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“Ronglian Cloud Communications” today IPO, can the story of the Chinese version of Twilio be reproduced?

#Ronglian #Cloud #Communications #today #IPO #story #Chinese #version #Twilio #reproduced
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Wen | Chanting

Editor | Shi Yaqiong

Cover source | IC photo

 

At 10:30 Beijing time tonight, the intelligent communication cloud service provider “Ronglian Cloud Communications” (hereinafter referred to as “Ronglian”) officially landed on the NYSE with the stock code “RAAS”. In this IPO, Ronglian Cloud Communications issued a total of 20 million ADS shares at an issue price of US$16, which is higher than the guidance range. After the Green Shoes, Rong Lian raised a total of 368 million US dollars.

Before the IPO, Ronglian Cloud Communications has won the favor of many first-line investment institutions. The largest institutional shareholder Main Access Limited holds 21.56% of the shares, Sequoia Capital holds 20.75%, in addition to Trust Capital and Prospect Avenue Capital (PAC), Holds 14.91% and 4.94% of the shares respectively, CEO Sun Changxun holds 15.21%.

Established in 2013, Ronglian Cloud Communications is the first batch of domestic manufacturers to take root in the field of cloud communications, and it is also the largest service provider in this field. Ronglian provides enterprises with products and capabilities including SMS, voice, cloud contact center, and converged communications. As of September 30, 2020, Ronglian has a team of more than 1,000 people, with an active customer base of more than 12,000 companies, and a net customer retention rate of 95%. Its main customers cover e-commerce, education, finance, life services and other fields.

From the communication provider to the full-capable platform, last year’s revenue is expected to be nearly 700 million yuan

The service provided by Ronglian is equivalent to being a “waterman” for communication between enterprises and operators. To put it simply, Ronglian serves tens of thousands of web pages, apps, PC modules that communicate with “you”, and various communication scenarios for collaborative office within the company. For example, when you use Didi to take a taxi, the driver communicates with you via anonymous phone calls, educational institutions send you messages, and when you go to work, you use the company system to talk to customers on the QQ dialog box and so on.

In the era before the Internet, people used text messages and telephones to communicate, and the company was connected in series by dedicated telephones, creating enterprise-level communication equipment service giants such as Arvaa and Genesys. Later, the rapid development of the Internet and cloud computing industry brought more diverse communication methods (online voice, video, live broadcast, instant messaging, etc.). But in the final analysis, the underlying communication methods brought about by the Internet are still supported by operators. For a company, it takes a huge amount of time and energy to integrate the information, voice, and QQ modules by itself.

Therefore, the bottom layer of Ronglian’s products connects operators, and the top layer of operators is the PaaS layer, which packs communication capabilities such as voice, SMS, and audio into APIs. Developers and enterprises use open platforms to embed APIs on their own Web, desktop, and apps to use communication capabilities. In terms of the charging model, Ronglian basically charges fees based on the volume of calls.

From the perspective of the services provided, the current US market has differentiated into three mature segments: CPaaS (voice, SMS, etc.), CCaaS (cloud contact center, etc.), and UCaaS (converged communications, such as IM instant messaging, video and conference, etc.) field. Most of the players in the market are vendors that provide a single capability, while Ronglian takes the entire product route, providing all three services.

According to the prospectus, Ronglianyun’s revenue in 2018 and 2019 were 500 million yuan and 650 million yuan, respectively; the revenue for the first nine months of 2020 was about 509 million yuan, compared with the revenue for the same period in 2019 426 million yuan, an increase of 19.4%. Since Ronglian Cloud Communications has the highest annual revenue in the fourth quarter, it can be estimated that the revenue in the fourth quarter of 2020 is expected to exceed 200 million yuan, and the annual revenue will exceed 700 million yuan, which is the largest revenue in this field. Domestic manufacturers.

Sorting out the development path of Ronglian can basically be divided into two stages.

First of all, between 2013 and 2015, Ronglian used CPaaS services (voice, SMS, etc.) to quickly iterate products in emerging market segments and complete early technology accumulation and market barrier establishment. After that, Ronglian expanded from PaaS to SaaS to determine the full product route.

In the early days of its establishment, Ronglian Cloud Communication can be said to be riding the east wind of the mobile Internet to lay the ground for CPaaS.In 2013, 4G licenses were officially issued to the three major operators, the Internet penetration rate reached 45.8%, and the rapid development of the APP ecosystem, including O2O, the rise of Internet finance and the melee, gave birth to a large number of cloud communications needs. Ronglian quickly tapped into new markets such as O2O and travel under the background of that year, allowing products to rapidly iterate following the track demand and accumulating a large number of small and medium customers.

According to previous reports from 36Kr, from 2013 to the end of 2015, Ronglian has grown at an average annual rate of 7 times. In 2016, its revenue has exceeded 100 million yuan, and it has accumulated more than 200,000 developers and 50,000 corporate customers. Customers include well-known companies such as Tencent, Alibaba, JD, Baidu, 360, and Xiaomi.

After stabilizing the basics of PaaS, Ronglian did two things: expand the product thickness, gradually develop from PaaS to CCaaS and UC&C business, and fully transform major customers.

Through the acquisition or investment of cloud customer service SaaS vendors such as “Ronglian Qimo” and “Taojin Cloud Customer Service”, Ronglian has cut into the small and medium customer group of CCaaS (cloud contact center), and Qimo will also provide customer service + marketing tools and service. Rong Lian first opened up the CC’s major customer market in the financial sector, polished the large customer solution “Rong CC”, and established a CC product service system covering small and medium customers to large customers. In addition to providing SaaS services, Ronglian will also cut into the customer’s core business link system to provide value-added services.

In the process of transforming large customers, Ronglian has made targeted efforts to streamline the product level, such as strategically reducing public cloud IM and developer-oriented services in the UC direction.

This decision also finally allowed the company to achieve large-scale growth.According to the prospectus, starting from 2018, Ronglian’s revenue has exceeded 500 million yuan, and will maintain a steady increase in the subsequent.

Transforming major customers, the whole product route is inevitable

From 2013 to today, the development trend of both domestic and global cloud communication fields has also proved that if Ronglian wants to grow larger, it is an inevitable choice to integrate products and expand product lines.

The first is the volatility of the domestic customer base in emerging markets.For example, the reshuffle period of O2O and Internet finance industry is coming, which is a huge risk for Ronglian, which was mainly small and medium-sized customers at that time.

The second is the profitability of the PaaS layer.Sun Changxun, founder and CEO of Rong Lian, said in an interview with 36 krypton that if the US is benchmarked, the industry background is different. US operators are mostly private enterprises, and the competition is relatively sufficient. The cloud business of operator resources is also lucrative. For example, Twilio’s voice and SMS gross profit can still exceed 50% today; while domestic profits are relatively small. With operators entering the PaaS market in recent years, the ceiling of PaaS profitability will soon come. Startups wanting to grow bigger must Go to the application layer to provide more solutions.

Source: iResearch

Back in China, in the early days of Ronglian’s establishment, the cloud communications market was in the ascendant, and players were on their side. In the same field, for example, Huanxin only does IM (collaborative communication), Cloud News focuses on IP landing, and Rongyun focuses on providing IM services for apps.

After the development of the entire track, the growth path of players can basically be divided into two modes.One is to focus on providing certain specific segmentation capabilities,To achieve the ultimate in products, such as the sound network launched in June last year, which mainly provides real-time audio and video interaction capabilities, which belong to a sub-field of CPaaS (Communication PaaS, communication platform as a service).The other is to take the whole product route,Including all communication capabilities such as SMS, voice, video, and QQ, Ronglian is the representative of the latter route.

Source: iResearch

But whether it is a single capability or a full product, the current top players in each segment are exploring and integrating with each other. The boundaries of IM instant messaging and RTC real-time audio and video are no longer so clear. A typical example is the sound network that announced the acquisition of Huanxin not long ago, which is a combination of IM+RTC. After the D round, Rongyun has now developed into a one-stop manufacturer of IM+RTC+ Push, covering the PaaS and SaaS layers. This also means that competition in the cloud communications market is becoming increasingly fierce.

The development trajectories of the global market and Ronglian also have similarities.Internet communication cloud startup companies are mainly concentrated in the United States and China, and in recent years, top players, such as Twilio, Vonage, CLX Communications, MessageBird, etc., have been deploying the entire industry chain through mergers and acquisitions. According to the iResearch report, 2015 was the hottest year in the global Internet communication cloud capital market. Since then, the proportion of financing of more than 100 million yuan has shown an overall increasing trend. Leading players have entered the C, D round or even the IPO stage. By improving their own communication cloud capabilities, manufacturers also extend to the application layer. In addition to communication scenarios such as video conferences and call centers, they also extend their business to marketing scenarios.

To become the Chinese version of Twilio, there is still a tough battle to fight

Twilio went public in 2016, and its share price doubled on the day it went public. Since then, the share price has been rising. As of press time, Twilio’s market value has exceeded 60 billion US dollars, a 44-fold increase in less than five years. Although the development trajectories of Ronglian and Twilio are quite different so far, Twilio still uses PaaS as the main revenue source, and Ronglian’s income sources are more diversified, but the development trajectory of Twilio is still worthy of reference. If Rong Lian wants to become the Chinese version of Twilio, there is still a tough battle to be fought.

Statistics on the revenue contribution of each product in 2018, 2019 and the first three quarters of 2020

As mentioned above, the essential differences in the communication markets between China and the United States determine that PaaS layer vendors must look for more profitable areas. Ronglian’s big logic is also to maintain the PaaS business at a steady and rising level, and then expand the SaaS layer and the value-added services that are more closely connected to the customer’s business. Currently, CPaaS business accounts for about 53% of the company’s revenue.

It is worth noting the influence of operators on the company’s business.According to the prospectus, more than 73% of the company’s costs in the first three quarters of 2020 are paid to operators, which has a key impact on the company’s profit margin. However, it is a common feature of this industry that is greatly affected by operators. It can be used as a comparison that more than 88% of Twilio’s 2019 cost expenditures are network resource purchases.

Source: Ronglianyun Prospectus

Second, the number of Ronglian’s large customers continues to increase, but customer retention has declined slightly, and customer concentration is worth noting.In 2018, 2019, and the first three quarters of 2020, Ronglian provided services to 125, 152, and 173 major customers, with a significant year-on-year increase, while the customer net retention rate (DBNRR) was 135.7%, 102.7%, and 94.7, respectively. %, a slight decrease. In the prospectus, Rong Lian explained that due to the impact of the new crown epidemic, some smaller companies have reduced their usage, and some industries have been affected by regulations to reduce their scale, resulting in partial loss of customers. In terms of concentration, the proportion of revenue contributed by Ronglian’s ten largest customers has dropped from 27.7% in 2018 to 20.8% now, which has improved significantly.

Loss is also a concern of the market, but it is not the most important issue at the moment. Many cloud communication service providers, including Twilio, have not yet made a profit. Ronglian’s 2018, 2019 and the first nine months of 2020 Net profits were -155 million yuan, -183 million yuan, and -270 million yuan. However, considering that the repayments of the communications industry were concentrated in the fourth quarter, the epidemic has delayed the delivery and repayment of major customers. Moreover, Ronglian has invested a lot of resources in new business research and development in recent years, which can be regarded as a strategic loss during the market development period.

At the level of market competition, before going public, Shengwang, which focuses on RTC, officially announced the acquisition of IM manufacturer Huanxin. Although Shengwang and Ronglian have different market focuses (one is for applications that provide services to the C side, such as live broadcasting, Games, etc., the latter is biased towards B-end business applications and internal collaboration), but both of them actually belong to the field of CPaaS. The combination of the two companies of Soundnet and Huanxin has undoubtedly extended their market layout, and is more suitable for taking the full product route. The federation will cause a certain amount of pressure.

Even so, some favorable factors still make Ronglian’s development after listing worth looking forward to.

From the market point of view:

The domestic cloud communications market is growing rapidly, as is the global cloud communications market. Research shows that from 2015 to 2019, the domestic cloud communications market has increased to 35.7 billion yuan at a compound annual growth rate of 21.7%. It is expected that the market size will increase to 101.5 billion yuan by 2024. According to iResearch, the global cloud communications market reached US$2.45 billion in 2019, and the Chinese market accounted for more than 50%. Moreover, the world is currently at a key node from 4G to 5G. It is estimated that by 2023, the global Internet communication cloud market will reach 13.35 billion US dollars. According to the report of the China Investment Corporation, the current penetration rate of China’s enterprise cloud communications is still very low, and the hardware equipment of many enterprises is close to the replacement cycle of 3-5 years, which also provides a broad development space for Ronglian.

At the investor level, domestic and foreign markets still have strong confidence in cloud computing companies. In 2020, the market value of the cloud computing market has exceeded US$1 trillion, with a growth rate of 45%. From the perspective of companies in the same field, cloud communications vendors such as Zoom, Twilio, Zendesk, RingCentral, Agora, etc. have all achieved growth in their share prices ranging from several to ten times since their listing. Although the ps multiple has even reached an astonishing hundreds of times, under the long influence of the epidemic and the rapid implementation of new technologies such as 5G, investors are actually buying the future development of the cloud computing market in the next five to ten years. The market is still improving.

From the perspective of the company itself:

As the first domestic cloud communication manufacturer focusing on the full product line, Ronglian entered the market early and has formed a mature cooperation network with domestic operators and channel vendors. At the customer level, Ronglian’s services are mainly large customers. In the first nine months of 2020, large customers contributed 75.7% of Ronglian’s revenue, and the number of customers has also increased year-on-year.

In the future, domestic major customers will still be the customer group with superior willingness and ability to pay, and their purchasing habits are more inclined to overall solutions. Ronglian’s full product line is adapted to the needs of market development. The prospectus shows that more than one-third of Ronglian’s current large customers use more than one Ronglian solution, and there is still cross-selling potential. Project-based revenue increased by 89.1% year-on-year, mainly due to the increasing number of complex modules and demands contained in the project, which further shows that Ronglian has further increased the depth of its services to major customers.

In terms of the new growth curve, Ronglian has already had a layout and results. It is an effective way to increase profits by continuously deepening its products into the industry and improving its ability to bind with customers’ businesses.In 2017, Ronglian released the IoT protocol to provide support for more customers’ devices. Starting in 2019, Ronglian has vigorously developed the application of AI technologies such as CV (visual recognition), and has now entered many industrial parks, Industrial and other IoT scenarios, such as machine monitoring and identification of equipment in chemical parks, so as to perform production safety management.

Ronglian Cloud Communications also stated to 36Kr that at present, within Ronglian, CV-oriented UC business is the focus of Ronglian’s development after listing. Since 2019, this part of the business has been commercialized and has brought scale. income. The prospectus shows that other income including IoT has increased by more than 100% in the first three months of 2020, which is a new growth direction worth looking forward to in the future.

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