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RingCentral RNG reported third-quarter 2024 non-GAAP earnings of 95 cents per share, beating the Zacks Consensus Estimate by 3.26% and increasing 21.8% year over year.

RNG’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the earnings surprise being 4.60%, on average.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Net revenues of $608.8 million comfortably beat the consensus mark by 1.14% and increased 9.1% year over year. A robust product portfolio and strong subscription revenues drove the upside.

Ringcentral, Inc. Price, Consensus and EPS Surprise

Ringcentral, Inc. price-consensus-eps-surprise-chart | Ringcentral, Inc. Quote

What Should You Expect From RNG Shares Post Q3 Earnings?

RingCentral shares were down 3.32% in the pre-market trading.

RNG shares have returned 11.9% year to date (YTD), underperforming the Zacks Computer & Technology sector’s 28.5%.

RingCentral shares have outperformed the Zacks Internet Software-Services industry and peers, including Okta OKTA, Donnelley Financial DFIN and Sabre SABR.

YTD, shares of Donnelley Financial have returned 0.1%, while Okta and Sabre shares have fell 14.7% and 20.2%, respectively. The industry fell 6.5% over the same timeframe.

RNG raised earnings guidance for 2024, which bodes well for investors. It is benefiting from continued momentum with new products, specifically RingCX, and a strong market position in its core UCaaS market.

RNG’s Software Subscriptions Rises Y/Y

Software subscription revenues (95.8% of total revenues) increased 9.8% year over year to $583 million.

Other revenues (4.2% of total revenues) decreased 4.9% year over year to $25.8 million.

Annualized Exit Monthly Recurring Subscriptions (ARR) increased 9% year over year to $2.48 billion. Enterprise ARR increased 11% year over year to $1.07 billion.

RNG’s Operating Details

The third-quarter 2024 non-GAAP gross margin contracted 120 basis points (bps) from the year-ago quarter’s tally to 76.9%.

On a non-GAAP basis, research & development expenses increased 11.9% year over year to $62.3 million. Sales and marketing expenses increased 3.1% to $237.4 million.

General and administrative expenses fell 6.7% year over year to $40.6 million in the reported quarter.

The non-GAAP operating margin expanded 190 bps from the year-ago quarter to 21%.

RNG’s Balance Sheet and Cash Flow Remain Strong

As of Sept. 30, 2024, cash and cash equivalents were $213 million compared with $199 million as of June 30, 2024.

Cash flow from operations was $127 million in the third quarter, unchanged sequentially.

Non-GAAP free cash flow was $105 million compared with $109 million reported in the previous quarter. The non-GAAP cash flow margin was 17.3% in the second quarter.

In the third quarter of 2024, RNG bought shares worth $83 million. The current remaining repurchase authorization is $243 million.

RNG Offers Positive Guidance for 2024

For 2024, RingCentral expects revenues between $2.397 billion and $2.399 billion, indicating 9% growth over 2023.

Subscription revenues for 2024 are expected between $2.295 billion and $2.399 billion, indicating 9% growth over 2023.

The non-GAAP operating margin is expected to be 21% for 2024.

Earnings are expected to be $3.69 per share, better than the previous guidance of $3.62-$3.67 per share range.

For the fourth quarter of 2024, RingCentral expects revenues between $611 million and $613 million, indicating year-over-year growth of 7%.

Subscription revenues for the fourth quarter are expected to be between $587 million and $589 million, indicating year-over-year growth between 7% and 8%.

The non-GAAP operating margin is expected to be 21.2% in the fourth quarter of 2024. Earnings are expected to be 96-97 cents per share.

Zacks Rank

Currently, RingCentral has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment Research

Sabre Corporation SABR reported third-quarter 2024 adjusted loss of 4 cents per share, wider than the Zacks Consensus Estimate of a loss of 2 cents. However, the figure was narrower than the year-ago quarter’s loss of 6 cents. The year-over-year improvement in the bottom line was due to the benefits of increased revenues and cost-improvement implementations.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Sabre reported revenues of $764.7 million, which missed the consensus mark of $773.5 million. The top line increased 3.3% from $740.5 million reported in the year-ago period. This year-over-year surge in the top line was due to a significant improvement in global air, hotel and other travel bookings. Additionally, the company's Travel Solutions division benefited from improved rates and favorable customer mix.

Following its lower-than-expected third-quarter performance, Sabre lowered guidance for full-year 2024. This raises concerns about the company’s near-term prospects, which might weigh on its share price performance. Shares of SABR have plunged 27% year to date, underperforming the Zacks Internet - Software and Services industry’s decline of 7.8%.

Quarter in Detail

The Travel Solutions segment’s revenues increased 3% year over year to $691 million. The growth in this segment was led by a rise in global hotel and other travel bookings. The segment also benefited from favorable rates from the travel supplier mix. Our model estimates for Travel Solutions revenues were pegged at $697.7 million.

Distribution’s (a sub-division of Travel Solutions) revenues improved 5% to $551 million. The distribution segment registered growth in the number of bookings and benefited from a favorable shift in the booking mix and higher average booking fees. Our model estimates for Distribution revenues were pegged at $548.2 million, which indicated 4.5% year-over-year growth.

IT Solutions’ (a sub-division of Travel Solutions) revenues were $140.3 million, down 5% year over year. The decline in performance was due to the negative impact of de-migrations,

partially offset by growth in passengers boarded from existing partners. Our model estimates for IT Solutions’ revenues were pegged at $149.5 million.

The Hospitality Solutions segment’s revenues were $84 million compared with the year-ago quarter's $78.6 million. The growth in revenues was mainly due to positive customer deployments, CRS transaction growth and a favorable mix within the customer base. Our model estimates for Hospitality Solutions revenues were pegged at $87.1 million.

Sabre reported an adjusted operating income of $107 million, significantly improving from the operating income of $84 million posted in the year-earlier period. Adjusted EBITDA improved from $110 million reported a year ago to $131 million.

Sabre Corporation Price, Consensus and EPS Surprise

Sabre Corporation price-consensus-eps-surprise-chart | Sabre Corporation Quote

Balance Sheet and Cash Flow

Sabre exited the September-end quarter with cash, cash equivalents and restricted cash of $689.8 million compared with the previous quarter’s $633.7 million.

During the third quarter, it generated operating cash flow and free cash flow of $27.8 million and $7.6 million, respectively.

Revised Financial Outlook

Due to the lower-than expected third-quarter results, Sabre revised its guidance downward for 2024. For the year, it now projects revenues of $3.03 billion, down from the previous guidance of $3.05 billion. The Zacks Consensus Estimate for 2024 revenues is pegged at $3.04 billion.

Adjusted EBITDA is now forecasted to be $515 million for 2024, down from the earlier projection of $525 million. The company continues to expect to generate positive free cash flow for the full year.

Additionally, Sabre initiated guidance for the fourth quarter. For the fourth quarter, SABR anticipates revenues of approximately $715 million. It anticipates an adjusted EBITDA of $120 million and expects to have a free cash flow of more than $80 million.

Sabre’s Zacks Rank & Stocks to Consider

Sabre currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Shopify SHOP, Fortinet FTNT and Adobe ADBE. While Shopify and Fortinet sport Zacks Rank #1 (Strong Buy) each, Adobe carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.

The consensus mark for Shopify’s 2024 earnings has been revised upward by 13 cents to $1.12 per share over the past 90 days, indicating a 51.31% year-over-year increase. The long-term expected earnings growth rate for the stock stands at 39.2%. Shares of SHOP have gained 2.7% in the year-to-date period.

The Zacks Consensus Estimate for Fortinet’s 2024 earnings has been revised upward by a penny to $2.01 per share in the past 60 days, indicating an increase of 23.31% on a year-over-year basis. It has a long-term earnings growth expectation of 16.3%. Shares of FTNT have jumped 40.8% in the year-to-date period.

The Zacks Consensus Estimate for ADBE’s fiscal 2024 earnings has been revised upward by a penny to $18.28 per share in the past 30 days, suggesting a year-over-year increase of 13.8%. It has a long-term earnings growth expectation of 13.1%. Shares of ADBE have plunged 19.9% in the year-to-date period.

Zacks Investment Research