RingCentral Prepaid $162.2 Million to Partner on Brink of Bankruptcy
Software firm warns larger write downs possible due to agreement with Avaya, which is down 93.2% since being added to the DuDil Shorts list
November 9, 2022
For three years RingCentral (RNG), a business communications software provider, has partnered with Avaya (AVYA), a call center software maker, to sell its offerings. RingCentral prepaid for sales commissions that Avaya earns from selling the Avaya Cloud Office by RingCentral (ACO) during the partnership.
The prepayment now appears to be a mistake.
Avaya recently revealed it would not file its Q3 report on time and issued a going concern warning. The good news for RingCentral, though not shareholders, is that the sales commissions were prepaid with company stock. The bad news, as revealed in RingCentral’s latest quarterly filing is the size of the potential loss:
“...the Company has recorded a non-cash asset write-down charge of $124.9 million, out of which $21.7 million of this balance is accrued interest and is recorded in other expenses in the Condensed Consolidated Statement of Operations. As of September 30, 2022, the remaining prepaid sales commission balance was $162.2 million.”
RingCentral also warned larger future write downs are possible.
In January 2022, DuDil warned of revenue recognition trouble at Avaya. Specifically, the company recognized $15 million in 2021 that should have been recognized in prior periods. Avaya’s management concluded the company’s internal control over financial reporting were effective. The company’s auditor, PwC, also had no problems with Avaya’s internal controls though it did cite revenue recognition as a critical audit matter.
Avaya shares are down 93.2% since being added to the DuDil Shorts list.
Become a DuDil Insider
Get our due diligence alerts before they're published & be first to know.