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RingCentral (RNG) Q1 Earnings Top Estimates, Revenues Up Y/Y

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RingCentral (RNG - Free Report) reported first-quarter 2021 non-GAAP earnings of 27 cents per share, which surpassed the Zacks Consensus Estimate by 8% and surged 42.1% year over year.

Net revenues of $352 million also beat the consensus mark by 3.7% and jumped 31.7% year over year. The results reflect solid demand for RingCentral’s cloud-communication solutions.

Quarter Details

Software-subscription (92.3% of total revenues) revenues surged 33.8% year over year to $325.2 million.

Annualized Exit Monthly Recurring Subscriptions (“ARR”) increased 37% year over year to $1.4 billion.

Ringcentral, Inc. Price, Consensus and EPS Surprise

Ringcentral, Inc. Price, Consensus and EPS Surprise

Ringcentral, Inc. price-consensus-eps-surprise-chart | Ringcentral, Inc. Quote

RingCentral Office ARR (UCaaS + CCaaS) soared 40% year over year to $1.2 billion. Channel ARR soared 53% year over year to $505 million. Direct and Partners Office ARR increased 33% year over year to $817 million.

Other revenues (7.7% of total revenues) climbed 11.2% year over year to $27.1 million, reflecting higher adoption of RingCentral apps in the prevailing work-from-home wave.

First-quarter 2021 non-GAAP gross margin expanded 60 basis points (bps) from the year-ago quarter to 77.1%.

On a non-GAAP basis, research & development (R&D) expenses increased 43.6% year over year to $48 million. Sales and marketing expenses were up 28.9% to $153.5 million. General and administrative expenses rose 23.7% to $37.6 million in the reported quarter.

On a non-GAAP basis, operating income was $32.5 million, up 50.6% year over year. Non-GAAP operating margin expanded 120 bps from the year-ago quarter to 9.2%.

Balance Sheet

As of Mar 31, 2021 cash and cash equivalents were $463.1 million compared with $639.9 million as of Dec 31, 2020.

Key Q1 Developments

RingCentral, in collaboration with Avaya (AVYA - Free Report) , announced the global expansion of Avaya Cloud Office by RingCentral in 13 countries. Moreover, with Atos RingCentral launched Unify Video by RingCentral in Europe.

Further, with Alcatel-Lucent Enterprise, RingCentral announced the launch of Rainbow Office, in eight European countries –  including Austria, Belgium, France, Germany, Ireland, Italy, Spain, and the Netherlands.

RingCentral, in partnership with AT&T Business, introduced AT&T Office@Hand Wireless.

Guidance

For the second quarter of 2021, RingCentral expects revenues between $356.5 million and $359.5 million, indicating year-over-year growth of 29-30%.

Moreover, software-subscription revenues for the quarter are expected between $332 million and $334 million, indicating year-over-year growth of 29-30%.

Non-GAAP operating margin is expected to be in the 9.3% for the second quarter. Earnings are expected between 27 cents to 28 cents per share.

For 2021, RingCentral now expects revenues between $1.500 billion to $1.510 billion (up from previous guidance of $1.475-$1.490 billion), indicating year-over-year growth of 27% to 28%.

Further, software-subscription revenues for the year are expected between $1.388 billion and $1.396 billion, implying year-over-year growth of 28% to 29%.

Non-GAAP operating margin is expected between 10% and 10.1% for full-year 2021.

Earnings are expected between $1.24 and $1.27 per share compared with previous guidance of $1.20-$1.24 per share.

Zacks Rank & Stocks to Consider

Currently, RingCentral has a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Synaptics (SYNA - Free Report) and Agilent Technologies (A - Free Report) . Both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Synaptics and Agilent are set to report their earnings results on May 6 and 20, respectively.

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