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Operator
Good afternoon, and welcome to the RingCentral second quarter 2023 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, Vice President, Investor Relations.
Will Wong
Please go ahead. Thank you.
spk09
Good afternoon, and welcome to RingCentral's second quarter 2023 earnings conference call. Joining me today are Vlad Shmunis, founder, chairman, and CEO, Tarek Robiadi, incoming CEO, and Sonali Parekh, CFO. Our format today will include prepared remarks by Vlad, Tarek, and Senalee, 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 discussion and responses to your questions will contain forward-looking statements regarding the company's business operations, financial performance, and outlook. These statements are subject to risks and uncertainties, some of which are beyond our control and are not guarantees of future performance. Actual results may differ materially from our forward-looking statements, and we undertake no obligation to update these statements after this call. For a complete discussion of the risks and uncertainties related to our business, please refer to the information contained in our filings to the Securities and Exchange Commission, as well as today's earnings release. Unless otherwise indicated, all measures that follow are non-GAAP with year-over-year comparisons. Reconciliation of all GAAP to non-GAAP results is provided with our earnings release and in the slide deck. 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.
Vlad Shmunis
Good afternoon, and thank you for joining our second quarter earnings conference call. This has been a busy quarter for RingCentral. I know you've likely seen the exciting news that Tarek Rabiati has been appointed Director as RingCentral's next CEO, effective August 28th. I will be transitioning to Executive Chairman on that date. I'd like to extend a warm welcome to Tarek, and we'll talk more about this later on in this call. I also want to take a moment to say a few words about Mo Katiba, who will be leaving the company in the coming weeks to pursue other opportunities. Mo has played a pivotal role building out our team, evolving our product roadmap, expanding our partner ecosystem, shaping our winning culture, and driving meaningful efficiencies in the business. On behalf of myself, the board, and the entire team, we wish Mo all the best in his future endeavors. On the corporate development side, last week we announced the acquisition of the event and session product lines from Klopin. a leading provider of online audience engagement technology. Hopin Events allows users to easily set up complex virtual and hybrid events and fits well with our video strategy of delivering more personalized and engaging video meetings and event experiences for customers, all at a competitive price point. The technology from Hopin provides us with the complete video portfolio that now includes meetings, webinars, rooms, and virtual and hybrid events. I would like to welcome Hopin events and Hopin sessions talented teams to the RingCentral family. Now, let's turn to the quarter. This is my 40th earnings call as the CEO of RingCentral. On our first earnings call nearly 10 years ago, we reported $161 million in ARR. Today, this number stands at over $2.2 billion. Ten years is a long time, and I am proud to say we have not ever missed our financial guidance during this period. And today is no exception. Q2 was another solid quarter as we continued to execute against our plan of delivering sustainable, profitable growth and continued innovation. For the second quarter, total revenue grew 11%, above the high end of our guidance range, and ARR grew 12%. Operating profit margins increased 8 percentage points versus last year to 19.4%, another quarterly record and well above our outlook. This improvement demonstrates the leverage in our model and our disciplined approach to spending. The profit improvement also translated to another quarter of record-free cash flows. We're delivering this increased profitability while also continuing to invest in innovation, which is the lifeblood of our company. RingCentral was founded and grew on the complementary megatrends of connectivity, mobility, and cloud computing. RingCentral has been an early pioneer leveraging and contributing to all these important innovations. But now, there is a new megatrend emerging that may prove to be the most impactful of all, and that is conversation intelligence. RingCentral again expects to be the beneficiary of and a contributor to this major innovation. Conversation intelligence is highly relevant for business communications as it has the potential of enhancing employee productivity, improving customer service, and positively impacting business outcomes. We saw the potential of conversation intelligence several years ago. In December 2020, we acquired Deep Effects, a conversation intelligence company, which is now the foundation of our RingSense AI platform. In March of this year, we announced our first commercial product, RingSense for Sales. Since March, we have introduced significant new updates to RingSense for Sales. And earlier today, we announced two new products, RingSense for Phone and RingCX. our new native intelligent omnichannel contact center. A few words about these products. First, Ring Sense for Sales. We've been innovating at a fast pace. We have added many features to address customer feedback and improve our competitive positioning. Some of these enhancements include 10 integrations with leading third-party applications such as Salesforce, HubSpot, Microsoft Dynamics, Outlook Calendar, and Gmail Calendar. Deal scoring, which makes it easier for leaders to track pipeline health and see whether deals are progressing or are at risk. AI coaching, which helps sales agents improve interactions based on AI-analyzed customer sentiment and effectiveness of their pitch. And AI-driven win-loss analysis, which provides effective selling insights from conversations to improve win-loss rates. Second, Ring Sense for Phone. Leveraging conversation intelligence, Ring Sense for Phone enables organizations to apply AI to their voice conversations and leverage deep insights to boost productivity and collaborate more efficiently. A few key highlights include live transcription and closed captioning, and post-call summaries, insights, and sentiment analysis. RingCentral is hosting billions of minutes of voice traffic for many millions of users. RingSense for phones will allow them to be more effective on live calls as well as gain important insights via post-call analysis. Together, we believe it will lead to more efficient and productive conversations so as to drive improved business outcomes. Last but not least, RingCX. We have seen great success selling RingCentral MVP with RingCentral Contact Center that is powered by Nice InContact. With our CCaaS business that is now well in excess of $300 million of ARR, we have conclusively proven the case for UCaaS and CCaaS integration. Our joint solution with Knife-in-Contact is well differentiated as it integrates our respective Magic Quadrant leading products into a unified offering from a single provider. We continue to invest in this partnership and see significant continued potential. However, in listening to our customers, we've recognized an additional need for a native, intelligent contact center solution that would also be better suited to simpler use cases. That is why we are now introducing RingCX. RingCX is a powerful product that offers a native, integrated, 20-plus omnichannel experience for agents and administrators. It also includes AI-powered transcripts, summaries, and conversational insights, as well as workforce engagement management via an OEM partner integration. We believe RingCX will also be well-received because of its ease of use, ability to be quickly deployed, and its disruptive pricing. RingSense for Sales, RingSense for Phone, and RingCS are all currently in controlled availability, with expected general availability by the end of this year. It is early, but we are getting good initial feedback. In summary, It was another solid quarter highlighted by our strong innovation and operational execution. Now, back to the CEO succession. When I founded TwinCentral over two decades ago, we were a tiny, unfunded startup with an ambitious mission to improve how businesses around the world communicate internally and with their customers. From those humble beginnings, we have become a recognized leader in our space and one of the largest pure place SaaS companies in the world. September 2023 marked the 10th anniversary of our IPO. Given the strong position we are in today, operationally and financially, I believe this is the right time for a CEO succession and Tarek is the right person for the job. Tarek is a highly accomplished senior business leader. He has been a key member of our board since January which has given him an opportunity to get to know our business, our team, and our culture. I believe Tarek is in a unique position to hit the ground running on day one. As for myself, my plan is to stay actively engaged in the business, focusing on what I love most, strategy, innovation, and product development. I am incredibly proud of what we have accomplished together and am energized about the future. With this, I will now turn the call over to Tarek for some additional remarks.
Rabiati
Thank you, Vlad. I consider it a distinct privilege to be RingCentral's second-ever CEO. And on behalf of the board, let me express our immense gratitude for all you have built. You took this company from an idea to a multi-billion-dollar global enterprise serving approximately 6 million paying end-users and bringing together an expansive 15,000 partner ecosystem. I believe our potential is vast, and we have an enduring foundation on which to build our future. Vlad and I are aligned on RingCentral's core principles, people and customers first, ever-present drive for innovation, and a commitment to delivering results for all our stakeholders. These will continue to be cornerstones of our operations as we drive greater performance and profitability through the focused execution of our strategic initiatives. And importantly, on behalf of the Board and from me personally, I would like to thank Mo for the contributions that he has made during his tenure and wish him the best of luck. Now let me turn the call over to Sonali to go over the quarter in more detail.
Vlad
Thank you, Vlad. I'm very much looking forward to continuing our partnership in your new role. Tarek, I'm equally excited to be working with you again. I'd also like to thank Mo for his valued contributions and partnership and wish him the best of luck going forward. I'll now provide highlights from the second quarter and then discuss our business outlook for the third quarter and full year. Subscriptions revenue of $514 million was up 11% year over year and above our guidance range. ARR was 12% versus last year to $2.22 billion. Growth was driven by strength within key industry verticals where our products are mission critical, such as professional and financial services, healthcare, retail, and public sector. Additionally, Contact Center ARR was roughly $330 million, up from roughly $300 million at the end of 2022. The strong traction we are seeing in Contact Center is driven by continued demand from customers for a leading integrated UCAS plus CCAS solution. An example of the power of our platform is our recent competitive win with Republic Airways. one of the largest regional airlines in the U.S. The company's legacy tools required frequent maintenance. Their on-prem phone system also did not integrate well into their contact center, which Republic Airways relies on to quickly reach its pilots and flight attendants to provide them with any urgent scheduling changes. RingCentral's industry-leading 5.9s reliability for the past 20 quarters Advanced call routing and integrated cloud contact center will help Republic Airways solve these challenges, all while saving them money. Importantly, Republic Airways plans to utilize our new RingCentral for Teams 2.0 embedded app, which continues to see great traction in the marketplace. Moving to profitability, I'll be referring to non-GAAP results unless otherwise noted. Our subscription growth margin was 82%, consistent with last quarter. Overall ARPU was again above $30, as customers continued to value our differentiated offerings. Our solid ARPU supports our strong growth margin. Operating margin rose 800 basis points versus last year to 19.4%, another quarterly record. The increase was driven by operating leverage and efficiencies generated across the business, most notably in sales and marketing, which was down 490 basis points versus last year. Sales and marketing expense improved due to the efficacy of our marketing spend, as well as the headcount actions we took last November. As a reminder, those actions did not impact customer-facing salespeople. Our increasing profitability translated into record quarterly free cash flow of 81 million on an adjusted, unlevered basis. The improvements to our free cash flow continue to be driven by operating leverage, efficiency throughout the business, and improving our free cash flow conversion. Our robust free cash flow generation allows us to employ a dynamic capital allocation strategy that includes evaluating organic and inorganic investments, repurchasing shares, and addressing our convertible debt maturity. This quarter, we were able to execute against all three of these vectors. First, during the second quarter, we paid $427 million to repurchase $461 million in aggregate principal amount of our 2025 convertible note. The repurchase was funded with cash on hand and $400 million from our term loan A. We also entered into a swap agreement that fixed the floating interest rate on our term loan A. The fixed interest on our term loan A is approximately 6.6% and can step down modestly as we further deleverage. This results in a weighted cost of debt of approximately 1.6% following the repurchase. Based on our second quarter results, our trailing 12-month net leverage ratio is 3.3 times. And based on our 2023 outlook, we continue to expect our net leverage to be less than three times as we exit the year. Second, in the quarter, we repurchased approximately $100 million of shares at an average price of approximately $30. Additionally, during the second quarter, our board approved a new share repurchase authorization for $125 million, effective through December 31st, 2023. Lastly, as Vlad mentioned, last week we acquired assets from Hopin to augment our video offering. While we are excited about the addition, we expect the acquisition to have an immaterial impact on our revenues and expenses in 2023. Before I provide our third quarter and full year guidance, I'd like to provide you with additional details on the macro trends we are seeing in the market today. Macro trends are largely consistent with last quarter. Sale cycles remain elevated versus last year, and customer buying decisions continue to go through additional layers of approval. We are also seeing less upsell within our existing base as customers have slowed hiring and rationalized their employee counts. Importantly, marketing-driven lead flow remains consistently strong, demonstrating continued demand for on-prem to cloud conversion. Now, turning to guidance. For the third quarter of 2023, we expect subscriptions revenue growth of 9% to 10%. total revenue growth of 8 to 9 percent, non-GAAP operating margin of 18 to 18.5 percent, and non-GAAP EPS of 75 to 78 cents. Note that we are reinvesting a portion of the operating profit outperformance we delivered in the second quarter into innovation and go-to-market activities in the third quarter. Specifically, there are areas of strength in select verticals where investment, including in AI, are expected to drive greater product differentiation and incremental demand. Now, moving to the full year, 2023, we continue to expect subscriptions revenue growth of 11% and total revenue growth of 10 to 11%. And we now expect Non-GAAP operating margin of 18.5 to 19%. At the midpoint, this is up more than 600 basis points versus last year, and 25 basis points above our prior outlook. And non-GAAP EPS of $3.11 to $3.25. Note that this outlook is inclusive of interest expense from our term loan A, which our prior outlook of $3.19 to $3.25 did not include. Additionally, last quarter, we noted that we would be able to achieve $280 million in free cash flow much earlier than our original target of 2024. I'm pleased to share that we now expect to achieve adjusted unlevered free cash flow of $270 to $290 million in 2023, roughly a full year earlier than we had originally expected. We are well on our way as we have already generated 142 million in the first six months of 2023. Our updated target demonstrates the power of the operating leverage inherent in our business. It also speaks to the progress we are making on our efficiency initiatives, all while continuing to invest in innovation, and targeted go-to-market activities. In summary, Q2 again demonstrated our ability to execute against our strategy of driving profitable, healthy growth with robust free cash flow generation. We believe our leading, differentiated product offerings and focus on innovation, coupled with our scale and attractive business model, positions us well for continued success. With that, Let's open the call for questions.
Operator
We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. In the interest of time, please limit yourselves to one question. Our first question is from Meta Marshall with Morgan Stanley. Please go ahead.
Meta Marshall
Great. Thanks, Vlad. Sorry to see you stepping aside after so long. Looked forward, really enjoyed working with you. I guess just in terms of, you know, Tarek obviously has been on the board, but just why you felt like he was the right choice, you know, what your kind of ongoing engagement with the company will be and, you know, maybe deciding to go with somebody kind of outside of, of traditional software realms. Thanks.
Vlad Shmunis
Right. Hi, Amita. Okay, firstly, I'm not quite stepping aside. I'm transitioning to an executive chair role. I intend to stay actively involved. Less so on the governance side. Obviously, Tarek will be, you know, a real CEO, no questions asked. But I'll be around and... working on innovation, product introductions, long-term vision and strategy, et cetera. And by the way, for disclosure, Tarek is here in the room with us, so he can also answer some of the questions directly. But we both, I believe I speak for both of us, we see it as a partnership moving forward. We specifically discussed that quite a great length. And I also want to remind you and the rest of the folks, Tarek has been on the board since December of last year. He's been an active board member, both member of our audit committee and comp committees. And he knows the company very, very well. It was very important for me and the board to have a seamless transition. to have someone who understands the business, understands the landscape, very importantly, shares our values, shares our strategy, that being profitable growth. So both words are being very important, profitable and growth. And Tarek is a well-known heavy hitter on both of those dimensions. Look to your question, why not someone from the software industry? Tarek is from the software industry. And he's had a number of major accomplishments, specifically both at HPE and prior. And I tell you what, Sonali, our CFO, she's been working with Tarek and for Tarek for a number of years. Maybe you can shed some light.
Vlad
Yeah, absolutely. Hi, Mita. So, yes, I've known Tarek for over 25 years and did have the pleasure of working and reporting directly into him when we were at HPE. where he did a spectacular job of really shifting the HPE portfolio to much higher growth areas, such as Aruba, and he was a huge proponent of investing at the edge, which is where we saw a massive amount of growth. Obviously, HPE is a much larger revenue base, so sometimes you don't see it in the aggregate amount, but the Aruba business was a significant grower, and then he was also very central to the GreenLake and as-a-service pivot, and then finally the high-performance computing and AI divisions, which all grew well above the overall portfolio. And Tarek has vast experience, and a very strong track record as both a CEO and CFO, and has successfully scaled businesses whilst also driving growth and, importantly, profitability and cash flow. So we think he's just very, very well-rounded.
Operator
The next question is from Terry Tillman with Truist Securities. Please go ahead.
Terry Tillman
Yeah, I mean, I have a question, but I do want to ask an extra one, and I think I should be able to. Vlad, are you still going to be on these calls answering our provocative questions? And then I will ask my question.
Vlad Shmunis
Look, I want to reiterate, you know, Derek is going to be the CEO of But I would say, as appropriate, if Tarek wants me to participate, maybe on a case-by-case basis, look, I'm around. I'm not sailing into the sunset. I still have immense interest, not just financial, but also financial, in this company's success. And as you know me, I tend to speak my mind. for better or worse, so I don't think that they're going to stop anytime soon either.
Derek
Congrats to you both. My question for the call is actually, Sonali, I think in the past you've talked about ARR bookings, how that would trend ahead of top line growth. We only have two quarters left, and I don't know what kind of visibility you have in the second half, but could you give us an update on how you're thinking about ARR bookings for the year and the growth rate there? Thank you.
Vlad
Yeah, sure, Terry. As you know, we don't typically guide on ARR and we do have good visibility on the second half and that's why we guided and reiterated very much our full year guide today and raised our guidance on operating margin as well as provided more color around free cash flow. But when you think about ARR, in terms of providing you color, we did about 60 million of bookings in the quarter. So that means we've generated about 120 million of net new ARR bookings in the first half of 23. And if you think about how our business has historically been slightly more second half weighted, whilst not guiding specifically, we think if typical seasonality holds, it's absolutely something that we should be able to achieve. And just if you do, you didn't ask specifically around the guidance, but we are reiterating the full year on both revenue and subscription revenue. And on margins, we strongly exceeded the 2Q outlook by about 200 basis points, which is up 800 basis points year over year versus Q2 of a year ago. So because of that, we raised the midpoint of the margin guidance by 25 basis points. So for the full year, we're now looking for 18.5% to 19% margins. And we continue to expect to exit the year at least 20%. And you know we will always strive to do more.
Operator
The next question is from Samad Samana with Jefferies. Please go ahead.
Samad Samana
Great. Good evening. Thanks for taking my questions. I'll echo Vlad. It's been great working with you. I look forward to still talking to you every now and then. Maybe just a question on the Seagas side of the business. I know you mentioned where the new product fits into the world, but I guess can you double-click on that? Maybe who do you see? Is that more of a greenfield opportunity, or are you targeting replacements if If so, who would that be that you're going after with that product? And then I actually have a CCAS ARR follow-up as well.
Vlad Shmunis
Sure. Okay, well, thank you, Samad. Okay, so as far as RingCX is, I think, what you're asking about in that announcement. And look, so what do we have that's unique? We have a CCaaS business as part of our portfolio that's well over $300 million in ARR. It actually makes us one of the largest CCaaS providers in the world. But there is a twist here, and the twist is that we are playing and playing extremely well in the unified UCaaS, CCaaS communications market, okay? This is where people, we have this integration. It's unique to this day between us and in contact, nice in contact, and obviously it's been playing extremely well, okay? Now, so what's the new opportunity? So firstly, we are frankly, up until now, not that we were locked out, but we don't really tend to see pure play requests line of business requests, if somebody needs just a contact center, they would likely not even involve us in an RFP. So with Ring CX, we expect to be getting those opportunities and participating directly. So that's the number one thing to remember. Secondly, Nice In Contact is a fantastic product. Gartner has it right. They are up and to the right and one of the two core leaders without any questions. But it's also an enterprise-grade product. It's a high-end product, and unfortunately, that means complexity, and that means fairly healthy pricing. We see an opportunity, this is where the greenfield comes in, to command not just necessarily into smaller businesses, but into businesses with simpler requirements. And they can be small or they can be very large. It depends on how they've organized their contact center. We believe that RingCX will be a viable player. It will compete well based on features, based on the fact that it is AI first. It is a next generation product built on next generation pure cloud architecture. pricing will be competitive, if not disruptive. And look, I tell you, people, you, certainly not the least of them, have been asking, okay, well, where is your own contact center? Here is the answer. Here it is. So we're in beta now. Early results are promising or better. Feedback has been great. We're obviously learning on that feedback and incorporating. And expect more to come. And I tell you, with me now having more time to concentrate on little housekeeping items like getting products out, expect it will be a strong player in that area.
Vlad
And if I could just add something there, you can just imagine that with proprietary economics, the contribution margin on RingCX will be... much higher than what we drive today on RCCC.
Samad Samana
Understood. And maybe just a quick question on the CCAS, on the ARR disclosure, that 300 million plus, or the data that you gave, it implies really robust growth, right? So it's like north of 30%. One, I want to see if that math is right. And then for UCAS, that would make it kind of more like high single digit. Is that the right way to think about those two growth rates for the go forward future?
Vlad
Yeah, so I think a couple of points I'd make. So yes, we are very pleased with how the CCAS business is growing. And the last time we updated you, we said that we'd update you every other quarter on where we are. So this quarter, proud to say we're now at $330 million of ARR. And what I would say there is that we've seen great success, obviously, in selling RingCentral MVP with RingCentral Contact Center. And over 60% of our large 1 million plus TCV deals include both UCAS and CCAS. And what I would say there is we really are uniquely positioned relative to all of our competitors to offer that both UCAS and CCAS from one single vendor, which is what we truly believe particularly enterprise customers are looking for. In terms of what we're seeing on the UCAS business, we still are growing well above the market in terms of revenue market share, absolutely. And if you look at any of the third-party data, Synergy, Gartner, et cetera, we are continuing to take revenue share there. So I would say absolutely see CAS growing well above the market and UCAS still continuing to take revenue share relative to the overall market.
Operator
The next question is from Brian Peterson with Raymond James. Please go ahead.
Brian Peterson
Hi, thanks for taking the question and congrats to Vlad and Tariq. But certainly I wanted to follow up with you. You mentioned that on some of the efficiencies that you've recognized you're going to be reinvesting in the third quarter. I'd love to understand You know, how much of that is more product-oriented versus go-to-market oriented? And how should we be thinking about, you know, potential efficiencies going forward? Should those be reinvested as well? Thank you.
Vlad
Yeah, so great question. And, you know, as I said earlier, we strongly exceeded our Q2 profit margin outlook. It was about a 200 basis point beat. So we were at 19.4%. But, you know, we still need to invest in the business. And there are areas of strength that we are seeing in select verticals. where investment, including in AI, and Vlad has said he's going to spend more time there, are expected to drive greater product differentiation and incremental demand. So in Q3, we will be investing in those areas, given the opportunity we see. And part of that will include investing in some of the higher-performing marketing channels that we believe will drive more sales. That being said, if you look at the overall full-year margin outlook, that is very much still increasing. But we do want to balance both investment for growth and profitability. And you've heard us call this out in prior calls, but upsell has been an area of the business where we've seen some challenges. And we do feel that the new products being introduced will deserve investment and also will drive that upsell motion that we expect to see as the macro recovers.
Operator
The next question is from Cash Rangan with Goldman Sachs. Please go ahead.
spk02
First of all, Vlad, I've got to say congratulations on a 10-year stint as public company CEO. And bigger congratulations on hiring a former equity analyst from Lehman Brothers as your CEO for the future of our industry. In my industry, it's really, really bright, it looks like. Having said that, I actually want to ask Tarek a question that's okay. First of all, very impressive that you speak six languages. Maybe over a beer one day, you'll tell me how you managed to do that. That's very impressive. But I'm curious, Tarek, to get your take on What is it that you've learned about the company that you can share with us being on the board that gives you the conviction to step into the hot seat and take questions from people like us? I look forward to working with you. And what about – you've got tremendous background. I mean, you've been an equity analyst many years back, and you've been in the tech industry for a long time. What do you see as RingCentral's primary – every company has challenges. So what do you think is RingCentral's primary challenge going forward And what is going to be that secret sauce that you bring with your background, whether it's, you know, pivoting towards that new segment of the market or these acquisitions? I want to just be cognizant that there are challenges and how do you envision overcoming them in your future? Thank you so much and congrats.
Rabiati
Well, thank you very much for the intro. You made me feel a bit younger because when I was an equity analyst, it was 25 years ago and we were with the same team with Somali. So thanks for reminding me of this. Let me answer first by saying I see a tremendous opportunity at RingCentral and the vast potential. The opportunity that exists in UCAS and CCAS combined that Vlad has mentioned is quite formidable, and it's something that I'm very keen on capitalizing on for the future and realizing that full potential. Those use cases that you've heard about from Frontier Airlines, are very telling. These are use cases where communications become more pervasive all the way from inside the office with a contact center all the way on to field workforces or sales forces, any way you want to look at them. These are unique use cases that RingCentral can pursue and I'm very keen on making sure that we continue at RingCentral to innovate and to grow. Because the practical reality is that in this industry, The very first lever for value creation is growth, and we intend to continue to dial up the growth here for all our stakeholders and obviously our shareholders. What stands in the way, to be honest, it's a bit early for me to say what stands in the way. It's true that I have the vantage point of having spent nine months on the board of Ring, and I think I know it somewhat, but I have to spend more time under the hood, so to speak, really in the operations of the business to figure out what stands in the way. And I will start doing so immediately upon my first full-time day on the 28th of August. But between now and then, you know, we're not going to be waiting. I'm going to be spending some time with the management team, making sure I understand where they're coming from so that we can have a real solid operation moving forward.
Operator
As a reminder, please limit yourselves to one question in the interest of time. The next question is from George Sutton with Craig Hallam. Please go ahead.
George Sutton
Thank you. My congrats to Vlad and welcome to Tarek. I am curious. Suddenly you had mentioned that marketing-driven lead flow had been really the strength in this quarter. I was just as interested that there was no mention of the large partnerships, the Avias and Mitels and Frontiers and AT&Ts of the world. Can you just give us an update on the partnership side of the business?
Vlad
Yeah, absolutely, with pleasure. So you called out Avaya Mitel. Specifically, we also have AWS, and I'll talk to the GSP's global service providers as well. So Avaya, as you know, has recently emerged from bankruptcy. They continue to execute on their new go-to-market motion. that were enabled as part of our updated contract with them. And we've seen slightly better traction and execution from Avaya this quarter. And as I said earlier, we do expect more of a back-end loaded impact from Avaya, and we continue to expect that. Mitel also continues to contribute seats at a healthy clip. On AWS, while it's still early, We have started to see some really good traction in the pipeline there, and we're starting to see the first deals beginning to close. So we're on track to be live on the AWS marketplace later this year. In terms of the GSTs you talked to, one of the ones that I would specifically call out is Charter, where we're continuing to see extremely strong execution there. And as you know, there are a couple of other GSPs that have recently come online, particularly in Europe. And we're seeing more and more traction with Vodafone as well. So we have the legacy partners that are fully ramped and continue to contribute. But then importantly, we have these new ones that we're beginning to see very solid impact from. So that's the story for partnerships. And as you know, they remain a very, very important part of our overall go-to-market. And, you know, we see a lot of scope for all of those partners to continue contributing for the rest of this year and beyond to our overall growth.
Operator
The next question is from Matt Stotler with William Blair. Please go ahead.
Matt Stotler
Hey, thank you for taking the questions. Um, you know, Vlad, uh, you know, sorry to see you go, um, but, uh, obviously you'll still be engaged. So look forward to chatting occasionally going forward to rep congressional position. Uh, maybe just one question on, um, uh, geographic specific question. There were a number of press releases over the course of the quarter, uh, specific to India, uh, with regulatory compliance, uh, office openings, plan hires, et cetera. I would love to just double click on the opportunity you see in that geography. how that might layer into the business over time, and then how you think about the competitive landscape there relative to what you see elsewhere around the globe.
Vlad Shmunis
Right. Well, thank you, firstly. Look, as far as India is concerned, so firstly, it's great that we're – we think we're actually literally the first foreign service provider to be allowed to offer this kind of services in the area. So it's a huge accomplishment. Look, our primary or first foot forward, let's say, would be to extend India into our global office technology. So what that means, if you have a U.S. or some other international-based business with offices in India, then we would be able to deliver local dial tone in a legal manner. So that's really where we're seeing most of the demand at this point. Secondly, as you all know, we have a strong and growing GSP practice. And with this announcement, and more importantly with this capability, we are now much more likely to be able to partner with local service providers in powering up their b2b offerings in the area and Lastly is is an opportunity to engage directly Again, that's a little bit farther down the list for us We first need to you know, do the first two but certainly an opportunity and needless to say India is You know second largest country in the world population wise by far the largest in where we can legally do business given, you know, other restrictions in China. So definitely an area of growth for us as we look forward.
Operator
The next question is from Jim Fish with Piper Sandler. Please go ahead.
Jim Fish
Hey, this is Quinton on for Jim. Glad we wanted to echo the congratulations and well wishes for the new role and look forward to working with you, Terrence. On the Microsoft Teams 2.0 opportunity, we continue to hear strong results from this product across your channel partners. You know, when Microsoft talks about their 17 million PSTN users on the platform, do you think all 17 of those, you know, 17 million of those players make sense as the addressable market for the 2.0 opportunity? Or are you more focused on the G2K players? And then maybe just on the penetration side, how do you see that penetration of the opportunity today? Thank you.
Vlad Shmunis
Yeah, well, it's super hard to talk about all, you know, when you're talking about large numbers. But again, as we look at the landscape, Microsoft is packaged into E1, E3 and E5 tiers. E1 and E3 have no business telephony included, can be upsold, but not included. And E5 does have it, but it's still positioned behind us features-wise and global reach-wise. So look, it's been our major introduction last quarter, this past quarter. It continues to do well. I think on earnings in prepared remarks, we talked about Republic Airways. Importantly, they're a Teams customer, and the plan is for them to be using our embedded dialer as part of the technology suite that they're standardizing on. We continue, and you've heard me say this before, Teams has been, and we believe for the foreseeable future, will continue to be a growth driver for us. We were, I would say, at parity up until Q1 or late Q1. I don't think we're at parity anymore. I think we're leading now as far as quality and user experience that our integration has to offer. So it is basically the best integration that we know of in the marketplace. Very importantly, you saw some of these other announcements from us, and in particular, Ring Sense for phone. And I just want to stress that that will also be available in the Microsoft version of our packaging. And by the way, the site comment, it will also be made available to all of our 15,000 partners, including GSPs and strategics. Okay? So it will all play in together, will make us stronger. You know, rest is GTM and, you know, getting to at-bats. And actually with Tarek's joining and his, you know, absolute focus on operational excellence and efficiencies, we're having pretty high hopes here that we will be getting more at-bats in all segments, not just being enterprise.
Operator
The next question is from Sidi Panagrahi with Mizuho Securities. Please go ahead.
spk14
Thanks for taking my question. I also extend my best wishes to Vlad and Tarek. I'm very looking forward to working with you. And I want to ask about your growth at this point. I understand you talked about various factors influencing growth, but now that, let's say, Avaya coming, you know, reemerging out of bankruptcy and there are partnerships that's coming back, when do you think that growth will drop and when should we think, and what are the drivers you think, all this product you talk about, What do you think we'll start seeing growth to re-accelerate again?
Vlad Shmunis
Yeah. Well, look, obviously, you know, we've guided how we've guided. And, you know, this is probably not the best time to make forward-looking remarks. So you'll just have to wait until, you know, our guide after this present quarter and, you know, how we guide next year and beyond. but directionally, for the first time in a fairly long time, RingCentral now is a true multi-product company, and we have a full quiver of product offerings addressing needs of both employees, so EX, as well as contact center, centers and customers, so CX. So if you look at just the announcements this past quarter, we've augmented and completed our video portfolio with Hopin's assets. And for those of you who are new to this story, Hopin has been a unicorn, really high-flying, They've pioneered the virtual and then hybrid events markets. They have a number of who's who names amongst their customers and an extremely well-received product. And we were just very fortunate to be able to acquire this asset from Hopin. So now we have video meetings, rooms, webinars, And now events, and not just virtual events, and obviously, you know, with COVID being no more, purely virtual events are less interesting, still interesting. Airfare is still expensive, by the way, okay? But hybrid events, which is where Hopin has been making investments prior to us getting involved. And we continue to double down on those, I can tell you that. So that really does complete our portfolio there. In particular, Microsoft doesn't seem to have an events product, so this would be one good area to differentiate. And look, in general, what we find is if we're in an account and the customer gets exposed to Ring, those customers tend to stay with us. So we view all of these as springboards to get into accounts and then lend an expense from there. So that's just on the video side. Then we have RingCX, and I already addressed that, where now we have our own native standalone as well as integrated contact center products. that we think will be disruptive on features, on positioning, on pricing, and on just the value that it generates. So that's two. Then there is this whole AI opportunity. And look, it's interesting. News, late-breaking news here is that Zoom, I guess, changed their terms of service. and is now announcing that they'll be training on their customers' data. Well, we don't do that. We have other means of training the system. Training that we are doing and intend to be doing will be on customers' own data to enhance results for that particular customer, not intermixing. So we think that with that, and the fact that we are moving billions upon billions of minutes, we're serving millions of direct customers, but if you think about it, it's tens or hundreds of millions of callers who get to experience RingCentral. So the fact that we, given the scale, you know, breadth and depth of our network and partnerships, that we're now able to weave intelligence into all of those conversations, that's a big step. So look, again, without changing the guide, we think we're well positioned. We think the product is well differentiated, more so than any time in the last few years. And the team is energized. Mo has done an outstanding job. Keeping the ship steady last few years or last 18 months, but now we have you know a new blood coming in with Tarek and I'm sure he'll be bringing in his own ideas and His own playbook that you know, we we think will further in half. So again, you know upwards and onwards and Yeah, hopefully we won't let anyone down and
Operator
The next question is from Ryan Kuntz with Needham. Please go ahead.
Ryan Kuntz
Thanks for the question. I wanted to follow up on the AI capabilities. Sounds like you've got a great team there from DeepFX. How do you think about the infrastructure requirements for that in-house versus building your own versus public cloud partners? Can you talk a little bit about that and how that can affect the model going forward on cash flow, et cetera? Thank you.
Vlad Shmunis
100% public cloud.
Will Wong
No infrastructure. Very short answer, but all public cloud, all high margin.
Operator
This concludes our question and answer session, and the conference is also now concluded. Thank you for attending today's presentation. You may now disconnect.
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