RingCentral (RNG) Q4 2021 Earnings Call Transcript

RingCentral (RNG -0.79%)
Q4 2021 Earnings Call
Feb 22, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to RingCentral's fourth quarter 2021 earnings conference call. All participants will be in a listen-only mode. [Operator instructions] After today's presentation, there will be an opportunity to ask questions. [Operator instructions] Please also note this event is being recorded.

And I would now like to turn the conference over to Ryan Goodman, head of investor relations. Please go ahead.

Ryan Goodman -- Head of Investor Relations

Thank you. Good afternoon and welcome to RingCentral's fourth quarter 2021 earnings conference call. I'm Ryan Goodman, RingCentral's head of investor relations. Joining me today are Vlad Shmunis, founder, chairman, and CEO; Mo Katibeh, chief operating officer; and Vaibhav Agarwal, interim chief financial officer.

Our format today will include prepared remarks by Vlad, Mo, and Vaibhav, followed by a Q&A. Some of our discussions and responses to your questions will contain forward-looking statements, including our first quarter and full year 2022 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, we continue to be impacted by the COVID-19 pandemic and its effects on our business will depend on the severity, duration and extent of the pandemic and actions taken by governments businesses and consumers in response to the pandemic, 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. Please 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 our investor relations website. With that, I'll turn the call over to Vlad Shmunis.

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

Good afternoon and thank you for joining our fourth quarter earnings conference call. I'd like to start the call with a warm welcome to our new chief operating officer, Mo Katibeh. Mo and I have known each other for many years, and Mo is very familiar with RingCentral as he had previously led the group responsible for our AT&T partnership. Mo joins us from AT&T business, where over the past 20 years he held multiple executive positions, including chief product officer, chief marketing officer, and head of AT&T Network Infrastructure and Build.

Mo has managed the portfolio of businesses with $36 billion in annual revenues and has managed a global force of 50,000. Given Mo's customer-centric mentality, deep appreciation for innovation, and passion for building multibillion-dollar global cloud businesses, I'm confident that he will be an invaluable asset to our entire team as we head into exciting 2022. I'm also pleased to be joined by Vaibhav Agarwal, our interim chief financial officer. Vaibhav has been with RingCentral for six years, most recently as chief accounting officer, and has been instrumental in scaling and leading RingCentral's finance organization.

Vaibhav was essential in driving the financial aspect of key growth initiatives, including our strategic partnerships and rapidly expanding ecosystem of global service providers. Prior to RingCentral, Vaibhav had senior financial position at PricewaterCoopers and Intel. With that, on to the results. We delivered an outstanding fourth quarter.

First, subscriptions revenue increased 37% year over year to $420 million. This is an acceleration of 3 points year over year. Second, total ARR increased 39% year over year to $1.8 billion. This is an acceleration of 4 points year over year.

Third, mid-market and enterprise ARR, which includes customers generating $25,000 or more in ARR increased 52% year over year to over $1 billion. And fourth, we announced our strategic partnership with Mitel, a global market leader in business communications with over 35 million UC users worldwide. Our continued leadership and success in the massive $100 billion-plus UCaaS market opportunity is evident in our strong Q4 and 2021 financial results. We are in the early innings of a generational transformation from legacy landline voice-only telephony to mobile-first multimodal cloud communications.

Businesses are embracing multiple modes of communications, including team messaging, video, and voice across multiple types of devices. They require a solution that can meet these evolving use cases without sacrificing reliability or functionality of a traditional PBX system. RingCentral is well-positioned to provide a feature-rich, highly reliable enterprise PBX replacement via a mobile service platform with integrated team messaging and business media. Why does RingCentral win? I'll give you a tip.

It all comes down to our culture of trust, innovation, and partnerships. Trust is something we earn with our customers day in and day out. The communications platform is the central nervous system of the business. Reliability, security, and data privacy are table stakes.

And as larger companies adopt cloud communications platform, auditability, analytics, and feature depth are mission-critical. RingCentral's track record of delivering Five9 uptime for over three years and counting is unparalleled. This equates to around five minutes of downtime a year, including maintenance windows. This is literally 100 times better than the three 9s or close to nine hours of downtime per year that some of our competitors provide.

Another cornerstone of the trust we've built with our customers is our unquestioned commitment to security and data privacy. Simply put, we never sell, share, misroute or mishandle our customer data in any way, shape or form. But -- last but not least, it is our deep commitment to comply with local regulations across the globe. Case in point, wherever RingCentral is available to customers, they can rest assured that it is compliant and legal to use.

Next, innovation. At the core of our innovation is our multi-mode mobile service approach to our mission to make business communications easy. RingCentral provides world-class voice capabilities fully integrated with world-class business video and advanced team messaging. Over one-third of our customer accounts engaged with both messaging and phone and over one-third of our customer accounts engaged with video and phone.

Overall, we continue to see over half of our customer accounts use RingCentral MVP for more than one mode of communication. But there is more to RingCentral than message, video, and phone. Our partnership with the leading cloud contact center provider puts us in a uniquely advantaged position to offer a market-leading UCaaS solution that is deeply integrated with the market-leading CCaaS. This bundled offering is driving strong traction with our market customers as RingCentral offers the only pure cloud mobile-first multimode UCaaS platform that is deeply integrated with a market-leading CCaaS cat that is available in the market today.

To further leverage and amplify this technology leadership, we've invested in co-branded solutions with industry incumbents providing our customers a more seamless path to modern communication and expanding our go-to-market reach. This brings me to partnerships, the third pillar of our success where we finished the year with strong momentum. Notably, we expanded our unique family of strategic partners, namely Avaya, Atos, and Alcatel-Lucent Enterprise with the addition of Mitel, thus growing our total opportunity with these strategic partners to over 200 million users. Mitel is off to a very promising start with rapid channel enablement underway and already contributing to our seven-digit TCV customer portfolio.

We are also working on integrating CloudLink for Mitel customers and beyond. We have also assembled a unique ecosystem of leading global service providers, which include AT&T, BT, Bell, and Verizon business. To this, we recently added Vodafone business and Deutsche Telekom, where last week, we announced the expansion of the relationship from video-only to full MVP functionality. Overall, we have now signed with four of the top 10 GSPs and over 10 in total, up from five last year.

This continues to unlock new geographies and new channels that we expect to help drive growth for years to come. In conclusion, 2021 was a transformative year for how businesses worldwide operate. And RingCentral is well poised to continue leading through our differentiated trust, innovation, and partnership strategy. With that, and with our winning team in place now fortified with exceptional new talent, we are looking forward to an exciting 2022 and beyond.

I will now turn the call over to our chief operating officer, Mo Katibeh.

Mo Katibeh -- President and Chief Operating Officer

Thank you, Vlad. I wanted to take a moment to introduce myself. I've been fortunate to spend the last 20 years of my life in the communications industry and have had the pleasure of working directly with Vlad and the team over the last five years. Many people have asked me, why did you want to join RingCentral and it's a pretty simple answer.

The size of the market opportunity, the quality of RingCentral's platform, and the relentless commitment to innovation are at the heart of why I've seen so many businesses select RingCentral and why my previous team and I were one of the first key partners for RingCentral. This is why I wanted to join the team. For years, I have seen firsthand the customer feedback on the positive impact RingCentral has had on their businesses, simplifying communications; enabling greater work flexibility; and ultimately, elevating productivity. I've now been with the company for a month and have been so impressed with our well-seasoned executive team and 2022 velocity.

The year is off to a strong start with robust pipeline growth, new partnership ramps, and a high innovation velocity, all reinforcing my decision. With that said, let me turn to our 4Q results and the product and go-to-market differentiators that position RingCentral to continue to lead in the cloud communications market. On the product side, we have our RingCentral MVP platform and our contact center solutions. And on the go-to-market side, we have a growing channel partner ecosystem, as well as ramping strategic and GSP partners.

I'll begin with the RingCentral MVP platform. It's all about delivering value and ROI to our customers. We are constantly adding customer-driven capabilities to our solution, which is driving new large enterprise wins. A great example is a win for 10,000 users at a Fortune 1000 financial sources company.

Here, the global presence of our platform set us apart from the competition. This implementation was across more than 20 countries with high-quality regulatory-compliant voice capabilities. Next, a nearly 15,000 user win with Brigham Young University, our new embedded dialer integration with Microsoft Teams with the key point of differentiation. We provided the customer with the advanced call handling and SMS that they required all in an easy-to-use interface with high reliability.

And what I loved about this win is that it wasn't just about UCaaS. The customer also chose us to provide a tightly integrated contact center implementation. And that brings me to our integrated cloud contact center offerings. We are seeing strong growth here, where over 60% of our $1 million-plus TCV wins included contact center.

A great example is our win with Renaissance Learning, who are a global leader in education technology. They are implementing RingCentral MVP for over 1,000 users and contact center for approximately 300 agents. By embracing the full platform, Renaissance provide the truly unique experiences to their customers, like contact center agents, the customer video interactions via RingCentral Video. The net here is that the RingCentral platform stands alone in its ability to meet large-scale customer needs.

And over the past few years, we have built an advantaged go-to-market model that includes direct channel, strategic and global service provider partners to tap into the global market opportunity. This has provided our customers with multiple ways to choose RingCentral. It's becoming less about how we reach the customer and more about providing a differentiated, seamless path to the cloud. To that end, we are evaluating the go-to-market-based ARR metrics that we currently provide.

As for Q4, channel delivered a great quarter with ARR of $684 million, up 47% year over year. Channel partners are especially key to winning with large enterprise customers who need to manage multi-mode communication implementations across in-office and remote workers. We have established trust and leadership in the channel community over multiple years, and we continue to expand our community presence at double-digit rates. Additionally, we're activating incremental channel networks via our strategic partners, including Avaya, Atos, Alcatel-Lucent Enterprise, and Mitel.

We benefited from ramping contributions in Q4 and look forward to incremental contributions in 2022. Avaya, Atos, and Alcatel-Lucent Enterprise all delivered sequential growth in both number of accounts and users. Three examples of marquee wins include a 1,500-user Avaya Cloud Office win with Carter Machinery, a large industrial equipment provider; and over 3,500-user Avaya Cloud Office win healthcare services provider, Watson Clinic; and an over 1,000 user Atos Unify Office Healthcare win. Finally, Mitel, our newest partner, is off to a promising start in terms of both channel enablement and early wins.

In fact, Mitel already contributed a win for approximately 7,500 users and 400 contact center agents with a leading financial services organization who needed an integrated UCaaS and CCaaS platform. As for global service providers, a space that is near and dear to my heart, we have several recent notable announcements. First, Vodafone business UC with the RingCentral has now launched in the UK, Germany, Hong Kong, Ireland, Italy, Portugal, Singapore, Spain, and Sweden. And within the first week, we secured an 800-user win with a prestigious university in the UK.

Just last week, we announced an expanded partnership with Deutsche Telekom, in which Deutsche Telekom will now sell a full MVP RingCentral with telecom solution. And third, with our RingCentral Rise platform, which enables faster lead to close time and significantly faster onboarding, we continue to expand our GSP presence with new carriers such as Versatel in Germany. In conclusion, I'm early in my journey with RingCentral, and I believe that RingCentral is early in its journey as well. This market is massive.

And with cloud penetration at less than 10%, we believe we're just getting started. I strongly believe that the company has the best technology in the space with a unique go-to-market motion that enables quick and efficient scale. I'm excited to tap into the passion of the team and determine a path to further realize shareholder and employee value. With that, I'll turn the call over to our interim chief financial officer, Vaibhav Agarwal.

Vaibhav Agarwal -- Interim Chief Financial Officer

Thank you, Mo, and good afternoon. 2021 was another strong year, and key financial metrics came in above our guidance. Subscriptions revenue grew 36% year over year to $1.5 billion, a 3-point acceleration from prior year. Non-GAAP operating margin was 10.2%, up 0.5 point year over year.

And non-GAAP free cash flow of $90 million was 5.6% of revenue, reflecting over 0.5 point of margin increase year over year. We finished the year on a high note in the fourth quarter. RingCentral Office ARR grew 41% to $1.7 billion. Total ARR grew 39% year over year to $1.8 billion.

Subscription revenues grew 37% year over year to $420 million. And non-GAAP operating margin was 10.5%, up over 40 basis points year over year. To summarize, this year, we delivered growth acceleration, higher profitability, and an increase in free cash flow generation. The company is operating well above the rule of 40.

This is a significant accomplishment for a growth SaaS company generating over $1.5 billion in revenue. It is a strong validation of our commitment to durable growth as we aim to capture this massive market opportunity, as well as our disciplined mindset in terms of investments and profitability. Let's begin with growth where I'd like to highlight several important underlying drivers. First, upmarket traction, Enterprise demand for our cloud-based communications platform continues to rise as evidenced by enterprise ARR which includes customers generating $100,000 or more of ARR, increasing 62% year over year to $734 million.

In 2021, we secured a record number of $1 million-plus TCV wins bolstered by growing traction with Fortune 1000 and Global 2000 enterprises. Second, contact center. Our unique offering of industry-leading UCaaS deeply integrated with industry-leading CCaaS is gaining traction with our larger customers. We are seeing bundled wins with both new and existing customers and contact center accounts for over 10% of the overall business.

Third, our partnerships. Our direct and partners' ARR increased 38% year over year, an 8-point acceleration versus last year, driven by ramping contributions from our strategic and global service provider partners. Looking ahead between strategic and GSP partner ramps and ongoing channel contributions, we are poised to significantly and efficiently scale our go-to-market reach. And fourth, international.

We more than doubled the number of international $1 million-plus TCV wins in 2021. International now accounts for 12% of revenue in 2021, up from 8% in 2020, and much of this opportunity is still ahead of us. We are well-positioned to capture this growth with key international partners ramping in 2022 and beyond. In addition to growth, it's also about delivering profitability.

We are benefiting from increasing net retention with higher upsell and record low churn for the year. Greater contributions from upmarket segment are driving higher lifetime customer value and higher sales lift productivity. In addition, as we capture incremental growth via our partner-oriented GTM motion, we expect to increasingly benefit from favorable unit economics by leveraging our partner scale distribution network. And finally, as the overall business continues to grow, we are unlocking efficiencies of scale in other operating expenses.

These positive dynamics on profitability enabled us to reinvest in key strategic areas while delivering 0.5 point of margin expansion in 2021. With this backdrop of robust market demand, UCaaS and CCaaS platform leadership, rapidly expanding go-to-market reach, and increasing profitability, let's turn to the 2022 outlook numbers. We expect total revenue growth of 25% to 26%, reflecting $2 billion at the midpoint. We expect subscription revenue growth of 26% to 28%, with similar revenue linearity between the first half and the second half as we saw in 2021.

We expect non-GAAP operating margin of 10.6%, reflecting a 40-basis-point increase year over year, and we expect non-GAAP EPS of $1.69 to $1.72. In summary, 2021 was an outstanding year, and we finished with strong momentum. With our market-leading solutions, ramping partnerships, and diversified go-to-market strategy, we are excited and energized at the opportunity ahead of us in 2022 and beyond. We have multiple incremental drivers flaring on and are confident in our ability to continue to deliver durable, profitable growth.

With that, let's turn the calls to the operator for Q&A.

Questions & Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator instructions] And the first question comes from Brian Peterson with Raymond James. Please go ahead.

Brian Peterson -- Raymond James -- Analyst

Thanks, everyone, and congrats on the strong quarter. So I wanted to hit on some of the strategic partnerships. So we saw the incremental ARR step-up this quarter. Maybe shed some light on how each of these are progressing versus your expectations? And how do you stack rank kind of the strategic partnerships as we think about a growth vector into 2022?

Mo Katibeh -- President and Chief Operating Officer

This is Mo, and thanks for the kind words. Let me take that one, and then I'll let Vaibhav chime in as appropriate. What I tell you is the partnerships are all executing relative to our expectations. As we look forward to '22, obviously, the newest one is Mitel, and it's getting off to a strong start.

Since we didn't have to use a branded solution there, we were able to very quickly go to market. As you heard during my commentary, we are already putting up wins as part of that partnership. And then it becomes incremental growth on top of everything that we've been doing today. The other comment that I'd make there is really the continued expansion of our GSP relationships.

As Vlad mentioned, we ended last year with five relationships. We're ending this -- the end of '21, if you will, with 12, we've more to come. So these are all strategic partners that layer on top of one another. They get through contracting.

We go through the sales enablement motion, and they start incrementally contributing to our growth. It's been quite strong across the board, as I mentioned, meeting our expectations.

Brian Peterson -- Raymond James -- Analyst

Great. Mo, and maybe a follow-up for you. Just -- it's great to have you on board. But I'd be curious, from your perspective, what are you looking to try to accomplish our key growth opportunities over the next kind of year or 2? And how we should be thinking maybe about longer term about those partnerships? Where do you think that you could take them? Thanks, guys.

Mo Katibeh -- President and Chief Operating Officer

Yeah. Thank you. So I tell you, I'm focused on five key things relative to near-term growth. The first one, as you stated, is executing on our existing partnerships and getting them ramped.

The second one, which we didn't talk as much about, is expanding on our AI motion around optimizing retention. We're getting to be quite a large company now. And so continuing to drive down our churn year over year is incredibly important. We started this work in 2021, and we're pouring fuel on that fire.

I think there's more opportunity there for us. The third one is even more new channel and partner motions in getting those scaled. The fourth one is brand investments and implementing our first brand investment at scale, which inherently we expect will drive growth across all of our channels. And then the fifth one is continuing to invest and differentiating on an ongoing basis, our MVP solution, as well as the way that we're approaching an integrated UCaaS and CCaaS solution for our customers.

So call that what we're doing explicitly for '22, beyond that, I think it's quite clear to everyone that we've got a world-class product, a pretty incredible go-to-market motion. My focus now is also on longer-term initiatives that are going to enable us to deliver sustainable, profitable growth in '23 and beyond. And so I'll leave it there and I'll just say more to come, OK? Let's talk about that further in the coming quarters.

Brian Peterson -- Raymond James -- Analyst

Good to hear. Thank you.

Operator

The next question comes from Bhavan Suri with William Blair. Please go ahead.

Bhavan Suri -- William Blair -- Analyst

Hey team, thanks. And let me echo my congrats on another just solid quarter. I guess maybe for Mo and a lot of this on -- but Mo, as you think about Mitel, it feels like that partnership is ramping faster than Avaya certainly did, faster than Atos and things like that. I guess, help me think through sort of -- is that because now you guys have become the standard and it's accepted? Is that because their salespeople are getting it faster? Is that because of the cloud? Like help me think through maybe why Mitel appears to be -- maybe it's not, but it seems to be ramping faster than those guys did, given the early nature of that relationship?

Mo Katibeh -- President and Chief Operating Officer

Well, the first comment I'd make is, as I mentioned during my opening comments, that all the partnerships, the three A's, if you will, saw quarter-over-quarter seat and revenue growth. So check on that one. Relative to your question on Mitel, and I made a reference to this just a few moments ago, it's off to a great start. One key difference here is there is no co-branding.

So we were able to immediately begin enabling the channel and the go-to-market motion. Already secured multiple wins, I mentioned the 7,500-user MVP win with over 400 contact center agents. And where we are now, and you can imagine like with all of our partners, the Mitel team and myself are spending multiple hours together every week trying to accelerate our growth, is continuing to enable their channel partners for success with the RingCentral products.

Bhavan Suri -- William Blair -- Analyst

Yeah. No, that's helpful. And I'm glad it's off to a good start. And then a quick follow for Vaibhav.

You talked a little bit about the better economics from these relationships and how those will play out. I think it would be really helpful for me and for everyone else maybe to get a sense of maybe what those economics might look like three years down the road or five years down the road. Like the relationship with Avaya, yes, there was a prepaid sales commissions or with Mitel. Help us think through what those economics might look like vis-a-vis the current direct sales model.

Some sense would be really helpful. Thank you.

Vaibhav Agarwal -- Interim Chief Financial Officer

Of course. Thank you, Bhavan, for the question. So look, for us, it's always been about profitable growth and not just growth. And it comes down to two things, really.

It's the unit economics and the leverage in the model. So in terms of unit economics, look, we have attractive economics, and we've been operating well above the Rule of 40 over the past few years. And then I think ahead in terms of the levers particularly on the distribution side like you were mentioning, we will benefit from the lower cost to book as we will be leveraging the partner-led GTM motion. So that inherently will be a driver of margin expansion in the future.

The partnerships are enormously accretive to us. And even right now, there is a choice that we have to make in terms of do you expand margins or do you invest in the business to drive more growth. And given how early on we are in this journey, we are reinvesting the dollars back into the business for growth. So I think you'll see a continuation of much the same, enormous leverage in the model, redeploying it back in the business for this year and for the next few years.

But as the growth matures, there will be meaningful upside in the margins.

Bhavan Suri -- William Blair -- Analyst

Got you, got you. Thanks for taking my questions, guys.

Operator

The next question comes from Terry Tillman with Truist. Please go ahead.

Terry Tillman -- Truist Securities -- Analyst

Hi. Congrats from me on the results and the outlook. Vlad, Mo, and Vaibhav. Two questions, first for you, Mo.

It's good to see the ongoing traction up market. And I think you mentioned in your prepared remarks, you see strong sales pipeline into '22. So that's great. What I'm curious about is, is there any gating factors or anything that could get in the way of you all continuing to ramp the size of your customers, so 20,000, 50,000 seats, or even greater? I'm just kind of curious what you see on the ability to keep moving upmarket and are there any gating factors there? And then I have a follow-up.

Mo Katibeh -- President and Chief Operating Officer

Well, Terry, first and foremost, thanks. And I hate to give one-word answers, but I think the answer to that one is no. There's nothing gating us. You can imagine, back to your comment on the prepared remarks, robust pipeline growth year-over-year, driven largely by large-scale customers.

I'll tell you that the pipeline growth that we're seeing from the broader channel, our partners or the third parties, et cetera, is also a material contribution to the growth year-over-year and just more and more larger customers in that pipeline. So from a product perspective, it's ready, and we look forward to continuing to win larger customers and demonstrating the efficacy of our product.

Terry Tillman -- Truist Securities -- Analyst

That's great. And I did lure you into more than a one-word answer there. So I'm excited about that. I guess --

Mo Katibeh -- President and Chief Operating Officer

I feel bad. I felt like I needed to say more than no.

Terry Tillman -- Truist Securities -- Analyst

Yeah, you should feel bad, but that was a great catch-up. Thank you. And then for Vaibhav, just a quick question as it relates to the change in office ARR. We have seen the last couple of years, if my math is right? There is kind of a low double-digit decline in net new office ARR between 4Q and 1Q.

Mo's saying a lot of great things in terms of the pipeline. It sounds like the business is strong. But should we expect kind of similar seasonality as we move into the first quarter around Office ARR additions? Thank you and congrats, again.

Vaibhav Agarwal -- Interim Chief Financial Officer

Yeah. So when you look at the fourth quarter, we posted our strongest Q4 in terms of the new ARR ever and we still grew it over 30%. We grew ARR at 39% at over $1.8 billion. So we are exiting the year with a strong momentum.

But the other thing to keep in mind is that we are lapping increasingly tough compares. And the law of large numbers is kicking in. So you have to factor that in. But on counterbalance, there's a lot of -- number of growth drivers ahead of us.

More talked about the partnership ramps. We are pretty early on in terms of Avaya and Atos and AL. And contributions from Mitel, Verizon, Vodafone, and the others that we recently announced are largely incremental and ahead of us.

Terry Tillman -- Truist Securities -- Analyst

Thank you.

Operator

We ask that moving forward that those in the question queue limit themselves to just one question, please. And the next question comes from Sterling Auty with J.P. Morgan. Please go ahead.

Unknown speaker

Hi. This is Drew on for Sterling. What is baked into the 2022 guidance for the assets that you acquired from Mitel?

Vaibhav Agarwal -- Interim Chief Financial Officer

Yeah. So in terms of the Mitel partnership, the $650 million that we paid has been recorded as an intangible asset, and that will be amortizing over a period of time in the books.

Unknown speaker

OK. Got it. Thank you.

Operator

The next question comes from Samad Samana with Jefferies. Please go ahead.

Samad Samana -- Jefferies -- Analyst

Hi, good evening. Thanks for taking my questions. So I'll ask a guidance follow-up. Just Vaibhav, is there any change to the guidance framework that versus what the company has used over the last couple of years, just given the change in the CFO position? Just trying to understand if there's anything we should be aware of because the initial guide for 26% to 28% growth for subscription revenue is actually a stronger starting point than you've had over the last few years, despite a tougher comp.

So just trying to understand the guidance framework.

Vaibhav Agarwal -- Interim Chief Financial Officer

Yeah. Thank you, Samad, for the question. So just by way of context, I've been with the company for six years and I have been deeply involved with Mitesh with the guidance process. So overall, no change in the guidance philosophy.

We guide to where we have a high degree of visibility on, but look, we don't know what we don't know. So we build an appropriate level of prudence accordingly. In terms of the confidence in the guide, we ended the year with strong momentum. We had strong retention rates.

We have a good base, solid base to grow from. And we have all these incremental growth drivers ahead of us in terms of the partners. When you layer that on, along with the healthy demand environment, we feel very comfortable with where we've guided. Of course, we are being prudent across all of these drivers as we establish the guidance.

And as my boss would say, there's a healthy dose of prudence and optionality in the guide that we've baked in.

Samad Samana -- Jefferies -- Analyst

Great. Great. And, Mo, just a follow-up for you on the brand investment side. I just want to make sure I understand that.

So are we talking about like national advertising campaign? Are we talking about kind of traditional media? Just how should we think about that where should we expect to maybe see it or hear about it with our eyes and ears?

Mo Katibeh -- President and Chief Operating Officer

Yeah, thanks for asking about that. We're pretty excited. You are going to see our first major brand campaign and spend at scale. And that is inclusive of advertisements.

Obviously, in the B2B space, we want to be very judicious and targeted with how we're putting our ads out there. And so we're finalizing the exact attack motion if you will, on where the dollars are going to go, but think traditional, advertising upper funnel, as well as targeted ads that are intended to drive both e-commerce traffic, as well as general awareness of RingCentral. We have an incredible win rates, and we want to make sure that we're continuing to crank up the awareness of our brand and drive more growth, that's simple.

Samad Samana -- Jefferies -- Analyst

Great. Congrats on your new role, Mo. Take care.

Mo Katibeh -- President and Chief Operating Officer

Thank you.

Operator

The next question comes from George Sutton with Craig-Hallum. Please go ahead.

Unknown speaker

Hey, good afternoon. This is Adam, on for George. Thanks for taking my questions. It was great to see existing partnerships continue to expand.

I'm curious to hear whether or not you see incremental opportunity coming from partnership expansions. And if so, how would you describe the size of that opportunity?

Mo Katibeh -- President and Chief Operating Officer

Well, I'll start with what I mentioned a little bit ago, which is if you think about Vlad's remarks earlier, one of the beautiful things is that from a GSP perspective, we went from five announced partnerships at the end of 2020 to 12 relationships at the end of 2021. And obviously, those take a little bit of time to get the product ready to get the sales motion ready, the sales enablement, if you will, and then they started ramping from there. So, just the increase in the number of GSP partners from my perspective is upside for 2022. And then as you think about, there's likely more to come in that space which then again, brings additional upside for late 2022 and 2023.

It is a positive. And then of course we've talked quite a bit about Mitel already. So I won't go back to that, but to say, brand new partnership there. And as we said, it started strong and we're now in the middle of continuing the enablement process.

Operator

The next question comes from Meta Marshall with Morgan Stanley. Please go ahead.

Meta Marshall -- Morgan Stanley -- Analyst

Great, thanks. I wanted to circle back to kind of the slide in your deck that referred to kind of over 50% engage in multimode and just how that statistic either informs how you think about the team's opportunity or how that goes into how you think about reducing churn over the next couple of years? Thanks.

Mo Katibeh -- President and Chief Operating Officer

Thanks for the question. So let me kick that one off and then Vaibhav can build on it. I mean what you just asked, Meta, is at the heart of why we believe having the world-class MVP product matters. Just to give you a quick anecdote, Vlad and I were chatting the other day in the office, and I needed to drive and go to a dinner.

And so we started on my desktop PC and then I seamlessly transitioned that to my mobile device. And then when I was in the car, we needed to take a look together at a slide deck, I pulled over, flipped over to my iPad, again seamlessly transitioned over, and we were able to go through slides together, I turned on the video. And this is the heart of multimodal. This is the heart of why our product truly matters when you think about businesses and how businesses use their devices in a multimodal way either for internal communications across employees or externally with their customers.

And then the other question that you asked in there is the opportunity with teams. And what I'll tell you is, from my perspective, teams is a better together opportunity. There's going to be businesses out there, especially in the enterprise space that are embracing and adopting teams. And we're seeing strong traction with both our direct routing capabilities putting in Five9's world-class voice behind that product, which is really, really important to a lot of business customers as well as with our embedded dialer.

I talked about Brigham Young and that win that was enabled by our embedded dialer and some of the key business capabilities like SMS and fax, et cetera, that brings to the table as well. So I think I fully answered your question, but if I didn't, feel free to ask a follow-on.

Meta Marshall -- Morgan Stanley -- Analyst

No. I think that that gets to it. I just wondered if kind of part of your initiatives that you mentioned earlier about reducing churn are around kind of getting people to interact more multimodally with RingCentral, but you essentially answered part of that.

Mo Katibeh -- President and Chief Operating Officer

Yeah. Thank you. I appreciate that. On the churn side, I'll just quickly say really excited about what our teams have been working on and building internally.

And not only is it about multimobile and usage more overall, it's about looking at many different drivers that would be indicative, that we need to actively lean in with our customers and help them better understand, better use the product. We're seeing really, really strong success, which means we're just simply expanding that to more and more of the customer base to continue improving our churn percentage. Thank you for the question.

Meta Marshall -- Morgan Stanley -- Analyst

Great.

Operator

The next question comes from Kash Rangan with Goldman Sachs. Please go ahead.

Kash Rangan -- Goldman Sachs -- Analyst

Hi, thank you very much. Congratulations on the results. And Mo, congratulations on your new position. If this question has been already addressed before, my apologies, I've been toggling from call to call.

But wondering what your take on the strategic direction of RingCentral is? Granted that it's got a very solid strategy and execution for a number of years, wondering the unique angle that you bring. If you repeat the answer, again, I wouldn't mind hearing it at all. And also, any go-to-market changes as the competitive environment definitely changes and your motion increasingly goes to upmarket into the enterprise, any tweaks or changes to go-to-market to accommodate that change in events also would be appreciated. Thank you so much and congrats.

Mo Katibeh -- President and Chief Operating Officer

Thank you, and no problem. I'm happy to repeat the answer I gave a little bit ago. So specifically, if you think about it in terms of first key initiatives with the company, I'm really focused on what I call our growth, our people, and our future. And growth is really about '22, unleashing the drivers that drive the growth that we're expecting.

And there are five things. First, one is executing on our existing partnerships and getting them ramped. The second one to the last question that I answered is about expanding our AI motion around optimizing retention and continuing to drive down churn. The third one is there's more out there when you think about channel and partners and continuing to scale new partnerships.

The fourth one is about implementing our first brand investment at scale to drive growth across both e-commerce and really all channels en route to market, getting the name RingCentral better recognized out there. And then finally, continuing to invest in the incredible R&D machine that we have to differentiate our MVP solution and our integrated UCaaS and CCaaS solution. And then as you think a little bit further out, right, if you call it our future, everyone knows that we've got a world-class product and an incredible go-to-market machine. I'm also focused on longer-term initiatives that are going to enable us to deliver sustainable profitable growth in '23 and beyond.

And I'm spending quite a bit of time there, as you can imagine, and I'll just say more to come. Let's talk about that in the coming quarters.

Kash Rangan -- Goldman Sachs -- Analyst

Wonderful. If I could follow up very quickly. Mo, you probably had a very good lens into the company. You probably are aware of the UCaaS landscape.

Can you just give us some comfort, how did you feel better about the longer-term competitive position, given that investors are worried about more influx of PBX in the cloud from the likes of Microsoft, and Sumit said although they may not have as deep a technology that could confront RingCentral head on. How did you get comfortable with the technology competitive position of the company vis-a-vis larger competitors? And that's it for me. Thanks once again.

Mo Katibeh -- President and Chief Operating Officer

Very good. So the way I'll answer that is, yes, as part of my previous remit, I did say grace over both our UCaaS solutions at my previous employer as well as the broader voice set of portfolios. So very deep knowledge of, call it, the TDM to IP, the prem to cloud ecosystem. And this is at the heart of why I wanted to come to RingCentral.

The No. 1 reason was what I see is that UCaaS still has a staggering amount of growth ahead of it. We always talk about that this is less than 10% of the total TAM has been addressed. I was looking at some third-party data this morning that showed that UCaaS as a space is going to grow by another 75 million seats in the next handful of years.

And the heart of it is I've seen it and I believe it, and this is why I wanted to be part of the RingCentral family and team. And then vis-a-vis some of the competitive landscape that you've articulated, I am deeply comfortable, again, in my previous life, having been a partner for essentially every solution that exists out there at scale that the RingCentral product bar none is best in class in the world. And then the very last comment I'll make is to the larger competitors piece of it is I think there's been a lot of chatter about are some of them friends or foes. And I think that there's a better together motion.

We talked about one of them a little bit earlier. Direct routing, embedded dialer is opening up entire new sets of the customer base for us to go after and one that I'm very excited about. Appreciate the question.

Operator

The next question comes from Michael Turrin with Wells Fargo Securities. Please go ahead.

Michael Turrin -- Wells Fargo Securities -- Analyst

Hey there, thanks. Good afternoon. Congrats on the closeout of the year. Look, the ARR metrics read is showing continued strength.

The one question we're getting is just the Q4 revenue upside was maybe a touch lighter relative to prior guidance than what we've seen in recent quarters. Vaibhav, anything you'd add to help characterize the Q4 revenue results? Was there anything timing-related for us to be mindful of? Or anything else you'd add to help frame that out, particularly given the especially strong guide into next year. That's helpful. Thank you.

Vaibhav Agarwal -- Interim Chief Financial Officer

Yeah. Thanks, Michael, for the question. Yes, we guided a bit later in the quarter than usual, which provided us with greater visibility in Q4, and we have posted, call it, the strongest Q4 guide. I think that's what was pretty much driving the lighter beat that you are seeing for Q4.

Overall, no structural changes or no change in the guidance philosophy, if you will.

Michael Turrin -- Wells Fargo Securities -- Analyst

Thank you.

Operator

The next question comes from James Fish with Piper Sandler. Please go ahead.

James Fish -- Piper Sandler -- Analyst

Hey, guys. Maybe one-off of not asking around the quarter or guide here, but you guys have highlighted innovation and quality of the network as differentiation. And obviously, a big part of the news today has been around the Russia-Ukraine conflict, and we were wondering with such a large part of your development team based there that is also handling the quality assurance of the network, how you are looking to handle the situation of further escalation or sanctions and ensuring that Five9s of quality and if you're potentially looking to shift any of this development to other countries instead. Thanks, guys.

Mo Katibeh -- President and Chief Operating Officer

Thanks for the question. What I'd tell you is, first and foremost, about 12% of our revenue comes from outside of North America. And you can see that much of our sales presence is really outside the U.S., in the U.K., Europe, and Australia. And then to your question around R&D, you can imagine we've got contingency planning in place for any eventuality.

We're monitoring like everyone, I think, right now. We're monitoring what's happening in these regions and believe that the likelihood of any meaningful business impact is low because of our contingency planning. I appreciate the question.

Operator

The next question comes from Ryan Koontz with Needham. Please go ahead.

Ryan Koontz -- Needham and Company -- Analyst

Thanks for the question. I wanted to touch on pricing, if I could, please. I see your revenue per account is certainly heading up nicely there as you penetrate the larger accounts. But on a per-seat basis, are you seeing any pressure there, especially with the opportunity to upsell into teams with direct routing.

Thank you.

Vaibhav Agarwal -- Interim Chief Financial Officer

Yeah. This is Vaibhav. So overall trends on pricing remains stable, so nothing really to call out. A couple of areas of color.

When we look at our larger customers, we do see some volume discounting, which is a fact of life, but enterprise customers do end up buying premium SKUs along with contact center. As we are going more and more upmarket, what's -- what matters more is the wallet share, which is the ARPA metric you just mentioned. And we are seeing a steady increase in that. And that's driven by a couple of things.

It's the customer demand, coupled with the integrated MVP platform and the multimodal engagement. And then when you go down to SMB, pricing is holding very steady. So net-net, ARPU trends are holding really stable, and we are -- nothing really to report there.

Ryan Koontz -- Needham and Company -- Analyst

All right. Thanks very much.

Operator

The next question comes from Alex Zukin with Wolfe Research. Please go ahead.

Unknown speaker

This is Allan, on for Alex Zukin. Thanks for taking the question. I just wanted to touch on hiring for 2022. I was wondering what your trajectory of growth for quota-carrying reps is and how you're thinking about an increase in productivity.

Thanks.

Mo Katibeh -- President and Chief Operating Officer

Yeah. So what I'd tell you on that, Alex, is we don't disclose the explicit numbers around hiring. What I will tell you is for the last several years, the efficiency of each one of our sales reps has increased in terms of the total quota that they're carrying. It's -- frankly, it's a fairly impressive metric.

And even with that, based on the growth rates that we're projecting, we do expect to continue hiring a new sales force. I'm not going to get into the exact numbers, but I think that gives you the color you need around both the efficiency side of it as well as what are our expectations around hiring new workforce. Appreciate that.

Operator

The next question comes from Matt Niknam with Deutsche Bank. Please go ahead.

Matt Niknam -- Deutsche Bank -- Analyst

Hey, guys. Thanks for taking the question. Just given the number of the C-level changes over the last few months, obviously, the risk for business disruption or execution risk has been on a lot of investors' minds. I'm just wondering if you can talk to anything you may have seen surface the last couple of months or whether any of these C-level changes impacted customer demand or behavior in any way? And then just as a follow-on, anything you'd call out in terms of omicron-related impacts during 4Q that may have pushed some larger activity into 2022 that you might call out Thanks.

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

Yeah. Hey, there. Vlad here. I thought I'd say hi to people as well.

I guess I'll take the first part of the question. Look, as you all have heard from me before, numbers speak for themselves. When we went through some changes on the management team, I believe we've projected a very strong sense of security, if you will, and confidence in our ability to continue executing at least at the same or if not better level. And I think you're seeing this now.

We had a truly outstanding quarter. It capped a very, very strong year. And we firmly believe that we have the team in place to continue our march forward in 2022 and beyond without skipping a beat and hopefully even picking up beat. The fact that people like Mo are choosing to join us is the most clear testament to what RingCentral really represents in the marketplace competitively.

And if people are familiar with the space and the art, these are the people who tend to do well here. So again, this is just to reiterate, very warm welcome to Mo. And you can rest assured that we will do no worse under Mo than ever, and we have always done reasonably well pretty well, I would say. And there is room for optimism that we will do meaningfully better moving forward, especially as the world is coming out of the pandemic.

And this may be here for the second part of your question is, look, many people have had omicron by now, and most people came out and life is beginning to stabilize, it seems like, yes. And I just want to remind everyone, again, this is a repeat of past performances here for me, but RingCentral was not a COVID story. RingCentral is not a work-from-home story. RingCentral was, is, will continue to be a work-from-anywhere.

And that is our core strength, is ability for people to be equally productive from the office, home, hotel room, airplane, what have you. This is our unique differentiator. And as work shifts from purely at home to other more traditional venues and I'm not saying that work-from-home is not going to continue. Clearly, it will.

But it is going to revert to normal or start moving in the direction that our strong belief from our customers. And again, this is why we are so confident and are providing fairly strong guidance for '22 at this point. Anything to add, Vaibhav or Mo?

Vaibhav Agarwal -- Interim Chief Financial Officer

I think from my perspective, it was a great quarter and a great finish to the year, so we are pleased with the results. I think the team did a great job executing without missing a beat. So of course, any given year, we want a lot more, but there were no material missteps. And there's a lot of excitement and optimism with all the incremental growth drivers that are ahead of us.

Matt Niknam -- Deutsche Bank -- Analyst

That's great. And I appreciate all the color. Thank you.

Operator

The next question comes from Ryan MacWilliams with Barclays. Please go ahead.

Ryan MacWilliams -- Barclays Capital -- Analyst

Thanks, guys. Nice results. Sneaking in a two-part question here. How should we think about the potential for RingCentral's partnership with Microsoft Teams? Do you think this contribute more in line with some of your strategic partnerships from a seat count perspective? Or more in line with your global service provider partnerships? And then separately, you just mentioned your contact center business now accounts for greater than 10% of your total overall business.

How does this number compare to this time last year? Thanks, guys.

Mo Katibeh -- President and Chief Operating Officer

OK. On the Microsoft side, I think that we've hit on this one a couple of times. I'll just put a bow on it and say, look, there's a two-pronged opportunity here. There's the direct routing opportunity, and there is the embedded dialer opportunity.

And to kind of build on an earlier question, as you think about larger and larger customers up the stack in the enterprise space, many of them are demanding Five9's voice. Our voice is substantially better than other VoIP products out there. And it's an opportunity to go sell better together, if you will. And let me turn it over to Vaibhav to wrap this up and talk about the second part of your question.

Vaibhav Agarwal -- Interim Chief Financial Officer

Yeah. In terms of contact center, we are growing at a fairly healthy clip. Contact center is growing faster than the overall business. So seeing some healthy growth trends there.

I don't think we disclosed what the actual number was last year. So I'll just keep it at that greater than 10% now, growing faster than the overall business.

Ryan MacWilliams -- Barclays Capital -- Analyst

I appreciate the going. Thanks, guys.

Vaibhav Agarwal -- Interim Chief Financial Officer

Thank you.

Operator

Ladies and gentlemen, we are out of time for questions. So this concludes our question-and-answer session [Operator signoff]

Duration: 68 minutes

Call participants:

Ryan Goodman -- Head of Investor Relations

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

Mo Katibeh -- President and Chief Operating Officer

Vaibhav Agarwal -- Interim Chief Financial Officer

Brian Peterson -- Raymond James -- Analyst

Bhavan Suri -- William Blair -- Analyst

Terry Tillman -- Truist Securities -- Analyst

Unknown speaker

Samad Samana -- Jefferies -- Analyst

Meta Marshall -- Morgan Stanley -- Analyst

Kash Rangan -- Goldman Sachs -- Analyst

Michael Turrin -- Wells Fargo Securities -- Analyst

James Fish -- Piper Sandler -- Analyst

Ryan Koontz -- Needham and Company -- Analyst

Matt Niknam -- Deutsche Bank -- Analyst

Ryan MacWilliams -- Barclays Capital -- Analyst

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