Summary
RingCentral reported third-quarter 2023 revenue of $558.16 million, up 9.7% year over year. GAAP gross profit rose 13.9% to $389.19 million, and gross margin improved to 69.7%, up 2.6 percentage points. The GAAP operating loss narrowed to $54.18 million, and operating margin improved to negative 9.7%, up 26.2 percentage points. The net loss narrowed to $42.12 million, and diluted net loss per share narrowed to $0.45. Those GAAP results include heavy share-based compensation, amortization of acquired intangibles, and restructuring costs. On a non-GAAP basis, operating income was $107 million, or 19.1% of total revenue, up 560 basis points year over year. Adjusted EBITDA was $128 million, or 22.9% of total revenue, compared to $87 million, or 17.1%.
Cash generation improved. GAAP operating cash flow was $86.59 million for the quarter, up 104.9% year over year. Capital expenditures were $4.36 million, down 47.8%. Deferred revenue, current portion only, rose 10.4% to $231.25 million. Remaining performance obligations increased 15% to $2.30 billion. Annualized exit monthly recurring subscriptions reached $2.26 billion, up 11% year over year, while mid-market and enterprise ARR rose 13% to $1.41 billion. Net monthly subscription dollar retention rate was above 99%.
On a nine-month basis, revenue rose 11.4% to $1.63 billion. Gross profit rose 15.7% to $1.14 billion. The operating loss narrowed to $153.77 million. The net loss narrowed to $118.00 million. Diluted net loss per share narrowed to $1.24. Operating cash flow for the nine months was $285.82 million, up 88.1%, while capital expenditures fell 26.5% to $17.52 million.
Guidance points to continued growth. For the full fiscal year 2023, RingCentral raised its total revenue outlook to $2.198 billion to $2.205 billion, representing annual growth of 11%, and its subscriptions revenue range to $2.095 billion to $2.101 billion, also 11% growth. Full-year non-GAAP operating margin is guided to 19.0%. Full-year non-GAAP EPS is guided to $3.19 to $3.20 on 97.0 million fully diluted shares. The company raised its adjusted, unlevered free cash flow outlook to $290 million to $300 million, up from $270 million to $290 million. For the fourth quarter of 2023, total revenue is guided to $566.5 million to $573.5 million, or 8% to 9% growth, and subscriptions revenue is guided to $542.0 million to $548.0 million, also 8% to 9% growth. Fourth-quarter non-GAAP operating margin is guided to 20.0%. Fourth-quarter non-GAAP EPS is guided to $0.82 to $0.83 on 97.0 million to 96.5 million fully diluted shares.
Risk factors remain substantial. Management pointed to cautious buying behavior from larger customers, smaller initial deployments, and elevated sales cycle times for up-market customers. The company also sees less upsell within its existing base as customers slow hiring and rationalize employee counts. Competitive pressures could reduce average subscription revenue per user or increase down-sell and churn. Interest expense increased because of the Credit Agreement entered in February 2023 and the 2030 Senior Notes issued in August 2023. RingCentral carries 2025 convertible notes and 2026 convertible notes, and it plans to use proceeds from the 2030 Senior Notes and free cash flow to address maturities. Restructuring costs are expected at $23 million to $28 million for full-year 2023. The company also faces integration risk from the Hopin asset acquisition and lingering uncertainty from Avaya's financial condition.
The quarter showed better profitability and cash generation, helped by cost efficiencies and lower amortization of acquired intangibles. The company still posted GAAP losses, and its full-year GAAP operating margin guidance remains negative. The fourth-quarter revenue growth guidance is 8% to 9%. Management is betting on new products such as RingCX, RingSense, and RingCentral Events, along with efficiency initiatives, to drive durable growth. Execution on those products, macroeconomic conditions, and the company's debt and restructuring plans are the main swing factors.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $558.2M | $539.3M | +3.5% | $509.0M | +9.7% |
| Gross profit | $389.2M | $374.9M | +3.8% | $341.6M | +13.9% |
| Gross margin | 69.7% | 69.5% | +0.2 pp | 67.1% | +2.6 pp |
| Research & development | $85.4M | $80.3M | +6.4% | $86.7M | -1.4% |
| Sales & marketing | $270.8M | $264.4M | +2.4% | $261.9M | +3.4% |
| General & administrative | $87.2M | $75.2M | +15.9% | $72.3M | +20.6% |
| Total operating expenses | $443.4M | $419.9M | +5.6% | $524.1M | -15.4% |
| Operating income (loss) | -$54.2M | -$45.1M | -20.2% | -$182.6M | +70.3% |
| Operating margin | -9.7% | -8.4% | -1.4 pp | -35.9% | +26.1 pp |
| Net income (loss) | -$42.1M | -$21.5M | -96.1% | -$284.6M | +85.2% |
| Net margin | -7.5% | -4.0% | -3.6 pp | -55.9% | +48.4 pp |
| Diluted EPS | -$0.45 | -$0.23 | -$0.22 | -$2.98 | +$2.53 |
Risks
MD&A states RingCentral has experienced more cautious buying behavior from larger customers, with smaller initial deployments, elevated sales cycle times for up-market customers, and less upsell as customers slowed hiring and rationalized employee counts. These conditions could persist until the macroeconomic environment becomes less uncertain and adversely impact results.
Future operating results rely on strategic partners and global service providers including Avaya, Amazon, Atos, ALE, Mitel (Unify), Charter Communications, Vodafone, DT, and Optus. The company has revised certain aspects of partnerships with Avaya, ALE, and Mitel (Unify), and partners may fail to meet seat or revenue commitments, cease selling RingCentral solutions, or transition customers to competing offerings.
RingCentral faces intense competition from Microsoft, Cisco, Zoom, 8x8, Twilio, Vonage, and others, some with significantly greater resources. MD&A notes competitive pressures and macroeconomic factors may reduce average subscription revenue per user, decrease acquisition and renewal rates, or increase down-sell and churn.
Customers with month-to-month contracts may terminate at any time, and renewal customers may choose fewer users, shorter contract lengths, or less expensive plans. MD&A reports less upsell within the existing base as customers slowed hiring and rationalized employee counts, which could raise turnover and require higher retention spending.
A significant portion of software development, quality assurance, and operations workforce is located in Ukraine and Israel, where there are armed conflicts. RingCentral reduced and likely will discontinue partner operations in Ukraine, disrupting development and release of new features, and its Israel engineering operations continue to be affected by armed conflict.
In August 2023, the board appointed Tarek Robbiati to succeed co-founder Vladimir Shmunis as Chief Executive Officer. The risk factor states failure to manage this transition could be viewed negatively by customers, partners, employees, or investors and increases dependency on other senior management, none of whom is bound by a written employment agreement.
RingCentral has incorporated AI-powered features into its solutions, including RingCX AI and RingSense, and may continue adding AI features. The filing states use of AI features and technologies may create additional cybersecurity risks or increase cybersecurity risks, including risks of security breaches and incidents, and AI technologies may be used in cyberattacks.
The company has outstanding Credit Agreement borrowings, 2030 Senior Notes, and Convertible Notes, and MD&A states interest expense increased for the three and nine months ended September 30, 2023 due to the Credit Agreement and 2030 Senior Notes. It expects to incur quarterly interest expense on these debt facilities, which could fluctuate with interest rates and affect liquidity.
Risk factors highlight estimates or judgments relating to critical accounting policies, including recoverability assessment for prepaid sales commission balances with Avaya. The prior-year period included an asset write-down charge related to Avaya uncertainty, and changes in assumptions could cause results to fall below expectations.
SaaS KPIs
All quarters →Net Monthly Subscription Dollar Retention Rate
Non-GAAP Operating Margin
Monthly Recurring Subscriptions
Mid-market and Enterprise ARR
Adjusted EBITDA
Adjusted EBITDA Margin
Non-GAAP Subscriptions Gross Margin
Summary, forecast, risks and KPIs are extracted from RingCentral, Inc.'s SEC filings for Q3 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.