S&P assigns BB to RingCentral, notes

S&P said it assigned BB ratings to RingCentral Inc. and its upcoming $400 million of guaranteed senior unsecured notes. The outlook is stable.

“Following years of considerable investments in both its direct and indirect sales motions to bolster revenue growth (CAGR of just above 30% from 2013 to 2022), RingCentral has recently decided to improve its profitability by reducing headcount, rationalizing vendors, and taking other actions. In addition to operating leverage gains, we expect this to drive an EBITDA margin expansion to just below 20% in 2023 from about 12% in 2022, resulting in leverage falling to the mid-3x area from almost 7x (including the $200 million series A convertible preferred equity, which we treat as debt).

“Furthermore, we expect EBITDA growth, as well as better working capital management and an asset-light operating model, to support an increase in FOCF to $270 million-$280 million in 2023 from about $125 million in 2022,” S&P said in a press release.

RingCentral will use the proceeds to refinance debt.

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