Chief Financial Officer & Treasurer, Zoom Video Communications
Zoom CFO Kelly Steckelberg on Q2 earnings, return to work policy
Zoom CFO Kelly Steckelberg joins 'Squawk Box' to discuss the company's quarterly earnings results, which beat on top and bottom lines and raised its full-year guidance, return to work policy, and more. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi
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About Kelly Steckelberg
Kelly Steckelberg, Zoom’s CFO, has discussed the company’s financial performance and strategy in multiple media appearances. In February 2024, she told CNBC’s Jim Cramer that Zoom’s priority is investing for growth, both organically and through potential acquisitions, while also executing a $1.5 billion share repurchase program. She stated that Zoom is expanding its platform with features like workspace reservation to support hybrid work. In November 2023, she said on CNBC’s “Squawk Box” that Zoom was pleased with its Q3 results, noting that Zoom Phone had crossed the 10% of revenue threshold and that the company uses a “federated approach” to AI, working with multiple models including OpenAI, Anthropic, and Meta. She also highlighted that the company saw stabilization in its online business earlier than expected and reported peak gross margins of 80.5%. Steckelberg has also addressed the company’s approach to hybrid work and competition. In a December 2023 interview, she said Zoom’s structured hybrid approach, asking employees near an office to come in two days a week, was going well and that 65% of employees remain remote. She has described Microsoft as a partner, stating that Zoom works with customers to integrate its products with Microsoft’s offerings. At Zoomtopia 2023, she said the company would not charge extra for its AI Companion, aiming to make it available to all paying customers. Steckelberg, a UT McCombs alumna, has said that her goal of becoming a public company CFO was realized with Zoom’s IPO, and she has established an endowed scholarship at the business school.
Transcript (14 segments)
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Interviewer0:00
Shares of Zoom video rising on better than expected second quarter sales and earnings. The company also raising its full year revenue and earnings per share forecast, pointing to growth in products for big business. Joining us right now is Zoom CFO Kelly Steckelberg. Kelly, welcome, glad to have you on the show this morning.
K
Kelly Steckelberg0:18
Thank you, good morning.
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Interviewer0:19
So one of the things you all have been able to do is come out with new products and services that have helped keep people around even while so many people went back to work. Why don't you talk a little bit about those products? What have been the most innovative that have helped?
K
Kelly Steckelberg0:34
Yeah, we are thrilled with the continuing expansion of our portfolio. Of course we have Zoom Phone, which is our cloud PBX solution, which has been a real propellant to our growth over the last several years. We recently announced Zoom Contact Center, which is also our cloud-based contact center solution, natively built and seamlessly integrates with the rest of our platform. And then of course we have many solutions to support this hybrid work environment that we are all facing today, including things like Intelligent Director, which places multiple cameras around a room so that when you're working remotely, for example, and there are others in a conference room, you can still see everybody's face on the screen on an individual square, which is something we all became very accustomed to during the pandemic and working remotely. And all of these solutions are doing a great job of keeping workers and employees, whether they're in the office or remote, connected in a very seamless way.
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Interviewer1:35
Hey Kelly, I'm looking at the stock which is right now indicated up by about 1.8 percent, so indicated up, but earlier it had been indicated up much more. I know earlier this morning it was four percent. I think last night after the ballot it might have even been eight percent. Part of that is some of the analysts are weighing in at this point, and just running through the price targets, a lot of firms on the street have actually cut their price targets this morning. Baird went to $90 from $95, Wells Fargo went to $75 from $80, Bernstein went to $82 from $92. Obviously those new price targets are all well above where the stock is right now, but they are moving things a little bit lower. And maybe part of that is summarized by what a KeyBank analyst said, where he said that the company is facing down sell pressure among some of its enterprise clients, meaning that some of these enterprise clients because they have so many people back might say okay, we'll continue to work with you but we want a cheaper price overall for what we're paying for. Are you seeing that at this point?
K
Kelly Steckelberg2:33
So we were really pleased with our Q2 results. We beat on both our top line as well as our profitability numbers, and we raised our full year outlook for both revenue and profitability as well. One of the things that we did talk about with the analysts in our call last night was the fact that we have seen, given the macro environment, some of our customers that potentially have seen dislocation in their employee base wanting to potentially reduce the number of meeting licenses they have. But we're taking that opportunity. Our team is doing a great job of sharing with them the value of the broader platform that we just talked about. So taking the opportunity to talk to them about how they can have savings if they were to convert from on-prem to Zoom Phone, for example, or how Zoom Contact Center could be the great next generation contact center for them. So what we've seen is this evolution of our customers as they are expanding in the platform, potentially right-sizing spending in some areas but expanding that in others. And I think that's what he's referring to.
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Interviewer3:43
Okay. I'm not sure I understood all that. Zoom Prem I guess is Zoom on the premises for work versus Zoom on the phone. So companies are looking for ways to say hey, we're not using it the same way we were during the pandemic, we'd like to reduce the number of licenses. Or how this works, explain that a little more. Is it something that the analysts are justified, you think, in taking down their numbers, or you think that they are taking something you were giving them a little insight onto and maybe running a little further with it?
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Kelly Steckelberg4:09
What we've talked about is many organizations have experienced a reduction in their employee numbers over the last several quarters, you know, given this environment, and so they might want to have fewer meeting licenses. But we're taking that opportunity to share with them how they can have savings across the rest of the Zoom platform, buying Zoom Phone, buying Zoom Contact Center, expanding Zoom Rooms as they are welcoming their employees back into a hybrid work environment. So that's what we've seen and I think that's what the analyst is referring to. Is while we may see reduction in certain parts of a customer spend, we're taking that opportunity to help them expand across other aspects of our portfolio with other products and things that are there.
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Interviewer4:53
So overall, are enterprise clients spending more or are they spending less? I know you've expanded the number of partners you're working with. Is their spend up or down?
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Kelly Steckelberg5:03
Yeah, overall we've seen our customers spending equal or more. And that's evidenced by the growth in our revenue both from an online and an enterprise segment. And then something that we look at, which is a metric of how our customers are spending last year versus this year, and that's over a hundred percent. It's our net dollar expansion metric. So that's it.
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Interviewer5:24
If you break it down per customer, are your enterprise customers spending more, or is it that you have more customers who have come in?
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Kelly Steckelberg5:33
Our enterprise customers individually are spending more, and that's what that dollar expansion metric measures: customers a year ago as compared to the same customer base today.
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Interviewer5:44
Great, I understand. Thank you. Kelly, let's talk a little bit about what you guys are doing too. It made news earlier in this last month when you all said that you wanted your employees back on premises as well. That's just part of the reality what companies everywhere are dealing with. It's a little different when it's Zoom itself doing it, and I think that made headlines. How's that going so far?
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Kelly Steckelberg6:06
It's going very well. We believe that a structured hybrid approach works well for us. It's great for collaboration. We hear from our employees they want to see each other, they want to see their friends and colleagues. And so doing it in a way that ensures when they go to the office, their friends and colleagues are going to be there. And it's great for innovation. We are in the best position to leverage our technology as I talked about Zoom Rooms, making sure that it's working well to support a hybrid environment. And so we've asked our employees that live near an office to come in just two days a week. And this doesn't mean that remote work is not still part of the future. Approximately 65 percent of our employees in fact are still remote. 35 percent live near an office. And so we believe this is a great balance and allows us to keep our workforce connected and keep us innovating.