- During the Q3 2020 earnings call, Zoom founder and CEO Eric S. Yuan discussed the growth potential of the company internationally and in the enterprise
During the Q3 2020 earnings call, Zoom founder and CEO Eric S. Yuan spoke about the company’s growth potential internationally and in the enterprise. For the quarter, Zoom reported revenue of $166.6 million for the third quarter, up 85% from the prior year. However, it was slightly slower than the 96% revenue growth that the company saw in the last quarter.
Zoom is projecting that it will hit between $175 million and $176 million in the next quarter. And for the FY 2020, Zoom is expecting to hit $609 million to $610 million. During the earnings call, Yuan pointed out the company saw increased profitability and free cash flow of $54.7 million.
“We continue to have success with customers of all sizes and one metric that has continued to impress is customers with more than $100,000 of trailing 12 months revenue. This metric grew 97% from Q3 last year. Our execution so far this year has put us in a position to finish the year strong and we are raising our revenue and profitability outlook for the fourth quarter as well as full fiscal year,” said Yuan during the call.
One of the biggest customer wins for the company includes the US Postal Service. The USPS is starting to deploy Zoom Meetings broadly across the organization following an extensive proof-of-concept. And Yuan also highlighted the National Australia Bank as an organization that is looking to Zoom for supporting its enterprise telephone and video conferencing services.
Yuan also highlighted the success of its premier customer event Zoomtopia. The third Zoomtopia is coming up and the company saw record registrations of 2,600, up over 80% from last year. During the event, customers such as AB-InBev, Autodesk, Electronic Arts, Uber, and Walmart shared their stories about using Zoom.
Zoom’s new customers accounted for about 61% of its year-over-year growth in subscription revenue while the remaining 39% was due to additional purchases from existing customers. Zoom also added 7,800 customers with over 10 employees in the period and exited Q3 with more than 74,100 customers, up 67% year-over-year. And the company’s continued expansion up-market resulted in 546 customers with more than $100,000 in trailing 12-months revenue, up 97% year-over-year.
Zoom ended Q3 with about $811 million in cash, cash equivalents and marketable securities, excluding restricted cash. And the company’s remaining performance obligations (RPO) totaled approximately $517 million, up 102% from $256 million last year.
The operating cash flow for the quarter was $62 million, up from $18 million or 240% year-over-year. And in Q3, free cash flow was $55 million, up from $10 million or 440% year-over-year growth.
Merrill Lynch managing director Kash Rangan asked Yuan about the kind of enterprise deals in the pipeline and whether the company needs to add more salespeople.
“So if you look at our growth potential, international and also enterprise, we already hired a lot of enterprise reps over the past 12 to 18 months. Also (we) want to focus on the quality rather than just quantity. And from a leads perspective, it’s very healthy. Like HSBC, like USPS and also government… public sector as well and especially for a lot of enterprise customers, they would like to go through the PUC to make sure of the solution they are going to deploy for the next several years,” explained Yuan. “I think our pipeline is pretty healthy and we really are doubling down our enterprise expansion.”
Tom Roderick of Stifel, Nicolaus & Co asked Yuan about Zoom’s international prospects. Yuan responded that the company is doubling down on its expansion in Amsterdam — which is the company’s headquarters for EMEA. And the company is expected to see accelerated growth for customers to deploy video and voice at the same time for APAC like in Japan and Australia.
Stephens analyst Ryan Williams asked about whether the company is planning to achieve local service coverage in China and India in the next few years.
“Oh, not in the next few years, it’s for next several months, actually. We are making very, very good progress. I think that multinational customers whose office is probably in China, we already can support to like support the China local network. India we’re also making good progress and so soon we should support both India and China. Well, if we wait for several years, we are going to have problems. So we feel very comfortable to support both India and China very soon,” noted Yuan.
