RingCentral, Inc. Q3 FY2024 earnings call

Introduction - Introduced Abhey Lamba as new Chief Financial Officer, who joins from Amazon Web Services. - Thanked Vaibhav Agarwal for his contributions during transition. ### Strategic Priorities - Solidifying UCaaS leadership: Named a Leader in Gartner's 2024 Magic Quadrant for UCaaS, strong voice usage, and launched RingCentral AI Assistant included at no additional cost for all RingEX customers. - Expanding TAM with new AI-powered products: RingCX is a modern AI-powered omnichannel CCaaS platform with over 500 customers, RingSense has over 1,200 customers, and RingCentral Events added over 100 new customers. - Broadening reach: Strong GSP business growth, partnerships like with AT&T, Optus, Vodafone, etc., and migrated internal contact center to RingCX.

In the third quarter, subscription revenue was $583 million, up 10% year-over-year, solidly above the high end of the guidance range. ARR was $2.48 billion, up 9% year-over-year on a reported and constant currency basis. New products showed strong performance: RingCX had over 500 customers, up over 45% sequentially, with a $1 million-plus TCV deal; RingSense had over 1,200 customers, up over 45% sequentially; RingCentral Events added over 100 new customers during the quarter.

Q4 2021 - Expected subscription revenue growth of 7% to 8% and total revenue growth of 7%, non-GAAP operating margin of approximately 21% and non-GAAP EPS of $0.96 to $0.97. ### Full Year 2021 - Raised subscription revenue outlook to $2.295 billion to $2.297 billion (9% growth), total revenue to $2.397 billion to $2.399 billion (9% growth). - Expected non-GAAP operating margin 21%, non-GAAP EPS $3.69, free cash flow $400 million to $405 million.

Q: How to evaluate AI strategy and near-term impact on top-line growth?

A: AI is transformative with real demand and traction. RingSense and other AI products are monetizing, pulling up ARPU with high attach rates. Early but everything growing day over day.

Q: Trends in CCaaS and positioning of RingCX with Verint partnership?

A: RingCX started as SMB product but handles enterprise use cases, migrated internal contact center to RingCX seamlessly. RingCX is the go-forward solution, combining UC and CCaaS with owner economics.

Q: Gross margin downtick explanation?

A: Slight sequential headwind due to ramping up new products like RingCX, investing in infrastructure as they scale.

Q: 2025 revenue guidance and RingCX progress?

A: Not ready to guide for 2025, laser-focused on Q4. RingCX doing well but not yet at peak RingCC levels, but optimistic for future growth.

Q: Microsoft Teams opportunities and impact on RingCX?

A: Enterprise growth still in double-digits, Teams is a potential channel. RingCX and Teams integration not a needle-mover yet but expected to be in future.

Q: Drivers of ARPU expansion and sales/marketing leverage?

A: Cross-sell of new products like RingCX, AI-based products, and delivering good value with bundled features. Sales and marketing expense as % of revenue declined 200 basis points, focusing on cost efficiency.

Q: Macro dynamics and enterprise vs SMB demand?

A: Enterprise ARR growing in double-digits, SMB showing early stabilization. NRR above 99%, new seats upsells an opportunity.

Q: Relationship with AWS progress?

A: Relationship is live and healthy, complementary technology, but specific revenue not broken out.