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RingCentral Announces Third Quarter 2016 Results

Software Subscriptions Revenue up 31%
RingCentral Office® ARR up 39%
GAAP Software Subscriptions Gross Margin of 79%; Non-GAAP: 80%

BELMONT, Calif.–October 25, 2016–RingCentral, Inc. (NYSE: RNG), a leading provider of cloud business communications and collaboration solutions, today announced financial results for the third quarter ended September 30, 2016.

Third Quarter Financial Highlights

  • Software subscriptions revenue grew 31% year-over-year to $91.9 million; total revenue was $96.8 million.
  • RingCentral Office® annualized exit recurring software subscriptions (ARR) grew 39% year-over-year to $316.8 million.
  • Total annualized exit recurring software subscriptions (ARR) grew 31% year-over-year to $389.5 million.
  • GAAP software subscriptions gross margin was 79.1%, up 3.4 points year-over-year, while Non-GAAP software subscriptions gross margin was 80.1%, up 3.6 points year-over-year.
  • GAAP operating margin was (7.3%), up 0.3 points year-over-year, while Non-GAAP operating margin was 2.3%, up 1.6 points year-over-year.
  • Net monthly subscriptions dollar retention: RingCentral Office® over 100% and overall subscriptions over 99%.

“In the third quarter, we executed well by balancing revenue growth, investments in enterprise, and expanding margins to drive results at the high-end or above our outlook,” said Vlad Shmunis, RingCentral’s Chairman and CEO. “Growth in our enterprise pipeline has accelerated meaningfully over the past three quarters, which we believe demonstrates the success of our focus on innovation and the investments we have made with our comprehensive go-to-market strategy. We were also honored to once again be placed in the leader’s quadrant and furthest to the right on vision in Gartner’s 2016 Magic Quadrant for UCaaS, further extending our leadership position.”

Financial Results for the Third Quarter 2016

  • Revenue: Total revenue was $96.8 million for the third quarter of 2016, up from $76.8 million in the third quarter of 2015. Software subscriptions revenue was $91.9 million for the third quarter of 2016, up from $70.3 million in the third quarter of 2015.
  • Pro Forma1 Revenue Comparison: Total revenue of $96.8 million in the third quarter of 2016, up from $74.5 million in the third quarter of 2015, representing 30% growth, adjusting for the agency model on a comparable basis.
  • Net Income (Loss) Per Share: GAAP net loss per share was ($0.11) for the third quarter of 2016 compared with ($0.09) for the third quarter of 2015. Non-GAAP net income per diluted share was $0.03 for the third quarter of 2016, compared with $0.00 per diluted share for the third quarter of 2015.
  • Balance Sheet: Total cash and cash equivalents at the end of the third quarter of 2016 was $152.4 million, compared with $147.8 million at the end of the second quarter of 2016.

Third Quarter 2016 and Recent Business Highlights

  • Placed by Gartner in the Leaders Quadrant for Unified Communications as a Service (UCaaS) Magic Quadrant. Gartner noted good customer satisfaction and named RingCentral the top UCaaS provider across multiple metrics.
  • Recognized with the 2016 North American Frost & Sullivan Award for Company of the Year for hosted Internet protocol telephony and UCaaS market. Frost & Sullivan noted that RingCentral stands out among cloud communications providers for its ability to assess evolving customer needs and implement best practices.
  • Won a 5,000 user deal at a multibillion-dollar restaurant chain with a total contract value over $3 million dollars.
  • Launched new Android and iOS native apps for RingCentral’s team messaging platform that are faster and higher performing as well as seamlessly integrated with RingCentral Office.
  • Introduced RingCentral CloudConnect, a service that allows enterprises the ability to use their preferred network service provider to directly connect to RingCentral Cloud. The connection is provided through a private data exchange enabling lower latency, greater network reliability and availability, and added security.
  • Announced a partnership with Intelisys, one of the nation’s key master agents in the US. Intelisys’ established international presence will enable RingCentral to further expand its global cloud communications footprint.

Conference Call Details:

  • What: RingCentral financial results for the third quarter of 2016 and outlook for the fourth quarter and full year of 2016.
  • When: Tuesday, October 25, 2016 at 1:30PM PT (4:30PM ET).
  • Dial in: To access the call in the United States, please dial (877) 705-6003, and for international callers dial (201) 493-6725. Callers may provide confirmation number 13647029 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: (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 13647029.

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, RingCentral Office, and the RingCentral logo are registered trademarks of RingCentral, Inc.

Forward-Looking Statements

This press release contains “forward-looking statements,” including but not limited to, statements regarding our future, our GAAP and non-GAAP guidance, our markets and strategic opportunities, our expectations regarding the growth in our enterprise pipeline, and our planned investments and innovation. 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 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 June 30, 2016, 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.

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