Zoom Video Communications, Inc. (NASDAQ:ZM) Citi's 2023 Global Technology Conference Call September 6, 2023 4:00 PM ET Company Participants Tom McCallum - Head of IR Conference Call Participants Tyler Radke - Citigroup Inc. Tyler Radke Good afternoon, everybody. My name is Tyler Radke. I Co-Head the Software Sector here at Citi. Welcome to day 1 of our Tech Conference. We have Tom McCallum from Zoom here and excited to have a great conversation. So Tom, I think it would be great -- actually, just with the ...

Zoom Video Communications, Inc. (NASDAQ:ZM) Goldman Sachs 2023 Communacopia & Technology Conference September 5, 2023 1:50 PM ET Company Participants Eric Yuan - Founder & CEO Conference Call Participants Kasthuri Rangan - Goldman Sachs Kasthuri Rangan Eric's contribution to the world cannot possibly be exaggerated. We all know what you've created. I mean truly changed our lives. So thank you for this breakthrough. I mean, we don't see things like this happen in our life that often, so what a revolution. So ...

Zoom Video Communications, Inc. (NASDAQ:ZM) Deutsche Bank 2023 Technology Conference August 31, 2023 3:30 PM ET Company Participants Kelly Steckelberg - Chief Financial Officer Conference Call Participants Matt Niknam - Deutsche Bank Matt Niknam All right. If everybody can please go ahead and take their seats. We'll go ahead and get started with our next session. For those of you who don't know me, I'm Matt Niknam, the UCaaS, CCaaS networking analyst here at Deutsche Bank. We are very pleased to have Zoom's ...

OR Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________________________________________ FORM 10-Q ___________________________________________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 2023 Commission File Number 001-38865 (Exact name of registrant as specified in its Charter) _______________________________________ ...

Zoom Video Communications, Inc. (NASDAQ:ZM) Q2 2024 Earnings Conference Call August 21, 2023 5:00 PM ET Company Participants Tom McCallum - Head of IR Eric Yuan - Founder & CEO Kelly Steckelberg - CFO Conference Call Participants Mark Murphy - JPMorgan Meta Marshall - Morgan Stanley Kasthuri Rangan - Goldman Sachs Michael Funk - Bank of America James Fish - Piper Sandler Matthew VanVliet - BTIG Ryan Koontz - Needham Sitikantha Panigrahi - Mizuho Rishi Jaluria - RBC Capital Markets Alex Zukin - Wolfe Resear ...

| --- | --- | |------------------|-------| | | | | | | | Zoom Video | | | Communications | | | Q2 FY24 Earnings | | | August 21, 2023 | | | | | Use of non-GAAP financial measures → In addition to the financials presented in accordance with U.S. generally accepted accounting principles ("GAAP"), this presentation includes the following non-GAAP metrics: Revenue in Constant Currency, non-GAAP gross profit, non-GAAP gross margin, non-GAAP R&D expense, non-GAAP S&M expense, non-GAAP G&A expense, non-GAAP operat ...

Zoom Video Communications, Inc. (NASDAQ:ZM) Bank of America 2023 Global Technology Conference June 7, 2023 4:20 PM ET Company Participants Sanjay Rao - Head of Corporate Development, M&A Strategy and Zoom Ventures Charles Eveslage - Manager Investor Relations Conference Call Participants Michael Funk - Bank of America Michael Funk Okay. We'll get started here in a minute. Once again, Michael Funk, SMidCap software analyst, Bank of America. Really happy to have Zoom here with us again this year. New speake ...

Revenue Performance - Revenue for the three months ended April 30, 2023, was $1,105.4 million, representing a period-over-period growth of 2.9% compared to $1,073.8 million in the same period of 2022[99]. - Revenue for the three months ended April 30, 2023, was $1,105.4 million, representing a 2.9% increase from $1,073.8 million in the same period of 2022, driven by a 13% increase in subscription revenue from Enterprise customers[131]. - Revenue from Enterprise customers represented 57.2% of total revenue for the three months ended April 30, 2023, compared to 52.2% for the same period in 2022[106]. - Revenue from Online customers represented 42.8% of total revenue for the three months ended April 30, 2023, down from 47.8% for the same period in 2022[107]. - Revenue from the rest of the world (APAC and EMEA) represented 29% of total revenue for the three months ended April 30, 2023, down from 32% for the same period in 2022 due to macroeconomic conditions[113]. Profitability - Net income for the three months ended April 30, 2023, was $15.4 million, down from $113.7 million for the same period in 2022[99]. - Gross profit for the three months ended April 30, 2023, was $841.4 million, up 3.6% from $812.0 million in the same period of 2022, with a gross margin of 76.1% compared to 75.6%[130][133]. - Free Cash Flow (FCF) for the three months ended April 30, 2023, was $396.7 million, a decrease of 20.9% from $501.1 million in the same period of 2022[120]. - Other income for the three months ended April 30, 2023, was $31.2 million, a substantial increase of 546.6% from a loss of $7.0 million in the same period of 2022[139]. - Gains on strategic investments for the three months ended April 30, 2023, were $2.3 million, a significant recovery from losses of $36.4 million in the same period of 2022[138]. Customer Metrics - The trailing 12-month net dollar expansion rate for Enterprise customers was 112% as of April 30, 2023, down from 123% for the same period in 2022[106]. - As of April 30, 2023, the company had approximately 215,900 Enterprise customers, an increase from 198,900 as of April 30, 2022[116]. - Customers contributing more than $100,000 of trailing 12 months revenue represented 29% of total revenue for the three months ended April 30, 2023, up from 24% for the same period in 2022[117]. - The online average monthly churn for Online customers was 3.1% for the three months ended April 30, 2023, compared to 3.6% for the same period in 2022[108]. Expenses - Research and development expenses increased by 45.0% to $209.3 million for the three months ended April 30, 2023, compared to $144.3 million in the same period of 2022[134]. - Sales and marketing expenses rose by 16.5% to $422.5 million for the three months ended April 30, 2023, compared to $362.8 million in the same period of 2022[135]. - General and administrative expenses increased by 69.6% to $199.9 million for the three months ended April 30, 2023, compared to $117.8 million in the same period of 2022[137]. Cash Flow and Financial Position - Net cash provided by operating activities was $418.5 million for the three months ended April 30, 2023, a decrease of 20.5% compared to $526.2 million for the same period in 2022[147]. - Net cash used in investing activities was $480.8 million for the three months ended April 30, 2023, primarily due to net purchases of marketable securities of $208.5 million and cash paid for acquisitions of $199.4 million[148]. - Net cash provided by financing activities was $7.0 million for the three months ended April 30, 2023, compared to a net cash used of $133.2 million in the same period of 2022[150]. - Cash and cash equivalents totaled $1,029.5 million, with marketable securities amounting to $4,566.8 million as of April 30, 2023[155]. - As of April 30, 2023, the company had cash, cash equivalents, and marketable securities totaling $5.6 billion, available for working capital and growth investments[141]. Future Outlook - Future capital requirements will depend on factors such as revenue growth rate, subscription renewal activity, and expenses related to international expansion[145]. - The company may seek additional equity or debt financing in the future if necessary[145]. - There have been no material changes to cash requirements from known contractual obligations compared to previous disclosures[144]. - The company has not entered into derivative or hedging transactions for foreign currency exposure but may consider it in the future if exposure increases[154].

Financial Data and Key Metrics - Q1 total revenue was $1.105 billion, up 3% YoY and 5% in constant currency, exceeding guidance by $20 million [96] - Enterprise business grew 13% YoY, representing 57% of total revenue, up from 52% a year ago [96] - Number of Enterprise customers grew 9% YoY to approximately 215,900 [97] - Trailing 12-month net dollar expansion rate for Enterprise customers was 112% [97] - Non-GAAP gross margin was 80.5%, exceeding the long-term target [119] - Operating cash flow was $418 million, and free cash flow was $397 million [124] Business Line Data and Key Metrics - Zoom Phone surpassed 10% of revenue in Q1 [119] - Online revenue stabilized, with average monthly churn decreasing to 3.1% from 3.6% YoY [120] - Contact Center and Zoom Virtual Agent are key focus areas, with investments in go-to-market strategies [19][185] - Workvivo acquisition is expected to enhance employee communication and engagement, with minimal immediate financial impact [200] Market Data and Key Metrics - Americas revenue grew 8% YoY, while EMEA and APAC declined by 8% and 5%, respectively, due to headcount reductions and currency impacts [121] - Enterprise customers contributing over $100,000 in trailing 12-month revenue grew 23% YoY, representing 29% of total revenue [97] Company Strategy and Industry Competition - AI is a key focus, with investments in generative AI to enhance productivity across the platform [115][116] - Federated approach to AI, leveraging partnerships with Anthropic and OpenAI, aims to deliver customized solutions [115][148] - Hybrid work remains a significant opportunity, with Zoom positioned to support evolving workstyles [164][184] - Price increases and buy flow optimizations have positively impacted Online revenue stabilization [120][188] Management Commentary on Operating Environment and Future Outlook - Management expects Online revenue to stabilize at approximately $480 million in Q2 and remain flat for the rest of FY24 [125] - FY24 revenue guidance is updated to $4.465 billion to $4.485 billion, representing 2% YoY growth [125] - Non-GAAP operating income is expected to be $1.63 billion to $1.65 billion, with a 37% margin [126] - Long-term focus on reaccelerating growth, particularly in Enterprise and Online segments, with investments in innovation and go-to-market strategies [56][204] Other Important Information - Legal settlement expected in Q2 or Q3, impacting cash flow outlook for FY24 [103][68] - R&D expense grew 25% YoY to $106 million, reflecting investments in AI and product expansion [99] - Sales and marketing expense grew 4% YoY to $278 million, while G&A expense declined 10% to $84 million [100] Q&A Summary Question: Impact of Microsoft Teams debundling on Zoom's collaboration strategy - Management believes the adjustment in Enterprise growth is due to internal reorganization rather than competition, with confidence in the new sales structure [6][26] Question: Monetization of generative AI and enterprise revenue deceleration - Generative AI features like Zoom IQ for Sales are monetized through new services and paid features, with multiple opportunities for upselling [193] - Enterprise revenue deceleration is attributed to sales reorganization and macro uncertainty, with expectations of reacceleration in the back half of the year [26][204] Question: Verticalization of AI solutions - AI solutions are being tailored for specific departments (e.g., sales, HR) and vertical industries (e.g., healthcare, legal), leveraging proprietary data for differentiation [144][182] Question: Impact of hybrid work on product opportunities - Hybrid work has created new use cases for Zoom, such as supporting multiple cameras in conference rooms and enhancing employee engagement through Workvivo [164][184] Question: Contact Center adoption and go-to-market strategy - Contact Center adoption is progressing, with a focus on hiring specialists and improving go-to-market execution [19][185] Question: Online segment stabilization and price increase impact - Online segment has stabilized due to price increases and buy flow optimizations, with churn rates improving to 3.1% [120][188] Question: Workvivo acquisition and revenue opportunity - Workvivo is seen as a long-term opportunity to enhance employee communication, with potential for cross-selling into existing customer base [190][191] Question: Margin outlook and investment priorities - Management expects margins to peak in the high 30s to 40% range, with potential for margin compression as investments in growth opportunities increase [195]

Revenue Growth and Market Dynamics - The company has experienced fluctuations in revenue growth, with a stabilization over the past year, but future growth rates may decline due to factors such as increased competition and macroeconomic conditions [80]. - User growth rate may slow or decline as market penetration increases, particularly as users return to work or school post-COVID-19 pandemic [79]. - The company generates revenue primarily from subscription sales, and any decline in demand for its platform could negatively impact future growth [92]. - The company acknowledges that its historical revenue growth may not be indicative of future performance, with potential risks including reduced demand, increased competition, and economic recession [161]. - The company recognizes revenue from subscriptions over the terms of these subscriptions, making it difficult to immediately reflect increases or decreases in new sales in results of operations [143]. Competition and Market Position - The company launched Zoom Contact Center in February 2022, which may increase competition against established companies like Five9, Inc. and Genesys [86]. - The company operates in a competitive market with rapidly changing dynamics, requiring effective strategies to maintain market position [85]. - Competitive pressures may force the company to engage in price-cutting initiatives or increase marketing expenses to retain customers [87]. - The shift in customer base from businesses to a mix of businesses, enterprises, and consumers could lead to higher non-renewal rates than previously experienced [76]. - The company faces challenges in maintaining and expanding its network of resellers, which is crucial for revenue generation, especially as it expands into international markets [145]. Customer Retention and Growth Strategies - The company must continually attract new customers and retain existing ones, as any decline in renewals or upgrades would harm business performance [76]. - The company is focusing on converting free users to paid subscriptions, but many may never upgrade, impacting profitability [95]. - The company plans to expand its marketing and sales capabilities, but challenges in hiring qualified personnel could impact future revenue growth [103]. - The company anticipates increased sales to large organizations will lead to higher up-front sales costs and greater unpredictability in business operations [91]. Economic and Regulatory Risks - Economic conditions, including high inflation and recessionary environments, may reduce demand for the company's platform and impact customer spending [89]. - The company faces significant risks from service interruptions and outages, which could lead to revenue loss and customer attrition [81]. - The company is subject to compliance with international laws and regulations, which increases the cost of doing business and may lead to enforcement actions if not adhered to [140]. - The company faces intense competition for qualified personnel, particularly software developers, which may hinder its ability to attract and retain talent [132]. - The company may incur additional charges related to the Restructuring Plan, including severance payments and employee benefits [128]. Cybersecurity and Data Protection - Cyber-attacks and other malicious activities pose ongoing threats to the confidentiality and integrity of the company's sensitive data and information technology systems [110]. - The company faces significant legal risks related to compliance with various privacy and data protection laws, including the California Consumer Privacy Act (CCPA) which imposes civil penalties of up to $7,500 per violation [167]. - The company is subject to ongoing investigations by the Department of Justice and the SEC regarding its data protection practices and interactions with foreign governments, which could result in substantial fines and reputational harm [166]. - The potential for large-scale security incidents could lead to catastrophic consequences for the company and its customers [111]. - The company relies on third-party service providers, which introduces additional cybersecurity risks and vulnerabilities [113]. Financial Performance and Position - The company recorded $4,393 million in revenue for the year ended January 31, 2023 [360]. - Total current assets increased to $6,356,412 thousand as of January 31, 2023, compared to $6,183,807 thousand in 2022, reflecting a growth of approximately 2.8% [365]. - Total assets reached $8,128,065 thousand as of January 31, 2023, compared to $7,551,318 thousand in 2022, indicating an increase of approximately 7.6% [365]. - The company’s deferred revenue increased to $1,266,514 thousand as of January 31, 2023, compared to $1,141,435 thousand in 2022, reflecting a growth of approximately 11% [365]. - The company has maintained effective internal control over financial reporting as of January 31, 2023, according to independent auditors [353]. International Operations and Currency Risks - The company has significant operations outside the United States, which may subject it to increased business, regulatory, and economic risks [136]. - For the fiscal year ended January 31, 2023, 20.0% of the company's revenue was denominated in currencies other than U.S. dollars, while 10.8% of expenses were in foreign currencies, exposing the company to currency exchange rate fluctuations [146]. - The strengthening of the U.S. dollar contributed to total revenue being lower than anticipated for the year ended January 31, 2023 [147]. - The company does not currently maintain a program to hedge exposures to non-U.S. dollar currencies, increasing financial risk [147]. - Changes in export and import regulations could delay the introduction of new products in international markets, impacting growth opportunities [191]. Legal and Compliance Challenges - The company has received subpoenas from the Department of Justice regarding its interactions with foreign governments, which could result in substantial fines or reputational harm [142]. - The company faces risks related to intellectual property claims, which could result in costly litigation and impact business operations [208]. - The use of third-party open source software may expose the company to litigation risks and compliance challenges, potentially disrupting business [211]. - The company is adapting to increasing scrutiny and regulatory requirements regarding the use of artificial intelligence and machine learning in its products and services [172]. - The company may face challenges in transferring personal information across borders due to stringent data localization laws in the European Economic Area (EEA) and the UK, which could disrupt operations [171]. Strategic and Operational Challenges - The company has incurred significant costs to upgrade infrastructure and expand capacity to meet increased demand, particularly during the pandemic [88]. - The company has faced past security incidents that could harm its reputation and lead to significant fines and liabilities [109]. - The company anticipates challenges in managing growth due to significant increases in employee headcount and operational demands [126]. - The company has limited experience in acquisitions, which may disrupt business operations and dilute stockholder value if not managed effectively [159]. - The company is experiencing resistance from individuals regarding the collection and use of personal information for targeted advertising, necessitating changes in marketing strategies [175].