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

Thank you all for coming out for the afternoon session after lunch. I'm Michael Funk. I'm one of the software analysts at Bank of America. Really pleased this afternoon to have Zoom and Kelly Steckelberg here with us. Now the format is going to be fireside chat. I'll leave a few minutes at the end for Q&A from the audience. So if you have any questions at the end, please raise your hand. They'll come around with the mic for you. So please wait for the mic. Kelly, thank you again for being here with us.

Yes. Thanks for having us. It's great to be here. Hi, everybody.

Yes. Wanted to give maybe a minute or 2 to start, just want to kind of lay the groundwork for us, discuss the most recent quarter, anything you wanted to communicate post-earnings.

Sure. So we are in the stage of successfully transitioning from the killer meetings app that you probably all lived on for the last couple of years to a unified communications platform and really excited about the progress that we're seeing across all aspects of that. I'll talk about the products and then I'll talk about the results a little bit. So we've seen tremendous momentum with Zoom Phone, which is our cloud PBX solution, which is about 3 years old at this point. We announced in the quarter that we crossed over that 3 million seat mark. Excited about the momentum we're seeing in Zoom Rooms, our conferencing solution, which is really imperative as everybody is trying to figure out about what the future of work looks like. I think one thing is certain is having the right technology in your conference room is really important and Zoom Room plays a very important part of that. And then we have some new products that we're super excited about, including Zoom Contact Center, which we talked about a few new customers on the call. We have Zoom Whiteboard, which is integrated with our platform. These are all natively built products as well as Zoom IQ for Sales. And those were all launched within the last quarter, so very excited about that. And then we have Zoom Events, which was announced last fall. And then, of course, Zoom Chat, which is a product we've had for a long time, comes bundled with Zoom Meetings but is a really important part of our ongoing investment strategy. So our results for the quarter, our Enterprise business grew 31% year-over-year. So really excited about the ongoing momentum we see there. And that's a really important part of the long-term strategy around growth for Zoom. If you remember, pre-pandemic, 80% of our business was Enterprise. And in Q1, we announced it moved from 50% to 52% of our revenue as the online segment of our business grew so quickly during the pandemic and now seeing that the Enterprise move ahead from a growth perspective.

That was a great overview. Thank you for that, Kelly. And I wanted to dig into a few of those points that you made. First of all, your expanded product portfolio beyond the ubiquitous video solution that we all use and know so well into CCaaS and into Phone. So how has the sales motion changed though, right? Because I'm sure it's changed significantly in the last 2 years. Some enterprises first were scrambling and saying, how do we keep our employees connected? How do we stay connected with our clients? And obviously, Zoom was the solution, right?

Yes.

And now you're selling a more complex product portfolio. So how has that sales motion changed over the last 2 years? And I guess, how do you envision it changing going forward?

Yes. I think, first of all, we're back to a much more normalized buying approach from our customers. So back to how they were buying pre-pandemic, which is very thoughtful buying decisions. As you mentioned, during the pandemic, I think everybody was scrambling to figure out how they were going to keep their employees safe and productive. And now they're being more thoughtful about this, which includes normal buying strategies like RFPs or proof of concepts that we're very well used to. Our strategy for selling any of our new products, including Zoom Phone, Zoom Rooms, Contact Center, is we're selling into our existing install base, which we really focus always on delivering happiness to our customers and our employees. When you think about our customers, what most customers have is a great degree of trust for Zoom because they've seen how we transform their meetings experience. And that leads to, it feeds into the decision about buying things like Zoom Phone or Contact Center. And so I would say, while they are more normalized buying cycles, there's a high degree of trust there already, so probably accelerated against other competitors. And some customers even buying Zoom Phone just straight out without going through a proof of concept. So I think we're, from like a rep productivity standpoint, we are higher than we were pre-pandemic, but certainly not in the phases that we were in the last couple of years.

Got it. Understood. And you mentioned already the growth rate of the Enterprise business. And I think that's clear, the success rate that you're seeing there. The other piece of the business that has been feeling some pressure post-pandemic, not surprising. I think last year at your Analyst Day, you pulled out a slide and you talked about the customer cohorts, right?

Yes.

And very similar to other subscription-based models that as customers age, the churn rate naturally declines. They become stickier, right? I've noticed a point of this on the slide.

Yes.

And I think this past quarter, you reiterated that and said that you thought that churn rate would be improving for that customer segment because of the aging of the cohorts later this year, right?

Yes.

I just want to revisit that for a second, though, because, I guess, in my mind, I can understand the historic cohort churn rates and why that makes sense. We have this specific event that happened, right, COVID. And now post-COVID and behaviors are shifting maybe in a different fashion than they would normally, right? So I guess, why do you have confidence that customer cohorts are going to churn at the same rate post-COVID as they would have during a more normal situation or circumstance?

Yes. It's a really good question. I've had lots of discussions around these online cohorts. And the one thing that I can say for sure is when you look at the retention rates after the cohorts hit this 15- to 16-month window or birthday, they are remarkably stable and consistent, even when we've had a lot of volatility in the earlier cohorts. So last summer, for example, there was a lot of volatility around summer seasonality, and we weren't sure if it was COVID-related, if it was just seasonal, turned out to be seasonal in nature. But even while that was happening, the retention rates for those older cohorts has maintained. And as we continue to see them month after month after month and quarter after quarter, it has just stayed the same. And so by the time, we're at about, more than 50% of our customers today are those cohorts are older than that 15 months. By the time we get to the back half of this year, it's going to cross over like 80% mark. So that just tells you that for the large portion of the largest cohorts that are now in that stable period. And I think part of why it's maintaining, even though we were in a post-COVID, partially post-COVID era, right, people have integrated that into their lives. So what we hear from our customers is they are enjoying real-time happy hours with their friends. They're not doing that over Zoom anymore, but they are doing things like having their kids go to tutoring or businesses have built their businesses on this platform with smaller businesses. And so even in a post-COVID era, those are not going to change. Those experiences or those use cases are not going to change, and that's what we see.

So that stickiness is going to be consistent is what you're saying?

I don't see anything in the data that points to anything else. That's what I would say.

And the data is next that I wanted to get to actually ask this question or a call back after earnings. And I said, I get the historical empirical evidence. But I think I asked you, do you have a real-time capability to track usage by customer segment and then use that for a predictive analysis to think about churn? And just kind of, if you could kind of repeat what you told me back then or a few weeks ago.

Yes. So we do absolutely look at usage. We can look at it by customer and by individual. Now what's interesting is when you look at enterprises, for example, the usage has come down as people are going back to the office, they're meeting and collaborating in different ways and in-person. However, that has not translated to a change in our retention rates. In fact, Enterprise retention rates have remained very, very strong. And that's because even though usage is coming down slightly in terms of minutes usage, people aren't going to the office every single day of the week. And so they need those new licenses. If they're working outside of the office even one day a week, they still need those licenses, and that's what we're seeing. People might be spending fewer hours per week on Zoom, but they're still using Zoom and they still need a license. And I get this question a lot like, well, but can't people share licenses? I mean, in theory, you could share the license. It's extremely inefficient to do so because we don't allow concurrent meetings on the platform. So you'd have to like schedule your day out to share. And that's not what organizations are focused on, right? They're focused on keeping their employees productive in a very efficient way, and Zoom provides that.

That makes a ton of sense. Not sure if you saw this morning, we actually had our CTO, Tony Kerrison. And he was saying this morning that even though IT spending increased significantly during the pandemic, he sees no point in that pulling back any time soon. And part of his messaging was communication and collaboration, so definitely supporting your message. But as more people are thinking about the economy and the macro and the uncertainty around recession, not recession, and we're hearing more about corporates pulling back on spending, maybe not specifically in IT, but in other areas, are you having customers come to you and ask for price cuts? Has that started to happen yet? Because feels like every cycle we hear about that where customers come and they say, can you lower my pricing or can you shift the contract?

Yes. We have not seen that. So in Q1, as a reminder, especially in the Enterprise, Q1 is our largest renewal cycle all the way, starting back from the spike that we saw during the pandemic. And we saw stronger-than-expected renewals in Q1. And again, I think that our customers, in general, see a great deal of value from Zoom. We actually hear the opposite from our customers, which is often they would be willing to pay more for Zoom. But that's okay. We want them to see...

They're asking to pay more?

I don't know they're asking. They offer that up. We would pay more for Zoom. But the way our whole model is built such that the way that we want to increase our revenue per account is by selling them additional services. So if they're a Meetings customer, we want them to buy Zoom Phone and then Contact Center and Whiteboard, et cetera. And because we have such an efficient margin structure, it enables us, we, by definition, are pretty disruptive already on our list prices in the market, and that's been fully done by design. So we have not seen customers come to us. Now I mean, who knows what's ahead? But to date, we haven't seen that.

Okay. That's great. That's great to hear. And I wanted to shift a bit to talk about the incremental functionality, features. You mentioned Phone, Contact Center. Can you just walk through the success rate that you've seen to date? I think you've had good Phone traction numbers. You gave us some of those. And maybe after that, we can talk about the Contact Center.

Yes. So we're so excited about the momentum of Zoom Phone. So we announced in Q4 that in Q4 we added over 550,000 seats, which was not only a record for Zoom, but a record for this industry in terms of in-quarter adds. And we crossed over the 3 million seat threshold in Q1. So it's been a very strong momentum, really excited about what we're seeing there. And then on the Contact Center, so Contact Center is about 2 months old. I mean, it's such a brand-new product.

Yes. So nascent, yes.

Yes. But on the call, we talked about 2 exciting customer names, and so that's great to see. And we see a couple of different things happening right now. We see the smaller companies implementing Contact Center to take their full company contact center. And then in larger companies, we're seeing them do it on a departmental basis. So we have a 200-seat customer that's about to go live in a month or so, so super excited about that. And we'll just continue to build on features and functionality there and are excited about the momentum we're going to see.

Okay. And on the features and functionality for Contact Center, how should we think about that evolution? Obviously, it's a pretty broad space, very fast-growing space, but also one where there is a wide variety of functionality in the marketplace.

Yes. Really good point. So today, our Contact Center supports video; of course, voice; SMS; and will very quickly also support, be a full omnichannel contact center, so supporting other things like social media. And then we just announced the acquisition of Solvvy, which will help with the conversational AI as well. And then there's a lot of other areas you can think about for Contact Center that we're looking at. And they will potentially either be build or buy, things around areas like workforce management, which are also really important. So we have a full road map ahead. And of course, at this early stage, we listen a lot to our customers and take their feature requests. As with all products, somewhere between 10% and 20% of all new features come, ideas come directly from our customers.

Okay. I think the common wisdom in contact center was it would take 3 to 5 years to really build a competitive platform, right? And obviously, there was a different strategic direction a year ago and just didn't work, but I think probably supports that thesis that it takes a number of years to really build a comprehensive complete platform. How much more investment do you think that Zoom has to make and time to be competitive with the high end of the market with the most complete solutions that are out there?

Yes. It will take some time for sure. I guess I will come back to the example I can point to is Zoom Phone. So 3 years in today, we have a Fortune 10 customer using Zoom Phone. So that tells you that at this stage of the company's life cycle, it is meeting the needs of the most sophisticated users in the world. And I would expect that Zoom Contact Center is going to follow the exact same trajectory. And I always tell people, don't ever underestimate Eric because he'll do it. And I think he is.

Yes. But is Phone a commodity now in this conversation when you're talking to enterprise customers. I mean, I've been covering communications for 24 years, right? And I've seen every technology cycle through wireless, enterprise communications, cloud. And what was once bleeding edge technology in communications ultimately becomes a commodity, right? And I feel that Phone now and XCaaS becoming more of a commodity solution because nobody cares who is running that dial tone when they pick up the phone. They want it to work. They want it to work simply. So is that a commodity in your conversations? Are customers asking for voice discounting within the bundle or is there still a way to differentiate that product?

Well, I agree with you, people just want the dial tone to work. You wouldn't believe the number of lines that are still sitting out there on on-prem solutions. And so that is one of the last areas that organizations have taken the plunge of moving from on-prem to the cloud. The pandemic, I think, really highlighted how painful it is to have all these on-prem solutions while your workers are remote. And so I think it's creating this momentum in terms of the movement. So is it a commodity? Potentially. Maybe they don't care, but they're realizing they don't need to have it on-prem. And in fact, it's cheaper to get it into the cloud, right? It's cheaper in terms of you don't have to have that on-prem hardware and more mobile and more convenient for your users. And oh, by the way, our product is highly competitively priced in the marketplace. So for all of those reasons, it creates a lot of value and reason for them to make the move, especially now when you start to think about, you can consolidate vendors and have this natively built platform that has video, voice, contact center, chat. All of it together becomes very, very powerful. And in fact, it increases the functionality that you get by putting them all together because you can do things like one click, launch a phone call or a meeting from within chat, which you can't do if you have disaggregated vendors.

Yes. That makes a ton of sense. And even the market transition from say, PBX in the cloud, I completely get and agree with that point that you were making. More broadly, though, when enterprises are making that decision to move on-prem into the cloud, is that decision-making, is that correlated with the broader enterprise decision to move into the cloud or is it communication-specific?

It's really interesting because the phone buyer or the team that manages the phone is often separate from even other parts of the IT organization. They might ultimately report to the CIO, but like there's a different buyer there, just like there's typically a different buyer for contact center as well, which is having this broader platform is great for us because it gives us access to more people within an organization. So it's typically a different buyer and they often rely on experts to make these decisions. So that's why the channel has become a much more important part of our selling strategy as well. So they often look to channel providers that have expertise in this area. We, over the last 1.5 years, have spent a lot of time building and refining, I would say, our channel organization, our channel partnerships in the U.S. and now are very focused on building that internationally. And that will also be one of our strategic growth drivers for the future is getting both our international sales team built out but also our international channel further built out.

Okay. What's your expectation for the mix of sales, some channel versus internal sales over time? How do you think that mix shakes out?

Yes. I mean, it varies by product line, I would say. So when we were only a meetings company, fewer than 10% of our total deals were touched by the channel. For Phone, I would say around today, around 20% of our Phone deals are touched by the channel. And if you think about now expanding that internationally, it could grow to a little more than that.

Okay. In respect to the Phone comment about the commodity nature of it, in those discussions, when you're talking about adding Phone on to your customers, are you coming in, how is your pricing relative to your peers? I guess is the most direct way to ask that question.

Yes. It's about half that. If you look at our list price compared to our peers, it's about half that. And again, because we have such an efficient margin structure, we're able to support that. We can do that. And some of our competitors can't.

Okay. Okay. So you expect to continue to gain market share in Phone, continue to post strong net addition numbers like you have been doing because of the more efficient, because of the more efficient price.

Yes. I would say, it's not just about the pricing though, it's about the product. It's a great product that our customers, we always say we want to win based on product and we won't lose based on price. And that absolutely holds up for Zoom Phone.

Great. I wanted to shift the conversation for a moment just to margin and profitability. And this is just a broader observation and comment, maybe doesn't apply as directly to Zoom. But I do think the market and through valuation specifically in this space is saying that they think it's a principal-agent issue, right, where maybe isn't trusting management as much to invest that next dollar or saying that you're investing a dollar at negative return or you're throwing it into a bonfire, right? So there's that level of distrust. And across the space, sales and marketing and R&D is relatively high because there is a tremendous market opportunity. But what is your thought, though, on balancing that spending and balancing growth versus margin given my earlier comment about valuations and what I believe they're saying at least.

Yes. So we are in a unique position. So for those of you that have followed us, right, remember, during the pandemic, our revenue ramped so, so quickly that we actually could not keep up from an investment and a hiring perspective and our operating margins crossed over the 40% margin line. And where we're sitting today, I think we've done a really good job of being very thoughtful about how we're investing. And we're, by our nature, we are a very frugal company. However, we are actually underinvested in R&D very specifically. So our long-term target for R&D spend is 10% to 12% of revenue. Last year, we invested under 7%. And the year before that, we invested under 4%. So that just tells you, we still have room. And we are, as quickly as we can, hiring and attracting engineers on a global basis. And it's really important because I think this is one of the most important things we have to do as a company to ensure the sustainable growth of this company is innovate every single day. And without enough engineers to do that, we have to get back to a level of being at that investment, that right investment level to ensure for the next 5 years we're innovating at the rate we need to be.

Yes. That makes a ton of sense. And now I wanted to ask about the hiring environment as well. I mean, employee attrition was high across the entire industry. The last year or 2, hiring was difficult, specifically for engineers, right? Are you finding it easier to hire in the current environment just given the relative stability of your company maybe versus some privates or even some peers? Is it getting easier to hire?

So we've been able to continue during this whole time to attract great talent. And having a flexible environment and a flexible hiring practice has helped a lot. Because we don't believe that you have to only find great talent here in the Bay Area any longer, especially engineers. We've opened up an engineering center in India. We've opened up one in Singapore. And we are also attracting engineers anywhere in the U.S. and as well as other functions as well. And that's been really great. And yes, I think Zoom has a great culture. People see that. They have seen what we've done as an organization and a company over the last couple of years. And I don't know if you guys all saw, we hired a new President yesterday. We're super excited to have Greg be joining us to lead all of our go-to-market functions. And I think that's just a testament about the great talent that we're able to continue to attract.

That's great to hear. So your hiring plans are on track?

Yes. Absolutely.

Okay. So we should expect that, I think you've mentioned in the last call that R&D spending and expectations, that should be ramping in line with your previous comments.

Yes. Absolutely.

You mentioned earlier that you'll build some capability organically, some inorganically through acquisitions. You have a large cash balance in your balance sheet, nice position to be in. How should we think about you using that cash balance for inorganic growth? How are you thinking about utilizing that cash balance?

Yes. So M&A is a very important part of our growth strategy. We just completed the acquisition of Solvvy to really help build out some of the functionality in our Contact Center. And we look at any acquisition first through the gate of technology. It has to really meet the standards of our existing platform. We, of course, look for talent and culture to make sure they would be a great addition to the team and then, of course, price. I got questions this morning about some of the products that we're building ourselves. And why didn't we just go buy other companies out there? Because there are some great companies out there, but historically, some of the valuations have been so high. Now potentially, what's happening in the marketplace, creating some dislocation of value will make that easier for us. But we're always very, very thoughtful about how we spend our investors' money or stock, however we look at it. And there's just, have been some great companies out there, but just the valuations didn't make sense to us. And so that's the framework that we use for evaluating and hopefully, we're going to see more opportunities in the future.

And I'm sure it's a robust discussion internally when people have different wants and needs. I'm sure somebody is saying, we have to have this capability. And then I'm sure you're saying, well, the valuation doesn't make sense. But with your CFO hat on, what are the parameters that you're thinking about? Is it accretion, dilution? Is it just a pure valuation metric? What are the variables or metrics that you're looking at when somebody is bringing a deal to you and saying, I have to have this shiny new product, right? And then you tell them no because it's for 100x sales, right?

Yes. Well, so certainly, we look at what it is. And the trade-off is how long would it take us to build that versus what it's going to buy. And then it depends on the type. If it's really just around technology functionality, that's the primary lens we're going to look at it through. We, of course, have looked at opportunities to increase revenue. Like the big acquisition we were talking about last year, like that would have accelerated the company in a different way and just unfortunately didn't work out that way. But I think what you'll see in the future is more technology tuck-ins that accelerate our product development cycles because that is, I think, the best way to continue to accelerate top line growth is by increasing the product output.

And how do you measure that because that does seem like the biggest risk would be the lost market opportunity. To your earlier point, with the technology transition, happy enterprises, the significant size of the TAM and relatively low churn rates, there's great value in gaining share in the near term. So how do you, I mean, as the CFO, how do you measure that?

Yes. Well, we listen to our customers, first of all, right? We want to understand what are they asking for? Like Whiteboard is a perfect example of, based on customer requests and demand, we knew it was something that had to be prioritized in terms of our development cycle. I think the great news is that we do have a very large customer base. So we look for opportunities to not only continue to take market share, but also retain at the same time. And those are all, all those things are what we're balancing every day when we look at how do we build new products, how do we buy new products or where are we investing our existing resources.

Okay. And really this is for my own knowledge because I don't remember, but can you remind me why wasn't there a collar on that deal last year? And would you insist on one now? I mean, would that be part of your conversation you'd have?

Yes. I think that was probably the big learning out of that deal. I would say we would have structured it. Hindsight is always 20/20, right? And had there been a collar, there probably would have been a very different outcome for the deal. I can't sit here and tell you why there wasn't one, which is something that just the way the deal was structured initially from both sides, it felt like it made sense at the time.

Sure. No. I agree with your point, hindsight. I'm an analyst. I'm wrong 90% of the time. So that's the risk of my job. I wanted to get a few macro questions in here, then I'm going to turn it over to the audience at the end with a few minutes left. So once again, if you have any questions when I open it up just raise your hand. They'll walk around with the microphone and you can ask them then. We are asking a few kind of standardized questions at the conference just so we can compile the answers. So what impact have you seen, if any, from the Russian war, the war in the Ukraine in your business over in Europe or more broadly?

So we talked about on the call that we certainly have seen some headwinds in the online segment of our business from both FX as well as the war in Russia and Ukraine. And we quantified it on the call. It's about a 1% impact to total revenue for the year. Now it is both of those factors. And then also what the impact we're seeing from the war is dampening of demand in Europe in general, like I think just general economic uncertainty there. But all of that's combined in that 1% number.

Okay. That's great. And then I think I've asked this after the call, but just to discuss it publicly. The stock-based comp, that's been a discussion a lot of investors are asking about. What companies are planning to do if they're going to restrike? If they're going to shift from stock-based to more cash compensation? So what's the discussion been over at Zoom?

Yes. So equity is a very important part of our compensation philosophy at Zoom. And we've done a couple of things. So we grant RSUs and they vest, they cliff vest in a year and then they vest quarterly after that. We, a couple of quarters ago, implemented a program whereby as employees are coming up to their 1-year anniversary, if the value of their grants on that anniversary date is less than what was in their offer letter, we are giving them a top-up. So we want people, employees, when they get to that, so like you have an offer letter that said, you're getting RSUs of $300,000. And say, the way we back into that is we take the dollar value and we divide it by sort of an average stock price at that point. So say, if the stock was $300, right, that you're going to get a value of RSUs based on that. If you fast forward on your 1-year anniversary and now the stock price is $100, your values come down by 1/3. So what we're doing is giving them, sorry, come down by 2/3. So we're giving you a top-up on that. So we want employees to feel great when they come to their 1-year anniversary and not to worry about it in between and have any risk of feeling that they're being undervalued.

That makes a ton of sense. So that's for all employees that joined within the last 12 months?

I think it went back a little bit further than that. I don't remember the exact time period, but we did a look-back to see like what made sense and even implemented it retroactively for some employees.

Okay. And I don't recall, but what was the financial impact? How many it was?

So our stock-based comp did tick up a little bit in Q4. I don't remember exactly what the number was.

Was it a material number, if you recall?

It wasn't materially up from where it had been in Q3. No. I think it was, I don't remember off the top of my head honestly so I don't want to guess.

Okay. And to your point, that was a onetime true-up. You just wanted to do the right thing by the employees that had joined in the last year.

Well, it's an ongoing program so that all employees that are joining feel great about the value that they're getting in their employment letter, that they know they have a guarantee that when they get to year 1, at least it's going to be that amount.

Yes. It's a guaranteed dollar figure to give them that certainty and that peace of mind.

Yes, exactly. And then we also did implement a new annual like stock bonus program this year as well. So we have our traditional stock program is a 4-year, a grant that vests over 4 years. We don't do annual refreshes. So we've implemented an annual bonus program, which is also contributing to a little bit of a tick up in our stock-based comp.

Okay. That makes a ton of sense. I'm going to ask one more then I'll kick it out to the crowd. I'm sure you probably plan for multiple scenarios financially on a macro basis. Do you have a plan in place for a recessionary environment? And I guess, how do you anticipate that would affect your business? Obviously, we'll have business closures. We'll have headcount reductions at customers. But how do you anticipate that would affect your business?

Yes. So we've continued to see strong retention rates in Enterprise. And I expect if we were to move into a more dramatic recessionary that, that would hold because if you think about, Zoom is a way for organizations to keep their employees productive and a very efficient way of, at $15 a month, which is the list price, right? That's a lot cheaper than a plane flight even. So as organizations are thinking about cutting other potential discretionary spending and travel seems to be the most common one that people are talking about, Zoom is a really great alternative to that. And we have not heard from our customers, at least yet, around or having them come and ask for reductions in their contracts due to headcount reductions, et cetera. We really have not seen that. If, for some reason, top line demand were to change dramatically, we are, again, very, very thoughtful about how we invest every dollar. We have a hiring plan for the rest of the year. We feel we're in a good place to control cost if we needed to, to adjust to any changes in top line demand.

Understood. So you have multiple levers that you could pull to adjust to a changing environment?

Yes. Yes.

Any questions from the crowd? We have about 5 minutes left. And if not, I can obviously fill in as well. So thinking about the inorganic growth that you mentioned earlier, we've already kind of ticked off. You already have video. You already have voice. You already have CCaaS. And you mentioned your most recent acquisition. Are there any other big pieces to the puzzle that we're missing here that we haven't talked about or is it more along the tuck-in side?

So I think in the short term, absolutely continuing tuck-in, technology tuck-ins to expand Contact Center, one of our earlier products, makes a lot of sense. I was in a meeting yesterday with Eric. And somebody asked Eric like, what do you expect Zoom looks like 5 years from now? And his answer was, Zoom will be the operating system for your work life, for your day. So if you think about that, that's the vision that we're going towards, then you can think about, well, what else do you use every day in your day-to-day work, right? You use project management software. You use other collaboration software. You use storage. You use e-mail. And so I think any of those could potentially be opportunities for both organic and inorganic. And especially the goal is every year now we will be announcing a new service. All of those new services especially lead for opportunities for acceleration through acquisition.

Got it. And what is the right level of cash on the balance sheet? I mean, right now, I mean, you have so much cash on the balance sheet right now, right?

Yes. We do, for sure. We are using some of our cash in a buyback. Our Board approved a buyback 2 quarters ago up to $1 billion. And we bought, through Q1, we bought $132 million of stock back. So we think that isn't necessarily a long-term strategy, but we felt like there was an opportunity here that we couldn't ignore with the stock price where it was. And then the other reason is, it's absolutely for M&A. That's exactly what it's sitting there for as well as continuing to invest organically as quickly as we can. We are trying to hire engineers as quickly as we need to and making sure that we invest as we can. And I do think there's going to continue to be opportunities for more M&A as the market uncertainty likely continues and the cash will serve us well there, I'm sure.

Okay. So you don't anticipate being more aggressive on the stock buyback then? I know the program is in place, but to your point even...

It's in place. Yes. It's not the long-term strategy for us. We really would rather put our cash to use for more strategic needs.

Okay. Okay. I mean, is there an estimate or a plan for the amount of time to put that cash to use? I'm just trying to get a sense of sizing here because we're talking about adding kind of, maybe we have more functionality and valuation coming back in the market. So I'm not envisioning a big blockbuster-type deal, at least not in my mind. So what's the thought on the amount of time to actually utilize this cash?

I think that what you'll see is an acceleration of small deals now that we've, I mean, this is our third acquisition, but it's really our first sort of sizable one that we'll start to see an acceleration there, especially as an organization, as we get better and better at doing these. And I mean, I expect, I mean, the Solvvy team is great. We're thrilled to have them as part of our organization. And when everybody starts to see the added benefits that we get from this, I think you'll continue to see more and more of this.

Okay. And how many deals during a year is too many? Because at some point, you get integration risk. And then, I mean, anybody gets stretched beyond their capabilities, right, of integrating X number of acquisitions. So how many is too many in 1 year?

I don't know how many. I mean, we have only, this is our first sizable one so I don't know. I think it depends on what area it is. I mean, first and foremost, we always want to be thoughtful about the technology and the platform that we would never want to put anything at risk there. And so depending on which product line is getting integrated into could affect that. If we were doing them across the platform, we might be able to do more than if we were doing, say, 5 all in Contact Center versus 5 across the platform. Five might be the right number if it was more disseminated.

Okay. And I probably know the answer to this, but like are you having bankers bring you more deals today than they were 12 months ago or is it fewer? I'd imagine it's probably more just given what's happened to the origination market and private and public valuations.

I will tell you that during the pandemic, we got a lot of, we've had, continues to have a lot of deal flow. So I don't know that it's increasing. I think certainly valuations have changed, but I think it's been pretty constant. Sanjay, who is part of my team, this is what he does every single day is look at deal flow.

It's an amazing job.

Yes. It's great. It's really fun.

We all know that public valuations have come down, but are the private valuation expectations still elevated relative to the public? Do you understand what I mean by that?

Yes. I mean, they're still elevated beyond sort of what we are willing to pay. Let me say it that way. But again, we're very thoughtful.

So there's not value there yet on the private side?

Not yet. Not yet.

Okay. So we should wait for more of the private deals.

Yes.

Okay. We're just about out of time here, unless there's one quick question. I'm going to go ahead and thank Kelly for her time.

Thank you. It's great to be here.

Okay. Thank you so much.

Nice to see everybody.

Yes. Thank you.