Chief Financial Officer & Treasurer, Zoom Video Communications
Zoom CFO Kelly Steckelberg on Q3 earnings beat, OpenAI partnership
Zoom CFO Kelly Steckelberg joins 'Squawk Box' to discuss the company's quarterly earnings results, which posted better than expected third quarter results on top and bottom lines, OpenAI partnership, and more.
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 (10 segments)
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Andrew Ross Sorkin0:00
Zoom posting a better than expected third quarter results. The company also raising its annual revenue and profit forecasts. Shares popped initially, but you can see they've retreated pretty significantly. Want to talk about that. Also, company has a relationship with OpenAI, a conversation that's in the midst of the news right now. Joining us first on CNBC is Kelly Steckelberg, Zoom's CFO. Let's talk about the earnings first, Kelly, because they were better than expected, but as I just mentioned, you've seen a reversal in the stock, which actually picked up right after that news and has now shifted. What are you hearing from the investor community about all this?
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Kelly Steckelberg0:39
Yeah, good morning, Andrew. So we were very pleased with our Q3 results. As you said, we beat on both the top line and the bottom line. We had some amazing milestone achievements like Zoom Phone crossing over the seven million seat mark, as well as AI, which everybody wants to talk about. Our AI Companion has been out for about two months and we've seen over 200,000 of our accounts activating and using that feature. I think what everybody is looking for though is re-acceleration of growth in both our Enterprise business and stabilization in Online. We've made a lot of progress in our Online segment of our business. We've had the lowest turn rates that we've ever reported in Q3, so really looking forward to as we're moving into FY24, starting to see stabilization and re-acceleration in the business.
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Andrew Ross Sorkin1:33
What are you seeing in terms of hybrid work and where that's going, married with or as you look at the competitor set, Microsoft Teams coming on so strong?
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Kelly Steckelberg1:45
You know, what we hear from our customers is they're looking forward to welcoming their employees back and doing it in the most effective and productive way. And Zoom has all kinds of amazing solutions for that to support them in hybrid work. We of course have Zoom Rooms, but we also have things like Workforce Reservation, we have remote receptionists, we have wayfinding, we have the ability to reserve your desk and also reserve lunch, which we all know treats and food are very important to having happy employees in the office. So when you bring that all together in our consolidated communications and collaboration platform, it supports what we're calling the employee experience part of the platform. Combine that with the customer experience part of the platform and you have the complete view of Zoom. And as a reminder, we are the only platform that has been natively built and is seamlessly integrated across all aspects of these features and functionality, and that's really a competitive differentiator for us when you put us up against any other platform out there.
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Andrew Ross Sorkin2:51
We had mentioned OpenAI at the top of this. You have a partnership with OpenAI. I'm just curious what your reaction was when you first heard the news about Sam Altman effectively being pushed out of the company and all the drama that's taken place over the last several days.
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Kelly Steckelberg3:06
So we do work with OpenAI. It's an important part of the federated approach we're taking to AI, which means that we work with several models to ensure that we get the best performance for our customers. So we work with them, we also work with Anthropic, we work with Meta using their model, and we have our own model as well. And I think it's been a very interesting development that we'll all wait and see what happens there from a governance and a board perspective.
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Andrew Ross Sorkin3:35
Does it make you though rethink, I mean this is something that I think some of the investors who are involved and even just other partners either rethink the relationship or rethink how you consider partnering with companies that may not have the same type of governance that a traditional business would, in this case obviously a business where a not-for-profit effectively controls the company?
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Kelly Steckelberg4:00
Well, I think it really highlights the need to ensure that you have multiple source vendors for critical functions such as this, and that's exactly the approach that we have taken to ensure that no matter what happens with any one of these partners, we have the ability to provide uninterrupted service to our customers. And that's what we're always thinking about, is how do we take care of our customers in the best possible way. And I think the approach here is going to work. They have to play forward however this is going to work out for them, but we're really focused on making sure that our customers have access to their services no matter what happens.
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Andrew Ross Sorkin4:38
Speak to the market share issue and how you think about your competitor set at this point. I mentioned Microsoft Teams because obviously it's a product that effectively gets given away largely with so many of the other suite products that Microsoft has. You know, people who are deciding to buy your service have to make an affirmative decision that this is what they want to do.
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Kelly Steckelberg5:03
Yeah, what we hear from our customers is they really love Zoom. They started off seeing how we were able to transform their meeting experience. They trust us then to do the same for them with Zoom Phone. We have a relatively new contact center product as well, which we announced on our call, has over 700 customers in just a very short amount of time. So really excited. There are some amazing names like Dropbox and Major League Baseball that are using Contact Center. So they see the value in having a platform that their employees love, that when they're supporting from a contact center, their customers like engaging with. And yes, they make an affirmative decision to choose Zoom. And you know, it's interesting because you mentioned free. I mean, it's a perception of free. Nothing in the world is free, we all know that. And yet people see a great deal of value. We're very competitive from a cost perspective. So total cost of ownership when customers are switching from other legacy on-prem type providers like Cisco or Avaya, we often see that they have a great amount of savings as well as productivity enhancements in their employee base.