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RingCentral Poised to Cross $1B Revenue in 2020

Posted on Tuesday, Aug 13th 2019

According to a recent research report, the global unified communications market is estimated to grow 17% to $167.1 billion by the year 2025 driven by the continued use of cloud-based solutions for communication across enterprises. Recently, RingCentral (NYSE:RNG), a leading cloud-based communications platform provider announced its quarterly results that sent the stock soaring to record high levels.

RingCentral’s Financials

For the second quarter of the year RingCentral saw revenues grow 34% to $215 million, ahead of the market’s forecast of $204.7 million. It reported a net loss of $0.11, compared to $0.10 reported a year ago. Adjusting for share-based compensation and amortization of intangibles, earnings per share was $0.21 compared with $0.19 a year ago and ahead of the $0.16 expected by the market.

By segment, software subscriptions revenue increased 33% over the year to $195 million. Other revenues grew 37% to $20.4 million.

Among key metrics, its annualized exit monthly recurring subscriptions (ARR) increased 32% over the year to $831 million with RingCentral Office ARR growing 37% to $749 million. Mid-market and Enterprise ARR increased 66% to $386 million, Enterprise ARR grew 88% to $230 million and Channel ARR increased 69% to $235 million.

For the third quarter, RingCentral expects revenues of $220-$222 million with a non-GAAP EPS of $0.18-$0.20. The market was looking for revenues of $219.7 million and an EPS of $0.18. RingCentral expects to end the current year with revenues of $874-$877 million and an EPS of $0.77-$0.79. The market had forecast revenues of $864 million with an EPS of $0.73 for the year.

RingCentral’s Platform and Partner Focus

RingCentral is targeting revenues of $1 billion by the year 2020. To achieve that, it is focusing on platform and product innovation. It believes that its key differentiator is its mobile-first integrated voice, video, team messaging and contact center solution that comes with an open platform. Its open platform ecosystem has seen developers grow 60% over the year to more than 23,000 developers. App integrations built on the platform have also reported a 60% growth and the platform now supports more than 2,500 certified app integrations.

To help attract developers, RingCentral continues to add new features. Recently, it announced that it was rolling out the beta of Toll-free SMS messaging, a pay per message service that allows organizations to send commercial or automated messages to their customers. Currently, the carrier-based SMS plans have several restrictions in terms of the number of messages and the number of phones that one can send messages to per day. With Toll-free SMS, these limitations will no longer apply and organizations will be able to share promotional codes, sending shipping updates, appointment reminders, or company news instantly to all their customers.

Additionally, to drive market expansion, RingCentral is looking at advancing its partner network. Earlier last year, it entered into an agreement with Fujitsu to provide enterprises across EMEA with cloud communications and contact center solutions for enhanced mobility, workforce productivity, and customer engagement. As part of the agreement, Fujitsu will offer RingCentral Office and RingCentral Contact Centre as part of the Fujitsu Digital Workplace solutions and will help RingCentral expand its presence in the European market.

Analysts estimate that of the current $56 billion unified communications market, the replacement market for legacy PBX systems in the US alone is worth $15 billion. RingCentral has a huge market opportunity, and its $1 billion revenue goal does not look unreal with the measures that it has put in place.

Its stock is currently trading at $138.39 with a market capitalization of $11.5 billion. It touched a 52-week high of $146.38 last month. It has climbed from a 52-week low of $64.41 that it had fallen to in December last year, when most tech stocks had taken a beating.

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