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.

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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