Exhibit 99.1
RingCentral Announces Third Quarter 2016 Results
Software Subscriptions Revenue up 31%
RingCentral Office® ARR up 39%
GAAP Software Subscriptions Gross Margin of 79%; Non-GAAP: 80%
Belmont, Calif. – October 25, 2016 –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, 2016.
Third Quarter Financial Highlights
| | • | | Software subscriptions revenue grew 31% year-over-year to $91.9 million; total revenue was $96.8 million. |
| | • | | RingCentral Office® annualized exit recurring software subscriptions (ARR) grew 39% year-over-year to $316.8 million. |
| | • | | Total annualized exit recurring software subscriptions (ARR) grew 31% year-over-year to $389.5 million. |
| | • | | GAAP software subscriptions gross margin was 79.1%, up 3.4 points year-over-year, while Non-GAAP software subscriptions gross margin was 80.1%, up 3.6 points year-over-year. |
| | • | | GAAP operating margin was (7.3%), up 0.3 points year-over-year, while Non-GAAP operating margin was 2.3%, up 1.6 points year-over-year. |
| | • | | Net monthly subscriptions dollar retention: RingCentral Office® over 100% and overall subscriptions over 99%. |
“In the third quarter, we executed well by balancing revenue growth, investments in enterprise, and expanding margins to drive results at the high-end or above our outlook,” said Vlad Shmunis, RingCentral’s Chairman and CEO. “Growth in our enterprise pipeline has accelerated meaningfully over the past three quarters, which we believe demonstrates the success of our focus on innovation and the investments we have made with our comprehensive go-to-market strategy. We were also honored to once again be placed in the leader’s quadrant and furthest to the right on vision in Gartner’s 2016 Magic Quadrant for UCaaS, further extending our leadership position.”
Financial Results for the Third Quarter 2016
| | • | | Revenue: Total revenue was $96.8 million for the third quarter of 2016, up from $76.8 million in the third quarter of 2015. Software subscriptions revenue was $91.9 million for the third quarter of 2016, up from $70.3 million in the third quarter of 2015. |
| | • | | Pro Forma1 Revenue Comparison:Total revenue of $96.8 million in the third quarter of 2016, up from $74.5 million in the third quarter of 2015, representing 30% growth, adjusting for the agency model on a comparable basis. |
| 1 | In 1Q16 RingCentral transitioned direct phone sales to an agency model, in which RingCentral receives a commission for phone sales instead of separately recognizing the full sale price and cost of the product. RingCentral is providing supplemental information on a pro forma basis to provide a clear comparison of the Company’s results with prior periods as-if the Company had transitioned phone sales to the new agency model on January 1, 2015. Carrier phone sales will remain under the direct phone sales model. |
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| | • | | Net Income (Loss) Per Share: GAAP net loss per share was ($0.11) for the third quarter of 2016 compared with ($0.09) for the third quarter of 2015. Non-GAAP net income per diluted share was $0.03 for the third quarter of 2016, compared with $0.00 per diluted share for the third quarter of 2015. |
| | • | | Balance Sheet: Total cash and cash equivalents at the end of the third quarter of 2016 was $152.4 million, compared with $147.8 million at the end of the second quarter of 2016. |
Third Quarter 2016 and Recent Business Highlights
| | • | | Placed by Gartner in the Leaders Quadrant for Unified Communications as a Service (UCaaS) Magic Quadrant. Gartner noted good customer satisfaction and named RingCentral the top UCaaS provider across multiple metrics. |
| | • | | Recognized with the 2016 North American Frost & Sullivan Award for Company of the Year for hosted Internet protocol telephony and UCaaS market. Frost & Sullivan noted that RingCentral stands out among cloud communications providers for its ability to assess evolving customer needs and implement best practices. |
| | • | | Won a 5,000 user deal at a multibillion-dollar restaurant chain with a total contract value over $3 million dollars. |
| | • | | Launched new Android and iOS native apps for RingCentral’s team messaging platform that are faster and higher performing as well as seamlessly integrated with RingCentral Office. |
| | • | | Introduced RingCentral CloudConnect, a service that allows enterprises the ability to use their preferred network service provider to directly connect to RingCentral Cloud. The connection is provided through a private data exchange enabling lower latency, greater network reliability and availability, and added security. |
| | • | | Announced a partnership with Intelisys, one of the nation’s key master agents in the US. Intelisys’ established international presence will enable RingCentral to further expand its global cloud communications footprint. |
Conference Call Details:
| | • | | What: RingCentral financial results for the third quarter of 2016 and outlook for the fourth quarter and full year of 2016. |
| | • | | When: Tuesday, October 25, 2016 at 1:30PM PT (4:30PM 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 may provide confirmation number 13647029 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 13647029. |
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, California. RingCentral, RingCentral Office, and the RingCentral logo are registered trademarks of RingCentral, Inc.
Forward-Looking Statements
This press release contains “forward-looking statements,” including but not limited to, statements regarding our future, our GAAP and non-GAAP guidance, our markets and strategic opportunities, our expectations regarding the growth in our enterprise pipeline, and our planned investments and innovation. 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
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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 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; 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, 2016, 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 include certain Non-GAAP financial measures, including Non-GAAP operating income (loss), Non-GAAP operating margin, Non-GAAP net income (loss), and Non-GAAP net income per diluted share. Non-GAAP operating income (loss) is defined as operating income (loss) excluding share-based compensation, amortization of acquisition intangibles, and acquisition related matters. Non-GAAP operating margin is defined as Non-GAAP operating income (loss) divided by total GAAP revenue. Non-GAAP net income (loss) is defined as net income (loss) excluding stock-based compensation, intercompany remeasurement gains or losses, acquisition related matters, amortization of acquisition intangibles, and tax benefit for release of valuation allowance.
We have included Non-GAAP operating income (loss), Non-GAAP operating margin, Non-GAAP net income (loss), and Non-GAAP net income per diluted 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), Non-GAAP operating margin, Non-GAAP net income (loss), and Non-GAAP net income per diluted share can provide a useful measure for period-to-period comparisons of our core business.
Although Non-GAAP operating income (loss), Non-GAAP operating margin, Non-GAAP net income (loss), and Non-GAAP net income per diluted 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. Reconciliations of the Company’s historical non-GAAP financial measures and key metrics 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 total annualized exit monthly recurring subscriptions, RingCentral Office® annualized exit monthly recurring subscriptions, and net monthly subscriptions 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 equal 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.
Investor Relations Contact:
Darren Yip, RingCentral
(650) 641-2220
ir@RingCentral.com
Media Contact:
Jennifer Caukin, RingCentral
650-561-6348
Jennifer.caukin@ringcentral.com
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TABLE 1
RINGCENTRAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
| | | | | | | | |
| | | September 30, 2016 | | | December 31, 2015 | |
Assets | | | | | | | | |
Current assets | | | | | | | | |
Cash and cash equivalents | | $ | 152,390 | | | $ | 137,588 | |
Accounts receivable, net | | | 23,583 | | | | 19,163 | |
Inventory | | | 84 | | | | 2,317 | |
Prepaid expenses and other current assets | | | 16,644 | | | | 11,978 | |
| | | | | | | | |
Total current assets | | | 192,701 | | | | 171,046 | |
Property and equipment, net | | | 31,139 | | | | 28,160 | |
Goodwill | | | 9,393 | | | | 9,393 | |
Acquired intangibles, net | | | 2,500 | | | | 3,266 | |
Other assets | | | 3,064 | | | | 2,948 | |
| | | | | | | | |
Total assets | | $ | 238,797 | | | $ | 214,813 | |
| | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | |
Current liabilities | | | | | | | | |
Accounts payable | | $ | 4,701 | | | $ | 5,196 | |
Accrued liabilities | | | 46,368 | | | | 34,702 | |
Current portion of capital lease obligation | | | 181 | | | | 269 | |
Current portion of long-term debt | | | 14,528 | | | | 3,750 | |
Deferred revenue | | | 42,738 | | | | 36,657 | |
| | | | | | | | |
Total current liabilities | | | 108,516 | | | | 80,574 | |
Long-term debt | | | 1,250 | | | | 14,840 | |
Sales tax liability | | | 3,527 | | | | 3,670 | |
Capital lease obligation | | | — | | | | 181 | |
Other long-term liabilities | | | 3,402 | | | | 5,416 | |
| | | | | | | | |
Total liabilities | | | 116,695 | | | | 104,681 | |
Stockholders’ equity | | | | | | | | |
Common stock | | | 7 | | | | 7 | |
Additional paid-in capital | | | 351,784 | | | | 319,792 | |
Accumulated other comprehensive income | | | 2,868 | | | | 527 | |
Accumulated deficit | | | (232,557 | ) | | | (210,194 | ) |
| | | | | | | | |
Total stockholders’ equity | | | 122,102 | | | | 110,132 | |
| | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 238,797 | | | $ | 214,813 | |
| | | | | | | | |
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TABLE 2
RINGCENTRAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2016 | | | 2015 | | | 2016 | | | 2015 | |
Revenues | | | | | | | | | | | | | | | | |
Software subscriptions | | $ | 91,853 | | | $ | 70,321 | | | $ | 257,898 | | | $ | 194,713 | |
Other | | | 4,986 | | | | 6,459 | | | | 17,323 | | | | 18,076 | |
| | | | | | | | | | | | | | | | |
Total revenues | | | 96,839 | | | | 76,780 | | | | 275,221 | | | | 212,789 | |
| | | | | | | | | | | | | | | | |
Cost of revenues | | | | | | | | | | | | | | | | |
Software subscriptions | | | 19,211 | | | | 17,084 | | | | 54,107 | | | | 49,503 | |
Other | | | 4,244 | | | | 5,249 | | | | 13,452 | | | | 14,906 | |
| | | | | | | | | | | | | | | | |
Total cost of revenues | | | 23,455 | | | | 22,333 | | | | 67,559 | | | | 64,409 | |
| | | | | | | | | | | | | | | | |
Gross profit | | | 73,384 | | | | 54,447 | | | | 207,662 | | | | 148,380 | |
Operating expenses | | | | | | | | | | | | | | | | |
Research and development | | | 16,490 | | | | 13,475 | | | | 48,097 | | | | 37,612 | |
Sales and marketing | | | 50,306 | | | | 34,878 | | | | 137,796 | | | | 101,473 | |
General and administrative | | | 13,649 | | | | 11,922 | | | | 41,114 | | | | 34,231 | |
| | | | | | | | | | | | | | | | |
Total operating expenses | | | 80,445 | | | | 60,275 | | | | 227,007 | | | | 173,316 | |
| | | | | | | | | | | | | | | | |
Loss from operations | | | (7,061 | ) | | | (5,828 | ) | | | (19,345 | ) | | | (24,936 | ) |
Other income (expense), net | | | | | | | | | | | | | | | | |
Interest expense | | | (176 | ) | | | (245 | ) | | | (585 | ) | | | (927 | ) |
Other income (expense), net | | | (696 | ) | | | (319 | ) | | | (2,280 | ) | | | (637 | ) |
| | | | | | | | | | | | | | | | |
Other income (expense), net | | | (872 | ) | | | (564 | ) | | | (2,865 | ) | | | (1,564 | ) |
| | | | | | | | | | | | | | | | |
Loss before provision (benefit) for income taxes | | | (7,933 | ) | | | (6,392 | ) | | | (22,210 | ) | | | (26,500 | ) |
Provision (benefit) for income taxes | | | 46 | | | | (56 | ) | | | 153 | | | | (1,342 | ) |
| | | | | | | | | | | | | | | | |
Net loss | | $ | (7,979 | ) | | $ | (6,336 | ) | | $ | (22,363 | ) | | $ | (25,158 | ) |
| | | | | | | | | | | | | | | | |
Net loss per common share | | | | | | | | | | | | | | | | |
Basic and diluted | | $ | (0.11 | ) | | $ | (0.09 | ) | | $ | (0.31 | ) | | $ | (0.36 | ) |
| | | | | | | | | | | | | | | | |
Weighted-average number of shares used in computing net loss per share | | | | | | | | | | | | | | | | |
Basic and diluted | | | 73,285 | | | | 70,580 | | | | 72,669 | | | | 69,614 | |
| | | | | | | | | | | | | | | | |
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TABLE 3
RINGCENTRAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
| | | | | | | | |
| | | Nine Months Ended | |
| | | September 30, | |
| | | 2016 | | | 2015 | |
Cash flows from operating activities | | | | | | | | |
Net loss | | $ | (22,363 | ) | | $ | (25,158 | ) |
Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | | | | |
Depreciation and amortization | | | 10,749 | | | | 9,935 | |
Share-based compensation | | | 22,603 | | | | 15,790 | |
Foreign currency remeasurement loss | | | 2,450 | | | | 315 | |
Tax benefit from release of valuation allowance | | | — | | | | (1,411 | ) |
Non-cash interest expense and other expenses related to debt | | | — | | | | 156 | |
Net accretion of discount and amortization of premium on available-for-sale securities | | | — | | | | 602 | |
Provision for bad debt | | | 458 | | | | 152 | |
Deferred income taxes | | | (4 | ) | | | 5 | |
Others | | | 464 | | | | 220 | |
Changes in assets and liabilities: | | | | | | | | |
Accounts receivable | | | (4,878 | ) | | | (7,688 | ) |
Inventory | | | 2,233 | | | | (577 | ) |
Prepaid expenses and other current assets | | | (4,667 | ) | | | (3,907 | ) |
Other assets | | | 201 | | | | 173 | |
Accounts payable | | | (2,470 | ) | | | (61 | ) |
Accrued liabilities | | | 13,737 | | | | 4,758 | |
Deferred revenue | | | 6,080 | | | | 8,700 | |
Other liabilities | | | (2,157 | ) | | | 204 | |
| | | | | | | | |
Net cash provided by operating activities | | | 22,436 | | | | 2,208 | |
| | | | | | | | |
Cash flows from investing activities | | | | | | | | |
Purchases of property and equipment | | | (9,634 | ) | | | (11,106 | ) |
Capitalized internal-use software | | | (1,515 | ) | | | (1,836 | ) |
Cash paid in business combination, net of cash acquired | | | — | | | | (4,670 | ) |
Proceeds from the maturity of available-for-sale securities | | | — | | | | 25,760 | |
Proceeds from the maturity of restricted investments | | | — | | | | 100 | |
| | | | | | | | |
Net cash provided by (used in) investing activities | | | (11,149 | ) | | | 8,248 | |
| | | | | | | | |
Cash flows from financing activities | | | | | | | | |
Proceeds from issuance of stock in connection with stock plans | | | 8,268 | | | | 12,040 | |
Taxes paid related to net share settlement of equity awards | | | (131 | ) | | | (105 | ) |
Payment of holdback from Glip acquisition | | | (1,500 | ) | | | — | |
Repayment of debt | | | (2,813 | ) | | | (5,205 | ) |
Repayment of capital lease obligations | | | (269 | ) | | | (509 | ) |
| | | | | | | | |
Net cash provided by financing activities | | | 3,555 | | | | 6,221 | |
| | | | | | | | |
Effect of exchange rate changes on cash and cash equivalents | | | (40 | ) | | | 145 | |
Net increase in cash and cash equivalents | | | 14,802 | | | | 16,822 | |
Cash and cash equivalents | | | | | | | | |
Beginning of period | | | 137,588 | | | | 113,182 | |
| | | | | | | | |
End of period | | $ | 152,390 | | | $ | 130,004 | |
| | | | | | | | |
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TABLE 4
RINGCENTRAL, INC.
RECONCILIATION OF OPERATING INCOME (LOSS)
GAAP MEASURES TO NON-GAAP MEASURES
(Unaudited, in thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2016 | | | 2015 | | | 2016 | | | 2015 | |
Revenues | | | | | | | | | | | | | | | | |
Software subscriptions | | $ | 91,853 | | | $ | 70,321 | | | $ | 257,898 | | | $ | 194,713 | |
Other | | | 4,986 | | | | 6,459 | | | | 17,323 | | | | 18,076 | |
| | | | | | | | | | | | | | | | |
Total revenues | | | 96,839 | | | | 76,780 | | | | 275,221 | | | | 212,789 | |
| | | | | | | | | | | | | | | | |
Cost of revenues reconciliation | | | | | | | | | | | | | | | | |
GAAP Software subscriptions cost of revenues | | | 19,211 | | | | 17,084 | | | | 54,107 | | | | 49,503 | |
Stock-based compensation | | | (824 | ) | | | (535 | ) | | | (2,239 | ) | | | (1,468 | ) |
Amortization of acquisition intangibles | | | (151 | ) | | | — | | | | (453 | ) | | | — | |
| | | | | | | | | | | | | | | | |
Non-GAAP Software subscriptions cost of revenues | | | 18,236 | | | | 16,549 | | | | 51,415 | | | | 48,035 | |
| | | | | | | | | | | | | | | | |
GAAP Other cost of revenues | | | 4,244 | | | | 5,249 | | | | 13,452 | | | | 14,906 | |
Stock-based compensation | | | (35 | ) | | | — | | | | (86 | ) | | | — | |
| | | | | | | | | | | | | | | | |
Non-GAAP Other cost of revenues | | | 4,209 | | | | 5,249 | | | | 13,366 | | | | 14,906 | |
| | | | | | | | | | | | | | | | |
Gross profit and gross margin reconciliation | | | | | | | | | | | | | | | | |
Non-GAAP Subscriptions | | | 80.1 | % | | | 76.5 | % | | | 80.1 | % | | | 75.3 | % |
Non-GAAP Other | | | 15.6 | % | | | 18.7 | % | | | 22.8 | % | | | 17.5 | % |
Non-GAAP Gross profit | | | 76.8 | % | | | 71.6 | % | | | 76.5 | % | | | 70.4 | % |
Operating expenses reconciliation | | | | | | | | | | | | | | | | |
GAAP Research and development | | | 16,490 | | | | 13,475 | | | | 48,097 | | | | 37,612 | |
Stock-based compensation | | | (1,996 | ) | | | (1,351 | ) | | | (5,491 | ) | | | (3,745 | ) |
Amortization of acquisition intangibles | | | — | | | | (256 | ) | | | — | | | | (328 | ) |
Acquisition related matters | | | (619 | ) | | | (331 | ) | | | (1,102 | ) | | | (331 | ) |
| | | | | | | | | | | | | | | | |
Non-GAAP Research and development | | | 13,875 | | | | 11,537 | | | | 41,504 | | | | 33,208 | |
| | | | | | | | | | | | | | | | |
As a % of total revenues non-GAAP | | | 14.3 | % | | | 15.0 | % | | | 15.1 | % | | | 15.6 | % |
GAAP Sales and marketing | | | 50,306 | | | | 34,878 | | | | 137,796 | | | | 101,473 | |
Stock-based compensation | | | (3,023 | ) | | | (1,797 | ) | | | (7,790 | ) | | | (5,333 | ) |
Amortization of acquisition intangibles | | | (105 | ) | | | — | | | | (315 | ) | | | — | |
| | | | | | | | | | | | | | | | |
Non-GAAP Sales and marketing | | | 47,178 | | | | 33,081 | | | | 129,691 | | | | 96,140 | |
| | | | | | | | | | | | | | | | |
As a % of total revenues non-GAAP | | | 48.7 | % | | | 43.1 | % | | | 47.1 | % | | | 45.2 | % |
GAAP General and administrative | | | 13,649 | | | | 11,922 | | | | 41,114 | | | | 34,231 | |
Stock-based compensation | | | (2,511 | ) | | | (2,069 | ) | | | (6,997 | ) | | | (5,244 | ) |
Acquisition related matters | | | — | | | | (2 | ) | | | (59 | ) | | | (749 | ) |
| | | | | | | | | | | | | | | | |
Non-GAAP General and administrative | | | 11,138 | | | | 9,851 | | | | 34,058 | | | | 28,238 | |
| | | | | | | | | | | | | | | | |
As a % of total revenues non-GAAP | | | 11.5 | % | | | 12.8 | % | | | 12.4 | % | | | 13.3 | % |
| | | | | | | | | | | | | | | | |
Income (loss) from operations reconciliation | | | | | | | | | | | | | | | | |
GAAP loss from operations | | | (7,061 | ) | | | (5,828 | ) | | | (19,345 | ) | | | (24,936 | ) |
Stock-based compensation | | | 8,389 | | | | 5,752 | | | | 22,603 | | | | 15,790 | |
Amortization of acquisition intangibles | | | 256 | | | | 256 | | | | 768 | | | | 328 | |
Acquisition related matters | | | 619 | | | | 333 | | | | 1,161 | | | | 1,080 | |
| | | | | | | | | | | | | | | | |
Non-GAAP Income (loss) from operations | | $ | 2,203 | | | $ | 513 | | | $ | 5,187 | | | $ | (7,738 | ) |
| | | | | | | | | | | | | | | | |
Non-GAAP Operating margin | | | 2.3 | % | | | 0.7 | % | | | 1.9 | % | | | -3.6 | % |
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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 | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2016 | | | 2015 | | | 2016 | | | 2015 | |
Net Income (loss) reconciliation | | | | | | | | | | | | | | | | |
GAAP Net loss | | $ | (7,979 | ) | | $ | (6,336 | ) | | $ | (22,363 | ) | | $ | (25,158 | ) |
Stock-based compensation | | | 8,389 | | | | 5,752 | | | | 22,603 | | | | 15,790 | |
Amortization of acquisition intangibles | | | 256 | | | | 256 | | | | 768 | | | | 328 | |
Acquisition related matters | | | 619 | | | | 333 | | | | 1,161 | | | | 1,080 | |
Intercompany remeasurement loss | | | 745 | | | | 257 | | | | 2,341 | | | | 332 | |
Tax benefit from release of valuation allowance | | | — | | | | — | | | | — | | | | (1,411 | ) |
| | | | | | | | | | | | | | | | |
Non-GAAP Net income (loss) | | $ | 2,030 | | | $ | 262 | | | $ | 4,510 | | | $ | (9,039 | ) |
| | | | | | | | | | | | | | | | |
Basic and diluted net income (loss) per share | | | | | | | | | | | | | | | | |
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 net loss per share | | | 73,285 | | | | 70,580 | | | | 72,669 | | | | 69,614 | |
Effect of dilutive securities (stock options and restricted stock awards) | | | 3,838 | | | | 3,353 | | | | 3,355 | | | | — | |
| | | | | | | | | | | | | | | | |
Non-GAAP weighted average shares used in computing non-GAAP net income per share | | | 77,123 | | | | 73,933 | | | | 76,024 | | | | 69,614 | |
| | | | | | | | | | | | | | | | |
GAAP Net loss per share | | $ | (0.11 | ) | | $ | (0.09 | ) | | $ | (0.31 | ) | | $ | (0.36 | ) |
| | | | | | | | | | | | | | | | |
Non-GAAP Net income (loss) per share | | $ | 0.03 | | | $ | 0.00 | | | $ | 0.06 | | | $ | (0.13 | ) |
| | | | | | | | | | | | | | | | |
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TABLE 6
RINGCENTRAL, INC.
PRO FORMA2 STATEMENT OF GROSS MARGIN UNDER AGENCY MODEL
(Unaudited, in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2015 | | | 2016 | | | 3Q16 | |
| | | 1Q | | | 2Q | | | 3Q | | | 4Q | | | 1Q | | | 2Q | | | 3Q | | | Q/Q | | | Y/Y | |
GAAP Software subscription revenue | | $ | 59,951 | | | $ | 64,441 | | | $ | 70,321 | | | $ | 76,532 | | | $ | 79,978 | | | $ | 86,067 | | | $ | 91,853 | | | | 7 | % | | | 31 | % |
GAAP Other revenue | | $ | 5,367 | | | $ | 6,250 | | | $ | 6,459 | | | $ | 6,907 | | | $ | 6,560 | | | $ | 5,777 | | | $ | 4,986 | | | | | | | | | |
Revised Agency Model adjustment | | | (2,222 | ) | | | (2,101 | ) | | | (2,278 | ) | | | (2,597 | ) | | | (1,436 | ) | | | — | | | | — | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pro forma other revenue | | $ | 3,145 | | | $ | 4,149 | | | $ | 4,181 | | | $ | 4,310 | | | $ | 5,124 | | | $ | 5,777 | | | $ | 4,986 | | | | (14 | %) | | | 19 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total pro forma revenue | | $ | 63,096 | | | $ | 68,590 | | | $ | 74,502 | | | $ | 80,842 | | | $ | 85,102 | | | $ | 91,844 | | | $ | 96,839 | | | | 5 | % | | | 30 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
GAAP Software subscription cost of revenue | | $ | 15,914 | | | $ | 16,505 | | | $ | 17,084 | | | $ | 16,851 | | | $ | 16,723 | | | $ | 18,173 | | | $ | 19,211 | | | | | | | | | |
Stock-based compensation | | | (457 | ) | | | (476 | ) | | | (535 | ) | | | (586 | ) | | | (634 | ) | | | (781 | ) | | | (824 | ) | | | | | | | | |
Amortization of acquisition intangibles | | | — | | | | — | | | | — | | | | — | | | | (151 | ) | | | (151 | ) | | | (151 | ) | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-GAAP Software subscriptions cost of revenue | | $ | 15,457 | | | $ | 16,029 | | | $ | 16,549 | | | $ | 16,265 | | | $ | 15,938 | | | $ | 17,241 | | | $ | 18,236 | | | | | | | | | |
GAAP Other cost of revenue | | $ | 4,633 | | | $ | 5,024 | | | $ | 5,249 | | | $ | 6,011 | | | $ | 5,017 | | | $ | 4,191 | | | $ | 4,244 | | | | | | | | | |
Stock-based compensation | | | — | | | | — | | | | — | | | | — | | | | (19 | ) | | | (32 | ) | | | (35 | ) | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-GAAP Other cost of revenue | | $ | 4,633 | | | $ | 5,024 | | | $ | 5,249 | | | $ | 6,011 | | | $ | 4,998 | | | $ | 4,159 | | | $ | 4,209 | | | | | | | | | |
Revised Agency Model adjustment | | | (2,222 | ) | | | (2,101 | ) | | | (2,278 | ) | | | (2,597 | ) | | | (1,436 | ) | | | — | | | | — | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pro forma other cost of revenue | | $ | 2,411 | | | $ | 2,923 | | | $ | 2,971 | | | $ | 3,414 | | | $ | 3,562 | | | $ | 4,159 | | | $ | 4,209 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total pro forma cost of revenue | | $ | 17,868 | | | $ | 18,952 | | | $ | 19,520 | | | $ | 19,679 | | | $ | 19,500 | | | $ | 21,400 | | | $ | 22,445 | | | | 5 | % | | | 15 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pro forma software subscriptions revenue gross profit | | $ | 44,494 | | | $ | 48,412 | | | $ | 53,772 | | | $ | 60,267 | | | $ | 64,040 | | | $ | 68,826 | | | $ | 73,617 | | | | 7 | % | | | 37 | % |
Pro forma other revenue gross profit | | | 734 | | | | 1,226 | | | | 1,210 | | | | 896 | | | | 1,562 | | | | 1,618 | | | | 777 | | | | (52 | %) | | | (36 | %) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total pro forma gross profit | | $ | 45,228 | | | $ | 49,638 | | | $ | 54,982 | | | $ | 61,163 | | | $ | 65,602 | | | $ | 70,444 | | | $ | 74,394 | | | | 6 | % | | | 35 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pro forma software subscriptions revenue gross margin | | | 74 | % | | | 75 | % | | | 76 | % | | | 79 | % | | | 80 | % | | | 80 | % | | | 80 | % | | | | | | | | |
Pro forma other revenue gross margin | | | 23 | % | | | 30 | % | | | 29 | % | | | 21 | % | | | 30 | % | | | 28 | % | | | 16 | % | | | | | | | | |
Total pro forma gross margin | | | 72 | % | | | 72 | % | | | 74 | % | | | 76 | % | | | 77 | % | | | 77 | % | | | 77 | % | | | | | | | | |
| 2 | In 2Q16, RingCentral provided supplemental information on a pro forma basis to provide a clear comparison of the Company’s results with prior periods. The pro forma information reflects results as-if the Company had transitioned to the new agency model for the first quarter of 2016 and for all periods in 2015. |
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