Zoom's third-quarter profit jumps 71% on strong sales

Net profit in the period ending on October 31 surged to $340.3m

Zoom Video Communications said its third-quarter net profit surged nearly 71.5 per cent from the same period last year, driven by an increase in the number of paid customers for the video-conferencing platform.

Net profit surged to $340.3 million, almost $141m more than the third quarter last year, the Nasdaq-listed company said. It was up nearly 7.4 per cent on a quarterly basis.

Revenue for the three months ending on October 31 jumped 35.2 per cent to more than $1.05 billion, beating analysts' estimates of $1.02bn, according to Refinitiv.

Quote
We are well on our way to becoming an indispensable platform for enterprises, individuals and developers to connect, collaborate and build in the flexible hybrid world of work
Eric Yuan, Zoom's founder and chief executive

“Through innovation and dedication, we will continue to deliver happiness to our customers,” Zoom founder and chief executive Eric Yuan said.

“We believe our global brand, innovative technologies and large customer base position us well for the future."

Zoom shares, which started the year at about $360, closed at $242.3 on Monday after falling more than 3.5 per cent.

The company increased its revenue outlook for the fourth quarter and the full financial year, with fourth quarter revenue reaching more than $1.05bn.

For the full year, Zoom estimates revenue of between $4.07bn and $4.08bn – about 52 per cent more than its earnings in the past financial year.

“We are well on our way to becoming an indispensable platform for enterprises, individuals and developers to connect, collaborate and build in the flexible hybrid world of work,” Mr Yuan said.

He said the company expected “strong profitability and operating cash flow growth” in the coming months.

Zoom said the key “drivers of total revenue included acquiring new customers and expanding across existing customers”.

As of October 31, the company had nearly 512,100 paid customers with more than 10 employees, up by almost 18 per cent from the same period last fiscal year.

The company’s Zoom Rooms software posted a strong growth as an increased number of businesses adopted a hybrid work model in the post-pandemic era.

“The conference room strategy has become even more important than it was pre-pandemic,” Zoom’s chief financial officer Kelly Steckelberg said in a call with analysts.

The video communications platform has been adopted by businesses, schools, universities and people due to Covid-19-induced movement restrictions and lockdowns.

It became an essential service, underpinned by the increasing demand for video conferencing as companies adopted hybrid work models.

The company based in California invested more than $98.5m in research and development in the August-September period, almost 131 per cent more than in the same period last year.

It was more than 9.4 per cent of the total revenue earned during the quarter.

The company’s operating cash flow was $394.6m for the third quarter, nearly 4.1 per cent less than the same period last year.

Total cash and marketable securities stood at $5.4bn on October 31.

In the last quarter, Zoom called off its plans to buy cloud call-centre software provider Five9 for $14.7bn. This was expected to be its largest-ever acquisition.

Zoom said Five9 did not obtain the requisite stockholder support for the merger agreement.

Industry experts have said Zoom's cash reserves will help it to acquire new start-ups and competitors in video conferencing.

In June, it joined forces with German start-up Karlsruhe Information Technology Solutions-kites, a translation software maker.

It was also part of an alliance that bought a minority stake in software company Assembled in March and acquired Keybase Financial Group, a secure messaging and file-sharing service, last year.

Updated: November 23rd 2021, 12:31 AM
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