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Why Is RingCentral (RNG) Up 6.9% Since Last Earnings Report?
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It has been about a month since the last earnings report for RingCentral (RNG - Free Report) . Shares have added about 6.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is RingCentral due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
RingCentral Q3 Earnings Top Estimates, Revenues Up Y/Y
RingCentral reported third-quarter 2023 non-GAAP earnings of 78 cents per share, which surpassed the Zacks Consensus Estimate by 2.63% and jumped 41.8% year over year.
Net revenues of $558.2 million comfortably beat the consensus mark of $554 million and increased 9.7% year over year.
Quarter Details
Software subscription (95.1% of total revenues) revenues increased 9.9% year over year to $531 million. Other revenues (4.9% of total revenues) increased 5.2% year over year to $27.1 million.
Annualized Exit Monthly Recurring Subscriptions (“ARR”) increased 11% year over year to $2.26 billion. Mid-market and Enterprise ARR increased 13% year over year to $1.41 billion.
Third-quarter 2023 non-GAAP gross margin expanded 90 basis points (bps) from the year-ago quarter to 78.1%.
On a non-GAAP basis, research & development expenses decreased 8.3% year over year to $55.7 million.
Sales and marketing expenses were up 4.3% to $230.1 million. General and administrative expenses rose 1.1% to $43.5 million in the reported quarter.
On a non-GAAP basis, operating income was $106.8 million, up 55.6% year over year. Non-GAAP operating margin expanded 570 bps from the year-ago quarter to 19.1%.
Balance Sheet
As of Sep 30, 2023, cash and cash equivalents were $432.4 million compared with $225.4 million as of Jun 30, 2023.
Cash flow from operations was $86.6 million in the third quarter compared with the second-quarter 2023 figure of $90.7 million.
Non-GAAP free cash flow was $86.7 million compared with $81 million reported in the previous quarter.
Guidance
For the fourth quarter of 2023, RingCentral expects revenues between $566.5 million and $573.5 million, indicating year-over-year growth of 8-9%.
Subscription revenues in the quarter are expected to be between $542 million and $548 million, indicating year-over-year growth of 8-9%.
The non-GAAP operating margin is expected to be 20% in the fourth quarter. Earnings are expected to be 82-83 cents per share.
For 2023, RingCentral maintains its revenue guidance to $2.198 billion and $2.205 billion, indicating year-over-year growth of 11%.
Subscription revenues for the year are expected to be between $2.095 billion and $2.101 billion, suggesting year-over-year growth of 11%.
The non-GAAP operating margin is expected to be 19% for 2023.
Earnings are expected to be between $3.19 and $3.20 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted -149.09% 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 an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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. Notably, RingCentral has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
RingCentral belongs to the Zacks Internet - Software and Services industry. Another stock from the same industry, VeriSign (VRSN - Free Report) , has gained 6.5% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
VeriSign reported revenues of $376.3 million in the last reported quarter, representing a year-over-year change of +5.4%. EPS of $1.83 for the same period compares with $1.58 a year ago.
VeriSign is expected to post earnings of $1.83 per share for the current quarter, representing a year-over-year change of +7.7%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.7%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for VeriSign. Also, the stock has a VGM Score of B.
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Why Is RingCentral (RNG) Up 6.9% Since Last Earnings Report?
It has been about a month since the last earnings report for RingCentral (RNG - Free Report) . Shares have added about 6.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is RingCentral due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
RingCentral Q3 Earnings Top Estimates, Revenues Up Y/Y
RingCentral reported third-quarter 2023 non-GAAP earnings of 78 cents per share, which surpassed the Zacks Consensus Estimate by 2.63% and jumped 41.8% year over year.
Net revenues of $558.2 million comfortably beat the consensus mark of $554 million and increased 9.7% year over year.
Quarter Details
Software subscription (95.1% of total revenues) revenues increased 9.9% year over year to $531 million. Other revenues (4.9% of total revenues) increased 5.2% year over year to $27.1 million.
Annualized Exit Monthly Recurring Subscriptions (“ARR”) increased 11% year over year to $2.26 billion. Mid-market and Enterprise ARR increased 13% year over year to $1.41 billion.
Third-quarter 2023 non-GAAP gross margin expanded 90 basis points (bps) from the year-ago quarter to 78.1%.
On a non-GAAP basis, research & development expenses decreased 8.3% year over year to $55.7 million.
Sales and marketing expenses were up 4.3% to $230.1 million. General and administrative expenses rose 1.1% to $43.5 million in the reported quarter.
On a non-GAAP basis, operating income was $106.8 million, up 55.6% year over year. Non-GAAP operating margin expanded 570 bps from the year-ago quarter to 19.1%.
Balance Sheet
As of Sep 30, 2023, cash and cash equivalents were $432.4 million compared with $225.4 million as of Jun 30, 2023.
Cash flow from operations was $86.6 million in the third quarter compared with the second-quarter 2023 figure of $90.7 million.
Non-GAAP free cash flow was $86.7 million compared with $81 million reported in the previous quarter.
Guidance
For the fourth quarter of 2023, RingCentral expects revenues between $566.5 million and $573.5 million, indicating year-over-year growth of 8-9%.
Subscription revenues in the quarter are expected to be between $542 million and $548 million, indicating year-over-year growth of 8-9%.
The non-GAAP operating margin is expected to be 20% in the fourth quarter. Earnings are expected to be 82-83 cents per share.
For 2023, RingCentral maintains its revenue guidance to $2.198 billion and $2.205 billion, indicating year-over-year growth of 11%.
Subscription revenues for the year are expected to be between $2.095 billion and $2.101 billion, suggesting year-over-year growth of 11%.
The non-GAAP operating margin is expected to be 19% for 2023.
Earnings are expected to be between $3.19 and $3.20 per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted -149.09% 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 an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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. Notably, RingCentral has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
RingCentral belongs to the Zacks Internet - Software and Services industry. Another stock from the same industry, VeriSign (VRSN - Free Report) , has gained 6.5% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
VeriSign reported revenues of $376.3 million in the last reported quarter, representing a year-over-year change of +5.4%. EPS of $1.83 for the same period compares with $1.58 a year ago.
VeriSign is expected to post earnings of $1.83 per share for the current quarter, representing a year-over-year change of +7.7%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.7%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for VeriSign. Also, the stock has a VGM Score of B.