Slide 1: Q4 2023 Earnings Presentation
Q4 2023 Earnings Presentation February 20, 2024 ©2024 RingCentral
Slide 2: Safe Harbor and Non-GAAP Measures
Safe Harbor and Non-GAAP Measures This presentation includes forward-looking statements within the meaning of the federal securities We do not provide guidance on forecasted GAAP EPS because of the inherent uncertainty and laws. These statements relate to, among other things, our business strategy a
Slide 3: RingCentral at a Glance
RingCentral at a Glance Global Scale 400K+ #1 In UCaaS Revenue ~4K Employees (2) 18 Languages + Customers Market Share (1) 46 MVP Countries Expanding Profitability with Consistent Customer Retention 82% 24% Q4’23 Adj. 20%Q4’23 99%+ Q4’23 Q4’23 Net Monthly Subscription Subscription GM% (3) EBITDA Mar
Slide 4: Strategic Priorities
Deliver durable growth and value from core Expand Total Addressable Strategic Market through Priorities multi-product portfolio Drive continued free cash flow (FCF) generation, materially reduce SBC, and maximize FCF/share growth 4 ©2024 RingCentral
Slide 5: At least $100M of ARR from new products by 2025-end
At least $100M of ARR $100M+ from new products by 2025-end RingCX Multi-product portfolio benefits: RingSense RingCentral Events 1 Attract new customers 2 Drive higher uptake with existing customers 3 Increase retention Today 2025-End 5 New products include RingCX, RingSense and RingCentral Events ©
Slide 6: Q4'23 Highlights
Q4’23 Highlights ARR Total Revenue Adj. Unlevered FCF(1) $2.33B $571M $97M Up 11% Y/Y Up 9% Y/Y Quarterly Record 1. Non-GAAP financial measure 6 ©2024 RingCentral
Slide 7: Overall Average Revenue per User (ARPU)
Overall Average Revenue per User (ARPU) Remains Steady $30 >$30 $20 $10 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 7 ©2024 RingCentral
Slide 8: Non-GAAP Subscriptions Gross Margin
Non-GAAP Subscriptions Gross Margin Above 80% 80% 60% 40% 20% Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 8 ©2024 RingCentral
Slide 9: Expanding Operating Margin - Quarterly
Expanding Operating Margin - Quarterly(1) Quarterly Record Drivers of margin expansion 20.5% Up 650 bps Operating leverage Y/Y in Q4’23 19.4% 19.1% Actively managing workforce 17.2% Lowering costs of acquiring new customers Vendor rationalization 14.0% 13.5% 11.3% 10.5% 10.4% Q4'21 Q1'22 Q2'22 Q3'22
Slide 10: Expanding Operating Margin - Annual
Expanding Operating Margin - Annual(1) 19.1% 12.4% 9.7% 10.2% 9.2% 2019A 2020A 2021A 2022A 2023A 10 ©2024 RingCentral (1) Non-GAAP Operating Margin
Slide 11: Net debt to LTM adjusted EBITDA
Net debt to LTM adjusted EBITDA(1) Significant adjusted EBITDA growth driven primarily by operational improvements 5.0x 4.6x 4.5x 4.3x 4.0x 3.7x 3.5x 3.2x 3.0x 3.0x 2.6x 2.5x 2.0x Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 1. See Appendix for calculation. 11 ©2024 RingCentral
Slide 12: Debt Maturity Profile
Debt Maturity Profile(1) $1,000M $650M $400M $400M $609M $390M $400M $161M 2024 2025 2026 2027 2028 2029 2030 Convertible Notes Convertible Notes Term Loan Senior Notes Remaining Repurchased / Repaid in 2023 12 1. Amounts reflect outstanding balances of the 2025 Convertible Notes, 2026 Convertible N
Slide 13: Q1 2024 Guidance
Q1 2024 Guidance Q1 2024 Subscriptions Revenue $550.0M to $555.0M Subscriptions Revenue Growth Y/Y 8% to 9% Total Revenue $575.0M to $580.0M Total Revenue Growth Y/Y 8% to 9% GAAP Operating Margin (5.2%) to (4.3%) Non-GAAP Operating Margin 19.5% Non-GAAP Tax Rate 22.5% Non-GAAP EPS $0.79 to $0.80 13
Slide 14: FY 2024 Guidance
FY 2024 Guidance 2024 Subscriptions Revenue $2,260M to $2,285M Subscriptions Revenue Growth Y/Y 8% to 9% Total Revenue $2,370M to $2,395M Total Revenue Growth Y/Y 8% to 9% GAAP Operating Margin (1.7%) to (0.9%) Non-GAAP Operating Margin 21.0% Non-GAAP Tax Rate 22.5% Non-GAAP EPS $3.50 to $3.58 Adj.
Slide 15: Adj. unlevered free cash flow margin expected to exceed SBC as % of revenue in 2024
Adj., unlevered free cash flow margin expected to exceed stock-based compensation expense as % of total revenue in 2024 25.0% 23.6% 20.0% Adj., unlevered 19.9% 19.7% 17.5% free cash flow margin 14.8% 15.0% 16.2% Stock based compensation as % of total revenue 10.0% 5.6% 5.2% 5.0% 0.0% 2021A 2022A 202
Slide 16: Appendix
Appendix 16
Slide 17: Total ARR
Total ARR $2,329 $2,265 $2,219 $2,161 $2,100 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 17 ©2024 RingCentral
Slide 18: Q4 2023 Financial Highlights
Q4 2023 Financial Highlights $ Metric Y/Y Growth Revenue Subscriptions Revenue $547M 9% Other Revenue $24M 3% Total Revenue $571M 9% ARR Total $2,329M 11% Customer ARR by Size1 Mid-Market and Enterprise $1,458M 12% Enterprise $1,005M 13% 1) Our reported results also include our annualized exit month
Slide 19: Q4 2023 Results vs Guidance
Q4 2023 Results vs Guidance Q4 Guidance Q4 Results Subscriptions Revenue $542.0M to $548.0M $547.4M Subscriptions Revenue Growth Y/Y 8% to 9% 9% Total Revenue $566.5M to $573.5M $571.3M Total Revenue Growth Y/Y 8% to 9% 9% GAAP Operating Margin (8.8%) to (6.7%) (7.9%) Non-GAAP Operating Margin 20.0%
Slide 20: Debt Profile at December 31, 2023
Debt Profile at December 31, 2023 (1) The Company repurchased $838.7 million principal amount of the 2025 Convertible Notes during the twelve months ended December 31, 2023 using $400.0 million of proceeds from the Term Loan, $359.7 million of proceeds from the 2030 Senior Notes, and $27.3 million o
Slide 21: Net debt to adjusted EBITDA
Net debt to adjusted EBITDA ($millions) Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4’23 Adj. EBITDA 65.5 72.7 87.0 92.7 112.3 125.0 127.8 138.0 LTM Adj. EBITDA 317.9 364.7 416.9 457.8 503.1 Total Debt 1,638.4 1,639.5 1,578.8 1,801.3 1,545.5 Total Cash 270.0 274.8 225.4 432.4 222.2 Net Debt 1,368.4 1
Slide 22: Reconciliation of Operating Income (Loss)
22 RINGCENTRAL, INC. RECONCILIATION OF OPERATING INCOME (LOSS) ‘(GAAP MEASURES TO NON-GAAP MEASURES ‘Revenues Subscriptions Other Total revenues Cost of revenues reconciliation (GAAP Subscriptions cost of revenues ‘Share-based compensation Amortization of acquisition intangibles ‘Third-party relocat
Slide 23: Reconciliation of Operating Income (Loss)
23 RINGCENTRAL, INC. RECONCILIATION OF OPERATING INCOME (LOSS) GAAP MEASURES TO NON-GAAP MEASURES Income (loss) from operations reconciliation GAAP loss from operations Share-based compensation Amortization of acquisition intangibles Asset write-down charge Third-party relocation and other costs Res
Slide 24: Reconciliation of Net Income (Loss)
24 RINGCENTRAL, INC. RECONCILIATION OF NET INCOME (LOSS) GAAP MEASURES TO NON-GAAP MEASURES (In thousands, except per share data) (Unaudited) Three Months Ended Year Ended December 31, December 31, 2023 2022 2023 2022 Net income (loss) income reconciliation GAAP net loss $ (47.243) $ (284,063) $ Sha
Slide 25: Reconciliation of Cash Flows from Operating Activities
25 RINGCENTRAL, INC. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES GAAP MEASURES TO NON-GAAP ADJUSTED, UNLEVERED FREE CASH FLOW MEASURES (Unaudited, in thousands) Net cash provided by operating activities Less: Capitalized expenditures Strategic partnerships Add: Restructuring and other pay
Slide 26: Reconciliation of Forecasted Operating Margin
26 RINGCENTRAL, INC. RECONCILIATION OF FORECASTED OPERATING MARGIN GAAP MEASURES TO NON-GAAP MEASURES GAAP revenues GAAP loss from operations GAAP operating margin Share-based compensation Amortization of acquired intangibles Restructuring costs Non-GAAP income from operations Non-GAAP operating mar