Q4 2021 Zoom Video Communications Inc Earnings Call
In the worst state and at the Master agent saw the lift for us.
Tennessee, when the review for modernized their phone systems.
The fixed bumps devaluation of the euro cost vendors U S C chose to deploy plenty.
21000 zoom phone safety work for tangibles that USA for their trough zoom to deliver on increasingly comprehensive and integrated set of communications services.
On auto pilot this quarter well the.
Expansion with Equinix and the work they saw the trucks are comparable enabling digital leaders for harness each part of the platform to bring it together and the interconnect the foundational infrastructure that of powers their success.
And there had been zoom on customer for several years and of using zoom meetings and zoom rooms for its global employees to communicate and collaborate.
The recently expanded their partnership by adding the zoom phone with over 10000, the states on top of of being similar to the integrated with zoom meetings and the rooms. They took the zoom phone for our global footprint of <unk>.
Ability to sort of.
Equinix data centers with the zero touch provisioning and the one of the features or other new course offerings.
Net and the also work on a the retrofits with well very happy to announce that Universal music group. The work leading music of comparable is adopting zoom foods for it.
The global workforce.
U M D was looking to replace on a consolidated of legacy on premise technologies, we flipped the flexible cloud the PBX solutions.
And the existing zoom meetings and zoom customer you empty with the drawn for the integrated nature of the zoom phone product.
Maybe you'd be using zoom in items, which we provided the global users with a one touch experience of video chat and voice.
Thank you for Mg.
The the stories on.
Not acceptance in the acquired customers.
Blue replace their legacy system because of the positive experiences with our other high quality products that are very ease of use and well integrated.
The value of our rapid of inhibition circles and ability to skill for loss and the global deployments the.
Also look of the us the partnered with them to deliver a unified communications solution that'll be the users IP and the poverty.
Thank you Echo next USA U M D and our supporting the channel partners I Love you all.
With that let me turn things over for Canada.
Thank you, Eric and Hello, everybody as Eric mentioned FY 'twenty, one was a pivotal year for us while the pandemic stress testing of our operations. It also ex alright, and our growth opportunities.
According to <unk> 'twenty 'twenty, one business that work report relies upon data from octave customers zoom.
<unk> was by far the preferred enterprise video conferencing App ranked among the most popular workplace apps overall.
And was the top app by number of customers and active unique users.
In addition analyst firm Frost <unk> Sullivan recently recognized <unk> with its 2020 company of the year Award.
On the rating zoom dedication to providing customers with innovative solutions that drive growth and deliver new capabilities.
Thank you to our amazing customers, who made these accolades possible.
Bolstering the growth of our product portfolio zoom phone, which has grown incredibly in turn to last quarter.
We believe the opportunity of had as significant as the Tampa telephony is forecasted to grow to $23 billion by 2024.
We have seen wins from legacy on Prem provider as well as other cloud PBX vendors.
Here are a few milestones to mark the anniversary.
Illustrating the ability of zoom phone to meet the needs for large scale enterprise Rollouts zoom phone finished FY 'twenty, one with 18 customers each with over 10000 paid seats.
We closed FY 'twenty, one with approximately 10700 zoom phone customers with more than 10 employees of 269% year over year.
We continue to drive broad adoption across industries, and customer sizes, where 60% within the mass market and 40% from the App market.
With our base of approximately 467000 customers with more than 10 employee and our growing channel presence zoom phone is in a strong position as customers look to modernize their phone system to an integrated communications platform.
Now getting into the results, let me start with the few of the financial highlights and then for the full year I will review our financial results for Q4, and finally, our outlook for Q1 and the full year of FY 'twenty two.
Revenue grew 326% the $2 $7 billion as we exited the fiscal year and on an annualized run annualized run rate of $3 5 billion.
We grew non-GAAP operating margin to 37, 1% up from 14, 2% in FY 'twenty.
Free cash flow grew by over 12 times to one $4 billion for the full year.
In Q4 total revenue grew 369% year over year to $882 million the.
Top line result exceeded the high end of our guidance range of $811 million due to strong sales and marketing execution in online direct and channel businesses as well as lower than expected churn.
The demand was widespread across products industry verticals geographies, new logos and customer cohorts.
The year over year growth in revenue for the quarter was mainly driven by the sharp increase in new customers. This year, which accounted for approximately 80% of the incremental revenue up from 59% in Q4 of last year.
We continue to add customers of all sizes and across industries that we anticipate will provide future upsell opportunity.
Let's take a look at the key customer metrics for the quarter.
We continue to see expansion in the up market as we ended the quarter with 1640 for customers generating more than $100000 in trailing 12 month revenue of 156% year over year and 28% quarter over quarter.
This is an increase of 355 customers sequentially the highest number of quarterly net adds for this segment.
We made great progress in the upmarket and still see a lot of opportunity ahead. For example, we grew the number of global 2000 customers generating at least of $100000 of a R. R by more than 100% this year.
But that's still accounts for only 14% of the total population.
We exited the quarter with approximately 467000 customers with more than 10 employees, adding approximately 33000 customers during the quarter and 385000 customers during the year.
In Q4 customers with more than 10 employees represented approximately 63% of revenue.
We also continued to benefit from significant growth in our segment of customers with 10 or fewer employees in Q4 customers with 10 or fewer employees represented approximately 37 per cent of revenue up from 20% in Q4 last year and down modestly from 38% in Q3.
Our net dollar expansion rate for customers with more than 10 employees exceeded 130% for the 11th consecutive quarter as existing customers acquired more of the zoom meeting licenses rooms, Webinars and zoom phone products, we value of their trust in us to build the unified.
Communications on zoom.
Both domestic and international markets had strong growth during the quarter, our Americas revenue grew over 292% year over year.
Our combined APAC and EMEA revenue grew 687% year over year to be 33% of revenue up from 20% of year ago.
In FY 'twenty, two we intend to make additional investments in international resources to further capitalize on the global opportunity.
Now turning to profitability the.
The increase in demand and strong execution drove net income profitability for both GAAP and non-GAAP perspective.
I will focus on our non-GAAP results, which exclude stock based compensation expense and associated payroll taxes charitable donation of common stock and acquisition related expenses.
Non-GAAP gross margin in the fourth quarter was 71 three per cent compared to 84, 2% in Q4 last year and 68, 2% in Q3.
The year over year declining on a gross margin is partially due to the dramatic increase in free usage related to the pandemic, including our ongoing commitments in support approximately of 125000 K 12 domain.
As well as the higher utilization of public cloud services.
The sequential improvement mainly relates to seasonal audio usage, which decreases during the holiday season.
We would expect gross margins to remain around 70% as long as we continue to support free K 12 education.
Research and development expense grew by 91% year over year to approximately $31 million.
At the percentage of total revenue R&D expense was approximately three 5%, which was lower than in Q4 of FY 'twenty, mainly due to the strong top line growth.
The only made strides in expanding our team we remain committed to prioritizing R&D hiring and continuing to grow in order to drive further innovation expansion and security on our platform.
Sales and marketing expense grew by 90% year over year to $159 million the.
This reflects an additional $75 million over last year, primarily due to investments in hiring to drive future growth.
Sales and marketing expense was approximately $18 one per cent of total revenue a decrease from Q4 of FY 'twenty, mainly due to strong top line growth.
We plan on who continue to invest in the adding sales capacity and product marketing programs over the next several quarters focus on capturing market share.
G&A expense in the quarter grew by 291% to $78 million as we continue to scale, our G&A functions and invest heavily in security and compliance head count and professional services.
G&A expense was approximately eight 8% of total revenue a decrease from Q4 of FY 'twenty.
The revenue upside in the quarter territory of the bottom line with non-GAAP operating income of $361 million exceeding our guidance.
This translates to a 49% non-GAAP operating margin for the fourth quarter of large improvement from 24% in Q4 last year and steady improvement from 37, 4% in Q3.
Non-GAAP earnings per share in Q4 with $1 22.
On approximately 301 million non-GAAP weighted average shares outstanding and adjusting for undistributed earnings.
This result is 43 cents above the high end of our guidance of $1 <unk> higher in Q4 of last year.
Turning to the balance sheet the.
Bird revenue at the end of the period was $883 million up 283% year over year from $231 million.
Also please note we have seen a shift in the mix of invoicing to approximately 50% of business being billed monthly up from approximately 40% in the previous year.
Looking at bolt, our billed and Unbilled contracts, our RPI totaled approximately $1 $8 billion up 190% year over year from $604 million.
The increase in <unk> is consistent with the strong demand and execution in the quarter.
We expect to recognize approximately 70% of $1 $2 billion of the total RPM as revenue over the next 12 months as compared to 62% or $375 million in Q4 of FY 'twenty.
We ended the quarter with approximately $4 $2 billion in cash cash equivalents and marketable securities excluding restricted cash.
This balance includes approximately $2 billion from our follow on public offering in January.
We had exceptional operating cash flow in the quarter of $399 million up from $37 million in Q4 last year free.
The cash flow was $378 million up from $27 million in Q4 last year.
The increase is primarily attributable to strong billings and collections.
Looking into FY 'twenty, two we expect to increase our capital expenditures related to the build out of our data center infrastructure to support our growth outlook and drive additional efficiencies.
Now turning to guidance.
We are pleased to announce our outlook for FY 'twenty two for both revenue and non-GAAP profitability.
Though we remain optimistic on June outlook. Please note the impact to the extent of the COVID-19 pandemic and people returning to in person contact still remains largely unknown for.
Our outlook is based on our current assessment of the business environment.
For the first quarter of FY 'twenty, two we expect revenue to be in the range of $900 million to $905 million.
We expect non-GAAP operating income to be in the range of $295 million to $300 million.
Our outlook for non-GAAP earnings per share is <unk> 95 to 97 based on approximately 307 million shares outstanding.
For Q1 and full year share count includes the additional shares issued in our follow on public offering.
For the full year of FY 'twenty, two we expect revenue to be in the range of $3 76 to $3 $78 billion, which would represent approximately 42% to 43% year over year growth.
We expect non-GAAP operating income to be in the range of $1.13 billion to $1.15 billion, which would represent approximately 14% to 16% year over year growth.
Our outlook for the non-GAAP earnings per share of $3 59 to $3 65 based on approximately 311 million shares outstanding.
Before concluding I'm happy to highlight the today, we announced the first group of grant recipients from our AD Innovation Awards program.
As part of our zoom cares philanthropic program under our ESG umbrella.
We are excited to support their work, which includes promoting diversity for the within the teaching profession entrepreneurial job training assisting aspiring used in conflict affected areas to join the digital economy economy, and providing access the science based approaches to reading education.
We are proud to sponsor of these critical in innovative education efforts around the world and support the next generation of talent.
As we look forward to FY 'twenty to do is grateful to be a driving force, enabling connection and collaboration worldwide with our high quality frictionless and secure communications platform.
Thank you for the entire zoom team, our customers our community and our investors.
If you have not yet enabled your video. Please do so now for the interactive portion of our meeting Matt. Please queue up our first question.
The first question is from Alex Kurtz with Keybanc.
Okay. Thanks for the question and I hope everyone at Zoom is doing well so could you frame how much of the zoom phone versus new customers versus the expansion opportunity is driving the fiscal of 'twenty two growth outlook and.
And as part of that what churn rates are you assuming is returned to office ramps later in the year. Thank you.
So Alex we are really excited about the opportunity of zoom phone ahead. As you you heard they performed very well this year. They were the zoom phone was the fastest growing product line quarter over quarter in Q4, and we expect to see strong growth as we look towards FY 'twenty two.
If you remember our strategy is to sell into our existing install base. So based on the customers that we have today, we see tremendous opportunity for further upsells with zoom phone and then high level in terms of the churn rates.
We have seen turn lights turn rates stabilize in the back half of FY 'twenty, one and we do though they are certainly elevated from pre pandemic period, and we have assumed that to continue as we move through FY 'twenty, two and the uncertainty around when people will be able to start to safely move around the world again.
Thank you.
Next question. Please ma'am.
Our next question is from will power with Baird.
Great. Thanks for taking the question Yeah, I wanted to touch on zoom phone.
Well terrific. The suite of the strong results of I was wondering if you could help us understand where you are in the evolution of rolling out channel partners of sounds like that was a key contributor for some of the bigger customer additions how much more is sort of to go how much more of an acceleration could we expect there and I guess the.
Tied to that you know you can look at these bigger wins. These 10000 seat paid customers, what's really helping differentiate you versus the other cloud providers out there.
Yeah, So that's where the questions for Paul if you look at it by.
Of our customers.
Average for the zoom or all of the cloud PBX solution. The first of all look at all of our existing customers. We are a bit of trough. The really enjoyed it you know all of the very high part of the product. The part of that then with Okta of Kevin is name of the pivotal human realized on the uniform offer the test that realizes this feature rich very reliable easy to use.
Use modern architecture integrated very well with all the meetings Zumiez Inc.
And all of the political that so that's the stuff from credit perspective, we have high confidence on the distribution perspective, not only delivered five of the articles from our directors, whose team and you'll see like the.
The U N C. The upon right driven by must the agent I think what we're doubling down on that of channel partners, especially the kind of history of the phone club at the pediatric growth primarily driven by the channel partners. I think of you know all of our strategy to focus on building of grid in partnership with the channel partners such as the month agent as really paid at all.
I think of welcoming dump it on all of that.
Congratulations good luck. Thank you. Thank you will.
The next question is from Matt Hedberg with RBC.
Alright, Thanks for taking my questions guys and congrats really on a stellar year.
The momentum with the GTK customers.
The $100000 in IRR was certainly impressive but it still remains vastly underpenetrated relative to your overall population.
Can you talk about incremental steps youre looking at in fiscal 'twenty two to draw drive even faster sheets UK or further GTP adoption and then maybe just as the fall for Kelly for $2 billion in cash exiting the year just thoughts on deploying that just sort of obviously there is some capex expenditures, which is broader capex our cash expenditures.
Yeah.
Yes, maybe Matt I kind of dress the first of all of the part of the question you're absolutely right is the only 14%.
For the customers for the reason why if you look at the hub of fifth Street, the weird for US the grew our revenue our user base is from a bottom up.
On why are you there for you the human Department of multiple department ended the of the CIO and.
And the working on some consumer that's why the huge opportunity. The ahead of us the bulk of last year I think the if you talk with the enterprise customers. If you didn't have a very strong brand normally of the even the normal until you know.
All of Pakistan right, because the last year I think of zoom has become a household brand I think of it have more and more opportunities in the pipeline and of the lethal.
Lisa I would call the last mile not only from bottom up but also from top down as well kind of inside of that I think of the you know the rest of the globe to give customers, especially kind of international and the.
The growth opportunity I think of the futures, but as long as we keep bolting on execution.
In terms of what we're going to do with that $4 $2 billion. So we as you said, we are certainly investing and building out more data center infrastructure and we are constantly looking for opportunities for other interesting companies potentially M&A activity that could add either to our talent.
For our technology.
It's just as I'm sure all of you know Eric has a very high bar for both and so we just haven't quite found the right match, yet, but the we keep looking Colin born in the Corp. Dev team and the team are just constantly looking and seeing what's out there that looks interesting so on.
You know, we'll see we're certainly open to it's just finding the right match for us.
Thanks for the guys by the way the math if any of you have any great otherwise.
Okay.
So a lot of all of those and why ex thank you. Thank you.
Our next question is from Sterling Auty with JP Morgan.
Yeah. Thanks, Hi, guys. So were you successful in rolling out all of the countries that you wanted to presume bone during calendar 2020, what's the plan for 2021 and can you eliminate the need for the bring your own carrier program that you launched with.
Yeah. So first of all the new kind of our international penetration of my risk for the two countries you can kind of our smartphone on the sort.
I think I look at the all.
All of whom the gross white on the 40% of form the upmarket and are 60% of them F&B market. If you will talk with you talk about of the off of market I think of more and more opportunities on the pump international a slip of the reason why we started by the leader for the North American market since the.
There's lots of the calendar year.
Started of rolling out to multiple in the national customers I think of the Internet penetration I think we'd be the catalyst for our future zoom phone bills.
Got it thank you.
Our next question is for me to Marshall with Morgan Stanley.
Great. Thanks.
Do you think about leveraging your platform does all of that and so something you talked about it in Tokyo, whereas on zoom as another kind of a natural adjacency any traction here to call out on on zoom or just how do you think about kind of finding other use cases are platforms for video usage.
Yes, yes, it kind of feel free to chime in actually in terms of solve on him relaunched on zoom or on offset of last October and the zoom our annual user conference for now the skew on the beta.
Beta stage now right, so and the based on you know the.
Our target with some of the early adopters.
So based on the progress we think is on zoom and all of them at the event of for the knowledge workers for the Molla consumer to learn the yoga class and also the another part of on Zoom is about of the overall and the brilliant customer enterprise customer on of what Youre <unk>.
No lack of this year has been the pulp yacht, we will hold of out of event completed the on keep half of it especially on zoom has two parts consumer journey on zoom to a lot of the noted workers to make a living and of course that yoga class in all of our teaching of anything on either of what's in the platform and also well be able to expand our web.
On a platform to be on.
Corporate what's sort of event platform that that the market also has huge growth opportunity.
Great. Thanks, Chris Thank you.
Our next question is from Philip Winslow with Wells Fargo.
Hey, guys. Thanks for taking my question I also just wanted to dig in on on zoom phone on one of thing.
That jumped out of me was the 18 customers with more than 10000 seats. I was wondering is there any sort of.
I guess cohorts sort of speed what are you seeing there.
Of these larger customers for me in particular, the industry as a workforce of more distributed than others.
The thing that you the comment on and sort of.
What the type of customer profile is presumed part of especially with the bigger transactions on how you're thinking about that going forward.
And I think the great news Phil is that it's actually spread across all industries. You saw those names that we've talked about right. We had a university, we add an entertainment organization.
And on a technology company and that's been I think the success of zoom problems on the very beginning is it's really appealed the well too small and large enterprises alike and across all industries and the reason that we win right is based on as Eric mentioned the trust that they already have in us as well as.
On the usability and the total cost of ownership, which which plays well across all industries I've ever Smith.
Got it and then just a follow up on the theoretically as companies are ramping up to return to office, how do you think about all of it.
And also additional penetration of zoom rooms sort of people not being there it's easy to take away my phone.
Now for you.
The conference room, it's maybe easier to upgrade to.
Zoom room, how are you thinking about sort of the first half there and particularly as people prepped for potentially return to office.
Yeah, Phil Yes first of all we all want to go back of the office by the circuit of for such a long time, so painful but actually in the event. We all go back of the office I think of another product weighted harvesting is wet expect the buyer for the gross but most important of native customer deal with the lives of the consolidated and a photo and video the things in the video and the new was why do they need to have another.
Why are the thing to deploy the hardwood victim of on why you know the essentially the zoom phone already gave you of everything I think of plus also the <unk> is very well integrated with the zoom meetings and as Jimmy rooms, but a lot of of companies are talking about of how to read into the office, especially for some of the causes of the arithmetic Ava in the.
Inhibitions like of what your reception like somewhat of that interview Plasmapheresis dose group and really help us give a customer of unified.
Our collaboration of conviction expense, that's why I got very excited.
Got it. Thank you very much appreciate it congrats on great. Thank you for <unk>.
Do you feel you have of best of what you're back on.
Yeah.
Thank you Eric of dry I'll always be branded items.
Next question is from Tyler Radke with Citi.
How are you there of that.
On the regular room behind me.
All of them again can.
Can you hear me, Okay, yes, the welcome aboard of Tyler.
Alright, Thanks, a lot of good to see everybody again.
I'm curious how you're thinking about.
Investing in compensating on the direct sales force this year, obviously, you're talking about the increased channel leverage.
Particularly with zoom phone.
And I imagine you know.
Renewals are going to be a pretty important topic as well for you and.
FY 'twenty two so maybe just help me understand how fast do you expect to grow your direct sales force and that the changing kind of of the way that you're compensating them in terms of the mix of of numerous renewals. Thank you.
So the few areas of significantly that's what we're really focused on for FY 'twenty. Two are exactly as you highlight its quota carrying reps and our sales organization and its engineers and in both areas. When we look at the FY 'twenty two plants.
We looked at in terms of what's available in terms of capacity in the organization to absorb that as well as markets that are available. So.
You can just expect continued significant growth in the Aes and the sale of organization and then in terms of compensation. We didn't have significant change of our comp plan, but you did pick on key on on one of the key points, which is renewals and retention and historically, we have not compensated for that so we did add a bonus component.
To the plan for this year to help align the reps.
Interest along with him as well.
Thanks, so much.
Yeah.
Next question is from Rishi Galeria with D. A davidson.
Hey, Eric Kelly, Tom. Thanks, So much for taking my questions great to see continued strong momentum and I'm heading into next year I wanted to ask about maybe potential areas for expansion. You've obviously had some really great success with zoom phone and I. Appreciate the disclosures here as you think about.
Becoming a broader enterprise collaboration and communication platform, whereas some other adjacencies that you think you can get into I know you've hit the disease in the past and philosophically how do you think about the build versus buy especially just given the amount of capital you have available on the balance sheet.
Yes, so Richard that's a grid of question. So when we started we were laser focused on working interest video cost impact ripen. However over the past several years looking at the day I think because of the popularity of the you know the.
Video Congress being a lot of people that you can assume the end of the pandemic crisis discussing the zoom just the video conferencing at the company that's not of the case.
The loopnet at all.
You can read the Congress is looking at a few of them looking at zoom rooms, the kind of beauty and chat and if you look at the also webinar I think of a huge opportunity almost each area of item, we should adopt the Dol also look at the brunt of new opportunities you look at the on Zoom I mentioned earlier, perhaps another thing is about zoom.
Ex U ecosystem insensitive reached the Domino to you on our web in the talk over zoom not because we have opinions communications you know the.
The study, but also more of like you and I can play games wealthy but of that entire ecosystem. That's the reason why and we talk about how to transform our business on the killer App company for.
I have on the company.
Is that in many of us and a lot of opportunity. The UC platform remodel work of platform and also the consumer presume of platform I think for sure we cannot of good areas, but we've got to be very careful right. What we should've beauty by the sale what kind of product new categories reassured of partner or maybe of course through the acquisition that's the.
Like any of the wipes, but overall I think to become part of our company.
Of greater opportunity for us when notably of video conferencing company anymore.
Great. Thank you.
Thank you.
The next question is from Zane Crane with Bernstein.
Congrats on another great quarter theme I, just wanted to dig in on the the answer I'm offering it seems like a really great way to improve the conversion rate of kind of approach tumors of knowledge workers of the lower end of the market can you give us a sense of how much that's improving the paid conversion rate for free users to paid maybe among consumers or our independent contractors for <unk>.
There's things like that as of 10% increases of double.
And then secondly on the the gross margins for zoom phone I know its still subscale, but how should we think about this the non-GAAP gross margin for that relative to video conferencing kind of in a steady state long term I know, it's a lot less computing sensitive so I'm curious about potentially of higher margins. Thank you.
Yes, I can address the first part of the killing of address the second part of your question and I of pulp of havoc with the answer for you, but the present unfortunately items because it's too early to tell on where skewing the beta or language pack a mixture of the product expense really solid before we announced the JV on all of the snow data.
You're still kind of Goldman on zoom and of a register cloth lesson learned of cooking class of learning something that you've kind of of basic of pictures already of beautiful, but again I think as in all of fully ready yet.
We will offer the very optimistic of down the road not only do we have of Nu.
The revenue stream mono weighted would have on our cost more but also look at our free with the for Peter I'll ask of the focus of the suburbs right. We have one more opportunity.
The little something a host of our on zoom you've been in a more like of Woburn right I have of private time might be come up with the driver that's our strategy, but again if the so far is 20 propel I denial of very solid answer about that yet.
Got it that's helpful and we're very optimistic so thanks, thanks for the update.
Thank you.
And the sorry did you ask about the gross margins for zoom phone or on the zoom.
Zoom phone in the separate question a little bit I'm curious I expenses less compute intensive if that could maybe have higher margins, especially since you don't have of free offering for that like the video conferencing.
Yeah.
Pre pandemic, where when we looked at the zoom phone margins were actually slightly under the gross margin for meeting due to the cost for the carriers on either and so that the goal. Though is as we continued to grow is to have leverage and be able to invest and of course to see efficiencies across the overall.
The platform that eventually those gross margins converge and that that's what we're expecting the C. Right now given the gross margin being impacted on meeting by the free usage.
For gross margin is probably actually even higher than meetings right now great very helpful. Thank you Congrats Inc. Thank.
Thank you the.
The next question is from Brad Zelnick with credit Suisse.
Great. Thank you so much of it's so nice to see everybody, Eric and Kelly and Tom.
Wonderful great Great Q4, great year, we're all grateful.
Kelly My question is for you just around the seasonality of the business last year was so unusual how are you thinking about modeling.
This year from of new business perspective.
Thinking about seasonality and I know your caveat it in your guidance relative to the uncertainty of Covid, but what's the embedded assumption, even though I totally appreciate the economies reopening it doesn't mean that people stop using zoom.
Yeah, I think first of all of you have to think about our business in terms of online and direct is there. The they both have become very significant businesses and there's a little bit of different behavior to the two of them in the direct business, we expect to move back to a more normalized seasonality. If you will as you growing through the year.
We're especially with enterprise fire to be a little more.
The backend loaded in each of the quarters as well as backend loaded in terms of the year, especially as we're continuing to add capacity in our sales organization and having those reps ramped throughout the year as well from an online perspective that is the one that I think of a little more uncertain dependent upon the timing of people potentially returning to work as well as this.
Integration with on zoom and what what we've modeled is we believed to be conservative in terms of the acceleration instrument rates. We're doing everything we can the of course to retain those consumers and help them for you the value in doing so that we don't see that as we move through the year.
Great. Thank you so much for taking the questions. Brad. Thank you very much aware of in zoom. The pop your head I should have exceeded that and price.
Proudly. Thank you. Thank you.
Next question is from Bhavan, Suri with William Blair.
Hey, everyone. Thanks, and now let me Echo my congrats really great job.
I wanted to talk a little bit about one specific competitor.
Our friends of Microsoft and I'd love to understand in a little more debt, how that's playing out not today, because obviously the results speak for themselves, but they are ostensibly giving a range for free and we know <unk> five is not free operating the <unk> costs for.
They have a lot of power in the <unk>.
The market and the enterprise and I guess, how do you feel about what theyre doing it better sense that at some point, maybe we can get back to work. It's good enough like how are you on the sales team sort of working around the issue of teams you know a standard that would give them away for free that that's kind of what im getting out on.
Specific to them given the sort of their scale on their power on their platform and the bundling et cetera. Thank you.
Yeah. So I can start of Canada for a free that's happening I think the first of all of that is the grid of Crescent. However, I'd like to take a step back I think with share of I think of their journey of Max of themselves because I think the day the mix of this break district.
Since the Saudi I took all of the CEO of dropped several years ago I think the Mexico I think of the open mandate by Saturday of its good to see you in the work our read of the my view on quite often with the integration of the asking for.
Well, the laggard to working together with the waiting for hybrid.
It's very important.
The lack of 10 years ago, if sometimes they've I think of Albert neuro for concerned a day that in order to keep on Mexico perspective, Mike I gave me the C.
And the work of seal of study a grid of credit that is.
If you look at it and the use of perspective is for.
I think of kind of the tinnitus workforce almost of all of one third of millennials.
I guess, what the where the lag for use of the best of breed of service if it's the.
The argument for something they do not likely to see no I'd like to pick because of my own credit card for the best of breed of service, we win for flow and.
And also if you look at it the uniform of CIO of IP perspective the.
The lack of the bed on.
Who vendors right, if you're talking with the one window for everything but guess what what if net outage what if in the future innovation speed of service zone. That's why part of the enterprise customer, even though I can deploy the best of breed of service like Zoom is the video and voice is much better, but that's why the co exist the strategy to wearable.
Couple of if you look at the auto import probably that's the most important and reported for any.
Professionals like you took it off the report.
Zoom, especially the number of video constant right and in the months all for the.
The provision in terms of.
Based on number of the customers zoom apps ranks number five however, that's one of the metrics very interesting you look at it all for US Microsoft all of which 355 the dip.
Appointment of the conference.
For people per cent ultra deployments to Mezz loans.
That of course, one thing customer maybe with like the fed on installations, because we can coexist very well.
Again this is market of sites much bigger than any of them can't imagine that's why I think of that of course. This is credit it looks very well and we look at everything from a customer perspective.
Alright, that's a long answer unfortunately, the answer to your question as well, but the that's based on all of our ambition.
Oh, that's of Great answer I appreciate the color on the counter thank you Rob. Thank you.
Our next question is from Richard Valera with Needham.
Thank you and let me add my congratulations to a really great.
Great year and fourth quarter.
So the question on the education vertical which has gotten a lot of sort of attention.
On your thoughts on the trajectory of that business for you you could maybe argue that there is a headwind and maybe decreased use of just folks go back to in person. The school, but you guys have I think it's 125000 K through 12 customers that are free now, but presumably at some point, we will be paying and so I just wanted to check about how youre thinking about.
That revenue trajectory and the potential to monetize them and if the July 31.
Date on your website is sort of the the date that youre going to turn off free or is that sort of just.
A place holder for now.
Yeah.
In terms of the future and the opportunity ahead for education. As you noted we have of 125000 K 12 domains that are using the product and haven't really become believers in zoom and what we expect is that as we look forward to seeing being able to return to campuses in person.
There is even a hybrid of protein education, we always joke right that soon they're going to hate us because theres no such thing as a snow day any longer.
And imagine the benefit that has the parents of also received from being able to attend PTA meetings from home to be able to do the parent teacher conferences. So there are many many use cases that extend beyond just the student Inc. In the classroom that we foresee the.
Domains wanting to continue to work with us on and in terms of the dates on the website.
As always I believe the debt deal we will do whatever the right thing is as we continue to assess how the pandemic could.
Progresses, the goal of that was really to minimize the disruption in learning and we remain committed to that.
Great. Thanks, very much Kevin.
The next question is from Ryan Macwilliams with Stephens.
Thanks for taking the question.
Could you talk about enterprise zoom meetings purchasing that you saw on the quarter like the enterprise customers increasingly can go wall to wall and consolidated pockets of zoom usage of business silos, and then separately with the improving zoom film momentum that youre seeing.
Attach rates for contact center increase on one side of the thank you.
What in terms of the.
You saw the significant growth in the customers with greater than 100 K of a trailing 12 months revenue and that I think is an indicator of all of those enterprise customers that we have seen purchase this year continuing to rollout and expand on.
In terms of wall to wall. We are we continue to see customers that are adding in terms of number of seats as well as buying broader so I think it's a combination of both.
And then in terms of contact center within zone, Eric do you want to add share for.
Yes, I think it right in.
And some of the solve a contact center.
Think of for now I think of you know our strategy to working together with the all of the contact center solutions like of farmland in the Genesis in contact of Hog index on the others I think of working very well of course customer leave talk about how do you seamlessly integrated all of us.
And you'll find that for example, and the walk through the partner and all of the law.
On the RV share the same vision, although for the import of product constraints Awesome love that I think we'll have a much better simulates the nutrition, that's the right approach, particularly data of of happiness for the mutual customers.
Our next question is from James Fish with Piper Sandler.
Hey, guys Congrats on the department of the year.
Good day.
No it was an impressive.
And our private investments this quarter with kind of understand how much of the featuring the pain.
Moving to commercial customers of.
From phone or the pro forma column within the commercial meeting of the recall base for new customer wins versus the other.
The other items.
Okay.
Yeah.
So I think it's really a combination of all of the above so we continue to see customers that bought earlier this year deploying enrolling out and adding to their services you heard some of the great wins that we talked about specifically on the call as well as continued ourselves in terms of just expansion in terms of meeting.
Continuing to make sure that their employees are being as efficient as possible. So and it's not something specifically that we breakout I can just tell you that it's the combination of all of the of that.
Understood. Thank you.
Yes.
The next question is for Matthew Van Vliet with BTG.
Yeah, Hi, Thanks for taking my question I guess wanted to dig a little deeper not just on the contact center side, but as customer experience really becomes a greater focus for larger enterprises just for.
The opportunity is to embed zoom from of partnership perspective, either in the other software platforms.
Youre kind of in company websites things of that nature to help facilitate.
A more interactive approach with customers and sort of how you can better monetize that in the long run.
Yes, Matt that's the beauty of questions that the overall of our platform play. So today. In addition to having the Api's an SDK is to give the served part of the competent of companies that are part of the computer of vertical apps like honour of education and kind of matter of the apps via our platform SDK. We also introduced the zoom apps I think.
As you know.
I think that's the future because of the reason why humans and all of the only beautiful the benefit of conditions, but also offer a people centric interface unit I kind of use of zoom and also have a window right you on Europe.
The games together you of Peru, My expense report on the integration of the service now of what David The Sioux Falls and all kinds of applications not only for opinions of acts, but also for consumer assets, well today, who kind of our marketplace. We are the how or when thousands of apps by publishing the marketplace. So we are getting the double down on our zoom.
<unk> equaled 16 necessity that the future of our platform play on the Domino, Let's say you have of loss of.
The new applications are existing the integrations.
You'll have morning, many ways to monetize down the road. The goal is for all for all of people centric zoom interface for all the applications to be integrated into Google.
Alright. Thank you. Thank you Mike.
The next question is from ask the geology with Guggenheim.
It looks like we have to have on audio only.
Hey, guys can you hear me.
Yes, Hi, Hi, Hi, Thanks for taking my question all of a question for ARINC Kelly on on Zoom phone attached Russia zoom meetings on I'd say, a customer has good zoom makes sense zoom phone I was hoping that I mean, the user who haven't zoom phone license versus zoom mixed for the limit the host net zoom meetings.
Sounds like a rule of thumb on you don't just speaking of that from a basic non comes on.
One of the original zoom using lessons since the zoom forms and I'm on.
The potentially could be going forward.
Generally what we see is that you were you pointed that not everybody needs of zoom meetings license because only the hosting of the bolt we see for most organizations is they actually by zoom meeting licenses for all of their employees as they want them to be as efficient as possible and then they buy a corresponding number.
Zoom phone as well so typically when a company is doing on our customers doing on full deployment of one to one ratio of the meetings to zoom phone.
On the cases, where it comes from us and the buying more on less.
By the different vertical of all comes from the size or is it typically does it usually 112 on.
It for it it depends on the stage of where our company is in terms of its rollout of its deployment on behalf of them start with meetings in the has been found and they may take some time to roll it out depending on if market geographic.
Geographic location. The case for example that I do remember where they were more zoom phone licenses bought them zoom meeting. It was the case at a retailer that had been meetings and zoom phone in their corporate headquarter, but for example, they wanted to deploy zoom phone into the retail locations in the malls and so there wasn't really.
The need for zoom meetings in the mall, but zoom phone was a really great fit for them. So that's really the only case of I remember specifically, where they were Morgan from my seat sold then zoom meeting licenses.
Got it very very helpful color. Thank you very much kind of it.
Thank you Deb.
The next question is from city Pentagon <unk> with Mizuho.
Hey, Thanks for taking my question I just wanted to ask on the product side last year I think more focused you had on the security.
And are you looking at this year on your product and what are you more excited about where you are more focused on.
I think the first of all of its accretive on the privacy is always side of the very important in the last year, you know I think the.
Zoom is it become much stronger company, because we embrace of a lot of of consumers to civil consumers in terms of sell private of executed very different the part of it before we did learn a lot we've really exhibited on all of our team size.
A lot of the conduct and the sort of heart of companies and I think of you know.
As of today, who kind of zoom privacy and the security policy and of the practice is totally different.
Hi, Communist, but however, we are not of interest eight is dumped note. This ongoing effort in a private the security is a part of our combat Ddos and inside of that we also need to continue innovating right. That's why you know how to transform our business to become platform company at the same time any new services new feature the new process.
The mix of private issue to the all of us, they're not only for business or government customers, but also what more importantly, lack of consumer says well. That's I think that's why you know.
The future is the bright because none of them, we do have a new opportunity, but also the privacy and security of story and much better than before.
Okay. Thank you.
Thanks Keith.
And we have time for one more question on our last question will be from Tom Roderick with Stifel.
Great well, Hi, Eric Hey, Kelly, Hey, Tom Great to see you all congratulations on a fantastic finish to what was the crazy ear, but of fantastic one for you all.
As we're going on almost a year now sitting in our home offices and our bosses are are telling us in variety of ways that we're probably not going back to the old normal whether its this year for next year or at all.
I'm curious for your thoughts on how you think about the way the world has changed in the way that you run zoom.
Whether that's more remote offices R&D specialists in different parts of the world is the cost structure sort of permanently changed for your vision of the world.
Because it seems like for the rest of US. It is it is changing in that in that way of about get your thoughts on that.
Yes.
Yeah sure. So I think the amazing thing that's happened during the pandemic openness ought to be able to hire talent wherever we've really taken advantage of the opportunity Engineers for example, which are highly competitive that we are now looking to hire the best talent from anywhere in the globe.
I'm really focused on especially in the U S diversifying outside of San Jose, which has been of great of win for us in terms of long term.
Growth I'm, sorry expense impact we have not modeled in this year at least for FY 'twenty to expenses associated with return to work as we continue to evaluate when it feels safe to support our employees and moving back into the office and coming back together in person and once we.
Have more clarity around that of course, we will assess how that impacts our operating margin.
Okay.
That's great I'll turn it back to you. Thank you.
Alright.
Thank you so much for joining us today, we really appreciate it.
Look forward to FY 'twenty two.
Thank you everybody.
Thank you all.
Thank you guys.
Yes.