Q1 2025 RingCentral Inc Earnings Call
Good day and welcome to the ring Central first quarter 'twenty 25 earnings conference call.
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Avago Walle: I would now like to turn the conference over to revive Avago Walle Deputy CFO for ring Central. Please go ahead. Thank you good afternoon, and welcome to ring Central its fourth quarter 2025 earnings conference call joining.
Speaker Change: Joining me today are large walnuts founder chairman and CEO, Keith <unk>, President and C O and avail Umbo CFO.
Speaker Change: Our format today will include prepared remarks by block, Keith and I'll be followed by Q&A.
Speaker Change: We also have a slide presentation available on our Investor Relations website that will coincide with todays call, which you can find under financial results section at IR Dark Green Central Dot com.
Speaker Change: Some of our discussion and responses to your questions will contain forward looking statements regarding the company's business operations financial performance and outlook.
Speaker Change: These statements are subject to risks and uncertainties some of which are beyond our control and are not guarantees of future performance.
Speaker Change: Actual results may differ materially from our forward looking statements and we undertake no obligation to update these statements. After this call.
Speaker Change: For a complete discussion of the risks and uncertainties related to water business. Please refer to the information contained in our filings with the Securities and Exchange Commission as well as today's earnings release.
Speaker Change: Unless otherwise indicated all measures that follow are non-GAAP.
Speaker Change: Year over year comparison.
Speaker Change: A reconciliation of all GAAP to non-GAAP results.
Speaker Change: Provided with our earnings release and in the slide deck.
Speaker Change: Certain forward looking guidance, a reconciliation of the non-GAAP financial guidance to the corresponding GAAP measure is not available.
Speaker Change: Discussed in detail in the slide deck posted on our Investor Relations website.
Vlad: With that I'll turn the call over to Vlad.
Return the call over to Vlad.
Good afternoon, and thank you for joining us today.
Speaker Change: We had a strong start to the year and are excited about the opportunity I had.
Speaker Change: We exceeded $2.5 billion in ARR, delivered revenue at the upper end of our guidance.
Speaker Change: Expanded Operating Margin, Generated Record Quarterly Free Cash Flow and reduced that and share count year-over-year and quarter-over-quarter [inaudible]
Speaker Change: How AI powered multi-product strategy is clearly working and we continue to see strong proof points that are new products are resonating with customers.
[inaudible]
We achieved total revenues of $612 million.
Our Operating Margin was 21.8% exceeding our guidance range.
Speaker Change: This marks our third consecutive quarter of gap operating profitability, and we are committed to maintaining gap operating profitability going forward.
Speaker Change: We generated record, free cash flow of $130 million, up 70% year-over-year, putting us well on track to achieve our 2020-25 goal of over $500 million.
Speaker Change: Additionally, we pay down $166 million of debt during the quarter, reducing our net leverage
Speaker Change: Our robust, free cash flow generation enables us to invest in growth while simultaneously strengthening our balance sheet.
Speaker Change: Our success continues to be grounded in the values that have guided us from day one. Trust, innovation and partnerships or tip.
Speaker Change: These principles shaped our rise from a startup to a market leader and now guide us as we expand into a multi-product company with AI at the core.
Speaker Change: We continue to lead in the $30 billion U-Cast market with the steady 20% market share.
Speaker Change: Now we are leveraging our leadership position by supercharging our platform with AI and expanding our portfolio to enable us to expand our TAM and grow our market share.
Speaker Change: We are investing over a quarter billion dollars in innovation annually with a significant and growing portion dedicated to our emerging AI-led new products.
Speaker Change: This underscores a continued commitment to a best-in-class and complete product portfolio focused on AI-powered employee and customer experiences.
Speaker Change: which includes our flagship RingEX, RingCX, and our emerging portfolio of voice-centric
The early results of these new products are promising.
Kira: Kira will provide additional details, but here are some quick proof points.
Kira: At the core of our new product portfolio is RingCX, our modern AI-powered, omnichannel, cloud context-sense solution that is delivering strong double-digit sequential growth.
Kira: The success of RingCentral is thoroughly validated by leadership recognition from key industry analysts, including arrogant research, ISG, and GIGO.
Kira: They cited seamless capabilities, ease of deployment that use and AI and AI throughout the customer interaction life cycle.
RingCent
Kira: R.A.I. powered Insights & Coaching Tool also saw a strong double-digit sequential increase in the number of customers this quarter.
Kira: RingCent is integrated with and is being sold alongside RingEX and RingCX for sales, customer care and other quality management use cases.
[inaudible]
Kira: I'm also extremely excited about the early progress that we are seeing with our latest innovation. RingCentral AI receptionist or air, which launched last quarter.
Kira: Air is a category-defining AI phone agent that augments and replaces human receptionists, resulting in major productivity improvements and substantially better customer experience.
Kira: We activated more than 400 air customer customers within just six weeks of the launch and now have over 1000.
Kira: These are early but meaningful proof points that our AI-led multi-product strategy is working.
Kira: RQ-1 results reflect our performance as a unified, multi-product enterprise.
Kira: However, I'd like now to dive deeper into some specific customer cohorts that are integral to our success Please note that while we are sharing these details today, we may not update them regularly
Kira: Our company is trusted by over 400,000 businesses as their mission critical communications provider. We proudly count some of the world's largest companies as our customers.
Kira: The majority of our customers, however, are smaller businesses. In fact, approximately 30% of our overall ARR comes from customers with fewer than 100 employees.
Kira: Small business is a backbone of the US economy contributing over 40% of our nation's GDP.
Kira: RingCentral is positioned extremely well in this cohort as many of these businesses are in consumer-facing sectors such as healthcare, financial services, retail, and travel and transportation.
Kira: Voice communication remains an important mode of interaction in these industries, and the leader in business voice solutions were well positioned to meet their needs.
Kira: Importantly, we are seeing strong adoption of our AI-based products in particular air and ring sense with these customers due to strong product set.
The numbers speak for themselves.
Kira: In Q1, ARR from these smaller customers grew by double digits, marking an acceleration over the past two quarters and reaching a two-year high.
Kira: Another key customer cohort for us is Telecom Careers and Multiple System Operators, MSOs, collectively referred to as Global Service Providers or GSPs.
Our GSP partnerships are not merely transactional.
There are strategic alliances that amplify our market presence.
Kira: By collaborating with GSPs, we leverage their extensive networks and customer relationships to deliver our innovative products and services more effectively, while allowing them an opportunity to deliver world class
Modern innovation to their vast customer business. [inaudible]
Kira: This symbiotic relationship enables us to tap into new markets and customers that might otherwise be challenging to reach directly. And importantly, most of our major GSB partners.
Kira: including but not limited to AT&T, BT, Charter, Optus, Tellus, Vodafone, and now Krach's Communications.
Kira: are now signed up to resell many of our new products including RingCx, RingCentral and NowAir.
Kira: This is a critical validation of our multi-product platform strategy and global go-to market
Kira: The overall GSB opportunity is substantial with an estimated over 40 million seats worldwide, approximately half of which are in North America.
Kira: GSPs account for over 10% of our ARR delivering double digit growth with the time to break even of under 18 months.
Kira: Our success is a testament to our position as a known and trusted provider to GSPs.
Kira: The competitive landscape is favorable. Other vendors are either too small and unproven, or too large and directly competitive with the GSPs, making RingCentral uniquely positioned in the space.
Kira: Between our smaller customers and the GSPs, we have cultivated sizable cohorts with over $1
Kira: These cohorts are growing in double digits and both impressive ROI metrics will time to break even of under 18 months.
Kira: These cohorts also provide strong competitive modes as we continue to innovate and expand our offerings.
Kira: Our remaining customer cohort comprises larger businesses with over 100 employees.
Kira: While the competitive environment in this cohort is more challenging particularly with some larger enterprises emphasizing alternative communication modalities, we continue to perform strongly.
Kira: Voice remains an important communications modality, especially for customers in B2C, Verticals, such as Healthcare Insurance, Professional and Consumer Services, Retail and Manufacturing.
and we are the Dessert Shoes for those.
Kira: As a proof point, impu1, we saw a year-over-year increase in $1 million dollar plus total contract value or TCV deals
Kira: We continue to displace legacy on-prem providers due to our leading enterprise, great cloud voice capabilities, reliability, global reach, and our unique channel partner network that is best in class.
Kira: Another important factor in our success with larger customers is our open platform that offers superior integrations into Microsoft Teams, Google and Salesforce, which now includes our new integration of RingCx with Salesforce Service Cloud Boys.
Kira: In fact, we now have over 500 integrations in our app gallery, which is a key competitive advantage for us
Kira: Of particular importance with larger enterprises is our strong Microsoft Teams integration.
Kira: It is a key differentiator as enterprises look to pair our best-in-class voice with a team's collaboration suite.
Kira: Simply put, for enterprises seeking to augment their teams' chat and video with the best of breed cloud boy solutions, Rinky As for Teams is the answer.
Kira: Consequently, our team's integration, monthly active users, or MAUs, grew by 30% year-over-year, which is outpatient our overall growth.
Kira: Looking forward, our competitive positioning is now greatly aided by the introduction of RingCFs and our emerging AI product portfolio.
Kira: In fact, over half of our 1 million plus TCB deals were with customers who bought multiple products from us.
Kira: Larger enterprises continue to be a growth driver and a profit generator for us and we're optimistic about the scoreboard given the depth and breadth of our product portfolio and GTM strengths.
Speaker Change: Saeibhav Agarwal, Sonalee Parekh, Kira Makagon, William Wong, Unknown Executive, Vladimir Shmunis
Inclothic
Speaker Change: RingCentral is a pioneer and a breakaway leader in driving the shift from on-prem to clouds communications.
Speaker Change: The next phase in our growth will be driven by leveraging AI throughout our growing portfolio with increased
RingCentral was always about helping businesses succeed by saving them.
Speaker Change: time and money. And now, with Voice Antic, a Genetic AI at the core of our product portfolio, we are uniquely positioned to provide further efficiency and productivity gains to businesses of all sizes worldwide.
Speaker Change: The opportunity I had is bigger than ever and we're just getting started.
Speaker Change: With that, I'll turn the skull over to Kira. Thank you.
Kira: Thank you, Vlad. I'm energized by the momentum we are seeing across the business.
Speaker Change: RingCentral has built a category-leading business cloud communications platform for voice-remains mission critical.
Kira: AI is fundamentally shaping how people communicate and work, presenting a significant opportunity.
Kira: Our voice-centric, agentic AI solutions are resonating with customers and we're well positioned to capitalize on the shift by aligning our product innovation and go-to-market strategy to lead in this evolving landscape.
Last quarter, I outlined three strategic priorities.
Kira: and I'm pleased to report measurable progress across all of them. So let's go through each.
Thank you.
Kira: First, build upon our new cast leadership, infusing AI across our entire portfolio.
Kira: Customers consistently choose Incentral for our market-leading, cloud business phone system.
Kira: Especially, in key B2C verticals, our platform strengths was leading integrations and are expanding AI-powered multi-product portfolio.
Kira: Let me give you an example of a new customer win in UCAS. [inaudible]
We won an iconic 150-year-old consumer food brand.
Kira: They selected RingEX for its enterprise-grade voice capabilities to meet the requirements of connecting their global and distributed workforces.
Arilla Ability, Ease of Administration, Simulus Integration with Microsoft Teams
and Global Range for Key Differentiators. [inaudible]
Kira: These companies anticipate substantial cost savings by moving away from their incumbent legacy solution to their RingCentral Cloud Platform while enhancing employee and customer experience.
Kira: In addition to our leadership in Newcastle with our RingGF platform, we're uniquely positioned to transform the industry with AI.
Kira: I vision centers on the voice-first agentic AI platform that harnesses RingCentral's two decades of expertise in advanced voice-cut technology and our massive global communications network.
Kira: We are delivering measurable value throughout the entire communication life cycle.
Before, during and after every interaction.
Kira: Making warm dramatic with faster, significantly easier, and fundamentally more intelligent for our customers.
This AI-driven approach isn't just enhancing our existing offerings.
Kira: It's creating entirely new possibilities for how businesses communicate and operate.
Let's start with before the interaction.
We launched AIR in Q1.
Kira: AR creates a new category with an AI-form agent that uses a generative AI to automatically answer customer
Kira: Air is needed to set up for businesses of any size and delivers measurable ROI by driving efficiency, reducing spam, and strengthening customer opportunities.
Kira: We're seeing early success across healthcare, accounting, transportation, and financial services demonstrating there's ability to deliver targeted and impactful business outcomes.
as proof points of air's impact. [inaudible]
Kira: Owen Security said that they are seeing massive efficiency gains and that air saves each agent two to four hours per day, which is a 50% decrease in time spent on inbound calls.
Kira: Now with the time saved, all insecurity is able to spend more time on outbound calls and focus on client follow-ups, all without adding headcount
Speaker Change: Integral Recruiting said that they used to have hundreds of calls every month, was around 90% of them being spam or irrelevant.
Kira: Now with ear, they can filter out irrelevant calls and focus on the 10% which are irrelevant customer opportunities.
Kira: The value here isn't just time-saved, it's the focus on the real customer leads to help grow their businesses.
Thank you.
Speaker Change: Next for during the call. We've enabled AI assistant for RingEX customers.
Kira: A.S. Assistant enables and users to be more productive transcribing calls, taking notes and composing text and messages with AI.
Kira: It continues to gain strong traction across health care, financial services, transportation and other verticals.
In Q1,
Kira: AIS system for calling has generated 40 plus million nodes for US-based users and among those who use it for animating nodes, were seeing 85% repeat usage.
Next, let's talk about the After the Call Experience.
RingCentral analyzes conversations, score schools, services coaching opportunities.
and believers, key performance metrics.
[inaudible]
We now have more than 2,800 customers using Green Sense.
Kira: Up from more than 2,000 last quarter, highlighting strong sequential growth.
Kira: RingCent's attach was $1 million plus TC videos into one is demonstrating our ability to scale RingCent's AI across customer cohorts.
As an example. [inaudible]
MedCare
A long time Rengie X-Customer recently added Rincense. Rengie X-Customer,
Kira: Freeing up resources to allocate more focus on care and outcomes.
Kira: Now that they are using ringCentral, all calls are automatically analyzed and summarized.
Kira: And from what they've seen, RingCentral is highly accurate with its analysis and call insights.
Thank you.
Kira: The second priority, expand them through our multi-proto-proto-platform led-biting CX, our native AI-powered
[inaudible]
We are seeing strong traction with RingCx.
Kira: Customers are choosing RingCX because it's AI-powered with reach on the channel, it's seamlessly integrated with RingCX, it's easy to deploy and use, plus it delivers fast time to value.
Kira: At the end of Q4, we had over 700 RingCx customers.
Kira: A great example is a new win with one of the largest other dealership groups in the world.
Kira: This customer is deploying thousands of RingEX seats alongside RingCX and RingCentrali across nearly 100 locations.
Kira: Within Central, there are standardizing communications, improving call-performance analytics and enhancing customer experience across sales and support.
Speaker Change: Another example is NHS Hartfordshire, a well-known regional healthcare trust in UK.
Went live in Q1, only six weeks after signing up.
Speaker Change: Serving over 1.2 million residents, they have already achieved a 30% reduction in call-way times and are expanding services that benefit both patients and agents.
Speaker Change: Over the last few quarters, more than 50% of $1 million plastic CV deals involving RingCX also included AI Quality Management.
underscoring the value of combining CX and AI together.
Our AI quality management automatically scores 100% of calls.
Providing actionable insights for coaching and performance improvement
for instance, [inaudible]
Speaker Change: A large prescription benefit administrator, a $1,000,000 plus D.C.V. deal signed in Q1. So let's bring D.X., L.C.X., and AI Quality Management to streamline their support operations and improve service quality.
Speaker Change: These examples illustrate how our AI-powered multi-product strategy is resonating with customers, driving gross and delivering measurable outcomes.
Thank you. Thank you. Thank you.
We also continue to see strong traction with RingCentral events.
Speaker Change: Now for the third priority, drive profitable growth and improve customer engagement across our entire business.
as you heard from Vlad.
Speaker Change: We're generating profitable growth, expand their operating margin, and driving more free cash flow.
Speaker Change: And AI adoption is a key driver in improving efficiencies across our organization and the early results are compelling.
Speaker Change: Let me give you some examples of how we are using AI.
Speaker Change: In customer support, we are laser focused on improving customer outcomes.
AI is helping us modernize both technology and workforce efficiency.
Speaker Change: With RingCx deployed, we're seeing a 10-20% reduction in average handle times, using it in Carson, in concert with AI agent assist and AI supervisor assist, which are now in open beta and will be generally available in the coming months.
Speaker Change: In film and marketing, we're using AI to improve accuracy in targeting and customer outreach.
Speaker Change: This enhances our pipeline quality, account planning and overall sales agent productivity.
More effective campaigns and improved lead quality.
Speaker Change: To put it simply, we are now able to generate more qualified leads for less dollars.
Speaker Change: In innovation, we are already seeing a 20% productivity improvement from using AI to accelerate development cycles and improve code quality.
In summary, there is not just a technology shift.
Speaker Change: It is a business transformation engine that is enhancing both our top line growth and bottom line efficiency.
Speaker Change: We're staying focused on driving profitable growth through discipline execution in our core and delivering on our multi-product strategy.
Speaker Change: AI is transforming business communications in profound ways and RingCentral is committed to leading this change, helping businesses communicate more effectively, work smarter and deliver exceptional customer outcomes.
Who's that? Let me turn it over to Abbey. [inaudible]
Abhi: Thank you, Kira, with kicked off the year with a solid overall performance and maintain a very strong financial profile.
Abhi: I am pleased with our execution across all key financial metrics, revenues, operating margin, free cash flow per share, debt pay down, and reduction in stock based compensation in absolute dollars and as a percent of revenue.
Abhi: Let me first provide highlights from the first quarter and then discuss our outlook.
Abhi: Total revenue of $612 million, up 5% year over year, was at the high end of guidance, subscription
Abhi: ARR increased to 2.53 billion dollars, up 7% over year, driven by our AI-powered multi-product portfolio. Large steel activity was strong, as million dollar plus TCV deals were up over year, with the strong RingCX and RingCent's attach.
Abhi: New Products continue to show strong traction and we are on track to deliver over $100 million in ARR from new products by the end of 2025.
Abhi: Now moving to profitability, I will be referring to non-GAAP results unless otherwise noted.
Subscription, gross margin continues to be strong, above 80%
Abhi: Appearing margin expanded 110 basis points year over year to about 22%, which was above our guidance.
Abhi: This was driven by realizing efficiencies, especially in sales and marketing. We are committed to further driving operational efficiencies resulting in margin expansion while enabling us to invest in growth opportunities.
Abhi: Notably, we delivered GAP operating profitability for the third consecutive quarter, as we reduced stock-based compensation as a percent of revenue by almost 250 basis points every year due to discipline new grand activity, in addition to improvement in operating margin.
Abhi: Frigashlo Margin was 21.3% up 820 basis points versus last year.
Abhi: Moving to buybacks, during the quarter we also repurchased approximately $1.8 million shares for $50 million. We have $218 million available in our buyback authorization as of March and
Abhi: As a result of our discipline capital allocation policy over the last year, our diluted share count declined 3% versus last year to 92.9 million.
Abhi: Moving to our balance sheet, we paid down 161 million dollars of convertible debt during the quarter.
Abhi: The reduction in debt combined with 9% growth in EBITDA to 155 billion dollars drove our net debt leverage ratio to 2x on 2.2x on a trailing 12 month basis.
Abhi: We expect to generate over $500 million of free cash flow in 2025.
Abhi: A strong free cash flow generation combined with cash on hand and available long-term credit facilities provide us with sufficient liquidity to address our debt obligations both in the near and long term. We remain committed to further reducing our growth rate level to below $1 billion by the end of 2026.
We performed well in Q1 and our business remains strong.
Abhi: Macro, however, remains uncertain. We are therefore taking a prudent approach and guiding for the remainder of 2025.
Total Revenue Goat Ring, 4-6% Over Here
Abhi: Non-depth operating margin of approximately 22.5%, up approximately 150 basis points over here.
Share-based compensation range of $300 to $310 million [inaudible]
Abhi: Freak Ashlow of approximately 500 to 510 million dollars, growth of approximately 25% at the midpoint
Abhi: For the second quarter, we expect subscriptions revenue range of $594 to $600 million representing
Abhi: Total revenue of $614 to $620 million, representing EOE a growth of 4% to 5%.
Abhi: In summary, we are executing from a position of strength in a large and expanding market.
Abhi: Business benefits from a sticky revenue base and a growing portfolio of mission-curricular products
Abhi: We continue to deliver profitable growth supported by robust cash flows and are maintaining
Abhi: We are actively managing dilution and further strengthening our balance sheet by reducing dead. We are confident that we are well positioned to deliver sustained, shareholder value. With that, let's open up the call to questions.
Speaker Change: and many more. I hope you enjoyed this video. If you did, please give it a thumbs up and subscribe to my channel. I'll see you in the next video.
Thank you.
Well, and I'll begin the question and answer session.
Speaker Change: To ask a question, you may first start with one on your call from Kipad.
Speaker Change: If you're using a speaker phone, we ask you to please pick up your hands up before pressing the keys.
Speaker Change: If at any time your question has been addressed, do you like to a draw your question? Please press star them too. And as a reminder, we do ask the you please let me yourself to one question and a simple follow up.
Speaker Change: At this time, we'll pause for just a moment to assemble a roster.
Speaker Change: And today's first question comes from Meta Marshall with Morgan Stanley . Please go ahead.
Metta Marshall: Great. Thanks. And appreciate all of the detail up front. Just wanted to get a sense, you know, that was very helpful in terms of kind of what the current makeup of the business is. You know, as you look forward, is there kind of a target split that you think of that should be the makeup of the business just from the the various customer types?
Metta Marshall: And then, you know, second question, just on kind of where or what part of the customer types or verticals or, you know, customer sizes are you seeing kind of the greatest success with RingCent? That would be helpful. Thanks.
Metta Marshall: As far as ideas split, we would like to grow all cohorts to the maximum degree possible.
Metta Marshall: As noted, smaller businesses, you know, that's 40 percent of US GDP. So, you know, one with a little bit of a state that we should just track how businesses in general distribute themselves.
Thank you. Thank you. Thank you.
Metta Marshall: As I noted, we are seeing better traction with smaller businesses at this point.
Metta Marshall: and it's got to do with a better product. [inaudible]
very different competitive environment.
The end
Metta Marshall: And we are still leading with voice. We clearly have other modalities as well. We have chat, we have meetings, SMS, facts, all of that. But voice is still the predominant reason where people will be choosing us. And voice is critically important in the number of...
Metta Marshall: Very important verticals, which is getting to the second part of your question. And you know, it's now that it's health care, it's financial services, it's retail, you know.
Metta Marshall: As we move to larger businesses, you start adding things like manufacturing, travel, you know, pervades all statements. So...
Metta Marshall: I think one takeaway, I really like people to take, is the fact that we excel and dominate whenever there is
Metta Marshall: Need for enterprise grade and enterprise grade means robust, reliable, secure, fully featured state of the art. Whenever there is a need for that for voice communications, that's where you're in touch with.
Metta Marshall: and also want to point out that the market is still largely under penetrated. There is still a lot of on-prem left.
Metta Marshall: And especially in the enterprise, we're still seeing quite a few on-prem-to-cloud conversions. On-prem presence is still well over 50% throughout. Okay? And so that remains a good opportunity for us.
Metta Marshall: And finally, we also broke out additional data on our GSP practice.
Metta Marshall: And that is really one of the probably most underappreciated aspects of our business. The fact that we have this very different changes and frankly very amazing set of partnerships where we have a great name there.
Metta Marshall: We, you know, the old talk to each other, we have a good number of positive preferences.
to the service that we provide.
Metta Marshall: and it really allows us to reach wide and deep. They have international presence, for example, with Vodafone, with British Telecom.
Metta Marshall: with Deutsche Telekom, you know that we simply don't have and it's a very efficient route to market for us but even here domestically you know they have this captive user basis.
Metta Marshall: And, you know, a few years ago, most of them chose broadsoft since acquired by Cisco, but that product is growing long in the tools. It's not cloud, it's not keeping up with the time.
Metta Marshall: and we're having a really good run at being able to convert those seeds.
from Legacy to the Cloud, which is the RingCentral Cloud.
So you know, it is growing in strong double digits.
It's quite profitable for us.
Metta Marshall: They good ROI economics as noted, and we keep on signing new partners. Cox was the latest along with Hawaiian.com.
Metta Marshall: and you know, we're optimistic there will be more to come.
Great, thanks.
Cash Rangin: Thank you, and our next question for today comes from Kasthuri Rangan with Goldman Sachs. Let's go ahead.
Cash Rangin: Hi, thank you so much of Latin team. So glad that just watching the AI project create the innovation that the company is put in place.
Speaker Change: Do how much pricing power does the company have? Because Afro, as Kira talked about, there's a lot of cost savings that your customers are getting today. But they are that just was not possible with the RingCentral 1.0.
Speaker Change: Pre-AI, so how much of a ceiling do you have to be able to raise prices and get paid for the value that you're delivering at the time? One for Abhey.
Speaker Change: and our growth rate, the second outpace subscription revenue and revenue growth rate. Could this be a leading indicator or should we not be misled by this turn? Thank you so much.
Speaker Change: Well, no, it's absolutely leading indicator if you're talking about the impact that AI is going to have on our revenues and our portfolio. And look at how high I think of this. So, when we were leading the transformation, we literally were one of the first cloud companies, born in the cloud companies, and you know, emerges as one of the leaders and winners.
Speaker Change: in the on-prem to cloud. But if you think about it, what were we doing? We and the others like us who were leading in this transformation. We were replacing in our case hardware by a cloud-based
Speaker Change: And some other people, for example, Salesforce.com software that used to be their slogan as you will know.
Speaker Change: Okay, and there were multiple bonuses to be associated with that, but in the end you were replacing
It so happens that if you look at pre
Cloud,
Speaker Change: Software Spend as a Gold, and now you look at the Cloud Spend as a Gold. The Cloud Spend is now greater than...
You know, pre-cloud overall spend once.
Speaker Change: Okay, but now you look at what AI is doing is that taking this into a completely different dimension to where we're no longer replacing IT with IT, we're replacing human labor, we're replacing HR with IT.
Speaker Change: You know two, three, four, maybe five thousand dollar per month agent, human agent with a software package that cost you
Speaker Change: You know, tens of dollars or maybe low hundreds of dollars per month, that's an easy trade.
Speaker Change: So, as this technology matures, we are absolutely expected to have a very positive impact on our pools, which of course will translate into overall profitability and growth.
Speaker Change: that Kira and I mentioned in a prepared remarks today. So, of course, RingCentral Inc. itself, BUDD.
RingCent, AR, AI Quality Management, all of these are…
Speaker Change: But on the other hand it took us weeks to get to a thousand accounts
Speaker Change: You know, so we are extremely, extremely happy with this and, you know, there's quite a bit more to come we think.
Speaker Change: Yeah, and Kasthuri, your question about ARR? Thanks for pointing it out. You'll be excited about the 7% growth we posted on ARR and a lot of the positive momentum that I've let talk to one of the calls.
Speaker Change: is helping and as you can see our full year guide is for 6% subscription growth. So ARR is a positive indicator for our students think through our revenue guide as you are thinking about it.
Thank you so much.
Speaker Change: Thank you and our next question today comes from Samad Samana with Jeffries. Please go ahead.
Speaker Change: Hi, this is Billy Fitzsimmons on for Samad. I want to dig a little deeper on macro and the potential impacts early in the second quarter. Some other companies discerning cycles called out lengthening sales cycles, or deals pushing in the April post, tariff announcements, and so
Speaker Change: How if deals and customer spending tracked in April and in quarter to date? Have they lengthened? Have have
Speaker Change: sales cycles and deals lengthened, any differences in deal activity in early April or
Speaker Change: What are some of your third-party hardware partners saying about the tariff impacts and do some of the macro uncertainty potentially make it easier to sell some of your AI tools given the productivity gains involved? What are you talking about?
Hi Samantha, this is Kira, so I'll just...
Speaker Change: Start with the AI answering that. I think selling AI into businesses today is almost like it is becoming a must because it is looking for cost savings, macro or not.
Speaker Change: Phones really still make up their relatively small components of what we sell and haven't seen that either, but we're all watching the news.
Speaker Change: and Joseph Sales, I think that was your second point. I think again business as usual as of now.
Thank you. Thank you. Thank you.
Peter Levine: Thank you, apologies for the interrupt, Senator. Our next question today comes from Peter Levine at Evercore ISI. Please go ahead.
Peter Levine: Great. Thank you for, I think my question here. Maybe just one, I'm a guidance.
Peter Levine: You know, you kept the full year, you know, flat from the guy that you gave us in Q4, so let me just talk about, you know, what are your expectations then into the second half? Sounds like you're being a little bit more prudent here to Q, but they'd be talking about how you stress tested, you know, the second half and your kind of expectations going bad.
Yeah, I'll try to the high level.
Peter Levine: Yeah, look, I mean, we've reiterated the guide for the year. It's how I was thinking of this.
Peter Levine: We had a pretty strong Q1, you know, we beaten all parameters.
Peter Levine: But, as Kira said, we are not necessarily seeing direct impact, but we also don't know what we don't know.
Peter Levine: So for this reason, and really only for this reason is we held the guide at this point and you know we'll be watching what's happening with tariffs, what's happening with interest rates and all of that.
Peter Levine: and, you know, nothing on the horizon of this point suggests that we would be directly impacted.
Peter Levine: which is why it just makes it a little bit harder to project out.
Peter Levine: But I can tell you that anything under our power and the direction the company is going, look we are saving people time and money and making their businesses better.
Peter Levine: With AI, we're simply connecting more phone calls and more interactions and we're letting more transactions go through which in the end result in better outcomes for our customers. So that's all you can ask for.
Peter Levine: So, for Zonkers, our customers are in business, we think we'll be fine as well.
Speaker Change: And at the very same point, are you at all maybe perhaps changing your go-to-market in this environment meaning the consolidated approach given that you guys now have the full suite of UC assets?
Speaker Change: You know, is it, you know, is it more prudent for you all to kind of sell that platform? Obviously, there's, there's cost saving. There's one vendor. Maybe walk us through. Are there any tweets to your go to market that you're taking advantage? If you're taking advantage of the macro, is any of that feeding into your go to market today? No.
Thank you. Thank you.
Speaker Change: Excellent question. Well, here is one case in point that I'll just double click on. So, with our new product, our GSP partners, most of them are taking many if not all of the new products.
Speaker Change: Okay, and all the time we expect for all of them to take all of the new products.
Speaker Change: So what does this mean? It means that the instrument is appetite?
Okay, and there are these brands with massive following links.
that needs product.
and we're the providers there.
So that was J.S.P's.
Speaker Change: We're seeing very similar with channel partners. I can tell you that we're never here. Here's one thing we're never here is, okay, you know, we like your ES product, you're the leader in PBS and the cloud, but you know, what your AI voice agents were not interested, you know, we've never heard that. And the reason is...
Whatever we're doing with AI.
Speaker Change: You know, exactly the right solution or solutions plural, but using the very latest in tech, in Ayyad advances and of course that thing you know is you know improving geometrically in the song right.
Speaker Change: So, the net result is we are seeing major savings internally within the company, Kira addressed some of those.
Speaker Change: I think if you look at our corporate deck, there are earnings deck, there are you know, few more details there maybe. So, we're thinking for ourselves and we're able to pass similar to our customers.
[inaudible]
Speaker Change: Thank you, and our next welcome to the A-Cons from Brian Peterson or Rayman James. Please go ahead.
Speaker Change: Hi, this is Jessica Oliver-Bioff, so following up a little bit on a previous question, these new products you have have really impressive customer growth. I was wondering if you talk a little bit more about the
Speaker Change: and Bedded Expansion. Opportunity within the installed base, specifically, how much expansion potential do you see within the customer cohorts and how you're thinking about adoption, if they've already adapted adoption solution, but you're possibly going for more of these solutions. Thanks.
Yeah, look, so, uh...
Speaker Change: Okay, especially since for now, and this is not going to be this way forever, I can tell, I can tell you but for now we are mostly targeting our own base with air, we are mostly targeting our own base [inaudible]
with RingCentral, with Quality Management, and even with RingCx, [inaudible]
Speaker Change: We are, you know, getting more and more traction as an independent C-Cath provider as people are getting more familiar, but it's way far easier for us to go into after our own base, which is 400,000 accounts strong.
Speaker Change: So, you know, definitely in this mansion and an absolute opportunity with all of us.
Speaker Change: But thanks, and also, I'm curious, so you held the outlook, but is there anything you have embedded from a geographic perspective as an international opportunities, and is there anything outside of the U.S. they are really excited about?
We're excited about...
Speaker Change: Look, we're excited about the way the things are going, we're excited about AI and the opportunities it creates. But look, 90% of our business is US and Canada, so...
Speaker Change: And you know, these tend to be the early adopter markets [inaudible]
Speaker Change: at least for us anyway, so we see more direction here. Our play with international, a lot of it will have to do with GSBs. It is just a much more efficient way for us to go to market.
as well as Building Out, Throser Building Out, International Channel Presents
Speaker Change: So again, with the guide, everything that we knew to put in, we did a quarter go, that's how the guide was put together and we just haven't seen any dislocations at this point.
Speaker Change: Thank you, and our next question today comes from Kasthuri Trebnick with Rosenblatt. Please go ahead.
Speaker Change: Oh, thank you for taking the questions. Yeah, mine has to do with some of your partnerships. You know nice was a really nice partnership for up market and then how are you looking at that partnership going forward. Thank you
Yeah.
Look, it wasn't even a nice partnership.
Speaker Change: Put it together and it's a product that continues to be absolutely unique in the market, okay?
Speaker Change: The way that nice business is, you know, I don't want to speak for them, but it is generally known as a very feature rich robust, you know, solution for, you know, mission critical counter centers.
Speaker Change: We have similar perception enough that if you want your voice to work and to have all of the features
Speaker Change: Even last water, you know, we saw upsell deals, we saw some new deals, and you know, we're optimistic it will continue. Grant, absolutely, at this point, the Resurring CX.
Speaker Change: RingCX, it's a different type of a product, it's much lighter weight, it does not have all of the features, it's priced quite a bit differently, so you know, I've been saying this for a long time, I think there is absolutely an opportunity to have both of these in the market.
Speaker Change: and in a large degree we think that they can be complementary to each other.
Speaker Change: Okay, thank you, and the follow-on is with RingC X and a bakeoff, who do you usually come up against most?
Frequently,
Speaker Change: Yeah, Kira, you want to take that? You know, it's a list. Yeah, it's a list. I think there's no...
Kira: One that comes out, it's a sort of a standard list of people who play in the same segment that were we itself was in seats and so was that naming specific competitors, you know who they are.
[inaudible]
Yeah, I would say it's a bunch of smaller companies.
Kira: We usually don't come up with this against call it MQ leaders.
Kira: You know, we come up, we come against people who are newer to the space, and you can say, okay, they're newer to the space as you are, but many of them are minicfully smaller, minicfully less known, and of course, don't have our history, don't have our reach, don't have our GTM, you know, breadth of our GTM motions, don't have our...
Kira: Wong White Coverage, so that's generally how we win. And you know, just verification, I mean, we're known as a good solid secure product.
Kira: and compare to where we are, okay? How long you took us? And many have not, you know, many have not even reached 1000, you know, and we did it in basically, you know, here.
So, we shall really go about adoption of this product.
Speaker Change: Thank you, and our next question comes from Michael Turrin at Wells Fargo. Please go ahead.
Speaker Change: Hi, this is Ronit Shah on per Michael. Just a question on the RingCentral air product. I just wanted to know how initial customer feedback has been since the launch and how much is embedded into your $100 million new product ARR target for the end of the year.
[inaudible]
Hi Michael.
Speaker Change: So, that's the feedback and adoption speaks to that, in terms of baking it into the, called the NPI, new products, we're not disclosing individual products in there, I'll just suffice to say that that continues to be led by LCX.
[inaudible]
Speaker Change: about it helpful. And just a follow up here, are you seeing any increased discounting from competitors in the current macro environment? And if so, what's your pricing strategy been?
and many more. Thank you. Thank you.
Price has stabilized. I don't think that we're seeing increased discounts by competitors. There was a time when there was quite a bit of that. And right now it's, you know, we're premium price products for premium quality and reliability and competitors price accordingly.
and others. Thank you.
Speaker Change: Thank you. This concludes today's question and answer session and today's conference call. We thank you all for joining today's presentation. You may not have select your lines and have a wonderful day.
Speaker Change: [music].