RingCentral, Inc.

Good afternoon, and welcome to the RingCentral first quarter 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Will Wong, Head of Investor Relations. Please go ahead.

Thank you. Good afternoon, and welcome to RingCentral's first quarter 2022 earnings conference call. I'm Will Wong, RingCentral's Head of Investor Relations. Joining me today are Vlad Shmunis, Founder, Chairman, and CEO, Mo Kadabay, President and Chief Operating Officer, and Vaibhav Agarwal, Interim Chief Financial Officer. Our format today will include prepared remarks by Vlad, Mo, and Vaibhav, followed by Q&A. We also have a slide presentation available on our Investor Relations website that will coincide with today's call, which you can find under the Financial Results section at ir.ringcentral.com. Some of our discussions and responses to your questions will contain forward-looking statements, including our second quarter and full year 2022 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 findings with the Securities and Exchange Commission and is incorporated by reference into today's discussion. Brent Central 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's non-GAAP results is provided with our earnings release and in the slide deck. Please visit our Investor Relations website 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 of the non-gap financial guidance to the corresponding gap measure is not available as discussed in detail in the slide deck posted on our Investor Relations website. With that, I'll turn the call over to Vlad.

Thanks, Will. Good afternoon, everyone, and thank you for joining our first quarter earnings conference call. I want to start today's call by first acknowledging the horrific event taking place in Ukraine. We're shocked to see the dreadful challenges facing the local people as the situation unfolds. As a company, we are proud to support local relief and humanitarian efforts. We are matching employee donations up to $1 million, and we've already matched $850,000 to date. From a business perspective, we're enabling free phone calls to Ukraine for all customers using our RingCentral services. As you may know, this unspeakable humanitarian crisis is very close to my heart. We hope for a rapid end to this shocking disaster and we send our thoughts and prayers to the people affected. With that, I'd like to shift to our people and our business. First, I want to give a warm welcome to Sonali Parekh as our new Chief Financial Officer. Sonali will be starting full-time later this month. She joins us from HP Enterprise, where she was CFO of HPE's communications technology group, as well as head of corporate development and investor relations for the entire company. Donna Lee is a seasoned executive and brings over 25 years of experience in the global technology, media, and telecommunications industries. including senior roles at Goldman Sachs, Barclays, Jeffries, and others. I'm also delighted to share that we're appointing our Chief Operating Officer, Mo Katibe, to the position of President and Chief Operating Officer. Mo has had a meaningful impact since he joined Drink Central, including driving our strong Q1 performance. Mo brings outstanding executive leadership and a customer and people first approach. In his new role, Mo's responsibilities will be expanded to include human resources and corporate strategy alongside product, sales, marketing, and customer experience. I would also like to sincerely thank Vaibhav Agarwal for his valuable contributions to our company as interim CFO. His selfless dedication and outstanding leadership ensured that we did not miss a beat during the transition period. Vaibhav will partner with Sonali as we scale the company in the next stage of growth. Now, turning to our Q1 results. we had a strong start to the year. We delivered solid revenue growth and significantly expanded both operating and free cash flow margins, clearly demonstrating the inherent benefits of our business model at scale. Top-line growth was very robust and we are well on track to achieve $2 billion in revenue this year. In Q1, Total revenue grew 33% to $468 million, above the high end of our guidance of $455 to $459 million. Subscriptions revenue increased 35% year over year to $440 million, up from 34% last year. Total exit ARR was $1.9 billion, up 35% year over year. Mid-market and enterprise ARR, which includes customers generating $25,000 or more in ARR, increased 46% year over year to over $1 billion. Notably, operating margins expanded 120 basis points to 10.4%, significantly above our guidance of 9.2%. This is a clear testament to the inherent profitability of our business, even as we continue to grow rapidly. We had a good Q1. So, why are we winning? Let me give you a tip on the secret of our success. It's built on three factors. Trust, innovation, and partnerships, which comprise our core corporate values. First, trust. I am proud to announce that we have now achieved 15 consecutive quarters of five-nines uptime, which is a standard that most of our competitors can only aspire to. And underpinning everything we do is our dedication to security and data privacy. Simply put, We treat our customers' data like our own. We also embed state-of-the-art capabilities such as end-to-end encryption into our portfolio. Our innovation strategy is focused on the customer. We invest heavily into making our products easy to set up, easy to use, and easy to manage for businesses and partners alike, which is a key competitive advantage. As to new capabilities, in Q1, we introduced RingCentral Webinar Beta, arguably the simplest, seamlessly integrated webinar product available in the market today. Also new is our AI-based meetings, insights, and summaries, a category-defining feature that helps people catch up on meetings with short-term summaries, video highlights, and hot-linked keywords. Now on the partnerships. We're fortunate to count names such as AT&T, Avaya, BT, Deutsche Telekom, Mitel, Verizon, Vodafone, and many others as part of our valued partners. And in Q1, we also added Frontier with more to come. Our partnerships are accretive to our growth and profitability. Mo and Beboff will go deeper on this. Looking forward, we see four global megatrends that give us confidence in the long-term prospects for our business. These are, one, the semantic of hybrid work in the post-COVID era, which in turn reinforces the need for cloud-based communications platforms. Two, ongoing adoption of mobility by businesses worldwide that drives the need for solutions that enable work in any mode on any device worldwide. from anywhere. Three, Microsoft Teams in the enterprise, which creates a meaningful opportunity for well-integrated enterprise-grade UCaaS and CCaaS solutions. And four, continued preference from CIOs to evolve to cloud-based unified communications and contact center as an integrated solution from a single provider. Mo will expand on how each of these megatrends are a positive long-term growth driver for RingCentral. We have now delivered 35 straight quarters of strong performance, driven by focused execution, and we're excited to start 2022 with solid momentum. With two seasoned leaders in Mo and Sonali now at the helm, we have the right management team and skill set to drive the next stage of our growth. The market opportunity ahead of us is large, and our innovation and go-to-market strengths are a key differentiator. Looking ahead, we're firmly focused on durable revenue growth, sustainable profitability, and stronger cash flows. With our leadership position in UCAS, unique partnerships, and most importantly, our great people, I am very optimistic about the future for RingCentral. With that, let me hand the call over to our President and Chief Operating Officer, Mo Kative.