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RingCentral (RNG - Free Report) reported non-GAAP earnings of 91 cents per share in second-quarter 2024, surpassing the Zacks Consensus Estimate by 3.41% and increasing 9.6% year over year.
Net revenues of $593 million comfortably beat the consensus mark by 1.13% and increased 10% year over year. A robust product portfolio and strong subscription revenues drove the upside.
Quarter Details
Software subscription revenues (95.6% of total revenues) increased 10.4% year over year to $567.1 million, beating the Zacks Consensus Estimate by 1.28%.
Other revenues (4.4% of total revenues) increased 25.8% year over year to $25.8 million, missing the Zacks Consensus Estimate by 2.01%.
Ringcentral, Inc. Price, Consensus and EPS Surprise
Annualized Exit Monthly Recurring Subscriptions (ARR) increased 9% year over year to $2.43 billion. Mid-market and Enterprise ARR increased 11% year over year to $1.52 billion, beating the Zacks Consensus Estimate by 3.10%. The Enterprise ARR increased 12% year over year to $1.05 billion.
The second-quarter 2024 non-GAAP gross margin contracted 80 basis points (bps) from the year-ago quarter’s tally to 77.3%.
On a non-GAAP basis, research & development expenses increased 8.8% year over year to $59.3 million.
Sales and marketing expenses increased 5.8% to $234.4 million. General and administrative expenses fell 0.7% to $40.3 million in the reported quarter.
On a non-GAAP basis, operating income was $124.2 million, up 18.9% year over year. The non-GAAP operating margin expanded 160 bps from the year-ago quarter to 20.9%.
RingCentral saw strong traction with RingCX, its AI-first cloud contact center product, which now has more than 350 customers. RingCX net new bookings nearly doubled in the second quarter. RNG also saw significant growth in RingSense for Sales and RingCentral Events.
The company expanded its global partner network, including a new partnership with Cox Communications and a resale agreement with Vodafone for RingCX. RNG acquired assets from Mitel and extended its partnership with Avaya.
Balance Sheet
As of Jun 30, 2024, cash and cash equivalents were $199 million compared with $203 million as of Mar 31.
Cash flow from operations was $127 million in the second quarter compared with the first-quarter 2024 figure of $96 million.
Non-GAAP free cash flow was $109 million compared with $77 million reported in the previous quarter. The non-GAAP cash flow margin was 18.3% in the second quarter.
In the second quarter of 2024, $82 million was allocated for repurchase of the company’s shares. Its board also increased the repurchase authorization by $326 million.
Guidance
For the third quarter of 2024, RingCentral expects revenues between $600.5 million and $603.5 million, indicating year-over-year growth of 8%.
Subscription revenues for the third quarter are expected to be between $572 million and $575 million, indicating year-over-year growth of 8%.
The non-GAAP operating margin is expected to be 21% in the third quarter of 2024. Earnings are expected to be 92-93 cents per share.
The share-based compensation is anticipated to be in the range of $96-$98 million in the third quarter of 2024.
Zacks Rank & Stocks to Consider
Currently, RingCentral has a Zacks Rank #2 (Buy).
RingCentral’s shares have lost 11.6% year to date against the Zacks Computer & Technology sector’s growth of 12.2%.
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RingCentral's (RNG) Q2 Earnings & Revenues Surpass Estimates
RingCentral (RNG - Free Report) reported non-GAAP earnings of 91 cents per share in second-quarter 2024, surpassing the Zacks Consensus Estimate by 3.41% and increasing 9.6% year over year.
Net revenues of $593 million comfortably beat the consensus mark by 1.13% and increased 10% year over year. A robust product portfolio and strong subscription revenues drove the upside.
Quarter Details
Software subscription revenues (95.6% of total revenues) increased 10.4% year over year to $567.1 million, beating the Zacks Consensus Estimate by 1.28%.
Other revenues (4.4% of total revenues) increased 25.8% year over year to $25.8 million, missing the Zacks Consensus Estimate by 2.01%.
Ringcentral, Inc. Price, Consensus and EPS Surprise
Ringcentral, Inc. price-consensus-eps-surprise-chart | Ringcentral, Inc. Quote
Annualized Exit Monthly Recurring Subscriptions (ARR) increased 9% year over year to $2.43 billion. Mid-market and Enterprise ARR increased 11% year over year to $1.52 billion, beating the Zacks Consensus Estimate by 3.10%. The Enterprise ARR increased 12% year over year to $1.05 billion.
The second-quarter 2024 non-GAAP gross margin contracted 80 basis points (bps) from the year-ago quarter’s tally to 77.3%.
On a non-GAAP basis, research & development expenses increased 8.8% year over year to $59.3 million.
Sales and marketing expenses increased 5.8% to $234.4 million. General and administrative expenses fell 0.7% to $40.3 million in the reported quarter.
On a non-GAAP basis, operating income was $124.2 million, up 18.9% year over year. The non-GAAP operating margin expanded 160 bps from the year-ago quarter to 20.9%.
RingCentral saw strong traction with RingCX, its AI-first cloud contact center product, which now has more than 350 customers. RingCX net new bookings nearly doubled in the second quarter. RNG also saw significant growth in RingSense for Sales and RingCentral Events.
The company expanded its global partner network, including a new partnership with Cox Communications and a resale agreement with Vodafone for RingCX. RNG acquired assets from Mitel and extended its partnership with Avaya.
Balance Sheet
As of Jun 30, 2024, cash and cash equivalents were $199 million compared with $203 million as of Mar 31.
Cash flow from operations was $127 million in the second quarter compared with the first-quarter 2024 figure of $96 million.
Non-GAAP free cash flow was $109 million compared with $77 million reported in the previous quarter. The non-GAAP cash flow margin was 18.3% in the second quarter.
In the second quarter of 2024, $82 million was allocated for repurchase of the company’s shares. Its board also increased the repurchase authorization by $326 million.
Guidance
For the third quarter of 2024, RingCentral expects revenues between $600.5 million and $603.5 million, indicating year-over-year growth of 8%.
Subscription revenues for the third quarter are expected to be between $572 million and $575 million, indicating year-over-year growth of 8%.
The non-GAAP operating margin is expected to be 21% in the third quarter of 2024. Earnings are expected to be 92-93 cents per share.
The share-based compensation is anticipated to be in the range of $96-$98 million in the third quarter of 2024.
Zacks Rank & Stocks to Consider
Currently, RingCentral has a Zacks Rank #2 (Buy).
RingCentral’s shares have lost 11.6% year to date against the Zacks Computer & Technology sector’s growth of 12.2%.
Shopify (SHOP - Free Report) , Analog Devices (ADI - Free Report) and Digital Ocean (DOCN - Free Report) are some better-ranked stocks that investors can consider in the broader sector. DigitalOcean sports a Zacks Rank #1 (Strong Buy), while Analog Devices and Shopify carry a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shopify’s shares have declined 25.4% year to date. SHOP is set to report its second-quarter 2024 results on Aug 7.
Analog Devices shares have increased 10.2% year to date. ADI is set to report third-quarter fiscal 2024 results on Aug 21.
DigitalOcean’s shares have moved down 15.9% year to date. DOCN is set to report second-quarter 2024 results on Aug 8.