Zoom Video Communications (ZM 0.05%) reported powerful fiscal third-quarter 2021 results on Monday after the market close. The videoconferencing specialist's business continued to get a brisk tailwind from the COVID-19 pandemic-driven surge in the number of people working, learning, and socializing from home.
Zoom's revenue and earnings crushed the Wall Street consensus estimates. Moreover, its fiscal fourth-quarter guidance for both the top and bottom lines also sailed by analysts' expectations.
But shares fell 5.1% in Monday's after-hours trading session. The market's initial reaction isn't that unusual for a stock with a sky-high valuation, which means that investor expectations are, likewise, through the roof. Given the stock's incredible gains this year, some investors -- such as short-term traders -- probably decided to take some profits.
In 2020, Zoom stock is up 603% through Monday's regular trading session. The S&P 500 index has returned 14% over this period. Since the company's initial public offering (IPO) in April 2019, its stock has increased in value by more than 13 times.
Below is an overview of Zoom's quarter, along with its guidance for fiscal Q4.
Image source: Zoom Video Communications.
1. Revenue jumped 367%
Zoom's quarterly sales soared 367% year over year to $777.2 million. This result crushed the $694 million analysts were expecting, and the company's guidance of $685 million and $690 million. Growth was driven by the addition of new customers and expansion of the services the company provides to existing customers.
For context, last quarter, Zoom's revenue jumped 355% year over year to $663.5 million, demolishing the $500.5 million consensus estimate.
Here's a look at key customer metrics:
|
Customer Metric |
Fiscal Q3 2021 |
Change YOY |
|---|---|---|
|
Customers with more than 10 employees |
433,700 |
485% |
|
Customers contributing revenue of more than $100,000 in trailing 12 months |
1,289 |
136% |
|
Trailing-12-month dollar expansion rate for customers with more than 10 employees |
Above 130% (for the 10th consecutive quarter) |
N/A |
Data source: Zoom Video Communications. YOY = year over year.
2. Adjusted operating income soared 1,265%
Income from operations under generally accepted accounting principles (GAAP) was $192.2 million, up from a loss of $1.7 million in the year-ago quarter. Adjusted for one-time items, operating income came in at $290.8 million, more than 13 times the year-ago-period's result.
3. Adjusted EPS surged 1,000%
GAAP net income was $198.4 million, or $0.66 per share, up from $2.2 million, or $0.01 per share, in the year-ago quarter. Adjusted net income landed at $297.2 million, or $0.99 per share, up from $25.2 million, or $0.09 per share, in the year-ago period.
Wall Street had been looking for adjusted earnings per share (EPS) of $0.76, as outlined in my earnings preview, so the company easily beat the profit expectation. It also zoomed by its own guidance of $0.73 to $0.74.
4. Operating cash flow rocketed 565%
Operating cash flow grew 565% year over year to $411.5 million. Free cash flow was up 610% to $388.2 million.
The company ended the period with cash and cash equivalents of $1.9 billion.
5. Fiscal Q4 revenue is expected to jump 329%
For fiscal Q4, Zoom management guided for revenue between $806 million and $811 million, representing growth of 329% year over year at the midpoint. It also expects adjusted EPS of $0.77 to $0.79, representing growth of 420% year over year at the midpoint.
Going into the report, Wall Street had been modeling for Q4 adjusted EPS of $0.66 on revenue of $730.1 million. So Zoom's outlook on both the top and bottom lines trounced analysts' expectations.
Another stellar quarter
Zoom's fiscal Q3 results were stellar, as is its Q4 guidance.
Long-term investors shouldn't be concerned about the market's somewhat negative reaction during Monday's after-hours trading session. The downward movement in the stock, which was small in the scheme of things, was probably driven by short-term traders.
