RingCentral Announces Third Quarter 2021 Results

RingCentral, Inc. (NYSE: RNG), a leading provider of global enterprise cloud communications, video meetings, collaboration, and contact center solutions, today announced financial results for the third quarter ended September 30, 2021.

Third Quarter Financial Highlights

  • Total revenue increased 37% year over year to $415 million.
  • Subscriptions revenue increased 38% year over year to $385 million.
  • Total Annualized Exit Monthly Recurring Subscriptions (ARR) increased 39% year over year to $1.64 billion.
  • RingCentral Office® ARR (UCaaS + CCaaS) increased 42% year over year to $1.55 billion.
  • Mid-market and Enterprise ARR increased 53% year over year to $971 million.

“Third quarter results were outstanding, with accelerating growth driven by ramping contributions from our key partners and momentum from our upmarket customers,” said Vlad Shmunis, RingCentral’s founder, chairman and CEO. “Our success is rooted in our commitment to cultivating trust with our customers, our relentless pace of innovation, and our differentiated partner network with industry leaders. With our award-winning RingCentral Message Video Phone (or MVP) platform, our seamless integration with an industry-leading cloud contact center solution, and our unparalleled market access with strategic partners, we believe we are uniquely positioned to meet the rising global demand for cloud-based communications solutions.”

Financial Results for the Third Quarter 2021

  • Revenue: Total revenue was $415 million for the third quarter of 2021, up from $304 million in the third quarter of 2020, representing 37% growth. Subscriptions revenue of $385 million increased 38% year over year and accounted for 93% of total revenue.
  • Operating Income (Loss): GAAP operating loss was ($83) million, compared to ($30) million in the same period last year, primarily driven by higher share-based compensation. Non-GAAP operating income was $44 million, compared to a non-GAAP operating income of $31 million in the same period last year.
  • Net Income (Loss) Per Share: GAAP net loss per share was ($1.60), compared to ($0.24) in the same period last year, primarily driven by higher share-based compensation and mark-to-market losses associated with investments. Non-GAAP net income per diluted share was $0.36, compared to $0.26 per diluted share in the same period last year. The third quarters of 2021 and 2020 reflected a 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 2021 was $345 million. This compares to $325 million at the end of the second quarter of 2021.

Financial Outlook

Full Year 2021 Guidance:

  • Raising total revenue range to $1.580 to $1.581 billion, representing annual growth of 33% to 34%. This is up from our prior range of $1.539 to $1.545 billion and annual growth of 30% to 31%.
  • Raising subscriptions revenue range to $1.466 to $1.467 billion, representing annual growth of 35%. This is up from our prior range of $1.424 to $1.430 billion and annual growth of 31% to 32%.
  • Raising GAAP operating margin range to (18.7%) to (18.5%). This is up from our prior range of (19.2%) to (18.3%).
  • Raising non-GAAP operating margin to 10.1%. This is up from our prior range of 10.0% to 10.1%.
  • Non-GAAP tax rate assumed to be 22.5%. No material cash taxes expected given net operating loss carryforwards.
  • Raising non-GAAP EPS to $1.32 based on 93.5 million fully diluted shares. This is up from our prior range of $1.28 to $1.30 based on 93.0 to 93.5 million fully diluted shares.
  • Share-based compensation range of $378 to $380 million, amortization of debt discount and issuance costs of $64 million, amortization of acquisition intangibles of $68 million, and acquisition related and other matters of approximately $7.6 million.

Fourth Quarter 2021 Guidance:

  • Total revenue range of $433.5 to $434.5 million, representing annual growth of 30%.
  • Subscriptions revenue range of $404.5 to $405.5 million, representing annual growth of 32%.
  • GAAP operating margin range of (22.3%) to (21.7%).
  • Non-GAAP operating margin range of 10.4% to 10.5%.
  • Non-GAAP tax rate assumed to be 22.5%. No material cash taxes expected given net operating loss carryforwards.
  • Non-GAAP EPS of $0.37 based on 94.5 to 95.0 million fully diluted shares.
  • Share-based compensation range of $108 to $110 million, amortization of debt discount and issuance costs of $16 million, and amortization of acquisition intangibles of $32 million.

CFO Transition Plan

RingCentral announced today that Mitesh Dhruv will be stepping down from his role as Chief Financial Officer. Mr. Dhruv will remain in his current role through the end of 2021.

“On behalf of everyone at RingCentral, I would like to thank Mitesh for his valuable contributions to our Company over the past decade. And especially since stepping in as a CFO nearly 5 years ago, Mitesh has been instrumental in driving consistent profitable growth and outsized shareholder results. We wish Mitesh all the best in all of his future endeavors,” said Vlad Shmunis, RingCentral’s founder, chairman and CEO. “Mitesh established a strong foundation and we have an exceptional finance and accounting team in place. We are confident that our ability to execute and lead in the $100 billion-plus UCaaS digital transformation market will continue unabated.”

In selecting our next CFO, RingCentral will consider internal and external candidates.

“It has been a privilege to be the CFO of RingCentral. The Company’s track record of trust, innovation, and partnerships is exceptional, and I am proud to have contributed,” said Mr. Dhruv. “RingCentral is a well-oiled execution machine that I am confident should continue to operate at a high level. With the company firing on all cylinders, now is the right time for me to take some time off as I consider the next chapter of my life.”

Additional Highlights

Recognition

  • Recognized as a Leader in the 2021 Gartner Magic Quadrant for Unified Communications as a Service (UCaaS), Worldwide report, making this RingCentral’s seventh year in a row being named to the Leaders quadrant. RingCentral was positioned furthest for completeness of vision in the Leaders quadrant.
  • Ranked highest in three out of four use cases among 14 total vendors in the 2021 Gartner Critical Capabilities for Unified Communications as a Service (UCaaS), Worldwide report.

Partnerships

  • Introduced RingCentral Rise, a new platform designed exclusively for service providers around the world. By leveraging Resources, Innovation, System integration, and Experiences (Rise) from RingCentral, service providers can now offer their own unique, co-branded unified cloud communications solutions including team messaging, video meetings, cloud phone system, and contact center solutions to businesses around the world in a fast, flexible, and scalable manner.
  • Announced that MCM Telecom will offer a co-branded solution called RingCentral for Symphony, which will be the lead MCM Unified Communications as a Service offering to all business customers. MCM and RingCentral have joined forces to bring together all the essential elements of hybrid work into a single app for video conferencing, mobile collaboration, and advanced business phone capabilities enhanced by MCM’s leading fiber network and expertise in serving the Mexican enterprise market.
  • Announced new partnerships with three leading healthcare Independent Software Vendors (ISVs) - Ascom, ChronicCareIQ, and ELLKAY - to bring new capabilities to RingCentral MVP and RingCentral Contact Center. The partnerships enable providers to transform point of care workflows managed via ruggedized VoIP wireless devices. It also helps enhance patient engagement with data-driven interaction during outbound and inbound patient calls.

Platform

  • Received a Unified License that will enable RingCentral to provide its Unified Communications as a Service (UCaaS) and Contact Center as a Service (CCaaS) solutions in India, which will make RingCentral the first global cloud provider to offer fully compliant voice and other unified cloud communications in the country.
  • Announced new capabilities that will help organizations to bring together their preferred apps and services with a cloud-based business communications platform. Incremental developments include APIs for call performance analytics and audit trail recording, new RingCentral Add-ins integrations, and new ISV partnerships.
  • Announced new innovative features for RingCentral MVP, including live meeting transcription, meeting summaries, infinite whiteboard, and next-gen analytics. Also introduced new capabilities for RingCentral Rooms, including mobile to room meeting switch, Rooms as softphone, Rooms proximity sharing, and Room Connector, as well as several new Room appliances.
  • Announced a range of new innovations enabling employees to communicate and collaborate effectively, securely, and productively from anywhere. New capabilities include Dynamic End-to-End Encryption (E2EE), C5:2020 certification, RingCentral Add-ins, RingCentral for Microsoft Teams embedded dialer, and Mobile Heads Up Display, as well as RingCentral Video innovations including presentation mode, touch-appearance capabilities, auto-framing, and breakout rooms.

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 2021, 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.

Conference Call Details:

  • What: RingCentral financial results for the third quarter of 2021 and outlook for the fourth quarter and full year of 2021.
  • When: Tuesday, November 9, 2021 at 2:00PM PT (5:00PM ET).
  • Webcast: RingCentral Q3 2021 Earnings Webcast (live and replay).
  • Replay: Following the completion of the call through 11:59 PM ET on November 16, 2021, a telephone replay will be available by dialing (844) 512-2921 from the United States or (412) 317-6671 internationally with recording access code 10161263.

Investor Presentation Details

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

About RingCentral

RingCentral, Inc. (NYSE: RNG) is a leading provider of business cloud communications and contact center solutions based on its powerful Message Video Phone™  (MVP™) global platform. More flexible and cost effective than legacy on-premises PBX and video conferencing systems that it replaces, RingCentral® empowers modern mobile and distributed workforces to communicate, collaborate, and connect via any mode, any device, and any location. RingCentral offers three key products in its portfolio including RingCentral MVP™, a Unified Communications as a Service (UCaaS) platform including team messaging, video meetings, and cloud phone system; RingCentral Video®,  the company’s video meetings solution with team messaging that enables Smart Video Meetings™; and RingCentral cloud Contact Center solutions. RingCentral’s open platform integrates with leading third-party business applications and enables customers to easily customize business workflows. RingCentral is headquartered in Belmont, California, and has offices around the world.

© 2021 RingCentral, Inc. All rights reserved. RingCentral, Message Video Phone,  MVP, RingCentral Office, RingCentral Video, Glip, Smart Video Meetings, RingCentral Rise, 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, 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: the future effects of the COVID-19 pandemic; our ability to realize the anticipated benefits of our strategic relationships; our expectations regarding our strategic acquisitions; 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 Office®, 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 Form 10-Q for the quarter ended June 30, 2021, 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 net income (loss), Non-GAAP net income (loss) per diluted share, Non-GAAP net cash provided by (used in) operating activities, and Non-GAAP free cash flow. 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, and acquisition related and other matters including transaction costs, integration costs, restructuring costs, acquisition-related retention payments, as well as changes in the fair value of contingent consideration obligations and certain litigation related costs. Non-GAAP operating margin is defined as Non-GAAP income (loss) from operations divided by total GAAP revenue. Non-GAAP net income (loss) is defined as GAAP net income (loss) excluding share-based compensation which includes related employer payroll taxes, intercompany remeasurement gains or losses, acquisition related and other matters, amortization of acquisition intangibles, non-cash interest expense associated with amortization of debt discount and issuance costs related to our convertible senior notes, gain (loss) associated with investments, loss on early extinguishment of debt, tax benefit from release of valuation allowance, 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 net cash provided by (used in) operating activities is defined as net cash provided by (used in) operating activities plus cash paid for repayments of convertible senior notes attributable to debt discount and cash paid for strategic partnerships. Non-GAAP free cash flow is defined as Non-GAAP net cash provided by (used in) operating activities reduced by purchases of property and equipment and capitalized internal-use software. We believe information regarding 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 net income (loss), Non-GAAP net income (loss) per diluted share, Non-GAAP net cash provided by (used in) operating activities, and Non-GAAP free cash flow 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 net income (loss), Non-GAAP net income (loss) per diluted share, Non-GAAP net cash provided by (used in) operating activities, and Non-GAAP free cash flow provide useful measure for period-to-period comparisons of our business.

Although Non-GAAP subscriptions gross margin, Non-GAAP other gross margin, Non-GAAP operating margin, Non-GAAP income (loss) from operations, Non-GAAP net income (loss), Non-GAAP net income (loss) per diluted share, Non-GAAP net cash provided by (used in) operating activities, and Non-GAAP free cash flow 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, RingCentral Office® annualized exit monthly recurring subscriptions, mid-market and enterprise annualized exit monthly recurring subscriptions, enterprise annualized exit monthly recurring subscriptions, channel Office partner annualized exit monthly recurring subscriptions, direct and partner Office annualized exit monthly recurring subscriptions, and net monthly subscriptions dollar retention. 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 our RingCentral Office® annualized exit monthly recurring subscriptions in the same manner as we calculate our annualized exit monthly recurring subscriptions, except that only customer subscriptions from RingCentral Office® and RingCentral customer engagement solutions customers are included when determining monthly recurring subscriptions for the purposes of calculating this key business metric. We calculate mid-market and enterprise annualized exit monthly recurring subscriptions in the same manner as we calculate our RingCentral Office® 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 RingCentral Office® annualized exit monthly recurring subscriptions, except that only customer subscriptions from customers generating $100,000 or more in annual recurring revenue are included. We calculate channel Office annualized exit monthly recurring subscriptions in the same manner as we calculate our annualized exit monthly revenue subscriptions, except that only customer subscriptions generated from channel partners are included. We calculate direct and partners Office annualized exit monthly recurring subscriptions in the same manner as we calculate our annualized exit monthly revenue subscriptions, except that only customer subscriptions not generated from channel partners are included. We define 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.

*Disclaimer

Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

Gartner, “Critical Capabilities for Unified Communications as a Service, Worldwide” Christopher Trueman, Megan Fernandez, Daniel O’Connell, Rafael Benitez, Pankil Sheth, October 19, 2021.

Gartner, Magic Quadrant for Unified Communications as a Service, Worldwide, By Rafael Benitez, Megan Fernandez, Daniel O’Connell, Christopher Trueman, Pankil Sheth, 18 October 2021

GARTNER and Magic Quadrant are registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally, and are used herein with permission. All rights reserved.

TABLE 1

RINGCENTRAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

 

September 30, 2021

December 31, 2020

Assets

Current assets

Cash and cash equivalents

$

345,152

$

639,853

Accounts receivable, net

216,126

176,034

Deferred and prepaid sales commission costs

91,948

63,726

Prepaid expenses and other current assets

40,371

46,516

Total current assets

693,597

926,129

Property and equipment, net

158,779

142,208

Operating lease right-of-use assets

48,038

51,115

Long-term investments

199,655

213,176

Deferred and prepaid sales commission costs, non-current

709,347

667,779

Goodwill

56,012

57,313

Acquired intangibles, net

92,346

118,313

Other assets

7,729

8,564

Total assets

$

1,965,503

$

2,184,597

Liabilities, Temporary Equity, and Stockholders’ Equity

Current liabilities

Accounts payable

$

46,831

$

54,043

Accrued liabilities

259,380

210,654

Current portion of convertible senior notes, net

31,148

Deferred revenue

169,399

142,223

Total current liabilities

475,610

438,068

Convertible senior notes, net

1,382,406

1,375,320

Operating lease liabilities

34,176

38,722

Other long-term liabilities

28,050

20,241

Total liabilities

1,920,242

1,872,351

Temporary equity

3,787

Stockholders’ equity

Common stock

9

9

Additional paid-in capital

673,422

673,950

Accumulated other comprehensive income

2,029

6,806

Accumulated deficit

(630,199

)

(372,306

)

Total stockholders’ equity

$

45,261

$

308,459

Total liabilities, temporary equity and stockholders’ equity

$

1,965,503

$

2,184,597

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,

2021

2020

2021

2020

Revenues

Subscriptions

$

385,440

$

279,639

$

1,061,866

$

779,781

Other

29,189

23,985

84,392

69,340

Total revenues

414,629

303,624

1,146,258

849,121

Cost of revenues

Subscriptions

84,229

60,531

236,719

169,685

Other

26,220

21,783

75,634

62,710

Total cost of revenues

110,449

82,314

312,353

232,395

Gross profit

304,180

221,310

833,905

616,726

Operating expenses

Research and development

84,121

48,481

222,958

132,910

Sales and marketing

225,111

152,986

607,758

421,931

General and administrative

78,083

49,513

201,716

146,381

Total operating expenses

387,315

250,980

1,032,432

701,222

Loss from operations

(83,135

)

(29,670

)

(198,527

)

(84,496

)

Other income (expense), net

Interest expense

(15,977

)

(12,680

)

(48,197

)

(32,780

)

Other income (expense)

(47,062

)

21,824

(9,742

)

36,910

Other income (expense), net

(63,039

)

9,144

(57,939

)

4,130

Loss before income taxes

(146,174

)

(20,526

)

(256,466

)

(80,366

)

Provision for income taxes

577

431

1,427

803

Net loss

$

(146,751

)

$

(20,957

)

$

(257,893

)

$

(81,169

)

Net loss per common share

Basic and diluted

$

(1.60

)

$

(0.24

)

$

(2.83

)

$

(0.92

)

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

Basic and diluted

91,811

89,173

91,213

88,259

TABLE 3

RINGCENTRAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

Nine Months Ended
September 30,

2021

2020

Cash flows from operating activities

Net loss

$

(257,893

)

$

(81,169

)

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

Depreciation and amortization

78,223

53,563

Share-based compensation

254,749

137,410

Amortization of deferred and prepaid sales commission costs

53,307

33,060

Amortization of debt discount and issuance costs

47,980

32,613

Loss on early extinguishment of debt

1,736

12,323

Repayment of convertible senior notes attributable to debt discount

(10,131

)

(32,640

)

Reduction of operating lease right-of-use assets

13,320

11,478

Unrealized loss (gain) on investments

14,346

(41,453

)

Provision for bad debt

5,384

3,909

Other

1,463

(1

)

Changes in assets and liabilities:

Accounts receivable

(45,476

)

(27,502

)

Deferred and prepaid sales commission costs

(125,181

)

(183,745

)

Prepaid expenses and other assets

7,849

(14,291

)

Accounts payable

(4,472

)

5,180

Accrued and other liabilities

55,971

49,449

Deferred revenue

27,176

20,128

Operating lease liabilities

(13,851

)

(11,019

)

Net cash provided by (used in) operating activities

104,500

(32,707

)

Cash flows from investing activities

Purchases of property and equipment

(21,787

)

(33,992

)

Capitalized internal-use software

(30,932

)

(28,049

)

Purchases of intangible assets and long-term investments

(10,463

)

Net cash used in investing activities

(63,182

)

(62,041

)

Cash flows from financing activities

Proceeds from issuance of convertible senior notes, net of issuance costs

1,627,209

Payments for repurchase or redemption of convertible senior notes

(333,632

)

(1,019,813

)

Payments for capped calls and transaction costs

(102,695

)

Proceeds from issuance of stock in connection with stock plans

21,738

24,123

Payments for taxes related to net share settlement of equity awards

(16,995

)

(27,698

)

Payment for contingent consideration for business acquisition

(3,600

)

(3,548

)

Repayment of financing obligations

(2,804

)

(1,215

)

Net cash provided by (used in) financing activities

(335,293

)

496,363

Effect of exchange rate changes

(726

)

337

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

(294,701

)

401,952

Cash, cash equivalents, and restricted cash

Beginning of period

639,853

343,606

End of period

$

345,152

$

745,558

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,

2021

2020

2021

2020

Revenues

Subscriptions

$

385,440

$

279,639

$

1,061,866

$

779,781

Other

29,189

23,985

84,392

69,340

Total revenues

414,629

303,624

1,146,258

849,121

Cost of revenues reconciliation

GAAP Subscriptions cost of revenues

84,229

60,531

236,719

169,685

Share-based compensation

(6,337

)

(2,871

)

(16,168

)

(7,623

)

Amortization of acquisition intangibles

(10,998

)

(7,577

)

(32,618

)

(22,950

)

Non-GAAP Subscriptions cost of revenues

66,894

50,083

187,933

139,112

GAAP Other cost of revenues

26,220

21,783

75,634

62,710

Share-based compensation

(2,403

)

(976

)

(6,406

)

(2,796

)

Amortization of acquisition intangibles

(4

)

(4

)

Non-GAAP Other cost of revenues

23,813

20,807

69,224

59,914

Gross profit and gross margin reconciliation

Non-GAAP Subscriptions

82.6

%

82.1

%

82.3

%

82.2

%

Non-GAAP Other

18.4

%

13.2

%

18.0

%

13.6

%

Non-GAAP Gross profit

78.1

%

76.7

%

77.6

%

76.6

%

Operating expenses reconciliation

GAAP Research and development

84,121

48,481

222,958

132,910

Share-based compensation

(25,779

)

(10,679

)

(62,808

)

(27,918

)

Non-GAAP Research and development

58,342

37,802

160,150

104,992

As a % of total revenues non-GAAP

14.1

%

12.5

%

14.0

%

12.4

%

GAAP Sales and marketing

225,111

152,986

607,758

421,931

Share-based compensation

(40,986

)

(17,552

)

(104,371

)

(45,165

)

Amortization of acquisition intangibles

(959

)

(959

)

(2,900

)

(2,819

)

Acquisition related and other matters

4

Non-GAAP Sales and marketing

183,166

134,475

500,487

373,951

As a % of total revenues non-GAAP

44.2

%

44.3

%

43.7

%

44.0

%

GAAP General and administrative

78,083

49,513

201,716

146,381

Share-based compensation

(32,510

)

(19,488

)

(80,455

)

(53,908

)

Acquisition related and other matters

(6,705

)

(420

)

(7,642

)

(2,576

)

Non-GAAP General and administrative

38,868

29,605

113,619

89,897

As a % of total revenues non-GAAP

9.4

%

9.8

%

9.9

%

10.6

%

Income (loss) from operations reconciliation

GAAP loss from operations

(83,135

)

(29,670

)

(198,527

)

(84,496

)

Share-based compensation

108,015

51,566

270,208

137,410

Amortization of acquisition intangibles

11,961

8,536

35,522

25,769

Acquisition related and other matters

6,705

420

7,642

2,572

Non-GAAP Income from operations

43,546

30,852

114,845

81,255

Non-GAAP Operating margin

10.5

%

10.2

%

10.0

%

9.6

%

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,

2021

2020

2021

2020

Net income (loss) reconciliation

GAAP net loss

$

(146,751

)

$

(20,957

)

$

(257,893

)

$

(81,169

)

Share-based compensation

108,015

51,566

270,208

137,410

Amortization of acquisition intangibles

11,961

8,536

35,522

25,769

Acquisition related and other matters

6,705

420

7,642

2,572

Amortization of debt discount and issuance costs

15,898

12,595

47,980

32,613

Loss (gain) associated with investments

45,660

(26,447

)

6,201

(47,805

)

Loss on early extinguishment of debt

5,116

1,736

12,323

Intercompany remeasurement loss (gain)

699

(121

)

1,509

416

Income tax expense effects

(9,045

)

(6,575

)

(24,298

)

(17,857

)

Non-GAAP net income

$

33,142

$

24,133

$

88,607

$

64,272

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

91,811

89,173

91,213

88,259

Effect of dilutive securities

1,314

3,751

1,792

4,577

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

93,125

92,924

93,005

92,836

Diluted net income (loss) per share

GAAP net loss per share

$

(1.60

)

$

(0.24

)

$

(2.83

)

$

(0.92

)

Non-GAAP net income per share

$

0.36

$

0.26

$

0.95

$

0.69

TABLE 6

RINGCENTRAL, INC.

RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES

GAAP MEASURES TO NON-GAAP FREE CASH FLOW MEASURES

(Unaudited, in thousands)

 

Nine Months Ended
September 30,

2021

2020

Net cash provided by (used in) operating activities

$

104,500

$

(32,707

)

Strategic partnerships

100,000

Repayment of convertible senior notes attributable to debt discount

10,131

32,640

Non-GAAP net cash provided by operating activities

114,631

99,933

Purchases of property and equipment

(21,787

)

(33,992

)

Capitalized internal-use software

(30,932

)

(28,049

)

Non-GAAP free cash flow

$

61,912

$

37,892

TABLE 7

RINGCENTRAL, INC.

RECONCILIATION OF FORECASTED OPERATING MARGIN

GAAP MEASURES TO NON-GAAP MEASURES

(Unaudited, in millions)

 

Q4 2021

FY 2021

Low Range

High Range

Low Range

High Range

GAAP revenues

433.5

434.5

1,579.8

1,580.8

GAAP loss from operations

(96.8)

(94.5)

(295.3)

(293.0)

GAAP operating margin

(22.3

%)

(21.7

%)

(18.7

%)

(18.5

%)

Share-based compensation

110.0

108.0

380.2

378.2

Amortization of acquisition intangibles

32.0

32.0

67.5

67.5

Acquisition related and other matters

7.6

7.6

Non-GAAP income from operations

45.2

45.5

160.0

160.4

Non-GAAP operating margin

10.4

%

10.5

%

10.1

%

10.1

%

Contacts:

Investor Relations Contact:
Ryan Goodman, RingCentral
(650) 918-5356
Ryan.Goodman@ringcentral.com

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