RingCentral's (NYSE:RNG) Q1 Sales Beat Estimates, Stock Jumps 11.2%
Office and call centre communications software provider RingCentral (NYSE:RNG) reported Q1 CY2024 results exceeding Wall Street analysts' expectations, with revenue up 9.5% year on year to $584.2 million. The company expects next quarter's revenue to be around $586 million, in line with analysts' estimates. It made a non-GAAP profit of $0.87 per share, improving from its profit of $0.76 per share in the same quarter last year.
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RingCentral (RNG) Q1 CY2024 Highlights:
- Revenue: $584.2 million vs analyst estimates of $578.2 million (1% beat)
- EPS (non-GAAP): $0.87 vs analyst estimates of $0.80 (8.9% beat)
- Revenue Guidance for Q2 CY2024 is $586 million at the midpoint, roughly in line with what analysts were expecting
- The company reconfirmed its revenue guidance for the full year of $2.39 billion at the midpoint
- Gross Margin (GAAP): 70.8%, up from 69.9% in the same quarter last year
- Free Cash Flow of $76.69 million, down 18.3% from the previous quarter
- Market Capitalization: $2.80 billion
“We had a solid start to the year, and exceeded the high end of our revenue and non-GAAP operating profit margin guidance," said Vlad Shmunis, RingCentral’s Founder and CEO.
Founded in 1999 during the dot-com era, RingCentral (NYSE:RNG) provides software as a service that unifies phone, text, fax, video calls and chat in one platform.
Video Conferencing
Work is becoming more distributed, both across geographies and devices. In order for businesses to keep functioning efficiently, they need to be able to communicate as well as they did when the teams were co-located, which drives the demand for integrated communication platforms.
Sales Growth
As you can see below, RingCentral's revenue growth has been strong over the last three years, growing from $352.4 million in Q1 2021 to $584.2 million this quarter.
RingCentral's quarterly revenue was only up 9.5% year on year, which might disappoint some shareholders. We can see that revenue increased by $12.94 million in Q1, which was roughly the same as in Q4 CY2023.
Next quarter's guidance suggests that RingCentral is expecting revenue to grow 8.7% year on year to $586 million, slowing down from the 10.8% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 8% over the next 12 months before the earnings results announcement.
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Cash Is King
If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. RingCentral's free cash flow came in at $76.69 million in Q1, down 12.1% year on year.
RingCentral has generated $313.4 million in free cash flow over the last 12 months, a decent 13.9% of revenue. This FCF margin stems from its asset-lite business model and gives it a decent amount of cash to reinvest in its business.
Key Takeaways from RingCentral's Q1 Results
It was good to see RingCentral beat analysts' billings expectations this quarter. We were also glad its gross margin improved and free cash flow was solid. Zooming out, we think this was a decent quarter, showing that the company is staying on target. The stock is up 11.2% after reporting and currently trades at $33.35 per share.
So should you invest in RingCentral right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
