RingCentral(US:RNG)2025-08-07 21:26PART I. FINANCIAL INFORMATION Financial Statements (unaudited) RingCentral's unaudited Q2 2025 financial statements report $620.4 million revenue, a 5% increase, and a shift to $13.2 million net income, with improved cash flow and debt reduction Condensed Consolidated Balance Sheets Total assets decreased to $1.61 billion by June 30, 2025, from $1.78 billion, while total liabilities reduced to $1.89 billion, improving the stockholders' deficit Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $168,113 | $242,811 | | Total current assets | $800,253 | $871,122 | | Total assets | $1,605,459 | $1,779,873 | | Liabilities & Stockholders' Deficit | | | | Total current liabilities | $1,233,090 | $748,799 | | Long-term debt, net | $632,903 | $1,347,881 | | Total liabilities | $1,892,597 | $2,131,343 | | Total stockholders' deficit | ($486,587) | ($550,919) | Condensed Consolidated Statements of Operations Q2 2025 total revenues grew 5% to $620.4 million, with income from operations reaching $37.0 million and net income at $13.2 million, a significant turnaround from prior year losses Q2 2025 vs Q2 2024 Statement of Operations (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total revenues | $620,398 | $592,907 | | Gross profit | $441,448 | $416,237 | | Income (loss) from operations | $36,963 | ($5,359) | | Net income (loss) | $13,193 | ($14,753) | | Diluted EPS | $0.14 | ($0.16) | Condensed Consolidated Statements of Cash Flows Net cash from operations increased to $317.1 million for the six months ended June 30, 2025, while financing activities used $353.8 million, primarily for debt repayments and stock repurchases Six-Month Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $317,076 | $223,175 | | Net cash used in investing activities | ($42,515) | ($63,992) | | Net cash used in financing activities | ($353,787) | ($180,871) | | Net decrease in cash | ($74,698) | ($22,867) | Notes to Condensed Consolidated Financial Statements Notes detail revenue disaggregation, debt structure including 2025 Convertible Notes settlement and 2030 Senior Notes repurchase, share repurchases, share-based compensation, and restructuring costs - Revenue from North America accounted for 88% of total revenues for the three months ended June 30, 202536 - As of June 30, 2025, the company had approximately $2.6 billion in remaining performance obligations, with 54% expected to be recognized as revenue over the next 12 months38 - In March 2025, the company settled the remaining $161.3 million principal of its 2025 Convertible Notes in cash; in June 2025, it repurchased $50.0 million of principal on its 2030 Senior Notes for $53.9 million5861 - The company incurred restructuring costs of $2.8 million and $9.9 million for the three and six months ended June 30, 2025, respectively, as part of efforts to optimize its cost structure113 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2025 financial performance, highlighting 5% revenue growth, $2.59 billion ARR, improved profitability from disciplined spending, significant debt reduction, and strong operating cash flow Overview and Key Business Metrics RingCentral's key business metrics show Annualized Exit Monthly Recurring Subscriptions (ARR) grew to $2.59 billion, a 6.6% increase, with Net Monthly Subscription Dollar Retention Rate consistently above 99% - The company's multi-product portfolio is centered on AI-powered solutions, including RingEX, RingCentral Contact Center, RingCX, and AI Receptionist127 Key Business Metrics | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Annualized Exit Monthly Recurring Subscriptions (ARR) | $2.59 billion | $2.43 billion | | Net Monthly Subscription Dollar Retention Rate | >99% | >99% | Results of Operations Q2 2025 total revenues increased 5%, driven by 6% subscription revenue growth, with gross margin at 71% and operating expenses decreasing to 65% of revenue, resulting in a 6% operating margin Revenue Comparison (in thousands) | Revenue Type | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Subscriptions | $598,728 | $567,058 | 6% | | Other | $21,670 | $25,849 | (16)% | | Total revenues | $620,398 | $592,907 | 5% | Operating Expense Comparison (in thousands) | Expense Category | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Research and development | $77,539 | $79,750 | (3)% | | Sales and marketing | $263,585 | $269,487 | (2)% | | General and administrative | $63,361 | $72,359 | (12)% | Liquidity and Capital Resources As of June 30, 2025, the company held $168.1 million in cash, repaid $271.3 million in debt, generated $317.1 million in operating cash flow, and repurchased $81.8 million in shares - The company reduced its outstanding debt by repaying $271.3 million of principal in the first half of 2025, including settling its 2025 Convertible Notes and repurchasing a portion of its 2030 Senior Notes170 - During the six months ended June 30, 2025, the company repurchased approximately 3.0 million shares for $81.8 million169 Non-GAAP Free Cash Flow Reconciliation (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $317,076 | $223,175 | | Capitalized expenditures | ($42,515) | ($37,701) | | Non-GAAP free cash flow | $274,561 | $185,474 | Quantitative and Qualitative Disclosures About Market Risk Primary market risks include foreign currency and interest rate fluctuations, with foreign currency risk currently low and interest rate risk mitigated by a swap agreement on the variable-rate Term Loan - The majority of sales contracts are denominated in U.S. dollars, limiting current foreign currency risk, though this risk may increase with international expansion190191 - The company uses a five-year floating-to-fixed interest rate swap to hedge against interest rate fluctuations on its variable-rate Term Loan194 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - As of June 30, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective197 - There were no material changes in the company's internal control over financial reporting during the quarter198 PART II. OTHER INFORMATION Legal Proceedings The company settled a CIPA class action lawsuit in July 2025, with the settlement amount accrued as a general and administrative expense in Q2 2025 - The company settled the CIPA class action lawsuit (Reuben v. RingCentral) in July 2025 and accrued the settlement amount during the quarter ended June 30, 202584201 Risk Factors Key risks include a history of net losses, intense competition, reliance on third-party vendors, service interruptions, cybersecurity threats, evolving AI legal landscape, regulatory compliance, and substantial debt obligations - The company has a history of significant losses and may not be able to achieve or sustain profitability in the future due to competition, macroeconomic conditions, and the need for continued investment206207 - Intense competition exists from providers such as Microsoft, Zoom, 8x8, and others, many of whom have greater resources, longer operating histories, and larger customer bases230231232 - The business relies on third-party vendors for critical services, including video (Zoom), contact center (NICE), and network connectivity, making it vulnerable to disruptions or changes in these relationships263292 - Servicing the company's substantial debt, including convertible notes, senior notes, and a term loan, requires significant cash flow and could constrain business flexibility and growth325330 Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 1,256,349 Class A Common Stock shares in Q2 2025, with $186.0 million remaining for repurchases, and the authorization subsequently increased to $500.0 million Q2 2025 Share Repurchase Activity | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 519,869 | $23.54 | | May 2025 | 0 | N/A | | June 2025 | 736,480 | $27.15 | | Total Q2 2025 | 1,256,349 | $25.62 (calculated) | - On July 30, 2025, the board of directors increased the share repurchase authorization to $500.0 million367 Other Information Key events include the appointment of Vaibhav Agarwal as new CFO on August 5, 2025, and director Robert Theis adopting a Rule 10b5-1 trading plan for stock sales - Effective August 5, 2025, Vaibhav Agarwal was appointed as the new Chief Financial Officer, succeeding Abhey Lamba373 - On May 22, 2025, director Robert Theis adopted a Rule 10b5-1 trading plan for the sale of up to 5,610 shares of Class A common stock370 Exhibits Exhibits include compensatory and transition agreements for CFO changes, along with CEO and CFO certifications required by the Sarbanes-Oxley Act - The report includes new compensatory and transition agreements related to the CFO change as exhibits 10.1, 10.2, and 10.3381 - Certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act are filed as exhibits381