RingCentral, Inc.

Greetings and welcome to the RingCentral first quarter 2020 earnings call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Ryan Goodman, Head of Investor Relations for RingCentral. Thank you. You may begin.

Thank you. Good afternoon and welcome to RingCentral's first quarter 2020 earnings conference call. I am Ryan Goodman, RingCentral's head of investor relations. Joining me today are Vlad Shmunis, founder, chairman, and CEO, Anand S.waran, president and chief operating officer, and Mitesh Dhruv, chief financial officer. Our format today will include prepared remarks by Vlad, Anand, and Mitesh, followed by Q&A. Some of our discussions and responses to your questions will contain forward-looking statements, including our second quarter and full year 2020 financial outlook and our assumptions underlying that outlook. These statements are subject to risks and uncertainties. Actual results may differ materially from our forward-looking statements. A discussion of the risks and uncertainties related to our business is contained in our filings with the Securities and Exchange Commission and is incorporated by reference into today's discussion. In particular, our business is currently being impacted by the COVID-19 pandemic. The extent of its continued impact on our business will depend on several factors, including the severity, duration, and extent of the pandemic, as well as actions taken by governments, businesses, and consumers in response to the pandemic, all of which continue to evolve and remain uncertain at this time. RingCentral assumes no obligation and does not intend to update or comment on forward-looking statements made on this call. Unless otherwise indicated, all measures that follow are non-GAAP with year-over-year comparisons. A reconciliation of all GAAP to non-GAAP results is provided with our earnings release and in the slide deck. I encourage you to visit our investor relations website at ir.ringcentral.com to access our earnings release, slide deck, our gap to non-gap reconciliations, our periodic SEC reports, a webcast replay of today's call and to learn more about RingCentral. For certain forward-looking guidance, a reconciliation Good afternoon and thank you for joining our first quarter earnings conference call. Before we begin, I'd like to first take a brief moment to address the current macro environment. We're living

In an unprecedented time of global uncertainty and disruption, our priority at Incentral is the health and safety of our workforce, and we acted quickly in transitioning to a work-from-home model. As a leader in unified communications as a service, we believe we have a responsibility to help our communities maintain business continuity. To that end, we began offering Incentral office, for free, K-12 educators, healthcare providers, nonprofits, government entities, and news media organizations. We also announced a free offer for our cloud contact center solution to those affected by COVID-19 related challenges. We're providing our cloud communications and collaboration solutions Two organizations that are working globally and tirelessly to mitigate the impact of this crisis. This offer has been well received, and we now have over 4,000 such organizations now using RingCentral. We wish our customers, partners, employees, and shareholders good health and safety in days ahead. Now on to Q1. We delivered a strong first quarter. with continued strength in mid-market enterprise and channel. We also recently made several key announcements. First, we released RingCentral Video, our own video meeting solution, completing RingCentral's differentiated message video phone, or what we refer to as MVP platform. We announced general availability of Avaya Cloud Office by RingCentral, delivering on the promise made six months prior. Third, yesterday we announced a new unified desktop app, an entirely reimagined user experience for enterprise communication that is available both on Windows PCs and Macs. Key differentiators for our new desktop apps include close integration and real-time switching between message, video, and phone communications, as well as seamless switching of meetings between devices. And today, we're happy to announce that Phil Surgeon has joined us as the Chief Revenue Officer, reporting to our President and COO, Anand Aswaram. Most recently, was the corporate vice president for the U.S. enterprise business at Microsoft. We'll expand on these key announcements later. As to our financial performance, revenue and non-GAAP EPS exceeded our guidance. Key drivers continue to be mid-market, enterprise, and channel. We continue to see strong contributions from our vertical market initiatives focused on education, financial services, and healthcare. These initiatives yielded good results, including an over 15,000-seat win with Cornell University, an over 8,000-seat win with a Fortune 500 insurance provider, and multiple accelerated healthcare wins. Key metrics for Q1 were solid across the board. Total revenue grew to $268 million. This is a 33% increase year-over-year and is above the high end of our guidance range. Total annual recurring revenue, or ARR, surpassed $1 billion for the first time. Mid-market and enterprise continues to be a key driver of our performance. We define mid-market and enterprise as and more. This grew 52% year-over-year to a $524 million business. Enterprise defined as customers with $100,000 or more in ARR grew 59% year-over-year to $318 million. Channel ARR grew 62% year-over-year to Looking forward, in this challenging macro environment, companies are facing the reality that legacy on-premise voice-only systems can no longer meet modern work-from-anywhere requirements. We believe unified communication and collaboration cloud solutions are key for productive customer-partner and internal interactions. We believe RingCentral is uniquely positioned to meet this demand. We have a differentiated, enterprise-proven, global, scalable, and secure unified message video phone or MVP platform. In particular, RingCentral provides cloud-based, enterprise-class global PBS capabilities seamlessly integrated with comprehensive native team messaging and video meeting capabilities. With the recent introduction of native RingCentral video or RCV capability, RingCentral customers can now truly stay fully engaged and productive from anywhere, on any device, and in any mode. Very importantly, we can onboard new customers quickly and efficiently without ever having to go on-site, which is especially critical in the current environment. It has never been more clear that customers use RingCentral for a lot more than just lighting up their legacy desktop phone. As a matter of fact, we saw our app downloads increase over 180% in April versus February, with strong app usage metrics across all modes of communication. To that end, total messages posted in April are up 70% versus February. Total video minutes in April are up over 200% versus February. And total phone calls in-app in April are up over 150% versus February. The triple-digit growth in in-app voice in the last two months makes it abundantly clear that business voice is as important as ever. We've also been very pleased with the update of our new RCEVIDIA or RCEV capabilities. We're seeing rapid adoption of RCEV and now have over a thousand organizations using RCEV as their primary video meeting solution. And this number is growing very rapidly. We are also excited to see our strategic partners embrace RCEV in their UCAS offerings. These include AT&T with Office at Hand and Avaya with Avaya Cloud Office by RingCentral. Speaking of Avaya, as I mentioned, we launched Avaya Cloud Office by RingCentral or ACO on March 31st, delivering on the promise made nearly six months ago. At launch, Avaya had signed a number of leading master agents to sell ACO, including Janin, ScanSource, Avant Communications, Cynics, and Solaris. And today, they have onboarded over 1,700 channel partner agents. With only about one month since the launch, it's still early, but market reception is encouraging. COVID-19 has put an additional spotlight on the limitations of legacy on-premise communication systems. Longer term, we believe that work from anywhere and in particular work from home will continue to be a key requirement for businesses worldwide. Business communication solutions that enable work from anywhere are now more critical than ever. RingCentral has always been at the forefront of enabling people to work from anywhere, use any device and communicate in any mode. With this backdrop and given our recent progress with the differentiated MVP platform that solve a mission-critical need for many businesses, we're confident that in the long term, cloud will continue winning, and RingCentral will continue winning in the cloud. Now, for some additional color on Q1, I will turn the call over to our president and chief operating officer, Anand Aswaram.