Q2 2024 RingCentral Inc Earnings Call

Unknown Executive: Unless otherwise indicated, all measures that follow are non-GAAP with your over-year comparison. A reconciliation of all gaps, non-GAAP results provided with our earning release and in the flight deck.

Unless otherwise indicated all measures that follow are non-GAAP with year over year comparison, and a reconciliation of our GAAP to non-GAAP results is provided with our earnings release and in the slide deck.

Unknown Executive: For certain four-looking guidance, a reconciliation of the non-GAAP financial guidance to the course money gap measure is not available, as discussed in detail in the flight deck posted on our investor relations, let's say.

And forward looking guidance, a reconciliation of the non-GAAP financial guidance to the corresponding GAAP measure is not available.

Speaker Change: As discussed in detail in the slide deck posted on our Investor Relations website with that I'll turn the call over to what.

Vladimir Shmunis: But that I'll try my call over to why. Good afternoon and welcome to our second quarter earnings conference call. We had a solid second quarter, as results were above the high end of guidance on all kinetics again this quarter. Total revenue rose 10% to $593 million, $7 million above the midpoint of our guidance. We saw good traction with our new products. In particular, with RingCx, our native AI source cloud contact center product. RingCx traction was solely above our expectations. Importantly, we also delivered another quarter of expanding profitability and strong cash flows. Sony will provide more details shortly, but some key highlights include achieving an operating margin of 20.9% which was above our guidance.

Unknown Executive: Unless otherwise indicated, all measures that follow are non-GAAP with a year-over-year comparison. A 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 posting on our Investor Relations page. With that, I'll turn the call over to Good afternoon and welcome to our second quarter earnings conference call. We had a solid second quarter, as results were above the high end of guidance on all key metrics again. Total revenue rose 10% to $593 million, $7 million above the midpoint of our goal.

Good afternoon, and welcome to our second quarter earnings Conference call.

Speaker Change: We've had a solid second quarter.

Speaker Change: <unk> well above the high end of guidance on all key metrics again this quarter.

Speaker Change: Total revenue rose, 10% to $593 million 7 million above the midpoint of our guidance.

Unknown Executive: We saw good traction with our new product, in particular with RingCX, our native AI-sourced cloud contact center. RingCX traction was solidly above our expectations. Importantly, we also delivered another quarter of expanding profitability and strong cash. Sonalee will provide more details shortly, but some key highlights include achieving an operating margin of 20.9%, which was above our guidance, driving down SBC by 5 percentage points year over year, and generating 109 million of levered free cash flow at a quarterly rate.

Speaker Change: We saw good traction with our new products.

Speaker Change: In particular with rinks, yes, all major AI sure.

Speaker Change: Out contact Center Brook.

Speaker Change: Rink CX traction was solidly above our expectations.

Speaker Change: Importantly, we also delivered another quarter of expanding profitability and strong cash flows.

Speaker Change: So no we will provide more detail shortly but some key highlights include achieving an operating margin well.

Speaker Change: 29%, which was above our guidance.

Vladimir Shmunis: Driving down SDC by 5% each point year over year and generating 109 million of levered free cash flow, a quarterly record. We see our business as being comprised of three major customer groups. These are large businesses or enterprises which are customers that generate over 100,000 of error and which we present about 40% of our total error. Mid-market which are customers that generate between 25 to 100,000 of error and which we present about 20% of our total error. And small businesses, which are customers with less than 25,000 of error, and which we present about 40% of our total error.

Speaker Change: Driving down in D C by five percentage points year over year, and generating hundreds and nine mill in Levered free cash flow a quarterly record.

Unknown Executive: We see our business as being comprised of three major customers. These are large businesses, or enterprises, which are customers that generate over 100,000 errors, and we should present about 40% of our total. Midmarket, which are customers that generate between 25 to 100,000 ARR and which represent about 20% of our total ARR, and Small Business, which are customers with less than 25,000 ARR and which represent about 40% of our total.

Speaker Change: We see our business as being comprised of three major customer groups. These are.

Speaker Change: Large businesses or enterprise would your customers that generate over 200000.

Speaker Change: And we shifted that about 40% of our thoughtful.

Speaker Change: Mid market would your customers did generate between 25 to transit thousands era and Wuxi present about 20%.

Speaker Change: Total error.

Speaker Change: And small businesses would you have got them with less than 25000, <unk> and which represent about 40% or so.

Speaker Change: Yeah.

Vladimir Shmunis: Our results reflect continued strengths in our core UCADS business across all customer groups. Our enterprise business continues the trend of double-digit year-over-year growth in Q2. We're also seeing growth in the average enterprise deal size on both acquisition and upsell. We close around 20 deals with over 1 million PCB or total counter-value in Q2, which was in line with the number of such deals in Q2 2023. Importantly, the average PCB of large deals grew by 30% year-over-year. As we have seen, the last few orders, many enterprise customers want our deep teams integration. In fact, more than half of our large deals this quarter were again to customers that are utilizing our solutions integrated with and alongside Microsoft Teams. This is a key differentiator and an important reason why we win.

Unknown Executive: My results reflect continued strength in our core UCAS business across all customer groups. Our enterprise business continues the trend of double-digit year-over-year growth in Q2. We're also seeing growth in the average enterprise deal size on both acquisitions and upsells. We closed around 20 deals with over 1 million TCV, or total contract value, in Q2, which was in line with the number of such deals in Q2 2020.

Speaker Change: Our results reflect continued strength in our core you've got the business across all customer groups.

Speaker Change: Our enterprise business continued the trend of double digit year over year growth in Q2.

Speaker Change: We're also seeing growth in that.

Speaker Change: Average enterprise deal size on both acquisition and up sell.

Speaker Change: We closed around 20 deals with over one mill in D. C V or total contract value in Q2, which was in line with a number of such deals in Q2.

Speaker Change: <unk> 2023.

Unknown Executive: Importantly, the average TCV of large deals grew by 30% year over. As we have seen in the last few quarters, many enterprise customers want our deep teams integration. In fact, more than half of our large deals this quarter were again with customers that are utilizing our solutions integrated with and alongside. This is a key differentiator and an important reason why we're winning. We see Teams as a tremendous opportunity to grow our presence with the many large enterprises that use it for collaboration but are also in need of best-in-class.

Speaker Change: Importantly, the average GCB large deals grew by 30% year over year.

Speaker Change: As we have seen the last few quarters, many enterprise customers want our deep integration.

Speaker Change: In fact more than half of our large deals this quarter once again to customers that are utilizing our solutions integrate with and alongside Microsoft teams.

Speaker Change: This is a key differentiator and.

Speaker Change: An important reason why even when we.

Vladimir Shmunis: We see teams as a tremendous opportunity to grow our presence with the many large enterprises that use it for collaboration but are also in need of best-in-class telephony. Within Enterprise, we also continue to see strong traction in our gold verticals, which include healthcare, financial, financial and professional services, retail, and public sector. Given the mission-critical nature of voice in this industry, we are uniquely positioned to disproportionately capture the opportunity in our gold verticals. We estimate this opportunity represents at least 100 million on-prem seats that we expect to move to the cloud over time. In past quarters, we have discussed our large enterprise wins in financial services and healthcare.

Speaker Change: We see team is a tremendous opportunity to grow our presence with the many large enterprises that use it or collaboration but there also you need a best in class telephony.

Unknown Executive: Within enterprise, we also continue to see strong traction in our goal vertical, which includes health care, financial and professional services, retail, and public sector. Given the mission-critical nature of voice in these industries, we are uniquely positioned to disproportionately capture the opportunity in our Goldberg platform.

Speaker Change: Within enterprise, we also continue to see strong traction in our go to North Dakota.

Speaker Change: Which includes health care financial financial and professional services retail and public sector.

Speaker Change: Given the mission critical nature of voice in these industries, we are uniquely positioned to disproportionately capture the opportunity in our gold vertical.

Unknown Executive: We estimate this opportunity represents at least 100 million on-prem seats that we expect to move to the cloud over time. In previous quarters, we discussed our large enterprise wins in financial services and healthcare. This quarter, I want to specifically call out the significant strengths we're seeing in the retail sector, which we believe comprises nearly one-third of seats in our gold. Last quarter, we announced the largest win in our company history.

Speaker Change: We estimate this opportunity represents at least 100 mill in one breath seats that we expect to move to the cloud over time.

Speaker Change: In Boston, we have discussed a large enterprise wins in financial services and healthcare.

Vladimir Shmunis: This quarter, I want to specifically call out the significant strengths we're seeing in the retail sector, which we believe comprises nearly one-third of seats in our gold verticals.

Speaker Change: This quarter I want to specifically call out the significant strength, where she is the retail sector, which we believe comprises nearly one third of sheets in our Goldberg.

Vladimir Shmunis: Last quarter, we announced the largest win in our company history. This was a 40,000-seat win with our flagship cloud PBX UCAS RingEX product with a large Fortune 500 retailer. This quarter, we won two 10,000-plus seed deals in the retail vertical as well. The first is a large retailer with hundreds of stores across Europe that purchase 13,000 RingEX seats. The second is a well-known retailer in the Asia-Pacific region that purchased 11,000 RingEX seats, the largest APEG deal in our company history. These customers selected RingCentral because of our combination of vertical specific integrations, deep-team integration, proven ability in solving complex use cases, and critically best-in-class reliability.

Speaker Change: Last quarter, we are now the largest win in our company's history.

Unknown Executive: This was a 40,000-seat win with our flagship Cloud PBX UCAS Ring EX product, with a large Fortune 500 retail company. This quarter, we won two $10,000 plus C deals in the retail vertical as well. The first is a large retailer with hundreds of stores across Europe that purchased 13,000 ringgit. Second, is a well-known retailer in the Asia-Pacific region that purchased 11,000 trinkets.

Speaker Change: This was 40000.

Speaker Change: <unk> win with a flagship cloud PBX you Kat.

Speaker Change: Yeah.

Speaker Change: Yep.

Speaker Change: With a large fortune 500 retailer.

Speaker Change: This quarter, we won 210000 plus seat deals in the retail vertical as well.

Speaker Change: The first is a large retailer with congress of stores across Europe that purchased 13000 <unk>.

Speaker Change: The second is a well known retailer in the Asia Pacific region that purchased 11000.

Unknown Executive: The largest APEC deal in our company's history. These customers selected RingCentral because of our combination of vertical-specific integration, Jeep Team Integration, proven ability to solve complex use cases, and, critically, best-in-class reliability. In our small and mid market customer groups, we're seeing early signs of stabilization, despite a continually challenging macro. This is due to our ongoing focus on the customer support experience, as well as our transition to a multiproduct portfolio company, which allows us to get greater wallet share from our sizable SMB pool. Looking ahead, we believe these improvements should drive net retention and growth. So why did we win?

Speaker Change: It's the largest a big deal in our company's history.

Speaker Change: These customers selected drink central because our combination of vertical specific integration.

Speaker Change: The team integration.

Speaker Change: Proven ability in solving complex use cases and critically best in class reliability.

Vladimir Shmunis: In our small and mid-market customer groups, we're seeing early signs of stabilization despite a continually challenging macro. This is due to our ongoing focus on customer support experience as well as our transition to a multi-product portfolio company, which allows us to get greater wallet share from our sizable SMD base. Looking ahead, we believe this improvement should drive natural tension and growth higher.

Speaker Change: In our small and mid market customer groups, we're seeing early signs of stabilization. Despite a continued challenging macro.

Speaker Change: This is due to our ongoing focus on customer support experience as well as our transition to a multi product portfolio company, which allows us to get greater wallet share from our sizeable SMB base.

Speaker Change: Looking ahead, we believe these improvements should drive net your downstream and grow.

Vladimir Shmunis: So, why do we win? Our success is driven by our differentiated strategy of trust, innovation, and partners. Partnerships, or Tate, as we call it, Source Trust. We achieved 99.99% uptime for the 24th trade quarter, and our carrier-grade reliability, combined with our secure, standards-compliant and battle-tested platform, continue to be a key differentiator. It is one of the reasons why Verpool, a Fortune 500 manufacturer, selects Transcentral Disquarter to power communications at its U.S. Manufacturing plans. The company purchased 5,000-ring E.X. seeds and selected us for our ability to deliver a cloud communications platform that is reliable, easily deployable, and scalable.

Speaker Change: So why do we win.

Unknown Executive: Our success is driven by our differentiated strategy of trust, innovation, and partnership, or Dave Edwards. SourceTrack. We achieved 99.999% uptime for the 24th trade quarter. And our carrier-grade reliability, combined with our secure, standards-compliant, and battle-tested platform, continues to be a key differentiator. It is one of the reasons why Whirlpool, a Fortune 500 manufacturer, selected RingCentral this quarter to power communications at its U.S. manufacturing facilities. The company purchased 5,000 Ring EX seats and selected us for our ability to deliver a cloud communications platform that is reliable, easily deployable, and scalable. Innovation.

Speaker Change: Our success is driven by our differentiated strategy of through innovation and partnerships or as we call. It.

Speaker Change: Sure sure.

Speaker Change: We achieved 99.9, 99% uptime for the 24th straight quarter and carrier grade reliability combined with a secure.

Speaker Change: Blind and battle tested platform continued to be a key differentiator.

Speaker Change: It is one of the reasons why the whirlpool a fortune 500 manufacturer selected central this water bar Communications E.

Speaker Change: U S manufacturing plants.

Speaker Change: The company purchased 5000 seats.

Speaker Change: Seats and selected us for our ability to deliver a cloud communications platform that is reliable easily deployable and scalable.

Vladimir Shmunis: Innovation. The past 12 months have marked one of the most innovative periods in the company's history. In this short time, we launched RingCent's R.A.I. platform. RingCX, our native C.C.C.S. product. RingCentral's for sales, our conversation intelligence offering, and RingCentral Events, our hybrid events products. This has transformed us into a multi-product portfolio company. We are seeing strong early momentum across all our new products. In February of this year, we set a target of achieving at least 100 million of exit ARR from our new products by the end of 2025. Six months in, these products are already having a positive impact on our growth, and I am confident we will achieve the target.

Speaker Change: Innovation.

Unknown Executive: The past 12 months have marked one of the most innovative periods in the company's history. In this short time, we launched RingCentral, our AI platform, and RingCX, our native CCAS product.

Speaker Change: The past 12 months kept mark one of the most innovative periods in the company's history.

Speaker Change: In this short time, we launched ring fence, our AI platform rinks, yes, our nature gas border ring fenced for sales.

Unknown Executive: RingCentral for Sales, our conversation intelligence offering, and RingCentral Events, our hybrid events product. This has transformed us into a multi-product portfolio company, and we're seeing strong early momentum across all our new products. In February of this year, we set a target of achieving at least 100 million exit ARR from our new products by the end of 2025. Six months in, these products are already having a positive impact on our growth, and I am confident we will achieve this goal. Let me provide more detail on the traction we are seeing with each new product. First, RingCM.

Speaker Change: They should intelligence offering and ring central events are hybrid events brought up.

Speaker Change: This has transformed us into a multi product portfolio company.

Speaker Change: We're seeing strong early momentum across all of our new products.

Speaker Change: In February of this year, we set a target of achieving at least Congress mill and exit from.

Speaker Change: Our new product by the end of 'twenty to 'twenty five.

Speaker Change: Six month thing.

Speaker Change: As these products are already having a positive impact on our growth and I'm confident we will achieve this target.

Vladimir Shmunis: Let me provide more detail on the traction we are seeing with each new product. First, RingCX. We are seeing strong demand for RingCX, which now has over 350 customers, up more than 70 percent sequentially. RingCX net new bootings nearly doubled in 2Q, delivering a higher average revenue per account. This ARPA expansion has been largely fueled by over 25 percent of our 1 million plus GCD deals, now including both RingCX and RingCX. RingCX wins because it is a modern AI source product that is natively integrated with our industry-leading RingCX UCAS solution. RingCX is reliable, easy to deploy and use, and is disruptively priced.

Speaker Change: Let me provide more detail on the traction we're seeing with each new product.

Rick: Sure Rick.

Speaker Change: <unk> CX.

Unknown Executive: We're seeing strong demand for RingCX, which now has over 350 customers, up more than 70% sequentially. RingCX net new bookings nearly doubled in 2Q, delivering higher average revenue per account. This ARPA expansion has been largely fueled by over 25% of our 1 million plus TCV deals now including both RingEX and RingCentral. RingCX wins because it is a modern AI-sourced product that is natively integrated with our industry-leading RingEX UCAS solution. RingCX is reliable, easy to deploy and use, and is disruptively priced.

Speaker Change: We're seeing strong demand for <unk>, which now has over 350 customers.

Rick: More than 70% sequentially.

Speaker Change: <unk> net new bookings nearly doubled in two Q delivering a higher average revenue per account.

Speaker Change: These are bar expansion.

Speaker Change: Largely few by over 25% of our 1 million plus D. C V deal now, including both <unk> and <unk>.

Speaker Change: <unk> when you got to do some modern AI source product that is natively integrated with our industry, leading <unk> E X Ucas solution.

Speaker Change: Rink CX is reliable easily easy to deploy and use and is disruptive repriced.

Vladimir Shmunis: In Q2, the rapid pace of innovation continued as we added more than 300 additional features, including integrations with ServiceNow, HubSpot, and importantly Microsoft Teams. Notably, in Q2, we rolled out RingCX for RingCX, a premium add-on which provides AI, power quality management, and conversational. This product is currently in the control availability phase of its rollout. However, we're already seeing strong early traction, with nearly two-thirds of our 1,000,000-plus TCD deals that included RingCx, also attaching RingCentral. When RingCentral is purchased alongside RingCx, our combined list price is roughly $100. A good example of a combined RingCx, RingCx, and RingCentral when the last quarter is a large county in the Midwestern United States.

Unknown Executive: In Q2, the rapid pace of innovation continued as we added more than 300 additional features, including integrations with ServiceNow, HubSpot, and importantly, Microsoft. Notably, in Q2, we rolled out RingSense for RingCX, a premium add-on that provides AI-powered quality management and conversational analytics. This product is currently in the control availability phase of its rollout. However, we are already seeing strong early traction, with nearly two-thirds of our 1 million plus TCB deals that included RingCX also attaching RingCentral. When RingCentral is purchased alongside RingCX, our combined list price is roughly $100,000. A good example of a combined Ringia, RingCX, and RingCent's win last quarter is a large county in the Midwestern United States.

Speaker Change: In Q2, the rapid pace of innovation continues as we added more than 300 additional teachers, including integrations with service now top spot and importantly, Microsoft teams.

Speaker Change: Notably in Q2, we rolled out <unk> four rigs here.

Speaker Change: Premium agile, which provides both quality management and conversational analytics.

Speaker Change: This product is currently in the controlled availability Facebook its rollout.

Speaker Change: However, we're already seeing strong early traction with nearly two thirds of our 1 million plus do you see these deals that included <unk> also at that you ring fence.

Speaker Change: When doing so is purchased alongside brink outcome.

Speaker Change: Our combined lease price is roughly $100.

Speaker Change: A good example of a combined <unk> ring.

Speaker Change: And ring fence win last quarter is the largest county in the Midwestern United States.

Vladimir Shmunis: The county, one of the 25 largest in the US, touches 5,000 RingCx seats and 500 RingCx seats, as well as added on RingCentral for RingCx. The county will use RingCx to power communications for its workforce, and RingCx to power its contact center, allowing seamless collaboration across departments such as Treasury and Elections. The county is also a great example of a major win in the public sector, one of our key gold verticals.

Unknown Executive: The county, one of the 25 largest in the U.S., purchased 5,000 Ring EXEs and 500 Ring CXEs, as well as edit on RingCentral for RingShare. The county will use RingEX to power communications for its workforce and RingCX to power its contacts, allowing seamless collaboration across departments such as treasury and Building on the RingCX momentum is a recent announcement that Vodafone will be reselling RingCX, the first major GSP to offer RingCX to its global customers, with all the great early traction we're seeing with RingCA.

Speaker Change: The county, one of the 25 largest in the U S. So we're just 5000 seats.

Speaker Change: And by phone does ring CX seats as well as added on the ring fence or rings here.

Speaker Change: The county will use <unk> to power communications for its workforce and rings gx to power its contact center, allowing seamless collaboration across departments, such as threats and elections.

Speaker Change: The County is also a great example of a major win in the public sector one of our key Goldberg.

Vladimir Shmunis: Building on the RingCx momentum is a recent announcement that Vodafone will be selling RingCx, the first major GSP to offer RingCx to its global customer base. With all the great early traction we're seeing with RingCx, we also continue winning with our upmarket RingCentral Contact Center product, which targets customers with more complex use cases. During the quarter, we significantly increased our presence with a multinational travel and leisure firm and a large global healthcare organization. We also added two large credit unions to RingCentral Contact Center customers. Many enterprises, especially in our gold verticals, where voice is mission critical, demand best in class UCAS, closely integrated with the strong UCAS solution.

Speaker Change: Yeah.

Speaker Change: Building on the rink. She ex momentum is our recent announcement that Vodafone will be selling rinks, yes. The first major GSP do offer rigs yet to its global customer base.

Speaker Change: With all the great early traction we're seeing with drinks. Yes. We also continue winning without upmarket ring central context sensitive products.

Unknown Executive: We also continue winning with our upmarket RingCentral contact center, which targets customers with more complex needs. During the quarter, we significantly increased our presence with a multinational travel and leisure firm and a large global healthcare organization. We also added two large credit unions to RingCentral Contact Center customers. Many enterprises, especially in our gold verticals, where voice is mission critical, demand best-in-class U-CAP, closely integrated with a strong CCAS solution. Ring EF combined with RingCentral Contact Center is a unique, deep integration between two leading Gartner Magic Quadrant products.

Speaker Change: Which targets customers with more complex use cases.

Speaker Change: During the quarter, we significantly increased our presence with a multinational travel and leisure firm.

Speaker Change: And a large global health care organization.

Speaker Change: We also added two large credit unions to ring central contact center customers.

Speaker Change: Many enterprises, especially in our Goldsboro to go where voice is mission critical demand best in class Ucas.

Speaker Change: Locally integrated with the strong U S solution.

Vladimir Shmunis: RingCx, combined with RingCentral Contact Center, is a unique deep integration between two Gardner, Magic-Watered, quadrant-leading products. And for customers looking to streamline workflows while leveraging the power of AI, we have the RingCx, RingCx, and the nation to offer. In either case, reliability, scalability, security, global reach, standards, compliance, depth and breadth of integrations, and their robust features set are table stakes. RingCx with RingCx, and RingCx with our CCC, check all of the boxes and continue to be unique in doing so. Our total contact center business now stands at $390 million of ARR, up 19% year-over-year.

Rick: Rick Yes, combined with ring Central contact center.

Speaker Change: A unique deep integration between do Gartner Magic quadrant.

Speaker Change: What's the leading product.

Unknown Executive: And for customers looking to streamline workflows while leveraging the power of AI, we have RingDX, RingCX, and The Nation. In either case, reliability, scalability, security, global reach, standards compliance, depth and breadth of integration, and their box feature set are all tabled. Ring EX with RingCX and Ring EX with RCCC check all of these boxes and continue to be unique in doing so.

Speaker Change: And for customers looking to streamline workflows, while leveraging the power of AI, we have the right yeah.

Rick: <unk> ammunition sulfur.

Speaker Change: In either case reliability scalability deteriorate.

Speaker Change: We'll reach Don just complying.

Speaker Change: Death, and breath of integrations.

Rick: The robust feature set are table Stakes.

Speaker Change: Yeah, with <unk>, TX and Rinky acts with R. E. T E. G. All of these boxes and continue to be unique in doing so.

Unknown Executive: Our total contact center business now stands at $390 million in ARR, up 19% year over year. Now moving on to RingCentral sales, we now have over 800 customers, with net new bookings almost tripling sequentially. Customers choose RingCentral Sales for its ability to record and summarize conversations, provide AI follow code deliver insights on what customers care about most, and allow managers to have a comprehensive, easy-to-access view of the team's journey. For example,

Speaker Change: Our total contact center business now stands at $390 million of air are up 19% year over year.

Unknown Executive: here.

Vladimir Shmunis: Now moving on to RingCentral sales. We now have over 800 customers with net new bookings almost tripling sequentially. Customers choose RingCentral Sales for its ability to record and summarize conversations, provide AI-powered coaching, deliver insights on what customers care about most, and allow managers to have a comprehensive, easy-to-access view of the team's performance. For example, Terry Town Expocare, the largest ITD-focused pharmacy in America, reported that it is now able to review 100% of their customer calls, thus realizing significant productivity gains. Continuing with our strong innovation cadence, in Q2, we introduced a new integration with Microsoft, which now captures and creates insights from Team's conversations.

Speaker Change: Now moving on to ring fence for sale.

Rick: We now have over 800 customers with net new bookings almost tripling sequentially.

Rick: Got them much juice ring central sales for its ability to record and summarize conversation.

Rick: Provide AI powered coaching deliberate insights on what got them with care about most and allow managers Yo gabba comprehensive easy to access view of the team's performance.

Speaker Change: For example, tarrytown extra care the largest IGD focused pharmacy in America reported.

Unknown Executive: Terrytown ExpoCare, the largest IDD-focused pharmacy in America, reported that it is now able to review 100% of its customer calls, and that's realizing significant productivity. Continuing with a strong innovation cadence, in Q2, we introduced a new integration with Microsoft, which now captures and creates insights from Teams Conversations. This, combined with our integrations with leading CRM tools, such as Salesforce and HubSpot, allows our customers to keep track of all their interactions without needing to toggle. And now, on to RingCentral events.

Speaker Change: Now able to review the percent of their customer pool, thus realizing significant productivity gains.

Speaker Change: Continuing with our strong innovation cadence in Q2, we introduced a new integration with Microsoft, which now captures entries insights from chief seems conversation.

Vladimir Shmunis: This combined with our integrations with leading CRM2, such as Salesforce and HubSpot, allows our customers to keep track of all their interactions without needing to toggle between applications.

Speaker Change: This combined with our integrations with leading CRM tool, such as Salesforce and the top spot.

Speaker Change: Now our customers to keep track of all the interactions without needing to toggle between application.

Vladimir Shmunis: And now on to RingCentral Events. Custom account was up over 30% sequentially, with bookings grows over 40% sequentially. New wins included a large six-figure deal with the leading global management consulting firm, one of the world's largest aerospace companies, and the large global personal computing company. On the innovation front, we introduced a new LinkedIn integration, which allows users to directly register and share events all within LinkedIn. The traction we're seeing across all our new products, we believe, we can attract new customers as well as increase upsell to our existing base, which is the key driver of net retention.

Speaker Change: And now onto ring central events.

Unknown Executive: Customer count was up over 30% sequentially, with bookings growth of over 40%. New wins included a large six-figure deal with a leading global management consulting firm, one of the world's largest aerospace companies, and a large global personal computer. On the innovation front, we introduced a new LinkedIn integration, which allows users to directly register for and share events all within LinkedIn.

Speaker Change: Customer count was up over 30% sequentially with bookings growth of over 40% sequentially.

Speaker Change: New wins included a large six figure deal.

Speaker Change: With a leading global management consulting firm one of the worlds largest aerospace companies and the large global gross little confusion company.

Speaker Change: On the innovation front, we introduced a new Lincoln integration, which allows users to directly registered share events.

Speaker Change: Linkedin.

Unknown Executive: With the attractions we are seeing across all our new products, we believe we can attract new customers as well as increase upsells to our existing customers, which is the key driver of. We will be providing you with periodic updates on our new products as we achieve certain, Back to tape. Last but not least, Park.

Speaker Change: The traction we're seeing across all of our new products. We believe we can attract new customers as well as increased upsell to our existing base.

Speaker Change: Which is the key driver of notes redemption.

Vladimir Shmunis: We will be providing you with periodic updates on our new products as we achieve certain milestones.

Speaker Change: We will be providing you with updates on our new products as we achieve certain milestones.

Unknown Executive: Back to tip.

Speaker Change: Back to chip.

Vladimir Shmunis: Last but not least, partnerships. As we scale our business, we will continue to leverage our expensive and differentiated gold to market ecosystem. This ecosystem, which includes channel partners, strategic partners, and global service providers, combined with direct selling motions, allows us to have access to multiple segments, verticals, and routes to market. It has been key to our success and an important part of our competitive mode that allows us to successfully scale our multi-product business.

Speaker Change: Last but not least partnerships.

Unknown Executive: As we scale our business, we will continue to leverage our expansive and differentiated go-to-market economy. This ecosystem, which includes channel partners, strategic partners, and global service providers, combined with a direct selling motion, allows us to have access to multiple segments, verticals, and routes. It has been key to our success and an important part of our competitive mode that allows us to successfully scale our multiproductivity. Let me now give you some highlights from Doris G. Espis. Our GSP business again grew faster than our overall business and now represents over 10% of our total area.

Chip: As we scale our business, we will continue to leverage our expensive and differentiated go to market ecosystem.

Speaker Change: This ecosystem, which includes general partners.

Speaker Change: Partners and global service providers combined with a direct selling motion.

Speaker Change: Allows us to have access to multiple segments vertical and routes to market. It.

Speaker Change: It has been key to our success and an important part of our competitive moat that allows us to successfully scale, our multi product business.

Vladimir Shmunis: Let me now give you some highlights from the quarter. First, GSPs. Our GSP business again grew faster than our overall business and now represents over 10% of our total error. Our network of GSP partners and deep engagements that we have built with them on both products and go to market are unmatched by RUC and CCPS.

Speaker Change: Let me now give you some highlights from the quarter.

Speaker Change: Sure Gsp's.

Speaker Change: Our GSP business again grew faster than our overall business and now represents over 10% of our total error.

Unknown Executive: Our network of GSP partners and deep engagements that we have built with them on both product and go-to-market are unmatched by RUC and CCP. Today, I'd like to warmly welcome Cox Communications. The largest private broadband provider in the U.S. and the comprehensive technology provider for business, Cox selected RingCentral to support their future UCAS and CCAS solutions with plans to launch UCAS later this year. Cox provides us with another meaningful channel to help move more on-prem customers to the cloud. We now have a network of 14 GSP providers.

Speaker Change: Our network of GSP partners and deep engagements that we have built with them on both product and go to market are unmatched by our U C and C. C. P S.

Vladimir Shmunis: Today, I would like to warmly welcome Cox Communication. The largest private broadband provider in the U.S. and the comprehensive technology provider for businesses to our growing GSP family. Cox selected Trebnick Central to support their future UCAS and CCAS solutions with plans to launch UCAS later this year. Cox provides us with another meaningful channel to help move more on-prem customers to the cloud. We now have a network of 14 GSP providers in total, including two MSOs. As Cox follows the successful rollout of Charter in late 2022. Our presence and expansion with the leading GSP in Europe is key to scaling our international presence.

Cox Communications: Today I'd like to warmly welcome Cox Communications.

Speaker Change: Our largest private broadband provider in the U S and the comprehensive technology provider for businesses to our growing GSP family.

Speaker Change: Cock selected truth central to support their future you guessed and she gets solutions with plans to launch <unk> later this year.

Speaker Change: <unk> provides us with another meaningful channel to help move more on prem customers to the cloud wins.

Speaker Change: We now have a network of fortune GSP providers.

Unknown Executive: In total, including two MSOs, as Cox followed the successful rollout of Charter in late 2020. Our presence and expansion with the leading GSPs in Europe is key to scaling our international presence. In this vein, as I already mentioned, Vodafone recently announced that it will be reselling RingCX to its users.

Speaker Change: In total, including two Msos as Scott followed the successful rollout of charter in late 2022.

Cox Communications: Our presence and expansion with the leading Gsp's in Europe is key to scaling our international presence.

Vladimir Shmunis: In this vein, as I already mentioned, both the phone recently announced that it will be reselling RingCx to their user base. We also continue to expand into new geographies with the phone. For example, in the second quarter, we launched in Ireland and already won a sizable deal at Misstoys, one of the country's largest toy retailers. We expect to have access to a total of 30 global markets through Vodafone by 2025, up from 2020 today.

Wayne: This is Wayne.

Speaker Change: Already mentioned Vodafone recently, I know that it will be reselling brink's yet to their user base.

Unknown Executive: We also continue to expand into new geographies with water. For example, in the second quarter, we launched in Ireland and already won a sizable deal at Smith's Toys, one of the country's largest toy retailers. We expect to have access to a total of 30 global markets through Vodafone by 2025, up from 2020. Now on to strategic partners. Source, Mike.

Wayne: We also continue to expand into new geographies with waterfall for example in the second quarter, we launched in Ireland and already won a sizable deal at this story one of the country's largest retailers we.

Speaker Change: We expect to have access to a total of 30 global market through Vodafone by 2025 up from 20 today.

Vladimir Shmunis: Now on to strategic partnerships. First, my tell. In Q2, we acquired certain additional assets and customer relationships related to Mitals, Me Clouds Connect and Sky UCAS platform. While we have migrated hundreds of thousands of mitals, clouds is already. We expect that this will allow us to provide a better customer experience for the remaining cloud base in the customer's digital transformation journey. Moving forward, RingCx and Mitals will be non-exclusive partners.

Wayne: Now on to strategic partnerships.

Speaker Change: Mitel in Q2, we acquired certain additional assets and customer relationships related to myself my cloud connect and Sky Ucas platform.

Unknown Executive: In Q2, we acquired certain additional assets and customer relationships related to Mitel's MeCloud Connect and Sky UCAS platform. While we have migrated hundreds of thousands of Michael's customers already, we expect that this will allow us to provide a better customer experience for the remaining cloud base in the customer's digital transformation journey. Moving forward, RingCentral and Mitel will be non-exclusive partners. Now on to Avaya.

Speaker Change: While we have migrated the Congress of thousands of Mitel cloud seats already we expect that this will allow us to provide a better customer experience for their remaining cloud base in the customers' digital transformation journey.

Speaker Change: Looking forward with ring central and Michael will be non exclusive partners.

Vladimir Shmunis: Now on to Avaya. Earlier this year, we announced an extension of our relationship. We are already seeing good renewed traction, including with several of Avaya's top customers, who are going through their digital transformation. This includes a recent large win with one of the busiest commercial ports in North America, as well as another win with an auto retailer with locations in all 50 states. In Q2, we also jointly announced a new hybrid solution that allows customers to integrate their existing Avaya on-prem products with RingCx cloud messaging and video solutions. This hybrid approach will enable Avaya's customers to transition to Avaya Cloud authors powered by RingCx or ACO at their own pace.

Unknown Executive: Earlier this year, we announced an extension of our relationship, and we're already seeing good renewed traction, including with several of Avaya's top customers who are going through their digital transformation. This includes a recent large win with one of the busiest commercial ports in North America, as well as another win with an auto retailer with locations in all 50 states. In Q2, we also jointly announced a new hybrid solution that allows customers to integrate their existing Avaya on-premises products with RingCentral's cloud messaging and video solutions.

Speaker Change: Now onto Armada.

Speaker Change: Earlier this year, we announced an extension of our relationship.

Speaker Change: We're already seeing good renewed traction including with.

Speaker Change: With several of our bias towards customers.

Wayne: Who are going through their digital transformation.

Speaker Change: This includes a recent large win with one of the busiest commercial ports in North America.

Speaker Change: As well as another win with an auto retailer with locations in all 50 states.

Speaker Change: In Q2, we also jointly announced a new hybrid solution that allows customers to integrate their existing avaya.

Speaker Change: On Prem products products with ring Central cloud messaging and video solutions.

Unknown Executive: This hybrid approach will enable Avaya's customers to transition to Avaya cloud office powered by RingCentral or ACO at their own pace by allowing employees from the same company to use either Avaya or on-premises product or ACO to power their calling. Meanwhile, they can use RingCentral's AI-powered cloud messaging and VGA capabilities for digital collaboration.

Speaker Change: This hybrid approach will enable a voice customers to transition to avaya.

Speaker Change: Avaya cloud office powered by ring central or ACO at their own pace.

Vladimir Shmunis: By allowing employees from the same company to use either Avaya or on-prem products or ACO to power their calls. Meanwhile, they can use RingCentral's AI-powered cloud messaging and VGA capabilities for digital collaboration. We believe our opportunity with Avaya remains significant, and that we are well positioned to drive the transition of Avaya's large UC-based to the cloud.

Speaker Change: By allowing employees from the same company to use either avaya or on brand product or ACO to power their calling.

Wayne: Meanwhile, they can use ring central AI powered cloud messaging and video capabilities for digital collaboration.

Unknown Executive: We believe our opportunity with Avaya remains significant, and we are well positioned to drive the transition of Avaya's large UC base to the cloud. In summary, Q2 results were a continuation of the strong execution that we saw in the first quarter. Demand in our core UCAS business remains solid. Our new products are gaining traction, our pace of innovation is quickening, and we're expanding our portfolio. We're doing all this while continuing to improve profitability, reduce stock-based compensation, and grow free cash flow and free cash flow per share.

Speaker Change: We believe our opportunity remains significant.

Speaker Change: And that we're well positioned to drive the transition of our wireless large you see base to the cloud.

Vladimir Shmunis: In summary, Kutur results were a continuation of the strong execution that was saw in the resource water. Demand in our core UCAS business remains solid. Our new products are gaining traction; our pace of innovation is quickening, and we're expanding our partnerships. We're doing all this while continuing to improve profitability, reduce stock-based compensation, and grow free cash flow and free cash flow per share. We believe this will generate value for all our stakeholders over time. We are on an exciting path, and I am confident that we can continue to execute in the quarters and years ahead.

Speaker Change: In summary, Q2 results were a continuation of the strong execution that we saw in the first quarter.

Speaker Change: Demand in our core U K business remained solid.

Speaker Change: Our new products are gaining traction our pace of innovation is quickening and we're expanding our partnerships.

Speaker Change: We're doing all this while continuing to improve profitability reduce stock based compensation and grow free cash flow and free cash flow per share.

Unknown Executive: We believe this will generate value for all our stakeholders over time. We are on an exciting path, and I am confident that we can continue to execute in the quarters and years ahead. With that, I will turn the call over to Sonalee. Thanks a lot.

Speaker Change: We believe this will generate value for all our stakeholders overtime.

Wayne: We are on an exciting path and then confident that we can continue to execute in the quarters and years ahead.

Sonalee Parekh: With that, let me join the call over to Sonalee.

Sanofi: With that let me turn the call over to Sanofi.

Sonalee Parekh: Thanks, Vlad.

Sonalee Parekh: I'll provide highlights from the second quarter and then discuss our business outlook for the third quarter and full year. In Q2, subscription revenue of $567 million was up 10% year over year, solidly above the high end of our garden. ARR of 2.43 billion was up 9% year-over-year. However, adjusted for constant currency, it was up 10% versus last year. CCAS ARR was $390 million, up 19% versus last year with good early traction from RingCentral. However, as Vlad noted, the number of large TCV deals was roughly flat versus last year.

Sanofi: Thanks, Brian.

Sonalee Parekh: I'll provide highlights from the second quarter, and then discuss our business outlook for the third quarter and full year. In Q2, subscription revenue of $567 million was up 10% year-over-year, solidly above the high end of our guidance range. ARR of 2.43 billion was up 9% year-over-year; adjusted for constant currency, ARR was up 10% year-over-year. C-CAS ARR was 390 million, up 19% year-over-year, with good early traction from Ring-CX. As Vlad noted, the number of large TCV deals was roughly flat versus last year, but the value of each deal was up on average 30%. Additionally, the value of our large U-CAS-only deals grew even faster, up over 60% versus last year.

Sanofi: I'll provide highlights from the second quarter, and then discuss our business outlook for the third quarter and full year.

Speaker Change: In Q2 subscription revenue of $567 million was up 10% year over year solidly above the high end of our guidance range.

Speaker Change: There are 2.43 billion was up 9% year over year.

Speaker Change: Adjusted for constant currency <unk> was up 10% versus last year.

Sanofi: Because.

Sanofi: With 319.

Speaker Change: 19% versus last year with good early traction from Marine Sea.

Sanofi: As I have noted the number of large T. C. D deal was roughly flat versus last year.

Sonalee Parekh: But the value of each deal was up on average 30%. Additionally, the value of our large UCAS-only deals grew even faster, up over 60% versus less. While the macro has impacted growth the last two years, we believe our business is stabilized, and our large UCAS wins and growth in deals are illustrative of the size of the opportunity that is still in front of us and an encouraging leading indicator of continued market adoption. Now, moving to profitability. I'll be referring to non-GAAP results unless otherwise noted. For example, the subscription growth margin was 81%. Overall, our bill was again over $30.

Sanofi: But the value of each deal was up on average 30%.

Speaker Change: Additionally, the value of our large new castle media grew even faster up.

Sanofi: Over 60% versus last year.

Sonalee Parekh: While the macro has impacted growth the last two years, we believe our business is stabilizing, and our large U-CAS wins and growth in deal size are illustrative of the size of the opportunity that is still in front of us, and an encouraging leading indicator of continued market adoption.

Sanofi: While the macro has impacted growth the last two years, we believe our business is stabilizing and there were a large new cast wins and growth in deal size are illustrative of the size of the opportunity that is still in front of us.

Speaker Change: And an encouraging leading indicator of continued market adoption.

Sonalee Parekh: Now, moving to profitability. I'll be referring to non-GAAP results unless otherwise noted. Subscription growth margin was 81%. Overall, ARPOO was again above $30. Our new product ARPOOs are solidly higher than current overall ARPOOs. Over time, as the contribution from new products grows and its penetration within our large base increases, we expect new products to become increasingly accretive to overall ARPOO. Operating margin rose 160 basis points year over year to 20.9. 10%, which is above our guidance. The outperformance was driven by revenue up performance and continued discipline around spending. Sales and marketing expense of the percent of total revenue declined 150 basis points to 39.5%.

Speaker Change: Now moving to profitability.

Speaker Change: I'll be referring to non-GAAP results unless otherwise noted.

Speaker Change: Subscription gross margin was 81%.

Speaker Change: Overall, our pill was again above $30.

Sonalee Parekh: Our new product ARPUs are solidly higher than current overall ARPUs. Over time, as the contribution from new products grows, and its penetration within our large base increases, we expect new products to become increasingly accretive to overall. Operating margin rose 160 basis points year over year to 20.9%, which is above our guide. The outperformance was driven by revenue outperformance and continued discipline around spending. Sales and marketing expenses, a percent of total revenue, declined 150 basis points to 39.5% as we drive higher sales productivity and remain focused on keeping compensation commensurate with the value created.

Speaker Change: Our new product our players are solidly higher.

Speaker Change: Current overall ARPA.

Speaker Change: Overtime as the contribution from new products.

Speaker Change: And its penetration within our large base increases, we expect new products to become increasingly accretive to overall RPM.

Speaker Change: Operating margin rose 160 basis points year over year to 29%.

Speaker Change: Which is above our guidance.

Speaker Change: The outperformance was driven by revenue outperformance and continued discipline around spending.

Speaker Change: Sales and marketing expense as a percent of total revenue declined 150 basis points to 39, 5%.

Sonalee Parekh: As we drive higher sales productivity and remain focused on keeping compensation commensurate with the value created. This continues to be an area of focus for the company, and we expect to drive further incremental improvements in the second half of this year.

Speaker Change: As we drive higher sales productivity and remain focused on keeping compensation commensurate with the value created.

Sonalee Parekh: This continues to be an area of focus for the company, and we expect to drive further incremental improvements in the second half of this year. Importantly, we are able to drive margin expansion while continuing to reinvest back into the business to support innovation and growth. Moving to free cash.

Speaker Change: This continues to be an area of focus for the company and we expect to drive further incremental improvements in the second half of this year.

Sonalee Parekh: Importantly, we are able to drive margin expansion while continuing to reinvest back into the business to support innovation and growth.

Speaker Change: Importantly, we are able to drive margin expansion, while continuing to reinvest back into the business to support innovation and growth.

Sonalee Parekh: Moving to free cash flow. In the last year, this includes interest of 8 million, restructuring and other payments of 3 million, and cash received from strategic partners of 10 million.

Speaker Change: Moving to free cash flow.

Sonalee Parekh: In the second quarter of 2024, we generated free cash flow of $109 million, up 49% versus last year. This includes interest of $8 million, restructuring, and other payments of $3 million, and cash received from strategic partners of TenBil. Moving to stock-based compensation, stock-based compensation fell 470 basis points versus last year to 15% of total revenue.

Speaker Change: In the second quarter of 'twenty 'twenty, four we generated free cash flow of 109 million up 49% versus last year.

Speaker Change: This includes interest of 8 million.

Speaker Change: Restructuring and other payments of 3 million.

Speaker Change: Cash received from strategic partners.

Speaker Change: Sure.

Sonalee Parekh: Moving to stock-based compensation. Stock-based compensation fell 470 basis points versus last year to 15% of total revenue. We remain disciplined on stock grants. As we have said before, reducing FBC is a key priority for the entire management team. As of the first half of 2024, net new share grants are down almost 60% versus last year, which is ahead of our previously stated goal to reduce share grants by 50% of 2023 levels. We have also again improved our FBC outlook and now expect FBC as a percent of total revenue to be 15.7% in 2024, ahead of our prior guidance of 16.1% last quarter.

Speaker Change: Moving to stock based compensation.

Speaker Change: Stock based compensation is down 470 basis points versus last year to 15% of total revenue.

Sonalee Parekh: We remain disciplined on stock grants. As we have said before, reducing FBC is a key priority for the entire management team. As of the first half of 2024, net new share grants are down almost 60 percent versus last year, which is ahead of our previously stated goal to reduce share grants by 50 percent by 2023. We have also again improved our SBC outlook and now expect SBC as a percent of total revenue to be 15.7% in 2024, ahead of our prior guidance of 16.1% last quarter. Importantly, free cash flow exceeded stock-based compensation for the first time ever this quarter

Speaker Change: We remain disciplined on stop right.

Speaker Change: As we have said before reducing SBC is a key priority for the entire management team.

Speaker Change: As of the first half of 2024 net new share grants are down almost 60% versus last year, which is ahead of our previously stated goal to reduce share grant by 50% or 2023.

Speaker Change: We have also again improved our SBC outlook and now expect SBC as a percent of total revenue to be 15, 7% in 2024.

Speaker Change: Ahead of our prior guidance of 16, 1% last quarter.

Sonalee Parekh: Importantly, free cash flow exceeded stock-based compensation for the first time ever this quarter. This is a testament to the progress we have made to both reduce stock-based compensation as well as significantly grow free cash flow through operating leverage from our large and growing ARR base, along with continued progress on disciplined spend and efficiency initiatives.

Speaker Change: Importantly, free cash flow exceeded stock based compensation for the first time ever this quarter. This.

Sonalee Parekh: This is a testament to the progress we have made to both reduce stock-based compensation as well as significantly grow free cash flow through operating leverage from our large and growing ARR program, along with continued focus on disciplined spend and efficiency initiatives. Moving to our balance sheet and capital allocation, We have made great progress in strengthening our balance sheet over the last 18 months, with net debt to adjusted EBITDA declining from 4.3 times in Q4 2022 to 2.4 times in Q2 2024. In fact, Fitch Ratings recently upgraded its outlook on RingCentral from stable to positive.

Speaker Change: This is a testament to the progress we have made to both reduced stock based compensation as well as significantly grow free cash flow through the operating leverage from our large and growing our base.

Speaker Change: Long with continued focus on disciplined spend and efficiency initiatives.

Sonalee Parekh: Moving to our balance sheet and capital allocation. We have made great progress in strengthening our balance sheet over the last 18 months, with net debt to adjusted EBITDA declining from 4.3 times at Q4 2022 to 2.4 times at Q2 2024. In fact, Fitch Ratings recently upgraded its outlook on RingCentral from stable to positive. This upgraded outlook was based on our low and improving leverage, potential for future expansion, and EBITDA, margin, and free cash flow graph.

Speaker Change: Moving to our balance sheet and capital allocation.

Speaker Change: We have made great progress in strengthening our balance sheet over the last 18 months.

Speaker Change: With net debt to adjusted EBITDA declining from four three times at Q4 2022.

Speaker Change: So two four times at Q2 2024.

Speaker Change: In fact, Fitch ratings recently upgraded its outlook on marine central from stable to positive.

Sonalee Parekh: This Upgraded Outlook was based on our low and improving leverage, potential for future expansion, and EBITDA, margin, and free cash flow. Going forward, we will continue to employ a balanced and disciplined approach to returning cash to shareholders through both debt repayment and share repurchase, while also remaining flexible in considering inorganic. Allocating capital between these priorities will be based on driving a high ROI for our show, while also preserving financial flexibility.

Speaker Change: This upgraded outlook was based on our low and improving leverage.

Speaker Change: Potential for future expansion in EBITDA margin and free cash flow graph.

Sonalee Parekh: Going forward, we will continue to employ a balanced and disciplined approach to returning cash to shareholders through both debt repayments and share repurchases, while also remaining flexible in considering inorganic growth. Allotating capital between these priorities will be based on driving a high ROI for our shareholders, while also preserving financial flexibility.

Speaker Change: Going forward, we will continue to employ a balanced and disciplined approach to returning cash to shareholders through both debt repayment and share repurchase while also remaining flexible and considering inorganic growth.

Speaker Change: Allocating capital between these priorities will be based on driving a high ROI for our shareholders, while also preserving financial flexibility.

Sonalee Parekh: With this framework, let me give you some color on how we plan to allocate our capital. We plan to address our 161 million 2025 convertible notes outstanding at June 30th, 2024, with the incremental free cash flow we expect to generate between now and March 2025, reducing our growth debt by approximately 10%. We intend to address the remaining balance of the 2026 convertible notes, with cash on hand, a portion of the free cash flow generated between now and March 2026, and access to bank lending markets given our strong and improving financial and credit profile. Regarding buybacks, we believe that shares we purchase currently provide an attractive relative return.

Sonalee Parekh: With this framework, let me give you some color on how we plan to allocate our We plan to address our 161 million 2025 convertible notes outstanding at June 30 of 2024 with the incremental free cash flow we expect to generate between now and March 2025, reducing our growth debt by approximately 10%. We intend to address the remaining balance of the 2026 convertible notes with cash on hand, a portion of the free cash flow generated between now and March 2026, and Access to Bank Lending Markets, given our strong and improving financial and credit profile.

Speaker Change: With this framework, let me give you some color on how we plan to allocate our capital.

Speaker Change: We plan to address our $161 million 2025 convertible notes outstanding at June 32024, with the incremental free cash flow, we expect to generate between now and March 2020.

Speaker Change: Reducing our gross debt by approximately 10%.

Speaker Change: We intend to address the remaining balance of the 2026 convertible notes with cash on hand.

Speaker Change: A portion of the free cash flow generated between now and March 2026.

Speaker Change: And access to bank lending markets, given our strong and improving financial and credit profile.

Sonalee Parekh: Regarding, We believe that share repurchase currently provides an attractive relative return. As of June 30, 2024, we have repurchased 4.8 million shares and paid $162 million for share repurchases under the plans previously authorized by our Board of Directors, resulting in our fully diluted share count declining by approximately 1 million shares. We have approximately $326 million remaining on our total authorization at June 30, 2024. Importantly, we are targeting to reduce our growth debt from $1.5 billion today to no more than $1 billion before the end of 2026. We also plan to continue to at least fully offset dilution from FBC via Bible, all while preserving financial flexibility with respect to excess. Now, let me turn to Guy.

Speaker Change: Regarding buybacks.

Speaker Change: We believe that share repurchase currently provides an attractive relative return.

Sonalee Parekh: As of June 30th, 2024, we have repurchased 4.8 million shares and paid 162 million for share repurchases under the plans previously authorized by our Board of Directors, resulting in our fully diluted share count declining by approximately 1 million shares this year. We have approximately 326 million remaining on our total authorization at June 30th, 2024. Importantly, we are targeting to reduce our growth debt from 1.5 billion today to no more than 1 billion before the end of 2026. We also plan to continue to at least fully offset dilution from FBC via buybacks, all while preserving financial flexibility with respect to excess cash.

Speaker Change: As of June 32024, we have repurchased four 8 million shares and paid $162 million for share repurchases under the plan previously authorized by our board of directors.

Speaker Change: Resulting in a fully diluted share count declining by approximately 1 million shares this year.

Speaker Change: We have approximately 326 million remaining on our total authorization at June 30 of 2024.

Speaker Change: Importantly, we are targeting to reduce our gross debt from $1 5 billion today to no more than $1 billion before the end of 2026.

Speaker Change: We also plan to continue to at least fully offset dilution from SBC via buybacks.

Speaker Change: All while preserving financial flexibility with respect to excess cash.

Sonalee Parekh: Now, let me turn to guidance. 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 condition. With that backdrop, for the third quarter of 2024, we expect subscription revenue growth of 8%. Total revenue growth of 8%. Non-gap operating margin of 21%, and non-gap EPS of 92 to 93 cents.

Speaker Change: Now, 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 condition. With that backdrop, for the third quarter of 2024, we expect subscription revenue growth of 8% and total revenue growth of 8%. Non-Gap Operating Margin of 21% and Non-Gap EPS of $92 to $93, for the full year.

Speaker Change: Embedded in our guidance is the expectation that the macro environment and current business trends remain relatively stable.

Speaker Change: With no further material improvement or deterioration in condition.

Speaker Change: With that backdrop for.

Speaker Change: For the third quarter of 2024, we expect.

Speaker Change: Subscription revenue growth of 8%.

Speaker Change: Total revenue growth of 8%.

Speaker Change: non-GAAP operating margin of 21%.

Speaker Change: non-GAAP EPS of 92 to 93.

Sonalee Parekh: For the full year, we are raising our revenue outlook. We now expect subscription revenue of 2.282 billion to 2.288 billion, representing growth of 9%. And total revenue of 2.393 billion to 2.399 billion, representing annual growth of 9%. We continue to expect a non-GAAP operating margin of 21%. as we balance profitability with reinvesting back into the business. Importantly, we now expect stock-based compensation as a percentage of total revenue to be 15.7% at the midpoint, down from 16.1% at the midpoint previously. We also expect non-GAAPPS of $3.62 to $3.67, up from $3.59 to $3.67, as we now expect 95 to 96 million fully diluted shares outstanding in 2024, down from 96 to 97 million shares previously.

Speaker Change: For the full year.

Sonalee Parekh: We are raising our revenue. We now expect subscription revenue of $2.282 billion to $2.288 billion, representing growth of 9%, and total revenue of $2.393 billion to $2.399 billion, representing annual growth of 9%. We continue to expect a non-GAAP operating margin of 21% as we balance profitability with reinvesting back into the business. Importantly, we now expect stock-based compensation as a percentage of total revenue to be 15.7% at the midpoint, down from 16.1% at the midpoint. Non-GAAP EPS of $3.62 to $3.67, up from $3.59 to $3.67.

Speaker Change: We are raising our revenue outlook.

Speaker Change: We now expect subscription revenue.

Speaker Change: Two points to eight 2 billion.

Speaker Change: So two points to eight eight.

Speaker Change: Representing growth of 9%.

Speaker Change: And total revenue of 2.393 billion to $2 399 million representing annual growth of 9%.

Speaker Change: We continue to expect non-GAAP operating margin of 21%.

Speaker Change: And we balance profitability with reinvesting back into the business.

Speaker Change: Importantly, we now expect stock based compensation as a percentage of total revenue to be 15, 7% at the midpoint.

Speaker Change: Down from 16, 1% at the midpoint previously.

Speaker Change: We also expect non-GAAP EPS of $3.62 to $3 67.

Speaker Change: Up from $3 59 to $3 and 67%.

Speaker Change: As we now expect 95 to 96 million fully diluted shares outstanding in 2024.

Speaker Change: Down from 96 to 97 million shares previously.

Sonalee Parekh: Regarding free cash flow, we now expect free cash flow of $395 to $400 million, up from $385 to $390 million. Our outlook continues to include capitalized expenditures of $85 million, cash paid for interest of $60 million, and restructuring and other payments of $20 million, as well as $25 million of cash received from certain strategic partners.

Speaker Change: Regarding free cash flow, we now expect free cash flow of $395 million to $400 million.

Unknown Executive: We now expect free cash flow of $395 to $400 million, up from $385 to $390 million. We are executing against our strategy of delivering durable, profitable growth and value from our core. We will now begin the question and answer session. Just to make sure I understand, you're asking why we would or would not be a shared consolidator? No, no, why you should be.

Speaker Change: From $385 million to $390 million.

Speaker Change: Our outlook continues to include capitalized expenditures of $85 million.

Speaker Change: Cash paid for interest of $60 million.

Speaker Change: And restructuring and other payment of $20 million.

Speaker Change: Well, it's $25 million of cash received from certain strategic partners.

Sonalee Parekh: In summary, we have another strong quarter. We are executing the GAPESDAR strategy of delivering durable, profitable growth and value from our core, expanding our addressable markets through new products and driving continued free cash flow generation while materially lowering SBC.

Speaker Change: In summary, we had another strong quarter.

Speaker Change: We are executing against our strategy of delivering durable profitable growth and value from our core.

Speaker Change: Expanding our addressable markets through new products.

Speaker Change: And driving continued free cash flow generation, while materially lowering SBC.

Sonalee Parekh: We believe this is the right strategy that will maximize returns for all stakeholders and look forward to continuing to execute strongly against it.

Speaker Change: We believe this is the right strategy that will maximize returns for all stakeholders.

Speaker Change: And look forward to continuing to execute strongly against it.

Unknown Executive: With that, let's open up the call for questions.

Speaker Change: With that let's open up the call for questions.

Unknown Executive: We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Unknown Executive: In the interest of time, we will limit the Q&A to one question per analyst.

Speaker Change: In the interest of time, we will limit the Q&A to one question per analyst at this time, we will pause momentarily to assemble our roster.

Unknown Executive: At this time, we will pause momentarily to assemble our roster.

Michael Funk: The first question comes from Michael Funk with Bank of America.

Speaker Change: The first question comes from Michael Funk with Bank of America. Please go ahead.

Michael Funk: Thank you for the question tonight. One for you, Glad. Kind of higher level industry structure question. You know, industry structure isn't static, right? You see a number of providers add capabilities whether it was boys or contacts in their last several years. You clearly expanded your own portfolio.

Speaker Change: Yeah. Thank you for the question Tonight.

Michael Funk: <unk>, one kind of higher level industry structure question, I mean, I understand structure ryzen static right the same number of providers.

Speaker Change: I'd capabilities, whether it was boy contacts in our last several years you clearly expanded your own product portfolio. So love to hear your thoughts on why ring Central beer share consolidator. If you believe you can outgrow the industry and if your product portfolio will allow you to maintain.

Vladimir Shmunis: So, you know, love to hear your thought on why Ring Central be a share consultator. If you believe you can outgrow the industry and if your product portfolio will allow you to maintain pricing discipline to a greater degree than we have seen. In any metrics, maybe you can provide support; that would be great. Thank you.

Speaker Change: <unk> pricing discipline.

Speaker Change: You had greater degree than we have seen.

Speaker Change: Any metrics, maybe you can provide the support that would be it would be great. Thank you.

Vladimir Shmunis: Yes, Michael, hi. Thank you for the question. So I'm saying, just to make sure, just to make sure I understand that you're asking why we would or would not be sharing a consolidated. No, no, no, why, why, why, why you should be, why you should be a share consolidator in the next cast with your product portfolio. And if and why you believe that we've greater, greater pricing discipline and you add more products to the portfolio in the I'm evolving competitive environment. Right, I don't believe we stated that we were planning to be market share consolidator, if that's what you mean.

Michael Funk: Oh, Yeah, Michael Hi.

Speaker Change: Thank you for the question, so I'm, sorry, just to make sure.

Speaker Change: Just to make sure I understand you're asking why we would or would not be sure. The consolidator no no. What why do you why you should be why you should be a share consolidate or ex cats with your product portfolio.

Unknown Executive: Why you should be a shared consolidator in XCAS with your product portfolio and why you believe there can be greater pricing discipline as you add more products to the portfolio in the evolving competitive environment. Right. I don't believe we stated that we were planning to be a market share consolidator. Is that what you mean?

Speaker Change: And if and why you believe the green brighter greater pricing discipline as you add more products to the portfolio and the evolving competitive environment.

Speaker Change: Right I do believe we stated that we were planning to be market share and a consolidator because that's what you mean.

Unknown Executive: Our goal is to continue and double, triple down on profitable growth. So in as much as opportunities present themselves for us to accelerate growth and profitability, we will obviously keep an open mind to that. And we do evaluate opportunities as they come up. But having said that, we are quite happy with our internal plan and our internal progress at this point. We are consistently leading the market in UCAS, and we are coming up strong in CCAS.

Vladimir Shmunis: Our goal is to continue and double dribble down on profitable growth. So in as much as opportunities present themselves for us to accelerate growth and profitability, we will obviously keep an open mind to that, and we do evaluate opportunities as they come up. But having said that, we are quite happy with our internal plan and our internal progress at this point. We are leading the markets consistently in UCAS. We are coming up strong in UCAS. RingCentral platform is gaining traction, and we have many happy customers, and it's now growing very rapidly. And there are new events platform is gathering major logos.

Speaker Change: Our goal is to continue.

Michael Funk: And double triple down on profitable growth.

Michael Funk: So in as much as opportunities present themselves for us to accelerate our growth emphasis ability. We will obviously keep an open mind to that and we'll do it you're right. It's.

Speaker Change: Opportunities as they as they come up but having said that we are.

Unknown Executive: Well I said it was our internal plan and our internal focus at this point, we are leading the market consistently in your gas.

Speaker Change: We are coming up strong.

Michael Funk: Ucas.

Unknown Executive: Our RingCentral platform is gaining traction, and we have many happy customers on it now and it's growing, you know, very rapidly. And our new events platform is gathering major logos. All of this is under our own horsepower. The next question comes from Siti Panigrahi with Mizuho. Please go ahead.

Unknown Executive: Ring sense platform is gaining traction and we have many customers now and growing.

Michael Funk: You know very rapidly and our new U S platform.

Michael Funk: Gathering major logos all of this is under our old horsepower.

Sonalee Parekh: All of this is under our own course power.

Sonalee Parekh: Hi, it's all E here.

Michael Funk: My Hi, Charlie here, just in terms of pricing and price discipline. Obviously, you saw we disclosed our business.

Sonalee Parekh: Just in terms of pricing and price discipline, obviously you saw we disclosed our booths remain above $30. And just a couple of points to make there on our booth.

Speaker Change: Remain above $30 and just a couple of points to make there or two so we have some opposing dynamics taking place. So one is our business is very successfully shifting more to enterprise and you've seen some really big deals we announced this quarter as well as the last couple of quarter.

Sonalee Parekh: So we have some opposing dynamics taking place. So one is our business is very successfully shifting more to enterprise. And you've seen some really big deals we announced this quarter, or as well as the last couple of quarters. And obviously, with those larger enterprise deals comes slightly more discounting. So that does have an impact on pricing. But on the other side, that's been offset by new products, which in my scripted remarks you would have heard me say, carry significantly higher ARPU. So those new products today are growing off a very, very small base, but they will continue to ramp.

Speaker Change: Yes.

And obviously with those larger enterprise deals.

Speaker Change: Slightly more just counting them so that does have an impact on pricing.

Speaker Change: On the other side, that's been offset by new products, which in my scripted remarks, you may have heard me say carry significantly higher.

Speaker Change: So there was no products today are growing off of a very.

Speaker Change: Very small base, but they will continue to rise.

Sonalee Parekh: And the other point I would just make there on pricing overall is we are less focused on ARPU per se and much more focused on ARPA. So average revenue per account and how we drive greater share of wallet out of our 7 million plus paid seat base. And I think that's where you'll see Room Central really focused in terms of value proposition. And just to remind you on ARPUs around the new products, Ring CX, we list at $65 per month per seat, so way above the corporate average. And rooms then for sales is about $60 per month.

Speaker Change: And you know that's one that you just made there on pricing overall as well.

Speaker Change: We are less focused on our pivotal per se and much more focused on our part so average revenue per account.

Speaker Change: And how we drive greater share of wallet.

Speaker Change: Our 70 million plus paid seat base and I think that's where you'll see them Grand central really focus in terms of value proposition.

Speaker Change: And just to remind you on the on the argument around the new products range CX, We list at that $65. Permian proceed so way above the corporate average and room for sales is about $60 per month.

Sonalee Parekh: But expect to see, with more innovation, comes higher ARPU and higher retention as well. So hopefully that answers a bit around the pricing.

Speaker Change: But you now expect to see with with more innovation.

Speaker Change: How does higher auto and higher retention as well, so hopefully that answers a bit around the pricing.

Sitikantha Panigrahi: Next question comes from Sitikantha Panigrahi with Mizuhau.

Speaker Change: Next question comes from City Panic right with Mizuho. Please go ahead.

Sitikantha Panigrahi: Please go ahead. Great. Thanks for taking my question. And you guys talked about the rings, yes, traction that seems to be above your expectation.

Sitikantha Panigrahi: Great. Thanks for taking my question. You guys talked about the RingCS traction, which seems to be above your expectations.

Siti Panigrahi: Oh, great. Thanks for taking my question and you you guys talked about the drinks, yes tracks and that tends to be above your expectation. So could you talk about you know what kind of use cases, you are seeing the traction where do you see the sweet spot and how do you would you send yourself against the competition.

Unknown Executive: So, could you talk about, you know, what kind of use cases you are seeing traction for, where do you see the sweet spot, and how do you position yourself against the competition in this cloud contact center opportunity? And then, specifically, contact center. You said CECA is 390 million, up 19%. How much of that growth is also driven by RingCX? Thank you. Okay. Right, so let me take the first part of the question. Look, RingCX is a modern AI-first contact center that is first and foremost seamlessly integrated with our flagship Ring EX product.

Vladimir Shmunis: So, could you talk about, you know, what kind of use cases you are seeing the traction, where do you see the sweet spot, and how do you position yourself against the competitor in this cloud contact center opportunity, and then specifically contact center, you say, C-390 million, up 19%. How much of that growth also driven by the RingCX? Thank you. Okay. Right, so let me take the first part of the question. Look, RingCX is a modern AI first contact center that is, first and foremost, seamlessly integrated with our flagship RingES product. So, that is, you know, that's a huge advantage for RingCX because, as Sonalee just mentioned, we are the absolute leader in paid UKC's at 7 million now and counting.

Speaker Change: This cloud contact center opportunity and then specifically contact center you says he got street, a 390 million up 19% how much of that growth also driven by the ring CX.

Unknown Executive: Yeah.

Unknown Executive: Okay.

Unknown Executive: Right. So let me take the.

Speaker Change: First of all that's a question.

Unknown Executive: Luke.

Luke: Yes, it's a.

Unknown Executive: Modern.

Speaker Change: First a contact center.

Unknown Executive: That is our first and foremost seamlessly integrated with our flagship <unk> product.

Unknown Executive: So that's as.

Speaker Change: You know that's a huge advantage for rigs, yes, because as soon as he just mentioned we are the absolute leader in a big bet you <unk> at 7 million now and counting.

Vladimir Shmunis: And we have this very large captive base to mine to offer RingCX too. And RingCX being designed for simplicity is a fusion deployment, and those will be priced very disruptively. It resonates well with our existing customers as well as a number of new products. So, again, where it's resonating is integration, simplicity, of course, our core values of reliability, security, global reach. You've now shared about the fact that it will be available internationally, including via partnership with BorderFome. So, I think that's the first for a product at this stage of development. So, again, we feel very, very good about it.

Unknown Executive: And we have this very large.

Speaker Change: Cast your base tomorrow into all four room CX <unk> two.

Speaker Change: <unk> B.

Speaker Change: Being.

Speaker Change: Designed for.

Speaker Change: The simplicity ease of use and deployment.

Speaker Change: Also would be very disruptive.

Speaker Change: Disruptive, we resonates well with our existing customers as well as a.

Speaker Change: A number of new prospects, so again, whether it's resonating.

Unknown Executive: So again, where it's responding is integration, simplicity, of course, our core values of reliability, security, global reach. Now we've shared about the fact that it will be available internationally, including via partnership with Vodafone. So I think that's a first for a product at this stage of development. So again, we feel very, very good about it. And Sonalee, maybe you can take the rest of it.

Sonalee Parekh: Is integration simplicity of course, our core values.

Sonalee Parekh: Have a good liability Chi security a global reach you.

Sonalee Parekh: No no we shared about decided that it would be available internationally.

Unknown Executive: In closing via a partnership with.

Sonalee Parekh: Well the home so I think that's the first for a product at this stage of development. So again, we feel.

Sonalee Parekh: Very very good about it that's another maybe you can take so yeah. So in terms of how much of the gorilla.

Sonalee Parekh: And Sonalee, maybe you can take the rest of it. Yeah, so, in terms of how much of the growth of that 19% is being driven by RingCX versus RCCC, we don't actually break that out. But if you consider the number of customers we disclose and the growth that we talked about in terms of net new proteins being more than 2X quarter over quarter, and the customer growth being up 70% sequentially, you can see that we are very pleased and tracking ahead of where we were hoping to be. And although it's small today, over time this will become a much more meaningful part of our overall contact center ARR, and already today it's driving a significant portion of growth in contact.

Sonalee Parekh: Yeah, so in terms of how much of the growth of that 19% is being driven by RingCX versus RCCC, we don't actually break that out. Great, thanks. Maybe Vlad, you know, you noted seeing stabilization in. We're disclosing by customer size or customer group, and you can see that our enterprise segment continues to be outperforming small business. That is not surprising, given the macro environment that is still particularly punishing small business, but we are actually quite pleased with our ability to stabilize even in that segment that is currently difficult, and William and I fully believe that it will also return to healthier growth as the economy recovers. Okay, so that's as far as size goes.

Speaker Change: That 19% is being driven by a range of experts is arce H D D.

Sonalee Parekh: We don't actually break that out.

Speaker Change: But if you consider the number of customers, we disclosed and the growth that we talked about in terms of net new bookings being more than two X quarter over quarter and are the customer growth being up 17% sequentially. You can see that we are very pleased and and and.

Speaker Change: Tracking ahead of them wherever you were hoping to be and although it's small today.

Speaker Change: Tying this will become a much more meaningful part of our overall contact center a R. R.

Speaker Change: Already today, it's driving a significant portion of gross.

Speaker Change: And contact center.

Meta Marshall: Next question comes from Meta Marshall with Morgan Stanley.

Speaker Change: The next question comes from meta Marshall with Morgan Stanley. Please go ahead.

Vladimir Shmunis: Great, thanks. Maybe Vlad, you know, you noted scene stabilization in your end market, but just wondered if you could, you know, particularly since you were giving kind of a breakdown of the ARR by customer type, just any different trends that you're seeing between customer types or just international regions. Clearly seeing a lot of traction on new products, but just kind of a state of play of what you're seeing from a macro perspective. Thank you. Yes. You know, we're disclosing by customer size or customer group. And you know, we can see that our enterprise segment continues to be outperforming small business.

Sonalee Parekh: Great. Thanks, maybe Brad you know you noted.

Speaker Change: <unk> seen stabilization and and in your end markets, but just wondering if you could you know, particularly since you were giving kind of a breakdown of the Arab by customer type just any different trends.

Speaker Change: Trends that you're seeing between customer types or just international regions I'm clearly seeing a lot of traction on new products, but just kind of a state of play out what you're seeing from a macro perspective. Thank you.

Sonalee Parekh: Yes.

Sonalee Parekh: Hum.

Vlad: You know we were disclosing our by our customer sides Augusta about rules and you know you can see that our enterprise segment continues to be outperforming.

Speaker Change: Small business.

Vladimir Shmunis: That is no surprising given the macro environment that is to particularly banish it to small business, but we are actually quite pleased with our ability to stabilize even in that segment that is current difficult.

Sonalee Parekh: That is not surprising given the macro environment is still particularly partnership to small business.

Sonalee Parekh: But we're actually quite pleased with our ability to stabilize even in death segments to this given it's difficult.

Vladimir Shmunis: And when we and I fully believe that it will also return to healthier growth as the economy recovers. Okay, so this is far as by size. As far as by geography, look, we continue to be predominantly a North American provider, but we have very distinct issues. We announced a 10,000-plus seed deal in APEC, which is our largest. So definitely we're seeing action there. We're getting good traction through a number of GSP partners. I think we announced a large win with the bottom form in Ireland. And I'm sure you noticed in our prepared remarks, we are well in track to be in 30 countries with the bottom form by the end of next year.

Sonalee Parekh: And Oh, well beyond I fully believe that it will also return to healthy growth.

Speaker Change: As a as a.

Speaker Change: With me are recovers.

Unknown Executive: As far as geography is concerned, look, we continue to be predominantly a North American provider, but we have very interesting issues. We announced a 10,000 plus deal in APEC, which is our largest. So definitely, we're seeing action there. We're getting good traction with a number of GSP partners. I think we announced a big win with Vodafone in Ireland, and I'm sure you noticed in our prepared remarks that we are well on track to be in 30 countries with Vodafone by the end of next year.

Sonalee Parekh: So that's as far as our buy side as.

Unknown Executive: As far as by geography, well, we continue to be a predominantly a.

Unknown Executive: North American.

Unknown Executive: Provider, but we have the existing reissued.

Unknown Executive: Now.

Unknown Executive: So plus seats deal.

Unknown Executive: Hey, Beth which is our largest so definitely a win.

Unknown Executive: <unk> seen our actions there.

Unknown Executive:

Speaker Change: Got you.

Unknown Executive: Good traction.

Unknown Executive: So a number of GSP partners.

Speaker Change: I think when notwithstanding.

Speaker Change: A large win was a boy this home.

Unknown Executive: In Ireland.

Unknown Executive: And.

Unknown Executive: I'm sure you noticed in our prepared remarks.

Unknown Executive: We're well on track to be in 30 countries was Vodafone Ah.

Unknown Executive: The end of next year.

Vladimir Shmunis: So these are all very positive signs for us.

Unknown Executive: So these are all very positive signs for us.

Unknown Executive: So these are all very positive signs for us. And, you know, we think that there is a lot to be done, both domestically and internationally. The next question comes from Brian Peterson with Raymond James. Please go ahead.

Vladimir Shmunis: And you know, we think that there is a lot to be done both domestically and internationally.

Unknown Executive: And.

Speaker Change: You know we.

Unknown Executive: We see that there is a lot to be done in both domestically and internationally.

Brian Peterson: The next question comes from Brian Peterson with the Raymond James.

Unknown Executive: The next question comes from Brian Peterson with Raymond James. Please go ahead.

Brian Peterson: Please go ahead.

Sonalee Parekh: Hi, guys. The rest of the quarter takes a take on the question. So a lot of us want to extend our extended momentum with GSPs. I'm curious how should you think about the opportunity to expand that base over time? Are there more partners that you can build with? And as we think about the percentage of ARR, what do you think that could get to over the long term?

Brian Peterson: Hi guys, congrats on the quarter and thanks for taking the question. So, Vlad, I just wanted to expand on your momentum with GSPs. You know, I'm curious, how should you think about the opportunity to expand that base over time? Are there more partners that you can build with?

Brian Peterson: Hi, guys congrats on the quarter and thanks for taking the question so but I just wanted to send out our expanded more momentum of Gsp's you I'm curious how should you think about the opportunity to expand that base over time are there more partners that you can build with them and as we think about the percentage of Bayer or what what do you think that could get to over the long term. Thanks guys.

Unknown Executive: And as we think about the percentage of ARR, what do you think that could get to over the long term? Thanks. Yes, a very good question.

Vladimir Shmunis: Thanks, guys. Yes. Very good question. Look, our GSP practice is differentiated, but it's really unique. You know, we have no other peer. This includes companies larger than us. We have anything close to our GSP practice. I think we have about 14 GSPs now. And these count major logos like AT&T, for the phone charter. Today we've announced cost communications. British Telecom tell us, you know, let's go. So we already said that, and I think that the first time that we've disclosed this, that they are a contribution at this point. I think we said it's around 10%.

Unknown Executive: Look, our GSP practice is differentiated, but it's really unique, you know; we have no other peer, this includes companies larger than us, who have anything close to our GSP practice. I think we have about 14 GSPs now, and these count major logos, like AT&T, Vodafone, Charter, today we've announced Cox Communications, British Telecom, Dallas, you know, this goes on. So, we already said that, and I think this is the first time that we've disclosed this, that their contribution at this point is around 10%. So that already obviously registers.

Unknown Executive: Yes, a very good question Luke.

Speaker Change: Oh GSP practice is differentiated with its really unique you know we have no. Other peer. This includes companies are larger than us.

Speaker Change: So separating some close to R. J S. P. A practice I think it was.

Unknown Executive: 14, GSK snow and <unk>.

Unknown Executive: Major logos.

Unknown Executive: Like AT&T.

Speaker Change: Vodafone Ah charter today move announced Cox Communications are British Telecom Dallas, you know, let's go though.

Speaker Change: So a little bit you said the same thing.

Unknown Executive: Got it and that's what we've disclosed is that Oh contribution at this point I think we said it was around 10%. So that's already obviously registers.

Vladimir Shmunis: So that already will be the registers. And growth of that segment as a whole is actually a tailwind for us. Now this segment grows in two ways. As we add new logos and existing logos get our product through their channels of their sales forces, which are massive. So I firmly believe that GSPs is a core asset, that it is a very well-defined and defensible model for us and that it will continue to be a gross driver for us in as much as it will be pulling our overall growth up.

Unknown Executive: And growth of that segment as a whole is actually a tailwind for us. Now, this segment grows in two ways, as we add new logos and as existing logos get our products through their channels and their sales forces, which are massive. So, I firmly believe that GSP is a core asset, that it is a very well-defined and a defensible mode for us, and that it will continue to be a growth driver for us in as much as it will be pulling our overall growth.

Unknown Executive: And our growth of this segment as a whole.

Unknown Executive: <unk> is actually a.

Unknown Executive: Tailwind for us.

Unknown Executive: Now this segment girls in two ways.

Unknown Executive: As we add new logos and.

Unknown Executive: Existing logos.

Unknown Executive: Get a broader so they're thiago sales forces.

Speaker Change: Your message.

Unknown Executive: So I firmly believe the GSP is either core assets.

Unknown Executive: It is a very.

Unknown Executive: Very well defined and defensible moat for us.

Unknown Executive: And it will continue to be a growth driver for us in as much as it will be pulling our overall growth.

Vladimir Shmunis: So could not be happier with welcoming Cough to the family and certainly expect more goodness from them and others.

Unknown Executive: So, I could not be happier with welcoming Cox to the family and certainly expect more goodness from them and others. You've had a nice enterprise growth here. Are you getting more opportunities going up market through your traditional channel, or do you see this through the GSP? Thank you. So yeah, it's, for now, mostly through direct as well as our traditional channels. So most of our enterprise leads come through traditional channel partners, but as GSPs, who are, by the way, tend to be some of the world's best logos when we count across, you know, most of our GSP partners, as they get more comfortable with our product, we are absolutely seeing possibilities to expand within each and every particular GSP within their own footprint.

Speaker Change: So could not be happier it was a it was welcomed talks with the family.

Unknown Executive: Certainly expect more goodness from them and others.

Kasthuri Rangan: The next question comes from Kasthurrin Trebnick with Ross and Blatt.

Speaker Change: Our next question comes from Katherine <unk> with Rosenblatt. Please go ahead.

Kasthuri Rangan: Please go ahead.

Vladimir Shmunis: Oh, thank you for taking my question. Back to the GSPs and your traditional channel market. You have a nice enterprise growth here, and are you getting more opportunities going up market through your traditional channel, or do you see this through the GSPs? Thank you. Yes, the short answer is it's a former. Most GSPs are positioning us for small, medium, and large, but not extra large. There are absolutely notable examples of the contrary. But if you look at the logos that we have, say chart or no coughs going forward, they sell to smaller medium-sized businesses. So yeah, it's for now most through direct as well as our traditional channels.

Speaker Change: Oh, Thank you for taking my question back to the E. S. P.

Speaker Change: And your traditional.

Speaker Change: Your traditional.

Unknown Executive: Town market, where you know you've had a nice enterprise growth here and are you getting more opportunities going up market to your traditional channel or do you see this through the G. S. P. Thank you.

Speaker Change: Ah yes sure.

Unknown Executive: Short answer is it's a it's the former.

Speaker Change: Most GSP is positioning.

Speaker Change: For us for small medium and large but not extra wallet.

Unknown Executive: There are absolutely notable examples of the contrary, but you know if you think if you look at the logos that we have you don't say charter Cox moving forward.

Unknown Executive: You know they are that they sell to small and medium sized businesses.

Unknown Executive: So yeah.

Unknown Executive: For now mostly is through direct as well as that of a traditional Janet so most of our enterprise leads come through traditional general partners.

Vladimir Shmunis: So most of our enterprise leads come through traditional channel partners. But as GSPs, core by the way, they tend to be some of the world's best logos when we account across amongst our GSPs partners. As they get more comfortable with our product, we are absolutely seeing possibilities to expand within each and every particular GSP within their own footprints.

Unknown Executive: But as GSP is oh by the way that tends to be some of the world's best logos well when you count a cool almost allergies get partners.

Unknown Executive: As they get more comfortable with our product.

Unknown Executive: We are absolutely seeing possibilities to expand well was in.

Unknown Executive: Each and every particular GSV was in their own footprint.

William Power: The next question comes from Will Power with Barrett.

Unknown Executive: The next question comes from will power with Baird. Please go ahead.

William Power: Please go ahead. Okay, great. Thanks.

Speaker Change: Okay. Great. Thanks, Yeah, you know Vlad one of the you know I guess new announcements since your last call was the Microsoft dynamics contact Center, you know announcement I think you all probably have some interesting perspective.

Vladimir Shmunis: Yeah, you know, Vlad, one of the, you know, I guess new announcements since your last call was the Microsoft Dynamics, you know, Contact Center, you know, announcement. I think you all probably have some interesting perspective. You know, did you have a good relationship with Microsoft or that, you know, that's been a source of growth working with teams, providing some of the underlying network capabilities. And of course, on the flip side, you're also, you know, increasingly pushing, you know, contact center, whether the nice partnership or your own, your own native approach. So just let me get your perspective on, you know, how you think that maybe impacts you, you know, and or maybe the broader industry too.

Unknown Executive: I think you all probably have some interesting perspectives, you know, as you noted, you have a good relationship with Microsoft for that, and that's been a source of growth working with teams. The next question comes from Mike Turrin with Wells Fargo. Please go ahead. Hey, thanks for getting me in. David, I'm Brian from Michael Turrin tonight. So the sub revenue beat was actually larger than the prior six quarters. Would you mind just talking through some of the mechanics of working there and how we should think about the potential impact for the rest of the year?

Speaker Change: Did you have a good relationship with Microsoft for that you know that's been a source of growth working with teams are providing somebody you know the underlying you know.

Speaker Change: Network capabilities and of course on the flip side. You also you know christianly pushing contact center.

Speaker Change: Whether the nice partnership or your own your own native approach I'd, just love to get your perspective on how you think that maybe impacts you and or maybe the broader industry too.

Vladimir Shmunis: Sure, look, it's early and it's early for us, and in a way, I don't know to speak for Microsoft, but you know it's a new offering for them as well. Look, we're very happy with our team's integration with our RingEX UCAS product. I would absolutely not be ruling out as integrating with Microsoft CounterCenter or others. We do view ourselves and pride ourselves on being an open platform. Having said that, one of the major benefits of RingCe apps, you know, which is quite competitive and modern and forward-looking in every respect, in any case. But one of the main benefits when all of them down is the fact that it is seamlessly integrated with RingEX, which is the market leader, seven million paid customers.

Speaker Change: Sure Okay.

Unknown Executive: And.

Speaker Change: It's early for us in any way.

Speaker Change: Speak from Microsoft, but this isn't new.

Speaker Change: Great for them as well look we're very happy with our teams integration.

Speaker Change: With our <unk> E X.

Speaker Change: Cas product Ah I would absolutely not be ruling out.

Speaker Change: Integrating <unk> with Microsoft contact center, or others, we do view ourselves and pride themselves on being an open platform.

Speaker Change: Having said that.

Speaker Change: One of the major benefits offering she adds.

Speaker Change: Which is quite competitive and I'm wondering going forward looking in every respect in any case with one of the main benefits when all of us about if the fed does it.

Speaker Change: This seamlessly integrated.

Speaker Change: With Rinky, yes, which is the market leader in 7 million paying customers.

Vladimir Shmunis: And also, you know, it delivers what people expect from RingCentral, which is reliability, security, you know, basically all the dimensions of one of the prior answers. So we absolutely think that there is room to co-exist with Microsoft and not just with Microsoft Teams, but with Microsoft as a product. And, again, look, that majority of counterCenter seeds, they're still on-prem. So Microsoft will get some, and we will get some, and other people will get some, and everyone will go.

Speaker Change: And also you know even believers are what people expect for them in central which is reliability.

Speaker Change: Security you know obviously you already mentioned.

Unknown Executive: Brian.

Speaker Change: So we're absolutely the same because there is a room to coexist.

Speaker Change: With Microsoft there not just with Microsoft teams, both with Microsoft and other products.

Speaker Change: Yeah look a vast majority of our contact center seats Theyre still on Brendan So Microsoft will get some and we will get some of that other people will get film and everyone will go.

Michael Turrin: The next question comes from Mike Turin with Wells Fargo.

Speaker Change: Next question comes from Mike <unk> with Wells Fargo. Please go ahead.

Michael Turrin: Okay, thanks for getting me in.

Michael Turrin: Hey, Thanks for getting me in David I'm drawn from Michael churn Tonight. So the the sub revenue beat was actually larger than the prior six quarters would you mind just talking through some of the mechanics of work there and how we should think about the potential impact for the rest of the year. Thank you.

Sonalee Parekh: David, I'm Ron from Michael Turin tonight. So the sub revenue beat was actually larger than prior six quarters. Would you mind just talking through some of the mechanics of work there and how we should think about potential impact the rest of the year? Thank you. So I'll take that. So, yeah, in terms of what drove the revenue beat, which obviously we carried through. And you saw in terms of how we guided. And you can also see what that is implying for the second half in terms of where we will end on top line and growth.

Unknown Executive: Thanks. Sure, I'll take that. So yeah, in terms of what drove the revenue beat, which obviously we carried through, as you saw in terms of how we guided, and you can also see what that is implying for the second half in terms of where we will land on the top line and growth. But the key driver of the beat really was better than expected.

Speaker Change: Sure I'll take that.

Unknown Executive: So yeah in terms of what drove them the revenue beat.

Unknown Executive: Which obviously, we carried through and as you saw in terms of how we guided and you can also see what that is implying for the second half in terms of where we will land on top line and growth.

Sonalee Parekh: But the key driver of the beat really was better-than-expected progress from our new products. So in particular, RenewCX was a bulk expectation. We also had another strong double-digit growth quarter in enterprise, which was ahead of expectations. And, you know, you heard Blood earlier talk about stabilization in our SMB business, which we were really pleased about. One thing I would just mention is that overall upsell continues to be impacted slightly by macro. But on the other side of that, not only did we see strong traction and pricing with our new products, but also we saw deal sizes in the enterprise side of our business recover quite a bit.

Unknown Executive: But the key driver of the beat when he was better than expected.

Unknown Executive: <unk>.

Unknown Executive: Progress from our new products. So in particular, when you see X, but above expectations.

Unknown Executive: We also had another strong double digit growth quarter in enterprise AR.

Unknown Executive: Which was ahead of expectations.

Speaker Change: And you know you heard slides earlier talk about stabilization.

Unknown Executive: In our SMB business, which we were really pleased about.

Unknown Executive: One thing I would just mention is that overall upsell them continues to be impacted slightly by a crowd.

Unknown Executive: But on the other side of that not only did we see strong traction and pricing with our new products, but also we saw deal sizes in the enterprise side of our business recover quite a bit and actually they were up 30% in the corner.

Sonalee Parekh: And actually, they were up 30% in the quarter. So, as we look ahead, you know, we were clear with how we guided for Q3, and you can apply the full year. We're not really factoring in any improvement or change in the macro. So it's really guiding based on what we see and the expectations we have today.

Unknown Executive: So as we look ahead.

Unknown Executive: Clear with how we guided for for Q3 and you can apply the full year and we're not really factoring in any improvement or a change in the macro.

Speaker Change: So it's really a guiding based on what we see any expectations we have to.

Unknown Executive: There are no further questions in the queue.

Unknown Executive: There are no further questions in the queue. With that, this concludes our call for today. You may now disconnect. Copyright 2020 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent.

Speaker Change: There are no further questions in the queue with that this concludes our call for today you may now disconnect.

Unknown Executive: With that, this concludes our call for today. You may now disconnect.

Unknown Executive: Yeah.

Unknown Executive: Okay.

Unknown Executive: [music].

Unknown Executive: Okay.

Unknown Executive: Yes.