Zoom Shares Fall After Financial Report and Announcement to Buy Five9 for $14.7B

Shares of Zoom saw a drop earlier this week after the video-calling software maker reported its second quarter financial results and announced that it has plans to acquire Five9 for $14.7 billion.

Zoom said it plans to buy the cloud contact-center software maker in a stock transaction.

For the second quarter the company reported a higher than expected earnings forecast but saw its revenue guidance fall below expectations.

For the quarter, which ended on July 31st, Zoom reported earnings of $1.36 cents per share, adjusted, vs. $1.16 per share as expected by analysts, according to Refinitiv.

Revenue was $1.02 billion, vs. $991.0 million as expected by analysts, according to Refinitiv.

Revenue increased by 54% year over year in the quarter. In the previous quarter revenue had grown 191%. Next quarter, Zoom is guiding to 31% growth.

Gross margin increased to 74.4% from 72.3% in the previous quarter.

The announcement to acquire Five9 comes after Zoom gained millions of new users after the coronavirus emerged and companies rushed to enable online meetings, pushing up Zoom’s stock.

The company also announced in the second quarter the availability of Zoom Events, which gives organizations the ability to hold premium online meetings. Zoom also said that it invested in event software maker Cvent.

Looking ahead, Zoom is expecting $1.07 to $1.08 in adjusted earnings per share on $1.015 billion to $1.020 billion in revenue. Analysts polled by Refinitiv had expected adjusted earnings per share of $1.09 and revenue of $1.01 billion.

For the full fiscal year, the company projects adjusted earnings of $4.75 to $4.79 per share and $4.005 billion to $4.015 billion in revenue. This is an increase from its last estimates of $4.56 to $4.61 in adjusted earnings on $3.98 billion to $3.99 billion in revenue. It’s also better than analysts’ consensus estimates of $4.67 in adjusted earnings per share and $4.01 billion in revenue.

In a Zoom blog post, CEO Eric S. Yuan wrote, “I am excited to announce that we’ve reached an agreement to acquire Five9, a leading provider of the intelligent cloud contact center. We continuously look for ways to enhance our platform, and the addition of Five9 is a natural fit that will deliver even more happiness and value to our customers.”

He added, “We expect that this acquisition will help enhance Zoom’s presence with customers and allow us to accelerate our long-term growth opportunity by adding the $24 billion contact center market. Five9 is a pioneer of cloud-based contact center software. Its highly-scalable and secure cloud contact center delivers a comprehensive suite of easy-to-use applications that allows management and optimization of customer interactions across many different channels. Combining Five9’s Contact Center as a Service (“CCaaS”) solution with Zoom’s broad communications platform will transform how businesses connect with their customers, building the customer engagement platform of the future.”

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.