Yahoo Finance Why Is RingCentral (RNG) Up 12.2% Since Last Earnings Report?
A month has gone by since the last earnings report for RingCentral (RNG). Shares have added about 12.2% 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 Q1 Earnings Top Estimates, Revenues Up Y/Y
RingCentral reported first-quarter 2023 non-GAAP earnings of 76 cents per share, which surpassed the Zacks Consensus Estimate by 10.15% and increased 94.9% year over year.
Net revenues of $534 million surpassed the consensus mark by 1.2% and increased 14% year over year.
Quarter Details
Software subscription (95% of total revenues) revenues increased 16% year over year to $508 million. Other revenues (5% of total revenues) declined 8% year over year to $25 million.
Annualized Exit Monthly Recurring Subscriptions (“ARR”) increased 14% year over year to $2.16 billion. Mid-market and Enterprise ARR increased 15% year over year to $1.33 billion.
The first-quarter 2023 non-GAAP gross margin expanded 50 basis points (bps) from the year-ago quarter’s levels to 78.5%.
On a non-GAAP basis, research and development expenses declined 3.6% year over year to $59.8 million. Sales and marketing expenses were up 3.6% to $219 million. General and administrative expenses rose 13% to $48.3 million in the reported quarter.
On a non-GAAP basis, operating income was $92 million, up 89.1% year over year. The non-GAAP operating margin expanded 680 bps from the year-ago quarter’s levels to 17.2%.
Balance Sheet
As of Mar 31, 2023, cash and cash equivalents were $274.8 million compared with $269.9 million as of Dec 31, 2022.
Cash flow from operations was $108.5 million in the first quarter compared with fourth-quarter 2022 figure of $39.4 million.
Non-GAAP free cash flow was $54 million compared with a negative $13.6 million reported in the previous quarter.
Guidance
For the second quarter of 2023, RingCentral expects revenues between $535 million and $537 million, indicating a year-over-year growth of 10%.
Subscription revenues in the quarter are expected between $511 million and $513 million, indicating a year-over-year growth of 10-11%.
The non-GAAP operating margin is expected to be 17.5% in the second quarter. Earnings are expected to be 74-76 cents per share.
For 2023, RingCentral raised its revenue guidance to $2.187 billion and $2.205 billion, indicating a year-over-year growth of 10-11%.
Subscription revenues for the year are expected between $2.086 billion and $2.104 billion, suggesting a year-over-year growth of 11%.
The non-GAAP operating margin is expected to be at least 18.5% for 2023.
Earnings are expected between $3.19 and $3.25 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 5.62% due to these changes.
VGM Scores
Currently, RingCentral has a great 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, Inc. (RNG) : Free Stock Analysis Report
