Zoom Video Communications, Inc. (NASDAQ: ZM), announced financial results for the third fiscal quarter ended October 31, 2022.
“At Zoomtopia, we announced a number of innovations including Zoom Mail and Zoom Calendar, along with new partnerships that are expected to power and enhance the modern work experience,” said Eric S. Yuan, Zoom founder, and CEO. “Our customers are increasingly looking to Zoom to help them enable flexible work environments and empower authentic connections and collaboration. Proactively addressing these needs with Zoom’s expanding platform continues to be our focus in this dynamic environment. In Q3, we drove revenue above guidance with continued momentum in Enterprise. In addition, our non-GAAP operating income came in meaningfully higher than our outlook, setting us up to finish the year with full-year revenue growth, strong GAAP and non-GAAP profitability, and free cash flow that we expect to be at the high end of our range of $1 billion to $1.15 billion.”1
Third Quarter Fiscal Year 2023 Financial Highlights:
- Revenue: Total revenue for the third quarter was $1,101.9 million, up 5% year over year. After adjusting for foreign currency impact, revenue in constant currency was $1,126.1 million, up 7% year over year in constant currency. Enterprise revenue was $614.3 million, up 20% year over year and Online revenue was $487.6 million, down 9% year over year.
- Income from Operations and Operating Margin: GAAP income from operations for the third quarter was $66.5 million, compared to GAAP income from operations of $290.9 million in the third quarter of fiscal year 2022. After adjusting for stock-based compensation expense and related payroll taxes, and acquisition-related expenses, non-GAAP income from operations for the third quarter was $380.9 million, compared to non-GAAP income from operations of $411.3 million in the third quarter of fiscal year 2022. For the third quarter, GAAP operating margin was 6.0% and non-GAAP operating margin was 34.6%.
- Net Income and Diluted Net Income Per Share: GAAP net income attributable to common stockholders for the third quarter was $48.4 million, or $0.16 per share, compared to GAAP net income attributable to common stockholders of $340.3 million, or $1.11 per share in the third quarter of fiscal year 2022.
Non-GAAP net income for the third quarter was $323.2 million, after adjusting for stock-based compensation expense and related payroll taxes, losses (gains) on strategic investments, net, acquisition-related expenses, undistributed earnings attributable to participating securities, and the tax effects on non-GAAP adjustments. Non-GAAP net income per share was $1.07. In the third quarter of fiscal year 2022, non-GAAP net income was $338.4 million, or $1.11 per share.
- Cash and Marketable Securities: Total cash, cash equivalents, and marketable securities, excluding restricted cash, as of October 31, 2022 was $5.2 billion.
- Cash Flow: Net cash provided by operating activities was $295.3 million for the third quarter, compared to $394.6 million in the third quarter of fiscal year 2022. Free cash flow, which is net cash provided by operating activities less purchases of property and equipment, was $272.6 million, compared to $374.8 million in the third quarter of fiscal year 2022.
Customer Metrics: Drivers of total revenue included acquiring new customers and expanding across existing customers. At the end of the third quarter of fiscal year 2023, Zoom had:
- Approximately 209,300 Enterprise customers, up 14% from the same quarter last fiscal year.
- A trailing 12-month net dollar expansion rate for Enterprise customers of 117%.
- 3,286 customers contributing more than $100,000 in trailing 12 months revenue, up approximately 31% from the same quarter last fiscal year.
- Online average monthly churn of 3.1% for Q3, down 60 bps from the same quarter last fiscal year.
Financial Outlook: Zoom is providing the following guidance for its fourth quarter fiscal year 2023 and its full fiscal year 2023.
- Fourth Quarter Fiscal Year 2023: Total revenue is expected to be between $1.095 billion and $1.105 billion and revenue in constant currency is expected to be between $1.120 billion and $1.130 billion. Non-GAAP income from operations is expected to be between $316.0 million and $326.0 million. Non-GAAP diluted EPS is expected to be between $0.75 and $0.78 with approximately 301 million weighted average shares outstanding.
- Full Fiscal Year 2023: Total revenue is expected to be between $4.370 billion and $4.380 billion and revenue in constant currency is expected to be between $4.442 billion and $4.452 billion. Full fiscal year non-GAAP income from operations is expected to be between $1.490 billion and $1.500 billion. Full fiscal year non-GAAP diluted EPS is expected to be between $3.91 and $3.94 with approximately 304 million weighted average shares outstanding.
Additional information on Zoom’s reported results, including a reconciliation of the non-GAAP results to their most comparable GAAP measures, is included in the financial tables below. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty of expenses that may be incurred in the future, although it is important to note that these factors could be material to Zoom’s results computed in accordance with GAAP.
A supplemental financial presentation and other information can be accessed through Zoom’s investor relations.