Mad Hedge Technology Letter
August 24, 2020
Fiat Lux
Featured Trade:
(RING IN THE PROFITS)
(RNG)
Posts
RingCentral is strategically positioned to meet exploding demand with an enterprise program, global and trusted unified Message Video Phone, or MVP, platform.
The results speak for themselves and investors should look at deploying capital in this company.
The pandemic has created unprecedented global challenges and is having a transformative impact that we all need to reckon with.
Cloud transformation of business communications platform has become a priority as companies adjust to a work-from-anywhere environment.
Businesses of all sizes now require communication solutions where employees can work productively with clients, partners, and peers from anywhere on any device and in any model.
This complexities of enabling cloud migration of business communications started over a decade ago and could never be more important today.
Ring delivered a strong second quarter as they continue to take advantage of strong contributions from mid-market, enterprise, and mid-channel partners.
First, Ring announced an expansion of strategic partnership with Atos.
Second, together with Avaya, Ring announced a further global rollout of Avaya Cloud Office by RingCentral.
Several of these large wins were in targeted verticals of healthcare, financial services, and education.
Total revenue grew to $278 million. This is a 29% increase year over year and is above the high end of the guidance range.
Approximately 60% of their on-premise installed base of 40 million users is in Europe, with a strong presence in Germany.
Other locations of strategic importance include France, Spain, Italy, Netherlands, Austria, Belgium, Ireland, U.S., U.K., and Australia.
There is a robust pipeline building and several critical large deals already on the books. An example of a large joint win was the selection of Ring’s platform by a large organization that supports the U.K. government's virus tracing program to control the spread of the virus.
In this highly urgent and critical use case, the solution-leveraged RingCentral's open API platform and was rolled out to multiple thousands of users in approximately six weeks.
To add to the growing hype, Ring saw double-digit growth in messaging and triple-digit growth in video and mobile voice minutes on Ring’s MVP platform quarter over quarter.
Speaking of video, RingCentral Video, or RCV platform, has been quickly proving itself since the April launch.
As part of the agreement, Alcatel-Lucent channel partners and customers will have full access to RNG’s mobile-voice-phone (MVP) platform capabilities, with it also including a $100 million cash payment from RingCentral and providing exclusive access, minimum seat commitment and future commissions to Alcatel-Lucent.
Both companies will also be on the hook for operating expenses related to product development.
This deal will serve as another opportunity for RingCentral to expand sales more quickly globally, especially given Alcatel-Lucent's 40 million-plus unified communications (UC) customer base.
Following this new partnership, RNG now has roughly 45% of the estimated global UCaaS market accounted for via strategic partnerships (180 million seats of a total of 400 million seats).
RingCentral will consistently grow its seat count above an expected industry growth rate of 15% - 20% over the next five years.
The partnerships mean and added $1 billion of incremental revenue opportunity.
In all, this extrapolates into potentially a 40% compounded top-line growth longer term.
With a tech company such as Ring that is locked and loaded in the middle of its sweet spot growth trajectory, it’s hard not to see the underlying stock higher in the next 1 to 2 years.
Then, when investors consider that the Federal Reserve has artificially propped up markets, with traditional valuation metrics no longer telling the whole story, one must conclude that tech growth companies targeting the cloud are prime for a doubling or tripling from current valuations.
The virus has cut off the start-up culture with a round of layoffs from unprofitable companies in Silicon Valley.
The last tech growth companies “in the door” will benefit most since the scarcity value of these firms will filter down to the bottom line.
I am very bullish on RingCentral’s prospects.
Mad Hedge Technology Letter
April 29, 2020
Fiat Lux
Featured Trade:
(TAKING A LOOK AT RINGCENTRAL)
(RNG), (ZM)
Tech stakeholders have won out by corporate American extracting a King’s ransom in the form of a favorable stimulus and unwavering government support for the next lucrative explosion upwards in tech shares.
We have moved into a post-industrial capitalistic apocalyptic world for better or worse and I will give you another hot tip - RingCentral, Inc. (RNG).
The company is poised to rise with all corporate tech boats moving forward.
Inside the deep underbelly of U.S. Capitalism 2.0, the financial fallout and response to it mirrors the last crisis of 2008 signaling to investors to buy tech growth stocks and lots of it.
That might be a cynical take of how the cookie is crumbling but just look at the Teflon tech market that shrugs off the unemployed who are standing in food lines.
Then consider that many of the small business loans were front run by the corporate crowd by hijacking almost $900 million in funds allocated to the small business relief program that was meant to go to main street.
It’s a sign of the pecking order of the future and investors must input the new data into their models going forward.
Corporate America value and its economic extraction machine are powering ahead leaving main street behind offering opportunities for tech-savvy investors.
What does this mean? This is demonstrably bullish for the tech sector and could initiate the Golden Age of 5G investing.
Big tech will get bigger and corporate America will lurch out of the coronavirus epidemic positioned the strongest precisely because they have been best, fully funded, and the strongest tech companies have the country’s best balance sheets.
I advise investors to look at tech growth and RingCentral is one of the leaders in this field.
RingCentral is a robust cloud communications company that is at the vanguard of the Unified Communications as a Service (UCaaS) space.
RingCentral has about 2 million users on its platform and according to management is “the last service to be turned off” in this wonky economy that is mostly shut down.
The knock-on effect of the coronavirus is that RingCentral app downloads are up 400% month over month, online meetings on the platform are up over 200%, and messaging is up over 90%.
RingCentral is regarded as one of the originators of the UCaaS market, which projects to grow at a double-digit pace for the next ten years.
Unified Communications as a service (UCaaS) is the concept of integrating enterprise communication services, such as messaging, voice, and video, into one platform and ecosystem.
The company is brilliantly placed to turn rising demand for UCaaS services into real revenues in Q2 and Q3.
RingCentral (RNG) has launched its highly effective RC Video product for meeting applications.
RingCentral Video is bundled across the entire RC Office portfolio for free and preliminary analysis indicates that the product outperforms for basic multi-user video conferencing requirements via the Chrome browser, including screen sharing.
RingCentral is fighting with Zoom to be at the top of the food chain.
The company’s robust cloud communication platform ties together message, call, and video.
The open platform nature allows for easy integrations and strong brand equity.
The stats don’t lie with RingCentral reporting 30%-plus revenue growth in each of the past three years.
The company is growing out of their ears and when you add in a favorable margin profile, this robust revenue growth will lead into equally robust profit growth cycle.
I will assume in my model that the company will grow 20% over the next 10 years with several hundred basis points of gross margin expansion.
If the company can hit these moderate performance targets, I can’t imagine anything other than the stock being much higher than it is today in the future.
Secular tailwinds cannot be understated as the stock is on the verge of surpassing its prior high of $245, making a perfect V-shaped recovery from the nadir of $139, and breaking out as the rest of the economy comes back online.
The almost doubling of the stock can be extrapolated to many other tech growth stocks that have experienced similar price action in the past 45 days.
Slip this one into your portfolio as tech goes from strength to strength.
