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Ringcentral (RNG) Up 14.3% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for RingCentral (RNG - Free Report) . Shares have added about 14.3% 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 drivers.
RingCentral Q4 Earnings Top Estimates, Revenues Up Y/Y
RingCentral reported fourth-quarter 2023 non-GAAP earnings of 86 cents per share and increased 43.3% year over year.
Net revenues of $571.3 million increased 8.9% year over year.
Quarter Details
Software subscription (95.8% of total revenues) revenues increased 9.1% year over year to $547.4 million. Other revenues (4.2% of total revenues) increased 3.3% year over year to $23.9 million.
Annualized Exit Monthly Recurring Subscriptions (“ARR”) increased 11% year over year to $2.3 billion. Mid-market ARR increased 10% and Enterprise ARR increased 13% year over year to $1 billion.
In the fourth quarter of 2023, RNG expanded its product portfolio with the introduction of three new products, RingCX, RingSense for Sales and RingCentral Events, aimed to cater to evolving customer needs in areas such as contact center solutions, sales intelligence, and event management.
The fourth-quarter 2023 non-GAAP gross margin contracted 60 basis points (bps) from the year-ago quarter to 78.4%.
On a non-GAAP basis, research & development expenses decreased 6.4% year over year to $59.9 million.
Sales and marketing expenses decreased 0.5% to $230.7 million. General and administrative expenses decreased 11.4% to $40.4 million in the reported quarter.
On a non-GAAP basis, operating income was $117 million, up 59.3% year over year. The non-GAAP operating margin expanded 650 bps from the year-ago quarter to 20.5%.
Balance Sheet
As of Dec 31, 2023, cash and cash equivalents were $222.1 million compared with $432.4 million as of Sep 30, 2023.
Cash flow from operations was $113.8 million in the fourth quarter compared with the third-quarter 2023 figure of $86.6 million.
Non-GAAP free cash flow was $96.9 million compared with $86.7 million reported in the previous quarter.
Guidance
For the first quarter of 2024, RingCentral expects revenues between $575 million and $580 million, indicating year-over-year growth of 8-9%.
Subscription revenues in the quarter are expected to be between $550 million and $555 million, indicating year-over-year growth of 8-9%.
The non-GAAP operating margin is expected to be 19.5% in the first quarter of 2024. Earnings are expected to be 79-80 cents per share.
The share-based compensation is anticipated to be in the range of $98-$100 million in the first quarter of 2024.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 115.71% due to these changes.
VGM Scores
At this time, 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 C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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.
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Ringcentral (RNG) Up 14.3% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for RingCentral (RNG - Free Report) . Shares have added about 14.3% 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 drivers.
RingCentral Q4 Earnings Top Estimates, Revenues Up Y/Y
RingCentral reported fourth-quarter 2023 non-GAAP earnings of 86 cents per share and increased 43.3% year over year.
Net revenues of $571.3 million increased 8.9% year over year.
Quarter Details
Software subscription (95.8% of total revenues) revenues increased 9.1% year over year to $547.4 million. Other revenues (4.2% of total revenues) increased 3.3% year over year to $23.9 million.
Annualized Exit Monthly Recurring Subscriptions (“ARR”) increased 11% year over year to $2.3 billion. Mid-market ARR increased 10% and Enterprise ARR increased 13% year over year to $1 billion.
In the fourth quarter of 2023, RNG expanded its product portfolio with the introduction of three new products, RingCX, RingSense for Sales and RingCentral Events, aimed to cater to evolving customer needs in areas such as contact center solutions, sales intelligence, and event management.
The fourth-quarter 2023 non-GAAP gross margin contracted 60 basis points (bps) from the year-ago quarter to 78.4%.
On a non-GAAP basis, research & development expenses decreased 6.4% year over year to $59.9 million.
Sales and marketing expenses decreased 0.5% to $230.7 million. General and administrative expenses decreased 11.4% to $40.4 million in the reported quarter.
On a non-GAAP basis, operating income was $117 million, up 59.3% year over year. The non-GAAP operating margin expanded 650 bps from the year-ago quarter to 20.5%.
Balance Sheet
As of Dec 31, 2023, cash and cash equivalents were $222.1 million compared with $432.4 million as of Sep 30, 2023.
Cash flow from operations was $113.8 million in the fourth quarter compared with the third-quarter 2023 figure of $86.6 million.
Non-GAAP free cash flow was $96.9 million compared with $86.7 million reported in the previous quarter.
Guidance
For the first quarter of 2024, RingCentral expects revenues between $575 million and $580 million, indicating year-over-year growth of 8-9%.
Subscription revenues in the quarter are expected to be between $550 million and $555 million, indicating year-over-year growth of 8-9%.
The non-GAAP operating margin is expected to be 19.5% in the first quarter of 2024. Earnings are expected to be 79-80 cents per share.
The share-based compensation is anticipated to be in the range of $98-$100 million in the first quarter of 2024.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 115.71% due to these changes.
VGM Scores
At this time, 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 C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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.