- Steven Horwitz - VP of Investor Relations
Thank you. Good afternoon and welcome to RingCentral's first 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.
18
- Vlad Shmunis - Founder, Chairman and CEO
Good afternoon and thank you for joining us.
- Q1 FINANCIAL RESULTS
We are off to a strong start to the year as we delivered another solid quarter, with total revenue
at the high end of our guidance.
Importantly, we are also making meaningful progress in the quality of our operating model. We
delivered record GAAP and non-GAAP operating margins, reduced stock-based compensation,
paid down debt, and returned capital to shareholders, including our first-ever dividend. These
are important milestones and reflect a business that is becoming more efficient, more profitable,
and more durable over time.
As to free cash flows, we now expect approximately $600 million of free cash flow this year,
which is approaching $7.00 per share, which we believe is among the best in our peer group.
Moving forward, we plan to continue to reduce SBC with a path toward our medium-term target
of 3% to 4% of revenue, and we are steadily building toward our goal of 20% GAAP operating
margin in the next 3 to 4 years.
Our strong financial performance is rooted in operational discipline that is underpinned by our
unwavering commitment to innovation and a strong competitive position.
As one of the original cloud-native SaaS providers, we revolutionized customer communications
by taking it from on-prem legacy infrastructure to the multi-tenant cloud. On the strength of that
innovation, we've built a $2.7 billion ARR business that is growing, generating a healthy amount
of cash, and is returning value to shareholders in a meaningful way.
RingCentral's original success was rooted in the convergence of -broadband, mobility, and
cloud computing. We leveraged these megatrends to transform how hundreds of thousands of
businesses and millions of users communicate with their customers. Today, we're at the start of
an even bigger innovation: namely AI, and specifically, the rise of agentic voice AI. AI builds on
top of all the world-class assets that RingCentral has created over the years. 45
It plays directly to our strengths. With our robust platform, massive amounts of rich data,
omnichannel communication capabilities and global GTM and innovation at scale, we are well
positioned to leverage AI as a key driver of our long-term growth and profitability. 49
While agentic AI is very powerful and will be transformational to how businesses interact with
consumers, our core belief is that it won't replace all humans. AI can and will do a lot, and it will
make humans in the loop more effective. RingCentral's secret sauce is to deliver agentic AI
experiences at every stage of consumer-to- business interactions, while enabling businesses to
get human agents involved at the right time. RingCentral's differentiated approach is to make
both AI agents and human agents smarter by working together seamlessly, resulting in better
customer outcomes and greater cost efficiencies. This hybrid, human-in-the-loop model is
where RingCentral excels.
More specifically, our ability to orchestrate AI and human interactions at scale on a single
platform, across voice, text, and video, and do this at a global scale, with industry-leading
reliability, security, and quality of service - this is our structural advantage and a defensible
competitive moat.
RingCentral processes tens of billions of minutes and billions of calls and messages each year.
As the front door to consumer-to-business interactions at scale, we're uniquely positioned to
deploy AI across every stage of the journey-before, during, and after human involvement. We
offer a modern, end-to-end customer engagement platform spanning all consumer-to-business
interactions. Our portfolio includes RingEX for cloud PBX, RingCX and RingCentral Workforce
Engagement Management or RingWEM for full-featured contact centers, and our recently
introduced Customer Engagement Bundle or CEB, for informal contact center capabilities. We
embed agentic voice AI across our entire platform. Our agentic voice AI portfolio or RCAI, is
currently comprised of AI Receptionist or AIR and AIR Pro - which automate customer
interactions from the get go, AI Virtual Assistant, or AVA, which assists the human agent in real-
time, and AI Conversation Expert, or ACE, for deep conversational analysis and coaching.
Overall, we are good at helping businesses connect with more customers, resolve issues faster
and more cost effectively, capture more leads, and make remaining human agents more
effective.
Adoption of our AI product portfolio is strong. Customers using our AI adopt more products,
spend more with us, and stay longer - driving higher ARPU and net retention well above
100%. ARR from customers who utilize at least one of our paid AI products, which we refer to
as RCAI utilizing customers, has more than doubled year over year, and is growing in double
digits sequentially, with favorable ARPU and retention metrics. Kira and Vaibhav will provide
more details.
- Closing
In summary, I'd like to leave you with these 4 takeaways:
First, RingCentral has a deep and defensible moat in an expanding market. We have built a
carrier-grade communications platform with the scale, reliability, and trust required for mission-
critical customer interactions. As AI expands the scope of customer engagement, we believe
that our market opportunity is only getting larger, and we are uniquely positioned to capture it.
We are currently investing over $250 million dollars in innovation annually, with a meaningful
and increasing portion dedicated to RCAI. This is another sustainable competitive advantage,
and we are confident in our ability to keep investing in innovation while continuing to further
improve our operating metrics moving forward.
Second, we are at the front door and the top of the funnel for consumer to business
communications. We sit where interactions begin, where customer intent is first expressed, and
where routing and resolution decisions are made. This gives us access to the real-time context
and workflow intelligence that are increasingly valuable in the AI era.
Third, we have a complete customer engagement platform powered by RCAI. This allows us
to bring together AI agents and human agents on a single platform across voice, messaging,
and video. This is delivering real value for customers, and we are already seeing solid early
adoption, growing monetization, higher ARPU and strong retention across our RCAI-utilizing
customer base. Important to note is that all of our RCAI and customer engagement products are
fully owned by RingCentral with attendant benefits to control over the roadmap, time to market,
and owner economics. We believe this to be another important competitive differentiator.
And fourth, we are delivering strong financial performance. We are improving non-GAAP and
GAAP profitability, reducing SBC, generating meaningful free cash flow and free cash flow per
share that is amongst the best in class, and returning capital to shareholders via buybacks and
dividends.
Our results speak for themselves and we could not be more excited about the road ahead.
With this, let me turn it over to Kira.
109
- Kira Makagon, President & COO
Thank you Vlad - and good afternoon everyone.
Vlad laid out our vision: a complete Customer Engagement platform built on a hybrid model of
AI and humans working together - delivering seamless customer experiences and better
business outcomes. Here is an example of this vision becoming reality.
Meet Cartelligent, a California-based automotive broker, deployed our entire RCAI portfolio -
AIR, AVA, and ACE. Previously, their high-value leads were being routed to an answering
service where many calls were dropped. With AIR, they decreased lead abandonment to zero,
connecting 100% of live leads during business hours, and achieved an 85% lead-to-signup
target. AVA eliminated manual notetaking. ACE delivered visibility and coaching to keep
improving. As the result of all 3As working together with human in the loop they achieved a 9.85
out of 10 customer satisfaction score.
Let me unpack these solutions further.
- AIR
AI Receptionist, or AIR, is designed for front office workers who demand "it just works" -
deployable in minutes, no developers required, built for businesses of any size. AIR can now
receive customer inquiries over voice and text messages. AIR is also integrated into call
queues, handling overflow and missed calls to improve responsiveness without adding
operational overhead. The market is responding well - we ended Q1 with more than 11,800
paying AIR customers, up more than 40% percent quarter-over-quarter.
130
- AIR Pro
For customers requiring more complex, configurable use cases, we recently introduced AIR Pro.
With AIR Pro, customers can create multitudes of fit-to-purpose agents leveraging over one
hundred pre-built integrations, including EHR, CRM, scheduling, e-commerce, and billing. Users
simply describe what they need their AI agent to do - AIR Pro builds and deploys it, executing
multi-step workflows. We already have our first paying customers, with healthcare emerging as
a natural early fit given AIR Pro's ability to address rich workflows, while maintaining ease of
deployment.
One example is a federally qualified health center that was already running RingEX, RingCX,
and ACE. They added AIR Pro to handle real-time shuttle routing for patients. The agent
recognizes the caller's location, current time, and live shuttle status to guide patients to the right
pickup point. It sounds simple. The underlying workflow is not. That's exactly the point: AIR Pro
makes complex orchestration feel effortless - for the customer, and for the business.
And once the conversation ends, ACE takes over.
- ACE
ACE now has more than 5,200 customers, up 85% year-over-year. Sales, marketing, and
compliance leaders use it to automate interaction reviews, connect conversation intelligence
into their CRM and ticketing systems, and replace manual evaluations with complete visibility
across every call.
Take ATB, the largest financial institution in Canada. They added RingEX seats and ACE to
eliminate the time lost on manual analysis; a strong example of AI and humans working
together. With human agents handling customer interactions, ACE delivers the post-call
analysis - surfacing sentiment, gaps, and next steps - giving supervisors a clear picture of
every conversation, scoring agents, and the coaching data to continuously improve human
agent performance.
- SMS
As Vlad mentioned, we have an extensive R&D spend with a wave of new innovations opening
up new use cases and expanding our TAM. These investments are leading to tangible results.
Last week, we introduced Branded Messaging via Rich Communication Services, also known as
RCS, delivering a verified business identity directly into the customer's native messaging app.
This pairs with Enterprise Branded Calling, which displays a company's name and logo on
outbound calls, driving higher answer rates from the first moment of contact. We've also
expanded support for SMS notifications with local numbers to 190 countries - so businesses
can engage their customers wherever they are, with the same reliability they expect from
RingCentral. Building upon our hybrid model of AI and humans working together, SMS is an
important customer engagement channel for both.
- Growth of CEB and RingCX
Customer Engagement Bundle, or CEB, is our latest product introduction, and it is off to a
strong start. CEB already has more than 5,000 customers, with nearly 40% attach rate of our
paid AI products. CEB brings informal contact center capabilities to RingEX, including contact
center-grade call queues and SMS shared inboxes. One example of a customer using these
capabilities is Worldwide Steel Buildings, a Missouri-based company already using RingEX
and ACE. They added CEB to manage call queues, eliminate missed inquiries, and now get a
complete view into every interaction - all on one platform.
Importantly, CEB is now available for Microsoft Teams - embedding voice, call queues, SMS
inbox, intelligent routing, and analytics inside Teams, effectively turning Teams into an informal
contact center.
As to formal contact centers, RingCX now has more than 1,700 customers, up over 70% year-
over-year, with more than half utilizing AI. For example, Excelsior Orthopedics in Amherst, NY
was struggling with a 22% call abandonment rate and hold times averaging 30 minutes. With
RingCX and ACE Quality Management, they cut abandonment to 8% and reduced wait times
tenfold - down to just 3 minutes.
Together, CEB and RingCX give customers powerful, right-sized options across both informal
and formal contact centers - and a clear path to grow with us as their needs evolve.
- Continued Expansion
The combination of our RingEX + RingCX + AI portfolio, robust platform, and omnichannel
capabilities, is fueling ongoing migrations from on-prem to cloud. For example, this quarter:
● Coca-Cola United, the third-largest Coca-Cola bottler in the US with 60 locations, is
migrating thousands of seats to RingEX.
● A large Fortune 500 insurance company replaced their on-prem system and is further
expanding RingCentral enterprise-wide deployment with tens of thousands of RingEX
seats.
● The New York Mets are replacing a decade-old on-prem system with RingEX, RingCX,
and our Call Queues booster.
● A major internet and streaming provider added RingEX to their existing RingCX
deployment, along with AI capabilities, including ACE, to drive greater operational
efficiency.
● Casio, the iconic consumer electronics company, consolidated their legacy systems
onto RingEX and RingCX, and added ACE Quality Management to automatically score
calls and improve visibility across every customer interaction.
- GSP
Our innovations continue to be well received by the channel and our GSP partner community in
particular. Multiple GSP partners are now extending their offerings to include our AI products.
Cox Communications recently began deploying our native, AI-powered contact center to their
customer base. And this quarter, Telus and Spectrum Business have also started bringing our
AI portfolio to their customers - expanding our reach and reinforcing the platform's value at
scale.
- Closing
In summary, we're delivering significant value to businesses - and the industry analysts are
recognizing this. This quarter, we were named a leader in both the inaugural 2026 IDC
MarketScape for Worldwide Communications Engagement Platforms, and the 2026 Omdia
Universe for Customer Engagement Platforms.
From serving SMBs to enterprise, and addressing simple to complex needs - and with our
unwavering commitment to innovation and a well-differentiated GTM, we are in a strong position
to deliver a modern complete, AI-first Customer Engagement platform at scale.
With that, I'll hand it to Vaibhav.
- Vaibhav Agarwal, CFO
Thank you, Kira, and good afternoon, everyone.
- Introduction
We started 2026 with another solid quarter and delivered against all commitments we laid out
entering the year. Q1 reflected continued consistency in our execution and the further
strengthening of our financial profile.
Let me turn to our first quarter results.
- Profitable Growth
Starting with growth, total revenue was approximately $644 million, up 5.3% year-over-year
and at the upper end of guidance. Subscription revenue was approximately $623
million, up 5.6% year-over-year.
Customer trends remain healthy, including steady new customer additions and monthly net
retention above 99%. These metrics continue to reinforce the resilience of our recurring revenue
model and the mission-critical role our platform plays for customers.
As Vlad noted, we are seeing encouraging early momentum in our AI-led new products.
Customers using at least one paid AI product now represent more than 10% of the base, have
doubled year over year and are growing in double digits sequentially. Within these cohorts, we
see stronger ARPU and net retention rates above 100%. Our growth profile remains durable,
and newer products are increasingly contributing to both expansion and overall revenue quality.
- Profitability & Margins
Turning now to profitability, we delivered another quarter of strong margin performance.
Subscription gross margin remained stable above 80%. Non-GAAP operating margin reached
approximately 23%, up 110 basis points year over year and at the high end of our guidance.
We continue to view this margin expansion as structural. It is being driven by the underlying
leverage in a high-recurring-revenue model at scale, combined with disciplined hiring, expanded
offshoring, vendor consolidation, greater internal use of AI, and continued focus on our highest-
return go-to-market and products.
- Stock-based Compensation and GAAP Profitability
SBC as a percentage of revenue declined approximately 400 basis points year over year to 9%
in Q1. For the full year, we now expect SBC to be approximately 9% of revenue in 2026, down
from approximately 11% in 2025. This continued improvement reflects our disciplined approach
to equity management and gives us confidence in our path forward toward a steady-state level
of 3% to 4% in the medium term.
The combination of stronger non-GAAP margin and lower SBC drove a record GAAP operating
margin of 7.8%, improving by more than 600 basis points year over year in Q1. For the full
year, we now expect GAAP operating margin to improve from 4.8% in 2025 to more than 9% in
2026. That is a meaningful step forward and reinforces our confidence in reaching our target of
20% over the next three to four years.
- Free Cash Flow and Free Cash Flow per Share
Turning to cash flow, we generated more than $140 million of free cash flow in the quarter, up
8% year over year. This reflects strong operating performance, continued efficiency gains, and
improvement in working capital. We generated free cash flow per share of $1.62, up 15.4% year
over year.
Recurring revenue, strong gross margins, and improving operating efficiency continue to
translate into substantial cash generation. As a result we are now raising our full-year free cash
flow outlook to approximately $600 million or a 13% improvement year-over-year.
- Capital Allocation and Balance Sheet
Now let me turn to capital allocation. Our approach remains balanced and disciplined. We are
investing in growth, de-levering the balance sheet, and returning capital to shareholders.
During the quarter, we addressed the $609 million convertible maturity by refinancing it with
undrawn Term Loan A. We reduced overall debt by approximately $46 million and lowered net
leverage to 1.6x. We continue to make steady progress toward our goal of reducing gross debt
to $1 billion by the end of 2026. Importantly, we now have no maturities until 2030, and we
maintain $355 million of undrawn credit capacity.
We also continued to return capital to shareholders. During the quarter, we repurchased
approximately 2.5 million shares for $81 million. At the end of Q1, we had approximately
- $418 million remaining under our repurchase authorization. Diluted share count declined 6%
- year over year to approximately 87 million shares, and we paid our first quarterly dividend of 7
- and ½ cents per share during the quarter.
- Guidance
With that, let me turn to guidance. For fiscal 2026 we are:
● Raising subscription revenue to be $2.540 billion to $2.560 billion, representing growth
279 of 4.7% to 5.5%
280 ● Raising total revenue to be $2,620 billion to $2.640 billion, representing growth of 4.2%
281 to 5.0%
● Raising GAAP operating margin to 8.9% to 9.6%, expanding 450 basis points y/y.
● Raising non-GAAP operating margin to 23.3% to 23.7%, expanding 100 basis points y/y
● Raising free cash flow to $590 million to $605 million, up 13% y/y.
● SBC in the range of approximately $240 million to $245 million, improving 180 basis
points y/y as a percentage of revenue.
● Fully diluted shares count of approximately 86.5 to 87.0 million shares, 5% lower y/y.
● Raising non-GAAP EPS to between $4.85 to $5.01, up 13% y/y.
● This results in free cash flow per share of $6.78 to $6.99 for the year, up 18% y/y.
For Q2'26, we expect:
● Subscription revenue of approximately $628 million to $633 million
● Total revenue of approximately $648 million to $653 million
● GAAP operating margin of 6.6% to 7.6%, up 110 basis points y/y
● Non-GAAP operating margin of approximately 23.0% to 23.2%, up 50 basis points y/y
● Non-GAAP EPS of $1.15 to $1.17, up 10% y/y
● SBC in the range of approximately $58 million to $62 million, improving 130 basis points
y/y as a percentage of revenue
● Fully diluted share count of approximately 87 million shares, lower by 6% y/y 299
300
- Closing
In closing, Vlad has stated 4 key takeaways. Namely, deep and defensible moat in an
expanding market, RingCentral as the front door and the top of the funnel for consumer to
business interactions, complete customer engagement platform powered by RCAI, and strong
financial performance. To double click on the last point, we have an efficient business at-
scale and a durable compounding free cash flow model. With approaching $600 million of
expected free cash flow in 2026, we have the flexibility to reinvest for growth, strengthen the
balance sheet, all while returning capital to shareholders.
And I couldn't be more excited about the opportunities ahead.
With that, let's open the call for questions.
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RingCentral Inc. published this content on May 08, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 08, 2026 at 21:13 UTC.
