RingCentral, Inc. (RNG) reported its Q4 2023 and FY 2023 results this week. The cloud communications provider beat expectations on earnings and revenue. RingCentral delivered another quarter of record operating margin and free cash flow, above the company’s outlook.

Here’s an overview of the numbers.

Performance versus Expectations

• Q4 2023 Revenue: $571 million, increased by 9% YoY. (Expected: $571 million.)
• Q4 2023 EPS (Loss): GAAP EPS ($0.50); diluted non-GAAP EPS $0.86. (Expected: $0.82.)

• FY 2023 Revenue: $2.2 billion, up 11% YoY.
• FY 2023 EPS (Loss): GAAP EPS ($1.74), diluted non-GAAP EPS $3.23.

Other Key Numbers

• Q4 2023 net cash: a record $114 million.
• Q4 2023 subscriptions revenue grew 9% YoY to $547 million, constituting 96% of total revenue.
• FY 2023 ARR increased 11% YoY to $2.329 billion.
  • Enterprise ARR rose 13% YoY to $1.005 billion for FY 2023.
• Q4 2023 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.
• FY 2023 operating income (Loss): GAAP operating loss was ($199) million, and non-GAAP operating income was $420 million.

Analyst Notes

Vlad Shmunis resumed his role as CEO in December 2023 after briefly stepping down (announced in August 2023) and becoming chairman. Shmunis, or “Vlad” as he is called at the company, is synonymous with RingCentral. He is the company’s cofounder and has grown it to over $2 billion in revenue. The board decided to consolidate the company’s strategic product vision and operations under one leader. In an increasingly competitive and product-driven space, it was apparent that the leader was Shmunis.

RingCentral reported solid momentum this year. One of the company’s biggest highlights was the launch of RingCX, an AI-first contact center powered by the RingSense AI platform. The company has diversified its portfolio this year as well. In August 2023, it acquired Hopin’s events platform and relaunched it as RingCentral Events, a solution for virtual, onsite, and hybrid events. RingCentral also recently introduced a unified patient care solution for global healthcare organizations, integrating with major electronic health record providers.

In prepared remarks, the CEO highlighted his increased focus on establishing a diversified product portfolio, enhancing profit margins, and reducing stock-based compensation. The company touted the success of its recent product launches, particularly RingCX. Shmunis detailed the company’s plan to drive at least $100 million in additional ARR by the end of 2025. The company expects this revenue from new customer wins across RingCentral Events, RingCX, and RingSense. The company sees its multi-product portfolio as key to attracting new logos to the platform, driving higher product uptake within the existing customer base, and improving customer retention.

The company also appointed new members to the board of directors, including former Twitter (now X) CFO Ned Segal and former Cisco chief accounting officer Prat Bhatt.

RingCentral’s Pressures

• The company’s future operating results partially depend on the successful performance of strategic partnerships and global service providers. These relationships include Atos, Amazon, Avaya, Charter Communications, DT, Mitel (Unify), Optus, Vodafone, and other partners and resellers. Disruptions or failures in these partnerships could impact the company’s results.
• Tough macroeconomic conditions have affected XaaS spending.
• RingCentral faces heated competition in the UCaaS (unified communications as a service) and CCaaS (contact center as a service) spaces, particularly from competitors investing heavily in AI-based and contact center offerings.

Looking Forward

RingCentral’s guidance came up light looking into Q1 and FY 2024.

Q1 2024 Guidance:

• RingCentral set a Q1 2024 non-GAAP EPS range guidance of $0.75 to $0.80. The analyst consensus is $0.82.
• RingCentral projects Q1 2024 revenue of $575 million to $580 million, below the analyst consensus of $581.5 million.

Full Year 2024 Guidance: 

• RingCentral sees a FY 2024 non-GAAP EPS range of $3.50 to $3.58, in line with the analyst consensus of $3.51.
• RingCentral sees FY 2024 revenue of $2.37 billion to $2.4 billion, the top end of which is in line with analysts’ consensus of $2.4 billion.

RingCentral provided a cautious forecast for the current quarter. However, achieving profitability could be imminent if RingCentral can replicate the last few quarters of strong performance.

On the earnings call, Shmunis said that the firm has a customer base of 100 paying RingCX clients, a notable increase from the initial 50 at its November launch. He highlighted two Fortune 1000 companies with more than 1,000 seats each, indicating healthy growth, particularly in the enterprise segment.

I met with the RingCentral executive team this week at the company’s analyst summit in Northern California. Much of what RingCentral shared about its plans for its AI-first cloud communications platform was shared under NDA. The company’s executive team—including Shmunis—highlighted recent growth, GTM strategy, and routes to revenue. They took questions and solicited feedback from a small group of industry analysts. While I am bound by the NDA for now, I do look forward to watching RingCentral execute its plans. I left the analyst summit feeling optimistic about the company’s ability to deliver on its goal of $100 million in new ARR growth and feeling confident in the company’s leadership.

Related Recent MI&S Research on RingCentral

RESEARCH NOTE: RingCentral Highlights EHR Integrations for Unified Healthcare Communications Offering — by Melody Brue — February 13, 2024

RingCentral and Vodaphone Power Hybrid and Remote Work for Customers in Spain — by Melody Brue, Anshel Sag, and Patrick Moorhead — November 8, 2023

RingCentral Acquires Hopin Assets For Enhanced Virtual And Hybrid Events — by Melody Brue and Patrick Moorhead — August 24, 2023

RingCentral Goes Back To The Future With Push-To-Talk And AI At Enterprise Connect by Melody Brue and Patrick Moorhead — April 27, 2023

RingCentral Dials In Strategic Partnerships With AWS And Avaya — by Melody Brue and Patrick Moorhead — March 8, 2023