UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________________________________________________________ FORM 10-Q _________________________________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-36089 _ ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q _________________________________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-36089 _________________________________________________________ RingCe ...

RingCentral, Inc. (NYSE:RNG) Q2 2021 Earnings Conference Call August 3, 2021 5:00 PM ET Company Participants Ryan Goodman – Head-Investor Relations Vlad Shmunis – Founder, Chairman, and Chief Executive Officer Anand Eswaran – President and Chief Operating Officer Mitesh Dhruv – Chief Financial Officer Conference Call Participants Brian Peterson – Raymond James Bhavan Suri – William Blair Terry Tillman – Truist Securities Sterling Auty – JPMorgan Meta Marshall – Morgan Stanley Samad Samana – Jefferies George ...

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20%28unaudited%29) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies and financial statement components [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2021 | December 31, 2020 | Change | | :----------------------------- | :------------- | :---------------- | :----- | | Cash and cash equivalents | $463,067 | $639,853 | $(176,786) | | Total assets | $2,069,712 | $2,184,597 | $(114,885) | | Total liabilities | $1,852,519 | $1,872,351 | $(19,832) | | Total stockholders' equity | $213,068 | $308,459 | $(95,391) | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines the company's financial performance over a period, showing revenues, expenses, and net loss Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change | % Change | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | :----- | :------- | | Total revenues | $352,356 | $267,512 | $84,844 | 32% | | Subscriptions revenue | $325,223 | $243,104 | $82,119 | 34% | | Other revenue | $27,133 | $24,408 | $2,725 | 11% | | Gross profit | $255,375 | $194,068 | $61,307 | 32% | | Loss from operations | $(42,011) | $(25,490) | $(16,521) | 65% | | Other income (expense), net | $42,265 | $(35,019) | $77,284 | nm | | Net loss | $(186) | $(60,721) | $60,535 | 99.7% | | Basic and diluted net loss per common share | $0.00 | $(0.70) | $0.70 | 100% | [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) This section details the total comprehensive loss, including net loss and other comprehensive income or loss items Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Net loss | $(186) | $(60,721) | $60,535 | | Foreign currency translation adjustments, net | $(3,412) | $(1,617) | $(1,795) | | Comprehensive loss | $(3,598) | $(62,338) | $58,740 | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section tracks changes in the equity accounts, reflecting net loss, share-based compensation, and other equity transactions Condensed Consolidated Statements of Stockholders' Equity Highlights (in thousands) | Metric | December 31, 2020 | March 31, 2021 | Change | | :--------------------------------------- | :---------------- | :------------- | :----- | | Total Stockholders' Equity | $308,459 | $213,068 | $(95,391) | | Equity component from partial repurchase of 2023 convertible senior notes | — | $(147,740) | $(147,740) | | Share-based compensation | — | $59,993 | $59,993 | | Net loss | $(372,306) (Accumulated Deficit) | $(372,492) (Accumulated Deficit) | $(186) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Net cash provided by operating activities | $36,955 | $13,069 | $23,886 | | Net cash used in investing activities | $(26,836) | $(14,250) | $(12,586) | | Net cash (used in) provided by financing activities | $(186,496) | $420,296 | $(606,792) | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(176,786) | $418,458 | $(595,244) | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [Note 1. Description of Business and Summary of Significant Accounting Policies](index=10&type=section&id=Note%201.%20Description%20of%20Business%20and%20Summary%20of%20Significant%20Accounting%20Policies) RingCentral, Inc. provides software-as-a-service (SaaS) solutions for business communication. The notes outline the basis of financial statement presentation, the use of management estimates, the impact of the COVID-19 pandemic, and the company's single reportable segment - **RingCentral, Inc. is a provider of software-as-a-service ("SaaS") solutions** that enables businesses to communicate, collaborate and connect[29](index=29&type=chunk) - The preparation of condensed consolidated financial statements requires management to make **significant estimates and assumptions**, which may differ from actual results[32](index=32&type=chunk) - The Company operates in a **single reportable segment**, with the chief executive officer reviewing financial information on a consolidated basis[34](index=34&type=chunk) [Note 2. Revenue and Cost of Revenue](index=11&type=section&id=Note%202.%20Revenue%20and%20Cost%20of%20Revenue) The company primarily generates revenue from subscriptions, with North America being the dominant geographical market. A significant portion of deferred revenue was recognized, and substantial remaining performance obligations indicate future revenue recognition Disaggregated Revenue by Primary Geographical Markets | Primary geographical markets | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------- | :-------------------------------- | :-------------------------------- | | North America | 88 % | 93 % | | Others | 12 % | 7 % | | Total revenues | 100 % | 100 % | - The Company recognized **$82.0 million in revenue** during the three months ended March 31, 2021, that was included in the corresponding deferred revenue balance at the beginning of the year[42](index=42&type=chunk) - Contract revenue that has not yet been recognized (remaining performance obligations) was approximately **$1.5 billion** as of March 31, 2021, with **51% expected to be recognized over the next 12 months**[43](index=43&type=chunk) [Note 3. Financial Statement Components](index=12&type=section&id=Note%203.%20Financial%20Statement%20Components) This note provides a detailed breakdown of key balance sheet accounts, including cash and cash equivalents, accounts receivable, prepaid expenses, property and equipment, goodwill, and acquired intangible assets, along with their respective changes and amortization expenses Cash and Cash Equivalents (in thousands) | Component | March 31, 2021 | December 31, 2020 | | :-------------------- | :------------- | :---------------- | | Cash | $120,758 | $124,853 | | Money market funds | $342,309 | $515,000 | | Total | $463,067 | $639,853 | Property and Equipment, Net (in thousands) | Component | March 31, 2021 | December 31, 2020 | | :-------------------------------- | :------------- | :---------------- | | Total property and equipment, gross | $296,201 | $280,581 | | Less: accumulated depreciation and amortization | $(150,603) | $(138,373) | | Property and equipment, net | $145,598 | $142,208 | - Amortization expense from acquired intangible assets for the three months ended March 31, 2021, was **$11.6 million**, with an estimated remaining amortization of **$35.9 million for 2021** and **$41.7 million for 2022**[49](index=49&type=chunk)[50](index=50&type=chunk) [Note 4. Fair Value of Financial Instruments](index=14&type=section&id=Note%204.%20Fair%20Value%20of%20Financial%20Instruments) The company categorizes its financial instruments into a fair value hierarchy, with money market funds as Level 1, convertible senior notes as Level 2, and long-term investments as Level 3. Long-term investments showed a significant unrealized gain in Q1 2021 Fair Value of Financial Assets (in thousands) | Asset Type | Fair Value at March 31, 2021 | Level 1 | Level 2 | Level 3 | | :-------------------- | :--------------------------- | :------ | :------ | :------ | | Money market funds | $342,309 | $342,309 | $— | $— | | Long-term investments | $270,697 | $— | $— | $270,697 | - The fair value of the 2026 Notes was approximately **$658.9 million**, 2025 Notes was approximately **$1.1 billion**, and 2023 Notes was approximately **$142.1 million** as of March 31, 2021, classified as Level 2[54](index=54&type=chunk) - The Company's total net unrealized gain on long-term investments was **$56.6 million** for the three months ended March 31, 2021, compared to a **$(23.2) million loss** in the prior year period[55](index=55&type=chunk) [Note 5. Asset Acquisition](index=15&type=section&id=Note%205.%20Asset%20Acquisition) In March 2021, the company acquired intellectual property rights for $8.6 million, which will be amortized over an estimated useful life of five years - On March 18, 2021, the Company acquired intellectual property rights for approximately **$8.6 million**, to be amortized over approximately **five years**[58](index=58&type=chunk) [Note 6. Convertible Senior Notes](index=15&type=section&id=Note%206.%20Convertible%20Senior%20Notes) The company has outstanding 0% convertible senior notes due in 2023, 2025, and 2026. The 2023 Notes were partially repurchased in Q1 2021 and fully redeemed in April 2021. Capped call transactions are in place to mitigate dilution - The Company issued **$460.0 million of 2023 Notes**, **$1.0 billion of 2025 Notes**, and **$650.0 million of 2026 Notes**, all bearing **0% interest** and maturing in their respective years[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk) - During Q1 2021, the Company settled **$39.0 million principal balance of 2023 Notes** by paying **$183.2 million in cash**. The remaining **$41.2 million principal** was fully redeemed in April 2021 for **$153.3 million cash**[64](index=64&type=chunk)[65](index=65&type=chunk) Net Carrying Amount of Convertible Senior Notes (in thousands) | Note Series | Principal | Unamortized Discount | Unamortized Issuance Cost | Net Carrying Amount | | :---------- | :-------- | :------------------- | :------------------------ | :------------------ | | 2023 Note | $41,176 | $(3,789) | $(336) | $37,051 | | 2025 Note | $1,000,000 | $(156,506) | $(8,939) | $834,555 | | 2026 Note | $650,000 | $(126,676) | $(7,087) | $516,237 | [Note 7. Leases](index=17&type=section&id=Note%207.%20Leases) The company leases office and data center facilities under non-cancelable operating leases. Operating lease right-of-use assets and liabilities are reported, with cash payments for lease liabilities totaling $5.1 million in Q1 2021 Operating Lease Information (in thousands) | Metric | March 31, 2021 | December 31, 2020 | | :------------------------------ | :------------- | :---------------- | | Operating lease right-of-use assets | $48,938 | $51,115 | | Total operating lease liabilities | $52,748 | $54,989 | - Cash paid for amounts included in the measurement of lease liabilities was **$5.072 million** for the three months ended March 31, 2021[77](index=77&type=chunk) [Note 8. Commitments and Contingencies](index=18&type=section&id=Note%208.%20Commitments%20and%20Contingencies) The company is involved in several legal proceedings, including a settled TCPA matter, ongoing patent infringement claims, a CIPA class action, a dispute with Zoom Video Communications, Inc., and a lawsuit against Bright Pattern, Inc. Outcomes are inherently unpredictable - A tentative settlement was achieved and received final court approval on February 9, 2021, for the TCPA class action lawsuit, with an **immaterial accrual** included in financial statements[81](index=81&type=chunk) - The Company is defending against **two patent infringement actions** filed by Uniloc USA, Inc. and Uniloc Luxembourg, S.A., currently stayed pending resolution of inter partes review proceedings[82](index=82&type=chunk) - Zoom Video Communications, Inc. filed a lawsuit in March 2021 alleging breach of a Strategic Alliance Agreement and trademark violations; RingCentral filed counterclaims. A **temporary restraining order was granted to RingCentral**, but a **preliminary injunction was denied**[86](index=86&type=chunk) [Note 9. Share-Based Compensation](index=20&type=section&id=Note%209.%20Share-Based%20Compensation) Share-based compensation expense increased significantly in Q1 2021, primarily driven by restricted stock units (RSUs). The company has equity incentive plans, an Employee Stock Purchase Plan (ESPP), and a Bonus Plan Share-Based Compensation Expense (in thousands) | Category | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------ | :-------------------------------- | :-------------------------------- | | Total share-based compensation expense | $54,962 | $36,589 | | Restricted stock units | $52,938 | $35,174 | | Employee stock purchase plan rights | $2,023 | $1,391 | | Options | $1 | $24 | - As of March 31, 2021, there was **$301.2 million of unrecognized share-based compensation expense** related to RSUs, to be recognized over approximately **2.6 years**[94](index=94&type=chunk) [Note 10. Income Taxes](index=22&type=section&id=Note%2010.%20Income%20Taxes) The company recorded a provision for income taxes of $0.4 million in Q1 2021, primarily for foreign and state minimum taxes. A full valuation allowance is maintained against U.S. and most foreign net deferred tax assets due to uncertainty of realization - The provision for income taxes for the three months ended March 31, 2021, was **$0.4 million**, primarily consisting of foreign income taxes and state minimum taxes[97](index=97&type=chunk) - A **full valuation allowance** is provided against the entire domestic and the majority of the foreign net deferred tax assets as of March 31, 2021, due to uncertainty of future taxable income[98](index=98&type=chunk) [Note 11. Basic and Diluted Net Loss Per Share](index=22&type=section&id=Note%2011.%20Basic%20and%20Diluted%20Net%20Loss%20Per%20Share) Basic and diluted net loss per share improved significantly to $0.00 in Q1 2021 from $(0.70) in Q1 2020. All common stock equivalents were excluded from diluted EPS as their effect would be anti-dilutive Basic and Diluted Net Loss Per Share (in thousands, except per share data) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :---------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(186) | $(60,721) | | Weighted-average common shares outstanding for basic and diluted net loss per share | 90,634 | 87,339 | | Basic and diluted net loss per share | $— | $(0.70) | - Potentially dilutive common shares, including those from equity incentive awards (**3.465 million**) and convertible senior notes (**0.538 million**), were excluded from diluted net loss per share as they were anti-dilutive[102](index=102&type=chunk) [Note 12. Related Party Transactions](index=23&type=section&id=Note%2012.%20Related%20Party%20Transactions) The company engages in transactions with Google Inc., where one of its directors holds a leadership position. Total payables to Google Inc. were $2.9 million, and expenses incurred were $4.8 million for Q1 2021 - Total payables to Google Inc. were **$2.9 million** as of March 31, 2021, and total expenses incurred from Google Inc. were **$4.8 million** for the three months ended March 31, 2021[104](index=104&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of RingCentral's business, key performance metrics, detailed analysis of financial results for Q1 2021 compared to Q1 2020, and a discussion of liquidity and capital resources. It highlights strong revenue growth, improved net loss, and the ongoing impact of the COVID-19 pandemic [Overview](index=23&type=section&id=Overview) RingCentral is a leading SaaS provider of cloud communications, video meetings, collaboration, and contact center solutions, primarily generating subscription revenues. The company is expanding its sales channels, and while COVID-19 has driven demand for remote work solutions, its full impact on financial performance remains uncertain - **RingCentral is a leading provider of cloud communications, video meetings, collaboration, and contact center SaaS solutions**, enabling flexible and cost-effective communications for mobile and distributed workforces[107](index=107&type=chunk) - **Subscriptions revenues accounted for 90% or more of total revenues** for both the three months ended March 31, 2021 and 2020[109](index=109&type=chunk) - The COVID-19 pandemic has led to contributions from new bookings as more businesses transition to RingCentral in the work-from-anywhere environment, but the **full extent of its impact on financial condition or results of operations remains uncertain**[112](index=112&type=chunk)[115](index=115&type=chunk) [Key Business Metrics](index=25&type=section&id=Key%20Business%20Metrics) The company tracks Annualized Exit Monthly Recurring Subscriptions (ARR), RingCentral Office Annualized Exit Monthly Recurring Subscriptions (Office ARR), and Net Monthly Subscription Dollar Retention Rate to assess business health and guide strategic decisions, all showing positive trends Key Business Metrics (dollars in millions) | Metric | March 31, 2021 | December 31, 2020 | September 30, 2020 | June 30, 2020 | March 31, 2020 | | :------------------------------------------------ | :------------- | :---------------- | :----------------- | :------------ | :------------- | | Net Monthly Subscription Dollar Retention Rate | >99% | >99% | >99% | >99% | >99% | | Annualized Exit Monthly Recurring Subscriptions | $1,407.4 | $1,299.5 | $1,179.0 | $1,106.5 | $1,029.7 | | RingCentral Office Annualized Exit Monthly Recurring Subscriptions | $1,322.3 | $1,215.2 | $1,091.6 | $1,018.3 | $943.3 | [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Total revenues increased by 32% year-over-year, primarily driven by subscription growth. While operating expenses also rose, a significant increase in other income, mainly from unrealized gains on long-term investments, led to a substantial reduction in net loss for the period [Revenues](index=27&type=section&id=Revenues) This section details the company's revenue streams, primarily from subscriptions and other services, and their year-over-year changes Revenue Comparison (in thousands, except percentages) | Revenues | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | $ Change | % Change | | :--------- | :-------------------------------- | :-------------------------------- | :------- | :------- | | Subscriptions | $325,223 | $243,104 | $82,119 | 34 % | | Other | $27,133 | $24,408 | $2,725 | 11 % | | Total revenues | $352,356 | $267,512 | $84,844 | 32 % | - Subscriptions revenue increased by **34%** due to the acquisition of new customers and upsells of seats and additional offerings to existing mid-market and enterprise customers[128](index=128&type=chunk) - Other revenues increased by **11%**, primarily due to an increase in product sales and professional services, despite a shift towards RingCentral apps over traditional desktop phones due to COVID-19[130](index=130&type=chunk) [Cost of Revenues and Gross Margin](index=29&type=section&id=Cost%20of%20Revenues%20and%20Gross%20Margin) This section analyzes the costs directly associated with generating revenue and the resulting gross profit margins Cost of Revenues and Gross Margin Comparison (in thousands, except percentages) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | $ Change | % Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :------- | :------- | | Subscriptions cost | $73,247 | $52,433 | $20,814 | 40 % | | Other cost | $23,734 | $21,011 | $2,723 | 13 % | | Total cost of revenues | $96,981 | $73,444 | $23,537 | 32 % | | Subscriptions gross margin | 77 % | 78 % | | | | Total gross margin % | 72 % | 73 % | | | - Cost of subscriptions revenues increased by **40%**, driven by increases in infrastructure support costs (**$7.1 million**), third-party costs (**$6.9 million**), personnel and contractor-related costs (**$3.6 million**), and amortization of acquired intangible assets (**$2.9 million**)[131](index=131&type=chunk) [Research and Development](index=29&type=section&id=Research%20and%20Development) This section outlines the expenses incurred for developing new products and enhancing existing services Research and Development Expenses (in thousands, except percentages) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | $ Change | % Change | | :------------------------ | :-------------------------------- | :-------------------------------- | :------- | :------- | | Research and development | $62,676 | $40,910 | $21,766 | 53 % | | Percentage of total revenues | 18 % | 15 % | | | - The increase was primarily due to a **$17.9 million increase in personnel and contractor costs**, including **$10.7 million from headcount growth** and **$5.7 million in share-based compensation expense**[135](index=135&type=chunk) [Sales and Marketing](index=30&type=section&id=Sales%20and%20Marketing) This section details the expenses related to selling products and services and promoting the company's brand Sales and Marketing Expenses (in thousands, except percentages) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | $ Change | % Change | | :---------------- | :-------------------------------- | :-------------------------------- | :------- | :------- | | Sales and marketing | $179,249 | $131,312 | $47,937 | 37 % | | Percentage of total revenues | 51 % | 49 % | | | - The increase was primarily due to personnel and contractor costs (**$24.6 million**, including **$10.1 million in share-based compensation**), third-party commissions (**$19.7 million**), and amortization of deferred sales commission costs (**$5.8 million**), partially offset by a **$3.6 million decrease in travel costs** due to COVID-19[137](index=137&type=chunk) [General and Administrative](index=30&type=section&id=General%20and%20Administrative) This section covers the overhead expenses necessary for the overall management and administration of the company General and Administrative Expenses (in thousands, except percentages) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | $ Change | % Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------- | :------- | | General and administrative | $55,461 | $47,336 | $8,125 | 17 % | | Percentage of total revenues | 16 % | 18 % | | | - The increase was primarily due to increases in personnel and contractor costs (**$3.3 million**), business fees and taxes (**$1.9 million**), and overhead costs (**$1.6 million**)[139](index=139&type=chunk) [Other Income (Expense), Net](index=30&type=section&id=Other%20Income%20%28Expense%29,%20Net) This section reports non-operating income and expenses, including interest and gains or losses from investments Other Income (Expense), Net (in thousands, except percentages) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | $ Change | % Change | | :------------------------ | :-------------------------------- | :-------------------------------- | :------- | :------- | | Interest expense | $(16,278) | $(7,502) | $(8,776) | nm | | Other income (expense) | $58,543 | $(27,517) | $86,060 | nm | | Other income (expense), net | $42,265 | $(35,019) | $77,284 | nm | - Other income (expense), net increased by **$77.3 million**, primarily due to a **$79.7 million increase in net unrealized gain** recognized on long-term investments[142](index=142&type=chunk)[144](index=144&type=chunk) - Interest expense was higher by **$8.8 million** mainly due to increased amortization of debt discount and issuance costs from the 2025 and 2026 convertible senior notes[143](index=143&type=chunk) [Net loss](index=31&type=section&id=Net%20loss) This section presents the company's overall financial loss after all revenues and expenses are accounted for - Net loss decreased by **$60.5 million** for the three months ended March 31, 2021, primarily due to a **$79.7 million net unrealized gain on long-term investments**[146](index=146&type=chunk) - This improvement was partially offset by **$18.4 million higher share-based compensation expense** and **$3.0 million amortization of acquired intangible assets**[146](index=146&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) The company's cash and cash equivalents decreased to $463.1 million. Operations are financed through customer sales and convertible senior notes. Management believes existing liquidity and financing options will cover future cash requirements for at least 12 months, but future capital needs depend on growth, acquisitions, and market conditions - As of March 31, 2021, cash and cash equivalents were **$463.1 million**[148](index=148&type=chunk) - The company believes its operations, existing liquidity sources, and ability to raise cash through additional financing will satisfy future cash requirements and obligations for **at least the next 12 months**[151](index=151&type=chunk) - The remaining **$41.2 million aggregate principal of the 2023 Notes** was fully redeemed in April 2021 for **$153.3 million in cash**[149](index=149&type=chunk) [Net Cash (Used in) Provided by Operating Activities](index=32&type=section&id=Net%20Cash%20%28Used%20in%29%20Provided%20by%20Operating%20Activities) This section details the cash generated or used by the company's primary business operations - Net cash provided by operating activities increased by **$23.9 million** to **$37.0 million** for the three months ended March 31, 2021, compared to the respective prior year period[152](index=152&type=chunk)[155](index=155&type=chunk) [Net Cash Used in Investing Activities](index=32&type=section&id=Net%20Cash%20Used%20in%20Investing%20Activities) This section outlines the cash flows related to the purchase or sale of long-term assets and investments - Net cash used in investing activities was **$26.8 million** for the three months ended March 31, 2021, an increase of **$12.6 million** compared to the prior year period[152](index=152&type=chunk)[158](index=158&type=chunk) - This was primarily due to capital expenditures, including personnel-related costs for internal-use software development (**$18.5 million**), and the acquisition of intellectual property (**$8.4 million**)[157](index=157&type=chunk) [Net Cash (Used in) Provided by Financing Activities](index=32&type=section&id=Net%20Cash%20%28Used%20in%29%20Provided%20by%20Financing%20Activities) This section summarizes cash flows from debt, equity, and dividend transactions - Net cash used in financing activities was **$186.5 million** for the three months ended March 31, 2021, a significant shift from **$420.3 million provided** in the prior year period[152](index=152&type=chunk)[161](index=161&type=chunk) - This was primarily due to **$178.5 million cash paid for conversion requests of the 2023 Notes** and the absence of large convertible note issuances seen in 2020[160](index=160&type=chunk)[161](index=161&type=chunk) [Non-GAAP Free Cash Flow](index=32&type=section&id=Non-GAAP%20Free%20Cash%20Flow) Non-GAAP free cash flow increased to $23.2 million in Q1 2021, reflecting improved operating cash flow after adjustments for debt discount repayments and capital expenditures Non-GAAP Free Cash Flow Reconciliation (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :---------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $36,955 | $13,069 | | Repayment of convertible senior notes attributable to debt discount | $4,712 | $13,894 | | Non-GAAP net cash provided by operating activities | $41,667 | $26,963 | | Purchases of property and equipment | $(8,721) | $(6,861) | | Capitalized internal-use software | $(9,757) | $(7,389) | | Non-GAAP free cash flow | $23,189 | $12,713 | [Backlog](index=33&type=section&id=Backlog) The company does not consider backlog a reliable indicator of future revenues due to the variability in contract lengths and does not use it as a key internal management metric - Backlog is not considered a reliable indicator of future revenues due to variability in contract length and is **not utilized as a key management metric internally**[164](index=164&type=chunk) [Deferred Revenue](index=33&type=section&id=Deferred%20Revenue) Deferred revenue is not considered a reliable indicator of future revenues because it only captures advanced billings for typically one monthly or annual subscription period, not the full contract value of multi-year agreements - Deferred revenue balance does not capture the full contract value of multi-year contracts, as the company generally invoices only **one monthly or annual subscription period in advance**[165](index=165&type=chunk) [Contractual Obligations and Commitments](index=33&type=section&id=Contractual%20Obligations%20and%20Commitments) There were no significant changes in contractual obligations and commitments from the prior annual report, beyond those detailed in specific notes to the financial statements - No significant changes in contractual obligations from the Annual Report on Form 10-K for the year ended December 31, 2020, except as set forth in Notes 3, 6, 7, and 8[166](index=166&type=chunk) [Contingencies](index=33&type=section&id=Contingencies) The company is subject to various legal proceedings and claims, for which a provision for liability is recorded when a loss is probable and can be reasonably estimated. Litigation outcomes are inherently unpredictable - The Company is subject to various legal proceedings, claims, lawsuits, investigations, and regulatory compliance matters that arise in the normal course of business[167](index=167&type=chunk) - A provision for liability is recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated, though **legal proceedings are inherently unpredictable**[167](index=167&type=chunk) [Off-balance Sheet Arrangements](index=34&type=section&id=Off-balance%20Sheet%20Arrangements) The company did not have any relationships with unconsolidated organizations or financial partnerships for off-balance sheet arrangements during the three months ended March 31, 2021, or 2020 - The Company did not have any relationships with unconsolidated organizations or financial partnerships for off-balance sheet arrangements during the three months ended March 31, 2021 and 2020[168](index=168&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks primarily from foreign currency exchange rates and interest rates, but does not use financial instruments for trading. Long-term investments are also subject to market risk from stock price and volatility fluctuations [Foreign Currency Risk](index=34&type=section&id=Foreign%20Currency%20Risk) This section assesses the company's exposure to fluctuations in foreign currency exchange rates and their potential impact on financial results - The majority of sales and contracts are denominated in U.S. dollars, limiting **significant foreign currency risk on net revenue**[170](index=170&type=chunk) - Operating expenses are primarily in the U.S., with some exposure in Canada, Europe, and Asia-Pacific. The company has **not entered into any hedging arrangements** for foreign currency risk[170](index=170&type=chunk) - A hypothetical **10% change in foreign currency exchange rates would not have had a material impact** on the condensed consolidated financial statements for Q1 2021[170](index=170&type=chunk) [Interest Rate Risk](index=34&type=section&id=Interest%20Rate%20Risk) This section evaluates the company's exposure to changes in interest rates, particularly concerning its cash investments and convertible senior notes - Cash and cash equivalents of **$463.1 million** are invested in short-term money market funds, and declines in interest rates would reduce future interest income[171](index=171&type=chunk) - The company's **0% convertible senior notes** (2023, 2025, 2026) have a fixed annual interest rate, meaning no economic exposure to changes in interest rates, but their fair value is exposed to interest rate and stock price risk[172](index=172&type=chunk) [Market Risk](index=34&type=section&id=Market%20Risk) This section discusses the risks associated with the fair value of the company's long-term investments due to market fluctuations - Long-term investments in convertible and redeemable preferred stock totaled **$270.7 million** as of March 31, 2021[173](index=173&type=chunk) - These equity investments are subject to market-related risks, including **fluctuations in the investee's stock price and volatility**, which could decrease or increase their fair value[173](index=173&type=chunk) - A hypothetical adverse stock price or volatility change of **10%** could have resulted in a potential decrease of up to **$22.4 million** in the fair value of these investments as of March 31, 2021[174](index=174&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2021, concluding they were effective. No significant changes in internal control over financial reporting occurred, despite the shift to remote work due to COVID-19 [Evaluation of Disclosure Controls and Procedures](index=35&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section details the assessment of the effectiveness of the company's controls designed to ensure timely and accurate financial disclosures - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective at the reasonable assurance level** as of March 31, 2021[175](index=175&type=chunk) [Changes in Internal Control over Financial Reporting](index=35&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports any material changes in the company's internal control over financial reporting during the period - There was **no change in internal control over financial reporting** that significantly affected, or is reasonably likely to significantly affect, internal control over financial reporting during the period[176](index=176&type=chunk) - The company is continually monitoring and assessing the impact of the COVID-19 pandemic on its internal controls[177](index=177&type=chunk) [Limitations on Effectiveness of Controls and Procedures](index=35&type=section&id=Limitations%20on%20Effectiveness%20of%20Controls%20and%20Procedures) This section acknowledges the inherent limitations of any control system, providing reasonable rather than absolute assurance - Management recognizes that disclosure controls and procedures can provide only **reasonable, not absolute, assurance** of achieving desired control objectives due to inherent limitations and resource constraints[178](index=178&type=chunk) [PART II. OTHER INFORMATION](index=35&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference the detailed discussion of legal proceedings from Note 8, Commitments and Contingencies, in the financial statements - Information regarding legal proceedings is **incorporated by reference from Note 8, Commitments and Contingencies**, in the accompanying notes to the Condensed Consolidated Financial Statements[181](index=181&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) The company faces a high degree of risk, including those related to its business operations, regulatory environment, intellectual property, and capital structure. These risks are exacerbated by the COVID-19 pandemic and could materially affect financial condition and results of operations [Summary Risk Factors](index=36&type=section&id=Summary%20Risk%20Factors) This section provides a high-level overview of the most significant risks that could impact the company's business and financial performance - The company has incurred **significant losses and negative cash flows** and anticipates continuing to incur losses for the foreseeable future, potentially failing to achieve or sustain profitability[185](index=185&type=chunk)[188](index=188&type=chunk) - Future operating results rely on the **successful execution of strategic partnerships** (e.g., with Avaya, Atos/Unify, Alcatel-Lucent Enterprise, Vodafone), which may not be successful[185](index=185&type=chunk)[199](index=199&type=chunk) - The **dual-class structure of common stock concentrates voting control** with a limited number of stockholders (founders, executive officers, directors, and affiliates), limiting other stockholders' ability to influence corporate matters[185](index=185&type=chunk)[317](index=317&type=chunk) [Risks Related to Our Business and Our Industry](index=37&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Our%20Industry) This section details risks inherent to the company's operations and the broader industry, including competition, growth management, and reliance on third parties - The company expects to continue incurring losses for the foreseeable future and must generate and sustain increased revenues to achieve profitability, facing risks from **macroeconomic conditions, competition, and unforeseen operating expenses**[189](index=189&type=chunk) - Rapid growth places **significant demands on management, organizational structure, and operational/financial infrastructure**, requiring substantial financial, operational, and technical resources[197](index=197&type=chunk) - The company faces **intense competition** from traditional and cloud-based business communications providers, many with greater resources, which could lead to pricing pressure, slower growth, and reduced market share[200](index=200&type=chunk)[202](index=202&type=chunk) - Reliance on third-party network service providers for connectivity and features (e.g., Zoom, Bandwidth.com) creates risks of **service disruptions, quality issues, and potential loss of customers** if these providers fail or contracts terminate[206](index=206&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk) - Increased customer turnover or high costs to retain and upsell customers could **materially and adversely affect financial performance**, especially if customers reduce usage or terminate subscriptions due to economic downturns like COVID-19[236](index=236&type=chunk)[237](index=237&type=chunk) - Expanding international operations exposes the company to **significant regulatory, economic, and political risks**, including compliance with differing standards, difficulties in managing foreign operations, and fluctuations in currency exchange rates[252](index=252&type=chunk)[253](index=253&type=chunk) - Future capital requirements may necessitate **additional equity or debt financings**, which may not be available on favorable terms and could result in significant dilution to existing stockholders or restrictive covenants[267](index=267&type=chunk)[269](index=269&type=chunk) [Risks Related to Regulatory Matters](index=55&type=section&id=Risks%20Related%20to%20Regulatory%20Matters) This section outlines the regulatory and compliance risks, including telecommunications, data privacy, and emergency services regulations - The company's Internet voice communications services are subject to **federal (FCC) and state regulations**, including those related to privacy, E-911, and USF contributions, with non-compliance potentially leading to enforcement actions, fines, and reputational harm[271](index=271&type=chunk)[274](index=274&type=chunk) - International expansion subjects the company to **country-specific telecommunications, consumer protection, data protection, and emergency call service laws**, which may increase compliance costs or restrict service offerings[277](index=277&type=chunk) - The company processes personal information and is subject to **evolving international (e.g., GDPR, e-Privacy Regulation) and U.S. (e.g., HIPAA, CCPA, CPRA, CDPA) data privacy laws**, increasing compliance burdens, costs, and liability risks[280](index=280&type=chunk)[281](index=281&type=chunk)[282](index=282&type=chunk)[283](index=283&type=chunk)[284](index=284&type=chunk)[287](index=287&type=chunk)[289](index=289&type=chunk)[290](index=290&type=chunk) - Emergency and E-911 calling services expose the company to **significant liability** due to potential misrouting or delays, especially if customer-provided location information is incorrect or not updated[295](index=295&type=chunk)[296](index=296&type=chunk)[299](index=299&type=chunk) [Risks Related to Intellectual Property](index=61&type=section&id=Risks%20Related%20to%20Intellectual%20Property) This section addresses risks concerning the company's intellectual property, including potential infringement claims and the ability to protect its own patents and trade secrets - The company faces accusations of infringement of third-party intellectual property rights, which can lead to **costly litigation, diversion of management attention, and potential liability or restrictions** on using/selling certain subscriptions[304](index=304&type=chunk)[305](index=305&type=chunk)[308](index=308&type=chunk) - The company's ability to protect its intellectual property (patents, trademarks, trade secrets) is **limited**, especially internationally, where laws may offer less protection, and competitors may independently develop similar technologies[309](index=309&type=chunk)[310](index=310&type=chunk)[312](index=312&type=chunk) - The use of open source technology in its platform could impose **unanticipated conditions or restrictions**, potentially requiring the company to make proprietary software source code available or discontinue offerings[313](index=313&type=chunk) [Risks Related to Our Class A Common Stock, Our Notes and Our Charter Provisions](index=63&type=section&id=Risks%20Related%20to%20Our%20Class%20A%20Common%20Stock%2C%20Our%20Notes%20and%20Our%20Charter%20Provisions) This section covers risks associated with the company's stock, convertible notes, and corporate governance structure, including market volatility and voting control - The market price of the Class A Common Stock is likely to be **volatile** due to operating performance, industry conditions, public announcements, analyst coverage, and macroeconomic factors, potentially leading to significant fluctuations[314](index=314&type=chunk)[315](index=315&type=chunk) - The **dual-class common stock structure concentrates voting control (approximately 56% of voting power)** with pre-IPO stockholders, including founders and executive officers, limiting other stockholders' influence over corporate matters[317](index=317&type=chunk)[318](index=318&type=chunk) - The company does not anticipate paying cash dividends, meaning the only opportunity for return on investment is through **stock price appreciation**[320](index=320&type=chunk) - The company may not have the ability to raise necessary funds to settle conversions of its convertible senior notes in cash or to repurchase them upon a fundamental change, potentially leading to **default or adverse financial impacts**[321](index=321&type=chunk)[322](index=322&type=chunk)[324](index=324&type=chunk) - **Anti-takeover provisions** in the company's charter documents and Delaware corporate law could make an acquisition more difficult and limit attempts by stockholders to replace or remove current management[329](index=329&type=chunk)[330](index=330&type=chunk) [General Risk Factors](index=66&type=section&id=General%20Risk%20Factors) This section includes broader risks such as tax rate changes, effectiveness of internal controls, and potential impacts from natural disasters - Changes in effective tax rates or adverse outcomes from tax examinations could **negatively affect results of operations and financial condition**, influenced by factors like deferred tax asset valuation, tax credit laws, and international expansion[332](index=332&type=chunk) - If internal control over financial reporting is not effective, it could **adversely affect investor confidence**, potentially leading to a decline in stock price and SEC investigation[336](index=336&type=chunk)[337](index=337&type=chunk) - The company's corporate headquarters, data centers, and R&D facilities are located near known earthquake fault zones or in hurricane-prone areas, making them **vulnerable to catastrophic disasters** that could seriously impair business operations[340](index=340&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=66&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item reports that there were no unregistered sales of equity securities or use of proceeds during the period - No unregistered sales of equity securities or use of proceeds to report[342](index=342&type=chunk) [Item 3. Default Upon Senior Securities](index=66&type=section&id=Item%203.%20Default%20Upon%20Senior%20Securities) This item reports that there was no default upon senior securities during the period - No default upon senior securities to report[343](index=343&type=chunk) [Item 4. Mine Safety Disclosures](index=66&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item reports that there were no mine safety disclosures during the period - No mine safety disclosures to report[344](index=344&type=chunk) [Item 5. Other Information](index=66&type=section&id=Item%205.%20Other%20Information) This item reports that there was no other information to disclose during the period - No other information to report[345](index=345&type=chunk) [Item 6. Exhibits](index=66&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed or incorporated by reference, including certifications from the Chief Executive Officer and Chief Financial Officer, and XBRL interactive data files - Includes certifications of the Chief Executive Officer and Chief Financial Officer pursuant to **Sections 302 and 906 of the Sarbanes-Oxley Act**[349](index=349&type=chunk) - XBRL Instance Document and Taxonomy Extension Documents are filed herewith[349](index=349&type=chunk) [Signatures](index=70&type=section&id=Signatures) This section contains the official signatures of the company's authorized officers, certifying the accuracy and completeness of the report - The report was signed on **May 7, 2021**, by Mitesh Dhruv, Chief Financial Officer, and Vaibhav Agarwal, Chief Accounting Officer[353](index=353&type=chunk)

Financial Performance - Q1 2021 - Subscriptions revenue reached $325 million, a 34% year-over-year increase[13] - Total revenue amounted to $352 million, reflecting a 32% year-over-year growth[13] - Total ARR (Annual Recurring Revenue) reached $1407 million, up 37% year-over-year[13] - RingCentral Office ARR (UCaaS + CCaaS) grew by 40% year-over-year to $1322 million[10, 13] - Non-GAAP operating margin was 92%, exceeding the guidance of 86%-88%[22] Enterprise and Partner Growth - Enterprise ARR surpassed $500 million, showing a 62% year-over-year increase[11] - Direct and Partners Office ARR increased by 33% year-over-year to $817 million[10, 13] - Channel ARR increased by 53% year-over-year to $505 million[13] Guidance - The company raised FY 2021 subscriptions revenue guidance to $1388 billion - $1396 billion, representing a 28%-29% year-over-year growth[27] - The company raised FY 2021 total revenue guidance to $1500 billion - $1510 billion, representing a 27%-28% year-over-year growth[27] - Q2 2021 subscriptions revenue is guided to be $332 million - $334 million, representing a 29%-30% year-over-year growth[28]

RingCentral, Inc. (NYSE:RNG) Q1 2021 Earnings Conference Call May 4, 2021 5:00 PM ET Company Participants Ryan Goodman - Investor Relations Vlad Shmunis - Founder, Chairman and Chief Executive Officer Anand Eswaran - President and Chief Operating Officer Mitesh Dhruv - Chief Financial Officer Conference Call Participants Terry Tillman - Truist Bhavan Suri - William Blair Sterling Auty - JPMorgan Brian Peterson - Raymond James George Sutton - Craig-Hallum Meta Marshall - Morgan Stanley Michael Turrin - Wells ...

[Part I](index=4&type=section&id=PART%20I) [Business](index=5&type=section&id=Item%201.%20Business) RingCentral is a leading provider of global enterprise cloud communications, video meetings, collaboration, and contact center software-as-a-service (SaaS) solutions - The company's core business is providing cloud-based communication and collaboration solutions via a SaaS model, with its flagship product being the Message Video Phone (MVP) platform[17](index=17&type=chunk)[20](index=20&type=chunk) Key Product Offerings | Product | Description | | :--- | :--- | | **RingCentral Office** | A Unified Communications as a Service (UCaaS) platform including team messaging, video meetings, and a cloud phone system. | | **RingCentral cloud CCaaS** | A Contact Center as a Service solution. | | **RingCentral Glip** | A smart video meeting solution with team messaging, launched in 2020. | - A key growth strategy involves expanding go-to-market channels through strategic partnerships with established technology and telecommunications companies such as Avaya, Atos, Alcatel-Lucent Enterprise (ALE), and Vodafone to sell co-branded solutions[22](index=22&type=chunk)[27](index=27&type=chunk) - The company has a diverse customer base across many industries, with no single customer accounting for more than **10%** of total revenue in **2020**, **2019**, or **2018**[41](index=41&type=chunk) - As of December 31, 2020, RingCentral had **3,140** full-time employees, with approximately **30%** located outside the United States[60](index=60&type=chunk) - The business is subject to significant regulation by the FCC in the U.S. and similar bodies internationally (e.g., Ofcom in the UK, CRTC in Canada), as well as evolving data privacy laws like GDPR and CCPA[62](index=62&type=chunk)[63](index=63&type=chunk)[65](index=65&type=chunk) [Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors) The company identifies numerous risks that could materially affect its business, including a history of net losses, reliance on partnerships and third-party infrastructure, intense competition, cybersecurity threats, and complex regulatory environments - The company has a history of significant net losses and negative cash flows and anticipates incurring losses for the foreseeable future, making future profitability uncertain[75](index=75&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk) - The COVID-19 pandemic poses risks through potential disruptions to customer operations, decreased technology spending, and challenges for the company's remote workforce and sales efforts[81](index=81&type=chunk) - Future operating results depend significantly on the successful execution of strategic partnerships with Avaya, Atos/Unify, Alcatel-Lucent Enterprise, and Vodafone[86](index=86&type=chunk) - The business relies on third-party network service providers (like CenturyLink and Bandwidth.com) and data center hosting facilities (like Equinix and AWS), making it vulnerable to service interruptions or delays from these vendors[94](index=94&type=chunk)[99](index=99&type=chunk) - Cyber-attacks, information security breaches, or denial of service events pose a significant threat, potentially leading to service interruptions, reputational harm, and liability[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) - The company is subject to complex and evolving regulations in the U.S. (FCC) and internationally, including E-911 service requirements and data privacy laws like GDPR and the California Consumer Privacy Act (CCPA), which could increase costs and liability[163](index=163&type=chunk)[174](index=174&type=chunk)[183](index=183&type=chunk)[188](index=188&type=chunk) - The dual-class common stock structure concentrates approximately **56%** of voting power with a limited number of stockholders, including founders and executive officers, limiting the influence of other stockholders on corporate matters[212](index=212&type=chunk) [Unresolved Staff Comments](index=50&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - There are no unresolved staff comments[238](index=238&type=chunk) [Properties](index=50&type=section&id=Item%202.%20Properties) RingCentral's corporate headquarters is located in Belmont, California, occupying approximately 110,000 square feet under leases expiring in July 2026, with additional leased office space globally and cloud infrastructure supported by third-party data centers - Corporate headquarters are in Belmont, California, with approximately **110,000** square feet of leased office space[239](index=239&type=chunk) - The company leases other offices in locations such as Denver, Charlotte, London, Xiamen, and Paris, and utilizes third-party co-location data centers in the U.S. and Europe[240](index=240&type=chunk) [Legal Proceedings](index=50&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in several legal proceedings, including a settled TCPA class action, ongoing patent infringement lawsuits, a CIPA class action, and litigation related to failed acquisition negotiations - A TCPA class action lawsuit (Hurley v. RingCentral) was settled, with the court granting final approval in February **2021**[486](index=486&type=chunk) - The company is defending against two patent infringement lawsuits filed by Uniloc related to the Glip application, which are currently stayed[487](index=487&type=chunk) - A putative class action lawsuit was filed in California alleging violations of the California Invasion of Privacy Act (CIPA) for allegedly recording communications without consent[488](index=488&type=chunk) - The company is engaged in litigation with Bright Pattern, Inc., involving a complaint and cross-complaint stemming from failed acquisition negotiations[490](index=490&type=chunk) [Mine Safety Disclosures](index=50&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[242](index=242&type=chunk) [Part II](index=51&type=section&id=PART%20II) [Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=51&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) RingCentral's Class A common stock is listed on the New York Stock Exchange under 'RNG', and the company has never declared or paid cash dividends, intending to retain earnings for business operations and growth - The company's Class A common stock trades on the New York Stock Exchange under the symbol 'RNG'[244](index=244&type=chunk) - The company has never paid cash dividends and does not anticipate paying any in the foreseeable future[246](index=246&type=chunk) [Selected Consolidated Financial Data](index=53&type=section&id=Item%206.%20Selected%20Consolidated%20Financial%20Data) The company presents selected consolidated financial data for the five fiscal years ended December 31, 2020, showing strong revenue growth alongside consistent net losses and substantial asset growth Selected Consolidated Financial Data (2018-2020) | (in thousands, except per share data) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Total revenues** | **$1,183,657** | **$902,858** | **$673,624** | | **Loss from operations** | **$(113,239)** | **$(45,675)** | **$(16,436)** | | **Net loss** | **$(82,996)** | **$(53,607)** | **$(26,203)** | | **Net loss per share, basic and diluted** | **$(0.94)** | **$(0.64)** | **$(0.33)** | | **Total assets (at year-end)** | **$2,184,597** | **$1,450,747** | **$894,326** | | **Total stockholders' equity (at year-end)** | **$308,459** | **$745,700** | **$317,609** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=54&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In fiscal year 2020, RingCentral's total revenues grew **31%** to **$1.18 billion**, driven by subscription revenue, but net loss widened to **$83.0 million** due to increased operating expenses and share-based compensation, while liquidity was significantly altered by new convertible debt issuance Key Business Metrics (as of Dec 31) | Metric | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Annualized Exit Monthly Recurring Subscriptions (ARR) | **$1.3 billion** | **$960.1 million** | **+35%** | | RingCentral Office ARR | **$1.2 billion** | **$876.8 million** | **+39%** | | Net Monthly Subscription Dollar Retention Rate | **>99%** | **>99%** | Stable | Revenue Performance (FY 2020 vs. FY 2019) | Revenue Type (in thousands) | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | Subscriptions | **$1,086,276** | **$817,811** | **+33%** | | Other | **$97,381** | **$85,047** | **+15%** | | **Total revenues** | **$1,183,657** | **$902,858** | **+31%** | - Net loss increased to **$83.0 million** in **2020** from **$53.6 million** in **2019**; the increase was driven by higher non-cash items including share-based compensation (**+$88.2M**), interest expense from convertible notes (**+$28.7M**), and amortization of acquired intangibles (**+$25.1M**), partially offset by an **$81.1M** unrealized gain on long-term investments[312](index=312&type=chunk) - The company's liquidity position was significantly altered in **2020**; it issued **$1.0 billion** of **2025** convertible notes and **$650 million** of **2026** convertible notes, using a portion of the proceeds to repurchase existing **2023** notes[315](index=315&type=chunk) - Net cash used in operating activities was **$35.2 million** in **2020**, a decrease of **$100.0 million** from **2019**, primarily due to **$141.6 million** paid for strategic partnership agreements and **$35.0 million** related to debt repayment[319](index=319&type=chunk)[321](index=321&type=chunk)[322](index=322&type=chunk) - Non-GAAP free cash flow was **$59.7 million** in **2020**, an increase from **$55.1 million** in **2019**[330](index=330&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=71&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from foreign currency fluctuations, interest rate changes, and the market value of its investments, though foreign currency impact was not material in 2020 and convertible notes have a fixed interest rate - The majority of sales are denominated in U.S. dollars, but growing international operations in Europe and Asia-Pacific are increasing exposure to foreign currency risk; a hypothetical **10%** change in exchange rates would not have had a material impact in **2020**[345](index=345&type=chunk) - The company's convertible notes have a **0%** fixed interest rate, eliminating economic interest rate risk on the debt itself; however, the fair value of the notes is sensitive to changes in market interest rates and the company's stock price[347](index=347&type=chunk) - The company holds **$213.2 million** in long-term investments (convertible and redeemable preferred stock) as of December 31, 2020; these are subject to market risk; a hypothetical **10%** adverse change in the investee's stock price or volatility could decrease the investment's fair value by up to **$16.8 million**[348](index=348&type=chunk) [Consolidated Financial Statements and Supplementary Data](index=72&type=section&id=Item%208.%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited consolidated financial statements for the fiscal year ended December 31, 2020, and the independent auditor's report from KPMG LLP, detailing financial position, results of operations, and cash flows, with key notes on revenue, partnerships, debt, and share-based compensation [Report of Independent Registered Public Accounting Firm](index=73&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) KPMG LLP issued an unqualified opinion on the consolidated financial statements and internal control over financial reporting, highlighting the evaluation of subscriptions revenue as a critical audit matter - The auditor, KPMG LLP, issued an unqualified (clean) opinion on the financial statements[352](index=352&type=chunk) - A critical audit matter was identified concerning the evaluation of audit evidence for subscriptions revenue, due to the high volume of transactions and the complexity of the multiple IT systems involved[361](index=361&type=chunk)[362](index=362&type=chunk) [Consolidated Financial Statements](index=75&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements for the year ended December 31, 2020, show significant growth in both assets and revenues, alongside continued net losses, reflecting substantial debt increases and negative cash flows from operations Consolidated Balance Sheet Data (as of Dec 31, 2020) | (in thousands) | Amount | | :--- | :--- | | Total current assets | **$926,129** | | **Total assets** | **$2,184,597** | | Total current liabilities | **$438,068** | | Convertible senior notes, net | **$1,375,320** | | **Total liabilities** | **$1,872,351** | | **Total stockholders' equity** | **$308,459** | Consolidated Statement of Operations Data (Year ended Dec 31, 2020) | (in thousands) | Amount | | :--- | :--- | | Total revenues | **$1,183,657** | | Gross profit | **$860,050** | | Loss from operations | **$(113,239)** | | **Net loss** | **$(82,996)** | Consolidated Statement of Cash Flows Data (Year ended Dec 31, 2020) | (in thousands) | Amount | | :--- | :--- | | Net cash (used in) provided by operating activities | **$(35,191)** | | Net cash used in investing activities | **$(107,686)** | | Net cash provided by financing activities | **$437,590** | [Notes to Consolidated Financial Statements](index=80&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide critical details underlying the financial statements, including revenue disaggregation, strategic partnership payments, convertible debt status, share-based compensation expense, and net operating loss carryforwards - As of December 31, 2020, the company had approximately **$1.3 billion** in remaining performance obligations from customer contracts, with **53%** expected to be recognized as revenue in the next **12** months[433](index=433&type=chunk) - In **2020**, the company entered into strategic partnerships with Vodafone and ALE, paying a total of **$141.6 million** in cash for costs to obtain contracts and **$26.6 million** for intellectual property rights[448](index=448&type=chunk) - The company has three series of convertible senior notes outstanding; as of Dec 31, 2020, the net carrying amount was **$71.2M** for the **2023** Notes, **$825.0M** for the **2025** Notes, and **$510.3M** for the **2026** Notes[475](index=475&type=chunk) - Total share-based compensation expense for **2020** was **$189.6 million**, a significant increase from **$101.4 million** in **2019**[497](index=497&type=chunk) - As of December 31, 2020, the company had federal net operating loss (NOL) carryforwards of approximately **$1.4 billion** and state NOLs of **$1.1 billion**[512](index=512&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=108&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[525](index=525&type=chunk) [Controls and Procedures](index=108&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020, with no material changes to internal control over financial reporting despite the shift to remote work due to COVID-19 - Management concluded that disclosure controls and procedures were effective as of December 31, 2020[528](index=528&type=chunk) - There were no changes in internal control over financial reporting during the fourth quarter of **2020** that have materially affected, or are reasonably likely to materially affect, internal controls[531](index=531&type=chunk) - The shift to remote work due to the COVID-19 pandemic has not resulted in any material impact to the company's internal controls over financial reporting[532](index=532&type=chunk) [Other Information](index=110&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[536](index=536&type=chunk) [Part III](index=111&type=section&id=PART%20III) [Directors, Executive Officers and Corporate Governance](index=111&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2021 Proxy Statement, and the company confirms it has a Code of Conduct - The required information is incorporated by reference from the Registrant's Proxy Statement to be filed within **120** days of the fiscal year-end[539](index=539&type=chunk)[540](index=540&type=chunk) [Executive Compensation](index=111&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's Proxy Statement for the 2021 Annual Meeting of Stockholders - The required information is incorporated by reference from the Registrant's Proxy Statement[543](index=543&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=111&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the company's Proxy Statement, detailing securities authorized for issuance under equity compensation plans as of December 31, 2020 - Security ownership information is incorporated by reference from the Registrant's Proxy Statement[544](index=544&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2020) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | **3,680,993** | **$127.15** | **22,051,914** | [Certain Relationships and Related Transactions and Director Independence](index=112&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) Information regarding certain relationships, related-party transactions, and director independence is incorporated by reference from the company's Proxy Statement for the 2021 Annual Meeting of Stockholders - The required information is incorporated by reference from the Registrant's Proxy Statement[550](index=550&type=chunk) [Principal Accountant Fees and Services](index=112&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's Proxy Statement for the 2021 Annual Meeting of Stockholders - The required information is incorporated by reference from the Registrant's Proxy Statement[551](index=551&type=chunk) [Part IV](index=113&type=section&id=PART%20IV) [Exhibits and Financial Statement Schedules](index=113&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the exhibits filed as part of the Annual Report on Form 10-K, including corporate governance documents, debt agreements, material contracts, and certifications, with all financial statement schedules omitted as not applicable or included elsewhere - A list of all exhibits filed with the Form **10-K** is provided, including corporate governance documents, debt agreements, material contracts, and required certifications[553](index=553&type=chunk)[554](index=554&type=chunk)[555](index=555&type=chunk) - All financial statement schedules have been omitted because they are not applicable or the information is already included in the consolidated financial statements or notes[556](index=556&type=chunk)

RingCentral, Inc. (NYSE:RNG) Q4 2020 Earnings Conference Call February 16, 2021 5:00 PM ET Company Participants Ryan Goodman - Head, Investor Relations Vlad Shmunis - Founder, Chairman and CEO Anand Eswaran - President and Chief Operating Officer Mitesh Dhruv - Chief Financial Officer Conference Call Participants Brian Peterson - Raymond James Bhavan Suri - William Blair Terry Tillman - Truist Securities George Sutton - Craig-Hallum Michael Turrin - Wells Fargo Securities Meta Marshall - Morgan Stanley Jame ...

| --- | --- | |------------------------------------------------------|-------| | | | | | | | | | | | | | | | | Q4 2020 and FY 2020 Earnings Presentation | | | Revenue and EPS above guidance | | | | | | Initiating FY 2021 guidance | | | February 16, 2021 | | | | | | | | | | | | | | | | | | 1 \| © 2018 RingCentral, Inc. All rights reserved. | | Safe Harbor and Non-GAAP Measures This presentation includes forward-looking statements within the meaning of the federal securities laws. These statements relate to, ...

Strategic Partnership Overview - RingCentral and Vodafone Business are partnering to offer a co-branded cloud-based Unified Communications as a Service (UCaaS) solution and Contact Center as a Service (CCaaS)[2] - RingCentral will be Vodafone's lead UCaaS solution for its global customer base of 30M+ customers[9] - The new co-branded solution will be delivered on RingCentral's Message Video Phone platform[9] - The partnership includes joint development capability to drive product roadmap, innovation, and go-to-market strategies[9] - The solution will initially be available to business customers in the UK and multinational customers in Europe in 2021[9] Vodafone Business Key Metrics - Vodafone Business' network reaches 182 countries[6] - Vodafone Business is the largest wholesale voice carrier, handling >56 billion minutes per year[6] - Vodafone Business has Europe's largest 5G network with 1,000+ cell sites in 100+ cities[6] - Vodafone Business has 30M+ mobile Business Customers, 140,000 UC Customers, and 112M+ IoT connections[6] - Vodafone Business serves 2.5M Customer SOHOs, 500,000 SMEs, 65,000 Large Enterprises, and 1,400 MNCs[6] Unique Strategic Partnership Advantages - Vodafone Business brings a global brand and leading network footprint, a broad global customer base, and leadership in Mobility and 5G, SD-WAN, UC, and IOT[12] - Vodafone Business offers mobile-first compelling bundles, customers of all sizes, and proven experience in providing Managed & Professional services[12] - RingCentral provides a leading Message Video Phone UCaaS platform, a complete CCaaS solution, a global delivery footprint, and an open platform with 5K app integrations & 50K developers[12]