RingCentral To Slash 10 Percent Of Workforce
The UCaaS leader, citing the challenging economic climate, revealed plans to cut 10 percent of jobs by the beginning of 2023 despite 23 percent revenue growth during it most recent fiscal quarter. The company posted an increasing net loss for the quarter but revenue rose.
RingCentral said it’s cutting its workforce by 10 percent in light of what the company is calling “an increasingly difficult macro environment.”
The unified communications-as-a-service giant announced the cuts just ahead of its Q3 2022 earnings conference call on Wednesday. The company’s board of directors approved the reduction in force of full-time employees as part of its effort to rationalize spending, while still continuing to be a leader in the UCaaS arena and help customers migrate from legacy systems to the cloud, the company said.
“Throughout the year, we have taken steps to expand our operating margins and drive efficiencies throughout our business. While we recently made the extremely difficult decision to further rationalize our workforce, we believe this will allow us to be more agile and better align our course with our strategic priorities in the current macro environment,” said RingCentral Founder and CEO Vlad Shmunis during the company’s earnings call with investors.
RingCentral did not return CRN’s request for comment on whether the job cuts would impact channel positions by publication time.
Investors sent company shares up about 30 percent in late trading Thursday to $36.67 in reaction to the news.
[Related: RingCentral’s Zane Long: UCaaS Opportunity In 2021 Is ‘Still a Land Grab’]
The Belmont, California-based company said the restructuring costs are expected to total approximately $10 million to $15 million and will come primarily from severance payments, employee benefits and related costs. RingCentral said it expects to incur these charges in Q4 2022 and into the first quarter of 2023.
The company expects the reduction in force to be “substantially” complete by the first quarter of 2023. Sonalee Parekh, RingCentral’s CFO, said that the company plans to be “a lot more efficient” around labor spend in 2023 and will also post improvement in other areas of spend, including in marketing.
As of the end of 2021, RingCentral said that it had approximately 3,915 full-time, part-time and temporary employees. About 2,489 out of those were U.S. employees, and about 1,426 were located outside of the United States, according to a regulatory filing.
RingCentral in September laid off 50 employees from its headquarters in the San Francisco Bay Area.
Despite the proposed cuts, the company remains optimistic about its position as a leader in the crowded UCaaS space.
“We’re just at the beginning of the journey. There are $400 million telephony seats worldwide, and many of those seats are expected to move to the cloud, driven by a number of clearly visible megatrends. This includes the shift to hybrid work, ongoing adoption of mobility by businesses, increasing reliance on distributed workforces, and the desire for an integrated cloud-based UC and CC solution from a single provider,” Shmunis said in the earnings call.
RingCentral during its third quarter, which ended September 30, 2022, that ended September 30 saw its total revenue increase 23 percent year over year to $509 million, up from $415 million and above the company’s outlook of $502 million. The company reported a GAAP net loss for the quarter of $284.6 million, compared with $146.8 million in the same period a year ago.