Thank you, Matt. Hello, everyone, and welcome to Zoom's earnings webinar for the fourth quarter and full fiscal year 2020. 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 on the zoom.com website. 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 about future financial performance and other future events or trends, including guidance. These statements are only predictions that are based on what we believe today, and actual results may differ materially.
These forward-looking statements are subject to the risks and other factors that could affect our performance and financial results, and which we discuss in detail in our filings with the SEC, including today's earnings press release and our latest 10-Q. Zoom assumes no obligation to update any forward-looking statements we may make on today's webinar. With that, let me turn it over to Eric.
Thank you, Tom. Thank you and welcome everyone joining us on the Zoom video webinar. At Zoom, we strive to empower our customers to accomplish more with our video-first unified communications platform. Our success toward achieving this goal is evident in our results, with the fourth quarter capping off a strong year for Zoom, our first year as a public company. Kelly will discuss our Q4 results and outlook in detail in a moment. So let me give you a few key highlights for the full year. For FY 2020, we delivered a unique combination of high revenue, profitability, and free cash flow growth. Revenue grew 88% to $623 million, and we exited Q4 at an annualized run rate of three quarters of a billion dollars. We achieved non-GAAP operating margin of 14.2%, up over 900 basis points year-over-year.
We generated a free cash flow of $114 million for the full year, up 397% year-over-year. This is our first full year of positive free cash flow and non-GAAP operating income. Our customer metrics were also impressive for FY 2020, including 86% growth year-over-year for customers with $100,000 of trailing 12 months revenue. We also recently celebrated the one-year anniversary of the launch of Zoom Phone, a key component of the Zoom unified communications platform that has significantly expanded our TAM. Zoom Phone had an incredible start, we are very excited about the continued momentum of the offering. Here are just a few of the key metrics to demonstrate some of the Zoom Phone accomplishments we had this past year. First, we are grateful to have existing customers who trust us and new customers who have looked to Zoom Phone to resolve their telephone challenges.
These factors enabled us to close Zoom Phone deals with approximately 2,900 customers who have more than 10 employees. Second, we exited the year with a run rate of 230 million Zoom Phone minutes. Zoom Phone is a great opportunity to expand our footprint with existing customers and drive new logos for companies looking to modernize away from legacy PBX systems. Now, let me discuss a few of our happy customers. We are thrilled to welcome Johnson & Johnson, the world's largest and most broadly based healthcare company, to the Zoom family. We are grateful that Johnson & Johnson chose Zoom to help modernize and consolidate on a unified communications platform with approximately 60,000 Zoom meeting users. As a global company, they wanted a solution that would enable them to communicate reliably around the world, including growing regions in Asia. Thank you, Johnson & Johnson.
I also want to thank VMware for trusting Zoom. VMware has been providing all employees globally access to Zoom Meetings and digital workspace, and will soon utilize a large deployment of Zoom Phone. The easy single sign access to Zoom from any device is enabled to leverage the VMware Workspace ONE platform, allowing employees to access all the applications they need from their device of choice while ensuring security and compliance. Together with Zoom, VMware Workspace ONE helps businesses support their distributed workforces by enabling a remote first culture. Thank you, VMware. Moving to a few recent business highlights. First is the 2020 Gartner Peer Insights Customers' Choice Award for Meeting Solutions. Zoom received the top overall rating in the voice of the customers category. Zoom was the only company to achieve Customers' Choice Awards for meeting solutions serving all listed regions, company sizes, and industry verticals.
Second, Okta published their annual Business at Work 2020 report, a premier study of how organizations and people are using technology in the enterprise. The report highlighted Zoom as a preferred video application, posting 876% growth in the Okta network over the past three years. Zoom is the only company to earn the distinction of being both the fastest-growing and most popular app. Third, we announced an expansion of our global channel partner program to add new partnerships with industry-leading master agents for Zoom Phone. Fourth, caring for our community is a core value for Zoom, and we are conscious of our impact on the environment. We proudly announced our top 10 green leaders customers, who were estimated to avoid the most carbon dioxide emissions by replacing in-person meetings with Zoom video meetings.
In a 90-day period, the top 10 customers were estimated to have avoided the equivalent of the annual carbon dioxide emissions of 149,000 cars. Before turning the webinar over to Kelly, I'd also like to address the global impact we're seeing from the coronavirus. While this tragic situation is very fluid, Zoom is focused on using our resources to help alleviate some of the disruption and communication challenges as an alternative to in-person meetings for our employees, customers, and community. I'm happy to report that all of our employees in the affected areas are healthy. Given the recent emergence and growing number of coronavirus cases in the U.S., we have directed our headquarters employees to work from home unless there's a business-critical need for them to be in the office. We are taking this step out of abundance of caution.
Zoom is doing everything we can, especially for global educational institutions, to provide resources and support to our customers and those navigating the coronavirus outbreak, including we are proactively monitoring capacity globally to ensure maximum reliability amid usage increases. In China, we have removed the 40 minutes limit on free meetings, and we are providing informational sessions and on-demand resources so anyone can learn how to use the Zoom platform with ease. With the reliability of our high-quality video platform, we have seen a large increase in the number of free users, meeting minutes, and new video use cases. For instance, in China, healthcare workers under stressful conditions in affected areas are able to connect live on video with therapists. In closing, I'd like to thank the over 2,500 Zoom employees who are building Zoom into a great company through caring for our customers, community, company, teammates, and themselves.
As we remain focused on creating a culture built around happiness and caring, I know we will position Zoom for future success. With that, let me turn things over to Kelly.
Thank you, Eric, and hello, everyone. Let me start by reviewing our financial results for Q4, then discussing our outlook for Q1 and the full year of FY 2021. As Eric said, Q4 was a strong end to the year. We delivered another amazing quarter with continued traction for all offerings across all major geographies. For Q4 specifically, total revenue grew 78% year-over-year to $188 million. This top-line result exceeded the high end of our guidance range by $12 million due to our strong sales execution in the quarter. We delivered our Zoom Meetings, Zoom Rooms, and Zoom Phone solutions to new accounts while driving major expansions with existing customers. For the quarter, new customers accounted for approximately 59% of our year-over-year growth in subscription revenue, while the remaining 41% was due to additional purchases from existing customers. Now let me share some of the key customer metrics for Q4.
We added approximately 7,800 customers with more than 10 employees quarter-over-quarter and exited Q4 with 81,900 customers. This is an increase of 31,100 new customers or 61% year-over-year. Customers with more than 10 employees represented approximately 80% of revenue in FY 2020, compared to approximately 78% in the prior fiscal year. Our continued expansion in the upmarket resulted in 641 customers with more than $100,000 in trailing 12 months revenue, up 86% year-over-year. This is an increase of 95 customers, a record number of adds in a quarter. The high level of satisfaction and trust customers have in Zoom was evident in our net dollar expansion rate that was over 130% for the seventh consecutive quarter. Our net promoter score, which remained above 70 in Q4. Next, international expansion outpaced the high rate of growth in Americas revenue.
In Q4, our combined APAC and EMEA revenue grew 84% year-over-year and represented approximately 20% of revenue. Revenue from the Americas was up 77% year-over-year and represented approximately 80% of revenue. International expansion will continue to be one of our key growth initiatives in FY 2021 and beyond. Now, turning to profitability. Once again, we were net income profitable from both GAAP and non-GAAP perspectives, but I will focus on our non-GAAP results, which excludes stock-based compensation expense and related share-based equity taxes. Non-GAAP gross margin in the fourth quarter was 84.2%, compared to 82.1% in Q4 last year and 82.9% last quarter. This result was driven by the strong sales execution in the quarter and lower seasonal audio usage in Q4 due to the extended holiday season.
Due to the coronavirus, we have already seen significant usage of our platform. Accordingly, we will expand our capacity to meet the increased demands of both paid and free users. For FY 2021, we believe our gross margins will be at the lower end of our long-term target of 80%-82%. R&D expense in Q4 was approximately $16 million, up 60% year-over-year. As a percent of total revenue, R&D was 9%, which was slightly lower than Q4 last year. In FY 2021, we plan to continue investing in our highly efficient R&D model to drive innovation through adding additional engineering talent, especially in the first half of the year. Sales and marketing expense for Q4 was $84 million. This reflects an increase of 57%, or $30 million over last year, with investments to drive further growth.
As a percentage of total revenue, sales and marketing was 45% lower than last year due to continued efficiency gains in marketing, combined with slightly slower than expected sales hiring and the higher than forecasted revenue. We look to increase the pace of hiring in the upmarket and internationally in FY 2021, with additional resources being added to recruiting. G&A expense in Q4 was $20 million, up 49% on a year-over-year basis. It represented 11% of total revenue, benefiting from efficiencies as we scale our administrative functions and lower our accrual for telco taxes. non-GAAP operating income was $38 million, translating to a 20.4% non-GAAP operating margin for the fourth quarter. This compares to Q4 last year's result of $10 million and 9.3% margin. The higher revenue, plus expense efficiencies across all areas, were the main drivers of this additional profit.
Non-GAAP earnings per share in Q4 was $0.15 on approximately 293 million of non-GAAP weighted average shares outstanding and adjusting for undistributed earnings. This result is $0.08 higher than our guidance and $0.11 higher than Q4 of last year. Turning to the balance sheet. Deferred revenue at the end of the quarter was $231 million, up 83% year-over-year. Looking at both our billed and unbilled contracts, our remaining performance obligations, or RPO, totals approximately $604 million, up 94% from $312 million last year. We expect to recognize approximately 62%, or $375 million of the total RPO as revenue over the next 12 months, as compared to 67%, or $208 million in Q4 of last year.
This is a result of a mix shift between our current RPO, which grew 81% year-over-year, while non-current RPO grew 120% year-over-year as we closed longer term deals. The RPO results also reflect some expected seasonality benefits in Q4 due to our semi-annual quotas in the upmarket segment of our business. We ended Q4 with approximately $855 million in cash equivalents, and marketable securities excluding restricted cash. In Q4, operating cash flow was $37 million, up from $16 million, or 129% year-over-year. Free cash flow was $27 million, up from $6 million, or 368% year-over-year. As we previously discussed, these results reflect the use of cash for the purchase of shares via the employee stock purchase plan.
Starting in FY 2021, we expect the cadence of benefits from contributions to the ESPP to occur in Q1 and Q3, and then outflows from purchases to occur in Q2 and Q4. Turning to guidance. We are pleased to provide a strong outlook for the full year FY 2021 based on our view of the current business environment, our ability to gain market share, and with the momentum we built in FY 2020. For the full year of FY 2021, we expect revenue to be in the range of $905 million-$915 million, which would be approximately 45%-47% year-over-year growth. Non-GAAP operating income is expected to be in the range of $110 million-$120 million.
We expect to deliver non-GAAP earnings per share of $0.42-$0.45 for the full year FY 2021, based on approximately 301 million shares outstanding. For the first quarter, we expect revenue in the range of $199 million-$201 million. We expect non-GAAP operating income to be in the range of $25 million-$27 million. Our outlook for non-GAAP earnings per share is $0.10 based on approximately 297 million shares outstanding. In closing, we executed very well and are proud of the results we delivered in our first year as a public company. Our high growth outlook at this scale is truly unique. Given our ROI-focused business model, we continue to deliver a rare combination of strong profitability and free cash flow margins along with top-line growth.
I would also like to thank the entire Zoom team for their hard work this past year and look forward to achieving additional market share gains and growth as we deliver happiness to our customers with our unified communications platform. With that, let's open it up for questions. If you have not yet enabled your video, please do so now for the interactive portion of this meeting. Matt, please queue up our first question.
Our first question is from Nikolay Beliov from Bank of America, Merrill Lynch.
Hi. Thanks for taking my questions, congratulations on solid results here. I just wanted to thank Zoom for playing an important role in dealing with the tragedy with this virus. My first question is for Eric. This virus situation, this virus tragedy, do you feel like it's elevating the customer conversations, and it's leading to better appreciation of your business model? Do you think it's maybe a permanent elevation of spending intentions, or it's a temporary thing? Question for you, Kelly. Did you see impact from the virus in Q4 results, maybe in billings and RPO? How did you incorporate any potential positive impact on the business in the guidance?
Nikolay, that's a great question. First of all, I like your working background. Where are you now?
You don't want to know where I am.
I think first of all, I don't think that's temporary. The reason why is, in terms of experience about using the video conference like Zoom, look at a company sitting in Valley, like InVision, Zapier or GitLab, which is great companies. They do not have a single physical office to really understand how to enable remote workers to work together. If you look at the companies in other parts of the world or maybe other side of California, quite often we need to tell them video is the future of communication. You need to enable video, and we need to explain that. Given this coronavirus, I think overnight, almost every business really understand they need tools like this. This will dramatically change the landscape. I truly believe in the future, every business they will take onto video for the remote workers for the collaboration.
In terms of our results, Nikolay, for Q4, we did not see any impact directly related to coronavirus. As a reminder, we have definitely seen an uptick in usage, but a lot of that is on the free side. It's very early to tell whether or not that's going to convert long-term into paying customers. As we mentioned, we are seeing impact and have continued to build capacity to ensure that we can support this increased usage. We are seeing impact on our gross margins, which is why we're guiding you to the lower end of our range for next year.
Yeah, by the way, I already mentioned to some of my friends, if I start over the company, we're not even going to have a single physical office. A lot of people they mentioned, are you crazy? Now I realize that's reality now.
Got it. Thank you, guys.
Thank you.
Thank you, Nikolay.
Next question please, Matt.
Next question is from Bhavin Suri with William Blair.
Hey, guys. Thanks for taking my question. I want to touch a little bit on the vertical sales effort. You've talked a lot, Eric, about sort of the adoption of Zoom, taking hold on a vertical-by-vertical basis. Just strategies you think about the verticals, strategy on the sales force, the go to market, and then the applications you're integrating, how do you think about that given sort of the increasing presence enterprise?
That's a great question. When we started, we do not know which vertical market we are going to focus on. Fortunately, we saw quite a few high ed customers who deployed Zoom. Stanford Continuing Studies Group was our first paid customer. That's why our first vertical market is high ed. Several years ago, we found a great use case, which is healthcare customers because they are looking for a solution, because we talk about telemedicine for a long time. There's no good solution until they found Zoom. We also HIPAA compliance, the product experience, integration with Epic. I think that's very important vertical market. Also at the same time, last year we got a FedRAMP certificate.
We also expanded into the public sector market by focusing on enterprise, healthcare, public sectors, also, I think later last year, we also expanded into the financial institutions. I think all those vertical market use cases are a little bit different, our functionality, our feature flexibility can truly help them.
That's helpful. I want to touch a little bit more sort of then strategic if we take a step back. We've talked a lot about convergence, and you've discussed this in the past, you've discussed on calls, but it's convergence video, voice, we've talked about that. We know collaboration's a piece, and again, you're partnered there. As you think about this idea of remote disconnected people, all of it ties into collaboration. How do we communicate? How do we collaborate in Word documents, PowerPoints, whatever you're using? You think about Zoom's place, say it's video. Sure, there's Zoom Phone. If I was to fast-forward, do you think ultimately that collaboration space converges? Where do you guys end up sitting in terms of the content piece?
I'd love to understand how you think about the content part of the collaboration piece, not video and voice content, obviously, but we're talking about the data piece. How do you think about that? I know you're going to say partnership, but I'm talking 10 years out. Somehow to say the near term.
I think for the foreseeable future in video and voice, unified communications, that's a huge market, right? $47 billion market. I think we are going to be very busy, right? Especially for enterprise migrating to the cloud, video, voice will be converted into one service. We are going to laser-focus on video and voice. At the same time, we also build a platform. Our marketplace, there are already over 200 applications. We would like to integrate harder with other collaboration vendors, with a focus on the content, like a Dropbox, and a Box, like Okta or Microsoft. I think that's a way, right? Customer, they are looking for the best way to service, right? When it comes video and voice, I think that's our game.
All right. Thank you. Congratulations.
Thank you.
Thank you, Donovan.
Next question, please, Matt.
Our next question is from Sterling Auty with JP Morgan.
Yeah, thanks. Hi, guys. With the surge in free users, are you actually developing programs that will work on conversion of these potentially temporary free users into permanent paid users?
Yeah, that's a great question. First of all, we all feel sorry about those who have suffered from the coronavirus in China and all over the world, but still grateful to those doctors for helping the world to deal with the coronavirus. I think that's why we really focus on how to help those companies, those knowledge workers to connect. In this critical time, I would say empathy, humanity, and support for each other is more important than revenue, than growth. At this moment, we laser focus on offering the best service to help the people in the world. We even never thought about monetize because that's not our focus. That's not important. If we truly care about the customers, truly deliver value to the world, I think all those follow in the future.
Got it. One follow-up on Zoom Phone. You talked about the almost 3,000 Zoom Phone customers. Where are you finding the sweet spot in terms of the size of the companies that are really gravitating towards moving over to Zoom Phone? You mentioned VMware in your prepared remarks, is there a sweet spot for where Zoom Phone is heading?
I think in my view, I feel that everybody is the sweetest spot now. Because you look at our install base from SMB all the way up to large enterprise customers, when we talk about Zoom Phone, after they test that, they say, wow, that's exactly what they are looking for. We see the great customer adoption from SAP customers, from VMware as well. Because experience is very different, right? If you look at all other phone system, no matter on-prem phone system or cloud-based phone system, ultimately, you just can make a phone call, right? Sterling, I call your phone number, we can only talk. We really cannot do anything else. With Zoom Phone, it's very different. One more click, I can see you. I can share the content. That's a totally different architecture.
That's why if you look at our install base, after they test our solutions, they really like our experience. No any other solutions can match that experience.
Got it. Thank you.
Thank you.
Thanks, Sterling.
Next question, please, Matt.
Our next question comes from Meta Marshall with Morgan Stanley.
Oh, Matt, she's on mute still.
I did unmute her. Hey, Meta?
Yeah. Can you hear me?
Yeah. Yes, we can.
Okay, great. Sorry about that. You put out some announcements over the past couple of days on additional geographies as far as Zoom Phone went. Just wanted to see whether we should consider you guys covered in the major regions you'd like to be deployed in as far as Zoom Phone reach for now. Maybe, Kelly, you addressed the gross margin impact should be mostly from capacity increases from some of the free usage right now. Should we consider some of that gross margin impact from Zoom Phone adoption as well? That's it for me. Thanks.
Yeah, we're super excited that we added 11 new countries into G&A for Zoom Phone, taking us to 18 total countries that were G&A and additional 25 in beta. We're getting close to, I think, the coverage that the goal is to be in close to 50 countries by the end of this year, which is really what we're striving for. A couple key markets like India and China, we're still continuing to work on. In terms of the gross margin impact, no, we really haven't seen impact from Zoom Phone. As we talked about, it's still small relative to the overall usage that it's not having an impact on the gross margins. It's really coming from the increase that we're seeing globally in terms of in the last month or so, related mostly to coronavirus. Thanks, Meta.
Next question, please, Matt.
Our next question is from Heather Bellini with Goldman Sachs.
Great. Thank you so much. I just wanted to follow up on Zoom Phone. In a really short period of time, you've obviously had some great success with that rollout. Eric, knowing that you're constantly listening to customer feedback, what are the top R&D priorities for Zoom Phone as you look ahead over the next 12 months? Do you see any benefit on the horizon by Avaya's decision to partner with RingCentral instead of going down their own path? As those customers look to migrate, do you see an opportunity there? Thank you so much.
Yeah, Heather, thank you. I know you probably are traveling, next time, we can see you much better. That's a really good question. In terms of Zoom Phone effort, we do not think that's a brand-new application. Because when we built a platform, the first application that is built upon the platform is video conference. The second application is Zoom Phone. Many, we share lots of components, when we built the Zoom Phone system. Having said that, there are some features missing, and also international coverage as well. We are making very good progress, as Kelly just shared. In terms of the priority this year, we are just adding a little bit more features. Like recently, we announced SMS, the beta. Right? Also add a lot of features. All those features, I do not think rocket science. Really just application level work.
The hard part already done. Right? That's why we have a high confidence we can deliver a much better solution than any of our potential competitors. Regarding the Avaya or RingCentral deal, I think, from our perspective, we really focus on our installer base, focus on the video and voice convergence. That's kind of our vision. If today look at some of the customer, take VMware, for example, right? They deployed on-premise solutions, and some other customer also deployed maybe the on-prem Avaya solutions. When they evaluate which cloud-based PBX solution to go, if they do the test, they will know that Zoom experience is better than any other cloud-based PBX vendors. We have a high confidence as long as customers try our solutions, that's the solution to go.
Thank you very much.
Thank you.
Thank you, Heather.
Thank you, Heather.
Next question, please, Matt.
Our next question is from Brad Zelnick with Credit Suisse. Hey, Brad, you're unmuted.
Great. Thank you so much. I don't know if you guys can see me, it was nice to see you.
We see you.
Yeah. [cross talk]
Oh, fantastic. Great. Congrats on all the success thus far with Phone. We've seen some of your competitors really leverage the channel to drive success, and I was wondering how should we think about your willingness to do the same?
Yeah. We're really excited to announce that we just yesterday, I guess, launched our master agent program for Phone specifically, and we've signed up two big partners in [ Emphasys] and Avant, and the more formal launch will be next week.
Conference.
Conference. Yes. Thank you.
Great. Thank you, Kelly, and maybe just to follow up on net expansion. It remains above 130%, but based on our math, it would seem to be the lowest level of expansion that we've seen thus far. How much of the deceleration is due to large lands, and how should we think about expansion rates from here?
there's a couple of things that contribute to our net dollar expansion rate. It's land and expand, as you touched on, as well as Zoom Phone. we really see great opportunity for that number to be influenced by Zoom Phone as well as land and expand is a critical part. It does vary quarter to quarter, depending, as you just indicated, on the size of the initial deals. we're confident for the long term that it'll stay at above 130.
Great. Thanks so much. Congrats.
Yep.
Thank you.
Thank you, Brad.
Next question, please, Matt.
Our next question is from Tom Roderick with Stifel.
Hi, everyone. Thank you for having me on. Thanks for taking my question. Eric, apologies, I jumped over, and I think you were talking about this right as I jumped over, but obviously, your customers are very excited to be able to use Zoom during a challenging time. At the same time, obviously, you have a pretty nice sized workforce over there in China as well, and I'd love to hear just a little bit more about how you're able to still communicate what your procedures are with your R&D staff. As you talk about building up more R&D dollars in the year 2020, help us understand where geographically you're thinking about that in spite of all of the challenges we're facing globally right now with the coronavirus taking place? Thank you.
Yeah, it's a great question. If you look at our R&D resources, the core R&D are here in our headquarters in San Jose. We also have a team in China. Because I managed a web-based engineering team before, I'm very familiar with that process, how to manage the offshore team. Having said that, actually, we are using Zoom video every day. Many area engineers, anytime, anywhere they can work. For sure, we have a security process, right? We are already familiar with remote working, the practice for a long time. During the coronavirus, a lot of other businesses, they have to work at home. I think quite often we got a feedback they really do not know how to do that. We know how. That's why, over the past several weeks, now most of them are already back to work.
Over the past several weeks, when they went back home to work, there's not any impact whatsoever because they already know how to do that. Right? Here, we also did not see any impact. We're still working together with our team. For sure, we all know how to use Zoom. Right? I think the impact to us is very minimum. Plus, this year and the next two years, I think we are going to hire more and more resources here for the new services, a lot of artificial intelligence features and the core capabilities because the core IP, R&D still are developed here. That's why we further expand our R&D team here in our headquarter this year and also for the foreseeable future as well.
Great. A quick follow-up for you, Eric, just in thinking about, you've been doing this a long time. You've seen a number of these sort of disruptive moments in tech. This is clearly a disruptive moment in the global economy. When you think about your conversations with your biggest customers out there, how are they talking about the way that they want to expand with their key partners over the next one or two or three years? Do you think of this as an opportunity to really shift some of those into a big digital transformation as they reevaluate how they spend their money coming out of the back end of this whole situation?
Yeah, that's a good question. By the way, today, we also have our annual analyst meetings as well.
Okay.
In addition to talking with our customers, your observation is right on. Meaning, I think more and more businesses, they are going to leverage video conferencing service like Zoom and to drive our productivity. No matter where those employees are, they still want to get the job done. However, when it comes to video conferencing, the key is that you have to make it work anytime, anywhere with any device. Otherwise, they are not going to use it. Because of this coronavirus, a lot of businesses either have remote employees. After they try Zoom first time, a lot of users first time try Zoom, they say, wow, it just works. Because of that, I think this is a very exciting time in terms of how to further drive the video conferencing adoption.
I think this is very sustainable.
Wonderful. Thank you very much.
Thank you, Tom. [cross talk]
Thank you, Tom.
Yep. Next question, please, Matt.
Our next question is from Pat Walravens with JMP.
Oh, great. Thank you. Eric, I'm looking forward to having the COVID-19 resolve, and when we get there, I was wondering if you could help us think a little bit about what the long-term opportunity is like for Zoom in China. Maybe just to put a couple ideas there, how might pricing be different, how might the competition be different, and how might user behavior be different?
Yeah, that's a great question. You look at the revenue, and also the revenue from Asia and China included, is relatively small, right? It's kind of still driven by North America and Europe, and Japan, Australia. I think because of this coronavirus, I think businesses in China realized they need to have more tools, not only Zoom, but more and more of the B2B tools to drive their productivity. Used to be you can hire 10 people, right? You do not need to deploy HR tools. Now you really cannot have those 10 people anymore. They all went back home, right? I think this will further boost the B2B SaaS application adoption in China. Aside from that, video conferencing is a tool they all understand.
We also have some local competitors, but the market is there, potential is big, and also we're in the process of navigating through several options, right? To see which option is better, because all the past several years, we really wanted to go to China market. However, I do not think the time is right. For now, I think the time is right. We need to make sure we have a sustainable strategy to expand into China, to have the local businesses there.
Yeah. If I could ask, since we're all starting to have to work from home remotely a lot more, do you have one or two key pointers you would give us about how to do it effectively? Does the camera have to be on all the time?
First of all, I do not think that you are at home. I did not realize that.
Yeah, man.
Yeah.
That's the first one, is get a virtual background.
Yes.
I think that helps a lot.
I think that's pretty much, actually. We have all the features built in, right? When you just play around some features, you will see them. My favorite feature is touch up my appearance, right? Also, choose your background. A lot of features are built in, and also small, like a pre-recorded session as well, and a lot of features already built in over the past several years. I think finally our customers realized it's time to play around all the features we built for them.
Thank you.
Thank you. I like your background.
I know. It's beautiful.
It's so beautiful.
Yep.
Thank you, Pat. Matt, could we have the next question, please?
Our next question is from Ryan MacWilliams with Stephens. Ryan, you're unmuted.
Perfect. Thanks for taking the question. How do you see the market trending for cloud voice pricing going forward? Is there a temptation on your end to reduce pricing for Zoom Phone, especially given the fact some of your competitors have started offering their own video capabilities for free?
Well, we believe that we are already very competitively priced from both a Zoom Phone and a Zoom Meetings perspective against the market. We haven't seen price pressure beyond kind of the normal discounting that we typically do, and we feel really good about where we're sitting. The way that we've historically brought value to our customers is by adding more and more features to both Meetings and Phone, and we will continue to do that approach across all of our product lines.
In terms of your comment about some of the vendors offering the free video conferencing, I can tell you it's very easy, extremely easy to build a very, very basic video conferencing solution with some open source. However, to have a global scale, very secure, reliable, five net availability, it just works, it's extremely hard, right? I'm already in this real-time collaboration business for almost 23 years. Today, you look at where we are now, there are still a lot of things that are not done yet. I think free does not mean your customer, they want to use that service.
Great. Just to that point, with 230 million Zoom Phone voice minutes and video minutes also expanding with Zoom Phone or Zoom customer growth. Now, how do you see the AI opportunity for Zoom to add features around transcription, around this influx of usage?
In voice and video, the same platform, but in voice, quite often, we always share the same platform, encryption, right? We have end-to-end encryption and plus we're working on support a customer key, the encryption based on the key offered by customers. sometimes for voice, it's little different. If all use Zoom, we can offer very secure service. However, if you want to dial somebody else, the cell phone number or the PSTN number will go through the traditional PSTN network. I think it's really hard because it's completely out of our control.
Great. Thanks, guys. Congrats on the report.
Thanks for having us on.
Thank you.
Next question, please.
Our next question is from Zane Tane with Bernstein. Hey, Zane, you're unmuted. All right, we'll come back to Zane.
Okay.
All right, next question is from Will Power with Baird.
Great, thanks. I guess first question is, as we think about the coronavirus impacts, any color you can provide in terms of the geographic spread of traffic, how much of the traffic increase was in China versus in other geographies? I'd love to hear anything more on some of the more unique use cases you've seen.
Yeah, I can start. Feel free to chime in, Kelly. I think over the past several weeks, first of all, we see the very, very big jump from users in China. The good news, we have a very flexible backend architecture. We can auto-scale our servers. That's why within several days, and we added a lot of capacity and really focused on the product experience, and the customer there are very, very happy. Also afterwards, we see the usage not only for China, for Vietnam, for Singapore, for Japan, all followed over the past several weeks. Especially, I think if you look at APAC, almost every country usage jumped a lot. Since last week, we see the usage from Europe and here as well. It's kind of particular trend to see the usage jump.
I think in terms of use cases, we talked about the doctors getting therapy. We also, of course, see lots of educational institutions that have stopped either study abroad programs or having all of their students study from home, as well as we've seen a few of our customers here that have already moved to requiring their employees to work from home as well. we're seeing an increase in that sense.
Virtual events too.
Oh, yeah. Lots of virtual events. True.
Yeah. One use case and service, not only do we offer the video meetings, we also offer the Video Webinar platform. It's pretty powerful. The city of Wuhan, where they have tens of thousand doctors for a long time there, and depression, anxiety, and the Tsinghua University, number one university in China, also with some other psychologists, they use Zoom and to train the doctors there. That's a great use case and really made those doctors in Wuhan very, very happy.
Okay. If I could just get one question in on Zoom Phone. As you look across the broader unified communication space, there seems to be increased interest with bundling contact center. I wonder if you look at your 2,900 customers, any comments as to how many are taking contact center? How do you think about the partnership model there long term versus having your own platform?
Yes, you're right on. We focused on our core video and voice capability. In terms of contact center, I think it's very different market from our perspective. However, from a customer perspective, they like to have very seamless integration. That's why we partner with Five9 and also inContact, Twilio, and Genesys. Specifically, about Five9, the CEO, Rowan, he's a great leader, really understand collaboration, and the two team work together very well. Like Zoom, we also use our video conference, our Zoom Phone system. We also deploy Five9, and the solution works very well. I think there's a huge opportunity between Zoom and Five9. Ultimately, we want to partner with other contact center solutions.
Okay. Thank you all.
Great. Thanks, Will.
Thanks, Will.
Next question, please, Matt.
Next question, we're going to go back to Zane, is from Zane Tane with Bernstein.
Yes. Can you hear me?
Yes.
Hey, Zane.
Hey, Zane.
Good afternoon. Congrats on a great quarter. I wanted to dig into the non-business customers a little bit. I know that's only about 20% of your revenue at the time of IPO, but it's an important group in some ways just because it had a much higher annualized churn rate than I think your business customers typically do. Can you give us a sense of what portion of the revenue non-business customers comprise now and what that should look like over the next couple of years?
Yeah, it's actually been really steady at that same 20% of revenue for FY 2020.
Okay, great.
I think over time, as we continue to focus more and more on the upmarket, we'll see that overall percentage decrease, but it's been pretty steady and consistent over the last year.
Just to follow up to that, have the renewal rates, the contract renewal rates, either on a customer or dollar basis changed over the last year? I know you talked about the net expansion rate, but before including upsell and seat expansion, how should we think about the trend for just contract renewals?
Yeah, we haven't seen any change. It's been pretty consistent. It's holding pretty steady.
Got it. Okay, great. Well, thanks very much, and congrats on a great quarter.
Yep. Thanks, Zane.
Thank you, Zane. Thank you.
Next question, please, Matt.
Our next question comes from Alex Zukin with RBC.
Hey guys, thanks for taking my question. Congratulations on another very successful quarter. Maybe first, for Eric, how important, particularly in the larger deal opportunities as you think about the future of work and the compression of that adoption curve, given something like the coronavirus. How important from a go-to-market perspective in some of those larger deals are your relationships with partners like Slack, like Dropbox, that enable your customers to create an entire experience around this area?
Yeah, that's a great question. I think, first of all, I'd like to take a step back to share with you what's happening about the decision-making process for a lot of enterprise. Because, over the past 10 or 20 years, normally CIO will make the final decision. Today is very different. Almost 50% of workforces today here are millennials, right? They grown up along with a smartphone, and that's why, if they do not like your service, no matter what, they are not going to use your service. This is their habit, right? This is their experience. Beside that, I think land and expand, influenced by the bottom-up users, extremely critical. Quite often they already use the Dropbox, right? use Slack. They want to find the best video service, like video and voice, also deploy Zoom. That's why we have very tight integration with Dropbox.
Within Dropbox interface, you can launch Zoom. Within Slack, you also can launch Zoom. I think that's a trend. Best video service will drive the adoption, will truly deliver happiness to a lot of enterprise customers.
That's great. Maybe Kelly, one for you. If I think about current RPO and RPO, looking at the current RPO bookings of 58%, compare that roughly to the 46% guide for revenue growth next year. Help us bridge that a little bit. In the script, you also mentioned some seasonality benefits to RPO from semi-annual quotas in the up-market segment. Can you maybe unpack that and explain that a little bit?
Yeah. Just a quick reminder that RPO is not an absolute directional metric for us due to, there's a significant percentage of our customers who both buy and pay monthly. It doesn't correlate the way you would expect it to from other enterprise customers. In terms of the seasonality, if you remember when we talked about this in Q3, we saw some seasonality in terms of it being somewhat flatter Q2 to Q3, and now we're seeing that benefit in Q4 due to the fact that our up-market teams are on six-month plans. what we see is as they get to the end of their six-month plan, and they have the opportunity obviously to overachieve and then go into accelerators, that we see a typical linearity or seasonality towards the back half of their six-month plan.
That's what you're seeing in some of that increase for the RPO for Q4.
Perfect. Thank you guys.
Yep.
Thanks, Alex.
Thanks, guys.
Our next question is from Phil Winslow with Wells Fargo. Hey, Phil, I unmuted you. All right, you just joined back in. We'll come back to you, Phil. Next question is from Ryan Koontz with Rosenblatt. Ryan, you're unmuted.
Oops. Ryan, do you have your phone on mute?
There he is.
Great. Hi, guys, thanks.
Hi.
Congrats on a great quarter.
Thank you.
As you look at your video seats, you're winning, can you estimate the percentage that are defections from other platforms versus greenfield wins? In the broader picture, are you seeing changes in the competitive landscape, given your increasing market leadership there?
I think if you look at our report, right, over the past several years, and Zoom is becoming the most popular video conference applications. look at our customers, quite often, especially for a lot of enterprise customers or medium-sized customers, they already deploy other solutions. they do not use that very often, and it's also the different experience. It's more like a web conferencing or audio conferencing. Zoom is a true video-first solution. that's why they all want to switch to Zoom. It's not like from one solution to other solution. I believe this is a totally different service, and that we are in a different category. Because more like a Tesla car and other cars, they're all cars. They're totally separated, different category.
That's why I think from that perspective, I would say every customer, no matter which other solutions they are using today, that's greenfield, right? That's our experience, yeah.
Great. Thanks, Eric.
Thank you, Ryan.
Thank you, Ryan.
All right, we're going to go back to Philip Winslow. Our next question's from Philip Winslow with Wells Fargo.
Hey, guys. Congrats on a great quarter. Just want to focus in on Zoom Phone. Obviously, you guys continue to see great traction there, and I remember when you first launched it, you said, hey, it would take a while to get some of these bigger customer wins knocked down, but it seems like you've done that. When you think about just the functionality of the offering, is this the 80/20 rule, where you've got 80% of what you need to actually knock down some of these big accounts, and the 20% is just for maybe, let's say, a small percentage of the base? Maybe help us think about where the functionality is right now, how that affects the types of customers you can address, and where you see this going forward?
Yeah. Phil, that's a great question. Maybe I'd like to share with you a little bit analogy about what's going on in the smartphone industry, right? The first time I saw the BlackBerry-I know that all the feature phone, that era is over and all those feature phones die because the BlackBerry does offer something no any other feature phone can offer, which is the email. I fell in love with BlackBerry for many, many years until I saw the iPhone. I saw the iPhone, I know BlackBerry is over because the reason why they have a marketplace, all kinds of applications. Even if the iPhone does not offer some of the functionalities that were already available at BlackBerry, but that's a trend of the future for marketplace. Something similar is happening in the cloud with the PBX market.
On the one hand, you are so right, we lack of some of the features. On the other hand, when customer look at our product experience, look at the unified collaborating experience, and with one more click, they can screen share, it can upgrade to video call. They say, wow, that's the future. That's something so critical. In terms of other minor features, they know we can add it. That's the reason why you look at iPhone today and versus the BlackBerry. I think that's the same story now.
Thank you, Phil. Matt, can we have the next question, please?
Yes. Our next and final question is from Jonathan Kees with Summit Insights Group.
Great. Woo, glad I made it in. Thank you for taking my questions, and I'll add my kudos to your strong numbers. Yeah, and also commend you for the humanitarian efforts you're making there. My questions are, I guess, if you can update us in terms of your partnership with RingCentral, Five9, the partners where you're white label? Basically, any of the partners where they're the lead to a deal, and they bring you in? In the past, you've talked about how that's trending and trending well. If you can update us on that and quantify anything for us, that'd be great. I have one other question.
Yeah. Thank you, Jonathan. By the way, we have a very cool feature called virtual background if you want to try.
Okay. I'm still learning it, so I may need help in terms of setting the background. Right now, I have humble home office.
I'm happy to follow up with you, Jonathan, make sure you can get it. Not a problem.
Your IR/IT support. Great.
Yes. sales.
Sales. Okay.
Yeah, speaking of partnerships, take Five9, for example. I think this year we'll achieve more because the two team, they enjoy working together. I know Ron very well, he's such a great leader. I think more and more customers, if we like to, hey, I want to deploy Zoom Phone, also want to pick up a contact center solution, Five9 is great, the partner. Along with some other contact center partners as well. In terms of RingCentral, they were a very good partner over the past several years, and I think they're pretty smart in terms of partnering with the best video service. That's why we built a white label solution for them, which is RingCentral Meetings. That partnership really help RingCentral in terms of becoming the unified communication market leader because they have a best video conference service.
However, I think from our perspective, and we would like to really look at our customer and look at what's the best experience we can offer. [Zoom] over the past several years, they tried to build their own video conference solution. I don't know how good that solution is, but we focus on our customer experience. In terms of revenue from any of our partners is relatively small. Customers, they would like to deploy the unified solution from one vendor, from us. Video was the same architecture, same experience, and you will see more and more overlap between Zoom and RingCentral. In particular, after they announce their video conference service, I'm pretty sure that experience not as good as Zoom.
I'm sure. If I can, I guess it's more out of curiosity. You already talked about you have your headquarters employees working from home because COVID-19. You have most of your sales are direct sales. They're field reps. They're knocking on doors. I guess, are you seeing an impact there, and are you going to change your strategy there, or is that what you're doing with channel and getting others to start selling for you? Thank you.
I don't think there will have any impact whatsoever. The reason why our sales rep, they're pretty creative, and we also support a video background. They shoot for a video in the office and use that video background. I even do not know where they are. Seriously, I feel like they're still in the office. I would say there's no any impact. Probably even better because you can save the commuter time from where they live to office, probably we should increase the quota for them. Anyway, I'm kidding. I don't know.
Okay. All right. Sounds great. Thank you so much.
Thank you, Jonathan.
Thank you, Jonathan.
Take care.
Well, Eric, I think that's the last question. Matt, is anyone else out there?
That was our last question.
Great. Do you want to have some closing remarks and just thank everyone, Eric?
Yeah. First of all, thank you all for your time. I really appreciate for your support, and we will do all we can to deliver much better service to serve our customers well. Thank you.
Thank you, everyone.
Bye, everybody. Thank you.
Appreciate it. Thank you.