August 2, 2022

RingCentral Announces Second Quarter 2022 Results

Q2'22 results exceed high end of guidance across key metrics

Raises 2022 operating margin outlook; Maintains 2022 revenue outlook

BELMONT, Calif.--(BUSINESS WIRE)-- 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 second quarter ended June 30, 2022.

Second Quarter Financial Highlights

  • Total revenue increased 28% year over year to $487 million.
  • Subscriptions revenue increased 32% year over year to $463 million.
  • Annualized Exit Monthly Recurring Subscriptions (ARR) increased 31% year over year to $2.0 billion.
  • Mid-market and Enterprise ARR increased 38% year over year to $1.2 billion.
  • Net cash provided by operating activities was $51 million and non-GAAP free cash flow was $29 million. Free cash flow represented 6.0% as a percent of total revenue, up 220 basis points year over year.

“Our second quarter key metrics exceeded the high end of our guidance range and demonstrated our consistent execution,” said Vlad Shmunis, RingCentral’s founder, chairman and CEO. “We continue to see the benefits of scale, with solid top line contributions complemented by increasing bottom line profitability. The market opportunity in front of us is large, and customers continue to gravitate to RingCentral because of our industry leading UCaaS and integrated CCaaS solution, proven reliability and broad geographic reach.”

“We achieved a record quarterly non-GAAP operating margin,” said Sonalee Parekh, RingCentral's CFO. “This showcases our ability to drive strong growth while increasing profitability. All while providing our customers with a leading product and a strong ROI.”

Financial Results for the Second Quarter 2022

  • Revenue: Total revenue was $487 million for the second quarter of 2022, up from $379 million in the second quarter of 2021, representing 28% growth. Adjusted for constant currency, total revenue rose 30%. Subscriptions revenue of $463 million increased 32% year over year. Adjusted for constant currency, subscriptions revenue rose 33%.
  • Operating Income (Loss): GAAP operating loss was ($108) million, compared to ($73) million in the same period last year, primarily driven by higher amortization of acquired intangibles. Non-GAAP operating income was $55 million, compared to a non-GAAP operating income of $39 million in the same period last year.
  • Net Income (Loss) Per Share: GAAP net loss per share was ($1.68), compared to ($1.22) in the same period last year, primarily driven by higher amortization of acquired intangibles, and mark-to-market losses associated with investments. Diluted non-GAAP net income per share was $0.45, compared to $0.32 per share in the same period last year. The second quarters of 2022 and 2021 reflected an approximately 22.5% non-GAAP tax rate. There were no material cashtaxes given our net operating loss carryforwards.
  • Cash and Cash Equivalents: Total cash and cash equivalents at the end of the second quarter of 2022 was $306 million. Our cash balance reflects $25 million in cash paid for the share repurchases under the plan announced in December 2021.

Financial Outlook

Full Year 2022 Guidance:

  • Maintaining subscriptions revenue range of $1.882 to $1.898 billion, representing annual growth of 27% to 28%.
  • Maintaining total revenue range of $1.990 to $2.015 billion. This represents annual growth of 25% to 26%.
  • GAAP operating margin range of (19.2%) to (18.3%) compared to the prior range of (20.1%) to (19.0%).
  • Raising non-GAAP operating margin to 12.0%. This is up from our prior outlook of 11.5%.
  • Non-GAAP tax rate assumed to be 22.5%. No material cash taxes expected given net operating loss carryforwards.
  • Raising non-GAAP EPS to $1.91 to $1.95 based on 96 to 97 million fully diluted shares. This is up from our prior range of $1.83 to $1.87 based on 96 to 97 million fully diluted shares.
  • Share-based compensation range of $415 to $425 million. As a percent of revenue, this represents over 250 basis points of improvement at the midpoint versus last year.
  • Amortization of acquired intangibles of $173 million, third-party relocation and other costs of $19 million, and acquisition related and other matters of $4 million.

Third Quarter 2022 Guidance:

  • Subscriptions revenue range of $473.5 to $476.5 million, representing year-over-year growth of 23% to 24%.
  • Total revenue range of $500.0 to $504.0 million, representing year-over-year growth of 21% to 22%.
  • GAAP operating margin range of (18.3%) to (17.1%).
  • Non-GAAP operating margin of 12.5%.
  • Non-GAAP tax rate assumed to be 22.5%. No material cash taxes expected given net operating loss carryforwards.
  • Non-GAAP EPS of $0.50 to $0.51 based on 96 to 97 million fully diluted shares.
  • Share-based compensation range of $105 to $110 million.
  • Amortization of acquired intangibles of $44 million.

Additional Highlights

  • Announced the launch of ‘Vodafone Business UC with RingCentral’ in Germany. This enables RingCentral’s flagship offering RingCentral Message Video Phone™ (MVP™) with Vodafone’s mobility and 5G capabilities. The solution gives companies more choice, flexibility and simplicity in how their employees communicate and collaborate - in the office, at home or on the go.
  • Announced an expansion of the RingCentral Rooms hardware ecosystem and associated feature enhancements. With return to office becoming a focus for many organizations, 76% of respondents in a recent survey reported that technological improvements and upgrades to conference rooms is a key priority.
  • Recognized by Frost & Sullivan as a Growth and Innovation leader in the Frost Radar™: North American Unified Communications-as-a-Service Market, 2021. Frost & Sullivan highlighted RingCentral's strong position in North America by leveraging creative partnerships. RingCentral's unwavering commitment to innovation and comprehensive–yet tiered service bundles were also highlighted.
  • Comparably recognized RingCentral's CEO Vlad Shmunis as a top ten Best CEO for Women and Best CEO for Diversity. Additionally, the company earned a top 10 ranking for Best Leadership Team and Best Company for Career Growth.

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 2022, 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 second quarter of 2022 and outlook for the third quarter and full year of 2022.
  • When: Tuesday, August 2, 2022 at 2:00PM PT (5:00PM ET).
  • Dial-in: 1-888-349-0093 from the United States; 1-412-317-5201 internationally
  • Webcast: RingCentral Q2 2022 Earnings Webcast (live and replay).
  • Replay: Following the completion of the call through 11:59 PM ET on August 9, 2022, a telephone replay will be available by dialing 1-844-512-2921 from the United States or 412-317-6671 internationally with recording access code 10168368.

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, 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 allows customers to customize business workflows easily. RingCentral is headquartered in Belmont, California, and has offices worldwide.

© 2022 RingCentral, Inc. All rights reserved. RingCentral, Message Video Phone, MVP, RingCentral MVP, RingCentral Video, Smart Video Meetings, 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: 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 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 March 31, 2022, 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, Non-GAAP free cash flow, and constant currency revenue. Non-GAAP subscriptions gross margin is defined as Non-GAAP subscriptions gross profit divided by GAAP subscriptions revenue. Non-GAAP other gross margin is defined as Non-GAAP other gross profit divided by GAAP other revenue. Non-GAAP income (loss) from operations is defined as GAAP income (loss) from operations excluding share-based compensation which includes related employer payroll taxes, amortization of acquired intangibles, third-party relocation and other costs tied to the conflict between Russia and Ukraine, and acquisition related and other matters including transaction 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 acquired intangibles, third-party relocation and other costs tied to the conflict between Russia and Ukraine, 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 (gain) on early extinguishment of debt, 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, Non-GAAP free cash flow and constant currency revenue in this press release because they are key measures used by us to understand and evaluate our operating performance and trends, to prepare and approve our annual budget, and to develop short and long-term operational plans. In particular, the exclusion of certain expenses and cash flow items in calculating Non-GAAP subscriptions gross margin, Non-GAAP other gross margin, Non-GAAP operating margin, Non-GAAP income (loss) from operations, Non-GAAP 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.

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

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

Other Measures

Our reported results also include our annualized exit monthly recurring subscriptions, mid-market and enterprise annualized exit monthly recurring subscriptions, enterprise annualized exit monthly recurring subscriptions and net monthly 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 mid-market and enterprise annualized exit monthly recurring subscriptions in the same manner as we calculate our annualized exit monthly recurring subscriptions, except that only customer subscriptions from customers generating $25,000 or more in annual recurring revenue are included. We calculate enterprise annualized exit monthly recurring subscriptions in the same manner as we calculate our annualized exit monthly recurring subscriptions, except that only customer subscriptions from customers generating $100,000 or more in annual recurring revenue are included. We define our Net Monthly Subscription Dollar Retention Rate as (i) one plus (ii) the quotient of Dollar Net Change divided by Average Monthly Recurring Subscriptions. We calculate dollar net change as the quotient of (i) the difference of our monthly recurring subscriptions at the end of a period minus our monthly recurring subscriptions at the beginning of a period minus our monthly recurring subscriptions at the end of the period from new customers we added during the period, (ii) all divided by the number of months in the period. We define our average monthly recurring subscriptions as the average of the monthly recurring subscriptions at the beginning and end of the measurement period.

TABLE 1

RINGCENTRAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

 

 

June 30, 2022

 

December 31, 2021

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

306,497

 

 

$

267,162

 

Accounts receivable, net

 

253,571

 

 

 

232,842

 

Deferred and prepaid sales commission costs

 

126,854

 

 

 

102,572

 

Prepaid expenses and other current assets

 

52,376

 

 

 

48,165

 

Total current assets

 

739,298

 

 

 

650,741

 

Property and equipment, net

 

178,240

 

 

 

166,910

 

Operating lease right-of-use assets

 

40,515

 

 

 

47,294

 

Long-term investments

 

113,220

 

 

 

210,445

 

Deferred and prepaid sales commission costs, non-current

 

758,687

 

 

 

723,448

 

Goodwill

 

53,780

 

 

 

55,490

 

Acquired intangibles, net

 

628,559

 

 

 

716,606

 

Other assets

 

7,122

 

 

 

8,105

 

Total assets

$

2,519,421

 

 

$

2,579,039

 

Liabilities, Temporary Equity, and Stockholders' Equity

 

 

 

Current liabilities

 

 

 

Accounts payable

$

96,647

 

 

$

70,022

 

Accrued liabilities

 

318,272

 

 

 

279,798

 

Deferred revenue

 

207,044

 

 

 

176,450

 

Total current liabilities

 

621,963

 

 

 

526,270

 

Convertible senior notes, net

 

1,636,175

 

 

 

1,398,489

 

Operating lease liabilities

 

25,436

 

 

 

31,812

 

Other long-term liabilities

 

74,087

 

 

 

84,052

 

Total liabilities

 

2,357,661

 

 

 

2,040,623

 

 

 

 

 

Temporary equity

 

 

 

Series A convertible preferred stock

 

199,449

 

 

 

199,449

 

 

 

 

 

Stockholders' equity

 

 

 

Common stock

 

9

 

 

 

9

 

Additional paid-in capital

 

937,119

 

 

 

1,086,870

 

Accumulated other comprehensive income (loss)

 

(9,600

)

 

 

644

 

Accumulated deficit

 

(965,217

)

 

 

(748,556

)

Total stockholders' equity

$

(37,689

)

 

$

338,967

 

Total liabilities, temporary equity and stockholders’ equity

$

2,519,421

 

 

$

2,579,039

 

TABLE 2

RINGCENTRAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share data)

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenues

 

 

 

 

 

 

 

Subscriptions

$

462,984

 

 

$

351,203

 

 

$

902,911

 

 

$

676,426

 

Other

 

23,912

 

 

 

28,070

 

 

 

51,641

 

 

 

55,203

 

Total revenues

 

486,896

 

 

 

379,273

 

 

 

954,552

 

 

 

731,629

 

Cost of revenues

 

 

 

 

 

 

 

Subscriptions

 

131,022

 

 

 

79,243

 

 

 

260,711

 

 

 

152,490

 

Other

 

27,168

 

 

 

25,680

 

 

 

52,953

 

 

 

49,414

 

Total cost of revenues

 

158,190

 

 

 

104,923

 

 

 

313,664

 

 

 

201,904

 

Gross profit

 

328,706

 

 

 

274,350

 

 

 

640,888

 

 

 

529,725

 

Operating expenses

 

 

 

 

 

 

 

Research and development

 

96,518

 

 

 

76,161

 

 

 

186,792

 

 

 

138,837

 

Sales and marketing

 

265,398

 

 

 

203,398

 

 

 

519,853

 

 

 

382,647

 

General and administrative

 

74,554

 

 

 

68,172

 

 

 

145,549

 

 

 

123,633

 

Total operating expenses

 

436,470

 

 

 

347,731

 

 

 

852,194

 

 

 

645,117

 

Loss from operations

 

(107,764

)

 

 

(73,381

)

 

 

(211,306

)

 

 

(115,392

)

Other income (expense), net

 

 

 

 

 

 

 

Interest expense

 

(1,203

)

 

 

(15,942

)

 

 

(2,435

)

 

 

(32,220

)

Other income (expense)

 

(49,500

)

 

 

(21,223

)

 

 

(94,719

)

 

 

37,320

 

Other income (expense), net

 

(50,703

)

 

 

(37,165

)

 

 

(97,154

)

 

 

5,100

 

Loss before income taxes

 

(158,467

)

 

 

(110,546

)

 

 

(308,460

)

 

 

(110,292

)

Provision for income taxes

 

1,048

 

 

 

410

 

 

 

2,027

 

 

 

850

 

Net loss

$

(159,515

)

 

$

(110,956

)

 

$

(310,487

)

 

$

(111,142

)

Net loss per common share

 

 

 

 

 

 

 

Basic and diluted

$

(1.68

)

 

$

(1.22

)

 

$

(3.27

)

 

$

(1.22

)

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

 

 

 

 

 

 

 

Basic and diluted

 

95,130

 

 

 

91,181

 

 

 

94,854

 

 

 

90,909

 

TABLE 3

RINGCENTRAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

 

Six Months Ended

June 30,

 

 

2022

 

 

 

2021

 

Cash flows from operating activities

 

 

 

Net loss

$

(310,487

)

 

$

(111,142

)

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

 

 

 

Depreciation and amortization

 

122,201

 

 

 

50,724

 

Share-based compensation

 

198,119

 

 

 

150,323

 

Amortization of deferred and prepaid sales commission costs

 

50,068

 

 

 

33,398

 

Amortization of debt discount and issuance costs

 

2,232

 

 

 

32,082

 

Loss on early extinguishment of debt

 

 

 

 

1,736

 

Repayment of convertible senior notes attributable to debt discount

 

 

 

 

(10,131

)

Reduction of operating lease right-of-use assets

 

9,857

 

 

 

8,778

 

Unrealized loss (gain) on investments

 

98,045

 

 

 

(34,361

)

Provision for bad debt

 

7,103

 

 

 

3,743

 

Other

 

1,736

 

 

 

70

 

Changes in assets and liabilities:

 

 

 

Accounts receivable

 

(27,832

)

 

 

(26,589

)

Deferred and prepaid sales commission costs

 

(108,349

)

 

 

(86,378

)

Prepaid expenses and other assets

 

(1,984

)

 

 

6,562

 

Accounts payable

 

28,494

 

 

 

3,490

 

Accrued and other liabilities

 

20,147

 

 

 

24,912

 

Deferred revenue

 

30,594

 

 

 

23,359

 

Operating lease liabilities

 

(10,271

)

 

 

(9,105

)

Net cash provided by operating activities

 

109,673

 

 

 

61,471

 

Cash flows from investing activities

 

 

 

Purchases of property and equipment

 

(15,489

)

 

 

(14,385

)

Capitalized internal-use software

 

(26,232

)

 

 

(19,600

)

Purchases of intangible assets and long-term investments

 

(3,990

)

 

 

(9,623

)

Net cash used in investing activities

 

(45,711

)

 

 

(43,608

)

Cash flows from financing activities

 

 

 

Payments for repurchase or redemption of convertible senior notes

 

 

 

 

(333,632

)

Payments for repurchase of common stock

 

(25,004

)

 

 

 

Proceeds from issuance of stock in connection with stock plans

 

10,889

 

 

 

18,857

 

Payments for taxes related to net share settlement of equity awards

 

(3,182

)

 

 

(11,566

)

Payment for contingent consideration for business acquisition

 

(1,538

)

 

 

(3,600

)

Repayment of financing obligations

 

(3,092

)

 

 

(2,295

)

Net cash used in financing activities

 

(21,927

)

 

 

(332,236

)

Effect of exchange rate changes

 

(2,700

)

 

 

(183

)

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

 

39,335

 

 

 

(314,556

)

Cash, cash equivalents, and restricted cash

 

 

 

Beginning of period

 

267,162

 

 

 

639,853

 

End of period

$

306,497

 

 

$

325,297

 

TABLE 4

RINGCENTRAL, INC.

RECONCILIATION OF OPERATING INCOME (LOSS)

GAAP MEASURES TO NON-GAAP MEASURES

(Unaudited, in thousands)

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenues

 

 

 

 

 

 

 

Subscriptions

$

462,984

 

 

$

351,203

 

 

$

902,911

 

 

$

676,426

 

Other

 

23,912

 

 

 

28,070

 

 

 

51,641

 

 

 

55,203

 

Total revenues

 

486,896

 

 

 

379,273

 

 

 

954,552

 

 

 

731,629

 

Cost of revenues reconciliation

 

 

 

 

 

 

 

GAAP Subscriptions cost of revenues

 

131,022

 

 

 

79,243

 

 

 

260,711

 

 

 

152,490

 

Share-based compensation

 

(6,648

)

 

 

(5,853

)

 

 

(13,844

)

 

 

(9,831

)

Amortization of acquired intangibles

 

(42,758

)

 

 

(11,002

)

 

 

(85,859

)

 

 

(21,620

)

Third-party relocation and other costs

 

(1,155

)

 

 

 

 

 

(1,155

)

 

 

 

Acquisition related and other matters

 

(156

)

 

 

 

 

 

(156

)

 

 

 

Non-GAAP Subscriptions cost of revenues

 

80,305

 

 

 

62,388

 

 

 

159,697

 

 

 

121,039

 

 

 

 

 

 

 

 

 

GAAP Other cost of revenues

 

27,168

 

 

 

25,680

 

 

 

52,953

 

 

 

49,414

 

Share-based compensation

 

(2,231

)

 

 

(2,347

)

 

 

(4,639

)

 

 

(4,003

)

Amortization of acquired intangibles

 

(19

)

 

 

 

 

 

(31

)

 

 

 

Non-GAAP Other cost of revenues

 

24,918

 

 

 

23,333

 

 

 

48,283

 

 

 

45,411

 

Gross profit and gross margin reconciliation

 

 

 

 

 

 

 

Non-GAAP Subscriptions

 

82.7

%

 

 

82.2

%

 

 

82.3

%

 

 

82.1

%

Non-GAAP Other

 

(4.2

) %

 

 

16.9

%

 

 

6.5

%

 

 

17.7

%

Non-GAAP Gross profit

 

78.4

%

 

 

77.4

%

 

 

78.2

%

 

 

77.2

%

Operating expenses reconciliation

 

 

 

 

 

 

 

GAAP Research and development

 

96,518

 

 

 

76,161

 

 

 

186,792

 

 

 

138,837

 

Share-based compensation

 

(23,761

)

 

 

(22,380

)

 

 

(48,159

)

 

 

(37,029

)

Third-party relocation and other costs

 

(12,541

)

 

 

 

 

 

(16,092

)

 

 

 

Acquisition related and other matters

 

(89

)

 

 

 

 

 

(339

)

 

 

 

Non-GAAP Research and development

 

60,127

 

 

 

53,781

 

 

 

122,202

 

 

 

101,808

 

As a % of total revenues non-GAAP

 

12.3

%

 

 

14.2

%

 

 

12.8

%

 

 

13.9

%

 

 

 

 

 

 

 

 

GAAP Sales and marketing

 

265,398

 

 

 

203,398

 

 

 

519,853

 

 

 

382,647

 

Share-based compensation

 

(39,697

)

 

 

(38,618

)

 

 

(81,610

)

 

 

(63,385

)

Amortization of acquired intangibles

 

(915

)

 

 

(971

)

 

 

(1,852

)

 

 

(1,941

)

Third-party relocation and other costs

 

(14

)

 

 

 

 

 

(14

)

 

 

 

Acquisition related and other matters

 

(737

)

 

 

 

 

 

(937

)

 

 

 

Non-GAAP Sales and marketing

 

224,035

 

 

 

163,809

 

 

 

435,440

 

 

 

317,321

 

As a % of total revenues non-GAAP

 

46.0

%

 

 

43.2

%

 

 

45.6

%

 

 

43.4

%

 

 

 

 

 

 

 

 

GAAP General and administrative

 

74,554

 

 

 

68,172

 

 

 

145,549

 

 

 

123,633

 

Share-based compensation

 

(29,982

)

 

 

(30,502

)

 

 

(56,413

)

 

 

(47,945

)

Third-party relocation and other costs

 

(694

)

 

 

 

 

 

(1,469

)

 

 

 

Acquisition related and other matters

 

(1,534

)

 

 

(499

)

 

 

(2,558

)

 

 

(937

)

Non-GAAP General and administrative

 

42,344

 

 

 

37,171

 

 

 

85,109

 

 

 

74,751

 

As a % of total revenues non-GAAP

 

8.7

%

 

 

9.8

%

 

 

8.9

%

 

 

10.2

%

Income (loss) from operations reconciliation

 

 

 

 

 

 

 

GAAP loss from operations

 

(107,764

)

 

 

(73,381

)

 

 

(211,306

)

 

 

(115,392

)

Share-based compensation

 

102,319

 

 

 

99,700

 

 

 

204,665

 

 

 

162,193

 

Amortization of acquired intangibles

 

43,692

 

 

 

11,973

 

 

 

87,742

 

 

 

23,561

 

Third-party relocation and other costs

 

14,404

 

 

 

 

 

 

18,730

 

 

 

 

Acquisition related and other matters

 

2,516

 

 

 

499

 

 

 

3,990

 

 

 

937

 

Non-GAAP Income from operations

 

55,167

 

 

 

38,791

 

 

 

103,821

 

 

 

71,299

 

Non-GAAP Operating margin

 

11.3

%

 

 

10.2

%

 

 

10.9

%

 

 

9.7

%

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

June 30,

 

Six Months Ended

June 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net income (loss) reconciliation

 

 

 

 

 

 

 

GAAP net loss

$

(159,515

)

 

$

(110,956

)

 

$

(310,487

)

 

$

(111,142

)

Share-based compensation

 

102,319

 

 

 

99,700

 

 

 

204,665

 

 

 

162,193

 

Amortization of acquired intangibles

 

43,692

 

 

 

11,973

 

 

 

87,742

 

 

 

23,561

 

Third-party relocation and other costs

 

14,404

 

 

 

 

 

 

18,730

 

 

 

 

Acquisition related and other matters

 

2,502

 

 

 

499

 

 

 

3,976

 

 

 

937

 

Amortization of debt discount and issuance costs

 

1,116

 

 

 

15,882

 

 

 

2,232

 

 

 

32,082

 

Loss (gain) associated with investments

 

48,769

 

 

 

20,138

 

 

 

94,245

 

 

 

(39,459

)

Loss (gain) on early extinguishment of debt

 

 

 

 

1,078

 

 

 

 

 

 

1,736

 

Intercompany remeasurement loss

 

456

 

 

 

75

 

 

 

484

 

 

 

810

 

Income tax expense effects

 

(10,986

)

 

 

(8,320

)

 

 

(21,286

)

 

 

(15,253

)

Non-GAAP net income

$

42,757

 

 

$

30,069

 

 

$

80,301

 

 

$

55,465

 

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

 

95,130

 

 

 

91,181

 

 

 

94,854

 

 

 

90,909

 

Effect of dilutive securities

 

932

 

 

 

1,714

 

 

 

1,002

 

 

 

2,032

 

Non-GAAP weighted average shares used in

computing non-GAAP diluted net income per share

 

96,062

 

 

 

92,895

 

 

 

95,856

 

 

 

92,941

 

 

 

 

 

 

 

 

 

Diluted net income (loss) per share

 

 

 

 

 

 

 

GAAP net loss per share

$

(1.68

)

 

$

(1.22

)

 

$

(3.27

)

 

$

(1.22

)

Non-GAAP net income per share

$

0.45

 

 

$

0.32

 

 

$

0.84

 

 

$

0.60

 

TABLE 6

RINGCENTRAL, INC.

RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES

GAAP MEASURES TO NON-GAAP FREE CASH FLOW MEASURES

(Unaudited, in thousands)

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net cash provided by operating activities

$

50,678

 

 

$

24,516

 

 

$

109,673

 

 

$

61,471

 

Repayment of convertible senior notes attributable to debt discount

 

 

 

 

5,419

 

 

 

 

 

 

10,131

 

Non-GAAP net cash provided by operating activities

 

50,678

 

 

 

29,935

 

 

 

109,673

 

 

 

71,602

 

Purchases of property and equipment

 

(8,637

)

 

 

(5,664

)

 

 

(15,489

)

 

 

(14,385

)

Capitalized internal-use software

 

(12,641

)

 

 

(9,843

)

 

 

(26,232

)

 

 

(19,600

)

Non-GAAP free cash flow

$

29,400

 

 

$

14,428

 

 

$

67,952

 

 

$

37,617

 

TABLE 7

RINGCENTRAL, INC.

RECONCILIATION OF FORECASTED OPERATING MARGIN

GAAP MEASURES TO NON-GAAP MEASURES

(Unaudited, in millions)

 

 

Q3 2022

 

FY 2022

 

Low Range

 

High Range

 

Low Range

 

High Range

GAAP revenues

500.0

 

 

504.0

 

 

1,990.0

 

 

2,015.0

 

 

 

 

 

 

 

 

 

GAAP loss from operations

(91.5

)

 

(86.0

)

 

(381.9

)

 

(368.9

)

GAAP operating margin

(18.3

%)

 

(17.1

%)

 

(19.2

%)

 

(18.3

%)

Share-based compensation

110.0

 

 

105.0

 

 

425.0

 

 

415.0

 

Amortization of acquired intangibles

44.0

 

 

44.0

 

 

173.0

 

 

173.0

 

Third-party relocation and other costs

 

 

 

 

18.7

 

 

18.7

 

Acquisition related and other matters

 

 

 

 

4.0

 

 

4.0

 

Non-GAAP income from operations

62.5

 

 

63.0

 

 

238.8

 

 

241.8

 

Non-GAAP operating margin

12.5

%

 

12.5

%

 

12.0

%

 

12.0

%

 

Investor Relations Contact:
Will Wong, RingCentral
[email protected]

Media Contact:
Brett Smith, RingCentral
[email protected]

Source: RingCentral, Inc.

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