RingCentral Announces Fourth Quarter and Fiscal Year 2023 Results

Total ARR up 11% to $2.33 billion

Enterprise ARR up 13% to over $1 billion

Record quarterly net cash provided by operating activities of $114 million

RingCentral, Inc. (NYSE:RNG), a leading provider of AI-driven cloud business communications, contact center, video and hybrid event solutions, today announced financial results for the fourth quarter and fiscal year ended December 31, 2023.

Fourth Quarter Financial Highlights

  • Total revenue increased 9% year over year to $571 million
  • Subscriptions revenue increased 9% year over year to $547 million
  • Annualized Exit Monthly Recurring Subscriptions (ARR) increased 11% year over year to $2.329 billion
  • Mid-market and Enterprise ARR increased 12% year over year to $1.458 billion
  • Enterprise ARR increased 13% year over year to $1.005 billion
  • GAAP operating margin of (7.9)%, compared to (48.7)% in the prior year
  • Non-GAAP operating margin of 20.5%, up 650 basis points year-over-year

"We ended the year on a strong note," said Vlad Shmunis, RingCentral's founder and CEO. "The solid traction we are seeing with our new products demonstrates the progress we are making in becoming an AI-first, multi-product company as we deliver on our strategy of delivering durable, profitable growth."

"We delivered another quarter of record operating margin and free cash flow, which were above our outlook," said Sonalee Parekh, RingCentral's CFO. "We are just beginning to realize the full cash flow potential of our business, with continuing efforts to improve our efficiency and productivity, while investing for growth."

Financial Results for the Fourth Quarter 2023

  • Revenue: Total revenue was $571 million for the fourth quarter of 2023, up from $525 million in the fourth quarter of 2022, representing 9% growth. Adjusted for constant currency, total revenue rose 8%. Subscriptions revenue of $547 million increased 9% year over year and accounted for 96% of total revenue. Adjusted for constant currency, subscriptions revenue rose 9%.
  • Operating Income (Loss): GAAP operating loss was ($45) million, compared to ($256) million in the same period last year. Non-GAAP operating income was $117 million, or 20.5% of total revenue, compared to $73 million, or 14.0% of total revenue, in the same period last year.
  • Adjusted EBITDA: Adjusted EBITDA was $138 million, or 24.2% of total revenue, compared to $93 million, or 17.7% of total revenue, in the same period last year.
  • Net Income (Loss) Per Share: GAAP net loss per share was ($0.50), compared to ($2.97) in the same period last year. Diluted non-GAAP net income per share was $0.86, compared to $0.60 per share in the same period last year. The fourth quarters of 2023 and 2022 reflected a 22.5% non-GAAP tax rate.
  • Cash Flow: Net cash provided by operating activities for the fourth quarter of 2023 was a record $114 million, or 19.9% of total revenue, compared to $39 million, or 7.5% of total revenue, for the fourth quarter of 2022. Adjusted, unlevered free cash flow for the fourth quarter of 2023 was a record $97 million, or 17.0% of total revenue, compared to $0.4 million, or 0.1% of total revenue, for the fourth quarter of 2022.
  • Cash and Cash Equivalents: Total cash and cash equivalents at the end of the fourth quarter of 2023 was $222 million. This compares to $432 million at the end of the third quarter of 2023. Our cash balance reflects approximately $240 million paid in the fourth quarter of 2023 to repurchase a portion of our 2025 convertible notes. The Company also repurchased over $60 million in shares during the fourth quarter of 2023 under the plans authorized in May and November of 2023.

Financial Results for the Full Year 2023

  • Revenue: Total revenue was $2.202 billion for 2023, up from $1.988 billion in 2022, representing 11% growth. Adjusted for constant currency, total revenue rose 11%. Subscriptions revenue of $2.100 billion increased 11% and accounted for over 95% of total revenue. Adjusted for constant currency, subscriptions revenue rose 11%.
  • Operating Income (Loss): GAAP operating loss was ($199) million, compared to ($649) million in 2022. Non-GAAP operating income was $420 million, or 19.1% of total revenue, compared to $246 million, or 12.4% of total revenue, in 2022.
  • Adjusted EBITDA: Adjusted EBITDA for 2023 was $503 million, or 22.8% of total revenue, compared to $318 million, or 16.0% of total revenue, for 2022.
  • Net Income (Loss) Per Share: GAAP net loss per share was ($1.74), compared to ($9.23) in 2022. Diluted non-GAAP net income per share was $3.23, compared to $1.99 per share in 2022. Both fiscal year 2023 and 2022 reflected a 22.5% non-GAAP tax rate.
  • Cash Flow: Net cash provided by operating activities for 2023 was a record $400 million, or 18.1% of total revenue, compared to $191 million, or 9.6% of total revenue, for 2022. Adjusted, unlevered free cash flow for 2023 was a record $325 million, or 14.8% of total revenue, compared to $103 million, or 5.2% of total revenue, for 2022.

Additional Highlights

  • Named a leader in the 2023 Gartner® Magic Quadrant™ for Unified Communications as a Service, Worldwide Report for ninth year in a row. The 2023 Gartner Critical Capabilities for UCaaS report, which accompanies the Magic Quadrant report, also ranked RingCentral #1 in three out of the six product or service use case categories ranking: #1 for UC with Integrated Contact Center Use Case; #1 for Midsize Enterprise Use Case; and #1 for Telephony Centric/Heavy Organizations Use Case.
  • Announced the general availability of RingCX™, a native, AI-first contact center with new capabilities powered by its RingSense™ AI platform. Integrated with RingCentral MVP™, RingCX offers a disruptive combination of product, packaging, and pricing.
  • Announced the global availability of RingCentral Events™, an all-in-one solution for virtual, onsite, and hybrid event needs. Formerly Hopin Events, RingCentral Events is designed to be immersive and personalized, enabling businesses to provide engaging experiences that take events to the next level.
  • Announced a unified patient care solution for healthcare organizations worldwide. New integrations with Electronic Health Record (EHR) providers, including industry titans Epic, Cerner, and AllScripts, combined with RingCentral’s AI-powered communications suite bridge gaps in the patient engagement journey and simplify workflows. Powered by a new partnership with patient engagement software platform SpinSci, these EHR integrations ensure optimal and secure patient experiences, improved documentation, and reduced administrative burden.
  • Highlighted that healthcare organizations are adopting RingCentral for Healthcare solution for its trusted reputation in delivering consistent 99.999% reliability, innovative products, and an industry-leading open platform with rich APIs, plus security and privacy by design standards, and various certifications such as HIPAA and HITRUST. Over the past 18 months, RingCentral has added more than 500 new healthcare customers across small, midsize, and large enterprise segments.
  • Announced that Ned Segal has been elected to the Company’s Board of Directors, effective as of the Company’s 2023 Annual Meeting of Shareholders which was held on December 29, 2023. Segal has also been named a member of both the audit committee and nominating and corporate governance committee of the Company’s Board of Directors. Ned is a seasoned executive with more than 25 years of technology, finance and capital markets experience including at Twitter, Intuit and Goldman Sachs.
  • Announced that Prat Bhatt has been appointed to the Company’s Board of Directors, effective March 1, 2024. Bhatt has been named a member of the Board’s audit committee. Prat is an accomplished technology industry veteran and financial expert, having served as the Chief Accounting Officer at Cisco Systems for over twenty years. Additionally, Allan Thygesen, who has served on the Board for nine years, will be transitioning off in the second quarter of 2024 to focus on his other commitments.
  • Announced that it paid approximately $240 million to repurchase approximately $253 million aggregate principal amount of the 2025 Convertible Notes, using the proceeds received from the Company’s previously announced issuance of its 8.500% Senior Notes due 2030 (the “2030 Notes”). Following the closing of the Note Repurchases, approximately $161 million aggregate principal amount of the 2025 Convertible Notes remains outstanding.

Financial Outlook

Full Year 2024 Guidance:

  • Subscriptions revenue range of $2.260 to $2.285 billion, representing annual growth of 8% to 9%.
  • Total revenue range of $2.370 to $2.395 billion, representing annual growth of 8% to 9%.
  • GAAP operating margin range of (1.7%) to (0.9%).
  • Non-GAAP operating margin of 21.0%.
  • Non-GAAP tax rate assumed to be 22.5%. No material cash taxes expected given net operating loss carryforwards.
  • Non-GAAP EPS range of $3.50 to $3.58 based on 99.0 to 98.0 million fully diluted shares.
  • Share-based compensation range of $380 to $390 million.
  • Amortization of acquisition intangibles of $140 million.
  • Restructuring costs range of $5 to $7 million.
  • Adjusted, unlevered free cash flow margin of 17.5%, or an implied range of approximately $415 to $420 million.

First Quarter 2024 Guidance:

  • Subscriptions revenue range of $550 to $555 million, representing annual growth of 8% to 9%.
  • Total revenue range of $575 to $580 million, representing annual growth of 8% to 9%.
  • GAAP operating margin range of (5.2%) to (4.3%).
  • Non-GAAP operating margin of 19.5%.
  • Non-GAAP tax rate assumed to be 22.5%. No material cash taxes expected given net operating loss carryforwards.
  • Non-GAAP EPS of $0.79 to $0.80 based on 97.0 to 96.5 million fully diluted shares.
  • Share-based compensation range of $98 to $100 million.
  • Amortization of acquisition intangibles of $35 million.
  • Restructuring costs range of $5 to $7 million.

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 2024, 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 and adjusted, unlevered free cash flow margin 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 and adjusted, unlevered free cash flow margin guidance is not available without unreasonable effort.

Conference Call Details:

  • What: RingCentral financial results for the fourth quarter and fiscal year 2023 and outlook for the first quarter and fiscal year 2024.
  • When: February 20, 2024 at 2:00 PM PT (5:00 PM ET).
  • Dial-in: 1-888-349-0093 from the United States; 1-412-317-5201 internationally
  • Webcast: RingCentral Q4 2023 Earnings Webcast (live and replay).
  • Replay: Following the completion of the call through 11:59 PM Eastern Time on February 27, 2024, a telephone replay will also be available by dialing 1-844-512-2921 from the United States or 1-412-317-6671 internationally with recording access code 10185977.

Investor Presentation Details

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

About RingCentral

RingCentral is a leading provider of AI-driven cloud business communications, contact center, video and hybrid event solutions. RingCentral empowers businesses with conversation intelligence, and unlocks rich customer and employee interactions to provide insights and improved 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.

©2024 RingCentral, Inc. All rights reserved. RingCentral, RingSense, RingCX, RingCentral Events, 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 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, Non-GAAP adjusted, unlevered free cash flow margin, 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. Non-GAAP adjusted, unlevered free cash flow margin is defined as Non-GAAP adjusted, unlevered free cash flow divided by total GAAP revenues.

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, Non-GAAP adjusted, unlevered free cash flow margin, 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, Non-GAAP adjusted, unlevered free cash flow, Non-GAAP adjusted, and unlevered free cash flow margin 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, Non-GAAP adjusted, unlevered free cash flow margin, 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 subscriptions 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.

CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

 

 

December 31, 2023

 

December 31, 2022

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

222,195

 

 

$

269,984

 

Accounts receivable, net

 

364,438

 

 

 

311,318

 

Deferred and prepaid sales commission costs

 

184,620

 

 

 

158,865

 

Prepaid expenses and other current assets

 

77,396

 

 

 

55,849

 

Total current assets

 

848,649

 

 

 

796,016

 

Property and equipment, net

 

184,390

 

 

 

185,400

 

Operating lease right-of-use assets

 

42,989

 

 

 

35,433

 

Deferred and prepaid sales commission costs, non-current

 

395,724

 

 

 

438,579

 

Goodwill

 

67,370

 

 

 

54,335

 

Acquired intangibles, net

 

393,767

 

 

 

528,051

 

Other assets

 

12,024

 

 

 

35,848

 

Total assets

$

1,944,913

 

 

$

2,073,662

 

Liabilities, Temporary Equity, and Stockholders’ Deficit

 

 

 

Current liabilities

 

 

 

Accounts payable

$

53,295

 

 

$

62,721

 

Accrued liabilities

 

325,632

 

 

 

380,113

 

Current portion of long-term debt, net

 

20,000

 

 

 

 

Deferred revenue

 

233,619

 

 

 

209,725

 

Total current liabilities

 

632,546

 

 

 

652,559

 

Long-term debt, net

 

1,525,482

 

 

 

1,638,411

 

Operating lease liabilities

 

28,178

 

 

 

20,182

 

Other long-term liabilities

 

61,827

 

 

 

45,848

 

Total liabilities

 

2,248,033

 

 

 

2,357,000

 

 

 

 

 

Temporary equity

 

 

 

Series A convertible preferred stock

 

199,449

 

 

 

199,449

 

 

 

 

 

Stockholders’ deficit

 

 

 

Common stock

 

9

 

 

 

10

 

Additional paid-in capital

 

1,204,781

 

 

 

1,059,880

 

Accumulated other comprehensive loss

 

(8,223

)

 

 

(8,781

)

Accumulated deficit

 

(1,699,136

)

 

 

(1,533,896

)

Total stockholders’ deficit

$

(502,569

)

 

$

(482,787

)

Total liabilities, temporary equity and stockholders’ deficit

$

1,944,913

 

 

$

2,073,662

 

TABLE 2

RINGCENTRAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share data)

 

 

 

 

 

Three Months Ended

December 31,

 

Year Ended

December 31,

 

2023

 

2022

 

2023

 

2022

Revenues

 

 

 

 

 

 

 

Subscriptions

$

547,373

 

 

$

501,616

 

 

$

2,100,329

 

 

$

1,887,756

 

Other

 

23,898

 

 

 

23,130

 

 

 

102,100

 

 

 

100,574

 

Total revenues

 

571,271

 

 

 

524,746

 

 

 

2,202,429

 

 

 

1,988,330

 

Cost of revenues

 

 

 

 

 

 

 

Subscriptions

 

143,386

 

 

 

136,015

 

 

 

557,050

 

 

 

531,098

 

Other

 

26,838

 

 

 

24,578

 

 

 

107,241

 

 

 

110,633

 

Total cost of revenues

 

170,224

 

 

 

160,593

 

 

 

664,291

 

 

 

641,731

 

Gross profit

 

401,047

 

 

 

364,153

 

 

 

1,538,138

 

 

 

1,346,599

 

Operating expenses

 

 

 

 

 

 

 

Research and development

 

84,886

 

 

 

88,764

 

 

 

335,851

 

 

 

362,256

 

Sales and marketing

 

272,628

 

 

 

275,464

 

 

 

1,068,050

 

 

 

1,057,231

 

General and administrative

 

88,576

 

 

 

75,088

 

 

 

333,048

 

 

 

292,898

 

Asset write-down charges

 

 

 

 

180,447

 

 

 

 

 

 

283,689

 

Total operating expenses

 

446,090

 

 

 

619,763

 

 

 

1,736,949

 

 

 

1,996,074

 

Loss from operations

 

(45,043

)

 

 

(255,610

)

 

 

(198,811

)

 

 

(649,475

)

Other income (expense), net

 

 

 

 

 

 

 

Interest expense

 

(16,505

)

 

 

(1,194

)

 

 

(35,997

)

 

 

(4,807

)

Other income (expense)

 

16,442

 

 

 

(25,046

)

 

 

77,963

 

 

 

(219,771

)

Other income (expense), net

 

(63

)

 

 

(26,240

)

 

 

41,966

 

 

 

(224,578

)

Loss before income taxes

 

(45,106

)

 

 

(281,850

)

 

 

(156,845

)

 

 

(874,053

)

Provision for income taxes

 

2,137

 

 

 

2,213

 

 

 

8,395

 

 

 

5,113

 

Net loss

$

(47,243

)

 

$

(284,063

)

 

$

(165,240

)

 

$

(879,166

)

Net loss per common share

 

 

 

 

 

 

 

Basic and diluted

$

(0.50

)

 

$

(2.97

)

 

$

(1.74

)

 

$

(9.23

)

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

 

 

 

 

 

 

 

Basic and diluted

 

94,018

 

 

 

95,663

 

 

 

94,912

 

 

 

95,239

 

TABLE 3

RINGCENTRAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

 

Year Ended December 31,

 

2023

 

2022

Cash flows from operating activities

 

 

 

Net loss

$

(165,240

)

 

$

(879,166

)

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

 

 

 

Depreciation and amortization

 

233,940

 

 

 

246,561

 

Share-based compensation

 

426,679

 

 

 

386,009

 

Unrealized loss on investments

 

1,506

 

 

 

203,483

 

Asset write-down and other charges

 

 

 

 

305,351

 

Amortization of deferred and prepaid sales commission costs

 

138,134

 

 

 

115,184

 

Amortization of debt discount and issuance costs

 

4,566

 

 

 

4,468

 

Gain on early extinguishment of debt

 

(53,400

)

 

 

 

Reduction of operating lease right-of-use assets

 

20,469

 

 

 

19,907

 

Provision for bad debt

 

6,852

 

 

 

9,367

 

Other

 

1,486

 

 

 

4,327

 

Changes in assets and liabilities:

 

 

 

Accounts receivable

 

(57,819

)

 

 

(87,843

)

Deferred and prepaid sales commission costs

 

(156,734

)

 

 

(235,869

)

Prepaid expenses and other assets

 

14,492

 

 

 

3,812

 

Accounts payable

 

(21,213

)

 

 

(6,166

)

Accrued and other liabilities

 

9,101

 

 

 

89,473

 

Deferred revenue

 

17,681

 

 

 

33,275

 

Operating lease liabilities

 

(20,838

)

 

 

(20,868

)

Net cash provided by operating activities

 

399,662

 

 

 

191,305

 

Cash flows from investing activities

 

 

 

Purchases of property and equipment

 

(23,513

)

 

 

(32,713

)

Capitalized internal-use software

 

(52,227

)

 

 

(53,730

)

Cash paid for business combination, net of cash acquired

 

(14,709

)

 

 

 

Purchases of intangible assets and long-term investments

 

 

 

 

(3,990

)

Proceeds from sale of marketable equity investments

 

 

 

 

3,223

 

Net cash used in investing activities

 

(90,449

)

 

 

(87,210

)

Cash flows from financing activities

 

 

 

Proceeds from issuance of stock in connection with stock plans

 

16,687

 

 

 

15,855

 

Payments for taxes related to net share settlement of equity awards

 

(9,062

)

 

 

(7,598

)

Payments for repurchase of common stock

 

(311,088

)

 

 

(99,793

)

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

 

785,749

 

 

 

 

Payments for the repurchase of convertible notes

 

(820,960

)

 

 

 

Repayments of principal on term loan

 

(10,000

)

 

 

 

Repayment of financing obligations

 

(5,777

)

 

 

(4,815

)

Payment for contingent consideration

 

(3,567

)

 

 

(1,867

)

Net cash used in financing activities

 

(358,018

)

 

 

(98,218

)

Effect of exchange rate changes

 

1,016

 

 

 

(3,055

)

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

(47,789

)

 

 

2,822

 

Cash, cash equivalents, and restricted cash

 

 

 

Beginning of year

 

269,984

 

 

 

267,162

 

End of year

$

222,195

 

 

$

269,984

 

TABLE 4

RINGCENTRAL, INC.

RECONCILIATION OF OPERATING INCOME (LOSS)

GAAP MEASURES TO NON-GAAP MEASURES

(Unaudited, in thousands)

 

 

Three Months Ended

December 31,

 

Year Ended

December 31,

 

2023

 

2022

 

2023

 

2022

Revenues

 

 

 

 

 

 

 

Subscriptions

$

547,373

 

 

$

501,616

 

 

$

2,100,329

 

 

$

1,887,756

 

Other

 

23,898

 

 

 

23,130

 

 

 

102,100

 

 

 

100,574

 

Total revenues

 

571,271

 

 

 

524,746

 

 

 

2,202,429

 

 

 

1,988,330

 

Cost of revenues reconciliation

 

 

 

 

 

 

 

GAAP Subscriptions cost of revenues

 

143,386

 

 

 

136,015

 

 

 

557,050

 

 

 

531,098

 

Share-based compensation

 

(7,206

)

 

 

(6,381

)

 

 

(28,302

)

 

 

(26,802

)

Amortization of acquisition intangibles

 

(37,136

)

 

 

(42,196

)

 

 

(147,460

)

 

 

(170,805

)

Third-party relocation and other costs

 

(31

)

 

 

(16

)

 

 

(136

)

 

 

(1,245

)

Restructuring costs

 

(181

)

 

 

(205

)

 

 

(818

)

 

 

(457

)

Non-GAAP Subscriptions cost of revenues

 

98,832

 

 

 

87,217

 

 

 

380,334

 

 

 

331,789

 

 

 

 

 

 

 

 

 

GAAP Other cost of revenues

 

26,838

 

 

 

24,578

 

 

 

107,241

 

 

 

110,633

 

Share-based compensation

 

(2,374

)

 

 

(1,890

)

 

 

(9,266

)

 

 

(8,595

)

Amortization of acquisition intangibles

 

(22

)

 

 

(22

)

 

 

(88

)

 

 

(76

)

Restructuring costs

 

 

 

 

 

 

 

(58

)

 

 

 

Non-GAAP Other cost of revenues

 

24,442

 

 

 

22,666

 

 

 

97,829

 

 

 

101,962

 

Gross profit and gross margin reconciliation

 

 

 

 

 

 

 

Non-GAAP Subscriptions

 

81.9

%

 

 

82.6

%

 

 

81.9

%

 

 

82.4

%

Non-GAAP Other

 

(2.3

)%

 

 

2.0

%

 

 

4.2

%

 

 

(1.4

)%

Non-GAAP Gross profit

 

78.4

%

 

 

79.1

%

 

 

78.3

%

 

 

78.2

%

Operating expenses reconciliation

 

 

 

 

 

 

 

GAAP Research and development

 

84,886

 

 

 

88,764

 

 

 

335,851

 

 

 

362,256

 

Share-based compensation

 

(23,869

)

 

 

(20,697

)

 

 

(95,673

)

 

 

(90,961

)

Third-party relocation and other costs

 

(899

)

 

 

(1,427

)

 

 

(5,863

)

 

 

(18,987

)

Restructuring costs

 

(176

)

 

 

(2,599

)

 

 

(4,457

)

 

 

(5,321

)

Non-GAAP Research and development

 

59,942

 

 

 

64,041

 

 

 

229,858

 

 

 

246,987

 

As a % of total revenues non-GAAP

 

10.5

%

 

 

12.2

%

 

 

10.4

%

 

 

12.4

%

 

 

 

 

 

 

 

 

GAAP Sales and marketing

 

272,628

 

 

 

275,464

 

 

 

1,068,050

 

 

 

1,057,231

 

Share-based compensation

 

(37,232

)

 

 

(35,997

)

 

 

(154,295

)

 

 

(155,746

)

Amortization of acquisition intangibles

 

(995

)

 

 

(895

)

 

 

(3,524

)

 

 

(3,641

)

Third-party relocation and other costs

 

(14

)

 

 

(66

)

 

 

(115

)

 

 

(121

)

Restructuring costs

 

(3,665

)

 

 

(6,662

)

 

 

(8,758

)

 

 

(9,695

)

Non-GAAP Sales and marketing

 

230,722

 

 

 

231,844

 

 

 

901,358

 

 

 

888,028

 

As a % of total revenues non-GAAP

 

40.4

%

 

 

44.2

%

 

 

40.9

%

 

 

44.7

%

 

 

 

 

 

 

 

 

GAAP General and administrative

 

88,576

 

 

 

75,088

 

 

 

333,048

 

 

 

292,898

 

Share-based compensation

 

(42,692

)

 

 

(28,231

)

 

 

(146,550

)

 

 

(112,740

)

Third-party relocation and other costs

 

(2,094

)

 

 

(396

)

 

 

(7,411

)

 

 

(3,770

)

Restructuring costs

 

(3,421

)

 

 

(888

)

 

 

(6,277

)

 

 

(2,711

)

Non-GAAP General and administrative

 

40,369

 

 

 

45,573

 

 

 

172,810

 

 

 

173,677

 

As a % of total revenues non-GAAP

 

7.1

%

 

 

8.7

%

 

 

7.8

%

 

 

8.7

%

 

 

 

 

 

 

 

 

Income (loss) from operations reconciliation

 

 

 

 

 

 

 

GAAP loss from operations

 

(45,043

)

 

 

(255,610

)

 

 

(198,811

)

 

 

(649,475

)

Share-based compensation

 

113,373

 

 

 

93,196

 

 

 

434,086

 

 

 

394,844

 

Amortization of acquisition intangibles

 

38,153

 

 

 

43,113

 

 

 

151,072

 

 

 

174,522

 

Asset write-down charge

 

 

 

 

180,447

 

 

 

 

 

 

283,689

 

Third-party relocation and other costs

 

3,038

 

 

 

1,905

 

 

 

13,525

 

 

 

24,123

 

Restructuring costs

 

7,443

 

 

 

10,354

 

 

 

20,368

 

 

 

18,184

 

Non-GAAP Income from operations

 

116,964

 

 

 

73,405

 

 

 

420,240

 

 

 

245,887

 

Non-GAAP Operating margin

 

20.5

%

 

 

14.0

%

 

 

19.1

%

 

 

12.4

%

 

 

 

 

 

 

 

 

Depreciation and amortization

 

21,063

 

 

 

19,282

 

 

 

82,868

 

 

 

72,039

 

Non-GAAP Adjusted EBITDA

 

138,027

 

 

 

92,687

 

 

 

503,108

 

 

 

317,926

 

As a % of total revenues non-GAAP

 

24.2

%

 

 

17.7

%

 

 

22.8

%

 

 

16.0

%

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

December 31,

 

Year Ended

December 31,

 

2023

 

2022

 

2023

 

2022

Net income (loss) income reconciliation

 

 

 

 

 

 

 

GAAP net loss

$

(47,243

)

 

$

(284,063

)

 

$

(165,240

)

 

$

(879,166

)

Share-based compensation

 

113,373

 

 

 

93,196

 

 

 

434,086

 

 

 

394,844

 

Amortization of acquisition intangibles

 

38,153

 

 

 

43,113

 

 

 

151,072

 

 

 

174,522

 

Asset write-down charge

 

 

 

 

180,447

 

 

 

 

 

 

283,689

 

Third-party relocation and other costs, net

 

3,038

 

 

 

1,905

 

 

 

3,016

 

 

 

24,109

 

Restructuring costs

 

7,443

 

 

 

10,354

 

 

 

20,368

 

 

 

18,184

 

Amortization of debt discount and issuance costs

 

1,101

 

 

 

1,118

 

 

 

4,566

 

 

 

4,468

 

Loss associated with investments

 

 

 

 

27,265

 

 

 

1,745

 

 

 

221,345

 

Gain on early extinguishment of debt

 

(10,510

)

 

 

 

 

 

(53,401

)

 

 

 

Intercompany remeasurement gain

 

(428

)

 

 

(639

)

 

 

(1,645

)

 

 

(120

)

Income tax expense effects

 

(21,952

)

 

 

(14,641

)

 

 

(82,271

)

 

 

(50,459

)

Non-GAAP net income

$

82,975

 

 

$

58,055

 

 

$

312,296

 

 

$

191,416

 

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

 

94,018

 

 

 

95,663

 

 

 

94,912

 

 

 

95,239

 

Effect of dilutive securities

 

1,989

 

 

 

1,005

 

 

 

1,714

 

 

 

984

 

Non-GAAP weighted average shares used in

computing non-GAAP diluted net income per share

 

96,007

 

 

 

96,668

 

 

 

96,626

 

 

 

96,223

 

 

 

 

 

 

 

 

 

Diluted net (loss) income per share

 

 

 

 

 

 

 

GAAP net loss per share

$

(0.50

)

 

$

(2.97

)

 

$

(1.74

)

 

$

(9.23

)

Non-GAAP net income per share

$

0.86

 

 

$

0.60

 

 

$

3.23

 

 

$

1.99

 

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

December 31,

 

Year Ended

December 31,

 

2023

 

2022

 

2023

 

2022

Net cash provided by operating activities

$

113,844

 

 

$

39,372

 

 

$

399,662

 

 

$

191,305

 

Less:

 

 

 

 

 

 

 

Capitalized expenditures

 

(19,984

)

 

 

(22,977

)

 

 

(75,740

)

 

 

(86,443

)

Strategic partnerships

 

(17,000

)

 

 

(30,000

)

 

 

(50,250

)

 

 

(30,000

)

Add:

 

 

 

 

 

 

 

Restructuring and other payments

 

13,642

 

 

 

13,892

 

 

 

35,102

 

 

 

28,010

 

Cash paid for interest, net of interest rate swap

 

6,463

 

 

 

75

 

 

 

16,629

 

 

 

347

 

Non-GAAP adjusted, unlevered free cash flow

$

96,965

 

 

$

362

 

 

$

325,403

 

 

$

103,219

 

Non-GAAP adjusted, unlevered free cash flow margin

 

17.0

%

 

 

0.1

%

 

 

14.8

%

 

 

5.2

%

TABLE 7

RINGCENTRAL, INC.

RECONCILIATION OF FORECASTED OPERATING MARGIN

GAAP MEASURES TO NON-GAAP MEASURES

(Unaudited, in millions)

 

 

Q1 2024

 

FY 2024

 

Low Range

 

High Range

 

Low Range

 

High Range

GAAP revenues

575.0

 

 

580.0

 

 

2,370.0

 

 

2,395.0

 

 

 

 

 

 

 

 

 

GAAP loss from operations

(29.9

)

 

(24.9

)

 

(39.3

)

 

(22.1

)

GAAP operating margin

(5.2

%)

 

(4.3

%)

 

(1.7

%)

 

(0.9

%)

Share-based compensation

100.0

 

 

98.0

 

 

390.0

 

 

380.0

 

Amortization of acquired intangibles

35.0

 

 

35.0

 

 

140.0

 

 

140.0

 

Restructuring costs

7.0

 

 

5.0

 

 

7.0

 

 

5.0

 

Non-GAAP income from operations

112.1

 

 

113.1

 

 

497.7

 

 

503.0

 

Non-GAAP operating margin

19.5

%

 

19.5

%

 

21.0

%

 

21.0

%

 

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