Financial Data and Key Metrics Changes - Total revenue for 2025 grew nearly 5% to $2.52 billion, with subscription revenue increasing just over 5.5% to $2.43 billion [5][27] - Record free cash flow of more than $500 million was achieved, up 32% versus 2024, translating to over $5.80 of free cash flow per share [5][28] - GAAP operating margin reached nearly 5% in 2025, with expectations to double in 2026, targeting approximately 20% GAAP operating margin in the next three to four years [7][30] - Non-GAAP operating margin improved to 22.8% in Q4, up more than 140 basis points year-over-year [26] Business Line Data and Key Metrics Changes - Subscription revenue in Q4 was $622 million, up 5.5% year-over-year, while total revenue was $644 million, up 4.8% [25] - RCAI-utilizing customers, those using at least one AI product, now account for nearly 10% of overall ARR, more than doubling year-over-year [25][11] - AIR, the AI receptionist, saw customer count reach 8,300, up 44% sequentially, indicating strong demand [15] - ACE, the AI conversation expert, exceeded 4,800 customers, up 144% year-over-year, showcasing the growing adoption of AI products [16] Market Data and Key Metrics Changes - Demand remains strong across all customer segments, with small business and global service provider business growing in double digits [45] - The combined revenue from small business and global service providers is over $1.1 billion, performing well above the Rule of 40 [45] - Pricing pressure is more pronounced in the enterprise segment compared to SMB, but small business growth has accelerated year-over-year [45] Company Strategy and Development Direction - The company is focused on transforming into a leading agentic voice AI platform, with significant investments in AI-led products [9][12] - A quarterly dividend of $0.075 per share was announced, marking a strategic enhancement to the capital return strategy [7][24] - The company aims to reduce stock-based compensation (SBC) to 3%-4% of annual revenue over the next three to four years [6][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business's future, highlighting strong financial performance and a robust market position [23][24] - The ongoing investment in AI is expected to drive long-term growth and enhance customer value [11][12] - Management anticipates that the headwinds from COVID-lapping contracts will subside, entering 2027 with a clean slate [45] Other Important Information - The company reduced debt by more than $275 million, ending the year at 1.7x net leverage [28][29] - New equity grants declined by 36% to approximately $160 million, contributing to a reduction in SBC as a percentage of revenue [28] Q&A Session Summary Question: What are the capital allocation priorities for 2026 and beyond? - The company plans to invest over $250 million in R&D, primarily for AI-led products, while also focusing on reducing leverage and returning capital through buybacks and dividends [38][40] Question: How is demand characterized across different customer segments? - Demand is strong across all segments, with small business growth accelerating and enterprise facing some pricing pressure [45] Question: What levers are being used to improve profitability? - Profitability improvements are driven by strong gross margins, disciplined spending, and operational leverage [51][52] Question: What is the average contract value for AI customers? - AI-related customers are showing significantly better retention and higher average revenue per user (ARPU) compared to non-AI customers [55][58] Question: How is the partner program adjusted for AI priorities? - The partner program is focused on key verticals like healthcare and financial services, with strong uptake of AI products among partners [70][71]