Posted on Tuesday, Jul 10th 2018
According to a MarketResearch report, the global mobile VoIP market is a fast growing one. According to the researcher, the low cost of calls offered by VoIP providers are driving growth in the industry. Billion Dollar Unicorn RingCentral (NYSE:RNG) offers these SaaS based communication services to small business. Recent results suggest that it is doing rather well so far.
San Mateo, California-based RingCentral was founded in 2003 by Vlad Shmunis and Vlad Vendrow. It offers hosted phone systems through its flagship products RingCentral Office, RingCentral Mobile, and RingCentral Internet Fax. Its core offering RingCentral Office is a VoIP service that enables businesses to connect teams in different locations. The service comes with advanced features such as multi-extension business phone systems, fax service, unlimited calling, and pre-configured phones. Its Mobile offering provides customers with access to a single local or toll-free number that connects their existing phone lines as virtual extensions. It also offers additional services such as an Internet fax product, a virtual Meeting room, and a collaborative platform called Glip. I had met Vlad Shumnis a few years ago when he explained how the business grew into becoming a “business-in-a-box idea”.
RingCentral earns revenues through monthly subscriptions. For its recently reported first quarter, revenues grew 34% over the year to $150 million. Revenues were ahead of market expectations of $145.4 million. EPS of $0.16 grew 77% over the year and was ahead of the Street’s forecast of $0.12 for the quarter.
By segment, software subscription revenues grew 32% over the year to $136.96 million. Revenues from other sources more than doubled to $13.3 million.
For the current quarter, RingCentral expects revenues of $154.5-$156.5 million with an EPS of $0.14-$0.16. The Street had forecast revenues of $155.65 million with an EPS of $0.15. It expects to end the year with revenues of $638-$647 million and an EPS of $0.61-$0.65. The market was looking for revenues of $642.8 million with an EPS of $0.62.
RingCentral was privately held till 2013. It had raised $45 million from investors prior to listing. Its initial investors included Akkadian Ventures, Hermes Growth Partners, RTP Ventures, Scale Venture Partners, Khosla Ventures, Silicon Valley Bank, DAG Ventures, Cisco, and Sequoia Capital. In 2013, it went public by raising $97.5 million in an IPO that valued it at $790 million.
RingCentral’s Expanding Offerings
RingCentral continues to expand its market presence through additional offerings. Earlier this quarter, it announced the launch of RingCentral Collaborative Contact Center solution, an offering that transforms the way organizations manage customer engagement. The new service integrates contact center features with team messaging, thus enabling communication and collaboration across agents and supervisors on a real-time basis to resolve customer issues efficiently.
It also announced the release of RingCentral Pulse, another innovative solution that provides intelligent bots that monitor critical call center metrics in real-time. The offering is able to send alerts and notifications automatically to key stakeholders within the team using RingCentral Glip. The service helps improve quality of service offered by organizations to their customers.
Finally, it launched RingCentral Collaborative Meetings, a virtual meeting solution that provides integrated team messaging, online meetings, video conferencing, screen-sharing, and task management. The service is available on a stand-alone basis as well as a part of the RingCentral Office solution.
Its innovative products have helped RingCentral achieve the leading position in the 2018 IHS Markit UCaaS Leadership Scorecard released earlier this year. Last year, Synergy Research had also rated RingCentral as the worldwide market share leader in both revenues and subscriber seats, significantly ahead of its competitors 8×8, Shoretel, and Vonage Business.
RingCentral attributes its success to its open collaborative platform that help organizations empower their global and distributed workforce to work anywhere, anytime, and on any device. The company believes that the rise of cloud-based solutions will lead to the demise of legacy providers like Avaya and help RingCentral grow to a $1 billion business by 2020.
Questions for RingCentral’s Board
RingCentral has successfully leveraged the growing opportunity within SaaS. Gartner had ranked RingCentral’s offerings the most complete in the industry with its execution matched only by Verizon. Last year, the market was abuzz with rumors that tech giants including Google and Amazon were interested in acquiring RingCentral for its services. So far, RingCentral has managed to stay independent. I would like to know how does the company plan to expand in the future? What additional services is it looking to add, and what players is it looking to acquire to add those capabilities?
RingCentral had priced its shares at $13 apiece for the listing. Today, its shares are trading at $74.95 with a market capitalization of $5.9 billion. It had touched a 52-week high of $81.20 earlier last month. The stock has been climbing steadily from the 52-week low low of $34.10 nearly a year ago.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns.
This segment is a part in the series : Billion Dollar Unicorns
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