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

Good morning, and welcome to the 24th Annual Needham Growth Conference. I'm Ryan Koontz. I cover the broadband networking and cloud communications sectors here at Needham. You're watching the event from our conference platform, feel free to submit questions via the browser links. I hope to have some time at the conclusion of our remarks to address them. With that, I'm pleased to welcome Zoom, that provides frictionless communications platforms, including its flagship meetings product for large enterprises, small businesses and individuals. I'm joined by CFO, Kelly Steckelberg. How are you, Kelly?

Hi, Ryan. Good morning. I'm great. How are you?

Good. Nice to see you.

You, too. Thanks for having us.

You're welcome. Yes. So maybe let's start with kind of what the recent business trends, how '21 as a calendar year, sort of trends you saw in the business year. Obviously, the pandemic ebbs and flows were a big impact. But maybe walk us through at a high level how we got here.

Yes, sure. So as a company, and I think as a workforce, most organizations are in this really interesting phase of transition. So at Zoom, we are transitioning from being a meetings company into a platform that can support all aspects of your communication and collaboration, including Zoom Phone, including Zoom Rooms, Zoom Events, which we recently launched, and then upcoming video engagement center as well. And what we see from many of our customers is this is perfect timing, right? Because they're in their stages of thinking about what does the future of work look like? And I think -- I know you're working from home, I'm working remotely today as well. And many organizations are thinking about what does the future look like? And the longer that this pandemic continues on in various stages, they're really embracing a hybrid or flexible approach. And that's where all of these solutions that we have to offer come to be. And so what we've seen during the year -- during the last calendar year is continued strength in the upmarket as organizations -- simply said, thinking about how do they keep their employees safe and realizing that they need a Zoom license for every one of their employees to accomplish that, and that employees really want the flexibility of working outside of the office at least a few days a week. And then in the mass market, what we've seen is that customers are going back to kind of more similar behaviors and buying patterns that we saw before the pandemic. So we talked about this a little bit on the call earlier this year that we've seen returns to normal seasonality, people taking a break during the summer. We talked about you were able to take a break, I took a break also over the holiday season. So we saw a normal global end of the year seasonality as we would expect. So it's very familiar to us. It's -- you have to look back a few years, but we're going back to kind of that way, which is great to see people moving around the globe again. And so that's kind of the pattern that we're seeing in the 2 segments of our business.

Yes. So most of the growth is coming upmarket in meetings.

Yes.

And Phones had some really great success too, right? It has a huge installed base to sell into.

That's exactly right. So Zoom Phone is about 2.5 years old at this point. And as you just mentioned, our strategy for selling Zoom Phone is selling into our existing installed base. We are just thrilled with the momentum that we've seen. We announced in December that we had hit 1 million seats. And then by August, we had hit the 2 million seat mark. The other thing that we've really focused on with Zoom Phone is investing in our channel. As we -- when we were selling Meetings, we were largely direct led, but the channel plays a very important part in the Phone sales. It's typically a different buyer. And so over the last 1.5 years as we've invested a lot in our Master Agent Program, especially in the U.S., and that's going really well. And now we're focused on expanding our channel program outside the U.S., and that's a combination of Master Agents, which work in some markets, it's carriers and others, but really, really excited about the momentum that we're seeing there.

Terrific. And so in the enterprise space, I think that's kind of the golden ring that everyone's chasing after and you guys have done a terrific job of moving upmarket there. What's that environment like these days? Sales cycles are returning, maybe lengthening a little bit compared to the panic of the pandemic of trying to plug holes and get companies functional again.

Yes. That's exactly right. Organizations are being more thoughtful about buying and going back to the typical proof-of-concept or RFP process that they all employed before the pandemic. But again, it's familiar to us, right? We know how to do that, and we fare well. We -- when we have the opportunity to compete, we do really, really well as people still value what Zoom has to offer, which is ease of use and reliability. And then when you think about the expansion of this platform, the ability to have a natively built integrated solution for video, for voice, for rooms and eventually events and contact center, like that is very, very powerful. And we continue to see right before the break, we had some really amazing enterprise wins. And some of them is asking like why is this customer at this point? What are they doing when they were buying more Meetings and they were adding Phone? And in that situation, it more than doubled their existing MRR. So we continue to see strength in customers as they're really thinking about now simplifying their vendor strategy and taking the opportunity to consolidate. And also, it's really -- the pandemic has been a real incentive for people to finally take the leap and get phone off of their premises and into the cloud. And that's what we're seeing as well.

Great. And so -- and Rooms is still a relatively new business. Was it about a year old, I guess?

Rooms is a little bit older than that, but it's taken a little bit of a break somewhat during the pandemic as organizations have been rethinking their strategy. A conference room strategy is really, really important. It's really front and center as they think about welcoming their employees back because you need now the right technology, both software and hardware, in the rooms to recreate this experience that we've all come to enjoy during the pandemic, which is that we can see everybody's face. And if you think about the experience we might have had pre-pandemic when you have some people that are in a conference room and some people that are working in a different location, the experience for the people that are outside the room hasn't been great historically. So we are really working on innovations to improve that. And there are things like Smart Gallery, which recreate this. So even if you have like 4 people in a conference room the cameras and the software make it feel for the others that are outside the room that you can see each individual's face. So it's recreating this experience, which is really, really great. And then the other innovation has been companion mode. So when you're on a meeting, a Zoom meeting like this, there are additional ways to communicate rather than just sitting here and talking, right? There's the chat functionality, there's polling, there's the ability to raise your hand, to use emojis, and companion mode gives that way, allows you to come into a conference room and silently join a meeting and take advantage of that additional functionality as well.

Interesting. Can you explain that a little more? Like what is that experience like? With Zoom running, they're more of an observer than a participant?

Well, sort of. It's like think about -- we've heard from individuals, especially, that they really appreciate joining a Zoom meeting as opposed to in-person because it gives them -- especially if you're someone who might be a little bit more introverted perhaps. And it's difficult sometimes for you to find your way vocally, verbally into a meeting that the chat functionality in Zoom or the ability to raise your hand and have an indicator that you would like the opportunity to be recognized to speak is really, really helpful. So now if you're an individual that walks back into a conference room, and this is how you're meeting, you might lose some of those advantages. And so what companion mode does is it allows you to join the meeting without your camera and without your microphone being on, which can be super disruptive. You've probably done that before in the past, where you've watched into a meeting and it turns on and there's that terrible squealing noise and the camera might be on when your phone is in your pocket or not, you turn it the right way. Like it's very disruptive. So companion mode eliminates all of that noise around it, but allows you to join on your device or your laptop and be a participant in the chat or be a participant in the polling or be able to indicate that you would like to be next in line to have a speaking opportunity. And so it takes -- again, it combines the best of both worlds. It combines -- it brings you together with your colleagues in-person, which many of us are longing to do, but still leveraging the technology to give you all the tools of communicating. Eric's mission, if you step back for a minute, has always been to make a Zoom meeting better than an in-person meeting. And now I think what we're doing is not only making Zoom meeting better than in-person meetings, but making in-person meetings better with Zoom than without them. And that's really what we're focused on.

Awesome. And you mentioned that the mass market has seen some seasonality and slowing and maybe folks that use the platform in kind of a crisis mode during the pandemic. And what's your current view? What have you learned about that market and the process of -- the types of customers that come and go and the type that stay?

Yes, so first of all, we -- in everything that we do, we focus on delivering happiness to our customers. And when it comes to the online segment of the business, we make it very flexible for customers to come and go. We love it when they buy annual agreements, but we also give them the flexibility to buy monthly, if that's what serves them best and to easily come sign up on the platform but also to leave if they want to take a summer break. And that's how we've seen -- as we've gotten sort of through the initial wave of the pandemic, how we've seen people use it. And I think it makes sense, right? Like we've all realized how Zoom brings convenience into our lives from a work perspective, and we also want to do that from -- in our personal lives or maybe for small business owners or individual proprietors. And so we've seen these normal return to, like I said, normal seasonality. We saw it in the summer. We saw it -- we've seen it over the year-end holidays on a global basis. And that's exactly what we expect. Now what we have really seen, and we talked about this a lot at Analyst Day as we shared that chart that showed as customers in this segment, especially get to 15 months plus of their tenure, the retention rates really stabilize. So these are customers that really have embraced the value of Zoom and that we understand that they really have a long tail of renewal from that point on. And as we are seeing our cohorts, especially those that we acquired during the pandemic, age through and hit that 15-month mark, we're starting to see more and more stability in that segment of our business, which is very helpful in terms of the overall volatility and stability of the business.

Right. Well, hats off to the company on execution and just what an amazing job you did in the early days of keeping the ship afloat and keeping the world afloat, it really seems.

Thank you.

So great kudos to you and the team on just incredible execution.

Thank you.

So from your seat financially, you're still doing some catch-up on spend and hiring, seems like, but the gap is closing. Can you kind of walk us through kind of your OpEx outlook and how you hope to get to what your targets are there?

Yes, sure. Exactly. So there -- we are absolutely continually focused on continuing to grow top line and take market share. And so what that means is there are a couple of areas that we are really, really focused on continuing investing in and even increasing our investment, including R&D. So our long-term target that we've stated for R&D spend is 10% to 12% of revenue. And in Q3, we came in at 6%, so still not anywhere near where we would like to be. We've seen steady improvement in that, though, and growth from around 4% at the beginning of the year. And this is just due to the rapid acceleration of revenue that we've seen over the last couple of years. It's taking time for us to catch up in terms of hiring and investment, but we were absolutely focused on not only hiring engineers on a global basis, but hiring the talent acquisition team to help us hire those engineers. And that's a big focus for us. And yes, I mean, you laugh but it's really true, right? You think about when you need to almost double your engineering team, you need a team focused on accomplishing just that. And we're making great strides in that. So really excited about that, and we should be much nearer our target as we come through FY '23, which we're working on the planning process for right now. And then the other areas that we're very focused on investing is sales and marketing. So continuing to add sales capacity on a global basis, you should -- as you did this year, expect to see continued growth in international, and that's part of the plan for FY '23 as well. And then marketing, if you go all the way back to pre-pandemic, our marketing spend was largely focused on brand awareness. Some of you may remember, we had billboards on the 101 or lots of banners in airports around the globe. And due to the pandemic, the increase in our brand awareness -- it would have taken years and millions of dollars to have accomplished what happened during the pandemic, which is great because now it's allowing us to shift a little bit away from brand awareness to more targeted product marketing. So you should expect to see more targeted marketing around Zoom Phone, around Zoom Rooms, around Zoom Events, in the future video engagement center so that everybody who knows about Zoom Meetings also knows about the full platform of products that we have available. So those are the areas that we're very focused on continuing to invest in. And then the areas where we're really focused on being as efficient as possible include cost of goods sold. You may remember that our gross margin changed pretty dramatically during the pandemic, and it was impacted by a couple of factors, including the shift of the majority of our traffic out of our own servers to the public cloud as well as the increase of free users on our platform and the provision of services for free to K-12s around the globe. And we've seen steady progress in improving in gross margins. There's a multiyear strategy, building out our own data centers, and it is multiyear. I want to just keep reminding everybody that it takes time. We are very, very thoughtful about ensuring that there's no disruption to the service. And we want to -- we were able to do at the beginning of the pandemic. We certainly don't want to cause disruptions at this point as we're migrating back to our own servers. And we've also seen, on a global basis, schools being able to return to on-campus teaching, which is great. So little by little, we've seen improvements of our margin as the provision or the usage by those K-12s has started to decline. And then the last area, of course, is G&A. And we are always focused on being as efficient as possible in the G&A function. And that's really right in our target already, 8% to 10% is our target for that. We came in at 9% in Q3. So always focused on doing if we can do more, but that's kind of right in the target range we'd like it to be.

Cool. And on the data center strategy, you mentioned that was a multiyear approach. Is that supply chain limited or more just execution, just having enough staff to do that because it's not something you probably -- you had to build a lot faster than you ever thought you would in your dreams, I'm sure.

Yes. It's really a combination of being very careful to make sure we don't disrupt. But also, we absolutely have been constrained by supply chain availability. And we have some amazing partners that we work with. But we're facing what everybody else is on a global basis.

Yes. Great. And just circling back to your R&D focus, I recall some geographic expansion and new kind of target areas to hire in, how has that played out for you?

Yes, it's been really -- I mean, one of the things that we've really embraced during this time is hiring talent wherever they are. And that's been great. It's really accelerated our ability to add amazing talent. From an engineering perspective, we really opened up in the U.S., which has been great. Also, India has been a hiring opportunity for us, and probably to a lesser extent, in Europe, but it's been really nice to have that opportunity for global expansion.

And are you trying to fill offices with your R&D hires or remote? Or whatever works as of now?

Yes. So as a company, our -- we are still fully remote. We -- in our offices to welcome our employees back and we have a plan. We have one office open as a proof of concept of a test right now, which is in Sydney. And we have the rest of our offices staged for later this year. Of course, we're watching very closely to see what's happening with the variants and where it's safe. But we will -- depending on the types of roles, have a combination of work styles in our company, including some that will be fully remote, some that will be full time in the office and then the majority of our employees will be in a hybrid approach where they get to choose how many times a day -- they are how many had a month or a week they want to come to the office.

Great. And maybe just wrapping up the past year, some of the M&A activity you've had? I know you just did a deal for this liminal broadcast area, maybe walk us through a few of the deals you guys...

Yes. So some of you may know we added a great member to our team, Sanjay Rao, who was previously banker with JPMorgan. He's joined us. He's focused full-time on M&A and corp dev opportunities and that's been really great. To date, as you mentioned, we -- this is our third, we've completed 3. They've been mostly smaller acquisitions, but we continue to look for opportunities to either augment our talent, which has been mostly what we've done to date, or our technology. And as we continue to expand the platform, I think you should expect to see opportunities for technology tuck-ins that accelerate the development of our new products. And that's where Sanjay has been spending a lot of time. While we continue to look for opportunities for bigger acquisitions, I mean, the obvious one was the Five9 deal that unfortunately failed to come to fruition last year, but we continue to look for opportunities like that as well. We just have a very high bar internally for both talent and technology. We want to ensure that, especially from a technology perspective, that anything we would add would be additive, accretive to the platform itself, which is built on a modern architecture and what really sets Zoom apart, right? It just works is largely based on the fact that we have a platform that was built in modern technology. And we want to make sure that we continue to move forward in that and never backwards in that.

Yes. Great. Let me just circle back on a couple of the products and supply chains. We talked about Zoom Rooms. Is that an area where supply chain has been a little difficult as well? I imagine new product ramps, I've heard just across the industry and the hardware side have been a bit challenging.

Yes. So we have some amazing hardware partners. So just as a quick reminder, we developed a software, the Zoom Rooms software but we partner very closely with many hardware providers, including Neat, Poly, DTEN. And they have all done an amazing job, especially during the last 2 years, of working very closely with us, understanding what the needs of our customers are as they think about reopening their offices and running their spaces. And I think there's some constraint. I don't think it's quite as significant as it is in other areas like servers. And they've taken this time to really, again, be thoughtful about -- some of these things like Smart Gallery are a combination of both the hardware and the software and working very closely with us during this time to make sure that we're really at the forefront of what our customers need.

Yes, great. Maybe shifting gears to the competitive landscape. In particular in the enterprise where I think that's where the biggest barriers to entry are and you guys have made some break inroads, and there's a couple of big guys there in Cisco and Microsoft. How do you kind of handicap what's going on in the competitive landscape these days compared to Zoom, Kelly?

Yes. So I think when you look around in most markets, they're generally emerged to key players. And that's what we've always expected to happen in this space, and it's coming to fruition really with Zoom and Microsoft emerging as the leaders. We certainly see other competitors when you look around on areas like phone still. But I think, really, Microsoft is a great partner to ours. We hear from customers as they often want to leverage parts of the Zoom platform with parts of the Teams platform. And so we've worked very closely with them to enable that for our customers so that they could leverage for example, Zoom Phone and Zoom meetings from the Microsoft interface where they want to leverage for example, the chat product. You could also launch a Zoom meeting from a Microsoft-enabled conference room. But we don't take Microsoft for granted ever. They certainly are -- they're pervasive in the space and it just encourages us to continue to innovate as quickly as possible and really be thoughtful about the needs of our customers, ensure that we are there. We also not only are focused on continuing to bring value to our customers through the product and features and functionality but to be disruptive in terms of price as well. And that is something that's been our strategy from day 1, and it continues to be true as we think about the upcoming product launches as well.

Yes. And I'll go back to Microsoft, I recall they introduced a lightweight version of Teams, lower price point. Have you seen that? Kind of how much of an impact in marketplace? I mean, Microsoft seems to be a little more of an enterprise player to begin with. So I don't know with the downmarket, Teams is really going to have wins or not.

Yes. I mean, that's exactly right. We really haven't seen it. It certainly -- it's -- people are aware of it. However, what I would say is that it is largely an enterprise, and it was interesting when I was speaking to Ryan Azus, our CRO, about that offering. and he said the perception of Microsoft is largely that it's "free," right, because it's largely probably a different buyer. It's a centralized IT buyer than someone. So he's like, I can compete with $4 or $5 all day long, right, as compared to free. So I think that's how most people think about it, especially in the enterprise. And yet people -- even with this perception of Microsoft being free, people are willing to pay for Zoom because they see such great value to it. And in fact, we hear from our customers often that they would be willing to pay more for Zoom because compared to especially the other software that they use, they see such a great value from us.

Well, it just works. I mean, it always works. It's easy to use. I mean, it's an absolutely incredible product. I've got a couple of questions here coming in from investors. So can you maybe give us an overview of the recent announcement on the marketing capabilities for your partners and how big that opportunity is for Zoom to sell into that approach? I guess you guys had some kind of announcement there. Are you familiar with that?

The marketing capabilities, I would assume that they're talking about Zoom Events maybe, which is our Events product that was launched late last calendar year, and we're really excited about this. If you think about the exact experience that we're having here, right? And so if you think about pre-pandemic,, all events were largely in-person and now we've all become very accustomed to doing these virtually. And it's like work, right? What people really want for the future and they envision for the future is a hybrid approach to this. And that we're missing some of the components that you get in-person that we haven't had historically in these types of events. Like the ability to move into a waiting room or a lobby so that I could network with everybody else that's at this conference. Those are the types of things that we're creating with Zoom Events. And really, really excited about it. This is an area that's really benefited, obviously, during the pandemic, and we see a huge opportunity there.

And so is Events going to come out kind of as a phased approach, different capabilities over time? It's a very -- I'm sure it's a very complex set of requirements and different market verticals, probably have different requirements and...

Yes. So the product is available today, but it's exactly as you say. With all of our products, we take the approach of getting it out there and then listening to our customers and continuing to build features and functionality so that it grows over time.

Yes. Great. Question here from an investor. Have you seen any reacceleration in usage or customer growth as a result of Omicron? Could you comment on that.

Yes, so Omicron has been really interesting is it really I think peaked sort of right before the holiday season. So as a quick reminder, in the upmarket, we have continued to see strength in new logos as well as renewals. So no real impact there. In the mass market business, the peak really -- I think a lot of this has happened during the few weeks where we've seen lots of seasonal breaks, right? Like -- unfortunately, I tested positive over the holiday season. And I think that there were lots of others that did as well. And then last week, it was really the first week back, and we've seen sort of normal what we would expect renewals again or sales in the mass market or the online segment, I should say, as people are coming back from this holiday season. So I think what we're going to continue to see is in the next few weeks, how is it going and how are we seeing organizations potentially delay their office reopenings or schools being able -- leveraging Zoom if they don't feel comfortable reopening yet.

Yes. Yes, completely. And I know there's been some chatter around the free product and how you guys might look at monetizing that. Any -- what's been your latest public position around how to monetize, whether it's through advertising or integrating other platforms?

Yes. It's so interesting because we continuously talk about this. We had a big discussion about it again yesterday. And the free customer base has always been very valuable to us. It serves as an opportunity for leads. They always have the opportunity to expose others to the power of Zoom. But as we've seen that grow as an overall percentage and really also seen significant extension into markets that might be much more price sensitive to others, we continuously talk about this. So advertising is something that we are currently testing in a few markets. We -- I get this question of like how can you do advertising? Isn't that completely corollary to your point of like delivering happiness? But not necessarily, right? If you think about -- especially in markets that are highly price sensitive, they might be very willing to watch an ad or watch a video if it enables them to have the product -- continue to have the product for free, maybe even potentially extend beyond having a 40-minute limit, things like that. And so those are the things that we are testing. And we're doing it in a very, very thoughtful way so as not to impact certainly our paid customers. And I think you're going to continue to see more opportunities for us to -- more from us in terms of experimenting and figuring out how you can bring value to people that don't want to necessarily pay in the traditional way for the platform but have access to it.

And when you say price-sensitive markets, are those typically international areas or?

Yes. Absolutely. They're outside the U.S.

Yes. Interesting. Great. I want to remind everyone, if you have any questions for Kelly, please submit. We have a few more minutes to finish up. So as you think about growth going forward, you also talked about your other product, Video Engagement. Can you maybe walk us through how that kind of fits into the portfolio and the types of partners that you work with on that product?

Yes. So Video Engagement Center is currently in beta, and it is expected to be generally available sometime in the first half of this calendar year. Really excited about this product. Think about how video has changed the way that we work and how now it can start to bring even more convenience into your day-to-day life. So think about leveraging a call center with video to do things like show a repairman something that's broken in your home so they can avoid the first trip out to diagnose it but not have the part and then have to come back, like you could do that all over video. Or think about maybe you need to buy a couch for your living room. Rather than you trying to take the dimensions and then go to the showroom, look at the color opportunities, you can welcome a designer right into your space and show them the other furnishings that you have or the space that you're trying to fill, like you really give them a sense of what you're trying to accomplish. And so the first focus of Video Engagement Center will be those types of high-touch scenarios. Of course, medical, doctor visits are right up there as well. Over time, we will continue -- just as we talked about how we're doing it with Events. Over time, we will absolutely continue to add features and functionality and expect it to continue to evolve into a full-fledged omnichannel contact center, that if you think about the power now of having a natively built voice, video and contact center, it becomes really, really an engaging platform for our customers. And we're excited about the beta. We had some really amazing enterprise customers sign up for it. So really looking forward to their feedback and the launch again sometime later this year.

Great. I mean, do you think about things like VR and AR kind of starting to creep into the offering as well?

I think that's a possibility. I think the reality is that it's not quite where people are yet, I would say, in day-to-day scenarios, right? It's probably more likely that we would focus first on the other channels in which businesses are meeting with their customers, when you think about all of the social media channels, the more traditional voice channel as well, focusing on those, chat, e-mail, et cetera. But over time, absolutely, we have those capabilities built into our Meetings platform today and certainly could leverage that for VEC as organizations and customers are ready for it.

Yes. I want to circle back to kind of the future of Meetings a little bit because that's really the core of the business. And some of these exciting capabilities you have around kind of democratization of the Meetings, in room, out of room. It sounds like a lot of work to do it. I mean, it sounds really hard.

I mean, yes and no, right? Remember -- think about, first of all, that we have this amazing platform that is very efficient and that was built to scale and support millions of users as we do every single day. And that -- adding -- so you start with that. And then you add to that, that we listen to our customers every single day. And the big part of our future development comes from their feedback. And so when you take a scalable platform with an amazing engineering team and customers that -- they use this product every single day. Some of us live in this product every day, and we all see opportunities for things that can make it more efficient, more useful for us, especially as these use cases are evolving, really. I mean, we all know how to work in the office. We've all learned how to work at home, and now we're all going to learn how to work in a hybrid approach. And that's what's coming for -- I mean, there's no doubt about it, right? I don't think there's any debate anymore that that's where we're moving towards. And so it's just taking the best of all of those experiences and putting them together in a way that works, right? Because it's not just you take this and you take that and you match it together. It takes a very thoughtful approach. And it's a combination, again, of both the software, the hardware and then, of course, the policy or the culture of the company itself and making sure that Zoom is here to support all of these organizations, large and small, however they want to work for the future and ensuring that our hardware partners are coming along with us at the same time. And is it hard? I mean it takes time, it takes effort, it takes listening, but it takes all of these skills that we, as a company, have embraced from the very beginning. If you step back again and think about our core tenets are focusing on delivering happiness to our customers and our employees. And that means listening to our employees, too, how do they want to work for the future and learning from that and learning internally how to do it best. And we are evolving as a company. We are evolving our usage of space. We are really focused on we're adding executive -- like executive briefing centers. We're building one in San Jose right now, which is going to -- what we've realized is we need space. We, as a company, need space for different reasons than we needed it before the pandemic. Our space was largely used for highlighting our technology, selling. But the majority of the space was devoted to our employees, and we are absolutely going to see a shift in the future where more of that space is going to be devoted to highlighting our technology and getting a great place for our customers to come and experience it, for our sales organization to leverage for selling and much less of it devoted to our employees who have been very clear about the fact that they want to have the opportunity to come to the office, but they're going to do it to a much lesser degree as they move through the world in a very flexible approach going forward.

And where is that product today in development? Are you in beta yet on it? Or the kind of -- the Rooms product with kind of full hybrid mode?

Yes. It's -- the software itself is available today. It's moving through different versions, I would say, of working with our technology partners. So those things like Smart Gallery previously had largely been available if you were leveraging a device, a specific hardware device that was built for that. And now what we are focused on is the development for things like even the Windows environment. So making sure that, again, it's going to be largely available across -- because that's what you need, right? For us to all move into this hybrid approach successfully, it has to be pervasive. It's got to be everywhere. So that every time you walk into a conference room, you know what that experience is going to be no matter what the hardware is in there.

Great. Great, great, great. I'm really looking forward to that, Kelly. And I think it will be a really big add to the hybrid work model. I mean it's something.

Yes, I agree.

It will be super. I want to remind everybody if you have any questions, we just have a couple of minutes left. Feel free to log those in. So maybe talking about M&A targets going forward, strategy, how should we think about Zoom as a platform, augmentation through M&A? What's been your approach there?

Yes. We've really been thinking about there are some amazing companies out there doing really cool things that could accelerate areas of our development. So think about Video Engagement Center is a perfect one. When you think about -- it is -- contact center is a complicated product for sure. And there are many different aspects to it. And so looking around, we kind of have like this core, if you will, diagram of the functionality that we want to make sure that we own and is really necessary. But then there's a whole bunch of other functionality that's around it. Think about even things like workforce management, like scheduling, right? Like that sits around sort of the core contact center functionality, if you think about that. So those are the areas that we look at and say like, okay, do we need to build that ourselves? Is there an opportunity that there's somebody out there today that maybe could be additive to it? And so that's how we think about it. Of course, we -- Sanjay works very, very closely with our product team to understand where is our road map today, where are we making progress? And where could we, the corp dev team, help accelerate that development? And so think over time, for FY '23, you should expect that M&A is going to be a bigger part of it as we continue to look at areas across all of our portfolio of products that could accelerate that development.

I certainly think that your ecosystem approach also plays right into some really elegant M&A opportunities because you already have partners you're working with, and you're creating a system of smaller companies. Don't you have a venture fund also?

We do. Yes. So we have the Zoom Apps Fund, which is $100 million that we set aside last year. And you're exactly right. We've invested in probably, I don't know, approaching 20 companies to date that are in the -- doing all areas of -- from gaming to like enterprise support. And so that's been really amazing. And you're right. It's a great opportunity to see what's up and coming in the funnel for potential M&A.

Great. And you mentioned the Zoom Apps. I mean should we think about these as kind of add-on features to some of your other products?

That's exactly right. So typically, they do a couple of things. They either extend the meeting experience itself or they augment in the experience so that you can do you things -- some of the bigger ones, of course, are like Dropbox, ServiceNow, Asana, which allow you to join those from within the meeting experience. And then we've seen some smaller ones, which extend beyond it.

Great. Well, super. Kelly, At this point in time, any closing remarks you want to make in finishing up?

I would just say, first of all, thank you for having us today and for all the support. We're really excited about the future of work and this transition that Zoom is in and moving from being a meeting app to a platform to support all of our customers' communication and collaboration needs of the future.

Great, Kelly. Thanks so much. Nice to see you.

Thank you. Nice to see you, too. Have a great day.

You, too.