Zoom Video Communications, Inc. (NASDAQ:ZM) Q3 2023 Earnings Call Transcript

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Kelly Steckelberg: Yeah. I think it’s very similar to Zoom Meeting licenses in the aspect of as long as you have a hybrid workforce, you need the right technology in your conference room. Other — to ensure that you have this inclusive experience that we have all become so accustomed to and we continue to listen to our customers, customers work on innovations to ensure that we provide that. But I don’t think it’s going to go away. I mean we will see what happens, right? I think it’s still yet to come to see what happens with like commercial real estate. However, Zoom Rooms and the importance of those in a hybrid workforce, I just — I can’t tell you how important that is. I can’t stress enough the importance of that and that’s really what our customers are seeing as well as they are in some sort of state of a hybrid work environment.

Matthew VanVliet: Great. Thank you.

Eric Yuan: And also, Matt, another thing just quickly, so it used to be like you look at the conference room, right, most of the usage are used internal, right, for internal cost. Now look at the Zoom Rooms, that’s not the case. A lot of customers are leveraging Zoom, right, talk to the customers and the partners, right? That’s one difference, because that’s the reason why customer like Zoom, right? When you talk with the customer partners, you want to make sure I have the best experience, right? And another thing even for those companies who might think about laying off employees and reduce number of the employees. Guess what? Less taxes, but more conference rooms. Then otherwise, what can you do, right, to double down our customer and partner, right? And that’s why we still see the great opportunity ahead of us.

Matthew VanVliet: Thank you.

Operator: And we will move on to Tyler Radke with Citi.

Tyler Radke: Hey. Thanks for taking my question. Kelly, in terms of the Q4 guide, I understand that currency was a bit of a factor there on the lower outlook. But can you just unpack kind of what you are assuming from a macro perspective? Is the Q4 guide relative to what was implied last quarter, is it incorporating churn getting worse in SMB or weaker net adds or maybe you are seeing something on the Enterprise side? Just help us understand the non-FX side in terms of what you are expecting for Q4.

Kelly Steckelberg: Yeah. So in the Online segment of the business for Q4, we expect churn to be pretty much in line with Q3. I mean it’s likely that number is going to bounce around a little bit quarter-to-quarter and that’s going to all be visible to you now as we report it, but we are not forecasting any dramatic changes there. And then in the Online segment, I would say that, the — I mean, sorry, in the Enterprise segment, I would say, the biggest change that We are seeing is just this continued push to deals being at the back end of the quarter. And so that linearity — over the last few years, we had a much more balanced linearity in our Enterprise segment and what that leads to, of course, is deals contributing to revenue in the quarter and We are seeing much less of that as these deals are going back to the more traditional back end, really, really back end of the quarter.

Now we have the benefit in of having kind of the two periods of December 31st close and then the January 31st close, but we are expecting the linearity more consistent like with what we have seen in Q3 than what we saw a year ago.

Tyler Radke: Thank you.

Kelly Steckelberg: Yeah.

Operator: And we have time for one additional question from Karl Keirstead with UBS.

Kelly Steckelberg: Hi, Karl.

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