10-Q 1 rng-20210930.htm 10-Q rng-20210930

(Mark One)
For the quarterly period ended September 30, 2021
For the transition period from                      to                     
Commission File Number: 001-36089
RingCentral, Inc.
(Exact Name of Registrant as Specified in its Charter)
(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 October 29, 2021, there were 82,113,259 shares of Class A Common Stock issued and outstanding and 10,048,328 shares of Class B Common Stock issued and outstanding.

Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

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;
the impact of the coronavirus (“COVID-19”) pandemic, any associated economic downturn, and related actions by individuals, governments and private industry on our business, future operating and financial performance, and markets;
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;
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;

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;
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; 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.

Item 1. Financial Statements
(Unaudited, in thousands)
September 30,
December 31,
Current assets  
Cash and cash equivalents$345,152 $639,853 
Accounts receivable, net216,126 176,034 
Deferred and prepaid sales commission costs91,948 63,726 
Prepaid expenses and other current assets40,371 46,516 
Total current assets693,597 926,129 
Property and equipment, net158,779 142,208 
Operating lease right-of-use assets48,038 51,115 
Long-term investments199,655 213,176 
Deferred and prepaid sales commission costs, non-current709,347 667,779 
Goodwill56,012 57,313 
Acquired intangibles, net92,346 118,313 
Other assets7,729 8,564 
Total assets$1,965,503 $2,184,597 
Liabilities, Temporary Equity, and Stockholders' Equity
Current liabilities
Accounts payable$46,831 $54,043 
Accrued liabilities259,380 210,654 
Current portion of convertible senior notes, net 31,148 
Deferred revenue169,399 142,223 
Total current liabilities475,610 438,068 
Convertible senior notes, net1,382,406 1,375,320 
Operating lease liabilities34,176 38,722 
Other long-term liabilities28,050 20,241 
Total liabilities1,920,242 1,872,351 
Commitments and contingencies (Note 8)
Temporary equity 3,787 
Stockholders' equity
Common stock9 9 
Additional paid-in capital673,422 673,950 
Accumulated other comprehensive income2,029 6,806 
Accumulated deficit(630,199)(372,306)
Total stockholders' equity45,261 308,459 
Total liabilities, temporary equity and stockholders’ equity$1,965,503 $2,184,597 

See accompanying notes to condensed consolidated financial statements

(Unaudited, in thousands, except per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
Subscriptions$385,440 $279,639 $1,061,866 $779,781 
Other29,189 23,985 84,392 69,340 
Total revenues414,629 303,624 1,146,258 849,121 
Cost of revenues
Subscriptions84,229 60,531 236,719 169,685 
Other26,220 21,783 75,634 62,710 
Total cost of revenues110,449 82,314 312,353 232,395 
Gross profit304,180 221,310 833,905 616,726 
Operating expenses
Research and development84,121 48,481 222,958 132,910 
Sales and marketing225,111 152,986 607,758 421,931 
General and administrative78,083 49,513 201,716 146,381 
Total operating expenses387,315 250,980 1,032,432 701,222 
Loss from operations(83,135)(29,670)(198,527)(84,496)
Other income (expense), net
Interest expense(15,977)(12,680)(48,197)(32,780)
Other income (expense)(47,062)21,824 (9,742)36,910 
Other income (expense), net(63,039)9,144 (57,939)4,130 
Loss before income taxes(146,174)(20,526)(256,466)(80,366)
Provision for income taxes577 431 1,427 803 
Net loss$(146,751)$(20,957)$(257,893)$(81,169)
Net loss per common share
Basic and diluted$(1.60)$(0.24)$(2.83)$(0.92)
Weighted-average number of shares used in computing net loss per share
Basic and diluted91,811 89,173 91,213 88,259 
See accompanying notes to condensed consolidated financial statements

(Unaudited, in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
Net loss$(146,751)$(20,957)$(257,893)$(81,169)
Other comprehensive (loss) income
Foreign currency translation adjustments, net(2,576)2,420 (4,777)1,574 
Comprehensive loss$(149,327)$(18,537)$(262,670)$(79,595)
See accompanying notes to condensed consolidated financial statements

(Unaudited, in thousands)
Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive IncomeAccumulated DeficitTotal Stockholders' Equity
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 

Common StockAdditional Paid-in CapitalAccumulated Other Comprehensive IncomeAccumulated DeficitTotal Stockholders' Equity
Balance as of December 31, 201986,940 $9 $1,033,053 $1,948 $(289,310)$745,700 
Issuance of common stock in connection with Equity Incentive and Employee Stock Purchase plans, net of tax withholdings875 — (5,549)— — (5,549)
Share-based compensation— — 37,001 — — 37,001 
Equity component of convertible senior notes, net of issuance costs— — 192,442 — — 192,442 
Purchase of capped calls related convertible senior notes— — (60,900)— — (60,900)
Equity component from repurchase or redemption of convertible senior notes— — (355,932)— — (355,932)
Changes in other comprehensive income— — — (1,617)— (1,617)
Net loss— — — — (60,721)(60,721)
Balance as of March 31, 202087,815 9 840,115 331 (350,031)490,424 
Issuance of common stock in connection with Equity Incentive and Employee Stock Purchase plans, net of tax withholdings870 — 8,550 — — 8,550 
Share-based compensation— — 52,129 — — 52,129 
Equity component from repurchase or redemption of convertible senior notes— — (4,051)— — (4,051)
Temporary equity reclassification— — (6,756)— — (6,756)
Changes in other comprehensive income— — — 771 — 771 
Net income— — — — 509 509 
Balance as of June 30, 202088,685 9 889,987 1,102 (349,522)541,576 
Issuance of common stock in connection with Equity Incentive and Employee Stock Purchase plans, net of tax withholdings580 — (6,576)— — (6,576)
Share-based compensation— — 53,640 — — 53,640 
Equity component of convertible senior notes, net of issuance costs— — 136,838 — — 136,838 
Purchase of capped calls related convertible senior notes— — (41,795)— — (41,795)
Equity component from repurchase or redemption of convertible senior notes320 — (372,227)— — (372,227)
Temporary equity reclassification— — 4,822 — — 4,822 
Changes in other comprehensive income— — — 2,420 — 2,420 
Net loss— — — — (20,957)(20,957)
Balance as of September 30, 202089,585 $9 $664,689 $3,522 $(370,479)$297,741 

See accompanying notes to condensed consolidated financial statements

(Unaudited, in thousands)
Nine Months Ended
September 30,
Cash flows from operating activities  
Net loss$(257,893)$(81,169)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization78,223 53,563 
Share-based compensation254,749 137,410 
Amortization of deferred and prepaid sales commission costs53,307 33,060 
Amortization of debt discount and issuance costs47,980 32,613 
Loss on early extinguishment of debt1,736 12,323 
Repayment of convertible senior notes attributable to debt discount(10,131)(32,640)
Reduction of operating lease right-of-use assets13,320 11,478 
Unrealized loss (gain) on investments14,346 (41,453)
Provision for bad debt5,384 3,909 
Other1,463 (1)
Changes in assets and liabilities:
Accounts receivable(45,476)(27,502)
Deferred and prepaid sales commission costs(125,181)(183,745)
Prepaid expenses and other assets7,849 (14,291)
Accounts payable(4,472)5,180 
Accrued and other liabilities55,971 49,449 
Deferred revenue27,176 20,128 
Operating lease liabilities(13,851)(11,019)
Net cash provided by (used in) operating activities104,500 (32,707)
Cash flows from investing activities
Purchases of property and equipment(21,787)(33,992)
Capitalized internal-use software(30,932)(28,049)
Purchases of intangible assets and long-term investments(10,463) 
Net cash used in investing activities(63,182)(62,041)
Cash flows from financing activities
Proceeds from issuance of convertible senior notes, net of issuance costs 1,627,209 
Payments for repurchase or redemption of convertible senior notes(333,632)(1,019,813)
Payments for capped calls and transaction costs (102,695)
Proceeds from issuance of stock in connection with stock plans21,738 24,123 
Payments for taxes related to net share settlement of equity awards(16,995)(27,698)
Payment for contingent consideration for business acquisition(3,600)(3,548)
Repayment of financing obligations(2,804)(1,215)
Net cash provided by (used in) financing activities(335,293)496,363 
Effect of exchange rate changes(726)337 
Net increase (decrease) in cash, cash equivalents, and restricted cash(294,701)401,952 
Cash, cash equivalents, and restricted cash
Beginning of period639,853 343,606 
End of period$345,152 $745,558 
Supplemental disclosure of cash flow data:
Cash paid for interest$246 $190 
Cash paid for income taxes, net of refunds$1,062 $512 
Non-cash investing and financing activities
Equipment and capitalized internal-use software purchased and unpaid at period end$7,639 $7,879 
See accompanying notes to condensed consolidated financial statements

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, 2021. 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, 2020, filed with the SEC on February 26, 2021.
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.
The novel coronavirus (“COVID-19”) pandemic has created and may continue to create significant uncertainty in macroeconomic conditions. The full extent to which the COVID-19 pandemic will directly or indirectly impact the global economy, and its impact on Company’s operational and financial performance will depend on future developments, such as the duration, severity and spread of the outbreak, including potential recurrence of the virus and its variants, impact on the Company’s customers and sales cycles, and its employees, all of which is uncertain and cannot be accurately predicted. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require updating significant estimates or judgments or revising the carrying value of the Company's assets or liabilities as presented in the unaudited interim condensed consolidated financial statements. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates.
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.

Notes to Condensed Consolidated Financial Statements (Unaudited)
As of September 30, 2021 and December 31, 2020, 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, 2021 and December 31, 2020, approximately 89% and 90% of the Company’s consolidated long-lived assets, respectively, 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 condensed consolidated financial statements.
In August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which simplifies the accounting for certain convertible instruments, amends the guidance on derivative scope exceptions for contracts in an entity's own equity, and modifies the guidance on diluted earnings per share calculations as a result of these changes. This new standard is effective for public entities for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The amendment is to be adopted through either a fully retrospective or modified retrospective method of transition. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its condensed consolidated financial statements.
Note 2. Revenue and Cost of Revenue
The Company derives its revenues primarily from subscriptions, sale of products, and professional services. Revenues are recognized when control of these products and services are transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products and 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,
Primary geographical markets    
North America88 %92 %88 %92 %
Others12 8 12 8 
Total revenues100 %100 %100 %100 %
The Company derived over 90% of subscription revenues from RingCentral Office and RingCentral customer engagement solutions products for both of the three and nine months ended September 30, 2021 and 2020.
Deferred revenue
During the three and nine months ended September 30, 2021, the Company recognized revenue of $18.7 million and $132.5 million, respectively, 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 September 30, 2021 that has not yet been recognized was approximately $1.7 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 51% of this balance over the next 12 months and 49% thereafter.

Notes to Condensed Consolidated Financial Statements (Unaudited)
Other revenues and cost of revenues
Other revenues are primarily comprised of product revenue from the sale of pre-configured phones, professional services, and phone rentals. Product revenues from the sale of pre-configured phones were $12.9 million and $11.3 million for the three months ended September 30, 2021 and 2020, respectively, and $37.1 million and $31.5 million for the nine months ended September 30, 2021 and 2020, respectively. Cost of product revenues were $11.0 million and $10.2 million for the three months ended September 30, 2021 and 2020, respectively, and $32.7 million and $29.8 million for the nine months ended September 30, 2021 and 2020, respectively.
Note 3. Financial Statement Components
Cash and cash equivalents consisted of the following (in thousands):
September 30, 2021December 31, 2020
Cash$100,688 $124,853 
Money market funds244,464 515,000 
Total cash and cash equivalents$345,152 $639,853 
As of September 30, 2021, $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, 2021December 31, 2020
Accounts receivable$181,698 $148,741 
Unbilled accounts receivable41,832 32,477 
Allowance for doubtful accounts(7,404)(5,184)
Accounts receivable, net$216,126 $176,034 
Prepaid expenses and other current assets consisted of the following (in thousands):
September 30, 2021December 31, 2020
Prepaid expenses$23,435 $18,497 
Inventory662 551 
Other current assets16,274 27,468 
Total prepaid expenses and other current assets$40,371 $46,516 
Property and equipment, net consisted of the following (in thousands):
September 30, 2021December 31, 2020
Computer hardware and software$190,714 $169,093 
Internal-use software development costs125,476 90,361 
Furniture and fixtures8,402 8,217 
Leasehold improvements13,318 12,910 
Total property and equipment, gross337,910 280,581 
Less: accumulated depreciation and amortization(179,131)(138,373)
Property and equipment, net$158,779 $142,208 
Total depreciation and amortization expense related to property and equipment was $15.5 million and $10.5 million for the three months ended September 30, 2021 and 2020, respectively, and $42.7 million and $27.8 million for the nine months ended September 30, 2021 and 2020, respectively.

Notes to Condensed Consolidated Financial Statements (Unaudited)
During the three and nine months ended September 30, 2021, the Company financed $1.1 million and $3.9 million, respectively, of property, equipment and software licenses through vendor financing arrangements at an interest rate of approximately 3.00% to be repaid over a three-year term. The related equipment is collateralized. The assets purchased under these arrangements are a non-cash investing activity.
The carrying value of goodwill is as follows (in thousands):
Balance at December 31, 2020$57,313 
Foreign currency translation adjustments(1,301)
Balance at September 30, 2021$56,012 
The carrying values of intangible assets are as follows (in thousands):
September 30, 2021December 31, 2020
Weighted-Average Remaining Useful LifeCostAccumulated
Intangibles, Net
Intangibles, Net
Customer relationships
1.8 years
$21,548 $14,910 $6,638 $22,087 $12,289 $9,798 
Developed technology
2.8 years
159,688 73,980 85,708 149,987 41,472 108,515 
Total acquired intangible assets$181,236 $88,890 $92,346 $172,074 $53,761 $118,313 
Amortization expense from acquired intangible assets for the three months ended September 30, 2021 and 2020 was $12.0 million and $8.6 million, respectively, and $35.5 million and $25.8 million for the nine months ended September 30, 2021 and 2020, 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):
2021 (remaining)$11,975 
2025 onwards3,003 
Total estimated amortization expense$92,346 
Accrued liabilities consisted of the following (in thousands):
September 30, 2021December 31, 2020
Accrued compensation and benefits$46,685 $43,225 
Accrued sales, use, and telecom related taxes37,958 31,311 
Accrued marketing36,051 30,332 
Operating lease liabilities, short-term17,189 16,267 
Other accrued expenses121,497 89,519 
Total accrued liabilities$259,380 $210,654 

Notes to Condensed Consolidated Financial Statements (Unaudited)
Deferred and Prepaid Sales Commission Costs
Amortization expense for the deferred and prepaid sales commission costs was $19.9 million and $12.4 million for the three months ended September 30, 2021 and 2020, respectively, and $53.3 million and $33.1 million for the nine months ended September 30, 2021 and 2020, respectively. There was no impairment loss in relation to the costs capitalized for the periods presented.
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.
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, 2021
Level 1Level 2Level 3
Cash equivalents:    
Money market funds$244,464 $244,464 $ $ 
Noncurrent assets:
Long-term investments$198,830 $ $ $198,830 
Fair Value at
December 31, 2020
Level 1Level 2Level 3
Cash equivalents:    
Money market funds$515,000 $515,000 $ $ 
Noncurrent assets:
Long-term investments$213,176 $ $ $213,176 
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.
Convertible Senior Notes
As of September 30, 2021, the fair value of the 0% convertible senior notes due 2026 (the “2026 Notes”) was approximately $606.2 million, and 0% convertible senior notes due 2025 (the “2025 Notes”) was approximately $981.5 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.
Long-Term Investments
As of September 30, 2021 and December 31, 2020, the fair value of the Company's long-term investments in convertible and redeemable preferred stock was $198.8 million and $213.2 million, respectively. The Company classifies these

Notes to Condensed Consolidated Financial Statements (Unaudited)
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 and interest rates. 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 income (expense). The Company recorded a loss of $48.7 million for the three months ended September 30, 2021 compared to a gain of $23.3 million for the three months ended September 30, 2020. The Company recorded a loss of $15.3 million for the nine months ended September 30, 2021 compared to a gain of $38.6 million for the nine months ended September 30, 2020. Volatility in the global economic climate and financial markets, including the effects of the COVID-19 pandemic, could result in a significant change in the underlying share-price of the Company’s investees, resulting in a material change in the value of the long-term investments. As of September 30, 2021, the Company had an immaterial amount of investments held in debt and equity securities, 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.
Note 5. Asset Acquisition
On March 18, 2021, the Company entered into an arrangement to acquire intellectual property rights for approximately $8.6 million. The transaction was accounted for as an asset acquisition, which is amortized over its expected useful life of approximately five years.
Note 6. 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 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 $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.
The Notes are senior unsecured obligations and will rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the Notes (all Notes are equal in right of payment) with the Company’s existing and future liabilities that are not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of current or future subsidiaries of the Company.

Notes to Condensed Consolidated Financial Statements (Unaudited)
Redemption of 2023 Notes
In March 2021, the Company delivered a notice to fully redeem the remaining outstanding $41.2 million principal balance of its 0% convertible senior notes due 2023. During the three months ended June 30, 2021, the Company settled the redemption by paying $160.1 million in cash. The redemption of the 2023 Notes resulted in a $1.1 million loss that is included in other income (expense), net in the Consolidated Statement of Operations. The loss represents the difference between the fair value of the liability component and the sum of the carrying value of the debt component and any unamortized debt issuance costs at the time of settlement.
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
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. Upon conversion, the Company will pay or deliver, as the case may be, either cash, shares of Class A Common Stock or a combination of cash and shares of Class A Common Stock, at the Company’s election. It is the Company’s current intent to settle the principal amount of the Notes with cash.
During the three months ended September 30, 2021, 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.
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, 2021 were as follows (in thousands):
2025 Notes2026 Notes
Principal$1,000,000 $650,000 
Unamortized discount(137,991)(115,111)
Unamortized issuance cost(7,975)(6,517)
Net carrying amount$854,034 $528,372 

Notes to Condensed Consolidated Financial Statements (Unaudited)
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,
Amortization of debt discount$15,122 $11,941 $45,645 $30,821 
Amortization of debt issuance cost776 654 2,335 1,792 
Total interest expense related to the Notes$15,898 $12,595 $47,980 $32,613 
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.
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)
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, 2021.
Note 7. 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, 2021, non-cancellable leases expire on various dates between 2021 and 2029.
The components of leases are as follows (in thousands):
September 30, 2021December 31, 2020
Operating leases
Operating lease right-of-use assets$48,038 $51,115 
Accrued liabilities$17,189 $16,267 
Operating lease liabilities34,176 38,722 
Total operating lease liabilities$51,365 $54,989 

Notes to Condensed Consolidated Financial Statements (Unaudited)

Nine Months Ended September 30,
Supplemental Cash Flow Information (in thousands)
Operating cash flows resulting from operating leases:
Cash paid for amounts included in the measurement of lease liabilities$15,858 $12,713 
New ROU assets obtained in exchange of lease liabilities:
Operating leases$10,495 $22,509 
As of September 30, 2021, the Company has an additional operating lease of approximately $1 million that has not yet commenced and, as such, has not yet been recognized on the Company’s Consolidated Balance Sheet. This operating lease is expected to commence in the fourth quarter of 2021 with a lease term of three years.
Note 8. 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.
TCPA Matter
On November 17, 2017, Joann Hurley (“Hurley”), filed a second amended complaint in an ongoing putative class action lawsuit pending in the United States District Court for the Southern District of West Virginia, adding the Company as a named defendant and alleging that the Company and other defendants violated the Telephone Consumer Protection Act (“TCPA”) and regulations promulgated thereunder by allegedly using an automated telephone dialing system to deliver prerecorded political messages to Hurley, an incumbent running for reelection, and others. Hurley alternatively alleged that the Company was vicariously liable for the actions of the other co-defendants. Hurley seeks statutory, compensatory, consequential, incidental and punitive damages, costs, and attorneys’ fees in connection with her claims. The Company was served with the second amended complaint on January 4, 2018. On March 23, 2018, the Company filed a motion to dismiss the complaint for lack of standing and failure to sufficiently state a claim on which relief may be granted. Hurley filed her opposition brief on April 6, 2018, and the Company filed its reply brief on April 13, 2018. On October 4, 2018, the district court issued its memorandum and opinion order granting in part and denying in part the Company’s motion to dismiss. The district court dismissed Hurley’s vicarious liability claim but allowed Hurley’s TCPA claim to proceed. The Company filed its answer and affirmative defenses to the second amended complaint on October 18, 2018. Hurley filed a motion to certify a class on July 9, 2019. The Company and another defendant filed oppositions to the motion, which were fully briefed and are pending decision by the court. Discovery closed on October 25, 2019. The Company filed a motion for summary judgment on November 14, 2019. Hurley opposed the motion, which also has been fully briefed and is pending decision by the court. The parties mediated the case before a private mediator on January 23, 2020, at which time a tentative settlement was achieved. A fairness hearing on the proposed settlement was held on January 25, 2021, at which time the Court tentatively gave final approval of the settlement. The Court thereafter entered its final order and judgment approving the settlement on February 9, 2021. The settlement became effective as of March 12, 2021, and is concluded.

Notes to Condensed Consolidated Financial Statements (Unaudited)
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’