Summary of ZM Q1 Results

Zoom still seems to be producing some good growth numbers. Here is a brief overview of the results from their 8K filing for Q1.

Q1 8K link: ?
Q1 ?Investor Slides link:…

Q1FY22 Results

  • GAAP Revenue: $956M up 191%

  • N-GAAP Revenue: $956M up 191%

  • GAAP Gross Margin: 72.3% +389bps

  • N-GAAP Gross Margin: 73.9% +446bps

  • GAAP Op Margin: 23.7% +1,654bps

  • N-GAAP Op Margin: 41.9% +2,528bps

  • GAAP Net Income: $226.3M, up from $23.4M

  • N-GAAP Net Income: $402.1M up from $54.6M

  • GAAP EPS diluted: $0.74, up from $0.09

  • N-GAAP EPS diluted: $1.32, up from $0.20

  • TTM Net Dollar Expansion Rate > 130%, 12th consecutive Qtr above 130%

  • Customers paying > $100k/yr increased by 160% from 769 to 1,990

  • Customers with > 10 employees increased by 87% from 265K to 497K

  • Op cash flow is up 106%, free cash flow is up 80%

Q2 Outlook

  • Rev. $985M-$990M
  • N-GAAP Op Income $355M-$360M
  • N-GAAP EPS $1.14-$1.15

FY22 Outlook

  • Rev. $3975M-$3990M
  • N-GAAP Op Income $1425M-$1440M
  • N-GAAP EPS $4.56-$4.61

Shares are up about $10 in after hours trade. We’ll see what tomorrow brings.


Operating cash flow was up more than 30% QoQ and free cash flow was up 20% QoQ.



As a hybergrowth investor, I was concerned about the QoQ growth rate slowing to 8.4% by my math. 882 in Q4 to 956 in Q1. Zoom’s cash generation is a strong point in its favor, but revenue has seemed to slow from hyper growth status as it has gone from (huge %), to 17%, to 14%, to now 8.5%. That is a massive slowdown. I could live with teens (not different from many other names followed here).

Gross profit growth has fared better, which I sometime use as a criteria.

In a way similar to TTD, ZM has emerged as a huge cash earner. It could still be a good investment (a P/OCF of 50 that is still growing in the 30s? or 20s?). But I now put it in a different category than many of the other companies we follow here.

Interested in others views.



Still new to individual stock investing and been following this board for 1.5 years now.

It seems that Covid has taught us that QoQ revenue growth may be the more important revenue metric to follow over YoY revenue growth. It has helped provide insight into both DataDog and Zoom. Any reason that this shouldn’t continue moving forward post-Covid?

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8.5% is within a hair’s distance of a 40% grower annualized, right? (38.5+%)

Couple that with the OCF growth or the FCF growth and this is still crushing “the Rule of 40” for another year, at least?

This board has moved beyond the “Rule of 40”, though, for minimum expectations.


40% is nothing to scoff at Rob, but perhaps not the hyper grower of a year ago. But COVID will be aberration across most of the tech industry for another year or so until we get more meaningful YoY comps.

I do wonder how companies are leveraging zoom as they return to the office. Will zoom meetings decline significantly?

My company is not forcing anyone to return to the office, it’s totally voluntary. But they are requiring those who do go back to the office must be vaxxed, and they are not requiring anyone to get vaxxed, although it is recommended. At this time there are fewer than 1% in the office. The leadership specifically instructed those who return to the office, they must continue to join all meeting individually from their laptops, even if they are using any of our conference rooms, all of which are equipped with video conferencing. Apparently, those who are remote want to see your face. So effectively, we are not reducing licenses.


8.5% is within a hair’s distance of a 40% grower annualized, right? (38.5+%)

Revenue was $956M compared to $882M QoQ. That’s 8.4% growth. But the problem is they’re guiding for even slower growth.

For Q2 they said revenue will be $985M-$990M, and for FY2022 they said revenue will be $3975M-$3990M.

So, $956M + $990M = $1946M revenue for 1H, leaving $2044M for 2H. For simplicity, $2044M/2 = $1022M for 3Q and 4Q.

$956M + $990M + $1022M + $1022M = $3990M

That’s anemic growth (though surely sandbagged). But with a $4B run rate and $4.7B on the balance sheet they’ve got options.

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Here’s what sequential revenue growth looks like.

Sequential Revenue % Increase

**2019		18	 25	  20    18** 
**2020		15	 20       14	13** 
**2021		74      102	  17	14**
**2022	         8** 

As you can see, in the Apr and July Covid quarters, sequential revenue grew by 74% and 102%, and then dropped off a cliff to 17% and 14% in the October and January quarters.

This quarter it dropped down to 8%!!!

As you can see, Zoom has NEVER had sequential growth that low. In fact it was never below 13%. If you want to kid yourself with the yoy increases, go ahead, but 8% sequential growth is catastrophic for their future. When you go from 370% yoy growth to 36% growth it will really shock the investing public.



I wanted more Rev QoQ like most but thought the Full yr. guidance increase was nice at a 5% increase. If they raise that a minimum of 2.5% for the each of the remaining quarters we’ve got 58% YoY growth for the yr. Not too bad!

They said they increased from 1 million zoom phone seats to 1.5m in just the first 4 months of the yr. continuing great momentum! Not sure what this can do to the top line, have yet to listen to the call.


Also if you look at RPO growth - that dropped to 94%. Not only has that never been this low but the ratio between revenue growth rate and RPO growth rate is now 2:1 when pre Covid it was the other way around and even during Covid it was never 2:1.

RPO (current and non-current) now no longer covers 1 year of revenue.

It does seem that the growth runway is running out.



Zoom has pretty firmly moved from a stock that trades on a sales multiple to one trading on cash flow and/or earnings. Part of that was the monster revenue growth it’s coming off of, and part of it is the stock price being cut in half. Either way, it doesn’t need to sustain 40% yoy growth to be an attractive buy. It’s no longer a hyper growth,“Saul Stock” (and may never be again)but there’s different ways to make your money in the market.


A few of my quick thoughts on the quarter…


RPO growth reaccelerated nicely. The QoQ total dollars added over the last five quarters looks like this; $464 $348 $215 $120 $323. However, after reading the prepared remarks it sounds like there is a bit of seasonality in their RPO as renewals take place early in the year. Still a nice boost though.

International growth continues at a higher pace. While the Americas growth came in at 159%, the ROW (rest of world) growth was 288% YoY. Albeit this is growing off a smaller base, but it is nice to see this trend continue.

Incredible profitability shows no sign of stopping. I thought we would see the profitability dip a bit once the world began to stabilize but that has not happened. Adj Operating Margins of 42% and a FCF margin of 48% is pretty mind boggling. It now makes more sense to value this company based upon the bottom line instead of the top line (although you cannot ignore the top line).


Decelerating revenue growth. As Saul flushed out above, Zoom turned it is slowest sequential growth ever. While they are at a much larger scale now, this trend is not promising and I was expecting revenue of closer to $1B. To add insult to injury, this was also Zoom’s smallest beat ever of just 6%. It does not inspire much confidence.

Growth of >$100K customers has been extremely disappointing in my opinion. Because this metric is based upon the TTM revenue of each customer, I was fully expecting this number to explode this quarter. That simply did not happen. The sequential growth for this metric now looks like this; 30% 28% 22%. I was really surprised to see this number come in as low as it did.

Guidance seems to indicate Zoom is going to continue to grow closer to 10% QoQ instead of 15%. If they beat their Q2 guidance by 6% again like they did this quarter, their QoQ growth would be only 10%. To be fair, if they can beat by 12% like they have in the past, then sequential growth would be 16% but I do not think this is very likely.

All in all, I came away largely disappointed in this quarter. The cons outweigh the pros in my mind, particularly the slowing revenue growth. With this being said, I must give you a tip of the cap Saul. I remember questioning why you were so disappointed with 17% QoQ growth after Q3 but you saw the writing on the wall long before I did. I still have much to learn :slight_smile:

I plan to trim my position for the first time since buying into Zoom last April (I move like a turtle compared to some of you seasoned vets). I will add to my positions in UPST, ROKU, SE and likely initiate a starter position in SNOW. I do not think Zoom will do poorly going forward, rather I believe these other businesses offer more upside going forward.



Clearly, the market has voted in favor of Saul (and others) who sold out of Zoom as soon as they sniffed the slowdown coming. It is no coincidence that Zoom’s share price is ~40% away from its peak in October. In fact, Zoom’s share price has not even neared those level – not even during this year’s February high (it was still 22% off its all-time-high).

I think observing what the leaders of this board did with their Zoom position over the past 18 months provides one of the best case studies for those wanting to learn their techniques. For example, Saul had already built a 14% position by February 2020. GauchoRico indicated that month that he was “seeing ZM as a clear winner” and Retirementdough had built a sizable position since 2019 and by February indicated that “part of me thinks trimming might be wise, another part of me thinks that next earnings report could be crazy due to growth from coronavirus demand.”

By winter, many of the board’s leaders had reduced their positions, and warned others of the tough year ahead. Since then, Zoom’s share price has stagnated around $300-$350 while many of this board’s favorite companies have surged ahead. In addition to the Knowledgebase and all of the other tools we have here, analyzing the monthly actions taken with Zoom provides an excellent lesson.

That being said, I also don’t think that Zoom’s latest results disqualify it from being one of the companies discussed on this board. While it is not experiencing the hypergrowth stage of the S-curve that we seek here, I found these results to be more bullish than others did based on this discussion.

QoQ Growth
While 8.4% is not phenomenal, in percentage terms it was higher than Twilio’s [1] and Okta’s. This is the challenge that comes with the law of large numbers, 8.4% might look weak, but the net revenue added last quarter ($73.7M) is ~$7M higher than what Zoominfo, Datadog, Cloudflare, and Zscaler added last quarter…combined! All while improving its gross margins (once again), and generating impressive profitability.

I’m not trying to justify the slowdown – if we compare some of our favorite companies with the cloud behemoths (i.e. Salesforce, Workday) the net revenue added might show a similar effect; but I think it is a relevant comparison as Zoom’s top-line growth nears 40% annualized.

RPO Growth
Adding $18.3% in QoQ RPO growth is very encouraging, despite the seasonality that may be involved with Q1. At least, it shows that tailwinds are still strong, and it the “growth machine” is still firing strong. With another important quarter for renewals coming up, this is providing Zoom enough runway ahead of its future products – that we feared were too far out into the future. We got some clues on this when it was announced that Zoom already surpassed 1.5M seats of Zoom Phones sold, after celebrating reaching 1.0M during last quarter’s earnings call.

Guidance & Expectations
After Zoom’s extraordinary numbers last year, I remember there was a debate of whether Zoom will eventually turn into a 40% grower or a 60% grower. This quarter shed some light on what this year might entail. Zoom initially reported revenue guidance for the year to be $3.78B, only to raise it to $3.99B yesterday (5.6% raise). Let’s run an optimistic scenario and assume that Zoom raises the $3.99B by 5.6% again next quarter, and then again the following quarter. That would lead to full-year revenue of $4.45B, which represents 68% YoY growth.

But wait! That still has this quarter’s outlier of 191% revenue growth, so let’s back that out. Removing the Q1 numbers just reported ($4.45B - $956M) results in $3.49B. Comparing this to Q2 through Q4’s revenue ($2.32B) yields 50% revenue growth. Not too shabby after it’s insane growth last year.

I’ll reiterate the disclaimer that I’m not trying to “defend” Zoom from its deceleration – it was always going to be hard for them to get anywhere near last year’s numbers. Those that spotted that at the right time were rewarded handsomely; and those that didn’t have an opportunity to learn. However, I do think that Zoom’s latest report is encouraging – and there are encouraging signs for its shareholders.

[1] I realize Twilio experiences strong Q4 seasonality, but this includes their inorganic acquisition.

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We got some clues on this when it was announced that Zoom already surpassed 1.5M seats of Zoom Phones sold, after celebrating reaching 1.0M during last quarter’s earnings call.

Just to elaborate a bit more on this point. It took Zoom two years to reach the 1 million seat level for Zoom Phone as you can see in this article.…

It took the company an additional four months to reach 1.5 million Zoom Phone seats.

This is from yesterday’s quarterly webcast:

At the start of the calendar year, we announced reaching 1 million seats for Zoom Phone. Well,
that momentum continues, and I’m happy to announce we have now surpassed 1.5 Million Seats
as of the end of April. Thanks for having me and with that I’ll hand things over to Kelly. Graeme Geddes, Head of Zoom Phone and Rooms…

Growth in the Zoom Phone seats is now running at about 100,000 seats per month. Now if you look back to the Q4 quarterly webcast we have this from CFO Kelly Steckelberg

Bolstering the growth of our product portfolio is Zoom Phone, which has grown incredibly and
turned two last quarter. We believe the opportunity ahead is significant as the TAM for
telephony is forecasted to grow to $23 billion by 2024.…

So what does a Zoom Phone seat cost? Here is a link to the pricing plans and feature sets.

Call me crazy - I am not selling any shares.

Frank - long ZM, see profile for all holdings


A few posts have included a points I believe are misguided.

1. Zoom Phone growth – In general I believe Zoom Phone is a bit of a “hopes and dreams” reason to hold ZM. But to be clear, the numbers actually show slowing growth.

On this presentation (slide 16) they stated that as of the end of July they were at 500,000+ seats:…

It’s been 10 months since. If they got to 1m in 5 months that was 100% growth, and in the last 5 months if they got to 1.5m that was 50% growth.

2. Revenue growth is slowing Others have asked whether 8.4% sequential growth is bad. It’s not, but realize that if you’re anchoring to that number, you’re calling a bottom. The trend the last three quarters is:
Oct: 17.1%
Jan: 13.6%
Apr: 8.4%

Sure it could stop falling now…but that might not be the most prudent assumption.

3. RPO strength is misleading Another potential bright spot was RPO which grew a bunch because of seasonally high billings due to renewals. The CFO explained why this was a one-time thing. It’s important to remember that deferred revenue and RPO trends are not reliable predictors of future revenue growth due to the large percent of monthly billings in our customer base. In addition, the timing of our renewals has increasingly shifted to the beginning of the fiscal year, with Q1 now representing our largest renewal quarter. Later she clarified: this will be the largest billings and renewal quarter of the year.

4. Zoom is a great company. Of course it is…but that doesn’t mean it will beat the market. Its market cap is over $100b, so it’s already bigger than all but the top 100 public companies (roughly). To double, it would have to become roughly a top 40 company. Obviously this is possible, but I think it could take many years. Will Zoom one day, maybe a decade or two from now, become one of the top 10 largest companies in the world? Possibly. But betting on that seems like a long shot, and besides that, if you’re betting on something not based on the numbers, you didn’t learn that from Saul or most anyone on this board. The numbers are slowing. Other companies’ numbers aren’t.

My advice: Look at Zoom as if you didn’t own it. Then ask yourself, “Is this one of the best ideas I have right now?” I try to do that for every company I own every day.

A huge Zoom fan but no longer a ZM shareholder


The numbers are slowing. Other companies’ numbers aren’t… My advice: Look at Zoom as if you didn’t own it. Then ask yourself, “Is this one of the best ideas I have right now?” I try to do that for every company I own every day.

What a great way Bear had of putting that! Looking at the company as if you didn’t own it takes away several of the (almost) unconscious issues.

First, Pride of Ownership: “That’s my baby. How can people criticize or say that it’s past its prime. I have to defend it.” It’s a bit like rooting for your home baseball team, or football, or basketball. … But you are investing here and trying to make correct objective decisions.

Second, Loyalty: “I’m in it so I have to defend it.” A little like Pride of Ownership.

Third, and most destructive, not wanting to admit (to yourself) that you could have made a mistake. “I’m in it so it MUST be a great investment!” Boy, that one will kill you!

Thanks so much to Bear,


A link to the Knowledgebase for this board is in the Announcements panel that is on the right side of every page on this board.


What I learned from this forum is to ask yourself following question on a regular basis for all your holdings: If this company would IPO today, would I start a position? If the answer is no, you should probably sell.

This led to my decision to sell Okta and Coupa (yes I was still holding Coupa) recently, which I would probably have held otherwise even though the numbers aren’t as good as most stocks here.

Thanks Saul for the wisdom.


Beth Kindig wrote an article for Forbes on Zoom after the ER:
Zoom Discusses Two Important Catalysts In Q1 Earnings…

It starts with:
Zoom has had record-breaking earnings results for four quarters now and the market is growing complacent with this stock. The company has (again) posted the highest growth in the cloud software category with revenue at of $956.24 million, or 191% year-over-year growth. The bottom line is also the best in its category (yet again) with adjusted EPS of $1.32 and free cash flow of $454.2 million – which is nearly double the consensus of $280.4 million.

She then talks alot about Zoom Phone and concentrating on international growth. She says the company expects over 50% YoY revenue growth. Zoom Phone users went from 1million to 1.5million in the last 5 months.

Unfortunately, she then repeats her somewhat inaccurate comments from Sept 2019 (citing them as such), including one of Zoom’s advantages being that you don’t need to download an application - seemingly unaware that WebEx and MS Teams also have that capability.

At one point the article points out that comps will be difficult in the second half of this year compared to the barn burner performance (my words) of last year.

Essentially, she thinks the market is mis-pricing ZM and that continued performance at its current level should wake the market up. I disagree, but then since Kindig has made more than a couple mis-statements about the tech in these tech companies, I’m biased to think that she’s not understanding in what she not only invests in, but recommends to others.


This is an interesting concept. I think a healthy amount of skepticism about investment thesis is good. I feel like I have too much skepticism. I keep a running spreadsheet of my thesis and my results, it turns out I am correct, but often don’t believe in myself and cost myself value.