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Zoom Video Communications (ZM -0.34%)
Q1 2025 Earnings Call
May 20, 2024, 5:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Kelcey McKinley
Hello, everyone, and welcome to Zoom's Q1 FY '25 earnings webinar. As a reminder, today's webinar is being recorded. And I will now hand things over to Charles Eveslage, incoming head of investor relations. Charles, over to you.
Charles Eveslage -- Incoming Head of Investor Relations
Thank you, Kelcey. Hello, everyone, and welcome to Zoom's earnings video webinar for the first quarter of fiscal year 2025. I'm joined today by 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.us.
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 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 full fiscal year 2025; our expectations regarding financial and business trends; impacts from the macroeconomic environment, our market position, opportunities, go-to-market initiatives, growth strategy and business aspirations, and product initiatives and the expected benefits of such initiatives. 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 annual report on Form 10-K and quarterly reports on Form 10-Q.
Zoom assumes no obligation to update any forward-looking statements we may make on today's webinar. And with that, let me turn the discussion over to Eric.
Eric Yuan -- Founder and Chief Executive Officer
Thank you, Charles. Thank you, everyone, for joining us today. Our rapid innovation over the years has taken us far beyond video conferencing. Every step of the way has been guided by our mission to solve customer problems and enable greater productivity.
In the process, we have very deliberately created a communication and collaboration powerhouse with AI infused natively across the platform. Time and time again, we are recognized as a leader by Gartner, G2, TrustRadius, and many others. And we are so pleased that in March. Fast Company added Zoom to their prestigious list of the World's Most Innovative Companies of 2024, further validating our dedication to providing our customers with a high-quality, open-collaboration platform powered by AI that just works.
In March, we announced Zoom Workplace, our AI-powered collaboration platform designed to help our customers streamline communications, improve productivity, increase employee engagement, and optimize in-person time. Within the launch of Zoom Workplace are new enhancements and capabilities like multi-speaker view, document collaboration, AI-powered portrait lighting, along with upcoming features and products like Ask AI Companion, which will work across the platform to help employees make the most of their time. The Workplace launch also boosts Zoom Phone, Team Chat, Events, and Whiteboard with many more AI Companion capabilities to help make customers more productive. One of the core pillars of Zoom Workplace is optimizing in-person time and embracing flexible work.
Our Spaces portfolio has expanded from Zoom Rooms into integrated adjacencies like Workplace Reservation, Visitor Management, and Digital Signage. As of the end of Q1, the cumulative number of Zoom Rooms licenses purchased was over 2 million. And in the last 12 months, we provisioned over 100,000 desks in Workspace Reservations to support in office work. Leading financial services and legal firms, such as Capital One and Cooley, use Zoom Rooms to support their globally dispersed hybrid workforce.
And others like Flex and BAYADA Home Health Care have expanded from Zoom Rooms to Workspace Reservation in order to optimize in-office time. Zoom Workplace is also designed to increase employee engagement through the integration of Workvivo into our platform. In Q1, we landed a major telco customer on Workvivo, who bought approximately 100,000 seats. And Workvivo was named Meta's only preferred migration partner for its customers as it retires Workplace from Meta.
Our success in employee experience represents an important beachhead for us in upselling customers on the full suite. Zoom Workplace exists alongside and is designed to seamlessly integrate with our business services, including Zoom Events, Revenue Accelerator, Contact Center, Virtual Agent, and others. Zoom Contact Center, launched only two years ago, is ready for prime time. We now support PCI compliance, opening the door for customers that have payment processing in their workflows.
We also received FedRAMP moderate authorization for our essentials and premium SKUs, allowing U.S. government agencies and entities doing business with them to leverage Zoom Contact Center. We have launched all key social channels, including Facebook Messenger, Whatsapp, and Gmail, and have enabled direct transfers between contact center agents and other departments via Zoom Phone, helping to further bridge the employee and customer experiences. As a result of how far the product has come, we have seen strong growth in the number of deals where we have beat or displaced a Gartner top four CCaaS player.
We have also strengthened our channel partnerships, leading to a significant increase in our channel wins and ability to compete for larger deals. ASPs are heading north, buoyed by the popularity of our higher tier packages that allow agents and managers to lean further into AI with AI Expert Assist, Workforce Management, Quality Management, and more. Now, let me recognize some of our amazing customers. First, let me thank Expedia, who needs no introduction, for becoming a Lighthouse Zoom Revenue Accelerator customer in the quarter, leaning heavily into our AI products to drive revenue.
A power user of Zoom Phone for years, they wanted to better automate workflows, coach sellers, and drive efficiencies. We partnered with them on an initial quadruple-digit seat Zoom Revenue Accelerator deal, which includes working directly with their team to improve and tailor the product based on their business model and industry-specific use case. We are so excited about this AI-centric partnership to drive value for Expedia and continuously improve our platform based on customer feedback. Let me also thank Major League Baseball.
A year ago, MLB made a highly strategic decision to adopt Zoom Contact Center. In Q1, they chose to expand our successful partnership by integrating Zoom Quality Management into their Zoom Contact Center deployment. This enhancement further strengthens their fan engagement strategy and streamlines business operations. MLB was particularly impressed by the interactive features, enhanced accessibility, and the ability of Zoom Quality Management to support virtual fan engagement.
Let me also thank Centerstone, a nonprofit health system specializing in mental health and substance use disorder treatments for individuals, families, and veterans, for doubling down on Zoom. Seeing strong value from their existing Zoom Meetings, Zoom Phone, and Rooms deployment, in Q1, they expanded Zoom Phone and added Zoom Contact Center in order to leverage AI to provide better care, and Zoom Team Chat in order to streamline communications all from a single platform. I am also very excited to share that we greatly expanded our footprint with a leading global financial services firm, who doubled their Zoom Phone seats to over 100,000. We are so pleased to see more customers adopting our Zoom Workplace and Business Services products in order to reap the benefits of our modern, natively integrated, AI-powered technologies.
And with that, I'll pass it over to Kelly. Thank you.
Kelly Steckelberg -- Chief Financial Officer
Thank you, Eric, and hello, everyone. Let's start with some exciting milestones for our emerging products in Q1. We saw additional traction in Zoom Contact Center as we reached 90 customers with over $100,000 in ARR, representing 246% year-over-year growth. This was driven by our recently launched higher pricing tiers, as well as our success in larger deals.
Zoom Phone saw continued expansion upmarket. With the addition of the marquee financial services customer Eric just mentioned, we now have five customers with 100,000 or more Zoom Phone seats. Zoom AI Companion has grown significantly in just eight months with over 700,000 customer accounts enabled as of today. These customers range all the way from solopreneurs up to enterprises with over 100,000 users.
Embedding AI across all aspects of Zoom Workplace and Business Services is a key priority as we continue to drive productivity and engagement for our customers. Now, let's dive into the financial results. In Q1, total revenue came in at $1.141 billion, up 3% year over year. This result was approximately $16 million above the high end of our guidance.
Our enterprise revenue grew 5% year over year and represented 58% of total revenue, up from 57% a year ago. Online average monthly churn came in at 3.2% as compared to 3.1% in Q1 of FY '24. The slight uptick in churn was related to tightening up the grace period for unmade payments, which pulled some churn forward. Absent this change, online average monthly churn would have remained consistent with the last two quarters at 3%, the lowest we have ever reported.
We saw 8% year-over-year growth in the upmarket as we ended the quarter with 3,883 customers contributing more than $100,000 in trailing twelve months revenue. These customers represented 30% of revenue, up from 29% in Q1 of FY '24. As a reminder our classification of enterprise versus online is determined by how we engage the customer, with enterprise referring to customers who are supported by our direct sales team, resellers, or strategic partners, and online referring to customers who self-serve. During Q1, as part of an effort to improve the customer experience and drive greater efficiency in our operations, we transitioned 26,800 enterprise customers with low ARR to online.
The number of Enterprise customers at the end of Q1, after accounting for the transition, was approximately 191,000. It is important to note, that while the customer transition had a noticeable impact on our number of enterprise customers in Q1, the associated revenue was de minimis, representing an approximately $4 million shift from enterprise to online. Additionally, our trailing twelve-month net dollar expansion rate for enterprise customers in Q1 came in at 99%, which was not affected by this transition. Our Americas revenue grew 4% year over year, while EMEA increased by 2% and APAC declined by 2%.
The APAC performance was due to the FX headwinds in Japan and Australia. Moving to our non-GAAP results, which exclude stock-based compensation expense and associated payroll taxes, acquisition-related expenses, net gains on strategic investments, and all associated tax effects. Non-GAAP gross margin in Q1 was 79.3%, which was slightly lower than 80.5% in Q1 of last year, mainly due to our investments in AI innovation. In Q2, we will incur one-time investments to upgrade our data center backbone and expect gross margins to dip to 78%.
For the full year of FY '25, we continue to expect our gross margin to be approximately 79%. Non-GAAP income from operations grew by 8% year over year to $457 million, exceeding the high end of our guidance of $415 million. This translates to a 40% non-GAAP operating margin for Q1, an improvement from 38.2% in Q1 of last year. Non-GAAP diluted net income per share in Q1 was $1.35, on approximately 315 million non-GAAP diluted weighted average shares outstanding.
This result was $0.15 above the high end of our guidance and $0.19 higher than Q1 of last year. Turning to the balance sheet. Deferred revenue at the end of the period was $1.35 billion, down approximately 1% from Q1 of last year. This was roughly 3 percentage points higher than the range we provided last quarter, partially due to tightening up our discounting practices last year.
For Q2, we expect deferred revenue to be up approximately 1% year over year. Looking at both our billed and unbilled contracts, our RPO increased 5% year over year to approximately $3.67 billion. We expect to recognize approximately 59% of the total RPO as revenue over the next 12 months, consistent with Q1 of last year. Operating cash flow in the quarter grew 41% year over year to $588 million.
Free cash flow grew 44% year over year to $570 million. Our operating cash flow and free cash flow margins expanded to 51.5% and 49.9%, respectively. The sharp increase in our cash flow metrics was due to stronger collections, targeted expense management, and higher interest income. We ended the quarter with approximately $7.4 billion in cash, cash equivalents and marketable securities, excluding restricted cash.
Last quarter, we announced the authorization of a $1.5 billion share buy-back plan. As of the end of Q1, we had purchased $150 million of stock, representing 2.4 million shares. Now, turning to guidance. For Q2, we expect revenue to be in the range of $1.145 billion to $1.15 billion, representing approximately 1% year-over-year growth.
We expect non-GAAP operating income to be in the range of $415 million to $420 million. Our outlook for non-GAAP earnings per share is $1.20 to $1.21 based on approximately 316 million shares outstanding. We are pleased to raise our top-line and profitability outlook for the full year of FY '25. We now expect revenue to be in the range of $4.61 billion to $4.62 billion, which represents approximately 2% year-over-year growth.
We still believe that Q2 will be the low point from a year-over-year growth perspective and to improve from there. We forecast our non-GAAP operating income to be in the range of $1.74 billion to $1.75 billion, representing an operating margin of 37.8%, at the midpoint. Our outlook for non-GAAP earnings per share for FY '25 is $4.99 to $5.02, based on approximately 319 million shares outstanding. Moving on to free cash flow.
Please remember that due to timing of U.S. federal and state tax payments, we pay two quarters worth in Q2 and minimal amounts in Q1. Primarily due to this seasonality and AI-related capex, we expect free cash flow in Q2 to decrease by approximately 50% to 60% quarter over quarter before normalizing in Q3 and Q4. With the strength in free cash flow in Q1 and increased outlook for operating income in FY '25, we now expect free cash flow to be toward the high end of our range of $1.44 billion to $1.48 billion for the full year.
Thank you to the entire Zoom team, our customers, our community, and our investors for your trust and support! Kelcey, please queue up the first question.
Kelcey McKinley
Thank you so much, Kelly. And like Kelly mentioned, we're going to go ahead and move on to taking your questions. When I call your name, please turn on your video and unmute. And as a reminder, to try to hear from everyone, please limit yourself to one question.
So, our first question will come from Meta Marshall with Morgan Stanley.
Meta Marshall -- Morgan Stanley -- Analyst
Great, thanks. Appreciate it, and congrats on the quarter. A couple of questions, maybe just to start with, if you could just give a sense of what you're seeing kind of on the SMB side of the environment, just given kind of commentary from others throughout the quarter. And then, second, just maybe on DBNE, and, you know, you noted last quarter that you expected fiscal Q2 to kind of be the down point of the year, if that still kind of holds as you look throughout the year.
Thanks.
Kelly Steckelberg -- Chief Financial Officer
Sure. So, hi, Meta. As we're looking at the outlook for the rest of the year, as we mentioned, we do still expect Q2 to be the low point from a year-over-year growth perspective and that the net dollar expansion rate will follow a similarity behind that, when you look at -- if you look at the in-quarter net dollar expansion, you'll see that it actually was consistent quarter over quarter. So, we're starting to see that stabilization.
And we think that that's a really good indicator that the net dollar expansion rate on trailing 12 months will similarly follow. And then, in terms of SME, you know, we saw, I think, similar performance across all of our different segments of our enterprise business. And both -- you heard about some of the amazing customer wins that we had in the upmarket, but also some really nice ones in SMB as well.
Meta Marshall -- Morgan Stanley -- Analyst
Great, thanks. I'll pass it on.
Kelcey McKinley
Thanks, Meta. And we'll now move on to Samad Samana with Jefferies.
Samad Samana -- Jefferies -- Analyst
Hi, good evening. Thanks for taking my question. So, Eric, I wanted to dig into the CCaaS side. As you mentioned, the product's ready for prime time, and we took investors to see it at Enterprise Connect as well a couple of months ago.
So, I was wondering if maybe you could just help us understand -- you know, I understand the payment side. But when you think about prime time, how would you define that? Has the uptime gotten better and you're clearly seeing larger logos? So, how should we think about what prime time means, right? Should we see an inflection in larger customers going forward?
Eric Yuan -- Founder and Chief Executive Officer
Yes, great question. First of all, you know, just over two years ago, right, we launched our Zoom Contact Center. You look at our quarterly progress, every quarter we added so many, you know, customers, right? So, that's one thing, right? Customers trust our Contact Center, the product. In terms of prime time, look at just the recent quarter, right? You know, like I gave you two examples, right? You know, so like one of the Silicon Valley-based cloud software company, you know, they deployed, you know, our competitor solution, which is one of the top three in cloud business, CCaaS, you know, the provider.
And guess what? You know, they switched to our contact center platform because they really like our feature set, you know, seamless integration, and those -- greater uptime and also a lot of AI features built in, right? That's one example. Another example, we're also competing -- we're competing against another very -- also one of the top three, you know, CCaaS vendors for the most -- for the largest deal in Q1. Guess what? We won. And this is not a small deal.
It's not like a few, you know, hundred. That's more than 1,000 seats. That's another big deal, right? And those two are just examples. Also, you look at our total, you know, installer base.
Just look at the ARR, more than 100,000. right, for those customers, right? And you look at the end of Q1, we have around 90 new deals like that, right? Look at -- compared to last year, almost, you know, 250% year-over-year growth. I think with all those, you know, factored in, I would say, yeah, this is prime time. Most important thing is the customer trust of our brand.
They know and we listen to customers, and we innovate. That's the reason why our contact center, we're making very good progress is, you know, the prime time. So --
Samad Samana -- Jefferies -- Analyst
Great, thank you so much.
Eric Yuan -- Founder and Chief Executive Officer
Thank you.
Kelcey McKinley
Our next question will come from Michael Funk with Bank of America.
Michael Funk -- Bank of America Merrill Lynch -- Analyst
Yeah, thank you all for the question tonight. And, Eric, you touched on it briefly with the last question, but love to hear about the competitive environment today, maybe even contrast it with 12 or 24 months ago. And specifically pricing and how pricing is changing, whether or not to a more competitive, less competitive, and then I guess related to that, if we're seeing more competition from Microsoft on the video side.
Eric Yuan -- Founder and Chief Executive Officer
Yeah, so -- sorry, you're talking about pricing on the Contact Center or overall the --
Michael Funk -- Bank of America Merrill Lynch -- Analyst
Really, the entire platform. Now that more competitors are likely bundling solutions, you know, just the general pricing trends.
Eric Yuan -- Founder and Chief Executive Officer
Yeah, overall, I think only one competitor. They bonded a solution together, which is Microsoft, right? And so, you know, over the past few years, right, for sure, there is some impact. You already saw the number over the past several years because they're bundling and strategy. However, if you look at our installer base, you know, like a year ago, we increased the online price, and, you know, we do see a very positive feedback because they really appreciated our service.
And also, look at our, you know, installer base. And a lot of customers really like our service. The reason why -- the reason why in the customers -- that our customers, employees, they like Zoom. They truly enjoy using Zoom, right? When they use other competitors' product, guess what? They do not like it, right? Even if they're bundled, you know, the price is sort of free.
However, when customers, they deep dive, they look at a total cost of ownership in terms of support cost and AI cost, guess what? I think we're in a much better position now. That's the reason why I think, you know, not like every time we talk to customer, call this customer, always, you know, telling us, "Hey, you know, your price," or those kinds of things, customer really appreciate, right? They want to deploy the best-of-breed service. That's the reason why we did not see, you know, the big price pressure, you know, over the -- you know, at least in the last quarter. And I think we're maintaining our press, you know, the strategy very well, so --
Michael Funk -- Bank of America Merrill Lynch -- Analyst
OK, and just really quickly, so your last comment there, you didn't really see price pressure last quarter. Should I take that to mean that pricing is stabilizing relative to where it was, pricing is getting better?
Eric Yuan -- Founder and Chief Executive Officer
I think so, because you look at it overall of online trend, right, and kind of a historical low, right, as Kelly mentioned earlier, right? And also, look at our enterprise customers as well because we have a lot of other services, upsell, you know, entire -- you know, the product suite. And I think it's a much better position now.
Michael Funk -- Bank of America Merrill Lynch -- Analyst
Great. Thank you, Eric. Thank you, Kelly.
Eric Yuan -- Founder and Chief Executive Officer
Appreciate it. Thank you.
Kelcey McKinley
We will now hear from Rishi Jaluria with RBC Capital Markets.
Rishi Jaluria -- RBC Capital Markets -- Analyst
Oh, wonderful. Thanks, Eric, thanks, Kelly, for taking my question. I just wanted to ask, following up on the CCaaS side, Eric, you made the comment that you have either displaced or beaten each of the top four CCaaS vendors as ranked by Gartner. Can you provide a little more color on those wins maybe? And what vector did you tend to win those on? Was it on pricing? Was it on certain features and capabilities you have that they don't have? Maybe help us understand and provide more color.
That'd be helpful. Thank you.
Eric Yuan -- Founder and Chief Executive Officer
Yeah, so just to give two examples, right, a lot of other examples. You know, if you look at just the two examples, I do not think just one factor, you know. And to let a customer make that decision, they look at it, first of all, do they trust this vendor now, right? And they look at the product roadmap, look at existing feature set, look at integration, look at AI features, also look at the pricing. And, you know, all those factors, they think -- you know, because -- you know, so some customers, they trusted Zoom years ago, right, many years ago.
They deployed Zoom Phone. They say, "Yeah, this is great story." You know, we are going to replicate that story. That's the reason why customers say yes. But interestingly enough, those customers -- some of the logos we won in Q1, they are not -- even not Zoom customers, but they trust our brand.
They know we are very innovative. You look at all other CCaaS vendors, guess what? Their solution was -- were not a build recently. It's a long time ago, from on-prem to cloud. You know, it's really sort of a clunky interface.
And that's the reason why we have high confidence we're going to win more deals, so --
Rishi Jaluria -- RBC Capital Markets -- Analyst
Right, thank you.
Eric Yuan -- Founder and Chief Executive Officer
Thank you.
Kelcey McKinley
Our next question will come from Siti Panigrahi with Mizuho. Siti, please go ahead.
Siti Panigrahi -- Mizuho Securities -- Analyst
Thank you. I saw the demo of your Zoom workspace, very impressive in terms of like AI feature, like Ask AI Companion that you added, Eric. So, I have a couple of questions. Firstly, like how do you see, you know, the Zoom workspace, how do you plan to -- you know, what's your strategy in terms of branding or go-to-market, you know, push this product? And do you see this more traction on the -- more on the low end, like small business segment, or more on the enterprise side? And if you combine this workspace with AI, should we expect this to drive more free to paid migration? And if so, when should we start seeing that effect? Thank you.
Eric Yuan -- Founder and Chief Executive Officer
Yeah, it's a great question. You know, it's great to know you like Zoom Workplace. I think it does not only drive, you know, the revenue growth, adoption, not only SMB, enterprise customers. Overall, if you take a step back, right, you look at Zoom Workplace.
Look at the first 10 years, right, in Zoom, one of those journey, essentially, more like our slogan is Meet Happy, right? For now, we have a collaboration platform. And customers, they can live within a platform to get all the work done, right? Does not mean they should use everything from Zoom, but we do have a collaboration platform. We also can co-exist with other vendors very well, like Microsoft, Google, ServiceNow, Salesforce, or Atlassian, all those SaaS leaders. At the same time, you know, you look at the customer requirements, right? And when they use Zoom Meetings, you know, from Phone or Team Chat, Whiteboard, and Contact Center, a lot of things together, that's a full collaboration, you know, platform.
Used to be, you know, from Meet Happy now to the Work Happy, right? That's sort of our slogan evolution, right? And also, AI is a part of that. Look at our work with these customers. Guess what? AI is not only a part of that, but also at no additional cost, right? So, that is our vision. And essentially -- you know, and from, you know, many, many years ago, from one application service provider and into a full collaboration suite.
And SAP customers, for sure, they like that. Interface customer, they want to deploy the best of the best-of-breed service. They also like that, too. So -- plus, it's an open platform.
That's the reason why we are doubling down our Workplace, the platform, to become, a work, you know, happy platform.
Siti Panigrahi -- Mizuho Securities -- Analyst
Thank you.
Eric Yuan -- Founder and Chief Executive Officer
Thank you.
Kelcey McKinley
Moving on to Catharine Trebnick with Rosenblatt Securities.
Catharine Trebnick -- Rosenblatt Securities -- Analyst
Hi, thanks for taking my question. Can you update us on the partner program? What I'm really trying to dig into is really how you are positioning yourself competitively against Ring and the traditional partners? Thanks.
Eric Yuan -- Founder and Chief Executive Officer
Kelly?
Kelly Steckelberg -- Chief Financial Officer
Eric, you want me to take that?
Eric Yuan -- Founder and Chief Executive Officer
Go ahead.
Kelly Steckelberg -- Chief Financial Officer
OK. Yeah. So, we continue with our partners and with our direct sales organization. We continue to win, I think, not only against other providers in the phone cloud, but also, as Eric just mentioned, on the contact center side as, I think, several vectors, right? It's around pricing and total cost of ownership.
It's around the momentum because of the ease of use of deploying and selling this product. We believe that our partners should be able to see that value in not only the deal -- you know, the end user but also in their deals as well. And so -- and if you're asking about compensation to the partners, we continue to ensure that our partner programs are competitive but also appropriate. We are always thinking about the impact to them, as well as to our internal margins.
And as you heard us talk about last quarter and also this quarter, we have some additional partnerships that we've been named as the preferred partner migration for not only Meta, but if you remember, also Twilio as well.
Catharine Trebnick -- Rosenblatt Securities -- Analyst
Yeah, thank you.
Eric Yuan -- Founder and Chief Executive Officer
Yeah, just quickly, add-on to what Kelly cited, those are partnerships, you know, most of time. Because the reason why all those good partners because customers they ask for that, right? Because they say, "Yeah, they really want to build more businesses with Zoom." And that's the reason why we have so many partners and recently like Avaya or Meta, right? This is a great example, so --
Kelcey McKinley
Thanks, Catharine. And, Ryan MacWilliams with Barclays, please go ahead with your question.
Ryan MacWilliams -- Barclays -- Analyst
Appreciate it. Kelly and Eric, you beat me to it as usual. I was going to ask about the Meta and Avaya partnership. So, great to see that they chose Workvivo as the migration partner for their workplace solution.
I guess, to double click on that, do you have any sense of the timing on how these customers could move over? And how do you frame the opportunity for this partnership? And then, just on the Avaya partnership, love to just hear like kind of what exactly that partnership is trying to get at, how that can open the door for more customer relationships between you guys? Thanks.
Eric Yuan -- Founder and Chief Executive Officer
It looks like I know your question now. So, thank you for asking those two questions. So, in terms of Meta partnership, right, I think, you know, Meta is such a great company, works on a lot of AI Llama 3, and it's great and open source. That's the reason, you know, why they wanted to retire their workplace for Meta products.
For sure, they talked to their customers and understand. We have a Zoom Workvivo platform is a very preferred solution. And many -- as I mentioned earlier right, we just won a very large telco deal. It's not a small deal, 100,000 seats, right? So, the very mature platform is a lot of innovations.
That's the reason why, you know, Zoom became a preferred partner. We're going to work together, right, to make sure all those workplace for Meta customers have a smooth transition, right? In the next -- I think in the next 12 to 18 months, you know, I can work together with Meta, with customers, make sure the entire transition period is very, very seamless. So, we have high confidence. You know, they are a greater partner and not only a customer, but also a greater partner, I mean Meta.
So -- and again, we are very excited about that partnership and about, you know, that transition. In terms of Avaya deals, right? So, Avaya, they have lots of very, very big, large enterprise customers who deployed both UCaaS and CCaaS solutions. Those large enterprise customers, they are not fully ready to migrate everything to cloud. You know, you look at integrations, many, many years effort they put.
It's almost impossible to migrate to cloud overnight. However, we also want to leverage a lot of, you know, the features, like AI features, a lot of innovations, right? So, that's the reason why the customer, they share with both of us, both, you know, online from Avaya. And when they are not ready to move to the cloud, they're also doing on-premise solution. Guess what? This is a hybrid architecture.
And how to leverage Zoom Workplace client to talk with Avaya on-prem future servers, right? And on the one hand, the Zoom Workplace client has a lot of rich features that they can leverage. On the other hand, they also kind of seamlessly integrate with Avaya on-prem future servers. I think that is a win-win partnership, right, benefit us, benefit Avaya, benefit the customers, in particular for all those very, very big, very complicated, you know, the enterprise customers. That's the reason why I think this hybrid architecture will help customers a lot.
Ryan MacWilliams -- Barclays -- Analyst
Appreciate the color. Thanks, guys.
Eric Yuan -- Founder and Chief Executive Officer
Thank you.
Kelcey McKinley
Baird's William Power has the next question.
Will Power -- Robert W. Baird and Company -- Analyst
OK. Great. Hopefully, you can hear me OK calling from my mobile. I guess, Kelly, for you, can you talk about the enterprise growth outlook from here? Should we expect that trough in Q2 as well and then accelerate? And I guess tied to that, maybe just help us understand your level of confidence in raising the full year guidance to reflect the Q1 beat, given we are still pretty early in the year here?
Kelly Steckelberg -- Chief Financial Officer
Yeah. So, hi, Will. Yes, we expect that enterprise growth will follow the similar trend that we've discussed for the entire company with Q2 being the low point for FY '25 from a year-over growth perspective and then seeing reacceleration in the back half from there. And in terms of our confidence for the year, you know, we applied a similar approach that we always do to setting guidance, which is, you know, talking to our sales organization, of course, looking at the pipeline that we're seeing, also the trends that we're seeing with online and what's on deck in terms of initiatives, what's the performance we're seeing for churn.
And then, looking at all of that, putting it together, and coming up with our outlook.
Will Power -- Robert W. Baird and Company -- Analyst
Thank you.
Kelly Steckelberg -- Chief Financial Officer
Yeah.
Kelcey McKinley
We will move on to Tyler Radke with Citi.
Tyler Radke -- Citi -- Analyst
Hi, Kelly. Hi, Eric. Thanks for taking the question. Kelly, to start off, just on the enterprise customers, I appreciate the explanation on the movement of some of those customers moving into online.
I think if I back that out, it's still decline sequentially. So, I was wondering if you could unpack kind of the drivers of that enterprise customer number and then how you're thinking about growth for that long term? And then, second of all, just as we think about the billings outlook, I think that came in a little bit stronger for the second quarter despite revenue being a little bit below consensus. Should we think about that as kind of, I guess, what are the puts and takes on that that would be kind of driving the divergence? Any change in billings terms we should be thinking about?
Kelly Steckelberg -- Chief Financial Officer
Yeah. So, first of all, on the enterprise number, it didn't decline quarter over quarter. I just want to be clear, even if you back out those numbers. So, it should be up.
You know, we have discussed this in the past that as our strategy, especially on selling Zoom Phone and Contact Center, is selling into our existing installed base, and that as more of our revenue growth is coming from these emerging products and selling into our existing installed base, that you should expect those customer adds to not grow at the same rate that they did historically. But it did grow quarter over quarter. So, I just want to be clear about that. And then, in terms of -- you know, we've said this before, too, which is, I know it's not always what you want to hear, but in terms of billings and RPO, really, the best indicator that I can give you of the future is our revenue guidance itself.
So, there are, you know, changes in the trends in terms of -- we do -- we continue to see strength in movement from monthly to annual to multiyear billing terms, so that's really positive, as well as we see expansion and growth into those longer-tenured customers in online, which typically also means they've expanded into longer billing terms. And we've also seen some benefit, as we mentioned, as we've really been more thoughtful about our discounting practices, which includes fewer free periods in the enterprise. And so, all of that is leading to the growth that you're seeing from billings and the deferred revenue side of things.
Tyler Radke -- Citi -- Analyst
Great. Thank you.
Kelly Steckelberg -- Chief Financial Officer
Yup.
Kelcey McKinley
We are moving right along, so we will now hear from Alex Zukin with Wolfe Research.
Alex Zukin -- Wolfe Research -- Analyst
Hey, guys. Thanks for taking my question. First, I just want to acknowledge, we saw something from you guys this quarter we haven't seen in a long time, accelerating enterprise revenue growth, accelerating enterprise billings growth, and declining opex. So, just maybe stack rank for us, like if you look at all the things you called out, whether it's Contact Center, Phone, Workvivo, even the sales product and the Quality Management product you referenced in the prepared remarks, Eric, stack rank where those kind of landed in terms of the driving factors or the driving force behind that acceleration? And then, I've got a quick follow-up.
Kelly Steckelberg -- Chief Financial Officer
Yeah --
Eric Yuan -- Founder and Chief Executive Officer
Kelly, do you want to take it?
Kelly Steckelberg -- Chief Financial Officer
Yeah, sure. Let me talk about revenue, and you can talk about sort of the business momentum in general. But, you know, Zoom Phone continues to be a very strong growth driver. Very pleased with the growing momentum we are seeing from Contact Center.
And then, Workvivo also gaining in its own right. In terms of -- you know, relative overall dollars, Workvivo is still a smaller component of the business but is growing very, very quickly. So, certainly, contributing. And some really exciting customers that are coming to Zoom as a result of both Contact Center and Workvivo.
And also, we had won a new customer coming from the Zoom Revenue Accelerator as well this quarter. So, that's really exciting to see these emerging products that are bringing new customers and new logos to the company. So, I think in terms of momentum, we're excited across all of those thresholds, but kind of in that order. Eric, anything else you want to add?
Eric Yuan -- Founder and Chief Executive Officer
Sure. Alex, that's a great observation. I think to echo what Kelly cited, that momentum, you know, is -- boils down to our product strategy. It's actually the two key pillars.
The first one is the Zoom Workplace. The second one is Business Services. If you look at the Zoom Workplace, right, for those customer deployment meetings and for now -- and they have Zoom Workplace client, and they try to consolidate, right, some other solutions like Zoom Team Chat, is good flexible, you know, very scalable chat solution is part of that at no additional cost. We need to put other whiteboard solutions, look at Zoom has whiteboard, Zoom has a meeting for scheduler functionality as well, right? You know, a lot of features is part of the Zoom Workplace.
But what's more important to that, they look at the -- take the Zoom meeting summary feature, for example, that's our AI feature, when they test the feature -- their feedback is not only positive to say, "Wow, I cannot believe that." It's worked so well, plus at no additional cost. They also trust and like our AI vision as well. This is kind of a workplace. You know, plus, you know, the reason why Meta, is great company, truly, I admire, why they pick up Zoom Workvivo? Because they also look at it from their customer perspective.
They want to pick out the best, you know, the partner who can deploy a greater solution, right? AI is part of that. Workvivo is also part of our Workplace platform. Look at the Business Services, you know, Contact Center for support team, Revenue Accelerator for sales team, Event Sessions for marketing team, and all those new services, right, also will help us a lot. Again, back to the contact center story, a lot of opportunities, a lot of enterprise customers by and large still on-premise solution.
They are thinking about which cloud contact center solution, they can trust, they can count on in the next five to 10 years. Zoom is a much better platform. That's the reason why I think that's kind of -- you know, and the momentum is coming, really focused on the enterprise side, so --
Alex Zukin -- Wolfe Research -- Analyst
And, Eric, maybe just on pricing. You got asked this question a couple of times. It feels like you're talking about it being stable. You also raised price, and you didn't see a real change in churn.
I guess, I know you don't like raising price too many times. But if you think about just the strategy of continuing to add a tremendous amount of value, whether it's through consolidation or incremental functionality like sales or quality management, is the -- what is -- if you look at the ACV uplift in those two accounts that you called out for Expedia and MLB, and you look at that across your pipeline for adding those types of features, assuming some kind of attach rate, what's that opportunity look like for you guys?
Eric Yuan -- Founder and Chief Executive Officer
Yeah, I can talk about business side. Kelly, feel free, if you want to chime in on the revenue side. I think this is -- Expedia is a great example, right? And they deployed Revenue Accelerator, right? Again, those are Business Services, right? It's kind of -- I would say, it's a very compelling service, right? We are not against comparing to our competitors, A, we are dramatically lower in price. That's another case because there's a huge value.
AI is part of that, not like Workplace, AI at no additional cost, right? However, AI is playing a very big role for all of the Business Services, right? And also, most of them are enterprise customers, right? And the reason why I think, you know, we are doubling down all those business services, you know, pricing is, you know, kind of not like when we offer a meeting service many years ago, right? It's the better pricing, better product, better service. However, here is a very different story, right? We compete against any other competitors. Also, the price is -- you know, also, you know, customer like that as well because they do not want to use Zoom, "Oh, that's just a low price." That's not the case for Business Services because of the huge value.
Kelly Steckelberg -- Chief Financial Officer
Yeah. In terms of the revenue upside, Alex, it kind of varies by product because certain products have much higher ASPs, for example, like Zoom Contact Center than Meetings. But, of course, the attach rate in terms of number of seats isn't 1-to-1, right? There's a lesser ratio there. Zoom Phone, you know, we saw an attach rate of generally 1-to-1 -- or do see a attach rate, I should say, of 1-to-1 for Meetings to Phone.
Sometimes even greater when we look at customers that we've talked about here before that have, you know, a bigger attach rate because they have phones in retail locations, for example. So, it just varies. The thing that I will say is, generally, a lot of these emerging products also had better gross margins which is helpful when you look at something like Contact Center because of the ASP. Especially with the rollout of the pricing tiers, we saw the ASPs for those products almost doubled from quarter to quarter with the rollout of the new pricing tiers.
And I think that will continue as the features and functionality, especially in those upper tiers, continues to expand.
Alex Zukin -- Wolfe Research -- Analyst
Great. Congrats, guys. Thank a lot.
Kelly Steckelberg -- Chief Financial Officer
Thanks.
Eric Yuan -- Founder and Chief Executive Officer
Thank you, Alex.
Kelcey McKinley
Matt VanVliet with BTIG has the next question.
Matt VanVliet -- BTIG -- Analyst
Hi, good afternoon. Thanks for taking the question. I guess on the last point, you know, as you include more AI Companion in the mix, how are you -- how do you feel like that's actually monetizing maybe more seats, a larger opportunity at those individual customers than maybe limited by only Phone or only Meetings? How is the workspace and sort of bringing all this together helping drive deal sizes higher?
Eric Yuan -- Founder and Chief Executive Officer
I think AI Companion to not only to help our Meetings, Phone, our Team Chat is across entire Zoom Workplace product lines platform, plus all the Business Services, right? And because of our federated-AI approach, you look at our workplace, the deployment, right, for the entire collaboration platform and not only make all those services better, but also its customer appreciated, right? We thought they're targeting customer more, right? We do add more value to customers because -- at no additional cost, right? That's kind of a power, you know, part of the Zoom AI companion. At the same time, in terms of monetization, as I mentioned earlier, look at our Business Services, you know, AI is a key differentiation right. Leverage AI and also -- and we had a premium price as well, and that's because of the value. At the same time, you know, we also are going to leverage AI Companion to build a lot of new things, new services like Ask AIC.
That will be introduced later this year and also some other new services that we're working on as well. But overall, I think the AI, for the existing collaboration customers, add more value for new services, right? And also, you know, we can charge a premium price, plus also can leverage AI Companion to build new services, given the edge-AI is coming, and there's a lot of new opportunities.
Matt VanVliet -- BTIG -- Analyst
Thank you.
Eric Yuan -- Founder and Chief Executive Officer
Thank you.
Kelcey McKinley
We will now hear from Ryan Koontz with Needham.
Ryan Koontz -- Needham and Company -- Analyst
Thanks for the question. First, Kelly, a quick housekeeping one. The reclassification of customers, is that expected to change any of your KPIs like NER and like that, turning those in the right direction at all?
Kelly Steckelberg -- Chief Financial Officer
I mean, no significance. As we mentioned, although the number was pretty significant, the revenue shift from enterprise to online was only $4 million. And we -- as we indicated, it didn't change -- because it was so de minimis, the impact on net dollar expansion calculation, for example, it didn't make a -- it didn't move it at all.
Ryan Koontz -- Needham and Company -- Analyst
Got it. Helpful. And, Eric, maybe a quick strategic question on Events. Any update there in terms of how the ecosystem is building out? I know that's a complex market to penetrate? Any update you have for us there.
Thanks.
Eric Yuan -- Founder and Chief Executive Officer
Yeah, great question. I do not think I gave a few examples about that. But I can tell you, Zoom Events is doing extremely well. And you look at every quarter contribution to our revenue growth is the reason why it's kind of -- you know, we had a Webinar long, long time ago, right, you know, and Zoom introduced Zoom Sessions.
Events is a very trustable brand. It will offer the most flexible event service. And I think that service, you know, is going to help us more and more. Because if you look at any other competitors, right, you know, most important competitor, think of the very large one, they even do not have something similar.
And probably, their product on par with our Webinar, now we have these Events and Sessions, right? We offer the best Events and Sessions, you know, for our customers. That's the reason why for almost every enterprise customer, and then you look at the very large events and Zoom is the best platform. Our competitors even does not have that, so -- by the way, also forgot to mention, actually, it's not only for event itself. Essentially, a lot of customers use Zoom, you know, for -- you know, to improve their working, you know, thei marketing, you know, the efficiency, right, how to drive the lead generation.
You know, and our workflow, right, integrated very well with our Events and Sessions, so --
Ryan Koontz -- Needham and Company -- Analyst
Great. Thank you.
Eric Yuan -- Founder and Chief Executive Officer
Thank you.
Kelcey McKinley
We will now hear from James Fish with Piper Sandler.
James Fish -- Piper Sandler -- Analyst
Hey, guys. Thanks for the question here. Maybe just bridging the Phone and Contact Center opportunity, whether -- it's kind of hard to probably parse this out in the entire installed base. But as we think about those greater than 90 Contact Center accounts over 100K, maybe could you go over the overlap of adoption between Phone and Contact Center, how that packaging of the two is going together, and if you guys are starting to see that pipeline or backlog increase for cloud conversions across those spaces relative to the last year? Thanks guys.
Eric Yuan -- Founder and Chief Executive Officer
Yeah, sure. So, Kelly feel free to chime in. Because if you look at it -- you know, when we started, we saw -- we look at the quarterly the Contact Center, you know, the deals we won, we thought it probably most of the customers will be the existing customer, right, either Meeting customers, the Phone customers. However, that's not right.
And quite often, some customers, they are not a Meeting customers, not Phone customers, but, you know, they became the first customer to deploy the Zoom Contact Center. So, that means, you know, we have a lot of opportunities for existing installed base. So, we are going to double down on that because the product already works very well. And plus, you know, buyers are different.
We also -- that's the reason why we invested more to our channel partnership as well. I think, you know, more and more existing installed base, right, after they heard about our Contact Center success story, I think we are going to see acceleration of Contact Center business growth, so --
James Fish -- Piper Sandler -- Analyst
Thank you.
Eric Yuan -- Founder and Chief Executive Officer
Thank you.
Kelcey McKinley
We have one additional question, which will come from Michael Turrin with Wells Fargo.
Michael Turrin -- Wells Fargo Securities -- Analyst
Hey, thanks for squeezing me in. Kelly, you had a few comments on tightening discounts, tightening grace periods, just as things for us to be mindful in terms of the model. I'm wondering if that's somewhat standard operating procedure for Zoom, or if that's coming from more confidence that the business is now stabilizing. And if you're just able to help us with visibility you have from here into Q2 marking the low point in terms of growth and any additional driver details on drivers there is useful.
Thank you.
Kelly Steckelberg -- Chief Financial Officer
Yes. I think that, you know, the discounting we started working on being more thoughtful and disciplined about that last year. We've talked about that several times before. And you're starting to see the impact and the benefit of that rolling through the results this year, which makes sense as customers are coming up for renewal, especially some of those ones that are on annual accounts.
And then, in terms of tightening up the dunning period, I think that it's just, you know, as we continue to mature as an organization and really be thoughtful about not only what's good for our business, what's good for our customers as well, and seeing that -- it was just the right time. And we continuously go through and look at our, you know, financial and accounting policies and make sure that those align with what's right, again, right for the business, right for our customers as well. I think it's more about that and less about sort of anything else that's happening in the business other than just being thoughtful and maturing into some of those policies.
Michael Turrin -- Wells Fargo Securities -- Analyst
Thank you.
Kelcey McKinley
And again, that is all the time we have for questions today. That concludes our questions. So, I'll turn it back to Eric for any closing comments you might have.
Eric Yuan -- Founder and Chief Executive Officer
Yeah. Thank you all for joining us today. I really appreciate it, and we are working as hard as we can to truly deliver happiness to our customers and partners. And also, I'd like to leverage this opportunity to thank every Zoomies for their hard work, and really appreciate it.
Thank you all for your time. See you next quarter.
Kelcey McKinley
Thank you so much, Eric and Kelly. And again, everyone, this concludes today's earnings release. We thank you all for your participation. Enjoy your summer, and we will see you next quarter.
Duration: 0 minutes
Call participants:
Kelcey McKinley
Charles Eveslage -- Incoming Head of Investor Relations
Eric Yuan -- Founder and Chief Executive Officer
Kelly Steckelberg -- Chief Financial Officer
Meta Marshall -- Morgan Stanley -- Analyst
Samad Samana -- Jefferies -- Analyst
Michael Funk -- Bank of America Merrill Lynch -- Analyst
Rishi Jaluria -- RBC Capital Markets -- Analyst
Siti Panigrahi -- Mizuho Securities -- Analyst
Catharine Trebnick -- Rosenblatt Securities -- Analyst
Ryan MacWilliams -- Barclays -- Analyst
Will Power -- Robert W. Baird and Company -- Analyst
Tyler Radke -- Citi -- Analyst
Alex Zukin -- Wolfe Research -- Analyst
Matt VanVliet -- BTIG -- Analyst
Ryan Koontz -- Needham and Company -- Analyst
James Fish -- Piper Sandler -- Analyst
Michael Turrin -- Wells Fargo Securities -- Analyst
