RingCentral Inc. (RNG)

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RingCentral Announces Fourth Quarter and Fiscal Year 2023 Results
Business Wire
Tue, February 20, 2024 at 2:05 PM MST·24 min read

https://finance.yahoo.com/news/ringcentral-announces-fourth-quarter-fiscal-210500724.html

Total ARR up 11% to $2.33 billion
Enterprise ARR up 13% to over $1 billion
Record quarterly net cash provided by operating activities of $114 million

BELMONT, Calif., February 20, 2024--(BUSINESS WIRE)--RingCentral, Inc. (NYSE:RNG), a leading provider of AI-driven cloud business communications, contact center, video and hybrid event solutions, today announced financial results for the fourth quarter and fiscal year ended December 31, 2023.

Fourth Quarter Financial Highlights

Total revenue increased 9% year over year to $571 million

Subscriptions revenue increased 9% year over year to $547 million

Annualized Exit Monthly Recurring Subscriptions (ARR) increased 11% year over year to $2.329 billion

Mid-market and Enterprise ARR increased 12% year over year to $1.458 billion

Enterprise ARR increased 13% year over year to $1.005 billion

GAAP operating margin of (7.9)%, compared to (48.7)% in the prior year

Non-GAAP operating margin of 20.5%, up 650 basis points year-over-year

"We ended the year on a strong note," said Vlad Shmunis, RingCentral's founder and CEO. "The solid traction we are seeing with our new products demonstrates the progress we are making in becoming an AI-first, multi-product company as we deliver on our strategy of delivering durable, profitable growth."

"We delivered another quarter of record operating margin and free cash flow, which were above our outlook," said Sonalee Parekh, RingCentral's CFO. "We are just beginning to realize the full cash flow potential of our business, with continuing efforts to improve our efficiency and productivity, while investing for growth."

Financial Results for the Fourth Quarter 2023

Revenue: Total revenue was $571 million for the fourth quarter of 2023, up from $525 million in the fourth quarter of 2022, representing 9% growth. Adjusted for constant currency, total revenue rose 8%. Subscriptions revenue of $547 million increased 9% year over year and accounted for 96% of total revenue. Adjusted for constant currency, subscriptions revenue rose 9%.

Operating Income (Loss): GAAP operating loss was ($45) million, compared to ($256) million in the same period last year. Non-GAAP operating income was $117 million, or 20.5% of total revenue, compared to $73 million, or 14.0% of total revenue, in the same period last year.

Adjusted EBITDA: Adjusted EBITDA was $138 million, or 24.2% of total revenue, compared to $93 million, or 17.7% of total revenue, in the same period last year.

Net Income (Loss) Per Share: GAAP net loss per share was ($0.50), compared to ($2.97) in the same period last year. Diluted non-GAAP net income per share was $0.86, compared to $0.60 per share in the same period last year. The fourth quarters of 2023 and 2022 reflected a 22.5% non-GAAP tax rate.

Cash Flow: Net cash provided by operating activities for the fourth quarter of 2023 was a record $114 million, or 19.9% of total revenue, compared to $39 million, or 7.5% of total revenue, for the fourth quarter of 2022. Adjusted, unlevered free cash flow for the fourth quarter of 2023 was a record $97 million, or 17.0% of total revenue, compared to $0.4 million, or 0.1% of total revenue, for the fourth quarter of 2022.

Cash and Cash Equivalents: Total cash and cash equivalents at the end of the fourth quarter of 2023 was $222 million. This compares to $432 million at the end of the third quarter of 2023. Our cash balance reflects approximately $240 million paid in the fourth quarter of 2023 to repurchase a portion of our 2025 convertible notes. The Company also repurchased over $60 million in shares during the fourth quarter of 2023 under the plans authorized in May and November of 2023.

Financial Results for the Full Year 2023

Revenue: Total revenue was $2.202 billion for 2023, up from $1.988 billion in 2022, representing 11% growth. Adjusted for constant currency, total revenue rose 11%. Subscriptions revenue of $2.100 billion increased 11% and accounted for over 95% of total revenue. Adjusted for constant currency, subscriptions revenue rose 11%.

Operating Income (Loss): GAAP operating loss was ($199) million, compared to ($649) million in 2022. Non-GAAP operating income was $420 million, or 19.1% of total revenue, compared to $246 million, or 12.4% of total revenue, in 2022.

Adjusted EBITDA: Adjusted EBITDA for 2023 was $503 million, or 22.8% of total revenue, compared to $318 million, or 16.0% of total revenue, for 2022.

Net Income (Loss) Per Share: GAAP net loss per share was ($1.74), compared to ($9.23) in 2022. Diluted non-GAAP net income per share was $3.23, compared to $1.99 per share in 2022. Both fiscal year 2023 and 2022 reflected a 22.5% non-GAAP tax rate.

Cash Flow: Net cash provided by operating activities for 2023 was a record $400 million, or 18.1% of total revenue, compared to $191 million, or 9.6% of total revenue, for 2022. Adjusted, unlevered free cash flow for 2023 was a record $325 million, or 14.8% of total revenue, compared to $103 million, or 5.2% of total revenue, for 2022.

Additional Highlights

Named a leader in the 2023 Gartner® Magic Quadrant™ for Unified Communications as a Service, Worldwide Report for ninth year in a row. The 2023 Gartner Critical Capabilities for UCaaS report, which accompanies the Magic Quadrant report, also ranked RingCentral #1 in three out of the six product or service use case categories ranking: #1 for UC with Integrated Contact Center Use Case; #1 for Midsize Enterprise Use Case; and #1 for Telephony Centric/Heavy Organizations Use Case.

Announced the general availability of RingCX™, a native, AI-first contact center with new capabilities powered by its RingSense™ AI platform. Integrated with RingCentral MVP™, RingCX offers a disruptive combination of product, packaging, and pricing.

Announced the global availability of RingCentral Events™, an all-in-one solution for virtual, onsite, and hybrid event needs. Formerly Hopin Events, RingCentral Events is designed to be immersive and personalized, enabling businesses to provide engaging experiences that take events to the next level.

Announced a unified patient care solution for healthcare organizations worldwide. New integrations with Electronic Health Record (EHR) providers, including industry titans Epic, Cerner, and AllScripts, combined with RingCentral’s AI-powered communications suite bridge gaps in the patient engagement journey and simplify workflows. Powered by a new partnership with patient engagement software platform SpinSci, these EHR integrations ensure optimal and secure patient experiences, improved documentation, and reduced administrative burden.

Highlighted that healthcare organizations are adopting RingCentral for Healthcare solution for its trusted reputation in delivering consistent 99.999% reliability, innovative products, and an industry-leading open platform with rich APIs, plus security and privacy by design standards, and various certifications such as HIPAA and HITRUST. Over the past 18 months, RingCentral has added more than 500 new healthcare customers across small, midsize, and large enterprise segments.

Announced that Ned Segal has been elected to the Company’s Board of Directors, effective as of the Company’s 2023 Annual Meeting of Shareholders which was held on December 29, 2023. Segal has also been named a member of both the audit committee and nominating and corporate governance committee of the Company’s Board of Directors. Ned is a seasoned executive with more than 25 years of technology, finance and capital markets experience including at Twitter, Intuit and Goldman Sachs.

Announced that Prat Bhatt has been appointed to the Company’s Board of Directors, effective March 1, 2024. Bhatt has been named a member of the Board’s audit committee. Prat is an accomplished technology industry veteran and financial expert, having served as the Chief Accounting Officer at Cisco Systems for over twenty years. Additionally, Allan Thygesen, who has served on the Board for nine years, will be transitioning off in the second quarter of 2024 to focus on his other commitments.

Announced that it paid approximately $240 million to repurchase approximately $253 million aggregate principal amount of the 2025 Convertible Notes, using the proceeds received from the Company’s previously announced issuance of its 8.500% Senior Notes due 2030 (the "2030 Notes"). Following the closing of the Note Repurchases, approximately $161 million aggregate principal amount of the 2025 Convertible Notes remains outstanding.

Financial Outlook

Full Year 2024 Guidance:

Subscriptions revenue range of $2.260 to $2.285 billion, representing annual growth of 8% to 9%.

Total revenue range of $2.370 to $2.395 billion, representing annual growth of 8% to 9%.

GAAP operating margin range of (1.7%) to (0.9%).

Non-GAAP operating margin of 21.0%.

Non-GAAP tax rate assumed to be 22.5%. No material cash taxes expected given net operating loss carryforwards.

Non-GAAP EPS range of $3.50 to $3.58 based on 99.0 to 98.0 million fully diluted shares.

Share-based compensation range of $380 to $390 million.

Amortization of acquisition intangibles of $140 million.

Restructuring costs range of $5 to $7 million.

Adjusted, unlevered free cash flow margin of 17.5%, or an implied range of approximately $415 to $420 million.

First Quarter 2024 Guidance:

Subscriptions revenue range of $550 to $555 million, representing annual growth of 8% to 9%.

Total revenue range of $575 to $580 million, representing annual growth of 8% to 9%.

GAAP operating margin range of (5.2%) to (4.3%).

Non-GAAP operating margin of 19.5%.

Non-GAAP tax rate assumed to be 22.5%. No material cash taxes expected given net operating loss carryforwards.

Non-GAAP EPS of $0.79 to $0.80 based on 97.0 to 96.5 million fully diluted shares.

Share-based compensation range of $98 to $100 million.

Amortization of acquisition intangibles of $35 million.

Restructuring costs range of $5 to $7 million.