Zoom Video Communications, Inc. (NASDAQ:ZM) Q4 2023 Earnings Call Transcript

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And because the buyer is different, right? The good news over the past 12 months, we learned a lot, working to sort of change our go-to-market strategy, right? And make sure all those traditional customers no matter which on-premise solution and deploy or other cloud contact center deployed, we should let them know, right? Zoom has very scalable contact center solutions like those third-party resellers, right, and also we need to change our go-to-market model for contact center because the product works so well. So that part, I think we need to focus on this year.

Kelcey McKinley: And our next question will come from Tyler Radke with Citi.

Tyler Radke : So clearly, the profitability guidance was much stronger than consensus and you’ve talked about some of the hard decisions you’ve made as it relates to restructuring. Kelly and Eric, I’m wondering just about your willingness to kind of expand margins from here. Obviously, you’re guiding to a pretty low revenue growth for the coming year of about 1%. But how do you just think about the puts and takes on future margin expansion from here in a scenario where you don’t get a reacceleration in total revenue?

Kelly Steckelberg : Tyler, we’re always focused on being as efficient as possible in our gross margin. And you’ve seen — we said we expect to be 79.5% for next year, which is right on top of our long-term target margins. In terms of our operating margins, we want to always watch for opportunities for investment in top line is that’s really what we are driving for. So we will continue to make these decisions and watch for opportunities throughout the year if we see opportunities to invest in go-to-market, maybe channel programs, anything that we can do to drive top line growth, that would be our first priority. But as we said in the prepared remarks, we’re going to balance that with profitability. So we’re certainly committed to the guidance that we set, I don’t think we’re committing to expanding beyond that today. As again, our first priority is continuing to accelerate through go-to-market efficiencies as well as continuing to expand our product portfolio.

Kelcey McKinley: UBS’s Karl Keirstead has the next question. But Kelly and Eric, he’s on audio only. So he won’t appear to you via video. Karl, go ahead.

Karl Keirstead : I’m good. Thank you. Sorry.

Kelcey McKinley: No problem with that. In that case, we’ll move on to Siti Panigrahi with Mizuho.

Sitikantha Panigrahi : Thanks for taking my question, Kelly and Eric. So when you think about this year’s growth, I know you’re expecting some online segment to kind of bottom at some point. So what’s your expectation when you think about online segment versus enterprise? I know this is, again, renewal will come in Q1, Q2. And what are you now pushing to our customer during renewal? I know last few years, it is Phone. So what other products you’re right now pushing to renewal.

Kelly Steckelberg : So in terms of the expectations for online this year, they are consistent with what we’ve been saying for the last couple of quarters, which we expect it to stabilize during mid next year from a dollar amount, meaning starting to see the — we’ve seen it continue to decline quarter-over-quarter from a dollar perspective for the last probably five or six quarters. And when we get kind of like Q2 to Q3 of next year, we expect to see that start to stabilize, which is great. When you look at all the initiatives that are in place. And then — I’m sorry, the last part of your question about renewals was about?

Sitikantha Panigrahi : Also Enterprise part of the business, how you’re thinking about the growth and renewal.

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