Seth Gilbert

Seth Gilbert noted that if online growth remains flat, enterprise growth would decelerate by about 1 point from its Q4 exit rate of 7%, and asked Michelle Chang about the factors that could enable enterprise to outperform this projection.

Answer

Michelle Chang (CFO, Zoom) highlighted online's return to growth, driven by the Workplace portfolio and AI value, with an assumed 6% price increase on the annual SKU effective mid-March. She emphasized that enterprise will be the durable growth driver, propelled by progress in meeting churn, sustained mid-teens Zoom Phone growth, the pull-through of Zoom Contact Center, and AI monetization through agent-assisted AI, Zoom Virtual Agent, and new SKUs like the AI note taker.

Seth Gilbert asked Michelle Chang about the implied deceleration of Enterprise growth in fiscal year 2027, assuming online growth remains flat, and what factors could lead to Enterprise outperformance.

Answer

Michelle Chang, CFO, Zoom, noted that online business returned to growth in Q4 due to Workplace portfolio value and AI, with a 6% price increase planned for the annual SKU in mid-March. She emphasized that Enterprise will be the durable growth driver, fueled by progress in meeting churn, mid-teens Phone growth, Contact Center's 'better together' story, and incremental AI monetization in agent-assisted AI and ZVA.

Seth Gilbert asked about Zoom's free cash flow exceeding models and reaching a 50% margin, inquiring if there were any one-time benefits contributing to this strong performance.

Answer

CFO Michelle Chang expressed satisfaction with Q3 results and the updated full-year guidance, attributing the strong free cash flow to durable results and improvements in the collection process. She noted that while collection process changes led to notable, sustainable progress on DSO, the marked acceleration would not continue at the same pace.

Seth Gilbert asked if there were any one-time benefits contributing to Zoom's free cash flow being above models and its margin hitting 50%.

Answer

Michelle Chang, CFO, expressed satisfaction with Q3 results and the updated full-year guidance. She highlighted that while the results are durable, improvements in the collections process led to notable, sustainable progress on Days Sales Outstanding (DSO), though this acceleration won't continue at the same rate. Eric Yuan, CEO, praised Michelle's work on collections.

Seth Gilbert from UBS Group asked about the drivers of the strong Q4 free cash flow and whether the guided cloud revenue acceleration is driven by existing high-growth areas or a turnaround in larger, slower segments.

Answer

CFO Chadwick Westlake attributed the strong Q4 free cash flow to core operational performance, including higher revenue and business optimization progress, with no one-time items. CEO Mark J. Barrenechea explained that the FY26 cloud acceleration is expected to come from maintaining high growth in Content, OSM, and DevOps, while also turning both the Business Network and Cybersecurity segments from flat or negative performance to positive growth.

Seth Gilbert of UBS asked about the customer upgrade journey for Titanium X and for qualitative color on the performance of the different business units, noting the absence of a quantitative breakdown.

Answer

CEO and CTO Mark Barrenechea explained that the Titanium X upgrade push will begin next quarter, targeting customers on older releases first, with support fees set to rise for those who don't migrate. He noted that this quarter's disclosure focus was on the new RPO metrics, but qualitatively, Content and Security are growing, SMB is stabilizing, and ADM/ITOM face license and maintenance challenges.

Seth Gilbert questioned the updated full-year guidance, particularly the reduced high end of the non-GAAP net loss, and asked about investment plans. He also sought clarification on the public sector growth trajectory, noting the significant acceleration required in Q4 to meet the annual 100-150% growth target.

Answer

CFO Mike Zemetra explained that the adjustment to the non-GAAP net loss guidance was primarily due to expected gross margin compression from a higher mix of VDR revenue. Regarding the public sector growth, Zemetra confirmed the questioner's math was 'directionally accurate' and that while the significant Q4 ramp is not dependent on a single contract, the recently announced U.S. Air Force deal serves as a major vehicle for that growth.

Seth Gilbert of UBS followed up on the second-half growth forecast, asking when the large public safety deals would begin generating revenue. He also asked about the strategic initiatives for Veritone Hire in the current challenging market and whether the competitive landscape has changed.

Answer

Executive Ryan Steelberg stated that for high-visibility Public Sector contracts, the company is ready for immediate deployment on platforms like AWS once contracts are released, meaning revenue generation will begin almost immediately. Regarding Veritone Hire, Steelberg outlined a three-pronged strategy for growth: expanding the reseller network with partners like Workday, increasing media services' share of wallet with existing clients, and optimizing algorithms to maintain a competitive ROI for customers.

Seth Gilbert of D.A. Davidson & Co. inquired about the drivers for the revised 2024 revenue guidance and sought a more detailed bridge for the significant revenue acceleration forecasted for 2025.

Answer

Executive Michael Zemetra explained that the 2024 guidance change was 100% attributable to the timing of large public sector deal closures. For 2025, he confirmed the primary growth driver is the public sector, which is expected to grow 100% to 150% year-over-year, supplemented by growth in the commercial sector.

Seth Gilbert, on for Taylor McGinnis at UBS, asked about the drivers behind the subscription revenue acceleration and NRR inflection, and what AI could represent as a percentage of enterprise revenue in the next one to two years.

Answer

CFO Bryan Lee attributed the subscription revenue acceleration primarily to enterprise AI revenue growth, which accelerated from 32% to 42% YoY. He also confirmed that non-AI subscription revenue accelerated as well. While not providing a specific long-term target, he highlighted that AI's current 20%+ share of new enterprise bookings is a leading indicator for its future revenue mix, up from the current 10%.

Seth Gilbert asked for the key drivers behind the strong RPO growth, particularly from consumer banking, and requested that management outline the company's top three strategic priorities for 2025.

Answer

Head of Finance and Operations Amir Jafari confirmed the record RPO was driven by broad-based new and expansion wins, with the recently announced $50 million deal to be reflected in Q2. CEO Nima Ghamsari outlined the top three priorities as: 1) Ensuring existing customers love their current products, 2) Driving adoption of value-add solutions like Blend Close and Rapid Refi with that base, and 3) Earning the right to cross-sell into new product lines.

Seth Gilbert inquired about the primary drivers behind the increased 2026 CAGR guidance for the Consumer Banking segment and asked for clarification on the new non-GAAP net operating income guidance for the Blend Platform, noting it was a new disclosure.

Answer

Amir Jafari, Head of Finance and Administration, stated that the conviction to raise the Consumer Banking CAGR guidance to 40% is primarily driven by Blend's strong execution and the large market opportunity, rather than macro factors. He confirmed this was the first time providing specific non-GAAP operating income guidance for the Blend Platform segment to offer more clarity.

Seth Gilbert of UBS inquired about the drivers of Consumer Banking success, including details on a Top 10 bank deal and product mix, and later asked for clarification on the short-term revenue impact from the Covered Insurance Solutions sale and its effect on Q4 guidance.

Answer

Nima Ghamsari, Co-Founder and Head of Blend, explained that the Top 10 bank was an existing mortgage customer expanding into Consumer Banking, with Home Equity and Deposit Account Opening being the largest and fastest-growing products. Amir Jafari, Head of Finance and Administration, confirmed the Covered deal will reduce short-term revenue, which is factored into Q4 guidance, but emphasized that this is offset by an equal or greater increase in per-unit profit, improving operating leverage.