RingCentral, Inc.

Hello, and welcome to the RingCentral Second 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 1 on a touch-tone phone. To withdraw your question, please press star, then two. Please limit yourself to one question. Please note, this event is being recorded. At this time, I would like to turn the conference over to Will Wong, VP of Investor Relations. Please go ahead.

Thank you. Good afternoon and welcome to RingCentral's second quarter 2022 earnings conference call. I'm Will Wong, RingCentral's Vice President of Investor Relations. Joining me today are Vlad Shmunis, Founder, Chairman, and CEO, Mo Kadaba, President and Chief Operating Officer, and Sona Lee Parrick, Chief Financial Officer. Our format today will include prepared remarks by Vlad, Mo, and Sona Lee, 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 or responses to your questions will contain forward-looking statements, including our third 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. The 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. 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. Please visit our investor relations website to access our earnings release, slide deck, our GAAP to non-GAAP 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-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. With that, I'll turn the call over to Vlad.

Thanks, Will. Good afternoon, everyone, and thank you for joining our second quarter earnings conference call. While we're not immune from the current macro environment, we delivered a strong Q2. Let me start by giving you five fun facts. One, we are a $2 billion ARR company. Two, Contact Center is now over a quarter billion of ARR and is a key growth driver for us. Three, we are now at more than 5 million paid seats in our base. Four, we matched our quarterly record of $1 million plus TCV deals, bringing the total to almost 500. And five, we delivered a record operating margin in the quarter of 11.3%, up 110 basis points year over year. These results demonstrate RingCentra's leadership position in UCAS, driven by our product innovations and unique go-to-market strategies. We have been able to achieve these milestones through consistent execution. Q2 was no exception. Sonali, who I'd like to welcome to her first earnings call as RingCentral's CFO, will share with you more details about our financial results shortly. Let me first give you the highlights. Subscription revenue grew 32% year-over-year. and 33% on a constant currency basis. Total revenue grew 28% year over year and 30% on a constant currency basis. Both were above the high end of our guidance, even taking into account the stronger dollar. Operating margins of 11.3% were a quarterly record and well above our guidance. with three cash flow margins expanding 220 basis points year-over-year to 6%. Following solid margin expansion in Q1, these results give us confidence in our ability to deliver sustainable growth while expanding our margins. Our success to date is grounded in four global megatrends. These are 1. The cementing of hybrid work in the post-COVID era, which in turn reinforces the need for cloud-based communications platforms. Two, the ongoing adoption of mobility by businesses worldwide, which drives the need for solutions that enable work in any mode, on any device, from anywhere. Mobility is a friend, not a foe. Three, teams in the enterprise. which creates a meaningful opportunity for well-integrated, enterprise-grade UCaaS and CCaaS solutions. We believe Teams is a growth driver for RingCentral. Four, preference from CIOs to purchase an integrated cloud-based unified communications and contact center from a single provider, consistent with historical on-prem buying behaviors. Voice remains a key mode of communication for consumer-to-business interactions across a vast array of industries. These include healthcare, professional services such as insurance and finance, logistics, government and education, to name a few. We continue to win in all these verticals. Another fun fact. We recently engaged a third party to conduct a survey of key technology purchase decision makers. 85% of respondents consider voice to be very to extremely important to customer engagement. 80% noted that voice is very to extremely important to revenue generation. We continue to win because of our core corporate values, trust, innovation, and partnerships. First, trust. For our customers, this marks the 16th consecutive quarter of Five Nines Uptime, which is a key competitive differentiator. Our customers need to know with certainty that when their customers need to reach them or when they need to communicate with any of their stakeholders, the technology will work. Time and again, customers tell us that one of their top reasons for picking Green Central is our proven reliability. 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. And speaking of traffic, we are proud to announce that yesterday we released our 2021 impact report, which highlights our commitment to our customers, our people, our shareholders, and the communities we operate in. Second, innovation. RingCentral is committed to leading with innovation, creating features and functionality that customers want and need. To highlight a few of our significant innovations in Q2, we launched new enhancements with our Salesforce and Hotspot integrations, making it easier for our customers to reach and engage with their prospects and customers. For large international deployments, we introduced a smart dial plan and a new bulk number management capability. These innovative features make it easier for international enterprises to connect their employees and customers across the globe. We have also enhanced RingCentral Rooms with new seamless integrations with hardware partners like Abacor, Jabra, and EPOS. This allows customers to enhance their ability to work from anywhere, whether in the office or remotely. And last but not least, partnerships. We had a good quarter with our strategic partners led by Mitel and Avaya. On that note, we would like to welcome Avaya's new CEO and reiterate our commitment to this unique partnership that paved the way for the world's largest installed on-prem customer base to move to the world's leading UCaaS solution. Our unique global partnerships have contributed to our growth as customers transition from on-prem to the cloud, and we're still relatively early in this journey. Looking ahead, we're firmly focused on durable growth, improving profitability, and stronger free cash flows. We have the industry's leading UCaaS platform, and the talented management team in place to drive our continued success as we address the large, untapped opportunity still ahead of us. With that, let me hand the call over to our President and Chief Operating Officer, Mo Katibe. Thanks, Vlad.