Good day, and welcome to the RingCentral Third Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Will Wong, RingCentral's Vice President of Investor Relations. Please go ahead. Thank you. Good afternoon, and welcome to RingCentral's Third Quarter 2022 Earnings Conference Call. I'm Will Wong, RingCentral's Vice President of Investor Relations. Joining me today are Vlad Shmunis, Founder, Chairman, and CEO, Mo Katibeh, President and Chief Operating Officer, and Sonalee Parekh, Chief Financial Officer. Our format today will include prepared remarks by Vlad, Mo, and Sonalee, followed by Q&A. We also have a slide presentation available on our investor relations website that will coincide with today's call, which you can find under the Financial Results section at ir.ringcentral.com. Some of our discussions or responses to your questions will contain forward-looking statements, including our fourth quarter and full year 2022 financial outlook and our assumptions underlying that outlook. These statements are subject to risks and uncertainties. Actual results may differ materially from our forward-looking statements. A discussion of the risks and uncertainties related to our business is contained in our filings with the Securities and Exchange Commission and is incorporated by reference in today's discussion. RingCentral assumes no obligation and does not intend to update or comment on forward-looking statements made on this call. Unless otherwise indicated, all measures that follow are non-GAAP with year-over-year comparisons. A reconciliation of all GAAP to non-GAAP results is provided with our earnings release and in the slide deck. Please visit our investor relations website to access our earnings release, slide deck, our GAAP to non-GAAP reconciliations, our periodic SEC reports, a webcast replay of today's call, and to learn more about RingCentral. For certain forward-looking guidance, a reconciliation of the non-GAAP financial guidance to the corresponding GAAP measure is not available as discussed in detail in the slide deck posted on our investor relations website. With that, I'll turn the call over to Vlad. Good afternoon, and thank you for joining our third quarter earnings conference call. We had a solid quarter and exceeded our guidance on every key metric. Total revenue of $509 million was up 23% versus last year and above our outlook of $502 million. We achieved these results despite an increasingly difficult macro environment. While it is hard to predict the exact timing of an economic recovery, we're confident that RingCentral will continue playing a prominent role as businesses rationalize their spend and strive to be more efficient via digital transformation efforts. We serve a mission-critical need and provide customers value as they migrate from legacy systems to the cloud. Additionally, we delivered a record quarterly operating profit margin of 13.5%, up 300 basis points versus last year. This was significantly above our guidance of 12.5%. Looking ahead, I'm confident in our ability to deliver strong operating results, which includes meaningfully expanding profitability. To this point, we're now targeting operating margin expansion of at least 350 basis points in 2023. This puts us on an accelerated path to achieving our prior commitment of at least a 20% operating margin. Now, let me share the reasons why RingCentral is winning in the UCaaS market. First, we win because we believe we have the world's best cloud phone system. Innovation is part of our DNA. We will continue to make targeted investments in key growth areas such as AI, analytics, and contact center, and provide differentiated, intelligent, and connected experiences to our customers as they proceed with their digital transformations. These investments will further add to what we believe is the most complete cloud PBX solution in the world, with features for every type of user and use case. With over 8,500 private and public applications and an ecosystem of over 75,000 developers, we enable customers to innovate on our platform. This includes over 150 pre-built telephony apps, over 330 pre-built apps for UC and CC, and the most advanced integrated contact center experience. One integration example is with Salesforce. Our integration lets customers make and receive calls, schedule RingCentral Video meetings, and quickly assign call dispositions, all without having to leave Salesforce. Customers are also able to make and log customer calls from anywhere in the world. With advanced features such as offline and multi-call logging that no other provider has, users can save time, which they can allocate to revenue-generating activities. This integration and the hundreds of other integrations we've developed, including with Microsoft, Google, ServiceNow, HubSpot, Zendesk, and others, have helped us become an industry leader. That's not all. Other key differentiators include our outstanding 99.999% reliability, which we achieved for the 17th consecutive quarter, as well as our global reach, with full availability in over 45 countries and presence in over 100 countries. We also support a wide range of endpoints, including from our strategic partners such as Mitel, Avaya, Atos, and Alcatel-Lucent Enterprise. We also have a fully integrated IMS cloud architecture that enables fixed mobile convergence that is a key requirement from some of our GSP partners. Second, we win because of our unmatched partner ecosystem, which is made up of our strategic partners and multiple global service providers. We have a proven ability to partner with the world's leading on-prem PBX providers, as well as leading service providers such as AT&T, BT, Telus, and Vodafone. I'm also very pleased to announce our new upcoming relationship with Charter Communications, where we will be launching a joint offering for both SMB and enterprise businesses. Be on the lookout for more details in the coming days. Last but not least, we have over 15,000 resellers spanning the globe. We believe this gives us unrivaled access to the large market opportunity ahead of us. Finally, we win because we're known as the leader in our industry. We are proud to be a Gartner Magic Quadrant for the Unified Communications as a Service worldwide leader for seven years in a row, with the last recognition occurring in 2021. Gartner also recognized RingCentral for being ranked number one in all four use cases in the 2021 Gartner Critical Capabilities for Unified Communications as a Service worldwide report, updated 1 August 2022. Additionally, this quarter, The Tolly Group, a leading global provider of testing and third-party validation and certification, conducted a feature-by-feature comparison of analytics capabilities in which RingCentral met 100% of the specification criteria outlined in 13 categories. The next closest vendor only met 100% in 4 of the 13 categories. Lastly, Synergy Research Group recently recognized RingCentral as the leader in UCaaS, with over 20% market share based on paid seats, which is double the second and third-place vendors. Big picture is that voice remains as relevant as ever. A good reminder of this is a recent survey of key technology purchase decision-makers, which highlighted that 90% of business leaders prefer to use the phone over other communication tools. This is true across companies of all sizes, with use cases ranging from internal calls and meetings to external client and vendor calls. Of note, we see this in our own customers as well, as more than 95% of our base actively use phone. We're just at the beginning of the journey. There are 400 million telephony seats worldwide, and many of those seats are expected to move to the cloud, driven by a number of clearly visible megatrends. This includes the shift to hybrid work, ongoing adoption of mobility by businesses, increasing reliance on distributed workforces, and the desire for an integrated cloud-based UC and CC solution from a single provider. Synergy recently concluded that just 21 million UCaaS are in the cloud today or a single-digit penetration rate. This highlights how early we are in the journey when comparing to the number of seats that are still on-prem and are yet to be migrated. Looking forward, we will remain laser-focused on delivering a best-in-class UCaaS offering by investing in innovation and driving profitable growth. Throughout the year, we have taken steps to expand our operating margins and drive efficiencies throughout our business. While we recently made the extremely difficult decision to further rationalize our workforce, we believe this will allow us to be more agile and better align our costs with our strategic priorities in the current macro environment. This decision was not made lightly, and we understand the impact this has on our people and their families. We're taking meaningful action to help ease the transition for our impacted employees. We want to underscore how grateful we are for their hard work and all their contributions. RingCentral would not be where we are today without them. Finally, I want to reiterate how proud I am of what we as a company have accomplished. Building from two guys in a garage, we are now a $2 billion recurring revenue business with leading share and an unrivaled platform. I believe we're well-positioned to emerge even stronger as the economic recovery begins. Now, let me turn the call over to Mo. Thanks, Vlad. Q3 results were solid as we continue to execute despite a more challenging economic backdrop. We had solid new deal activity highlighted by multiple $1 million+ TCB wins. We also saw good activity from strategic partners, and our contact center attach rate was again over 60% for our large deals. Let me give you a few examples of our recent wins. First, a win at HealthComp with our newest strategic partner, Mitel. HealthComp is one of the nation's largest third-party benefits administrators. They chose RingCentral to be their communications partner for both UC and CC as part of their enterprise-wide digital transformation. Our integration with Teams, which they currently use, was key in helping us win this deal. This is in addition to our leading voice and advanced eFax, SMS, and integrated contact center capabilities, which Teams does not offer. Relative to our contact center, HealthComp is now able to expand customer outreach to all channels, including voice, chat, email, social, and 30+ digital channels. Importantly, we enabled HealthComp to save money by routing calls to the first available agent, which also reduced agent idle time, as well as by enabling them to utilize analytics to determine productivity opportunities. We continue to see customers like HealthComp choose RingCentral due to our best-in-class integrated UCaaS and CCaaS platform. Second, in the current environment, cost savings are also an important catalyst in driving purchasing decisions. For example, a large Fortune 500 company in the logistics sector with operations in over 50 countries selected Avaya Cloud Office by RingCentral to help them consolidate disparate systems created over many years. Multiple IT teams were required to maintain these systems, which also ran on separate carriers, resulting in higher operating costs. Moving to RingCentral's cloud infrastructure will enable them to quickly replace outdated equipment and improve collaboration and communication, all while showing an overall reduction in the total cost of ownership by 30%. I also wanted to highlight a number of wins in the education sector, including a nearly 5,000-seat win at the University of North Dakota and an over 3,000-seat win at a large Midwest university. This continues the trend that we've seen in the last few quarters, with many thousands of seats being added across school districts and universities. Now, turning to our partners, our strategic channel and GSP partners also continue to be a key part of our go-to-market motion. Both Mitel and Avaya again grew new seats sold quarter-over-quarter. On the channel side, we saw a quarterly record number of leads generated, and we expect those leads to translate into opportunities and sales over time. Also, our channel partners continue to drive incremental new deal activity, and were part of over 60% of our $1 million plus TCB deals this quarter. Channel partners enjoy working with RingCentral because we offer flexible paths to the market depending on their business needs and individual customer use cases while also providing tools and training to help them succeed. Regarding our GSP partners, we continue to see positive growth, are beginning to ramp with Vodafone in Europe, and as Vlad stated, we're excited to begin working with Charter. Finally, we continue to invest in expanding sales internationally. We landed multiple $1 million plus TCB deals outside the U.S., including with Healius, one of Australia's leading healthcare companies. We expect more as we ramp in the coming quarters and years ahead. Now, let me provide you with an update on what we're seeing in the market today. Leads, pipeline, and win rates remain strong and stable. That said, sales cycle times for our up-market customers, which reverted to pre-COVID levels last quarter, elongated incrementally in Q3 as customers required additional approvals before making purchase decisions. This also resulted in smaller initial purchases. We anticipate that this behavior will persist until the macro environment becomes less uncertain. These factors, along with the stronger dollar, were headwinds to our business this quarter. Of note, overall churn has remained stable throughout the year, and overall ARPU remains stable and over $30. Sonalee will discuss in more detail how these trends are impacting our near-term financial outlook. Looking forward, the market remains large and under-penetrated, and we believe our leading product ability to drive cost savings and unmatched partner ecosystem will continue to resonate with customers. Importantly, our focus on profitable, efficient growth puts us in a stronger position going forward to capture that opportunity. To summarize, we had a solid quarter despite the current macro environment. Our leading product continues to differentiate us from others, and our focus on execution and driving profitable growth sets us up well for the future. Now, I'll pass it over to Sonalee to discuss our financials and guidance. Thanks, Mo. I'll provide highlights from the third quarter and then discuss our business outlook for the fourth quarter and full year. I am very pleased with our Q3 results, which were above guidance across all key metrics. Subscriptions revenue of $483 million was up 25% year-over-year and above our growth outlook of 23%-24%. On a constant currency basis, subscriptions revenue rose 27% year-over-year. Once again, overall and new acquisition ARPU held steady. Customers value our differentiated offerings, which was the primary factor in the continued resilience of our ARPU. Subscription growth margins remain in the top tier of software peers and were again over 82%. Moving to ARR. ARR grew 25% year-over-year to $2.05 billion. On a constant currency basis, ARR grew 28%. Given the recent strengthening of the dollar, particularly versus the British pound, which is our largest exposure, currency represented a $19 million headwind this quarter relative to the second quarter. As a reminder, we adjust our entire ARR base using currency rates on the last day of each quarter. Now, moving to profitability. Operating margin was a record 13.5%, up 300 basis points versus last year, and a full 100 basis points above our prior outlook. This is the third consecutive quarter that we have solidly exceeded our operating profit margin outlook, which demonstrates our ability to execute on our strategy of driving efficient growth. Our margin improvement was and will continue to be driven by four main levers. One, we are seeing the benefits of operating leverage as we scale above $2 billion in recurring revenue. Two, we are prioritizing more efficient labor spend and taking further steps to improve the productivity of our workforce. As Vlad noted in his opening remarks, we have made the extremely difficult decision to reduce our full-time workforce by approximately 10% to ensure our cost base is aligned with our strategic priorities in the current environment. Three, we are rationalizing program spend, such as marketing and lead generation activities, to ensure they meet our hurdle rates, as well as being judicious around all discretionary spend. Four, we are consolidating vendors to simplify our procurement process as well as drive savings across all functions. Now, moving to our balance sheet and cash flow. We ended the quarter with $305 million of cash on hand. This is inclusive of $20 million of shares repurchased during the quarter. We generated free cash flow of $21 million in Q3 and $88 million year to date. Note that our free cash flow includes one-time cash outflows related to third-party relocation efforts and efficiency actions we took in Q3. Excluding these one-time items, our year-to-date free cash flow would be $119 million, or a margin of 8%. During Q3, we recorded a $125 million non-cash charge related to our Avaya prepaid commissions balance given their recent public disclosures. Please refer to our third quarter Form 10-Q for additional details. We will continue to monitor the Avaya situation and take financial actions accordingly. As Mo noted, the number of ACO seats that Avaya sold continued to grow quarter-over-quarter. Now turning to guidance. This outlook is reflective of what we see in the market today. As Mo noted, leads, pipeline, and win rates remain strong and stable. Overall churn also remains stable. However, sales cycle times for upmarket customers elongated incrementally in Q3 as customers required additional approvals before making purchase decisions. This also resulted in smaller initial deployments. While our SMB segment is proving to be resilient in the current climate, we believe enterprise customers are being more cautious given the current economic landscape, and we don't expect this to change in the near term. Taking this into account, for the fourth quarter, we expect subscriptions revenue growth of 19%-21%. Adjusted for constant currency, we expect subscriptions revenue growth of 22%-23%. Total revenue growth of 17%-18%. Adjusted for constant currency, we expect total revenue growth of 19%-20%. Non-GAAP operating margin of 14%, which reflects 350 basis points of year-over-year improvement. And non-GAAP EPS of $0.59-$0.60. Note our workforce reduction actions will result in GAAP-only restructuring charges of $10-$15 million related to employee severance and benefit costs, which we expect to incur in the next two quarters. For the full year 2022, we are reiterating our subscriptions revenue growth outlook of 27%-28%. Adjusted for constant currency, we expect growth of 29%. Additionally, we expect total revenue growth of 25%. Adjusted for constant currency, we expect growth of 26%-27%. Lastly, we are once again raising our operating margin and EPS outlook. We now expect full year non-GAAP operating margin of 12.4%, up from our prior outlook of 12%, and non-GAAP EPS of $1.97-$1.98, up from our prior range of $1.91-$1.95. Throughout 2022, we have shown our ability to consistently deliver strong and improving profitability. At the start of the year, we guided to operating margins of 10.6% for 2022. We now expect operating margins of 12.4% for the full year 2022, or up 220 basis points. Further, we plan to exit Q4 with an operating margin of 14%, which is up a full 350 basis points year over year. Looking ahead, we now expect operating margins to expand at least 350 basis points year over year in 2023, which accelerates our path to achieving our target of at least a 20% operating margin. We expect to generate a significant amount of cash flow over the next few years. This will provide us with increased flexibility as we look at capital allocation going forward, including our capacity to make strong ROI investments and increased optionality on addressing our March 2025 converts. To summarize, I am very proud of the quarter we delivered. RingCentral is well-placed to navigate the current environment, and we have the financial profile and flexibility to invest in the significant opportunity ahead of us while continuing to grow and expand profitability in a meaningful way. With that, let's open the call for questions. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. In the interest of time, please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. Our first question will come from Kash Rangan with Goldman Sachs. Please go ahead. Hey, thank you very much. Nice job on the operating leverage and the good cost discipline here. I'm curious to get your take on retention trends among small businesses that's been of late a bit of concern if there's layoffs, et cetera, which if it continues to pervade, how might that affect the install base? Not that that is what you're experiencing, but I'm just curious to get your take on how you see the strength of the SMB ecosystem in your install base. I completely appreciate the slowing sales cycles in the enterprise market. More concerned about the SMB side. That's it for me. Thank you so much. Sure. Kash, hi. Vlad here. Great to have you on. Fantastic question. I'm glad you left us with it. Look, I think many folks underestimate resiliency of SMBs. As you know, you know, we've been through cycles, and I've been through cycles. We started out as an SMB company. We're now a multi-channel, multi-segment, so have much wider exposure. To your question, SMBs are fine. Now to be clear, we earlier in the quarter, in the first month of the quarter, we saw some elevated fraud, not really churn, but everything has stabilized, and it seems to be steady as you go for now. I'll let Mo provide more details, but I can tell you in these turbulent times, I think that the wider your base, the better is my take. Mo? Kash, thanks for the question. Yeah, to answer the other part of it, our overall net retention remains stable and above 100%. We're gonna continue to monitor SMB for any signs of a slowdown. As Vlad said, it's showing resilience, and even in terms of what we've seen so far in October, it's that small SMB continues to be pretty resilient. Sonalee, anything you'd like to add? Yeah. Kash, the other thing I'd just say is that, certainly from a collections point of view, we've seen absolutely no impact in terms of the SMB base. Actually, if anything, collection has been stronger this quarter than in most recent quarters, and also no change to bad debt expense on that count either. Next question please, operator. Our next question will come from Meta Marshall with Morgan Stanley. Please go ahead. Great, thanks. You know, appreciate all of the guidance that you gave on 2023. Just how should we think about growth in 2023 with kind of the operating leverage that you're planning on showing? Just how much of how you look at growth in 2023 is impacted by macro versus kind of objectives to gain operating leverage? Thanks. Thanks, Meta. Really appreciate the question. Clearly you did call out the operational leverage that we've guided to for 2023. As you know, we don't typically guide to revenue growth at this point in Q3 for next year. What I would say, just in terms of the trade-off you pointed to, we don't really see it as a trade-off. We feel like we can drive the operational leverage that's really inherent in a SaaS model when you scale to the size that we now are, you know, $2 billion-plus of recurring revenues. In terms of the macro, you know, we did talk to certain trends Mo alluded to in his script, sales cycles elongating to sort of the levels we saw pre-COVID. We are seeing heightened approvals and sometimes multiple approvals, certainly for our larger customers. You know, some impact from smaller initial deployments on deal sizes. That did, you know, incrementally worse Q3 on Q2. We also have a bit of FX impact in the quarter. If you look ahead, you know, we have a further FX impact if you look at our Q4 guide. It's about an additional one point of pressure on top line. What I'd say is, you know, you've heard us talk this year about driving efficient growth. You know, we did 300 basis points of expansion in Q3. We're now guiding to a further 350 basis point year-over-year in Q4. We've really tried to outline for you an accelerated path of getting to that at least 20% operating margin that we alluded to last time we posted earnings. We've now laid out a target really of about 700 basis points of improvement over, say eight or so quarters. 2023 will be a further 350 basis points on top of where we will end 2022. I think really we're getting the benefits of scale. We're also looking, you know, at all aspects of the business and being super disciplined around those margin levers that I called out in my script. You know, obviously, a lot more efficient around labor spend. You did see that today we made the extremely difficult decision to let 10% of our full-time headcount go. That obviously will have an impact mainly in Q1 of next year. We're really being disciplined on all aspects of the P&L. You know, as we look to 2023, we really expect to see that operational leverage kick in on operating margin, OP growth and also flow to free cash flow as well. We don't really see it as a trade-off. We are driving efficient growth, and that's the way forward. Our next question will come from Ryan MacWilliams with Barclays. Please go ahead. Thanks for taking the question, and would like to reiterate, pleased to see the improving margins. Sonalee, what could the restructuring actions mean from a dollar perspective for next year, or how you think about that? Thanks. Yeah, thanks for the question, Ryan. I think in my script, I was quite specific about the restructuring charge that we take as a result of the actions. That's anywhere between $10 million and $15 million, and that will obviously be a GAAP-only below-the-line charge associated with the restructuring. In terms of how to think about you know the overall impact of the headcount action, we've guided to 350 basis points of margin improvement for next year. I said just now to Meta that you know we'll see a significant uptick really in Q1 from those headcount actions. What I would say is you know labor is you know a fairly strong or fairly big contributor to the overall margin improvement. We're also going to post improvement in areas like sales and marketing, rationalizing procurement spend. You know, there's a list of over 50 initiatives that we're working on now. The improvement will really be very broad-based across the P&L, but in terms of the headcount action, you should expect $10 million-$15 million of P&L charge. Obviously the benefit will go through from Q1 and, you know, increasingly throughout the year. Our next question will come from Michael Turrin with Wells Fargo. Please go ahead. Hey, great, thanks. Appreciate you taking the question. Vlad, you've seen cycles before. You founded this business in 1999. Can you put some context around how your playbook changes? It looks like there are some quicker actions you're making here. The margin emphasis is clear, but anything else you'd point us and investors to that's informing your decision process here based on prior cycles? Thank you. Sure, sure. Well, to be clear, I don't know cycles prior to 1999, but there were some cycles after 1999. Look, my general belief and understanding is that cycles come and go, seasons come and go, and, you know, eventually sanity prevails. We're obviously in a very different macro. RingCentral, we're a sizable player in a large market, and we are obviously not immune. Okay? Having said that, we have a very strong core belief that what we do matters. We're solving a real need for many, many hundreds of thousands of businesses and many millions of end users. I believe, we've shared our end user count of over five million. That is the largest pure play in the industry, okay? Which has us at approximately 2x of actually paying users. That's a major asset, okay? Not anyone else can really boast that in our space. What are our priorities? It's firstly to make sure that our user base continues to enjoy our services, including our absolutely unrivaled reliability, five nines reliability, unrivaled security, and, of course, our you know, differentiated feature set, where we simply check more boxes for more people than anyone else in our space. That's our number one priority. Secondly, we believe that, again, this cycle will also end. There will be another expansion. We wanna be set up well for the goodness that will undoubtedly come ahead, you know, come to be at some point in time. Okay? We can discuss if it's next year or year after, but, you know, life will go on. What does this mean, with respect to your question? We are absolutely going to continue our innovation strategy and innovative efforts. The cutback that we've announced has largely spared our R&D force. Okay? The areas that are interesting over and above what I just mentioned, which is keeping the lights on, basically, but there is a lot happening in AI. There is a lot happening in analytics. There is a lot happening in our platform. If you look through the prepared remarks, I think we specifically called out our largest UCaaS developer ecosystem, okay? Which is both in terms of number of software engineers who have used our API, which is in the, you know, what did we say, about 75,000 of them, as well as many hundreds of actually prepackaged apps and integrations sitting in our app gallery. Those are all differentiators, those are all strengths, and we will be redoubling on those. Okay? That's on the R&D side. I think I already mentioned, if not, I'll repeat, deeper, better UCaaS, CCaaS, or cloud phone system, cloud contact center integration. Okay? That's definitely an area of emphasis for us. Look, on GTM, you know what? Life goes on. Okay? We just announced a very major relationship with Charter Communications. Charter is obviously one of the U.S. leading MSPs, cable service providers. We could not be happier, more proud with this. We hope there is more to come. For now, up until now, we have been quite successful, I would say uniquely successful, with global service providers, but that's basically your telcos, AT&T, BT, Vodafone, like that. Here, it's a major win in what is really next adjacent market. We will continue those efforts. We will continue onboarding and enabling new resellers, as well as we will continue in addressing what is still the juiciest market to yet go through digital transformation, which is 400 million on-prem PBX seats that are still sitting there on-prem, and with overall cloud market penetration in the 5% range, about 20 million. We'll have our hands full, and I tell you what, it's great that we're at a scale we are, $2 billion, growing, profitable, turning to be too much more serious profitability, effective immediately, certainly in 2023 and beyond. We'll be fine. We'll survive this one. Come out stronger. Our next question will come from Michael Funk with Bank of America. Please go ahead. Yeah. Thank you for the questions tonight. I don't think the comment on the sales cycle was surprising. I heard that quite a bit this quarter. I did think that your tone around funnel and the business in general is actually more constructive than we've heard otherwise this quarter from other companies. Just wondering if your partner relationships maybe are helping with the resiliency in your business, and if you have some examples there of some wins that you're getting through the partner relationships. A great question. Thank you much for it. Yeah, as we called out, we're very proud of our broad go-to-market approach. We're offering our customers multiple paths to the cloud, whether that's from the GSP community, as Vlad articulated, Charter joining that group, whether it's our VAR channel community, 15,000 plus strong, as well as our strategic partnerships with the legacy PBX on-prem providers. To your point, yeah, absolutely, we've called out that multiple million-dollar wins have come from those partnerships. We're continuing to work well across all three of those dimensions to address the cross-segment opportunity that exists in this extremely low penetration market. Thanks for the question. Our next question will come from Peter Levine with Evercore ISI. Please go ahead. Yeah. Hi, guys. This is actually Peter Burkly on for Peter Levine. Appreciate you taking the question, sir. Just curious, you know, given Avaya's financial situation right now, curious if you could share any potential risk to the ACO partnership, and then maybe, you know, any contractual provisions you have in place protecting that partnership from any change in control or restructuring of Avaya. Yeah, look, I'll take it to the high level, Vlad, here. Again, Mo will, of course, detail. But look, at the high level, we have all kinds of contractual provisions in place. You know, we'll just have to see how Avaya proceeds. You know, we are rooting for them to stay an independent company and to continue the going concern. You know, as a reminder, they're still the world's largest holder of on-prem seats, both in UC and CC. Okay? That's a big thing. They're still a very large company with something like $2.5 billion in revenue and the sticky customers. Very importantly, for our relationship is the fact that they do not have a UCaaS offering. ACO is their only UCaaS offering, and they are contractually barred from having another one. Regardless of what happens, you know, with the company moving forward, you know, we know that for the last three years that they signed their exclusive arrangement with us, they were not supposed to have been working on UCaaS, and we have never heard that they were, and there are just, you know, no rumblings to that effect. What this really means is that there are approximately 100 million installed seats, which is what they've been disclosing publicly, are largely still up for grabs, you know? Our position is, and understanding, is that while we would very much like for Avaya to survive their difficulties and to continue under the current arrangement, but in the unfortunate event that it does not have to be, it still doesn't change the fact that those on-prem customers need to go to the cloud. RingCentral is still the undisputed leader in unified communications as a service. Also the fact that through our multiple years of working closely with Avaya, we believe we are in the best position to support their customer base, including their endpoints, where we believe we are in a very advantageous position given the work that already took place. That's where we are on Avaya. I can also mention that, even through all of these well-publicized difficulties of theirs, not ours, to be clear, okay, but Q3 grew quarter-over-quarter over Q2, and Q2 grew quarter-over-quarter over Q1. There is clearly demand and, you know, let's say we're cautiously optimistic. Mo. Vlad, I think you hit it all. I mean, just to recap, ACO seats that Avaya have sold has continued to grow sequentially quarter-over-quarter for the last several quarters. We're the only UCaaS provider that is compatible with Avaya endpoints. ACO is a bright spot for Avaya, and there are tens of millions of seats out there, and we have a right to win. We are the obvious choice for those customers as they're looking to migrate to the cloud at whatever point is appropriate for them. Thanks for the question. Our next question will come from James Fish with Piper Sandler. Please go ahead. Hey, guys. Thanks for the question. Just wanna touch base on the Avaya prepaid commission write-down. What would prevent it from being the rest of the prepaid commissions that are left there? Could we see another further write-down? Is really what I'm asking, or did we actually work through that $375 now with the $125 write-down? Additionally, I understand why you guys would be seeing a slowdown in the mid-market SMB side, but why did enterprise as a segment here slow the fastest this quarter? Thanks, guys. Thanks. I'll just take the first question on the Avaya non-cash write-down, and then I'll hand over to Mo just on enterprise. In the quarter, we recorded $125 million non-cash charge related to the Avaya prepaids, and that was as a result of their public disclosures, and we felt it was prudent to do in the circumstances. It doesn't in any way mean we're stepping away from their commitment to us. As Vlad just outlined to you, on a commercial basis, we actually took more seats this quarter versus last quarter and the quarter before. In terms of the commercial arrangement, we are still transferring seats actually at an accelerated pace. In terms of, you know, any further write down, it's really hard for me to give you any color on that apart from the fact that, you know, like any other prepay or any other asset, we will evaluate it based on new information every quarter and do the impairment testing that we do, you know, as we did in this case. Not really much else to add there. To pick up and hit on the second part of the question around enterprise. You know, one thing to keep in mind is that sequentially quarter-over-quarter, we did see about $20 million of FX hit, which is predominantly in that enterprise space. Then beyond that, it's the reasons that I articulated during my prepared remarks, which is, hey look, while leads and pipeline and win rates remain strong and stable, we have seen a continuation of the trends that I outlined in the second quarter, which is modestly elongated sales cycles, very much aligned with what we were seeing in pre-COVID as well as earlier, I'm sorry, smaller initial deployment in the enterprise space. Look, I mean, I think every company is experiencing that right now. Like within RingCentral, we've recently changed our own purchase order process to give Sonalee and I even more visibility in what's being approved, and we're seeing that same dynamic play out across the board due to the uncertain macro. Thanks for the question. Our next question will come from Siti Panigrahi with Mizuho. Please go ahead. Hey, thanks for taking my question. I just wanna dig a little bit into the macro question, especially you talked about slowdown. Did you see towards the end of the quarter, that slowdown? When I look at enterprise growth deceleration, and you talked about sales elongation, did you see any deals that got slipped and you expect that to close maybe in Q4? Okay. Let me address both prongs of that. Generally, what we see is especially up markets, a more back-end loaded quarter. I mean, that's been historically true and it's remained. The elongated sales cycle, additional approvers, all the things that I just articulated, certainly do play into deals that, you know, one might have expected to hit in one quarter, roll into the next. That's been true for both third quarter and second quarter, and frankly, you know, unlikely to change. It's something that we factor in, as we've got for fourth quarter and something we'll factor in as we go into 2023 as well. Okay. Thank you very much. Question? Our next question will come from Matt Niknam with Deutsche Bank. Please go ahead. Hey, thank you for taking the question. I know we talked a little bit about Avaya, but I'm just curious in terms of the partnership with NICE, any updates you can share in terms of how that's faring, whether you're seeing more success with cross-sell there at the lower end or upper end of the market? Then maybe secondly, I think, Sonalee, you alluded to this, but I know we're several years away, but any initial thoughts you can share on how you're planning on addressing the roughly $1.65 billion in upcoming 2025 and 2026 maturities, just given where rates are today? Thanks. Okay. I'll take the NICE question then turn it over to Sonalee. You know, first and foremost, I'll say, we're seeing continued success in attaching contact center to our largest deals. You know, as part of the prepared remarks, we talked about continuing to see 60%+ of our largest deals having contact center attached. I really think that speaks to two things. One is the pretty amazing integrations that we built as part of our UCaaS, CCaaS platform, as well as the buying behavior that we're seeing in the market, where more and more, especially mid-market on up customers want to buy these two products together because it allows for, a much improved end customer experience as well as a improved employee experience by allowing integration of both customer-facing employees and the ability to seamlessly transition, customers to back office employees. Think of it as a contact center-like technology, if you will. And that's really the power of the integrations that we've built and why we're continuing to see strong wins there. With that, let me turn it over to Sonalee to talk about the second part of the question. Thanks, Mo. Thanks for the question, Matt. Yes, of course, you know, capital structure is always top of mind for a CFO. You know, in terms of the actual converts themselves, as you quite rightly pointed out, they're not due. You know, the first one comes due over two years from now, March 2025, and the second one in March 2026. What I would say is if you think about the financial profile that we outlined for you today, and particularly around that expansion of operating margin, which will, you know, also drive free cash flow expansion, and you think about the optionality that that will give us in terms of how we decide to fund the business going forward, it's really a picture of a strengthening financial profile. Today I'm really happy with the, you know, the converts because they you know, we don't pay anything for them. It's 0% interest. I feel like the flexibility we have to address them only gets better and will only get better from where we are today. Thanks for the question. Our next question will come from Tim Horan with Oppenheimer. Please go ahead. Thanks, guys. Can you talk about the overall competitive and pricing environment? Are you seeing Microsoft or Zoom or anyone, you know, else getting more aggressive or less aggressive? Thanks. Thanks for the question, Tim. This is Mo. What I'll tell you is, as we said in our prepared remarks, we are continuing to see overall ARPU staying strong and steady over $30. This has been a very consistent metric that we've given for three quarters in a row now. You know, I think something that speaks to the resilience of this product set in the marketplace. To the second half of your question, I articulated that our win rates have remained steady and strong as well. When you think about those two things together, what I would tell you is, you know, broadly, no. We're not seeing any elevated levels of competition that's resulting in deal loss or ARPU degradation. Thanks for the question. Our next question will come from Brian Peterson with Raymond James. Please go ahead. Thanks for taking the question, and I appreciate all the commentary, especially all the way out into 2023. Mo, I just wanted to double-click on one of your comments. I know you're not alone in seeing sales cycles expand. I'd love if you could open up on that maybe a little bit more in terms of is that more on the net new side, or has the expand motion with your enterprise customer base, has that slowed down a bit as well? Thanks, guys. Good question. What I'll tell you is that, you know, this modulates a bit quarter to quarter, but essentially approximately 60% of our new bookings comes from acquisition, and approximately 40% comes from net upsell. We're generally seeing those two things move together with no meaningful change over the last few quarters. As you think about the trends that I articulated, they're playing out across the board, whether it's a new shift from on-prem to cloud, or as people are thinking about spending incremental dollars expanding what they have today. Thanks for the question. Our last question will come from Matt Stotler with William Blair. Please go ahead. Hey, team. Thank you for taking the question. We get a lot of inbound from investors on your stock-based comp as a percentage of revenue. You know, it had increased there for some time well into the twenties, and it seems to actually be coming down over the last several quarters. I would love to just get an update on how you're thinking about, you know, plans to continue reducing that and then where ultimately you'd like that to kind of settle out in terms of percentage of revenue. Thanks. I'll start, and Mo may wanna add a comment or two. You're absolutely right, it is something that we have been focused on. If you think about where we're guiding for full- year 2022, you should see about a 400 basis point improvement in stock-based comp as a percentage of revenue. The reason that the spend was elevated is partly by virtue of when we gave out those grants, it was at a much higher stock price. It is something that we manage and evaluate as a management team. What I would say is it will continue to be one of the levers we use to incentivize our employees. We think it's really important for our employees to be aligned with all of you, all of the shareholders. It is something that we continue to use. You should expect that number as a percentage of revenues over time to stabilize. You won't see as strong an improvement as you saw this year. We made a big step change, but over time that should stabilize. Secondly, just in terms of SBC, the flip side of that is we also use buybacks at times. You saw this quarter in my prepared remarks that we did $20 million of share buyback this quarter. That helps to offset the dilution as well. I don't know if you have anything to add, Mo. No, I think you nailed it. I mean, coming into the year, we got it to about 200 basis points of improvement. We expect to be exiting the year, you know, closer to 400 basis points, which shows the discipline that we've enacted, and Sonalee's talked about. To the second half of your question, I do expect that to continue trending down over time. We have taken some operational actions this year. While continuing to use SBC as a key retention and compensation tool, we have been able to take actions that over the next several years as new stock vests, I would expect that to continue trending down into the teens range. To Sonalee's point, stabilize at, you know, call it, BAU SaaS levels then. Thanks again for all of the questions. I'll turn it back over to the operator. Thank you. This concludes our question and answer session, which also concludes our conference for today. 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