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RingCentral (RNG)
NYSE:RNG
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RingCentral
(NYSE:RNG)
Rating:53Neutral
Price Target:
$27.00
▼(-4.76%Downside)
Positive Factors
Financial Strategy
Financial engineering, including increasing FCF margins and reducing net leverage, is underway, which is expected to lead to a higher multiple for shares.
Market Expansion
RingCentral is well positioned to expand their strong UCaaS market share in voice while creating new AI-based products that can sell into the SMB market, where they have the highest growth rate.
Product Adoption
There is strong traction with new products such as RingCX and RingSense, with a significant number of customers adopting these solutions.
Negative Factors
Macroeconomic Risks
Concerns around macroeconomic risks with the SMB customer base may eliminate any short-term catalysts for growth.
Market Challenges
Challenges in gaining comfort with the long-term growth of cloud telephony are significant inhibitors to being more positive about RingCentral.
Market Slowdown
The UCaaS market growth has slowed, growing at a mid-single-digit rate, which could affect RingCentral's market expansion.
RingCentral (RNG) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$2.50B
Dividend YieldN/A
Average Volume (3M)1.04M
Price to Earnings (P/E)―
Beta (1Y)1.54
Revenue Growth7.78%
EPS Growth70.43%
CountryUS
Employees4,260
SectorTechnology
Sector Strength88
IndustrySoftware - Application
Share Statistics
EPS (TTM)1.00
Shares Outstanding80,131,680
10 Day Avg. Volume1,396,810
30 Day Avg. Volume1,040,270
Financial Highlights & Ratios
PEG Ratio-0.03
Price to Book (P/B)-6.98
Price to Sales (P/S)0.00
P/FCF Ratio33.42
Enterprise Value/Market Cap1.91
Enterprise Value/Revenue0.50
Enterprise Value/Gross Profit2.79
Enterprise Value/Ebitda5.28
Forecast
1Y Price Target
$30.75Price Target Upside8.47% Upside
Rating ConsensusHold
Number of Analyst Covering13
RingCentral Business Overview & Revenue Model
Company DescriptionRingCentral, Inc. provides software-as-a-service solutions that enable businesses to communicate, collaborate, and connect in North America. The company offers business cloud communications and contact center solutions based on its Message Video Phone? platform. Its products include RingCentral Office that provides communication and collaboration across various modes, including high-definition voice, video, SMS, messaging and collaboration, conferencing, online meetings, and fax; RingCentral Contact Center, a collaborative contact center solution that delivers omni-channel; and RingCentral Engage Digital, a digital customer engagement platform that allows enterprises to interact with their customers. The company's products also comprise RingCentral Engage Voice, a cloud-based outbound/blended customer engagement platform for midsize and enterprise companies; RingCentral Video, a video meeting service which includes our RCV video and team messaging capabilities and offers video and audio conferencing, file sharing, contact, task, and calendar management. In addition, it offers RingCentral Professional, a cloud based virtual telephone service that provides inbound call answering and management services for professionals; and RingCentral Fax that provides online fax capabilities. The company serves a range of industries, including financial services, education, healthcare, legal services, real estate, retail, technology, insurance, construction, hospitality, and state and local government, as well as others. It sells its products through a network of direct sales representatives, as well as sales agents, resellers, and channel partners. RingCentral, Inc. has strategic partnerships with Alcatel-Lucent Enterprise; and Vodafone Business. The company was incorporated in 1999 and is headquartered in Belmont, California.
How the Company Makes MoneyRingCentral generates revenue primarily through the sale of subscription-based cloud communication and collaboration services. The company's revenue model is built on offering various pricing tiers and packages for its RingCentral MVP platform, tailored to different business sizes and needs. Additional revenue streams come from its contact center solutions and integrations with third-party applications, which enhance the functionality of its core offerings. RingCentral also engages in strategic partnerships with major technology companies, such as Avaya and AT&T, which help expand its market reach and customer base. These partnerships often involve co-selling and co-marketing agreements, contributing significantly to the company's earnings. Moreover, RingCentral's commitment to continuous innovation and expanding its product capabilities ensures a steady stream of recurring revenue from its growing base of subscription customers.
RingCentral Key Performance Indicators (KPIs)
Any
Subscription ARR
Shows the annual recurring revenue from subscriptions, reflecting the stability and predictability of the company's income stream.
Shows the annual recurring revenue from subscriptions, reflecting the stability and predictability of the company's income stream.
Data provided by:
Main Street Data
Main Street DataRingCentral Earnings Call Summary
Earnings Call Date:May 08, 2025
(Q1-2025)
| % Change Since: 6.30%|
Next Earnings Date:Aug 05, 2025
Earnings Call Sentiment Positive
The earnings call reflects a strong financial performance and successful execution of an AI-powered multi-product strategy. The highlights significantly outweigh the lowlights, with record free cash flow, strong revenue growth, and successful product launches. However, there are concerns about macroeconomic uncertainty and competitive challenges in the large enterprise segment.Q1-2025 Updates
Positive Updates
Record-Breaking Free Cash Flow
RingCentral generated record quarterly free cash flow of $130 million, up 70% year-over-year, with a free cash flow margin of 21.3%, up 820 basis points from last year.
Strong Revenue and ARR Growth
Total revenue reached $612 million, up 5% year-over-year, at the high end of guidance. ARR increased to $2.53 billion, up 7% year-over-year, driven by the AI-powered multi-product portfolio.
Successful AI Product Launches
The launch of RingCentral AI Receptionist (AIR) was successful, with over 1,000 customers within weeks. RingSense and RingCX also saw strong adoption, contributing to growth in new product ARR.
Debt Reduction and Strong Balance Sheet
Paid down $161 million of convertible debt, reducing gross debt to $1.36 billion and achieving a net debt leverage ratio of 2x. The company aims to reduce gross debt to below $1 billion by the end of 2026.
UCaaS Market Leadership
RingCentral holds a steady 20% market share in the $30 billion UCaaS market, with leading integrations and a strong AI-powered multi-product portfolio.
Negative Updates
Macro Uncertainty
The company expressed concerns about macroeconomic uncertainty, including interest rates and tariffs, which could impact future performance.
Challenges in Large Enterprise Segment
The competitive environment is more challenging in the larger enterprise cohort, particularly with some larger enterprises emphasizing alternative communication modalities.
Company Guidance
In the RingCentral First Quarter 2025 Earnings Conference Call, several key metrics and forward-looking guidance were highlighted. The company reported total revenues of $612 million, marking a 5% year-over-year increase, and subscription revenues of $590 million, reflecting a 6% growth. The Annual Recurring Revenue (ARR) reached $2.53 billion, with a 7% year-over-year growth. The operating margin expanded to 21.8%, surpassing guidance, while the record quarterly free cash flow was reported at $130 million, up 70% from the previous year. RingCentral also reduced its debt by $166 million during the quarter, bringing the net leverage ratio down to 2x. The company is investing over $0.25 billion annually in innovation, with a strong focus on AI-powered products, and aims to achieve over $100 million in ARR from new products by the end of 2025. For the full year 2025, the company expects subscription revenue growth of 5% to 7%, total revenue growth of 4% to 6%, and a non-GAAP operating margin of approximately 22.5%. Free cash flow is projected to be between $500 million to $510 million, representing a growth of about 25% at the midpoint.RingCentral Financial Statement Overview
Summary
RingCentral shows strong revenue growth and efficient cash flow management, but profitability and balance sheet stability remain concerns. The company is under financial strain due to high leverage and negative equity, which could impact long-term sustainability.Income Statement
RingCentral has shown consistent revenue growth, as seen in the TTM (Trailing-Twelve-Months) data where revenue reached $2.43 billion, up from $1.98 billion in 2022. Gross profit margins are robust at 70.5%, but the company is struggling with profitability, evident from negative net profit margins and net income. Despite improvements in EBIT and EBITDA margins, the company remains unprofitable.45
Neutral
Balance Sheet
The company is highly leveraged, with a negative stockholders' equity reported in the TTM. The debt-to-equity ratio is not meaningful due to negative equity, posing a significant risk. Total assets have decreased over time, and the equity ratio is negative, indicating financial instability.30
Negative
Cash Flow
RingCentral's cash flow performance is a positive highlight, with operating cash flows improving significantly to $536.6 million in TTM. The free cash flow to net income ratio shows the company generating positive free cash flow despite net losses, indicating effective cash management. However, fluctuations in free cash flow growth pose some risks.60
Neutral
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 2.43B | 2.40B | 2.20B | 1.99B | 1.59B | 1.18B |
| Gross Profit | 1.71B | 1.69B | 1.54B | 1.35B | 1.15B | 860.05M |
| EBITDA | 266.06M | 240.38M | 133.56M | -649.48M | -166.02M | 58.54M |
| Net Income | -40.12M | -58.29M | -165.24M | -879.17M | -376.25M | -83.00M |
Balance Sheet | ||||||
| Total Assets | 1.63B | 1.78B | 1.94B | 2.07B | 2.58B | 2.18B |
| Cash, Cash Equivalents and Short-Term Investments | 154.44M | 242.81M | 222.19M | 269.98M | 267.16M | 639.85M |
| Total Debt | 1.41B | 210.99M | 1.59B | 1.68B | 1.43B | 1.45B |
| Total Liabilities | 2.17B | 2.33B | 2.45B | 2.56B | 2.04B | 1.87B |
| Stockholders Equity | -541.20M | -351.47M | -502.57M | -482.79M | 538.42M | 312.25M |
Cash Flow | ||||||
| Free Cash Flow | 453.41M | 400.21M | 323.92M | 100.87M | -232.80M | -142.88M |
| Operating Cash Flow | 536.56M | 483.28M | 399.66M | 191.31M | 152.15M | -35.19M |
| Investing Cash Flow | -109.44M | -109.36M | -90.45M | -87.21M | -396.83M | -107.69M |
| Financing Cash Flow | -476.01M | -351.08M | -358.02M | -98.22M | -127.05M | 437.59M |
RingCentral Technical Analysis
Positive
28.35
Price Trends
26.39
Positive
27.14
Positive
30.96
Negative
Market Momentum
0.34
Negative
62.21
Neutral
93.24
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RNG, the sentiment is Positive. The current price of 28.35 is above the 20-day moving average (MA) of 27.03, above the 50-day MA of 26.39, and below the 200-day MA of 30.96, indicating a neutral trend. The MACD of 0.34 indicates Negative momentum. The RSI at 62.21 is Neutral, neither overbought nor oversold. The STOCH value of 93.24 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for RNG.
RingCentral Risk Analysis
RingCentral disclosed 56 risk factors in its most recent earnings report. RingCentral reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
RingCentral Peers Comparison
Overall Rating
UnderperformOutperform
Sector (63)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
71 Outperform | $3.32B | 82.48 | 2.23% | ― | -3.12% | -37.59% | |
68 Neutral | $3.16B | 139.16 | 9.25% | ― | 15.53% | -75.45% | |
68 Neutral | $3.33B | ― | -4.59% | ― | -18.75% | -256.14% | |
63 Neutral | $251.27M | ― | -24.28% | ― | -1.87% | 61.90% | |
63 Neutral | $1.23B | ― | -6.48% | ― | 10.75% | 56.37% | |
63 Neutral | $33.26B | 5.86 | -11.55% | 1.91% | 5.52% | -20.13% | |
53 Neutral | $2.50B | ― | 16.58% | ― | 7.78% | 70.43% |
* Technology Sector Average
Performance Comparison
RNG
RingCentral
28.35
-0.17
-0.60%
EGHT
8X8
1.96
-0.31
-13.66%
AGYS
Agilysys
114.64
10.99
10.60%
CALX
Calix
53.19
18.99
55.53%
GTM
ZoomInfo Technologies
10.12
-2.13
-17.39%
JAMF
Jamf Holding
9.51
-7.75
-44.90%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.