Summary
RingCentral closed the third quarter of fiscal 2022 with total revenue of $509.0 million, up 22.8% from $414.6 million in the prior-year quarter. Nine-month revenue of $1.46 billion rose 27.7% year over year. Subscriptions accounted for 95% of the top line and grew 25%. Annualized exit monthly recurring subscriptions reached $2.05 billion at September 30, 2022, against $1.64 billion a year earlier, and monthly recurring subscriptions stood at $170.6 million. Mid-market and enterprise ARR climbed 29% to $1.25 billion. Net monthly subscription dollar retention stayed above 99%.
Margins tell a different story. Gross profit of $341.6 million rose 12.3%, well short of revenue growth, and gross margin fell to 67.1% from 73.4%. Higher amortization of acquired intangibles, third-party support costs and infrastructure spending all pushed cost of revenues up faster than sales. The GAAP operating loss widened to $182.6 million from $83.1 million, and operating margin slipped to negative 35.9% from negative 20.1%. Net loss widened to $284.6 million from $146.8 million, and diluted loss per share widened to $2.98 from $1.60. Sales and marketing expense rose 16%, research and development rose 3%, and general and administrative expense fell 7%.
Non-cash items explain most of that deterioration. The company booked a $125 million charge tied to its Avaya prepaid commissions balance, and unrealized losses on long-term investments reached $77.4 million in the quarter, up from $48.7 million a year earlier. Strip those out and operating leverage still shows. Non-GAAP operating income was $69 million against $44 million, lifting the non-GAAP operating margin 300 basis points to 13.5%, the highest quarterly figure the company has reported. Adjusted EBITDA of $87 million was 17.1% of revenue, compared with $59 million and 14.2% a year earlier.
Cash generation held up. Net cash provided by operating activities was $42.3 million for the quarter, down 1.8% from $43.0 million, while the nine-month total of $151.9 million rose 45.4%. Non-GAAP free cash flow was $21 million. Capital expenditures of $8.3 million rose 12.7%. Deferred revenue of $209.4 million rose 23.6%, and remaining performance obligations of $2.00 billion rose 17.6%. The balance sheet held $305.4 million of cash and cash equivalents at September 30, 2022, up from $267.2 million at December 31, 2021. About $20 million funded share repurchases during the quarter, leaving $55 million available under the authorization.
Guidance sets expectations for the quarters ahead. For the full fiscal year 2022, management guided subscriptions revenue growth of 27% to 28% and total revenue growth of 25%, reiterating the midpoint of its subscriptions revenue range. Fourth quarter guidance points to subscriptions revenue growth of 19% to 21% and total revenue growth of 17% to 18%. The full-year non-GAAP operating margin outlook rose to 12.4% from 12.0%, and non-GAAP EPS guidance rose to $1.97 to $1.98 from $1.91 to $1.95. Fourth quarter non-GAAP operating margin is guided to 14.0%, up 350 basis points, with non-GAAP EPS of $0.59 to $0.60. GAAP profitability guidance moved lower to absorb the Avaya write-down.
Cost discipline is now part of the story. The board approved a restructuring plan that cuts full-time employees by roughly 10%, with $10.0 million to $15.0 million of severance and related costs expected in the fourth quarter of 2022 and the first quarter of 2023. Demand is the bigger question. Sales cycles for up-market customers lengthened again in the quarter as buyers required more approvals, and management expects that caution to persist while the macroenvironment stays uncertain. A stronger dollar cut about 2% from subscriptions revenue, and inflation, interest rates and currency swings remain live risks.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2022 | Q2 FY2022 | QoQ | Q3 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $509.0M | $486.9M | +4.5% | $414.6M | +22.8% |
| Gross profit | $341.6M | $328.7M | +3.9% | $304.2M | +12.3% |
| Gross margin | 67.1% | 67.5% | -0.4 pp | 73.4% | -6.3 pp |
| Research & development | $86.7M | $96.5M | -10.2% | $84.1M | +3.1% |
| Sales & marketing | $261.9M | $265.4M | -1.3% | $225.1M | +16.3% |
| General & administrative | $72.3M | $74.6M | -3.1% | $78.1M | -7.5% |
| Total operating expenses | $524.1M | $436.5M | +20.1% | $387.3M | +35.3% |
| Operating income (loss) | -$182.6M | -$107.8M | -69.4% | -$83.1M | -119.6% |
| Operating margin | -35.9% | -22.1% | -13.7 pp | -20.1% | -15.8 pp |
| Net income (loss) | -$284.6M | -$159.5M | -78.4% | -$146.8M | -93.9% |
| Net margin | -55.9% | -32.8% | -23.1 pp | -35.4% | -20.5 pp |
| Diluted EPS | -$2.98 | -$1.68 | -$1.30 | -$1.60 | -$1.38 |
Risks
Net loss widened to -$284.62 million in FY2022 Q3 from -$146.75 million in FY2021 Q3, and operating loss widened to -$182.56 million from -$83.14 million. Gross margin fell to 67.1% from 73.4% in the quarter, driven in part by non-cash items including an asset write-down and unrealized investment losses.
Avaya disclosed substantial doubt about its ability to continue as a going concern and an inability to timely file its Form 10-Q. RingCentral performed a recoverability assessment of prepaid sales commission balances with Avaya and cannot assure that current estimates will not need revision, which could lead to further write-downs.
MD&A states sales cycles are normalizing to pre-COVID norms with more cautious buying from larger customers, smaller initial deployments, and up-market sales cycle times elongated incrementally in Q3. A strengthening U.S. dollar against the British Pound Sterling, Euro, and Canadian Dollar could further pressure results.
RingCentral relies on third-party contractors in Ukraine and previously Russia for software development, quality assurance, operations, and customer support. The ongoing Russian invasion may delay product development or increase costs, and MD&A reports direct and incremental relocation expenses in the current quarter and year to date.
Future operating results depend on strategic partnerships with Avaya, Atos/Unify, ALE, Mitel, Vodafone, DT, Verizon, and others. Some partners are also competitors and may fail to meet minimum seat or revenue commitments, cease selling RingCentral solutions, or transition customers to competing offerings, which could materially reduce revenues.
The cloud communications market remains intensely competitive, with larger competitors such as Microsoft, Cisco, Zoom, Amazon, and Twilio. Some competitors may sacrifice revenue to gain share through lower prices or freemium offerings, which could pressure pricing, growth, and customer turnover.
The filing states cyber-attack activity such as ransomware and phishing has increased in connection with Russia's invasion of Ukraine, and remote work arrangements have heightened risks. A successful incident could interrupt service and expose the company to liability and reputational harm.
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 Free Cash Flow
Non-GAAP Subscriptions Gross Margin
Summary, forecast, risks and KPIs are extracted from RingCentral, Inc.'s SEC filings for Q3 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.