2018 Q3 (FY 2018 Q3) – RingCentral

Current Highlights

  • Total quarterly revenue increased 33% year-over-year to $174 million.
  • Software subscriptions increased 32% year-over-year to $158 million.
  • Annualized Monthly Recurring Subscriptions (ARR) increased 31% year-over-year to $674 million.
  • The company re-engaged and extended a reseller relationship with AT&T; ATT sells to enterprises through both direct and indirect sales channels.
  • Formed a new relationship with BT to resell RingCentral branded as BT Cloud Work.
  • Closed the acquisition of Paris-based Dimelo.

Results Timeline

Q3-2018 vs. Q3-2017 Changes

Comments and Reflections

As we said last quarter, RingCentral continued its methodical expansion into mid-market and enterprise accounts.  This effort appears to be supported by growing channel partner support assisted by a brand awareness campaign based on radio and billboard advertising (at least in the greater Boston area).

As is the case for many in this market, the cost of acquiring a customer is a first-order challenge.  The financial documents from RingCentral (and others) are challenging for non-financial analysts due to accounting rule changes, accounting complexities around acquisitions (such as this quarter’s acquisition of Dimelo[1]), stock options, capitalization of R&D, one-time costs, and subscription revenues.

In addition, or perhaps as a result, there is typically a huge gap between what is reported according to GAAP (Generally Accepted Accounting Principles) and non-GAAP numbers.  Such is the case for RingCentral.

For Q3, RingCentral’s net income per share was -$0.12 for GAAP and +$0.19 non-GAAP.  Given the trajectory of the company’s share price, it appears that Wall Street is either much more focused on non-GAAP or just focused on revenue and subscriber growth, with the assumption that real profits will follow.

While the devil remains in the details, RingCentral’s goal is to provide a comprehensive cloud-based platform that can manage a customer’s internal and external communications needs, while also integrating to third party applications – CRM in particular.

[1] In this quarter, RingCentral completed its acquisition of Dimelo – a cloud based digital customer engagement platform that allows subscribers to manage their customer interactions through a single platform.  Dimelo supports external customer communications via non-voice channels such as messaging, social media, live chat, email, and forums.  Dimelo is a technology play and is the first acquisition for RingCentral since its June 2015 acquisition of Glip.