Q2 2021 RingCentral Inc Earnings Call
Hello, and welcome to the ring Central second quarter 2021 earnings conference call and webcast. At this time all participants are in a listen only mode.
Didn't want you require operator assistance. Please press star zero on your telephone keypad.
Sure and answer session will follow the formal presentation. As a reminder, this conference is being reported.
My pleasure.
To turn the call over to Ryan Goodman head.
Investor Relations. Please go ahead Sir.
Thank you good afternoon, and welcome to ring Central second quarter 2021 earnings Conference call I'm, Ryan Goodman bring Central's head of Investor Relations. Joining me today are large munis founder chairman and CEO I'm, an S..1 president and Chief operating officer, Tim attached truth.
<unk> financial officer, our format today will include prepared remarks by fly on them and Mantashe followed by Q&A.
Some of our discussions and responses to your questions will contain forward looking statements, including our third quarter and full year 2021 financial outlook and our assumptions underlying that out.
These statements are subject to risks and uncertainties actual results may differ materially from our forward looking statements.
A 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 into today's discussion.
Particularly our business is currently being impacted by the COVID-19 pandemic. The extent of its continued impact on our business will depend on several factors, including the severity duration and extent of the pandemic. The success of vaccination efforts 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.
Central 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 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 at IR Dot ring central.
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.
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 in 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 power second quarter earnings Conference call.
What are the established a track record of consistent quarter over quarter growth for 30 quarters income too.
And you don't want your 1 was no exception.
Right sounds real delivered another great quarter with ring Central office or are growing 41% year over year due $1.4 billion.
This is our highest level of growth in 5 years.
It is also an acceleration in growth of 5 point year over year off a base of over $1 billion.
We also delivered a record number of 1 mill in block P. C V wins, including 1 with over $10 million.
So what is driving this performance.
Gosh I'm also looking for cloud solutions to manage do things their communication needs and their collaboration needs.
Each with distinct characteristics.
For businesses. It all begins with communications capabilities, the central nervous system of any enterprise.
Market opportunity is massive with over 400 million legacy P. B X users in place.
David Stakes to deliver in this space power exceptionally high.
Rich functionality.
Security.
Nice reliability.
What would your service.
Lots of them analytics.
Enterprise apps integration and regulatory compliance are staples.
All for an enterprise grade PBX system.
Businesses require all of these core capabilities.
But also requires them on a mobile friendly platform.
Selecting a communications platform is a critical enterprise wide decision.
Justice companies have a single corporate wide email platform companies, usually choose 1 communications platform for the entire company.
The communications platform may not be a disparate siloed line of business decision.
Hey, don't you seem decision requires a rigorous proof of concept and analysis, which is where ring central itself based on the proven industry leadership and track record of excellent delivery.
With over 3 quarters of on premise sales historically done through channels and global carrier partners.
The customer buying breath, whereas for cloud solutions continues to be susie's trusted partners.
And ring Central leap here with our unique go to market partnership network.
And as the definitive proof point.
Over 2 thirds of our 7 figure D. C V wins were brought in by the channel and partners.
I still collaboration there is team messaging and video conferencing.
Tim messaging improved internal message interactions and file sharing.
You also have these capabilities. He has increased with modern mobile distributed and hybrid working environments.
As we all learned over the past 18 months.
Congress, Inc provides a viable alternative to endorse and meetings.
Users require an easy and reliable way to connect with high quality video audio and screen share.
Along with score features like waiting rooms, breakout rooms, virtual background et cetera.
Additionally, as the walls the Jonathan back to his office video conference room solutions that support hybrid meetings R M off cash.
Ring central is well positioned to address.
Both communications and collaboration needs of modern enterprises with our differentiated message video phone or M V B platform.
This is complemented by our unique G T M strategy.
That now includes some of the world's best known incumbent P. B F provide theirs.
And leading carriers amongst our strategic partners.
So why do we win well here's a tip, it's about trust innovation and partnerships.
Source Trust.
Ross with enterprises is established over multiple years with consistent delivery of reliability security and data privacy.
Ring Central has delivered its rock record of 5 nines uptime or was the last 12 quarters.
This equates to around 5 minutes of downtime a year.
With no exclusions for maintenance Windows.
This track record is simply unmatched in the industry.
And it is literally 3 times better than the 3.9 or close to 9 hours of downtime that many of our competitors.
As the security and data privacy.
We will let our clean multi year records speak for itself.
Through continued investments in security reliability, and David privacy, which has built 1 of the world's most trusted global communications platform.
Next innovation.
Ring Central has always been committed to a rapid pace of innovation.
Our years of outsized R&D investing in a modern scalable cloud based architecture.
Yup enabled us to meet the stringent requirements expected of a leading enterprise communication system.
Crucially.
In addition, we have a complete portfolio of cloud contact center solutions that include our proprietary digital source engage platform as well as solutions from our partnership with nice in contact.
Recently, we extended and expanded our relationship with nice income to include additional W. F O N E. W. F M capabilities.
Which.
Is contributing now door significant contact center win momentum in large enterprises.
Next on the topic of collaboration waiting I woke up the next generation award winning videoconferencing solution ring Central video with over 250, New features introduced since launch in April last year.
These include virtual background waiting rooms, close captioning and many more.
And we're now beginning to leapfrog with innovative new capabilities like Jim Cogdell advanced web browser support and lives switching between devices with more to come on this front zone.
Rooted in this innovation and product strengths momentum for our C. V is picking up across multiple fronts.
Sure.
All new customers get the integrated envy people out to them with ring Central video.
And customer response has been excellent in fact customers choose us for the integrated N V platform and menu or was it $1 million plus D. C. D wins cited RCV as a key influencing capability Inc.
The decision to go with the ring Central N V P.
Second, we're making solid progress on migrating our installed base accounts.
And we pick up that much from Brian generation V Dear to ring Central video we.
Recently crossed the halfway mark in this transition.
As a case in point.
And death wholesale the largest wholesale grocery supply company in the U S is now in the process of upgrading its user base of over 5000 ring Central N V P users to RCV.
Third our partners.
Early in Q2 August announced a video solution based on the RCD.
And later in Q2, Deutsche Telekom selected ring Central V. There for its own co branded video solution for its customers.
We are optimistic that this trend will continue and additional strategic partners.
Will.
Lineup and endorse RCB.
And on that note our partnerships.
Our partnership oriented go to market is enabling us to quickly and efficiently scale, our global market reach.
In Q2, our direct and partner a R. R which includes contributions from a buyer at those AT&T British Telecom Entellus grew 34 per cent year over year to $860 million.
This is a strong acceleration in growth of 9 points year over year and were confident that this is just the beginning of a multiyear successful journey.
Are you in your go to market and that's work that continues to expand we got Scott several exciting partner updates in recent months.
Sure.
We announced a new strategic partnership with Verizon business.
Verizon business got a radio launched ring central with Verizon Inc.
Co branded cloud based <unk> solution for their enterprise customers.
This also speaks to our unique ability to onboard major carriers quickly and efficiently.
Second Alcatel Lucent Enterprise launched Rainbow office powered by ring central in the U K.
And third we announced a partnership with Deutsche Telekom.
We'll introduce a standalone co branded video solution based on ring Central video.
Of course, all of these partnerships are based on their collective recognition of rigs Central's industry, leading standards of trust and innovation.
In closing we delivered an exceptional Q2.
And with our speed of innovation, along with the fact that most of our strategic partnerships are in the early or 3 launch phases. We feel confident that the cloud is winning and drink central will continue to be with you in the cloud.
With that I will now turn the call over to our President and Chief operating Officer and S World for additional color on our recent progress. Thank you.
Thank you Doug good afternoon, everyone.
Q2 results and execution were exceptional across the board.
Before I dive in here.
I want to talk about the foundation of break central our people.
And our products.
On the product side, we have Jeff.
<unk> been named as the best UC platform and best Ucas provider.
As long as a top 2 collaboration platform as part of the U C Award 2021.
As a matter of fact ring sectors has been named the best UC platform 3 years in a row now.
And I hope to finish on the collaboration side is exceptionally gratifying given that we have entered this area relatively recently.
Most importantly, as 1 of the people comparably annual survey for large companies recently ranked bring central as the number 1 engineering team and the number 2 sales team.
For a total of 11 awards.
Additionally, lag was named amongst the top 2 Ceos for diversity and amongst the top 6 heels for women.
We are incredibly proud and humbled by these awards.
Our core strengths, which has contributed to the exceptional success at Grand Central are our people and our exceptional leadership bench strength.
On that note I'm proud to share 3 new executive Vice President promotions, recognizing exceptional performance and a proven record of success. In addition to the top talent, we have attracted to ring central.
Boston Hospital is being promoted to executive Vice President and Chief revenue Officer.
Carson has been with the company for over 5 years, and which time. He has built our enterprise business from the very beginning to over half a billion dollars today.
Besides the Hugo is being promoted to executive Vice President and our first chief customer officer.
<unk>, who has been with ring central for over 10 years has a strong track record of building the F&B business for ring central with a customer obsession that makes her the ideal candidate for ring central supposed to have a chief customer officer.
When volume does hobby is being promoted to executive Vice President and head of global service providers.
In 18 months with ring Central Homayoun has accelerated our partnerships with AT&T BT and Telus.
As well as established new strategic relationships with top tier providers, including Vodafone business, Verizon business and Deutsche Telekom amongst others.
All 3 will be directly reporting to me.
We can Phil sorgen for his contributions and wish him well as he embarks on a new chapter in his life working with nonprofit and the venture community.
We're also excited that they'll be joining rigs Central's advisory board.
Now onto Q2.
I will highlight 5 key areas of our exceptional quarter.
Bush partners, maybe saw contributions continue to ramp across all strategic and carrier partners.
Second our channel community, which delivered another strong quarter.
Good.
Upmarket customers that we are bidding a higher volume of large deals the wins are getting bigger and the sales cycles are improving.
Fourth <unk>.
Increasing traction with our integrated Ucas, and see Cas offering with both new customers and our installed base.
And fifth.
Accelerating momentum Paul brink Central MVP integrated with Microsoft teams direct routing, which is effectively opening up incremental upmarket opportunities.
Let me now dive into some detail.
I will begin with our strategic partners, maybe saw great momentum with multiple million dollar plus wins across all strategic and carrier partners.
This contributed to a record breaking number of 7 figure wins, a notable accomplishment to achieve in Q2.
In Q2.
Cloud office by ring Central.
Another strong quarter of solid growth in new seats, new accounts and transaction volume.
E C O is seeing solid traction with businesses of all sizes and from both new and existing customers, including a notable win for over 12000 seats, which are fortune 500.
Transportation Company, who.
From an avaya on premise solution to Avaya cloud office.
<unk> also delivered a solid Q2 with strong <unk> growth.
Upmarket segment.
We are pleased with how this partnership is progressing and look for contributions to continue to ramp.
As for Alcatel Lucent enterprise.
Rainbow office, followed by ring Central launched in the U K and we will be launching additional countries in the coming quarters.
As the global service providers, we see a generational opportunity here as many top providers are now looking for their next generation Ucas platform.
This is especially urgent.
G. S peas are introducing revolutionary 5 G technology to the world.
Given our recent successes with top tier providers like Verizon business, Vodafone business and Deutsche Telekom amongst others.
As well as a strong pipeline of new deals, we believe ring central is emerging as the preferred ucas platform for this important strategic community.
After AT&T BT and Telus. They have all had strong quarters led by up market traction and strength in key verticals, including retail healthcare and manufacturing.
An example of our momentum is a written through B P.
Donut Group, Inc.
Uk's largest independent insurance distribution platform, where we will together provide integrated ucas and see cash or over 3500 users and 800 contact center agents.
We also continue our long standing momentum with the channel community.
Our channel partners delivered another great quarter.
Is that being in robust E. R. R. R.
52% year over year, and reaching $571 million.
These strategic and channel partnerships provide drink central with an important and effective go to market motion that may also prove difficult for others to replicate.
They are also essential.
In reaching our rapidly expanding mid market and enterprise customers, where we delivered 51% year on year growth to $877 million any at all.
And you see large deal strength in verticals with the most stringent platform requirements like financial services and health care.
They accounted for about 1 quarter of the million dollar plus P. C V bins.
Yeah.
Looking ahead.
We entered the second half with our enterprise pipeline at a high level.
Fueled by strong demand for both our Ucas and see cash solutions.
On that note.
Traction for our integrated you can see cash platform.
Contributed to triple digit new logo growth for our ring Central contact center and engage solutions.
You've recently extended and expanded our partnership with nice in contact.
Our partnership is rooted in years of joint development integration and market learnings.
Ring central continues to be uniquely positioned to.
We offer customers the worlds only deep integration of Gartner Magic quadrant, leading ucas and see cash solutions.
Based on these trends in.
In Q2.
We had a great contact center driven been with the medicine.
A leading mortgage lender.
Amerisafe selected ring central to provide a more scalable Ian.
Integrated ucas and seek as platforms.
Across nearly 4000 users, including 2000 contact center agents.
Building on this momentum from Q2 the month of July has been a very strong start for our contact center business for Q3.
In fact rehab close multiple deals over $1 million in PCB just in the last 2 weeks.
Another area of strength for Q2 was not integration with Microsoft teams direct Howdy.
Direct routing is proving to be an effective go to market motion that is creating incremental opportunities, particularly in upmarket where customers require enterprise grade cloud communications and contact center capabilities.
It has contributed to multiple million dollar plus P. C D been slots quarter.
In conclusion Q.
Q2 was simply a fantastic quarter.
With our continued commitments to trust innovation and partnerships.
We feel confident about.
<unk> ability to continue leading in this unique 50 billion plus market opportunity.
With that.
I will turn the call over to our Chief Financial Officer drew.
Drew.
Thank you Ron and good afternoon, everyone. We had a great Q2, and all key metrics came in above the high end of our guidance.
Subscription revenue grew 37% year over year up 5 points from the prior year.
Non-GAAP operating margin was about 10%.
90 basis points above our guidance demonstrating the leverage in our model, especially as our partnership start to scale.
This again puts us well above the rule of 40, which is particularly rewarding at our 1.5 billion revenue run rate.
We've consistently achieve this metric for the last several years and it continues to provide an important measure of our profitable growth success.
Our positive growth trends are the result of robust win rates with new customers as well as strong retention rates.
Our existing customers.
On the new logo front, we had multiple vectors.
First enterprise new logo strength.
This contributed to our enterprise base getting close to 600 million and growing 60 per cent year over year.
Second accelerating strategic partner contributions.
Direct and partner office, Iraq grew 34 per cent and acceleration of 9 points versus prior year.
And we are just getting started.
Avaya is still in its early days.
Auto is just starting to ramp Alcatel Lucent enterprise is in the process of training and rollout.
Verizon just launched in the last 2 weeks and Vodafone and Deutsche Telekom are still prelaunch.
So strictly speaking many of our unique growth vectors have yet to play out.
Third our momentum what international is picking up.
We had a record number of international over a million dollar D. C. We've been this quarter.
Several of these wins were joint wins with our key partners.
Which is a testament to the effectiveness of our partner oriented strategy.
And fourth contact center, where we continue seeing strong traction for our deeply integrated best of breed Ucas and seek S platform.
Our new logo strength, along with contributing to a standout Q2 also see its future expansion opportunities.
As for some latest retention trends.
Sorts of upmarket customers that we've added over the past completed a year.
I've already expanded by greater than 50 per cent.
This positive net retention was driven by more seats more products and low churn.
On that note gross churn across our entire business 1 of the multi year low.
This is a result of our stronger focus on customer success.
Product stickiness as well as implementation of AI enabled tools, which provide predictive analytics on customer health metrics across the entire customer base.
In addition to accelerating revenue growth profitable growth remains a core tenet of our financial model to drive healthy long term margins.
We saw several robust underlying trends in Q2 on that front.
First our people held steady across the business.
Second sales and marketing efficiency improved.
This was a result of higher sales per rep productivity as well as lower cost per book tied to the strategic partner ramps.
And third we benefited from efficiencies of scale in other operating expense items.
These levers provides us the ability to invest in innovation and growth as well as have a clear path to margin expansion in the long term.
Putting it altogether, we are landing more large customer wins customers are expanding at a higher velocity and the churn is at a multiyear low.
The strong and improving unit economics are enabling us to deliver both revenue growth acceleration as well as margin expansion defying the typical growth versus margin tradeoffs associated with SaaS models.
With this backdrop of positive momentum increasing visibility and higher confidence we are raising our 2021 outlook.
We are increasing total revenue growth to 30% to 31% up from $27.28 per cent.
We are increasing subscriptions revenue growth to 31% to 32% up from 28 to 29 per cent.
We expect non-GAAP operating margin of 10 to $10.1 per cent.
And we are raising our non-GAAP EPS of $1.28.30 up from dollars 24 per dollar of 27.
We are benefiting from the intersection of a massive opportunity a structural acceleration in global demand and a SaaS model, but attractive improving unit economics.
Case in 0.1 year ago, we were slightly over the rule of 40.
Today.
With subscription revenue growing at 37 per cent and operating margins over 10%.
Operating at nearly a rule of 50 on a much higher base.
Looking ahead with new growth drivers and multiple margin levers still to come we believe that we are well positioned to become a multibillion dollar revenue company with profitable growth.
Before I turn the call back to the operator.
Also like to give a big thanks to all of the employees at ring Central.
Your exceptional work and consistent execution make this all possible.
With that let's open the call for Q&A.
Yeah.
Ladies and gentlemen, we do apologize for the technical difficulties. Please standby 1 moment, ladies and gentlemen, please stand by we do apologize for technical difficulties.
Now lives.
Hello, Kevin can you Paul for Q&A, Yes, ladies and gentlemen will not be conducting a question and answer session. If you'd like to be placed in the question queue. Please press star 1 on your telephone keypad, a confirmation tone will indicate.
Your line is in the question queue, you May press star 2 if you'd like to remove your question from the queue for participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.
Our first question today is coming from Brian Peterson from Raymond James Your line is now live.
Thanks for taking my question and congrats on a really strong results. So first 1 maybe from a cash so your operating closer to 50 now.
Just raise your implied outlook for the back half of 'twenty 1.
As your prior outlook, you know, maybe unpack, what's giving you the confidence to raise the outlook in the back half of the year.
Thanks, Thanks, Brian So yeah overall, if you look at the the guidance there's no change to our guidance philosophy, we've always kept a healthy goes up students and optionality in the guidance. So no different this time as well.
In terms of the bullishness on the upside drivers to the guidance.
I'll break it out in 2 buckets.
Our roll forward for the from the strength we saw in Q2.
Which is a natural given the recurring revenue model and then increased visibility we have for the second half.
So on Q2, our enterprise business. If you if you look at it is now the fastest piece of our business.
Around $600 million and it's growing at 60 per cent.
It's growing up of.
Of all the pieces we have.
And we are seeing large deal momentum driven by seats and products and just didnt deal momentum is coming across the board from Avaya Autos contact Center International and all of Gsp's. So this momentum we expect to continue going forward in the back half and then in terms of the second half visibility which is also.
Injuries for US we are seeing a stronger pipe, we're seeing stronger convergence.
And we're seeing stronger retention trends.
And with our partnerships. We are just starting to ramp. So we will see this benefit even beyond 2021so on the on the heels of a strong Q2 performance along with the increased visibility we have for the second half it does give us confidence to raise our guidance for Q3, and Q4 and hopefully perform even better.
Well it sounds it sounds like a lot of good things going on there with cash and so on and maybe just 1 for you all on the channel. We did see the IRR kind of incrementally pick up versus what we've seen in prior quarters in any way to unpack or just describe what's going on there in the channel. Thanks guys.
Yes, absolutely, Brian So I would probably say 3 quick things 1 is the velocity of Onboarding New channel partners has continued so our channel base is getting larger the second thing I would say is you know <unk> talked about this large deal momentum over 2 thirds of them actually came from a channel and partner. So we are seeing larger day.
<unk> come through the channel in a meaningful way and the third thing I would say, which is sort of the.
Icing on the cake is that there is meaningful improvement in velocity and conversion rates that is also helping how they're showing up in quarters. So that's what I'd probably over.
Sharon can you poll for the next question.
Hey, Kevin Brian is a way for us to look at collars.
It seems like the system on their site is crashing is a notification I'm getting.
So check the wait time to switch or during central systems for them as Robert.
Yes.
Thank you. Our next question comes from Bob <unk> with William Blair. Please proceed with your question.
Thank you can you guys hear me okay, yes.
Yes, now we can believe share.
And and maybe it and kindness wisdom ring central.
We did that for a while with the video offering Illinois.
I didn't keep that going but anyway, maybe maybe next time.
Let me Echo my congrats obviously, great numbers across the board I'm going to be quick here, obviously because.
We've had a couple of issues Mitch I should really quickly for you I think you mentioned that the higher end the core analysis of your larger customers net dollar retention rate was 150% that's amazing given sort of you know on the products, we sell things like its rare we haven't seen that at all in the space.
Even from you guys in the early day, So help me sort of understand what's driving that 150% and sort of how customers are driving that growth it'd be great to get a little color on.
Sure sure Bhavan, so definitely a very encouraging sign due to have expansion rate of 150% on the most recent cohorts we are seeing.
Its couple of things are you seeing more upsells of seats.
More cross sell of Ucas, and she gets together and lower churn.
And in fact, if you if I unpack it even 1 more click.
The 2020 cohort.
In the in that Covid, we've added nearly the same dollar expansion as the combined cohorts for 2018 in 2019, so almost 2 X expansion there.
There I would take a couple of reasons for this 1 is these new customers who've come onto our system in the last year. They have experienced the full power of the platform MVP message video phone and there's tight integration across all modes. So these customers are using all modes.
They're upselling more and they're stickier. So that's 0.1.0.2 is.
These customers who came on during COVID-19. They have sort of survived the COVID-19 onslaught and so the business is naturally a healthier and tend to have a much higher lifetime value naturally because they they survived this whole thing. So as you project forward. These cohorts as they assimilate in our overall era fabric it should have a positive.
In fact on a net retention going forward and I do expect that newer cohorts that would come on will be similar. So you know you should think of it like you know the the green shoots we planted last year will hopefully turn into like tall tall trees in a dense forest for some imagery there for you.
Understood and helpful. Thanks for the color. There you know you touched on people buying multiple products to new KFC cast you touched on sort of the integrated offerings, maybe maybe I'll turn this to all 3 of you, but obviously you saw zoom acquire 5 nines and sort of the space, we've talked about consolidations pace, you've talked about some a our net dollar retention rates being <unk>.
By cross sell and up sell and love to get sort of your thoughts on are you willing to share about that acquisition, it's competitive pressures and kind of how you see yourself sitting in our space visa visa zoom F..9 combination. Thank you.
I'll take that this is on enable on good to talk to you. So look what I would say.
C Zuma 5 might have been partners for 2 plus years, and we are actually pretty thrilled about our win rates against them over the last 1 off here's the other thing I would probably offer up as you know if I. If you just look at our strategy.
<unk> working with nice in contact for 6 plus years needs.
We saw this UC plus cc trend long before it has become festival as it is right now.
Deep integration within contact and in fact.
What you see is this no other gartner magic quadrant, leading deeply integrated you cash and seek a solution outside of ring Central contact center and that is what is making a difference and as you know we just extended our partnership for a long time to come.
Nice non contact and Youre seeing great by you you heard me talk about our contact center performance.
We actually closed multiple million dollars PCB contact center wins in July in the last 2 weeks. After these announcements so we're feeling pretty good about the value we bring to our customers with our solution.
Got it that's really helpful. Thanks, guys congrats.
Baker next question today is coming from Terry Tillman from tour Securities. Your line is now live.
Yes.
Good afternoon, and congrats from me as well hopefully the rest of the call. We can get to some 4 nines of 5.9 but.
Maybe a non maybe for you.
You talked about Microsoft that's interesting in terms of what's going on there I'm curious is it is it sporadic and opportunistic or are you able to create kind of plays here or something programmatic going forward that you have good visibility in terms of maybe the Microsoft opportunity actually growing from what you've seen so far I'd love to share.
A little bit more about that and then I had a follow up from attached.
No. That's a great question Terry so it has.
Your question is many layers of answers to Terry you know the first thing is when we compete with them head to head on Ucas opportunities our win rates have been holding very good and very stable. So that's that's 1 the second thing I would say is Ian I mean, obviously, Microsoft is a huge teams installed base as we all know and rip.
The ability to integrate with Microsoft teams, we have direct routing that's a tailwind for US we had multiple million dollar plus TCP, Vince using direct routing and so we knew that the base of teams installed base as an incremental opportunity. It opens up a new segment of the market.
That's very good and the third thing is as important once we get in it also gives us the opportunity to upsell to see cash to contact center.
And so those are the 3 lives, which is actually making us feel pretty good about how we compete with them when we compete head to head and how we integrate with them and open further upsell opportunities when we connect with them on their installed base.
Okay.
Got it thank you for that and I guess metastasis. The follow up question as it relates to this accelerating growth at scale to you a bit been exhibiting here over a number of quarters I would love to unpack a little bit more in terms of the drivers, particularly international and and so that's kind of real time on what you've seen recently and going forward how important is interim.
National and this continued high growth at scale. Thank you.
Yeah sure I mean, if you if you take a look at their job.
In this overall cloud.
On premise market of 400 million seats Shah.
A third of them or half a day my international so it becomes a very very important growth vector for us and right now international for ours is call it over 10% with all the partnerships we have.
With Alcatel Lucent, Otto's Vodafone Deutsche Telecom I think over time, it would be not unreasonable to expect that our mix of the international piece will be in the high teens over the next couple of years. So we feel very positive and bullish about the overall international opportunity because there's a lot of momentum we have there we had.
People wins.
This quarter is well over $1 million in the international front and there's a lot of work we are doing.
Internationally to increase the mix there and grow rapidly.
Okay.
Okay.
Yeah.
Yes.
Okay.
Operator.
Yes.
Sure.
Okay.
Okay.
Yeah.
Yes.
Okay.
Yes.
Sorry about this folks I think this.
The service provider we are using.
Is having some technical difficulties it seems like some other companies are having is still so apologies for day.
Hopefully these guys get the systems back on track.
In the in the next couple of minutes here so.
Apologies about this.
Unfortunately, we don't control the cure anything otherwise we have just under directly.
Okay.
Sure.
Ladies and gentlemen, please excuse the technical difficulties. Our next question is coming from <unk>.
Sterling Auty from J P. Morgan and we ask you. Please limit yourself to 1 question and return to the acuity point.
Yeah, Thanks, Hi, guys.
Zane Natasha Yeah. My teams on other calls they're having the same problem. So.
And actually I only did have 1 question I was going to ask and it's more of a high level longer term question and and getting it from a number of investors wondering given the explosion in the use of video solutions ring Central video zoom et cetera.
There's a question as to whether we're going to see contraction in the number of business telephony users. So we often talk about over 400 million business phone users that would shift to the cloud are you concerned that that number may end up being a fraction of that over time.
Yes, or no and how do you think that impacts your business over the long term.
I'll take that so short answer is no. We are not concerned about business contraction by any stretch of imagination. Because if you look at the number of seats. We have in the cloud you're still talking about pick your favorite analysts 14.15 million seats in the cloud right now and compared that to the opportunity at hand 404.
250 million Theres still a long way to go before we see any sort of contraction. That's number 1 number 2 what we also sees US companies are going to be office. It is about having a weight of meaningfully work in a hybrid manner. This is where the power of unified app across multiple modes message.
Video and phone is making a huge difference that's number 2 number 3 we do see the same momentum and velocity awesome. This was reflected in a pipe a pipe is the strongest it has ever been as we exited Q2 and that tells us that the amount of companies who are looking at making a communication.
Sufficient for the future is increasing at the same rate in the same velocity. So all the early trends, we see although it reflects in our pipe and our customer conversations we feel pretty bullish about the opportunity ahead of us.
And Sterling if I just may add on and if I can just to add to the 2.2 simple points here.
<unk> commentary you gave but overall sterling as you take thing think about what video conferences doing here. It's in a way, it's replacing as audio conferencing in a preplanned manner. So this conference call rights. For example, we're having which is a preplanned call next time, we'll probably do it and bring central video is a preplanned called but that does not change.
The need for customers to communicate with businesses, how if I were to read JP Morgan how would I reached that I cannot just do a video call with JP Morgan orbit Sterling Auty right, so that central nervous system like an email system. It's a very different need to have a communication system versus a collaboration tool which is <unk>.
Replays, Inc. Audio conferencing, which is very transitory. So it's 2 different markets, it's not either or it's.
It's not instead of it's in addition to.
That makes sense. Thank you.
Baker next question is coming from meta Marshall from Morgan Stanley. Your line is now live.
Okay, great. Thanks.
And then maybe building on Sterling's question of just the other investor.
Deep dive that our investors have been wanting to do over the past couple of quarters is just some pricing. So if you could just give any commentary on what you're seeing in pricing in the market that would be helpful. Thanks.
Sure meta I will take that and thank God, there's been no hiccups here between you and Sterling here and conference a perfect. So pricing overall I did call out in my script in our script that the pricing overall trends are pool.
<unk> held steady.
If I were to further disaggregate that and the enterprise side of course, there is a there's volume discounting fact of life, but on the other side. We are seeing enterprises take on more upper end bundles, along with contact center. So what we're seeing is a deal ticket or Paul average revenue per account is actually going up and that's helping.
Our overall lifetime value to CAC ratios and in terms of the SMB side.
I think it's holding very steady so net net if.
If I look at the ARPA trends, it's holding very steady despite some of the rhetoric you may be hearing outside so we don't see that.
Great. Thanks.
Yep.
Baker next question is coming from Samad Samana from Jefferies. Your line is now live.
Hi, good afternoon. So.
I think during the quarter you might have mentioned a range of the number of seats that ring has but I was just wondering if you could maybe give us an update on maybe more precisely how many seats. The company has because if I look if I do the math I think it implies you've added about 2 million over the last 2 years and yourselves and I think that may be underappreciated zone, just how many seats is.
The company have in how does that compare to the hedging of 2 million ish or so you had when you.
Signed a partnership with Avaya.
Sure. So you know somewhat in ultimately in my mind E. S. L. So we did give a disclosure and recorded last time between 3 and a half and 4 million seats, but here's the thing right. We can all get I understand that and I totally understand the spirit of your question here about the seats goes other other companies are getting out seats, but ultima.
<unk>, we don't quite manage our business to seats, we do manage our business to a R. R.
And it's just not about the seats right. It's about the dollars you get per seats and the value you can extract from that seat.
As I was telling made up our IPO has been holding flat and what I can tell you is that we have added more seats than last year.
With our differentiated platform, so which has got which has led to a strong performance for US now if you just take a click up and the big picture here.
There's 400 million seats here, whether its 3 and a half or for.
The entire cloud market is 15 million seats, and we have a straight shot at 180 million preferred access with the 3 A's. So ICU you know seats aside we feel really good about how we will compete in the market and gain market share.
Great and congrats to the strong acceleration again this quarter. Thanks for taking my question.
Yep.
Thank you next question is coming from George Sutton from Craig Hallum. Your line is now live.
Thank you you talked earlier about wanting to add even more partners and obviously I assume part of it is the letters b and beyond but I'm curious how broad your thinking about the partner opportunities outside of specifically the telcos.
So when we look at partner systems on them and go to talk to you George So when we look at partners. We look at it in 3 layers. The first is the channel community, which I spoke about early in the call with Dr. Terry's question. The second is the global service providers and you have carrier part.
But you also have msos, who have different flavors of service providers and you know that we announced Verizon business.
Our arms Deutsche Telekom.
Now several regional carrier partners and we feel that's just the beginning so you're going to see that as a key focus for us global service providers.
This is what we have talked about purchase of ire Alcatel Lucent.
Enterprise and autos unify so so with these 3 layers of partners, we feel there's a huge amount of opportunity in the years to come to convert their on premise space.
To the cloud and the exclusive path to the cloud is central for them.
Great I was just wondering will add to that George has loved here.
Yeah towards unanswered.
Just look at the GSV.
<unk> opportunity alone.
About 700.
Service providers are in.
The world.
Broadsoft.
Years ago.
And adopt licensing the software stacks too many of them may be most of them.
And but since then the really have not been successful.
In the cloud with our cloud offering income door business and ended up San Francisco etcetera.
So at this point given the momentum we have and the type of job.
We are pretty optimistic that.
What we've announced so far which is frankly pretty remarkable was the Vodafone business by Blue chip.
Right and I mentioned that he regionals.
But the Staples day, which hinders a lot more there and as far as moving beyond the letter a while they do feel that we have exhausted leather AE.
But are there other letters in the alphabet, obviously, it's a much shorter list than with the GSV Budd.
Again, I would not necessarily.
Assume that were done with.
Traditional on Prem PBX providers as far as being a platform of choice for them moving forward.
So more to come here and as you'll know was it the molded Cameroon, we've announced today are doing.
So an EVP extremely well absorbed.
And she's assembled the team that really is by non invasive cheap so.
Tables there.
Yes.
Baker next question is coming from Michael turn from Wells Fargo. Your line is now live.
Hey, there might be 3 in a row 3 axis 3 or 4 in a row. It's a it's a that's a strong showing so happy to make it on.
Attached to the metrics here look pretty clean the 1 question I do have is just given the uptick in growth you are seeing maybe the direct and partner a R. R split you've broken out isn't maybe surprises in kicking and even a touch more given the number of partnerships. We've layered on so maybe you can just remind us and help level set what's in that metric and where we are from a timing perspective.
Some of those partnerships as well. Thank you, yes sure Michael So the direct and partnership includes our direct business. Obviously in all of the partnerships, we have which is the 3 a's and the GSP Richa with George was also asking earlier and not look if you. If you take a look at the day.
The numbers there we.
Accelerated 9 points year over year on that metric and you.
You know all our turbo engine are yet to even fire in a way.
Right now what are we seeing here. So we have got avaya in the early days.
Otto's just about ramping.
Alcatel Lucent, yet to show up in 2022.
Verizon just launched so again, our 2022 story and Vodafone and Deutsche Telekom will also be in 2022 and beyond so I think this metric over time. This is that this is the upshot right you have access to this 180 million seats exclusively and this is the gift that's going to keep on giving in the long term.
Because it's not 1 and done and we will keep ramping and adding more and more momentum and putting more and more wood behind these arrows.
So more to come here.
That's good context, thank you.
Yep.
Baker next question is coming from net nickname from Deutsche Bank. Your line is that long.
Hey, Thanks for taking the question.
Can you shed some more light on the change at the Chief revenue officer level, what drove this and then maybe secondarily to that what was the impetus for creating the chief customer officer role and what do you hope to achieve from that new condition.
So it's a great question. So so first thing.
Phil has just decided to move on to the next chapter of his life journey and he is going to focus on nonprofits in the venture community so that.
What we're excited about is we have been very intentional about succession planning and building our leadership bench. So if you look at the quality of people get promoted Carson Hostetter has been here for 5 years. He has tens of years of depth in our domain.
And he launched our enterprise business literally from scratch from zero and as we share today, it's growing 60%.
$600 million, so Carson comes into that gravitas and experience.
And we are excited to have him as a new CRO a further literally did the same thing she stood up our SMB business and she comes in with that depth of the customer obsession and the attention to detail.
Which is going to be the right fit for the chief customer officer, and as you know with any SaaS business 1 of the most critical things as net redemption now how do you make sure that we have shown to the lowest level possible. How do we make sure that NPS is something every employee lives and dies by and then how do we make sure that net retention.
<unk> constantly proceeding in the right direction that is what is going to be accountable for leveraging the organizations of customer support professional services.
And professional services and customer success. So so that is a very very very important role in the new world and Vlad already talked about from William Vermilion in the last 18 months, the accelerated our existing partnerships with AT&T BT and Telus.
He has also broaden our incredible team with deep relationships across the service provider community. We're in 18 months, we have you know what.
The phone Verizon Deutsche Telekom several regional partners.
Our carrier partners and many more to come so we feel really good about the depth of bench, we have in the company to actually take us to the next level.
That's great. Thank you.
Thank you. Our next question is coming from Matt Vanvliet from BTG. Your line is now live.
Hey, guys. Thanks for taking the question Mitch job on the quarter.
You highlighted particular success in financial services, and health care and I know that's been an area that you've been investing in vertical teams.
I guess do you do you need more are you looking at more vertical teams out there are there additional investments or.
Or are you comfortable with where you're at now in terms of that specialization and it's really just about execution and efficiency from here.
That's a great question actually.
You've talked about financial services and health care are obviously, we have also focused on education.
We have focused on retail so verticals is a continually evolving focus for us.
But the reason we also called it out in different places is it's not just a direct teams and our vertical focus which is making a difference.
We see vertical traction across every partner, so that's where we called out the vertical traction we have with AT&T with BP that astellas with Avaya with autos. So we're seeing this come across in every single partnership we have and so it's it's a compound that that's where success compounds yourself in terms of the vertical wins, we've been able to.
As part of.
This cycle and going forward.
Great. Thank you.
Thank you. Our next question is coming from Ryan Koontz from Needham and company. Your line is that long.
Hi, Thanks for the question.
I forgot your applications integrations, there and.
Obviously, it's a competitive advantage you have against most of your peers can you maybe walk us through a couple of simple use cases on the integrations, where you feel like you're differentiated and you can really flex your muscles. There. Thank you.
Yeah, and Vlad feel free to chime in as well so when we look at integrations, we look at it in 2 different ways..1 there is we have a very vibrant ecosystem of developers and integrations, we have 5500 integrations.
55000 developers and growing and that essentially is self accelerating momentum.
That's making a difference and obviously you have the usual suspects, which is well known like our deeper integrations with Microsoft and Google and sales force on slack and so on and so forth, but many more so there's 1 day. The second thing I would call out which is not so evident is relating back to the last question on vertical strength. This is where we are also.
Starting to integrate with specific vertical applications, which are systems of records for each of these vertical slight when you look at education and we're looking at Marsh, we're looking at the health care specific applications and systems of record.
And integrating day. So those are the 2 layers of integrations, we're doing 1 through the platform an open ecosystem and second through our vertical over there.
She ever helpful.
<unk>.
What would a vector to the is Luke.
Our.
Integration capability and our.
Ecosystem integrations is a you know numbers or the second to non leading in some areas, but most important thing about our integration is not who we integrate words, but what we integrate and what we integrate is rune central and.
And what makes or in central interesting to integrate with is the fact that we award formerly 5 nines.
Fully.
Global Hulu distributed and redundant platform.
That has not has been at 5.9.
For.
I think surgeon quarters now.
Zero is a for those of you who are not aware or Gavin.
Recently.
The reason independent a service called the down detector down detector, dotcom, which tracks outages.
Across a good number of our major providers.
And I would simply urge people to.
Do your own do your own Jacob you can compare our RIN central.
Do some of our competitor or some other people in the industry. You know you can get your own mix I suppose.
Ah I have to say that when you dive into ruin central.
The you're not unlikely.
To get the complaint that my doorbell stopped working with the people are confusing to us was ring.
But beyond that.
We have not had a noted issue than a lots February okay and that 1 was minor.
This this chart there are it is simply unparalleled. So when we talk about again integrations are in terms of Standalone, but as you. All know, we're all about partnerships, including partnerships with Isps and other applications vendors. This is what we are uniquely positioned to provide 5.9.
Reliability on tuition.
Acuity.
And worlds largest global footprint that by the way is being fortified and extended in real time through our most recent partnerships with companies like Verizon like Vodafone Deutsche Telecom, you can only imagine the diet.
Reach.
And what would you have service that we will be able to provide over and above what we already do as we get towards the integrated.
Wisdom into their networks.
Super helpful. Thank you.
Sure.
Our next question is from Katherine Treadmill with Calia you May proceed with your question.
Yes excellent quarter. Thanks for taking my question.
This is probably a pretty much a softball question, but can you discuss how often you really see them zone found in some of the channel.
Because that would speak to the majority of their channel partners and my journey and how long Youre really doing I know because everybody's always asking us on the sales side what to be counted.
Just trying to get another way too narrow in on that thanks.
No. It's a great question Catherine.
So when we look at ucas opportunities in the channel.
We see we don't see them too often there there we are really happy with our current position and our win rates in these head to head new cash opportunities. When these opportunities stem expand and there are as we just shared over 60% of our large deals includes the contact center. So when these opportunities.
<unk> is excited to be a use cash plus C. Cash conversation, we just don't see them at all because.
At that point, the combination of and contact and ring Central Youll get to Gartner MQ, leading companies as the foundation for ring Central contact Center, and we are really sorry, with our win rates across the entire industry. When it comes to a new cash let's see gasoline. So we're pretty certain about where we are when we compete we are really.
Good and then it expense, we don't see them at all.
Alright, thank you.
Thank you next question today is coming from Taz <unk> from Guggenheim Partners. Your line is now live.
Hey, guys can you hear me.
Hello.
Yes, we got it as of yet.
Hey, guys. Thanks for taking my question I have a question about the about your combined UC and Cc scrap you've been very you sound very positive on the strength you saw with contact center and then combined UC and Cc deals can you provide some more color on what kind of S. P. R. I guess per seat pricing uplift you get when you have.
Our CCD versus Youll see a when you have a combined.
Do you see in TC did versus the pure UC deal.
No I just wanted to day to day on cloud.
Yeah, I can take it it's hard to provide your exact specific task, but think of the rough math as.
Uh huh.
C C market is about 10% of the ucas market and.
The ARPA on the on.
On the seat itself is 2 to 3 X higher so its a its deal specific and it's hard to use 1.
A common denominator of what the exact couple of fares, but needless to say this combination if you look at the market from a market share point of view. This combination is definitely yielding a lot of wins and the <unk> alone is growing much faster for us than the overall installed base.
Got it and have you provided any kind of data.
Data points on the mix today all.
I guess, you see revenue the Ccs seats.
Is your overall.
The overall numbers sure I think last quarter, when we extended our partnership with in contact we said that the U C. C business is over 10% of our overall business and so that's the last datapoints they provided.
Got it that's very helpful and fish, Okay, Yes of course.
Okay.
Kevin how do we have next.
Yeah.
I think you know because of these technical difficulties I apologize I think we just have to call. It a wrap here itself.
It goes to 315 here, we will definitely follow up 1 on 1 with everybody else, who didn't get a chance to ask their call. It next time you know this is an opportunity for all of these service providers to use a platform like ring central So sorry about this day stay tuned and we'll talk soon.
Goodbye everybody.
Ladies and gentlemen, we do apologize for technical difficulties.
That does conclude today's teleconference and webcast you may now disconnect your lines.