Zoom ZM Q2 2021 Earnings Call Transcript

Matt: (00:01) Hello, everyone, and welcome to Zoom's second quarter fiscal year 2021 earnings release. This call will be recorded. At this time I'll hand it over to Tom McCallum, Head of Investor Relations. Tom McCallum: (00:11) Thank you, Matt. Hello, everyone, and welcome to Zoom's earnings video webinar for the second quarter of fiscal 2021. Joining me today will be Zoom's Founder and CEO, Eric Yuan, and Zoom's CFO, Kelly Steckelberg. Our earnings press release was issued today after the market closed, and may be downloaded from the investor relations page on the Zoom.com website. 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. Tom McCallum: (00:46) During this call we will make forward-looking statements about market size and growth strategy, our estimated and projected costs, margins, revenue, expenditures, investments, growth rates, our future financial performance, and other future events or trends, including guidance for the third quarter 2021 and full fiscal year 2021, our plans and objectives for future operations, growth, initiative strategies and the impact to our business from the COVID-19 pandemic. Tom McCallum: (01:16) 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 today's earnings press release and our latest 10-Q. Zoom assumes no obligation to update any forward-looking statement we may make on today's webinar. With that, let me turn the discussion over to Eric. Eric Yuan: (01:46) Hey, Tom, thank you. Hello, I hope you're all doing well. I want to thank our customers, investors and the community for their support of Zoom. Their clear feedback and their trust of Zoom makes a huge difference. As we grow our business from being a startup to a not for the public company, to be a longterm [inaudible 00:02:16] company, we might be facing all kinds of challenges, but no matter how busy we are, no matter what the challenges we are facing, we are always recharged when we think about our customers' support, and become even more motivated to serve them better. Eric Yuan: (02:40) With the pandemic persisting, we are very committed to work apart and are humbled by our role of enabling communications worldwide during this challenging time. As we move work, trends have accelerated during the pandemic. Organizations have moved beyond addressing immediate business continuity needs for actively redefining and embracing new approaches to support a future of working anywhere, learning anywhere and the connecting anywhere. We continue to see meaningful establishment of Zoom's video first, unified communications platform across industries and geographies. Eric Yuan: (03:33) Let me share with you just a few key metrics that reflect this. Revenue grew 355% year over year in Q2. Customers with more than 10 employees grew 458% year over year, and new customers chose Zoom to be their preferred communication and collaboration solutions. We had over 35,000 educators, school administrators and IT professionals from around the world joined our free virtual Zoom Summer Academy. This successful two day Zoom event was our biggest educational event to date, bringing it together so the leadership is remote learning, practical training and the networking opportunities. We remain committed to helping our education customers, including the more than 100,000 K-12 schools who have set it up to use the platform for free during the pandemic. Eric Yuan: (04:52) Moving on to a few recent [inaudible 00:04:55] highlights, we've completed our 90 day plan on security and privacy. A comprehensive summary of accomplishments is available on our website. I'm a very proud of our team's swift and transparent response, as well as the resulting improvements we made to our platform. Although the 90 day initiative is over, security and privacy measures will remain an important part of Zoom's strategy and DNA moving forward as we strive to maintain our customers' and other stakeholders' trust. Eric Yuan: (05:44) We also made two exciting hardware announcements in the quarter. First is the launch of Zoom Hardware as a Service, which offers customers a variety of increasing opportunities for phone and with Zoom hardware from leading hardware manufacturers. This offering makes Zoom Phone and Zoom Rooms more accessible by minimizing friction around hardware procurement. Eric Yuan: (06:16) Second is Zoom for Home, our new innovative category of server experience and hardware device [inaudible 00:06:24] to support remote work use cases. We launched this program with our partner DTEN in July, and this month we announced its expansion to Amazon, Facebook and Google devices. We also achieved significant accomplishment for Zoom Phone. In mid June, Zoom Phone was authorized under the FedRAMP program, enabling federal agencies to consolidate their costly legacy telephone systems onto our unified modern cloud solution. This month we expanded the availability of Zoom Phone service to 25 additional countries and territories. Zoom now provides local telephone service and domestic calling in more than 40 countries and territories. Eric Yuan: (07:28) On a final note, we welcome our new CIO, Jason Lee, former SVP of Security Operations at Salesforce, and our new General Counsel, Jeff True, former EVP and General Counsel at Palo Alto Networks. We are very excited to have them. Eric Yuan: (07:52) Now let's talk about some exciting wins in the quarter. Let me start with a couple of new customers that represent some of the largest companies in their industry. First, we are thrilled to welcome ExxonMobil, one of the largest publicly traded international energy companies to the Zoom family. ExxonMobil develops and applies next generation technologies to help simply and responsibly meet the world's grueling needs for energy and chemical products. They recently used their scale and capabilities to ramp up production to make medical grade masks, [inaudible 00:08:44] and hand sanitizers. We are grateful that ExxonMobil chose Zoom as their unified communication platform. ExxonMobil wanted a solution that would enable them to collaborate reliably and securely with their teams, couplers and partners around the world. ExxonMobil employees are now using Zoom video communications across their global business. Eric Yuan: (09:17) Second, Activision Blizzard, a member of the Fortune 500 has chosen Zoom to modernize and consolidate onto a single communication platform across their business units and gaming franchises. As a leading interactive entertainment company, connecting and engaging the world through epic entertainment, Activision committed to a full enterprise [inaudible 00:09:47] of Zoom Meeting and Zoom Rooms to replace their mix of legacy video conferencing products. Eric Yuan: (09:55) Our ability to expand with existing customers also helped drive our results this quarter. One of the highlights this quarter was the expansion with ServiceNow, who has been a Zoom customer since 2018, using Zoom Meetings for its 11,000 global employees. Since the global pandemic, ServiceNow employees working from home have relied heavily on Zoom's easy to use interface to stay productive and connected with their customers. As the Zoom new platform has become a core piece of ServiceNow's technology ecosystem, this past quarter the company chose to replace its legacy hardware PBX system with Zoom Phone across their organization, further elevating their team's work anywhere experience with famous one-touch communication and collaboration. Eric Yuan: (11:08) Thank you, ExxonMobil, Activision Blizzard, ServiceNow, and all our wonderful customers for trusting Zoom. I love you. All Zoom employees love you. Thank you. In summary, we continue to scale and expand our business to meet the needs of our customers and the global community. I am very proud of our achievements and thank our more than 3400 employees for another exceptional quarter. Let's remain focused on delivering happiness for the customers and the community. With that, let me turn things over to Kelly. Kelly Steckelberg: (12:00) Thank you, Eric, and hello, everyone. Q2 was a remarkable quarter for Zoom, as we continued to rapidly grow and invest in our business to meet the demands of our customers and communities. Let me start by reviewing our financial results for Q2, then discuss our outlook for Q3 and the increased view of our full year FY21. Total revenue grew 355% year over year to $664 million in Q2. This top line result significantly exceeded the high end of our guidance range of $500 million as demand remained at heightened levels combined with lower than expected churn and exceptional sales execution. Kelly Steckelberg: (12:45) For the quarter, the year over year growth in revenue was primarily due to subscription provided to new customers which accounted for approximately 81% of the increase, while subscriptions provided to existing customers accounted for approximately 19% of the increase. This demand was broad-based across industry verticals, geographies and customer cohorts. Kelly Steckelberg: (13:09) Let's take a look at the key customer metrics for Q2. We continued to see expansion in the upmarket as we ended Q2 at 988 customers generating more than $100,000 in trailing 12 months revenue, up 112% year over year. This is an increase of 219 customers over Q1, the highest number of adds in a quarter. We exited the quarter with a total of approximately 370,000 customers with more than 10 employees. We added approximately 105,000 of these customers in Q2, the second highest number of adds in any quarter. Year over year, we added approximately 304,000 new customers with more than 10 employees, for 458% growth. We have continued to benefit from significant growth in our customer segment with 10 or fewer employees as small businesses and individuals adopted and maintain their Zoom licenses for various uses during the pandemic. Kelly Steckelberg: (14:12) In Q2, customers with 10 or fewer employees represented 36% of revenue, up from 30% in Q1 and 20% in Q4 of last year. The increasing customers with 10 or fewer employees continues to shift our billing mix, as these customers generally pay monthly rather than annually as do most enterprise customers. This shift is an important point for our outlook, which I will discuss in just a moment. Kelly Steckelberg: (14:42) Our net dollar expansion for customers with more than 10 employees was over 130% for the 9th consecutive quarter, as existing customers continued to support and trust Zoom to be their video communications platform of choice. Both domestic and international markets had strong growth during the quarter. Americas grew at a rate of 288% year over year. Our combined APAC and EMEA revenue accelerated to 629% year over year and represented approximately 31% of revenue. We will continue to invest in international expansion to capitalize on our brand awareness and the increased global opportunity. Kelly Steckelberg: (15:26) Now turning to profitability, the increase in demand and strong execution drove net income profitability from both GAAP and non-GAAP perspectives. I will focus on our non-GAAP results, which exclude stock-based compensation expense and associated payroll taxes, charitable donation of common stock and acquisition-related expenses. Non-GAAP gross margin in the 2nd quarter was 72.3%, compared to 82.2 in Q2 last year and 69.4 last quarter. The incremental improvement from Q1 reflects our strategy to increase our co-located data center capacity while leveraging the public cloud as needed. We expect gross margin for the rest of the year to be consistent with Q2. However, actual results may vary as gross margin is contingent upon the percentage of free users and the utilization of public cloud during the pandemic. Kelly Steckelberg: (16:23) R&D expense in Q2 was approximately $29 million, up 128% year over year. As a percentage of total revenue, R&D was approximately 4%, which was lower than Q2 last year, mainly due to the strong top line growth. In FYI 21 we will continue to invest in R&D to drive innovation across all aspects of our platform. We also plan to diversify our engineering talent as reflected by our expansion in the US and India. Kelly Steckelberg: (16:57) Sales and marketing expense for Q2 was $123 million. This reflects an increase at 78% or $54 million over last year with investments to drive future growth. As a percentage of total revenue, sales and marketing was approximately 19%, a decrease from Q2 last year, due mainly to strong top line growth and marketing efficiencies from our increased global awareness. Overall, we plan to add sales capacity quickly over the next several quarters. The swift ramping of our sales organization to further capitalize on market opportunity is a priority. Kelly Steckelberg: (17:35) G&A expense in Q2 was $51 million, up 189% on a year over year basis due to higher accrual for telco taxes, correlated to higher billing, professional services and additional hiring to meet the functions of a public company of this scale. As a percentage of total revenue, G&A expense is approximately 8%, a decrease from Q2 last year, as we gain leverage on our investments with a rapid growth in revenue. The- Kelly: (18:03) ...Rapid growth in revenue. The substantial revenue upside in the quarter carried over to the bottom line, with non-GAAP operating income of $277 million far exceeding our guidance, translating to a 41.7 non-GAAP operating margin for the second quarter. This compares to Q2 last year's results of $21 million and 14.2% margin. A significant margin expansion year of a year is due to the steep increase in revenue in Q2, which outpaced the rate of investment. Even as we added over 500 employees in Q2, a 20% increase in last quarter, and a 53% growth year-over-year. Kelly: (18:43) Non-GAAP earnings per sharing Q2 was 92 cents on approximately 297 million of non-GAAP weighted average shares outstanding, and adjusted for undistributed earnings. This result is 46 cents higher than the high end of our guidance, and 84 cents higher than keeps you of last year. Turning to the balance sheet, deferred revenue at the end of the quarter with $743 million, up 309% year-over-year. Looking at both our billed and unbilled contracts, our RPO totaled approximately $1.4 billion, up 209% from $458 million year-over-year. Kelly: (19:26) The increase in RPO is consistent with the strong demand in execution in the quarter. We expect to recognize approximately 72% or $1 billion of the total RPO as revenue over the next 12 months as compared to 62%, or $285 million in Q2 last year. This indicates a shift in our renewal seasonality, which is historically weighted for Q2 and Q4, and has now shifted to Q1 due to the strength of last quarter's performance. Kelly: (19:58) As a reminder, we do not focus on calculated billings as a metric for our business. We have a diverse business that spans from enterprises to individual. With a changing mix of our business, annual billing terms, and the growing level of monthly billing term, such calculations have become less meaningful. Especially, now that we have a full quarter of monthly billings making up a bigger part of our revenue. We ended Q2 with approximately $1.5 billion in cash, cash equivalents, and marketable securities, excluding restricted cash. Kelly: (20:33) Similar to Q1, we had exceptional operating cashflow in Q2 of $401 million. Up from $31 million in Q2 last year. Free cash flow with $373 million up from $17 million in Q2 last year. The increase is attributable to strong collections from the increase in top line growth and higher percentage of monthly contracts throughout the quarter. For the second half of a fiscal year, we expect to increase capital expenditures for additional data center infrastructure. As a reminder, we will see the semiannual cadence of net cash inflows for ESPP to occur Q3. Kelly: (21:21) Now turning to guidance. We are pleased to raise our outlook for FYI 21 for both revenue and non-GAAP profitability. Although, we remain optimistic on Zoom's outlook, please note that the impact and extent of the COVID-19 prices and its associated economic concerns remain largely unknown. Our higher outlook for FY21 is based on our view of the current business environment. For the third quarter, we expect revenue in the range of 685 to $690 million. We expect non-gap operating income to be in the range of $225 to $230 million dollars. Our outlook for non-GAAP earnings per share is 73 to 74 cents. Based on approximately 300 million shares outstanding. Kelly: (22:13) Before giving you the full year outlook, let me provide some context on our assumptions. While, better than expected churn was one of the drivers to our Q2 out performance. We did experience a significantly higher level of overall churn in Q2 as compared to historical rates. As customers with 10 or fewer employees have increased to 36% of our revenue, we are assuming a higher rate of churn due to this mixed shift. From an expense perspective, we continue to focus on investing for growth. Targeting investments that are appropriate for our market opportunity and the size of the business that we have become. Kelly: (22:52) Looking ahead, we expect operating margins to decrease from the peak in Q2 over the balance of this year, as our hiring and scale catch up with a much greater scale of our business. It is prudent to expect margins to normalize lower levels over the next several quarters. For the full year of FYI 21, we expect revenue to be in the range of $2.37 to $2.39 billion. Which will be approximately 281% to 284% year-over-year growth. This implies that Q3 and Q4 revenue will be only modestly higher than Q2, indicating a decline in quarter-over-quarter growth. For the full year of FY21 non-GAAP operating income is expected to be in the range of $730 to $750 million. We expect to deliver non-GAAP earnings per share a $2.40 to $2.47 for the full year, FY21 based on approximately 300 million shares outstanding. Kelly: (23:55) In closing, we executed in the first half of our fiscal year. With our commitment to delivering customer happiness. We believe we will grow to over $2 billion in total revenue this fiscal year. Which will be a remarkable milestone, considering our guidance was below $1 billion in revenue at the start of this fiscal year. we are proud of how our team continued to perform in support of our customers and global community. Thank you to the entire Zoom team. Before we move to our Q&A session. Let me turn it back to Eric. Eric: (24:26) Okay, thank you Kelly. By the way, I wanted to invite you all to our virtual Zoomtopia event, on October 14th and the 15th. There's so many cool features like legal filter. We're hoping to see you all in there at Zoomtopia. Now, let me take back to Tom. Tom. Tom: (24:49) Thank you Eric. With that, let's open it up for questions. If you have not enabled your video, please do so now for the interactive portion of this meeting. I will ask everyone to try to keep themselves to one question. If we have time at the end, we'll do some follow ups, but please try to keep it to one question. Matt, please queue up the first question. Matt: (25:07) First question is from Alex Zukin with RBC. Alex Zukin: (25:11) Thank you. Thanks, Matt. Eric first, I want to say thank you from the leading analyst community. As a parent, as a husband, you've made a substantive difference in all our lives. So I guess the question I get most frequently, Eric is most people are now staring at their Zoom screen probably more than watching any kind of content globally. So outside of starting to show commercials in between your relevant Zoom calls, talk about the biggest opportunity for continued bookings growth, whether it's Zoom phones, opening up the APIs, monetizing consumers, filters that you just showed. The better you do this year, the harder it is for us to know and understand what's the durable growth rate, how do you comp this amazing spectacular performance? So I'll stop there I could go on for a bit. Eric: (26:09) Alex, first of all. I just really appreciate for your continued support for many years. I think you are so right, it looks like there's so many opportunities here. There are all kinds of use cases like my kids off to the zoo, and telemedicine, telehealth. I think it's serious to point out our total priority is to have the people stay connected, and make sure our service always up. [inaudible 00:26:35] based on the customer feedback, edits on features, and make sure when you have multiple meetings, you do not have a meeting for take. I think that's our top priority. So we would like to maybe live for the future, for how to [inaudible 00:08:50]. Again, that's another [inaudible 00:08:52]. Regardless of [inaudible 00:26:55] how to truly make a customer happy. So having them stay connected, especially during this pandemic crisis. Alex Zukin: (27:03) Right then maybe if I could squeeze one in for Kelly. Kelly, you talked about the differences in churn that you're experiencing from the new customer cohort that you onboarded through the pandemic. We've talked previously about what your historical churn looked like for monthly customers. We know, I think a little bit about how it looked in guidance before. Can you level set at a high level, what did you experience with that cohort versus where it's been historically? At a high level, what are you assuming in your guidance for that churn for that monthly cohort of new users? Kelly: (27:41) So remember going all the way back to the S1, we talked about that the monthly customers churn on average about 4% per month, and monthly rate is about 4%. We did see an increase against that in Q2. We have modeled at that same level going forward as we... With all the uncertainty with how long this pandemic will last and what other potential economic uncertainty there is, we've modeled at that same rate going forward. Alex Zukin: (28:12) Got it. Thank you. Eric: (28:14) Thank you. Matt: (28:16) The next question is from Meta Marshall with Morgan Stanley. Meta Marshall: (28:27) All right, great. Thanks and congratulations. Just wanted to get a sense of where you think you are kind of innings, or percentage wise on working with organizations that may have adopted you in a department, or adopted you and part of having multiple services? Displacing those solutions, or having a more full organization discussion? As well as having a follow up discussion, as well as attacking on phone, or rooms, or webinar type services. Do you have the sales teams in places to start having those conversations on broader organization and deployment? Eric: (29:09) Kelly do you want to take it? Kelly: (29:13) Sure. We continue to see growth in the period from both new customers as well as existing customers. Tremendous opportunity with webinars, especially as well as Zoom phone. We actually signed our largest Zoom phone deal to date in Q2. So exciting to see that continued momentum. We also saw customers that were doubling, one of them that quadrupled their existing deployment. So we're still in early stages. When we look at penetration, like we look at it in the global 2000, there's a small percentage that had a significant spend with us. So there're tremendous opportunities still ahead, Meta. Meta [crosstalk 00:29:58] I'm sorry you went back on mute. Meta Marshall: (30:00) Oh Sorry. Just whether you have the sales organization in place to have that gathered conversation? Kelly: (30:08) So as I said earlier, we are hiring very quickly to keep up with all of the demand, that's potential. The team, thank you to our amazing Zoom team which are really working around the clock to keep up with demand today and to support and serve our customers, and the community. But we are hiring. Absolutely, this is one of the biggest priorities for the rest of this year. Meta Marshall: (30:29) Great. Thanks for the congrats. Matt: (30:33) Our next question is from Nikolay Beliov with Bank of America. Nikolay Beliov: (30:37) All right. Thank you my question, just wanting to continue on that topic from the last question, Eric and Kelly, as the business grows at unprecedented rates, can you help us understand what's happening internally? Your customer support organization, your sales organization, your [inaudible 00:30:55] system. The onboarding, like a hyper growth scenario saw, and maybe putting pressure on the systems. Also, culturally what's happening inside your organization? Eric: (31:06) Yeah, that's a good question. So prior to pandemic crisis and when we hit a steady growth, and make sure our systems, process, and procedures everything is doing well. However, during this pandemic crisis I think a business grows is just that unpredictability. The good news on the one hand we had a very solid company culture. Nobody complained, we all worked very hard. We looked at are there any other holes in terms of procedure, or per se. Also, we had a loss of employees from top down of our support resources, customer success management team. It's [inaudible 00:13:44], because there's so many new use cases, new customers. That's why, we hired on also employees. Eric: (31:50) On the other hand, we also wanted to leverage this opportunity. I could spend some other billions to the next level. In terms of privacy and security, and internal process and systems. I think again, we are very committed, right? Every day we're working so hard. What kind of new issues like, even the premium costs of online payments of the subscribers when they try to cancel the service. We were the [inaudible 00:32:15] to respond in a timely manner. Another thing, we're not perfect, but very committed to really double down on our work. That's crucial to make sure to be able to deliver happiness to all the users. Nikolay Beliov: (32:28) Eric, which use cases, new use cases are most excited about and surprise you the most? That's it for me? Thank you. Eric: (32:34) My God, if I talk about a new use cases I probably can speak for four or five minutes. I can give you several. You see the problem [inaudible 00:32:41] of the Virtual Public Tour. Now during the last 10 weeks they have a closed over 50% of the newly launched property in Singapore, over Zoom. Also, the CFK, a corporate law firm in Florida, to have a virtual [Inaudible 00:15:03]. Also, like a Source Coast, Community Services, which is, largest and mental health. So it's part of and can appointment, also, use Zoom. All, for mental health. You know, the mental health has become a very big part. A lot of new use cases like that. So every day I feel very, very excited to see so many new use cases. Not to mention, we just announced a partnership with the United States Tennis Association, all for the virtual experience., its very cool. Nikolay Beliov: (33:37) Thanks so much. Eric: (33:38) Thank you. Matt: (33:40) Our next question is from Tiaz Koujalgi with Guggenheim. Tiaz Koujalgi: (33:54) You guys can hear me? Can you guys hear me? Matt: (33:54) Yeah, we have you Tiaz. Tiaz Koujalgi: (33:54) Hey guys. I think you mentioned one of the customers that you signed this year was ServiceNow. There's the legacy phones, the legacy PBX system with Zoom. Does that mean that your offering video and phone to service to ServiceNow? That they meshed all their conferencing tools with one product? Zoom? Eric: (34:16) Yeah. So, first of all, ServiceNow has been a customer since 2018. They deploy Zoom to increase other video conferencing, web services with the Zoom video conferencing. Over the past several years we already established a grid chart. We also announced a partnership. When you look at it their entire UC is spreading. They also deployed legacy, very costly, very complex, on-prem PBX system. Why not consolidate with one system? We're very confident in the product from experience, [inaudible 00:00:34:53] and architecture. [inaudible 00:16:59] solve for the total cost, much lower, you got experience of much better. So that's why they decided to recreate their legacy PBX system. It's one system, standardized on Zoom's unified communications solutions. Tiaz Koujalgi: (35:11) That, very helpful. Just one follow up. Kelly, you mentioned that you signed the largest phone deal this quarter. Was that also an upsell to an existing video customer? Or was that a new customer who signed up with Zoom phone? Kelly: (35:24) No, it was already a meeting customer as well, a video customer as well. Tiaz Koujalgi: (35:29) Thank you. Eric: (35:31) Thank you. Matt: (35:33) Our next question is from Sterling Auty with JP Morgan. Sterling Auty: (35:37) Yeah. Thanks. Hi guys. So now that the 90 day feature freeze is complete, Eric, I'm kind of curious, where's the focus of R&D going forward? You mentioned diversifying into India in the U.S., how are you structurally changing your R&D effort? Is that in relation to any type of geopolitical pressure? Eric: (35:58) Yeah, first of all, and we accomplished a lot over the past- Eric: (36:03) We accomplished a lot over the past 90 days, but I can tell you that we take privacy and security extremely seriously. I'm not seeing we are at the end of that. I would say the journey has just start. We are going to double down on privacy and security. Inside of that, we also have a big R&D team, and our core technology, our engineering leadership team here in San Jose. We also have an offshore team. Look at a lot of new use cases, not only for enterprise, but also the case, [inaudible 00:00:36:33], K-12 schools, and telemedicine. There's so many use cases. I think for this R&D team, I do not think that we can really handle that in term of scalability. We have to find more talents in a timely manner. That's why we opened up two R&D offices in Phoenix and in Pittsburgh. Eric: (36:56) Also, we like this onshore, offshore R&D model. That's why India also opened up a big office. We hired our President of Product and Engineering, Velchamy, a great leader. With that, we really want to hire engineers. Not only here, but also other sites, also even including remote engineers, because there's so many features and it's hard. That's why I wanted to invite you to join our Zoomtopia, which is our annual user conference. We'd like to share with you very good product [inaudible 00:01:31]. Speaker 1: (37:32) Thank you. Eric: (37:34) Thank you. Eric Yuan: (37:36) The next question is from Richard Valera with Needham. Richard Valera : (37:40) Thank you. Let me add my congratulations on another incredible quarter, team. The question is on pipeline. Kelly, you were sort of on the record saying that you entered Q2 with a bigger pipeline than you had entering Q1. I'm wondering if you could give any similar color on how you entered Q3 from a pipeline perspective, and if there's been any change in the composition of that pipeline in terms of product or geography. Kelly: (38:09) Certainly coming into the quarter, our pipeline is still strong and we're continuing to see demand, but based on our guidance, you can see that the demand for the year was front end loaded. We saw the performance in Q1, the benefit of which we saw in Q2, and that's why the guidance is highlighted and we expect revenue for the back half of the year to be effectively consistent with Q2. Richard Valera : (38:32) Just in terms of the contribution of Phone in the pipeline, has that changed much? Any color at all on how you're thinking about the magnitude of Phone in the balance of the year? Kelly: (38:42) No. It's performing as we expected. As I said, we were really excited to see our largest deal to date and ongoing upsells. Really still can see strong demand for Zoom Phone. We see a lot of potential there for the future. Richard Valera : (38:57) Got it. Thank you. Eric Yuan: (39:01) Our next question is from Tom Roderick with Stifel. Tom Roderick : (39:05) Great. Thank you. Thank you, guys. Great job on another outstanding quarter. Eric, this is going to kind of go in conjunction with the question on Zoom Phone, and just thinking about the unified communications platform, not just a communications tool for video. I'd love to hear about some of the strategic conversations you're having in the context of digital transformation, and what else these customers want you to do. [inaudible 00:39:29] If you could just comment in there in conjunction with how your customers are thinking about your 90 day plan and security, that would be great. Thanks. Eric: (39:39) Yeah, that's a great question. I would say that this pandemic crisis completely accelerated every enterprise, every business customer's digital transformation, because you want to support employees no matter where they are, but the traditional on prem system really is not [inaudible 00:40:00] anymore. That's why you've got all the club is just software service companies doing very well. With respect to Zoom Phone, I think overall that's a part of our video conferencing offering, which would agree video is the new voice. There's no reason for any business to deploy two separate systems, ultimately different experience. Inside of that, when the customers too soon deploy the on prem legacy PBX system, when they migrate to cloud, they want to understand who has the better architecture. They want to consolidate it into one system. That's the reason why we position the whereabouts. Eric: (40:40) Some other SMB customers already deploy maybe some other cloud with the PBX system. They also wanted to consolidate into one system to further solidify their experience. Overall, we even do not think that's for separate market. This is just one thing, video conferencing on a cloud with PBX are converged into one service. That's our story when we talk with customers. The customer really likes that. Tom Roderick : (41:10) Kelly, a quick one for you in terms of the conversation around security, but as you agreed to enable end to end security for not just paying customers, but for all customers, which was a recent pronouncement, I think, what does that do to the cost structure? Is that meaningful? Will we even notice that? Can you just talk about that a little bit? Kelly: (41:31) Yeah, no, you won't see a meaningful impact. We certainly have been investing in both our security team, we're thrilled to have Jason Lee have joined us, and you'll continue to see ongoing investments there, but it will not have a meaningful impact on the margin. Tom Roderick : (41:47) Got it. Thank you. Great job. Appreciate it. Kelly: (41:49) [inaudible 00:41:49]. Eric Yuan: (41:52) Our next question is from Heather Bellini with Goldman Sachs. She's joined in by phone. Heather, press star nine to unmute, star six, excuse me. Heather Bellini : (42:03) Great, yes. Yep, great. Thank you. Thank you so much, and congratulations. I think as Alex started out by saying, Eric and team, just thank you for keeping everybody connected. We're so appreciative that school started today on Zoom. My kids we're apt users today. For the question I had was really just a little bit on Zoom Phone. I know, Kelly, you've just answered a handful of questions, but Eric or Kelly, I'm just wondering if you could share with us, how fast do you think you can see these kind of legacy phone systems, like how fast do you think this work from home benefit can drive displacement of legacy PBXs, which we've all been waiting for for quite a long time? I know this is only sold to new customers, but you have so many of those, or to existing customers, but you have so many of those at this point. Is there any kind of typical competition sphere that you're seeing as you're talking to customers and they're making the migration? Thank you so much. Eric: (43:08) Yeah, Heather, that's a great question. I think prior to this pandemic crisis, you look at the enterprise, a very high percentage of customers, they still deployed with a traditional on prem legacy costly PBX system. However, I think this pandemic crisis, I think it's sort of like a wake up call. You've got to think about how to focus on and embrace digital transformation. Inside of that, a cloud-based PBX for sure is one of the things we've got to look into that. I now think that the [inaudible 00:07:44], as compared to the video conferencing, the pressure is on a lot of enterprise customers with their stream. At the same time, I think they have a lot of other systems, not only for PBX, but also a lot of other systems. They also look at a cloud-based solution. I think this crisis has just accelerated that migration from a traditional PBX into a cloud-based system. Eric: (44:09) Also, Zoom is very well positioned, but if a customer, they do not want to, "Oh, I migrated to the cloud." They also want to look at a new user experience, like a Zoom solution, because this is a one system. I think in the next 12 to 18 months, I would say you will see a little bit higher acceleration rate of enterprise customers to migrate to unified collaboration and communicating solutions at Zoom. [crosstalk 00:44:38]. Heather Bellini : (44:35) Thank you very much. Eric: (44:40) Yeah. Just quickly, in terms of competition, still the traditional legacy systems and some other cloud-based PBXs, but again, Zoom is much better positioned because we have one unified solution. Thank you, Heather. Heather Bellini : (44:54) Thanks again. Eric Yuan: (44:57) Our next question is from Will Power with Robert W. Baird. Will Power: (45:01) Great. Thank you. I wanted to ask a question on the rest of world shrink. You saw a surge in activity there, usage revenue obviously improved significantly as a percentage of the total. I wonder if you could speak to how broad-based that was, was there any particular regions or countries that stood out? I know you've talked a bit about India. How do we think that progressing from here? Do you expect that to continue to grow as a percent of revenue? What might that mean for the margin impact of the business, if any? Eric: (45:30) [crosstalk 00:09:33]. Kelly: (45:34) Go ahead, Eric. Eric: (45:35) Yeah. You look at our free user or paid online subscriptions. It's coming almost everywhere. However, if you look at the number of registers on a cloud website, the top countries are like [inaudible 00:45:49] and US obviously number one, and India number two, Japan number three, Canada and UK number four and number five. I think there's users almost from every country. They subscribe to Zoom because we're easy. It's free. If 40 minutes is not enough, they would like to pay. Some of the big customers, they also try our webinar series and also the enterprise customer might try the Phone service. I think [inaudible 00:46:15] grew because of the brand awareness, I think really helped us. For now we just say, no matter where the users come from, we would like to take a step back and say, what can we do differently to serve them better in terms of have a local data center like we just announced a data center in Singapore. Also, we doubled our India presence and we are going to have a team in the capital [inaudible 00:46:38] from international expansions. Kelly, sorry, feel free to chime in. Kelly: (46:42) No, that's okay. I was just going to say that the streams and the growth outside the world was really consistent between EMEA and APAC. We're very pleased with that. Overall, the market, the pricing is adjusted for the markets, so you shouldn't see significant impact on the longterm margins based on the structure that we have in place for our pricing today. Will Power: (47:03) Thank you. Eric Yuan: (47:06) Our next question is from Rishi Jaluria with D.A. Davidson. Rishi Jaluria: (47:10) Hey, everyone. Thank you so much for taking my question. I'll echo a truly outstanding quarter, I think beyond what any of us could have imagined. I wanted to follow up a little bit on an earlier question, which is some of the moves in China, I mean, stopped free trials, recently stopped direct sales there, at the same time expanding R&D efforts in India and in the US as well. Just what's kind of the impetus for this move? Is this a signal of kind of distancing a little bit away from China, maybe in response to geopolitical pressure? Then for Kelly, what sort of impact would this have from a model perspective, both on the top line and margins? Thank you. Kelly: (47:53) Yeah. We don't have any current plans to move our engineering talent out of China. We're focusing on diversifying it by adding talent in the US and India. That's really the goal. Our leadership team is currently based in San Jose. There's no change in that overall structure. For the longterm, if something were to change, there would be no immediate impact on our service or our ability to provide services to our customers. Sorry, in the short term, in the medium term. Over the longterm, there could be a potential impact on the margins as we would need to replace those talents somewhere else, potentially. Eric: (48:33) It's just down to [inaudible 00:48:35], but revenue-wise, it's very small, no impact. Previously, you look at almost every country, we have online subscriptions, we have direct sales of our channel. In China, overall revenue is very small. The online subscriptions, you need to have a special license. We already sold that before. We would like to signify our go-to-market, because actually the support and [inaudible 00:12:58], a lot of resources. Right now this signifies that. Just as we levied our third party partners with a wider liberty solution, I think that that's where it's sustainable and good from our side. Rishi Jaluria: (49:12) Wonderful. Thank you, Kelly and Eric. Eric: (49:13) Thank you. Eric Yuan: (49:17) Our next question is from Phil Winslow with Wells Fargo. Phil Winslow : (49:20) Hey, thanks, guys, for taking my question, and congrats on another just phenomenal quarter. Wanted to talk about converting monthly users to annual users. Kelly, that was one of the things you talked about on the last call. I wonder if you can give us an update on just sort of what you saw from the call that Q1 cohort during Q2 in terms of your ability to convert those and how should we think about any sort of the promotions, sort of initiative changing going forward? Thanks. Kelly: (49:42) Yeah, of course. Our marketing team is really focused on this, running campaigns and reaching out to these customers to provide them the opportunity to convert from monthly to annual. We were happy with the success that we saw in Q2 and are continuing to focus on this. We've also made some changes to our online buy flow to make this easier for the customers as well, to self serve and upgrade if they are so inclined. We expect to see this continue to be a focus for us as we move through Q3. Phil Winslow : (50:14) Got it. Thanks. Eric Yuan: (50:19) Our next question is from Shebly Seyrafi with FBN Securities. Shebly Seyrafi: (50:24) Yes. Thank you very much. A question for Kelly, you're guiding revenue to be up around 3% sequentially, but if I assume that your customer count is at least flattish Q to Q, your average customer count's going to be up around 16% Q to Q, which implies that your ARPU is implicitly guided to be down 13% Q to Q. My question is, I've never seen a double digit decline in your ARPU before. What would drive that? Kelly: (50:59) Well, as we're sitting here right now, looking forward, I think it's more around the uncertainty around churn and what's going to happen with the overall economy. That's really the uncertainty there and why we're guiding flat for Q3 to Q ... that Q3 and Q4 revenue will be flat, modestly up from Q2. We've had a significant increase in our mass market customers, where there just remains limited visibility in terms of the longterm contribution for those customers. I don't think that we necessarily expect that dramatic increase in ARPU that you're pointing out. It's more around the uncertainty in churn and what does that mean for the top line growth? Shebly Seyrafi: (51:38) Okay. Thank you. Eric Yuan: (51:42) Our next question is from Brad Zelnick with Credit Suisse. Brad Zelnick : (51:46) Great. Thank you so much. I echo my congratulations and gratitude all around. It's nice to see everybody. My question is for Eric. Eric, from a product perspective, how might Zoom in the future be able to go deeper into the context in which communications is happening? I'm thinking about human behavior or human intents, for example, to help make the experience even more valuable. Eric: (52:10) Yeah, that's a great question. That's why please join our Zoomtopia. I think first of all, you are so right. Zoom is not only a communication tool. It helps teams go deep, because our mission is to develop a better service, a better online video conferencing service, even better than face to face meeting, how to leverage AI functionality, like not only have the meeting transcription, but also help analyze that in a timely manner. Eric: (52:40) Let's say if you changed the topic, I give you a quick reminder, "Hey, put this down," so if you're texting or something like that, all of the pictures ... Plus, look at it in the long run, navigated translation real time, and also how to shake hands remotely, a lot of cool features like that. In the past, you look at the flow of a video and the perspective. How do some of the fun features like a video filter and how to make a 3D video, [inaudible 00:53:12] AR, I think a lot of the technologies, not to mention 5G in the future, I think that if you look at the future, a lot of those core technologies can surely make the video conferencing experience much better. Brad Zelnick : (53:26) Thank you so much. Eric: (53:28) Thank you. [inaudible 00:53:28] at Zoomtopia. Thank you. Brad Zelnick : (53:31) I wouldn't miss it. Eric: (53:33) Thank you. Eric Yuan: (53:35) Our next question is Ryan Koontz with Rosenblatt Securities. Ryan Koontz : (53:39) Great. Thanks for the question. In regards to the sales and marketing investment, came in a little light there, and obviously having really strong customer pull for the product. How are you thinking about you're go to market motion, or how you might change your sales strategy relative to your prolific success to date? Are you looking at reseller channels or other technology platform partners to take you to market in the enterprise? Thank you. Ryan Koontz : (54:03) ... get platform partners to take you to market in the enterprise. Thank you. Kelly: (54:06) So the decline in sales and marketing was partly due to the strong top line performance, as well as efficiencies that we're seeing in marketing. When we expect, as a percentage of revenue and sales and marketing to increase through the back half of the year, as we're really focused on continuing to hire globally. We also, if you remember, announced the Master Agent program for Zoom Phone in Q2, and are really excited about that program and expect it to continue to contribute more significantly as we move through the year. And on the meeting side, continuing our mostly direct model, which has been very successful for us today. Ryan Koontz : (54:48) Got it. Thank you. Eric: (54:48) Just briefly, [inaudible 00:54:50] If you've got a marketing deficiency, you look at our market place, you ought to have more than second hand or third party application. That's another way for us to promote our brand awareness, right? More and more integrations, so then it can have our marketing efficient. Ryan Koontz : (55:11) Got it. Thank you. Eric: (55:12) Thank you. Eric Yuan: (55:14) The next question is from Bavon Siri with William Blair. Bavon: (55:19) Great. Thanks for taking my questions and congrats. I guess, I want to touch on something a little more, probably higher level and strategic. Obviously, asked you in the past about the convergence and where does Slack and collaboration fit in? So let's turn this a little bit differently, you're going to host Zoomtopia. And this whole event planning space is a huge market. And it feels like it'd be an obvious fit for you. And you have partners there, but the natural extension of this into events and meetings seems to make a lot of sense. Bavon: (55:47) How do you think about that market? And then do you think about maybe using the stock as a way to buy? But you could also build, I mean, Kelly's got it to R and D coming up. You've got a lot of points between 40 and 30 to spend on R and D. Not all that's going to go to support the existing platforms. So just some sense in the event space, how you think about it, is that a builders buy decision or a partner decision? Thank you. Eric: (56:07) First of all, I think that you have a good question. So you have a bit of a vision right on the fly. You have some good ideas. Actually, maybe after the call, I could connect you with our product managers. I think that you are so right. Bavon: (56:18) Thank you. Eric: (56:19) You look at our Zoomtopia, right? Not only do we have a webinar, but also we need to look at an entire online event management experience. Not only just the real time part, the free event, and the planning, and marketing, and the promotion, the marketing content, and my peers. Eric: (56:39) Operating with a lot of the content, right? I think having sight of that, I think we believe this service as a strategic advisor, to have other quality spent on webinar reach. Having sight of that, I think to myself, due to that, if everything [inaudible 00:56:59] offering you a partner. Maybe acquired somebody, I think is flooded with help. But [inaudible 00:57:05] wise, you are so right. That's got to be our focus, our priority. It's low hanging fruit, right? Bavon: (57:12) Thank you. Eric: (57:14) Thank you. Eric Yuan: (57:14) The next question is from Walter Prichard with Citi. Walter: (57:20) Thanks. I'm curious this quarter, or just as it related to the really strong new customer ads and the revenue that came from that channels, how many... Are you seeing an uptick in customers that are coming in through displacements that had, maybe not an older generation solution, but had tried something in the last three to six months and weren't happy with it and switched over? Kelly: (57:41) I don't think that we saw as much of that. I mean, it's definitely... Customers have been using something. I think that what has happened over the last four to five months is people have realized that the solution they had in place just wasn't up to the strength of what it needed to be in this pandemic. And so we've continued to see amazing brands move over from some other competitors, as they're really looking for something to ensure that they can keep their employees really effectively engaged, while keeping them safe as well. And then of course, we're super excited about some of the school districts that we've seen sign up. You know, we have the top two school districts in the U.S. as our customers today. So that really highlights the scalability of the platform and them wanting to ensure that they have a really reliable solution as they went back to school. Walter: (58:37) Then, when do you think you will get phone customer accounts? Any horizon on that? Kelly: (58:43) That's one of the things we're considering Walter, that we'll talk about. We said that for Zoom Phone, we'll give milestone updates. We'll look at it at Zoomtopia, and see if that makes sense. The last update we gave was actually at the anniversary date of Zoom Phone. So we might wait until then. Walter: (58:57) Okay. Thank you. Kelly: (59:00) Thank you. Eric Yuan: (59:02) Our next question is from Matthew VanFleet with BTIG. Matthew: (59:06) Hi guys. Thanks for taking the question, a great quarter there. You talked a little bit about channel partners, still remains a fairly low portion of your overall sales, but curious what the uptake is in total partners registering as part of the program? Is it something that you're proactively doing, or is it just the demand for the product sort of pulling them in? And then on sort of a related note from an international market perspective, do you feel like you can hire aggressively enough from a sales headcount internationally? Or do you need to look at partnerships in specific markets that could be smaller growth areas, but growth areas, nonetheless? Kelly: (59:49) So from the hiring side, we definitely believe we can hire everything that we need internationally. We've really invested in our talent acquisition team, and are doing that on a broad base around the globe to ensure that we are able to hire as quickly as possible. As you know, there's a little bit of a longer lead time, or notice periods internationally, but we're hiring as quickly as we can. And then in terms of the uptake and partners in channel, we don't give out those specifics. But we are continuously looking at our channel programs to ensure that they are not only competitive, but driving the results that we want. So it's something we evaluate on a constant basis. Matthew: (01:00:30) Okay. Thank you. Eric Yuan: (01:00:34) Okay. Our next question is from Quinton Gabrielli with Piper Sandler. Quinton: (01:00:38) Hey guys, thanks for taking my question and congrats on a great quarter. Really, just one quick question from our end. Obviously, you guys saw some really strong enterprise traction for Q2. I'm just wondering if we could get some idea of the percentage of revenues from enterprise customers compared to that 23% we saw in the last quarter? Thanks. Kelly: (01:01:01) We are sharing that the revenue. We don't call out specifically customers, but we... Sorry, enterprise customers, but that the revenue from effectively customers with fewer than 10, was 20% in Q2, which is consistent with previous quarters in that same range. Quinton: (01:01:21) Got it. Okay. Thank you. Eric Yuan: (01:01:26) Our next question is from Eti Quitone with Oppenheimer. Eric Yuan: (01:01:40) Eti? Okay, we'll come back. Our next question is from Alex Kurtz with KeyBank. Alex: (01:01:47) Yeah. Thanks. Thanks for taking the question. Actually, someone at Zoom did a good job because we just switched our school district from Google Meeting over to Zoom for the start of the fall semester. So someone deserves a raise. Thanks. So Kelly, as you think about op ex training into next fiscal year, I know you aren't going to talk explicitly to it yet, but there's a lot of turn to assume, especially in that Q1 of next year. And you have a lot of investments that you're making as far as R and D, and sales and marketing. As we're working through our models and looking into op ex levels from Q4 to Q1, how should we be... What's a framework for that? Kelly: (01:02:29) Yeah. So you should expect the operating margins to decrease incrementally each quarter, going forward as we are continuing to, as you said, invest in R and D, and invest more in our sales and marketing teams as well. And getting towards that longer term margin that we've talked about, historically, we're going to talk in more detail around this at analyst day. But the last time we updated you on this, we still said that our longterm margins were around 20%. So I think you should assume we're getting more in that range, near to that, than to 41.7%. Alex: (01:03:05) Okay. Eric: (01:03:09) Alex, by the way, if your kids school district has any questions or any feedback with Zoom, let us know. You know Zoom very well, and can't be there... Alex: (01:03:20) I'll send them right to you, Eric. Eric: (01:03:22) Thank you, Alex. Eric Yuan: (01:03:26) Our next question is from Ryan McWilliams with Stevens. Ryan: (01:03:32) Thank you guys for the question. So for Zoom Phone, pretty unbelievable rate of achieving global service coverage, so congrats on the expansion there. Kelly, when you mentioned doubling or tripling the Zoom Phone seats and various appointments, is that a part of us expanding global service coverage? And have you seen more enterprises trialing Zoom Phone as a result of the additional coverage? Kelly: (01:03:55) So certainly international expansion, like we said, historically, that was the biggest opportunity for us. And I think for example of that, is the two largest Zoom Phone deals in Q2, we're outside the U.S. So that really shows the strings and what the international coverage is bringing to Zoom Phone. And sorry, what was the other one? Oh, enterprise customers trialing Zoom. Yes, absolutely. There are some amazing names that we can't talk about yet, but we're excited about the traction that we're seeing in the enterprise customer base as well. Ryan: (01:04:29) So that is yet to come. Got it. Eric Yuan: (01:04:33) Our next question is from Pat Walravens with JMP securities. Tiaz Koujalgi: (01:04:37) Oh, great. Thank you. If she comes in on time, I'm going to give you some real feedback from one of your customers. Oh, here she is. Gigi: (01:04:45) Hello. Tiaz Koujalgi: (01:04:47) Okay. So Gigi's school also just switched from Google to Zoom. And Gigi, what is it that you like best about Zoom? Gigi: (01:04:55) The breakout rooms. I thought they were really convenient, because we have a lot of students in our cohort, our group, and it's really hard for all of us to talk at once. So she puts us in six breakout rooms and I have four or five students with me. And it's really nice to talk to them, do work with them, check answers instead of having 40 kids in one huge group. And you can never get to talk. That's why I love breakout rooms so much and my teachers love it too. Tiaz Koujalgi: (01:05:26) Thank you, Gigi. Kelly: (01:05:26) Great. Thanks for the feedback, Gigi. Tiaz Koujalgi: (01:05:31) So my question is... So Eric, when everyone's working from home, how do you make where you work an attractive place to work? Eric: (01:05:41) First of all, your daughter, Gigi, it is common to minimize day to day. I hope with the lack [crosstalk 00:01:05:51]. Tiaz Koujalgi: (01:05:47) Oh, good. I'm glad. Yeah. Eric: (01:05:50) So speaking workplace, I think for now, I think for the foreseeable future, we all need to work from home. We've got a good thing about a longterm planning. So meaning after pandemic crisis over, what's the work place look like? We've talked to many customers, partners, we believe most all are working from home, which then will stay? But I'm not seeing all of us keep working from home. It's very, very likely it's a hybrid, meaning twice a week or three days a week you can send all employees back at home. And some other times we all keep working in the office. I know also, you can further consolidate a lot of the small offices, right?You do not need to have offices everywhere anymore. You also can have finance almost everywhere. And of course, even for the workplace today, look at a lot of companies, it's a very big open space. I think that maybe not work anymore in the future. Good news, we do have a plan for next 10 maybe 12 months, we can optimize what the future workplace look like. But again, no matter what, I think the tools like this and still are still going to help. Tiaz Koujalgi: (01:07:07) Okay. Eric Yuan: (01:07:10) You have time for one more question. The last question is from Jonathan Keys with Summit Insights Group. Jonathan: (01:07:16) Great. Okay. Snuck me in there. I add my congratulations to the quarter and thank you for getting me in here. So I guess I have my one question as well as, if I can get clarification. The clarification first, maybe is more for Kelly. Kelly, you had said last quarter, you're modeling in the assumption that your sales teams would start being more moderate or more normalized level of business activity. I didn't... I noticed that wasn't in the guidance in the commentary this quarter. Is that still the case then, that carry over from last quarter? That's a clarification. My real question is, can you tell me about the discounting on the pricing that you have for the enterprise RFPs? Are you seeing a lot of that? Are you seeing a good amount of that? Thanks. Kelly: (01:08:09) So in terms of our sales rep productivity, as you can imagine, it was in an extreme high level in Q1 and also extremely elevated in Q2. As we looked forward to Q3 and Q4, we have modeled it certainly to be lower than that, but still higher than what we saw last year. So it's kind of somewhere in between what we thought for the first half of this year, but where it was exiting FY20. Then, in terms of enterprise discounting, we don't disclose specifics around that, but we haven't really seen a significant change in the buying patterns of our enterprise customers. Jonathan: (01:08:51) Great. Keep up the good work. Thanks. Eric Yuan: (01:08:57) Okay. That wraps up our Q and A. Speaker 2: (01:09:00) Great. And I think we'll turn it over to Eric for any final comments. Eric? Eric: (01:09:04) Is Eti still available? It looks like he still had questions, right? Nope. Eric Yuan: (01:09:12) No, I don't think Eti is going to be asking a question today. Eric: (01:09:16) Yeah. So thank you all for joining us today and we truly appreciative for your time. It has been a meritable post op to our investors and entities. We appreciate your continued support for Zoom. Thank you all. See you next quarter. Thank you. Kelly: (01:09:35) Bye. Thank you. Speaker 2: (01:09:36) Thank you. Eric Yuan: (01:09:37) Thank you everybody. Speaker 3: (01:09:40) Goodbye.