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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________________________________
FORM 10-Q
_________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-36089
_________________________________________________________
RingCentral, Inc.
(Exact Name of Registrant as Specified in its Charter)
_________________________________________________________
Delaware94-3322844
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer
Identification No.)
20 Davis Drive
Belmont, California 94002
(Address of principal executive offices) (Zip Code)
(650) 472-4100
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common StockRNGNew York Stock Exchange
par value $0.0001
_________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No   x
As of May 1, 2024, there were 82,249,651 shares of Class A Common Stock issued and outstanding and 9,924,538 shares of Class B Common Stock issued and outstanding.



TABLE OF CONTENTS
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained principally in, but not limited to, the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates”, “believes”, “could”, “seeks”, “estimates”, “expects”, “intends”, “may”, “plans”, “potential”, “predicts”, “projects”, “should”, “will”, “would” or similar expressions and the negatives of those terms. Forward-looking statements include, but are not limited to, statements about:
our progress against short-term and long-term goals;
our future financial performance;
our anticipated growth, growth strategies and our ability to effectively manage that growth and effect these strategies;
our success in our target market segments;
anticipated trends, developments and challenges in our business and in the markets in which we operate, as well as general macroeconomic conditions and geopolitical conflicts;
our ability to scale to our desired goals, particularly the implementation of new processes and systems and the addition to our workforce;
the impact of competition in our industry and innovation by our competitors;
our ability to anticipate and adapt to future changes in our industry;
our ability to predict subscriptions revenues, formulate accurate financial projections, and make strategic business decisions based on our analysis of market trends;
our ability to anticipate market needs and develop new and enhanced solutions and subscriptions to meet those needs, and our ability to successfully monetize them;
our ability to successfully incorporate artificial intelligence (AI) and machine learning powered features into our solutions;
maintaining and expanding our customer base;
maintaining, expanding and responding to changes in our relationships with other companies;
maintaining and expanding our distribution channels, including our network of sales agents and resellers, and our strategic partnerships;
our success with our strategic partners and global service providers;
our ability to sell, market, and support our solutions and services;
our ability to expand our business to larger customers as well as expanding domestically and internationally;
our ability to realize increased purchasing leverage and economies of scale as we expand;
the impact of seasonality on our business;
the impact of any failure of our solutions or solution innovations, including our innovations relating to AI;
our reliance on our third-party product and service providers;
the potential effect on our business of litigation to which we may become a party;
our liquidity and working capital requirements;
the impact of changes in the regulatory environment including with respect to AI;
our ability to protect our intellectual property and rely on open source licenses;
our expectations regarding the growth and reliability of the internet infrastructure;
3

the timing of acquisitions of, or making and exiting investments in, other entities, businesses or technologies;
our ability to successfully and timely execute on, integrate, and realize the benefits of any acquisition, investment, strategic partnership, or other strategic transaction we may make or undertake;
our capital expenditure projections;
our capital allocation plans, including expected allocations of cash and timing for any share repurchases and other investments;
our Credit Agreement, including both the Term Loan and the Revolving Credit Facility (each as defined below);
the estimates and estimate methodologies used in preparing our condensed consolidated financial statements;
the political environment and stability in the regions in which we or our subcontractors operate;
the impact of economic downturns on us and our customers;
our ability to defend our systems and our customer information from fraud and cyber-attack;
our ability to prevent the use of fraudulent payment methods for our solutions;
our ability to retain key employees and to attract qualified personnel;
our ability to successfully implement our plans for reductions in workforce or otherwise achieve the anticipated cost reductions; and
the impact of foreign currencies on our non-U.S. business as we expand our business internationally.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be significantly different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in the section entitled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report on Form 10-Q. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be significantly different from what we expect.
Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ significantly from those anticipated in these forward-looking statements, even if new information becomes available in the future.
4

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
RINGCENTRAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
March 31,
2024
December 31,
2023
Assets  
Current assets  
Cash and cash equivalents$203,130 $222,195 
Accounts receivable, net371,357 364,438 
Deferred and prepaid sales commission costs184,816 184,620 
Prepaid expenses and other current assets71,728 77,396 
Total current assets831,031 848,649 
Property and equipment, net182,736 184,390 
Operating lease right-of-use assets39,615 42,989 
Deferred and prepaid sales commission costs, non-current381,175 395,724 
Goodwill66,903 67,370 
Acquired intangibles, net358,850 393,767 
Other assets12,793 12,024 
Total assets$1,873,103 $1,944,913 
Liabilities, Temporary Equity, and Stockholders’ Deficit
Current liabilities
Accounts payable$24,030 $53,295 
Accrued liabilities312,405 325,632 
Current portion of long-term debt, net180,923 20,000 
Deferred revenue246,690 233,619 
Total current liabilities764,048 632,546 
Long-term debt, net1,360,457 1,525,482 
Operating lease liabilities25,616 28,178 
Other long-term liabilities45,901 61,827 
Total liabilities2,196,022 2,248,033 
Commitments and contingencies (Note 9)
Series A convertible preferred stock199,449 199,449 
Stockholders’ deficit
Common stock9 9 
Additional paid-in capital1,210,366 1,204,781 
Accumulated other comprehensive loss(5,113)(8,223)
Accumulated deficit(1,727,630)(1,699,136)
Total stockholders’ deficit(522,368)(502,569)
Total liabilities, temporary equity and stockholders’ deficit$1,873,103 $1,944,913 
See accompanying notes to condensed consolidated financial statements
5

RINGCENTRAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
Three Months Ended
March 31,
20242023
Revenues  
Subscriptions$557,487 $508,294 
Other26,724 25,395 
Total revenues584,211 533,689 
Cost of revenues
Subscriptions143,650 136,425 
Other26,829 24,251 
Total cost of revenues170,479 160,676 
Gross profit413,732 373,013 
Operating expenses
Research and development80,528 85,241 
Sales and marketing272,730 260,212 
General and administrative71,373 82,091 
Total operating expenses424,631 427,544 
Loss from operations(10,899)(54,531)
Other income (expense), net
Interest expense(16,254)(2,212)
Other income1,944 5,429 
Other income (expense), net(14,310)3,217 
Loss before income taxes(25,209)(51,314)
Provision for income taxes3,285 3,085 
Net loss$(28,494)$(54,399)
Net loss per common share
Basic and diluted$(0.31)$(0.57)
Weighted-average number of shares used in computing net loss per share
Basic and diluted93,142 95,720 
See accompanying notes to condensed consolidated financial statements
6

RINGCENTRAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited, in thousands)
Three Months Ended
March 31,
20242023
Net loss$(28,494)$(54,399)
Other comprehensive income (loss)
Foreign currency translation adjustments(3,241)1,760 
Unrealized gain on derivative instruments6,351  
Total other comprehensive income3,110 1,760 
Comprehensive loss$(25,384)$(52,639)
See accompanying notes to condensed consolidated financial statements
7

RINGCENTRAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited, in thousands)
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders’ Deficit
SharesAmount
Balance as of December 31, 202393,467 $9 $1,204,781 $(8,223)$(1,699,136)$(502,569)
Issuance of common stock in connection with Equity Incentive and Employee Stock Purchase plans, net of tax withholdings1,765 — (2,020)— — (2,020)
Issuance of common stock in connection with strategic partnership arrangement255 — 7,972 — — 7,972 
Repurchases of common stock(2,364)— (80,635)— — (80,635)
Share-based compensation— — 80,268 — — 80,268 
Other comprehensive income— — — 3,110 — 3,110 
Net loss— — — — (28,494)(28,494)
Balance as of March 31, 202493,123 $9 $1,210,366 $(5,113)$(1,727,630)$(522,368)
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders’ Deficit
SharesAmount
Balance as of December 31, 202295,385 $10 $1,059,880 $(8,781)$(1,533,896)$(482,787)
Issuance of common stock in connection with Equity Incentive and Employee Stock Purchase plans, net of tax withholdings1,108 — (1,641)— — (1,641)
Issuance of common stock in connection with strategic partnership arrangement1,265 — 42,585 — — 42,585 
Repurchases of common stock(2,160)— (74,776)— — (74,776)
Share-based compensation— — 97,303 — — 97,303 
Other comprehensive income— — — 1,760 — 1,760 
Net loss— — — — (54,399)(54,399)
Balance as of March 31, 202395,598 $10 $1,123,351 $(7,021)$(1,588,295)$(471,955)

See accompanying notes to condensed consolidated financial statements
8

RINGCENTRAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Three Months Ended
March 31,
20242023
Cash flows from operating activities  
Net loss$(28,494)$(54,399)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization56,651 57,518 
Share-based compensation88,168 98,191 
Unrealized loss on investments 1,646 
Amortization of deferred and prepaid sales commission costs38,599 32,211 
Amortization of debt discount and issuance costs1,003 1,119 
Reduction of operating lease right-of-use assets5,074 5,053 
Provision for bad debt1,562 2,732 
Other534 (175)
Changes in assets and liabilities:
Accounts receivable(8,481)(6,749)
Deferred and prepaid sales commission costs(35,937)(19,403)
Prepaid expenses and other assets6,397 (10,289)
Accounts payable(28,732)(18,936)
Accrued and other liabilities(9,935)15,013 
Deferred revenue13,071 10,208 
Operating lease liabilities(3,386)(5,207)
Net cash provided by operating activities96,094 108,533 
Cash flows from investing activities
Purchases of property and equipment(6,133)(8,723)
Capitalized internal-use software(13,276)(12,596)
Net cash used in investing activities(19,409)(21,319)
Cash flows from financing activities
Proceeds from issuance of stock in connection with stock plans 95 
Payments for taxes related to net share settlement of equity awards(2,020)(1,736)
Payments for repurchases of common stock(80,468)(74,501)
Payments for fees on long-term debt(1,867)(5,191)
Repayments of principal on long-term debt(5,000) 
Repayments for financing obligations(1,224)(1,393)
Payments for contingent consideration(4,086) 
Net cash used in financing activities(94,665)(82,726)
Effect of exchange rate changes(1,085)332 
Net increase (decrease) in cash, cash equivalents, and restricted cash(19,065)4,820 
Cash, cash equivalents, and restricted cash
Beginning of period222,195 269,984 
End of period$203,130 $274,804 
Supplemental disclosure of cash flow data:
Cash paid for interest, net of interest rate swap$23,364 $63 
Cash paid for income taxes, net of refunds$4,895 $2,406 
Non-cash investing and financing activities
Common stock issued in connection with strategic partnership arrangement$7,972 $42,585 
Equipment and capitalized internal-use software purchased and unpaid at period end$3,328 $3,212 
Acquisition of intangibles$ $3,629 
Equipment acquired under financing obligations$ $2,997 
See accompanying notes to condensed consolidated financial statements
9

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1. Description of Business and Summary of Significant Accounting Policies
Description of Business
RingCentral, Inc. (the “Company”) is a leading provider of AI-driven global enterprise cloud communications, video meetings, collaboration, and contact center software-as-a-service solutions. The Company was incorporated in California in 1999 and was reincorporated in Delaware on September 26, 2013.
Basis of Presentation and Consolidation
The Company’s unaudited condensed consolidated financial statements and accompanying notes reflect all adjustments (all of which are normal, recurring in nature and those discussed in these notes) that are, in the opinion of management, necessary for a fair presentation of the interim periods presented. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending December 31, 2024. Certain information and note disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted under the rules and regulations of the Securities and Exchange Commission (“SEC”).
The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 22, 2024, as amended on April 24, 2024.
The Company’s significant accounting policies are described in Company’s Annual Report on Form 10-K for the year ended December 31, 2023. There have been no significant changes to these policies that have had a material impact on the condensed consolidated financial statements and related notes for the three months ended March 31, 2024.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The significant estimates made by management affect revenues, the allowance for doubtful accounts, deferred and prepaid sales commission costs, goodwill, useful lives of intangible assets, share-based compensation, capitalization of internally developed software, return reserves, derivative instruments, provision for income taxes, uncertain tax positions, valuation of contingent consideration, loss contingencies, sales tax liabilities and accrued liabilities. Management periodically evaluates these estimates and will make adjustments prospectively based upon the results of such periodic evaluations. Actual results may differ from these estimates.
Segment Information
The Company has determined the chief executive officer is the chief operating decision maker. The Company’s chief executive officer reviews financial information presented on a consolidated basis for purposes of assessing performance and making decisions on how to allocate resources. Accordingly, the Company has determined that it operates in a single reportable segment.
Concentrations
As of March 31, 2024 and December 31, 2023, none of the Company’s customers accounted for more than 10% of the Company’s total accounts receivable.
Long-lived assets by geographic location is based on the location of the legal entity that owns the asset. As of March 31, 2024 and December 31, 2023, approximately 94% of the Company’s consolidated long-lived assets were located in the U.S. No other single country outside of the U.S. represented more than 10% of the Company’s consolidated long-lived assets as of March 31, 2024 and December 31, 2023.
10

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Related Party Transactions
All contracts with related parties are executed in the ordinary course of business. There were no material related party transactions for three months ended March 31, 2024 and 2023, and no material amounts payable to or amounts receivable from related parties as of March 31, 2024 and December 31, 2023, respectively.
Asset Write-down Charges
Asset write-down charges consist of write-offs related to our assets, including deferred and prepaid sales commission. The Company performs periodic reviews to assess the recoverability of such assets, whenever events or changes in circumstances have occurred that could indicate the carrying amount of such assets may not be recoverable. An impairment loss is recognized if the carrying value of deferred commission asset exceeds the amount of consideration that the Company expects to receive in the future in exchange for goods or services to which the asset relates, less the costs that relate directly to providing those goods or services that have not yet been recognized.
Recent Accounting Pronouncements Not Yet Adopted
In November 2023, the FASB issued ASU 2023-07 Segment Reporting - Improving Reportable Segment Disclosures (Topic 280). The update is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The ASU requires disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker (CODM), a description of other segment items by reportable segment, and any additional measures of a segment’s profit or loss used by the CODM when deciding how to allocate resources. The ASU also requires all annual disclosures currently required by Topic 280 to be included in interim periods. The update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted and requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the impact that the updated standard will have on its financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-09.
Note 2. Revenue
The Company derives its revenues primarily from subscriptions, sale of products, and professional services. Revenues are recognized when control is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services or products.
Disaggregation of revenue
Revenue by geographic location is based on the billing address of the customer. The following table provides information about disaggregated revenue by primary geographical markets:
Three Months Ended
March 31,
 20242023
Primary geographical markets  
North America90 %91 %
Others10 9 
Total revenues100 %100 %
The Company derived over 90% of subscription revenues from RingEX (formally RingCentral MVP) and RingCentral contact center solutions for the three months ended March 31, 2024 and 2023. For the three months ended March 31, 2024 and 2023, RingCentral contact center solutions represented over 10% of total revenues.
11

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Deferred revenue
During the three months ended March 31, 2024, the Company recognized revenue of $140.8 million that was included in the corresponding deferred revenue balance at the beginning of the year.
Remaining performance obligations
The typical subscription term ranges from one month to five years. Contract revenue as of March 31, 2024 that has not yet been recognized was approximately $2.5 billion. This excludes contracts with an original expected length of less than one year. Of these remaining performance obligations, the Company expects to recognize revenue of 52% of this balance over the next 12 months and 48% thereafter.
Other revenues
Other revenues are primarily comprised of product revenue from the sale of pre-configured phones, and professional services. Product revenues from the sale of pre-configured phones were $13.1 million and $10.2 million for the three months ended March 31, 2024 and 2023, respectively.
Note 3. Financial Statement Components
Cash and cash equivalents consisted of the following (in thousands):
March 31, 2024December 31, 2023
Cash$92,836 $113,733 
Money market funds110,294 108,462 
Total cash and cash equivalents$203,130 $222,195 
As of March 31, 2024 and December 31, 2023, $1.1 million in the cash balance above, respectively, represents restricted cash, which is held in the form of a bank deposit for issuance of a foreign bank guarantee.
Accounts receivable, net consisted of the following (in thousands):
March 31, 2024December 31, 2023
Accounts receivable$289,029 $280,544 
Unbilled accounts receivable97,815 96,366 
Allowance for doubtful accounts(15,487)(12,472)
Accounts receivable, net$371,357 $364,438 
Prepaid expenses and other current assets consisted of the following (in thousands):
March 31, 2024December 31, 2023
Prepaid expenses$33,823 $32,440 
Inventory2,089 1,492 
Other current assets35,816 43,464 
Total prepaid expenses and other current assets$71,728 $77,396 
Property and equipment, net consisted of the following (in thousands):
12

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2024December 31, 2023
Computer hardware and software$241,308 $238,802 
Internal-use software development costs270,581 255,649 
Furniture and fixtures9,143 8,964 
Leasehold improvements14,295 14,369 
Total property and equipment, gross535,327 517,784 
Less: accumulated depreciation and amortization(352,591)(333,394)
Property and equipment, net$182,736 $184,390 
Total depreciation and amortization expense related to property and equipment was $21.7 million and $20.3 million for the three months ended March 31, 2024 and 2023, respectively.
A summary of activity of the Company’s carrying value of goodwill during the three months ended March 31, 2024 is presented in the following table (in thousands):
Balance as of December 31, 2023$67,370 
Foreign currency translation adjustments(467)
Balance as of March 31, 2024$66,903 
The carrying values of intangible assets are as follows (in thousands):
March 31, 2024December 31, 2023
Weighted-Average Remaining Useful LifeCostAccumulated
Amortization
Acquired
Intangibles, Net
CostAccumulated
Amortization
Acquired
Intangibles, Net
Customer relationships
2.3 years
$26,312 $22,112 $4,200 $26,506 $21,834 $4,672 
Developed technology
2.6 years
803,905 449,255 354,650 826,077 436,982 389,095 
Total acquired intangible assets$830,217 $471,367 $358,850 $852,583 $458,816 $393,767 
During the three months ended March 31, 2024, the Company retired $22.1 million of fully amortized developed technology.
Amortization expense from acquired intangible assets for the three months ended March 31, 2024 and 2023 was $34.9 million and $37.2 million, respectively. Amortization of developed technology is included in cost of revenues and amortization of customer relationships is included in sales and marketing expenses in the Condensed Consolidated Statements of Operations.
Estimated amortization expense for acquired intangible assets for the following fiscal years is as follows (in thousands):
2024 (remaining)$104,474 
2025138,521 
2026115,448 
202787 
2028 onwards320 
Total estimated amortization expense$358,850 
13

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Accrued liabilities consisted of the following (in thousands):
March 31, 2024December 31, 2023
Accrued compensation and benefits$48,342 $63,009 
Accrued sales, use, and telecom related taxes48,109 43,796 
Accrued marketing and sales commissions56,273 60,528 
Operating lease liabilities, short-term17,575 16,707 
Other accrued expenses142,106 141,592 
Total accrued liabilities$312,405 $325,632 
Deferred and Prepaid Sales Commission Costs
Amortization expense for the deferred and prepaid sales commission costs was $38.6 million and $32.2 million for the three months ended March 31, 2024 and 2023, respectively. There was no impairment loss in relation to the deferred commissions costs capitalized for the periods presented.
Supplier Financing Obligations
The Company has established financing arrangements with certain third-party financial institutions and participating suppliers to be repaid over different terms ranging up to five years. Some of these financing arrangements are collateralized against property and equipment. As of March 31, 2024 and December 31, 2023, the Company’s outstanding financing obligations related to such arrangements included in accrued liabilities and other long-term liabilities were $2.9 million and $4.2 million respectively.
Note 4. Fair Value of Financial Instruments
The Company measures and reports certain cash equivalents, including money market funds and certificates of deposit, derivative interest rate swap agreement, and contingent consideration at fair value in accordance with the provisions of the authoritative accounting guidance that addresses fair value measurements. This guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:
Level 1:    Observable inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2:    Other inputs, such as quoted prices for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.
Level 3:    Unobservable inputs that are supported by little or no market activity and that are based on management’s assumptions, including fair value measurements determined by using pricing models, discounted cash flow methodologies or similar techniques.
The financial instruments carried at fair value were determined using the following inputs (in thousands):
14

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Fair Value at
March 31, 2024
Level 1Level 2Level 3
Cash equivalents:    
Money market funds$110,294 $110,294 $ $ 
Other assets:
Interest rate swap derivatives
$4,373 $ $4,373 $ 
Other long-term liabilities:
Interest rate swap derivatives
$534 $ $534 $ 
Contingent consideration$7,461 $ $ $7,461 
Fair Value at
December 31, 2023
Level 1Level 2Level 3
Cash equivalents:    
Money market funds$108,462 $108,462 $ $ 
Other assets:
Interest rate swap derivatives
$3,505 $ $3,505 $ 
Other long-term liabilities:
Interest rate swap derivatives
$6,017 $ $6,017 $ 
Contingent consideration$7,461 $ $ $7,461 
The Company’s other financial instruments, including accounts receivable, other current assets, accounts payable, accrued liabilities and other liabilities, are carried at cost, which approximates fair value due to the relatively short maturity of those instruments.
Fair Value of Long-Term Debt
As of March 31, 2024, the fair value of the 0% convertible notes due 2025 (the “2025 Convertible Notes”) was approximately $152.7 million, and the 0% convertible notes due 2026 (the “2026 Convertible Notes”) was approximately $551.2 million. The fair value for these convertible notes was determined based on the quoted price for such notes in an inactive market on the last trading day of the reporting period and is considered as Level 2 in the fair value hierarchy.
As of March 31, 2024, the carrying amount of the Term Loan was $385.0 million. As there are no embedded features or other variable features, the fair value of the Term Loan approximated its carrying value.
As of March 31, 2024, the fair value of the 8.5% senior notes due 2030 (the “2030 Senior Notes”) was approximately $416.0 million. The fair value for the 2030 Senior Notes was determined based on the quoted price for such notes in an inactive market on the last trading day of the reporting period and is considered as Level 2 in the fair value hierarchy.
Fair Value of Derivative Instruments
The Company’s interest rate swap derivative, which is considered as Level 2 in the fair value hierarchy, is valued using a discounted cash flow model that utilizes observable inputs including forward interest rate data at the measurement date.
Contingent Consideration
The contingent consideration as presented in the fair-value table above is related to the Company’s acquisition of Hopin in the third quarter of 2023, and represents the future potential earn-out payments based on the achievement of specified performance targets over multiple years, paid quarterly in cash. The fair value of the contingent consideration liability was determined using a Monte Carlo simulation that includes significant unobservable inputs including the discount rate and projected revenues over the earn-out period. This contingent liability was classified as level 3 within the fair value hierarchy. There was no change in the estimated fair value of the contingent consideration during the three months ended March 31, 2024.
15

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 5. Long-Term Debt
The following table sets forth the net carrying amount of the Company’s long-term debt (in thousands):
Debt InstrumentMaturity DateMarch 31, 2024December 31, 2023
2025 Convertible NotesMarch 1, 2025$161,326 $161,326 
2026 Convertible NotesMarch 15, 2026609,065 609,065 
Term Loan under Credit Agreement (1)
February 14, 2028385,000 390,000 
Revolving Credit Facility under Credit Agreement (2)
February 14, 2028  
2030 Senior Notes
August 15, 2030400,000 400,000 
Total principal amount1,555,391 1,560,391 
Less: unamortized debt discount and issuance costs on long-term debt(14,011)(14,909)
Less: current portion of long-term debt, net (3)
(180,923)(20,000)
Net carrying amount of long-term debt$1,360,457 $1,525,482 
(1)The Company has $75.0 million available for drawdown under the Term Loan as of March 31, 2024.
(2)The Company has $225.0 million available for borrowing under the Revolving Credit Facility as of March 31, 2024.
(3)The current portion of long-term debt, net as of March 31, 2024 relates to $160.9 million net carrying amount from the 2025 Convertible Notes, and $20.0 million of expected principal payments due on the Term Loan. The Term Loan requires quarterly principal payments equal to 1.25% of the original $400.0 million aggregate principal amount with balance due at maturity.
The following table sets forth the future minimum principal payments for long-term debt as of March 31, 2024 (in thousands):
2025 Convertible Notes2026 Convertible NotesTerm Loan2030 Senior NotesTotal
2024 remaining$ $ $15,000 $ $15,000 
2025161,326  20,000  181,326 
2026 609,065 20,000  629,065 
2027  20,000  20,000 
2028 onwards  310,000 400,000 710,000 
Total principal amount$161,326 $609,065 $385,000 $400,000 $1,555,391 
2030 Senior Notes
On August 16, 2023, the Company issued $400.0 million aggregate principal amount of the 2030 Senior Notes in a private offering. The total net proceeds from the debt offering, after deducting $5.5 million initial purchase discounts and $2.6 million debt issuance costs, were approximately $391.9 million. The 2030 Senior Notes are senior unsecured obligations of the Company and bear interest at a fixed rate of 8.5% per annum payable semi-annually in arrears on February 15th and August 15th of each year. The 2030 Senior Notes will mature on August 15, 2030, unless redeemed or repurchased earlier, and are subject to the terms and conditions set forth in the indenture governing the 2030 Senior Notes (the “Senior Notes Indenture”). As of March 31, 2024, the carrying value of the 2030 Senior Notes, net of unamortized debt discount and issuance costs, was $392.5 million.
The 2030 Senior Notes are or will be, as applicable, fully and unconditionally guaranteed on a senior unsecured basis by each of the Company’s existing and future domestic subsidiaries that guarantee indebtedness of the Company under the Credit Agreement.
16

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
The Senior Notes Indenture also requires compliance with certain covenants, including the ability to create certain liens on assets to secure debt, the ability to grant subsidiary guarantees of certain debt without also providing guarantees of the 2030 Senior Notes by such subsidiary and certain change of control transactions, events of default, and other customary provisions. As of March 31, 2024, the Company was in compliance with all covenants under the Senior Notes Indenture.
The Company may redeem the 2030 Senior Notes, in whole or in part, at any time prior to August 15, 2026 at a price equal to 100% of the principal amount thereof plus a “make-whole” premium and accrued and unpaid interest, if any. The Company may redeem the 2030 Senior Notes, in whole or in part, on or after August 15, 2026, at the redemption prices set forth in the Senior Notes Indenture, plus, in each case, accrued and unpaid interest thereon, if any. In addition, at any time prior to August 15, 2026, the Company may, on any one or more occasions, redeem up to 40% of the aggregate principal amount of the 2030 Senior Notes outstanding under the Senior Notes Indenture with the net cash proceeds of one or more equity offerings at a redemption price equal to 108.5% of the principal amount of the 2030 Senior Notes to be redeemed, plus accrued and unpaid interest thereon, if any, so long as 50% of the original aggregate amount of the 2030 Senior Notes remains outstanding immediately after such redemption.
If the Company experiences a change of control triggering event (as defined in the Senior Notes Indenture), holders of the 2030 Senior Notes may require the Company to repurchase the 2030 Senior Notes at a repurchase price equal to 101% of the principal amount of the 2030 Senior Notes to be repurchased, plus accrued and unpaid interest, if any.
Debt issuance costs were capitalized in the Condensed Consolidated Balance Sheets and amortized as interest expense using the effective interest rate method over the term of the 2030 Senior Notes. The effective interest rate on the 2030 Senior Notes, which is calculated as the contractual interest rate adjusted for the debt discount and issuance costs was 8.9% as of March 31, 2024.
Credit Agreement
On February 14, 2023, the Company entered into a Credit Agreement with certain lenders from time to time party thereto. The Credit Agreement originally provided for a $200.0 million revolving loan facility (the “Revolving Credit Facility”), with a $25.0 million sub-limit for the issuance of letters of credit, and a $400.0 million delayed draw term loan facility (the “Term Loan”). On August 15, 2023, the Company entered into the first amendment to the Credit Agreement to increase the Revolving Credit Facility by $25.0 million to an aggregate principal amount of $225.0 million. On November 2, 2023, the Company entered into the second amendment to the Credit Agreement to increase the Term Loan by $75.0 million to an aggregate principal amount of $475.0 million (collectively, as amended, the “Credit Agreement”). The proceeds of the loans under the Revolving Credit Facility may be used for working capital and general corporate purposes. The proceeds of the loans under the remaining $75.0 million tranche of the Term Loan commitments may be used to repurchase a portion of the Company’s convertible notes and for working capital and general corporate purposes. The Revolving Credit Facility and the Term Loan commitments terminate, and all outstanding loans thereunder are due and payable, on February 14, 2028. The obligations under the Credit Agreement are guaranteed by certain material domestic subsidiaries of the Company, and secured by substantially all of the personal property of the Company and such subsidiary guarantors. As of March 31, 2024, the Company was in compliance with all covenants under the Credit Agreement.
In the second quarter of 2023, the Company fully drew down the then existing Term Loan of $400.0 million and the proceeds were used to repurchase a portion of the 2025 Convertible Notes, in accordance with the terms of the Credit Agreement. As of March 31, 2024, $75.0 million of Term Loan commitments remain available for draw until August 2, 2024. If on any date that is within 91 days prior to the final scheduled maturity date of any series of the Convertible Notes, such series of Convertible Notes is in an aggregate principal amount outstanding that exceeds an amount equal to 50% of last twelve months EBITDA, calculated as set forth in the Credit Agreement, the maturity date of both the Revolving Credit Facility and Term Loan shall automatically be modified to be such date.
Borrowings under the Credit Agreement will bear interest, at the Company’s option, at either: (a) the fluctuating rate per annum equal to the greatest of (i) the prime rate then in effect, (ii) the federal funds rate then in effect, plus 0.5% per annum, and (iii) an adjusted term SOFR rate determined on the basis of a one-month interest period, plus 1.0%, in each case, plus a margin of between 1.0% and 2.0%; and (b) an adjusted term SOFR rate (based on one, three or six month interest periods), plus a margin of between 2.0% and 3.0%. The applicable margin in each case is determined based on the Company’s total net leverage ratio. Interest is payable quarterly in arrears with respect to borrowings bearing interest at the alternate base rate or on the last day of an interest period, but at least every three months, with respect to borrowings bearing interest at the term SOFR rate.
17

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Debt issuance costs capitalized in the Condensed Consolidated Balance Sheets in connection with the Credit Agreement are amortized primarily using the effective interest rate method over the term of the Credit Agreement. The effective interest rate on the Term Loan, which is calculated as the contractual interest rate adjusted for the debt discount and issuance costs, was 8.2% as of March 31, 2024. As of March 31, 2024, the carrying value of the Term Loan under Credit Agreement, net of unamortized debt discount and issuance costs, was $382.2 million.
Convertible Notes
In March 2020, the Company issued $1.0 billion aggregate principal amount of 0% convertible notes due 2025 in a private placement to qualified institutional buyers (the “2025 Convertible Notes” and together with the 2026 Convertible Notes, the “Convertible Notes”). The 2025 Convertible Notes will mature on March 1, 2025, unless earlier repurchased or redeemed by the Company or converted pursuant to their terms. The total net proceeds from the debt offering, after deducting initial purchase discounts and debt issuance costs, were approximately $986.5 million.
In September 2020, the Company issued $650.0 million aggregate principal amount of 0% convertible notes due 2026 in a private placement to qualified institutional buyers (the “2026 Convertible Notes”). The 2026 Convertible Notes will mature on March 15, 2026, unless earlier repurchased or redeemed by the Company or converted pursuant to their terms. The total net proceeds from the debt offering, after deducting initial purchase discounts and debt issuance costs, were approximately $640.2 million.
The Convertible Notes are senior, unsecured obligations of the Company that do not bear regular interest, and the principal amount of the Convertible Notes does not accrete. The Convertible Notes may bear special interest under specified circumstances relating to the Company’s failure to comply with its reporting obligations under the respective indentures governing each of the Convertible Notes (collectively, the “Convertible Notes Indentures”) or if the Convertible Notes are not freely tradeable as required by each respective Convertible Notes Indenture.
As of March 31, 2024, the carrying value of the 2025 Convertible Notes and 2026 Convertible Notes, net of unamortized debt issuance costs, was $160.9 million and $605.8 million, respectively.
Partial Repurchase of 2025 and 2026 Convertible Notes
In May 2023, the Company used the entire proceeds from the drawdown of the $400.0 million Term Loan and $27.3 million of other available cash to repurchase $460.7 million principal amount of the 2025 Convertible Notes, resulting in a gain on early debt extinguishment of $31.1 million, net of related unamortized debt issuance costs.
In August 2023, the Company used a portion of the net proceeds from the offering of the 2030 Senior Notes to repurchase $125.3 million and $40.9 million aggregate principal of the 2025 Convertible Notes and 2026 Convertible Notes, respectively, by paying an aggregate amount of $153.6 million in cash, resulting in a gain on early debt extinguishment of $11.8 million, net of related unamortized debt issuance costs.
In December 2023, the Company used a portion of the remaining net proceeds from the offering of the 2030 Senior Notes to repurchase $252.7 million aggregate principal of the 2025 Convertible Notes by paying $241.3 million in cash, resulting in a gain of early debt extinguishment in the amount of $10.5 million net of related unamortized debt issuance costs.
Other Terms of the Convertible Notes
2025 Convertible Notes2026 Convertible Notes
$1,000 principal amount initially convertible into number of the Company’s Class A Common Stock, par value $0.0001
2.7745 shares
2.3583 shares
Equivalent initial approximate conversion price per share
$360.43 $424.03 
The conversion rate is subject to adjustment upon the occurrence of certain specified events but will not be adjusted for any accrued and unpaid special interest. In addition, upon the occurrence of a make-whole fundamental change or a redemption period, each as defined in the respective Convertible Notes Indenture, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its Convertible Notes in connection with such make-whole fundamental change or during the relevant redemption period.
The Convertible Notes will be convertible at certain times and upon the occurrence of certain events in the future. Further, on or after December 1, 2024 for the 2025 Convertible Notes, and December 15, 2025 for the 2026 Convertible Notes, until the close of business on the scheduled trading day immediately preceding the relevant maturity date, holders of the
18

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Convertible Notes may convert all or a portion of their Convertible Notes regardless of these conditions. Pursuant to the terms of the respective Convertible Notes Indenture, effective January 1, 2022, the Company made an irrevocable election to settle the principal portion of the Convertible Notes only in cash, with the conversion premium to be settled in cash or shares.
During the three months ended March 31, 2024, the conditions allowing holders of the 2025 Convertible Notes and 2026 Convertible Notes to convert were not met. The Convertible Notes of either series may be convertible thereafter if one or more of the conversion conditions specified in the applicable Convertible Notes Indenture is satisfied during future measurement periods.
The Company may redeem the Convertible Notes at its option, on or after March 5, 2022 for the 2025 Convertible Notes, and March 20, 2023 for the 2026 Convertible Notes, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid special interest to, but excluding the redemption date, subject to certain conditions. No sinking fund is provided for the Convertible Notes.
Upon the occurrence of a fundamental change (as defined in each respective Convertible Notes Indenture) prior to the maturity date, holders may require the Company to repurchase all or a portion of the 2025 Convertible Notes or 2026 Convertible Notes for cash at a price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus any accrued and unpaid special interest to, but excluding, the fundamental change repurchase date.
As of March 31, 2024, the Company was in compliance with all covenants under each of the Convertible Notes Indentures.
Capped Calls
In connection with the offering of the 2026 Convertible Notes, the Company entered into privately-negotiated capped call transactions with certain counterparties (the “Capped Calls”). The initial strike price of the 2026 Convertible Notes corresponds to the initial conversion price of the 2026 Convertible Notes. The Capped Calls are generally intended to reduce or offset the potential dilution to the Class A Common Stock upon any conversion of the 2026 Convertible Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. The Capped Calls are subject to either adjustment or termination upon the occurrence of specified extraordinary events affecting the Company, including a merger event, a tender offer, and a nationalization, insolvency or delisting involving the Company. In addition, the Capped Calls are subject to certain specified additional disruption events that may give rise to a termination of the Capped Calls, including changes in law, insolvency filings; and hedging disruptions. The Capped Call transactions are recorded in stockholders’ deficit and are not accounted for as derivatives.
The following table below sets forth key terms and costs incurred for the outstanding Capped Calls:
2026 Convertible Notes
Initial approximate strike price per share, subject to certain adjustments$424.03 
Initial cap price per share, subject to certain adjustments$556.10 
Net cost incurred (in millions)$41.8 
Class A Common Stock covered, subject to anti-dilution adjustments (in millions)1.5
Settlement commencement date2/13/2025
Settlement expiration date3/13/2025
The following table sets forth the interest expense recognized related to long-term debt (in thousands):
Three Months Ended
March 31,
20242023
Contractual interest expense$14,958 $ 
Amortization of debt discount and issuance costs1,003 1,119 
Total interest expense related to long-term debt$15,961 $1,119 
19

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 6. Derivative Instruments
In May 2023, the Company entered into a five-year floating-to-fixed interest rate swap agreement with the objective of reducing exposure to the fluctuating interest rates associated with the Company’s variable rate borrowing program by paying quarterly a fixed interest rate of 3.79%, plus a margin of 2% to 3%. The interest rate swap agreement was effective on June 30, 2023, and terminates on February 14, 2028, consistent with the duration of the maturity of the Term Loan. As of March 31, 2024, the interest rate swap agreement had a notional amount of $385.0 million.
The Company’s interest rate swap agreement is designated as a cash flow hedge under ASC 815, Derivatives and Hedging (“ASC 815”). These hedges are highly effective in offsetting changes in the Company’s future expected cash flows due to the fluctuation of the Company’s variable rate debt. The Company monitors the effectiveness of its hedges on a quarterly basis. The Company does not hold its interest rate swap agreement for trading or speculative purposes. The Company will recognize its interest rate derivative designated as a cash flow hedge on a gross basis as an asset and a liability at fair value in the Condensed Consolidated Balance Sheets. The unrealized gains and losses on the interest rate swap agreement are included in other comprehensive income (loss) and will be subsequently recognized in earnings within or against interest expense when the hedged interest payments are accrued.
As of March 31, 2024, the Company estimates the net amount related to the interest rate swaps under the interest rate swap agreement expected to be reclassified into earnings over the next 12 months is approximately $4.4 million. During the three months ended March 31, 2024, the Company reclassified $1.5 million from accumulated other comprehensive loss to earnings as an offset and reduction to interest expense.
Note 7. Business Combinations
On July 31, 2023, the Company completed its acquisition of certain assets of Hopin, Inc. (“Hopin”), a virtual events platform that aims to connect people around the world through immersive and interactive online experiences. The total purchase price consideration of $22.2 million consisted of $14.7 million in cash, and the acquisition date fair-value of contingent consideration of $7.5 million, out of total maximum contingent consideration of $35.0 million based on the achievement of specified performance targets by the Hopin business over multiple years, paid quarterly in cash. The acquired technology will be incorporated into the Company’s global communication platform, providing customers with enhanced virtual events and webinar experiences.
The transaction was accounted for as a business combination. The preliminary allocation of the purchase price based on their estimated fair values included $12.7 million for acquired technology and customer relationships, less $3.3 million for net acquired liabilities, with the remaining $12.8 million allocated to goodwill. The amortizable intangible assets have a weighted-average useful life of three years. The goodwill recognized is attributable primarily to the contributions of the acquired technology and customer relationships to the overall corporate strategy and assembled workforce.
Note 8. Leases
The Company primarily leases facilities for office and data center space under non-cancelable operating leases for its U.S. and international locations. As of March 31, 2024, non-cancelable leases expire on various dates between 2024 and 2029.
Generally, the non-cancelable leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more. The Company has the right to exercise or forego the lease renewal options. The lease agreements do not contain any material residual value guarantees or material restrictive covenants.
As of March 31, 2024 and December 31, 2023, the balance sheet components of leases were as follows (in thousands):
March 31, 2024December 31, 2023
Operating lease right-of-use assets$39,615 $42,989 
Accrued liabilities$17,575 $16,707 
Operating lease liabilities25,616 28,178 
Total operating lease liabilities$43,191 $44,885 
20

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
The supplemental cash flow information related to operating leases for the three months ended March 31, 2024 and 2023 were as follows (in thousands):
Three Months Ended March 31,
20242023
Operating cash flows resulting from operating leases:
Cash paid for amounts included in the measurement of lease liabilities$4,137 $5,711 
New ROU assets obtained in exchange of lease liabilities:
Operating leases$1,958 $3,685 
As of March 31, 2024, the Company has additional operating leases of approximately $1.2 million that have not yet commenced and as such, have not yet been recognized on the Company’s Condensed Consolidated Balance Sheets. These operating leases are expected to commence in the second quarter of 2024 with lease terms of up to 5 years.
Note 9. Commitments and Contingencies
Legal Matters
The Company is subject to certain legal proceedings described below, and from time to time may be involved in a variety of claims, lawsuits, investigations, and proceedings relating to contractual disputes, intellectual property rights, employment matters, regulatory compliance matters, and other litigation matters relating to various claims that arise in the normal course of business.
The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. The Company assesses its potential liability by analyzing specific litigation and regulatory matters using reasonably available information. The Company develops its views on estimated losses in consultation with inside and outside counsel, which involves a subjective analysis of potential results and outcomes, assuming various combinations of appropriate litigation and settlement strategies. Actual claims could settle or be adjudicated against the Company in the future for materially different amounts than the Company has accrued due to the inherently unpredictable nature of litigation. Legal fees are expensed in the period in which they are incurred.
Patent Infringement Matter
On April 25, 2017, Uniloc USA, Inc. and Uniloc Luxembourg, S.A. (together, “Uniloc”) filed in the U.S. District Court for the Eastern District of Texas two actions against the Company alleging infringement of U.S. Patent Nos. 7,804,948; 7,853,000; and 8,571,194 by RingCentral’s Glip unified communications application. The plaintiffs sought a declaration that the Company has infringed the patents, damages according to proof, injunctive relief, as well as their costs, attorney’s fees, expenses and interest. On October 9, 2017, the Company filed a motion to dismiss or transfer requesting that the case be transferred to the United States District Court for the Northern District of California. In response to the motion, plaintiffs filed a first amended complaint on October 24, 2017. The Company filed a renewed motion to dismiss or transfer on November 15, 2017. Although briefing on that motion was completed, the motion was not decided. On February 5, 2018, Uniloc moved to stay the litigation pending the resolution of certain third-party inter partes review proceedings (“IPRs”) before the United States Patent and Trademark Office. On February 9, 2018, the court stayed the litigation pending resolution of the IPRs without prejudice to or waiver of the Company’s motion to dismiss or transfer. The parties entered into a settlement agreement and filed a Voluntary Stipulation of Dismissal with Prejudice. The court entered an order dismissing the action with prejudice on January 2, 2024.
CIPA Matter
On June 16, 2020, Plaintiff Meena Reuben (“Reuben”) filed a complaint against the Company for a putative class action lawsuit in California Superior Court for San Mateo County. The complaint alleges claims on behalf of a class of individuals for whom, while they were in California, the Company allegedly intercepted and recorded communications between individuals and the Company’s customers without the individual’s consent, in violation of the California Invasion of Privacy Act (“CIPA”) Sections 631 and 632.7. Reuben seeks statutory damages of $5,000 for each alleged violation of Sections 631 and 632.7, injunctive relief, and attorneys’ fees and costs, and other unspecified amount of damages. The parties participated in mediation on August 24, 2021. On September 16, 2021, Reuben filed an amended complaint. The Company filed a demurrer to
21

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
the amended complaint on October 18, 2021, and a motion for judgment on the pleadings on January 23, 2023. The Court overruled the Company’s demurrer and motion for judgment on the pleadings, and the parties are now engaged in discovery. The Company filed a motion for summary judgment on February 16, 2024, and a hearing on the motion is set for August 2, 2024. Based on the information known by the Company as of the date of this filing and the rules and regulations applicable to the preparation of the Company’s condensed consolidated financial statements, it is not possible to provide an estimated amount of any such loss or range of loss that may occur. The Company intends to vigorously defend against this lawsuit.
Other Matter
On June 14, 2019, the Company filed suit in the Superior Court of California, County of Alameda, against Bright Pattern, Inc. and two of its officers, alleging that the defendants negotiated a potential acquisition of Bright Pattern by RingCentral fraudulently and in bad faith. The Company sought its costs incurred in negotiating under the Letter of Intent (“LOI”) that the parties entered into and damages for lost opportunity as a result of forgoing another acquisition opportunity, and attorneys’ fees and costs. On August 26, 2019, Bright Pattern filed a cross-complaint against the Company and two of its executive officers alleging breach of the LOI as well as tort claims arising from the Company’s allegedly inducing Bright Pattern to enter into the LOI and subsequent extensions while allegedly misstating the timeframe for the proposed transaction. As damages, Bright Pattern sought audit fees it allegedly incurred, a $5.0 million break-up fee, its alleged “cash burn” during the negotiations, and unspecified lost opportunity damages. The Company filed a demurrer to Bright Pattern’s amended cross-complaint, as well as a related motion to strike. On May 7, 2020, the court denied both the motion to strike and demurrer. On July 19, 2022, the parties filed a joint motion to stay the proceedings, which the court granted on July 20, 2022. On October 19, 2023, Bright Pattern moved to lift the stay. The parties entered into a settlement agreement and filed a Request for Dismissal with Prejudice, in which they agreed to dismiss the action, and all claims and counterclaims alleged therein, with prejudice. The court entered an order dismissing the action with prejudice on January 9, 2024.
Note 10. Stockholders’ Deficit
Share Repurchase Programs
Under the Company’s share repurchase programs, share repurchases may be made at the Company’s discretion from time to time in open market transactions, privately negotiated transactions, or other means, subject to a minimum cash balance. The programs do not obligate the Company to repurchase any specific dollar amount or to acquire any specific number of shares of its Class A Common Stock. The timing and number of any shares repurchased under the programs will depend on a variety of factors, including stock price, trading volume, and general business and market conditions.
On November 1, 2023, the Company’s board of directors authorized a share repurchase program under which the Company may repurchase up to $100.0 million of the Company’s outstanding shares of Class A Common Stock, subject to certain limitations. On February 7, 2024, the Company’s board of directors authorized an additional $150.0 million of the Company’s outstanding shares of Class A Common Stock, subject to certain limitations. The authorization expires on December 31, 2024. As of March 31, 2024, approximately $154.7 million remained authorized and available under the Company’s share repurchase programs for future share repurchases.
On May 1, 2024, the Company’s board of directors further increased their authorization by $250 million, subject to certain limitations. This authorization does not expire. Refer to Note 15 – Subsequent Events in this Quarterly Report on Form 10-Q for additional information.
The following table summarizes the share repurchase activity of the Company’s Class A Common Stock for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended March 31,
20242023
SharesAmountSharesAmount
Repurchases under share repurchase programs2,361 $80,347 2,160 $74,458 
Amounts for excise tax withholdings and broker’s commissions
— 288 — 318 
Total repurchases of common stock2,361 $80,635 2,160 $74,776 
22

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
The Inflation Reduction Act of 2022 imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. During the three months ended March 31, 2024 and 2023, the Company reflected the applicable excise tax withholdings and broker’s commissions in additional paid in capital as part of the cost basis of the stock repurchased and recorded a corresponding liability for the excise taxes payable in accrued liabilities in the Condensed Consolidated Balance Sheets.
During the three months ended March 31, 2024, the Company repurchased approximately 2.4 million of its shares of Class A Common Stock for $80.3 million, of which 115,008 of these shares for $4.0 million, which are reflected in the table above, settled in April 2024. During the three months ended March 31, 2024, the Company settled the repurchase of 117,706 shares of Class A Common Stock for $4.1 million that were pending from the prior quarter. The following table summarizes the number of shares of the Company’s Class A Common Stock repurchased and settled for the three months ended March 31, 2024 (in thousands):
Repurchases under share repurchase programs2,361 
Repurchases unsettled as of quarter end(115)
Prior quarter repurchases settled in current quarter118 
Total repurchases of common stock settled2,364 
Note 11. Share-Based Compensation
A summary of share-based compensation expense recognized in the Condensed Consolidated Statements of Operations is as follows (in thousands):
Three Months Ended
March 31,
 20242023
Cost of revenues$8,033 $8,734 
Research and development19,242 23,205 
Sales and marketing33,915 36,735 
General and administrative26,978 29,517 
Total share-based compensation expense$88,168 $98,191 
A summary of share-based compensation expense by award type is as follows (in thousands):
Three Months Ended
March 31,
 20242023
Employee stock purchase plan rights (“ESPP”)$1,731 $2,251 
Performance stock units (“PSUs”) 7,001 569 
Restricted stock units (“RSUs”) 79,436 95,371 
Total share-based compensation expense$88,168 $98,191 
Equity Incentive Plans
As of March 31, 2024, a total of 18,131,313 shares remained available for grant under the Company’s Amended and Restated 2013 Equity Incentive Plan (“2013 Plan”).
Employee Stock Purchase Plan
The Company’s ESPP allows eligible employees to purchase shares of the Company’s Class A Common Stock at a discounted price through payroll deductions.
As of March 31, 2024, there was a total of $1.3 million of unrecognized share-based compensation expense, net of estimated forfeitures, related to the ESPP, which will be recognized on a straight-line basis over the remaining weighted-
23

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
average vesting period of approximately 0.1 years. As of March 31, 2024, a total of 7,228,645 shares were available for issuance under the ESPP.
Restricted and Performance Stock Units
A summary of activity of restricted and performance-based stock units as of March 31, 2024, and changes during the period then ended is presented in the following table:
Number of
RSUs/PSUs
Outstanding
(in thousands)
Weighted-
Average
Grant Date Fair
Value Per Share
Aggregate
Intrinsic Value
(in thousands)
Outstanding as of December 31, 202310,047 $52.47 $325,153 
Granted670 32.20 
Released(1,831)59.60 
Canceled/Forfeited(547)43.72 
Outstanding as of March 31, 20248,339 $49.85 $289,692 
Restricted Stock Units
The 2013 Plan provides for the issuance of RSUs to employees, directors, and consultants. RSUs issued under the 2013 Plan generally vest over four years.
As of March 31, 2024, there was a total of $325.3 million of unrecognized share-based compensation expense, net of estimated forfeitures, related to RSUs, which will be recognized on a straight-line basis over the remaining weighted-average vesting period of approximately 2.5 years.
Performance Stock Units
The 2013 Plan provides for the issuance of PSUs. The PSUs granted under the 2013 Plan are contingent upon the achievement of predetermined market, performance, and service conditions. The Company uses a Monte Carlo simulation model to determine the fair value of its market condition PSUs. PSU expense is recognized using the graded vesting method over the requisite service period. For performance-based metrics, the compensation expense is based on a probability of achievement of the performance conditions. For market-based conditions, if the market conditions are not met but the service conditions are met, the PSUs will not vest; however, any stock-based compensation expense recognized will not be reversed.
For the majority of the PSUs granted, the number of shares of common stock to be issued at vesting will range from 0% to 200% of the target number based on the achievement of the different performance and market conditions over the respective measurement period. The PSUs generally vest over a three-year period.
As of March 31, 2024, there was a total of $13.3 million unrecognized share-based compensation expense, net of estimated forfeitures, related to these PSUs, which will be recognized over the remaining service period of approximately 1.9 years.
Employee Equity Compensation Plans
The Company’s board of directors adopted employee equity bonus and executive equity compensation plans (“Plans”), which allow the recipients to earn fully vested shares of the Company’s Class A Common Stock upon the achievement of quarterly service and/or performance conditions and in lieu of a portion of base salary. During the three months ended March 31, 2024, the Company issued 369,797 under these Plans. The shares under these Plans are issued from the reserve of shares available for issuance under the 2013 Plan. The total requisite service period for these Plans is approximately 0.4 years.
The unrecognized share-based compensation expense as of March 31, 2024 was approximately $4.1 million, which will be recognized over the remaining service period of 0.1 years. The shares issued under these Plans are issued from the reserve of shares available for issuance under the 2013 Plan.
24

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 12. Income Taxes
The provision for income taxes was $3.3 million and $3.1 million for the three months ended March 31, 2024 and 2023, respectively.
Beginning in 2022, the U.S. Tax Cuts and Jobs Act (“Tax Act”) enacted on December 22, 2017 eliminated the option to deduct research and development expenditures for tax purposes in the period the expenses were incurred and instead requires all U.S. and foreign research and development expenditures to be amortized over five and fifteen tax years, respectively. Although Congress is considering legislation that would defer the capitalization and amortization requirement, there is no assurance that the provision will be repealed or otherwise modified.
Due to this required capitalization of research and development expenditures, the Company has recorded current U.S. income tax expense of $1.4 million for the quarter ended March 31, 2024. The current U.S. income tax provision is primarily for federal and state taxes currently payable that we anticipate paying as a result of statutory limitations on our ability to offset expected taxable income with net operating loss carry forwards.
The realization of tax benefits of net deferred tax assets is dependent upon future levels of taxable income, of an appropriate character, in the periods the items are expected to be deductible or taxable. Based on the available objective evidence, the Company does not believe it is more likely than not that certain net deferred tax assets will be realizable. Accordingly, the Company continues to provide a full valuation allowance against the entire domestic and the majority of the foreign net deferred tax assets as of March 31, 2024 and December 31, 2023. The Company intends to maintain the full valuation allowance on the U.S. and certain foreign net deferred tax assets until sufficient positive evidence exists to support a reversal of, or decrease in, the valuation allowance.
During the three months ended March 31, 2024, there were no material changes to the total amount of unrecognized tax benefits.
Note 13. Basic and Diluted Net Loss Per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential shares of common stock, stock options, restricted stock units, ESPP, convertible notes, and convertible preferred stock, to the extent dilutive. For the three months ended March 31, 2024 and 2023, all such common stock equivalents have been excluded from diluted net loss per share as the effect to net loss per share would be anti-dilutive.
The following table sets forth the computation of the Company’s basic and diluted net loss per share of common stock (in thousands, except per share data):
Three Months Ended
March 31,
20242023
Numerator  
Net loss$(28,494)$(54,399)
Denominator
Weighted-average common shares outstanding for basic and diluted net loss per share93,142 95,720 
Basic and diluted net loss per share$(0.31)$(0.57)
25

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table summarizes the potentially dilutive common shares that were excluded from diluted weighted-average common shares outstanding because including them would have had an anti-dilutive effect (in thousands):
Three Months Ended
March 31,
 20242023
Shares of common stock issuable under equity incentive plans outstanding9,944 5,617 
Shares of common stock related to convertible preferred stock743 743 
Potential common shares excluded from diluted net loss per share10,687 6,360 
Pursuant to the terms of the respective Convertible Notes Indentures, effective January 1, 2022, the Company made an irrevocable election to settle the principal portion of the Convertible Notes only in cash, with the conversion premium to be settled in cash or shares.
The Company calculates the potential dilutive effect of its Convertible Notes under the if-converted method. Under this method, only the amounts settled in excess of the principal will be considered in diluted earnings per share, in line with the terms of the Convertible Notes Indentures.
The denominator for diluted net income per share does not include any effect from the capped call transactions the Company entered into concurrently with the issuance of the Convertible Notes as this effect would be anti-dilutive. In the event of conversion of the Notes, if shares are delivered to the Company under the capped call, they will offset the dilutive effect of the shares that the Company would issue under the Convertible Notes.
Note 14. Restructuring Activities
During the three months ended March 31, 2024, the Company incurred restructuring costs of $4.6 million in continuation of management’s headcount actions as part of the broader efforts to optimize the Company’s cost structure. The restructuring costs primarily consisted of severance payments, employee benefits and related costs. The Company expects to substantially complete these actions in 2024, subject to local law and consultation requirements in certain countries. The Company may incur other charges or cash expenditures not currently contemplated due to unanticipated events that may occur as a result of or in connection with the implementation of these actions.
The following table summarizes the Company’s restructuring costs that were recorded as an operating expense in the accompanying Condensed Consolidated Statement of Operations during the three months ended March 31, 2024, and 2023 (in thousands):
Three Months Ended
March 31,
20242023
Cost of revenues$561 $418 
Research and development1,450 1,434 
Sales and marketing2,162 2,599 
General and administrative409 424 
Total restructuring costs$4,582 $4,875 
The following table summarizes the Company’s restructuring liability that is included in accrued liabilities in the accompanying Condensed Consolidated Balance Sheets (in thousands):
Balance as of December 31, 2023$3,191 
Restructuring costs4,582 
Cash payments(5,532)
Balance as of March 31, 2024$2,241 
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RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 15. Subsequent Events
Share Repurchase Program
On May 1, 2024, the Company's board of directors authorized a share repurchase program under which the Company may repurchase up to $250 million of the Company's outstanding shares of Class A Common Stock. Under the program, share repurchases may be made at the Company's discretion from time to time in open market transactions, privately negotiated transactions, or other means, subject to a minimum cash balance. The program does not obligate the Company to repurchase any specific dollar amount or to acquire any specific number of shares of its Class A Common Stock. The timing and number of any shares repurchased under the program will depend on a variety of factors, including stock price, trading volume, and general business and market conditions. The authorization under this program does not expire.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 22, 2024, as amended on April 24, 2024, under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As discussed in the section entitled “Special Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ significantly from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this report, particularly in the section entitled “Risk Factors” included under Part II, Item 1A below.
Overview
We are a leading provider of AI-driven global enterprise cloud communications, video meetings, collaboration, and contact center software-as-a-service (“SaaS”) solutions. We believe that our innovative, cloud-based communication and contact center solutions disrupt the large market for business communications and collaboration by providing flexible and cost-effective solutions that support mobile and distributed workforces. We enable convenient and effective communications for organizations across all their locations and employees, enabling them to be more productive and more responsive.
Our cloud-based business communications and collaboration solutions are designed for ease of use and flexibility, enabling seamless user identity across multiple devices including smartphones, tablets, PCs, and desk phones. These solutions can be rapidly deployed, configured, and managed, making them ideal for the modern mobile and global enterprise workforce, far surpassing legacy on-premises systems in adaptability. Our solutions are location and device independent, with advanced capabilities that extend even to mobile and browser use cases. Through our open Application Programming Interface (“API”) platform and pre-built applications, RingCentral integrates with leading business applications and empowers customers and third-party developers to tailor their business workflows. Additionally, our RingSense AI platform enhances these offerings by providing automation and intelligent features, further simplifying user experience and boosting operational efficiency.
Our multi-product portfolio includes:
RingEX (formally RingCentral MVP), an AI-driven Unified Communications as a Service (“UCaaS”) platform, which features an industry-leading cloud phone system, enhanced business SMS, efax, team messaging, and video meetings. It includes advanced telephony capabilities such as Interactive Voice Response (“IVR”), advanced call queues and management, along with the broadest set of telephony integrations as well as numerous APIs to create custom communication workflows. Additionally, the platform offers robust IT and business analytics, plus a comprehensive suite of cloud migration solutions like RingCentral Cloud Connector for simplified hybrid deployments;
Contact Center as a Service (“CCaaS”), a set of cloud-based customer experience solutions that includes RingCentral Contact Center, and RingCX, a native omnichannel contact center with generative AI capabilities and conversation analytics launched in August 2023;
RingCentral Video, our native video meeting solution with team messaging, whiteboarding that enables smart video meetings, rooms solutions (sold separately as RingCentral Rooms), and webinars (sold separately as RingCentral Webinars);
RingCentral Events, launched in November 2023 following the acquisition of Hopin Events and Session Platforms, offers a comprehensive suite of features for hosting virtual, hybrid, and in-person events of all sizes from single-session gatherings to multi-day, multi-session conferences. It includes advanced personalization options and AI-driven capabilities to enhance attendee experience; and
RingSense, announced in March 2023, is an AI platform for enhanced business communications and revenue intelligence that helps organizations unlock powerful insights from conversation data. RingSense for Sales, the first offering in this portfolio, analyzes interactions among salespeople and their prospects to surface key insights and performance measures, helping increase sales efficiency. RingSense AI is being infused across our entire portfolio with offerings such as RingSense AI for RingEX, RingSense AI for RingCX (Quality Management and Workforce Engagement Management), and AI capabilities included as part of RingCentral Events and Webinar.
Our portfolio of cloud-based offerings are subscription based and made available at different rates varying by the specific functionalities, services, and number of users. We primarily generate revenues from the sale of subscriptions to our
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offerings. Our subscription plans have monthly, annual, or multi-year contractual terms. We believe that this flexibility in contract duration is important to meet the different needs of our customers. For each of the three months ended March 31, 2024 and 2023, subscriptions revenues accounted for 90% or more of our total revenues. The remainder of our revenues are primarily comprised of product revenues from the sale of pre-configured phones and professional services. We do not develop or manufacture physical phones and only offer them as a convenience to our customers. We rely on third-party providers to develop and manufacture these devices and fulfillment partners to successfully serve our customers.
We use our direct inside sales force and indirect sales channels to market our brand and our subscription offerings. Our indirect sales channels who sell our solutions consist of:
Regional and global network of resellers and distributors;
Strategic partners who market and sell our RingEX or other solutions, including co-branded solutions.
Global Service Providers including AT&T, TELUS, BT, Vodafone, DT, Optus, 1&1 Versatel and Ecotel in Germany, MCM in Mexico, Frontier, Charter Communications, Brightspeed and others.
Our revenue growth has primarily been driven by our flagship RingEX, RingCentral contact center solutions, and recurring license and other fees. Our revenue is derived from sales through our direct and indirect sales channels, including resellers and distributors, strategic partners and global service providers. As of March 31, 2024, we had customers from a range of industries, including financial services, education, healthcare, legal services, real estate, retail, technology, insurance, construction, hospitality, and state and local government, among others. For each of the three months ended March 31, 2024 and 2023, the vast majority of our total revenues were generated in the U.S. and Canada.
The growth of our business and our future success depend on many factors, including our ability to expand our customer base, expand our indirect sales channels, continue to innovate, grow revenues from our existing customer base, expand our distribution channels, and scale internationally.
In 2023, pursuant to our approved reduction-in-force plan as part of broader efforts to optimize the Company's cost structure, we are actively implementing various measures to enhance operational efficiencies. These include disciplined spending, increased productivity, efficiency gains, and optimizing our go-to-market strategies.
Macroeconomic Conditions and Other Factors
We are subject to risks and exposures caused by the current macroeconomic environment. Macroeconomic factors include persistent inflation, higher interest rates, supply chain disruptions, decreased economic output, geopolitical conflict and fluctuations in currency exchange rates, all of which can cause uncertainty. The overall macroeconomic environment may affect buying behavior from larger customers that could have an adverse impact on our results. We are also seeing less upsell of additional RingEX (formally RingCentral MVP) services within our existing base as customers have slowed hiring and rationalized their employee counts. We continuously monitor the impact of these circumstances on our business and financial results, as well as the overall global economy and geopolitical landscape. The implications of macroeconomic conditions on our business, results of operations and overall financial position, particularly in the long term, remain uncertain.
Key Business Metrics
In addition to United States generally accepted accounting principles (“U.S. GAAP”) and financial measures such as total revenues, gross margin, and cash flows from operations, we regularly review a number of key business metrics to evaluate growth trends, measure our performance, and make strategic decisions. We discuss revenues and gross margin under “Results of Operations”, and cash flow from operations and free cash flows under “Liquidity and Capital Resources.” Other key business metrics are discussed below.
Annualized Exit Monthly Recurring Subscriptions
We believe that our Annualized Exit Monthly Recurring Subscriptions (“ARR”) is a leading indicator of our anticipated subscriptions revenues. We believe that trends in revenue are important to understanding the overall health of our business, and we use these trends in order to formulate financial projections and make strategic business decisions. Our ARR equals our Monthly Recurring Subscriptions multiplied by 12. Our Monthly Recurring Subscriptions equals the monthly value of all customer recurring charges at the end of a given month. For example, our Monthly Recurring Subscriptions at March 31, 2024 was $197.5 million. As such, our ARR at March 31, 2024 was $2.37 billion compared to $2.16 billion at March 31, 2023.
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Net Monthly Subscription Dollar Retention Rate
We believe that our Net Monthly Subscription Dollar Retention Rate provides insight into our ability to retain and grow subscriptions revenue, as well as our customers’ potential long-term value to us. We believe that our ability to retain our customers and expand their use of our solutions over time is a leading indicator of the stability of our revenue base and we use these trends in order to formulate financial projections and make strategic business decisions. We define our Net Monthly Subscription Dollar Retention Rate as (i) one plus (ii) the quotient of Dollar Net Change divided by Average Monthly Recurring Subscriptions.
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, all divided by (ii) 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.
For example, if our Monthly Recurring Subscriptions were $118 at the end of a quarterly period and $100 at the beginning of the period, and $20 at the end of the period from new customers we added during the period, then the Dollar Net Change would be equal to ($0.67), or the amount equal to the difference of $118 minus $100 minus $20, all divided by three months. Our Average Monthly Recurring Subscriptions would equal $109, or the sum of $100 plus $118, divided by two. Our Net Monthly Subscription Dollar Retention Rate would then equal 99.4%, or approximately 99%, or one plus the quotient of the Dollar Net Change divided by the Average Monthly Recurring Subscriptions.
Our key business metrics for the five quarterly periods ended March 31, 2024 were as follows (dollars in billions, except percentages):
 March 31, 2024December 31, 2023September 30, 2023June 30, 2023March 31, 2023
Net Monthly Subscription Dollar Retention Rate>99%>99%>99%>99%>99%
Annualized Exit Monthly Recurring Subscriptions$2.37 $2.33 $2.26 $2.22 $2.16 
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Results of Operations
The following tables set forth selected condensed consolidated statements of operations data and such data as a percentage of total revenues. The historical results presented below are not necessarily indicative of the results that may be expected for any future period (in thousands):
Three Months Ended March 31,
20242023
Revenues  
Subscriptions$557,487 $508,294 
Other26,724 25,395 
Total revenues584,211 533,689 
Cost of revenues  
Subscriptions143,650 136,425 
Other26,829 24,251 
Total cost of revenues170,479 160,676 
Gross profit413,732 373,013 
Operating expenses  
Research and development80,528 85,241 
Sales and marketing272,730 260,212 
General and administrative71,373 82,091 
Total operating expenses424,631 427,544 
Loss from operations(10,899)(54,531)
Other income (expense), net  
Interest expense(16,254)(2,212)
Other income1,944 5,429 
Other income (expense), net(14,310)3,217 
Loss before income taxes(25,209)(51,314)
Provision for income taxes3,285 3,085 
Net loss$(28,494)$(54,399)
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Percentage of Total Revenues*
Three Months Ended March 31,
20242023
Revenues  
Subscriptions95 %95 %
Other
Total revenues100 100 
Cost of revenues
Subscriptions25 26 
Other
Total cost of revenues29 30 
Gross profit71 70 
Operating expenses
Research and development14 16 
Sales and marketing47 49 
General and administrative12 15 
Total operating expenses73 80 
Loss from operations(2)(10)
Other income (expense), net
Interest expense(3)— 
Other income— 
Other income (expense), net(2)
Loss before income taxes(4)(10)
Provision for income taxes
Net loss(5)%(10)%
* Percentages may not add up due to rounding.
Comparison of the Three Months Ended March 31, 2024 and 2023
Revenues
Three Months Ended March 31,
(in thousands, except percentages)20242023$ Change% Change
Revenues    
Subscriptions$557,487 $508,294 $49,193 10 %
Other26,724 25,395 1,329 
Total revenues$584,211 $533,689 $50,522 %
Percentage of revenues    
Subscriptions95 %95 %  
Other  
Total100 %100 %  
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Subscriptions revenue. Subscriptions revenue increased by $49.2 million, or 10%, for the three months ended March 31, 2024, as compared to the respective prior year period. The increase was primarily due to the acquisition of new customers, upsells of RingEX and additional offerings to our existing customer base, derived from sales through our direct and indirect sales channels, including resellers, distributors, and global service providers. Although we expect to continue to add new customers and increase the usage of our product for existing customers, we will monitor the impact of macroeconomic factors that could have an impact on customer buying behavior and demand, including contract duration, timing of customer purchases, churn, upsell and down-sell, renewals, payment terms, and credit card declines, all of which could cause variability in our revenue.
Other revenue. Other revenue increased by $1.3 million, or 5%, for the three months ended March 31, 2024, as compared to the respective prior year period, primarily due to higher device sales due to overall growth in business compared to the respective prior year period.
Cost of Revenues and Gross Margin
Three Months Ended March 31,
(in thousands, except percentages)20242023$ Change% Change
Cost of revenues    
Subscriptions$143,650 $136,425 $7,225 %
Other26,829 24,251 2,578 11 
Total cost of revenues$170,479 $160,676 $9,803 %
Gross margins   
Subscriptions74 %73 %  
Other— %%  
Total gross margin %71 %70 %  
Subscriptions cost of revenues and gross margin. Cost of subscriptions revenues increased by $7.2 million, or 5%, for the three months ended March 31, 2024, as compared to the respective prior year period. The higher cost of subscription revenues was primarily due to an increase in third-party costs of $8.8 million to support our solution offerings and an increase in infrastructure support costs of $1.8 million, partially offset by $2.6 million decrease in the amortization of our intangible assets.
For the three months ended March 31, 2024, as compared to the respective prior year period, our subscription gross margin improved due to lower amortization of acquired intangible assets and higher subscription revenue.
We expect to continue investing in our infrastructure and capacity to improve the availability of our subscription offerings, supporting the growth of both our new and existing customers.
Other cost of revenues and gross margin. Cost of other revenues increased by $2.6 million, or 11%, for the three months ended March 31, 2024, as compared to the respective prior year period, primarily due to $1.8 million increase in personnel and contractor costs, as well as $1.3 million increase in costs associated with phones sales, partially offset by $0.9 million decrease in professional fees.
Research and Development
Three Months Ended March 31,
(in thousands, except percentages)20242023$ Change% Change
Research and development$80,528 $85,241 $(4,713)(6)%
Percentage of total revenues14 %16 %  
Research and development expenses decreased by $4.7 million, or (6)%, for the three months ended March 31, 2024, as compared to the respective prior year period, primarily due to a $2.5 million reduction in personnel and contractor costs and $2.5 million decrease in professional fees. The overall reduction in personnel and contractor costs was primarily attributed to a reduction in headcount.
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We believe that continued investment in our products is important for our future growth, and our research and development expenses may increase in absolute dollars, although these expenses may fluctuate as a percentage of our total revenues from period to period depending on the timing of these expenses.
Sales and Marketing
Three Months Ended March 31,
(in thousands, except percentages)20242023$ Change% Change
Sales and marketing$272,730 $260,212 $12,518 %
Percentage of total revenues47 %49 %  
Sales and marketing expenses increased by $12.5 million, or 5%, for the three months ended March 31, 2024, as compared to the respective prior year period, primarily due to an increase in third-party commissions of $10.9 million, amortization of deferred sales commission costs of $5.6 million, and increase in advertising and marketing costs of $2.0 million, partially offset by decrease in personnel and contractor costs of $7.1 million primarily attributable to reduction in headcount and share-based compensation driven by disciplined stock grants for new and existing employees.
We expect to incur incremental sales and marketing expenses to support our growth while driving cost efficiencies by further optimizing our go-to-market strategies.
General and Administrative
Three Months Ended March 31,
(in thousands, except percentages)20242023$ Change% Change
General and administrative$71,373 $82,091 $(10,718)(13)%
Percentage of total revenues12 %15 %  
General and administrative expenses decreased by $10.7 million, or (13)%, for the three months ended March 31, 2024, as compared to the respective prior year period, primarily due to a decrease in professional fees by $9.2 million and personnel and contractor costs by $2.0 million.
We expect the general and administrative expenses to reflect the impact of our operational efficiency measures as we re-align our hiring strategies and rationalize our discretionary spending.
Other Income (Expense), Net
Three Months Ended March 31,
(in thousands, except percentages)20242023$ Change% Change
Interest expense$(16,254)$(2,212)$(14,042)nm
Other income1,944 5,429 (3,485)nm
Other income (expense), net$(14,310)$3,217 $(17,527)nm
*nm - not meaningful
Interest expense. Interest expense increased by $14.0 million for the three months ended March 31, 2024, as compared to the respective prior year period, primarily due to interest incurred under our Credit Agreement and 2030 Senior Notes.
Other income. Other income decreased by $3.5 million for the three months ended March 31, 2024, as compared to the respective prior year period, primarily due to a $4.5 million decline in strategic partner gains, partially offset by a reduction of $1.6 million in unrealized losses on our long-term investments.