Sure. And you guys see great profitability improvement and new products over the last few years. So, kind of new RingCentral, new environment for UCaaS. We'd love to hear from you just kinda how you see the lay of the land in the market today.
Yeah. Look, market remains very large greenfield remains very large. We continue leading with cloud voice. You know, it's competitive, but it's always been competitive. We continue growing, not at the same pace, but COVID years were, you know, quite strange in many respects.
Yeah.
But, you know, big change on our side is we've moved from a single product company to a multi-product portfolio. That's a big change. We've introduced our own cloud contact center. Before we were leading with an OEM product. And the big change this year is that now we have our own product called RingCX in the market. We're leading with that. It's been growing strong double digits sequentially. So we're pretty optimistic about that. We have an emerging AI portfolio, which was also not the case back when you launched.
Sure.
We've acquired technology from Hopin, not the company, a couple of years ago. Hopin was one of the better-known unicorns in the event space, hybrid and virtual events. That's been doing well for us as well. We are, you know, pretty optimistic. It's a large company, $2.5 billion ARR now as we speak. You know, as you, I think you already mentioned, a major pivot towards profitability. We went from, you know, almost doubling profitability in that time frame. We feel pretty good about that as well.
Excellent. When you think about the next five years for UCaaS and CCaaS and the space in general, like, what are some of the trends that you think could become more important? You know, maybe is it weaving AI into your toolset every day? Is it still, like, you know, on-prem to cloud conversions, you know, driving more of this, product development and, you know, customer utilization? Or, like, what do you think becomes more a part of your business from here?
Look, AI is, you know, the greatest disruptor. We feel that longer term, we'll be a clear beneficiary of that. AI is perfectly complementary to UC and UCaaS. AI only enhances conversations and communications. It never replaces them, in person to person. You know, if I wanna call you, I'll call you. I don't wanna talk to your bot. But if you have AI taking notes for you, that's a good thing. If you have AI scheduling, you know, calendar for you, based on what we've discussed, that's a good thing. But it's not going to replace the fact that you and I need to be on the service.
With CC and CCaaS, it's different. AI is going to be a big disruptor. It's going to be replacing some, not all, but some physical human agents will be clearly replaced by AI over time. Then all of the note-taking and all of the analytics and, you know, things like translations, again, calendaring, etc., all of those still remain. We do not have a large contact center footprint to protect. We have some, but it's not, you know, nearly as meaningful as our UCaaS footprint, which is in the millions. This one, you know, is.
That's true.
Meaningfully less than that. So we don't have the innovator's dilemma there. And we expect that our own contact center will play well. We've designed it for down-market. We are seeing that it's actually hunting in the up-market as well. We ourselves, at our size, we're able to move all of our agents. That's 2,000 agents, to be clear. We've moved all of them from inContact to our own tech in a matter of weeks. Okay? And.
Pretty fast for contact center. Yeah.
Yeah. And look, we're kinda middle of the road. And look, inContact is a fantastic product. Like, don't, don't make any, you know. And we've had a very, very good relationship with them for a number of years. We still think that there is value in that relationship. They are one of the two clear leaders in CCaaS. We are a very clear leader in UCaaS. So, you know, one plus one still equals three there. Having said that, we do not have ownership economics on that product. And we don't control the roadmap, obviously. And also, it's an up market product. It's an enterprise product. And we've been successful in the enterprise with it, but much less so down market.
So with RingCX, we see it going all the way down to smaller SMBs as well as scaling up into thousands of seats. We are one of a few examples. We're not the only example of that. So we think that between what we have in-house and still, you know, the opportunity with, NICE inContact, we really do have, probably the widest coverage in the industry.
I definitely wanna come back to, you know.
Yeah.
What that overall economic shift means for you guys. But I gotta start with Abhey and you joining RingCentral. Congratulations on the new role.
Thank you.
Just love to hear about, you know, maybe a little bit about your background, how that relates to RingCentral, and what kinda drew you to the role.
Absolutely. Thank you, thank you, Ryan.
Yeah.
Thanks for having us and for the question. Yeah, my background. I was, not too long ago, in your seat. I was a sell-side analyst for nearly 15 years, but started my career as an engineer on the product side and building the products. And after that, I joined Autodesk. I ran investor relations, sales finance. Then I was at Cisco, where I ran about one-fourth of Cisco's P&L. So it was their services business, the subscription revenue part of it, and I was the CFO for that business, and then I was at Amazon, responsible for all of Amazon's AWS's infrastructure, the CapEx budget for that.
I mean, so definitely an inspiration from our side.
So yeah. It was a lot of fun, but then, when the opportunity at Ring came along, it was something not completely new to me. At Cisco, we competed in the same space. I was very familiar with Ring, and I've been a big fan as I've been watching the Ring team grow here. And at the same time, when I was at Amazon, we have a partnership with Amazon with Ring, as you know. So I was very familiar with the space from that perspective. And really kinda was appreciative of what Vlad and team have built in terms of, as we said, about $2.5 billion of business in UCaaS plus customer care space, contact center space, sorry.
And then on top of that, the margin progress that we've had done in the past for generating nearly $500 million of free cash flow on an annual basis. So there were a lot of goodness. And as we are moving from single product to multi-product company, I've got a lot of experience in kinda working in multi-product, multi-growth driver companies, organizations. So a lot of the similarities that I see where we are today, where Autodesk was when I was in 2018 through 2021, there are a lot of similarities there in terms of we were looking for multiple growth drivers.
That's what we had here, developing multiple growth drivers and working on how we really kinda make the story a lot simpler, a lot kinda easier to digest. We did a lot of that heavy lift when we were at Autodesk. Interestingly, Will and I were partners in crime there as well. It's definitely a lot of those things resonated. I was kinda excited when this came along.
I know you're seven days in on the job, so I'm not gonna. The conversation next year will be a little more granular, but.
Thank you.
At least for now, you know, Ring's done a great job of increasing your, you know, profitability efficiency over the last two years. As we talk about ownership economics on contact center, I mean, at a high level, is that one of the drivers from here as you scale that product, how you think you can start to change parts of the income statement for RingCentral?
I think just wait, wait on that.
Yeah.
As you said, I mean, I'm on my day eight of the job. So just, we'll do an analyst day in first half of next year. And at that time, we'll give you a lot more color. And we'll essentially dig into some of these areas. But keep in mind, I mean, some of the journey that we've been on, on margin expansion, we're not done. And some of the growth drivers that we're working on, we're not done on those. But it's something just to stay tuned.
No, I appreciate that perspective. And we'll definitely stay in touch for that analyst day. Vlad, I even got the question last night just 'cause you brought up the partnership with NICE inContact, which has been great for both parties over the last few years. And it totally makes sense that they're you know the upmarket contact center. They've been doing that for a long time. Can you just talk about like from your side you guys own the customer relationship for your contact center customers. You do the highest levels of support for them. So those are really like more RingCentral service customers. And like at the lower end that's where you'll you know start to look for like opportunities to sell through RingCX for like new contact center opportunities from here.
We will be okay. So firstly, to be clear, we own the customer relationships. These are our customers. Now, look, customers, you know, they make choices. They can stay with us or go elsewhere. But contractually, these are our contracts. Certainly, we expect customers to live up to their obligations as we're living up to ours.
Perfect.
Okay? To be clear, RingCX, our own product, we've conceived more for SMB initially, so lighter, lighter weight product, less features, easier to deploy, disruptively priced.
Right.
What we're seeing is that it is also hunting up market. Does it have all of the bells and whistles that inContact or Genesys does? It clearly does not. Does it have some advantages over both of those better-known players as well as Five9? It clearly does. Again, new tech, easier to deploy, conceived, and designed with AI in mind just because of the vintage. And the one area I wanna be, you know, just clarify a little, we are leading with RingCX across the entire gamut at this point.
Now, if we see that it is just not a fit, and there are some cases, then we still have the other product to offer. And, you know, and we do that. And, it's still a very good integration and differentiated one. But, our future at this point is RingCX. We love having the other integration available in our portfolio. We think there's still some goodness there. But certainly, tip of the spear is RingCX for us.
I like that point because the product has come out so recently. It'll be a lot easier for you to more quickly add AI features or add new use cases as they pop up, you know, across the customer base you have now and the code base you have now instead of, like, having, you know, hundreds of millions of customers, hundreds of thousands of seats that you have to make a new feature deployment across. So you'll be more quickly to iterate on top of your CX.
We also own the tech, you know. We, you know, look, you know, everyone, you know, you look around, everyone's talking about AI. So what makes us different, you know? What makes us different is our very large network, our very large customer base, the fact that we understand, you know, their use cases. We are custodians of the data, you know, so we can do things that other people simply don't have access to, you know. You know, it's closest integration that's available because we can have our AI engineers and our contact center engineers sitting in the same room together as they do, you know. You know, if you have a brand new startup, it's a little bit hard for them because they don't have this, you know, this network or the user base.
Yeah.
So again, I think that longer term, we're positioned very, very well. Shorter term, as we flagged, there could be not, doesn't need to be, but there could be some headwinds, as we're transitioning from selling solely the inContact integration to, you know, now leading with our own. They're just a fact of life, but we, we're pretty sure that given the own economics of it, given the extremely positive reception that RingCX has in the marketplace, we've announced 45% sequential growth Q2 to Q3. Q4 is looking well. We're not going to do mid-quarter updates here. But look, it's a product that, let's put it this way. Q2, Q3, they were not an aberration. We, we've hit a nerve in the market. And we expect to be a very meaningful entrant and a player in the CCaaS market, especially with AI rolling in.
And historically, the installed UCaaS based on prem, they were sold together in, like, 80%-90% deployments, right? So it makes sense that people would wanna consolidate.
Yeah. I think 80- 90 is maybe a little bit too aggressive, but over 50.
Fair enough.
But over 50.
Fair enough.
60, Scott.
I mean, that's what we do on our side, right? Like.
Yeah.
To get these numbers up. But j ust on back to your UC business, you know, we were pleased to see your largest UC win this year. You know, we picked it up in our channel checks, and we've been talking about larger deal sizes for RingCentral on the UCaaS side. You know, I think we've seen just like less willingness for customers to shift the UCaaS, you know, from on-prem to the cloud over the last year just due to expenses and due to the macro. You know, should that start to alleviate, do you think you could see customers will more willing to make that digital transformation at this point, you know, besides the TCO sell, but also due to some of the AI features they wanna get?
Look, AI makes it yet another arrow in the quiver, and it's a very big arrow, yeah. Look, on-prem, it's hard to innovate on-prem. Nobody really is that if you think about it, you know. So, all of the action is in the cloud. It will continue to be. I believe it will continue to be. And, it's yet another reason for someone to say, "Yeah, okay, fine, this old, you know, Cisco system or even an Avaya system, does that matter?" You know, it's time, it's time to move on. Now, will it, look, this is a very, very sticky installations, you know. And, they take time. You know, I'd like to go faster, obviously, but, they take time, but it's one directional. Nobody ever goes from on-prem back to the cloud. It just does not happen.
So over time, you know, look, this next year is going to be interesting. Also, you've got to remember, there is just so much innovation in core AI, and these models are developing and evolving so rapidly. And there is so much competition among the hyperscalers to get this in. So that means that there will be, you know, we think there will be pricing pressure on them. So AI tech, I mean, it's wonderful, but it's not for free, you know. So, I don't think it's going to be free, but, there will be price pressures there. And I think people like us will be net beneficiaries because we are the next link closer to the customer. Ultimate beneficiaries will be customers. They will.
Totally.
In the end, get more for less.
I say that a lot. Like, your customer service experience or just, like, your collaboration experience will actually start to get good over the next few years.
It's starting to get better.
Yeah.
Absolutely.
You know, one thing I think people miss is, like, AI is a great cherry on top as part of these, like, cloud transformations. But, just with your normal telephony or normal UCaaS systems, I'm like, they're like, "Oh, will competitor X, Y, Z do this?" Well, I'm like, "Well, if you wanna do this thing, like time-of-day call routing, advanced call queuing, or, like, these certain specifications, you wanna place your Cisco CallM anager deployment, those vendors can't do that, but RingCentral can." So as you moved into some of the larger deployments, can you just talk about some things that differentiate you guys to win some of those conversions at scale on the UCaaS side?
We are the UCaaS leader.
Yep.
Okay? We have the widest global footprint. Latest, latest win is our pan-India license, which is unique.
Yeah.
You know? Direct competitors do not have that.
I couldn't believe you got that.
Yeah, well, it's not, you know, yeah, it wasn't an accident. I mean, we took a long, long time, and then, you know.
Yeah.
But now we have it, okay? So there is that. There is also our, you know, core value prop is reliability at scale, yeah? So, you know, we are five to six nines, not in the name, but in reality. And, that's huge, you know. Other people simply don't have that, you know. We have much deeper feature set. We have more integrations. We have, for the lower end of the market in particular, we have our service provider business, that is very, you know, that's quite sizable and growing well and growing faster than the company as a whole. There is a long runway there. So we have a number of differentiated motions and capabilities. But again, it really starts with, you know, what we call TIP, right?
Yeah.
Trust, innovation, partnerships, and trust-wise, security and reliability. We don't sell, you know, our customers' data. We are very careful how we use it even for our own needs, you know, for training and so forth. Innovation. Look, we got 2,000 engineers, you know. Lots and lots happening. We went from single product company to multi-product portfolio. All that takes effort. This was pretty much all organic, almost all of it was except for the events product, you know. So there is that. Partnerships are just, you know, we got this huge VAR network. We have a completely differentiated service provider network of resellers, starting with AT&T and Vodafone, British Telecom, you know, a number of others. Cable providers are now lining up. We have Charter, which is doing very well. Cox, you know, you can well imagine that.
Yeah.
You know, we understand that there are other MSPs worldwide that might be good targets for us, and you combine that with the deep technology that we have to offer and the ability and willingness to integrate and customize. That's a unique value prop.
I like your point on AI where it's like, "I wanna call you. I don't wanna call the agent bot version of you," right? And if you wanna call a business, like, you wanna make sure that phone line isn't down. So that makes a lot of sense in terms of the reliability standpoint.
Yeah.
Just for, like, your sell-through into the Microsoft Teams ecosystem that's been fertile ground for you guys, you know, I think that's also allowed you to expand into some larger deal sizes as well. Like, you know, we'd love to hear just your commentary on that partnership and how it's been going.
Look, it's an integration.
Sure.
We have a very good Teams integration. Teams and Microsoft understands that, I guess they understand that their phone, you know, it's world-class, maybe world's best messaging platform since their video is definitely coming up. Phone is fine for lightweight use. It's also fine. It's not fine for heavy use. It's not fine for contact centers. Forget high-end contact centers where, you know, RingCX plays or, you know, but we have lots and lots of very small contact centers, few people here, a few people there.
They're running on our phone products. They're running on RingEX. We still have queues. We still have reports. We still have, you know, very lightweight workforce management, but it's there. If you have five, 10-person contact center, it's good enough, okay? And Teams doesn't have any of that. Also, by the way, they just raised prices on their phone, you know, so that, that doesn't, that helps, right?
Sure.
So, the way it works, if it's a Teams customer, they will ask, "Do you have a Teams integration?" So it's a qualifier. We do. It's a good integration. And some of them use us inside their Teams environment, and some of them just use Teams for Teams. But just because we have that integration, you know, there is a mixed use. So, we can easily coexist with Teams, and we do. And, as people are migrating from on-prem to the cloud, Teams is taking a big portion of that. But the phone part, some of it we get as well, even within Teams.
That's a good point. So you can upsell contact center on top of those direct cloud deployments. And then they can get better service from you on the contact center side, you know, if they have any problems or they wanna make any customizations. So that's like.
Yeah.
A value-add sell through there. You mentioned the Microsoft Teams Phone price increase, first one in a couple of years, you know.
The first one ever, actually.
First one ever, since 2018. You saw Zoom raised prices last year. You know, we kinda lived through 2021, 2022, you know, 10 times spiff for the channel, and those have gotten more reasonable as well. Do you feel like we've found better footing from a price stabilization standpoint on a per-seat basis? And do you think AI could support better economics?
Well, hopefully.
Hopefully.
Yeah, sure. These are valued services and, valuable services. Look, you have a bunch of people come out, you know, and everybody's first idea is, "Well, you know, we're gonna drop the price, and this everybody's gonna go our way." It doesn't work that way, you know? You know, you kinda get what you pay for. And there is fair pricing. We think we're priced, we try to price fairly, you know? But you gotta remember what's, you know, people are asking, you know, "Your, our pool, you know, where is it trending?"
You know, it continues to have a three-handle, okay? So that's good, $30 a month. But what's $30 a month? Two cups of coffee, okay? And you don't need to worry about that line not ringing. Like, look at it that way, you know? And you look at our pricing. We also hear, "Well, you know, look at Microsoft Teams. It's so much cheaper. Even Zoom Phone is so much cheaper." Well, not so much because they only come in as part of the bundle. Look at the bundle cost. Still the same $30. It's not going anywhere, you know.
No.
For decades, you know, traditional telco, TDMs, you know, they were in the same range, you know. So I don't know why that magic point, but that's a point to where we can grow, we can make money, we deliver customers a lot of money for those dollars. New products absolutely are pulling it up as well because guess what? RingCX, it's not, you know, it's a, you know, $65-$75 product before you get into all of the AI componentry.
Yep.
You know? And, again, I think that long-term, vectors are pretty much all positive, I would say, at this point.
Unfortunately, in New York, $30 is like one salad, so that makes even more sense. Just for your installed base, you know, I think across software, we saw companies, like, downsize their employee footprint, especially at the start of 2023. But since, do you feel like things are healthier from just what your customers are saying about their hiring plans or you've seen just, like, seats a little better? Is there any changes there over the last couple of weeks?
I think that what it is is all of the aftershocks of COVID are subsiding, and I would say it's reversion to normal, you know. The patterns we're seeing now are more like 2019 patterns at this point to where there is not this crazy, crazy growth, and then everybody, "Okay, we overbought," and like, you know, "Now, now we need to drop, and we need to downsell," so I think that it's kinda more business as usual, which we like.
Perfect. And then I always wanna get, like, one question for me in these firesides. So this one's up for me, but I would love to see where your answer goes for this. It's like, I'm getting a lot of questions from investors on voice AI. And, like, they're like, "Look, these startups, they're doing this." And I'm like, "Well, if you wanna high reliability, like, there's people that specialize in this, and it's very difficult to do at scale and multi-geo." I would just love from here, from you, like, do you think that will actually be, like, something people ask for in a UCaaS setting? Or I can see it in a CCaaS setting more likely, but, like, I just don't know if customers are even ready for something like this today, so.
When you say voice AI, like.
Yeah, it's like you call in, and you get an interactive chatbot.
I'd like it.
Or an agent.
Yeah.
An agent, yeah.
No, no, no, absolutely. Well, certainly in the CCaaS space. I don't know about the CC space.
Fair enough.
Okay? CCaaS space, they're asking for it all the time. And, you know, we have a number of partnerships or reseller relationships or cross-seller relationship in place already. By the way, we've just announced a very strategic relationship with Verint. They're extremely well-known for their workforce management, WFM. They're actually easily one of the two breakaway leaders there, maybe the breakaway leader, for the high-end enterprise. They also have a very broad AI portfolio, okay, that we are expecting to leverage, okay, for, but that's for the enterprise. For mid-market and below, you know, there are a number of players there. We expect to be working with many of them, but we also expect to be developing our own, not expect, we are developing our own tech. And, we expect, you know, as you mentioned, that, human agents to some degree will be replaced by AI bots.
And who provides those bots? You know, we expect to be one of those providers, right? For UC space, which is more person to person, that's a super interesting question as well. If you look at our portfolio today, what's today on our website, we are already leading with introduction of some of those bots, into our UC base, okay? Now, it's very, very early. I can say that preliminary results are very, very positive based on usage, but we are kinda in at a beta stage. But what we're seeing is, so our number one use case is note-taking, okay? Note-taking is huge. You know, you can actually concentrate on the conversation as opposed to, you know, having to write or type something and, like, actually, you know, pay attention to, to the person you're talking to. So that's a big thing, you know?
And then there's all of this calendaring and, you know, task, you know, management and generation, all of that. Look, there is a gamut of possibilities. It is a game changer. AI as a whole is a complete game changer. And, you know, we expect to participate, and we expect to benefit. We have 2,000 engineers, you know, and they need to do something, so a lot of them will, a lot of them will be doing AI.
I feel like for many of your UCaaS customers, that'll be their first implementation, like, interaction in their business setting with AI, right? Maybe besides email, but, like, they're not gonna have the resources to implement AI across their own business themselves, but to, you know.
Meaning our customers?
Yes. But.
No, it's hard for a customer to do. Look, first, you've got to remember we have a wide base.
Right.
You know, at the high end of the base, you know, yeah, big banks, you know, they can kinda do whatever they wanna do, you know. But anything below that, you know, people run their businesses, you know.
Yes.
You're running a flower shop, or you're running a, you know, dental practice or something, you are probably not developing AI.
You're like, "Great. Yeah, I'll tell Tegus to join us.
And that's the first, which is why, you know, which is why we have a value to provide.
I think that was kind of like a couple quarters ago in your earnings call. You said, like, "We are now a multi-product company. This is really important for RingCentral." I think, like, just that bigger footprint to upsell a lot of these new capabilities makes a lot of sense as well, so.
That is an absolute, like, I really want to use. There is one takeaway. This is a takeaway. If you, you know, everybody can talk and scream AI, and people do it more powerfully, but this is just one of the components. You need to have core tech, okay? And by the way, that's changing rapidly as well. And OpenAI is innovating, and Anthropic is innovating, and so forth, yeah. But what else do you need? You need to have a customer base. You need to have a network. You need to be able to deliver reliability, security, standards compliance, you know, geographical footprint. There are very, very few people who can do that. These are just the people at scale. We're, we're, we're one of them.
Easier said than done, right? That is.
Because, you know, it took us 25 years because.
Well, Vlad and RingCentral team, we'll just say thanks so much for being here. Bye. Next time.
Yep.
You know what I mean? It's gonna be.
We're gonna be grinding the power and.
What's up for next year? What happened with bookings?
We'll be ready for you.
Yeah.
I mean, you've seen on both sides now, but.
Yeah. Just wanna say thanks again, and if any questions, we can get them out of the RingCentral team. Thanks so much.
Thank you.
Thank you.
Thank you.
Thanks.
Thank you.
Thank you.