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RingCentral (NYSE:RNG)
Q4 2020 Earnings Call
Feb 16, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Greetings. Welcome to the RingCentral fourth-quarter 2020 earnings conference call. [Operator instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Ryan Goodman.

You may begin.

Ryan Goodman -- Head of Investor Relations

Thank you. Good afternoon, and welcome to RingCentral's fourth-quarter 2020 earnings conference call. I'm Ryan Goodman, RingCentral's head of investor relations. Joining me today are Vlad Shmunis, founder, chairman, and CEO; Anand Eswaran, president and chief operating officer; and Mitesh Dhruv, chief financial officer.

Our format today will include prepared remarks by Vlad, Anand, and Mitesh, followed by Q&A. Some of our discussions and responses to your questions will contain forward-looking statements, including our first-quarter and full-year 2021 financial outlook and our assumptions underlying that outlook. These statements are subject to risks and uncertainties. Actual results may differ materially from our forward-looking statements.

A discussion of the risks and uncertainties related to our business is contained in our filings with the Securities and Exchange Commission and is incorporated by reference into today's discussion. In particular, our business is currently being impacted by the COVID-19 pandemic. The extent of its continued impact on our business will depend on several factors, including the severity duration, and extent of the pandemic, as well as actions taken by governments, businesses, and consumers in response to the pandemic, all of which continue to evolve and remain uncertain at this time. RingCentral assumes no obligation and does not intend to update or comment on forward-looking statements made on this call.

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 deck. I encourage you to visit our Investor Relations website at ir.ringcentral.com to access our earnings release, slide deck, our GAAP to non-GAAP reconciliations, our periodic SEC reports, a webcast replay of today's call and to learn more about RingCentral. For certain forward-looking guidance, a reconciliation of the non-GAAP financial guidance to the corresponding GAAP measure is not available as discussed in detail in the slide deck posted on the investor relations website.

With that, let me turn the call over to Vlad.

Vlad Shmunis -- Founder, Chairman, and Chief Executive Officer

Good afternoon, and thank you for joining our fourth-quarter earnings conference call. I would like to start this call with a warm welcome to our newest board member, Secretary Arne Duncan. Arne is the former United States Secretary of Education. Prior to his federal government service, Arne was CEO of Chicago Public Schools for eight years, and he is currently a senior fellow at the University of Chicago Harris School of Public Policy.

Welcome, Arne. Now, to RingCentral. 2020 was a transformational year. The global pandemic is fundamentally changing how businesses operate.

With the vaccine now being distributed, many businesses are preparing for a hybrid work environment. They are planning for some workers in the office and some at home for the foreseeable future. As companies adapt to this new work-from-anywhere norm, digital transformation of business communications will become more critical. Enabling this transformation are cloud-based communications solutions.

This is essential to enabling employees to productively engage with customers, partners, and peers from anywhere on any device and any mode. According to Gartner, by 2024, 74% of the new unified communication licenses purchased by organizations will be cloud-based, up from 48% in 2019. Businesses are increasingly turning to RingCentral as a trusted partner in their transition to a cloud-based communications platform. This growing customer demand is evident in our strong and standout Q4 results.

Total revenue grew 32% year over year to $335 million, an acceleration of 2 points sequentially. RingCentral Office ARR grew 39% year over year to $1.2 billion, an acceleration of 3 points sequentially. We delivered a record number of $1 million TCV wins, up over 50% sequentially. And we had strong contributions from our key partners led by Avaya, AT&T, and Atos.

As we look to 2021 and beyond, we are increasingly confident in the size of the opportunity and market receptivity to our differentiated Message Video Phone, or MVP as we call it, and cloud contact center solutions. This, together, enables us to address the full range of business communications needs for most enterprises worldwide. And now with the recent addition of RingCentral Glip, our free, unlimited, Smart Video Meetings solution, we can help even more businesses or their individual departments to communicate in any mode, on any device, from anywhere. Please visit glip.com to experience it for yourself.

Our leading UCaaS solution, RingCentral Office, is an enterprise program, carrier-grade, global, trusted Message Video Phone, or MVP, solution. It offers a seamlessly integrated user multimode experience, five nines of reliability, world-class global coverage, and an open platform, all of which we believe are important competitive differentiators. We are also proud to once again be recognized as a leader in the latest Gartner Magic Quadrant for Unified Communications as a Service, Worldwide report for the sixth year in a row. In addition, RingCentral ranked highest in all five use cases of the 2020 Gartner Critical Capabilities for Unified Communications as a Service, Worldwide report.

Leveraging all the strengths of our industry-leading cloud PBX platform, we have recently added RingCentral Video, a new core component of our MVP solution. RingCentral Video is built on the modern WebRTC industry-standard framework with numerous proprietary enhancements. We continue to innovate here at a rapid pace. Some of the recent enhancements include virtual background, closed captions, third-party virtual camera support, and waiting rooms.

Earlier this month, we introduced RingCentral Embeddable for RingCentral Video, enabling developers to quickly embed video into business applications. And in Q4, we acquired certain technology assets of the company called DeepAffects, a pioneer in AI-powered conversational intelligence. DeepAffects will enable us to provide RingCentral Video with new capabilities, such as emotional sentiment recognition and multi-speaker identification. To help businesses transition to cloud communication solutions we recently introduced RingCentral Glip, our free Smart Video Meeting solution available through our glip.com website.

Glip provides unlimited RingCentral Video meetings seamlessly integrated with team messaging capabilities, all at no cost. This smart meeting solution provides users with a persistent platform for communications before, during, and after meetings. This is an important differentiator from other single-mode video solutions available today. And of course, all of this with RingCentral's carrier-grade quality, security, reliability, and global footprint.

Complementing our UCaaS solutions is the RingCentral CCaaS product portfolio. We are seeing strong cloud adoption trends, with many customers choosing integrated UCaaS and CCaaS from a single leading provider. Contact center was included in over 60% of our $1 million TCV wins in Q4, including multiple wins for our native RingCentral Engage Cloud Contact Center platform. We are particularly proud of a recent 2,000-user win that combined RingCentral Office with RingCentral Engage.

This major NGO customer will leverage the full power of RingCentral to help people displaced by COVID-19 find new employment. In conclusion, we have a strong, well-differentiated portfolio of industry-leading cloud communication solutions. And over the past several years, we focused on finding new innovative ways to efficiently bring these solutions to global markets. On that note, I'd like to extend my warm welcome to Vodafone Business as our newest key partner.

Vodafone is the largest model and fixed network operator in Europe. RingCentral will be the lead UCaaS offer for Vodafone Business' installed base of over 30 million customers. The Vodafone business will also offer RingCentral's CCaaS customer engagement solutions. RingCentral believes in winning through partnerships.

Over the past several years, we've established a unique go-to-market ecosystem of direct channel and strategic partnerships. RingCentral is the lead UCaaS provider for Avaya, Atos, Alcatel-Lucent Enterprise, AT&T, BT, TELUS, and now Vodafone Business. This gives us preferred access to over 200 million potential users worldwide. We're humbled and grateful to find ourselves in this unique position.

And we are committed to driving a pace of rapid innovation and GTM expansion to continue delivering world-class cloud communication solutions for years to come. With that, I will now turn the call over to our president and chief operating officer, Anand Eswaran, for additional details on our progress and some recent achievements.

Anand Eswaran -- President and Chief Operating Officer

Thank you, Vlad. Good afternoon, everyone. Operationally, Q4 was an outstanding quarter across the board. ARR growth was solid in all customer segments.

Both new customer wins and installed base expansions contributed to the strong performance. And we are seeing a high level of demand across our integrated portfolio of cloud-based unified communications and customer engagement solutions. Modern cloud communication solutions are becoming a top priority for companies of all sizes. We are privileged to be a key partner in their journey to the cloud.

We continue rapidly innovating, and we are scaling our operations and platform to effectively meet the needs of a growing customer base. Let me share some highlights. First, our people. We further strengthened our leadership team throughout the year.

We appointed a new EVP of products and engineering, Nat Natarajan; chief marketing officer, Jaya Kumar; chief digital officer, Matthew Bishop; chief information security officer, Heather Hinton; and chief privacy officer, Paul Azani. These industry leaders bring invaluable operational and technology expertise. Second, our channel partners. We continue to expand our presence in the channel community, a key driver of our upmarket success.

In Q4, our channel ARR increased 55% year over year to $465 million. Third, our service provider partners. We are seeing positive momentum with service provider partnerships. We expanded our relationships and became a lead offer for industry leaders like AT&T and BT.

We are also excited to welcome Vodafone Business as a strategic partner. Fourth, our strategic partners in Q4. We expanded our rollout with Avaya and Atos in several new geographies. Alcatel-Lucent Enterprise is on track for a Q1 launch.

We are seeing early go-to-market traction with our strategic partners contributing multiple million-dollar-plus TCV wins in Q4. Fifth, with our proven upmarket traction, we signed two $10 million-plus TCV deals, along with a record number of $1 million-plus large TCV wins in Q4, up over 50% sequentially. And finally, our growing product portfolio was a key driver of our strong Q4 results. Our integrated portfolio of UCaaS and CCaaS solutions is a key differentiator.

Looking ahead, with RingCentral Glip, we are reimagining smarter meeting solutions with integrated team messaging and video for persistent collaboration in a work-from-anywhere environment. Let me now dive into some detail. I'll begin with the exceptional Q4 contributions of the channel. Channel contributed over three-quarters of the $1 million-plus TCV wins with a mix of UCaaS and CCaaS wins across both new customers and upsells to existing customers.

One of the marquee wins from channel in Q4 was a Fortune 500 specialized staffing firm. This customer needed to replace aging on-premise systems with a highly reliable global cloud platform. With RingCentral, this customer can now manage its 6,000-plus users across over 20 countries on a single global communications platform. As for service providers, we had another exciting quarter with strong results and new partnerships.

First, Vodafone Business. This partnership provides RingCentral an opportunity to further scale our international go-to-market reach to a complementary enterprise and mobile user base. Vodafone Business will deliver a new co-branded, cloud-based communication service based on our leading MVP platform, as well as our portfolio of CCaaS solutions. For AT&T, we continue to see solid momentum as we lead UCaaS solution.

We are seeing increased traction with large customers and excited at the opportunity to broaden our partnership in new verticals like state and local education customers. For BT, on the heels of becoming their lead UCaaS provider, we had a strong UCaaS quarter in Q4. As for the strategic partnerships, let me start with Avaya. We expanded our ACO rollout, launching in five new European countries in Q4.

We are seeing adoption across customers of all sizes in multiple geographies with particular strength in our enterprise segment. This includes a 7,000-plus user Microsoft Direct Routing win with a large, diversified insurance vendor. We are encouraged with a strong early growth momentum in seat count, transaction value, volume, and deal size. With Atos, we have also hit the ground running.

Since initial European launch in August, we've expanded to the U.S., U.K., and Australia. The pipeline is growing well. We are also excited to have Atos begin its own implementation of Unify Office via RingCentral for their 30,000-plus employees in over 20 countries. As businesses embraces working from anywhere, our integrated platform of UCaaS and CCaaS solutions drove strong customer wins during the quarter.

In Q4, we won a deal with a Fortune 500 financial services provider. This customer required a highly reliable, trusted, FINRA-compliant communication system. Our deep enterprise cloud phone system expertise and vertical market integrations were key differentiators in this 4,000-user win. We have a bigger opportunity to expand our footprint over time not only for users but also with other products.

We also saw strength in the quarter with our contact center solutions. Contact center was included in over 60% of our $1 million-plus TCV wins in Q4, including nearly 100 wins for our native RingCentral Engage Cloud Contact Center platform. We are seeing positive momentum with existing customers. For example, Path Forward, a provider of IT and technology solutions for medical practices and a long-standing RingCentral UCaaS and CCaaS customer, tripled its Engage Voice seat count to 450.

Wins like these demonstrate our ability to land and expand and illustrate our significant opportunity ahead with larger customers. I joined RingCentral a little over a year ago, and I'm so proud of the accomplishments of the team in 2020. We strengthened our leadership team with six new CXOs and top talent added throughout the organization. We deepened our portfolio of product capabilities with RingCentral Video, Glip, and RingCentral Cloud PBX for Microsoft Teams, which enables direct routing integration.

We launched Avaya Cloud Office and Atos Unify Office and added new key partners, including Alcatel-Lucent Enterprise and Vodafone Business. We had numerous industry accolades for diversity, leadership, and culture, and we broke through the Glassdoor Technology Top 10 Best Places to Work. Last but not the least, we delivered consistent and strong results for the year. We continue to execute with a clear vision and strong discipline.

I'm incredibly grateful and humble to be a part of this journey. With that, I will turn the call over to our chief financial officer, Mitesh Dhruv.

Mitesh Dhruv -- Chief Financial Officer

Thanks, Anand, and good afternoon, everyone. 2020 was a standout year for our financial performance driven by many of the tailwinds that Vlad and Anand highlighted. Subscriptions revenue grew 33% year over year and surpassed $1 billion, a significant milestone for RingCentral. Non-GAAP operating margin improved 50 basis points to 9.7%.

And for several consecutive years, we've been executing above the Rule of 40, demonstrating profitable growth. Q4 capped the year with strong performance on key financial fronts. Here's a quick snapshot. The RingCentral Office ARR grew 39% year over year to over $1.2 billion.

Total ARR grew 35% to $1.3 billion. Subscriptions revenue grew 34%, above the high end of our guidance. Non-GAAP operating margin was over 10%, at the high end of our guidance. And non-GAAP free cash flow margin of 6.5% improved about 120 basis points sequentially.

These robust trends reflect RingCentral's growing customer mind share, both with new and existing customers, as well as contributions from our partnerships, at favorable unit economics. To that end, we yet again saw strong new logo momentum in Q4. Our ability to land new logos validate the strength and value of our MVP platform as enterprises look to transform their entire business communication stack to the cloud. And traction with our existing customers has never been better.

Three key things there. First, upsell represented over 40% of new office bookings. Second, churn hit a record low exiting the year. And third, trends stabilized in those verticals most impacted by COVID earlier in the year.

As to our partnerships, we are pleased to see contributions from Avaya and Atos as they begin to ramp. We are also seeing strong results from our carrier partners, most notably from AT&T. Looking ahead in 2021, we have a healthy pipeline across all our segments as each facet of our global sales ecosystem is providing growth opportunities. As more users from our partners come online throughout the year, we expect strong incremental contributions.

And beyond 2021, we'll layer on more growth from partners like Alcatel-Lucent Enterprise and Vodafone Business. With these structural tailwinds, we feel confident in the momentum into the new year. With that, the 2021 outlook numbers. We expect total revenue growth of 25% to 26%.

We expect subscription revenue growth of 26% to 27% with similar revenue linearity between the first half and the second half as we saw in 2020. We expect non-GAAP operating margin between 10% and 10.1%. And we expect non-GAAP EPS of $1.20 to $1.24. In summary, 2020 truly was a transformational year for RingCentral.

New logo momentum was strong. Expansion within the base was picking up. Churn continued to improve throughout the year. Global partnerships have started to contribute.

We expanded our product portfolio, and we've added new catalysts for future growth. Our technology moat, combined with a differentiated distribution moat with our unique partnerships, positions us for long-term durable growth. We continue to invest in R&D, growth partnerships, and quota-carrying resources. This will enable us to drive further product innovation and build pipeline to capture this large opportunity ahead of us.

We are confident in our ability to thrive in this $50 billion-plus addressable market, and we believe 2021 could be a very exciting year ahead for RingCentral. With that, let me turn the call to the operator for Q&A.

Questions & Answers:


Operator

[Operator instructions] Our first question is from Brian Peterson with Raymond James. Please proceed with your question.

Brian Peterson -- Raymond James -- Analyst

Oh, sorry, a little bamboozled by the mute button there. Apologies, guys. Can you hear me? So, yeah, just on the enterprise strength. I know you mentioned the record number of seven-figure deals.

It sounds like there were a lot of contributing factors there. Is there any way to kind of unpack that a little bit?

Mitesh Dhruv -- Chief Financial Officer

Sure. Sure, Brian. I'll take that. So I'll give some more financial color on the $1 million TCV deals here.

You're right. We did have a banner year on the $1 million TCV wins. It was up 50% sequentially. We also were able to squeeze in two deals over $10 million.

What I'll do is I'll provide some color on two or three dimensions, Brian. One is on the quality of the deals themselves, on the go-to-market motion, and then some product color on where the deals came from. On the deals themselves, right, the deals are getting larger. The wins are getting larger, and customers are committing to longer durations.

On Q4 itself, it was a record year -- a record quarter, right? The total TCV value we booked for $1 million deals was over $100 million. So it was unprecedented for us, and this was up 70%. On the go-to-market side, it was really broad-based. Three-quarters of the wins came from channel partners.

And we also had like very good representation from all the three As. We had Avaya, Atos, AT&T, all had $1 million representations. We also had -- about half the deals were from our targeted verticals like financial, education, healthcare. And now, if you move on to the product side, about over 60% of our $1 million wins included a contact center element, so really good pull-through.

I mean, so, overall, if you just pull this all together, net-net, we are clocking in higher lifetime value deals, and they're coming in from all facets, on GTM products and verticals, some established factors but also some still ramping.

Brian Peterson -- Raymond James -- Analyst

No, that's great color, Mitesh, and congrats on that. So maybe a follow-up. You guys have made a lot of investments internationally over the last 12 months. I know it's kind of hard to paint all international markets with a broad brush, but I'd be curious what you've seen in terms of demand signals for some of these markets.

Is there a tipping point? And how should we think about the adoption curve relative to the strength that you've seen in the U.S.? Thanks, guys.

Anand Eswaran -- President and Chief Operating Officer

No, that's a great question. This is Anand. I'll take that. So you're right in your question.

If I look at Avaya, if I look at Atos, we've added multiple international geographies in Q4. And in line with that, we've had one of the stronger international quarters as well both in terms of growth and in terms of percent of revenues. So the progress is exactly as we expected because we are layering in many facets of growth primarily through our partners, all contributing to significant international expansion.

Brian Peterson -- Raymond James -- Analyst

Great. Thank you.

Operator

And our next question is from Bhavan Suri with William Blair. Please proceed with your question.

Bhavan Suri -- William Blair -- Analyst

Great. Thanks for taking my question guys and congrats on the $1 million deals. Number is great. And then, obviously, the color you just gave was phenomenal.

I just want to follow up on the previous question but now looking forward. So you think about the guide you gave, and it's one of the higher ranges that you have given for a forward guide historically. I'd love to understand, maybe for Mitesh on initially, what's behind that? What are the tailwinds that you're building in? And what are you not building in that could potentially be upside? Help us think about how to unpack the guide given the tailwinds of the three A partners, obviously, the BT partnership, Vodafone, the natural move to cloud, etc. I'd love to understand that.

Mitesh Dhruv -- Chief Financial Officer

Yeah. Just a request for everybody to just go on mute. Vlad, if you are on mute -- because we are on different locations, Bhavan. So, yes, I will take that.

So what we'll do is -- Bhavan, I'll quickly take it a clip below on the planning process itself, how we do planning. And then I'll hit the punchline. So we'll give you some good color on what we are baking in or not. From an annual planning perspective, right, we combined two inputs, Bhavan.

One is the extrapolation of trends we witnessed. That's one. And then we then marry those to a bottoms-up view from our various go-to-market product motions. So from a trend's point of view last year, COVID definitely raised the priorities for, as you said, business communication solution.

It's a structural change. It's a more strategic purchase. And we saw elements of that play out throughout the year. Our new logos were strong, and we saw incremental improvement on churn and retention metrics as we progress throughout the year.

And enterprise is kicking in high gear. So those are the trends we are seeing. Now, looking at bottoms-up 2021, we evaluated multiple aspects: first, on the go-to-market side, direct channel, the three A service providers; and then also, we layered on our go-to-market product promotion for the Office, Glip, Video Messaging, and Contact Center. So combining these two trends, call it tops-down and bottoms-up, usually -- and as usual, even for 2021, we always take a prudent approach to our guidance.

And so we've assumed a reasonable ramp for Avaya and Atos. And for Alcatel-Lucent and Vodafone, we've baked in minimal contributions as the ramp -- it will take about six to nine months to ramp from the launch date, so it's more of a 2022 driver for us. So overall, I mean, if you just send it out, we feel really good about what we saw in Q4 and the visibility we are seeing with the early trends here.

Bhavan Suri -- William Blair -- Analyst

Gotcha. That's helpful. And maybe one, maybe to Anand here. You know, you guys have offered, from a product perspective, a solid set of APIs, right, to voice customers some time.

Along with purchases of RCO, you've added some CPaaS capabilities, bulk messaging. But some of the primary UCaaS competitors have made investments in full CPaaS offerings. I guess I'd just love to think strategically about the importance of this functionality as part of the ability to differentiate your UCaaS Contact Center as a Service offerings. Do you kind of see the full CPaaS ownership that's having benefits from a competitive perspective? Or do you think that right now, it's kind of a focus on the core integrated functionality of what you have today? I'd love to understand how you think about that strategically.

Thanks.

Anand Eswaran -- President and Chief Operating Officer

Well, that's a great question, actually. So I would basically say our core focus remains the same, which is UCaaS across Message Video Phone, deep integration of Contact Center, bringing that AI element to it. You saw the DeepAffects acquisition, which Vlad called out. And so that remains the core strategy.

Now, when customer demands come through, we are absolutely open to exploring specific CPaaS use cases. You saw us do that with a high-volume SMS use case, which we basically talked about last quarter. But that's very specific, and that's customer-driven. So that's been our strategy.

It's consistent, and we are going down the same path.

Bhavan Suri -- William Blair -- Analyst

Thanks, Anand. I appreciate the color and the candor. And again, guys, just really consistent, what a great job.

Anand Eswaran -- President and Chief Operating Officer

Thank you.

Operator

And our next question is from Sterling Auty with J.P. Morgan. Please proceed with your question.

Sterling Auty -- J.P. Morgan -- Analyst

Hey, thanks, guys. I think you got audio issues because, for a while, it sounded like Darth Vader was on the call with us. So maybe, Mitesh, can you give us a sense, you added a number of geographies through the fourth quarter with Avaya. Help us understand how these big five partnerships will ramp in terms of the additional geographies and at what quarter would you anticipate all of the partners to be fully ramped in all of the geographies that they want to compete in.

Mitesh Dhruv -- Chief Financial Officer

Yeah, sure. So look, we've got three partners right now, strategic partners: Avaya, Atos, and Alcatel. Avaya is in 12 countries, Atos is in 11 and Alcatel will launch in 10, 11 countries coming on. If you look at the size of the market and the addressable market we have, we'll be able to address a lot of this opportunity in the next couple of years.

So I don't think there's going to be any dearth of what we can attack in terms of these seats because we are going after the biggest geographies first and where the most of the seats are. So I feel, over time, as I mentioned earlier, Avaya is ramping really nicely, Atos is off to a good start and it will keep on providing incremental contributions throughout the year. And Alcatel-Lucent is going to be more of a 2022 driver. And one thing is that these partnerships, I don't think you can think of as them as a one-and-done.

So they provide you a continual benefit for several years to come. So that's the way we think about these partnerships.

Sterling Auty -- J.P. Morgan -- Analyst

Sounds good. And then one follow-up. In terms of the Avaya wins in the quarter, you mentioned the 7,000-seat win. Where are you hitting in terms of the sweet spot? And is there a cap on the size of the organization where you think the product is going to resonate moving forward, specifically through Avaya?

Anand Eswaran -- President and Chief Operating Officer

That's a great question. Let me take that. So a couple of things. You said, where are we hitting the sweet spot.

So what I see is, across all fundamentals, we feel that the Avaya team, their channels are firing on all cylinders. So that's the customer transactions, that seat expansion, that large seats closed, and that geo expansion we saw. In line with the fact that we have now 12 countries online for ACO, we actually saw a good bit of geo expansion broadly. And we also see the last layer, which is specific traction on verticals like financial services and manufacturing.

So what I would say is it's actually broad. It's broad, and we see strength everywhere as we expand our relationship with our Avaya.

Sterling Auty -- J.P. Morgan -- Analyst

Got it. Thank you.

Operator

And our next question is from Terry Tillman with Truist Securities. Please proceed with your question.

Terry Tillman -- Truist Securities -- Analyst

Yeah. Thanks for taking my questions, and I'll echo that congratulations. Great quarter. I guess maybe, Mitesh, this question is for you.

There's been a lot of chapters to the AT&T book. Over time, it ramped from basically nothing to well over 10% of revenue. In fact, I think it was in the teens as a percentage of revenue. But then it started to kind of trend lower.

But what I would love to get a perspective on is was that still a headwind though in '20 from some of the dynamics going on with AT&T a couple of years ago? And how do we look at AT&T into '21 in terms of tailwinds, specifically around that relationship?

Mitesh Dhruv -- Chief Financial Officer

Sure, Terry. I love the way you phrased it. There are a lot of chapters in the AT&T storybook. And I will say the greatest chapter is being written right now.

So that's, of course, tongue-in-cheek here. But if you harken back memory lane, at the trough a couple of years ago, AT&T was about a 5-point headwind to growth. Now, fast forward to the end of 2020, with our new relationship under way, these headwinds are dissipating. 2020, in fact, was one of the best bookings year in our history with AT&T.

And the contributions are strong across the board, upmarket and down market, and we recently have launched new packages to open up new verticals like SLED. So for 2021, looking beyond, to answer your question, we don't expect this AT&T relationship to be a headwind anymore to overall growth. And I'll wrap it by saying this that, with our new expanded relationship with new markets, I think in the next couple of years, AT&T could become a larger business definitely than the previous go-around we had.

Terry Tillman -- Truist Securities -- Analyst

Yes, that's great to hear. I don't usually talk about or ask about stock comp, but it looks like it's going to double. Could you just quickly describe some of the dynamics that's causing the significant stock comp? And again, congrats.

Mitesh Dhruv -- Chief Financial Officer

Sure. Thanks, Terry. Yes, stock comp, I would say there are two or three main reasons for the stock comp increase. The first one is our strengthening of the executive team.

Anand did mention that we've been hiring a seasoned C-suite bench. The market opportunity is just too large for us not to scale to become a multibillion-dollar company. So we are hiring ahead of that. We've hired several C-suite executives there.

So that's part one. Second is our overall headcount increase, which is RingCentral is a great place to work. And people are seeing our vision. So we are adding headcount in the normal course of business.

And that's sort of the second reason with the headcount increase. And third one is the increase in stock price, right? While it's great, for the market cap and the stock price increase is good, it also puts pressure on the stock comp. But having said all of that, Terry, net-net, if you look at the dilution in the share count, we are adding about 1.5 million shares. So there's going to be lower dilution than we've had in the previous years.

So we get to combine the best of all elements. We get to hire a top talented team, and we get to reduce dilution for our shareholders. So I think it's a win-win there.

Operator

And our next question is from George Sutton Craig-Hallum. Please proceed with your question.

George Sutton -- CraigHallumCapital Group LLC -- Analyst

Thank you. Mitesh, that was the best job I've ever heard, taking a large stock comp and turning it into a positive, so congratulations.

Mitesh Dhruv -- Chief Financial Officer

George, thanks a lot.

George Sutton -- CraigHallumCapital Group LLC -- Analyst

I wanted to look at 2020, which I completely agree was a transformational year when we look at all the partners and the new offerings. I wonder if we look forward a full year from here, judging on your pipeline that you're looking at right now, are we going to see additional partners? Or are we going to see additional offerings that expand the platform in ways that we might not be considering today?

Anand Eswaran -- President and Chief Operating Officer

I'll take that. So I think we've always talked about this. RingCentral's success is founded on the basis of partnerships. So you can expect that we are constantly looking to expand our relationship with our partners and thinking through partnerships across all dimensions, which is our health and wealth partners, our strategics, and our GSPs.

So that is absolutely something which we are focused on.

George Sutton -- CraigHallumCapital Group LLC -- Analyst

Gotcha. One other thing relative -- you brought up Microsoft in a direct routing win. I wondered if you could go into a little more detail on what you're seeing out of that Microsoft opportunity.

Anand Eswaran -- President and Chief Operating Officer

Yeah. So see, when I think of Microsoft, I literally think about it in three different ways. The first is the UCaaS solution, right? We feel really good about where we are because, one, it's about integrating across message, video, and phone, like Vlad called out, which is the reason you see Ring as the leader in the Magic Quadrant for the sixth year in a row now with Gartner. And we're still expanding our innovation moat every single day, which is what you see reflected in the large deal wins.

So we feel very good about the UCaaS solution. The second thing I would call out is the integration with CCaaS. I mean, one of the things Mitesh just mentioned is over 60% of our large deal wins actually had contact center in it, and the deep integration with CCaaS is a very unique differentiator. And then the final thing I'd talk you through is core customers who are a big Microsoft shop.

That's where the direct routing comes in because they've made their decision to standardize on Microsoft and, hence, Teams is in play. But with direct routing with Teams, it still gives them the opportunity to leverage the best cloud business forms, such as RingCentral, which is where we are seeing the traction. And that's the example of the 7,000-plus Teams direct routing win we talked about. So we feel very good when we compete, and we feel really good when we can actually just work with Teams and integrate with it as well.

George Sutton -- CraigHallumCapital Group LLC -- Analyst

Great. Thanks, guys.

Operator

[Operator instructions] And our next question is from Michael Turrin with Wells Fargo Securities. Please proceed with your question.

Michael Turrin -- Wells Fargo Securities -- Analyst

Hey there. Thanks. Good afternoon. Mitesh, ARR picked up here in Q4.

We had to go back to 2015 to find 35% growth in our model. Is there anything you can add in terms of contribution from those strategic partnerships you're calling out? It sounds like the likes of Avaya and Atos are likely the furthest along. Anything you can add, both in terms of Q4 contribution and anything that might be embedded there in framing the initial outlook for the coming year is helpful.

Mitesh Dhruv -- Chief Financial Officer

Sure, Michael. Look, Q4 ARR was strong across the board. And every chip, in a way, further away. Also, we did have very strong contribution from our partnerships there.

We are extremely pleased with the progress with Avaya. It's been a heavy lift to make it a reality. It's really cross-functional with both companies. But it's been working really well.

And we saw states doubled quarter over quarter with Avaya, and we had multiple million-dollar deals there. And Avaya will serve as a blueprint for future partnerships. The first one is Atos, which is again, off to a great start. The product is now offered in 11 countries now.

More international companies are coming. Countries are coming in 2021. We are activating the partner ecosystem. In Q4, for Atos, we had 3x the number of partners in Q4 quarter over quarter.

So I think Atos will start to incrementally add on to growth rates in 2021. But overall, the key thing to note, Michael, is that with the size of the opportunity we are and the penetration level being so low, I think this will be a multiyear drumbeat for us to provide an opportunity to grow at a solid rate for years to come with these partnerships.

Michael Turrin -- Wells Fargo Securities -- Analyst

Great. That's all clear. Thanks, guys.

Mitesh Dhruv -- Chief Financial Officer

Thank you, Michael.

Operator

And our next question is from Meta Marshall with Morgan Stanley. Please proceed with your question.

Meta Marshall -- Morgan Stanley -- Analyst

Great. Thanks. Maybe just a question, given the success of the homegrown Engage Contact Center platform and, obviously, the success of RingCentral Video, just any recent thinking about either transitioning kind of existing customers that may be on your kind of Zoom video product, as well as just kind of status of the inContact relationship as your kind of homegrown products kind of continue to develop. Thanks.

Anand Eswaran -- President and Chief Operating Officer

Yes. Meta, this is Anand. I'll take that. Good question.

So let me start from the last question you asked. Engage was a good quarter. Our partnership with inContact is really strong, and that continues as well. So no change in strategy.

We continue to work closely with inContact. They are a big part of our large TCV wins where Contact Center was embedded while we make progress on Engage. Now, on the second part of your question, which was Zoom and RCV, right now, every customer who we acquire new defaults to RingCentral Video, and we've had good traction, and we've got good feedback. As for the installed base, we are going through the process of getting them on.

It's not a forced migration, but we're getting them on our RCV platform because the benefit of a tightly integrated experience across message, video, and phone is very strongly resonating with our customers, and we are on that journey as well right now.

Meta Marshall -- Morgan Stanley -- Analyst

Is there a timeline for that as far as when you would expect that migration to be complete?

Anand Eswaran -- President and Chief Operating Officer

No timeline, but the journey and the process is pretty strong.

Meta Marshall -- Morgan Stanley -- Analyst

Great. Thanks.

Operator

Our next question is from Samad Samana with Jefferies. Please proceed with your question.

Samad Samana -- Jefferies-Analyst

Hi. Good evening. Great quarter. I'll jump to the question for the sake of time.

Mitesh, if I look at the channel partner ARR, it actually, on a percentage of net added dollars, was the smallest contribution that it's had in several quarters, even looking back the last couple of years. I'm just curious, how should we think about maybe the percentage of channel ARR dollars as a percentage of total ARR added going forward? And just was there anything in the fourth quarter where Direct was particularly strong that might have driven that mix shift lower for the contribution from the channel?

Mitesh Dhruv -- Chief Financial Officer

Look, I mean, yeah, so everything was really strong in Q4, particularly Direct and the enterprise was really strong. If you look at the growth rate for the channel, again, the mix is driven by both components, right, the channel and the overall. So the overall was very strong. But if you look at, Samad, the channel growth rate of, I think, about 55%-ish, it's tracking in line with the overall enterprise growth rate.

So there was nothing really to call out. In fact, channel, we are seeing increased momentum in terms of number of partners we are signing. And some of the initiatives we are working on where we can help channel close the deals faster, that's under way as well. So nothing more to read there.

Samad Samana -- Jefferies-Analyst

Great. I figured it was Direct strength. And, Anand, maybe just one for you. On Glip Pro, any early reads on download data or activity or early engagement from customers or trends that are worth calling out, to the extent you've seen conversion? I know it's only been just around 60 days, give or take, but just given that it's an exciting opportunity, anything you could share would be helpful.

Anand Eswaran -- President and Chief Operating Officer

No. So, I mean, good question. It is too early. It's 61 days to be precise.

And the progress is as we expected, and it's just too early to share any trends or any other details.

Samad Samana -- Jefferies-Analyst

Great. Gotcha. Thanks for taking my questions, guys, and congrats on a strong finish to 2020.

Anand Eswaran -- President and Chief Operating Officer

Thank you.

Operator

And our next question is from James Fish with Piper Sandler. Please proceed with your question.

James Fish -- Piper Sandler -- Analyst

Hey, guys. You highlighted a number of very impressive wins with large entities. But really, we only heard a few thousand seats across them. Is it just the initial rollout to the broader enterprise? Was it more departmental at this point and that we're looking to upsell kind of over the next year to two? Even extend that to Office, obviously, impressive 30,000-employee addition, but they obviously have about 3 times more than that in terms of the overall.

So just trying to understand, is it just the initial win and we should expect the next year to two to see additional adds?

Anand Eswaran -- President and Chief Operating Officer

Not really. If I just look at the record $1 million-plus TCV wins we had, it was actually pretty healthy, and it was a good mix of UCaaS and CCaaS. And so I actually thought it was pretty healthy as we look at the number of seats going forward as well. So I'm not sure where you picked that up from.

And we've also had a fairly good upsell, as Mitesh called out as well. So we're also not just getting in new customers, but we are reaching back into our installs. And we have a very good upsell expansion motion, which is bearing fruit as well, which is reflected in the seats as well. So we see good progress across all of them, not just the number of large deals but also the seats across them.

And Frost & Sullivan just published their report for 2020 where they called out RingCentral as not just the highest in terms of share in terms of users and seats but also in terms of growth for users and seats as well. So we feel pretty good about it.

James Fish -- Piper Sandler -- Analyst

Thank you.

Operator

Our next question is from Ryan Koontz with Rosenblatt Securities. Please proceed with your question.

Ryan Koontz -- Rosenblatt Securities -- Analyst

Thank for taking the question, and thanks for all the color on the channels. Some terrific progress there. As we think about the channel mix increasing over time, any headwinds we should consider on the model to gross or operating margins?

Mitesh Dhruv -- Chief Financial Officer

No, you would not -- no, channel, in fact, it's an accretive motion, right? The channel themselves, as well as the strategic partners, they are accretive to unit economics because we don't get to pay the upfront sales and marketing costs for these motions. So over time, as the channel takes share, it would be neutral or at best -- neutral or slightly accretive to the model.

Operator

And our next question is from Will Power with Baird. Please proceed with your question.

Charlie Erlikh -- Baird -- Analyst

Hey, this is actually Charlie Erlikh on for Will. Thanks for taking the question. Congrats on the really strong results. I'll ask a quick one, just maybe on the pricing environment you're seeing.

With a lot of competitors and some coming at the market at a bit of a lower price point, I'm wondering if you could maybe comment on any changes you're seeing in the pricing environment at all if anything.

Anand Eswaran -- President and Chief Operating Officer

Yeah. So I'll take that, Mitesh. No, not a whole lot of change. We see the trend sort of kind of be the same across the year, so no material change.

Operator

Our next question is from Rich Valera with Needham. Please proceed with your question.

Rich Valera -- Needham & Company -- Analyst

Thank you, and congratulations on the strong results. Question on the SMB performance. Looked like you saw another quarter-over-quarter acceleration in the SMB growth rate. Wondered if that was due to improving churn, if that was a factor and if, in fact, SMB churn was back to pre-COVID levels.

Thank you.

Mitesh Dhruv -- Chief Financial Officer

Yeah, Rich. So, yeah, it's a good call-out on the SMB. There are a couple of things happening under the cover on the SMB side. I would say there are three or maybe four trends to call out.

The first thing is we are seeing stronger traction with our e-commerce motion, which is more of a self-service motion. And that's accelerating, which is pulling up the SMB growth. Second one is the benefit we are getting from our recent branding efforts. We now have the optionality for Glip Pro as well.

So that overall brand-new halo does fall through to the SMB side. And the third one, as you called out, the net retention or churn, definitely an improvement in churn in the SMB side. It's stabilized. It kept on getting better throughout the year.

We are almost there at the pre-COVIID level on the SMB churn front there as well. And I think the uber-driver I see in this COVID world, no one is really deploying on-premise equipment, right? People are only going to the cloud to stay productive. So I think that definitely helps the SMB space first.

Operator

And our next question is from Matt VanVliet with BTIG. Please proceed with your question.

Matt VanVliet -- BTIG -- Analyst

Thanks for taking my question and nice job on the quarter. I guess from a bigger picture standpoint, you mentioned the number of countries that you're in with a bunch of the bigger partnerships now. But I wonder if you have much of an update in terms of the number of partners kind of within those geographies or kind of across their entire systems, how well penetrated some of these bigger ones. I presume Avaya is a little further along, but just kind of how do you feel overall about the potential for sort of organic growth within these partnerships as you move through the year?

Anand Eswaran -- President and Chief Operating Officer

I'll give the first part of the subjective color, which is I'm assuming you're talking about partnerships like Avaya and Atos and their partners, right?

Matt VanVliet -- BTIG -- Analyst

Yes.

Anand Eswaran -- President and Chief Operating Officer

Yeah. So as we look at it, I mean, as we bring -- every country we bring on, we basically are able to activate all the partners in their channel who exist in those countries. And so as of now, we have activated almost somewhere in the 90s on Avaya partners in the countries we operate in. As Mitesh said, ACO is now available in 12 countries.

Atos is now available in 11 countries. And we feel really good about the percentage of partners in those countries we've activated, and we are working with to train, enable and, build pipe jointly.

Matt VanVliet -- BTIG -- Analyst

Thank you.

Operator

Our next question is from Siti Panigrahi with Mizuho. Please proceed with your question.

Siti Panigrahi -- Mizuho Securities -- Analyst

Guys, congratulations. Most of my questions are asked, but just a follow-up to the SMB question earlier. Mitesh, what's your expectation baked into 2021 in terms of SMB growth? Should we expect a similar kind of trend that we saw in Q4?

Mitesh Dhruv -- Chief Financial Officer

Yes. Look, SMB, we always internally model SMB, call it, high teens like that, mid- to high teens. It used to be low to mid-teens. Now, it's mid- to high teens.

I think that's the reasonable level to model. You just never know. SMB is easy come, easy go. So I think a more prudent way to dial in expectations is, call it, like high teens growth, right, in 2021.

Operator

And our next question is from Catharine Trebnick with Colliers. Please proceed with your question.

Catharine Trebnick -- Colliers Securities -- Analyst

Well, thank you for sneaking me in. Congratulations on a good quarter. So this is back to the Contact Center. Could you parse perhaps and go a little bit deeper into where you're using inContact versus your internal and Engage? And what's the gap you would say in capabilities between inContact and Engage? Because it does seem like you're moving yourselves directly into the Contact Center, even though you said earlier you still have a tight relationship with inContact.

So I'm just trying to parse the capabilities and where you use one versus the other. Thank you.

Anand Eswaran -- President and Chief Operating Officer

Yeah. You know, Catharine, hopefully, we'll have a follow-up with you on that. That will take a bit of time. I would say at a 30,000-foot level, essentially, it depends, one, on the specific use cases which the customer is looking at.

It also depends on the size of the customer and the number of agents they want. So all of that comes in together to help us understand which product we lead with. As I said -- again, I'll go back to saying it again, our partnership with inContact is really strong and further strengthening, and we see huge momentum as part of that. We also see Engage pick up momentum in specific use cases, in smaller customers as well.

So it's literally -- it's working across the board with our customers directly and also with our channel.

Operator

Our next question is from Matt Niknam with Deutsche Bank. Please proceed with your question.

Matt Niknam -- Deutsche Bank -- Analyst

Hey, guys, thank you for taking the question. Just a follow-up on the $1 million deal, so we got some good color on the fourth quarter. Any color you can share in terms of how those size deals have been trending thus far during the quarter in 1Q? Thanks.

Mitesh Dhruv -- Chief Financial Officer

Yeah. Let me answer that. But in 1Q -- we are still in 1Q. What I would say is Q4 is a seasonally strong quarter.

It's the strongest quarter. That said, I'll just broaden out the question here. If you look at the trends we are seeing, early trends in Q1, we are seeing our trends of Q4 continue into Q1 overall.

Operator

[Operator signoff]

Duration: 65 minutes

Call participants:

Ryan Goodman -- Head of Investor Relations

Vlad Shmunis -- Founder, Chairman, and Chief Executive Officer

Anand Eswaran -- President and Chief Operating Officer

Mitesh Dhruv -- Chief Financial Officer

Brian Peterson -- Raymond James -- Analyst

Bhavan Suri -- William Blair -- Analyst

Sterling Auty -- J.P. Morgan -- Analyst

Terry Tillman -- Truist Securities -- Analyst

George Sutton -- CraigHallumCapital Group LLC -- Analyst

Michael Turrin -- Wells Fargo Securities -- Analyst

Meta Marshall -- Morgan Stanley -- Analyst

Samad Samana -- Jefferies-Analyst

James Fish -- Piper Sandler -- Analyst

Ryan Koontz -- Rosenblatt Securities -- Analyst

Charlie Erlikh -- Baird -- Analyst

Rich Valera -- Needham & Company -- Analyst

Matt VanVliet -- BTIG -- Analyst

Siti Panigrahi -- Mizuho Securities -- Analyst

Catharine Trebnick -- Colliers Securities -- Analyst

Matt Niknam -- Deutsche Bank -- Analyst

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