Posted on Wednesday, Jul 28th 2021
Online video conferencing player Zoom Video Communications (Nasdaq: ZM) has benefited from the pandemic conditions. The company is continuing to expand its market presence through acquisitions. Recently, it announced the acquisition of Five9, its biggest acquisition so far.
Revenues for the first quarter grew 191% to $956.2 million, shattering the market’s forecast of $908.18 million. Excluding items, Zoom reported an EPS of $1.34, again beating analysts’ estimate of $0.98.
Among key metrics, Zoom now has more than 497,000 customers with more than 10 employees, recording a growth of 87% over the year. Customers contributing more than $100,000 in trailing twelve-month revenues grew 160% to 1,999.
It forecast revenues of $985-$990 million for the second quarter with an EPS of $1.14-$1.15. It expects to end the current year with revenues of $3.975-$3.990 billion and an EPS of $4.56-$4.61. The market was looking for revenues of $991.29 million and an EPS of $1.16 for the quarter and $4 billion for the year with an EPS of $4.68.
Recently, Zoom announced the acquisition of California-based Five9 (NASDAQ: FIVN) for an estimated $14.7 billion. Founded in 2001 by Gus Laredo, James Southworth, John Sung Kim, Lovepreet Singh, and Ray Soto, Five9 is a provider of cloud software for the enterprise contact center market. It provides access to a cloud-based contact center software that is reliable, secure, and compliant, thus increasing agent productivity and delivering tangible business results, while also creating memorable customer experiences.
As explained by its former
CEO and current Executive Chairman Mark Burklaud, it is a routing engine for customer interactions that intelligently distributes multi-channel interactions between the consumer and the agent in the contact center. Additionally, being a cloud-based solution, the platform also allows companies to migrate to its platform with minimal upfront investment.
The acquisition will allow Zoom to combine its communications platform with Five9’s Contact Center as a Service solution, enhancing Zoom’s presence with enterprise customers, while also allowing it to accelerate its long-term growth opportunity. Analysts believe
that the acquisition will help Zoom expand its overall offerings and enter the $24 billion contact center addressable market.
Five9 reported revenue of $434.9 billion last year. It was trading at $195.65 at a market cap of $13 billion. Five9 went public in 2014 when it raised $70 million by selling shares at $7 apiece. Prior to that, it had raised $71 million in venture funds from investors including SAP Ventures, Partech Ventures, Adams Street Partners, Hummer Winblad Venture Partners, and Mosaic Venture Partners.
Earlier this summer, Zoom had also announced plans to acquire Germany-based Karlsruhe Information Technology Solutions, also known as Kites. Terms of the acquisition were not disclosed. Kites is a startup dedicated to developing real-time Machine Translation solutions. Founded in 2015, Kites was initially set up in Karlsruhe Institute of Technology where co-founders Dr. Alex Waibel and Dr. Sebastian Stüker are faculty members. It has a team of 12 research scientists who will join Zoom to advance multi-language translation capabilities to improve meeting productivity and efficiency for Zoom users.
Zoom has benefited significantly from the pandemic that forced the acceleration of the adoption of virtual meeting capabilities. But analysts believe that while the coronavirus may have helped Zoom become a household name, it faces pressure to find new avenues of growth as economies reopen and remote conferencing requirements drop. It will need to come up with enhanced features to encourage more people to pay for its services.
Its stock is currently trading at $367.54 with a market capitalization of $108.3 billion. It was trading at a 52-week low of $230.00 in August last year and a record high of $588.84 in October last year. Zoom went public last April when it raised $751 million at a valuation of $9.2 billion and a list price of $36.
Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. This segment is a part in the series : Cloud Stocks . Smartsheet Acquiring Bootstrapped Startups to Drive Growth . Bootstrapped Unicorn Atlassian is Acquiring Capital Efficient Startups . Netflix Price Hike Ruffles Competition . How Will Carbon Black Differentiate? . 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IBM's Transition to a Hybrid Cloud and AI Company . Analysis of Box's Acquisition of SignRequest . ON24 Should Look at Consolidating MarTech SaaS . Snowflake Exploring AI for Data Warehousing Capabilities . Unity Software Focuses on Digital Marketing with RestAR Acquisition . Tuya Counts on PaaS for Growth Within IoT . ServiceNow Continues to Acquire, Partner, and Integrate . Atlassian Expands Beyond IT Teams to Enterprise-Wide Offerings . Google's Growth Continues Despite Regulatory Concerns . Analysis of Microsoft's Acquisition of Nuance . Amazon's Ad Revenue on the Rise . Alteryx Focuses on the User and Partner Community . Qualys Expands Endpoint Security Offerings . SurveyMonkey Investing in AI and ML Tools . GoDaddy Expands Registry Catalog . Wix Goes on an Acquisition Spree . Analysis of Twilio's Zipwhip Acquisition . HubSpot's PaaS Ecosystem Revenues Expected to Grow Rapidly . Zendesk's Products Help Increase Average Deal Size . Shopify Focuses on Social Commerce . 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Analysis of Magnite's Spot X Acquisition . PagerDuty Focuses on Integrations . Analysis of Bill.com's Divvy Acquisition . C3.ai Doubles Down on Partnerships . Analysis of Coupa's Pana Acquisition . BigCommerce Eyes a Bigger Marketshare Through Walmart Tie-up . Analysis of Everbridge's xMatters Acquisition . Adobe's Digital Solutions Drive Stellar Growth . CrowdStrike Leads in Endpoint Security Through Tie-ups . Snowflake Focuses on Expanded Partner Program to Drive Growth . Analysis of Sumo Logic's Sensu Acquisition . Dynatrace Counts on AI to Continue its Market Leadership . Analysis of IBM's Waeg Acquisition . Tuya Focuses on Smart Product Distribution . Appian Strengthens AI Offerings . Analysis of Zoom's Five9 Acquisition . Google's Offerings Help Drive Partner Revenue Growth . ServiceNow's Entire Portfolio is Booming . How can Atlassian Amplify its Robust Growth? . Analysis of Microsoft's Three More Acquisitions After Nuance . Twilio Focuses on Customer Engagement . 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PagerDuty's Expanding Integration Portfolio . Analysis of Tenable's Accurics Acquisition . Upstart’s Improving AI Algorithm in FinTech Consumer Lending . Analysis of C3.ai's Growing Partnerships . Analysis of Veeva's Learnaboutgmp Acquisition . Analysis of Adobe's Frame.io Acquisition . Snowflake Focuses on the Financial Services Sector . CrowdStrike Expands Government Offerings . Zoom Focuses on Expanding Reseller Offerings . Dropbox Focuses on Content Creators with New Product . Analysis of Okta's atSpoke Acquisition . Sumo Logic Leverages Red Hat Marketplace . Analysis of Dynatrace's SpectX Acquisition . Tuya Prepares to Address the Chip Shortage . Analysis of Appian's Lana Labs Acquisition . Analysis of Qualtrics's $1.125B Clarabridge Acquisition . Fastly Addresses Latency Issues for Developers . Alarm.com Leverages AI for Growth . Analysis of IBM's Rego Acquisition . Analysis of Unity's Parsec Acquisition . UiPath Envisions Advanced ML Capabilities . Microsoft Teams Lags Far Behind Zoom . Analysis of ServiceNow's Gekkobrain Acquisition . Google Attempts to Gain Ground in Cloud and AI . Atlassian Expands Beyond IT Offerings . Amazon Addresses Margin Pressures Through Product Upgrades . Twilio Leverages Segment Platform for Product Expansion . Shopify Expands PaaS Integrations . Analysis of Zendesk's $4.1B Momentive Acquisition . HubSpot Becomes a Stickier Platform . Analysis of Alteryx's Acquisitions . Wix Focuses on Fitness Services Providers . Pure Storage Partners with Microsoft Azure to Address Chip Shortage Concerns . Analysis of Salesforce's LevelJump Acquisition . Qualys Expands Solutions to Address Ransomware . Veeva Eyes Data Cloud . Splunk Expands Partner Capabilities . Coupa Continues to Build on its PaaS . MongoDB Focuses on Winning Government Contracts . DocuSign Targets $50B Market Opportunity in Agreement Cloud . Smartsheet Focuses on PaaS Growth . C3.ai Expands Enterprise and Public Sector Presence