Hello again everyone, and welcome to Zoom's Q1 FY 2023 earnings release. As a reminder, today's earnings release is being recorded. Now I will hand things over to Tom McCallum, Head of Investor Relations. Tom, take it away. Thank you, Kelsey. Hello everyone, and welcome to Zoom's earnings video webinar for the Q1, of fiscal Q1 fiscal 2023. 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 Q2 and full year full fiscal year 2023. Our expectations regarding financial and business trends, impacts from macroeconomic developments and the Russia-Ukraine war, our market position, opportunities, growth strategy, and business aspirations and product initiatives and the expected benefits of such initiatives. 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 statement we may make up on today's webinar. With that, let me turn the discussion over to Eric. Thank you, Tom. Thank you everyone for joining us today. As we continue to execute on the strategic pillars I shared with you last quarter, we are very grateful for the support and trust we have received from our customers and investors. Let me start with some recent news, then touch on our new product launches, and finally discuss some exciting customer wins before handing it over to Kelly. Just last week, we closed our acquisition of Solvvy, which we believe will strengthen our capabilities around conversational AI and accelerate the adoption of our contact center product. The nature of the customer experience is undergoing a fundamental transformation as enterprises increasingly look to engage their customers in more exceptional, personalized, and effortless ways. We recognize this shift and saw in Solvvy, a key laser focus on providing the very best conversational technology and empowering customer support leaders to deliver better experiences. We believe Solvvy's technology will broaden our contact center offering with the scalable self-service and AI capabilities that truly enable fast and personalized customer resolutions, improve agent productivity and valuable insights. We are very excited to join forces with Solvvy and help our growing number of contact center customers set new standards for customer service. A key part of our strategy is to enable more and more business workflows within our platform, and I'm super excited about our recent launches of Zoom Whiteboard and Zoom IQ for Sales. Zoom Whiteboard is arming teams with the power of continuous collaboration in an easy-to-use solution that provides a virtual space to collaborate before, during, and after a meeting. To help sales teams reach their full potential, we have launched Zoom IQ for Sales, a conversational AI solution that analyzes customer interactions to surface key insights, actions, and content from sales meetings. These new product launches encapsulate our strategy to move into adjacent workflows both horizontally and vertically in order to ensure our customers are getting more and more out of our platform. Now, moving on to customer wins. We are very happy to share that Humana, one of the nation's leading health and well-being companies, has expanded their relationship from Zoom Meetings to include approximately 24,000 Zoom Phones to integrate voice and video in their communications platform. Thank you, Humana. I also want to thank Avis Budget Group, a leading global provider of mobility solutions, offering three of the most recognized brands in their industry through Avis, Budget, and Zipcar, for expanding from being a Zoom Meetings and Zoom Rooms customer to being a broader UCaaS customer. They continue to stay seamlessly connected, having added approximately 10,000 Zoom Phone across many of the global offices and car rental locations. In addition to Zoom Meetings and Zoom Phone, our UCaaS solution includes a very robust, persistent team chat product that further drives collaboration in a seamless and integrated way. Our chat product is used by a number of large enterprises, including a Fortune 10 company with over 130,000 users. I also want to thank Lumio, a preeminent leader in residential, solar, and home experts. Lumio is a happy Zoom Meetings customer who recently enabled their 4,000 employees to enjoy the use of Zoom Chat. Lumio chose Zoom Chat for its ease of deployment and to enhance communication and collaboration across their team. The next two wins are very special because they demonstrated the strengths of our platform offering and how the contact center is a critical component of the platform. I want to thank TeamHealth, the leading physician practice in the U.S. for their trust in Zoom. Their innovation-focused team is committed to delivering the best quality experience possible for their employees, healthcare providers, and customers. A long-standing award-winning Zoom Meetings, Zoom Webinar, and Zoom Rooms customer, TeamHealth recently expanded their service with thousands of Zoom Phone licenses across their organization. Their journey did not end there. Given their seamless experience across our platform, they saw potential value in adding our Zoom Contact Center to modernize internal IT support services across their tens of thousands of employees and healthcare affiliates. The last, but certainly not least, I want to thank FranklinCovey, a leading provider of leadership, individual effectiveness, and business execution training and assessment services. FranklinCovey started as a Zoom Meetings and a Zoom Events customer. In Q1, recognizing Zoom's expansion into the contact center and improving UCaaS capabilities, they decided to deploy Zoom Phone together with Zoom Contact Center. They saw Zoom as going hand-in-hand to support many of their external call center needs in the U.S., including voice and video channels, as well as skill-based routing. We look forward to continuing our journey with FranklinCovey by delivering additional capabilities as we enhance and expand our contact center offering. Thank you, Humana, Avis, Lumio, TeamHealth, and FranklinCovey. I'm so grateful to have such a great group of customers. We hear every day from our customers about just how much impact Zoom's Unified Communications Platform has had on how they communicate internally and externally. Recently, we commissioned Forrester Consulting to quantify Zoom's business value and provide a framework for organizations looking to understand their unified communications investment. The study indicates that Zoom's Unified Communications Platform could provide a 261% return on investment over three years for a composite organization in their model with a payback in just less than six months. This did not come as a surprise to us or our customers who see and feel the value of Zoom every day, but it does set a healthy bar for what organizations can strive to accomplish with our flexible, scalable, and growing suite of communications solutions. As companies look to empower hybrid workforces, Zoom can drive further efficiency gains through our robust Zoom Rooms offering. There are intangible benefits as well. A new study from Gartner found that employees with more flexibility in terms of work style and location felt more connected to their organization's culture. We have found this to be true at Zoom, and are working to help our customers realize similar goals by enabling productivity and belonging across their teams, whether they be in person, remote, or hybrid. As always, let me also thank our global Zoom team, customers, partners, and investors for their great trust and support. With that, I will pass it over to Kelly. Thank you. Thank you, Eric, and hello, everyone. Let me start by also extending my warm welcome to the Solvvy team. We are thrilled to have you join the Zoom family. I'll first discuss the results for Q1 and then provide our outlook for Q2 and FY 2023. In Q1, total revenue grew 12% year-over-year to $1.074 billion, near the high end of our guidance. The growth was primarily driven by strength in our enterprise business, which saw a steady increase of customers as well as improved renewal rates year-over-year. We also saw ongoing success in Zoom Rooms and Zoom Phone, which reached three million seats during the quarter. Renewals in online improved sequentially, but growth was impacted mainly by international headwinds, including the strengthening of the dollar and the Russia-Ukraine war. Revenue from enterprise customers grew 31% year-over-year and represented 52% of total revenue, up from 45% in Q1 of FY 2022. The number of enterprise customers grew 24% year-over-year to approximately 198,900. We expect revenue from enterprise customers to become an increasingly higher percentage of total revenue over time. Our trailing 12-month net dollar expansion rate for enterprise customers in Q1 came in at 123%. This was in line with expectations as existing enterprise customers continued to expand their investments in the Zoom platform, with growth rates beginning to normalize following the very high rates of expansion previously. We saw 46% year-over-year growth in the upmarket as we ended the quarter with 2,916 customers contributing more than $100,000 in trailing 12-month revenue. These customers represented 24% of revenue, up from 19% in Q1 of FY 2022. Our Americas revenue grew 15% year-over-year. Our APAC revenue grew even faster at 20% year-over-year. The performance in Americas and APAC was partially offset by the flat year-over-year growth in EMEA. This was primarily due to continued headwinds in the online business. On a quarter-over-quarter basis, we believe the Russia-Ukraine war has broadly impacted our online business in Europe and is expected to weigh on the balance of FY 2023 as well. Now, turning to profitability, which was 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, 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 Q1 was 78.6%, an improvement from 73.9% in Q1 of last year, and 78.3% last quarter. The sequential improvement was mainly due to optimizing usage across the public cloud and our increasing number of co-located data centers. Given the improvements we are seeing so far this year, we expect gross margins to be in the range of 76%-78% for the remainder of the year, which is higher than our previous view of the mid-70s. Research and development expense grew 105% year-over-year to approximately $85 million, driven by our focus on innovation. As a percentage of total revenue, R&D expense increased to 7.9% from 4.3% in Q1 of last year. Our new product launches reflect our ongoing investments in expanding Zoom's platform and our commitment to delivering on our customers' evolving needs. We plan to further invest in R&D to reach our long-term target of 10%-12%. Sales and marketing expense grew by 40% year-over-year to $267 million. This represented approximately 24.9% of total revenue, up from 20% in Q1 of last year. We remain committed to investing in worldwide sales capacity, channel partners, and product marketing across the Zoom platform. G&A expense grew by 26% to $93 million, or approximately 8.6% of total revenue. Non-GAAP operating income expanded to $400 million, exceeding the high end of our guidance of $350 million as we are seeing the benefit of efficiencies in our cloud operations. This translates to a 37.2% non-GAAP operating margin for Q1, compared with 41.9% a year ago, and 39.2% last quarter. Non-GAAP diluted earnings per share in Q1 was $1.03 on approximately 307 million non-GAAP diluted weighted average shares outstanding. This result is $0.15 above the high end of our guidance and $0.29 lower than Q1 of last year. Now, turning to the balance sheet. Deferred revenue at the end of the period was $1.3 billion, up 22% year-over-year from $1.1 billion. Looking at both our billed and unbilled contracts, our RPO totaled approximately $3 billion, up 44% year-over-year from $2.1 billion. We expect to recognize approximately 63% of the total RPO as revenue over the next 12 months, as compared to 72% in Q1 of last year, reflecting a shift towards longer-term plans. As a reminder, our seasonality of renewals is front and loaded and tapers through the year, and therefore our collections follow the same trends. This leads deferred revenue to peak in Q1 and moderate over the rest of the year, reflecting the smaller renewal base. We expect Q2 deferred revenue to grow at approximately 9%-10% year-over-year. We ended the quarter with approximately $5.7 billion in cash, cash equivalents, and marketable securities, excluding restricted cash. We had operating cash flow in the quarter of $526 million, as compared to $533 million in Q1 of last year. Free cash flow was $501 million, up from $454 million in Q1 of last year. Our margins for operating cash flow and free cash flow remain strong at 49% and 46.7% respectively. For the fiscal year, we would expect free cash flow margin to be roughly 3-5 points lower than our non-GAAP operating margin, taking into account the lower deductions for stock-based compensation caused by the recent stock volatility. The Section 174 requirement to capitalize and amortize R&D expenses could further impact our free cash flow if Congress does not defer, repeal, or otherwise modify the existing legislation. Over time, assuming a more normalized SBC environment, we would expect our free cash flow margin on an annual basis to track approximately at or above our non-GAAP operating margin. Last earnings, we announced our $1 billion share buyback plan. As of the end of Q1, we had purchased $132 million of stock, representing 1.2 million shares. 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 the Q4 of FY 2023. For the Q2 of FY 2023, we expect revenue to be in the range of $1.115 billion-$1.12 billion. We expect non-GAAP operating income to be in the range of $360 million-$365 million. Our outlook for non-GAAP earnings per share is $0.90-$0.92 based on approximately 308 million shares outstanding. As mentioned last quarter, due to our multi-year history of profitability, we have fully utilized our NOLs. We continue to expect our tax rate to approximate the blended U.S. federal and state 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 are raising our non-GAAP operating income to be in the range of approximately $1.48 billion-$1.5 billion, representing a non-GAAP operating margin of approximately 33%. Our outlook for non-GAAP earnings per share is $3.70-$3.77 based on approximately 309 million shares outstanding. Before we conclude, I'd like to update you on our recently issued inaugural ESG report. The report includes information regarding our ESG initiatives and policies, environmental performance and targets, details of Zoom's and our employees' charitable contributions, diversity metrics, and an index providing standardized reporting according to the SASB framework. 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, everyone, we are moving into our Q&A session. As a reminder, please limit yourself to one question to ensure that we can hear from everyone today. Our first question will come from Meta Marshall with Morgan Stanley. Perfect. Thanks so much, guys, and congratulations on the quarter. You know, clearly you guys are seeing a lot of traction on the phone front. I just wanted to get a sense of, as you look into fiscal 2023, just what you think could be kind of other categories of kind of ancillary products that could contribute to growth and just when you would expect kind of those categories outside of core video to be more than 10% of revenue? Thanks. We're super excited, of course, about recently launched products, including Whiteboard and Contact Center. We saw some contact center deals. You heard some of those names that Eric talked about at the beginning of the call. Of course, Zoom Rooms continues to be a really important part of our strategy going forward, especially with, I think, the ever-evolving status of what flexible and hybrid work is gonna look like in the future. In terms of when I expect any of those products, I think, you know, on a combined basis, we do see the combination of those products exceeding 10% of revenue today. We've always committed that as soon as each, any individual product gets to 10%, of course, we'll start disclosing that. I think that's likely. Not likely to happen in FY 2023, but probably in FY 2024 or FY 2025, you'll start to see some of those, you know, product lines coming into their own and, you know, producing at least 10% of revenue. Great. Thanks. Congratulations. Thank you, Meta. Thank you. Our next question will come from Matt Stotler with William Blair. Hey, Matt. Hey, guys. Hey, thank you for taking the question. Maybe just one on contact center for me. Obviously, good to hear some early wins there. Would love to get a, you know, an update, I guess, more broadly on kind of the adoption, you know, overall demand that you're seeing for that product, specific use cases, that you're seeing customers kind of roll it out for. As you think about the functionality roadmap from here, you know, what are the most critical pieces? Obviously nice to see Solvvy coming in. But on that side, we'd love to get your thoughts on that going forward as well. Yeah, yeah, Matt, that's as good a question. First of all, we are very, very excited to already have several contact, kind of paid customers, right? Because their trust in the proven new cost, you know, the capabilities. For those customers, they already deploy Zoom Meetings and also either already deployed Zoom Phone or they are going to deploy Zoom Phone. They prefer deploying Zoom Contact Center as well, 'cause we already built a very scalable call routing engine already, right? A lot of features, call contact center, call contact center features already built in. Also we find not only just a functional one use case like, you know, enterprise IT services. You know, broadly speaking, this is a much bigger opportunity for us. We keep adding more and more features, you know, like recently we acquired Solvvy, you know, conversational AI capabilities and, you know, even some not core features like workforce management, you know, QA module, like CSAT, all those features. We are going to add a consumer contact center. We are going to become a very, you know, I would say very meaningful large enterprise contact center service provider. We're very excited. The team working extremely hard and, yeah, very excited. Very helpful. Thank you. Thank you. Our next question will come from Michael Funk with Bank of America. Yeah, hi. Thank you all for taking the question tonight. You know, along a similar line of thinking about the added capabilities, you know, whether it's Zoom Phone or a contact center, how is that changing your sales strategy, in the way that, you know, way you interact with customers? How should we think about that also affecting the sales cycle, potentially lengthening that, if you add a more complex solution? Thank you. Yeah. Kelly, feel free to chime in. I think, first of all, I do not think that's complex because the trust already established. Customer always ask about, you know, about our product roadmap. They want us offer more value to them, right? Based on the very consistent front-end experience and the seamless backend architecture. The customer already deploy Zoom Meetings, Zoom Chat, and also deploy Zoom Phone, Zoom Rooms. Now, given the contact center is a no-brainer, customers. Yeah, I trust your brand, I trust your capabilities, and would like to test your contact center as well. That's the reason why when we announced Zoom Webinar, right, we also see the early adoption. It is pretty good. Not to mention the Zoom IQ for Sales, because we received a lot of feedback from customers. They trust Zoom. They want us offer more value. You know, look at all, you know, those use cases, you know, starting from a sales department, you know, support department, contact center, maybe other department. We are gonna add more and more value, the new services, new product innovations and features, because I do not think that will, you know, introduce any, you know, complex sales process because the trust already established, right? It's more like the upsell. Even for new customers, you know, when they, you know, do a reference check with other, you know, very happy customers, I think it is, again, this is a pretty, you know, straightforward, you know, sales process. Yeah. Thank you for that. I would just add that. You know, land and expand is a very tried and true sales strategy for Zoom from the very beginning. Working with our account teams, we have these experts in the overlay team that come in and continue to do land and expand, and it's working very, very well. I completely agree with Eric. It isn't adding complexity, it's just continuing to build our relationship with our customers, which is what we've been doing since day one. Hey, well, thank you both so much. Thank you, Michael. Kash Rangan with Goldman Sachs has the next question. Hello, Eric and Kelly. How are you? Doing well. We're good. Thank you, guys. Good to see you guys. Eric, I was deeply intrigued by your launch of the conversational AI product through the acquisition of Solvvy. Can you just give us a sense as to the product roadmap? How does it integrate with the Zoom platform? Relative to embedded competitors in the conversational intelligence space, what would be Zoom's competitive differentiation in the industry? It seems like at one level you're entering the CRM market, not in the way salesforce.com and so on and so forth do, but you are getting into a level of customer engagement which is very different than the video meeting platform. Can you tell us a little bit more about that? Thank you so much. Yes, great question. You know, first of all, you look at a contact center, that's a huge market, right? A lot of use cases, right? Also, by the way, a lot of enterprise customers today, they still deploy on-prem contact center solutions. In next few several years, they are gonna migrate to the cloud. Inside of that, I think, you know, to have a customer seamlessly migrate to cloud offering, we need to make sure there are no any feature regressions. Similar to what we did it before to have a customer migrate to Phone, right? From on-prem phone to cloud-based phone. With that aside, a lot of features, right, you know, it's just, you know, corner cases, right, we have to add, right? That's one, right? It's more like a no-brainer. I do not think that's a key differentiation, but we have to add that. That's one. Two is you look at the AI. You know, AI is something new. You look at a lot of other contact center solution providers, they do not have AI capabilities before, right? Now, this is something new, and we are doubling down on that. You know, that is one, you know, what is, I would say the key differentiation, right? How to move faster at a much better AI capabilities. In terms of overall, you know, key differentiation, I would say the video is a key use case, right? You know, how to further improve the interaction between the customers or IT, the support with employees, and how to turn on the video, how to analyze the video conversation, you know, like a speech-to-text transcription, right? Recently like Zoom IQ for Sales. That is very important for us. In terms of integration with the, you know, ServiceNow, with Zendesk or Salesforce or others, I think this is a feature. We have to add that. I do not think that's a key differentiation because every contact center solutions, they all have that, right? Again, we think that's a huge opportunity ahead of us. Because customers also like the new solution, the modern solution. Not like the old architecture, very hard to innovate, right? Given the progress we made over the past several years for Zoom Phone, we are going to do something similar. That's why I'm very excited. Thank you, Eric and Kelly. Thank you, Kash. Thank you, Kash. Moving on to Siti Panigrahi with Mizuho. Hi, Siti. Hey. Thanks for taking my question. Wanted to ask you about your fiscal 2023 guidance. You talked about FX headwinds. Maybe could you know, give us a little more color on the FX headwinds and also the impact from the Ukraine war on the EMEA side, which mostly gonna impact online segment. What should we expect in terms of, you know, growth rate or churn on the online segment versus enterprise? Yeah. In terms of FX, where we're seeing the impact, of course, is in the euro, the pound, and the yen. When we look at the trends that we've seen in Q1 for the combination of both, the strengthening of the dollar as well as the impact for the war, it built into our guidance as an expectation that the combination of those two factors is having about a 1% impact on revenue. That's largely the impact of the war is largely on the online segment. We haven't really seen the impact in the enterprise. The FX, of course, is extending across both of the segments. Thank you. Thanks, Kelly. Yeah. Our next question will come from Ryan MacWilliams with Barclays. Hey, guys. Good to see you again. Another one on guidance. Kelly, just how do you think about Zoom reaching your Q2 revenue guide from a segment standpoint? Just wondering here, given some fluctuations in your online business, maybe what we could see some strength in next quarter? Thanks. Yeah. If you remember last quarter, we talked about that enterprise would be growing in 20% plus for the year and that online would be flattish. We said that flattish meant that it could be a little bit above zero, it could be a little bit below zero, depending on the quarter. The other thing we've talked about is that inflection point coming in Q4. You should expect that Q2 is also going to be another volatile quarter for the online segment, given all the factors we just talked about, but that we really continue to see strength in the enterprise, and that's where the growth for Q2 will be driven from. By the time we get to the back half of the year, that's where we're really gonna start to see that stabilization of the online business. Should be coming. Thank you, guys. Yep. Thanks, Ryan. Thank you, Ryan. Moving on to Rishi Jaluria with RBC. Wonderful. Hi, Eric, Kelly, Tom, thanks so much for taking my question. I wanted to drill into the NRR that we're seeing across the board. Appreciate all the color, but maybe can you give us a sense for how have you seen the NRR for 100,000 customers generally trending? You know, have you seen that hold up? Has that gone down? Maybe just help us understand usage patterns for your largest customers. Thank you. Thank you, Rishi. As a quick reminder, last quarter, we shifted to the new metric of net dollar expansion for our enterprise customers. This is as we're starting to split out enterprise segment, I should say. As we're starting to split out the business between enterprise and online, as we think that's really the most appropriate way to look at the business going forward and how we're managing it internally. That metric did, you know, historically we had disclosed 130% or above. It came down to 123%, which is really right in line with what we were expecting. As you think about the overall growth rate of the company, and as we indicated, we expect the enterprise segment to be growing 20%+, the net dollar expansion should be tracking, you know, the deceleration, if you will, of it should be tracking to that as well, and that's why it's coming in right at 123%, which is just what we would expect. Oh, yeah, sorry, just to quickly follow up. If we were to think specifically at the 100,000 level, right, 'cause I'm sure there's more churn going on at kind of the medium level versus your six-figure customers. Without putting a number on it, how would you say that the NRR for that cohort of your largest customers has trended over time, and how is it trending now? Yeah. It's higher than 123%. That's what I would say, is we've really continued to see strength in both, the new bookings as well as renewals in that segment of our customer base. Okay, wonderful. Thank you. Yep. Citi's Tyler Radke has the next question. Hi, Tyler. Hey, Eric. Hey, Kelly. Thanks for taking the question. A question on the cost side of the equation here. You know, you outperformed, I think, by 400 basis points or 500 basis points this quarter on operating margin. Yet it seemed like it's still a decently strong hiring quarter. Can you just talk about, you know, if you're finding more efficiencies in the business, or if there's something specific this quarter? And then as I look at your gross margins, again, it sounds like you're expecting them to come down between 76% and 78%. You were above that this quarter. Just anything in terms of new capacity or, you know, call center stuff being deployed that would impact kind of that trajectory? Thank you. Sure. Actually, gross margins were stronger than we expected in the quarter. If you remember in Q4, the way that we talked about the outlook for gross margins, even though we don't explicitly guide to them, was we talked about expecting them to be in the mid-70s for the balance of the year. Actually 76%-78% for the rest of the year is higher than we were anticipating coming into the quarter. That improvement, as we really have made a lot of strides in terms of optimizing our cloud usage and getting that into the coLOS, thanks to our DevOps team. That is really helping drive the improvement in the operating margins going forward. As you said, we do continue to see strength in hiring, continuing to attract great talent, which we're really excited about, continuing to invest in R&D, which is really important for the long-term innovation and commitment to our platform. Thank you. Yeah. Our next question will come from William Power with Baird. Good afternoon. Thanks for taking the question. I guess, Kelly, you know, for you, as you look at the fiscal Q2 revenue guidance, it came in a bit stronger than I think, you know, we in the Street, you know, might have been, yet the full year is still pretty consistent. Any other color just as to the puts and takes in the H2 of the year? I guess just as part of that, just trying to understand the key drivers around your confidence of re-accelerating revenue growth in fiscal Q4. What are the key drivers to that? Yeah. You know, when we gave Q4 guidance, and it continues to be the case today, we continue to see strength in our enterprise business, and that's both on new bookings as well as renewals. When you think about the opportunity coming with all of these new product introductions, super excited about Zoom Events, which came last year, of course, Zoom Rooms and their strength, the new contributions that are possible from Whiteboard as well as Contact Center, that's what we think is gonna drive the growth continue through the rest of this year. And then online, while we saw some volatility in Q1 as we've talked about at length already, and we expect to see some of that continue into Q2. By the time we get into Q3 and Q4, there's a couple of things that are happening. First of all, the team has done an amazing job with new initiatives around pricing and packaging and localized payment types, which is really driving strength across the board, especially internationally, as well as the fact that we see stabilization occurring just because of the aging of our cohorts. We go all the way back to last year's Analyst Day, and we showed you that chart, right? Which shows how once cohorts get to that 16 months of tenure, they really start to stabilize in terms of retention rates. That has continued to hold cohort after cohort, even when there's volatility earlier on. By the time we get to Q3 and Q4, you start to see, you know, 75% plus of our cohorts in that tenure, which in and of itself drives a lot of stability in the online business, which leads to not only stabilization, but potentially growth in the back half, which is what we're modeling today. Okay, great. Thank you. Yep. We'll move on to Parker Lane with Stifel, who I think might be having some difficulties with his video, so he may not appear on video today. Hi, Parker. Parker, if you'll go ahead and come off mute, that would be great. Hey, sorry about that. It's Max Osnowitz standing in for Parker Lane. Yeah, we're in transit today, both of us, so sorry for the no video. It's okay. Just thinking about the customer announcements that you made, it feels like there's a good variety of industries. Is there any industry that you're noticing that you're seeing a lot of demand from that maybe kind of lagged behind everybody else during COVID and is still going through the transition or has started a transition that others haven't? Yeah, I would say it's pretty consistent, right? You know, look at our installed base from education to healthcare, financial services, and it's pretty consistent, right? You know, customers would like to consolidate not only meetings and also the Zoom Phone down to the Zoom Contact Center, but also more and more customers are deploying the Zoom Chat solution as well. That persistent team chat works extremely well. They like that solution. That's also free. Having said that, I think I did not see like any specific, you know, the vertical industry, right? You know the kind of make a big difference, right? Compared to other industries. Overall it's very consistent. You know, look at our installed base and they need more and, you know, they need us to deliver more, you know, value and more services for them. You know, take a Whiteboard for example, right? Look at the early adopters across industries, right? That's pretty promising. All right. We will go ahead and. All right. Thank you. Oh, thank you. We'll move on to Matt VanVliet with BTIG. Hi, good afternoon. Thanks for taking the question. Good afternoon. I guess thinking about overall direct sales, headcount, investments that you look to be making over the next year plus, you know, any specific SKU across various regions that you're finding you wanna invest more heavily in? Then sort of alongside of that, on the channel side, you know, how much of that is driving this pretty significant increase in Zoom Phone versus direct sales, and kind of where investments are gonna grow around channel enablement as well? Yeah. We are continuing to invest in our sales organization globally, but you'll see as a percentage of over a year-over-year basis, greater investment happening internationally, including channels. We've made huge progress in our channel investments and contribution in the U.S., but that's largely nascent still internationally, and the team is doing a really great job of looking for, you know, not only master agents, but carriers, and it depends on which works best in, depending on each of the regions. That is a significant area of focus for us this year. Perfect. Thank you. Yep. Moving on to Alex Zukin with Wolfe Research. Hey, guys. Can you hear me okay? Hey, Alex. Kelly, maybe just for you, can you remind us what the difference is in either the operating margin or free cash flow margin profile between the online and enterprise business? Because it looks like you massively outperformed on cash flow at the same time as the online business actually declined 2%. I wanna understand just how much reliance is there. You gave a free cash flow margin target for the full year, at least a range. How much of that is based on the performance of the online business versus the enterprise business? Eric, if I think about the stock-based comp, what's the plan for the company? How should we think about that on a go-forward basis in terms of either, you know, repricing people's RSUs, giving more shares? Just curious how you're thinking about that. Eric, do you wanna go first? Yeah, you can address the first one. Okay. Alex, the impact that you've seen in the outlook we're giving from free cash flow is much greater impact from stock-based comp than from sort of any change in the balance of online versus enterprise. What's happening because of the stock volatility, we've seen much fewer stock-based comp deductions, as you know, employees are choosing to hold on to their options or their RSUs at this point and not exercising or the deduction itself just isn't as great. That's really the significant contributor to why there's a difference that we've given from the Q1 performance to the outlook for the rest of the year. Yeah. Yeah, Alex, back to your second question. I think, you know, our company culture is deliver happiness, right? My number one priority is to make sure all Zoomies feel happy, right? Together we make our customer happy. Prior to COVID, we had a little bit over 2,000 employees. Look at it today, almost at 7,000 employees. We hired so many employees over the past two years. Guess what? When they joined Zoom, the stock price was too high. We cannot control the price, but we can control the delivery happiness for our employees, you know, certainly for all those employees who joined over the past two years and the stock price, you know, probably much higher than, you know, the stock price today. We did, you know, issue the new stocks for them, right? Ultimately, you know how to make sure those employees are happy every time, you know, every quarter, every week, we look at are there any things we can do differently to make sure our employee happy. You know, this is always ongoing effort. That's our number one priority as always. Kelly, just maybe to ask the question. I meant in terms of the differential the margin profile of the two businesses, is one of them inherently more profitable than the other? Yes. The online business, as we've said before, contributes more substantially from an operating margin as well as cash flow perspective because they largely are untouched by our sales organization. They don't, you know, have the associated expense from a commissions perspective. They may have credit card fees associated with it, but you know, that's a few points versus the commissions. That's the biggest difference you're gonna see between those two. Got it. Thank you. Yeah. Moving on to Matthew Niknam with Deutsche Bank. Hey, guys. Thank you for taking my question. I'm wondering, have you seen any paring back or moderation of investments from some customers in light of growing macro concerns? If so, has it varied by either geography or customer size? Thanks. You know, I think we really haven't, especially in enterprise, we have continued to see strength in renewals as well as adding new customers and expansion into additional products. We really haven't seen that in terms of concern. I think, you know, we've heard from other people that what they're really focused on might be if they're limiting spending, it's focused more around potentially hiring or travel. Of course, Zoom is a great alternative, you know, if they're focusing on limiting internal travel, we really haven't seen that impact to date. Got it. Thank you. James Fish with Piper Sandler has the next question. Hey, thanks for the question. Hi, James. Hey, thanks for the question. Deferred revenue grew about 8- 9 points faster than you anticipated this quarter, but it did seem like duration's extended a little bit. Are you guys incentivizing customers or the sales team to extend those durations, or is it more a factor of the product mix, like phone and contact center picking up, which if it's the latter and we're seeing kind of long-term RPO grow faster than current RPO, I guess why wouldn't we see deferred revenue grow as you get more multi-year deferred revenue up front and that helps the free cash flow margins versus the operating margins? Our compensation structure around this or incentives for either reps or customers has not changed, James. We do have discounts in place for customers in terms of multi-year agreements, but that has been consistent over time. We, as we're seeing more and more of the revenue contribution coming from enterprise, we are and I think as we've moved sort of past the COVID buying cycles, we've seen people go back to buying more and more longer term agreements. We also have seen a lot of initiatives, even online, in terms of opportunities for customers to buy annual rather than monthly, and the team has done a really great job of incenting that as well. We are seeing kind of an overall shift across both segments of the business to longer term. The reason you could see an increase in non-current RPO, but not necessarily deferred, is because they don't always pay all of those multi-year terms upfront. They could have a three-year deal but only pay a year. Less often they'll have a three-year deal but pay monthly. It's not uncommon to have, like a three-year deal but only pay one year in advance. Got it. Booking three years, billing annually. Makes sense. Yeah. Yeah. Thanks, Kelly. Happy birthday next week. You too. Itai Kidron with Oppenheimer has the next question. Hey, guys. Nice quarter. Kelly, a couple. Thanks, Itai. Quick ones for you. On the phone subscriber additions, great to see the three million milestone, but if my math is right, it took you kinda nine months to get from 2 million- 3 million. It took you seven months to get from 1 million- 2 million. Are we seeing a deceleration in the pace of phone additions, or maybe my math is wrong here? On the duration on the enterprise contracts, it's great to see that customers are signing longer term contracts. Can you talk about duration, how that has changed quarter-over-quarter? How do I think about the discounting that comes along with the longer duration contracts in mind? Yeah. First of all, around Zoom Phone, we actually said we achieved three million during the quarter, not at the end of the quarter. We are sitting above three million and we're at the end of the quarter. I don't think you actually can't do the exact count based on the information we've given. I wouldn't assume there's a deceleration in that rate. Okay. Then in terms of the longer term contracts, it's a little bit of what I was just discussing with James, is that I think customers, as they move past the pandemic and really thinking about how they're gonna support their employees in this post-pandemic flexible hybrid work, they're committing to our platform, and they're committing to it in a longer term. Especially as they're bringing on multi-product and seeing the efficiency that they get, it makes sense for them. Our structure around that has not changed, so we do, as we always have, offer discounts for, you know, size of deal, multi-products, multi-year willingness to pay up front, but that hasn't changed. It's just as customers continue to see the value of Zoom and committing to that for a longer term. Very good. Thank you. Yeah. Itai, just to quickly, on the one hand, we've got to look at a number of the seats, the pay-per-seat is sold. On the other hand, also do not forget the quality of service, right? You know, we kind of deliver a platform to make a workforce happy, right? Let's say you talk with some other, you know, cloud-based phone service providers. You talk with their customers and talk with our customers. And as you know, we make a customer happy. And it applies, not only for all those on-prem, you know, the phone service, you know, customers might migrate from on-prem to cloud, but also some other cloud-based, you know, the customer also migrate some other cloud-based, you know, phone services to Zoom platform as well. It further proves we deliver a better experience, make a customer feel happy. That's our, you know, mantra, so. Very good. Thank you. Thank you. Thank you, Itai. Shebly Seyrafi with FBN Securities. We'll move on to the next question. Yes. Shelby. Thank you very much. With your guidance for deferred revenue growth of like 9%-10% in Q2, it looks like you're, with your revenue guidance, you're getting to be slightly negative on a billings basis in Q2. My first question is: Do you think that's the low watermark in terms of billings growth this year? Then secondly, related to that, do you think that the deferred revenue growth can accelerate meaningfully in the back half, especially with the easy compares in the back half for deferred? Yeah. Remember that our renewals are front-end loaded. This goes all the way back to early in the pandemic when we had that large inflow of bookings in Q1. Q1 is still the high point for renewals, and that declines through the year. Based on that, our collections and our deferred, it's not one-to-one, but they largely follow that similar trend because you have this large inflow of deferred revenue in Q1, but then it's getting amortized throughout the year. The renewals as they're lesser each period are not the same rate to necessarily refill what's being amortized over the year. That's why we have that trend, and you won't necessarily. I mean, it's gonna change over time as we start moving to more and more of our new bookings to a normalized seasonality of, you know, back half of the year, but that is going to take some time given just the large amount of bookings we saw a few years ago in Q1. In terms of Q2 being the low watermark, you know that it's not. It could be even lower in Q3 as we're still continuing through that renewal cycle that I just described. That's a billing statement or revenue statement? I'm sorry. Yes, billing. In Q3. Thanks. Yeah. Patrick Walravens with JMP Securities, please go ahead with your question. Hi, you've got Aaron on for Pat. I say, my Patrick, how you've changed. Given the layoffs, hiring freezes, and hiring slowdowns we're seeing throughout the tech sector, can you give an update about what you're seeing on the hiring front and your hiring approach? Any changes you've made? Yeah. We had a very strong hiring quarter in Q1. We continue to attract great talent. As we mentioned in our prepared remarks, we are still continuing to invest in innovation, so very focused on hiring in R&D as, you know, we continue to build out our platform and produce new products. Then also very committed to continuing to hire in sales and marketing as we continue to expand our sales capacity on a global basis and focus on product marketing also on a global basis. While we are always focused on being as efficient as we can around G&A and COGS, we are continuing to invest there as well as at the levels that we need to continue to support the expansion of the business. Thank you so much. Let me just quickly, Patrick, you look at our, you know, the revenue, you know, the base. Plus extremely, you know, a positive in terms of cash flow, right? So why not double down on R&D, new product, and AEs, account executive, right? You know, I think we are, you know, more flexible, much better position, right? In given this sort of a Great Resignation, economic downturn. Yeah, that's why we're very excited about the future, you know, more innovative services and more efficient, so. Thank you. Thank you. Thank you. The next question comes from Ryan Koontz with Needham. Thanks for the question. I wanted to ask a little, Eric, about your contact center strategy a little more. Was Solvvy an existing partner that you worked with, previous to the deal? Do you envision Solvvy being a standalone play where you can use that to augment existing other contact centers? Or how do you envision kind of Solvvy? Or is it gonna roll right into the Zoom platform and be a holistic offer? Thank you. Yeah. First of all, we are very excited about Solvvy acquisition. You know, that's, this is a great team. Laser-focused on, you know, conversational AI with the talents and technologies. First of all, we are gonna embed that into our overall contact center offering. That's number one for sure. In terms of, you know, if we needed to also keep making that product as a standalone product, you know, keep adopting down that and sell that as service, as a standalone service, you know, and in the next few weeks, you know, a few months, we are gonna discuss that. Overall, we gotta look at the bigger picture, right? Customers, they need a full-blown great contact center experience from Zoom, right? The Solvvy, you know, product will be part of that. Many customers already told us, very excited about this acquisition. Got it. Thanks, Eric. Thank you. We will now hear from Michael Turrin with Wells Fargo. Hey there. Nice to see everyone. Thanks for taking the question. Kelly, you mentioned the outlook calls for a modest re-acceleration of growth in fiscal Q4. Thinking through the drivers and assumptions beyond that just beyond compares, is there anything you can add to help us think through how much of that comes from some of the online headwinds rolling off of the model, the seasonal profile of enterprise coming through as we get closer to the exit of the year, or just other pieces to be mindful of? On the EMEA impacts and the flattish growth that you're seeing there in Q1, anything you can add just around if that changes, if that's a change for, in terms of the fiscal year outlook and how much of that could be incremental versus the targets and what you're seeing when you frame the outlook in Q4 for us? Thank you. Sure. The acceleration in Q4 is coming from both online and enterprise. Online is due to the great initiatives that they're working on in terms of pricing and packaging and payment types and local payment currencies, as well as just the aging of the cohorts, that they just get a lot more stable as they age past that 16- month, 8-month, you know, the term, if you will. What we're seeing is by the time we get to Q4, we're gonna have 75-ish% of our online cohorts that have aged to that level. That really brings a lot of stability to the online segment and should return it to not only being stable, but also growing. The enterprise, we continue to expect growth to expand due to just expanded sales capacity. Eric just talked about continuing to invest in AEs, investing in our international channel, as well as contribution from all these amazing new products that are continuing to grow and find their sea legs, if you will, and will really contribute when we get to the back half of the year, including Whiteboard, Contact Center, Events, all of those things that we'll start to see more and more contribution from th ose. What else did you add? Oh, EMEA. Increments, anything incremental from EMEA, that is really, I think, difficult to predict right now given the state of what's happening in EMEA. You know, we're, as I talked about, the impact from FX as well as the war is approximately 1% of revenue included in our current outlook and guidance that we've given. You know, if things in any way were to improve dramatically sooner than that, there could be upside, but, you know, I think we're all in a wait and see mode there. Very helpful. Thank you. Moving on to Peter Levine with Evercore. Thank you for squeezing me in. Maybe to follow up on the, I think the prior land expand question with, you know, you have Phone, Contact Center, your core Meetings. It would seem like there are a number of different buyers across the org that you have to go after, right? To gain market share. For one, on the enterprise side, I'm assuming you're seeing sales cycles if you're selling Phone, Contact Center, the whole package is taking longer, obviously because there's more approvals, but really asking is like how should we think about sales and marketing leverage longer term? Like how do you synchronize your go-to-market to kind of leverage, you know, now that you have the platform and you're selling? Eric, do you wanna talk about that or you want me to? Sure, absolutely. In terms of our go-to-market strategy, right? You know, similar to what we did before, I think it worked extremely well, so, and it built trust with customers, right? Given that we have so many very happy customers, you know, over the past two years, and we truly have the world helping people stay connected. You know, for any new services, you know, they are very happy, you know, trying to test the services, right? You know, because of that, upsell, you know, opportunity is huge, right? We already established the trust. You know, customers really not like, oh, just looking for other solution just to work, but they really need to have some solution that can truly make an employee workforce happy, right? Inside of that, you know, Zoom IQ for Sales, right? After we launched that, we already have several paid customers. The reason why the customers trust our brand and during the upsell, you know, the period, right? We always talk with the customer, "Hey, we have this service, have that service," right? Overall, I think if trust already is there, you know, any new and upsell opportunity should be relatively easier, even if the buyer is different because the CIO, you know, they already made a decision, right? To standardize Zoom, the meetings, the phone, downloadable contact center, Zoom IQ for Sales, Whiteboard, and also by the way, do not forget about, you know, also, you know, presence and chat solution as well, right? That's the reason why customers look at the full UC stack. Zoom has everything, right? That's the key. You know, that's why customers, they trust us. By the way, we build everything by ourselves, very consistent front-end experience, very scalable back-end, and also very efficient, you know, architecture as well. That's why we are, you know, very optimistic, you know, about our go-to-market strategy. In terms of marketing, you know, for sure, you know, we do not need to spend so much money, right? To promote Zoom brand, right? Zoom already, you know, became a word, right? How to make sure focus on those, like, you know, vertical marketing, right? Some are, you know, in-person events and also the, you know, stay as close as possible with the prospect and customers, and that's our focus, right? Not like previously, we really focus on the brand, you know, the marketing. That's not our focus. More enterprise marketing now. Thank you. Thank you. Thanks, Peter. We have time for one additional question, which will come from Matthew Harrigan with Benchmark. Thank you. Can you talk about how the advent of private 5G networks, especially relative to the limitations of Wi-Fi on the security side, you know, really help the enterprise opportunity over a period of time, both as far as the TAM and the specific alternatives that you offer for that? Yeah, Matthew, first of all, thank you so for waiting for such a long time to ask the question. It's really appreciate. I think, you know, look at Wi-Fi or corporate LAN network or 5G, actually, you know, from our perspective, right? You know, as long as any technology can help improve customers' connectivity, make the connection stable, you know, we are very happy, right? You know, especially, you know, between the 4G and the 5G. 5G is great, but not every country already deployed 5G. Also, you know, look at our optimization technology, right? And you can support a very unstable network, even 5G, you know. Also, you know, I think optimize more if needed. Overall, I think anything from infrastructure layer can help improve customer video collaboration experience, you know, we are all for it, right? That's why, you know, we do not have a 5G or 6G. You know, I think we just make sure we build an application, can leverage those advanced infrastructure to truly deliver happiness to our customers. Thanks, Eric. Congratulations. Thank you, Matthew. Appreciate it. Yep. Again, this does conclude our Q&A session for today. Eric, I'll turn things back to you for any closing or additional comments. Well, thank you all. Really appreciate it. Again, thank you for every Zoomie's hard work. Thank you for every customer, partner, investors. We truly appreciate it. Thank you again. Thank you. Bye everybody. Thank you. Thank you, Eric. Again, everyone, that does conclude today's earnings release. We thank you all so much for your participation. Enjoy the rest of your day, and we'll see you next quarter.