I felt this needed a subject line all to itself so I started a new thread. This one comment is worth calling out (in my words):
Churn rate stabilized and is expected to stay stable from here.
This is a BIG change in messaging. Every single quarter they sited this issue as a possible reason why growth would be flat. They are not saying that anymore!
The reply is live. I believe there was a mention in the first part but also see ~23:10. (I was going to hold this back until I could watch the reply again, but I have to run out for the evening.)
Note last YEAR, 20% of all customers had 10 or fewer employees and this time it is 37%, which looks like a lot of acceleration in the cohort, BUT…last QUARTER it was 38% even adding 63,500 new customers! So, as you will see below, this quarter showed virtually no change to the proportion of customers with <10 employees, very little growth in the medium sized customers and big growth in the $100k+ revenue cohort as well as some big wins in this new 10,000+ paid seat cohort, of which there are 18! Also the >10 segment is expected to come down over time as a percentage of revenue. Is this the picture you see as well? Read on…
All the numbers are YoY so I went back to last quarter’s report for some QoQ numbers.
27.5% sequential growth in customers > $100k in TTM revenue!!
Q4 Q3 1,644 1,289
7.6% sequential growth in customers > 10 employees
Q4 Q3 467.1k 433.7k
Significant focus of sales team to convert monthly customers to yearly
When asked what differentiates Zoom from here the answer was perfect: Quality. Having just been on a really bad Teams call about 2 weeks ago I think this is about right. Still so few countries too!
- Fastest growing product line, across all customer sizes (including largest deal to date this quarter) and they expect this to continue.
- Their strategy has primarily been to up-sell and they say this has plenty of room to grow still.
- Call/contact center strategy important. Using partnerships with providers to provide Zoom Phone as an option to their customers.
11th consecutive quarter above 130% DBNER
GM expected to improve over the longer term but consistent next quarter.
Earnings in Context
First there was a deceleration here, even though YoY looked like acceleration. BUT, considering the news above, we have a big unknown removed from the story. We can now assume that Zoom will roughly continue what they just did, which is historically similar too, in to the near future at least.
So even though they gave an outlook of $900-$905 million, I guessed higher. There is plenty to fuel continued growth so I think it is fair to give them a $1B quarter next time around and note that the QoQ growth number that this would create is still consistent if not low historically:
*Guess* **Jan-21** Oct-20 Jul-20 Apr-20 Jan-20 Oct-19 Jul-19 Apr-19 Jan-31-19 Revenue *1000* **882.5** 777.2 663.5 328.2 188.3 166.6 145.8 122 105.8 YoY *204.7%* **368.7%** 366.5% 355.1% 169.0% 77.9% 84.9% 95.7% 103.1% 107.80% QoQ *13.3%* **13.5%** 17.1% 102.2% 74.3% 13.0% 14.3% 19.5% 15.3% 17.4%
It is interesting to me that this isn’t all the much better than Cloudflare’s (NET) numbers, for example, which also showed a deceleration QoQ but where NET was punished, Zoom saw a price run-up before earnings today of nearly 10% and is currently another 8%+ in after-hours. Perhaps a difference in expectations? Perhaps everyone thought Zoom was done turning in great quarters.