This communications software company provides connectivity for remote and mobile employees. The business is expected to grow its revenues by 50% this year.
RingCentral Inc. (RNG)
from The Buyback Letter
RingCentral Inc. (RNG) is a leading provider of cloud-based phone systems for small businesses. This makes it easier to manage and more flexible than on-premise traditional hardware-based phone systems, and serves today’s mobile workforces better. It’s based in San Mateo, Calif. and has more than 300,000 customers.
An example from a real-world business might help explain it best. Pacific BMW, one of the largest BMW dealerships on the west coast, uses RingCentral for its communications system, replacing an antiquated on-site PBX system that had only basic desktop phone voice service, and which crashed several times a year for a day or more at a time, disrupting customer and employee communications. With RingCentral, the dealership has smartphone support, text and video (HD video meetings, conferencing) to improve efficiency. The mobile app keeps employees accessible to customers and colleagues as calls made to employee business numbers can be automatically routed to their mobile phones, for example (without having to give out a personal cell number).
RingCentral is also useful as a way to streamline communications among different locations, and scale up efficiently as business grows. An example is the Tri-Valley Learning Corp. which operates five facilities up and down the state of California. The company got rid of PBX systems and now takes advantage of video-conferencing and screen-sharing capabilities to unify communications, as well as the ability to turn an employee’s cell into a work phone without giving away personal information. And national law firm Resnick & Louis connects 11 locations using RingCentral (60% of its employees are mobile or working remotely).
Last year the company received “The Big Idea Award,” given to the most disruptive business model in the past 12-18 month at the International Business Forum Venture Capital Investing Conference in San Francisco.
One analyst suggests RingCentral looks ripe to benefit from “The January Effect.” “It was never super expensive as a new, high-growth company, but it’s just downright almost stupid here (at the current price),” said Sean Udall, the CIO of Quantam Trading Strategies. (The January Effect, you’ll recall, is an idea that there’s a general increase in stock prices during January, due to an increase in buying, following the usual December sell-off when investors tried to create tax losses to offset capital gains.)
Q3 2014 revenue increased 36% year-over-year to $56.9 million. Total annualized exit monthly recurring subscriptions were up 37% year-over-year to $219.8 million. RingCentral Office® annualized exit monthly recurring subscriptions were up 53% year-over-year to $153.7 million, and net monthly subscription dollar retention was over 99%.
RNG reduced shares outstanding by 9.13% in the past 12 months.
David R. Fried, The Buyback Letter, www.buybackletter.com, 888-289-2225, January 15, 2015