Total Revenue up 34%
Mid-market and Enterprise ARR up 73%
Enterprise ARR up 99%
BELMONT, Calif.–(BUSINESS WIRE)–lt;a href=”https://twitter.com/search?q=%24RNG&src=ctag” target=”_blank”gt;$RNGlt;/agt; lt;a href=”https://twitter.com/hashtag/RingCentral?src=hash” target=”_blank”gt;#RingCentrallt;/agt;–RingCentral,
Inc. (NYSE: RNG), a leading provider of global enterprise cloud
communications, collaboration, and contact center solutions, today
announced financial results for the fourth quarter ended December 31,
2018.
Fourth Quarter Financial Highlights
“Fourth quarter results were outstanding, and we finished 2018 with
strong momentum, capped with our first eight-figure customer deal. Our
growth was driven by our mid-market and enterprise business, supported
by strong contributions from channel and international,” said Vlad
Shmunis, RingCentral’s founder, chairman and CEO. “We continue to
rapidly innovate and expand our industry leading cloud communications
platform that empowers enterprises to improve their business
productivity and customer satisfaction.”
New Accounting Standard
The Company adopted the new standard related to revenue recognition
(Topic 606) effective January 1, 2018. The financial information in this
press release is prepared in accordance with Topic 606, and the
comparison period amounts used to calculate growth rates are based on
amounts that have been adjusted from previously reported amounts to
conform to the requirements of Topic 606.
Financial Results for the Fourth Quarter 2018
Recent Highlights
Financial Outlook
Full Year 2019 Guidance:
First Quarter 2019 Guidance:
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 GAAP
EPS 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) 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 forecasted GAAP tax rates as we do no 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
2019, we have determined the projected non-GAAP tax rate to be in the
range of 22-24%. Accordingly, a reconciliation of the non-GAAP financial
measure guidance to the corresponding GAAP measure is not available
without unreasonable effort.
Conference Call Details:
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 global enterprise
cloud communications, collaboration, and contact center solutions. More
flexible and cost-effective than legacy on-premises systems, RingCentral
empowers modern mobile and distributed workforces to communicate,
collaborate, and connect from any location, on any device, and via any
mode. RingCentral provides unified voice, video meetings, team
messaging, digital customer engagement and integrated contact center
solutions for enterprises globally. RingCentral’s open platform
integrates with leading business apps and enables customers to easily
customize business workflows. RingCentral is headquartered in Belmont,
California, and has offices around the world.
©2019 RingCentral, Inc. All rights reserved. RingCentral, RingCentral
Office, RingCentral Contact Center, RingCentral Engage, Dimelo, Connect
First, 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 and growth, our strength in the
mid-market and enterprise segments and our channel partner and
international business, our continued innovation and expansion of our
cloud communications platform, and our market opportunity.
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 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
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, 2018, 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 software subscriptions
gross margin, Non-GAAP other gross margin, Non-GAAP operating margin,
Non-GAAP operating income (loss), Non-GAAP net income (loss) and
Non-GAAP net income (loss) per diluted share. Non-GAAP software
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 operating income (loss) is defined as operating income
(loss) 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 operating income (loss) 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, 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.
We have included Non-GAAP software subscriptions gross margin, Non-GAAP
other gross margin, Non-GAAP operating margin, Non-GAAP net income
(loss), and Non-GAAP net income (loss) per diluted share 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 in calculating Non-GAAP
software subscriptions gross margin, Non-GAAP other gross margin,
Non-GAAP operating margin, Non-GAAP net income (loss), and Non-GAAP net
income (loss) per diluted share provide useful measure for
period-to-period comparisons of our business.
Although Non-GAAP software subscriptions gross margin, Non-GAAP other
gross margin, Non-GAAP operating margin, Non-GAAP net income (loss), and
Non-GAAP net income (loss) 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 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 and enterprise annualized exit
monthly recurring subscriptions, and net monthly subscriptions dollar
retention. We define our annualized exit monthly recurring subscriptions
as our monthly recurring subscriptions multiplied by 12. Our monthly
recurring subscriptions equal the monthly value of all customer
recurring charges contracted at the end of a given month. We believe
this metric is a leading indicator of our anticipated subscriptions
revenue. We calculate our RingCentral Office® annualized exit monthly
recurring subscriptions in the same manner as we calculate our
annualized exit monthly recurring subscriptions, except that customer
subscriptions from RingCentral Office, RingCentral Contact Center and
RingCentral Engage 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
annualized exit monthly recurring subscriptions, except that only
customer subscriptions from customers with 50 seats or more are
included. We calculate enterprise annualized exit monthly recurring
subscriptions in the same manner as we calculate our annualized exit
monthly recurring subscriptions, except that only customer subscriptions
from customers generating $100,000 or more in annual recurring revenue
are included. We define Dollar Net Change as the quotient of (i) the
difference of our Monthly Recurring Subscriptions at the end of a period
minus our Monthly Recurring Subscriptions at the beginning of a period
minus our Monthly Recurring Subscriptions at the end of the period from
new customers we added during the period, (ii) all divided by the number
of months in the period. We define our Average Monthly Recurring
Subscriptions as the average of the Monthly Recurring Subscriptions at
the beginning and end of the measurement period.
|
TABLE 1 RINGCENTRAL, INC. CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands) |
||||||||
| December 31, | December 31, | |||||||
| 2018 | 2017 | |||||||
| *As Adjusted | ||||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 566,329 | $ | 181,192 | ||||
| Accounts receivable, net | 94,375 | 46,690 | ||||||
| Deferred sales commission costs | 23,038 | 15,424 | ||||||
| Prepaid expenses and other current assets | 23,772 | 21,512 | ||||||
| Total current assets | 707,514 | 264,818 | ||||||
| Property and equipment, net | 70,205 | 43,298 | ||||||
| Deferred sales commission costs, noncurrent | 55,735 | 37,871 | ||||||
| Goodwill | 31,238 | 9,393 | ||||||
| Acquired intangibles, net | 19,480 | 1,462 | ||||||
| Other assets | 10,154 | 2,972 | ||||||
| Total assets | $ | 894,326 | $ | 359,814 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 10,145 | $ | 7,322 | ||||
| Accrued liabilities | 100,687 | 54,977 | ||||||
| Deferred revenue | 88,527 | 62,917 | ||||||
| Total current liabilities | 199,359 | 125,216 | ||||||
| Convertible senior notes, net | 366,552 | — | ||||||
| Other long-term liabilities | 10,806 | 6,252 | ||||||
| Total liabilities | 576,717 | 131,468 | ||||||
| Stockholders’ equity: | ||||||||
| Common stock | 8 | 8 | ||||||
| Additional paid-in capital | 551,078 | 434,840 | ||||||
| Accumulated other comprehensive income | 2,226 | 2,998 | ||||||
| Accumulated deficit | (235,703 | ) | (209,500 | ) | ||||
| Total stockholders’ equity | $ | 317,609 | $ | 228,346 | ||||
| Total liabilities and stockholders’ equity | $ | 894,326 | $ | 359,814 | ||||
* Prior-period information has been adjusted for the adoption of ASU
2014-09, Revenue from Contracts with Customers (Topic 606), which
we adopted on January 1, 2018.
|
TABLE 2 RINGCENTRAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share data) |
||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| *As Adjusted | *As Adjusted | |||||||||||||||
| Revenues | ||||||||||||||||
| Software subscriptions | $ | 171,901 | $ | 130,312 | $ | 612,888 | $ | 465,254 | ||||||||
| Other | 16,723 | 10,873 | 60,736 | 38,363 | ||||||||||||
| Total revenues | 188,624 | 141,185 | 673,624 | 503,617 | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Software subscriptions | 30,254 | 24,223 | 109,454 | 89,193 | ||||||||||||
| Other | 13,861 | 9,397 | 47,675 | 32,078 | ||||||||||||
| Total cost of revenues | 44,115 | 33,620 | 157,129 | 121,271 | ||||||||||||
| Gross profit | 144,509 | 107,565 | 516,495 | 382,346 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | 27,230 | 20,362 | 101,042 | 75,148 | ||||||||||||
| Sales and marketing | 91,894 | 67,992 | 329,116 | 240,223 | ||||||||||||
| General and administrative | 28,789 | 19,428 | 102,773 | 72,313 | ||||||||||||
| Total operating expenses | 147,913 | 107,782 | 532,931 | 387,684 | ||||||||||||
| Loss from operations | (3,404 | ) | (217 | ) | (16,436 | ) | (5,338 | ) | ||||||||
| Other income (expense), net | ||||||||||||||||
| Interest expense | (4,939 | ) | (5 | ) | (16,102 | ) | (99 | ) | ||||||||
| Other income, net | 2,531 | 178 | 6,475 | 1,491 | ||||||||||||
| Other income (expense), net | (2,408 | ) | 173 | (9,627 | ) | 1,392 | ||||||||||
| Loss before provision for income taxes | (5,812 | ) | (44 | ) | (26,063 | ) | (3,946 | ) | ||||||||
| Provision (benefit) for income taxes | (134 | ) | 77 | 140 | 258 | |||||||||||
| Net loss | $ | (5,678 | ) | $ | (121 | ) | $ | (26,203 | ) | $ | (4,204 | ) | ||||
| Net loss per common share | ||||||||||||||||
| Basic and diluted | $ | (0.07 | ) | $ | (0.00 | ) | $ | (0.33 | ) | $ | (0.06 | ) | ||||
|
Weighted-average number of shares used in computing net loss per share |
||||||||||||||||
| Basic and diluted | 80,638 | 77,665 | 79,500 | 76,281 | ||||||||||||
* Prior-period information has been adjusted for the adoption of ASU
2014-09, Revenue from Contracts with Customers (Topic 606), which
we adopted on January 1, 2018.
|
TABLE 3 RINGCENTRAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands) |
||||||||
| Year Ended December 31, | ||||||||
| 2018 | 2017 | |||||||
| *As Adjusted | ||||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (26,203 | ) | $ | (4,204 | ) | ||
|
Adjustments to reconcile net loss to net cash provided by operating activities |
||||||||
| Depreciation and amortization | 23,273 | 16,214 | ||||||
| Share-based compensation | 68,088 | 42,060 | ||||||
| Amortization of deferred sales commission costs | 19,754 | 12,623 | ||||||
| Amortization of debt discount and issuance costs | 15,918 | — | ||||||
| Foreign currency remeasurement (gain) loss | 951 | (666 | ) | |||||
| Provision for bad debt | 3,091 | 1,674 | ||||||
| Deferred income taxes | (303 | ) | (47 | ) | ||||
| Other | 614 | 181 | ||||||
| Changes in assets and liabilities | ||||||||
| Accounts receivable | (47,877 | ) | (17,903 | ) | ||||
| Deferred sales commission costs | (45,232 | ) | (32,469 | ) | ||||
| Prepaid expenses and other current assets | (342 | ) | (6,199 | ) | ||||
| Other assets | 279 | 1,533 | ||||||
| Accounts payable | 2,783 | 176 | ||||||
| Accrued liabilities | 33,695 | 9,918 | ||||||
| Deferred revenue | 24,780 | 18,298 | ||||||
| Other liabilities | (1,139 | ) | (24 | ) | ||||
| Net cash provided by operating activities | 72,130 | 41,165 | ||||||
| Cash flows from investing activities | ||||||||
| Purchases of property and equipment | (27,123 | ) | (19,497 | ) | ||||
| Capitalized internal-use software | (11,421 | ) | (7,420 | ) | ||||
| Cash paid for business combination, net of cash acquired | (26,434 | ) | — | |||||
| Cash paid for acquisition of intangible assets | (18,470 | ) | — | |||||
| Restricted investment | — | 530 | ||||||
| Net cash used in investing activities | (83,448 | ) | (26,387 | ) | ||||
| Cash flows from financing activities | ||||||||
|
Proceeds from issuance of convertible senior notes, net of issuance costs |
449,457 | — | ||||||
| Payments for capped call transactions and costs | (49,910 | ) | — | |||||
| Repurchase of common stock | (15,000 | ) | — | |||||
| Proceeds from issuance of stock in connection with stock plans | 20,621 | 25,495 | ||||||
| Taxes paid related to net share settlement of equity awards | (7,172 | ) | (3,691 | ) | ||||
| Repayment of debt | — | (14,840 | ) | |||||
| Repayment of capital lease and financing obligations | (741 | ) | (181 | ) | ||||
| Net cash provided by financing activities | 397,255 | 6,783 | ||||||
| Effect of exchange rate changes | (800 | ) | (724 | ) | ||||
| Net increase in cash, cash equivalents and restricted cash | 385,137 | 20,837 | ||||||
| Cash, cash equivalents and restricted cash | ||||||||
| Beginning of period | 181,192 | 160,355 | ||||||
| End of period | $ | 566,329 | $ | 181,192 | ||||
* Prior-period information has been adjusted for the adoption of ASU
2014-09, Revenue from Contracts with Customers (Topic 606), which
we adopted on January 1, 2018.
|
TABLE 4 RINGCENTRAL, INC. RECONCILIATION OF OPERATING INCOME (LOSS) GAAP MEASURES TO NON-GAAP MEASURES (Unaudited, in thousands) |
||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| *As Adjusted | *As Adjusted | |||||||||||||||
| Revenues | ||||||||||||||||
| Software subscriptions | $ | 171,901 | $ | 130,312 | $ | 612,888 | $ | 465,254 | ||||||||
| Other | 16,723 | 10,873 | 60,736 | 38,363 | ||||||||||||
| Total revenues | 188,624 | 141,185 | 673,624 | 503,617 | ||||||||||||
| Cost of revenues reconciliation | ||||||||||||||||
| GAAP Software subscriptions cost of revenues | 30,254 | 24,223 | 109,454 | 89,193 | ||||||||||||
| Stock-based compensation | (1,162 | ) | (849 | ) | (4,343 | ) | (3,552 | ) | ||||||||
| Amortization of acquisition intangibles | (277 | ) | (150 | ) | (729 | ) | (602 | ) | ||||||||
| Acquisition related matters | (29 | ) | — | (29 | ) | — | ||||||||||
| Non-GAAP Software subscriptions cost of revenues | 28,786 | 23,224 | 104,353 | 85,039 | ||||||||||||
| GAAP Other cost of revenues | 13,861 | 9,397 | 47,675 | 32,078 | ||||||||||||
| Stock-based compensation | (194 | ) | (65 | ) | (639 | ) | (183 | ) | ||||||||
| Non-GAAP Other cost of revenues | 13,667 | 9,332 | 47,036 | 31,895 | ||||||||||||
| Gross profit and gross margin reconciliation | ||||||||||||||||
| Non-GAAP Subscriptions | 83.3 | % | 82.2 | % | 83.0 | % | 81.7 | % | ||||||||
| Non-GAAP Other | 18.3 | % | 14.2 | % | 22.6 | % | 16.9 | % | ||||||||
| Non-GAAP Gross profit | 77.5 | % | 76.9 | % | 77.5 | % | 76.8 | % | ||||||||
| Operating expenses reconciliation | ||||||||||||||||
| GAAP Research and development | 27,230 | 20,362 | 101,042 | 75,148 | ||||||||||||
| Stock-based compensation | (3,906 | ) | (2,751 | ) | (14,975 | ) | (9,550 | ) | ||||||||
| Acquisition related matters | (9 | ) | — | (9 | ) | (443 | ) | |||||||||
| Non-GAAP Research and development | 23,315 | 17,611 | 86,058 | 65,155 | ||||||||||||
| As a % of total revenues non-GAAP | 12.4 | % | 12.5 | % | 12.8 | % | 12.9 | % | ||||||||
| GAAP Sales and marketing | 91,894 | 67,992 | 329,116 | 240,223 | ||||||||||||
| Stock-based compensation | (7,645 | ) | (4,459 | ) | (27,324 | ) | (16,015 | ) | ||||||||
| Amortization of acquisition intangibles | (726 | ) | — | (3,617 | ) | (180 | ) | |||||||||
| Acquisition related matters | (146 | ) | — | (146 | ) | — | ||||||||||
| Non-GAAP Sales and marketing | 83,377 | 63,533 | 298,029 | 224,028 | ||||||||||||
| As a % of total revenues non-GAAP | 44.2 | % | 45.0 | % | 44.2 | % | 44.5 | % | ||||||||
| GAAP General and administrative | 28,789 | 19,428 | 102,773 | 72,313 | ||||||||||||
| Stock-based compensation | (5,802 | ) | (3,432 | ) | (20,807 | ) | (12,760 | ) | ||||||||
| Acquisition related matters | (794 | ) | — | (2,536 | ) | — | ||||||||||
| Non-GAAP General and administrative | 22,193 | 15,996 | 79,430 | 59,553 | ||||||||||||
| As a % of total revenues non-GAAP | 11.8 | % | 11.3 | % | 11.8 | % | 11.8 | % | ||||||||
| Income (loss) from operations reconciliation | ||||||||||||||||
| GAAP loss from operations | (3,404 | ) | (217 | ) | (16,436 | ) | (5,338 | ) | ||||||||
| Stock-based compensation | 18,709 | 11,556 | 68,088 | 42,060 | ||||||||||||
| Amortization of acquisition intangibles | 1,003 | 150 | 4,346 | 782 | ||||||||||||
| Acquisition related matters | 978 | — | 2,720 | 443 | ||||||||||||
| Non-GAAP Income from operations | 17,286 | 11,489 | 58,718 | 37,947 | ||||||||||||
| Non-GAAP Operating margin | 9.2 | % | 8.1 | % | 8.7 | % | 7.5 | % | ||||||||
Contacts
Investor Relations Contact:
Ryan Goodman, RingCentral
(650)
918-5356
Ryan.Goodman@RingCentral.com
Media Contact:
Mariana Kosturos, RingCentral
(650)
562-6545
Mariana.Kosturos@ringcentral.com
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