Strecker Backe: Hi. Thanks for taking our question. Can we hear about just how you’re thinking about seat growth versus ARPU growth contemplated within the guide? And then just a quick clarification. I believe you mentioned an operating margin exit rate for 2023, and I missed that. So if you could just give that again, that would be very helpful. Thank you.
Sonalee Parekh: Sure. So I’ll start off with the second part of your question, and then I’ll hand over to Mo around seat growth and how it’s in correlated to the guide. So yes, you heard that correctly. So we are guiding to operating margins for the full year 2023 of at least 18%. And you heard me correctly, we are targeting and expect to exit Q4 with operating margins of at least 20%. So you may recall two quarters ago, we gave that 20% medium-term guide, and we are now very happy to tell you today that we will exit Q4 2023 at, at least 20%.
Mo Katibeh: And then building on that to talk about the ARPU portion of your question, I mean, our overall ARPU has remained stable now for the last one to two years at above $30. And frankly, we’re not seeing competitive pressures impact our ARPU. At the end of the day and this goes back to our guiding mantra of profitable growth. We are being disciplined, we are entering into deals that are profitable and we’re expecting that our ARR will grow above our revenue growth in 2023 tied to each one of those aspects.
Operator: The next question is from Michael Funk with Bank of America. Please go ahead.
Matt Bullock: Hi. Thanks for the question. This is Matt Bullock on for Mike Funk. My question is around business momentum. So clearly, some conservatism built into the guide for 1Q, but obviously, a step down in growth. We’ve talked about some sales cycle elongation, smaller deployment sizes for a couple of quarters now. Just curious on any trends you’ve seen so far within the first quarter if you’ve seen customer behavior kind of stabilize. Thank you.
Mo Katibeh: Thanks for the question. And the net there is we’re seeing very similar trends so far in first quarter versus what we saw in fourth quarter. And as I mentioned during my prepared remarks, sales cycles remain elongated. We have seen the size of initial deployments decline sequentially throughout 2022, and that was true in Q3 to Q4. And from a churn perspective, we did see a degree of year-over-year improvement. Q4 is usually our seasonal high on churn, but improving trends year-over-year.
Operator: The next question is from Ryan MacWilliams with Barclays. Please go ahead.
Ryan MacWilliams: Thanks for taking the question. We’ll touch on your Microsoft Teams opportunity. Are you seeing more wins to this channel? And is this helping you get into larger customers? Like is it also helping pull through your contact center deals? And when does that include the Microsoft partnership? Thanks.
Mo Katibeh: Very good. Yes, as I mentioned in my prepared remarks, we are seeing triple-digit growth into our Microsoft Teams practice. And yes, to the second part of your question, we are definitely seeing an upmarket skew to the customers who are purchasing our Microsoft Teams products. And it really becomes about the value of the product capabilities, Five9s, the integrated UC and CC to your point. That is unique in our offering there. And inherent to those two things, it’s skewing upmarket and the power of UC and CC together. We are seeing a very strong attach rate of contact center when we’re selling into Microsoft teams.
Operator: The next question is from Terry Tillman with Truist Securities. Please go ahead.
Terry Tillman: Thanks for taking my questions. Hi, Vlad, Mo and Sonalee. Two quick questions. The first one is on the contact center side. I mean, Mo, you’re talking about some of these dynamics that have continued to weigh on the business. Then the contact center side, is there anything different, though, in terms of ARR activity? And is that more resilient? Or is it about the same type of dynamics that you’re seeing on the PBX side? And then I have a follow-up.
Mo Katibeh: Well, we are seeing that our CCaaS ARR is now approximately $300 million, which, frankly, we think is pretty amazing and positions us as one of the five largest CCaaS players on the planet. We are seeing the growth trend above the company average and well above the market growth as well. Relative to our attach rate, we’re seeing it be attached on our larger deals, call it the $1 million plus deals, a fairly consistent rate of over 60% for some number of quarters. And at the end of the day, I think it speaks to the trend from €“ in the buyer community, if you will, of customers are looking for tightly integrated UC and CC capabilities and the unique differentiations that they get when they’re purchasing our market-leading UC product and this market-leading CC product together.
Operator: The next question is from George Sutton with Craig-Hallum. Please go ahead.
George Sutton: Thank you. Relative to the Avaya bankruptcy is it logical to assume customers €“ premise customers at Avaya will feel some discomfort from that move and could accelerate migration? Is that something you historically have seen?
Vlad Shmunis: Yes. Vlad here. Look, we actually €“ no one wanted Avaya to go bankrupt again. But we are firmly of the opinion, and I think Avaya concurs, we remain the absolute best cloud destination or destination for their world’s largest customer base migrating today . We have the integrations. We have endpoint support, we have channel relationships, and we have the sales process well oiled. Just to remind everyone, many, many hundreds of thousands of seats have already moved under the original agreement. We expect for this to continue and hopefully accelerate, but at least continue with a new structure. And it’s a win-win for both companies, but most importantly, it’s a win for customers. And if you think about it, sure, no one wants to deal with a bankrupt provider if I’m an Avaya customer.
But, a, no one is also expecting for this bankruptcy to last too long. This is why there is a pre-pack. We’re part of that pre-pack. And look, I’m not a bankruptcy attorney, obviously. But I think generally simulations are that this is going to be a relatively short and relatively painless process and that the company will reemerge. By the way, it’s a substantially stronger entity with a stronger balance sheet, much better debt coverage, et cetera. So if you’re a customer frankly, where are you going to go? If you want to go €“ it’s really hard to go from on-prem to on-prem. You might as well go to the cloud. Why not go to the absolute cloud UCaaS leader, which is RingCentral and which has all of these differentiated integrations and assets with Avaya?
So I have to say, we feel really, really good given the backdrop. We feel really good where we ended up. I think they feel the same, and we’ll see what the future brings. Again, many tens of millions of seats on-prem with Avaya, in particular, ready to be migrated.
Operator: The next question is from Matt Stotler with William Blair. Please go ahead.
Matt Stotler: Hi everyone. Thanks for taking the question. Just two for me. So one, I think, Mo, you talked about changing the terms of the Atos agreement. With that business being sold to Mitel, what are the implications there for RingCentral, both on an absolute basis and you think about kind of the trajectory of that business historically versus what you expect going forward? And then the second question is on the converts. Just now you have the debt facility that you can leverage for that. What are you waiting for in terms of kind of what you need to pull the trigger on that? And then what should we expect in terms of interest expense associated with those €“ that credit facility? Thank you.
