Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Zoom Management Talks Overseas Growth, Large Customers, and More

By Daniel Sparks - Sep 21, 2019 at 10:05AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Here are some insightful excerpts from Zoom's earnings call.

Earlier this month, Zoom Video Communications ( ZM -3.02% ), a provider of a video-conferencing platform, reported its second quarterly update as a publicly traded company. The period's financial results showed more of the same strong growth the company delivered in its fiscal first quarter. Revenue during the period jumped 96% year over year, and free cash flow more than doubled, rising from $8.2 million in the year-ago period to $17.1 million. 

But as investors continue to get to know this growth stock, it's worth going beyond these headline figures and hearing out management in the company's earnings calls. Zoom's fiscal second-quarter earnings call was particularly interesting, featuring discussion on important topics like international sales, large customers, and more.

Here are some insightful excerpts from the call.

Zoom's video conferencing in action.

Image source: Zoom Video Communications.

Strong growth overseas

The company's revenue growth overseas continued to outpace growth in its Americas segment. "In Q2, our APAC [Asia Pacific] and EMEA [Europe, the Middle East, and Africa] revenue combined grew 115% year-over-year and represented approximately 20% of revenue," said Zoom CFO Kelly Steckelberg. This compares to 91% revenue growth in its Americas segment.

While 115% year-over-year growth is solid, it's a notable deceleration compared to growth seen in APAC and EMEA in the prior quarter. Combined revenue from these segments rose 127% year over year in fiscal Q1.

But this growth is still rapid enough for management to prioritize investing in its international markets. "Looking forward, we expect to continue to invest in [sales and marketing], especially to drive international and up-market growth."

Large customers are a key catalyst

One key driver for Zoom's business continues to be its momentum with large customers, or customers who are contributing over $100,000 in annual recurring revenue for the company. According to CFO Steckelberg: "The combination of our land and expand strategy, along with our continued up-market focus, resulted in Q2 ending with 466 customers with more than $100,000 in revenue over the last 12 months. This is up 104% year-over-year."

But just as was the case with Zoom's international growth, this was a deceleration from 120% year-over-year growth in these customers in fiscal Q1.

Zoom's land-and-expand strategy is working

Zoom's business model and customers' trust in its platform are leading to significant add-ons from its customers. Indeed, that's why the company's net dollar expansion rate -- a measurement of a customer's increased spending over 12 months -- was over 130% for the fifth consecutive quarter. "[C]ustomers are deploying more Zoom products and adding more licenses within their organizations," said Steckelberg.

Highlighting how significant the opportunity is for add-ons, management said that one of its largest customers had an add-on during the quarter that resulted in an incremental $1 million in annual recurring revenue.

"So even in our large customers, we continue to see expansion as they add on new products like Zoom Phone, and I think very few of our customers today are wall to wall with Zoom meetings," noted Steckelberg. "And so, as they continue to build trust with Zoom and with the platform, then see the value [and] they continue to expand that globally throughout their teams."

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Zoom Video Communications Stock Quote
Zoom Video Communications
ZM
$191.75 (-3.02%) $-5.96

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
634%
 
S&P 500 Returns
141%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/02/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.