Q1 2024 RingCentral Inc Earnings Call

Operator: Thank you for standing by. This is the conference operator. Welcome to the RingCentral first quarter 2024 earnings conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After your presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then 0. I would now like to turn the conference over to William Wong, Vice President, Investor Relations. Please go ahead.

Thank you for standing by this is the conference operator, welcome to the ring Central first quarter 'twenty 'twenty four earnings conference call.

Operator: As a reminder, all participants are in listen only mode and the conference is being recorded.

Operator: After your presentation there'll be an opportunity to ask questions. During the question King You May Press Star then one on your telephone keypad.

Operator: Need assistance during the conference call, let me see when an operator by pressing star Zero I would now like to turn the conference over to William Wong Vice President Investor Relations. Please go ahead.

William Wong: Good afternoon, and welcome to ring Central <unk> first quarter 2024 earnings Conference call. Joining me today are watch finished founder chairman and CEO and suddenly per our CFO.

William Wong: Good afternoon, and welcome to RingCentral's first quarter 2024 earnings conference call. Joining me today are Vlad Shmunis, Founder, Chairman, and CEO, and Sonalee Parekh, CFO.

William Wong: Today will include prepared remarks by flat and Italy, 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 type brings central Dot com.

William Wong: Our format today will include prepared remarks by Vlad and Sonalee, followed by Q&A. We also have a slide presentation available on our Investor Relations website that will coincide with today's call, which you can find under the financial results section at ir.ringcentral.com. Some of our discussion and responses to your questions will contain forward-looking statements regarding the company's business operations, financial 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.

William Wong: Our discussion and responses to your questions will contain forward looking statements regarding the company's business operations financial performance and outlook. These statements are subject to risks and uncertainties some of which are beyond our control. They are not guarantees of future performance.

William Wong: 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 in today's earnings release. Unless otherwise indicated, all measures that follow are non-GAAP with a year-over-year comparison. Reconciliation of all 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.

William Wong: 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.

William Wong: Today's earnings release.

William Wong: Ive indicated all measures that follow are non-GAAP with year over year comparison reconciliation of all GAAP to non-GAAP results is provided with our earnings release and in the slide deck for certain forward looking guidance, a reconciliation of non-GAAP financial guidance to the corresponding GAAP measure is not available as discussed in detail in the slide I posted on our Investor Relations website with that I will turn the call over to flat.

William Wong: With that, I'll turn the call over to Vlad.

Vladimir G. Shmunis: Good afternoon, and welcome to our first quarterly conference call. We had a solid start to the year.

Vlad: Good afternoon, and welcome to our source water Com started school.

Vlad: We had a solid start to the year.

Vladimir G. Shmunis: In Q1, total revenue rose 9% to $584 million, above the high end of our output. ARR rose 10% to $2.4 billion, with enterprise up 13% for the fourth consecutive quarter. Consistent with our strategy of driving profitable growth, we delivered a record quarter of profitability with operating margin rising to approximately 21%, which was well above our outlook for Q1. I am also proud of the material progress we have made on reducing stock-based compensation, as we delivered another quarter of year-over-year improvement in SBC as a percent of revenue.

Vlad: In Q1.

Vladimir G. Shmunis: Revenue rose, 9% to $584 million above the high end.

Vladimir G. Shmunis: Hey, Robert Rose, 10% due to a pause for billing with enterprise up 13% for the fourth consecutive quarter.

Vladimir G. Shmunis: Consistent with our strategy of driving profitable growth, we believe on a record quarter for profitability with operating margin rising to approximately 21%, which was well above our outlook for Q1.

Vladimir G. Shmunis: I'm also proud of them.

Vladimir G. Shmunis: Material progress, we have made on reducing stock based compensation.

Vladimir G. Shmunis: What are you a believer and another quarter of year over year improvement in SBC as a percent of revenue.

Vladimir G. Shmunis: Our execution in driving profitable growth has already resulted in an approximately four <unk>.

Vladimir G. Shmunis: Our execution in driving profitable growth has already resulted in an approximately 4x year-over-year increase in non-GAAP operating profits left at the head. Improvements in SBC, combined with our share repurchase program, are expected to result in our full year fully diluted share count declining year over year for the first time in our history. Speaking of making history,

Vladimir G. Shmunis: Year over year increase in non-GAAP operating profit less that'd be.

Vladimir G. Shmunis: Improvements in S E T.

Vladimir G. Shmunis: With our share repurchase program.

Vladimir G. Shmunis: Is expect to result in a full year fully diluted share count declined year over year for the first time in our history.

Vladimir G. Shmunis: Speaking of making history.

Vladimir G. Shmunis: I'm excited to share that in Q1, we signed our largest UCAS heat deal ever. We won a competitive RFP and sold 40,000 seats to a Fortune 500 retailer with over $20 billion in revenue. With RingCentral, this customer will be able to address their main pain points, which include dropped calls, long hold times, inadequate call reporting, and lack of advanced voice features. In this mega deal win, RingCentral will be replacing their legacy solution, Skype for Business, demonstrating our ability to win against Teams phones while operating within the Teams ecosystem. In fact, the majority of our enterprise customers have Steam, and in Q1, more than half of our large $1 million TCB deal was for customers that are utilizing our solution integrated with and alongside Microsoft Steam.

Vladimir G. Shmunis: I'm excited to share that in Q1, we signed our largest U K E deal ever.

Vladimir G. Shmunis: We won a competitive RFP and so what is thousands of feet.

Vladimir G. Shmunis: Fortune 500 retailer with over $20 billion in writing.

Vladimir G. Shmunis: We're doing central this customer will be able to address their main pinpoint which includes dropped call long haul time in magic, what's called reporting and Black box.

Vladimir G. Shmunis: With features.

Vladimir G. Shmunis: In this mega deal win rigs down Joe will be replacing their legacy solution Geismar business, demonstrating our ability to win Yep seems fone, while operating within the ecosystem.

Vladimir G. Shmunis: In fact.

Vladimir G. Shmunis: The majority of our enterprise customers have seen in Q1 more thing so far a large $1 million GCB deal one or two customers that are utilizing our solution integrated with and alongside Microsoft teams.

Vladimir G. Shmunis: Importantly, this win was in one of our gold verticals, which include healthcare, financial and professional services, retail, and public sector. We are mission critical in this vertical, and we win given our unmatched reliability, ability to solve complex use cases, our integrated UCAS and TCAS platform, and our thousands of available integrations. These verticals have been a key growth driver, especially in enterprise, and we believe that there are at least 100 million seats in this vertical that we can convert over time.

Vladimir G. Shmunis: Importantly, this win was.

Vladimir G. Shmunis: In one of our gold vertical which include health care financial and professional services retail and public sector.

Vladimir G. Shmunis: We are a mission critical it was it started to go and.

Vladimir G. Shmunis: When you were given our unmatched reliability ability to so complex use cases.

Vladimir G. Shmunis: Our integrated you cats, you've got last fall.

Vladimir G. Shmunis: <unk> thousand available integration.

Vladimir G. Shmunis: As this article.

Vladimir G. Shmunis: A key growth driver, especially in enterprise.

Vladimir G. Shmunis: And we believe.

Vladimir G. Shmunis: There are at least how does it mill N C.

Vladimir G. Shmunis: So that we can convert overtime.

Vladimir G. Shmunis: Let me now give you more color on why do we win which is centered around our guiding principles or trust innovation and partnerships.

Vladimir G. Shmunis: Let me now give you more color on why we went, which is centered around our guiding principles of trust, innovation, and partnerships, or TIP, as we call it. [inaudible] We achieved five nines uptime for the 23rd trade quarter. In fact, over the past year, we've reached a new milestone of six nines.

Vladimir G. Shmunis: As we quote.

Speaker Change: Sure drew.

Vladimir G. Shmunis: We achieved five nines uptime or the way you start drinking water in fact over the past year, we've reached a new milestone of six nine.

Vladimir G. Shmunis: Our cloud platform is carrier-grade, secure, standards-compliant, and battle-tested and continues to be a wide competitive mode and the key differentiator. Another core strength is our ability to solve complex use cases and integrate into customers' commonly used horizontal and vertical specific applications, especially in our Gold version. We offer these customers a large breadth of business communications APIs, as well as industry-specific integration, workflows, and certification. For example, within the healthcare vertical, we integrate into patient data management applications such as EPIC and Cerner, as well as meet CHITRA and HIPAA compliance requirements. These customers can create workflows based on the specific needs of their business.

Vladimir G. Shmunis: Our cloud platform is get real great. Thank you.

Speaker Change: Sure Dan This is compliant and battle tested.

Vladimir G. Shmunis: Continues to be a wide competitive moat and the key differentiator.

Vladimir G. Shmunis: Another core strength is our ability to solve complex use cases and integrate into the most commonly used car example, and vertical specific applications, especially in our golden articles.

Vladimir G. Shmunis: We offer these customers.

Vladimir G. Shmunis: A large breadth of business communications, API as well as industry specific integration workflow and simplification.

Vladimir G. Shmunis: No.

Vladimir G. Shmunis: Within the healthcare vertical.

Vladimir G. Shmunis: We integrate into patient data management application that just yet.

Vladimir G. Shmunis: And so are there as well as meet.

Vladimir G. Shmunis: I try and keep a compliance requirement.

Vladimir G. Shmunis: As these customers can create workflow based on their specific needs of their businesses.

Vladimir G. Shmunis: For example, healthcare providers can use RingCentral's API to send prescriptions directly to the pharmacy system electronically and automatically trigger appointment reminders via SMS. Additionally, our market-leading UCAS solution, integrated with the CCAS platform, supports a wide variety of use cases and is also a vital differentiator. With RingCentral, companies have the ability to streamline workflows with our advanced tools and integration. This was a key factor in why Sanitas, a Fortune 500 operator of medical centers in the US, selected RingCentral this quarter to power its communications platform. With RingCentral, Sanitas will be able to provide their customers with a unified, seamless experience across integrations such as scheduling, billing, and general inquiries.

Vladimir G. Shmunis: For example, health.

Vladimir G. Shmunis: Care providers can use green Central's API two prescription directly to this pharmacy system electronically.

Vladimir G. Shmunis: Particularly through the appointment reminders via SMS.

Vladimir G. Shmunis: Additionally, our market, leading ucas solution integrated with the Ucas platform supports a wide variety of use cases, and there's also invite though differentiator wisdom.

Vladimir G. Shmunis: What's your own central companies together, the ability to streamline workflows with our advanced tools and integration.

Vladimir G. Shmunis: This was a key factor in why is that.

Vladimir G. Shmunis: Fortune 500, operator of medical centers in the U S selected central this quarter to power its communications platform.

Vladimir G. Shmunis: With rent central and users will be able to provide their customers with a unified experience across integration that just hey, Julien building in general in place.

Vladimir G. Shmunis: We believe this should drive increased revenue and patient retention from improved customer experiences as well as lower costs from the increase in employee efficiency that our industry-leading integrated UCAS and CCAS platform provides. These are just two examples of our robust progress in new customer acquisition activity in Q1. But equally as important is our ability to retain existing customers and maximize customer lifetime value.

Vladimir G. Shmunis: We believe this should drive increased revenue and patient redemption from improved customer experiences as well as lower cost from the increase in employee efficiency, our industry, leading integrated ucas platform.

Speaker Change: Last one from me.

Vladimir G. Shmunis: These are just two examples of our robust progress in new customer acquisition activity in Q1.

Vladimir G. Shmunis: But equally as important is our.

Vladimir G. Shmunis: To retain existing customers and maximize customer lifetime value.

Vladimir G. Shmunis: At this point, our renewed focus on customer care is resulting in improved growth retention and a better NPS score. The combination of better gross retention, improving micro trends, and the introduction of our new products should drive higher net retention rates. Now on to innovation.

Vladimir G. Shmunis: On this point a renewed focus on customer care is resulting in improved gross redemption and better NPS scores.

Vladimir G. Shmunis: The combination of better gross retention, improving micro macro trends and the introduction of our new products should drive higher net retention going forward.

Vladimir G. Shmunis: Now onto innovation.

Vladimir G. Shmunis: This past quarter, we announced a name change of our flagship industry-leading U.K. solution from MVP to Ring EX, which stands for RingCentral Employee Experience. With this change, we're signaling our commitment to continuous innovation based on emerging generative AI technology. We started off on a high note with RingEX and RingSense AI, as we won the overall Best of Enterprise Connect award in March. One key reason we won was because of our differentiated, industry-first, real-time AI for voice interaction.

Vladimir G. Shmunis: This past quarter, we announced a name change of our flagship industry, leading UK solution.

Vladimir G. Shmunis: From N V P to E X, which stands for central employee experience.

Vladimir G. Shmunis: With this change we're signaling our commitment to continuous innovation based upon emerging generally if I did not.

Vladimir G. Shmunis: Sure.

Vladimir G. Shmunis: We started off on a high note with the rig yeah.

Vladimir G. Shmunis: Ring sense AI.

Vladimir G. Shmunis: As we won the overall best of Enterprise Connect award in March.

Vladimir G. Shmunis: One key reason, we want is because of our differentiated industry source real time AI for voice interaction.

Vladimir G. Shmunis: With this feature, users are able to capture key decisions and track action items in real time, enabling on-the-spot referencing and heightened accuracy. It is early days, but users are already seeing significant time savings. For example, one customer highlighted that for an average 20-minute call, real-time notes save them five minutes post-call, while also keeping all their notes attached to the contact to allow for easy referencing in future interactions. Voice-driven data has historically been largely inaccessible at scale as the data has been siloed.

Vladimir G. Shmunis: Was this teacher users are able to capture key decisions and drive action item in real time, enabling.

Vladimir G. Shmunis: Spot referencing and accuracy.

Vladimir G. Shmunis: It is early days, but users are already seeing significant time savings.

Vladimir G. Shmunis: For example, one customer highlighted that for an average 20 minutes called real time note save them five minutes. Both school, while also keeping older nodes attached to the content to allow for easy referencing in future interactions.

Vladimir G. Shmunis: Voice driven data historically has been largely inaccessible at scale and the data has been siloed.

Vladimir G. Shmunis: With RingSense AI now being an integral part of RingGX, we empower customers to take advantage of the billions of minutes of conversations that take place on our platform. Our customers will thus be able to automate manual tasks, unlock deeper insights, and create more streamlined employee and customer workflows. Continuing on the theme of innovation, let me now share progress on our new product.

Vladimir G. Shmunis: With drinks, that's AI now being an integral part of Ricky.

Vladimir G. Shmunis: We empower customers to take advantage of the Bill is just minutes of conversation.

Vladimir G. Shmunis: Take place on our platform.

Vladimir G. Shmunis: Our customers will be able to automate made note that.

Vladimir G. Shmunis: Unlock deeper insights and create more streamlined employee and customer workflows.

Vladimir G. Shmunis: Continuing on the Cmos innovation, let me I'll share progress on our new products.

Vladimir G. Shmunis: First, RingCX, our AI-powered contact center, which is simple to use and easy to deploy, and which provides agents with all-in-one capabilities across 20-plus digital channels, including Auto Screen Parks, Contact matching in the CRM, case and ticket creation, and interaction logging for all voice and digital interactions, all from an intuitive user interface. We now have over 200 RingCF customers, almost double versus first quarter 2023. RingCX is now available in six countries: the U.S., Canada, the U.K., France, Germany, and most recently, Australia.

Vladimir G. Shmunis: Sure Rick Shea, our AI powered contact center, which is simple to use and easy to deploy.

Vladimir G. Shmunis: This should provide agents with all in one capabilities across 20, plus digital channels.

Vladimir G. Shmunis: Domestic screen Pops.

Vladimir G. Shmunis: Contact matching in the CRM, Jason Kidd ticket creation and interaction of logging for all boys and digital interaction.

Vladimir G. Shmunis: All from.

Vladimir G. Shmunis: Into Egypt user interface.

Vladimir G. Shmunis: We now have over 200 rigs, yes customers.

Vladimir G. Shmunis: Almost doubled versus fourth quarter 'twenty to 'twenty three.

Vladimir G. Shmunis: <unk> is now available in six countries.

Vladimir G. Shmunis: The U S Canada the UK.

Vladimir G. Shmunis: France, Germany, and most recently Australia.

Vladimir G. Shmunis: In fact, one of our newest RingCES customers is from outside the U.S., Roseram Metropolitan Borough Council in the United Kingdom. They purchased over 200 RingCF seats and over 3,000 Ring EX licenses in Q1. Two key factors for our win.

Vladimir G. Shmunis: In fact, one of our newest Brink's U S customer is from outside the U S.

Vladimir G. Shmunis: Rosa Ram.

Vladimir G. Shmunis: Metropolitan Borough Council is the United Kingdom.

Vladimir G. Shmunis: They purchased over 200 rigs CFC and over 3000 ranked E X licensees in Q1.

Vladimir G. Shmunis: Two key factors for our with our unmatched reliability.

Vladimir G. Shmunis: One, our unmatched reliability as a prior cloud provider had consistent outages. And two, our fully integrated Ring EF and Ring CF solution. They will be using RingCF to provide a range of services for their almost 300,000 residents, including addressing incoming social care, planning, housing, and business regulation and enforcement questions. We are rapidly innovating with RingCX. We added over 300 features in Q1, bringing the total to over 1,000.

Vladimir G. Shmunis: The prior cloud provider got consistent outage and to a fully integrated rig E F and G S solution.

Vladimir G. Shmunis: They will be using green yeah to provide a range of services. What is there almost 300000, driven including addressing incoming social care Blaine housing and business regulation enforcement question.

Vladimir G. Shmunis: We're rapidly innovating with drinks yet.

Vladimir G. Shmunis: We added over 300 teachers in Q1, bringing the total to over one seven.

Vladimir G. Shmunis: Among the new features of RingCF are native integrations into Salesforce, HubSpot, ServiceNow, Zendesk, and Microsoft Dynamics. We have also opened the RingCX platform to enable a growing ecosystem of partners such as Google, Dialogflow, AgniG, Yellow.ai, Balto, and Collaborate. Our strength in voice, ease of deployment, use, and maintenance, and attractive pricing and packaging give us confidence that we will continue to see positive results from RingCX going forward. We also continue to see good traction with RingCentral for sale.

Vladimir G. Shmunis: The new features of Briggs, yet a native integration into Salesforce chop spot service now than death, and Microsoft Theyre not.

Vladimir G. Shmunis: We have also opened the rings the X platform to enable a growing ecosystem of partners such as Google.

Vladimir G. Shmunis: Dialog flow of energy yellow dot AI baotou and Columbia.

Vladimir G. Shmunis: Our strength in voice.

Vladimir G. Shmunis: So the deployment.

Vladimir G. Shmunis: Use and maintenance and out attractive pricing and packaging give us confidence that we will continue to see positive results from brings here going forward.

Vladimir G. Shmunis: We also continue to see good traction with ring fence what they.

Vladimir G. Shmunis: Our first product in the RingCentral portfolio, we have more than doubled our customer count sequentially in Q1 to over 600. Many customers are benefiting from the automated interaction summary, follow-up notifications, poll scoring, sentiment analysis, and performance management. This frees up salespeople's time, allowing them to focus on selling versus performing administrative tasks.

Vladimir G. Shmunis: Our source product in the <unk> portfolio.

Vladimir G. Shmunis: We have more than doubled our customer count sequentially in Q1 to over 600.

Vladimir G. Shmunis: Many customers are benefiting from the automated interaction summary.

Vladimir G. Shmunis: Notification bold scoring.

Vladimir G. Shmunis: The analysis and performance measure management. This frees up salespeople time, allowing them to focus on selling nurses performing administrative staff.

Vladimir G. Shmunis: For example, an insurance agency in the Midwest is using AI-driven insights for RingCentral sales to gain visibility into what's working and not working in the agency's sales and client services practice. RingCentral is able to monitor and glean insights from all their voice data. Stone, Word Choice, and Energy Sentiment, helping the customer identify valuable insights they would not have caught by listening to a random selection of agent conversations. And within our own sales organization, we are seeing RingCentral sales deliver both productivity and efficiency gains.

Speaker Change: Or is that.

Vladimir G. Shmunis: Insurance agency in the Midwest is using the AI driven insights for ring central sales to gain visibility into what's working and not working in the agency's sales and client service is breakfast.

Vladimir G. Shmunis: Ring sense is able to monitor and glean insights from older voice data.

Vladimir G. Shmunis: One word choice and sentiment L.

Vladimir G. Shmunis: Helping the customer identify valuable insights.

Vladimir G. Shmunis: Not to get caught by listening to a random selection of agents conversation.

Vladimir G. Shmunis: And within our own sales organization, we're seeing bring sensor sales deliver both predictability and efficiency gain.

Vladimir G. Shmunis: Our employees are now able to save at least two hours a week or about one full workday a month from using RingCentral's automated note summary feature. That is one extra day to speak with customers and potentially win more deals.

Vladimir G. Shmunis: Our employees are now able to say at least two hours a week or about one workday in months from using Green census, but they made it no somebody features.

Vladimir G. Shmunis: That is one extra day to speak with customers and potentially win more deals.

Vladimir G. Shmunis: Lastly, even which provides us with the opportunity to expand into new persona outside of our typical base, including language business decision makers.

Vladimir G. Shmunis: Lastly, events, which provides us with the opportunity to expand into new personas outside of our typical base, including line of business decision makers. RingCentral Events saw a roughly 25% sequential increase in new logos in the first quarter. New AI features for events, such as AI Writer and QA Categorization, further enhance the value that customers receive.

Vladimir G. Shmunis: Bring central event, so roughly 25% sequential increase in new logos in the first quarter.

Vladimir G. Shmunis: New AI teacher for event that you're a writer and Q eight categorization GA in the value that customers see.

Vladimir G. Shmunis: These features also continue to differentiate RingCentral from the competition and work as important contributors to customers such as the Detroit Pistons, Vanderbilt University, a Fortune 50 technology company, and one of the largest media companies in the world, selecting RingCentral events during the first quarter. Last but not least, partnerships, which are key to continue to scale our multiproduct distribution. We have a diverse network of partners, which includes over 15,000 channel partners and a number of large strategic OEM partners, such as AWS, and some of the largest global service providers, which include AT&T, BT, Charter Communications, Deutsch Telekom, Telus, and Vodafone.

Vladimir G. Shmunis: These features also continued to differentiate ring central from the competition and were important contributors to customers that use the Detroit system Vanderbilt University, a fortune 50 technology company and one of the largest media companies in the world selecting ring central event during this.

Vladimir G. Shmunis: First quarter.

Vladimir G. Shmunis: Last but not least partnerships.

Vladimir G. Shmunis: Which are a key to continue to scale, our multi product business.

Vladimir G. Shmunis: We have a diverse network of partners, which includes over 15000 General partners and number of large strategic OEM partners.

Vladimir G. Shmunis: The U S and some of the largest global service providers, which include AT&T BG Charter communications Deutsche Telekom.

Vladimir G. Shmunis: And Vodafone.

Vladimir G. Shmunis: We also continue to expand this network and announced our new partnership with Optus, Australia's second largest provider of telecommunications services, during the first quarter. GSPs are a key growth driver for RingCentral and are growing above our overall growth rate. We saw good traction with this cohort in Q1, including with Vodafone, where we won a 1000 seat plus deal with a large European retailer. Regarding Hawaii, they continue to be the world's largest holder of on-prem UC and CCC.

Vladimir G. Shmunis: We also continued to expand its network and announced a new partnership with Optum.

Vladimir G. Shmunis: Trail is second largest provider of telecommunication services during the first quarter.

Vladimir G. Shmunis: G S P. A ricky gross driver for central and growing above our overall growth rate.

Vladimir G. Shmunis: We saw good traction with this cohort in Q1, including with Vodafone, where we won 8000 seat plus deal with a large European retailer.

Vladimir G. Shmunis: Regarding goodbye.

Vladimir G. Shmunis: Continue to be the world's largest holder of on Prem do you see empty seats.

Vladimir G. Shmunis: RingCentral continues to be Avaya's exclusive UCAS provider, and in Q1, we extended the term of our multi-year agreement and enhanced our GTM and innovation collaboration model. We expect to work even more closely with Avaya to position, market, and sell Avaya cloud Office by RingCentral to the millions of existing Avaya on-premises users. Stay tuned for additional joint product announcements at the upcoming Avaya ENGAGE conference next week. We believe that, as a whole, a broad partner network will be an important contributor to our continued profitable growth.

Vladimir G. Shmunis: Residential continues to be a bias exclusive ucas provider.

Vladimir G. Shmunis: Q1, we extended the term of our multiyear agreement and enhance our G T M and innovation collaboration model.

Vladimir G. Shmunis: We expect to work even more closely with avaya to position.

Vladimir G. Shmunis: Market and sell Avaya cloud office by region central to the Netherlands, but existing avaya.

Vladimir G. Shmunis: Avaya form for end users.

Vladimir G. Shmunis: June four additional joint product announcements.

Vladimir G. Shmunis: Upcoming Avaya engage conference next week we.

Vladimir G. Shmunis: We believe that doesn't hold a broad partner network will be will be.

Vladimir G. Shmunis: An important contributor to our continued profitable growth.

Vladimir G. Shmunis: In closing, Q1 was solid. We're executing on all our strategic priorities. Our core growth is stabilizing, our new products are demonstrating traction, our FDC is improving, and our free cash flow is expanding, demonstrating the strengths of our business and its inherent profitability. I am very excited about our future. With that, I will turn the call over to Sonalee.

Vladimir G. Shmunis: In closing Q1 was solid.

Sonalee: We're executing on all our strategic priorities our core growth is stabilizing our new products are demonstrating traction our SBC is improving and our free cash flow is expense demonstrating the strengths of our business and its inherent profitability.

Sonalee: I am very excited about our future.

Sonalee: Let me turn the call over to Sally.

Sonalee: Thanks, a lot.

Sonalee Parekh: I'll provide highlights from the first quarter and then discuss our business outlook for the second quarter and full year. In Q1, subscription revenue of $557 million was up 10% year over year, above the high end of our guidance range. ARR of $2.37 billion was up 10% versus last year. On a year-over-year basis, currency was neutral, while on a sequential basis, currency represented an almost $10 million headwind.

Sonalee: I will provide highlights from the first quarter and then discuss our business outlook for the second quarter and full year.

Sonalee Parekh: In Q1 subscription revenue of 557 million was up 10% year over year.

Sonalee Parekh: But the high end of our guidance range.

Sonalee Parekh: A R. R. F 2.37 billion was up 10% versus last year.

Sonalee Parekh: On a year over year basis currency was neutral on a sequential basis.

Sonalee Parekh: Currency represented an almost $10 million headwind.

Sonalee Parekh: Enterprise ARR continues to perform well and rose 13% versus last year to $1.02 billion. We saw good traction with large customers, winning many $1 million plus TCB deals in our gold vertical. As Vlad highlighted, this includes a new Fortune 500 retailer that has committed to spending more than eight figures with us over the next few years. Now, moving to profitability. I'll be referring to non-GAAP results, unless otherwise noted. Subscription growth margin was 82%, consistent with prior quarters. Overall, ARPU was again above $30.

Sonalee Parekh: Enterprise <unk> continues to perform well and rose 13% versus last year.

Sonalee Parekh: One point here too.

Sonalee Parekh: We saw good traction with large customers, winning many $1 million plus P. C b deal and our God protocols.

Sonalee Parekh: As Bob highlighted this includes the new Fortune 500 retailer that has committed to spending more than eight figures with us over the next few years.

Sonalee Parekh: Now moving to profitability.

Sonalee Parekh: I'll be referring to non-GAAP results unless otherwise noted.

Sonalee Parekh: Inscription gross margin was 82%.

Sonalee Parekh: As with prior quarters.

Sonalee Parekh: Okay.

Sonalee Parekh: It was again above $30.

Sonalee Parekh: Our new product ARPUs are solidly higher than current overall ARPUs. Over time, we expect new products to become increasingly accretive to overall ARPU and retention. Operating Margin rose 350 basis points versus last year to 20.7%, solidly above our guidance of 19.5%. The outperformance was driven by upside to our revenue guidance, as well as the timing of certain operating expenses. Importantly, we continue to remain disciplined in our spending, in particular in sales and marketing.

Sonalee Parekh: Our new product our planes are solidly higher than current overall.

Sonalee Parekh: Overtime, we expect new products become increasingly accretive overall ARPA and retention.

Sonalee Parekh: Operating margin rose 350 basis points versus last year to 27%.

Sonalee Parekh: Solidly above our guidance of 19, 5%.

Sonalee Parekh: The outperformance was driven by upside to our revenue guidance as well as the timing of certain operating expenses.

Sonalee Parekh: Importantly, we continue to remain disciplined in our spending.

Sonalee Parekh: In particular within sales and marketing.

Sonalee Parekh: Moving to free cash flow. We are now reporting and will guide to free cash flow, defined as net cash provided by operating activities less capitalized expenditure. This more closely reflects the cash flow generation of our business in a given period and includes cash paid for interest and other non-recurring items, such as restructuring, which we will call out separately. For example, in the first quarter of 2024, we generated a free cash flow of $77 million.

Sonalee Parekh: Moving to free cash.

Sonalee Parekh: We are now reporting and we will guide to free cash flow defined as net cash provided by operating activities less capitalized expenditures.

Sonalee Parekh: This more closely reflect the cash flow generation of our business in a given period.

Sonalee Parekh: And includes cash paid for interest and other nonrecurring items, such as restructuring, which we will call out separately.

Sonalee Parekh: In the first quarter of 'twenty 'twenty, four we generated free cash flow of 77 million.

Sonalee Parekh: This is net of cash paid for interest of $23 million and a non-recurring payment of $15 million, as well as $10 million of cash received from certain strategic partners. Excluding the impact of interest and these non-recurring items, free cash flow would have been $105 million compared to $61 million in the first quarter of 2023, representing over 70% growth. Moving to stock-based compensation, as a percent of total revenue, stock-based compensation fell to 15.6%, down 340 basis points versus last year.

Sonalee Parekh: This is net of cash paid for interest was 23 million.

Sonalee Parekh: And non recurring payment of 15 million.

Sonalee Parekh: As long as $10 million of cash receipts from certain strategic partners.

Sonalee Parekh: Excluding the impact of interest and these nonrecurring items.

Sonalee Parekh: Free cash flow would have been 185 million.

Sonalee Parekh: Compared to 61 million in the first quarter of 2020 three.

Sonalee Parekh: Presenting over 70%.

Sonalee Parekh: Moving to stock based compensation.

Sonalee Parekh: As a percent of total revenue.

Sonalee Parekh: Based compensation fell to 15, 6%.

Sonalee Parekh: Down 340 basis point versus last year.

Sonalee Parekh: We also remain disciplined out stock grant at both new and existing employees.

Sonalee Parekh: And continue to expect new grant Netapp forfeitures in 'twenty 'twenty four to be about half of 2020 three.

Sonalee Parekh: Moving to our balance sheet.

Sonalee Parekh: We also remain disciplined on stock grants for both new and existing employees and continue to expect new grants net of forfeitures in 2024 to be about half of the 2023 level. Moving on, During the quarter, we repurchased 2.4 million shares for $80 million under the plans previously authorized by our board of directors. Recently, our board increased our repurchase authorization by an incremental $250 million. We currently have approximately $375 million remaining on our total authorization, given our current valuation.

Sonalee Parekh: During the quarter, we repurchased two 4 million shares or $80 million under the plan previously authorized by our board of directors.

Sonalee Parekh: Recently, our board increased our repurchase authorization by an incremental 250 million.

Sonalee Parekh: We currently have approximately $375 million remaining on our total authorization.

Sonalee Parekh: Given our current valuation.

Sonalee Parekh: Strong and Growing Free Cash Flow and the significant progress we have made to bring down our leverage, we believe that share repurchase provides an attractive relative return. Moving to our Convertible.

Sonalee Parekh: Strong and growing free cash flow.

Sonalee Parekh: And the significant progress we have made in bringing down our leverage.

Sonalee Parekh: We believe the share repurchase provides an attractive relative return.

Sonalee Parekh: Moving to our kingbird.

Sonalee Parekh: We had 161 million of our 2025 convertible notes outstanding on March 31. There is no change in our plan shared last quarter to utilize our existing liquidity sources and a portion of our free cash flow to retire the 2025 convertible prior to its maturity date in March 2025. Our net leverage ratio, which declined year over year by over one turn to two and a half times at the end of Q1 2024, continues to trend downward as we expand our Adjusted EBITDA and reduce gross debt.

Sonalee Parekh: We had 161 million about 2025 convertible notes outstanding on March 31st.

Sonalee Parekh: There is no change in our plant and shared last quarter to utilize our existing liquidity sources and a portion of our free cash flow to retire the 2025 convert prior to its maturity date in March 2025.

Sonalee Parekh: Our net leverage ratio, which declined year over year by over one turn it two and a half times at the end of Q1 'twenty 'twenty four.

Sonalee Parekh: Continues to trend downward as.

Sonalee Parekh: As we expand our adjusted EBITDA and reduce debt.

Sonalee Parekh: Our low and improving leverage ratio.

Sonalee Parekh: Long double B credit rating.

Sonalee Parekh: Our Low and Improving Leverage Ratio, a strong Double B credit rating, significant liquidity, and strong free cash flow growth give us flexibility and a range of alternatives for addressing our 2026 convertible notes. Now, let me turn to the guys.

Sonalee Parekh: Michigan liquidity and strong free cash flow growth gives us flexibility and a range of alternatives for addressing our 'twenty 'twenty six convertible notes.

Sonalee Parekh: No.

Speaker Change: Let me turn to guidance.

Sonalee Parekh: Embedded in our guidance is the expectation that the macro environment and current business trends remain relatively stable, with no further material improvement or deterioration in conditions. With that in mind, for the second quarter of 2024, we expect subscription revenue growth of 9%. Total Revenue Growth of 8-9% Non-GAAP Operating Margin of 20.7%, slot versus the first quarter of 2024 and non-GAAP EPS of $0.87 to $0.88 for the full year. We are raising our revenue outlook to reflect our Q1 revenue outperformance.

Sonalee Parekh: Embedded in our guidance is the expectation that the macro environment and current business trends remained relatively stable.

Sonalee Parekh: With no further material improvement or deterioration in condition.

Sonalee Parekh: We now expect subscription revenue of $2.267 billion to $2.287 billion, representing growth of 8% to 9%, and total revenue of $2.379 billion to $2.399 billion, representing annual growth of eight to nine percent. We continue to expect non-GAAP operating margins of 21% and Stock-Based Compensation as a percentage of total revenue of approximately 16%. We are raising our non-GAAP EPS to $3.59 to $3.67, up from $3.50 to $3.58. As we now expect, 96 to 97 million will be diluted shares outstanding in 2024, down from 98 to 99 million shares previously.

Sonalee Parekh: With that backdrop for the second quarter of 'twenty 'twenty four we expect.

Sonalee Parekh: A description revenue growth of 9%.

Sonalee Parekh: Total revenue growth of <unk>.

Sonalee Parekh: Eight 9%.

Sonalee Parekh: non-GAAP operating margin of 27%.

Sonalee Parekh: Versus the first quarter of 'twenty 'twenty four.

Sonalee Parekh: non-GAAP EPS.

Sonalee Parekh: 87 to 88 cents.

Sonalee Parekh: For the full year.

Sonalee Parekh: We are raising our revenue outlook to reflect our Q1 revenue outperformance.

Sonalee Parekh: We now expect subscription revenue of 2.267 billion to 2.287 billion.

Sonalee Parekh: Representing growth of 8% to 9%.

Sonalee Parekh: And total revenue.

Sonalee Parekh: 2.379 billion.

Sonalee Parekh: 0.39, 9 billion, representing annual growth of 8% to 9%.

Sonalee Parekh: We continue to expect non-GAAP operating margin of 21%.

Sonalee Parekh: And stock based compensation as a percentage of total revenue.

Sonalee Parekh: At least 16%.

Sonalee Parekh: We are raising our non-GAAP EPS.

Sonalee Parekh: The $3 59 to $3 67.

Sonalee Parekh: Up from $3.50 to $3 and 58.

Sonalee Parekh: As we now expect 96 to 97 million fully diluted shares outstanding in 2024.

Sonalee Parekh: Down from 98 to 99 million shares previously.

Sonalee Parekh: Regarding free cash flow.

Sonalee Parekh: Regarding free cash flow, under our updated definition, we expect free cash flow of $385 to $390 million. Our outlook for $385 to $390 million includes cash paid for interest of $60 million and cash paid for non-recurring restructuring and other items of $20 million, as well as $25 million in cash received from certain strategic partners. Excluding interest and these non-recurring items, we are raising our free cash flow outlook from $415 to $420 million to $440 million to $445 million, up $25 million from our prior output.

Sonalee Parekh: Under our updated definition.

Sonalee Parekh: We expect free cash flow of 385 to 319 million.

Sonalee Parekh: Our outlook for $385 million to $390 million includes cash paid for interest of $60 million.

Sonalee Parekh: And cash paid for non recurring restructuring and other items of 20 million.

Sonalee Parekh: As well as $25 million cash received from certain strategic partners.

Sonalee Parekh: Excluding interest in these nonrecurring items, we are raising our free cash flow outlook from $415 million to $420 million.

Sonalee Parekh: 440, 445 million up 25 million from our prior outlook.

Sonalee Parekh: Our updated free cash flow guidance reflects the benefit we are seeing from better cash collection and lower Commission.

Sonalee Parekh: Our updated pre-cash flow guidance reflects the benefit we are seeing from better cash collection and lower commissions. We are also benefiting from a shift to annual upfront billing for some contact center customers. In summary, we had a strong start to the year and are raising our revenue and free cash flow expectations. Our leading differentiated products and unique go-to-market, combined with our scale and laser focus on driving profitability and free cash flow, position us well for creating long-term shareholder value. With that, let's open up the call for questions. Thank you.

Sonalee Parekh: We are also benefiting from a shift to annual upfront billing for some contact center customers.

Sonalee Parekh: In summary, we had a strong start to the year and are raising our revenue and free cash flow outlook.

Sonalee Parekh: Our leading differentiated product.

Sonalee Parekh: And unique go to market combined with our scale and laser focused on driving profitability and free cash flow.

Sonalee Parekh: Position us well for creating long term shareholder value.

Sonalee Parekh: With that let's open up the call for questions.

Speaker Change: Thank you.

Operator: Thank you. We will now begin the question-and-answer session. To join the question queue, you may press star, then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. In the interest of time, please limit yourselves to one question each. To withdraw your question, please press star, then 2. The first question comes from Kash Rangan of Bank of America. Please go ahead.

Speaker Change: We will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad.

Kasthuri Gopalan Rangan: Arizona acknowledging your request if you're using a speakerphone. Please pick up your handset before pressing any keys in the interest of time, please limit yourself to one question each.

Kasthuri Gopalan Rangan: Draw. Your question. Please press Star then two.

Operator: First question comes from Kash Rangan of Bank of America. Please go ahead.

Kasthuri Gopalan Rangan: Hi, Thank you very much Charlotte Goldman Sachs Black question for you.

Kasthuri Gopalan Rangan: Hi, thank you very much, Goldman Sachs. Vlad, I have a question for you.

Kasthuri Gopalan Rangan: You it looks like enterprise at all it's growing faster than the overall company. It looks like there's that's an area of relative strength for the company as evidenced by the 40000 Ucas deals that you signed can you tell us what is driving the strength in the enterprise.

Vladimir G. Shmunis: It looks like enterprise ARR is growing faster than the overall company. It looks like that's an area of relative strength for the company, as evidenced by the $40,000 UCAS deal that you signed. Can you tell us what is driving the strength in the enterprise, be it product or competitiveness or execution? One for you, if I could slip in, Sonalee.

Sonalee Parekh: It would be a product of competitiveness or execution standpoint, one for you if I could slip and suddenly you raised free cash flow guidance by a pretty meaningful about can you tell us congratulations and can you tell us how sustainable is the free cash flow growth rate of the company going forward. Thank you so much.

Sonalee Parekh: You raised your free cash flow guidance by a pretty meaningful amount. Congratulations. Can you tell us how sustainable is the free cash flow growth rate of the company going forward? Thank you so much.

Vladimir G. Shmunis: Great, thank you. Okay, so the first question.

Speaker Change: Great Hi, Catherine Thank you.

Sonalee Parekh: Okay. So the first question look we have a good product.

Speaker Change: Continues to be an industry, leading product we continue innovating as we mentioned we have Justin.

Vladimir G. Shmunis: However, one of the so overall award and the first to come back.

Speaker Change: The big deal and we wanted to.

Vladimir G. Shmunis: Specifically on.

Vladimir G. Shmunis: The strength of our differentiated AI for it.

Vladimir G. Shmunis: Look, we have a good product. It continues to be an industry-leading product. We continue to innovate. As we mentioned, we have just, for the first time ever, won the best of the show overall award at Enterprise Connect. That's a big deal, and we won it specifically on the strength of our differentiated AI offering.

Speaker Change: With respect to both.

Vladimir G. Shmunis: Both our enterprise as a whole, but this once you take a look what he said.

Vladimir G. Shmunis: <unk> deal in particular.

Vladimir G. Shmunis: Well, whether with encore, we're known for our reliability, we are known for and this is Bob.

Vladimir G. Shmunis: Nothing worth more.

Vladimir G. Shmunis: Multiple multiple years of five nines of availability and now I think with about a year and a couple of six months.

Vladimir G. Shmunis: With respect to both enterprises as a whole, but this one particular policy deal in particular, look, what are we known for? We're known for reliability. And it is bulletproof, not in wood. It's multiple, multiple years of five-nines availability, and now I think, what, about a year and a half of six-nines. That has not been matched, I don't think, in history.

Vladimir G. Shmunis: That's.

Vladimir G. Shmunis: It has not been much I don't think in history.

Vladimir G. Shmunis: I can tell you are you does not come by accident.

Vladimir G. Shmunis: I can tell you, it did not come by accident. There was a lot of blood, sweat, and tears that went into this over many, many years by many people, OK? And, you know, eventually, we got pretty good at it. We are uniquely positioned to address complex use cases. As noted in preferred remarks, we were chosen in this particular case because of our reliability, as well as use cases and, you know, some of the examples, ability to handle messages and just call times in general. Call times, what's happening during the call, is a big deal for many enterprises. This one, in particular, is a meaningful retailer. They also have, as part of their retail establishment; they host pharmacies.

Vladimir G. Shmunis: Was a lot of blood sweat and tears into this over many many years, but many people okay.

Vladimir G. Shmunis: Yeah.

Speaker Change: I'd like to live in that particular.

Vladimir G. Shmunis: We have a we.

Vladimir G. Shmunis: We are uniquely positioned to complex to address complex use cases.

Vladimir G. Shmunis: Uh huh.

Vladimir G. Shmunis: No it does.

Vladimir G. Shmunis:

Vladimir G. Shmunis: We were chosen.

Vladimir G. Shmunis: Okay.

Vladimir G. Shmunis: Reliability as well as use cases and.

Vladimir G. Shmunis: You know some of the examples.

Vladimir G. Shmunis: Our ability to handle our messages and Jeff Cold Temps in general hold times, what's happening during the hold is a big deal or maybe even the prizes.

Vladimir G. Shmunis: This one in particular.

Vladimir G. Shmunis: Meaningful retailer.

Vladimir G. Shmunis: We also have as part of the retail.

Vladimir G. Shmunis: Establishment, they fill those pharmacies so whatsoever.

Vladimir G. Shmunis: So what's happening during on call times is incredibly important. And, you know, we just have better ways of handling it. But I want to turn the mic over to Sonalee here in a sec, but I also want to give you the big picture.

Vladimir G. Shmunis: On coal dust.

Sonalee Parekh: Incredibly important and you know, we just have a better way okay.

Sonalee Parekh: But I'm going to turn the mic over to send over here, but I also wanted to give you the big picture Big picture is why do we win the enterprise yes.

Vladimir G. Shmunis: And the big picture is why we win in the enterprise is, again, a good product, robust, reliable, fully featured, but, very importantly, a huge amount of green field still left. I really want people to internalize the fact that in spite of all of the rhetoric about, oh, video is taking over, messaging taking over, collab taking over, which, by the way, we have all of those modalities as well, voice continues to be the primary mission-critical medium of communications for people.

Vladimir G. Shmunis: Yeah, good product, a robust reliable who the future, but very importantly, huge amount of greenfield still left I really want people to.

Vladimir G. Shmunis: And therein lies the fact that in spite of all of the rhetoric about Oh, you know video is taking over messaging didn't go over collateralized and go over which led to a a couple of those modalities as well, but the voice continues to be the primary mission critical.

Vladimir G. Shmunis: Medium of communication for people and especially in a gold goes it goes.

Vladimir G. Shmunis: And especially in our gold verticals, which include retail, health care, financial, et cetera, we can easily see 100 million seats out there. Self-Fostering just published a report saying that the prevalent modes of E2B communications are voice and e-mail and do not need messaging.

Vladimir G. Shmunis: Would you go to retail and whose health care.

Vladimir G. Shmunis: Includes a financial et cetera, we can easily see how the Midland ALDA.

Vladimir G. Shmunis: Sales forces and just published a report saying that.

Vladimir G. Shmunis: Rather than malls.

Vladimir G. Shmunis: He used to be communications, our voice and email.

Vladimir G. Shmunis: We get in messaging.

Vladimir G. Shmunis: And this is where we shine. And last but by far not least, why we continue winning there and why we have stabilized our growth in double digits is still our focus. There was rhetoric, as you know, relatively recently that RingCentral is abandoning enterprise. Well, this is our way of showing that not quite. We're not abandoning enterprise. We're doubling down on enterprise. We absolutely see a right to win there, and I tell you what: as we have focused on enterprise and will continue to focus on it, we will also be redoubling our efforts on SMB.

Vladimir G. Shmunis: And this is what we're showing.

Vladimir G. Shmunis: It is lovely, but far mostly.

Vladimir G. Shmunis: While we continue to win there and we have stabilized the gross.

Vladimir G. Shmunis: In double digits is still is a is focus.

Vladimir G. Shmunis: There was relatively because you know a relatively recently the drink central is abundant enterprise AR.

Vladimir G. Shmunis: Well this is a way of showing the north was.

Vladimir G. Shmunis: Not abandoning the enterprise, we're doubling down on enterprise, we absolutely see a right to win there and then tell you what we have focused on enterprise and we'll continue to focus.

Vladimir G. Shmunis: We will also be redoubling, our efforts on SMB.

Vladimir G. Shmunis: It's been relatively underperforming in a very challenging macro for SMBs, but we think that there is still a lot of juice left there. We also have a very strong position and a very strong and protectable right to win. So, I'm cautiously optimistic that we'll be showing good results there as well moving forward. Annalie. Thanks.

Vladimir G. Shmunis: It's been relatively underperforming in a very challenging macro for SMB, but we think that those still.

Vladimir G. Shmunis: Left there we also have a very strong position in the very strong and predictable right to win so let's say I'm cautiously optimistic that we'll be showing good results there as well moving forward.

Vladimir G. Shmunis: Okay.

Sonalee Parekh: Thanks a lot. And thanks, Kash, for the call out on free cash flow. Yes, we are very, very proud of what we delivered. As you know, last year, we took really important steps to transform the profile of our cost base. And we expanded operating margins by nearly 700 basis points a year over year. And the efficiencies and productivity benefits realized are now reflected in a big way, not only on operating margin, but we're seeing it in free cash flow.

Annalie: Thanks, Todd and thanks for the color I don't think has though yes. We are very very proud of what you feel like right now.

Sonalee Parekh: And you know last year, we took really important steps to transform the profile of our cost base and we expanded operating margins by nearly 700 basis points year over year.

Sonalee Parekh: With, if you look at where I've guided today, our unlevered adjusted free cash flow is expected to grow 34% this year, and free cash flow margins are expanding by about 370 basis points based on that updated guidance. So free cash flow margins are really starting to converge with operating margin. This is a trend that we sort of telegraphed because we're realizing the positive impact of the lower intensity of deferred commissions that we've amortized over the last couple of years through the P&L.

Sonalee Parekh: And the efficiency and productivity benefits realized are now reflecting in a big way not only on operating margin, but we're seeing it in free cash flow with them. If you look at where I guided today, our unlevered adjusted free cash flow is expected to grow 34% this year.

Sonalee Parekh: And free cash flow margins are expanding by about 370 basis points based on the updated guidance.

Sonalee Parekh: Free cash flow margins are really starting to converge with the operating margin. This is a trend that we you know.

Sonalee Parekh: Sort of telegraphed because we're realizing the positive impact of the lower intensity of deferred commissions.

Sonalee Parekh: That were amortizing over the last couple of years through the P&L and we've also realized significant working capital efficiencies and shifting more of our long term contractual commitments to upfront payments.

Sonalee Parekh: And we've also realized significant working capital efficiencies and are shifting more of our long-term contractual commitments to upfront payment. So, the power of the growing free cash flow, coupled with our focus on driving SBC down, which I hope you noticed as well, provides a real opportunity to drive significant free cash flow per share growth and drive that growth in excess of both revenue and overall free cash flow growth. So, this year, we expect, based on the midpoint of our guide on free cash flow, that our free cash flow per share will grow about 36%.

Sonalee Parekh: The power of the growing free cash flow, coupled with our focus on driving SBC downtown which hopefully you noticed as well provide a real opportunity to drive significant free cash flow per share growth and driving that growth in excess of both revenue and overall free cash flow growth this year.

Sonalee Parekh: We expect based on the midpoint of our guide on free cash flow.

Sonalee Parekh: Free cash flow per share will grow about 36% and that outlook has improved by about 10 percentage points. Since we last reported last quarter. So you know given the improvements in our free cash flow and the updated outlook. We've given you on share count.

Sonalee Parekh: And that outlook has improved by about 10 percentage points since we last reported last quarter. So, you know, given the improvements in our free cash flow and the updated outlook we've given you on share count, which we now expect to reduce year over year, we hope that you will judge us on the strong free cash flow per share growth that we will continue to deliver on a sustainable basis.

Sonalee Parekh: Which we now expect to produce year over year, we hope that you will judge us on a strong free cash flow per share growth that people continue to deliver on a sustainable basis.

Sonalee Parekh: Yeah.

Operator: The next question comes from Samad Samana of Jeffries. Please go ahead.

Sonalee Parekh: The next question comes from Samad Samana of.

Samad Saleem Samana: Jefferies. Please go ahead.

Samad Saleem Samana: Hi, good afternoon. Thanks for taking my questions. I'm also honored to go after Cash, so I love the order of the Q&A. Hope you guys are doing well.

Samad Saleem Samana: Hi, Good afternoon, yeah. Thanks for taking my questions also honored to go after cash so loved the order of the Q&A I'm Hope you guys are doing well maybe first question just Vlad if I think about the large deal. It's obviously small in the overall context of the mill.

Vladimir G. Shmunis: Maybe the first question just, Vlad, as I think about the large deal, it's obviously small in the overall context of the millions of seats that RingCentral has, but when I think about it, it's got to be one of your larger individual deals. So could you help us maybe double-click on, you know, what the timeline looks like in terms of winning the deal? What led it, maybe, in terms of like the features, so on and so forth? And what they expect to roll out of a deal of this size looks like, just given how big the deal is, and it's a signature win.

Vladimir G. Shmunis: Is it seats that ring central had but when I think about it that's got to be one of your larger individual deals. So could you help us maybe double click in until you know what the timeline looks like in terms of winning the deal what what led to it maybe in terms of like the features so on and so forth and what what they expect to roll out of a deal of this size.

Vladimir G. Shmunis: Like just given how.

Sonalee Parekh: And then Sonalee, I'll squeeze in a stub question for you up front as well. It's just on the upfront billing. Is there any discounting that's going on to drive the upfront collections? Or is that just the customers are agreeing to that, and the timing doesn't really matter to them? Thank you both for taking my questions.

Vladimir G. Shmunis: How big the deal is and it's a signature win and then suddenly just I'll I'll I'll squeeze in a question for you upfront as well with just on the upfront billing does that is there any discounting that's going on to drive the upfront collections or is that just the customers are agreeing to that and the time it doesn't really matter to them. Thank you both for taking my questions.

Sonalee Parekh: Yes.

Sonalee Parekh: Yeah.

Vladimir G. Shmunis: Yeah, hi Samad. Okay, yes, glad to have you in your full position here on the Q&A list. Okay, so as far as the deal goes, it wasn't one of the largest; it was the largest. So this is especially interesting, you know, given again all of the especially recent rhetoric, you know, about our positioning in the enterprise and the teams and all of that. Look, as far as how long, these types of deals are generally 1-2 year cycles. This particular one happened to be right in the middle, 18 months.

Sonalee Parekh:

Samad: Oh, Okay, yes glad to have you are in the pole position.

Vladimir G. Shmunis: On the Q&A with Oh, Okay, so as far as the deal a it wasn't a one of the largest it was our largest so this is a yeah, especially into the scheme.

Vladimir G. Shmunis: You know given again, the all of the especially the more recent rhetoric.

Vladimir G. Shmunis: You know about our positioning.

Vladimir G. Shmunis: In the enterprise and teams and all of that.

Vladimir G. Shmunis: Look as far as how long are these types of deals are generally one to two year cycles.

Vladimir G. Shmunis: Particular, one I'm going to be right in the middle of 18 months Okay.

Vladimir G. Shmunis: Okay? I already mentioned some of the differentiated features. This customer is rotating out of Skype for Business, so it was a competitive RFP process. We don't always know who else is involved, but you can probably imagine the usual suspects. And as I already mentioned, the cash, it really has to do with reliability and features. And again, we don't think that this is such an aberration.

Vladimir G. Shmunis: And.

Vladimir G. Shmunis: Ah is a you know already mentioned some of the differentiated features.

Vladimir G. Shmunis: This customer is rotating out of Skype for business.

Vladimir G. Shmunis: Oh.

Vladimir G. Shmunis: It was a competitive RFP process.

Vladimir G. Shmunis: We don't always know.

Vladimir G. Shmunis: Who else is involved but you know you can probably imagine the usual suspects.

Vladimir G. Shmunis: And as you know.

Vladimir G. Shmunis: You mentioned the cash it really has to do with our ability and our teachers okay.

Vladimir G. Shmunis: Yeah, We don't think that this is such an aberration 40 seats deals you know there are only so many of them all of those can be had.

Vladimir G. Shmunis: Policy deals, there are only so many of them out there to be had, but we do have other large installments. We have 20% of GDK, which we count as part of our enterprise segment, so they're spending more than $100,000 with us. So we are very much active in large accounts. We will continue this, and we believe that we have a good chance to continue this being the case.

Vladimir G. Shmunis: But you know we do have other large installment.

Vladimir G. Shmunis: You have 20% of G T K.

Vladimir G. Shmunis: Which is <unk> disposal.

Vladimir G. Shmunis: The segments those are spending more a kind of south of era.

Vladimir G. Shmunis: Or was that.

Vladimir G. Shmunis: So we are very much active in a logical we continue this oh.

Vladimir G. Shmunis: There's a good.

Vladimir G. Shmunis: To continue this being the case.

Vladimir G. Shmunis: And I really want to say this one more thing, again, this is getting back into enterprise and teams, and how do we coexist there, and we need to understand that there are teams, and then there are teams phone. We compete with teams phone, and as you can see, we have some success competing against teams phone. We work and partner with teams themselves. So we are an integral part or extension to teams via available APIs.

Vladimir G. Shmunis: They really wanted that says it's one of those and again this is going to go back and do no enterprise and teams and how do we.

Vladimir G. Shmunis: Good there.

Vladimir G. Shmunis: We need to understand the risk teams.

Vladimir G. Shmunis: It seemed to fall, we compete with zoom phone and as you can see we will have some success competing against Kingstone.

Vladimir G. Shmunis: Work and partner with dealers itself. Okay. So we are an integral part a or.

Vladimir G. Shmunis: Or extension to two genes.

Vladimir G. Shmunis: Available E. P is we provide a all support the single pane of glass.

Vladimir G. Shmunis: We provide all the support, there is a single payment glass, and that's a major strength. We really have what we believe is one of the best, if not the best, team integrations on the market. So I hope that answers your question.

Vladimir G. Shmunis: That's the latest trends.

Vladimir G. Shmunis: We believe one of the best if not done but given the.

Vladimir G. Shmunis: Integration of the market today.

Vladimir G. Shmunis: Corporate answer the question.

Sonalee Parekh: So as we grow in enterprise and the composition of enterprise as a total increases in our overall revenue, it tilts us to more upfront billings and longer-term contracts. And that's obviously much more common in enterprise to bill upfront than say, SMB, which is often month to month.

Sonalee Parekh: Yeah, and Samad, just Sonalee here. On your question with respect to discounting, no, there's nothing to call out there. It's really a makeshift.

Speaker Change: Yeah, and as demand just suddenly here on your question with respect to just the accounting no. There's nothing to call out there, it's really a mix shift so.

Sonalee Parekh: We grew our enterprise and the composition of enterprises, a total increase in our overall.

Sonalee Parekh: And revenue it helps us to more upfront billing and longer term contracts and that's obviously much more common in enterprise to bill upfront.

Sonalee Parekh: P which is often.

Sonalee Parekh: Yes.

Sonalee Parekh: Right.

Operator: The next question comes from Ryan MacWilliams of Barclays. Please go ahead.

Sonalee Parekh: The next question comes from Ryan Macwilliams of Barclays. Please go ahead.

Sonalee Parekh: Thanks, taking my question also continue with some of the two part question one for Brad Holly.

Ryan Patrick MacWilliams: Thanks for taking the question. I'll also continue with the two-part question. One for Vlad, and one for Sonalee.

Vladimir G. Shmunis: For Vlad, just given the macro uncertainty, how does your pipeline look for the rest of this year? And have you noticed any trends in the pipeline, whether between S&B and Enterprise or UCAS and CCAS opportunities? And then for Sonalee, a nice revenue result and a pre-cash flow step-up, but looks like the non-GAAP four-year operating margin guide was maintained. Can we just use this as conservatism as an early start to the year, or are we leaving room for more additional sales and marketing and R&D investments this year?

Ryan Patrick MacWilliams: Well I just given the macro uncertainty how does your pipeline look like for the rest of this year and have you noticed any trends in the pipeline whether between SMB and enterprise or you can't you can't opportunities.

Vladimir G. Shmunis: And then suddenly a nice result in free cash to step up.

Sonalee Parekh: But looking at the non-GAAP, who your operating margin guide was maintained.

Vladimir G. Shmunis: Yeah.

Sonalee Parekh: And that's really to start the year or are you, leaving room for more additional sales and marketing and R&D investments this year.

Vladimir G. Shmunis: Okay, great. Yes, Aaron.

Speaker Change: Okay great.

Vladimir G. Shmunis: Yeah.

Vladimir G. Shmunis: Okay.

Vladimir G. Shmunis: Pipeline.

Vladimir G. Shmunis: So you Chicago guided you know we've had a good quarter.

Vladimir G. Shmunis: What we believe is a strong guide as well.

Speaker Change: And so that should go to the ER.

Speaker Change: You are.

Vladimir G. Shmunis: Relatively good this optimistic about device.

Vladimir G. Shmunis: Okay, look at the pipeline. So, you see how we guided it. You know, we had a good quarter and what we believe is a strong guide as well. And so that should tell you that, you know, we feel relatively good and optimistic about the pipeline. You asked about Enterprise and SMB. They're very different because Enterprise, again, is a year-plus cycle. SMB, you know, could easily be under six months; in many cases, you know, one to three months.

Vladimir G. Shmunis: You you asked between enterprise and SMB.

Vladimir G. Shmunis: They're very different because the enterprise again.

Vladimir G. Shmunis: Plus cycle.

Vladimir G. Shmunis: You know it could be.

Vladimir G. Shmunis: Six months in many cases, you know once a few months so like they are in the world.

Vladimir G. Shmunis: So PIPE there is a lot less... it's not important, but, you know, it's just a very different dynamic there. But again, overall, we feel that we are, you know, finding the bottom, if you will. And you have seen our Enterprise rate stabilize over multiple quarters. You have not yet seen this from us in SMB, but we are optimistic that we're not far from that as well. And given the size of the greenfield opportunity, which is still, you know, we're still under 10 million seats ourselves, right?

Vladimir G. Shmunis: Les.

Vladimir G. Shmunis: That's the most important but you know you've got so many different dynamics there.

Vladimir G. Shmunis: But again overall, we feel that we are you know finding the bottom if you will and you have seen our enterprise grade stabilize over multiple quarters.

Vladimir G. Shmunis: You have not yet seen this from us in SMB, but we are optimistic that we are not far from that as well.

Vladimir G. Shmunis: And.

Vladimir G. Shmunis: Given the size of the Greenfield opportunity, which is still you know we're still under 10 villages ourselves right and where is the lead by fewer seats gone. According to third party research. Some of you may have.

Vladimir G. Shmunis: And we're in the lead by a few seat counts, according to third-party research. Some of you may have caught our recent Wall Street Journal ad, which details some of that research. You know, with the overall opportunity just in the Enterprise being 100 million, that's a long way to go. And given that we're still doubling, tripling down on innovation, we're infusing AI across the entire portfolio and not just limiting it to our new products, for example. Again, we are pretty optimistic that we will continue holding our own and not. Thank you. It was a pleasure.

Vladimir G. Shmunis: Wall Street Journal.

Vladimir G. Shmunis: Details of his research.

Vladimir G. Shmunis: You know was the overall opportunity Justin's enterprise okay.

Vladimir G. Shmunis: Because that's just a long way to go and given that we're still doubling tripling down on innovation.

Vladimir G. Shmunis: We are infusing AI across the entire portfolio.

Vladimir G. Shmunis: And we'll just let me take you through a new product for example.

Vladimir G. Shmunis: Again, we have those are some of the work to get to mystic.

Vladimir G. Shmunis: Continue holding our own.

Vladimir G. Shmunis: And models.

Vladimir G. Shmunis: Not be disappointed.

Sonalee Parekh: On the margin question, overall, we're really happy with the improvements we've driven in profitability over the last two years or so. Margins have gone from 10% to, as you say, 21% to where I hold the guide today. I think we really feel we need to balance growth versus profitability, and we need to maintain some flexibility to be able to go after attractive investments in either product or innovation on the marketing side. We talked about the gold verticals, vertical-specific campaigns.

Vladimir G. Shmunis: Okay.

Speaker Change: Yeah. So on the on the margin question. So overall, we're really happy with the improvements, we've driven and profitability over the last.

Sonalee Parekh: No 10 years, or so margins have gone from 10% to as you say, 21% to where I've I've held the guide today.

Sonalee Parekh: I think really we feel we need to balance growth versus profitability and we need to maintain some flexibility to be able to go after attractive.

Sonalee Parekh: Best mentioned either product innovation on the marketing side, you know we talked about the gold's articles vertical specific campaign, yeah, we really see it as a balancing act and on operating margin I would say that yeah.

Sonalee Parekh: So, yeah, we really see it as a balancing act. And on operating margin, I would say that I've got it closer to the pin. Hopefully, what you've seen is that we took up free cash flow margins from 17.5% to 18.5%. That's adjusted for levers. So, hopefully that answers the question.

Sonalee Parekh: It closer to the pin hopefully what you've seen is that we took out free cash flow margins.

Sonalee Parekh: Margins from 17.5 to 18, 5% adjusted Unlevered.

Sonalee Parekh: So hopefully that answers the question.

Operator: The next question... The next question comes from Siti Panigrahi of Mizzouho. Please go ahead.

Speaker Change: The next question.

Sitikantha Panigrahi: So the next question comes from city plenty Graiae of Mizuho. Please go ahead.

Sitikantha Panigrahi: For taking my question I wanted to ask you about the new products that do you expect to hit 100 million era by end of next year, which one do you feel more excited about it because they think say see exiting since then.

Sitikantha Panigrahi: Central events and also how do you as you keep adding features two links yes, how do you try to put you send your product works is there.

Sitikantha Panigrahi: Our product within the installed base.

Sitikantha Panigrahi: Oh, yes sure.

Sitikantha Panigrahi: Yes, sure. Okay. Well, for those of you with multiple kids, it's like asking which daughter you like best. So there's no politically correct answer to that.

Sitikantha Panigrahi: Okay.

Sitikantha Panigrahi: Well for those of you with multiple kids, it's like asking which go through if you like but so theres no politically correct answer to that we liked them all or else you might be investing in some of them.

Vladimir G. Shmunis: We like them all, or else, we would not be investing in some of them. As far as they're different, So we're talking about three products, one of which is really not a product but a family of products. So it's RingCX, which is our native contact center. It's RingCentral Events, and it's RingCentral for sales, but it's the first in a family of products for us because we expect to be introducing RingCentral for other verticals and industry-specific solutions.

Sitikantha Panigrahi: As far as the very different so we're talking about seed products.

Vladimir G. Shmunis: One of which is really the North Dakota.

Vladimir G. Shmunis: So, it's CX, which is or.

Vladimir G. Shmunis: Maybe give a contact center.

Vladimir G. Shmunis: It's a really central events.

Vladimir G. Shmunis: Ah is a route for sales, but the source in the firm a little product for us because we expect to.

Vladimir G. Shmunis: Introducing a win.

Vladimir G. Shmunis: For the vertical specific solutions.

Vladimir G. Shmunis: I think it's easiest to quantify RingCX because the C-Caps market is relatively well covered and well understood. And this will get into the second part of your question. RingCX differentiates on ease of use, pricing, and packaging, and, very importantly, it's an AI-native product. So AI is infused there from day one.

Vladimir G. Shmunis: I think it's easiest.

Vladimir G. Shmunis: To quantify rents yes.

Vladimir G. Shmunis: Because the CCAR.

Vladimir G. Shmunis: <unk> market is relatively well covered and well understood and this is getting into the second part of your question, we see F differentiate on ease of use.

Vladimir G. Shmunis: Our pricing and packaging and very importantly, a major Florida, So Uh huh.

Vladimir G. Shmunis: He was there from day, one and of course, it seamlessly integrates with <unk>, which is our flagship ETF.

Vladimir G. Shmunis: And, of course, it seamlessly integrates with RingCX, which is our flagship U-Caps product. Uh, so, um... We have internal projections which we are not going to share at this point, but suffice to say that we feel confident that our goal of 100 million ARR across all three products is achievable. We mentioned some numbers. We have approximately doubled or even more than doubled customer counts on both RingCX and RingCentral events. And that's just quarter over quarter. Obviously, very strong growth, very strong demand for both of them. Events, I think 25% quarter over quarter growth, which is still very, very strong.

Vladimir G. Shmunis: You just brought up.

Vladimir G. Shmunis: So.

Vladimir G. Shmunis: We havent done on projections, which we are not going to share at this point, but you know suffice.

Vladimir G. Shmunis: Suffice to say this week.

Vladimir G. Shmunis: Do you have confidence that our goal of 100 million air are across all three products.

Vladimir G. Shmunis: Yes.

Vladimir G. Shmunis: Okay.

Vladimir G. Shmunis: We mentioned some numbers.

Vladimir G. Shmunis: We are we have approximately doubled or even more than doubled our cash.

Vladimir G. Shmunis: The markdowns.

Vladimir G. Shmunis: So we see a new central events.

Vladimir G. Shmunis: And that's just a quarter over quarter. So while it's early August very strong growth very strong demand.

Vladimir G. Shmunis: Both of them.

Vladimir G. Shmunis: Events I think what is the sort of similarly.

Vladimir G. Shmunis: Uh huh.

Vladimir G. Shmunis: Uh huh.

Speaker Change: Mike I think we've got 25%.

Vladimir G. Shmunis: Yeah quarter over quarter growth.

Vladimir G. Shmunis: They are very strong so again, it's a very.

Vladimir G. Shmunis: Or at least for all of them, but very promising okay and I'd tell you what our lifesaving multiple horses in this race the wholesale with each other.

Vladimir G. Shmunis: Events sale for example is absolutely opens opportunities for us.

Vladimir G. Shmunis: CX with Linzess and with.

Vladimir G. Shmunis: So it's a virtuous cycle.

Vladimir G. Shmunis: Yeah.

Operator: The next question comes from Meta Marshall of Morgan Stanley. Please go ahead. Hey, this is Jamie on from Meta. I appreciate it.

Operator: The next question comes from Meta Marshall of Morgan Stanley. Please go ahead. Hey, this is Jamie on for me.

Vladimir G. Shmunis: The next question comes from meta Marshall of Morgan Stanley. Please go ahead.

Operator: Hey, this is Jamie on for me to I. Appreciate you taking the question I think maybe just following up on that last point great to see the traction you guys are getting with a ring. She asks are you able to provide any detail on how much of that base comes from existing customers versus new and then just as a follow up to that have you seen any conflicts with the partnership that you guys have.

Jamie: With nice how are you.

Jamie: Running into any challenges in terms of what to present to the customer or have you seen nice tried to take any of those customers direct.

Operator: Yeah.

Vladimir G. Shmunis: Yeah, to your last question, look, it would not be in the spirit of a death metal letter of agreement for them to take them direct. So we hope not.

Jamie: Last question.

Vladimir G. Shmunis: Look.

Jamie: It would not be in the spirit of the letter of agreement for them to take down the road. So we call. It now.

Vladimir G. Shmunis: Okay.

Vladimir G. Shmunis: As far as a base or not when they see things.

Jamie: Some of them are coming from obese, but.

Jamie: Not necessarily from the.

Speaker Change: Uh huh.

Vladimir G. Shmunis: Our CCC, which is in contract base nicely.

Jamie: You know what I'm not trying to convert those to see you again.

Vladimir G. Shmunis: The two products are very different.

Jamie: Anyway, it's complementary.

Vladimir G. Shmunis: It is much simpler to use.

Jamie: So a very different price point more aggressive price point.

Speaker Change: So margins are healthy.

Vladimir G. Shmunis: Okay. But, you know, it really is designed to address simpler use cases, more mass market, if you will, as opposed to RingCentral Contact Center, RingCC, which is, you know, the flagship industry-leading, Gartner, MQ-leading product that NICE has. Very clear rules of engagement, self-imposed internally. When we get an inquiry or a lead, we qualify which product to present it to the customer, or which product will be presented to the customer. And once we do, we are locked into that path. Okay, so it's rare to see a tug-of-war between TFs and CFs.

Vladimir G. Shmunis: But.

Jamie: It really is designed to address simpler use cases more mass market. If you will as opposed to a central accomplishment.

Vladimir G. Shmunis: Which is you know flagship industry leading.

Vladimir G. Shmunis: Gardner and Julien.

Speaker Change: Does that make sense.

Vladimir G. Shmunis: So again we.

Vladimir G. Shmunis: We have.

Speaker Change: Very clear.

Vladimir G. Shmunis: Lots of engagement.

Vladimir G. Shmunis: Dosing goals internally.

Vladimir G. Shmunis: When we get in.

Vladimir G. Shmunis: Inquiry or Lee with <unk>.

Vladimir G. Shmunis: <unk>, which brought us to present to do.

Vladimir G. Shmunis: Which products will be bigger.

Vladimir G. Shmunis: Turning to the customer and.

Vladimir G. Shmunis: Once we do you know who will be walking through.

Vladimir G. Shmunis: Okay. So it's rare to see.

Vladimir G. Shmunis: It doesn't work.

Vladimir G. Shmunis: Yeah.

Vladimir G. Shmunis: But.

Operator: The next question comes from Tim Horan of Oppenheimer. Please go ahead.

Vladimir G. Shmunis: The next question comes from Tim Horan of Oppenheimer. Please go ahead.

Timothy Kelly Horan: Thanks, guys, also, if I might ask you something about RingCX. Do you think you're expanding the number of agencies out there or companies, you know, adding contact center capabilities? Or is it, you know, kind of more you taking market share from existing competitors? And then secondly, on Microsoft Teams, do you have a sense of what percentage of Teams users now are using it for external, you know, phone calls, and maybe a sense of where that can kind of go? And, you know, do you maybe just have a rough sense of what percent Microsoft has versus other outsourcing companies like yourself?

Timothy Kelly Horan: Thanks, guys on two also if I might on <unk> do you think you're expanding the number of agents seats out there or companies you know, adding contact center capabilities or is it kind.

Timothy Kelly Horan: The more you are taking some market share.

Timothy Kelly Horan: From existing and then secondly on Microsoft teams do you have a sense of what percentage of teams users now or are using it for external no phone calls and maybe a sense of where that can kind of go to and.

Timothy Kelly Horan: Maybe just to have a rough sense of what percent Microsoft has versus other outsourcing like yourself.

Timothy Kelly Horan: Yeah, No I mean, Microsoft you've kept out their own numbers.

Vladimir G. Shmunis: No, I mean, Microsoft, you have to have your own numbers, you know. Our use within Teams is, I mean, I think it's a well-known fact that people use Microsoft more for internal than external purposes. Our goal verticals, so let me answer this way: our goal verticals all tend to be B2C, okay? So whenever you have a consumer needing to access their brand, whether it be healthcare or financial, you know, or retail, these are just some of these what we call goal verticals. This is where we shine, okay? And it's a very, very large market still and a, you know, huge amount of greenfield still left for that. Okay, so what was the CS part of the question?

Vladimir G. Shmunis: You know.

Vladimir G. Shmunis: Are used within team.

Vladimir G. Shmunis: I think it's a well known fact that people use Microsoft more and more internal than external.

Vladimir G. Shmunis: I'll go vertical so.

Vladimir G. Shmunis: And so this way I'll go vertical.

Vladimir G. Shmunis: All of them to be to see okay still.

Vladimir G. Shmunis: So whenever you have a consumer.

Vladimir G. Shmunis: Mhm to access.

Vladimir G. Shmunis: Okay, whether it be health care or financial.

Vladimir G. Shmunis: Our retail these are just some of them with Michael Goldberg Nichols.

Vladimir G. Shmunis: This is where we shine okay.

Vladimir G. Shmunis: It is very very large market.

Vladimir G. Shmunis: You know huge amounts.

Vladimir G. Shmunis: And you are left with us.

Vladimir G. Shmunis: Okay.

Speaker Change: What was the question.

Speaker Change: Trying to understand do you think the number of agents are growing in CX or are they shrinking your price points pretty low end.

Vladimir G. Shmunis: Trying to understand, do you think the number of agents is growing in CX? Or are they shrinking?

Vladimir G. Shmunis: You know, your price point is pretty low and, you know, easy to use. Do you think you're enabling people to kind of go into this business for the first time if you're a small business that maybe didn't have this capability before? Absolutely, absolutely.

Vladimir G. Shmunis: Easy to use do you think you're enabling people.

Vladimir G. Shmunis: When they go into this business for the first time, if you're a small business that maybe you didn't have this capability before.

Vladimir G. Shmunis: So if your question is, well, yeah, our count of patients is, of course, growing, growing very rapidly because, you know, we are early in the life cycle and we are, you know, just, I think, you know, I mean, doubling quarter over quarter. Obviously, we're growing quite a lot. But if your question is about the overall number of agents in the industry growing, that's a really interesting question. And obviously, there is this line of thinking that AI will replace agents.

Vladimir G. Shmunis: Absolutely. Absolutely.

Speaker Change: Absolutely absolutely. So if your question is yes outcome to patients is of course growing growing very rapidly because you know.

Vladimir G. Shmunis: Early lifecycle and we are you know just.

Vladimir G. Shmunis: You know, what I mean, doubling quarter over quarter or just going quite nicely.

Vladimir G. Shmunis: But if your question is about overall number of agents in the industry growing.

Vladimir G. Shmunis: That's a really interesting question.

Vladimir G. Shmunis: Okay.

Vladimir G. Shmunis: There's a line of thinking that.

Vladimir G. Shmunis: We'll replace agents.

Vladimir G. Shmunis: For now, we're seeing more AI-augmented agents. I do believe that over time, the overall number of humans in the industry will stabilize and be decreasing. I also subscribe to that. And for that reason, we're building AI and agent assist, co-pilot, and even agent replace capabilities into CX. So this is absolutely taking place.

Vladimir G. Shmunis: For now we're seeing more AI augmenting our agents.

Vladimir G. Shmunis: I do believe that over time overall number of humans in the industry will stabilize and be decreasing.

Vladimir G. Shmunis: Also subscribe to that.

Vladimir G. Shmunis: For that reason we're building AI.

Vladimir G. Shmunis: The agent assist copilot and even agent to place capabilities.

Speaker Change: Yes, absolutely.

Vladimir G. Shmunis: Absolutely taking place.

Vladimir G. Shmunis: It will.

Vladimir G. Shmunis: It has always been the case, and it is already the case, that a bot is much cheaper than a human being. But they're not as good yet, not as versatile, and this is across the industry, or else there wouldn't be any agents left. You made an interesting point about small businesses not having access to this type of functionality before. I would agree with that. That's largely true. From my personal interactions with small and medium-sized businesses, many of them actually pride themselves on the fact that they provide human assistance and not, if you will, hide behind bots. This is their way of differentiating and kind of showing the human touch and human TLC. I do expect that to stay for the foreseeable future as well.

Vladimir G. Shmunis: Always be the case and obviously indicate that in that the board is much cheaper than a human being.

Vladimir G. Shmunis: It's not as good yet.

Vladimir G. Shmunis: This versatile.

Vladimir G. Shmunis: This is a growth across the industry or else it wouldn't be any agents left you.

Vladimir G. Shmunis: You made an interesting point about pay small businesses that didn't have access to this type of functionality.

Vladimir G. Shmunis: Functionality before.

Vladimir G. Shmunis: That's a big piece of that.

Vladimir G. Shmunis: That's all I can tell you from my personal interactions with small and medium size businesses.

Vladimir G. Shmunis: Any of them actually prides himself on the fact that they provide human assistance.

Vladimir G. Shmunis: No.

Vladimir G. Shmunis: You know if you will.

Vladimir G. Shmunis: Besides boss.

Vladimir G. Shmunis: As a way of differentiating the shrink.

Vladimir G. Shmunis: Sure.

Vladimir G. Shmunis: Human data human TLC.

Vladimir G. Shmunis: Doing studies that to stay for the foreseeable future as well so there are different dynamics here.

Vladimir G. Shmunis: Yeah.

Operator: So there are different dynamics here. As a business at the high level, how we approach it is saying, look, customer. You know, if you want to have a good, solid, cost-effective solution for empowering and lighting up your human agents, here is a solution. As you are ready, here is a simple and relatively seamless path of augmenting their experience, your agent's experience, and your customer's experience. And as you get more comfortable, if you feel that you can start reducing the number of agents, that's just fine as well because here is this technology which will allow you to do that without leaving the classroom. Okay, so it's more of an evolution than a revolution in what we see and how we The next question comes from Brian Peterson and Raymond James.

Vladimir G. Shmunis: As a business is that kind of level.

Operator: Our approach at St. Luke.

Operator: Customer you know.

Operator: If you wanted to have.

Operator: So it's a cost effective solution.

Operator: Empowering and lightened up your human agents given the solution.

Operator: As you already here's the simple.

Operator: Relatively seamless path of augmenting.

Operator: Their experience your agent experience and the customers' experience.

Operator: And as.

Operator: As you get more comfortable.

Operator: If you feel that you can start using the number of agents that just fine as well because he has this technology, which will allow you to do that without leaving the platform.

Operator: So it's more of an evolution in the resolution as well.

Operator: Yes, I'll, let disruption in our road map.

Operator: The next question comes from Brian Peterson Raymond James. Please go ahead.

Operator: The next question comes from Brian Peterson and Raymond James. Please go ahead. Thanks for taking my call.

Brian Christopher Peterson: Thanks for taking my question and congrats on the quarter. So why the tone of Gsp's was notably strong this quarter I'm curious is that a broad based comment or there are a couple that are really driving that strength and how are you thinking about that growth profile through that channel over the next couple of years. Thank you.

Operator: Right.

Vladimir G. Shmunis: Right, with GSPs. So yeah, thank you for asking that.

Brian Christopher Peterson: So yeah. Thank you for asking that.

Brian Christopher Peterson: This is the hidden gem.

Vladimir G. Shmunis: No.

Brian Christopher Peterson: And actually I'm surprised there's not more people up this equation and concentrate on this because this is one area, where we really have built a process that is unrivaled in the industry.

Vladimir G. Shmunis: Look, GSPs is a hidden gem, you know, and actually, I'm surprised that not more people ask this question and concentrate on this, because this is one area where we really have built a practice that is unrivaled in the industry. If you think about it in historical terms, a few years ago, Broadsoft, which was an on-prem provider, really had licensed something like 700 carriers worldwide, which is really almost all of them, and they provided them with software licenses. In many cases, they were perpetual licenses that carriers had just bought in bulk, and all sounds wonderful, and the company had a nice exit, and Cisco now owns them.

Brian Christopher Peterson: If you think about it in historical terms.

Vladimir G. Shmunis: A few years ago.

Vladimir G. Shmunis: Broadsoft, which wasn't on prem provider.

Vladimir G. Shmunis: Really have license something like seven countries carriers worldwide, which is really almost all of them and they provided them with software licenses in many cases.

Vladimir G. Shmunis: They were perpetual licenses okay.

Vladimir G. Shmunis: It's just kind of just both both in bulk and it's in the old phone was wonderful that the companies had a nice exit the system Oh, yeah. The thing here.

Vladimir G. Shmunis: <unk> has not been innovated on in a number of years now is it still one prime there is not a <unk>.

Vladimir G. Shmunis: <unk> vessels the cloud.

Vladimir G. Shmunis: Delek us.

Vladimir G. Shmunis: And what does that delta as it suggests telcos.

Vladimir G. Shmunis: Telcos and.

Vladimir G. Shmunis: Gabe will provide us as well.

Vladimir G. Shmunis: For example, Joseph Communications.

Vladimir G. Shmunis: Yes.

Vladimir G. Shmunis: No.

Vladimir G. Shmunis: Valued member of our.

Vladimir G. Shmunis: GSV partners and they are there.

Vladimir G. Shmunis: It was extremely well, okay with that for them.

Vladimir G. Shmunis: They're just increasingly realizing that they have to move on this dated-age, really almost unsupported software that's out there with Broadsoft, which has seen its prime, and there are mass migrations underway. We are very bullish about this channel. We are seeing both growth from, quote, same-store sales, where each and every individual GSP is growing nicely, as well as new major logos. We just announced Optus, Australia's second-largest.

Vladimir G. Shmunis: So they're just increasingly realizing that they have to move on.

Vladimir G. Shmunis: David H.

Vladimir G. Shmunis: Really almost all support the software that's out there with Brookfield, which Justin it's Brian and as there are mass migrations underway.

Vladimir G. Shmunis: So we're very bullish about the CMO.

Vladimir G. Shmunis: We are seeing both.

Vladimir G. Shmunis: <unk> growth.

Vladimir G. Shmunis: Call It same store sales.

Vladimir G. Shmunis: Each of the individual GSP is growing nicely as well as we are adding new major logos, while those were just announced.

Vladimir G. Shmunis: Still the second largest.

Vladimir G. Shmunis: I believe everybody can tell, so you can imagine that, you know, there are conversations across the board there. And look, Broadsoft; we have a number of very good people from what used to be Broadsoft. We know the playbook, we know who the accounts are, and we are also well aware of the fact that out of the 700 that they have, we have, you know, approximately 2% of those. So a long runway there, and we will be, we expect to be sharing more in this later in the year and perhaps at our end of the day. But this is definitely an area of strength and a very nice competitive model. And our last question comes from Terry Tillman of Truist.

Vladimir G. Shmunis: I believe over the Citadel. So you can imagine that Oh, you know the.

Vladimir G. Shmunis: Conversations across the board, there and Blue Broadsoft.

Vladimir G. Shmunis: We have a number of very good people from what used to be <unk>.

Vladimir G. Shmunis: We know the playbook.

Vladimir G. Shmunis: We know who the accounts are.

Terrell Frederick Tillman: We also.

Terrell Frederick Tillman: Well it was the fact that out of the.

Vladimir G. Shmunis: 700.

Terrell Frederick Tillman: They have.

Terrell Frederick Tillman: We have.

Vladimir G. Shmunis: Approximately 2% of those so low growth low rate runway there.

Terrell Frederick Tillman: And we.

Vladimir G. Shmunis: We will be we expect to be sharing more.

Terrell Frederick Tillman: This later.

Terrell Frederick Tillman: During the year and perhaps at our analyst day.

Vladimir G. Shmunis: It's definitely an area of strength.

Vladimir G. Shmunis: Very nice competitive moat for us.

Vladimir G. Shmunis: And our last question comes from Terry Tillman of Truest. Please go ahead.

Operator: And our last question comes from Terry Tillman of Truist. Please go ahead. Great. Thanks for asking.

Operator: Great. Thanks for squeezing me in this is Bobby Dion for Terry I'm curious with the ringing ex rebrand I'm curious how they go to market organization has to react to that evolved with the change or are there potentially some productivity gains on the table for more of a multi product platform selling approach. Thank you.

Vladimir G. Shmunis: Yeah, I think people understand the reason for this, and I think the general reception has been quite positive. They understand that by renaming MVP, which was Message Media Phone, to Ring ES, it does not mean that we're abandoning the multi-modal strategy; it just means that we are redoubling on the experience part of it. It's not more about any modality in particular but more about integration of all modalities together.

Terrell Frederick Tillman: Yeah, I think our I think people understand the reason for this.

Vladimir G. Shmunis: The general reception has been quite positive.

Vladimir G. Shmunis: They understand that by remaining from MVP, which would message video phone to win E. F does not mean that we're abandoning the multimodal strategy. It just means that.

Vladimir G. Shmunis: We are redoubling on the exterior part of it.

Vladimir G. Shmunis: But even more importantly than that, is the infusion of AI and semantic capabilities across the entire portfolio and across all modalities. This is what people are excited about. This is what won us Best of Show at Enterprise Connect. And look, we're in beta. We're in closed beta here. But expect that we will be showing and showcasing these capabilities, even to this group, our coverage universe, in the relatively near future. I can tell you that we're using this product internally, and it's a game-changer. It's just amazing what you can do with AI. If you apply it to a large network, just what kind of results can be achieved?

Vladimir G. Shmunis: More about any modality in particular, but more about integration all modalities together, but even more importantly than that is infusion of AI.

Vladimir G. Shmunis: Semantic capabilities across the entire portfolio and across all modalities.

Vladimir G. Shmunis: Uh huh.

Vladimir G. Shmunis: This is what people are excited about this is with one of our best of show in the first in there.

Vladimir G. Shmunis: And look weird beta would go make it here.

Vladimir G. Shmunis: But.

Vladimir G. Shmunis: We will be.

Vladimir G. Shmunis: So and and.

Vladimir G. Shmunis: In the show.

Vladimir G. Shmunis: <unk> casing these capabilities even to this group are.

Vladimir G. Shmunis: Our coverage universe.

Vladimir G. Shmunis: In the relatively near future I can tell you that we are using these.

Vladimir G. Shmunis: These photos internally.

Vladimir G. Shmunis: And.

Vladimir G. Shmunis: If it's a game changer.

Vladimir G. Shmunis: It's just amazing what you can do with AI.

Vladimir G. Shmunis: It applies to.

Vladimir G. Shmunis: The large network Jeff.

Vladimir G. Shmunis: Just what kind of results can be achieved.

Speaker Change: And this concludes our conference call you may now disconnect.

Operator: And this concludes our conference call. You may now disconnect.

Operator: [music].

unknown: BF-WATCH TV 2021