Zoom Video Communications, Inc. (ZM) Q1 2022 Earnings Call Transcript

Zoom Video Communications, Inc. (NASDAQ: ZM) Q1 2022 earnings call dated Jun. 01, 2021

Corporate Participants:

Tom McCallum — Head of Investor

Eric S. Yuan — Founder & Chief Executive Officer

Graeme Geddes — Head of Zoom Phone & Rooms

Kelly Steckelberg — Chief Financial Officer

Analysts:

Ittai Kidron — Oppenheimer & Co. Inc. — Analyst

Daniel Bartus — Bank of America Merrill Lynch — Analyst

Alex Zukin — Wolfe Research — Analyst

Patrick Walravens — JMP Securities — Analyst

Sterling Auty — J.P. Morgan — Analyst

Meta Marshall — Morgan Stanley — Analyst

James Fish — Piper Sandler — Analyst

Siti Panigrahi — Mizuho Securities — Analyst

Will Power — Robert W. Baird & Co. — Analyst

Matthew Niknam — Deutsche Bank — Analyst

Karl Keirstead — UBS — Analyst

Shelby Seyrafi — FBN Securities — Analyst

Tyler Radke — Citi — Analyst

Matt Stotler — William Blair — Analyst

Matt VanVliet — BTIG, LLC — Analyst

Imtiaz Koujalgi — Guggenheim Partners — Analyst

Jonathan Kees — Summit Insights Group — Analyst

Chaim Siegel — Elazar Advisors, LLC — Analyst

Rishi Jaluria — RBC Capital Markets — Analyst

Tom Roderick — Stifel Financial Corp. — Analyst

Presentation:

Operator

Hello everyone, and welcome to Zoom’s First Quarter Fiscal Year 2022 Earnings Release. I’d like to remind everyone that this call is being recorded. At this time, I’d like to turn it over to Tom McCallum, Head of Investor Relations.

Tom McCallum — Head of Investor

Thank you, Matt. Hello, everyone, and welcome to Zoom’s earnings video webinar for the first quarter of fiscal 2022. Joining me today will be Zoom’s Founder 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 Investor Relations page at investors.zoom.com. Also, on this page you’ll be able to find a copy of today’s prepared remarks and a slide deck with financial highlights that, along with our earnings press release, include a reconciliation of GAAP to non-GAAP financial results.

During this call we will make forward-looking statements, including statements regarding our financial outlook for the second quarter and the full fiscal year of 2022, Zoom’s growth strategy, business aspirations to lead the evolution to hybrid work, and the continued impact of the COVID-19 pandemic on our business. 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 and other factors that could affect our performance and financial results, which we discuss in detail in our filings with the SEC, including our latest Annual Report on Form 10-Q, as well the Current Report on Form 8-K we filed with the SEC today. Zoom assumes no obligation to update any forward-looking statements that we may make on today’s webinar.

And with that, let me turn it over to Eric.

Eric S. Yuan — Founder & Chief Executive Officer

Thank you Tom and welcome everyone joining us on today’s Webinar. I want to start by thanking our customers for their commitment to and trust in Zoom, which drove a strong start to our fiscal year with revenue growing 191% year-over-year as well as strong profitability and free cash flow. I also want to recognize our more than 5,000 employees. Their dedication to our customers’ happiness is an incredible advantage and creates a positive feedback loop that keeps our customers coming back and our employees eager to meet their diverse needs. Our ability to help our customers by increasing their productivity, promoting their employees’ happiness and connections to each other, and reducing their travel-related carbon footprint gives our work a great meaning and makes Zoom a great place to work.

Our company culture is strong and we are more motivated than ever. Let me also thank all of you, our investors, for your trust and support. So we are very grateful to our employees, our customers’ partners and our investors, thank you. As parts of the world reopen, a few things are clear. First, many customers I talk to are looking to create hybrid solutions as they seek to cautiously reopen some offices; and second, each industry, company, and individual varies in their optimal working model. Zoom is here to help each customer calibrate their future working model in their own way. Many companies are redesigning the workplace to enhance the hybrid work experience. So to meet this need, we announced Zoom Rooms features such as smart gallery, which puts in-room and remote participants on equal footing, virtual receptionist, participant counting, and environmental sensors.

We have begun to deliver on our platform strategy. In February we launched our video SDK. In April we announced our $100 million Zoom Apps Fund to further build our App ecosystem. Zoom Apps is designed to enable users to bring their favorite apps directly into the Zoom experience in a way that inspires collaboration, boosts efficiency, creates healthier habits, and generates much more fun. We will also launch Zoom Events, our events platform, which will be focused on our enterprise customers and support an array of virtual event use cases. In a recent survey we conducted, 80% of U.S. respondents agreed that all interactions will continue to have a virtual element post-pandemic, and that figure was even higher in many of the other markets we surveyed.

The hybrid model is here to stay and Zoom Events will be an excellent solution for our customers who are looking to create and host company events with a versatile and powerful solution. We are very happy to announce that we closed our largest deal ever in terms of ARR, with a leading global financial services firm that selected Zoom Meetings to deploy for over 90,000 hosts. That is only one of the large deals we closed this quarter. Let me recognize three more industry-leading companies that have increased their commitment to Zoom. First, I want to thank Kimberly-Clark, whose trusted brands are an indispensable part of life for people in more than 175 countries, for expanding the relationship with Zoom by adding approximately 25,000 Zoom Phone licenses.

As an existing Zoom Meetings and Video Webinar customer, Kimberly-Clark saw the same reliability, value, and innovation in Zoom Phone. I also want to recognize our partner British Telecom for advocating for Zoom in the decision-making process at Kimberly-Clark. Next, thank you Target Corporation, which serves guests at more than 1,900 stores and online at Target.com with the mission to help families discover the joy of everyday life, for their commitment to Zoom. We are very excited to help Target take their communications initiatives to the next level by expanding their Zoom platform solution while unifying their internal and external communications on our technology. As a long-standing Zoom Meetings customer, we truly appreciate their trust and faith in Zoom as a platform and partner.

And finally, I want to thank Denso, Japan’s largest and the world’s second largest automotive parts company, and a leading company in the Toyota Group. They first joined the Zoom family last year, but last quarter they decided to significantly expand their usage of Zoom Meetings and Zoom Video Webinars for internal and external communications. Zoom now connects 47,000 employees across offices, factories, and homes. Denso said the introduction of Zoom has contributed greatly to our ability to create a work environment that drives faster decision-making. Kimberly-Clark, Target, and Denso, thank you. Love you. We are off to a great start in fiscal 2022. I look forward to updating you on our hybrid workspace and platform evolution throughout the year and at Zoomtopia, which will be held on September 13 and 14 in a virtual format.

Before handing it over to Kelly, I want to share a quick update. As you know, demand for Zoom Phone has been amazing and I’m very excited to announce our new device category, the Zoom Phone Appliance. I’ve invited Graeme to tell you more. Thank you.

Graeme Geddes — Head of Zoom Phone & Rooms

Thanks Eric. Hi everyone. I’m Graeme Geddes. I’m the Head of Zoom Phone and Zoom Rooms, and I’m excited to be joining the call today from, you guessed it, my Zoom Phone Appliance. Our new Zoom Phone Appliance allow our customers to take advantage of the powerful audio and video capabilities of Zoom and they’re a great solution for touchdown spaces, huddle rooms and executive offices alike. We also can’t wait to see some of the vertical applications that our customers come up with for this new category as well.

And, while I’m here, I’ve got some exciting news to share. I think I’ll use the whiteboarding feature on this device. So at the end of December, we announced reaching 1 million seats of Zoom Phones sold. Well, that momentum continues, and I’m excited to announce we have now surpassed 1.5 million seats of Zoom Phones sold as of the end of September. It’s been absolutely amazing to see the growth continue to accelerate.

Thank you for allowing me to join you today and now I’ll turn it over to Kelly.

Kelly Steckelberg — Chief Financial Officer

Thank you, Graeme. And thanks to you and your team for your hard work and for that amazing accomplishment. Hello everybody. Our impressive growth story continued in Q1. As you can see, we continued to win awards and third-party recognition for our strong security focus, empowering company culture, and lasting impact on society. Thank you to all of our amazing customers and employees who made these accolades possible. In Q1, the year-over-year growth of total revenue remained strong at 191%, reaching $956 million. This top-line result exceeded the high end of our guidance of $905 million due to strong sales and marketing execution led by our direct and channel businesses, as well as lower-than-expected churn.

The demand was widespread across products, industry verticals, geographies, new logos and customer cohorts. It’s also worth noting that our fiscal 2021 results have shifted our renewal seasonality, which is now more weighted towards the beginning of the fiscal year. To illustrate, we saw approximately four times more deals up for renewal in Q1 FY22, as compared to Q1 of last year. Our Renewals, Sales and Online Marketing teams really outperformed in securing renewals and the success is a testament to their hard work and our product’s strong and lasting value proposition. The year-over-year growth in revenue for the quarter was driven by a healthy mix between new and existing customers, where new customers accounted for approximately 57% of the incremental revenue, and existing customers accounted for 43% of the incremental revenue.

This trend towards existing customers was expected considering the tremendous growth in our base last year. Let’s take a look at the key customer metrics for the quarter. We saw growth in the up-market as we ended the quarter with 1,999 customers generating more than $100,000 in trailing 12 months revenue. We exited the quarter with approximately 497,000 customers with more than 10 employees, adding approximately 30,000 customers during the quarter. In Q1, customers with more than 10 employees represented approximately 63% of revenue. We also continued to benefit from solid growth in our segment of customers with 10 or fewer employees. In Q1, customers with 10 or fewer employees represented approximately 37% of revenue, up from 30% in Q1 last year and stable quarter-over-quarter.

Our Net Dollar Expansion rate for customers with more than 10 employees exceeded 130% for the 12th consecutive quarter as customers acquired more Zoom Meetings, Rooms, Webinars and Phone products. For this customer subset, we expect the Net Dollar Expansion rate to remain above 130% for the next few quarters. For customers with 10 or fewer employees, which are not included in this Net Dollar Expansion metric, we expect that cohort to be lower than FY21 and more volatile as economies continue to reopen. Both domestic and international markets had strong growth during the quarter. Our Americas revenue grew over 159% year-over-year.

Our combined APAC and EMEA revenue grew 288% year-over-year to be approximately 34% of revenue, up from 25% a year ago. In recent quarters, we made significant investments in our international teams, which have already begun to pay dividends. The global opportunity remains large and we’ll continue to empower our team to capitalize on it. Now turning to profitability, the increase in demand and strong execution drove net income profitability from both GAAP and non-GAAP perspectives. I will focus on our non-GAAP results, which exclude stock-based compensation expense and associated payroll taxes, charitable donation of common stock, acquisition-related expenses and net litigation expenses.

Non-GAAP gross margin in the first quarter was 73.9%, compared to 69.4% in Q1 last year and 71.3% in Q4. The sequential improvement in gross margin is mainly due to optimization of public cloud resources. We expect gross margin to remain relatively stable in the low 70s as long as we continue to support free K-12 education. Research and development expense grew by 97% year-over-year to approximately $41 million. As a percentage of total revenue, R&D expense was approximately 4.3%, which was lower than in Q1 of last year mainly due to the strong top-line growth. However, on a quarter-over-quarter basis, expenses grew by 33%, demonstrating our commitment to building out our engineering teams globally and maintaining best-in-class product and innovation.

Sales and marketing expense grew by 84% year-over-year to $191 million. This reflects an additional $87 million over last year primarily due to investments and hiring to drive future growth. Sales and marketing expense was approximately 20% of total revenue, a decrease from Q1 of last year mainly due to strong top-line growth. We plan to continue to invest in adding global sales capacity, and brand and product marketing programs in order to capitalize on our growing leadership position and growth initiatives. G&A expense in the quarter grew by 51% to $73 million, as we continued to scale these functions and invest in systems, automation and compliance to meet our new scale. G&A expense was approximately 7.7% of total revenue, a decrease from Q1 of last year.

The revenue upside in the quarter carried through to the bottom line, with non-GAAP operating income of $401 million, exceeding our guidance. This translates to a 41.9% non-GAAP operating margin for Q1, a large improvement from 16.6% in Q1 last year, and a slight improvement from 40.9% in Q4. Non-GAAP diluted earnings per share in Q1 was $1.32 on approximately 305 million non-GAAP weighted average shares outstanding. This result is $0.35 above the high end of our guidance and $1.12 above Q1 of last year. Turning to the balance sheet, deferred revenue at the end of the period was $1.1 billion, up 98% year-over-year from $552 million. Looking at both our billed and unbilled contracts, our RPO totaled approximately $2.1 billion, up 94% year-over-year from $1.1 billion.

We expect to recognize approximately 72% of the total RPO as revenue over the next 12 months, consistent with the level of this metric last year. It’s important to remember that deferred revenue and RPO trends are not reliable predictors of future revenue growth due to the large percent of monthly billings in our customer base. In addition, the timing of our renewals has increasingly shifted to the beginning of the fiscal year, with Q1 now representing our largest renewal quarter. We expect sequential increases in deferred revenue and RPO in each of the remaining quarters to be lower as our available population of annual renewals is smaller.

We ended the quarter with approximately $4.7 billion in cash, cash equivalents and marketable securities, excluding restricted cash. We had exceptional operating cash flow in the quarter of $533 million, up from $259 million in Q1 of last year. Free cash flow was $454 million, up from $252 million dollars in Q1 of last year. The increase is primarily attributable to strong sales execution and collections. Looking at the rest of the fiscal year, we expect to increase our capital expenditures related to ongoing data center expansion to support our growth outlook. We also expect a legal settlement, which will be disclosed in our 10-Q, to be a cash out flow in late FY22.

Now, turning to guidance, we are pleased to raise our outlook for Q2 FY22 and the full fiscal year. Please note that the impact and extent of the global pandemic still remain largely unknown. Our outlook is based on our current assessment of the business environment, as well as our own research and conversations with customers. For the second quarter of FY22, we expect revenue to be in the range of $985 million to $990 million. We expect non-GAAP operating income to be in the range of $355 million to $360 million. Our outlook for non-GAAP earnings per share is $1.14 to $1.15 based on approximately 311 million shares outstanding.

For the full year of FY22, we expect revenue to be in the range of $3.975 billion to $3.99 billion, which would represent approximately 50% year-over-year growth. We expect non-GAAP operating income to be in the range of approximately $1.425 billion to $1.44 billion, which would represent approximately 45% to 46% year-over-year growth. Our outlook for the non-GAAP earnings per share is $4.56 to $4.61, based on approximately 311 million shares outstanding. Before concluding, I am happy to highlight that we recently launched our ESG website, which can be found on our Investor Relations and Corporate websites. We also recently published our Social Impact report, which can be found on our Zoom Cares website.

Giving back to the community has always been a key tenant of what we do at Zoom. We look forward to updating our investors as we continue along our ESG journey. As always, Zoom is grateful to be a driving force enabling connection and collaboration worldwide with our high-quality, frictionless and secure communications platform. Thank you to the entire team, our customers, our community, and our investors. 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.

Questions and Answers:

Operator

First question is from Ittai Kidron with Oppenheimer.

Ittai Kidron — Oppenheimer & Co. Inc. — Analyst

Okay. Milestone today announced 1.5 million. I’m trying to think in the past, I think you launched phones in early 2019. So you took I guess a couple of years to get to a million and then 5 months to add another 0.5 million. Although at the beginning, you didn’t have the global availability as you had and plus we weren’t pushing as hard at least at the beginning from a sales standpoint. So help me think about, what is the pace of addition, Kelly?

Should we take this to about 100,000 per month addition is that sounds like the more recent kind of track record here? And maybe also you can talk about the success of Zoom United your ability to kind of bundle meetings, phone and chat together? How much of your renewal activity comes in United right now versus maybe a quarter or two ago? How successful are you in that effort?

Kelly Steckelberg — Chief Financial Officer

So we’re really excited about the momentum of Zoom Phone and it was great to have Graeme as a guest star today on our call. And what I think you’re seeing and what you’re gathering Ittai is that there is definitely increased momentum happening there. So it took us seven quarters to get to that million seat level. And then yes, that was in December, so it’s taken us about 5 months to add additional 500,000 seats to that number. So it doesn’t happen exactly equally, each of those months, right? As you can imagine there are trends at the end of the quarter, but we absolutely are seeing an acceleration in the momentum there and we’re very excited about it.

Ittai Kidron — Oppenheimer & Co. Inc. — Analyst

And with respect to the United plans, how much of your renewal activity comes in at this type of a bundle form?

Kelly Steckelberg — Chief Financial Officer

Yeah. So absolutely, our salespeople take the opportunity when there is a renewal to talk about cross selling and up-selling. In terms of the specific packages themselves we aren’t going to disclose the actual break out of that. But a lot of what you saw disclose the revenue coming from new customer, is the opportunity that they saw to upsell either Zoom Phone or Webinars or Rooms as people are thinking about going back into the office space to begin.

Ittai Kidron — Oppenheimer & Co. Inc. — Analyst

That’s great. Thanks guys, good luck.

Eric S. Yuan — Founder & Chief Executive Officer

Ittai, just to quickly to add on to what Kelly said, when it comes to Zoom Phone growth what’s fascinating is that it’s about our product innovation, reliability, security availability all the very good features. There are so many customers, no matter which solution it deployed before in the on-prem or other cloud-based phone solutions, they all like Zoom solution.

Ittai Kidron — Oppenheimer & Co. Inc. — Analyst

Right. Very good, thanks.

Eric S. Yuan — Founder & Chief Executive Officer

Thank you.

Operator

Our next question is from Dan Bartus with Bank of America.

Daniel Bartus — Bank of America Merrill Lynch — Analyst

Hey guys.

Kelly Steckelberg — Chief Financial Officer

Hi Dan.

Daniel Bartus — Bank of America Merrill Lynch — Analyst

Great to see you. Thanks for taking the question. So Kelly, you had modeled heightened churn in the first half of this year related to renewals coming up. Based on what you’re seeing what’s the reality? Do up-market renewals really mean heightened churn or is it showing more of an enhanced expansion opportunity versus what you expected? And maybe just continuing with the churn theme on the other side of the business, the 1 to 10 employee base. I’m just curious, what’s the latest of what you’re seeing in the second half of this year? Any reason to be more optimistic than when you started this year? Thanks.

Kelly Steckelberg — Chief Financial Officer

So we were really pleased and as I said great thanks to all of our renewals and sales and online marketing team for their great work done in Q1 as we had a better than expected results in terms of not only retaining customers but also up selling them during Q1, especially in that cohort of customers with greater than 10 employees. So that’s really exciting to see as — and we expect that momentum to continue as we carry through the year as we see significant renewals also coming up in Q2 as well. In terms of the customer segment with fewer than 10 employees as we mentioned in the prepared remarks, we are still expecting that to be more volatile as that’s the segment that we’ve seen over the last 15 months has reacted more quickly to the openings and potential closings of markets around the globe.

Daniel Bartus — Bank of America Merrill Lynch — Analyst

Alright, great. Thanks guys.

Eric S. Yuan — Founder & Chief Executive Officer

Thank you Dan.

Operator

Our next question is from Alex Zukin with Wolfe Research.

Alex Zukin — Wolfe Research — Analyst

Hey guys. Thanks for taking the question and congrats on another great, great report. I guess first for Kelly and I’ve got a quick one for you, Eric. Kelly, the unending debate on the stock, I believe, is that what does growth look like in 2022? And I know that you’re not going to guide there now and we understand the churn is an unknown factor, but can you help us better understand the trend that you do have control over to there? Specifically how much are you increased your quota-carrying capacity relative to pre-pandemic levels? What are you seeing on the productivity of the sales organization relative to pre-pandemic and what’s driving that productivity today?

Kelly Steckelberg — Chief Financial Officer

So we continue to see tremendous opportunity. We were thrilled with the performance in the up-market in Q1. As Eric just talked about, we had our largest deal to-date and we had some amazing customer wins. And so we are continuing to invest in our direct and our channel sales organization especially and we’ve seen pretty consistent sales productivity. It’s going back to levels that are more reflective of pre-pandemic but at an elevated level from there, given the benefit we have of the global brand awareness, our expanded portfolio of products. And so, we’re really excited about the future especially in that up-market and international as well. As you heard they are 34% of revenue and then of course, we look to Zoom Phone and the continuing momentum that we’re seeing there.

Alex Zukin — Wolfe Research — Analyst

And then, Eric, the return to office is on everyone’s mind — looking at some recent close, I think it’s on your mind as well. With that, it will be logical to think about Zoom Rooms as really starting to become a material growth driver in this new and developing hybrid world. Can you talk about what you’re seeing from that product today? How do you think about the opportunity in terms of just the sheer number of conference rooms that are out there and what are your most forward thinking clients doing today? And how is that impacting the spend relative to that you’re seeing?

Eric S. Yuan — Founder & Chief Executive Officer

Yeah, Alex, that’s a good question. First of all, I want to say I’m a fan of you because of your weekly update, sometimes daily update about what’s going on, on such market where we are down, Alex. Thank you. I think when it comes to Zoom Rooms, that’s a huge opportunity in particular area of opinions when they are reopening their office because the way to set up Zoom Rooms or the Con Rooms are very different. As I mentioned earlier, we have a smarter gallery view which puts in Zoom participant and remove the participant on equal footing. That kind of experience I do not see requested before. But in the future, more and more like that, a lot of innovation are on Zoom Rooms.

I would say this probably the third revenue driver in terms of usage and a lot of new use cases. Also, what’s more important is that when it comes to the Con Room or Zoom Room setup, customer, they like a consistent experience, meaning the impact of the whole because the future is about a hybrid. When they are working from the home they also want to have a consistent experience. That’s another reason why customer not only do they deploy the best of the Zoom Meeting or Webinar or Zoom, but also they like the Con Room experiences. So that’s another driver for our customers to finalize on Zoom for meetings, webinar or the Phone. Again a lot of innovation are in the pipeline for the Zoom Rooms.

Alex Zukin — Wolfe Research — Analyst

Perfect. Thank you, guys. I appreciate the compliment.

Kelly Steckelberg — Chief Financial Officer

Thanks Alex.

Operator

Our next question is from Patrick Walravens with JMP Securities. He’s joining through audio only. Patrick, are you there? [Operator Instructions]

Patrick Walravens — JMP Securities — Analyst

Hi, sorry, in the car, you don’t want to see that. Eric, I would love to hear what you’re — if there is sort of like three strategic imperatives that you have for this year? I’d love to hear what you think they are.

Eric S. Yuan — Founder & Chief Executive Officer

Yeah, so, Patrick. Yeah, drive safely.

Patrick Walravens — JMP Securities — Analyst

I drive very safely.

Eric S. Yuan — Founder & Chief Executive Officer

Thank you. I think I want to share with you my personal priority I share with the company team. I share with our team when we started the year for me I think three, four quarters for me as a CEO, right? Number one as we make sure our company culture, to maintain the company quarter, evolve our common culture, because you have so many new employees coming on board remotely. Number two is double down my time on the platform, on the platform, platform, right? It’s not only a killer video conference app company, not only a killer video phone business but also the overall platform. Last but not least some of the very big, large and a strategic review that’s more like my personal art.

If you look at Zoom from a strategy perspective, first of all, I think how to make sure support all those businesses reopen and reenter the offices. That’s very, very important. That’s why you see a lot of innovations around that angle, right, either the conference room or the phone, even during chat or meetings. That’s number one initiatives. Number two is really about in the national market expansion. That’s a huge opportunity from a 25% to more than 30% I think we do see a lot of opportunities from other EMEA APAC and Japan. A lot of opportunities we got to invest more. That’s the second thing. Last but not least it’s overall how to make sure our platform strategy works. How to double down our platform doing by our Zoom Events, Zoom Apps and UC platform and also our [Indecipherable], I think that essentially that will set us up for the future growth if we can invest more to our platform.

Patrick Walravens — JMP Securities — Analyst

That’s super helpful. Thank you so much.

Eric S. Yuan — Founder & Chief Executive Officer

Thank you Patrick.

Operator

Next we have Sterling Auty with J.P. Morgan.

Sterling Auty — J.P. Morgan — Analyst

Yeah, thanks. Hi guys. Great to see you. I love the Zoom Pride logo. So first just want to start out with you added about $74 million in revenue quarter-over-quarter this quarter and about 30,000 customers. If I look at that same addition last quarter it actually mathematically points to the average new customer being smaller this quarter and what we saw last quarter. Is that what you’re seeing in the business or is there something else going on underneath those metrics?

Kelly Steckelberg — Chief Financial Officer

I think that it actually depends on when it is in the quarter in terms of the renewal. So think about especially Q1 has this very weird timing from last year where all of those — like the real dramatic change in the business happened on March 15 so literally halfway through the business. So, we don’t have the full benefit of all of those rules yet in this quarter. You’re going to see it come in the next quarter and unfortunately Q1 is always going to have that kind of funny phenomenon because most people co-term with their original date which sometime after March 15 in last year.

Sterling Auty — J.P. Morgan — Analyst

Gotcha.

Eric S. Yuan — Founder & Chief Executive Officer

Then also Sterling, I would like to add a little more. If you look at Q1 or Q2 last fiscal year in terms of revenue growth driven by a lot of online buyers, so I presume a consumer SMB business. Starting Q1, we do see driven by large customers, enterprise customers, right, also with Zoom Phone as well. We closed our largest ever deal, right? It is very good. I think that’s a future trend, right driven by our business customers.

Sterling Auty — J.P. Morgan — Analyst

That makes sense. And then maybe one quick follow-up, can you give us an update on your plans and where you are to monetize on Zoom and Zoom Events?

Eric S. Yuan — Founder & Chief Executive Officer

Yes, so on Zoom has two parts, one is about of the corporate events. Another one is about consumer or consumer events. I think our clients to launch our property events first. Essentially we have so many Webinar customers, they are looking for a lot of new innovations, essentially we can run their annual user conference everything online. That’s why we doubled down our events platform. I think we are going to books on the corporate event first and then later this year we also on profitability our consumer events. Essentially, you have time, you have Zoom Meeting Wholesale account, you can sell tickets, you can teach anything online. That’s more like the opportunity for the second half of this year.

Sterling Auty — J.P. Morgan — Analyst

Makes sense. Thank you.

Kelly Steckelberg — Chief Financial Officer

Thank you Sterling.

Eric S. Yuan — Founder & Chief Executive Officer

Thank you Sterling.

Operator

Our next question is from Meta Marshall with Morgan Stanley.

Meta Marshall — Morgan Stanley — Analyst

Great. Thanks. Kelly, you noted the gross margin pickup was largely due to kind of gains and efficiency. But just was there any contribution from students may be returning to in-person and just a last usage from students that worth the calling out? And then maybe second question, just, you also noted that international is continuing to see traction from a lot of those channel investments you made kind of at the time of the IPO. Just where are you on channel development in the U.S. versus international and just how do you see that developing? Thanks.

Kelly Steckelberg — Chief Financial Officer

So in terms of the gross margin, it was really was more around continuing to optimize with our public cloud partners. As we’ve scaled that we’ve had the opportunity to work with them on better pricing packages and that’s really what — that’s attributable rather than seeing a dramatic shift yet in students going back to school. As we’ve talked about before, there is a pretty significant impact on the gross margin due to the K-12 and we — what we expect is that is going to do what you say though is going to come in over time. If all of a sudden they were to go back to school you would see a pretty dramatic step function improvement in the gross margin.

But I expect that you’re going to see that probably happened starting in the fall as more and more students are able to safely go back to school. And then in terms of international expansion, specifically around the channel, this is a really great question. We had a discussion about that in the last couple of weeks. So the team has done a really good job in focusing on our U.S. channel strategy, especially around Zoom Phone and building out our master agent program and we are now working on building up out internationally, it’s probably this guessing, but we’re probably where we were in the U.S. a year ago or so. So it’s probably about a year behind in terms of our international channel strategy. So it’s great, but there is opportunity ahead and [Indecipherable] and her team are working on that now.

Meta Marshall — Morgan Stanley — Analyst

Great. Thanks guys.

Operator

Your next question is from James Fish with Piper Sandler.

James Fish — Piper Sandler — Analyst

Hey Kelly and Eric. Thanks for the questions and Kelly actually happy early birthday tomorrow.

Kelly Steckelberg — Chief Financial Officer

Happy early birthday to you too James.

James Fish — Piper Sandler — Analyst

Thank you.

Kelly Steckelberg — Chief Financial Officer

Wish you happy birthday.

James Fish — Piper Sandler — Analyst

Yeah. Eric, you guys noted a win with Kimberly-Clark for Zoom Phone. Yet one of your competitors really sites BT as one of their key partners. Are you penetrating those tech incumbents that have in theory really opened up their installed base more? I’m specifically talking like an Avaya, for example, more than you were last year. As well as what are you hearing with carriers about partnership opportunities?

Eric S. Yuan — Founder & Chief Executive Officer

I think, first of all, I think as Kelly mentioned earlier like not only need to empower directors team when it comes to Zoom equipment by and large, a lot of our customers, they already build a great initiatives with those carriers or partners on March 18. We are already doubling down on that. Like, this is essentially becomes more and more important at Zoom Phone group. That’s our strategy. And aside of that every time we’re working together with our channel partners or carriers, take British Telecom, for example, when we work together with our potential prospect after they evaluate our Zoom service not only do they realize this service has worked so well but also look at — we shared the roadmap with them, they say, wow.

That’s amazing because compared to any other solutions. I mean in other cloud-based phone solutions, really like our roadmap, really like of usability and integration with the video meetings, webinars and also the reliability plus security. And that’s the reason why British Telecom they advocated for Zoom at Kimberly-Clark. This is huge, important. I think overall we see more and more deals like that, in particular in customers who test our solutions, we have high confidence. Zoom Phone is much more innovative than any other solutions.

James Fish — Piper Sandler — Analyst

That’s helpful. If I can sneak in one more obviously some exciting announcements with Zoom Phone appliance and other things the last few quarters. I guess how do you think about chat functionality really outside of video experience apps as well as kind of a broader customer experience and collaboration markets longer term presents growth opportunities?

Eric S. Yuan — Founder & Chief Executive Officer

Yes. So, great question. So, when it comes to Zoom Chat, we already had build-in chat for many, many years. Some customer even standardize on Zoom Video, Zoom Phone and Zoom Chat. However, our approach is always look at everything from the end user from customer perspective, right? We already deployed slide wonderful and the two best of breed service working together very well. Some customer we wanted to spend [Indecipherable] is okay. We also interoperatively max of teams in some parts of the might be using other chair or standardize everything on our platform. Overall, I think that I do not think that the customer with the just before had a solution for everything. That’s why I think the integration with our meeting and phone for sure can help drive up the usage for our customers. Again, we’re taking a very open-minded approach, no matter which is rooted [Indecipherable] solution they are using. We want to make sure a much better integration experience.

James Fish — Piper Sandler — Analyst

Thanks.

Eric S. Yuan — Founder & Chief Executive Officer

Thank you.

Operator

Next question is from Siti Panigrahi with Mizuho.

Siti Panigrahi — Mizuho Securities — Analyst

Hey, Eric and Kelly. Good to see you. Thanks for taking the question. I want to dig into that 100,000 customer being under 100,000 that segment. So this was a big renewal quarter for you guys. So just wanted to understand what sort of changes you have done to drive that such that there and what have you learned so that you can apply the Q2? And then a little bit color on what sort of growth in terms of, is that more users or cross-selling products, what you saw in that segment?

Kelly Steckelberg — Chief Financial Officer

Yeah. So first of all, take the last part first. It was really a combination of both. As we talked about some of the customers we mentioned in the prepared remarks, we saw expansion in terms of users some transition from active to enterprise licenses as well as additional products being deployed. And what we did I think we talked about this last quarter, we made sure that especially our up-market reps were aligned with the goal of renewing as many customers as possible this quarter. So we had a special bonus program in place for them to help them focus on renewals and it really worked. And that program is in place also for Q2. So we’re looking forward to a strong renewal performance to as well.

Siti Panigrahi — Mizuho Securities — Analyst

And then quick follow-up on that, it’s very impressive to see that 90,000 plus user customer. So when you think of your addressable market when and mainly in the enterprise and business is now looking to reopen. So how many such large customer you could potentially close?

Kelly Steckelberg — Chief Financial Officer

Well, I think the way that we look at it is there is a huge market opportunity already. While we’re super excited about deals like this when you look at, for example, the Global 2K or the Fortune 100, there is still a relatively small penetration in terms of customers that’s paying that’s more than $100,000. I think that in the Global 2K, we’re still under like 15% that are paying more than $100,000, So that to me this represents opportunity that is ahead. And we have our sales team is doing a great job of focusing on all of those opportunities. We have regular check in with them and so there being the potential is still massive.

Siti Panigrahi — Mizuho Securities — Analyst

Thank you. Thank you both.

Eric S. Yuan — Founder & Chief Executive Officer

Thank you Siti.

Operator

Our next question is from Will Power with Baird.

Will Power — Robert W. Baird & Co. — Analyst

Thanks for taking the question. Eric earlier on for previous question you spoke to some of the areas of strategic focus you and the team this year and I think right at the top of that was the focus on returning Zoom into a broader platform looking at those opportunities. So as you look out over the next three years and putting Zoom Phone side, which is already having tremendous success and Zoom Rooms, as you look at the SDK/API opportunity which is rolling out when you look at Zoom Events what gets you most excited in terms of the bigger growth opportunity? And I guess within that, what are you thinking about today in terms of contacts that are here the UCaaS provider talk about the importance of contents there? You probably get this like every quarter, where does that fit into the equation in your team?

Eric S. Yuan — Founder & Chief Executive Officer

Yeah, Will, that’s a wonderful question. I think there are so many things. I’m very excited every day, but in top, top priority I’m really excited for next four, five years, I would say number one thing is about Zoom Apps. So essentially, if you look at as Zoom — Zoom is more like — when we go do Zoom is more like a business communication tool, right. During the pandemic crisis a lot of consumers are using Zoom. Again it’s still for the business communication or may be consumer communication, right? You look at a Zoom interface it not only give you a lot of contents. How to bring in those contents to this Zoom people centric integrates down lot of way before the meeting is over, you and I simply gives together, you get a poor report.

We have a grid adequacy his job-ups in market with all others. It does assume we become operating system hopes on a people centered interprets the Zoom app. That’s a huge opportunity. It’s a part of our overall marketplace strategy including Zoom SDK and other integration. That’s the most exciting opportunity. When it comes to contact center it is part of our UC right, and that’s the reason why I mentioned Zoomtopia and scheduled September 13 and 14, stay tuned, you will see something, hopefully we can do something or one of the contact center. Again that’s also the bigger market to we do integrated very well with our GRID partner 59 and also the target contract and a whole back into the mall. Again some of the usage stay tuned at Zoomtopia.

Will Power — Robert W. Baird & Co. — Analyst

Look forward to that. Thanks.

Eric S. Yuan — Founder & Chief Executive Officer

Thank you, Will.

Operator

The next question is from Matthew Niknam with Deutsche.

Matthew Niknam — Deutsche Bank — Analyst

Hey, guys. Thanks so much for taking the question. First just on Zoom Phone, if I can just go back. Congrats on the success. Can you give any more color in terms of where you’re seeing some of the accelerating growth both in terms of customer cohorts, up-market versus small business and then talk about some of the geographic mix where you’re adding subs? And then just to go back to churn, particularly for the less than 10 employee base maybe Kelly, can you talk about how that trended in the quarter relative to expectations? And then talk about what’s embedded in your forecast for the second half of the year? Thanks.

Kelly Steckelberg — Chief Financial Officer

Yeah. So in terms of Zoom Phone we continue to see success across all segments of our business. As we’ve said in the beginning, we were really excited about continued expansion in the up-market. And we currently have 21 customers with more than 10,000 seats of Zoom Phone. So I think that shows that we really are seeing momentum in that up-market and enterprise customer base. And so that’s really exciting. And then international was the fastest growing segment in terms of geographical locations for the Zoom Phone last fall so seeing really widespread momentum across that. And then in terms of the 1 through 10 cohort, we talked about it consistently being the most volatile cohort, we’ve seen significant growth as it a year, a little over year ago with 3% of revenue growing to the mid ’30s currently.

And that has certainly been a segment that has been a lot more volatile than in the up-market due to the fact that first of all, most of them buy or majority of them buy on monthly plans. So that’s the flexibility that we give them and we want people stay with unique they needed, but we have seen, volatility in that segment and we have modeled. We came into the year we modeled accelerated churn in that segment and it’s — that’s how we’re continuing to think about it as we look for the rest of the year.

Eric S. Yuan — Founder & Chief Executive Officer

So Matt just to quickly add a little bit of color to what Kelly said, you look at it a full deployment. Today I do not think any customer no matter big enterprise SMB customer they do not have a before have some either on-prem or cloud. That’s the reason why you can look at our growth, that means our solution is better. Because if we’re replacing any other solutions. It’s not a brand new market right. So that’s a replacement really helps us drive up our growth. Not a big enterprise on credit and on-premise deployment or SMB customers or even enterprise customer who deploy our cloud-based business solution. They like our solution.

Matthew Niknam — Deutsche Bank — Analyst

Got it, thank you both for the color and congrats.

Eric S. Yuan — Founder & Chief Executive Officer

Thank you.

Operator

Our next question is from Karl Keirstead with UBS.

Karl Keirstead — UBS — Analyst

Thanks everybody. Kelly, I’m going to ask you a fairly prosaic question about cash flow. Congrats by the way. $533 million in operating cash flow, great performance. So, Kelly I think we and a number of investors make some assumption about the gap between operating margins and operating cash flow margins. So given that Zoom you obviously raised your full-year operating margin guidance by a decent amount you might see people apply that gap and raised their operating cash flow margin guidance or estimates as well, but I just wanted to ask you is everybody is tempted to do that, whether there is anything happening in 2Q, 4Q that you would encourage us to keep in mind as we adjust our cash flow estimates? Thank you.

Kelly Steckelberg — Chief Financial Officer

Yeah. So thank you for asking that Karl. So first of all, Q1 due to the high level of renewals and that’s being our biggest bookings quarter last year, right? And so a big renewal quarter also means the largest billings quarter for the year. So that leads to also the opportunity for exceptional collections in the quarter. So, bear that in mind, and this will be the largest billings and renewal quarter of the year as I mentioned in the prepared remarks. And then as we continue to go through the year you should go back to see how the relationship between free cash flow and operating margin existed kind of pre-pandemic. If you go all the way back to the sort of more normal operating period that what you should start to see as a new through the year. The only kind of exceptional considerations for the rest of the year is the US ESPP purchases in Q2 and in Q4, so that that cash build up as we go through Q1 and into Q2 and then there is the purchase in the same in Q3 and Q4.

Karl Keirstead — UBS — Analyst

Okay and then Kelly maybe as a follow-up. This dynamic of renewals being front end loaded this fiscal year you cautioned us to be careful about our RPO and DR sequentials, is there anything else that that kind of renewal front-end loading distorts or changes in terms of the seasonality in any other metric that you’d encourage us to keep in mind?

Kelly Steckelberg — Chief Financial Officer

Well, the one we just talked about, we did billings and collections. I think that’s really the impact.

Karl Keirstead — UBS — Analyst

Okay, terrific. Thank you very much.

Kelly Steckelberg — Chief Financial Officer

Yeah. Thank you.

Operator

Next question is from Shelby Seyrafi with FBN Securities.

Shelby Seyrafi — FBN Securities — Analyst

Yes. Thank you very much. So as kids go back to school, what kind of gross margin uplift are you thinking about is possible in the second half of the year? For example, you said 74%. Are you thinking about like a couple of points of uplift in the second half? And following that, you have a long-term target of 80% for the gross margin. Talk about your expected timetable to get there?

Kelly Steckelberg — Chief Financial Officer

Yeah, so currently we in our, in the guidance that we just gave we have not modeled any impact or benefit from returning to school, as we are committed to supporting the needs of those as long as we’re in a situation where it is safer for students to return. If they were to all of a sudden go back, which I don’t think it’s how it happens. You would see certainly a couple of points improvement in the gross margin. I think what will happen likely it will be more measured than that and little by little you’ll start to see the gross margin starting to creep up again. But in terms of the timeline around that long-term margin target of 80% we haven’t set a timeline, as it remains still unknown how long that service is going to be needed by the school.

Shelby Seyrafi — FBN Securities — Analyst

Okay. Thank you.

Operator

Our next question is from Tyler Radke with Citi.

Tyler Radke — Citi — Analyst

Hey, thanks a lot for taking the question and I loved seeing the demo. I’m glad we didn’t have to write our question using whiteboard.

Kelly Steckelberg — Chief Financial Officer

Hey, that’s a great idea for next time. Maybe we’ll get you off.

Matt Stotler — William Blair — Analyst

As long as I don’t go first. So Kelly, I wanted to ask you obviously really strong revenue growth this quarter. But I think most investors couldn’t help but notice the magnitude of upside relative to your guidance was smaller than we’ve seen in the last four quarters. You obviously called out better than expected churn in customer adds look good relative to the Street. I just wanted to understand was there anything unusual that may be held back more robust revenue upside relative to your guide or is this just kind of the new normal that we should expect, given you’re starting the lapse and tough comps?

Kelly Steckelberg — Chief Financial Officer

Yeah, I think we talked about this also in last quarter’s call, as well as we really started to round the year on some very difficult comps. And also we’re approaching almost $4 billion in revenue this year. We’re becoming a very large company and I think are still very pleased with our guidance of 50% year-over-year growth. But yes, this is going to be more the new normal, which is what I would expect of a company that at this scale that these are more normalized growth rate for Q2.

Tyler Radke — Citi — Analyst

Great, thank you.

Operator

The next question is from Matt Stotler with William Blair.

Matt Stotler — William Blair — Analyst

Hey, guys. Good to see you and thanks for taking the question. I’ll just ask one and hopped on a little bit late. Didn’t know we had a conference going on or somebody asked this already, but obviously the Zoom Events platform was great to see. It’s something we’ve been thinking about for a while and kind of saw the on Zoom release that this is going to be part of this going forward. I want to just double click on how meaningful the opportunity with Zoom Events could be? Obviously, it makes a lot of fundamental sense and a lot of companies been hosting their events on Zoom. But as you think about what that brought opportunity could look like, whether there’s numbers around that or just qualitative that would be helpful. Thank you.

Kelly Steckelberg — Chief Financial Officer

Eric, do you want to talk about the vision?

Eric S. Yuan — Founder & Chief Executive Officer

Sure absolutely. So, Matt so the reason why the beauty of Zoom Events is first of all, we’re really received a lot of feedback from the customer side. We already hosted a lot of Zoom Webinars. Now we want to do more, especially the pre-event and post event and how to ramp everything virtually on online like take Zoom popular, for example, from the day when you are planning the Zoom popular and all the way through you’ll finish everything makes everything you can have on one platform, that’s the opportunity coming from, right?

However, I think given the pandemic crisis feel like a little bit more pressure for us how to quickly satisfy customer needs. But we do already to have a large installed base for Zoom with Webinar. I think more like a natural a migration to the Zoom Events platform. Also as brand new opportunities not only to inform corporate events but also later this year for the consumer prosumer events, right? As I mentioned earlier, right, you really kind of host very meaningful events and you can sell tickets to your participant. We have a tighter integration with the payment and provider as well. That’s the reason why this could be another revenue driver on both corporate side and also on consumer.

Matt Stotler — William Blair — Analyst

Thank you.

Eric S. Yuan — Founder & Chief Executive Officer

Thank you Matt.

Operator

Next question is from Matt VanVliet with BTIG.

Matt VanVliet — BTIG, LLC — Analyst

Hey, everyone. Thanks for taking the question. Appreciate it. I guess, thinking about the channel question a little bit differently. Curious how much of an opportunity is that for the video-only side or at least of those the landing spot for the video side, or is that primarily Zoom Phone right now driving most of the channel business?

Kelly Steckelberg — Chief Financial Officer

No. Early on, we saw great success as selling Meeting through direct and we continue to expand our channel relationships across both Meetings and Phone. But it depends on where the customer is themselves, right? We really want to meet them and provide them the opportunity to have access to our sales organization in whatever manner works for them best. So we do obviously sell both Meetings and Phone, a larger percentage of our Zoom Phone business comes through the channel. I think that’s just based on historically how organizations have typically bought. But again, it’s really up to the customer, we want to meet them wherever they feel most comforatable.

Matt VanVliet — BTIG, LLC — Analyst

Great. Thank you.

Eric S. Yuan — Founder & Chief Executive Officer

Thank you, Matt.

Operator

Our next question is from Imtiaz Koujalgi with Guggenheim.

Imtiaz Koujalgi — Guggenheim Partners — Analyst

Hey guys. Thanks for taking my question. I have a question on Zoom Phone, you’ve been selling through channel partners and direct as well. I had a question about the impact of margins when you sell through the channel was selling directly because I’ve heard that there’s lot of spares and residuals you have to pay to the channel partners when you sell through them. So can you talk about the head to margins for Zoom Phone when you sell a deal directly versus selling through a channel partner?

Kelly Steckelberg — Chief Financial Officer

Yeah, I mean, we certainly have a channel program that we think is on attractive and competitive in the market, but I will say we thought a very long time about setting those rates and where they are and allowing them to having a differentiated product. So the way that we see it is while there is some impact to the overall margin when there’s a channel partner involved, it’s really about the broader opportunity to continue to take market share and grow as quickly as possible. And again back to the last question, we really want our customers to be able to buy in the way that feels the most comfortable to them. So while there is some impact to margin, overall we think that for the long term it’s absolutely sustainable and it’s really the best approach as we continue to focus on growing top line.

Imtiaz Koujalgi — Guggenheim Partners — Analyst

And just one more housekeeping question, you didn’t — I don’t know if you give us a number of Zoom Phone customers this quarter. I think last quarter was 11,000 maybe I missed it but can you comment on the number of Zoom Phone customers this quarter.

Kelly Steckelberg — Chief Financial Officer

Yeah, we did not disclose that. That’s one of the things that we’re going to do you want to milestone basis. And the next milestone where we are likely disclose it will be Analyst Day at Zoomtopia in September.

Imtiaz Koujalgi — Guggenheim Partners — Analyst

Thanks guys. Thank you very much.

Eric S. Yuan — Founder & Chief Executive Officer

Thank you.

Operator

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

Jonathan Kees — Summit Insights Group — Analyst

Great. Hey, thanks for taking my question and congrats on the quarter. I just wanted to double-click on Eric your comments earlier about Phones in that you’re winning more and more, it sounds like from other cloud providers. Is that becoming a bigger part of the wins for Phone? Do you see that as indeed the stronger growth trajectory versus replacing the legacy premise Phones business? And as well as if you can provide any details in terms of like any bake-offs between you and the other Phones providers, that would be great? I know you may be hesitant but more detailed the better. Thank you.

Eric S. Yuan — Founder & Chief Executive Officer

Sure. I think first of all, you look at only the two years since we launched the Zoom Phone. Last four days 1 million paid seats as grabbing share on this whiteboard session is already 1.5 million, it does tell us something, it works. So today, you look at a lot of enterprise customers were largely deployed on-prem solution, that’s a huge opportunity for the cloud business service, phone service provider including Zoom. So in Zoom, I think the cloud business is big, now to marketing to sales that was street win there. So I think we are part of that. I know you look at other businesses already deployed cloud-based solutions. Our growth coming from replacing those with this year a lot of deals right and a no matter which window. We do see the customer that’s the other cloud based different business solutions switching to us. There are multiple reasons.

First of all, we already build the trust. Suddenly looking at our solution is modern interface, much better integration in the video because ultimately we are seeing voice and the video are same to same. Those two we can work into one experience otherwise the broad solution performed several solution for video, but any of the perspective is not a consistent and not work. Zoom is much better positioned to that any all windows on their and also we look at our other, you know the functionalities not Zoom events apps. I’m also the webinars rooms, a lot of overseas overall customer our experience, right? That’s the reason why we look at an opportunity could come from large enterprise on-prem deployment, or the cloud-based opportunities from other service providers. We do see growth coming from almost everywhere but again, it’s too early to tell. It’s only two years. Maybe next two years I can share more with some detailed numbers.

Jonathan Kees — Summit Insights Group — Analyst

Look forward to it. Thank you Eric.

Eric S. Yuan — Founder & Chief Executive Officer

Thank you.

Operator

Our next question is from Chaim Siegel with Elazar Advisors.

Chaim Siegel — Elazar Advisors, LLC — Analyst

Thank you.

Operator

We can hear you.

Chaim Siegel — Elazar Advisors, LLC — Analyst

No, I said my question was asked. Thank you.

Kelly Steckelberg — Chief Financial Officer

Oh, okay, thank you.

Eric S. Yuan — Founder & Chief Executive Officer

But my answer is very straight forward, thank you.

Chaim Siegel — Elazar Advisors, LLC — Analyst

Thank you.

Operator

We have our next question is from Rishi Jaluria with RBC.

Rishi Jaluria — RBC Capital Markets — Analyst

Hey, Eric, Kelly, Tom. Thanks so much for taking my questions. Nice to see continued momentum in the business. I wanted to ask a little bit of a philosophical question which is around hybrid work right, I mean I think its consensus at this point that the workplace of the future is going to be hybrid, but you have this really enlightening survey a couple of months ago 1,500 Zoomers of what that means and everyone is very sharply divided on what hybrid work is whether that’s home as the primary or the office is the primary something in between. So simple kind of question what is hybrid work mean when you think about that? And is there a particular model of hybrid work that you think.

Eric S. Yuan — Founder & Chief Executive Officer

Yeah, so sorry, Rishi, your voice a little bit of broken. But anyway so to answer to question, so I happen to read a article today from Bloomberg, right? In May right, I think they did a survey right, 1,000 U.S. adults slight and 39% of respondents they mentioned they needed flexibility. If you look at millennials or the generation Z the number increases to 49%, right, meaning, we need to give them flexibility to those employees. All of us, we are going to lose their plans so when it comes to hybrid, first of all that we become however different businesses, we might have a dividend matter into a hybrid work to be in the office or Sweden obvious is different, right? And also the minor one can obvious and all week at a home office could be different, but overall the definition of a hybrid work is about flexibility to give employee flexibility.

Operator

All right, thank you Rishi. Okay, we have time for one more question and that last question is from Tom Roderick with Stifel.

Tom Roderick — Stifel Financial Corp. — Analyst

Okay, great. Thanks, Matt for the question. Hi, Eric. Hi, Kelly, great to see you I was thinking back to a year ago on your first quarter call last year. And with all the great success you still spend a fair bit of time on that call, kind of walking us all through the big plans on how to beef up security and solve for a lot of the emerging concerns that were coming with all of this jump in activity. I think it’s pretty-telling to your success on that front that we haven’t uttered the word security once on this call, I think, but I also recognize the threat vectors aren’t going away. Can you just give us an update, Eric, to your thoughts on what, what you need to do to stay ahead of the security plan? You’ve reached end-to-end encryption your 90-day plan was a success, but what’s next? How do you stay ahead of it?

Eric S. Yuan — Founder & Chief Executive Officer

Yes, this is great question before I talk about the next maybe the fixed step back, the share of what I had to happen, right, because you know Zoom was a build so for enterprise customers, we never thought of a K-12 schools of prosumers consumers who are going to use Zoom. We never thought about that prior pandemic crisis, that’s, but in a lot of most of a challenge will coming from that or what I think we really take about a seriously right we will more than doubled. I mean the size of a company, the reason why, if you want to the more resource on privacy is secured. I can tell you we have almost the tool 200 people looking for the private and secreted not I’d assume I will run really doubling down on that, that is one, but who is we are so critical to our customers.

The reason why we are possible back we understand what I had to I know that’s a lot of people joined our weighted about last May and April the 90 days and I still running the monthly secured Webinar and share everything open, transparent. Now that’s a second see. So the thing I think that we secured and privacy is not only a feature. It is. I call it be in terms of process and the functionality and features or Google map innovation, everything. This is our I think the new our approach. Also we share with our customers. So in terms of us the features or enhancement, a lot of smaller things, right, like recently we added a notifications in particular be out of a lot of Zoom apps in the Zoom app might wanted to and the standard your meeting in all the content without telling customers what’s going on. That’s not as good from a security perspective, right a lot of innovation on that front. So again, I think we do spend a lot of time resource on that this is still a part of our overall innovation for the supporting the privacy and security is important, our future goals.

Tom Roderick — Stifel Financial Corp. — Analyst

That’s great update. Thank you, Eric.

Eric S. Yuan — Founder & Chief Executive Officer

Yeah. By the way Tom, the reason to look at it, RSA security conference, they are using Zoom as well, right? We have a lot of security companies that standardize on Zoom platform. It doesn’t tell we take security very, very seriously.

Tom Roderick — Stifel Financial Corp. — Analyst

That’s great. Thank you.

Eric S. Yuan — Founder & Chief Executive Officer

Thank you.

Operator

And that was the last question we have time for today.

Tom McCallum — Head of Investor

Thank you everyone, and thank you for joining us.

Eric S. Yuan — Founder & Chief Executive Officer

Thank you all. So I really appreciate. Thank you.

Kelly Steckelberg — Chief Financial Officer

Bye everybody. Thank you.