SSNI: thoughts and figures

Thoughts on SSNI

Adjusted Earnings


2014:  -19  -20  -14   03 =  -50
2015:  -11   02   10   08 =    09
2016:   02 

You’ll note that each quarter is a substantial improvement from the same quarter the year before. And that the last four quarters have been positive.

12-month trailing earnings as of:


Dec 2014:  	-50
Mar 2015: 	-42
Jun  2015:  	-20
Sep 2015:    	 04
Dec 2015:    	 09
Mar 2016:	 22

You don’t see many nicer sequences than that.

Gross Margin Percent


2014:  30.0   41.0   42.7   41.3  
2015:  40.3   42.0   44.0   47.1
2016:  43.7

Here also, each quarter has been an improvement from the year before.

Here’s a quote from Bert Hochfeld’s Deep Dive:

While its initial focus had been on intelligent meters and their networks, the company is now focused far more on software and networking solutions and software that supports its concept of the IoT. The company’s “new solutions” with 61% revenue growth is far outstripping the relatively flat revenue performance of the company’s meters. Their solutions that have a recurring revenue model are at 35% revenue growth.

The company has had difficulty in reporting clean numbers since it went public about 3 years ago. Much of that had to do with the corporate decision to eliminate pass through revenues generated by the sales of 3rd party solutions….

By the way, anyone trying to understand SSNI without reading Bert’s deep dive is working with one hand tied behind his or her back, figuratively speaking.

http://seekingalpha.com/article/3977868-silver-spring-networ…

Saul

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Thanks Saul. That was a great article that seemed reasonably balanced.

Still not the most impressive company performance IMO based on:

  1. They promised 20% CAGR when they IPO’ed and didn’t deliver
  2. They seem to have trouble producing “clean” numbers
  3. Around half their earnings number this last quarter was from a tax benefit
  4. They are only growing their top line by single digits (9% this past quarter and expected to be lower the next)
  5. They have some very serious and very large competitors
  6. I wouldn’t be surprised that their real business strategy is actually to be a larger player’s acquisition (such as what oracle did recently), rather than a long term growth play.

I suppose there is a leap of faith for the longer term investor in SSNI that could materialize into a nice investment but it doesn’t seem to be that this company has a track record of stellar performance.

It still bothers me that the CFO, such a celebrated and award winning executive, chooses to move on with such potential??? Seems odd.

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They seem to have trouble producing “clean” numbers

Hi Duma, what he meant by that was that numbers weren’t comparable because they eliminated 3rd party products:

Much of the share price decline was due to investor uneasiness regarding the impacts of phasing out of 3rd party, pass-through products. In 2014 they decided to essentially eliminate third party content from its product offering. In 2014, this reduced the top line by $40 million, but it helped to grow adj gross margins by 13%!!! Third party products dropped from 20% to 10% of revenue by the final quarter of 2014.

I think this is important too:

In 2015 they delivered 29% more end points in 2015 than in 2014 and their recurring revenue per cumulative network endpoint rose as well. They are building a base of recurring revenues that should be significant over time, and is not really reflected in the company’s valuation.

It currently has about 23 million end-points installed. Some of the things that both 3rd party developers and SSNI itself hang off these endpoints these days is quite amazing. At the moment, they say that they have a menu of ancillary features and services that can be offered at $5/end-point. End-points have a projected service life of 15 years or more. Much of that opportunity is seen in the 35% growth in the company’s New Solutions business.

The company has won a couple of high profile awards last year including a win at ConEd recently to deploy 3.9 million electric meters and 1.3 million gas meters. The ConEd win was the largest in the company history and it has a minimum value for SSNI of $230 million and the inference I drew from the CEO’s comment on the conference call was that it may well be double that minimum amount. Most of the revenue from the ConEd deployment will get underway in 2017.

Hope that helps you to understand my thinking (which certainly may be wrong).

Saul

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