Summary
RingCentral's first quarter of fiscal 2023, ended March 31, 2023, produced revenue of $533.69 million, up 14.1% from the prior-year quarter. Gross profit rose 19.5% to $373.01 million. Gross margin was 69.9%, up 3.1 percentage points. The company's GAAP operating loss narrowed 47.3% to $54.53 million. Operating margin was negative 10.2%, up 11.9 percentage points. Net loss narrowed 64.0% to $54.40 million. Diluted EPS loss narrowed 64.4% to $0.57. On a non-GAAP basis, operating margin was 17.2%, up 680 basis points from the prior-year quarter, and non-GAAP EPS was $0.76. Adjusted EBITDA was $112 million, or 21.0% of revenue. ARR reached $2.16 billion, up 14% year over year. Mid-market and enterprise ARR was $1.33 billion, up 15%. Net monthly subscription dollar retention rate was above 99%. Adjusted for constant currency, total revenue rose 15%.
Cash generation improved. Operating cash flow was $108.53 million, up 84.0% from the prior-year quarter. Capital expenditures were $8.72 million, up 27.3%. Deferred revenue was $219.93 million, up 9.2%. Remaining performance obligations were $2.20 billion, up 15.8%. The company repurchased 2,160,164 shares under a $175 million authorization, leaving $100.5 million available at quarter end. It also put in place a $200.0 million revolving facility and a $400.0 million delayed draw term facility. The company had no loans or letters of credit outstanding under the credit agreement at March 31, 2023. Liquidity remains a focus given convertible notes due in 2025 and 2026.
Management raised its full-year 2023 outlook. Total revenue guidance is now $2.187 billion to $2.205 billion, representing annual growth of 10% to 11%. Subscriptions revenue guidance is $2.086 billion to $2.104 billion, representing annual growth of 11%. GAAP operating margin guidance is negative 7.9% to negative 6.6%. Non-GAAP operating margin guidance is at least 18.5%. Non-GAAP EPS guidance is $3.19 to $3.25 based on 98.0 million to 99.0 million fully diluted shares. The outlook assumes a 22.5% non-GAAP tax rate. For the second quarter of 2023, total revenue guidance is $535 million to $537 million, representing year-over-year growth of 10%. Subscriptions revenue guidance is $511 million to $513 million, representing year-over-year growth of 10% to 11%. GAAP operating margin guidance is negative 10.0% to negative 8.9%. Non-GAAP operating margin guidance is 17.5%, and non-GAAP EPS guidance is $0.74 to $0.76 based on 96.5 million to 97.5 million fully diluted shares.
The quarter included several product launches. RingCentral introduced RingCentral for Teams 2.0, which brings cloud PBX capabilities into Microsoft Teams. It launched RingSense by RingCentral, an AI platform for business communications, with RingSense for Sales in beta. It introduced RingCentral for Frontline Workers and RingCentral Overlay, which Vodafone Business is using in Italy. These efforts aim to broaden the platform and support up-market growth.
Risks remain. Macroeconomic conditions include increased inflation, higher interest rates, supply chain disruptions, decreased economic output, and currency fluctuations. Larger customers are showing more cautious buying behavior, with smaller initial deployments and elevated sales cycle times. The company is also seeing less upsell as customers slow hiring and rationalize employee counts. Competitive pressures could reduce average subscription revenue per user, decrease acquisition and renewal rates, or increase down-sell and churn. The company faces legal proceedings and contingencies that could affect results. Management continues to monitor these conditions and the global economic landscape. The company expects to meet its remaining purchase commitments.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $533.7M | $524.7M | +1.7% | $467.7M | +14.1% |
| Gross profit | $373.0M | $364.2M | +2.4% | $312.2M | +19.5% |
| Gross margin | 69.9% | 69.4% | +0.5 pp | 66.8% | +3.1 pp |
| Research & development | $85.2M | $88.8M | -4.0% | $90.3M | -5.6% |
| Sales & marketing | $260.2M | $275.5M | -5.5% | $254.5M | +2.3% |
| General & administrative | $82.1M | $75.1M | +9.3% | $71.0M | +15.6% |
| Total operating expenses | $427.5M | $619.8M | -31.0% | $415.7M | +2.8% |
| Operating income (loss) | -$54.5M | -$255.6M | +78.7% | -$103.5M | +47.3% |
| Operating margin | -10.2% | -48.7% | +38.5 pp | -22.1% | +11.9 pp |
| Net income (loss) | -$54.4M | -$284.1M | +80.8% | -$151.0M | +64.0% |
| Net margin | -10.2% | -54.1% | +43.9 pp | -32.3% | +22.1 pp |
| Diluted EPS | -$0.57 | -$2.98 | +$2.41 | -$1.60 | +$1.03 |
Risks
MD&A cites increased inflation, higher interest rates, supply chain disruptions, decreased economic output and currency fluctuations as creating uncertainty. The company has seen more cautious buying behavior from larger customers, smaller initial deployments and elevated sales cycle times for up-market customers.
MD&A reports less upsell within the existing customer base as customers slowed hiring and rationalized employee counts, and warns this behavior may persist until macroeconomic uncertainty eases. It also says future results may see lower average subscription revenue per user, lower acquisition or renewal rates, or higher down-sell and churn.
Avaya's Chapter 11 restructuring led to a $279.3 million non-cash asset write-down for the year ended December 31, 2022, and the new February 14, 2023 agreement keeps Avaya Cloud Office by RingCentral as Avaya's exclusive UCaaS offering with minimum volume commitments. Partner failure to meet commitments or further restructuring could materially affect revenue and recovery of prepaid sales commissions.
A significant portion of revenues depends on indirect sales channels, including strategic partners, global service providers and resellers such as Avaya, Amazon, Atos/Unify, ALE, Mitel, Vodafone and DT. The company has no long-term contracts with many channel partners and is transforming its partner go-to-market strategy with increasing emphasis on a resale/wholesale model, which could delay implementation and impact revenue.
The new Credit Agreement entered February 14, 2023 imposes restrictive covenants, including a maximum total net leverage ratio and minimum interest coverage ratio. As of March 31, 2023, no loans or letters of credit were outstanding and the company was in compliance, but it still had $1.0 billion of 2025 Notes and $650.0 million of 2026 Notes outstanding; a breach could accelerate debt and cross-default the convertible notes.
Significant software development, quality assurance, operations and customer support are outsourced to third parties in Ukraine, Georgia, the Philippines, Spain and Bulgaria. Russia's invasion of Ukraine has reduced or may discontinue partner operations in Ukraine, delay product development and increase costs as staff relocate to geographies with less cost efficiency.
The UCaaS and SaaS markets remain intensely competitive, with competitors including Microsoft, Cisco, Zoom, 8x8, Vonage and Twilio. Competitors have greater resources and may use aggressive pricing, bundled services or freemium models, which could reduce prices, slow growth and increase customer turnover.
A significant portion of revenues comes from small and medium-sized businesses that may have fewer financial resources during a downturn. Turnover or reductions in users could require higher marketing and sales spending, and MD&A notes potential increases in down-sell and churn due to macroeconomic conditions.
The company depends on senior management, including co-founder, Chairman and CEO Vladimir Shmunis, and other highly skilled employees. No executive officers are bound by written employment agreements, and competition for technical personnel remains intense despite recent layoffs.
Risk factors cite increased cyber-attack activity in connection with Russia's invasion of Ukraine, nation-state actors, remote work and third-party vendor access. A security incident could disrupt service, expose customer data and create liability even if insurance is insufficient.
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
Adjusted EBITDA
Non-GAAP Free Cash Flow
Summary, forecast, risks and KPIs are extracted from RingCentral, Inc.'s SEC filings for Q1 FY2023 (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.