In an interview with the CEO he says the company Founded in 1999, RingCentral has over 300,000 customers and posted revenues of $114.5 million last year, up 45%. But it still looks like the company is in the early stages. Consider that it believes the addressable market in North America is a whopping $15 billion.
So the addressable markets in $15 Billion. That is EGHT's market as well. I'll take $500 million in revenue. At the current profit margins, EGHTS stock would trade at $50/share.
EGHT has 32,000 customers and $112Miollion in annual revenue. That is $3500/customer/year. For RNG that is $380/customer/year. For EGHt to double revue they need they would really only have to get to 50K business subs. RNG would have to get to 600,000 because the markets they serve are basically mom and pop stores. EGHT is moving upstream to larger customers who spend more annually. We will see larger wins over the next year.
As of the June 30 quarter which ends this Monday, 8x8 should have in excess of 34,500 subscribers and a total revenue run rate in excess of $124 million. The average monthly service revenue per business subscriber should be around $270. To double their revenue at $300 AMSR, 8X8 would need 70,000 subscribers. This might be modified downwards if the SoftBank relationship brought in substantial revenues.
RingCentral numbers are not adding up well for me.
First of all, 300,000 customers looks more like 300,000 individual users.
380/year makes their Average Monthly rate about $31 per user. That's in between 25/mo for their basic plan and 35/mo for premium that are listed on their web site. That makes some sense.
If they really have 300k customers with each of 2+ users then it's well below their advertised rates.
Second, the comparison plans on RingCentral site show AMSR at 580 for 20 users and about 2000 for 100 users. That's more expensive than 8x8 .
So the fact RNG is still losing money means that their margins are too low which is understandable when you sell commodity to the public. Overall, it's a good thing for EGHT that someone went for low-end market - this is a hard place to compete and the reward is miniscule.
Actually, I calculate that over the next couple of years they should be able to AMSR up to around $350.00 as they are doing a great job of upselling existing customers and as they bring on larger customers, it will help as well. That will raise the AMSR quickly. $350.00 AMSR would equate to 50000 business subs. Which means approximately 15,000 more to double revenue.
Look for that $270.00 number to be up around $280.00 this quarter. If they continue to drive additional features to their base, they will be at $350.00 AMSR in two years. That is only $10 increase per quarter. Larger customers will help as well.
All IMHO of course. the numbers will tell the story.