Zoom's earnings webinar for the third quarter of 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.us. Also on this page, you'll be able to find a copy of today's prepared remarks, a slide deck with financial highlights that along with our earnings press 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 fourth quarter and full fiscal year 2023. Our expectations regarding financial and business trends, impacts from the 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. 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 may make today on today's webinar. With that, let me turn the discussion over to Eric. Hey, thank you, Tom, and, thank you everyone for joining us today. Last week, we hosted our first fully hybrid Zoomtopia using Zoom Events, and it was great. We unveiled new innovations like Zoom Mail and Calendar, which enable users to frictionless navigate across their email, calendar, and other Zoom products all within the same client. At Zoomtopia, many of our customers highlighted how they use our expanding platform to do more in the world of flexible work. At our first Partner Connect event, we hosted hundreds of channel partners who are very excited about working with us to drive adoption of the Zoom platform globally. Our developer partners showcased add-on apps that connect integrate, interrelated workflows to Zoom client. As global organizations adapt to how, when, and where work happens, human connection remains paramount. Zoom is purpose-built to make all kinds of connections possible, effective, and meaningful. We have developed and launched more than 1,500 features and enhancements on the Zoom platform this year. Revolving how people connect with each other, their organization, and their customers, ultimately opening the doors wide for creativity and collaboration. Of course, even as we celebrate our innovations and customers, we still face the backdrop of a challenging macroeconomic environment. We continue to see FX pressure and heightened deal scrutiny for new business, but remain focused on delivering happiness to our customers by innovating our platform and expanding our go-to-market capabilities. Zoom provides a full suite of communications solutions at an attractive total cost of ownership that enables teams to do more with less. Our new product, like Zoom Contact Center and Zoom IQ for Sales, enable revenue generation and drive productivity. The continuous strength of our enterprise growth is a testament to how the value proposition of our platform resonates with customers, even in tougher economic environments. As we enable customers to drive greater efficiency, we also are focusing on our own efficiency. We have always been judicious with investments, prudent about spending, we have commanded robust margins since our IPO. This is not a major shift for us. We will continue to drive innovation, customer value, and platform expansion, balanced with an increasing emphasis on efficiency and profitability. We're continuing to see strong traction with customers spending greater than $100,000 in trailing 12 months revenue, which was up 31% year-over-year. What's more, these customers are increasingly seeing value in buying the whole platform. With thousands of customers already buying Zoom Rooms packages, from an industry perspective, the largest deals came from tech, media, and financial services. We also had notable wins in retail, transportation, and pharma. On the tech front, let me first thank Qualtrics, the leader and creator of the experience management category, for expanding their partnership with us. Qualtrics recently upgraded to Zoom Enterprise, which provides the full power of the Zoom platform to their users and allows them to make meaningful connections with Meetings, Team Chat, Whiteboard, Phone, and more in one offering. We are delighted to offer Qualtrics a broad set of communications products integrated into one secure and easy-to-use platform. Our enterprise segment comprises not only large publicly traded companies, but also many private companies of all sizes, who see great value in enhancing their Zoom implementations by moving towards our full UC platform. Let me give you a few examples. First of all, I'd like to thank Vensure Employee Services, a privately owned professional employer organization, for placing their trust in Zoom. In Q3, they added 5,500 Zoom Phone seats and 650 Zoom Contact Center seats, demonstrating the promise they saw in adopting a modern integrated solution for their teams to interact. Let me also thank Chime Solutions for establishing and already expanding their partnership with Zoom, which includes Zoom One and Zoom Contact Center. Founded with an unwavering focus on bringing jobs and opportunities to underrepresented communities, Chime Solutions delivers high-touch contact center solutions to mid-sized companies and Fortune 500 corporations. After seeing how well Zoom Contact Center addressed many of their customers' needs and gaining confidence in Zoom's ability to deliver innovation at a rapid pace, they decided to replace their legacy solution with the Zoom Contact Center. Executing our innovation roadmap for Contact Center will give us the opportunity to further enhance our partnership with Chime Solutions in the quarters and years to come. I also want to thank G-P, the number one SaaS-based global employment platform, for choosing Zoom Phone to transform their communications systems and support employees across their organization. G-P understood the value of our integrated platform of communication products from their experience using Zoom Meetings, Zoom Webinars, Team Chat, and Zoom Rooms. G-P ultimately opted for Zoom Phone as a missing piece in their UC stack in order to improve their customer experience while also enjoying the savings benefits of a cloud-based PBX solution integrated into a full communications platform. I'd like to add that G-P is Zoom's global expansion employment partner and has played a critical role in our growth strategy, giving us the agility and speed to enter new markets very quickly. Again, thank you Portrix, Vensure, Chime Solutions, and G-P, and all of our customers worldwide. With that, I'll pass it over to Kelly. Thank you. Thank you, Eric. Let me now turn to the quarter's results and guidance. In Q3, total revenue came in at $1.102 billion, up 5% year-over-year and 7% in constant currency. This result was approximately $2 million above the high end of our quarterly guidance. The growth in revenue was primarily driven by strength in our enterprise business, which grew 20% year-over-year and represented 56% of total revenue, up from 49% a year ago. We expect enterprise customers to comprise an increasingly higher percentage of total revenue over time. From a product perspective, we had strong growth in Zoom Phone, coupled with contribution from Zoom Rooms and other products. At Investor Day earlier this month, we introduced a new metric, online average monthly churn. In Q3, this metric continued to improve to 3.1% from 3.7% in Q3 of FY 2022, and 3.6% last quarter. We are pleased that this metric has now returned to pre-pandemic levels. The number of enterprise customers grew 14% year-over-year to approximately 209,300. Our trailing 12-month net dollar expansion rate for enterprise customers in Q3 came in at a healthy 117%. We saw 31% year-over-year growth in the upmarket as the end of the quarter, with 3,286 customers contributing more than $100,000 in trailing 12 months revenue. These customers represent 27% of revenue, up from 22% in Q3 of FY 2022. Our Americas revenue grew 11% year-over-year. EMEA continues to be impacted by the stronger dollar, the Russia-Ukraine war, and online performance, which combined led to a decline of 9% year-over-year. APAC, which was also impacted by the stronger dollar, declined 3% year-over-year. Turning to profitability. 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, undistributed earnings attributable to participating securities, and all associated tax effects. Non-GAAP gross margin in Q3 was 79.5%, an improvement from 76% in Q3 of last year, and 78.9% 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 this, we expect our full year gross margin to be approximately 79%. Research and development expense grew by 59% year-over-year to approximately $108 million. As a percentage of total revenue, R&D expense increased to 9.8% from 6.4% in Q3 of last year. This reflects our ongoing investments in expanding Zoom's product portfolio and delivering on our customers' evolving needs. We expect to exit the year in the range of 10%-12% of total revenue, consistent with our long-term target. Sales and marketing expense grew by 27% year-over-year to $301 million. This represented approximately 27.3% of total revenue, up from 22.6% in Q3 of last year. We continue to invest judiciously in sales capacity and channel partner expansion. G&A expense grew by 6% to $87 million, or approximately 7.9% of total revenue, in line with 7.8% in Q3 of last year. Non-GAAP operating income was $381 million, exceeding the high end of our guidance of $330 million as we continue to thoughtfully prioritize investments. This translates to a 34.6% non-GAAP operating margin for Q3 as compared to 39.1% in Q3 of last year. Non-GAAP diluted earnings per share in Q3 was $1.07, $0.24 above the high end of our guidance. Due to our share repurchase program, our Q3 weighted average share count has decreased year-over-year approximately 4 million shares to 302 million. Turning to the balance sheet. Deferred revenue at the end of the period was $1.4 billion, up 14% year-over-year from $1.2 billion. Looking at both our billed and unbilled contracts, our RPO totaled approximately $3.2 billion, up 32% year-over-year from $2.5 billion. We expect to recognize approximately 59% of the total RPO as revenue over the next 12 months, as compared to 67% in Q3 of last year, reflecting the trend towards longer-term contracts. As a reminder, our annual seasonality of renewals is front and loaded and moderates over the rest of the year, reflecting a sequentially smaller renewal base. As such, we expect Q4 deferred revenue to grow at approximately 2%-3% year-over-year. We ended the quarter with approximately $5.2 billion in cash equivalents, and marketable securities, excluding restricted cash. Year to date, we have repurchased $991 million of our own stock, representing approximately 11 million shares. We had operating cash flow in the quarter of $295 million, as compared to $395 million in Q3 of last year. Free cash flow was $273 million as compared to $375 million in Q3 of last year. Our margins for operating cash flow and free cash flow were 26.8% and 24.7%, respectively. As previously discussed, this year we have seen larger cash outflows from an increase in cash taxes starting in Q2, which relates to the depletion of our NOL and the lower tax deductions for stock-based compensation caused by the stock price decline. We now expect free cash flow to be at the high end of our range of $1 billion- $1.15 billion. As a reminder, our range assumes that the Section 174 tax legislation requiring capitalization of R&D expenses will be repealed or deferred by Congress by the end of this fiscal year. Turning to guidance. This outlook is consistent with what we are observing in the market today. Specifically, it assumes that our enterprise business will grow in the low to mid-20s, while our online business will decline approximately 8% for the year. For the fourth quarter of FY 2023, we expect revenue to be in the range of $1.095 billion-$1.105 billion, which at the midpoint would represent approximately 3% year-over-year growth or 5% in constant currency. We expect non-GAAP operating income to be in the range of $316 million-$326 million. Our outlook for non-GAAP earnings per share is $0.75-$0.78 based on approximately 301 million shares outstanding. For the full year of FY 2023, we now expect revenue to be in the range of $4.37 billion-$4.38 billion, which at the midpoint represents approximately 7% year-over-year growth or 8.5% in constant currency. This represents a decrease of $15 million from our previous full year guidance, of which approximately $14 million is attributable to the FX pressure in Q3 and Q4. We now expect our non-GAAP operating income to be in the range of $1.49 billion-$1.5 billion, representing a non-GAAP operating margin of approximately 34%. This is an increase of $50 million or 1%, respectively, as compared to our Q2 guidance. Our tax rate is expected to approximate the blended U.S. federal and state rate. Our outlook for non-GAAP earnings per share is $3.91-$3.94 based on approximately 304 million shares outstanding. Zoom remains focused on thoughtfully balancing growth and profitability through platform innovation, customer value creation, and partner ecosystem expansion. Thank you to the Zoom team, our customers, our community, and our investors. Kelsey, please queue up our first question. Will do, Kelly. As Kelly mentioned, we'll now move into the Q&A session. When I call your name, please turn on your video and unmute. As a reminder, in an effort to allow everyone to ask a question, please limit yourself to one question. Of course, our first question is going to come from Meta Marshall with Morgan Stanley. Great. Thanks so much for the question, and congrats on the quarter. Maybe just sticking with the online business for a second and kind of the stabilization of that business. You know, clearly you saw the churn in statistics improve, but just wanted to get a sense of how you guys are thinking about stabilization there, how you guys are thinking about just initiatives on new ads as well as just free-to-pay conversion? Thanks. Yeah. We, as we shared at Analyst Day a few weeks ago, you know, we're really happy with the continued improvement in the churn, first of all, and I think it improved even further in Q3. The fact that now 70% of those cohorts have moved beyond that 16-month period in which they really see stabilization, and we've continued to see that happen. Wendy and her team are really focused on continuing to look at initiatives for conversion. Those include things like adding local currencies, adding local payment types, as well as looking at packages that make sense. All of that is still in process and, you know, what we're thinking, and we had talked about before, is we expect online to stabilize from a dollar perspective in Q2 of next year. Based on our most recent forecast, that is still the case. Great. Thank you. Moving on to Mark Murphy with JP Morgan. Thank you very much. I'll add my congrats. Very nice free cash flow performance. I wanted to ask you, Eric, you know, the pace of R&D activity is so rapid at the moment. To what extent do you anticipate that perhaps some of the new product innovations, and I'm thinking of Zoom Mail, Calendar, Zoom Spots and others, could perhaps enhance the stickiness of the usage patterns, right? Or drive engagement and collaboration higher in a way that could maybe benefit your either your dollar retention rates or maybe some of the premium plan adoption? Yeah. Mark, that's a great question. That's the reason why we had a very successful Zoomtopia, because we announced, you know, so many innovations. Almost every innovation, when we look at that, what we can do to either add value to the existing paid customer to focus on stickiness or maybe the potential revenue opportunity, right? Look at every features. I think we always follow that principle. Look at email and calendar. Look at our online paid users subscribers, we do not offer it for users, right? For all those online, you know, the pro buyers, if we give the email calendar for free, they can use the email calendar for anything they service, for sure add another, you know, greater service, which is end-to-end attributed, right? Look at all other features, you know, like a Spots and, you know, all those features certainly can help our enterprise customers, you know, also make our service more sticky. Not only do they use Zoom for scheduling meetings, but also can use that, you know, to mimic the office, you know, environment. For free users, right, for sure, you know, like email calendar goes for the client, right? Every feature innovation, I think for sure will add more value to our customer, either drive stickiness or drive potential revenue opportunity like Zoom, you know, IQ, you know, virtual agent and the contact center, you know, and the virtual agent who might feel like a virtual coach and a lot of features like that. We are very, very excited. Again, you know, and the feedback from the customers are very, very positive, you know, and they're very excited about adopting those new features and enhancements. Thank you. Thank you, Mark. Credit Suisse's Fred Lee has the next question. Hi, thank you for taking my question. I was wondering if you could talk a little bit about the macro impact on Phone adoption and maybe give us an update on Zoom Phone adoption overall, as you have over the past couple of quarters? We continue to see strength in Zoom Phone. As a reminder, we announced on the last call that we had crossed over the 4 million seat mark. We also added nine customers in Q3 that have purchased over 10,000 seats, that brings us to a total of 64 customers in that category. I think it shows continued strength, especially in the upmarket, even in these challenging economic times. We're excited about the prospects that we continue to see there. As we keep promising you all, we'll break it out when it gets 10% of revenue, you'll be able to see that then a little more clearly. Fred, to add on to what Kelly is saying, you know, more and more customers are increasingly looking at our Zoom, you know, the platform, Zoom One UC platform. Used to be look at a point product or Phone or Meetings or Webinars or Team Chat. Look at a full UC stack, because that will give you a better experience in terms of the total ownership of cost is also much better. That's why more and more customers are moving towards our, you know, full Zoom platform, and I'm very excited about the opportunities there. Great. Thank you very much. Thank you. Moving on to Michael Turrin with Wells Fargo. Hey. Thanks. Good afternoon. Appreciate you taking the question. On the front-end loaded renewal seasonality, you had a useful tidbit on the deferred revenue growth you're expecting in Q4. Can you just maybe walk through how you gear up for that as a company, given it's a little bit outside the norm on general calendar cycles that we're used to seeing? What kind of visibility do you have into that cohort currently? Is there anything you can do to shift that profile, or is it just kind of gradual as this rolls forward and you've gotten just accustomed to it internally, thus far? Thank you. Yeah. As a reminder, this occurred, right, due to the significant increase of customers we had during Q1, in the early stages of the pandemic. What has happened is due to the practice that we have internally of making it easy for our customers, we co-term when they add on additional products or, you know, expand their seat count, for example. It's continued to actually exacerbate, if you will, when we're upselling customers, that front-end loaded, phenomenon. It, it will, you know, start to level out over time as we see customers, you know, in Q2 and Q4 being our largest seasonal quarters due to the six-month quotas of our upmarket reps. As you say, we are used to it now internally. Everybody knows this is how it works. We're coming into just our third renewal period, and we've seen strength in each of the last two cycles. We're able to accommodate, we know how it works, and it's just something we know that it's not aligned with most of the rest of the industry, which is why we keep reminding you and trying to give you as much color as possible around that. Appreciate that. Thank you. Our next question will come from Kash Rangan with Goldman Sachs. Hello, thank you very much. Happy Thanksgiving in advance. Good to see you, Eric and Kelly. I had a question on the enterprise business. I think most of us on the call, at least me, we're waiting for the tilt where the enterprise business will, the strength of the enterprise business can offset the weakness in the online business. As we wait for that, I'm curious to get your take on the expansion rate. I think it came in at 117% or so. The number of customer, which used to be higher in prior quarters, the number of net new adds in the enterprise still also not quite rebounding and recovering. Can you give us some perspective on how much of this macro versus maybe competition from the likes of Team, et cetera? Eric, how does this play out into your broader adoption thesis for the Zoom platform? When are we likely to see these metrics inflect the other way that could validate your overall thesis that Zoom is not just about video meetings, but a broader communication platform? Thank you so much. Eric, do you wanna talk about Zoom One first, and then I'll talk about the metrics after that? Yeah, sure. Absolutely. Kash, that is a great question. You know, you look at the customer portraits, right? The move towards the Zoom Web platform, right? Leverage, you know, our full UC stack. You know, started from meetings many years ago, they added a phone, you know, a webinar, team chat, and so on and so forth. I think, you know, the problem was that, you know, previously, you know, when it comes to Zoom, everybody probably assumed that it's just a video conferencing, and that's not the case. That's why we are doubling down on the Zoom Web, you know, marketing awareness. Also talk with the customers, let them understand not only do we all, you know, offer the best video conferencing service, but also, you know, you look at our other offerings, that's a full UC stack. Also have Contact Center as well. I think that will take a little bit of time, but as long as customers realize, wow, Zoom have a full, you know, the stack, you know, plus also have very flexible Team Chat, plus it's free, it works so well, integrated other UC solutions, I think customers, you know, are showing a great, you know, excitement about adopting the full UC platform. More and more customers are moving towards our full UC stack rather than just the Meetings or Phone. That's why we are very excited because you look at all those offerings, you know, working together seamlessly. In terms of total ownership of cost, much better, because many enterprise customers are trying to consolidate their full UC stack. You know, UC stack and collaborative stack is different. Like, they might use an email or calendar or SharePoint, you know, or the Office, you know, from other vendors. In terms of UC stack, we want to, you know, deploy the best video service. That's why we are gonna win on UC stack plus the, you know, down the road the CC as well. Okay. Thank you so much, Eric. Thank you. Kash, just in terms of, like, your comment about renewals, I wanna highlight, especially in the enterprise, renewals remain very, very strong. We were actually slightly ahead of our internal forecast for Q3. We continue to see You know, we've talked about many metrics, growth and expansion in the enterprise. It's just, as you say, we're waiting for that stabilization in online to, 'cause it right now it's really having, you know, a dampening effect on the overall growth rate of the company. Thank you, Kelly. Yeah. Thank you, Kash. George Iwanyc with Oppenheimer has the next question. Okay. Thank you for taking my question. Eric, maybe with all the enterprise progress you're showing, can you give us a update on contact center and the adoption that you're seeing there? Yeah, again, in contact center is the new service we are very excited, in particular for those customers who deploy our, you know, the full service with the lack of consulted the UC and CC together. Also we found interesting use cases as well. You know, not only do those traditional, you know, customer inter-interaction, you know, department is started deploying the Zoom Contact Center, but also the internal IT desk as well, right? Again, you know, the contact center is still cycle a little bit longer, you know, like the meetings. However, when we, you know, the showcase, you know, our platform capability and the speed of innovation, customers are very excited. Plus you look at our own business, right? We're used to deploying, you know, other, you know, cloud-based contact center solutions. After we switch to our own Contact Center solutions, our teams themselves are very, very excited. A lot of potential pipelines and leads, right, in the pipeline. You know, also we are doubling down on that. Again, the product side, we have a high confidence. Go to market side, you know, we are gaining taxes, you know, as quickly as possible because again, takes some time. Also leverage channel and internal go-to-market, you know, the investment. I think that's a future big revenue driver for us, especially customer like the CC and UC together, right? With much better experience and also the total ownership of cost also much better. Thank you. Thank you. Moving on to Siti Panigrahi with Mizuho. Thank you. Thanks for taking my question. Just wanted to ask about macro pressure. You talked about last quarter, you know, sales elongation on the enterprise side. What kind of trends you are seeing, you know, anything worsen, and also how does that impact your pipeline as well? We certainly have seen impact, as I mentioned, from FX. You know, of the reduced guidance of $15 million, $14 million of that is coming from FX pressure, and you saw that certainly in our year-over-year growth in Europe and in APAC. In the enterprise, you know, again, renewals stay strong, excitement about the products, but as we discussed, it's continued in terms of additional deal scrutiny. I think all of my peer CFOs now are looking at deals, and that's just, you know, causing elongation in general. Not that things are losing. We're not losing deals. They're just taking longer to get done and potentially some of them pushing over quarters. You know, we haven't seen that have impact. It's just taking longer and longer, not that they're going anywhere else. It's just taking longer to get those done. The good news is, right, especially with all of the new products, the consolidation that we offer, is a really great value story for our customers in terms of, you know, elimination of additional vendors, getting rid of on-prem servers, and that continues to be a great story that our customers love. Thank you. Thank you, Siti. SVB Moffett, Sterling Auty has the next question. Thanks. Hi, guys. Kelly, maybe following on that, wanna understand the 20% growth in enterprise in the quarter versus the guidance of low to mid 20% for the full year. Does that mean that there's a little bit of a back-end loaded hockey stick or a bump up that we'll see next quarter? Specifically, I think investors are really interested in trying to gauge how should that business react as we move into next fiscal year in light of the concern about layoffs across all industries and a lot of your Zoom Meetings, et cetera, are based on per employee, per seat pricin?. We certainly, we've talked about this the last couple of quarters, have seen more and more of our deals shifting to the end of the quarter and taking on that more historically natural cycle that we, you know, we haven't seen since really early in the pandemic, but that is absolutely the case for us. We have adjusted our forecast for Q4 for some of that linearity as well. you know, we have continued to see, as I keep saying, strength in our renewals. I think that's because while there's concern about layoffs, there's this other phenomena about flexible work, right? Everybody wants to continue to working in the way they've become accustomed to, and as long as employers are supporting that and their employees, it really means everybody needs a Zoom license. If you're out of the office even one day a week, you need that Zoom license for phone, for meetings, for whatever, Zoom One. I think that is really a compelling reasons for organizations to continue to renew with Zoom. Understood. Thank you. Yes, thank you, Sterling. We will move on. Oh, apologies there. Right. You know, even for those businesses, right, in the operate deploy the full UC stack, you look at a Team Chat is getting more and more popular. Also we found those can use that for their personal use cases as well, right? Because that's free. Now that's why, you know, a lot of, you know, traction, you know, for other part of our entire UC platform. My next question will come from Michael Funk with Bank of America. Michael, if you'll please start your video for us? All right, Michael. If you can hear us, please go ahead and start your video and come off mute to ask your question. Are you hearing? Yeah. Hearing no response, we'll go ahead and move on to William Power with Baird. William, if you wouldn't mind doing the same thing? Great. Thank you so much. All right, thanks for taking the question. Probably for Kelly. A pretty notable increase in stock-based, you know, compensation expense. I know you talked about this at the Investor Day, too, that, you know, you expect it, given top ups, it'd be more elevated. It'd be great to just get a little more perspective as to how you're thinking about, you know, that going forward. Is this closer to peak levels? Will it stay at this level? Maybe over a longer-term timeframe, you know, how investors should expect that to trend. I guess kind of tied to that, you know, you've been aggressive on the stock buyback front. You know, what are the plans there going forward, and how could that tie into how you think about stock-based compensation? First, we believe that the supplemental grant program is really important for the strategy of the company in terms of retaining our employees and keeping them focused and not having to worry about that. The supplemental grants vest over the same period as the underlying grants that they're tied to. You are going to see this level, you know, continue for a few years as those grants are vesting through, and many of them, you know, originally were four-year grants, so they have two or three years left in which you're gonna see that stock-based comp as those underlying shares are vesting. With the stock, we, you know, Once the stock stabilizes, you will see less impact of that or less need for additional grants. You know, we're hoping that we're at that place and that you're gonna not see additional supplemental grants on that same level. Until we get past the probably another year's worth, we might have some more. In terms of the repurchase. As you heard, we purchased $991 million dollars or 11 million shares. We have a little bit of room with that, and once we've completed that, we'll evaluate whether or not we want to, you know, ask the board for authorization. We haven't done that yet. Thank you. We'll now hear from Matt Stotler with William Blair. Hey there. Thank you for taking the question. Maybe just one more on the online business. It'd be great to maybe get some color, some commentary on the economics of that business, the margin profile, as it compares to the enterprise segment of the business and what the implication there is as that revenue mix continues to shift, specifically in the context of the updated long-term figures you gave us two weeks ago. Yeah. you know, we've talked about this before. Our online business is a higher margin business, as it's largely, not completely, but largely untouched by any person from a sales organization. There are some online account executives that are there to answer questions, but it's minimal compared to our enterprise sales organization. We certainly took. We've done a lot of work on modeling what that looks like, and we've taken that into consideration as we laid out our long-term margins that we shared with you at Analyst Day, as we looked forward for the next several years and how we think the mix could shift between the enterline and the online, sorry, online and enterprise businesses. Cool. Thank you. Yep. Moving on to Ryan with. My apologies. Ryan MacWilliams with Barclays. Hi, Ryan. Thanks so much. To follow-up on Matt's question, Kelly, can you hear me? Yes. Hi. Yeah. Oh, there we go. Perfect. You previously noted a potential inflection in the online business early to mid next year. With churn now right at around pre-pandemic levels, we're still seeing revenue decline sequentially in this segment. Any updates to this potential inflection? Is there any impact from existing Zoom customers upselling to enterprise on this online business segment? Thanks. Yes. The answer is yes. There are customers that eventually upsell into enterprise, which is great, right? Because that means they're expanding, and they're becoming a bigger customer overall, which we love to see. That does then, I mean, it's not company churn, but it looks like it's moving out of the online business into the enterprise. In terms of the way we're talking about it is a stabilization of online, and we expect that from a dollar perspective to still happen in Q2 of next year based on our current forecast that we're seeing. Let's go. Moving on to Parker Lane with Stifel. Hi, thanks for taking the question. Kelly, you referenced thousands of customers that have signed up for Zoom One since it launched, I believe, about five months ago. Can you help me understand the profile of those customers a little bit better? Do the majority of them tend to be existing customers that have then migrated onto Zoom One new packaging or are you seeing a big net new cohort as well? Two, is it skewing, you know, more enterprise for customers that are thinking about going with Zoom One, or are you also seeing, you know, a pretty decent spread across all different size organizations? Thanks. Eric, I know you love to talk about Zoom One. Do you wanna talk about it for a second? Yeah, sure. Absolutely. I think that, you know, you know, first of all, I think Parker, you look at our Zoom One, we launched it several months ago, right? Look at all those customers, you know, medium-sized, enterprise, SMB, they all see the value. You know, that's why we see, you know, in almost on every market segment, you know, they are moving towards the Zoom One package to see the value. We do not see a any specific market segment, you know, truly standing out from all the way from SMB to enterprise. I think that's exactly what we anticipated. Thank you, Eric. I would just add to that the key customer wins that we saw in Zoom One in Q3 were a pretty balanced mix of new as well as customers that are upselling as they're adding new products to their portfolio. We're really happy about that we're seeing traction in both aspects of the business. Understood. Thanks again. Thank you. I hear from Shebly Seyrafi with FBN Securities. Yes. Thank you very much. I'd like to hear from you what you think your current visibility is compared to, say, three months ago. I noticed that your RPO grew by 32% year-to-year, which is impressive. You also had a decline in your CRPO percentage over the past several quarters. Your expansion rate has been declining. With your guidance for deferred revenue to grow 2%-3%, with my model, I'm getting billings down 10% year-to-year in Q4, and you've never really had a billings decline in my model. Just talk about the visibility you have right now versus three months ago and when you think you might see this stabilize. You know, is it a few quarters or is it a few years? Thanks. Yeah. the current RPO pressure is largely related to the online customers and the decline that you're seeing in online as the long-term RPO really benefits from the direct or the enterprise side of our business, which are, you know, managed by the direct business and have more annual and multi-year contracts. That's kind of why you see that shift in terms of the overall percentage. I would say... The other, you know, impact that we're having that we can't, which is difficult to predict, of course, is FX, right? You have to consider that which is more concentrated in online than in enterprise. You heard we, in our guidance that we reduced, we said about $14 million of that we believe to be attributable to FX. In general, I would say the economics or the state of our business hasn't changed. Meaning, our enterprise business and our enterprise sales organization is stable. They're continuing to operate in the same way. The online business, with the improvement in churn, as well as the way that the majority of it now has shifted out beyond the 15 months, is really helpful in terms of our ability to forecast that business. I think the visibility is the same. There's just some different reasons for all those different components that you're talking about. you know, the deferred is. Again, the decline you're seeing in Q4 is really due to the front-end loaded nature of our business. Remember, the front-end billing. Sorry, the renewals happen at the front end of the year. That's where you're gonna see the upswing in billing, the upswing in deferred, then that gets amortized over the year, so deferred's coming down. Then we have much lower renewals in Q4 as well. They, you know, those renewals that are filling up the bucket are much smaller. It's, you mentioned very many factors, and there are different reasons for all of those. Okay. Thank you. Yeah. Our next question will come from Peter Levine with Evercore. Thank you for taking my question. You know, I think given some of your customers are pushing back on larger decisions, you know, are you able to kind of toggle your sales force to maybe focus more on those back-based opportunities? Kelly, just to follow-up, you know, can you share how many of those nine, I think you said nine, 10,000 seat phone customers are net new to Zoom? Maybe just share, were these legacy PBX replacements or are you going in and replacing another cloud provider? Thank you. Yeah. First of all, remember our strategy for selling Zoom Phone is selling into existing, the existing install base. I don't know, actually, a split between those nine, but I'm sure that the majority of those were existing Zoom customers. I think I would say there's a focus on the company that Eric has talked about of expanding not beyond, not to just phone, right? Expanding to the full platform. That's really what we have our teams focusing on now. It's Zoom One, it's Contact Center, it's Zoom IQ for Sales. Now it's email and calendar, and really thinking about that complete platform, including Zoom Chat and the adoption within organizations. For all the reasons we've been talking about in terms of retention, flexibility for organizations to reduce vendors, the cost savings, the total cost of ownership that they see by having that combined, that for all of those reasons, that's really becoming the focus of our enterprise sales organization. Our next question will come from Matthew Niknam with Deutsche Bank. Hey, thank you for taking the question. Wanted to ask, you mentioned the greater value that customers are seeking out from the broader platform. I'm just wondering, are there specific areas where you see maybe more room to strengthen the platform? With the compression we've seen in market valuations, how are you thinking about potential inorganic opportunities? Thanks. Eric, do you wanna talk about the platform and the value they see? Yeah, sure, absolutely. I think, you know, for those customers, right, who deploy the Zoom One platform, right, they really like it. The reason why you look at it as one same plan, the same interface, right? You have a scheduled meeting, you can use our Zoom Team Chat to communicate with your teammates and customers, make a phone call, a whiteboard there. Now we added an email calendar fully integrated together. I think that's the whole value, right? Plus, you look at a customer, we used to be, you know, deploying many other partner solutions. Now with one platform, the full UC stack, you know, that's its value in a seamless experience. That's why more and more customers, no matter which other cloud-based solutions they deploy, take a phone, for example. They deploy other cloud-based solutions. Now they realize the full value of the entire Zoom One platform. We see more and more end customer, they just, you know, reach out to us rather than reach out to Zoom for upsell. Now they reach out to us to say, "Yeah, I see the greater value." That's why, you know, more and more innovations will be built upon the Zoom One platform. Yeah, Zoom is for the listening announced, and that's our focus, you know, to double down our platform, you know, story. Just in terms of inorganic opportunities. Yeah. if you can elaborate on that? Sure. You know, we continue every day to look at opportunities, and yes, the compression evaluation certainly is not lost on us. You know, what we're always trying to balance, of course, is what would it bring to our customers? What would it bring or the impact potentially on our culture? Of course, the value and the state of the technology, right? We have a high bar for both talent and technology here at Zoom. It's been difficult, I would say, to date, to find something that really meets all of those standards. Eric is a very hard judge, but that doesn't mean that we're stopping, and we continue to look for opportunities every day. Yeah. Also, you know, in terms of the full platform experience, I mentioned our customer, the number one thing is they like the entire experience. Let's say, you know, if you look at other biggest, you know, service provider, right, you know, how to make sure you have a consistent experience that's not that easy. That's why, you know, we're tending to look at all those greater technology companies like Solvvy we, you know, we acquired many years ago. Again, you know, if you wanted to, you know, just to focus on the, you know, the brand new service, you know, we might just think about the inorganic, you know, opportunity. Now look at UC platform, we already give everything. Now we just need to focus on the go-to-market side, right? We are, you know, we're, we have a high confidence, right? We're getting more and more, tractions there, so. Thank you. Thank you. Moving on to Alex Zukin with Wolfe Research. Hey, guys. Just maybe I have one question that's, it's a bit forward, it's a bit hard. Kind of to Shelby's point, the forward-looking metrics and the implicit guide for enterprise revenue next quarter is about 15% to maintain that low 20s for the full year. If you go forward a second, it does look like growth next year is gonna be kind of in the low to mid-single digits, assuming the normalization or stabilization of the online business and assuming some further decel with the macro getting tougher. With OpEx growing nearly 30% this year, you know, how are we thinking about a worsening environment? Like, what's the recession playbook for Zoom? We've seen some companies, you know, take some pretty meaningful steps with respect to employees, with respect to dialing up, you know, if you will, the efficiency of the business. What's the plan? What's the recession plan here, maybe for both you and Eric? I think that your assessment, you know. Let me just maybe caveat first of all, we're not giving FY 2024 guidance on this call. We will do that obviously at the Q4 call. Your assessment and the way you're kind of thinking about the top line growth is right in line with kind of how we're thinking about it right now. In terms of from an operating margin perspective, the way we're thinking about it is, as we're working on our FY 2024 plan, we are being very, very thoughtful about prioritization of investments, is how I would say it. As you noted, we have grown our expenses, and we've hired a lot this year, and so being very thoughtful about ensuring that they're focused on the right things, that we are prioritized internally. We are committed to continuing on innovation and meeting our customers' needs as well as go-to-market expansion. Those are really the top priorities that we have in making sure that we have resources in the right areas for that. I guess that's what I would say. Yeah. I think we are in a much better position. You look at the, you know, the efficiency and the potential productivity improvements like cash flow profitability. Plus we hired, as Kelly mentioned, we hired a lot of, you know, teammates, you know, this year. I think that they are gonna reach their full productivity next year. You know, that's why I think, you know, I think we can weather the storm, right? For any, you know, either short-term or long-term, short or long recession, we feel very confident, you know, as we drive efficiency and productivity. I guess maybe just as a follow-up, if I look at the buyback cadence given. On the one side, Kelly, if you're talking about, you know, having to issue shares as long as the stock goes down. On the other side, you have $5 billion in cash on the balance sheet to buy back stocks. How do we? 'Cause I get a lot of questions about, you know, dilution, particularly given the supplemental share buyback. At least on that front, what's the right way to think about over the next year, over the next two, three years, how, you know, ex M&A, how you're gonna leverage that cash balance? You know, we think based on the share repurchase program that we've had, we currently have in place, we've done a good job of being able to offset the dilution from the supplemental shares. We wanna be very thoughtful about our cash flows. We just talked about M&A, for example. Especially as we're focusing on our FY 2024 plan, are balancing the opportunity for, you know, managing dilution as well as earnings on that cash and M&A opportunity. All of those are being considered as we look forward for FY 2024, and that's really, you know, what we have to say today. We'll have more to talk about when we come back for the Q4 call. Perfect. Thanks to you guys. Yeah. We'll now hear from Ryan Koontz with Needham & Co. Thanks for the question. I wonder if you could unpack the strength in enterprise and how to think about that revenue growth across different product categories. If, if not quantitative, can you kind of give us an idea where, you know, Phone stacks up versus expanded Meeting License and any other products look like they could become meaningful, you know, in the next 12 months as you look at that on the enterprise side? Thanks. Really happy with the progress we've seen with Zoom One, with Zoom Phone, and the strength in Zoom Rooms in Q3. We also certainly see potential in Contact Center and Zoom IQ for Sales. They're just so early, you know, that We're seeing progress there and excitement, but it's early stages, so in terms of what they're contributing overall to the dollar amount, it's minimal at this point. We are seeing growth in terms of quarter-over-quarter expansion in those products, so that's really exciting to see. Got it. Thank you. Thanks, Kelly. Our next question will come from Catharine Trebnick with MKM. Oh, thank you for taking me, my question. Appreciate it. One of mine is on your partner program. You brought in a new partner executive last July. You know, could you specify any particular areas that he's going to concentrate on to drive more revenue? He just interviewed at one of the CRM magazines and said he wants to get to 50% revenue through the channel. Can you just address some of the ideas that he has to implement? Yeah, Todd, and Catharine's referring to Todd, who joined us, I think a couple of quarters ago. He's great. At Zoomtopia, he hosted our first Partner Connect with over 400 partners. We're there, so that was super exciting to see. While there are lots of opportunities, I think one of the biggest areas of opportunity is international partner expansion. We've done a good job over the last few years of building up master agent and carriers here in the U.S.. It's still relatively nascent outside the U.S., so that will be a big area of focus for sure. All right. Thank you. Yep. James Fish with Piper Sandler, please go ahead with your question. Hey, thanks for the question. Most might have been asked, but I do actually wanna ask on the enterprise sales investment that we've been talking about the last, feels like couple years. How are you guys looking to balance productivity improvements to support your margin stability versus expanding capacity, especially as these reps who over the last few years really had the advantage of, you know, an easier sales cycle, with meetings especially? Is there any way to also understand the experience of reps underneath in terms of how much are fully productive at this point? Thanks. In terms of our reps, you know, we are constantly looking at opportunities to help make them more productive. As we were just talking about, we've hired a lot over the last few years, and as we look forward to FY 2024, we'll be making many fewer hires. We're really looking for how do we enable the reps? How do we make sure that we have the right overlay teams in the right places to support them? As a reminder, that's, we have specialists that are selling Contact Center and Phone, and that's a really important aspect of making sure that everybody is aligned on serving our customers in the best way possible. That is a big focus. We also have a new President, Greg Tomb, that you all met last quarter, and he's been spending a lot of time helping us think about that, especially as we're moving up in the enterprise stack, and that's his experience, as where his background is. Really focusing on making sure that our comp plans align. That's another thing that we're taking a look at for FY 2024 as well. James, another quick point just to add on to what Kelly said, and also the Zoom IQ for Sales, that product certainly added value to drive our team's productivity, right? Especially when the reps, they work remotely, right? How to manage their productivity, drive efficiency, take some, you know, actions, right, you know, quickly. I think we deployed Zoom IQ for Sales. By end of this month, literally every rep will be fully trained on Zoom IQ for Sales, right? Not only do we help our sales productivity and also will create a lot of opportunity for us to sell more and more Zoom IQ for Sales. That's a huge value for every sales team to drive productivity. Helpful. Thanks, guys. Thank you, James. Moving on to Matt VanVliet with BTIG. Yeah, hi, good afternoon. Thanks for taking the question. I guess you highlighted Zoom Rooms and curious how much of that uptick do you feel like has been sort of a return to office for a number of companies and really, you know, having that mixed modality of a conference room and still having remote workers in? How much, I guess, sort of risk might that come under over the next several quarters of being a growth lever as we've seen layoffs, as we see, you know, slower macro, maybe that's, you know, not an additive spend that companies are gonna wanna undertake when they're already paying for the individual Zoom licenses. Thanks. Yeah. I think it's very similar to Zoom meeting licenses in the aspect of, as long as you have a hybrid workforce, you need the right technology in your conference rooms. You know, to ensure that you have this inclusive experience that we've all become so accustomed to. We continue to listen to our customers work on innovations to ensure that we provide that. I don't think it's gonna go away. I mean, we'll see what happens, right? I think it's still yet to come to see what happens with like, commercial real estate. However, Zoom Rooms and the importance of those in a hybrid workforce, I just... I can't tell you how important that is. I can't stress enough the importance of that, and that's really what our customers are seeing as well, as they're in some sort of state of a hybrid work environment. Great. Thank you. Also, Matt, another thing, just quickly. Used to be like, you look at a conference room, right? Most of the usage, used to internal, right, for internal cost. Now look at Zoom Rooms, that's not the case. A lot of customers are leveraging Zoom, right, to talk to the customers and the partners, right? That's the one, you know, difference because that's the reason why the customer likes Zoom, right? When you talk with the customer and partners, you wanna make sure they have the best experience, right? Another thing, even for those companies who might think about laying off employees and reduce the number of the employees, guess what? Less desks, but more conference rooms. You know, then the otherwise, you know, what can you do, right, to double down on customer and partner interaction? That's why we still see a good opportunity ahead of us. Thank you. Thank you. Great. We'll move on to Tyler Radke with Citi. Hey, thanks for taking my question. Kelly, in terms of the Q4 guide, understand that the currency was a bit of a factor there on the lower outlook. Can you just unpack kinda what you're assuming from a macro perspective? You know, is the Q4 guide relative to what was implied last quarter? Is it incorporating, you know, churn getting worse than SMB or weaker net adds? maybe you're seeing something on the enterprise side. Just help us understand the non-FX side in terms of what you're expecting for Q4? Yeah. In the online segment of the business for Q4, we expect churn to be pretty much in line with Q3. I mean, it's likely that number's gonna bounce around a little bit quarter to quarter, and that's gonna all be visible to you now as we report it. But we're, you know, we're not forecasting any dramatic changes there. In the online segment, I would say that I mean, sorry, in the enterprise segment, I would say the biggest change that we're seeing is just this continued push to deals being at the back end of the quarter. That linearity, you know, over the last few years, we had a much more balanced linearity in our enterprise segment, and what that leads to, of course, is deals contributing to revenue in the quarter. We're seeing much less of that as these deals are going back to the more traditional, you know, back end, really, really back end of the quarter. Now, we have the benefit in Q4. Of having kind of the two periods of December 31st close and then the January 31st close. We are expecting the linearity more consistent, like with what we've seen in Q3 than what we saw a year ago. Thank you. Yeah. We have time for one additional question from Karl Keirstead with UBS. Hi, Karl. Hey, great. Thanks for fitting in. Hey, Kelly, I'd just love to ask you about the, your perceived utility of the billings number. Traditionally, we look at that number as a decent proxy for business momentum, but obviously -10% in 4Q and +1% for the full year. Yeah. I'm guessing you would argue that that's a poor proxy for Zoom's momentum. Can you opine on that a little bit? Yeah. I think maybe there's some consternation about that -10% implied billings. Thank you, Karl. I should have said this earlier. As a reminder, we don't guide to billings, we never have, because we don't think that they are a good indicator for us because of the large percentage of our customers that are, especially in the online segment of the business, that are on monthly contracts. Because they bill and they pay us monthly, they don't show up in that number. That's why it doesn't, it isn't really a good proxy for you to use. Okay. As a follow-up, Kelly, is there anything else that's skewing that DR number? You know, is there any change to invoicing terms or maybe more flexible payment terms to customers that maybe on the margin are impacting DR as well? Nothing significant. Okay. It's really more about, you know, the timing. The deferred revenue specifically, right? Yeah. About the seasonality of the renewals. I can't stress that enough for everybody. It's the two factors. It's the fact that they bill in Q1, and then so you're gonna see an uptick in billings and deferreds and collections, and then that amortizes over time. The billings in Q4 are just a lot smaller. You have this double impact, right? Of now you've amortized a lot of the deferred that was picked up in Q1, so we're down at a lowest period in Q4, and the billings in Q4 are the lightest period to refill that bucket. This is gonna be a phenomenon that we're going to see for years to come, as I talked about, until over time, we start to see, you know, more and more of our bookings happening in Q4. Got it. That's gonna take a long time. Makes sense. Thank you. Okay. Thanks a lot, Karl. Thank you, everybody. Again, that does conclude our Q&A session for today. I'll go ahead and turn things back over to Eric for any closing or additional remarks. Thank you. First of all, thank you for every Zoom employee's great work. Thank you for every customer, partner, and investor's great support. You all have a wonderful holiday season. Thank you again. See you in our Q4 meeting. Thank you. Thank you, Eric. Again, this does conclude today's earnings release. We thank you all so much for your participation. From our family to yours, may you have a safe and happy holiday season. Enjoy the rest of your day, and again, we'll see you next quarter.