Ronglianyun will rise by 200 upon listing. Will Ronglian Cloud be the next "unicorn" in the communications cloud era?

Zhitong Finance APP observed that on February 9, Ronglian Cloud (RAAS.US), the largest domestic intelligent communication cloud service provider, officially landed on the US stock market. Ronglianyun’s IPO is priced at US$16, which is higher than its IPO pricing range of US$13-15. Calculated at this issue price, the amount of funds raised by Ronglianyun’s IPO will reach US$320 million.

Pricing higher than the IPO pricing range fully reflects the market's favor for Rong Lianyun, which is prominently reflected in the company's stock price after listing. At the close of US stocks on February 9, Ronglian Cloud closed at US$48 per share, an increase of 200 from the issue price of US$16, and the company's market value reached US$7.67 billion.

After experiencing the previous trough of Chinese concept stocks, US stock investors are still enthusiastic about Rong Lianyun. The first reason is that the stock price of star benchmark company Twilio has increased by more than 50 times in 5 years, and secondly because Investors are relatively optimistic about the development prospects of the communications cloud market.

"Money-making opportunities" in the communication cloud era

The "cloud era" is an inevitable trend in the current development of science and technology. As an application scenario of the cloud era, communication cloud will naturally not miss this opportunity. historical development boom.

According to Zhitong Finance APP, Communication Cloud mainly targets the enterprise and government-level markets and is responsible for customized information transmission services. By integrating multi-party communication resources and Internet technology, it becomes customized text messages. , voice, video, traffic and other service capabilities.

Generally speaking, communication cloud companies purchase telecom resources from telecom operators, and then provide various API interfaces and SDK modules to the enterprise to serve customers through cloud calls. Currently, many APPs on mobile phones require users to log in using mobile phone verification codes, which is one of the concrete manifestations of this business.

Communication cloud mainly includes CPaaS (cloud communication platform), cloud-based CC (contact center), cloud-based UC (unified communications and collaboration).

The development of the communications cloud market has been underestimated for a long time. According to IDC statistics, the global CPaaS (cloud communication platform) market size in 2017 was only about US$2 billion. In terms of market size, it only ranked low among the cloud service segments.

However, as more and more consumer scenarios begin to use communication cloud services and Twilio is listed on the US stock market, the development potential of this segment is gradually being tapped.

Compared with traditional communication methods that require communicating through dedicated switches or PBX equipment and paying high fixed costs for infrastructure, software and hardware, communication cloud is a "cloud-based" out-of-the-box solution IT solutions with high flexibility and scalability. With the deepening of industrial division of labor and collaboration, communication cloud meets the needs of enterprise-level communication means reform, and the ceiling of the track is opened. Statistics show that the global CPaaS market size will have a compound growth rate of 39 between 2017 and 2022, and the market size will exceed US$10 billion in 2022.

However, compared to the estimated market size, what really detonated this track was Twilio’s listing on the US stock market.

Twilio, an American cloud communications service provider, was listed on the New York Stock Exchange on June 23, 2016. The company’s IPO was priced at US$15. At that time, the corresponding market value was only US$1.2 billion, but as of 2 Eastern Time At the close of trading on March 9, Twilio’s market capitalization reached US$61.3 billion. The rapid development of the communications cloud market is reflected in the growth of this company's market value.

The popularity of Ronglian Cloud is not unrelated to the fact that China's communications cloud market is also in the growth stage and has a huge market space.

Zhitong Finance APP has learned that the market size of China’s cloud communications industry has increased from 16.3 billion yuan in 2015 to 35.7 billion yuan in 2019, with a compound annual growth rate of 21.7, and is expected to grow in 2024 will exceed 100 billion yuan.

It is not difficult to see that China’s communications cloud market is forming a blue ocean market worth hundreds of billions. For the unicorn Ronglian Cloud in the market, the valuation ceiling will continue to rise as the market grows. Wall Street will naturally Don't want to miss this opportunity to make money.

The development of unicorns still needs to continue to build foundations

But whether Rong Lianyun can truly grow into a "behemoth" similar in size to Twilio still needs to be determined at present. question mark. Judging from the data disclosed in the prospectus and the company's development, Ronglianyun's development still needs to continue to build a foundation.

From the perspective of financial data, in terms of revenue, in 2018, 2019 and the first nine months of 2020, Ronglian Cloud’s revenue was 502 million yuan, 650 million yuan and 509 million yuan respectively, year-on-year The growth rates were 29.7 and 19.4 respectively.

However, on the profit side, losses are the norm for the company. During the reporting period, the company's net losses were 156 million yuan, 184 million yuan, and 204 million yuan respectively. Despite the increasing revenue, the company's net losses were further expanded year-on-year.

The reason for the further expansion of the company's losses lies in cost and expense factors.

From a cost perspective, due to the development characteristics of the industry, telecommunications resource costs are the core item among the company's cost items. Data show that during the reporting period, telecommunications resource costs accounted for 73.7, 76.4, 74.1 and 73.1 of the company's total revenue costs for the period respectively.

The reason for this phenomenon lies in the special circumstances of the development of the domestic telecommunications industry.

In China, communication resources are allocated by the three major operators. As a service intermediary, communication cloud companies have difficulty in obtaining bargaining rights when cooperating with operators. Therefore, telecommunications resource costs have always accounted for more than 70% of the company's total revenue costs, and until Ronglian Cloud's downstream market share is significantly increased, this cost situation may not be substantially improved. This is why the company's gross profit situation has not been improved. The root cause of improvement.

On the expense side, R&D expenses and marketing expenses have become the direct reasons for the expansion of the company's net losses.

It is not difficult to see that during the reporting period, the company's R&D expenses and marketing expenses accounted for the proportion of total operating expenses for the current period have been maintained at around 35 and 40, and the overall operating expenses continued to grow. The reason is that the research and development of cloud services requires continuous investment, and the company also needs to increase marketing efforts in order to continuously expand market share.

From a customer perspective, although as of the end of 2019, the number of active customers of Ronglian Cloud reached 10,200, in comparison, Twilio’s active customers reached 179,000.

Not only that, from the customer structure of Ronglianyun, as of September 2020, the number of active customers of Ronglianyun increased by 511 year-on-year to 12,048, including 173 major customers*** , accounting for 1.4, and the contribution of large customers to its revenue is as high as 76.

In addition, it is worth noting that during the reporting period, Ronglian Cloud’s customer retention rate showed a continuous downward trend, which were 135.7, 102.7 and 94.7 respectively. This directly reflects that the company's strong binding relationship with existing customers is declining, and indirectly indicates that market competition is increasing, which is the main reason for the company's increasing marketing expenses.

Although customized SaaS services can increase customer replacement costs in terms of business attributes, for Party B such as Ronglian Cloud, it also increases dependence on large customers in disguise. As the company mentioned in the risk factors in its prospectus, although the company has a relatively stable relationship with large customers, “since the company’s business mainly focuses on large enterprises, there is the possibility of being required to significantly reduce prices.

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Compared with today's Twilio, after expanding its downstream market share and having nearly 200,000 active customers, the company's dependence on large customers has declined significantly. The company's good customer structure has promoted increasingly healthy operations. This This is the key reason for its market recognition, and Rong Lianyun still has a long way to go if it wants to achieve scale effects.