Greetings and welcome to the RingCentral First Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Mr. Clyde Hosein, Chief Financial Officer for RingCentral. Thank you, Mr. Hosein, you may begin.

Thank you. Good afternoon and welcome to RingCentral's first quarter 2015 earnings conference call. I'm Clyde Hosein, RingCentral's Chief Financial Officer. Joining me on today's call is Vlad Shmunis, Founder, Chairman and CEO. Our format today will include prepared remarks by Vlad and I followed by Q&A. The primary purpose of today's call is to provide you with information regarding our performance for the first quarter of 2015 along with our financial outlook for the second quarter and full year 2015. Some of our discussions and responses to your questions may contain forward-looking statements including statements regarding our expected financial results for the second quarter and full year of 2015, our future plans, prospects and opportunities, trends in the business communications market, our expectations regarding our expansion of market and our carrier and other reseller relationships, our RingCentral connect initiative, our growth strategies, current and future market position and expected growth. These statements are subject to risks and uncertainties. Actual results may differ materially from our forward-looking statements and projections for a variety of reasons including, but not limited to, general, economic and market conditions, the effects of competition and technological change, the success of our market and sales and retention efforts and customer demand for and acceptance of our products and services. A discussion of the risk and uncertainties related to our business is contained in our 10-Q for the year ended December 31, 2014 and filed with the Securities and Exchange Commission and is incorporated by reference into today's discussion. We disclaim any obligation to update information contained in our forward-looking statements whether as a result of a new information of future events or otherwise. I encourage you to visit our Investor Relations website at ir.ringcentral.com to access our first quarter 2015 earnings press release, our non-GAAP to GAAP reconciliation, our periodic SEC reports, a webcast replay of today's call and to learn more about RingCentral. With that, let me turn the call over to Vlad.

Thanks Clyde. Welcome everyone and thank you for joining us on our first quarter 2015 earnings call. The first quarter marked a strong start to the year for RingCentral as we made progress across a number of strategic initiatives and extended our leadership position in the cloud business communications market. The RingCentral’s integrated cloud solution addresses key business communications needs including voice, text and video and web conferencing. Our easy-to-use carrier-grade SaaS platform continues to be a disruptive force in the large global business communications market, which was historically served by inflexible and expensive on permits system. Furthermore, we believe that the release of the RingCentral Connect Platform will serve to further [deviate] our offering by integrating business communications into broader business workload and applications. Subscription revenues in Q1 grew by 37% year-over-year, again led by the success of our flagship RingCentral Office product. At the end the quarter, the annualized monthly recurring subscription revenues or MRS of RingCentral Officer grew by 47% year-over-year to over $185 million. And we accomplished this growth while improving both our growth and operating margins. Our initiative to expand our market is proving fruitful. The revenue and booking from customers was 50 users and above continue to grow at a rapid pace. Annualized MRS for these customers grew by over 100% year-over-year once again. This category accounted for over 20% of RingCentral Office bookings. We remained focused on further expanding our market given the attractive unit economics, the size of the opportunity and our successes to date. In Q1, we added a number of customers with multiple hundreds of users. For example our largest win in the quarter was a 1000-seat deal with Tecta, a commercial roofing company with 52 locations across the U.S. After running a pilot, with a few dozen users, we…

Thanks Vlad. The progress we are making across our strategic initiatives is generated in both strong top line growth and significant margin expansion. Total revenue for the first quarter was 65.3 million up 35% year-over-year and 6% sequentially from Q4. This was above our previous estimates of 63.5 million to 64.5 million. Subscriptions revenue grew through 16 million, up 37% year-over-year and 6% sequentially. Excluded impact from declines in the Canadian dollar and British pound, our year-over-year growth would have been one point higher. Product revenues grew to 5.4 million and were a little over 8% of revenue in the quarter. Total company annualized exit monthly recurring subscriptions grew to approximately 254 million up 35% year-over-year and 7% sequentially. The annualized exit MRS for our RingCentral Office product grew to approximately 185 million, up 47% year-over-year and 9% sequentially. This growth has been driven by continued combination of user and ARPU growth as larger customers adopting our price initiatives. In fact over 50% of our new bookings this quarter subscribed to either the premium of enterprise addition a rate which is more than double from the same period a year ago. Our overall net monthly subscription dollar retention rates remained well over 99% in the fourth quarter. Office net monthly subscription dollar retention was about 100% ones again. Before I move down to income statement, I want to remind you that my comments are only be focused on non-GAAP results. A reconciliation of all non-GAAP to GAAP results is provided with our earnings press release issued earlier today. Subscription gross margin improved to 74.2% in the quarter, up 280 basis points from 69.4% in Q1 of last year and 90 basis points and 73.3% in Q4 of last year. This represents of eighth consecutive quarter of improvement. We are continued…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Nicole Fuller from Bank of America. Please proceed with your question.

Hi thanks for taking my questions and congratulations on the nice start of the year. It’s nice to see steady and actually increasing level of innovation from RingCentral and I wanted to any thoughts on the ways you can monetize the Connect platform? And secondly, entering the cost at this space like what the business carries, why now and why partner? Thank you.

Yes, hello Nicole. This is Vlad, I’ll take the question. So thank you very much for the kind words and congratulation guys with us have a nice quarter. So as for your questions, as far as the RingCentral Connect platform in concerned, we really sees as a very good way to differentiate what we have in this much to our knowledge where the only true clued business communications solution, that is actually exposing our data to other applications. And so that actual communications. Data now can be embedded into workflows integrated with CRMs et cetera. So we don’t view this as a way to generate revenue per se, it’s not a separate product or a Tier for us but it’s really makes out technology much thicker, much more interesting for higher enterprise customers who are interested in developing results custom workflows. And in that it just positions us and store this demand to our position as a market leader, so that’s our approach to the platform. As far as I think your second part of your question and far as the Contact Center. So the timing of this is we have a demand from a certain number of customers to deliver a world class integrated solutions which combines best of breed business communications which is something that we deliver in each of this along with best-in-cloud based Contact Center And our primary consideration was to deliver it quickly and at the highest level possible, so we’ve partnered with inContact which is I believe we believe and disputed industry leader in cloud Contact Center space, so we feel that by combining best with best, we really are able to deliver a very interesting well differentiated solution to our off market customers, so we are very much excited about this opportunity and this new technology and this new offering and look forward to good enough.

Thank you.

Our next question comes from the line of Brad Zelnick with Jefferies. Please proceed with your question.

Thank you very much and my congratulations, nice work guys. Just Clyde I wanted to focus on the up market growth specifically on the field, you’ve invested in field sales in recent quarter, how do you feel about by traction you are seeing there, how do you know it’s working and how you think about additional hiring in the field?

Yes. Hi Brad. And yes thank you for the kind word as well. So we feel very good about our off market effort. As we’ve just announced, we are seeing continued strong traction. We’re seeing continue triple digit growth on what is now meaningful part of our business. But to be clear, the way that we approach our market is not solid through field sales. Basically most of our sales people and especially out market sales people they really following a hybrid model. We generate awareness, there is good brand of ignition for essential this morning, we have lot of inbound increase and this is form customers of all levels and with - of all sizes. But we are also now augmenting it with some outbound campaigns. And we are very pleased with progress so far again with triple digit growth in the out market segment frankly looking far to complain.

Now it looks like it shows and if I can add a follow-up here. And Brad, I have to ask this because I am already getting asked by investors, but can you share a bit more about the circumstances around Dave’s departure, and you expect to replace him and how do you feel about your rate of new business growth in Q1 and pipeline going forward, should we read anything into his departure as it relates to your momentum?

Yeah, I don’t think you should read anything into few departures as it relates to the momentum, we believe we had a very good, very strong quarter. We are quite pleased with our pipeline as well. So they’ve designed to procure other, we wish his well and values his contributions over the past two years. But to be clear, we have a very strong management in place already on the go-to-market size and includes our head of sales who has been with us for over five year and who have built our sales force and who is dispute heading or taking charging of our out market expansion as well. We have our new CMO, who comes with a very strong background from Taleo and number of other companies and a head of customer service is also a very strong industry background. And look I mean we have, have and have had for always an open management style, people interact a lot across levels. So all of Dave’s reports, I very schedule line with as well for a long time and I expect that to continue. So I don’t that that was going to any title, but the interaction and just look forward to continue forward with a strong team.

That’s helpful color. And gain nice job, keep up a good work guys.

Thank you.

Our next question comes from the line of Brian Peterson with Raymond James. Please proceed with your question.

Thanks guys and congrats again on the quarter. The deferred revenue it was up 55% year-over-year and it’s been accelerating on last few quarters. Clyde, I am just curious how of this is driven by the annual prepayment, what’s the mix of that prepayments and should we expect that you continue to increase over the course of ’15?

Most of that is prepay. As we move up market Brian and we’ve mentioned this before, both larger customer in addition to be sticker with lesser churn, better LTV, the ARPU is better because they are buying more premium services. What they also do and they are signing longer terms contracts on prepaying, so this reflection is that more accurately reflects the fact of moving up market. I wouldn’t get to enough quarter-over-quarter but trend wise you will continue to see as we move up market. I terms of mix, I am not that you mean by that but most of this is our up market trend that is showing visibly on our balance sheet. Small amount still but in trend wise you can see is moving consistent with the size of customers that we are addressing.

Okay, understood. And on the enterprise side, I am just curious when you saw in some of these customers there what’s called it’s 500, 1,000 seats, what do you initially in terms of implementation and do you see a tailwind over them as more of these seats continue to get added to the platform?

Yes, Vlad here, I will take this question. So in many cases what we see our initial deployment which would a few seats or few dozen seats and then we view these as more of a proof of concept with the customers. And as we prove our ability and as well as get people familiar with all of the benefits that we have to offer, mobility ease of use, platform integrations. So at that point of time, companies get interested in getting that as if to the entire workforce of to a meaningful portion of it. So we have several customers with over 1,000 seats with us and each and every case, the engagement started with a field trail. So see this is as a viable strategy and we are very comfortable in getting people exposed or product sourced on essential a trial basis because the products stands up well.

Our next question comes from the line of Bhavan Suri from William Blair. Please proceed with your questions.

Hey guys, can you hear me okay.

Yes, we can Bhavan.

Great, thanks guys, nice job there. Just a couple of quick questions. First, just when you look at the pipeline for large deals, just some sense of how that’s looking compared to say a year ago? And then in 1,000 seat plus win, who are the competitors and sort of how that play out, a little more would be helpful?

So the pipeline is growing substantially from a year ago. If you recall it was only just over a year ago before we have considered effort to move up market. The pipeline is growing I would say, the gross pipeline is obviously is much more, much higher than all company growth, overall office growth. Obviously that gets weeded out. But what I would say is quarter-over-quarter and obviously year-over-year, we see meaningful growth in that pipeline coming through, it’s an area as in the up market we need to manage, we are managing, we continue to manage closely and the team that’s basically doing the good job. In terms of competition, you get some of the - most of that space 1,000 person space, you get more of the bigger PVX guys in that space you see. And so these are bigger enterprises that probably have had five to seven years of an old PVX or agent PVX, they look it as a replacement cycle. We do see a few examples where want to upgrade their services even if it’s PVX, we see then one and two upgrade and integrate other services in there. So I would say as you move up and shifting a little bit to some of the established guys in that space.

Got it and then I mean one last one for me. I just look at the pipeline for resellers the large guys like AT&T and BT and TELUS, just in terms of how that’s looking and you know could we expect maybe an announcement or something for an incremental largely to sell this year?

Okay, Vlad, I’ll take this one. So we actually interesting, we see a quite a bit of pipeline with those indirect channels and in particular with AT&T, we are in a number of interesting trails with companies with well known brands. And you know that’s going well. As we just discussed lended expand is a very much proven strategy for us, so with those results where we will encourage and it result in meaningful business. It’s a little bit earlier it was both TELUS and BT, as you know both of them launched just a little bit ago. And again a little bit early but good engagements both ways. And from interesting customers that we’ll be getting out, that’s why. Now as far as additional announcements with lots and resellers we will be proud be announced but we are very pleased with the way that our channel is developing and this is when you the bar assignment in the left and that includes VARs as well as carriers. And I think that other carriers as well as other VARs that become are well aware of this dynamics. And you know to these points, we have announced recently addition of a major reseller Jenne, who is typically well known for technology sales, so we are pleased with progress.

Great, thanks a lot.

Thanks Bhavan.

Our next question comes from the line of Aaron Schwartz from Macquarie. Please proceed with your question.

Hi good afternoon. Thanks. Just had a question on the platform initiatives, you talked a number of thing you could use this announce in the quarter and partnerships. Can you just walk through if you are seeing any change in the lead generation dynamics into the pipeline? And then also on the 15 user and above transactions, what sales say is relative to the rest of your business. Is there much of a change there?

Yes, hi Aaron. So as far as the platform is concerned, the platform we have it it’s basically a vital at its capability to our customers so it’s not so much of the lead to for us but again as a way to just cement our relationship with customers that in particular with higher end larger accounts. Now having said that, we are seeing a great number of development request and we are not yet deployment you can share and I will share number but this is a meaningful that very strong demand for people to actually get into our platform to using our API. So again that’s going very, very well. And then sorry the second part of your question was?

I was just wanted to characterize the sales cycles on the 50 user and above versus your rest of your business?

So they are generally longer with smaller businesses, we end up to again to the decision maker of almost in the - almost immediately. So the sales cycles could be well under months or even few weeks. The large the company is the longer the sale cycle, it’s a different dynamic. We don’t talk initially to the decision maker. And as far as the larger the company the more likely there to have a formal IP function and you know so end up having to deal with CIO a lot. But again as I’ve mentioned, this will lesser expand think they for us. And that’s we are simply able to deploy our technology at a small scale without deploying a large commitment and then ones we throw our colors then the company is really to convert. So we are continuing to see the dynamic.

Okay and secondly for Clyde if I can, on the sales and marketing expense area, is that increase there just a normal sort of annual weight and also staffing in of these centers here, or there any maybe one time marketing or campaign items in there just wanted to get help out on, just how we should think about the churn line from here? Thanks.

Thank you, Aaron. There is certainly no one time paying. Yes, as you are aware, throughout the P&L there is usually some increases in Q1 that I can him accountant related vacation, recruits and some of that but we are continue to invest to grow the rate we expected and we then invested earlier all was that you lead and like faster. So there is no one time thing I think we continue to invest in terms of market and the join the growth in the business.

Okay, thank you.

Thanks Aaron.

Our next question comes from the line of Mike Latimore from Northland Capital. Please proceed with your question.

Yeah, great, thanks a lot, very nice quarter. On the new bookings in the quarter, are you seeing specifically in the market, are you seeing ARPU continue to increase that?

Yeah on the - certain if mid-market even by 50 plus, yes we say that early on the prepared remarks, we are seeing in Mike. And when is that coming from is as we move up to larger and large is obviously 50 plus but we had a number of multi-100 wins and tell us in personal when doing the quarter, so that during the last quarter, they did very well with larger deals. And what we are seeing with those customer demands and other is they being to buy the premium at enterprise edition. That’s driving the overall company’s average revenue per using.

And on the contact and our offering, do you see you know opportunities where you are dealing with 50 to 200 call center agents or would you see more opportunity say under 50 kinds of call center scenarios?

Yes, hi Mike. So look I mean we just launched so it’s a little bit clear to see what the trends is going to be, but as I stress is it was very, very important for us to come out with a truly world class solution right out the gate. And in choosing inContact we were specifically looking for a partner was a very well proven deployments in the multi-100 feet and above range. And feel that inContact is as scalable as we are cloud contact centers. So we absolutely expect to be able to satisfy requirement and demand from customers of really any size, very important part of our market strategy.

And then last on AT&T, is that kind of roughly growing with the overall business or is faster or slower?

Mike, it’s growing but I can’t add much more color than that for given the contractual reason you have.

Great and thanks a lot.

Thanks Mike.

Our next question comes from the line of Brian Schwartz from Oppenheimer. Please proceed with your question.

Yeah, hi thanks for taking my question. Good afternoon. I too well add my congratulations on a very strong quarter out of the gate here.

Thank you, Brian.

Two question that I had, kind of two topics that have been asked before but it seems like you get in a little deeper here. So Clyde, just wanted to see if you can talk a little bit more about the platform story and the vision that you have along the platform. I think what you doing is clearly becoming more vision that’s here to inventors, but my question is how about the customers, you clearly have done a lot of innovations, you’ve added more third party app integrations to the platform over the last 12 to 18 months. Can you talk about how the conversation with the customer is changing out there especially as you are moving hot market with this capability?

Yes and again thank you for the kind words here. So look, this platform initiative, we’re introducing it as a game changer. It is something that’s unique to the best of our knowledge in our space. And as already mentioned we have a lot of requests from developers to integrate. And so that’s probably the best measure of how well received this initiative has been. Now as far as us being better known story, look again numbers differ themselves, we are growing primarily by buying new customers, new business and we are able to do this across all segments you know starting with very small business. And at this point all the way up to 1,000 plus seat engagement was multi-1000 employee enterprises. So I would say the story is getting out nicely but of course there is always more to do. And you know to that end, we continue investments across a number of fronts, both technology as well as brand generation.

Thank you, Vlad. And one follow-up with Clyde, if I look at on the financials both the billings and the subscription revenue growth trajectory it’s remarkable how robust they have been, but also how consistent the growth has been in the high 30%, near 40% here over the last five to seven quarters. As we think about the new growth requirements, you know clearly that’s going to get tougher from the large numbers. Do you feel that you need to ramp up at all your sales hiring or your advertising spending to maintain these growth rates. Clyde, do you feel you have enough capacity right now to achieve the growth targets that you are putting out this year? Thanks.

Thanks Brian. Look, we can grow the business as we’ve been growing and thank you very much for that observation, we - there is no question we’ve got to invest both in sales and separately in market. And so we are hiring people and in this - labor market it’s been a difficult market but we are looking and that continuing to higher sales people consistent with our growth expectation. We are also looking to invest in market in similar. The demand for more of that is greater than obviously we want to manage right now. If you recall, we have a trajectory of being at or around breakeven exit in the year in Q4. We’ve done great progress in Q1, a big installment of that. So it gives us some latitude, but - so we are investing more in sales, we are investing more in marketing. The fact that we invested in indirect with carriers, VARs and distributors helps stimulate that growth and that’s a conscious part of the strategy. The fact that we move in up market while there is a longer latency, the land and expand strategy that Vlad identified earlier with help kicking in. So it is not just all about pouring money, it’s about some conscious strategic initiatives which should be taken on with indirect carriers, VARs and the like, with moving up market and that also helps leverage that.

Thank you. One quick question on the metric, Clyde if you or Mitesh have that, do you happen to have what the FX impact was on your differed revenue in the quarter, if not I can take it offline.

One point - it’s about one point.

Thank you.

Our next question comes from the line Heather Bellini from Goldman Sachs. Please proceed with your question.

Hi thanks for taking the call. Hi [indiscernible] for Heather. There is a lot of changing in the communications landscape with players like Facebook focusing on Messenger for business and video calls, just any high level thoughts on how this impacts your market and maybe how you approach your business in that areas and partnerships in that space?

Hi Vlad here. It’s a great question. So we feel that when players like Facebook move in it’s a great enabler for us, it really opens up people’s eyes to the value of our cloud communications. However, we are - we don’t see them playing at all in the business communications market. And Whatsapp for business is, it’s really still a person-to-person consumer product. So to be very clear, you cannot run a business communications system or a business [phone] system on any of those products. And this as an example is why our partnership with Google is so interesting and valuable, is that’s we’re able to add business communications functionality to a well established business cloud suite and join it into a complete cloud based solution. So again you know Facebook we frankly never see them in our market directly.

Okay, great, thank you.

You’re welcome.

Our next question comes from the line of Terry Tillman from Raymond James. Please proceed with your question.

Yes, good afternoon guys. Can you hear me okay.

Yes, that’s fine.

Thanks Clyde. Hi Vlad. It’s a risk of asking a question that was already asked, I jumped on late because we’re jumping around different calls. So I apologize if this was asked. But it’s a philosophical question, high level question in terms of, here you have this enterprise PVX opportunity that’s starting to play out more, more each quarter, you’ve got more of that, the Greenfield opportunity with small businesses buying office, you have made a point about being discipline with your spend, and Clyde, I heard you a little bit when I jumped on the call, maybe talking a little bit about the balancing act with investing for growth versus showing some leverage. But if we look out over the next two or three years, is there any thought that maybe you really leaving a lot of revenue on the table here particularly with these two big TAM opportunities in front of you. So what I am getting at is any potential shift away from just showing operating leverage to the extent you have and maybe investing more for some of these growth opportunities? Thanks.

Thanks Terry. So first of all let’s understand at least so far what we’ve printed. We’ve printed mid to high 30s growth, that’s nothing to scorn after and at the same time, that - by the way that is about 2X the average fast company growth, about most 2X nearest competitors. So we should feel really proud of other revenue growth that we’ve been generating. At the same time, we are in business to make money and while investment so we’ve improved over the last year or two about eight points on the bottom line. Last quarter, I think we did 1100 - or so. So I think it demonstrates unit the economics we have but it’s on no compromise, as we sit here there is no compromise. Having said that, I think if you are looking at the two year or three year horizon I think those questions become more relevant. But to date it has not been as much of a compromise to demonstrate that growth.

Alright, thanks.

Thanks Terry.

There are no further questions in the queue. This does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.