Earnings

Zoom CEO Eric Yuan speaks at the Dropbox Work In Progress Conference in San Francisco on September 25, 2019.

Matt Winkelmeyer | Getty Images for Dropbox

Shares of video conference software company Zoom initially rose but then fell as much as 11% Thursday after the company issued fiscal third-quarter earnings that surpassed estimates, revealing slowing growth.

Here are the key numbers:

  • Earnings: Excluding certain items, 9 cents per share, vs. 3 cents per share as expected by analysts, according to Refinitiv.
  • Revenue: $166.6 million, vs. $154.9 million as expected by analysts, according to Refinitiv.

Zoom’s revenue increased 85% on an annualized basis in the third quarter of the company’s 2020 fiscal year, which ended on October 31, according to a statement. Last quarter, revenue growth was 96% from the previous year, falling below 100% for the first time in at least one year.

Zoom said it had 74,100 customers with over 10 employees at the end of the quarter, up 67% year over year. The growth rate in the prior quarter was 78%.

The company had 546 customers that were contributing over $100,000 in revenue over the trailing 12 months at the end of the quarter, up 97%. The percentage is down from 104% one quarter ago.

“For now our top priority is to focus on existing customers, to make sure they are very happy. This is pretty hard, actually,” Eric Yuan, Zoom’s CEO, told analysts on a Zoom call on Thursday.

Zoom competes with Avaya, Cisco and Microsoft, among others. In the quarter Zoom announced new appliances from companies like Poly that work with its Zoom Rooms product for conference rooms and said RingCentral executive Ryan Azus had joined Zoom as chief revenue officer.

The company’s fiscal fourth-quarter forecast calls for 7 cents in earnings per share, excluding certain items, on $175 million to $176 million in revenue. Analysts polled by Refinitiv had expected 4 cents in fourth-quarter earnings per share, excluding certain items, on $165.2 million in revenue for the quarter.

For the 2020 fiscal year Zoom sees 27 cents in earnings per share, excluding certain items, and $609 million to $610 million in revenue. The consensus estimates from analysts polled by Refinitiv were 19 cents per share, excluding certain items, and revenue of $588.7 million.

Guggenheim Partners analysts Nandan Amladi and Sameer Kalucha initiated coverage of Zoom with a buy rating two weeks ago. “Zoom’s unique business model is a combination of low initial price and very rapid adoption, which makes for a very profitable financial model in the long run,” they wrote.

Before the after-hours move, Zoom stock was up about 12% from the $62 closing price on its April 18 trading debut.

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