Hello, everyone and welcome to Zoom's Earnings Webinar for the Second Quarter of Fiscal 2020. 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 maybe downloaded from the Investor Relations page on the zoom.com website. Also on this page, we are able to find a copy of today's prepared remarks and a slide deck with financial highlights that, along with our earnings press release, include a reconciliation of GAAP to non-GAAP financial results. During this call, we will make forward-looking statements about our future financial performance and other future events or trends, including guidance. 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 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 that we may make on today’s call. And with that, let me turn the discussion over to Eric.

Thank you, Tom. Thank you and welcome to everyone joining us on today’s Zoom webinar. I am very pleased to report that we had a remarkable second quarter and continued to deliver a unique combination of high growth with increased profitability and a free cash flow. As Kelly will discuss in a moment, the first half momentum in our business has enabled us to meaningfully raise our revenue and profitability outlook for the rest of the year. Our strong second quarter results are evidence that organizations are turning to Zoom as a strategic technology partner to help them improve their communications and collaboration. While we continue to attract customers of all sizes and across several industry segments, let’s discuss one of our largest wins of the quarter. I am proud to the welcome HSBC to the Zoom family. HSBC is one of the largest financial services organizations in the world with over 3,900 offices in 67 countries. HSBC will standardize on Zoom platform by deploying to 290,000 hosts and to 5,500 conference rooms. HSBC will consolidate onto Zoom’s video-first unified communications platform for both internal and external meetings. By standardizing on Zoom, HSBC we will consolidate costs and create an enhanced, frictionless experience for end users. This enterprise-wide deployment represents one of the largest customer commitments to Zoom in our history and reflects our growing momentum with global customers. HSBC, I love you. My wife switched to HSBC credit card, so. Now, let me discuss two more business highlights from Q2. First, we announced a new partnership with Verizon Business Group to offer Zoom to its global customers. Zoom's platform is available as a cloud service enabling a variety of HSBC customers to ensure reliable and innovative video communications. This agreement with Verizon is a great example of our strategy…

Thank you, Eric, and welcome to everyone joining us today. Let me start by first reviewing financial results for Q2. And then I will discuss our outlook for Q3 and the full fiscal year. Total revenue grew 96% year-over-year in the second quarter, to $146 million. This top line result exceeded the high-end of our guidance range and had a positive impact on our profitability and free cash flow. Similar to last quarter, we executed very well in a strong demand environment for the Zoom platform. This execution was represented broadly across our major geographies and offerings. Key drivers of our revenue performance included both our acquisition of new customers and expansion of Zoom’s footprint within existing customers. Specifically, new customers accounted for approximately 61% of our year-over-year growth in subscription revenue while the remaining 39% was due to additional purchases from existing customers. Here are some key customer metrics from Q2. We exited the quarter with over 66,300 customers with more than 10 employees, up 78% year-over-year. This is a record number of new customer additions in a quarter. One of our key verticals is the Financial Services sector. I am pleased to share with you that we are experiencing strong success in this segment with firms like HSBC, Moody's and Morgan Stanley becoming Zoom customers in Q2. The combination of our land and expand strategy, along with our continued up-market focus, resulted in Q2 ending with 466 customers with more than $100,000 in revenue over the last 12 months, this is up 104% year-over-year. This also led to a net dollar expansion rate that was over 130% for the 5th consecutive quarter as customers are deploying more Zoom products and adding more licenses within their organization. One example was a significant expansion with a large luxury brand. This…

Our first question is from Sterling Auty from JPMorgan. Sterling, you are unmuted.

All right. Thanks. Hi, guys.

Hey, Sterling.

I like the background, I think it's better than last quarter. To get us started, can you just comment in terms of what are you experiencing in terms of initial deal sizes? What's the trend that you're seeing over the last couple of quarters?

So, we can remain really focused on the strategy of land and expand. So even though we're seeing stronger growth in the upmarket customer base, you saw that grew more quickly than our total customer base. We are still focusing on smaller deal sizes to start and then continue expansion, which you see in the net dollar expansion rate continuously strong at that 130%. So we haven't really seen a dramatic change in our initial deal size.

All right. Makes sense. And then one follow-up in terms of Zoom Phone. What kind of attach rates are you seeing in the initial deals on Zoom Phone, or is it still too early, because I think a couple of the examples you gave was really kind of upsell Zoom Phone into existing customers?

Yes, Sterling that's a good question. So we launched Zoom Phone service earlier this year. Our kind of strategy is to upsell to other existing installed base. I think it's still too early to tell, but we do see a very good sign. Customers really want to understand what's the differentiation from a Zoom Phone side like a unified collaborating experience. As Kelly shared, one of our larger -- largest customers [indiscernible] deployed Zoom Phone in Q2 realize the ease of use. I think we can replicate that success in the future quarters.

That makes sense. Thank you.

Thank you, Sterling.

Thanks, Sterling.

Next question, please, Matt.

Next question is from Matt Statler from William Blair. Matt, you're unmuted.

Hey, great quarter and thanks for taking my questions. So first on the Verizon partnership. Obviously, you announced that back in June, with Verizon using Zoom's as a solution for I think small and medium businesses and maybe still reselling WebEx enterprise level. Any feedback just on the initial traction that you're seeing with that partnership and thoughts about establishing similar, similar partnerships with Verizon or others to resell Zoom in the up market as well?

Yes, so Verizon partnership, you're right. We set up the Verizon partnership recently. I think we are already gaining momentum. So they are one of the top channel partners and our team really enjoy working together with the Verizon team. We see the great result already. I think -- I think Verizon partnership help us more and this is a great partner.

Great. Great. Okay. And then just one more for me on the gross margin front. As you spoke in the prepared remarks, gross margins were strong in the quarter. A little about the high-end of your long-term model. Can you just refresh us on what drove strong performance in the quarter and what you expect to bring that number down a little bit as we look forward? Thank you.

Yes. So the increase in the quarter-over-quarter gross margin was really driven by the increased revenue and the performance on the top line. Going forward, we continue to add more data centers as well as building capacity for all of our customer bases around the globe. And as we continue to invest in this infrastructure, we expect it to continue to be in the range of 80% to 82%.

Great. Thank you very much.

Thanks, Matt. And Matt, another question please.

Our next question is from Heather Bellini from Goldman Sachs. Heather, your line is unmuted.

Great. Thank you so much for taking the question. I just had two. I was wondering Zoom Phone, I know it's a new launch, but I'm wondering how you would benchmark the ARR that you've generated to date versus your expectations at the time you launched it. And also kind of where your wins are, kind of who you're seeing your wins coming from, if you could share with us that. And then also just the other question would be related to the cadence of the expansions you are seeing, given the value that customers start to see pretty quickly from the adoption of your solution. Are you actually starting to see the expansions of those deals starting to happen at a faster pace? Thank you.

Yes. So thanks, Heather. We certainly are. Given that we are selling Zoom Phone into our existing customer base, they already are on the Zoom platform. And so that has accelerated the rollout of Zoom Phone. We’ve seen that in Q1, we talked about Ciena, and they've already continued to roll out to over 5,000 Zoom Phone users around the globe. So that's super exciting. And as you saw the customer that signed in Q2 has already started to roll out their Zoom Phone licenses as well. And interesting to note, they bought more Zoom Phone licenses, than they have with meetings, which we think is a trend will expect to see as well. And then sorry I'm just looking at …

Just benchmarking the ARR. The ARR that you've generated to date from it, how is it doing versus your initial expectations?

Yes, it's doing well. We've seen traction in Zoom Phone across all segments of the business, which we think is really exciting. And approximately 50% of Zoom Phone is coming from customers with AR greater than 100K or more.

So to add on to what Kelly said, you look at it today's enterprise market, most of the enterprise customers are still using the on-prem phone system. Over the past several years, SMB customers might have moved to the cloud-based solution. We do see the huge opportunity for the large enterprise segment to go to the cloud based PBX system. They want to have a unified solution. Heather, by the -- yes, Heather by the way, we miss you on video.

Oh, yes, I know. Sorry about that. Next time.

No worry. Thank you.

Thank you.

Thank you. Next question please, Matt.

Our next question is from Brad Zelnick from Credit Suisse. Brad, you're unmuted.

Thanks, Brad.

Hey, Brad.

Hi, Brad.

Great. Hi. Hi, Eric. Hi, Kelly. Hey, Tom. Nice to see everybody. Congratulations on another great quarter. And congrats on adding Ryan as your new Chief Revenue Officer. It's good to hear the long standing relationship that you have with him. What might we expect his priorities might be and what else can he do to help even drive more happiness for Zoom employees and Zoom customers? And I've got a follow-up as well.

Yes, that's a good question. By the way, is that a real background or virtual [ph] background? It's so nice. It's better than us. Thank you. So long story short, Ryan and I've been known each other for many, many years, even before Ryan left Cisco to join RingCentral. We already talked about that. Hey, in the future Ryan let's work it together. We talked about that many, many years before, right. It's right time. I think as we further expanded into the large enterprise international and also get into the unified collaboration market, as Ryan's experience can really have us. He's very hands on leader and really understand communication and the collaboration industry. And we have a high confidence with Ryan's joining Zoom, and we can keep the momentum right, not only do we win in the domestic market, but also international market as well.

That makes a lot of sense. And if I could just ask, the scale of the success and happiness you're delivering to customers, the size of HSBC is nothing short of unbelievable. How should we think about the pricing differential at the very high-end of the market? And perhaps Kelly, if you can, just on a like-for-like basis, give us any kind of color or commentary on what you're seeing pricing wise, perhaps versus a year-ago? Thank you.

Yes, we haven't seen a dramatic shift in our pricing or in the need from a competitive standpoint from a year-ago. Certainly, as you scale up to a customer size of HSBC, because of the volume and the long-term nature of the contract. We do price that accordingly, as you can imagine. And remember, we also really like the opportunity to do buyouts with our customers, which we often do if they're interested. That's one way that we get them to come in early, and especially if they're with a competitor, but they love Zoom. We want them to have Zoom as quickly as possible.

Excellent. Thank you so much. Congrats again.

Thank you.

Thank you, Brad.

Matt, next question, please.

Next question is from Kash Rangan from Bank of America Merrill Lynch. Kash, you're unmuted.

Hi. got to hand it to Brad. I don't know how he managed to smile so beautifully when he was asking his questions. So I'm going to have to try the same thing. How to sound nice, look nice and [technical difficulty] looking at your operating step as a marketing relative with the revenue growth rate, clearly, is this a sign that you have reached that step function, evolution in your business model where the revenue is at a scale where you're starting to see underlying productivity improvements in different line items of the expenses, and you can sustain this level of operating margin. Are there -- were there kind of one-time things that did not appear in your expenses that maybe will reappear in the future, maybe you defer some expenses, or maybe the timing of expenses didn't fall the way you would expect, because although it's terrific to see massive operating leverage in your company, it was also unusual to see sequentially this level of operating margin expansion. So I'm curious as to what drove this? How much of this is permanent versus Chinese expenses? Congratulations on a spectacular quarter. Thank you.

Thank you, Kash. Sure. And it's a great question. So just a quick reminder, our philosophy here is that we're investing for growth with discipline and thought. So we are very careful about ensuring that every dollar we spend has an appropriate ROI. With that said, there were a few one-time benefits that we saw in Q2 that led to the higher operating margin. So we had a higher rate of capitalized software that reduced our R&D expenses as a percentage of revenue as compared to the previous quarter. You can see the dollars were about the same, but the percentage came down. We also had a slight benefit in G&A as well as we are now starting to not only collect telco taxes. If you remember, we've talked about telco taxes in the past, we have now started collecting in certain jurisdictions and passing that through, which is reducing our need to accrue for it. And we got to some agreements with some jurisdictions that helped us understand that we could reverse a little bit of our crew that we had in there for things like penalties and interest. So there were a few one-time items that we don't expect to see going forward. And we will really continue to invest in sales and marketing. So we did see -- we’re seeing some efficiencies in marketing, as we discussed in the prepared remarks. But as we see opportunities, we will continue to invest in that area.

Congrats. Thank you so much.

Thank you, Kash.

Thank you Kash. By the way, Kash, you are using the phone to join this Zoom video webinar. We can see that you have a little bit of network connectivity issues. Our technology quickly adapt with your network efficiency. We still can hear you well.

Great. Awesome.

Thank you, Kash.

Thank you.

Next question, please, Matt.

Our next question is from Alex Zukin, from RBC. Alex, you're unmuted now.

Hey, Alex.

Hey, guys.

Congratulations.

Thank you. Thank you. You guys congratulations on another great quarter as well. I've got two quick ones. One, maybe first, Eric, on the federal government and the federal vertical. You guys have achieved FedRAMP certification. I'm just curious how you see that playing out for you from a pipeline perspective, from a deal perspective? How important is that vertical to your growth prospects? And then I've got a quick just a financial question for Kelly.

Yes, so to have a FedRAMP certificate is very important for us to expand into the public sector. Prior to that we even don't have a team, right, because we do not have that certificate. Given that we have that now, I think it's too early to tell because we just established a public sector team for targeting public sectors. We do have a many state level customers. I think in the next several quarters probably would see some contribution from public sectors.

Perfect. And then, Kelly, if I do the rough math on kind of current RPO bookings, I get to around 81%, 82%. I'm curious, is that the right kind of forward-looking indicator given some of the different methods you guys have, from a sales and contracting perspective? Is that an important metric for you guys? Or is billings the better one right now?

So billings is really not a good metric for us due to the split of our customers that pay monthly versus annually. Remember, the core base of the company, while it is shifting, is still really based on SMB customers that pay monthly on a credit card. So buildings is really not a good metric for an indicator. I would certainly say that RPO is a much better metric to use.

Great. Thank you.

Thank you, Alex. Matt, next question, please.

Our next question is from Phil Winslow from Wells Fargo. Phil, you're unmuted.

See the Wells Fargo.

I know I love your marketing Phil.

Thank you. You like that?

Yes.

[Indiscernible] a bit. But my questions actually are just going to be on just what you're saying in terms of the customer in terms of replacement versus net new expansion. In other words, what percentage you’re seeing are replacing a existing solution versus actually with the customer either coming to you net new or actually expanding the number of seats versus prior provider? Thanks.

Yes. So, if you talk about when we're going into our new base of customers, and when we're going into the up market, there's certainly always an incumbent that we are replacing there. And it's all the traditional providers that you would know. In SMB, it often can either be Greenfield, or maybe three that we are competing with, or some of the more mass market vendors that you're also very familiar with. As I said earlier, your net retention expansion rate though, remains really strong at a 130%, as we continue to start with small seated land and expand and then growing up from there.

Great. And then just a follow-up in terms of that land and expand. So at Eric's point about Zoom being super easy to use, and so it's a more user guy actually using what do you think in terms of sort of that seat expansion, particularly when it was replacing an existing [indiscernible]?

Well, in terms of seat expansion, you're saying in general, or across specific customers?

Just on the larger customers.

Yes, I mean, I think it -- customers are buying in two different ways. Obviously, we saw with HSBC, one of the largest customer deal is the largest customer single deal we've ever had. And yet now our second, our previously largest customer had another add-on in this quarter, which was over $1 million in ARR. So even in our large customers, we continue to see expansion as they add on new products like Zoom Phone, and I think very few of our customers today are wall to wall with Zoom meetings. And so, as they continue to build trust with Zoom and with the platform, then see the value they continue to expand that globally throughout their teams.

Great.

Great. Thanks a lot.

Yes.

Thanks, Phil. Matt, next question, please.

Next question is from Pat Walravens from JMP. Pat, you are unmuted.

Hi Pat.

Great. Hi, guys.

Hi, Pat.

Thank you. I like the 5:30 start time by the way. It makes the [multiple speakers]

It's better for you guys?

Yes.

Yes, yes. Especially on a busy day like today.

That’s why [indiscernible] get it.

So I think this is for both Kelly and Eric. Look what's going to be the biggest challenge in continuing to scale at this rate and I realize your guidance is not at this rate, but to continue to scale like we are here, what's going to be the biggest challenge?

I think for sure for us to further scale our business many challenges. I would say the most important challenge is to maintain our company culture. We already have almost 2,300 employees. As we further expand into the international market, doubled our sales and R&D team, we are going to hire more and more people, top [indiscernible]. However, how to maintain our delivering happiness culture, make sure all of us always look at everything from customer perspective, right, responding to customer issues in a timely manner. That's a challenge. How to turn the new employees and make sure we are very humble, paranoid to care about the customer, that's a number one challenge. Other challenges are very manageable, like a product, may be the sales efficiency, the cost is not a big challenge.

All right. And then I'm going to ask one more if I can, which is I was driving up the 101 today, I saw a billboard which said, Zoom and Slack, see what together can do? So Eric, what can together they do?

I have a similar question to you, maybe you can tell us what they can do? But anyway, so I'm a huge fan of Slack, right, and a huge fan of [indiscernible]. I think many of our customers, they told us, they like best-of-breed service. They follow both Zoom and Slack, they kind of hire talents all over the world like a [indiscernible] envision. They standardize on Zoom and Slack platform, guess what, if they don't have a single physical office, right, I think the best-of-breed service can truly deliver happiness to our customers. That's why we like this partnership. We want to do more with Slack. Together we wanted to make sure costumer happy.

All right. Thank you.

Great.

Thanks, Pat.

Thank you.

Thank you.

Next question, please, Matt.

Our next question is from Alex Kurtz from KeyBanc. Alex, you are unmuted.

Hey, Alex.

Yes, thanks. Thanks, everyone. Great quarter. I love the video interaction here. It's awesome. So just on the net expansion rate in the quarter, how much is that being driven by new seats versus the phone? Then I had a clarifier on margin.

Yes, it's being driven primarily by new seats as well, you were excited about the momentum we're seeing in phone, it's still a very, very small contributor to revenue. We just reminded, we launched it only in January. It did go GA in both Australia and the U.K in Q2, but it's really having a very small impact at this point.

And just on your margin assumptions in the back half of the year around the adoption of phone, is there anything that we should be thinking about as far as the variables around that, any impact there?

No. The only impact for -- on margins in the second half of the year are around expanding data centers, we are planning to add two to three more, but that is not necessarily having to do with Zoom Phone. It's just adding capacity in general for our users around the globe.

Okay, right. Thank you.

Yes, by the way from architecture perspective, our video conferencing and Zoom Phone, we shared the same platform. As Kelly mentioned, we just needed to expand our capacity. That's pretty much, yes.

Okay. Thank you.

Thank you. Thanks, Alex. And, Matt, next question, please.

Our next question is from Meta Marshall from Morgan Stanley. Meta, you are unmuted.

Hi, Meta.

Hi, Meta.

Hi, Meta.

Hey, congrats on the quarter. So I just wanted to ask a couple of questions, maybe first and get your response to that. As you approach customers with Zoom Phone, has it changed your perspective on kind of cadence of additional features you will need to add over time, or has it really kind of met expectations to date and the cadence you were planning?

Yes. So, today our strategy is focus on upsell, right? We already build our trust. Customers really like our video conferencing experience, in terms of video quality and voice quality. We truly believe video is the new voice. Essentially, the way for customer the uses of phone is more like another way to use our video conferencing service, right? Customer -- even if they deploy a solution on the web, they feel like very familiar with our service. Just the same experience, same unified client, I think is, customer really like that experience. We do not need to tell customers to train customers. They feel like there's a part of the overall collaboration platform. This is a very natural experience.

Got it. And then maybe on kind of the hiring of Ryan. Traditionally you guys have not had a large channel presence. And so, he, obviously, has a lot of experience there. Does it change your perspective on how you think of the channel as a method of go-to-market, or just how does the hiring of Ryan kind of change the go-to-market approach?

Yes, well, that's a good question. In terms of channel strategy, we just announced the Verizon partnership and the channel always plays a big role for our revenue growth. And even if you look at the total revenue, probably driven by the revenue team, as we further expand into the international market, with Ryan's good background, I would say, the channel contribution will play a big role in the future. Like Verizon partnership just started and we are going to more and more channel partners to help us expand into the international market.

Great. Thanks. Congrats, guys.

Thanks, Meta.

Thank you.

Matt, next question, please.

Our next question is from Tom Roderick from Stifel. Tom, you are unmuted.

Matt, can you unmute it?

Hey, Tom. There he is, I see him. Hey, Tom.

Congratulations on another fantastic quarter. Well done. Eric, I want to ask my first question to you and I want to put a finer point on the question. Pat just asked about, maintaining culture. Getting to a scale, that's pretty remarkable here. And I think you're up to about 2,200 employees. Can you talk a little bit about what you're doing to drive that hiring plan in place? How you are building out HR? Capturing that incremental employee at a great company like Zoom is always good problem to have, but you're getting to a scale and makes it challenging. Can you talk a little bit about just hiring and the challenge of that at scale?

Yes. So, well, in terms of hiring, so on the one hand, we wanted to do hire as quickly as possible, right? Because we have great opportunities. On the other hand, we also want to be very careful, right? We want to make sure we hire the right employees who can fit very well to our company culture with self-motivation, self-learning personality. And hiring side of that, I think we have a very aggressive hiring goal. But, to be honest with you, every quarter we did miss that, right? So the reason why we want to focus on the company culture, and we -- this is not a -- this is not a one person company, our management team company, all part of Zoom. We refer employees to join us. We do all the kind of hire for the new employees to make sure they are familiar with our business process or product. We have each other, care for each other. I think to do that right, we don't want to be too aggressive, right? That's the challenge, because sometimes I say, yes, let's hire another [indiscernible] people and starting to realize that it might break our company culture. That's why we have to balance everything, so.

Tom, earlier this year we hired Lynne as our Chief People Officer, and just last week we hired a new Head of Talent Acquisition as well. And I think both of them are really focused on doing exactly what Eric said, which is hiring the right people, hiring quickly, but not lowering the bar. So, it's been a great -- two great additions to the team, yes.

Excellent. And then, Kelly, just one follow-up for you on the RPO commentary, following that the current RPO number, that is declining, as you see more and more customers at the enterprise level signing up for multi-year deal. Should we expect that trend to continue? Where the current number will -- the percentage will shrink just as a function of more enterprise multi-year deals out there?

Yes, I think certainly we are continuing to see more and more of our revenue base come from up market customers is that's really one of our key strategic focus areas. How quickly that grows? I don't know. But absolutely, it's one of the key focuses that we’ve for growing the company this year.

Got it. Understood. Thank you, guys.

Yes.

Thank you.

Great. Thank you, Tom. Matt, next question, please.

Our next question is from Ittai Kidron from Oppenheimer. Ittai, you're unmuted. We will give Ittai another moment. Next question is going to be from Zane Chrane from Bernstein. Zane, [technical difficulty].

Thank you very much.

Hey, Zane.

Hi, Zane.

Congratulations on a great quarter.

Thank you.

Thank you.

[Indiscernible] solid results. So I was just wondering if you could dig into the architecture and the technology a little bit, Eric. One of the push backs I hear from skeptics is that, a good program replicates something like Zoom or video conferencing over the weekend and it's not really differentiated solution. That's not what I've heard from enterprise customers that have adopted Zoom. So I was just wondering, if you could dig into what is the secret sauce that really makes your technology and architecture unique and difficult to replicate? Thank you.

Well, so in terms of large enterprise customers, for sure, when we started, we were focusing on SMB customers, right. Over the past several years, we started expanding into large enterprise customers. And the reason why we do see the -- we -- almost every enterprise customers, we do see a lot of users. Even for the large enterprise customers or the standardize on other platform, we see the one user, two user, one department, and two department, they all use their own budget to deploy Zoom. The reason why they are not happy about any other services in terms of ease-of-use, the quality, like this what’s your background or feature and consistent experience across the desktop, mobile and conference room statistics, right. I think the combination of technology, ease-of-use, security will win the customer trust, right. If you look at all other solutions out there today, all of them architecture is very old, right? Not a design for modern video cloud -- video first architecture. That's why we're ahead of any of our competitors for several years. Otherwise, I will go back to work all the weekend.

Yes, that's really interesting. One of the things I think is really fascinating is the extensibility and the APIs to connecting another platforms. It seems like there's a lot of Greenfield opportunity there for maybe tying in with vendors like Salesforce or HubSpot or other cloud providers. Could you talk about what your vision is for those partnerships and kind of the technology integration to build that ecosystem?

That's a good question. Today, look, you talk with many customers in -- on one hand, they all like best-of-breed services. On the other hand, quite often you need to switch back and forth in terms of context, say like, a Dropbox or Box to Zoom or Salesforce to Zoom, the last into Zoom, right. A customer like to stay within the same context, right, say, like I'm using the Jira Atlassian system, right. Within that Jira system I can launch a Zoom call, join a Zoom meeting [indiscernible] meeting, I think that what the customer told us. That's why how to seamlessly embed Zoom into any other business workflow applications, that's the direction to go. That's the reason why we're announcing the Zoom marketplace, right? Give a customer a very flexible API. Customer even -- they do not know that it belong to a Zoom call. They feel like they are going to stay within the work day, the user interface or ServiceNow user interface. I think that's the direction.

Sounds great. Well, thanks a lot and congratulations on a great quarter.

Thank you, Zane.

Thanks, Zane.

Matt, next question, please.

Our next question is from Ryan Koontz from Rosenblatt. Ryan, you are unmuted.

Great. Thanks, guys. Congrats on a great quarter. Given your early success in the enterprise space, why don't you give us some color on the market verticals you're seeing the lowest hanging fruit for competitive displacements out there?

Yes. So, when we started, we were focusing on high-tech market and later on we expanded into the high-end, as well as healthcare market. Over the past two to three years, we also doubled on financial sectors, and we’re going to focus on public sector as well. Over the past two quarters, we do see a very good momentum in our financial sectors. I think we are going to see more and more big enterprise customers from financial sector.

Helpful. Thank you.

Great.

Thank you.

Thanks, Ryan.

Thank you. Matt, next question, please.

Next question is from Jonathan Kees from Summit Insights Group. Jonathan, you are unmuted.

Great. I want to add my congratulations for the quarter. Great results. I want to ask a couple of topics. One, in regards to -- how I'm thinking about it, this is -- you beat your guidance, you beat estimates. When you gave guidance for this quarter you just reported, is about a month and a few days after the quarter ended. So, I guess, the way I'm thinking about is a lot of the revenue, a lot of the deals were more back-end loaded. Was there anything specific that caused that? Did you have any promotions or were there deals, like an HSBC deal that were in the previous quarter that came over into this report quarter? Just curious in terms of how that upside trended in terms of revenues and also, yes, what caused that?

Yes. Hi, Jonathan. We did not see a tremendous shift in our linearity for the quarter. As we move into more and more enterprise customers, some of them do buy towards the back part of the quarter. But due to the -- we have customers of all sizes, so they tend to buy consistently -- pretty consistently throughout the period. So, I think, part of the over performance against our guidance was, again, us giving guidance that we want to ensure that we can achieve as a public company.

Okay, great. That makes sense. And second topic, if I can here, this one is more for you, Eric. I understand that you make it a task to reach out to customers who've left and try to understand why they're left or are leaving. I think that personal touch is wonderful. Just curious if you share with us any gems, anything that you've learned in terms of why these customers have left or thinking about leaving?

Yes. So, several years ago, I did spend a lot of time talking with those customers who left, but over the past two to three years, I did not spend too much time on that, because a lot of those users will cancel their service are very low and went per users. Actually, they really do not leave the Zoom. It's like they are going to take the family vacation over the summer timeframe and they cancel the service. After the summer, they're going to risk it as well, right. So we did not see any very big large enterprise customers, that's why I spend less and less time on that. So -- and yes, so really do not focus on that anymore.

Hey, Jonathan, did you get the camera we sent you?

Yes. Wonderful. I hope -- can you see me? Is the camera off?

No, we can't.

Oh, no.

We will help you out in the next one. I will follow up and we will make sure it gets you on there, so …

Oh, no. I'm using it right now. I guess, you can hear the mic?

Yes.

Yes.

Okay. Yes, I am using it right now. So sorry about that. I thought it was on camera.

No worries. I just want to make sure you got it. Thank you. Hey, Matt, how many more do we have?

We have one more question. Next question and last question is from Ryan Williams from Stephens. Ryan, you are unmuted now.

Thank you.

Hi, Ryan.

Hi, Ryan.

So, in a recent interview, Eric, you mentioned that 95% of your engineers are working on voice video. But you noted your focus is always on what customers are asking for. Are there any current capabilities customers are asking for aside from Zoom meeting phone?

I think, first of all, we already have a roadmap, right. At the same time, we wanted to talk with the customers and make sure our roadmap fits well to customer need. Having said that, we’ve so many large enterprise customers, quite often if they tell us a feature or a solution, it's really hard for us to prioritize that. That's why every time we offer product managers, our sales engineers always try to understand what's the pain point from a customer side, quite often they have a same pain point. And because of that, I think you look at our feature set roadmap is not that very complex, right. It's kind of we understand the pain point and want to make sure our solution can fit very well to customer need. Having said that, I think we do not have the challenges to manage the feature request from a large enterprise customers. The roadmap is -- we always share the roadmap with our large enterprise customers, they all buy that.

Thanks. And one last question on acquisitions. Last quarter, you mentioned that you're keeping your options open. But to this point, do you currently believe you’ve the infrastructure in place to handle a large acquisition?

I think, well, in terms of acquisition, I think, we are working very hard on day-to-day execution and huge opportunity ahead of us. And we do not see any great opportunity, right. If you know of any opportunity, please let us know. Otherwise, we are just laser focused on our execution to make sure our customer happy.

20 investment bankers are now calling you, Eric.

Yes.

I do not have money. Money from Kelly's side.

Thanks, guys.

Thank you.

Thank you.

Congratulations on new position too. So Eric, do you have any closing remarks?

So, I think, Ittai also in the call, right?

Oh, yes. Matt, does Ittai still with us?

Let's see if we can get him back. We tried him earlier. So Ittai, you are unmuted again.

Ittai, are you on the call?

Who is joining in his place?

He did have somebody joined earlier and we did confirmed with him earlier they were on the phone. I'm not sure if they're listening at the moment.

Okay.

Okay. Thanks, Matt.

Thank you Matt.

Yes. Thank you all for joining us and we look forward to seeing many of you at Zoomtopia. Thank you.

Thank you.

Bye, everybody.