Zoom Video Communications, Inc. (ZM) Q3 2024 Earnings Call Nov. 20, 2023

Here is a summary of the ZM earnings call.

Eric Yuan - Founder & CEO

Zoomtopia Event Highlights

• Hybrid Format:
  Hosted both in-person and virtually via Zoom Events.

• Notable Attendees:
  Representatives from JP Morgan, MIT, Boston Consulting Group, HubSpot, Kohls, and others.

• Innovations Showcased:
  Zoom AI Companion, Zoom AI Expert Assist, Quality Management for Contact Center.

• Zoom AI Companion Success:
  Over 220,000 accounts enabled, producing 2.8 million meeting summaries.

Customer Success Story: Flex

• Company Profile:
  Global manufacturing and supply chain leader with 170,000 employees in 30 countries.

• Usage Growth:
  Increased use of Zoom Meetings, Rooms, Team Chat, and Whiteboard.

• Cost Reduction:
  Switch to Zoom Phone led to a significant reduction in circuits and infrastructure costs.

Key Customer Wins in Q3

• Dropbox:
  Extended partnership to include Zoom Virtual Agent and Zoom Contact Center.

• Amynta Group:
  Expanded use of Zoom Phone and Zoom Contact Center, leading to a 5x increase in monthly spend.

• Virgin Group:
  Launched Workvivo platform for 60,000 employees across almost 40 companies.

Product Development and Customer Experience

• Innovations:
  Introduction of Workforce Management, Quality Management, Zoom Virtual Agent, and AI Expert Assist.

• Employee Experience:
  Integration of Workvivo into the Zoom client, enhancing collaboration and company culture.

Kelly Steckelberg - CFO

Q3 Performance Overview

• Revenue: $1.137 billion, a 3% increase year-over-year, and 4% in constant currency.

• Guidance Surpass: $17 million above the high end of their guidance.

Key Milestones and Customer Metrics

• Zoom Phone: Reached approximately 7 million paid seats.

• Zoom Contact Center: Acquired about 700 customers.

• Zoom Virtual Agent: Nearly doubled customers quarter-over-quarter.

• Zoom One Bundles: 330% year-over-year growth including Zoom Phone.

Enterprise Business Growth

• Revenue Contribution: 58% of total revenue, up from 56% last year.

• Customer Growth: 5% year-over-year to about 219,700 Enterprise customers.

• Net Dollar Expansion Rate: 105% for Enterprise customers.

• High-Value Customers: 3,731 customers contributing over $100,000, representing 29% of revenue.

Regional Performance

• Americas: 5% revenue growth year-over-year.

• EMEA and APAC: Both declined by 2% year-over-year.

Non-GAAP Financial Results

• Gross Margin: 79.7%, an improvement from the previous year.

• Operating Income: Grew 17% to $447 million.

• Operating Margin: Improved to 39.3%.

• Earnings Per Share: $1.29, $0.20 above guidance.

Balance Sheet and Cash Flow

• Deferred Revenue: $1.32 billion, down 3% from last year.

• RPO (Remaining Performance Obligations): Increased 10% to $3.6 billion.

• Operating Cash Flow: Grew 67% to $493 million.

• Free Cash Flow: Increased 66% to $453 million.

Q4 and Full Year FY ‘24 Guidance

• Q4 Revenue: Expected to be between $1.125 billion and $1.13 billion.

• Q4 Non-GAAP Operating Income: Projected to be between $409 million and $414 million.

• Q4 Non-GAAP Earnings Per Share: Forecasted to be $1.13 to $1.15.

• FY ‘24 Revenue: Updated to be between $4.506 billion and $4.511 billion.

• FY ‘24 Non-GAAP Operating Income: Anticipated to be between $1.74 billion and $1.745 billion.

• FY ‘24 Non-GAAP Earnings Per Share: Projected to be $4.93 to $4.95.

Q&A followed.

Anne Chapman

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