Hello, everyone, welcome to Zoom's first quarter fiscal year 2020 earnings release. I'd like to remind everyone that this conference is going to be recorded. At this time, I'd like to turn the floor over to Tom McCallum, Head of Investor Relations.
Thank you, Matt. Hello, everyone, welcome to Zoom's earnings webinar for the first quarter of fiscal 2020. Joining me today will be Zoom's President and CEO, Eric Yuan, Zoom's CFO, Kelly Steckelberg. Our earnings press release was issued today after the market closed and may be downloaded from the zoom.com site on the investor relations page. Also on this page, you'll be able to find a copy of today's prepared remarks and a slide deck of financial highlights that, along with the earnings press release, include a reconciliation of GAAP to non-GAAP financial results. During this call, we will make forward-looking statements about our future financial performance and other future events and trends, including guidance. These statements are only predictions that are based on what we believe today, actual results may differ materially.
These forward-looking statements are subject to the risks, uncertainties, assumptions, and other factors that could affect our financial results and the performance of our business, which we discuss in detail in our filings with the SEC, including today's earnings press release and the risk factors and other information contained in the final prospectus relating to our initial public offering. Zoom assumes no obligation to update any forward-looking statements we may make on today's call. With that, let me turn it over to Eric.
Thank you, Tom. Thank you. Thank you, all. First of all, welcome to all of you joining us on today's Zoom video webinar. I really appreciate it. Hopefully, after the webinar, all of you can give us some feedback. Of course, we really wanted to leverage our platform for the future earning calls. Like Brad, I like your virtual background. Please turn on that virtual background. This is our first earning announcement as a public company, I'm pleased to report that we delivered revenue of $122 million for the first quarter, an increase of 103% year-over-year. In addition to tremendous growth at scale, we are also pleased that our highly efficient business model and disciplined investments contributed to positive profitability and free cash flow.
Our strong first quarter results are evidence that organizations are turning to Zoom as a strategic technology partner to help them increase communications and collaboration. Since this is our first earnings call as a public company, I'd like to take a step back to share how Zoom's video-first approach delivers happiness to our customers. First, we deliver a single easy-to-use platform. Second, we are 100% cloud-native and hardware agnostic. Third, we offer high-quality service globally. Fourth, we offer robust mobile functionality. Fifth, we are developer-friendly with open APIs, also with a marketplace. We believe the growth opportunity for Zoom is significant. Based on IDC estimates, the market opportunity, the TAM, is huge, a $43 billion market by 2022. We believe it is even larger than that, as we are in the early stages of video becoming a new voice.
Our platform is fundamentally transforming the way organizations of all sizes communicate. Zoom is enabling far greater effectiveness and intimacy in human-to-human interactions over a distance, we are witnessing the rapid adoption of Zoom for diverse use cases that were not possible with legacy technology. Let me give you an example of how our customers leverage Zoom platform. One company, Ciena, a networking systems, services, and a software company, has been a Zoom customer, a heavy customer, for the last two years. They have built up to a full-site deployment of Zoom, including Zoom Rooms, Zoom Webinar, and our premium audio. They have transformed how they conduct their business and communicate with a video-first culture. They are currently doing more than 10 million minutes a month on Zoom platform.
When faced with replacing their legacy, very complex PBX infrastructure, they turned to Zoom, Ciena was very impressed with the capabilities of Zoom Phone system. We closed a deal with Ciena in Q1. That brings their Zoom Phone licenses to 5,000 users, while significantly expanding the use of the Zoom platform within their organization. This is a good example of the trust customer have in Zoom. Now, let me discuss a few recent business and technology highlights that further reinforce our long-term growth opportunity. First, we announced that our FedRAMP authorization has been approved with the sponsorship of the U.S. Department of Homeland Security. This authorization allows U.S. federal government agencies and contractors to securely use Zoom for video meetings, API integrations, and more. Second, we continue to build out our best-of-breed partnerships with deeper relationships like HP, Salesforce.com, and Slack.
Many companies, they standardize on Zoom and Slack platform. That's sort of like a standard for collaboration. Third, we continue to enhance our core technologies that have disrupted the video communications market. During the Enterprise Connect back in March, we announced additional smarter features to Zoom Meetings, such as real-time transcriptions. Fourth, we continue to enhance and extend the reach of Zoom Phone. We announced the new features that enable Zoom Phone to elevate voice calls to Zoom Video Meetings seamlessly, while bringing your own carrier service and a new beta for Zoom Phone service for both the U.K. and Australia market. In summary, I'd like to thank our nearly 2,000 Zoom employees around the globe for an exceptional performance in our first quarter as a public company. Our industry-leading video-first architecture, viral adoption model, and large TAM were also positive factors to our remarkable results this year.
It was a great start for the year, we are very excited about the growth opportunity in front of us. We truly believe Zoom is very well positioned to capitalize on the transformation of how companies communicate and collaborate with their employees, customers, and partners. In many ways, we have to drive this transformation. The strategy that we have employed over the years to make our customer happy with a frictionless communications platform is working, and it continues to deliver remarkable results. With that, let me turn things over to Kelly.
Thank you, Eric, and welcome to everyone joining us. Let me start by first reviewing financial results for Q1, then I will discuss our outlook for Q2 and the full fiscal year. As Eric discussed, total revenue grew 103% year-over-year in the first quarter to $122 million. Some of the key drivers of our revenue performance were our acquisition of new customers and the execution of our land and expand strategy with existing customers. Specifically, the year-over-year increase in revenue was split between subscription services provided to new customers, which accounted for approximately 64% of the increase. The remaining 36% increase was due to subscription services for existing customers. Here are some key customer metrics in Q1 that drove these results.
We had over 58,500 customers with more than 10 employees, up nearly 86% year-over-year. We aren't just adding a large volume of new customers, though. We are also winning larger customers as a result of our enterprise focus. For example, we are excited to announce we added new customers, including DocuSign and FICO. Customers of all sizes are deploying more Zoom products and users within their organizations as they realize the power of our platform. During the first quarter, we expanded our relationship with customers, including Ciena and Take-Two Interactive. The combination of our land and expand strategy, along with our growing enterprise focus, resulted in 405 customers with more than $100,000 in revenue over the last 12 months, up 120% year-over-year.
Overall, we have a loyal customer base as evidenced by an exceptional net dollar expansion rate that has consistently been over 130% for the fourth consecutive quarter. Geographic expansion is another driver of our strong revenue growth as we continue to enjoy high demand and growth globally. Revenue in Q1 from the Americas was up 98% year-over-year and was approximately 80% of revenue. Our APAC and EMEA revenue combined grew 127% year-over-year. We believe that this is only the beginning of a tremendous opportunity to bring Zoom platform to customers around the world. To achieve this, we will make additional investments to expand our global footprint and drive additional growth. Now turning to profitability.
Here you can see we were profitable from both a GAAP and non-GAAP perspective, but I will focus on our non-GAAP results, which exclude stock-based compensation expense. Non-GAAP gross margin in the first quarter was up 17 basis points to 80.9%, compared to 80.7% in Q1 last year. Our non-GAAP gross margin reflects some additional investments to increase the redundancy of our infrastructure. For the full year, we expect non-GAAP gross margins to be at the low end of our long-term target range of 80%-82%. R&D expense in Q1 was $13 million and represented approximately 10% of total revenue. R&D remains a major investment area as we expand our platform with new features and capabilities every quarter. Approximately one-third of our workforce is R&D.
It is lower as a percentage of revenue because we have a highly efficient global R&D model. Sales and marketing expense for Q1 was $61 million, representing approximately 50% of total revenue. While we expect to realize leverage in sales and marketing over the long term, we are currently focused on adding sales capacity to drive growth and capture the large TAM in front of us. These investments include ramping key strategic initiatives, such as expanding our global footprint and building out our initial sales coverage for Zoom Phone. G&A expense in Q1 was $16 million and represented 13% of total revenue. This includes costs associated with expanding our corporate functions to effectively operate as a public company. Non-GAAP operating income was $8 million, translating to a 6.7 non-GAAP operating margin for the first quarter.
This was an 8 percentage points improvement versus the modest non-GAAP operating loss in Q1 of last year. Non-GAAP earnings per share in Q1 was $0.03 on approximately 290 million of non-GAAP weighted average shares outstanding and adjusted for undistributed earnings. Non-GAAP EPS increased $0.03 from Q1 of last year. Turning to the balance sheet, we ended Q1 with approximately $737 million in cash equivalents, and marketable securities, which is up from $176 million at the end of Q4. The significant increase in cash was due primarily to $543 million of net proceeds from our IPO and our growth in cash flow from operations. Deferred revenue at the end of the quarter grew to $149 million, up 108% year-over-year. Our remaining performance obligations, or RPO, totaled approximately $377 million, up 127% year-over-year.
We expect to recognize approximately 64% of the current RPO as revenue over the next 12 months, compared to 68% in Q1 of last year. We were pleased with the non-current RPO growth, which signals growing long-term customer commitments to our platform. Operating cash flow was $22 million in Q1, up from $3 million in the same period a year ago. Free cash flow was $15 million in Q1 compared to a negative $1 million in the same period a year ago. Both of these results reflect higher profitability and growth in deferred revenue. Before I provide the outlook for Q2 and the full year, let me reiterate our investment strategy to drive our growth initiatives. As evidenced from our past results, we have both a highly efficient business model and a proven track record of running the business in a disciplined manner.
The end result has been rapid top-line growth combined with positive non-GAAP operating income and free cash flow. Our customers' happiness and the rapid adoption of the Zoom platform are our top priorities, and we believe our focus on investing in the business will drive increased market share and future revenue growth. Turning specifically to the second quarter guidance. For the second quarter of fiscal 2020, we expect revenue in the range of $129 million to $130 million. We expect non-GAAP operating income to be in the range of $2 million to $3 million with non-GAAP earnings per share of $0.01 to $0.02 based on approximately 301 million shares outstanding. For the full year fiscal 2020, we expect revenue to be in the range of $535 million to $540 million. We expect non-GAAP operating income in the range of breakeven to $3 million.
This forecast includes the impact in Q3 of our premier user event, Zoomtopia. Non-GAAP earnings per share is expected to be in the range of $0.02 to $0.03 based on approximately 301 million shares outstanding. In closing, Q1 was a great start to our fiscal year. We had strong execution during our first quarter as a public company, and I would like to thank the entire Zoom team for their hard work. We delivered a combination of triple-digit top-line growth, increased profitability, and positive free cash flow. We're also pleased with the high rate at which customers are embracing our platform. We believe this trust from our customers and partners for Zoom will help drive additional growth. I'm excited about our execution this past quarter and the opportunity ahead for Zoom, and I look forward to sharing our progress with you. With that, let's open it up for questions.
If you have not yet enabled your video, please do so now for the interactive portion of this meeting. Matt, please queue up our first question.
Our first question is from Meta Marshall with Morgan Stanley. Meta, you are unmuted.
Thank you. Congrats on the quarter, and thanks for the question. Maybe versus expectations, what was the biggest source of surprise during the quarter? Was it kind of new customer adds, faster deployments, new products? Maybe turning to new products, understanding it's still early, but just any further details on Zoom Phone traction and whether any of the upside guide to the fiscal 2020 guidance is due to kind of Zoom Phone expectations. That's it for me. Thanks.
Yeah, sure. From product side, customer side, we do not see the biggest surprise. We work so hard to make sure the customer are happy. One thing probably I'd like to highlight is Zoom Phone. We announced that back in January, and we do have some early adopters, like Ciena. I mentioned, right? They deploy 5,000 licenses. I think that's something probably help us more in the future. Other than that, I think we just focus on our customer and the product experience.
I think we're also excited about the continued progress we're making in the upmarket. As you saw, our customers in that segment grew more quickly than our general customer base, which we continue to be really excited about. We had a really large financial services organization become a customer this quarter, which we're really happy about.
Yep.
Great. Thank you, guys.
Thank you. Next question, Matt, please.
Our next question is from Brad Zelnick with Credit Suisse. Brad, you are unmuted.
Great. Nice to see you all and Eric, nice to see how happy you are. Congratulations on a great number for Q1 as a public company. I have one question for you, Eric, and one follow-up for Kelly. For Eric, I appreciate that the IPO had to have been a fantastic branding event for you. Is there any discernible impact in terms of customer adds, free to paid conversion, or even top of funnel development that you've noticed since becoming a public company?
Brad, first of all, I like your voice. Watch your back on. Thank you. I think since we became a public company, I would say very little has changed. Maybe it's too early to tell, but for sure, I think our company's brand is getting much better. From our existing installed base. After we became a public company, I do receive so many emails from our customers, really expressed all the great appreciation for what we did before with them, right? I think from branding perspective, it certainly help us a lot. It's too early to tell. Maybe one more quarter, I can share with you more.
Great. Kelly, for you, if we look at your sales and marketing expense relative to the new customer adds, it would seem that you're losing some productivity per customer. How much of that is related to Zoom Phone, and how should we think about your productivity moving forward?
Yeah. We are really focused this year on continuing to hire in international and for Zoom Phone. You are going to see some impact initially as it takes a while for all those reps to get ramped. I think when you start to get to the back half of this year or early next year, you should see that taking hold.
Great. Thank you so much.
Great. Thanks, Matt. Next question, please.
Our next question is from Kash Rangan with Bank of America Merrill Lynch. Kash, you are unmuted.
Hey, Zoom team. Thank you so much.
Hi, Kash.
Very happy to be joining your video conference call. I had two questions for you. One, with respect to the quarter, what were the one or two largest deals the company landed in the quarter, and what were the competitive dynamics and also the nature of the topology of the customer's IT infrastructure, against which you were able to win this big deployment? Secondly, could you just talk about the overlap on the phone side, how are customers making the phone decision? Is it in conjunction with the video decision or as a separate standalone capability? How are they making that evaluation? Thank you so much and congrats.
Yeah. Back to your first question, feel free to chime in about some large customers we acquired in Q1. I think if you look at the competitive landscape in Q1, I do not think there are any changes. Because most of our legacy players still the old solution with old architecture. I do not see anything new from our legacy competitors in terms of innovation or some innovative go-to-market model. Everything else, I think remains the same. Yeah.
We were really excited. We had four deals in the quarter that were over a million ARR. Unfortunately, we can't disclose the names of most of those. One of them is a really exciting, large financial institution that we're thrilled to have as a new customer. A couple of them were upsells. Positive traction, I would say, on all fronts in that area.
I think Kash's follow-up was on the decision to-
Yeah, for the second question.
Zoom Phone.
Yeah, yeah.
What drives that decision-making?
When we look at our go-to-market strategy for our Zoom Phone system, we focus on our existing installer base because they already trust us. They already use the video, they already use the voice. They really like our quality. Customer told us, "Hey, you just add a phone number." Right? They do not need to use any other phone system. Customer like the quality, unified collaboration experience, and ease of use, plus some very individual features like seamlessly upgrading your phone call to the video call. The customer really like that experience.
Great. Thanks. Matt, next question, please.
Our next question is from Sterling Auty with JP Morgan. Sterling, you are unmuted.
All right. Thanks. Hi, guys. Eric, one of the questions that I consistently got through the IPO and post is the direction of the UCaaS space. Specifically with the launch of Zoom Phone, it looks like you are actually on a competitive direction with RingCentral, yet you announced the extension of your partnership. I also get questions over whether you need to actually own some of the technology that you see out of Slack. Just directionally, how do you see your partnership and competition, and directionally, what technologies you need to own versus partner going forward?
Yeah. Sterling, that's a great question. If you look at what's happening in the industry and also when we talk to the customers, they take Slack, for example. Slack and Zoom are, I think, the best partners. A lot of companies standardize on Slack and Zoom. Right? It's almost just become a standard, right? It's very important. If you look at the UC space, like video and phone, we started from building a platform. The first application built upon that platform is video conferencing. However customer really like our voice or IP quality, it's not very hard for us to add a phone system. In terms of phone system, we build our own technology from the ground up. It's a modern architecture compared with any other phone system, right? We build it from the ground up, and customer really like that experience.
From a phone to the video and video to the phone is one unified collaborative experience.
All right, great. Maybe just one follow-up. I do get questions over the U.S.-China relations and things that are happening from that perspective. Given the large R&D presence that you have in China, has anything changed in terms of how you're managing that aspect of the business?
I don't think anything changed, especially if you look at our core R&D are done here in our headquarter office in San Jose. Plus, very similar to a lot of other companies who might have offices there, I think we do not have in terms of revenue, we do not have a big business there in China. I do not think there's any impact. We have very good process here in terms of how to manage the offshore team, and we have high confidence. I do not think there are any changes in Q1.
Great. Thank you.
Great. Next question, Matt, please.
Our next question is from Matthew Hedberg with RBC. Matt, you are unmuted.
Oh, hey, guys. Thanks for taking our questions. I love this new interface. Hopefully, other companies will maybe embrace the same idea for earnings calls. Kelly, I want to start with you. Obviously, stellar results on the top line and bottom line, you've got a lot of success in international regions. Can you walk us through how you think about balancing growth and profitability? I guess specifically, how do you think about deploying direct sales reps out into the field, especially as you're having more success in larger deals?
Yeah. We are really focused on investing in both R&D as well as sales and marketing, continuing to build out the product as well as expanding internationally. If you look at our overall sales hires for this year, about half of them are international, which means as a percentage, those sales reps are going to grow much more quickly than the U.S.-based reps since we have so many more here today. I think we mentioned this on the road show, but we recently hired a new head of international, Abe Smith. He's really helping accelerate our business there. I think you'll continue to see strong results there.
That's great. Maybe as a follow-up, in addition to the RingCentral partnership, salesforce.com is a good partner of you guys as well and participated in the IPO. Can you talk a little bit about that relationship? How embedded is it today? Because it seems like there's obviously a logical integration point between those two companies, between yourself and Salesforce.
Yeah. Matt, you are right on. We are a huge fan of salesforce.com service. Our team and we live within the Salesforce platform. Quite often, when you use Salesforce and Zoom, the integration is still not seamless. Our sales manager really want to understand what's going on for the Zoom meetings with the customer, with the prospect, and they need to go back to the Zoom, and what if after the meeting is over, we automatically added a transcription back to the Salesforce portal, right? With that, the customer can live within the Salesforce portal. I think we are going to do more partnership integrations with salesforce.com, which we truly believe, I think the sales team in the future, they are going to either live within the Salesforce or they can use Zoom, but they do not feel like they are using two different solutions, right?
Seamless integration can truly help the sales productivity.
Thank you.
Our next question is from Pat Walravens with JMP. Pat, you are unmuted.
Oh, great. Thank you, congratulations, you guys. Eric, my question is for you, which is, I love your whole focus on delivering happiness, and I'm wondering, given how fast you're growing, how are you going to make sure that your employees stay happy so they can keep your customers happy? That's the first part. The second part is there as much of an opportunity around Zoom Phone as there was around meetings? Because the meetings area was such a disaster before you guys came along. I'm not sure there's the same level of Right? I'm not sure there's the same level of pain around the phone. Those are my two happiness questions.
Yeah. Pat, first of all, I think you are reading my mind very well. The first question about a company culture, if there's one thing that keeps me up in the night is about a company culture. Before we have 1,000 people, I think I can remember most of employees' name. I never spent a minute on the people-related issues. Experience is great. For now, we have almost 2,000 employees. Quite often, I need to spend time to deal with those people. They might have integrity issues or maybe sexual harassment, and we need to let them go, right? It's not that easy. However, we try to do all we can to make sure we have open, transparent culture. We just hired our chief people officer. We just launched the employee survey, try to understand where we can improve. We are very paranoid.
We do all we can to make sure every employee happy every morning. If they are not happy, we would like them to stay at home to figure out a root cause and either tell us what had happened and help us to fix the problem. Again, this is something not very easy. We keep an eye on that. We take it very seriously.
Pat, second-
But-
Yeah, sorry.
Yeah. The second question, you are right. Before we build up a Zoom platform, I built Webex before, right? I did not see a single happy Webex customer. You're so right. When it comes to phone system, you look at a lot of enterprise today, most of them are still using very complex, old-fashioned on-prem systems for the phone system, and very hard to maintain. Also quality not as great. Plus, it's still the phone system. Like Pat, I call you, we still talk over the phone. We really cannot upgrade the video experience. Zoom can truly have that. If you deploy Zoom Phone system, I call your phone number, one more click, we can upgrade it to a video experience seamlessly. I think the customer really likes that.
Great. Next question please, Matt.
Thank you.
Our next question is from Alex Kurtz with KeyBanc. Alex, you are unmuted.
He is not unmuted.
He's still on mute, Matt.
I can't seem to unmute Alex right now. All right, Alex, we'll come back to you. Our next question is from Tom Roderick with Stifel.
Oh, there. Alex is unmuted now.
I'm here.
Oh, there we go. Great.
Hey, Alex.
Hey, guys. Just on the Cisco front, they've made some big efforts in the last six months to revamp the platform, the Webex platform. They've done some integration at a high level. They've added some AI functions, at least from a marketing perspective that's been out in the marketplace. I'm just wondering, during the quarter, has there been any change in their competitive posture, especially in the Global 2000? I had a follow-up question for Kelly.
I think that Cisco is right on. They made absolutely the right decision to focus on AI, we already started AI effort two years ago.
The first feature was announced almost two years now, right? Which is meeting transcription to leverage the AI platform after the meeting is over, we can automatically generate the meeting transcription. We are going to double down on that as well because we already started two years ahead of any other competitors.
Okay. Kelly, just around the Zoom Phone contribution to the updated view for the fiscal year, I guess at this point, we're not calling out any kind of contribution at this point, right?
That's right. We're really excited about the momentum that we saw in Q1, we're still at such an early phase that we expect it to have minimal overall contribution the way that we're forecasting it for the full year.
Okay. All right. Thank you.
Thank you. Next question, please, Matt.
Our next question is from Tom Roderick with Stifel. Tom, you are unmuted now.
Hey, thanks for the chance to ask a question, congratulations on the IPO. I'll second Matt's earlier comments with regards to kudos on the format. I think this means you can't make faces at us when you don't like our questions anymore. That may be good or it may be bad for you. Eric, I'm going to start with you just on the topic of the IPO and thinking back to when you started this, the days of bootstrapping this company. You probably didn't foresee the day when you'd have over $700 million of cash on your balance sheet. A bit of an embarrassment of riches. What do you do with all of it? I know the easy answer is everything, but I'm sure the backdrop of that is investors probably want to understand, does this suddenly make you an acquisitive company?
Do you want to accelerate the advertising in international markets? As you have this big pile of cash, how do you think about how you want to deploy it and how you focus your resources?
Tom, you can ask this question to my wife as well, because I have no idea how to spend money. I would like to defer to our CFO.
That's funny. Well, I think it's probably thanks to Eric that we have this cash because of what he just said. We are continuing to invest, Tom, certainly, as I said, mentioned before, in R&D and sales marketing, those are the two key focus areas. While we haven't been acquisitive historically, Eric and I have talked a lot about this, that we will keep looking for companies that we think could elevate our company in terms of technology or potentially personnel if that were needed. I think we're keeping our options open at this point.
Fair enough. Okay, good. Quick follow-up from me just in terms of the enterprise selling motion here. Looking at the numbers, the number of customers you've landed greater than 10 employees up over 80%, but the enterprise contribution there, up over 120%. As we think about the selling motion, as you get reps out into the field, as you deploy more product, can you just talk about how that selling motion has changed and how you'd like to further change that as you add and layer more product into the mix? Thank you.
Yeah. Certainly our enterprise cycles differ from our SMB approach. It's really interesting because we've seen a wide range of selling cycles in the enterprise. For example, one of our largest customers went from beginning to end in six weeks. That was really a forward-looking CIO that embraced the need to digitize their platform. I will say that is not typical, though. Most of our enterprise customers, they are what you would expect, more traditionally, they have a proof of concept. They have pretty extensive user acceptance testing. I think what happens is once it's in the hands of the users, though, and they see it, there's a love for Zoom that drives the demand, which then from that stage usually goes pretty quickly to close.
Yeah. In particular, for every enterprise customer, normally we start from land and expand experience, right? We never wanted to let enterprise customers deploy Zoom with a full-sided deployment on day one. We like this bottom-up approach. That's why it will take some time, but it's very healthy if you look at our pipeline.
Great. Thanks, Tom. Next question, please.
Our next question is from Zane Chrane with Bernstein. Zane, you are unmuted.
Oh, Zane. There he is.
There you go.
Can you hear me? Okay, great.
Yes.
Eric, Kelly, Tom, hi. Congratulations on the successful IPO. Very nice to see you on the first earnings webinar.
Thank you.
Thank you, too.
I have a question on your strategy for capturing market in industry verticals. I know, for example, healthcare, telemedicine, very rapidly growing field. I understand from people in the industry that Zoom is really one of the only platforms, aside from HIPAA compliance, that ties in with the existing major electronic medical records. That seems to be maybe an underappreciated moat in that industry. How should we think about other examples such as that maybe in different industry verticals, and how do you think about developing those industry strategies?
I think you are right on. When it comes to vertical industry opportunity, huge opportunity. We just cannot focus on that. The reason why, you look at our video collaboration, the phone system, also the huge opportunity. Back to the $43 billion opportunity. For now, we also wanted to explore some ideas. That's the reason why we introduced the marketplace. Make sure to focus on our platform to let third-party partners, developers, build those applications first based on our platform. However, whenever we are ready, meaning we are the number one on both video conferencing and phone system, and Zoom working to double down, triple down on those vertical industry, huge opportunity. You are right on.
Yeah, that makes a lot of sense. I was wondering, have you guys had any work or done any work on quantifying how TAM expansive Zoom is? It seems like Zoom is very similar to a lot of other industry-changing companies, where a company comes in with a better product that's easier to use, lower cost of adoption, superior functionality. Is there any sense you have for just how much that's increasing the usage of video conferencing among knowledge workers or, what multiple that is on legacy habits for video conferencing?
You look at the knowledge workers today, worldwide, more than 1 billion knowledge workers. For today, if you look at the video usage, it's still very small. I think just to focus on today's TAM, $43 billion market, as long as we do not lose the focus, I think it will keep us very busy in the next several years.
It's a huge opportunity. Congratulations. Best wishes.
Thank you.
Thank you.
Thank you.
Next question please, Matt.
Our next question is from Jonathan Kees with Summit Insights Group. Jonathan, you are unmuted now.
Great. Thanks for taking my question. I hope you can hear me. I'm having trouble with my video here. Congratulations on the quarter. I just wanted to ask more of a modeling question. You've talked about for the year, the top line and bottom line. Just curious how we should think about cash flow, at the very least, if you can give us direction in terms of CapEx, and how we should model that for the year. Thanks.
Yeah. Thanks for the question, Jonathan. We are not going to provide guidance around cash flow, but given the opportunity that you're seeing in the top line, I think you should think about that there is a positive impact on cash flow due to that. Given that we're a SaaS business and what you can see is happening also with the change in deferreds, I think you should think about that and what the impact it's having on cash.
Okay.
Also, please let me know your mailing address. I will mail you a new camera.
Okay. Great. All right. I look forward to it. Yeah. We don't normally have video meetings. If I can sneak in one other question, this is more of a high level.
Sure.
I guess I'm trying to reconcile the $43 billion TAM. Talking with your UCaaS peers, they're also pretty excited about the expansive TAM and how it's untapped and there's just a lot of potential upwards. I guess the TAMs that they talk about, and obviously this is for the voice, but also includes like contacts and even video, the TAMs that they've talked about, and this even includes RingCentral. If you include contact center and maybe video, you can get up to around $40 billion TAM. I guess I'm just trying to reconcile, if you can help me here, between the TAM that you talk about and the TAM that your peers talk about.
Yeah, what we did was we looked at IDC's approach, and it's even a bigger TAM of like $60 billion. We looked at it and backed down into the areas we could address with our platform today, and it estimates by 2022, it's going to be at that $43 billion number. I think the other thing you should think about, which I don't know if you mentioned exactly these, you're talking about, but it's also Zoom Rooms, which is a really important part of our platform. Addressing the whole conference room is something that Zoom can do very uniquely because of our hardware-agnostic approach, that there's a significant opportunity there that I'm not sure any of our competitors are addressing completely or maybe talking about, and we're super excited about that opportunity.
Great. Matt, next question please.
Thank you.
Actually, that is our last question.
Okay.
Great.
Wonderful. Well, thank you everyone. Thank you for joining us by video. That's great. We will look forward to speaking to you guys again. Thank you.
Thank you.
Yeah. By the way, please do send us a feedback. We really want to leverage Zoom Webinar for the future earnings call. Thank you so much for your time. I really appreciate it.
Okay.
Thank you.
Thank you very much.