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RingCentral Announces 35% Revenue Growth for Third Quarter 2015

November 2, 2015 4:05 PM

RingCentral Office® Annualized Exit Monthly Recurring Subscriptions up 48%

Reports First Non-GAAP Operating Profit

BELMONT, Calif.--(BUSINESS WIRE)-- RingCentral, Inc. (NYSE: RNG), a leading provider of cloud business communications and collaboration solutions, today announced financial results for the third quarter ended September 30, 2015.

Third Quarter Financial Highlights:

“We are pleased to have achieved the Company’s first non-GAAP operating profit one quarter earlier than our forecast, while growing revenues 35% year-over-year in Q3,” said Vlad Shmunis, RingCentral’s Chairman and CEO. “We also continued to demonstrate our expansion up-market with key customer wins including Columbia University and MindBody, each of which were deployments of more than 1,000 seats. In addition, Gartner recognized our efforts this year adding RingCentral to the Leaders Quadrant and placing us furthest on Vision within their 2015 Magic Quadrant for UCaaS.”

Third Quarter 2015 and Recent Business Highlights:

Conference Call Details:

About RingCentral

RingCentral, Inc. (NYSE: RNG) is a leading provider of cloud-based business communications and collaboration solutions. RingCentral’s cloud solution is easier to manage, and more flexible and cost-efficient than legacy on-premises communications systems. It meets the needs of modern distributed and mobile workforces spanning SMB to Enterprises globally. RingCentral, Business Communications Made Simple. RingCentral is headquartered in Belmont, Calif. RingCentral and the RingCentral logo are trademarks of RingCentral, Inc.

Forward-Looking Statements

This press release contains “forward-looking statements”, including statements regarding our future financial results and our continued expansion up-market. 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 June 30, 2015, 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, acquisition related matters and other one-time items.

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.

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 subscriptions revenue. 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.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands)

September 30,2015 December 31,2014
Assets
Current assets:
Cash and cash equivalents $ 130,004 $ 113,182
Short-term investments 2,307 28,479
Accounts receivable, net 15,187 7,651
Inventory 2,287 1,710
Prepaid expenses and other current assets 12,749 8,767
Total current assets 162,534 159,789
Property and equipment, net 29,084 25,527
Goodwill 9,393 —
Intangibles, net 3,522 —
Other assets 2,681 3,021
Total assets $ 207,214 $ 188,337
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 4,162 $ 4,181
Accrued liabilities 37,391 29,236
Current portion of capital lease obligation 262 509
Current portion of long-term debt 3,750 16,764
Deferred revenue 34,286 25,586
Total current liabilities 79,851 76,276
Long-term debt 15,778 7,813
Sales tax liability 3,887 3,953
Capital lease obligation 273 535
Other long-term liabilities 4,540 3,255
Total liabilities 104,329 91,832

Stockholders’ equity:

Common stock 7 7
Additional paid-in capital 306,045 274,844
Accumulated other comprehensive income (loss) 86 (251 )
Accumulated deficit (203,253 ) (178,095 )
Total stockholders’ equity 102,885 96,505
Total liabilities and stockholders’ equity $ 207,214 $ 188,337

RINGCENTRAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share data)

Three Months EndedSeptember 30, Nine Months EndedSeptember 30,

2015

2014

2015

2014

Revenues:
Subscriptions $ 70,321 $ 51,951 $ 194,713 $ 143,668
Product 6,459 4,993 18,076 14,325
Total revenues 76,780 56,944 212,789 157,993
Cost of revenues:
Subscriptions 17,084 14,799 49,503 43,305
Product 5,249 4,606 14,906 13,546
Total cost of revenues 22,333 19,405 64,409 56,851
Gross profit 54,447 37,539 148,380 101,142

Operating expenses:

Research and development 13,475 11,931 37,612 32,478
Sales and marketing 34,878 26,697 101,473 76,342
General and administrative 11,922 9,725 34,231 28,184
Total operating expenses 60,275 48,353 173,316 137,004
Loss from operations (5,828 ) (10,814 ) (24,936 ) (35,862 )
Other income (expense), net (564 ) (1,153 ) (1,564 ) (2,174 )
Loss before provision (benefit) for income taxes (6,392 ) (11,967 ) (26,500 ) (38,036 )
Provision (benefit) for income taxes (56 ) 19 (1,342 ) 184
Net loss $ (6,336 ) $ (11,986 ) $ (25,158 ) $ (38,220 )
Net loss per common share:
Basic and diluted ($0.09 ) ($0.18 ) ($0.36 ) ($0.58 )
Weighted-average number of shares used in computing net loss per share:
Basic and diluted 70,580 67,800 69,614 66,313

RINGCENTRAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands)

Nine Months EndedSeptember 30,

2015

2014

Cash flows from operating activities:
Net loss $ (25,158 ) $ (38,220 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 9,935 7,409
Share-based compensation 15,790 11,306
Tax benefit from release of valuation allowance (1,411 ) —
Non-cash interest expense related to debt 156 194
Net accretion of discount and amortization of premium on available-for-sale securities 602 —
Allowance for doubtful accounts 152 —
Loss on disposal of assets 131 24
Change in fair value of purchase consideration 89 —
Deferred income tax 5 82
Changes in assets and liabilities
Accounts receivable (7,688 ) (4,398 )
Inventory (577 ) 100
Prepaid expenses and other current assets (3,907 ) (3,155 )
Other assets 488 (1,109 )
Accounts payable (61 ) 1,078
Accrued liabilities 4,758 11,318
Deferred revenue 8,700 6,863
Other liabilities 204 1,400
Net cash provided by (used in) operating activities 2,208 (7,108 )
Cash flows from investing activities:
Proceeds from the maturity of available-for-sale securities 25,760 —
Purchases of available-for-sale securities — (28,696 )
Purchases of property and equipment (11,106 ) (14,522 )
Cash paid in business combination, net of cash acquired (4,670 ) —
Capitalized internal-use software (1,836 ) (647 )
Proceeds from restricted investments 100 —
Net cash provided by (used in) investing activities 8,248 (43,865 )
Cash flows from financing activities:
Net proceeds from secondary public offering of common stock — 57,167
Payment of offering costs — (1,219 )
Proceeds from exercise of stock options and common stock warrants 12,040 7,052
Repayment of debt (5,205 ) (7,182 )
Repayment of capital lease obligations (509 ) (509 )
Taxes paid related to net share settlement of equity awards (105 ) (42 )
Net cash provided by financing activities 6,221 55,267
Effect of exchange rate changes on cash and cash equivalents 145 19
Net increase in cash and cash equivalents 16,822 4,313
Cash and cash equivalents:
Beginning of period 113,182 116,378
End of period $ 130,004 $ 120,691

RINGCENTRAL, INC.RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES(In thousands, except per share data)(Unaudited)

Three MonthsEnded September30, 2015

Three MonthsEnded September30, 2014

Nine MonthsEnded September30, 2015

Nine MonthsEnded September30, 2014

Revenues:
Subscriptions $ 70,321 $ 51,951 $ 194,713 $ 143,668
Product 6,459 4,993 18,076 14,325
Total Revenues 76,780 56,944 212,789 157,993
Cost of Revenues reconciliation:
GAAP Subscriptions cost of revenues 17,084 14,799 49,503 43,305
Stock-based compensation (535 ) (330 ) (1,468 ) (974 )
Non-GAAP Subscriptions cost of revenues 16,549 14,469 48,035 42,331
GAAP Product cost of revenues 5,249 4,606 14,906 13,546
Gross profit and gross margin reconciliation:
Non-GAAP Subscriptions 76.5 % 72.1 % 75.3 % 70.5 %
Non-GAAP Product 18.7 % 7.8 % 17.5 % 5.4 %
Non-GAAP Gross profit 71.6 % 66.5 % 70.4 % 64.6 %
Operating expenses reconciliation:
GAAP Research and development 13,475 11,931 37,612 32,478
Stock-based compensation (1,351 ) (926 ) (3,745 ) (2,426 )
Amortization (256 ) — (328 ) —
Acquisition related matters (331 ) — (331 ) —
Non-GAAP research and development 11,537 11,005 33,208 30,052
As a % of total revenues non-GAAP 15.0 % 19.3 % 15.6 % 19.0 %
GAAP Sales and marketing 34,878 26,697 101,473 76,342
Stock-based compensation (1,797 ) (1,396 ) (5,333 ) (3,661 )
Non-GAAP sales and marketing 33,081 25,301 96,140 72,681
As a % of total revenues non-GAAP 43.1 % 44.4 % 45.2 % 46.0 %
GAAP General and administrative 11,922 9,725 34,231 28,184
Stock-based compensation (2,069 ) (1,546 ) (5,244 ) (4,245 )
Acquisition related matters (2 ) — (749 ) —
Non-GAAP general and administrative 9,851 8,179 28,238 23,939
As a % of total revenues non-GAAP 12.8 % 14.4 % 13.3 % 15.2 %
Income (loss) from operations reconciliation:
GAAP loss from operations (5,828 ) (10,814 ) (24,936 ) (35,862 )
Stock-based compensation 5,752 4,198 15,790 11,306
Amortization 256 — 328 —
Acquisition related matters 333 — 1,080 —
Non-GAAP Income (loss) from Operations 513 (6,616 ) (7,738 ) (24,556 )
Non-GAAP Operating Margin 0.7 % (11.6 %) (3.6 %) (15.5 %)
Net Income (loss) reconciliation:
GAAP Net loss (6,336 ) (11,986 ) (25,158 ) (38,220 )
Stock-based compensation 5,752 4,198 15,790 11,306
Amortization 256 — 328 —
Acquisition related matters 333 — 1,080 —
Tax benefit from release of valuation allowance — — (1,411 ) —
Non-GAAP Net Income (loss) $ 5 $ (7,788 ) $ (9,371 ) $ (26,914 )
Reconciliation of shares used in computing basic and diluted net income (loss) per share:
Weighted average number of shares used in computing GAAP basic net loss per share 70,580 67,800 69,614 66,313
Effect of dilutive securities (stock options and restricted stock awards) (a) 3,353 — — —
Weighted average shares used in computing non-GAAP basic and diluted net income per share 73,933 67,800 69,614 66,313
GAAP basic and diluted net loss per share $ (0.09 ) $ (0.18 ) $ (0.36 ) $ (0.58 )
Non-GAAP basic and diluted net income (loss) per share $ 0.00 $ (0.11 ) $ (0.13 ) $ (0.41 )

(a) These securities are anti-dilutive on a GAAP basis as a result of our net loss, but are considered dilutive on a non-GAAP basis in periods where we reported positive non-GAAP earnings.

Investor Relations:

RingCentral

Darren Yip, 650-641-2220

or

ICR for RingCentral

Sheila Ennis, 650-641-2220

[email protected]

or

Media:

RingCentral

Jennifer Caukin, 650-561-6348

[email protected]

Source: RingCentral, Inc.

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