RingCentral upgraded to ’BB+’ by S&P on improved financial metrics

Investing.com -- S&P Global Ratings has upgraded RingCentral Inc. to ’BB+’ from its previous rating, citing the company’s reduced leverage and improved free cash flow generation. The outlook is stable.

The unified communications provider has steadily expanded its EBITDA margins to approximately 22% from about 12% in 2022, driven by effective cost management and operating leverage gains from consistent revenue growth. This improvement has allowed RingCentral to lower its adjusted leverage to mid-2x as of June 30, 2025.

S&P expects the company’s leverage to decrease further to slightly above 2x by the end of 2025, supported by projected revenue growth of 4%-5% and EBITDA margins of 22%-23%.

RingCentral’s free operating cash flow (FOCF) has benefited from EBITDA growth and net working capital management, with S&P projecting reported FOCF to increase to slightly above $500 million in 2025, representing over 40% of debt on an adjusted basis. This strong cash flow position enables the company to further reduce debt while maintaining share repurchases.

The company has stated its goal to reduce reported gross debt to below $1 billion by the end of 2026 from approximately $1.3 billion as of June 30, 2025.

S&P highlighted RingCentral’s strong competitive position in the UCaaS (Unified Communications as a Service) market, its expanding presence in the CCaaS (Contact Center as a Service) market, and its robust partner ecosystem as factors supporting near-term revenue growth. These partners include on-premises unified communications providers, global telecoms service providers, and value-added resellers.

The rating agency expects RingCentral to maintain mid-single-digit percent annual revenue growth over the next few years, aligning with International Data Corp.’s forecast of a compound annual growth rate of about 4.3% for the public cloud UCaaS market from 2024 to 2029.

The stable outlook reflects S&P’s expectation that RingCentral will continue expanding its UCaaS user base and cross-selling its CCaaS platforms, with revenues growing 4%-5% in 2025 and 2026. Cost discipline and operating leverage gains are expected to support EBITDA margins remaining above 20% and strong free cash flow.

S&P noted it could lower the rating if macroeconomic uncertainty, increased competition, or operational missteps lead to a weakened market position or sustained revenue decline. A rating upgrade, while unlikely in the next 12-24 months, could occur if RingCentral strengthens its market position while achieving above-market growth rates and maintaining leverage of mid-1x or below on a sustained basis.

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