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RingCentral (RNG) this fall 2020 income call Transcript | 7750X Free PDF and PDF Questions

a close up of a logo: RingCentral (RNG) Q4 2020 Earnings Call Transcript © offered with the aid of The Motley idiot RingCentral (RNG) this autumn 2020 income name Transcript

RingCentral (NYSE: RNG)

q4 2020 salary call

Feb sixteen, 2021, 5:00 p.m. ET

Contents:
  • prepared Remarks
  • Questions and answers
  • name members
  • organized Remarks:

    Operator

    CONSTELLATION manufacturers, INC.

    Greetings. Welcome to the RingCentral fourth-quarter 2020 income conference call. [Operator instructions] Please notice this convention is being recorded. i'll now flip the convention over to your host, Ryan Goodman.

    You can also start.

    Ryan Goodman -- Head of Investor members of the family

    thank you. respectable afternoon, and welcome to RingCentral's fourth-quarter 2020 income convention name. i am Ryan Goodman, RingCentral's head of investor relations. joining me these days are Vlad Shmunis, founder, chairman, and CEO; Anand Eswaran, president and chief working officer; and Mitesh Dhruv, chief fiscal officer.

    Our structure nowadays will include prepared remarks by using Vlad, Anand, and Mitesh, followed via mp;A. a few of their discussions and responses to your questions will comprise forward-searching statements, together with their first-quarter and entire-year 2021 fiscal outlook and their assumptions underlying that outlook. These statements are area to hazards and uncertainties. precise consequences may additionally fluctuate materially from their ahead-looking statements.

    this text is a transcript of this convention call produced for The Motley idiot. while they strive for their silly most efficient, there could be blunders, omissions, or inaccuracies in this transcript. as with any their articles, The Motley idiot does not expect any responsibility in your use of this content, and they strongly motivate you to do your personal analysis, including listening to the name your self and studying the company's SEC filings. Please see their terms and conditions for extra details, including their obligatory Capitalized Disclaimers of legal responsibility.

    Motley fool Transcribing has no place in any of the stocks outlined. The Motley fool has no place in any of the shares mentioned. The Motley fool has a disclosure coverage.

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    A dialogue of the risks and uncertainties concerning their company is contained in their filings with the Securities and change fee and is integrated via reference into state-of-the-art dialogue. In particular, their company is at present being impacted by using the COVID-19 pandemic. The extent of its persisted have an effect on on their enterprise will depend upon several elements, including the severity period, and extent of the pandemic, as well as moves taken via governments, agencies, and buyers in line with the pandemic, all of which proceed to conform and stay doubtful at the present. RingCentral assumes no obligation and doesn't intend to update or comment on ahead-searching statements made on this name.

    until in any other case indicated, all measures that follow are non-GAAP with year-over-yr comparisons. A reconciliation of all GAAP to non-GAAP consequences is provided with their earnings unlock and in the slide deck. I motivate you to discuss with their Investor family members web page at ir.ringcentral.com to entry their profits free up, slide deck, their GAAP to non-GAAP reconciliations, their periodic SEC reports, a webcast replay of state-of-the-art call and to be trained more about RingCentral. For definite ahead-searching information, a reconciliation of the non-GAAP financial information to the corresponding GAAP measure isn't purchasable as discussed in element in the slide deck posted on the investor relations website.

    With that, let me turn the name over to Vlad.

    Vlad Shmunis -- Founder, Chairman, and Chief govt Officer

    respectable afternoon, and thanks for becoming a member of their fourth-quarter income convention name. i want to start this name with a heat welcome to their most up-to-date board member, Secretary Arne Duncan. Arne is the former u.s. Secretary of training. previous to his federal executive service, Arne was CEO of Chicago Public schools for eight years, and he's at the moment a senior fellow on the institution of Chicago Harris college of Public coverage.

    Welcome, Arne. Now, to RingCentral. 2020 was a transformational yr. The international pandemic is essentially altering how companies operate.

    With the vaccine now being disbursed, many groups are Getting ready for a hybrid work ambiance. they're planning for some people within the workplace and a few at home for the foreseeable future. As corporations adapt to this new work-from-anywhere norm, digital transformation of company communications will turn into more crucial. Enabling this transformation are cloud-primarily based communications options.

    here is primary to enabling employees to productively have interaction with customers, companions, and friends from anywhere on any machine and any mode. in keeping with Gartner, by 2024, seventy four% of the new unified communique licenses bought by groups should be cloud-based, up from 48% in 2019. corporations are more and more turning to RingCentral as a relied on associate in their transition to a cloud-primarily based communications platform. This growing consumer demand is evident in their mighty and standout this autumn effects.

    total income grew 32% year over 12 months to $335 million, an acceleration of 2 aspects sequentially. RingCentral office ARR grew 39% yr over yr to $1.2 billion, an acceleration of three features sequentially. They delivered a checklist number of $1 million TCV wins, up over 50% sequentially. And they had robust contributions from their key partners led by using Avaya, AT&T, and Atos.

    As they seem to 2021 and beyond, they are more and more confident in the size of the opportunity and market receptivity to their differentiated Message Video cell, or MVP as they call it, and cloud contact core options. This, together, allows us to address the total range of enterprise communications needs for most organizations international. And now with the fresh addition of RingCentral Glip, their free, unlimited, sensible Video meetings solution, they are able to support much more groups or their particular person departments to speak in any mode, on any gadget, from anyplace. Please consult with glip.com to adventure it for your self.

    Our leading UCaaS answer, RingCentral workplace, is an commercial enterprise application, carrier-grade, global, relied on Message Video cellphone, or MVP, answer. It presents a seamlessly built-in person multimode experience, five nines of reliability, world-category international coverage, and an open platform, all of which they consider are crucial competitive differentiators. we're also proud to once once again be recognized as a pacesetter within the newest Gartner Magic Quadrant for Unified Communications as a service, global report for the sixth yr in a row. moreover, RingCentral ranked highest in all 5 use instances of the 2020 Gartner essential Capabilities for Unified Communications as a service, global report.

    Leveraging all the strengths of their business-main cloud PBX platform, they now have lately brought RingCentral Video, a new core component of their MVP solution. RingCentral Video is constructed on the modern WebRTC industry-general framework with a large number of proprietary enhancements. They continue to innovate here at a speedy tempo. one of the accurate enhancements encompass digital background, closed captions, third-birthday celebration digital camera aid, and waiting rooms.

    previous this month, they brought RingCentral Embeddable for RingCentral Video, enabling developers to straight away embed video into enterprise purposes. And in q4, they acquired certain expertise property of the business called DeepAffects, a pioneer in AI-powered conversational intelligence. DeepAffects will enable us to supply RingCentral Video with new capabilities, similar to emotional sentiment awareness and multi-speaker identification. To support corporations transition to cloud verbal exchange solutions they lately delivered RingCentral Glip, their free sensible Video assembly solution purchasable via their glip.com web site.

    Glip gives unlimited RingCentral Video meetings seamlessly integrated with crew messaging capabilities, all for gratis. This sensible assembly answer offers clients with a persistent platform for communications earlier than, during, and after meetings. here is a vital differentiator from other single-mode video options obtainable today. and naturally, all of this with RingCentral's carrier-grade excellent, protection, reliability, and international footprint.

    Complementing their UCaaS options is the RingCentral CCaaS product portfolio. they are seeing strong cloud adoption traits, with many purchasers picking out built-in UCaaS and CCaaS from a single leading issuer. Contact core become covered in over 60% of their $1 million TCV wins in this autumn, together with distinctive wins for their native RingCentral have interaction Cloud Contact core platform. they are above all pleased with a accurate 2,000-user win that mixed RingCentral office with RingCentral engage.

    This major NGO consumer will leverage the entire vigor of RingCentral to support people displaced by using COVID-19 find new employment. In conclusion, they have a strong, smartly-differentiated portfolio of trade-main cloud communication solutions. And during the last a couple of years, they concentrated on finding new ingenious how you can efficaciously bring these solutions to global markets. On that word, i'd like to lengthen my heat welcome to Vodafone company as their most accurate key companion.

    Vodafone is the biggest model and fixed community operator in Europe. RingCentral may be the lead UCaaS present for Vodafone business' installed base of over 30 million clients. The Vodafone enterprise will additionally offer RingCentral's CCaaS customer engagement solutions. RingCentral believes in successful via partnerships.

    over the past a number of years, they have now established a different go-to-market ecosystem of direct channel and strategic partnerships. RingCentral is the lead UCaaS issuer for Avaya, Atos, Alcatel-Lucent commercial enterprise, AT&T, BT, TELUS, and now Vodafone business. This offers us favourite entry to over 200 million skills clients worldwide. We're humbled and grateful to discover ourselves during this interesting place.

    And they are committed to riding a pace of speedy innovation and GTM enlargement to proceed supplying world-class cloud conversation solutions for years to come back. With that, i will be able to now turn the name over to their president and chief working officer, Anand Eswaran, for additional particulars on their progress and a few contemporary achievements.

    Anand Eswaran -- President and Chief working Officer

    thanks, Vlad. decent afternoon, all and sundry. Operationally, q4 become a great quarter throughout the board. ARR growth became solid in all consumer segments.

    both new client wins and installed base expansions contributed to the strong performance. And they are seeing a high stage of demand throughout their built-in portfolio of cloud-based unified communications and consumer engagement solutions. modern cloud communique solutions have become a proper precedence for organizations of all sizes. they are privileged to be a key partner in their adventure to the cloud.

    We proceed rapidly innovating, and we're scaling their operations and platform to comfortably meet the wants of a growing client base. Let me share some highlights. First, their americans. They additional bolstered their leadership crew right through the yr.

    We appointed a brand new EVP of products and engineering, Nat Natarajan; chief advertising officer, Jaya Kumar; chief digital officer, Matthew Bishop; chief information protection officer, Heather Hinton; and chief privacy officer, Paul Azani. These business leaders convey precious operational and technology advantage. 2d, their channel companions. They continue to extend their presence in the channel community, a key driver of their upmarket success.

    In this fall, their channel ARR increased 55% yr over year to $465 million. Third, their provider issuer partners. we're seeing fantastic momentum with provider provider partnerships. They improved their relationships and became a lead offer for trade leaders like AT&T and BT.

    we are also excited to welcome Vodafone business as a strategic partner. Fourth, their strategic companions in this autumn. They improved their rollout with Avaya and Atos in a number of new geographies. Alcatel-Lucent business is on target for a Q1 launch.

    we're seeing early go-to-market traction with their strategic partners contributing assorted million-dollar-plus TCV wins in this fall. Fifth, with their confirmed upmarket traction, they signed two $10 million-plus TCV deals, together with a listing variety of $1 million-plus big TCV wins in this fall, up over 50% sequentially. and finally, their turning out to be product portfolio changed into a key driver of their strong this autumn results. Their integrated portfolio of UCaaS and CCaaS options is a key differentiator.

    looking forward, with RingCentral Glip, they are reimagining smarter meeting solutions with integrated team messaging and video for persistent collaboration in a piece-from-anywhere environment. Let me now dive into some detail. i'll start with the wonderful this autumn contributions of the channel. Channel contributed over three-quarters of the $1 million-plus TCV wins with a mix of UCaaS and CCaaS wins across each new valued clientele and upsells to latest shoppers.

    one of the marquee wins from channel in this autumn become a Fortune 500 specialized staffing enterprise. This client essential to exchange growing old on-premise methods with a highly official global cloud platform. With RingCentral, this client can now manage its 6,000-plus users throughout over 20 nations on a single global communications platform. As for provider suppliers, they had another unique quarter with robust results and new partnerships.

    First, Vodafone enterprise. This partnership offers RingCentral an opportunity to further scale their international go-to-market attain to a complementary enterprise and cell user base. Vodafone company will deliver a new co-branded, cloud-based communication provider according to their leading MVP platform, in addition to their portfolio of CCaaS solutions. For AT&T, they proceed to see strong momentum as they lead UCaaS answer.

    we're seeing extended traction with enormous purchasers and excited on the probability to expand their partnership in new verticals like state and local education consumers. For BT, on the heels of becoming their lead UCaaS issuer, they had a powerful UCaaS quarter in q4. As for the strategic partnerships, let me delivery with Avaya. They improved their ACO rollout, launching in five new European countries in this autumn.

    we are seeing adoption across shoppers of all sizes in dissimilar geographies with specific energy in their commercial enterprise segment. This contains a 7,000-plus consumer Microsoft Direct Routing win with a large, varied coverage supplier. we're encouraged with a strong early growth momentum in seat count number, transaction value, extent, and deal size. With Atos, they have additionally hit the ground running.

    because preliminary European launch in August, we've got multiplied to the U.S., U.okay., and Australia. The pipeline is transforming into well. we're also excited to have Atos begin its personal implementation of Unify office by means of RingCentral for his or her 30,000-plus personnel in over 20 nations. As organizations embraces working from any place, their integrated platform of UCaaS and CCaaS solutions drove effective client wins all over the quarter.

    In this fall, they gained a deal with a Fortune 500 fiscal services issuer. This customer required a particularly reliable, depended on, FINRA-compliant conversation system. Their deep commercial enterprise cloud phone device advantage and vertical market integrations were key differentiators in this 4,000-consumer win. they now have a much bigger chance to extend their footprint over time no longer handiest for users but also with other items.

    We also noticed strength in the quarter with their contact middle options. Contact center became included in over 60% of their $1 million-plus TCV wins in this autumn, together with nearly one hundred wins for their native RingCentral engage Cloud Contact center platform. we're seeing fine momentum with latest customers. as an example, course forward, a issuer of IT and know-how options for scientific practices and an extended-standing RingCentral UCaaS and CCaaS consumer, tripled its have interaction Voice seat count to 450.

    Wins like these exhibit their capability to land and expand and illustrate their large possibility forward with higher purchasers. I joined RingCentral a little over a year in the past, and that i'm so happy with the accomplishments of the team in 2020. They bolstered their management crew with six new CXOs and exact talent delivered right through the organization. They deepened their portfolio of product capabilities with RingCentral Video, Glip, and RingCentral Cloud PBX for Microsoft teams, which makes it possible for direct routing integration.

    We launched Avaya Cloud workplace and Atos Unify workplace and delivered new key partners, together with Alcatel-Lucent commercial enterprise and Vodafone company. They had a lot of business accolades for diversity, management, and tradition, and they broke through the Glassdoor know-how desirable 10 ultimate locations to Work. ultimate but no longer the least, they delivered consistent and robust outcomes for the year. They continue to execute with a clear imaginative and prescient and powerful self-discipline.

    i'm enormously grateful and humble to be part of this event. With that, i'll flip the call over to their chief monetary officer, Mitesh Dhruv.

    Mitesh Dhruv -- Chief monetary Officer

    Thanks, Anand, and respectable afternoon, each person. 2020 changed into a standout 12 months for their monetary performance driven by means of lots of the tailwinds that Vlad and Anand highlighted. Subscriptions profits grew 33% 12 months over 12 months and surpassed $1 billion, a major milestone for RingCentral. Non-GAAP working margin more advantageous 50 basis features to 9.7%.

    And for a couple of consecutive years, they now have been executing above the guideline of 40, demonstrating ecocnomic growth. q4 capped the yr with amazing efficiency on key monetary fronts. right here's a brief photo. The RingCentral workplace ARR grew 39% yr over year to over $1.2 billion.

    complete ARR grew 35% to $1.three billion. Subscriptions revenue grew 34%, above the high conclusion of their guidance. Non-GAAP operating margin became over 10%, on the high end of their tips. And non-GAAP free money circulation margin of 6.5% more advantageous about a hundred and twenty groundwork points sequentially.

    These strong developments reflect RingCentral's growing to be customer intellect share, each with new and current clients, in addition to contributions from their partnerships, at favorable unit economics. To that end, they yet once more noticed amazing new brand momentum in this autumn. Their potential to land new logos validate the power and cost of their MVP platform as organisations seem to transform their complete enterprise communique stack to the cloud. And traction with their present clients has under no circumstances been superior.

    Three key issues there. First, upsell represented over 40% of accurate office bookings. 2d, churn hit a listing low exiting the 12 months. And third, traits stabilized in those verticals most impacted by way of COVID past within the 12 months.

    As to their partnerships, we're pleased to see contributions from Avaya and Atos as they begin to ramp. we're additionally seeing robust results from their provider partners, most primarily from AT&T. looking ahead in 2021, they have a match pipeline throughout all their segments as each and every aspect of their global income ecosystem is presenting boom opportunities. As more clients from their partners come on-line all the way through the year, they predict amazing incremental contributions.

    And past 2021, they will layer on more increase from companions like Alcatel-Lucent enterprise and Vodafone company. With these structural tailwinds, they feel assured within the momentum into the brand new year. With that, the 2021 outlook numbers. They are expecting total earnings boom of 25% to 26%.

    We predict subscription earnings increase of 26% to 27% with identical income linearity between the first half and the second half as they noticed in 2020. They are expecting non-GAAP operating margin between 10% and 10.1%. And they predict non-GAAP EPS of $1.20 to $1.24. In abstract, 2020 in reality become a transformational 12 months for RingCentral.

    New brand momentum turned into mighty. expansion in the base changed into picking out up. Churn persevered to enrich right through the year. global partnerships have all started to contribute.

    We extended their product portfolio, and they have now added new catalysts for future increase. Their expertise moat, combined with a differentiated distribution moat with their interesting partnerships, positions us for lengthy-term long lasting boom. They proceed to invest in R&D, boom partnerships, and quota-carrying supplies. this can permit us to drive further product innovation and build pipeline to catch this significant probability forward of us.

    we are confident in their ability to thrive in this $50 billion-plus addressable market, and they consider 2021 could be a extremely interesting 12 months forward for RingCentral. With that, let me flip the call to the operator for mp;A.

    Questions & solutions:

    Operator

    [Operator instructions] Their first question is from Brian Peterson with Raymond James. Please proceed along with your query.

    Brian Peterson -- Raymond James -- Analyst

    Oh, sorry, a bit bamboozled with the aid of the mute button there. Apologies, guys. can you hear me? So, yeah, simply on the business strength. i do know you mentioned the record number of seven-determine offers.

    It seems like there have been a lot of contributing factors there. Is there any approach to sort of unpack that a little bit?

    Mitesh Dhruv -- Chief fiscal Officer

    bound. bound, Brian. i could take that. So i may provide some more economic colour on the $1 million TCV deals here.

    you're correct. They did have a banner 12 months on the $1 million TCV wins. It turned into up 50% sequentially. They also have been capable of squeeze in two deals over $10 million.

    What i may do is i could supply some colour on two or three dimensions, Brian. One is on the quality of the offers themselves, on the go-to-market movement, and then some product colour on the place the offers came from. On the offers themselves, correct, the deals are getting better. The wins are becoming larger, and customers are committing to longer periods.

    On this autumn itself, it turned into a listing yr -- a record quarter, correct? the whole TCV cost they booked for $1 million deals became over $one hundred million. So it was exceptional for us, and this turned into up 70%. On the go-to-market side, it become basically huge-based mostly. Three-quarters of the wins got here from channel partners.

    And they additionally had like very respectable illustration from the entire three As. They had Avaya, Atos, AT&T, all had $1 million representations. They also had -- about half the offers had been from their centered verticals like monetary, training, healthcare. And now, in case you stream on to the product side, about over 60% of their $1 million wins protected a contact core factor, so in fact first rate pull-through.

    I suggest, so, average, if you simply pull this all collectively, net-web, we're clocking in larger lifetime cost deals, and that they're coming in from all aspects, on GTM products and verticals, some dependent components but additionally some nevertheless ramping.

    Brian Peterson -- Raymond James -- Analyst

    No, it is remarkable colour, Mitesh, and congrats on that. So might be a follow-up. You guys have made a lot of investments internationally over the final 12 months. I know it's form of hard to paint all international markets with a vast brush, however i might be curious what you could have considered in terms of demand alerts for some of these markets.

    Is there a tipping element? and how should they suppose in regards to the adoption curve relative to the electricity that you've considered in the U.S.? Thanks, guys.

    Anand Eswaran -- President and Chief working Officer

    No, it really is a very good question. here is Anand. i could take that. so that you're right in your query.

    If I analyze Avaya, if I analyze Atos, they now have introduced assorted foreign geographies in this fall. And in response to that, they now have had one of the crucial stronger international quarters as neatly both in terms of growth and in terms of p.c of revenues. So the progress is exactly as they expected because we're layering in lots of sides of boom basically via their companions, all contributing to big international enlargement.

    Brian Peterson -- Raymond James -- Analyst

    extraordinary. thanks.

    Operator

    And their subsequent question is from Bhavan Suri with William Blair. Please proceed along with your question.

    Bhavan Suri -- William Blair -- Analyst

    exceptional. Thanks for taking my question guys and congrats on the $1 million offers. quantity is fantastic. after which, absolutely, the colour you simply gave become exceptional.

    I just need to comply with up on the previous query however now searching forward. so that you feel about the e-book you gave, and it's probably the most bigger degrees that you've given for a forward e-book historically. i would love to take into account, maybe for Mitesh on originally, what's in the back of that? What are the tailwinds that you just're constructing in? And what are you now not building in that may doubtlessly be upside? support us consider about a way to unpack the e book given the tailwinds of the three A companions, certainly, the BT partnership, Vodafone, the natural stream to cloud, etc. i might love to remember that.

    Mitesh Dhruv -- Chief fiscal Officer

    Yeah. just a request for everyone to simply go on mute. Vlad, if you are on mute -- as a result of we're on distinct areas, Bhavan. So, sure, i will be able to take that.

    So what they are going to do is -- Bhavan, i could immediately take it a clip beneath on the planning method itself, how they do planning. after which i'll hit the punchline. So they will provide you with some respectable color on what they are baking in or now not. From an annual planning viewpoint, appropriate, they mixed two inputs, Bhavan.

    One is the extrapolation of traits they witnessed. it really is one. and then they then marry these to a bottoms-up view from their numerous go-to-market product motions. So from a style's element of view remaining year, COVID in fact raised the priorities for, as you mentioned, business communication solution.

    it's a structural trade. it's a greater strategic buy. And they saw aspects of that play out throughout the year. Their new emblems had been effective, and they noticed incremental development on churn and retention metrics as they development all over the 12 months.

    And business is kicking in excessive equipment. So these are the trends we're seeing. Now, looking at bottoms-up 2021, they evaluated assorted features: first, on the go-to-market side, direct channel, the three A service providers; after which also, they layered on their go-to-market product promotion for the office, Glip, Video Messaging, and make contact with center. So combining these two tendencies, call it tops-down and bottoms-up, continually -- and as common, even for 2021, they all the time take a prudent strategy to their information.

    And so we've assumed a reasonable ramp for Avaya and Atos. And for Alcatel-Lucent and Vodafone, they have baked in minimal contributions as the ramp -- it is going to take about six to 9 months to ramp from the launch date, so it's greater of a 2022 driver for us. So ordinary, I imply, in case you just send it out, they think definitely decent about what they noticed in q4 and the visibility we're seeing with the early developments right here.

    Bhavan Suri -- William Blair -- Analyst

    Gotcha. this is valuable. and maybe one, might be to Anand right here. You comprehend, you guys have offered, from a product standpoint, an excellent set of APIs, correct, to voice consumers a while.

    along with purchases of RCO, you will have added some CPaaS capabilities, bulk messaging. but some of the basic UCaaS opponents have made investments in full CPaaS choices. I guess i might simply love to think strategically concerning the significance of this functionality as part of the potential to differentiate your UCaaS Contact core as a provider choices. Do you form of see the total CPaaS ownership it truly is having advantages from a aggressive viewpoint? Or do you consider that presently, or not it's type of a spotlight on the core integrated functionality of what you have these days? i'd love to understand how you feel about that strategically.

    Thanks.

    Anand Eswaran -- President and Chief working Officer

    smartly, it really is a pretty good question, truly. So i might definitely say their core focal point continues to be the equal, which is UCaaS across Message Video mobile, deep integration of Contact middle, bringing that AI point to it. You saw the DeepAffects acquisition, which Vlad referred to as out. And so that remains the core method.

    Now, when customer demands come through, they are absolutely open to exploring certain CPaaS use circumstances. You saw us do this with a high-extent SMS use case, which they actually talked about remaining quarter. however it is very particular, and that's consumer-pushed. So it truly is been their method.

    or not it's consistent, and they are happening the equal course.

    Bhavan Suri -- William Blair -- Analyst

    Thanks, Anand. I respect the color and the candor. And once more, guys, simply definitely constant, what a superb job.

    Anand Eswaran -- President and Chief operating Officer

    thanks.

    Operator

    And their next query is from Sterling Auty with J.P. Morgan. Please proceed along with your query.

    Sterling Auty -- J.P. Morgan -- Analyst

    hiya, thanks, guys. I feel you obtained audio considerations as a result of, for a long time, it sounded like Darth Vader became on the call with us. So probably, Mitesh, are you able to provide us a way, you introduced a number of geographies in the course of the fourth quarter with Avaya. support us consider how these huge five partnerships will ramp in terms of the additional geographies and at what quarter would you expect the entire companions to be fully ramped in the entire geographies that they need to compete in.

    Mitesh Dhruv -- Chief fiscal Officer

    Yeah, certain. So look, they have bought three partners presently, strategic partners: Avaya, Atos, and Alcatel. Avaya is in 12 international locations, Atos is in eleven and Alcatel will launch in 10, eleven countries coming on. in case you look on the measurement of the market and the addressable market they have, they are going to be able to tackle lots of this opportunity in the subsequent couple of years.

    So I do not believe there is going to be any dearth of what they will attack when it comes to these seats as a result of we're going after the greatest geographies first and where the many of the seats are. So I believe, over time, as i mentioned prior, Avaya is ramping basically nicely, Atos is off to a great beginning and it'll keep it up presenting incremental contributions all over the year. And Alcatel-Lucent goes to be greater of a 2022 driver. And one issue is that these partnerships, I do not feel that you would be able to think of as them as a one-and-performed.

    in order that they deliver you a continuous benefit for a couple of years to come back. So that's the way they believe about these partnerships.

    Sterling Auty -- J.P. Morgan -- Analyst

    Sounds good. and then one observe-up. when it comes to the Avaya wins in the quarter, you outlined the 7,000-seat win. where are you hitting in terms of the candy spot? And is there a cap on the size of the corporation where you consider the product is going to resonate moving ahead, principally through Avaya?

    Anand Eswaran -- President and Chief working Officer

    that is a pretty good query. Let me take that. So a few issues. You referred to, the place are they hitting the candy spot.

    So what I see is, throughout all fundamentals, they suppose that the Avaya group, their channels are firing on all cylinders. So it's the client transactions, that seat expansion, that enormous seats closed, and that geo expansion they noticed. in response to the indisputable fact that they have now 12 nations online for ACO, they basically noticed a very good bit of geo enlargement generally. And they additionally see the remaining layer, which is certain traction on verticals like fiscal capabilities and manufacturing.

    So what i'd say is it be truly vast. it's extensive, and they see energy in every single place as they extend their relationship with their Avaya.

    Sterling Auty -- J.P. Morgan -- Analyst

    received it. thank you.

    Operator

    And their next query is from Terry Tillman with Truist Securities. Please proceed along with your question.

    Terry Tillman -- Truist Securities -- Analyst

    Yeah. Thanks for taking my questions, and that i'll echo that congratulations. amazing quarter. I bet maybe, Mitesh, this question is for you.

    there is been lots of chapters to the AT&T book. Over time, it ramped from basically nothing to smartly over 10% of salary. truly, I feel it become in the teens as a percent of income. but then it begun to variety of vogue reduce.

    but what i'd love to get a viewpoint on is turned into that still a headwind though in '20 from some of the dynamics occurring with AT&T a couple of years in the past? and the way can they study AT&T into '21 when it comes to tailwinds, above all around that relationship?

    Mitesh Dhruv -- Chief monetary Officer

    bound, Terry. i like the manner you phrased it. There are loads of chapters in the AT&T storybook. and i will say the premier chapter is being written at the moment.

    So that is, of path, tongue-in-cheek here. but if you harken lower back memory lane, at the trough a couple of years in the past, AT&T become a few 5-factor headwind to increase. Now, fast forward to the conclusion of 2020, with their new relationship beneath way, these headwinds are dissipating. 2020, really, changed into probably the most top-quality bookings yr in their background with AT&T.

    And the contributions are strong throughout the board, upmarket and down market, and they these days have launched new programs to open up new verticals like SLED. So for 2021, searching beyond, to reply your query, they do not are expecting this AT&T relationship to be a headwind anymore to standard growth. and i'll wrap it via asserting this that, with their new increased relationship with new markets, I feel in the subsequent couple of years, AT&T might develop into a larger company really than the previous go-round they had.

    Terry Tillman -- Truist Securities -- Analyst

    sure, it is superb to hear. I do not continually talk about or ask about stock comp, nonetheless it looks like it's going to double. could you simply right away describe some of the dynamics it's inflicting the massive stock comp? And once again, congrats.

    Mitesh Dhruv -- Chief economic Officer

    bound. Thanks, Terry. yes, inventory comp, i'd say there are two or three main factors for the inventory comp raise. the primary one is their strengthening of the executive team.

    Anand did mention that they now have been hiring a seasoned C-suite bench. The market opportunity is just too huge for us no longer to scale to become a multibillion-greenback enterprise. So they are hiring forward of that. they have now employed a number of C-suite executives there.

    So it truly is half one. 2nd is their general headcount raise, which is RingCentral is an excellent vicinity to work. And people are seeing their vision. So they are adding headcount in the usual route of company.

    and that's the reason type of the second motive with the headcount boost. And third one is the boost in stock cost, correct? while or not it's top notch, for the market cap and the stock price boost is respectable, it additionally puts drive on the stock comp. however having talked about all of that, Terry, net-net, in case you seem at the dilution in the share count number, they are adding about 1.5 million shares. So there is going to be reduce dilution than they have now had within the previous years.

    So they get to mix the best of all facets. They get to appoint a accurate proficient group, and they get to in the reduction of dilution for their shareholders. So I think it's a win-win there.

    Operator

    And their next query is from George Sutton Craig-Hallum. Please proceed together with your query.

    George Sutton -- CraigHallumCapital community LLC -- Analyst

    thank you. Mitesh, that become the best job I've ever heard, taking a huge stock comp and turning it into a positive, so congratulations.

    Mitesh Dhruv -- Chief monetary Officer

    George, thanks a great deal.

    George Sutton -- CraigHallumCapital community LLC -- Analyst

    i needed to study 2020, which I completely agree changed into a transformational yr after they analyze the entire partners and the new choices. i wonder if they seem to be forward a full 12 months from right here, judging on your pipeline that you're looking at presently, are they going to look extra partners? Or are they going to see further choices that expand the platform in ways that they could no longer be because today?

    Anand Eswaran -- President and Chief working Officer

    i'll take that. So I believe they now have always spoke of this. RingCentral's success is established on the groundwork of partnerships. so you can are expecting that we're continually trying to expand their relationship with their companions and considering via partnerships across all dimensions, which is their health and wealth companions, their strategics, and their GSPs.

    So it truly is fully some thing which we're focused on.

    George Sutton -- CraigHallumCapital community LLC -- Analyst

    Gotcha. One different factor relative -- you brought up Microsoft in a right away routing win. I wondered if you might go into a bit extra element on what you are seeing out of that Microsoft possibility.

    Anand Eswaran -- President and Chief working Officer

    Yeah. So see, once I suppose of Microsoft, I actually believe about it in three different ways. the primary is the UCaaS answer, right? They feel in reality respectable about the place they are as a result of, one, it's about integrating throughout message, video, and contact, like Vlad called out, which is the cause you see Ring as the chief within the Magic Quadrant for the sixth 12 months in a row now with Gartner. And we're nonetheless expanding their innovation moat day-after-day, which is what you see reflected in the gigantic deal wins.

    So they suppose very good about the UCaaS answer. The second factor i might name out is the mixing with CCaaS. I suggest, one of the crucial issues Mitesh simply mentioned is over 60% of their huge deal wins in reality had contact core in it, and the deep integration with CCaaS is a extremely exciting differentiator. after which the ultimate factor i'd talk you through is core shoppers who're a large Microsoft store.

    it truly is where the direct routing comes in as a result of they've made their choice to standardize on Microsoft and, therefore, groups is in play. but with direct routing with groups, it nevertheless offers them the opportunity to leverage the finest cloud company types, equivalent to RingCentral, which is where they are seeing the traction. and that's the reason the instance of the 7,000-plus groups direct routing win they noted. So they feel very decent once they compete, and they suppose definitely good when they are able to truly just work with groups and integrate with it as neatly.

    George Sutton -- CraigHallumCapital community LLC -- Analyst

    top notch. Thanks, guys.

    Operator

    [Operator instructions] And their subsequent query is from Michael Turrin with Wells Fargo Securities. Please proceed along with your question.

    Michael Turrin -- Wells Fargo Securities -- Analyst

    hiya there. Thanks. first rate afternoon. Mitesh, ARR picked up right here in this autumn.

    We needed to go lower back to 2015 to discover 35% increase in their mannequin. Is there anything else that you would be able to add in terms of contribution from those strategic partnerships you might be calling out? It sounds just like the likes of Avaya and Atos are probably the furthest along. the rest that you may add, each when it comes to this fall contribution and anything else that can be embedded there in framing the preliminary outlook for the coming 12 months is useful.

    Mitesh Dhruv -- Chief financial Officer

    bound, Michael. appear, this autumn ARR turned into robust across the board. and each chip, in a method, additional away. additionally, they did have very potent contribution from their partnerships there.

    we are extraordinarily comfortable with the growth with Avaya. it's been a heavy carry to make it a fact. or not it's definitely cross-useful with both companies. but it surely's been working really neatly.

    And they saw states doubled quarter over quarter with Avaya, and they had assorted million-greenback deals there. And Avaya will function a blueprint for future partnerships. the primary one is Atos, which is once more, off to an outstanding start. The product is now provided in eleven nations now.

    more overseas businesses are coming. international locations are coming in 2021. they are activating the associate ecosystem. In this autumn, for Atos, they had 3x the number of partners in q4 quarter over quarter.

    So I feel Atos will birth to incrementally add on to increase quotes in 2021. however standard, the key factor to notice, Michael, is that with the measurement of the chance they are and the penetration stage being so low, I consider this can be a multiyear drumbeat for us to deliver a chance to develop at a fantastic fee for years to include these partnerships.

    Michael Turrin -- Wells Fargo Securities -- Analyst

    first rate. it's all clear. Thanks, guys.

    Mitesh Dhruv -- Chief economic Officer

    thanks, Michael.

    Operator

    And their next question is from Meta Marshall with Morgan Stanley. Please proceed along with your query.

    Meta Marshall -- Morgan Stanley -- Analyst

    brilliant. Thanks. might be just a query, given the success of the homegrown engage Contact middle platform and, undoubtedly, the success of RingCentral Video, simply any contemporary brooding about either transitioning form of existing valued clientele that could be to your type of Zoom video product, in addition to just variety of repute of the inContact relationship as your type of homegrown items kind of continue to improve. Thanks.

    Anand Eswaran -- President and Chief operating Officer

    sure. Meta, this is Anand. i may take that. good question.

    So let me delivery from the last query you requested. have interaction turned into an excellent quarter. Their partnership with inContact is really strong, and that continues as well. So no change in strategy.

    We continue to work carefully with inContact. they are a large a part of their huge TCV wins the place Contact center became embedded while they make growth on engage. Now, on the 2d a part of your question, which become Zoom and RCV, right now, every consumer who they purchase new defaults to RingCentral Video, and now they have had decent traction, and we've got received decent remarks. As for the installed base, we're going during the manner of getting them on.

    or not it's no longer a compelled migration, but we're getting them on their RCV platform because the benefit of a tightly integrated journey across message, video, and call is very strongly resonating with their consumers, and they are on that adventure as well at this time.

    Meta Marshall -- Morgan Stanley -- Analyst

    Is there a timeline for that as far as in the event you would expect that migration to be complete?

    Anand Eswaran -- President and Chief working Officer

    No timeline, but the adventure and the procedure is pretty amazing.

    Meta Marshall -- Morgan Stanley -- Analyst

    fantastic. Thanks.

    Operator

    Our subsequent question is from Samad Samana with Jefferies. Please proceed along with your query.

    Samad Samana -- Jefferies-Analyst

    hi. good night. first rate quarter. i'll start to the question for the sake of time.

    Mitesh, if I seem at the channel partner ARR, it actually, on a percent of internet delivered bucks, was the smallest contribution that or not it's had in a number of quarters, even looking lower back the last couple of years. i'm simply curious, how should they think about might be the percentage of channel ARR dollars as a percent of total ARR brought going ahead? And simply became there anything else within the fourth quarter where Direct changed into above all amazing that might have pushed that combine shift reduce for the contribution from the channel?

    Mitesh Dhruv -- Chief financial Officer

    look, I mean, yeah, so everything was definitely robust in q4, peculiarly Direct and the business turned into definitely robust. if you seem at the boom fee for the channel, once again, the combine is pushed through each add-ons, appropriate, the channel and the standard. So the overall become very mighty. but if you study, Samad, the channel increase rate of, I believe, about 55%-ish, or not it's tracking in accordance with the overall business increase expense.

    So there turned into nothing definitely to call out. actually, channel, we're seeing elevated momentum when it comes to number of companions we're signing. and a few of the initiatives we're working on where they can assist channel shut the deals quicker, this is under way as smartly. So nothing extra to examine there.

    Samad Samana -- Jefferies-Analyst

    exceptional. I figured it became Direct electricity. And, Anand, perhaps only one for you. On Glip professional, any early reads on get information or undertaking or early engagement from shoppers or developments which are price calling out, to the extent you could have seen conversion? I realize it's best been simply round 60 days, supply or take, but simply considering that it's an exciting chance, anything you might share could be useful.

    Anand Eswaran -- President and Chief working Officer

    No. So, I imply, decent question. It is just too early. it's sixty one days to be actual.

    And the development is as they anticipated, and it's just too early to share any trends or another details.

    Samad Samana -- Jefferies-Analyst

    extraordinary. Gotcha. Thanks for taking my questions, guys, and congrats on a powerful finish to 2020.

    Anand Eswaran -- President and Chief working Officer

    thank you.

    Operator

    And their subsequent question is from James Fish with Piper Sandler. Please proceed together with your query.

    James Fish -- Piper Sandler -- Analyst

    whats up, guys. You highlighted a few very miraculous wins with big entities. but definitely, they simplest heard a number of thousand seats across them. Is it simply the preliminary rollout to the broader enterprise? was it extra departmental at this element and that we're seeking to upsell form of over the next 12 months to two? Even prolong that to office, certainly, mind-blowing 30,000-employee addition, but they obviously have about three instances greater than that when it comes to the typical.

    So just trying to be mindful, is it simply the preliminary win and they may still expect the next year to 2 to peer further provides?

    Anand Eswaran -- President and Chief operating Officer

    no longer actually. If I just seem to be on the listing $1 million-plus TCV wins they had, it turned into actually fairly healthy, and it became a superb mixture of UCaaS and CCaaS. And so I basically thought it turned into relatively healthy as they seem at the number of seats going forward as well. So i am now not sure the place you picked that up from.

    And now they have additionally had a fairly good upsell, as Mitesh called out as neatly. So we're also now not just moving into new valued clientele, but they are accomplishing returned into their installs. And they now have a good upsell enlargement action, which is bearing fruit as neatly, which is mirrored in the seats as smartly. So they see good growth across all of them, now not simply the number of huge deals however also the seats throughout them.

    And Frost & Sullivan just published their report for 2020 the place they known as out RingCentral as now not just the optimum when it comes to share in terms of clients and seats however also when it comes to growth for clients and seats as neatly. So they feel pretty first rate about it.

    James Fish -- Piper Sandler -- Analyst

    thank you.

    Operator

    Our subsequent question is from Ryan Koontz with Rosenblatt Securities. Please proceed with your question.

    Ryan Koontz -- Rosenblatt Securities -- Analyst

    Thank for taking the query, and thanks for all the color on the channels. Some remarkable growth there. As they feel about the channel mix expanding over time, any headwinds they should trust on the model to gross or working margins?

    Mitesh Dhruv -- Chief financial Officer

    No, you could now not -- no, channel, truly, it's an accretive action, correct? The channel themselves, as smartly because the strategic partners, they are accretive to unit economics because they don't get to pay the upfront earnings and advertising costs for these motions. So over time, because the channel takes share, it might be impartial or at foremost -- impartial or a bit accretive to the model.

    Operator

    And their subsequent query is from Will vigour with Baird. Please proceed together with your query.

    Charlie Erlikh -- Baird -- Analyst

    good day, this is basically Charlie Erlikh on for Will. Thanks for taking the query. Congrats on the definitely powerful results. i may ask a short one, simply maybe on the pricing atmosphere you are seeing.

    With lots of competitors and a few coming on the market at a little of a decrease rate factor, i ponder if you could maybe touch upon any alterations you might be seeing within the pricing ambiance at all if anything.

    Anand Eswaran -- President and Chief operating Officer

    Yeah. So i may take that, Mitesh. No, now not a lot of alternate. They see the vogue form of type of be the equal throughout the year, so no material trade.

    Operator

    Our next query is from prosperous Valera with Needham. Please proceed with your query.

    prosperous Valera -- Needham & enterprise -- Analyst

    thank you, and congratulations on the effective results. question on the SMB performance. appeared like you noticed a different quarter-over-quarter acceleration within the SMB increase price. questioned if that become due to improving churn, if that become a factor and if, really, SMB churn changed into back to pre-COVID stages.

    thank you.

    Mitesh Dhruv -- Chief economic Officer

    Yeah, prosperous. So, yeah, it's a great call-out on the SMB. There are a few things happening beneath the cowl on the SMB aspect. i'd say there are three or possibly 4 trends to name out.

    the primary element is we're seeing better traction with their e-commerce movement, which is extra of a self-carrier movement. and that's the reason accelerating, which is pulling up the SMB growth. second one is the improvement they are becoming from their fresh branding efforts. they have the optionality for Glip seasoned as smartly.

    so that universal brand-new halo does fall through to the SMB facet. And the third one, as you referred to as out, the net retention or churn, actually an development in churn within the SMB aspect. it's stabilized. It kept on getting stronger right through the 12 months.

    we're practically there on the pre-COVIID degree on the SMB churn front there as smartly. and i suppose the uber-driver I see in this COVID world, no one is really deploying on-premise device, appropriate? americans are handiest going to the cloud to live productive. So I suppose that actually helps the SMB house first.

    Operator

    And their subsequent question is from Matt VanVliet with BTIG. Please proceed along with your question.

    Matt VanVliet -- BTIG -- Analyst

    Thanks for taking my query and nice job on the quarter. I bet from a much bigger photo standpoint, you outlined the variety of countries that you're in with a bunch of the greater partnerships now. but i wonder if you have a lot of an replace when it comes to the number of partners form of within those geographies or type of throughout their total programs, how well penetrated some of these greater ones. I presume Avaya is a bit additional along, but just form of how do you believe normal about the capabilities for variety of biological increase within these partnerships as you flow during the year?

    Anand Eswaran -- President and Chief working Officer

    i could supply the first a part of the subjective colour, which is i'm assuming you are speaking about partnerships like Avaya and Atos and their partners, right?

    Matt VanVliet -- BTIG -- Analyst

    yes.

    Anand Eswaran -- President and Chief working Officer

    Yeah. in order they study it, I suggest, as they deliver -- every country they convey on, they actually are capable of prompt all of the companions of their channel who exist in those nations. And in order of now, they have activated almost somewhere within the 90s on Avaya partners in the international locations they function in. As Mitesh mentioned, ACO is now attainable in 12 international locations.

    Atos is now accessible in eleven nations. And they believe definitely decent in regards to the percent of partners in these nations now they have activated, and we're working with to coach, enable and, build pipe jointly.

    Matt VanVliet -- BTIG -- Analyst

    thanks.

    Operator

    Our subsequent query is from Siti Panigrahi with Mizuho. Please proceed with your question.

    Siti Panigrahi -- Mizuho Securities -- Analyst

    Guys, congratulations. Most of my questions are asked, however just a comply with-as much as the SMB question prior. Mitesh, what's your expectation baked into 2021 when it comes to SMB increase? should they predict an analogous variety of style that they noticed in this autumn?

    Mitesh Dhruv -- Chief fiscal Officer

    yes. seem, SMB, they always internally model SMB, name it, excessive teenagers like that, mid- to high teenagers. It was low to mid-teenagers. Now, or not it's mid- to high teenagers.

    I suppose it truly is the inexpensive degree to mannequin. You just in no way recognize. SMB is handy come, convenient go. So I believe a greater prudent way to dial in expectations is, call it, like high teens increase, correct, in 2021.

    Operator

    And their subsequent question is from Catharine Trebnick with Colliers. Please proceed along with your query.

    Catharine Trebnick -- Colliers Securities -- Analyst

    smartly, thanks for sneaking me in. Congratulations on a pretty good quarter. So this is returned to the Contact center. may you parse perhaps and go a bit bit deeper into the place you might be the usage of inContact versus your inside and engage? And what is the hole you could say in capabilities between inContact and have interaction? since it does appear like you're moving yourselves directly into the Contact core, although you referred to prior you still have a tight relationship with inContact.

    So i'm just attempting to parse the capabilities and where you use one versus the other. thanks.

    Anand Eswaran -- President and Chief operating Officer

    Yeah. You understand, Catharine, expectantly, we'll have a observe-up with you on that. with a purpose to take somewhat of time. i'd say at a 30,000-foot level, essentially, it depends, one, on the selected use circumstances which the client is asking at.

    It additionally depends upon the size of the client and the number of brokers they want. So all of that is available in collectively to assist us remember which product they lead with. As I stated -- again, i could go lower back to asserting it again, their partnership with inContact is in reality amazing and extra strengthening, and they see large momentum as a part of that. They also see interact choose up momentum in selected use circumstances, in smaller clients as neatly.

    So it's literally -- it be working across the board with their consumers directly and additionally with their channel.

    Operator

    Our subsequent query is from Matt Niknam with Deutsche financial institution. Please proceed together with your query.

    Matt Niknam -- Deutsche financial institution -- Analyst

    hiya, guys, thanks for taking the question. just a follow-up on the $1 million deal, so they bought some decent color on the fourth quarter. Any colour you could share when it comes to how those size deals had been trending thus far during the quarter in 1Q? Thanks.

    Mitesh Dhruv -- Chief monetary Officer

    Yeah. Let me reply that. but in 1Q -- we're still in 1Q. What i'd say is this fall is a seasonally mighty quarter.

    it be the strongest quarter. That referred to, i may just develop out the question right here. in case you look at the tendencies we're seeing, early traits in Q1, we're seeing their developments of this fall continue into Q1 general.

    Operator

    [Operator signoff]

    length: 65 minutes

    name participants:

    Ryan Goodman -- Head of Investor members of the family

    Vlad Shmunis -- Founder, Chairman, and Chief government Officer

    Anand Eswaran -- President and Chief working Officer

    Mitesh Dhruv -- Chief economic Officer

    Brian Peterson -- Raymond James -- Analyst

    Bhavan Suri -- William Blair -- Analyst

    Sterling Auty -- J.P. Morgan -- Analyst

    Terry Tillman -- Truist Securities -- Analyst

    George Sutton -- CraigHallumCapital group LLC -- Analyst

    Michael Turrin -- Wells Fargo Securities -- Analyst

    Meta Marshall -- Morgan Stanley -- Analyst

    Samad Samana -- Jefferies-Analyst

    James Fish -- Piper Sandler -- Analyst

    Ryan Koontz -- Rosenblatt Securities -- Analyst

    Charlie Erlikh -- Baird -- Analyst

    prosperous Valera -- Needham & company -- Analyst

    Matt VanVliet -- BTIG -- Analyst

    Siti Panigrahi -- Mizuho Securities -- Analyst

    Catharine Trebnick -- Colliers Securities -- Analyst

    Matt Niknam -- Deutsche financial institution -- Analyst

    greater RNG evaluation

    All income call transcripts


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    References :


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