RingCentral Office® ARR up 36% to $1.1
billion
Subscriptions Revenue up 33%
RingCentral, Inc. (NYSE: RNG), a
leading provider of global enterprise cloud communications,
collaboration, and contact center solutions, today announced
financial results for the third quarter ended September 30,
2020.
Third Quarter Financial Highlights
- Total revenue increased 30% year over year to $304
million.
- Subscriptions revenue increased 33% year over year to $280
million.
- Annualized Exit Monthly Recurring Subscriptions (ARR) increased
34% year over year to $1.2 billion.
- RingCentral Office® ARR increased 36% year over year to $1.1
billion.
- Mid-market and Enterprise ARR increased 49% year over year to
$633 million.
- Enterprise ARR increased 55% year over year to $401
million.
- Channel ARR increased 59% year over year to $419 million.
“We delivered a solid third quarter driven by strong new logo
momentum across SMB, mid-market, and enterprise sized businesses
and continued contributions from channel partners,” said Vlad
Shmunis, RingCentral’s founder, chairman and CEO. “We are excited
to add Alcatel-Lucent Enterprise and expand our relationship with
BT as we further expand and deepen our unique global distribution
network. We believe our customers and partners are embracing
RingCentral’s differentiated Message Video Phone (MVP) cloud
platform as a go forward staple of their digital transformation
journeys.”
Financial Results for the Third Quarter 2020
- Revenue: Subscriptions revenue of $280 million increased
33% year over year and accounted for 92% of total revenue. Other
revenue of $24 million increased 7% year over year, reflecting
higher adoption of RingCentral apps in the current work from
anywhere environment. Total revenue was $304 million for the third
quarter of 2020, up from $233 million in the third quarter of 2019,
representing 30% growth.
- Operating Income (Loss): GAAP operating loss was ($30)
million, compared to a GAAP operating loss of ($11) million in the
same period last year, primarily driven by higher share-based
compensation and amortization of acquisition intangibles. Non-GAAP
operating income was $31 million, compared to a non-GAAP operating
income of $22 million in the same period last year.
- Net Income (Loss) Per Share: GAAP net loss per diluted
share was ($0.24), compared to ($0.15) in the same period last
year, primarily driven by higher share-based compensation,
amortization of acquisition intangibles, and amortization of debt
discount and issuance costs, offset by gains associated with
investments and strategic partnerships. Non-GAAP net income per
diluted share was $0.26, compared to $0.22 per diluted share in the
same period last year. The third quarters of 2020 and 2019
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 2020 was $746
million, which reflects a one-time payment related to our recent
strategic partnership for exclusive access, a minimum seat
commitment, and future commissions. This compares to $774 million
at the end of the second quarter of 2020.
Additional Highlights
RingCentral Video
- Announced that RingCentral has released more than 70 new
features to RingCentral Video™ since
it launched in April 2020. Key innovations include security
enhancements, waiting rooms, flexible video layouts, participant
view pagination, and network quality indicators. We believe this
rapid innovation makes business video meetings fast, smart, open,
and secure while delivering a great user experience within a
browser, with no downloads required, or via mobile or desktop apps,
as per user preference. Also announced that RingCentral Video™ is
now available as part of the RingCentral Office® solution in
Europe.
- Based on these innovations, RingCentral Video™ has been
recognized by the Academy of Interactive and Visual Arts with a W3
Gold award in the General Website Applications-Services category.
RingCentral Video also received two W3 Silver awards for Best
Visual Appeal - Experience and Best Visual Appeal - Utility.
- Announced RingCentral Rooms™ for Poly, bringing the power and
ease-of-use of RingCentral Video™ to every work space. Designed for
a flexible and hybrid workforce, the powerful and intuitive
RingCentral Rooms service will be built into the simple Poly Studio
X all-in-one video bars.
MVP Platform
- Announced a new high-volume SMS service that enables businesses
to send SMS messages and updates to their customers rapidly and
reliably. Using this service, developers can build customized apps
using RingCentral’s business communications platform for use cases
such as mass marketing, automated messages, notifications, customer
polls/surveys, chatbots, Two-Factor Authentication (2FA), and One
Time Passwords (OTP).
- Announced that RingCentral is now featured in the new Amazon
Web Services (AWS) Activate Console Exclusive Offers program. This
means startups building on AWS can now access customized,
discounted offers on RingCentral Office® directly through the AWS
Activate Console.
- Announced that RingCentral Global Office™ will be available in
six continents including Africa, Asia, Australia, Europe, North
America, and South America, with expansion into several countries
including Estonia, Greece, Lithuania, Slovenia, and South Africa.
Also announced RingCentral’s unified communications platform will
now be available in Germany with a new datacenter in Frankfurt, and
a new office in Hamburg, Germany.
Strategic Partnerships
- Announced a strategic partnership with Alcatel-Lucent
Enterprise to introduce a new co-branded cloud solution - Rainbow
Office powered by RingCentral - making it unique and exclusive for
Alcatel-Lucent Enterprise. RingCentral and Alcatel-Lucent
Enterprise will jointly develop programs enabling both companies to
lead the cloud communications services for the enterprise
market.
- In partnership with Atos SE, launched Unify Office by
RingCentral in Germany and its strong partner community of 800
partners, as well as in France, Austria, Belgium, Ireland, Italy,
Spain and the Netherlands.
- Announced expansion of Avaya Cloud Office™ by RingCentral®
across Europe, with general availability in France, Ireland, and
the Netherlands. In addition, announced several new ACO
capabilities including additional network performance and quality
controls, admin and security controls, and adoption and usage
analytics.
Financial
- Issued $650 million aggregate principal amount of 0%
Convertible Senior Notes due 2026 priced with a 52.5% conversion
premium to the last reported sale price per share of RingCentral’s
Class A common stock on September 10, 2020 (‘last reported price’).
We also purchased a capped call in conjunction with these Notes
with a cap price of approximately $556 per share, representing a
premium of 100% over the last reported price.
Financial Outlook
Full Year 2020 Guidance:
- Raising subscriptions revenue range to $1.070 to $1.072
billion, representing annual growth of 31%. This is up from our
prior range of $1.043 to $1.048 billion and annual growth of
28%.
- Raising total revenue range to $1.164 to $1.167 billion,
representing annual growth of 29%. This is up from our prior range
of $1.135 to $1.143 billion and annual growth of 26% to 27%.
- GAAP operating margin range of (9.9%) to (9.8%), up from our
prior range of (10.8%) to (10.1%).
- Non-GAAP operating margin of 9.7%, up from our prior range of
9.6% to 9.7%.
- Non-GAAP tax rate for 2020 assumed to be 22.5%. No material
cash taxes expected given net operating loss carryforwards.
- Raising non-GAAP EPS to $0.96 based on 93 million fully diluted
shares. This is up from our prior range of $0.92 to $0.94.
- Share-based compensation range of $190 to $191 million,
amortization of debt discount and issuance costs of $49 million,
amortization of acquisition intangibles of $34 million, and
acquisition related matters of approximately $2.6 million.
Fourth Quarter 2020 Guidance:
- Subscriptions revenue range of $290.5 to $292.5 million,
representing annual growth of 27% to 28%.
- Total revenue range of $315 to $318 million, representing
annual growth of 25% to 26%.
- GAAP operating margin range of (9.8%) to (9.2%).
- Non-GAAP operating margin 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.
- Non-GAAP EPS range of $0.26 to $0.27 based on 93 million fully
diluted shares.
- Share-based compensation range of $53 to $54 million,
amortization of debt discount and issuance costs of $16 million,
and amortization of acquisition intangibles of $8.5 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
and strategic partnerships, 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 and strategic
partnerships 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 2020,
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 2020 and outlook for the fourth quarter and full year of
2020.
- When: Monday, November 9, 2020 at 2:00PM PT (5:00PM
ET).
- Dial-in: To access the call in the United States, please
dial (877) 705-6003, and for international callers, dial (201)
493-6725. Callers are encouraged to dial into the call 10 to 15
minutes prior to the start to prevent any delay in joining.
- Webcast: http://ir.ringcentral.com/ (live and
replay).
- Replay: Following the completion of the call through
11:59 PM ET on November 16, 2020, a telephone replay will be
available by dialing (844) 512-2921 from the United States or (412)
317-6671 internationally with recording access code 13711153.
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 cloud
Message Video Phone (MVP), customer engagement and contact center
solutions for businesses worldwide. More flexible and
cost-effective than legacy on-premise 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’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.
©2020 RingCentral, Inc. All rights reserved. RingCentral,
RingCentral Office, RingCentral Video, Message Video Phone, 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, our momentum in
SMB, mid-market and enterprise, contributions from channel
partners, the success of our RCV solution, the success of our
strategic relationships, such as our relationships with Avaya,
Atos, Alcatel-Lucent Enterprise, and BT, our ability to expand and
deepen our global distribution network, our market opportunity, and
the effects of the COVID-19 pandemic. 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, such as our relationships
with Avaya, Atos, Alcatel-Lucent Enterprise, and BT; 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
RCV; 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, 2020, 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, amortization of
acquisition intangibles, and acquisition related matters including
transaction costs, integration costs, restructuring costs, and
acquisition-related retention payments, as well as changes in the
fair value of contingent consideration obligations. 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, intercompany remeasurement gains or losses,
acquisition related 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 and strategic
partnerships, 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 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 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 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 partner
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 partner 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 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.
TABLE 1
RINGCENTRAL, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited, in
thousands)
September 30, 2020
December 31, 2019
Assets
Current assets
Cash and cash equivalents
$
745,558
$
343,606
Accounts receivable, net
153,583
129,990
Deferred and prepaid sales commission
costs
53,212
36,589
Prepaid expenses and other current
assets
40,251
25,354
Total current assets
992,604
535,539
Property and equipment, net
132,967
89,230
Operating lease right-of-use assets
50,414
39,269
Long-term investments
173,641
132,188
Deferred and prepaid sales commission
costs, non-current
599,759
462,344
Goodwill
56,223
55,278
Acquired intangibles, net
101,894
127,338
Other assets
8,812
9,561
Total assets
$
2,116,314
$
1,450,747
Liabilities, Temporary Equity, and
Stockholders’ Equity
Current liabilities
Accounts payable
$
38,002
$
34,612
Accrued liabilities
189,555
138,729
Current portion of convertible senior
notes, net
14,156
—
Deferred revenue
127,500
107,372
Total current liabilities
369,213
280,713
Convertible senior notes, net
1,394,898
386,889
Operating lease liabilities
37,973
28,516
Other long-term liabilities
14,555
8,929
Total liabilities
1,816,639
705,047
Temporary equity
1,934
—
Stockholders’ equity
Common stock
9
9
Additional paid-in capital
664,689
1,033,053
Accumulated other comprehensive income
3,522
1,948
Accumulated deficit
(370,479
)
(289,310
)
Total stockholders’ equity
$
297,741
$
745,700
Total liabilities, temporary equity and
stockholders’ equity
$
2,116,314
$
1,450,747
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,
2020
2019
2020
2019
Revenues
Subscriptions
$
279,639
$
210,906
$
779,781
$
588,406
Other
23,985
22,446
69,340
61,587
Total revenues
303,624
233,352
849,121
649,993
Cost of revenues
Subscriptions
60,531
40,930
169,685
114,343
Other
21,783
18,775
62,710
49,827
Total cost of revenues
82,314
59,705
232,395
164,170
Gross profit
221,310
173,647
616,726
485,823
Operating expenses
Research and development
48,481
35,286
132,910
97,705
Sales and marketing
152,986
109,882
421,931
313,023
General and administrative
49,513
39,142
146,381
100,401
Total operating expenses
250,980
184,310
701,222
511,129
Loss from operations
(29,670
)
(10,663
)
(84,496
)
(25,306
)
Other income (expense), net
Interest expense
(12,680
)
(5,160
)
(32,780
)
(15,280
)
Other income, net
21,824
2,926
36,910
9,118
Other income (expense), net
9,144
(2,234
)
4,130
(6,162
)
Loss before income taxes
(20,526
)
(12,897
)
(80,366
)
(31,468
)
Provision for (benefit from) income
taxes
431
(148
)
803
(3,118
)
Net loss
$
(20,957
)
$
(12,749
)
$
(81,169
)
$
(28,350
)
Net loss per common share
Basic and diluted
$
(0.24
)
$
(0.15
)
$
(0.92
)
$
(0.34
)
Weighted-average number of shares used in
computing net loss per share
Basic and diluted
89,173
83,283
88,259
82,348
TABLE 3
RINGCENTRAL, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited, in
thousands)
Nine Months Ended
September 30,
2020
2019
Cash flows from operating
activities
Net loss
$
(81,169
)
$
(28,350
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
53,563
26,060
Share-based compensation
137,410
71,690
Amortization of deferred and prepaid sales
commission costs
33,060
21,189
Amortization of debt discount and issuance
costs
32,613
15,149
Loss on early extinguishment of debt
12,323
—
Repayment of convertible senior notes
attributable to debt discount
(32,640
)
—
Reduction of operating lease right-of-use
assets
11,478
10,166
Unrealized gain and other related costs on
investments
(41,453
)
—
Foreign currency remeasurement (gain)
loss
63
61
Provision for bad debt
3,909
2,339
Deferred income taxes
(267
)
(632
)
Tax benefit from release of valuation
allowance
—
(3,210
)
Other
203
1,925
Changes in assets and liabilities:
Accounts receivable
(27,502
)
(24,845
)
Deferred and prepaid sales commission
costs
(183,745
)
(51,467
)
Prepaid expenses and other current
assets
(14,613
)
(8,125
)
Other assets
322
400
Accounts payable
5,180
10,626
Accrued liabilities
41,530
22,432
Deferred revenue
20,128
16,632
Operating lease liabilities
(11,019
)
(10,507
)
Other liabilities
7,919
(525
)
Net cash (used in) provided by operating
activities
(32,707
)
71,008
Cash flows from investing
activities
Purchases of property and equipment
(33,992
)
(21,355
)
Capitalized internal-use software
(28,049
)
(11,472
)
Cash paid for business combination, net of
cash acquired
—
(27,870
)
Net cash used in investing activities
(62,041
)
(60,697
)
Cash flows from financing
activities
Proceeds from issuance of convertible
senior notes, net of issuance costs
1,627,209
—
Payments for 2023 convertible senior notes
partial repurchase
(1,019,813
)
—
Payments for capped calls and transaction
costs
(102,695
)
—
Proceeds from issuance of stock in
connection with stock plans
24,123
17,590
Payments for taxes related to net share
settlement of equity awards
(27,698
)
(10,244
)
Payment for contingent consideration for
business acquisition
(3,548
)
—
Repayment of financing obligations
(1,215
)
(943
)
Net cash provided by financing
activities
496,363
6,403
Effect of exchange rate changes
337
(380
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
401,952
16,334
Cash, cash equivalents and restricted
cash
Beginning of period
343,606
566,329
End of period
$
745,558
$
582,663
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,
2020
2019
2020
2019
Revenues
Subscriptions
$
279,639
$
210,906
$
779,781
$
588,406
Other
23,985
22,446
69,340
61,587
Total revenues
303,624
233,352
849,121
649,993
Cost of revenues reconciliation
GAAP Subscriptions cost of revenues
60,531
40,930
169,685
114,343
Share-based compensation
(2,871
)
(1,759
)
(7,623
)
(4,796
)
Amortization of acquisition
intangibles
(7,577
)
(1,338
)
(22,950
)
(3,688
)
Acquisition related matters
—
—
—
(64
)
Non-GAAP Subscriptions cost of
revenues
50,083
37,833
139,112
105,795
GAAP Other cost of revenues
21,783
18,775
62,710
49,827
Share-based compensation
(976
)
(592
)
(2,796
)
(1,316
)
Non-GAAP Other cost of revenues
20,807
18,183
59,914
48,511
Gross profit and gross margin
reconciliation
Non-GAAP Subscriptions
82.1
%
82.1
%
82.2
%
82.0
%
Non-GAAP Other
13.2
%
19.0
%
13.6
%
21.2
%
Non-GAAP Gross profit
76.7
%
76.0
%
76.6
%
76.3
%
Operating expenses
reconciliation
GAAP Research and development
48,481
35,286
132,910
97,705
Share-based compensation
(10,679
)
(6,230
)
(27,918
)
(16,000
)
Acquisition related matters
—
—
—
(352
)
Non-GAAP Research and development
37,802
29,056
104,992
81,353
As a % of total revenues non-GAAP
12.5
%
12.5
%
12.4
%
12.5
%
GAAP Sales and marketing
152,986
109,882
421,931
313,023
Share-based compensation
(17,552
)
(10,182
)
(45,165
)
(27,589
)
Amortization of acquisition
intangibles
(959
)
(931
)
(2,819
)
(2,791
)
Acquisition related matters
—
(499
)
4
(2,109
)
Non-GAAP Sales and marketing
134,475
98,270
373,951
280,534
As a % of total revenues non-GAAP
44.3
%
42.1
%
44.0
%
43.2
%
GAAP General and administrative
49,513
39,142
146,381
100,401
Share-based compensation
(19,488
)
(8,613
)
(53,908
)
(21,989
)
Acquisition related matters
(420
)
(2,183
)
(2,576
)
(3,008
)
Non-GAAP General and administrative
29,605
28,346
89,897
75,404
As a % of total revenues non-GAAP
9.8
%
12.1
%
10.6
%
11.6
%
Income (loss) from operations
reconciliation
GAAP loss from operations
(29,670
)
(10,663
)
(84,496
)
(25,306
)
Share-based compensation
51,566
27,376
137,410
71,690
Amortization of acquisition
intangibles
8,536
2,269
25,769
6,479
Acquisition related matters
420
2,682
2,572
5,533
Non-GAAP Income from operations
30,852
21,664
81,255
58,396
Non-GAAP Operating margin
10.2
%
9.3
%
9.6
%
9.0
%
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
September 30,
Nine Months Ended
September 30,
2020
2019
2020
2019
Net income (loss)
reconciliation
GAAP net loss
$
(20,957
)
$
(12,749
)
$
(81,169
)
$
(28,350
)
Share-based compensation
51,566
27,376
137,410
71,690
Amortization of acquisition
intangibles
8,536
2,269
25,769
6,479
Acquisition related matters
420
2,682
2,572
5,533
Amortization of debt discount and issuance
costs
12,595
5,118
32,613
15,149
Gain associated with investments and
strategic partnerships
(26,447
)
—
(47,805
)
—
Loss on early extinguishment of debt
5,116
—
12,323
—
Intercompany remeasurement (gain) loss
(121
)
340
416
264
Income tax expense effects (1)
(6,575
)
(5,751
)
(17,857
)
(18,341
)
Non-GAAP net income
$
24,133
$
19,285
$
64,272
$
52,424
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) income per share
89,173
83,283
88,259
82,348
Effect of dilutive securities
3,751
5,127
4,577
5,263
Non-GAAP weighted average shares used in
computing non-GAAP diluted net income per share
92,924
88,410
92,836
87,611
Diluted net income (loss) per
share
GAAP net loss per share
$
(0.24
)
$
(0.15
)
$
(0.92
)
$
(0.34
)
Non-GAAP net income per share
$
0.26
$
0.22
$
0.69
$
0.60
(1) Income tax expense effects for the nine months ended
September 30, 2019 include the tax benefit from release of
valuation allowance.
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,
2020
2019
Net cash (used in) provided by operating
activities
$
(32,707
)
$
71,008
Strategic partnerships
100,000
—
Repayment of convertible senior notes
attributable to debt discount
32,640
—
Non-GAAP net cash provided by operating
activities
99,933
71,008
Purchases of property and equipment
(33,992
)
(21,355
)
Capitalized internal-use software
(28,049
)
(11,472
)
Non-GAAP free cash flow
$
37,892
$
38,181
TABLE 7
RINGCENTRAL, INC.
RECONCILIATION OF FORECASTED
OPERATING MARGIN
GAAP MEASURES TO NON-GAAP
MEASURES
(Unaudited, in
millions)
Q4 2020
FY 2020
Low Range
High Range
Low Range
High Range
GAAP revenues
315.0
318.0
1,164.1
1,167.1
GAAP loss from operations
(31.0
)
(29.4
)
(115.5
)
(113.9
)
GAAP operating margin
(9.8
%)
(9.2
%)
(9.9
%)
(9.8
%)
Share-based compensation
54.0
53.0
191.4
190.4
Amortization of acquisition
intangibles
8.5
8.5
34.3
34.3
Acquisition related matters
—
—
2.6
2.6
Non-GAAP income from operations
31.5
32.1
112.8
113.4
Non-GAAP operating margin
10.0
%
10.1
%
9.7
%
9.7
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201109006086/en/
Investor Relations Contact: Ryan Goodman, RingCentral
(650) 918-5356 Ryan.Goodman@ringcentral.com
Media Contact: Mariana Leventis, RingCentral (650)
562-6545 Mariana.Leventis@ringcentral.com
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