ZM - NASDAQ

Hello, everyone. We'll get started shortly. Hello, and welcome to

Thank you, Megan.

Hello, everyone, and welcome to

Thank you, Charles. We delivered strong results this quarter with broad momentum across products, industries, and customer segments from online to our largest enterprise accounts. This performance reflects the durability of our business driven by the growing value we are delivering for customers as we evolve from a communications leader to an AI-first platform for work and customer experience. Our vision is to be the AI-first work platform for human connection. As we march towards this vision, we are focused on three priorities. Elevating core products with AI, driving growth of new AI products, and scaling AI-first customer experience. Pivoting to our first priority, at

Thank you, Eric, and hello, everyone. I'm excited to share

Thank you, Michelle. We will now begin the Q&A portion of the call. When I read your name, please turn on your video and unmute. As a reminder, in an effort to hear from everyone, please limit yourself to one question. Our first question will come from Tyler Radke with Citi.

Alright. Hey, everyone. Thanks for taking the question. So really nice to see stabilization and acceleration in the business as well as the margin expansion. Just a multiparter here on growth. So can you if if we look at Q4, you know, the outlook looks looks very strong. How should we be thinking about that as a jumping off point? Into next year? And I ask because I know there were some price increases that you took on on the online business this year. How do you think about pricing, heading into next year? And then Know, big picture, you're you're kinda near that 5% growth mark. Certainly, it should be by Q4. What do you need? What are sort of the stepping stones to get back to a 10% growth over the long run? Thank you.

Yeah. I can jump in and take that one. First of all, we're not we're not sort of at our plan plan planning process, to the stage of giving FY27 guidance We're gonna go ahead and do that as per the normal kind of

Our next question is from Michael Funk with Bank of America.

Yes, great, great. Thank you for the question. Maybe a related question asked slightly different way. So looking at the enterprise, net dollar expansion you reported, still still below 100%. Clearly an opportunity to help drive top line growth if that does improve Several competitors though noted they're continuing to see post COVID seat based contraction. So, you know, this can you peel apart the pressure on ND and if you're also seeing post COVID seat based contraction if you are, you expect that to turn and maybe contribute to more positive top line growth?

First, thanks for the question. But we're pleased, you know, after six quarters to see the net dollar expansion stabilizing. We're not gonna get sort of guide to to inflection, but certainly inflection, is is the goal. What I would say in terms of how to think about it, maybe just a continued reminder for investors, that when we have products like contact center, work Vivo, they tend to bring in new customers to

Great. Thank you, Michelle. Thank you, Eric.

Thank you.

Our next question is from Rishi Jaluria with RBC Capital Markets.

Rishi, are you there?

There we go. So my apologies on that. Thanks so much for taking my questions. May maybe just one simple one for me. Coming out of

Yeah. Thanks, Rishi, for the question. You know, really, I would say our our thoughts on m and a are very consistent to kind of what I've said previously. Really no change, just to update investors. But let me go ahead and recap them, just for everybody's knowledge. First of all, is that we're gonna be very thoughtful and disciplined in both acquisitions and integrations. We're gonna make sure that they're strategically aligned with synergies. And, obviously, coming with sound financials. And for

Alright. Thank you.

Our next question comes from Josh Baer with Morgan Stanley.

Excellent. Thank you. Thank you very much for the question. Congrats on the beat and race. I wanted to double click on on growth enterprise growth, from one more angle. Just really double clicking on

Yeah. Maybe I can take that one. And maybe I'll use the opportunity as well and judge just to call out to investors. We made a slight tweak to the three priorities that we've been highlighting to Really two themes of what we were trying to get across. One, AI in all of our priorities, and two, really just sharpening kinda the language with which we talked about our priorities. So let me, introduce them or reintroduce them the same as what Eric talked about in his script and give an update to sort of get at your product specific question. The first one is really about elevating, workplace with AI. And and, broadly, what that means is AI over the entire meeting life cycle And and the things that I would think about in terms of growth and progress that we saw in three there, our continued progress against churn. Is the fifth consecutive quarter on enterprise for year over year declines on churn, and then you obviously heard the call out, in online for record low churns. But not just that. It's it's the

Great. Thank you. Yep.

Next up, we'll hear from Ryan Williams with Wells Fargo. Hey, guys. Good to see you again.

Really cool to see the AI avatar in the in the prepared remarks. You know? Maybe one day, I'll be asking AI Michelle about growth next year. Just just kidding. We'll find our bots, Ryan, to talk to one another.

So Yeah. AI Mac, I don't know if you can recreate the Philly accent, but just historically. one for Eric, actually. So

Well, Ryan, that is a great question. I think in the in the AI era, I think every you know, businesses Right? And are facing the the the similar challenge and also the great opportunities. So the the innovation speed is is unprecedented. Look at the way engineer write a code. Look at our marketing team, how they lab the AI to automate the process. You know, we we go to leverage AI to reinvent everything. The good news, you know, I have a engineer background. Right? And I think, you know, I have to. You know? And also I also determined. Right? To spend way more time than any time in my career to double down, triple down on the product side. I think there's a huge opportunity. You know? Meaning, we have to change the company culture. And make sure every engineers. Right? The way they write a code is totally different. The way they they troubleshoot. Right, the test also is very different. They need to make sure every engineer even if the writer that tens of a thousand lines of code before, they have to embrace AI now. Back to your question, I truly believe the innovation speed will be much faster. You know, to build a new features and new services. Right? I think that's the opportunity. And we are much better positioned Right? And, again, I'm figuring out a way really, you know, spend more time on that. That's the reason why I can tell you I couldn't be couldn't be more excited now. You know, finally, I think, you know, we are going going back to the early days of

Appreciate the color. Thanks, Eric.

Thank you. Our next

question comes from Patrick Walravens with Citizens.

Oh, great. Thank you. Let me add my congratulations. I love the accent that you picked, Eric. Don't know what it was, but it was fantastic.

Can you go into some detail and help us understand exactly how the, Salesforce win works? Like, Eric, if you're if you're sitting there with Benny off, how do you how do you pitch it? Right? And then, it just gives us some details on how it changes the experience. For people at Salesforce.

Yeah. So, you know, Salesforce is a good company. Market is good friend, also was our investor. Right? Pretty sure he'd think about AI every day as well. Look at it at Salesforce event. Right? The June force is very successful, the agent force event. Very successful. Right? So they have agent force framework. You know, they also have a customer. How to integrate our AI company. I I mean, sorry, customer and AI company. Right? To integrate with the agent force, you know, the framework. Essentially, we drive productivity. Right? Because, you know, they're they have a genetic, you know, the the framework by Aviso. Our customer company. You know, together, for sure, that's a no brainer, right, to to integrate it together. You know, given our customer, why not, right, to enable this feature? That's how know, this con conversation started. That's the reason why you know, they they they decided to, you know, move forward with the customer company. More and more customer realized the the potential of not only for

Alright. Thank you.

Thank you. Yeah. I will invite you to test our AI combined in. Next month whenever we reach GA. So I'm pretty excited. So our employee really like that too.

Our next question comes from Alex

Hey, guys. Thanks for having me on. And Eric, I'd love to test out that virtual avatar when when it's ready for GA. Maybe just a quick one for you and a and a quick one for Michelle. For you, Eric, when you think about AI monetization, that you're seeing in the business and in in the quarter, and in the coming quarters. Maybe talk about that a little bit. And then, Michelle, for deferred revenue was a little bit light of your high end of your guide this quarter. But it seems like it's actually a pretty strong guide for next quarter. Was there anything that that shifted from one quarter to to the next or pushed out or pulled in that that maybe explains that?

Yeah. So, yeah, Alex, by the way, the virtual Harvard feature already is there. Right? This is the third know, times I'm using my AI avatar for our earning call. Right? As it free up a lot of my time. I really love that. So back to your question, to monetize the AI as a mission. Right? You look at the few priorities. Right? You know, elevate the

Yeah. And if if helpful, Alex, maybe just tag on to Eric, and then I'll hit your deferred revenue question. We we produced

Thanks, Alex. Our next question comes from Timothy Horan with Oppenheimer.

Patient with other.

Other apps that are really important to kind of improve on your overall productivity strategy. Or software? Thank you.

First part of the question, I'm so sorry. Cut out. Can you would you mind repeating them just so Yeah. Sure. Sorry, Michelle.

An important part of the strategy, I think, is to integrate with other productivity software apps Can you talk about some of the most critical ones and where you are in that process?

Yeah.

Eric, you wanna take that?

Sure. I think, first of all, you know, we have we are way beyond video conferencing. Right? So we have so many other services we would like to, you know, integrate it. And at the same time, you know, it's you get the the ecosystem. Right? We do integrate with Google ecosystem well. And Microsoft ecosystem well as well. And plus, you know, ServiceNow, Salesforce, Right? We all work on the integration. and Atlassian, you know, all those popular productivity tools. Again, this is the open ecosystem. And, also, we listen to our customer very carefully. And whenever know, they tell us, hey. Then, you know, more integration, we also work on that as as well. So

And is AI making that easier or or harder at this point?

Easy and harder. Meaning, the reason why easy for sure, for a execution perspective, for sure easier. The harder part, because of AI, every cost they want to tell us, hey. The AI error, can you integrate more? Right? Can you release the, you know you know, timely manner. Right? So the requirement also is different. Right? So from that perspective, a little bit harder. But it really boils down to execution. So I I have a confidence our team can deliver. So

Thank you.

Thank you.

Our next question is from Seth Gilbert with UBS. Hey, thanks for the question.

Free cash flow is a bit above what we in the street were model and free cash flow margin hit 50%. I'm curious if you call out anything additional here. Were there any one time benefits to free cash flow? Thank you.

Yeah. Thanks. Thanks for it. Obviously, we're pleased you know, with the Q3 results, and as such, it made sense to update the the full year guidance as well. So I'm pleased with the overall progress, frankly, that we made since the beginning of the year. Kind of guidance. That said, to your questions specifically on the onetime you know, look, there there are very durable, results as part of that. You see that, obviously, in our in our core financials. The one thing that we did put in script that I would make sure I emphasize with investors is we made some changes as part of our collections process, really looking at that more end to end as a a new CFO coming in. And as a result, we were able to make real notable progress on DSO. Those are sustainable. Changes to our DSO, but but, obviously, you won't continue to see that marked progress as we go forward, meaning it won't continue to accelerate off that. So you can kind of think about that as durable but one time a bit in nature.

Got it. Thank you. Yeah.

Yes. That's by the way, our CFO, she did a great job. Really drive her team. Right? You know, dramatically improve our, you know you know, collection collection process. This is very sustainable. So

We agree.

Yeah.

Thank you.

Next, we'll hear from James Fish with Piper Sandler.

Hey, guys. Thanks for the question. Maybe, Eric, for you on BrightHire, Is this the start of expanding into other mission critical business workflows? Or or how should we think about I'm not asking about the m and a strategy, but more about that sort of broader platform expansion. And and, Michelle, how should we think at this point about, the duration of the overall installed base? Thanks.

Well, this is a great question. So and my great friend, Kramer, you know, he made a comment recently. Right? And he wishes

And just so I I get to your your question on install base was in regards to BrightHire? Or No. I it was a separate question around the duration that you're seeing because it seems as though you guys are doing pretty well on on sort of cross sell of existing products, and and you're seeing that show up also on the long term RPO driving some growth here on the on the overall RPO. So just trying to understand where the duration of the of the enterprise contracts has gone.

Yeah. Look. I think, you know, look. Many quarter to quarter, you're gonna see fluctuations. We've had a very consistent RPO trend in the current I'm very pleased with the current quarter RPO that went up. Which really reflects a couple large contact center and AI deals in particular. And so look, I would say it it varies from quarter to quarter, but we're very pleased with the upsell progress that we have relative to our upsell base as well as kind of what I was referencing earlier, which is bringing in new customers. To the

Our next question is from Mark Murphy with JPMorgan.

Hey. This is Artie on for Mark Murphy. Thanks for taking my question and congrats on the strong quarter. We recently spoke with a

Yeah. I would say to that end, I think, we are. We're seeing strong uptick of AI usage as well as strong uptick of use in our three plus products. And, certainly, this is, I would say, is a sweet spot for

Yeah. By the way, to add on to what Michelle's side the reason why that middle market of a sweet spot is, number one, know, those middle market customers, they really embrace technology fast than any other segment. Right? Two, you know, middle market customers really truly care about employee experience. Right? And really they really wanna deploy the the best solution is a much better, you know, total cost of ownership. That's the reason why that's our sweetest sport. That's the reason why we're winning. Over there. So Thank you, Mark.

Great. Thanks, Eric and Michelle.

Our next question is from Citi Panigrahi with Mizuho. Hi. Thanks, guys. This is Chad TVB on here for Citi. Just wondering if you could touch on sort of the broader demand environment. I know there were some moving pieces earlier in the year, sort of how that shaped out during the quarter? And expectations for the rest of the year?

Yeah. So, look, I think, in the quarter, we saw further improvement. I think we see it in metrics like our customers over a 100,000, you know, growing at 9%. Look. That doesn't mean that we're not gonna see some, you know, seat pressure like we talked about earlier, where that's certainly our business model, and we won't be immune. But we saw broad consistent demand across both enterprise and online. And full abatement, if that was your specific question to what we referenced in our Q1 earnings. So with respect to our forecast, it assumes, similar conditions to what we saw. In the third quarter. And maybe to end with sort of where Eric left us in the last quest You know, at

Awesome. Thank you.

Yeah.

Next, we'll hear from Jackson Adair with KeyBanc.

Great. Guys. Good to see you. Thanks for taking our question. Michelle, on the know, call it the nonrevenue top line metrics. You've talked about billings. You've talked about RPO. I'm just curious, like, you know, as you shift more of your business toward the enterprise, when should we expect you know, those those nonrevenue metrics to start to outgrow maybe your your overall revenue metrics. On the top line?

I mean, in terms of the nonrevenue metrics, I would point to things like our AI usage. I would point to, you know, product momentum type stats to which they already are outpacing our revenue growth. So I don't know. Jackson, correct me if I'm I'm sort of missing your question, but I think those are the sorts of nonspecific explicit revenue drivers that I look at I would say they're already outpacing.

Got it. No. No. No. That's helpful. Yeah. Just curious about the dynamics there.

Thanks, Michelle.

Yeah. Just to quickly add, Jackson. You're right. And that's your right. Right? AI usage really number one. You know, the metrics about looking. You know, looking at that every day. The same time, it's CSAT. It's it's not a metric. It's also look at that. Right? The customers are pretty happy. Know, not only for online customers, online bars, SMB, and all the way to enterprise customers. We also manage CSAT as well. So

Got it. Thanks, Eric.

Thank you, Jackson. Appreciate it.

See you guys.

Our next question is from Peter Levine with Evercore.

Great. Thank you for taking my question. Maybe just to follow-up, I think, on Jim Fish's question. If you think about Eric, you mentioned a lot about employee experience on a call. And I look at BrightHire. I mean, is this like the on ramp in into, like,

Well, Peter, this is a great question. So look at our core competency. Look at our technology, right, in the collaboration and the productivity suite under the AI. Is our core technology. And how to apply those technologies. Right? Into the use case? That that's kind of every you know, quarter, every year we we are looking to. Right? Now the reason why you know, few years ago, we introduced the contact center. Essentially, to targeted support, you know, IT help desk those kind of use cases department. We also have

Thank you very much.

Thank you, Peter.

Our next question is from Tom Blakey with Cantor Fitzgerald.

Eric and Michelle, thank you for taking questions. I have for you, Michelle. Eric, you were couple of quick ones. Really just one for you, Eric, and a clarification you know, key in leading the charge in terms of, the higher pricing tiers in CX. It's great to see the success you've had you're having there. So another

Yeah. Yeah. Tom, thank you for a good question. But just curious, your background is your background or real? I'm so jealous. It's so beautiful. That is that is as fake as it can be.

Oh my god. I even do not know how it I cannot work so well. I I did not realize that's real how people buy. So, anyway, let your yeah. Thank you. So back to your question. So you you are so right, Remember, I was

Thank you. Just to clarify, the the virtual agent, well, our agent assisted product is a per user model. Our

Super helpful. Thank you, Michelle. Thank you,

Thank you, Dom.

Our next question is from William Power with Baird. Great. Thanks for taking the question. I

Eric. Maybe let's stick with your contact center GM hat for a moment. Can you maybe remind us and maybe update us where we are on contact center go to market? Where are you in terms of the opportunity in terms of channel partner reach? And and and I guess if you extend that the opportunity outside The US, US versus international, and I assume international is still on the on the earlier front.

Yes. So William, by the way, I I was the current energy. I'm I'm not that anymore likely. So you know, if I do that and maybe focus on the virtual agent, You know? But, anyway, so back to your question, I think know, for for you know, look at our you know, the the the customers, right, you know, suited to our platform. You know, last quarter, you know, many of them are switching from other cloud vendors. To

And if helpful, maybe just to punctuate Eric's comments to your GTM question. In particular. We look at top 10 deals in contact center as sort of a of the demand and the customer signal that we see. If helpful, nine out of 10 of our largest deals were channel driven. So a very important investment to us and one that we're very pleased with the results.

Great. Thank you.

Thank you.

Next, we'll hear from Arjun Bhatia with William Blair. Thank you. This is Alinda on for Arjun. A question here on like, what type of customers are adopting custom AI companions in particular, and what incremental value are they seeing from the custom AI companions versus customers using the free AI companions?

I think we you know, for sure, we wanted to, you know, SMB medium size all the way to enterprise customers adopt customer companion as quickly as possible. But to start off is, we focus on the relatively large enterprise customers for customer AI company. You know, the reason why the demand and other reasons is because, you know, look at our you know, the value of a customer We can integrate with customer sort of part applications, You can have a framework and for the the the data search as well. And a lot of functionality features is beautiful. Those are little bit complicated enterprise use cases. Right? And that's the reason why we start from there. So for sure, we do have you know, we want to introduce the SKU or online buyers as well. To empower the a small and a medium sized business as well. So

Thank you. Thank you.

Our next question is from Catherine Trebnick with Rosenblatt Securities.

Hey there. This is Andrew King on for Catherine Trebnick. Thanks for taking the Just since Nick Tidd has come in and started revamping your channel partners program, can you just give us any more color to how that channel partner platform is performing? Obviously, that nine out of 10 is great metric to hear. So any further color there? And then also within that, you were one of the earliest to to a partner led, part a professional services, organization. Can you just give us a little bit of color as to how that may be helping you win certain deals?

Yeah. Maybe I can lay down on that one. So first, you know, for for a company that's gonna focus on phone and experience, you know, having a healthy, vibrant channel ecosystem is just part of the game. Meaning, it's how customers opt and wanna buy, They're certainly part of the deployment and services after. And so

Great. Thank you.

Our final question comes from Peter Weed with Bernstein.

Hey, thank you very much. Know, I guess the Peters on this call are at similar mind. I was really interested in in BrightHire and I was appreciated your response around kind of the vertical specific focus that you have, which makes a lot of sense, and and I can understand why, you're excited about that. Should we think about that opportunity? Like, when you think of it at, you know, relative to your existing customer base, how much of this is a more of an upsell opportunity to them versus expanding the the TAM to to new customers? And when you kind of think about the monetization, how how does this add to your your stack and and really could expand the TAM or or generate revenue upside for the business?

Yeah. Maybe I can take that one. And give you sort of the finance version because Eric talked about BrightHire earlier. First of all, you know, it starts a lot at those critical conversations. One one thing

Thank you.

Alright. This concludes the Q&A portion of today's call. I'll turn it back over to Eric for closing remarks.

So yeah. Thank you. Thank you, Megan. Thank you for every investor customer, and partner's greatest support and trust We truly appreciate. Thank you for every

Thanks, everyone.