RingCentral Announces Third Quarter 2019 Results
RingCentral, Inc, a leading provider of global enterprise cloud communications, collaboration, and contact center solutions, have last week announced financial results for the third quarter ended September 30, 2019.
Third Quarter Financial Highlights
- Total revenue increased 34% year over year to $233 million.
- Software subscriptions revenue increased 33% year over year to $211 million.
- Annualized Exit Monthly Recurring Subscriptions (ARR) increased 31% year over year to $881 million.
- RingCentral Office® ARR increased 35% year over year to $800 million.
- Mid-market and Enterprise ARR increased 61% year over year to $426 million.
- Enterprise ARR increased 77% year over year to $259 million.
- Channel ARR increased 63% year over year to $263 million.
“We delivered another solid quarter. We are benefiting from continued momentum in mid-market and enterprise markets, with strong contributions from the channel,” said Vlad Shmunis, RingCentral’s founder, chairman and CEO. “We continue to drive success with our leading unified voice, video, and team messaging platform. With today’s announcement of our expanded relationship with AT&T, and the earlier announced strategic partnership with Avaya, we are excited to broaden our global sales reach to help accelerate the transition to the cloud for businesses worldwide.”
Financial Results for the Third Quarter 2019
- Revenue: Total revenue was $233 million for the third quarter of 2019, up from $174 million in the third quarter of 2018, representing 34% growth.
- Operating Income (Loss): GAAP operating loss was $10.7 million, compared to a GAAP operating loss of $7.0 million in the same period last year, primarily driven by higher share-based compensation, amortization of intangibles, and acquisition-related matters. Non-GAAP operating profit was $21.7 million, compared to a non-GAAP operating profit of $14.3 million in the same period last year.
- Net Income (Loss) Per Share: GAAP net loss per share was ($0.15), compared to ($0.12) in the same period last year, primarily driven by higher share-based compensation, amortization of intangibles, and acquisition-related matters. Non-GAAP net income per diluted share was $0.22, compared to $0.19 per diluted share in the same period last year. The third quarter of 2019 reflected a 22.5% non-GAAP tax rate. There were no material cash taxes given our net operating loss carryforwards.
- Balance Sheet: Total cash and cash equivalents at the end of the third quarter of 2019 was $583 million. This compares with $568 million at the end of the second quarter of 2019.
- Announced a strategic agreement with Avaya making RingCentral the exclusive provider of UCaaS solutions to Avaya. RingCentral and Avaya will introduce a new solution, "Avaya Cloud Office by RingCentral." RingCentral and Avaya will jointly develop programs to leverage Avaya’s global sales and partner network, as well as build automated technologies for seamless customer transition to RingCentral’s leading global UCaaS solution.
- Named a Leader in the Gartner Magic Quadrant for Unified Communications as a Service, Worldwide Report.* In the Magic Quadrant report, published on July 30, 2019, RingCentral was positioned furthest for completeness of vision in the Leaders quadrant.
- Announced partnership with SYNNEX Corporation, a leading business process services company, in which RingCentral will deliver a new wave of unified communications and collaboration, cloud communications, and contact center solutions to SYNNEX’ US channel partners. With a network of more than 25,000 reseller partners, SYNNEX will help broaden RingCentral’s channel reach while supporting partner enablement and onboarding.
- Announced agreement with Fujitsu to provide enterprises across EMEA with cloud communications and contact centre solutions for enhanced mobility, workforce productivity, and customer engagement. Fujitsu will offer RingCentral Office® and RingCentral Contact CentreTM as part of Fujitsu Digital Workplace solutions.
- Announced Westcon will act as a master agent for RingCentral initially in the UK and Ireland. It is anticipated that Westcon will draw on its established EMEA footprint to extend RingCentral’s reach across multiple markets in Europe.
Fourth Quarter 2019 Guidance:
- Total revenue range of $238 to $240 million, representing annual growth of 26% to 27%.
- Software subscriptions revenue range of $217 to $219 million, representing annual growth of 26% to 27%.
- GAAP operating margin range of (16.7%) to (16.1%).
- Non-GAAP operating margin of 9.6%.
- Non-GAAP tax rate assumed to be 22.5%, compared to 0% non-GAAP tax rate in 2018. No material cash taxes expected given net operating loss carryforwards.
- Non-GAAP EPS of $0.21 based on 91.5 million fully diluted shares, which includes approximately 1.5 million weighted-average shares associated with the Avaya transaction.
- Share-based compensation range of $30 to $31 million, amortization of debt discount of $5 million, amortization of acquired intangibles of $3.7 million, and acquisition-related matters related to Avaya of approximately $28 million.
Full Year 2019 Guidance:
- Raising total revenue range to $888 to $890 million, representing annual growth of 32%. This is up from our prior range of $874 to $877 million and annual growth of 30%.
- Raising software subscriptions revenue range to $805 to $807 million, representing annual growth of 31% to 32%. This is up from our prior range of $795 to $797 million and annual growth of 30%.
- GAAP operating margin between (7.3%) and (7.2%).
- Non-GAAP operating margin between 9.1% and 9.2%.
- Non-GAAP tax rate for 2019 assumed to be 22.5%, compared to 0% non-GAAP tax rate for 2018. No material cash taxes expected given net operating loss carryforwards.
- Raising non-GAAP EPS to $0.81 based on 88.6 million fully diluted shares, which includes approximately 0.4 million weighted-average shares associated with the Avaya transaction. This is up from our prior range of $0.77 to $0.79.
- Share-based compensation range of $102 to $103 million, amortization of debt discount of $20 million, amortization of acquired intangibles of $10 million, and acquisition-related matters of approximately $34 million.
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