RingCentral, Inc.

the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then 0. I would now like to turn the conference over to Will Wong, Vice President, Investor Relations. Please go ahead.

Good afternoon and welcome to RingCentral's first quarter 2024 earnings conference call. Joining me today are Vlad Shminis, 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 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 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 comparison. Reconciliation of all GAAPs and 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 first quarter conference call. We had a solid start to the year. In Q1, total revenue rose 9% to $584 million, above the high end of our outlook. ARR rose 10% to $2.4 billion, with enterprise up 13% for the fourth consecutive quarter. Consistent with our strategy of driving profitable growth, we delivered a record quarter of profitability, with operating margin rising to approximately 21%, which was well above our outlook for Q1. I'm also proud of the material progress we have made on reducing stock-based compensation, as we have delivered another quarter of year-over-year improvement in SBC as a percent of revenue. Our execution in driving profitable growth has already resulted in an approximately 4x year-over-year increase in non-GAAP operating profit less SBC. Improvements in SBC combined with our share repurchase program is expected to result in our full-year, fully diluted share count declining year-over-year for the first time in our history. Speaking of making history, I'm excited to share that in Q1, we signed our largest UCAS seat deal ever. We won a competitive RFP and sold 40,000 seats to a Fortune 500 retailer with over $20 billion in revenue. With RingCentral, this customer will be able to address their main pain points, which include dropped calls, long hold times, inadequate call reporting, and lack of advanced voice features. In this mega-deal win, RingCentral will be replacing their legacy solution, Guide for Business, demonstrating our ability to win against Teams phones while operating within the Teams ecosystem. In fact, the majority of our enterprise customers have Teams, and in Q1, more than half of our large $1 million TCB deal were to customers that are utilizing our solution integrated with and alongside Microsoft Teams. Importantly, this win was in one of our gold verticals, which include healthcare, financial and professional services, retail, and public sector. We are mission critical in this vertical, and we win given our unmatched reliability ability to solve complex use cases, our integrated UCaaS and TCaaS platform, and our thousands of available integrations. These verticals have been a key growth driver, especially in enterprise. And we believe that there are at least 100 million seeds in these verticals that we can convert over time. Let me now give you more color on why we win which is centered around our guiding principles of trust, innovation, and partnerships, or TIP, as we call it. First, trust. We achieved five nines uptime for the 23rd trade quarter. In fact, over the past year, we've reached a new milestone of six nines. Our cloud platform is carrier-grade, secure, standards-compliant, and battle-tested, and continues to be a wide competitive mode and the key differentiator. Another core strength is our ability to solve complex use cases and integrate into customers' commonly used horizontal and vertical-specific applications, especially in our gold verticals. We offer these customers a large breadth of business communications API, as well as industry-specific integration, workflows, and certifications. For example, within the healthcare vertical, we integrate into patient data management applications, such as EPIC and Cerner, as well as meet KITROT and HIPAA-compliant requirements. These customers can create workflows based on their specific needs of their businesses. For example, healthcare providers can use RingCentral's API to send prescriptions directly to the pharmacy system electronically and automatically trigger appointment reminders via SMS. Additionally, our market-leading UCAS solution integrated with the CCAS platform supports a wide variety of use cases and is also a vital differentiator. With RingCentral, companies have the ability to streamline workflows with our advanced tools and integration. This was a key factor in why Sanitas, a Fortune 500 operator of medical centers in the US, selected RingCentral this quarter to power its communications platform. With RingCentral, Sanitas will be able to provide their customers with a unified, seamless experience across integrations such as scheduling, billing, and general inquiries. We believe this should drive increased revenue and patient retention from improved customer experiences as well as lower costs from the increase in employee efficiency that our industry-leading integrated UCaaS and CCaaS platform provides. These are just two examples of our robust progress in new customer acquisition activity in Q1. But equally as important is our ability to retain existing customers and maximize customer lifetime value. On this point, our renewed focus on customer care is resulting in improved growth retention and better NPS scores. The combination of better growth retention, improving micro trends, and the introduction of our new products should drive higher net retention going forward. Now, onto innovation. This past quarter, we announced a name change of our flagship industry-leading UCAS solution. from MVP to RingEX, which stands for RingCentral Employee Experience. With this change, we're signaling our commitment to continuous innovation based on emerging generative AI technologies. We started off on a high note with RingEX, with RingSense AI, as we won the overall Best of Enterprise Connect award in March. One key reason we won is because of our differentiated industry-first real-time AI for voice interaction. With this feature, users are able to capture key decisions and track action items in real time, enabling on this part referencing and heightened accuracy. It is early days, but users are already seeing significant time savings. For example, one customer highlighted that for an average 20-minute call, real-time nodes save them five-minute post-call, while also keeping all their nodes attached to the content to allow for easy referencing in future interactions. Voice-driven data historically has been largely inaccessible at scale, as the data has been siloed. With RingSense AI now being an integral part of Ringy apps, we empower customers to take advantage of the billions of minutes of conversations that take place on our platform. Our customers will thus be able to automate manual tasks, unlock deeper insights, and create more streamlined employee and customer workflows. Continuing on the theme of innovation, let me now share progress on our new products. First, Ring CX, our AI-powered, contact center, which is simple to use and easy to deploy, and which provides agents with all-in-one capabilities across 20-plus digital channels, automatic screen pops, contact matching in the CRM, case and ticket creation, and interaction logging for all voice and digital interaction, all from an intuitive user interface. We now have over 200 RingCX customers almost doubled versus fourth quarter 2023. RingCX is now available in six countries, the U.S., Canada, the U.K., France, Germany, and most recently, Australia. In fact, one of our newest RingCX customers is from outside the U.S., Roseram Metropolitan Borough Council in the United Kingdom. They purchased over 200 RingCF seats and over 3,000 RingEX licenses in Q1. Two key factors for our win. One, our unmatched reliability as their prior cloud provider had consistent outages. And two, our fully integrated RingEX and RingCF solution. They will be using RingCF to provide a range of services for their almost 300,000 residents, including addressing incoming social care, planning, housing, and business regulation and enforcement questions. We are rapidly innovating with RingCX. We added over 300 features in Q1, bringing the total to over 1,000. Among the new features of RingCX are native integrations into Salesforce, HubSpot, ServiceNow, Zendesk, and Microsoft Dynamics. We have also opened the RingCX platform to enable a growing ecosystem of partners such as Google, Dialogflow, Agnagy, Yellow.ai, Balto, and Calabria. Our strength in voice, ease of deployment, use and maintenance, and our attractive pricing and packaging give us confidence that we will continue to see positive results from RingCX going forward. We also continue to see good traction with RingSense for Sale, our first product in the RingSense portfolio. We have more than doubled our customer count sequentially in Q1 to over 600. Many customers are benefiting from the automated interaction summary follow-up notification, goal scoring, sentiment analysis, and performance management. This frees up salespeople's time, allowing them to focus on selling versus performing administrative tasks. For example, an insurance agency in the Midwest is using the AI-driven insights for Ring Sense for Sales to gain visibility into what's working and not working in the agency's sales and client services practices. Ring Sense is able to monitor and glean insights from all their voice data, tone, word choice, energy, sentiment, helping the customer identify valuable insights they would not have caught by listening to a random selection of agent conversations. And within our own sales organization, we are seeing Ring Sense for Sales deliver both productivity and efficiency gains. Our employees are now able to save at least two hours a week or about one full workday a month from using Ring Sense's automated note summary features. That is one extra day to speak with customers and potentially win more deals. Lastly, events. which provides us with the opportunity to expand into new personas outside of our typical base, including line of business decision makers. RingCentral Events saw a roughly 25% sequential increase in new logos in the first quarter. New AI features for events, such as AI Writer and QA Categorization, further enhance the value that customers receive. These features also continue to differentiate RingCentral from the competition and were important contributors to customers such as the Detroit Pistons, Vanderbilt University, a Fortune 50 technology company, and one of the largest media companies in the world, selecting RingCentral events during the first quarter. Last but not least, partnerships, which are a key to continue to scale our multi-product business. We have a diverse network of partners, which includes over 15,000 channel partners, a number of large strategic OEM partners, AWS, and some of the largest global service providers, which include AT&T, BT, Charter Communications, Deutsche Telekom, Telus, and Vodafone. We also continue to expand this network and announced our new partnership with Optus, Australia's second-largest provider of telecommunication services during the first quarter. GSPs are a key growth driver for Rick Central and are growing above our overall growth rate. We saw good traction with this cohort in Q1, including with Vodafone, where we won a 1,000-seat-plus deal with a large European retailer. Regarding Avai, They continue to be the world's largest holder of on-prem UC and CC seats. RingCentral continues to be Avaya's exclusive UCaaS provider, and in Q1, we extended the term of our multi-year agreement and enhanced our GTM and innovation collaboration model. We expect to work even more closely with Avaya to position market and sell Avaya Cloud Office by RingCentral to the millions of existing Avaya on-prem users. Stay tuned for additional joint product announcements at the upcoming Avaya Engage conference next week. We believe that as a whole, our broad partner network will be an important contributor to our continued profitable growth. In closing, Q1 was solid. We're executing on all our strategic priorities. Our core growth is stabilizing, our new products are demonstrating traction, our FDC is improving, and our free cash flow is expanding, demonstrating the strength of our business and its inherent profitability. I am very excited about our future. With that, let me turn the call over to Sonalit.