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RingCentral shouts revenue growth from the rooftops while shareholders can't help but notice deepening losses
Isn't that work-at-home-workforce eyeing a return to the office?
RingCentral is all about the integration of apps in the comms and collaboration sectors to boost productivity and efficiency, but the biz might just need someone to run the same rules over its own bloated overheads.
The cloudy comms concern reported second quarter numbers that show continued demand for its services: revenues leaped 36 per cent year-on-year to $379m, of which $351m was subscriptions.
This was the 30th period of quarter-on-quarter growth and the highest level of growth in five years, Vlad Shmunis, CEO, chairman and founder of RingCentral, he told analysts on an earnings call.
This was down to a "higher number of volume deals" with carriers, better traction with integrated Unified Comms-as-a-Service (UCaaS) and Contact Centre-as-a-Service sales, as well as demand for the RingCentral MVP platform (message, video, and phone).
Mitesh Dhruv, CFO, chipped in to say that "gross [customer] churn across our entire business was at a multi-year low."
This, he claimed, was the result of more attention paid to "product stickiness, as well as implementation of AI enabled tools which provide predictive analytics on customer health metrics across the entire customer base."
Delving further into the numbers, RingCentral recorded operating expenses of $348m compared to $231m a year ago. This included a 75 per cent hike in R&D, soaring sales and marketing costs, and admin expenses up too.
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This left the company nursing a loss from operations of $73.38m, more than double the $29.3m operating loss in Q2 2020. Unsurprisingly, execs didn't focus on this during the conference call. Cash and cash equivalents was $325m, down from $463m at the end of calendar Q1.
Shmunis tried to talk up the cloud comms market by pointing to the opportunity ahead with "400 million legacy PBX users in play". And he highlighted early tie-ups with Alcatel Lucent, Atos, Vodafone, and Deutsche Telekom.
RingCentral upped its revenues guidance for the year to a range of $1.539bn to $1.55bn, growth of between 30 to 31 per cent. Previously it estimated 2021 turnover at $1.5bn to $1.51bn.
Shareholders weren't impressed and the stock was down 4.6 per cent at the time of writing. In fact, the price is down from a high of $434 in February to $255.
Clearly investors are eyeing up workers' return to the office and the consequences for some of the business that have made hay during the pandemic. And it's worth remembering that old adage: revenue is vanity, profit is sanity, and cash is reality. Bubbles are made when businesspeople forget those sentiments. ®