Good afternoon, and welcome to the RingCentral 3rd Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Stephen Horwitz, Vice President of Investor Relations. Please go ahead.

Good afternoon and welcome to RingCentral's third quarter 2025 earnings conference call. Joining me today are Vlad Shmounis, Founder, Chairman, and CEO, Kira Makagong, President and Chief Operating Officer, 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. 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.

Thank you, Stephen. Good afternoon, everyone, and thank you for joining our third quarter earnings conference call. Let me begin by welcoming the talented people from Community WFM to the RINC Central family. We have now added AI-driven workforce engagement management capabilities that strengthen our RINC-CX contact center solution. This also lays the foundation for a new standalone product line. We delivered another strong quarter in Q3 with subscription revenue growth at 6% year-over-year. These results reflect continued execution in our core business coupled with strong progress from our AI-led new product portfolio. In fact, our pure AI ARR is growing in strong double-digit rates sequentially, while also making meaningful contributions to overall ARR from these AI-enabled customers. Importantly, we are also delivering expanding margins, meaningfully lowering stock-based compensation, and generating strong free cash flows. This strong performance is rooted in our leadership in voice, the most mission-critical mode of communication for businesses. While voice continues to be an important means of intercompany communication, it is critical for consumers engaging with businesses, or B2C. This is particularly true in our top verticals, such as health care, financial services, retail, and professional services. Revenue from these verticals represent over half of our entire business. As a further proof point, overall voice usage on our platform remains robust and is growing in double digits. In short, voice remains a critical modality for business communications as missed calls result in lost revenues, missed opportunities, or worse. RingCentral has built a $2.5 billion business from ground up by providing a robust, global, secure, and reliable voice-first cloud communications platform that is trusted by over half a million businesses with tens of billions of minutes of annual use. RingCentral has been at the forefront of moving business communications to the cloud. If you think about our initial offering at RingCentral 1.0, it was about enabling digital transformation for businesses worldwide by transitioning their business communications from on-prem to the cloud. By leveraging our voice-first global, secure, and reliable cloud business communications platform, we have built a strong leadership position over the last two decades. This remains to be the case to this day. In the next phase of our journey, which I call RingCentral 2.0, we built on this foundation to become a multi-product platform provider. Many customers prefer to purchase both their business communications and contact center solutions from the same vendor. Increasingly, organizations also need seamless interaction between contact center agents and other company employees to resolve customer inquiries. RingCentral has purpose-built solutions to meet these needs. There are situations where consumer inquiries are handled by employees who are not dedicated contact center agents. To support these scenarios, we enhanced RingEx with call queues, analytics, and other contact center-like functions. This has been extremely well received, with over one-third of our overall inbound traffic now being consumed by such informal contact center use. As for dedicated customer engagement needs, we've introduced our own native AI-first contact center solution, RingCX. It is a fully integrated offering that's intuitive to use, easy to deploy, and is infused with AI from the start. This product has been well-received with strong traction and double-digit growth. And now we're entering the era of RingCentral 3.0. We are innovating rapidly with the majority of our quarter billion dollar annual spend on innovation is now being dedicated to our new AI-led product. We are now expanding and extending our platform by adding a host of voice-first AI agents, as well as infusing AI across our entire product portfolio for a better customer experience and engagement. Why are we well positioned to win in this new AI era? RingCentral is the first point of contact between businesses and their consumers. This puts us in a unique position to deploy AI agents from the get-go, thus giving us a natural advantage as we lead the shift to intelligent business communications via agentic voice AI. To double-click, our agentic AI product portfolio covers every phase of the customer journey, before, during, and after an interaction. For before the interaction, our air receptionist, or Air, handles inbound calls, routes them intelligently, and automates routine interactions before they reach a human. Since launch, Air has seen strong early traction and is growing rapidly. For during the interaction, today we announced our new AI virtual assistant, or AVA. It's an AI agent that helps employees and agents in real time, surfacing insights, summarizing key points, and automating tasks to enhance productivity. And for after the conversation, our AI conversation expert, or ACE, formerly known as RingSense, analyzes calls, extracts insights, and provides actionable intelligence. is growing at a healthy double-digit pace and is helping customers understand and improve their customer experiences. Together, these AI-driven solutions, Air, Ava, and Ace, complement RingEX and RingCX and are already contributing meaningfully to growth. We're investing significantly with over 50% of our approximately $250 million R&D spend now focused on our new product portfolio. And we remain on track to exceed the $100 million in ARR from new products by the end of 2025. Adoption of our new AI-led products is broad-based across various customer cohorts, from small businesses to large enterprises. Our GSP partners are also beginning to sell these new offerings, expanding our reach and accelerating adoption. Importantly, we have recently expanded our partnership with AT&T, which began offering AIR to their customers, highlighting our shared commitment to intelligent communications experiences. Our small business and GSP businesses together now represent over $1 billion in ARR and continue to grow in double digits, with strong unit economics and increasing adoption of our AI portfolio. In summary, we are executing well across the board. Our core voice platform remains durable and mission-critical, and we are expanding into new high-growth markets through RingCX and our AI-led product suite. We've evolved from a UCAS leader into a multi-product, AI-powered communications platform with multiple growth levers. We are excited about the road ahead as we enter the era of agentic voice AI, driving smarter, more efficient communications for our customers and sustainable, profitable growth for our shareholders. I want to thank our employees for their dedication and focus on driving innovation and our customers for trusting us to be the voice of their business. With a tenured and talented management team in place, a strong commitment to innovation and a loyal and growing customer and partner base, We are well-positioned for this next phase of our AI-led evolution. With that, I'll turn the call over to Kira to tell you more.

Thank you, Vlad. I'm looking forward to meeting many of you at our investor product briefing on Wednesday. It's a great opportunity for you to see our AI portfolio in action. I'll start by giving you an update on my strategic priorities. First, build upon our leadership in business voice with agentic voice AI. As Vlad noted, Green Central is uniquely positioned here. Voice is mission critical, and it is the richest source of business intelligence. We're turning voice data into insights that elevate customer experiences, automate work, and drive faster outcomes. I'm proud of how quickly we're executing against our agentic AI roadmap, delivering value throughout the entire conversation, before, during, and after. For before the conversation, we're seeing fast adoption of GreenCentral AI receptionist or AIR. Since our launch earlier this year, we now have more than 5,800 paying customers and over 80% increase quarter over quarter. AIR ensures businesses never miss a call or an opportunity. And today, we rolled out new features in AIR, including lead capture, enhanced appointment settings, and contextual handover. We're thrilled to see that AIR is having a material impact on our customers' businesses. For example, with AIR, Televera Health now answers 100% of their calls and achieved a 15% increase in monthly appointment volume within just the few first months of deployment. This resulted in a $200,000 uplift in monthly revenue, providing meaningful ROI. For during the conversation, today we unveiled RealCentral's Next Generation AI Virtual Assistant, or AVA. For example, Trinity Logistics, a leading freight and logistics provider, is saving 30 seconds to a minute per call by using AI to capture real-time notes and action items from every customer interaction. This frees up their salespeople to focus on building relationships and driving new business. For after the conversation, AI Conversation Expert, or ACE, formerly known as RingSense, unifies customer and employee conversations into one powerful analytics dashboard. We now have more than 4,300 customers using it, up from approximately 3,600 customers, reflecting sequential solid growth. Our customers are using it to coach their agents and improve efficiency. For example, Modisoft, a point-of-sale cloud software company, is using ACE to gain clear visibility into customer sentiment, behavior patterns, and emerging trends. insights that they did not have before. Ace enables them to turn voice data into business outcomes. AIR, AVA, and Ace, together with our core RingX and RingCX products, create a fully integrated, agentic voice AI workflow before, during, and after every interaction. This is the power of our unified AI-first platform.

The second priority, expand them through our multi-product portfolio.

We're seeing strong traction with RingCX. Customers value its simplicity, omni-channel flexibility, seamless integration with RingAX, and a rich set of AI capabilities. As Vlad said, this product is enjoying double-digit sequential growth and makes up nearly half of our $1 million plus TCB deals this quarter. A strong lend and expand motion of AI-first RingCX with RingEX is demonstrating our ability to increase our share of wallet. A good example of an expansion deal is one of Canada's largest insurance companies who was already using RingEX and chose to add RingCX with various AI modules. Together, these solutions are expected to improve outbound performance, reduce agent turnover, and ultimately contribute to their revenue growth as they transform their contact center operations. Today, we also announced the integration of community WFM into our workforce engagement management suite, a major step toward helping organizations optimize contact center performance. By harnessing AI across three key pillars, Asian performance, customer sentiment, and operational planning, we're empowering smarter, more efficient operations. These capabilities are available as add-ons for the core RingCX package and now included in the new RingCX Advanced and Ultra packages.

We're expanding our core UCAS offerings.

As Vlad said, a meaningful portion of RingEx inbound call minutes and SMS usage are used for customer engagement. To capitalize on this, we are introducing new paid add-ons for enhanced call queues and advanced SMS. And we're bringing together RingEx and these add-ons in one simple integrated package called Customer Engagement Bundle. This expansion opens a new growth avenue and extends our total addressable market. Now, on to my third priority. We're harnessing AI across our organization to work smarter, move faster, and do more with less. While we're using a number of third-party tools to improve efficiency across all departments, We're particularly happy with adoption and internal use of our own products within our company. We call it RingCentral on RingCentral.

Let me give you some examples.

We were able to transition our 2,000-plus customer support agents to RingCX and now have deployed Community WFM for workforce engagement management to this entire organization in just a few short weeks. With AI quality management, we're driving faster resolution throughout automated coaching with nearly 100% of calls being scored. Combined with AI agent and supervisor assist capabilities, we're reducing average candle time by 15%. In sales, Ace has improved sales rep performance and customer satisfaction. Ace now coaches 100% of our prospect, partner, and customer calls in North America. This drop fails quota attainment by 10%. These operational gains are translating into greater scalability, workforce efficiency, better customer experiences, and improved margins. In summary, our multi-product AI strategy is working. We're delivering measurable customer value, expanding our market opportunity, and improving profitability. I'm incredibly proud of our teams and excited for what's next. With that, I'll hand it over to Weibov.

Thank you, Kira, and good afternoon, everyone. U3 was another solid quarter with disciplined execution across key metrics and the three priorities I outlined last quarter. First, driving sustainable, profitable growth while investing in new product innovation. Second, expanding margins and free cash flow through disciplined cost management. Third, executing on capital allocation strategy focused on investing in innovation, paying down debt, returning capital through share repurchases, and reducing stock-based compensation and dilution. Together, these priorities are aimed at expanding free cash flow per share and positioning RingCentral for durable long-term value creation. With that, let me turn to our third quarter performance. Starting with growth, total revenue was $639 million, up 5% year-over-year, and at the high end of our guidance. Subscription revenue grew 6% to $616 million, reflecting the durability of our core business and increasing traction from our AI-led products. As Vlad highlighted, we have multiple growth levers across the business. We delivered continued growth in our core business with healthy new customer ads and stable over 99% monthly net retention rates. As to our AI-led new products, we are growing in strong double digits sequentially, putting us well on track to exceed $100 million in ARR by year end. In keeping with our philosophy of profitable growth, we drove record margins and free cash flow per share. This was made possible as we continue to drive efficiencies with hiring discipline, extended use of offshoring, vendor consolidation, and increasing use of AI internally. Subscription gross margin remains strong at about 81%. Operating margin was 22.8%, up 180 basis points year over year and above the high end of our Sales and marketing expenses, the percent of revenue improved 140 basis points, driven by ongoing go-to-market efficiencies, non-GAAP EPS increased 19% to $1.13 per diluted share. Reducing SPC remains a key focus. Through the first three quarters of 2025, new share grants declined year-over-year as we are able to achieve more with less with offshoring and use of AI. As a result of this, we are updating our 2025 SPC outlook to 11% of revenue, a 350 basis points improvement year-over-year. Our annual grants this year are expected to be about $150 million, or 6% of revenue, which we expect to further improve upon in the years ahead. We expect SPC as a percent of revenue to trend lower to these levels over time as the older grants roll-off. With a reduction in SVC and improved profitability, we delivered another quarter of positive GAAP operating and net income, which we expect to continue. Moving to free cash flow, we generated $130 million of free cash flow in Q3, up 23% year over year. This reflects ongoing efficiency gains and disciplined working capital management. As a result, we are raising our full-year free cash flow outlook again to be between $525 and $530 million, which represents over 30% year-over-year growth and a free cash flow margin of 21%. Lower SVC, coupled with our share repurchase program, is driving a meaningful reduction in share count. We now expect fully diluted share count for 2025 to be approximately 92 million shares, returning to 2020 levels. We are optimistic of driving this further down in the years ahead. We now expect 2025 free cash flow of over 570 per share, which is an increase of about 35% year over year. We are delivering strong and compounding free cash flow per share and driving long-term shareholder value. Moving to capital allocation, following the framework I outlined earlier, year-to-date we have paid down $275 million of debt and repurchased $200 million of stock. We also acquired Community WFM, which is consistent with our strategy of accelerating innovation by adding capabilities that enhance our product portfolio. During the quarter, we expanded and extended our credit agreement. The facility now totals $1.26 billion, of which $955 million remains undrawn. This refinancing was a proactive step to address our $609 million convertible notes due in March 2026. The refinancing maintains our current leverage profile and extends all debt maturities until 2030. Following our earlier upgrades from Fitch Ratings and Moody's, S&P has also upgraded our ratings, recognizing our improving leverage and free cash flow profile. Going forward, we remain committed to reducing gross debt to $1 billion by the end of 2026. We also view share repurchases as an attractive use of cash at current valuation levels. In Q3, we repurchased 3.9 million shares for $117 million, with $384 million remaining under the current authorization.

Moving to guidance.

For the fourth quarter, we expect subscription revenue of $618 to $626 million, total revenue of $638 to $646 million, non-GAAP operating margin of 22.8%, up approximately 145 basis points year-over-year. Non-GAAP EPS of $1.12 to $1.15 based on approximately 90 million fully diluted shares. Share-based compensation range of $64 to $69 million. As a result, we expect our full year 2025 to be subscription revenue growth year-over-year of approximately 5.5% to 6%, total revenue growth year-over-year of approximately 4.5% to 5%, operating margin at approximately 22.5%, raising non-GAAP EPS to $4.29 to $4.33 per diluted share, improving share-based compensation range to $275 to $280 million, raising free cash flow per share to approximately $5.71 to $5.79 per diluted share based on approximately 92 million shares. Let me conclude with three key takeaways. First, we delivered another quarter of profitable growth with revenue at the high end, margins reaching record levels, and expected annualized free cash flow growth of over 30% year over year. Second, we are scaling our AI-led products, which are well on track to exceed $100 million in ARR by year end. Third, we are delivering on our capital allocation strategy. We are on track to generate well over $500 million in annual free cash flow, resulting in more than $5.70 in free cash flow, which is best in class among the peer group. We are looking forward to meeting many of you at our investor product briefing on Wednesday at the NYSE. With that, let me open up the call for questions.

We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. Our first question today is from Cash Rangan with Goldman Sachs. Please go ahead.

Hi. Thank you very much, team. This may be the last time for me on a earnings conference call. I want to say it's been great working with you, Vlad and the team. You've been resilient. You pivoted the company hard during the downturn, went for profitability, and also steered the ship once again, not from a financial standpoint, but from a technological standpoint, to be ready for the AI world ahead. I wish you really well in that journey ahead, and you've been, once again, validating the view that you're a very resilient leader and a very resilient company. Vlad, as you look ahead, the product discussion certainly is thoughtful, but it also represents a lot of rebranding, change, etc., etc., and I hear the term RingCentral 3.0 being thrown about. So as you predict ahead, if a customer, a large Fortune 500 customer, were to buy into your vision of RingCentral 3.0 and were to implement your full family and portfolio of products under the 3.0 banner, what are the business benefits that that Fortune 500 company would stand to benefit that they couldn't get with RingCentral 1.0 or 2.0? That's it for me. Thank you very much, and best wishes to the team.

Firstly, thank you very much for your very kind words, and obviously very, very sorry to understand that this might be your last call with us. However, never say never. Never is a long time, so who knows? In any case, certainly wish you and yours the very best in this next chapter of your life. To your question, And RingCensus 3.0 is a very, very big deal. It is taking voice communications that is ubiquitous, most commonly used means of consumers reaching their business providers, service providers, brands, whichever way you want to look at it, and establishing contact. So when you are reaching out to your doctor, you're probably calling him or her, maybe increasingly texting, okay? Same applies to your financial advisor. Same applies to your architect or another business service provider, you know, your mechanic and so forth. and global leader in voice and increasingly text communications, RingCentral is uniquely positioned to deploy AI at the very onset of every consumer-to-business interaction. We process tens of billions of minutes on our platform annually and billions of – and for each and every one of those, with agentic AI, and at this point, we're really pivoting hard to agentic voice AI. We are in a great position to enhance human-to-human interactions throughout the entire life cycle of a transaction. And that includes offering assistance and AI, so we call it AIR, AI Receptionist, during the call, and we call it AVA, AI Virtual Assistant. That, if you will, is our version of a co-pilot. And lastly, by far not least, is the AI expert, conversation expert, which we'll call ACE. So this is where after a call and in a contact center use, we have calls being recorded and transcribed. This gives us an opportunity to analyze or enable our customers to analyze these calls at a deeper level, understanding caller intent, sentiment, providing all kinds of deep analytics, and very importantly, feeding all of this data and knowledge right back into the cycle. So, a bit to do with, and we have actually pioneered, use of cloud in the cloud, application of transactions to the cloud, but to the community. So, could not be more excited.

The next question is from Elizabeth Porter with Morgan Stanley. Please go ahead.

Great. Thank you so much for the question. I wanted to follow up on the strength in your global service provider partnerships. Can you speak to which products are gaining the most traction and the durability of that growth? Are the GSP contributions becoming kind of more reoccurring and predictable, or are they somewhat concentrated in the new deployments? And then just as a follow-up, as this partner scale, how should we think about the revenue mix and margin implications versus the direct sales?

No, great question. Look, I believe we've disclosed that our GSP business is already a bit over 10% of our revenues. I think we also disclosed that it is a tailwind for us, so that entire GSP segment is growing in double digits, which is higher than a company overall. Predictability-wise, it is as predictable as the rest of our business because it is SaaS. It is cloud and all recurrent revenue, just like our direct business is. Okay? What we've been seeing lately is, and we were frankly pleasantly surprised, is how readily the GSPs are adapting our new product portfolio. We started out with RingCX which was really our first major product, you know, flagship Ring EX product, but now I'll call AIR ACE, employing AIR, not internally, but in our direct business, we are quite optimistic that this will be now also will apply to AT&T and their scale as well as to a number of other service providers.

Elizabeth, this is Faye. Just to add to the profitability point, we have disclosed that GSPs from one of the metrics we look at is time-to-break-even. And from a time-to-break-even standpoint, they are under 18 months. So, in addition to growth, they are also demonstrating strong unit economics.

Thank you so much.

Next question is from Brian Peterson with Raymond James. Please go ahead.

Thanks for taking the question. So, a really nice job on free cash flow again this quarter. I guess as we think about the durability of that metric going forward, is there anything that you guys can share in terms of long-term drivers or long-term targets. I would appreciate any context there. Thanks, guys.

Yeah, thanks, Brian, for the question. This is Veba, and I'll address that. So, thanks for the call-out on the free cash flow expansion. Look, we've done a lot of work over the last couple of years, and very proud of what we've delivered. As you saw, we raised our free cash flow outlook today for the rest of the year at over 525 million or 30% of growth. When you look at the last two to three years, we've driven a 5x expansion. So we've gone from 100 million to 500 million. So we have a track record now of a number of years of driving expansion. Where is the expansion coming from? It's a concerted effort and a disciplined approach that we are taking in right-sizing the cost base you know we are very disciplined when it comes to hiring you know there is offshoring that we are using vendor consolidation and there's increasing use of AI internally the net net long story short we are doing you know more with this so that's point number one and I expect that that will continue as we look ahead point number two is from a quality of a free cash flow standpoint, we are also making meaningful improvements. What I mean with that is trading margins are now converging with free cash flows, and that's a result of working capital efficiencies. So we've taken a number of steps there. And point number three is we look at free cash flow also in conjunction with SBC as a driver of free cash flow per share growth. So again, we've taken a number of steps. We are bringing in a lot of discipline around new share grants as a result of which SBC is going down and that when combined with share buybacks is resulting in share count going down. So overall the net net result of all of this is our free cash flow per share which for 2025 is almost at over $5.70 is growing faster and it's best in the peer class. So overall we believe there is more to be had here. And we have a strong foundation with our recurring business model and our diversified customer base that will give us an anchor to sustain and improve free cash flows over time.

I would actually like to add to that. That is, of course, all exactly right. But looking at it from the other side, from the product side, and here I am preempting a little bit some of the information we'll be sharing on Wednesday during our analyst product day. But as a, you know, product person, I am always keenly interested in actual usage of the platform because core belief is that if people are using your product then you will be at the provider we will be able to derive value from it and if people are using the product less then no amount you know of financial engineering or price increases or anything you know you cannot counteract that trend if you're dealing with a falling knife and to be blunt we hear sometimes things that the whole market is a fall knife the falling knife our market and that voice is going away and that you know video and other means of communications are taking over and what we see is that nothing could be farther from the truth Our usage on the platform is increasing, and it's actually increasing ahead of our revenue. So people are using more. They're placing more calls on our platform. They're doing more text and utilizing or consuming more voice minutes. okay and this is what gives us a great amount of confidence that our margins will actually continue improving because our core belief is that costs rising our revenues in the in the big scheme of things we're able to utilize cost efficiencies were using AI heavily internally definitely being able to achieve a lot more with less and for as long as we see increasing usage of our platform we have every reason to believe that free cash flow will follow and again with continual financial this share will follow and will be rising as well. We think quite likely this will be even ahead of revenue growth, which we also project to be continuing. So we think that we are, you know, perhaps at an early phase of another virtue cycle here.

Great to hear. Thank you.

The next question is from C.D. Panagrahi with Mizuho, please go ahead.

Thank you. I just have two quick questions. Starting with the contact center momentum, how are you seeing the trend following your renewal with partnership with NICE and both in the up market and ring CX momentum in the down market? And a quick follow-up for Bevov, how are you thinking about your capital allocation framework given that you have to pay back, pay down some of the debt, and how should we think about the buyback going forward?

Great. So I guess I'll take the first one. So, Luke, you mentioned CFs and NICE. And as you all know, we were happy to report last quarter that we've extended the resale agreement with NICE. So that's in place. The user install base that we have with NICE is stable. We're seeing upsells. We are, you know, re-educating the channel on the fact that this partnership is alive and well because there was quite a bit of FUD from, you know, from joint competitors. So that is being addressed. But these are longer sales cycles. And, you know, we see some positive moments. but, you know, certainly not at the level where it used to be at the peak. Having said that, quite a bit of that slack is being picked up by RingCX, which is a lighter-weight product, less expensive product, but also a lot easier to deploy. And we are showing very strong growth with that product, double-digit growth sequentially. which is a lot to be said uh you know for the product uh for a product that's in uh you know strong tens of millions of dollars and you know still you know double digital growth so we feel very very good about that uh we also think that uh with uh our uh introduction of our new uh agentic voice ai family uh again air ava and ace applicable to our agentic uh uh ai cloud already mentioned a number of uh important gsps are picking up the entire portfolio include quite optimistic requests are uh we have enough of a history with this product now uh and uh whatever people are asking for is on our immediate roadmap and I want to mention we have dollars in annual spend on R&D that's not insignificant majority of the spend is now dedicated towards new products which is RingCX, AIR, AVA and ACE. And the fact also is that we're using quite a bit of AI for code development. We're seeing some amazing results being able to, in certain cases, develop by factors faster than, you know, using traditional methods. So expect rapid innovation, okay? We have introduced more products this year than at any point, more new products, than at any point in our 20-plus year history. And, you know, I'm not going to say that we'll be introducing three, four new products every quarter. That probably would get too confusing if nothing else. But now expect quick iteration and quick improvements in what we have. And, look, we really believe that we have a unique suite addressing needs of consumers contacting their business service providers, and we expect to go wide and deep on that.

Yeah, and Citi, in terms of capital allocation, look, our approach always has been a disciplined approach, and it's all aimed at improving free cash flow per share. The benefit of having over $525 million in free cash flow is that it opens up a lot of flexibility and provides opportunistic benefits of capital allocation. So first as a priority is always investing in innovation and growth. So as Vlad said, over a quarter billion dollars spent in product innovation, over half of which is going into new products. So that's the use of cash. We are also opportunistic in terms of M&A, you know, where it accelerates our product roadmap, case in point being the recent acquisition of Community WFM. And from there, look, our strategy involves paying down debt and share buyback, and that depends upon, you know, the conditions such as valuation as well as interest rates. In terms of leverage, we are committed to deleveraging and strengthening the balance sheet. If you look at our leverage ratios over the last three years, we've gone down from 4X to under 2X. And we've continued that in 2025. We've reduced the debt. And we've addressed near-term convert maturities such that there will be no debt due until 2030. And overall, we remain committed on that path of reducing gross debt to a billion dollars by 2026. In terms of buybacks, it remains an attractive use of cash at the current valuation levels. This year, we bought back roughly 200 million of shares, and we still have close to 380 million remaining in authorization, which we plan to execute on. So discipline in stock-based compensation as well as buying back stock will result in lowering share count, which we are committed to. So overall, our framework is to prioritize actions to enhance long-term shareholder value while maintaining a strong balance sheet and financial flexibility, net-net of which is all aimed at improving pre-cash flow per share.

Thank you both for the caller.

The next question is from Ryan McWilliams with Wells Fargo. Please go ahead.

Hey, thanks for taking the question. Vlad, I'd love to hear your thoughts on how RingCentral has an advantage compared to startups in servicing the voice ai and ai receptionist use case to me these voice use cases are complex from a telephony standpoint and require call routing expertise from ai to human that'd be difficult to build without a history of providing telephony services but is there more that comes to mind that gives ring central an advantage versus others in going after this agentic voice ai opportunity yeah yes fantastic question so look ring central used to be a startup to be blunt and fair I still do everything I can in my power to

continue behaving like a startup but it is a two and a half billion dollar startup now so startups have good ideas smart people and I'm sure some of them will do well but I don't believe that most of them will do well and the reason is here is what they don't have they do not have a network they do not have decades of know-how and data of actual behavior and calling patterns that we have. They do not have the extended GTM capabilities. We have tens of thousands of reseller partners close if not over 200,000 feet on the street that's been you know trained with RingCentral we have this absolute unique GSP network and very importantly here are the other things that they don't have they don't have, with maybe one or two exceptions, they don't have $250 million of annual spend that they can dedicate to this area where we're laser focused on. But I tell you what, the most thing they don't have is they don't have a 2,000 strong engineering team and product team that's been doing business communications at scale and globally for years and in certain cases for a couple of decades. And I also want to bring up this other point. I think that sometimes what people under-appreciate about RingCentral is how deep our roots are and how stable the core team has been over literally two and a half decades from our inception back in 1999. Engineering team, engineering leadership, the CTO, who is my co-founder, and many senior directors and VPs have been with us for over 10 years. I believe this is unique in the industry and gives us just unsurpassed know-how and depth in and talent pool in being able to out innovate you know anyone in the space and I believe that this is likely to continue okay so AI this AI revolution explosion is really the best thing that ever happened to us as a company I think to the industry as a whole, but because we are at scale and we're a clear leader in a key communications modality, which is voice, I think that we will stand a lot to gain and including market share in this space.

Handling one or a handful of voice AI calls a day is a lot different than handling 10,000 voice AI calls a day. I appreciate the color.

Yes, and I suspect it's more than 10,000. way more.

The next question is from Peter Levine with Evercore ISI. Please go ahead.

Great. Thank you for taking my question. Maybe you want to just maybe talk about the acquisition of Community WFM. How does that strengthen kind of your end-to-end offering on RingCX? Kind of compare that to some of the standalone offerings out there in the market. And then second one, maybe can you just kind of walk us through your 4Q guide? I know there's a bit of a pick down for the full year. So maybe just walk us through the puts and takes with our deals that got pulled forward into Q3. Is it macro? Is the government shutdown just impacting kind of how we think about Q4?

Okay, so this is Kira.

Let me handle the WM. So we have our NCX suite of today contains a number of modules, the core CX product, and the number of AI modules that work together with that base product for quality management, for agent assist, for interaction analytics, screen recording. These work together, works together with Ring EX. With the acquisition of Community FM product, WFM product, we've completed that suite, And actually today we've announced something that we now call WEM PowerSuite. And that includes the acquisition from Community WFM, which is workforce management. That component was not something that was part of our core product and something that now is absolutely integrated and actually deployed at RingCentral for one over the last couple of weeks that went live and completes that offering that makes us a complete suite for CX deployments.

In terms of how does this interact with existing customers, all existing customers can buy on uh any one of these modules in addition to the base modules that they've got so the the the suite works together and uh a la carte hey real quick before we uh just just together thin i just want to get back to the prior comment um so um we actually do a little bit more than 10 000 calls a day uh we just looked it up and it's approximately 100 million calls A hundred million minutes a day, which translates into tens of millions of calls per day. Again, just to reiterate, we are running one of the world's largest business voice platforms by use.

This concludes our question and answer session. I would like to turn the conference back over to Stephen Horwitz for any closing remarks.

Thank you, everyone, for attending today. We're looking forward to seeing many of you on Wednesday for our investor product briefing. For those who can't make it, it will be webcast on the RingCentral IR site, and there will also be a replay there. Thank you, and for those who aren't there, we'll see you next quarter.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.