Zoom Future Expectations
I had written:
Thus for the first half of the quarter Zoom probably grew roughly 80% (maybe a couple of percent less. For the second half of the quarter, even if revenue grew 200%, the two halves would average to “just” up 140%. If revenue grew a huge 250% in the second half of the quarter, 250 and 80 average to up “just” 165% for the quarter. That’s certainly the absolute maximum you can imagine.
So let’s go back to what actually happened. I’ll assume that in the first half of the quarter they grew at 78% (unchanged sequentially, but still a very large rate of growth). To average 169% they would have grown 260% in the second half of the month (260+78=238 and 238/2 = 169.
And the year-ago revenue of $122 million plus 260% growth means they would have had $439 million if they had that growth for the entire quarter. Are you with me so far?
But let’s look at that second half of the quarter. They were not growing at 260% the whole time. Think back to March 16. That’s when they started exploding their growth, and it was by the end of March that they had 200 million daily participants and mid April when they had 300 million. Obviously they ended those six weeks with a higher revenue growth than they had at the start of the six weeks. Are you still with me?
So if they hit 260% growth for the entire six weeks, lets say they exited the quarter at a rate of 310% growth (which seems a reasonable estimate). If they had had that for the entire quarter they would have had $500 million for the quarter. That was their exiting run rate!
Which explains their 2nd quarter guidance of $500 million, as something that they expect to beat.
For another subject, I wouldn’t get all carried away by that $252 million Free Cash Flow. A lot of those new customers they signed up must have paid in advance, and that gave them $552 million in deferred revenue (RPO already paid in but not yet billed). I don’t think we’ll see anything like $252 million each quarter, because I don’t see them signing up that many NEW customers each quarter.
One more thing: Share Count guidance for 2nd Q is 299 million and for fiscal year is 300 million, guiding to almost no dilution
Best,
Saul
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.
For some additions to the Knowledgebase, bringing it up to date, I’d advise reading several other posts linked to on the panel, especially “How I Pick a Company to Invest In,” and “Why My Investing Criteria Have Changed,” and “Why It Really is Different.”