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RingCentral Announces Third Quarter 2023 Results

Q3 2023 revenue above high end of guidance

Q3 2023 GAAP and non-GAAP operating margin up strongly

Raising midpoint of 2023 revenue outlook

RingCentral, Inc. (NYSE: RNG), a leading provider of AI-powered global enterprise cloud communications, video meetings, collaboration, and contact center solutions, today announced financial results for the third quarter ended September 30, 2023.

Third Quarter Financial Highlights

  • Total revenue increased 10% year over year to $558 million.
  • Subscriptions revenue increased 10% year over year to $531 million.
  • Annualized Exit Monthly Recurring Subscriptions (ARR) increased 11% year over year to $2.26 billion.
  • Mid-market and Enterprise ARR increased 13% year over year to $1.41 billion.
  • GAAP operating margin of (9.7%), compared to (35.9%) in the prior year.
  • Non-GAAP operating margin of 19.1%, up 560 basis points year-over-year.

“RingCentral is leveraging its leading position in Unified Communications to transform into an AI-first, multi-product company with proprietary offerings across UCaaS, CCaaS, Conversation and Revenue Intelligence, and Events, Webinars and Meetings,” said Tarek Robbiati, RingCentral’s CEO. “Our solid third quarter results demonstrate our ability to drive long-term durable, profitable growth.”

Financial Results for the Third Quarter 2023

  • Revenue: Total revenue was $558 million for the third quarter of 2023, up from $509 million in the third quarter of 2022, representing 10% growth. Adjusted for constant currency, total revenue rose 9%. Subscriptions revenue of $531 million increased 10% year over year and accounted for 95% of total revenue. Adjusted for constant currency, subscriptions revenue rose 10%.
  • Operating Income (Loss): GAAP operating loss was ($54) million, compared to ($183) million in the same period last year. Non-GAAP operating income was $107 million, or 19.1% of total revenue, compared to $69 million, or 13.5% of total revenue, for the third quarter of 2022.
  • Adjusted EBITDA: Adjusted EBITDA for the third quarter of 2023 was $128 million, or 22.9% of total revenue, compared to $87 million, or 17.1% of total revenue, for the third quarter of 2022.
  • Net Income (Loss) Per Share: GAAP net loss per share was ($0.45), compared to ($2.98) in the same period last year. Diluted non-GAAP net income per share was $0.78, compared to $0.55 per share in the same period last year. The third quarters of 2023 and 2022 reflected an approximately 22.5% non-GAAP tax rate. There were no material cash taxes given our net operating loss carryforwards.
  • Cash and Cash Equivalents: Total cash and cash equivalents at the end of the third quarter of 2023 was $432 million. This compares to $225 million at the end of the second quarter of 2023. Our cash balance reflects the August 2023 issuance of $400 million of senior notes due 2030, with $154 million of the proceeds from this issuance subsequently used during the third quarter of 2023 to repurchase a portion of our 2025 and 2026 convertible notes. The Company also repurchased $75 million in shares during the third quarter of 2023 under the plans announced in February and May of 2023. On November 1, 2023, the company's Board of Directors authorized an incremental $100 million for the repurchase of shares.

Financial Outlook

"We are seeing early traction with our new products such as RingCX, RingSense and RingCentral Events," said Sonalee Parekh, RingCentral's CFO. "Our efficiency initiatives also continue to drive improved non-GAAP operating margins, which we are raising to 19.0%, at the high end of our prior range of 18.5% to 19.0%. We are also raising our free cash flow outlook, and now expect to generate $290 to $300 million of adjusted, unlevered free cash flow in 2023, up from our prior outlook of $270 to $290 million.”

Full Year 2023 Guidance:

  • Updating subscriptions revenue range to $2.095 to $2.101 billion, representing annual growth of 11%; raising midpoint to $2.098 billion.
  • Updating total revenue range to $2.198 to $2.205 billion, representing annual growth of 11%; raising midpoint to $2.201 billion.
  • GAAP operating margin range of (9.3%) to (8.7%) versus (8.0%) to (6.3%) previously, as we continue to streamline the organization and incur restructuring costs.
  • Raising non-GAAP operating margin range to 19.0%, up from 18.5% to 19.0% previously.
  • Non-GAAP tax rate assumed to be 22.5%. No material cash taxes expected given net operating loss carryforwards.
  • Non-GAAP EPS of $3.19 to $3.20 based on 97.0 million fully diluted shares. This compares to $3.11 to $3.25 based on 99.0 million to 98.0 fully diluted shares.
  • Share-based compensation range of $426 to $431 million.
  • Amortization of acquired intangibles of $151 million.
  • Third-party relocation and other costs, net, of $10 million.
  • Restructuring costs of $23 to $28 million.
  • Raising adjusted, unlevered free cash flow to $290 to $300 million, up from $270 to $290 million.

Fourth Quarter 2023 Guidance:

  • Subscriptions revenue range of $542.0 to $548.0 million, representing year-over-year growth of 8% to 9%.
  • Total revenue range of $566.5 to $573.5 million, representing year-over-year growth of 8% to 9%.
  • GAAP operating margin range of (8.8%) to (6.7%).
  • Non-GAAP operating margin of 20.0%.
  • Non-GAAP tax rate assumed to be 22.5%. No material cash taxes expected given net operating loss carryforwards.
  • Non-GAAP EPS of $0.82 to $0.83 based on 97.0 to 96.5 million fully diluted shares.
  • Share-based compensation range of $105 to $110 million.
  • Amortization of acquired intangibles of $38 million.
  • Restructuring costs of $10 million to $15 million.

Additional Highlights

  • Announced in August 2023 the issuance of $400 million aggregate principal amount of senior notes due 2030 (the “2030 Senior Notes”) in a private offering. The 2030 Senior Notes are senior unsecured and bear interest at a rate of 8.5% per annum. We intend to use the net proceeds from the 2030 Senior Notes to repurchase a portion of our outstanding convertible senior notes and the remainder of the net proceeds, if any, for general corporate purposes.
  • Announced in August 2023 we had entered into individual, privately negotiated repurchase transactions with certain holders of our 0% Convertible Senior Notes due 2025 (the “2025 Convertible Notes”) and 0% Convertible Senior Notes due 2026 (the “2026 Convertible Notes”). We paid $154 million in cash to repurchase approximately $166 million in aggregate principal of the 2025 and 2026 Convertible Notes. The transaction was funded with proceeds from the August 2023 issuance of the 2030 Senior Notes.

For a reconciliation of our forecasted non-GAAP operating margin, see “Reconciliation of Forecasted Operating Margin GAAP Measures to Non-GAAP Measures.” We have not reconciled our forecasted non-GAAP EPS to its respective forecasted GAAP measure because we do not provide guidance on it. We do not provide guidance on forecasted GAAP EPS because of the inherent uncertainty and complexity involved in forecasting the intercompany remeasurement gain (loss), gain (loss) associated with investments, gain (loss) on early debt conversions, and provision (benefit) from income taxes, which could be significant reconciling items between the non-GAAP and respective GAAP measures. The intercompany remeasurement gain (loss) is affected by the movement in various exchange rates relative to the U.S. Dollar, which is difficult to predict and subject to constant change. We do not provide guidance on gain (loss) associated with investments as it is based on future share prices, which are difficult to predict and subject to inherent uncertainties. We do not provide guidance on gain (loss) on debt early conversions as it is based on future conversion requests, future share prices, and interest rates, which are difficult to predict and are subject to inherent uncertainties. We do not provide guidance on forecasted GAAP tax rates as we do not forecast discrete tax items as they are difficult to predict. The provision (benefit) from income taxes, excluding discrete items, is expected to have an immaterial impact to our GAAP EPS. We utilized a projected long-term tax rate in our computation of the non-GAAP income tax provision. For fiscal 2023, we have determined the projected non-GAAP tax rate to be 22.5%. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measure is not available without unreasonable effort.

We have not reconciled adjusted, unlevered free cash flow guidance to net cash provided by (used in) operating activities because we do not provide guidance on the reconciling items between net cash provided by (used in) operating activities and adjusted, unlevered free cash flow due to the uncertainty regarding, and the potential variability of, these items. Accordingly, a reconciliation of net cash provided by (used in) operating activities to adjusted, unlevered free cash flow guidance is not available without unreasonable effort.

Conference Call Details:

  • What: RingCentral financial results for the third quarter of 2023 and outlook for the fourth quarter and full year of 2023.
  • When: Monday, November 6, 2023 at 2:00PM PT (5:00PM ET).
  • Dial-in: 1-888-349-0093 from the United States; 1-412-317-5201 internationally
  • Webcast: RingCentral Q3 2023 Earnings Webcast (live and replay).
  • Replay: Following the completion of the call through 11:59 PM ET on November 13, 2023, a telephone replay will be available by dialing 1-844-512-2921 from the United States or 1-412-317-6671 internationally with recording access code 10183256.

Investor Presentation Details

An investor presentation providing additional information and analysis can be found at https://ir.ringcentral.com.

About RingCentral

RingCentral is a leading global provider of cloud-based business communications and collaboration solutions that seamlessly combine phone, messaging, video meetings, and contact center. RingCentral empowers customers with AI-powered conversation intelligence that unlocks insights from their interaction data to accelerate business outcomes. With decades of expertise in reliable and secure cloud communications, RingCentral has earned the trust of millions of customers and thousands of partners worldwide. Visit ringcentral.com to learn more.

© 2023 RingCentral, Inc. All rights reserved. RingCentral, RingCentral Contact Center and the RingCentral logo are trademarks of RingCentral, Inc.

Forward-Looking Statements

This press release contains “forward-looking statements,” including but not limited to, statements regarding our future financial results, our GAAP and non-GAAP guidance, the results of the pace of our innovation and our partner networks, our expectations regarding our profitability and our non-GAAP adjusted, unlevered free cash flow, our estimates and expectations regarding third parties, and our ability to execute and lead in the UCaaS digital transformation market, our expectations around the demand for our products and the growth of the markets in which we compete. Forward-looking statements are subject to known and unknown risks and uncertainties, and are based on assumptions that may prove to be incorrect, which could cause actual results to differ materially from those expected or implied by the forward-looking statements. Among the important factors that could cause actual results to differ materially from those in any forward-looking statements are: our ability to realize the anticipated benefits of our strategic relationships; our expectations regarding our strategic acquisitions, including our recently announced acquisition of select assets from Hopin; our ability to grow at our expected rate of growth; our ability to add and retain larger and enterprise customers and enter new geographies and markets; our ability to continue to release, and gain customer acceptance of, new and improved versions of our services, including RingCentral MVP™, and RingCentral Video®; our ability to compete successfully against existing and new competitors; our ability to enter into and maintain relationships with resellers, carriers, channel partners and strategic partners; our ability to successfully and timely integrate, and realize the benefits of any significant acquisition we may make; our ability to manage our expenses and growth; and general market, political, economic, and business conditions, as well as those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our most recent Form 10-Q filed with the Securities and Exchange Commission, and in other filings we make with the Securities and Exchange Commission from time to time.

All forward-looking statements in this press release are based on information available to RingCentral as of the date hereof, and we undertake no obligation to update these forward-looking statements, to review or confirm analysts’ expectations, or to provide interim reports or updates on the progress of the current financial quarter.

Non-GAAP Financial Measures

Our reported financial results and financial outlook include certain Non-GAAP financial measures, including Non-GAAP subscriptions gross margin, Non-GAAP other gross margin, Non-GAAP operating margin, Non-GAAP income (loss) from operations, Non-GAAP adjusted EBITDA, Non-GAAP net income (loss), Non-GAAP net income (loss) per diluted share, Non-GAAP adjusted, unlevered free cash flow, and constant currency revenue. Non-GAAP subscriptions gross margin is defined as Non-GAAP subscriptions gross profit divided by GAAP subscriptions revenue. Non-GAAP other gross margin is defined as Non-GAAP other gross profit divided by GAAP other revenue. Non-GAAP income (loss) from operations is defined as GAAP income (loss) from operations excluding share-based compensation which includes related employer payroll taxes, amortization of acquisition intangibles, asset write-down charges, third-party relocation costs tied to the conflict between Russia and Ukraine and other costs including acquisition-related transaction costs and retention payments, certain litigation-related costs, net impact of amended agreements with strategic partners, and restructuring costs. Non-GAAP operating margin is defined as Non-GAAP income (loss) from operations divided by total GAAP revenue. Non-GAAP adjusted EBITDA is defined as Non-GAAP income (loss) from operations excluding depreciation and amortization. Non-GAAP net income (loss) is defined as GAAP net income (loss) excluding share-based compensation which includes related employer payroll taxes, amortization of acquisition intangibles, asset write-down charges, third-party relocation costs tied to the conflict between Russia and Ukraine and other costs including acquisition-related transaction costs and retention payments, certain litigation-related costs, net impact of amended agreements with strategic partners, restructuring costs, non-cash interest expense associated with amortization of debt discount and issuance costs related to our long term debt, loss (gain) associated with investments, loss (gain) on early extinguishment of debt, intercompany remeasurement gains or losses, and the related income tax effect of these adjustments.

Non-GAAP diluted shares outstanding include the impact on shares used in per share calculations of our outstanding capped call transactions. Our outstanding capped call transactions are anti-dilutive in GAAP earnings per share but are expected to mitigate the dilutive effect of our convertible notes and therefore are included in the calculations of non-GAAP diluted shares outstanding.

Non-GAAP adjusted, unlevered free cash flow is defined as GAAP net cash provided by (used in) operating activities adjusted for capital expenditures including purchases of property and equipment and capitalized internal-use software, strategic partnerships, restructuring and other non-recurring payments, and cash paid for interest. We believe information regarding adjusted, unlevered free cash flow provides useful information to investors in understanding and evaluating the strength of liquidity and available cash.

We have included Non-GAAP subscriptions gross margin, Non-GAAP other gross margin, Non-GAAP operating margin, Non-GAAP income (loss) from operations, Non-GAAP adjusted EBITDA, Non-GAAP net income (loss), Non-GAAP net income (loss) per diluted share, Non-GAAP adjusted, unlevered free cash flow, and constant currency revenue in this press release because they are key measures used by us to understand and evaluate our operating performance and trends, to prepare and approve our annual budget, and to develop short and long-term operational plans. In particular, the exclusion of certain expenses and cash flow items in calculating Non-GAAP subscriptions gross margin, Non-GAAP other gross margin, Non-GAAP operating margin, Non-GAAP income (loss) from operations, Non-GAAP adjusted EBITDA, Non-GAAP net income (loss), Non-GAAP net income (loss) per diluted share, and Non-GAAP adjusted, unlevered free cash flow provide useful measure for period-to-period comparisons of our business.

The Company has provided certain revenue-related information adjusted for constant currency to provide a framework for assessing how the Company's underlying business performed excluding the effect of foreign currency rate fluctuations. To present this information, current period results in currencies other than United States dollars are converted into United States dollars at the average exchange rate prevailing for the quarter being compared to for growth rate calculations presented, rather than the actual exchange rates in effect during that period.

Although Non-GAAP subscriptions gross margin, Non-GAAP other gross margin, Non-GAAP operating margin, Non-GAAP income (loss) from operations, Non-GAAP adjusted EBITDA, Non-GAAP net income (loss), Non-GAAP net income (loss) per diluted share, Non-GAAP adjusted, unlevered free cash flow, and constant currency revenue are frequently used by investors in their evaluations of companies, these non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Because of these limitations, these non-GAAP financial measures should be considered alongside other financial performance measures.

Reconciliations of the Company’s non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included in this press release.

Other Measures

Our reported results also include our annualized exit monthly recurring subscriptions, mid-market and enterprise annualized exit monthly recurring subscriptions, enterprise annualized exit monthly recurring subscriptions, and net monthly subscription dollar retention rate. We define our annualized exit monthly recurring subscriptions as our monthly recurring subscriptions multiplied by 12. Our monthly recurring subscriptions equal the monthly value of all customer recurring charges contracted at the end of a given month. We believe this metric is a leading indicator of our anticipated subscriptions revenue. We calculate mid-market and enterprise annualized exit monthly recurring subscriptions in the same manner as we calculate our annualized exit monthly recurring subscriptions, except that only customer subscriptions from customers generating $25,000 or more in annual recurring revenue are included. We calculate enterprise annualized exit monthly recurring subscriptions in the same manner as we calculate our annualized exit monthly recurring subscriptions, except that only customer subscriptions from customers generating $100,000 or more in annual recurring revenue are included. We define our net monthly subscription dollar retention rate as (i) one plus (ii) the quotient of dollar net change divided by average monthly recurring subscriptions. We calculate dollar net change as the quotient of (i) the difference of our monthly recurring subscriptions at the end of a period minus our monthly recurring subscriptions at the beginning of a period minus our monthly recurring subscriptions at the end of the period from new customers we added during the period, (ii) all divided by the number of months in the period. We define our average monthly recurring subscriptions as the average of the monthly recurring subscriptions at the beginning and end of the measurement period.

TABLE 1

RINGCENTRAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

 

 

September 30, 2023

 

December 31, 2022

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

432,352

 

 

$

269,984

 

Accounts receivable, net

 

347,912

 

 

 

311,318

 

Deferred and prepaid sales commission costs

 

176,197

 

 

 

158,865

 

Prepaid expenses and other current assets

 

95,858

 

 

 

55,849

 

Total current assets

 

1,052,319

 

 

 

796,016

 

Property and equipment, net

 

183,593

 

 

 

185,400

 

Operating lease right-of-use assets

 

32,477

 

 

 

35,433

 

Deferred and prepaid sales commission costs, non-current

 

394,020

 

 

 

438,579

 

Goodwill

 

66,482

 

 

 

54,335

 

Acquired intangibles, net

 

431,920

 

 

 

528,051

 

Other assets

 

21,683

 

 

 

35,848

 

Total assets

$

2,182,494

 

 

$

2,073,662

 

Liabilities, Temporary Equity, and Stockholders' Deficit

 

 

 

Current liabilities

 

 

 

Accounts payable

$

43,311

 

 

$

62,721

 

Accrued liabilities

 

310,752

 

 

 

380,113

 

Current portion of long-term debt, net

 

20,000

 

 

 

 

Deferred revenue

 

231,247

 

 

 

209,725

 

Total current liabilities

 

605,310

 

 

 

652,559

 

Long-term debt, net

 

1,781,252

 

 

 

1,638,411

 

Operating lease liabilities

 

18,577

 

 

 

20,182

 

Other long-term liabilities

 

62,362

 

 

 

45,848

 

Total liabilities

 

2,467,501

 

 

 

2,357,000

 

 

 

 

 

Temporary equity

 

 

 

Series A convertible preferred stock

 

199,449

 

 

 

199,449

 

 

 

 

 

Stockholders' deficit

 

 

 

Common stock

 

9

 

 

 

10

 

Additional paid-in capital

 

1,170,672

 

 

 

1,059,880

 

Accumulated other comprehensive loss

 

(3,244

)

 

 

(8,781

)

Accumulated deficit

 

(1,651,893

)

 

 

(1,533,896

)

Total stockholders' deficit

$

(484,456

)

 

$

(482,787

)

Total liabilities, temporary equity and stockholders’ deficit

$

2,182,494

 

 

$

2,073,662

 

TABLE 2

RINGCENTRAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share data)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenues

 

 

 

 

 

 

 

Subscriptions

$

531,030

 

 

$

483,229

 

 

$

1,552,956

 

 

$

1,386,140

 

Other

 

27,134

 

 

 

25,803

 

 

 

78,202

 

 

 

77,444

 

Total revenues

 

558,164

 

 

 

509,032

 

 

 

1,631,158

 

 

 

1,463,584

 

Cost of revenues

 

 

 

 

 

 

 

Subscriptions

 

141,172

 

 

 

134,372

 

 

 

413,664

 

 

 

395,083

 

Other

 

27,802

 

 

 

33,102

 

 

 

80,403

 

 

 

86,055

 

Total cost of revenues

 

168,974

 

 

 

167,474

 

 

 

494,067

 

 

 

481,138

 

Gross profit

 

389,190

 

 

 

341,558

 

 

 

1,137,091

 

 

 

982,446

 

Operating expenses

 

 

 

 

 

 

 

Research and development

 

85,444

 

 

 

86,700

 

 

 

250,965

 

 

 

273,492

 

Sales and marketing

 

270,767

 

 

 

261,914

 

 

 

795,422

 

 

 

781,767

 

General and administrative

 

87,154

 

 

 

72,261

 

 

 

244,472

 

 

 

217,810

 

Asset write-down charge

 

 

 

 

103,242

 

 

 

 

 

 

103,242

 

Total operating expenses

 

443,365

 

 

 

524,117

 

 

 

1,290,859

 

 

 

1,376,311

 

Loss from operations

 

(54,175

)

 

 

(182,559

)

 

 

(153,768

)

 

 

(393,865

)

Other income (expense), net

 

 

 

 

 

 

 

Interest expense

 

(12,162

)

 

 

(1,178

)

 

 

(19,492

)

 

 

(3,613

)

Other income (expense)

 

20,441

 

 

 

(100,006

)

 

 

61,521

 

 

 

(194,725

)

Other income (expense), net

 

8,279

 

 

 

(101,184

)

 

 

42,029

 

 

 

(198,338

)

Loss before income taxes

 

(45,896

)

 

 

(283,743

)

 

 

(111,739

)

 

 

(592,203

)

(Benefit from) provision for income taxes

 

(3,780

)

 

 

873

 

 

 

6,258

 

 

 

2,900

 

Net loss

$

(42,116

)

 

$

(284,616

)

 

$

(117,997

)

 

$

(595,103

)

Net loss per common share

 

 

 

 

 

 

 

Basic and diluted

$

(0.45

)

 

$

(2.98

)

 

$

(1.24

)

 

$

(6.26

)

Weighted-average number of shares used in computing net loss per share

 

 

 

 

 

 

 

Basic and diluted

 

94,593

 

 

 

95,575

 

 

 

95,213

 

 

 

95,097

 

TABLE 3

RINGCENTRAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

 

Nine Months Ended

September 30,

 

 

2023

 

 

 

2022

 

Cash flows from operating activities

 

 

 

Net loss

$

(117,997

)

 

$

(595,103

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

174,723

 

 

 

184,166

 

Share-based compensation

 

314,533

 

 

 

293,777

 

Unrealized loss on investments

 

1,646

 

 

 

176,218

 

Asset write-down charge

 

 

 

 

124,904

 

Amortization of deferred and prepaid sales commission costs

 

100,618

 

 

 

81,536

 

Amortization of debt discount and issuance costs

 

3,465

 

 

 

3,350

 

Non-cash interest expense

 

4,156

 

 

 

 

Gain on early extinguishment of debt

 

(42,891

)

 

 

 

Reduction of operating lease right-of-use assets

 

15,272

 

 

 

14,887

 

Provision for bad debt

 

5,200

 

 

 

7,103

 

Other

 

723

 

 

 

3,688

 

Changes in assets and liabilities:

 

 

 

Accounts receivable

 

(39,641

)

 

 

(40,247

)

Deferred and prepaid sales commission costs

 

(103,773

)

 

 

(185,049

)

Prepaid expenses and other assets

 

(7,251

)

 

 

(689

)

Accounts payable

 

(31,664

)

 

 

19,384

 

Accrued and other liabilities

 

9,383

 

 

 

47,001

 

Deferred revenue

 

15,309

 

 

 

32,970

 

Operating lease liabilities

 

(15,993

)

 

 

(15,963

)

Net cash provided by operating activities

 

285,818

 

 

 

151,933

 

Cash flows from investing activities

 

 

 

Purchases of property and equipment

 

(17,515

)

 

 

(23,828

)

Capitalized internal-use software

 

(38,241

)

 

 

(39,638

)

Cash paid for business combination, net of cash acquired

 

(14,709

)

 

 

 

Proceeds from sale of marketable equity investments

 

 

 

 

3,223

 

Purchases of intangible assets and long-term investments

 

 

 

 

(3,990

)

Net cash used in investing activities

 

(70,465

)

 

 

(64,233

)

Cash flows from financing activities

 

 

 

Proceeds from issuance of stock in connection with stock plans

 

10,954

 

 

 

10,892

 

Payments for taxes related to net share settlement of equity awards

 

(7,124

)

 

 

(5,180

)

Payments for repurchase of common stock

 

(249,568

)

 

 

(45,004

)

Proceeds from issuance of long-term debt, net of issuance costs

 

786,311

 

 

 

 

Payments for the repurchase of convertible senior notes

 

(580,960

)

 

 

 

Repayments of principal on term loan

 

(5,000

)

 

 

 

Repayments for financing obligations

 

(4,738

)

 

 

(3,950

)

Payments for contingent consideration

 

(1,673

)

 

 

(1,538

)

Net cash used in financing activities

 

(51,798

)

 

 

(44,780

)

Effect of exchange rate changes

 

(1,187

)

 

 

(4,699

)

Net increase in cash, cash equivalents, and restricted cash

 

162,368

 

 

 

38,221

 

Cash, cash equivalents, and restricted cash

 

 

 

Beginning of period

 

269,984

 

 

 

267,162

 

End of period

$

432,352

 

 

$

305,383

 

TABLE 4

RINGCENTRAL, INC.

RECONCILIATION OF OPERATING INCOME (LOSS)

GAAP MEASURES TO NON-GAAP MEASURES

(Unaudited, in thousands)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenues

 

 

 

 

 

 

 

Subscriptions

$

531,030

 

 

$

483,229

 

 

$

1,552,956

 

 

$

1,386,140

 

Other

 

27,134

 

 

 

25,803

 

 

 

78,202

 

 

 

77,444

 

Total revenues

 

558,164

 

 

 

509,032

 

 

 

1,631,158

 

 

 

1,463,584

 

Cost of revenues reconciliation

 

 

 

 

 

 

 

GAAP Subscriptions cost of revenues

 

141,172

 

 

 

134,372

 

 

 

413,664

 

 

 

395,083

 

Share-based compensation

 

(7,392

)

 

 

(6,577

)

 

 

(21,096

)

 

 

(20,421

)

Amortization of acquired intangibles

 

(37,045

)

 

 

(42,750

)

 

 

(110,324

)

 

 

(128,609

)

Third-party relocation and other costs

 

(93

)

 

 

(74

)

 

 

(105

)

 

 

(1,229

)

Restructuring costs

 

 

 

 

(96

)

 

 

(637

)

 

 

(252

)

Non-GAAP Subscriptions cost of revenues

 

96,642

 

 

 

84,875

 

 

 

281,502

 

 

 

244,572

 

 

 

 

 

 

 

 

 

GAAP Other cost of revenues

 

27,802

 

 

 

33,102

 

 

 

80,403

 

 

 

86,055

 

Share-based compensation

 

(2,380

)

 

 

(2,066

)

 

 

(6,892

)

 

 

(6,705

)

Amortization of acquired intangibles

 

(22

)

 

 

(23

)

 

 

(66

)

 

 

(54

)

Restructuring costs

 

(6

)

 

 

 

 

 

(58

)

 

 

 

Non-GAAP Other cost of revenues

 

25,394

 

 

 

31,013

 

 

 

73,387

 

 

 

79,296

 

Gross profit and gross margin reconciliation

 

 

 

 

 

 

 

Non-GAAP Subscriptions

 

81.8

%

 

 

82.4

%

 

 

81.9

%

 

 

82.4

%

Non-GAAP Other

 

6.4

%

 

 

(20.2

)%

 

 

6.2

%

 

 

(2.4

)%

Non-GAAP Gross profit

 

78.1

%

 

 

77.2

%

 

 

78.2

%

 

 

77.9

%

Operating expenses reconciliation

 

 

 

 

 

 

 

GAAP Research and development

 

85,444

 

 

 

86,700

 

 

 

250,965

 

 

 

273,492

 

Share-based compensation

 

(24,576

)

 

 

(22,105

)

 

 

(71,804

)

 

 

(70,264

)

Third-party relocation and other costs

 

(3,401

)

 

 

(1,468

)

 

 

(4,964

)

 

 

(17,560

)

Restructuring costs

 

(1,794

)

 

 

(2,383

)

 

 

(4,281

)

 

 

(2,722

)

Non-GAAP Research and development

 

55,673

 

 

 

60,744

 

 

 

169,916

 

 

 

182,946

 

As a % of total revenues non-GAAP

 

10.0

%

 

 

11.9

%

 

 

10.4

%

 

 

12.5

%

 

 

 

 

 

 

 

 

GAAP Sales and marketing

 

270,767

 

 

 

261,914

 

 

 

795,422

 

 

 

781,767

 

Share-based compensation

 

(38,287

)

 

 

(38,139

)

 

 

(117,063

)

 

 

(119,749

)

Amortization of acquired intangibles

 

(1,134

)

 

 

(894

)

 

 

(2,529

)

 

 

(2,746

)

Third-party relocation and other costs

 

(86

)

 

 

(41

)

 

 

(101

)

 

 

(55

)

Restructuring costs

 

(1,124

)

 

 

(2,096

)

 

 

(5,093

)

 

 

(3,033

)

Non-GAAP Sales and marketing

 

230,136

 

 

 

220,744

 

 

 

670,636

 

 

 

656,184

 

As a % of total revenues non-GAAP

 

41.2

%

 

 

43.4

%

 

 

41.1

%

 

 

44.8

%

 

 

 

 

 

 

 

 

GAAP General and administrative

 

87,154

 

 

 

72,261

 

 

 

244,472

 

 

 

217,810

 

Share-based compensation

 

(40,456

)

 

 

(28,096

)

 

 

(103,858

)

 

 

(84,509

)

Third-party relocation and other costs

 

(1,689

)

 

 

(430

)

 

 

(5,317

)

 

 

(3,374

)

Restructuring costs

 

(1,520

)

 

 

(740

)

 

 

(2,856

)

 

 

(1,823

)

Non-GAAP General and administrative

 

43,489

 

 

 

42,995

 

 

 

132,441

 

 

 

128,104

 

As a % of total revenues non-GAAP

 

7.8

%

 

 

8.4

%

 

 

8.1

%

 

 

8.8

%

 

 

 

 

 

 

 

 

Income (loss) from operations reconciliation

 

 

 

 

 

 

 

GAAP loss from operations

 

(54,175

)

 

 

(182,559

)

 

 

(153,768

)

 

 

(393,865

)

Share-based compensation

 

113,091

 

 

 

96,983

 

 

 

320,713

 

 

 

301,648

 

Amortization of acquired intangibles

 

38,201

 

 

 

43,667

 

 

 

112,919

 

 

 

131,409

 

Asset write-down charge

 

 

 

 

103,242

 

 

 

 

 

 

103,242

 

Third-party relocation and other costs

 

5,269

 

 

 

2,013

 

 

 

10,487

 

 

 

22,218

 

Restructuring costs

 

4,444

 

 

 

5,315

 

 

 

12,925

 

 

 

7,830

 

Non-GAAP Income from operations

 

106,830

 

 

 

68,661

 

 

 

303,276

 

 

 

172,482

 

Non-GAAP Operating margin

 

19.1

%

 

 

13.5

%

 

 

18.6

%

 

 

11.8

%

 

 

 

 

 

 

 

 

Depreciation and amortization

 

20,966

 

 

 

18,298

 

 

 

61,804

 

 

 

52,757

 

Non-GAAP Adjusted EBITDA

 

127,796

 

 

 

86,959

 

 

 

365,080

 

 

 

225,239

 

As a % of total revenues non-GAAP

 

22.9

%

 

 

17.1

%

 

 

22.4

%

 

 

15.4

%

TABLE 5

RINGCENTRAL, INC.

RECONCILIATION OF NET INCOME (LOSS)

GAAP MEASURES TO NON-GAAP MEASURES

(In thousands, except per share data) (Unaudited)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net income (loss) reconciliation

 

 

 

 

 

 

 

GAAP net loss

$

(42,116

)

 

$

(284,616

)

 

$

(117,997

)

 

$

(595,103

)

Share-based compensation

 

113,091

 

 

 

96,983

 

 

 

320,713

 

 

 

301,648

 

Amortization of acquired intangibles

 

38,201

 

 

 

43,667

 

 

 

112,919

 

 

 

131,409

 

Asset write-down charge

 

 

 

 

103,242

 

 

 

 

 

 

103,242

 

Third-party relocation and other costs, net

 

(1,731

)

 

 

2,013

 

 

 

(22

)

 

 

22,204

 

Restructuring costs

 

4,444

 

 

 

5,315

 

 

 

12,925

 

 

 

7,830

 

Amortization of debt discount and issuance costs

 

1,067

 

 

 

1,118

 

 

 

3,465

 

 

 

3,350

 

Loss associated with investments

 

99

 

 

 

99,835

 

 

 

1,745

 

 

 

194,080

 

Gain on early extinguishment of debt

 

(11,784

)

 

 

 

 

 

(42,891

)

 

 

 

Intercompany remeasurement loss (gain)

 

669

 

 

 

35

 

 

 

(1,217

)

 

 

519

 

Income tax expense effects

 

(25,866

)

 

 

(14,532

)

 

 

(60,319

)

 

 

(35,818

)

Non-GAAP net income

$

76,074

 

 

$

53,060

 

 

$

229,321

 

 

$

133,361

 

Reconciliation between GAAP and non-GAAP weighted average shares used in computing basic and diluted net income (loss) per common share:

 

 

 

 

 

 

 

Weighted average number of shares used in computing basic net loss per share

 

94,593

 

 

 

95,575

 

 

 

95,213

 

 

 

95,097

 

Effect of dilutive securities

 

2,362

 

 

 

927

 

 

 

1,622

 

 

 

977

 

Non-GAAP weighted average shares used in computing non-GAAP diluted net income per share

 

96,955

 

 

 

96,502

 

 

 

96,835

 

 

 

96,074

 

 

 

 

 

 

 

 

 

Diluted net income (loss) per share

 

 

 

 

 

 

 

GAAP net loss per share

$

(0.45

)

 

$

(2.98

)

 

$

(1.24

)

 

$

(6.26

)

Non-GAAP net income per share

$

0.78

 

 

$

0.55

 

 

$

2.37

 

 

$

1.39

 

TABLE 6

RINGCENTRAL, INC.

RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES

GAAP MEASURES TO NON-GAAP ADJUSTED, UNLEVERED FREE CASH FLOW MEASURES

(Unaudited, in thousands)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net cash provided by operating activities

$

86,594

 

 

$

42,260

 

 

$

285,818

 

 

$

151,933

 

Less:

 

 

 

 

 

 

 

Capitalized expenditures

 

(16,632

)

 

 

(21,745

)

 

 

(55,756

)

 

 

(63,466

)

Strategic partnerships

 

 

 

 

 

 

 

(33,250

)

 

 

 

Add:

 

 

 

 

 

 

 

Restructuring and other payments

 

10,038

 

 

 

12,724

 

 

 

21,460

 

 

 

14,118

 

Cash paid for interest, net of interest rate swap

 

6,737

 

 

 

52

 

 

 

10,166

 

 

 

272

 

Non-GAAP adjusted, unlevered free cash flow

$

86,737

 

 

$

33,291

 

 

$

228,438

 

 

$

102,857

 

TABLE 7

RINGCENTRAL, INC.

RECONCILIATION OF FORECASTED OPERATING MARGIN

GAAP MEASURES TO NON-GAAP MEASURES

(Unaudited, in millions)

 

 

Q4 2023

 

FY 2023

 

Low Range

 

High Range

 

Low Range

 

High Range

GAAP revenues

566.5

 

 

573.5

 

 

2,197.7

 

 

2,204.7

 

 

 

 

 

 

 

 

 

GAAP loss from operations

(49.7

)

 

(38.3

)

 

(203.4

)

 

(192.1

)

GAAP operating margin

(8.8

%)

 

(6.7

%)

 

(9.3

%)

 

(8.7

%)

Share-based compensation

110.0

 

 

105.0

 

 

430.7

 

 

425.7

 

Amortization of acquired intangibles

38.0

 

 

38.0

 

 

150.9

 

 

150.9

 

Third-party relocation and other costs, net

 

 

 

 

10.5

 

 

10.5

 

Restructuring costs

15.0

 

 

10.0

 

 

28.0

 

 

23.0

 

Non-GAAP income from operations

113.3

 

 

114.7

 

 

416.7

 

 

418.0

 

Non-GAAP operating margin

20.0

%

 

20.0

%

 

19.0

%

 

19.0

%

 

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