RingCentral, Inc.

Good afternoon, and welcome to the RingCentral fourth 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 of Investor Relations. Please go ahead.

Thank you. Good afternoon and welcome to Ring Central's fourth quarter 2023 earnings conference call. Joining me today are Vlad Shmunis, founder, chairman, and CEO, and Sonali Parekh, CFO. Our format today will include prepared remarks by Vlad and Sonali, 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 guaranteed a 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 with 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. A 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. Good afternoon, and welcome to our fourth quarter 2023 earnings call. First, I'd like to welcome two new board members, Matt Segal and Proud Bud, to the RingCentral family. Ned is a seasoned executive with more than 25 years of technology, finance, and capital market experience, including at Twitter, Intuit, and Goldman Sachs. Fred is an accomplished technology industry veteran and financial expert, having served as the chief accounting officer at Cisco Systems for over 20 years. I look forward to working with them both. I also want to warmly thank Alan Sigerson for his nine years of service on our board, as he will be transitioning off the board in Q2. Now, moving to our results. We ended the year on a strong note. In Q4, total revenue rose 9% above the midpoint of our guidance. ARR rose 11% to $2.3 billion. We also achieved record profitability with quarterly operating margin of 20.5% and free cash flow of nearly $100 million, well above our outlook. Our strong finish to 2023 positions us well to execute on our strategy in 2024 and beyond. I return the CEO to deliver on our strategy of 2020. One, delivering durable growth and value from our core. Two, expanding our TAM by turning RingCentral into a multi-product AI-first communications leader. To that end, we have recently added three new products to our portfolio. RingCX, our native AI-first contact center. RingCentral Sales, our conversation intelligence platform. for sales professionals, and RingCentral Events, our new virtual, hybrid, and on-site events platform. And three, driving continued robust free cash flow generation while materially reducing SBC and maximizing free cash flow per share growth over the long term. Our right to win is rooted in our industry-leading, reliable, global, fully-featured business communications platform that now includes Cloud PBX, Cloud Contact Center, and video meetings, webinars, and events, all infused with state-of-the-art AI capabilities. As a testament to our industry leadership, In November 2023, RingCentral was named a leader in the Cardinal Magic Quadrant for Unified Communications as a Service Worldwide Report for the ninth consecutive year. And we're excited to report that Aragon Research, an independent third-party research firm, just named RingCF as a leader in the Intelligent Contact Center for SMB. We believe this is a testament to RingCentral's ability to continue delivering a superior differentiated solution in a competitive market. We are proud to have built a $2.3 billion recurring revenue business that is growing, profitable, and serves over 400,000 customers across enterprise, mid-market, and SMB. Within enterprise, which we define as customers that generate $100,000 in ARR or more, I am particularly proud to report that this segment has just achieved $1 billion of ARR. This is a major milestone for our company. In fact, in this post-COVID world, enterprise continues to be a strong growth driver for us. Today, we count almost 20% of Fortune 1000 companies as our enterprise customers. Among these are two of the world's three largest hotel brands, one of the world's largest car rental companies, and many leading Fortune 500 financial service companies. Notably, the majority of our enterprise customers utilize our solutions integrated with and alongside Microsoft Teams. This strong presence with large customers and within the Microsoft Teams environment is a testament to the trust our enterprise customers have in our products and our ability to add value to the Teams environment. Our new advanced integration with Microsoft Teams is a key reason enterprise customers select RingCentral. This includes customers such as Republic Airways, one of the largest regional airlines in the U.S. Overall, enterprise continues to be a growth driver for RingCentral with a positive long-term outlook. Let me now share some additional highlights of why customers, large and small, continue to choose RingCentral to power their communications. Broadly speaking, customers have historically picked us because of our 99.999 or 593 reliability, which we achieved for the 22nd straight quarter. Robust feature set, regulatory compliance, and depth and breadth of our integrations. Here are some examples of key large wins and expansion for this quarter. One is a Fortune 100 insurance provider that purchased 20,000 UCAT seats to connect its distributed broker network made up of thousands of field offices. Another one is a global 500 retailer that purchased 18,000 UCAT seats to power communications across more than 2,000 stores. And finally, a Fortune 500 global healthcare solutions company that added millions of dollars to their existing contracts. One of the key integrations for this customer is our reliable and powerful calling capabilities embedded in Microsoft Teams, which they have already deployed to their employees. Their additional spend is a testament to their confidence in our ability to deliver a full communications platform and add value to the team's environment. Leveraging our core strengths, we are now expanding into adjacencies such as CCaaS, hybrid and virtual events, and conversational intelligence for sales. These categories have addressable markets that more than double our current opportunity, to over $70 billion, providing multiple vectors for us to drive long-term profitable growth. Industry analysts and customers alike are already recognizing our ability to deliver in one of our key adjacencies, namely CCaaS. In the latest report, elegant research brings CX's ability to deliver powerful AI functionality, which includes automated quality management, coaching, and conversational analytics, while being easy to deploy, easy to use, and easy to maintain. and all at a disruptive price point. Regarding customers, we now have over 100 paying RingCX accounts, up from about 50 when we launched in November. These accounts include two Fortune 1000 enterprises who each purchased over 1,000 seats. We also now have hundreds of paying RingCents for sales customers after having just launched in the second half of 2023. Lastly, approximately six months ago, we acquired Topping Events Business. We are happy with this acquisition and view it as a key addition to our portfolio. Since relaunching at RingCentral events, hundreds of customers have hosted virtual and hybrid events on this platform in the past few months. These include many large Fortune 500 companies and well-known businesses such as Spotify, Reddit, and HubSpot. We continue to see strong demand for our events platform. With recent improvements in packaging and pricing and the addition of AI-powered features for events, we expect to significantly scale this business over time. Notably, we recently won Harvard University over a well-known video first competitor. Harvard chose us because of our advanced branding capabilities, level of production, and superior AT&T user experience. While it is still early for our new products, given the level of traction we are already seeing, we believe we can achieve at least $100 million in ARR from Ring CF, Ring Sense, and Ring Central events collectively by the end of 2025. We expect these new products to be meaningful contributors to our strategy of delivering long-term profitable growth. Importantly, going forward, our multi-product strategy will be augmented by taking an AI-first approach to everything we do. AI is revolutionizing the way the world works and communicates. The pace of AI innovation in our industry is accelerating. We have a robust roadmap of new AI best features that should help differentiate our core and new products from the competition. Over the course of this year, we are planning to announce many more AI-rooted innovations that will enhance both employee and customer experiences. Stay tuned for some exciting product and innovation announcements at Enterprise Connect at the end of March. We will leverage our broad go-to-market capabilities as we execute on our AI-first multi-product strategy. In that vein, I am pleased to welcome Brightspeed, formerly known as CenturyLink, who will join other valuable members of our global service provider family that now includes AT&T, BT, Charter Communications, Dallas and Vodafone, amongst others. Speaking of Vodafone, we started with Vodafone UK in Germany and in 2023 we expanded with Vodafone into Italy, Portugal and Spain. And we're super excited about a recent enterprise win with Vodafone lending a 15,000 seed deal at IKEA Germany. And last but certainly not least, profitability. We have greatly expanded our profitability with operating margins improving from 12% in 2022 to over 20% exiting 2023. We also more than doubled our adjusted unlevered free cash flow. to $325 million for the year. We continue to expect to get further margin expansion and robust free cash flow generation in 2024 and beyond. Another important factor in creating shareholder value is minimizing FBC. I and our entire senior management team and the board are laser focused on and committed to delivering meaningful improvement in 2024 and beyond. Sonali will provide more color for us. In closing, we agitate 2023 as a stronger, leaner, more profitable business, and we're well on our way to becoming an AI-first, multi-product portfolio company. Our opportunity is large, our strategy is clear, and we're head-down executing. I am optimistic about our future and am happy to be back at the helm leading the central next chapter. With that, thank you and let me turn the call over to Sonali.