So RingCental is both an incredibly impressive SaaS and Cloud company — but also a bit of a cautionary tale.
It’s been around for decades but has continued to iterate, expanding into the enterprise, the contact center, and so much more.
Fast forward to today, it’s at:
- $2.43 Billion in ARR
- Growing 9%-10%
- With non-GAAP operating margins of 20.9%
and yet …
- It trades at a $3 Billion maket cap,
- or 1.2x ARR
Now they have $1.5 Billion in debt, so one could argue it’s really 3x net of debt. But I’m not sure that’s the proper way to look at it.
Either way — ouch.
5 Interesting Learnings:
#1. Even With a Big Enterprise Push for Years, 60% of Revenue Still From Mid-Market and SMB
RingCentral closed 20 $1M+ TCV deals last quarter. But even as they push more and more into the enterprise, the SMBs still are buying. Almost just as much. A reminder not to abandon the bottom of the market even as you go more and more enterprise.
#2. Working Hard to Add $100m ARR From New Products
It’s early here, though. Another reminded on how important it is to properly sequence going more and more multi-product.
#3. Quality Management is Their Biggest AI Play at the Moment
This makes sense. Using AI to understand the efficacy of contact center agents is a big use case.
#4. Driving Stock-Based Compensation Much Lower. New Share Grants Are Down -60%.
SBC has become a much bigger issue in SaaS and Cloud the past 2+ years as the markets have focused on true efficiency and profitability. RingCentral has followed, driving SBC down from 23.6% of revenue in 2021 to 15.7% today.
#5. 16,000 Channel Partners
A very large percent of RingCentral’s revenue comes from the channel. A reminder to not stay too reliant on direct sales as you scale.
And a classic SaaStr deep dive with founder CEO Vlad Shmunis here:
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Jason Lemkin, Khareem Sudlow
