Summary
RingCentral closed the second quarter of fiscal 2023 with revenue of $539.3 million, up 10.8% from the prior-year quarter. Subscriptions revenue rose 11% and accounted for 95% of the total. Gross profit of $374.9 million was up 14.0% year over year, and gross margin of 69.5% expanded 2.0 percentage points from 67.5%. Annualized exit monthly recurring subscriptions reached $2.22 billion, up 12%, while mid-market and enterprise ARR climbed 13% to $1.37 billion. Through the first six months of the fiscal year, revenue of $1.07 billion was up 12.4% and gross margin of 69.7% was up 2.6 percentage points.
Profitability improved even faster than the top line. The GAAP operating loss of $45.1 million narrowed from $107.8 million a year earlier, and operating margin of negative 8.4% improved 13.8 percentage points from negative 22.1%. Net loss of $21.5 million narrowed from $159.5 million, and diluted EPS of negative $0.23 compared with negative $1.68. On a non-GAAP basis, operating margin of 19.4% was up 800 basis points and marked a quarterly record. Adjusted EBITDA of $125 million, or 23.2% of revenue, compared with $73 million, or 14.9%. Non-GAAP net income per diluted share was $0.83 versus $0.45, and both quarters reflected an approximately 22.5% non-GAAP tax rate with no material cash taxes given net operating loss carryforwards.
Cash generation also improved. Operating cash flow of $90.7 million rose 79.0% from $50.7 million in the prior-year quarter, while capital expenditures (purchases of property and equipment) fell 48.6% to $4.4 million. RingCentral's own non-GAAP adjusted, unlevered free cash flow was $80.6 million compared with $30.9 million. Capital allocation tilted toward the balance sheet. The company fully drew its $400 million term loan, paid roughly $100 million for share repurchases, and spent about $427 million in cash to retire approximately $461 million of principal on its 0% convertible senior notes due 2025. Deferred revenue of $227.2 million was up 9.7%, and remaining performance obligations of $2.30 billion were up 21.1%.
Management's full-year 2023 outlook raises the non-GAAP operating margin range to 18.5% to 19.0%, up from at least 18.5% previously, against a non-GAAP tax rate of 22.5%. No material cash taxes are expected given net operating loss carryforwards. Non-GAAP EPS guidance of $3.11 to $3.25 now includes estimated interest expense, net, tied to the May 2023 term loan draw. For the third quarter of 2023, the company guided to a non-GAAP operating margin of 18.0% to 18.5% and non-GAAP EPS of $0.75 to $0.78. It also expects $270 million to $290 million of adjusted, unlevered free cash flow for the full year.
The quarter brought a leadership change. Tarek Robbiati, a board member since December 2022, takes over as CEO from founder Vlad Shmunis on August 28, 2023. Product news included the launch of RingCX, a native contact center, RingSense for Phone, and the purchase of select assets from Hopin, plus regulatory clearances in India. The demand backdrop remains the main risk. RingCentral said larger customers kept buying cautiously, with smaller initial deployments, longer sales cycles, and less upsell as customers slowed hiring and cut headcount. Net monthly subscription dollar retention held above 99%. The balance sheet still carries $536.9 million of 2025 notes and $645.2 million of 2026 notes. Guidance for GAAP EPS was not reconciled.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $539.3M | $533.7M | +1.1% | $486.9M | +10.8% |
| Gross profit | $374.9M | $373.0M | +0.5% | $328.7M | +14.0% |
| Gross margin | 69.5% | 69.9% | -0.4 pp | 67.5% | +2.0 pp |
| Research & development | $80.3M | $85.2M | -5.8% | $96.5M | -16.8% |
| Sales & marketing | $264.4M | $260.2M | +1.6% | $265.4M | -0.4% |
| General & administrative | $75.2M | $82.1M | -8.4% | $74.6M | +0.9% |
| Total operating expenses | $419.9M | $427.5M | -1.8% | $436.5M | -3.8% |
| Operating income (loss) | -$45.1M | -$54.5M | +17.4% | -$107.8M | +58.2% |
| Operating margin | -8.4% | -10.2% | +1.9 pp | -22.1% | +13.8 pp |
| Net income (loss) | -$21.5M | -$54.4M | +60.5% | -$159.5M | +86.5% |
| Net margin | -4.0% | -10.2% | +6.2 pp | -32.8% | +28.8 pp |
| Diluted EPS | -$0.23 | -$0.57 | +$0.34 | -$1.68 | +$1.45 |
Risks
MD&A highlights macroeconomic factors including inflation and interest rates that have caused more cautious buying behavior from larger customers, smaller initial deployments, and less upsell as customers slowed hiring and rationalized employee counts. These conditions may persist and could have an adverse impact on results.
Revenue depends significantly on strategic partners and global service providers such as Avaya, Amazon, Atos/Unify, ALE, Mitel, Charter Communications, Vodafone, and DT. Avaya's Chapter 11 restructuring resulted in a $279.3 million non-cash asset write-down for the year ended December 31, 2022, and the new partnership relies on Avaya minimum volume commitments and ACO exclusivity.
On February 14, 2023, RingCentral entered a Credit Agreement with a $200.0 million revolver and $400.0 million term loan, and the term loan was fully drawn in Q2 2023. The agreement requires compliance with a maximum total net leverage ratio and minimum interest coverage ratio; interest expense increased $3.9 million for the three months ended June 30, 2023. A breach could accelerate debt obligations.
RingCentral relies on third-party contractors in Ukraine, Georgia, Philippines, Spain, and Bulgaria for software development, quality assurance, operations, and customer support. Russia's invasion of Ukraine has reduced and may discontinue partner operations in Ukraine, caused relocations, and may delay product development; R&D personnel and contractor costs decreased $18.2 million for the three months ended June 30, 2023, including $11.0 million from relocating third-party contractors.
MD&A states average subscription revenue per user remains stable but may see a reduction due to competitive pressures and macroeconomic factors, and notes less upsell as customers slowed hiring. Risk factors cite increased customer turnover and costs to retain and upsell that could materially and adversely affect financial performance.
MD&A reports elevated sales cycle times for up-market customers because customers required additional approvals before making purchase decisions. This can delay deal conversion and revenue recognition.
In August 2023, the board appointed Tarek Robbiati to succeed Vladimir Shmunis as CEO effective August 28, 2023, with Shmunis continuing as Executive Chairman. The filing states this transition could disrupt the business, impact culture, and increase dependency on other senior management, and executive officers are not bound by written employment agreements.
Risk factors describe intense competition from providers such as Microsoft, Cisco, Zoom, 8x8, Amazon, and others, some with greater resources, aggressive pricing, or freemium models. MD&A notes competitive pressures could reduce average subscription revenue per user.
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
Adjusted EBITDA Margin
Non-GAAP Subscriptions Gross Margin
Non-GAAP Operating Income
Summary, forecast, risks and KPIs are extracted from RingCentral, Inc.'s SEC filings for Q2 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.