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Press Release

RingCentral Announces Revenue Increase of 37% for Fourth Quarter 2014

Company Release - 2/3/2015 4:05 PM ET

RingCentral Office® Annualized Exit Monthly Recurring Subscriptions up 52%

Total Year 2014 Revenue up 37%

SAN MATEO, Calif.--(BUSINESS WIRE)-- RingCentral, Inc. (NYSE: RNG), a leading provider of cloud business communications solutions, today announced financial results for the fourth quarter and full year ended December 31, 2014.

Fourth Quarter Highlights:

  • Revenue increased 37% year-over-year to $61.9 million.
  • Total annualized exit monthly recurring subscriptions were up 37% year-over-year to $237.5 million.
  • RingCentral Office® annualized exit monthly recurring subscriptions were up 52% year-over-year to $170.5 million.
  • Net monthly subscription dollar retention was over 99%.

“We had a very successful year in 2014, capped by a fourth quarter of industry leading revenue growth and meaningful margin improvements,” said Vlad Shmunis, RingCentral’s Chairman and CEO. “Our strategy to expand up market and acquire larger customers continues to build momentum, and is contributing meaningfully to our financial results. We believe that our differentiated, cloud-based business communications platform is clearly resonating with customers and positions us well for success in 2015 and beyond.”

Financial Results of the Fourth Quarter 2014:

  • Revenue: Total revenue was $61.9 million for the fourth quarter of 2014, up 37% from the fourth quarter of 2013. Service revenue was $56.4 million for the fourth quarter of 2014, up 37% from the fourth quarter of 2013.
  • Net Income (Loss): GAAP net income (loss) per diluted share was ($0.15) for the fourth quarter of 2014 compared with ($0.22) for the fourth quarter of 2013. Non-GAAP net income (loss) per diluted share was ($0.09) for the fourth quarter of 2014, compared with ($0.14) per diluted share for the fourth quarter of 2013.
  • Balance Sheet: Total cash and short-term investments at the end of the fourth quarter of 2014 was $141.7 million, compared with $149.4 million at the end of the third quarter of 2014.

Financial Results of the Full Year 2014:

  • Revenue: Total revenue was $219.9 million for the full year of 2014, up 37% from the full year of 2013. Service revenue was $200.1 million for the full year of 2014, up 37% from the full year of 2013.
  • Net Income (Loss): GAAP net income (loss) per diluted share was ($0.72) for the full year of 2014 compared with ($1.39) for the full year of 2013. Non-GAAP net income (loss) per diluted share was ($0.49) for the full year of 2014, compared with ($1.01) per diluted share for the full year of 2013.
  • Balance Sheet: Total cash and short-term investments at the end of 2014 was $141.7 million, up from $116.4 million at the end of 2013.

Fourth Quarter 2014 and Recent Business Highlights:

  • Announced that RingCentral Office® is now integrated with Google for Work. Users can click-to-call, send and receive SMS text messages, host web meetings, and video and audio conferences with up to 1,000 people – all within the Google for Work environment.
  • Released a fully HIPAA-compliant RingCentral Office® solution to better serve the large and growing healthcare industry.
  • Integrated RingCentral Office® with Zendesk, a leading cloud-based customer service software provider.

Conference Call Details:

  • What: RingCentral financial results for the fourth quarter and full year of 2014 and outlook for the first quarter and full year of 2015.
  • When: Tuesday, February 3, 2015 at 2PM PT (5PM ET).
  • Dial in: To access the call in the United States, please (877) 705-6003, and for international callers dial (201) 493-6725. Callers may provide confirmation number 13598805 to access the call more quickly, and 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: A replay of the call will be available via telephone for seven days, beginning two hours after the call. To listen to the telephone replay in the U.S., please dial (877) 870-5176 from the United States or (858) 384-5517 internationally with recording access code 13598805.

About RingCentral

RingCentral, Inc. (NYSE: RNG) is a leading provider of cloud-based business communications solutions. Easier to manage and more flexible than on-premise communications phone systems, RingCentral’s cloud solution meets the needs of modern distributed and mobile workforces, while eliminating the expense and complications of on-premise traditional hardware-based systems and software. RingCentral is headquartered in San Mateo, California.

Forward-Looking Statements

This press release contains “forward-looking statements”, including statements regarding our strategy to expand up market and acquire larger customers and our anticipated future financial results. 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 grow at our expected rate of growth; our ability to add and retain larger 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; our ability to compete successfully against existing and new competitors; our ability to enter into and maintain relationships with carriers and other resellers; 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 September 30, 2014, 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 results include certain Non-GAAP financial measures, including Non-GAAP operating income (loss) and Non-GAAP net income (loss) per share. We define Non-GAAP operating income (loss) as operating income (loss) excluding share-based compensation, legal settlements and other one-time items. We define Non-GAAP net income (loss) per share as net income (loss) per share assuming all preferred stock converted into common stock at the later of the start of the period or the date of issuance.

We have included Non-GAAP operating income (loss) and Non-GAAP net income (loss) per share in this press release because they are key measures used by us to understand and evaluate our core 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 in calculating Non-GAAP operating income (loss) and Non-GAAP net income (loss) per share can provide a useful measure for period-to-period comparisons of our core business.

Although Non-GAAP operating income (loss) and Non-GAAP net income (loss) per share 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.

We have not reconciled Non-GAAP operating income (loss) to operating income (loss) guidance or Non-GAAP net income (loss) per share to net income (loss) per share guidance because we do not provide guidance for share-based compensation expense, provision for income taxes, interest income, interest expense, and other income and expenses, which are reconciling items between Non-GAAP operating income (loss) to operating income (loss) guidance or Non-GAAP net income (loss) per share to net income (loss) per share. As items that impact net income (loss) are out of our control and/or cannot be reasonably predicted, we are unable to provide such guidance. Accordingly, reconciliation to net income (loss) is not available without unreasonable effort. For a reconciliation of historical non-GAAP financial measures to the nearest comparable GAAP measures, see the reconciliation tables included in this press release.

Our reported results also include our total annualized exit monthly recurring subscriptions, RingCentral Office annualized exit monthly recurring subscriptions, and net monthly subscription dollar retention. We define our total annualized exit monthly recurring subscriptions as our total monthly recurring subscriptions multiplied by 12. Our total monthly recurring subscriptions equals the monthly value of all customer subscriptions in effect at the end of a given month. We believe this metric is a leading indicator of our anticipated services revenues. We calculate our RingCentral Office annualized exit monthly recurring subscriptions in the same manner as we calculate our total annualized exit monthly recurring subscriptions, except that only customer subscriptions from RingCentral Office customers are included when determining monthly recurring subscriptions for the purposes of calculating this key business metric. 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.

 

RINGCENTRAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

 
 
                December 31,
2014
    December 31,
2013
Assets
Current assets:
Cash and cash equivalents $ 113,182 $ 116,378
Short-term investments 28,479
Accounts receivable, net 7,651 3,045
Inventory 1,710 2,111
Prepaid expenses and other current assets   8,767   5,214
Total current assets 159,789 126,748
Property and equipment, net 25,527 16,660
Other assets   3,021   1,777
Total assets $ 188,337 $ 145,185
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 4,181 $ 4,414
Accrued liabilities 29,236 20,559
Current portion of capital lease obligation 509 347
Current portion of long-term debt 16,764 9,871
Deferred revenue   25,586   16,552
Total current liabilities 76,276 51,743
Long-term debt 7,813 24,356
Sales tax liability 3,953 3,988
Capital lease obligation 535 247
Other long-term liabilities   3,255   1,336
Total liabilities 91,832 81,670
 

Stockholders’ equity:

Common stock 7 6
Additional paid-in capital 274,844 193,574
Accumulated other comprehensive loss (251) (310)
Accumulated deficit   (178,095)   (129,755)
Total stockholders’ equity   96,505   63,515
Total liabilities and stockholders’ equity $ 188,337 $ 145,185
 

RINGCENTRAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share data)

 
 
      Three Months Ended
December 31,
    Year Ended
December 31,
2014     2013 2014     2013
Revenues:
Services $ 56,430 $ 41,327 $ 200,098 $ 145,995
Product   5,464   4,016   19,789   14,510
Total revenues   61,894   45,343   219,887   160,505
Cost of revenues:
Services 15,368 13,051 58,673 47,230
Product   4,554   4,100   18,100   14,289
Total cost of revenues   19,922   17,151   76,773   61,519
Gross profit 41,972 28,192 143,114 98,986
 

Operating expenses:

Research and development 12,104 9,139 44,582 33,399
Sales and marketing 28,485 19,983 104,827 72,336
General and administrative   10,726   9,425   38,910   34,284
Total operating expenses   51,315   38,547   188,319   140,019
Loss from operations (9,343) (10,355) (45,205) (41,033)
Other income (expense), net   (864)   (2,990)   (3,038)   (5,110)
Loss before provision (benefit) for income taxes (10,207) (13,345) (48,243) (46,143)
Provision (benefit) for income taxes   (87)   20   97   (45)
Net loss $ (10,120) $ (13,365) $ (48,340) $ (46,098)
Net loss per common share:
Basic and diluted ($ 0.15) ($ 0.22) ($ 0.72) ($ 1.39)
Weighted-average number of shares used in computing net loss per share:
Basic and diluted   68,318   62,098   66,818   33,155
 

RINGCENTRAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

              Year Ended
December 31,
2014     2013
Cash flows from operating activities:
Net loss $(48,340) $(46,098)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 10,378 8,980
Share-based compensation 15,516 7,540
Non-cash interest and other expense related to debt 259 2,014
Loss on disposal of assets 100 338
Deferred income tax (32) (16)
Changes in assets and liabilities:
Accounts receivable (4,606) (355)
Inventory 401 (1,279)
Prepaid expenses and other current assets (3,553) (1,873)
Other assets (1,015) (328)
Accounts payable (510) (453)
Accrued liabilities 9,054 1,370
Deferred revenue 9,034 5,262
Other liabilities 1,884 1,127
Net cash used in operating activities (11,430) (23,771)
Cash flows from investing activities:
Purchases of property and equipment (17,965) (10,789)
Purchases of available-for-sale securities (28,696)
Restricted investments (130)
Net cash used in investing activities (46,661) (10,919)
Cash flows from financing activities:
Net proceeds from public offerings of common stock 57,167 103,309
Net proceeds from debt agreements 37,857
Repayment of debt (9,909) (26,309)
Repayment of capital lease obligations (698) (422)
Proceeds from issuance of preferred stock warrants 1,625
Payment of offering costs (1,219) (3,720)
Proceeds from issuance of stock in connection with stock plans 9,446 893
Net cash provided by financing activities 54,787 113,233
Effect of exchange rate changes on cash and cash equivalents 108 (29)
Net increase (decrease) in cash and cash equivalents (3,196) 78,514
Cash and cash equivalents:
Beginning of period 116,378 37,864
End of period $113,182 $116,378
 

RINGCENTRAL, INC.

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

(In thousands, except per share data)

(Unaudited)

                   

Three Months
Ended December
31, 2014

   

Three Months
Ended December
31, 2013

Year Ended
December 31, 2014

   

Year Ended
December 31,
2013

Revenues:
Services $ 56,430 $ 41,327 $ 200,098 $ 145,995
Product   5,464   4,016   19,789   14,510
Total Revenues   61,894   45,343   219,887   160,505
Cost of Revenues reconciliation:
GAAP Services cost of revenues 15,368 13,051 58,673 47,230
Share-based compensation   (320)   (242)   (1,294)   (539)
Non-GAAP services cost of revenues   15,048   12,809   57,379   46,691
GAAP Product cost of revenues   4,554   4,100   18,100   14,289
Gross margin reconciliation:
Non-GAAP Services 73.3% 69.0% 71.3% 68.0%
Non-GAAP Product 16.7% (2.1%) 8.5% 1.5%
Non-GAAP Gross margin 68.3% 62.7% 65.7% 62.0%
Operating expenses reconciliation:
GAAP Research and development 12,104 9,139 44,582 33,399
Share-based compensation   (917)   (611)   (3,343)   (1,495)
Non-GAAP research and development   11,187   8,528   41,239   31,904
As a % of total revenues non-GAAP 18.1% 18.8% 18.8% 19.9%
 
GAAP Sales and marketing 28,485 19,983 104,827 72,336
Share-based compensation   (1,599)   (579)   (5,260)   (1,313)
Non-GAAP sales and marketing   26,886   19,404   99,567   71,023
As a % of total revenues non-GAAP 43.4% 42.8% 45.3% 44.2%
 
GAAP General and administrative 10,726 9,425 38,910 34,284
Share-based compensation (1,374) (1,561) (5,619) (4,193)
Legal related matters   -   -   -   (3,097)
Non-GAAP general and administrative 9,352 7,864 33,291 26,994
As a % of total revenues non-GAAP 15.1% 17.3% 15.1% 16.8%
Loss from operations reconciliation:
GAAP loss from operations (9,343) (10,355) (45,205) (41,033)
Share-based compensation 4,210 2,993 15,516 7,540
Legal related matters   -   -   -   3,097
Non-GAAP loss from Operations   (5,133)   (7,362)   (29,689)   (30,396)
Net loss reconciliation:
GAAP Net loss (10,120) (13,365) (48,340) (46,098)
Share-based compensation 4,210 2,993 15,516 7,540
Legal related matters - - - 3,097
Debt refinance     1,833     1,833
Non-GAAP Net loss $ (5,910) $ (8,539) $ (32,824) $ (33,628)
Basic and diluted net loss per share
GAAP $ (0.15) $ (0.22) $ (0.72) $ (1.39)
Non-GAAP $ (0.09) $ (0.14) $ (0.49) $ (1.01)
Shares used to compute basic and diluted GAAP and Non-GAAP net loss per share 68,318 62,098 66,818 33,155

Investor Relations Contact:
RingCentral
Mitesh Dhruv, 650-581-9443
or
ICR for RingCentral
Greg Kleiner, 650-581-9443
ir@RingCentral.com
or
Media Contact:
RingCentral
Jennifer Caukin, 650-561-6348
Jennifer.caukin@ringcentral.com

Source: RingCentral, Inc.