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What changed in RingCentral, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of RingCentral, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+587 added−529 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-23)

Top changes in RingCentral, Inc.'s 2023 10-K

587 paragraphs added · 529 removed · 426 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

52 edited+16 added−9 removed64 unchanged
Biggest changeSuch partnerships include Mitel US Holdings, Inc. (“Mitel”), Amazon Web Services (“Amazon”), Alcatel-Lucent Enterprise (“ALE”), Avaya Holding Corp. (“Avaya”), Atos SE (“Atos”), and Unify Software and Solutions GmbH & CO.
Biggest changeOur indirect sales channels who sell our solutions consist of: • Regional and global network of resellers and distributors; • Strategic partners who market and sell our MVP or other solutions, including co-branded solutions. Such partnerships include Alcatel-Lucent Enterprise (“ALE”), Amazon Web Services (“Amazon”), Atos SE (“Atos”), Avaya LLC (“Avaya”), and Mitel US Holdings, Inc.
Some of these competitors include: • traditional on-premise, hardware business communications providers such as Alcatel-Lucent Enterprise, Avaya Inc., Cisco Systems, Inc., Mitel Networks Corporation, NEC Corporation, and Siemens Enterprise Networks, LLC, any of which may now or in the future also host their solutions through the cloud; • software providers such as Microsoft Corporation and Cisco Systems, Inc. that generally license and/or host their software solutions, and their resellers including major global service providers and cable companies; • established business communications providers that resell on-premise hardware, software, and hosted solutions, such as Comcast, COX, TMU, Orange, and others, all of whom currently have significantly greater resources than us and now or in the future also may develop and/or host their own or other solutions through the cloud; • other cloud companies such as 8x8, Inc., Amazon.com, Inc., DialPad, Inc., LogMeIn, Inc, Microsoft Corporation, Nextiva, Inc., Twilio Inc., Vonage Holdings Corp.
Some of these competitors include: • traditional on-premise, hardware business communications providers such as Alcatel-Lucent Enterprise, Avaya Inc., Cisco Systems, Inc., Mitel Networks Corporation, NEC Corporation, and Siemens Enterprise Networks, LLC, any of which may now or in the future also host their solutions through the cloud; • software providers such as Microsoft Corporation and Cisco Systems, Inc. that generally license and/or host their software solutions, and their resellers including major global service providers and cable companies; • established business communications providers that resell on-premise hardware, software, and hosted solutions, such as Comcast, COX, TMU, Orange, and others, all of whom currently have significantly greater resources than us and now or in the future also may develop and/or host their own or other solutions through the cloud; • other cloud companies such as 8x8, Inc., Amazon.com, Inc., DialPad, Inc., GoTo, Microsoft Corporation, Nextiva, Inc., Twilio Inc., Vonage Holdings Corp.
Professional Services helps guide our customers through the many points of the cloud adoption lifecycle: consultation, UCaaS and CCaaS implementation, VoIP phone system adoption, configuring custom workflows, customer and user onboarding, ongoing support, managed services, and more. Segment Reporting Our organizational structure is a single reportable segment.
Professional Services helps guide our customers through the many points of the cloud adoption lifecycle: consultation, UCaaS and CCaaS implementation, VoIP phone system adoption, configuring custom workflows, customer and user onboarding, ongoing support, advanced support, managed services, and more . Segment Reporting Our organizational structure is a single reportable segment.
Our engineering team has significant experience in various disciplines related to our platform, such as voice, video, text, team messaging and collaboration, mobile application development, IP networking and infrastructure, contact center, digital customer engagement, user experience, security, and robust multi-tenant cloud-based system architecture.
Our engineering team has significant experience in various disciplines related to our platform, such as voice, video, events, text, team messaging and collaboration, mobile application development, IP networking and infrastructure, contact center, digital customer engagement, user experience, security, and robust multi-tenant cloud-based system architecture.
A discussion of the results of our operations is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report of Form 10-K, under Consolidated Financial Statements, which are incorporated herein by reference.
A discussion of the results of our operations is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K, under Consolidated Financial Statements, which are incorporated herein by reference.
Our public clouds are built on a platform that allows us to leverage shared components and services, enabling us to rapidly develop new features and functionalities on our existing platform without re-architecting the infrastructure to achieve geographical redundancy and high availability.
Our public clouds are built on a scalable platform that allows us to leverage shared components and services, enabling us to rapidly develop new features and functionalities on our existing platform without re-architecting the infrastructure to achieve geographical redundancy and high availability.
(Google Voice), Facebook, Inc., Oracle Corporation, and Salesforce.com, Inc., any of which might launch its own cloud-based business communication services or acquire other cloud-based business communications companies in the future; • providers of communications platform as a service solutions and messaging software platforms with APIs such as Twilio Inc., Vonage Holdings Corp. (acquired by Ericsson), and Slack Technologies, Inc.
(Google Voice), Meta Platforms, Inc., Oracle Corporation, and Salesforce.com, Inc., any of which might launch its own cloud-based business communication services or acquire other cloud-based business communications companies in the future; • providers of communications platform as a service solutions and messaging software platforms with APIs such as Twilio Inc., Vonage Holdings Corp. (acquired by Ericsson), and Slack Technologies, Inc.
We do not have significant customer concentration and no individual customer accounted for more than 10% of total revenue for the years ended December 31, 2022, 2021, and 2020. We believe that we will not have significant customer concentration in the future. We sell our solutions to enterprise customers, and small and medium-sized businesses.
We do not have significant customer concentration and no individual customer accounted for more than 10% of total revenue for the years ended December 31, 2023, 2022, and 2021. We believe that we will not have significant customer concentration in the future. We sell our solutions to enterprise customers, and small and medium-sized businesses.
Over the course of 2022, many countries across Europe implemented the EU Electronic Communications Code, clarifying and updating obligations on PSTN-connected voice service providers as well as imposing new requirements on number-independent services such as videoconferencing and team messaging.
Over the course of 2023, many countries across Europe implemented the EU Electronic Communications Code, clarifying and updating obligations on PSTN-connected voice service providers as well as imposing new requirements on number-independent services such as videoconferencing and team messaging.
Our Solutions Our cloud-based business communications, collaboration, and customer engagement solutions function across multiple locations and devices, including smartphones, tablets, PCs and desk phones, allow for communication across multiple modes, including high-definition (“HD”) voice, video, SMS, messaging and collaboration, conferencing, and fax.
Our Solutions Our AI-driven cloud-based business communications, collaboration, and customer engagement solutions function across multiple locations and devices, including smartphones, tablets, PCs and desk phones, allow for communication across multiple modes, including high-definition (“HD”) voice, video, SMS, messaging and collaboration, conferencing, and fax.
We believe that the principal competitive factors in our market include: • product features and capabilities; • system reliability, availability, and performance; • speed and ease of activation, setup, and configuration; • ownership and control of the underlying technology; • open platform; • incumbency; • integration with mobile devices; • brand awareness and recognition; • simplicity of the pricing model; and • total cost of ownership.
We believe that the principal competitive factors in our market include: • product features and capabilities; 10 Table of Contents • system reliability, availability, and performance; • speed and ease of activation, setup, and configuration; • ownership and control of the underlying technology; • open platform; • incumbency; • integration with mobile devices; • brand awareness and recognition; • simplicity of the pricing model; and • total cost of ownership.
Additionally, the French regulatory agency, ARCEP, has made major changes to its telephone numbering plan that went into effect in January 2023, allowing for greater nomadic use of services like ours, and prohibiting the sub-assignment of phone numbers to resellers, requiring each provider to obtain numbers directly from ARCEP.
Additionally, the French regulatory agency, ARCEP, has made major changes to its telephone numbering plan that went into effect in January 2023, allowing for greater nomadic use of services like ours, and prohibiting the sub-assignment of phone numbers to resellers, 12 Table of Contents requiring each provider to obtain numbers directly from ARCEP.
We believe that both hardware and software components of our platform can be replaced, upgraded or added with minimal or no interruption in service. The system is designed to have no single point-of-failure. For the foreseeable future, we expect to increase our utilization of Amazon’s public cloud services.
We believe that both hardware and software components of our platform can be replaced, upgraded or added with minimal or no interruption in service. The system is designed to have no single point-of-failure. We also utilize Amazon’s public cloud services, and for the foreseeable future, we expect to increase our utilization of such services.
We are committed to being inclusive to enable our workforce and customers to succeed. We invest in developing our talent and creating a superior employee experience. We believe that a highly engaged workforce will continue to drive RingCentral’s competitive advantage as an innovative company and will also keep RingCentral as an employer of choice.
We are committed to being inclusive to enable our workforce and customers to succeed. 11 Table of Contents We invest in developing our talent and creating a superior employee experience. We believe that a highly engaged workforce will continue to drive RingCentral’s competitive advantage as an innovative company and will also keep RingCentral as an employer of choice.
High-Volume SMS is a service that enables businesses to send high-volume and commercial SMS messages and updates to their customers eliminating the need to purchase and program a separate number. Our service also provides access to message status, logs, store, and analytics for advanced insights and regulatory compliance. • RingCentral Live Reports.
High-Volume SMS is a service that enables businesses to send high-volume and commercial SMS messages and updates to their customers eliminating the need to purchase and program a separate number. Our service also provides access to message status, logs, store, and analytics for advanced insights and regulatory compliance. • RingCentral Business Analytics.
Research and Development We believe that continued investment in research and development is critical to expanding our leadership position within the cloud-based business communications, collaboration, and contact center solutions market and is a key element of our culture. We devote the majority of our research and development resources to software development.
Research and Development 9 Table of Contents We believe that continued investment in research and development is critical to expanding our leadership position within the cloud-based business communications, collaboration, and contact center solutions market and is a key element of our culture. We devote the majority of our research and development resources to software development.
Our cloud-based solutions are location and device independent and better suited to address the needs of modern mobile and global enterprise workforces than are legacy on-premises systems. Through our open platform, we enable third-party developers and customers to develop integrations and workflows using our robust set of Application Programming Interface (“API”) and software developers’ kits (“SDKs”).
Our cloud-based solutions are location and device independent and better suited to address the needs of modern mobile and global enterprise workforces than are legacy on-premises systems. Through our open platform, we enable third-party developers and customers to develop integrations and workflows using our robust set of Application Programming Interfaces (“APIs”) and software developers’ kits (“SDKs”).
RingCentral Contact Center is a collaborative contact center solution that delivers AI powered omni-channel and workforce engagement solution with integrated RingCentral MVP. RingCentral Contact Center brings together the powerful integration of CCaaS which leverages technology from NICE inContact, Inc., along with RingCentral MVP, enabling an easy collaboration while delivering seamless omnichannel experiences across 30+ digital and voice channels.
RingCentral Contact Center is a collaborative contact center solution that delivers AI-driven omni-channel and workforce engagement solution with integrated RingCentral MVP. RingCentral Contact Center brings together the powerful integration of CCaaS which leverages technology from NICE inContact, Inc., along with RingCentral MVP, enabling an easy collaboration while delivering seamless omnichannel experiences across more than 30 digital and voice channels.
Our indirect sales channel consists of global and regional networks of resellers and distributors, strategic partners and global and regional service providers. Our indirect sales channels help broaden the adoption of our solutions and enables us to leverage their sales force to sell our services as well as access their customer bases. • Customer Support and Services.
Our indirect sales channel consists of global and regional networks of resellers and distributors, strategic partners and global and regional service providers. Our indirect sales channels help broaden the adoption of our solutions and enable us to leverage the channel to sell our services as well as access their customer bases. • Customer Support and Services.
We believe that our employee relations are good, and we have never experienced any work stoppages. 11 Table of Contents Regulatory As a provider of communication services over the Internet, we are subject to regulation in the U.S. by the FCC.
We believe that our employee relations are good, and we have never experienced any work stoppages. Regulatory As a provider of communication services over the Internet, we are subject to regulation in the U.S. by the FCC.
We provide onboarding implementation services to help our customers set up and configure their newly purchased communications system, as well as ongoing self-service, phone support, online chat support, and training. We also closely track and monitor customer acquisition costs to assess how we are deploying our marketing, sales, and customer support spending. 8 Table of Contents • Marketing.
We provide onboarding implementation services to help our customers set up and configure their newly purchased communications system, as well as ongoing self-service, phone support, online chat support, and training. We also closely track and monitor customer acquisition costs to assess how we are deploying our marketing, sales, and customer support spending. • Marketing.
It is an easy-to-use solution that offers high quality and high availability video and audio conferencing, seamlessly integrated with team messaging, file sharing, contact, task, and calendar management. It includes pre-meeting, in-meeting, and post-meeting capabilities, and provides a completely integrated team collaboration capability.
It is an easy-to-use solution that offers high quality and high availability video and audio conferencing, 8 Table of Contents seamlessly integrated with team messaging, file sharing, contact, task, and calendar management. It includes pre-meeting, in-meeting, and post-meeting capabilities, and provides a completely integrated team collaboration capability.
Our open platform is supported by APIs and software developers’ kits (“SDKs”) that allows developers to integrate our solution with leading business applications or with other custom applications to customize their own business workflows. • RingCentral Global MVP.
Our open platform is supported by APIs and software developers’ kits (“SDKs”) that allows developers to 7 Table of Contents integrate our solution with leading business applications or with other custom applications to customize their own business workflows. • RingCentral Global MVP.
Our proprietary solutions enable a more productive and dynamic workforce and are architected using industry standards to meet modern business communications and collaboration requirements, including workforce mobility, “bring-your-own” communications device environments and multiple communications methods.
Our proprietary solutions enable a more productive and dynamic workforce and are architected using industry standards to meet 5 Table of Contents modern business communications and collaboration requirements, including workforce mobility, “bring-your-own” communications device environments and multiple communications methods.
As we expand internationally, we will be subject to laws and regulations in the countries in which we offer our subscriptions. Regulatory treatment of communications services over the Internet outside the U.S. varies from country to country, and may be more onerous than imposed on our subscriptions in the U.S.
As we have expanded internationally, we have become subject to laws and regulations in the countries in which we offer our subscriptions. Regulatory treatment of communications services over the Internet outside the U.S. varies from country to country, and may be more onerous than imposed on our subscriptions in the U.S.
Our worldwide intellectual property portfolio includes over 940 issued patents, which expire between 2023 and 2041, and over 129 patent applications, pending examination in the U.S. and in foreign jurisdictions, all of which are related to U.S. applications. In general, our patents and patent applications apply to certain aspects of our SaaS and mobile applications and underlying communications infrastructure.
Our worldwide intellectual property portfolio includes over 450 issued patents, which expire between 2024 and 2041, and over 90 patent applications, pending examination in the U.S. and in foreign jurisdictions, all of which are related to U.S. applications. In general, our patents and patent applications apply to certain aspects of our SaaS and mobile applications and underlying communications infrastructure.
See the section entitled “Risk Factors” for more information. 12 Table of Contents Available Information We make available our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, free of charge on our website (ir.ringcentral.com), as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission, or the “SEC”.
Available Information We make available our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, free of charge on our website (ir.ringcentral.com), as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission, or the “SEC”.
RingCentral Fax capability is made available to all 7 Table of Contents RingCentral MVP customers or as a stand-alone offering at monthly subscription rates that vary based on the desired number of pages and phone numbers allotted to the plan. RingCentral Contact Center.
RingCentral Fax capability is made available to all RingCentral MVP customers or as a stand-alone offering at monthly subscription rates that vary based on the desired number of pages and phone numbers allotted to the plan. • RingCentral Overlay.
We continue to drive key initiatives in talent acquisition and talent management to focus on increasing the representation of women and underrepresented groups in our global workforce. We received recognition for our initiatives in the area of diversity, equity and inclusiveness, wherein our CEO was recognized as the “Best Company for Women” and “Diversity” by Comparably in 2022.
We continue to drive key initiatives in talent acquisition and talent management to focus on increasing the representation of women and underrepresented groups in our global workforce. We received recognition for our initiatives in the area of diversity, equity and inclusiveness, wherein the Company was recognized as one of the “Best Company for Diversity” by Comparably in 2023.
Our solutions are generally affordable, requiring little to no upfront infrastructure hardware costs or ongoing maintenance and upgrade costs commonly associated with on-premise systems and can be integrated with other existing communication systems.
Our solutions require little to no upfront infrastructure hardware costs or ongoing maintenance and upgrade costs commonly associated with on-premise systems and can be integrated with other existing communication systems.
(acquired by salesforce.com, inc), on which customers can build diverse solutions by integrating cloud communications into business applications; • contact center and customer relationship management providers such as Amazon.com, Inc., Aspect Software, Inc., Avaya Inc., Five9, Inc., NICE InContact, Genesys Telecommunications Laboratories, Inc., Serenova, LLC (acquired by Lifesize, Inc.), Talkdesk, Inc., Vonage Holdings Corp.
(acquired by Salesforce.com, Inc.), on which customers can build diverse solutions by integrating cloud communications into business applications; • contact center and customer relationship management providers such as Amazon.com, Inc., Alvaria, Inc., Avaya Inc., Five9, Inc., NICE InContact (including LiveVox Holdings, Inc.), Genesys Telecommunications Laboratories, Inc., Serenova, LLC (acquired by Enghouse Systems Ltd.), Talkdesk, Inc., Vonage Holdings Corp.
Some of these regulatory obligations include contributing to the Federal Universal Service Fund, Telecommunications Relay Service Fund, and federal programs related to phone number administration; providing access to E-911 services; protecting customer information; and porting phone numbers upon a valid customer request.
Some of these regulatory obligations include contributing to the Federal Universal Service Fund, Telecommunications Relay Service Fund, and federal programs related to phone number administration; providing access to E-911 services; protecting customer information; complying with caller ID authentication and anti-robocall measures; and porting phone numbers upon a valid customer request.
We also provide access to a variety of flexible health and wellness programs to our employees. As of December 31, 2022, we had 3,902 full-time employees located in 17 countries. As of December 31, 2022, approximately 39% of our full-time employees were located outside of the United States.
We also provide access to a variety of flexible health and wellness programs to our employees. As of December 31, 2023, we had 4,084 full-time employees located in 16 countries. As of December 31, 2023, approximately 47% of our full-time employees were located outside of the United States.
(acquired by Ericsson), and Zoom Video Communications, Inc.; 10 Table of Contents • video meeting and collaboration service providers such as Amazon.com, Inc., Apple Inc., Alphabet Inc. (Google G-Suite and Meet), Facebook, Inc., Microsoft Teams, Slack Technologies, Inc. (acquired by Salesforce.com, Inc.), and Zoom Video Communications, Inc.; • other large internet companies such as Alphabet Inc.
(acquired by Ericsson), and Zoom Video Communications, Inc.; • video meeting and collaboration service providers such as Amazon.com, Inc., Apple Inc., Alphabet Inc. (Google G-Suite and Meet), Meta Platforms, Inc., Microsoft Teams, Slack Technologies, Inc. (acquired by Salesforce.com, Inc.), and Zoom Video Communications, Inc.; • other technology companies such as Alphabet Inc.
Globally, these regulations continue to be introduced and to change over time. Such regulations can impact our ability to offer services to various customer segments, and our cost to deliver our services.
Globally, these regulations continue to be introduced and to change over time. Such regulations can impact our ability to offer services to various customer segments, and our cost to deliver our services. See the section entitled “Risk Factors” for more information.
We seamlessly connect distributed and mobile users, enabling employees to communicate with a single identity whether working from a central location, a branch office, on the road, or at home. 5 Table of Contents • Global. Our RingCentral Global MVP capabilities support multinational enterprise workforces.
We seamlessly connect distributed and mobile users, enabling employees to communicate with a single identity whether working from a central location, a branch office, on the road, or at home. • Global.
We maintain a security program designed to ensure the security and integrity of customer data, protect against security threats or data breaches, and prevent unauthorized access to our customers’ data.
We maintain a security program designed to ensure the security and integrity of customer data, protect against security threats or data breaches, and prevent unauthorized access to our customers’ data. We limit access to on-demand servers and networks at our production and remote backup facilities.
KG (“Unify”). • Global Service Provider partners who sell our product, including AT&T (“AT&T”), TELUS Communications Company (“TELUS”), BT Group plc (“BT”), Vodafone Group Services Limited (“Vodafone”), Verizon Business (“Verizon”), Deutsche Telekom (“DT”), 1&1 Versatel in Germany, Ecotel in Germany, MCM in Mexico, Frontier, Charter Communications and others. Our principal executive offices are located in Belmont, California.
(“Mitel” or “Unify”); and • Global Service Providers including AT&T (“AT&T”), TELUS Communications Company (“TELUS”), BT Group plc (“BT”), Vodafone Group Services Limited (“Vodafone”), Deutsche Telekom (“DT”), Optus Networks Pty Ltd (“Optus”) in Australia, 1&1 Versatel and Ecotel in Germany, MCM in Mexico, Frontier, Charter Communications and others. Our principal executive offices are located in Belmont, California.
We enable convenient and effective communications for organizations across all their locations and employees, enabling them to be more productive and responsive. Our cloud-based solutions are designed to be easy to use, providing a global user identity across devices, including smartphones, tablets, PCs and desk phones. Our solutions can be deployed rapidly and configured and managed easily.
Our cloud-based business solutions are designed to be easy to use, providing a global user identity across multiple locations and devices, including smartphones, tablets, PCs and desk phones. Our solutions can be deployed rapidly and configured and managed easily.
The features, capabilities and price per user increase from Essentials to Ultimate. The solution capabilities include high-definition voice, call management, mobile applications, business SMS and MMS, fax, team messaging and collaboration, audio/video/web conferencing capabilities, out-of-the-box integrations with other cloud-based business applications, and business analytics and reporting.
The solution capabilities include high-definition voice, call management, mobile applications, business SMS and MMS, fax, team messaging and collaboration, audio/video/web conferencing capabilities, out-of-the-box integrations with other cloud-based business applications, and business analytics and reporting. Our platform also enables customers to create, develop, and deploy custom integrations using our APIs.
RingCentral Global MVP connects multinational workforces globally, while reducing the complexity and high costs of maintaining multiple legacy private branch exchanges (“PBX systems”) with a single global cloud solution. • Device Independence.
Our core UCaaS capabilities support multinational enterprise workforces, connecting multinational workforces globally, while reducing the complexity and high costs of maintaining multiple legacy private branch exchanges (“PBX systems”) with a single global cloud solution. • Generative AI.
Customers can extend RingCentral MVP to support their multinational workforce in many countries around the world. This subscription is designed primarily for businesses that require a communications solution, regardless of location, type of device, expertise, size, or budget. Businesses are able to seamlessly connect users working in multiple office locations on smartphones, tablets, PCs and desk phones.
RingCentral MVP offers a unified Message, Video, and Phone experience on our global platform. Customers can extend RingCentral MVP to support their multinational workforce in many countries around the world. This subscription is designed primarily for businesses that require a communications solution, regardless of location, type of device, expertise, size, or budget.
Our platform provides seamless and intuitive integration with multiple popular cloud-based business applications such as Microsoft productivity and CRM tools, Google G-Suite, Salesforce CRM, Oracle, Okta, Zendesk, Box, and Workday, as well as customer lines-of business applications.
Our platform provides seamless and intuitive integration with multiple popular cloud-based business applications such as Microsoft productivity and CRM tools, Google G-Suite, Salesforce CRM, Oracle, Okta, Zendesk, Box, and Workday, as well as line-of business applications. • Enterprise-grade Security and Compliance. RingCentral emphasizes data security through a secure cloud platform demonstrated through numerous third-party attestations and certifications.
We limit access to on-demand servers and networks at our production and remote backup facilities. 9 Table of Contents Intellectual Property We rely on a combination of patent, copyright, and trade secret laws in the U.S. and other jurisdictions, as well as license agreements and other contractual protections, to protect our proprietary technology.
Intellectual Property We rely on a combination of patent, copyright, and trade secret laws in the U.S. and other jurisdictions, as well as license agreements and other contractual protections, to protect our proprietary technology. We also rely on a number of registered and unregistered trademarks to protect our brand.
In addition, our differentiated open platform enables seamless integration with third-party and custom software applications. These integrations improve business workflows resulting in higher employee productivity and better customer service.
This open platform enables seamless integration with third-party and custom software applications, helping improve business workflows, drive higher employee productivity and enhance better customer service. Our global delivery capabilities support the needs of multi-national enterprises in multiple countries.
Our platform also enables customers to create, develop, and deploy custom integrations using our APIs. Key features of RingCentral MVP include: • Cloud-Based Business Communications Solutions. We offer multi-user, multi-extension, cloud-based business communications solutions that do not require installation, configuration, management, or maintenance of on-premise hardware and software.
Key features of RingCentral MVP include: • AI-driven Cloud-Based Business Communications Solutions. We offer multi-user, multi-extension, AI-driven cloud-based business communications solutions that do not require installation, configuration, management, or maintenance of on-premise hardware and software. Our solutions are instantly activated and deliver a rich set of functionalities across multiple locations and devices. • Team Messaging and Collaboration.
It includes a robust analytics platform that gives IT system administrators access to key performance indicators such as adoption, usage, and quality of service metrics. 6 Table of Contents RCV is also integrated with business productivity applications such as Google Workspace, Salesforce, HubSpot, Microsoft 365, Slack, Theta Lake, and Zoho, among others.
RCV is also integrated with business productivity applications such as Google Workspace, Salesforce, HubSpot, Microsoft 365, Slack, Theta Lake, and Zoho, among others.
RingCentral MVP (formerly RingCentral Office), our flagship solution, provides a unified experience for communication and collaboration across multiple modes, including HD voice, video, SMS, messaging and collaboration, conferencing, online meetings, and fax. RingCentral MVP offers a unified Message, Video, and Phone experience on our global platform.
We primarily generate revenues from the sale of subscriptions to our offerings, which include the following: RingCentral MVP. RingCentral MVP, our flagship solution, provides an AI-embedded experience for communication and collaboration across multiple modes, including HD voice, video, SMS, messaging and collaboration, conferencing, online meetings, and fax.
We have a portfolio of cloud-based offerings that are subscription-based and made available at different monthly rates, varying by the specific functionalities, services, and number of users. We primarily generate revenues from the sale of subscriptions of our offerings, which include the following: RingCentral MVP.
With over 15 geographically dispersed data centers and media points of presence, RingCentral provides a global infrastructure that ensures mission critical continuity for your organization. 6 Table of Contents We have a portfolio of cloud-based offerings that are subscription-based and made available at different monthly rates, varying by the specific functionalities, services, and number of users.
In addition to team messaging and communications, teams can share tasks, notes, group calendars, and files. • RingCentral Video (“RCV”) and RingCentral Rooms. RingCentral Video leverages RingCentral’s open platform to address the demand in work from anywhere by leveraging technologies to enable a fast, unified, open, and trusted video meetings experience.
RingCentral Video leverages RingCentral’s open platform to address the demand in work from anywhere by leveraging technologies to enable a fast, unified, open, and trusted video meetings experience. It includes a robust analytics platform that gives IT system administrators access to key performance indicators such as adoption, usage, and quality of service metrics.
Our solutions are instantly activated and deliver a rich set of functionalities across multiple locations and devices. • Team Messaging and Collaboration. We offer team messaging and collaboration solutions which allow diverse teams to stay connected through multiple modes of communication.
We offer team messaging and collaboration solutions which allow diverse teams to stay connected through multiple modes of communication. In addition to team messaging and communications, teams can share tasks, notes, group calendars, and files. • RingCentral Video (“RCV”) and RingCentral Rooms.
We believe RingCentral benefits from both the shift to mobile and distributed workforces and the migration of on-premises based communication systems to cloud-based software solutions. Our cloud communications and customer engagement solutions are based on our Message Video Phone (MVP) platform, which has been designed from the ground up, specifically for today’s mobile and distributed workforce.
RingCentral is focused on embedding AI into our product portfolio, which we believe is a key product differentiator for the markets and customers we serve. 4 Table of Contents Our cloud communications and customer engagement solutions are based on our Message Video Phone (MVP) platform.
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ITEM 1. BUSINESS Overview We are a leading provider of global enterprise cloud communications, video meetings, collaboration, and contact center software-as-a-service (“SaaS”) solutions. We believe that our innovative, cloud-based communication and customer engagement platform disrupts the large market for business communications and collaboration by providing flexible and cost-effective solutions that support mobile and distributed workforces.
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ITEM 1. BUSINESS Overview We are a leading provider of AI-driven cloud business communications, contact center, video and hybrid event solutions. We believe that our innovative solutions enable smarter interactions among customers and employees, turning conversations into meaningful insights that drive better business outcomes.
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The rapid growth of mobile communications has changed the way businesses interact. Employees connect from anywhere with any device, using multiple modes of communications including messaging, video, phone, and text. These forms of flexible communications enable employees to be productive in ways that traditional on-premises systems do not support.
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For today’s mobile and highly distributed workforce, RingCentral empowers people to connect from anywhere on any device, across any mode of communication. This gives today’s workforce the ability to communicate more productively and seamlessly in ways that traditional on-premises systems do not support.
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Our global delivery capabilities support the needs of multi-national enterprises in multiple countries. 4 Table of Contents We offer three key products in our portfolio, including: • RingCentral MVP (formerly RingCentral Office), a Unified Communications as a Service (“UCaaS”) platform, including team messaging, video meetings, and a cloud phone system; • Customer engagement solutions, including RingCentral Contact Center, RingCentral Engage Digital and Voice; and • RingCentral Video, launched in 2020, our branded video meeting solution with team messaging that enables smart video meetings.
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RingCentral offers a fully integrated business communications platform, which includes cloud private branch exchanges (“PBX”), cloud contact center, video meetings and webinars, and events.
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We generate revenues primarily from the sale of subscriptions for our cloud-based services. We focus on acquiring and retaining our customers, adding value to their experience, and increasing their use of our solutions. As their needs change, customers add users to services and additional features and functionality to expand their use of other solutions.
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Our multi-product portfolio includes: • RingCentral MVP, an AI-driven Unified Communications as a Service (“UCaaS”) platform, which includes team messaging, video meetings, business SMS and a cloud phone system; • Contact Center as a Service (“CCaaS”), a set of cloud-based customer experience solutions that includes RingCentral Contact Center, and RingCX, a native omnichannel contact center with generative AI capabilities and conversation analytics launched in 2023; • RingCentral Video, our branded video meeting solution with team messaging that enables smart video meetings, rooms solutions, and webinars; • RingCentral Events, announced in November 2023 following the acquisition of Hopin Events and Session Platforms provides a robust set of features to host virtual, hybrid, and in-person events of all sizes and formats, spanning from single-session events to multi-day & multi-session conferences; and • RingSense, announced in March 2023, is an AI platform for enhanced business communications and revenue intelligence that helps organizations unlock powerful insights from conversation data.
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We continue to support our direct inside sales force while also developing indirect sales channels to market our brand and our subscription offerings. Our indirect sales channels who sell our solutions consist of: • Regional and global network of resellers and distributors; • Strategic partners who market and sell our MVP and other solutions, including co-branded solutions.
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RingSense for Sales, the first offering in this portfolio, analyzes interactions among salespeople and their prospects to surface key insights and performance measures, helping increase sales efficiency. We primarily generate revenues from the sale of subscriptions to our offerings. Our subscription plans have monthly, annual, or multi-year contractual terms.
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RingCentral Engage Digital. RingCentral Engage is a cloud digital customer engagement platform that allows enterprises to interact with their customers through a single platform across all digital channels. The platform uses AI-based smart routing engine that enables agents to efficiently manage customer interactions across digital channels including mobile and in-app messaging, several social channels, live chats, and email.
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We believe that this flexibility in contract duration is important to meet the different needs of our customers. For the years ended December 31, 2023 and 2022, subscriptions revenues accounted for 90% or more of our total revenues. The remainder of our revenues has historically been primarily comprised of product revenues from the sale of pre-configured phones and professional services.
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RingCentral Engage Voice. Engage Voice is a cloud-based outbound/blended customer engagement platform for small to midsize companies. The platform provides automated dialing capabilities to help accelerate the sales process and reduce time it takes sales teams to reach prospects. RingCentral Video. RingCentral Video is a smart video meeting service, which includes our RCV video and team messaging capabilities.
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We do not develop or manufacture physical phones and offer them as a convenience to our customers. We rely on third-party providers to develop and manufacture these devices and fulfillment partners to successfully serve our customers. We continue to support our direct inside sales force while also developing indirect sales channels to market our brand and our subscription offerings.
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We also rely on a number of registered and unregistered trademarks to protect our brand.
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We are focused on embedding AI capabilities into all of our products, providing our customers with an affordable way to benefit from advancements of this key technology.
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In 2022 and 2023, we undertook some “reductions in force” (“RIF”) that decreased our total number of world-wide employees by approximately ten percent (10%) and we may elect to undertake additional RIFs in the future.
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RingCentral has developed a set of unique AI models that deliver conversational speech analysis and emotional sentiment recognition, which allows the Company to deliver a set of enhanced features across its product portfolio. • Device Independence.
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These certifications and attestations highlight RingCentral's strong commitment to maintaining high standards of data security and regulatory compliance. • Mission Critical Reliability. RingCentral has a long-standing industry-leading service level agreement (SLA) of 99.999% uptime offered in over 45+ countries.
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Businesses are able to seamlessly connect users working in multiple office locations on smartphones, tablets, PCs and desk phones. The features, capabilities and price per user increase from Core to Ultra.
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RingCentral offers a suite of add-on analytics that provide real-time information and customizable dashboards so that customers can better monitor their agents and business performance. These offerings include RingCentral Live Reports, RingCentral Business Analytics and RingCentral Business Analytics Pro. • RingCentral for Microsoft Teams.
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RingCentral for Microsoft Teams is an embedded app for Microsoft Teams users, giving companies the ability to integrate RingCentral’s cloud PBX capabilities directly into the Microsoft platform. • RingCentral for Frontline Workers.
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RingCentral for Frontline Workers is an add-on or standalone product designed for essential workers or field staff to enhance employee- or company-owned mobile devices with walkie-talkie, voice, AI-powered video capabilities, team messaging, file sharing, and more. • RingCentral Live Reports.
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RingCentral Overlay provides partners with the ability to retain existing calling capability and add on additional collaboration tools offered by RingCentral, such as messaging and video conferencing. Through our Global Service Providers unit, we make it easy for strategic partners to leverage the RingCentral platform to launch co-branded offerings. RingCentral Contact Center and RingCX.
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In August 2023, we launched RingCX, our next generation, AI-driven contact center solution that delivers a complete native omnichannel experience. RingCentral Video. RingCentral Video is a smart video meeting service, which includes our RCV video and team messaging capabilities.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

281 edited+108 added−48 removed265 unchanged
Biggest changeAs a result, we may fail to meet or to exceed the expectations of research analysts or investors, which could cause our stock price to fluctuate. • We rely on third parties, including third parties in countries outside the U.S. including Russia (previously), Ukraine, Georgia, Philippines, and Spain and Bulgaria, for some of our software development, quality assurance, operations, and customer support, and some of these activities may be further impacted by Russia’s ongoing invasion of Ukraine. • Global economic conditions may harm our industry, business and results of operations, including relations between the United States and China. • Our rapid growth and the quickly changing markets in which we operate make it difficult to evaluate our current business and future prospects, which may increase the risk of investing in our stock. • Our future operating results will rely in part upon the successful execution of our strategic partnerships with Avaya, Amazon, Atos/Unify, ALE, Mitel, Vodafone, DT, Verizon and others, which may not be successful. • We face intense competition in our markets and may lack sufficient financial or other resources to compete successfully. • We rely and may in the future rely significantly on our strategic partners, resellers, and global service providers to sell our subscriptions; our failure to effectively develop, manage, and maintain our indirect sales channels could materially and adversely affect our revenues. • To deliver our subscriptions, we rely on third parties for our network connectivity and for certain of the features in our subscriptions. • Interruptions or delays in service from our third-party data center hosting facilities and co-location facilities could impair the delivery of our subscriptions, require us to issue credits or pay penalties and harm our business. • Failures in Internet infrastructure or interference with broadband access could cause current or potential users to believe that our systems are unreliable, possibly leading our customers to switch to our competitors or to avoid using our subscriptions. • A security incident, such as a cyber-attack, information security breach or denial of service event could delay or interrupt service to our customers, harm our reputation or business, impact our subscriptions, and subject us to significant liability. • Increased customer turnover, or costs we incur to retain and upsell our customers, could materially and adversely affect our financial performance. • If we are unable to attract new customers to our subscriptions or upsell to those customers on a cost-effective basis, our business will be materially and adversely affected. • For as long as the dual class structure of our common stock as contained in our charter documents is in effect, voting control will be concentrated with a limited number of stockholders that held our stock prior to our initial public offering, including primarily our founders and their affiliates, and limiting other stockholders’ ability to influence corporate matters. 14 Table of Contents • Our Series A Convertible Preferred Stock has rights, preferences and privileges that are not held by, and are preferential to the rights of, our common stockholders, which could adversely affect our liquidity and financial condition.
Biggest changeAs a result, we may fail to meet or to exceed the expectations of research analysts or investors, which could cause our stock price to fluctuate. • We rely on third parties, including third parties in countries outside the U.S., primarily in Georgia and the Philippines for a significant portion of our software development, quality assurance, operations, and customer support. • Global economic conditions may harm our industry, business and results of operations, including the effects of the ongoing war between Russia and Ukraine and related international sanctions against Russia, the ongoing war between Israel and Hamas, and relations between the United States and China. • Our historically rapid growth and the quickly changing markets in which we operate make it difficult to evaluate our current business and future prospects, which may increase the risk of investing in our stock. • Our future operating results will rely in part upon the successful execution of our relationships with our strategic partners and global service providers, including Avaya, Amazon, Atos, ALE, Mitel (Unify), Charter Communications, Vodafone, DT, Optus, and other partners and resellers, some or all of which may not be successful. • We face intense competition in our markets and may lack sufficient financial or other resources to compete successfully. • We rely and may in the future rely significantly on our strategic partners, agents, brokers, resellers, and global service providers to sell our subscriptions; our failure to effectively develop, manage, and maintain our indirect sales channels could materially and adversely affect our revenues. • To deliver our subscriptions, we rely on third parties for our network connectivity and for certain of the features in our subscriptions. • Interruptions or delays in service from our third-party data center hosting facilities, co-location facilities and other third-party providers could impair the delivery of our subscriptions, require us to issue credits or pay penalties and harm our business. • Failures in Internet infrastructure or interference with broadband access could cause current or potential users to believe that our systems are unreliable, possibly leading our customers to switch to our competitors or to avoid using our subscriptions. • A security incident, such as a cyber-attack, information security breach or denial of service event could delay or interrupt service to our customers, harm our reputation or business, impact our subscriptions, and subject us to significant liability. 14 Table of Contents • We depend largely on the continued services of our senior management and other highly-skilled employees, and if we are unable to hire, retain, manage and motivate our employees, we may not be able to grow effectively and our business, results of operations and financial condition could be adversely affected. • Increased customer turnover, or costs we incur to retain and upsell our customers, could materially and adversely affect our financial performance. • If we are unable to attract new customers to our subscriptions or upsell to those customers on a cost-effective basis, our business will be materially and adversely affected. • Our Credit Agreement imposes operating and financial restrictions on us. • Servicing our debt, including the Notes, may require a significant amount of cash, and we may not have sufficient cash flow from our business to pay all of our indebtedness. • The Senior Notes Indenture contains restrictive covenants that may limit our ability to engage in activities that may be in our long-term best interest. • For as long as the dual class structure of our common stock as contained in our charter documents is in effect, voting control will be concentrated with a limited number of stockholders that held our stock prior to our initial public offering, including primarily our founders and their affiliates, and limiting other stockholders’ ability to influence corporate matters. • Our Series A Convertible Preferred Stock has rights, preferences and privileges that are not held by, and are preferential to the rights of, our common stockholders, which could adversely affect our liquidity and financial condition.
Such competitors may not be successful in or cease marketing and selling our solutions to their customers and ultimately be able to transition some or all of those customers onto their competing solutions, which could materially and adversely affect our revenues and growth.
Such competitors may not be successful in or cease marketing and selling our solutions to their customers and may ultimately be able to transition some or all of those customers onto their competing solutions, which could materially and adversely affect our revenues and growth.
Such competitors may cease marketing or selling our solutions to their customers and ultimately be able to transition some or all of those customers onto their competing solutions, which could materially and adversely affect our revenues and growth.
Such competitors may cease marketing or selling our solutions to their customers and may ultimately be able to transition some or all of those customers onto their competing solutions, which could materially and adversely affect our revenues and growth.
However, RCLEC also uses the infrastructure of third-party network service providers to deliver its services and the ILECs may favor themselves and their affiliates may not provide network services to us at lower prices than we could obtain through third-party CLECs, or at all.
However, RCLEC also uses the infrastructure of third-party network service providers to deliver its services and the ILECs may favor themselves and their affiliates and may not provide network services to us at lower prices than we could obtain through third-party CLECs, or at all.
Interruptions in our services caused by undetected errors, failures, or bugs in our subscriptions could harm our reputation, result in significant costs to us, and impair our ability to sell our subscriptions. Our subscriptions may have errors or defects that customers identify after they begin using them that could result in unanticipated interruptions of service.
Interruptions in our services caused by undetected errors, failures, or bugs in our services could harm our reputation, result in significant costs to us, and impair our ability to sell our subscriptions. Our services may have errors or defects that customers identify after they begin using them that could result in unanticipated interruptions of service.
Additionally, we are subject to FCC regulations imposing obligations related to our use and disclosure of certain data related our interconnected VoIP service. If we experience a data security incident, we may be required by state law or FCC or other regulations to notify our customers and/or law enforcement.
Additionally, we are subject to FCC regulations imposing obligations related to our use and disclosure of certain data related to our interconnected VoIP service. If we experience a data security incident, we may be required by state law or FCC or other regulations to notify our customers and/or law enforcement.
Pursuant to the CCPA, we are required, among other things, to make certain enhanced disclosures related to California residents regarding our use or disclosure of their personal information, allow California residents to opt-out of certain uses and disclosures of their personal information without penalty, provide Californians with other choices related to personal data in our possession, and obtain opt-in consent before engaging in certain uses of personal information relating to Californians under the age of 16.
Pursuant to the CCPA, we are required, among other things, to make certain enhanced disclosures to California residents regarding our use or disclosure of their personal information, allow California residents to opt-out of certain uses and disclosures of their personal information without penalty, provide Californians with other choices related to personal data in our possession, and obtain opt-in consent before engaging in certain uses of personal information relating to Californians under the age of 16.
Although the FCC’s rules prohibiting unsolicited fax advertisements or making illegal robocalls apply to those who “send” the advertisements or make the calls, fax transmitters or other service providers that have a high degree of involvement in, or actual notice of, unlawful sending of junk faxes or making of illegal robocalls and have failed to take steps to prevent such transmissions may also face liability under the FCC’s rules, or in the case of illegal robocalls, Federal Trade Commission rules.
Although the FCC’s rules prohibiting unsolicited fax advertisements or making illegal robocalls apply to those who “send” the advertisements or make the calls, fax transmitters or other service providers that have a high degree of involvement in, or actual notice of, unlawful sending of junk faxes or making of illegal robocalls and have failed to take steps to prevent such transmissions may also face liability under the FCC’s rules, or in the case of illegal robocalls, Federal Trade Commission (“FTC”) rules.
The counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our Class A Common Stock and/or purchasing or selling our Class A Common Stock or other securities of ours in secondary market transactions at any time prior to the respective maturity of the Notes (and are likely to do so on each exercise date of the capped call transactions).
The counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our Class A Common Stock and/or purchasing or selling our Class A Common Stock or other securities of ours in secondary market transactions at any time prior to the respective maturity of the Convertible Notes (and are likely to do so on each exercise date of the capped call transactions).
Also, these providers could take measures that degrade, disrupt or increase the cost of user access to third-party services, including our subscriptions, by restricting or prohibiting the use of their infrastructure to support or facilitate third-party services or by charging increased fees to third parties or the users of third-party services, any of which would make our subscriptions less attractive to users, and reduce our revenues.
Also, these providers could take measures that degrade, disrupt or increase the cost of user access to third-party services, including our offerings, by restricting or prohibiting the use of their infrastructure to support or facilitate third-party services or by charging increased fees to third parties or the users of third-party services, any of which would make our subscriptions less attractive to users, and reduce our revenues.
In addition, in certain circumstances, such as conversion by holders or redemption, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of such series of Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
In addition, in certain circumstances, such as conversion by holders or redemption, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of such series of Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
Furthermore, many medium-sized and larger businesses that we target for sales may already purchase business communications solutions from our larger competitors or, due to economic conditions or otherwise, reduce their technology spending or reduce the number of employees for whom they purchase our solutions or reduce the number of existing employees using our solution (i.e., down-sell).
Furthermore, many medium-sized and larger businesses that we target for sales may already purchase business communications solutions from our larger competitors or, due to economic conditions or otherwise, reduce their technology spending or reduce the number of new employees for whom they purchase our solutions or reduce the number of existing employees using our solution (i.e., down-sell).
Internet-based services frequently contain undetected errors and bugs when first introduced or when new versions or enhancements are released. While the substantial majority of our customers are small and medium-sized businesses, the use of our subscriptions in complicated, large-scale network environments may increase our exposure to undetected errors, failures, or bugs in our subscriptions.
Internet-based services frequently contain undetected errors and bugs when first introduced or when new versions or enhancements are released. While the substantial majority of our customers are small and medium-sized businesses, the use of our services in complicated, large-scale network environments may increase our exposure to undetected errors, failures, or bugs in our services.
Many factors, including our marketing, user acquisition and technology costs, and our current and future competitors’ pricing and marketing strategies, can significantly affect our pricing strategies. Our competitors may be able to adopt more aggressive pricing policies and devote greater resources to the development, promotion and sale of their services than we can to ours.
Many factors, including our marketing, user acquisition and technology costs, and our current and future competitors’ pricing and marketing strategies, can significantly affect our pricing strategies. Our competitors may be able to adopt more aggressive pricing policies and promotions and devote greater resources to the development, promotion and sale of their services than we can to ours.
For example, the GDPR, which came into force in May 2018, strengthened the existing data protection regulations in the EU and its provisions include increasing the maximum level of fines that EU regulators may impose for the most serious of breaches to the greater of €20 million or 4% of worldwide annual turnover.
For example, the GDPR, which came into force in May 2018, strengthened existing data protection regulations in the EU. Its provisions include increasing the maximum level of fines that EU regulators may impose for the most serious of breaches to the greater of €20 million or 4% of worldwide annual turnover.
In the event that these customers do renew their subscriptions, they may choose to renew for fewer users, shorter contract lengths, or for a less expensive subscription plan or edition. We cannot predict the renewal rates for customers that have entered into subscription contracts with us.
In the event that these customers do renew their subscriptions, they may choose to renew for fewer users, shorter contract lengths, or for a less expensive subscription plan or edition. We cannot predict the renewal rates or types for customers that have entered into subscription contracts with us.
Our certificate of incorporation and bylaws include provisions that: 45 Table of Contents • authorize our board of directors to issue, without further action by the stockholders, up to 100,000,000 shares of undesignated preferred stock, 200,000 share of which are currently designated as Series A Convertible Preferred Stock; • require that, once our outstanding shares of Class B Common Stock represent less than a majority of the combined voting power of our common stock, any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; specify that special meetings of our stockholders can be called only by our board of directors, the Chairman of our board of directors, or our Chief Executive Officer; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • prohibit cumulative voting in the election of directors; • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; • state that the approval of our board of directors or the holders of a supermajority of our outstanding shares of capital stock is required to amend our bylaws and certain provisions of our certificate of incorporation; and • reflect two classes of common stock, as discussed above.
Our certificate of incorporation and bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, up to 100,000,000 shares of undesignated preferred stock, 200,000 share of which are currently designated as Series A Convertible Preferred Stock; • require that, once our outstanding shares of Class B Common Stock represent less than a majority of the combined voting power of our common stock, any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; specify that special meetings of our stockholders can be called only by our board of directors, the Chairman of our board of directors, or our Chief Executive Officer; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors; • prohibit cumulative voting in the election of directors; • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; • state that the approval of our board of directors or the holders of a supermajority of our outstanding shares of capital stock is required to amend our bylaws and certain provisions of our certificate of incorporation; and • reflect two classes of common stock, as discussed above.
Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays, service delivery, and quality problems and other unknown factors that may result in losses in future periods, such as our write-down charges relating to our strategic partnership with Avaya.
Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays, service delivery, and quality problems and other unknown factors that may result in losses in future periods, such as our previous write-down charges relating to our strategic partnership with Avaya.
Continued growth could also strain our ability to maintain reliable service levels for our customers, resellers, and global service providers, develop and improve our operational, financial and management controls, enhance our billing and reporting systems and procedures and recruit, train and retain highly skilled personnel.
Continued growth could also strain our ability to maintain reliable service levels for our customers, resellers, partners, and global service providers, develop and improve our operational, financial and management controls, enhance our billing and reporting systems and procedures, and recruit, train and retain highly skilled personnel.
If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase such series of Notes or make cash payments upon conversions thereof.
If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase such series of Notes or make cash payments upon conversions thereof, as applicable.
The expansion of our systems and infrastructure will require us to commit substantial financial, operational, and technical resources in advance of an increase in the volume of business, with no assurance that the volume of business will increase. Any such additional capital investments will increase our cost base.
The expansion of our systems and infrastructure could require us to commit substantial financial, operational, and technical resources in advance of an increase in the volume of business, with no assurance that the volume of business will increase. Any such additional capital investments will increase our cost base.
Risks Related to Our Class A Common Stock, Our Notes and Our Charter Provisions The market price of our Class A Common Stock is likely to be volatile and could decline. The stock market in general, and the market for SaaS and other technology-related stocks in particular, has been highly volatile.
Risks Related to Our Class A Common Stock and Our Charter Provisions The market price of our Class A Common Stock is likely to be volatile and could decline. The stock market in general, and the market for SaaS and other technology-related stocks in particular, has been highly volatile.
If one or more holders of a series elect to convert their Notes, we would be required to settle a portion or all of our conversion obligation in cash, which could adversely affect our liquidity.
If one or more holders of a series elect to convert their Convertible Notes, we would be required to settle a portion or all of our conversion obligation in cash, which could adversely affect our liquidity.
Additionally, we and our customers face the potential for regulators in the EEA, Switzerland or the U.K. to apply different standards to the transfer of personal data from the EEA, Switzerland or the U.K. to the U.S. and other non-EEA countries.
Additionally, we and our customers face the potential for regulators in the EEA, Switzerland, or the U.K. to apply different standards to the transfer of personal data from the EEA, Switzerland, or the U.K. to the U.S. and other countries.
We cannot assure you that our backup systems, regular data backups, security controls and other procedures currently in place, or that may be in place in the future, will be adequate to prevent significant damage, system failure, service outages, data breach, data loss, unauthorized access, loss of use, interruption, or increased charges from our technology vendors. 23 Table of Contents Also, our subscriptions are web-based.
We cannot assure you that our backup systems, regular data backups, security controls and other procedures currently in place, or that may be in place in the future, will be adequate to prevent significant damage, system failure, service outages, data breach, data loss, unauthorized access, loss of use, interruption, or increased charges from our technology vendors. 23 Table of Contents Also, our services are web-based.
However, the consent of the holders of a majority of the outstanding shares of Series A Convertible Preferred Stock (voting together as a separate class) is required in order for us to take certain actions, including (i) any amendment, alteration, or repeal of (A) any provision of our certificate of incorporation or bylaws that adversely affects, in any material respect, the rights, preferences, privileges, or voting power of the Series A Convertible Preferred Stock or the holders thereof or (B) any provision of our certificate of designations, (ii) issuances of securities that are 44 Table of Contents senior to, or equal in priority with, the Series A Convertible Preferred Stock as to dividend rights or rights on the distribution of assets on liquidation, (iii) any increase or decrease in the authorized number of shares of Series A Convertible Preferred Stock or issuances thereof, and (iv) any dividend on our common stock that is a one-time special dividend of $100,000,000 or more.
However, the consent of the holders of a majority of the outstanding shares of Series A Convertible Preferred Stock (voting together as a separate class) is required in order for us to take certain actions, including (i) any amendment, alteration, or repeal of (A) any provision of our certificate of incorporation or bylaws that adversely affects, in any material respect, the rights, preferences, privileges, or voting power of the Series A Convertible Preferred Stock or the holders thereof or (B) any provision of our certificate of designations, (ii) issuances of securities that are senior to, or equal in priority with, the Series A Convertible Preferred Stock as to dividend rights or rights on the distribution of assets on liquidation, (iii) any increase or decrease in the authorized number of shares of Series A Convertible Preferred Stock or issuances thereof, and (iv) any dividend on our common stock that is a one-time special dividend of $100,000,000 or more.
The introduction of new services by competitors or the development of entirely new technologies to replace existing offerings could make our solutions obsolete or adversely affect our business and results of operations.
The introduction of new services by competitors or the development of entirely new technologies to replace existing offerings could make our solutions outdated, obsolete or adversely affect our business and results of operations.
If such owners prevail in such claim, we could be required to make the source code for our proprietary software (which contains our valuable trade secrets) generally available to third parties, including competitors, at no cost, to seek licenses from third parties in order to continue offering our subscriptions, to re-engineer our technology, or to discontinue offering our subscriptions in the event re-engineering cannot be accomplished on a timely basis or at all, any of which could cause us to discontinue our subscriptions, harm our reputation, result in customer losses or claims, increase our costs or otherwise materially and adversely affect our business and results of operations.
If such owners prevail in such claim, we could be required to make the source code for our 44 Table of Contents proprietary software (which contains our valuable trade secrets) generally available to third parties, including competitors, at no cost, to seek licenses from third parties in order to continue offering our subscriptions, to re-engineer our technology, or to discontinue offering our subscriptions in the event re-engineering cannot be accomplished on a timely basis or at all, any of which could cause us to discontinue our subscriptions, harm our reputation, result in customer losses or claims, increase our costs or otherwise materially and adversely affect our business and results of operations.
Moreover, we will be required to repay the Notes of the applicable series in cash at their respective maturity unless earlier converted, redeemed or repurchased.
Moreover, we will be required to repay the Notes of the applicable series in cash at their respective maturity unless earlier converted, redeemed or repurchased, as applicable.
We also face competition from digital engagement vendors such as eGain Corporation, LivePerson, Inc., among others named above that may offer similar features. Many of our current and potential competitors have longer operating histories, significantly greater resources and name recognition, more diversified offerings, and larger customer bases than we have.
We also face competition from digital engagement vendors such as eGain Corporation, LivePerson, Inc., among others named above that may offer similar features. Many of our current and potential competitors have longer operating histories, significantly greater resources and name recognition, more diversified offerings, international presence, and larger customer bases than we have.
Despite the implementation of security measures by us or our vendors, our computing devices, infrastructure, or networks, or our vendors’ computing devices, infrastructure, or networks, may be vulnerable to hackers, computer viruses, worms, ransomware, other malicious software programs, employee theft or misuse, phishing, denial-of-service attacks, or similar disruptive problems that are caused by or through a security weakness or vulnerability in our or our vendors’ infrastructure, network, or business practices or our or our vendors’ customers, employees, business partners, consultants, or other Internet users who attempt to invade our or our vendors’ corporate and personal computers, tablets, mobile devices, software, data networks, or voice networks.
Despite the implementation of security measures by us or our vendors, our computing devices, infrastructure, or networks, or our vendors’ computing devices, infrastructure, or networks have in the past, and may in the future, be vulnerable to hackers, computer viruses, worms, ransomware, other malicious software programs, employee theft or misuse, phishing, denial-of-service attacks, or similar disruptive problems that are caused by or through a security weakness or vulnerability in our or our vendors’ infrastructure, network, or business practices or our or our vendors’ customers, employees, business partners, consultants, or other Internet users who attempt to invade our or our vendors’ corporate and personal computers, tablets, mobile devices, software, data networks, or voice networks.
We also face competition from other cloud companies and established communications providers that resell on-premise hardware, software, and hosted solutions, such as 8x8, Inc., Amazon.com, Inc., Dialpad, Inc., LogMeIn, Inc, Microsoft Corporation, Nextiva, Inc., Twilio Inc., Vonage Holdings Corp., and Zoom Video Communications, Inc., which has introduced a voice solution.
We also face competition from other companies and established communications providers that resell on-premises hardware, software, cloud and hosted solutions, such as 8x8, Inc., Amazon.com, Inc., Dialpad, Inc., LogMeIn, Inc, Microsoft Corporation, Nextiva, Inc., Twilio Inc., Vonage Holdings Corp., and Zoom Video Communications, Inc., which has introduced a voice solution.
Excess inventory levels would subject us to the risk of inventory obsolescence, while insufficient levels of inventory may negatively affect relations with customers. For instance, our customers rely upon our ability to meet committed delivery dates, and any disruption in the supply of our subscriptions could result in loss of customers or harm to our ability to attract new customers.
Excess inventory levels would subject us to the risk of inventory obsolescence, while insufficient levels of inventory may negatively affect relations with customers. For instance, our customers rely upon our ability to meet committed delivery dates, and any disruption in the supply of our services could result in loss of customers or harm to our ability to attract new customers.
In addition, we currently use and may in the future use third-party service providers to deliver certain features of our subscriptions.
In addition, we currently use and may in the future continue to use third-party service providers to deliver certain features of our subscriptions.
In addition, our inability to successfully operate and integrate newly acquired businesses or newly formed strategic partnerships appropriately, effectively, and in a timely manner could impair our ability to take advantage of future growth opportunities and other advances in technology, as well as on our revenues, gross margins, and expenses.
In addition, our inability to successfully operate and integrate newly acquired businesses or newly formed strategic partnerships appropriately, effectively, and in a timely manner could impair our ability to take advantage of future growth opportunities and other advances in technology, as well as our revenues and gross margins.
The impact of the DSA on the overall industry, business models and our operations is uncertain, and these regulations could result in changes to our subscriptions or introduce new operational requirements and administrative costs each of which could have an adverse effect on our business, financial condition, and results of operations.
The impact of the DSA on the overall industry, business models and our operations are uncertain, and these regulations could result in changes to our subscriptions or introduce new operational requirements and administrative costs each of which could have an adverse effect on our business, financial condition, and results of operations.
As a communications services provider, we are subject to existing or potential FCC regulations relating to privacy, disability access, porting of numbers and enabling abbreviated dialing to designated numbers, maintaining records for disconnected numbers, cooperation with law enforcement, Federal Universal Service Fund 34 Table of Contents (“USF”) contributions, Enhanced 911 (“E-911”), outage reporting, call authentication, call spoofing, call blocking and other requirements and regulations.
As a communications services provider, we are subject to existing or potential FCC regulations relating to privacy, disability access, access to and porting of numbers and enabling abbreviated dialing to designated numbers, maintaining records for disconnected numbers, cooperation with law enforcement, Federal Universal Service Fund (“USF”) contributions, Enhanced 911 (“E-911”), outage reporting, call authentication, call spoofing, call blocking and other requirements and regulations.
As our operations grow in size, scope, and complexity, we will need to increase our sales and marketing efforts and add additional sales and marketing personnel in various regions worldwide and improve and upgrade our systems and infrastructure to attract, service, and retain an increasing number of customers.
As our operations grow in size, scope, and complexity, we may need to increase our sales and marketing efforts and may add additional sales and marketing personnel in various regions worldwide and improve and upgrade our systems and infrastructure to attract, service, and retain an increasing number of customers.
Although we test our subscriptions to detect and correct errors and defects before their general release, we have, from time to time, experienced significant interruptions in our subscriptions as a result of such errors or defects and may experience future interruptions of service if we fail to detect and correct these errors and defects.
Although we test our services to detect and correct errors and defects before their general release, we have, from time to time, experienced significant interruptions in our services as a result of such errors or defects and may experience future interruptions of service if we fail to detect and correct these errors and defects.
Our estimates or judgments relating to our critical accounting policies may be based on assumptions that change or prove to be incorrect, including with respect to our recoverability assessment for prepaid sales commission balances with Avaya, which could cause our results of operations to fall below expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock.
Our estimates or judgments relating to our critical accounting policies may be based on assumptions that change or prove to be incorrect, such as with respect to our recoverability assessment for prepaid sales commission balances with Avaya, which could cause our results of operations to fall below expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock.
The costs incurred in correcting such defects or errors may be substantial and could harm our results of operations. In addition, we rely on hardware purchased or leased and software licensed from third parties to offer our subscriptions.
The costs incurred in correcting such defects or errors may be substantial and could harm our results of operations. In addition, we rely on hardware purchased or leased and software licensed from third parties to offer our services.
Substantial losses due to fraud or our inability to accept credit card payments could cause our paid customer base to significantly decrease, which would have a material adverse effect on our results of operations, financial condition, and ability to grow our business. 29 Table of Contents We are in the process of expanding our international operations, which exposes us to significant risks.
Substantial losses due to fraud or our inability to accept credit card payments could cause our paid customer base to significantly decrease, which would have a material adverse effect on our results of operations, financial condition, and ability to grow our business. We are in the process of expanding our international operations, which exposes us to significant risks.
While management concluded internal control over financial reporting was at a reasonable assurance level as of December 31, 2022, there can be no assurance that material weaknesses will not be identified in the future.
While management concluded internal control over financial reporting was at a reasonable assurance level as of December 31, 2023, there can be no assurance that material weaknesses will not be identified in the future.
These businesses typically have more limited financial resources, including capital-borrowing capacity, than larger entities. Any economic downturn could decrease technology spending and the number of employees of small and medium sized businesses in ways that adversely affect demand for our offerings, could increase churn or downsell and harm our business and results of operations.
These businesses typically have more limited financial resources, including capital-borrowing capacity, than larger entities. Any economic downturn could decrease technology spending and the number of employees of small and medium sized businesses in ways that adversely affect demand for our offerings, could increase churn or down-sell and harm our business and results of operations.
Interruptions in our subscriptions may reduce our revenues, may require us to issue credits or pay penalties, subject us to claims and litigation, cause customers to terminate their subscriptions and adversely affect our renewal rates and our ability to attract new customers.
Interruptions in our subscriptions may reduce our revenues, may require us to issue credits or pay penalties, subject us to claims and litigation, cause customers to terminate their subscriptions and adversely affect our renewal rates and our ability to attract new and retain existing customers.
Currently, this access is provided by companies that have significant and increasing market power in the broadband and Internet access marketplace, including incumbent phone companies, cable companies, and wireless companies. Some of these providers offer solutions and subscriptions that directly compete with our own offerings, which can potentially give them a competitive advantage.
Currently, 22 Table of Contents this access is provided by companies that have significant and increasing market power in the broadband and Internet access marketplace, including incumbent phone companies, cable companies, and wireless companies. Some of these providers offer solutions and subscriptions that directly compete with our own offerings, which can potentially give them a competitive advantage.
As a result, there can be no guarantee around the timing or volume of our share repurchases. The program could affect the price of our Class A Common Stock, increase volatility and diminish our cash reserves. The program may be suspended or terminated at any time and, even if fully implemented, may not enhance long-term stockholder value.
As a result, there can be no guarantee around the timing or volume of our share repurchases. The programs could affect the price of our Class A Common Stock, increase volatility and diminish our cash reserves. These programs may be suspended or terminated at any time and, even if fully implemented, may not enhance long-term stockholder value.
If we are unable to maintain effective advertising programs, our ability to attract new customers could be materially and adversely affected, our advertising and marketing expenses could increase substantially, and our results of operations may suffer. Some of our potential customers learn about us through leading search engines, such as Google, Yahoo!, and Microsoft Bing.
If we are unable to maintain effective advertising programs, our ability to attract new customers could be materially and adversely affected, our advertising and marketing expenses could increase substantially, and our results of operations may suffer. 27 Table of Contents Some of our potential customers learn about us through leading search engines, such as Google, Yahoo!, and Microsoft Bing.
In addition, since telecommunications billing is inherently complex and requires highly sophisticated information systems to administer, our internally developed billing system, which is currently being implemented, may experience errors or we may improperly operate the system, which could result in the system incorrectly calculating the fees owed by our customers for our subscriptions or related taxes and administrative fees.
In addition, since telecommunications billing is inherently complex and requires highly sophisticated information systems to administer, our internally developed billing system may experience errors or we may improperly operate the system, which could result in the system incorrectly calculating the fees owed by our customers for our subscriptions or related taxes and administrative fees.
Additionally, on November 17, 2022, the Digital Services Act (“DSA”) entered into force in the EU and includes new obligations to limit the spread of illegal content and illegal products online, increase the protection of minors, and provide users with more choice and transparency and allows for fines of up to 6% of annual turnover.
For example, on November 17, 2022, the Digital Services Act (“DSA”) entered into force in the EU. The DSA includes new obligations to limit the spread of illegal content and illegal products online, increase the protection of minors, and provide users with more choice and transparency. The DSA allows for fines of up to 6% of annual turnover.
Bribery Act of 2010; • more limited protection for intellectual property rights in some countries; • adverse tax consequences; • fluctuations in currency exchange rates; • exchange control regulations, which might restrict or prohibit our conversion of other currencies into U.S. dollars; • restrictions on the transfer of funds; • new and different sources of competition; • natural disasters or global health crises, including the ongoing COVID-19 pandemic; • political and economic instability created by the Russian invasion of Ukraine; • deterioration of political relations between the U.S. and other countries in which we operate, particularly China and the Philippines; and • political or social unrest, economic instability, conflict or war in such countries, or sanctions implemented by the U.S. against these countries, such as the ongoing geopolitical tensions related to Russia’s actions in Ukraine, and resulting sanctions imposed by the U.S. and other countries, and retaliatory actions taken by Russia in response to such sanctions, all of which could have a material adverse effect on our operations.
Bribery Act of 2010; • more limited protection for intellectual property rights in some countries; • adverse tax consequences; • fluctuations in currency exchange rates; • exchange control regulations, which might restrict or prohibit our conversion of other currencies into U.S. dollars; • restrictions on the transfer of funds; • new and different sources of competition; • natural disasters or global health crises, such as the COVID-19 pandemic; • political and economic instability created by the war between Russia and Ukraine and the war between Israel and Hamas; • deterioration of political relations between the U.S. and other countries in which we operate, particularly China and the Philippines; and • political or social unrest, economic instability, conflict or war in such countries, or sanctions implemented by the U.S. against these countries, such as the ongoing geopolitical tensions related to the war between Russia and Ukraine, and resulting sanctions imposed by the U.S. and other countries, and retaliatory actions taken by Russia in response to such sanctions, as well as the war between Israel and Hamas, all of which could have a material adverse effect on our operations.
In addition, larger customers may demand more features, integration services, and customization, and may require highly skilled sales and support personnel. Our investment in marketing our subscriptions to these potential customers may not be successful, which could significantly and adversely affect our results of operations and our overall ability to grow our customer base.
In addition, larger customers may demand more features, integration services, customization, more complex contract negotiations, and may require highly skilled sales and support personnel. Our investment in marketing our subscriptions to these potential customers may not be successful, which could significantly and adversely affect our results of operations and our overall ability to grow our customer base.
Furthermore, as we expand our operations internationally, we may need to make significant expenditures and investments in our customer service and support to adequately address the complex needs of international customers, such as support in additional foreign 39 Table of Contents languages. We also use third parties to deliver onsite professional services to our customers in deploying our solutions.
Furthermore, as we expand our operations internationally, we may need to make significant expenditures and investments in our customer service and support to adequately address the complex needs of international customers, such as support in additional foreign languages. We also use third parties to deliver onsite professional services to our customers in deploying our solutions.
In particular, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) establishes privacy and security standards that limit the use and disclosure of individually identifiable health information and requires the implementation of administrative, physical, and technical safeguards to protect the privacy of protected health information and ensure the confidentiality, integrity, and availability of electronic protected health information by certain institutions.
In particular, at the federal level, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) establishes privacy and security standards that limit the use and disclosure of individually identifiable health information and requires the implementation of administrative, physical, and technical safeguards to protect the privacy of protected health information and ensure the confidentiality, integrity, and availability of electronic protected health information by certain institutions.
If one or more of the research analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our Class A Common Stock may decrease, which could cause our stock price or trading volume to decline. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 48 Table of Contents
If one or more of the research analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our Class A Common Stock may decrease, which could cause our stock price or trading volume to decline. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
National data protection supervisory authorities have been actively monitoring and sanctioning noncompliance with applicable regulations with particular focus on use of cookies without consent, protection of children data and breach of security.
National data protection supervisory authorities have been actively monitoring and sanctioning noncompliance with applicable regulations with particular focus on use of cookies without consent, behavioral profiling, protection of children data, and breach of security.
In addition, our competitors may independently develop technologies that are similar or superior to our technology, duplicate our technology in a manner that does not infringe our intellectual property rights or design around any of our patents. Furthermore, detecting and policing 41 Table of Contents unauthorized use of our intellectual property is difficult and resource-intensive.
In addition, our competitors may independently develop technologies that are similar or superior to our technology, duplicate our technology in a manner that does not infringe our intellectual property rights or design around any of our patents. Furthermore, detecting and policing unauthorized use of our intellectual property is difficult and resource-intensive.
Factors that could cause the market price of our Class A Common Stock to fluctuate significantly include: • our operating and financial performance and prospects and the performance of other similar companies including our strategic partners; • our quarterly or annual earnings or those of other companies in our industry; • conditions that impact demand for our subscriptions; • the public’s reaction to our press releases, financial guidance, and other public announcements, and filings with the SEC; • changes in earnings estimates or recommendations by securities or research analysts who track our Class A Common Stock; • actual or perceived security breaches, or other privacy or cybersecurity incidents; • market and industry perception of our success, or lack thereof, in pursuing our growth strategy; • strategic actions by us or our competitors, such as acquisitions or restructurings; • changes in government and other regulations; • changes in accounting standards, policies, guidance, interpretations, or principles; • arrival and departure of key personnel; • sales of common stock by us, our investors, or members of our management team; • changes in general market, economic, and political conditions in the U.S. and global economies or financial markets, including those resulting from natural disasters, telecommunications failure, cyber-attack, changes in diplomatic or trade relationships, civil unrest in various parts of the world, acts of war (including ongoing geopolitical tensions related to Russia’s actions in Ukraine, resulting sanctions imposed by the U.S. and other countries, and retaliatory actions taken by Russia in response to such sanctions), terrorist attacks, or other catastrophic events, such as the global outbreak of COVID-19; and • Geopolitical relations between the US and China.
Factors that could cause the market price of our Class A Common Stock to fluctuate significantly include: • our operating and financial performance and prospects and the performance of other similar companies including our strategic partners and global service providers; • our quarterly or annual earnings or those of other companies in our industry; • conditions that impact demand for our subscriptions; • the public’s reaction to our press releases, financial guidance, and other public announcements, and filings with the SEC; • changes in earnings estimates or recommendations by securities or research analysts who track our Class A Common Stock; • actual or perceived security breaches, or other privacy or cybersecurity incidents; • market and industry perception of our success, or lack thereof, in pursuing our growth strategy; • strategic actions by us or our competitors, such as acquisitions or restructurings; • changes in government and other regulations; • changes in accounting standards, policies, guidance, interpretations, or principles; • arrival and departure of key personnel; • sales of common stock by us, our investors, or members of our management team; • changes in general market, economic, and political conditions in the U.S. and global economies or financial markets, including those resulting from natural disasters, telecommunications failure, cyber-attack, changes in diplomatic or trade relationships, banking crises, civil unrest in various parts of the world, acts of war (including geopolitical tensions related to the war between Russia and Ukraine, resulting sanctions imposed by the U.S. and other countries, and retaliatory actions taken by Russia in response to such sanctions, and the war between Israel and Hamas), terrorist attacks, or other catastrophic events, such as the global outbreak of COVID-19 or any future pandemic; and • Geopolitical relations between the U.S. and China.
We do not make any representation or prediction as to the direction or magnitude of any potential effect that the transactions described above may have on the price of each series of Notes or the shares of our Class A Common Stock. In addition, we do not make any representation that these transactions will not be discontinued without notice.
We do not make any representation or prediction as to the direction or magnitude of any potential effect that the transactions described above may have on the price of the Convertible Notes or the shares of our Class A Common Stock. In addition, we do not make any representation that these transactions will not be discontinued without notice.
We may also face competition from other large Internet companies, such as Alphabet Inc. (Google Voice), Facebook, Inc., Oracle Corporation, and Salesforce.com, Inc., any of which might launch its own cloud-based business communications services or acquire other cloud-based business communications companies in the future.
We may also face competition from other large Internet companies, such as Alphabet Inc. (Google Voice), Meta Platforms, Inc., Oracle Corporation, and Salesforce.com, Inc., any of which might launch its own cloud-based business communications services or acquire other cloud-based business communications companies in the future.
As our customer base grows and their usage of our services increases, we will be required to make additional investments in network capacity to maintain adequate data transmission speeds, the availability of which may be limited, or the cost of which may be on terms unacceptable 22 Table of Contents to us.
As our customer base grows and their usage of our services increases, we will be required to make additional investments in network capacity to maintain adequate data transmission speeds, the availability of which may be limited, or the cost of which may be on terms unacceptable to us.
In addition, upon conversion of the Notes of the applicable series, we will be required to make cash payments in respect of such Notes being converted, as set forth in the applicable indenture governing the Notes.
In addition, upon conversion of the Convertible Notes of the applicable series, we will be required to make cash payments in respect of such Convertible Notes being converted, as set forth in the applicable Convertible Notes Indenture.
If such a failure to comply with relevant standards occurs, we may also face legal liability if we are found to not comply with applicable laws that incorporate, by reference or by adoption of substantially similar provisions, merchant or service provider standards, including PCI DSS.
If such a failure to comply with relevant standards occurs, we may also face legal liability if we are found to not comply with applicable laws that incorporate, by 30 Table of Contents reference or by adoption of substantially similar provisions, merchant or service provider standards, including PCI DSS.
As a result, the market price and trading volume for our Class A Common Stock has been and may continue to be highly volatile, and investors in our Class A Common Stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects.
As a result, the market price and trading volume for our Class A Common Stock has been and may continue to be highly volatile, and investors in our Class A Common Stock may experience a decrease in the value of their shares, including 48 Table of Contents decreases unrelated to our operating performance or prospects.
Local number portability is considered an important feature by many potential customers, and if we fail to reduce any related delays, we may experience increased difficulty in acquiring new customers. Moreover, the FCC requires Internet voice communications providers to comply with specified number porting timeframes when customers leave our subscription for the services of another provider.
Local number portability is considered an important feature by many potential customers, and if we fail to reduce any related delays, we may experience increased difficulty in acquiring new customers. Moreover, the Federal Communications Commission (the “FCC”) requires Internet voice communications providers to comply with specified number porting timeframes when customers leave our subscription for the services of another provider.
To deliver our subscriptions, we rely on third parties for our network connectivity and for certain of the features in our subscriptions. We currently use the infrastructure of third-party network service providers, including CenturyLink, Inc. and Bandwidth.com, Inc. in North America and several others internationally, to deliver our subscriptions over their networks.
To deliver our subscriptions, we rely on third parties for our network connectivity and for certain of the features in our subscriptions. We currently use the infrastructure of third-party network service providers, including Lumen Technologies, Inc. and Bandwidth.com, Inc. in North America and several others internationally, to deliver our subscriptions over their networks.
Realization of these net operating loss and research tax credit carryforwards depends on future income, and there is a risk that our existing carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could materially and adversely affect our results of operations.
Realization of these net operating loss and research tax credit carryforwards depends on future income, and there is a risk that our existing carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could materially and adversely affect our reported financial condition and results of operations.
For example, to address customer hardships, we may work with customers to provide greater flexibility to manage challenges they are facing, but we cannot be 26 Table of Contents assured that they will not reduce their number of users or terminate their subscriptions altogether.
For example, to address customer hardships, we may work with customers to provide greater flexibility to manage challenges they are facing, but we cannot be assured that they will not reduce their number of users or terminate their subscriptions altogether.
In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, our ability to utilize NOLs or other tax attributes, such as research tax credits, in any taxable year may be limited if we experience an “ownership change.” An “ownership change” generally occurs if one or more stockholders or groups of stockholders, who each own at least 5% of our stock, increase their collective ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period.
In addition to the potential carryforward limitations described above, under Sections 382 and 383 of the Internal Revenue Code of 1986 (the “Code”), as amended, our ability to utilize NOLs or other tax attributes, such as research tax credits, in any taxable year may be limited if we experience an “ownership change.” An “ownership change” generally occurs if one or more stockholders or groups of stockholders, who each own at least 5% of our stock, increase their collective ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period.
Summary Risk Factors An investment in our Class A Common Stock involves a high degree of risk, and the following is a summary of key risk factors when considering an investment. It is only a summary.
Summary Risk Factors An investment in our Class A Common Stock involves a high degree of risk, and the following is a summary of key risk factors when considering an investment. This is only a summary.
However, our future success likely will also depend on our ability to introduce and sell new services, features, and functionality that enhance or are beyond the subscriptions we currently offer, as well as to improve usability and support and increase customer satisfaction.
However, our future success may also depend on our ability to introduce and sell new services, features, and functionality that enhance or are beyond the subscriptions we currently offer, as well as to improve usability and support and increase customer satisfaction.
Our competitors include traditional on-premise, hardware business communications providers such as ALE, Avaya, Cisco Systems, Inc., Mitel, NEC Corporation, Siemens Enterprise Networks, LLC, their resellers, and others, as well as companies such as Microsoft Corporation and Cisco Systems, Inc., and their resellers that license their software.
Our competitors include traditional on-premises, hardware business communications providers such as ALE, Avaya, Cisco Systems, Mitel, NEC Corporation, Siemens Enterprise Networks, LLC, their resellers, agents and others, as well as companies such as Microsoft Corporation and Cisco Systems, Inc., and their resellers that license their software.
Any defects in, or unavailability of, our or third-party software or hardware that cause interruptions of our subscriptions could, among other things: • cause a reduction in revenues or a delay in market acceptance of our subscriptions; • require us to pay penalties or issue credits or refunds to our customers, resellers, or global service providers, or expose us to claims for damages; • cause us to lose existing customers and make it more difficult to attract new customers; • divert our development resources or require us to make extensive changes to our software, which would increase our expenses and slow innovation; • increase our technical support costs; and • harm our reputation and brand.
Any defects in, or unavailability of, our or third-party software or hardware that cause interruptions of our services could, among other things: • cause a reduction in revenues or a delay in market acceptance of our services; • require us to pay penalties or issue credits or refunds to our customers, channel partners, strategic partners, or global service providers, or expose us to claims for damages; • cause us to lose existing customers and make it more difficult to attract new customers; • divert our development resources or require us to make extensive changes to our software, which would increase our expenses and slow innovation; • increase our technical support costs; and • harm our reputation and brand.
Many countries, including the United States, and organizations such as the Organization for Economic Cooperation and Development are also actively considering changes to existing tax laws or have proposed or enacted new laws that could increase our tax obligations in countries where we do business or cause us to change the way we operate our business.
Many countries, including the United States, and organizations such as the Organization for Economic Cooperation and Development are also actively considering changes to existing tax laws or have proposed or enacted new laws that could increase our tax obligations in countries where we do business or cause us to change the way we operate our business, including a proposed 15% global minimum tax.
All of these locations are near known earthquake fault zones, which are vulnerable to damage from earthquakes and tsunamis, or are in areas subject to hurricanes.
Many of these locations are near known earthquake fault zones, which are vulnerable to damage from earthquakes and tsunamis, or are in areas subject to hurricanes.
If we are unable to continue to reduce our pricing as a result of obtaining network services through our subsidiary, we may be forced to rely on other third-party network service providers and be unable to effectively lower our cost of service.
If we are unable to continue to reduce our pricing as a result of obtaining network services through our subsidiary, we may be forced to rely on other third-party network service providers and 20 Table of Contents be unable to effectively lower our cost of service.
Any such errors in our customer billing could harm our reputation and cause us to violate truth in billing laws and regulations. Our current internally developed billing system requires us to process an increasing number of invoices 25 Table of Contents manually, which could result in billing errors.
Any such errors in our customer billing could harm our reputation and cause us to violate truth in billing laws and regulations. Our current internally developed billing system requires us to process an increasing number of invoices manually, which could result in billing errors.
We cannot guarantee that our stock repurchase program will be fully implemented or that it will enhance long-term stockholder value. On February 13, 2023, our board of directors authorized a share repurchase program under which we may repurchase up to $175 million of our outstanding Class A Common Stock, subject to certain limitations.
We cannot guarantee that our stock repurchase programs will be fully implemented or that they will enhance long-term stockholder value. On February 13, 2023, our board of directors authorized a share repurchase program under which we may repurchase up to $175.0 million of our outstanding Class A Common Stock, subject to certain limitations.
If any disasters were to occur, our ability to operate our business could be seriously impaired, and we may endure system interruptions, reputational harm, loss of intellectual property, delays in our subscriptions development, lengthy interruptions in our services, breaches of data security, and loss of critical data, all of which could harm our future results of operations.
If any disasters or geopolitical conflicts were to occur or worsen, our ability to operate our business could be seriously impaired, and we may endure system interruptions, reputational harm, loss of intellectual property, delays in our subscriptions development, lengthy interruptions in our services, breaches of data security, and loss of critical data, all of which could harm our future results of operations.
We pass USF, E-911 fees, and other surcharges through to our customers, which may result in our subscriptions becoming more expensive or require that we absorb these costs. State public utility commissions may attempt to apply state telecommunications regulations to Internet voice communications subscriptions like ours.
We pass USF, E-911 fees, and other surcharges through to our customers, which may 36 Table of Contents result in our subscriptions becoming more expensive or require that we absorb these costs. State public utility commissions may attempt to apply state telecommunications regulations to Internet voice communications subscriptions like ours.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES Our corporate headquarters is located in Belmont, California, and consists of approximately 110,000 square feet of office space under leases that expire in July 2026. We also lease office space in Denver, Colorado; Charlotte, North Carolina; Dallas, Texas; London, England; Paris, France; Tel Aviv, Israel; Xiamen and Hangzhou, China; and other small offices worldwide.
Biggest changeITEM 2. PROPERTIES Our corporate headquarters is located in Belmont, California, and consists of approximately 110,000 square feet of office space under leases that expire in July 2026.
Added
We also lease office space in Denver, Colorado; Charlotte, North Carolina; Dallas, Texas; London, England; Paris, France; Alicante, Spain; Sofia, Bulgaria; Tel Aviv, Israel; Xiamen and Hangzhou, China; and other small offices worldwide.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS Information with respect to this item may be found in Note 8 – Commitments and Contingencies in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K, under “Legal Matters” which is incorporated herein by reference. ITEM 4.
Biggest changeLEGAL PROCEEDINGS 55 Table of Contents Information with respect to this item may be found in Note 10 – Commitments and Contingencies in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K, under “Legal Matters” which is incorporated herein by reference.
MINE SAFETY DISCLOSURES Not applicable. 49 Table of Contents PART II
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 56 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities The following table summarizes the share repurchase activity of our Class A Common Stock for the three months ended December 31, 2022 (in thousands, except per-share amounts): Period Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs (1) Approximate dollar value of shares that may yet be purchased under the program (1) October 1, 2022 to October 31, 2022 — $ — — 55,013 November 1, 2022 to November 30, 2022 1,314,610 $ 37.12 1,314,610 5,249 December 1, 2022 to December 31, 2022 142,465 $ 35.08 142,465 252 Total 1,457,075 1,457,075 (1) In December 2021, our board of directors authorized a share repurchase program to repurchase up to $100 million of the Company’s outstanding shares of Class A Common Stock.
Biggest changeIssuer Purchases of Equity Securities The following table summarizes the share repurchase activity of our Class A Common Stock for the three months ended December 31, 2023 (in thousands, except per-share amounts): Period Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs (1) Approximate dollar value of shares that may yet be purchased under the program (1) Balance as of September 30, 2023 50,591 October 1, 2023 to October 31, 2023 — $ — — 50,591 Authorization of November 2023 share repurchase program (1) — $ — — 100,000 November 1, 2023 to November 30, 2023 743,170 $ 28.83 743,170 129,200 December 1, 2023 to December 31, 2023 1,353,732 $ 32.73 1,353,732 85,036 Balance as of December 31, 2023 2,096,902 2,096,902 85,036 (1) On November 1, 2023, our board of directors authorized a share repurchase program under which we may repurchase up to $100.0 million of the Company’s outstanding shares of Class A Common Stock, subject to certain limitations.
Sales of Unregistered Equity Securities and Use of Proceeds We did not sell any equity securities which were not registered under the Securities Act during the fiscal year ended December 31, 2022 that were not otherwise disclosed in our Quarterly Reports on Form 10-Q or our Current Reports on Form 8-K.
Sales of Unregistered Equity Securities and Use of Proceeds We did not sell any equity securities which were not registered under the Securities Act during the fiscal year ended December 31, 2023 that were not otherwise disclosed in our Quarterly Reports on Form 10-Q or our Current Reports on Form 8-K.
The graph below matches RingCentral Inc.’s cumulative 5-year total shareholder return on common stock with the cumulative total returns of the Russell 1000 index and the NASDAQ Computer index. The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2017 to December 31, 2022.
The graph below matches RingCentral Inc.’s cumulative 5-year total shareholder return on common stock with the cumulative total returns of the Russell 1000 index and the NASDAQ Computer index. The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2018 to December 31, 2023.
Stockholders As of February 14, 2023, there were 15 stockholders of record of our Class A Common Stock and Class B Common Stock. Because most of our shares of Class A Common Stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial stockholders represented by these record holders.
Stockholders As of February 12, 2024, there were 15 stockholders of record of our Class A Common Stock and Class B Common Stock. Because most of our shares of Class A Common Stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial stockholders represented by these record holders.
The stock price performance on the following graph is not intended to forecast or be indicative of future stock price performance of our Class A Common Stock. The stock price performance included in this graph is not necessarily indicative of future stock price performance. 51 Table of Contents ITEM 6. [Reserved] 52 Table of Contents
The stock price performance on the following graph is not intended to forecast or be indicative of future stock price performance of our Class A Common Stock. The stock price performance included in this graph is not necessarily indicative of future stock price performance. 58 Table of Contents ITEM 6. [Reserved] 59 Table of Contents
Please refer to 50 Table of Contents Note 9 – Stockholders’ Deficit and Convertible Preferred Stock in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional information.
Please refer to Note 11 – Stockholders’ Deficit and Convertible Preferred Stock in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional information.
Removed
Under the program, share repurchases were permitted to be made at the Company’s discretion from time to time in open market transactions, privately negotiated transactions, or other means. We completed our Share Repurchase Program on December 31, 2022.
Added
On February 7, 2024, our board of directors increased their authorization by $150 million, also subject to certain limitations. The 57 Table of Contents authorization under these programs expires on December 31, 2024.
Removed
On February 13, 2023, the Board authorized another share repurchase program to repurchase up to $175 million of the Company’s outstanding shares of Class A Common Stock. Under this share repurchase program, share repurchases were permitted to be made at the Company’s discretion from time to time in open market transactions, privately negotiated transactions, or other means.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

76 edited+31 added−43 removed32 unchanged
Biggest changeNet Loss Net loss increased by $502.9 million during fiscal year 2022 as compared to fiscal year 2021, mainly due to non-cash items including $305.4 million related to asset write-down charges on our prepaid sales commission balance, a $188.1 million increase of unrealized net losses recognized from our long-term investments, and $108.2 million of incremental amortization from certain intangible assets we acquired in the prior year, partially offset by a $59.6 million reduction in non-cash interest expense from the amortization of the debt discount and issuances costs related to our 2025 and 2026 Notes as a result of our adoption of ASU No. 2020-06. 62 Table of Contents Liquidity and Capital Resources Liquidity is a measure of our ability to access sufficient cash flows to meet the short-term and long-term cash requirements of our business operations.
Biggest changeThe remaining reduction is driven by a gain of $53.4 million from the partial repurchase of our Convertible Notes, $12.5 million increase in interest income, and $11.5 million gain recognized in connection with our amended agreement with a strategic partner, partially offset by incremental interest expense of $31.2 million recorded during fiscal year 2023. 68 Table of Contents Liquidity and Capital Resources Liquidity is a measure of our ability to access sufficient cash flows to meet the short-term and long-term cash requirements of our business operations, and debt obligations as they become due.
Refer to Note 8 – Commitments and Contingencies of the notes to the consolidated financial statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional information. Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with U.S. GAAP.
Refer to Note 10 – Commitments and Contingencies of the notes to the consolidated financial statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional information. Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with U.S. GAAP.
Cost of Revenues and Gross Margin Our cost of subscriptions revenue primarily consists of fees paid to third-party telecommunications providers, network operations, costs to build out and maintain data centers, including co-location fees for the right to place our servers in data centers owned by third parties, depreciation of servers and equipment, along with related utilities and maintenance costs, amortization of acquired technology related intangible assets, personnel costs associated with customer care and support of the functionality of our platform and data center operations, including share-based compensation expenses, and allocated costs of facilities and information technology.
Cost of Revenues and Gross Margin Our cost of subscriptions revenue primarily consists of fees paid to third-party telecommunications providers, network operations, costs to build out and maintain data centers, including co-location fees for the right to place our servers in data centers owned by third parties, depreciation of servers and equipment, along with related utilities and maintenance costs, amortization of acquired technology related intangible assets, personnel costs associated with customer support of the functionality of our platform and data center operations, including share-based compensation expenses, and allocated costs of facilities and information technology.
We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. Revenue Recognition We derive our revenues from subscriptions, sale of products, and professional services. Subscriptions revenue is generally recognized over the period of the subscription contract.
We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. Revenue Recognition We primarily derive our revenues from subscriptions, sale of products, and professional services. Subscriptions revenue is generally recognized over the period of the subscription contract.
Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this report, particularly in the section entitled “Risk Factors” included under Part I, Item1A. This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this report, particularly in the section entitled “Risk Factors” included under Part I, Item1A. This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Overview We are a leading provider of global enterprise cloud communications, video meetings, collaboration, and contact center software-as-a-service (“SaaS”) solutions. We believe that our innovative, cloud-based communication and contact center solutions disrupt the large market for business communications and collaboration by providing flexible and cost-effective solutions that support mobile and distributed workforces.
Overview We are a leading provider of AI-driven global enterprise cloud communications, video meetings, collaboration, and contact center software-as-a-service (“SaaS”) solutions. We believe that our innovative, cloud-based communication and contact center solutions disrupt the large market for business communications and collaboration by providing flexible and cost-effective solutions that support mobile and distributed workforces.
Refer to Note 5 – Strategic Partnerships and Asset Acquisitions the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for further information regarding our assessment of our deferred and prepaid sales commission balances with our strategic partners.
Refer to Note 5 – Strategic Partnerships the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for further information regarding our assessment of our deferred and prepaid sales commission balances with our strategic partners.
Recent Accounting Pronouncements For a summary of recent accounting pronouncements and the anticipated effects on our consolidated financial statements, see Note 1 to the consolidated financial statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” in this Annual Report on Form 10-K, which is incorporated herein by reference. 67 Table of Contents
Recent Accounting Pronouncements For a summary of recent accounting pronouncements and the anticipated effects on our consolidated financial statements, see Note 1 to the consolidated financial statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” in this Annual Report on Form 10-K, which is incorporated herein by reference. 73 Table of Contents
We believe information regarding free cash flow provides useful information to management and investors in understanding the strength of liquidity and available cash. A limitation of the use of free cash flow is that it does not represent the total increase or decrease in our cash balance for the period.
We believe information regarding adjusted, unlevered free cash flow provides useful information to management and investors in understanding the strength of liquidity and available cash. A limitation of the use of adjusted, unlevered free cash flow is that it does not represent the total increase or decrease in our cash balance for the period.
Our solutions can be deployed rapidly and configured and managed easily. Our cloud-based solutions are location and device independent and better suited to address the needs of modern mobile and global enterprise workforces than are legacy on-premise systems.
Our solutions can be deployed rapidly and configured and managed easily. Our cloud-based solutions are location and device independent and better suited to address the needs of modern mobile and global enterprise workforces than are legacy on-premises systems.
To date, we have not incurred any material costs as a result of such indemnification provisions and have not accrued any liabilities related to such obligations in the consolidated financial statements as of December 31, 2022.
To date, we have not incurred any material costs as a result of such indemnification provisions and have not accrued any liabilities related to such obligations in the consolidated financial statements as of December 31, 2023.
Free cash flow should not be considered in isolation or as an alternative to cash flows from operations, and should be considered alongside our other GAAP-based financial liquidity performance measures, such as net cash provided by (used in) operating activities and our other GAAP financial results.
Adjusted, unlevered free cash flow should not be considered in isolation or as an alternative to cash flows from operations and should be considered alongside our other GAAP-based financial liquidity performance measures, such as net cash provided by operating activities and our other GAAP financial results.
Non-GAAP Free Cash Flow To supplement our statements of cash flows presented on a GAAP basis, we use non-GAAP measures of cash flows to analyze cash flow generated from our operations.
Non-GAAP Adjusted, Unlevered Free Cash Flow To supplement our statements of cash flows presented on a GAAP basis, we use non-GAAP measures of cash flows to analyze cash flow generated from our operations.
A summary of our significant accounting policies is included in Note 1 of the notes to the 66 Table of Contents consolidated financial statements included in Part II, Item 8, which is incorporated herein by reference.
A summary of our significant accounting policies is included in Note 1 of the notes to the consolidated financial statements included in Part II, Item 8, which is incorporated herein by reference.
In many instances, we could reasonably use different accounting estimates, and in some instances changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, our actual results could differ significantly from the estimates made by our management.
In many instances, we could reasonably use different accounting estimates, and in some instances changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, our 72 Table of Contents actual results could differ significantly from the estimates made by our management.
Other significant components of general and administrative expenses include professional service fees, allocated costs of facilities and information technology, cost of compliance with certain government-imposed taxes, the costs of legal matters, business acquisition costs, loss contingencies, and the impact of the RIF undertaken in 2022.
Other significant components of general and administrative expenses include professional service fees, allocated costs of facilities and information technology, cost of compliance with certain government-imposed taxes, the costs of legal matters, business acquisition costs, loss contingencies, and the impact of the restructuring activities in 2023 and 2022.
Our future capital requirements will depend on many factors, including revenue growth and costs incurred to support customer growth, acquisitions and expansions, sales and marketing, research and development, increased general and administrative expenses to support the anticipated growth in our operations, and capital equipment required to support our headcount and in support of our co-location data center facilities, repurchase, repayment or otherwise settlement of a portion of our 2025 Notes and/or the 2026 Notes, as well as the impact of the global macroeconomic conditions.
Our future capital requirements will depend on many factors, including revenue growth and costs incurred to support customer growth, acquisitions and expansions, sales and marketing, research and development, increased general and administrative expenses to support the anticipated growth in our operations, and capital equipment required to support our headcount and in support of our co-location data center facilities, our interest payments for both our Term Loan and 2030 Senior Notes, the repurchase, repayment or otherwise settlement of a portion of our 2025 Convertible Notes and/or our 2026 Convertible Notes, as well as the impact of the global macroeconomic conditions.
We continuously monitor the impact of these circumstances on our business and financial results, as well as the overall global economy and geopolitical landscape. The implications of macroeconomic conditions on our business, results of operations and overall financial position, particularly in the long term, remain uncertain.
If these conditions continue, they could have an adverse impact on our results. We continuously monitor the impact of these circumstances on our business and financial results, as well as the overall global economy and geopolitical landscape. The implications of macroeconomic conditions on our business, results of operations and overall financial position, particularly in the long term, remain uncertain.
Due to evolving hybrid work environments, we continued to see a shift towards using RingCentral apps on laptops and mobile devices over traditional desktop phones which impacted the demand of phones and timing of professional services.
Due to evolving hybrid work environments, we continued to see a shift towards using RingCentral apps on laptops and mobile devices over traditional desktop phones which impacted the demand of phones and timing of professional services. We will continue to monitor the impact of the macroeconomic factors on phone and professional services revenue.
Our Monthly Recurring Subscriptions equals the monthly value of all customer recurring charges at the end of a given month. For example, our Monthly Recurring Subscriptions at December 31, 2022 was $175.0 million. As such, our ARR at December 31, 2022 was $2.1 billion compared to $1.8 billion at December 31, 2021.
Our Monthly Recurring Subscriptions equals the monthly value of all customer recurring charges at the end of a given month. For example, our Monthly Recurring Subscriptions at December 31, 2023 was $194.1 million. As such, our ARR at December 31, 2023 was $2.33 billion compared to $2.10 billion at December 31, 2022.
GAAP”) and financial measures such as total revenues, gross margin, and cash flows from operations, we regularly review a number of key business metrics to evaluate growth trends, measure our performance, and make strategic decisions.
Key Business Metrics In addition to United States generally accepted accounting principles (“U.S. GAAP”) and financial measures such as total revenues, gross margin, and cash flows from operations, we regularly review a number of key business metrics to evaluate growth trends, measure our performance, and make strategic decisions.
The increase was primarily a combination of the acquisition of new customers and upsells of seats and additional offerings to our existing customer base from our MVP and customer engagement solutions, and an increase in recurring license and other fees, derived from sales through our direct and indirect sales channels, including resellers and distributors, strategic partners and global service providers.
The increase was primarily due to the acquisition of new customers, upsells of MVP seats and additional offerings to our existing customer base, derived from sales through our direct and indirect sales channels, including resellers and distributors, strategic partners and global service providers.
Given the variability in our contract length, we believe that backlog is not a reliable indicator of future revenues and we do not utilize backlog as a key management metric internally.
Until we meet our performance obligations, we do not recognize them as revenues in our consolidated financial statements. Given the variability in our contract length, we believe that backlog is not a reliable indicator of future revenues and we do not utilize backlog as a key management metric internally.
We primarily generate revenues from the sale of subscriptions to our offerings. Our subscription plans have monthly, annual, or multi-year contractual terms. We believe that this flexibility in contract duration is important to meet the different needs of our customers.
We primarily generate revenues from the sale of subscriptions to our offerings. Our subscription plans have monthly, annual, or multi-year contractual terms. We believe that this flexibility in contract duration is important to meet the different needs of our customers. For the years ended December 31, 2023 and 2022, subscriptions revenues accounted for 90% or more of our total revenues.
Net cash provided by operating activities was $191.3 million for the year ended December 31, 2022. The cash flow from operating activities was driven by timing of cash receipts from customers and global service providers, primarily offset by cash payments for personnel related costs and to vendors.
Net cash provided by operating activities was $399.7 million for the year ended December 31, 2023. The cash flow from operating activities was driven by timing of cash receipts from customers and global service providers, primarily offset by cash payments for personnel-related costs and to vendors and interest expense on our debt obligations.
Discussion regarding our financial condition and results of operations for fiscal 2021 as compared to fiscal 2020 is included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 1, 2022, as amended, which information is incorporated herein by reference.
Discussion regarding our financial condition and results of operations for fiscal 2022 as compared to fiscal 2021 is included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 23, 2023.
When we control the performance of the contractual obligations, we record the revenues on a gross basis and amounts retained by our resellers are recorded as sales and marketing expense.
We also generate revenues through sales of our subscriptions and products by resellers, strategic partners, and global service providers. When we control the performance of the contractual obligations, we record the revenues on a gross basis and amounts retained by our resellers are recorded as sales and marketing expense.
Net cash provided by operating activities for the year ended December 31, 2022, increased by $39.2 million as compared to the year ended December 31, 2021. This change reflects working capital impacts resulting from the timing of payments and collections.
Net cash provided by operating activities for the year ended December 31, 2023, increased by $208.4 million as compared to the year ended December 31, 2022. This change reflects working capital impacts resulting from the timing of payments and collections as well as higher operating margin driven by cost efficiencies.
We define free cash flow, a non-GAAP financial measure, as GAAP net cash provided by (used in) operating activities plus (subtract) cash paid (received) for strategic partnerships and repayments of convertible notes attributable to debt discount, reduced by purchases of property and equipment and capitalized internal-use software.
We define adjusted, unlevered free cash flow, a non-GAAP financial measure, as GAAP net cash provided by (used in) operating activities adjusted for capital expenditures including purchases of property and equipment and capitalized internal-use software, strategic partnerships, repayment of convertible notes attributable to debt discount, restructuring and other non-recurring payments, and cash paid for interest.
We define subscriptions gross margins as subscriptions revenue minus the cost of subscriptions revenue expressed as a percentage of subscriptions revenue. Cost of other revenue is comprised primarily of the cost associated with the purchase of phones, personnel costs for employees and contractors, including share-based compensation expenses, cost of professional services, and allocated costs of facilities and information technology.
Cost of other revenue is comprised primarily of the cost associated with the purchase of phones, personnel costs for employees and contractors, including share-based compensation expenses, cost of third parties used for professional services, and allocated costs of facilities and information technology.
The historical results presented below are not necessarily indicative of the results that may be expected for any future period (in thousands): Year ended December 31, 2022 2021 2020 Revenues Subscriptions $ 1,887,756 $ 1,482,080 $ 1,086,276 Other 100,574 112,674 97,381 Total revenues 1,988,330 1,594,754 1,183,657 Cost of revenues Subscriptions 531,098 345,948 236,990 Other 110,633 102,421 86,617 Total cost of revenues 641,731 448,369 323,607 Gross profit 1,346,599 1,146,385 860,050 Operating expenses Research and development 362,256 309,739 189,484 Sales and marketing 1,057,231 854,156 583,773 General and administrative 292,898 284,276 200,032 Asset write-down charges 283,689 — — Total operating expenses 1,996,074 1,448,171 973,289 Loss from operations (649,475) (301,786) (113,239) Other income (expense), net Interest expense (4,807) (64,382) (49,281) Other income (expense) (219,771) (7,554) 80,458 Other income (expense), net (224,578) (71,936) 31,177 Loss before income taxes (874,053) (373,722) (82,062) Provision for income taxes 5,113 2,528 934 Net loss $ (879,166) $ (376,250) $ (82,996) 58 Table of Contents Percentage of Total Revenues* Year ended December 31, 2022 2021 2020 Revenues Subscriptions 95 % 93 % 92 % Other 5 7 8 Total revenues 100 100 100 Cost of revenues Subscriptions 27 22 20 Other 6 6 7 Total cost of revenues 32 28 27 Gross profit 68 72 73 Operating expenses Research and development 18 19 16 Sales and marketing 53 54 49 General and administrative 15 18 17 Asset write-down charges 14 — — Total operating expenses 100 91 82 Loss from operations (33) (19) (10) Other income (expense), net Interest expense — (4) (4) Other income (expense) (11) 0 7 Other income (expense), net (11) (5) 3 Loss before income taxes (44) (23) (7) Provision for income taxes — — — Net loss (44 %) (24 %) (7 %) * Percentages may not add up due to rounding.
The historical results presented below are not necessarily indicative of the results that may be expected for any future period (in thousands): Year ended December 31, 2023 2022 2021 Revenues Subscriptions $ 2,100,329 $ 1,887,756 $ 1,482,080 Other 102,100 100,574 112,674 Total revenues 2,202,429 1,988,330 1,594,754 Cost of revenues Subscriptions 557,050 531,098 345,948 Other 107,241 110,633 102,421 Total cost of revenues 664,291 641,731 448,369 Gross profit 1,538,138 1,346,599 1,146,385 Operating expenses Research and development 335,851 362,256 309,739 Sales and marketing 1,068,050 1,057,231 854,156 General and administrative 333,048 292,898 284,276 Asset write-down charges — 283,689 — Total operating expenses 1,736,949 1,996,074 1,448,171 Loss from operations (198,811) (649,475) (301,786) Other income (expense), net Interest expense (35,997) (4,807) (64,382) Other income (expense) 77,963 (219,771) (7,554) Other income (expense), net 41,966 (224,578) (71,936) Loss before income taxes (156,845) (874,053) (373,722) Provision for income taxes 8,395 5,113 2,528 Net loss $ (165,240) $ (879,166) $ (376,250) 64 Table of Contents Percentage of Total Revenues* Year ended December 31, 2023 2022 2021 Revenues Subscriptions 95 % 95 % 93 % Other 5 5 7 Total revenues 100 100 100 Cost of revenues Subscriptions 25 27 22 Other 5 6 6 Total cost of revenues 30 32 28 Gross profit 70 68 72 Operating expenses Research and development 15 18 19 Sales and marketing 48 53 54 General and administrative 15 15 18 Asset write-down charges — 14 — Total operating expenses 79 100 91 Loss from operations (9) (33) (19) Other income (expense), net Interest expense (2) 0 (4) Other income (expense) 4 (11) — Other income (expense), net 2 (11) (5) Loss before income taxes (7) (44) (23) Provision for income taxes — — — Net loss (8 %) (44 %) (24 %) * Percentages may not add up due to rounding.
Cost of subscriptions revenues increased by $185.2 million, or 54%, during fiscal year 2022 as compared to fiscal year 2021.
Cost of subscriptions revenues increased by $26.0 million, or 5%, during fiscal year 2023 as compared to fiscal year 2022.
Of the total increase in personnel and contractor costs, $3.3 million was mainly due to higher share-based compensation expense primarily driven by equity awards granted to new and existing employees, and $2.7 million was due to restructuring costs.
Of the total increase in personnel and contractor costs, $34.1 million was due to higher share-based compensation expense primarily driven by equity awards granted to new and existing employees including performance stock units (“PSUs”), partially offset by a decrease of $3.2 million due to reduction in headcount.
We expect general and administrative expenses to continue to increase in absolute dollars as we continue to make additional investments in processes, systems, and personnel to support our anticipated revenue growth. 61 Table of Contents Asset Write-Down Charges Year ended December 31, Year ended December 31, (in thousands, except percentages) 2022 2021 $ Change % Change 2021 2020 $ Change % Change Asset write-down charges $ 283,689 $ — $ 283,689 nm $ — $ — $ — nm Percentage of total revenues 14 % — % — % — % nm - not meaningful Asset write-down charges increased by $283.7 million during fiscal year 2022 as compared to fiscal year 2021, primarily due to the non-cash write-down of our prepaid sales commission balances in the second half of 2022 in connection with our strategic partnerships for Avaya.
Asset Write-Down Charges Year ended December 31, Year ended December 31, (in thousands, except percentages) 2023 2022 $ Change % Change 2022 2021 $ Change % Change Asset write-down charges $ — $ 283,689 $ (283,689) nm $ 283,689 $ — $ 283,689 nm Percentage of total revenues — % 14 % 14 % — % nm - not meaningful Asset write-down charges decreased by $283.7 million during fiscal year 2023 as compared to fiscal year 2022, primarily due to the non-cash write-down of our prepaid sales commission balances in the second half of 2022 in connection with our strategic partnerships with Avaya.
S ubscriptions revenue increased by $405.7 million, or 27%, during fiscal year 2022 as compared to fiscal year 2021.
S ubscriptions revenue increased by $212.6 million, or 11%, during fiscal year 2023 as compared to fiscal year 2022.
Cash Flows The table below provides selected cash flow information for the periods indicated (in thousands): Year ended December 31, 2022 2021 2020 Net cash provided by (used in) operating activities $ 191,305 $ 152,151 $ (35,191) Net cash used in investing activities (87,210) (396,829) (107,686) Net cash provided by (used in) financing activities (98,218) (127,051) 437,590 Effect of exchange rate changes (3,055) (962) 1,534 Net increase (decrease) in cash and cash equivalents $ 2,822 $ (372,691) $ 296,247 Net Cash Provided by Operating Activities Cash used in or provided by operating activities is driven by the timing of customer collections, as well as the amount and timing of disbursements to our vendors, the amount of cash we invest in personnel, marketing, and infrastructure costs to support the anticipated growth of our business, and payments under strategic arrangements.
The uncertainty created by the global economic conditions, including concerns about rising inflation and an associated economic downturn, may also impact our customers’ ability to pay on a timely basis, which could negatively impact our operating cash flows. 69 Table of Contents Cash Flows The table below provides selected cash flow information for the periods indicated (in thousands): Year ended December 31, 2023 2022 2021 Net cash provided by operating activities $ 399,662 $ 191,305 $ 152,151 Net cash used in investing activities (90,449) (87,210) (396,829) Net cash used in financing activities (358,018) (98,218) (127,051) Effect of exchange rate changes 1,016 (3,055) (962) Net increase (decrease) in cash and cash equivalents $ (47,789) $ 2,822 $ (372,691) Net Cash Provided by Operating Activities Cash provided by operating activities is driven by the timing of customer collections, as well as the amount and timing of disbursements to our vendors, the amount of cash we invest in personnel, marketing, and infrastructure costs to support the anticipated growth of our business, and payments under strategic arrangements.
Net cash used in investing activities for the year ended December 31, 2022 decreased by $309.6 million as compared to the year ended December 31, 2021.
Net cash used in financing activities for the year ended December 31, 2023, increased by $259.8 million as compared to the year ended December 31, 2022.
Other income (expenses) consist primarily of the following items: • unrealized gains and losses from fair value adjustments on our long-term investments • the realized impact on foreign exchange resulting from the settlement of our foreign currency assets and liabilities as well as unrealized impact on foreign exchange resulting from remeasurement of transactions and monetary assets and liabilities denominated in non-functional currencies; and • interest income from our investments.
Other income (expenses) consist primarily of the following items: • unrealized gains and losses from fair value adjustments on our long-term investments; • Gains and losses on extinguishment of debt relating to the partial repurchase of our convertible notes; • the realized impact on foreign exchange resulting from the settlement of our foreign currency assets and liabilities as well as unrealized impact on foreign exchange resulting from remeasurement of transactions and monetary assets and liabilities denominated in non-functional currencies; and • interest income from our investments. 63 Table of Contents Results of Operations The following tables set forth selected consolidated statements of operations data and such data as a percentage of total revenues.
Comparison of Fiscal Years Ended December 31, 2022, 2021, and 2020: Revenues Year ended December 31, Year ended December 31, (in thousands, except percentages) 2022 2021 $ Change % Change 2021 2020 $ Change % Change Revenues Subscriptions $ 1,887,756 $ 1,482,080 $ 405,676 27 % $ 1,482,080 $ 1,086,276 $ 395,804 36 % Other 100,574 112,674 (12,100) (11) % 112,674 97,381 15,293 16 % Total revenues $ 1,988,330 $ 1,594,754 $ 393,576 25 % $ 1,594,754 $ 1,183,657 $ 411,097 35 % Percentage of revenues Subscriptions 95 % 93 % 93 % 92 % Other 5 7 7 8 Total 100 % 100 % 100 % 100 % Subscriptions revenue.
Comparison of Fiscal Years Ended December 31, 2023, 2022, and 2021: Revenues Year ended December 31, Year ended December 31, (in thousands, except percentages) 2023 2022 $ Change % Change 2022 2021 $ Change % Change Revenues Subscriptions $ 2,100,329 $ 1,887,756 $ 212,573 11 % $ 1,887,756 $ 1,482,080 $ 405,676 27 % Other 102,100 100,574 1,526 2 % 100,574 112,674 (12,100) (11) % Total revenues $ 2,202,429 $ 1,988,330 $ 214,099 11 % $ 1,988,330 $ 1,594,754 $ 393,576 25 % Percentage of revenues Subscriptions 95 % 95 % 95 % 93 % Other 5 5 5 7 Total 100 % 100 % 100 % 100 % Subscriptions revenue.
Our Average Monthly Recurring Subscriptions would equal $109, or the sum of $100 plus $118, divided by two. Our Net Monthly Subscription Dollar Retention Rate would then equal 99.4%, or approximately 99%, or one plus the quotient of the Dollar Net Change divided by the Average Monthly Recurring Subscriptions.
Our Average Monthly Recurring Subscriptions would equal $109, or the sum of $100 plus $118, divided by two.
Cost of Revenues and Gross Margin Year ended December 31, Year ended December 31, (in thousands, except percentages) 2022 2021 $ Change % Change 2021 2020 $ Change % Change Cost of revenues Subscriptions $ 531,098 $ 345,948 $ 185,150 54 % $ 345,948 $ 236,990 $ 108,958 46 % Other 110,633 102,421 8,212 8 % 102,421 86,617 15,804 18 % Total cost of revenues $ 641,731 $ 448,369 $ 193,362 43 % $ 448,369 $ 323,607 $ 124,762 39 % Percentage of revenues Subscriptions 27 % 22 % 22 % 20 % Other 6 % 6 % 6 % 7 % Gross margins Subscriptions 72 % 77 % 77 % 78 % Other (10) % 9 % 9 % 11 % Total gross margin % 68 % 72 % 72 % 73 % Subscription cost of revenues and gross margin.
Cost of Revenues and Gross Margin Year ended December 31, Year ended December 31, (in thousands, except percentages) 2023 2022 $ Change % Change 2022 2021 $ Change % Change Cost of revenues Subscriptions $ 557,050 $ 531,098 $ 25,952 5 % $ 531,098 $ 345,948 $ 185,150 54 % Other 107,241 110,633 (3,392) (3) % 110,633 102,421 8,212 8 % Total cost of revenues $ 664,291 $ 641,731 $ 22,560 4 % $ 641,731 $ 448,369 $ 193,362 43 % Percentage of revenues Subscriptions 25 % 27 % 27 % 22 % Other 5 % 6 % 6 % 6 % Gross margins Subscriptions 73 % 72 % 72 % 77 % Other (5) % (10) % (10) % 9 % Total gross margin % 70 % 68 % 68 % 72 % Subscription cost of revenues and gross margin.
We believe that continued investment in our products is important for our future growth, and we expect our research and development expenses to continue to increase in absolute dollars for the foreseeable future, although these expenses may fluctuate as a percentage of our total revenues from period to period depending on the timing of these expenses. 56 Table of Contents Sales and marketing expenses are the largest component of our operating expenses and consist primarily of personnel costs for employees and contractors directly associated with our sales and marketing activities including share-based compensation expenses, internet advertising fees, television, radio and billboard advertising, public relations, commissions paid to employees, resellers and other third parties, amortization of capitalized sales commissions, trade shows, travel expenses, credit card fees, marketing and promotional activities, amortization of acquired customer relationship intangibles, allocated costs of facilities and information technology, and the impact of the RIF undertaken in 2022.
Sales and marketing expenses are the largest component of our operating expenses and consist primarily of personnel costs for employees and contractors directly associated with our sales and marketing activities including share-based compensation expenses, internet advertising fees, television, radio and billboard advertising, public relations, commissions paid to employees, resellers and other third parties, amortization of capitalized sales commissions, trade shows, credit card fees, marketing and promotional activities, amortization of acquired customer relationship intangibles, allocated costs of facilities and information technology, and the impact of the restructuring activities in 2023 and 2022.
General and Administrative Year ended December 31, Year ended December 31, (in thousands, except percentages) 2022 2021 $ Change % Change 2021 2020 $ Change % Change General and administrative $ 292,898 $ 284,276 $ 8,622 3 % $ 284,276 $ 200,032 $ 84,244 42 % Percentage of total revenues 15 % 18 % 18 % 17 % General and administrative expenses increased by $8.6 million, or 3%, during fiscal year 2022 as compared to fiscal year 2021, primarily due to increases in personnel and contractor costs of $7.9 million, business fees and taxes of $3.6 million, and overhead costs of $1.6 million, partially offset by a $4.4 million reduction in professional fees.
General and Administrative Year ended December 31, Year ended December 31, (in thousands, except percentages) 2023 2022 $ Change % Change 2022 2021 $ Change % Change General and administrative $ 333,048 $ 292,898 $ 40,150 14 % $ 292,898 $ 284,276 $ 8,622 3 % Percentage of total revenues 15 % 15 % 15 % 18 % General and administrative expenses increased by $40.2 million, or 14%, during fiscal year 2023 as compared to fiscal year 2022, primarily due to an increase in personnel and contractor costs of $33.2 million, and professional fees of $5.2 million.
Research and development expenses consist primarily of personnel costs for employees and contractors, including share-based compensation expenses, and allocated costs of facilities and information technology, software tools, product certification, and the impact of the “reductions in force” (“RIF”) undertaken in 2022. We expense research and development costs as incurred, except for certain internal-use software development costs that we capitalize.
Research and development expenses consist primarily of personnel costs for employees and contractors, including share-based compensation 62 Table of Contents expenses, and allocated costs of facilities and information technology, software tools, product certification, and the impact of the restructuring activities in 2023 and 2022.
Our key business metrics for the five quarterly periods ended December 31, 2022 were as follows (dollars in millions): December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 Net Monthly Subscription Dollar Retention Rate >99% >99% >99% >99% >99% Annualized Exit Monthly Recurring Subscriptions $ 2,099.7 $ 2,046.9 $ 1,980.7 $ 1,894.8 $ 1,799.9 55 Table of Contents Components of Results of Operations Revenues Our revenues for the years presented consisted of subscriptions and other revenues.
Our Net Monthly Subscription Dollar Retention Rate would then equal 99.4%, or approximately 99%, or one plus the quotient of the Dollar Net Change divided by the Average Monthly Recurring Subscriptions. 61 Table of Contents Our key business metrics for the five quarterly periods ended December 31, 2023 were as follows (dollars in billions): December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 Net Monthly Subscription Dollar Retention Rate >99% >99% >99% >99% >99% Annualized Exit Monthly Recurring Subscriptions $ 2.33 $ 2.26 $ 2.22 $ 2.16 $ 2.10 Components of Results of Operations Revenues Our revenues for the years presented consisted of subscriptions and other revenues.
Sales and Marketing Year ended December 31, Year ended December 31, (in thousands, except percentages) 2022 2021 $ Change % Change 2021 2020 $ Change % Change Sales and marketing $ 1,057,231 $ 854,156 $ 203,075 24 % $ 854,156 $ 583,773 $ 270,383 46 % Percentage of total revenues 53 % 54 % 54 % 49 % Sales and marketing expenses increased by $203.1 million, or 24%, during fiscal year 2022 as compared to fiscal year 2021, primarily due to increases in third-party commissions of $64.0 million, personnel and contractor costs of $50.9 million, amortization of deferred sales commission costs of $42.4 million, advertising, marketing and related travel costs of $42.2 million, and overhead costs of $4.5 million.
Sales and Marketing Year ended December 31, Year ended December 31, (in thousands, except percentages) 2023 2022 $ Change % Change 2022 2021 $ Change % Change Sales and marketing $ 1,068,050 $ 1,057,231 $ 10,819 1 % $ 1,057,231 $ 854,156 $ 203,075 24 % Percentage of total revenues 48 % 53 % 53 % 54 % Sales and marketing expenses increased by $10.8 million, or 1%, during fiscal year 2023 as compared to fiscal year 2022, primarily due to an increase in third-party commissions of $57.9 million, amortization of deferred sales commission costs of $20.6 million, and professional fees of $6.1 million, partially offset by decrease in advertising and marketing costs of $45.8 million, and decrease in personnel and contractor costs of $26.5 million primarily attributed to reduction in headcount.
The higher cost of other revenues and lower gross margin were primarily due to the increase in professional fees of $5.9 million and personnel costs of $5.0 million, partially offset by a decrease in hardware costs of $3.4 million. 60 Table of Contents Research and Development Year ended December 31, Year ended December 31, (in thousands, except percentages) 2022 2021 $ Change % Change 2021 2020 $ Change % Change Research and development $ 362,256 $ 309,739 $ 52,517 17 % $ 309,739 $ 189,484 $ 120,255 63 % Percentage of total revenues 18 % 19 % 19 % 16 % Research and development expenses increased by $52.5 million, or 17%, during fiscal year 2022 as compared to fiscal year 2021, primarily driven by an increase in personnel and contractor costs of $50.2 million, and $6.8 million in overhead costs to support our research and development efforts, partially offset by a $5.2 million reduction in professional fees.
Research and Development Year ended December 31, Year ended December 31, (in thousands, except percentages) 2023 2022 $ Change % Change 2022 2021 $ Change % Change Research and development $ 335,851 $ 362,256 $ (26,405) (7) % $ 362,256 $ 309,739 $ 52,517 17 % Percentage of total revenues 15 % 18 % 18 % 19 % Research and development expenses decreased by $26.4 million, or (7)%, during fiscal year 2023 as compared to fiscal year 2022, primarily due to a $31.1 million reduction in personnel and contractor costs, partially offset by $5.7 million increase in professional fees.
The growth of our business and our future success depend on many factors, including our ability to expand our customer base to larger customers, expand our indirect sales channels, continue to innovate, grow revenues from our existing customer base, expand our distribution channels, and scale internationally.
The growth of our business and our future success depend on many factors, including our ability to expand our customer base, expand our indirect sales channels, continue to innovate, grow revenues from our existing customer base, expand our distribution channels, and scale internationally. 60 Table of Contents In the fourth quarter of each of 2023 and 2022, our board of directors approved a reduction-in-force plan as part of broader efforts to optimize the Company cost structure.
Asset write-down charges consist of write-offs related to our assets, including deferred and prepaid sales commission and acquired intangibles balances, whenever events or changes in circumstances have occurred that could indicate the carrying amount of such assets may not be recoverable. 57 Table of Contents Other Income (Expense), Net Interest expenses consist primarily of amortization of the debt discount and issuance costs in connection with our convertible senior notes.
We will continue to invest in processes, systems, and personnel to support our anticipated revenue growth while driving efficiencies. Asset write-down charges consist of write-offs related to our assets, including deferred and prepaid sales commission and acquired intangibles balances, whenever events or changes in circumstances have occurred that could indicate the carrying amount of such assets may not be recoverable.
Subsequent Events Share Repurchase Program On February 13, 2023, our board of directors authorized a share repurchase program under which we may repurchase up to $175 million of our outstanding shares of Class A Common Stock.
In February, May and November 2023, our board of directors authorized a share repurchase program up to an aggregate of $400.0 million of our outstanding shares of Class A Common Stock, subject to certain limitations.
Net Cash Used In Investing Activities Our primary investing activities have consisted of our capital expenditures and expenditures for internal-use software, intellectual property assets, and long-term investments, partially offset by proceeds from sales of our marketable equity investments. As our business grows, we expect our capital expenditures to continue to increase.
Net Cash Used In Investing Activities Our primary investing activities have consisted of our capital expenditures and expenditures for internal-use software, intellectual property assets, and cash paid for business acquisitions.
We offer our subscriptions based on the functionalities and services selected by a customer, and generally our subscription arrangements automatically renew for additional periods at the end of the initial subscription term. We believe that this flexibility in contract duration is important to meet the different needs of our customers. We generally bill our subscription fees in advance.
We provide subscription services to our customers pursuant to contractual arrangements that range in duration typically from one month to five years. Our subscription services are based on the functionalities and services selected by a customer and may automatically renew for additional periods at the end of the initial subscription term.
Net cash used in investing activities was $87.2 million for the year ended December 31, 2022, primarily due to capital expenditures including personnel-related costs associated with development of internal-use software of $86.4 million, our acquisition of intellectual property of $4.0 million to complement and support our product development and enhancement initiatives, partially offset by proceeds from the sales of our marketable equity investments of $3.2 million.
Net cash used in investing activities for the year ended December 31, 2023 increased by $3.2 million as compared to the year ended December 31, 2022. The increase was primarily due to net cash paid of $14.7 million to acquire Hopin, partially offset by $10.7 million from lower capital expenditures and costs associated with internal-use software development.
We define a “customer” as any party that purchases or subscribes to our products and services directly or indirectly through our channel partners. As of December 31, 2022, we had customers from a range of industries, including financial services, education, healthcare, legal services, real estate, retail, technology, insurance, construction, hospitality, and state and local government, among others.
As of December 31, 2023, we had customers from a range of industries, including financial services, education, healthcare, legal services, real estate, retail, technology, insurance, construction, hospitality, and state and local government, among others. For the years ended December 31, 2023, 2022 and 2021, the vast majority of our total revenues were generated in the U.S. and Canada.
Our indirect sales channels who sell our solutions consist of: • Regional and global network of resellers and distributors; • Strategic partners who market and sell our MVP and solutions, including co-branded solutions.
Our indirect sales channels who sell our solutions consist of: • Regional and global network of resellers and distributors; • Strategic partners who market and sell our MVP or other solutions, including co-branded solutions. • Global Service Providers including AT&T, TELUS, BT, Vodafone, DT, Optus, 1&1 Versatel and Ecotel in Germany, MCM in Mexico, Frontier, Charter Communications and others.
During the year ended December 31, 2022, we repurchased and subsequently retired 2,297,330 shares of our Class A Common Stock for an aggregate amount of approximately $100 million. We completed our share repurchase program on December 31, 2022.
During fiscal year 2023, we repurchased and subsequently retired 10 million shares of our Class A Common Stock, for an aggregate amount of approximately $315 million. As of December 31, 2023, approximately $85.0 million remained authorized and available under our share repurchase programs for future share repurchases.
At any point in the contract term, there can be amounts allocated to services that we have not yet contractually performed, which constitute a backlog. Until we meet our performance obligations, we do not recognize them as revenues in our consolidated financial statements.
Backlog We have generally signed new customers contracts with varying length, from month-to-month to multi-year terms for our subscription services. At any point in the contract term, there can be amounts allocated to services that we have not yet contractually performed, which constitute a backlog.
Net Cash Used In Financing Activities Our primary financing activities have consisted of the issuance of stock under our stock plans, offset by payments toward the repurchase of our Class A Common Stock and our current financing obligations.
Net Cash Used In Financing Activities Our primary financing activities have consisted of raising capital through the issuance of stock under our stock plans and incurrence of debt including from the drawdown of our Term Loan in connection with our Credit Agreement, and the offering of our 2030 Senior Notes, offset by repurchases of our Class A Common Stock and the partial repurchase of our Convertible Notes.
In addition, these macroeconomic factors could have an impact on customer buying behavior and demand, contract duration, churn, upsell and down-sell, payment terms, and credit card declines, all of which could cause variability in our revenue. Other revenues. Other revenues are primarily comprised of product revenue from the sale of pre-configured phones and professional services.
Although we expect to continue to add new customers and increase the usage of our product for existing customers, we will monitor the impact of macroeconomic factors that could 65 Table of Contents have an impact on customer buying behavior and demand, including contract duration, timing of customer purchases, churn, upsell and down-sell, renewals, payment terms, and credit card declines, all of which could cause variability in our revenue.
The higher cost of subscription revenues and lower gross margin were due to incremental amortization of $108.2 million primarily from intangible assets we acquired in the fourth quarter of 2021, third-party costs of $31.8 million to support our solution offerings, infrastructure support costs of $29.2 million, personnel and contractor-related costs of $14.2 million, and professional fees of $1.4 million.
The higher cost of subscription revenues was primarily due to an increase in third-party costs of $29.5 million to support our solution offerings, infrastructure support costs of $13.1 million, and personnel and contractor-related costs of $5.7 million, partially offset by $23.3 million decrease in the amortization of our intangible assets.
Refer to Note 16 – Subsequent Events of the notes to the consolidated financial statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for additional information. 63 Table of Contents The proceeds of the loans under the Revolving Facility may be used for working capital and general corporate purposes.
Refer to Note 5 – Strategic Partnerships the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of 67 Table of Contents this Annual Report on Form 10-K for further information regarding our assessment of our deferred and prepaid sales commission balances with our strategic partners.
We expect our sales and marketing expenses to continue to increase in absolute dollars for the foreseeable future as we expand our sales and marketing efforts domestically and internationally and continue to build our brand, although these expenses may fluctuate as a percentage of our total revenues from period to period depending on the timing of these expenses.
We expect to incur incremental sales and marketing expenses to support our growth while driving cost efficiencies by further optimizing our go-to-market strategies, although these expenses may fluctuate as a percentage of our total revenues from period to period depending on the timing of these expenses.
Cost of other revenues increased by $8.2 million, or 8%, during fiscal year 2022 as compared to fiscal year 2021.
Other revenues. Other revenues increased by $1.5 million, or 2%, during fiscal year 2023 as compared to fiscal year 2022, primarily due to higher professional services revenue compared to the respective prior year period.
The increase in personnel and contractor costs was mainly driven by $18.5 million in incremental expenses associated with relocation of our third-party contractors as a result of the Russia-Ukraine conflict, $13.3 million related to headcount growth, $7.4 million related to contractor-related costs, $5.8 million related to share-based compensation expense primarily driven by equity awards granted to new and existing employees, and $5.3 million was due to restructuring costs.
Of the total decrease in personnel and contractor costs, $21.2 million was due to reduction in headcount, and $14.2 million was due to reduction in costs associated with the relocation of our third-party contractors resulting from the Russia-Ukraine conflict, partially offset by $5.1 million due to higher share-based compensation expense primarily driven by equity awards granted to new and existing employees. 66 Table of Contents We believe that continued investment in our products is important for our future growth, and we expect our research and development expenses to continue to increase in absolute dollars, although these expenses may fluctuate as a percentage of our total revenues from period to period depending on the timing of these expenses.
We recognize subscription revenue over the term of the agreement. Amounts billed in excess of revenue recognized for the period are reported as deferred revenue on our Consolidated Balance Sheets. We also generate revenues through sales of our subscriptions and products by resellers, strategic partners, and global service providers.
We believe that this flexibility in contract duration is important to meet the different needs of our customers. We generally bill our subscription fees in advance. We recognize subscription revenue over the term of the agreement. Amounts billed in excess of revenue recognized for the period are reported as deferred revenue on our Consolidated Balance Sheets.
The increase in expenses was driven by amortization of intangible assets we acquired in prior year, investments in our infrastructure and capacity to improve the availability of our subscription offerings, while also supporting the growth of new customers and increased usage of our subscriptions by our existing customer base. Other cost of revenues and gross margin .
During fiscal year 2023 as compared to fiscal year 2022, our subscription gross margin improved due to lower amortization of acquired intangible assets and higher subscription revenue. We expect to continue investing in our infrastructure and capacity to improve the availability of our subscription offerings, supporting the growth of both our new and existing customers.
Net cash used in financing activities was $98.2 million for the year ended December 31, 2022, primarily due to payments of $99.8 million to repurchase and retire 2,297,330 shares of our Class A Common Stock pursuant to our share repurchase program, $7.6 million for net taxes paid in connection with our stock plans, and $4.8 million in payments toward our current financing obligations, partially offset by $15.9 million in proceeds from issuance of stock in connection with our stock plans. 64 Table of Contents Net cash used in financing activities for the year ended December 31, 2022, decreased by $28.8 million as compared to the year ended December 31, 2021.
Net cash used in financing activities was $358.0 million for the year ended December 31, 2023, primarily due to payments of approximately $311.1 million to repurchase and retire 10 million shares of our Class A Common Stock pursuant to our share repurchase program, and $821.0 million paid toward the partial repurchase of our Convertible Notes from $785.7 million of proceeds, net of debt issuance costs, from the issuance of both our Term Loan and 2030 Senior Notes in fiscal year 2023.
Macroeconomic Conditions and Other Factors We are subject to risks and exposures, including those caused by the current macroeconomic environment, the Russia-Ukraine conflict and the COVID-19 pandemic. Macroeconomic factors include increased inflation, increased interest rates, supply chain disruptions, decreased economic output and fluctuations in currency exchange rates, all of which can cause uncertainty.
Macroeconomic factors include increased inflation, increased interest rates, supply chain disruptions, decreased economic output, geopolitical conflict and fluctuations in currency exchange rates, all of which can cause uncertainty. We have experienced more cautious buying behavior from larger customers manifesting itself in smaller initial deployments.
We also finance our operations from proceeds from issuance of convertible senior notes, proceeds from issuance of convertible preferred stock, and proceeds from issuance of stock under our stock plans. As of December 31, 2022 and 2021, we had cash and cash equivalents of $270.0 million and $267.2 million, respectively.
We also have access to additional liquidity from our term loan and revolving credit facility. As of December 31, 2023 and 2022, we had cash and cash equivalents of $222.2 million and $270.0 million, respectively.
We have experienced sales cycles normalizing to pre-COVID norms and more cautious buying behavior from larger customers manifesting itself in smaller initial deployments. We also noted sales cycle times for up-market customers elongated incrementally in 2022, as customers often required additional approvals before making purchase decisions. We anticipate this behavior may persist until the macroenvironment becomes less uncertain.
We have experienced elevated sales cycle times for our up-market customers, as customers required additional approvals before making purchase decisions. We are also seeing less upsell of additional MVP services within our existing base as customers have slowed hiring and rationalized their employee counts. We anticipate this behavior may persist until the macroeconomic environment becomes less uncertain.
We rely on third-party providers to develop and manufacture these devices and fulfillment partners to successfully serve our customers. We continue to support our direct inside sales force while also developing indirect sales channels to market our brand and our subscription offerings.
We use our direct inside sales force and indirect sales channels to market our brand and our subscription offerings.
We expect interest income to further fluctuate in the future due to interest rate volatility in the current macroeconomic environment and reduction of our investments in money market funds.
Other income and expense, net, can fluctuate in the future due to changes in interest rates on our money market funds, interest expense on our Credit Agreement, asset write-down charges, and fluctuations in currency exchange rates in the current macroeconomic environment.
Such partnerships include Mitel, Amazon, ALE, Avaya, Atos, and Unify. • Global Service Providers including AT&T, TELUS, BT, Vodafone, Verizon, DT, 1&1 Versatel in Germany, Ecotel in Germany, MCM in Mexico, Frontier, Charter Communications and others. 53 Table of Contents Our revenue growth has primarily been driven by our flagship RingCentral MVP, RingCentral customer engagement solutions product offering, recurring license and other fees, derived from sales through our direct and indirect sales channels, including resellers and distributors, strategic partners and global service providers, which has resulted in an increased number of customers, relatively stable average subscription revenue per user, and relatively stable retention of our existing customer and user base.
Our revenue growth has primarily been driven by our flagship RingCentral MVP, RingCentral contact center solutions, and recurring license and other fees. Our revenue is derived from sales through our direct and indirect sales channels, including resellers and distributors, strategic partners and global service providers.
The following table presents a reconciliation of free cash flow to net cash provided by (used in) operating activities, the most directly comparable GAAP measure, for each of the periods presented (in thousands): Year Ended December 31, 2022 2021 2020 Net cash provided by (used in) operating activities $ 191,305 $ 152,151 $ (35,191) Strategic partnerships (30,000) — 141,584 Repayment of convertible senior notes attributable to debt discount — 10,131 35,020 Non-GAAP net cash provided by operating activities 161,305 162,282 141,413 Purchases of property and equipment (32,713) (28,959) (43,618) Capitalized internal-use software (53,730) (43,692) (38,113) Non-GAAP free cash flow $ 74,862 $ 89,631 $ 59,682 Backlog We have generally signed new customers contracts with varying length, from month-to-month to multi-year terms for our subscription services.
The following table presents a reconciliation of adjusted, unlevered free cash flow to net cash provided by operating activities, the most directly comparable GAAP measure, for each of the periods presented (in thousands): Year Ended December 31, 2023 2022 2021 Net cash provided by operating activities $ 399,662 $ 191,305 $ 152,151 Less: Capitalized expenditures (75,740) (86,443) (72,651) Strategic partnerships (1) (50,250) (30,000) — Add: Repayment of convertible notes attributable to debt discount — — 10,131 Restructuring and other payments 35,102 28,010 — Cash paid for interest, net of interest rate swap 16,629 347 309 Non-GAAP adjusted, unlevered free cash flow $ 325,403 $ 103,219 $ 89,940 (1) During the year ended December 31, 2022, the Company updated the terms of its arrangement with certain strategic partners and, in connection with these changes, a portion of the original advance payments were refunded.
Accordingly, we believe that deferred revenue is not a reliable indicator of future revenues and we do not utilize deferred revenue as a key management metric internally. 65 Table of Contents Contractual Obligations The following summarizes our contractual obligations as of December 31, 2022 (in thousands): Payments due by period Up to 1 year 1 to 3 years 3 to 5 years More than 5 years Total Operating lease obligations $ 18,984 $ 14,505 $ 5,361 $ 2,078 $ 40,928 Financing obligations 4,972 1,791 — — 6,763 Long-term debt — 1,000,000 650,000 — 1,650,000 Purchase obligations 77,201 75,981 53,131 32,160 238,473 Total $ 101,157 $ 1,092,277 $ 708,492 $ 34,238 $ 1,936,164 Purchase obligations represent an estimate of open purchase orders and contractual obligations in the normal course of business for which we have not received the goods or services as of December 31, 2022.
Accordingly, we believe that deferred revenue is not a reliable indicator of future revenues and we do not utilize deferred revenue as a key management metric internally. 71 Table of Contents Contractual Obligations The following summarizes our contractual obligations as of December 31, 2023 (in thousands): Payments due by period Up to 1 year 1 to 3 years 3 to 5 years More than 5 years Total Operating lease obligations (1) $ 18,643 $ 23,237 $ 7,228 $ 701 $ 49,809 Supplier financing arrangements (2) 2,464 1,267 463 — 4,194 Principal payments on long-term debt (3) 20,000 810,391 330,000 400,000 1,560,391 Contractual interest payments on long-term debt (3) 65,641 126,492 97,886 68,000 358,019 Purchase obligations (4) 95,405 78,490 56,193 4,135 234,223 Total $ 202,153 $ 1,039,877 $ 491,770 $ 472,836 $ 2,206,636 (1) Represents obligations under non-cancellable lease agreements for our corporate and worldwide offices, and colocation data centers.
Other Income (Expense), Net Year ended December 31, Year ended December 31, (in thousands, except percentages) 2022 2021 $ Change % Change 2021 2020 $ Change % Change Interest expense $ (4,807) $ (64,382) $ 59,575 nm $ (64,382) $ (49,281) $ (15,101) nm Other income (expense) (219,771) (7,554) (212,217) nm (7,554) 80,458 (88,012) nm Other income (expense), net $ (224,578) $ (71,936) $ (152,642) nm $ (71,936) $ 31,177 $ (103,113) nm nm - not meaningful Other expense, net, increased by $152.6 million during fiscal year 2022 as compared to fiscal year 2021, primarily due to incremental net unrealized losses of $188.1 million recognized from our long-term investments, and a write-down charge of $21.7 million related to accrued interest on our prepaid sales commission balance, partially offset by a $59.6 million reduction in non-cash interest expense from the amortization of the debt discount and issuances costs related to our 2025 and 2026 Notes as a result of adopting ASU No. 2020-06 in the first quarter of 2022.
Other Income (Expense), Net Year ended December 31, Year ended December 31, (in thousands, except percentages) 2023 2022 $ Change % Change 2022 2021 $ Change % Change Interest expense $ (35,997) $ (4,807) $ (31,190) nm $ (4,807) $ (64,382) $ 59,575 nm Other income (expense) 77,963 (219,771) 297,734 nm (219,771) (7,554) (212,217) nm Other income (expense), net $ 41,966 $ (224,578) $ 266,544 nm $ (224,578) $ (71,936) $ (152,642) nm nm - not meaningful Other expense, net, decreased by $266.5 million during fiscal year 2023 as compared to fiscal year 2022.
Removed
For the years ended December 31, 2022, 2021, and 2020, subscriptions revenues accounted for 90% or more of our total revenues. The remainder of our revenues has historically been primarily comprised of product revenues from the sale of pre-configured phones and professional services.
Added
The remainder of our revenues are primarily comprised of product revenues from the sale of pre-configured phones and professional services. We do not develop or manufacture physical phones and only offer them as a convenience to our customers. We rely on third-party providers to develop and manufacture these devices and fulfillment partners to successfully serve our customers.
Removed
We do not develop or manufacture physical phones and offer it as a convenience for a total solution to our customers in connection with subscriptions to our services; however, in some cases, we have built “interoperability” between MVP and third-party hardware devices.
Added
We are actively implementing various measures to enhance operational efficiencies throughout the Company. These include disciplined spending, increased productivity, efficiency gains, and optimizing our go-to-market strategies. Macroeconomic Conditions and Other Factors We are subject to risks and exposures caused by the current macroeconomic environment.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+4 added−1 removed6 unchanged
Biggest changeA change in the investee’s probability of default, recoverability of investment assumptions or a combination of both, could have an adverse impact on the fair value up to the full amount of our investment. Inflation Risk We do not believe that inflation has had a material effect on our business, financial condition, or results of operations.
Biggest changeGenerally, the fair values of the Senior Notes will increase as interest rates fall and decrease as interest rates rise. 74 Table of Contents Inflation Risk We do not believe that inflation has had a material effect on our business, results of operations, or financial condition.
Nonetheless, if our costs in connection with the operation of our business were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations. 68 Table of Contents
Nonetheless, if our costs in connection with the operation of our business were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations. 75 Table of Contents
During fiscal 2022, a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have had a material impact on our consolidated financial statements. As our international operations continue to expand, risks associated with fluctuating foreign currency rates may increase. We will continue to reassess our approach to managing these risks.
During fiscal 2023, a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have had a material impact on our consolidated financial statements. As our international operations continue to expand, risks associated with fluctuating foreign currency rates may increase. We will continue to reassess our approach to managing these risks.
We carry the Notes at face value less unamortized discount on our balance sheet, and we present the fair value for required disclosure purposes only. The Notes have a zero percent fixed annual interest rate and, therefore, we have no economic exposure to changes in interest rates. The fair value of the Notes is exposed to interest rate risk.
We carry the Convertible Notes at face value less unamortized discount on our balance sheet, and we present the fair value for required disclosure purposes only. The Convertible Notes have a zero percent fixed annual interest rate and, therefore, we have no economic exposure to changes in interest rates.
Generally, the fair value of our fixed interest rate Notes will increase as interest rates decline and decrease as interest rates increase. In addition, the fair values of the Notes are affected by our stock price.
The fair value of the Convertible Notes is exposed to interest rate risk. Generally, the fair value of our fixed interest rate Convertible Notes will increase as interest rates decline and decrease as interest rates increase. In addition, the fair values of the Convertible Notes are affected by our stock price.
Interest Rate Risk As of December 31, 2022, we had cash and cash equivalents of $270.0 million. We invest our cash and cash equivalents in short-term money market funds. The carrying amount of our cash equivalents reasonably approximates fair values.
Interest Rate Risk As of December 31, 2023, we had cash and cash equivalents of $222.2 million. We invest our cash and cash equivalents in short-term money market funds. The carrying amount of our cash equivalents reasonably approximates fair values.
During fiscal year 2022, a hypothetical 10% increase or decrease in overall interest rates would not have had a material impact on our interest income. As of December 31, 2022, we had $994.1 million and $644.3 million outstanding from our 2025 Notes and 2026 Notes (collectively the “Notes”), respectively.
During fiscal year 2023, a hypothetical 10% increase or decrease in overall interest rates would not have had a material impact on our interest income. As of December 31, 2023, we had $161.3 million and $609.1 million outstanding from our 2025 Convertible Notes and 2026 Convertible Notes, respectively.
The fair value of the Notes will generally increase as our common stock price increases and will generally decrease as our common stock price decrease in value. Market Risk As of December 31, 2022, we had long-term investments in convertible and redeemable preferred stock of $1.6 million.
The fair value of the Convertible Notes will generally increase as our Class A common stock price increases and will generally decrease as our Class A common stock price decrease in value. As of December 31, 2023, we had no amounts outstanding under our Revolving Credit Facility and $390.0 million outstanding under our Term Loan under our Credit Agreement.
Removed
These investments are subject to market related risks that could decrease or increase the fair value of our holdings. These investments are adjusted to fair value based on market inputs at the balance sheet date, which are subject to market-related risks that could decrease or increase the fair value of our holdings, including uncertainty created by the macroeconomic conditions.
Added
Borrowings under our Credit Agreement will bear interest under a floating rate mechanism, which exposes us to interest-rate risk.
Added
To address this risk, we entered into a five-year floating-to-fixed interest rate swap agreement with the objective of reducing exposure to the fluctuating interest rates associated with our variable rate borrowing program by paying a fixed interest rate of 3.79%, plus a margin of 2% to 3%.
Added
The interest rate swap agreement was effective beginning June 30, 2023, and terminates on February 14, 2028, consistent with the duration of the maturity of the Term Loan. Our interest rate swap agreement is designated as cash flow hedge and highly effective in offsetting changes in our future expected cash flows due to the fluctuation of our variable rate debt.
Added
As of December 31, 2023, we had $400.0 million outstanding under our 2030 Senior Notes. The 2030 Senior Notes have fixed annual interest rates, and therefore we do not have economic interest rate exposure on these debt obligations. However, the fair values of the 2030 Senior Notes are exposed to interest rate risk.

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