10-Q 1 rng-20220930.htm 10-Q rng-20220930
FALSE2022Q3000138490512/31http://fasb.org/us-gaap/2022#AccountingStandardsUpdate202006Member10.00235830.0027745http://fasb.org/us-gaap/2022#AccruedLiabilitiesCurrenthttp://fasb.org/us-gaap/2022#AccruedLiabilitiesCurrent00013849052022-01-012022-09-300001384905us-gaap:CommonClassAMember2022-11-02xbrli:shares0001384905us-gaap:CommonClassBMember2022-11-0200013849052022-09-30iso4217:USD00013849052021-12-310001384905us-gaap:LicenseAndServiceMember2022-07-012022-09-300001384905us-gaap:LicenseAndServiceMember2021-07-012021-09-300001384905us-gaap:LicenseAndServiceMember2022-01-012022-09-300001384905us-gaap:LicenseAndServiceMember2021-01-012021-09-300001384905us-gaap:ProductAndServiceOtherMember2022-07-012022-09-300001384905us-gaap:ProductAndServiceOtherMember2021-07-012021-09-300001384905us-gaap:ProductAndServiceOtherMember2022-01-012022-09-300001384905us-gaap:ProductAndServiceOtherMember2021-01-012021-09-3000013849052022-07-012022-09-3000013849052021-07-012021-09-3000013849052021-01-012021-09-30iso4217:USDxbrli:shares0001384905us-gaap:CommonStockMember2021-12-310001384905us-gaap:AdditionalPaidInCapitalMember2021-12-310001384905us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001384905us-gaap:RetainedEarningsMember2021-12-3100013849052021-01-012021-12-310001384905us-gaap:AdditionalPaidInCapitalMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2021-12-310001384905srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2021-12-310001384905srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2021-12-310001384905us-gaap:CommonStockMember2022-01-012022-03-310001384905us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-3100013849052022-01-012022-03-310001384905us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310001384905us-gaap:RetainedEarningsMember2022-01-012022-03-310001384905us-gaap:CommonStockMember2022-03-310001384905us-gaap:AdditionalPaidInCapitalMember2022-03-310001384905us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310001384905us-gaap:RetainedEarningsMember2022-03-3100013849052022-03-310001384905us-gaap:CommonStockMember2022-04-012022-06-300001384905us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-3000013849052022-04-012022-06-300001384905us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-300001384905us-gaap:RetainedEarningsMember2022-04-012022-06-300001384905us-gaap:CommonStockMember2022-06-300001384905us-gaap:AdditionalPaidInCapitalMember2022-06-300001384905us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300001384905us-gaap:RetainedEarningsMember2022-06-3000013849052022-06-300001384905us-gaap:CommonStockMember2022-07-012022-09-300001384905us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-300001384905us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-012022-09-300001384905us-gaap:RetainedEarningsMember2022-07-012022-09-300001384905us-gaap:CommonStockMember2022-09-300001384905us-gaap:AdditionalPaidInCapitalMember2022-09-300001384905us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-300001384905us-gaap:RetainedEarningsMember2022-09-300001384905us-gaap:CommonStockMember2020-12-310001384905us-gaap:AdditionalPaidInCapitalMember2020-12-310001384905us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001384905us-gaap:RetainedEarningsMember2020-12-3100013849052020-12-310001384905us-gaap:CommonStockMember2021-01-012021-03-310001384905us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-3100013849052021-01-012021-03-310001384905us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001384905us-gaap:RetainedEarningsMember2021-01-012021-03-310001384905us-gaap:CommonStockMember2021-03-310001384905us-gaap:AdditionalPaidInCapitalMember2021-03-310001384905us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001384905us-gaap:RetainedEarningsMember2021-03-3100013849052021-03-310001384905us-gaap:CommonStockMember2021-04-012021-06-300001384905us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-3000013849052021-04-012021-06-300001384905us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300001384905us-gaap:RetainedEarningsMember2021-04-012021-06-300001384905us-gaap:CommonStockMember2021-06-300001384905us-gaap:AdditionalPaidInCapitalMember2021-06-300001384905us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001384905us-gaap:RetainedEarningsMember2021-06-3000013849052021-06-300001384905us-gaap:CommonStockMember2021-07-012021-09-300001384905us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001384905us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-012021-09-300001384905us-gaap:RetainedEarningsMember2021-07-012021-09-300001384905us-gaap:CommonStockMember2021-09-300001384905us-gaap:AdditionalPaidInCapitalMember2021-09-300001384905us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-09-300001384905us-gaap:RetainedEarningsMember2021-09-3000013849052021-09-300001384905us-gaap:PropertyPlantAndEquipmentMemberus-gaap:GeographicConcentrationRiskMembercountry:US2021-01-012021-12-31xbrli:pure0001384905us-gaap:PropertyPlantAndEquipmentMemberus-gaap:GeographicConcentrationRiskMembercountry:US2022-01-012022-09-30rng:segment0001384905srt:NorthAmericaMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMember2022-07-012022-09-300001384905srt:NorthAmericaMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMember2021-07-012021-09-300001384905srt:NorthAmericaMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMember2022-01-012022-09-300001384905srt:NorthAmericaMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMember2021-01-012021-09-300001384905us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMemberrng:OtherGeographicalAreaMember2022-07-012022-09-300001384905us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMemberrng:OtherGeographicalAreaMember2021-07-012021-09-300001384905us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMemberrng:OtherGeographicalAreaMember2022-01-012022-09-300001384905us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMemberrng:OtherGeographicalAreaMember2021-01-012021-09-300001384905us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMember2022-07-012022-09-300001384905us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMember2021-07-012021-09-300001384905us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMember2022-01-012022-09-300001384905us-gaap:RevenueFromContractWithCustomerMemberus-gaap:GeographicConcentrationRiskMember2021-01-012021-09-300001384905us-gaap:RevenueFromContractWithCustomerMemberrng:RingCentralMVPAndRingCentralCustomerEngagementSolutionsMemberus-gaap:ProductConcentrationRiskMember2022-01-012022-09-300001384905us-gaap:RevenueFromContractWithCustomerMemberrng:RingCentralMVPAndRingCentralCustomerEngagementSolutionsMemberus-gaap:ProductConcentrationRiskMember2021-07-012021-09-300001384905us-gaap:RevenueFromContractWithCustomerMemberrng:RingCentralMVPAndRingCentralCustomerEngagementSolutionsMemberus-gaap:ProductConcentrationRiskMember2021-01-012021-09-300001384905us-gaap:RevenueFromContractWithCustomerMemberrng:RingCentralMVPAndRingCentralCustomerEngagementSolutionsMemberus-gaap:ProductConcentrationRiskMember2022-07-012022-09-300001384905us-gaap:RevenueFromContractWithCustomerMemberrng:RingCentralCustomerEngagementSolutionsMemberus-gaap:ProductConcentrationRiskMember2021-07-012021-09-300001384905us-gaap:RevenueFromContractWithCustomerMemberrng:RingCentralCustomerEngagementSolutionsMemberus-gaap:ProductConcentrationRiskMember2021-01-012021-09-300001384905us-gaap:RevenueFromContractWithCustomerMemberrng:RingCentralCustomerEngagementSolutionsMemberus-gaap:ProductConcentrationRiskMember2022-07-012022-09-300001384905us-gaap:RevenueFromContractWithCustomerMemberrng:RingCentralCustomerEngagementSolutionsMemberus-gaap:ProductConcentrationRiskMember2022-01-012022-09-300001384905srt:MinimumMember2022-01-012022-09-300001384905srt:MaximumMember2022-01-012022-09-3000013849052022-10-012022-09-3000013849052023-10-012022-09-300001384905us-gaap:ProductMember2022-07-012022-09-300001384905us-gaap:ProductMember2021-07-012021-09-300001384905us-gaap:ProductMember2022-01-012022-09-300001384905us-gaap:ProductMember2021-01-012021-09-300001384905us-gaap:TechnologyEquipmentMember2022-09-300001384905us-gaap:TechnologyEquipmentMember2021-12-310001384905us-gaap:SoftwareDevelopmentMember2022-09-300001384905us-gaap:SoftwareDevelopmentMember2021-12-310001384905us-gaap:FurnitureAndFixturesMember2022-09-300001384905us-gaap:FurnitureAndFixturesMember2021-12-310001384905us-gaap:LeaseholdImprovementsMember2022-09-300001384905us-gaap:LeaseholdImprovementsMember2021-12-310001384905us-gaap:CustomerRelationshipsMember2022-01-012022-09-300001384905us-gaap:CustomerRelationshipsMember2022-09-300001384905us-gaap:CustomerRelationshipsMember2021-12-310001384905us-gaap:DevelopedTechnologyRightsMember2022-01-012022-09-300001384905us-gaap:DevelopedTechnologyRightsMember2022-09-300001384905us-gaap:DevelopedTechnologyRightsMember2021-12-310001384905us-gaap:MoneyMarketFundsMember2022-09-300001384905us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Member2022-09-300001384905us-gaap:FairValueInputsLevel2Memberus-gaap:MoneyMarketFundsMember2022-09-300001384905us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel3Member2022-09-300001384905us-gaap:FairValueInputsLevel1Member2022-09-300001384905us-gaap:FairValueInputsLevel2Member2022-09-300001384905us-gaap:FairValueInputsLevel3Member2022-09-300001384905us-gaap:MoneyMarketFundsMember2021-12-310001384905us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Member2021-12-310001384905us-gaap:FairValueInputsLevel2Memberus-gaap:MoneyMarketFundsMember2021-12-310001384905us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel3Member2021-12-310001384905us-gaap:FairValueInputsLevel1Member2021-12-310001384905us-gaap:FairValueInputsLevel2Member2021-12-310001384905us-gaap:FairValueInputsLevel3Member2021-12-310001384905us-gaap:FairValueInputsLevel2Memberrng:ConvertibleSeniorNotesDueTwoThousandTwentySixMember2022-09-300001384905us-gaap:FairValueInputsLevel2Memberrng:ConvertibleSeniorNotesDueTwoThousandTwentyFiveMember2022-09-300001384905us-gaap:ConvertibleDebtMemberrng:ConvertibleSeniorNotesDueTwoThousandTwentyThreeMember2018-03-310001384905us-gaap:ConvertibleDebtMemberrng:ConvertibleSeniorNotesDueTwoThousandTwentyThreeMember2018-03-012018-03-310001384905us-gaap:ConvertibleDebtMemberrng:ConvertibleSeniorNotesDueTwoThousandTwentyFiveMember2020-03-310001384905us-gaap:ConvertibleDebtMemberrng:ConvertibleSeniorNotesDueTwoThousandTwentyFiveMember2020-03-012020-03-310001384905us-gaap:ConvertibleDebtMemberrng:ConvertibleSeniorNotesDueTwoThousandTwentySixMember2020-09-300001384905us-gaap:ConvertibleDebtMemberrng:ConvertibleSeniorNotesDueTwoThousandTwentySixMember2020-09-012020-09-300001384905rng:ConvertibleSeniorNotesDueTwoThousandTwentySixMemberus-gaap:CommonClassAMember2022-09-300001384905us-gaap:CommonClassAMemberrng:ConvertibleSeniorNotesDueTwoThousandTwentyFiveMember2022-09-300001384905us-gaap:CommonClassAMemberrng:ConvertibleSeniorNotesDueTwoThousandTwentyFiveMember2020-03-310001384905rng:ConvertibleSeniorNotesDueTwoThousandTwentySixMemberus-gaap:CommonClassAMember2020-09-300001384905us-gaap:ConvertibleDebtMember2022-01-012022-09-300001384905rng:ConvertibleSeniorNotesDueTwoThousandTwentyFiveMember2022-09-300001384905rng:ConvertibleSeniorNotesDueTwoThousandTwentySixMember2022-09-300001384905rng:ConvertibleSeniorNotesDueTwoThousandTwentyThreeMemberrng:CappedCallMember2018-03-012018-03-310001384905rng:CappedCallMemberrng:ConvertibleSeniorNotesDueTwoThousandTwentyFiveMember2020-03-012020-03-310001384905rng:CappedCallMemberrng:ConvertibleSeniorNotesDueTwoThousandTwentySixMember2020-09-012020-09-300001384905rng:ConvertibleSeniorNotesDueTwoThousandTwentyThreeMemberrng:CappedCallMember2018-03-310001384905rng:CappedCallMemberrng:ConvertibleSeniorNotesDueTwoThousandTwentyFiveMember2020-03-310001384905rng:CappedCallMemberrng:ConvertibleSeniorNotesDueTwoThousandTwentySixMember2020-09-300001384905rng:ConvertibleSeniorNotesDueTwoThousandTwentyThreeMemberrng:CappedCallMemberus-gaap:CommonClassAMember2018-03-012018-03-310001384905rng:CappedCallMemberus-gaap:CommonClassAMemberrng:ConvertibleSeniorNotesDueTwoThousandTwentyFiveMember2020-03-012020-03-310001384905rng:CappedCallMemberrng:ConvertibleSeniorNotesDueTwoThousandTwentySixMemberus-gaap:CommonClassAMember2020-09-012020-09-300001384905rng:ConvertibleSeniorNotesDueTwoThousandTwentySixMemberus-gaap:CommonClassAMember2020-09-012020-09-300001384905us-gaap:CommonClassAMemberrng:ConvertibleSeniorNotesDueTwoThousandTwentyFiveMember2020-03-012020-03-3100013849052017-04-252017-04-25rng:action00013849052020-06-160001384905rng:RingCentralSuitAgainstBrightPatternInc.AndOfficersMember2019-06-142019-06-14rng:defendent00013849052019-08-262019-08-260001384905rng:BrightPatternInc.CrossComplaintAgainstRingCentralMember2019-08-262019-08-2600013849052021-12-130001384905rng:SeriesAConvertiblePreferredStockMember2021-11-080001384905rng:SeriesAConvertiblePreferredStockMember2021-11-082021-11-080001384905us-gaap:CommonClassAMember2021-11-080001384905rng:SeriesAConvertiblePreferredStockMember2022-09-300001384905us-gaap:CostOfSalesMember2022-07-012022-09-300001384905us-gaap:CostOfSalesMember2021-07-012021-09-300001384905us-gaap:CostOfSalesMember2022-01-012022-09-300001384905us-gaap:CostOfSalesMember2021-01-012021-09-300001384905us-gaap:ResearchAndDevelopmentExpenseMember2022-07-012022-09-300001384905us-gaap:ResearchAndDevelopmentExpenseMember2021-07-012021-09-300001384905us-gaap:ResearchAndDevelopmentExpenseMember2022-01-012022-09-300001384905us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-09-300001384905us-gaap:SellingAndMarketingExpenseMember2022-07-012022-09-300001384905us-gaap:SellingAndMarketingExpenseMember2021-07-012021-09-300001384905us-gaap:SellingAndMarketingExpenseMember2022-01-012022-09-300001384905us-gaap:SellingAndMarketingExpenseMember2021-01-012021-09-300001384905us-gaap:GeneralAndAdministrativeExpenseMember2022-07-012022-09-300001384905us-gaap:GeneralAndAdministrativeExpenseMember2021-07-012021-09-300001384905us-gaap:GeneralAndAdministrativeExpenseMember2022-01-012022-09-300001384905us-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-09-300001384905us-gaap:EmployeeStockOptionMember2022-07-012022-09-300001384905us-gaap:EmployeeStockOptionMember2021-07-012021-09-300001384905us-gaap:EmployeeStockOptionMember2022-01-012022-09-300001384905us-gaap:EmployeeStockOptionMember2021-01-012021-09-300001384905us-gaap:EmployeeStockMember2022-07-012022-09-300001384905us-gaap:EmployeeStockMember2021-07-012021-09-300001384905us-gaap:EmployeeStockMember2022-01-012022-09-300001384905us-gaap:EmployeeStockMember2021-01-012021-09-300001384905us-gaap:RestrictedStockMember2022-07-012022-09-300001384905us-gaap:RestrictedStockMember2021-07-012021-09-300001384905us-gaap:RestrictedStockMember2022-01-012022-09-300001384905us-gaap:RestrictedStockMember2021-01-012021-09-300001384905rng:TwoThousandAndThirteenEquityAndIncentivePlanMember2022-09-300001384905us-gaap:EmployeeStockMember2022-09-300001384905us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-09-300001384905us-gaap:RestrictedStockMember2021-12-310001384905us-gaap:RestrictedStockMember2022-09-300001384905us-gaap:RestrictedStockUnitsRSUMember2022-09-300001384905us-gaap:RestrictedStockUnitsRSUMemberrng:KeyEmployeeEquityBonusPlanMember2022-07-012022-09-300001384905us-gaap:RestrictedStockUnitsRSUMemberrng:KeyEmployeeEquityBonusPlanMember2022-01-012022-09-300001384905us-gaap:RestrictedStockUnitsRSUMemberrng:KeyEmployeeEquityBonusPlanMember2022-09-300001384905us-gaap:StockCompensationPlanMember2022-07-012022-09-300001384905us-gaap:StockCompensationPlanMember2021-07-012021-09-300001384905us-gaap:StockCompensationPlanMember2022-01-012022-09-300001384905us-gaap:StockCompensationPlanMember2021-01-012021-09-300001384905rng:SeriesAConvertiblePreferredStockMember2022-07-012022-09-300001384905rng:SeriesAConvertiblePreferredStockMember2021-07-012021-09-300001384905rng:SeriesAConvertiblePreferredStockMember2022-01-012022-09-300001384905rng:SeriesAConvertiblePreferredStockMember2021-01-012021-09-300001384905us-gaap:ConvertibleDebtSecuritiesMember2022-07-012022-09-300001384905us-gaap:ConvertibleDebtSecuritiesMember2021-07-012021-09-300001384905us-gaap:ConvertibleDebtSecuritiesMember2022-01-012022-09-300001384905us-gaap:ConvertibleDebtSecuritiesMember2021-01-012021-09-300001384905rng:GoogleIncMember2022-09-300001384905rng:GoogleIncMember2021-12-310001384905rng:GoogleIncMember2022-07-012022-09-300001384905rng:GoogleIncMember2021-07-012021-09-300001384905rng:GoogleIncMember2022-01-012022-09-300001384905rng:GoogleIncMember2021-01-012021-09-300001384905srt:ScenarioForecastMember2022-10-012023-03-310001384905srt:ScenarioForecastMembersrt:MinimumMember2022-10-012023-03-310001384905srt:ScenarioForecastMembersrt:MaximumMember2022-10-012023-03-31


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 September 30, 2022
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)
(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 November 2, 2022, there were 85,914,505 shares of Class A Common Stock issued and outstanding and 9,955,674 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 reliance on our third-party product and service providers, particularly in light of Russia’s ongoing invasion of Ukraine on our software development, quality assurance and customer support operations;
the political environment and stability in the regions in which we or our subcontractors operate, particularly in light of Russia’s ongoing invasion of Ukraine;
the impact of the current macroeconomic environment on us and our customers;
the impact of foreign currencies on our non-U.S. business as we expand our business internationally;
our ability to defend our systems and our customer information from fraud and cyber-attack;
our success in the enterprise market;
anticipated trends, developments and challenges in our business and in the markets in which we operate, as well as general macroeconomic conditions;
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;
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 carrier partners;
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;
3

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;
our ability to protect our intellectual property and rely on open source licenses;
our expectations regarding the growth and reliability of the internet infrastructure;
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;
the estimates and estimate methodologies used in preparing our condensed consolidated financial statements;
our ability to prevent the use of fraudulent payment methods for our solutions; and
our ability to retain key employees and to attract qualified personnel.
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)
September 30,
2022
December 31,
2021
Assets  
Current assets  
Cash and cash equivalents$305,383 $267,162 
Accounts receivable, net265,986 232,842 
Deferred and prepaid sales commission costs151,292 102,572 
Prepaid expenses and other current assets51,939 48,165 
Total current assets774,600 650,741 
Property and equipment, net182,194 166,910 
Operating lease right-of-use assets36,902 47,294 
Long-term investments31,824 210,445 
Deferred and prepaid sales commission costs, non-current646,466 723,448 
Goodwill52,572 55,490 
Acquired intangibles, net584,741 716,606 
Other assets6,418 8,105 
Total assets$2,315,717 $2,579,039 
Liabilities, Temporary Equity, and Stockholders' (Deficit) Equity
Current liabilities
Accounts payable$88,526 $70,022 
Accrued liabilities341,256 279,798 
Deferred revenue209,420 176,450 
Total current liabilities639,202 526,270 
Convertible senior notes, net1,637,293 1,398,489 
Operating lease liabilities22,348 31,812 
Other long-term liabilities62,301 84,052 
Total liabilities2,361,144 2,040,623 
Commitments and contingencies (Note 7)
Series A convertible preferred stock199,449 199,449 
Stockholders' (deficit) equity
Common stock10 9 
Additional paid-in capital1,022,909 1,086,870 
Accumulated other comprehensive (loss) income(17,962)644 
Accumulated deficit(1,249,833)(748,556)
Total stockholders' (deficit) equity(244,876)338,967 
Total liabilities, temporary equity and stockholders’ (deficit) equity$2,315,717 $2,579,039 
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
September 30,
Nine Months Ended
September 30,
2022202120222021
Revenues    
Subscriptions$483,229 $385,440 $1,386,140 $1,061,866 
Other25,803 29,189 77,444 84,392 
Total revenues509,032 414,629 1,463,584 1,146,258 
Cost of revenues
Subscriptions134,372 84,229 395,083 236,719 
Other33,102 26,220 86,055 75,634 
Total cost of revenues167,474 110,449 481,138 312,353 
Gross profit341,558 304,180 982,446 833,905 
Operating expenses
Research and development86,700 84,121 273,492 222,958 
Sales and marketing261,914 225,111 781,767 607,758 
General and administrative72,261 78,083 217,810 201,716 
Asset write-down charge103,242  103,242  
Total operating expenses524,117 387,315 1,376,311 1,032,432 
Loss from operations(182,559)(83,135)(393,865)(198,527)
Other income (expense), net
Interest expense(1,178)(15,977)(3,613)(48,197)
Other expense(100,006)(47,062)(194,725)(9,742)
Other expense, net(101,184)(63,039)(198,338)(57,939)
Loss before income taxes(283,743)(146,174)(592,203)(256,466)
Provision for income taxes873 577 2,900 1,427 
Net loss$(284,616)$(146,751)$(595,103)$(257,893)
Net loss per common share
Basic and diluted$(2.98)$(1.60)$(6.26)$(2.83)
Weighted-average number of shares used in computing net loss per share
Basic and diluted95,575 91,811 95,097 91,213 
See accompanying notes to condensed consolidated financial statements
6

RINGCENTRAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited, in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Net loss$(284,616)$(146,751)$(595,103)$(257,893)
Other comprehensive loss
Foreign currency translation adjustments, net(8,362)(2,576)(18,606)(4,777)
Comprehensive loss$(292,978)$(149,327)$(613,709)$(262,670)
See accompanying notes to condensed consolidated financial statements
7

RINGCENTRAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY
(Unaudited, in thousands)
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive Income (Loss)Accumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance as of December 31, 202194,309 $9 $1,086,870 $644 $(748,556)$338,967 
Cumulative effect of accounting change— — (329,280)— 93,826 (235,454)
Issuance of common stock in connection with Equity Incentive and Employee Stock Purchase plans, net of tax withholdings588 — (120)— — (120)
Share-based compensation— — 98,424 — — 98,424 
Changes in other comprehensive income— — — (2,062)— (2,062)
Net loss— — — — (150,972)(150,972)
Balance as of March 31, 202294,897 9 855,894 (1,418)(805,702)48,783 
Issuance of common stock in connection with Equity Incentive and Employee Stock Purchase plans, net of tax withholdings842 — 7,827 — — 7,827 
Repurchases of common stock(421)— (25,004)— — (25,004)
Share-based compensation— — 98,402 — — 98,402 
Changes in other comprehensive loss— — — (8,182)— (8,182)
Net loss— — — — (159,515)(159,515)
Balance as of June 30, 202295,318 9 937,119 (9,600)(965,217)(37,689)
Issuance of common stock in connection with Equity Incentive and Employee Stock Purchase plans, net of tax withholdings, and other commercial arrangements967 1 11,165 — — 11,166 
Repurchases of common stock(419)— (20,000)— — (20,000)
Share-based compensation— — 94,625 — — 94,625 
Changes in other comprehensive loss— — — (8,362)— (8,362)
Net loss— — — — (284,616)(284,616)
Balance as of September 30, 202295,866 $10 $1,022,909 $(17,962)$(1,249,833)$(244,876)
8

Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive IncomeAccumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance as of December 31, 202090,430 $9 $673,950 $6,806 $(372,306)$308,459 
Issuance of common stock in connection with Equity Incentive and Employee Stock Purchase plans, net of tax withholdings438 — (3,708)— — (3,708)
Share-based compensation— — 59,993 — — 59,993 
Equity component from repurchase or redemption of convertible senior notes— — (147,740)— — (147,740)
Temporary equity reclassification— — (338)— — (338)
Changes in other comprehensive income— — — (3,412)— (3,412)
Net loss— — — — (186)(186)
Balance as of March 31, 202190,868 9 582,157 3,394 (372,492)213,068 
Issuance of common stock in connection with Equity Incentive and Employee Stock Purchase plans, net of tax withholdings642 — 10,999 — — 10,999 
Share-based compensation— — 95,685 — — 95,685 
Equity component from repurchase or redemption of convertible senior notes— — (121,844)— — (121,844)
Temporary equity reclassification— — 4,124 — — 4,124 
Changes in other comprehensive income— — — 1,211 — 1,211 
Net loss— — — — (110,956)(110,956)
Balance as of June 30, 202191,510 9 571,121 4,605 (483,448)92,287 
Issuance of common stock in connection with Equity Incentive and Employee Stock Purchase plans, net of tax withholdings652 — (2,548)— — (2,548)
Share-based compensation— — 104,849 — — 104,849 
Changes in other comprehensive income— — — (2,576)— (2,576)
Net loss— — — — (146,751)(146,751)
Balance as of September 30, 202192,162 9 673,422 2,029 (630,199)45,261 

See accompanying notes to condensed consolidated financial statements
9

RINGCENTRAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Nine Months Ended
September 30,
20222021
Cash flows from operating activities  
Net loss$(595,103)$(257,893)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization184,166 78,223 
Share-based compensation293,777 254,749 
Unrealized loss on investments176,218 14,346 
Asset write-down charge124,904  
Amortization of deferred and prepaid sales commission costs81,536 53,307 
Amortization of debt discount and issuance costs3,350 47,980 
Loss on early extinguishment of debt 1,736 
Repayment of convertible senior notes attributable to debt discount (10,131)
Reduction of operating lease right-of-use assets14,887 13,320 
Provision for bad debt7,103 5,384 
Other3,688 1,463 
Changes in assets and liabilities:
Accounts receivable(40,247)(45,476)
Deferred and prepaid sales commission costs(185,049)(125,181)
Prepaid expenses and other assets(689)7,849 
Accounts payable19,384 (4,472)
Accrued and other liabilities47,001 55,971 
Deferred revenue32,970 27,176 
Operating lease liabilities(15,963)(13,851)
Net cash provided by operating activities151,933 104,500 
Cash flows from investing activities
Purchases of property and equipment(23,828)(21,787)
Capitalized internal-use software(39,638)(30,932)
Proceeds from sale of marketable equity investments3,223  
Purchases of intangible assets and long-term investments(3,990)(10,463)
Net cash used in investing activities(64,233)(63,182)
Cash flows from financing activities
Payments for repurchase or redemption of convertible senior notes (333,632)
Payments for repurchase of common stock(45,004) 
Proceeds from issuance of stock in connection with stock plans10,892 21,738 
Payments for taxes related to net share settlement of equity awards(5,180)(16,995)
Payment for contingent consideration(1,538)(3,600)
Repayment of financing obligations(3,950)(2,804)
Net cash used in financing activities(44,780)(335,293)
Effect of exchange rate changes(4,699)(726)
Net increase (decrease) in cash, cash equivalents, and restricted cash38,221 (294,701)
Cash, cash equivalents, and restricted cash
Beginning of period267,162 639,853 
End of period$305,383 $345,152 
Supplemental disclosure of cash flow data:
Cash paid for interest$272 $246 
Cash paid for income taxes, net of refunds$2,895 $1,062 
Non-cash investing and financing activities
Equipment and capitalized internal-use software purchased and unpaid at period end$9,355 $7,639 
See accompanying notes to condensed consolidated financial statements
10

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 provider of software-as-a-service (“SaaS”) solutions that enables businesses to communicate, collaborate and connect. 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, 2022. 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, 2021, filed with the SEC on March 1, 2022.
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, valuation of long-term investments, deferred and prepaid sales commission costs, goodwill, useful lives of intangible assets, share-based compensation, capitalization of internally developed software, liability and equity allocation of convertible senior notes, return reserves, provision for income taxes, uncertain tax positions, 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. In particular, the Company evaluates its deferred and prepaid sales commission balances for possible recoverability whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable, and as a result of the uncertainty regarding Avaya’s financial condition, the Company performed a recoverability assessment based on the facts and circumstances known to date. There can be no assurances that the Company’s current estimates are accurate or will not subsequently need to be revised as additional information regarding Avaya’s financial status and condition is made publicly available. Refer to Note 3, Financial Statement Components in this Quarterly Report on Form 10-Q for further information regarding our assessment of the recoverability of our deferred and prepaid sales commission balances with Avaya.
Segment Information
The Company has determined that 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.
11

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Concentrations
As of September 30, 2022 and December 31, 2021, none of the Company’s customers accounted for more than 10% of the Company’s total accounts receivable.
Long-lived assets by geographic location are based on the location of the legal entity that owns the asset. As of September 30, 2022 and December 31, 2021, approximately 95% 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.
Recent Accounting Pronouncements Not Yet Adopted
In March 2020, the FASB issued optional guidance for a limited time to ease the potential burden in accounting for or recognizing the effects of reference rate reform, particularly, the risk of cessation of the London Interbank Offered Rate (“LIBOR”) on financial reporting. The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments are elective and are effective upon issuance for all entities through December 31, 2022. The amendments in this ASU are not expected to have a material impact on the Company's consolidated financial statements.
Recently Adopted Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. This update simplifies the accounting for convertible instruments by eliminating the conversion option separation model for convertible debt that can be settled in cash. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. This update also eliminates the treasury stock method and instead requires entities to calculate the impact of convertible instruments on diluted earnings per share when the instruments may be settled in cash or shares. The required use of the if-converted method did not impact the diluted net loss per share as the Company was in a net loss position.
The Company adopted this update, effective January 1, 2022, using the modified retrospective method. Upon adoption, the Company is no longer recording the conversion feature of its convertible senior notes in equity. Instead, the Company combined the previously separated equity component with the liability component, which together is now classified as debt, thereby eliminating the subsequent amortization of the debt discount as interest expense. Similarly, the portion of issuance costs previously allocated to equity was reclassified to debt and amortized as interest expense. Accordingly, the Company recorded a decrease to accumulated deficit of approximately $93.8 million, a decrease to additional paid-in capital of $329.3 million, and an increase to convertible senior notes, net of approximately $235.5 million. Prior period financial statements were not restated.
Note 2. Revenue
The Company derives its revenues primarily from subscriptions, sale of products, and professional services. Revenues are recognized when control of these services is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.
Disaggregation of revenue
The following table provides information about disaggregated revenue by primary geographical markets:
Three Months Ended
September 30,
Nine Months Ended
September 30,
 2022202120222021
Primary geographical markets    
North America90 %88 %90 %88 %
Others10 12 10 12 
Total revenues100 %100 %100 %100 %
The Company derived over 90% of subscriptions revenues from RingCentral MVP and RingCentral customer engagement solutions products for each of the three and nine months ended September 30, 2022 and 2021. For the three and
12

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
nine months ended September 30, 2022 and 2021, RingCentral customer engagement solutions represented over 10% of total revenues.
Deferred revenue
During the three and nine months ended September 30, 2022, the Company recognized revenue of $20.5 million and $163.6 million, respectively, that was included in the corresponding deferred revenue balance at the beginning of the year.
Remaining performance obligations
The typical subscription contract term ranges from one month to five years. Contract revenue as of September 30, 2022 that has not yet been recognized was approximately $2.0 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 54% of this balance over the next 12 months and 46% 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 $12.6 million and $12.9 million for the three months ended September 30, 2022 and 2021, respectively, and $35.2 million and $37.1 million for the nine months ended September 30, 2022 and 2021, respectively.
Note 3. Financial Statement Components
Cash and cash equivalents consisted of the following (in thousands):
September 30, 2022December 31, 2021
Cash$90,818 $91,499 
Money market funds214,565 175,663 
Total cash and cash equivalents$305,383 $267,162 
As of September 30, 2022, $5.5 million in the cash balance above 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):
September 30, 2022December 31, 2021
Accounts receivable$200,869 $193,192 
Unbilled accounts receivable74,104 47,676 
Allowance for doubtful accounts(8,987)(8,026)
Accounts receivable, net$265,986 $232,842 
Prepaid expenses and other current assets consisted of the following (in thousands):
September 30, 2022December 31, 2021
Prepaid expenses$26,849 $26,254 
Inventory1,256 5,655 
Other current assets23,834 16,256 
Total prepaid expenses and other current assets$51,939 $48,165 
Property and equipment, net consisted of the following (in thousands):
13

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2022December 31, 2021
Computer hardware and software$214,446 $197,395 
Internal-use software development costs185,622 140,424 
Furniture and fixtures8,768 8,660 
Leasehold improvements13,592 13,533 
Total property and equipment, gross422,428 360,012 
Less: accumulated depreciation and amortization(240,234)(193,102)
Property and equipment, net$182,194 $166,910 
Total depreciation and amortization expense related to property and equipment was $18.3 million and $15.5 million for the three months ended September 30, 2022 and 2021, respectively, and $52.8 million and $42.7 million for the nine months ended September 30, 2022 and 2021, respectively.
The carrying value of goodwill is as follows (in thousands):
Balance at December 31, 2021$55,490 
Foreign currency translation adjustments(2,918)
Balance at September 30, 2022$52,572 
The carrying values of intangible assets are as follows (in thousands):
September 30, 2022December 31, 2021
Weighted-Average Remaining Useful LifeCostAccumulated
Amortization
Acquired
Intangibles, Net
CostAccumulated
Amortization
Acquired
Intangibles, Net
Customer relationships
1.0 year
$20,126 $17,602 $2,524 $21,333 $15,725 $5,608 
Developed technology
4.0 years
814,380 232,163 582,217 814,873 103,875 710,998 
Total acquired intangible assets$834,506 $249,765 $584,741 $836,206 $119,600 $716,606 
Amortization expense from acquired intangible assets for the three months ended September 30, 2022 and 2021 was $43.7 million and $12.0 million, respectively, and $131.4 million and $35.5 million for the nine months ended September 30, 2022 and 2021, 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):
2022 (remaining)$41,198 
2023150,457 
2024147,099 
2025132,930 
2026 onwards113,057 
Total estimated amortization expense$584,741 
14

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Accrued liabilities consisted of the following (in thousands):
September 30, 2022December 31, 2021
Accrued compensation and benefits$45,286 $48,911 
Accrued sales, use, and telecom related taxes37,557 30,463 
Accrued marketing68,278 52,547 
Operating lease liabilities, short-term16,685 18,686 
Other accrued expenses173,450 129,191 
Total accrued liabilities$341,256 $279,798 
Deferred and Prepaid Sales Commission Costs
Amortization expense for the deferred and prepaid sales commission costs was $31.5 million and $19.9 million for the three months ended September 30, 2022 and 2021, respectively, and $81.5 million and $53.3 million for the nine months ended September 30, 2022 and 2021, respectively. There was no impairment loss in relation to the deferred commissions costs capitalized for the periods presented.
In October 2019, the Company entered into certain agreements for a strategic partnership with Avaya Holdings Corp. (“Avaya”) and its subsidiaries, including Avaya Inc. In connection with the strategic partnership, the Company prepaid Avaya in the Company's class A Common Stock predominantly for future sales commission to be earned for each qualified unit of Avaya Cloud Office by RingCentral (“ACO”) sold during the term of the partnership. The unutilized prepaid sales commission is refundable and payable to the Company at the end of the contractual term.
Avaya recently disclosed in its earnings release, among other things, a substantial doubt about its ability to continue as a “going concern.” While Avaya provided preliminary third quarter financial information and related disclosures, it also indicated that it would be unable to timely file its Form 10-Q for the quarter ended June 30, 2022. Avaya has not made any additional financial information publicly available with respect to its third quarter or its financial results for its fiscal year ended September 30, 2022.
The Company evaluates the recoverability of its deferred and prepaid sales commission balance whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. Avaya continues to sell the ACO product and earn sales commissions, which the Company is applying against the prepaid sales commission balance, but as a result of the uncertainty regarding Avaya’s financial condition, the Company performed a recoverability assessment based on the facts and circumstances known to date. While the Company lacks Avaya's financial information, in light of Avaya's public disclosures, the Company has recorded a non-cash asset write-down charge of $124.9 million, out of which $21.7 million of this balance is accrued interest and is recorded in other expenses in the Condensed Consolidated Statement of Operations. As of September 30, 2022, the remaining prepaid sales commission balance was $162.2 million. The Company will continue to evaluate the recoverability of the assets on an ongoing basis and if the evaluation indicates that the carrying amount of the assets is not recoverable, the Company may incur significant incremental write down charges in the future.
Note 4. Fair Value of Financial Instruments
The Company measures and reports certain cash equivalents, including money market funds and certificates of deposit, in addition to its long-term investments 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.
15

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
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 assets carried at fair value were determined using the following inputs (in thousands):
Fair Value at
September 30, 2022
Level 1Level 2Level 3
Cash equivalents:    
Money market funds$214,565 $214,565 $ $ 
Non-current assets:
Long-term investments$28,911 $ $ $28,911 
Fair Value at
December 31, 2021
Level 1Level 2Level 3
Cash equivalents:    
Money market funds$175,663 $175,663 $ $ 
Non-current assets:
Long-term investments$199,965 $ $ $199,965 
Marketable equity investments
$8,600 $8,600 $ $ 
The Company’s other financial instruments, including accounts receivable, accounts payable, and other current liabilities, are carried at cost, which approximates fair-value due to the relatively short maturity of those instruments.
Long-Term Investments
As of September 30, 2022 and December 31, 2021, the fair value of the Company's long-term investments in convertible and redeemable preferred stock issued by Avaya was $28.9 million and $200.0 million, respectively. The Company classifies these investments as Level 3 in the fair value hierarchy based on the nature of the fair value inputs and judgment involved in the valuation process. The Company uses a lattice model to value these investments and relies on observable inputs including share-price, credit spread, and volatility. The model also incorporates judgments relating to the probability of special redemption triggers, the expected holding period of the investment, interest rates, and expected recoverability. These investments are reported at fair value in long-term investments in the Condensed Consolidated Balance Sheets with net unrealized gain (loss) recorded in other expense. The Company recognized an unrealized loss of $77.4 million and $48.7 million for the three months ended September 30, 2022 and 2021, respectively, and a net unrealized loss of $174.0 million and $15.3 million for the nine months ended September 30, 2022 and 2021, respectively. In determining the fair value of the investment, the Company also considered Avaya's recent public disclosures. Volatility in the global economic climate and financial markets, including the effects of rising inflation and associated economic slowdown, the ongoing Russian invasion of Ukraine, and the investee's financial and liquidity position, could result in a significant change in the underlying share-price of the Company’s investee and their financial position, resulting in a material change in the value of the long-term investments, requiring impairment charges.
Marketable Equity Investments
During the three months ended September 30, 2022, the Company completed the sale of its marketable equity investments for proceeds of $3.2 million. During the three and nine months ended September 30, 2022, the Company recognized a loss from its marketable equity investments of $1.8 million and $5.4 million, respectively, which was reported in other expense in the Condensed Consolidated Statement of Operations.
Other Non-Marketable Investments
As of September 30, 2022, the Company had an immaterial amount of non-marketable investments held in debt and equity securities without readily determinable fair values in which it had neither a controlling interest nor significant influence. These investments are carried at cost under the measurement alternative as part of long-term investments in the Condensed Consolidated Balance Sheets.
16

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Convertible Senior Notes
As of September 30, 2022, the fair value of the 0% convertible senior notes due 2026 (the “2026 Notes”) was approximately $498.8 million, and 0% convertible senior notes due 2025 (the “2025 Notes”) was approximately $840.8 million. The fair value for the 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.
Note 5. Convertible Senior Notes
In March 2018, the Company issued $460.0 million aggregate principal amount of 0% convertible senior notes due 2023 in a private placement, including the exercise in full of the over-allotment options of the initial purchasers (the "2023 Notes"). The 2023 Notes would have matured on March 15, 2023, unless repurchased or redeemed earlier 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 $449.5 million. In the second quarter of 2021, the Company redeemed the remaining outstanding principal balance of its 2023 Notes.
In March 2020, the Company issued $1.0 billion aggregate principal amount of 0% convertible senior notes due 2025 in a private placement to qualified institutional buyers (the "2025 Notes"). The 2025 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 senior notes due 2026 in a private placement to qualified institutional buyers (the "2026 Notes"). The 2026 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 2023 Notes, 2025 Notes and 2026 Notes (collectively, the “Notes”) are senior, unsecured obligations of the Company that do not bear regular interest, and the principal amount of the Notes do not accrete. The Notes may bear special interest under specified circumstances relating to the Company's failure to comply with its reporting obligations under the indentures governing each of the Notes (collectively, the "Notes Indentures") or if the Notes are not freely tradeable as required by each respective Notes Indenture.
Other Terms of the Notes
2025 Notes2026 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 Notes Indentures, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its Notes in connection with such make-whole fundamental change or during the relevant redemption period.
The 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 Notes, and December 15, 2025 for the 2026 Notes, until the close of business on the scheduled trading day immediately preceding the maturity date, holders of the Notes may convert all or a portion of their notes regardless of these conditions. Under the terms of the respective Notes Indentures, effective January 1, 2022, the Company made an irrevocable election to settle the principal portion of the Notes only in cash, with the conversion premium to be settled in cash or shares.
During the three months ended September 30, 2022, the conditions allowing holders of the 2025 Notes and 2026 Notes to convert were not met. The Notes may be convertible thereafter if one or more of the conversion conditions specified in the indentures are satisfied during future measurement periods.
17

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
The Company may redeem the Notes at its option, on or after March 5, 2022 for the 2025 Notes, and March 20, 2023 for the 2026 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 Notes.
Upon the occurrence of a fundamental change (as defined in each respective Notes Indentures) prior to the maturity date, holders may require the Company to repurchase all or a portion of the 2025 Notes or 2026 Notes for cash at a price equal to 100% of the principal amount of the Notes to be repurchased, plus any accrued and unpaid special interest to, but excluding, the fundamental change repurchase date.
The net carrying amount of the liability component of the Notes as of September 30, 2022 were as follows (in thousands):
2025 Notes2026 Notes
Principal$1,000,000 $650,000 
Unamortized issuance cost(6,555)(6,152)
Net carrying amount (1)
$993,445 $643,848 
(1)The net carrying amount was increased on January 1, 2022 as a result of the adoption of ASU No. 2020-06. Refer to Note 1, Description of Business and Summary of Significant Accounting Policies, in this Quarterly Report on Form 10-Q for further information.
The following table sets forth the total interest expense recognized related to the Notes (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Amortization of debt discount (1)
$ $15,122 $ $45,645 
Amortization of debt issuance cost (1)
1,118 776 3,350 2,335 
Total interest expense related to the Notes (1)
$1,118 $15,898 $3,350 $47,980 
(1)The decrease in total interest expense during the three and nine months ended September 30, 2022 was due to the derecognition of the unamortized debt discount, partially offset by the increase in the amortization of issuance costs previously recognized in equity. These changes were the result of the Company’s adoption of ASU No. 2020-06, as of January 1, 2022, as described in Note 1, Description of Business and Summary of Significant Accounting Policies.
Capped Calls
In connection with the offering of the Notes, the Company entered into privately-negotiated capped call transactions relating to each series of notes with certain counterparties (collectively the “Capped Calls”). The initial strike price of the Notes corresponds to the initial conversion price of each of the 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 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’ equity and are not accounted for as derivatives.
18

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table below sets forth key terms and costs incurred for the Capped Calls related to each of the Notes:
2023 Notes2025 Notes2026 Notes
Initial approximate strike price per share, subject to certain adjustments$81.45 $360.43 $424.03 
Initial cap price per share, subject to certain adjustments$119.04 $480.56 $556.10 
Net cost incurred (in millions)$49.9 $60.9 $41.8 
Class A Common Stock covered, subject to anti-dilution adjustments (in millions)5.62.81.5
Settlement commencement date1/13/20231/31/20242/13/2025
Settlement expiration date3/13/20232/28/20243/13/2025
All of the capped call transactions, including the capped call relating to the 2023 Notes, were outstanding as of September 30, 2022.
Note 6. 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 September 30, 2022, non-cancellable leases expire on various dates between 2022 and 2029.
The components of leases are as follows (in thousands):
September 30, 2022December 31, 2021
Operating leases
Operating lease right-of-use assets$36,902 $47,294 
Accrued liabilities$16,685 $18,686 
Operating lease liabilities22,348 31,812 
Total operating lease liabilities$39,033 $50,498 

Nine Months Ended September 30,
20222021
Supplemental Cash Flow Information (in thousands)
Operating cash flows resulting from operating leases:
Cash paid for amounts included in the measurement of lease liabilities$17,541 $15,858 
New ROU assets obtained in exchange of lease liabilities:
Operating leases$5,653 $10,495 
Note 7. 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.
19

RINGCENTRAL, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
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 seek 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 has been completed, the motion has not yet been 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. This litigation is still in its early stages. 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.
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. On July 7, 2020, the Court granted the parties’ stipulation to extend time for the Company to respond to the Reuben’s complaint. The parties participated in mediation on August 24, 2021. On September 16, 2021, Reuben filed an amended complaint. The Company filed a demurrer to the amended complaint on October 18, 2021. Reuben filed her opposition on November 8, 2021, and the Company filed its reply on November 22, 2021. A hearing was held on January 6, 2022. The Court overruled the Company’s demurrer and the parties are now engaged in discovery. This litigation is still in its early stages. 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.
20