The ZM numbers that matter most

Thats 17x increase. I don’t think I will ever see a quarter like this ever either from Zoom or any other company.

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Wow what a beat.

Sure, great numbers this Q but is it sustainable… wellllll

They very conservative management just increased FY21 guidance from $980M (which they gave last Q) to $1.8B which is a 100% (ish) increase!!

And… Number of customers contributing more than $100,000 in TTM revenue up 90% year-over-year

This increase isn’t going away. As Saul said, this is a new company now.

Austin, their guidance for FY21 includes revenue up to January 2021. I think the question of sustainability really isn’t answered by these numbers.

What is more interesting to me is their growth in small business - those with 10 or more employees. Obviously they signed on because of the pandemic. But now that Zoom has its foot in the door with these businesses, how is Zoom going to make sure they keep them around going forward.

At this point, after seeing these results, I’m much more bullish on Zoom. Its not a given that they will grow into a MegaCap operator. But they have as clear of a shot on goal as I’ve ever seen.

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Sure, great numbers this Q but is it sustainable… wellllll

Without a timeframe the question is meaningless. That’s the reason I keep bringing up the “S” curve. No it’s not sustainable for 100 years but I’m betting Q2 beats Q1. The whole point of the "S curve is to get in at the right time and to get out at the right time and don’t sweat the in between time. When will teleconferencing hit the top of the “S”? When it is approaching 80-85% market penetration. The market is just starting to explode thanks to covid-19. I think I can say with confidence that 80-85% market penetration will not be reached in the next five to ten years. During that timeframe, yes, “it is sustainable.”

Anyone do the P/S numbers that have some worried?


Shares         295,184,958
Price              $208.08
Market CAP  61,422,086,061
Revenue Q1     328,167,000
P/S                 187.17
Divide by 4          46.79

**25% quarterly growth**
Revenue Q1     328,167,000
Revenue Q2     410,208,750
Revenue Q3     512,760,938
Revenue Q4     640,951,172
Revenue 2021 1,892,087,859
P/S                  32.46

47 if there is no growth during the next three quarters. Assuming 25% revenue growth per quarter, P/S drops to 32 on annual revenue of $1,892,087,859.

The price shot up and the P/S shot down. Amazing.

Denny Schlesinger

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Saul,
Want to give credit where credit is due. So glad I listened to you and stayed the course with ZM.

I know we have had our differences at times but that aside I wanted to thank you for keeping me in this stock and giving you the props that you very much deserve.

TMB
Taking a knee

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I’ll add my mea culpa to the ZM parade. My valuation concerns are knocked down a bit. I still have concerns about other companies trying to take away share in the future, but there is no denying they crushed it today. I may never get that pullback I’m hoping for, but I’m going to wait and watch - if I miss it, I’m ok with that. Congrats longs.

At least I bought more CRWD today! 8~D

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Folks, undoubtedly a great quarter for Zoom. Q2 should be good as well and most likely FY as well. What ur thoughts about the future? Market will be pricing Zoom future in next 12-18 months, if everything opeNs up, there will be deceleration in growth.

And is anyone buying now? I added to my position after the report, but now I‘m thinking that perhaps I was too hasty… If market will focus on deceleration in 12-18 months, valuation might drop…

What are ur thoughts?

Currently down ~4% after-hours. Can’t say the market isn’t giving us an opportunity to load up!

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2 months ago I estimated $1.4B as ZM’s rev. for this year here.

https://discussion.fool.com/there-have-been-a-lot-of-reports-tha…

I kept increasing that and estimated $1.8B. Looks like they will do $2B this year! Very impressive performance. Glad I kept my small 3% position. The question now is what will they do next year. $3B?

Zoom Quarterly Earnings Call
Questions and Answers from Analysts

The following include the (somewhat unedited questions and answers from the analysts that followed the prepared remarks from the CEO and CFO. I was on the CRWD call and was unable to do both at the same time.

Erik Yuan and his CFO, Kelly clarified that the 300 million daily participants include both free and paid. It has come down a little bit in May. If and individual joins 5 meetings per day, it’s counted 5 times.
% of TAM that’s been penetrated? Where do we go from here w/ ZM?

Erik believes this will change everything about work, live and play. For now, top priority is to keep service up and user experience is exceptional, and down the road, figure out how to
TAM is bigger than they thought before.

End to end encryption became a big part of the discussion. Can it be monetized?
Education, telemedicine & telehealth are big areas they plan to expand further into. WFH is obviously a huge driver and opportunity in which to further expand.
What systems/programs do you have in place to keep customers sticky with your platform?
Upgrade to an annual contract
Video and voice will be convergent in ZM in the future.

Started with an enterprise product and now it’s a consumer product? What’s it look like going forward?
Video conferencing will become a mainstream service. Must maintain a consistent experience for retail customers. For enterprise customers, the security is much more simple. They challenge is security for retail customers.

How does revenue get accounted for?
Entire revenue gets amortized over the billing period with the 601 accounting standard.

They’ve doubled down on hiring account executives.

Zoom phone cross-sell opportunity is significant to increase revenue. Penetration rates, adoption and how it’s starting to take-off. What’s next for ZM. Should we expect a chat service from ZM?
Ensuring communications continuity was #1 focus for this quarter. Now there are significant opportunities and many ways to up-sell and monetize additional sales.
Laser focused on video/audio for the future.

CFO: Taking a very conservative approach to the future since the historic norms don’t necessarily apply verbatim.
Lots of pipeline has been created to up-sell Zoom Rooms and Zoom Phones with their existing ZM customers.

ZM was designed for enterprise customers. As a CEO, Erik said that he should have done a better job to enable IT (he took full responsibility for the fact that he could have done better). If there’s a conflict between privacy/security and ease of use, privacy must come first. That’s why they hired so many security resources.

Overall focusing on video/voice for the future to stay best of breed.
ZM’s scale is a differentiator, and how does ZM’s technology function as a differentiator. The market for video conferencing is much, much bigger now. Competition benefits the customer and is a good thing.

For 2nd qtr, do you expect Recurring Revenue to be greater in 4th qtr from last year? Yes, she Kelly, the CFO) expects this to be so.

Do you see this market consolidating around 1 or 2 competitors? Erik believes best of breed service will prevail and win the most market share. Quality and a lot of innovations to “just make it work” and listen to their customers’ use cases and pain points.” The market opportunity is huge.

Churn in the 2nd half of the year: Yes, As the education market will likely go back to school.

Lots of opportunity to grow in the phone market. Given the land and expand strategy and the significant expansion in the last quarter, they see a lot of opportunity in the future in the platform phone.

They don’t believe the Covid pandemic as something that will limit their expansion.

Education sector: How are they planning to deal with this in the 2nd half of the year.
Education was the 2nd highest vertical, and many Universities and Schools are anticipating to do distance learning this Fall. CFO said they don’t typically disclose details of each vertical market.

Ability to scale up: Will add capacity with more full-time employees that were outsourced temporarily during the past quarter to accommodate rapid expansion that took place. It will cost less to hire these people/resources as full-time employees than keep them outsourced.

sjo

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Want to give credit where credit is due. So glad I listened to you and stayed the course with ZM. I know we have had our differences at times but that aside I wanted to thank you for keeping me in this stock and giving you the props that you very much deserve. TMB Taking a knee.

Thanks TMB. I appreciate it very much, and it’s very gentlemanly of you to be willing to revise your opinion and acknowledge it publicly.

Thanks again

Saul

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Thank you for the call notes! Those are exactly the answers I was hoping to hear! The Phone and Rooms land-and-expand is really happening! I expect we will see this be a more significant part of the story in the next 2 quarters as more physical spaces are upgraded to interact with employees already using video clients remotely daily.

The question about adding chat is interesting but I am glad he deflected the idea so they can stay focused on winning market share as the best-in-breed. Still, it sounds like they are open to up-sale opportunities. So, selfishly, I wish they would do this as we now have Zoom but no good chat at work. We’d probably get one of the opensource options going if we had the bandwidth, but if Zoom had something slack-like it would be a no-brainer. Further, I can imagine all sorts of really really cool subscribable extensions and integrations, in and out of chat, such as translation, transcription, logging and indexing hooks to build video knowledge bases, chat-to-speech tech (this is pretty new stuff but will drive digital human avatars soon), and so many more possibilities.

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Author: sjo reported:

Q: Started with an enterprise product and now it’s a consumer product? What’s it look like going forward?
A: Video conferencing will become a mainstream service. Must maintain a consistent experience for retail customers. For enterprise customers, the security is much more simple. They challenge is security for retail customers.

Some might remember me saying that Eric should embrace retail. Glad to hear they are!

Q: Do you see this market consolidating around 1 or 2 competitors?
A: Erik believes best of breed service will prevail and win the most market share. Quality and a lot of innovations to “just make it work” and listen to their customers’ use cases and pain points.” The market opportunity is huge.

Consolidation is the normal course of events, from hundreds of auto brands the Big Three emerged, in oil there are the Seven Sisters, in accounting the Big Four. In increasing returns businesses it’s even more pronounced with the winner taking more than half the market. The worry about others eating Zoom’s lunch is misplaced once they have the formidable lead they have taken. It was a real concern before the market picked the winner but not after.

Denny Schlesinger

The Big Three: https://en.wikipedia.org/wiki/Big_Three_(automobile_manufact…
The Seven Sisters: https://en.wikipedia.org/wiki/Seven_Sisters_(oil_companies)
The Big Four: https://en.wikipedia.org/wiki/Big_Four_accounting_firms

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I want to add my congrats to Zoom bulls on this board.

After the quick poll we did a week back, I realized that I was missing something in this picture. So I bought a few call options… very expensive at the time but turned out to be profitable! So thanks Zoom team.

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Darth, you wrote (bolding mine)-

Number of customers contributing more than $100,000 in TTM revenue up 90% year-over-year

This is only a slight acceleration from last quarter where they achieved this:

641 customers contributing more than $100,000 in trailing 12 months (“TTM”) revenue, up approximately 86% from the same quarter last fiscal year.

I just wanted to point out that this metric is looking only at TTM revenue. The 182,600 new customers you mentioned have only been using Zoom for less than three months.

In their presentation on slide 9, they indicated they signed up 500+ new customers with >$100K ARR in Q1. This tells me that we should expect the number of customers contributing >$100K in TTM revenue to explode in the coming 2-3 quarters.

500+ new customers with greater than $100K ARR is pretty significant considering there were only 769 customers with greater than $100K in TTM revenue this Q.

The 90% YoY growth in this metric was a bit of an outlier considering the 354% growth in customers with >10 employees, but I think this helps shed some light on it. My guess is this metric is going to increase significantly by the end of the year.

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I just wanted to point out that this metric is looking only at TTM revenue.

Exceptional point major. I did not catch that and more importantly didn’t see the slide you were referencing when you said this:

In their presentation on slide 9, they indicated they signed up 500+ new customers with >$100K ARR in Q1

Like Dr. Emmit Brown is fond of saying. “Great Scott!”

That’s going to be a huge number in future quarters. Well done picking up on that. By the way that slide has a note “rounded down to the nearest hundred”. Building an Empire all right.

Darth

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Sorry just to expand on what the Major is saying here.

Zoom exited Q4 with 641 customers contributing greater than $100K to TTM.

They grew customers that will in the future contribute to that by at least 78% (+500) in 1 quarter.

Great Scott.

Darth

Back to the Future is On Netflix so forgive the throw backs

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Number of customers contributing more than $100,000 in TTM revenue up 90% year-over-year. This is only a slight acceleration from last quarter where they achieved 641 customers contributing more than $100,000 in trailing 12 months (“TTM”) revenue, up approximately 86% from the same quarter last fiscal year.

I just wanted to point out that this metric is looking only at TTM revenue. The new customers you mentioned have only been using Zoom for less than three months. In their presentation on slide 9, they indicated they signed up 500+ new customers with over $100K ARR in Q1. We should thus expect the number of customers contributing over $100K in TTM revenue to explode in the coming 2-3 quarters.

500+ NEW customers with greater than $100K ARR is pretty significant considering there were only 769 customers with greater than $100K in TTM revenue this Q.

Hi major fool,
Thanks so much for deciphering that for me. I missed the distinction between $100,000 in TTM, and new customers with $100,000 in ARR. Wow! That really is large!
Thanks again,
Saul

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Look at how they took the businessworld by storm.

WeI said it a few times.Many
of those free users were decision makers

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Do you remember all the people on our board who were sure that all the increased usage Zoom was reporting was all free users?

Do you realize that in the October quarter they only had 546 enterprise customers with over $100,000 in TTM spend?

Do you realize that in the January quarter they only had 641 enterprise customers with over $100,000 in TTM spend? They had added 95 in the quarter.

Then this quarter they reported 500+ new enterprise customers with over $100,000 in ARR spend (customers whose contracts going forward are for over $100,000 per year). I don’t know what 500+ means. It was intentionally vague. Let’s guess about 520.

Do you realize how enormous that is for them? It was like getting five quarters of new enterprise customers in one quarter.

Now that’s an impressive metric.

Saul

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It’s funny I remember saying in May 2019 that Sea was reporting the best year you would ever see from a public company.

And yet here we are at the start of June 2020 and that’s already gone…