Office and call centre communications software provider RingCentral (NYSE:RNG) met Wall Street’s revenue expectations in Q4 CY2024, with sales up 7.6% year on year to $614.5 million. On the other hand, next quarter’s revenue guidance of $609.5 million was less impressive, coming in 2.7% below analysts’ estimates. Its non-GAAP profit of $0.98 per share was 1.3% above analysts’ consensus estimates.
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Revenue: $614.5 million vs analyst estimates of $612.4 million (7.6% year-on-year growth, in line)
Adjusted EPS: $0.98 vs analyst estimates of $0.97 (1.3% beat)
Adjusted Operating Income: $131.2 million vs analyst estimates of $129.8 million (21.3% margin, 1% beat)
Revenue Guidance for Q1 CY2025 is $609.5 million at the midpoint, below analyst estimates of $626.5 million
Adjusted EPS guidance for the upcoming financial year 2025 is $4.20 at the midpoint, in line with analyst estimates
Operating Margin: 0%, up from -7.9% in the same quarter last year
Free Cash Flow Margin: 18.2%, similar to the previous quarter
Market Capitalization: $2.86 billion
«We had a good fourth quarter, capping a strong year,” 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.
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.
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last three years, RingCentral grew its sales at a 14.6% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our benchmark for the software sector, which enjoys a number of secular tailwinds.
This quarter, RingCentral grew its revenue by 7.6% year on year, and its $614.5 million of revenue was in line with Wall Street’s estimates. Company management is currently guiding for a 4.3% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 7.1% over the next 12 months, a deceleration versus the last three years. This projection doesn’t excite us and implies its products and services will face some demand challenges.
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