Well, hello, everyone, and welcome to Zoom's Q4 FY 2023 Earnings Release Webinar. As a reminder, today's webinar is being recorded. Now I will turn things over to Tom McCallum, Head of Investor Relations. Tom, over to you. Thank you, Kelsey. Hello, everyone, and welcome to Zoom's earnings video webinar for the fourth quarter and full year of FY 2023. I'm joined today by Zoom's founder and CEO, Eric Yuan, and Zoom 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 and a slide deck with financial highlights that, along with our earnings release, include a reconciliation of GAAP to non-GAAP financial results. During this call, we will make forward-looking statements, including statements regarding our financial outlook for the first quarter and full fiscal year 2024, our expectations regarding financial and business trends, impacts to the macro. Impacts from the macro environment, our market position, opportunities, go-to-market initiatives, growth strategies, and business aspirations, and product initiatives in 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 statements we may make on today's webinar. With that, let me show you a quick video highlighting our exciting technologies before turning the discussion over to Eric. Kelsey, please cue up the video. Hello, Eric. How may I help you? Wow, that's amazing. Thank you, Tom, thank you everyone for joining us today. FY 2023 was truly a pivotal period in our evolution into a full collaboration platform. As you saw in the video, we launched the multiple innovations to help transform work and expanded our product portfolio to open new markets. Since Zoom Contact Center's release early last year, we have worked hard to expand its features, functionality, and integrations. In Q4, we landed a 2,000-seat Contact Center deal, our largest to date. It truly demonstrated the rapid progress we have made towards becoming a full-fledged Contact Center solution. The success of our Zoom One bundle, which we launched last June, contributed to the strong performance of Zoom Phone, which in Q4 exceeded 5.5 million seats, making us a clear leader in the space. We closed out the fiscal year with the release of Zoom Virtual Agent, an intelligent conversational AI and a chatbot solution that we believe will transform the way businesses assist their customers and employees. FY 2023 was not without its challenges. We experienced headwinds in terms of currency impact, online contraction, and deal scrutiny, which continued into Q4. A few weeks ago, we made a very tough but necessary decision to reduce our team by 15% and saying goodbye to around 1,300 hardworking, talented Zoom colleagues. I want to extend to them my heartfelt appreciation and deepest gratitude for their crucial contribution to Zoom. This painful exercise has been a tremendous learning experience for us, and it allows us to look inward, to reset ourselves, so we can weather the economic environment with greater focus and agility, deliver for our customers, and achieve Zoom's long-term vision. Now, let me discuss our strategic focuses in FY 2024 and beyond. First, we'll help redefine teamwork through offering new immersive experiences that improve employee engagement and modern collaboration tools for ideation across locations and modalities. We will give teams everything they need through a single pane of glass. Second, the age of AI and large language models has arrived, and we want to empower smarter experiences and workflows that truly enable our customers to benefit from these transformational tools. By embedding AI into more workflows, we can provide our customers with richer, more actionable insights that empower them to work smarter and serve their customers better. Zoom IQ, Zoom Virtual Agent, as well as our translation, captioning, and meeting summary tools are just the beginning. We will layer more AI technologies into our products to truly help our customers maximize their ROI on our platform and thrive in this new era of computing. Third, we will offer more and more departments tailored solutions to meet their nuanced digital transformation needs. We constantly solicit feedback, not only from CIOs, but also heads of sales, customer experience leads, and many other leaders across various industries. Zoom IQ for Sales was built in this collaborative fashion and has already added tremendous value to many sales teams. You can expect additional industry-specific and department-specific applications developed both by us and our third-party partners. All of this comes together as a collaboration platform that unites people to unlock their potential, enables more dynamic and intelligent experiences, allow us to reimagine productivity and work. As we navigate this period of technological and economic volatility, our role as a trusted partner providing best-in-class unified communication services has never been more crucial. Again, this is a tremendous opportunity in front of us, and we are very confident that our strong foundation, ambitious vision, and customer-centric culture will enable us to seize this opportunity and continue to lead the way in the unified communications and collaboration space. Now, moving on to some of our customer wins. I want to thank Aramco, one of the world's leading integrated energy and chemicals companies, for establishing a strategic partnership with Zoom. This is a landmark multi-year partnership where we will provide a full suite of collaboration services, including Zoom Meetings, Team Chat, Phone, Events, and Zoom Rooms. In addition, we will work together to build a data center in the region and explore the joint development of innovative technology solutions. We are so grateful that Aramco has chosen to partner with Zoom on their digitization strategy. I'd also like to thank Nasdaq, my favorite company, who has been a Zoom customer for several years. Recognizing Zoom's strong reliability, security, and ease of use, they expanded to Zoom One, our all-in-one unified communications and collaborations bundle. As part of this expansion, Nasdaq will be deploying Zoom Phone and also adding capabilities like translation and advanced whiteboard to their Zoom Meetings. I want also to thank Raymond James, a leading financial services company, for expanding their relationship with us by integrating Zoom Phone to their Zoom Meetings implementation for a more complete communications package. We are excited to work with Raymond James to provide a highly reliable and secure system, enabling their employees to communicate, collaborate, and ultimately thrive in the hybrid work world. I want to also thank Barracuda Networks, which builds cloud-first enterprise-grade security solutions, for expanding with Zoom. A long-standing Zoom Meetings customer, Barracuda saw the value of having a single platform for all their communications needs and upgraded all workflow to Zoom One Enterprise Plus in Q4. In addition, Barracuda also chose Zoom IQ for Sales to enhance sales engagement and Zoom Contact Center to elevate the customer experience. Again, thank you Aramco, Nasdaq, Raymond James, Barracuda Networks, and all of our customers worldwide. Before closing, let me express my warm welcome to Cindy Hoots for joining our Board of Directors. Cindy brings a wealth of experience and currently is the Chief Digital Officer and Chief Information Officer at AstraZeneca. We're so excited to work with her. I also want to welcome our new Chief Product Officer, Smita Hashim, who joins us from a seasoned executive career at Microsoft and Google. We are also super excited to work with her. With that, I'll pass over to Kelly. Thank you. Thank you, Eric. Hello, everyone. Let me start with a few of the financial highlights for FY 2023 and the results for Q4. Then provide our outlook for Q1 and FY 2024. We delivered solid results in FY 2023. Here were some of the highlights. Our enterprise business grew 24%. Our non-GAAP operating margin was 35.9%. We achieved a free cash flow margin of 27%. In Q4, total revenue came in at $1.118 billion, up 4% year-over-year and 6% in constant currency. This result was approximately $13 million above the high end of our guidance. The growth in revenue was primarily driven by strength in our enterprise business, which grew 18% year-over-year and represented 57% of total revenue, up from 50% 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. Online average monthly churn decreased to 3.4% from 3.8% in Q4 of FY 2022 and increased slightly from 3.1% in Q3 as expected due to seasonality. The number of enterprise customers grew 12% year-over-year to approximately 213,000. Our trailing twelve-month net dollar expansion rate for enterprise customers in Q4 came in at a healthy 115%. We saw 27% year-over-year growth in the upmarket as we ended the quarter with 3,471 customers contributing more than $100,000 in trailing twelve months revenue. These customers represent 28% of revenue, up from 23% in Q4 of FY 2022, span diverse industries such as healthcare, education, government, and more. Our Americas revenue grew 10% year-over-year. EMEA continues to be impacted by the stronger dollar, macro headwinds, and online performance, which combined led to a decline of 9% year-over-year. APAC, also impacted by the stronger dollar, declined 5% year-over-year. Turning to expenses and margins. A quick note on our GAAP results. In Q4, they included a one-time stock-based compensation expense of $208 million due to the sunsetting of our supplemental grant program, which carries neither dilutive nor tax deduction impacts. Moving on to 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 Q4 was 79.8%, an improvement from 78.3% in Q4 of last year and 79.5% last quarter. The sequential improvement was mainly due to optimizing usage across the public cloud and our co-located data centers. For FY24, we expect non-GAAP gross margin to be approximately 79.5%. Research and development expense grew by 43% year-over-year to approximately $103 million. As a percentage of total revenue, R&D expense increased to 9.2% from 6.7% in Q4 of last year, reflecting our investments in expanding our product portfolio. Looking ahead, innovation will remain a top priority for Zoom. Sales and marketing expense grew by 20% year-over-year to $301 million. This represented approximately 26.9% of total revenue, up from 23.4% in Q4 of last year. As part of our restructuring, we are optimizing our go-to-market strategy to better support our enterprise customers and drive additional productivity. G&A expense declined by 12% to $84 million, or approximately 7.5% of total revenue, down from 8.9% in Q4 of last year, as we focused on achieving greater efficiencies in our back office. Non-GAAP operating income was $405 million, exceeding the high end of our guidance of $326 million as we took actions to reprioritize our investments in Q4. This translates to a 36.2% non-GAAP operating margin for Q4 as compared to 39.2% in Q4 of last year. Non-GAAP diluted earnings per share in Q4 was $1.22, $0.44 above the high end of our guidance. Due to our share repurchase program, our Q4 weighted average share count has decreased year-over-year by approximately 5 million shares to 301 million. Turning to the balance sheet. Deferred revenue at the end of the period was $1.3 billion, up 11% year-over-year from $1.2 billion. This is above our guidance as we saw increased commitments from customers and extended contract durations. Looking at both our billed and unbilled contracts, our RPO totaled approximately $3.4 billion, up 30% year-over-year from $2.6 billion. We expect to recognize approximately 56% of the total RPO as revenue over the next 12 months, as compared to 63% in Q4 of last year. As a reminder, our annual seasonality of renewals is weighted towards the first half of the year. We expect Q1 deferred revenue to be up 0%-1% year-over-year, partially due to the strengthening of the dollar starting late in Q1 of FY 2023. Since then, the major currencies we do business in are down 5%-10% vis-a-vis the dollar. We ended the quarter with approximately $5.4 billion in cash equivalents and marketable securities, excluding restricted cash. We had operating cash flow in the quarter of $212 million, up from $209 million in Q4 of last year. Free cash flow was $183 million as compared to $189 million in Q4 of last year. Our margins for operating cash flow and free cash flow were 18.9% and 16.4% respectively. Because the Section 174 tax legislation requiring capitalization of R&D expenses was not repealed in FY 2023, we incurred an additional cash tax payment in Q4. Despite this payment, we still exceeded the high end of our previously provided range by $36 million, for a full year total of $1.186 billion. For FY 2024, we expect free cash flow to be in the range of $1.2 billion-$1.25 billion. Now turning to guidance. For the 1st quarter of FY 2024, we expect revenue to be in the range of $1.08 billion-$1.085 billion, which at the midpoint would represent approximately 1% year-over-year growth or 2% in constant currency. We expect non-GAAP operating income to be in the range of $374 million-$379 million. Our outlook for non-GAAP earnings per share is $0.96-$0.98, based on approximately 304 million shares outstanding. This outlook reflects the three fewer days in Q1 versus all other quarters. For the full year of FY 2024, we expect revenue to be in the range of $4.435 billion-$4.455 billion, which at the midpoint represents approximately 1% of year-over-year growth or 2% in constant currency. We expect our non-GAAP operating income to be in the range of $1.606 billion-$1.626 billion, representing a non-GAAP operating margin of approximately 36%. Our tax rate is expected to approximate the blended U.S. federal and state rate. Our outlook for non-GAAP earnings per share is $4.11-$4.18, based on approximately 309 million shares outstanding. Zoom is dedicated to maintaining a careful balance between growth and profitability. We remain committed to innovating our platform, optimizing our go-to-market motions, and evolving our culture to meet the dynamic needs of the market. We are confident that our continued investment in innovation will enable us to provide an even greater value to our customers while also positioning us for sustained growth. Thank you to the Zoom employees, our customers, our community, and our investors. Kelsey, please queue up our first question. Thank you, Kelly. Again, everyone, we will go ahead and move into the Q&A session. When I call your name, please turn on your video and unmute yourselves. As a reminder, in an effort to hear from everyone, we please ask that you limit yourself to one question. Our first question will come from Fred Lee with Credit Suisse. Hey, there we go. Can you all hear me? Yep. Yes. Hi, Fred. All right, great. Hey, Kelly, just a question regarding the full year operating margin guide, which looks like it's coming in around 5 percentage points above consensus. I was wondering if you could break down where those efficiencies are coming from, how much was coming from the RIF versus efficiencies and other operating expense line items? Thank you. Yes. Thank you. As I mentioned in the prepared remarks, we started really focusing on driving efficiencies across the business in Q4. As you saw in the results, this came from looking across all third-party spend, and then as we moved into Q1, of course, the reduction. It's really a combination of that, as well as looking across all of our business processes, including go-to-market, where there's a restructuring happening, to really focus the resources on our enterprise customers and be as efficient as we can in our commercial and small business teams. Got it. Thank you. A quick question for Eric. With regard to everything that's happening in, around AI and generative AI, you've talked a little bit about some of the new product areas we're expecting some initial impact. What kind of analogy can you draw for investors and for us with regard to the uptake of, you know, all things generative AI? A little bit of commentary around that would be greatly appreciated. Yeah, sure. Yeah, first of all, that's a great question about AI. I think your question about AI is sort of reminds me of 1995, 1996, when Internet was, you know, the first wave of Internet revolution. I was so excited. That's why I moved to Silicon Valley, right, to embrace that first wave of revolution. Since then, I was stuck for real-time collaboration until today. I can tell you, speaking of AI, I'm as excited as 1995. Maybe sorry, I'm wrong. Maybe more excited than 1995, 1996, given my engineering and product background. I think AI, everyone, you know, sort of faces a challenge. At the same time, also have huge opportunity ahead of us, right? Given our strong innovation culture, I think AI can truly help Zoom, right? To involve us to, you know, sort of, you know, part of the Zoom 2.0 journey, right? That would be I think Zoom will be the AI-first company. You know, speaking of specific features, how to leverage AI, even before we talk about ChatGPT, before we talk about all those AI, actually, we already invest heavily on ZI, on AI, right? You know, some customer may not see that, right? Like noise reduction, even virtual background or a lot of things like that. Even recently, we announced a feature called Zoom Smart Meeting Summary, you know, where we already leveraged GPT-3 to augment our ML, right, to improve that experience. We are gonna double down, triple down on AI. A lot of features like Virtual Agent or Zoom IQ for Sales, our chat solution, every, you know, even calendar as well. I think AI can truly empower everything we are doing here, and will benefit the customers. Plus, you know, we are taking a very open-end approach, and we have our own AI engineers, a lot of talents working very hard, and also working to partner with other companies like OpenAI. It's a great company, and I just talked with recently, and, you know, this is great. Again, I can talk a lot about AI. I'm very excited. Great. Thank you. That was very helpful. Thank you. Michael Funk with Bank of America has the next question. I'm still here. Michael, you're muted. I'm unmuted on my phone. Now we can hear you, Michael. Okay. Thank you, Kelly. First for you, Eric. You know, you have a tremendous cash balance. It's a huge strategic asset for Zoom, you know, specifically today when a lot of your competitors don't have that optionality. What is the argument in your opinion against deploying that cash to further your advantage and improve your capacity? Yeah, when it comes to money, I better to delegate it to Kelly. Probably she's better to have manage that. Thank you, Michael. I don't think there is any argument against deploying our cash, certainly to continue to advance our technology, advance our customer base. As I said, we are constantly looking for opportunities. As I've mentioned in the past, we have kind of, you know, three main criteria, of course, we look at. We look at the technology, as we wanna make sure that we would be providing our customers something that works as well as the core of Zoom does today, the core Zoom platform. We look at the culture to make sure that the organizations could come together very, very well. As you know, we take culture so seriously here, and Eric and the whole executive team have spent a long time focusing on building that. Then last but certainly not least is valuation. That has been tricky in the past. We've seen great assets that we loved, but just couldn't get there, as unfortunately all of you know. We now see that becoming easier and easier. I will tell you that Sanjay and his team have been very busy continuing to look for targets for us, and it certainly is a part of our strategy that we're considering for FY 2024. Great. Thank you for that, Kelly. Kelly, while I have you know, back to the earlier question about the delta in operating income fiscal 2023 to fiscal 2024. You know, we estimated earlier in this month about a $260 million benefit from the RIF. Is there an issue with my math around that? You know, we're not gonna get into the specifics around the reduction. I will tell you it was pretty consistently applied across the company, the 15% that Eric mentioned, across the organizations as well as U.S. and some of our other locations outside of the U.S. You can take that into consideration as you're calculating what you think the savings are. Great. Thank you, Kelly. Thank you, Eric. Thank you. We will now move on to Meta Marshall with Morgan Stanley. Hi, Meta. Hey. Great. Thanks. Maybe, Kelly, just for you to start with, you know, maybe versus where we were 90 days ago when you were kind of talking about low to mid-single digit potential for fiscal 2024, just trying to get a sense of is kind of the incremental conservatism, is that more around the enterprise or the online business, particularly given that you did see some kind of stabilization in the online business in the quarter? Yeah, I guess I don't know that I would say... I mean, remember when on the Q3 call, we weren't specifically giving guidance. We were trying to help sort of give, I think, a little bit of visibility, but we were still right in the midst of doing our FY 2024 planning. As, you know, we continued to work on that with all of the go-to-market teams and also, you know, made this decision, around the team and the reduction, putting all of that together came up with, you know, what we've now guided to. You know, we do continue to see headwinds that we spoke about. Of course, currency is still a challenge. We're gonna see some, you know, as compared to year-over-year, we're gonna see some impact in Q1, because remember, the dollar really started to strengthen at the back half of Q1 last year. You should expect to see some year-over-year impact there. As well as just these changes in especially the go-to-market teams right now, making sure that we get everybody lined up and looking at where that is. All of that was considered as we set the FY 2024 guidance. Got it. Maybe Eric, in the past you guys have wanted to have kind of this singular Zoom platform and let the third party apps be where you would kind of do the departmental or industry use cases. It sounded like there was some departure from that. I guess I just wanted to get a sense of, are there going to be different Zoom additions for kind of some of these different verticals or will it still kind of be largely third party driven? I think that's a good question. First of all, I don't think that we would depart, you know, it's departure to what we're trying to do before. Maybe it's more like augmenting what we're doing now. 'Cause given that a lot of new opportunities, I do not think everything should be done by our, you know, own developers, right? That's why, you know, also want to leverage third party. I do not see machine learning as a strategy, just more augment, you know, what we're doing today. Great. Thanks. Thank you. Just as a reminder, please limit yourself to one question in order, in an effort to hear from everyone. We'll go ahead, and we'll move on to Mark Murphy with JPMorgan. Thank you so much. You've added so much value into the product, when we look at the amount of recording storage, the whiteboarding, you have, mail and calendar client and so much more that's on 1 to come. Could you update us perhaps on your pricing strategy and whether you think this could be the right time to, perhaps increase prices a bit or, even to just go out and maybe activate a CPI adjustment that would benefit you? Yeah. Kelly, please go ahead. Sure. We have announced a price increase for our online customers that we will be effective, I believe the date is March first, as we announced it earlier this month. We believe that reflects, and that's only for monthly customers, not for annual customers. We believe that starts to reflect the value, as you said, that we have created for our customers over the last few years. It's been many, many, many years. It predates me since the last time there was a price increase. On the enterprise side, you know, we did a pricing update, you know, all inclusive with Zoom One, the bundle that we came up with last year. We believe that really reflects the best way for our customers to buy and to get full value out of the platform. You know, that considers all of the products that are included at what we, you know, feel is an appropriate price point at this time. Okay, nothing planned outside of Zoom One on the enterprise side and nothing more material than what you had already announced? Yeah, that's right. Thank you. Yeah. Piper Sandler's James Fish has the next question. Hey, thanks, guys. This is Quentin on for Jim Fish. You know, in terms of the longer term vision for Zoom, how is the team thinking about the maturity of the core meetings and phone products at this point, especially following what was a really strong phone quarter in Q4? You know, do we need adoption of emerging products like contact center and email or calendar to reaccelerate growth as we look to 2025 and 2026? Or are there catalysts that can help the core products kind of reaccelerate from the guided 2024 levels? Thank you. I think great question. I think we should focus on both. You know, take, you know, the phone, for example, the market, you know, potential is still huge, you know, and we are doing extremely well and will help us more because given the product, you know, very reliable, it is really innovation and better than any other phone service providers. That's why, you know, on core product, I still seeing a huge growth opportunity. Having said that, the new product, Zoom Contact Center, of which you agent Zoom IQ for Sales down the road and more and more departmental applications, in particular AI. It's another great layer. I feel like a lot of new opportunity ahead of us. You know, I think, you know, second half this year, probably, you know, the transition period for us, you know, given the, you know, we launched Zoom Contact Center early last year, Zoom IQ for Sales as well. All of the new services plus new services in the pipeline, I think will help us. You know, we need to focus on both. The reason why, you know, our vision is to build an all-in-one collaboration platform, right? You can live within a Zoom interface, can get most of the work done, right? I think that's our vision. Thanks, Eric. Very helpful. Thank you. Rishi Jaluria with RBC has the next question. Hi. Wonderful. Thanks so much for taking my questions. I just wanted to have one which I wanted to dive a little bit deeper into some of the new features that you're seeing. I know Mark had brought that up earlier, but if we think about chat, mail, calendaring, just, you know, to the extent possible, I would love to hear what have you seen in terms of actual uptake rates of these features, right? Because it's available to anyone who's on Zoom One, but how many people are actively using it? If you think about those customers who are using these, you know, additional features or modules, what are you seeing from those customers in terms of anything like engagement, time spent on the platform, retention, ARPU expansion rates, anything like that? I think that would really help us get some color in terms of your ability to expand into a broader enterprise communication collaboration platform. Thank you. Yeah, yeah, that's a great question. First of all, I would say, you know, last year, we developed more than 1,500 features. I think our team worked extremely hard. One thing we did not do well, I think we should improve, read about the product adoption. You know, say, after finish developing features, we also need to remember the customer may not know it. Again, this is something important for us this year. Besides that, a lot of customers, you know, in order to find a lot of cool features, pick Nasdaq, for example, right? They would like to consult it, like, you know, meeting with a whiteboard as well. You know, it has a whiteboard, you know, they really like that, right? Also another feature, we also have a Team Chat, which is a precision chat solutions. We use that for many years. A lot of enterprise customers also deploy it. Why do they want to pay for other services after they found, wow, Zoom has a very scalable, you know, also very flexible, the greater Zoom Team Chat solution. After they found that, they tested, they also like that, right? They also adopt all those features. You know, a lot of things like that, you know, not to mention the sales department, right? Obviously Zoom IQ for Sales opportunity. Again, a lot of innovations, but we need to focus on product adoption. Let customers know that the huge value, you know, from the Zoom platform, right? That's something we need to focus on. You know, quite a few probably already use Zoom Team Chat. I can tell you again, it's much better, Whiteboard as well. Anyway, a lot of features, innovations we should focus on adoption. Thank you. Thank you. We will now hear from Matt VanVliet with BTIG. Good afternoon. I guess on that last point, Eric, curious, maybe if you could share a few details or some of the winning points around the contact center product. What's driving the adoption there? Are you seeing, you know, replacing existing contact centers or some of these sort of net new where, you know, video is going to be a key component, whether it's field service or things of that nature, where video really lends an extra help to it? Yes, it's a great question. On product front, right? You know, we launched it in early last year, right? Almost one year anniversary now. I think we are going to keep innovating. You know, can essentially today look at our, you know, the contact center customer. We just include the 2,000, you know, seats contact center solution, right? They test everything and find, wow, Zoom Contact Center works very well. Not only, you know, for the, you know, just as you know, like early last year, we went quite a few deals for internal IT helpdesk. This is, you know, for their, you know, support agent, right? A lot of features are already built in. I think on product front, we are adding more and more features very quickly. I think we are doing very well. I'm, you know, I have a huge confidence for our team, product team. However, on go-to-market side, I think, you know, we should have done a better job, you know, to be honest with you, right? You know, of course the buyer is different, right? The good news, you know, over the past 12 months, we learned a lot. You know, we are going to sort of change our go-to-market strategy, right? You know, make sure, you know, all those traditional customers, no matter which, you know, on-premise solution deployed or other cloud contact center deployed, we should let them know, right, Zoom has a very scalable contact center solutions. You know, like, you know those third-party, you know, resellers, right? Also, you know, we need to each, you know, change our go-to-market model for Contact Center because the product works so well. That part, you know, I think we need to focus on this year. Great. Thank you. Thank you. Our next question will come from Tyler Radke with Citi. Hey, thanks for taking the question. clearly the profitability guidance was much stronger than consensus. you know, you've talked about some of the hard decisions you've made as it relates to restructuring. Kelly and Eric, I'm wondering just about your willingness to kind of expand margins from here. Obviously, you're guiding to a pretty low revenue growth for the coming year of about 1%. How do you just think about the puts and takes on future margin expansion from here, you know, in a scenario where you don't get a re-acceleration in total revenue? You know, Tyler, we're always focused on being as efficient as possible in our gross margin. You've seen, you know, we said we expect to be 79.5% for next year, which is right on top of our long-term target margins. In terms of our operating margins, we want to always watch for opportunities for investment in top-line growth. That's really what we are driving for. We will continue to make these decisions and, you know, watch for opportunities throughout the year. If we see opportunities to invest in go-to-market, maybe channel programs, anything that we can do to drive top-line growth, that would be our first priority. As we said in the prepared remarks, we're committed to the guidance that we set. I don't think we're committing to expanding beyond that today, as again, our first priority is continuing to accelerate through, you know, go-to-market efficiencies as well as continuing to expand our product portfolio. Got it. Thank you. UBS's Karl Keirstead has the next question, but Kelly and Eric, he's on audio only, so he won't appear to you via video. Karl, go ahead. No, I'm good, thank you. Sorry. No problem at all, Karl. Thank you so much for letting us know. In that case, we'll move on to Siti Panigrahi with Mizuho. Hey, thanks for taking my question, Kelly and Eric. When you think about this year growth, I know, you're expecting some, you know, online segment to kind of bottom at some point. What's your expectation when you think about online segment versus enterprise? I know this is, again, renewal will come in Q1, Q2. What are you now pushing to now customer during renewal? I know last few years it was, phone. What other products you are right now pushing during renewal? In terms of the expectations for online this year, they are consistent with what we've been saying for the last couple of quarters, which we expected to stabilize during mid-next year from a dollar amount. Meaning starting to see the, you know, we've seen it continue to decline quarter-over-quarter from a dollar perspective for the last probably five or six quarters. When we get kind of like Q2 to Q3 of next year, we expect to see that start to stabilize, which is great when you look at all the initiatives that are in place. I'm sorry, the last part of your question about renewals was about? Yeah. Enterprise part of the business, how you're thinking about the growth and renewal? Yeah. Yes. Renewals or not, right? There's always an opportunity to talk to our enterprise customers around Zoom One, the platform bundle, which we think is a great opportunity for our enterprise customers to, you know, help our prospects and customers understand the full features of the platform. Of course, there is a natural opportunity to do that as they're going through the renewals period. You know, as we guided, we expect renewals to be strong in Q1. However, there is going to be that impact of currency that, you know, we've already experienced for Q2 through Q4, but unfortunately, we have one more quarter against the previous year comps that there's gonna be some impact and some headwinds there. Great. Thank you. Sterling Auty with SVB MoffettNathanson has the next question. Thanks. Hi, guys. Hey, Kelly, maybe just to clarify on that last answer. Now that we're in fiscal 2024, on that online answer you just gave, you meant that we'd see the turn Q2, Q3 of this fiscal year, correct? Sorry, did I say twenty... Yeah, this fiscal year. Yes. FY 2024. I just want to make sure people didn't think fiscal 2025. Not FY 2025, no. Thank you for clarifying. Yes. You're welcome. In terms of question, I want to take the other side of it and go to the enterprise. What's built into the expectation for full year revenue around the enterprise? Maybe dive into, you know, at least some qualitative commentary around net retention and what you expect on renewals from customers, and what you're expecting from contribution of new customers. What needs to happen for the enterprise to deliver that side? We expect renewals. We talked about renewals over the last year, the last 12 months, and we expect them to continue at kind of the same rate. What we've mentioned in the past is that we have seen some contraction in seats as organizations, you know, around the world are experiencing reductions, so working with them on that. On the other side, the opportunity to really bring a lot of value to our customers through our total cost of ownership, which includes expansion of the total portfolio. As you saw, Zoom Phone really resonating very well, especially in this economy. Zoom Contact Center, while it's still small from an absolute dollar perspective, you know, it doubled the ARR for Zoom Contact Center from Q3 to Q4. Again, small relative dollar, but really exciting to see it coming into its own. That is what we expect that to continue to contribute through all of this year, but then really start to accelerate from a contribution perspective in FY 2025, and I do mean FY 2025 in that comment. Then, of course, there's Zoom IQ for Sales as well, which is on a, you know, kind of a similar trajectory in terms of Zoom Contact Center, that small dollar contribution, but it, you know, accelerating in terms of its overall growth. Got it. Thank you. Yep. We'll now hear from Matt Stotler with William Blair. Thank you. Hey, Eric. Thank you for taking the question. maybe just one on a follow-up on Zoom One. You mentioned some strength there, obviously, you know, relatively early days, a couple quarters in. I would love to get some color on, you know, maybe the portion of new customers that are going with the Zoom One bundle versus other, you know, paths to buying Zoom products, and then what the characteristics are that you're seeing of those early adopters, right? Both in terms of, you know, customer size, you know, whether they're, you know, adopting that for specific departments and rolling that out like you've seen the core, you know, meetings product historically. Any color there would be helpful. I think what's amazing and really interesting about Zoom One is it's not just new customers that are buying the Zoom One bundle, it's existing customers as well that are upgrading. As a reminder, it includes Zoom Meetings, but also Zoom Phone. It includes Team Chat and Whiteboard. Really starting to see customers embracing the full effects of the platform. We have a Fortune 10 customer now that is a long-standing customer of ours that moved on to the Zoom One bundle and has standardized on Zoom Team Chat, which we're super excited to see. That's the example of what starts to happen when these customers are really exposed to the full value of the platform that we can bring to them. I don't know exactly the percent of how it broke out in Q4, but it is really starting to take the lead in terms of how our enterprise sales teams are selling. Very helpful. Thank you. Anything you want to add, Eric? No, this is great. Thank you. Moving on to Kash Rangan with Goldman Sachs. Hey, thank you so much. Good to see you guys, Eric and Kelly. I just wanna understand how we should reconcile the guidance going forward vis-a-vis what seems to be pretty close to the anniversary effect of the SMB attrition, and then we should start to really mirror the growth of the so-called enterprise business. The guidance still seems to be quite conservative. Just help us understand what might have happened at a higher level incrementally relative to this anniversary effect and what we should be seeing by this time, a real acceleration of the business. Thank you so much. Sure. One thing to remember, Kash, is that while we are expecting the online portion of the business to stabilize from a dollar perspective during the year, it is still down year-over-year because of what happened in FY 2023, where it was much higher. The dollar amounts were much higher in those earlier quarters as it came down. We still have the unfortunate impact of the online segment of the business tamping down the growth of the enterprise business. That's what you're seeing reflected there. You know, the stabilization that occurs this year will really help as we look forward to next year, which we've always said is sort of re-acceleration, the back half of this year into FY 2025. You know, that's what we see in our internal models today. Got it. Curious, Kelly, why does it take till fiscal 2025 to see the effect, the net effect to be positive? Can you help us understand the timing of why it takes another year from now? There's the combination of, first of all, online is still down year-over-year, you're not gonna start to see the year-over-year stabilization of online until the back half of the even though the dollars are stabilizing, right. The year-over-year comparables are still down until the very back half of this year. While we've seen all the strength we've talked about in Zoom One and Zoom Phone, part of the expected growth is coming from these other newer products that are still so they're doing great, you know, all positive indicators, but they're still so early in their trajectory that if you remember and think about how where Zoom Phone was in its second year of life, that's where Zoom Contact Center and Zoom IQ for Sales. you know, now you see Zoom Phone, which is about to turn four, I believe, how it's really contributing. We've just got a little time ahead to get those products maturing and really contributing. Got it. Thank you so much. Very clear. Appreciate it. Thank you. We'll now hear from Bernstein's Peter Weed. Peter, please go ahead. Thank you. Maybe I'll follow up on that and kind of reinforce, you know, what appears to be a reasonably conservative revenue guide this year. When we start to think about some of the things you've chatted about earlier in this conversation, you know, everything from stabilization in the online business, which may even do better than that, perhaps, hopefully, with some of the pricing increases that go on all of the product that you've been shipping, you know, these types of things. When we take into account, you know, the fact that, you know, a year ago on the top line, you know, this business was, you know, even a little bit smaller than what we're anticipating Q1 this upcoming year might be, you know, help me understand why we would do as bad, I guess as only a 1% year-over-year. Like, what's the downside case that gets us there? Or is this, you know, more of an opportunity to perhaps start to see some of the lift coming out of here? Thank you. Remember for Q1, there is the definite impact of being three fewer days, which, you know, has real impact as compared to these three fewer days of Revenue Recognition, as well as the impact of currency, which we didn't have last year. That year-over-year impact is going to definitely be visible in Q1 of FY 2024. Then, you know, we continue to see in the enterprise, you know, elongated sales cycles, deal scrutiny. I was sort of laughing with a fellow CFO saying, "This is the year of the CFO," because I have gotten invited to speak at more sales kickoffs this year than you can imagine, because every sales team is having to learn how to sell to the CFO, and including ours. That is exactly the experience that we're having. You know, it just means they're taking a little bit longer, and everybody's being very, very thoughtful about their purchases. All of that was taken into consideration as we set our full year guidance. I guess, you know, many of those things are stuff, I guess, in the second half of this year you have been addressing and are kind of carrying forward, so they're not kind of brand new. You know, I would think that some of this, unless you are anticipating another leg down for some reason, are there any additional legs down relative to things that you've been already seeing in the business? Is this just conservatism on, like, we just don't know how long this stuff's gonna really be impacting, and we can't really say how much people are gonna be, you know, purchasing the Zoom One bundle, you know, which is kind of the standard thing that you're putting out, and really how well people are gonna react to price increases this year so that it's really created a floor on which we hope to do better then? I definitely think there is a question as to the state of the economy. When it comes to investments, while we think we are incredibly well-positioned with our total cost of ownership and the value that we bring to our customers, everybody is being very cautious until there's better visibility about, you know, the potential of a recession or not, and where we're gonna come through this. We expect that could, you know, impact us at least through the rest of this year. Thank you. Yeah. Imtiaz Koujalgi with Wedbush has the next question. My question. Two questions, one for Eric. Eric, when you spoke about Zoom One traction in the quarter, and it's still pretty early, I understand that. When you sell a customer Zoom One from Zoom Meetings, what is the typical uplift you're seeing in the deal sizes? Let's say somebody has Zoom Meetings today and they upgrade to Zoom One, what is the kinda uptick you get in the deal value there? Yeah, normally it's a great question. It comes from up-market opportunities, right? Not of our SMB customers, you know, they do not use like a Whiteboard and some other, you know, cool features. As an enterprise customer, you know, given economic uncertainty and a challenge of cost reduction, they would like to consolidate, right? Into one platform, right? Mostly too from a total window perspective. When they look at a Zoom product, they're trying to understand what kind of other services, features they can leverage more. Then also talk with my Whiteboard and Team Chat, Contact Center, Zoom IQ for Sales, you know, more and more upsell opportunity. This is a great time for those up-market, you know, customers, especially, you know, commercial and enterprise customers, right? Because they already trust our brand. They know those services. Take Zoom Whiteboard, for example. They know we are doing keep innovating. They know our service will be better than others. Why not, you know, deploy Zoom Whiteboard, right? This is a great example, so. In the early deals that you've had so far, what is the uplift you've seen in, I guess, dollars you're getting from that customer? How much do you see typically, you know, I guess as an uptick factor when somebody goes from just using Zoom Meetings to using Zoom One? What is the, what's the, I guess the upsell or the uptick in the deal value? It really depends on the customer. The thing that I would point out, though, is it's not just the uplift in the dollar amounts, it's the retention that we see, which is really important to us as customers that have more... If you remember at Analyst Day, we showed that chart that, like, I can't remember exactly what it is. It's more than 50% improved retention rates when they have more than one product deployed. The value of us having a broader platform in there, including the ones that are much more retentive, like Zoom Chat and Zoom Phone, really brings a lot of value to us. Got it. Just 1 follow-up, Kelly. Typically, we see customers, companies having free cash flow margins higher than operating margins. Yours reversed last year. I think you had a drag from cash taxes and stock-based comp. Yeah. Again, your guide implies free cash flow margin, I believe, lower, by about 9 points from operating margin. Does that reverse at some point in the future, or do we see that as more of a permanent gap? Given that we are a cash taxpayer for here to eternity now, I think you're likely to see it be slightly under, but what we're getting back to, which was very disrupted last year, is a more normalized relationship between those two as we're on more of a normal course now from a cash tax perspective. Thank you. Moving on to Matthew Harrigan with Benchmark. Hi, Matthew. Matthew, you're currently muted. If you'll come off mute for us. Yeah. I'm sorry. I tried to take myself out of the queue. I sent a message, but. Oh. Evidently, didn't get through. No problem at all. Great. Thanks, Matthew. Thank you. See you next time. All right. Thank you. Well, we'll go ahead and in that case and move on to William Power with Baird. William, if you'll go ahead and turn on your video and come off mute for us. Great, thanks for squeezing me in. A lot of my questions have been answered, but I did wanna ask about, you know, Zoom Phone. That looked like a particularly strong quarter. I think, you know, the push around Zoom One is probably, you know, helping, but it'd be great to get any other perspective on what seems to be a nice acceleration there in Zoom Phone adoption and then any color you're able to provide just around, you know, pricing trends and when does this become a 10%, you know, revenue component? In terms of when it's going to become 10%, it's sometime early this year in FY 2024. You know, we are very excited about the momentum. You know, we had a 100% year-over-year growth in the product. It's back to even in this economy, and especially in this economy, companies looking for opportunities to standardize on one vendor, and also because there is a lot of value to be gained by getting rid of those on-prem servers, as well as the very disruptive price point that we have all the way around. It's just proving to be very attractive. As Eric mentioned, there's still a lot of opportunity in market available, so we expect that to continue. You know, I don't know what to expect you... Just a reminder, everybody, Q2 and Q4 tend to be our really peak quarters in terms of Zoom Phone ads. While we had an amazing number of additions in Q4, I don't expect that necessarily to be the new bar. You know, we would expect it to be seasonally down in Q1, but still very excited that the momentum continues to be up and to the right. Thank you. JMP Securities, Patrick Walravens has the next question. Oh, great. Thank you. I have a really fun question for Eric. Eric, in 2021, you guys invested in Cvent, and before their deal, and you also invested in monday.com. How do you feel about those two spaces today? How do you feel about event technology, and how do you feel about collaborative work management? Given this is a fun question, maybe I should launch a ChatGPT, let it answer two questions is better. Might give you a fun answer. Anyway, I think monday.com interesting, right? Because the reason why I invest them, a lot of our customers, you know, they also, especially in Europe, right, also deploy the service. You know, they would like, you know, them to integrate with us, and also they also Zoom customer as well, I think as far as I know. You know, I think it's more like from a customer perspective, right? They want us to work together, right, to integrate them. That's the reason why I invest them, right? Take, you know, Zoom, Cvent, for example, during the COVID, right, a lot of customers deployed, you know, our Zoom, more and more webinars, Zoom Events, especially, you know, for those hybrid events, right, you know, in-person events, you know, we are more like a pure technology platform, right. We also need some other components to help to make sure we have a, you know, streamline your events management. That's why we partner with Cvent, right. We see the opportunity to further solidify our relationship. Why not, you know, to invest them? I think given now is, you know, more and more companies support hybrid work, I think Cvent, I think they would do well. That's another reason why we invest them. Yeah. That's pretty much. Maybe my answer not as fun as the ChatGPT, but that's pretty much I can do. Sorry. Great. Thank you. Thank you. We do have time for one additional question that will come from Ryan MacWilliams with Barclays. Guys, appreciate you fitting me in. My question is kind of in the same spirit as Pat's question. Kelly, it looks like you filled the remaining amount of your share repurchase authorization this quarter. I guess, how are you thinking about a new authorization for a buyback? In terms of M&A, would Zoom potentially look at acquisitions where you already have a competing product today, or are you generally looking at adjacent solutions? Thanks. In terms of M&A, we look at both. You know, we've been very successful in the past by buying those technology tech-ins to accelerate our development, as you've seen with the Solvvy acquisition, which has been a great accelerant for us in terms of contact center and continue to look at those. Also looking at other areas that there might be leaders in the space that make sense for us. We're continuing to look at both. Every, you know, every quarter, we talk to our board about our capital allocation strategy, and of course, M&A is at the top of the list. We do not, as you indicated, have a buyback authorization in place today. You know, we will continue to look for opportunities to deploy our capital in the best way possible for our investors. Right now, we, you know, again, as I said earlier, our number one focus is re-accelerating top-line growth and making sure that we have the flexibility to do that if opportunities arise. So that's why, for the moment, we've decided to hold at least on requesting an authorization for a buyback. Appreciate the color. Thanks so much. Yeah. Again, everyone, that does conclude our Q&A for today. I'll go ahead and pass it back to you, Eric, for any closing or additional comments. Oh, thank you all. I really appreciate your time. Love you all. Thank you. Take care. Bye, everybody. Thank you. Again, everyone, this does conclude today's earnings release. As always, we thank you all for your participation, and we look forward to seeing you again in the spring and summer. Until then, take care and enjoy the rest of your day.