Recording in progress. 22. I'm joined today by 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 at investors.zoom.com. 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. During this call, we will make forward-looking statements, including statements regarding our financial outlook for the first quarter and full year 2023, our expectations regarding financial and business trends, our market position, opportunities, growth strategy, and business aspirations, product initiatives, and the expected benefits of such initiatives, and our stock repurchase program. 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 our annual report on Form 10-K and quarterly reports on Form 10-Q. Zoom assumes no obligation to update any forward-looking statements that we make on today's webinar. With that, let me turn the discussion over to Eric. Thank you, Tom. Before I begin, I wanted to welcome Bill McDermott, CEO of ServiceNow, who will join our board of directors tomorrow. I look forward to working together with Bill, a visionary in the technology space and a successful software executive. I'd also like to thank Bart Swanson, who is stepping down from our board of directors tomorrow, for his years of service on our board, and I wish him the best in his future endeavors. Let me also thank our global Zoom team, customers, partners, and investors for their support as we celebrate the 10-year anniversary of our inception and the three-year anniversary of our IPO. Now, I'd like to share with you three key pillars of the Zoom strategy, which we are building out to drive our future growth. The first pillar is really about being a full unified communications platform. We made enormous strides over the past several years evolving from a meetings company into a multi-product platform, including video conferencing, events, chat, or phone, and more. The missing piece was a contact center. That was until our announcement last week. More on that in a moment. The second pillar is hybrid work, because we believe hybrid work is going to become more flexible and less about location. So no matter where you are, office, traveling, or home, Zoom wants to make sure you have a consistent experience. Whether it is Zoom Rooms or on a Zoom-connected device, we want to make sure you are part of the conversation and able to collaborate anywhere and everywhere. The third pillar is business workflows and how we leverage our API marketplace, our Zoom Apps, and our SDK. Many technology companies tell me that they want to integrate Zoom into their platform to improve the communication and collaboration experience for their customers. For instance, we recently announced a Zoom DocuSign integration. This will allow customers to review a document during a Zoom meeting and approve it as part of a simple bidirectional business workflow. We are in the early innings of this transformation of work and communication. We believe there's a massive opportunity, and we plan to address it with the same level of innovation, scalability, and simplicity that has made Zoom the trusted platform for hundreds of thousands of businesses around the world. As a key part of our UC stack, I'm super excited about an announcement we made last week. We announced the general availability of Zoom Contact Center, an omnichannel customer engagement solution that is optimized for video and integrated right into the Zoom client. It brings unified communications together with modern contact center capabilities, helps customers connect over video, and also support channels like voice, SMS, and web chat. Zoom Contact Center is simple for admins to configure and deploy. They can easily create menus, greetings, and prompts right in the Zoom admin portal. The product can also integrate chat and video into an existing digital presence, like a website, helping organizations have conversations with the customers in the right place and at the right time. This is just the beginning of our plan to modernize the contact center and enrich the experience for our customer and our customer's customer. Speaking of customers, we ended the year with a lot of great wins. First, I want to thank Medtronic, a global leader in healthcare technology, for expanding their partnership with Zoom. In 2020, Medtronic chose Zoom Meetings, Zoom Rooms, and Zoom Webinars to enable its global employees to communicate and collaborate better. In Q4 of fiscal 2022, after a careful vendor selection process, they decided to add 60,000 Zoom Phone licenses to a new multi-year agreement. Thank you, Medtronic, for trusting Zoom to deliver modern, integrated UCaaS solution to support your global communication needs. Thank you, Intuit, a global technology platform that makes TurboTax, QuickBooks, Mint, Credit Karma, and Mailchimp for entrusting Zoom with their video communications over the past several years, and recently adding Zoom Phone to create a unified communications platform across their organization. Thank you, Arizona State University, which was recently recognized by U.S. News & World Report as the country's most innovative school and has been a strong supporter of Zoom products over the years. As a leading research university, a highly effective communications platform is very important to drive collaboration between their staff, students, staff, and the community. ASU chose Zoom to be a complete communications platform with 50,000 Zoom Meetings, 700 Zoom Rooms, and 15,000 Zoom Phone licenses, as well as Zoom Webinars. I also want to recognize LIXIL Group Corporation, a Japanese manufacturer and a pioneer of building materials and housing equipment. As a Zoom Meetings and Zoom Rooms customer, LIXIL has embraced hybrid work for communication and collaboration while leveraging the ease of use of the Zoom's platform to enhance their customer experience with video tours of their showrooms. In Q4, LIXIL added 10,000 Zoom Phone licenses, committing to a unified communications platform. Thank you, Medtronic, Intuit, Arizona State, and LIXIL. I'm very grateful to have such a great group of customers. I love you all. Thank you. The world wants a full communications platform, one that's integrated with other workflows, supports hybrid work, and is secure and easy to use. Zoom is hard at work ensuring our customers exceed the soaring expectations of how businesses collaborate internally and communicate externally. To sustain and enhance our leadership position in this new era of digital transformation, we plan in FY 2023 to build out our platform to further enrich the customer experience and expand our go-to-market motions, which will enable us to drive future growth for Zoom. I wanted to thank our Zoomies for their hard work over the past 10 years. We have grown to nearly 6,800 strong and are more focused than ever on delivering happiness every day to our hundreds of thousands of customers around the world. With that, let me pass it over to Kelly. Thank you. Thank you, Eric, and hello, everyone. Let me start with a few of the financial highlights for FY 2022 and the results for Q4, then provide our outlook for Q1 and FY 2023. We delivered another year of strong results. Revenue grew 55% to $4.1 billion as we exit FY 2022 at an annualized run rate of $4.29 billion. We grew non-GAAP operating margin to 40.4%, up from 37.1% in FY 2021 as we scale our operations. We achieved an adjusted free cash flow margin of 38%. In Q4, total revenue grew 21% year-over-year to $1.07 billion, exceeding the high end of our guidance of $1.053 billion. The growth was primarily driven by strength in our enterprise business, which continued to grow significantly faster than our online business. We also saw strong demand for Zoom Phone, which had a record quarter, adding over 550,000 paid seats. Much of the Zoom Phone growth came from strength in large customers, with the number of customers with more than $100,000 of ARR growing 149% year-over-year, and the number of customers with more than 10,000 paid seats growing 122% year-over-year. We also added a major global bank as a Zoom Phone customer. We saw 66% year-over-year growth in the upmarket as we ended the year with 2,725 customers contributing more than $100,000 in trailing 12 months revenue. These customers represented 23% of revenue, up from 18% in Q4 of last year. We exited the quarter with approximately 598,000 customers with more than 10 employees, up 9% year-over-year. In Q4, customers with more than 10 employees represented 67% of revenue, up from 63% in Q4 of last year. As we approach our three-year anniversary as a public company, a lot of incredible things have occurred at Zoom. We've seen unprecedented growth and brand awareness for Zoom Meeting and incredibly strong momentum for newer products. We've also expansively built out our direct channel and ISV go-to-market motion, which we collectively call Enterprise. These customers have high lifetime value, and they tend to increase deployments, extend terms, and churn at much lower rates over time. Starting today, we will provide metrics that more closely align with the way our internal view of the business has evolved following this period of unprecedented growth and expansion. This will include the number of Enterprise customers and the net dollar expansion rate for Enterprise customers. In the appendix of the investor deck, you will find two years of historical data for these new metrics. Additionally, through the end of FY 2023, we will continue to provide the number of customers with more than 10 employees in the appendix. In Q4, the number of enterprise customers grew 35% year-over-year to approximately 191,000. Revenue from enterprise customers grew 38% year-over-year and represented 50% of total revenue, up from 44% in Q4 FY 2021. We expect revenue from enterprise customers to become increasingly higher percentage of total revenue over time. Our online business, which we define as customer self-service through our online channel, represents the other half of our revenue, up from approximately 25% in Q4 of FY 2020 before the pandemic. The self-service model is very attractive from profitability and cash flow perspective. While we have seen online grow more slowly than enterprise in recent quarters and expect that to continue going forward, we are continuing to invest in and innovate around this channel to drive growth. We will also be presenting our net dollar expansion rate for enterprise customers rather than our net dollar expansion rate for customers with more than 10 employees. First, let me start with the historic metrics. Our Q4 net dollar expansion rate for customers with more than 10 employees was in line with what we discussed in Q3, being just under 130% to 129%. Going forward, we will report the trailing twelve-month net dollar expansion rate for enterprise customers, which in Q4 was 130%. Both domestic and international markets had strong growth during the quarter. Our Americas revenue grew 21% year over year. year. Our combined APAC and EMEA revenue grew 23% year over year to be approximately 33% of revenue, stable with Q4 of last year. On a quarter-over-quarter basis, Asia Pac revenue grew slightly faster than the overall company, but we saw headwinds to our online business in EMEA, partially associated with the holiday seasonality. Let me share a few international highlights with you. We closed our largest overall deal ever in EMEIA with 200,000 meeting licenses and our largest Zoom Rooms deal in APAC, with a customer deploying more than 3,300 Zoom Rooms to drive hybrid work across their offices. We have also expanded our partnership with Deutsche Telekom by committing to developing a joint solution specifically for the German market. We continue to view international expansion as a major opportunity for future growth. Now turning to profitability, which is strong 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, acquisition-related expenses, net litigation settlements, net gains or losses on strategic investments, income tax benefits from discrete activities, and undistributed earnings attributable to participating securities. Non-GAAP gross margin in Q4 was 78.3%, an improvement from 71.3% in Q4 of last year and 76% in Q3 of this year. The sequential improvement was mainly due to optimizing usage across the public cloud and our co-located data centers, as well as the seasonally lower usage during the holidays. We expect this figure to return to the mid-70s in the short term before improving in the mid- to long-term as we continue to build out our data centers. Research and development expense grew by 133% year-over-year to approximately $72 million. As a percentage of total revenue, R&D expense nearly doubled year-over-year to 6.7%, demonstrating our commitment to innovation and product development. We plan to further invest to enhance our platform, including our recently announced contact center products. Sales and marketing expense grew by 58% year-over-year to $251 million, or approximately 23.4% of total revenue, primarily driven by increased marketing programs and sales headcount to drive future growth. We remain committed to investing in worldwide sales capacity and product marketing across our comprehensive communications platform. G&A expense grew by 22% to $95 million, or approximately 8.9% of total revenue. Non-GAAP operating income expanded to $420 million, exceeding the high end of our guidance of $363 million. This translates to a 39.2% non-GAAP operating margin for Q4, compared with a 40.9% a year ago and 39.1% last quarter. Non-GAAP diluted earnings per share in Q4 grew to $1.29 on approximately 306 million non-GAAP weighted average shares outstanding. This result is $0.22 above the high end of our guidance and $0.07 above Q4 of last year. Turning to the balance sheet. Deferred revenue at the end of the period was $1.2 billion, up 34% year-over-year from $883 million. Looking at both our billed and unbilled contracts, our RPO total approximately $2.6 billion, up 51% year-over-year from $1.7 billion. We expect to recognize approximately 63% of the total RPO as revenue over the next 12 months, as compared to 70% in Q4 of last year, reflecting a shift back towards longer-term plans. As a reminder, due to the seasonality of renewals being front and loaded and tapering through the year, our collections follow the same trends. Since our renewal linearity is unique, let me provide you once again with some color on next quarter's deferred revenue. We believe it will peak in Q1 at 12%-13% year-over-year growth and moderate over the rest of the year, reflecting the smaller renewal base. We ended the quarter with approximately $5.4 billion in cash equivalents, and marketable securities, excluding restricted cash. We had operating cash flow in the quarter of $209 million as compared to $399 million in Q4 of last year. Adjusted free cash flow, which excludes a one-time $85 million cash outflow related to a legal settlement that was disclosed and recognized as a GAAP expense in Q1, was $274 million as compared to $378 million in Q4 of last year. Now turning to our FY 2023 guidance. This outlook is consistent with what we are observing in the market today. Specifically, it assumes that our enterprise business will grow substantially faster than our online business. It also assumes that our year-over-year total revenue growth rate will modestly accelerate in late FY 2023. For the first quarter of FY 2023, we expect revenue to be in the range of $1.07-$1.075 billion. We expect non-GAAP operating income to be in the range of $345-$350 million. Our outlook for non-GAAP earnings per share is $0.86-$0.88 based on approximately 309 million shares outstanding. As mentioned last quarter, due to our multi-year history of profitability, we have fully utilized our NOLs. We expect our tax rate to approximate the U.S. blended tax rate in FY 2023. For the full year of FY 2023, we expect revenue to be in the range of $4.53 billion-$4.55 billion, which would represent approximately 11% year-over-year growth. We expect non-GAAP operating income to be in the range of approximately $1.43 billion-$1.45 billion, representing a non-GAAP operating margin of approximately 32%. While our revenue grew 558% from FY 2020 to FY 2022, our operating margin also increased from 14%-40%. We are pursuing a massive opportunity, and we will continue to focus on the appropriate balance between growth and margins as we build out and deliver on the potential of our platform. Our outlook for non-GAAP earnings per share is $3.45-$3.51 based on approximately 312 million shares outstanding. As indicated in our earnings press release today, our board has authorized a $1 billion share repurchase program that we intend to execute on beginning this quarter. This not only underscores the confidence that our board and our management team have in the future of Zoom, but it also allows us to leverage our strong profitability, cash flow generation, and strength of our balance sheet to deliver returns back to our shareholders. We are excited about the large and growing opportunity ahead of us as we continue to execute on our strategy and growth outlook. As always, Zoom is grateful to be a driving force, enabling connection and collaboration worldwide with our high quality, frictionless, and secure communications platform. Thank you to the entire Zoom team, our customers, our community, and our investors. Kelsey, please queue up our first question. Thank you, Kelly. Again, we will now move into the Q&A session. As a reminder, to best hear from everyone, please limit yourself to one question. Our first question is going to come from Meta Marshall with Morgan Stanley. Great. Thank you. Kelly and Eric, you're coming up on the anniversary date of COVID and, you know, close to kind of the renewal date that a lot of your customers are gonna have. Can you just speak to some of the trends you're seeing? We're just trying to get a sense of is this a good phone entry point? Are you seeing normalization of kind of room adoption rates? Or what are you seeing as far as video licenses? Just any trends that you're seeing as some of these major renewals kind of come up at the end of this month and into next month. Yeah. Thank you, Meta. We continue to see strength in our renewals, especially in the enterprise business. As you heard from some of the highlights we talked about earlier, we had a very strong performance from Zoom Phone in Q4 as well, and also Zoom Rooms. As customers are really thinking about the future of hybrid work and how they're gonna keep everyone connected as they bring them back to the office, this is a really important strategy for them. You heard Eric talk about some of that. Maybe Eric wants to touch on the strategy around that. Continue to see strength both in renewals in the enterprise as well as additional phone seats and Zoom Rooms. Got it. No, that's it for me. I mean, just in terms of, you know, maybe just another quick question in terms of what kind of metrics you're looking at as you make some of these sales and marketing investments to just determine what return you're gonna see on those or what benchmarks you're kind of measuring yourself against there. That's it for me. Yeah. I mean, one of the key things we always look at internally is the sales productivity, looking at it both from a U.S. and an international perspective. On the marketing side, we look at internally. We also look at things like opportunities and leads that get generated from any of those. Of course, the external benchmark we're always looking at is sales and marketing as a percentage of rev. Great. Thank you. Michael Turrin with Wells Fargo has the next question. Hey there. Thanks. Appreciate you taking the question. I was hoping to ask one on contact center. Just some more detail, can you help just frame out initial observations around positioning? Is there a certain size contact center you're targeting? Are there advantages you see with Zoom Video or lessons learned from having Phone in the market you would point to? Just in terms of the go-to-market motion, how different is that or how well geared are you from some of those initial conversations? Thank you. Yeah, Michael, that is a great question. You know, we are super excited about our contact center announcement last week. First of all, you know, this is based on our customers' feedback. You know, several years ago, after the launch of Zoom Phone, many of our customers told us they would like to standardize on Zoom platform for unified communication. The one missing piece is contact center. We listened to our customers, our team worked so hard, and finally we announced the Zoom Contact Center. In terms of growth, similar to what we did, you know, to grow our Zoom Phone business, right? You know, for the first year, for sure, right, you know, we are going to target those customers who really want to standardize on Zoom platform. Problem is, you know, started from, you know, Meeting and for those customers who deployed both Meeting and Phone, now they look at the, you know, contact center. Also, at the same time, you know, we are working very hard at more and more features. I think that, you know, probably for those customers, as long as they wanted to embrace the cloud-based contact center, as long as they wanted to standardize on Zoom unified communication platform, we would like to target them, right? That's our strategy. That's opening the channel, you know, video, and it's very strong. We also support SMS, voice, and web chat. Again, you know, a lot of hard work, and we are gonna continue innovating and to drive our Zoom Contact Center growth. Based on the early beta feedback, you know, our customers are also very excited. They wanted to deploy a solution, you know, and really understand, you know, the unified collaboration. Also, at the same time, we built this solution from the ground up, right? Very consistent comparable video and phone. We're very excited about this opportunity. Very helpful. Best of luck to you there. Thank you. Thank you, Michael. Appreciate it. Our next question will come from Sterling Auty with JP Morgan. Sterling, will you go ahead? Thank you for turning on your camera. Thanks. Hopefully, you can hear me okay, given the wind, the wind noise. Kelly, I didn't quite hear Meta's question. I was just wondering, within the guidance for this coming year, can you give us a sense what the enterprise growth specifically looks like within that guide? Yeah. Specifically in enterprise, we expect that part of our business to grow at approximately 20% year-over-year, and then that you can back into that what we're expecting from our online business is for it to be flattish for the year, but it might have some variability quarter-over-quarter. Got it. Thank you. Yeah. Yes. Sterling, by the way, our enterprise growth is pretty strong as we add more and more new services like contact center is first one, right? We are not gonna stop here. You know, this is our company DNA. We truly understand the enterprise customer need. We are gonna add more and more enterprise services, you know, to further grow our enterprise business. Thank you. That makes sense. Thank you. Jim Fish with Piper Sandler has the next question. Hey, good afternoon, everyone. This is Quinton on for Jim Fish. Thanks for taking our question. You know, the labor market right now remains difficult, especially as you're looking to hire and retain some of the top engineering and sales talent. Can you talk about any changes or impacts you've seen in Zoom's ability to maintain your top talent? And then how you plan on differentiating and acquiring the new talent? Thank you. Yeah. Kelly, feel free to chime in. James, you are right. Given the Great Resignation, right, it's pretty challenging, right? Across the industry, right? Again, you know, we always, you know, double down on our company culture, you know, and this is extremely important for us, right? You know, how to make sure we deliver happiness to our customers. You know, my number one priority is really to think about our employees, how to make sure our employees are happy, right? We are doing so many things to really help our employees. Also, again, you know, over the past two years, we more than tripled the size of the company, right? Many employees joined Zoom remotely. Again, that's not easy, but good news, Zoom is gonna change. You know, especially in looking at our remote employees, how to make sure offer the flexibility and also make sure support our employees' needs by always soliciting feedback from our employees. We also have a happiness crew, always try to understand what's the pain point, what we can do differently to think of our employees. By doing that, I'm pretty sure, and we are going to make sure our employees are happy, and, you know, we'll be okay. That's always our formula. Moving on to Ittai Kidron with Oppenheimer. Thanks, Kelsey. Kelly, I have a couple of questions for you. First, I think you mentioned in your prepared remarks that you're looking for re-acceleration in the second half of the year. Maybe you can walk us through the kind of the puts and takes and what's behind that assumption. The second question would be regarding the online business. I know you're only giving expansion rate, the dollar-based expansion rate on the enterprise side, but given that online is still 50% of your revenue, could you at least give us kinda a rough range of where online that dollar-based expansion rate typically falls, just so we get a sense of how to model that out? Sure. In terms of the second half acceleration, we're looking at in the upmarket or the enterprise, I should say now, it will be driven largely by continued expansion and growth in our existing customers, as well as contribution from some of our new products that we're really excited about, including contact center. In the online business, what you're gonna see is, remember we talked about at Analyst Day last year how once those cohorts get to a certain age of 16 months and older, there's a lot of stability that comes with those retention rates? By the time we get to the second half of this year, all of those cohorts that we acquired during the pandemic are going to have hit that age cycle. It's really gonna start to bring stability to the online business in a way that we haven't seen historically. Then in terms of the net dollar expansion rate for the online business, we won't be disclosing that going forward. I think the best I can give you is based on, you know, what Sterling just asked, which is what's the growth rate for that business. As I mentioned, we expect it to be flattish for next year with some variability quarter over quarter. Got it. Very good. Thank you. Yep. Baird, William Power has the next question. Great. Thanks for taking the question. Great to see the strong Zoom Phone numbers again. I guess I'd love to get, you know, more color around the key drivers there. It sounds like particularly up market, you know, how are you competing there? You know, what would have been kind of the key differentiators? So just trying to understand growth within existing customers versus landing new customers, and sorry for the multi-part one. First one, where does distribution stand? I mean, how important has that been expanding distribution? How much further is there to go using the channel, etc.? Yeah, that's a great question. Actually, you know, Q4 was a record quarter, right? In terms of the number of new seats, more than 500,000. If I recall correctly, around 550,000 newly added seats for Zoom Phone. I think first of all, not only for our existing customers, but also for new customers as well, because of the trust we established with our customers over the past several years, when customers think about how to transform their business to fully embrace digital transformation, how to migrate their on-prem phone system to the cloud, they always want to deploy the best solution. Plus, most of the customers already deployed the video conference solution, and also they want to have one consistent experience. My front-end experience is very consistent. The back-end also is very consistent. You know, product is very reliable and ease of use, security, and also a lot of very cool features. That's the reason why, you know, customer, they want to deploy the Zoom Phone. You know, as long as the customer, they went through the vendor selection process, they have high confidence. You know, let me look at Intuit, look at Medtronic. It's not 1,000 licenses. That's tens of thousands of licenses, right? Again, you know, that business still will continue, you know, doing very well, and also we are not gonna stop here. We'll add more and more features, more innovations, plus, you know, combine it with the contact center. We do see, you know, the accelerated growth for both the Phone and also our, you know, Contact Center down the road. Okay, great. Thank you. Thank you. I will now hear from Ryan Koontz with Needham. Hi, thanks for the question. I wanted to ask about your business workflow strategy there, Eric, and for your API and SDK. What type of applications are you using that for typically? Is this primarily with tech companies? Any color would be helpful. Thank you. Yeah, Ryan, that's a great question. Look at our, you know, growth strategy, right? Three things, three pillars, right? Unify the communications platform. We just added a contact center. We are gonna add more and more. The second pillar, really about hybrid work. The third one is extremely important, which is the business workflow platform, right? You know, we have SDK, you know, some healthcare customers, and they would like to embed SDK into their telemedicine, telehealth offering. We have API, also Marketplace. But the most important thing is really about Zoom Apps, right? We just announced Zoom DocuSign integration. You know, essentially, during the meeting time, it's very easy. In one click, I look at a document, I can approve that. More and more integration like that. You know, during the meeting time or outside the meeting time as well, right? That is the key for our, you know, the platform growth, you know. Another reason why we invited a, you know, great leader, CEO of ServiceNow, right? To join our board, right? You know, ServiceNow, probably the best workflow application provider, right? You know, how to learn from ServiceNow, how to embed more and more, you know, other business workflow applications to the Zoom platform and also vice versa. I think that can truly help our customers, right? Rather than they leave the Zoom interface, you know, go to other business context, right? They can stay within the Zoom interface, can get the job done, right? Also, you know, we are doubling down our SDK platform, right? You know, like education, healthcare, a lot of vertical industry startup, they would like to embed Zoom, you know, to their, you know, offering. That's why we're very excited about our business workflow platform. Got it, Eric. Thank you. Thank you. Brad Sills with Bank of America has the next question. Hi. It's Michael Funk for Brad Sills. If I could. You know, first on your churn by cohort, love to hear your thoughts and the assumptions around that. Second, the visibility into the attach rate for contact center. Sure. Brad, if you or Mike, sorry. If you remember back in Analyst Day last fall, we shared a chart that shows how as cohorts age, when they get to that 16 months and older, they really stabilize in terms of retention rates. When you go back and look at that, you're able to see what we shared with not only the retention rates, but also where we are in that aging process. It's very easy for us now to look forward and predict how those retention rates are gonna impact the overall base of that of the online business. That's exactly what we would assume, that they just continue aging because we've seen really strong stability in those retention rates as they get to that 15-16 months age. It hasn't changed. Even as the business has been kind of overall volatile, there, it doesn't change in those older things. We're just following that along. The assumption for the attach rate for contact center? It's so early right now. We haven't done it in terms of attach rate yet. We just look forward to the back half of this year and assume that we start to see some revenue there. Really we had, you know, many really strong enterprise customers sign up for the beta, so we're excited to see how it goes as we go. Great. Thank you so much. Matt VanVliet with BTIG has the next question. Yeah, hi. Thanks for taking the question. I guess as you look at the many investments you made on the international side of things, you know, where do you feel like you are from a sales force maturity and efficiency relative to, you know, a lot of the efficiencies you've already shown in the U.S.? Just as each of those markets mature, maybe any kind of regional or country by country specifics would be great. Thanks. The international team has grown tremendously over the last few years. We certainly continue to see opportunity and we've talked about this before, but as a quick reminder, with the growth in the brand awareness over the last few years, it's really enabled us to go in and put reps where we see opportunities without having to seed markets with marketing dollars. I think the big area of opportunity that still exists for us internationally is the channel. That is where we, you know, there's a cross-functional initiative in the company to really focus on the channel, especially focused around Zoom Phone, and that can be master agents, that can be carriers. Deutsche Telekom and our strong partnership there we just announced is a great example of that effort, and we're gonna continue to focus that, especially over this next coming year, because that's a really important part of the distribution strategy for Zoom Phone. Thank you. Matthew Knickman with Deutsche Bank has the next question. Hi. Thanks for taking the question. You've talked about M&A being the greater part of the story going forward. I'm just wondering, with the pullback in market valuations for some higher growth names, how are you thinking about inorganic opportunities, and are you seeing more of these opportunities surface, particularly in the private market? Maybe if I can just sneak in a follow-up. On the customers with more than 10 employees, I believe that declined slightly sequentially. Just wondering if there's any color you can give in terms of maybe what drove the bulk of those departures in terms of customer size. Thanks. Sure. In terms of inorganic and the opportunity for M&A, we really are continuing to be focused on that. I think, the strength of our balance sheet in terms of cash leaves us a lot of opportunity regardless of what's happening with our stock price, honestly. We will continue to focus on opportunities for augmenting talent or technology, which is what we've said all along. In terms of the decline, you are right, it was slightly down, the metric of customers with greater than 10 employees. If you back up for just a quick minute, remember that when we went public, we picked that metric as a proxy for our direct business, and that customers with fewer than 10 was the proxy for our online segment. What's happened over time, as we've seen this tremendous growth in online as a channel, it started to kind of overlap there, which is why we don't think it's really the appropriate metric to use any longer going forward. That decline was driven by churn that we saw in the online segment of our business with customers that have more than 10 employees. Yeah, Matt, to add on to what Kelly said, I think it's time to really look at the online business and also our direct business driven by sales channel. Online business, you know, meaning those customers never interacting with our sales rep, right? Just to go online to use their credit card to buy. I think it's the right time for us to look at online business and also direct channel business, right? Rather than just the team employee, because it's still a little bit confusing, right? Sometimes they also talk to the, you know, our sales rep. Sometimes they go online to buy. It's time for us to look at pure online business, meaning they never interact with our sales rep, right? I think that's a better way, the better metrics, you know, down the road. Yeah. Thank you. Thank you, Matt. Peter Levine has the next question with Evercore. Great. Thanks for taking my question. Maybe just to piggyback off the contact center discussion. I think it's been reported that you're selling seats at $70 per month per agent, so that's obviously a huge discount from the industry average, call it $200. Is the pricing an indication that Zoom just doesn't have all the features, functionality or, and it just doesn't warrant the premium price? Or is this just Zoom being aggressive and just trying to get market share? I would assume my second part of my question is this, I would assume over time the idea is to get the full voice functionality, AI, is it WFO, and kind of move that pricing up to kind of where the industry is today? Thanks. Peter, I would say that Zoom has always been disruptive in pricing and contact center is absolutely no different. If you look across the market in how we price meetings, how we priced Zoom Phone when we introduced it, you know, we're approximately half the price of any of our competitors' list price. That continues to be the case with contact center as well. I mean, over time, we absolutely will continue to add features and functionality. It's the exact same approach that we took with Zoom Phone in terms of the launch and how it grew over time and expanded the features and functionality. The same is true with contact center, but you should not take the price as reflecting anything in terms of the quality of that product. Yeah, Peter, Katie, right on. Our growth strategy always is better product, better price, and also much better service. Thank you. Shebly Seyrafi with FBN Securities has the next question. Yes. Thank you very much. With your guidance for fiscal 2023, it looks like you're gunning for about 11% or so revenue growth. In my model, to fit your bottom line, guidance, I'm getting around 40% OPEX growth. It's like 4x your revenue growth. That's an unusual kind of multiple. It's like 4-to-1, and usually that's indicative of a company's belief that they could grow fast, meaning like 20%+ in the future. My question really is. Is the goal here to invest way ahead of your expected revenue growth in 2023 with the idea of accelerating your revenue growth to 20%+ at some point in the future? Related to this, I know you're guiding for online being flattish this year. Is your goal to get that to at least double digit growth, you know, in the future? As we mentioned in the prepared remarks, Shebly, we absolutely expect there to be an inflection point and for revenue to start to re-accelerate in the back half of the year. We're not yet, you know, we're not prepared to give multi-year guidance at this point, but what you should expect is we're modeling for the exit growth rate to be higher than the full year growth rate for FY 2023. Yeah, just quickly, you know, prior to pandemic, you know, our growth strategy very clear, right? Double down on enterprise. Every two years we are gonna introduce a new service, right? To really add more value, right? Also upsell. Over the past two years, you know, we have to really, you know, think about how to help the world, helping people stay connected. That's the reason why, you know, we spend a lot of time making sure I offer the K-12 schools free services and focus on online business as well. Right now, it seems the COVID crisis is over, right? We got to go back, you know, double down our enterprise growth strategy. Also, at the same time, we have to adjust our previous enterprise growth strategy, which is every two years you are gonna add a new service. Now, probably every one year you need to add one more new services, right? You know, that's a big one for us. That's the reason why, you know, we adjust our growth strategy, right? To double down, triple down on our enterprise customers. Okay. Thank you. Thank you. Moving on to Karl Keirstead with UBS. Thanks. Kelly and Eric, the EMEA and APAC growth have been a big part of the Zoom story as the U.S. market has become more penetrated. Yet in this past quarter, the growth in both those regions decelerated pretty sharply. Kelly, I know you talked a little bit about seasonality in Europe. Do you mind elaborating on what's happening in international? When you set your 11% growth target, what's embedded in that number in terms of your non-U.S. growth, even if you can be, you know, directional? Yeah. In Q4 we saw strength in Asia Pac, and we even saw strength in EMEA too. If you remember, we announced our largest deal ever for EMEA, which is super exciting. Strength in the enterprise segment of the business. We absolutely saw an impact from holiday seasonality, which we expected. We talked about that in the call on Q3, as you remember. In terms of looking forward, international absolutely is a really important part of our growth strategy, and we do continue to expect it to grow at a rate that is higher than the U.S. We will continue to also add, invest in sales capacity internationally at a rate that is higher on a percentage basis than we would be doing in the U.S. as well. Got it. Okay. Thanks, Kelly. Yep. Our next question comes from Rishi Jaluria with RBC. Wonderful. Thanks so much for taking my questions, guys. I wanted to go back to, and look, I appreciate the new reporting way of reporting things. I think it makes a lot more sense. Just when we think about the above 10 and sub-10 employee segment, you know, it was down sequentially again, but it's actually slightly up versus Q1 and up year-over-year. How is this relative to your own expectations, and how should we be thinking about that segment going forward? Maybe alongside that, you know, when we see these above 10 employee customer count down sequentially, you know, I know a big chunk of those are online customers. Totally makes sense. Based on your observations, what are you seeing those customers doing? Are they unplugging? Are they moving to a competitor, or are they just downgrading to a free version of Zoom and maybe there's a monetization opportunity down the line? Thank you. Yeah, I mean, it's so in terms of like this is why this number doesn't make sense anymore, because it's gotten so mixed up between the you know the customers and the channel. Like, the size of the customers and the channel. That's what's gotten really convoluted with this metric going forward and why we're not gonna really talk about it going forward. In terms of how we see it going forward, honestly, Rishi, we aren't even modeling around this metric any longer. We are completely moving to thinking about Enterprise and Online because as I said in the prepared remarks, that really reflects how we think about the business and how we're measuring and managing it. That's what makes the most sense. What you should really continue to see is ongoing growth in the Enterprise business. We're super excited about the strength that we see there and double-digit growth for next year, and that you know, online is gonna be flattish, and that's what we expect. You know, in terms of what these customers are doing, you know, especially in the smaller customers, we see them leave and come back, right? We make it very flexible for them to do that. At any point in time, they might be taking a break, but they might come back when it makes sense for them, and that's what we want. We want it to be easy for them to come and go as they see the need for our products. Wonderful. Thank you. We will now hear from Tyler Radke with Citi. Hey, good afternoon, everyone. Thanks for taking my question. Kelly, I wanted to ask you just a couple points on the FY 2023 outlook. I guess first, how are you thinking about price increases and just generally, you know, pricing power philosophically? Then second of all, you know, the reported revenue this quarter relative to your guide was some of the smallest upside we've seen as a public company. Just any changes in guidance philosophy or how you're approaching the guide for this year would be helpful. Thank you. Yeah. In terms of the outlook from a pricing perspective, we currently don't have plans to increase our prices across the board. We are, especially for the online segment of our business, looking at opportunities for localized pricing and selling in local currency, which I think will be really helpful in terms of especially some of the smaller customers in those markets and getting those plans right-sized to those markets. But no plans to increase our prices across the board. Then in terms of the beat that you were mentioning for Q4, you know, as we've grown and scaled as a business, I think you're starting to see our guidance and our beats get more correlated to the size of the business and reflect the growth rates that we're experiencing going forward. Thank you. Moving on to Alex Zukin with Wolfe Research. Hey, guys. Can you hear me okay? Hi, Alex. Yep. Hey, guys. Thanks for taking the question. I've got a competition one and then a numbers one. Eric, maybe for you first, given the increasing importance of the enterprise business, the increasing spend there, the product diversification, what's the right way to think about this post-pandemic competitive environment vis-à-vis Microsoft, as well as your other competitors? Is it same sales cycles, longer, you know, more. You know, give us a flavor of what you're seeing and how you're planning for the full year. Yeah. Again, Alex, yes, when it comes to competition, right, we always focus on, really focus on our customers, right? Listen to feedback and double down on innovation. That's pretty much. That formula is very sustainable. However, if you really just focus on some of our competitors, I would say, you know, first of all, you know, you take Microsoft, for example, right? You know, in some enterprise customers, it's standardized on Microsoft. Some enterprise customers standardized on Zoom platform. For some enterprise customers, you look at Okta business report, right? Look at Okta's Microsoft 365 deployment. You know, in terms of coexistence, you know, between Zoom and Teams. You know, that percentage, you know, is increasing year-over-year, around 45%, right? Meaning for those Okta and Microsoft 365 customers, we deployed both Zoom and Microsoft solution, right? Also, you know, we also on many fronts, we partner with Microsoft as well, right? I think, you know, that's why market is huge, right? Some customers really like the Zoom platform, you know, great. They like Microsoft, the chat, yeah, you know, they since this deploy the Zoom video and it works. I think that will continue. Also, at the same time, right, you know, like we added a contact center, we're gonna add more and more new services, right? In addition to focus on horizontal collaboration platform, we also want to focus on more, you know, value added like contact center and also some other services as well, right? By doing that, on the one hand, we can compete against some of those bigger competitors. On the other hand, it also integrate more and more with them as well, right? That's our strategy. Yeah. Got it. Kelly, I just wanna go back to the point that Sterling asked about the guidance with respect to enterprise versus online, the 20% and flat. Just help us bridge that to where billings guidance for Q1 is negative. Billings guidance for the full year, I think, pencils out to low single digits. CRPO sequentially decelerated. What's the, like, what is the number we should focus on the forward-looking metric to give us confidence in that re-acceleration of revenue growth that you're calling for in particularly the sustainability on some of the enterprise and online trends? Yeah. Remember that unfortunately, billings is not a good forward-looking metric, and it's due to the fact that we have this 50/50 split in our business. The enterprise business is, you know, the billings associated with that are what you would expect in a normal SaaS business. They're multi-year, annual to multi-year. In the online business, it is not. There are many of those customers that are still buying and paying on a monthly basis, so it really doesn't make sense for a metric, and that's why you're gonna continue to see volatility in that metric. Because of that, I think what we've tried to give you was at least some color around deferred revenue, so you can understand that, because also of you know, the seasonality and the linearity that we have in our renewals and our billings. Unfortunately, the best that I have to give you is our revenue guidance, and that's it. I'm trying to give you metrics that better reflects now how we think about that. Okay. Thank you, guys. Hey, Eric. We'll now hear from Kash Rangan with Goldman Sachs. Hey, Eric, before Kash jumps on here, I just wanted to let you know Kash unfortunately was on the participant side, so we just pulled him in as a panelist, but he used our Zoom Chat product to come on over. Welcome to the world of Zoom Chat. Hi, Kash. Thank you. Hey, Kelly. Hello, Eric. How are you doing? Nice Zoom- I'll give you a Zoom chat T-shirt after this meeting. Thank you, Kash. There you go. Love it. I love it. Eric, I think 2022 is the year of transition, right? I was really intrigued by something you said back in September, how you were positioning Zoom for the next era of communications, and you had a lot of products in the product roadmap, the video exchange center, and you had the event platform, et cetera. I'm curious to see to get your thoughts on how you're preparing Zoom for the next chapter. What are the product milestones we should be expecting from the company and the go-to-market transformation, your strategic initiatives, your partnerships, et cetera, to help Zoom be ready for that vision that you laid out in September. Yeah, Kash, that's a good question, given that you are using Zoom chat, right? It's always our unified, you know, communication platform. Not only that, but when it comes to unified communication platform, chat, phone, and video conferencing, events, webinar, and all those, missing part contact center we just added on, right, to the UC platform. Also look at other two pillars, and also the hybrid work and the business workflow as well. Essentially, in the next several years, we are working very hard, you know, to transform our business from a, you know, meeting company to a platform company, right? In terms of metrics, you know, got to look at our enterprise growth. Now, online business used to be the revenue was very small. It's more like a byproduct of our online marketing platform. Because of COVID, right, that revenue is growing very well, also very profitable. Now, as given that COVID is over, we have to go back to triple down our enterprise's growth in terms of more new services, in terms of, you know, embracing the platform, right? You will see in the next several years, we are gonna, you know, introducing more and more enterprise services. And also from a technology perspective, you know, like AI and also, you know, and also some more integration with other business workflow applications. I think overall, add more and more value to our enterprise customers. I think that's the way for us, you know, to look at our growth, you know, for the next few years. Thanks so much. Thank you, Kash. Matt Stotler with William Blair, please go ahead. Yeah. Hey, Eric, Kelly and Tom. Good to see you guys. Thanks for taking the question. Maybe just one, as you think about, you know, building out the full UC stack, obviously you've got, you know, many of the key components, video, phone, everything around those two contact center now that you're pushing into. When you look at, you know, especially, you know, some of your enterprise competitors, some of the large buy-in that you get from IT around those other solutions is because they're based on things like foundational productivity tools like email or file sharing or scheduling and full feature chat, things like that. How do you think about how those fit into your roadmap? Or, you know, if not directly, how you satisfy those needs for your enterprise customers as you keep moving upmarket? Yeah, Matt, you know, first of all, you know, for now we focus on unified communications platform, right? They're not like a file sharing. You know, that's the reason why Kash is using Zoom chat, which is our persistent group chat, is a part of our unified communications platform, right? Customer can standardize on Zoom. I send you a chat message. I send a chat message to the group. I continue. I have a phone call and a contact center. That's our unified communications platform, right? That's part of, you know, the first pillar of our platform strategy. In terms of file sharing or email calendar, you know, first of all, we are integrating very well with other vendors, right? How to further embed the, like, you know, those solutions into the Zoom platform play, this is also our strategy down the road. You know, more to come and stay tuned. Yeah. Got it. Thank you. Thank you. Siti Panigrahi with Mizuho, please go ahead with your question. Hey, Eric and Kelly. Just wanted to ask you about the growth drivers. You know, could you rank order, like you talked about so many products, you know, besides video. You talked about phones, chat, contact center, so many other products. So how do you rank order this growth driver near term versus, maybe medium term, like two, three years out? Yeah. Near term, as I mentioned earlier, right, you look at our platform's three key pillars, unified communications platform, hybrid work, and business workflow platform. In terms of near-term driver, we've got to focus on double down, triple down our unified communications platform for the time being. The future driver is not only that, but also the how to spread a hybrid work, how to support the business workflow platform, right? Those two things will help us to further grow our business down the road, in addition to unified communication platform. I mean, what about contact center? When should we expect that to have some kind of material contribution? Yeah. Contact Center is part of our unified communication platform, right? Again, you know, if those customer already deploys meeting and phone, they would like to deploy the Contact Center. You know, overall, we put the Contact Center into our missing piece of the unified communications platform. You know, together, right? We'll drive our UC growth. New growth will come from second pillar and third pillar. Thank you. Thank you. Taz Koujalgi with Guggenheim has the next question. Thanks, Taz. Hey, guys. Can you guys hear me? Yep. Yes. All right. I have a question for Eric and then a follow for Kelly. Eric, as you launch your own contact center, what does that mean for your partnership with Five9? Oh, the partnership is still doing well because some customer already deployed Five9, now has deployed Zoom. You know, we wanna make sure, and we keep improving that experience, right? However, some customers, some brand new customers who deployed on-premise solution, they would like to, you know, consolidate everything to Zoom platform. Yeah, we would like to get those customers, right? Again, you know, this market is huge for contact center. You look at all those modules, right? Around the contact center, it is huge, right? You know, sometimes, you know, customer already deploy Five9, they're gonna deploy more, you know, the features from Zoom, also deploy to the Zoom Contact Center or deploy Genesys. That's all absolutely okay. Again, you know, we focus on, you know, our installed base. We focus on those customers who truly believe Zoom's UC vision, would like to standardize on Zoom platform, right? That's our go-to strategy. One for Kelly. Kelly, if I look at your free cash flow margins for this year, there's about a four-point gap between your operating margin and free cash flow margin. Going forward, as we have a bigger mix of enterprise, I guess, versus the online cohort, does that gap get wider? Do you see a bigger delta between operating margins and free cash flow margins in fiscal 2023? The gap in operating margins year-over-year is really being driven by our ongoing investment in R&D. At a little over 6% this year, it's still not within our target range. Our target range for R&D is 10%-12%. That's a big driver for, as we're continuing to invest and innovate for the future. A little bit of that will be offset in overall improvement in gross margins for the long term, but we still are in the middle of that multi-year strategy of moving from the public cloud into our own co-located data centers. That's gonna take a little bit more time. Then sales and marketing is also gonna increase a little bit as a percentage of revenue as we continue to focus on sales capacity, as we talked about. Also really, as we're building upon this amazing brand awareness that we garnered for Zoom Meetings, we wanna make sure that everybody also understands the great value they can get from Zoom Phone, from Zoom Events, as well as Zoom Contact Center. You should expect to see more targeted product marketing in the future. In terms of, I know you don't guide the free cash flow margins, but that delta between operating margin and free cash flow margin, should that remain consistent in going forward? Or should that delta widen because now you have more enterprise customers who are probably paying upfront more and you get a better cash flow margin? Yeah. Over time, we expect our relationship between operating margin and free cash flow to go back to what it was pre-pandemic. If you go back and look at the variability or the, I should say, the differential you saw there, that's what you should expect to see as we move through, probably sort of get through the back half of FY 2023, it should start to normalize like that again. We still have some investments in the early part of this year around continue to build out on our data centers. We're doing some office build-outs as well. You should expect to see CapEx a little bit higher than kind of the normalized rate, but eventually we'll get back to that normal relationship. Thanks, Kelly. Very helpful. Yep. We have time for one additional question, which will come from Parker Lane with Stifel. Yeah, hi. Thanks for taking the question. With the return of business travel and mandates being rolled back, curious to hear what your customers are thinking about in terms of their event plans for this year. Are you still anticipating that your customers will do more virtual only and hybrid events than they did pre-COVID? How's that sort of translating into the demand you're seeing for events in 2022? We really expect that as people start to travel, they're gonna travel for certain events, but not for all of them. We really expect the future to be hybrid, and that's why we're really excited about our Zoom Events strategy, and that it can accommodate both in-person as well as virtual attendees. That's what we really think is gonna be the future because people, I think are excited to be out and being traveling again, but they wanna do it when it's convenient for them and when it makes sense in their life. I don't think it's we expect people to return back to the way it was pre-pandemic, and it's gonna be some combination just as work is, we expect events to be the same. Yeah. Parker, just to quickly add on to Kelly about to what Kelly said. You know, look at the events, for sure, that'll be hybrid. You know, like last summer, I joined Salesforce Dreamforce hybrid event. I had a great experience, right? A lot of people joined online, and also they have several hundred of people there in person, right? But in the future, you know, even if that's a still hybrid event, I would say the percentage of, you know, and those people who are gonna show up in person will be more and more. But again, it's still the hybrid. Also, a lot of people join online as well. I do not think we'll be back to pre-pandemic, you know, all the events, just everyone being there in person. I do not think that's the case based on the, you know, the conversation with some of our customers. Yeah. Makes sense. Thank you, guys. Thank you, Parker. Thank you, Parker. Again, that does conclude our Q&A. Eric, I'll turn it back to you for any closing comments you may have. Yes, thank you all. I really appreciate your time. Thank you for your time. Thank you for your support. I truly appreciate. Thank you. Take care. Thank you so much, Eric. Thank you. Again, everyone, that concludes today's earnings release. We thank you all for your participation. Enjoy the rest of your day. See you next time.