Slide 1: RingCentral 2018 Investor Day: Welcome
RINGCENTRAL 2018 INVESTOR DAY Welcome Paul Thomas Head of Investor Relations
Slide 2: Disclaimer
Disclaimer This presentation and the accompanying oral presentation include forward-looking statements within the meaning of the federal securities laws. These statements relate to, among other things, our business strategy, goals and expectations concerning our market position, our products and pro
Slide 3: 2018 Investor Day agenda
2018 Investor Day agenda Time Topic Speaker 1:30–1:35pm Welcome Paul Thomas 1:35–2:00pm Opportunity Vlad Shmunis 2:00–2:30pm Industry Leadership David Sipes 2:30–2:50pm Product Demo Jose Pastor 2:50–3:00pm Break 3:00–3:25pm Customer Panel Mitch Tarica 3:25–3:50pm Partner Panel Zane Long 3:50–4:10pm
Slide 4: $50B+ TAM, Collaborative Communications, Compelling SaaS Economics
OPPORTUNITY INNOVATION FINANCIAL MODEL +$50B Collaborative Compelling SaaS TAM Communications Economics
Slide 5: Opportunity
RINGCENTRAL 2018 INVESTOR DAY Opportunity Vlad Shmunis Founder, CEO and Chairman
Slide 6: Employees come first
Employees come first. If you take care of your employees, they will take care of the clients. Sir Richard Branson
Slide 7: The world is changing
The world is changing (2) Mobile subscribers Billions (1) 7 World population (3) 1 Fixed lines 2005 2017 (1) Worldometers elaboration of data by United Nations, Department of Economic and Social Affairs, Population Division. World Population Prospects: The 2017 Revision (2) ITU International Telecom
Slide 8: Legacy designed for the old world
Legacy designed for the old world
Slide 9: The way people communicate has changed
The way people communicate has changed Any device Anywhere Any mode
Slide 10: Business communications is now more than voice
Business communications is now more than voice 44% 32% 29% 11% Team Video Voice Text conference messaging Based on a global survey of 2,000 knowledge workers by CITE Research, January 2018
Slide 11: UCaaS: Any device, anywhere, any mode
UCaaS: Any device, anywhere, any mode
Slide 12: More than legacy wireline voice replacement
More than legacy wireline voice replacement Customer rank PBX Mobile Team messaging Video Contact center Platform 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Features that influenced the purchasing decisions of the top 15 customers ranked by MRR as of 1Q18
Slide 13: Usage growth
Usage growth 2017 Annual Growth 240%+ 150%+ 110%+ 115%+ 100%+ 40% Voice Platform Video Team Messaging Mobile Contact Center Total Minutes API Calls Minutes Posts Voice Minutes Minutes
Slide 14: Cloud is winning. RingCentral is winning in the cloud.
Cloud is winning. RingCentral is winning in the cloud. 40% 30% Cloud (UCaaS) (2) 20% 34% (1) 10% 21% On-premises (UC) 0% (1) -10% (12%) (1) Synergy Research Unified Communications as a Service (UCaaS) Revenue Tracker, Q3 2017 Y/Y revenue growth of on-premise and cloud markets (2) Represents RingCent
Slide 15: Driven by innovation
Driven by innovation Cumulative R&D Spend TTM Revenue $542 $254 (in millions) (in millions) $406 $184 $318 $125 $237 $297 $97 $173 $253 $77 $209 $69 $45 $162 $34 $129 $24 $11 1Q14 1Q15 1Q16 1Q17 1Q18 1Q14 1Q15 1Q16 1Q17 1Q18 Nearest competitor Cumulative RNG and nearest competitor non-GAAP R&D spend
Slide 16: Why we win
Why we win User-centric and Integrated Open platform with mobile first team messaging and 1,000+ integrations cloud PBX
Slide 17: Broad industry recognition
Broad industry recognition A Gartner Magic Quadrant Leader for UCaaS 2017, 2016, and 2015 Frost & Sullivan North American UCaaS Company of the Year 2017 and 2016 Ranked #1 in the IHS Markit 2018 and 2017 North American UCaaS Scorecard *Gartner does not endorse any vendor, product, or service depicte
Slide 18: Market still in the early stage of transition
Market still in the early stage of transition 5M UCaaS seats (1) 100M+ US seats (2) 200-300M global seats (3) (1) Pure Play Cloud Providers, Synergy Research Group, UC Market Tracker – UCaaS, Worldwide Revenue Market Shares for 1Q 2016 to 1Q 2018 (2) 2010 U.S. Census data and RingCentral estimates;
Slide 19: $1B in Revenue by 2020
$1B in Revenue by 2020 Global expansion Channel growth Product Direct growth excellence . . . is just the beginning
Slide 20: Beyond $1B in Revenue
Beyond $1B in Revenue Platform Ecosystem 40% From existing Global 2000 customers Vertical Installed Base Targeting Penetration
Slide 21: Management team with proven ability to execute
Management team with proven ability to execute Vlad Shmunis Praful Shah Dave Sipes Ryan Azus Founder, CEO, and Chairman Chief Strategy Officer Chief Operating Officer EVP of Global Sales and Services 10 years 10 years 9 years Mitesh Dhruv Kira Makagon Riadh Dridi Derrell James Chief Financial Office
Slide 22: Industry Leadership
RINGCENTRAL 2018 INVESTOR DAY Industry Leadership David Sipes COO
Slide 23: Driving innovation
Driving innovation 2018 2017 Collaborative Meetings, Collaborative 2016 Contact Center, Analytics and Pulse™ and Quality of 2015 Service Collaborative 2014 Communications™ Contact Center™, and Global Office® Pre-2014 Team Messaging, Office for and Open Enterprise and Platform RingCentral Video Meeti
Slide 24: Collaborative Communications
Contact center Cloud PBX Collaborative Communications Video and meetings Team messaging
Slide 25: RingCentral app unified experience
RingCentral app unified experience Cloud PBX
Slide 26: RingCentral app unified experience
RingCentral app unified experience Cloud PBX Sara Bennett Call completed, 31 sec
Slide 27: RingCentral app unified experience
RingCentral app unified experience Team messaging Sara Bennett Call completed, 31 sec
Slide 28: RingCentral app unified experience
RingCentral app unified experience Video & meetings Sara Bennett Call completed, 31 sec
Slide 29: Collaborative Contact Center
Collaborative Contact Center Contact Center RingCentral RingCentral Glip™ team messaging Contact Center™ Pulse
Slide 30: RingCentral Pulse for Contact Center
RingCentral Pulse™ for Contact Center Contact Center
Slide 31: Collaborative Communications: Open platform, Global
Open platform Collaborative Communications Global
Slide 32: RingCentral Connect Platform
RingCentral Connect Platform™ App Gallery 1,000+ Standard/customer integrations 12,000+ Developers ringcentral.com/apps
Slide 33: Global footprint
Global footprint Global Office Virtual Numbers Gateway Solution
Slide 34: Global quality of service analytics
Global quality of service analytics
Slide 35: Why we win against legacy vendors
Why we win against legacy vendors Legacy vendors Alcatel-Lucent Mitel Mobile first Avaya NEC Multimodal communications Cisco Panasonic Huawei Unify (Siemens) Speed of innovation Microsoft Single global solution Significant cost of ownership savings
Slide 36: Why we win versus cloud competitors
Why we win versus cloud competitors Cloud vendors Innovation leadership Open platform Enterprise referenceable wins Gartner Magic Quadrant leadership Market leadership
Slide 37: Segmented GTM model
Segmented GTM model Sales Channel model model Strategic accounts (10K+) Field sales Overlay Enterprise (250+) Field sales Overlay Mid-Market (50–249) Hybrid Overlay Online and Dedicated Mass market (<50) telesales team
Slide 38: Channel momentum—new bookings
Channel momentum—new bookings 17% 29% 2016 2017 Direct Channel New bookings mix for 2016 and 2017
Slide 39: Enterprise marketing strategy
Enterprise marketing strategy Build a Create Customer global brand demand advocacy • Thought leadership • CxO marketing • User conference • Industry events • Account-based marketing • Customer Advisory Board • Influencers engagement • Field and partner events • Customer references
Slide 40: Delivering a great customer experience
Delivering a great customer experience Professional Customer services support
Slide 41: Services enhancements
Services enhancements Global delivery Enterprise RingCentral Multi-language capability premium support University support
Slide 42: Award-winning customer satisfaction
Award-winning customer satisfaction 9.40 Pacesetters 9.20 (top 15%) Benchmark avg. 8.50 7 8 9 10 Based on TSIA 2017 survey data and Medallia 2018 data
Slide 43: Innovation, Differentiation, Go to Market
INNOVATION DIFFERENTIATION GO TO MARKET
Slide 44: Product Demo
RINGCENTRAL 2018 INVESTOR DAY Product Demo Jose Pastor VP, Product
Slide 45: Customer Panel
RINGCENTRAL 2018 INVESTOR DAY Customer Panel Mitch Tarica SVP, Worldwide Sales
Slide 46: Customer Panel
Customer Panel Paul Chapman David Baker Hernando Celada Chief Information Officer Chief Information Officer Chief Information and Asset Officer
Slide 47: Channel Partner Panel
RINGCENTRAL 2018 INVESTOR DAY Channel Partner Panel Zane Long SVP, Global Channel Sales
Slide 48: Channel Partner Panel
Channel Partner Panel Mike Dolloff Scott Davis Ryan Heath Chief Revenue Officer EVP, Sales and Marketing CTO
Slide 49: Compelling SaaS Economics
RINGCENTRAL 2018 INVESTOR DAY Compelling SaaS Economics Mitesh Dhruv CFO
Slide 50: $50B+ TAM, Collaborative Communications, Mid-Market/Enterprise & Channel
OPPORTUNITY INNOVATION GO TO MARKET $50B+ Collaborative Mid-Market/Enterprise TAM Communications & Channel
Slide 51: Since IPO: Significant Revenue Growth
Since IPO: Significant Revenue Growth Total Revenue ($ in millions) 504 33% Other Revenue CAGR (2) 380 Subscription 296 90%+ Revenue 220 465 161 357 200 271 Recurring 146 Revenues (1) 2013 2014 2015 2016 2017 (1) Recurring Revenues: Subscription Revenue / Total Revenue for the periods 2013 - 2017 (2
Slide 52: Since IPO: Driving Leverage in the Model
Since IPO: Driving Leverage in the Model Annual Operating Margin 8% 5% 0% +24 pts Margin Expansion -10% +12 pts Subscription COGS -16% 2013 2014 2015 2016 2017
Slide 53: SaaS Business Model Tradeoff
SaaS Business Model Tradeoff Growth Profitable Growth Profit
Slide 54: Growth
Growth
Slide 55: SaaS Model: Building Blocks
SaaS Model: 3 Building Blocks
Slide 56: Building Block 1: Net Bookings
Building Block 1: Net Bookings Beginning ARR New Bookings Gross Churn Ending ARR Net Bookings
Slide 57: Building Block 2: Net Bookings/Revenue Growth
Building Block 2: Net Bookings/Revenue Growth 40% 37% 115 40% 36% Net Bookings 82 40% 34% Revenue 40% 59 30% 32% 428 42 30% 30 313 231 130 172 100 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Illustrative example
Slide 58: Building Block 2: Scenarios
Building Block 2: Scenarios Net Bookings Growth Revenue Growth 40% 40% Acceleration 30% 30% Flat 20% 20% Deceleration Year 1 Year 2 Year 3 Year 4 Year N Illustrative example: Sample company Year 1 revenue and net bookings at 30%.
Slide 59: Building Block 3: Revenue Growth/Company Size
Building Block 3: Revenue Growth/Company Size >4x Revenue Expansion by Year 5 40% >3.5x Net Bookings Growth >3x >4x Revenue Expansion by Year 5 20% 30% 40% Net Bookings Growth Illustrative example: Sample company Years 0 and 1 revenue and net bookings growth at 30%. Second year and onward assumes ne
Slide 60: The RingCentral SaaS Model
The RingCentral SaaS Model
Slide 61: RingCentral: Net Bookings and Revenue Growth
RingCentral: Net Bookings and Revenue Growth >50% Core Net Bookings Growth(1) Core Subscription 37% Revenue Growth(2) 36% 34% 32% 32% 31% 29% 29% 20% Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 (1) Core Net Bookings Growth: New Bookings less Gross Churn, excluding impact of AT&T and Q117 monetization of
Slide 62: RingCentral: Efficient Growth
RingCentral: Efficient Growth >50% Core Net Bookings Growth(1) Sales & Marketing Growth(2) 29% 30% 20% Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 (1) Core Net Bookings Growth: New Bookings less Gross Churn, excluding impact of AT&T and Q117 monetization of the base for trailing twelve month period comp
Slide 63: Growth: Mid-Market/Enterprise
Growth Mid-Market/Enterprise Channel
Slide 64: Mid-Market/Enterprise Growth Performance
Mid-Market/Enterprise Growth Performance Annual Recurring Revenue ($ in millions) 205 $200M+ (1) Runrate 75%+ Y/Y Growth 13 Q114 Q115 Q116 Q117 Q118 (1) Mid-Market and Enterprise ARR and growth rate exiting Q118, Mid-Market and Enterprise defined as 50 seats and above
Slide 65: Mid-Market/Enterprise Growth Economics
Mid-Market/Enterprise Growth Economics Cost to Book Churn Upsell EFFICIENCY STICKINESS EXPANSION
Slide 66: Cost to Book: Improvement
Mid-Market/Enterprise Cost to Book: Improvement Enterprise(1) Enterprise Very early stages Mid-Market(2) < 50 % reps ramped Productivity increasing 2015 2016 2017 (1) Enterprise defined as 250+ seat opportunities (2) Mid-Market defined as 50-249 seat opportunities Note: Cost to Book is measured as n
Slide 67: Gross Churn: Lower
Mid-Market/Enterprise Gross Churn: Lower Churn 10% Overall Office(1) Low business mortality <50% High switching costs Mid-Market/ Enterprise(2) Enhanced support (1) Overall Office includes all company segments and excludes Pro and Fax products (2) Mid-Market/Enterprise defined as 50 seats and above
Slide 68: Upsell: Higher Net Retention
Mid-Market/Enterprise Upsell: Higher Net Retention Annualized Net Retention by Cohort as of Q118 >160% Net Retention >135% Customer mix >125% Land and expand >120% >115% Product expansion 2013 Cohort 2014 Cohort 2015 Cohort 2016 Cohort 2017 Cohort Note: Chart reflects growth in total monthly recurri
Slide 69: Mid-Market/Enterprise
. - e oe a ‘ = t so v 4 q ii " ‘ + — ) = ——— A RingCentral’
Slide 70: Installed Base: Expansion Potential
Mid-Market/Enterprise Installed Base : Expansion Potential Potential Users 6x to 8x Customer Whitespace ~8-10x $1.6B-$2B Current Users Current Base +$200M 0 ARPU/User/Month ARPU Expansion $30-$35 $45-$50 Notes: Potential Users includes all employees from install base. Number of employees from Dun &
Slide 71: Growth Runway: TAM $30-35B
Growth Runway Mid-Market/Enterprise TAM $30-35B Potential Users 6x to 8x Customer Whitespace ~8-10x $1.6B-$2B Current Users Current Base +$200M 0 ARPU/User/Month ARPU Expansion $30-$35 $45-$50 Notes: Potential Users includes all employees from install base. Number of employees from Dun & Bradstreet
Slide 72: Growth: Channel
Growth Mid-Market/Enterprise Channel
Slide 73: Channel Growth Performance
Channel Growth Performance Annual Recurring Revenue ($ in millions) (exiting each period) 116 $115M+ Runrate ~100% Y/Y Growth 11 Q114 Q115 Q116 Q117 Q118 Channel ARR and growth rate exiting Q118, Channel defined as deals sourced by channel partners
Slide 74: Channel Growth Economics
Channel Growth Economics Cost to Book Churn Residuals EFFICIENCY STICKINESS COST
Slide 75: Cost to Book: Lower
Channel Cost to Book: Lower Lower Cost Direct Lead gen savings Channel Paid only on deals won Note: Cost to Book is measured as non-GAAP Sales & Marketing spend divided by New Bookings excluding monetization of the base, carrier spend and partner commissions as if under ASC 605; FY17 data
Slide 76: Gross Churn: Lower
Channel Gross Churn: Lower Churn 10% Larger customers Direct <50% Channel Reseller support Residual incentives Churn based on RingCentral Office; FY17 data
Slide 77: Net Efficiency Including Residuals
Channel Net Efficiency Including Residuals Channel Net Efficiency High Dollar Value Direct Cumulative Residuals Offset by Lower Cost to Book Lower Churn 5 Year Cumulative $ Revenue 5 Year Cumulative $ Contribution 5 Year cumulative contribution: Subscription Revenue less Subscription COGS and Residu
Slide 78: Growth, Profitable Growth, Profit
Growth Profitable Growth Profit
Slide 79: Profit
Profit
Slide 80: Key Profit Measures
Key Profit Measures Revenue Cost to Serve Recurring Gross Churn Economic Margin Margin Note: Cost to serve includes non-GAAP Subscription COGS, R&D and G&A
Slide 81: Recurring Margin
Recurring Margin 55% 52% 45% Recurring Margin(1) 34% +27 pts 28% Since IPO Pricing power 8% 5% 0% Scale Operating Margin -10% -16% Operating efficiencies 2013 2014 2015 2016 2017 (1) Recurring Margin: Subscription Revenue less non-GAAP Subscription COGS, R&D and G&A divided by Subscription Revenue
Slide 82: Recurring Margin Benchmarking
Recurring Margin Benchmarking 63% 60% 58% 58% 55% 54% 53% 51% 49% 48% 48% Avg 45% 43% 42% 41% 29% 17% PAYC NOW CRM HUBS PFPT NEWR VEEV CSOD ULTI PCTY BOX WDAY ZEN SHOP TWLO Recurring Margin is Subscription Revenue less Subscription COGS, R&D, and G&A divided by Subscription Revenue Total Revenue and
Slide 83: Economic Margin
Economic Margin 50-55% ~10%(1) 40-45% Recurring Margin Gross Churn Economic Margin (1) Gross Churn based on overall Office; FY17 data
Slide 84: Reinvesting for Growth
Reinvesting for Growth 40-45% Operating Margin 7-8% Economic Margin Innovation & New Business Note: New business is non-GAAP Sales & Marketing spend. Innovation represents concept that we use economic margin to invest in R&D. Based on FY17 data
Slide 85: Revenue Growth, Profitable Growth, Overall Profit
Revenue Profitable Growth Overall Growth Profit Growth Profit
Slide 86: Rule of 40: >$1 Billion 2020 Target
Rule of 40 Operating Margin 40% 30% 40% Rule of 40 > 40% >$1 Billion 20% 40% 2020 Target >Rule of 40 10% 40% Bias towards 0% 40% growth -10% Rule of 40 < 40% 40% +75-100 bps margin/yr -20% 0% 10% 20% 30% 40% 50% 60% Revenue Growth (YoY) Rule of 40 Defined as Y/Y Revenue Growth + Operating Margin Rin
Slide 87: Rule of 40 Drivers
Rule of 40 Operating Margin 40% 30% 40% Rule of 40 > 40% >40 20% 40% Drivers Shift Upmarket 10% 40% Reduced Churn 0% 40% Ramped Reps -10% Rule of 40 < 40% 40% >Recurring Margin -20% 0% 10% 20% 30% 40% 50% 60% Revenue Growth (YoY) Rule of 40 Defined as Y/Y Revenue Growth + Operating Margin RingCentra
Slide 88: RingCentral Competitive Advantage
RingCentral Competitive Advantage Innovation Growth Efficiency
Slide 89: We empower employees to be more productive
We empower employees to be more productive and ultimately more responsive to their customers.
Slide 90: Thank You
THANK YOU
Slide 91: Reconciliation of GAAP to non-GAAP
Reconciliation of GAAP to non-GAAP Year ended December 31, 2013 2014 2015 2016 2017 *As Adjusted *As Adjusted *As Adjusted *As Adjusted *As Adjusted Revenues Software subscriptions $ 145,995 $ 200,102 $ 271,288 $ 356,562 $ 465,254 Other 14,510 19,789 24,983 23,874 38,363 Total revenues 160,505 219,8
Slide 92: Reconciliation of Core Software Subscription Revenue
Reconciliation of Core Software Subscription Revenue June 30, September 30, December 31, March 31, June 30, September 30, December 31, March 31, 2016 2016 2016 2017 2017 2017 2017 2018 Core subscription revenue reconciliation Software subscriptions 86.1 92.0 98.4 104.1 110.9 119.9 130.3 137.0 AT&T s
Slide 93: Reconciliation of S&M Spend Growth
Reconciliation of S&M Spend Growth Three months Ended March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, March 31, 2016 2016 2016 2016 2017 2017 2017 2017 2018 *As Adjusted *As Adjusted *As Adjusted *As Adjusted *As Adjusted *As Adjusted *As Adjusted *As Adju
Slide 94: Reconciliation of Recurring Margin
Reconciliation of Recurring Margin Year ended December 31, 2013 2014 2015 2016 2017 *As Adjusted *As Adjusted *As Adjusted *As Adjusted *As Adjusted Revenues Software subscriptions $ 145,995 $ 200,102 $ 271,288 $ 356,562 $ 465,254 Cost of revenues reconciliation GAAP Software subscriptions cost of r
Slide 95: Reconciliation of Cost to Book
Reconciliation of Cost to Book 2015 2016 2017 *As Reported *As Reported *As Reported GAAP Sales and marketing 131,581 180,125 240,223 Stock-based compensation (7,200) (10,902) (16,015) Amortization of acquisition intangibles (105) (420) (180) Non-GAAP Sales and marketing 124,276 168,803 224,028 S&M