Matthew Bullock: Hi, Eric, and Kelly. Thanks for the question. I’ll be asking one — we have a microphone today regarding Zoom’s progress and roadmap for Contact Center product development. Can you provide an update on the company’s near-term priorities in terms of functionality improvement. And then the longer term where is the company’s focus to better position the offering for large-scale enterprise deployments? Thanks.
Eric Yuan: Yes. Great. So first of all, I want to tell you from architecture perspective, we are ready already for bigger, very, very big aligning with customers in terms of number of concrete agents, and we did a test, it works well. For now, but just focus on the future set. Again, we already have lots of features, most of the customers they can deploy Zoom Contact Center without any problem either migrate from legacy contact center solutions providers or migrated from the other cloud solution providers. In terms of new features, I think in next few quarters, like one big feature is PCI compliance, right. We need to support that. And also how to support channel partners, right, and also all of those features, may not be the core features but also like PCI compliance and also the support of the channel partners, right.
All of those features, sort of like enterprise-related. So, and we’re also working on that and also some like Workforce Management and Quality Management further enhance that and also add a lot of AI features as well. I think, as you can see, in the core feature set already is there, we just need to add a few here and there and I think we are almost 100% ready. Like even for social media channel we already support and the other — like in the social media channel, how to support more the channels like WhatsApp, right. How to add a WhatsApp there. It is just some corner feature here and is there in the next few quarters. And that’s team working very hard on that.
Matthew Bullock: So, super helpful. Thank you.
Matthew Bullock: Appreciate it. Thank you.
Operator: Okay. Our next question comes from Mark Murphy with J.P. Morgan. Mark, are you there? Okay, will move ahead, it’s alright.
Kelly Steckelberg: [Multiple Speakers] Excuse me, he just came off mute, there you go.
Eric Yuan: Hi, Mark.
Unidentified Participant: Sorry about that. This is [indiscernible] on for Mark Murphy. Thanks for taking the question and congrats on all the milestones. You mentioned in your prepared remarks about how AI Companion is into your Contact Center suite of solutions. In our discussions with industry contacts, those sort of applications for gen AI have been pretty scaled — pretty strong and a lot of customer interest. Are you guys seeing a similar pattern with the customers, is that an area where you’re seeing kind of an outsized interest to utilization of AI tool? Thanks.
Eric S. Yuan: Yes. I think it’s very similar. I mean, you look at a Zoom meeting product, customers discovered the Zoom AI Companion to help you with a meeting summary and after they discover that feature, and they would like to adopt that. Contact Center is exactly same thing. And like Virtual Agent, Zoom Expert Assist, those are AI features, manager can understand what’s going on in real time and also agent can leverage AI to get real time knowledge base and any update about these customers. All these AI features can dramatically improve the agent efficiency, right, that’s the reason why it’s kind of we’re not take a much longer time for those agents to realize the value of AI features, because it is kind of very easy to use and I think the most adopting, I feel like Carnegie Center AI adopt rate probably faster than the other features, so called services.
Unidentified Participant: Thank you very much.
Eric Yuan: Thank you.
Operator: Okay. Our next question comes from Matthew Harrigan with Benchmark.
Matthew Harrigan: I’m sorry, I actually wasn’t — I didn’t have my hand up. But since you asked, do you have any thoughts on the relative macro strength you’re seeing in different markets pacific rim, Japan obviously, Buffett was just extolling the virtues of Japan, it is an investment area right now, Europe, U.S., etc. Thank you.
Kelly Steckelberg: Yeah. We agree, we see Japan as certainly a very important market for us and it is a core focus for FY ’25 is reinvesting and reinvigorating our go-to-market teams in both EMEA and APAC. We have new leadership in some of those markets and are really excited again about the quick start the teams being in market and we’re ready to go and look forward to great things from them this year.
Matthew Harrigan: I’m very facile of that mute button, since I was even expecting being called on, so I probably — I should get brownie points for that.
Eric Yuan: Thank you.
Kelly Steckelberg: Good job. Good to see you, Matthew. Thank you.
Matthew Harrigan: Thanks.
Operator: Thank you. Our next question comes from Peter Weed with Bernstein.
Peter Weed: Thank you very much. I really appreciate all the detail and it’s obviously pretty exciting news to see all the expansion opportunities going on with the enterprise customers, along with kind of maybe a fore coming in with the Online customer groups. I guess two follow-ups, got around the enterprise customers. I don’t think you commented on how churn is evolving with those customers. And obviously, with continued tailing NRR. I’m trying to unpack what portion of that coming from churn versus what portion of that is coming from the kind of continued refresh cycle you have with like long-tenured customers that are still coming down on seats. And then the second part is kind of you look through on that NRR and you’re talking about some acceleration going on later this year and I think that’s starting to mixed in and customers that no longer those long tenure that has seats coming down and it’s really being replaced by those that expansion is really in functionality is coming in.
If you look at those customers that are kind of past their seat readjustment how expansive are those customers that we can maybe, look forward to out a year or so being a greater portion of the mix.
Kelly Steckelberg: Yeah. So it’s a really good point here. So we’ve talked about this a few times, but in FY ’24, we know — we saw that the majority of our customers had a renewal event. So they had the opportunity to work with us as they needed to potentially right size their seat count. Again, our renewals team has done an amazing job of taking the opportunity to talk to them about the opportunity to upgrade to Zoom One, to potentially add-in Zoom Phone or additional products. So, maintaining that spend. So we’ve seen some shifting around in terms of the overall portfolio, but really focused on maintaining that spend, and what that does is it really situates us very well as those customers start to grow again that the customers are now sitting in different SKUs that potentially are more retentive.
And also at a higher price point, honestly, that they can grow into. As they start adding seats again, we do see there’s going to be a much lower percentage of our customers that are up for renewal this year that didn’t have a renewal event last year. So, we’ve seen again the majority of our customers, if they had something to work through in terms of rightsizing, we’ve seen the majority of them had the opportunity to do that in FY ’24, so we expect that to have a much lower impact in FY ’25.
Peter Weed: And the churn side of it. How much of the roll-off and NRR is because churn has gone up or is it continuing to be what it has always been on the enterprise side pretty stable?
Kelly Steckelberg: It’s been pretty stable. We did — we’ve talked about, these customers that we’re rightsizing. You saw — given the reduction that we saw across our customer base and you saw generally in organizations last year there was some impact for that, but the churn rate themselves have been pretty stable. And you remember that our net RR number is a trailing 12-month metric. So you’re likely going to see a little more decline in that metric before it starts to reaccelerate again along with our revenue that we’re expecting to see at the back half of this year.
Peter Weed: Thank you. I appreciate it.
Kelly Steckelberg: Yeah.
Operator: Yeah. Okay. Thank you. Our next question comes from Shelby Seyrafi with FBN Securities.
Shelby Seyrafi: Yeah. Thank you very much. So adjusted for the two fewer days in Q1, you’re guiding for a 3.6% — 4% growth in Q1 and for the year, you’re guiding for about 1.5% growth. I know you are bottoming Q2 but it seems like with a reasonable projection still going to be like 2% growth roughly half the 4% growth in Q1 in the back half of the year, you’re going to have these new products ramping, the Phone, the Contact Center, AI, etc. I’m trying to understand why you don’t expect an adjusted revenue growth acceleration in the back half instead of the implied deceleration, I get in my model.
Kelly Steckelberg: Yeah. We do — we are guiding to 1.8% in Q1. So that’s the outlook that we’re giving. If you’re backing into something different, but the guidance that we’re giving is a reminder is 1.8% and then 1.6% for the full year, with the decline that we’re expecting from a year-over-year growth perspective in Q2.
Shelby Seyrafi: Let me be clear, but Q1 has a 1.8% hit from the two fewer days. So adjusted for that is 3.6% growth in Q1, right. So apples-to-apples 3.6 goes down something like 1 or 2 in the back half of the year and you have new products ramping in the back half of the year. So, I am trying to [Multiple Speakers] on that.
Kelly Steckelberg: Yeah. So as I mentioned in the prepared remarks, we are not assuming any improvement in the overall macroeconomic outlook and/or changes significantly in terms of our international contribution. So all of that combined, we’re taking what we believe to be an appropriately prudent outlook for the year.
Shelby Seyrafi: Okay. Thanks.
Operator: Okay. Our next question comes from Catharine Trebnick with Rosenblatt Securities.
Catharine Trebnick: Hi. Thanks for taking my question. Much appreciate it.
Kelly Steckelberg: Hi, Catharine.
Catharine Trebnick: So back to the Contact Center, to beat a dead horse, it seems like there is this — a lot of the Information I gathered was there’s a big push for light contact centers and it seems that Zoom fits it quite well with your pricing model. And when I say light, I mean those are non-agents versus agents. So, we’ve like a split for the quarter that you were willing to share that would be agent versus non-agent. I’m just trying to get a good handle on that growth outside the traditional agents for a license because there seems to be a good opportunity there.
Eric Yuan: I think direction-wise, you’re still right. And on the one hand for the real human agent they still need a modern contact center solution while working hard on that to replace legacy vendor solutions or other cloud-based solutions. On the other hand and if it is more and more demand I think on the customers, they are not going a human agent anymore, right. can have a virtual agent. I think that is the reason we also sell Zoom Virtual Agent as well. I think maybe in the next few quarters and maybe ready to disclose that, for now I do not think we are ready to disclose that number, but we focus on both side and either you do not have more agent, you can have the AI. This is good or you can buy agents, that’s okay too. So — and that’s our plan.
Catharine Trebnick: All right. Thank you.
Eric Yuan: Thank you.
Operator: Okay. Our next question comes from Peter Levine with Evercore.
Peter Levine: Well, great, thanks for squeezing me. And I’ll just give you a quick. Kelly, your comments on M&A, can you share with us what you’re thinking in terms of inorganic contributions, but what area would you consider is at CCaaS, is it like workflow optimization, you have got collaboration, but any sense on kind of where you’re thinking or how you’re thinking about adding to the portfolio. Thank you.
Kelly Steckelberg: Yeah. We’ve been exploring opportunities actually across all of those areas, Peter, we look for opportunities to either accelerate what we already have, which would obviously be in the CCaaS space and a good example is, what we did in the past with Solvvy around our Zoom Virtual Agent product or something that sits a little bit next to it which Workvivo is a great example of that as well. So we’re continuing to look in areas both within our current portfolio as well as around us with things like productivity tools. That’s how we’re thinking about. Eric, is there anything you want to add?
Eric Yuan: Yeah. You’re just right on, just either technology-driven or just expand on the cap[ph] or maybe double down on our existing services. Pretty much those three things. We’re interested in all three.
Peter Levine: Thank you.
Eric Yuan: Appreciate it. Thank you.
Operator: Okay. We only have time for one more question and that comes from George Iwanyc with Oppenheimer.
George Iwanyc: Thanks for taking me. Kelly, maybe expanding on your comments on the sales side and the reorg, how do you feel about your productivity in North America and internationally, and when you look at investing this year, where are you putting the most effort?
Kelly Steckelberg: Yeah. So you saw in our results for Q3 and Q4 that we had reacceleration and sales productivity in the back half of FY ’24, and again, off to a really fast start for FY ’25. So excited about that. We are investing in both direct and channel on a global basis, as it’s really important that we keep fueling the growth driver that we have here in North America, but also reinvesting and reinvigorating our international markets as well.
George Iwanyc: All right. Thank you.
Operator: Okay. Thank you, everyone. This concludes our Q&A and. I would now like to pass things back to Eric for closing comments.
Eric Yuan: Well, thank you all for your support and thank you all for your time. Really appreciate it. And see you next quarter. Thank you.
Operator: Again, this concludes today’s release. We thank you all for your participation — from our family to yours. Thank you.
