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Why Is RingCentral (RNG) Down 18.9% Since Last Earnings Report?
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A month has gone by since the last earnings report for RingCentral (RNG - Free Report) . Shares have lost about 18.9% 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 drivers.
RingCentral Q2 Earnings Top Estimates, Revenues Up Y/Y
RingCentral reported second-quarter 2022 non-GAAP earnings of 39 cents per share, which surpassed the Zacks Consensus Estimate by 12.50% and improved 40.6% year over year.
Net revenues of $487 million beat the consensus mark by 1.65% and surged 28% 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 (95.1% of total revenues) revenues climbed 32% year over year to $487 million.
Annualized Exit Monthly Recurring subscriptions (ARR) increased 31% year over year to $2.0 billion.
Mid-market and Enterprise ARR surged 38% year over year to $1.2 billion.
Other revenues (4.9% of total revenues) fell 14.8% year over year to $23.9 million.
Second-quarter 2022 non-GAAP gross margin expanded 100 basis points (bps) from the year-ago quarter to 78.4%.
On a non-GAAP basis, research & development (R&D) expenses increased 11.8% year over year to $60.1 million. Sales and marketing expenses escalated 36.8% to $224 million. General and administrative expenses advanced 13.9% to $42.3 million in the reported quarter.
On a non-GAAP basis, operating income was $55.2 million, up 42.2% year over year. Non-GAAP operating margin expanded 110 bps from the year-ago quarter to 11.3%.
Balance Sheet & Cash Flow
As of Jun 30, 2022, cash and cash equivalents were $306 million compared with $302 million as of Mar 31, 2022.
As of Jun 30, 2022, cash flow from operation was $51 million compared with $30 million from the year-ago quarter. Non-GAAP free cash flow was $29 million compared with $14.4 million in the prior-year quarter.
Guidance
For the third quarter of 2022, RingCentral expects revenues between $500 million and $504 million, indicating year-over-year growth of 21% to 22%.
Software subscription revenues for the quarter are expected to be $473.5-$476.5 million, suggesting year-over-year improvement of 23% to 24%.
Non-GAAP operating margin is expected to be 12.4% for the third quarter. Non-GAAP EPS is expected between 50 cents and 51 cents on 96 to 97 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 12% for full-year 2022.
Earnings are expected between $1.91 per share and $1.95 per share.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted 18.37% due to these changes.
VGM Scores
Currently, RingCentral has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, 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 broadly 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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Why Is RingCentral (RNG) Down 18.9% Since Last Earnings Report?
A month has gone by since the last earnings report for RingCentral (RNG - Free Report) . Shares have lost about 18.9% 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 drivers.
RingCentral Q2 Earnings Top Estimates, Revenues Up Y/Y
RingCentral reported second-quarter 2022 non-GAAP earnings of 39 cents per share, which surpassed the Zacks Consensus Estimate by 12.50% and improved 40.6% year over year.
Net revenues of $487 million beat the consensus mark by 1.65% and surged 28% 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 (95.1% of total revenues) revenues climbed 32% year over year to $487 million.
Annualized Exit Monthly Recurring subscriptions (ARR) increased 31% year over year to $2.0 billion.
Mid-market and Enterprise ARR surged 38% year over year to $1.2 billion.
Other revenues (4.9% of total revenues) fell 14.8% year over year to $23.9 million.
Second-quarter 2022 non-GAAP gross margin expanded 100 basis points (bps) from the year-ago quarter to 78.4%.
On a non-GAAP basis, research & development (R&D) expenses increased 11.8% year over year to $60.1 million. Sales and marketing expenses escalated 36.8% to $224 million. General and administrative expenses advanced 13.9% to $42.3 million in the reported quarter.
On a non-GAAP basis, operating income was $55.2 million, up 42.2% year over year. Non-GAAP operating margin expanded 110 bps from the year-ago quarter to 11.3%.
Balance Sheet & Cash Flow
As of Jun 30, 2022, cash and cash equivalents were $306 million compared with $302 million as of Mar 31, 2022.
As of Jun 30, 2022, cash flow from operation was $51 million compared with $30 million from the year-ago quarter. Non-GAAP free cash flow was $29 million compared with $14.4 million in the prior-year quarter.
Guidance
For the third quarter of 2022, RingCentral expects revenues between $500 million and $504 million, indicating year-over-year growth of 21% to 22%.
Software subscription revenues for the quarter are expected to be $473.5-$476.5 million, suggesting year-over-year improvement of 23% to 24%.
Non-GAAP operating margin is expected to be 12.4% for the third quarter. Non-GAAP EPS is expected between 50 cents and 51 cents on 96 to 97 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 12% for full-year 2022.
Earnings are expected between $1.91 per share and $1.95 per share.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted 18.37% due to these changes.
VGM Scores
Currently, RingCentral has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, 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 broadly 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.