Vonage Holdings Corp. (ERICB) Earnings Call Transcript & Summary

Hello, everyone, and welcome to today's presentation on Vonage. On this call today, we will have Borje Ekholm, CEO of Ericsson; Rory Read, Head of Business Area Global Communication Platform and CEO of Vonage; and Savinay Berry, Head of Product and Engineering for Vonage. The purpose for today's call is to give you the opportunity to learn more about Vonage, its product portfolio and markets. And this section will then be followed by a Q&A session. As this is more of an educational call on Vonage, we should focus the questions to cover Vonage and the intention is not to answer short-term related questions both in regard to Vonage and Ericsson as we are close to the end of the quarter. In order to be able to ask questions, you will need to join the conference by phone. Details can be found on our website, ericsson.com Investors. Please be advised that today's conference is being recorded. Before handing over to Borje, I would like to say the following: during today's presentation, we will be making forward-looking statements. These statements are based on our current expectations and certain planning assumptions, which are subject to risks and uncertainties. The actual results may differ materially due to factors mentioned in today's conference call. We encourage you all to read about these risks and uncertainties in our latest earnings report as well as in our annual report. With that said, I would like to hand over the call to Borje Ekholm, President and CEO of Ericsson. Please, Borje.

Thank you, Peter, and a warm welcome to everyone on this call focus on Vonage. In 2017, we presented our focused strategy built on the strength of our mobile network business, which was underpinned by investments in R&D to drive technology leadership. And we have seen this strategy leading to an increased market share, but also a robust financial performance. This focus on the mobile networks business has been complemented by our recently introduced enterprise strategies, and we believe the enterprise segment has a high growth profile and attractive return potential. A key step in our expansion into enterprise is the acquisition of Vonage, of course, and that does complements our enterprise wireless solutions, which has created point and dedicated networks. The acquisition of Vonage provides Ericsson with access to powerful building blocks underpinning a full range of cloud communication solutions. And with the acquisition, we aim to transform the way advanced 5G network capabilities are exposed, consumed and paid for. With 5G, the network becomes a platform for innovation, offering nearly limitless opportunity to develop super fast, highly reliable, low latency and mission-critical services, but it requires those capabilities to be exposed properly. For context and a bit looking back, operators in the 4G world could largely only monetize the networks through a subscription model. But with the features offered by the 5G network, such as speed, time bound latency as well as network slicing, it's going to be very difficult to monetize only based on subscriptions. We believe that these features instead will have to be paid for separately and the ability to do that was actually implicitly part of the specification of 5G in the 3GPP design. And that's what we referred to as the network APIs. We believe that in the future, CSPs will derive a significant portion of the revenues from these type of network APIs. If our customers cannot grow revenues, they will simply not invest in the network. So this monetization of the features of the 5G network is going to be critical. And we actually find a great reception from our customers, and we have many ongoing discussions. These new type of APIs require a very deep network understanding, but also a platform to expose consume and monetize. And that's the reason we needed a CPaaS platform with a significant developer community to develop global applications using this type of network APIs. After we have conducted a detailed review of the market and consider several alternatives, including an organic development, we believe Vonage provided the best strategic fit for what we want to achieve. In addition to the CPaaS platform, Vonage has -- also has a strong UCaaS and CCaaS applications with compelling value propositions for small and medium enterprises. These offerings and Ericsson's existing wireless office can enable smaller companies to accelerate their digital transformation by leveraging what 5G has to offer. We also see that these solutions can be white labeled by our CSP customers. Today, we introduce Vonage in more detail, and we'll talk more about the strategic direction at our December Capital Markets Day. That said, before I hand back to Peter and later on to Rory and Savinay, I would like to address a number of misleading stories predominantly in Swedish media around our withdrawal from Russia. At our April earnings call, we announced that we have suspended all our affected business in Russia indefinitely and would engage with authorities and in this case, Western authorities to implement this in an orderly fashion and that's what we have done. As you all understand, it's a highly complex matter as telecommunication networks represent critical infrastructure. Western governments are clear on the importance of maintaining Internet access and the flow of information for the people of Russia. As a consequence, we've been providing the necessary support to maintain civilian networking compliance with current sanctions. This also ensures the company is respecting its contractual obligations. The Swedish and EU authorities have granted limited exemptions for Ericsson as well as other companies to deliver technical assistance and software needed to maintain civilian telecommunication networks. I want to emphasize that those exemptions are limiting to supporting the civilian networks, which we consider to be consistent with our humanitarian obligation to provide connectivity as well. These exemptions will allow us to orderly wind down our business in Russia, including taking care of the safety and interest of our employees in Russia and to closing outstanding contractual obligation. The Swedish authority, the ISP, made it clear in their statement that the limited licenses they granted are only for civilian public telecommunications network and not for military use. These exemptions expire by year-end and Ericsson is and will remain fully compliant with Swedish EU U.S. sanctions. Finally, I note that the 400 employees in Russia have been notified of layoffs and are leaving Ericsson. We have explained the orderly wind down process for them, and they are now leaving our organization in a phased approach by the end of 2022. Thank you for allowing me a couple of minutes to make this important clarifications, and I'd now like to turn it back to you, Peter, to introduce Rory and Savinay and to talk about Vonage.

Thank you, Borje. And by that, actually, I would like now to welcome the Vonage team and hand over the word to you, Rory. Please, Rory.

Thank you, Peter, and hello, everyone, and thank you for joining us today. I'm Rory Read, the CEO of Vonage, and now a member of the Ericsson executive team. I have been in the technology industry for more than 30 years, and I joined Vonage in 2020 from Dell Technologies, where I was Chief Operating Executive. Prior to Dell, I held positions as CEO and President at Advanced Micro Devices and President and COO at Lenovo. I am delighted to be with you today along with Savinay Berry, Vonage's Head of Product and Engineering. We appreciate the opportunity to share with you some background on Vonage's business, its products, our market opportunity and why combining with Ericsson creates even more value for collective customers, partners, developers, team members and shareholders. Savinay will share details about our products and how the Vonage Communication Platform enables our strategy. He will share insights on the developer experience and details on use cases that demonstrate why businesses all over the world choose Vonage to power their connections, conversations and engagement. Savinay will also begin to share how the Vonage communication platform, together with Ericsson's 5G network capabilities and the CSP ecosystem, will begin to create the foundation for our global network platform for open innovation. And we will spend the second half of our meeting answering your question. Let me start with some background on Vonage. Vonage was founded in 2001 and pioneered and commercialized voice over Internet protocol, VOIP, as an early disruptor in the communication market. Today, Vonage has more than 2,300 team members globally and more than 1 million registered developers and over 120,000 business customers worldwide. Vonage saw the opportunity in the business cloud communication space early and began a strategic pivot to capture this market through a series of acquisitions. Those acquisitions coupled with our focus on organic growth over the past several years, have positioned Vonage as a global leader in cloud communications. And today, more than 80% of our revenues come from this business segment, which we call the Vonage Communications Platform. The Vonage Communications Platform is made up of revenues from our Unified Communications as a Services, UCaaS, and Contact Center as a Service, CCaaS, and our communication platform as a service, programmable APIs, which we refer to as CPaaS. When I joined Vonage, we saw an opportunity to accelerate our business performance by transforming our business in 3 areas: culture, strategy and execution model. Initially, we focused on business optimization and execution excellence, better aligning our go-to-market approach with our product strength and investing in those areas where we have the best product fit and the highest growth opportunity as the foundation of every transformation is the culture of that company. At Vonage, we created what we call the Vonage way, taking the passion and vision for communications innovation and combining that with accountability, collaboration and a customer-first mentality. One of the reasons that we're so excited about becoming part of Ericsson is because we share a very similar culture. We have also built a 3-year strategy and business plan, which we have cascaded down to every team member. So everyone is aligned with our strategy and understands how they personally contribute to drive our execution. We also put in place a data-driven fact-based daily business management system that uses analytics to understand the changing and growing market dynamics so we can quickly make moves needed to capture market opportunities as they arise and drive results. Now we have been moving into a phase focused on product leadership. We all see the changing macro global economic activities underway, but we remain steadfast and our focus to deliver the best products for our customers. With Ericsson, we will take our platform and products to the next level as we build out network capabilities and expand our current offering. Key to our successful transformation is our talented and passionate Vonage team members all across the world and the strength of our leadership team. I'll highlight several key appointments I made to enhance the strong leadership team already in place. We brought in Joy Corso as CMO; Steve Lasher as our Chief Financial Officer; Jay Bellissimo, as COO; and Savinay Berry as our Head of Product and Engineering over just the past 2 years. This team has deep global experience in technology, cloud, software as a service and in executing on business transformation and driving results driven change at scale and they have successfully led Vonage into its position of strength in the marketplace. As I mentioned earlier, Vonage has 2 segments: a cloud communications business, which we call the Vonage Communication Platform; and a legacy, residential VOIP business. Our cloud business is high growth and the focus of our strategy. The Vonage Communication Platform has 2 categories of offering, CPaaS or communication APIs enabling developers and enterprises to program communication functions into their applications, systems and workflows, which grew at 42% in 2021, and our UCaaS and CCaaS application which are enabling businesses to replace their on-prem PBX phone systems and contact centers with a cloud-delivered solution. This part of our business grew at 7% in 2021, and the cloud portion of this area grew in double digits. Collectively, the communications platform grew at 24%, generating $1.1 billion in revenue for the year. The Vonage communication platform is architected on a public cloud infrastructure and enabled by our global carrier-grade network with over 800 interconnected carriers, which Savinay will talk about in a bit more detail a little bit later. Bill using an API-first strategy, the Vonage Communication Platform is a highly scalable global platform with a portfolio of stand-alone APIs that are programmable and configurable. Our UCaaS and CCaaS applications are being built and enhanced on our underlying API. Many of the world's leading global enterprises have chosen Vonage to power their cloud communications as they undergo their digital transformation and focus on customer engagement. Vonage has customers in more than 100 countries around the globe, representing almost every industry vertical. This enables us to provide a broad-based opportunity and balance growth trajectory, and we continue to innovate on our platform so we can meet the needs of our customers, not only today, but in the future. Vonage's vision is to accelerate the world's ability to connect. Our strategy is to power customers' communications, conversations and engagement to capture the next technology wave, the digital transformation and intelligent communications wave. There are multiple drivers that are accelerating this next technology wave. The emergence of the public cloud and the proliferation of mobile devices is fundamentally changing how businesses communicate with their employees as well as how they interact, sell to and support their customers. Additionally, the COVID-19 pandemic caused market disruptions across almost every industry, accelerating the need for digital transformation of communications as a critical driver of business outcomes with hybrid work environment and work from anywhere becoming the new standard and customers expecting to interact with businesses across any channel based on what they prefer from anywhere. These trends are driving a large and rapidly expanding global total addressable market or TAM in the cloud communications space. Collectively, we're looking at a $73 billion TAM by 2025. With the 5G capabilities and APIs that Vonage and Ericsson will enable in the future, we will add to this opportunity by being a first mover in the creation of a global network platform and network-based APIs. Technology transitions occur in waves and are built upon each other. The convergence of Internet, mobility, the cloud and powerful 5G network, combined with programmable APIs is driving a rapid acceleration in digital transformation around how businesses engage with their customers. This is occurring across all vectors of engagement, discovery, commerce, support, service and even how employees within those companies work in a hybrid work environment. We're seeing multimodal communications, voice, video, messaging, authentication being used seamlessly to merge the physical and digital customer experience. What we're starting to see is a movement from individual transactions and notification to 2-way conversations. And ultimately, these will move to 360-degree immersive customer engagement where the physical customer experience in the store, the experience on your PC at home and the experience on your mobile device from anywhere you are in the world provides an integrated consistent engagement experience. Every company in every vertical is going to move in this direction over the next 3, 5, 10 years, and this will drive growth over the next decade. Vonage's combination with Ericsson is built to capture this opportunity. Our communications and network platform will create and expose communication and network APIs that will be the basis of many new experiences. Ericsson's 5G capability, network leadership and engineering scale, combined with Vonage's knowledge and leadership in cloud communications, will enable the creation of new applications by putting the power of the network at the fingertips of developers to capture these market opportunities. This differentiates us in the market. Our competitors are still trying to build out what we have in the Vonage Communications Platform. And some will need to combine with others just to do that. We believe we have a powerful solution combination that is not easily replicated. The winners will emerge over the next 3 to 5 years. And I think we have a great opportunity to be one of those winners. Now Savinay will go into more detail on our product capabilities and what we're doing to execute on this strategy and vision.

Thank you, Rory, and good afternoon, good evening, good morning, everybody. I'm excited to be here with you today. I'm going to cover 3 things in this section. I'll go into a little more detail on Vonage's products, a look at our competitive landscape in our market and how we are working with Ericsson on opportunities we have together moving forward in the future. So let me dive in. First, let's start with the products, the basis for which is the Vonage Communications Platform, as Rory explained. The Vonage communication platform is one of the largest communication platforms and enabled communications, connections and engagement for some of the biggest brands in the world. For example, if you get a text message today from a delivery service like DHL, chances are Vonage is a technology and a needs that delivery notification or if you're using a video capability for a telehealth provider and telehealth, as we know, became extremely popular during the pandemic when people couldn't see a doctor in an office and is a preferred way to receive medical consultations. Vonage's video APIs power this. Another example, when you log into an account or a website that requires 2-factor authentication to access the site or change your password using a code that you receive through a text message, chances are Vonage is providing that underlying capability. Vonage provides all of these services and enables many more use cases through our APIs for voice, SMS, video, verify and more as part of our communications platform as a service or CPaaS capabilities. On top of that, we have our Unified Communications as a Service and Contact Center as a Service, UCaaS and CCaaS applications. As Rory referenced, the UCaaS essentially takes a business's on-prem PBX, our phone system and moves it to the cloud. This enables the business to seamlessly connect to its officers and employees around the world and also includes features for SMS, team messaging, video conferencing and more that you can use whether you are in an office, on a desk phone or at home from your laptop or on the road using your mobile phone. We have thousands of UCaaS customers, including Domino's Pizza, Allstate and a global coffee chain with a brand you would recognize anywhere in the world. Companies use our CCaaS application to enable their customer contact centers. For example, when you call a company with questions about a product you bought, you are prompted to add information, click on 1 to go here, click on 2 to go there, and then you are connected to an agent that can answer your question or solve your problem. Our CCaaS product captures and records all of the information you shared through the automated system and live discussions. So the next time you call, you'll have a better customer experience. Large enterprises and small medium businesses use our Contact Center as a Service product, including brands like Siemens, Glassdoor, Hotelbeds and Revolut. Now we've been in the business cloud communication space with UCaaS, CCaaS, communications APIs or our CPaaS business for a long time. And in 2021, we acquired a company called Jumper.ai, which got us into the conversation of commerce space. Conversation of commerce enables consumers and brands to engage within the social channel. This area is still emerging, and we believe it will be a high-growth category, which is gaining popularity today with the Gen X, Gen Y and millennials. That's how it works. If you're in a social platform like Instagram or Facebook Messenger and you see an ad for a beauty product like L'Oreal, with our conversational commerce solution, you can pay for the product and have it shipped to you without ever having to leave your social media feed. That's what we are powering. The common link underneath all of these solutions is the Vonage Communications platform. Now let me also go into detail into the market size. The UCaaS and CCaaS market today combined is roughly about a $33 billion market but it is expected to grow to almost a $51 billion market in the next 3 years. Similarly, the Communications Platform as a Service market, communication APIs, is projected to grow to around $22 billion. These are high-growth markets that collectively expected to reach $73 billion in 2025. Despite what we are seeing in the world right now regarding the headwinds in the economy, we believe that the demand for the kind of communications capabilities that Vonage offers will continue to grow. Now how do we enable it? We enable the Vonage Communications platform using our entire global technology footprint. Vonage has more than 800 connections with global carriers worldwide, which means we have 800 carriers that we work with globally. We have a global reach with our APIs available in more than 200 countries. We have global R&D centers in San Francisco, New Jersey, Atlanta, London, Tel Aviv, India, Poland and Spain. And we are completely cloud native, which provides us the ability to scale and the flexibility to meet the operations of large global brands. In fact, we work very closely with AWS. And today, we have almost 16 AWS zones and 50 availability zones, which provides us with this global connectivity. This enables us to provide 25 billion-plus messages and minutes annually for our customers. And with Ericsson's network, global scale and R&D resources, we will continue to grow. Now I want to share a bit about where we stand among the competition. Because it's a high-growth market, we obviously have competitors and we also have competitive strength. If you look at the chart in front of you, what you'll see is that Vonage is placed in the top right corner of by reputed industry analyst firm, OMDIA in its OMDIA universe selecting a CPaaS platform '22 report, in which Vonage was ranked in the top positions on customer experience and solutions capability. This report outlines our strength in the communications APM market and also how Vonage is differentiated by providing UCaaS, CCaaS and conversation of commerce on the same platform. Here, you will see that there is a really simple way that the developers work with us and interact with our APIs. As you heard Rory say, we have over 1 million registered developers that have worked with us, which is the second largest developer community in this category. This is how the developer would typically come to our developer site, which is developer.vonage.com, and gain access to any of our APIs, SMS, voice, video and more. They are able to self-serve and embed our APIs into their applications. They might start very small to test to see how the APIs work. Over time, that consumption increases and often gets to the point where they turn into enterprise accounts are large managed accounts. What we do is we hide all of that complexity of all the connections to the carriers behind the scenes and simplify these connections for our customers using our APIs. Brands like those on the slide, DHL, Uber, L'Oreal, Airbnb, started out small with a developer who came to Vonage through developer.vonage.com, and started embedding our APIs into their existing products and increased usage over time. That's how we grow our CPaaS business. CPaaS is a consumption-based business, which means that the more developers and enterprises consume our APIs, the more revenue we drive for our business. This slide illustrates other use cases examples powered by our platform. If, for example, you use Uber and you can't locate your driver, the Uber driver is either going to call you or you call the driver. If this happens, you will never know their number. You don't know the driver's number and the driver doesn't know your number yet, you can still have a phone call. This capability is called Voice of [indiscernible] or voice proxy and is provided by the Vonage voice API. This is used in the Uber application and is a good example of where customers start small and grows over time. Unified Communications as a Service, or UCaaS applications, is another use case enabled by our APIs. Vonage's 2,300 employees use our UCaaS product, and this helps us to test new features and functionality, which we scale and then offer to our customers. Contact Center as a Service, or CCaaS, is another use case, and we also use our own CCaaS application to serve our customers. Our UCaaS and CCaaS applications are subscription-based. For customers who buy these solutions, we provide a subscription for the number of users that use that application. That will typically be a 2- to 3-year contract, which can be consumed over time. Now let me turn to how our global scale and connectivity is going to help us as we continue this journey with Ericsson moving forward. One of the key tenets of the combination with Ericsson is its 5G network capabilities. We expect the demand for new services, innovations and value creation enabled by 5G to grow significantly over the coming years. This innovation will come from the network capabilities, which were so far hidden behind things in like quality of service, network slicing and device management. These are all core components of the network, but they were not exposed quite yet as standard restful APIs. To enable this innovation, 5G capabilities need to be available to developers and enterprises to embed in more advanced use cases, and this will be done through open network APIs. This makes it much easier to expose the network capabilities as standard functions that can be embedded into the Vonage Communications platform and easily used by the Vonage developer community and millions of other developers. Now you can start to think about new use cases like cloud gaming, connected vehicles and remote patient monitoring, things which right now only happen in small silos and in small places can become democratized. Vonage can only do that with Ericsson, Ericsson carriers and their customers. In fact, we have already started meeting with the CSPs to see how we can enable these network functions to provide these new use cases because these use cases are going to happen. It's just a matter of time, and we want to be there on the ground floor when it does. Finally, if you look at what this means for our combination together, we believe in this vision of the global network platform. This global network platform will capture all of the use cases I just described on a standardized platform. It will be an open platform for innovation and provides the capability for these use cases across the globe, the Americas, EMEA and the Asia Pacific regions. There's a lot more to come in this area. Vonage is only in the early stages of working with the Ericsson engineering and product teams and communication service providers. There's a lot more to come on this, and we look forward to updating you on the progress as we move forward. With that, I'm going to turn it over to Rory to close out today's presentation.

Thanks, Savinay. In summary, together, Vonage and Ericsson are positioned to provide a differentiated value proposition to a large and growing total addressable market. Today, the Vonage Communication Platform is driving better connections, conversations and engagements for businesses around the world with a large and diverse client and developer base across almost every industry vertical. 5G will provide better bandwidth, security and performance that enables new dimension of network control and expands the use cases for developers to embed APIs, as Savinay has explained. As the world moves from notifications and transactions to conversation and ultimately to full immersive 360-degree engagement, the Vonage Communication Platform on top of Erickson's 5G network capabilities will be how new workflows experiences are being built and delivered. Together, we are creating the leading global network platform for open innovation. So thank you for your time today, and let's now turn it over to Peter to open it up for questions.

Thank you, Rory, and thank you, Savinay. It's now time for the Q&A session. And as I said earlier, as this is more an educational call of Vonage, we should focus the questions to cover Vonage and the intention is not to answer short-term related questions, both in regard to Vonage and Ericsson as we are close to end of the quarter. So please, operator, go ahead and open the Q&A session.

[Operator Instructions] And the first question comes from the of Predrag Savinovic from Carnegie.

So my first question is, if you could compare your position within the developer or the developer-led sales notion generally to Twilio. I mean, you make some claims here on your market leadership, but they have run rate revenue that's higher than yours and they're growing faster. You have 1 million developer accounts. It's an important achievement, but they have 10. So in the context of these things and these numbers, how would you compare maybe there are scale benefits, of course, in having the highest number in this and how you could win against them when they have such a head start? And then my second question is if you can talk about the different buckets of Vonage. I mean you have CPaaS, UCaaS and CCaaS, and we've found relative strength for -- some players invoice some are messaging. Where would you say Vonage stands out specifically in these buckets compared to competition?

So let me take that question first. This is Rory Read. I think what's really important here is that we're at the beginning of a huge digital transformation. I like in where we are in terms of this wave of technology around the web and these APIs to be around 2012 in terms of where the cloud was back then. This is going to be a 10-year journey. The winners and losers are not set. Sure. There are some people that have an early lead. We have a strong base to build from. We have a strong set of developers, and we have a strong set of products. What we're going to do is to work with Ericsson and the CSPs to create new strategic relationships to be an early first type mover in these next-generation APIs. I think they're going to take advantage of new use cases that can be introduced because of the latency, the performance, the security you inherently get in a network-based solution versus the cloud. I think that's where we're really trying to create this, a strategic set of relationships with enterprises, CSPs with the backing, the knowledge of Ericsson, our cloud communication background, I think, positions us well. We'll continue to invest in developing the developer network, and we'll continue to focus on introducing our new solutions as well as building on the existing. So I like that position, and I look forward to the next 3, 5, 7 years to show how we can grow in that space. Savinay, before I take the second question, anything you'd like to add about developers?

No, I think that's fine, Rory. So in terms of the developer community, there's overall about 27 million to 30 million developers worldwide today, and that number is only going to continue to increase. And then on top of that, if you add developers who are what you would call as no code or low code developers or [indiscernible] developers, that number can go up to almost 50 million to 60 million. . So we're in the very early stages of this entire journey of how we can empower these developers to access capabilities through our API platform, through the BCPA platform and leverage some of the capabilities of the network in doing so. So it's a long journey, big market opportunity, and we're excited to go through that journey with Ericsson over here, leveraging GNV.

So then let's go to the second one and look at the products. From a UCaaS and CCaaS, you were asking what's our relative strength, we've spent a lot of time as part of this preparation. We've -- over the past 11 months, we formed a value-creation project office to lead the integration of Vonage into Ericsson. We have 17 work streams that are working every day with team members from both Ericsson and Vonage to bring this solution to bear. When we look at the CCaaS and UCaaS and how we compare, I think one of the important things is to think about what we're hearing from our customer set. First, from the Vonage customer set, they're excited. They see this combination as an excellent move for Vonage. You can see the macro environment out there. Many of our competitors are in trouble. They are going to have to combine with others in order to survive or maybe not survive at all. We have an opportunity working with Ericsson, the CSPs to create new solutions that are going to open up even more TAM. What's interesting is we've met with CSPs across the planet, and we've met with quite a few of them. Their interest level is high on APIs for sure. It's a strategic space and very powerful to open up new revenue opportunities and to drive new network volumes. But it's also interesting that we saw on the UCaaS and CCaaS space, a real interest from them in terms of potentially offering, reselling a white label solutions in that space as well. We're particularly strong in the UCaaS and CCaaS space around small, medium and multi-location enterprises, and we highlighted some of those. I think one of the visions that we have here is to take and create that strategic long-term relationship with the CSPs and with enterprises that open up the marketplace. I hope that's helpful, and why don't we go to the next question, Peter?

We will do. Thank you, Predrag, for that question. And then we'll move to the next question, please, operator.

Thank you. We will now take the next question. Please stand by. And the next question comes from the line of Andrew Gardiner from Citi.

Once you, Rory, about the reach that Vonage has. On one hand, you're talking about the benefit of now being within Ericsson and sort of the advantage that gives you. But at the same time, you guys have just talked about the existing reach of Vonage over 800 carriers globally in 200 countries. I suppose to the prior question, yes, you might be down in terms of developer count a little bit, but it feels to me like you've already had a significant reach out there. So what is it in particular now about being within Ericsson is going to improve your relationship with the operators? Like what is Ericsson really bringing with you in concept to those conversations?

Well, that's a great question, Andrew, and thank you for that. One of the things that we -- as you mentioned, we have this large carrier base of our existing business. We want to create a deeper strategic relationship with those CSPs and carriers. I think Ericsson has an unbelievable market position. I give my right arm to have the opportunity to have almost 40% market share of 5G outside of China. That's an amazing set of market share. And they've been working with their equipment and their services to build these deeper relationships. I think what we're going to be able to do is now the 3 of us working together can even be more strategic. And I think that will open up for our existing business, more message opportunities across Asia, Europe and the Americas. I think it's going to open up, obviously, new opportunities in terms of this reselling and white labeling of some of our solutions around UCaaS and CCaaS. I think there's an opportunity for us, and I think this is always important in business. Pick those strategic relationships early as the market is changing. And you're right, Andrew. We've had some really good growth. We've seen a real success in the customers that we've built. We can grow that base business with the support from Ericsson, the better relationships we'll have with the CSPs. I can tell you that I speak to customers every day. I was all across the United States and Asia over the past 2 weeks, every customer commented on what a good move to combine with Ericsson. They saw us as more stable, a long-term bet. We're future-proofed. They see this as a plus. On the other side of it, now we open up this new TAM. That's what really excites me. So why did I come to Vonage? And why was I excited to join Ericsson? I had some really interesting jobs in almost 30-plus years in the technology space. I think this is really an opportunity to change how businesses interact with customers. And I think with combining our growth in our existing business that I just highlighted with this next-generation set of APIs that 5G and 6G will enable, we're going to do things that have not used cases that just can't be tackled today. These ideas have been around for 10, 20 years, but 5G opened it up. And as we move down this, we're going to be able to introduce as Savinay showed you that whole set. So it not only helps our existing business with the strategic relationships gives us the support that customers believe in us and know that we're here for the long term, but also gives us this future journey so that when they make a strategic decision to go with Vonage, they know that they don't only win today, but they have an opportunity to grow and win with us over the next 3, 5, 7 years. That's how I look at it, Andrew.

Thanks, Rory. Any more questions, Andrew?

Just -- yes, a follow-up relating to that. I mean you talked about the Ericsson's market share relative to your own. I mean if I look at some of the stats that you've given us today, in terms of CPaaS, you'll 7%, high single digit as a percent of the total market. You are viewed as one of the leaders, as you described by OMDIA. It feels quite fragmented at the moment. I mean maybe there's a couple of guys a bit bigger than you, but it feels fragmented. In terms of your ability to go ahead and gain market share to be one of the leaders that you expect to emerge over the next few years, is it entirely organic from here sort of leveraging what you just described with Ericsson? Or do you anticipate that there's going to be inorganic moves within this part of the market?

Yes, that's a really good question. When you look at our position, we're right there. We're in the top handful of players. I think in the top 2, maybe 3 of the entire space. Many of our competitors are trying to replicate what we have. They might be strong in one area or another, but they don't have the full platform. With our capabilities and with the support of Ericsson and the ability to take these next generation, I think organically, we're going to grow very well. Now the macro environment, everyone can read and see in the marketplace it's choppy right now. And that's affecting everybody. And currency is jumping all over the place. That's short term. The long term, the next 3, 5, 7 years, I think we're in a great position to emerge as a leader. And industries always go through the space. There's lots of fragmentation in the beginning, and then it begins to see these emerging players. They make the right strategic moves. I think this combination is one of those right strategic moves. You asked, is it organic or inorganic? Organic for sure. We're going to continue to grow the base business. We're going to combine with Ericsson and some of the work they're doing in network and introduce new APIs that will open up new business, but we're always going to continue to scan the marketplace for inorganic moves that augment the strategy and the marketplace opens up some really interesting opportunities. Now do we have to go combine with this gigantic player or not? No. What we can do is find those spot solutions that allow us to enhance this set of offerings. And I think it's a really interesting combination. So my answer is primarily organic, but we'll continue to look at inorganic moves that make sense. We're going to be prudent, particularly as this market cycle moves through and we're going to capture the market as it goes. And this fragmentation, you'll see emerging winners over the next 3, 4, 5 years. And I think we're as well positioned as just about anyone to be one of those big winners.

Thanks, Andrew. We'll move to the next question, please, operator.

We will now take the next question. The next question comes from the line of Frank Maaø from DNB Markets.

So there's been a bit of discussion around the numbers here with regards to the developer community and the size and so on. And obviously, there's a lot of growth there to be -- to come in terms of that. But when it comes to your existing base of developers, I mean, how can we be sure that there's a great fit between what their capabilities are and their customers are and their focus is when they are developing, for instance, SMS embedding -- SMS in a scheduling system for a doctor's software or that kind of typical use case compared to [indiscernible] needs here to -- for 5G APIs, which are quite advanced and deep and have quite different types of customers, perhaps referring to private networks for factory automation or similar. So very different capabilities that might be needed for these services. So given this, in terms of the developer community and the customer base they work with, what is really the relevant and the overlap in terms of the competence and product segment focus? That's my question.

Yes. I think, Frank, that's a good question. And let's talk about it first in 2 pieces. As Savinay mentioned, 27 million to 30 million developers around the world growing. We see developers registering, coming in. We see them thousands in any given month, activating this or doing that. We actually grow them into managed accounts. Many of the accounts or number of those accounts that Savinay showed actually started as developer accounts that we grew into managed accounts. It's a feeder system, and so we want to create that. We also have a direct enterprise push as well. So our go-to-market is both developer and enterprise driven. Now you really probed on the thought about, hey, 5G is going to open up these different sets of customers, like supply chain or factory automation, well, how is the overlap in the developer community? Well, there's a couple of thoughts. One of the things that you want to have is a platform. So we have a platform, and we have experience in terms of creating the code snippet, the documentation, the ability to register, the ability to move forward, the ability to nurture and then move them into managed accounts. One of the things we're continuing to do is work with partners in the space, both CSPs and the ISVs and SIs in order to create those new relationships. So I think there's strong infrastructure overlap and the idea that APIs are these kind of programmable bits code that sit on top of this carrier network that allows you to distribute this information to anyone anywhere. Many of our support solutions like field-based support models that Savinay talked about are very similar to these kinds of concepts. What changes is that the API is not only based on a server architecture, but on a network architecture and that network architecture has better performance and latency. So Savinay, why do you add a little bit of color on that one. So I think I've touched on a couple of points, Frank, that shows why the platform, why the infrastructure and why the solutions are quite similar. But Savinay, perhaps you can give a couple of examples that are very similar to this 5G concept that we already do today.

Yes. Sure thing. So Frank, think of it this way. What we have done over the past several years in enabling this platform is hitting all that complexity which sits behind the platform, the complexity of connecting with the carriers, clearing out where to scale all of that. We have taken all of that complexity away and simplified it by leveraging just 1 API to a developer. And remember, most of these developers are what's called as web developers. They don't really know how to leverage most of the network functions or anything else. They know web development or mobile development in most cases. So what we've done is it's taken all of that complexity away and simplified it so they can do their job and build applications for the web and mobile. We're going to do the exact same thing working with the 5G API. So you can imagine functions like party of service or network slicing, these are really core network capabilities, which can provide a lot of value to the developers in the right set of use cases. I mean imagine if you're doing a field service out in the field somewhere and you need to provide a video link back, that video link, if it had better quality of service, then wouldn't that be great. So you have a dedicated SLO to it. Now guess what? We actually already have a set of video APIs. In fact, we got one of the world's best video APIs, enabling enterprises at scale. So how can we take all of that complexity behind the scenes and provide that simple API function enabling -- enabled by the 5G functions underneath it, that's going to be our goal. So we don't think that there is a big disconnect at all actually. They are very synchronous in the way that we'll be enabling this for our customers going forward.

Thanks, Frank. We will now take the last question from Adithya Metuku at Credit Suisse.

[indiscernible]

It's a bad line here, I'd say. We can't hear you.

Can you hear me?

A little bit better.

Is this better?

Perfect. Perfect.

I was using my headset, apologies. So I mean, in response to a previous question, it sounded like you're essentially financially stronger being a part of Ericsson and your relationships with CSPs will also be stronger as a part of Ericsson. But you also mentioned earlier that Ericsson's knowledge will help you. And I just wondered if you could help me better understand what exactly does Ericsson have that will help you and that will be additive to the capabilities that you will be able to provide in terms of Ericsson's knowledge base. Any color there to help me understand that point would be really good. And then I just had a follow-up about 10 days ago, one of the peers -- I don't know if your peers Twilio cut the headcount, and it sounded like they are worried about their growth prospects. I just wanted to understand how do you feel about the -- about how the long-term growth prospects of Vonage have changed since the acquisition was announced. And if they haven't changed, do you expect them to change given macroeconomic headwinds that we're seeing today?

Thank you. So I'll take the second one first, and then we'll talk about the Ericsson value. Macro headwinds, they come and go. There's definitely -- we can all debate. I think we're going to see macro pressures for the next 3 or 4 quarters, maybe 5. It's hard to predict. It's anyone's view. It's going to affect everyone. Here's the point, though. In this space where we play with the Vonage Communication Platform or, for example, APIs, API's market is growing somewhere in the high 20s today. If there's a macro pressure that emerges here, what we'll see is it continue to grow. Is it going to grow at for the short term at 23 or 24 or 25, I can't predict that right now. But there could be some of that short-term pressure. What you're going to see, though, is it's going to continue to grow long term in a very substantial way. This market is in the early phases. I likened it to where cloud was in 2012. I think this is going to have substantial growth over the next 3, 5, 7, 10 years. Tactically, if there's some pressure, it's still going to grow really rapidly. And what we have to do is to take advantage of that marketplace and grow. We've been very conscious about how we've grown our business. We've grown our team member team in the developer space and particularly focused on creating the right engineer and products investments over the past year, but we've been prudent. We knew there was some market pressures, and we want to make sure we never got ahead of ourselves. We think we prudently invested and they maybe got a little bit ahead of their skis. In terms of the value that we see from Ericsson, I think Ericsson has an amazing brand, an incredible set of relationships and leadership in technology. You can't have almost 40% market share in anything without having leadership capabilities. And I've been working with engineers and business leaders across Ericsson for the past 10 months as we talked about this and began to work. It's an impressive organization. They bring the expertise of the CSP. We're going to have better detail. They bring the expertise in terms of the network in terms of what we can create, and this is something no one else has. This is something where we can be an early first mover. This can be differentiated. In business, I've been in business 30 -- almost 40 years now. The opportunities are always there. It's how you take advantage of them, and this network is always about getting there early. This is an opportunity for us to create that together. They have the knowledge and the expertise around the network that gives us the technical basis to create differentiated APIs, and that's going to create a better experience for the developer, the enterprise and ultimately the customer. That's how we're going to win, and that's why I think the combination is so powerful. I hope that helps. I'll pass it back to you, Peter.

Thanks, Rory. What a good ending of that answer. So thank you, all. We are over an hour. So I would like to thank you all there on the call covering Vonage. And I'm looking forward to hear from you when we have our report coming up on October 20. Thank you, and goodbye.