Enterprise business ARR crosses $100 million milestone
BELMONT, Calif.--
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RingCentral, Inc. (NYSE: RNG), a leading provider of global enterprise cloud communications and collaboration solutions, today announced financial results for the first quarter ended March 31, 2018.
First Quarter Financial Highlights
Total revenue increased 34% year over year to $150 million.
Software subscriptions revenue increased 32% year over year to $137 million.
Annualized Exit Monthly Recurring Subscriptions (ARR) increased 31% year over year to $589 million.
RingCentral Office® ARR increased 37% year over year to $509 million.
GAAP software subscriptions gross margin was 82.1%, up 1.6 points year over year, while non-GAAP software subscriptions gross margin was 82.8%, up 1.4 points year over year.
GAAP operating margin was (0.9%), up 1.1 points year over year, while non-GAAP operating margin was 8.6%, up 2.2 points year over year.
Net monthly subscriptions dollar retention: RingCentral Office over 100% and overall subscriptions over 99%.
“Our first quarter was an excellent start to 2018 for RingCentral. Our business strengthened, driven by our mid-market and enterprise customers. Our enterprise business is now over $100 million, growing triple digits,” said Vlad Shmunis, RingCentral’s chairman and CEO. “We announced innovative new products and we continued to extend our leadership position in the cloud communications industry. We believe we are well positioned to benefit as the on-premise market transitions to the cloud.”
New Accounting Standard The Company adopted the new standard related to revenue recognition (Topic 606) effective January 1, 2018. The financial information in this press release is prepared in accordance with Topic 606, and the comparison period amounts used to calculate growth rates are based on amounts that have been restated from previously reported amounts to conform to the requirements of Topic 606.
Financial Results for the First Quarter 2018
Revenue and Gross Margin: Total revenue was $150 million for the first quarter of 2018, up from $112 million in the first quarter of 2017, representing 34% growth. Total GAAP gross margin was 76.3% for the first quarter of 2018, up 0.6 points compared to 75.7% in the first quarter of 2017.
Net Income (Loss) Per Share: GAAP net loss per share was ($0.03) for the first quarter of 2018 compared with ($0.03) for the first quarter of 2017. Non-GAAP net income per diluted share was $0.16 for the first quarter of 2018, compared with $0.09 per diluted share for the first quarter of 2017.
Balance Sheet: Total cash and cash equivalents at the end of the first quarter of 2018 was $555 million, compared with $181 million at the end of the fourth quarter of 2017.
Recent Business Highlights
Announced RingCentral Collaborative Contact Center™ solution, which transforms the way organizations manage customer engagement. This new solution combines contact center features with team messaging to enable agents and supervisors to communicate and collaborate across their organizations in real-time to resolve customer issues efficiently.
Announced RingCentral Pulse™, an innovative solution which provides intelligent bots that monitor critical call center metrics in real time. It provides automated alerts and notifications to key stakeholders directly within team messages via RingCentral Glip. This empowers organizations to deliver superior quality service to their customers.
Announced RingCentral Collaborative Meetings™ which provides integrated team messaging, online meetings, video conferencing, screen-sharing, and task management in a single solution to enable a full meeting experience. Available stand-alone, the solution can be easily upgraded to the full cloud communications capabilities of RingCentral Office®.
Issued $460 million of 0% coupon Convertible Senior Notes due in 2023. In conjunction with the issuance of the convertible notes, RingCentral also entered into a capped call transaction to eliminate shareholder dilution up to a $119 stock price, or 90% above the share price at issuance.
Received a 5-star rating from CRN®, a brand of The Channel Company, in its 2018 Partner Program Guide. The CRN 5-Star Partner Program Guide rating recognizes an elite set of companies that offer the best partnering elements in their channel programs.
Financial Outlook Full Year 2018 Guidance:
Raising software subscriptions revenue range to $588 to $594 million, representing annual growth of 26% to 28%. This is up from our prior range of $581 to $589 million and annual growth of 25% to 27%.
Raising total revenue range to $638 to $647 million, representing annual growth of 27% to 28%. This is up from our prior range of $629 to $639 million and annual growth of 25% to 27%.
Raising GAAP operating margin range to (4.0%) to (3.4%), up from the prior range of (4.5%) to (3.5%). Raising non-GAAP operating margin range to 8.1% to 8.3%, up from the prior range of 7.8% to 8.2%.
Raising non-GAAP EPS range to $0.61 to $0.65 based on 86.0 million fully diluted shares. This is up from our prior range of $0.56 to $0.60.
Second Quarter 2018 Guidance:
Software subscriptions revenue range of $142.5 to $143.5 million, representing annual growth of 28% to 29%
Total revenue range of $154.5 to $156.5 million, representing annual growth of 29% to 31%
GAAP operating margin range of (5.3%) and (4.3%), and Non-GAAP operating margin range of 7.5% and 8.0%
Non-GAAP EPS range of $0.14 to $0.16 based on 85.0 million fully diluted shares
For a reconciliation of our forecasted non-GAAP operating margin, see “Reconciliation of Forecasted Operating Margin GAAP Measures to Non-GAAP Measures.” We have not reconciled our forecasted non-GAAP EPS to GAAP EPS because we do not provide guidance on it. We do not provide guidance on forecasted GAAP EPS because of the inherent uncertainty and complexity involved in forecasting the intercompany remeasurement gain (loss), which could be a significant reconciling item between the non-GAAP and respective GAAP measure. The intercompany remeasurement gain (loss) is affected by the movement in various exchange rates relative to the USD, which is difficult to predict and subject to constant change. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measure is not available without unreasonable effort.
Conference Call Details:
What: RingCentral financial results for the first quarter of 2018 and outlook for the second quarter and full year of 2018.
When: Wednesday, May 9, 2018 at 2:00PM PT (5:00PM ET).
Dial-in: To access the call in the United States, please dial (877) 705-6003, and for international callers, dial (201) 493-6725. Callers are encouraged to dial into the call 10 to 15 minutes prior to the start to prevent any delay in joining.
Replay: A replay of the call will be available via telephone for seven days, following the completion of the call. To listen to the telephone replay in the U.S., please dial (844) 512-2921 from the United States or (412) 317-6671 internationally with recording access code 13678764.