Good afternoon, and welcome to the RingCentral First Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Will Wong, Head of Investor Relations. Please go ahead.

Thank you. Good afternoon, and welcome to RingCentral's First Quarter 2022 Earnings Conference Call. I'm Will Wong, RingCentral's Head of Investor Relations. Joining me today are Vlad Shmunis, Founder, Chairman and CEO; Mo Katibeh, President and Chief Operating Officer; and Vaibhav Agarwal, Interim Chief Financial Officer. Our format today will include prepared remarks by Vlad, Mo and Vaibhav, 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 and responses to your questions will contain forward looking statements, including our second 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 into 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.

Thanks, Will. Good afternoon, everyone, and thank you for joining our first quarter earnings conference call. I want to start today's call by first acknowledging the horrific events taking place in Ukraine. We're shocked to see the dreadful challenges facing the local people as the situation unfolds. As a company, we are proud to support local relief and humanitarian efforts. We are matching employee donations up to $1 million and we've already matched $850,000 to date. From a business perspective, we're enabling 3 phone calls to Ukraine for all customers using our RingCentral services. As you may know, this unspeakable humanitarian crisis is very close to my heart. We hope for a rapid end to this shocking disaster and we send our thoughts and prayers to the people affected. With that, I'd like to shift to our people and our business. First, I want to give a warm welcome to Sonalee Parekh, as our new Chief Financial Officer. Sonalee will be starting full time later this month. She joins us from HP Enterprise, where she was CFO of HPE's Communications Technology Group as well as Head of Corporate Development and Investor Relations for the entire company. Sonalee is a seasoned executive and brings over 25 years of experience in the global technology, media and telecommunications industries, including senior roles at Goldman Sachs, Barclays, Jefferies and others. I am also delighted to share that we are appointing our Chief Operating Officer, Mo Katibeh, to the position of President & Chief Operating Officer. Mo has had a meaningful impact since he joined RingCentral, including driving our strong Q1 performance. Mo brings outstanding executive leadership and a customer and people first approach. In his new role Mo’s responsibilities will be expanded to include human resources and corporate strategy, alongside product, sales, marketing, and…

Thank you, Vlad. First, I'd also like to welcome Sonalee. I know she's going to be an amazing partner as we execute on our strategy of delivering sustainable growth and profitability. With that, let me give you more detail on our strong results. As Vlad stated, we see 4 key megatrends that are long-term growth drivers for RingCentral: hybrid work, adoption of mobility, Microsoft Teams and CIO preference to evolve to cloud-based unified communications and contact center from a single provider. Let me go deeper on each of these items and the key capabilities that differentiate RingCentral and allow us to win. First, hybrid. It's clearly here to stay. A good example of RingCentral being a preferred solution for the hybrid world, as well as a testament to the traction of our strategic partnerships, is Suffolk County in New York State. Suffolk County selected Avaya Cloud Office to connect more than 6,000 employees across more than 200 locations and everywhere else that their employees happen to be on any given day. This digital transformation project consolidated numerous on-premise phone systems across police departments and social services and community buildings onto a modern platform. And it delivered significant ROI, with the cost being approximately half of their legacy solution. And more broadly, as people are complementing their legacy phones with personal computers and mobile devices, we are seeing that the use of RingCentral on both desktop and mobile devices is outpacing our overall growth in a meaningful way, a clear proof point that RingCentral is an enabler and a beneficiary of hybrid. Second, mobile. Across every vertical, we are seeing customers select RingCentral for their entire workforce. And why? The industry-leading capabilities that we provide across all modalities, including wireless devices, whether they're being used in the office or on the…

Thank you, Mo, and good afternoon. Q1 was a solid start to the year. All key metrics came in above the high end of guidance. Subscriptions revenue grew 35% year-over-year, up from 34% in Q1 of last year. Non-GAAP operating margin was 10.4%, an expansion of 120 basis points, putting us well above the Rule of 40. And we ended the quarter with $302 million of cash and generated non-GAAP free cash flow of $39 million. This represented a free cash flow margin of 8.2%, reflecting 170 basis points of margin increase year-over-year. To summarize, we delivered strong growth, higher profitability and a corresponding increase in free cash flow generation. We are committed to durable profitable growth as we capture this massive market opportunity. Now let me provide you with the key underlying drivers of growth. First, upmarket traction. Enterprise demand for our cloud-based communications platform remains strong. Enterprise customers, defined as customers with $100,000 or more of ARR, increased 53% year-over-year to $790 million. These customers account for over 40% of our business, up 5 points from a year ago. Second, contact center. Our unique offering of industry-leading UCaaS deeply integrated with industry-leading CCaaS continues to be a strong differentiator. We are seeing bundled wins with both new and existing customers. Contact center ARR is now over 10% of our business and is accretive to our growth. Third, our strategic partnerships. With Mitel still in very early innings, Avaya, Atos and Alcatel-Lucent Enterprise continue to ramp. While we do not expect this to be a metric we consistently share, we do note that we achieved a milestone of approximately 0.5 million seats across our strategic partnerships. This is already a positive ROI on a lifetime value basis relative to our initial investments into the first 3 relationships. As our…

[Operator Instructions] Our first question comes from Kash Rangan with Goldman Sachs.

Vlad and Mo, congratulations on a fantastic start to the year. Mo couldn't help but notice, but you talked about the megatrends and one of the trends was Microsoft. And I wanted to just get behind that a little bit more. Do you see this as a trend, whereby Microsoft customers that have purchased the E1 bundle are increasingly looking to a specialist provider like RingCentral to augment their capabilities? And I also wanted to understand, I think you've thrown an eye-popping number 400% to 500% growth in your Microsoft practice. Can you just elaborate that a little bit? And Besides that, it was great to see that the ARPU trends are very stable. I think there was a fear that is going south, but you certainly did a good job talking about the stability there. And one for Vlad, of course, you're not going to be forgotten. With the changes -- tremendous changes in the management team you've brought on board some really experienced executives from outside the company. How do you think it's all going to gel together from a go-to-market, finance, strategies, what are the changes we should be expecting or you should be expecting from your new management team?

Well, hey, Kash, so yes, I guess I'll take the second question since you addressed it to me. Well, look, it's hard to predict the future. But I would say so far, so good. We had Mo joining in January. As you know, there were quite a few concerns with some of the turbulence we've experienced in Q4. And as you can see, and I should say, as advertised, so far so good. We had a fantastic quarter. Mo has a lot to do with it. You see the numbers and they speak for themselves. And certainly, his recent promotion to President is extremely well deserved, even if we just were to limit it to the numbers. But what you don't see is all of the work, which is under the surface. The next layer of management that he is bringing in, the type of talent we're adding. I can tell you now with virtually some confidence -- why virtually? Because it's never -- you never really don't know for sure, macro matters, for example. But with that aside, we will emerge a lot stronger from all of the events of last year with a more experienced management team; very importantly, a better aligned management team. And specifically, what both Mo and Sonalee, will talk about her now, what we both bring in is tremendous amount of discipline and the culture of discipline and the culture of true profitable growth. A $2 billion company like we are should absolutely be delivering tangible results and which you are seeing with our results and our raised profitability outlook and our record free cash flow generation. This is -- we expect this to be systemic. And both Mo and Sonalee, I believe, are fully aligned with that, and we'll implement. Again, as to…

12 additional countries.

Okay. Which matters. If you happen to be in one of those 12 countries, then the thing is simply not viable. And also remember, even for E5, it's still most free you still need to have an underlying carrier, okay, which you need to pay for. Again, you don't get the countries in any case. But very importantly, you don't have a single throw to choke. PBX in the cloud or any enterprise communications, it's about reliability, and it's about no drama. So if you have a poor quality call, unless there is an end-to-end vendor like RingCentral, who you're going to complain to, is it Microsoft issue, is it Verizon or in these issues or somebody. So again, this is why we think that Teams, it's not a flow, it's a channel. I think we mentioned we've had tremendous growth. It's a meaningful size business even now. We will eventually be disclosing the number, but for competitive reasons, let's just say this is one of our stronger growth drivers at this point. And what we set out to do was simply to provide the world's best Teams integration, which, at this point, we already have between direct routing and embedded dialer, we really are the only sizable vendor to support both. That opens up a tremendous amount of opportunities for us. And some of our competitors have quoted their Teams penetration, I can tell you that we are at least towards that already, okay? So a lot of juice left there. Mo?

Vlad, I think you hit all of it. And Kash, if you have any follow-ups, I have to chat with you later. Why don't we move on to the next question?

The next question is from Terry Tillman with Truist.

Yes. Congrats from me as well. And Vlad you certainly are on a roll. You crushed it with those answers there. And hi, Mo, and Vaibhav and congrats to Sonalee. Just 2 quick questions. I guess, first for you, Mo, you've had more time under your belt here at the company, and there's probably always going to be some low-hanging fruit areas on the go-to-market or operational excellence side that you can make an effect quickly. So anything you could touch on in terms of where you've been able to have an early impact? And then the second part of that question is the market has been rough obviously for software. But the shares are 3x sales on '23. And what do you think is most misunderstood about the story? And then I had just a quick follow-up for Vaibhav on Office ARR.

Very good, Terry. So let me jump in and say 2 things that I'm quite proud of relative to the first quarter. The first one, as we articulated, we saw a record increase in pipe from the channel. And any time we're seeing it come in from the channel, it's illustrative of just the foundational power of the product that we're providing and customer demand being strong. And so you can imagine behind the scenes, there was a lot of really good operational work by our sales and channel teams to go drive that and really enjoy seeing that come to life. The second one is obviously the 120 basis points of margin expansion that we saw in the quarter and how we've raised our guidance for the year relative to that. And it really boiled down to the way we accomplish that was driving efficiencies across 3 key areas that are representative of the whole organization. One is how do we think about our people, our hiring, our headcount? The second one how do we think about our program spend? And then the third one is how are we managing our supply chain and vendor ecosystem. And clearly, as we're lifting the guidance for the year, that should give you confidence about how we're thinking about the sustainability of this and really building on the points that Vlad made as well. And then I think you had a second question for Vaibhav?

Well, it was a tough question. It was just what do you think is most misunderstood, given the stock is where it's trading? It's such a low multiple compared to growth. So again, a tough question, but curious how you'd respond?

Part of today is getting your questions that I think flesh them with that out. But look, I think that what's happening with Teams is a huge part of that in terms of -- is that a revenue opportunity for us or is this a company and a product that is going to come in and essentially win a lot of the legacy PBX seats that we're going after. And the heart of it, as Vlad articulated, is it is 100% a vector of growth for us. We're seeing it as a route to market for us to go win alongside and into Teams customers and the 500% growth that we've seen is a huge part of it. And then frankly, the other key piece that I think is misunderstood by the market, and this is a big one, is ARPU. Kash made reference to it a little bit ago. And we included a slide in the deck, Vaibhav fairly explicitly hit it, but ARPU is over $30. It has been stable across our base of customers quarter-over-quarter, year-over-year. And arguably most importantly, our new acquisition ARPU -- so new customers that we're selling to in the quarter, that ARPU is also above a [3] and stable year-over-year and quarter-over-quarter. Those are kind of the 2 biggest questions that I most often get, Terry, and how I'd respond to it.

That's wonderful. And then just real quick here for Vaibhav. In terms of seasonality of office they are for the rest of the year, anything we should think about the seasonality of this business at this point given all the things you have going on? Or should it kind of ramp higher the net new ARR you add each quarter as we progress through the year?

Yes. Thanks, Terry, for the question. Look, we don't specifically guide to Office ARR. But what I would tell you is that we had a really good bookings quarter. We generated about $100 million of bookings. ARR is growing kind of in the mid-30s, which is very, very healthy. We did have some effects of the U.S. dollar strengthening during the quarter, about 1 point or 2. But overall, demand environment looks good. Pipeline remains healthy as we get into Q2. So overall, feel very good about where we are and what we've guided in terms of revenue and operating margins.

Let me just add a few words here. I think the rest of the folks on the call might find it useful as well. Because you asked a fantastic question about what's misunderstood and we hit on some of the highlights. Look, but I think at a high level, there are 2 things that people maybe don't quite realize. So -- and they're related. And basically, okay, hey, you have your competitors and they're larger, Microsoft, Zoom like that. And you look at their and your phone, the cloud, PBX part, it is lower than yours, your prices are not going to hold, yes. And the fallacy in that is they are not quoting as the entire package. If you look at the entire package offering versus Zoom, it's very much similarly priced with the side that the very heavy lift of five 9s, fully featured, partner-ready global PBX in the cloud with tons of integrations and tons of preference cases, we have and the others do not. And this is why we keep on -- at least holding our own there and keep posting these very nice growth numbers, without eroding ARPU, because, again, on apples-to-apples, our pricing is quite competitive, certainly when you compare to any of the larger companies. And the second one, and it's a little bit related as well is people tend to forget that we are not what we call as MVP, message, video, phone , not just a message, video, phone, but we are a message, video, phone plus contact center company, okay? We still today have the only -- the world's only integration between Gartner MQ leading UCaaS and Gartner MQ leading CCaaS available from a single vendor on a single invoice. It simply does not exist elsewhere. And it's no secret. Our high-end contact center is done in partnership with NICE inContact. But there is tons of IP from both sides that's went there. It's not an integration that's easy to replicate. And as the case in point, it has not been replicated. There is no one else. None of our competitors can go anything close and none of in context as well, okay? So there is real IP there is real longevity there. And this is what lets us continue winning in enterprises, frankly, of all sizes, including some very large ones because we are able to offer a differentiated, fully functional solution frankly, at fairly reasonable prices. And again, if you look on the blended basis, I think we mentioned we now shared that our blended ARPU is still over $30. Our RIA ARPU is same and our new acquisition ARPU is same. And the thing that -- what we're hoping is that now with these additional disclosures, the people will feel, let's call it incrementally comfortable more comfortable with our ability to stay at this level and continue growing at this level without losing profitability or margin.

[Operator Instructions] The next question is from Brian Peterson with Raymond James.

So I wanted to follow up on Terry's question on ARR. And as you guys become enterprise focus, I know that's growing faster than the rest of the average. Does the bookings grow outpace ARR growth? And so like maybe we shouldn't look at those metrics as the same thing. Because I know not everything is implemented or an ARR to start. But I just wanted to make sure I understood kind of the difference between what bookings is and what ARR is trending during the quarter. .

Yes. So thanks for the question, Brian. So ARR is growing in the mid-30s. And look, as we grow and mature as a company, ARR is a metric that we kind of look at internally. And we are continuing to add bookings quarter-on-quarter. So like I mentioned, we had a $100 million booking quarter, which was pretty strong. ARR growing in the mid-30s, and that's what's going to continue to layer on growth as we grow as a company. Mo, anything to add?

The only thing I'd add to that is, of course, I think all of us have hit on this is at the same time of delivering about $100 million of bookings, we had a very healthy margin we're getting the scale. We're ensuring that we're balancing both our revenue and our profitability, which is why you're seeing us guide the way we're guiding on both.

The next question is from Samad Samana with Jefferies.

So I just wanted to ask maybe on the subscription revenue guidance Vaibhav, just -- if I think about the beat versus management's guidance and then the revised guidance, it's actually slightly -- you don't roll the full beat board. So I'm just curious if there's something that's a difference in the guidance methodology? Or if that's just conservatism with more macro uncertainty? Just how should we think about putting that guidance?

Yes. Thank you, Samad, for the question. So on subs, we did from a full year guidance perspective, we did flow in the beat from Q1 and the rates from the Q2 on the subscription revenue side, we did have -- with the dollar strengthening, we did have some FX impacts that are flowing through the subscription revenue line. It's around, call it, between $5 million and $10 million. So that's something that we factored into the guidance.

The next question is from Meta Marshall with Morgan Stanley.

Great. I wanted to dive into the kind of increase you noted on the channel partnerships, noting 30% quarter-on-quarter ramp in Avaya and 50% in channel. Do you think that, that is just maturing of those relationships? Or were there any kind of particular efforts over the last kind of 6 months to kind of drive that uptick?

Hello there, Meta. What I'll tell you is we've got marketing and sales plans with our partners, each of them to capture both those customers that have issued RFPs call it, the organic growth as well as programs that are designed to actively go and put our message in front of customers that may have not yet made the decision to move to the cloud. And as you pointed out, it was a strong increase quarter-over-quarter with Avaya. I'm particularly pleased with the ramp that we're seeing from Mitel. And it's that confidence that's allowing us to come out and also start disclosing where we're at in terms of the seats from the partnerships. And look, the heart of these partnerships is we did them for 3 key reasons, right? Between them, they account for over 200 million legacy PBX seats. There's just a huge base out there, and we know that these are customers that are going to need the product that we have. Second, the structure of the deals, and Vaibhav hit on this, means that the unit economics are accretive to our overall company economics. And then the third one is really about being able to leverage our partners experienced sales and marketing teams and their long-standing company relationships that they have with these customers. We know that they're continuing to drive adoption over time. And we're going to give you periodic updates on how those partnerships are going and the number of seats that they're throwing off.

The next question is from Matt Stotler with William Blair.

I think I'll just ask a follow-up on Microsoft and maybe a little bit more pointed. We saw this morning that Avaya announced that they were expanding their relationship with Microsoft their co-selling relationship to not just include contact center but also the entire OneCloud portfolio. So I wanted to see what you can share in terms of confirmation that, that includes co-selling relationship for Avaya Cloud Office? What that implies for that product, the opportunity there? And then any thoughts on the potential for an expanded go-to-market relationship with Microsoft in the future?

We certainly can't comment on other companies' announcements. We have to direct questions on that back to Avaya and Microsoft. What I will tell you is that, as we articulated a little bit earlier, we're continuing to see increases quarter-over-quarter in our own relationship with Avaya. That's on both a seat and a new revenue bookings basis. And at the heart of it, I think it boils down to. They've got a lot of legacy PBX customers that's outside of the CCaaS section of their business, which is, I think, where they focused on this morning that need a solution to move to the cloud, and that's where our partnership with Avaya is currently focused.

The next question -- go ahead I'm sorry.

No, I'm sorry, I was going to say, and obviously, I can't speculate on any future partnerships or other go-to-market or relationships with Microsoft either. But we're very excited about the MS Teams practice that we talked about quite a bit earlier, so I won't repeat myself.

The next question is from Matthew Niknam with Deutsche Bank.

Can you talk about how churn trended across cohorts between small, midsized business and enterprise?

Yes. So overall churn, Matt, trended in line and was stable quarter-over-quarter, year-over-year. And that was true across the segments as well. So no material kind of trends to kind of outline. I think from a net retention standpoint, when you look at the cohorts, every subsequent cohort has been better than the previous one. When we look at the 2021 cohort as an example, net retention is, call it, north of 150%. So healthy net retention trends there.

The next question is from George Sutton with Craig Hallum.

Using Frontier as a proxy, how many Frontiers, how many Mitels remain out there from your perspective with relatively untapped customer sets?

Thanks for the question. This is Mo. I'll take that one. What I'll tell you is, first, we're excited to welcome Frontier is our latest global service provider partner in the quarter. And broadly, we're seeing strong seat and revenue growth from our GSPs, those service providers. These are relationships that are going to continue to unlock new sales addressable markets for us for the foreseeable future. To get to the heart of your question, here's the way I'd have you think about it. Last year, we ended the year with 12 contracted relationships with GSPs, and of that 12, only 3 of them were producing meaningful revenue because of the cycle between when you do the contracts, you go and you actually build the product together, you integrate your products and then you enable your sellers and they go off into the market. So 12 contracted, 3 producing revenue. We're expecting at the end of this year that we're going to have about 18 contracted relationships. So 6 more. And of that, 9 are going to be producing meaningful revenue. The net here is that the new revenue-producing GSPs are going to continue to grow both this year as well as next year, and then we can talk about '24 at a later point in time.

The next question is from Taylor McGinnis with UBS.

I wanted to touch on operating margins and the guidance raise there. If you look at Q1, it looks like most of the leverage was coming from the R&D and G&A line in terms of leverage. So I guess when we think about the raise for the full year, and I know, Mo, you had some commentary earlier on that. Can you just talk about like where we should see most of that increase coming from and how to think about that in relation to the model?

You're going to -- so great question. Thanks for asking it. What I'll tell you is that R&D, G&A and sales and marketing all actually saw improvements in the quarter relative to those 3 areas that we focused on. On the S&M side, we were able to take some of those savings and actually invest it as part of driving broader awareness of RingCentral in the marketplace. We know that our win rates are quite strong in the industry and as more and more businesses become aware of RingCentral with that same win rates it will drive more organic revenue growth in the future. And so that's what happened there. And then as you think about the rest of the year, same general dynamic. This is not about being focused on any one line item of the P&L. It's about those 3 key areas that we're focused on, which is how do we think about discipline and operational excellence as we look at hiring and our headcount, how do we think about our program spend and where can we drive efficiencies. And then third, how do we continue to go rationalize our supply chain and vendor ecosystem and drive savings there. Vaibhav, anything you want to add?

No, I think you covered it.

The next question is from Peter Levine with Evercore.

You -- I guess you addressed it in the prepared remarks, but can you walk us through or quantify what the incremental margin contribution looks like on a partner deal led deal versus direct? And kind of as we think about the model longer term in terms of profitability, like where do you think that leverage comes from?

Yes. Thank you for the question. So I think the way to think about the various go-to-market motion is as follows: when we book a deal through our direct, the cost to book is the highest because we are paying for the lead gen and for our sales force. So we are paying kind of end-to-end for getting the sale as we utilize our channel partners, we are only paying for wins. And as the partner -- the strategic partner-led motion take share, it's even more accretive on 2 fronts. One is in terms of the upfront cost to book, we are able to leverage the sales forces of our partners and their marketing motions. So we get efficiencies there that results in a lower cost of book. And then on the other hand, because these partners have had long-standing relationships with these customers, and they are incentivized for the customers to stay on the platform, churn is lower and it drives higher lifetime values. So when you kind of put the sum of the parts together, the LTV to CAC ratios are incrementally better on the direct -- on the partner-led motions when compared to the overall business.

The next question is from Michael Turrin with Wells Fargo.

This is [Austin Williams] on for Michael Turrin. I just wanted to touch on the seat contributions from partners. How should we think about the mix of those 500,000 seats from Mitel versus the 3As? And as a follow-up, is there any color you can provide on how those GSP partners have added to the account in the context of those as well?

Okay. So the seat count that Vaibhav articulated earlier, Austin actually excludes Mitel. So it's only from the first 3 relationships. So I think that answers the first part of your question. And then on the GSP side, we don't disclose the number of seats that we get from those relationships. But I'd go back to my earlier comments, which is -- what I love about the GSP relationships is that they're stacking over time. And as they come on board and actively start producing revenue, I think of that as incremental growth that we have line of sight into not just for the rest of this year, but 23% is a minimum as well. Thanks for the question.

The last question will be from Alex Zukin with Wolfe Research.

I just want to get a better understanding. I'm doing the calculation on the ARR. And I'm trying to get just a sense of if I look at net new ARR added it's down on a year-over-year basis versus Q1 of last year. Is that -- I think to someone else's question, is that just delayed recognition? Is that currency? Is that something in the business we should be mindful of? And then on a gross margin standpoint, can you just maybe comment on -- if I look at GAAP gross margins, they were pretty significantly down sequentially Again, if you could just comment on kind of where that stabilizes and what's the driver there?

Very good, Alex. I'll take the first half and then hand it off to Vaibhav. So I'll come back to what I articulated a little bit ago, which is a good bookings quarter, about $100 million. If you look at the last x number of years of our business, Q1 is almost always the seasonally lowest quarter of the year. And really, as we think about how we're managing the business, it's about both driving that top line revenue growth and new bookings as well as ensuring that we're doing it in a very disciplined and profitable way. And that's where management's focus is right now. We want to drive both top line and bottom line. And that's why you're seeing us accelerating our margin guidance about 3x up for the rest of the year versus our prior guide last quarter. And then Vaibhav, if you want to talk about gross margin?

Yes. So on the gross margin side, when you look at the non-GAAP gross margins, there are multiple kind of good guys there. As we are upgrading to our native video product, we get efficiencies. And generally, with scale, we are spreading the costs, the fixed costs over a wider base, and we are getting scale. From a GAAP perspective, the 2 things that we exclude are stock-based compensation and intangibles amortization. And we acquired the CloudLink technology from Mitel last quarter. I think that the amortization of that technology is running through, we are getting the full impact of that in the quarter that's driving down GAAP gross margins.

This concludes our question-and-answer session, and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.