In this challenging environment, unified communication and collaboration cloud solutions are key for productive customer, partner, and internal interactions. Cloud-based communication services provider RingCentral (NYSE:RNG), With about 2 million users globally and revenue CAGR of 33% in the past five years, is uniquely positioned in this $50 billion plus UCaaS market.
RingCentral’s first quarter revenues grew 33% over the year to $268 million, significantly ahead of the market’s forecast of $256.6 million. Non-GAAP net income per diluted share was $0.19, ahead of the Street’s estimates of $0.18.
By segment, software subscriptions revenue increased 33% to $243 million. Other revenues grew 35.5% to $21 million.
Among key metrics, Annualized Exit Monthly Recurring Subscriptions (ARR) grew 33% to over $1 billion. RingCentral Office ARR increased 36% to $943 million. Mid-market and Enterprise ARR, defined as $25,000 or more in ARR, increased 52% to $524 million. Enterprise ARR, defined as customers with $100,000 or more in ARR, increased 59% to $318 million. Channel ARR increased 62% to $329 million.
Total cash and cash equivalents at the end of the first quarter of 2020 was $762 million.
For the second quarter, RingCentral expects revenues of $260-$266 million, representing annual growth of 21% to 24%. It raised its guidance for subscription revenues to $244.5-$246.5 million, representing annual growth of 26% to 27% compared to prior guidance of $1.019 to $1.027 billion. Non-GAAP EPS is expected to be $0.20-$0.21. The market was looking for revenues of $266.83 million with an EPS of $0.20. RingCentral revised its full year 2020 outlook $1.116 to $1.125 billion, representing annual growth of 24% to 25%, vs the prior range of $1.125 to $1.135 billion.
RingCentral’s New Offerings
During the quarter, RingCentral announced RingCentral Video (RCV), a reimagined video meetings experience. Together with RingCentral messaging and RingCentral phone, it now provides a comprehensive Message Video Phone™ (MVP) solution. In particular, RingCentral provides cloud-based enterprise class global PBX capabilities, seamlessly integrated with comprehensive native team messaging and video meeting capabilities. RingCentral customers can now truly stay fully engaged and productive from anywhere, on any device and in any mode. Very importantly, new customers can be onboarded quickly and efficiently, without ever having to go on site, which is especially critical in the current environment.
It is already seeing rapid adoption of RCV with over 1,000 organizations using RCV as their primary video meeting solution. RingCentral also leveraged its partnership with AT&T to offer AT&T Office@Hand that will provides enhanced HD video capabilities through the new RCV technology.
RingCentral also announced general availability of the highly anticipated Avaya Cloud Office (ACO) by RingCentral solution. ACO enhances the way organizations communicate with customers, partners, and with colleagues through an all-in-one solution that delivers seamless collaboration across multiple channels. It will bring RingCentral’s leading UCaaS platform to Avaya’s installed base of over 100 million users and over 4,700 partners, providing long-term growth opportunities for both companies. Avaya has already onboarded over 1,700 channel partner agents.
RingCentral’s Customer Traction
During the quarter, the company started offering RingCentral Office for free to K-12 educators, healthcare providers, non-profits, government entities, and news media organizations. It also announced a free offer for its cloud contact center solution to those affected by COVID-19 related challenges. It now has over 4,000 such organizations now using RingCentral. It secured an over 15,000-seat win with Cornell University, an over 8,000-seat win with a Fortune 500 insurance provider Mutual of Omaha, and PM Pediatrics, a pediatric urgent care provider.
RingCentral has also been selected as the new communications platform for the Detroit Lions. The Lions embraced the complete MVP solution at the first virtual NFL draft on April 23.
The RingCentral open platform is seeing strong momentum and has more than 20,000 developers and over 2,000 integrations. Last year, it expanded its offerings with RingCentral Embeddable that allows developers to integrate communications and collaboration capabilities into their enterprise application workflows within minutes. Its app downloads increased over 180% in April versus February, with strong app usage metrics across all modes of communications.
In its large upmarket customers, COVID-19 has served as a catalyst for some of the existing customers to accelerate adoption of RingCentral across their footprint and across all modes: messaging, video and phone. However, small businesses in some verticals like retail, travel, and hospitality are seeing elevated churn. RingCentral announced during its earnings call that small businesses within these verticals account for less than 10% of its overall installed base.
Its stock is currently trading at $266.02 with a market capitalization of $23.45 billion. Last week, following its results, it touched a 52-week high of $266.75. It was trading at a 52-week low of $110.34 in June last year.