All right, great. Morning, everybody. Welcome to the 20th KeyBanc Capital Markets Emerging Technology Summit. My name is Jackson Ader, Enterprise Software Analyst here at KeyBank. We are thrilled to have Michelle Chang from Zoom join us this morning. So just to set the stage, we've got about 20-25 minutes. I'll ask a bunch of questions, but then audience, be ready. I'll ping you guys a couple of times. If you have any questions, raise your hand, but we'll try and do our best to make sure that we hit everybody's questions in the room. I think that's about it, right? Michelle, do you want to just quickly introduce yourself, introduce the company, and then we'll get started? All right, so let's see. Michelle Chang, CFO of Zoom, actually just started in October, so it's been about 25 years at a competitor, Microsoft, and just really excited to talk about where Zoom is going. I think we have a ton of brand awareness, and yet we're in this kind of pivotal moment as a company, so excited to get down there. I'm sure we'll talk more about it. Can we just talk about your background at the competitor? I mean, your CFO position at Microsoft in a particular division, but then what prompts the move from divisional CFO to now standalone public company CFO at a competitor? Yeah. So let's see. 25 years at Microsoft, I won't bore you with the details of where I went, but think about three primary roles. I was a CFO of what they call their Modern Work business, which is like Office, Windows, and Teams during the pandemic. So got a really deep, honestly respect for Zoom as a competitor at that point. I was the CFO of our Cyber Division, and then I finished being the CFO of Microsoft's commercial unit, so from a go-to-market perspective. And honestly, I joined Zoom really over an arc of conversations that happened between Eric and I starting in the summer that really talked about his vision. He'll call it Zoom 2.0, but really pivoting from this iconic company that helped the world in the pandemic. But we got talking over a lot of conversations about where he wanted to go with it. We talked broadly at Zoom about three primary priorities that we have right now. It's a good frame for so many of our conversations and why I got excited and why I made the choice to leave, which is the first priority is really, and something that Zoom has been working on quite a bit, which is taking this iconic brand of meetings and moving to what we call a more platform-based. Our platform is called Workplace. Think of this as like you're in one place where you can get all your work done. You don't have to toggle tasks. You're doing chat as well as meetings to phone, to email, to calendar, to docs, and many other things. So that's a central place where you can go to kind of get work done. That's sort of Zoom's first business priority. The second thing that Zoom has been working on that got me excited is they've moved into natural adjacencies in two primary areas. I'll just talk about the two that are driving a big part of our growth, which is Contact Center and then employee experience in a product that we have called Workvivo. So I got excited about the seeds and the signals as I began to kind of sort through things of really the diversification that Zoom built. And I think, and let me do the third one and then kind of wrap with some general comments on Zoom. The third thing that is a major priority for Zoom is really not dissimilar to many, I'm sure, but AI. And not just putting AI in kind of the core of our product, but in Zoomtopia, we began to talk about AI monetization and where we want to go in higher value scenarios. So beyond sort of the basics of kind of where I think a lot of customers are using AI today. So just as Eric and I got excited, it felt like a really good path for the future. There were a lot of those tough seeds planted. And yet, as I began to think about, well, what can I do to help the company? How can I bring sort of what I learned at Microsoft to help a company scale? Got really excited about things that I could also help mature in terms of having seen an AI transformation, having frankly seen many transformations over my 25 years and where I could really help Zoom. Can we stick with that third priority just for the time being on AI? You had AI 1.0, Zoom's now kind of talking about their AI 2.0. What's the difference? And then also, we'll talk about monetization maybe after you set the stage there. Perfect. So yeah, I wasn't here for the 1.0. I joined for 2.0, but think of it as when most users experience AI from a workplace, if you will, fashion, they already kind of have that consumer exposure, and so quite often in the workplace, it's, I couldn't attend a meeting, summarize a meeting, and so it honestly sort of started in the meeting scenario, makes sense from a Zoom perspective, and really, AI Companion 2.0 is just us really bringing that from meetings into our platform, so bringing AI value to phone, for example, bringing AI value to chat, bringing an AI companion that can look across that entirety of kind of your work scenario, and so I always like to tell this with this group in particular, but I just finished an earnings cycle, right? Let me just paint a picture of what it looks like to use it. You have a meeting with an analyst. What were the last things they said? You're just writing it, sorry, in a left-hand rail. What were the last things they said about our stock? When was the last time I met with them? What were the notes about it? What did we talk about? What are they writing about my competitors? When you're prepping for earnings, what are the broad themes that we're seeing? Are there any hot topics that came up in Q&A? Think about the hours saved, right? You go internal scenarios. What I think I always say is we really breathed life with AI Companion 2.0 into it really percolating far beyond meetings into really just how people get work done. Okay. Okay, Okay, on monetization. I know an analyst who about a year ago said something along the lines of, be wary of those software companies that embed AI into their products, but don't explicitly charge for it. That person was scared that you're going to spend all this money developing AI and paying for inference, right? And then not actually get a return on it because it was just going to, we were going to net retention our way into magic money, right? That was me, by the way. I apologize. Horrible joke, but Zoom kind of zagged, right? You went the other way. Embedding it, and I think Eric has said it's only valuable if people are using it, right? Which I completely understand that ethos, but why is now a good time to start monetizing it a little bit more directly? What has changed that's like, okay, now is the moment that embedding no longer works and why monetization should be the right thing going forward? I would actually say it's not a change in anything that we've done. It's just a natural sort of extension, and maybe I'll even take a couple of liberties to talk about the other way I've seen it done. Yeah. So, for those that may not be aware, what we said is that a certain amount of AI, I think of, I call it base- level AI, the stuff that I just described to you is going to be included in our paid SKUs at no additional cost. And it was a bold decision. I mean, it was a bold decision. It's very different than our competitor sets that are out there trying to have a $30 per user per month conversation, where then the conversation, I'm just going to, I talked to a lot of CFOs. I talked to them in my old seat as well as in this seat, who are then turning to their boards and saying, well, if Susie and Johnny get two hours back, how do I know they're not going to the gym? How do I know? How do I prove productivity to justify what is a large uptick in cost? And so look, we took a step to say we're going to do it differently. We're going to have base- level AI, which look, maybe we monetize one day and discount reduction and price increase? I don't know. Never say never. It's not on the current radar. But the priority for us was to get people in and using it and to start the change in behavior. And then what we announced at Zoomtopia was a pivot to say there are scenarios where it does make sense to monetize. And that's where a customer can see higher value in the tier. Those are the scenarios where it doesn't take long for a CFO to go, hey, turns out AI in a Contact Center when my costs are going high, makes sense. You know what I mean? It's an easy justification to make. Turns out, so the ways we monetize, the way we monetize AI, I would think about it this way. We put the base-level AI in our SKUs and there's no plans at this stage to monetize that other than we hope it stems churn, it's stickiness in the platform, all the things you would expect. We are currently monetizing on Contact Centers so you may hear us talk quite a bit in our earnings release about how much Contact Center is driving growth, right? A big driver, I think 80% of our top 10 deals, the bulk of what's driving that cost. Contact Center revenue is the highest tier SKU includes AI and then what we announced in Zoomtopia that will come out here in the spring is really monetization on three vectors beyond that. One, monetization on something called Custom AI Companion. When a customer wants to take AI value, add in their own data source, low code, look at a workflow, and kind of transform a process within an organization, that will monetize on at $12 per user per month. When there are specific high- value workloads for verticals, the two we started in our Healthcare and Education, they tend to be very strong areas for Zoom, we'll monetize there, and then we'll monetize in our Frontline worker SKU where we think it's sort of an untapped market, so look, we've taken a differentiated approach, but I think it's a good balance, right? Probably just having the chatter of it's all free when you wrote your comment made total sense, but I think we will balance it out in a way where it will have been a smart decision in terms of how the market unfolds. Because I'm hearing from a lot of CFOs, it is tough to justify across your entire knowledge worker base, $30 per user per month in these conditions. There's a cost side to it. You guys have shown pretty remarkable reduction in COGS on the AI front. What's driving that? We've been growing COGS and it's been growing off AI. As a percentage, yeah, the margins on the COGS. To your point, very well controlled, and really there's a couple of things. Let me talk. Zoom had room to control its margins in general, beyond AI, shifting to colos and various things and savings initiatives. Just, I believe it's an always on motion. From an AI perspective, we are very much, I mean, when you take a bold decision, you have to then grind out costs, so we are very focused on AI active user costs, but one of the things inherently keeping our cost structure down is something we call our federated approach to AI, which is we will not be sort of beholden as frequent competitors are to one model or the other. We will build our own. We will also source, look at other models, preference towards open source, and we will pick the model that best serves the need. And that's why you're seeing a lot of our quality beats competitors. And then when you have different models, you can also choose best quality at best price. And so that's a lot of what is driving those cost bursts down. So it's something that we're very focused on. Can we shift back to the first priority you mentioned, kind of taking this iconic brand, spreading it around, right? Feels like that's what Zoom has been trying to do for many moons now. What is the change in the strategy or that makes that the top priority? How is that going to be different in the next two to three years than maybe in the last two to three years for Zoom? Yeah. So maybe let me parse it out and talk online versus enterprise. So for those that may not be aware, our online business is about 40% of our revenue. Our enterprise business is about 60%. In online, post-pandemic, we very much came off challenging times as many did, but probably extra for Zoom, if you will, and worked very hard to sort of stabilize our base. And what's different, I would say at this point, is I consider us materially through that on both the online and the enterprise side. And the stat that I look at that tells me that we're materially through that is if you look at our online customer base, about three quarters of our customer base has been with us for over 16 months. And you might say, well, should that be 100? Probably not, because you're always going to have some degree of seasonality in your usage, and so where we're pivoting now, now that we've kind of gotten through that stabilization era, where we're pivoting online is really then looking at how do we take it to the next level in terms of growth. We've done some price increase, so we think we have pricing power in the market, but really where we're focused is really studying customer need, looking at pricing and packaging, where can we take value that already exists at Zoom, extend it more naturally to small businesses, solopreneurs, et cetera, which I think plays to the Zoom strengths, which tend to be, it's easy to use, it's intuitive, we have a fast pace of innovation, so that's what I would say is the differential on the online side. On the enterprise side, then we get into things like Contact Center and Workvivo, but I'll focus on just what's different on the meetings and phone side. And what I would say is we went through that similar kind of arc of post-pandemic. The stat I used to kind of internalize that with a lot of investors and even internally how we look at it is in contrast to prior years, only 6% of the renewals that are coming up this year in enterprise are their first time post-COVID, right? And we know that once they're sort of through that first time, you get a lot more stabilization in that. And so then really we're about landing and expanding. And even within meetings, one of the most common land and expand scenarios that we start on is taking sort of a meetings base and adding on phone. And so that's, and there really our focus is building out channel, building out international presence, continuing to mature our phone, but really channel is sort of, we think the big unlock. We've seen tremendous progress in winning share against certain competitors. And then we're gearing up to take on others. Great. Okay, I want to shift to priority two, CCaaS and Workvivo, but after this, then we'll come to the audience. So be thinking of questions, but we want to touch on priority two. CCaaS, I think, so both of these have an M&A component to them, right? And CCaaS, Zoom had made attempts, I guess, if you want to call it, to acquire Five9 in the past, and then Workvivo on the employee experience was just an outright acquisition. Are these areas still, the extension of Zoom, is that kind of the more buy versus build, whereas if we think about the core platform with meetings and things around it as more organic building versus buying, is that how we should be thinking about it in terms of capital allocation? It's a great question. I might say it a little differently, which is like Zoom has historically been a very built company. Look, if you look at the heart of what makes Zoom, Zoom, it's incredible pace of innovation, ease of use, hyper focus on the customer, which honestly has been an utter delight coming in where it's not a given that it's that way in many places. So look, we're going to continue to build. That being said, we're growing up here and we need to also. You guys have a lot of cash. We do. We also need to focus on strategic partnerships and more M&A. We got sort of our first. We've done two acquisitions, I would say, of size, one being Solvvy and then Workvivo being the key one. But I think you can. We look very heavily at M&A. I think if we do M&A, it will be in the three areas that I talked about. Yeah, we're going to be thoughtful and disciplined about it, having been on the other side of many deals. Sound good on paper, and they're tough to translate in the real world, and we're going to look for acquisitions that have strategic synergies and accelerate our ability to execute. Realistically, that's probably small to medium-sized deals for Zoom. Okay. Got it. All right. Any questions from the audience on things that we either have touched on or haven't touched on before I move on? Yeah. Sure, right back here. When you think on one of the big AI, are you thinking on setting tokens or however measure units you're thinking or just up to here is with a product and then you need to pay a certain price to get that? Yeah. So, just for the recording. Repeat it? Yeah, I'll just repeat the crux of the question is on AI monetization, how are you actually going to drive the levers to charge people money? Yeah. So look broadly in business models, we look at what's the norm in market and what do we think makes sense from a customer perspective. We're broadly a per user per month. The Custom AI Companion we've come out and said will be a per user per month. I think you can expect over time on some things that will go to more consumptive packs, which we started to do. We have not yet said what the sort of business model on Frontline or excuse me, Healthcare and Education will be, but I would probably veer more towards per user per month. But I think your broad question of like, will we differentiate our business model as we grow? Yeah. Yeah, consumption is in vogue, but like you said, you have roots in this is how people are comfortable paying for our solutions. I think that makes some sense. I saw another one in the back, but unless that was. Yeah. Sure, go ahead. If someone was to buy an entire company laying out the AI, I guess on a per user per month, what's the total amount you would charge one customer per user? What's the top amount that you would charge per user per month if they had all in Zoom, including AI bundled? Contact Center. Maybe my IR team can help me with the math here. Keep Contact Center out, just for. So the way to think about Workplace is generally it's somewhere in the $15-$30, depending on size of organization and depending on whether you have phone. AI, that base-level AI would be included in those prices. Then you get to the scenarios that we talked about for monetization and those would be $12 on top and we haven't yet come out with the pricing on those vertical SKUs or the Frontline. Can I sneak a couple more in? Yeah. And then, but if there are any other questions, certainly raise your hand. Okay, so they call it medium- term or updated long- term outlook, right, on the margin. The margin profile is significantly different from like the margin profile implied in your guidance for this year. Implies a lot more investments, right? Why does Zoom see a future where their operating margins are so far below where they are today? And what would that imply for the top line then for growth if you are going to make those investments? Yeah, that's a great question. So maybe for those that are less familiar, we updated in Zoomtopia our long- term guidance, gave quite a breadth of potential down to the negative of what operating income could be. And I think it was just to give one, I think even if I got my history right, I was just day two in job, but I think prior to that it had been even more. So we were trying to kind of tighten up and update things. And then in 2026, in this last earnings, I came out and sort of said, there's roughly a one point degradation. We didn't necessarily. We talked about this on some of the calls afterwards, but really think about the entirety of what's driving that degradation is we've been making some changes from more stock based comp, which Zoom had been very heavy in the pandemic to more in market like cash- based, and so that's really the entirety of kind of what's going on there, and so I think, look, I think you should think about the delta between those two statements as we will not invest in operating income until we have sort of the proof point on the top line of revenue, and I think it was very important to me to show that, that we hold those two things in tension, and then look, if we find that thing and we see an inflection in growth and we feel conviction, could we do that? But I tend to think of it as maybe a floor, if you will, in terms of how to think about it. Yeah, that makes sense. Only a couple, oh, we're red. We'll sneak one more in. I know we're getting the wrap up. Okay, all right. Well, shameless plug, if you're interested in Zoom video, we also have some panels for UCaaS and CCaaS throughout the conference. So if you want to hear more about AI in the Contact Center for UCaaS, be looking out for those. But Michelle, thanks so much for being here. Such a pleasure. Yeah. All right. Thank you so much. Great.