RingCentral Inc at Goldman Sachs Communacopia + Technology Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Correct. Still learning the acronyms. So how do you look at the evolution of the company? Where does this displace you with respect to what are your long-term goals for the company since you are a UCaaS platform? But do you see this changing? Just as you change from PBX in the cloud only to a UCaaS platform, how do you see the future of the company evolving in that direction?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : The Gartner Peer Insights, right?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Wow. It's a...

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Are you -- is there a gap between the #1 or #2? I mean, how wide or how not so wide is that gap since you touched on...

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : That's great. So maybe switching to you, Mo, I know you joined the company about 9 months back or so -- 9, 10 months back or so. And you're done answering this question, what attracted you to RingCentral? And I will not ask you that question. But as you get deeper into the RingCentral story, how would you describe the TAM, total available market, for the company? And where are we really with respect to market penetration in the UCaaS space across all players?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Back to you, Vlad. You have a new management team. Lots of new C-level Chief Digital Officer or Chief Marketing Officer, Chief Financial Officer, Chief Operating Officer, what do you want them to do?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : So how do you feel about those mandates? I mean do you feel like several months in -- do you have more conviction in being able to deliver last mandate? Sonalee, let's start you, Sonalee, and then go to Mo.

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Yes.

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Mandate for Mo.

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Got it. Mo, I want to come back to you again. On the last quarter earnings conference we talked about sales cycles reverting back to pre-COVID levels and a bit more caution in enterprise buying. At the same time, you also said that leads are up, and you had a record million dollar TCV deals. They seem like they are somewhat conflicting with each other. Can you just maybe diagnose this a little bit and tell us what you're seeing out in the field down to this day, what's going on in the broader macro as it pertains to the caution that you saw?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : And where are we with that? Okay, reckoning with higher cost of capital, whatever it is need to do a pilot project before I really go full stream. How long is it adjustment per in your view? Does it take a quarter or 2? Is it permanent? Or I mean...

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Got it. Okay. I want to go back to SMB, whoever wants to jump in here. So Enterprise, a little bit more cautious with all the factors you talked about. What's happening on the SMB side? I mean a slate of companies, including Intuit, which I regard as a pretty good indicator for the health of the SMB ecosystem, their guidance is fine. I mean the quarter was good, and people were very surprised that SMB is in the U.S. are doing quite well. Has your experience...

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Got it. Okay. Yes. With respect to -- maybe before we get into the competition, I just want to switch back and forth. Certainly, we'll get to you on net new business. One thing that struck people despite your very solid growth rate in Q1 and Q2, if you strip out the FX, net new business bookings, the way people do the calculation looking at ARR or run rate in your subscription revenue, it looks it was flat to maybe down a little bit relative to Q1, Q2 of last year. Can you just give us a bit of a diagnosis as to what drove that? And what are the things that you're looking for with respect to making your numbers in the second half of the year, you're expecting a better rebound in net new business, any things that can explain how it shaped up in Q -- first half? And how it might shape up the second quarter? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 12, 2022 / 5:45PM, RNG.N - RingCentral Inc at Goldman Sachs Communacopia + Technology Conference

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : I love it when you answer questions very much. It makes my job so good.

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Got it. Coming back to you, Mo, on the topic of competition, I think Zoom recently declared 4 million seats versus your 5 million. I know there's a big ARPU difference between your offering and theirs. But how -- what's your take on how Wall Street sees the competitive environment? So it assumes installed base is at 80%, although their yield rate is much lower than yours, and Teams throw out some big numbers, 12 million of their subscribers using PSTN lines. Help us understand what's going on in the ground as far as reality of the competitive situation is concerned vis-a-vis how they report these statistics? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 12, 2022 / 5:45PM, RNG.N - RingCentral Inc at Goldman Sachs Communacopia + Technology Conference

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Yes. Like $100 a year, $8 a month versus your $3,200, $3,300 ARPU.

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Sorry?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : It just works at the pricing of the other company that disclosed 4 million seats, and they're doing $400 million in revenue, that's about $100 per seat per year. So... REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 12, 2022 / 5:45PM, RNG.N - RingCentral Inc at Goldman Sachs Communacopia + Technology Conference

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : You made an acquisition, yes, long time back on this, yes.

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Yes, yes. So I know that you have off late started to publish your ARPU trends and you have this yellow line and then orange line, whatever, your RingCentral colors and then you have your ARPU going above that, right? And some say, "Oh, that's because contact center is growing very nicely, and that's a higher-value product. And if you strip that out, the underlying ARPU is actually going down." Any response to that?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : You got the contact center. You should be better for it.

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Yes. And at some point, maybe your ARPU starts to go up and contact center business becomes large enough as a percentage of revenue. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 12, 2022 / 5:45PM, RNG.N - RingCentral Inc at Goldman Sachs Communacopia + Technology Conference

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Anybody with questions, just raise your hand. Yes, just speak, and I will try to... Unidentified Analyst (inaudible)

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : I asked that question. Yes. What's Vlad holding you to margin?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Anybody else with the question. Yes, please. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 12, 2022 / 5:45PM, RNG.N - RingCentral Inc at Goldman Sachs Communacopia + Technology Conference Unidentified Analyst You've done a pretty good job of sort of making a range of advantage (inaudible) over the last few years. How did IT (inaudible) consolidation with more of the maybe smaller players that are actually sort of have true UCaaS platforms like an 8x8 or the new go-to or you might tell a flagship product there? Do you see more consolidation for the next few years across the board? Or do you think it will be more of a game of you guys continue to grow and they'll have challenges where you'll just sort of compete the revenue away?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Is there a question on this side? Unidentified Analyst (inaudible)

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : So Mo, you said 100% of the new seats were from partnerships?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Got it.

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Have the cake and eat it too without having to -- okay. Let's talk about the -- I think -- the Street is concerned about net adds, especially Avaya, since it's presumably the largest contributor to your partnerships. Did you add net new adds in Q2 on Avaya? That's the elephant in the partnership.

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : So in net ads, right? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 12, 2022 / 5:45PM, RNG.N - RingCentral Inc at Goldman Sachs Communacopia + Technology Conference

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Yes. And Vlad you said -- or Mo you said, it's 100% growth rate on a year-over-year basis, that base of 500,000 seats is $250,000 a year back or so. So obviously, trends recently it's been up...

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : And what's the outlook for the partnership business?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : What's the outlook for the partnership business?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : It's 10% growing 100%. That's...

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : It's good intake. I feel good. 10% growing 100%. You didn't say any forward-looking thing, but 10% growing 100%. Any other questions? Please go ahead. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 12, 2022 / 5:45PM, RNG.N - RingCentral Inc at Goldman Sachs Communacopia + Technology Conference Unidentified Analyst Give us a stated look with the contact center market looks like where you guys position there. I'm familiar with Genesis, I kind of view it as sort of one of the other larger ones throughout is really in this work that you're getting again how do you guys (inaudible) there?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : One last question from my end for Vlad. The stock did really well for a period of time, then it seems to be under a lot of pressure. But you've got a good business, it'd be growing 32%, 33%, vibrant market opportunity, good unit economics and you have -- you've logged the company. What do you think is -- let's say, a year from now we're doing the same conference and the stock is up whatever, 50, 75, who knows, right? What do you think will have been the misperception as to why RingCentral is still growing at an acceptable rate and turning more than except for profit? Let's say, looking backwards, what will be the reasons why RingCentral has outlooked people's pessimistic expectations?

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Be unites. It's chorus.

Question: Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst : Great. Thank you so much. Thank you, Vlad. Thank you, Sonalee. Thank you, Mo. I appreciate it.