Q4 2020 RingCentral Inc Earnings Call
Greetings and welcome to the ring Central fourth quarter 2020 earnings Conference call. At this time, all participants are in a listen only mode.
Question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note this conference is being recorded.
Now I'll turn the conference over to your host Ryan Goodman, you may begin.
Thank you good afternoon, and welcome to ring Central's fourth quarter 2020 earnings Conference call.
Ryan Goodman ring Central as head of Investor Relations. Joining me today are large munis founder chairman and CEO Ian.
Each one president and Chief operating Officer, and My Test Group Chief Financial Officer. Our format. Today will include prepared remarks by blood Anan and Med Tech followed by Q&A.
Some of our discussions and responses to your questions will contain forward looking statements, including our first quarter and full year 2021 financial outlook and our assumptions underlying that outlook.
These statements are subject to risks and uncertainties actual results may differ materially from our forward looking statements.
Cash at the risks and uncertainties related to our business is contained in our filings with the Securities and Exchange Commission and is incorporated by reference into today's discussion in.
In particular, our business is currently being impacted by the COVID-19 pandemic.
Stent of its continued impact on our business will depend on several factors, including the severity duration and extent of the pandemic as well as actions taken by governments businesses and consumers in response to the pandemic all of which continue to evolve and remain uncertain at this time.
Ring Central assumes no obligation and does not intend to update or comment on forward looking statements made on this call.
Otherwise indicated all measures that follow are non-GAAP with year over year comparisons a reconciliation of all GAAP to non-GAAP results is provided with our earnings release and in the slide deck I encourage you to visit our Investor Relations website, and I are dark ring central Dot com to access our earnings.
Release slide deck, our GAAP to non-GAAP reconciliations our periodic SEC reports a webcast replay of today's call and to learn more about ring central.
For certain forward looking guidance, a reconciliation of the non-GAAP financial guidance to the corresponding GAAP measure is not available as discussed in detail in the slide deck posted on the Investor Relations website.
With that let me turn the call over to blood.
Good afternoon, and thank you for joining our fourth quarter earnings Conference call.
I would like to start the school with the warm welcome door newest board member.
Terry argued Duncan.
Pardon me, he's a former United States Secretary of Education.
Brian It's Brad.
Government service, our new C E O O Chicago Public school for eight years.
And he is scarcely a senior fellow at the University of Chicago School of public policy.
Welcome R&D.
Now during central.
So we're just 'twenty was a transformational year.
The global pandemic is.
Intel is changing how businesses operate.
Was the vaccine now being distributed many businesses are preparing for a hybrid work environment.
Is there a plane inc for cell Walker's Enzo and some extra long for the foreseeable future.
If companies adapt to this new work from work norm Digi.
Digital transformation of business communications will become more critical.
Enabling this transformation our cloud based communications solutions.
This is essential to enabling employees to productively engage with customers partners and Pierre from anywhere.
Any device.
Any mode.
According to Gartner by.
By 2024 74 per cent of the new unified communication licenses torches by organizations will be cloud based.
Up from 48% in 'twenty. Thank you.
Businesses are increasingly joining touring central as a trusted partner in their transition to a cloud based communications platform.
Does this growing customer demand is evident in our strong and standout Q4 itself.
Total revenue grew 32% year over year to $335 million.
And acceleration of two points sequentially.
Ring Central office.
<unk> grew 39% year over year to $1.2 billion.
Acceleration.
Three points sequentially.
We delivered a record number of one Midland dollar.
These T V.
Up over 50% sequentially.
And we had strong contributions from our key partners led by Avaya and AT&T and others.
As we look to 'twenty to 'twenty, one and beyond we are increasingly confident in the size of the opportunity.
Market receptivity to our differentiated message video phone.
Or MVP as we call it and cloud contact Center solutions.
This is together enable us to address the full range of business communications needs for most enterprises worldwide.
And now with the recent addition of free that's a blip or free.
<unk> Smart video meeting solution, we can help even more businesses.
Or they are individual departments to communicate in any mode.
Any device from anywhere.
Please visit <unk> com to experience it for yourself.
Yeah.
Our lead you kept the Lucia ring Central office isn't enterprise program carrier grade global trusted message video phone or MVP solution.
It offers a seamlessly integrated multi mode user experience.
Nice to be liability World class global coverage and an open platform.
All of which we believe are important competitive differentiators.
We're also proud to once again be recognized as the leader in the latest Gartner Magic quadrant for unified Communications as a service worldwide report.
For the sixth year in a row.
In addition, <unk>.
Central ranked highest in all five use cases of the 'twenty 'twenty Gardner critical capabilities for unified Communications as a service worldwide reported.
Leveraging the strength of our industry, leading cloud PBX platform.
We have recently added ring Central V gel, a new core component of our MVP solution.
Ring Central <unk> is built on the modern web RTC industry standard framework with numerous proprietary in Kansas.
We continue to innovate here.
<unk> base.
Some of the recent enhancements include Zoro Joe background.
<unk> capture third party virtual cameras support groups.
Earlier this month.
We introduced ring central embed the boat for ring Central Vijay, enabling developers to quickly embed <unk> into business applications.
And in Q4, we acquired certain technology assets of a company called deep effects eight per unit.
In AI powered conversational intelligence.
Effects will enable us to provide research on <unk> with new capabilities, George your emotional sentiment, Duke admission and multi speaker identification.
To help businesses transition to cloud communications solutions.
<unk> recently introduced ring central grip.
Free Smart video meeting solution.
Whaler boat through our dot.
Dot com website.
<unk> provides unlimited reem central began meetings seamlessly integrated with team messaging capabilities.
No of course.
This smart metering solution provides users with the persist til platform for communications before during and after meetings.
This is an important differentiator from other single mode video solution available to date.
And of course.
All of this with <unk> carrier grade quality security reliability and global footprint.
Complementing our.
You kept solutions is the ring central C cap product portfolio.
We are seeing.
Strong cloud adoption trends with many customers choosing integrated ucas and seek out from a single provider.
Contact Center was included in over 60% of power, one mill and GCB wins in Q4, Inc.
<unk> multiple wins for our native <unk> central engage cloud contact center platform.
We are particularly proud of our recent 2000 user win that combine ring central office with ring central engage.
Does this major N G O customer will leverage the full power offering central to help people displaced by COVID-19 Fine Inc.
Raymond.
In conclusion.
We have a strong well differentiated portfolio of industry, leading cloud communications solutions.
And all of the past several years, we focused on finding new innovative ways to efficiently bring these solutions to global markets.
On that note I'd like to extend my welcome to Vodafone business.
Our new newest key partner.
Waterfall is the largest mobile and fixed network operator in Europe.
Ring Central will be the lead you cash offer for Vodafone businesses installed base of over 30 million customers.
But what the phone business will also offer ring central.
Customer engagement solutions.
Ring central belief in winning through partnerships.
Over the past several years.
<unk> established a unique go to market ecosystem of direct channel and strategic partnerships.
Rick Sandro is the leap ucas provider for Avaya after all.
Ill get they'll loosen the price.
AT&T BT doubled and know what the phone business.
This gives us preferred access to over 200 million potential users worldwide.
Work on both and grateful to find ourselves in this unique position.
We're committed to driving at a pace of rapid innovation and <unk> expansion to continue delivering world class Cloud communications solutions for years to come.
With that I will now turn the call over to our President and Chief Operating Officer Aman S Forum for additional details on our progress at some recent achievements.
Thank you <unk> good afternoon, everyone.
Operationally Q4 was an outstanding quarter across the board.
<unk> growth was solid in all customer segments.
Both new customer wins and installed based expansions contributed to the strong performance.
And we are seeing a high level of demand across our integrated portfolio of cloud based unified communications and customer engagement solutions.
Modern cloud communication solutions.
A top priority for companies of all sizes.
We are privileged to be a key partner in their journey to the power.
We continue rapidly innovating and scaling our operations and platform to effectively meet the needs of our growing customer base, let me share some highlights.
First our people.
We further strengthened our leadership team throughout the year.
We appointed a new EVP of product and engineering that meta Roger.
Chief Marketing Officer, Jay Kumar, Chief Digital Officer, Matthew Bishop Chief.
Chief Information Security Officer, Heather hinted.
And Chief Privacy Officer, Paul has any <unk>.
These industry leaders bring invaluable operational and technology expertise.
Second our channel partners, we continue to expand our presence in the channel community a key driver of our upmarket success.
In Q4, our channel our increased 55% year over year to $465 million.
Good.
Our service provider partners.
We are seeing positive momentum with service provider partnerships.
We expanded our relationships and became a lead offer for industry leaders like AT&T and BP.
We're also excited to welcome Vodafone business as a strategic partner.
Port.
Our strategic partners in Q4, we expanded our rollout with Avaya and autos in several new geographies.
Alcatel Lucent enterprise is on track for a Q1 launch.
We are seeing early go to market traction with our strategic partners contributing multiple million dollar plus PCV events in Q4.
Chip with a proven upmarket traction, we signed $210 million plus PCV deals.
Along with a record number of million dollar plus large PCB wins in Q4 up over 50% sequentially.
And finally <unk>.
<unk> product portfolio was a key driver of our strong Q4 results.
Our integrated portfolio of Ucas and seek solutions is a key differentiator.
Looking ahead with ring Central Blip, we are re imagining smarter meeting solutions with integrated team messaging and video for Paul.
Assistant collaboration.
In a work from anywhere environment.
Let me now dive into some detail.
I'll begin with the exceptional Q Paul contributions of the channel.
Channel contributed over three quarters of the million dollar plus <unk>.
With a mix of Ucas, and see catchments across both new customers and up sell to existing customers.
One of the marquee wins from channel in Q4 was a fortune 500 specialized staffing Paul.
This customer needed to replace aging on premise systems with a highly reliable global cloud platform.
With ring Central this customer can now manage its 6000 plus users across over 20 countries on a single global communications platform.
As for service providers, we had another exciting quarter with strong results and new partnerships.
Well the phone business.
This partnership provides strength central and opportunity to further scale, our international go to market reach to.
So our complementary enterprise and mobile user base.
Vodafone business will deliver a new co branded cloud based communication service based on our leading MVP platform as well as our portfolio of <unk> solutions.
For AT&T, we continue to see solid momentum as did leave Ucas solution.
We are seeing increased traction with large customers and excited at the opportunity to broaden our partnerships and new verticals like state and local education customers.
For BP on the heels of becoming their lead Ucas provider, we had a strong <unk> quarter in Q4.
As for the strategic partnerships.
Let me start with the wire.
We expanded our ACO rollout launching in five new European countries in Q4.
We are seeing adoption across customers of all sizes in multiple geographies with particular strength in our enterprise segment.
This includes a 7000 plus use Microsoft direct routing win with a large diversified insurance vendor.
We are encouraged with the strong early growth momentum in seat count transaction value volume and deal size.
With autos, you've also hit the ground running.
Since initial European launch in August we've expanded to the U S UK and Australia.
The pipeline is growing well.
Also excited to have autos began its own implementation of unify office by ring Central Paul The 30000 plus employees in over 20 countries.
As businesses embrace working from anywhere our integrated platform of Ucas, and CCAR solutions drove strong customer wins during the quarter.
In Q4, we won a deal with a fortune 500 financial services provider.
This customer required a highly reliable trusted FINRA compliant communication system.
Our deep enterprise cloud phone system expertise and vertical market integrations were key differentiators in this 4000 user win.
We have a bigger opportunity to expand our footprint over time not only for users, but also with other products.
We also saw strength in the quarter with a contact center solutions.
Contact Center was included in over 60% of our million dollar plus PCV wins in Q4, including nearly 100 wins for our need of ring central engage cloud contact center platform.
We are seeing positive momentum with existing customers.
For example put forward.
I'll provider of IP and technology solutions for medical practices, and a long standing ring central Ucas, and see cash customer tripled its engage voice seat count to 450 <unk>.
Like these demonstrate our ability to land and expand.
And illustrate our significant opportunity ahead with larger customers.
I joined ring central a little over a year ago and I'm. So proud of the accomplishments of the team in 2020.
We strengthened our leadership team with six new <unk> and top talent added throughout the organization.
We deepened our portfolio of product capabilities with drinks central video glib and rent central cloud PBX for Microsoft teams, which enables direct routing integration.
We launched Avaya cloud office and unify office.
And added new key partners, including Alcatel Lucent enterprise and Vodafone business.
We had numerous industry accolades for diversity leadership and culture.
And we broke through the blast hole technology top 10 best places to work.
Last but not the least we delivered consistent and strong results for the year.
We continue to execute with a clear vision and strong discipline I'm incredibly grateful and humbled to be a part of this journey.
With that I will turn the call over to our Chief Financial Officer Mitch.
Thanks, Todd and good afternoon, everyone.
2020 was a standout year for our financial performance.
By many of the tailwind that glad I didn't highlight it.
Subscription revenue grew 33 per cent year over year and surpassed the $1 billion a significant milestone for Inc. Central's.
Non-GAAP operating margin improved 50 basis points to nine 7%.
And for several consecutive years, we've been executing above the rule of 40 demonstrating profitable growth.
Q4 capped the year with strong performance on key financial fronts.
Here's a quick snapshot.
The ring Central office, they are grew 39% year over year to over $1 $2 billion.
Total error grew 35 per cent to one $3 billion sub.
Subscription revenue grew 34% above the high end of our guidance.
Non-GAAP operating margin was over 10% at the high end of our guidance.
And non-GAAP free cash flow margin of $6 five per cent improved about 120 basis points sequentially.
These robust strength reflects ring central its growing customer mind share.
Both with new and existing customers as well as contributions from our partnerships at favorable unit economics.
To that end, we yet again saw strong new logo momentum in Q4.
Our ability to land new logos validate the strength and value of our MBP platform as enterprises look to transform their entire business communications stack to the cloud.
And traction with our existing customers has never been better.
Three key things there.
First upsell represented over 40 per cent of new office bookings.
Second churn hit a record low exiting the year.
And third trend stabilized in those verticals most impacted by Covid earlier in the year.
As to our partnerships, we are pleased to see contributions from Avaya and others as they begin to ramp.
We are also seeing strong results from our carrier partners, most notably from AT&T.
Looking ahead in 2021, we have a healthy pipeline across all our segments and each facet of our global sales ecosystem is providing growth opportunities.
As more users from our partners come online throughout the year, we expect strong incremental contributions.
And beyond 'twenty 'twenty, one we layer on more growth from partners like Alcatel Lucent enterprise and Vodafone business.
With these structural tailwind, we feel confident in the momentum into the new year.
With that net <unk>.
'twenty one outlet numbers.
We expect total revenue growth of 25% to 26%.
We expect subscription revenue growth of $26 27 per cent.
With similar revenue linearity between the first half and the second half as we saw in 2020.
We expect non-GAAP operating margin between 10 and $10 one per cent.
And we expect non-GAAP EPS of $1 20 to $1 24.
In summary, 2020 truly was a transformational year for ring central.
New logo momentum was strong.
Expansion within the base is picking up.
Churn continued to improve throughout the year.
Global partnerships have started to contribute.
We expanded our product portfolio.
And we've added new catalysts for future growth.
Our technology moat combined with a differentiated distribution mode with our unique partnerships positions us for long term durable growth.
We continue to invest in R&D growth partnerships and quota carrying resources.
This will enable us to drive further product innovation and build pipeline to capture this large opportunity ahead of us.
We are confident in our ability to thrive in this $50 billion plus addressable market.
And we believe 2021 could be a very exciting year ahead for ring central.
With that.
Let me turn the call to the operator for Q&A.
At this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad accomplished some total of any commitment in the question queue.
You may price start to if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing just aren't keys.
One moment, please while we poll for questions.
And our first question is from Brian Peterson with Raymond James. Please proceed with your question.
Brian Please make sure your line is non U.
Oh, sorry out little bamboozled by the mute button there apologies guys can you hear me.
So so yeah just just.
The enterprise strength I know you mentioned a record number of seven figure deals. It sounds like there were a lot of contributing factors. There is there any way to kind of unpack that a little bit.
Sure sure Brian.
I'll take that Paul give some more financial color on the $1 billion DCP deals here and Youre right. We did have a banner year on the $1 billion on ECP wins, it was up 50% sequentially.
We also were able to squeeze in two deals over $10 million.
Can you provide some color on two or three dimensions Brian.
One is on the quality of the deals themselves on.
On the go to market motion.
And then some product color on where the deals came from.
On the deals themselves right. The deals are getting larger the wins are getting larger and customers are committing to longer durations.
Got it.
Good day Hello.
Glad you can't block can you go on mute.
On Q4 itself it was a record year a record.
The total PCB value, we booked $40 million deal was over $100 million.
So it was unprecedented for us and this was up 70%.
On the go to market.
It was really broad based.
Three quarters of the wins came from channel partners.
And we also had a very good representation from all the three years, we had avaya arcos AT&T all had millions dollars per presentations.
We also had.
About half the deals more free.
Our targeted verticals like financial Education Health care.
And now if you move onto the private site you know about over 60% of our million dollar wins included a contact center element, so really good pull through.
So overall if you just pull this all together.
Net net we are clocking in higher lifetime value of deals.
And they're coming in from all facets on GPM product in verticals. Some established factors, but also some that are still ramping.
No that's great color attached and congrats on that so maybe a follow up you guys have made a lot of investments internationally over the last 12 months. So I know, it's kind of hard to paint all international markets with a broad brush, but I'd be curious what you've seen in terms of demand signals are for some of these march it markets or is there a tipping point and how should we think about.
The adoption curve relative to the strength that you've seen in the U S. Thanks, guys.
No. That's a great question. This is on and I'll take that so yes.
Youre right in your question, if I look at a way out if I look at autos, we've added multiple international geographies in Q4.
In line with that we've had one of the stronger international quarters as well both in terms of growth and in terms of percentage of revenue. So.
The progress is exactly as we expected because we are layering in many facets of growth primarily through our partners all contributing to significant international expansion.
Great. Thank you.
Yeah.
And our next question is from.
Bob and Siri with William Blair. Please proceed with your question.
Great. Thanks for taking my question guys and congrats the million dollar deals numbers is great and then.
Obviously the color you just gave.
Was phenomenal I just want to follow up on the previous question, but now looking forward. So long as you think about the guide you gave.
And it's one of the higher ranges that you have given for our forward guide historically.
I'd love to understand maybe maybe from a cash initially what's behind that what are the tailwind that you're building in and what are you not building in that could potentially be upside that would help us think about how to unpack our guide given the tailwind of the three eight partners obviously.
The BT partnership Vodafone.
The Nashville move to cloud et cetera left I'd love to understand that.
Yeah, just give me just a request everybody to just go on mute, but if you are on.
On mute because they're all in different locations Melbourne so.
Yeah, So yeah, I don't understand that.
Yes.
Yeah. So what we'll do is built on I'll quickly take a click below on the planning process itself, how we do planning and then I'll hit the punch line. So we can give you some good color on what we are baking in or not.
Thomas.
Ryan can you yeah, yeah. Thank you Ryan.
So from an annual planning perspective right.
Combined two inputs Beaumont, one is the extrapolation of trends the witness.
That's one and then we then marry those two a bottoms up view.
Our various go to market product.
Motions, so from a transport a few last year, our COVID-19 definitely raised the priorities for as you said business communication solution.
It's a structural change it's a more strategic purchase and we saw.
Elements of that play out throughout the year.
Our new logos was strong.
And with that incremental improvement on churn and retention metrics.
As we progressed throughout the year and our enterprise is kicking in high gear.
The trends we are seeing now looking at bottoms up.
2021.
We evaluate multiple aspects.
First on the go to market side.
Direct channel the three as service providers and then also we layered on a go to market a product motion apartments office blip video messaging and contact center.
Combining these two trends call it tops down and bottoms up usually and as usual Ian.
'twenty, one we always take a prudent approach to our guidance.
So we've assumed a reasonable ramp.
Avaya and others.
And for Alcatel Lucent, and Vodafone Ah, we baked in minimal contributions at the ramp it'll take about six to nine months to ramp from the launch date. So it's more of a 2022 drivers less so overall I mean, if you just send it out we feel really good about what we saw in Q4 and the visibility we are seeing but the early trends here.
Gotcha Gotcha Thats helpful.
And maybe one maybe to unimpaired.
No.
You guys have offered from a product perspective, a solid set of API is right to voice customers some time long.
With purchase of RCM, you've added some C pass capabilities bulk messaging.
But some of the primary C. Ucas competitors have made investments in full C pass offerings I guess I'd just love to think strategically about the importance of this functionality is part of the ability to differentiate your ucas contact center as a service offerings.
You kind of see the full C pass ownership.
<unk> benefits from a competitor perspective, or do you think that right now it's kind of a focus on the core integrated functionality of what you have today I Love I'd love to understand how you think about that strategically.
Well, that's a great question actually so I would basically say our core focus remains the same which is.
Ucas across message video phone.
Deep integration with contact center, bringing the AI element to it.
The <unk>.
Acquisition, which lack called out and.
And so that that remains the core strategy.
Customer demands come through Youre, absolutely open to exploring specific seek feedback use cases, you saw us do that with the <unk>.
High volume estimates used case, which we basically talked about a quarter.
That's very specific and that's customer driven so that's.
Our strategy is consistent.
And we are moving down the St. Paul.
Thanks, Brian I appreciate the color on the Gander and again, guys just really consistently what a great job. Thank you.
Thank you.
And our next question is from Sterling Auty with J P. Morgan. Please proceed with your question.
Hey, Thanks, guys I think you've got the audio issues because for a while it sounded like Darth Vader was on the call with us.
So maybe <unk> can you give us a sense.
Added a number of geographies through the through.
Through the fourth quarter with Avaya help us understand how these big five partnerships will ramp in terms of the additional geographies and at what quarter would you anticipate all of the partners to be fully ramped and all of the geographies that they want to compete in.
Yeah sure. So you know looking at about three partners right now strategically strategic partners Avaya Argos and Alcatel.
<unk> is in 12 countries Ottomans isn't 11, and Alcatel will launch in 10 11 countries coming on if you look at.
The size of the market and the addressable market, we have we'll be able to address a lot of this opportunity in the next couple of years. So I don't think there's going to be any dirt of what we can.
Jack.
In terms of these seats because we are going after the biggest geographies first.
And where the most of the seats are so I feel over time as I mentioned earlier.
<unk> is ramping really nicely auto which is off to a good start and it will keep on providing incremental contributions throughout the year.
And I'll get they'll loosen theres going to be more of a 2022 driver and what one thing is that this these are partnerships.
I don't think you can think of them as one and done.
So they provide you a continual benefits for several years to come so that's the way we think about these partnerships.
It sounds good and then one follow up in terms of the Avaya wins in the quarter. You mentioned the 7000 seat win where are you heading in terms of the sweet spot and is there a cap on the size of the organization, where you think the product is per is going to resonate moving forward.
Specifically through Avaya.
That's a great question, let me take that so couple of things you said where are we hitting the sweet spot so what Ics.
Across all fundamentals, we feel that the avaya team that channels are firing on all cylinders. So that's the customer transactions that seed expansion, that's large deals closed and Thats Geo expansion.
In line with the fact that we have now 12 countries online power.
Or ACO, we actually saw a good bit of Geo expansion broadly and you also see the loss leader which is specific.
<unk> on verticals like financial services and manufacturing so what I would say it is actually broad it's broadly see strength everywhere as we expand our relationship with a wire.
Got it thank you.
And our next question is from Terry told me, which was securities. Please proceed with your question.
Yes, thanks for taking my questions and I'll Echo the.
<unk> great great quarter.
I guess, maybe in metastasis questions per year that theres been a lot of chapters.
T N T book overtime it ramp from.
From basically nothing to well over 10 per cent of revenue and in fact, I think it was in the teens as a percentage of revenue, but then it started to kind of trend lower.
Would love to get a perspective on as well is that still a headwind, though in 'twenty from some of the dynamics going on with AT&T, a couple years ago and how do we look at AT&T into 'twenty, one in terms of tailwind specifically around that relationship.
Sure Terry I like I Love the way you phrased. It there are a lot of chapters in the AT&T story book and I won't say the greatest chapter is being written right. Now. So that's also been stung in sheet here, but if you harken back to memory Lane, we did at the trough couple of years ago.
AT&T was.
It was about a five point headwind to growth.
Now fast forward to the end of 2020 with our new relationship underway.
Are dissipating.
2020 in fact, it was one of the best bookings year in our history with AT&T.
And the contributions are strong.
Across the board upmarket and Downmarket.
And we recently launched new packages to open up new verticals like sled.
So for 2021 looking beyond to answer your question, we don't expect that this AT&T relationship to be a headwind anymore to overall growth.
And Oh rapid it by saying this that you know with our new expanded relationship.
With new markets I think in the next couple of years AT&T, it could be and become a larger business definitely than the previous go around behalf.
Yeah, that's a that's great to hear.
I guess I don't usually talk about or ask about stock comp, but it looks like it is.
Double could you just quickly describe some of the the dynamics, that's causing the significant stock comp and again congrats.
Sure. Thanks, Gary, Yes, Dot Com I would say there are.
Two or three main reasons for the stock comp increase.
And the first one is.
Our strengthening of the executive team.
Alan did mentioned that we've been hiring.
Tiring it season C suite bench.
The market opportunity is just too large for us not to scale to become a multibillion dollar company.
We are.
Hiring a head of that we've hired several C suite executives there. So that's part one.
Secondly, our overall head count increase which is central is a great place to work and people are seeing our vision. So we are adding head count in the normal course of business and that's the second reason with the head count increase and third one is the increase in stock price while its great.
The market cap.
The stock price increases is good it also puts pressure on the stock comp, but you know having said all of that theory.
Net net if you look at the dilution in the share count we are adding about one and a half million shares so theres going to be lower dilution than we've had in the previous years. So we get a combined the best of all elements when you get to a higher top talented team and we get to reduce dilution for our shareholders. So I think it's a win win there.
And our next question is from George Sutton with Craig Hallum. Please proceed with your question.
Thank you Mitch that shows the best job I've ever heard taking a large stock comp and turning it into a positive so congratulations.
I wanted to check.
I wanted to look at 2020, which I completely agree was a transformational year. When we look at all the partners and the new offerings I Wonder if we look forward a full year from here judging on your pipeline that you're looking at right now are we going to see additional partner.
Are we going to see additional offerings that expand the platform in ways that we might not be considering today.
I'll take that so.
Paul I think we've always talked about this ring central success is founded on the basis of partnerships. So you can expect that we are constantly looking to expand our relationship with our partners and thinking too Paul.
The ships across all dimensions, which is on power.
Our partners are.
Strategics and on DSP, So that is absolutely something which we are focused on.
Got you one other thing relative you brought up Microsoft in a direct routing when I wondered if you could go into a little more detail on what youre seeing out of that Microsoft opportunity.
Yeah, So Steven I think Microsoft or can we think about it in three different ways.
First is the Ucas solution right, we feel really good about baby all because one it's about integrating across messaging video and phone like block called out which.
This is the reason you see bring us.
No leader in the Magic quadrant for the six given our role now with Gartner and we're still expanding our innovation more every single day, which is what you see reflected in the large deal wins. So we feel really good about the ucas solution. The second thing I would call out is the integration would see cash I mean, one of the things that Dave just mentioned as well.
60% of our large deal wins.
<unk> actually had contact center.
And we have the deep integration with <unk> is a very unique differentiator.
And then the final thing I talked it through is for customers, who are the big Microsoft shop, that's where the director of incomes in because they've made their decision to standardize on Microsoft and hence.
Teams is in play but with director.
With the teams.
It still gives them the opportunity to leverage the best cloud business, Paul instances, when central which is where we are seeing the traction and that's the example of the 7000 plus fees direct routing will be talked about so we feel really good when we compete and we feel really good when we can actually just work with teams that integrate with it as well.
Great. Thanks, guys.
And due to the interest of time, we do ask anyone who's asking the question to please limit yourself to only one question again with the interest of time, please limit yourself to only one question.
And our next question is from Michael <unk> with Wells Fargo Securities. Please proceed with your question.
Hey, there thanks good afternoon.
Okay attached a picked up here in Q4, we had to go back to 2015 declined 35% growth in our model is there anything you can add in terms of contribution from those strategic partnerships, you're calling out it sounds like the likes of Ian Auto Sir.
Likely the furthest along and anything you can add.
In terms of Q4 contribution or anything that might be embedded there and framing the initial outlook for the coming year is helpful.
Sure sure Mike.
Yeah.
For <unk> was strong across the board.
And.
Every.
Every chip in a way Paul or accelerate.
Also we did have very strong contribution from our partnerships there.
We are extremely pleased with the progress of Avaya, Inc.
It's been a heavy lift to make it a reality, it's really cross functional with both companies, but it's a it's been working really well.
And we saw seats doubled quarter over quarter with the buyer.
And we had multiple million dollar deals there.
And Avaya will serve as a blueprint for future partnerships.
The first one is <unk>, which is again off to a great start.
The product is now offered in 11 countries now.
More international companies are coming are countries are coming in 'twenty and 'twenty. One we are activating the partner ecosystem.
In Q4 for <unk> at three times, the number of partners in Q4.
Quarter over quarter.
So I think those will start to incrementally add on to growth rates in 2021.
But overall the key thing to note Michael is that with.
With the size of the opportunity, we are and the penetration level being so low I think this will be a multiyear drumbeat for us to provide an opportunity to grow at a solid rate for years to come with these partnerships.
Great. That's all clear thanks, guys. Thank.
Thank you Michael.
And our next question is from meta Marshall with Morgan Stanley. Please proceed with your question.
Great. Thanks, maybe just a question given.
And the success of the homegrown engaged contact center platform and obviously the success of ring Central video just any recent thinking about either transitioning existing customers that may be on the you were kind of zoom video product as well as just kind of status at the end contact relationship as you're kind of.
Ground products.
Kind of continued to develop.
Yep meta this is arne and I'll take that good question. So let me start from the last question you asked.
Indeed was a good quarter.
Our partnership with in contact is really strong and that continues as well. So no change in strategy. We continue to work closely with them contact that a big part of our.
Large PCB wins their contact center was embedded while we make progress on engage now on the second part of your question which was.
Zoom and RCB.
Right now.
Every customer who we acquire new defaults students into video and we've had good traction and we've got good feedback absolutely installed base, we are going through the process of getting them on.
It's not a forced migration, but we are getting them on <unk>.
OCD platform, because the benefit of a tightly integrated expedience across message video phone is very strongly resonating with our customers and we are on that journey as well right now.
Is there a timeline for that as far as when you would expect that migration to be complete.
No.
But the journey and the process is pretty strong.
Paul.
Great. Thanks.
Our next question is from semi Samana with Jefferies. Please proceed with your question.
Hi, good evening.
Quarter I'll jump to the question for the sake of time, Natasha if I look at the channel partner air or it actually on a percentage of net added dollars was the smallest contribution that has had in several quarters. Even looking back. The last couple of years I'm. Just curious how should we think about maybe the percentage of channel.
Air our dollars as a percentage of <unk>.
Of our total air are added going forward and just was there anything in the fourth quarter that were direct with particularly strong that that might have driven that mix shift lower for the contribution from the channel.
Look I mean, yeah. So everything was really strong in Q4, particularly direct and the enterprise was really strong if you look at the growth rates for the channel again, I'd say the mix is driven by boats both components right the channel and the overall so the overall was very strong but.
If you if you look at some of the channel the growth rate of I think about 55% average, it's and it's tracking in line with the overall enterprise growth rate. So there was nothing really to call out.
In fact channel we are seeing increasing momentum in terms of number of partners we are signing.
Some of the initiatives, we are working on where we can help channel close the deals faster.
That's underway as well so nothing nothing more to read there.
Great I figured it was direct strength in on and maybe just one for you on clip pro any early reads on download data our activity early engagement from customers are trends that are worth calling out if you can make that you've seen conversion I know it's only been.
You know just around 60 days give or take but just given that it's an exciting opportunity or any anything you can share would be helpful.
No.
Good question. It is too early 61 day is to be precise and.
The provinces as we expected.
And it's just too early to share any trends or any other details.
Great got you. Thanks for taking my questions guys and congrats on a strong finish to 2020.
Thank you.
And our next question is from James Fish with Piper Sandler. Please proceed with your question.
Hey, guys you highlighted a number of very impressive wins with large item, Dave, but really we only heard a few thousand seats.
Across them is it just the initial rollout to the broader enterprise was it more departmental at this point and that we're looking to upsell kind of over the next year or two even extend that to office. Obviously impressive 30000 employee addition, but they obviously have.
About three assets more than that in terms of the overall so just trying to understand is it just the initial land and we should expect for the next year or two to see additional ads.
Not really if I just look at the rec.
Record.
Million dollar plus TCP wins, we had it was actually pretty healthy and it was a good mix of Ucas and Cts.
So I actually thought it was pretty healthy as it looked at as we look at the number of seats going forward as well.
So I am not sure where you you know where you picked that up from and we've also had a fairly good upsell mutation called out as well. So we are also not just getting new customers, but reaching back into our installed and give them a very good upsell expansion motion, which is bearing fruit as well which is affected.
And in the seats as well so that so we see good progress across all of them not just the number of large deals, but also the seats across them and you.
Boston Sullivan, just published a report for 2020, there we called out bring central is not just the highest in terms of share in terms of users and seats, but also in terms of growth.
For users in seats as well, so we feel pretty good about it.
Thank you.
Our next question is from Ryan Koontz with Rosenblatt Securities. Please proceed with your question.
Hi, Thanks for the question and thanks for all the color on the channels some terrific progress there.
As we think about the channel mix increasing over time.
And any headwinds we should consider on the model to a gross or operating margins.
Thanks.
No you would not know channel in fact, it's a it's an accretive motion right the channel themselves as well as the non.
Our strategic partners they are accretive to unit economics, because we don't get too.
The upfront sales and marketing costs.
For for these motions so over time as the channel takes share it would be neutral or at best neutral or slightly accretive to the model.
And our next question is from will power with Baird. Please proceed with your question.
Hey, this is actually Charlie really come through well thanks for taking the question congrats on the really strong results.
I'll ask a quick one just maybe on the pricing environment Youre seeing.
With a lot of competitors and some coming at the market at a bit of a lower price point I'm wondering if you could maybe comment on any changes youre seeing in the pricing environment at all.
If anything.
Yeah, So I'll take that no not not a whole lot of change we see.
We see the trend sort of kind of be the same across the year. So no material change.
Our next question is from Rich Valera with Needham. Please proceed with your question.
Thank you and congratulations on the strong results question on the SMB performance looked like you saw another nice quarter over quarter acceleration in the SMB growth rate I wondered if that was due to improving churn if that was a factor in if in fact SMB churn was back to pre COVID-19 levels. Thank you.
Yeah, Hey, rich.
So yeah, it's a good call out on the F&B side, a couple of things happening under the cover on the SMB side I would say the three are meant for trends to call out. The first thing is we are seeing strong traction with our E Commerce motion, which is more of a self service motion.
And that's accelerating which is pulling up the SMB growth.
Second one is the benefit we're getting from our recent branding efforts.
Now have the optionality for flow as well so that overall branding halo that's fall through to the SMB side.
And the third one is you called out a net retention or churn.
Rightly and improvement.
Insured in the F&B side it stabilized it kept on getting better throughout the year. We are almost there at the pre COVID-19 level on the SMB churn from Venezuela, and I think the.
Our driver IC.
In this index Covid or no one is really deploying.
On premise equipment right people are only going to the cloud to stay productive. So I think that definitely helps the F&B space first.
Okay.
And our next question is from Matt Van Vliet, Inc. With BTG. Please proceed with your question.
Yes, Thanks for taking my question and nice job on the quarter I guess from a bigger picture standpoint, you mentioned the number of countries that you're in with a bunch of the bigger bigger partnerships now.
But I wonder if you have much of an update in terms of the number of partners kind of within those geographies or kind of across their entire systems, how how well penetrated at some of these bigger ones.
I presumed whereby a little further along but just kind of how do you feel overall about the potential for sort of organic growth within these partnerships as you move through the year.
I'll give the first part of this objective color, which is I'm, assuming you're talking about partnerships like avaya and autos and their partners right yes.
Yeah. So as we look at it I mean as we bring every country. We bring on we basically are able to activate all the partners.
In their channel who exist in those countries.
So as of now.
Have activated all moves somewhere in the Ninety's.
Allowing our partners.
In the countries the operating expectations that Avaya is now ACO is not available in 12 countries orthosis novel available in 11 countries and we feel really good about the percentage of partners in those countries. We've activated and we are working with between enable and build pipe jointly.
Great. Thank you.
Our next question is from Cte panic and a graduate leased.
Please proceed with your question.
Hey, guys congratulation most of my questions are asked.
But just a follow up to the SMB question earlier meta is what's your expectation baked into <unk>.
2021 in terms of SMB growth. So do we expect a similar kind of trend that we saw in Q4.
Yeah look SMB, we always.
Internally model SMB call it high teens like that mid to high teens at what used to be low to low to mid teens now it's mid to high teens I think that's a reasonable level to model you just never know Smbs easy company to go so I think a more prudent way to dial in expectations, let's call it like high teens.
Growth rate in 'twenty and 'twenty one.
And our next question is from Katherine dramatic with Colliers. Please proceed with your question.
Oh, Thank you for sneaking me and Tim Congratulations on a good quarter. So this is back to the contact center you know could you parse perhaps to go little bit deeper into where you're using in contact versus your internal and engage and what's the GAAP you would think capabilities between in contact in India.
Because it does seem like you're moving yourselves directly into the contact center.
Even though you said earlier you still have a tight relationship I think contact so I just trying to parse the capabilities and where he is one versus the other thank you.
Yes.
And hopefully the huddle follow up with you on David that will take a bit of time.
Would create adobe doesn't put level.
Essentially you know it depends one on the specific use cases with the customer is looking at it also depends on the size of the customer and the number of agents. The one so all of that comes in together to help us understand which product we lead with as I said again I'll go back to saying it again our partner.
With in contact is really strong and further strengthening and we see huge momentum as part of that we also see engage pick up momentum in specific use cases and smaller customers as well. So it's literally it's looking across the board with our customers directly and also with our channel.
And our next question is from Matt nickname with Deutsche Bank. Please proceed with your question.
Hey, guys. Thank you for taking the question just a follow up on the million dollar deals. So we got some good color on the fourth quarter any color you can share in terms of how those size deals had been trending thus far.
During the quarter in <unk>. Thanks.
Yeah.
Well, let me let me answer that says once you we are still in <unk>, what I would say is the Q4 in a seasonally strong quarter is the strongest quarter.
That said if you just I'll just brought another question here. If you look at the trends we are seeing early trends in Q1.
We have seen our trends of Q4 continue into Q1.
Robert.
And we have reached the end of the question and answer session and this also concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Sure.