RingCentral has had a strong start to its first quarter of 2023, exceeding expectations with a total revenue of $534 million.
The increase in the company’s total revenue reflects a 14 percent year-over-year growth and it is not the only highlight of the company’s results.
Key product innovations were also at the heart of discussions on the company’s quarterly earnings call with references to RingSense, RingSense for Sales, RingCentral for Teams 2.0, RingCentral for Frontline Workers, and RingCentral Overlay.
Vlad Shmunis, RingCentral’s Founder, Chairman and CEO, said:
“We had a good first quarter, as we exceeded the high end of guidance across key metrics.
“Our open platform, deep integrations to top third-party applications, 99.999% reliability, global reach, and integrated UCaaS and CCaaS platform continue to resonate with customers and distinguish RingCentral from competitors.
“We also introduced several new products and features this quarter that we believe further differentiate our platform.”
RingCentral also exceeded the high end of guidance for subscriptions, with a revenue increase of 16 percent year-over-year to $508 million.
Annualised Monthly Recurring Subscriptions (ARR) were up, as was the Mid-market and Enterprise ARR.
RingCentral’s Non-GAAP operating margin was 17.2 percent, up 680 basis points year-over-year, making it a quarterly record.
The RingCentral CEO put this quarter’s success down to cost discipline, operational efficiencies, and last year’s actions.
Such actions, he believes, have put them in a strong position for when the market recovers.
Although the macro market environment “remains uncertain”, according to Shmunis, RingCentral is focusing on the elements within its control, which include innovation and a disciplined approach to profitability.
RingSense
One such innovation, Shmunis spoke about, was RingSense, its new AI platform: “In the past, I have talked about four megatrends driving our business.
“These are; the shift to hybrid work; ongoing adoption of mobility by businesses; increasing reliance on distributed workforces; and the desire for an integrated, cloud-based UC and CC solution from a single provider.
“A fifth megatrend has now emerged that is truly revolutionary and that is AI.
“With RingSense, we now have the ability to inject AI capabilities across the entire RingCentral portfolio.
“As one of the world’s largest UCaaS providers, we are in a unique position to offer our customers powerful insights into their conversations.”
He also explained the utility of RingSense for Sales, its first commercial application for RingSense, which will provide sales teams features, including keyword analysis, scoring, and AI-generated recommendations.
RingSense for Sales is currently being tested by a number of customers in close beta and Shmunis said the RingCentral Sales Team is also transitioning from a third-party conversational intelligence solution to RingSense for Sales.
RingSense for Sales was released last month during an Enterprise Connect event in Orlando, alongside a number of other announcements, which are working towards a composable future of CX.
This shift in direction has also filtered through to RingCentral’s choice of partners, with deals recently struck with Avaya and AWS.
Speaking of Avaya, Mo Katibeh, the President and Chief Operating Officer at RingCentral, told analysts that, in spite of recently emerging from bankruptcy, it is still expecting to achieve the minimum commitment volumes from them. Even if they are unable to meet these commitments, there are “mechanisms in place” to deal with the shortfall.
Katibeh also commented on AWS saying that, although the partnership is in its early days, it is “developing well”.
Financial Outlook
RingCentral has raised its 2023 revenue and operating margin outlook.
The total revenue range is now between $2.187 and $2.205 billion, representing an annual growth of 10 percent to 11 percent.
The GAAP operating margin has been raised to between 7.9 percent and 6.6 percent and the non-GAAP operating margin is at least 18.5 percent, representing a 0.5 percent increase.
For the second quarter, total revenue is in the range of $535 to $537 million, which represents year-over-year growth of 10 percent.
RingCentral’s latest innovations, such as RingSense, and its shift towards composability will play a big part in determining the company’s success across its future financial quarters.
Shmunis is confident they will increase RingCentral’s customer value proposition and create expansion opportunities within its customer base.
