RingCentral Inc

Note 1. Description of Business and Summary of Significant Accounting Policies

Description of Business

RingCentral, Inc. (the “Company”) is a leading provider of AI-powered cloud business communications, contact center, video, and hybrid event solutions. The Company was incorporated in California in 1999 and was reincorporated in Delaware on September 26, 2013.

Basis of Presentation and Consolidation

The Company’s unaudited condensed consolidated financial statements and accompanying notes reflect all adjustments (all of which are normal, recurring in nature and those discussed in these notes) that are, in the opinion of management, necessary for a fair presentation of the interim periods presented. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending December 31, 2024. Certain information and note disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted under the rules and regulations of the Securities and Exchange Commission (“SEC”).

The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 22, 2024, as amended on April 24, 2024.

The Company’s significant accounting policies are described in Company’s Annual Report on Form 10-K for the year ended December 31, 2023. There have been no significant changes to these policies that have had a material impact on the condensed consolidated financial statements and related notes for the three and nine months ended September 30, 2024.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The significant estimates made by management affect revenues, the allowance for doubtful accounts, deferred and prepaid sales commission costs, goodwill, useful lives of intangible assets, share-based compensation, capitalization of internally developed software, return reserves, derivative instruments, provision for income taxes, uncertain tax positions, valuation of contingent consideration, loss contingencies, sales tax liabilities and accrued liabilities. Management periodically evaluates these estimates and will make adjustments prospectively based upon the results of such periodic evaluations. Actual results may differ from these estimates.

Segment Information

The Company has determined that the chief executive officer is the chief operating decision maker. The Company’s chief executive officer reviews financial information presented on a consolidated basis for purposes of assessing performance and making decisions on how to allocate resources. Accordingly, the Company has determined that it operates in a single reportable segment.

Concentrations

As of September 30, 2024 and December 31, 2023, none of the Company’s customers accounted for more than 10% of the Company’s total accounts receivable.

Long-lived assets by geographic location are based on the location of the legal entity that owns the asset. As of September 30, 2024 and December 31, 2023, approximately 91% and 94% of the Company’s consolidated long-lived assets were located in the U.S. No other single country outside of the U.S. represented more than 10% of the Company’s consolidated long-lived assets as of September 30, 2024 and December 31, 2023.

Related Party Transactions

All contracts with related parties are executed in the ordinary course of business. There were no material related party transactions for the three and nine months ended September 30, 2024 and 2023, and no material amounts payable to or amounts receivable from related parties as of September 30, 2024 and December 31, 2023.

Asset Write-down Charges

Asset write-down charges consist of write-offs related to our assets, including deferred and prepaid sales commission. The Company performs periodic reviews to assess the recoverability of such assets, whenever events or changes in circumstances have occurred that could indicate the carrying amount of such assets may not be recoverable. An impairment loss is recognized if the carrying value of deferred commission asset exceeds the amount of consideration that the Company expects to receive in the future in exchange for goods or services to which the asset relates, less the costs that relate directly to providing those goods or services that have not yet been recognized.

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07 Segment Reporting - Improving Reportable Segment Disclosures (Topic 280). The update is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The ASU requires disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), a description of other segment items by reportable segment, and any additional measures of a segment’s profit or loss used by the CODM when deciding how to allocate resources. The ASU also requires all annual disclosures currently required by Topic 280 to be included in interim periods. The update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted and requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the impact that the updated standard will have on its financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-09 on its disclosures.

Note 2. Revenue

The Company derives its revenues primarily from subscriptions, sale of products, and professional services. Revenues are recognized when control is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services or products.

Disaggregation of revenue

Revenue by geographic location is based on the billing address of the customer. The following table provides information about disaggregated revenue by primary geographical markets:

The Company derived over 90% of subscription revenues from RingEX (formerly RingCentral MVP) and RingCentral contact center solutions for the three and nine months ended September 30, 2024 and 2023. For the three and nine months ended September 30, 2024 and 2023, RingCentral contact center solutions represented over 10% of total revenues.

Deferred revenue

During the three and nine months ended September 30, 2024, the Company recognized revenue of $25.1 million and $213.2 million, respectively, that was included in the corresponding deferred revenue balance at the beginning of the year.

Remaining performance obligations

The typical subscription term ranges fromone month tofive years. Contract revenue as of September 30, 2024 that has not yet been recognized was approximately $2.6 billion. This excludes contracts with an original expected length of less than one year. Of these remaining performance obligations, the Company expects to recognize revenue of 52% of this balance over the next 12 months and 48% thereafter.

Other revenues

Other revenues are primarily comprised of product revenue from the sale of pre-configured phones, and professional services. Product revenues from the sale of pre-configured phones were $12.8 million and $11.9 million for the three months ended September 30, 2024 and 2023, respectively, and $38.5 million and $33.7 million for the nine months ended September 30, 2024 and 2023, respectively.

Note 3. Financial Statement Components

Cash and cash equivalents consisted of the following (in thousands):

As of September 30, 2024 and December 31, 2023, $7.4 million and $1.1 million in the cash balance above, respectively, represents restricted cash, which is held in the form of a bank deposit for issuance of a foreign bank guarantee.

Accounts receivable, net consisted of the following (in thousands):

Prepaid expenses and other current assets consisted of the following (in thousands):

Property and equipment, net consisted of the following (in thousands):

Total depreciation and amortization expense related to property and equipment was $21.1 million and $21.0 million for the three months ended September 30, 2024 and 2023, respectively, and $64.5 million and $61.8 million for the nine months ended September 30, 2024 and 2023, respectively.

A summary of activity of the Company’s carrying value of goodwill during the nine months ended September 30, 2024 is presented in the following table (in thousands):

The carrying values of intangible assets are as follows (in thousands):

For the nine months ended September 30, 2024, the Company recognized a gross reduction of $50.6 million related to its developed technology assets. This reduction included $28.5 million due to an amended agreement with a strategic partner and $22.1 million attributed to the retirement of fully amortized developed technology. See Note 5 -Strategic Partnerships, for additional information regarding our amended agreement with a strategic partner. During the three months ended September 30, 2024, the Company purchased certain intangible assets including trademarks and domain names amounting to $0.8 million.

Amortization expense from acquired intangible assets for the three months ended September 30, 2024 and 2023 was $33.5 million and $38.2 million, respectively, and $103.1 million and $112.9 million for the nine months ended September 30, 2024 and 2023, respectively. Amortization of developed technology is included in cost of revenues and amortization of customer relationships is included in sales and marketing expenses in the Condensed Consolidated Statements of Operations.

Estimated amortization expense for acquired intangible assets for the following fiscal years is as follows (in thousands):

Accrued liabilities consisted of the following (in thousands):

Deferred and Prepaid Sales Commission Costs

Amortization expense for the deferred and prepaid sales commission costs was $41.6 million and $35.5 million for the three months ended September 30, 2024 and 2023, respectively, and $120.7 million and $100.6 million for the nine months ended September 30, 2024 and 2023, respectively. There wasno asset write-off or impairment loss in relation to the deferred commissions costs capitalized for the periods presented.

Supplier Financing Obligations

The Company has established financing arrangements with certain third-party financial institutions and participating suppliers to be repaid over different terms ranging up tofive years. Some of these financing arrangements are collateralized against property and equipment. As of September 30, 2024 and December 31, 2023, the Company’s outstanding financing obligations related to such arrangements included in accrued liabilities and other long-term liabilities were $2.0 million and $4.2 million respectively.

Note 4. Fair Value of Financial Instruments

The Company measures and reports certain cash equivalents, including money market funds and certificates of deposit, derivative interest rate swap agreement, and contingent consideration at fair value in accordance with the provisions of the authoritative accounting guidance that addresses fair value measurements. This guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:

Level 1: Observable inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2: Other inputs, such as quoted prices for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3: Unobservable inputs that are supported by little or no market activity and that are based on management’s assumptions, including fair value measurements determined by using pricing models, discounted cash flow methodologies or similar techniques.

The financial instruments carried at fair value were determined using the following inputs (in thousands):

The Company’s other financial instruments, including accounts receivable, other current assets, accounts payable, accrued liabilities and other liabilities, are carried at cost, which approximates fair value due to the relatively short maturity of those instruments.

Fair Value of Long-Term Debt

As of September 30, 2024, the fair value of the 0% convertible senior notes due 2025 (the “2025 Convertible Notes”) was approximately $156.9 million, and the fair value of the 0% convertible senior notes due 2026 (the “2026 Convertible Notes and, together with the 2025 Convertible Notes, the “Convertible Notes”) was approximately $559.6 million. The fair value for the Convertible Notes was determined based on the quoted price for such notes in an inactive market on the last trading day of the reporting period and is considered as Level 2 in the fair value hierarchy.

As of September 30, 2024, the carrying amount of the Term Loan was $375.0 million. As there are no embedded features or other variable features, the fair value of the Term Loan approximated its carrying value.

As of September 30, 2024, the fair value of the 8.50% senior notes due 2030 (the “2030 Senior Notes” and, together with the Convertible Notes, the “Notes”) was approximately $427.9 million. The fair value for the 2030 Senior Notes was determined based on the quoted price for such notes in an inactive market on the last trading day of the reporting period and is considered as Level 2 in the fair value hierarchy.

Fair Value of Derivative Instruments

The Company’s interest rate swap derivative, which is considered as Level 2 in the fair value hierarchy, is valued using a discounted cash flow model that utilizes observable inputs including forward interest rate data at the measurement date.

Contingent Consideration

The contingent consideration as presented in the fair-value table above is related to the Company’s acquisition of Hopin in the third quarter of 2023, and represents the future potential earn-out payments based on the achievement of specified performance targets over multiple years, paid quarterly in cash. The fair value of the contingent consideration liability was determined using a Monte Carlo simulation that includes significant unobservable inputs including the discount rate and projected revenues over the earn-out period. This contingent liability was classified as level 3 within the fair value hierarchy. There was no change in the estimated fair value of the contingent consideration during the three and nine months ended September 30, 2024.

Note 5. Strategic Partnerships

During the second quarter of 2024, the Company and Mitel amended certain terms of their prior strategic arrangement, pursuant to which Mitel became a non-exclusive partner of the Company. In connection with the transaction, there was a release of $28.5 million of unpaid contingent consideration, which was recorded as a reduction to the developed technology intangible assets. During the second quarter of 2024, the Company also recorded a gain of $7.7 million in other income in the Condensed Consolidated Statements of Operations, pursuant to an amended agreement with one of its strategic partners.

Note 6. Long-Term Debt

The following table sets forth the net carrying amount of the Company’s long-term debt (in thousands):

(1)The Company has $350.0 million available for drawdown under the Term Loan as of September 30, 2024.

(2)The Company has $225.0 million available for borrowing under the Revolving Credit Facility as of September 30, 2024.

(3)The current portion of long-term debt, net as of September 30, 2024 relates to $161.1 million net carrying amount from the 2025 Convertible Notes, and $20.0 million of expected principal payments due on the Term Loan. The Term Loan requires quarterly principal payments of 1.25% of the $400.0 million principal amount drawn, with balance due at maturity.

The following table sets forth the future minimum principal payments for long-term debt as of September 30, 2024 (in thousands):

2030 Senior Notes

In August 2023, the Company issued $400.0 million aggregate principal amount of the 2030 Senior Notes in a private offering. The 2030 Senior Notes are guaranteed by the Company’s domestic subsidiaries and are subject to certain covenants and redemption provisions outlined in the indenture governing the 2030 Senior Notes (the “Senior Notes Indenture”). As of September 30, 2024, the carrying value of the outstanding 2030 Senior Notes, net of unamortized debt discount and issuance costs, was $392.9 million, and the Company was in compliance with all covenants under the Senior Notes Indenture. The effective interest rate on the 2030 Senior Notes was 8.9% as of September 30, 2024.

Credit Agreement

In February 2023, the Company entered into a credit agreement with certain lenders, providing for a $200.0 million revolving credit facility (the “Revolving Credit Facility”) and a $400.0 million term loan (the “Term Loan”). In the second quarter of 2023, the Company drew down the initial $400.0 million Term Loan to repurchase a portion of the 2025 Convertible Notes. The credit facilities were subsequently amended in 2023 and 2024 to increase the Revolving Credit Facility to $225.0 million and the Term Loan to $750.0 million (collectively, as amended, the “Credit Agreement”). The proceeds from the Revolving Credit Facility can be used for working capital and general corporate purposes, while the remaining $350.0 million tranches of the Term Loan can be used to repurchase a portion of the Company’s convertible notes and for working capital and general corporate purposes. The credit facilities are guaranteed by certain material domestic subsidiaries of the Company, and secured by substantially all of the personal property of the Company and such subsidiary guarantors. If on any date that is within 91 days prior to the final scheduled maturity date of any series of the Convertible Notes (defined below), such series of Convertible Notes is in an aggregate principal amount outstanding that exceeds an amount equal to 50% of last twelve months EBITDA, calculated as set forth in the Credit Agreement, the maturity date of both the Revolving Credit Facility and Term Loan shall automatically be modified to be such date. As of September 30, 2024, $350.0 million of the Term Loan remains available for draw until May 2025. The Company will continue to pay a quarterly ticking fee of up to 0.500% per annum on the daily unused amount of the Term Loan commitments until the earlier of the funding or the end of the availability period. Any drawdown under the Credit Agreement would be subject to compliance with the restrictive covenants in the Senior Notes Indenture.

Borrowings under the Credit Agreement will bear interest, at the Company’s option, at either: (a) the fluctuating rate per annum equal to the greatest of (i) the prime rate then in effect, (ii) the federal funds rate then in effect, plus 0.5% per annum, and (iii) an adjusted term Secured Overnight Financing Rate (“SOFR”) determined on the basis of a one-month interest period, plus 1.0%, in each case, plus a margin of between 0.75% and 2.0%; and (b) an adjusted term SOFR rate (based on one, three or six month interest periods), plus a margin of between 1.75% and 3.0%. The applicable margin in each case is determined based on the Company’s total net leverage ratio and varies between tranches of Term Loans. Interest is payable quarterly in arrears with respect to borrowings bearing interest at the alternate base rate or on the last day of an interest period, but at least every three months, with respect to borrowings bearing interest at the term SOFR rate.

As of September 30, 2024, the carrying value of the 2028 Term Loan, net of unamortized debt discount and issuance costs, was $372.5 million. As of September 30, 2024, the Company incurred $9.2 million of debt issuance costs in connection with the Credit Agreement, of which $7.0 million was capitalized in the Condensed Consolidated Balance Sheets and amortized primarily using the effective interest rate over the term of the Credit Agreement, while the remaining amount was expensed in the period incurred. As of September 30, 2024, the effective interest rate on the Term Loan was 8.1%. As of September 30, 2024, the Company was in compliance with all covenants under the Credit Agreement.

Convertible Notes

In March 2020, the Company issued $1.0 billion of the 2025 Convertible Notes, and in September 2020, it issued $650.0 million of the 2026 Convertible Notes. The Convertible Notes are senior, unsecured obligations that do not bear regular interest and the principal amount of the Convertible Notes does not accrete. As of September 30, 2024, the carrying values of the 2025 and 2026 Convertible Notes, net of unamortized debt issuance costs, were $161.1 million and $606.6 million, respectively, and the Company was in compliance with all covenants under the Convertible Notes Indenture.

Other Terms of the Convertible Notes

During the three and nine months ended September 30, 2024, the conditions allowing holders of the 2025 Convertible Notes and 2026 Convertible Notes to convert were not met. The Convertible Notes of either series may be convertible thereafter if one or more of the conversion conditions specified in the applicable Convertible Notes Indenture is satisfied during future measurement periods.

Partial Repurchase of 2025 and 2026 Convertible Notes

In May 2023, the Company used the entire proceeds from the drawdown of the $400.0 million Term Loan and $27.3 million of other available cash to repurchase $460.7 million principal amount of the 2025 Convertible Notes, resulting in a gain on early debt extinguishment of $31.1 million, net of related unamortized debt issuance costs.

In August 2023, the Company used a portion of the net proceeds from the offering of the 2030 Senior Notes to repurchase $125.3 million and $40.9 million principal of the 2025 Convertible Notes and 2026 Convertible Notes, respectively, by paying an aggregate amount of $153.6 million in cash, resulting in a gain on early debt extinguishment of $11.8 million, net of related unamortized debt issuance costs.

In December 2023, the Company used a portion of the remaining net proceeds from the offering of the 2030 Senior Notes to repurchase $252.7 million principal of the 2025 Convertible Notes by paying $241.3 million in cash, resulting in a gain of early debt extinguishment in the amount of $10.5 million, net of related unamortized debt issuance costs.

Capped Calls

In connection with the offering of the 2026 Convertible Notes, the Company entered into privately-negotiated capped call transactions with certain counterparties (the “Capped Calls”). The initial strike price of the 2026 Convertible Notes corresponds to the initial conversion price of the 2026 Convertible Notes. The Capped Calls are generally intended to reduce or offset the potential dilution to the Class A Common Stock upon any conversion of the 2026 Convertible Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price.

The following table below sets forth key terms and costs incurred for the outstanding Capped Calls:

The following table sets forth the interest expense recognized related to long-term debt (in thousands):

Note 7. Derivative Instruments

In May 2023, the Company entered into afive-year floating-to-fixed interest rate swap agreement with the objective of reducing exposure to the fluctuating interest rates associated with the Company’s variable rate borrowing program by paying a quarterly fixed interest rate of 3.79%, plus a margin of 2% to 3%. The interest rate swap agreement became effective on June 30, 2023, and terminates on February 14, 2028, consistent with the duration of the maturity of the Term Loan. As of September 30, 2024, the interest rate swap agreement had a notional amount of $375.0 million.

The Company’s interest rate swap agreement is designated as a cash flow hedge under ASC 815, Derivatives and Hedging (“ASC 815”). These hedges are highly effective in offsetting changes in the Company’s future expected cash flows due to the fluctuation of the Company’s variable rate debt. The Company monitors the effectiveness of its hedges on a quarterly basis. The Company does not hold its interest rate swap agreement for trading or speculative purposes. The Company will recognize its interest rate derivative designated as a cash flow hedge on a gross basis as an asset and a liability at fair value in the Condensed Consolidated Balance Sheets. The unrealized gains and losses on the interest rate swap agreement are included in other comprehensive income (loss) and will be subsequently recognized in earnings within or against interest expense when the hedged interest payments are accrued.

As of September 30, 2024, the Company estimates the net amount related to the interest rate swaps under the interest rate swap agreement expected to be reclassified into earnings over the next 12 months is approximately $0.1 million. During the three and nine months ended September 30, 2024, the Company reclassified $1.5 million and $4.5 million, respectively, from accumulated other comprehensive loss to earnings as an offset and reduction to interest expense.

Note 8. Business Combinations

On June 21, 2024, the Company acquired certain customer relationships, intellectual property assets, and supporting operations and personnel for Mitel’s MiCloud Connect & Sky UCaaS offerings for a cash consideration of $26.3 million. The transaction was accounted for as a business combination.

The preliminary purchase price was allocated based on the estimated fair value of the acquired customer relationships and developed technology intangible assets of $25.3 million and $2.0 million, respectively, net acquired liabilities of $8.7 million, and goodwill of $7.7 million. The amortizable intangible assets have a weighted-average useful life of approximately five years. The goodwill recognized is attributable primarily to the assembled workforce and synergies.

Transaction costs related to the acquisition of $4.2 million were expensed as incurred as general and administrative expenses. The Company included the results of operations from the acquisition date, which were not material, in the condensed consolidated financial statements.

Note 9. Leases

The Company primarily leases facilities for office and data center space under non-cancelable operating leases for its U.S. and international locations. As of September 30, 2024, non-cancelable leases expire on various dates between 2024 and 2029.

Generally, the non-cancelable leases include one or more options to renew, with renewal terms that can extend the lease term fromone tofive years or more. The Company has the right to exercise or forego the lease renewal options. The lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As of September 30, 2024 and December 31, 2023, the balance sheet components of leases were as follows (in thousands):

The supplemental cash flow information related to operating leases for the nine months ended September 30, 2024 and 2023 were as follows (in thousands):

As of September 30, 2024, the Company has additional operating leases of approximately $5.6 million that have not yet commenced and as such, have not yet been recognized on the Company’s Condensed Consolidated Balance Sheets. These operating leases are expected to commence in the fourth quarter of 2024 with a minimum lease terms of approximately 3.5 years.

Note 10. Commitments and Contingencies

Legal Matters

The Company is subject to certain legal proceedings described below, and from time to time may be involved in a variety of claims, lawsuits, investigations, and proceedings relating to contractual disputes, intellectual property rights, employment matters, regulatory compliance matters, and other litigation matters relating to various claims that arise in the normal course of business.

The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. The Company assesses its potential liability by analyzing specific litigation and regulatory matters using reasonably available information. The Company develops its views on estimated losses in consultation with inside and outside counsel, which involves a subjective analysis of potential results and outcomes, assuming various combinations of appropriate litigation and settlement strategies. Actual claims could settle or be adjudicated against the Company in the future for materially different amounts than the Company has accrued due to the inherently unpredictable nature of litigation. Legal fees are expensed in the period in which they are incurred.

CIPA Matter

On June 16, 2020, Plaintiff Meena Reuben (“Reuben”) filed a complaint against the Company for a putative class action lawsuit in California Superior Court for San Mateo County. The complaint alleges claims on behalf of a class of individuals for whom, while they were in California, the Company allegedly intercepted and recorded communications between individuals and the Company’s customers without the individual’s consent, in violation of the California Invasion of Privacy Act (“CIPA”) Sections 631 and 632.7. Reuben seeks statutory damages of $5,000 for each alleged violation of Sections 631 and 632.7, injunctive relief, and attorneys’ fees and costs, and other unspecified amount of damages. The parties participated in mediation on August 24, 2021. On September 16, 2021, Reuben filed an amended complaint. The Company filed a demurrer to the amended complaint on October 18, 2021, and a motion for judgment on the pleadings on January 23, 2023. The Court overruled the Company’s demurrer and motion for judgment on the pleadings, and the parties then engaged in discovery. The Company filed a motion for summary judgment (“MSJ”) on February 16, 2024. An evidentiary hearing was held on August 2, 2024 and a hearing on the MSJ was held on October 11, 2024, whereupon, the Court granted the Company’s motion for summary judgement. Based on the information known by the Company as of the date of this filing and the rules and regulations applicable to the preparation of the Company’s condensed consolidated financial statements, it is not reasonably possible to provide an estimated amount of any such loss or range of loss that may occur.

Note 11. Stockholders’ Deficit

Share Repurchase Programs

Under the Company’s share repurchase programs, share repurchases may be made at the Company’s discretion from time to time in open market transactions, privately negotiated transactions, or other means, subject to a minimum cash balance. The programs do not obligate the Company to repurchase any specific dollar amount or to acquire any specific number of shares of its Class A Common Stock. The timing and number of any shares repurchased under the programs will depend on a variety of factors, including stock price, trading volume, and general business and market conditions.

The following tables summarizes the share repurchase activity of the Company’s Class A Common Stock for the three and nine months ended September 30, 2024 and 2023 (in thousands):

As of September 30, 2024, approximately $242.8 million remained authorized and available under the Company’s share repurchase programs for future share repurchases. The Inflation Reduction Act of 2022 imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. During the three and nine months ended September 30, 2024 and 2023, the Company reflected the applicable excise tax withholdings and broker’s commissions in additional paid in capital as part of the cost basis of the stock repurchased and recorded a corresponding liability for the excise taxes payable in accrued liabilities in the Condensed Consolidated Balance Sheets.

During the nine months ended September 30, 2024, the Company paid $245.0 million for share repurchases, which included $4.1 million that was pending from the prior year and excluded $1.5 million that was settled in October 2024.

The following table summarizes the number of shares of the Company’s Class A Common Stock repurchased and settled under share repurchase programs for the three and nine months ended September 30, 2024 (in thousands):

Note 12. Share-Based Compensation

A summary of share-based compensation expense recognized in the Condensed Consolidated Statements of Operations is as follows (in thousands):

A summary of share-based compensation expense by award type is as follows (in thousands):

Equity Incentive Plans

As of September 30, 2024, a total of 14,073,905 shares remained available for grant under the Company’s Amended and Restated 2013 Equity Incentive Plan (the “2013 Plan”).

Employee Stock Purchase Plan

The Company’s ESPP allows eligible employees to purchase shares of the Company’s Class A Common Stock at a discounted price through payroll deductions.

As of September 30, 2024, there was a total of $0.8 million of unrecognized share-based compensation expense, net of estimated forfeitures, related to the ESPP, which will be recognized on a straight-line basis over the remaining weighted-average vesting period of approximately 0.1 years. As of September 30, 2024, a total of 6,781,827 shares were available for issuance under the ESPP.

Restricted and Performance Stock Units

A summary of activity of restricted and performance-based stock units as of September 30, 2024, and changes during the period then ended is presented in the following table:

Restricted Stock Units

The 2013 Plan provides for the issuance of RSUs to employees, directors, and consultants. RSUs issued under the 2013 Plan generally vest over three orfour years.

As of September 30, 2024, there was a total of $314.9 million of unrecognized share-based compensation expense, net of estimated forfeitures, related to RSUs, which will be recognized on a straight-line basis over the remaining weighted-average vesting period of approximately 2.3 years.

Performance Stock Units

The 2013 Plan provides for the issuance of PSUs. The PSUs granted under the 2013 Plan are contingent upon the achievement of predetermined market, performance, and service conditions. The Company uses a Monte Carlo simulation model to determine the fair value of its market condition PSUs. PSU expense is recognized using the graded vesting method over the requisite service period. For performance-based metrics, the compensation expense is based on a probability of achievement of the performance conditions. For market-based conditions, if the market conditions are not met but the service conditions are met, the PSUs will not vest; however, any stock-based compensation expense recognized will not be reversed.

For the majority of the PSUs granted, the number of shares of common stock to be issued at vesting will range from 0% to 200% of the target number based on the achievement of the different performance and market conditions over the respective measurement period. The PSUs generally vest over atwo orthree-year period.

As of September 30, 2024, there was a total of $21.8 million unrecognized share-based compensation expense, net of estimated forfeitures, related to these PSUs, which will be recognized over the remaining service period of approximately 0.9 years.

Employee Equity Compensation Plans

The Company’s board of directors adopted employee equity bonus and executive equity compensation plans (the “Plans”), which allow the recipients to earn fully vested shares of the Company’s Class A Common Stock upon the achievement of quarterly service and/or performance conditions and in lieu of a portion of base salary. During the three and nine months ended September 30, 2024, the Company issued 313,067 and 1,027,585, respectively, under the employee equity bonus plan. The shares under these Plans are issued from the reserve of shares available for issuance under the 2013 Plan. The total requisite service period for these Plans is approximately 0.4 years.

The unrecognized share-based compensation expense as of September 30, 2024 was approximately $4.3 million, which will be recognized over the remaining service period of 0.1 years. The shares issued under these Plans are issued from the reserve of shares available for issuance under the 2013 Plan.

Note 13. Income Taxes

The (benefit from) provision for income taxes was $(4.2) million and $(3.8) million for the three months ended September 30, 2024 and 2023, respectively, and $2.3 million and $6.3 million for the nine months ended September 30, 2024 and 2023, respectively.

Beginning in 2022, the U.S. Tax Cuts and Jobs Act (“Tax Act”) enacted on December 22, 2017 eliminated the option to deduct research and development expenditures for tax purposes in the period the expenses were incurred and instead requires all U.S. and foreign research and development expenditures to be amortized over five and fifteen tax years, respectively.

Due to this required capitalization of research and development expenditures, the Company has recorded current U.S. income tax expense of $1.9 million and $4.7 million for the three and nine months ended September 30, 2024. The current U.S. income tax provision is primarily for federal and state taxes currently payable that we anticipate paying as a result of statutory limitations on our ability to offset expected taxable income with net operating loss carry forwards.

The realization of tax benefits of net deferred tax assets is dependent upon future levels of taxable income, of an appropriate character, in the periods the items are expected to be deductible or taxable. Based on the available objective evidence, except with respect to the UK deferred tax assets described below, the Company does not believe it is more likely than not that certain net deferred tax assets will be realizable. Accordingly, the Company continues to provide a full valuation allowance against the entire domestic net deferred tax assets as of September 30, 2024 and December 31, 2023. The Company intends to maintain the full valuation allowance on the U.S. net deferred tax assets until sufficient positive evidence exists to support a reversal of, or decrease in, the valuation allowance.

On September 30, 2024, RingCentral UK Ltd (“RC UK”), a wholly-owned subsidiary of the Company, entered into a License Agreement and a Limited Risk Distributor Agreement with the Company, which resulted in the reclassification of RC UK from a Full Risk Distributor into a Limited Risk Distributor. The Company determined that it was more likely than not that the UK deferred tax assets were realizable. As a result, during the third quarter of 2024, the Company released the valuation allowance against the UK deferred tax assets and recorded a $4.6 million income tax benefit under (benefit from) provision for income taxes in the Condensed Consolidated Statement of Operations.

During the three and nine months ended September 30, 2024, there were no material changes to the total amount of unrecognized tax benefits.

Note 14. Basic and Diluted Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential shares of common stock, stock options, restricted stock units, performance stock units, ESPP, convertible notes, and convertible preferred stock, to the extent dilutive. For the three and nine months ended September 30, 2024 and 2023, all such common stock equivalents have been excluded from diluted net loss per share as the effect to net loss per share would be anti-dilutive.

The following table sets forth the computation of the Company’s basic and diluted net loss per share of common stock (in thousands, except per share data):

The following table summarizes the potentially dilutive common shares that were excluded from diluted weighted-average common shares outstanding because including them would have had an anti-dilutive effect (in thousands):

Pursuant to the terms of the respective Convertible Notes Indentures, effective January 1, 2022, the Company made an irrevocable election to settle the principal portion of the Convertible Notes only in cash, with the conversion premium to be settled in cash or shares.

The Company calculates the potential dilutive effect of its Convertible Notes under the if-converted method. Under this method, only the amounts settled in excess of the principal will be considered in diluted earnings per share, in line with the terms of the Convertible Notes Indentures.

The denominator for diluted net income per share does not include any effect from the capped call transactions the Company entered into concurrently with the issuance of the Convertible Notes as this effect would be anti-dilutive. In the event of conversion of the Convertible Notes, if shares are delivered to the Company under the capped call, they will offset the dilutive effect of the shares that the Company would issue under the Convertible Notes.

Note 15. Restructuring Activities

During the three and nine months ended September 30, 2024, the Company incurred restructuring costs of $4.8 million and $10.6 million, respectively, in continuation of management’s headcount actions as part of the broader efforts to optimize the Company’s cost structure. The restructuring costs primarily consisted of severance payments, employee benefits and related costs. The Company expects to substantially complete these actions in 2024, subject to local law and consultation requirements in certain countries. The Company may incur other charges or cash expenditures not currently contemplated due to unanticipated events that may occur as a result of or in connection with the implementation of these actions.

The following table summarizes the Company’s restructuring costs that were recorded as an operating expense in the accompanying Condensed Consolidated Statement of Operations during the three and nine months ended September 30, 2024, and 2023 (in thousands):

The following table summarizes the Company’s restructuring liability that is included in accrued liabilities in the accompanying Condensed Consolidated Balance Sheets (in thousands):