Q2 2024 Zoom Video Communications Inc Earnings Call

Speaker 1: We will get underway momentarily. Thank you all for joining us today.

Today.

And again for those of you just joining US today, you would have joined zooms Q3, FY 'twenty feet 23 earnings release Webinar again, we are waiting additional attendees and we will begin momentarily again, thank you for joining us.

Speaker 1: And again, for those of you just joining us today, you will have joined Zoom's Q3 FY23 earnings release webinar. Again, we are awaiting additional attendees, and we will begin momentarily. Again, thank you for joining us.

Well Hello, everyone and welcome to zoom as Q3, FY 'twenty four earnings release Webinar as a reminder, today's webinar is being recorded and now I will hand things over to Tom Mccallum head of Investor Relations Tom over to you.

Speaker 1: Well, hello everyone and welcome to Zoom's Q3 FY24 earnings release webinar. As a reminder, today's webinar is being recorded and now I will hand things over to Tom McCallum, Head of Investor Relations. Tom, over to you.

Speaker 2: Thank you, Kelsey. Hello, everyone, and welcome to Zoom's earnings video webinar for the third quarter of fiscal year 2024. I'm joined today by Zoom's founder and CEO , Eric Yuan, and Zoom CFO , Kelly Steckelberg.

Thank you Kelsey Hello, everyone and welcome to zooms earnings video webinar for the third quarter of fiscal year 2024, I'm joined today by <unk>, founder and CEO, Eric Yuan and Zoom CFO Kelly Steckelberg.

Okay.

Speaker 2: Our earnings press release was issued today after the market closed and may be downloaded from the Investor Relations page at investors.zoom.us. Also on this page, you'll be able to find a copy of today's prepared remarks and a slide deck with financial highlights that, along with our earnings release, include a reconciliation of GAAP to non-GAAP financial results.

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

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During this call we will make forward looking statements, including statements regarding our financial outlook for the fourth quarter and full fiscal year 2024, our expectations regarding financial and business trends impacts from the macroeconomic environment, our market position opportunities and go to market initiatives growth strategy.

Speaker 2: During this call, we will make four looking statements, including statements regarding our financial outlook for the fourth quarter and full fiscal year 2024, our expectations regarding financial and business trends, impacts from the macroeconomic environment, our market position, opportunities, go-to-market initiatives, growth strategy, and business aspirations, and product initiatives and the expected benefits of such initiatives.

And business aspirations and product initiatives and the expected benefits of such initiatives.

Speaker 2: These statements are only predictions that are based on what we believe today, and actual results may differ materially. These forward-looking statements are subject to the risks and other factors that could affect our performance and financial results, which we discuss in detail in our filings with the SEC, including the annual report on Form 10-K and quarterly reports on Form 10-Q . Zoom assumes no obligation to update any forward-looking statements we may make on today's webinar. And with that, let me turn the discussion over to Eric.

These statements are only predictions that are based on what we believe today and actual results may differ materially.

These forward looking statements are subject to the risks and other factors that could affect our performance and financial results, which we discuss in detail in our filings with the SEC, including the annual report on Form 10-K, and quarterly reports on Form 10-Q Zoom assumes no obligation to update any forward looking statements. We may make on today's webinar and with that.

Let me turn the discussion over to Eric.

Speaker 3: Hey, thank you, Tom. Thank you, everyone, for joining us today. In early October , we hosted a Zoom topic of a yearly customer and innovation focused event. And it was awesome.

He is angry Tom Thank you everyone for joining us today.

In early October we hosted a zootopia.

Our year to date customer and innovation focus that event and.

Ada was awesome.

Speaker 3: Like last year, we ran a hybrid on Zoom events. Thousands joined us in person and many multiples of that virtually.

Like last year, the Rite aid hybrid arm Sui events, some of them to join us in person and in many multiples of that virtually.

Speaker 3: Among the in-person attendees were 40 customer presenters, such as Jiffy Morgan, MIT, Boston Consulting Group, HubSpot, and Kohl's.

Our Mama implicit in this world 40 customer presenters such as JP Morgan I My T. Boston consulting group hub of sport and Kohls.

Speaker 3: who spoke about their amazing experiences on Zoom and excitement about the future.

Who spoke about their amazing exposing this zoom and excitement about the future.

We also showcased newly released innovations laggards zoom AI, compiling as well added zoom AI ex Florida assist and quantity management for the contact Center zoom.

Speaker 3: We also showcased newly released innovations like a Zoom AI companion, as well as Zoom AI expert assist and quality management for the context.

Speaker 3: Zoom AI companion is especially noteworthy for being included at no additional cost to our people.

Zoom AI compiler is especially noteworthy for being included at no additional cost to our Peter plants.

Speaker 3: and has fared tremendously well with over 220,000 accounts in the building aid and a 2.8 million meeting summaries created as of today. Remarkable growth in that.

And it has a fair to tremendously well with or to find out a 20000 accounts, enabling aid and had $2 8 million meeting summaries created as of today.

Remarkable growth in less than three months.

Speaker 3: At Zoomtopia, I also had the pleasure of sharing the stage with the flags.

At Zoom Tobia I also added a pleasure of sharing the stage with a flash.

Speaker 3: a global manufacturing and supply chain leader who spoke about how they use Zoom to connect their large distributor workforce of 170,000 employees across 30 countries.

Our global manufacturing and supply chain leader, who spoke about how they view the zoom to connected to their large distributor workforce of 170000 employees across 30 countries.

Speaker 3: Flex started using Zoom meetings in 2017, quickly followed by Zoom Rooms and Zoom Team Chat.

Blacks started are using zoom meetings in 2017 victory photo to by zoom rooms, and assume a team Chad <unk>.

Speaker 3: Since then, Flags increased team chat users by 200% and Zoom rooms by 245%.

Since then blacks increased human try to use this by 200% and assumed roofs by 245 person.

Okay.

Speaker 3: They also became part of users of Zoom whiteboard, creating over 13,000 whiteboards.

We also became power users, obviously whiteboard, creating over 13000 of Whiteboards.

Speaker 3: And moving to Zoom phone allows them to eliminate 50% to 70% of circuits and infrastructure across the globe and reduce total cost.

And moving to a zoom phone arrived with them to eliminate 50% to 70% of showcase and infrastructure across the globe.

And a reduced total cost of ownership.

Speaker 3: We were so happy to have Flex share their journey at Zoomtopia and I cannot wait for what is in store for our partnership now.

We were so happy to have fracs share their journey and zooming cobia and it cannot redefault what is in store for our partnership next.

Speaker 3: Now moving on to some of our customers in Q3 for us.

Now, we armed with some above our cost of risk in Q3 for us.

Speaker 3: Let me thank Dropbox, who has been an amazing customer for many years, starting with meetings and then extending to Zoom rooms, a phone, and events.

Let me in fact, Dropbox, who has been an amazing customer for many years, starting with meetings and even extending to zoom rooms, a phone and events in.

Speaker 3: In Q3, they selected a Zoom virtual agent and a Zoom contact center to provide world-class AI-enabled support to their global user base.

In Q3, they selected zoom of virtual agent and as a mechanic or center to provide a world class AI any voter support to their global user base.

Speaker 3: Let me also thank Amenta Group, a premier insurance services company who initially adopted a Zoom phone and a Zoom contact center on a limited scale in Q1 of this

Let me also Fang a mentor group a premier insurance services company, who initially adopted as zoom phone and as a Mcconaughey center on a limited scale in Q1 of this year.

Speaker 3: Seeing how our modern solution offers superior agility, customization for sales flows, and administrative functionality, in Q3, they decided to standardize their customer-facing sales support on the Zoom stack and add workforce management, leading to a nearly five times increase in their monthly spend.

Saying all of a modern solution all for a superior agility customization for fixed gross and administrative functionality in Q3, they decided to standardize their customer facing suite of support on the Zuma stack and at a workforce management leading tweet.

Nearly five times increase in their monthly spend with us.

Speaker 3: I'd also like to congratulate the Virgin Group on their launch of Workvivo to bring together 60,000 employees across almost 40 Virgin companies on one platform.

I'd also like to congratulate the Virgin group on their launch of a work of Eagle to bringing together 60000 employees across almost the 14th watching companies are when platform.

Speaker 3: The Virgin Family Workable platform is helping to drive social connection, encourage collaboration, and boost brand knowledge.

The wooden family work have been platform is happy to drive social connection incurred collaboration and boost our brand knowledge.

Speaker 3: It's inspiring to see how the working group is bringing the platform to life and a strengthening culture with Zoom's work.

It's inspiring to see how that working group is bringing the platform to life and a strengthening culture with zumiez work of vivo.

Speaker 3: These wins are a testament to the investment we are making in our customer experience offering with a rapid pace of new innovations like workforce management, quality management, Zoom virtual agent, and AI expert assist.

These wins.

A testament to the investment we are making in all of our customer experience offering with a rapid pace of new innovations like look false monderman audit imagine zoom, which Aegean and AI expert assist.

Speaker 3: We also highlight our progress with employee experience, especially with integrating work available into the Zoom Cloud.

We also highlight our progress with employee experience expressly with integrating a work of eagle into the zoom cloud.

Speaker 3: Thank you so much to Doorbox, Amenta and Virgin Group.

Thank you Sue Moss to adult box, a mentor and a Virgin group.

Speaker 3: Love you all. And with that, I'll pass it over to Kelly. Thank you.

A lobby all and with that I'll pass it over to Kelly. Thank you.

Thank you, Eric and Hello, everyone. We are pleased that we beat our top line and profitability guidance in Q3.

Speaker 4: Thank you, Eric. And hello, everyone. We are pleased that we beat our top line and profitability guidance in Q3.

Speaker 4: Here are a few milestones. First, ZoomPhone reached approximately 7 million paid seats.

Here are a few milestones.

First Jim Tholen reached approximately 7 million paid seats.

Speaker 4: Second, Zoom Contact Center reached approximately 700 customers as a quarter-end, while Zoom Virtual Agent customers nearly doubled quarter-over-quarter.

Second Jim contact center reached approximately 700 customers as of quarter end, while doing virtual agent customers nearly doubled quarter over quarter.

Speaker 4: And finally, the number of customers on Zoom One bundles that include Zoom phones grew approximately 330% year over year.

And finally, the number of customers on zoom one bundles that include zoom phone grew approximately 330% year over year.

These proof points demonstrate our customers' willingness to entrust us with their critical CX and E X processes and their commitment to grow with us as we expand our platform.

Speaker 4: These proof points demonstrate our customers' willingness to entrust us with their critical CX and EX processes and their commitment to grow with us as we expand our platform.

Speaker 4: In Q3, total revenue came in at $1.137 billion, up 3% year over year, and 4% in constant currency.

In Q3 total revenue came in at $1.137 billion up 3% year over year and 4% in constant currency.

Speaker 4: This result was approximately $17 million above the high end of our guidance.

This result was approximately $17 million above the high end of our guidance.

Speaker 4: Our enterprise business grew 8% year over year and represented 58% of total revenue up from 56% a year ago.

Our enterprise business grew 8% year over year and represented 58% of total revenue up from 56% a year ago.

Speaker 4: We continue to see improvement in online average monthly churn, which decreased to 3.0%, from 3.1% in Q3 of FY23. This is the lowest churn rate.

We continue to see improvement in online average monthly churn, which decreased to 3.0% from three 1% in Q3 of FY2023.

This is the lowest churn rate we have ever reported.

Speaker 4: The number of enterprise customers grew 5% year over year to approximately 219,700.

The number of enterprise customers grew 5% year over year to approximately 219700.

Speaker 4: our trailing 12-month net dollar expansion rate for enterprise customers in Q3 came in at 105%.

Our trailing 12 month net dollar expansion rate for enterprise customers in Q3 came in at 105%.

We saw 14% year over year growth in the upmarket as we ended the quarter with 3731 customers contributing more than $100000 in trailing 12 months revenue.

Speaker 4: We saw 14% year-over-year growth in the upmarket as we ended the quarter with 3,731 customers contributing more than $100,000 in trailing 12-months revenue.

Speaker 4: These customers represent 29% of revenue up from 27% in Q3 of FY23.

These customers represent 29% of revenue up from 27% in Q3 of FY2023.

Speaker 4: Are America's revenue grew 5% year-over-year, while EMEA and APAC declined by 2% each?

Our Americas revenue grew 5% year over year, while EMEA and APAC declined by 2% each.

Speaker 4: On a constant currency basis, APAC grew slightly year over year.

On a constant currency basis, APAC grew slightly year over year.

Speaker 4: Moving to our non-GAAP results, which exclude stock-based compensation expense and associated payroll taxes, acquisition-related expenses, net gains or losses on strategic investments, and all associated tax.

Moving to our non-GAAP results, which exclude stock based compensation expense and associated payroll taxes acquisition related expenses net gains or losses on strategic investments and all associated tax effects.

non-GAAP gross margin in Q3 was 79, 7% an improvement from 79, 5% in Q3 of last year, but slightly lower than the first half of this year.

Speaker 4: non-GAAP gross margin in Q3 was 79.7%, an improvement from 79.5% in Q3 of last year, but slightly lower than the first half of this year.

The strong performance in gross margin was primarily driven by the optimization of usage across the public cloud and our co located data centers, partially offset by additional investments in new AI technologies.

Speaker 4: The strong performance and growth margin was primarily driven by the optimization of usage across the public cloud and our co-located data centers, partially offset by our additional investments in new AI technology.

Speaker 4: For the full year, we expect non-GAAP growth margin to be approximately 80%.

For the full year, we expect non-GAAP gross margin to be approximately 80%.

Speaker 4: non-GAAP operating income grew by 17% to $447 million, exceeding the high end of our guidance of $405 million.

non-GAAP operating income grew by 17% to $447 million exceeding the high end of our guidance of $405 million.

Speaker 4: This translates to a 39.3% non-GAAP operating margin, a meaningful improvement from 34.6% in Q3 of last year.

This translates to a 39, 3% non-GAAP operating margin a meaningful improvement from 34, 6% in Q3 of last year.

non-GAAP diluted earnings per share in Q3 was $1.29 on approximately 310 million non-GAAP diluted weighted average shares outstanding.

Speaker 4: non-GAAP diluted earnings per share in Q3 was $1.29 on approximately 310 million non-GAAP diluted weighted average shares, outstanding.

Speaker 4: This result was $0.20 above the high end of our guidance and $0.22 higher than Q3 of last year.

This result was 20 cents above the high end of our guidance and 22 cents higher in Q3 of last year.

Turning to the balance sheet.

Speaker 4: Deferred revenue at the end of the period was $1.32 billion, down approximately 3% from Q3 of last year.

Deferred revenue at the end of the period was $1.32 billion down approximately 3% from Q3 of last year.

Speaker 4: This was roughly one percentage point better than the high end of our guidance we provided last quarter.

This was roughly one percentage point better than the high end of our guidance, we provided last quarter.

For Q4, we expect deferred revenue to be down 6% to 8% year over year, partially driven by shorter billing frequencies on enterprise deals arising from the high interest rate environment.

Speaker 4: For Q4, we expect deferred revenue to be down 6% to 8% year over year, partially driven by shorter billing frequencies on enterprise deals arising from the high interest rate environment.

Speaker 4: Looking at both our billed and unbilled contracts, our RPO increased 10% year over year to approximately $3.6 billion.

Looking at both our billed and Unbilled contracts, our our P O increased 10% year over year to approximately $3 $6 billion.

Speaker 4: We expect to recognize approximately 58% of the total RPO as revenue over the next 12 months as compared to 59% in Q3 of last year, indicating lengthening contract durations on a year-over-year basis.

We expect to recognize approximately 58% of the total RPM as revenue over the next 12 months as compared to 59% in Q3 of last year.

Indicating lengthening contract duration on a year over year basis.

Speaker 4: As a reminder, our renewal seasonality peaks in Q1 and declines throughout the rest of the year.

As a reminder, our renewal seasonality peaks in Q1 and declined throughout the rest of the year.

Speaker 4: operating cash flow in the quarter grew 67% year over year to $493 million.

Operating cash flow in the quarter grew 67% year over year to $493 million.

Speaker 4: free cash flow grew 66% year over year to $453 million.

Free cash flow grew 66% year over year to $453 million.

Speaker 4: The sharp increase in our cash flow metrics was due to stronger collections, targeted expense management, and higher interest income.

The sharp increase in our cash flow metrics was due to stronger collection targeted expense management and higher interest income.

Speaker 4: Our operating cash flow and free cash flow margins expanded to 43.4% and 39.9% respectively.

Our operating cash flow and free cash flow margins expanded to 43, 4% and 39, 9% respectively.

Speaker 4: We ended the quarter with approximately $6.5 billion in cash, cash equivalents, and marketable securities, excluding restricted cash.

We ended the quarter with approximately $6 $5 billion in cash cash equivalents and marketable securities excluding restricted cash.

Speaker 4: Given the strength and profitability in collections, we are increasing our free cash flow outlook for FY24.

Given the strength and profitability and collections, we are increasing our free cash flow outlook for FY 'twenty four.

Speaker 4: We now expect free cash flow to be in the range of $1.34 to $1.35 billion, which at the midpoint would represent 13% year-over-year growth.

We now expect free cash flow to be in the range of $1.34 billion to $1.35 billion, which at the midpoint would represent 13% year over year growth.

Turning to guidance.

Speaker 4: For Q4, we expect revenue to be in the range of $1.125 to $1.13 billion, which at the midpoint would represent approximately 1% year-over-year growth.

For Q4, we expect revenue to be in the range of one point once you five to 1.1 Green billion dollars, which at the midpoint would represent approximately 1% year over year growth.

Speaker 4: Adjusting for currency impact, this projection is slightly higher than the previously implied guidance from our Q2 call.

Adjusting for currency impact this projection is slightly higher than the previously implied guidance from our Q2 call.

We expect non-GAAP operating income to be in the range of 409 to boring and $14 million.

Speaker 4: We expect non-GAAP operating income to be in the range of $409 to $414 million.

Speaker 4: Our outlook for non-GAAP earnings per share is $1.13 to $1.15 based on approximately 312 million shares.

Our outlook for non-GAAP earnings per share is a dollar in 13 cents to $2.15 based on approximately 312 million shares outstanding.

We are also pleased to raise our topline and profitability outlook for the full year of FY 'twenty four.

Speaker 4: We are also pleased to raise our top line and profitability outlook for the full year of FY 24.

Speaker 4: We now expect revenue to be in the range of $4.506 to $4.511 billion, which at the midpoint represents approximately 3% year-over-year growth.

We now expect revenue to be in the range of 4.506 to four point by one $1 billion, which at the mid point represent approximately 3% year over year growth.

Speaker 4: We expect our non-GAAP property income to be in the range of $1.74 to $1.745 billion, representing an operating margin of approximately 39 percent.

We expect our non-GAAP operating income to be in the range of $174 billion to $1.745 billion, representing an operating margin of approximately 39%.

Speaker 4: Our outlook for non-GAAP earnings per share for FY24 is $4.93 to $4.95 based on approximately 308 million shares.

Our outlook for non-GAAP earnings per share for FY 'twenty four is $4.93.

To $4 95, <unk> based on approximately 308 million shares outstanding.

Speaker 4: Thank you to the entire Zoom team, our customers, our community, and our investors for your trust and support.

Thank you to the entire zoom team our customers our community and our investors for your trust and support.

Chelsea please queue up the first question.

Speaker 1: Thank you, Kelly. And as Kelly mentioned, we will now move into the Q&A session. So when I call your name, please turn on your video and unmute. And as a reminder, in an effort to hear from everyone, please limit yourself to one question, and we thank you in advance for your consideration. Our first question will come from Ryan McWilliams with Barclays.

Thank you Kelly and as Kelly mentioned, we will now move into the Q&A session. So when I call. Your name. Please turn on your video and unused and as a reminder, in an effort to hear from everyone. Please limit yourself to one question and we thank you in advance for your consideration.

<unk>, our first question will come from Ryan Macwilliams with Barclays.

Hey, guys answering the question.

Speaker 2: Hey guys, I have a question. Just to start with Kelly, do you have any changes in the overall macro environment in the third quarter compared to the second quarter? And can you touch on how linearity did throughout the quarter for new bookings?

Just to start with Kelly just any changes in the overall macro environment in the third quarter compared to the second quarter and could you touch on how linearity did throughout the quarter for new bookings.

Speaker 4: Yeah. Hi, Ryan. So the macro has been pretty consistent from Q2 to Q3. We continue to see similar trends in terms of deal scrutiny, back end loaded. So the quarter from a direct perspective was fairly back end loaded. As a reminder, the online segment of businesses is typically pretty linear throughout the quarter.

Yeah, Hi, Ryan so the macro has been pretty consistent from Q2 to Q3, we continue to see similar trends in terms of deal scrutiny backend loaded so that the quarter from a direct perspective was fairly backend loaded as a reminder, the online segment of business.

As is typically pretty linear through the throughout the quarter.

Speaker 4: I think the only thing that got a little worse from Q2 to Q3 was actually FX, as you saw in Asia-Pac, that was a fairly significant headwind for us, whereas Asia-Pac would have at least been flat year-over-year, if not for that impact.

I think the only thing that got a little worse from Q2 to Q3 was actually FX as you saw in Asia Pac that had you have that.

Fairly significant headwind for us, whereas Asia Pac would have at least been flat year over year, if not for that impact.

Thanks, guys.

Moving on to meta Marshall with Morgan Stanley.

Speaker 5: Great, thanks. Maybe just a question on kind of what feedback you're getting on the AI Companion, and that's a pretty big jump in kind of customers using it, so just what features are they really liking, you know, and is it kind of helping with some of the free-to-pay conversion that you guys were hoping for? Thanks.

Great. Thanks, maybe just a question on kind of what feedback you're getting on the AI companion and that's a pretty big jump and kind of customize using it. So just what features are they really like game and isn't kind of helping with some of the free to paid conversion that you guys were hoping for thanks.

Yes, great question, I single, well wherever problem of Ava teams subgroup ice snow since its relaunch resuming I companion either mission that vertical right a lot of accounts in Ebola that remember this is a and no additional cost while create a customer and a lot of features of why you know why.

Speaker 3: Yeah, it's a great question. I think we are very, very proud of our team's progress, you know, since the launch of the ZoomAI company, you know, as I mentioned earlier, right, a lot of accounts,

Speaker 3: enable that. Remember, this is no additional cost to our customers. You know, a lot of features, one feature of that is like take a meeting summary, for example. Amazingly, it's very accurate and really save the meeting host a lot of time.

Feature of that is that I could take a meeting summary for example, amazingly it a very accurate and ASEAN really separate out meeting hosted a lot of time and also our Federated I approach really contributed to that success, because we do knock on a single AI model and into more software latency Agra.

Speaker 3: And also, you know, our federated AI approach really contributed to that success.

Speaker 3: because we do not count on a single AI model. And in terms of latency, accuracy, and also the response, the speed, and so on and so forth, I think really helped our AI company. Again, and even for the online pro users, also is a new additional cost.

Chrissie and there and also the.

The response, you know with US a speed S. One supposed I think has really helped our AI combining again and for the uniform on a per users and also as a no additional cost for sure for free users you know the law. We cannot enjoy these are combining portrays a daily health.

Speaker 3: For sure, for free users, they cannot enjoy this AI company. For sure, it's a daily help for those afraid to approve for online upgrade. So anyway, so we are keep innovating on AI company. We have a high confidence. That's a true differentiation compared to any other AI features, functionalities offered by some of our companies.

For those of afraid to approval for all that Arbor way, so anyway, so well keep innovating on the <unk>, we have a high confidence that's a true differentiation compared to any other II features functionalities offered by some of our competitors.

Speaker 1: Great. Thanks so much. Thank you. Our next question will come from Cash Rangan with Goldman Sachs.

Great. Thanks, so much thank you our.

Our next question will come from Kash Rangan with Goldman Sachs.

Speaker 6: Hi, thank you very much. Good to see the results and happy Thanksgiving. I just had one question, if I could restrict myself to one. The SMB online share, 3%, I don't know, came down from 3.1%. Any initiatives that you are undertaking that could bring that number even down more significantly? Because that would be.

Hi, Thank you very much of it to see the results and happy Thanksgiving.

I just had one question if I could restrict myself to one the SMB online churn, 3% out of that came down from three 1%.

The initiatives that you're undertaking that could.

Bring that number even down more significantly in this element assume that that would have big implications for your growth rate and margins, which are already quite good. Thank you so much.

Speaker 6: that would have big implications for your growth rate and margins, which are already quite good. Thank you so much.

Well Wendy and her team are always working on initiatives that I think what Eric was just mentioning about AI is probably really going to be a key differentiator and a retention rutile retention tool in the future because as a reminder, all of the AI companion features Hum included for our three <unk>.

Speaker 4: Well, Wendy and her team are always working on initiatives, but I think what Eric was just mentioning about AI is probably really going to be a key differentiator and a retention.

Speaker 4: a retention tool in the future, because as a reminder, all of the AI companion features come included for our free, sorry, for our paid users. So we're seeing it not only help with conversion, but we really believe that for the long term, it will help with retention as well. And, you know, guys, I've gotten this question many times, and I would say like, this is the lowest we've ever seen, but also our platform is so much better. It's infinitely better than where it was on a pre-pandemic basis for our online users. And so I think we will, this is how we're modeling is at this level, but I think over time, you should continue to see.

Sorry for our paid users. So we're seeing it not only help with conversion, but we really believe that for the long term it will help with retention as well and catch.

As I've gotten this question many times and I would say like this is the lowest we've ever seen but also our platform is so much better it's imminently better than where it was pre unapproved pandemic basis for our online users and so I think we will this is our modeling is at this level, but I think over time, you should continue to see.

Speaker 7: retention just continue to improve.

Retention just continue to M groups.

Thank you so much.

Speaker 3: But by the way, to add on to what Katie said, also the happy thanksgiving to you as well.

But by Levine to add onto Warner Cardio side also without the happy Sacramento you install so in a more and more customers realize wow, a zoom a year before on a user's ignore a bogie for zoom meeting a lot of other features like analog optical zoom into human chatter focus now there's greater precision has had a solution is part or offered for free users.

Speaker 8: So more and more customers realize, wow, Zoom, even for online users, is not only for Zoom meeting. A lot of other features, right? And like, take a Zoom team chat, for example. This is a great precision chatter solution. It's a powerful offering, even for free users as well, right? For paid users, for sure, a lot of other features. The more they spend their time on Zoom platform, realize, wow, this is pretty powerful, not only just for meetings, entire platform. Thanks so much, Eric and Kevin. Yeah.

As Walt right polo or pay to use a portion of a lot of other features the more they spend a time on zoom fivefold realized wow is a pretty powerful not only just for meetings into our platform.

Got it thanks, so much Eric.

Wells Fargo's, Michael <unk>. Please go ahead with your question.

Speaker 2: Hey, great. Thanks, nice to see everyone. I guess as a compliment to Cash's question, you're showing stabilization here on some of the major metrics. The enterprise expansion metric took a step down to 105%. And so just wondering what it takes for that metric to similarly show stabilization. Is it getting to that Q1 renewal cohort and kind of walking through that? Anything on the product side for us to consider? Or just any other commentary there is helpful. Thank you.

Hey, great. Thanks places to everyone I guess as a complement to cashless question Youre showing stabilization here.

Some of the major metrics the enterprise expansion metrics took a step down to 105%. So just wondering what it takes for that metric to simulation. Similarly showed stabilization in the data that Q1 renewal cohort and kind of walking through that anything on the product side for us to consider or just any other commentary there is helpful.

Kim.

Speaker 4: Well, as a reminder, it's a trailing 12-month metric. So as we've seen our growth rate come down this year, that's the following behind it. But absolutely, we believe that AI companion in general, as well as the success that we are seeing in Zoom phone, in Zoom contact center, Zoom virtual agent, all of those will be key contributors to seeing that metric start to re-accelerate again as we see our growth rate starting to re-accelerate.

Well as a reminder, it's a trailing 12 month metric. So you know as we've unfortunately seeing a gradually come down this year that that's following behind it but absolutely we believe that AI companion in general as well as the success that we are seeing in zoom phone is in contact center zoom.

Virtual agent all of those will be can key contributors to seeing that metric start start to reaccelerate again, as we see our growth rate trend starting to reaccelerate as well.

Speaker 9: Thank you.

Thank you.

Speaker 1: Our next question will come from Michael Funk with Bank of America.

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

Speaker 10: Yeah, hi, thank you for the question tonight. So just the deferred revenue guidance for 4Q, Kelly, and the commentary on the macro and the rates expecting that, how should we think about growth rate in calendar year 24 given the decline in deferred revenue and impact on new deals from enterprises?

Yeah, Hi, Thanks for the question Tonight, So just from a deferred revenue guidance for sports you Kelly in the commentary on the macro on the rates respecting that.

Should we think of our growth rate in calendar year 'twenty four given the decline in deferred revenue and impact on on new deals from enterprise.

Yeah, So I mean, what with very interesting. If you look at right you see growth in our P O, but youre seeing a decline in deferred revenue, which implies customers, while they're committing for long term agreements. They are preferring to pay in shorter term increments to keep their cash and take advantage of the interest rate environment.

So.

The other thing is as a reminder, right we're going to have a big renewal cycle in Q1, and then that's the pekin could come down and we believe that in FY 'twenty for that were currently in we had the majority of our customers had some sort of renewal periods during FY 'twenty, four which means that we.

Believe that we've moved through a lot of our customers that were impacted themselves by a reduction and we talked in the past about her team has been doing a great job of preserving that spend but to the extent, we're helping them rightsize our transition from zoom meetings to say assume one bundle, we think the majority of our customers.

We know that a majority of our customers have gone through that renewal period in FY 'twenty boards. So that by the time, we get into FY 'twenty five hopefully we're in a little more normalized renewal cycle.

Speaker 1: Great. Thank you. Yeah. And moving on to Carl.

Great. Thank you.

Yes.

And moving on to Karl Keirstead with UBS.

Speaker 11: Great. Thank you. Hey, Kelly, the phone business has been a big part of the Zoom growth algorithm lately. So I'm wondering if you could elaborate on how that part of the business did in the quarter on the surface. And I know that you round that seat number, but it looks like the sequential phone seat ads might have been a lot less than the last several quarters. Maybe that's rounding, but I wanted to give you a platform maybe to elaborate about that part of the business. Thank you. So...

Okay, great. Thank you Hey, Kelly via the phone business has been a big part of the resumed growth algorithm lately. So.

So I'm wondering if you could elaborate on how that part of the business did in the quarter on the surface and I know that you round that seat number but it looks like the sequential phone seat adds might've been a lot less than the last several quarters, maybe that's rounding but I wanted to give you a platform maybe to elaborate about that part of the business. Thanks.

So.

Speaker 4: Q3 cyclically, just as a reminder, Q1 and Q3 cyclically are our lower quarters, given that our enterprise reps, some of our enterprise reps are on six-month quotas. So we've historically seen the big Zoom phone

Q3, cyclically just as a reminder, Q1 and Q3 cyclically are our lower quarters, given that our enterprise reps. Some of our enterprise reps are on six month quotas. So we've historically seen the big Zoom zone with.

Speaker 4: additional ad quarters being Q2 and Q4. What we did see in Q3 was that customers in the upper segment, so customers with greater than 10,000 seats, grew almost 9% quarter over quarter. So we're seeing a lot of strength in that upper end of Zoom phone. So really happy with that. I mean, that's the largest increase we've had so far this year. And then as we go to Q4, we're going to see a lot of growth in the number of customers that we've had over the last year.

Did you add quarters being Q2 and Q4, what we did see in Q3 was that customers in the upper segment, so customers with greater 10000 seats grew almost 9% quarter over quarter. So we're seeing a lot of strength in that upper end of zoom phone, so really happy with that I mean, that's the largest increase we've had.

So far this year and then as a matter of weeks.

Speaker 11: we haven't always given that metric, honestly, at the exact same period. So it's a little bit hard for you to tell exactly how it's trending every single quarter. And as just in the past, we'll continue to update you on future milestones as they make sense. Okay. Thank you.

We haven't always given that metric honestly at the exact same period, though it is a little bit hard for you to tell exactly how it's training every single quarter.

And just in the past, we'll continue to update you on.

Future milestones as they make sense.

Okay. Thank you.

George ironic with Oppenheimer has our next question.

Speaker 12: All right, well, thank you for taking my question. So Kelly may be following up on Zoom phones. Can you give us a bit of extra color on contact center and the customer attraction you're seeing there?

Alright, well. Thank you for taking my question. So can we maybe following up on John <unk> can you give us a bit of extra color on contact center and the customer traction youre seeing there.

Speaker 4: Yeah, so as we mentioned, we're up to over 700 customers on Zoom contact center, and we saw our Zoom virtual agent.

Yeah.

So as we mentioned we're up to over 700 customers on human contact center, and we saw our zoom virtual agents.

Speaker 4: product double the number of customers quarter over quarter. So really excited there. I mean, maybe Eric can talk about some of the features and functionality, but, um, you know, we're thrilled with the progress that we're making there.

<unk> double the number of customers quarter over quarter. So really excited there I mean, maybe Eric can talk about some of the features and functionality, but we're thrilled with the progress that we're making there so far.

Speaker 3: Yeah, so we are, we are extremely excited about our condescending opportunity. And it feels like back to a few years ago, when we announced the Zoom phone, right? Quite often, a lot of people mentioned, wow, it will take you guys many years to get recognized, deployed by large

Yeah. So we are we are extremely excited about our Congress center opportunity and in a few slides go back to a few years ago, when we announced or zoom phone right. When opened a lot of people missing Wow. You went to you guys. Many years to get to recognize the brave of large customers and look at what are we.

Speaker 3: and you know look at what we have today in terms of number of a pay to sit for phone. I feel like

Today in terms of number of PTC for fun I feel like you know if we add through well I finger wagging, a photo of a similar a similar journey iron maybe even better because you look at avocado Center and O and modern architecture extremely sustainable and plus a lot of AI features and inhibition speed.

Speaker 3: If we ask it well, I think we are going to follow a similar journey and maybe even better because you look at our content center, you know, and modern architecture, extremely scalable and plus a lot of AI features and innovation speed. I think whenever customer really take a Zoom content center seriously, evaluate a Zoom content center, the feedback is very consistent. Wow.

I think we never customer really take a zoom conference center seriously evaluate Mokoena center. The feedback is very cost Isit Wow I dunno rely you guys did have a suit powerful Cummings and it just got amazing right I think that there's further boosted our team has accomplished let's double down triple down Abel and contact center again.

Speaker 3: I did not realize you guys have a so powerful content center. It's just amazing, right? I think that this further boosted our team's confidence. Let's double down, triple down our own content center. Again, it's modern architecture, very scalable. I also shared quite a few customer cases during this call. And we are very, very excited. A lot of new AI features, virtual agent, and workforce management, and so on and so forth. This is something very, very exciting.

Modern architecture, whereas forgettable also shared required a few customer cases right. During this call and we're all very very excited on auto Juliet features in what you're aging and are working for some added munis wants to force. It is something ball we're excited.

Speaker 1: Thank you. We'll now hear from Peter Levine with Evercore.

Thank you.

Thank you.

We will now hear from Peter Levine with Evercore.

Speaker 13: Great. Thank you for taking my question here. Maybe for Kelly, as I look at gross margins, how sustainable is it keeping at these levels? I know AI Companions being given away as part of the package, I guess, for paid users. But if you think about the costs around these models, the margin profile of contact center and phone, how durable is it to sustain these levels? And then second, as you think it's the next year, you have to guide it. But what's the best way to think about stock-based comp and dilution as you kind of...

Great. Thanks for taking my question here, maybe for Kelly as I look at gross margins how sustainable is it keeping at these levels I know AI companions being given away from.

Part of the package I guess for prepaid users, but if you think about the cost run. These models the margin profile of a contact center install and how durable is it sustains levels and then second as you think into next year guidance, but what's the best way to think about stock based comp.

The dilution because he has managed to do that.

Yeah. So in terms of our gross margins will obviously give FY 'twenty five guidance on our call next quarter, but as we are working on our planning you are Dev ops team is doing an amazing job of continuing to optimize around the data centers and being very thoughtful about leveraging capacity.

Speaker 4: Yeah. So in terms of our gross margins, we'll obviously give FY 25 guidance on our call next quarter. But as we are working on our planning, our DevOps team is doing an amazing job of continuing to optimize around the data center and being very thoughtful about leveraging capacity to its highest and best use and making room for all of this AI innovation.

With each of its highest and best used and making room for all of his AI innovation. So.

Speaker 4: While we are going to invest and we're actually we're going to invest to the extent that that equity and and the team really believe that we need to and that for the long term, it's an amazing ROI when you look at what it's going to do for our customers for our growth and for our retention.

While we are going to invest and we're actually we're going to invest to the extent that that X D and the team really believes that we need to add that with a long term. It's an amazing ROI. When you look at what it's going to do for our customers for our growth in prior retention.

Speaker 4: But we do expect there's going to be some impact on gross margins.

But we do expect there's going to be some impact on gross margins I.

Speaker 11: I mean, we, I don't think it's going to be significant because the team will continue to operate in the very efficient manner that they do and run our clothes that way, but we do expect there's going to be some impact to our gross margins as we move forward.

I mean, we I don't think it's going to be significant because of the team will continue to want to operate in the very efficient manner that they do and run our clothes that way, but we do expect there's going to be some impact to our gross margins as we move forward.

You want to add anything err a.

Speaker 3: Yeah, so you are sort of right on just to echo on what Kenny said, you know, led by our CTU XD and his team.

So as you all saw it right I'll just echo on water Katie Society, you know led by our CTO XD and his team in our federate AI approach as I mentioned earlier really contribute a lot. So.

Speaker 3: You know, our federated AI approach, as I mentioned earlier, really contributed a lot. So, you know, for sure, you know, and as a cost impact, but extremely manageable, right? And our team really, really, you know, I think, you know, I had a very smart, you know, federated AI, you know, architecture. That's why I think, you know, in terms of cost, very manageable, but also the quality is pretty good. So, and we are, you know, keep.

For sure you know and as our cost impacted by extremely manageable right and our team really really I singled out ahead at averse smarter fighter AI architecture. That's why I figured you know in terms of cost are very manageable, but also the part of these is pretty good so.

And we are you know keep innovating on that so.

Speaker 4: Thank you very much. Thank you, Peter. Regarding stock-based comp, about a third of our expense this year is related to the supplemental grants. So as a reminder, those that best.

Thank you very much thanks, Eric are.

Peter regarding stock based comp about a third of our expense. This year is related to the supplemental grants. So as a reminder, those that best.

Speaker 11: along with how the underlying grants are vesting. So there's a couple more years for that to just start to bleed off, if you will. But you can.

As a long with how the underlying grants are vesting. So theres a couple more years for that to just start to bleed off if you will.

But you can model that out.

Thank you yeah.

Yeah.

Speaker 1: And we will now hear from Patrick Wall-Ravens with JMP Securities.

And we will now hear from Patrick Wall Ravens with JMP Securities.

Oh, great. Thank you.

Speaker 14: Hi. So Eric, what is your ideal customer profile on the contact center side of the business?

Hi, So Eric what is your ideal customer profile on the contact center side of the business.

Ah screwed a question I think you know.

Speaker 3: I think, first of all, again, this is based on architecture and AI features.

First of all again this is a peso architecture and AI features I think have find out medium size, because the visa wife over larger customers, even if our architecture everything every ready, but sometimes theres just one look at hey.

Speaker 3: I think for now, the medium size, because the reason why for very, very large customers, even if our architecture, everything, every ready, but sometimes they just want to look at, hey, you know, you are still so early, but even a product fully ready. That's why reason why sometimes even we do not reach out to them, very large, let's say tens of a thousand Asian customers, if they take our solution seriously.

You also see was so early but even a port are fully ready that's why the reason why sometimes even we do not reach autozone, where large leslie tens of 1000 and the vision of customers as they take of our southern and Sears.

Generic <unk>.

Speaker 4: I think Eric. I didn't know if it was me. Okay. Okay. Let me.

I think Eric <unk> with me.

Okay.

[laughter] alright.

Okay, Let me address.

Sounds good.

Okay.

Speaker 12: Yeah, sorry for that. You're back. Okay. We lost you for a minute there. I'm sorry.

Sorry for that Iraq, Okay, Eric we lost you for a minute there.

Sorry, so and so given the you know the new solution. There is sort of a modern architecture and although new App features my pointed is paid for those soft Nino I see less than 20000 teens honor agent of customers. If they look at all of our solutions are slated to have a confidence because of that we want to belabor a proactive you know folks on <unk>.

Speaker 3: And so given the new solution, sort of a modern architecture and all the new AI features, my point is, if those 20,000 or 10,000 agent customers

Speaker 3: if they look at our solutions seriously, they have confidence. Because of that, you know, we want to be a little bit proactive, you know, focus on medium-sized companies, like from hundreds of agents.

<unk> companies I go from hundreds of agents, who saw the number eight that's our sweet spot, but non army argument stop here as a mission of early hour any event annual very big large companies, mainly look at Agua Congress Center solution seriously, we have a confidence and welcomed win but a however, together there were some thunder the minimum size.

Speaker 3: 2018. That's our sweetest part. But not only are we going to stop here, as I mentioned earlier, any event, any very big, large companies, when you look at our kind of standard solution, seriously, we have a confidence that we can win. But however, to get there, we are focused on the minimum size.

<unk>.

Speaker 4: Great, thank you. I can give you a quick example, Patrick. We have a customer called Venture, which they provide like payroll and HR services. And they became, in the last year, they've doubled their Zoom phone seats. They've doubled their contact center seats into four digits now. They also have deployed workforce management as well as quality management and DMS.

Great.

I think I could give you a quick example, 100, we have a customer called venture, which they provide like payroll and HR services and they became in the light last year, they've doubled their zoom phone seats they've doubled their contact center seats is that they are in their four digits now. They also have deployed workforce management as well as.

Quality management and DBA, so really taking advantage of the full suite of new products is not only the contact center and its extension, but the full suite of.

Speaker 4: So really taking advantage of the full suite of Zoom products, not only the contact center and its extensions, but the full suite of Zoom. And I think when they start to deploy like that, they really see the power. And it's been very exciting to see them grow.

Zoom and I think when they start to deploy like that they really see the power and it's been very exciting to see them grow.

Great. Thank you both.

Speaker 1: Thank you. Our next question comes from Arjun Bhatia with William Blair.

Thank you. Our next question comes from Arjun Bhatia with William Blair.

Speaker 4: Perfect. Thank you. Can you just touch on the international business a little bit? It seems like it's certainly trailing the U.S. But what what gets that business to turn around and maybe talk about some of your new growth drivers and how they're pairing there with Zoom phone and contact center? Thank you. Yeah. So, you know, unfortunately, both EMEA and APAC over the last year have been impacted both by currency and then.

Thank you <unk> can you just touch on the international business, a little bit it seems like it's certainly trailing.

The U S, but what what gets that business to turnaround and maybe talk about some of your new growth drivers in other firm there with us and found a contact center. Thank you yeah.

So new unfortunately, both EMEA and APAC over the last year have been impacted both by currency and then.

Speaker 4: And he has been impacted by the general economy and the war there. But in terms of our focus, we have very recently actually added a new European leader and a new

EMEA has been impacted by the general economy, and the war there, but in terms of our focus we have very recently actually added in a European leader and a new leader.

Speaker 11: leader in Australia and New Zealand, so we're very excited about the team. And since we did the reorganization earlier this year, those regions have just taken a little bit longer than the U.S., but we're starting to see that momentum build again and really excited about what they're going to contribute and watching their success in the future.

In Australia, and New Zealand. So we're very excited about the team and we since we did the reorganization earlier. This year those regions have just taken a little bit longer than the U S. But we're starting to see that momentum build again and really excited about what they're going to contribute and watching their success in the future.

Alright, Thank you yeah.

Speaker 1: Our next question will come from Alex Zuckin with Wolf Research. His video is not on, so he may just be audio only.

Our next question will come from Alexandra <unk> with Wolfe research with videos that answer he may just be audio only.

Hi, Alex.

Alexandra clinical ahead. This is Ethan <unk> on for Alex You said Houston trends right now. Thank you guys taking my question.

Speaker 15: Alex, do you want to go ahead? This is Ethan Brock on for Alex. He's in transit right now. Thank you guys for taking my question. I just had two quick questions.

I had two quick questions just how do we think at what level should we expect or win for that in our arb enterprise cohorts of trough.

Speaker 15: How do we think at what level should we expect or when for the NRR of the enterprise cohort to trough?

Speaker 15: And just any kind of puts and takes around enterprise revenue in the quarter, right, it came in above your expectations, it grew sequentially. And it was also it was positive like you know RPO, CRPO, CRPO bookings, those all accelerated. I guess is it fair to think that for next year's the enterprise growth rate would be above what's implied in the 4Q guide and just if you give any more color around the 4Q numbers, kind of what you're expecting in the online churn, that'd be helpful. Thank you.

And just any kind of puts and takes around enterprise revenue in the quarter rate. It came in above your expectations. It grew sequentially.

And it was also it was positively RP O C. R. P O S. European bookings was all accelerated I guess is it fair to think that for next year's of enterprise growth rate would be above what's implied in the <unk>.

Good and just if you could give any more kind of color around the 40 number or is it kind of what youre expecting all my churn that'd be helpful. Thank you.

Speaker 4: Yeah, so we did see strings in the

Yeah. So we did see a string and then.

Direct bookings they were very backend loaded in Q3, which just continues the theme that we've been talking about in terms of the overall macro and as we look forward to Q4, yeah. We have typically we have the benefit of having year and where customers are having their yearend on 12 31.

Speaker 4: direct bookings, they were very back-end loaded in Q3, which just continues this theme that we've been talking about in terms of the overall macro, and as we look forward to Q4, you know, we have

Speaker 4: Typically, we have the benefit of having year-end where customers are having their year-end on 12-31. And then we have our year-end on January 31st. And of course, we have our six-month quota carrying reps that are coming to the end of their quota cycle. So hopefully taking advantage of their accelerators. But we are expecting similar behavior in terms of even if we have a 12-31 sort of bump, we're expecting that to be back and loaded and then January 31st one as well.

And then we have our year end on January 31, and of course, we have our six month quota carrying reps that are coming to the end of their quota cycle. So hopefully taking advantage of their accelerators.

But we are expecting similar behavior in terms of even if we are at 12 31 sort of bump we're expecting that to be backend loaded and then Jenny January 31st one as well.

Speaker 4: You know, in terms of your question around net dollar expansion, we're not going to give – I mean, we don't guide on that. I expect that given your growth rates have come down a little bit more that there might be a little bit more room for that to come down even further until it starts to stabilize and probably reaccelerate sometime next year.

You know in terms of your question around net dollar expansion.

We were not going to give we I mean, we don't guide on that I expect that given your growth rates have come down a little bit more that there might be a little bit more room for that to come down even further until it starts to stabilize and public Reaccelerate sometime next.

Next year.

Speaker 15: Okay, thank you. And just a quick follow up, just on the comment you made in your prepared remarks around the shorter billing duration is, is there just any way to qualitatively think relative to three Q is there's any change just how to think about, obviously people moving to maybe more different shorter payment terms is just how we think about that in terms of what's implied in the work you guys, and thank you.

Okay. Thank you and it's a quick follow up just on the comment you made in your prepared remarks around the shorter billing duration.

Is there just any way to qualitatively think relative to three Q, if theres any change just how to think about.

Obviously people moving to a more different short payment terms of just how we think about that in terms of whats implied in the of 40 guys. Thank you.

Speaker 4: Yeah, we so we commented first time we started seeing this trend was in Q2. If you remember, we also talked about this in our prepared remarks as we saw this happening. And given the interest rates are high, I don't expect it's going to change anytime soon. I think the good news is from the health of the underlying business, right? Customers are committing to longer term duration contracts. They just are preferring to pay on shorter.

Yeah. We said we commented burst time with iron seeing this trend was in Q2. If you remember we also talked about this in our prepared remarks as we saw this happening and given the interest rates are high I don't expect it's going to change anytime soon I think the good news is from the health of the underlying business right customers are committing to.

Longer term duration contracts. They just are preferring to pay on shorter term and yet we obviously had very strong castle in the periods. So I don't think it's something you should be worried about.

Speaker 11: And yet, you know, we obviously had very strong castle in the period. So I don't think it's something.

Speaker 15: Got it. Thank you very much and congrats on the nice results. Thanks.

Got it thank you very much and congrats on the nice results. Thanks.

Speaker 1: And our next question is going to come from Mark Murphy with JP Morgan. Mark will be audio only.

And our next question is going to come from Mark Murphy with J P. Morgan Mark will be audio only.

Yeah.

Speaker 16: Hey, this is already move on from Mark Murphy. Thanks for taking the question and congrats on the quarter. You guys called out the Virgin Group and their launch of WorkVivo across 60,000 employees and a number of the workforce related innovations you've launched recently. Can you just speak to the adoption of those products and what kind of momentum you're seeing on that front? Thank you. Yeah.

Thank you Ali this is already go on for Mark Murphy. Thanks for taking the question and congrats on the quarter.

You guys called out the Virgin group and their launch of where vivo Cross IP 60000 employees and the number of the workforce related innovations you've watched recently can you speak to the adoption of those products and what kind of momentum you're seeing on that front. Thank you.

Okay.

Yeah.

Can you go ahead yeah.

Speaker 11: Yeah, I mean, we're, we're really excited about work. They, you know, 1st of all, in terms of operating, they're continuing to run as an operating unit, which we're making sure that we support them and their continued momentum. And we have already talked about, we talked about dollar general on the last quarter and their amazing adoption. So we're, we're really excited about that team. They.

Yeah, I mean, where we're really excited about work vivo. They you know first of all in terms of operating they're continuing to run as an operating unit, which and we're making sure that we support them and their continued momentum and we've already talked about we talked about dollar general on the call last quarter and they are amazing adoption, so where we're really excited about.

That team they know.

Speaker 11: When they joined us, we said welcome to the family and gave them an accelerated booking target. And they are running and achieving against that. So really thrilled to have them and watching them continue to succeed.

When they joined US we said welcome to the family and gave them an accelerated bookings target and they are running in achieving against that so really thrilled to have them and watching them continue to succeed.

Great. Thank you.

Our next question is going to come from Catharine <unk> with Rosenblatt.

Speaker 1: All right, our next question is going to come from Catherine Trubnick with Rosenblatt.

Speaker 5: Well, thanks for taking my question. Nice quarter. Um, has your appetite for M&A changed at all in the last year? You know, all day long on CNBC, they kept saying, oh, you know, we're looking for growth, reacceleration of growth. So I'm just wondering if you're looking at the 6.5 billion and your attitude towards M&A. Thank you.

Thanks for taking my question Nice quarter has your appetite for M&A changed at all in the last year. You you know all day long on CNBC. They kept saying Oh, you know we're looking for growth Reacceleration of ground side, just wondering if youre looking at the $6 5 billion and your attitude towards M&A. Thank you.

Speaker 4: Yes, thank you Catherine. M&A is something that we evaluate and think about for as a potential strategy.

Yes, Thank you Catherine.

M&A is something that we evaluate and think about four as a potential strategy.

Speaker 11: all the time. I have a corp dev team that that looks at opportunities on a daily basis.

All the time I have a corp Dev team that looks at opportunities on a daily basis, and we have a very strong lens that we look through in terms of evaluating that is first of all.

Speaker 4: And we have a very strong lens that we look through in terms of evaluating that is, first of all.

Speaker 4: The technology and what does it bring to our customers, we would always want to make sure that our customers continue to enjoy a really high quality product like they do with zoom today.

The technology and what does it bring to our customers, we would always want to make sure that our customers continue to enjoy a really high quality product like they do with zoom today, we look at the culture to make sure that that is something that we think would work well with zoom. It's usually a really good indicator of the success of integrating two companies and then.

Speaker 4: We look at the culture to make sure that it's something that we think would work well with Zoom. It's usually a really good indicator of the success of integrating two companies.

Speaker 11: And then, of course, we look at the lens of valuation and does it make sense? Is it a price that we are willing to pay? And because we have such a high bar, it honestly has been hard to find companies that we love that that makes it through all three of those tests.

Of course, we look at the lands evaluation and does it make sense is it a price that we are willing to pay and because we have such a high bar. It honestly have been hard to find companies that we love that that makes it through all three of those tests on it doesn't mean that we wouldn't love to find someone that did there.

Speaker 4: It doesn't mean that we wouldn't love to find someone that did. There are some really great companies out there. And for one reason or the other, to date, we just haven't, you know, found the right match. But it doesn't mean that we won't. And that is why we have purposely retained, I should say, the flexibility of having that cash on our balance sheet so that if we do see something interesting, we're able to, you know, act on it.

There are some really great companies out there and for one reason or the other to date, we just haven't found the right match, but it doesn't mean that we won't and that is why we have purposely remain.

Retained I should say the flexibility of having that cash on our balance sheet. So that if we do see something interesting we're able to act.

Act on it.

Moving on to Keybank, Tom Blakey.

Speaker 17: Thank you very much. Good to see you, Eric. And hi, Kelly. Just wondering quickly on the stability that we were talking about a couple quarters ago in online, it's pretty impressive that

Thank you very much good to see Eric in gallium nitride.

Just wondering quickly on a stability that we were talking about a couple quarters ago and online it's a pretty impressive that.

Speaker 17: We went back and forth on that a little bit here, and it's very stable, and we talked about the record turn. Can you maybe update us on that in terms of, do we expect the same type of stability and online into the fiscal 4Q, and maybe even similarly into fiscal 25, that'd be helpful.

Back and forth on that a little bit here and a smooth very stable and the average Chicago parts off the record time humans maybe.

Maybe update us on that in terms of Europe, we expect the same type of stability in online in both fiscal <unk> and maybe even a.

Similarly into fiscal 'twenty would be helpful. Thank you yeah. So that the team has done a lot of work this year jus on many fronts around online first of all stabilizing retention, which which are seeing as the you know the benefits of that today as well as focusing on free to paid convert.

Speaker 11: Thank you, yeah, you know, so the team has.

Speaker 4: done a lot of work this year on many fronts around online. First of all, stabilizing retention, which you're seeing the benefits of that today, as well as focusing on free-to-pay conversion, because it's really important that we're continuing to fill the top of the funnel. And those are things like forced break.

And because it's really important that we're continuing to fill the top of the funnel and those are things like force breaks and they they as Eric mentioned earlier also being able to procure additional products online things like whiteboard and scheduler are very well aligned with the strategy of our online buyers.

Speaker 4: And they, as Eric mentioned earlier, also being able to procure additional products online, things like Whiteboard and Scheduler are very well aligned with the strategy of our online buyer.

Speaker 4: So those are all of the initiatives that Wendy and her team are continuing to focus on.

So those are all of the initiatives that Wendy and her team are continuing to focus on.

Speaker 4: In terms, I mean, we hold ourselves to a very high standard when we say stabilization. What we really want to see is dollar stabilization, quarter over quarter. And while it's very, very close, it's not quite there. And I expect it'll be slightly down, just very, very slightly down again in Q4. But as we're working on FY25 planning with the team, really looking forward to initiatives that drive stabilization, and if not, some growth into FY25.

In terms I mean, if we.

We hold ourselves to a very high generally we see stabilization, what we really want to see us dollar.

Dollar stabilization quarter over quarter, and while it's very very close if not quite there and I expect it will be slightly down just very very slightly down again in Q4, but as we were working on FY 'twenty by planning with the team really looking forward to initiatives that drive stabilization if not some growth in.

The FY 'twenty five.

Alright, well thank you Kelly.

Speaker 1: The next question is from Shebly Sayrafi with FBN Security.

The next question is from Shapley say Rafi with F. B and securities. Yes. Thank you very much you've guided deferred revenue to decline, 6% to 8% in Q4.

Speaker 18: Yes, thank you very much. You've guided deferred revenue to decline 6 to 8% in Q4. Due to shorter billing frequencies with enterprise customers.

Due to shorter billing.

Frequencies with enterprise customers.

Speaker 18: The question I have is, what kind of decline, would that have been without that billing frequency change and relate to this, you're going to have a big renewal cycle.

The question I have is what kind of decline would that have been without the billing frequency change and relate to this drug.

Youre going to have a big renewal cycle in Q1.

Speaker 18: So do you expect deferred revenue growth to pick up meaningfully in Q1?

So do you expect deferred revenue growth to pick up meaningfully in Q1.

Speaker 4: Yes. So as a reminder, the way that deferred revenue trends throughout the year is it's always the highest in Q1, and then it declines throughout the year. And there's there's two things that are happening.

Yes, so as a reminder, the way the deferred revenue trends throughout the year is it's always the highest in Q1 and then a decline throughout the year and there's there's two things that are happening first of all Q1 is the largest renewal period. So the bucket gets filled up and then that's getting amortized through the.

Speaker 4: First of all, Q1 is the largest renewal period, so the bucket gets filled up, and then that's getting amortized through the rest of the year. But also, the subsequent renewal cycles are lower than Q1, so it's the inverse of probably every other staff company in the world, where usually you're adding higher renewals every single quarter. We are actually adding a lower number, you know, a lower dollar amount of renewals every single quarter. So, as Q1 is getting amortized down, what's coming in to refill the top of that bucket is coming down every single quarter. And that's why you have seen, for quite a number of years now, typically a sequential decline in deferred revenue.

Rest of the year, but also the the subsequent renewal cycles are lower than Q1. So it's the inverse of probably every other SaaS company in the world, where usually you're adding higher renewals every single quarter. We are accurate, adding a lower number you know a lower dollar amount of renewals every single quarter, so as to <unk>.

<unk> getting amortized down what's coming in to rebuild the top of that bucket is coming down every single quarter and that's why you have seen for quite a number of years now typically a sequential decline in deferred revenue quarter over quarter.

Speaker 8: Quarter of a quarter. Thanks.

Okay.

Yep.

We'll now hear from James Fish with Piper Sandler.

Speaker 14: Hey, guys, thanks for the questions here. Appreciate all the details around some of the product lines, but building off of a few prior questions with that contact center customer account up to about 700 versus the.

Thanks for the questions here I appreciate all the details around some of the product lines, but building off of a few prior questions with that contact center customer count up to about 700 versus 500 last quarter. If my maths right given kind of what you guys have talked about price points kind of seems like we're nearing 100.

Speaker 13: 500 last quarter. If my math's right, given kind of what you guys have talked about with price points

Speaker 13: kind of seems like we're nearing 100 million of ARR now, or how should we think about that average seat count at this point? And then, Eric, for you, look, it got released and was available this quarter, but how has that workforce engagement solution really gone in terms of penetration with the contact center installed basis? Is that acting as sort of a consolidation function underneath or especially that small mid-market? Thanks, guys.

Millions of Eros now or how should we think about that average seat count at this point and then Eric for you.

Murphy got released and was available this quarter, but how has that.

Workforce engagement solution really gone in terms of penetration with the contact center installed basis is that acting as sort of a consolidation function.

Underneath for especially that small mid market. Thanks, guys.

Speaker 12: No, you go ahead, go ahead first.

Yes Erika.

No you go ahead go headfirst.

Speaker 3: I think you look at a contact center, right? So not only just for us to offer the core kind of center capabilities, we want to offer a full platform, including workforce management. This is the modern architecture, not something like, hey, you have on-prem solution for a long time. You just put it in the cloud. That's not the case. We build everything from the ground up. It's a tightly integrated with our core contact center solutions. That's the reason why you look at our customers, right, from SMB, medium-sized, all the way to large enterprise. I think we are ready. And however, as I mentioned earlier, the sweetest part should be in the middle, right?

I think it'll go to contract gets under right. So not ammonia to suit all for us to offer the O'connor center capabilities, we want to all four awful powerful by including workforce manner by is the modern Bristol Motor architecture, known as something like Hey, you have on Prem solution for long time, you just put a <unk> in the cloud is not a case, we go to the <unk>.

Servicing from Regrown up is titled integrated, but what really are the core contact center solutions as a reason why you know if you care to our customers via from SMB. Many besides all the way at the Latina buyers I think are already and however, as I mentioned earlier sweetest sweet spot has to be done.

Mito right. However, when things were realized customers, we want how one seamless experience and for Airbus Congress and a workforce management of which agent AI features co. Indeed right. So we are trying to over also so that's a kind of a you know our our strategy into muscle workers work as both a modern minute contribution in <unk>.

Speaker 3: However, one thing is to realize.

Speaker 3: Customers, they won't have one seamless experience in for everything. Contact center, workforce management, the virtual agent, AI features, call engine, right? So we are trying to offer all of them, you know? So that's the kind of, you know, our strategy. In terms of workforce management and contribution, it really helps.

Speaker 3: Because we tell customers, hey, we offer everything to you. We are not going to let you deploy other third-party workforce management solutions. We offer all the services, all the functionality to you with one price.

Really helped because withheld customer hey, we offer everything to you you know we are in Oregon to a letter Youtube deploy other sort of party workforce management versus we offer all the services all the functionality to you with one platform.

Speaker 4: Yeah, and James, in terms of your ability to kind of understand how those products are progressing themselves, we'll do as we've done with others and announce milestone metrics as we start to see them emerge. They're just so new right now that it doesn't really make sense, but we will do that.

Yeah.

James in terms of your ability to kind of understand how those products are progressing themselves will do as we've done with others and announced milestone metrics as we start to see them emerge. There just so new right now that that doesn't really make sense, but we will do that over time.

Speaker 6: I understand. Thanks, Kelly. Thanks, Eric. Yeah, yeah, we are not ready to share with a number exact number yet about how many customers deployed a workforce management. So stay tuned in the future.

Understood. Thanks, Kary, Thanks Art Yep Yep, Great. We are not ready to share with a number exact number yet about how many customers deployed a workforce management, so stay tuned in the future quarters.

Speaker 1: And our next question will come from Matt Van Fleet with BTIG.

And our next question will come from Matt Vanvliet with B P. I G.

Speaker 10: Good afternoon, thanks for taking the question, I guess, following up one more on on sort of the contact center and zoom phone.

Yeah. Good afternoon. Thanks for taking my question I guess following up on <unk>.

We're on sort of the contact center and zoom phone.

Speaker 10: In terms of overall customer mix, you're well below 1% penetration on contact center here. Is there a target that you think is sort of the next few years of the customers you're going to go after? How high do you think of the roughly 200,000 customers you have?

In terms of overall customer mix or well below 1% penetration on customer are on contact center here is there a target that you think is sort of the next few years of the customers Youre going to go after house, how high do you think of the roughly 200000 customers you have.

Speaker 10: have an existing contact center that you've maybe identified and can probably work your way into. And then sort of following up on that, what percentage, if you can share, of the over 100,000 customers, 100,000 revenue customers have Zoom phone or Zoom contact center as an attachment there?

Have an existing contact center that you have maybe identified and comparatively work your way into and then sort of a follow up on that what percentage. If you can share of over 100000 customers 100000 revenue customers have.

Zoom phone or zoom contact center as an attached there.

So I guess the way that I.

Think about contact center and its progress is that it's so far is very telling is very similar.

Speaker 4: think about contact center and its progress is that it's so far is very pulling in very similar.

Speaker 4: you know, roadmap, if you will, that Junfeng did.

E. A road map, if you will than that zoom bounded.

Speaker 4: So, if you think about, you know, we can see the visibility internally just as we could with Zoom phone, but in terms of ARR as a metric, for example,

So if you if you think about.

We can see the visibility internally just as we could with zoom phone, but in terms of.

Or are at as a metric for example.

Speaker 4: it's going to take a little while for that to be something that's visible to you. But so far, it's tracking in a very, very similar way that ZoomFone did, which I think is very encouraging. And that, you know, we need a couple more years and then it starts to be a really significant growth contributor. It just, you know, starts small and then grows quickly.

It's going to take a little while for that to be something that's visible to you, but so far it's tracking in a very very similar way that's inbound yet, which I think is very encouraging and that you know we need a couple more years and then it starts to be a really significant growth contributor.

As you know start to start small and then and then grows quickly and that's what we're saying.

Speaker 6: And also look at opportunity, you know, very similar as well. Many years ago, a lot of our enterprise customers, their phone, you know, UC deployment is still on-prem. Today, look at most of the enterprise customer contact centers still on-prem. So, you know, that's why, you know, a lot of opportunity ahead of us, in particular given our, you know, modern architecture is very scalable, so.

And also look at opportunity you know very favorite is similar as well many years ago, a lot of the Nebraska customers their phone you'll see the promise you on path today, who kind of emotional broad customer contracts under SKU on Pratt. So that's why you know on a lot of opportunity ahead of us in particular came our intermodal architecture is where scalable so.

Great. Thank you.

Speaker 1: Our next question, Ryan, please go ahead.

My name is Ryan Koontz has the next question Ryan. Please go ahead.

Speaker 15: All right, happy Thanksgiving. From Zootopia, yeah, I came away really impressed with Zoom Rooms and what you're doing there. The innovation really seems years ahead of the market. And I wondered what's your updated view on the Rooms opportunity for the company? Do you think it's strong enough that you can use that as a lead, as almost a standalone product? And do you see the market opportunity more promising for you with that product? Do you have any go-to-market initiatives, these sort of questions? Thank you.

Happy Thanksgiving.

Crumbs Tropea, yeah team, where I'm really impressed with the zoom rooms, and what Youre doing there and the innovation really seems years ahead of us.

The market and I wondered how you what's your updated view on the rooms opportunity for the company do you think it's strong enough that you can use.

Use that as a lead is almost a standalone product and you see the market opportunity more promising for you are with that productivity go to market initiatives. These sort of questions. Thank you.

Speaker 3: So yeah, Ryan, so speaking of the opportunity, you're so right, you know, whenever a customer, you know, for many years ago, right, they deployed Zoom rooms for more and more customers, and they try to embrace hybrid work, they need to have a modern solution for their conference rooms.

Yeah, Ryan so speaking off of the opportunity you're so right.

Never in a customer and off for many years ago right, a deported zoom rooms for more and more customers in the base try to embrace hybrid world and you'd have a modern solution for their comp rooms that you have.

Speaker 6: You know, they invited a multiple solutions, zoom rooms, indeed, you know, stand out is indeed, you know, years ahead of any other competitors.

Got it in multiple solutions zoom rooms indeed.

Send out is in Vietnam.

Years ahead of any other competitors however, sometimes.

Speaker 6: However, sometimes for customers, when they try to support hybrid work, for now, they are in the middle of embracing hybrid work. What's the new layout of the entire workplace and how many comfort rooms they needed to support and so on and so forth? That's why a lot of opportunities. At the same time, we need to work together with customers. And not only for comfort room innovation, but also entire workplace management. What's the new layout and so on and so forth? I think a lot of opportunities, not only for comfort room itself, like how to reserve a desk.

For customers when they try to support hybrid worldwide for now or Theyre in a mirror of embracing atom or hybrid or what why was the newly or of the entire workplace and harmonic homeroom they needed to support and so on so forth right. That's why a lot of opportunities at the same time in wind units working together with Kosmos in not only for copper room.

<unk> inhibition, but also entire local port a workplace that our management, Washington, Uliano. Once was I think a lot of opportunity not only for complement itself like a hardware resolver reserve a desk.

Speaker 3: Right. You know, all those.

Speaker 3: we already built in as a part of, you know, the Zoom rooms, like one example, like a digital signage.

All of those who express reorder beauty as a part of the zoom rooms. Like one example, like a digital signage and also part of a zoom rooms, as well as the full in or the copper room or workplace solutions and that's why in a window to make sure folks on marketing side, who serve as Kosovo again zoom rooms is not only just for you.

Speaker 3: and also part of Zoom rooms as well. It's the full comfort room or workplace solution. And that's why we need to make sure to focus on the marketing side.

Speaker 3: share with customer. Again, Zoom Rooms is not only just for your comfort room solution, but it is for hybrid work and also for entire workplace, you know.

Homeroom a solution, but it does have a hybrid work and also bought entire local place as well.

Speaker 1: That's great. Thank you. Thank you. Thanks. And we'll move on to Peter weed with Berenstein.

That's great. Thank you. Thank you Rob Thanks Ryan.

And we'll move on to Peter <unk> with Bernstein.

Thank you.

Speaker 2: You know, I think for the first time, at least as far as I can look at in the model, it looks like the kind of larger enterprises greater than $100,000 enterprise customers were roughly flat quarter over quarter.

I think for the first time at least as far as I can look at it in the model.

You know it looks like the kind of larger enterprise with greater than 100000.

Dollar enterprise customers were roughly flat quarter over quarter.

Speaker 2: But, you know, we're hearing, you know, the great stories about customer expansions, and the number of those customers has continued to increase, which would imply there's a whole other set of customers that are either shrinking or churning, and it appears that got more pronounced this quarter than perhaps we've seen recently. How should we think about those effects? And, you know, is that more churn, or is it downgrade?

We're hearing the great stories about customer expansions and the number of those customers has continued to increase which would imply there's a whole another set of customers that are either shrinking or churning and it appears that got more pronounced this quarter than perhaps we've seen.

Recently.

How should we think about those effects and is that more churn or is it downgrades and and when customers are churning or downgrading, where they're going and.

Speaker 2: And when customers are turning or downgrading, where are they going? And

Speaker 2: Is this something that is temporary and you see it ending, or is it something where we may have some pain for a bit of time before we get through some effects?

Is this something that that is kind of temporary see it kind of ending or is it something where we may have some pain for a bit of time before we get through some effects.

Speaker 4: Yeah, so I think we've talked about this the last couple of quarters. We certainly have seen impact in our customers having retraction in their own businesses and in their own employee count. So we if that's the situation, then we are working with them. We the good news is we have not seen.

Yeah, So I.

I think we've talked about this the last couple of quarters, we certainly have seen impact in in our customers, having retraction in their own businesses and they're in their own employee counts. So we if that's the situation that we are working with them we.

So the good news is we have not seen a lot of logo churn. It has been more down selling in terms of right sizing their their meeting license numbers and yet even in that situation. Our team is doing a great job of taking the opportunity she transition them from potentially meetings to one of ours in one bundles that include some we talked about.

Speaker 4: It has been more downselling in terms of right-sizing their meeting license numbers.

Speaker 4: And yet, even in that situation, our team is doing a great job of taking the opportunity to transition them from potentially meetings to one of our Zoom One bundles that includes phone. We talked about, in our prepared remarks, we saw that grow over 300% year over year in terms of the number of customers that are using those bundles. And that's great for many reasons, in terms of retention. And having more than one product deployed, we see is very advantageous to customer retention.

In our prepared remarks, we saw that grow over 300% year over year in terms of the number of customers that are using those bundles and that's great for many reasons right in terms of retention and having more than one product deployed we see is very advantageous to customer retention.

Speaker 4: So we certainly have worked with many, many, many of our customers this year on ensuring that they have the right package in place.

So we certainly have worked with many many many of our customers on.

This year on ensuring that they have the right package in place.

Speaker 4: And, but I also talked about earlier this, you know, earlier in the call that we know that the majority of our customers have had some sort of renewal period in FY24. Meaning that we hope, we anticipate that as we've got, as we get through the end of this year, we've moved through most of those transitions where organizations have done their own reductions and, you know, are aligning their licenses.

And then I also talked about earlier this year earlier in the call that we know that the majority of our customers have had some sort of a renewal period in FY 'twenty four meaning that we we hope we anticipate that as we got to get through the end of this year, we've moved through most of that.

Transitions, where organizations have done their own reductions and you know our our lining their licenses to that.

But it sounds like you're not seeing an uptick in churn. This is mostly just that kind of reduction in force and once we're through that then you set a floor in so that the expansions can kind of work going forward on all the great things people are buying which.

Speaker 2: But it sounds like you're not seeing an uptick in churn. This is mostly just that kind of reduction in force. And once we're through that, then you set a forend so that the expansions can kind of work going forward on all the great things people are buying, which.

Speaker 12: You know, even us at Burger King, we're great, great customers that love the product. So, yeah. Yeah. I mean, that, we're not giving FY25 guidance, just to be clear. But yeah, but that's in general what we anticipate, just knowing that we've worked through most of our, you know, customer renewals this year. And I assume that they've gotten through their reduction. Now, you know, it depends on what happens overall with the macro. But that's what we believe to be the case, yes. Thank you. Yeah.

EBIT also Virgin naphtha, yes, we're great.

Customers love the product sales.

Yeah, I mean that.

We're not giving up with revised guidance as declare but yeah, but that's in general what we anticipate just knowing that we've worked through most of our customer renewals this year and assume that they've gotten through the their reduction now it depends on what happens overall with the macro but that's what we believe to be the case, yes.

Thank you yeah.

Our next question will come from Taz <unk> with Wedbush.

Speaker 4: Oops, you're on mute.

Okay.

<unk>.

Hi can you hear me now yeah.

Speaker 19: I'm sorry, can you guys hear me now? Yeah. Thanks, hi. Question on Zoom phones. So can you give us the ARR last quarter, we have the Zoom phone feed this quarter. So do a rough math on the ASP, it comes down to like $7 to $8 or something per month, which seems like almost half or even more of the list price. If you can just confirm that and has that gone down?

Shanghai Croissant zoom phone. So can you give us the year on last quarter, we have the zoom phone shipped this quarter.

I do a rough math on the ESP it comes down to like $70 something per month, which is like almost half or even more of a list price. If you can just confirm that on has that.

Gone down in Ghana. So as a reminder, you can buy zoom phone either for $10 per license per month, if you have meter calling on top or $15. If you get unlimited long distance. So it the ASP is going to depend on where.

Speaker 20: So as a reminder, you can buy Zoom phone either for $10 per license per month if you have metered calling on top or $15.

Speaker 20: if you get unlimited long distance. So the ASP is going to depend on, you know, which version of that, which of the SKU the customers are buying and how they come together. And then if you think about some of our largest enterprise customers, we do discount not just for obviously for Zoom phone, but the overall value of their purchases or their value of being a customer.

She version of that which of the skew the customers are buying and how they come together and then if you think about some of the our largest enterprise customers. We do discount not just for obviously for us in pound, but the overall value of their purchases or is there value of being a customer for longevity in terms of linked the cycles.

Speaker 20: For longevity in terms of length of cycles, willingness to pay up front. So all of those things contribute, but it sounds like you're right in.

Willingness to pay up Brian So all of those things contribute but it sounds like your rights in Europe.

Speaker 20: You're right in sort of the ballpark, we have not seen a dramatic shift in those discounts up or down.

You're right in sort of the ballpark, we have not seen a dramatic shift in those discounts up or down.

Speaker 21: And just one follow up, is that similar to what you're seeing in the contact center or since you're I think the list price was 70 for contact center, any comment on how the discounting in contact center compares to what you've seen in zoom phone? Yeah, no, I don't think you can correlate them. They're very different products with with a very different sales cycle and approach. So I don't think you can try to take a percentage discount necessarily from one product and expect it to apply to a different one.

And just one follow up is that similar to what you're seeing in the contact center versus urethane. The list price was 74 contact center any comment on how.

The discounting and contact center compares to what you're seeing in zoom phone yeah.

Yeah, No I don't think you can correlate them, they're very different products with a very different sales cycle and approach. So I don't think you can try to you know.

Take a percentage discount necessarily from one product and expected to apply to a different one.

Thank you.

We will now hear from Tyler Radke with Citi.

Speaker 22: Yeah, hi. Hi, good evening. So, Kelly, if I look at the midpoint of your guidance for Q4, it's about 1% growth, and I know there's some currency in there, but how should we be thinking about that as a jumping off point for fiscal year 25? What are kind of the puts and takes that would cause growth to be higher than that, and also lower? It does sound like you're starting to see some stabilization.

Yeah, Hi, good evening, so Kelly if I look at the midpoint of your guidance for Q4, it's about 1% growth in it others some currency in there but how.

How should we be thinking about that as a jumping off point for fiscal year 'twenty five what are kind of the puts and takes that would cause growth to be higher than that and also lower it does sound like you are starting to see some stabilization in our in parts of the business, but just just help us frame for how how we should be thinking about.

Speaker 22: in parts of the business, but just help us frame for how we should be thinking about that trajectory beyond Q4.

That trajectory beyond Q4, yeah. So we will obviously give FY 'twenty five guidance on the Q4 call. However, I do think that the.

Speaker 20: Yeah, so we will obviously give FY 25 guidance on the Q4 call. However, I do think that the Q4 implied extra rates and considerations around the macro and if it's stabilizing or improving over time are important considerations.

The Q4 implied extra rage and.

Considerations around the macro and if it is stabilizing or improving over time are important considerations here. We do see we've talked about many great aspects of our business today, you know growth inbound growth in contact center stabilization in our online all could be contributors.

Speaker 20: We do see, we've talked about many great aspects of our business today, growth in phone, growth in contact center, stabilization and all online, all could be contributors that could drive growth in FY25 to be.

That could drive growth in FY 'twenty five to be.

Slightly higher than the implied Q4 exit rate.

Speaker 7: slightly higher than the implied Q4 exit rate, but right now, I think you should look at the exit rate, consider the macro, and take all of that into account as you're modeling. Thank you.

But right now I think you should look at the exit rate consider the macro and take all of that into account as you're as you're modeling.

Thank you.

I'll move on to William power with Baird.

Speaker 23: Great, thank you. Make a quick couple quick follow up. So I guess Eric to an earlier question on AI companion. Can you just.

Great. Thanks.

A quick couple of quick follow ups I guess on Eric to an earlier question on AI companion keenest.

Speaker 23: Talk about where you're seeing the greatest usage. I mean, what are customers most focused on and what's the early feedback look like? And what are customers asking for in AI? Where can you continue to add more value there?

Talk about where you're seeing the greatest usage me, but what are customers. Most focused on what's the early feedback and look like motor.

What are customers asking for NII working you continue to add more value there.

Speaker 3: Yeah, it's a great question. First of all, AI combining includes a lot of features like hey, if you are late to the call, you want to understand what's going on, you know, what kind of, you know,

Yes, Great question first of all no AI combining ease in cruise a lot of features like Hey, you are if you are needed to the call you want to insert a span of what's going on you know what kind of the.

Speaker 3: You know, the point I made, and as long as you can quickly ask why, you know, all those kind of features.

The other point I amazed to Amazon swaths of country, you'll ask why in all those kind of features and also use our human chat and kind of have your composer China solution and a lot of features a bureau of alcohol that right. So on a wall of the key features cost Marie like Asbury for for Us to move forward as imaging summary, right and <unk>.

Speaker 3: And also, use our team chat. You can have your composer chat solution. And a lot of features are built upon that, right? So one of the key features customers really like is where it's, for sure, straightforward, is the meeting summary, right? And after the meeting is over, not only do we generate it.

Imaging Zawahri Nora wanted to regenerate.

Speaker 3: you know, sometimes record a meeting some by now you do not record a meeting anymore, you just record a summary. And that feature works extremely well, we do see among a lot of other features customer already started in the building. I think this one probably one of the highlights, you know, is very easy, you know, to use.

Sometimes every corner meeting some finality of the northern corner began anymore, you're just a recorder a summary, and a lot of future works extremely well, we do see a more a lot of other features customer already started in the morning I think this one probably a while for the highlights it's very easy to use and you'll see the word very in a <unk>.

Speaker 3: And you see the very, very, you know, obvious in our way to enable that.

In our way to enable that feature so again is a lot of other features as well and in like for me I asked who use us.

Speaker 24: So again, it's a lot of other features as well. And for me, I also use the email client. You may connect to any other services you can. You can have you compose email as well. It's just a lot of features. And down the road, very soon, we'll support a wide board with AI companion as well. Almost every service, entire platform, we're going to have the AI companion. And a lot of features. And the AI companion.

Our the clan hemo clad human and Conagra a other services you can bite you kind a happier cabos a humorous about right is there's a lot of features right.

The O'donnell road or worsen was for a whiteboard with Oh AI companies, while almost every service entire platform well can elaborate AI combined so and a lot of features so you know and and of the company.

Okay, great. Thank you.

Speaker 24: Next slide, you enabled, you know, meeting summary and explore so many features. I'm pretty sure you love that. So we got a lot of very positive feedback from those early adopters.

<unk>, you any more meaning a summary, and a straw. So many features I'm pretty sure you love that so we've got a lot of very positive feedback from those early adopters.

Speaker 1: And our last question is going to come from Stephen Beresy with HSBC. Stephen, if you want to go ahead. Oh, I believe Stephen just disconnected. Stephen, are you still out there?

And our last question is going to come from Steven Bercy with HSBC. Steven If you want to go ahead I believe Stephen just disconnected Steven old deal out there.

Speaker 1: If you are not, I don't think Eric is no longer with us. So, you know what, Eric, I'll just turn it back to you for closing remarks.

If you are not I don't think the datacom no longer with us. So you know what Eric I'll, just turn it back to you for closing remarks.

Speaker 1: Yeah, so first of all, thank you all for your time to join our Q3 earning call. I really appreciate it. Wish you all and your families have a wonderful holiday season. Thank you again for your great support. Thank you. Thank you so much, Eric. And again, everyone. Oh, I apologize, Kelly.

Yeah. So first of all thank you all for time to join our Q3, earning call really appreciate wish you all and your families have a wonderful holiday season. Thank you again for your greatest support. Thank you. Thank you so much Eric and again everyone.

I apologize Kelly.

Speaker 1: Again, everyone, this concludes today's earnings release. As Eric and Kelly mentioned, we thank you all for your participation. And from our family to yours, may you and yours have a safe and happy holiday season. Enjoy the rest of your day.

Again, everyone. This concludes today's earnings release as Eric and Kelly mentioned, we thank you all for your participation from our family. It's yours Mcewen yours have a safe and happy holiday season, and enjoy the rest of your day.