Q3 2021 RingCentral Inc Earnings Call
[music].
Good day and welcome to ring Central's third quarter 2021 earnings Conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialists back pressing star then zero.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone to withdraw your question. Please press Star then too please.
Please note. This event is being recorded I would now like to turn the conference over to Ryan Goodman head of Investor Relations. Please go ahead.
Thank you good afternoon, and welcome to <unk> Central third quarter 2021 earnings Conference call I'm, Ryan Goodman bring Central's head of Investor Relations. Joining me today are large minutes founder chairman and CEO on an S. One president and Chief operating officer, and my test roof cheap.
Financial officer or format. Today will include prepared remarks by blood on <unk> and Natascha followed by Q&A.
Accompanying today's presentation or slides being shared your webcast. The link is available at our Investor Relations website.
R Dot ray Central Dot com, those listening via telephone dial and I would encourage you to also joined the webcast and select the listen by phone option.
Some of our discussions and responses to your questions will contain forward looking statements, including our fourth quarter and full year 2021 financial outlook and our assumptions underlying that.
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.
In particular, we continued to be impacted by the COVID-19 pandemic and does the effects on our business will depend on the severity duration and extent of the pandemic and actions taken by governments businesses and consumers in response to the pandemic, which continued to evil and remain uncertain at this time.
Ringcentral 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 your over your comparisons.
A reconciliation of all gap to non-GAAP results is provided with our earnings release and in the slide deck. Please.
Please visit our Investor Relations website access our earnings release.
Flight deck or gap to non-GAAP reconciliations are periodic M. C. C reports a webcast replay is today's call and to learn more about rings central.
For certain forward looking guidance, a reconciliation of the non-GAAP financial guidance to the corresponding gap measure is not available as discussed in detail in the slide deck posted on our Investor Relations website with that I'll turn the call over to lodge minutes.
Good afternoon, and thank you for joining our third quarter earnings Conference call.
I'd like to start by thanking me dash or valuable contributions to our company over the past decade as Ringcentral grew from a little over took the million dollars, who now over 1.6 billion dollar run right.
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C F O nearly five years ago meet that he has been instrumental in driving consistent profitable growth and outside so called the result.
We'll go certainly myth theme and working with my best on the day to day basis.
But he has left his mark <unk> with a very strong foundation and an exceptional finer theme with that I'm confident will carry the torch forward.
We we submit that old the best in all of your future endeavors.
Was that.
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<unk>, what the results were outstanding.
Sure.
Subscription revenue increased.
38% year over year do $385 million.
This is an acceleration oh 540, you're over here.
Second.
Ringcentral total a R R increased.
39% year over year do $1.6 billion.
This is an acceleration of five point, you're over here or ebay or over $1 billion.
And Sara.
<unk> R. A R R growth <unk> enterprise a wrong.
Which include gossip I'm with you I'm, the Regan <unk> thousand dollars or more <unk> era.
Yeah.
This is our fastest growing segment.
Yeah, we grew.
53% year over year, two $653 million.
This isn't accelerations and growth <unk> 8.0 over a year and demonstrate a strong going through action with large scale customers.
This dog result, <unk>.
<unk>. So I'll continue success in capturing the hundred billion dollar plus market up with you in the <unk> <unk> <unk> B B S users migrate into the cloud.
This massive opportunity does not include the new ideas.
Oh Cloud Congress center, another that's moving central solution, which add an additional south of billions of dollars <unk> adjustable market.
To date.
Industry research estimate the addressable market cloud penetration he's still at <unk> sounds with them.
This means that our Congress with millions open employees as the cost will be generational sounds were amazing through the clouds.
Ringcentral is at the forefront of this weight or digital transformation ended the well established <unk> you. This is Margaret.
And this is so is there evidence, but our strong consistent execution and claim that sugar for them.
On that note we are proud to once again be recognized as a leader Mmm deleted Gardner magic was good for you and if I can engagement is a service worldwide report for the seventh year in a row.
The report Ringcentral, what physicians Roses for completely vision you believe this wasn't.
In addition.
Ringcentral ranked number one three.
Three out of four Gardner critical capabilities for unified Communications is the third.
This use cases include large enterprise midsize.
N U T would integrate contact center.
This bill <unk> success with I V C.
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Why doesn't mean central when you.
It's about through innovation and partnerships.
Or what we like to call it.
It all begins with dry.
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You cats is the lifeblood.
Both internal and external communications.
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Security and data privacy stable state.
Especially with logged you're at the price customer.
Ringcentral struck record for delivering five ninth uptime.
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This is Luca really sounds good times better than three nine foreclosed two nine hours of downtime. So yeah. The normal fault goodbye that Sir bye bye.
Next innovation.
Ringcentral, that's always been committed to a rapid pace of innovation.
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Expensive differentiated platform, we continue to intense <unk> got so much user experience with many new features and capabilities across the platform.
Does this include Magoo heads up display go to video Microsoft T embedded dialer as well as multiple you Ringcentral, we'll need to do it.
This high level of innovation driving favorable trends.
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Sure.
Voice is alive and well with almost all of our got some account continue to leverage our phone and P. B S.
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45% of our customer accounts engage with both messages and phone.
And finally, 42% of our customer accounts engaged with both media and phone.
Overall.
Approximately 60% of rude central customer accounts are engaged with more than one modality authentication.
The deep level got number engagement across all modalities.
Any collection of the innovation and investment we have made <unk> Ringcentral M V P platform.
This rapid pace of innovation.
Also driving strong adoption or bring central D Bill.
We have now upgraded over 70% of our account to Ringcentral B B O.
And <unk> going migration migration <unk> refusing skunk.
We are also finding ways to leverage lots for innovation to open up new opportunities with our partners.
The third pillar of our.
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One such example is a new service provides a platform we developed name Ringcentral right.
This blossom will streamline the process will you carry a pocket the work between central.
Woot provide additional color for this person.
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<unk> <unk> small incremental contribution and multiple 1 million dollar loss.
With music water.
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I'm very excited to announce our newest that you department myself.
Myself you the global market will be the business communications with over 35 million users worldwide.
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Thousands of juggling partners servicing customers across the globe.
Cool largely incremental two or just in general.
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Eight differentiate digital to information <unk> will be provided to myself installed base of over 35 million users.
And this will be based on the newly acquired Growled link technology.
The key differentiate the teacher will this new partnership is that Michael to users will be able to utilize ringcentral cloud D V D S and C messaging capabilities Ah Longsight, Michael Ford brand New technology.
This will be provided via Ringcentral five M. B P app and administer they can pull it up.
My one friend with maybe a few this will then be able to migrate to Ringcentral blue cloud P. B S at their own pace.
Which is the fact that is unique in the industry.
Tofu wickets.
We kept clear feedback home to feel that given are well established in the city this position.
<unk> <unk> <unk> <unk> central is the Friday without giving me do since Britain S. Such with central will be the Gulf War, what brand for old cloud technology for Michael customers.
In summary, this new strategic partnership brings together too well established leave this.
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Utilizing cloud with technology and innovative cloud migration path will be provided you might discuss them or base of over 35 million users <unk>.
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In conclusion.
<unk> was a great water food central.
The results speak for themselves.
The communications market opportunities matches, and we believe we are in the early stages hopefully once in a generation global transformation.
How success is rooted in our commitment to building trust with a customer.
Let's.
Faith of innovation, and I'll be putting Jacob ecosystem of the digit partnerships with industry.
Based on these principles.
We've built a company that we believe he's in a position to continue <unk> leadership position for years to come.
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<unk> the cold over to our President and Chief operating officer, <unk> for additional color or the water and the underlying growth driver. Thank you.
Thank you, but good afternoon everyone.
We had an excellent and cute three across the board.
Growth is accelerating.
My plan is expanding and the partnerships are wrapping.
On today's call I'll focus on four key grilled drivers.
At both contributed to the strong Q3 performance and.
And reinforced Ah confidence you know the ability to continue meeting the cloud communications market.
First partnerships.
A strategic and carry a partner contributions are ramping and Ah channel continues to delivered strong Brooke.
Second international with a record number of million dollar plus P. C V events.
Ford upmarket customers, where do you see strong momentum.
And fourth integrated you cast and see cast which is driving new customer.
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Let me know dive into some detail.
Let's begin with the strategic partners.
In Q3, Avaya cloud office by Ringcentral delivered solid grilled with both new logos and migrations from the installed base.
Contributions are particularly strong in an upmarket segment.
Forget them in awhile reset cared a new 3500, plus user retain win across 240 still locations that replaced multiple Meg C on premise systems.
We also one medical best Hospital.
Migrating and Avaya on premise solution to Avaya cloud office with 1400 lines.
We also have strong contributions from office.
An example is a great win with a global 2000 chemical manufacturer in Europe, who is upgrading approximately 3500 users could unify office bartering central.
An asphalt Alcatel Lucent enterprise, our channel enablement and training wood is on track and we expect this partnership to start contributing next year.
And last but certainly not the least I'd like to extend a very warm welcome to myself our newest strategic Buck.
These two digit partners collectively account for approximately half of the global market opportunity.
Partnership Netbook creates a significant go to market mode.
Central in terms of both market reach and clouds migration process. This is evident in the accident reading grilled, we're seeing in a direct and park the office <unk>.
That's spelled global service providers keep hawknose, including AT&T B P and tell us delivered strong contributions.
A partnership with Verizon business is also off to a great start yep.
We are pleased to sure that'd be already have multiple enterprise twins you know.
Quarter working together.
As log mentioned leveraging our use of experience with global service providers. We're also excited to have recently launched a ring central advise platform. It stands for resources innovation system integration and experiences.
Rice provides a differentiated Kevin place dot com for global service providers to offer cool, Brian to new cast solutions and ask them to me their customers club transformation.
W. A partner so I'd already deploying drink sector drive, including Eco tell an M. C. M and we are excited at the incremental opportunities. This opens up in the future.
Next channel partners continue to deliver strong results <unk> increased 50% year on year $626 million.
Channel partners provide an important and effective go to market motion and reaching lodge a customers across multiple verticals.
Case in point channel and partners once again contribute it over two thirds of our million dollars plus P. C V V.
This included a great thing with a large U S. Public School district, that's more than tripled its ringcentral M. B P footprints to 16000 users across approximately 500 locations.
Ah divers Taco netbook is enabling us to efficiency scale Ah market reach the meat the rising global demand.
International is already a strong tailwind the grilled and just 12% of total revenue today remains a large opportunity ahead of us.
With T International partners like autos, Okay didn't loosen enterprise, Vodafone and Deutsche Telekom to name a few V. R Bell position to capitalize on this opportunity.
We had a major international milestone during the quarter, maybe became the first global cloud provider to be granted a unified license by the Indian Department of telecommunications.
Building on this achievement, we had a great win with all scripts a global leader in health care I T solutions this customer more than doubled its ringcentral implementation with a 3500 use a global expansion across India and six other countries.
The partner channel and international strain are all contributing to a robust underlying mid market enterprise stroke.
Upmarket when rates are holding steady and with a pipeline at a healthy level you are in a good position to close the strong continuing upmarket momentum.
As we continue to expand our upmarket traction we're seeing higher demand for our integrated new cast and seek absolution, leveraging recently expanded partnership with nice and contact.
Integrated C cast is a natural up so many of our enterprise you cast customers.
Co Dot N contact centre contribute it to almost 60% of a million dollars plus P. C V wins.
In addition.
Let me sell an integrated you cast and seek explanation <unk> much how ya you cast at all or put account what's this those with Standalone mucus.
These dynamics does that thing in customer standardizing on drink central both you cast N T S.
In conclusion, two three was a great quota.
And as blood highlighted it all comes back.
To our commitment to trust innovation and partnerships. These romain core tenant and bedroom two O Dot organization and we believe are the key drivers for our ongoing success and his hundred billion plus market opportunity.
Would that.
As my phone to call over to our Chief Financial Officer mutation drove.
I want to just pause and thank him for his partnership friendship and huge impact on drink cycles journey and success and vision the best of luck moving forward.
What what are your imitation.
Thank you on good afternoon, everyone.
We had a record Q3.
We had the best growth rate in over seven years, when drink Central was seven times smaller.
This speaks to the market opportunity the unique must be billed as well as that were consistent track record of execution.
Subscriptions revenue grew 38% year over.
You're up five points from the prior year.
And non-GAAP operating margin was 10.5% demonstrating the leveraged number model, especially as our partnership start to scale.
This again puts us closer to the rule of 50 on a subscription revenue run right off or one and a half billion dollars.
And is an important measure off our profitable enjoyed success.
The exception to the grocery store is a functional for underlying drivers.
Cruise ships contribution international grows.
Upmarket strengths and neck retention uptick.
First on partnerships, we are seeing ramping contributions.
This is evident in our direct and partner a R R, which to 37% up from 34% last quarter and a 12 point acceleration from last year.
On that note I'd like to extend a very warm welcome to my dog, which was at yet another engine to our future grilled.
Second international revenue grilled significantly outpaced our overall growth.
Nearly one third off of a million dollars plus D. C V deal came from international wins.
As new International partners come online. This present, a large instrumental untapped opportunity ahead of us.
Sure we've seen continued strength in mid market and enterprise customers.
Customer.
Demanding platforms that can bring together phone video messaging and contact center to meet the needs of increasing hybrid workforce environment.
<unk> M. B P platform and that were tightly integrated best of breed you get some <unk> Ah serving as a key differentiator.
Our <unk> market enterprise business is now approximately a billion dollar business, making up about 60% off our air mix and growing over 50 per cent.
Lastly, we continue to see positive dollar net retention trends.
We saw strong upset as well as record low chart.
Upsells were driven by increased user accounts as well as contact center adoption.
And our healthy customer base, along with strong multi mode usage drove record low chair.
These underlying drivers have resulted in strong growth not just for the top line, but also in our average revenue per account, which is a key forward indicator for our growth and self sufficiency.
Our average revenue per account has been steadily climbing with Q3, achieving a record high.
Recaps.
Partnerships are ramping international demand is opening up market is kicking into high gear and neck retention is it a multiyear high.
With this backdrop, we are raising our 2020th outlook.
Increasing total revenue growth, 233% to 34%.
Up from 30% to 31%.
The increasing subscriptions revenue growth to 35%.
From 31% to 32%.
They expect non-GAAP operating margin to be approximately 10.1%.
From 10% to 10.1%.
And we are raising our non-GAAP E. P. S dollar 32.
Up from dollar $28 30.
Given the strong pipeline and higher visibility with our partnerships. We also expect Q for direct and partner era grilled to be at are better than our Q3 growth levels.
In summary, it wasn't stellar Q3 and.
And we are in phase two closed that you're out with strong momentum.
Before I hand, the cause of the operator I wanted to say that it's been a privilege to be the C F offering central.
Bringing central strike record of trust innovation and partnerships is exceptional.
And I'm proud to have contributed.
With a company firing on all cylinders now is the right time for me to take some time off as I consider the next chapter of my life.
I want to thank the entire Ringcentral family for an extraordinary one.
And last but certainly not least I'm extremely grateful to all our analysts and investors for your support and recognition.
I was surely miss talking to all of you.
With that let's turn the call to the operator for Q&A.
We will now begin the question and answer session to ask a question press star than one and a touchtone phone.
If you're using a speaker phone please pick up your handset before pressing the keys.
If you would like to withdraw your question. Please press Star then too.
And the first question comes from Bob I'm, Sorry, with William Blair. Please go ahead.
Thank you can you guys hear me okay.
I'll give you a phone.
Great Great well, congratulations guys I mean I.
[laughter] blockbuster earnings the partnership number was amazing.
You know the the the one the one a blemish, obviously Natasha you've had a massive impact and I I know glad and instead of two but I'll say it from our side you had an amazing impact on shareholders and and on all of US you you've done a great job and you'll be sorely missed by debit just stay in touch my friend I do want to talk.
Uhm I just had one major question here, which is the one I think a lot of people have which is you had obviously a really really strong directed partner contribution I guess you added to that partner with my child, how should we or what do you expect how can we think about the contribution with my child going forward J over some period of time I'll, let you to find that but how should we think about that contribution might.
What do you expect I lost some color that thank you.
Sure hold on thank you for the kind words first off and of course, we'll stay in touch in terms of the the direct and partnerships Ah. Yes, we had a very strong quarter. There look R. Parker strategy is very unique it does give us a clear advantage to capture the secular growth.
For a long long period of time and I think this will be really hard for others to replicate.
<unk> Ah. This partner is this partnership is differentiated in many many of the guards. One key facet is that it'll be the ringcentral brand going forward and so that what it means is there'll be faster time to market. So we'll begin the sales and channel enablement fairly quickly but.
But in terms of contributions I think we'll start to meaningfully layer on contributions in the back half of 22. Following device compatibility and then we have this very unique cloud link architecture, which will further unlocked demand alphabet now.
Now if you take it a click up right for all the partnerships right. Oh 420, 22, you will have all of the three is contributing and you'll have mitel leering on and one final thing to note on these partnerships mbabane is that it's the these partnerships are just not a one and done the benefit of these partnerships come euro for your.
With a steady drumbeat and really extend the durability and the maturity of the financial models and really increase the terminal value of Ringcentral significantly.
Gotcha Gotcha Super helpful. Congrats and address thanks again.
Of course.
The next question comes from Terry Tilman with Truest Securities. Please go ahead.
Hey, good afternoon blood on and in <unk>, Congratulations for me as well and in the spirit of probably trying to embarrass <unk> I I would say you've come a long way from the being a fellow sulfide analyst over a decade ago. Instead of these analysts days together to the tremendous job you've done, particularly on this is consistent financial X.
<unk> quarter after quarter, you know all the metrics the unit economics, and really trying to create a narrative that was a good day for myself and investors. So congrats on everything and good luck going forward now with an actual question it looks like when I'm looking at fourth quarter, particularly the subscription revenue the guidance it look stout it actually looks.
Stronger than what typically you provide and I know you try to be conservative, but maybe you could help us kind of unpack, what's the confidence or what are the drivers that's driving that I think much stronger than I anticipated subscription revenue guide for for kids and and that's my only question. Thank you.
Okay. Thank you Jerry yes. Thank you for the kind words as well it has been a long long long journey since I used to be our back area. So so we'll try to do that once in a while but in terms of your actual question, but there's always there's no change to the guidance philosophy, we still guide with double the usual prudence and leave a fair.
The amount of of Optionality in the guidance and hope to outperform as we always do so in terms of so what's driving the confidence that's a fair question. It's a couple of things it's higher visibility from two or three things. So the first one is the full impact you see from Q3, it's a recurring revenue business. So the full impact showed up in the fourth.
<unk> that's point number one point overdue the pipeline the pipe is at a record high. So that also allows us to have a very high visibility and number three is our earnings is a week later on so we didn't get to see a full after a month of October and the momentum they're off so net net we've got multiple growth engine <unk>.
Hiring with our MVP and you get some gas demand together is pulling pulling forward and with the increased fight, but gives us enormous confidence for the queue for guide.
That sounds great I'll, probably be carrying your bag, though for for until I get that correct. There. Thank you.
The next question comes from Brian Peterson with Raymond James. Please go ahead.
I'll add to the voluntary comments <unk>, it's it's really been a pleasure to work with you and you're going to be sorely missed on these calls where you work on a drop in the Mike here with with a quarter of the guide and the end of the Mitel partnership, but I want to start off the other topic. What we're just gonna get this question Tomorrow and I guess, it's more on 2022.
That's what I'm officially got into anything, but we're gonna have a new CFO come again. So is there anything that you've got a shared qualitatively about expectations for 2022.
Yeah, No that's a fair one <unk>, Brian and thank you again for for the drop the Mic comment I really appreciate this so we again as usual be don't guide four hour 20, twenty-two until Q4, which as of February calls, but you shouldn't be rest assured that given the momentum we have the drivers in place plus with the addition.
One of my <unk>, we do have a lot of things to be excited going forward, which and four hour T is our durable enjoy the model. So I think there'll be no Shaw showstoppers for the years to come.
Got it maybe just a follow up Rotten. So obviously can big news today with Mitel, there's just a lot of potentially hardware vendors an interior vendors that you can work with are are you is it still needs appoint with some of these potential partners, where where it's why they aren't going with ring central what how confident in arguing the cadence to continue to add.
New partners as you kind of kind of continued to build that that global opportunities.
Yeah, what what did I take that so so a couple of things. One is you know it's it's not just we've talked about the three years, we've talked about might've. We also have the one partnerships you guys have been asked about yet is the carrier provider. So the street the service providers. So there's many different layers.
And types of partners and we are confident on this journey of learning more partners for more kinds of grilled coming on and that goes back to what Black said earlier, which is the possible first mindset shrinks and created this place is as critical to establishing the sparks on the ships.
In addition to the innovation and the Ringcentral MVP platform being the best your cancellation in the industry both of them equally matter and we're just getting started is that overseas.
The next question comes from Sterling, the Audi with J P. Morgan. Please go ahead.
Yeah. Thanks, just a quick congrats and good luck with the next step in the test shall be great to work with you again in the future in terms of the business onto my toe Uhm opportunity can you help us understand what your initial thoughts are around pricing for users given that it's this hybrid of <unk>.
Broach instead of full you cast and what the migration plan for those users over time will be you know to to full cloud and how that pricing evolves.
Unless you want to take the pricing one.
Sure I can take it look I think the the punch line here for.
My does partnership is that we will be converting the base two hour M B b.
Product so the pricing will follow what we have done in the past and on that note or artwork has been super stable and our our buy has been increasing so I think you will see a more of a continued story there.
I also wanted to come in.
The comment you guys Sterling.
It's strategies North hybrid strategy is foreclosed no equation of.
What cloud link offers us.
Is ability to transition customers.
If you were in baby steps.
With them using messaging and Vijay a root control of the submit that you're going to be there from the growth.
We'll still utilizing.
One from Iron for voice.
There is absolutely no thousand annually <unk> or <unk> or Michaels. The end result is going to be MVP with all of them in V it'd be all of them being strictly in the cough.
So once those customers transition, we would disturb same if not better pricing.
As they would be more familiar with the platform it would be a small step program to take.
But even in this interim of course, we're hoping.
To be able to Monetise R M messaging and video technology do Michael's 75 million users.
Just want to reiterate the this cause it's never been done before in the industry and you know he's an absolute first or does the jury's out we'll have to see how users react but you know for now it seems that it should remove a major major obstacle and then why not as people because it is.
Digital information.
That makes a lotta sense and maybe just one follow up if I could on Microsoft with the announcement and I forget the exact term if its operator connect and they have the direct program, where does ring central fit in each of those programs in our somebody announcements that have been made over the last quarter does that.
The minister opportunity to participate in and win business alongside Microsoft.
Yeah, Microsoft because many ways.
Addressing the core issues the court issued.
Issues as they do not have a viable cloud PBX Bravo.
So let's start with that so they have the retro too which is actually a tailwind for us which allows cloud ucas providers like ourselves to log into Microsoft what a bill then.
Strong Jim user base, but you remember those users are using teams messages by and large teams video not teams telephony. Okay. So this is where we come in and you know are are there appears we are doing very well there.
We are we haven't broken out as the numbers, but I can tell you that it is definitely a growth driver for us.
Just look at team and direct.
Yeah and direct routing.
As a sub segment.
Now as far as operator connect the late to say this is for you know people like a J G. As Verizon the size to plug the readily into the phone part.
Microsoft PBS.
And.
That's <unk> ability it was there for a long time anyway.
It doesn't <unk>.
<unk>. The fact that Microsoft again reason does not have a competitive PBX product in the cloud they don't have a competitive worldwide global footprint.
We do.
And you know correctly, if you were to ask me to just another admission.
You know the fact that they're technologies incomplete the MVP strategy and basically there's only one four other than ourselves who are talking about the strategy, but they're M. V. P strategy. She has a good M may be okay V and not a K P.
Obviously.
Coming from our side, we have a very very strong b.
You know we can.
Continue demonstrating.
Got it.
Before going to our next question, we ask that in the interest of time those asking questions moving forward. Please limit themselves to only one question.
The next question comes from George Sutton with Craig Hallum. Please go ahead.
Thank you <unk> I remember sitting down you told me about the Salesforce Dot Com model experience and how this was gonna look like that and I thought you're insane and look at you know so congratulations.
I I'm a believer in video becoming the first decision that a new company is going to make versus phone and I'm curious if you have started to do anything differently from a marketing of the video part of your capabilities.
As a result.
Yeah, So let me start.
[laughter].
Okay I'm glad you wanted to take it I'll jump off.
[laughter] Yeah. So this is this is what I was gonna say so one for those the strategy is across message video and phone.
And what would you do is black even shed in his prepared remarks.
The our customer base the number of users who are using multiple modalities is a lot I mean, so people use messaging N phone video and phone. So video is already.
Part of our strategy. The second thing I wanted to also share is all our new customers are defaulted on RCB at this point in time, all our strategic partners. The three A's might've now and going forward as you look at a carrier partners Vodafone business et cetera, all of them are before thing.
All of the new customers on video is about so also you've you've already going along into right past. The third thing I would also there is even looking at an installed base over 70% of an installed base has already migrated to watch T V and and by the way when they migrate to our CVV actually see Joe usage get daily at the post increase at Duke.
Better so be seen that video is already on the right path as part of for MEP strategy.
And that's where we go back to people, who want a unified communications strategy across messes with you and Paul and V. C V represent one of the best value proposition for customers and the market.
Awesome. Thank you.
I just wanted to add to this Joseph was a bit is that if you look at.
The new Michael announcement.
It actually.
Very much plays into this cheeses that you have that this media of these may be video, let's sales.
A double click on that and the SEC, but the whole thing was called link is the point that we will now be able to lead with video and message Ya while.
Letting them move phone telephony at a later date, so duct way introduce Jesus.
And to be.
The double click the opportunity here and it's a fairly immediate opportunity now is 75 million micro users, which by the way I should add a vast majority is in regions, where we are ready to operate namely.
America and.
And Western Europe.
Okay.
So that's one key point another ones, though.
Alright is that while sales may be video Ed.
It is also through that video is a lot less sticky zan messaging or the song.
And we're seeing this <unk> no on the positive side.
Of this equation if you will.
We are migrating users.
To writhe Central video.
Throw them in OEM, Florida.
Is that migration is going very very well and you know basically as long as vigia experiences are sufficient and comparable then people that tape. It to switch people are not <unk> or able to switch the message implored their phone which is why.
If you look at all of the competitors for would be competitors are now doubling downfall because it also realizes the issue that they have is it just a decade or a decade strong jumpstart on technology.
We are the only one with five ninth reliability over three years I would urge all of you compare that to record against any and all of our competitors.
And between our strategic partnerships.
August Alberto Enterprise now Mitel.
Something like 50%.
Or 60% of World Dork carriers now banking behind Ringcentral.
Uhm, it's Elizabeth hard for me to see.
So does this strategy is not going to play out in a positive way.
There is a technological advantage and there is I would say, especially with this announcement and almost insurmountable partnership advantages whichever is the menu component of the strategy, which will go with.
With stints with trust and.
Innovation is in partnership remaining part is G four thrust, whereas second and on there as well.
So pretty confident.
[noise] key next question comes from meta Marshall with Morgan Stanley. Please go ahead.
Great. Thanks, just a question since the myself partnership allows you to kind of have more exclusive access to cloud link is that something where are you could use that parting technology eventually with some of your other partnerships or would that does it the terms kind of require it to stay.
The Mitel platform online.
Yeah, Yeah last year.
Let me take that so sore down there is absolutely yes.
Ringcentral now own wildly outright.
There will be further cooperation between the companies in feature enhancements and.
You know other just as a classroom encampments, but it is our IP.
Meaningful number of dollars change hands as part of this transaction reason for that is cloud link.
Specifically, our ability to not only applied to my dose 35 million.
User base, but two applied to.
With two other platforms.
Uhm.
Perfect. Thank you [laughter].
The next question comes from some odd Semana with Jeffries. Please go ahead.
Hi, Good evening my questions first my cash congrats on and off any guide ring. So all over the last several years I Hope you get some time off and and I wish you. The best on your next game, a bigger challenge, which is improving your cough can maybe maybe onto the question you know I wanted to maybe unpack the the $650 million.
<unk>, that's that's being invested into my Tao how much of that is for the exclusivity and being able to transition the base verses the acquired I P.
And and could you built it yourselves or their minimum for the deal with that that you get in terms of minimum seek commitments.
Sure. Some yeah I will try on the on the first part which is a which is a golf game, but in terms of the $650 million. It's a combination of IP exclusivity and clouding together, it's gonna be hard for us to break down each component separately and the contract has all kinds of cool.
Cool provisions, which will be hard for us to get into on the skull for competitive reasons, but rest assured I think what blood mentioned there is some industry first defining things we are doing which has never been done before so stay tuned.
Great. Thanks, so much.
The next question comes from James Fish with Piper Sandler. Please go ahead.
Hey, guys. Thanks, Thanks for taking me in here and I think that's that's actually here.
Exit here and look forward to working with you down the road.
You know just for me what are you guys seeing in terms of new end points. One between new users wanted between those deals with a strategic partners versus kind of non strategic wins and in terms of the big ones and and the carriers of course in any way to think about how 'bout mix could change longer term and I'm gonna sneak in a one.
Be here did you guys provide the update on in terms of where the sea cast penetration is and what that mixes between reselling Your third party partners versus selling some of your own stuff. Thanks guys.
Got it.
Yeah, Joe maybe we can rephrase the question I'm not sure.
Windsor win and you know where the burgers, but we're not sure.
Like everyone regardless.
Come strong.
So what could you maybe just as equation. Please.
Yeah, I'm I'm trying to understand what percentage of the new users you guys are getting are coming from the strategic partnerships that you have versus the non strategic partners that you have so winning against Cisco for example, or any see those kind of companies just trying to understand how that.
That that is doing given the success. He does are talking about with partnerships, especially those corner.
Yeah.
I'm gonna take that.
Oh.
[laughter] well, let me take a push on it and then yeah. So this is how I would I would say the gym, which is actually all of these partners other actually nearing on growth put expectations of the right quick. So I'm you know when I look at it awhile I mean, it was a really good quarter record million dollars plus <unk>, good growth and see New York.
Sounds transaction volume strengthen upmarket stress and international the same way I look at <unk>, it's sort of the same thing strong fight sequence, you'll progress on large fields.
Private hope international grilled, but I look at the carriers, it's sort of more of the same which is you know the quotas are getting better sequentially and you're on your we're building momentum on vehicles and a lot of the key vertical popping up really nicely education health care retail and you're also starting to see <unk>.
Good upmarket, but it across the board with the carriers and then finally, we don't talk enough about the channel to channel has been a foundation for us and the channel momentum continues so it's gonna be hard to see a strategic versus non strategic all of these different varieties of partners different avatars with partners are letting on growth in the right way, which is you know.
Which is what is propelling these does a 12 point acceleration, but they should talked about directly spot is the result of all of these coming together the right way and Oh by the way.
Like a discount or direct in bar organization, you up you know a direct salesforce I've been putting on quarter of quarter of really good wins across the board across all customer segments. So this is a case of all of them starting to fire well and coming on board.
The next question comes from Matthew nickname with Deutsche Bank. Please go ahead.
Hey, Thanks for squeezing me and and I'll keep it the one as well can you talk about the linearity during the quarter and then any color on how four Q is started out now that we're roughly halfway in thanks.
Sure Matt linearity was not on it was very usual three Q nothing unusual to call out there and as far as the start to <unk>. It's been a strong start for us October and we've seen the full results for the full month and that also has given us more visibility for the <unk>.
Guidance for Q4.
That's great and congrats Smith S. Thank you.
Thank you my friend.
The next question comes from Willpower with Bird. Please go ahead.
Hey, Thanks for taking the question. This is actually Charlie only gone for well uhm Congrats on the results and attach it's been a pleasure working with you.
Just wanted to ask one question on contact center.
How do you guys feel about your internal capabilities and your strategy to partner on the higher end, how should we think about that strategy going forward. How should we think about you know your plans for your internal capabilities going forward.
That's a good question. So let me just set.
You have some context, one it was a fabulous quota for the contact center.
New Grove, New business growth has actually been really good again triple digit year over year, but strong enterprise momentum and you would also shared that over 60% of the million dollars plus T. C. V deals included the contact center.
As we look at it he followed the same playbook the same strategy a very very strong partnership with.
With nice in contact a nice C X one as they call them right now for all digital first use cases be would engage for everything else, we need but nice in contact and it's been working really well.
The mix has been sort of stable over the quarters.
Alright. Thanks.
The next question comes from Alex Zukin with Wolf Research. Please go ahead.
Hey, guys. Thanks, taking the question just quick housekeeping, one I guess, if if we think <unk> around the unit economics of the latest partnership with myself from and Roy or cost of customer acquisition basis, How would you compare it to the others at the other deals and and how should we think about.
The progression like you mentioned that the progression of seats or the the the on ramp for this one could be faster than the others. So how do we think about that and then on.
On the margin side, obviously, some good margin progressions. This year in the model, but as we start thinking about next year given the resumption of travel the increased investment in and kind of sales and marketing.
It should we continue to assume merchant leverage or or you know is should we kind of pause that and the model is we reopen.
Alex did thank you and amazing job as usual for backing 15 questions and.
In one question, so I will try to address all of them, but it's not just.
Follow up again, so the first one is in no particular order the seats ramping faster is a is a question or is a function of <unk>.
Leaving Central's brand being the go forward bran. So there is no. It's a faster time to market because there's no time to be spent on called renting the product and the channel enablement, along with the sales and noblemen happens immediately so that's point number one number two on Internet economics, the way to think about these economics and these partnerships is that.
Because there's enormous leverage for these partnerships on the sales and marketing site for us.
The economics workout such that these partnerships, especially this mitel one along with the other ones are massively accretive for the long term model or margin profile offering central So that's number two and number three on the leverage for next year look if you look at the unit economics again there.
Is enormous leverage in the business <unk>. If you look at a recurring margin, which is a revenue less cost of goods sold and some of the recurring.
It's north of 50%. So what we are doing though is plowing those margin dollars into fuelling further growth because this opportunity of 400 million seats is too big to pass up on so what are you will see next year is a continuation of more of the same enormous leverage but redeploy.
The the money to fuel more growth and elongate the business model and terminal value of the company.
As good of a job as I do of asking multipart questions. I think you do an even better job answering I'm. So congratulations Oh my God.
On the next thing but.
Thanks Man.
The next question comes from C. T pantograph with Mizuno. Please go ahead.
Hey, Hey.
Hey, guys congratulation admit this kind of what unimpressive journey from 50 million to 1.6 billion congratulation.
So I wanted to ask you on the do that 10 partner go that's a good to see that grilled excellent writing, even this quarter and next quarter as well so help us understand like where are you at this point with a a partner see if at any sense of timing as to how the grilled from a vine other major partner see if you have it.
Going to stagger next year.
Sure sure city. Thank you for the amazingly kind words here the way to think about the partnerships is in I'll pass it out with each and every partnership of hours and then I'll amalgamate them. So avaya is the furthest shrimp drempt and which is what you saw in Q3 and you will see in queue for those is next in line.
Where we are seeing contributions coming on the next one is Alcatel Lucent, where we hope to have contributions starting 2022, which is what reflect earlier and then now the latest installment of Mitel wood.
It would be in earnest back half of 22, and so that's going to be the leering affect the punch line of <unk> forward to beyond 22. This is what the beauty of these partnerships are because there will be a steady drumbeat of seats coming in for multiple years to come.
That's great. Thank you and we probably will say this explanation growing.
The next question comes from Ryan Mcwilliams with Barclays. Please go ahead.
Thanks, So we had the Avaya Cisco Channel then the reseller channel and after today I think it's fair to say, we now have the ring central channel, but kind of wanted to go a different direction and talk about your 1400 seat when with the on Prime hospital with a buyer uhm no that's pretty interesting given how complex you know some of them.
Those deployments are for hospital. So are you starting to see larger customers and sectors like the public sector or health care that I've previously been Florida adopt cloud solution starting to accelerate those cloud voice deployment. Thanks.
Absolutely right. We are actually that's why I said, we're starting to see vertical strength coming up from the strategic partnerships as well.
<unk> I, just called out how education and healthcare is actually make a big difference. So that's where we saw early traction for bigger and larger wins converting from on crime Mcgwire to ACO and you'll see similar strengths not just in awhile, but also in the office also and told the carrier partners you see some of these key vertical pop up in the.
A significant way, which is leading to give us some of the wind.
But there's also called on one specific thing a lot of these partners are coming on internationally. I mean, this was a record large deal billion dollars plus T C given photos internationally.
Coming on as well almost a third of a large million dollars plus been seeing some need to match the segment and that is their specific verticals of pumping out in a key way education health care retail financial services.
Richard together.
The next question comes from Steve Enders with Keybanc. Please go ahead.
Hi, This is Georgia for Steve at Thanks for taking my question on <unk>, everyone else's, Congratulations I wanted to follow.
Follow up on a previous question about applying cloud link to other partners outside of Mitel can you just explain the strategy a little more is the idea to tell this as a as a product into those basin or is it to utilize it as a tool to help accelerate their their adoption curves just any color would be helpful. Thank you.
Yeah blood here no graduation no.
Cloud monkeys middleware and value of cloud link is to allow for those transitional deployment. So monetization will be from MVP message video and phone and that's what it is.
The decision to ring, Michael will continue monetizing their on Brian Pease for as long as it exists.
And against the differentiating part with this approach is that we will now be in position to.
Sooner than later monetize the M N V part of MVP without having.
Having to wait for the heavier lift b.
That will come in later.
Perfect. Thanks, so much and congrats again.
Thank you.
The next question comes from Michael Taryn with Wells Fargo Securities. Please go ahead.
Hey, there congrats to the team on the results of a task congrats and stepping down on a very high note here I just wanted to sneak one in an international I know not referenced it a little bit just a moment ago, but the degree to which you are expanding their stands out now partnerships in Mexico licensing in India, So global footprint.
News to expand can you just put some context around where you are from international standpoint, and how some of those investments help differentiate whether it's region specific or just for a multinational perspective. Thank you.
It has many lives there Michael you actually called out some of them as well right.
Which is a lot of the partnerships are helping us extend our reach internationally. This is rare.
We just artists has been a huge powerhouse in helping us establish many of international Windsor and many international large deal wins actually there now there's a lot of things, which have been done which is adding to it you called out the unified license in India, which is the first ever granted to you.
<unk> and so we are pretty proud of stacked on top of that we also announced our security posture in security matters, a lot and this is relevant that talks about trust.
Is a huge commitment it is not just a five ninth between the journey of five nine Italy and reliability of you've been on more than three years.
That makes a difference you into an encryption mediasentry nonsports ringcentral videos that makes a difference our security posture, which we have announced for data privacy data visit and see that makes a difference. So all of those things are coming together.
<unk>.
Significant momentum enough marcus's significant momentum in large steel wins.
And Ah sponsorships from Avaya, two autos to the carrier partners from British Telecom is actually starting to create more layers of international growth and we have not even talk yet.
About Vodafone business, which is coming on soon Deutsche Telekom, which is coming on soon so we're pretty bullish and Michael has a significant international presence as well. So we're very bullish on the international is going in terms of contribution to the overall business.
Great. Thank you.
The next question comes from Tim Horan with Oppenheimer. Please go ahead well.
Oh, Thanks, guys are great quarter of Black can you just talk about the.
Conversations with enterprise customers now that we're kind of pulling out of Covid did they realize hybrid works gonna be you know.
The new normal and maybe they should accelerate the timing of cloud adoption and do you think we can kind of see maybe two or three next two or three years more like five.
Six years type of normal adoption, given hybrid working the new normal.
Yeah, Yeah, Hey, Brian he just to remind everyone.
And.
It was no it is not a corporate story right and.
Number numbers speak for themselves.
We are.
You know, we we performed at.
34.
Your your growth before covered in took longer.
Subsiding as you can see our growth is.
Ah Ah Ah.
On this one right here.
Again just.
Looking at the numbers and sticking with what we've already too slow or enterprise business is our fastest growing segment is growing at over 60% year over year and it is now a very significant businesses in this alright or.
$600 of error.
So yeah.
Only before numbers don't lie.
You know now is this a is this attributed to accompany as being you know more.
More our customers a customer two hybrid you know I live in how to say, we're seeing consistent growth in all segments led by enterprise Ah no operation and that.
And also just as a reminder, and it says a couple of days ago.
The double click.
This only strengthening mobility.
Mobile phones.
It's not their fault, it's a friend we.
<unk>.
And can that lots and lots of calls.
Through mobile devices as well as we do with desktop devices. Okay. So again with Gorbachev here I talked about I did talk about his work from home mainly people have I did not we did not we talked about work from anywhere.
Work from anywhere hasn't changed and we didn't think it will change.
Now what we are seeing though is now.
Interest in cloud contact centre in chaos.
And you are seeing is across the board and pure seek out square, so obviously, a pretty pretty good numbers. So so that's great when it absolutely benefiting from that but again our core business.
Is very strong is gwen is stronger than ever and we'll just again Louis Michael you might have a relationship and call. It link you know we think it will do well.
Thank you you too hybrid.
If that's where the future have for us.
This concludes our question and answer session, which also concludes today's conference call. Thank you for attending today's presentation. You may now disconnect.
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