February 4, 2016

RingCentral Announces Revenue Growth of 35% for Fourth Quarter 2015

RingCentral Office® Annualized Exit Monthly Recurring Software Subscriptions up 45%

Date: February 4, 2016

BELMONT, Calif.--(BUSINESS WIRE)-- RingCentral, Inc. (NYSE: RNG), a leading provider of cloud business communications and collaboration solutions, today announced financial results for the fourth quarter and full year ended December 31, 2015.

Fourth Quarter Financial Highlights:

Overall revenue increased 35% year-over-year to $83.4 million; software subscriptions revenue increased 36% year-over-year to $76.5 million.
Total annualized exit monthly recurring software subscriptions were up 34% year-over-year to $317.4 million.
RingCentral Office® annualized exit monthly recurring software subscriptions were up 45% year-over-year to $247.4 million.
Net monthly subscriptions dollar retention: RingCentral Office® over 100% and overall over 99%
Non-GAAP software subscriptions gross margin improved 5.4 points to 78.7% in the fourth quarter of 2015 from 73.3% in the same period a year ago. GAAP software subscriptions gross margin improved 5.2 points to 78.0% in the fourth quarter of 2015 from 72.8% in the same period a year ago.
Non-GAAP operating margin improved to 1.0% up from (8.3%) in the fourth quarter of 2014. GAAP operating margin of (7.2%) improved from (15.1%) in the fourth quarter of 2014.

“Q4 was a strong finish to an outstanding year. In 2015 we exhibited a combination of solid top line growth and meaningful margin expansion, resulting in the company reaching profitability in Q3. We continued our rapid pace of innovation and expansion up-market, successfully launched two new major carrier partners, and were selected by Gartner as the UCaaS Magic Quadrant leader,” said Vlad Shmunis, RingCentral’s Chairman and CEO. “We finished the year with tremendous momentum. In Q4 we had strong revenue growth across all market segments, our highest gross margins to date, and excellent traction up-market.”

Financial Results of the Fourth Quarter 2015:

Revenue: Total revenue was $83.4 million for the fourth quarter of 2015, up 35% from the fourth quarter of 2014. Software subscriptions revenue was $76.5 million for the fourth quarter of 2015, up 36% from the fourth quarter of 2014.
Net Income (Loss): GAAP net income (loss) per diluted share was ($0.10) for the fourth quarter of 2015 compared with ($0.15) for the fourth quarter of 2014. Non-GAAP net income (loss) per diluted share was $0.01 for the fourth quarter of 2015, compared with ($0.08) per diluted share for the fourth quarter of 2014.
Balance Sheet: Total cash and short-term investments at the end of the fourth quarter of 2015 was $137.6 million, compared with $132.3 million at the end of the third quarter of 2015.

Financial Results of the Full Year 2015:

Revenue: Total revenue was $296.2 million for the full year of 2015, up 35% from the full year of 2014. Software subscriptions revenue was $271.2 million for the full year of 2015, up 36% from the full year of 2014.
Net Income (Loss): GAAP net income (loss) per diluted share was ($0.46) for the full year of 2015 compared with ($0.72) for the full year of 2014. Non-GAAP net income (loss) per diluted share was ($0.12) for the full year of 2015, compared with ($0.48) per diluted share for the full year of 2014.
Balance Sheet: Total cash and short-term investments at the end of 2015 was $137.6 million, down from $141.7 million at the end of 2014.

Fourth Quarter 2015 and Recent Business Highlights:

Launched RingCentral Global Office, designed to address needs of multinational enterprises. Connecting the global workforce across multiple countries, RingCentral Global Office reduces complexity and high costs for multinational enterprises that have multiple, legacy on-premise PBX systems with a single cloud solution.
Entered into an agreement with Westcon Group to distribute phones to RingCentral customers, removing phone revenue from the Company’s future P&L. Westcon has also become a VAR for the Company’s cloud business communications solutions.
Chosen by Google as a top partner and one of the first solutions in the “Recommended for Google Apps for Work” program.
Appointed David Sipes as Chief Revenue Officer, a newly created position to oversee the company’s worldwide go-to-market activities including sales, marketing, customer care, as well as business and corporate development.

Conference Call Details:

What: RingCentral financial results for the fourth quarter and full year of 2015 and outlook for the first quarter and full year of 2016.
When: Thursday, February 4, 2016 at 2PM PT (5PM ET).
Dial in: To access the call in the United States, please (877) 705-6003, and for international callers dial (201) 493-6725. Callers may provide confirmation number 13629019 to access the call more quickly, and are encouraged to dial into the call 10 to 15 minutes prior to the start to prevent any delay in joining.
Webcast: https://ir.ringcentral.com/ (live and replay).
Replay: A replay of the call will be available via telephone for seven days, beginning two hours after the call. To listen to the telephone replay in the U.S., please dial (877) 870-5176 from the United States or (858) 384-5517 internationally with recording access code 13629019.

About RingCentral

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

Forward-Looking Statements

This press release contains “forward-looking statements”, including statements regarding our future financial results, our continued expansion up-market, our pace of innovation and expansion up-market, and the removal of phone revenues from our future P&L. 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 exit successfully from direct phone sales and act as an agent to sell phones to our customers on behalf of Westcon; our ability to enter into and maintain relationships with carriers and other resellers; our ability to manage our expenses and growth; and general market, political, economic, and business conditions, as well as those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Form 10-Q for the quarter ended September 30, 2015, filed with the Securities and Exchange Commission; and in other filings we make with the Securities and Exchange Commission from time to time.

All forward-looking statements in this press release are based on information available to RingCentral as of the date hereof, and we undertake no obligation to update these forward-looking statements, to review or confirm analysts’ expectations, or to provide interim reports or updates on the progress of the current financial quarter.

Non-GAAP Financial Measures

Our reported financial results include certain Non-GAAP financial measures, including Non-GAAP operating income (loss) and Non-GAAP net income (loss) per share. We define Non-GAAP net income (loss) as net income (loss) excluding share-based compensation, acquisition related matters, intercompany translation gains or losses, and other one-time items.

We have included Non-GAAP operating income (loss) and Non-GAAP net income (loss) per share in this press release because they are key measures used by us to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short and long-term operational plans. In particular, the exclusion of certain expenses in calculating Non-GAAP operating income (loss) and Non-GAAP net income (loss) per share can provide a useful measure for period-to-period comparisons of our core business.

Although Non-GAAP operating income (loss) and Non-GAAP net income (loss) per share are frequently used by investors in their evaluations of companies, these non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Because of these limitations, these non-GAAP financial measures should be considered alongside other financial performance measures.

Our reported results also include our total annualized exit monthly recurring subscriptions, RingCentral Office® annualized exit monthly recurring subscriptions, and net monthly subscriptions dollar retention. We define our total annualized exit monthly recurring subscriptions as our total monthly recurring subscriptions multiplied by 12. Our total monthly recurring subscriptions equal the monthly value of all customer subscriptions in effect at the end of a given month. We believe this metric is a leading indicator of our anticipated subscriptions revenue. We calculate our RingCentral Office® annualized exit monthly recurring subscriptions in the same manner as we calculate our total annualized exit monthly recurring subscriptions, except that only customer subscriptions from RingCentral Office® customers are included when determining monthly recurring subscriptions for the purposes of calculating this key business metric. We define Dollar Net Change as the quotient of (i) the difference of our Monthly Recurring Subscriptions at the end of a period minus our Monthly Recurring Subscriptions at the beginning of a period minus our Monthly Recurring Subscriptions at the end of the period from new customers we added during the period, (ii) all divided by the number of months in the period. We define our Average Monthly Recurring Subscriptions as the average of the Monthly Recurring Subscriptions at the beginning and end of the measurement period.


RINGCENTRAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands)

	December 31, 2015		December 31, 2014
Assets
Current assets:
Cash and cash equivalents	$	137,588	$	113,182
Short-term investments		—		28,479
Accounts receivable, net		19,163		7,651
Inventory		2,317		1,710
Prepaid expenses and other current assets		11,978		8,767
Total current assets		171,046		159,789
Property and equipment, net		28,160		25,527
Goodwill		9,393		—
Intangibles, net		3,266		—
Other assets		2,948		3,021
Total assets	$	214,813	$	188,337
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	5,196	$	4,181
Accrued liabilities		34,702		29,236
Current portion of capital lease obligation		269		509
Current portion of long-term debt		3,750		16,764
Deferred revenue		36,657		25,586
Total current liabilities		80,574		76,276
Long-term debt		14,840		7,813
Sales tax liability		3,670		3,953
Capital lease obligation		181		535
Other long-term liabilities		5,416		3,255
Total liabilities		104,681		91,832

Stockholders’ equity:
Common stock		7		7
Additional paid-in capital		319,792		274,844
Accumulated other comprehensive loss		527		(251)
Accumulated deficit		(210,194)		(178,095)
Total stockholders’ equity		110,132		96,505
Total liabilities and stockholders’ equity	$	214,813	$	188,337


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

	Three Months Ended December 31,				Year Ended December 31,
	2015		2014		2015		2014
Revenues:
Services	$	76,532	$	56,430	$	271,245	$	200,098
Product		6,907		5,464		24,983		19,789
Total revenues		83,439		61,894		296,228		219,887
Cost of revenues:
Services		16,851		15,368		66,354		58,673
Product		6,011		4,554		20,917		18,100
Total cost of revenues		22,862		19,922		87,271		76,773
Gross profit		60,577		41,972		208,957		143,114

Operating expenses:
Research and development		15,312		12,104		52,924		44,582
Sales and marketing		38,378		28,485		139,851		104,827
General and administrative		12,883		10,726		47,114		38,910
Total operating expenses		66,573		51,315		239,889		188,319
Loss from operations		(5,996)		(9,343)		(30,932)		(45,205)
Other income (expense), net		(866)		(864)		(2,430)		(3,038)
Loss before provision (benefit) for income taxes		(6,862)		(10,207)		(33,362)		(48,243)
Provision (benefit) for income taxes		79		(87)		(1,263)		97
Net loss	$	(6,941)	$	(10,120)	$	(32,099)	$	(48,340)
Net loss per common share:
Basic and diluted	$	(0.10)	$	(0.15)	$	(0.46)	$	(0.72)
Weighted-average number of shares used in computing net loss per share:
Basic and diluted		71,420		68,318		70,069		66,818


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

	Year Ended December 31,
	2015				2014
Cash flows from operating activities:
Net loss		$	(32,099	)		$	(48,340	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			13,467				10,378
Share-based compensation			22,088				15,516
Tax benefit from release of valuation allowance			(1,411	)			—
Impairment of fixed assets			1,317				—
Non-cash interest and other expense related to debt			156				259
Net accretion of discount and amortization of premium on available-for-sale securities			616				—
Allowance for doubtful accounts			411				40
Loss on disposal of assets			322				100
Deferred income tax			(8	)			(35	)
Others			94				—
Changes in assets and liabilities:
Accounts receivable			(11,923	)			(4,646	)
Inventory			(606	)			401
Prepaid expenses and other current assets			(3,636	)			(3,553	)
Other assets			421				(1,012	)
Accounts payable			1,591				(510	)
Accrued liabilities			2,354				9,054
Deferred revenue			11,071				9,034
Other liabilities			861				1,884
Net cash provided by (used in) operating activities			5,086				(11,430	)
Cash flows from investing activities:
Proceeds from the maturity of available-for-sale securities			28,080				—
Purchases of property and equipment			(14,631	)			(17,267	)
Purchases of available-for-sale securities			—				(28,696	)
Capitalized internal-use-software			(2,513	)			(698	)
Cash paid in business combination, net of cash acquired			(4,670	)			—
Proceeds from restricted investments			100				—
Net cash provided by (used in)investing activities			6,366				(46,661	)
Cash flows from financing activities:
Net proceeds from public offerings of common stock			—				57,167
Proceeds from issuance of stock in connection with stock plans			19,524				9,487
Repayment of debt			(6,142	)			(9,909	)
Repayment of capital lease obligations			(594	)			(698	)
Payment of offering costs			—				(1,219	)
Taxes paid related to net share settlement of equity awards			(151	)			(41	)
Net cash provided by financing activities			12,637				54,787
Effect of exchange rate changes on cash and cash equivalents			317				108
Net increase (decrease) in cash and cash equivalents			24,406				(3,196	)
Cash and cash equivalents:
Beginning of period			113,182				116,378
End of period		$	137,588			$	113,182


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

	Three Months Ended December 31, 2015			Three Months Ended December 31, 2014			Year Ended December 31, 2015			Year Ended December 31,2014
Revenues:
Services	$	76,532		$	56,430		$	271,245		$	200,098
Product		6,907			5,464			24,983			19,789
Total Revenues		83,439			61,894			296,228			219,887
Cost of Revenues reconciliation:
GAAP Services cost of revenues		16,851			15,368			66,354			58,673
Share-based compensation		(586	)		(320	)		(2,054	)		(1,294	)
Non-GAAP services cost of revenues		16,265			15,048			64,300			57,379
GAAP Product cost of revenues		6,011			4,554			20,917			18,100
Gross margin reconciliation:
Non-GAAP Services		78.7	%		73.3	%		76.3	%		71.3	%
Non-GAAP Product		13.0	%		16.7	%		16.3	%		8.5	%
Non-GAAP Gross margin		73.3	%		68.3	%		71.2	%		65.7	%
Operating expenses reconciliation:
GAAP Research and development		15,312			12,104			52,924			44,582
Share-based compensation		(1,642	)		(917	)		(5,387	)		(3,343	)
Amortization		(151	)		-			(480	)		-
Acquisition related matters		(244	)		-			(575	)		-
Non-GAAP research and development		13,275			11,187			46,482			41,239
As a % of total revenues non-GAAP		15.9	%		18.1	%		15.7	%		18.8	%

GAAP Sales and marketing		38,378			28,485			139,851			104,827
Share-based compensation		(1,867	)		(1,599	)		(7,200	)		(5,260	)
Amortization		(105	)		-			(105	)		-
Non-GAAP sales and marketing		36,406			26,886			132,546			99,567
As a % of total revenues non-GAAP		43.6	%		43.4	%		44.7	%		45.3	%

GAAP General and administrative		12,883			10,726			47,114			38,910
Share-based compensation		(2,203	)		(1,374	)		(7,447	)		(5,619	)
Acquisition related matters		(39	)		-			(787	)		-
Non-GAAP general and administrative		10,641			9,352			38,880			33,291
As a % of total revenues non-GAAP		12.8	%		15.1	%		13.1	%		15.1	%
Loss from operations reconciliation:
GAAP loss from operations		(5,996	)		(9,343	)		(30,932	)		(45,205	)
Share-based compensation		6,298			4,210			22,088			15,516
Amortization		256			-			585			-
Acquisition related matters		283			-			1,362			-
Non-GAAP income (loss) from Operations		841			(5,133	)		(6,897	)		(29,689	)
Non-GAAP operating margin		1.0	%		-8.3	%		-2.3	%		-13.5	%
Net loss reconciliation:
GAAP Net loss		(6,941	)		(10,120	)		(32,099	)		(48,340	)
Share-based compensation		6,298			4,210			22,088			15,516
Amortization		256			-			585			-
Acquisition related matters		283			-			1,362
Tax benefit from release of valuation allowance		-			-			(1,411	)		-
Intercompany translation loss		594			348			928			755
Non-GAAP Net income (loss)	$	490		$	(5,562	)	$	(8,547	)	$	(32,069	)
Basic and diluted net loss per share
Reconciliation between GAAP and non-GAAP weighted average shares used in computing basic and diluted net income (loss) per share Weighted average number of shares used to compute net income (loss) per share		71,420			68,318			70,069			66,818
Effect of dilutive securities (stock options and restricted stock awards)		3,612			-			-			-
Non GAAP weighted average shares used for calculating Non GAAP net income (loss) per share		75,032			68,318			70,069			66,818
GAAP net loss per share	$	(0.10	)	$	(0.15	)	$	(0.46	)	$	(0.72	)
Non-GAAP net income (loss) per share	$	0.01		$	(0.08	)	$	(0.12	)	$	(0.48	)

Investor Relations Contact:
RingCentral
Darren Yip, 650-641-2220
or
Media Contact:
RingCentral
Jennifer Caukin, 650-561-6348
[email protected]

Source: RingCentral, Inc.

For additional information, please contact:

For additional information,
please contact:

RingCentral Contact:
Mariana Kosturos
[email protected]
650-562-6545
www.ringcentral.com

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