Zoom Communications Inc (ZM) 2020 Q1 法說會逐字稿

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, Matt. 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's 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'll be able to find a copy of today's prepared remarks and a 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 and 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 the risks, uncertainties, assumptions and other factors that could affect our financial results and the performance of our business and which we discussed 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.

With that, let me turn it over to Eric.

Thank you, Tom. Thank you. Thank you all. So first of all, welcome to all of you joining us on today's Zoom video webinar. I really appreciate. And hopefully after the webinar, all of you can give us some feedback, and of course, we really wanted to leverage our platform for the future earning calls. Like [Brett], like you all, what's your background. Please tell [that] what's your background.

So this is our first earning announcement as a public company, and I'm 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 earning call as a public company, I would like to take a step back to share how Zoom's video-first approach delivers happiness to all the 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 also with the marketplace.

We believe the growth opportunity for Zoom is significant. Based on IDC estimates, the market opportunity, the TAM is huge, $43 billion market by 2022. But we believe it is even larger than that as we are in the early stages of video becoming a 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.

So let me give you an example of how our customers leverage Zoom platform. The one common is Ciena, a networking systems services and a software company, has been a Zoom customer, a happy customer for the last 2 years. We have built up to a full site deployment of Zoom, including Zoom Rooms, Zoom webinar and our premium audio. We 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 Zoom platform.

When (inaudible) is replacing their legacy, very complex PBX infrastructure, they turned to Zoom and Ciena was very impressed with capabilities of Zoom phone system. So we closed our 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 good example of the trust customers have in Zoom.

Now let me discuss a few recent opinions and the technology highlights that further reinforce our long-term growth opportunity. First, we announced that our FedRAMP authorization has been approved with a sponsorship of the U.S. Department of Homeland Security. This authorization allows U.S. 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, Sales force.com and Slack. Many companies, they standardize on Zoom and Slack platform. That's sort of like a standard for collaboration.

Third, we continued to enhance our core technologies that have disrupted the video communications market. During the Enterprise Connect back in March, we announced additional smarter 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 the voice calls to Zoom Video meetings seamlessly, bringing our own carrier service and a new beta for Zoom Phone service for both the U.K. and Australia market.

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 the large TAM were also positive factors to our remarkable results this year. It was a great start for the year, and we are very excited about the growth opportunity in front of us. We should believe Zoom is very well positioned to capitalize on the transformation of how companies communicate and collaborate with their employees, customers and partners. In many ways, we help 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 we added new customers, including DocuSign and FICO. And 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 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 reflect 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 1/3 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 8 percentage points improvement versus the modest non-GAAP operating loss in Q1 of last year. Non-GAAP earnings per share in Q1 was $0.03 on approximately 290 million of non-GAAP weighted average shares outstanding and adjusted for undistributed earnings. Non-GAAP EPS increased $0.03 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 of last year. We were pleased with the noncurrent 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 a 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 evidenced 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 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 is 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 our 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 yet enabled your video, please do so now for the interactive portion of this meeting. Matt, please queue up our first question.

(Operator Instructions) Our first question is from Meta Marshall with Morgan Stanley.

Congrats on the quarter. You gave a lot of detail on the revenue mix. But maybe versus expectations, what was the biggest source of surprise during the quarter? Was it kind of new customer adds, faster deployments, new products? And then maybe turning to new products, understanding it's still early, but just any further details on Zoom Phone traction and whether any of the upside guide to the fiscal '20 guidance is due to kind of Zoom Phone expectations? That's it for me.

Yes. Sure. So from product side, customer side, we do not see the big surprise. And we work so hard to make sure the customer happy. And one thing probably I'd like to highlight is Zoom Phone, and we announced that back in January. And we do have some early adopters like Ciena admission, right? They deployed 5,000 licenses. I think that's something I think probably will help us more in the future. Other than that, I think we just like 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 Crédit Suisse.

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 -- what's your background? Thank you. I think that since we became a public company, I would say very little has changed. And maybe it's too early to tell, but for sure I'd say, our company's brand is getting much better, but -- from our existing installed base. After we became a public company, I do receive so many e-mails from our customers and really expressed all the appreciation for what we did before with them, right? And I think from branding perspective, it has certainly helped us a lot. But it's too early to tell. Maybe one more quarter I can share with you more.

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 international 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. And I think when you start to get to the back half of this year or early next year, you should see that taking hold.

Our next question is from Kash Rangan with Bank of America Merrill Lynch.

I had 2 questions for you. One, with respect to the quarter, what were the 1 or 2 largest deals the company landed in the quarter? And what were the competitive dynamics and also the nature of the topology of the customer's IT infrastructure against which you're 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 stand-alone capability, how are they making that evaluation?

Yes. So back to your first question, feel free to tell me about some large -- the customers we acquired in Q1. I think that if you look at a competitive landscape, in Q1, I do not think there are any changes because most of our legacy players still with old solution, with old architecture, and I do not see anything new from our legacy competitors in terms of innovation or some innovative go-to-market model. And everything else, I think, remains the same.

So we were really excited. We had 4 deals in the quarter that were over $1 million ARR. And unfortunately, we can't disclose the names of most of those, but one of them is a really exciting large financial institution that we're thrilled to have as a new customer and a couple of them were up-sells. So positive traction, I would say, on all fronts in that area.

And I think, Kash's follow-up was on the decision to...

Yes. For the second question.

Zoom Phone, what drives that decision making?

So for -- 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, plus they already use the video, they already use the voice. They realize our quality. Customer told us, "Hey, you just added a phone number, right?" Then they do not even use any other phone system. Customer like the quality, a unified collaborating experience and ease of use and plus some very innovative features like seamlessly upgrade your phone call to the video call and the customer really like that experience.

Our next question is from Sterling Auty with JPMorgan.

Eric, one of the questions that I consistently got through the IPO and post is, the direction of the UCaaS space, and specifically with the launch of Zoom Phone, looks like you're actually on a competitive direction with RingCentral, yet you announced the extension of your partnership. And I also get questions over whether you need to actually own some of the technology that you see out of Slack. So just directionally, how do you see your partnership and competition? And directionally, what technologies you need to own versus partner going forward?

Yes. Sterling, that's a great question. So if you look at what's happening in those -- in the industry and also when we talk to the customers, let's take Slack for example. Slack and Zoom, I think, the best partners and a lot of the companies standardize on Slack and Zoom, right? It's almost -- it's just become a standard, right? It's very important. But if we look at UC space like video and phone and we started from building a platform and the first application built upon that platform is video conferencing. And however, customer really like our Voice over IP quality. It's not very hard for us to edit a phone system. In terms of phone system, we build our own technology from the ground up. It's a modern architecture compared with any other phone system, right? We build it from the ground up and the customer really like that experience from a phone to the video and video to the phone is one unified collaborating experience.

Great. And maybe just one follow-up. I do get questions over the U.S.-China relations and things that are happening from that perspective. Given the large R&D presence that you have in China, has anything changed in terms of how you're managing that aspect of the business?

I don't think anything changed, especially look at our core R&D are done here in our headquarter office in San Jose. And plus, very similar to a lot of other companies who might have office there. I think we do not -- in terms of revenue, we do not have a big business there in China. And I think -- I do not think there is any impact, right? So we have very, very good process here in terms of how to manage offshore 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.

I love this new interface. Hopefully, other companies will maybe embrace the same idea for earnings calls. Kelly, I want to start with you. Obviously, stellar results on 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, profitability? I guess 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, continuing to build out the product as well as expanding internationally. And 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 U.S.-based reps since we have so many more here today. So I think 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 there.

That's great. And then maybe as a follow-up. In addition to the RingCentral partnership, Sales force.com is a good partner of you guys as well and participated in the IPO. Can you talk a little bit about that relationship? And how embedded is it today because it seems like there's a -- obviously a logical integration point between those 2 -- between yourself and Salesforce?

Yes. So Matt, you're right on. We are a huge fan of Sales force.com service. Our team and I believe within the Salesforce platform, but quite often when you use the Salesforce and Zoom, the integration is still not seamless. Our sales manager really want to understand what's going on for the Zoom meetings with the customer with the prospect. And they need to go back to the Zoom and what if we -- after the meeting is over, we automatically added a transcription back to the Salesforce portal, right? With that, a customer that can live within a Salesforce portal. I think that we're going to do more partnership integrations with Sales force.com, which we truly believe -- I think the sales team in the future, they are going to either live within the Salesforce or they can use Zoom, but they do not feel like they're using 2 different solutions, right? Seamless integration can truly help the sales productivity.

Our next question is from Pat Walravens with JMP.

Congratulations to you, guys. Eric, my question is for you, which is, I love your whole focus on delivering happiness. And 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? As you said, the meetings area was such a disaster before you guys came along. I'm not sure there is same level of -- right? And I'm not sure there's the same level of pain around the phone. So those are my 2 happiness questions.

Yes. So Pat, first of all, I think you are reading my mind very well. And the first question about the company culture. If there's one thing that keeps him up in the night, is about the company culture. Before we have 1,000 people, I think I can remember most of employees' name. I never spend a minute on the people-related issues. Experience is great. For now, we have almost 2,000 employees. And quite often, I need to spend time to deal with those people. They might have integrity issues or maybe sexual harassment, and we needed to let them go, right? It's not that easy. However, we tried to do all we can to make sure we have open, transparent culture. We just hired our Chief People Officer. We just launched the employee survey, try to understand where we can improve. So we are very paranoid. We do all we can to make sure every employee happy every morning. If they're not happy, we would like them to stay at home to figure out a root cause and either tell us what had happened and help us fix the problem. Again, this is something not very easy. We keep an eye on that. We take that very, very seriously.

Then on your second question, you're right. Before we build another Zoom platform, I build WebEx before, right? I did not see a single happy WebEx customer. So why? But when it comes to phone system, you look a lot in voice today. Most of them are still using like very complex, older-fashioned on-prem systems, right, for the phone system, very hard to maintain. And also quality not as great. The plus is through the phone system, like Pat, I call you. We still talk over the phone. We really cannot upgrade the video experience. But Zoom can truly help that. And if you deploy Zoom Phone system, I'll call your phone number, one more click, we can upgrade to a video experience seamlessly. I think the customer really likes that.

Our next question is from Alex Kurtz with KeyBanc. Alex, we'll come back to you. Our next question is with -- is from Tom Roderick with Stifel.

Alex, I can hear you now.

I'm here.

There we go. Great.

Sorry about that. So just on the Cisco front, they've made some big efforts in the last 6 months to revamp the platform, the WebEx platform. They've done some integration at a high level. They've 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 is right on. They made an absolutely right decision to focus on AI, but we already started AI effort 2 years ago. And likely first feature were announced almost 2 years now, right, which is meeting transcription to lever the AI platform. After the meeting is over, we can automatically generate the meeting transcription. We are going to double down on that as well because we already started it 2 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 like 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 to have kind of minimal overall contribution the way that we're forecasting it for the full year.

Our next question is from Tom Roderick with Stifel.

Congratulations on the IPO. I'll second Matt's earlier comments with regards to kudos on the format. I think this means you can't make faces at us when you don't like our questions anymore. Maybe good or maybe bad for you. Eric, I'm going to start with you just on the topic of the IPO and thinking back to when you started this the days of bootstrapping this company, you probably didn't foresee the day when you'd have over $700 million of cash in your balance sheet. So a bit of an embarrassment of riches. What do you do with all of it? I know the easy answer is everything, but I'm sure the backdrop of that is, investors probably want to understand does this suddenly make you an acquisitive company? Do you want to accelerate the advertising at international markets? As you have this big pile of cash, how do you think about how you want to deploy and how you focus your resources?

So Tom, you can ask this question to my wife as well because I have no idea how to spend money. So I would like to give floor 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 said -- mentioned before in R&D and sales and marketing, those are the 2 key focus areas. And then while we haven't been acquisitive historically, Eric and I have talked a lot about this that 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 for 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 there up over 120%. So as we think about the selling motion, as you get reps out into the field, as you deploy more product, can you just talk about how that selling motion has changed? And how you'd like to further change that as you add and layer more product into the mix?

Yes. So certainly, our enterprise cycle is different from like our SMB approach and it's really because 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 6 weeks. That was really a forward-looking CIO that embraced the need to digitize their platform. I will say that is not typical though. Most of our enterprise customers, they are -- what you'd expect more traditional. They have a proof-of-concept. They have pretty extensive user acceptance testing. I think what happens is once it's in the hands of the users though and they see it, there's a love for Zoom that drives the demand, which then from that stage usually goes pretty quickly to close.

Yes. And in particular, for every enterprise customers, normally we started from land and expand experience, right? We never wanted to let enterprise customer deploy Zoom with a full site deployment on the event. We like this bottom up approach. That's why we will take some time, but it's very healthy if you look at our pipeline.

Our next question is from Zane Chrane with Bernstein.

Eric, Kelly, Tom, congratulations on this successful IPO. Very nice to see you on the first earnings webinar. So I have a question on your strategy for capturing market in industry verticals. I know, for example, health care, telemedicine, very rapidly growing field. I understand from people in the industry that Zoom is really one of the only platforms aside from HIPAA compliance that ties in with the existing major electronic medical records. That seems to be maybe an underappreciated moat in that industry. How should we think about other examples such as that maybe in different industry verticals? And how do you think about developing those industry strategies?

I think you're right on. When it comes to vertical industry opportunity, huge opportunity. However, we just cannot focus on that. The reason why, if you look at our video collaboration, the phone system, also the huge opportunity, back to a $43 billion opportunity. For now, we also wanted to explore some ideas. That's the reason why we introduced the marketplace, make sure our focus is on our platform to let third-party partners, developers to build those application for us based on our platform. But however, whenever we're ready, right, meaning on a number -- on both videoconferencing and phone system and work into double down, triple down on those vertical industry, huge opportunity. You are right on.

That makes a lot of sense. And I was wondering, have you guys had any work or doing work on quantifying how TAM expansive Zoom is? It seems like Zoom is very kind of similar to a lot of other industry-changing companies where a company comes in with a better product, it's easier to use, lower cost adoption, superior functionality. Is there any sense you have for just 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 if you look at the knowledge workers today worldwide, more than 1 billion knowledge workers. But today, if you look at the video usage, it's still very small. I think just for example, today's TAM, $43 billion market, as long as we do not lose the focus, I think it will keep us very busy in the next several years.

Our next question is from Jonathan Kees with Summit Insights Group.

I hope you can hear me. I'm having trouble with my video here. Congratulations on the quarter. And I just -- I guess I wanted to ask more of a modeling question. You've talked about for 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 yes, how we should model that for the year.

Yes. Thanks for the question, Jonathan. 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 that there is a positive impact on cash flow due to that. And given that we're a SaaS business and what you can see is happening also with the change in deferreds, I think you should think about that and what the impact it's having on cash.

Yes. Also please let me know your mailing address. I will mail you a new camera.

Great. All right. I look forward to it. Yes. 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. Talking with your UCaaS peers, they're also pretty excited about the expansive TAM and how it's untapped, and there is just a lot of potential upwards. I guess the TAM that they talk about and obviously, this is for the voice, but also includes like contacts and even video. The TAMs that they have talked about and this even includes RingCentral, if you include contact center and maybe video, you can get up to like around $40 billion TAM. I guess I'm just trying to reconcile if you can help me here between the TAM that you talk about and the TAM that your peers talk about?

Yes. I mean the way that we -- what we did was we looked at IDC's approach and it's even a bigger TAM of like $60 billion, but we looked at it and backed down into the areas we could address with our platform today. And it estimates by 2022, it's going to be at that $43 billion number. And I think the other thing you should think about, which I don't know if you mentioned exactly or we need to talk about, but there's also Zoom Rooms, which is a really important part of our platform. And addressing the whole conference room is something that Zoom can do very uniquely because of our hardware agnostic approach that there's a significant opportunity there that I'm not sure any of our competitors are addressing completely or maybe talking about and are -- we're super excited about that opportunity.

Okay. So that is our last question.

Okay.

Great.

Well, thank you, everyone. Thank you for joining us by video. That's great. And we will look forward to speaking to you guys again. Thank you.

Thank you.

Yes. By the way, please do send us a feedback. We really want to leverage Zoom webinar for the future earnings call. Thank you so much for the time. I really appreciate.

Thank you.

Thank you very much.