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Zoom's (ZM) Q2 Earnings Top Estimates, Revenues Jump Y/Y

Zoom's (ZM) second-quarter fiscal 2022 results reflect steady user growth, driven by remote-working and online-learning wave.

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This story originally appeared on Zacks

Zoom’s ZM 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 exceeded the high end of the 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.

- Zacks

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.

Zacks Rank & Key Picks

Currently, Zoom Video carries a Zacks Rank #4 (Sell).



Some better-ranked stocks in the broader technology sector include Microsoft MSFT, Cadence Design Systems CDNS and Texas Instruments TXN, all carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



The long-term earnings growth rate for Microsoft, Cadence Design and Texas Instruments is currently pegged at 11.09%, 11.68% and 9.33%, respectively.



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