Summary
RingCentral closed the September 2021 quarter with revenue of $414.63 million, up 36.6% year over year. Gross profit reached $304.18 million, up 37.4%, and gross margin was 73.4%, up 0.5 percentage points. Revenue and gross profit both rose by more than 36%. GAAP profitability moved the other way. The operating loss widened to $83.14 million, and operating margin was -20.1%, down 10.3 percentage points year over year. Net loss widened to $146.75 million, and diluted loss per share widened to $1.60. The company pointed to higher share-based compensation and mark-to-market losses on investments as the main drivers of the deeper losses. On a non-GAAP basis, operating income was $44 million, compared with $31 million in the prior-year period. Non-GAAP net income per diluted share was $0.36, compared with $0.26.
Operational metrics show the demand story remains strong. Total annualized exit monthly recurring subscriptions, or ARR, rose 39% year over year to $1.64 billion. RingCentral Office ARR, which covers unified communications as a service and contact center as a service, increased 42% to $1.55 billion. Mid-market and enterprise ARR climbed 53% to $971 million, a sign that the push upmarket is working. The net monthly subscription dollar retention rate stayed above 99%. Management credited ramping partner contributions and momentum with larger customers. During the quarter, RingCentral was named a Leader in the 2021 Gartner Magic Quadrant for Unified Communications as a Service for the seventh straight year. The company also launched RingCentral Rise for service providers, announced an MCM Telecom co-branded offering, added healthcare ISV partnerships, and received a unified license to offer UCaaS and CCaaS in India.
Cash generation improved sharply. Operating cash flow was $43.03 million for the quarter, up 159.1% year over year. For the first nine months of fiscal 2021, operating cash flow was $104.50 million, up 419.5%. Capital expenditures were $7.40 million, down 59.8%, as the company spent less on property and equipment. Deferred revenue, current portion only, was $169.40 million, up 32.9%. Remaining performance obligations were $1.70 billion, up 41.7%. Non-GAAP free cash flow for the first nine months was $61.9 million. Those RPO and deferred revenue figures suggest a growing base of contracted work, though management warns that neither metric is a reliable indicator of future revenue because many multi-year contracts are invoiced only one period in advance.
Guidance points to continued growth but also to near-term margin pressure. For full-year 2021, management raised its total revenue growth outlook to 33% to 34% and its subscriptions revenue growth outlook to 35%. The fourth-quarter 2021 outlook calls for total revenue growth of 30% and subscriptions revenue growth of 32%. Non-GAAP operating margin is guided to 10.1% for the full year and 10.4% to 10.5% for the fourth quarter. Non-GAAP earnings per diluted share is guided to $1.32 for the full year and $0.37 for the fourth quarter. The company also announced that Chief Financial Officer Mitesh Dhruv will step down from the role, though he will remain in place through the end of 2021. Management said it will consider internal and external candidates for the next CFO. Other risks include COVID-19 uncertainty, which could curtail customer demand, shorten contract duration, raise churn, lengthen payment terms, cause credit card declines, delay professional services, and reduce demand for desktop phones. Higher share-based compensation and volatility in investment mark-to-market gains or losses could also keep GAAP results under pressure. The company expects research and development and sales and marketing expenses to continue to increase in absolute dollars.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $414.6M | $379.3M | +9.3% | $303.6M | +36.6% |
| Gross profit | $304.2M | $274.4M | +10.9% | $221.3M | +37.4% |
| Gross margin | 73.4% | 72.3% | +1.0 pp | 72.9% | +0.5 pp |
| Research & development | $84.1M | $76.2M | +10.5% | $48.5M | +73.5% |
| Sales & marketing | $225.1M | $203.4M | +10.7% | $153.0M | +47.1% |
| General & administrative | $78.1M | $68.2M | +14.5% | $49.5M | +57.7% |
| Total operating expenses | $387.3M | $347.7M | +11.4% | $251.0M | +54.3% |
| Operating income (loss) | -$83.1M | -$73.4M | -13.3% | -$29.7M | -180.2% |
| Operating margin | -20.1% | -19.4% | -0.7 pp | -9.8% | -10.3 pp |
| Net income (loss) | -$146.8M | -$111.0M | -32.3% | -$21.0M | -600.2% |
| Net margin | -35.4% | -29.3% | -6.1 pp | -6.9% | -28.5 pp |
| Diluted EPS | -$1.60 | -$1.22 | -$0.38 | — | — |
Risks
FY2021 Q3 operating loss widened to $83.1 million from $29.7 million in FY2020 Q3, and net loss widened to $146.8 million from $21.0 million. The company expects to continue incurring losses for at least the foreseeable future, with Q3 net loss also driven by $52.9 million higher share-based compensation and a $72.1 million unrealized investment loss.
Future operating results rely on successful execution with Avaya, Atos/Unify, ALE, Vodafone, Deutsche Telekom, Verizon, and others. RingCentral made a $345 million prepayment to Avaya in Class A Common Stock and must successfully market and sell Avaya Cloud Office, Unify Office, and Rainbow Office to realize anticipated benefits.
Faces intense competition from Microsoft, Cisco, Zoom, Amazon, Twilio, and others, including pricing pressure, freemium models, and bundled offerings. Zoom video and web conferencing saw dramatically increased adoption during the COVID-19 response, and some carriers and strategic partners also compete with RingCentral.
Relies significantly on strategic partners, resellers, and carriers to sell subscriptions; these partners may also compete with RingCentral or cease selling its solutions. AT&T previously launched a competing hosted solution and new subscriptions sold by AT&T declined to an immaterial level in 2017 and into 2018 before resuming.
The pandemic has created a global slowdown of economic activity and could lead to curtailed customer demand, shortened contract duration, higher churn, lengthened payment terms, credit card declines, and reduced demand for desktop phones. These effects could adversely impact future financial performance.
RingCentral outsources software development, quality assurance, operations, and customer support to third-party contractors in St. Petersburg, Russia, Odessa, Ukraine, and Manila, Philippines. Political and military events in Ukraine, poor U.S.-Russia relations, and sanctions against Russia could adversely impact these operations.
Delivery relies on third-party network providers such as CenturyLink and Bandwidth.com and on service providers such as Zoom, Bandwidth, and NICE inContact. RingCentral no longer offers RingCentral Meetings to new customers and is migrating existing users to RingCentral Video, which risks customer loss or non-renewal if the transition is unsuccessful.
Subscriptions are served from third-party data center and co-location facilities from Equinix, AWS, NICE inContact, Google Cloud, and others. Damage, failure, or capacity constraints could cause service interruptions, require credits or penalties, and lead customers to terminate subscriptions.
Increased data storage, movement up market, and remote work heighten the risk of cyber-attack, ransomware, phishing, or breach. An incident could cause liability, regulatory notification, reputational harm, reduced revenue, and costs that cybersecurity insurance may not fully cover.
Depends on CEO Vladimir Shmunis and other key employees, and none of the executive officers are bound by written employment agreements. Competition for skilled personnel in the San Francisco Bay Area and Denver, plus immigration and travel restrictions, could impede hiring and retention.
Customers without long-term contracts may terminate at any time, and renewals may be for fewer users, shorter terms, or cheaper plans. Turnover and reductions in users require RingCentral to acquire new customers or upsell existing ones, potentially increasing marketing expenditures.
A significant portion of revenues comes from small and medium-sized businesses, which have limited financial resources and are more exposed to economic downturns. Many pay by credit or debit card, so weakness in credit markets could increase rejected payments and customer cancellations.
Targeting medium-sized and larger businesses increases costs and lengthens sales cycles, requiring more technical approvals, customization, and skilled sales support. These larger transactions may also delay revenue recognition until technical or implementation requirements are met.
Changes in U.S. and foreign tax laws, including France's 3% digital services tax and proposed U.S. corporate tax rate increases or a global minimum tax, could increase tax obligations. The company also faces potential challenges to intercompany arrangements and changes in tax law interpretations.
The company may not have enough cash or be able to obtain financing to settle conversions of its convertible notes in cash, repurchase notes upon a fundamental change, or pay principal at maturity. Capped call counterparties are financial institutions and are subject to default or termination risk.
Net loss for FY2021 Q3 increased by $125.8 million versus the prior-year quarter, partly due to a $72.1 million increase in unrealized net loss on long-term investments driven by changes in an investee's stock price. RingCentral expects these gains or losses to continue to fluctuate.
The dual-class common stock structure concentrates voting control with pre-IPO stockholders, including founders and executive officers. Holders of Class B common stock together hold approximately 55% of voting power, and CEO Vladimir Shmunis could in the future control a majority of combined voting power.
SaaS KPIs
All quarters →Net Monthly Subscription Dollar Retention Rate
Non-GAAP Operating Margin
Mid-market and Enterprise ARR
Summary, forecast, risks and KPIs are extracted from RingCentral, Inc.'s SEC filings for Q3 FY2021 (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.