Zoom Communications, Inc. Q1 FY2020 Earnings Call

Hello, everyone. And welcome to Zoom's First Quarter Fiscal Year 2020 Earnings Release. I'd like to remind everyone that this conference is going to be recorded. At this time, I'd like to turn the floor over to Tom McCallum, Head of Investor Relations.

Thank you. Hello, everyone and welcome to Zoom's earnings webinar for the first quarter fiscal 2020. Joining me today will be Zoom's President and CEO, Eric Yuan, and Zoom CFO, Kelly Steckelberg. Our earnings press release was issued today after the market closed and may be downloaded from the Zoom.com site on the Investor Relations page. Also on this page you will be able to find a copy of today's prepared remarks and slide deck of financial highlights that along with the earnings press release include a reconciliation of GAAP to non-GAAP financial results. During this call, we will make forward-looking statements about our future financial performance and other future events or trends, including guidance. These statements are only predictions that are based on what we believe today, and actual results may differ materially. These forward-looking statements are subject to risks, uncertainties, assumptions, and other factors that could affect our financial results and the performance of our business and which we discuss in detail in our filings with the SEC, including today’s earnings press release and the risk factors and other information contained in the final prospectus relating to our initial public offering. Zoom assumes no obligation to update any forward-looking statements we may make on today’s call. And with that, let me turn it over to Eric.

Thank you, Tom. Thank you all. So, first of all, welcome to all of you joining us on today’s Zoom video webinar. I really appreciate it. And hopefully after the webinar all of you can give us some feedback and of course we really want to leverage our platform for the future earnings call. This is our first earnings announcement as a public company, and I am pleased to report that we delivered revenue of $122 million for the first quarter, an increase of 103% year-over-year. In addition to tremendous growth at scale, we are also pleased that our highly efficient business model and disciplined investments contributed to positive profitability and free cash flow. Our strong first quarter results are evidence that organizations are turning to Zoom as a strategic technology partner to help them increase communications and collaboration. Since this is our first earnings call as a public company, I would like to take a step back to share how Zoom’s video-first approach delivers happiness to our customers. First, we deliver a single, easy-to-use platform. Second, we are 100% Cloud-Native and hardware agnostic. Third, we offer high-quality service globally. Fourth, we offer robust mobile functionality. Fifth, we are developer-friendly with open APIs along with the marketplace. We believe the growth opportunity for Zoom is significant. Based on IDC estimates, the market opportunity at TAM is huge, $43 billion market by 2022. But we believe that it is even larger than that as we are in the early stages of video becoming the new voice. Our platform is fundamentally transforming the way organizations of all sizes communicate. Zoom is enabling far greater effectiveness and intimacy in human-to-human interactions over a distance, and we are witnessing the rapid adoption of Zoom for diverse use cases that were not possible with legacy technology. One company, Ciena, a networking systems, services, and software company, has been a Zoom customer for the last two years. They have built up to a full site deployment of Zoom including Zoom Rooms, Zoom Webinar, and our premium audio. They have transformed how they conduct business and communicate with a video-first culture. They are currently doing more than 10 million minutes a month on the Zoom platform. When faced with replacing their legacy, very complex PBX infrastructure, they turned to Zoom, and Ciena was very impressed with the capabilities of the Zoom Phone system. We closed a deal with Ciena in Q1 that brings their Zoom Phone licenses to 5,000 users while significantly expanding the use of the Zoom platform within their organization. This is a great example of the trust customers have in Zoom. Now let me discuss a few recent business and technology highlights that further reinforce our long-term growth opportunity. First, we announced that our FedRAMP authorization has been approved, with the sponsorship of the US Department of Homeland Security. This authorization allows US Federal Government agencies and contractors to securely use Zoom for video meetings, API integrations, and more. Second, we continued to build out our best-of-breed partnerships with deeper relationships like HP, Salesforce.com, and Slack. Many companies are standardizing on the Zoom and Slack platform, which is becoming the standard for collaboration. Third, we continued to enhance our core technologies that have disrupted the video communications market. During the Enterprise Connect in March, we announced additional smart features to Zoom meetings such as real-time transcriptions. And fourth, we continue to enhance and extend the reach of Zoom Phone. We announced new features that enable Zoom Phone to elevate voice calls to Zoom Video meetings seamlessly and a bring-your-own-carrier service and a new beta for Zoom Phone service for both the UK and Australia. In summary, I’d like to thank our nearly 2,000 Zoom employees around the globe for an exceptional performance in our first quarter as a public company. Our industry-leading, video-first architecture, viral adoption model, and large TAM were also positive factors for our remarkable results this quarter. It was a great start for the year, and we are excited about the growth opportunities in front of us. We truly believe Zoom is well-positioned to capitalize on the transformation of how companies communicate and collaborate with their employees, partners, and customers. In many ways we are helping to drive this transformation. The strategy that we have employed over the years to make our customers happy with a frictionless communications platform is working, and it continues to deliver remarkable results. With that, let me turn things over to Kelly.

Thank you, Eric. And welcome to everyone joining us. Let me start by first reviewing financial results for Q1 and then I will discuss our outlook for Q2 and the full fiscal year. As Eric discussed, total revenue grew 103% year-over-year in the first quarter, to $122 million. Some of the key drivers of our revenue performance were our acquisition of new customers and the execution of our land and expand strategy with existing customers. Specifically, the year-over-year increase in revenue was split between subscription services provided to new customers which accounted for approximately 64% of the increase, while the remaining 36% increase was due to subscription services for existing customers. Here are some key customer metrics in Q1 that drove these results. We had over 58,500 customers with more than 10 employees, up nearly 86% year-over-year. We aren't just adding a large volume of new customers though; we are also winning larger customers as a result of our enterprise focus. For example, we are excited to announce that we added new customers including DocuSign and FICO. Customers of all sizes are deploying more Zoom products and users within their organizations as they realize the power of our platform. During the first quarter, we expanded our relationship with customers including Ciena and Take-Two Interactive. The combination of our land and expand strategy, along with our growing enterprise focus, resulted in 405 customers with more than $100,000 in revenue over the last 12 months, up 120% year-over-year. Overall, we have a loyal customer base, as evidenced by an exceptional net dollar expansion rate that has consistently been over 130% for the fourth consecutive quarter. Geographic expansion is another driver of our strong revenue growth as we continue to enjoy high demand and growth globally. Revenue in Q1 from the Americas was up 98% year-over-year and was approximately 80% of revenue. Our APAC and EMEA revenue combined grew 127% year-over-year. We believe that this is only the beginning of a tremendous opportunity to bring the Zoom platform to customers around the world. To achieve this, we will make additional investments to expand our global footprint and drive additional growth. Now turning to profitability. Here you can see we were profitable from both a GAAP and non-GAAP perspective, but I will focus on our non-GAAP results, which exclude stock-based compensation expense. Non-GAAP gross margin in the first quarter was up 17 basis points to 80.9% compared to 80.7% in Q1 last year. Our non-GAAP gross margin reflects some additional investments to increase the redundancy of our infrastructure. For the full year, we expect non-GAAP gross margins to be at the low end of our long-term target range of 80% to 82%. R&D expense in Q1 was $13 million and represented approximately 10% of total revenue. R&D remains a major investment area as we expand our platform with new features and capabilities every quarter. Approximately one-third of our workforce is R&D; however, it is lower as a percentage of revenue because we have a highly efficient global R&D model. Sales and marketing expense for Q1 was $61 million, representing approximately 50% of total revenue. While we expect to realize leverage in sales and marketing over the long term, we are currently focused on adding sales capacity to drive growth and capture the large TAM in front of us. These investments include ramping key strategic initiatives such as expanding our global footprint and building out our initial sales coverage for Zoom Phone. G&A expense in Q1 was $16 million and represented 13% of total revenue. This includes costs associated with expanding our corporate functions to effectively operate as a public company. Non-GAAP operating income was $8 million translating to a 6.7% non-GAAP operating margin for the first quarter. This was an 8 percentage point improvement versus the modest non-GAAP operating loss in Q1 last year. Non-GAAP earnings per share in Q1 were $0.03, on approximately 290 million of non-GAAP, weighted-average shares outstanding and adjusting for undistributed earnings. Non-GAAP EPS increased three cents from Q1 of last year. Turning to the balance sheet, we ended Q1 with approximately $737 million in cash, cash equivalents and marketable securities, which is up from $176 million at the end of Q4. The significant increase in cash was due primarily to $543 million of net proceeds from our IPO and our growth in cash flow from operations. Deferred revenue at the end of the quarter grew to $149 million, up 108% year-over-year. Our remaining performance obligations or RPO totaled approximately $377 million, up 127% year-over-year. We expect to recognize approximately 64% of the current RPO as revenue over the next 12 months compared to 68% in Q1 last year. We were pleased with the non-current RPO growth which signals growing long-term customer commitments to our platform. Operating cash flow was $22 million in Q1, up from $3 million in the same period a year ago. Free cash flow was $15 million in Q1, compared to negative $1 million in the same period a year ago. Both of these results reflect higher profitability and growth in deferred revenue. Before I provide the outlook for Q2 and the full year, let me reiterate our investment strategy to drive our growth initiatives. As evident from our past results, we have both a highly efficient business model and a proven track record of running the business in a disciplined manner. The end result has been rapid top line growth combined with positive non-GAAP operating income and free cash flow. Our customers’ happiness and the rapid adoption of the Zoom platform are our top priorities, and we believe our focus on investing in the business will drive increased market share and future revenue growth. Now turning specifically to the second-quarter guidance. For the second quarter of fiscal 2020, we expect revenue in the range of $129 million to $130 million. We expect non-GAAP operating income to be in the range of $2 million to $3 million, with non-GAAP earnings per share of $0.01 to $0.02 based on approximately 301 million shares outstanding. For the full year of fiscal 2020, we expect revenue to be in the range of $535 million to $540 million. We expect non-GAAP operating income in the range of breakeven to $3 million. This forecast includes the impact in Q3 of our premier user event, Zoomtopia. Non-GAAP earnings per share are expected to be in the range of $0.02 to $0.03, based on approximately 301 million shares outstanding. In closing, Q1 was a great start to our fiscal year. We had strong execution during our first quarter as a public company, and I would like to thank the entire Zoom team for their hard work. We delivered a combination of triple-digit top line growth, increased profitability, and positive free cash flow. We're also pleased with the high rate at which customers are embracing our platform. We believe this trust from customers and partners for Zoom will help drive additional growth. I'm excited about our execution this past quarter and the opportunity ahead for Zoom, and I look forward to sharing our progress with you. With that, let's open it up for questions. If you have not enabled your video, please do so now for the interactive portion of this meeting. Matt, please queue up our first question.

Our first question is from Meta Marshall with Morgan Stanley. Meta, you are unmuted.

Great, thank you, and congrats on the quarter and thanks for the question. You gave a lot of detail on the revenue mix, but maybe versus expectations what was the biggest source of surprise during the course of the quarter? Was it new customer adds, faster deployments, or new products? And then maybe turning to new products, understanding it's so early but just any further details on Zoom phone traction and whether any of the upside guidance to the fiscal 2020 guidance is due to Zoom phone expectations? That's it for me. Thanks.

Yes. Sure. So from the product side and customer side, we do not see the biggest surprise and we work so hard to make sure the customer is happy. One thing I'd like to highlight is Zoom phone, and we announced that back in January. We do have some early adopters like Ciena. They put 5,000 licenses, and I think this is something I think we will see more in the future. Other than that, we just focus on our customer and the product experience.

I think we're also excited about the continued progress we're making in the upmarket, as you saw, our customers in that segment grew more quickly than our general customer base, which we continue to be really excited about. We had a really large financial services organization become a customer this quarter, which we're really happy about.

Our next question is from Brad Zelnick with Credit Suisse. Brad, you are unmuted.

Great. Nice to see you all and Eric, nice to see how happy you are; congratulations on a great quarter for Q1 as a public company. I have one question for you, Eric, and one follow-up for Kelly. For Eric, I appreciate that the IPO had to have been a fantastic branding event for you. Is there any discernible impact in terms of customer adds, free-to-paid conversion, or even top-of-funnel development that you've noticed since becoming a public company?

Yes. So, Brad, first of all, I like your background, thank you. I think since we became a public company, I've seen very little change, and maybe it's too early to tell, but our company's brand is certainly getting much bigger from our existing installed base. After becoming a public company, I received many emails from our customers expressing appreciation for what we did before with them. I think from a branding perspective it has certainly helped us a lot. But it's too early to tell; maybe one more quarter I can share more with you.

Great, and Kelly, for you, if we look at your sales and marketing expense relative to the new customer adds, it would seem that you're losing some productivity per customer. How much of that is related to Zoom phone, and how should we think about your productivity moving forward?

Yes. So we are really focused this year on continuing to hire in international markets and for Zoom phone. So you are going to see some impact initially as it takes a while for all those reps to get ramped. I think when you start to get to the back half of this year, early next year, you should see that taking hold.

Our next question is from Kash Kasthuri Rangan with Bank of America Merrill Lynch. Kash, you are unmuted.

Hey, Zoom team, thank you so much. I'm very happy to be joining your video conference call. I had two questions for you. One with respect to the quarter, what were the one or two largest deals the company landed in the quarter? What were the competitive dynamics and also the nature of the topology of the customers' IT infrastructure against which you were able to win this big deployment? And secondly, you just talked about the overlap on the phone side. How are customers making the phone decision? Is it in conjunction with the video decision or as a separate standalone capability? How are they making that evaluation? Thank you so much and congrats.

Yes. So about your first question, feel free to tell me about some large customer wins in Q1. I think you look at the competitive landscape in Q1, I do not think there were any changes because most of our legacy players still have old solutions with old architecture. I didn't see anything new from our legacy competitors in terms of innovation or any innovative go-to-market model; everything else remains the same.

So we were really excited. We had four deals in the quarter that were over a $1 million ARR, and unfortunately, I can't disclose the names of most of those, but one of them is a really exciting large financial institution. We're thrilled to have as a new customer, and a couple of them were upsells. So positive traction, I would say, on all fronts in that area.

Yes, just to address your second question regarding decision-making related to Zoom Phone: when we look at our go-to-market strategy for our Zoom Phone system, we focus on our existing installed base because they already trust us. They all use video, and they all use the voice. They realize our quality. Customers told us that, hey, you just added a phone number, right? They do not even use any other phone system. Customers appreciate the quality, unified collaboration experience, and ease of use, plus features like seamlessly upgrading your phone call to a video call. Customers really like that experience.

Our next question is from Sterling Auty with JP Morgan. Sterling, you're unmuted.

Alright, thanks. Hi, guys. Eric, one of the questions that I consistently got through the IPO and post is the direction of the competitive landscape, and specifically with a lot of attention on Zoom Phone, it looks like you are actually in a competitive direction with RingCentral yet you announced the extension of your partnership. I also get questions over whether you need to own some of the technology that you see out of Slack. So just directionally, how do you see your partnership and competition, and what technologies do you need to own versus partner going forward?

Yes, Sterling, that's a great question. If you look at it what's happening in the industry and also when we talk with customers, they take a Slack upon Zoom, Slack and Zoom are best of partners, and a lot of companies are standardizing on Slack and Zoom. It's almost just becoming a standard. It's very important, but we look at the user space like video and phone — we started from building a platform, and our first application built upon that platform is video conferencing. However, customers realized our voice over IP quality; it's not very hard for us to edit a phone system into an integrated phone system. We built our own technology from the ground up. It's modern architecture compared to any other phone system. We did it from the ground up, and customers really like that experience from phone to video and video to phone in one unified collaboration space.

Alright, great. Maybe just one follow-up. I do get questions over the US-China relations and things that are happening from that perspective, given the large R&D presence that you have in China. Does anything change in terms of how you're managing that aspect of the business?

I don't think anything changed, especially if you look at our whole R&D down here in our headquarters office in San Jose. Plus, we're similar to a lot of other companies who might have offices there. I think we do not have enough revenue; we do not have a big business there in China, and I think I don’t see any impact right now. We have a very good process here in terms of how to manage our office or team, and we have high confidence. I do not think there are any changes in Q1.

Our next question is from Matt Hedberg with RBC. Matt, you are unmuted.

Hey, guys. Thanks for taking our questions, and I love this new interface — hopefully other companies will embrace the same idea for earnings calls. Kelly, I want to start with you; obviously stellar results from the top line and bottom line, and you've got a lot of success in international regions. Can you walk us through how you think about balancing growth and profitability? Specifically, how do you think about deploying direct sales reps out into the field, especially as you're having more success in larger deals?

Yes. So we are really focused on investing in both R&D, as well as sales and marketing to build out the product and expand internationally. If you look at our overall sales hires for this year, about half of them are international, which means as a percentage, those sales reps are going to grow much more quickly than the US-based reps we have, so many more here today. We mentioned this on the roadshow, but we recently hired a new Head of International, Abe Smith, and he's really helping accelerate our business there. So I think you'll continue to see strong results.

That's great. And then maybe as a follow-up, in addition to the RingCentral partnership, Salesforce.com is a good partner of you guys as well and participates in the IPO. Can you talk a little bit about that relationship and how embedded it is today? Because it seems like there's obviously a logical integration point between yourselves and Salesforce.

Yes. So, Matt, you are right on. We are huge fans of Salesforce.com service. Our team believes within the Salesforce platform, but quite often when you use Salesforce and Zoom, the integration is not seamless. Our system manager really wants to understand what's going on for the Zoom meetings with customers and prospects. They need to go back to Zoom and check after the meeting is over; we automatically add a transcription back to the Salesforce portal. This way, customers can navigate within the Salesforce portal. I think we need more partnerships and integrations with Salesforce.com, and we truly believe the sales team in the future will either live within Salesforce or use Zoom, but they should not feel like they are using two different solutions. Some of these integrations can truly help increase sales productivity.

Our next question is from Pat Walravens with JMP. Pat, you are unmuted.

Great, thank you, and congratulations you guys. Eric, my question is for you, which is I love your whole focus on delivering happiness. I'm wondering, given how fast you're growing, how are you going to make sure that your employees stay happy so they can keep your customers happy? That's the first part. And the second part is, is there as much of an opportunity around Zoom Phone as there was around meetings? Because just our meetings area was such a disaster before you guys came along. I'm not sure there's the same level of, yes, right, and I'm not sure there is as much of an opportunity around the phone.

Yes. So, Pat, first of all, I think you are reading my mind very well. The first question about company culture — if there's one thing that keeps me up at night, it's about our culture. Before we had 1,000 people, I think I could remember most of the employees' names, and I never spent a minute on people-related issues, and the experience was great. Now that we have almost 2,000 employees, quite often I need to spend time dealing with people who might have greater issues or maybe sexual harassment, and we needed to let them go. It’s not easy; however, we try to do all we can to make sure that we maintain an open, transparent culture. We just hired our Chief People Officer. We just launched an employee survey to understand where we can improve. So we are very paranoid. We do all we can to make sure every employee is happy every morning. If they are not happy, we would like them to stay at home to figure out the root cause and to either tell us what is wrong and help us to fix the problem. Again, this is not easy. We take it very seriously. Regarding your question on Zoom Phone, you're right — before we built another platform, I built web meetings. I did not see a single happy web meeting customer; you're so right. But when it comes to a phone system, you look at a lot of devices today. Most of them are still using complex, old-fashioned on-prem systems that are hard to maintain and also have quality issues. The phone system is like, “Pat, I call you,” we still talk on the phone, and we really can't upgrade to a video experience, but Zoom can truly provide that. If you deploy the Zoom Phone system, I can call your phone number and with one more click we can upgrade to a video experience seamlessly. Customers really like that.

Our next question is from Alex Kurtz with KeyBanc. Alex, you are unmuted.

Sorry about that. So, hey, guys. So just on the Cisco front, they've made some big efforts in the last six months to revamp the platform, the WebEx platform. They've done some integration at a high level and added some AI functions, at least from a marketing perspective that’s been out in the marketplace. So I'm just wondering during the quarter, has there been any change in their competitive posture, especially in the Global 2000? Then I had a follow-up question for Kelly.

I think Cisco made the right decision by putting on AI, but we already started our AI efforts two years ago. The first feature we announced almost two years ago was meeting transcription, which leverages the AI platform to automatically generate meeting transcriptions after the meeting is over. We are going to enhance that as well because we already started this two years ahead of any other competitors.

Okay, then Kelly, just around the Zoom Phone contribution to the updated view for the fiscal year. I guess at this point, we're not calling out any kind of contribution at this point, right?

That's right. We're really excited about the momentum that we saw in Q1, but we're still at such an early phase that we expect it to have minimal overall contribution the way that we're forecasting it for the full year.

Our next question is from Tom Roderick with Stifel. Tom, you are unmuted now.

Hey, thanks for the chat. That’s a question and congratulations on the IPO. I'll second Matt's earlier comment with regards to kudos on the format. I think this means you can't make faces when you don't like our questions anymore. May be good or may be bad for you. Eric, I'm going to start with you just on the topic of the IPO and taking back to when you started this the days of bootstrapping this company. You probably didn't foresee today when you have over $700 million cash in your balance sheet. So a bit of an embarrassment of riches. What do you do with all? I know the easy answer is everything, but I'm sure as a backdrop of that is investors probably want to understand it made you an acquisitive company. Do you want to pursue rates in the advertising and international markets as you have this big pile of cash? How do you think about deploying it now you focus your resources?

So, Tom, you can ask these questions to my wife as well because I have no idea how to spend money. I would like to refer to our CFO.

That's funny. Well, I think it's probably thanks to Eric that we have this cash because of what he just said. But we are continuing to invest, Tom. Certainly, as I mentioned before, we're focusing on R&D and sales marketing. Those are the two key focus areas. While we haven't been acquisitive historically, Eric and I have talked a lot about this and we will keep looking for companies that we think could elevate our company in terms of technology or potentially personnel if that were needed. So we're keeping our options open at this point.

Fair enough, okay, good. Quick follow-up from me, just in terms of the enterprise selling motion here and looking at the numbers, I mean the number of customers you've landed greater than 10 employees up over 80%, but the enterprise contribution, they're up over 120%. So as we think about the selling motions as you get reps out of the field as you deploy more products. Can you just talk about how that selling motion has changed and how you would like to further change that as you add more products into it? Thank you.

Yes. So certainly our enterprise cycles differ from like our SMB approach. It's really interesting as we've seen a wide range of selling cycles in the enterprise. For example, one of our largest customers went from beginning to end in six weeks; that was a really forward-looking CIO who embraced the need to digitize their platform. I will say that is not typical, though. Most of our enterprise customers have the expected more traditional proof-of-concept and extensive user acceptance testing. What happens is once it's in the hands of the users and they see there's a love for Zoom that drives the demand which then typically goes pretty quickly to close.

Yes. In particular for every enterprise customer, normally we start from a land and expand experience, right? We never wanted enterprise customers to deploy Zoom with a full site at once. We like this bottom-up approach. That's why it takes some time, but it's very healthy if you look at our pipeline.

Our next question is from Zane Chrane from Bernstein. Zane, you're unmuted.

Can you hear me? Okay, great. Eric, Kelly, Tom, hi. Congratulations on the successful IPO; very nice to see you on the first earnings webinar. I have a question on your strategy for capturing marketing industry verticals. I know, for example, healthcare and telemedicine is a very rapidly growing field. I understand from people in the industry that Zoom is really one of the only platforms that ties in with existing major electronic medical records. That seems to be maybe an underappreciated mode in that industry. How should we think about other examples such as that they have been in different industry verticals and how do you think about developing those industry strategies?

I think you are right on; it comes to vertical industry opportunities, it's a huge opportunity. However, we just cannot speak on that. The reason why, if you look at our video collaboration system, there's also a huge opportunity back to the $43 billion opportunity. For now, we also want to explore some ideas. That's the reason why we introduced the marketplace, to make sure it speaks about our platform and allows partners and developers to build those applications based on our platform. We're working to top down on those vertical industries. It's a huge opportunity, you're right.

And I was wondering if you guys had done any work in quantifying how TAM has expanded for Zoom? It seems like Zoom is very similar to a lot of other disruptive companies where a company comes in with a better product, easier to use, lower cost reduction, superior functionality. Is there any sense you have of how much that's increasing the usage of video conferencing among knowledge workers or what multiple that is on legacy habits for video conferencing?

So, when you look at the knowledge workers today worldwide, more than 1 billion knowledge workers, but today if you look at video usage, it is still very small. I think I just spoke on today's TAM, with the $43 billion market size; we don’t lose focus and I think it will keep us quite busy for the next several years.

A huge opportunity, so congratulations, best wishes.

Our next question is from Jonathan Kees with Summit Insights Group. Jonathan, you are unmuted now.

Great, thanks for taking my question. I hope you can hear me here. I'm having trouble with my video. Congratulations on the quarter. I just wanted to ask a modeling question. You've talked about the quarter and the year, the top line and bottom line. Just curious how we should think about cash flow. At the very least, you can give us direction in terms of CapEx. And how we should model that for the year? Thanks.

Yes. Thanks for the question. We are not going to provide guidance around cash flow, but given the opportunity that you're seeing in the top line, I think you should think about there being a positive impact on cash flow due to that. And given that we're seeing a change in deferred revenue, I think you should think about that and what the impact is having on cash.

Yes. Also, please let me know your email address. I will mail you our new camera.

Okay, alright, I look forward to that. We don't normally have video meetings. If I can sneak in one other question, this is more of a high-level. I guess I'm trying to reconcile the $43 billion TAM that you're talking about with your peers. They're also pretty excited about the expansive TAM and how it's untapped, and there's just a lot of potential upwards. I guess the TAM that they talk about, and obviously this is for the voice, but it also includes contact center and even video. The TAM that they've talked about can get up to around $40 billion in TAM. I guess I'm just trying to reconcile if you can help me here between the TAM that you talked about and the TAM that your peers talk about.

Yes. I mean, the way we looked at it, we followed IDC's approach and it's even a bigger TAM of like $60 billion, but we focused down into the areas we could address with our platform today, and it is estimated that by 2020 it's going to be at that $43 billion number. The other thing to consider is the whole concept of Zoom Rooms, which are a really important part of our platform. Addressing the whole conference room is something that Zoom can do very uniquely because of our hardware-agnostic approach. There’s a significant opportunity there that I'm not sure any of our competitors are addressing completely or maybe even talking about. We're super excited about that opportunity.

That was the last question.

Okay, wonderful. Well, thank you everyone. Thank you for joining us by video. That's great, and we will look forward to speaking to you all again. Thank you.

Thank you.

By the way, please send out your feedback; we really want to leverage Zoom Webinar for the future earnings call. Thank you so much for your time. I really appreciate it.