Zoom shares rise as company raises earnings outlook ahead of hybrid workplace

Shares of Zoom Video Communications rose about 3% in after-hours trading Tuesday as the company topped Wall Street estimates with year-over-year first-quarter revenue growth of 191% to $956.2 million, up from $328.2 million during the same period in 2020.

"This top-line result exceeded the high end of our guidance of $905 million due to strong sales and marketing execution led by our direct and channel businesses, as well as lower-than-expected churn," Chief Financial Officer Kelly Steckelberg told analysts on the company's earnings call Tuesday. 

The video-conferencing platform, which surged in popularity at the height of the COVID-19 pandemic, posted a quarterly profit of $227.4 million, or 74 cents a share, compared with $27 million, or 9 cents a share, a year ago. Adjusted earnings, which exclude stock-based compensation expenses and other items, came in at $1.32 a share, compared with 20 cents per share a year ago. 

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Zoom added roughly 30,000 customers during the quarter for a total of about 497,000 customers with more than 10 employees. In the first quarter, customers with more than 10 employees represented approximately 63% of revenue. The company ended the first quarter with 1,999 customers generating more than $100,000 dollars in trailing twelve months revenue.

Zoom also reported a strong free cash flow of $454.2 million, compared to $251.7 million a year ago. Net cash provided by operating activities was $533.3 million for the first quarter, compared to $259 million in the first quarter of fiscal year 2021, and the company ended the quarter with a total of $4.7 billion in total cash, cash equivalents and marketable securities, excluding restricted cash, as of April 30. 

"Our ability to help our customers by increasing their productivity, promoting their employees’ happiness and connections to each other, and reducing their travel-related carbon footprint gives our work great meaning and makes Zoom a great place to work," CEO Eric Yuan told analysts. "Zoom is here to help each customer calibrate their future working model in their own way. Many companies are redesigning the workplace to enhance the hybrid work experience."

Ticker	Security	Last	Change	Change %
ZM	ZOOM VIDEO COMMUNICATIONS INC.	85.00	+1.58	+1.90%

The better-than-expected results have prompted the company to raise its earnings outlook for the full 2022 fiscal year.

Looking ahead, Zoom is now forecasting total full-year revenue for fiscal 2022 between $3.975 billion and $3.990 billion, or 50% year-over-year growth, with adjusted earnings per share between $4.56 and $4.61, based on approximately 311 million shares outstanding. For the second quarter, the company is forecasting total revenue between $985 million and $990 million, with adjusted earnings per share between $1.14 and $1.15.

However, the company will face an uphill battle to keep its momentum going as COVID-19 restrictions continue to ease. 

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In order to help companies transition to hybrid work, the company has made enhancements to Zoom Rooms, which features a smart gallery, virtual receptionist, participant counting, and environmental sensors. The company is also developing a Zoom Events platform and launched its video software development kit in February and a $100 million Zoom Apps Fund in April to further develop its app ecosystem.  

In addition, Yuan touted strong demand for the upcoming Zoom Phone appliance, which surpassed 1.5 million seats as of the end of April, as well as its corporate partnerships with Kimberly Clark, Target, and Japan's largest automotive parts company, Denso.  

Zoom will update investors on its hybrid workspace and platform evolution at a virtual ‘Zoomtopia’ event on Sept. 13 and 14.