Zoom Video Communications (ZM 0.74%) reported powerful results for its first quarter of fiscal 2022, which ended on April 30. The videoconferencing specialist's business continued to get a tailwind from the COVID-19 pandemic, which has driven a surge in the number of people using its services for working, learning, and socializing from home.
Shares of Zoom (which went public in April 2019) are up 2.8% on Wednesday as of 9:35 a.m. EDT. We can attribute the market's initial positive reaction to both revenue and earnings handily beating the Wall Street consensus estimates, fiscal Q2 guidance for both the top and bottom lines also easily surpassing analysts' expectations, and management raising its full-year outlook for both revenue and earnings.
The market's reaction is muted because while year-over-year growth is still strong, it's slowing and expected to continue to slow. As I wrote in my earnings preview, this "report marks Zoom's last relatively easy year-over-year comparable. It covers the period from February through April, so the year-ago period includes only about one and a half months that got a boost from the pandemic."
Below is an overview of Zoom's quarter, along with its outlook.
1. Revenue jumped 191%
Zoom's fiscal first-quarter sales soared 191% year over year (and 8.4% from the prior quarter) to $956.2 million. This result sped by the $905.7 million analysts were expecting and the company's guidance of $900 million to $905 million. Growth was driven by the addition of new customers and expansion of the services the company provides to existing customers.
For context, in the prior two quarters, Zoom's revenue surged 369% (fourth quarter of fiscal 2021) and 367% (third quarter of fiscal 2021) year over year. For the full fiscal year 2021, revenue rocketed 326% year over year to $2.65 billion.
Here's a look at key customer metrics:
Fiscal Q1 2022
Customers with more than 10 employees
Customers contributing revenue of more than $100,000 in trailing 12 months
Trailing-12-month dollar expansion rate for customers with more than 10 employees
Above 130% (for the 12th consecutive quarter)
For context, last quarter, the number of customers with more than 10 employees skyrocketed 470% year over year to 467,000, and the number of customers contributing more than $100,000 in trailing-12-month revenue jumped 156% to 1,644.
While year-over-year growth in the first metric is slowing, this is not the case with the second metric, whose year-over-year growth was about the same as last quarter.
2. Adjusted operating income soared 634%
Income from operations under generally accepted accounting principles (GAAP) was $226.3 million, a nearly tenfold increase from the year-ago period. Adjusted for one-time items, operating income came in at $400.9 million, up 634% year over year.
3. Adjusted EPS surged 560%
GAAP net income was $227.4 million, or $0.74 per share, up from $0.09 per share in the year-ago period. Adjusted net income landed at $402.1 million, or $1.32 per share, up 560% year over year.
Wall Street had been looking for adjusted earnings per share (EPS) of $0.99, so the company easily beat the profit expectation. It also zoomed by its own guidance of $0.95 to $0.97.
4. Operating cash flow rose 106%
In fiscal Q1, operating cash flow grew 106% year over year to $533.3 million. Free cash flow increased 80% to $454.2 million.
The company ended the period with $4.7 billion in available cash, cash equivalents, and marketable securities.
5. Fiscal 2022 revenue is expected to jump about 50%
For the second quarter of fiscal 2022, Zoom management guided for revenue between $985 million and $990 million, representing growth of 49% year over year at the midpoint. It also expects adjusted EPS of $1.14 to $1.15, representing growth of 24% to 25%.
Going into the report, Wall Street had been modeling for fiscal Q2 adjusted EPS of $0.94 on revenue of $931.6 million. So Zoom's outlook on both the top and bottom lines breezed by analysts' expectations.
For full-year fiscal 2022, management raised its guidance as follows:
- Revenue of $3.975 billion to $3.99 billion, up from the prior range of $3.76 billion to $3.78 billion.
- Adjusted EPS of $4.56 to $4.61, up from $3.59 to $3.65.
The current full-year outlook represents expected annual revenue growth of 50% to 51% and adjusted EPS growth of 37% to 38%.
Another fantastic quarter
Zoom turned in fantastic Q1 results. Naturally, the company's year-over-year growth should slow as its comparables become extremely tough starting in Q2. Moreover, the fact that the pandemic is easing will likely hurt growth to some degree, but the company still has much long-term growth potential.
Investors should be heartened by the solid Q2 outlook, keeping in mind the company has a track record of easily beating its guidance. In other words, it's probably safe to say that we can expect Q2 revenue growth of more than 49% and adjusted EPS growth of more than 25% year over year.