Ringcentral, Inc. CAPEX surged on 43.2% and Revenue surged on 33.8%
02/11/2019 • About Ringcentral, Inc. (
$RNG) • By InTwits
Ringcentral, Inc. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- Ringcentral, Inc. is a fast growth stock: 2018 revenue growth was 33.8%, 5 year revenue CAGR was 33.2% at 2018 ROIC -3.6%
- Ringcentral, Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for 2014-2018 was 8.6% while average EBITDA Margin was -2.2% for the sames years. In 2018 SBC/Revenue was even higher: 10.1%
- Ringcentral, Inc. has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.9%. At the same time it's in pair with industry average of 13.3%
- CAPEX is quite volatile: $39m in 2018, $27m in 2017, $16m in 2016, $17m in 2015, $18m in 2014
- The company has unprofitable business model: ROIC is -3.6%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue jumped on 33.8%. Revenue growth showed small slowdown in 18Q4 - it was 33.6% YoY. During 2014-2018 Revenue growth bottomed in 2016 at 28.2% and was accelerating since that time. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased slightly on 1.1 pp from 2.2% to 1.0% in 2018. EBITDA Margin grew at 4.2 pp per annum in the last 5 years.
Gross Margin increased slightly on 0.75 pp from 75.9% to 76.7% in 2018. Gross Margin followed a growing trend at 2.9 pp per annum in 2014-2018. SG&A as a % of Revenue increased on 2.1 pp from 62.1% to 64.1% in 2018. Stock Based Compensation (SBC) as a % of Revenue increased slightly on 1.8 pp from 8.4% to 10.1% in 2018. SBC as a % of Revenue followed a growing trend at 0.70 pp per annum in 2014-2018.
Net Income margin decreased on 3.1 pp from -0.83% to -3.9% in 2018. Net Income margin followed a growing trend at 4.6 pp per annum in 2014-2018.
Investments (CAPEX, working capital and M&A)
Ringcentral, Inc.'s CAPEX/Revenue was 5.7% in 2018. Ringcentral, Inc. showed almost no change in CAPEX/Revenue from 2015 to 2018. For the last three years the average CAPEX/Revenue was 5.1%. Ringcentral, Inc. has spent a lot to CAPEX (564% of EBITDA) to secure its growth. During the last 5 years CAPEX as a % of Revenue bottomed in 2016 at 4.3% and was growing since that time.
Accounts receivable as a % of Revenue increased on 4.7 pp from 9.3% to 14.0% in 2018. Accounts payable as a % of Revenue showed almost no change in 2018.
Ringcentral, Inc. has spent
$26m on M&A in 2018 which accounts for 3.9% of revenue.
Return on investment
The company operates at negative ROIC (-3.6%) and ROE (-9.6%). ROIC decreased slightly on 0.74 pp from -2.9% to -3.6% in 2018. ROE decreased on 7.3 pp from -2.3% to -9.6% in 2018. ROIC stuck to a growing trend at 9.6 pp per annum in the last 5 years. ROE grew at 13.0 pp per annum in 2014-2018.
Leverage (Debt)
Company's Net Debt / EBITDA is -29.2x and Debt / EBITDA is 53.6x. Debt jumped while cash jumped on 213%.
The company has no short term refinancing risk: short term debt is zero.
Average interest expence charged on company's debt was 4.4% in 2018.
Management team
The company's CEO Vladimir Shmunis "Vlad" is a founder and has spent 20 years with the company. CEO total compensation was
$7,852,884 in 2018 which included
$543,750 salary. Ringcentral, Inc.'s CFO is Mitesh Dhruv. Mitesh Dhruv has 2 years tenure at the company.
1.9% of the company is owned by insiders. Insider ownership didn't change in 2018.
At the end of financial year the company had 1,352 employees. The number of employees didn't change in 2018. Average revenue per employee in 2018 was
$498,243 and it surged on 33.8%.
Financial and operational results
FY ended 12/31/2018
Ringcentral, Inc. ($RNG) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 219.9 | 296.2 | 379.7 | 503.6 | 673.6 | 33.8% |
| Gross Profit | 143.1 | 209.0 | 287.5 | 382.3 | 516.5 | 35.1% |
| SG&A | 143.7 | 187.0 | 248.0 | 312.5 | 431.9 | 38.2% |
| EBITDA | -34.8 | -17.5 | -11.3 | 10.9 | 6.8 | -37.1% |
| EBIT | -45.2 | -30.9 | -26.0 | -5.3 | -16.4 | |
| Interest expence | 2.0 | 1.1 | 0.7 | 0.1 | 16.1 | 16,164.6% |
| Tax | 0.1 | -1.3 | 0.2 | 0.3 | 0.1 | -45.7% |
| Net Income | -48.3 | -32.1 | -29.3 | -4.2 | -26.2 | |
| Stock Based Compensation | 15.5 | 22.1 | 30.8 | 42.1 | 68.1 | 61.9% |
Balance Sheet
|
|---|
| Cash | 113.2 | 137.6 | 160.4 | 181.2 | 566.3 | 212.6% |
| Accounts Receivable | 7.7 | 19.2 | 30.2 | 46.7 | 94.4 | 102.1% |
| Inventory | 1.7 | 2.3 | 0.1 | | | |
| Accounts Payable | 4.2 | 5.2 | 7.8 | 7.3 | 10.1 | 38.6% |
| Short Term Debt | 17.3 | 4.0 | 14.7 | 0.0 | 0.0 | |
| Long Term Debt | 8.3 | 15.0 | 0.3 | 0.0 | 366.6 | |
Cash flow
|
|---|
| Capex | 18.0 | 17.1 | 16.4 | 26.9 | 38.5 | 43.2% |
| Acquisitions | | 4.7 | | | 26.4 | |
Ratios
|
|---|
| Revenue growth | 37.0% | 34.7% | 28.2% | 32.6% | 33.8% | |
| EBITDA growth | 8.7% | -49.9% | -35.4% | -196.3% | -37.1% | |
|
|---|
| Gross Margin | 65.1% | 70.5% | 75.7% | 75.9% | 76.7% | 0.8% |
| EBITDA Margin | -15.8% | -5.9% | -3.0% | 2.2% | 1.0% | -1.1% |
| EBIT Margin | -20.6% | -10.4% | -6.8% | -1.1% | -2.4% | -1.4% |
| SG&A, % of revenue | 65.4% | 63.1% | 65.3% | 62.1% | 64.1% | 2.1% |
| SBC, % of revenue | 7.1% | 7.5% | 8.1% | 8.4% | 10.1% | 1.8% |
| Net Income Margin | -22.0% | -10.8% | -7.7% | -0.8% | -3.9% | -3.1% |
| CAPEX, % of revenue | 8.2% | 5.8% | 4.3% | 5.3% | 5.7% | 0.4% |
|
|---|
| ROIC | -41.0% | -24.6% | -18.9% | -2.9% | -3.6% | -0.7% |
| ROE | -60.4% | -31.1% | -24.4% | -2.3% | -9.6% | -7.3% |
| Net Debt/EBITDA | | | | -16.7x | -29.2x | -12.6x |
| Interest expence / Average debt | 7.8% | 5.0% | 5.0% | | 4.4% | |
People
|
|---|
| Insider ownership | 1.9% | 1.9% | 1.9% | 1.9% | 1.9% | 0.0% |
| Employees | 609 | 759 | 1,037 | 1,352 | 1,352 | 0.0% |
| Revenue/Employee, th. $ | 361 | 390 | 366 | 372 | 498 | 33.8% |
Ringcentral, Inc. ($RNG) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 150 | 161 | 174 | 189 | | 34.0% | 34.1% | 33.4% | 33.6% |
| EBITDA | 4 | 1 | -1 | 3 | | 169.3% | -10.5% | -134.2% | -34.2% |
| Net Income | -3 | -8 | -10 | -6 | | | | -3,638.3% | |
Balance Sheet
|
|---|
| Cash | 555 | 567 | 577 | 566 | | 270.7% | 239.7% | 235.0% | 212.6% |
| Short Term Debt | 1 | 1 | 1 | 0 | | | | | |
| Long Term Debt | 355 | 360 | 364 | 367 | | | | | |
Ratios
|
|---|
| Gross Margin | 76.3% | 76.3% | 77.4% | 76.6% | | 0.6% | 1.0% | 1.0% | 0.4% |
| EBITDA Margin | 2.8% | 0.8% | -0.8% | 1.4% | | 1.4% | -0.4% | -3.7% | -1.5% |
| Net Income Margin | -1.8% | -5.2% | -5.5% | -3.0% | | 0.2% | -3.4% | -5.7% | -2.9% |
Peers in Application Software
Below you can find Ringcentral, Inc. benchmarking vs. other companies in Application Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (151 companies) | -43.3% | 13.5% | 13.6% | 14.8% | 15.2% |
|---|
| Ringcentral, Inc. ($RNG) | | 34.7% | 28.2% | 32.6% | 33.8% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (150 companies) | 62.8% | 61.7% | 63.8% | 64.4% | 65.7% |
|---|
| Ringcentral, Inc. ($RNG) | 65.1% | 70.5% | 75.7% | 75.9% | 76.7% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| |
|---|
| Median (152 companies) | -10.1% | -10.7% | -5.3% | -4.2% | -3.3% |
|---|
| Ringcentral, Inc. ($RNG) | -15.8% | -5.9% | -3.0% | 2.2% | 1.0% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (153 companies) | 2.8% | 2.7% | 2.9% | 2.3% | 2.4% |
|---|
| Ringcentral, Inc. ($RNG) | 8.2% | 5.8% | 4.3% | 5.3% | 5.7% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (179 companies) | -14.2% | -11.2% | -9.2% | -11.8% | -10.4% |
|---|
| Ringcentral, Inc. ($RNG) | -41.0% | -24.6% | -18.9% | -2.9% | -3.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
| |
|---|
| Median (69 companies) | -1.4x | -1.0x | -0.9x | -0.8x | -0.6x |
|---|
| Ringcentral, Inc. ($RNG) | | | | -16.7x | -29.2x |
