- Total Revenue: $1.163 billion, up 2% year-over-year.
- Enterprise Revenue: Grew 4% year-over-year, representing 59% of total revenue.
- Online Average Monthly Churn: 2.9%, down from 3.2% in Q2 FY '24.
- Customers Contributing Over $100,000 in TTM Revenue: 3,933, representing 31% of revenue.
- Net Dollar Expansion Rate for Enterprise Customers: 98%.
- Americas Revenue Growth: 3% year-over-year.
- EMEA Revenue: Flat year-over-year.
- APAC Revenue: Declined by 2% year-over-year.
- Non-GAAP Gross Margin: 78.6%, down from 80.3% in Q2 of last year.
- Non-GAAP Operating Income: $456 million, with a 39.2% non-GAAP operating margin.
- Non-GAAP Diluted Net Income Per Share: $1.39.
- Deferred Revenue: $1.41 billion, up 3% year-over-year.
- RPO (Remaining Performance Obligation): $3.78 billion, up 8% year-over-year.
- Operating Cash Flow: $449 million, up 34% year-over-year.
- Free Cash Flow: $365 million, up 26% year-over-year.
- Cash, Cash Equivalents, and Marketable Securities: Approximately $7.5 billion.
- Share Buyback: 4.8 million shares for $288 million in Q2.
- Q3 Revenue Guidance: $1.16 billion to $1.165 billion.
- Q3 Non-GAAP Operating Income Guidance: $438 million to $443 million.
- Q3 Non-GAAP EPS Guidance: $1.29 to $1.31.
- FY '25 Revenue Guidance: $4.63 billion to $4.64 billion.
- FY '25 Non-GAAP Operating Income Guidance: $1.79 billion to $1.8 billion.
- FY '25 Non-GAAP EPS Guidance: $5.29 to $5.32.
- FY '25 Free Cash Flow Guidance: $1.58 billion to $1.62 billion.
Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Zoom Video Communications Inc (ZM, Financial) reported a strong quarter with significant upgrades to the Zoom Workplace offering, including enhanced AI capabilities.
- The company launched Zoom Docs, expanding its platform across more touch points in the productivity lifecycle.
- Zoom AI Companion has been enabled on over 1.2 million accounts, showcasing strong adoption of AI features.
- The company landed its largest deal for a new Contact Center customer, highlighting increased adoption of advanced Contact Center packages.
- Zoom Video Communications Inc (ZM) surpassed 1,100 Zoom Contact Center customers, representing more than 100% year-over-year growth.
Negative Points
- Non-GAAP gross margin in Q2 was 78.6%, down from 80.3% in Q2 of last year, mainly due to investments in AI and data center upgrades.
- APAC revenue declined by 2% year-over-year, indicating challenges in that region.
- The company is experiencing headwinds in the SMB segment, reflecting overall economic concerns.
- Kelly Steckelberg, the CFO, announced her decision to leave the company, which may impact investor confidence.
- EMEA revenue was flat year-over-year, with ongoing economic challenges in the region affecting growth.
Q & A Highlights
Q: Where are you seeing the most interest in the AI Companion products, and how does it inform your investment strategy?
A: Eric Yuan, CEO: Customers really like Zoom AI Companion, especially since it comes at no additional cost. The most popular feature is meeting summaries, which we continually improve. AI Companion is integrated across all our products, including Zoom Meetings, Phone, and Contact Center, enhancing productivity and user experience. We plan to announce more AI Companion enhancements at Zoomtopia in October.
Q: What is driving the strong adoption of Workvivo, and where are customers seeing the most value?
A: Eric Yuan, CEO: Workvivo helps with employee engagement, especially in flexible work environments. Large enterprises find it valuable for seamless employee engagement. Meta's decision to retire their platform in favor of Zoom highlights Workvivo's effectiveness. We closed many new logos in Q2 and have several large deals in the pipeline.
Q: How is the macroeconomic environment affecting your online segment and enterprise sales cycles?
A: Kelly Steckelberg, CFO: We see ongoing improvement in online retention rates, driven by platform enhancements, including AI Companion features. However, SMBs are experiencing some economic concerns. In the enterprise segment, we see growth and stability in retention rates, with expectations for net dollar expansion to reaccelerate by mid-next year.
Q: How do Zoom Contact Center features and capabilities compare to competitors, and when will it become a material revenue contributor?
A: Eric Yuan, CEO: Customers trust Zoom for innovation and faster delivery of AI features. Our Contact Center offers seamless integration with other UC platforms and is very price competitive. We are seeing significant momentum and expect it to become a material revenue contributor in the future.
Q: How do you think about the cost of providing generative AI features, and will Zoom eventually charge for these capabilities?
A: Eric Yuan, CEO: We do not plan to charge for AI Companion in our core workplace offerings. However, for business services like Contact Center, we will monetize AI features. Our focus is on delivering value to customers while managing costs effectively.
Q: Can you provide more details on the new business side of the online segment?
A: Kelly Steckelberg, CFO: We continue to add features and offerings to drive growth. While we see some headwinds in the SMB segment, overall, we are executing well against our guidance and have raised our outlook.
Q: What initiatives are driving the large win in the Contact Center, and why did the customer choose Zoom?
A: Eric Yuan, CEO: The customer evaluated multiple solutions and chose Zoom for our innovation speed, AI capabilities, and seamless integration with other UC platforms. Trust in our ability to deliver on commitments also played a significant role.
Q: How do you track the success of Zoom AI Companion internally?
A: Kelly Steckelberg, CFO: We track account activation and usage metrics like the number of meeting summaries produced. Customer feedback on productivity improvements also helps us gauge success.
Q: What is the mix of Contact Center customers, and how is it impacting your expansion metrics?
A: Kelly Steckelberg, CFO: We see growth in larger deals and higher ASPs due to premium features. The majority of recent deals are in the top two pricing tiers, contributing to both seat count and value expansion.
Q: How are AI products driving expansion with existing customers?
A: Eric Yuan, CEO: AI Companion adds significant value at no additional cost, building long-term trust. For premium services like Contact Center, AI features are a key differentiator and are monetized accordingly.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
