Summary
RingCentral reported $467.7 million of total revenue for the March 2022 quarter, up 32.7% from $352.4 million a year earlier. Subscriptions revenue rose 35% year over year and supplied the bulk of the top line, with the remainder coming from phones and professional services, which grew 2%. Growth came from new customers, upsells of seats and add-on offerings to existing accounts, and more business through resellers, carriers, and strategic partners. Annualized exit monthly recurring subscriptions reached $1.9 billion, up 35% year over year, and mid-market and enterprise ARR rose 46% to $1.2 billion. Net monthly subscription dollar retention stayed above 99%, and RingCentral Office ARR was $1,813.7 million at March 31, 2022.
GAAP profitability moved the other way. Gross margin fell to 66.8% from 72.5%, a drop of 5.7 percentage points that management tied largely to $32.5 million of incremental amortization from intangibles acquired in the fourth quarter of 2021. Gross profit still rose 22.2% to $312.2 million, but operating expenses grew faster. Research and development rose 44% to $90.3 million, sales and marketing rose 42% to $254.5 million, and general and administrative rose 28% to $71.0 million. The GAAP operating loss widened to $103.5 million from $42.0 million, and the operating margin fell to -22.1% from -11.9%. Non-GAAP operating income was $49 million, up from $33 million, and the non-GAAP operating margin was 10.4%.
The bottom line absorbed large non-cash charges. Net loss widened to $151.0 million from a loss of $0.2 million, and diluted EPS swung to a loss of $1.60 from $0.00. Share-based compensation was $102.3 million, up from $62.5 million, and amortization of acquired intangibles added $44.1 million. A $48.3 million unrealized loss on long-term investments replaced a $56.6 million gain in the prior-year quarter. Interest expense fell to $1.2 million from $16.3 million after adoption of a new accounting standard for convertible notes.
Cash generation held up. Operating cash flow was $59.0 million, up 59.6% from $37.0 million, while non-GAAP free cash flow was $39 million, equal to 8.2% of revenue, up 170 basis points year over year. Capital expenditures were $6.9 million, down from $8.7 million. Deferred revenue rose 37.7% to $201.4 million, and remaining performance obligations reached $1.9 billion, up 26.7%. Deferred revenue covers only the current portion, and multi-year contracts are generally invoiced one period in advance, so management cautions that neither backlog nor deferred revenue is a reliable indicator of future revenue.
Guidance was raised on the non-GAAP side. For the full fiscal year 2022, the company lifted its non-GAAP operating margin target to 11.5% from 10.6%, and non-GAAP EPS to $1.83 to $1.87 from $1.69 to $1.72, based on 96 to 97 million fully diluted shares. Subscription revenue guidance was raised and total revenue guidance was maintained, and the GAAP operating margin outlook also improved. Share-based compensation is expected to be $435 million to $450 million for the year. For the second quarter of 2022, guidance calls for a non-GAAP operating margin of 10.4% and non-GAAP EPS of $0.40 to $0.41.
Two risks frame the rest of the year. RingCentral outsources some software development, quality assurance, and operations work to contractors with personnel in Odessa, Ukraine, and it is helping relocate some of those staff. It expects direct and incremental expenses in fiscal 2022, with the full extent still uncertain. Management also flagged the pandemic's continuing effects on customer demand, contract duration, churn, payment terms, and credit card declines, plus foreign exchange swings. Share-based compensation remains the largest gap between GAAP and non-GAAP results. Separately, Sonalee Parekh was named chief financial officer and Mo Katibeh was made president, adding human resources and corporate strategy to his remit.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2022 | Q4 FY2021 | QoQ | Q1 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $467.7M | $448.5M | +4.3% | $352.4M | +32.7% |
| Gross profit | $312.2M | $312.5M | -0.1% | $255.4M | +22.2% |
| Gross margin | 66.8% | 69.7% | -2.9 pp | 72.5% | -5.7 pp |
| Research & development | $90.3M | $86.8M | +4.0% | $62.7M | +44.0% |
| Sales & marketing | $254.5M | $246.4M | +3.3% | $179.2M | +42.0% |
| General & administrative | $71.0M | $82.6M | -14.0% | $55.5M | +28.0% |
| Total operating expenses | $415.7M | $415.7M | -0.0% | $297.4M | +39.8% |
| Operating income (loss) | -$103.5M | -$103.3M | -0.3% | -$42.0M | -146.5% |
| Operating margin | -22.1% | -23.0% | +0.9 pp | -11.9% | -10.2 pp |
| Net income (loss) | -$151.0M | -$118.4M | -27.6% | -$186.0K | -81067.7% |
| Net margin | -32.3% | -26.4% | -5.9 pp | -0.1% | -32.2 pp |
| Diluted EPS | -$1.60 | -$1.29 | -$0.31 | $0.00 | -$1.60 |
Risks
Russia's invasion of Ukraine has forced the company's Russian partner to cease operations in St. Petersburg and may reduce or discontinue its Ukrainian partner's services in Odessa, which could delay product development and new features. MD&A states the company expects direct and incremental expenses in fiscal 2022 from relocating personnel, with the full extent uncertain.
The company has substantial net losses and expects to continue incurring losses. In FY2022 Q1, operating loss widened to $103.5 million and net loss widened to $151.0 million, compared with an operating loss of $42.0 million and net loss of $0.2 million in FY2021 Q1.
The cloud communications market is intensely competitive, with competitors including Microsoft, Cisco, Zoom, Amazon, Twilio, and carriers that also resell RingCentral. Some competitors may sacrifice revenue through freemium or lower pricing, which could pressure prices, slow growth, and increase customer turnover.
Future results rely on successful execution of strategic partnerships with Avaya, Atos/Unify, ALE, Mitel, Vodafone, DT, and Verizon, including co-branded solutions ACO, UO, and Rainbow Office. Failure to market or sell these solutions could reduce anticipated benefits and revenue opportunities, and the $345 million Avaya prepayment in Class A Common Stock heightens exposure.
An increasing portion of revenues comes from resellers, carriers, and strategic partners, some of which are also competitors and could cease selling RingCentral solutions or move customers to competing offerings, as AT&T did with a competing hosted solution in 2016.
Cyberattack risk is heightened by Russia's invasion of Ukraine, and cybersecurity researchers anticipate increased activity. A security incident could disrupt service, expose customer data, and lead to litigation, indemnity obligations, and reputational harm.
Customers without long-term contracts may terminate at any time without penalty, and economic downturn could cause small and medium-sized business customers to reduce users or fail to renew. Higher marketing spend may be required to maintain existing customer and revenue levels.
Service delivery relies on third-party network providers and data center/co-location facilities, including Equinix and AWS. Interruptions or failures could require service credits or penalties, cause customer terminations, and adversely affect renewal rates.
The business depends on senior management including CEO Vladimir Shmunis, and none of the executive officers are bound by written employment agreements. It also faces intense competition for highly skilled technical personnel in the San Francisco Bay Area and Denver.
Changes in U.S. and foreign tax laws, including France's 3% digital services tax and proposals for a global minimum tax, could increase tax obligations and adversely affect the effective tax rate and operating results.
Holders of convertible notes can require repurchase upon a fundamental change, and conditional conversion could require cash settlement or reclassify principal as a current liability, reducing net working capital. Capped call counterparties also pose default risk.
Series A Convertible Preferred Stock has preferential dividend and liquidation rights, including redemption at $1,000 per share and 1.5 times that amount if a change of control occurs before the second anniversary of November 9, 2021. These obligations could impact liquidity and limit additional financing.
The COVID-19 pandemic could still disrupt customer demand, contract duration, churn, payment terms, and credit card declines. Although offices are reopening, new variants could again suspend travel and restrict in-person sales and customer success efforts.
SaaS KPIs
All quarters →Net Monthly Subscription Dollar Retention Rate
Non-GAAP Operating Margin
Annualized Exit Monthly Recurring Subscriptions (ARR)
Monthly Recurring Subscriptions
Mid-market and Enterprise ARR
Free Cash Flow Margin
Non-GAAP Free Cash Flow
Summary, forecast, risks and KPIs are extracted from RingCentral, Inc.'s SEC filings for Q1 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.