Posted on Thursday, Feb 13th 2020
Cloud-based communication services provider RingCentral (NYSE:RNG),
which is one of our Top 20 Cloud Stocks for 2020, reported its fourth quarter results this week that blew past all market expectations, and its stock has soared to a record high post the announcement. RingCentral’s
RingCentral’s fourth quarter revenues grew 34% over the year to $253 million, significantly ahead of the market’s forecast of $239.5 million. This was the first quarter that the company reported a billion dollar annual revenue run rate. EPS of $0.22 was also ahead of the Street’s estimates of $0.21.
By segment, software subscriptions revenue increased 33% to $229 million. Other revenues grew 40% to $23.5 million.
Among key metrics, Annualized Exit Monthly Recurring Subscriptions (ARR) grew 32% to $960 million with RingCentral Office ARR increasing 36% to $877 million and Mid-market and Enterprise ARR increased 59% to $479 million.
RingCentral ended the year with
revenues growing 34% over the year to $903 million. GAAP net loss per share of ($0.64)
was higher than previous year’s loss of ($0.33) per share due to higher share-based
compensation, amortization of intangibles, and acquisition related spends. On an
adjusted basis, it reported an EPS of $0.82, compared to $0.77 a year ago.
For the first quarter, RingCentral expects revenues of $257-$259 million with a non-GAAP EPS of $0.18-$0.19. The market was looking for revenues of $249.2 million with an EPS of $0.18. RingCentral expects to end 2020 with revenues of $1.125-$1.135 billion, again ahead of the Street’s forecast of $1.1 billion.
RingCentral’s Growing Partnerships
RingCentral continues to drive growth by building strategic partners. After its earlier tie-up with Avaya, it recently entered an expanded relationship with AT&T. As part of the agreement, AT&T will market a business communication product supported by RingCentral. Known as the AT&T Office@Hand agreement, the two players will bring mobile-first voice, video, online meetings, messaging, and team collaboration capabilities to organizations. The partnership will help RingCentral get access to the wide market supported by AT&T. Additionally, the two players will work together to develop global capabilities to deliver enhanced Unified Communications as a Service(UCaaS).
Earlier this week, RingCentral
also announced its strategic system integrated partnership with Atos. Atos is a
global leader in enabling enterprise digital transformation. As part of the
agreement, Atos will add RingCentral as the preferred provider of UCaaS
solutions. They will enter into a System Integrator relationship and will
introduce a co-branded UCaaS solution that will become a critical part of Atos’
Digital Workplace client and partner offering. The tie-up will help RingCentral
extend its presence into large enterprise accounts that are focusing on moving towards
digital transformation initiatives.
This was the third strategic partnership that RingCentral has entered into in the recent past. The first one
being its tie-up with Avaya last year that was focused on introducing a new joint solution, Avaya Cloud Office (ACO) by RingCentral.
I think SaaS companies like RingCentral also need to focus on exploring a PaaS strategy that can further expand their product ecosystem and help build a developer ecosystem and marketplace around it. As I mentioned in an earlier post,
the beauty of the marketplace model lies in the leveraged multiplier effect of developers writing apps on their platform, selling to their customers through the marketplace, and paying platform/marketplace fees of ~30%. Companies like Salesforce and Atlassian have successfully delivered on this model.
The market is pleased with RingCentral’s collaborative approach to growth. Its stock is currently trading at $227.02 with a market capitalization of $19.5 billion. Earlier this week, it had touched a 52-week high of $233.81. It was trading at a 52-week low of $98.19 in February last year.
This segment is a part in the series : Cloud Stocks . Smartsheet Acquiring Bootstrapped Startups to Drive Growth . Bootstrapped Unicorn Atlassian is Acquiring Capital Efficient Startups . Netflix Price Hike Ruffles Competition . How Will Carbon Black Differentiate? . ServiceNow Grows Through Addition of Capital-Efficient Startups . Zendesk and Freshworks Follow Different Acquisition Strategies . Tableau Grows Through Small Acquisitions . Open Platform Strategy Stands Intuit in Good Stead . Will GoDaddy Follow the PaaS Route? . Adobe Delivers Via PaaS More »» . A Look at Oracle’s 2018 M&A Activity . What Apps Will Drive More Traction for Cloudera? . Slack's App Focus Will Be Key to Post-IPO Success . IBM Counts on its Cloud and Platform for the Turnaround . Atlassian Acquires From its PaaS Marketplace . What Should SAP Acquire to Triple its Value by 2023? . Expect ServiceNow to Acquire From App Marketplace . Should Alarm.com Follow a PaaS Strategy? . How Upwork Can Leverage the Virtual Company Trend . Qualys Scouting For Acquisitions . Should SAP Acquire Zendesk or Freshworks? . HubSpot Counts on its API Strategy . SurveyMonkey Eyes Acquisitions for Growth . Workday Wants to Disrupt Cloud Computing Using Machine Learning . Einstein and Open-Source Platform Lead the Charge for Salesforce . DocuSign Prepares to Beat Rival Adobe . Veeva Soars, But Dassault Acquires Medidata for $5.8 Billion . Tableau Acquisition Signals Massive Analytics Push for Salesforce . Oracle Joins Hands with Microsoft to Take on Amazon . GoDaddy is Making Strategic Acquisitions for the Next Level of Growth . Alteryx Sees Strong Momentum . Adobe Leveraging Magento and Marketo to Deliver Blockbuster Performance . Is Slack Overvalued? . How Will Cloudera Address the Competition? . Zoom is Not Bothered by Cisco or Microsoft . Domo Counts on Enterprise Revenue for Growth . Netflix Plays with Pricing and Games to Attract Subscribers . 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SAP Riding High on the Cloud . Amazon's Faster Shipping Hurting its Earnings . ServiceNow CEO Change Signals Focus on Acquisitions . Will Google Acquire Fitbit? . HubSpot Focuses on Its Platform . BlackLine Partners with Google Cloud . Rapid7’s Focus on Cloud SIEM Pays Off . Splunk Bets Big on Data Streaming . Intuit's QBO Scores Big . VMware Builds Up With Acquisitions . Palo Alto Targets $5B Revenue by 2022 . Workday Targeting Procure-to-Pay Cycle . Will Salesforce Acquire DocuSign? . Okta Targets Enterprise Customers . MongoDB Eyeing China With Alibaba Partnership . Twilio Counts on API Upgrades for Growth . Adobe Revs up its Experience Platform . Top 20 for 2020 . Anaplan Sees Expanding Use Cases . Dropbox Gears Up to Regain Lost Valuation . Forescout Fails to Deliver . Enterprise Bet Pays Off for SurveyMonkey . SAP Bets Big on Experience Management . Twilio Steps up Investment in 2020 to Preserve Growth Momentum . Zendesk, Freshworks Focus on Marketplaces and Integrations . Proofpoint Targets Insider Threats Through Acquisition . RingCentral's Powerful Partner Strategy Would Augment with PaaS . Qualys Counts on Google and Microsoft for Growth . Shopify Soars on Improved Merchant Offerings . HubSpot Believes in the Importance of PaaS . BlackLine Remains Focused on SAP Integration . Recently Public Cloudflare has New Edge . GoDaddy is on a Shopping Spree . Intuit Targets Online User Base Through Acquisition . Should Palo Alto Networks Acquire ZScaler? . Why Salesforce Buying Vlocity Proves the Growing Importance of PaaS . Datadog Performing Well Post Recent IPO . Workday Should Open Up About its PaaS Success . Anaplan Focuses on API Connectors for its Platform . Veeva . Five9 Strengthens its PaaS Focus . RealPage Brings AI and SaaS to Real Estate . Splunk Should Open up About its PaaS Metrics . Okta Benefiting from App Diversity . Oracle Sees Growth Momentum . Xero Focuses on a PaaS Strategy . DocuSign Resilient to COVID-19 . 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Palo Alto Networks Continues to Acquire . Workday Extends its PaaS Strategy . Splunk Rides High on Cloud Initiatives . Salesforce Partners with Workday to Address the New Normal . Veeva Scales New Highs . Is Smartsheet’s Pullback a Buying Opportunity? . MongoDB Soars Even in the Crisis . Okta Reiterates Outlook . Is Anaplan a Prospect for Oracle, SAP? . Oracle Relies on Autonomous Offerings . Adobe Shifts its Focus . Paycom Confident Under Current Conditions . DocuSign Soars to Record Highs . Paylocity Acquires Amid Crisis . Datadog's Integrations and Upgrades Help it Soar . AppFolio Improves Offerings for Current Conditions . SurveyMonkey Should Get Into PaaS . Model N Soars to a Record High . Appian Focuses on RPA for Growth . Slack Beefs up its Portfolio . Coupa Expands into Treasury Services . CrowdStrike Soars to Record Highs . Guidewire Expands Cloud Offerings . Dropbox Should Focus on PaaS . Talend Expands Data Offering Through Partners . IBM Expands Cloud Partners . 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ServiceNow Firing on All Cylinders But One . Snowflake Focuses on Developer Community for Growth . Is SAP Acquiring Alteryx? . Qualys Focuses on SaaS App Security . SurveyMonkey Remains Focused on APIs, ISV PaaS Still Missing . Domo Needs to Open up About PaaS Metrics . Like Wix, GoDaddy Needs to Focus on PaaS . Datadog on an Acquisition Spree . Twilio Soars, Focuses on Social Initiatives . HubSpot Expands Content Offering Through Acquisition . Zendesk Adds Products, While Freshdesk Keeps Acquiring . Shopify and BigCommerce Building API-based Ecosystems . RingCentral Acquires and Adds Partners, But PaaS is Still Missing . Acquisitions and Product Upgrades are the Mantra for Palo Alto Networks . Salesforce can Transform Slack PaaS, But Acquisition Still Pending . After Acquisitions, Five9 Focuses on Channel and Network Partnerships . Workday Drives Enterprise Use Cases Through PaaS, as Anaplan Taps Into Consultants . C3.ai Should Do ISV Focused PaaS . Splunk on the Right Track with Cloud and PaaS . Veeva Sets an Example, Transitions to a Public Benefit Corporation . BlackLine is Targeting A/R Automation Market . Okta Targets $25B Customer Identity Market with Acquisition . Teradata Trying to Reinvent Itself on the Cloud . Dropbox Acquires, But Competition Remains Stiff . Smartsheet Focuses on Partners, and not on ISVs . MongoDB has Huge Room to Grow in $97B Market . Cloud and Platform Expansion Continues at Nutanix . Rapid7 Targets $1B ARR by 2025 . DocuSign Exploring Unprecedented Digital Signature Offerings . Tenable Continues its Acquisition Spree . SolarWinds Attack Driving Zscaler's Stellar Performance . Zoom Should Report Developer Ecosystem Metrics . DigitalOcean Goes Public with a Strong ISV PaaS Strategy . Dynatrace Competing with Rivals by Simplifying DevOps . Talend Becomes a Private Firm, Once Again . Everbridge Focuses on the Government Sector . Analysis of Fastly’s Signal Sciences Acquisition . 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