ZM - Earnings call transcript Q1 2023 | Zoom Video Communications, Inc.

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Operator

Hello again, everyone, and welcome to Zoom's Q1 FY23 Earnings Release.

As a reminder, today's earnings release is being recorded. And now, I will hand things over to Tom McCallum, Head of Investor of Relations. Tom, take it away.

Tom McCallum

Thank you, Kelcey. to fiscal video -- welcome first for and of quarter QX everyone, Zoom's webinar earnings the Hello fiscal XXXX. by Kelly today and joined Zoom’s CEO, and I’m Eric Zoom’s CFO, Steckelberg. Founder Yuan

with a issued results. highlights a Our earnings may earnings downloaded GAAP prepared copy our you'll Also, of the from be after that, investors.zoom.com. and market Relations at this non-GAAP closed today's be to page a today slide Investor on include press financial reconciliation and the able along deck was with release page release, to remarks find of financial

materially. with let Annual Reports subject that, in XX-K me statements risks to update in turn that filings other we factors Zoom we including During growth from SEC, make performance discussion second regarding quarter call developments Russia-Ukraine Form any Quarterly macroeconomic on to and with affect our statements, the our fiscal full assumes including the and to financial results, detail forward-looking year webinar. today’s on may XXXX; may and the actual this statements forward-looking XX-Q. we market These will are and such Form no Eric. And expectations of for impacts strategy financial business expected trends; our differ aspirations; and outlook and predictions could discuss obligation and regarding we initiatives. our forward-looking the based Report and what business our believe make initiatives position, over financial statements on results that and our and the the product war, These are benefits which only statements are opportunities, today, on

Eric Yuan

joining Thank you everyone you, today. us Tom. Thank for

trust last on I have the we investors. the continue quarter, received and strategic support we you pillars As our are and from grateful we customers for with to shared execute

to touch customer news, Kelly. with before handing start me recent some over exciting product it some wins, finally and new discuss on then our Let launches,

accelerate of customers Just customer saw last of recognize strengthen Solvvy, enterprises ways. their personalized, fundamental with a this productivity, to contact more Solvvy adoption the center capabilities which that week, in believe shift laser-focused our is customer the deliver AI and product. better and very support a truly nature our around undergoing and agent believe acquisition to of we valuable and providing conversational look our scalable and in increasingly empowering AI we closed as transformation, on engage exceptional, will and technology Solvvy’s and the effortless improved experience our team conversational self-service The capabilities broaden personalized center enable resolutions, technology leaders offering insights. We contact experiences. will best customer fast We

more insights, Zoom to customer interactions And teams analyzes potential, surface out and our content that provides with meeting. join our Sales, customer new a customers sales reach We space solution during, IQ virtual AI strategy workflows, and more meetings. adjacent their have help move our A part a within power forces and I and for teams launches conversational of are before, easy-to-use and order of collaboration getting contact more to solution about Zoom we of collaborate our and our to workflows platform, help full key are product very standards arming into Solvvy IQ continuous vertically, in excited horizontally business of and These a encapsulate new enable recent of launched set ensure that center our number Zoom customers to Sales. sales to after actions, is strategy with is excited for Whiteboard to platform. key growing Zoom for our and Whiteboard from the both am an to service. super more launches in

wins. customer to on moving Now

product integrate leading communications share of Zoom to three Avis XX,XXX their well-being video most of meetings the Phones a for in added brands rental Phone, integrated customer happy global continue connected Meetings their to of include a Zoom approximately of UCaaS expanding mobility collaboration addition in to across companies, relationship locations. a provider and customer. to one their Zipcar, and Rooms persistent approximately XX,XXX and platform. way. seamlessly Meeting also being solution want UCaaS through that And are They Zoom our that from Zoom from Chat Zoom health thank Zoom having in stay nation’s has being and a the We voice to leading car Budget expanded and and to operating a Zoom in Phones drives seamless solutions, broader Thank offices many you, I to further Group, recognized Avis, Budget their robust Humana. industry team Humana, and includes very global

the Rooms critical our of Zoom. Webinar U.S., thousands avid center in ease to used licenses is how employees also want is across team the enhance and for the their their Zoom platform. collaboration communication by demonstrate use services in chose deployment Zoom Phone Chat. to employees, over in Zoom not did possible across TeamHealth, XX their preeminent is of there. Zoom leader Lumio, very product number special because their they physician Lumio the happy two including component of strength users. Chat and the leading to platform practice who a customer, experience. Their The with are end Zoom a and A their their innovation-focused XXX,XXX and I delivering to offering enjoy Zoom home experience expanded contact journey for enabled trust wins organization. And I Chat team. their recently X,XXX healthcare of next for of its residential customers. best providers, recently thank to Lumio Our thank and enterprises, a Zoom company customer, with TeamHealth solar quality and committed a Meetings of is longstanding, a large the Meetings, the want Fortune

of channels and Covey, potential but across experience execution a training saw leadership, Avis, I Meetings and services And and of business skills-based support Recently, forward routing. Franklin Zoom in had started that intangible growing Events of In much effectiveness, and and solutions. benefits with set healthcare investment. bar tens Zoom to our they composite going to in affiliates. a as services. our recognizing how value return or not as contact Zoom journey Zoom’s Zoom XXX% they external seamless well a we a want suite unified value least, drive communications modernize We Zoom’s call together provide to Covey their could hand found support framework certainly robust of value further with from culture. hand has business them Center. provider internally the organizations Zoom how Contact terms deploy to and Franklin did as needs IT flexible, continuing Contact as Phone assessment TeamHealth look Franklin communications Zoom’s UCaaS proven everyday, our to new their they Zoom just platform platform from quantify capabilities a offering. I to organization more customers and well. in years as we into in The for And to about not saw Covey. of model including payback see QX, efficiency the companies feel location employees to six on with voice organizations and of Covey enhance as of many adding it unified connected hear study platform, on investment commissioned thank communications and three look and surprise study Zoom’s grateful expand there customers, decided video that customers. felt less Zoom but strive Zoom Franklin months. last hybrid their Rooms Gartner provide who employees more our center understand And to over They to just gains customer. center leading a does our Lumio, their in can U.S. come Center our internal by in for and for organization’s as so A us am their offering. scalable, flexibility our through than with a We unified empower accomplish externally. and with thousands as indicates delivering workstyle to This across and a looking center individual expansion of workforces, Given healthy the can impact capabilities, Forrester such Consulting everyday communications their you additional what Humana, a are have group communicate Thank contact to great our

across belonging remote, help have productivity similar their Zoom, We be and at they goals by whether our are this to or found realize enabling and be to working teams, hybrid. customers in-person, true

global with that their Zoom investors Kelly. me And team, our partners, I’ll it over great let always, to you. As pass and customers, also support. trust Thank thank and for

Kelly Steckelberg

Thank And hello you, Eric. everyone.

start me by Solvvy to warm team. extending welcome also Let the my

primarily for are revenue to provide in customers the year-over-year. by Enterprise our steady strength $X.XXX The saw first our XX% QX, the and In rates We high grew increase results FYXX. Zoom growth our improved was in as have QX, and as thrilled near business, the for guidance. family. year-over-year driven end you discuss which then billion, I’ll outlook join QX of to total a renewal well

revenue, number from grew of year-over-year dollar during Rooms and to and XX% the which headwinds, the reached approximately the of Renewals Zoom XXX,XXX. the in sequentially, total year-over-year ongoing growth FYXX. XX% of from Online Enterprise Russia-Ukraine strengthening million saw of war. Zoom customers We XX% QX including and but quarter. mainly also in was grew X customers The Enterprise XX% seats success improved Phone, Revenue by international represented impacted in up

customers Enterprise revenue time. higher We expect revenue of an total over from become increasingly to percentage

growth saw investments high months in Enterprise previously. trailing trailing ended expansion in net of XX% in dollars platform, the rates beginning These with quarter QX year-over-year was rates for XX% XXX%. with rate up-market expand This of to growth line from customers as QX Enterprise revenue, dollar up we the revenue. to with continued expectations customers Zoom Our represented customers more We in the in in XX normalize very following the X,XXX than contributing at their $XXX,XXX as of XX-month expansion in XX% came existing customers FYXX.

Our Americas revenue XX% grew year-over-year.

APAC we and business expected faster quarter-over-quarter primarily the was flat due Americas online year-over-year performance continued was of online business. even FYXX well. XX% growth believe The EMEA. on in the On partially grew has balance as revenue APAC broadly impacted in This headwinds war is in the the basis, our in and Our to weigh by offset year-over-year. Europe, Russia-Ukraine a to at

litigation strong which and losses settlements, net on our compensation focus was will perspectives. which profitability, results, tax associated both to last gross centers. from net from turning expense undistributed acquisition-related from earnings an payroll securities. income non-GAAP QX taxes, in optimizing XX.X% benefits investments, of I year Non-GAAP stock-based and or discrete non-GAAP XX.X% strategic our gains Now, activities, sequential expenses, on The to GAAP the exclude QX participating data attributable and public co-located improvement number last mainly in improvement was across cloud usage and XX.X%, quarter. and due of margin increasing to was

improvements is the seeing Given XXX% view million, be mid-XXs. for higher approximately on this expense remainder to year-over-year development range the and to of margins by year grew by we to so driven our previous innovation. the XX% XX% our are in focus which gross $XX of the of far year, the Research expect than we

X.X% total of of percentage to in from As revenue, year. R&D last X.X% expense increased a QX

the Non-GAAP $XXX worldwide approximately from Zoom’s to a commitment to benefit in $XXX as of diluted X.X% million by share million non-GAAP plan R&D total is to channel This our across translates weighted to the last high of in total XXX last $XXX approximately committed partners, year. year margin XX.X% This ago Our capacity, XX% year-over-year our of of to expanded of This to XX% guidance Zoom the and high or end customers’ to our of for in operating to dollars, above reflect income up compared revenue. and are was expense grew to delivering evolving in earnings lower million new represented operating reach guidance We QX XX%. XX.X% XX.X% G&A approximately target seeing with by sales expanding XX% efficiencies Sales million. exceeding investments Non-GAAP $X.XX $X.XX, average platform product our we QX platform. of per cloud XX.X% a on QX remain outstanding. revenue, product grew than our on marketing our in of non-GAAP $XX and investing We shares result QX, diluted million the quarter. of further year. last operations. in end and ongoing $X.XX and expense marketing needs. launches term invest long our XX%

of Turning to $X.X from XX% sheet. at was Deferred $X.X revenue balance year-over-year up billion, the billion. the the end period

billion, Looking our and unbilled at $X contracts, year-over-year up billed billion. approximately XX% both RPO from totaled $X.X our

recognize to a plans. to approximately total XX XX% year, in last of shift over towards the of as compared longer months, as expect We reflecting revenue the term RPO XX% next QX

base. a As is seasonality the rest of to leads year renewal our the therefore tapers the revenue reminder, and our follow moderate renewals peak through and the deferred QX, and loaded in reflecting of over This front-end smaller same collections trend. the year,

ended revenue $XXX cash restricted and with the expect such, deferred We cash. QX in QX approximately $XXX QX year-over-year. excluding cash last million, securities, $XXX billion to we in cash cash, million to $XXX of had to in X% at We in year. marketable the operating $X.X as approximately flow last year. equivalents quarter flow quarter million up grow As XX% million, Free compared of was of from

and flow strong, cash and remain free at Our XX.X%, operating cash for respectively. margins XX% flow

free lower impact compensation fiscal flow taking for R&D cash to caused margin, XXX account recent X would stock-based to earnings Over deductions the our legislation. a points normalized margin billion roughly amortize our non-GAAP assuming lower more further requirement Section operating otherwise cash expect the track by repeal, Last be to we an flow our on could free and year, or expect existing capitalize margin our the not defer, or stock For dollar the cash SBC into free The environment, non-GAAP to volatility. expenses our X annual buy-back we time, if share we at would basis modify Congress does approximately operating than plan. announced above margin.

stock, we QX, purchased $XXX of end had million the X.X of shares. As million of representing

observing Now, consistent in what today. with is turning are we to market our outlook FYXX guidance. This the

our Specifically, will business. it Enterprise business modestly that in grow online total growth the It substantially quarter FYXX. revenue year-over-year that fourth than assumes our our assumes will faster rate accelerate also

to For of billion to range of FYXX, in $X.XXX the we $X.XX revenue the be quarter second billion. expect

in We the million expect be non-GAAP operating income $XXX range million. to of to $XXX

outstanding. for non-GAAP outlook million $X.XX based earnings to share Our per XXX is shares $X.XX on approximately

utilized history we quarter, of have As mentioned our due to multi-year last NOLs. profitability, fully our

the and our blended federal FYXX. state expect rate tax to continue We in rate to approximate U.S.

year of FYXX, expect full the the $X.XX year-over-year to would billion revenue which in be represent we approximately of For range growth. to $X.XX billion, XX%

operating of non-GAAP our to approximately be of raising billion, the billion are in representing a margin non-GAAP operating We $X.XX income approximately range $X.X XX%. to

share on non-GAAP XXX for based $X.XX outlook $X.XX, earnings outstanding. approximately to Our per million shares is

reporting and performance an to report. framework. according like to includes Zoom’s I’d initiatives recently conclude, standardized we of The charitable regarding our our employees’ report information SASB providing inaugural update metrics, on ESG policies, you ESG and environmental Before and our index diversity targets, issued contributions, details and the

connection is collaboration our Zoom and Zoom Kelcey, and first high-quality, you driving Thank secure queue with be a enabling our entire communications our worldwide customers, our community, always, grateful question. to our please force and up to the platform. investors. team, frictionless, As

Operator

[Operator Instructions] will from question Marshall Stanley. And first Meta with our come Morgan

Meta Marshall

just outside a Perfect. you video sense more you and think a contribute Thanks front. ancillary of could be than of get of categories I of that other to Congratulations categories kind revenue. when guys. products the seeing expect of, on XX% would 'XX, to to you lot core be traction just Clearly, just of much, what wanted Thanks. kind of those could growth you fiscal guys look quarter. so the into Phone on are as

Kelly Steckelberg

course, Contact Whiteboard excited, Center launched super and recently Center. saw including about deals. We products, we're Contact of some So,

that of hybrid ever-evolving to Rooms the like is You what status some in beginning especially Eric Zoom going And the look of heard call. really then, about those work of our a be part future. important and think, going the names to I talked at forward, of course, flexible the strategy with, continues of

see In of committed a -- that. combination products disclosing gets XX%, as of each when think we We've start on soon those revenue course, of we'll the today. do product exceeding to that combined of those products, expect any basis, as of terms I always any individual I XX%

likely likely see in FYXX, and to coming that's start of -- you'll least but think FYXX, some probably not I those happen own FYXX, product lines to their in of at producing revenue. into XX%

Operator

Stotler William And with our will Matt come question next from Blair.

Matt Stotler

of good guess, to some on there. that for. seeing you're kind forward as see for center here, your pieces? love are specific seeing And overall nice functionality demand think from update, critical customers kind on for early that an coming of in. then wins Maybe road well. that Obviously, me. Would going contact to thoughts broadly Solvvy you you're But I that to as the we'd just love roll the cases Obviously, product, more most on map hear get get out that adoption, on the use about what one side, to

Eric Yuan

that's a Matt, Yes. good question.

of because already Zoom already they routing Phone of features paid center deployed we center to and contact engine a their in -- they to trust and not as customers, for capabilities case is center. Zoom also Zoom because features UCaaS workforce And deploying very, excited First on have Meetings keep all, deploy we to AI features like or contact either They of like CSAT, prefer already even bigger composition going are Zoom Solvvy acquired right? already services. several recently this to very like -- And opportunity are customers, much well IT already the use built Zoom a or capabilities. Phone. deployed And model, right, those built Q&A proven features, we scalable going We call for contact those lot focus in. also, add management, center Broadly the some us. enterprise more like adding contact all a speaking, only and features try noncore more one core just very to

are The wise team price. is going I loving become very, service working hard We contact say, to center and would meaningful, excited. a very We're very excited. extremely very, very

Operator

Michael question of with next will America. come our Bank And from Funk

Michael Funk

whether about similar is Phone should the thinking add center, -- then, cycle, your of or you the more you changing customers? thinking, that sales that strategy in sales solution? you. how a it's capabilities, that way with the we way Thank about lengthening along affecting potentially as think how contact a added So, And line interact that complex also Zoom

Eric Yuan

in. feel Kelly, chime free to Yes.

I Phone, think consistent first cost of our all, trusts They Meetings, and the front-end deploy architecture, because are product always seamless road and Zoom want on ask the the I right? do more complex value Zoom very is and think map. that deploy Rooms. us to offer not them, Based about also Chat back-end Zoom to model, experience established. of Customers Zoom

pretty for offer Now Not product well. and brand, think customers, all more is I the use introduce innovations check They feedback see the to value. no-brainer the given starting support your a to adoption. the capabilities cases, established straightforward trust to when this the very the a the process. contact because also It good. the That's Look is to complex new working from your a contact that more I Whiteboard, as center right? do more received mention and new process services, your customers. more other early customers, us reason again, is trust features will other trust -- is because customers. trust from contact test new it for want they meet do and of departments, like revenue already any not like because Zoom I with Zoom a think They when we pretty we lot center department, sales opposite. at Even Zoom. IQ in Sales I those right, center is Yes, value sales It's sales happy add the announced that we'd demand,

Kelly Steckelberg

account If the it's experts sorry. that -- strategy working I a very, expand. that is Zoom continue and working we well. for in -- team have And And the and from very very sales overlay I teams, land would and beginning. tried just come these very and true land add our in with to expand do

since build So, is I our relationship been day adding with It isn't continuing completely with one. which complexity. just to It's agree what customers, our Eric. we've doing

Operator

Rangan Sachs the Goldman Kash question. next with has

Kash Rangan

your CRM deeply a conversational integrate product and the But than one it customer the industry? is space, level, was about through getting level Zoom's I you the meeting different AI launch map? way the in give what Eric, the Salesforce.com intrigued conversational does acquisition, video at the you so Can the of to so intelligence be Zoom How little It like embedded more competitors just market, not of you're on sense the relative tell feels in very forth. and bit product competitive would a And albeit. in platform. you platform? us to engagement, differentiation with us entering by Can which much. the as into so a you're Thank that? road

Eric Yuan

Great question. Yes.

market something of regressions, to no right, have -- that's AI. AI That's at [ph] key add is a look is you but lot did right, offering, of the from to [indiscernible]. I are nothing if contact of of from have to just the product deploy we that, one. we market, there of that's Two center, look like first any have no-brainer. huge right? before to it’s at customer add, customers by cases, years, all, next make right? the need a the lot sure And A new. feature customer solutions. on-prem what contact one. that a center Also, cloud right? still the features, That they migrated that. So, going is With similar we think aside In we to a a to similar cloud. today, to to more the cases, a to are several migrated use have to on-prem they Phone, a It's differentiation, enterprise way, lot It's aside, you the

have and That better lot other down AI doubling contact depreciation They a solution capabilities at how would move AI got providers. a not the do -- are center this Now is one new, to I You've key right? is say, capabilities. we before, something faster much of on that.

case differentiation, In how I would say of interaction the IT, terms how and for the to is how with on the right, between video, analyze recently use customers improve overall further video key speech key the a transcription, video like employees support Sales. right, IQ to is like very turn to conversation the That Zoom the to and a text important for us. or

integration ServiceNow, with Zendesk terms a of think is or I others, just [indiscernible] In feature. this with or

have We contact do not solutions, again, do the architecture, So, going very we Given for over center has huge excited. why to years also like a the are have solution, right? That's that's Phone, that, they -- I customers think because I'm because ahead old it we to new all seven similar. differentiation us very opportunity key the the not a innovate, of modern a think progress hard solution, right? something like Zoom made past we every

Operator

And to with moving Siti on Mizuho. Panigrahi

Siti Panigrahi

you ask guidance. 'XX wanted fiscal I your to about

us which headwinds. talked side, mostly to And little online Maybe from a also on color the FX the war You impact on Ukraine you headwinds? segment. the more about could FX give some impact going EMEA

of terms versus Enterprise? we the online should what growth segment on churn or in -- rate expect how So,

Kelly Steckelberg

Yes.

at seen that's strengthening combination well a trends the is euro, factors impact the about of for we've on we as -- it having for dollar yen. the of pound the -- largely -- So, we is segment. into the two an where is as the the terms of those in QX that war look when online war that of course, And the the as the impact combination built guidance on war, X% in of impact, our And and is both, revenue. impact FX, the the seeing the in largely the we're expectation the of largely

the really in the both, course, We haven't across segments. the is of FX, seen Enterprise. impact extending of The

Operator

Ryan will with question from MacWilliams come our And Barclays. next

Ryan MacWilliams

standpoint? online some Kelly, Another what in your one fluctuations strength think we business, about here, maybe on Zoom a guidance. some from next revenue Just see should just in can how your given second guide segment quarter wondering we quarter? Thanks. reaching

Kelly Steckelberg

Yes.

could XX% meant remember quarter, talked if about So, would the we the you talked little year a zero, would other in on that enterprise that growing be And we've plus depending then that flattish. quarter. little and QX. could low about bit be And it it in that be for a thing is be inflection flattish, zero, last bit said the we coming above online that point

So, that the given enterprise, to see that's the for strength online stabilization driven we that from. really to going QX quarter where we where growth that's going that QX another is then the year, be expect will the the volatile to the of we continue also to segment, you by should the start be And all for online the see time talked factors business. get to really just back and about, but we're of half in

Operator

moving RBC. with Jaluria I'm Rishi on to

Rishi Jaluria

board. generally up? hold NRR how Have into for have Has color. sense that that drill I for seen wanted NRR Thank the the gone down? us a And to for you the customers. maybe your XXX,XXX seen trending? customers But can maybe Appreciate across largest patterns we're usage us all just the give you. you that you understand help seeing

Kelly Steckelberg

Rishi. So, thank you,

to we should the customers. out sorry, This starting I segment, shifted metric for to As -- is of last a net split our Enterprise new say. quarter, enterprise expansion reminder, as we're dollar

and we the and Enterprise managing going to business appropriate split as out So business really the we're online, it how the starting we're internally. between think most way that's as to forward at look

came it XXX% So what above, disclosed we did really were in is that line which with metric or -- had expecting. historically, to down XXX%, we right

is As to about that's of it's segment and you just that And in as net dollar growth expect. tracking would you rate as what indicated, which be be should why the the to right Enterprise the expansion it we tracking overall should growing deceleration, the we at expect Company, plus, well. coming the be XX% and XXX%, think if we've will,

Rishi Jaluria

follow number your because specifically level Without how of level, Yes. it of at more But customers we I'm a how the time, customers. on largest X-figure XXX,XXX churn cohort is and medium your up. now? sorry, to over If on the to think just would sure in putting trending it, trended that NRR kind right, there's were quickly has versus you for say going that

Kelly Steckelberg

higher than It's the Yes. XXX%.

I say. that's So, what would

base. As segment that as strength bookings in new of see we well as both, customer continue to in the our really renewals

Operator

Citi's Tyler next Radke has the question.

Tyler Radke

here. A question on equation the the of cost side

XXX the by business something margins, or So, basis you come expecting sounds just it's think, more Yet you're it XXX, decently a you if on them your Can if specific points look at in operating then gross as strong quarter. down again, this talk about between this to I like margins. XX. outperformed, finding it like still and XX you're hiring seems And efficiencies there's I quarter. quarter

were You quarter. this above that

new So, deployed or of impact call just terms trajectory? that of that anything center capacity kind in stuff being would

Kelly Steckelberg

year. expecting in you them, gross even quarter. And about though the for than QX, remember, expected the don't outlook the way about the for of we we So if the be explicitly mid-XXs was balance were guide in the that in to stronger talked actually, and margins them talked to we margins, we gross

So strength terms actually, of as strides that of the really into rest is the XX made that coming DevOps into usage getting And do quarter. have the to our helping the thanks really and hiring, were our attract colos, excited a important than XX improvement our higher is is commitment And of continuing which going optimizing to said, we forward. to invest as the the that and about, really we in to for which R&D, talent, cloud improvement long-term operating in see continue continuing great year for anticipating innovation we're and team, you margins drive in lot the platform. to really we in to

Operator

come next our from with Power Baird. William And question will

William Power

of Any bit guidance, understand I the the the is your that, guess, have QX. fiscal are the year color yet revenue drivers been, trying half than came in as of as I I around second year? might full just key the key confidence revenue for the reaccelerating in to a Street at guess, look just that? takes Kelly, fiscal still as pretty you, And we and puts just the to it growth the and QX drivers you part to So, other of consistent. stronger What think in

Kelly Steckelberg

Yes.

we it a when Rooms what we this to these rest about the online. then continue we strength, is you in and happening. continues opportunity well guidance, couple see while Contact some which QX time going at and then, to Whiteboard with And all to we've new today, QX think that's case as renewals. contributions of the into Zoom when QX, So, year. By new well from things of bookings some Center. of both, the be on introductions, and And in course, as the our We -- possible there's as year, see business, excited into drive Zoom to are That's gave as talked length their we continue and saw enterprise volatility the through that get events, growth we QX, already, we about that the of coming as expect are product of continue last came QX. that and new super think about strength

really job First especially which that of is occurring of initiatives the done has localized well around and payment and strength because internationally, board, across cohorts. aging the the packaging team as driving fact as an new our with pricing just all, see stabilization the we types, of amazing

year's back shows continued all they even hold That of to has chart, of earlier cohorts last retention cohort once that months terms get showed stabilize XX the after how Day, right, tenure, after we volatility that to go when rates. cohort we which Analyst even really -- to start to So, you on. in way and there's

not And only itself but start modeling lot business, potentially to see stabilization, so, time growth which get cohort in online in which plus and a to of by today. that you in the to we're what back which of the QX XX is percentage in tenure, of leads the and our half, we QX, drives stability

Operator

move be think having who so video on on appear with to his Stifel we'll with I he may Lane some today. And Parker not video, might difficulties

Max Osnowitz

Lane. of for about Yes. today, Max both Parker We're transit It's that. us. Sorry in Osnowitz

there made, feels video. that you're the for no it a industry that customer sorry seeing or announcements demand Is the COVID still that during everybody kind good just like noticing transition thinking that lot you're about So lagged of going any maybe you else that a But is others the industries. to transition of there's of from variety through behind and has started haven't?

Eric Yuan

more but deploying Zoom care, Look also our installed that specific consistent. also think industry, like And do Take pretty That's more the said having they solution. well, base to like them. any Zoom example, the Meetings and winning our And as solution kind the [ph] would big consolidate, at Customers pretty other Look It's team of processing installed financial chat them it's at also consistent. more and allocation us difference data to deliver I right? to promising. not that, all vertical works industries, industries. They value, a it's services. Chat service early health need I a consistent, like And across see Look extremely not only Yes. free. I contact like base Whiteboard, to to Phone, say adopters well. very and would customers make pretty right? and compared from and right? more center, right, overall, at are for it's

Operator

Matt We'll VanVliet with on BTIG. move to

Matt VanVliet

be various headcount, are of making look want go Zoom as the invest across pretty then investments the side, to about channel increase that sales to of sort of in significant specific direct kind guess, sales, that SKU And finding you over year investments this of thinking I any regions is you So, plus, much where next heavily Phone that more well? to overall in? direct how enablement channel going around alongside driving on and versus that, you're

Kelly Steckelberg

Yes.

invest happening channels. So our but and continuing you'll a greater we globally, percentage basis, sales see, of organization internationally, including in as investment are year-over-year to

on huge significant nascent, but largely in for year. that's of area agents doing depends on U.S., really is in So, looking the this a our contribution works focus channel and only which depending great regions. of each is investments of it job progress carriers, that for we've But a master the us made but team best and still internationally. not the And

Operator

And moving on to Alex Wolf Zukin Research. with

Alex Zukin

can Because in you you, either as actually for us what Enterprise looks cash X%. online just the difference maybe remind At the online the margin flow is business the declined free Kelly, margin it operating outperformed you or flow. same business? cash massively So profile on like time, between the and

to reliance how there. understand much is And so, want I just

versus You business? at gave target range. what's How cash for about. year, a business Eric, about on in about then, the more is I Company? based flow And thinking a that free just stock-based a margin comp, the plan the How full if think online the either least we Enterprise RSUs, the on of go-forward shares, of much terms think the should giving the basis repricing of how that curious you're for performance people's

Kelly Steckelberg

first? Eric, do you want to go

Eric Yuan

Yes.

You the can address first one.

Kelly Steckelberg

Okay.

sort comp greater the So balance of from of stock-based we’re impact seen from the any versus impact cash the Alex, from free and much online than Enterprise. in giving outlook change that is flow you've

deductions and not the at either itself or stock-based of what's happening on choosing comp -- point deduction are as great. exercising to their as the options seen their isn't hold fewer we've RSUs employees stock So, or volatility, this to much just not because

for difference the year. to from rest the really QX the performance given that's contributor So, that we've to significant the why of outlook the there's a

Eric Yuan

Yes.

back to Alex, second your question. So

our the number company to our employees today, probably the past Look happy, Together, joined stocks higher we is customer almost employees. them, our at happiness, think X,XXX price, make stock make who is differently When cannot we culture stock price delivering right? the we happiness too a can We much Ultimately, to at happy every sure for stock This as two high. still is over sure the quarter, one was we they the a employees. is Certainly, week, to the what? any make employees. and we priority, My things right? control the sure so one hired had every two happy. X,XXX Zoom but time, all over priority are new employees do for issue all look years. how happy. make can control than is it effort. the many always. price deliver Guess Particularly, right? we did to And every bit over today, number little always those employees I employees those past joined our Zoom, That's price ongoing years, there we

Alex Zukin

the question. there to in the of other? the margin is maybe just profitable of businesses, one terms ask them -- differential Kelly, the in of more of just is the terms I than And profile Good. inherently meant two

Kelly Steckelberg

largely Yes. The from contributes untouched by as well our said because before, operating sales cash online we've more business, flow an organization. as substantially margin as they perspective are

versus commissions. may credit it, going associated card expense difference a So, between biggest few with they but don't the the that's have those to see That's commissions points have perspective. from two. associated you’re the a They fees

Operator

moving Deutsche And to Niknam Bank. Matthew on with

Matthew Niknam

back geography by Thanks. concerns? macro so, it paring growing any customers either have I'm And or of you wondering, varied or of if customer light seen moderation size? investment in from some has

Kelly Steckelberg

and products. enterprise, have customers we I additional as in additional especially have new strength really see renewals in we expansion as mean, well into to it, continued

in that seen terms concern. haven't really we So, of

it's what we've great they're hiring on be course, on travel. is I other really if that And, from people alternative potentially think more they're if a heard -- limiting around or internal they're might Zoom focused travel. spending, focusing focused limiting of

And that really seen haven't so, today. impact we

Operator

Fish has James Sandler with the Piper question. next

James Fish

the it sales durations, like of bit. you guys X those anticipated team you grew product wouldn't grow to it durations helped deferred margins extend revenue seem about faster why did Deferred kind revenue multiyear little grow or a like the X, RPO picking long-term faster see Are more operating up, latter that Phone and quarter, points than and extended upfront factor versus or we're Center of incentivizing if more the I RPO, customers free a margins? deferred is cash we but than the mix get and guess, the which flow current you this seeing revenue it's as Contact

Kelly Steckelberg

as James. changed, place has terms for not And reps time. We have been and around more customers incentives of more agreements, move customers compensation more we this coming of are over discounts to go of we do past as sort and longer-term revenue our -- think from I we've COVID people that or buying in for either has back or more multiyear the -- the and So, but seeing we Enterprise, cycles, in we're agreements. consistent contribution buying seen structure

terms has have also rather customers well. of a opportunities buy seen And a that We initiatives of done team as in than to the really even monthly. online of lot job for annual great incenting

So, monthly. pay multiyear only year. like three-year terms reason it's three-year the upfront. pay but one They pay to longer term. because they not pay a overall all shift an uncommon but deal have Less only could but have But increase noncurrent are to in deal could in often, but of both they'll not have a a of an RPO deal a advance. year necessarily deferred three-year you segments is The see kind business seeing those we across always of don't

James Fish

Okay.

three annually. booking years So billing Makes sense.

Kelly Steckelberg

Happy birthday Yes. week. next

James Fish

You, too.

Operator

Ittai has the Kidron Oppenheimer next question. with

Ittai Kidron

you. of ones Hey, guys. a for couple quarter. quick Kelly, Nice

X to million get X is right, But milestone. to my X kind million you X of million. X from to million. subscriber it's get took math to it great Phone On million months to It if the additions, X from you took the X see

it's how maybe So, deceleration on that about here? in discounting has in to about my contracts. math And of talk signing Phone I duration, duration Enterprise think longer-term contracts how is the customers longer are a great seeing of that then, comes are the changed duration the contracts, market? Could the or quarter-over-quarter? And additions you that wrong pace do the see we

Kelly Steckelberg

Phone, quarter. quarter, said the million achieved the of we not end actually at X all, of Zoom the So, around during first we

So, the we end at X million, sitting we're of and quarter. are above the

given. based the So, actually do on we've think don't you information I -- exact calc the can't

And there's employees longer on contracts, I with to longer-term and especially assume going support just thinking really sense is this pandemic it in move they're they're to how for -- they're platform, that efficiency multiproduct I they in a committing as the term, a get, the discussing the deceleration as makes of And that a think their seeing people of our in work, past hybrid that committing wouldn't customers terms James, in bit it so, what was about they it's bringing rate. I then, little and and they're to post-pandemic, them. flexible,

Our around changed. has structure that not

and multiproduct, So, the that multiyear, customers we It's we discounts see do, longer pay Zoom for value deal, as as of committing always upfront, but term. to have, to that willingness size offer changed. continue hasn't of for just to a

Eric Yuan

Yes. look number hand, seats Ittai, just of the the to a got we've at on that quickly main previously sold.

service, also On to not right? the kind platform hand, workforce of quality other deliver happy. forget the do We a of make

target you some say other providers. Let's cloud-based service

to the on-prem, only and You some also proves talk That's cloud-based, but customers, Zoom Phone is customer to customer deliver a experience, make on-prem our their those platform further better service microphone cloud-based momentum, cloud, services other customers we well. feel you and other happy. so. It all customer talk with from migrate as happy. Enterprise right, know, for a some as And we not our make customers. the a also the

Operator

to on question. will move Securities with FBN the Seyrafi next Shebly

Shebly Seyrafi

guidance in negative revenue -- XX% to X% your slightly QX. deferred growth revenue be looks guidance, billings you're your with with it getting to like for your on So, a of in QX, basis like

deferred to terms easy half back of you growth back that the that's related with deferred? low the think half, first accelerate that, question year? then the this billings meaningfully you in growth So, think my for revenue is, can the do compares watermark do secondly, in And especially the in

Kelly Steckelberg

Yes.

and front-end early it's This had point back remember still we large way the goes that QX inflow QX renewals pandemic for that of are in high the that to is through declines when that the and bookings year. So, our renewals all loaded. the that in

not reveal renewals, rate are lesser getting being then in inflow And necessarily throughout our And deferred, the that this but but period, their to they largely trend not year. QX revenue each amortized X, so, to then have on the X based and large is as follow deferred year. what's similar amortized the at same over you collections that, the because it's of our

I why and I seasonality watermark, the as of -- you it and the in of over some that a bookings necessarily time terms new ago that low time that's moving we be we given lower saw described. through our going more cycle change that few even bookings continuing it's -- So half in could going still renewal of have of to then, mean as to more the but QX. QX QX just back trend, is won't a that normalized large we in just that to of year, And start amount to we're years being take

Shebly Seyrafi

a or that's statement And revenue... billing

Kelly Steckelberg

sorry, yes, billings. Billings. I'm

Shebly Seyrafi

In QX.

Kelly Steckelberg

Yes.

Operator

JMP Securities. with your ahead question. Walravens Patrick with Please go

Patrick Walravens

Hi. [Indiscernible] on Pat. for

Kelly Steckelberg

changed. [Indiscernible] Patrick, how you've

Unidentified Analyst

and you've freezes tech hiring what hiring can an you and the about we're seeing you're front seeing changes hiring layoffs, had? the sector, update throughout slowdowns on give your any hiring Given approach,

Kelly Steckelberg

Yes.

We had are we a -- very quarter in strong hiring QX.

attract we our still We mentioned remarks, great in continue continuing as we to talent. invest innovation. are to And prepared in

then basis and R&D a hiring basis. as and build continuing to focus we on sales our expand product global focused marketing on to on on continue continue capacity products very and marketing in we also to platform new hire produce on So, global our very also sales to as committed in and a

need well at we focused as invest and the we G&A as always to are around levels continuing while business. are the continue as being there So, to the of can expansion that we we to support efficient on COGS,

Eric Yuan

resignation, we're very about positioned, more the accounting base, we're flexible, double at flow, much more it's and greater in not excited in look think I why revenue why executive, right? of positive sort on R&D, cash you yes, better if the that's downturn. And more terms services future, plus this extremely new down of right? efficient. right, the So, product innovative Patrick, a quickly, given Just economic and

Operator

And the next with question comes from Needham. Ryan Koontz

Ryan Koontz

ask Solvvy your I standalone previous strategy you more. you to contact little with being Was about Solvvy -- to going be worked where envision center into contact do use can Solvvy a Zoom that augment centers, do you the offer? existing or a it roll And a you that Eric, holistic deal? of how platform other is play and kind where wanted envision little, to partner a existing the to

Eric Yuan

Yes.

First about great acquisition. is Solvvy laser-focused technology. of are This excited a team, AI the with all, and conversational on very talent we

offering. embed to going That's are number we sure. contact our overall into that all, of First one center for

from if of at that and that the a got Zoom, service, service few we keep as But full-blown also this and great overall, right? center sell many making needed discuss picture, few be that. And about going the adopting on of terms Customer, need we've weeks, And product in to part In stand-alone already next are bigger stand-alone we and customers the excited very told product us to contact look months, the product, will that keep Solvvy a they to a acquisition. that. experience right?

Operator

You will Michael from Fargo. Wells now hear Turrin with

Michael Turrin

help of changes seeing from outlook model, closer through EMEA Thank through if just you the how year much you're terms that -- can you fiscal impacts outlook get assumptions frame there anything of the and fiscal that for add drivers on of the in in other comes a the that if through the seeing XQ QX, can you or modest beyond of there headwinds online growth of and for could profile compares, add pieces to QX. to mindful that there think be the when that's you. of flattish of? the the of year Thinking rolling just you're we seasonal around Kelly, some and coming what outlook the be how the change targets mentioned us? you versus is a And in the of and calls the reacceleration anything exit incremental growth Enterprise much us in just off as to

Kelly Steckelberg

Sure.

coming So the both, acceleration is QX online in from and Enterprise.

and of packaging So, online currencies the terms great the well payment initiatives and on just the working they're due of local cohorts. and to aging as payment that is in types as pricing

we're more get by And XX-month XXish we're we time QX, going percent just they past lot seeing that is that to cohorts to that have have our aged get they what age stable of as online if the to term, So, will. level. you a

stability being the segment return only a but it brings lot stable, to really also of to that online So growing. to and not

things talked our from Eric we about, exciting. to growth amazing And products then, And due AEs, really that well get and will, to expect grow legs, really new the to will to if Center, as contribution invest start continuing are find half Events, those. just as including you to Whiteboard, so, that's those in the see that we all to and just international contribute we'll continuing of more -- contribution EMEA. expanded sea the Enterprise, year, more Contact these and capacities in investing their continue expand channel sales from all to back And of then

EMEA. think, So the what's right state incremental I is now EMEA, of difficult that to really, predict happening given in

well guidance about war approximately revenue as outlook As of we've and in given. I is X% impact as and counted our the that current talked from FX the

So, think I mode if upside, that, but there in all things sooner be we're a improve were than in wait-and-see dramatically to there. any way could

Operator

Evercore. Levine to with on Peter Moving

Peter Levine

Contact to it'd -- maybe there like think have and expand across question buyers follow I right, a So board go get up of number core the market meetings, share. land you have seem that to prior are with a you the on -- Center, to Phone, after, different the

return? selling about how like, [Technical and if center, taking you one, and longer contact So Difficulty] the [Technical should assuming I'm that you you're how you're platform your leverage the kind on Difficulty] Difficulty]? really Like leverage [Technical marketing now Enterprise cycles, sales go-to-market and have we do approvals, for Difficulty] synchronize for seeing package [Technical asking, think is of side, sales but

Kelly Steckelberg

to that? want about you Do do talk Eric, me to? you want

Eric Yuan

absolutely. Sure,

past so So, and to right, word, before, given with people years, happy think a well, truly to stay happy right? to it very what customers connected. extremely the we so the two we that similar customer, have -- many over strategy, did trust talk worked And build about we have I to go-to-market

give is upsell to as well, and because Zoom standardize solution -- way, for us. easier built By CIO, the any fund the everything service, Whiteboard. an Because And not why also stack. need employee very Meetings, services, other like Very to looking solutions, For solution [ph] very that, should they and the to is is Zoom a right? And just are customer, opportunity already decision, respectable they full That experience, And usage optimistic has that we Reason Phone, different there, as Customers And already this why right, several right, of said services, our why Zoom always well. talk look right? the trust. our Contact forget very buyer That's trust I happy that's the at the right? for happy, Having do strategy. just we Centers, we've make right? be any the workforce they launched made can test about [ph] to also, new right? brand the efficient relatively to are paid the is really That's for the architecture we by that, about service, very why to We trust have are we're huge, backend only ourselves. you try after if have opportunity even have right? really that, the and new customers hey, consistent -- way, have our not Chat key. might customers that some truly right? think already work, upsell, the overall, if customers awesome to sales we reason Sales, customers. IQ everything, period, and we for the the the go-to-market position doing by stable trust

promote right? looks How enterprise the make also -- on and like -- some and to became so focus, stay right? we Not for and as right? of word, marketing, money to right, more not as the market brand, sure of Zoom now. it sure, on really need marketing. close the terms the focus, that's to our vertical our not folks do prospect with the the a previously, focused possible brand, customers, That's in-person like spend much Zoom market, In already we events

Operator

Matthew for question, from come which we have additional Harrigan one will And with time Benchmark.

Matthew Harrigan

Enterprise for talk specific really period you you of TAM private the offer limitations opportunity the of Can security XG about the advent as to the on alternatives over especially helped as a how Wi-Fi networks, side, that the relative of time, far the that? and both

Eric Yuan

first time. Matthew, waiting thank for long of for all, you such a

we are look but I long think XG, improve connection and as network, the experience, we very And Difficulty] at Wi-Fi [Technical Overall, country stable, between especially it. of collaboration deployed XG think happy, making connectivity, our perspective, from right? why look network or more customers' kind at XG. for or also corporate actually, XG. XG even have any optimization as And if and or related help technology help XG. we technology, also infrastructure And improve our from cannot That's can every with great, XG. needed. anything a in right, we stable not already I is XG LAN are all customer optimize

we application, we happiness advanced infrastructure truly deliver an build sure leverage that those customers. our just think to make to I

Operator

does And Q&A conclude today. for session this again, our

you to or additional back things comments. turn I'll Eric, closing any for So,

Eric Yuan

for every Well, thank work. all. you Again, customer, every thank appreciate. for partner, you Zoom's Thank hard you investors. Really

we -- Thank you. very it. Thank very, appreciate are again. you truly We

Kelly Steckelberg

you. Thank everybody. Bye,

Operator

And see thank much for again your next rest of day, Enjoy we'll so We release. you all earnings you everyone and the quarter. your does today's conclude that participation.

Zoom Video Communications (ZM) 24 May 222023 Q1 Earnings call transcript