In the 3rd part of my Q3 earnings analysis, I review reports from Zoom Video, Okta, Snowflake, Crowdstrike, ZScaler and Elastic.

Zoom Video

Zoom Video provided a nearly flawless earnings report for the first full quarter that followed initial work-from-home orders. The blend of Zoom Video having virality across consumers from its freemium model combined with enterprise is the company’s strength strategically as the competitors do not have the virality component. In Q3, customers with more than 10 employees represented 62% of revenue with net dollar expansion rate of 130%. Globally, Zoom exhibits strong growth, as well, with revenue from APAC and EMEA growing 629% year-over-year.

However, gross margins were a weakness in the report at 68.2% compared to 82.9% last year and 72.3% last quarter. The company is providing the service for free to many users including K-12 schools during the pandemic. From my perspective, the temporary margin hit in exchange for virality and establishing consumer behavior is a good trade-off.

Okta

According to most standards, Okta’s earnings report was solid and resulted in an uptick in the stock price. However, the growth has been flat for most of this year.

Revenue rose 42% to $217.4 million ahead of estimates for $202.7 million. Bookings (remaining performance obligations) are growing faster than revenue at 53% to $1.58 billion. Calculated billings were up 44% year-over-year. This was a re-acceleration of calculated billings from the previous quarters in FY2021 where the pandemic weighed on budgets.

The company is profitable on an adjusted basis with EPS of $0.04 and free cash flow of $41.6 million, up from $9 million a year ago. Highlights include a growing number of customers in the financial services sector and government.

Snowflake

Snowflake grew 119% year-over-year to $159.6 million with remaining performance obligations of $927.9 million, or 240% year-over-year growth. Product revenue grew 115% year-over-year. The net revenue retention rate of 162% is impressive although other companies have exceeded this in their 6th year (Snowflake was founded in 2012 but was in stealth mode until 2014 when it began to work with customers).

Gross margins are between 58% to 63%, which it’s normal for a cloud company to be lower than a SaaS company on margins. However, operating margins were negative (30%) with FCF margins of negative (23%). Probably the biggest issue that Snowflake faces are the sales and marketing costs. In the previous two quarters, they were near or exceeded total revenue and in this quarter they were about 90% of revenue at $134 million compared to the $159 million in revenue.

CrowdStrike

CrowdStrike beat consensus estimates on both the top and bottom lines and raised Q4 guidance. Revenue grew 86% YoY, representing an 8% beat above Wall Street estimates. Subscription revenue increased 87% YoY while annual recurring revenue advanced 81% compared to a year ago. The company also achieved its most impressive quarter ever in terms of profitability, earning $0.08 per share on the bottom line. This was CrowdStrike’s third consecutive quarter of positive EPS and its highest total yet. Free-cash-flow margin increased to 33% and gross margin improved to 76%.

In the quarter, CrowdStrike added 1,186 net new subscription customers, representing growth of 85% YoY. CrowdStrike also continues to drive new module adoption in existing customers, as 44% of the company’s subscription customers have adopted five or more modules versus 39% in the previous quarter.

Zscaler

ZScaler announced Fiscal Q1 2021 results that easily cleared analysts’ expectations. Revenue growth accelerated to 52% YoY, which represents the company’s third consecutive quarter of growth acceleration.

Adjusted billings growth increased 64% YoY, far surpassing the consensus expectation calling for 39% growth. This beat was driven in part by a record quarter of seven-figure deals. The company’s net retention rate of 122% advanced from 120% last quarter and 119% the quarter before. Non-GAAP EPS of $0.14 was 8 cents better than expectations while the company also announced an impressive 30% FCF margin. Non-GAAP operating margin of 14% far exceeds the consensus of 2.9%.

Elastic

Elastic announced strong FQ2 earnings on 12/2. Total revenue increased 43% YoY, representing an 11% beat above consensus. Total billings grew 42% YoY while SaaS revenue increased 81% versus the same period a year ago. The company’s losses also improved significantly, with non-GAAP EPS of -$0.03 coming in 17 cents better than expected. Non-GAAP operating loss improved to -$1.9 million, representing a -1% operating margin versus -10% projected. Gross margins also came in better than expected with 77% versus a consensus of 75%. FCF margin was -13% for the quarter.

Subscription revenue totaled 93% of Elastic’s total revenue in the quarter, with 45% of total revenue coming from outside the US. Management views this geographical distribution as a strength in the company’s business model. Elastic’s net retention rate ticked down several points from last quarter but still remained modestly above 130%. Elastic now has a total of 12,900 subscription customers with 650 of those (5%) having annual contract values exceeding $100K.

Read the Full Article at Forbes