For First Time Since Its IPO, RingCentral Didn't Beat Top End Of Top-Line Guidance

Goldman Sachs maintained its Neutral rating on RingCentral Inc RNG after the third quarter marked the first time the company didn't beat the high end of its revenue guidance range since its IPO.

RingCentral reported third quarter revenue of $96.8 million, above consensus of $96.1 million but below the high end of its $95-$97 million guidance. The company was profitable on a non-GAAP basis for the fifth straight quarter, with non-GAAP EPS of $0.03 versus the Street of $0.01 and guide of breakeven to $0.02.

“Typically RNG beats the high end of guidance by an average of $5.2mn. However, upside vs. subscription revenue will be an area of focus going forward,” analyst Heather Bellini wrote in a note.

Subscription revenue for the quarter was in line with Goldman Sachs estimate of $92 million and beat the high end of guide by $1.5-$2 million the last two of three quarters it was guided to (subscription revenue was not guided to this quarter).

Bellini noted that there was little color from the company over competition from Microsoft Corporation MSFT. The analyst also cut CY16E/CY17 revenue estimate to $378 million/$479 million from $375 million/$461 million.

“While RNG cited examples of 1k+ seat wins this quarter and a strengthened partnership with Google, there was little discussion around Microsoft competitively compared to prior quarters, leading us to believe that Microsoft is seeing more traction in this space,” Bellini added.

At time of writing, shares of RingCentral fell 4.97 percent to $22.00. The analyst has a price target of $26.