20 per share reported in the first quarter of fiscal 2021. Analysts had anticipated adjusted earnings of 99 cents per share.

The company registered revenue of $956.2 million, which reflected a growth of 191% year-over-year. Additionally, the metric surpassed analysts' predictions of $906 million.

Reflecting on the quarter, Zoom's founder and CEO Eric S. Yuan commented the following:

"We kicked off the fiscal year with a very strong first quarter, posting 191% total year-over-year revenue growth combined with strong profitability and cash flow. Our steadfast commitment to empowering customers to work and learn from anywhere with our expansive, innovative, and frictionless video communications platform continued to drive our results."



At the quarter's end, the company had total cash, cash equivalents and marketable securities (barring restricted cash) of a combined $4.7 billion.

Looking forward

Zoom was a beneficiary of the pandemic as it became one of most used applications for video conferencing calls. Investors are worried as to whether Zoom will be able to maintain the kind of fast growth it has seen in the last few quarters.

Revenue, for instance, was up a mammoth 367% in the third quarter of fiscal 2021, meaning that whle revenue growth is still high, it is slowing down.

On the other hand, Zoom's guidance is ahead of analyst projections, but it would be difficult for the company to exceed or even match up its own performance in the previous few quarters.

To offset the waning effects of the pandemic, the company has launched a hybrid capability called Smart Gallery, which helps remote participants to have an improved face-to face communication by creating a gallery-view of in-room participants. Yuan said:

"Many companies are redesigning the workplace to enhance the hybrid work experience. So to meet this need, we announced Zoom's features such as Smart Gallery, which puts in-room and remote participants on equal footing, Virtual Receptionist, participant accounting, and environmental sensors. We have begun to deliver on our platform strategy."



For the second quarter of fiscal 2022, the company is projecting adjusted earnings to be around $1.14 to $1.15. Revenue is expected to be between $985 million and $990 million. Analysts are guiding for Q2 earnings of 94 cents per share on $931.8 million in revenue.

Zoom has also issued full-year fiscal 2022 guidance figures. The company forecasts adjusted earnings to fall within the $4.56 to $4.61 range. Revenue guidance is between $3.98 billion and $3.99 billion. Analysts predict earnings of $3.76 per share, while revenue is expected to be around $3.8 billion.

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