RingCentral Stock Jumps After Earnings. What Wall Street Liked.

Subscription revenue was $531 million, up 10% and likewise ahead of both guidance and Street estimates. 

On an adjusted basis, RingCentral (ticker: RNG) earned 78 cents a share in the quarter, at the high end of its guidance range of 75 to 78 cents, and above consensus at 75 cents. Under generally accepted accounting principles, the company lost 45 cents a share in the quarter.

Non-GAAP operating margin of 19.1% was above the guidance range of 18% to 18.5%. Adjusted Ebitda, or earnings before interest, taxes, depreciation, and amortization, was $128 million, above consensus at $119 million.

RingCentral shares are up 7.3% in premarket trading Tuesday. Shares are down about 21% for the year to date. The company has been seeing an increasingly competitive environment in cloud-based communications, counting
Microsoft
Teams and
Zoom Video Communications
(ZM) among its rivals.

In an interview with Barron’s, CEO Tarek Robbiati said the company is taking steps to broaden its product portfolio, in particular in contact center software and in niche video applications. In August, RingCentral acquired the events software business from the start-up Hopin. In contact center, Robbiati said, the company is shifting its strategy from being a reseller of third-party software solutions to creating its own platform specifically targeting midsize companies.

Robbiati was named to the top job at Ring in August, replacing founder Vlad Shmunis, who is now executive chairman. Robbiati joined the company from Hewlett Packard Enterprise (HPE), where he had been CFO. He previously served in a similar role at Sprint.

For the fourth quarter, RingCentral is projecting revenue of $566.5 million to $573.5 million, up between 8% and 9%, with adjusted profits of 82 to 83 cents a share. Street consensus has been $570 million in revenue and profits of 81 cents. The company sees non-GAAP operating margin improving to 20%.

For the full year, RingCentral now sees revenue of $2.095 billion to $2.101 billion, up 11%; previous guidance had been in the range of $2.086 billion to $2.104 billion. The company lifted its full year non-GAAP EPS forecast range to $3.19 to $3.20 a share, up from a previous range of $3.11 to $3.25 a share. The company now sees full year non-GAAP operating margin of 19%, up from a previous forecast of 18.5% to 19%. Ring increased its free cash flow forecast for the year, now projecting a range of $290 million to $300 million, up from a previous estimate of $270 million to $290 million.

Ring said it repurchased $75 million in stock during the quarter. The company also announced a $100 million increase its buyback authorization.

Robbiati declined to comment in detail on the 2024 outlook, noting that the company is still in the planning cycle for next year. But he said a key theme for the company will be “dialing up innovation…to become a more diversified company with AI-infused products and services.”

Ring is holding an online event on Nov. 14 to unveil new products for both the virtual events and call center segments.

He sees an opportunity to apply artificial intelligence to call center operations, improving interactions between customers and agents before, during, and after calls. He also sees opportunity for better tracking customer interactions, summarizing calls, and analyzing customer feedback.

Write to Eric J. Savitz at [email protected]