It's Wednesday June 2nd. Welcome to Marketfoolery. I'm Chris Hill with me today, our man in Colorado. It's 10 buyers. Good to see you.

Good to see you, sir. How are you today?

I'm good. We have another acquisition to discuss. We've got news in the semiconductor chip industry, but we're going to start today with the Zoom video.

First quarter revenue grew 191% and I'm laughing because that seems like I made up number, but it grew 191%. Gross margins are getting fatter and yet shares of Zoom video down a couple percentage points due to guidance and I get that the business that the growth is slowing down to him.

But I looked at this quarter and I just thought I don't think I would want to be in the position of having to make a strong bear case against Zoom video.

No, I guess here's my question for anybody and maybe I'll pose it to you, Chris, as you know, the investor on the other side here potentially. So Zoom is disappointing. How many yachts can you water ski behind?

How many yachts are you going to water ski behind? Come on. What do you want here? I think when I look at these numbers, Chris, let's just hit some of them very quickly here.

So just under 1.6 billion in free cash flow, that includes a pretty fat contribution from stock based compensation, but not a ton. Under 350 million, this is an organically growing business.

Like you said, revenue up 191%, 956.2 million. Remember that the consensus here was I think 906 million. So they didn't just like edge out the consensus here. They blew the doors off the consensus.

497,000 customers. That's up 87% year over year. 12th consecutive quarter of dollar-based net expansion rate up 130% or higher. And large customers, those that are spending at least $100,000 a year on Zoom, that's up over 160%.

So this company, I mean, I know I don't like to necessarily quote my boss Ron Gross, but firing on all cylinders. Firing on all cylinders, right?

Well, and you know, of all the numbers you just hit, that one at the end there in terms of the people who are paying them the most money and sort of what direction that's going in. Because we talk about this all the time.

Whatever business you're in, the cost of acquiring new customers is expensive. It's certainly more expensive than keeping them. And if you're keeping them satisfied, then they're going to stay with you.

Because, you know, not that there aren't, you know, they're switching costs associated with switching away from Zoom video, particularly if you're a business, if you're saying, okay, we're not happy with them.

We're going to go with, you know, the solution offered by Cisco systems or some other company. They're doing a good job taking care of their customers.

Because keep in mind, you go back 15 months, and that was the question about Zoom video. It was, well, sure, everyone's using them now that the pandemic has started because they've got this free solution.

But how many people are going to pay them? And here we are 15 months later, turns out the shorter answer is a lot. A lot of businesses are going to pay them.

Right. I mean, you can just imagine. You can almost imagine it here where you have, you know, the consensus saying, hey, Zoom's just a pandemic stock. And Eric, you on saying, can you see my numbers? Here's a nice tall glass of shut the heck up. I mean, come on. What do you want from me here?

But let's just hit a couple of other things here because what you said, Chris, I think is really illuminating the first is that when you have customers that want to stick with you and spend more, then your unit economic costs go down.

And the net effect of that, you know, when you look at the financials here, you get a fatter balance sheet and your cash flow goes up. You're turning more dollars that you sell into actual cash you can use to reinvest in the business.

So I ran a couple of numbers here, Chris, just for for some perspective, there is a metric that I use called cash flow return on investment. And essentially the idea here is when a company generates a dollar of cash from its business, how does it put that dollar to work to generate new assets and then keep that from creating new liabilities on its balance sheet.

And the higher the number, it's sort of an indicator, if not a perfect indicator of what sometimes we call return on invested capital, like this business takes a buck, puts it back into its business and generates a return on it.

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