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RingCentral (RNG) Down 9.8% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for RingCentral (RNG - Free Report) . Shares have lost about 9.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is RingCentral due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
RingCentral Q1 Earnings Top Estimates, Revenues Up Y/Y
RingCentral reported first-quarter 2022 non-GAAP earnings of 39 cents per share, which surpassed the Zacks Consensus Estimate by 14.71% and improved 44.4% year over year.
Net revenues of $468 million beat the consensus mark by 2.08% and surged 33% year over year. The performance reflects solid demand for RingCentral’s cloud-based communication platform and Contact Center business that provides UCaas. RingCentral’s strategic partnerships have positively impacted revenue growth.
Quarter Details
Software-subscription (94.1% of total revenues) revenues climbed 35% year over year to $440 million.
Annualized Exit Monthly Recurring Subscriptions (“ARR”) increased 35% year over year to $1.9 billion.
Mid-market and Enterprise ARR increased 46% year over year to $1.2 billion.
Other revenues (5.9% of total revenues) rose 2.2% year over year to $27.8 million, reflecting higher adoption of RingCentral’s apps in the prevailing work-from-home trend.
First-quarter 2022 non-GAAP gross margin expanded 90 basis points (bps) from the year-ago quarter to 78%.
On a non-GAAP basis, research & development (R&D) expenses increased 29.3% year over year to $62.1 million. Sales and marketing expenses were up 45.2% to $211.4 million. General and administrative expenses advanced 9.1% to $42.8 million in the reported quarter.
On a non-GAAP basis, operating income was $48.7 million, up 49.7% year over year. Non-GAAP operating margin expanded 120 bps from the year-ago quarter to 10.4%.
Balance Sheet& Cash Flow
As of Mar 31, 2022, cash and cash equivalents were $302 million compared with $267 million as of Dec 31, 2021.
As of Mar 31, 2022, cash flow from operation was $59 million compared with $37 million from the year-ago quarter. Non-GAAP free cash flow was $39 million compared with $23.2 million in the year-ago quarter.
Guidance
For the second quarter of 2022, RingCentral expects revenues between $475.5 million and $479.5 million, indicating year-over-year growth of 25% to 26%.
Software subscription revenues for the quarter are expected between $449 million and $452 million, suggesting year-over-year improvement of 28% to 29%.
Non-GAAP operating margin is expected to be 10.4% for the second quarter. Non-GAAP EPS is expected between 40 cents and 41 cents on 95.5 to 965 fully diluted shares.
For 2022, RingCentral expects revenues in the range of $1.990 billion to $2.015 billion, indicating year-over-year growth of 25% to 26%.
Software subscription revenues for the year are expected between $1.882 billion and $1.898 billion, implying year-over-year growth of 27% to 28%.
Non-GAAP operating margin is expected to be 11.5% for full-year 2022.
Earnings are expected between $1.83 per share and $1.87 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 12.8% due to these changes.
VGM Scores
Currently, RingCentral has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise RingCentral has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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RingCentral (RNG) Down 9.8% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for RingCentral (RNG - Free Report) . Shares have lost about 9.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is RingCentral due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
RingCentral Q1 Earnings Top Estimates, Revenues Up Y/Y
RingCentral reported first-quarter 2022 non-GAAP earnings of 39 cents per share, which surpassed the Zacks Consensus Estimate by 14.71% and improved 44.4% year over year.
Net revenues of $468 million beat the consensus mark by 2.08% and surged 33% year over year. The performance reflects solid demand for RingCentral’s cloud-based communication platform and Contact Center business that provides UCaas. RingCentral’s strategic partnerships have positively impacted revenue growth.
Quarter Details
Software-subscription (94.1% of total revenues) revenues climbed 35% year over year to $440 million.
Annualized Exit Monthly Recurring Subscriptions (“ARR”) increased 35% year over year to $1.9 billion.
Mid-market and Enterprise ARR increased 46% year over year to $1.2 billion.
Other revenues (5.9% of total revenues) rose 2.2% year over year to $27.8 million, reflecting higher adoption of RingCentral’s apps in the prevailing work-from-home trend.
First-quarter 2022 non-GAAP gross margin expanded 90 basis points (bps) from the year-ago quarter to 78%.
On a non-GAAP basis, research & development (R&D) expenses increased 29.3% year over year to $62.1 million. Sales and marketing expenses were up 45.2% to $211.4 million. General and administrative expenses advanced 9.1% to $42.8 million in the reported quarter.
On a non-GAAP basis, operating income was $48.7 million, up 49.7% year over year. Non-GAAP operating margin expanded 120 bps from the year-ago quarter to 10.4%.
Balance Sheet& Cash Flow
As of Mar 31, 2022, cash and cash equivalents were $302 million compared with $267 million as of Dec 31, 2021.
As of Mar 31, 2022, cash flow from operation was $59 million compared with $37 million from the year-ago quarter. Non-GAAP free cash flow was $39 million compared with $23.2 million in the year-ago quarter.
Guidance
For the second quarter of 2022, RingCentral expects revenues between $475.5 million and $479.5 million, indicating year-over-year growth of 25% to 26%.
Software subscription revenues for the quarter are expected between $449 million and $452 million, suggesting year-over-year improvement of 28% to 29%.
Non-GAAP operating margin is expected to be 10.4% for the second quarter. Non-GAAP EPS is expected between 40 cents and 41 cents on 95.5 to 965 fully diluted shares.
For 2022, RingCentral expects revenues in the range of $1.990 billion to $2.015 billion, indicating year-over-year growth of 25% to 26%.
Software subscription revenues for the year are expected between $1.882 billion and $1.898 billion, implying year-over-year growth of 27% to 28%.
Non-GAAP operating margin is expected to be 11.5% for full-year 2022.
Earnings are expected between $1.83 per share and $1.87 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 12.8% due to these changes.
VGM Scores
Currently, RingCentral has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise RingCentral has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.