Billion Dollar Unicorn: What Should RingCentral Acquire?

According to a MarketResearch report, the global mobile VoIP market is a fast-growing one. According to the researcher, the low cost of calls offered by VoIP providers are driving growth in the industry. Billion Dollar Unicorn RingCentral (NYSE: RNG ) offers these SaaS-based communication services to small business. Recent results suggest that it is doing rather well so far.

RingCentral’s Financials

San Mateo, California-based RingCentral was founded in 2003 by Vlad Shmunis and Vlad Vendrow. It offers hosted phone systems through its flagship products RingCentral Office, RingCentral Mobile, and RingCentral Internet Fax. Its core offering RingCentral Office is a VoIP service that enables businesses to connect teams in different locations. The service comes with advanced features such as multi-extension business phone systems, fax service, unlimited calling, and pre-configured phones. Its Mobile offering provides customers with access to a single local or toll-free number that connects their existing phone lines as virtual extensions. It also offers additional services such as an Internet fax product, a virtual Meeting room, and a collaborative platform called Glip. I had met Vlad Shumnis a few years ago when he explained how the business grew into becoming a “business-in-a-box idea”.

RingCentral earns revenues through monthly subscriptions. For its recently reported first quarter, revenues grew 34% over the year to $150 million. Revenues were ahead of market expectations of $145.4 million. EPS of $0.16 grew 77% over the year and was ahead of the Street’s forecast of $0.12 for the quarter.

By segment, software subscription revenues grew 32% over the year to $136.96 million. Revenues from other sources more than doubled to $13.3 million.

For the current quarter, RingCentral expects revenues of $154.5-$156.5 million with an EPS of $0.14-$0.16. The Street had forecast revenues of $155.65 million with an EPS of $0.15. It expects to end the year with revenues of $638-$647 million and an EPS of $0.61-$0.65. The market was looking for revenues of $642.8 million with an EPS of $0.62.

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