Zoom CFO Kelly Steckelberg joins Yahoo Finance Live to discuss company earnings, macro economic pressure, consumer demand, hiring, and the outlook for growth.
– All right, let’s talk about shares of Zoom as well. That’s something else we’re watching closely today. The shares down 12% after Zoom posted slowing second-quarter revenue growth of 8% and also slashed its full-year guidance. The software company cited the US dollar and slowing consumer sales as the reasoning behind the hit to revenue. Its enterprise business fairly robust.
Joining us now to discuss is Zoom CFO Kelly Steckelberg. Kelly, it’s always great to see you. Thank you so much for joining us.
I want to ask you, first of all, about the forecast and how you characterized it and broke it down. You talked about macroeconomic pressure. You talked about pressure from the stronger dollar. And I’m wondering how you break all of that out. And in other words, when you’re looking at what’s pressuring the forecast, how do you figure out what’s macroeconomic? How do you figure out what is just lower demand, for example, from consumers?
KELLY STECKELBERG: So we have two pretty distinct segments of our business. We have the enterprise segment, which we are pleased with the performance there. It grew 27% year-over-year in Q2. And we continue to see highlights there, for example, with Zoom Phone, which crossed over the 4 million seat mark.
Where we are seeing pressure is in our online segment of the business. And this segment of the business is much more exposed to the strengthening dollar, as you mentioned, as well as macroeconomic, especially in Europe. So we actually saw revenues from Europe decline 8% year-over-year. And that was largely concentrated in our online segment of the business. And as we look forward, unfortunately, we expect some of that trend to continue through the rest of the year, which is what contributed to our lower guidance for the rest of the year as well.
– And so Kelly, I guess with what you had discussed on the call as well and this return to normalized sales cycles, what type of revenue growth rate and even margins on that should investors expect?
KELLY STECKELBERG: Yeah, so what we touched on is in the enterprise segment of the business, as we have now gone back to the majority of our revenue coming from the enterprise segment of the business– it’s 54% of our revenue in Q2– and the fact that we have really moved beyond the pandemic buying patterns that we’ve seen over the last couple of years, we are back to true enterprise linearity, which means a lot of these deals come at the end of the quarter, which that also results in the fact that they contribute very little revenue in the quarter themselves. They contribute to deferred revenue, which was up year-over-year and greater than– it was up greater than we had forecast. But they have very little impact in the quarter itself. And so as we expect those trends to continue, that is also built into our forward-looking guidance.
– Kelly, I didn’t hear much on the conference call last night about more closely managing expenses. That seems to be the buzzword in techland. How are you approaching that?
KELLY STECKELBERG: So we did talk about in our prepared remarks that we are taking a prudent and cautious approach as we look forward in the second half of the year. We are absolutely continuing to hire, but we’re doing that in very focused, high-ROI areas, which for us really includes our R&D teams, as well as sales partner enablement and product marketing.
We did highlight that our gross margins were 78.9% in Q2. And we expect them to continue in the range of 78% for the rest of the year, which is higher than we had expected. And we did maintain our full-year outlook for 33% non-GAAP operating margins, as we’re able to manage these expenses through the back half of the year, even with the lower top-line forecast.
– In the services that your portfolio of clients already buy into right now, where have you seen the best ability to cross-sell into some of the other products and services that you’ve brought forward? And how does that really contribute to not just the growth, but also where you’re able to see add-on margins for some of those larger customers as well?
KELLY STECKELBERG: Yeah, so we are making great progress in making this transition from being a meeting app to a full unified communications platform. And Zoom Phone was certainly a star in the quarter, crossing over that 4 million seat mark. We are also really thrilled with the performance of Zoom Contact Center, which had some great names that we’ll be excited to tell you about as they continue to deploy.
And they also, we’re seeing seat sizes sold in Zoom Contact Center only six months into the life of this product that we would not have expected for a couple of years. So that’s really great to see. And then also Zoom IQ for sales, which is also a new product, is really starting to contribute as well. So we’re looking forward to this full suite of platform products that are really going to enable the future growth, especially in our enterprise segment.
– Yeah, Kelly, everybody was talking about the phone, Zoom Phone, in terms of analyst notes and really highlighting that as an area of growth for you. I think, what, it more than doubled, right, in terms of the number of customers, individuals using the Zoom Phone. What do the margins look like on that product? And what are some of the goals and targets you guys have for it?
KELLY STECKELBERG: Yeah, so Zoom Phone has very high operating margins. As we said, our long-term target for the company operating gross margins, excuse me, is 80%. And that includes the contribution from Zoom Phone.
And what we see is that it’s typically an add on. Our sales strategy is it’s an add on to an existing customer. So it continues to increase the revenue that we’re getting from each individual account. And that’s why we’ve also talked about, we really expect the future growth in the enterprise segment to continue to come from expanding the experiences and the products that we’re selling into our existing install base.
– Kelly, you teased an investor day on November 8 to the extent you could. What is the sustainable growth rate for the top and bottom line for a company like Zoom at this point in the cycle?
KELLY STECKELBERG: So that will be one of the highlights that we will share at Zoomtopia and our analyst day on November 8. We will be thrilled to have our investors there. It gives us an opportunity to spend a little more time, go deeper into the story, and share things like our long-term operating margins, our long-term targets, as well as potentially seeing long-term growth. But really that will come when we give FY24 guidance on our Q4 call.
– Zoom CFO Kelly Steckelberg joining us here this morning on “Yahoo Finance Live.” Thanks so much for the time. We appreciate it.
KELLY STECKELBERG: Thanks for having me.
The Nuclear Waste Management Organization (NWMO) today issued the Draft Integrated Strategy for Radioactive Waste (ISRW) for public comment. According to the Canadian Nuclear Safety Commission, radioactive waste is any material (liquid, gaseous, or solid) that contains a radioactive nuclear substance for which no further use is foreseen and requires careful management.
Voices, the #1 voice marketplace, has released a new study that is sure to surprise many animation lovers: Yogi Bear is the most recognizable voice in animation.
Norwegian Air reported a second-quarter net profit on Thursday amid a surge in demand for air travel in Europe after pandemic restrictions were lifted, and was helped by reversal of an impairment charge related to its dispute with Boeing. Norwegian, which had been in the red in the first quarter, warned that surging fuel costs would affect full-year earnings but also said strong demand for travel was giving it some room to raise ticket prices to offset high energy prices. Its April-June net profit of 1.25 billion crowns ($129.5 million) was boosted by a reversal of a previous 2.1 billion-crown impairment charge, triggered by the resolution to a long-standing conflict with aircraft maker Boeing.
JACKSON, Wyo. (Reuters) -U.S. Federal Reserve officials on Thursday were noncommittal about the size of the interest rate increase they will approve at their Sept. 20-21 meeting, but continued hammering the point they will drive rates up and keep them there until inflation has been squeezed from the economy. Those higher rates could lead to a rise in unemployment and are already starting to crimp household and business spending, Kansas City Federal Reserve president Esther George said on CNBC, but the central bank will not flinch from tighter policy. George said it remained "too soon to say" whether a half-point or three-quarter-point rate increase would be most appropriate at the September meeting.
Consumers want a retailer's physical store to complement its online shopping component, report says
The net result of all the tumult may, it turns out, be a wash in terms of the U.S. economy's underlying potential, with little change in productivity or trend growth, and a still looming drag from demographics as the population ages, according to new research presented at the Kansas City Federal Reserve's annual Jackson Hole research symposium in Wyoming. "We find little evidence that the pandemic has so far caused substantial changes, up or down, to the economy's sluggish pre-pandemic longer-run growth-rate," which remains anchored between 1.50% and 1.75%, as it was before the greatest health crisis in a century, San Francisco Fed economists John Fernald and Huiyu Li wrote in the research paper. If some array of firms did well – and the research paper found that those where employees could telework saw "strong pandemic productivity" – problems elsewhere went in the other direction.
Passive income is definitely great to use up front, but this other strategy can create significant wealth in the millions! The post Forget Passive Income: Choose This Investment Strategy Instead appeared first on The Motley Fool Canada.
(Reuters) -Dollar Tree Inc trimmed its full-year profit forecast on Thursday, blaming price cuts at its Family Dollar stores in an effort to spur demand among lower-income shoppers and compete with other retailers that have been ramping up discounts. Chesapeake, Virginia-based Dollar Tree's shares, which have gained about 18% this year, fell more than 11% in early trading. Elevated inventory levels at Walmart Inc and Target Corp due to inflation-hit consumers cutting back on discretionary purchases have forced the retail chains to clear excess stocks by offering deep discounts.
A look at manufacturing activity in China is also due, while the euro is threatening to push decisively below the key $1-mark. Monthly U.S. jobs data on Sept. 2 will test the argument that the world's biggest economy is in solid health, and indicate whether the Federal Reserve can engineer a "soft landing" even as it hikes interest rates to fight inflation that has been running at four-decade highs.
LONDON (AP) — Jennifer Jones keeps feeding money into her energy meter, but it never seems to be enough. And when she can’t pay, she feels the impact immediately. The power in her London home has gone off suddenly three times recently, once when her partner was cooking an egg. Like millions of people, Jones, 54, is struggling to cope as energy and food prices skyrocket during Britain's worst cost-of-living crisis in a generation. The former school supervisor has health problems and relies on gov
KUALA LUMPUR, Malaysia (AP) — Malaysia’s top court on Saturday condemned as a smear attempt the leaking of an alleged guilty verdict against the wife of former Prime Minister Najib Razak days after he was imprisoned for graft linked to the looted 1MDB state fund. The High Court is due to deliver its verdict Thursday in Rosmah Mansor’s graft trial over a 1.25-billion-ringgit ($279-million) solar energy project. Najib began a 12-year prison term Tuesday after losing his final appeal in one of the
THIS JUST IN! The Canadian Country Music Association® (CCMA) is thrilled to announce that seven-time 2022 CCMA nominee Tenille Townes and multi-platinum selling artist Blanco Brown will be hosting the 2022 CCMA Awards presented by TD, live from Calgary's iconic Scotiabank Saddledome. Returning to Calgary live and in-person this fall, the 2022 CCMA Awards presented by TD will take centre stage on Global, broadcasting live Sunday, Sept. 11 at 8 p.m. ET and on Corus radio stations Country 104 (Lond
HBC's strategy looks pretty murky, experts say, plus the retailer runs the risk of ruining nostalgia for the Zellers brand
VIAVIA, a new video-first e-commerce platform, announces $8M seed round to launch a debut fashion retail destination catered to Gen Z shoppers. The funding is co-led by New Enterprise Associates (NEA) and Basis Set Ventures, with participation from Exor Seeds, Backend Ventures, and Andrew Ng's AI Fund. The funding follows a $1.15M pre-seed round that the company announced in February 2022. VIAVIA seeks to modernize the fashion e-commerce experience by marrying creator-driven live and short-form
The new plans, which would exist alongside T-mobile's existing cellular services, would cut out the need for cell towers and offer service for sending texts and images where cell coverage does not currently exist, key for emergency situations in remote areas, Musk said at a flashy event on Thursday at his company's south Texas rocket facility. Starlink's satellites will use T-Mobile's mid-band spectrum to create a new network.
When users search for "abortion clinics near me", the results box will display facilities verified to provide abortions, said Mark Isakowitz, vice president for government affairs and public policy for US and Canada at Google, in a letter to Senator Mark Warner and Representative Elissa Slotkin. The tech giant will also allow people to broaden their search to show other relevant listings, including from organizations that do not provide abortions, Isakowitz said.
Sollio Cooperative Group proudly announced the finalists and winners of the New Farm Enterprise and Farm Succession Award at a special gala on August 24 in celebration of Sollio's 100th anniversary.
Tesla Inc has demanded a safety advocacy group take down videos of its vehicles running over child dummies when its driver assistant system was engaged, calling them "defamatory" and "misleading." The group, the Dawn Project, has launched a nationwide TV campaign warning of alleged potential dangers of what Tesla calls "Full Self-Driving" (FSD) software, adding to public and regulatory scrutiny of the technology. One of the videos posted by the group shows a Tesla vehicle with FSD software running over child-sized mannequins, and says "Tell Congress to Shut it Down."
More countries are legalizing marijuana. Should you buy ACB stock? The post ACB Stock: What’s Behind Aurora Cannabis’ Recent Surge? appeared first on The Motley Fool Canada.
SEOUL, South Korea (AP) — South Korea landed a 3 trillion won ($2.25 billion) contract with a Russian state-run nuclear energy company to provide components and construct a turbine building for Egypt’s first nuclear power plant, officials said Thursday. The South Koreans hailed the deal as a triumph for their nuclear power industry, although it made for awkward optics as their American allies push an economic pressure campaign to isolate Russia over its war on Ukraine. South Korean officials sai
About Author
