RINGCENTRAL, INC. 2026 Q3 Earnings Call

Good afternoon, and welcome to RingCentral's third quarter 2026 conference call. Joining me today are Vlad Shmunis, founder, chairman, and CEO, Kira Makagon, President and COO, and Vaibhav Agarwal, CFO. Our remarks today include forward-looking statements regarding the company's business operations, financial performance, and outlook. These statements are subject to risks and uncertainties, some of which are beyond our control and are not guarantees of future performance. Actual results may differ materially from our forward-looking statements, and we undertake no obligation to update these statements after this call. If the call is replayed after today, the information presented may not contain current or accurate information. For a complete discussion of the risks and uncertainties related to our business, please refer to the information contained in our filings with the Securities and Exchange Commission, as well as today's earnings release.

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 presentation, which you can find under the financial results section at ir.ringcentral.com. With that, I'll turn the call over to Vlad.

Good afternoon, and thank you for joining us. We delivered another strong quarter in Q3, with subscription and total revenue above the high end of our guidance. We also achieved record GAAP and non-GAAP operating margins. Free cash flow generation remains strong, which enabled us to reach an important milestone of reducing gross debt to under $1 billion as of today, which is ahead of schedule. These results reflect RingCentral's leadership in agentic voice AI, healthy demand, and our continued focus on expanding operating margins through disciplined execution. We're building on this momentum by investing in innovation that strengthens our market position and brings AI and human agents together on a complete integrated customer engagement platform. Our strong momentum with agentic voice AI has been recognized by Business Insider, which named RingCentral to its America's Most Innovative Businesses list. Innovation has always been a driving force behind RingCentral's success.

We pioneered the shift from legacy communication systems to the cloud. The mega trend of AI represents an even larger opportunity and a powerful tailwind for RingCentral. We are leading this next transformation with agentic voice AI, making customer interactions more efficient, intelligent, and actionable. Our AI results provide strong proof points for our building success. AI Receptionist, or AIR, now has more than 22,000 customers, up nearly 4x year-over-year. ACE, our AI Conversation Expert, is approaching 7,000 customers, up 60% year-over-year. Our newest lightweight contact center offering, CEB, or Customer Engagement Bundle solution, has reached more than 14,000 paying customers, growing nearly 50% quarter-over-quarter. Nearly two-thirds of CEB customers have also purchased one or more of our AI products.

Importantly, RingCentral AI, which we define as customers using at least one native paid AI product, now represents approximately 15% of total ARR or over $400 million, doubling year-over-year. This cohort of customers also has meaningfully higher ARPU and net retention. These trends demonstrate how AI is expanding wallet share, strengthening retention, and creating a more durable foundation for profitable growth. The momentum we are seeing is rooted in our well-established position as a leader in consumer to business communications. Voice and SMS remain central to how consumers engage with their business providers, such as doctors, bankers, insurance agents, and a host of other service providers. RingCentral is a leader in consumer to business communications, with the platform carrying approximately 40 billion minutes, 14 billion calls, and 4 billion text messages annually.

Importantly, our customers can utilize the rich context in their own conversations to generate actionable insights, automate tasks, and drive resolutions through the use of our AI products. Our carrier-grade network, global scale, security, and decades of operating expertise in voice creates an opportunity for us to become a critical infrastructure layer for business communications and is a significant barrier to entry. Our ability to connect consumers with their service providers at scale well positions us to deploy AI agents across all stages of a consumer business interaction, whether it be human to human to AI, or human to AI and back to human, otherwise known as a human in the loop. For a little more color, AI agents can handle routine inquiries, automate workflows, and resolve issues autonomously. When judgment, empathy, or specialized expertise is required, a human can step in.

In healthcare, for example, AI can help manage routine interactions while bringing in a qualified professional when a patient needs medical advice. Another strong competitive moat for us is our distribution reach. Alongside our direct sales force, we have a global ecosystem of more than 16,000 channel partners and retailers, including some of the leading global service providers such as AT&T, British Telecom, Charter Communications, Optus, TELUS, and Vodafone, amongst others. Our GSP and channel partners are increasingly incorporating our AI portfolio into their product lines. Their established customer relationships and local expertise create a distribution advantage that is difficult to replicate. Let me close with three key points. First, RingCentral has a deep and defensible moat in a large and expanding market.

Our global voice infrastructure, billions of calls, text messages, and minutes that we process every year, an integrated customer engagement platform provide a distinct foundation for strengthening our leadership through agentic voice AI. Our partner ecosystem gives us the reach to scale these capabilities globally. Second, our investments in agentic voice AI strategy are delivering tangible results. Growing paid adoption, broader use of our AI portfolio, and stronger customer economics demonstrate how AI is expanding the value of our platform and accelerating our business. Third, our large and growing TAM, combined with disciplined execution and operating model leverage, is resulting in a strong and improving financial profile. We are growing revenue, expanding profitability, and generating substantial free cash flow and free cash flow per share.

With our gross debt now below our stated $1 billion target, we now have the balance sheet strength to continue investing in innovation while also delivering sustained long-term shareholder value via share buybacks and dividends. I want to thank our employees for their innovation and execution, our customers and partners for their trust, and our shareholders for their continued support. I am excited about the opportunity ahead and confident in our ability to deliver. With that, I will turn it over to Kira.

Thank you, Vlad, and good afternoon, everyone. As Vlad highlighted, RingCentral brings together a complete and integrated customer engagement platform with agentic voice AI and humans working together. Our leadership in voice puts us at the heart of consumer-to-business conversations and gives RingCentral AI the foundation to turn those conversations into better outcomes. We are building on that foundation to meet customers wherever they work, including the LLMs they use every day. This quarter, we introduced plugins for OpenAI's ChatGPT and MCP connectors for Anthropic's Claude. We were also selected as a Claude for Small Business Launch partner. RingCentral provides the conversation context, and the AI models provide reasoning. It is great to see how our innovation is helping our customers turn conversations into action as part of their everyday workflows. In less than a month, we are already seeing early traction with thousands of active customers.

Enabling humans and AI to work together is core to our strategy and where we are uniquely positioned because we bring voice, contact center, and AI into one platform, so AI can either handle the entire task or hand off to humans as needed. For example, an industrial parts manufacturer and supplier replaced its fragmented call queues with ACE, our Customer Engagement Bundle solution, bringing advanced call queues, SMS, live agent tracking, and virtual callbacks onto one place. Customers now spend less time on hold, get issues resolved in fewer handoffs, and report higher satisfaction, which means lower cost to serve and stronger retention. They are also leveraging ACE, our AI Conversation Expert, for rough scorecard grading and coaching. Plus, they are deploying AIR, our AI Receptionist, for handling inquiries with context-aware routing.

We see this in action with customers across all segments, including 1 million TCV deals, such as a rapidly growing national fitness operator with millions of members. Already using RingEX, this customer added ACE to identify key call drivers, then AIR to handle a high volume of recurring inquiries. This illustrates our AI flywheel. ACE uncovers opportunities, and AIR automates interactions, giving callers immediate answers while freeing staff to build member relationships, lead club tours, and support membership growth. As they have recognized value, they have expanded their investment with us by 4X. This past quarter, we also saw strong adoption of AIR Pro. AIR Pro extends the value of our agentic voice AI, delivering voice-first omnichannel AI agents that autonomously complete multi-step workflows and bring in human agents when judgment and empathy are needed.

As an example, one of the largest technology equipment and procurement providers for senior living in the U.S. already uses RingEX, RingCX, and ACE. This quarter, they added AIR Pro to help them take their customer experience to the next level. AIR Pro understands intent and automates more complex workflows. When a customer calls, AIR Pro verifies the caller's identity, matches the caller to their record, and identifies the reason for the call, then takes action. When needed, AIR Pro hands off to a human with full context, and then follows up. In just the first months, this customer achieved an over 95% accuracy rate in end-to-end workflow completion. We are also delighted to see our existing customer, Destination Pet, a nationwide pet care provider, extend their use case of our RCAI.