RingCentral (NYSE:RNG) announced non-GAAP earnings of 86 cents per share for the fourth quarter of 2023, surpassing the Consensus Estimate by 3.61% and marking a 43.3% increase from the previous year.
The company reported net revenues of $571.3 million, exceeding the consensus estimate of $570 million and reflecting an 8.9% year-over-year increase.
Details of the Quarter
Software subscription revenues, which accounted for 95.8% of total revenues, rose 9.1% year over year to $547.4 million. Other revenues, making up 4.2% of total revenues, increased 3.3% year over year to $23.9 million.
Annualized Exit Monthly Recurring Subscriptions (“ARR”) grew by 11% year over year to $2.3 billion. Mid-market ARR increased by 10%, while Enterprise ARR increased by 13% year over year, reaching $1 billion.
Product Expansions and Developments
In Q4 2023, RNG expanded its product portfolio with the introduction of three new products: RingCX, RingSense for Sales, and RingCentral Events. These products were designed to meet evolving customer needs in areas such as contact center solutions, sales intelligence, and event management.
Financial Metrics
The non-GAAP gross margin for the fourth quarter of 2023 contracted by 60 basis points (bps) from the previous year to 78.4%.
On a non-GAAP basis, research and development expenses decreased by 6.4% year over year to $59.9 million. Sales and marketing expenses decreased by 0.5% to $230.7 million, while general and administrative expenses decreased by 11.4% to $40.4 million.
Non-GAAP operating income was $117 million, up 59.3% year over year, and the non-GAAP operating margin expanded by 650 bps from the previous year to 20.5%.
Balance Sheet and Cash Flow
As of December 31, 2023, cash and cash equivalents were $222.1 million, compared with $432.4 million as of September 30, 2023.
Cash flow from operations was $113.8 million in the fourth quarter, compared with $86.6 million in the third quarter of 2023. Non-GAAP free cash flow was $96.9 million, up from $86.7 million in the previous quarter.
Guidance
For the first quarter of 2024, RingCentral expects revenues between $575 million and $580 million, indicating year-over-year growth of 8-9%. Subscription revenues are expected to be between $550 million and $555 million, reflecting the same year-over-year growth rate.
The non-GAAP operating margin is expected to be 19.5% in Q1 2024, with earnings expected to be 79-80 cents per share. Share-based compensation is anticipated to be in the range of $98-$100 million in the first quarter of 2024.
Stock Performance
Year to date, RingCentral’s shares have lost 9.1% compared with the Computer & Technology sector’s increase of 7.7%.
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