Q4 2024 RingCentral Inc Earnings Call
Good day and welcome to the ring Central fourth quarter 'twenty 'twenty four earnings conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone and to withdraw your question. Please press Star and then two.
Please note that this event is being recorded.
Speaker Change: I would now like to turn the conference over to will Wong Vice President of Investor Relations. Please go ahead.
Will Wong: Good afternoon, and welcome to ring central to fourth quarter of 'twenty 'twenty four earnings conference call. Joining me today are flashed minutes, founder Chairman and CEO, Karyn, Macrodont, President and C O L and a buyer lambar CFO. Our format. Today will include prepared remarks by Vlad carat antibody followed by Q&A.
Will Wong: Also have a slide presentation available on our Investor Relations website that will coincide with todays call, which you can find under the financial results section at IR got ring Central Dotcom.
Will Wong: Our discussion and responses to your questions will contain forward looking statements regarding the company's business operations financial performance and outlook. These statements are subject to risks and uncertainties some of which are beyond our control and are not guarantees of future performance.
Will Wong: Actual results may differ materially from our forward looking statements and we undertake no obligation to update these statements. After this call for a complete discussion of the risks and uncertainties related to our business. Please refer to the information contained in our filings with the Securities and Exchange Commission as well as today's earnings release.
Will Wong: Otherwise indicated all measures that follow are non-GAAP with year over year comparison reconciliation of all GAAP to non-GAAP results is provided with our earnings release and in the slide deck for certain forward looking guidance a reconciliation of the non-GAAP financial guidance to the corresponding GAAP measure is not available as discussed in detail in the slide deck posted on our Investor Relations website.
Will Wong: With that I'll turn the call over to what.
Will Wong: Good afternoon, and welcome to our fourth quarter 'twenty.
Will Wong: 'twenty 'twenty four airing in school.
Will Wong: We've got a good close to 'twenty to 'twenty four.
Will Wong: And could not be more excited about the year ahead.
Mike Hogan: I'd like to start by congratulating, Kevin Mike Hogan.
Mike Hogan: Onshore elevation to ring Central President and Chief operating officer.
Mike Hogan: Europe has been with the company for over a decade and has been our chief innovation officer for a number of years.
Mike Hogan: She has been in charge of all product and technology.
Mike Hogan: And she has been the driving force behind joining green Central Indian Open air platform and our evolution into a multi product company that now in close contact center and AI.
Mike Hogan: Ensuring euro.
Mike Hogan: Carol will be responsible for the company's product and technology organization.
Mike Hogan: And we'll add direct and channel sales customer success marketing and business operations organization.
Mike Hogan: Tears expertise in driving product vision and innovation, coupled with your deep understanding of customer needs and our company's sculpture makes you the ideal leader to help guide the ring central into our next phase of AI fueled multi product growth.
Mike Hogan: Now, let me share with you some highlights about the quarter and the year.
Mike Hogan: Before.
Mike Hogan: Sharing more about our AI strategy and the traction we're seeing without a new program.
Mike Hogan: Q4, total Arabia of $615 million.
Mike Hogan: <unk> operating margins.
Mike Hogan: 21.3% were both above our guidance.
Mike Hogan: We also generated free cash flow, all funded and $12 million in Q4, a quarterly record.
Mike Hogan: For the full year total revenue rose, 9% to $2.4 billion.
Mike Hogan: While still early are.
Mike Hogan: Multi product strategy is clearly working with.
Mike Hogan: With new products, such as our nature don't extend their rink CX and our flagship AI product ring fence already making meaningful contributions to our growth.
Mike Hogan: Operating margins were 21% up from 19.1% in 'twenty to 'twenty three.
Mike Hogan: And for the first time, we achieved positive GAAP operating profitability for the full year.
Mike Hogan: We also generated $403 million of free cash flow.
Mike Hogan: Up 24% versus 2023.
Mike Hogan: We expect to generate the cockpit bill in dollars or Levered free cash flow in 'twenty to 'twenty five.
Mike Hogan: In addition to our strong free cash flow growth.
Mike Hogan: I am pleased with the progress we have made on stock based compensation.
Mike Hogan: In 'twenty to 'twenty four SBC as a percent of revenue declined over five percentage points year over year to 14%.
Mike Hogan: Importantly, we reduced the value of Nathan your shares granted by about 40% year over year with similar improvements slated for 'twenty to 'twenty five.
Mike Hogan: This should set us up for another year of healthy free cash flow per share growth.
Mike Hogan: Our strong financial profile and culture innovation puts us in a strong position to supercharge our product portfolio through AI.
Mike Hogan: Yeah.
Mike Hogan: AI is the mother of all the Mega trends and the future offering central.
Mike Hogan: In this new era, our vision is to empower every business with an AI first platform that not only connect but also in Kansas conversations between businesses and consumers.
Mike Hogan: Thus driving better outcomes for our customers.
Mike Hogan: This brings me to our exciting product announcement today.
Mike Hogan: We just unveiled ring central a receptionist or air, which we believe will deliver tremendous value to businesses everywhere.
Mike Hogan: Building on our history of industry, leading innovation.
Mike Hogan: <unk> Air is an innovative AI.
Speaker Change: Hey, iPhone agent.
Speaker Change: Seamlessly integrated into the phone system.
Speaker Change: It acts as a true digital employee.
Speaker Change: That enables our customers to do more with less.
Speaker Change: <unk> will provide more details about this exciting new product.
Speaker Change: With respect to our new product announcement last year I'm, particularly pleased with the success, we're seeing with <unk>.
Speaker Change: Native AI first cloud contact center solution.
Speaker Change: We know cats.
Speaker Change: Over 700 customers and rig CX.
Speaker Change: Up from roughly 500 last quarter.
Speaker Change: This success is no accident.
Speaker Change: According to <unk> over 75% of customers before you get and you got from the same vendor to close silos and create more connected employee and customer experiences.
Speaker Change: We're seeing it firsthand from our customers.
Speaker Change: A good example of the power of an integrated <unk> and she kept solution is a large new customer win this quarter was jump back.
Speaker Change: Global Advanced technologies services and solutions company.
Speaker Change: <unk> has more than 25000 employees.
Speaker Change: Over 800 clients across.
Speaker Change: 30 plus countries.
Speaker Change: Gentex selected our full communication suite across <unk> and drink CX is a look to foster greater collaboration amongst both employees and clients core spread across many time zones.
Speaker Change: Importantly, <unk> will be replacing several cloud contact center solution.
Speaker Change: <unk> luxe to continuously improve and streamline their platforms.
Speaker Change: And that was a key reason why Jim Peck selected joint venture was our ability to deliver fully regulatory compliant <unk> solution across all 22 telecommunications circles in India.
Speaker Change: Another important proof point of Brink's Yexes success is its adoption by our DSP partners.
Speaker Change: Most recently <unk> has selected <unk> to power its guests offering joining Cox communications.
Speaker Change: The phone UK and Xavier USA S gsp's that they're now selling ring CX.
We expect.
Speaker Change: More gsp's to follow.
Speaker Change: We also continued to see strong traction with our other new products.
Speaker Change: Ring fence.
Speaker Change: Our conversation intelligence platform and ring central events are virtual hybrid onsite events platform are both doing well.
Speaker Change: We now have over 2000 ring fence customers.
Speaker Change: Up over 65% sequentially.
Speaker Change: We also have seven countries rig central event accounts up from about 600 in the third quarter 2024.
Speaker Change: With this we're already halfway towards reaching our goal of at least counted mill in dollars in new product ore by the end of 2025.
Alright.
Speaker Change: We closed out 'twenty 'twenty four on solid food chip.
Speaker Change: We look forward to continuing to drive profitable growth in 2025 and beyond.
Speaker Change: With strong free cash flow generation and further free cash flow per share April.
Speaker Change: I could not be more excited about our future as we continue expanding our portfolio.
Speaker Change: Here, our new Tam expanding AI first product.
Speaker Change: The opportunities are so huge and we have the right people products and partners to take us to the next level.
Speaker Change: With that let me turn the call over to Keira to discuss our product and go to market in more detail.
Speaker Change: Thanks glad it.
Speaker Change: It has been an exciting journey to be I think central since the IPO.
Speaker Change: And I'm excited to drive the next phase of our growth was the responsibility.
Speaker Change: And technology organization direct and channel sales customer success marketing and operations.
Speaker Change: Well it has always been my guide is listening to our customers and partners.
Speaker Change: Our strategy and innovation and here are my key priorities.
Speaker Change: First build upon our ucas leadership infusing AI across our entire portfolio.
Speaker Change: Second extend term so our multi product portfolio led by <unk>, our native AI powered seek out solution.
Speaker Change: Third.
Speaker Change: Drive profitable growth and improve customer engagement across our entire business.
Speaker Change: Yes.
Speaker Change: Now, let me share more about each priority.
Speaker Change: First build upon our new test leadership, infusing AI across our entire portfolio.
Speaker Change: We have built a leading business communications platform for voice remains mission critical.
Speaker Change: Customers choose us because of our market, leading cloud business phone system, which also includes <unk> collaboration backs and video capabilities, which are built on a secure compliant and highly scalable global open platform.
Speaker Change: These are the key differentiators and competitive advantage for us and why we are recognized by numerous industry analysts such as Gartner IDC and Frost.
Speaker Change: One of our largest wins this quarter is an international public sector customer purchased over 10000 E X.
Speaker Change: In central enables them to replace their legacy voice system with a leading <unk> product that will connect their large number of locations on a unified platform.
Speaker Change: We're also seeing the enterprise customers are choosing between central to complement the use of Microsoft teams messaging and BJ.
Speaker Change: Tim's customers turn series Central for advanced enterprise great capabilities.
Speaker Change: In Q4, we won numerous $1 million GCB deals, where our integration with <unk> was one of the key factors.
Speaker Change: An example is a leading Australian retailer that purchased 6000 sheets of Inky X to leverage our best in class voice capabilities alongside teams.
Speaker Change: Looking ahead, we have an unprecedented opportunity to extend our leadership in voice was AI.
Speaker Change: <unk> continues to be a dominant and preferred mode of customer communications and an untapped opportunity for AI to automate and create unique customer experiences.
Speaker Change: Okay.
Speaker Change: We are focused on infusing AI across our entire product portfolio.
Speaker Change: Starting with our flagship product <unk>, we're building and delivering an AI powered solution for every phase of the voice conversation before during and after the call.
Speaker Change: Today, we announced our new AIA receptionist English, yes, our air.
Speaker Change: Here is a generative AI phone agent that is seamlessly integrated into our phone system.
Speaker Change: There is an important step in our broader AI strategy.
Speaker Change: Full extension of our U S portfolio.
Speaker Change: It addresses the four phases in the conversational lifecycle, well gift, giving businesses the ability to do more with less.
Speaker Change: Customers like dental offices restaurants or in their businesses and now have their own digital employee Kendall invalid phone calls answered <unk> questions, alright directions schedule appointment and the golf course, where needed.
Speaker Change: One early customer example of air South swear a leading manufacturer of electric wires and cables.
Speaker Change: They said.
Speaker Change: Nevertheless, coal transfers across six to seven locations used to slow us down.
Speaker Change: Avr's one flexible.
Speaker Change: Life agents for costly and hard to scale, while maintaining quality.
Speaker Change: In central AI Receptionists change that.
Speaker Change: It's now answer scope understand school of intent and transfers them to the right person instantly.
Speaker Change: Well using cost significantly while maintaining started with squalor interesting new schools and Eric.
Speaker Change: It's like having a 24 700 receptionist at a fraction of the cost.
Speaker Change: Next our union conversations.
Speaker Change: Last quarter, we announced a S system or in Es.
Speaker Change: Capture snows generates conversation recaps and summarizes actions.
Speaker Change: Enabling employees to focus on their conversations well EI ixia.
Speaker Change: We're seeing good early traction and positive customer feedback.
Speaker Change: Before I turn the call phase three trials for <unk> analyzers conversations that's unethical score schools generates coaching insight and provide scope performance metrics.
Speaker Change: Our business system proved how their employees engaged with customers.
Speaker Change: We now have over 2000 customers on the ring fence.
Speaker Change: Over 60% sequentially.
Speaker Change: The initial customer feedback, we're seeing from our AI solutions for Mdx.
Speaker Change: There's of course, the growth potential and shows that AI innovation applied to every phase of conversation is a catalyst for better business outcomes and improve productivity for our customers.
Speaker Change: Second expand Tam so our multi product portfolio led by D. C S.
Speaker Change: Last year marked the first full year of us selling here.
Speaker Change: And I'm proud to say that our team has delivered strong results that exceeded our initial expectations.
Speaker Change: Many of our customers are choosing natively here because it seamlessly integrated with <unk> E X and it's easy to use and simple to deploy.
Speaker Change: Building on these strengths.
Speaker Change: Last year, we rolled out in essence, AI quality management, Inc. CX customers.
Speaker Change: This solution at the medical risk scores ECM interactions and identify scorching opportunities.
Speaker Change: In fact, we're seeing more than 50% attach rate for a high quality management zinc CX.
Speaker Change: This is a strong proof point of the demand and increased wallet share.
A good example of our multi product wins in Q4 Echo global logistics.
Speaker Change: Our fourth stop 200, private company and a leading provider of technology enabled transportation.
Speaker Change: Light chain management services.
Speaker Change: They selected <unk> and <unk>.
Speaker Change: I I quality management, because they wanted to seamlessly connect our employees and customers. While also providing the insights they need to scale more efficiently.
Speaker Change: Echo global describes in central products, as more intuitive and easier to use compared to other solutions.
Speaker Change: Sure.
Speaker Change: I am focused on driving profitable growth and improve customer engagement across our entire business.
Speaker Change: I intend to apply either disciplined metrics based approach and use of AI tools to optimize the business for our next phase of growth.
Speaker Change: People process and technology.
Speaker Change: In summary, I'm excited to lead in central and go to market and innovation.
New era of AI.
Speaker Change: Stay tuned for more updates at enterprise connect in London next month.
Speaker Change: For those who can't please join us in our <unk>.
Speaker Change: Succession for investors on Tuesday March 18th at Enterprise connect.
Amit: With that let me turn it over to Amit.
Amit: Thank you Kara I am excited to be here on my first earnings call as <unk> CFO.
Amit: In my first 90 days I'm very impressed with the strong prospects and financial profile of the company.
Amit: 2021% to 2024, we have tripled our operating profit and growing free cash flow from $80 million to $400 million.
Amit: Renting a CAGR of about 72%.
Amit: During this time, we returned over $700 million to investors via buybacks plus reduced stock based compensation driving our basic share count to 2020 levels.
Amit: Moving to Q4, we delivered strong results with all key metrics above our guidance range and record free cash flows.
Amit: Total revenue of $615 million up 8% year over year was above our guidance range yeah.
Amit: Yeah have increased to approximately $2 $5 billion up 7% year over year.
Amit: 8% on a constant currency basis.
Amit: Large deal activity was strong without signing over $30 million plus PCB deal with strong drink CX attach. This is a testament to our multi product strategy with customers now purchasing more products from us, allowing us to gain a larger wallet share.
Amit: Our new products are also showing good early traction with our small business customers driving its.
Amit: Growth of 7% or 8% on a constant currency basis, which is an explanation over the last three quarters.
Amit: Now moving to profitability I will be referring to non-GAAP results unless otherwise noted subsea.
Amit: Subscription gross margin was 81%.
Amit: Well a lot will remain above $30. Please note, we do not intend to share this metric going forward as it is no longer a meaningful indicator of our performance as we transition into a multi product portfolio.
Amit: Operating margin expanded approximately 100 basis points year over year to 21, 3%, which was above our guidance.
Amit: This was driven by disciplined spending, especially in sales and marketing and where we expect to drive further incremental improvements.
Amit: Notably, we also reduced stock based compensation as a percent of revenue by almost 700 basis points year over year.
Amit: Belt of disciplined new client activity.
Amit: This along with improvements in operating margin resulted in us achieving GAAP operating profitability for the second consecutive quarter moving.
Amit: Moving to our cash flows and balance sheet are strong operating performance combined with increased rigor in driving efficiencies and working capital improvements.
Amit: Adjusted and record quarterly free cash flow of $112 million up 19%.
Amit: Percent versus last year during the quarter, we also repurchased approximately two 2 million shares for $77 million.
Amit: Now turning to the full year, we delivered another year of strong revenue growth front GAAP operating income positive and reduced our fully diluted share count for the first time in our history for.
Amit: For the full year, we drove meaningful improvement in profitability, while continuing to grow.
Amit: Our 2024 revenue increased 9% to $2 $4 billion operating margin improved by 200 basis points to 21% and we completed over $400 million of free cash flow up 24% year over year.
Amit: In addition, we also drove a material reduction in stock based compensation.
Amit: P C. As a percent of total revenue declined to 14% down from 20% in 2020.
Amit: Moving to our balance sheet, we repurchased approximately nine 7 million shares during the year for $322 million.
Amit: Starting in the introduction of our diluted and basic share count.
Amit: Our board recently approved an incremental $100 million in share repurchases.
Amit: Brings our total available authorization to approximately $270 million.
Amit: Also grew EBITDA, 17% to $590 million, reducing our net debt leverage ratio to two to $2 six.
Amit: Before providing guidance, let me share a framework with you at.
Amit: Approximately 85% of our business is ucas.
Amit: So since in the last few years, we expect to maintain our leading ucas market share of approximately 20% based on synergy Research's latest research report.
Amit: According to IDC, the Ucas market is expected to grow revenues by about 6% in 2025.
Amit: With respect to seek us.
Amit: We are seeing strong adoption of our new <unk> product, which is expected to more than double in revenue in 2025.
Amit: While its aggressive pricing impacts the topline in the near term it is a higher margin product and net accretive on a unit economic basis due to a full technology ownership.
Amit: <unk> is also simpler and easier to deploy thus necessitating less professional services.
Additionally, we are seeing less hardware form sales because the app adoption is continuing to take share.
Amit: Both of these items affect the top line, but not the bottom line as there are no margin businesses for us.
Amit: Regarding capital allocation, we remain committed to delevering, the balance sheet and reducing our gross debt to $1 billion by the end of 2026.
Amit: With this for the full year, we expect so.
Amit: Subscription revenue to grow approximately 5% to 7% year over year, a 6% to 8% on a constant currency basis.
Amit: Total revenue to grow approximately 4% to 6% year over year, a 5% to 7% on a constant currency basis.
Amit: Operating margins of approximately 22, 5% representing expansion of approximately 150 basis points.
Amit: Stock based compensation of $310 million.
Amit: Presenting approximately 12% of total revenue down from 14% last year.
Amit: The value of net new stock grants are expected to decline about 40% year over year, which will result in further SPC declines going forward.
Amit: non-GAAP EPS of $4 13 to $4 27.
Amit: Representing approximately 14% growth at the midpoint non-GAAP EPS estimate is based on a fully diluted share count of $93 five to $94 5 million.
Amit: Free cash flow of $500 million to $510 million up 25% at the midpoint versus 2024.
Amit: For the first quarter, which has two fewer days in Q4, we expect so.
Amit: <unk> revenue range of $587 million to $592 million.
Amit: Representing year over year growth of 5% to 6% six.
Amit: 6% to 7% on a constant currency basis.
Amit: Total revenue of $607 million to $612 million, representing year over year growth of 4% to 5% on a reported and constant currency basis.
Amit: Operating margins of 21 to 21, 5%.
Amit: non-GAAP EPS of <unk> 93 to 97 cents based on fully diluted shares of 93 to $93 5 million.
Amit: Our strong financial profile provides us with many capital allocation options.
Amit: We plan to generate $500 million of free cash flow in 2025.
Amit: Combined with $350 million of incremental capacity on our term loan a.
Amit: And $225 million on our revolver, we have over $1 billion in available capital.
Amit: We're not predicting internally generated cash flow and external sources of liquidity. We believe we can extinguish our 2025 convertible notes, which we expect to pay off with available cash in the next few weeks and have the capacity to also address the entirety of our remaining 2026 convertible notes on a timely basis as is contractually Rick.
Amit: Wyatt.
Amit: In summary, let me conclude with four key takeaways, one we continue leading and holding market share in a mission critical segment of business voice communication.
To our new <unk> products are all growing strong double digits sequentially.
Amit: Ah.
<unk> is a proven innovation leader committed to growing our overall Tam.
Amit: Or we expect to generate half a billion dollars of free cash flow, which will allow us to reduce debt repurchase shares and invest heavily into innovation with that let's open the call up to questions.
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. If you were using a speakerphone. Please pick up your handset before pressing the keys. If at anytime. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: In the interest of time, please limit yourself to one question and one follow up we will now pause momentarily to assemble our roster.
Speaker Change: And your first question today will come from Kash Rangan with Goldman Sachs. Please go ahead.
Kash Rangan: Hi, Thank you very much congrats.
Speaker Change: Congrats on the taking over your positions.
Speaker Change: Respectively, and one for <unk> you had a slide in your presentation about market share and ring central is still top of the heap. It looks like the market share it seems to be stabilizing roughly after a period of moves here and there. So what are we to make of that market share presentation is the thing that keeps you 85% of your revenue comes from.
Speaker Change: The other 15% is in growth areas I mean does this set you up to.
Mike Hogan: Start to regain market share from this point going forward and one for you Mike Congratulations on I think it's your first public company CFO position what are in print do.
Mike Hogan: Do you bring to bear based on your prior experiences you've been at high growth companies like AWS you were at Autodesk Cisco prior to that you were an amazing sell side software and so what it would do these experiences bring to bear to you as you put your CFO job and how oh by value here. Thank you so much.
Mike Hogan: Great.
Mike Hogan: Thank you.
Mike Hogan: Sure.
Mike Hogan: Yes, thanks for the questions.
Mike Hogan: Okay.
Mike Hogan: Regarding the market share very happy you asked.
Does it tell you.
Mike Hogan: We've been.
Speaker Change: Hearings this persistent rhetoric that RIN central is losing market share and in particular, losing two Microsoft zoom.
Mike Hogan: That is simply not the case.
Mike Hogan: And now we have third party data that makes the case very clear and I think without any doubt ring central has been a 20%.
Speaker Change: Market shareholder.
Mike Hogan: Plus or minus a few basis points for the last number of years.
Speaker Change: Four or five years plus.
Mike Hogan: What.
Mike Hogan: What is the risk motion in the marketplace is smaller players as they are as a whole are getting weaker we are holding our own.
Mike Hogan: You can look at the chart on the data. We've provided this is from a third party synergy which is a well known as spring I think in respected industry analyst.
Mike Hogan: As far as people, who are actually paying for.
Mike Hogan: Their business phone service through the cloud.
Mike Hogan: We are as a clear leader, we have been and we have every intent.
Mike Hogan: Continuing got elite, we would very much like to expand it as well, but I have to say that you know 20% in the competitive space is not the worst position to be EBIT.
Speaker Change: He just holding steady regarding new products look it's very very early to speak of out of market share at this point.
Mike Hogan: Our new products.
Mike Hogan: Our growing strong.
Mike Hogan: Strong double digits.
Mike Hogan: If not better sequentially quarter over quarter. So we're very very happy with the progress they made they are making.
Speaker Change: We think that there is.
Mike Hogan: A huge opportunity.
Mike Hogan: This opportunity is I would say twofold, and it's unique to us as being central.
Mike Hogan: So this is not necessarily an order because it all goes together, but one is <unk>.
Mike Hogan: <unk> and <unk> combined together into a single suite we had.
Mike Hogan: Early success with it.
Mike Hogan: And OEM based based approach.
Mike Hogan: <unk> built a sizable base.
Mike Hogan: We are sitting on a very sizeable <unk> from that base.
Mike Hogan: Yeah.
Mike Hogan: We've also again tons and tons of experience as far as what it takes and what is really needed by those customers.
Mike Hogan: That <unk>.
Mike Hogan: Value.
Mike Hogan: There <unk>.
Mike Hogan: Employee communications and customer communications to come from the same vendor, which I think as we've noted third party research suggests that as well.
Mike Hogan: Well over half of companies have actually I think the metric you said was 65%.
Speaker Change: We have some other estimates from other analysts that are higher than this.
Speaker Change: Again, Cisco Avaya and <unk> have been selling their UC and cc together and we know that there is a very healthy appetite for <unk> and <unk> together.
Speaker Change: So this is one angle.
Speaker Change: We believe we are best positioned to satisfy that demand through a combination of partner base, but now also.
Speaker Change: In house developed products Okay.
Speaker Change: The other leg of the stool is AI and.
Speaker Change: <unk>.
Speaker Change: I don't know if I knew if you've had a chance to catch my CNBC interview, just about half an hour ago, but this very question was asked.
Speaker Change: The other piece answer which is.
Speaker Change: So we are the global leader in Ucas, we have.
Speaker Change: <unk> thousands of customers millions upon millions of seats slash and users and we're moving moving billions of minutes of voice traffic through our network voice continues to be the dominant means of communications.
Speaker Change: And preference between consumers and brands the providers and green central isn't the absolute wolf position in satisfying that demand. So what this means is that we are in a very good position to digs advances and promises that AI.
Speaker Change: Has to offer and deploying it across the base and just today, we introduced ring central.
Speaker Change: AI receptionist, we call it air Okay, it's not Nike areas during central Air and bring Central Air. We believe is the first close integration between a major service provider.
Speaker Change: And.
Speaker Change: And AI reception this digital employee that will.
Speaker Change: Answer calls that will provide directions that will block spam very importantly will direct calls.
Speaker Change: Not just based on a name or extension of an employee but based on context of what's being said please correct me.
Speaker Change: Connect me to your collections Department. Please connect me to your shipping Department those types of questions we know.
Speaker Change: That with South wire for example, the customer with highlighted early customer.
Speaker Change: We are able to save them substantial.
Speaker Change: Diamond mine your effort and most importantly make makes them more productive through this through this product. So very very excited about that and maybe to preempt. Your next question of if somebody with US yes, we absolutely see this as the paid Adam at this point.
Speaker Change: We think we're delivering value digital employees are a lot a lot less expensive than physical employees and that will simply free up people for doing what people do best but yet businesses can save.
Speaker Change: Money time, and become more efficient and more proficient with our customers.
Speaker Change: So our future is bright.
Kash Rangan: So thanks Kash for your questions and congratulations really appreciate them and so thank you for listening with CV.
Speaker Change: Yes.
Kash Rangan: It's been great to be here and what I can what I can see similarities with all the companies and differences is the pace of innovation here.
Kash Rangan: Really strong pace of innovation and that's that's true.
Kash Rangan: Kind of showing up in some of the AI based products that we're launching so my experiences from other companies are going to really be helpful will be helpful in driving profitable growth Tam.
Kash Rangan: We've come a long way in improving our ambition.
Kash Rangan: Efficiencies and also improving the balance sheet, we have and we think we are going to continue to build on the strong foundation for our financial Foundation that we have to keep driving free cash flow is higher so a lot of those lessons that I've learned in the other companies are going to be highly highly valuable here as we drive innovation and keep improving.
Kash Rangan:
Kash Rangan: On our debt leverage as well as free cash flow generation capabilities.
Kash Rangan: Yes. Thank you.
Kash Rangan: And.
Kash Rangan: I think.
Kash Rangan: Uh huh.
Kash Rangan: Question on specific questions that you have.
Kash Rangan: And just to double down.
Kash Rangan: Our continued pace of innovation.
Kash Rangan: Sure.
Announced a number of new products over the last year.
Kash Rangan: Just now.
Kash Rangan: We will continue to look to track.
Kash Rangan: Upon that.
Kash Rangan: The market share that we have today.
Kash Rangan: These outsized compared to everybody else.
Speaker Change: And your next question today will come from city <unk> with Mizuho. Please go ahead.
Mizuho: Thanks for taking my question again.
Kash Rangan: Yes.
Kash Rangan: On your first earnings call as a new role.
Speaker Change: So I don't I want to ask Oh, definitely it's really exciting to see the <unk> adoption and a doubling of revenue and <unk>.
Speaker Change: You talked about some of your I think genpact and with some of those large deals help us understand like what kind of you say is like they are doing and using it and and in terms of the CCAR. How would you put your sitting now green kits versus nice.
Speaker Change: And then out of the data.
Speaker Change: And you guys didn't disclose seek us out or what was that the end of Q4.
Speaker Change: Yes.
Speaker Change: Great Great question, let me.
Speaker Change: Let me take some of that.
Speaker Change: Bye.
Speaker Change: <unk>.
Speaker Change:
Speaker Change: Although bring CX.
Speaker Change: We introduced this last year.
Speaker Change: I already mentioned, it's doing well and exceeding our expectations.
It's addressing a wide swath of markets.
Speaker Change: It has good traction and it was specifically designed to be seamlessly integrated AI first.
Speaker Change: Very importantly.
Speaker Change: Easy to deploy use and manage its also priced aggressively so.
Speaker Change: Sure.
Speaker Change: Summary is it does very well down market.
Speaker Change: Where we are.
Speaker Change: Less successful with our prior products before but they've got to say, it's also the playing quite well in the market and jump back is just the latest example, but we do have a number of.
Speaker Change: You know thousands seat or so accounts.
Speaker Change: That are choosing <unk> results.
Speaker Change: <unk>.
Speaker Change: As Dave mentioned, having said this.
Speaker Change: It's great to have a full flavor we have bring CFS is our growing product certainly we are putting.
Speaker Change: Much muscle behind it.
Speaker Change: For this reasons on their economics control of the roadmap.
Speaker Change: Better.
Speaker Change: At quicker ability for us to serve customer needs that we are hearing directly.
Speaker Change: We obviously have our original OEM product powered by nice.
Speaker Change: That.
Speaker Change: It has been a very very successful partnership and a very successful product.
Speaker Change: <unk> been in that we've been doing business.
Speaker Change: For about 10 years, we've built a substantial base.
Speaker Change: We're sitting on a large IPO from that base.
Speaker Change: We believe that by and large that base is good.
Speaker Change: Going to be satisfied by a year.
Speaker Change: One of the products in our portfolio at least.
Speaker Change: Now, having said that we have other partnerships.
Speaker Change: I think last quarter I believe we've announced a variance relationship.
<unk>.
Speaker Change: Again this early but early signs are quite promising.
Speaker Change: We are beginning to adopt it within our own company and we are a large company.
Speaker Change: If you will with the sizable contact center. So we're good use case.
Speaker Change: We're also building a pipe.
Speaker Change: With variant based products and it's early but there's a definite interest. So we absolutely expect to be making phase there, but they've got to say we have other partners.
Speaker Change: Whenever we don't have in house technology.
Speaker Change: And it's a very dynamic market Norwegian one at all really.
Speaker Change: We have a number of other folks that we're doing business with and we expect that to continue as well. So overall it is customer first.
Speaker Change: Over the years I believe we'll have clearly proven our ability to deliver to.
Speaker Change: To the market.
Speaker Change: The combination of products and technologies as needed for the moment.
Speaker Change: Yes.
Speaker Change: Thanks <unk>.
Speaker Change: Essentially a sequence here kind of Google.
Speaker Change: In low double digits in the quarter, but as Vlad indicated.
Speaker Change: We should be focused more on what's driving it out new products here huh.
Speaker Change: <unk> is the biggest driver of our new products here, which will mention to you.
Speaker Change: It's over $50 million as we call it and we are well on track to deliver on.
Speaker Change: 2025 target of at least $100 million.
Speaker Change: What we disclosed is a new product new products similar and this led by <unk> and also just to remind everyone clarify.
Speaker Change: <unk>, while it is fantastic for our bottom line owner economics.
Speaker Change: Sure.
Speaker Change: It is priced aggressively in the market and.
Speaker Change: Top line.
Speaker Change: <unk>.
Speaker Change: Maybe.
Be impacted because of that there's a subsequent flagged last quarter as well obviously as we're now guiding for the year, we took all of those.
Speaker Change: Considerations into account.
Speaker Change: But.
Speaker Change: We absolutely are.
Speaker Change: Positives that having our own AI first contact center product is exactly the right thing to do but again.
Speaker Change: I really don't want people to fixate on our overall <unk> revenue at this point.
Speaker Change: Look at the growth of our.
Speaker Change: Of our new products.
Speaker Change: CX and also very importantly, our emerging AI portfolio.
Speaker Change: Okay.
Speaker Change: Your next question today will come from Ryan Macwilliams with Barclays. Please go ahead.
David: Hey, guys. This is David <unk> on for Brian. Thanks for the question at a high level, how should investors think about quantifying the potential impact results from the prioritization of bring CX for spring Central's Nice partnership.
Speaker Change: I mean this all into the guide.
Speaker Change: All of the guide.
Speaker Change: I think we already said a.
Speaker Change: A few times now.
Speaker Change: It's.
Speaker Change: There is a base.
Speaker Change: This base is largely under contract.
Speaker Change: Actually I would thing I believe is exclusive to other countries, but let's stick with larger for the record.
Speaker Change: There is a large IPO, so people our own contracts and.
Speaker Change: Payment stream guaranteed you all know what that means.
Speaker Change: And.
Speaker Change: As far as.
Speaker Change: Puts and takes there in.
Speaker Change: As a guide.
Speaker Change: Got it thanks, a lot and then.
Speaker Change: Can you help us understand the non-GAAP operating margin progression throughout 2025.
Speaker Change: Driving the operating leverage that you expect in the latter half of the year.
Speaker Change: Yes. Thank you.
Speaker Change: The key driver for operating margin Leverages topline and efficiency improvements in the cost structure and the disciplined spend that we have.
Speaker Change: You've seen us deliver that over the last few years we've delivered.
Speaker Change: We have nearly doubled.
Speaker Change: Margin in the last few years and you should expect a similar discipline to continue and during the year. Some of the work we are doing internally to optimize our cost structure using AI to bring in more efficiencies. Some of the stuff that <unk> talked about a lot of the all of those are going to generate.
Speaker Change: Margin leverage as you go along the year.
Speaker Change: Your next question today will come from Brian Peterson with Raymond James. Please go ahead.
Brian Peterson: Oh, Hey, guys. Thanks for taking the question.
Brian Peterson: Just as we're thinking about <unk> I think a lot of investors look at the sequential change in that metric as a method to just track kind of the overall business activity I know FX was an incremental headwind is there any way to look at what that figure would have done adjusted for FX or is it just fair to maybe take a 100 basis points out of the year year year over year.
Brian Peterson: Any any help on how to look at that.
Brian Peterson: Yes, I think you're thinking the right way, we called out one point. So it was actually one of $30 million impact from currency here. So you cannot you can make the adjustment that was the biggest factor there. The other element is what <unk> talked about <unk> doing really well. So when you adjust for all those things you can you can.
Brian Peterson: See our performance was relatively in line with the last few years.
Speaker Change: Great and maybe just one for you as we think about the incremental GSV partnerships. How do you think about the importance of that channel and the go to market motion going forward. Thanks, guys.
Brian Peterson: Yeah.
Brian Peterson: Yeah, no thanks for asking look.
Speaker Change: Our GSP practice, we believe is absolutely unique in the industry.
Brian Peterson: Simply no one I can think of.
Brian Peterson: In our segment that has nearly the depth and breadth of relationships and proven proven success with the GSP is that we have.
Brian Peterson: Very importantly.
Brian Peterson: We are seeing these gsp's.
Brian Peterson: Also buying and align up behind our multi product portfolio strategy and in particular, we have a number of major service providers and we have just now.
Brian Peterson: I think.
Brian Peterson: There yesterday announced that British telecom is.
Brian Peterson: <unk>.
Brian Peterson: As the largest partner to do this so they're now reselling bring CX.
Brian Peterson: This is by and large net new okay too to the entire industry, but they're also seeing an opportunity with their very very large installed.
Brian Peterson: Installed basis too.
Brian Peterson: Two.
Brian Peterson: Expand to expand the reach to offer more value. So I think gsp's agreed for our core U S business, but.
Brian Peterson: They will be.
Brian Peterson: Pivotal in making green CX.
Brian Peterson: Ring Central Air our AI assistant ring sense.
Brian Peterson: Our entire portfolio we have.
Brian Peterson: We expect to.
Brian Peterson: So not only directly and through the traditional channel, but via our GSP partners as well and this is an industry new and unique.
Brian Peterson: Physicians that I don't think anyone else can match at this point.
Your next question today will come from meta Marshall with Morgan Stanley. Please go ahead.
Meta Marshall: Great. Thanks.
Speaker Change: Maybe building on that last question, just obviously getting leverage.
Speaker Change: Out of the global service partners on kind of selling the multi product strategy, but just are there any additional kind of go to market investments or kind of more direct.
Speaker Change: Kind of overlay sales that you'll have to kind of sell some of the new portfolio that we should be mindful of going throughout the year and then just as a second question. If we think of the sources of upside potentially during the year does that come from kind of exceeding $100 million target kind of the new products or more kind of stability.
Speaker Change: On the ring E X product thanks.
Speaker Change: So.
Speaker Change: On the <unk>.
Speaker Change: On the new products and specifically as we take these products to <unk> and <unk>.
Speaker Change: And all of our other partners strategic partners.
Speaker Change: We already have.
Speaker Change: Number of Gsp's that are.
Speaker Change: He's just been announced yesterday, taking gene in CX two market. Vodafone is Cox is is in the process they were announced.
Speaker Change: So we are seeing what we haven't seen before.
Speaker Change: We are relatively new to a multi product portfolio and Egypt multi product portfolio that they're adopting all of our products.
Speaker Change: And eager to adopt more.
Speaker Change: And that includes air.
Speaker Change: We announced today and that will include every single AI based patients that we have planned for 2025 and there's a number that's in the pipeline.
Speaker Change: And we will be announcing them as they come out of course, including a number of AI enabled.
Speaker Change: Add ons that we have for example was the <unk> sessions are Inc.
Speaker Change: For <unk> quality management, which helps.
Speaker Change: Uh huh.
Speaker Change: Agents be more productive and gives management a dashboard that a way to manage agents. Those are just a couple.
Speaker Change: A couple of examples.
Speaker Change: What was the second part of your question.
Speaker Change: Just on sources of upside as we think about the year. What do you think of those coming from kind of beating the $100 million target around new products or kind of more stability.
On the <unk> side.
Speaker Change: Well I think it's kind of a combination of both it's new products is exceeding 100 million.
Speaker Change: Error that we have a good visibility into already.
Speaker Change: Also <unk> being able to sell new products into installed base and wishes.
Speaker Change: Frankly, a relatively new motion for us.
Speaker Change: And what we're seeing we're seeing early success for example last quarter, we announced assistant not monetizing that yet.
Speaker Change: What we're seeing data adoption and customers like users like the product.
Speaker Change: The.
Speaker Change: Compliment us on the quality of the product so expect us to then.
Speaker Change: Everything that's out there that's on that.
Speaker Change: In Ottawa and monetize our call today, we will be adding capabilities to monetize it so.
Speaker Change: Call it in the category of new products, but they do exist across our installed base and so we except expect that to accelerate I think lesson early on.
Speaker Change: Our future in terms of adding new capabilities led lighting CX.
Speaker Change: But argument that the Mi AI capabilities, which is what customers expect today from us and we'll continue to innovate and lead there.
Speaker Change: Your next question today will come from Michael Funk with Bank of America. Please go ahead.
Michael Funk: Yes. Thank you for the question.
Speaker Change: Maybe it's one four.
Speaker Change: We're glad but we've seen some very divergent results.
Speaker Change: And the last week or two across the space in terms of the actual reported and then and then guidance as well. So hope you can put your your guidance for the year in the context of market growth right for for C action, if that implied market share gain and then in which area.
Speaker Change: If you believe that.
Speaker Change: <unk> market share gain.
Speaker Change: Well see.
Speaker Change: Yeah. It was definitely taking share because the market is not growing.
Speaker Change: Strong double digits like I say quarter over quarter. So of course, we're taking share, but it's small and I.
Speaker Change: I think it's a little early to speak of market share for us yes.
But it's.
Speaker Change: It's a product that's well received.
Speaker Change: It.
Speaker Change: Hit a nerve.
Speaker Change: It's not a niche product.
Speaker Change: But I think already indicated this has a number of customers of all sizes and the latest large wind with genpact shows that it is quite capable of contact upmarket as well having said that look.
Speaker Change: There are more fully featured products out there. So we're not trying to measure market feature for feature but we went for ease of use ease of deployment.
Speaker Change: For ease of ownership, which includes but is not limited to the price point itself very very importantly, it's a next gen product that's been.
Speaker Change: Altogether.
Speaker Change: The era of AI so.
Speaker Change: It works very well with AI.
Speaker Change: With AI some of them are plug ins and some of them are core futures, but.
Speaker Change: Things that we can do with <unk> before COVID-19 during call after call.
Speaker Change: After call would be ring sense for CX for example.
You know or.
Speaker Change: Our agent assist.
Speaker Change: For CX, but by way of example.
Speaker Change: Example.
Speaker Change: So those are all well received.
Speaker Change: And.
It's an investment.
Speaker Change: Took us a few years to bring to market, but once we did you know he's doing well.
Speaker Change: And then you mentioned mid market flat some of the Bofa data credit card data is showing some relative weakness in and mid size business based on spending hiring.
Speaker Change: Does your guidance in caps and caps slight conservatism or the mid size business market or other factors.
Speaker Change: Yeah, well Oh.
Speaker Change: Look I think we specifically called out that we're seeing stabilization in small business I know youre, saying mid but let's start with small.
Speaker Change: Yeah.
Speaker Change: That's actually a b.
Speaker Change: Been doing well for us.
Speaker Change: We are optimistic it will continue to do so as.
Speaker Change: As far as mid adopt a look I mean, we're seeing our.
Speaker Change: Our acquisition patterns, we're seeing retention patterns.
Speaker Change: And Yeah look you know you can't you can't.
Speaker Change: You know you can't run away from the fact that there is still macro out there.
As you know not quite certain yet.
Speaker Change: You know we've experienced some currency headwinds as well.
Speaker Change: Everyone's head.
Speaker Change: All I can say is to diversify our ability we put it all together and this is the guide we provided you know.
Speaker Change: We feel.
Speaker Change: Good about are about.
Speaker Change: Our ability there.
Speaker Change: But very very importantly.
Speaker Change: Nobody has asked this question and I don't want to lose track of this is one thing we do control.
Speaker Change: Look better.
Speaker Change: Is is.
Speaker Change: Is the cost side of things.
Speaker Change: And.
Speaker Change: Yes.
Speaker Change: We've had a really.
Speaker Change: Very very strong margin expansion.
Speaker Change: <unk>.
Speaker Change: And free cash flow generation, but this coming year is the first year that we'll do over $500 million of Levered cash flow.
Speaker Change: Feel very good about that.
Speaker Change: We are able to do this as we're growing the top line.
Speaker Change: And as we are.
Speaker Change: Rai stickley drastically decreasing.
Rock based comp SBC, so put it all together and.
Speaker Change: Our earnings per share story is beginning to shape up quite well.
Speaker Change: And we.
Speaker Change: We believe there will be continue stress.
Speaker Change: Strengths there.
Speaker Change: And look there is market wise.
Speaker Change: Now there is good weather bad weather eventually everything reverts once economy terms.
Speaker Change: Yes.
Speaker Change: We should be doing even better, but we have not baked that into our guidance lets put it that way.
Speaker Change: Well one thing I do want to add about the guide here is that just keep in mind, there's about one point of currency headwind that we've talked about and.
Speaker Change: The other revenues also has an impact on our top line. So just if you adjust for all that.
Speaker Change: In your models.
Speaker Change: Your last question today will come from Ryan Koontz with need him. Please go ahead.
Speaker Change: Alright, thanks for the question.
Speaker Change: I appreciate the color on.
Speaker Change: <unk> position, there and we will now see excess traction John market could you maybe also reflect on some of the traction you have with some of your new product Youre talking about that part of your new product overall.
Yes, well overall.
Speaker Change: I think we said we are at a bit over $50 million.
Speaker Change: In.
Speaker Change: <unk> was a new product.
Speaker Change: So that makes us a bit better than halfway.
Speaker Change: Towards the 100 million dollar.
Speaker Change: Mark or target that I set a year ago, we feel really really good about this.
Speaker Change: To be already a bit over halfway there.
Speaker Change: As far as.
Speaker Change: Color is concerned well bring see as being a new product I think we already said that.
Speaker Change: In the Enterprise for example, where we had a really really good quarter with over 30 deals with $1 million <unk> or better <unk>.
Speaker Change: <unk> CX attach was over 50%. Okay. So this is one good measure.
Speaker Change: We are also seeing.
Speaker Change: Very strong attach of AI add ons within the ring CX.
Speaker Change: With bring sense being over 50% attach to.
Speaker Change: Two rigs CX as an example, okay.
Speaker Change: As far as the wide base is concerned.
Speaker Change: Look it's very very early.
Speaker Change: <unk>.
Speaker Change: We are seeing.
Speaker Change: Early results early traction.
Speaker Change: With.
Speaker Change: Our various add.
Speaker Change: But frankly, the one that I'm personally extremely excited about which is ring central air we've introduced today.
Speaker Change: We already have.
So I'm very very happy customers with it we've highlighted south wire, which is a sizable company that's able to save.
Speaker Change: Quite a bit of efficiencies with this product, but it's early.
Speaker Change: I have to say that.
Speaker Change: For the guide.
Speaker Change: This winter.
Speaker Change: We took it down some.
I would not say that we were overly aggressive at this point these things take time.
Speaker Change: And people need to get a look we've got lots and lots of customers and people need to get.
Speaker Change: Custom to this technology.
Speaker Change: What we can do with this new tool, but it will happen. It's very important. We also we ourselves are using we are eating our own dog food. So we are using all of this stuff in house and we can see firsthand.
Speaker Change: Type of improvements.
Speaker Change: This technology brings and Kieran maybe you can provide some more detail.
Speaker Change: I am deploying internally.
Speaker Change: Excellent.
Speaker Change: <unk>.
Speaker Change: In our own contact center.
Speaker Change: We're seeing.
Basically improved.
Speaker Change: <unk> response rates.
Speaker Change: Uh huh.
Speaker Change: Just call wait times.
Speaker Change: And just ability to simplify workflows, so which we're able to do even was on.
Speaker Change: Our own contact center.
Speaker Change: And in terms of what it shows in terms of sufficiency overall, we're seeing something on the order of 10% efficiency and moving upwards from there.
It's a good.
Benchmark to take to our customers as well.
Speaker Change: Okay. That's great color really appreciate it and look forward to order more to enterprise connect thanks. So much. Thank you.
Speaker Change: That concludes our call for today you may now disconnect your lines.
[music].