RingCentral, Inc. (RNG) Earnings Call Transcript & Summary

Yes. So we were really excited about this deal, and it is indeed the largest seat deal in the company's history, so 40,000 UCaaS seats. So let me tell you a bit about the customer without naming them. Fortune 100 retailer, and they have $20 billion of revenue, highly distributed. They had issues with their legacy system. And RingCentral from everything I've heard from our sellers and everything I've read, we were the only solution that addressed their pain points, all their pain points across the board. And we did replace a legacy system. The legacy system was Skype, which, as you all know, is now owned by Microsoft. And the other thing I would point out about this particular win is that it happened in a Teams environment, i.e., they are still using Microsoft Teams for their messaging and video capabilities. But they needed the reliability that we bring and [ 5-9s ] reliability. What does that really mean? It means less than 5 minutes of downtime, including scheduled maintenance in an entire year. And we have been able to deliver that for 23 straight quarters. Actually, the last couple of quarters have been [ 6-9s ]. But there were also integrations and features that we offered. And they -- this retailer happens to operate across many geographies. And they, for example, wanted to be able to have different messaging and hold music depending on where the customers and branches were located. We were able to do that. This retailer also has a pharmacy associated with it. And they needed a special functionality to be able to fax prescriptions back and forth. Their HR department wanted to be able to use the SMS solution to be able to get in touch with candidates in an automated way. Again, RingCentral was able to address that. So it was a complex use case, and that's again where we really thrive and where we tend to win. And who did we compete against? You can imagine for a customer this big, it would have been a large RFP process, and the usual suspects would have been there. We don't always know who we're competing against. They don't always tell you. But you can imagine for something this size, the large guys do participate. It's rare for them not to. And in terms of are there more out there? Absolutely. And I just want to add, this was the largest win in the company's history. But if you look back in the prior -- the quarter before and the quarter before that, we did have some 20,000 seat deals, again, Fortune 100 insurance company, Fortune 500, one of the largest tire manufacturers in the world. So we are winning large deals. And our enterprise business today, the one that's growing 13% is over $8 billion. It's a very, very large business and one that we're investing in and committed to. And again, I feel like we have a true right to win.

You mentioned Microsoft, and if you maybe step back and take more of a high-level 10,000-foot view down, can you talk about the Microsoft environment? And it seems like more and more in the last several earnings calls, you've talked about success there, tightly integrating. And maybe what role just especially for the audience that may be less familiar, how Ring is making that environment actually work for it as you go out and win deals more broadly than just that one that we just talked about?

That one is a great example, but that is just one. And what I would say is if you look at our million-dollar-plus TCV wins in the last quarter, and actually, if you look at our enterprise base, but certainly in the last quarter, more than 50% of the deals we won over $1 million TCV were in a Teams environment. So we absolutely, again, can thrive in a Teams environment, where we've shown that we can displace Teams, particularly Teams phone. And of course, Microsoft Teams is an open API, right? So we believe and if you look at third-party data as well, we have the best integration with Teams. And the only one, again, I believe that you don't have to toggle from screen to screen. So you can be in a Teams environment on a single pane of glass and use the RingCentral phone on the back end by just clicking an icon on the screen. So it's very easy to use. And again, we've seen great success certainly in the enterprise side of things and certainly in our larger deals. And if you look at our enterprise base today, and I think Microsoft goes broad but does not go deep. And we're really good at going deep, thousands of integrations, right? Certifications, HIPAA-compliant. You've heard me and Vlad talk about our gold verticals. In those gold verticals, the integrations we have with EPIC in the health care, [ Cerner ], these take time, these take investment, these take R&D. RingCentral has been around for -- I think it's our -- yes, it's our 25th anniversary. A lot of R&D has gone into that phone solution, where it is mission-critical for the phone to be there for you when you need it. RingCentral is a very obvious choice, and we win against Teams in those circumstances.

That's great to hear. We're at a software conference. I might go to jail if I don't bring up AI. I know you mentioned it. I'm legally required to ask about it. So you've talked about embedding AI capabilities into your platform. You mentioned it earlier, RingSense, some of the features that you guys are rolling out. How do you think about AI and the role it's going to play for RingCentral's product portfolio and maybe in helping you guys continue to drive that growth algorithm going forward?

Yes. So firstly, AI, I know, of course, it's a buzzword, right, or 2 buzzwords right now. We've been investing in AI for a really long time. Those backgrounds that you -- when you're on a RingCentral call, those -- that's actually using AI. Noise cancellation is using AI. But of course, it's -- we're infusing it more and more and leveraging the LLMs. We're not going and building our own LLM, but we're leveraging them for our customers to get richer insights for their communication data. And you can imagine a company like RingCentral with the number of customers we have, over 400,000 and the data that those phone calls generate, it's literally billions of minutes of conversations on our network. And our customers actually want to use that data and are asking us to help them derive insights from that data. And we very much believe that our AI products are not only unique and differentiated, but customers are willing to pay more for them and will be ultimately accretive to our ARPUs. So you mentioned RingSense for Sales. Our sales force are using it, and it actually replaced another product that they were using previously. And they've told us that they actually prefer using RingSense for Sales. And our customers, you heard me say, they more than doubled quarter-over-quarter. Customers are engaging with it and are finding it extremely useful and importantly, are willing to pay for it. And RingSense for Sales, for example, we sell for $60 per seat per month. And you know you may ask me about ARPU later, but our overall ARPU is $30 per seat per month. That's in aggregate. And RingCX, so our native contact center solution, again, that's been very disruptively priced, so $65 per seat per month. But that's very accretive if you look at our aggregate ARPU. So I think if you look at the features that our AI products are actually providing for customers, things like real-time note-taking or if you're a contact center agent for the manager to be able to see what strategy has been successful for our contact center agent so that they can then replicate that across all agents used for training, things like that, not just keyword searches, but like what keyword drove a certain outcome. If we were using RingSense right now and it was recording this, they would look to see how many times did Samad say a certain word, and how did Sonalee respond to that word? And what does that mean? It drives so many insights. And then it would say action item. Oh, Sonalee should do a road show with Samad and go to New York because investors are -- and I think that's really powerful. And again, our customers are willing to pay for it. So we absolutely believe that this is something that will be accretive to us and as you said, a growth lever.

I already like the insights that RingSense provides. I'll tell Jefferies to take a look. You mentioned CX contact center. I know that for a long time, you guys have partnered with NICE, but you've also innovated and released your own solution. Maybe you could just help us understand the CX customers that you have, the 200 or so customers, and maybe what makes them want to use the RingCentral solution and where they see value in that and maybe how you still coexist with NICE as well?

Yes. So we absolutely do coexist with NICE. So we have RingCentral Contact Center, RCCC, which is an OEM with NICE. I think the last time we gave you an update there, it was about a $350 million-plus business. That's the NICE OEM business. That is for much more complex use cases. So RingCX, really how it came about was we were listening to our customers. And our roots as a company, we're very much in SMB and mid-market. And those customers don't necessarily have massive IT departments or huge professional services budgets to be able to do a NICE-style implementation. And they don't have a need for a contact center in 20 languages. They need something simpler. They need something simpler to use, simpler to deploy, quicker to deploy because some of the larger contact centers can take certainly more than 6 months and sometimes up to a year to implement. So if you look at the 200-plus customers we have today, again, there's simpler use cases. It can be a larger company, an enterprise company but that just has small contact center needs. And we have a couple of those. But we see it as very distinct swim lanes. The beauty of RingCX is many of our customers like to buy our contact center and UCaaS from the same vendor. It's the one throat to choke, so to speak. But also now when we talk about AI, it's great to have the 2 of them integrated because there's more and more insights you can derive from that and richer and richer data sets. So we've proven we have a right to win in contact center. Clearly, our go-to-market is well positioned, and we've seen that with the logo wins that we've announced to date to be able to go out and sell this. And I think one of the things or one of the powerful things about RingCentral is we have this huge, fairly sticky installed base. And we now have more and more products to sell to them. And that really goes to where we started this conversation. What's going to -- as you look forward and you talked about growth, what's going to drive growth? We really feel that being a multiproduct company and being able to deliver more and more value to customers who trust us is absolutely going to be a driver of value for all of us.

Awesome. Well, Sonalee, thank you for helping us kick off the conference. I think that's a great place to leave it, and we ended where we started. So thank you again, and have a great day.

Thank you.