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Enterprise, large accounts get Zoom ahead of guidance in Q3

Communications and collaboration firm’s third quarter results for 2024 fiscal year show better-than-expected performance

Zoom Video Communications has reported financial results for the third quarter of its fiscal year 2024, with modest revenues beating previously expected gains but with notable performance in its enterprise business.

In its results for the quarter ending 31 October 2023, Zoom posted total revenue of over $1.13bn, up 3.2% year-on-year. Adjusting for foreign currency impact, revenue in constant currency was said to be $1.14bn, a 3.5% annual rise. Enterprise revenue grew 7.5% compared with the same period a year ago to $661m. However, online revenue was $476m, down 2.4% year over year.

GAAP income from operations for the third quarter was $169.4m, compared with GAAP income from operations of $66.5m in the third quarter of fiscal year 2023.

After adjusting for stock-based compensation expense and related payroll taxes, acquisition-related expenses, restructuring expenses and litigation settlements, Zoom noted that non-GAAP income from operations for the third quarter was $447.1m.

For the third quarter, GAAP operating margin was 14.9% and non-GAAP operating margin was 39.3%. Non-GAAP net income for the third quarter was $401.2m, after adjusting for stock-based compensation expense and other specific items. GAAP net income attributable to common stockholders for the third quarter was $141.2m.

Net cash provided by operating activities was $493.2m for the third quarter, compared with $295.3m in the third quarter of fiscal year 2023, up 67.0%. Free cash flow was up 66.2% year-on-year to $453.2m.

Drivers of Zoom’s Q3 revenue included acquiring new customers and expanding across existing customers. At the end of the third quarter of fiscal year 2024, Zoom had approximately 219,700 Enterprise customers, up 5% from the same quarter in the last fiscal year, with a trailing 12-month net dollar expansion rate for Enterprise customers of 105%.

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In Q3 FY 2024, 3,731 customers contributed more than $100,000 in trailing 12 months revenue, up approximately 13.5% from the same quarter last fiscal year.

The company’s online average monthly churn for the third quarter was 3.0%, down 10 bps from the same quarter last fiscal year. The percentage of total online monthly recurring revenue from online customers with a continual term of service of at least 16 months was 73.2%, up 250 bps year over year and slightly up on the 72.8% in the previous quarter, which was up 340 bps year on year.

Assessing the third quarter performance, Zoom founder and CEO Eric S Yuan emphasised that in Q3 FY 2024, revenue came in ahead of guidance, making mention of upgrading Zoom’s all-in-one intelligent collaboration platform with new capabilities such as Zoom AI Companion, and that the firm had continued to evolve customer and employee engagement services.

“We are also pleased with our Online business, where we drove higher retention and saw usage of our new AI capabilities, enhancing the value of our platform,” he said. “Our strong performance across a number of metrics has enabled us to increase our full year outlook for revenue and non-GAAP profitability, as well as for free cash flow.”

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