[ad_1]
Zoom video communication (ZM -0.44%) Shares rose 10.4% in after-hours trading on Monday after the cloud-based telecommunications company reported financial results for the fourth quarter of fiscal 2024 (ending Jan. 31).
The stock’s increase was primarily due to the company’s sales and profits for the quarter beating Wall Street consensus estimates, and its bottom line earnings outlook for the first quarter and full year of fiscal 2025 beating analysts’ expectations. The company’s strong cash flow and $1.5 billion share repurchase approval also likely helped the stock.
Below are Zoom’s fourth quarter results and guidance centered around five key metrics.
1. Revenue increased slightly by 2.6%
Zoom’s revenue for the fourth fiscal year was $1.147 billion, an increase of 2.6% year over year (+2.7% excluding currency effects). The result beat analysts’ expectations of $1.13 billion and the company’s guidance range of $1.125 billion to $1.13 billion.
Growth was driven by Zoom’s enterprise business, with revenue increasing 4.9% year over year to $667.3 million. Online segment revenue decreased 0.5% to $479.2 million.
Year-on-year revenue growth in the Enterprise business continued to slow. In the first, second, and third quarters of fiscal 2024, this metric was 13%, 10%, and 7.5%, respectively.
| customer metrics | 4th quarter of 2024 | Change from previous year |
|---|---|---|
| Corporate customers | 220,400 | 3.5% |
| Customers who generated more than $100,000 in revenue over the next 12 months | 3,810 | 9.8% |
| Enterprise customer net growth rate over the past 12 months | 101% | down from 115% in the same period last year |
| Average monthly churn rate for online segment | 3% | 40 basis points (0.4pp) improvement |
| Percentage of online business MRR* from online customers with at least 16 months of ongoing service | 74.2% | 220 basis points (2.2 points) increase |
Data source: Zoom Video Communications. The fourth quarter of fiscal year 2024 ended on January 31st. YOY = change from previous year. *MRR = monthly recurring revenue. pp = percentage points.
A net business customer growth rate of 101% means that existing business customers increased their spending with the company by an average of 1% year-over-year. This is a substandard result. This metric decreased throughout his 2024 fiscal year, with Q1, Q2, and Q3 results of 112%, 109%, and 105%, respectively.
That said, uncertainty in the macro environment has led many business customers to reduce spending over the past year or more. With macro conditions improving in calendar year 2024, the company’s net dollar growth in fiscal year 2025 should provide a clearer picture of how much businesses value Zoom’s services.
It’s encouraging to see that the number of customers with revenue over $100,000 increased by 9.8% year over year last year.
2. Adjusted operating profit increased by 9.6%
Operating income under generally accepted accounting principles (GAAP) was $168.5 million, up from a loss of $129.9 million in the prior-year period. Operating income, adjusted for one-time items, rose 9.6% year over year to $443.7 million.
3. Adjusted EPS increased 16%
GAAP net income was $298.8 million, or $0.95 per share, compared to a net loss of $104.1 million, or $0.36 per share, in the prior-year period. Adjusted net income was $444 million, or $1.42 per share, an increase of 16% from the prior year period.
Wall Street was looking for adjusted earnings per share (EPS) of $1.15, and the company competed according to this expectation. It also fast-tracked its own guidance of $1.13 to $1.15 per share.
4. Operating cash flow increased by 66%
Operating cash flow for the quarter was $351.2 million, an increase of 66% compared to the same period last year. Free cash flow increased 82% to $332.7 million.
Zoom’s balance sheet remains strong. The company ended the quarter with $7 billion of available cash, cash equivalents and marketable securities, and no long-term debt.
5. Adjusted EPS for FY2025 is expected to decrease by approximately 7% to 6%
Management has issued guidance for the first quarter and full year of fiscal 2025 (ending in late January 2025).
| metric | 2025 Q1 Guidance |
YoY change forecast for the first quarter of 2025* |
Full-year outlook for FY2025 | FY 2025: Expected increase/decrease compared to the previous year* |
|---|---|---|---|---|
| revenue | $1.125 billion |
1.8% |
$4.6 billion | 1.6% |
| Adjusted EPS | $1.18 to $1.20 | 15%～17% | $4.85 to $4.88 | (6.9%) ~ (6.3%) |
Data source: Zoom Video Communications. *Calculated by the author.
For this release, Wall Street had modeled first-quarter revenue and adjusted EPS of $1.13 billion and $1.13, respectively. So while Zoom’s revenue outlook was very close to consensus estimates, its profit outlook was significantly higher.
Analysts also expected full-year 2025 revenue and adjusted EPS of $4.65 billion and $4.71, respectively. As a result, the company’s earnings forecast was slightly lighter than expected, while its final profit forecast was unexpectedly higher than expected.
mixed bag
Just like last quarter, Zoom Video Communications had a mixed report. Strong adjusted EPS growth and solid cash flow continued to be positive. On the other hand, as I wrote last quarter, “For the company to grow profits over the long term, it needs to halt and reverse the year-over-year slowdown in revenue growth in its enterprise business. The cause is due to a decline in sales’ net dollar expansion rate. ”
[ad_2]
Source link
