Greetings. Welcome to the RingCentral Avaya Strategic Partnership conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Ryan Goodman. Thank you. You may begin.
Thank you. Earlier today, RingCentral announced that it will become the exclusive provider of UCaaS solution to Avaya. Joining me today to discuss the transaction is Vlad Shmunis, founder, Chairman, and CEO of RingCentral, and Mitesh Dhruv, Chief Financial Officer of RingCentral. Our format today will include prepared remarks by Vlad and Mitesh, followed by Q&A. Some of our discussions and responses to your questions will contain forward-looking statements, including statements regarding the new partnership between RingCentral and Avaya, and its potential results and benefits, and the potential size of the UCaaS market opportunity. These statements are subject to risks and uncertainties. Actual results may differ materially from our forward-looking statements. A discussion of the risks and uncertainties related to our business is contained in our filings with the Securities and Exchange Commission and is incorporated by reference into today's discussion.
RingCentral assumes no obligation and does not intend to update or comment on forward-looking statements made on this call. I encourage you to visit our investor relations website at ir.ringcentral.com to access our slide deck on the transaction with Avaya, our earnings release and slide decks, our non-GAAP to GAAP reconciliation, our periodic SEC reports, a webcast replay of today's call, and to learn more about RingCentral. Unless otherwise indicated, all financial measures that are discussed on this call are non-GAAP with year-over-year comparisons. A reconciliation of all GAAP to non-GAAP results is provided with our earnings releases and in the earnings slide decks on our website. With that, I'll turn the call over to Vlad.
Good afternoon, and thank you for joining us. We are excited to announce the strategic agreement between RingCentral and Avaya. This partnership leverages respective strengths of each company, aligning Avaya's strong market presence and worldwide go-to-market capabilities with RingCentral's leading global UCaaS platform. Many analysts view the UC to UCaaS transition as a $50 billion opportunity that is now reaching an inflection point. Benefiting from this shift, RingCentral has seen continued enterprise and channel momentum. We think the strategic partnership between Avaya and RingCentral will have long-term positive effects as enterprises worldwide continue migrating to the cloud. Most importantly, we view this strategic partnership as positive for customers and partners. We believe that Avaya UC customers will now be able to enjoy numerous productivity improvements offered by RingCentral's leading UCaaS solution that integrates voice, video, and team messaging with an open platform and strong global footprint.
Additionally, we expect Avaya customers to benefit from lower total cost of ownership as compared to their current operation, which involves their hosting and maintaining on-premise systems and self-managing a multitude of underlying carriers. As for partners, they will now be able to better satisfy the evolving needs of their customers while building a predictable, recurrent revenue portfolio with attractive economics. Our CFO, Mitesh Dhruv, will later address positive impacts that RingCentral expects from this partnership. I will now provide some additional details behind today's announcement. As part of this commercial agreement, we will be providing a new UCaaS solution named Avaya Cloud Office by RingCentral or ACO. ACO will be the exclusive UCaaS offering for Avaya. We believe it would effectively address the cloud transition opportunity for Avaya's 100 million strong user base, which includes over 90% of the Fortune 100 enterprises.
It will also empower Avaya's extensive partner network in over 180 countries with a leading UCaaS solution. RingCentral and Avaya will jointly contribute technology and resources to develop programs and automation to further aid in on-premise to cloud transition. Leveraging RingCentral's open platform, customer migration from Avaya's on-premise UC to Avaya Cloud Office powered by RingCentral will be streamlined. ACO will also enable Avaya customers to leverage their existing investments in most of their Avaya phones and other devices, which is an important cost of ownership consideration. In summary, we believe today's announcement represents a major opportunity for all parties involved, including, importantly, customers, partners, and of course, Avaya and RingCentral. With that, I will now turn the call over to our CFO, Mitesh Dhruv, for more color on financial terms of this agreement.
Thanks, Vlad, good afternoon, everyone. Let me begin with a walkthrough of the agreement terms. Under our commercial agreement, both companies will jointly contribute resources toward development and sales and marketing of Avaya Cloud Office, or ACO. As part of these efforts, RingCentral will pay Avaya an advance of $375 million in stock, which will primarily count towards future payments for ACO sales, as well as certain licensing rights. As part of the agreement for RingCentral to be the exclusive UCaaS offering for Avaya, RingCentral will invest $125 million for convertible and redeemable preferred stock. This would translate to an approximately 6% position in Avaya. RingCentral remains committed to our pure-play SaaS business model, and this 6% investment will require neither financial statement consolidation of any kind nor equity method accounting.
From a financial perspective, we are laser-focused on both the growth economics and growth itself. We believe ACO will be accretive to revenue and to operating margins. This partnership provides us the opportunity to accelerate the transition of a sizable install base of UC customers to the cloud. This should provide a new driver for our incremental long-term growth. As to margins, ACO contributions have favorable unit economics. We expect that by leveraging Avaya's worldwide go-to-market and channel network, ACO sales would have a lower cost to book versus our other direct and channel efforts. As a result, we believe this partnership will be accretive to long-term operating margins. In conclusion, we are excited about the opportunities this partnership creates. We remain committed to our pure-play SaaS business model and see this partnership as another driver to our continued philosophy of profitable growth.
Now let me turn the call to the operator for Q&A.
Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question is from Terry Tillman with SunTrust Robinson Humphrey. You may proceed.
Hey, Vlad and Mitesh. I mean, I was still just digesting the news, but it seems very interesting and congratulations. That's just kind of the opening statement. I had a two-part question. First for Vlad. As we're talking to investors and we see how you all are articulating how this enhances growth. How do we see KPIs or success metrics in terms of which would stand out the most in your mind, Vlad, as it relates to looking at metrics on how this progresses? Then I have a follow-up for Mitesh. Thank you.
Hey, Terry. Thank you. Look, it is exciting news. Very meaningful. Look, how do we measure success is how we always measure success, right? It's about growth. It's about profitable growth. In the end, it's about CSAT. Customers need to be happy, and happy customers beget more happy customers. Look for more growth, I would say, over time.
Okay. Maybe that was the easier question. Maybe the harder question is gonna be for Mitesh. Watch out, Mitesh.
Thank you, Vlad.
Yeah. Some of the questions I am getting from investors are, look, over time, on a piecemeal basis, you might take share anyways. Now partnering with them, how does this maybe change that kind of migration and share displacement in your favor? If we look out 12, 24 months, just trying to think of how this makes it different as opposed to your going out there and winning the business yourself from a direct or channel partner perspective. Just trying to understand how that might affect the model differently now. Thank you.
Sure, Terry. On the differentiation and the impact of the business model going forward, look, we have been doing a good job of gaining share, as you said, and you used a good word called piecemeal. The UCaaS market has been gaining share "piecemeal," and what this does is, it's not a zero-sum game, right? It actually enhances or amplifies RingCentral's opportunity to get more at-bats. The market's big enough where what's happening right now is, all the UCaaS players sort of like insurgents fighting with knives here to get the share. We have the opportunity to combine forces with the biggest player in terms of seats in the market, and then remove a friction for the channel partners to adopt RingCentral and for the customers to adopt RingCentral. I think that's where the magic is gonna happen over time. We feel very optimistic.
The way net-net to frame this opportunity is it's gonna be an incremental opportunity for us, which would help us on both growth and margin.
Thank you. Congrats.
Our next question is from Nikolay Stoyanov with Bank of America Merrill Lynch. Please proceed.
Hi. Thanks for taking my questions. Congratulations on the announcement. Vlad, my first question is for you. I have a follow-up for Mitesh, if you don't mind. Vlad, traditionally in technology company, partnerships between two companies haven't worked out very well. What steps are you putting in place to ensure this partnership is successful?
Great question. Obviously, some partnerships do work, or else there wouldn't be any more partnerships moving forward. There is some precedent. I tell you, this one is actually not that hard because it really is in everyone's best financial interest is to make it happen. The way we think of it is there are four main constituents. Okay? In order, if you will, first and foremost is the customer. Customer will get more for less. If you look at what a customer is paying today for an on-prem voice-only seat, if you take into account all of the costs involved, including, very importantly, lighting up that line that comes out of the box, then there are actual savings in going to the cloud. Of course, what they get is they get messaging with us, they get video, they get open platform.
They get all of the integrations. They get mobility. Customer wins. Okay. Next guy up there is the partner. We have really spent a lot of time with the Avaya folks understanding all of this from partner perspective. It is our common belief that partner actually comes out ahead. Okay. They now get on the bandwagon of UCaaS, so they don't need to fight the customer anymore. They get a recurrent revenue stream, which obviously has numerous advantages. I know they can really concentrate on what they do best, which is providing custom solutions, but now using modern state-of-the-art technologies that we at Ring are able to provide. All right. Let's go down the line. There is Avaya itself.
Simple truth of the matter is that vast majority, of two out of three of their customer base, again, as a reminder, it's 100 million users we're talking about, but two-thirds of them are currently unmonetized for Avaya. To make it very simple, it is in Avaya's economic interest moving forward to convert as many seats as possible, including their on-prem seats. Okay? Again, they're largely disintermediated after the initial sale is made. Even they have some of these hosted models out there, powered by [the college] right now, storefront. Literally, we went one by one by one, and look, you should ask Avaya, but our understanding is that they actually come out ahead pretty much in each and every case. They'll make more money. Look, for us, it's an incremental growth driver. We love partners. We love associating with major brands.
We have very positive experience with AT&T, for example. Okay. We have all of those learnings. Again, just economic interests are fully aligned here. We've done it before. Very importantly, we have done it before. We've empowered other people with our product with the core brand, and of course, Avaya is pretty good at selling. Yeah. We think it's going to work.
Thank you, Vlad. A follow-up for Mitesh. Speaking of economic interest, Mitesh, maybe if you can give us a little bit more details on is the customer sitting on Avaya or RingCentral paper? Is it the revenue share? Is it going to impact COGS or sales in marketing? How shall we think about the financial impact? Thank you.
Sure, Nikolay. It all boils down to unit economics in a SaaS business model. To answer your first question, yes, it's going to be on RingCentral paper. RingCentral owns the customer. Obviously, this is again, Avaya. Think of Avaya as a super master agent in this relationship where they have a large install base. For us, when it comes to unit economics for us, this transaction enables us to leverage their entire GTM, which in turn lowers our cost to book. That's part one. Second part is because the cost to book is lower and the churn is lower because it's sold through the channel, it helps us drive more revenue for every dollar of sales and marketing we invest. That's the second part. Point number 3 is that lower part of money, which we save, then again can be reinvested to fuel growth.
It's a bit of a virtuous cycle that goes for us. If you take this construct, this whole virtuous cycle, layer it on to international markets, it just amplifies. RingCentral has a presence in about, call it four or five countries where we sell directly. Avaya's revenue, more than 50% of Avaya's revenue comes internationally. There's a lot of synergies and very less overlap between these two companies. That's where I think ultimately it helps our unit economics. Again, it will help our Rule of 40 and profitable growth.
Thank you.
Our next question is from Bhavan Suri with William Blair. Please proceed.
Hey, this is Matt Stotler on for Bhavan. Thanks for taking my questions. I have one for Vlad and one for Mitesh as well. First off, Vlad, in the press release in the prepared remarks, you talked about joint technology development to migrate customers. Can you help me understand exactly what you mean or what that means?
Sure. Look, it will have a lot to do with easing customer migration from on-prem to the cloud. We're envisioning migration scripts. We're envisioning basically pre-populating a new Avaya Cloud Office by RingCentral account with their prior settings. The IVR contacts, routing rules, stuff like that. That's at a high level. We will be integrating with their endpoints. They are a major presence in the endpoint market. We'll be utilizing those not just for Avaya Cloud Office, but for RingCentral Office as well. Beyond that, look, there is a lot of know-how there. They are the leader in on-prem, and we are not going to deviate from our roots one bit. We are going to stay a pure cloud company always. As you know, we've been on this quest to achieve absolute parity with traditional on-prem equipment, feature-wise.
I can tell you that the more we go up market, the more embedded we become in the channel, the more obvious it is that you really do have to solve for all of those use cases. Don't believe whatever anyone else tells you. Customers want a complete solution like they're used to. They just want it through the cloud. Who better to learn those tricks from than Avaya itself. Hopefully that answers.
Right. Yeah. Very helpful. Then for Mitesh, just looking at the different financial components of this deal, what's the rationale with the $125 million investment here?
Sure, Matt. The $125 million is the preferred stake, about 6% minority stake in Avaya, which gives us a fully convertible and redeemable option at the end, A. B, there's no consolidation of any kind of financial statements for us. Again, as Vlad said, we preserve our pure SaaS model. Look, ultimately, what do we get for that? We become an exclusive destination for the world's largest install base. The UC install base, that's one. The customers again, get the best technology with a loyal brand they are familiar with. Ultimately for us, it comes down to unit economics. This becomes sort of a call option, if you will, for us with a big opportunity and attractive economics, which can help our margin and growth. That's the way we would think about this investment.
Okay. That's helpful. Thanks, guys.
Our next question is from George Barto with Craig-Hallum. Please proceed with your question.
Thank you. Guys, I think this is a fascinating deal. I'm curious from a channel partner perspective. Obviously, Avaya has a very strong channel partner group. Do you now have full access to that group? How are those partners going to be bringing these opportunities to you?
They're here. Look, I've been asked for years, over a few years, "Hey guys, so how many of Avaya's diamond-level resellers have you penetrated? How many overall?" Et cetera. At this point, I would say all of them, once they get to read the press release. Some of them are asleep now because they do have partners in 180 countries, so it is a worldwide situation. Yeah, as I already mentioned, we would not be doing any of this if we did not believe that it is extremely positive for the partner community as well. Okay? It is accretive to the partners, and we know the partners are asking for it. The partners were torn.
I can tell you this firsthand, in talking to those people, they were torn between customers demanding, not asking for, demanding UCaaS, demanding the cloud, and their loyalties to the Avaya brand, as well as frankly up until now, Avaya fighting it, and with incentives, with making it pretty difficult for people to leave. Avaya is incentivized in seeing this transaction happen, as this transition happen. Yeah, win-win-win. Good for us, good for Avaya, good for the community, I already mentioned a couple of times, I'll repeat, in the end, good for the customer, which trumps it all.
Avaya has a relatively new cloud effort. You mentioned ready now in storefront, obviously their contact center as well. Can you just talk about what their cloud efforts will be going forward?
Look, you need to ask that of Avaya as far as what their overall plans are. What I can tell you is that we are the exclusive UCaaS provider, as opposed, for example, CCaaS. That also means that Avaya is not going to be developing its own multi-tenant UCaaS solution during the duration of this agreement. What we hear from Avaya, but please, I should not be speaking for them, so you really should not quote me on this, but our understanding is that they will now be redoubling their effort in the contact center space, where they have a very strong position and following.
Okay. Thank you.
Yeah. Thank you.
Our next question is from Sterling Auty with JPMorgan. Please proceed.
Yeah, thanks. Hi, guys. I'm actually going to go the opposite direction. Mitesh, I'm going to start with you. How does the accounting work for the $375? In the release, it talks about that really for future commissions. Does this become like a large prepaid expense on the balance sheet? In other words, how does it flow through the balance sheet in P&L if it does?
Sterling, I knew you would ask me something which nobody else would ask me. No, the way this works is, yes, it's essentially a prepayment, but for future commissions, call it, right? Because they become a master agent. This will flow through, and the balance sheet will be a deferred commission for us, just the way we would have a deferred commission for other channel partners, and then it'll flow through the P&L as it's depleted.
All right, great. When you say depleted, so there'll be some sort of deal matching, or how does it get drawn down?
Yeah, I know. It's sort of, for lack of a better word, I'll use the word pay for play in that sense. The seats only get depleted once we get the seat. Yes, it's basically based on number of deals they are able to bring to us, and that's the way it gets depleted.
All right, great. Then Vlad or Mitesh, I think the slides that you sent were great. Slide eight, where you talk about who's responsible for what. On that go-to-market, let me ask it this way, are Avaya salespeople being quoted for the RingCentral UCaaS solution? Let's start there.
Sterling, again, please repeat the question.
Yeah. Will the Avaya salespeople actually have assigned quota for selling the Avaya RingCentral Office?
Best addressed to Avaya, but that is certainly our understanding.
Okay. Because they have such an enormous customer base, is there any exclusivity? Can you still go into those accounts and talk directly to them, even if it's being fulfilled by a channel partner? In other words, just trying to understand how in the customer relationship, how that's going to be handled.
We are exclusive to them as far as we are their exclusive UCaaS provider. We are still within our rights to do whatever else we have been doing. I have to say that, over time, even with all of our success, false modesty aside, we are at 2 million users, and they're at 100 million. We do expect for them to be a very, very major growth driver for us moving forward. It's not instead of.
Got it. Thank you
it's in addition to be clear.
Understood. Thank you, guys.
Our next question is from Rich Valera with Needham & Company. Please proceed.
Thank you. I have a question for Vlad and then a follow-up for Mitesh, please. Vlad, just wanted to get a sense of how much this changes your channel today. Can you remind us roughly how many channel partners you have today? If there's any overlap between those and Avaya's 4,700 partners? That's the first part of my question.
Yeah. Look, there is overlap, okay? It's far from a perfect overlap. I would say that sort of just directionally, some of the top ones we share, okay? Because there are only so many of them. Call it top 3, 5. There is a very long tail that we have not been able to penetrate Avaya's. That's where we think there is going to be this amazing incremental growth opportunity.
Can you give us a rough number on your number of partners now relative to their 4,700, just for comparison purposes?
It's in that same range. I don't think we've been disclosing that particular number, but it's multiple thousands of partners as well. Like I say, a different overlap. You've got to remember, they've been in business for much longer than we have, and they've developed this, you know, partner network, which is very much oriented specifically towards communication solutions. Many of our partners are more general IT. If that makes sense. Okay.
Sure.
Where conversely, Avaya has been a lot less active historically.
Right. Presumably, they have not been selling a lot of multi-tenant cloud software. Are you going to be engaging in any special training to make sure their partners are effective at selling true multi-tenant cloud software?
Short answer is yes. If you want to double-click, we are, at this point, envisioning more of a train the trainer motion. We will make sure that Avaya's folks are well-trained, and they will train the partners. To be clear, it does not mean that we're barred from speaking to those partners. We just want to be also as cost-effective as possible. Because Avaya really knows the space well and they know their partners, we feel that we can be surgical moving forward.
I appreciate that. Just quickly from Mitesh, you mentioned you see this as being accretive to long-term margins. Can you comment in the short term, is there any dilution from any investment near term, or is there any different dynamics near term than the accretion we should expect longer term?
No. Hey, Rich. No, I think you should expect this to be accretive to our margins starting day one.
Perfect. Thanks very much, gentlemen.
Our next question is from Samad Samana with Jefferies. Please proceed.
Hi. Good afternoon. Thanks for taking my questions. Congrats on this. It's an exciting opportunity. A few questions. First, Mitesh, for that $375 million, since it's mostly for future commissions, I guess what amount of book of business does that represent? What assumptions were made around the number of seats that are expected to be sold that $375 million represents for future commissions?
Yeah. Hey, Samad, thanks for the kind words. I think, look, we are not getting into specifics of the agreement, but here's one way to frame it for you. If you look at the install base of Avaya and the overall opportunity at hand, it's an unassuming number that needs to change hands for our prepayments to get depleted. That said, we do feel that once this prepayment is depleted, I feel this partnership is going to be here to stay, and the opportunity is a lot larger.
Okay, great. Vlad, maybe this is for both of you, but clearly this accelerates your ability to go to market, both domestic and international and with larger customers. How should we think about this changing your headcount investment plans or your go to market investments since you now have Avaya to help fill in or to extend what your own capabilities are?
I would not be projecting any slowdown on anything with us probably for as long as I'm involved with the company. We will continue in our aggressive way.
Great.
Yeah, sorry, I'm trying to be a little light about it. No, look, we will continue doing what we have been doing. I think Mitesh already mentioned, I want to double-click on this, is we do expect this to be accretive on all counts including profitability. Again, to temper expectations, obviously over time, obviously the core brand needs to get out and be accepted. It will take a little bit of time. Over time it's going to be accretive. At a high level, we plan to continue with our strategy of profitable growth. We don't see a reason to change that formula. It's been working fairly well for us.
In as much as there are additional incremental investable dollars available, some will go to the bottom line and some will go to GTM and expect a healthy dose to continue going to product so we can sort of differentiate ourselves from the rest of the field.
Great. Maybe one last question if I can squeeze it in. This focuses on UCaaS. You guys partner with some other vendors in other areas, and Avaya might be competitive with some of your other partners. How should we think about just kind of generally how this impacts maybe your other partnerships, if at all? Thanks again for taking my questions, and congrats.
Thank you. Thank you for the congrats. Look, we don't see any immediate change, and maybe not a change. If you look at it, Avaya has endpoints. That's probably the easiest one. That's purely complementary. We already carry a number of endpoints in our portfolio. They will just join that. Customers always want more choices. Okay? That's just goodness right there. Some of these other things, there is not that much overlap, as it turns out, between what they currently have and our other partners. They're still, by and large, as we sit here today, or at least a single tenant-hosted company, and very strong in that, obviously. We have been and will continue to be a pure-play UCaaS provider. I don't think that they are, at this point, will be all that competitive with any of our other arrangements.
Our next question is from Brian Peterson with Raymond James. Please proceed.
Hi, gentlemen. Thanks for taking the question. Maybe a high-level one for me. I know you've had some big partnerships before, and we've seen those take time to ramp. I'm curious, when should we start to see this really driving incremental ARR in revenue going forward?
Sure, Brian. Hey, it's Mitesh. Again, we have assumed Look, it's an exciting time for us, and we can all get pretty carried away with the large install base Avaya has. Look, while it represents an amazing opportunity for both companies, look, we've just inked the deal. It needs to close. We are, as usual, modeling in a very conservative ramp over time, and let's see how things progress. Structurally, seems to us that it's a combination that should remove all friction from customers and partners. I think over time, again, not really guiding to 2020 and beyond, I think it would be accretive to growth. Again, we are, as usual, modeling in very conservative ramp going forward.
Got it. Maybe one follow-up for you, Mitesh. Just in terms of the existing RingCentral sales reps, obviously they had success gaining share from Avaya in the past. How are the swim lanes defined in terms of their go-to-market versus the go-to-market with Avaya? Just trying to understand what that will look like going forward. Thank you.
Sure. No change. As said, Brian, think of this as one more addition to our family of channel partners, albeit at a much higher level. We have been harmonizing channels for a very long time, and this will be no different. Vlad did mention that this is going to be train the trainers. This is where the opportunity comes in for our unit economics, where we will be able to leverage Avaya's go-to-market, and we'll be able to supplement it with an overlay team. Really no change net, and it actually helps us to get to market faster, leveraging their go-to-market.
Got it. Thanks, Mitesh.
You bet.
Our next question is from Will Power with Baird. Please proceed with your question.
Great. Thanks. Yeah, my congratulations as well. Certainly, it just feels like it should provide a lot more depth, and I want to come to the global implications of that. I guess first question, I just want to come back to the partners that overlap both of you all, just to make sure I understand or thinking about the unit economics right. If a partner is selling both solutions or has options for both, do you all have a preference for RingCentral Office versus ACO? How do we think about that, and which direction that might go?
Well, look, first and foremost, we have a preference for a customer to be on our platform. This is by far the overriding factor. Look, they're a super master agent. They are economically incentivized to make that happen, which means that they'll be getting a piece of the action, right? We feel, and as you know, we tend to model things fairly carefully. We feel that our overall economics with this arrangement will be at least at level, if not superior, than what we're able to achieve internally. Obviously, we don't need to be investing sales and marketing $ anymore, nearly to the same, certainly not marketing, but nearly to the same level. We have a well-established motion of supporting core brands without stepping on each other's shoelaces too much. Cases in point, AT&T, British Telecom, Telus in Canada. We will apply those learnings.
We feel that overall, it will be complementary with not that much cannibalization either way.
Okay. Then I just wanted to ask you about the global opportunity. That's one of the big opportunities that the relationship seems to bring, given they're in, what, 180 countries plus. How do you think about your platform being able to handle a big increase in volume? What kind of investments, if any, are needed there? How do we think about the timeline for some of those other additional markets to open up for you outside the U.S.?
Yeah. No. Very fair question. I keep thinking about it, too, I have to say. Look, we are very comfortable in our ability to grow the platform incrementally, okay? We've shown this over and over again. We do expect this to be overall accretive to our growth. What we have in-house and now actually, really interesting factor here is now availability of public cloud, okay, worldwide. It is now possible to grow a footprint a lot faster and with a lot less CapEx than it ever was. By working with industry leaders there, you know the names, we feel that scale should not be an issue. As to the international angle, the only real obstacle long-term that we see is regulatory barriers.
Obviously not something we control, but there is absolutely potential good synergies there as well, because a legal way to provide at least partial UCaaS in those regulatory challenging geographies is to team up with local carriers as well as with on-prem providers. Obviously Avaya is extremely well-positioned there. I can't tell you that, "Hey, you know what? In six months or something, we are in 180 countries ourselves," but it certainly will be a major tailwind for us with this relationship.
Okay. Yeah, good luck. Thank you.
Thank you.
Our next question is a follow-up question from Sterling Auty with JPMorgan. Please proceed.
Hey, guys. Thanks, thanks for letting me do the follow-up. Mitesh, you actually mentioned and answered, I think, Rich Valera's question that the deal is freshly inked but not closed. When is the expectation for when it does close and go live, and is there any special approvals that are needed?
Yeah, usually we'll go through, so our expectation is Q4. It will go through the same regulatory HSR approvals, which is pretty standard, Sterling. Q4 is our expectation.
All right, great. The video component of Office is based on Zoom. Given that this is a separate agreement with Avaya, does that change at all the partnership on the video side or with the UCaaS solution, if they do the full Office, still includes the Zoom meeting capability, which is the RingCentral Meetings?
I don't see why it would because Avaya doesn't have anything competitive to Zoom. Avaya does have endpoints like cameras, for example, that would be complementary, but I don't see how it would be a factor in the core relationship.
All right, great. Just wanted to make sure. Thank you.
Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.