ZOOM Video Communications gave a sales forecast that was in line with estimates, suggesting the software maker’s effort to provide a wider range of productivity tools is not yet attracting more business customers.
Revenue will be about US$1.15 billion in the period ending in July, the company said on Monday (May 20). Profit, excluding some items, will be about US$1.21 per share. Analysts, on average, projected US$1.24, according to data compiled by Bloomberg.
The company, whose signature video software became the essential communications tool for homebound Americans during the pandemic, has turned its focus to business customers. It has expanded the product line to include phone, contact centre and artificial intelligence tools. Meta Platforms said last week it would shut down its internal workplace communication tool and recommended customers choose Zoom’s Workvivo as its replacement.
Shares were little changed in extended trading after closing at US$64.09 in New York. Investors have soured on Zoom this year with the stock dropping 11 per cent to Monday’s close.
For the fiscal first quarter, sales increased 3.2 per cent to US$1.14 billion, the company said. Analysts, on average, estimated US$1.13 billion. Profit, excluding some items, was US$1.35 a share in the period ended Apr 30, compared with the average estimate of US$1.19 a share.
Heading into the results, Wall Street analysts were concerned about the potential for increased turnover among Zoom’s consumer and small business users. Churn in this segment was 3.2 per cent in the quarter, compared with 3 per cent in the previous quarter. Sales from these customers was US$475.5 million, little changed from a year earlier.
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In prepared remarks, chief financial officer Kelly Steckelberg attributed the uptick in churn to new late-payment rules, which spurred some customers to cancel earlier than they would have otherwise.
Zoom had 3,883 enterprise clients paying more than US$100,000 a year in trailing 12-month revenue, compared with analysts’ average estimate of 3,966. Total enterprise revenue rose 5.3 per cent to US$665.7 million in the quarter.
Results suggest that new products “that are key to restoring growth aren’t yet contributing enough to pick up the slack”, John Butler, an analyst at Bloomberg Intelligence, wrote in a note after the results. “Weak key performance indicators in the enterprise segment may also reflect challenges in scaling up amid competition from Microsoft Teams,” he added.
The company said it had about 191,000 enterprise customers at the end of the quarter, but 26,800 business clients who generate lower monthly revenue were classified as online users rather than enterprise customers. Even after adjusting for this change, Zoom’s total count of enterprise customers declined by about 2,600 from the previous quarter.
“The impact of this transition did not have a material impact on the per cent of revenue from enterprise and online customers, net dollar expansion rate, or online average monthly churn,” Zoom said.
Zoom contact centre had 90 customers paying more than US$100,000 in annual recurring revenue and five phone customers are using over 100,000 licenses, Steckelberg said. BLOOMBERG