Zoom Communications, Inc. (ZM) Earnings Call Transcript & Summary

So first up is Gary Sorrentino. Gary is the Global Deputy CIO of Zoom. Gary has got an amazing background with an incredible global experience, most recently at JPMorgan Chase. Gary, welcome to the program.

Thank you very much.

It's worth getting 30 seconds on that experience at JPMorgan Chase because it really sets the global context of the kind of work you were doing for Jamie Dimon. Do you want to just give 30 seconds on that?

Yes. So yes, I did about 25 years in financial services, and I did that across 4 banks. So just to put the background. I did UBS, Crédit Suisse, Citi Group, all small banks, and then I went to JPMorgan. And part of my life with JPMorgan was a CTO for Asset Wealth Management. But towards the end, I developed a program called Protect the Client. And it was really about JPMorgan giving back to their clients to make them cyber safe from the outside of the bank looking in. The bank was safe on the inside, but how do we get out, actually work with our clients and figure out how to make them safe? And so for the last 4 years, I had the honor of seeing some of their most prestigious clients all over the world.

And you now head up the CISO council for Zoom, correct?

I'm -- besides being the Deputy CIO, the Global Deputy CIO, I head up the Zoom CISO council, which is made up of about 35 CISOs from some of the most prestigious companies in the world across 10 verticals, and they work with Zoom as voice of the client.

Awesome, love it. So when you think about the workforce has undergone amazing transformation and change over the past 120 days. What are the important steps for business leaders to succeed today in this journey, Gary?

So let's break it down to maybe they need to talk about 3 things. They need to talk about or think about taking lessons learned from the crisis into the future, never give up a good chaos. And part of that is about adapting to the new work-life challenges that the employees are facing. They need to consider what that new work-life balance is going to look like. But I really think that people need to be cognizant of the problems we're having from work from home now, kids, families, personal time, bad Internet, is going to continue. So it's taking all those lessons into the future. Let's not discount what we learned. I think the second thing is, they're going to need to adapt to flexible work schedules. You can already see some people are going back, thinking, well, we're going to get back to a normal schedule. You see, workers don't need to work near that office anymore. They can work anywhere they want. And we really do need to reassess which jobs need to be performed in the office and which don't. The employees are going to do this for us. We've heard many, many stories even through your network and your events where people go back to work just to find out they did the same thing they did at home. They're on 10 Zoom meetings at work all alone, why do I have to drive in? What do I have to risk my health? And within days, they've reverted back to full remote. And I think the problem is this. We knew how to work when -- what was it pre-COVID? About 3% of the people work full time from home. So when 97% of the people are working on premise, we know how to work. When 100% of the people are working virtually, we know how to work. Yet we don't know how to work in the hybrid. And that's a real problem with [ alt ]. We don't understand the communication challenges. So that's why I think the third thing they need to think about is getting collaboration in the hybrid. The employees aren't doing a good job about it. The managers aren't doing a good job about it. Middle management, managing while walking around, they have to be re-up-skilled, right? How are they going to do that? I think those are the 3 things that they need to think about moving forward.

Thanks, Gary. When you think about the workforce, both short and long term, what do you think it'll look like?

So let's think about this next stage. I look at this as we're evolving, right? We have no idea what the next norm is. We talk to lots of people. We talk to the analysts. Everybody has given us data from February. And in February, we were all thinking something different than we were in June. And so everybody is experimenting now. I think videoconferencing in the short and long term is going to keep us connected. So that's going to be a standard. I think we're going to find that balance between work and personal life again. And we're struggling right now, but we need to find that balance because when that computer bings in the other room, our sensation is to go over there and just answer it. And I think that people are now figuring out that boundary. Yes, kids and pets, it's summertime, people are home, distractions. We're going to have to filter that all into the short term. Because during this transition, those things are still going to be with us. Are we still going to be productive working from home? And that's the thing I think that we need to think about short term. You might figure it out long term, but short term, we have to get this phased approach. And so what I think we're going to see is a drop in productivity in the short term, a learning and then an increase in productivity and collaboration. We will figure out a hybrid world. And I do think travel restrictions are going to continue. It's just so easy to be at different events. Look, you're doing several events this week, and you've never left the office. And so we're going to see that continue probably until at least the end of the year. I know for Zoom, we're grounded until the end of the year period. I think the other -- go ahead.

After you.

I got 1 more thing. And I think the last thing here in the short and long term is we are going to see the advent of the personal office improve. You're going to see more of those personal collaboration spaces and things like that. I think people -- I was on with a bunch of just regular end users working from home. They're reinvesting into their home office. They're buying products they wouldn't have bought before because this is no more about Sunday night doing e-mail. This is about full-time work.

Culture matters and culture is important, that we've learned that from Peter Drucker, the late Peter Drucker. When you think of culture and the work from home environment in the Zoom world, what's important? What are your tips?

Yes. So we talked about culture. And there's -- we have to figure out how do we replace those in-person collisions, those chance meetings in the elevator that, hey, I met you by the coffee pot, and we started something. Culture is very much a person-to-person item. And so I think companies are going to have to figure out how do we engage people at the nonwork level. At Zoom, we do things like yoga, exercise classes, happy hours, trivia, name that tune. What our goal is, is to make them understand that, look, we're all working together but we're all friends, and we're all colleagues and that during the day. Now we don't do these at 8:00 at night, right? We do it at 3:00 in the afternoon some time. What we're trying to say is it is okay to take a break and sort of spend time reengaging on a personal level. And hopefully, we can keep the culture going. What I do think is this: Whatever your culture was when you left, I don't think it's going to be the same culture when you come back. I think that employees have changed their opinion. I have. I'm not a millennial, right? I'm a baby boomer, as we just said, right? But I think like a millennial now when it comes to working from home. I enjoy working from home. I enjoy the engagement I get. I've changed my whole view. And I think the 1 thing is, you need to set boundaries. You need to make sure that the employees realize that, that text that you sent at 10:00 at night doesn't need to be answered at 10:00 at night. And you really need to set the culture by example. And unfortunately, the senior managers, myself included, we're working hard and so it's easy to work hard, and it's easy to forget about your culture.

You guys -- you folks at Zoom have had some amazing success, and Eric was recently recognized in Barron's over the weekend as one of the top 25 CEOs of the year. Congratulations.

Thank you very much.

It must be an incredible ride for you, Gary. When you think of the skills required to be successful in this new normal, what comes to mind?

So I think from the management side, they really do need to reassess the tools they give people. I think that today, people are learning another way of working. We're seeing a lot more personal tools. Look, Zoom is part of your daily work, and it's keeping you connected with Mom. And so I think at the end of the day, we really do have to look for these tools that are going to make people work better, more productive. I like to coin it, I hope I'm coining a phrase, enabling technology. And it's really about, the technology is adapting the way people work. People are not working the way the technology wants to work. They're working the way they want to work because the technology is simple and just works. It makes them collaborative. It's flexible. It adapts into their desktop. People don't want to be challenged by technology anymore. They want that same frictionless, seamless experience we get with personal technology in the workforce. And we can give it to them. I just think that corporations need to step back and figure out how are they going to work by asking them. That's a big thing, ask them, right, and then figure out the right technology to make them productive, innovative, working together again. And the hybrid is going to be the hook that says if we can figure this out in a hybrid world, we're going to be moving forward. That will be the next power company.

Gary, big thanks to you, Eric and the team. You've done a great job and what an amazing story. Thank you, guys. It really made enterprise video platform communication ubiquitous and easy to use.

Not just enterprise, though, right? Big consumer play. Not only is the CEO doing his board meeting, but his kids are learning on Zoom. And so it's been a really good play from the consumer up to the enterprise. It really has changed the company. Thank you so much for everything you're doing keeping the community together, and we'll talk to you soon.

Great, Gary. Talk to you soon. Thanks.

Thank you.