2023-09-06 19:55:27 ET
Zoom Video Communications, Inc. (ZM)
Citi's 2023 Global Technology Conference Call
September 6, 2023, 04:00 PM ET
Company Participants
Tom McCallum - Head of IR
Conference Call Participants
Tyler Radke - Citigroup Inc.
Presentation
Tyler Radke
Good afternoon, everybody. My name is Tyler Radke. I Co-Head the Software Sector here at Citi. Welcome to day 1 of our Tech Conference. We have Tom McCallum from Zoom here and excited to have a great conversation.
So Tom, I think it would be great -- actually, just with the news this week, I think some pretty interesting updates on the new product side. Just kind of -- if you could recap just quickly the announcements this week? It's been a busy week with Labor Day, a bunch of conferences and Analyst Days. So just level set with us kind of what was announced this week would be a great way to start.
Tom McCallum
Thank you for having me, first of all. Thank you, everybody, for coming. I know it's late in the day. I appreciate your time. I don't think we can start a conversation without talking about AI in this day and age. So yes, we have a nice AI announcement. We have a new AI companion. You'll be able to do things like catch-up in meetings, if you're late for a meeting, there's a way to do that. There are summaries. There's ability to write chats, have the AI right chats for you and then change say like the mood. It's not upbeat enough or you wanted something more professional, you can change the moods on it.
So we announced the product. We've been working a lot of those technologies, we might have talked about in the past like some of these things that we wanted to put together. And we really look at this as an opportunity to establish a host to have -- paid host to have a set of AI tools that will make them more productive. And -- this is sort of our first foray, and we wanted it to be compelling as well from a technology perspective and a price perspective. So we decided we would offer it for free as part of your paid subscription. And really what we trying to do is drive greater retention and eventually sell you more products. So that's one of the things we announced.
The other was we announced a new rebranding of our Zoom IQ for sales. We had some feedback from our cab. They felt that it was more of a revenue generator and we should really get out there and talk that up. So those were the sort of the two big announcements, but the Zoom companion is probably the big one.
Question-and-Answer Session
Q - Tyler Radke
Okay. Great. Thanks for a quick update on that. So I think you kick off, I mean, Zoom is obviously a product we're all too familiar with during the pandemic, a terrific software product. Could you just maybe remind investors where we are in terms of the growth journey? What are kind of the key drivers of growth as you look forward over the next 12 months for Zoom?
Tom McCallum
Yes. I mean Zoom, just a few years ago -- I think when you picked this up, we were just a very small company. And we've expanded rapidly with the pandemic as people adopted more video conferencing. It was already a fast-growing company, already video conferencing is becoming better and more utilized.
I remember years ago, I wouldn't even touch video conferencing with investors because it would inevitably fail and it was too distracting and too disruptive. I joined Zoom, pre-IPO, fell in love with the technology, actually didn't know the financials of the company. I had no idea that they were profitable or growing fastest. This is just really good product.
And -- so we become known as a video conferencing company, but when Eric Yuan, our founder, designed the product -- he designed it as a platform, so you could add more technologies in there. So we really have a full CCaaS or UCaaS and CCaaS suite. Now we have video. Clearly, we have chat, called Team Chat. It's not the chat you find in a meeting, it's actually a separate chat. You can create chat channels. You can have emoji, you can net touch files. So it's a very robust chat, and it comes free with your license. And then we have Zoom Phone.
And if you think about the spectrum of technologies for communication, we started with the really hardest thing, which is video conferencing, right, getting the video and the voice to line up. And we continue to evolve that product, but now we've added other technologies to that mix.
Then we would also have now a contact center product. It's still evolving a bit, we still have a little bit of ways to go but to get to those really big enterprise wins, but we're starting to see more and more. We're up to 500 customers, and more and more of them are becoming externally focused contact center.
And then we've also put in a number of productivity tools. I talked about the productivity tool for sales. Basically, in the old days, your sales manager would sit beside you, like dialers with me, and he watched while I talk to a customer, making eye contact, my -- using verbal fillers and I positioning the product properly. Now the AI can do all that for the manager and the employee and give them reports on it.
We also have added even more -- another departmental app, we call those. Another one is in the HR department. It's not an HR app, it just sits and resides and managed by the HR team, but it's really for the entire company. It's kind of a social network. That's our Workvivo acquisition we did.
And we just had a really large win last quarter with Dollar General, and they're going to deploy it across their thousands or tens of thousands of employees. So really building out this portfolio of technologies. We're also doing more on the ecosystem side as well to build out Zoom apps and as well as APIs to build out more apps as well.
Tyler Radke
Got it. So just kind of translating that into what investors are seeing in the numbers. I think your most recent quarter, you definitely had strong results to beat the high end of the year, your guidance, but the outlook was a bit more cautious on the macro side. Can you just kind of expand on what you're seeing on the macro?
And it sounds like there are a lot of new products out there, whether it's phone, contact center, a lot of these add-ons between chat and some of the AI capabilities. But how much is this macro impacting your ability to grow? And as you -- we get through this macro period, is there kind of a medium-term growth rate, you're kind of thinking about with these new products?
Tom McCallum
Yes. So a couple of things. I'll talk about the macro in a minute, but I think investors, if you haven't been following Zoom lately, we started reporting out into two segments, basically. One is an online segment. It's basically credit cards, people purchasing online, self-serve. It's very high margin, very little sales attached to it. It does have higher churn, but that churn has stabilized recently. And it's really just a kind of a different customer, sort of a really small, medium-sized business all the way down to a consumer, prosumers in there as well.
And then we have our enterprise business, which is really enterprise all the way to the sort of the SMB space. And the difference there is it is more sales and marketing-oriented. There's more product being sold into it. The nice thing is the lifetime value of the customer is greater because the churn is much, much lower and the deal sizes tend to be much, much larger. So as you're looking at Zoom, I think that's the best way to look at it because it really is two different kinds of customers that buy differently. And we can talk a little bit about some of the things we're seeing on each one of those.
But as far as the macro goes, I've talked to the salespeople last quarter when we're going into earnings, what the head of sales and a number of the regional sales people told me is that it's gotten better than it was six months ago when people were just focused on cutting costs at all expense, just lay people off and that kind of thing. And it's gone back to more sort of last summer, which is still a challenging macro deal cycles are still long, lots of sign-offs, but it's not a sort of dire as it was sort of six months ago. And so I think that's better. I mean it's still a very challenging macro.
And you see it in our business more, I think, on the online side and the international part of our business. International crosses both of those segments. But -- it shows up in the international numbers, which international used to be a good growth driver for us. It was one of our fastest growing -- outside the U.S. was faster growing than the U.S., but it has come back quite a bit. Starting in Europe, probably again, last summer is where we started seeing it. And it has spread a little bit to Asia, not nearly as much, but definitely seeing it in both of those. And we really need to get international kind of moving as well.
Tyler Radke
Got it. Okay. So in terms of the factors that impacted -- negatively impacted the outlook, it was kind of the weakness internationally in the enterprise would you...
Tom McCallum
And online.
Tyler Radke
And online.
Tom McCallum
International across the board. Online is more international in nature. It has a lot to do with the pandemic. And when people join Zoom, a lot of customers came in on our online. Its -- demand was vertical, and we could even handle. So we opened up the aperture online so that more people could buy online and they've stayed online and a lot of them are international.
Tyler Radke
Yes. Yes. Got it. Okay. And as you think about the enterprise side of your business, I mean, how do you kind of frame how far Zoom is in terms of penetration, both I guess, on the core video side, but then as you think about the broad portfolio of products?
Tom McCallum
Yes. And so we talked a little bit about the video conference. And kind of in that video conferencing bucket, there's Zoom Meetings, which I think we all know. And then we actually have call webinars and Zoom events. Those are really large meetings, all the way to a more formal event that has a virtual lobby. And so we have those products.
And then we also have Zoom Rooms. And Zoom Rooms as people get back into the office, they're finding that the polity comp sitting on a table isn't good enough. They're used to being able to share content and whiteboard and things like that. So you're seeing more Zoom Rooms and started probably about two summers ago when people started coming back to the office. It wasn't the first thing that people did, but it's been a pretty consistent move towards more conference rooms shifting over to video conferencing rooms.
So even there though, the penetration rates, I think the last time we reported out was probably like 12% of our enterprise customers we're using those technologies. When it comes to Zoom Phone, it's probably more like 15%. So we're very still -- and again, this is probably one-year-old data, unfortunately, but we're still very underpenetrated. We feel like in a lot of these new technologies and things like contact center, Zoom IQ per sales, those things are very, very, very fresh.
Tyler Radke
Yes. One of the packages you announced, I think, last year, it was Zoom One, kind of being able to do phone plus video. How are you just kind of seeing the adoption of that track relative to your expectations? Is that something you're primarily seeing at the upper end of the market? If you could just kind of comment on that.
Tom McCallum
Yes. So we offered across the entire market. You see it both at the high end and at the smaller customer end. Interestingly, if you go to our website now, it's been so successful as kind of a brand name for our platform that we've actually kind of renamed the entire set of SKUs that you can buy online that are more sort of platform-oriented as Zoom One. So it has caused a little confusion with investors.
When we talk to investors, we're talking about basically the Zoom meeting and phone product together. You used to buy them separately. We bundle them together with some other products. And that's what we talk about. But it's done so well that the marketing team has decided to make the whole sort of SKU set more platform-oriented and not, "Oh, here's the Zoom Meetings product and you get a couple of other things." It's like, this is Zoom One Pro. This is Zoom One Business, it's a Zoom One Business Plus.
But when we talk to investors, we're talking about the sort of Zoom One Business Plus, which again has done well at both in the SMB space as well as the enterprise space. I don't have a good split, but I would say it's doing well on both.
Tyler Radke
Yes. Yes. Okay. And then on the online side, you did recently raise price earlier this year on that. How did the -- I guess, the subsequent churn trend relative to your expectations, I think you commented that churn was better than you expected this past quarter. So maybe that was better. But how does that kind of inform your ability to raise price going forward if you're not losing as many customers?
Tom McCallum
Sure, sure. So we raised our monthly price on the meetings product, and we went from $14.99 to $15.99. And when you raise price, you get a reaction when you announce the price increase. You get a reaction when you actually charge the customer since its credit cards, typically one to two quarters out, you see more reaction would be churn if people don't like what it is that you're offering.
We didn't see a lot of churn on any of those. And so this was back in February, March. So we're kind of through that period. And really, the one thing that surprised us was how price-sensitive folks are. So we increased the price on the monthly, but we left the price on the annual subscription, the same. And we saw a lot of people move from monthly to annual, which actually helps your churn over time.
And so is actually -- price increases are never sort of really great for customers, but I would say it was well received. I think they understood and understood the value they get. So that went in Q1, we did a little bit more in certain geos where we hadn't rolled it out for language reasons or whatever on the website. But now it's gone pretty much across the website.
We've done more recently, which is kind of interesting. We are also looking at free to paid in there. And we've now taken it so that instead of having back-to-back unlimited free Zoom Meetings every 40 minutes just restarting your meeting, we now force a break in between. And that hopefully drives a behavioral change that people are like that friction is enough to nudge them over to start to pay.
We'll see. We just put it in recently. And it's not like a price increase. Price increase, there's not a lot of negotiating room or alternatives, you just kind of have to accept it or not. This is sort of like, well, am I going to change my behavior and take a coffee break every 20 minutes? Or am I just going to buy Zoom.
Tyler Radke
You make them watch an annoying ad or something.
Tom McCallum
No. We looked at that. Not that we were going to put up annoying ads, but we looked at putting adds up and it just didn't get us the yield we wanted. So we've been doing other things to kind of nudge people over. And the folks we're nudging are small businesses that are using Zoom to really generate their own value. And so they need to share some of that. And a lot of them have been using Zoom for years.
And so I think the nice thing -- and we saw this last year, we did a little free to paid. You again see people renew more rapidly than you would have seen them if they were really truly new customers. Our highest churn is with new customers, and it dissipates over time. And so by the time you get to like 16 months, the churn is really low. And so when you look at the base of customers we have now on the online, so I think it's like somewhere around 73% are been with us for over 16 months
And so that really reduces your churn, and that's why we feel comfortable about it. It's almost mathematical. I don't want to take it for granted. I mean there are environmental macro changes that can impact it. But it's been relatively predictable, and it has been on a downward trend.
You do see some seasonality. So if you compare Q1 to Q2, Q2 was slightly higher than Q1, but that was expected. But if you look at it year-over-year, it was down about 40 basis points. And if you annualize that, you're in 100 basis points. So that's a pretty good reduction in churn. So it's been -- it's gotten back to sort of what we would have said pre-pandemic was sort of a normal historic churn with some seasonality baked in.
Tyler Radke
Yes. Okay. I guess on the -- so is it fair to say that maybe you saw more conversions to annual from monthly as a result of the price increase?
Tom McCallum
I think so. I think it's fair to say it's incremental. It's not -- there's no silver bullet here. It's really -- and if you look overall, even though -- and we go back and talk a little bit about the enterprise. But on the enterprise side, where we're seeing from a billings perspective is kind of shorter deals, people not willing to pay upfront. But if you look at our overall customer deal length that's actually increasing, and that's really coming from the monthly moving to annual. So annual is holding in quite nicely. Monthly is moving to annual, but you do have some macro effect at the larger deal, multiyear side.
Tyler Radke
Yes. Okay. Got it. So the online business, we talked about the churn rate kind of stabilizing, which understanding it is an SMB business or consumer business, right? But 3% monthly churn is still pretty significant on an annualized basis. So how do you think about the ability for that to continue to move down over time? Or is that kind of a cap just based on the nature of the type of customers that you're serving?
Tom McCallum
Yes. I'd love to say that we expect it to go down. I'm kind of hoping it will over time. Like I said, we've kind of gotten back to historic churn. And so we will keep trying to nudge people to annual deals, lower churn.
I think the next sort of thing that's out in the horizon that will get us lower churn is we sell more products to this group. So a lot of them are just Zoom Meeting only customers. If we could sell them Zoom Phone, then that would make them much stickier. So if we can sell more products into that group, and we do have some initiatives set up for next year, where we're going to try to sell more into that group.
And that could be helpful both from a churn and from the top of the funnel clearly basis, which is where we're having more of the challenge right now is that top of the funnel. So even though churn has kind of stabilized, our expectations for the back half of the year, we had to temper them because we weren't seeing the funnel that we wanted. And some of that's macro and some of it's just how quickly people are adopting some of these initiatives that we put in place.
Tyler Radke
Yes. So is the vast majority of online revenue, just the Meetings product? Or kind of what does that split look like between Meetings versus phones or [multiple speakers]?
Tom McCallum
Yes. It's mostly Meetings. There are people buy like Zoom rooms. You might have a small lawyer's office that buys a room. You will see occasionally a webinar webinars tend to be kind of onetime in nature people run events and things. So -- but the vast, vast majority of the revenue is coming from the Meetings product. There's some phone in there, but I think we can do a lot better. Our penetration rate is really low on the phone side. And from a dollar perspective, it's probably kind of single-digit kind of range of phone.
Tyler Radke
Yes. So you talked about maybe some focus next year on -- I mean, obviously, with a higher churn rate business, you're more reliant on new customer acquisitions. So I guess what or new product addition coming on? Like what are some of the things that you're looking to do next year, understanding that it's still very much a kind of product-led growth ocean, you're not going to put an enterprise account rep to go to sell to a one-person company?
Tom McCallum
Yes. I kind of put them in three buckets. One is we have the free-to-pay bucket we were discussing. We've got a large base of people who use free Zoom that are making value off of it, and we want to kind of nudge them over.
We have a lot going on around the website. We've started putting it in place and it's been really good. Everything from local currencies, local language, just making things easier to buy different payment methodologies. And the easier buys we call buy flow. It's like how many times do you have to click to get -- actually purchase a product. And if it takes five clicks, well, you're going to lose a lot of customers. But if you can get people to buy in two clicks, then you're going to get more.
So I know that sounds pretty basic, but making things simpler. It was something that Zoom does really well. That's why Zoom meetings is really simple, but it's really hard to replicate. And there's a lot of engineering time that goes into those. So those are some of the things we're going to continue to do around making things easier to purchase, make it more local.
And then I think the third thing is the new product. So Zoom Phone, get that going faster in there. And then we have some other products like scheduling -- Zoom Scheduler that we can also sell into that group. So I think you'll see us focusing more on new product initiatives next year to kind of help drive that business. Until you get a lot of traction, I think on the new product side, I think it's going to -- it's not going to be a big grower, but it will be very profitable.
Tyler Radke
Okay. Do you think it's a growth business, though?
Tom McCallum
It could be. It could be, but it's going to take those product initiatives to take off I think stabilizing it is achievable. But to get it to be a grower, you really need to make sure those new products are moving in that right space.
Tyler Radke
Yes. Yes. Makes sense. Okay. So let's talk a little bit about the cash on the balance sheet over $5 billion sitting there.
Tom McCallum
6.
Tyler Radke
Yes, 6.
Tom McCallum
There you go.
Tyler Radke
So clearly, a huge amount of cash, especially relative to the market cap. Stock is not trading at a very high valuation. I guess, why not be more aggressive on the buyback?
Tom McCallum
Yes. So we did have a buyback. And I just want to -- for those who don't know Zoom. We've been very profitable for a very long time, going back pre-IPO on a non-GAAP basis as well as free cash flow positive. Most of our -- I'm sorry, CapEx is going into data centers. We have our own private data center. So right now, we're spending a bit more on GPUs. And we are -- we have a small footprint for facilities, but it's very small. So most of the -- sorry, most of the CapEx is going into building out more AI servers.
But the rest of the cash, we're very efficient. Like I said, the online business is most of the credit cards, so that comes almost instantaneous cash. And then we've got really good collections on the enterprise side. And so we are generating a lot of cash, which is good.
And we did have a $1 billion share repurchase. We went through it rather quickly. We finished it off by the end of last fiscal year. We reduced the shares outstanding pretty significantly and to offset some of the dilution we're seeing from a true-up program we had, but so the cash is going to continue to do quite well, I think. Why are we going to do more buyback? Right now, we are looking at reinvigorating the business and reaccelerating it. And so we are looking at both organic and organic ways of doing it. And so we believe that valuations out there are actually attractive and it's worth sort of taking a pause here and looking at what's out there.
Clearly, we haven't found anything yet. We've done some smaller acquisitions Workvivo. Before that, we did a small company called Solvvy, but there are some interesting things out there that we're looking at, but nothing imminent for that way.
Tyler Radke
Okay. Yes. As I say, to your point, the most recent acquisitions have been more of the tuck-in size, right? But I guess what like -- obviously, you're not going to tell us what you're going to acquire. But what categories are attractive to do something transformative? Because clearly, there was the thought that you would CCaaS that category and then decided to go the organic route. But yes, what out there is kind of makes some more sense in there.
Tom McCallum
Yes. I don't think CCaaS is off the table. I think it's more -- is it something that can help us accelerate that part of the business? So we have 500 customers who are starting to get more externally focused cases. But we're still relatively small and there's some things we could probably do to help accelerate that business. I'd say anything in the AI space is fair game, whether it's an aqua hire or there's an actual product that seems to fit in and then apps like departmental apps like Workvivo that would be another sort of fair game.
Productivity apps as well. So I mean it's a broad, we're not I guess, looking to get beyond sort of the communication and collaboration space, really just looking to try to accelerate what we have today and leverage that.
Tyler Radke
Yes. So obviously, a high technical bar to pass with viewing everything.
Tom McCallum
Folks who don't know, Eric, Eric is a great guy, brilliant. He was one of the original coders. I think he does machine code for WebEx and he has a very high bar for technology. So technology fit and valuation would be the big three things. And -- for those who know us, you know we did try to acquire a company. It didn't work out. We weren't willing to increase the bid and we've held our own as far as being disciplined and not trying to overpay for something, and then we'll continue to be like that as well.
Tyler Radke
Yes. Okay. And in terms of M&A, how important is managing the dilution in the context of all those other parameters?
Tom McCallum
Yes. I mean we did a good job last year to reduce it, but we haven't set a policy or anything to say, okay, we're going to just manage the solution going forward. We do talk with the Board every quarter about capital allocation. They would like to see the management team find things that, again, would reaccelerate at a reasonable price. But we do also talk about things like share repurchases. So they're fully aware. It's just a matter of the trade-off.
Tyler Radke
Okay. And just on the -- obviously, there's a big acquisition, it's hard to say the impact that has on the financial profile. But where are we just kind of in the trajectory of margin? It sounds like a lot of really exciting new products. You talked about buying GPUs. There's investments in things like chat and some of the AI product capabilities. But where do you kind of -- how does the impact on margins net out, given that the demand environment is where it is right now?
Tom McCallum
Yes, it's really interesting. For the last couple of years, we've really focused on moving workloads from the public cloud back to our private cloud. And it's much cheaper for us to run these workloads on our own cloud. And it's not that we're that much more efficient, I think, than, say, the public cloud, we really like our partners. It's just they have a profit threshold that they have to fill, right? So we're probably somewhere around as efficient as they are, but we get to keep the profit for ourselves and pass it on to our shareholders.
So as we move more and more workloads over, we've been able to take margins at the low point during the pandemic. I think we went down to 68%, 69%, and now we're back right around the 80% level. We did guide down a little bit, tens of basis points, not hundreds, tens of basis points.
Going forward, just to be able to handle some of these -- some of the training around large language models, it's just -- it's very compute-intensive. On the other side, we will continue to move workloads over. So we still feel comfortable with the long-term target of 80%, but we might be slightly under that for the rest of this year.
Interestingly, if some of these newer products, like say, our contact center is a list price of $70 per agent, that got wildly successful, which I hope it does. That's actually a very high ASP for us, and it essentially runs on all the same infrastructure. And that would be another thing as you look at M&A is like can you put it on your own infrastructure because we are highly efficient. We're already at scale, and we continue to be able to do that.
Tyler Radke
What percentage of the workloads run on your own infrastructure now?
Tom McCallum
I don't have a good split. It's still...
Tyler Radke
50-50-ish. Somewhere in that range. The goal is to march towards 100 or...
Tom McCallum
No, no. We're always going to be using some public cloud for failover for regions that we're not in. One of the nice things about having a data center in a particular region as it cuts back on latency, somebody's talking their mouth doesn't move at a different pace kind of thing. So I'm sure in places like the Middle East or Africa. I'm sure we'll still stay dependent on the public cloud delivery. So they've done a phenomenal job. It just will optimize where we see fit.
Tyler Radke
Got it. Got it. Okay. And then on the -- I guess, on the operating margin line, like clearly, the gross margin progress has been very impressive from the early days of the pandemic. Also the online, the free schools I think kind of had an impact there. But in terms of hiring, you did a reorg earlier this year. How are you thinking about reinvesting back in the business? Obviously, AI talent isn't particularly cheap. And just given that you're building out all these new products?
Tom McCallum
And just to clarify. What I was talking about, during the pandemic, we gave free schooling or virtual schooling to 125,000 different school systems around the globe. This is kind of giving back from a corporate social responsibility perspective. As schools go back into session, we cut that back clearly. And we're happy to be able to help out in the world at the time. But yes, it did drive our margins down a bit. So that was part of it was being on the public cloud and being -- trying to help the world at the same time.
Going forward with AI, we just hired a gentleman from Microsoft, and he is a 30-year vet. And he most recently was working in the AI side. Sims Xd, he's going to be doing a lot more for us, I think, going forward, you probably will see some investment on the R&D line. I doubt we'll get out of our range.
We put a range out there like 10% to 12%. And I think we're just sub-10% these days. So I think that would be a place that we would look to invest. And again, it could be an aqua hire as well. We could find a nice start-up company that's got some really cool technology but doesn't have a product yet. We've done that in the past, and it's really helped us out. We have AI translation. We bought a small company in Germany. We put end-to-end encryption on our product with a small company we bought with some really intelligent security folks. So those would be some of the things we might look at as well.
Tyler Radke
Okay. On the contact center side, I guess, how would you kind of evaluate the performance relative to your original expectations since launch? And do you feel like it's comparable to other adoption cycles like you've seen with phone or even video conferencing?
Tom McCallum
Yes. I think it's going to be like phone from a sort of a technology perspective. When we launched Zoom Phone, it took the engineers -- a couple of dozen engineers a year to do it. The reason it was a little easier because we were already doing voice over IP. All we really did was extend out to the phone numbers.
Contact center is a bit more complicated, but we're seem to be on that same kind of trajectory that it's going to take a couple of years to not only build the base product, but then build in those capabilities and features that customers expect. I think by the end of this year, we'll be much better shape to go after those really large multi-thousand type agent deals. I think right now, we have the ability to be enterprise class from a scalability perspective, but there's still some things we still need to put in place.
I might understand last I looked we were still doing beta around e-mail, and that would finish out our omnichannel. We released this summer, our workflow management technology. And we did add some additional integrations, which are important as well. We now have, I think, Salesforce, Zendesk, Microsoft and ServiceNow integrated in. Those are important.
And then from a go-to-market strategy, we are putting in an overlay sales team to help sell because you're not just selling to IT, you're also selling to the CXO, the Chief Experience Officer typically as well. And so having some people who can speak the nomenclature is going to be important. We did the same thing with Zoom Phone. We put an overlay team in there.
And then building out the channel, which, again, is something we did with Zoom Phone. There's a lot of systems integrators out there that help people put their contact centers in because there's you've got a number of apps, even homegrown apps that you integrate into your contact center to get the data you want for your agents. So that will be the other piece that we're building out.
Tyler Radke
Yes. The last question I just wanted to ask you, Zoom, I think, was in the headlines a month or 2 ago about your own return to office plans. And I guess maybe for investors that weren't familiar with that, you could recap that, but also just how your work -- how your vision of the future work has evolved with that change?
Tom McCallum
Yes, we did it for a couple of reasons. One was to kind of do a little bit more collaboration. There was a feeling that people wanted to see their peers more often. So we made it a little more formal so that people would know when their peers were actually in the office as opposed to just. Hey, come whatever you want, right?
We said, okay, if you live within a commuting distance, a reasonable commuting distance, you need to come in the office when your peers -- your work peers are here, maybe Tuesday, Thursday or Monday, Wednesday and that would allow people to kind of get together more often. It's not really about coming to the office to work, you can do Zoom meetings clearly anywhere in the world, it's really about more of the collaboration with your peers in the office.
From a technology perspective, the world is hybrid, right? And we may have been over tilted towards remote and what the experience we weren't really getting is like how are people using our technology in the office. And so it's really given us an opportunity to use our own people to really use the technology the way it's supposed to be and give us ideas and ways to improve it by being in the office.
Myself I have been remote for Zoom for almost 4.5 years. I was one of the early remotes that joined Zoom. And it's worked out really well. I think pre-pandemic, post-pandemic during the pandemic was upon the technology really easy to work with. But -- so we still have probably the vast majority of the employees are still remote ease at this point.
We picked up a lot of people during the pandemic. So it's really it only impacts the people who live within a reasonable distance. And we didn't -- we actually shrank our real estate footprint over the pandemic. We had a lot of WeWork, we get out of all of those. So really, it's a small number of offices in places like San Jose and Denver places like that, that we have Amsterdam. So we have a larger office in London.
Tyler Radke
Awesome. Great. Well, with that, I think we got to wrap up. Tom, thank you for the discussion and thanks, everyone.
Tom McCallum
Thank you, everybody.
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Zoom Video Communications, Inc. (ZM) Presents at Citi's 2023 Global Technology Conference Transcript