Revenue Performance - Subscriptions revenue increased 6% year-over-year to $599 million, accounting for 97% of total revenue[5] - Total revenue for Q2 2025 was $620 million, up 5% from $593 million in Q2 2024[6] - Total revenues for Q2 2025 reached $620.4 million, a 4.3% increase from $592.9 million in Q2 2024[31] - Subscription revenues amounted to $598.7 million, up from $567.1 million year-over-year, reflecting a growth of 5.7%[31] - Total revenues for the six months ended June 30, 2025, reached $1.232 billion, compared to $1.177 billion for the same period in 2024, reflecting a year-over-year growth of approximately 4.7%[35] - Subscription revenues for the six months ended June 30, 2025, were $1.189 billion, up from $1.125 billion in 2024, indicating a growth of about 5.7%[35] Profitability Metrics - GAAP operating income was $37 million, compared to a loss of ($5) million in the same period last year[6] - Adjusted EBITDA was $162 million, or 26.0% of total revenue, compared to $146 million, or 24.6% of total revenue, in the same period last year[8] - The company reported a net income of $13.2 million for Q2 2025, a significant recovery from a net loss of $14.8 million in Q2 2024[31] - Non-GAAP net income for the six months ended June 30, 2025, was $190.071 million, compared to $169.929 million in 2024, representing an increase of approximately 11.9%[37] - Non-GAAP operating margin for the six months ended June 30, 2025, was 22.2%, compared to 20.8% in the same period of 2024, showing an improvement of 1.4 percentage points[35] Cash Flow and Financial Position - Free cash flow for Q2 2025 was $144 million, up 32.7% year-over-year[5] - Net cash provided by operating activities was $167 million, reflecting a 31.7% increase year-over-year[5] - Cash flows from operating activities for the six months ended June 30, 2025, amounted to $317.076 million, an increase from $223.175 million in 2024[33] - The company reported a net cash used in investing activities of $42.515 million for the six months ended June 30, 2025, compared to $63.992 million in 2024, indicating a reduction in cash outflow[33] - Cash and cash equivalents decreased to $168.1 million as of June 30, 2025, down from $242.8 million at the end of 2024[29] Liabilities and Assets - Total assets decreased to $1.6 billion from $1.8 billion at the end of 2024, primarily due to changes in cash and receivables[29] - The company’s total liabilities stood at $1.9 billion, a decrease from $2.1 billion at the end of 2024, indicating improved financial leverage[29] Future Projections - For Q3 2025, the GAAP operating margin is forecasted to be between 4.9% and 6.1%[40] - Non-GAAP operating margin for FY 2025 is projected to remain stable at 22.5%[40] - The company expects GAAP net cash provided by operating activities for FY 2025 to be between $600 million and $605 million[40] - Non-GAAP free cash flow for FY 2025 is anticipated to be in the range of $515 million to $520 million[40] - Share-based compensation for FY 2025 is estimated to be between $295 million and $285 million[40] - Capitalized expenditures for FY 2025 are projected to be $85 million[40] - Non-GAAP income from operations for FY 2025 is expected to be between $562 million and $573 million[40] Customer Metrics - AI Receptionist (AIR) customer base tripled to over 3,000 in the last quarter[3] - The annualized exit monthly recurring subscriptions (ARR) metric is a key indicator of anticipated subscription revenue, calculated as monthly recurring subscriptions multiplied by 12[26] - The Net Monthly Subscription Dollar Retention Rate is a critical metric for assessing customer retention and revenue stability[26] Stock-Based Compensation - The company reduced stock-based compensation expense as a percentage of revenue by 450 basis points year-over-year[5] - The company incurred share-based compensation expenses of $145.263 million for the six months ended June 30, 2025, down from $179.961 million in the same period of 2024[37]

Core Insights - Cold Jet is launching an initiative to transform renewable natural gas (RNG) biomethane sites into dual-purpose revenue generators by integrating carbon capture and liquefaction technology with dry ice production solutions [1][2][4] Group 1: Market Opportunity - RNG sites capture methane from organic waste and produce significant CO2 emissions, which are often released into the atmosphere. Cold Jet's approach allows for the capture and conversion of CO2 into valuable products, tapping into a growing market for liquid CO2, projected to increase 8x by 2050 in the EU and 2% annually by 2028 in the U.S. [2] - Revenue generated from dry ice production can be three to four times greater than that from liquid CO2, presenting a compelling economic opportunity for RNG sites [4] Group 2: Product and Technology - Cold Jet's modular Dry Ice Production Hub is a containerized unit designed for swift on-site installation and integration with existing RNG or CO2 plants, offering advantages such as the lowest carbon footprint and energy consumption per kilogram produced [5] - The system is scalable for future growth and retains high second-hand value, making it an attractive investment for RNG facilities [5] Group 3: Industry Applications - Dry ice has critical applications across various industries, including food processing, cold chain shipping, biopharma, and environmental cleaning, creating a ready market for RNG sites equipped with Cold Jet's solutions [4][6] - Cold Jet's extensive experience and support position the company to assist RNG sites in identifying local demand for CO2 and dry ice, as well as connecting them with potential partners and customers [6]

Summary of RingCentral (RNG) 2025 Conference Call Company Overview - RingCentral is a leader in cloud-based business communications, with a revenue of half a billion dollars and over half a billion dollars in annual free cash flow [6][14][22] - The company has transitioned into a multiproduct portfolio, adding AI-driven products and a contact center solution called Ring CX for the SMB market [8][10] Core Industry Insights - The enterprise communications market is estimated to be around $100 billion, with RingCentral holding a 20% share in cloud telephony [12][14] - The contact center market is smaller but growing faster, especially with the integration of AI technologies [16][20] - Voice remains the primary means of communication for consumers, presenting significant opportunities for RingCentral [19] Product Development and AI Integration - RingCentral has introduced several AI-led products, including RingCentral Air (AI receptionist) and AI assistants for calls, enhancing customer interactions [9][10][22] - The company aims to achieve a run rate of $100 million in annual recurring revenue (ARR) from its new AI products by the end of the year [22] Competitive Landscape - RingCentral is positioned as a disruptor in the contact center industry, leveraging its PBX capabilities to differentiate from competitors like Zoom and NICE [24][60] - The company maintains a strong market share, with competitors like Zoom and Microsoft having smaller bases in terms of paying seats [56][58] Partnerships and Market Strategy - RingCentral has over 16,000 channel partners, with significant relationships with global service providers like AT&T, which is refocusing on the SMB market [42][44] - The company sees small businesses as a critical market segment, representing over 40% of the economy [44] Financial Health and Future Outlook - RingCentral plans to reduce gross debt to under $1 billion by the end of next year while investing heavily in R&D [69][70] - The company is considering various options for returning capital to shareholders, including share buybacks and potential dividends [75][77] Key Takeaways - RingCentral is well-positioned to capitalize on the growing demand for AI-driven communication solutions in the SMB market [30][32] - The company is focused on maintaining its market share while expanding its product offerings to address evolving customer needs [29][60] - Future growth will be supported by strategic partnerships and a commitment to innovation in the cloud communications space [46][50]

Core Insights - RingCentral reported strong first-quarter 2025 results with non-GAAP earnings of $1 per share, exceeding estimates by 4.17% and showing a year-over-year increase of 14.9% [1] - Total revenues reached $612.1 million, beating consensus by 0.22% and increasing 4.8% year over year, driven by subscription business growth and AI adoption [1] Financial Performance - Software subscription revenues, which constitute 96.4% of total revenues, grew 5.9% year over year to $590.1 million, surpassing estimates by 0.03% [3] - Other revenues decreased 17.9% year over year to $21.9 million but exceeded estimates by 6.8% [3] - Annualized Exit Monthly Recurring Subscriptions (ARR) rose 7% year over year to $2.53 billion, fueled by demand for AI-powered offerings [3][4] Operating Metrics - Non-GAAP gross margin contracted by 130 basis points to 76.9% year over year [5] - Non-GAAP operating income increased 10.2% year over year to $133.4 million, with an operating margin of 21.8%, expanding 110 basis points [6] - Non-GAAP EBITDA margin improved to 25.3%, up 90 basis points year over year [6] Balance Sheet & Cash Flow - As of March 31, 2025, cash and cash equivalents were $154.4 million, down from $242.8 million at the end of 2024 [7] - Cash flow from operations was $149.7 million in Q1 2025, compared to $132.9 million in Q4 2024 [7] - Non-GAAP free cash flow increased to $130.2 million from $111.8 million in the previous quarter, with a cash flow margin of 21.3% [8] Future Guidance - For Q2 2025, RingCentral expects revenues between $614 million and $620 million, indicating year-over-year growth of 4-5% [9] - Subscription revenues are projected to be between $594 million and $600 million, reflecting a growth of 5-6% year over year [10] - Non-GAAP earnings for Q2 are anticipated to be between $1.00 and $1.04 per share, with an expected operating margin of 22-22.5% [10] - For the full year 2025, revenue growth is projected at 4-6%, with subscription revenue growth expected at 5-7% [10][11]

Q1 2025 Financial Performance - Total revenue reached $612.1 million, a 5% year-over-year increase[8] - Subscription revenue was $590.1 million, up 6% year-over-year[73] - Operating margin was 21.8%, exceeding guidance[8] - Free cash flow was $130 million[8] - Debt paydown was $166 million[8] - Annualized Recurring Revenue (ARR) reached $2.532 billion, a 7% year-over-year increase[8,73] Strategic Growth & Innovation - The company is on track to achieve $100 million+ ARR from new products by the end of 2025[16] - GSPs represent >10% of ARR with double-digit growth[21] - There was a >30% year-over-year increase in MS Teams integration MAU[27] - Over 1000 customers are using AI Receptionist (AIR) as of May 7, 2025[39] FY2025 Guidance - The company projects total revenue growth of 4% to 6% year-over-year[74] - The company projects subscription revenue growth of 5% to 7% year-over-year[74] - Non-GAAP operating margin is expected to be approximately 22.5%[74] - Non-GAAP EPS is projected to be between $4.13 and $4.27[74] - Free cash flow is expected to be between $500 million and $510 million[74]

Core Insights - RingCentral reported revenue of $612.06 million for the quarter ended March 2025, reflecting a year-over-year increase of 4.8% [1] - The company's EPS was $1.00, up from $0.87 in the same quarter last year, exceeding the consensus estimate of $0.96 by 4.17% [1] - The revenue surpassed the Zacks Consensus Estimate of $610.74 million, resulting in a surprise of +0.22% [1] Financial Metrics - Gross Margin - Other was reported at -14.6%, significantly below the average estimate of 2.8% from six analysts [4] - Gross Margin - Subscriptions stood at 80.3%, slightly below the average estimate of 81% from six analysts [4] - Subscription Revenues reached $590.11 million, a 5.9% increase compared to the year-ago quarter, and slightly above the average estimate of $589.93 million [4] - Revenues from Other sources were $21.94 million, exceeding the average estimate of $20.55 million, but represented a year-over-year decline of 17.9% [4] Stock Performance - Over the past month, RingCentral's shares have returned +7.1%, underperforming the Zacks S&P 500 composite's +11.3% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents RingCentral's unaudited condensed consolidated financial statements, highlighting a **5% revenue increase** and improved net loss and operating cash flow [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets decreased to **$1.63 billion**, liabilities decreased to **$1.97 billion**, and stockholders' deficit slightly improved to **$541.2 million** Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $154,436 | $242,811 | | Total current assets | $780,242 | $871,122 | | Total assets | $1,631,592 | $1,779,873 | | **Liabilities & Stockholders' Deficit** | | | | Total current liabilities | $1,208,296 | $748,799 | | Long-term debt, net | $736,250 | $1,347,881 | | Total liabilities | $1,973,340 | $2,131,343 | | Total stockholders' deficit | ($541,197) | ($550,919) | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Total revenues increased **5%** to **$612.1 million**, with operating income of **$10.3 million** and a narrowed net loss of **$10.3 million** Q1 2025 vs. Q1 2024 Statement of Operations (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total revenues | $612,056 | $584,211 | | Gross profit | $431,606 | $413,732 | | Income (loss) from operations | $10,340 | ($10,899) | | Net loss | ($10,328) | ($28,494) | | Net loss per share (Basic & Diluted) | ($0.11) | ($0.31) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations significantly increased to **$149.7 million**, while financing activities used **$219.9 million** due to debt settlement and share repurchases Q1 2025 vs. Q1 2024 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $149,662 | $96,094 | | Net cash used in investing activities | ($19,486) | ($19,409) | | Net cash used in financing activities | ($219,881) | ($94,665) | | Net decrease in cash | ($88,375) | ($19,065) | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, **$2.6 billion** in remaining performance obligations, **$161.3 million** convertible note settlement, and **$7.1 million** in restructuring costs - The company's remaining performance obligations, which represent contracted revenue not yet recognized, were approximately **$2.6 billion** as of March 31, 2025. **53%** of this is expected to be recognized in the next 12 months[38](index=38&type=chunk) - In March 2025, the company settled the remaining **$161.3 million** principal of its 2025 Convertible Notes in cash upon maturity[60](index=60&type=chunk)[70](index=70&type=chunk) - During Q1 2025, the company incurred restructuring costs of **$7.1 million**, primarily for severance and employee benefits, as part of broader efforts to optimize its cost structure[113](index=113&type=chunk)[114](index=114&type=chunk) - The company operates as a single reportable segment, with the CEO acting as the chief operating decision maker (CODM)[116](index=116&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's transformation to an AI-powered multi-product portfolio, highlighting **5% revenue growth**, improved operating income, and strong liquidity despite debt settlement - RingCentral has transformed into an AI-powered multi-product company with offerings like RingEX (UCaaS), RingCX (CCaaS), and RingSense AI solutions, focusing on trust, innovation, and partnerships[124](index=124&type=chunk)[126](index=126&type=chunk) - The company is actively implementing measures to enhance operational efficiencies, including stricter spending discipline, increased productivity, and optimizing go-to-market strategies[129](index=129&type=chunk) Key Business Metrics | Metric | March 31, 2025 | March 31, 2024 | | :--- | :--- | :--- | | Annualized Exit Monthly Recurring Subscriptions (ARR) | $2.53 billion | $2.37 billion | | Net Monthly Subscription Dollar Retention Rate | >99% | >99% | [Results of Operations](index=30&type=section&id=MD%26A_Results_of_Operations) Total revenues grew **5%** to **$612.1 million**, driven by subscription revenue, with operating expenses decreasing, leading to improved operating income and a narrowed net loss Revenue Comparison (in thousands) | Revenue Type | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Subscriptions | $590,112 | $557,487 | 6% | | Other | $21,944 | $26,724 | (18)% | | **Total revenues** | **$612,056** | **$584,211** | **5%** | Operating Expense Comparison (in thousands) | Expense Category | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Research and development | $81,983 | $80,528 | 2% | | Sales and marketing | $274,898 | $272,730 | 1% | | General and administrative | $64,385 | $71,373 | (10)% | - The improvement in net loss by **$18.2 million** was largely due to a **$21.2 million** reduction in loss from operations, driven by higher subscription revenues and disciplined spending, including a **$10.3 million** reduction in share-based compensation[156](index=156&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=MD%26A_Liquidity_and_Capital_Resources) The company maintains strong liquidity with **$154.4 million** cash, **$149.7 million** operating cash flow, and available credit, despite significant debt and share repurchases - In Q1 2025, the company repurchased **1.8 million** shares for **$50.0 million**. As of March 31, 2025, **$218.1 million** remained authorized for future repurchases[159](index=159&type=chunk) - The company has future minimum principal payments for long-term debt totaling **$1.37 billion**, with a significant portion (**$629.1 million**) due in 2026 related to the 2026 Convertible Notes and Term Loan[160](index=160&type=chunk) Non-GAAP Free Cash Flow Reconciliation (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $149,662 | $96,094 | | Capitalized expenditures | ($19,486) | ($19,409) | | **Non-GAAP free cash flow** | **$130,176** | **$76,685** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages market risks from foreign currency and interest rates, with most sales in USD and interest rate swaps mitigating variable debt exposure - The majority of sales are denominated in U.S. dollars, so foreign currency risk is not currently significant. A hypothetical **10%** change in exchange rates would not have a material impact[181](index=181&type=chunk) - Interest rate risk from the variable-rate Term Loan is managed through a five-year floating-to-fixed interest rate swap agreement, effectively fixing the rate at **3.79%** plus a margin[184](index=184&type=chunk) - The company's 2026 Convertible Notes and 2030 Senior Notes carry fixed interest rates, so there is no economic exposure to interest rate changes on this debt, though their fair values are affected by market rates[183](index=183&type=chunk)[185](index=185&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective at the reasonable assurance level[187](index=187&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[188](index=188&type=chunk) [PART II. OTHER INFORMATION](index=40&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in a CIPA class action lawsuit, with a favorable summary judgment currently under appeal, and no estimable potential loss - In the CIPA matter, the court entered a judgment in RingCentral's favor on November 5, 2024, but the plaintiff filed a notice of appeal on January 6, 2025. The company cannot reasonably estimate any potential loss[86](index=86&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks including a history of losses, intense competition, reliance on partners, technology and security threats, substantial debt, and dual-class stock structure - A summary of key risk factors includes a history of significant losses, intense competition, reliance on channel partners, potential for increased customer turnover, and risks associated with servicing debt[195](index=195&type=chunk) [Risks Related to Our Business and Our Industry](index=42&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Our%20Industry) The company faces business and industry risks including a history of losses, intense competition, challenges in customer acquisition and retention, and reliance on brand and key personnel - The company has a history of substantial net losses and may not achieve or sustain profitability due to high costs for development, marketing, and sales, as well as competitive pressures[197](index=197&type=chunk) - The company faces intense competition from a wide range of providers, including 8x8, Microsoft, Zoom, Cisco, and others who may have greater resources, brand recognition, and more diversified offerings[221](index=221&type=chunk)[222](index=222&type=chunk) - A substantial portion of revenue is derived from channel partners and GSPs; failure to effectively manage these indirect channels could materially harm revenues[209](index=209&type=chunk) [Risks Related to Technology and Security](index=51&type=section&id=Risks%20Related%20to%20Technology%20and%20Security) The company faces technological and security risks including service interruptions, cyber-attacks, data breaches, and new legal and ethical challenges from evolving AI technologies - The company is vulnerable to service interruptions from its third-party data center hosting facilities, which could impair service delivery, require credits or penalties, and harm the business[231](index=231&type=chunk) - Cyber-attacks, information security breaches, or denial of service events pose a significant threat, potentially interrupting service, harming reputation, and subjecting the company to liability[235](index=235&type=chunk) - The incorporation of AI technologies like RingSense presents new and evolving legal and business risks, including potential for regulatory scrutiny, intellectual property claims, and data bias[248](index=248&type=chunk)[249](index=249&type=chunk) [Risks Related to Our Indebtedness](index=67&type=section&id=Risks%20Related%20to%20Our%20Indebtedness) The company's substantial debt, including **$609.1 million** in 2026 Convertible Notes, poses risks to cash flow for repayment and imposes restrictive covenants - The company may need additional capital to pursue its objectives, but funds may not be available on acceptable terms, or at all, due to market volatility or restrictive covenants in existing debt agreements[312](index=312&type=chunk) - Servicing its substantial debt requires significant cash, and the company may not have sufficient cash flow to settle conversions of the 2026 Convertible Notes or repay all indebtedness at maturity[316](index=316&type=chunk) - The Credit Agreement contains covenants that limit the ability to incur debt, make investments, dispose of assets, and pay dividends, and requires compliance with maximum leverage and minimum interest coverage ratios[322](index=322&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=76&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **1.82 million** shares for **$50.0 million** in Q1 2025, with **$218.1 million** remaining authorized for future repurchases Share Repurchase Activity - Q1 2025 | Period | Shares Purchased (thousands) | Average Price Paid per Share | | :--- | :--- | :--- | | Feb 1 - Feb 28, 2025 | 174.6 | $28.60 | | Mar 1 - Mar 31, 2025 | 1,647.3 | $27.33 | | **Total Q1 2025** | **1,821.9** | N/A | - In February 2025, the board of directors authorized an incremental **$100.0 million** for the share repurchase program. As of March 31, 2025, **$218.15 million** remained available for future repurchases[358](index=358&type=chunk) [Item 5. Other Information](index=77&type=section&id=Item%205.%20Other%20Information) Several executive officers, including the CEO, President & COO, and CAO, adopted Rule 10b5-1 trading plans in March 2025 - In March 2025, CEO Vladimir Shmunis, President & COO Kira Makagon, and CAO Tarun Arora each adopted a Rule 10b5-1 trading arrangement for the future sale of shares of Class A common stock[361](index=361&type=chunk)[363](index=363&type=chunk)[364](index=364&type=chunk) [Item 6. Exhibits](index=77&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including an amended executive offer letter, credit agreement amendment, and CEO/CFO certifications - The report includes several exhibits, such as an amended employment agreement for President and COO Kira Makagon, the Fifth Amendment to the Credit Agreement, and CEO/CFO certifications[368](index=368&type=chunk)

Company Performance - RingCentral reported quarterly earnings of $1 per share, exceeding the Zacks Consensus Estimate of $0.96 per share, and up from $0.87 per share a year ago, representing an earnings surprise of 4.17% [1] - The company posted revenues of $612.06 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 0.22%, and an increase from $584.21 million year-over-year [2] - Over the last four quarters, RingCentral has consistently surpassed consensus EPS and revenue estimates [2] Stock Outlook - RingCentral shares have declined approximately 25.5% since the beginning of the year, compared to a decline of 4.3% for the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is $1.02 on revenues of $621 million, and for the current fiscal year, it is $4.19 on revenues of $2.52 billion [7] Industry Context - The Internet - Software and Services industry, to which RingCentral belongs, is currently ranked in the bottom 19% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - The performance of RingCentral's stock may be influenced by the overall outlook for the industry [8]

Financial Data and Key Metrics Changes - The company achieved total revenues of $612 million, representing a 5% year-over-year increase, and was at the high end of guidance [39] - Annual Recurring Revenue (ARR) increased to $2.53 billion, up 7% year-over-year, driven by the AI-powered multi-product portfolio [40] - Operating margin expanded by 110 basis points year-over-year to approximately 22%, exceeding guidance [40] - Record quarterly free cash flow of $130 million, up 70% year-over-year, with a free cash flow margin of 21.3% [42] Business Line Data and Key Metrics Changes - Subscription revenue grew by 6% to $590 million, with strong large deal activity noted [40] - The new product portfolio, including Ring CX and AIR, is expected to contribute over $100 million in ARR by the end of 2025 [40][10] Market Data and Key Metrics Changes - The company maintains a 20% market share in the $30 billion UCaaS market [8] - Strong adoption of AI-based products, particularly among smaller customers, with double-digit ARR growth from this cohort [13] Company Strategy and Development Direction - The company is focused on leveraging AI across its product portfolio to enhance customer experiences and drive growth [22] - A commitment to investing over $250 million annually in innovation, particularly in AI-led products [8] - The strategy includes expanding the total addressable market (TAM) through a multi-product portfolio [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to maintain profitability and growth despite macroeconomic uncertainties [44] - The company is taking a prudent approach to guidance for the remainder of 2025, expecting subscription revenue growth of 5% to 7% year-over-year [44] Other Important Information - The company paid down $166 million of debt during the quarter, reducing the net leverage ratio to 2x [7] - The company aims to reduce gross debt levels to below $1 billion by the end of 2026 [44] Q&A Session Summary Question: What is the target split for the business makeup across various customer types? - Management indicated a desire to grow all customer cohorts, noting better traction with smaller businesses due to product-market fit and reliance on voice communications [50][51] Question: How much pricing power does the company have with the introduction of AI products? - Management believes that AI will significantly enhance ARPU as it replaces human labor with software solutions, leading to greater cost savings for customers [61] Question: How have deals and customer spending tracked in the current macro environment? - Management reported that there has not been a significant impact on sales cycles or deal activity, maintaining business as usual [68] Question: What are the expectations for the second half of the year? - Management reiterated guidance for the year, citing strong Q1 performance but acknowledging macroeconomic uncertainties that could affect projections [72] Question: How is the company approaching international opportunities? - Management noted that 90% of the business is in the US and Canada, with international growth primarily through GSP partnerships [82] Question: How is the partnership with NICE progressing? - Management expressed optimism about the partnership, highlighting the unique product offering that combines strengths in UCaaS and CCaaS [86] Question: What is the initial customer feedback on the AIR product? - Feedback has been positive, with significant productivity improvements reported by early adopters [94]

Financial Data and Key Metrics Changes - The company achieved total revenues of $612 million, representing a 5% year-over-year increase, and was at the high end of guidance [40] - Annual Recurring Revenue (ARR) increased to $2.53 billion, up 7% year-over-year, driven by the AI-powered multi-product portfolio [41] - Operating margin expanded by 110 basis points year-over-year to approximately 22%, exceeding guidance [41] - Record quarterly free cash flow of $130 million, up 70% year-over-year, with a free cash flow margin of 21.3% [42] - The company reduced its net leverage ratio to 2x from 2.2x on a trailing twelve months basis [43] Business Line Data and Key Metrics Changes - Subscription revenue grew by 6% to $590 million, with strong large deal activity noted [41] - The new product portfolio, including Ring CX and RingCentral AI, is expected to contribute over $100 million in ARR by the end of 2025 [41][60] - The AI-powered products, particularly AIR, are seeing strong adoption and positive customer feedback, with significant productivity improvements reported [95] Market Data and Key Metrics Changes - The company leads the $30 billion UCaaS market with a steady 20% market share [7] - Strong adoption of AI-based products is noted among smaller customers, with ARR from these customers growing by double digits [12] - Global Service Providers (GSPs) account for over 10% of ARR, delivering double-digit growth [14] Company Strategy and Development Direction - The company is focused on leveraging AI across its product portfolio to enhance customer experiences and drive growth [22] - A commitment to investing over $250 million annually in innovation, particularly in AI-led products, is emphasized [7] - The strategy includes expanding the total addressable market (TAM) through a multi-product portfolio [31] Management's Comments on Operating Environment and Future Outlook - Management acknowledges macroeconomic uncertainties but remains optimistic about the company's strong performance and growth potential [44] - The company expects subscription revenue growth of 5% to 7% year-over-year for 2025, with total revenue growth of 4% to 6% [44] - Management highlights the ongoing shift from on-premises to cloud solutions as a significant opportunity [53] Other Important Information - The company repurchased approximately 1.8 million shares for $50 million during the quarter [43] - The company aims to reduce gross debt levels to below $1 billion by the end of 2026 [44] Q&A Session Summary Question: What is the target split for the business makeup across various customer types? - The company aims to grow all customer cohorts, with a noted better traction among smaller businesses due to product-market fit and reliance on voice communications [51][52] Question: How much pricing power does the company have with AI innovations? - The company expects significant pricing power as AI replaces human labor, leading to greater cost savings for customers [62] Question: How have deals and customer spending tracked in April? - The company has not seen significant impacts from macroeconomic factors, maintaining business as usual with no lengthening of sales cycles reported [70] Question: What are the expectations for the second half of the year? - The company is taking a prudent approach to guidance, monitoring macroeconomic conditions while remaining confident in its ability to deliver value to customers [74] Question: How is the company approaching international opportunities? - The company sees international growth primarily through GSP partnerships, with 90% of its business currently in the US and Canada [82] Question: How is the partnership with NICE progressing? - The partnership is viewed positively, with both companies offering complementary products that enhance market differentiation [86]