Why is RingCentral Stock Such Hot Property?
RingCentral have released their 2018 Q4 financials and we take a look at how their value has been impacted
The dramatic growth in the cloud communications market has seen the rise of some the tech industry’s hottest companies, RingCentral are a case in point.
RingCentral have just released their fourth-quarter 2018 results and they are even better than expected. Generally, if the financial report is positive then that is reflected in the stock price. Over the last few weeks the RingCentral stock price has risen more than 20% which is dramatic enough to be turning even more heads on the trading floor. The company is listed on the largest American stock exchange, The New York Stock Exchange (NYSE).
The headline figures from their Q4 report, which has garnered so much trading attention, are dramatic. Let’s start with the revenue. Many sceptics have claimed that cloud companies’ revenue figures are misleading, but they are still a viable indicator of overall growth and general market share. Total revenue for the quarter was up to $189 million representing a 34% increase year on year. Software subscriptions totalled £172 million also mirroring a dramatic increase of 32% against the previous period last year.
Perhaps the most impressive, an ominous from a competitor stand point, figures released relate to RingCentral’s success in their emerging go-to-market strategies. Many onlookers had considered RingCentral’s proposition to be most relevant to SME organisations, but the latest figures now show that the fastest growth is taking place with their offerings to the Enterprise. Customers that generate over $100000, or more, in annual recurring revenue (ARR) are classified by RingCentral as Enterprise. In the final quarter of 2018 RingCentral recorded a near doubling of their Enterprise business with 99% growth year on year. The total ARR accrued in the Enterprise sector, $171 million, still only represents around 23% of RingCentral’s overall total but this dramatic growth indicates that the proposition is becoming more and more appealing with potentially the most stringent of customers in terms of compliance and governance.
Sahil Rekhi, Managing Director for RingCentral EMEA, spoke to UC Today to explain how their strategy has resulted in this impressive growth across the board.
“As part of our global strategy, we continue to evolve the organisation in EMEA to service the Enterprise market, showcasing strong performance and growth in region of customers with 100k+ ARR.”
“This growth is driven by further investments into developing of channel partner networks. Part of the growth in region is also being driven by the great success RingCentral is having with our contact centre offering, and the addition of RingCentral Engage, is only going to strengthen our position further in terms of offerings and service wrap to the Enterprise market.”
Another area which is particularly interesting is the development of RingCentral’s channel partner business. Up until now RingCentral have primarily operated a direct sales model across the majority of their business territories. In recent months however they have been placing an increasing focus on developing their indirect channel business and this appears to be paying dividends. Last quarter there was an 80% increase in the annual recurring revenue created by their global channel partner community. Taking the total ARR generated by the channel to over $180 million, now representing nearly a quarter of the annual total. The fact that their partner business is growing so strongly alludes to another positive, increased customer demand. Partner businesses globally only tend to adopt new technology platforms when there is significant demand and enquiries from their customer base. The 80% increase infers that the brand is becoming even more synonymous globally and customers are requesting the platform from their technology partners, driving this conspicuous market development.
It might seem a simple concept that positive financial figures are reflected in a rise in stock value, but the markets are more nuanced than that. The dramatic rise in the stock value doesn’t just recognise RingCentral’s continually impressive growth it also perceives the areas in which the growth is occurring. With the business expanding from all angles, in the Enterprise sector and through the global partner channel, as well as its usual growth areas RingCentral’s proposition becomes even more attractive.