Q1 2021 RingCentral Inc Earnings Call
[music].
A 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 I'll now turn the conference over to your host Ryan Goodman, you may begin.
Thank you good afternoon, and welcome to bring Central's first quarter 2021 earnings Conference call I'm, Ryan Goodman ring Central as head of Investor Relations. Joining me today are large minutes founder chairman and CEO.
And that's one president and Chief operating Officer, and the Test group Chief Financial Officer. Our format. Today will include prepared remarks by blood on and M. Attash, followed by Q&A some of our discussions and responses to your questions will contain forward looking statements, including our second quarter and full year.
And <unk> 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 and discussion of the risks and uncertainties related to our business is contained in our filings with the Securities and Exchange Commission.
And is incorporated by reference and to todays discussion and.
In particular, our business is currently being impacted by the COVID-19 pandemic.
And the extent of its continued impact on our business will depend on several factors, including the severity and duration and extent of the pandemic. The success of vaccination efforts as well as actions taken by governments businesses and consumers and response to the pandemic.
All of which continue to evolve and remain uncertain at this time.
<unk> Central and assumes no obligation and does not intend to update or comment on forward looking statements made on this call.
Unless otherwise indicated all measures that follow are non-GAAP with year over year comparisons.
Reconciliation of all GAAP to non-GAAP results is provided with our earnings release and and the slide deck I encourage you to visit our Investor Relations website, and I are ranked central dot com to access our earnings release slide deck, our GAAP to non-GAAP reconciliations our periodic SEC report.
George and <unk>.
Net cash replay of today's call and to learn more about ring central.
For certain forward looking guidance, a reconciliation of non non-GAAP financial guidance to the corresponding GAAP measure is not available as discussed in detail and the slide deck posted on our Investor Relations website with that let me turn the call over to blood.
Good afternoon, and thank you for joining our first quarter earnings conference call.
We hope all of you are safe and and good health.
First quarter was and exceptional start to rent it to Mike do you want.
Ring Central office a R R.
It includes both you cats and see cash grew 40% year over year to $1.3 billion.
We last saw similar growth five years ago on the base that was sub 300 million or less than one quarter of outdoor Inc level.
And we're seeing the strong performance on all fronts.
Avaya and Argos and I continue to gain momentum.
<unk> Central office and all.
Our with direct and partners.
And could you all of our key partnerships grew 33 per cent year over year to 817 middle and dollars.
Because this is an acceleration in growth of three points sequentially and eight points year over year.
And the work environment, John hybrid for many businesses.
Bring central's any device any mode and you.
Nowhere message video phone or N V. P platform continues to gain steam.
Ring Central was always about work from anywhere and.
With our recent performance and accelerating pipeline, we see clear evidence that our solution is right for the emerging post pandemic world.
We saw this manifest in our strong Q1 performance across the board.
We're still exceptional strength in our enterprise business was a record number of Q1 $1 million plus GCB wins, and two dozen mill and dollar block T C B deals.
Also I'm pleased to share and new milestone.
And our global 2000, and Fortune 1000 enterprises business now stands at over hundreds and millions of dollars era and it gets close to have tripled year over year.
So why do we win.
Right and central business successes are underpinned by our industry, leading modern pure cloud mobile first global unified communications as a service platform.
It all starts with trust.
High reliability and security data privacy and regulatory compliance are essential to establishing a relationship of trust with enterprises worldwide.
So reliability.
Business communication solutions are the heartbeat of any organization in.
And the hybrid work environment reliability of business communications platform is more critical than ever before.
Rafe Central's consistent delivery of five nines uptime continues to be an important differentiator.
This translates to less than 30 seconds per months of downtime.
Very few cloud competitors can consistently provide this level of reliability.
And another key requirement is security and data privacy and.
Our security and customer data privacy track record is a meaningful differentiator between us and some of our competitors.
And this continues to be a focus area of our investments.
For example in Q1, we acquired King died eight develop a leading cryptographic technologies. This provides us with enhanced security capabilities, such as anthem and encryption that we intend to roll out later this year.
Additionally, enterprises demand full regulatory compliance and centralized connectivity management across their entire global footprint.
In central and allows our customers to concentrate on their business with ring central taken care of the global connectivity needs in a centralized regulatory compliant manner.
As this continues to be a strong competitive differentiator for us.
Sometimes we get the question, who even needs a phone system wide zone companies just rely on video and mobile phones for their employees.
The as it begins with the fact that.
There must be a clear well defined wait for people to reach a business and its employees.
Well video is clearly very important for meetings and most people use false and voice to each company.
Does this mean.
And that on the company side, there is a need for centralized business identity combined with sophisticated workflows and cold flow.
Or disability enterprise wide analytics and of course security and regulatory compliance for all of us the internal and external communication.
And this is what it's additional to be excess that are now being replaced by modern cloud based call systems, like who and central came into play.
And so mobile phones, they are an important and point during central similar two softballs and traditional desktop phones.
And now with ever more distributed model and do multiple workforces and the new work from anywhere paradigm use of mobile phones and cell phones connected vehicles and central is growing at approximately 60% year over year.
This outpatient use of mobile phones and point onward, and central Bruce our original thesis that mobile calls are often nautophone.
W downloads, this trend and stores and extending our technology leadership ring central cause recently collaborated with AT&T.
Leever office and standard wireless.
And you play and you and native integration between the pure cloud P. B F and the major mobile carrier network.
And this enables fixed mobile convergence whereby users can use their mobile phone number with the desktop phones as well and with full access to cloud PBX capabilities.
We believe this new technology moves towards a supercharge at&t's momentum in convergence and mobile business users do you guess.
How long was supporting a variety of endpoints. It is more important than ever to provide a seamless user experience across various communications modes of messaging video and phone or M. D. B.
And with introduction last year offering Central's video, we're incredibly proud of our pace of innovation with over 100, new feature delivered since the launch.
And we recently announced new capabilities, such as breakout rooms via virtual backgrounds.
Xander overlaid and picture in picture.
At this point, all the fun and new customers and key partners, our deliberate only Ruth central video as part of N V P.
Without the ritual roadmap the roadmap ahead, and they're committed to meeting all of our customers and partners need and so outpaced innovation and product excellence.
Yeah.
Towards the complementing our N V. T. You cast product is a ring central contact center portfolio.
By adopting and integrated Ucas and seek a solution from a single we didn't provide that our customers and drive higher employee and agent productivity and improved customer satisfaction in.
In Q1, we saw exceptional demand for all she cash solutions across the entire portfolio.
Contact Center was included in over 60 per cent of our $1 million plus D. C V wins, including our largest contact center win to date of over 10 million G. C D.
In closing.
We believe work from anywhere and C O to state.
And the global pandemic task force for what years, a few cash structural awareness and ring central in the pole position with a differentiated trusted platform accelerating pipeline and the unique partnership network that we believe will be getting even stronger.
Stay tuned for upcoming exciting news on that front.
With this backdrop, we're confident that we can continue to lead in this $50 billion plus global market.
With that I will now join the call over to our President and Chief operating officer and that's one.
For additional color on our recent progress.
And you.
Thank you Vlad and good afternoon, everyone.
As Vlad said Q1 was a very strong quarter.
And our growth was strong.
New business from every key partner contributed to accelerated growth and our Midmarket and enterprise segments.
And the enterprise segment was exceptionally strong for Q1 quarter.
Driven by accelerated aventis of the need to modernize their legacy communication systems.
Small business was also strong as we are seeing the positive impact of the economic recovery and the segment.
Our pipeline exiting the quarter was at a record level across our integrated portfolio of cloud based unified communications and contact Center solutions.
I'll start with some key highlights.
Ring Central office E at our direct and partners grew 33% year over year to $817 million.
And more importantly, accelerated eight points year over year.
To provide better transparency into the business. We have provided this metric which incorporates contributions from our strategic partners, including Avaya autos and all cause Alcatel Lucent enterprise or service provider partners, including AT&T, BT and Telus waterborne business.
And other non channel partners.
As long as our direct business.
Second.
Our channel community delivered <unk> growth of 53% year over year, surpassing half a billion dollars with a record level of pipe generation.
Could we closed significant opportunities and we have built a large pipeline where enterprises want ring central office and integrated with Microsoft teams direct routing.
And last but not the least demand for our deeply integrated you cash and seek apps platform.
A critical factor and contact center, posting a stand out quarter with triple digit year over year growth and new logo business.
Let me now dive into some detail.
I will begin with our strategic partnerships, maybe saw great momentum.
And Q1, we saw solid growth and Avaya cloud office seats, new accounts and transaction volume.
ACO has proven to win deals in all segments, including upmarket.
We are seeing strength across multiple verticals, including continued traction in education and health care.
Auto has had a very strong Q1 and.
And exited the quarter with pipelines.
Our fleet three X sequentially.
With new campaigns underway and continued channel enablement.
We are excited at the opportunity ahead.
We also introduced a new co branded offering called unified video by ring Central.
This innovative and integrated video with team messaging solution equips autos to expand their addressable market and meet growing need for smart buildings.
Alcatel Lucent Enterprise launched Rainbow office powered by ring Central in eight countries right on schedule.
We look forward to ramping the go to market motion and additional geographies and coming quarters.
While still early we are encouraged with the initial pipeline generation.
Our global service providers delivered a strong quarter and we had some exciting recent announcements.
I'll start with AT&T, we continue to see positive trends in the new business growth, particularly in our market.
Trends and BT and Telus and they're also very strong in terms of both year over year growth and pipeline generation.
We are particularly pleased to see BP starting to contribute C catchments and elevated upmarket traction since the expanded partnership was announced in Q4.
We also continue to expand strategic partnerships with new Global service partners.
Including Vodafone business.
Which is on track to launch this year in multiple countries across Europe.
As for our channel and community it was another strong quarter.
Time, and again, our channel partners are proving effective in.
And demonstrating the differentiated value proposition of the ring central platform.
One channel success story was with Equifax, a leading consumer credit reporting agency.
Equifax unified 10000 users across 24 global locations with drink central.
Interestingly Channel partners also often drive ring central wins, even with customers, who want tight integration with your other cloud based solutions.
In Q1, we had multiple million dollar plus channel sourced wins, where direct routing with Microsoft teams to the ring Central platform was critical.
For example, a channel partner provided a great 7000 use a direct howdy and win with a leading financial services company across over 60 locations.
When working with Cio's and decision makers look.
And the conversation begins with reliability security and platform capabilities.
It's about providing a global platform that can meet very broad and district comprehensive user communications requirements.
A great example of this is our win with the American Cancer Society.
They had a range of use cases across corporate offices retail stores and hope lodges for cancer patients.
We are incredibly humbled and proud that this inspiration and organization selected drink central to meet the diverse needs with a single cloud based platform for nearly 3000 users across over 100 locations.
Our focus on selling a comprehensive communications platform versus point solutions was further demonstrated with a strong demand for our C cash solutions in the form of both upsells to existing customers and.
And new logo business.
And that no.
We are proud to see <unk>.
We won our largest contact center deal ever.
A leading mortgage originator and servicer wanted to replace a mix of older solutions with a single integrated ucas and see cash solution.
And over 6000 office employees and over 2000 and contact center agents.
I am so proud of the many accomplishments of our team in Q1.
I'd like to extend my thanks to all of our employees and partners for their hard work and dedication.
And of course, thank you to.
To our customers for trusting us to be a key part of their digital transformation journeys.
It is an exciting time in the ring Central story and I truly believe the best is yet to come with that I will turn the call over to our Chief Financial Officer.
Thanks, Dan and good afternoon, everyone.
Q1 was a strong start to the year across the board.
All key metrics came in above the high end of guidance.
Subscription revenue grew 34 per cent year over year up from 33 per cent last year.
And non-GAAP operating margin was above 9%, putting and again well above the rule of 40.
We've consistently achieve this metric for the last several years and it is a key metric that we as a management team track for profitable growth.
Particularly exciting was standout brought and office are a 40 per cent.
And acceleration of four points versus prior year.
This growth was driven by strong momentum with enterprise customers.
Enterprise <unk> grew 62% year over year and surpassed half a billion dollars for the first time.
We are also seeing a trend of large enterprises increasingly embracing the entire ucas plus seek S platform.
In PCB deals over a million dollars. We saw the number of affluent increased more than 50 per cent year over year.
And the average Iraq per deal more than doubled.
The more and your customers are buying from us and.
And these customers are buying more from us.
There are several factors that are driving this upmarket growth.
We believe that the global pandemic is proving to be a catalyst for meaningful pull forward of awareness and adoption of cloud communications solutions, which is benefiting ring central.
And it also witnessing higher upsell.
Bookings from existing upmarket customers once again surpassed 40 per cent of new business.
This is driven by broader implementations of Ucas and.
And as well as a record level of sika and upsell into our integrated solution.
And contributions from our diversified go to market partner networks are kicking in.
And on a noted we saw an eight point year over your acceleration and direct and partner office L. R.
These partners give us preferential access to roughly half of the 400 million he was in a market.
Looking ahead.
As more users from partners come online throughout the year, we expect strong incremental contributions.
We believe this is just a precursor of sustainable multiyear trends.
The market opportunity is massive and underpenetrated.
We are excited to see continued traction and is driving market.
How long is a large tim the underpinnings of a long term sustainable SaaS model and all of its hinged on favorable unit economics to drive healthy long term margins.
And I'm pleased to highlight several drivers here as well.
First with a larger mix of upmarket customers with solid upsell potential and its sub 5% annual gross churn rate, we are benefiting from a higher lifetime value.
Second and.
Average deal size expands we are seeing higher sales rep productivity.
Third ring Central's unique strategic partnerships and global service provider partnerships, not only expand our global market reach but also lower customer acquisition costs.
We can leverage our highly experienced sales force from partners as well as lower our upfront marketing dollars.
This dynamic is even more pronounced and international markets wherever you're seeing increasing contribution from partners.
And finally.
And all new office sales.
One bring central video or RCV.
And you see higher gross margin potential long term.
With that backdrop of structural and macro tailwind.
I'll, let you guess, let's see guest performance momentum from partners and favorable unit economics, we are raising the outlook for 2020 one.
We are increasing subscription revenue growth to 28%, 29% up from $26 27 per cent.
We are increasing total revenue growth was 27 or 28 per cent up from $25 26 per cent.
We expect non-GAAP operating margin of 10 to 10 and 21 per cent.
And we are raising our non-GAAP EPS to $1 24 per dollar 27.
Up from $1 $23 24.
We expect to benefit from a slightly lower share count from lower dilution as we redeemed the outstanding 2020 three convertible debt.
Beyond 2021, we expect and layer on more growth as partners like Alcatel Lucent enterprise fully ramped and Vodafone business starts to contribute.
We continue to invest in R&D.
And with partnerships and quota carrying resources.
This will enable us to further drive product innovation and build pipeline to capture this large opportunity ahead of us.
Multiyear structural tailwind for you guys and seek out and I still and early days.
We believe that we are well positioned to deliver long term profitable growth on a path to becoming a multi billion dollar revenue company.
Before I turn the call back to the operator.
Also like to give a big thanks to all the employees of drink central.
Q4, your consistent execution.
With that let's open the call for Q&A.
And at this time and will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad and confirmation tone will indicate your line is and the question queue.
Press Star two if he would like to remove your question from the queue for participants using speaker equipment and it may be necessary to pick up your handset before pressing the darkies.
One moment, please while we pull for questions.
And our first question.
And from that.
Terry Tillman with truth. Please proceed with your question.
Yeah, Hey, everyone. Congratulations can you hear me okay.
Yeah, we can.
Yeah, Okay, great. Thanks, and congrats on the office there are acceleration I guess, a two part question and the test first if you could just touch on the stack ranking if you will of the office. They are our acceleration and kind of picking that apart in terms of the stack ranking the drivers there and then I'd love to get an update I don't usually ask this question, but I'd love to hear about the competitive landscape from flat. Thank you.
Okay.
Sure Terry.
So on the acceleration for office to 40%.
So, let's parse out the strength and and two elements the.
And the macro.
And then there are ring central Pacific trends.
So, let's start with the macro and the macro and what do you see the shift and the overall spending environment for cloud communications.
I mean, if you recall you've covered us for a long time, the biggest issue right for the space was lack of awareness and urgency and Don.
And here we are.
Broke and the use of inertia.
Power demand, so that's and the macro site.
On the ring Central specific side, we are seeing a couple of drivers here.
The first one is a new business strength.
Where our new logos.
And up 50 per cent year over year on a very tough compare from last year.
And that's one the Colo.
Cash flow.
I'm doing my own Echo if somebody can go on mute.
The combination of mucus and sea gas is also turning out to be a clear differentiator with a lot of pull through both ways with multiple on ramps for us, especially power enterprise customers.
Sure and has normalized to pre pandemic levels and.
And finally, our partner.
<unk> from Avaya and.
And eight India chicken and so.
Overall, I think what we're seeing is the denominator right for the 400 million seats coming to cloud PBX is growing at a rapid clip and.
And we with our product stack on.
Are able to capture this demand along with our distribution partnership. So that's one of the drivers.
Okay.
Yes.
Right.
Is there.
That was all our next question.
And is from.
Bob and Siri with William Blair. Please proceed with your question Ian.
Thank you and I'm glad and attach peripheral team.
Congratulations.
What a great result.
Touch about the partners and Mitch as you just touched it and maybe it will help us work through it but the contribution partners, especially avaya and maybe age outs.
And what has that been like what was it and a quarter and and more importantly, what have you assumed and the guide I'd love to understand some clarity or color around that.
Sure so absolutely so we'll start out with Doubleclick.
On the on the partner's contribution from Avaya and autos, if you say it goes above onto a French person and they will get really mad. So it's auto so we haven't tried to stick auto and auto yeah I understood.
No I'm, just kidding with you and I'm sure I'm, India and let you are my cash.
And I got it and say I, suppose but yeah all right.
And clearly very pleased with the progress and both funds there.
Clearly a very heavy left to make it a reality so let's start with Avaya Avaya and we continue to build strength every quarter. This quarter again, we saw multiple million dollar deals happened.
It happened this quarter.
And iOS is off to a good start.
We are already offering the solution and a day.
And countries and we have more countries coming up in 2020 one.
And and also mentioned the auto Spike up three X sequentially.
After a really good start saying.
So in total and the contribution we did try to provide more transparency. This time carving out a metric called ring Central office direct and partners, which does capture.
These key partners and that segment accelerated by eight points to 33 per cent and.
How long of a direct our direct contribution these.
And these partnerships are definitely and element there. So we are starting to see the benefits clearly one thing to note though.
And this benefit is not like a one and done.
And from these partnerships and it's not that you get a benefit and one quarter one year and then the fall off we will continue to see benefits well beyond 2021 and.
And so that's sort of the contribution part in terms of what's in the guide and that's again you know it's a it's a good way of framing it.
And look progress is as good today and as usual, we have taken a bit of a prudent approach and our guidance.
If you assume continued success and the split we have left some optionality left and the guys. So not baked and everything and also one one thing to clarify is that we've not baked and much for Alcatel Lucent, and Vodafone, which would be some nice layering for 2020 two.
Gotcha Gotcha very very helpful.
And turning the conversation a little differently too.
Competitive environment right and we've heard a lot of things this is zoom overhang.
And from Zoom and people that are free ring central video has been and impact to them.
So maybe for on and as you look at the sales process and you talk to the people and the field and how are you feeling about the competitive environment and has anything changed.
And especially as you look at the Partnership's Summer school system or not and how should we think about that.
Well, it's a great question Sterling. So this is what I'd say.
Uh huh.
Alright, Bob and necessarily but don't worry.
No no no. This is this calls coming through so yeah. So from a computer and points. If I look at the you know just look at the macro indicators are win rates has sort of held steady in fact, we saw a really meaningful acceleration of win rates and the enterprise.
That's the first thing and I'll tell you the second thing Mitch.
I'll tell you is part of what we saw which is the ability to have MVP message video phone and integrated.
Together.
Connected way is actually making a meaningful difference stuck with one more layer of why you saw the strong office and <unk> plus 40% growth.
Tim I'm going to tell you assist this is an interesting metric some metrics which is dead.
We had said that Paul.
Increasingly customers are making joined ucas and seek is sufficient.
And almost 62% of those companies are using the same provider. So this is joined you can see cash story, which we have through our partnerships with and contacts and our own portfolios is making a huge difference over 60% of our large deals included the contact center in fact, putting it differently. So a number of deals with contact.
And the more than doubled year on year. So that you see plus C. C story is actually making a huge difference and.
And then the partners and of the day it all comes down to this.
400 million plus on premise seats and.
And now with Avaya and.
Autos, Alcatel Lucent enterprise and our service provider partners, we pretty much have reach across to the 400 million plus on premise users and so these partnerships are starting to execute and starting to create new layers of growth and.
And all of that put together the sales fundamentals are showing showing that progress, which is accelerating pipe deal velocity close rates, bringing it all back we feel really good about the competitive environment, we feel really good about win rates and all of that is translating into the numbers.
Great I appreciate the color. Thank you guys.
Bob and I and.
And Bob and I got confused so just wanted to call and call it back and power.
Oh don't even worry about it at all Sterling and I are brothers from another mother, sorry, I. Appreciate it. Thank you for the color there thank God.
Yeah.
And our next question is from Sterling Auty with J P. Morgan. Please proceed with your question.
That's that's great timing, so bothered by our texting back and forth and I'm, claiming identity theft [laughter].
[laughter] don't worry about it I do want to touch upon something that he went into which is but I'm gonna go the Microsoft route.
And in terms of you called out the interest and the integration into teams that.
The other area that we've heard from investors is concerned about Microsoft competition on top of zoom competition, but maybe you can walk us through what that pipeline generation and interest you know from Microsoft customers for that integration and pull through looks like at this point.
Oh, that's a great question Sterling. So you know what we see is.
<unk> talked about it in the prepared remarks direct routing was a key part of multiple million dollar plus TCP wins for us in Q1 like the 7000 user fence of day.
Correct crowding when I talked about.
What we like about the situation. We're in is one when you have and Microsoft install base, which uses teams because it comes as part of <unk> five our direct routing solution gives these customers access to the industry, leading <unk> solution, and we see strength and pipe PC strength and win rates we see.
Pretty good about that and.
There are instances, where we just directly work with the customer and when we do that and compete head to head we actually have seen our win rates sustained remained steady as ever and so on both instances, whether we compete directly when rates are steady or when we are accessing Microsoft installed base at <unk>.
Just creates and expansion into a new segment for us almost <unk>.
Bring central direct selling team.
Makes sense and then maybe one follow up question for you.
I often get confused given you have a number of different metrics as we think about the guidance and we think about the guide for the subscription revenue line for the June quarter. What is the starting point or are we taking total <unk> divided by four and saying that's the base and you build on that and that feeds into the software.
Subscription revenue or are we just taking kind of the ring central office component divided by four because if I take total <unk> divided by four.
And it's greater than what you're guiding to so just.
Clarify that force.
Sure sure Sterling.
So yeah I mean.
It is it should be totally IRR divide by four because that translates into subscription revenue now.
Now there are two or three elements of this where we do take into account next quarter.
So revenue lags IRR for at least two reasons one is the linearity in the quarter.
And we are getting to larger customers, we do bake and a bit of a.
Backend loaded linearity and the quarter and our guidance and we keep it food and Bev and second element is contact center there.
There is and lag and revenue recognition on contact center because of the implementation cycle. So.
And that those are the two reasons why you may see the math being the way it is and this matter does not and divergent.
If you look at previous quarters, and it's very similar and so call it our prudence and conservatism and the way we guide due to keep up the good news ahead of us.
Excellent that's very clear thank you.
Thank you Sterling.
And our next question is from Brian Peterson with Raymond James. Please proceed with your question.
Yes.
Brian is in line on mute.
Alright, and your mute button two quarters in a row apologies guys well congrats on the strong quarter. Some attached maybe you could help me a little bit just on some of the large deal activity and some impressive seven figure T. C. D wins any help on some of the financial details there.
Sure we can unpack the financial details on the million dollars D. C V. If you're referring to that strength.
So let me unpack it and a couple of different ways. So first just to level set we did see whats a record for a Q1 and the million dollar DCP deals and deals were up 50% year over year and again it wasn't a on a tougher compare because last year and there was some pull through from COVID-19 until we had a tough comparison, we were able to go on.
50% on top of that number.
We did also have two eight figure deals one was from contact center. So I think.
Just a overall and their blend.
Now to add some color.
Can add some color for you on.
On a couple of dimensions.
Oh, let's say three dimensions.
One is on the quality of the deals and we'll talk about that.
Talking about where the deals come from and go to market motions.
And the products.
And if you look and the quality of the deals we are getting larger wins, along with the increase and velocity of the deals are volume.
Our our power deal actually doubled.
And that and will lead to this new metric, we disclosed of $100 million Iraq coming from a global 2000 and companies. So clearly, we're moving up market, there and customers realize the value.
On the go to migrate.
Sorry go ahead.
Yeah, and I love the market.
It was broadbased, where 75 per cent of the wins came from channel partners and we did see multiple wins from the three is that.
And that's the second part and third one on the product side on and also touched upon that over 60 per cent of the wins included contact center. This is a new driver. This is a new we are seeing this vector emerge because usually our previously it would be just more seats that would lead to upsell and now we are also seeing a multi product journey. So you know all of them.
And if you put it together we are turning out to be on our early days and becoming a multi dimensional company both in products and distribution, which ultimately leads to accretive growth and margins Brian.
Great and obviously it sounds like a lot of drivers there and attach and and so glad one for you. Yeah. You had a lot of good things to share and you alluded to some potentially some good news.
And the partner side curious if there's any any more thoughts you could share there and maybe how we should think about the cadence.
New partnerships going forward thanks, guys.
Yeah Yeah.
Yeah definitely.
Luke.
And we're cautiously optimistic that a partnership.
Or I should say strategic partnership network will.
We'll grow sometime in the foreseeable future.
And you know, it's too early to call them out, but with things that are with proven a ring central could be.
A very good partner.
To many of the industry players are starting with the traditional channel.
Extending into a carrier or a global service providers.
And Oh of course, Bosch recently, more and more recently I should say traditional PBX manufacturers and you're a buyer.
And it wasn't that the price.
So not everyone in our segment are at stake and just partnership oriented approach.
And we're doubling down on this.
And.
Our proven and supporting our we've been asked for a long time, well what are you going and start seeing results and one will.
To start moving the needle for you or a J T or b T or what have you and.
So.
I mentioned in prepared remarks, we have and.
And you know as you can see from the numbers are we are maintaining and even slightly accelerating our growth.
And when a meaningfully larger number we simply haven't seen this type of an add.
On the RMR.
M R R.
Good.
Percentage wise for several years now, but literally the third and fourth size, whereas the day when we lost sales of growth.
And I can tell you we would not beazer without our partners. So it is a strategic and energy for us and we'll be doubling and tripling down long ago.
Corporate and services question.
Yes, it does great to hear thanks, a lot.
Oh, great. Thank you.
And our next question is from George Sutton with Craig Hallum. Please proceed with your question.
Thank you Vlad and staying on the strength the strategic side. There are a couple of small, but what looked like strategically important things that you did this quarter that I just wanted to get a little bit more clarity on the innovation center in India and the cryptographic acquisition that you made can you just give us a perspective, if we look say 24 months.
Out.
What are these wanted and mean for you.
Sure.
And we do feel that both our strategic.
Couple of them done and nonstrategic and position and I don't see and nonstrategic and position us and next.
24 months.
Luke I'll take it in reverse order the security company, which of course are cryptographic acquisition.
They are deep security experts.
And there is a you know very specific milestones that we have to achieve which is called and third encryption and it's not the only thing that.
No that that used to be done to continue providing world class security, but and then do something.
And that many people because it relates to so as the first deliverable, we would expect and their findings to to announce that later this year and of course, we're almost up on it and there will be you know continue ongoing security.
And improvements.
And I also want to remind people that we have a relatively recently card our tourists.
And the Chief Security Officer.
Who has held a similar a similar role at eight P. M.
And she is making.
Very big difference, maybe I don't get to spend more and what is that.
Is there a stock.
Okay.
As far as India is concerned.
And.
Look it's a it's a you know simply and basic social Scotland.
And ring Central is an international company and we have a development centers are all over the world, but multiple bites absence up until now was India and.
And this is going to change and and frankly there was a bigger question here is just I'd like to address which is how are we going to continue.
This type of growth.
Hopefully you know this level if not better.
Even as we are a if you will quite and larger and larger number you.
You know as our revenue increase.
And our answer is very simple and I think we've been consistent on this and the answer is twofold.
And this product and.
And the other is partnerships.
And beat the married she has been product and partnerships.
And we'll deliver our customers as it has been.
So we see a substantial and continual growth.
In our commitment to innovation and.
Product innovation.
But obviously, we need to be physically frugal and.
And one way in which we can achieve.
Continue.
You know doubling down if you will oh on the product side.
Breaking the bank and without eating into our profitability.
East to offshore east to get World class talent.
And there is a little bit more affordable and.
And you know India is a fantastic place that goes out and obviously a number.
Or of a tier one companies have.
And have been doing quite well there.
We have hired a very very Ah kee.
Key person.
And with regard to India to leads that center and.
And.
And Mr. So within 24 months I would say as it would have a substantial substantial definitely told which means R&D and product our presence in India as long as potentially some other functions and we can start leveraging.
You know.
On the Olympics, and maybe some specific customer service functions et cetera, what do you think it's going to be a source of competitive advantage for us moving forward.
That's a great answer you mentioned being frugal and attention.
For both so I think you're fine.
Yes, yes.
Yes, we do balance each other out there to agree with that.
Thank you George.
Okay.
Okay.
And just as a reminder, we would like to now ask everyone to please limit themselves to only one question again, please limit yourself to only one question and the interest and time. Our next question is from meta Marshall with Morgan Stanley. Please proceed with your question.
Great Thanks, and I just.
Given that you're seeing and such high attach of contact center, just how do you see the interplay going up yourself developed tools versus your relationship with nice and you know do you see yourself and developing more tools that can help you go up market into some of the the solutions that nice offers today.
Yes, that's a good question meta this is arne.
So this is the way we look at it.
We basically have our partnership with nice and contact and the contact center solution.
And B basically use them for if you look at engage voice and engage physical or digital first use cases, we start to go down with engage for the other use cases, we start to go with nice and contact that that's helping.
[noise] approach, which customer.
Users, which are product from our side and the second thing is as we also look at larger customers, we worked with nice and contacts.
Partnership and product as the primary vehicles for these larger customers as well so the customer size and also sort of dictate who we beat but couldnt be happier with our partnership with nice and contact you know at this point and time.
Great. Thanks.
Our next question is from Michael <unk> with Wells Fargo Securities. Please proceed with your question.
Hey, there thanks, and good afternoon meta.
And as she mentioned the feeling you know and the path towards becoming a multibillion dollar software company can you walk us through the drivers beyond what you're seeing today and long term growth and margin what you're focused on and maybe how youre thinking about the sequencing of those beyond 2021.
Yeah.
Sure Michael Yeah, I did mentioned to become a multibillion dollar company and the drivers are clear and it's just not the growth drivers, it's always and I always mentioned, it's profitable growth not just growth.
So let's start with the with the growth side and will then tie and the profitability on the growth side. It's again, the trickiest to just layer on incrementals drivers to capture this massive tam because the Tam is already there. So what are the drivers one is the product side, we have our own video now.
Which is gonna be brewing, which will prove to be a a and you drive it for US we don't have it yet and then the combination for you guys and see gas. That's one on the go to market side, you know all our partnerships do you have today.
Plus you know in 2022 day.
It will still ramp, but again, we'll have more partnerships like Alcatel Lucent, and Vodafone ramp up in 2020, two and beyond and the park on the.
Outside is Gilles international it is performing really well and we do expect it to be a increase contributor to becoming a multibillion dollar company in the future so plenty of opportunities and the tank here for multiple years and hit on the profit side.
Again, the new customers via Onboarding with multiple products and larger enterprises are very sticky, which leads to a high lifetime value.
And then on the distribution side and again, we are seeing sales and marketing leverage because we are able to.
Use the experience of our partners distributions. So you combine these two the growth and profit drivers and you've got a really nice profitable growth slightly going for the years to come.
Thank you.
Okay.
Our next question is from semi and Savannah with Jefferies. Please proceed with your question.
Hi, good afternoon, and thanks for taking my questions.
And just maybe for you or on and but is there a difference and the visibility of the pipeline and deals and in any given quarter for direct led deals versus the pipeline that you have with that let's call. It. The three days right and you guys have just as much visibility or how does that change maybe the guidance framework.
And in fact, the guidance framework.
Yeah I can help.
Yeah, why don't you take the first part on them and I really I don't.
I'm going to say, let me do the first part of your question, we have a pretty good pipeline visibility across the board.
So much. So you know I have good visibility into our direct I have good visibility into what's happening with our vars and and we have good visibility into what's happening with all our partners and this is what I would tell you.
Our pipe you know in some way.
As we finished the quarter of five was at the highest levels, we've seen and fact that so far is going to say even April was one of the fastest starts we have seen in our history from a pipeline standpoint, so we feel pretty good about that.
Why don't you take the second part of the question.
Sure and so some of the way operating the way that rhythm works is we actually look at our power bookings forecast and pipeline on a daily and weekly basis net of weekly meeting that happens for them.
And then the probability adjusted.
When we give guidance so it's very very well and fine tune almost scientific due to the way, we adjusted and then to give our guidance.
Great and maybe just housekeeping was linearity different and <unk> just as a follow up to Sterling's question from earlier.
Yeah, Yeah. It was different we did have a backend loaded quarter, and it's happening more and more and.
And as you see more enterprise wins and it does come and it does happen.
It happened more backend loaded and so yes, it is and shape of the curve is a little bit back and loaded yes.
Great. Thanks, and congrats on the strong start to the year.
Yep.
Yeah.
And our next question is from Daniel Bartus with Bank of America. Please proceed with your question.
Hey, guys. Thanks for taking the question here.
And and great to see the office they are acceleration as well and I wanted to ask about contact center and know a lot of a lot of questions, so far and and so.
And I wanted to ask kind of a two part or from a different angle. What one just curious if you can discuss your you.
Your feelings about how your partner network can help you more with with see cash going forward and then too.
Just discuss your aspirations or potential to compete with <unk> standalone as well thanks.
But that's a that's a great question. So I'll I'll take that so a couple of things. One is we do leverage our partners today foresee cash for example, the partnership we announced with Vodafone business back in Q4 was actually you cash flow see cash coming together.
<unk> also talked about beef.
We haven't had much discussion on the details of BT, and AT&T and tell us, but as I look at beauty.
They are already read we announced the expanded partnership and Q4 with Ucas and see cash and they are already contributing significantly to the sea catchments with this new expanded partnership. So we already do that do you already see that and you can expect to see that more and more going forward and thats, what is coming better than that.
And that allows us to bring it all back together because when you have triple digit growth and new logo business and the average deal size more than doubling.
That's the result of partners, our Vars and our direct sales teams all have seen the momentum on companies, making UC and cc decisions together. So that's the one thing the second thing is Cc contact center as a standalone, we do have contact center only opportunities.
Primary pivot our primary focus is this increasing set of customers, who are making ucas and seek S decisions together, but we do have.
Customers, who have just wanted a contact center solution and we have successfully competed and won that is long.
Very helpful. Thanks.
And our next.
Question is from Peter Levine with Evercore ISI. Please proceed with your question.
Oh great.
Congrats on a great quarter.
And I, just don't want to dive a little deeper and to RCV and can you give us an update on how that migration is trending when you think that comes to them and and then as we think about having a permanent remote work environment and place power companies prioritizing voice and video, meaning because video and voice.
And that is video or voice rank in terms of importance.
Yeah, Hi, Vlad here.
Let's let me maybe take a stab and then certainly.
Certainly that down and then.
A it's interesting because so.
We're making a go to market with what we call message video phone and V P.
And we certainly believe that Oh modes of communications are a very important and.
And we also go anymore to any device anywhere so any mode. It's the same same N V P.
And we absolutely see situations, where video is a more appropriate well see situations where voice is more.
Appropriate for example, whenever a customer or a consumer reaches their provider or manufacturer and what have you they'll do this via voice many internal meetings.
Our he's doing corvus has been Ryan overheat, yeah, that's very important.
Medium, but interestingly enough.
Yesterday, a court, Jamie Diamond and saying that he has done with somatic excuse me and the cancel all of them and are you now expecting backed off this sort of back to pre COVID-19 normal.
So I think it's a really do depend on you know it depends Oh and then the organization.
And do it will depend on the particular leadership style.
But from outside.
We are not seeing any slowdown in consumption of voice minutes and.
And I do believe our I mentioned and are in the prepared remarks that.
We were not only see inc. A strong growth there, but particular overweight in mobile minutes runs through our platform, Okay, and I think that many times when people say well you know voice is dead. They forget that all mobile calls or best of as mature.
And with your mobile calls our voice, okay. So voices by far and no dead. So if you'd like to ask me are you.
You know, it's a there is a right to what's the right job.
And so from our perspective, you know, we're not going to COVID-19, but either way it will simply coupons provide inc. A world's best.
Business voice.
Our enterprise voice some people call it and.
And we are gaining a very rapidly on the digital domain and we absolutely expect to be and a very competitive and the leadership positions there are within the foreseeable future.
And you spoke to it on and potentially below the only thing I'd say is on the migration. The only thing you know even though it was a there was a question as well.
We have been on a phased migration plan, we had put that and motion well before that.
And the beginning of this year and we are in.
Intuit.
And you know me.
We are making meaningful progress on migrating the base and as it relates to new customers all of them get RCV as they come on board and the feedback has been pretty good so long.
Great. Thank you.
Yeah.
Our next question is from Tim Horan with Oppenheimer. Please proceed with your question. Thanks, guys do you have any sense of the $145 million teams users out there and what percentage have begun to bundled voice and and with teams and kind of where do you expect that to go. Thanks.
No you should ask that question of Microsoft, but what we would say is as companies I mean, black just talked about why voice and you cash is important, especially when it comes to liquidity and reliability five nine the last I checked.
Competitors, there somewhere between three and four nine and so the liability security and security data visit and see data privacy all of these things matter and that's why we feel that all of that.
And it competes.
We are seeing our win rates hold steady and for customers, who the 145 million users of teams.
That is and expansion of a new segment for us and we see is doing very well in acquiring some of these teams users and.
And giving them access to the ring central PBX, who are direct routing to keep so we've been pretty good about that.
Thank you.
Yeah.
And our next question is from Jim Fish with Piper Sandler. Please proceed with your question.
Hey, guys. Thanks for squeezing us and this is Clinton on for Jim and just a quick one for US and you know we got the change to the top of the funnel with the new free glib offering and we know it's still early on and the process, but any positive signs from those conversions to paid solutions with the within your customer.
Commercial solutions. Thanks.
Too early to you know.
Really talk about it good promise based on the six months.
Four months since we launched clip and December so it's still very early.
And what I'd tell you is this it is serving as an incremental lead Gen engine because it gives us that optionality of our premium solution and the other thing I would tell you is this this partner traction. So just recently, we announced that <unk>.
Has launched unified video, which is integrated team messaging and drink central video together and that is serving as a source of significant customer acquisition for them. So we're working with our partners on it too early to shed any more beat up beyond that.
And then that that makes them and thanks for the color.
Okay.
Our next question is from Matt Mcneill and Deutsche Bank. Please proceed with your question.
Hey, guys. Thanks for squeezing me and as well and we talked a lot about enterprise, but I'm just wondering when I think about SMB and mid market seemed like year on year growth, maybe a plateaued or stabilized a little bit relative to the really strong acceleration in enterprise and I'm. Just wondering if you can talk about the competitive backdrop, specifically within SMB and mid March.
And how churn it's trending within those two specific areas. Thanks.
Yeah I'll take that.
And so on the SMB, if you look at the model S.
And that would be growth has always been and the mid teens and we've accelerated as you said over the last year and weird and mid Twenty's. So that's it you know it's a it's a very good result, and the mid twenties and it's a very efficient engine I'll say if you look at the Incrementals bookings are we we punch through a very strong book.
And on what was a very very hard comp.
So what are the drivers behind that is actually efficient E Commerce engine.
Our recent partnerships, which is also helping SMB and and this hybrid environment no one's really deploying cloud so to stay productive and so that's especially true and the SMB space.
On the mid market side, we didn't have.
Quite a few customers that graduated to the enterprise side. So this is a land and expand motion and overall in terms of churn and.
Overall, the churn remains sub 5% annually and this whole segment and that will turn out to be and accretive driver and the model going forward.
Perfect. Thanks for the color.
Yep.
Yeah.
And our next question is from will power with Robert W. Baird and company. Please proceed with your question.
Okay, great Yeah, just coming back to the enterprise and acceleration, which is which is great to see on and you had made a comment that and you're seeing improved win rates and enterprise and that and I'd love to just kind of understand what's driving that what's really helping set you apart and and enterprise specifically two two and <unk>.
And that.
Yeah, no it's a great question and.
This is how I would put it number one having and integrated solution across message video phone. It makes a difference as companies are coming back or thinking about what the plans need to be to come back to the office or be day, and our hybrid capacity those integrated and persistent collaboration mechanism.
MVP is actually making a difference that's been won one huge thing. The second thing is the integrated motion between <unk> and <unk>.
As I shared some data earlier as well.
62% of the companies, who make a joined you kept the cash positions bite from a single window and so the ability for us to have a deeply integrated contact center solution with our ucas.
<unk> platform is actually making a big difference so that that combination is.
And it's making a difference number three the partners are starting to execute and starting to create layers of growth. This is a full year and all of Hawaii and they've already been up and going this was the second full quarter on autos and we had already pretty excited about what we see David as I said the pipe with auto it's doubled.
T X.
And so the partners are also making a huge difference both on the strategic side the carrier side and also the bars. So that engine is truly humming Doc speaking.
You know a big difference as well so that's how I would look at all of these things coming together.
Thank you.
Yeah.
Okay.
And ladies and gentlemen, we have reached the end of the question and answer session and also this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Okay.
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