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RingCentral Announces Fourth Quarter 2020 Results

02/16/21

RingCentral Office® ARR up 39% to $1.2 billion

Subscriptions Revenue up 34%

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 fourth quarter ended December 31, 2020.

Fourth Quarter Financial Highlights

  • Total revenue increased 32% year over year to $335 million.
  • Subscriptions revenue increased 34% year over year to over $306 million.
  • Annualized Exit Monthly Recurring Subscriptions (ARR) increased 35% year over year to $1.3 billion.
  • RingCentral Office® ARR increased 39% year over year to $1.2 billion.
  • Mid-market and Enterprise ARR increased 49% year over year to $713 million.
  • Enterprise ARR increased 55% year over year to $454 million.
  • Channel ARR increased 55% year over year to $465 million.
  • TCV deals over $1 million were a new record, up over 50% sequentially, including two over $10 million.

“Fourth quarter was outstanding, driven by robust growth across the business with strong contributions from the channel and our key partners led by Avaya, AT&T, and Atos,” said Vlad Shmunis, RingCentral’s founder, chairman and CEO. “We are also excited to add Vodafone Business as a key partner as we continue to expand our global distribution network to meet the rising worldwide demand for cloud-based communication solutions. We believe RingCentral is uniquely positioned to address business communication needs in the new work from anywhere environment with a well-differentiated Message Video Phone™ (MVP™) cloud solution. With the recent addition of our Smart Video Meetings solution, RingCentral Glip™, we can now address our customers’ needs even better to communicate via any mode, on any device, anywhere as they continue on their digital transformation journey.”

Financial Results for the Fourth Quarter 2020

  • Revenue: Subscriptions revenue of over $306 million increased 34% year over year and accounted for 92% of total revenue. Other revenue of $28 million increased 20% year over year, reflecting higher adoption of RingCentral apps in the current work from anywhere environment. Total revenue was $335 million for the fourth quarter of 2020, up from $253 million in the fourth quarter of 2019, representing 32% growth.
  • Operating Income (Loss): GAAP operating loss was ($29) million, compared to a GAAP operating loss of ($20) million in the same period last year, primarily driven by higher share-based compensation and amortization of acquisition intangibles, partially offset by lower costs for acquisition related matters. Non-GAAP operating income was $34 million, compared to a non-GAAP operating income of $24 million in the same period last year.
  • Net Income (Loss) Per Share: GAAP net loss per share was ($0.02), compared to ($0.30) in the same period last year. The lower loss was primarily driven by higher mark-to-market gains associated with investments and strategic partnerships and lower costs for acquisition related matters, partially offset by higher share-based compensation, amortization of acquisition intangibles, and amortization of debt discount and issuance costs. Non-GAAP net income per diluted share was $0.29, compared to $0.22 per diluted share in the same period last year. The fourth quarters of 2020 and 2019 reflected a 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 fourth quarter of 2020 was $640 million, which reflects a one-time payment related to a recent strategic partnership, as well as $69 million cash paid for partial repurchase of our 2023 convertible senior notes. This compares to $746 million at the end of the third quarter of 2020.

Financial Results for the Full Year 2020

  • Revenue: Subscriptions revenue of $1.1 billion increased 33% and accounted for 92% of total revenue. Other revenue of $97 million increased 15%, reflecting higher adoption of RingCentral apps in the current work from anywhere environment. Total revenue was $1.2 billion, up from $903 million in 2019, representing 31% growth.
  • Operating Income (Loss): GAAP operating loss was ($113) million, compared to a GAAP operating loss of ($46) million in 2019, primarily driven by higher share-based compensation and amortization of acquisition intangibles, partially offset by lower costs for acquisition related matters. Non-GAAP operating income was $115 million, compared to a non-GAAP operating income of $83 million in 2019.
  • Net Income (Loss) Per Share: GAAP net loss per share was ($0.94), compared to ($0.64) in 2019, primarily driven by higher share-based compensation, amortization of acquisition intangibles, and amortization of debt discount and issuance costs, partially offset by higher mark-to-market gains associated with investments and strategic partnerships and lower costs for acquisition related matters. Non-GAAP net income per diluted share was $0.98, compared to $0.82 in 2019. 2020 and 2019 reflected a 22.5% non-GAAP tax rate. There were no material cashtaxes given our net operating loss carryforwards.

Additional Highlights

Platform

  • Launched RingCentral Glip™, a free, unlimited, easy-to-use solution that offers high quality and high-availability video and audio conferencing, seamlessly integrated with team messaging, file sharing, contact, task, and calendar management - resulting in a Smart Video Meetings™ experience. It includes innovative pre-meeting, in-meeting, and post-meeting capabilities - all for free. Glip® video meetings last up to 24-hours for up to 100 people, and provide a completely integrated team collaboration capability.
  • Announced acquisition of certain technology assets of DeepAffects, a leading conversational intelligence pioneer that uses artificial intelligence (AI) to analyze business conversations and extract meaningful insights. DeepAffects brings powerful AI capabilities that will enable RingCentral to deliver enhanced pre-meeting, in-meeting and post-meeting experiences for customers.
  • Announced new innovations including RingCentral Embeddable™ for RingCentral Video™, enabling developers to quickly integrate video meeting capabilities such as scheduling, joining, and hosting directly from their custom enterprise workflows. Also announced a Call Supervision, Monitoring, and Streaming API, enabling developers to add real-time transcription of a call or use Natural Language Processing and Artificial Intelligence.
  • RingCentral UK announced that the company has secured the United Kingdom National Cyber Security Centre’s (NCSC) Cyber Essentials Plus certification. The Cyber Essentials Plus certification demonstrates robust practice across operational processes and resilient cyber defenses.
  • Announced that RingCentral Office® has achieved three internationally recognized ISO certifications including ISO 27001, ISO 27017, and ISO 27018 for information security best practices. With these third-party certifications in place, RingCentral meets a stringent set of requirements around security and privacy.

Partnerships

  • Announced a strategic partnership with Vodafone Business to deliver new cloud-based communications services. Together the companies will create a new co-branded, cloud-based service that will be the lead UCaaS solution for Vodafone Business, and also offer Contact Center as a Service (CCaaS) to Vodafone Business customers.
  • In partnership with Avaya, announced that Avaya Cloud Office™ by RingCentral® is expanding availability to five of the largest economies in Europe - Austria, Belgium, Germany, Italy, and Spain.
  • Announced that Atos SE is deploying Unify Office by RingCentral to over 30,000 workers in over 20 countries. Unify Office by RingCentral will be integrated by direct routing into Atos’ Microsoft Teams digital workplace environment providing a seamless single pane of glass for communications both internally and externally.
  • In partnership with Atos SE, launched Unify Office by RingCentral in the United States, United Kingdom, and Australia.
  • Announced an expansion of the partnership between RingCentral and TELUS to serve broader sizes of businesses. The two companies will work together to now enable Canadian small businesses to easily transition their legacy phone systems to the cloud via TELUS Business Connect, an all-in-one communications solution for message, video, and phone.
  • Announced that Horizon Telecom, a leading carrier-neutral provider of communication and connectivity for global enterprises, will offer RingCentral Office® to large-scale multinational enterprises around the world.
  • Announced a new partnership between RingCentral and Stack8. The partnership will enable Stack8 to offer RingCentral’s Unified Communications as a Service platform to their large enterprise customers around the world. Additionally, Stack8 will provide RingCentral Office® and an international cloud phone system to all customers.

People

  • Announced that Mignon Clyburn has been appointed to the company’s board of directors. Clyburn served as a Commissioner of the U.S. Federal Communications Commission from 2009 to 2018, including as acting chair. Prior to her federal appointment, Clyburn served 11 years on the Public Service Commission of South Carolina and worked for nearly 15 years as publisher of the Coastal Times, a Charleston weekly newspaper focused on the African American community.
  • Announced that Nat Natarajan has joined the company as its Executive Vice President of Products and Engineering. Natarajan brings more than 20 years of experience as a global operations, product, technology, and organizational leader. Natarajan joins from Ancestry where he was Chief Product Officer and Chief Technology Officer. Prior to Ancestry, Natarajan was Senior Vice President, Chief Product and Technology Officer for Intuit’s TurboTax, and also Chief Information Security and Fraud Officer.
  • Announced that Jaya Kumar has joined the company as its Chief Marketing Officer (CMO). Kumar brings more than 25 years of experience with multiple Fortune 100 companies including PepsiCo and Kraft Foods/Mondelez where he held both president and CMO positions. Most recently he was Global CMO at Capital Group, the world’s largest fund manager with over $2.2 trillion in assets under management.
  • Announced that Matthew Bishop has been appointed as Chief Digital Officer. Bishop spent over 18 years at Microsoft, most recently as Corporate Vice President of Commercial Strategy and Operations of Microsoft’s Worldwide Commercial Business. He joined RingCentral from Core Scientific, where he served as Chief Administrative Officer after leaving Microsoft.
  • Announced that Heather Hinton has joined RingCentral as the company’s Chief Information Security Officer (CISO). Hinton joins RingCentral from IBM, where she spent 13 years in various leadership positions, most recently as vice president and IBM distinguished engineer, and CISO for the company’s Cloud and Cognitive Software business unit.

Recognition

  • Announced that Gartner has recognized RingCentral as a Leader in the 2020 Magic Quadrant for Unified Communications as a Service, Worldwide report.* In the Magic Quadrant report, published on November 11, 2020, RingCentral was positioned furthest for completeness of vision in the Leaders quadrant. This is RingCentral’s sixth year in a row being named to the Leaders quadrant.
  • Announced that RingCentral has received the highest scores in every use case among 14 total vendors in the 2020 Gartner Critical Capabilities for Unified Communications as a Service (UCaaS), Worldwide report.* In the report, Gartner evaluated UCaaS vendors across the following five identified use cases: Mobility and Remote Working, Integrated Contact Center, Midsize Enterprise, Multinational Organization, and Large Enterprise.
  • Announced that RingCentral ranked first and highest for growth in the 2020 Frost Radar™ UCaaS Market Report from Frost & Sullivan for the second year in a row. RingCentral was also ranked as the number one market share leader in a separate report issued by Frost & Sullivan focused on growth opportunities in the UCaaS market.
  • Announced that RingCentral’s executive and investor relations leadership were named to Institutional Investor’s prestigious 2021 All-America Executive Team. For the second consecutive year, the team achieved the ‘Most Honored’ company distinction and ranked in the top three positions across all categories in the software sector of CEO, CFO, and Investor Relations.

Financial Outlook

Full Year 2021 Guidance:

  • Total revenue range of $1.475 to $1.490 billion, representing annual growth of 25% to 26%.
  • Subscriptions revenue range of $1.365 to $1.375 billion, representing annual growth of 26% to 27%.
  • GAAP operating margin range of (21.7%) to (20.4%).
  • 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 $1.20 to $1.24 based on 94.0 to 94.5 million fully diluted shares.
  • Share-based compensation range of $410 to $420 million, amortization of debt discount and issuance costs of $65 million, and amortization of acquisition intangibles range of $45 to $48 million.

First Quarter 2021 Guidance:

  • Total revenue range of $337 to $340 million, representing annual growth of 26% to 27%.
  • Subscriptions revenue range of $311.5 to $313.5 million, representing annual growth of 28% to 29%.
  • GAAP operating margin range of (15.1%) to (13.8%).
  • Non-GAAP operating margin range of 8.6% to 8.8%.
  • Non-GAAP tax rate assumed to be 22.5%. No material cash taxes expected given net operating loss carryforwards.
  • Non-GAAP EPS range of $0.24 to $0.25 based on 93.5 million fully diluted shares.
  • Share-based compensation range of $66 to $68 million, amortization of debt discount and issuance costs of $16 million, and amortization of acquisition intangibles range of $11 to $12 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, 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 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 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 fourth quarter of 2020 and outlook for the first quarter and full year of 2021.
  • When: February 16, 2021 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 February 23, 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 13715059.

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™) platform. 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 offers three key products in its portfolio including RingCentral Office® , a Unified Communications as a Service (UCaaS) platform including team messaging, video meetings, and a cloud phone system, Glip®  the company’s free 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, Glip, 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, our momentum in mid-market and enterprise, contributions from channel partners, the success of our Glip solution, the success of our strategic relationships, such as our relationships with Vodafone Business, Avaya, Atos SE, TELUS, Horizon Telecom, and Stack8, our ability to expand and deepen our global distribution network, our market opportunity, our ability to address business communication needs in the new work from anywhere environment, 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 Vodafone Business, Avaya, Atos SE, TELUS, Horizon Telecom, and Stack8; 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 Glip 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 September 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, 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 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.

*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, Inc., “Critical Capabilities for Unified Communications as a Service, Worldwide” Christopher Trueman, Megan Fernandez, Daniel O’Connell, Rafael Benitez, Pankil Sheth, November 17, 2020.

Gartner, Inc., “Magic Quadrant for Unified Communications as a Service, Worldwide,” Rafael Benitez, Megan Fernandez, Daniel O’Connell, Christopher Trueman, Pankil Sheth, November 11, 2020.

TABLE 1

RINGCENTRAL, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands)

 

 

December 31, 2020

 

December 31, 2019

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

639,853

 

 

$

343,606

 

Accounts receivable, net

176,034

 

 

129,990

 

Deferred and prepaid sales commission costs

63,726

 

 

36,589

 

Prepaid expenses and other current assets

46,516

 

 

25,354

 

Total current assets

926,129

 

 

535,539

 

Property and equipment, net

142,208

 

 

89,230

 

Operating lease right-of-use assets

51,115

 

 

39,269

 

Long-term investments

213,176

 

 

132,188

 

Deferred and prepaid sales commission costs, non-current

667,779

 

 

462,344

 

Goodwill

57,313

 

 

55,278

 

Acquired intangibles, net

118,313

 

 

127,338

 

Other assets

8,564

 

 

9,561

 

Total assets

$

2,184,597

 

 

$

1,450,747

 

Liabilities, Temporary Equity, and Stockholders’ Equity

 

 

 

Current liabilities

 

 

 

Accounts payable

$

54,043

 

 

$

34,612

 

Accrued liabilities

210,654

 

 

138,729

 

Current portion of convertible senior notes, net

31,148

 

 

 

Deferred revenue

142,223

 

 

107,372

 

Total current liabilities

438,068

 

 

280,713

 

Convertible senior notes, net

1,375,320

 

 

386,889

 

Operating lease liabilities

38,722

 

 

28,516

 

Other long-term liabilities

20,241

 

 

8,929

 

Total liabilities

1,872,351

 

 

705,047

 

 

 

 

 

Temporary equity

3,787

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

Common stock

9

 

 

9

 

Additional paid-in capital

673,950

 

 

1,033,053

 

Accumulated other comprehensive income

6,806

 

 

1,948

 

Accumulated deficit

(372,306

)

 

(289,310

)

Total stockholders’ equity

$

308,459

 

 

$

745,700

 

Total liabilities, temporary equity and stockholders’ equity

$

2,184,597

 

 

$

1,450,747

 

TABLE 2

RINGCENTRAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share data)

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

2020

 

2019

 

2020

 

2019

Revenues

 

 

 

 

 

 

 

Subscriptions

$

306,495

 

 

$

229,405

 

 

$

1,086,276

 

 

$

817,811

 

Other

28,041

 

 

23,460

 

 

97,381

 

 

85,047

 

Total revenues

334,536

 

 

252,865

 

 

1,183,657

 

 

902,858

 

Cost of revenues

 

 

 

 

 

 

 

Subscriptions

67,305

 

 

45,977

 

 

236,990

 

 

160,320

 

Other

23,907

 

 

20,896

 

 

86,617

 

 

70,723

 

Total cost of revenues

91,212

 

 

66,873

 

 

323,607

 

 

231,043

 

Gross profit

243,324

 

 

185,992

 

 

860,050

 

 

671,815

 

Operating expenses

 

 

 

 

 

 

 

Research and development

56,574

 

 

38,658

 

 

189,484

 

 

136,363

 

Sales and marketing

161,842

 

 

126,077

 

 

583,773

 

 

439,100

 

General and administrative

53,651

 

 

41,626

 

 

200,032

 

 

142,027

 

Total operating expenses

272,067

 

 

206,361

 

 

973,289

 

 

717,490

 

Loss from operations

(28,743

)

 

(20,369

)

 

(113,239

)

 

(45,675

)

Other income (expense), net

 

 

 

 

 

 

 

Interest expense

(16,501

)

 

(5,232

)

 

(49,281

)

 

(20,512

)

Other income, net

43,548

 

 

129

 

 

80,458

 

 

9,247

 

Other income (expense), net

27,047

 

 

(5,103

)

 

31,177

 

 

(11,265

)

Loss before income taxes

(1,696

)

 

(25,472

)

 

(82,062

)

 

(56,940

)

Provision for (benefit from) income taxes

131

 

 

(215

)

 

934

 

 

(3,333

)

Net loss

$

(1,827

)

 

$

(25,257

)

 

$

(82,996

)

 

$

(53,607

)

Net loss per common share

 

 

 

 

 

 

 

Basic and diluted

$

(0.02

)

 

$

(0.30

)

 

$

(0.94

)

 

$

(0.64

)

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

 

 

 

 

 

 

 

Basic and diluted

89,951

 

 

85,449

 

 

88,684

 

 

83,130

 

TABLE 3

RINGCENTRAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

 

Year Ended December 31,

 

2020

 

2019

Cash flows from operating activities

 

 

 

Net loss

$

(82,996

)

 

$

(53,607

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

 

 

 

Depreciation and amortization

75,612

 

 

37,870

 

Share-based compensation

189,600

 

 

101,354

 

Amortization of deferred and prepaid sales commission costs

47,207

 

 

30,134

 

Amortization of debt discount and issuance costs

49,031

 

 

20,337

 

Loss on early extinguishment of debt

13,284

 

 

 

Repayment of convertible senior notes attributable to debt discount

(35,020

)

 

 

Reduction of operating lease right-of-use assets

15,712

 

 

13,256

 

Unrealized gain and other related costs on investments

(80,988

)

 

3,369

 

Foreign currency remeasurement (gain) loss

(2,954

)

 

(105

)

Provision for bad debt

5,936

 

 

2,949

 

Deferred income taxes

(499

)

 

(737

)

Tax benefit from release of valuation allowance

 

 

(3,210

)

Other

512

 

 

240

 

Changes in assets and liabilities:

 

 

 

Accounts receivable

(51,980

)

 

(37,163

)

Deferred and prepaid sales commission costs

(274,908

)

 

(102,303

)

Prepaid expenses and other current assets

(20,878

)

 

(1,575

)

Other assets

266

 

 

764

 

Accounts payable

21,916

 

 

21,753

 

Accrued liabilities

62,451

 

 

27,095

 

Deferred revenue

34,851

 

 

18,845

 

Operating lease liabilities

(15,362

)

 

(13,830

)

Other liabilities

14,016

 

 

(590

)

Net cash (used in) provided by operating activities

(35,191

)

 

64,846

 

Cash flows from investing activities

 

 

 

Purchases of property and equipment

(43,618

)

 

(27,767

)

Capitalized internal-use software

(38,113

)

 

(16,526

)

Cash paid for business combination, net of cash acquired

 

 

(27,870

)

Purchases of long-term investments

 

 

(135,557

)

Cash paid for acquisition of intangible assets

(25,955

)

 

(89,060

)

Net cash used in investing activities

(107,686

)

 

(296,780

)

Cash flows from financing activities

 

 

 

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

1,627,177

 

 

 

Payments for 2023 convertible senior notes partial repurchase

(1,086,268

)

 

 

Payments for capped calls and transaction costs

(102,695

)

 

 

Proceeds from issuance of stock in connection with stock plans

41,230

 

 

29,827

 

Payments for taxes related to net share settlement of equity awards

(36,717

)

 

(14,666

)

Payment for contingent consideration for business acquisition

(3,648

)

 

(5,176

)

Repayment of financing obligations

(1,489

)

 

(943

)

Net cash provided by financing activities

437,590

 

 

9,042

 

Effect of exchange rate changes

1,534

 

 

169

 

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

296,247

 

 

(222,723

)

Cash, cash equivalents, and restricted cash

 

 

 

Beginning of year

343,606

 

 

566,329

 

End of year

$

639,853

 

 

$

343,606

 

TABLE 4

RINGCENTRAL, INC.

RECONCILIATION OF OPERATING INCOME (LOSS)

GAAP MEASURES TO NON-GAAP MEASURES

(Unaudited, in thousands)

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

2020

 

2019

 

2020

 

2019

Revenues

 

 

 

 

 

 

 

Subscriptions

$

306,495

 

 

$

229,405

 

 

$

1,086,276

 

 

$

817,811

 

Other

28,041

 

 

23,460

 

 

97,381

 

 

85,047

 

Total revenues

334,536

 

 

252,865

 

 

1,183,657

 

 

902,858

 

Cost of revenues reconciliation

 

 

 

 

 

 

 

GAAP Subscriptions cost of revenues

67,305

 

 

45,977

 

 

236,990

 

 

160,320

 

Share-based compensation

(2,831

)

 

(2,095

)

 

(10,454

)

 

(6,891

)

Amortization of acquisition intangibles

(9,105

)

 

(3,310

)

 

(32,055

)

 

(6,998

)

Acquisition related matters

 

 

(81

)

 

 

 

(145

)

Non-GAAP Subscriptions cost of revenues

55,369

 

 

40,491

 

 

194,481

 

 

146,286

 

 

 

 

 

 

 

 

 

GAAP Other cost of revenues

23,907

 

 

20,896

 

 

86,617

 

 

70,723

 

Share-based compensation

(1,025

)

 

(534

)

 

(3,821

)

 

(1,850

)

Non-GAAP Other cost of revenues

22,882

 

 

20,362

 

 

82,796

 

 

68,873

 

Gross profit and gross margin reconciliation

 

 

 

 

 

 

 

Non-GAAP Subscriptions

81.9

%

 

82.3

%

 

82.1

%

 

82.1

%

Non-GAAP Other

18.4

%

 

13.2

%

 

15.0

%

 

19.0

%

Non-GAAP Gross profit

76.6

%

 

75.9

%

 

76.6

%

 

76.2

%

Operating expenses reconciliation

 

 

 

 

 

 

 

GAAP Research and development

56,574

 

 

38,658

 

 

189,484

 

 

136,363

 

Share-based compensation

(11,365

)

 

(7,132

)

 

(39,283

)

 

(23,132

)

Acquisition related matters

 

 

(341

)

 

 

 

(693

)

Non-GAAP Research and development

45,209

 

 

31,185

 

 

150,201

 

 

112,538

 

As a % of total revenues non-GAAP

13.5

%

 

12.3

%

 

12.7

%

 

12.5

%

 

 

 

 

 

 

 

 

GAAP Sales and marketing

161,842

 

 

126,077

 

 

583,773

 

 

439,100

 

Share-based compensation

(19,075

)

 

(10,736

)

 

(64,240

)

 

(38,325

)

Amortization of acquisition intangibles

(962

)

 

(929

)

 

(3,781

)

 

(3,720

)

Acquisition related matters

 

 

(8,374

)

 

4

 

 

(10,483

)

Non-GAAP Sales and marketing

141,805

 

 

106,038

 

 

515,756

 

 

386,572

 

As a % of total revenues non-GAAP

42.4

%

 

41.9

%

 

43.6

%

 

42.8

%

 

 

 

 

 

 

 

 

GAAP General and administrative

53,651

 

 

41,626

 

 

200,032

 

 

142,027

 

Share-based compensation

(17,894

)

 

(9,167

)

 

(71,802

)

 

(31,156

)

Acquisition related matters

(244

)

 

(1,947

)

 

(2,820

)

 

(4,955

)

Non-GAAP General and administrative

35,513

 

 

30,512

 

 

125,410

 

 

105,916

 

As a % of total revenues non-GAAP

10.6

%

 

12.1

%

 

10.6

%

 

11.7

%

Income (loss) from operations reconciliation

 

 

 

 

 

 

 

GAAP loss from operations

(28,743

)

 

(20,369

)

 

(113,239

)

 

(45,675

)

Share-based compensation

52,190

 

 

29,664

 

 

189,600

 

 

101,354

 

Amortization of acquisition intangibles

10,067

 

 

4,239

 

 

35,836

 

 

10,718

 

Acquisition related matters

244

 

 

10,743

 

 

2,816

 

 

16,276

 

Non-GAAP Income from operations

33,758

 

 

24,277

 

 

115,013

 

 

82,673

 

Non-GAAP Operating margin

10.1

%

 

9.6

%

 

9.7

%

 

9.2

%

TABLE 5

RINGCENTRAL, INC.

RECONCILIATION OF NET INCOME (LOSS)

GAAP MEASURES TO NON-GAAP MEASURES

(In thousands, except per share data) (Unaudited)

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

2020

 

2019

 

2020

 

2019

Net income (loss) income reconciliation

 

 

 

 

 

 

 

GAAP net loss

$

(1,827

)

 

$

(25,257

)

 

$

(82,996

)

 

$

(53,607

)

Share-based compensation

52,190

 

 

29,664

 

 

189,600

 

 

101,354

 

Amortization of acquisition intangibles

10,067

 

 

4,239

 

 

35,836

 

 

10,718

 

Acquisition related matters

244

 

 

21,300

 

 

2,816

 

 

26,833

 

Amortization of debt discount and issuance costs

16,418

 

 

5,188

 

 

49,031

 

 

20,337

 

Gain associated with investments and strategic partnerships

(41,683

)

 

(8,343

)

 

(89,488

)

 

(8,343

)

Loss on early extinguishment of debt

961

 

 

 

 

13,284

 

 

 

Intercompany remeasurement gain

(2,050

)

 

(383

)

 

(1,634

)

 

(119

)

Income tax expense effects (1)

(7,621

)

 

(6,105

)

 

(25,478

)

 

(24,446

)

Non-GAAP net income

$

26,699

 

 

$

20,303

 

 

$

90,971

 

 

$

72,727

 

Reconciliation between GAAP and non-GAAP weighted average shares used in computing basic and diluted net (loss) income per common share:

 

 

 

 

 

 

 

Weighted average number of shares used in computing basic net (loss) income per share

89,951

 

 

85,449

 

 

88,684

 

 

83,130

 

Effect of dilutive securities

2,845

 

 

5,783

 

 

4,144

 

 

5,393

 

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

92,796

 

 

91,232

 

 

92,828

 

 

88,523

 

 

 

 

 

 

 

 

 

Diluted net (loss) income per share

 

 

 

 

 

 

 

GAAP net loss per share

$

(0.02

)

 

$

(0.30

)

 

$

(0.94

)

 

$

(0.64

)

Non-GAAP net income per share

$

0.29

 

 

$

0.22

 

 

$

0.98

 

 

$

0.82

 

(1) Income tax expense effects for the year ended December 31, 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)

 

 

 

Year Ended
December 31,

 

2020

 

2019

Net cash (used in) provided by operating activities

$

(35,191

)

 

$

64,846

 

Strategic partnerships

141,584

 

 

34,500

 

Repayment of convertible senior notes attributable to debt discount

35,020

 

 

 

Non-GAAP net cash provided by operating activities

141,413

 

 

99,346

 

Purchases of property and equipment

(43,618

)

 

(27,767

)

Capitalized internal-use software

(38,113

)

 

(16,526

)

Non-GAAP free cash flow

$

59,682

 

 

$

55,053

 

TABLE 7

RINGCENTRAL, INC.

RECONCILIATION OF FORECASTED OPERATING MARGIN

GAAP MEASURES TO NON-GAAP MEASURES

(Unaudited, in millions)

 

Q1 2021

 

FY 2021

 

Low Range

 

High Range

 

Low Range

 

High Range

GAAP revenues

337.0

 

 

340.0

 

 

1,475.0

 

 

1,490.0

 

 

 

 

 

 

 

 

 

GAAP loss from operations

(51.0

)

 

(47.1

)

 

(320.5

)

 

(304.5

)

GAAP operating margin

(15.1

%)

 

(13.8

%)

 

(21.7

%)

 

(20.4

%)

Share-based compensation

68.0

 

 

66.0

 

 

420.0

 

 

410.0

 

Amortization of acquisition intangibles

12.0

 

 

11.0

 

 

48.0

 

 

45.0

 

Acquisition related matters

 

 

 

 

 

 

 

Non-GAAP income from operations

29.0

 

 

29.9

 

 

147.5

 

 

150.5

 

Non-GAAP operating margin

8.6

%

 

8.8

%

 

10.0

%

 

10.1

%

 

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

Source: RingCentral, Inc.

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