Zoom CFO Kelly Steckelberg joins Yahoo Finance Live to discuss company earnings, transitioning the platform for collaboration, focusing on user retention, and the outlook for profit growth.
BRAD SMITH: Make room for Zoom, the pandemic darling seeing shares take a hit on its outlook, despite quarterly earnings that beat expectations. Investors zooming in on the company’s corporate bundles as the competition heats up. Joining us now with more, we’ve got Kelly Steckelberg, Zoom CFO. Kelly, always a pleasure to get some of your insights after the quarter ends. If there’s one thing that you kind of look out into the future to really signal where Zoom can continue to grow, what would you point towards right now?
KELLY STECKELBERG: Good morning. I would absolutely point towards our enterprise segment of our business, as well as the platform strategy. We are making this amazing transition from being the killer meeting app that everyone knows and loves to being a full collaboration platform. You see that with the success we talked about on the call yesterday with Zoom One, which is our platform bundle, as well as Zoom Phone, Zoom Chat, Zoom Contact Center.
And what this does is it really creates an opportunity for our customers to have a single place to come collaborate, communicate. And especially when you think about the future of work, having a unified platform for all of your employees to work on as efficiently as possible is really important.
JULIE HYMAN: Hey, Kelly. It’s Julie here. You guys definitely saw strength in that enterprise business, with the boost in customers as well. At the same time, the other part of the business, right, the online and more consumer focused business did see a decline. And you talked on the call about how that’s likely to continue to have what you call the dampening effect. Can you talk to us a little bit more about that, what you expect from that business and how long and how steep maybe the declines could be?
KELLY STECKELBERG: Absolutely. So, as you said, we have two segments of our business. We have the enterprise and the online segment. And the enterprise has really been the growth driver for the last couple of years. The online segment really has faced some headwinds over the last couple of quarters, a lot of that being FX. It is more international-based, and so we’ve continue to see challenges in Europe due to FX, as well as the war that’s happening there. We also saw some declines in Asia-Pacific as well due to the FX.
And so the team is working on lots of initiatives to improve free to pay conversion, to focus on retention. We have seen retention rates improve. In fact, our retention rates in the online segment are back to pre-pandemic levels, which is a really positive factor in terms of stabilizing that portion of the business. And as we look forward to FY24, we are predicting that we will see stabilization of that business in the mid part of the year.
BRIAN SOZZI: Kelly, does that mean that part of the business by the back half of next year returns the growth?
KELLY STECKELBERG: I would say flat to potentially modest growth. That’s what we’re looking at today. Wendy Bergh, who runs our online segment, has some amazing initiatives if you think about how do you bring this product into international markets. And that means pricing in local currency, allowing them to buy in payment types that are familiar to them, and ensuring that your packages are right.
So we have lots– we have a huge roadmap, I should say, of initiatives. And it really depends on how well all of those goes. And then, of course, FX continues to be a challenge, I think, for all of us in the tech environment to predict. And it will depend on what impact that continues to have.
BRAD SMITH: And Kelly, as corporations are really trimming some of their costs wherever they may right now, are you seeing any churn in terms of the number of licenses that each account may be looking to hold on to at this point?
KELLY STECKELBERG: Your enterprise segment has had really strong renewals over the last couple of quarters. And this is where we see organizations really embracing flexible work and realizing that if their employees are outside of their office even one day a week, they need a Zoom meeting license, maybe a Zoom Phone license, and recognizing that they need to ensure that their Zoom rooms have the right technology in them to provide an inclusive opportunity for collaboration.
So we were ahead of our internal forecast in terms of enterprise renewals. And the other thing I would highlight is that Zoom One, which is the bundle that brings together many of these products, provides a very attractive total cost of ownership for our customers and for prospects.
So as my peer CFOs are thinking about how do they allocate spend as efficiently as possible next year, we have an opportunity to help them when they’re consolidating vendors or potentially taking some of their on-prem– like, maybe their phone system is still on-prem– by moving that to the cloud with Zoom Phone. It creates a lot of efficiencies internally.
JULIE HYMAN: Kelly, you also talked on the call about looking at potential acquisitions. Where do you see that you need to or that you would like to add on some businesses to Zoom, and what areas?
KELLY STECKELBERG: So there’s a couple of different aspects in which we look forward to potential acquisitions. First is continuing to add functionality. You saw about a year ago, we did the Solvvy acquisition, which brought in the conversational AI feature to our Zoom Contact Center. And that has gone very, very well for us. They’ve helped us accelerate our development in that aspect of the product.
And then looking at potential adjacent, so maybe think about us going more in the productivity realm. That would be an easy opportunity where we could acquire a product that is potentially more mature with customers, products, revenue, and bring that in. So we are continuously looking for opportunities. And I’m sure we’re going to find another right match soon.
BRIAN SOZZI: All right, well, keep us posted on that. Zoom CFO Kelly Steckelberg, always good to see you. Have a happy Thanksgiving.
KELLY STECKELBERG: Thanks. You guys, too.