Q4 2021 RingCentral Inc Earnings Call
Good day, and welcome to ring Central's fourth quarter 2021 earnings conference call.
All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero.
After todays presentation, there will 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 two please.
Please also note this event is being recorded.
And I'd now like to turn the conference over to Ryan Goodman head of Investor Relations. Please go ahead.
Thank you good afternoon, and welcome to rank Central's fourth quarter 2021 earnings conference call.
Brian Goodman ring Central as head of Investor Relations. Joining me today are large fitness founder chairman and CEO , No Contra Chief operating officer, and Dave All the Agora interim Chief Financial Officer.
Our format today will include prepared remarks by blood Mo and pay Bob followed by Q&A.
Some of our discussions and responses to your questions will contain forward looking statements, including our first quarter and full year 2022 financial outlook and our assumptions underlying that outlook. These statements are.
Subject to risks and uncertainties actual results may differ materially from our forward looking statements and discussion of the risks and uncertainties related to our business is contained in our filings with the Securities and Exchange Commission and is incorporated by reference.
His discussion.
In particular, we continued to be impacted by the COVID-19 pandemic and its effects on our business will depend on the severity duration and extent of the pandemic and actions taken by governments.
Initiatives and consumers in response to the pandemic, which continue to evolve and remain uncertain at this time <unk>.
<unk> Central assumes no obligation and does not intend to update or comment on forward looking statements made on this call.
Otherwise indicated all measures that follow are non-GAAP with year over year comparisons a reconciliation of all GAAP to non-GAAP results is provided with our earnings release and in the slide deck.
Please visit our Investor Relations website at IR Dot ring central Dot com to access our earnings release slide deck, our GAAP to non-GAAP reconciliation, our periodic SEC reports a webcast replay of today's call and to learn more about ring central.
Certain forward looking guidance, a reconciliation of the non-GAAP financial guidance to the corresponding GAAP measure is not available as discussed in detail in the slide deck posted on our Investor Relations website.
With that I'll turn the call over of large groups.
Good afternoon, and thank you for joining our fourth quarter earnings Conference call.
I'd like to start the call with a warm welcome to our new Chief operating officer Mark <unk>.
And I have known each other for many years.
And more is very familiar with zoom central.
You had previously led the group responsible for our AT&T partnership.
<unk> joins us from AT&T business.
Or was the past year.
Key held multiple executive positions, including Chief product Officer, Chief Marketing Officer.
<unk> network infrastructure.
Yes.
<unk> had managed their portfolio.
With 36 billion in annual revenues.
Ed managed a global for all 50000.
Given mode customer first mentality.
Deep appreciation for innovation and passion for building multi billion dollar global cloud businesses I am confident that he will be an invaluable asset.
<unk>.
<unk> had in the exciting 2022.
I'm also pleased to be joined by Vivek Agarwal, our interim Chief Financial Officer.
Weibo has been with <unk> for six years, most recently as Chief Accounting Officer and has been instrumental in scaling and leading ring Central Finance organization.
Variable with central in driving the financial aspects of key growth initiatives, including our strategic partnerships and rapidly expanding ecosystem of global service providers.
Brian Central variable Scott senior financial position.
Brightwater Cooper and impact.
Was that.
Onto the results.
We delivered.
Spending for quarter.
Sure subscriptions revenue increased 37% year over year to $420 million.
This is acceleration of three points year over year.
Second total <unk> increased 39% year over year to $1 8 billion.
This is an acceleration or four point year over year.
Mid market and enterprise <unk>, which includes customers generating 25000 or more in IRR increased 52% year over year to over $1 billion.
And fourth we announced our strategic partnership with <unk>, a global market leader in business communication with over $35 million you see users worldwide.
Our continued leadership and success in the.
The massive <unk> billion, plus ucas market opportunity is evident in our strong Q4 and.
2021 financial results.
We are in the early evening, hopefully generational transformation from legacy landline voice only telephony to mobile sourced multimodal cloud communications.
Businesses are embracing multiple modes of communication, including key messaging video and voice across multiple types of devices.
They require a solution that can meet these evolving use cases without sacrificing reliability or functionality or a traditional PBX system.
Rick Central is well positioned to provide a feature rich highly reliable enterprise PBX replacement.
A mobile first platform with integrated team messaging and business video.
Why doesn't that tailwind.
Ill give you a dip if all comes down to our culture of innovation and partnerships.
Rod is something with with our customers day in day out.
The communications platform is a central nervous system of the business.
Reliability security and data privacy.
Okay.
And as the larger companies adopt cloud communications platform.
Visibility analytics and features that are mission critical.
<unk> track record of delivering $5 nine uptime for over three years and counting.
Hello.
This equates to around five minutes of downtime a year, including maintenance windows.
So this is literally come to times better than the three nine foreclosed to nine hours of downtime per year that some of our competitors provide.
Another cornerstone of the drug we've built with our customers is our.
Our western commitment to security and data privacy.
Simply put we never sell sure mid through or mishandled, our customer data in any way shape or form.
But luck, but mostly.
It is our deep commitment to comply with local regulations across the globe.
Case in point.
Wherever eccentric is available to customers.
They can rest assure compliance and legal fees.
Net innovation as the core of our innovation.
Our multi mode mobile first approach.
Our mission to make business communications.
Rick Central provide world class voice capabilities.
Integrated with World class business easier.
The key messaging.
Over one third of our customer accounts engaged with both messaging and Paul.
And over one third of our customer accounts engaged with video and phone.
Overall, we continue to see over half of our customer town you'd Ruth central VP for more than one mode of communication.
But there is motor in Central then message video phone.
Our partnership with the leading cloud contact center provider puts us in a uniquely advantaged position to offer a market leading <unk> solution that is deeply integrated with our market leading <unk>.
This bundled offering is driving strong traction with upmarket customers.
Ruth Central Oprah the only pure cloud mobile third multimode Ucas platform that is deeply integrated with a market cap.
Is available in the market to date.
Two thirds of leverage and amplify this technology leadership, we've invested in co branded solution with industry incumbent providing our customers a more seamless path to modern communication and extending our go to market.
This brings me to partnerships the third pillar of our success, where we finished the year with strong momentum.
Notably we expanded our unique family of strategic partners, namely Avaya Auto and Alcatel Lucent Enterprise with the addition of Mike Doyle.
Thus growing our total opportunity with these strategic partners to over 200 million users.
Michael is off to a very promising start with rapid channel enablement underway and already contributing to our double digit CCD customer portfolio.
We are also working on integrated cloud link for Mitel customer and beyond.
We have also assembled a unique ecosystem of leading global service providers, which include AT&T BT <unk> and Verizon.
We recently added Vodafone business.
<unk> telecom.
Last week, we announced the expansion of the relationship from video only two MVP functionality.
Overall, we have now signed with four of the top down GSP and all of them in total up from five last year.
This continues to unlock new geographies and new channel that we expect to help drive growth for years to come.
In conclusion.
21 was a transformative year for cloud businesses worldwide corporate.
<unk> central is well poised to continue leading through our differentiated innovation and partnership strategy.
With that.
And without a winning season team in place now fortified with exceptional new talent. We are looking forward to an exciting 2022 and beyond.
I'll now turn the call over to our Chief operating Officer Mark <unk>.
Thank you Vlad I wanted to take a moment to introduce myself I've been fortunate to spend the last 20 years of my life in the communications industry and I've had the pleasure of working directly with flat and team over the last five years.
Many people have asked me why did you want to join ring central and it's a pretty simple answer.
The size of the market opportunity the quality of ring central platform and the relentless commitment to innovation.
Art of why I've seen so many businesses select ring central and why my previous team and I were one of the first key partners for ring Central This is why I wanted to join the team.
For years I have seen firsthand the customer feedback on the positive impact ring Central has had on their businesses simplifying communications, enabling greater work flexibility and ultimately elevating productivity.
Now been with the company for a month and have been so impressed with our well seasoned executive team in 2020 to velocity.
<unk> is off to a strong start with robust pipeline growth new partnership ramps and a high innovation velocity all reinforcing by decision.
With that said, let me turn to our <unk> results and the product and go to market differentiator is the position ring central to continue to lead in the cloud communications market on the product side, we have our ring central MVP platform and our contact center solutions and on the go to market side, we have a growing channel partner ecosystem as.
Well as ramping strategic and GSP partners I'll.
I'll begin with the ring central MVP platform.
It's all about delivering value and ROI to our customers, we are constantly adding customer driven capabilities to our solution, which is driving new large enterprise wins.
A great example is a win for 10000 users at a fortune 1000 financial services company.
The global presence of our platform set us apart from the competition. This implementation was cross more than 20 countries with high quality regulatory compliant voice capabilities.
Next a nearly 15000 user win with Brigham Young University, our new embedded dialer integration with Microsoft teams with the key point of differentiation we.
We provided the customer with the advanced call handling and SMS that they required all in an easy to use interface with high reliability and what I loved about this win is that it wasn't just about ucas. The customer also chose us to provide a tightly integrated contact center implementation.
And that brings me to our integrated cloud contact center offerings, we are seeing strong growth year, we're over 60% of our million dollar plus PCV wins included contact center.
Great example is our win with Renaissance learning, who are a global leader in education technology.
They were implementing ring central MVP for over 1000 users and contact center for approximately 300 agents by embracing the full platform Renaissance to provide a truly unique experiences to their customers like contact center agents to customer video interactions via ring Central video.
The net here is that the ring central platform stands alone in its ability to meet large scale customer needs.
And over the past few years, we have built an advantage go to market model that includes direct channel strategic and global service provider partners to tap into the global market opportunity. This has provided our customers with multiple ways to choose ring central it's becoming less about how we reach the customer and more.
More about providing a differentiated seamless path to the cloud to that end. We are evaluating the go to market based IRR metrics that we currently provide ads for Q4 channel delivered a great quarter with.
$684 million up 47% year over year.
Channel partners are especially key to winning with large enterprise customers, who need to manage multi mode communication implementations across in office and remote workers, we've establish trust and leadership in the channel community over multiple years, and we continue to expand our community presence at double.
<unk> rates.
Additionally, we're activating incremental channel networks via our strategic partners, including Avaya, Actos, Alcatel Lucent enterprise and Mitel, we benefited from ramping contributions in Q4 and look forward to incremental contributions in 2022, Avaya <unk> and Alcatel Lucent enterprise all deliberate so.
<unk> growth in both number of accounts and users.
Examples of marquee wins include a 500 user Avaya cloud office win with Carter machinery, or large industrial equipment provider and over 3500 user Avaya cloud office win with health care services provider Watson clinic and in over 1000 user Actos unify office.
Healthcare win.
Finally, mitel, our newest partner is off to a promising start in terms of both channel enablement and early wins in fact mitel already contributed a win for approximately 7500 users and 400 contact center agents with a leading financial services organization, who needed an inner.
Grated Ucas and see cash platform.
As for global service providers, a space that is near and Dear to my heart. We have several recent notable announcements first Vodafone business you see with the ring Central has now launched in the U K, Germany, Hong Kong, Ireland, Italy, Portugal, Singapore, Spain, and Sweden and within the first.
Week, we secured an 800 user win with a prestigious university in the U K.
Just last week, we announced an expanded partnership with Deutsche Telekom and with Deutsche Telekom will now sell a full MVP ring central with Telecom solutions and third with our ring central rides platform, which enables faster lead to close time and significantly faster Onboarding, we continue to.
And our GSP presence with new carriers, such as versatile in Germany.
In conclusion I'm early in my journey with ring Central and I believe that ring Central is early in its journey as well this market is massive and with cloud penetration at less than 10%. We believe we're just getting started I strongly believe that the company has the best technology in the <unk>.
<unk> with a unique go to market motion that enables quick and efficient scale im.
I am excited to tap into the passion of the team and determinant path to further realize shareholder and employee value with that I'll turn the call over to our interim Chief Financial Officer <unk> <unk>.
Thank you Marc and good afternoon.
2021 was another strong year in key financial metrics came in above our guidance.
Subscription revenue grew 36% year over year to one 5 billion.
Three point acceleration from prior year.
non-GAAP operating margin was 10, 2%.
Up half a point year over year.
And non-GAAP free cash flow of 90 million was five 6% of revenue.
Reflecting over half a point of margin increase year over year.
We finished the year on a high note in the fourth quarter.
Ring Central office at our grew 41% to $1 7 billion.
Total <unk> grew 39% year over year to $1 8 billion.
Subscription revenue grew 37% year over year to $420 million and non-GAAP operating margin was 10, 5% up over 40 basis points year over year.
To summarize this year, we delivered growth acceleration.
Higher profitability.
And an increase in free cash flow generation.
The company is operating well above the rule of 40.
This is a significant accomplishment for our growth SaaS company generating over one 5 billion in revenue.
It is a strong validation of our commitment to durable growth as we aim to capture the massive market opportunity.
As well as our disciplined mindset in terms of investments and profitability.
Let's begin with growth that I'd like to highlight several important underlying drivers.
First upmarket traction.
Enterprise demand for our cloud based communications platform continued to rise.
As evidenced by enterprise.
<unk>, which includes customer to generating $100000 or more of <unk>.
Yes.
Increasing 62% year over year to $734 million.
In 2021, we secured a record number of million dollar plus PCB bins bulk.
Bolstered by growing traction with Fortune 1000, and global 2000 enterprises.
Second contact center.
Our unique offering of industry, leading ucas deeply integrated with industry, leading <unk> is gaining traction with our larger customers.
We are seeing bundled wins with both new and existing customers and contact center accounts, but over 10% of the overall business.
Third our partnerships.
Our direct and partner at <unk> increased 38% year over year, and eight point acceleration versus last year, driven by ramping contributions from our strategic and global service provider partners.
Looking ahead between strategic and GSP partner ramp and ongoing channel contributions, we are poised to significantly and efficiently scale our go to market reach.
And for international we more than doubled the number of international million plus PCB wins in 2021.
International now accounts for 12% of revenue in 2021 up from 8% in 2020.
And much of this opportunity is still ahead of us.
We are well positioned to capture this growth with key international partners ramping in 2022 and beyond.
In addition to growth it is also about delivering profitability.
We are benefiting from increasing net retention with higher upsell and record low churn for the year.
Greater contributions from upmarket segment are driving higher lifetime customer value and higher sales productivity.
In addition, as we capture incremental growth via our partner oriented GPM motion.
We expect to increasingly benefit from favorable unit economics.
By leveraging our partners scaled distribution networks.
And finally as the overall business continues to grow we are unlocking efficiencies of scale and other operating expenses.
These positive dynamics on profitability enabled us to reinvest in key strategic areas, while delivering half a point of margin expansion in 2021.
Yes.
With this backdrop of robust market demand you Catherine C cap platform leadership.
Rapidly expanding go to market reach and increasing profitability.
Let's turn to the 2022 outlook numbers.
We expect order and revenue growth of 25% to 26%, reflecting $2 billion at the midpoint.
We expect subscription revenue growth of 26% to 28% with similar revenue linearity between the first half and the second half as we saw in 2021.
We expect non-GAAP operating margin of 10, 6%, reflecting a 40 basis point increase year over year.
And we expect non-GAAP EPS of $1 69 to $1 72.
In summary, 2021 was an outstanding year, and we finished with strong momentum.
With our market leading solutions ramp.
The ramping partnerships and diversified go to market strategy, we are excited and energized at the opportunity ahead of us in 2022 and beyond.
We have multiple incremental drivers flaring gone and are confident in our ability to continue to deliver durable profitable growth.
With that let's turn the call to the operator for Q&A.
Thank you we will now begin the question and answer session. If you'd like to ask a question Press Star then one on a touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the keys.
If you'd like to withdraw yourself from the question queue Press Star then two.
And the first question comes from Brian Peterson with Raymond James. Please go ahead.
Well, thanks, everyone and congrats on the strong quarter. So I wanted to hit on some of the strategic partnerships. So we saw the incremental IRR step up this quarter and maybe shed some light on how each of these are progressing versus your expectations and how do you stack rank kind of the strategic partnerships as we think about growth vector in the 2022.
Hey, this is Mo and.
Thanks for the kind words, let me take that one and then I'll, let <unk> chime in.
As appropriate.
I would tell you is the partnerships are all executing relative to our expectations as.
As we look forward to 'twenty two obviously the newest one is mitel and it's getting off to a strong start since we didn't have to use a branded solution. There we were able to very quickly go to market.
As you heard during my commentary, we're already putting up wins as part of that partnership and then it becomes incremental growth on top of everything that we've been doing today. The other comment that I'd make there is really the continued expansion of our GSP relationships.
As Vlad mentioned, we ended last year with five relationships, we're ending this.
End of 'twenty, one if you will with 12 with more to come. So these are all strategic partners that layer on top of one another they get through contracting we go through the sales enablement motion and they start incrementally contributing to our growth.
It's been quite strong across the board and as I mentioned meeting our expectations.
Great and maybe a follow up for you just it's great to have you aboard but.
Curious from your perspective.
What are you looking to try to accomplish our key growth opportunities over the next kind of year or two and how we should be thinking maybe about longer term about those partnerships, where do you think that you could take that thanks guys.
Yes. Thank you. So I tell you I'm focused on five key things relative to nearer term growth. The first one as you stated is executing on our existing partnerships and getting them.
Ramped the second one which we didn't talk as much about is expanding on our AI emotion around optimizing retention.
We're getting to be quite a large company now and so continuing to drive down our churn year over year is incredibly important. We started this work in 2021, and we're pouring fuel on that fire I think theres more opportunities there for us the third one is even more.
New channel and partner motions and getting those scaled the fourth one is brand investments and implementing our first brand investment at scale, which inherently we expect will drive growth across all of our channels and then the fifth one is continuing to invest.
And differentiating on an ongoing basis, our MVP solution as well as the way that we're approaching an integrated ucas and CCAR solution for our customers so call that what we're doing.
Split simply for 'twenty, two beyond that I think it's quite clear to everyone that we've got a world class products are pretty incredible go to market motion.
My focus now is also on longer term initiatives that are going to enable us to deliver sustainable profitable growth in 'twenty, three and beyond and so I'll leave it there and I'll just say more to come Okay, let's talk about that further in the coming quarters.
Good to hear thank you.
Yeah.
The next question comes from Bob Im sorry, with William Blair. Please go ahead.
Hey team, Thanks, and let me Echo my congrats on another solid quarter I guess maybe for moment.
But.
As you think about mitel it feels like that partnership is ramping.
Faster than Avaya, certainly that platform asos and things like that I guess help me think through sort of is that because now you guys are becoming the standard accepted is that because of their salespeople are getting it faster is that because of the cloud linked help me think through maybe why mitel appears to be let me, it's not but it seems to be ramping faster than those guys did given the early <unk>.
Each of that relationship.
The first comment I'd make is as I mentioned during my opening comments that all of the partnerships. The <unk>. If you will so quarter over quarter seat and revenue growth. So check on that one relative to your question on Mitel and I made a reference to this just a few moments.
Ago, it's off to a great start.
One key difference here is there is no co branding. So we were able to immediately begin enabling the channel and the go to market motion.
Already secured multiple wins I mentioned, the 7500 user MVP win with over 400 contact contact center agents and where we are now and you can imagine like with all of our partners. The Mitel team and myself are spending multiple hours together every week trying to accelerate our growth.
Is continuing to enable their channel partners for success with the ring central products.
Yeah.
No no that's helpful. I'm glad it's up to a good start and then a quick clinical data.
Talk a little bit about the better economics from these relationships on how those will play out.
Really helpful for me and global announce maybe to get a sense of maybe what those economics might look like three years down the road five years down the road like the relationship with the buyer, yes, there was a prepaid.
Sales commissions were with Mitel help us think through what those economics might look like vis vis the current direct sales model some sense would be really helpful. Thank you.
Of course, thank you Bob for the question. So look for US, it's always been about profitable growth and not just growth and it comes down to two things really it's the unit economics and the leverage in the model. So in terms of unit economics look we have attractive economics, and we've been operating well above the rule of 40.
Over the past few years.
And then I think ahead in terms of the levers, particularly on the distribution side like you were mentioning.
We'll benefit from the lower cost of folk as we will be leveraging the partner led GTA motion so that inherently evil bill.
A driver of margin expansion in the future.
No.
The partnerships are enormously accretive to us and even right now that is a choice that we have to make in terms of do you expand margins or do you invest in the business to drive more growth and given how early on VR.
And this journey.
We are reinvesting the dollars back into the business for growth. So I think you'll see a continuation of much the same.
<unk> leverage in the model and redeploying it back into the business for this year and for the next few years, but as the growth matures, there will be meaningful upside in the margins.
Gotcha Gotcha, Thanks, taking my questions guys I.
I appreciate it and appreciate the candor my welcome to Jean Thanks, everyone.
The next question comes from Terry Tillman with Truest. Please go ahead.
Yes, hi, Congrats from me on the results and the outlook <unk>, Bob two questions.
First for your Mo.
It's good to see the ongoing traction up market.
You mentioned in your prepared remarks, you see strong sales pipeline into 'twenty. Two so that's great. What I'm curious about is is there any gating factors or anything they could get in the way of you all continuing to ramp the size of your customers. So 20000, 50000 seats or even greater I'm just kind of curious what you see on the ability to keep moving up market and are there any.
The gating factors there.
And then I had a follow up.
Yes.
Well Terry first foremost thanks.
I hate to give one word answers, but I think the answer to that one is no. There is nothing gating US you can imagine back to your comment on the prepared remarks.
Robust pipeline growth year over year, driven largely by large scale customers.
I will tell you that the pipeline growth that we're seeing from the broader channel our partners or the third parties et cetera is also a material contribution to the growth year over year and as more and more larger customers in that pipeline. So from a product perspective, it's ready.
And we look forward to continuing to win out.
<unk> customers and demonstrating the efficacy of our product.
That's great and I did learn and the more than a one word answer there so I'm excited about that.
I guess, that's all about.
I felt like you.
So that so that was great that was a great catch up thank you.
And then for <unk> just a quick question as it relates to the change in office. They are we have seen the last couple of years. If my math is right. There is kind of a low double digit decline in net new office there are between <unk> and <unk>.
This thing a lot of great things in terms of the pipeline. It sounds like the business is strong but should we expect kind of similar seasonality as we move into the first quarter around office. <unk> addition, thank you and congrats again.
Okay.
Yeah. So when you look at the fourth quarter, we posted our strongest Q4 in terms of the new anr ever and we still grew at over 30%. We grew at 39% at over one 8 billion. So we are exiting the year with a strong momentum.
But the other thing to keep in mind is that we are lapping increasingly tough compares and the law of large numbers is keeping again. So you have to factor that in but on counter balanced there is a lot of.
A number of growth drivers ahead of us more talked about the partnership ramps we are.
Pretty early on in terms of Avaya and <unk> and <unk>.
And.
Contributions from Mitel, Verizon Vodafone and the others that we recently announced are largely incremental and ahead of us.
Thank you.
We ask that moving forward that those in the question queue limit themselves to just one question. Please.
And the next question comes from Sterling Auty with Jpmorgan. Please go ahead.
Hi, This is drew on for Sterling.
It is baked into the 2022 guidance for the assets that you acquired from Mitel.
Yes, so in terms of the Mitel partnership.
The $650 million that we paid has been recorded as an intangible asset and that will be amortizing.
Over a period of time in the books.
Yeah.
Okay got it thank you.
Okay.
The next question comes from Samad Samana with Jefferies. Please go ahead.
Hi, good evening. Thanks for taking my question. So I'll ask a guidance follow up just me.
Hey, Bob is there any change to the guidance framework.
Versus what the company has used over the last couple of years just given.
The change in the CFO position, just trying to understand if there if theres anything we should be.
Because the initial guide for 26% to 28% growth for subscription revenue is actually a stronger starting point and then you've had over the last few years. Despite a tougher comps I'm just trying to understand the guidance framework.
Yes. Thank you so much for the question. So just by way of context I've been with the company for six years and I have been deeply involved with Natasha.
With the guidance process. So overall no change in the guidance philosophy.
Guide to where we have a high degree of visibility on but look we don't know what we don't know so we build an appropriate level of prudence accordingly.
In terms of the confidence in the guide.
<unk> ended the year with strong momentum, we had strong retention rates that we have.
A good base solid base to grow from and we have all these incremental growth drivers ahead of us in terms of the partners when you layer that on along with the healthy demand environment.
We feel very comfortable with where we've guided of course, we are being prudent across all of these drivers as we established the guidance and as my boss would say, there's a healthy dose of prudent and optionality in the guide that we've baked in.
Great Great and just a follow up for you on the brand investment side I just wanted to make sure I understand that so are we talking about like National advertising campaign are you talking about kind of traditional media just how should we think about that and where should we expect to maybe see it or hear about it with our eyes and ears.
Yes, thanks for asking about that we're pretty excited.
You are going to see our first major brand campaign and spend.
At scale and that is inclusive of advertisements obviously in the <unk> space, we want to be very judicious and targeted with how we're putting our ads out there and so.
So we're finalizing the exact attack motion if you will on where the dollars are going to go but think traditional advertising upper funnel as well as targeted ads that are intended to drive both e-commerce traffic.
As well as general awareness of ring Central we have an incredible win rates and we want to make sure that we're continuing to crank up the awareness of our brand and.
Drive more growth that simple.
Great Congrats on the neuroma take care. Thanks.
Yes.
The next question comes from George Sutton with Craig Hallum. Please go ahead.
Good afternoon. This is Adam on for George Thanks for taking my questions.
It's great to see existing partnerships continue to expand I'm curious to hear whether or not you see incremental opportunity coming from partnership expansions and if so how would you describe the size of that opportunity.
Well I'll start with what I mentioned, a little bit ago, which is if you think about vlad's remarks earlier.
One of the beautiful things is that from the GSP perspective, we went from five announced partnerships at the end of 2020 to 12 relationships at the end of 2021 and obviously.
Those take a little bit of time to get the product ready to get the sales motion already the sales enablement. If you will and then they start ramping from there. So just the increase in the number of GSP partners from my perspective.
Is upside for 2022, and then as you think about there is likely more to come in that space.
Which then again brings additional upside for late 'twenty, two and 'twenty three is a positive and then of course, we've talked quite a bit about mitel already so I won't go back to that but to say brand new partnerships.
And as we said it's started strong and we're now in the middle of continuing the enablement process.
Okay.
The next question comes from meta Marshall with Morgan Stanley . Please go ahead.
Great. Thanks.
I wanted to circle back to the slide in your deck that referred to kind of over 50%.
Engage and multi modes.
How that statistic either inform how you think about the team's opportunity.
Or how is that.
And how that goes into how you think about reducing churn over the next couple of years. Thanks.
Thanks for the question. So let me kick that one off and then maybe Bob can build on it.
I mean, what you just asked meta is at the heart of why we believe having Z world class MVP product matters.
Just to give you a quick anecdote Vlad and I were chatting the other day in the office and.
I needed a drive and go to a dinner and so we started on my desktop PC and then ice.
Seamlessly transitioned that to my mobile device and then when I was in the car we needed.
Take a look together at a.
A slide deck I pulled over flipped over to my iPad again seamlessly transitioned over and we were able to go through slides together I turned on the video and this is the heart of multi modal. This is the heart of why.
Our product truly matters, when you think about businesses and how businesses use their devices in a multi modal way either for internal communications.
Cross employees or externally with their customers and then the other question that you asked in there is the opportunity with teams and what I will tell you is from my perspective teams is a better together opportunity theres going to be businesses out there, especially in the enterprise space that are in.
Bracing and adopting teams and we're seeing strong traction with both our direct routing capabilities, putting in five nines World class voice behind.
That product, which is really really important to a lot of business customers as well as with our embedded dialogue I talked about bringing them young.
And that when that was enabled by our embedded dialer and some of the key business capabilities like SMS, and fax et cetera that bring that that brings to the table as well.
I fully answered your question, but if I didnt feel free to ask a follow on.
No I think that that gets to me and I just wondered if kind of.
Part of your initiatives that you mentioned earlier about reducing churn are around kind of getting people to interact more multimodal west Marine control, but you essentially answered part of that.
Yes.
Thank you I appreciate that on the churn side I will just quickly say.
Really excited about what our teams have been working on and building internally and not only is it about multi mobile and usage more overall, it's about <unk>.
Looking at many different drivers that would be indicative that we need to actively lean in with our customers and help them better understand better use the products. We're seeing really really strong success, which means we're just simply expanding that to more and more of the customer base to continue improving our term percentage.
Thank you for the question.
The next question comes from Kash Rangan with Goldman Sachs. Please go ahead.
Alright, Thank you very much congratulations on the results.
Congratulations on your new position.
If this question has minority addressed before.
I apologize I've been toggling from call to call but.
Wondering what your take on the strategic direction of incentives granted that it's got a very solid strategy and execution for a number of years.
Wondering the unique angle that you bring.
Thank you.
The asset.
Again.
Sure.
Mind carrying it at all.
Any go to market changes.
As the competitive run definitely changes in yield.
Your motion increasingly close upmarket into the enterprise.
Any tweaks or changes to go to market to accommodate changing events.
Also I appreciate it thank you so much and congrats.
Thank you and no problem I'm happy to.
Repeat the answer I gave a little bit ago. So specifically if you think about it in terms of first key initiatives with the company.
Really focused on what I call our growth our people and our future and growth is really about 'twenty two unleashing the drivers that drive the growth that we're expecting and there are slides things first one is executing on our existing partnerships and getting them ramped the second one to the lab.
A question that I answered is about expanding our AI emotion around optimizing retention and continuing to drive down churn. The third one is there is more out there when you think about channel and partners and continuing to scale new partnerships. The fourth one is about implementing our first brand <unk>.
<unk> at scale to drive growth across both E Commerce, and really all channels and route to market getting the name ring central better recognized out there and then finally continuing to invest in the incredible R&D machine that we have to differentiate our MVP solution and our integrated <unk> and <unk>.
Solution and then as you think a little bit further out right. If you call it our future.
Everyone knows that we've got a world class product and an incredible go to market machine I'm also focused on longer term initiatives that are going to enable us to deliver sustainable profitable growth in 'twenty, three and beyond and.
Spending quite a bit of time, there as you can imagine and I will just say more to come let's talk about that in the coming quarters.
Wonderful if I could follow up very quickly you probably had a very good lens into the company you probably are aware of the Ucas landscape can you just give us some comfort how did you feel better about the longer term competitive position given that investors are worried about.
More than <unk> of <unk>.
PBX in the cloud from the likes of Microsoft Zoom. It said, although they may not have rapidly.
Technology that could confound for example, head on how does it get comfortable with the technology.
Competitive position of the company recently.
Larger competitors and that's it for me thanks once again.
Very good so the way I'll answer that is yes.
Yes, as part of my previous Remits.
Did say grace over both our Ucas solutions.
In my previous employer as well as the broader voice set of portfolios. So very deep knowledge of call. It the tdm to IP.
The Prem to cloud ecosystem and this is at the heart of why I wanted to come to ring Central the number one reason was what I see is that Ucas still has a staggering amount of growth ahead of it we always talk about that this is less than 10% of the total Tam has been <unk>.
I was looking at some third party data this morning.
Joe that you cast as a space is going to grow by another 75 million seats in the next handful of years and the heart of it is I've seen it and I believe it and this is why I wanted to be part of the ring Central family and team and then these are the some of the competitive landscape that you've articulated.
<unk> I am deeply comfortable again in my previous life, having been a partner for essentially every solution that exists out there at scale that the ring central product Barr Nunn is best in class in the World and then the very last comment I will.
<unk> is the larger competitors.
Piece of it is I think theres been a lot of chatter about are some of them friend or foe, and I think that theres a better together motion.
We talked about one of them a little bit earlier direct routing embedded dialer is opening up an entire new sets of the customer base for us to go after and one that I'm very excited about I appreciate the question.
The next question comes from Michael <unk> with Wells Fargo Securities. Please go ahead.
Hey, there thanks.
Thanks, Good afternoon, congrats on the closeout to the year.
Look the HR metrics are each showing continued strength. The one question. We're getting is just the Q4 revenue upside was maybe a touch lighter relative to prior guidance and what we've seen in recent quarters.
Bob anything you'd add to help characterize the Q4 revenue results was there anything timing related for us to be mindful of or anything else you'd add to help frame that out, particularly given the especially strong guide into next year. It's helpful. Thank you.
Yes, Thanks, Michael for the question.
Yes, we guided a bit later in the quarter than usual, which provided us with greater visibility in Q4, and we had posted the.
The strongest Q4 guide.
That's what was pretty much driving the lighter beef that you are seeing for Q4 overall north structural changes or no change in the guidance philosophy, if you will.
Thank you.
The next question comes from James Fish with Piper Sandler. Please go ahead.
Hey, guys, maybe one off of not asking around the quarter or die here, but you guys have highlighted innovation and quality of our network differentiation and obviously a big part of the news today has been around the Russia, Ukraine conflict and we were wondering with such a large part of the development team base. There that is also handling the quality assurance of the <unk>.
How you are looking to handle the situation of no further escalation of sanctions and ensuring that five nines of quality acreage potentially looking to shift any of this development to other countries. Instead, thanks guys.
Yeah.
Thanks for the question what I would tell you is first and foremost.
12% of our revenue comes from outside of North America, and you can see that much of our sales presence is really outside the U S and the UK Europe and Australia, and then to your question around R&D you can imagine we've got contingency planning in place for any event.
<unk>, we're monitoring like everyone I think right now we're monitoring what's happening in these regions and believe that the likelihood of any meaningful business impact is low because of our contingency planning I appreciate the question.
The next question comes from Ryan Koontz with Needham. Please go ahead.
Our next question I wanted to touch on pricing if I could please I see your revenue per account is certainly.
Heading up nicely there, whereas you penetrate the larger accounts, but on a on a per seat basis are you seeing any pressure there, especially with the opportunity to upsell into teams with direct routing. Thank you.
Yes, Hey, this is me about so overall trends on pricing remains stable, so nothing really to call out.
Okay.
Couple of areas of color when we look at our larger customers, we do see some volume discounting.
Which is a fact of life, but enterprise customers do end up buying premium skus along with contact center.
As we are going more and more upmarket.
What matters more is the wallet share which is the ARPA metric you just mentioned and we are seeing a steady increase in that and that's driven by a couple of things.
Customer demand coupled with the integrated MVP platform and the multi modal engagement and then when you go down to SMB pricing is holding very steady. So net net ARPA trends are holding really stable and we are getting nothing really to report there.
Alright, thanks very much.
The next question comes from Alex Zukin with Wolfe Research. Please go ahead.
Hey, This is Allen on for Alex. Thanks for taking my question I just wanted to touch on hiring for 2022 I was wondering what your trajectory of growth for quota carrying reps is and how you're thinking about an increase in productivity.
Yes, so what I would tell you on that Alex is we don't disclose the explicit numbers around hiring what I will tell you is for the last several years the efficiency of each one of our sales reps has <unk>.
Chris in terms of the total quota that they are carrying it's frankly, it's a fairly impressive metric.
And even with that based on the growth rates that we're projecting we do expect to continue hiring new sales force.
I'm not going to get into the exact numbers, but I think that gives you the color you need.
Around both the efficiency side of it as well as what are our expectations around hiring new workforce. Appreciate it appreciate that.
The next question comes from Matt nickname with Deutsche Bank. Please go ahead.
Hey, guys. Thanks for taking the question.
Just given the number of the fee level changes over the last few months, obviously, the risk for business disruption or execution risk has been on a lot of investors' minds I'm. Just wondering if you can talk about anything you may have seen surface. The last couple of months of weather.
Of these C level changes impacted customer demand or behavior in any way and then just as a follow on.
Anything you'd call out in terms of omicron related impacts during <unk> that may have pushed some larger activity.
Into 2022 that you might call out thanks.
Yes.
Block here.
Say hi to people as well.
I guess I'll take the first part of.
The question.
Look as you heard from me before numbers speak for themselves.
When.
We went through.
Some changes on the management team.
I believe we've adjusted there is strong.
Of security, if you will and confidence.
In our ability to continue executing.
At least at the same or if not vessel level.
I think you're seeing this now we said.
A truly outstanding quarter.
<unk> is very very strong year, and we firmly believe that we have.
To have the team in place too.
Can you.
Our March forward.
In 2022.
Beyond.
<unk>.
Without skipping a beat.
It was even speaking that please.
First the depot leg of Mo.
Choosing to join us.
It is.
The most clear Testament to what room central.
Then in the marketplace competitively and.
If people are familiar with the space.
Art.
These are the people who tend to do well here. So again this is just to reiterate.
A warm welcome tomorrow and you can rest assure that.
Sure.
We will do.
You know horse under more than ever and we have always done reasonably well pretty well I would say.
There is room for optimism for optimism.
But we will do meaningfully better moving forward, especially as the world is coming out of the pandemic and this may be here for the second part of your question.
Is.
Luke.
<unk>.
Mainly people obsess on the ground by now.
Most people.
<unk> came out and.
Life is beginning to stabilize and keep slide.
And I just wanted to remind everyone again.
This is a repeat.
But the bonus this year for me, but rig Samsung does not incorporate storey residential is not a work from home study room. Central was is we will continue to be a work from anywhere that is.
Our core strength is.
Ability for people to be equally productive from the office.
Hotel room.
Airplane, what's their view.
This is a unique differentiator.
As work shifts from purely lets call two other more traditional venues that Hussein's is welcome Colm is not going to continue clearly it will but it is going to revert back to normal or start moving in the direction that our strong belief with each of our customers.
This is why we're so confident in providing.
Further the strong guidance for.
Once you feel at this point hasten to add labor hormone.
I think from my perspective, it was a great quarter and a great finish to the year. So we are pleased with the results I think the team did a great job executing without missing a beat so.
Of course, any given the <unk> want a lot more but there were no material missteps.
And there is a lot of excitement and optimism with all the incremental growth drivers that are ahead of us.
Okay.
That's great and I appreciate all the color. Thank you.
Okay.
The next question comes from Ryan Macwilliams with Barclays. Please go ahead.
Thanks, guys nice results sneaking into two part question here, how should we think about the potential for ring Central's partnership with Microsoft teams do you think this contribute more in line with some of your strategic partnerships from a seat count perspective, we are more in line with your global service provider partnerships and then separately can you just mentioned your contact center.
Business now accounts for greater than 10% of your total overall business. How does this number compare to this time last year. Thanks guys.
Okay on the Microsoft side.
I think that we've hit on this one a couple of times I'll just put a bow on it and say look there is a two pronged opportunity here. There is the direct routing opportunity and there is the embedded dialogue opportunity and to kind of build on an earlier question as you think about larger and larger customers.
Up the stack in the enterprise space. Many of them are demanding five nines voice or voice is substantially better than other voip products out there and it's an opportunity.
To go sell our better together, if you will and I will let me turn it over to <unk> to wrap this up and talk about the second part of your question in terms of contact center.
We are growing at a fairly healthy clip contact center is growing faster than the overall business. So.
Seeing some healthy growth trends there.
I don't think we disclosed what the actual number was last year. So I would just keep it at that greater than 10% now growing faster than the overall business.
Appreciate the color thanks, guys.
Thank you.
Ladies and gentlemen, we are out of time for questions. So this concludes our question and answer session, which also concludes today's conference call. Thank you very much for listening in you may now disconnect.
Okay.
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