Zoom Video Communications Inc
NASDAQ:ZM

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Zoom Video Communications Inc
NASDAQ:ZM
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Earnings Call Transcript

Earnings Call Transcript
2021-Q1

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Operator

Hello everyone, and welcome to Zoom's First Quarter Fiscal Year 2021 Earnings Release. As a reminder, this call is being recorded. At this time, I would like to turn the floor over to Tom McCallum, Head of Investor Relations.

T
Tom McCallum
Head of IR

Thank you, Matt, and hello everyone. Welcome to Zoom's earnings video webinar for the first quarter of fiscal 2021. Joining me today will be 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 on the zoom.com website. 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 about our market size and growth strategy, our estimated and projected costs, margins, revenue, expenditures, investments, and growth rates, our future financial performance and other future events or trends, including the guidance for the second fiscal quarter of 2021 and full fiscal year guidance for 2021, our plans and objectives for future operations, growth, initiatives, or strategies, and the impact to Zoom's business from the COVID-19 pandemic.

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 risks and other factors that could affect our performance and financial results and which we discuss in detail in our filings with the SEC, including today's earnings press release and our latest 10-Q. Zoom assumes no obligation to update any forward-looking statements we may make on today's webinar.

And with that, let me turn it over to Eric. I think Eric’s mic. Here he goes.

E
Eric Yuan
Founder and CEO

That’s great. Thank you, Tom.

T
Tom McCallum
Head of IR

Yes.

E
Eric Yuan
Founder and CEO

First of all, thank you all for your time today. I still remember the first time when we had an earnings call last year, it was around less than 1,000 participants. Today, we have over 3,000 participants. Thank you all for your time. And I hope you are doing as well as is possible in this unique moment around the globe.

To the frontline workers, we thank you for your courage and the tremendous sacrifices you are making to keep us healthy and our community running in this pandemic. Everyone at Zoom appreciates all your incredible work. COVID has brought pain for many, in particular, vulnerable communities.

The black community in the United States has also recently experienced shocking and a senseless loss. To our communities and customers, especially those in the black community, Zoom is standing with you, not only today, but also into the future.

Nearly 10 years ago, we created Zoom to build a better, simpler and more efficient video communications platform. Today, I am proud to see that our platform is serving a critical role beyond our original vision in enabling communication and collaboration for businesses, schools, consumers and in the global community to stay connected and operational during the COVID-19 pandemic.

Navigating this process has been a humbling learning experience, giving us a newfound appreciation for what it means to be a video communications technology provider in times of need. Work-from-Home and social distance initiatives have meaningfully accelerated the adoption and traffic on the Zoom video communications platform. We have seen many use cases, not only from enterprises to maintain work productivity as part of the business continuity plans, but also from first-time consumer users for personal and social use to connect with friends and families, when physical gathering is not possible.

Let me share some metrics that illustrate the demand we experienced in this past quarter. Customers with more than 10 employees grew 354% year-over-year, as we deployed millions of licenses for new customers in the quarter. One new banking customer deployed approximately 175,000 new Zoom enterprise licenses in the quarter. Usage by customers in the Global 2000 grew over 200% sequentially. We peaked at over 300 million daily meeting participants, free and paid, joining Zoom meetings in April 2020, up from 10 million in December 2019. Currently, we continue to see elevated levels of participants even as governments around the world have begun to ease stay-in-place restrictions.

We had an approximately twentyfold increase in our metric of annualized meeting minutes run rate, which jumped from 100 billion at the end of January 2020 to over 2 trillion meeting minutes based on April 2020’s run rate. Scaling capacity to meet this incredible increase in traffic and use cases while providing uninterrupted, reliable and high-quality services to our customers have been a tremendous undertaking for our team. And we could not have done it without relying on our partners. When the pandemic crisis started, our own data centers could not scale fast enough to handle the unprecedented traffic. Fortunately, some of the top public cloud providers were there to help.

Immediately during the crisis, our long-time partner AWS and its CEO Andy Jassy enabled us to meet this rapidly increasing demand. As our demand increased and we had limited visibility into the growth, AWS was able to respond quickly by provisioning the majority of the new servers we needed, so sometimes adding several thousands a day for several days in a row.

In April, our customer Oracle also showed a great support to help us. Not only did Larry Ellison record a great video to encourage our team to do the right things for the world, but also offered Oracle cloud support. We also provisioned a number of servers in the Oracle cloud as the demand for Zoom continued to increase. We are so grateful for their partnership and their responsiveness to provide capacity during this time.

While the COVID-19 pandemic has expanded our market opportunities, it also brought us many challenges. Prior to the pandemic, Zoom was primarily built for and used by large enterprises and institutions. During the crisis, with good intentions, we opened our platform to unprecedented numbers of first-time users without fully considering the challenges it would bring to those who did not have full IT support, or established protocols for security and privacy like our enterprise customers. As a result, we have experienced negative price related to meeting disruption, security and privacy issues.

Since these issues emerged, we have transparently and quickly addressed specific security and privacy issues, including: enacted a 90 day plan initiative on security and privacy with a weekly webinar for customers to ask me anything, acquired Keybase team to add engineering expertise to build an end-to-end encrypted meeting mode, also released Zoom 5.0 cloud with new security features and enhancements to give customers unparalleled control over their meetings and data. The new release also includes support for AES 256-bit GCM encryption and ability to report platform misuse to Zoom’s Trust& Safety Team.

During this period of unprecedented usage growth and negative PR, as a CEO of Zoom, I was also facing tremendous pressure. And I reached out to the high-tech community and received great support from fellow CEOs, and many of them are my mentors. And I can’t thank them enough for their advice. I’m also deeply grateful to see the strong support from our valued enterprise customers, such as CEOs from Atlassian, Equinix, HubSpot, Okta, PagerDuty, Poly, SurveyMonkey and many others, both through public statements and video testimonials.

With that, our users trust us to deliver the best and most secure video-first communications platform. I believe our result will continue to make us a stronger company for our customers and in the global community.

Now let me discuss a few of our happy customers. We are thrilled to welcome Arm Technology to the Zoom family. Arm Technology is at the heart of a computing and data revolution that is transforming the way people live and businesses operate. In Q1, Arm chose to deploy approximately 8,000 Zoom Meeting licenses, 800 Zoom Rooms and 9,000 Zoom Phones to deliver a one-touch experience to their employees globally.

We are also happy to welcome Baker McKenzie. One of Baker McKenzie’s distinguished strengths is their use of cutting-edge technologies to help clients overcome the challenges of competing in today's economic world. We feel privileged to be the video communications platform of choice for the number one law firm brand in the world. Thank you, Arm and Baker McKenzie.

On a final note, we welcomed Lieutenant General H.R. McMaster to serve as an independent director on Zoom's Board of Directors, Velchamy Sankarlingam as President of Engineering and Product, and Damien Hooper-Campbell as Chief Diversity Officer. Bringing their expertise to Zoom will be instrumental as we navigate rapid growth, transformation and scale.

I want to commend and thank our 2,854 employees for what we have accomplished together, and for working tirelessly over the past quarter to support millions of participants around the globe.

With that, let me turn things over to Kelly. By the way, I forgot to mention, today is also our CFO Kelly's birthday. So happy birthday, Kelly.

K
Kelly Steckelberg
CFO

Thank you, Eric. And this is the best birthday present I could ever have. Hello everybody. Q1 was an exceptional and pivotal quarter for Zoom. We are grateful for the incredible increase in demand as millions of doctors and patients, teachers and students, businesses and consumers chose Zoom to deliver critical communication and connection in a time of need. It speaks greatly of their trust and the quality and ease-of-use of our technology platform. We are also proud of our efforts to support our customers, employees and the global community during the COVID-19 pandemic.

In addition to opening up our platform to deliver free services to over 100,000 K-12 schools in 25 countries and millions of people around the world, especially those in areas highly impacted by the crisis, we have also donated $1.4 million to COVID-19 focused charities and funded another $1 million of stock to launch our charitable fund, Zoom Cares. The key long-term focus of Zoom Cares includes education, social equity and climate change.

Internally, we provided a one-time bonus, equivalent to two weeks of pay, for all Zoom's non-commissioned employees to offset costs associated with any disruption caused by the crisis. Not only has the world changed since we last reported results in early March, but so as Zoom's market opportunities and growth trajectory.

Let me start by reviewing our financial results for Q1, then discussing our outlook for Q2, and the full year of FY ‘21 that has been recalibrated to adjust for the new trends and scale of our business. Total revenue grew 169% year-over-year to $328 million in Q1. This topline result significantly exceeded the high-end of our guidance range of $201 million due to the increase in demand and strong sales execution in the quarter.

For the quarter, the growth in revenue was primarily due to subscriptions provided to new customers, which accounted for approximately 71% of the increase, while subscriptions provided to existing customers accounted for approximately 29% of the increase. This demand was broad-based across industry verticals, geographies and customer cohorts.

Let's take a look at the key customer metrics for Q1. We continue to see expansion in the up-market as we ended Q1 at 769 customers with greater than $100,000 in trailing 12 months revenue, up 90% year-over-year. This is an increase of 128 customers over Q4, a record number of adds in a quarter. Further demonstrating the strength in the up-market was the addition of over 500 customers with greater than $100,000 in annual recurring revenue in Q1. This is a one-time metric that we are sharing to provide more insight to our Q1 results.

For customers with more than 10 employees, we added over 183,000 in Q1, exiting with a total of approximately 265,000 customers in this segment. Year-over-year, we added over 206,000 new customers, growing 354%. While this is remarkable growth, our customer segment with 10 or fewer employees also expanded during the quarter as individuals adopted Zoom for many personal and social uses.

As a result, we have experienced a mix shift of customer cohorts, where customers with 10 or fewer employees represented 30% of revenue in Q1, up significantly from 20% in Q4. In addition, the increase in customers with 10 or fewer employees also shifted our billing mix, as these customers generally pay monthly, rather than annually like most enterprise customers.

Our net dollar expansion was over 130% for the eighth consecutive quarter, as existing customers continue to support and trust Zoom to be their video communications platform of choice. Both domestic and international markets had strong growth during the quarter. Americas grew at a rate of 150% year-over-year. However, our combined APAC and EMEA revenue grew even faster at 246% year-over-year and represented approximately 25% of revenue.

International expansion is a key growth initiative for Zoom. Our global brand awareness has spread more quickly and we have expanded into more countries than we had originally planned for FY '21.

Now turning to profitability, the increase in demand and execution drove net income profitability from both GAAP and non-GAAP perspectives. For my following comments, I will focus on our non-GAAP results, which exclude the charitable donation of common stock, stock-based compensation expense and related share-based equity taxes.

Non-GAAP gross margin for the first quarter was 69.4% compared to 80.9% in Q1 last year and 84.2% last quarter. Although in early March, we originally guided lower based on an increase in usage of our platform, our gross margin was further impacted by the elevated demand, especially higher levels of free meeting minutes, including those from K-12 schools in March and April.

Higher incremental cost also resulted from leveraging the public cloud providers, which was critical to our ability to meet the sudden exponential growth in usage, as the crisis spread and governments instituted stay-in-place policies around the world. Moving forward, as we build additional capacity in our own data centers, we expect to gain some efficiencies, bringing gross margin back to the mid-70s in the next several quarters ahead.

R&D expense in Q1 was approximately $21 million, up 66% year-over-year. As a percentage of total revenue, R&D was 6%, which was lower than Q1 last year mainly due to the strong topline growth. In FY '21, we plan to continue investing in R&D to drive innovation and security functionality, including leveraging the expertise and resources from top security firms.

Also, we recently announced the addition of two Engineering Centers of Excellence where we expect to add up to 500 software engineers in the next few years. The new R&D centers in Greater Phoenix, Arizona and Pittsburgh, Pennsylvania will both be located near top engineering universities.

Sales and Marketing expense for Q1 was $104 million. This reflects an increase of 69% or $42 million over last year with investments to drive future growth. As a percentage of total revenue, sales and marketing was 32%, a decrease from Q1 last year mainly due to strong topline growth. Overall, the increase in expense was attributable to record sales hiring and higher sales commissions due to strong execution, while we saw efficiencies in marketing. We are expanding our hiring plans for the rest of year to meet the opportunity presented in this new environment.

G&A expense in Q1 was $49 million, up 196% on a year-over-year basis. It represented 15% of total revenue, up from Q1 last year, due to higher accruals for telco taxes from higher billings, a one-time license payment and external professional services.

Non-GAAP operating income was $55 million, translating to a 16.6% non-GAAP operating margin for the first quarter. This compares to Q1 last year’s result of $8 million and 6.7% margin. Again, the higher revenue plus strong execution across all areas were the main drivers of this additional profit.

Non-GAAP earnings per share in Q1 was $0.20 on approximately $295 million of non-GAAP weighted average shares outstanding and adjusting for undistributed earnings. This result is $0.10 higher than our guidance and $0.17 higher than Q1 of last year.

Turning to the balance sheet. Deferred revenue at the end of the quarter was $552 million, up 270% year-over-year. Looking at both our billed and unbilled contracts, our RPO totaled approximately $1.1 billion, up 184% from $377 million year-over-year. The increase in RPO is consistent with the increase in demand and strong execution in the quarter. We expect to recognize approximately 72% or $772 million of the total RPO as revenue over the next 12 months, as compared to 64% or $240 million in Q1 of last year.

We ended Q1 with approximately $1.1 billion in cash, cash equivalents and marketable securities, excluding restricted cash. In Q1, we had exceptional operating cash flow of $259 million, up from $22 million year-over-year. Free cash flow was $252 million, up from $15 million year-over-year. The increase is attributable to strong collections from topline growth, higher percentage of monthly contracts, as well as billings that started early in the quarter.

Looking ahead, we expect to increase capital expenditures for additional data center infrastructure. And as a reminder, we will see the semi-annual cadence of net cash outflows from ESPP purchases to occur in Q2.

Now turning to guidance, as I have mentioned earlier, the current environment has expanded Zoom’s market opportunities and outlook as the increase in demand propelled us to a higher growth trajectory than originally planned for this year. This requires us to recalibrate our original FY ‘21 plan for the new scale of our business.

The COVID-19 pandemic added unprecedented new variable to our business model, where historical knowledge may no longer apply. Today, as we present our current best estimate of future quarters based on new assumptions of the dramatic shift in our business, we caution that the impact and extent of the crisis and its associated economic concerns remain largely unknown. Significant variations from our assumptions could cause us to modify our guidance. With that, we provide a higher outlook for FY ‘21 based on our view of the current business environment.

For the second quarter, we expect revenue to be in the range of $495 million to $500 million. We expect non-GAAP operating income to be in the range of $130 million to $135 million. Our outlook for non-GAAP earnings per share is $0.44 to $0.46 based on approximately 299 million shares outstanding. For the full year of FY ‘21, we expect revenue to be in the range of $1.775 billion to $1.8 billion, which would be approximately 185% to 189% year-over-year growth.

Let me now provide a bit more context on the assumptions behind our guidance. As I discussed earlier, we have a far higher portion of revenue attributable to new customers with 10 or fewer employees, who opted for monthly contracts. Historically, monthly subscribers have a higher churn rate compared to annual or multi-year subscribers.

In addition, as governments start to ease shelter-in-place restrictions, we may see a moderation of demand for our services. Given our assumptions on higher churn rate as well as economic uncertainty, we are projecting Q3 and Q4 revenue to be relatively consistent with Q2.

For the full year of FY ‘21, non-GAAP operating income is expected to be in the range of $355 million to $380 million. We expect to deliver non-GAAP earnings per share of $1.21 to $1.29 for the full year FY ‘21, based on approximately 300 million shares outstanding.

In closing, we executed well in Q1 and are proud of how our team dedicated themselves to support our customers and global community. Thank you to the entire Zoom team. And everyone, please stay healthy and safe.

With that, let's open it up for questions. If you have not yet enabled your video, please do so now for the interactive portion of this meeting. Matt, please queue-up our first question.

Operator

Before our first question, actually, Eric has asked me to open the mic for him. Eric, I think you’re muted.

E
Eric Yuan
Founder and CEO

Yes, I am muted.

Operator

Okay. Our first question is from Alex Zukin with RBC.

A
Alex Zukin
RBC

Hey, Eric. Thanks for taking my question and thanks for everything you do. You just delivered one of, if not the greatest all time quarter in enterprise software history, I think you've been given an amazing opportunity with Zoom becoming not just a verb, but really the poster child for enabling remote work.

But with that opportunity also comes a question, which is, where does Zoom go from here? How do we think about the percentage of your TAM that's been penetrated in the current environment? What are the most exciting incremental growth drivers? And do you have an update for us in terms of the long-term vision of your company, because it seems like the prior long-term vision were there? And I got a quick follow-up.

E
Eric Yuan
Founder and CEO

Alex, great questions. And if we have a time, I’d probably spend more time also want to get it otherwise, what's the future? But anyway, I truly believe video is a new voice. Video is going to change everything about the communication. The way for us to work, live and play is completely changed. From that perspective a huge opportunity, a lot of opportunities ahead of us. However, for now our top priority is to how to make sure we always keep our service up, because so many peoples are counting on Zoom to stay connected. Our top priority is to make sure keep the service up, double down triple down on the privacy, security issues.

And also down the road, we are going to figure out where we are going to double down on the new growth areas. But for now, I think one thing we know for sure is the TAM is bigger than we saw it before right? And it's how to capture that we of the new TAM I think there's something very important.

Also a lot of other new opportunities, our team are going to working together, right, to get to there, step-by-step. But now, number one thing is focus on the current product and the user experience, make sure during this pandemic crisis, hopefully it can end very soon, they can leverage Zoom to stay connected.

T
Tom McCallum
Head of IR

Next question, please, Matt?

Operator

Our next question is from Sterling Auty with JP Morgan.

Sterling Auty
JPMorgan

Thanks. Hi, guys. So Eric, maybe a technology question for you. You did your 90 day program and end-to-end encryption really became a big focal point of discussion around security and privacy. You made the acquisition. Can you update us on when you plan to deploy? And then the encryption, how will it be deployed? And is there actually an opportunity to monetize it perhaps as an upsell?

E
Eric Yuan
Founder and CEO

Yes. Sterling, that's a good question. Before I answer to that question, I'd like to take a step back to share with you what’s the industry standard for now, like Zoom or other competitors, because I mean, in this real-time collaboration industry for a long, long time. For now, I think most of the vendors we all use AES 256-bit either GCM or CBC, that's a standard.

The reason why, if you enable end-to-end encryption, guess what, you cannot use your phone to dial in. You cannot support a traditional, old legacy, hardware [indiscernible] and SIP devices. And plus the cloud recording also is not available with some limitations. That's why for now most of the industry conferencing vendors do not support this feature.

However we believe, no matter what, we needed to support that as well advance the feature. To give a customer see, your meeting is extremely sensitive. You don't want Zoom know the session key. Yet you can enable this feature with the limited functionality. It can all let the phone to dial in. And inside of that, we think this feature should be part of our offering. We do not want to charge based on the feature we try to customer more, that's not like that.

So we want to give to at least the enterprise customer or business customer. Free users, for sure, we don't want to give that, right? Because we also want to work it together, see if this with FBI, with local law enforcement, in case some people they use Zoom for the better purpose, right?

I think we also published a whitepaper I think a week ago right? And the opportunity to get a hub we got a lot of feedback and our team for now we're working on execution now. So I think soon we're going to know our release day. For now, we are seeing to review our whitepaper. So we have a confidence this will be a very good feature for our enterprise customers.

Sterling Auty
JPMorgan

Thank you.

E
Eric Yuan
Founder and CEO

Thank you, Sterling. You can join us as a beta tester.

Sterling Auty
JPMorgan

Sounds great.

T
Tom McCallum
Head of IR

Great. Next question please, Matt?

Operator

The next question is from Nikolay Beliov with Bank of America Merrill Lynch.

N
Nikolay Beliov
Bank of America Merrill Lynch

Hi, can you guys hear me?

E
Eric Yuan
Founder and CEO

Yes

N
Nikolay Beliov
Bank of America Merrill Lynch

Kelly, happy birthday, and look forward to chatting with you on Thursday at our conference. My question is I would like you guys to provide us with a little more context on the guidance. I was wondering what trends you saw in the business during the month of May. And what gives you confidence that those prosumers, increasing the mix from 20% to 30% are going to stay for the rest of the year? Just trying to get more color around the confidence in the guide.

K
Kelly Steckelberg
CFO

So, in the guidance what we have considered, especially around those prosumers, as you call them the monthly users, we assume that there is an escalated that the term will be escalated in terms of historical. So we've assumed a multiples of what the historical churn rates have been. And also we have taken a conservative approach in terms of thinking about that in terms of potential uncertainty around the economic environment.

With that said, I want to make sure you understand that while we did see an increased growth of monthlies is about half of our sales in the quarter came from monthly subscribers. When you look at the sales from our direct sales organization, the percentage of monthly subscribers was consistent with historical. So we didn't see an increase in monthly subscribers in the upmarket, we saw the same percentage as we have historically. And those typically, the churn in that segment when they’re annual or multi-year is a fraction of what the monthly subscribers are.

N
Nikolay Beliov
Bank of America Merrill Lynch

And Kelly, in this context, if I may ask a follow-up, billings grew 350% and CRPO grow around 220%. Why the discrepancy here? And what does it mean to revenues? And how revenues flow-through from CRPO and billings?

K
Kelly Steckelberg
CFO

So, thank you about the question about billings and RPO. As you know, we don't provide specific guidance around billings or RPO. Given the fact that it's actually been exacerbated with the growth in the subscribers, they are just very difficult for metric. They don't apply because of the high-rate of monthly billings and subscribers. They're just not good metrics for us.

N
Nikolay Beliov
Bank of America Merrill Lynch

Got it. Thank you.

T
Tom McCallum
Head of IR

Next question, please, Matt.

Operator

Our next question is from Alex Kurtz with KeyBanc.

A
Alex Kurtz
KeyBanc Capital Markets Inc.

Yes. Thanks. Zukin’s earlier question about growth opportunities, kind of a once in a lifetime opportunity to reimagine investments in new products, new sales coverage. And I mean, just look at your operating income this quarter next quarter, you couldn't have imagined that at the time of the IPO. So as the team and the Board look at the next 12 months, is there something that you guys are really laser-focused on that you could take all this extra cash flow and reinvest back into the business?

E
Eric Yuan
Founder and CEO

Yes. Alex, again, that's a great question. So, even before this pandemic crisis, not only do we offer the video conferencing service, but also we have a Zoom phone system. And don't forget about that is also huge opportunity. In particular, we believe video and voice, those two are going to be key words into one service, that's a huge, huge opportunity.

This pandemic crisis, I would say on the one hand, accelerated the video adoption. On the other hand, it was brand recognition, plus a lot of a prosumer, so a lot of the new use cases. Like online education, telemedicine, tele-health. For sure, we would like to double down on that.

But in terms of specific opportunity on one new service, we are going to work on that in the next several months. And as I mentioned earlier, for now, we needed to make sure we still keep helping people stay connected.

Another thing also, we know for sure is, the way for us to work in the future totally different and how to make sure focus on the whole new experience, right, to make sure that you have very consistent experience when you work in the office and work in the home. A lot of innovations will be upon that as well.

I actually believe a lot of opportunities, but we got to be very careful. You are so right. Where we should double it down? Where we may not leave to our partners, right, to develop those applications or leverage those opportunities upon our platform.

A
Alex Kurtz
KeyBanc Capital Markets Inc.

Thanks. And then a quick question for Kelly. In the areas where they've been lifting the quarantine, the shelter-in-places, have you seen any kind of change in churn in those regions whether it's in the U.S., Europe or Asia?

K
Kelly Steckelberg
CFO

It's really too early to tell, Alex. We've taken again a conservative approach to that. But it's too early to tell as most places even when they're starting to ease, shelter-in-place, people are taking their time to go back to work.

A
Alex Kurtz
KeyBanc Capital Markets Inc.

Makes sense. Thank you.

T
Tom McCallum
Head of IR

Next question, please, Matt.

Operator

Yes. Our next question is from Phil Winslow with Wells Fargo.

P
Phil Winslow
Wells Fargo

Thanks for taking my question. Two questions. First for Kelly, then one for Eric. Kelly, when you think about retention, that's something that's come up a lot on this call. What programs you have in place to make sure that all these users that you've added stick to the platform? I’m wondering if you can talk to us through the programs you’ve had in place.

And then also Eric, would you think about Zoom Phone and particularly not just retention but also upsell Zoom Phone, a similar thing, what is going to be the messaging to customers? How do you think about the potential in a year from now, six months from now et cetera attaching a full unified communications suite to that video customer?

K
Kelly Steckelberg
CFO

Yes. So, in terms of retention, first of all, for all of our customers new and existing we have a great customer success team that is focused on ensuring training, usage adoption happen in all of our customers, as well as we're looking for opportunities with our monthly subscribers to put forward offers to them to see if they would like to upgrade to an annual contract that we feel helping them evaluate [indiscernible] as well.

E
Eric Yuan
Founder and CEO

So Philip, back to your second question. So, as I mentioned earlier, we believe the video and voice those two are going to be converted into one service. Our team, we share our vision to our existing installed base, take Q1 for example. One of the very large global pharmaceutical companies, they were our heavy Zoom video conferencing customer. In Q1, they deployed a Zoom Phone, which is our largest phone deal. Around 18,000 phone licenses, right? Because they like the one consistent experience, more and more opportunity they like.

Call you from a number, one more click on the upgrade video with the same experience. I think there's huge opportunity. Not to mention a lot of enterprise customers for now they still deploy on-prem and PBX solution. I think in this pandemic crisis, we helped them to accelerate their migration from on-prem to enterprise will further boost the cloud-based PBX adoption. So we think that's a huge opportunity ahead of us.

P
Phil Winslow
Wells Fargo

Great. Thanks, guys. I do appreciate you enabling my kids to still go to school.

E
Eric Yuan
Founder and CEO

Thank you. By the way, I like your -- what your background is pretty nice.

P
Phil Winslow
Wells Fargo

Thank you. Branding, marketing.

E
Eric Yuan
Founder and CEO

Yes. I love that.

T
Tom McCallum
Head of IR

Great. Next question please, Matt.

Operator

Our next question is from Pat Walravens with JMP.

P
Pat Walravens
JMP

Great. Thank you. And happy birthday, Kelly.

K
Kelly Steckelberg
CFO

Thanks Pat.

P
Pat Walravens
JMP

So Eric, you started as an enterprise company, but now so many individuals are using Zoom to connect with their friends and their families and their classmates. When I go to say goodnight to my daughter at night, I get a lot of “Daddy, I'm talking to my friends, come back later.” So how is that changing your strategy going forward? What's your consumer strategy?

E
Eric Yuan
Founder and CEO

I think it’s a great question. My kids also use Zoom as well for their online classes. I believe, you go back to the voice, right, the voice, no matter where you're using a voice like a phone call, right? My kids and myself or in the office, on the way home at the same experience, used to be with due to Zoom, when we enable knowledge workers or business communication and collaboration.

For now, given that, video conferencing is going to become a mainstream service. The boundary between the prosumers and consumers or enterprise customers is not a direct clear anymore. We got to have maintain a very consistent experience. So that's why a lot of features we build for enterprise customers can be easily similar as they used to by prosumers consumers. However, we got to make sure, right, for enterprise customers, we already have all those security features to be in, how to easily let consumers in it to enable that this is the challenge we are facing.

In terms of opportunity, I do not think we needed to have a specific consumer strategy. Our strategies offer one service, no matter where you are, no matter what you do, no matter which device, it just help you to stay connected. The infrastructure services now, no internet service party cannot say, hey, you are using internet for what, for various collaboration or for consumer. It's a same thing now. That's a huge opportunity.

P
Pat Walravens
JMP

If I can ask Kelly a quick question. And thank you, Eric. I know sometimes when you are replacing a competitor and they have an existing contract, you sign up the customer, but then you let them have how every months are left on the competitors' contract for free?

K
Kelly Steckelberg
CFO

Yes.

P
Pat Walravens
JMP

When you do that, how do you account for that? Does that count as one of your new customers? And does that have any impact on billings or RPO?

K
Kelly Steckelberg
CFO

So we do count them as a new customer. And under the new revenue standard for 606, the entire revenue gets amortized over the full period including the free periods.

P
Pat Walravens
JMP

Okay. And so that would go into billings to them?

K
Kelly Steckelberg
CFO

Yes. We do build them upfront.

P
Pat Walravens
JMP

Thank you very much.

K
Kelly Steckelberg
CFO

It depends on what their period is, but yes, it's part of it.

P
Pat Walravens
JMP

Thank you.

T
Tom McCallum
Head of IR

Next question, please, Matt.

Operator

Our next question is from Meta Marshall with Morgan Stanley.

M
Meta Marshall
Morgan Stanley

Great, thanks. I just wanted to ask a question on, as you go forward with hiring salespeople. With the influx in new customers, do you change from looking for more gatherers versus hunters? And just as you look to layer on Zoom Phone, is the channel strategy still as important or as an overlay sales team kind of more important going forward? Thanks.

E
Eric Yuan
Founder and CEO

Yes. So on the one hand, for sure we already doubled down our sales hiring by starting late last year. I think we made a very good progress in Q1, not only hunters, EPI, SDR [ph], account executive, which was quota-carrying reps, but also for the phone right? It used to be look at our videoconference service primarily driven by our direct sales team. For the phone business, it's very different. That's why we really shift our focus not only for direct sales, but also we embraced our partner program like a master agent, and really helped us a lot during the Q1.

I think, we are going to do more and more on partner deals, on channel sales program or on our phone business. I think the team is working very hard on that.

M
Meta Marshall
Morgan Stanley

Got it. Thanks, and congratulations.

E
Eric Yuan
Founder and CEO

Thank you.

T
Tom McCallum
Head of IR

Thank you. Matt, next question, please.

Operator

Our next question is from Heather Bellini with Goldman Sachs. Heather, can you unmute?

H
Heather Bellini
Goldman Sachs

Great. Sorry about that. Look, I just wanted to say first of all, thank you for the company and with your steering acting the way it did over the last few months, which has been just such a trying time for so many. But not only obviously did you enable all of us to stay in touch and working, but just being able to still connect with family and friends. So thank you, I think on behalf of everybody.

My question has to do with your view and you've been asked a little bit about the Zoom Phone cross sell opportunity here. And I know you've touched on it a little bit already. But I'm interested in again a little bit about your vision on how you can expand your offerings given how much broader your customer bases now?

So I guess the two parts are, what are you seeing in terms of uptake of Zoom Phone? Is there anything you could share with us about penetration rates or the seat count that you're at now, or maybe just how you might have seen adoption inflect in the quarter? So anything around that just so we can see how that's starting to take off given how many more new customers you've added?

But also when you look at this evolving collaboration market, what's next for you all? Because you have phone, you obviously have video. Should we expect a chat service at some point just so we could close the loop on the entire messaging experience? So any thoughts you have there? Thank you so much.

E
Eric Yuan
Founder and CEO

Thank you, Heather. Maybe Kelly, you can address to the phone questions. I will answer to the second part of the question.

K
Kelly Steckelberg
CFO

So the primary demand and focus of our new customers and expanding customers in Q1 was really ensuring business continuity. And so they were focusing mostly on the video communication platform. But as our focus for Zoom Phone is to step sell into our existing installed base, it now creates a huge opportunity for more sales in Q2 and the rest of this year. So we're really looking forward to that team having an expanding customer base to sell to.

E
Eric Yuan
Founder and CEO

So to answer to your second question, if you look at the video collaboration business, as I mentioned earlier, TAM is bigger. The add up with the phone, together, I think is also a huge market. Not to mention, we also have online business. Online business used to be a small portion of our total net MRR growth. For now, given the popularity of the video conferencing, a lot of our consumers and prosumers, they all use Zoom for online [indiscernible] on a learning teaching class, it can be used. The use case is much more broad. For sure, we can monitor that.

Once you for sure we know we are not again to support advertisement model, we are not going to support that and never wanted to sell customer data. So that's something we knew for sure, we will not do it. However, in terms of how to embrace all kinds of prosumer to the use cases, I think there's a lot of ways to monetize. Online subscription, you already see the number. It’s not -- as we keep the service up keep the innovation, I think we are getting more and more online buyers as well.

So regarding the new services, I think the video voice, that's our company DNA. In terms of a chat message, we also have a building a chat, but also we really look at everything from customer perspective, They deployed a Slack, it’s great. We have a wonderful integration with Slack, it’s a great service. And a customer deploy max of teams, we also interpret integrated with max of teams very well. And so some customers, they want to spend to standardize on Zoom platform, okay, too.

Our video voice, we also have a chat built in. So from that perspective, we are taking a very open flexible approach and looking at everything from a customer perspective. But overall, we are going to be laser-focused on video and voice enterprise, brilliance [ph] and consumer prosumer as well. Thank you for that.

T
Tom McCallum
Head of IR

Matt, next question please.

Operator

Next question is from Walter Pritchard with Citi.

W
Walter Pritchard
Citi

Hi thanks. A question for Kelly, I'm wondering if you could help us understand on the churn side, obviously unprecedented demand for those under 10 employee monthly type customers. Any order of magnitude you can put around the sort of churn versus what it's been historically that you're thinking about in the forecast? And then I had one follow-up.

K
Kelly Steckelberg
CFO

Yes. All I would say is that we're taking a very conservative approach, assuming that the historic norms don't necessarily apply to this new cohort, both from the magnitude as well as the potential around economic uncertainty. So the way we're forecasting it is using multiples of the historic churn rates.

W
Walter Pritchard
Citi

And then maybe as you get into -- the obviously next quarter is going to be just sort of more of what you have this quarter in terms of a full quarter of all the business. But as you think about then the quarters beyond that, how do you think about just a sustainable level of new customer ads? I mean, do you feel like what's happened here has pulled forward multiple years of demand? Or do you think it has opened up awareness so much to what you do that you could actually see higher levels of new customer ads as we get past this big bump up that we've seen with COVID?

K
Kelly Steckelberg
CFO

Yes. I mean, we certainly have seen a lot of pipeline creation in the quarter in both Q1 and in early Q2, so that's been positive to see. And remember that our selling strategy around Zoom Phone, as well as Zoom Rooms is to sell into our existing customer base. So this just creates a whole new opportunity around those future products as selling those products in the future as well.

W
Walter Pritchard
Citi

Okay. Thank you.

T
Tom McCallum
Head of IR

Thank you, Walter. Next question, please Matt.

Operator

Next question is from Zane Chrane with Bernstein.

Z
Zane Chrane
Bernstein

Thank you, guys. Eric, Tom, Kelly and as everybody at the Zoom team, I just want to say thank you for your corporate leadership and the role of corporate citizenship that we all needed during this time, especially the things that you guys have done in the educational space.

I'm wondering, how do you think about balancing the data security and privacy concerns versus ease of use? It seems like that's always a balancing act where if you lean too far, one way or the other, you're going to upset one type of customer, and that becomes even more complex now that you're heavily moving into the consumer space. How do you balance that kind of from a technological and user interface perspective? And then I have one follow-up to that.

E
Eric Yuan
Founder and CEO

Yes. Zane, thank you. This is a great question. So, our service was built for serving enterprise customers. And we have all kinds of security features built in. Normally, we're working together with the enterprise IT team, right, to evaluate our service from a security perspective. And they are going to enable or disable those security features and we have official onboarding process. And we really understand how that process works.

However during this pandemic crisis we have lots of first time users. As a CEO, I think I should have done a better job. The reason why, not only do we have our service, but also we should have played a role of IT for those first time users. In terms of enabling [indiscernible] work and meeting room or a lot of features, this is a mistake I made. So we learned a hard lesson. And that's why I said when we look at enterprise customers and consumers, there's a little bit of different obvious philosophy.

For enterprise customers, just to keep any other secured features. However, for prosumers is different. Sometimes you're so right, whenever there's a treat of a conflict that's why we doubled down our security. We want to leverage this opportunity to completely transform our business to be the most secured solution. However, if there's a conflict between the privacy security versus usability, I think the privacy security is more important than usability.

Like a three clicks, yes, customer may not like it, they want to two clicks. But if there's a privacy issue, yes, we still want to have three clicks. So that's why, however and we do have a team, we review every use case, every feature, we want to make sure focus on the privacy security. At the same time, do all we can lose the ease of use; that's also critical. So, that's why we hired a lot of security researchers, engineers to make sure on the one hand, we are very secure, safe to use, on the other hand, also how to balance. This is an ongoing effort, we are committed.

Z
Zane Chrane
Bernstein

Very helpful. And just a quick follow-up to what Heather was asking. She mentioned chat, I've been thinking, is there opportunity for embedding more cloud based storage or file sharing to enable more real-time collaboration in file sharing or editing while on a Zoom call? Is that something you guys have considered? Or, like, I know you have a partnership with Dropbox. Is there something that would maybe make sense to build out yourself or even acquire some capability along those lines?

E
Eric Yuan
Founder and CEO

Yes, good question. So yes, we already announced the partnership with Dropbox before, recently also, partnership with Box as well, with a seamless integration. We also support Microsoft Drive, Google Drive as well, essentially, within the meeting interface, you want to share the files from those cloud providers. I think, overall, we are focused on the customer experience. As I mentioned earlier, video and the voice is still critical to our business in the future. So for now, we just want to integrate, interoperate with other best of breed service providers.

Z
Zane Chrane
Bernstein

Excellent. Thank you, guys. Congrats.

E
Eric Yuan
Founder and CEO

Thank you.

T
Tom McCallum
Head of IR

Thanks Zane. Next question, please, Matt.

Operator

Our next question is from Bhavan Suri with William Blair.

B
Bhavan Suri
William Blair

Hey guys, thanks for taking my question. I just have one, it's really around competition right. In last few months, given your success and given COVID, we've seen BlueJeans being acquired. [indiscernible] IPO of RingCentral announced their own video solution. I'd love to understand none of these actually imply anything immediately material in the competitive environment. But obviously, the investments are playing out in that environment, I'd love to think about how do you think about navigating through this and differentiating? Obviously, the scale you have is a differentiator. But how do you think about the competitive technology differentiation in the space? I’d love to Eric get your thoughts around that. Thank you.

E
Eric Yuan
Founder and CEO

Yes, sorry. I lost for several seconds. Pressed going back conduct the meeting.

B
Bhavan Suri
William Blair

I know maybe I did, too. But did you hear it or it was around competitive environment or around RingCentral introducing video, it's around [indiscernible] how do you think about the competitive environment? Has it changed? And how do you navigate it?

E
Eric Yuan
Founder and CEO

Yes. So you look at a competitive landscape, I think this pandemic crisis does not change anything. And we are still laser-focused video. And also we have a phone service. Pick, for sure, the market opportunity is much bigger than before now, right? You take a Ring Central for an example. They were focusing on the phone service, which was on video, we added a Cloud PBX, they added a video conferencing. We will put a pattern but for now, the market is bigger. I would say any competition is always good for consumers, right? And so, if there's no competitors, there's any use. So we are okay, so we do everything from end user perspective.

B
Bhavan Suri
William Blair

Fair enough. Thank you.

T
Tom McCallum
Head of IR

Next question please?

Operator

Our next question is from Ryan MacWilliams with Stephens.

R
Ryan MacWilliams
Stephens

Thanks for taking the questions. So I attended a Zoom Wedding last month and it went great. And my own wedding in September might be over Zoom. So I just want to say thank you for providing a backup plan there. Really a standout quarter and congrats on the execution.

For Kelly, for the second quarter, would you expect new recurring revenue added in the second quarter to be above the recurring revenue added in the fourth quarter of last year? I just have one follow-up.

K
Kelly Steckelberg
CFO

New recurring revenue in Q2 to be greater than Q4, yes, based on the outlook, I think that it will increase the historicals in front of me. It is an increase over what it would be as compared to Q4. Yes.

R
Ryan MacWilliams
Stephens

Perfect. I mean, I can't really compare it to the last quarter. And then Eric, just on addressing up Bhavan’s last question. You mentioned in your comments that enterprise communications continue to be a fragmented market, low overall cloud penetration rate. But with both competitors and customers now trending towards one platform for cloud video and voice, over the next few years, do you see this market consolidating around maybe one to two competitors for enterprise applications?

E
Eric Yuan
Founder and CEO

Yes. It's too early to tell. But overall, I truly believe the best of breed service provider will survive and thrive, because customer -- when it comes to the video and voice, you got to make it work anytime, everywhere, any device. It's not that easy. Otherwise, the reason why during this pandemic crisis in the customer trust Zoom, to use Zoom because it just works. And the quality and a lot of innovations. And that's why I think, video and voice it's not that easy.

If you can do the basic service with all the basic features, okay, but to make it work in 7/24, with no any outages and also focus on innovation it's not that straightforward. And that's why I think as long as we keep working harder, really listening our customers to be the first vendor understand their pinpoint, understand their use case, to be their first vendor to come up with a solution. Even if we have so many competitors, I think we're okay, because, again, this is a huge market opportunity.

So we may not kind of serve every customer, but as long as we keep listening to our customers keep the innovation, I think we should be okay.

R
Ryan MacWilliams
Stephens

Thanks.

T
Tom McCallum
Head of IR

Great. Thank you, Ryan. Congratulations. Can we have the next question please, Matt?

Operator

Our next question is from James Fish with Piper.

J
James Fish
Piper Sandler & Co.

Hey, thanks for the question. Kelly, happy birthday. I’d agree that June 2 is the best day of the year in my humblest of opinions. You guys talked about churn in the second-half of the year. I think if you can look at sort of some verticals like education or some consumer additions that you guys had in the quarter as potentially not sustainable in terms of that 300 million users. How should we think about that 300 million user number in terms of all added in education for example?

K
Kelly Steckelberg
CFO

Right, James. Could you just repeat the last part that how should we think about the 300 million user number in what?

J
James Fish
Piper Sandler & Co.

Just curious where you think that 300 million user count is actually -- what number is actually sustainable within the current customer base?

K
Kelly Steckelberg
CFO

So I just want to clarify that 300 million is daily participants both free and paid. So that was the peak that we saw in April. It has come down a little bit in May on average. But we still continue to see a high-level of usage of both free and paid users. So I think certainly over the long-term, we expect it to grow beyond that 300 million number.

E
Eric Yuan
Founder and CEO

By the way James, those 300 million meeting participants is -- that's just a meeting participants -- the number is not a unique. If you're joining five times in a day, we'll be counting five, right, from free users or paid users.

J
James Fish
Piper Sandler & Co.

Yes. Totally understand. And then just a quick follow-up, it's the eighth quarter in a row plus 130% net renewal rate. But could we get more color there as to how much stronger this quarter was from an upsell rate compared to the past few quarters?

K
Kelly Steckelberg
CFO

Yes. We've committed to providing the metric of being greater than 130% just because it bounces around for each period. And we don't want you to read too much into that. So that's the guidance that we're going to provide today.

J
James Fish
Piper Sandler & Co.

Got it. Thanks and congrats again.

K
Kelly Steckelberg
CFO

Thank you,

T
Tom McCallum
Head of IR

Matt, next question, please?

Operator

Our next question is from Ittai Kidron with Oppenheimer.

I
Ittai Kidron
Oppenheimer.

Hello, great quarter and happy birthday, Kelly. Fantastic. I had a couple of questions. First on Global 2000, you talked about how it grew 200% quarter-over-quarter. Those are generally very sophisticated organizations with a lot of IT dollars and they move very quickly. I guess my question is, as the penetration rate with meetings at that point, at this point, pretty much at 80% to 90% with that customer base. If we fully explored with the ones that have purchased with you, they are already -- where do you need to be given how fast you can usually move?

And then the second question related to phones. Kelly, you mentioned that regarding a previous question on phones that a lot of the focus has been on video right now. But you said there is an upcoming expansion opportunity going forward. I guess the question is considering the environment, is the environment helpful in accelerating phone adoption or perhaps the other way around? We fight to organizations are looking to cut in spend, they already have an established phone system. And everybody's using their cell phones from home I guess at this point. Is phones something that can get a boost from COVID as well, given that it's not walking into a vacuum, every company has a phone system whereas very few have a very broad adoption of video?

K
Kelly Steckelberg
CFO

Okay. So in terms of your first question around penetration of the global 2K, that isn't a metric that we specifically disclosed. But the good news is that it's not as high as you throughout there. So we still have lots of opportunity to grow in that segment today, even with the significant growth that we saw quarter-over-quarter.

And then in terms of the phone, I think given the land and expand strategy, and the significant increase we saw in new customers this quarter, we think that there is a lot of opportunity ahead. And that phone we talked about this probably before, but phone seems to really be the last area of IT that has been taken to the cloud. And as people have adopted more of Zoom, and they come to trust and rely on the ease of use and the reliability of the platform Phone is just the next natural step for them to take. So we're really excited about that opportunity and don't believe that the COVID pandemic should be an inhibitor to that.

E
Eric Yuan
Founder and CEO

So Kelly, right on. So it had to add on to what Kelly said. If you look at a phone as a separate or service, you're so right. Especially, during this pandemic, I have a cellphone number why do I needed to deploy another service, do not make any sense. However, if you think the phone is part of the video. Now phone and the video the same thing, the same service, you will know that the growth will follow as well. This is our vision. We are seeing the phone as the voice, the same thing, the same product, same service the same back, and the same experience. That's why we see the huge opportunity.

If you want to sell our phone service as a separate service it's not a part of video conference service. You're still right. There's no reason for us to deploy a separate service, just the same phone number. What's the point? That's why I think we have a huge opportunity because of architecture, because of the phone and Zoom Video, the same service. So that's a very different.

I
Ittai Kidron
Oppenheimer.

Very good. Good luck guys.

E
Eric Yuan
Founder and CEO

Thank you.

T
Tom McCallum
Head of IR

Thanks, Ittai. Matt, next question, please.

Operator

The next question comes from Will Power with Baird.

W
Will Power
Baird

Great. Thanks for taking the question. I wondered if we could drill down a bit into the education segment, either in terms of revenue, or paid users. Something to give us some context. And how you're thinking about education in the second-half of the year as we get back to school? Obviously, still a lot of uncertainties around that.

And I guess the other part to that is, are there any learnings from some of these countries where they've gone back to school in terms of usage, whether South Korea or elsewhere?

K
Kelly Steckelberg
CFO

So we don't break out the specific revenue by verticals. But what I can tell you is that from a growth perspective, education was the space’s highest vertical with growth on a quarter-over-quarter basis. So we saw very strong execution and demand there. And looking forward, as a reminder, many universities and schools have announced that they are potentially hosting all of their classes in the fall remotely. So we expect that demands to be strong, even as we see certain easing their restrictions of shelter-in-place.

E
Eric Yuan
Founder and CEO

Yes. And by the way, we offer a free service to more than 100,000 K-12 schools around the globe. And, I think you’re so right, after the summer, are they going to keep using zoom for online classes or what we should do? I think that's we’re going to work on that. But for now we just to have those K-12 schools and because primarily we are focused on the high-ad before and now we have more and more K-12 schools. That's very different again.

T
Tom McCallum
Head of IR

Great. Thank you. Thank you, Will. Hey, Matt, we have time for probably one more question, please.

Operator

Well, our final question then will be from Tom Roderick with Stifel.

T
Tom Roderick
Stifel

Here we go. We'll get the mute off. Hi everybody. Thanks for taking my question, I appreciate it. So, I guess the question a lot have been a lot of the questions have been asked in the topline, but you had to scale up massively in a way that 90 days ago, we couldn't possibly have expected this. You started to see a little bit of this in China and perhaps even at the time, the last call Europe. So you had some awareness, but Kelly, even at that time, you were talking about gross margins in the 80% range.

Can you just talk a little bit more about what you did? And how you managed to scale that business up so quickly? And then would love to hear just about the elasticity of that going forward to the extent that some of the monthly users do churn. Do you have the ability, and this may actually interact with the Oracle partnership that was announced late April? We'd love to just hear a little bit more about that the ability to scale up and scale down and how quickly you can do that?

K
Kelly Steckelberg
CFO

So first of all, I think huge thanks and credit to the entire employee base of Zoom. Many of them worked extended hours and lots of weekends to support our customers and this increased demand. Also huge thanks as Eric mentioned to many of our partners as well, who helped us scale up as we saw this unprecedented -- and it was difficult to forecast the expansion in our capacity that was needed.

In terms of the ability to scale up, what we're focused on of course is we were like in gross margins, focusing on adding in the public cloud. And over time, we'll start to add more capacity in our colos to start to moderate that gross margin impact a little bit, as well as in other areas of the business, we scaled up with third party resources to help us. And over time, we'll look to backfill those with direct employees, which is more cost effective, but helped us get through this unprecedented increase in demand.

E
Eric Yuan
Founder and CEO

And also Tom, during this pandemic crisis, our top priority is to show our corporate social responsibility. Essentially, we do all we can to have people stay connected at no cost. We even look at, hey, if you had a several thousand servers, what's the cost look like this, no don't worry about that. This is time to help people stay connected. But down the road, after the pandemic crisis its sort of ended soon, I think for sure we are going to go back to our the gross margin focus.

T
Tom Roderick
Stifel

Thank you, all. It's been a unique 90 days, so looking forward for next 90. I appreciate it.

E
Eric Yuan
Founder and CEO

Thank you, Tom.

T
Tom McCallum
Head of IR

Eric, do you have any final closing remarks before we turn off the webinar?

E
Eric Yuan
Founder and CEO

Yes. I want to say just, thank you all, thank you every Zoom employees, thank you all the users, customers, thank you for your trust. Thank you for our shareholders. And we will do all we can to truly deliver happiness to you. We will not let you down. Thank you for the support and I the truly appreciate it.