Thank you. Thank you, Vlad, for making it, first of all. Appreciate it.
Pleasure, always.
I think that you had last year. There was some scheduling conflict or whatever it is, but I believe this is my first time actually hosting you, if I'm not mistaken. So glad we could work it all out, and thank you as well for your attention. Why don't we start with this, Vlad. What does the company look like five years from now? Now, granted that five years ago, you didn't see the things that happened, but what are your objectives for the company five years from now? If you could share that perspective.
Yeah. You know, like Al Davis used to say, "Just win, baby." Objective is to continue with that path. We are a fairly sizable company at $2.4 billion. We are profitable, to the tune of over $400 million. We think there is room to grow, both top line, top line and bottom line, as we are decreasing SBC and generating, hopefully, better shareholder value and returns in the process. Very large market. Voice is not dead. That's another misconception. We're seeing it's not dead. We have over seven million seats, continue to be in the lead as far as paid, paying seats are concerned. We have a very differentiated product portfolio, a differentiated GTM, with some of the world's largest, service providers, global service providers, reselling with RingCentral. Future, we think, is bright.
Of course, we have these new products that I'm sure we'll talk about a lot as well.
Absolutely. We're going to get into the new product stuff. So let's revisit the term, which has always been very compelling, 400 million legacy PBX seat opportunity, that has always been out there, and you're only at seven million paid seats. What is the realistic addressable market? How many of these seats ultimately do you think move to the cloud?
Yeah. Look, there are different ways to look at this. So yes, 400-500 is the legacy base, but that was also a while ago. There are puts and takes here. Certainly, some of the seats may not convert because, and that's sort of the better case on us and the industry as a whole, is saying, "Well, gee, whiz, who is even using voice? The comeback to that is, well, some people are not using voice or not as much voice because of video, because of messaging, but when you're calling up your dentist or your personal attorney, or your broker or your real estate agent, guess what? You're calling them.
You're not videoing them, you're not writing them. Funny enough, this is what corresponds to our, what we call gold verticals, which are financial services, real estate, healthcare, and public sector and education. Okay? Just in those verticals, just in the U.S., there are 75 million people employed. We believe our addressable market, realistically, is the Western world, which is U.S., Canada, you know, North America, call it, plus E.U.. Generally, you would multiply by two, so we come up with a count of 150 million. We are in the lead at 7 million. If given everyone every possible, you know, piece of the doubt, maybe everyone together is at 25 million. Historically, we've been sort of 20%-25% holder, revenue shareholder or shareholder.
You're still, like, in the teens . For overall penetration. It does not take into account all of the new business formations. It does not take into account, say, Charter, or Cox Communications. Both of them are customers of ours, doing those triple plays, the way you get broadband, and media, entertainment, and communications, all together. So those are not even replacement seats. Many of them are going into new business formations. Funny stat is we have a billion-dollar SMB business-
You know, which is also growing and also profitable. And, you know, this is one of the areas which is particularly immune from both competitive measures or competitive threats, because Microsoft is not particularly strong there, for example. But it's also immune, you know, from AI taking over, which is absolutely going to do in the enterprise, but smaller businesses, you know, they value personal service. That's how they differentiate themselves. So we have all of these, called pockets of strength and resistance. Many of them are doing very, very well, which is what gives us hope for the longer-term future.
Got it. Before I ask Matt to jump in here, curious to get your take on the market structure. You said you have 20%-25% share roughly of the revenues. How do you see this playing out? So you were the pioneer when you started this company in 1998, 1999. I think you finished up at San Francisco State University many, many years ago, and we met many years ago, and you had this thing that was so unique, and now you got at least two other companies that have caught on to this. So how do you think the market structure shakes out?
Do you still, at the end of the day, have this: "We're the, the best functionality, we're not going to discount, we're not going to be a mass market, we're going to be this specialty..." I hate to say niche. I didn't say niche, but specialty, high-end, versus the mass market? Or do you envision yourself becoming the, the volume leader at some point? What are your thoughts?
We are the volume leader in paying. You know, for what people pay for. Look, so I mean, to carve a little, I don't see RingCentral as a Ferrari. I mean, I think it's a very good product but it's not that specialty.
The Ferrari breaks down a lot, by the way.
Pardon?
It breaks down a lot, I'm told. Yeah.
You know-
It's not 99% reliable.
It's not... well, 99.999%. Technically, yeah.
You got five nines.
Yeah. But it's a nice product, you know. Look, we are the leader in business voice, okay? And we go across all segments, from one seaters to current threshold at the upper end is 40,000 seats from one account. So that's a very wide span across a whole number of vertical industries. And even though we are mostly North America concentrated. From historical perspective, but we do have quite a bit of exposure to international markets as well, you know, given the size of it. Look, we are fighting for every account. We're winning many of those fights. We expect to, you know, continue to stay in this position. And, you know, we try to not lose on price, but we try to not lead with price either.
So again, back to car analogies, I don't know, you know, but it's somewhere, you know, BMW, kind of, m aybe Mercedes, like that. You know, it's not the very bottom. Maybe it's not the most exclusive, maybe, but it's, you know, it's pretty nice. It's hard to beat us on features. Certainly, impossible to beat us on reliability. I will refer people to our IR deck. Don't do it today, do it tomorrow, because there are a few things.
B eing updated.
For example, we have just added a new GSP, Zayo. So I don't know if that's on the site yet. But just our uptime, you know, we talk about five nines. We've had a number of quarters of six nines. If you look, there is this little site called Downdetector. It's a third-party service. Look on Down detector, and look at the percentage of outages reported against, call it the big three, which is Microsoft, Zoom, and ourselves. 60% of outages are reported against Teams. 37% of outages are reported against Zoom, which leaves 3% of outages against Ring. So if I'm bringing it up in this forum, you can well imagine that our 2,000 salespeople are using every opportunity to remind people of this reality. So if you are running a medical practice, for example, you probably don't want to miss that call.
It has very nasty implications, including liability. You know? And if you're running a real estate agency, you also don't want to lose that call because your competitor, who may be a RingCentral customer, will not lose that call. That's our pitch, and that's what we rely on.
It's a good one. I like that.
Yeah.
By the way, I had to give away my BMW of twenty-three years old, not because it was working just fine. It was just, I don't know, it's so old. We should not be using. But it was just absolutely fine. So it's got the longest life.
I've been married for a long time. Don't even go there.
Oh, that's so funny. On that note, Matt, jump in.
I t feels like, you know, RingCentral's product philosophy has picked up a lot in the last twelve months. So if you could stack rank for us kind of the most important drivers of kind of future growth? Where is RingCentral focusing from an investment perspective? How should investors gauge the success of RingCentral's emerging products that have come out over the last couple of months?
I think investors should gauge success by the numbers. Because words are cheap and subject to change, but numbers are the numbers, you know. And we have auditors who make sure that those are numbers. Look, we've certainly. So let's start with the negative. Growth has slowed down. Part of it is because we're a $2.4 billion business, and it's hard to grow a $2.4 billion business with a twenty- with a two handle, because that would be $500 million of recurring revenue added every year, and that's hard, you know? But we're adding about half of that, which is also hard, but we're able to do that. But you asked about the new products. New products are growing in double or triple digits, but not year over year, quarter over quarter. They're small. We have three new products, three main new products.
One is RingCX, which is our own, contact center, product, native contact center. Another one is, what we call RingSense, which is, has sort of many faces to it, but, the one that's I'll talk about now is revenue intelligence. We call it RingSense for Sales. And that's a product that, b oth of those products, we have, many hundreds of customers already, so customers being companies. Both of them are, if not doubling quarter over quarter, then something not far from it, call it. Okay, and, then there is something called RingCentral Events, which, in fairness, is something that we've acquired, from a company called Hopin.
They're one of the unicorns that fell on harder times after COVID. We picked it up for a good price, and since then, we have returned it back to growth, and we've signed accounts like Harvard. Probably there are a few grads here, so next time you do your alumni get-together, maybe on RingCentral. McKinsey, HP, Spotify, just some of the names, okay? So again, look, having said all of this, it is early. It is early. Those products are relatively small, but we're well on the way to get $100 million. It's a low bar, $100 million ARR by end of next year. Way we look at it, and I look at it personally, is each and every one of them.
I don't know, one of our directors should be in the room here. Maybe Rob here. So yeah, so Rob here, you can stand up. He's our lead independent.
Hello, Rob.
Rob, yes, yeah, has had poor judgment to invest in us in Series D, I believe. And, look, we learned a lot about SaaS from Rob and his, you know, his circle, and our new businesses we're trying to run as we would a startup, okay? So everyone needs to be fundable, in its own right, and, we think that many of them are. So, they already register $100 million, so, call it next year. I'm not guiding for next year, but plus or minus $2.5 billion, you know, that's already 4%, so that registers, but it's just the beginning. So you ask, you know, where will growth be coming from? From the core, and from the core, it means, just growing number of seats, improving retention, okay?
There are many processes internally we're changing to improve gross retention, to aid with net retention. Macro, eventually turning around, will absolutely help further with net retention because upsells will start going again, and then the new products adding in, and it becomes a virtuous circle. We get more revenue from new products and also better retention, okay, and better cross-sell, better upsell, so everything becomes working, so I can tell you that turning from a single product company to a multi-product portfolio company is still work in progress, in fairness. Very, very hard, a super heavy lift, but well worth it because everything becomes more valuable.
I like the way you framed it. It's a lot of forward-looking, if this happens, this compounds, and just as the last three years have been such a tough cycle for everybody, that NER started going down, new customer adds started to go down. Everything was just compounding in a very negative spiral, right? Hopefully, the cycle out of this is in the opposite direction, but it also means that you got to have good products to benefit from the next economic cycle. Talk about AI. You know, what are your visions for RingCentral AI? We had Eric from Zoom talk about his vision for how he's gonna redo a lot of the core platforming of Zoom, whether it's the companion AI, document and et c.. So he envisions a ground-up rebuilding of that architecture.
How do you look at AI? Is it different, augmenting or redoing the whole stack? How are you approaching this?
More into evolutions, I guess, than revolutions. I don't know about redoing the whole stack, but we are, injecting AI into our entire stack. I don't see a need to sort of start from scratch. And I don't know, I don't want to speak for Eric. I mean, he knows what he is doing, I'm sure. In our case, look, we have this AI platform, called RingSense, that we call RingSense.
We have RingSense for CX, for the contact center, which is fundamentally quality management. So it's a QM play. It adds $30-$65, which is already disruptive on the CX side. So you have your $95 suite price point, which is already super competitive and disruptive. But also, we have high percentage of our enterprise deals pick up this QM package, okay? So we know it's working. We have RingSense for EX, and that's a little bit of a different play, where
Employee experience or?
Pardon?
EX. You said EX.
RingEX, employee experience.
Yeah.
Right. So, our product portfolio, maybe, you know, is a core product, the flagship, we call it RingEX. We used to call it, MVP, message, video, phone. Staff hasn't won in a few years, so we went away from MVP. But so now the portfolio is EX. Main product, 7+ million seats. $2 billion in revenue. CX, which is the contact center product. We have something called RingCentral Contact Center, CC, which is our legacy inContact integration, which is still doing very well because it's very unique, integration between two industry leaders. And then we have RingSense for Sales, one of the newer products. And then we have video, and in particular, RingCentral Events that we've talked about.
Okay, so that's the portfolio. So each and every one, EX, CX, events, everything we touch, e ither has or will have an AI component to it. Whether it be in the form of quality management, summarizations, transcriptions, translations. It's super helpful to have a very large network with a sticky customer base that you can actually deploy all of this stuff to. Because many people talk about all of this new technology, but they're finding it may be a little bit hard, harder to generate a multimillion user base, and we are one of the companies that over time were able to deliver it.
So you're a believer in Generative AI, then?
Oh, 100%.
I don't know any CEO that's not a believer in generative AI.
Or else it will cancel me, you know, so.
It's a generative AI conference, Vlad.
Yes. But I'm not necessarily. Yes, generative AI, but we can talk about model sizing. Are we talking large models? Are we talking, you know, smaller models, vertical? You know, that, that's a different story.
Yeah. So are you able to, not that I planned this thing, but, are you prepared to discuss what kind of model you're building at RingCentral? Are you leveraging the frontier models? Are you doing things on your own? How are you going about this?
Look, you have to have, you know, you have to choose your fights. You know, are we going to offer AI as a service? There are other better funded people who are, and better placed people who are doing that, you know? But are we planning and are already leveraging everything that's out there? Look, we got 2,000 people in R&D, you know, so you can well.
Two thousand?
We got 2,000. It's crazy, yeah.
Wow!
It's a large company. I know, you've known us small. We got 2,000 salespeople and 2,000 R&D people. If I could cross-train them, that'd, that'd be a lot better. Yeah, so we have a bunch of people and, you know, AI experts, PhDs, looking at each and every, you know, tech that, that's coming out. But mostly, we are where we are, differentiating is in, verticalizing to our use case. We're not that interested in the general purpose AI. Okay, let other people fight that fight. But when people are asking, the system, "Hey, which ones of our calls, of my calls, went well or less well? That's where we come in.
Because we have this giant network, we are in a differentiated, preferential position to leverage that data obviously, without getting into.
To privacy, yeah.
Into privacy, yeah. But, we can help people understand what went well what did not. We can help people understand what types of questions their customers are asking and offer help along those ways. That's our application of AI.
Matt wants to know how you're going to cross-train your engineers to be salespeople and vice versa.
I'll share it one day.
Yeah. No, that's not, that, that was my imagination.
Shut out the markets. Vlad, I want to drill down-
I was with it.
I want to drill down into contact center a little bit, right? Contact center is a big market, but it's fragmented, it's competitive. You launched RingCX, quite some time ago now. Just want to get a sense of, you know, what your right to win is in that market, in particular. Is it price? Is it feature set? Is it integrations? Any color there?
Primary right to win is integration onto ourselves. Okay? Because, again, we have this very large base. We have four hundred thousand accounts, seven million paying seats, on EX, on the phone product. The likes of AT&T, British Telecom, Vodafone, Charter, and Cox, and a long list. And now we just announced today, yet another member of that class, which is a company called Zayo, which is one of the top providers in the US. I mean, more regional, obviously, than AT&T, but still a large name. So, the fact that the product is so seamlessly integrated into our flagship, and the fact that we have this entire channel that is wanting to sell it, and what we've announced so far is that both Charter and Cox have already agreed to resell it. So that's one.
Okay, on the product side, look, it's a new tech. Yeah, so, but it's a new tech, but still built on the same, okay, proven BMW platform for it. So people know it will work. Again, the five nines reliability is a calling card for us. But the newer tech part, look, it's AI first, okay? It's much easier to deploy, easier to manage and use, disruptively priced. So all of that, all of that is why.
How does your relationship with NICE inContact evolve now with the RingCX launch, right? It sounds like there may be some overlap in terms of the customer base that you're going after. That's a 350 million ARR business for RingCentral alone. So maybe talk a little bit about, you know, what that opportunity looks like in the future.
Yeah. Look, sure, before we had our own contact center product, it was just purely complementary. You know, it's more nuanced than that, but we were very clear that from day one, that we see RingCX as more of an SMB product, and also addressing simpler use cases. In particular, if you need complicated, and sometimes people get, go completely, you know, nuts, crazy with it, routing rules, yeah, you need NICE inContact, or you need the Genesys or Five9. You need one of those people that have been at it for twenty years, you know? But there are many, many cases, especially, but not limited to just small businesses, to where you don't need all of that complexity, and that's where RingCX comes in. So we're still seeing opportunities on both sides.
You know, from our, our perspective, our combination, our integration with inContact is unique, remains to be unique in the industry and, you know, hopefully it will have, you know, another number of years, in its own right. Having said all of that, obviously, wood behind the arrow on our side of this point is behind CX . We are investing heavily there, and we see good action.
So maybe shifting gears a little bit, you made reference at the,
We don't say shifting gears, segue, double click. No double click, drill it down. Yeah, we don't- we ever heard all these, what do you call the, commonplace, things.
Well, for the SMB business, you made reference for $1 billion in ARR at the onset of the conversation. You know, your enterprise business is also pacing a little bit faster than the overall, you know, growth profile of the business. So how do you think about kind of balancing, you know, the go-to-market focus between SMB and enterprise at this juncture?
Yeah. Look, sales forces have always been segmented. It's a very different motion in the enterprise versus SMB and SB, in particular, small business. You know, enterprise is sales driven, there's a lot of channel involved, there is Pro Serv involved. They're very different teams addressing this and different skill sets. The smaller you go, the more product-led growth, the more e-commerce. Just above that is an inbound call center where we have, you know, very large presence in Manila in particular. Not 2,000 people . So, okay, you know.
You know, over 500 agents taking those calls. It's not an either/or. The common platform, so the beauty of this approach, is that product is largely the same. Now, enterprises will absolutely require special integrations. They do have more complicated use cases. And, you know, we do develop for the enterprise stuff that small business wouldn't need, but anything and everything we do for small biz does also go to the enterprise, like all of the usability, PLG improvements like that. And look, I view both of them as essentially independent BUs. Well, semi-independent, because there's a common layer of product, common product underneath both of them.
Both need to be profitable, both need to grow, both need to hopefully start marching back to the Rule of 40 in their own right, and, you know, that's how we're running the business.
Vlad, I had a question for you. Yeah. Have you deployed generative AI within your company? And if yes, what benefits are you seeing? [crosstalk] but disruptions, feel free to share that, too.
Across many functions, absolutely. And, but I would say that at this point, a lot of this is in the experimentation phase. You know, obviously, people are trying to play with code generation. It's not there yet. We're not yet able to provide code, to generate code.
Who are you using for code generation?
Oh, gosh. I, I don't know. Who do we use? Let me. Yeah. Okay. Yeah, I don't know. A bunch of them. Yeah. Y ou know, I'm sure including OpenAI itself . But, I do know that we talk about that a lot. Look, we're in the process of migrating from inContact to RingCX internally, so that brings AI in that way. We use AI for marketing. We use AI, believe it or not, for product naming. Okay, we use AI to fashion our knowledge base. So we're absolutely. [crosstalk] .
And who, what kind of impact is it having on the company? Is it, do you. Are you getting a return?
Look, it's it, it's hard to quantify. Yeah. But it certainly saves you time. And it really depends on the proficiency of the user, and there are some people who say, within the company who say that their work has become substantially easier. They happen to be mostly in marketing at this point in time some in analytics. But, you know, that's going to change. But I think you're hitting on a very important point which I actually don't wanna kind of reciprocate on. As we are going through this experimentation phases and from what I understand, we are kind about where people are in general. You know, everybody's playing with things. Things are a little bit still hard to quantify.
There was some literature on Copilot kind of not tracking as well as maybe they thought. You know, but the Copilot can never be as good as the pilot. I mean, it's, it's just. That's good. Yeah. Good. But as we're figuring things out for ourselves, our intent is absolutely to be passing on to our customers and channel partners, and I think that there is an additional benefit that we'll be realizing from this over the years.
So you feel like you can, when you turn it around and productize it for your customers, you, you think you can charge more for AI?
So short answer is we are today. Yeah. I gave you some examples, you know? But some of it, maybe we don't charge more dollars for it, but we just have better retention. And that may be worth even more to us. [crosstalk] , than dollars.
Fair enough. Any questions? Yes, feel free to, Danny, go ahead .
It seems like for at least the last several years, you know, we've just heard more and more anecdotes of kind of lower-end phone coming into the market. That feels like it's not getting louder, but what is changing is that RingCentral is focusing on newer products like RingCX. You guys are increasingly having more proof points. So I guess, when do those two kind of opposing forces offset, and when do we kinda see that in the numbers? Because for a long time, you know, the business has been in this plus or minus 50 million of net new ARR per quarter, but you haven't had the multi-product motion before. When do you kinda see those two overlap?
Yeah. Look, this field was always competitive. The idea of, you know, let's do a cheaper, you know, phone service, it's not a new idea, and actually, we did not invent it either, you know? But you also get what you pay for. Again, we lead with reliability, with features, with integrations, with referenceability, and simply playing on the fear factor of, missing that important phone call, and we're bar none, okay? Now, it doesn't mean that there will always be a segment of the market that will want to go bottom fishing. That's okay. We can't do anything about it. We are not going to play in that game, okay? But our core business is steady.
Growth, again, is slower than it used to be, but it's still the fastest in the industry, if you think about it, you know, and, you know, hopefully that will continue. New products, as they grow, they will take more and more share, but for our new products to get, you know, to, to that level, you know, you don't have that many companies that have crossed $2 billion. Like, you have actually zero companies over $2 billion in revenue in CCaaS, in pure CCaaS. Like, even Genesys, whatever, they're, they're below that for their pure CCaaS product. So, you know, it's going to be some time. It's just the entire TAM is smaller for contact center than it is for the phone.
Look, we're playing in both, and, if your question is, "Okay, hey, when are you guys going to reaccelerate?" then, it's a very good question. We're working hard on that. Again, we're dealing with a large ship to turn, you know, but, I'm optimistic, and the reason for that is that the TAM is huge, continues to be huge. That's what Kash started out with, one of the early questions.
So the good news, Vlad, to end on a positive note, every CEO that I've interviewed, I think, we've had five before you, wants reacceleration in the top line, and which is what we want. We want reacceleration. So on that note, thank you once again for giving us your time and your perspectives. Thank you to our clients as well for chiming in with your questions and perspectives, and we hope you have an amazing conference. You are better informed at the end of the three and a half days, and you're ready to go at it and make some killer investment returns. Thank you.