RingCentral, Inc.

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 22, 2024, as amended on April 24, 2024, under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As discussed in the section entitled “Special Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ significantly from those expressed or implied by such forward-looking statements. 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 II, Item 1A below.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2025, under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As discussed in the section entitled “Special Note Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ significantly from those expressed or implied by such forward-looking statements. 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 II, Item 1A below.

Previous wording

Our portfolio of cloud-based offerings are subscription based and made available at different rates varying by the specific functionalities, services, and number of users. 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 each of the three and nine months ended September 30, 2024 and 2023, subscriptions revenues accounted for over 90% of our total revenues. 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.

Current wording

Our flagship cloud-based offerings, RingEX and RingCX, are subscription based and made available at different rates varying by the specific functionalities, services, and number of users. 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 three months ended March 31, 2025 and 2024, subscriptions revenues accounted for over 90% of our total revenues. 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.

Previous wording

We use our direct inside sales force and indirect sales channels to market our brand and our subscription offerings. Our indirect sales channels who sell our solutions consist of:

Current wording

We use our direct inside sales force and indirect sales channels to market our product and our subscription offerings. Our indirect sales channels who sell our solutions consist of:

Previous wording

Our revenue growth has primarily been driven by our flagship RingEX, 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. As of September 30, 2024, 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 each of the three and nine months ended September 30, 2024 and 2023, the vast majority of our total revenues were generated in the U.S. and Canada.

Current wording

Our revenue has primarily been driven by our flagship RingEX, RingCentral Contact Center, RingCX, 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. As of March 31, 2025, 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 each of the three months ended March 31, 2025 and 2024, the vast majority of our total revenues were generated in the U.S. and Canada.

Previous wording

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, increase our sales and revenues from our existing and new products, expand our distribution channels, and scale internationally.

Current wording

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, increase sales and revenues from our existing and new products, expand our distribution channels, and scale internationally.

Previous wording

Beginning in 2023, pursuant to our approved reduction-in-force plan as part of broader efforts to optimize the Company’s cost structure, we have been actively implementing various measures to enhance operational efficiencies. These include stricter discipline in spending, increased productivity, efficiency gains, and optimizing our go-to-market strategies.

Current wording

We have been actively implementing various measures to enhance operational efficiencies. These include stricter discipline in spending, increased productivity, efficiency gains, and optimizing our go-to-market strategies.

Previous wording

We are subject to risks and exposures caused by the current macroeconomic environment. Macroeconomic factors include persistent inflation, higher interest rates, supply chain disruptions, decreased economic output, geopolitical conflict and fluctuations in currency exchange rates, all of which can cause uncertainty. The overall macroeconomic environment may affect buying behavior from larger customers that could have an adverse impact on our results. We have in the past and may in the future experience lower upsell and increased downsell of additional RingEX (formerly Ring MVP) services within our existing base as customers slow hiring and rationalize their employee counts. 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.

Current wording

We are subject to risks and exposures caused by the current macroeconomic environment. Macroeconomic factors include persistent inflation, higher interest rates, change in government administrations, supply chain disruptions, the imposition of tariffs and other non-tariff trade barriers, decreased economic output, geopolitical conflict and fluctuations in currency exchange rates, all of which can cause uncertainty. The overall macroeconomic environment may affect buying behavior from our customers, potentially reducing demand for our products and adversely impacting our results. We have in the past and may in the future experience lower upsell and increased downsell of additional RingEX services within our existing base as customers slow hiring and rationalize their employee counts. 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 remains uncertain.

Previous wording

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. We discuss revenues and gross margin under “Results of Operations”, and cash flow from operations and free cash flows under “Liquidity and Capital Resources.” Other key business metrics are discussed below.

Current wording

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 review a number of key business metrics to evaluate growth trends, measure our performance, and make strategic decisions. We discuss revenues and gross margin under “Results of Operations”, and cash flow from operations and free cash flows under “Liquidity and Capital Resources.” Other key business metrics are discussed below.

Previous wording

We believe that our Annualized Exit Monthly Recurring Subscriptions (“ARR”) is a leading indicator of our anticipated subscriptions revenues. We believe that trends in revenue are important to understanding the overall health of our business, and we use these trends in order to formulate financial projections and make strategic business decisions. Our ARR equals our Monthly Recurring Subscriptions multiplied by 12. 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 September 30, 2024 was $206.7 million. As such, our ARR at September 30, 2024 was $2.48 billion compared to $2.26 billion at September 30, 2023.

Current wording

We believe that our Annualized Exit Monthly Recurring Subscriptions (“ARR”) is a leading indicator of our anticipated subscriptions revenues. We believe that trends in revenue are important to understanding the overall health of our business, and we use these trends in order to formulate financial projections and make strategic business decisions. Our ARR equals our Monthly Recurring Subscriptions multiplied by 12. 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 March 31, 2025 was $211.0 million. As such, our ARR at March 31, 2025 was $2.53 billion compared to $2.37 billion at March 31, 2024.

Previous wording

Comparison of the Three and Nine Months Ended September 30, 2024 and 2023

Current wording

Comparison of the Three Months Ended March 31, 2025 and 2024

Previous wording

Other revenue. Other revenue decreased by $1.3 million, or (5)%, for the three months ended September 30, 2024, as compared to the respective prior year period, primarily due to the timing of performance of revenue contracts for professional services.

Current wording

Other revenue. Other revenue decreased by $4.8 million, or (18)%, for the three months ended March 31, 2025, as compared to the respective prior year period, primarily due to the timing of performance of professional services.

Previous wording

Subscriptions revenue. Subscriptions revenue increased by $51.9 million, or 10%, for the three months ended September 30, 2024, and $154.6 million, or 10%, for the nine months ended September 30, 2024, as compared to the respective prior year periods. The increase was primarily due to the acquisition of new customers, sale of new products, upsells of RingEX and additional offerings to our existing customer base, derived from sales through our direct and indirect sales channels, including resellers, distributors, and global service providers. 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 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.

Current wording

Although we expect to continue to add new customers for our products, including new product sales, and increase the usage of our products for existing customers, we will monitor the macroeconomic factors that could impact 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.

Previous wording

Subscriptions cost of revenues and gross margin. Cost of subscriptions revenues increased by $9.7 million, or 7%, for the three months ended September 30, 2024, as compared to the respective prior year period. The higher cost of subscription revenues was primarily due to a $6.6 million increase in third-party costs to support our solution offerings, a $5.4 million increase in infrastructure support costs, and a $3.0 million increase in personnel and contractor costs, partially offset by a $5.7 million decrease in the amortization of our intangible assets.

Current wording

Subscriptions cost of revenues and gross margin. Cost of subscriptions revenues increased by $9.4 million, or 7%, for the three months ended March 31, 2025, as compared to the respective prior year period. The higher cost of subscription revenues was due to a $4.0 million increase in third-party costs to support our solution offerings, a $4.5 million increase in infrastructure support costs, and a $3.0 million increase in personnel and contractor costs. These increases were partially offset by a $2.9 million reduction in the amortization of our intangible assets.

Previous wording

For the three and nine months ended September 30, 2024, as compared to the respective prior year period, our subscription gross margin remained relatively consistent period over period. We expect to continue investing in our infrastructure and capacity to improve the availability of our subscription offerings, including new products, supporting the growth of both our new and existing customers.

Current wording

For the three months ended March 31, 2025, as compared to the respective prior year period, our subscription gross margin remained relatively consistent period over period.

Previous wording

Other cost of revenues and gross margin. Cost of other revenues increased by $1.5 million, or 5%, for the three months ended September 30, 2024, and $4.3 million, or 5%, for the nine months ended September 30, 2024 as compared to the respective prior year period, primarily due to an increase in costs associated with phone sales.

Current wording

Other cost of revenues and gross margin. Cost of other revenues increased by $0.5 million, or 2%, for the three months ended March 31, 2025, as compared to the respective prior year period. Other revenue gross margin fluctuated mainly due to lower transaction price of products.

Previous wording

Sales and marketing expenses increased by $6.2 million, or 2%, for the three months ended September 30, 2024, as compared to the respective prior year period. This increase was primarily due to a $13.9 million increase in third-party commissions and a $6.0 million increase in amortization of deferred sales commission costs. These increases were partially offset by a $7.8 million reduction in advertising and marketing costs, and a $5.0 million decrease in personnel and contractor costs, primarily due to headcount reductions and decrease in share-based compensation due to reduced stock grants to employees.

Current wording

Sales and marketing expenses increased by $2.2 million, or 1%, for the three months ended March 31, 2025, as compared to the respective prior year period. This increase was driven by a $8.1 million increase in third-party commissions, partially offset by a $3.4 million decrease in personnel and contractor costs due to headcount reductions, and a $1.7 million decline in advertising and marketing costs driven by disciplined spending.

Previous wording

We expect the general and administrative expenses to reflect the impact of our operational efficiency measures as we realign our hiring strategies and rationalize our discretionary spending.

Current wording

We expect the general and administrative expenses to reflect the impact of our operational efficiency measures as we continue to realign our hiring strategies and rationalize our discretionary spending.

Previous wording

Research and development expenses decreased by $6.5 million, or (3)%, for the nine months ended September 30, 2024, as compared to the respective prior year period. This decline was primarily due to a $6.3 million reduction in professional fees.

Current wording

Interest expense. Interest expense decreased by $0.1 million, or (1)%, for the three months ended March 31, 2025, as compared to the respective prior year period. This decline was primarily driven by a reduction in our outstanding Term Loan balance due to quarterly principal repayments.

Previous wording

Net loss decreased by $34.3 million for the three months ended September 30, 2024, as compared to the respective prior year period. This decrease was largely due to a $57.5 million reduction in loss from operations, driven by higher subscription revenues and lower operating expenses, both in absolute dollars and as a percentage of total revenue. The reduction in operating expenses was achieved through continued disciplined spending, including a $28.0 million decrease in share-based compensation and a $6.0 million reduction in professional fees. These reductions in operating expenses were partially offset by non-operating factors, including an $11.8 million decrease in gain from the early extinguishment of debt, a $7.0 million decrease in gains from our amended agreement with a strategic partner recognized during the three months ended September 30, 2023, and a $4.2 million increase in interest expense related to our 2030 Senior Notes during the three months ended September 30, 2024.

Current wording

Net loss decreased by $18.2 million for the three months ended March 31, 2025, as compared to the respective prior year period. This improvement was largely due to a $21.2 million reduction in loss from operations, driven by higher subscription revenues and lower operating expenses as a percentage of total revenue. The reduction in operating expenses reflects ongoing disciplined spending, including a $10.3 million reduction in share-based compensation.

Previous wording

We finance our operations primarily through sales to our customers, which could be billed either monthly or annually one year in advance. For customers with annual or multi-year contracts and those who opt for annual invoicing, we generally invoice only one annual period in advance and revenue is deferred for such advanced billings. We also have access to additional liquidity from our Term Loan and Revolving Credit Facility. As of September 30, 2024 and December 31, 2023, we had cash and cash equivalents of $212.7 million and $222.2 million, respectively.

Current wording

We finance our operations primarily through sales to our customers, which could be billed either monthly or annually one year in advance. For customers with annual or multi-year contracts and those who opt for annual invoicing, we generally invoice only one annual period in advance and revenue is deferred for such advanced billings. We also have access to additional liquidity from our Term Loan and Revolving Credit Facility. As of March 31, 2025 and December 31, 2024, we had cash and cash equivalents of $154.4 million and $242.8 million, respectively. These amounts include $7.4 million in restricted cash for both periods, held as a bank deposit for issuance of a foreign bank guarantee.

Previous wording

Under our share repurchase programs, share repurchases may be made at our 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 us to repurchase any specific dollar amount or to acquire any specific number of shares of our 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. During the nine months ended September 30, 2024, we repurchased and settled approximately 7.5 million shares of our Class A Common Stock, by paying an aggregate amount of approximately $245.0 million under the plans previously authorized by our Board. As of September 30, 2024, approximately $242.8 million remained authorized and available under our share repurchase programs for future share repurchases. Refer to Note 11, Stockholders’ Deficit in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Current wording

Under our share repurchase programs, share repurchases may be made at our 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 us to repurchase any specific dollar amount or to acquire any specific number of shares of our 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. During the three months ended March 31, 2025, we repurchased and settled approximately 1.8 million shares of our Class A Common Stock, by paying an aggregate amount of approximately $50.0 million under the plans previously authorized by our board of directors. In February 2025, our board of directors authorized an incremental $100.0 million share repurchase, subject to certain limitations. The authorization does not expire. As of March 31, 2025, approximately $218.1 million remained authorized and available under our share repurchase programs for future share repurchases. Refer to Note 10, Stockholders’ Deficit in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Previous wording

Our outstanding principal debt as of September 30, 2024 was comprised of $161.3 million from our 2025 Convertible Notes due on March 1, 2025, $609.1 million from our 2026 Convertible Notes due on March 15, 2026, $375.0 million under our Term Loan due on February 14, 2028, as well as $400.0 million under our 2030 Senior Notes due on August 15, 2030. As of September 30, 2024, we have $350.0 million available under our delayed draw-down Term Loan and $225.0 million available under our Revolving Credit Facility. Refer to Note 6, Long-Term Debt, in the accompanying notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information regarding our Credit Agreement, the 2030 Senior Notes and the Convertible Notes. We were in compliance with all debt covenants as of September 30, 2024.

Current wording

In March 2025, the Company repaid the remaining $161.3 million of the 2025 Convertible Notes upon maturity using cash and cash equivalents. We have access to additional liquidity of $350.0 million available under our delayed draw-down Term Loan and $225.0 million available under our Revolving Credit Facility. Refer to Note 5, Long-Term Debt, in the accompanying Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information regarding our Credit Agreement, the 2030 Senior Notes, and the 2026 Convertible Notes. We were in compliance with all debt covenants as of March 31, 2025. We believe that cash flows from our operations, combined with $350.0 million of incremental capacity on our Term Loan and $225.0 million on our Revolving Credit Facility, as well as our ability to raise cash through additional financing, will provide adequate liquidity to extinguish our 2026 Convertible Notes on a timely basis as contractually required.

Previous wording

We believe that our operations, existing liquidity sources as well as capital resources and ability to raise cash through additional financing will satisfy our future cash requirements and obligations for at least the next 12 months. 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. Our capital expenditures in future periods are expected to grow in line with our business. We continually evaluate our capital needs and may decide to raise additional capital to fund the growth of our business for general corporate purposes through public or private equity offerings or through additional debt financing. The timing and amount of any such financing requirements will depend on a number of factors, including the maturity dates of our existing debt. We may from time to time seek to refinance certain of our outstanding debt through issuances of new notes or convertible debt, term loans, exchange transactions or debt repurchases. Such issuances, exchanges or repurchases, if any, will depend on prevailing market conditions, our ability to negotiate acceptable terms, our liquidity position and other factors. Refer to risk factors in Part II, Item 1A of this Quarterly Report on Form 10-Q for discussion of risks relating to our liquidity and capital resources.

Current wording

We believe that cash flows from our operations, existing liquidity sources as well as capital resources and ability to raise cash through additional financing will satisfy our future cash requirements and obligations for at least the next 12 months. Our future capital requirements will depend on many factors, including revenue growth and costs incurred to support customer growth, acquisitions and expansions, operating expenses, 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, and the repayment of our 2026 Convertible Notes. Our capital expenditures in future periods are expected to grow in line with our business. We continually evaluate our capital needs and may decide to raise additional capital to fund the growth of our business for general corporate purposes through public or private equity offerings or through additional debt financing. The timing and amount of any such financing requirements will depend on a number of factors, including the maturity dates of our existing debt. We may from time to time seek to refinance certain of our outstanding debt through issuances of new notes or convertible debt, term loans, exchange transactions or debt repurchases. Such issuances, exchanges or repurchases, if any, will depend on prevailing market conditions, our ability to negotiate acceptable terms, our liquidity position and other factors. Refer to risk factors in Part II, Item 1A of this Quarterly Report on Form 10-Q for discussion of risks relating to our liquidity and capital resources.

Previous wording

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.

Current wording

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, sales, marketing, innovation and infrastructure costs to support the anticipated growth of our business, and payments under strategic arrangements.

Previous wording

Net cash provided by operating activities was $350.4 million for the nine months ended September 30, 2024. The cash flow from operating activities was primarily driven by timing of cash receipts from customers and global service providers, offset by cash payments for personnel-related costs and payments to vendors along with interest payments on our debt obligations.

Current wording

Net cash provided by operating activities was $149.7 million for the three months ended March 31, 2025. The cash flow from operating activities was driven by timing of cash receipts from customers and global service providers, offset by cash payments for personnel-related costs and payments to vendors along with interest payments on our debt obligations. The improvement also reflects a $21.2 million reduction in loss from operations, driven by higher subscription revenues and lower operating expenses as a percentage of total revenue.

Previous wording

Net cash provided by operating activities for the nine months ended September 30, 2024 increased by $64.6 million as compared to the respective prior year period. This change reflects working capital impacts resulting from the timing of payments and collections as well as interest payments on our debt obligations.

Current wording

Net cash provided by operating activities for the three months ended March 31, 2025 increased by $53.6 million, as compared to the respective prior year period. This change reflects working capital impacts resulting from the timing of payments and collections.

Previous wording

Our primary investing activities consist of our capital expenditures and expenditures for internal-use software, intellectual property assets, and cash paid for business acquisitions.

Current wording

Our primary investing activities consist of our capital expenditures and expenditures for internal-use software, business acquisitions, and cash paid for intellectual property assets.

Previous wording

Net cash used in investing activities was $88.3 million for the nine months ended September 30, 2024. This was primarily driven by $59.5 million in capital expenditures, including personnel-related costs associated with the development of internal-use software, and $26.3 million in cash paid for the acquisition of certain assets from Mitel.

Current wording

Net cash used in investing activities was $19.5 million for the three months ended March 31, 2025, driven by capital expenditures, which included personnel-related costs associated with the development of internal-use software.

Previous wording

Net cash used in investing activities for the nine months ended September 30, 2024 increased by $17.8 million as compared to the respective prior year period. This increase was primarily driven by $11.6 million for business acquisitions, and $3.7 million in capital expenditures, including personnel-related costs associated with the development of internal-use software.

Current wording

Net cash used in investing activities for the three months ended March 31, 2025 increased by $0.1 million, as compared to the respective prior year period, due to capital expenditures, including personnel-related costs associated for the development of internal-use software.

Previous wording

Our primary financing activities include utilizing cash to repurchase Class A Common Stock under our share repurchase programs, servicing and repaying debt, paying contingent consideration, raising capital through stock issuance under our stock plans, paying taxes related to these plans, and meeting our existing financing commitments.

Current wording

Our primary financing activities include utilizing cash to repurchase Class A Common Stock under our share repurchase programs, servicing and repaying debt, paying contingent consideration, proceeds from issuance under our stock plans, paying taxes related to these plans, and meeting our existing financing commitments.

Previous wording

Net cash used in financing activities was $273.1 million for the nine months ended September 30, 2024. This was primarily driven by $245.0 million paid to repurchase and retire approximately 7.5 million shares of Class A Common Stock under our share repurchase program. Additionally, cash outflows included $19.3 million for debt service costs and debt repayments, $10.3 million for contingent consideration, $5.3 million for taxes associated with our stock plans, and $3.1 million to fulfill our existing financing commitments. These expenditures were partially offset by $10.0 million in proceeds from issuance of stock in connection with our stock plans.

Current wording

Net cash used in financing activities was $219.9 million for the three months ended March 31, 2025. This was primarily driven by the cash settlement of $161.3 million upon the maturity of our 2025 Convertible Notes and $50.0 million to repurchase and retire approximately 1.8 million shares of Class A Common Stock under our share repurchase program. Additionally, other cash outflows included $6.0 million for debt service costs and repayments, $1.9 million for taxes associated with our stock plans, and $0.6 million to fulfill our existing financing commitments.

Previous wording

Net cash used in financing activities for the nine months ended September 30, 2024, increased by $221.3 million as compared to the respective prior year period. This increase was primarily due to a $205.4 million net financing cash inflow during the nine months ended September 30, 2023 as a result of issuance of new debt and repurchase of convertible notes. The increase in net cash used in financing activities also included $14.3 million for debt service costs and repayments, as well as an $8.7 million increase in contingent consideration payments. These increases were partially offset by a $4.6 million reduction in payments for the repurchase and retirement of our Class A Common Stock.

Current wording

Net cash used in financing activities for the three months ended March 31, 2025 increased by $125.2 million, as compared to the respective prior year period. This increase was driven by a cash outflow of $161.3 million related to the cash settlement of our 2025 Convertible Notes. This was partially offset by a $30.5 million decrease in payments for the repurchase and retirement of our Class A Common Stock, a $4.1 million decrease in contingent consideration payments, and a $0.8 million decrease in debt service costs and repayments.

Previous wording

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. We define free cash flow, a non-GAAP financial measure, as GAAP net cash provided by (used in) operating activities adjusted for capitalized expenditures that include purchases of property and equipment and capitalized internal-use software. 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. 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.

Current wording

To supplement our statements of cash flows presented on a U.S. GAAP basis, we use a non-GAAP measure of cash flows to analyze cash flow generated from our operations. We define free cash flow, a non-GAAP financial measure, as U.S. GAAP net cash provided by (used in) operating activities adjusted for capitalized expenditures that include purchases of property and equipment and capitalized internal-use software. 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. 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 U.S. GAAP-based financial liquidity performance measures, such as net cash provided by operating activities and our other U.S. GAAP financial results.

Previous wording

The following table presents a reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable GAAP measure, for each of the periods presented (in thousands):

Current wording

The following table presents a reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable U.S. GAAP measure, for each of the periods presented (in thousands):

Previous wording

We have generally signed new customer contracts with typical subscription term ranging from one month to five years. At any point in the contract term, there can be amounts allocated to services that we have not yet contractually performed, which constitute our remaining performance obligations. Until we meet our performance obligations, we do not recognize them as revenues in our condensed consolidated financial statements. Given the variability in our contract length, our remaining performance obligations exclude contracts with an original expected length of less than one year. We believe that our remaining performance obligation is not a reliable indicator of future revenues as it is influenced by several factors, including contract renewal timing, average contract terms and foreign currency exchange rates. We do not utilize remaining performance obligation as a key management metric internally.

Current wording

We have generally signed new customer contracts with typical subscription terms ranging from one month to five years. At any point in the contract term, there can be amounts allocated to services that we have not yet contractually performed, which constitute our remaining performance obligations. Until we meet our performance obligations, we do not recognize them as revenues in our condensed consolidated financial statements. Our remaining performance obligations exclude contracts with an original expected length of less than one year. Contract revenue as of March 31, 2025 that has not yet been recognized was approximately $2.6 billion.

Previous wording

Deferred revenue primarily consists of the unearned portion of monthly or annual invoiced fees for our subscriptions, which we recognize as revenue in accordance with our revenue recognition policy. For customers with multi-year contracts, we generally invoice for only one monthly or annual subscription period in advance. Therefore, our deferred revenue balance does not capture the full contract value of multi-year contracts. 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.

Current wording

Deferred revenue primarily consists of the unearned portion of monthly or annual invoiced fees for our subscriptions, which we recognize as revenue in accordance with our revenue recognition policy. For customers with multi-year contracts, we generally invoice for monthly or only one annual subscription period in advance. Therefore, our deferred revenue balance does not capture the full contract value of multi-year contracts. 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.

Previous wording

Except as set forth below, and in Notes 3, 6, 9 and 10 in the accompanying notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, there were no significant changes in our commitments under contractual obligations, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, as amended on April 24, 2024.

Current wording

Except as set forth below, and in Notes 3, 5, 8 and 9 in the accompanying notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, there were no significant changes in our commitments under contractual obligations, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

Previous wording

During the nine months ended September 30, 2024 and 2023, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Current wording

During the three months ended March 31, 2025 and 2024, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Previous wording

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 could differ from these estimates.

Current wording

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, change in the fair value 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.