RingCentral RNG reported fourth-quarter 2024 non-GAAP earnings of 98 cents per share, surpassing the Zacks Consensus Estimate by 2.08% and increasing 14% year over year.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Total revenues of $614.5 million beat the consensus mark by 0.37% and increased 7.6% year over year. A robust product portfolio and strong subscription revenues drove the upside.
Following the results, RNG shares fell 2.57% in the pre-market trading to $29.98, driven by concerns over the company’s subdued first-quarter 2025 outlook.
Ringcentral, Inc. Price, Consensus and EPS Surprise
Ringcentral, Inc. price-consensus-eps-surprise-chart | Ringcentral, Inc. Quote
However, RingCentral has growing prospects, driven by AI-powered product adoption, securing high-value enterprise deals and expanding profit margins.
RNG’s Quarterly Details
Software subscription revenues (96% of total revenues) increased 7.7% year over year to $589.7 million, beating the Zacks Consensus Estimate by 0.26%.
Other revenues (4% of total revenues) increased 3.9% year over year to $24.8 million, beating the Zacks Consensus Estimate by 2.95%.
Annualized Exit Monthly Recurring Subscriptions (ARR) increased 7% year over year to $2.49 billion. Enterprise ARR increased 7% year over year to $1.07 billion.
RingCentral secured more than 30 deals exceeding $1 million in total contract value in the reported quarter.
RingCentral’s Operating Details
The fourth-quarter 2024 non-GAAP gross margin contracted 110 basis points (bps) from the year-ago quarter to 77.3%.
On a non-GAAP basis, research and development expenses increased 3.5% year over year to $62.1 million.
Sales and marketing expenses increased 4.3% to $240.6 million. General and administrative expenses were up 2.6% to $41.4 million in the reported quarter.
On a non-GAAP basis, operating income was $131.2 million, up 12.1% year over year. The operating margin expanded 90 bps from the year-ago quarter to 21.3%.
The non-GAAP EBITDA margin was 24.9%, expanding 70 bps year over year.
RNG’s Balance Sheet & Cash Flow Details
As of Dec. 31, 2024, cash and cash equivalents were $243 million compared with $213 million as of Sept. 30, 2024.
Cash flow from operations was $132.9 million in the fourth quarter compared with the third-quarter 2024 figure of $127.2 million.
The non-GAAP free cash flow was $111.8 million compared with $105.4 million reported in the previous quarter. The non-GAAP cash flow margin was 18.2% in the fourth quarter.
In the fourth quarter of 2024, RNG bought shares worth $77 million. The current remaining repurchase authorization is $270 million.
RNG Initiates Q1 & 2025 Guidance
For the first quarter of 2025, RingCentral expects revenues of $607-$612 million, indicating year-over-year growth of 4-5%.
Subscription revenues are expected to be $587-$592 million, indicating year-over-year growth of 5-6%.
The non-GAAP operating margin is expected to be 21-21.5% in the first quarter of 2025. Earnings are expected to be 93-97 cents per share.
The share-based compensation is anticipated to be $81-$84 million in the first quarter of 2025.
For 2025, RingCentral projects year-over-year revenue growth of 4-6% on a reported basis. Year-over-year Subscriptions revenue growth is expected to be 5-7%.
The non-GAAP operating margin is expected to be 22.5%, up 150 basis points year over year.
Non-GAAP earnings for 2025 are expected to be $4.13-$4.27 per share, and share-based compensation is likely to be $300-$310 million.
Zacks Rank & Stocks to Consider
Currently, RingCentral has a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader Computer and Technology sector are Okta OKTA, DoubleVerify DV and Eventbrite EB. Okta sports Zacks Rank #1 (Strong Buy), and DoubleVerify and Eventbrite carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Okta shares have risen 20.8% year to date. OKTA is set to report fourth-quarter fiscal 2025 results on March 03.
DoubleVerify shares have gained 16.4% year to date. DV is set to report fourth-quarter 2024 results on Feb. 27.
Eventbrite shares have fallen 0.3% year to date. EB is set to report fourth-quarter 2024 results on Feb. 27.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
