Q2 2023 RingCentral Inc Earnings Call
Good afternoon, and welcome to the ring Central second quarter, 'twenty twenty-three earnings conference call.
All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad.
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Please note. This event is being recorded I would now like to turn the conference over to will Wong Vice President Investor Relations. Please go ahead.
Thank you good afternoon, and welcome to ring Central second quarter 2023 earnings Conference call. Joining me today are watched minutes founder chairman and CEO , Terry Kobe, Audi incoming CEO and so many pereq CFO .
Our format today will include prepared remarks by Rod Terex, and finally, followed by Q&A.
We also have a slide presentation available on our Investor Relations website that will coincide with todays call, which you can find on the financial results section at IR that ring central Dot com.
Some of our discussion and responses to your questions will contain forward looking statements regarding the company's business operations branch performance and outlook.
These statements are subject to risks and uncertainties some of which are beyond our control and are not guarantees of future performance actual results may differ materially from our forward looking statements and we undertake no obligation to update these statements. After this call for a complete discussion of the risks and uncertainties related to our business. Please refer to the information contained in our filings with the Securities and Exchange Commission.
As well as today's earnings release.
Unless otherwise indicated all measures that follow are non-GAAP with year over year comparisons a reconciliation of our GAAP to non-GAAP results is provided with our earnings release and in the slide deck for certain forward looking guidance a reconciliation of the non-GAAP financial guidance to the corresponding GAAP measure is not available as discussed in detail in the slide deck posted on our Investor Relations website.
That I will turn the call over to Florida.
Good afternoon, and thank you for joining our second quarter earnings Conference call.
This has been a busy quarter for ring central.
I know you've likely seen the exciting news that Derek Ruby I T has been appointed as ring Central next CEO effective August 28.
I will be transitioning to executive chairman on that date.
I'd like to extend a warm welcome to Derek and we'll talk more about this later on in the school.
I also want to take a moment to say a few words about more karti Bhatt, who will be leaving the company in the coming weeks to pursue other opportunities.
Mark has played a pivotal role building out our team evolving our product road map, expanding our partner ecosystem shaping our winning culture and driving meaningful efficiencies in the business.
On behalf of myself, the board and the entire team well with small all the best in his future endeavors.
On the corporate development side.
Last week, we announced the acquisition of the event and session product line from coffee is a leading provider of online audience engagement technology.
Carbon event.
Wows users to easily set up complex virtual and hybrid events and fits well with our strategy of delivering more doors in the life and engage them. If you did.
Meetings and events experiences for customers or is it competitive bright sport.
The technology from copying provides us with a complete portfolio that now includes meetings webinar rooms.
And virtual and hybrid events.
I would like to welcome copying events and concession talented team does it ring central family.
Now, let's turn to the quarter.
This is Mike what are you, earning school this year.
Ill offering central.
Oh, no I first earnings call nearly 10 years ago, we reported $261 million in a R. R.
Today this notwithstanding.
Over $2.2 billion.
10 years is a long time and I'm proud to say, but have not ever missed our financial guide them. During this period.
Today is no exception.
Q2 was another solid quarter as we continued to execute against our plan of delivering sustainable profitable growth and continued innovation.
For the second quarter total revenue grew 11% above the high end of our guidance range and error grew 12%.
Operating profit margins increased eight percentage points versus last year to 19, 4% and another quarterly record and well above our outlook.
These improvements demonstrate the leverage in our model and our disciplined approach to spending.
The profit improvement also translated to another quarter of record free cash flows.
We're delivering this increased profitability, while also continuing to invest in innovation, which is the lifeblood of our company.
Bring central was founded and grew what was it complementary mega trend of connectivity mobility and cloud computing.
Great. That's really has been an early pioneer leveraging and contributing to all of these important innovations.
But now there's a new mega trend emerging.
It may prove to be the most impactful and that is because of a station intelligence.
Central again expect to be the beneficiary of and contributor to this major innovation.
Conversation intelligence.
Is highly relevant for business communications.
Potential enhancing employee productivity, improving customer service and positively impacting business outcomes.
We saw the potential of conversation intelligence several years ago in.
In December 2020, we acquired deep effects. It can rotation intelligence company, which is now the foundation of our ring fence AI platform.
In March of this year, we announced our third commercial product rings out for sale.
This march.
<unk> introduced significant new updates doing sensor sales.
And earlier today, we announced two new products ring fence for phone and ring CX, our new native intelligent Omnichannel contact center.
A few words about these products.
Rig counts for sale.
We've been innovating at a fast pace.
We have added many features to address customer feedback and improve our competitive positioning.
Some of these enhancements include.
Done integrations with leading third party applications, such as Salesforce com spot, Microsoft dynamics outlook calendar and Gmail calendar.
Deal, scoring which makes it easier for leaders to track pipeline health and see where the deals are progressing or are at risk.
Hey, I called you, which helped sales agents improve interaction based on a I analyzed customer sentiment and effectiveness of the outage.
And a I driven win loss analysis, which provides if that's keep selling insight from conversations to improve win loss rate.
Second ring sense football.
Leveraging conversational intelligence rigs that's for phone enables organizations to apply AI to their voice conversation and leverage deep insights to boost productivity and collaborate more efficiently.
A few key highlights include.
Well life description and close captioning.
And both golf families insights and sentiment analysis.
Ring Central East coasting billions of minutes of voice traffic for many millions of users bring.
Bring sense for phone, which allows them to be more effective on lifestyle as well as gain important insight via both called analysis.
Together, we believe it will lead to more efficient and productive conversation so as to drive improved business outcomes.
Last but not least rinks here.
We have seen great success, selling ring Central N V P with ring Central contact center that is powered by nice in Congo.
With a business that does not whether in excess of $300 million of era, we have conclusively proven the case for your guests and he gets integration.
Our joint solution with nice income is well differentiated as.
Integrate our respective magic quadrant, leaving products.
A unified offering from a single provider.
We continue to invest in this partnership and see significant continued potential.
However in listening to our customers we have recognized an additional need for a native intelligence contact center solution that would also be better suited to simple use cases.
That is why we're now introducing rinks, yes right.
<unk> is a powerful product.
Offers a native integrated 20, plus omnichannel experience for agents and administrators.
It also includes AI powered trucks with salaries and conversational insights.
Well its workforce engagement management.
Yeah, and OEM partner integration.
We believe rigs here will also be well received because of its ease of use and ability to be quickly deployed and is disruptive pricing.
That's for sale ring sense for phone and drinks here are all currently in control availability with expected general availability by the end of this year. It is early but we're getting good initial feedback.
In summary, it was another solid quarter highlighted by our strong innovation and operational execution.
Now back to the CEO succession.
When I found the twin central over two decades ago, we were a tiny unfunded startup with an ambitious mission to improve our businesses around the world communicate internally and with their customers.
From those combo. The game, we have become a recognized leader in our space and one of the largest beautifully south companies in the world.
September 2023 marked the 10th anniversary of our IPO.
Given the strong position we're in today.
And financially I believe this is the right time for a CEO succession and Derek is the right person for the job.
Direct is a highly accomplished senior business leader.
He has been a key member of our board since January which has given them an opportunity to get to know our business our team and our culture.
I believe that it is in a unique position to hit the ground running on day one.
As for myself My plan is to stay actively engaged in the business.
Focusing on what they love most.
<unk> innovation and product development.
I'm incredibly proud of what we have accomplished together and I'm energized about the future.
With this I will now turn the call over to Derrick for some additional remarks.
Thank you Vlad I consider it a distinct privilege to be ring central second ever C E O.
And on behalf of the Board, let me express our immense gratitude for all you have built.
You took this company from an idea to a multibillion dollar global enterprise, serving approximately 6 million paying end users and bringing together an expansive 15000 partner ecosystem.
I believe our potential is vast and we have an enduring foundation on which to build our future.
There's a lot and I are aligned on ring central core principles people and customers first ever present drive for innovation and a commitment to delivering results for all our stakeholders.
These will continue to be cornerstones of our operations as we drive greater performance and profitability through the focused execution of our strategic initiatives.
And importantly on behalf of the board and for me personally I would like to thank moved for the contributions that he has made during his tenure and wish him the best of luck.
Thank you Brad I'm very much looking forward to continuing our partnership in your new role.
I'm equally excited to be working with you again.
I'd also like to thank Paul for his valued contributions and partnership and wish him. The best of luck going forward.
I'll now provide the highlights from the second quarter, and then discuss our business outlook for the third quarter and full year.
Subscription revenue of 514 million was up 11% year over year and above our guidance range.
A ah was 12% versus last year to 2.22 billion.
Growth was driven by strength within key industry verticals, where our products are mission critical such as professional and financial services.
<unk> retail and public sector.
Additionally, contact center Ah was roughly 330 million up from roughly 300.
At the end of 2020 team.
The strong traction we are seeing in contact center is driven by continued demand from customers for a leading integrated ucas <expletive> cat solution.
An example of the power of our platform is our recent competitive win with Republic Airways, one of the largest regional airline in the U S.
The company's legacy tours require frequent maintenance.
Their on Prem phone system also did not integrate well into their contact center with Republic Airways relies on quickly with pilots and flight attendants to provide them with any urgent scheduled maintained it.
Ring central industry, leading five nines of reliability for the past 20 quarters.
That's called me and integrated cloud contact Center will help Republic airway solve these challenges all while saving them money.
Importantly, Republic Airways plans to utilize our new venue Central 13, 2.0 embedded App, which continues to see great traction in the marketplace.
Moving to profitability.
Be referring to non-GAAP results unless otherwise noted.
Our subscription gross margin was 82% consistent with last quarter.
Overall, our two was again above $30.
Customers continue to value our differentiated offering.
Our solid arpin supports our strong gross margin.
Operating margin rose 800 basis points versus last year to $19 four per cent another quarterly record.
The increase was driven by operating leverage and efficiencies generated across the business.
Most notably in sales and marketing, which was down 490 basis points versus last year.
Sales and marketing expense improved due to the efficacy of our marketing spend as well as the head count actions, we took last November .
As a reminder, those actions did not impact customer facing sales people.
Our increasing profitability translated into record quarterly free cash flow of 81 million on an adjusted Unlevered basis.
The improvements to our free cash flow continued to be driven by operating leverage efficiencies throughout the business and improving our free cash flow conversion.
Our robust free cash flow generation.
Two implying a dynamic capital allocation strategy that includes evaluating organic and inorganic investments we.
Purchasing shares and addressing our convertible debt maturity.
All three of these sectors.
First during the second quarter, we paid 427 million to repurchase 461 million in aggregate principal amount of our 2025 convertible notes.
The repurchase was funded with cash on hand, and 400 million from our term loan a.
We also entered into a swap agreement that fixed to floating interest rate on our term loan a.
The fixed interest on our term loan is approximately six 6% and can step down modestly as we further de leverage.
This result in a weighted cost of debt of approximately one 6% following the report yet.
Based on our second quarter results.
Our trailing 12 month net leverage ratio at three three times and based on our 'twenty to 'twenty three outlook. We continue to expect our net leverage to be less than three times as we exit the year.
Second in the quarter, we repurchased approximately $100 million of shares at an average price of approximately $30.
Additionally, during the second quarter.
Our board approved a new share repurchase authorization for $125 million effective through December 31st.
Right.
Lastly, as Bob mentioned last week, we acquired assets from hopping to augment our video offering.
Well we are excited about the addition, we expect the acquisition to have an immaterial impact on our revenue and expenses in 2023.
Before I provide our third quarter and full year guidance I'd like to provide you with additional detail on the macro trends we are seeing in the market today.
Macro trends are largely consistent with last quarter.
Sales cycles remain elevated versus last year and customer buying decisions continue to go through additional layers of approval.
We are also seeing less upsell within our existing base as customers have slowed hiring and rationalize their employee count in.
Importantly, marketing driven lead flow remains consistently strong demonstrating continued demand for on prem to cloud conversion.
Now turning to guidance.
In the third quarter of 2023, we expect.
Subscriptions revenue growth of 9% to 10%.
Total revenue growth of eight 9%.
non-GAAP operating margin of 18 to 18, 5%.
And non-GAAP EPS of <unk> 75 to 78 cents.
Note that we are reinvesting a portion of the operating profit outperformance, we delivered in the second quarter into innovation and go to market activities in the third quarter.
Specifically there are areas of strength in select vertical where investment including in AI.
Second to drive greater product differentiation and incremental demand.
Now moving to the full year 2023.
We continue to expect subscriptions revenue growth, 11% and total revenue growth of 10% to 11%.
And we now expect non-GAAP operating margin of 18, 5% to 19%.
At the midpoint. This is up more than 600 basis points versus last year, and 25 basis points above our prior outlook.
And non-GAAP EPS of $3 11 to $3.25.
Note that this outlook is inclusive of interest expense from our term loan a with our prior outlook of $3.19 to $3.25 did not include.
Additionally, last quarter, we noted that we would be able to achieve $280 million and free cash flow much earlier than our original target of 'twenty 'twenty four.
I'm pleased to share that we now expect to achieve adjusted Unlevered free cash flow of 270 to 290 million in 2023.
Roughly a full year earlier than we had originally expected.
We are well on our way as we have already generated $142 million in the first six months of 2023.
Our updated target demonstrates the power of the operating leverage inherent in our business.
It also speaks to the progress we are making on our efficiency initiatives.
All while continuing to invest in innovation and targeted go to market activity.
In summary, Q2, again demonstrated our ability to execute against our strategy of driving profitable healthy growth with robust free cash flow generation.
We believe our leading differentiated product offerings and focus on innovation, coupled with our scale and attractive business model.
I sent us well for continued success.
With that let's open the call for questions.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad. If you were using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two in the interest of time, please limit yourself to one question.
Our first question is from meta Marshall with Morgan Stanley . Please go ahead.
Great. Thanks, I'm glad sorry to see you stepping aside after so long looked hard.
I enjoyed working with you.
I guess just in terms of you know.
Terry obviously, he's been on the board, but just why you felt like he was the right choice. You know what you were kind of ongoing engagement with our company will be and you know maybe deciding to go with somebody kind of outside of our traditional software realm. Thanks.
Right Hi, Amit.
Ah, Okay, Firstly, I'm not quiet stepping aside and transitioning to the executive chair role.
I intend to stay actively involved.
Less so on the governance side or definitely will be.
You know a real CEO no questions asked but I'll.
I'll be around and are working on innovation product.
Introduction of long term vision and strategy et cetera, Oh and by the way for a disclosure delek us here in the room with US. So she can also and so it's almost a question directly but.
We both I believe it speaks to work for both of US we see it as the partnership moved.
These forward with specifically discussed that quite as great lengths and I also want to.
I'll remind you and the rest of the folks tariff has been on the board since December of last year. He has been an active board member are both member of our audit Committee and comp committees and she knows the company very very well.
It was very important for me and the board to have a seamless transition to have someone who understands the business understands the landscape very importantly shares our values. So there is a strategy that being profitable growth. So both worth of being very important brought to the billing growth and.
Direct is a well known gave you either are both of those are on both of those dimensions look to your question why not someone from the software industry direct east from the software industry.
And he's CAD.
A number of major accomplishments specifically, both at HB and prior and they tell you what are some of the Lee our CFO she's been working we started and for direct for a number of years maybe.
Maybe you can shed some light yeah, absolutely I'm Jaime that and so yes, I've known tech for over 25 years and didn't have the pleasure of working and reporting directly into him. When we were at HPE, where he did a spectacular job of really shifting the HPE portfolio to much higher growth.
Areas, such as Aruba, and he was a huge proponent of investing at the edge, which is where we saw.
A massive amount of growth and obviously H P is a much larger revenue.
Revenue base, so sometimes you don't see it in the aggregate amount, but the Aruba business was a significant grower and then he was also very central to the green like an as a service pivot and then finally, the high performance computing and AI divisions, which all grew well above the OS.
Our own portfolio and Terex has vast experience you know as both Tom and I and a very strong track record record as both a CEO and CFO and has successfully scaled businesses, whilst also driving growth and importantly profitability and cash flow. So we think he is just very very well rounded.
The next question is from Terry Tillman with true as Securities. Please go ahead.
Yeah, I mean, I have a question, but I did want to ask an extra I think I should be able to vlad or are you still going to be on these calls answering our <unk>.
Provocative questions.
And then I will ask my question.
Oh look I want to I want to reiterate are we you know direct is going to be the CEO .
But I would say is as appropriate historic wants me to participate maybe.
Maybe on the Cuba case basis.
Oh I'm wrong, you know I'm not sure I think gives us a sunset I still have a you know immense interest not just not just financially but also financial in this company for success.
And you know as you know me I tend to speak in my mind for better or worse. So I don't think this is going to stop anytime soon.
Congrats to you both my my question for the call is actually thrown away I think in the past you've talked about are our bookings how that would trend ahead of our topline growth.
We only have two quarters left and you know I don't know what kind of visibility you have in the second half, but could you could you give us an update on how youre thinking about.
Our bookings for the year and the growth rate there. Thank you.
Yeah sure Terry as you know, we don't typically guide on AOR and we.
We do have good visibility on the second half and that's why you know we guided and reiterated very much are our full year guide today and and raised our guidance on on operating margin.
As well as you know provided more color around free cash flow, but when you think about a R. R.
And in terms of providing your color we did about 60 million in bookings in the quarter. So that means we've generated about $120 million of net new <unk> bookings in the first half of 'twenty three.
And if you think about how our business has historically been slightly more second half weighted.
Whilst not guiding specifically, we think it's typical seasonality holds it's absolutely something that we should be able to achieve them and just if if you do you you didn't ask specifically around the guidance but.
Our reiterating the full year on both revenue and subscription revenue and our you know on on margins, we strongly exceeded the <unk> outlook by about 200 basis points.
<unk>, which is up 800 basis points year over year versus Q2 of a year ago.
So.
Cause of that we are we raised them the.
The midpoint of the margin guidance by 25 basis points for the full year, we're now looking for 18, 5% to 19%.
Margins and we continue to expect to exit the year at something at least 20% and you know we will always strive to do more.
The next question is from Samad Samana with Jefferies. Please go ahead.
Great. Good evening, Thanks for taking my questions I'll Echo glad it's been it's been great working with you and look forward to still talking to you every now and then so maybe just a question on the gas side of the business I know you mentioned, where the new product fits into the world, but I guess, if you can you double click on that maybe who do you see is that more of a greenfield opportunity or are you talking.
Getting replacement, if if so who would that be that you're going after with that product and then I actually have a C. Cassa <unk> follow up as well.
Sure Okay, well, thank you Soma.
Ah Okay, so as far as.
<unk> is I think what youre asking about in that announcement.
And Oh look.
Uh huh.
So what do we have this unique we have a.
She Cas business as part of our portfolio, that's well over $300 million in air or it actually makes us one of the largest C caps providers in the world.
But there is a twist here is the twist is that.
We are playing and playing extremely well in the unified Ucas D cast communications market.
This is where people we have in this integration is unique to this day between us and in contact and nice and conduct and August has been playing extremely well.
No.
So it wasn't new opportunities. So firstly, we are frankly up until now.
Not as we were locked out, but we don't really tend to see pure play requests language business request, if somebody needs. A just a contact center you know they would likely not even involve us in an RFP.
So we're doing that we're in C S.
We expect to be getting those opportunities and participate in directly so that's number 123.
Secondly, nice and content is a fantastic product.
Garden discuss it right they are up into the right.
One of the two global leaders without any question, but it's also an enterprise grade product. It's a high end product and unfortunately that means complexity and that means you know fairly healthy pricing.
We see an opportunity this is where the greenfield comes in do.
You came in.
Not just necessarily into smaller businesses, but into businesses with simpler we simply requirements. Okay and you know as they can into smaller they can be very large it depends on you know ziv organize their contact center. We believe the drinks. He asked it will be a viable player it will.
Compete.
Well based on features based on the fact that it has AI first it is a next generation product built a next generation.
Pure cloud architecture.
I think we'll be competitive if not disruptive.
And a little Guy telling people you you know certainly not the least of them had been asking okay. Well what is your contact center here's answer here. It is.
We're in beta now early results are promising for better feedback has been great. We're obviously learning on that feedback and incorporating and expect more to come and Italian was me now having more time to concentrate on.
You know little housekeeping items like getting products out.
Expect you now expect it will be a strong player in that area.
And if I could just add something there and you can just imagine that with proprietary economics. The contribution margin on rainy Ax will be written to the X will be much.
Much higher than what we drive today on our C. C C.
Understood and maybe just a quick question on the sea cast on the air or disclosure that 300 million plus alright data that you gave an adviser really robust growth right, Joe it's like <unk>.
North of 30%.
What I wanted to see if that math is right and then on for you cast that would make it kind of more like high single digit is that the right way to think about those two growth rates for the go forward future.
Yeah. So I think a couple of points I'd make so yes, we are very pleased with how the C. Cat business is growing and the last time. We updated you. We said that we would update you every other quarter on where we are so this quarter I'm proud to say we were now at 330 million of May our and you know what I would say there is that we've seen great.
Success, obviously in selling them ring central MVP with ring Central contact center and over 60% of our large 1 million plus TCP deals include both ucas and see Cas.
And what I would say there is we really are uniquely positioned relative to all of our competitors to offer that both you know you can't see cast in one single from one single vendor, which is what we truly believe particularly enterprise customers are looking for in terms of what we're seeing on the UK business, we still are growing well above the.
The market in terms of revenue market share absolutely.
And if you look at any of the third party data you know synergy a gartner etcetera. You know we are continuing to take a revenue share. There. So I would say absolutely see cash growing well above the market and you can still continuing to take revenue share relative to.
The overall market.
The next question is from Brian Peterson with Raymond James. Please go ahead.
Hi, Thanks for taking my question and congrats to Gladden Park, but certainly I wanted to follow up with you you mentioned that on some of the efficiencies that you've recognized youre going to be reinvesting in the third quarter I'd love to understand how much of that is more product oriented versus go to market oriented and how should we be thinking about you know potential efficiencies going forward.
Forward should should those be reinvested as well thank you.
Yeah. So great question and you know as I said earlier, we strongly exceeded our Q2 profit margin outlook. It was about a 200 basis point beat that we were at 19, 4%.
But we still need to invest in the business and there are areas of strength that we are seeing in select verticals, where investment, including an AI and cloud has said he's going to spend more time there.
Are expected to drive greater product differentiation and incremental demand. So in Q3, we will be investing in those areas given the opportunity we see and part of that will include investing in some of the higher performing marketing channels that we believe will drive more sales.
That being said you know if you look at the overall full year margin outlook that is very much still increasing.
But you know, we we do want to balance both investment for growth and profitability.
And you know you've heard us called this out and in prior calls, but upsell has been an area of the business that has where we've seen some challenges and we do feel that the new products being introduced will deserve investment and also will drive them.
Upsell motion and that we expect to see at the macro recovers.
The next question is from Kash Rangan with Goldman Sachs. Please go ahead.
First of all a lot I've got to say congratulations on a 10 year stint as public company CEO .
And they go congratulations on hiring a former equity analysts from Lehman brothers as your CEO for future of our industry and by the changed or is it really bright it looks like Oh.
Having said that I want I actually want to ask TARP question, if that's okay.
First of all very impressive that you speak six languages, maybe over a beer. One day you were telling me how you manage to do that that's very impressive, but I'm curious to get your take on what is it that you've learned about the company that you can share with us being on the board.
That gives you the conviction to stepping into the hot seat.
And then take questions from people like Us I look forward to working with you.
And what about that you've got tremendous background and we don't return equity analysts. Many years back have you been in the tech industry, a long time, what do you see as ring Central primary every company has challenged so what do you think is recurring centers primary challenge going forward and what is going to be that secret sauce that you bring with you back on but that's you know pivoting towards that news.
Second with the market or this acquisition I wanted to just be cognizant that there are challenges and how do you envision overcoming them in near future. Thank you so much and congrats.
Okay.
Well. Thank you very much for for the intro you maybe feel a bit younger because when I wasn't angry generalist. It was 25 years ago, and we work with the same team with some early so thanks for reminding me of this.
Let me answer first in by saying Ah I see a tremendous opportunity as being central in the vast potential.
The.
Opportunity that exists in Ucas and she cash combined that light as mentioned is quite formidable and it's something that I'm very keen on capitalizing on for the future and realizing their full potential those use cases that you've heard about from frontier Airlines are very telling.
These are use cases, where communications become more pervasive all the way from inside the office with a contact center all the way on two fields that work forces. Our sales forces anyway, you want to look at them. These are unique use cases that ring central can pursue and I'm very keen on making sure that we continue as being central to.
Innovating to grow because of practical reality is that in this industry. The very first lever for value creation is growth and we intend to continue to dial up the growth here for all our stakeholders and obviously our shareholders.
What stands in the way I got to be honest, it's a bit early for me to say what stands in the way. It is true that I have the vantage point of having spent nine months on the board.
Offering and I think I know it somewhat but I have to spend more time under the hood so to speak really in the.
The operations of the business to figure out what stands in the way.
And I will start doing so immediately upon my first full time day on the 28th of August but between now and then you know we're not gonna be waiting and whenever you're spending some time with the management team, making sure I understand where they're coming from so that we can have a real solid operation moving forward.
As a reminder, please limit yourselves to one question in the interest of time.
The next question is from George Sutton with Craig Hallum. Please go ahead.
Thank you and my congrats to glad and Wilson deterrent.
I am curious Charlie you had mentioned that marketing driven lead flow had been really the strength in this quarter.
I was just as interested that there was no mention of the large partnerships, the avaya and mitel and frontier as AT&T, usually the world can you just give us an update on the partnership side of the business.
Yeah, absolutely with pleasure so.
You called out Avaya and Mitel, specifically, we also have AWS and I'll talk to the GSP as global service providers as well so our bias as you know has recently come out of emerged from bankruptcy and.
They continue to execute on their new go to market notion that were enabled as part of our updated contract with them.
And we've seen slightly better traction and execution from from Avaya This quarter end.
As I said earlier, we do expect more of a back end loaded impacts from Avaya and we continue to expect that.
Mitel also continues to contribute seats at a healthy clip.
On AWS well, it's still early we have started to see some really good traction in the pipeline there and we're starting to see the first deals beginning to close.
We're on track to be live on the AWS marketplace later this year.
In terms of the GSP as you you talked to one of the ones that I would specifically call out is charter, where we're continuing to see extremely strong.
Execution, there and as you know there are a couple of other GSP that have recently come online, particularly in Europe , and you know where.
Seen a more and more attraction with Vodafone as well. So we have you know the legacy partners that are fully ramped and continue to contribute but then importantly, we have these new ones that we're beginning to see you know very solid impact from it.
So that's that's the story for partnerships and as you know they remain a very very important part of our overall go to market and you know we see a lot of scope for all of those partners to continue contributing for the rest of this year and beyond to our overall growth.
The next question is from Matt Stotler with William Blair. Please go ahead.
And thank you for taking the questions.
I'm glad you sorry to see you go.
But.
There's still be engage so look forward to Shannon occasionally going forward direct congrats on your position.
Just one question on <unk>.
Geographic specific question there were a number of press releases over the course of the quarter.
So we can India with regulatory compliance office openings planned hires et cetera.
Just double click on the opportunity you see in that geography.
And then my learning to the.
The business over time, and then how you think about competitively.
Competitive landscape there relative to what you see elsewhere around the globe.
Right well thank you firstly.
Look as far as India is concerned so firstly, it's trades, that's where we think we are actually literally the first foreign service provider to be allowed to offer this kind of.
Services.
In the area. So there's a huge accomplishment look oh.
Our primary.
Or sourced with forward, let's say would be to extent, India into our global office technology. So it was it means if you have a U S or some.
Some of US are international based business.
With offices in India than we would be able to deliver a.
Local dial tone in the legal matter. So that's really where we're seeing most of the demand at this point secondly, as you all know.
We have a strong and growing GSP practice.
And with this announcement.
And more importantly, with this capability, we are now much more likely to be able to partner with local service providers.
In powering up there would be to be offerings in the area.
And lastly is either an opportunity to engage directly again, there's a little bit farther down the list for US we first need to you know to do the first two but certainly an opportunity and needless to say India is a second.
Second largest country in the world population wise by far is the largest where we can legally do business given.
Restrictions in China, So definitely an area of growth for us as we move forward.
The next question is from Jim Fish with Piper Sandler. Please go ahead.
Hey, just as Quintin on board, Jim glad we wanted to echo the congratulations and well wishes for the new role and look forward to working with you Ted.
On the Microsoft teams to point of opportunity. We continue to your strong results from this product across your channel partners. When Microsoft talks about there are 17 million PSTN users on the platform do you think all 17 of those 70 million of those players make sense as the addressable market for the <unk> opportunity or are you more focus.
On the G tube K players and then maybe just on the penetration side, how do you how do you see that penetration of the opportunity to do that thank you.
Yeah, well, it's super hard to talk about all you know when you were talking about large numbers.
But again as.
As we look at the landscape.
Microsoft is packaged into Q1 is three and five tiers.
You won and the street have no business telephony included Ah can be up sold but not included.
And five dogs covered but you know is still.
Positioned behind Us features wise.
And you know global reach waste.
So look it's.
It's been a major introduction last quarter this bus water.
It's it continues to do well.
We are I think on the earnings.
In prepared remarks, we talked about Republic Airways.
Importantly, there are teams customer and the plan is for them to be using our embedded dialer.
You know part of the technology suite to the there are standardizing on we continue and you've heard me say this before teams has been and we believe for the foreseeable future will continue to be a growth driver for us.
We are where I would say at parity up until Q1 release Q1, I don't think we're at parity anymore. I think we're at Allegiant now as far as quality and user experience at our integrations has to offer so it is basically the best.
Gration between the north in the marketplace very importantly, you saw some of these other announcements from us and in particular bring sense for phone.
And I just want to stress that that will also be available.
In the Microsoft version of our of our packaging.
And by the way as a side comment. It will also be made available to all of our 15000 partners, including GSP and strategics. Okay. So it will all.
Please play in together will make us stronger.
You know the rest is a G. G M and you know getting to add beds and actually was directs the Germans and she is our absolute focus on operational excellence and efficiencies are you know, we're having pretty high hopes here.
We will be getting more at bats.
All in all segments, you know not so these being at the price.
The next question is from CD Panic right with Mizuho Securities. Please go ahead.
Uh huh.
Thanks for taking my question I also extend my best wishes to blood and Tarek.
Looking forward to working with you.
And I wanted to ask you about your growth at this point I understand you've talked about various factor influencing growth, but now that that sounds about right.
You know three emerging out of bankruptcy and there are partnership starts coming back when do you think that growth will trough and went through everything and what are the drivers you think all this product you talk about when do you think we'll start seeing growth to Reaccelerate again.
Yeah, well look.
Obviously, you know we've guided how we guided and.
No. This is probably not the best time to make forward looking remarks. So you'll just have to wait until you know our guide after this present quarter and you know how we guide next year and beyond.
But directionally.
Directionally.
For the first time in a very long time ring central now as he is a true multi.
Product of the company and we have a full quiver of product offerings addressing the needs of both employees. So E S.
As well as.
Our contact center.
Our centers.
And customers so CX.
So if you look at just the announcements.
Uh huh.
Last quarter.
We've Ah.
Augmented and completed our video portfolio was sharpens assets.
And for those of you who are new to this story shopping has been a unicorn.
Really high flying they've pioneered the virtual and hybrid events markets.
We have a number of you know who's who of names amongst their customers.
And and extremely well received product.
And we were just very fortunate to be able to acquire this asset from carbon.
So now we have VGA meetings rooms, webinars and now events.
And not just virtual events and obviously you know with.
Corporate would be no more purely virtual events are less interesting still interesting air fr is still expensive ways away okay.
But.
Hybrid events, which is what has happened has been making.
Investments prior to us getting involved and we continue to do to double down themselves. They can tell you that so this.
Really does complete our portfolio there.
In particular, Microsoft doesn't seem to have an events product.
So this would be one good area to differentiate and look in general what we find is if we are in an account and <unk>.
Customer gets exposed to ring.
Because those customers tend to stay with us. So we view all of these are as you know a springboard.
To get into accounts and then.
You know, our lend and expand from there so the adjustments the video side than we have room CX and Theyre already addressed that we're in now we have our own native.
Standalone as well as integrated.
Contact center product.
That was.
Was it will be disruptive.
On features on positioning and pricing.
And on just the values that it generates okay. So let's do the answer is the skull.
<unk> opportunity.
And look it's interesting.
News of late late breaking news here is that zoom.
I guess changed the terms of service.
And you know us now and now it seems that there'll be training.
On their.
Their customers data well, we don't do that you know we have other means of trading trading system training that we're.
We are doing and intend to be doing will be on customer response data.
To enhance results with that particular customer not not not intermixing. So we think that with that and besides that we are moving billions upon billions of minutes, we're serving millions of direct customers, but if you think about it its deaths or conscious of mirrors.
<unk> of callers, who get to experience or in central So the fact that week evens as scale breadth and depths of our network and partnerships that we're now able to.
Two interim.
Intelligence into all of those conversations.
Big step so look again without changing the guide we think we're well positioned.
We think the product is.
As you know is well differentiated more so than in.
Anytime in the last few years.
The team is energized.
You know Mark has done an outstanding job in keeping the ship stadia last few years or last 18 months, but now we have a new blood to come again.
With storage and I'm sure you'll be bringing in his own ideas and his.
There's one playbook that we think will surgery and cap. So again, you know upward and onward and Oh.
Hopefully, we won't let anyone down.
Yeah.
The next question is from Ryan Koontz with Needham. Please go ahead.
Thanks for the question I wanted to follow up on the AI capabilities. It sounds like you've got a great team there.
From deep effects, how do you think about the infrastructure requirements for that are in house versus building your own versus public cloud partners can you talk a little bit about that and how that can affect the model going forward on cash flow et cetera. Thank you.
And it sounded percent public cloud.
Infrastructure.
Yes.
So the short answer but.
Okay.
All high margin.
This concludes our question and answer session and the conference is also now concluded. Thank you for attending today's presentation. You may now disconnect.
Okay.
Okay.
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No.
Right.
Yes.
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