Slide 1: Q3 2023 Earnings Presentation
Q3 2023 Earnings Presentation November 6, 2023 ©2023 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% 23% Q3’23 Adj. 19%Q3’23 99%+ Q3’23 Q3’23 Net Monthly Subscription Subscription GM% (3) EBITDA Mar
Slide 4: Operational Focus Areas
Operational Focus Areas Innovate and build multi-product business Segment customers and key verticals more deeply Expand partnerships Grow internationally Increase operational productivity 4 ©2023 RingCentral
Slide 5: Q3'23 Highlights
Q3’23 Highlights ARR Total Revenue Adj. Unlevered FCF(1) $2.3B $558M $87M Up 11% Y/Y Up 10% Y/Y Up 161% Y/Y 1. Non-GAAP financial measure 5 ©2023 RingCentral
Slide 6: 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 6 ©2023 RingCentral
Slide 7: Non-GAAP Subscriptions Gross Margin
Non-GAAP Subscriptions Gross Margin 80% Above 80% 60% 40% 20% Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 7 ©2023 RingCentral
Slide 8: Expanding Operating Margin
Expanding Operating Margin(1) Drivers of margin expansion 19.4% 19.1% Up 560 bps Operating Leverage leverage Y/Y in Q3’23 Actively managing workforce 17.2% Lowering costs of acquiring new customers Vendor rationalization 14.0% 13.5% 11.3% 10.5% 10.5% 10.4% Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q
Slide 9: 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 2.5x 2.0x Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 1. See Appendix for calculation. 9 ©2023 RingCentral
Slide 10: Debt Maturity Profile
Debt Maturity Profile Sources available to address remaining 2025 Convertible Notes $1,000M • $238M of proceeds from 2030 Senior Notes currently on balance sheet • $75M incremental capacity from Term Loan A(1) $650M • Incremental free cash flow we expect to generate between now and maturity in March
Slide 11: Q4 2023 Guidance
Q4 2023 Guidance Q4 2023 Subscriptions Revenue Growth Y/Y 8% to 9% Total Revenue Growth Y/Y 8% to 9% Non-GAAP Operating Margin 20.0% Non-GAAP EPS $0.82 to $0.83 11 ©2023 RingCentral
Slide 12: FY 2023 Guidance
FY 2023 Guidance Prior Current Subscriptions Revenue Growth Y/Y 11% 11% Total Revenue Growth Y/Y 10% to 11% 11% Non-GAAP Operating Margin 18.5% to 19.0% 19.0% Non-GAAP EPS $3.11 to $3.25 $3.19 to $3.20 Adj. Unlevered Free Cash Flow $270 to $290 mil. $290 to $300 mil. 12 ©2023 RingCentral
Slide 13: Appendix
Appendix 13 ©2023 RingCentral
Slide 14: Total ARR
Total ARR $2,265 $2,219 $2,161 $2,100 $2,047 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 14 ©2023 RingCentral
Slide 15: Q3 2023 Financial Highlights
Q3 2023 Financial Highlights $ Metric Y/Y Growth Revenue Subscriptions Revenue $531M 10% Other Revenue $27M 5% Total Revenue $558M 10% ARR Total $2,265M 11% Customer ARR by Size1 Mid-Market and Enterprise $1,410M 13% Enterprise $966M 13% 1) Our reported results also include our annualized exit month
Slide 16: Q3 2023 Results vs Guidance
Q3 2023 Results vs Guidance Q3 Guidance Q3 Results Subscriptions Revenue $526M to $530M $531M Subscriptions Revenue Growth Y/Y 9% to 10% 10% Total Revenue $552M to $556M $558M Total Revenue Growth Y/Y 8% to 9% 10% GAAP Operating Margin (9.1%) to (7.3%) (9.7%) Non-GAAP Operating Margin 18.0% to 18.5%
Slide 17: Q4 2023 Guidance
Q4 2023 Guidance Q4 2023 Subscriptions Revenue $542.0M to $548.0M Subscriptions Revenue Growth Y/Y 8% to 9% Total Revenue $566.5M to $573.5M Total Revenue Growth Y/Y 8% to 9% GAAP Operating Margin (8.8%) to (6.7%) Non-GAAP Operating Margin 20.0% Non-GAAP Tax Rate 22.5% Non-GAAP EPS $0.82 to $0.83 17
Slide 18: FY 2023 Guidance
FY 2023 Guidance Prior Current Subscriptions Revenue $2,086M to $2,104M $2,095M to $2,101M Subscriptions Revenue Growth Y/Y 11% 11% Total Revenue $2,187M to $2,205M $2,198M to $2,205M Total Revenue Growth Y/Y 10% to 11% 11% GAAP Operating Margin (8.0%) to (6.3%) (9.3%) to (8.7%) Non-GAAP Operating M
Slide 19: Debt Profile at September 30, 2023
Debt Profile at September 30, 2023 Debt Instrument Maturity Date September 30, 2023 December 31, 2022 2025 Convertible Notes (1) March 1, 2025 $ 413,957 $ 1,000,000 2026 Convertible Notes (2) March 15, 2026 609,065 650,000 Term Loan under Credit Agreement February 14, 2028 395,000 -- Revolving Credi
Slide 20: Net debt to adjusted EBITDA
Net debt to adjusted EBITDA ($millions) Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Adj. EBITDA 63.4 65.5 72.7 87.0 92.7 112.3 125.0 127.8 LTM Adj. EBITDA 288.7 317.9 364.7 416.9 457.8 Total Debt 1,637.3 1,638.4 1,639.5 1,578.8 1,801.3 Total Cash(1) 305.4 270.0 274.8 225.4 432.4 Net Debt 1,331.9
Slide 21: Reconciliation of Operating Income (Loss)
RINGCENTRAL, INC. RECONCILIATION OF OPERATING INCOME (LOSS) GAAP MEASURES TO NON-GAAP MEASURES (Unaudited, in thousands) ‘Three Months Ended ‘Nine Months Ended 30, ber 30, 203 202 7023 2022 Revenues Subscriptions $ 531,030 $ 483,229 $1,552,956 $1,386,140 Other 27,34 25,803 78,202 Tats Total revenues
Slide 22: Reconciliation of Operating Income (Loss)
RINGCENTRAL, INC. RECONCILIATION OF OPERATING INCOME (LOSS) Three Months Ended Nine Months Ended September 30, September 30. 2023 2022 2023 2022 Income (loss) from operations reconciliation GAAP loss from operations (54,175) (182,559) (153,768) (393,865) Share-based compensation 113,091 96,983 320,7
Slide 23: Reconciliation of Net Income (Loss)
RINGCENTRAL, INC. RECONCILIATION OF NET INCOME (LOSS) GAAP MEASURES TO NON-GAAP MEASURES (in thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 2023 2022 Net income (loss) reconciliation GAAP net loss. S$ (42,116) S$ (284.616) $ (
Slide 24: Reconciliation of Cash Flows from Operating Activities
24 RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES RINGCENTRAL, INC. 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 25: Reconciliation of Forecasted Operating Margin
25 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 Third-party relocation and other costs, net Restructuring costs Non-GAAP i