Thank you. 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 remained 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 megatrend of AI represents an even larger opportunity and a powerful tailwind for RingCentral.

We're 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 Business 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're 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 a 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 resolution 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, 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 resellers, 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, and 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're 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'm 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's 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 AI CEB, our Customer Engagement Business solution, bringing advanced call queues, SMS, live agent routing, 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're also leveraging ACE, our AI conversation expert, for rep scorecard grading and coaching. Plus, they're 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've recognized value, they've 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 multistep 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 United States 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 month, this customer achieved an over 95% accuracy rate in end-to-end workflow completion.

We're also delighted to see our existing customer Destination Pet, a nationwide pet care provider, extend their use case of our CAI. They started with ACE to analyze call transcripts and identify opportunities to improve service, and recently expanded to AIR Pro to automate workflows around scheduling appointments, sending confirmations, and updating records for customers across locations.

This supports Destination Pet's goal of capturing every opportunity, improving customer experience, increasing revenue, and lowering labor costs. When our solutions work together, as they do for these customers, it creates a virtuous loop where it turns conversation context into action.

That's the value of RingCentral's agentic voice AI. It's changing the game for businesses, and that is something we're really excited about.

Speaking of changing the game, today we announced the expansion of our decade-long partnership with Golden State Warriors to be named the official agentic voice AI platform for fan engagement. Together, the two organizations will work to elevate fan experiences from ticket inquiries to game day questions and ongoing engagement.

We continue to expand our agentic voice AI solutions to more businesses around the world through a network of 17 global service providers. This quarter, we expanded our partnership with BT Business.

This expansion enables BT customers to seamlessly layer native, intelligent automation over their existing telephony setups. Together, we're empowering UK organizations to capture lost revenue and drive operational efficiency.

Additionally, we added two new partners to our GSP portfolio. Digital Island, our first partner in New Zealand, will sell, implement, and support our agentic voice AI.

In Italy, Allnet.Italia, our first partner there, will bring RingEX with the full suite of RC AI agents onto its network. These partnerships are key to our overall go-to-market strategy and international reach.

In closing, our customer wins show our vision in action: humans and AI working together onto one platform to turn conversations into better outcomes. With growing AI adoption and expanding global reach, we're bringing that opportunity to more businesses around the world.

With that, I will turn it over to Vaibhav.

Thank you, Kira, and good afternoon, everyone. Q3 was a solid quarter with key metrics above the high end of our guidance, reflecting continued execution against the financial framework and commitments we have outlined.

Our core business remains resilient, with growing contributions from our AI portfolio. Just as importantly, we are expanding margins and free cash flow, reducing SBC, and making meaningful progress towards our target of 20% GAAP operating margin and steady-state SBC of 3% to 4% of revenue.

We also reached an important milestone, reducing gross debt to below $1 billion as of now, significantly strengthening our balance sheet while continuing to return capital to shareholders through share repurchases and dividends. This combination of growth, improving profitability, and disciplined capital allocation is translating into stronger free cash flow per share growth.

With that context, let me turn to our third quarter performance. Starting with growth, subscription revenue was approximately $653 million, up 6% year-over-year, while total revenue was approximately $676 million, up 5.9%.

Underlying customer trends remain healthy, with steady new customer additions and monthly net retention above 99%, underscoring the mission-critical nature of our platform. Notably, our RC AI portfolio continues to gain traction, which reinforces the role of AI not only as an incremental growth driver, but also as a meaningful contributor to strong customer economics.

We believe these trends, combined with our established competitive position, provide a solid foundation for durable growth over time. Turning to profitability, we delivered another quarter of record GAAP and non-GAAP operating margins alongside further reductions in SBC.

Subscription gross margin remains strong at above 80%. Non-GAAP operating margin reached 24.7%, up nearly 200 basis points, and SBC as a percent of revenue declined 50 basis points, reflecting our continued discipline around equity compensation.

The combination of stronger non-GAAP margin and lower SBC drove a record GAAP operating margin of 8%, an improvement of 320 basis points. GAAP EPS was $6.50 per share, which included a non-cash benefit of $545 million from the release of a valuation allowance against certain domestic deferred tax assets.

This adjustment was driven by an improvement in GAAP profitability. The valuation allowance release had no impact on non-GAAP results, and we do not expect material changes to our near-term cash taxes as we continue to utilize deferred tax assets.

Excluding this benefit, diluted EPS was 28 cents, an improvement of 47% year-over-year. Non-GAAP EPS increased about 18% to $1.33.

Our margin expansion trend is driven by multiple structural drivers, such as strong gross margins, operating leverage, disciplined cost management, broader internal adoption of AI, and a focus on our highest-return investments. Together with SBC reduction, these drivers reinforce our confidence in long-term sustainability and durability of margin expansion while investing in growth.

Turning to cash flow, we generated $157 million in free cash flow in Q3, up 21% year-over-year. Our recurring revenue model, strong gross margins, and improving operating efficiency continue to translate into substantial cash generation.

Reflecting this performance, we are raising our full-year free cash flow outlook to $625 million at the midpoint, representing nearly 24% of revenues. This represents over $7 of free cash flow per share, up about 23% year-over-year.

We believe the durability of our recurring revenue base, AI tailwinds, structural margin expansion, disciplined capital allocation, and continued reduction in SBC provide a strong foundation for sustained free cash flow generation over time. Turning to capital allocation, in Q3, we prioritized repayment of our highest-cost debt, the 8.5% high-yield notes that became callable, reducing gross debt by just over $110 million and bringing net leverage to 1.3 times.

In fact, as of today, our gross debt is now below a billion dollars. As a reminder, there are no debt maturities until 2030, and we have $305 million of undrawn credit capacity.

We also continue to return capital to shareholders, spending approximately $18 million on share repurchases during the quarter and paying a dividend of 12.5 cents per share. Diluted share count declined about 5% year-over-year to approximately 87.7 million shares.

We have over $300 million remaining under our share repurchase authorization. Our substantial cash generation and our stronger balance sheet gives us the flexibility on capital allocation while maintaining a consistent focus on long-term value creation.

With that, let me turn to guidance. For fiscal 2026, we are raising subscription revenue to be $2.563 billion to $2.569 billion, representing growth of 5.6% to 5.9%; raising total revenue to $2.650 billion to $2.657 billion, representing growth of 5.4% to 5.6%; GAAP operating margin of 9.2% to 9.6%, expanding by 460 basis points; raising non-GAAP operating margin to 24% to 24.2%; raising free cash flow to $620 million to $630 million, up 18%; SBC in the range of approximately $240 to $245 million, representing 9% of revenues; fully diluted share count of approximately 87.5 million shares; raising non-GAAP EPS to be between $5.07 to $5.12, up about 17%.

This results in free cash flow per share of $7.09 to $7.20 per share for the year, up 23%. For Q4 '26, we expect: subscription revenue of approximately $653 million to $659 million; total revenue of approximately $673 million to $680 million; GAAP operating margin of 13.3% to 14.7%, up 740 basis points; non-GAAP operating margin of 25% to 25.5%, up 250 basis points; non-GAAP EPS of $1.32 to $1.37, up 14%; fully diluted share count of approximately 89 million shares.

As we look ahead, our execution is delivering tangible results, with a durable core business, growing momentum across our AI portfolio, and continued improvement in profitability and cash generation. Together with a stronger balance sheet and disciplined capital allocation, we believe these fundamentals position RingCentral to compound free cash flow per share and drive meaningful long-term shareholder value.

With that, let's open the call for questions.

Great. Thank you so much for the question.

Congrats on the quarter. Subscription revenue growth has been modestly improving for several quarters now, and the beat was more pronounced in Q3.

Could you just help us unpack what drove the upside in the quarter? Curious if there were any specific drivers to call out, whether it was any stronger AI-driven demand or potentially starting to see some easing of those enterprise renewal headwinds you guys previously discussed.

Thanks.

Thanks, Elizabeth, for the callout. Look, the beat was driven by broad-based execution across the board.

We had a solid quarter. We delivered results on both the top line and the bottom line.

Fundamentally, we are executing with discipline, delivering consistent results on all our commitments. As you called out, we are showing a sustainable and a stabilized growth profile, and that's what's getting reflected in our full-year guide, basically reflecting the confidence in the underlying growth drivers, particularly AI.

On the top line, our core business continues to be a scaled recurring revenue business that is durable, supported by strong retention metrics and steady customer demand. Usage on the platform continues to be healthy, and it just underscores the mission-critical nature of our solutions.

On top of the core, we are seeing growing contributions from our AI-led products. As we called out in our prepared remarks, adoption is strong across the board.

We are seeing strong customer engagement. Customers who are using one-plus paid AI products are now approaching 15% of ARR, doubling year-over-year.

Within these cohorts, very importantly, we see strong customer economics in terms of increased ARPUs and over 100% net retention rate. Net-net, it reinforces both the monetization opportunity as well as it demonstrates the stickiness of the base.

Very importantly, we are not only growing, but we are also very focused on the quality of the growth. We delivered record GAAP and non-GAAP operating margins and a strong free cash flow profile.

Net-net, we have a recurring model. We have a diversified customer base, from small to enterprise customers.

Our solutions are mission-critical. We have a deep competitive moat that's built on platform scale, the depth of our product, and differentiated GTM.

These fundamentals are, frankly, contributing to the durability and the sustainability of the model and our ability to expand both margins and free cash flows.

Great. Then just as a follow-up, I wanted to hit on capital allocation.

It was great to see that the gross debt target was ahead of schedule, and you have free cash flow growing faster than revenue. When we think about the set of opportunities, how should we think about the case for increasing any sort of organic investment to go after AI and contact center, relative to pursuing acquisitions or prioritizing further capital returns?

Hi, Elizabeth. Vlad here.

Look, this question comes up fairly regularly. Look, fundamentally, we are a very tech-heavy organization.

We view ourselves as an innovator at heart. I think, as you all know, my background is quite technical.

Many of the original contributors, including the CTO, is still with us, which I think is not that common. We feel we have a lot of talent now, yeah, in-house.

Our commitment and spend on product technology continues to be quite healthy, over $0.25 billion per year. We can do a lot ourselves.

Now, having said that, we're always looking out opportunistically. People are calling us.

We do have an M&A function in-house, and we are evaluating multiple opportunities always. If things clear the bar, we consider them and then we move forward.

I'm not going to tell you that we will never do a sizable acquisition, but I'm also saying that we're very confident in our ability to deliver on our roadmap using capacity we have at hand. We'll just have to see what the future brings, but as you can see, for now, we're able to deliver the results without having to go outside.

Great. Thank you.

Yeah.

Thank you. Thanks for taking my question and congrats on a good quarter.

Just wanted to ask you about the new product ARR that you guys talked about, $100 million run rate exiting '25. How fast that's growing in Q3, and how should we think about that exiting this year?

I have a follow-up.

Hey, Siti. Thanks for the question.

This is Vaibhav. In terms of the ARR for new products, the metric we provided this quarter was customers adopting at least one paid AI product, or as we call it, RC AI.

That's approaching 15%, or $400 million, and it's doubling year-over-year. As I mentioned in my previous comment, the customer economics there are very healthy.

ARPUs are higher. Net retention rates are above 100%.

The reason that we are focused on that metric, and we manage the business, frankly, based on that metric is it's the clearest proof point of AI adoption and penetration, both into the base as well as with new sales. What that metric is clearly showing is that there is healthy customer demand.

Customers are moving beyond experimentation. They're getting tangible ROI benefits from the use of AI, and it's leading to the base being more sticky.

Over time this metric has been continuously growing, and we provided an update on this every quarter. Our expectation is that as adoption continues to grow and as customers adopt more AI products, that this metric will continue to grow.

That's great. Just on the margin side, I think what's impressive is your subscription margin still holding well, despite AI investment.

Can you help us how should we think about the gross margin as you ramp on AI?

Yeah. Look, overall gross margins, as you called out, are strong at 80%-plus.

Our gross margins on AI products are generally holding in line with the corporate average as well. Really we are optimizing with two levers there.

One is pricing, and the other one is costs. On the pricing front, relative to AI, we are being very deliberate in our pricing strategy.

The idea is to kind of charge customers for the value and the usage that they receive. Customers are willing to pay because they're getting tangible ROI benefits, both from a revenue standpoint as well as a cost avoidance or cost saving standpoint.

The uplift is indicated in the metric that I just talked about. In terms of the costs, we are optimizing against model selection, call it inference efficiency, and infrastructure.

In terms of inference, as it's getting better with different models, the price per unit is coming down. In terms of model selection, we are currently using frontier models, and over time, we will benefit from the use of open-source models.

A very important point is that these AI products are being delivered through the same platform and same single GTM engine, and therefore we get very good incremental unit economics. I think overall our expectation is that gross margins will continue to hold at around 80%.

Thank you.

Hey, guys. Thanks for taking the questions.

I wanted to hit on the AI adoption a bit. I'm curious if there's any part of the customer segment, whether that's enterprise or US or SMB, that's really kind of embracing some of that portfolio.

Where do you think that next unlock may come as we think about that expanding beyond the mid to high teens number you just gave us?

Hi. This is Kira.

We see adoption across all segments from enterprise to SMB customers for AI and for all our products for AIR, ACE, and AVA. Brian, we were happy to see that it shows adoption is across the board.

What was the second part of the question?

Oh, just as we think about where the incremental adoption is coming from, is there a certain part of a geography or customer base, or maybe even thinking about some partner channels, where you could see that leverage kind of expanding beyond the number you just gave us?

I can take that. Vlad here.

Very good question. Look, we've been on record with what we call golden verticals, which is fundamentally healthcare and financial services.

As we continue, we are seeing more AI within those sectors that were stronger for us to begin with. Again, as we've been saying for quite some time now, our best traction is in consumer-to-business interactions.

Most are by voice and text, and we are very strong in both of those channels, moving billions and tens of billions of minutes through our platform. That is as far as verticals is concerned.

On the partnership side, it's also very interesting because we are seeing increasing adoption of our AI portfolio by the partner community, and in particular, global service providers. There were some releases relatively recently, for example, with British Telecom, some others.

As a maybe word of caution, when we say that it's still pretty early, very early with AI in general for this type of an application, it is yet earlier through the channel, and in particular with GSPs. They just move a little slower, but once they move, they move with very strong force.

We're pretty optimistic that as we get our formula down, we should be able to propagate it through our channel, which, as is large and unique.

Thanks, Vlad. Vaibhav, maybe just a follow-up.

I know the margins have been ramping us ramping up. Can you remind us just from a GAAP perspective, how are you thinking about goals like stock-comp and targeting that, and and how should we be thinking about kind of the non-GAAP and GAAP operating margins going forward?

Thanks, guys.

Thank you, Brian. Look, we are very pleased with the work that we've done on both operating margins from a GAAP standpoint as well as a non-GAAP standpoint over the years.

We laid out a medium-term target of reaching 20% in GAAP operating margins, and we remain confident in our ability to get there. The proof point there is if you look at our guide for 2026, we are expanding GAAP operating margins by about call it 400 basis points or so.

About half of that is coming from improvements in non-GAAP operating margins, and the other half is coming from SBC. Call it 200 basis points each.

If you were to project these out into the outer years, that's how we remain confident in our ability to reach the 20% target. In terms of the non-GAAP operating margin, look, we have a lot of structural drivers behind that.

We have a scaled recurring revenue model that's producing gross margins at 80%, which is industry-leading. We inherently get a lot of leverage in our operating model, and that's coupled with the discipline and cost across the board that we have, it is resulting in material improvements in non-GAAP operating margins.

Then on the SBC side, we are continuing our discipline in terms of managing grants, managing SBC, and what's flowing through the SBC model now is also the prior grants as well as the new grants, and as the impact of the prior grants that were given at higher prices, as that kind of tails off, that gives us the confidence to continue to reduce SBC over time. That's where we've laid out a target of getting to 3% to 4% in the next three to four years.

Net-net, it's a combination of expansion in non-GAAP operating profit as well as reductions in SBC, that allowed us to kind of make those targets, and we remain on track to achieve that.

Thanks, guys.

Great. Thank you for taking my questions.

Maybe the first one I have, if you think about, I guess the trajectory of subscription revenue growth into '27, I know you haven't guided, but how should we think about I think distinguishing between I think the underlying performance of the core UCaaS business versus how much of that is coming from newer AI, some of your consumer customer engagement products. Just trying to understand how much growth is dependent on upsell, cross-sell of AI versus stabilization in your core business.

We've been sharing this before that it's roughly 50/50. 50% from the base and the other half from new customers.

I think we will always also saying that as of new customers, also about half of them take AI and the other ones do not yet take AI, but they may well be upgraded or cross-sold to AI over time. For now, those are the metrics.

I'm sorry, go on, please.

Peter, just to add on that, I think what Vlad was mentioning is the contribution on bookings from the AI product. In terms of 2027, look, we're not providing formal guidance here today, but I think the underlying growth drivers would be similar to what I talked about before, which is the core business continues to be durable.

Margins are high. It's a recurring revenue base, and the retention metrics there are strong.

AI will be a layer on the top, and that is growing rapidly today, and it's becoming an increasing contributor to growth. The thing is that it's growing off a smaller base relative to the size of the overall subscription business.

Net-net, we are seeing strong adoption to Vlad's point, and customer engagement across the platform. We talked about the margin expansion, the progress there in free cash flow, and we expect to continue to kind of do a lot of the same there.

All right. That's a good segue.

My another question is, AI receptionist has gained a lot of traction. How do you think about the opportunity, I guess, then to expand monetization within that installed base?

What are other avenues, usage or use cases, pricing mechanisms, that you think you could use with an AI receptionist or even AIR? Thank you.

Thanks for the callout on the momentum in AIR. It now has over 22,000 customers.

The reason it's kind of seeing this momentum is the ROI that we hear from customers is real. Customers are able to address missed calls and they're capturing more leads, which is resulting in more revenue.

From a pricing standpoint, Peter, it's usage-based pricing. The more customers use the product, the more they consume it, it kind of contributes to revenue.

It's currently selling I think in a big part in our small business segment, and over time, it's also kind of going upmarket to the mid-market and the enterprise customers. That's one kind of way to think of it.

In terms of the use cases, customers are looking for more and more AI agents. AIR is a form of an AI agent that helps customers address missed calls.

Over time, the idea is for AIR to kind of handle more sophisticated use cases and workflows over time and integrate into more kind of platforms and workflows to do more and more, if you will.

Just to chime in, as we mention in our prepared remarks, we have AIR Pro that addresses more complex use cases. Those more complex use cases usually have more workflow attached to them and take on sort of more turns in a conversation, they're more autonomous.

The big thing for our AI, whether it's AIR, AIR Pro, any of our products, that we think of as we think about, we think about human-in-the-loop. We think about handling as much as possible by AI, but also making sure that for judgment, sentiment, or more complex questions and required, those are handled off and to human being, and then they work together.

Preserving that context, our customers are telling us is very important. We provided some of those scenarios in our prepared remarks of where customers are finding that is especially valuable to be able to do this warm handoff with context, and if necessary, take it off from human being then back to AI, where you kind of have this virtuous continuous loop.

Those create additional use cases for us, and we see those as expansion opportunities as customers get more and more comfortable adopting AI for what initially we went to market with this AI receptionist, no missed calls, which continues to be a big driver because businesses do miss calls, miss opportunities, but then it gets into handoffs within the business and more involved use cases, such as handling more complex billing inquiries, returns, appointment settings that require deeps into databases, knowledge bases. Those are being now handled with AIR Pro, and the use cases will continue as we see from our customers sort of will continue to go they're almost growing think of it as incrementally, one by one, as customers are realizing value with our products.

Great. Thank you very much for the questions.

Thanks for the question, and this drafts off the last question. Vlad, I thought your comments on the voice AI potential for Ring was interesting.

As AI agents become more of the inbound call volume for businesses, how do you think RingCentral AIR benefits from businesses wanting an AI line of defense from inbound calls from other AI agents? AIR Pro seems like it could fit here, let AIR talk with a muse agent or another voice AI agent, and then if it's human calls, then you can flip it over to where another human can chat.

How do you think the soon-to-be increase in voice AI means for the demand for your AIR products? Thanks.

Yeah. If I understand the question, look, there are two fundamental growth drivers for RingCentral.

One is more calls, and the other one is more AI. They tend to go together, there's the good news.

The more calls through the system, the more AI we have a chance to apply. The larger the percentage of AI-assisted calls on the network, the better off we are because, obviously, we're able to deliver better value, but also extract better value for intelligence and insights that AI brings.

They work together. I can tell you that our traffic growth has been strong, but linear.

Our AI growth has been explosive, obviously. Overall penetration of AI and AI-answered calls on our network is still very, very small percentage-wise.

We think that there is very meaningful opportunity to simply, if you will, in the very simplest terms, have our customers assign AI to more of their traffic. This is very much front and center, what our teams are working on, as well as, obviously, increasing overall traffic, adding new logos, better engagement with the base in general.

Hey, guys. Wanting to work off of the last couple of questions here.

Really what I'm trying to understand is what you guys view as the opportunity in terms of the ability to cross-sell CEB, ACE, and AIR, and in terms of where we could see that penetration go over the next two, three years. You kind of alluded to this in the one answer, but how does penetration differ between sort of major customer accounts versus the more SMB commercial customer base?

Thanks, guys.

CEB, I'll start with the second part of the question. CEB is fundamentally a smaller business product because it is basically an informal contact center, and larger enterprises tend to have formal contact center, they would be more ripe to buy our RingCX product, which is a full-up contact center.

Okay? Now, how do we deliver to them?

Each and every way we can, but fundamentally, certainly our sales teams are well aware. Look, it's been growing really, really well for us.

That means that we have lots of satisfied customers and lots of reference cases. Our sales teams are able to leverage that.

Of course, we are doubling down on product-led growth, PLG, and that is showing results as well. We're also working on specifically explaining to customers what CEB can do for them, and in as much as possible, we try to make them understand that RingCentral does not need to be thought of as just a cost center, but we can actually help them generate revenues, capture more leads, do better leads processing.

CEB does that, and in particular, the flavor of CEB that we sell with AI. That really is our most explosive new offering this year.

Hey there. Thanks for taking my question, and congrats on the good quarter and guidance.

Just wanted to touch base quickly on two of your partnerships. NICE obviously began reselling RingEX in July.

Any early pipeline wins to share to call out there? Then also, could if you just touch base on the ACO transition, if you're seeing any increased churn as you go through that transition, that would be great.

Thanks.

Yeah. I think second question is no.

It was very orderly. Remember, those customers, their experience does not change.

It's just a small tweak in the logo in the upper left corner, and that's about it. Not about it, that is actually.

There is no friction whatsoever, I'm not aware of any churn related to that. As far as partnerships in general, yeah, look, the one with NICE, that's kind of new, and again, it's early, and remember, they are very much high-end enterprise.

We don't expect many logos there, just because they don't have that many logos, basically, but we are hoping for traction with some whales through there. Rest of the channel, it's performing.

Look, it's all getting up, and as various folks are doing channel checks on the industry and us in particular. Signs are pretty up at this point.

I think people understand that voice is here to stay in business, and as long as voice stays in business, Ring stays in business, because we are the voice leader.

Thank you very much. Related to the NICE partnership, what's your plan for RingCentral Contact Center when the one-year NICE extension ends?

It seems to me that one year is rather small. Why wouldn't you have a three-year extension or something like that?

First, I'm not sure where you got the one year from. I don't think that we've ever disclosed any specifics.

Be that as it may, and I'm not suggesting this is one year, by the way, but in any case, it's an extension to the whatever term was there to begin with, we still have very much multiple years left on this contract. To fast-forward it a number of years, look, the number of things.

This partnership could continue being extended, as it has been for the last, I don't know, 12 years. Also very importantly, our RingCX product is getting stronger and stronger.

We believe that we have a very robust offering already today with RingCX for the mid-market, and moving forward, we think that it will be quite viable and attractive for the larger enterprise as well, especially if you take into account the fact that the world is changing and that these gigantic call centers that traditionally were utilized by larger enterprises, there the AI will bend the situation there for sure. While smaller businesses, they very much prize themselves and differentiate on their ability to answer customer inquiries with a human being.

That is, at least for the time being, basically regardless of how good AI gets, because that is part of their service that they provide. Larger enterprises, it is a cost center, and AI can do a very good job there, and we're seeing that as well, in our own case as well as through our customers.

Net-net is we're very confident that this base will be taken care of, well taken care of, and increasingly so with AI involved, whilst still keeping human-in-the-loop.

Hi. Thanks so much for taking my question, and sorry for any background noise.

If I look at the 4Q subscription revenue guide, it's a bit stronger than what we saw in 3Q and in 2Q. It seems like there's a little bit more of an unlock or an uptick in growth that you guys are seeing.

Could you just unpack for us what's driving that? Is that more stability with the UCaaS business?

Now we're starting to see the strength in AI revenue start to show through? Any contribution from the NICE partnership?

Maybe you could just unpack that as we think about that potential momentum going into next year. Thanks.

Thanks, Taylor, for the question. I think it's kind of most of what you said.

Look, our core business continues to be durable. Retention metrics there are strong, and it's a recurring revenue base for us, and as Vlad said, the usage metrics on the platform are very healthy, which underscore the mission-critical nature of our platform.

Then on top of the durable core, AI is continuing to add more contributions. It's growing off a smaller base, but it's already additive, and as it becomes a larger part of the mix, it's contribution to the overall number will grow over time.

I think it's a combination of a durable core, growing contributions from our AI products, strong retention are kind of all the drivers for growth. Then in addition to that, I called out, we are growing, and at the same time, we are also expanding margins and free cash flow in a very meaningful way.

We are being very disciplined in terms of how we are using that money and allocating that capital. All in all, the goal for us is to be a compounding free cash flow per share story, and our free cash flow per share that we've guided to this year is over $7 and growing faster than free cash flow at above 20%.

I think that's how I would characterize kind of the quarter and things kind of going forward.