Zoom (ZM) Q2 2023 Results
Eric Yuan, founder and CEO of Zoom Video Communications Inc., speaks during the BoxWorks 2019 conference at the Moscone Center in San Francisco, California, United States, Thursday, October 3, 2019.
Michael Short | Bloomberg
Shares of Zoom Video Communications fell 9% in extended trading on Monday after the video-calling software maker cut its full-year earnings and revenue guidance.
Here’s how the company did it:
- Earnings: $1.05 per share, adjusted, versus 94 cents per share as expected by analysts, according to Refinitiv.
- Revenue: $1.10 billion, versus $1.12 billion as expected by analysts, according to Refinitiv.
Zoom’s fiscal second-quarter revenue grew 8% year-over-year, slowing from 12% growth in the prior quarter, according to a statement. The second fiscal quarter ended July 31. Zoom’s net income fell to $45.7 million in the quarter from $316.9 million in the year-ago quarter as the company increased sales and marketing expenses.
The strong U.S. dollar, the performance of the company’s online business, and sales that were weighted toward the end of the quarter negatively impacted revenue in the quarter, Zoom’s chief financial officer Kelly Steckelberg said in the press release.
“We implemented initiatives focused on creating new online subscriptions, which showed promise early on but were not enough to overcome the macroeconomic dynamics of the quarter,” Steckelberg said on a Zoom call with analysts.
The company said at the end of the quarter it had approximately 204,100 enterprise customers, which are business units that Zoom’s direct sales teams, resellers or partners work with. That’s less than 3% from 198,900 three months earlier. Business customers generate 54% of total revenue. Online business customers are Zoom customers who do not work directly with Zoom sellers, resellers or partners.
As for guidance, Zoom called for fiscal third-quarter adjusted earnings of 82 cents per share to 83 cents per share on revenue of $1.095 billion to $1.100 billion. Analysts polled by Refinitiv were looking for 91 cents in adjusted earnings per share and $1.15 billion in revenue.
Management lowered its full-year 2023 guidance to $3.66-$3.69 adjusted earnings per share and $4.385-4.395 billion in revenue, implying growth 7% in the middle of the income range. Analysts polled by Refinitiv had expected adjusted earnings of $3.76 per share and revenue of $4.54 billion. Three months ago, the view was $3.70 and $3.77 in adjusted earnings per share and revenue ranging from $4.530 billion to $4.550 billion. The economic conditions mainly caused the leaders to reconsider their point of view.
“While the majority of our revenue has returned to the business and we have moved beyond pandemic buying patterns, we are returning to more normalized business selling cycles with weighted linearity towards the end of the quarter. “, Steckelberg said during the Zoom call. “This contributed to higher than expected deferred revenue in the second quarter, and as we believe this customer behavior will persist, we have factored it into our outlook.”
The company expects online business to be down 7% to 8% for the full year, compared to its forecast of no growth in this part of the business earlier. . Zoom has shifted its spending expectations for the second half to prioritize areas with high ROI, such as research and development and sales operations, Steckelberg said.
During the quarter, Zoom announced a new pricing structure called Zoom One and said it had agreed to acquire conversational artificial intelligence software startup Solvvy. Citi lowered its rating on Zoom stock to sell from the equivalent of the hold last week, citing growing competition and economic pressure on small and medium-sized businesses and spending in less essential categories.
Excluding the after-hours move, Zoom shares have fallen 47% so far this year, while the S&P 500 index is down 13% over the same period.
This story is developing. Please check for updates.
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