TEUM

Did anyone pay attention to Pareteum Corporation? It is growing at >100%. It runs a communications cloud services platform in Europe and internationally. A tiny firm with <400 m cap, and only 62 employees. Their employee review was not good.

May worth a dive into the long term perspectives.

2 Likes

Here’s a link to the latest (Q3 2018) press release.

https://www.pareteum.com/news/pareteum-announces-record-thir…

Some quick tid bits…

Revenues of $8 Million, up 129% Year-Over-Year

gross margin of 73%

Adjusted EBITDA of $1.8 Million

Non-GAAP EPS of $0.01

Raised 2018 Outlook to 100% Revenue Growth

Dollar-based expansion rate where customers of record in 2017 have grown their revenue dollar spending by 147% in the third quarter of 2018 versus the third quarter of 2017

Increased 36-Month Contractual Revenue Backlog from $276 million at end of the second quarter of 2018 to $403 million; includes $72 million incremental from existing contracts

Ended the third quarter of 2018 with 2,903,000 Connections, an increase of 127% over the end of the third quarter of 2017 and 7% higher than the second quarter of 2018

At September 30, 2018, Pareteum had $18.9 million of cash and restricted cash, $0 senior secured debt and 59.3 million shares issued and outstanding.

Operating loss for the three months ended September 30, 2018, was a loss of ($6.9) million, an increase of $5.4 million, compared to a loss of ($1.5) million for the same period in 2017.

Taken from their 10Q

https://www.pareteum.com/wp-content/uploads/2018/11/tv507065…

Pareteum is an award-winning global Cloud Communications Platform company with a mission: “to connect every person and every thing”.™ Customers use
Pareteum’s award-winning Communications-Platform-as-a-Service (CPaaS) and software solutions to energize their growth and profitability through cloud
communication services and complete turnkey solutions featuring relevant content, applications, and connectivity worldwide. We provide a single software
solution, fully enabling and securing cloud communications, connections and transactions, regardless of users’ location or network. With estimates of up to 30
billion devices to be managed, connected and intelligently leveraged, there are numerous large addressable markets for our Communications-Platform-as-aService (CPaaS) solutions.

Pareteum’s customers include Enterprises of all sizes, Communication Service Providers (CSPs), Internet of Things (IoT) and other software and application
developers, manufacturers and brand-marketing companies. These customers use Pareteum to energize their growth and profitability through cloud-based
communication services featuring relevant content, applications, and connectivity worldwide

Seems interesting at first glance and would love to hear what the more experienced investors have to say.

Chris.

3 Likes

Hi Chris-

Interesting company. I haven’t looked into it any more than what you posted, but 3 things stand out to me (from what you posted.)

Revenue of only $8M, really small.

  1. Revenue of $8M and a backlog of over $400 M!. I have never seen such a backlog to current revenue.

  2. Expansion rate of 147% and rev. grew 29%.

SO current customers of 1 year added 29%, and all other customers were -18% contribution to revenue. I would really want to understand that. Could be how they calculate expansion rate, high churn, etc.

Thanks,
Jim

2 Likes

Jim,

Yes very small and I’ve heard others warn of companies so small, so something to consider.

I think you mis-read the rev % growth…? It was 129% YOY. Unless you meant something else?

Chris.

Hi Chris-

Yes, I misread the growth. Dis-regard that concern.

Jim

It seems like they are just losing money faster and increasing the number of shares at a faster rate than they are growing revenue.

NET LOSS went from 2.3M to 7M
and losses per share went down from 0.16 to 0.12

Unless I'm missing something, they increased the number of shares outstanding by a factor of 4 in the last year.

Last eight quarters of YoY revenue growth:

-3.9%
-14.6%
-0.9%
10.3%
27.7%
47.1%
85.3%
128.9%

Seems like they are figuring something on top line out…

GMs consistently north of 70%.

Don’t know a lick about the biz (yet), but found those initial numbers interesting enough to have a deeper look…

2 Likes

Hey Drew - that loss is a non GAAP basis. Whilst some costs like salaries and hiring costs for product development and sales and marketing have gone up proportionately (50-100%) as you would expect with 100%+ revenue increases, the bogey man was in non cash SBC. There’s also an acquisition cost in the mix.

Thanks for flagging and begging a closer look!

Restructuring and acquisition costs for the three months ended September 30, 2018 and 2017 were $2.0 million and $0.3 million, respectively.

Of note, the following were non-cash expenses associated with the three months ended September 30, 2018 and 2017. We recognized share-based compensation expense of $5.6 million and $0.4 million, respectively, an increase of $5.2 million. Depreciation and amortization expenses for the three-month period ended September 30, 2018 was $1.0 million, a decrease of $0.4 million or 30%, compared to $1.4 million for the same period in 2017.

Net loss for the three months ended September 30, 2018, was ($7.0) million, an increase of $4.7 million as compared to a net loss of ($2.3) million, for the same period in 2017. The net loss increase was primarily due to the increase in share-based compensation and the increase in acquisition charges related to the acquisition of Artilium. The resulting EPS for the three months period ended September 30, 2018 was ($0.12), as compared to the loss of ($0.16) for the same period in 2017.

1 Like

2) Revenue of $8M and a backlog of over $400 M!. I have never seen such a backlog to current revenue.

Me neither Jim, astonishing and they stress that they have a 100% conversion rate on this!

I’m very interested but need to look at the valuation and the team as well as this acquisition.

Aren’t they up against Twilio head to head tho?

A

I’m very interested but need to look at the valuation and the team as well as this acquisition.

Apparently they had a leadership and management switch out a few years back, which I need to look into more.
There are some pretty massive acquisitions going on (for their size at least)…

The latest is iPass:-
https://seekingalpha.com/article/4221648-pareteum-signs-defi…

The previous was Artilium:-
https://seekingalpha.com/pr/17185598-pareteum-artilium-annou…

Both of these were partners where Pareteum saw an opportunity for a merger of the businesses shortly after entering strategic alliances.

Artilium looks like a case of promotional synergy and the results have already shown up in the backlog.
iPass looks like a cost synergy and complimentary solution opportunity (with some join sales synergies as well).

iPass appears to have been a real dog of a business and was delisted but if Pareteum can achieve the $10m+ cost synergy savings then they have a profitable business that is highly related.

They appear to be very global in outlook and highly focused on Asia with a good track record here. I’m going to keep an eye out for them.

So far I’m warming to them but - the price has already doubled in 6 months (whilst still a microcap) and their SBC and dilution related to acquisitions is super high.

Ant

2 Likes

Guys

I’m resurrecting this conversation for anyone who had and interest in Pareteum as well as Twilio actually.

We have continued this conversation since the Q4 Earnings Release for TEUM over on NPI and wanted to make sure anyone over wasn’t missing out.

Their results killed their already pre-announced numbers.
Q4 Adjusted EBITDA of $2.34M and FY $6.4M
Q4 Non-GAAP EPS of $0.02 cents and FY $0.09 cents
Net Dollar-Based Expansion Rate of 214% Year-Over-Year
Announces 2019 Guidance - Projecting 225-260% Year-Over-Year Revenue Growth

Their 36 month backlog is up to $800m as of the ER.

Without wanting to repeat the entire content, here’s the link to the thread:-

https://discussion.fool.com/teum-q4-er-34155521.aspx?sort=whole#…

Here’s the announcement:
https://seekingalpha.com/pr/17441912-pareteum-announces-four…

Here’s the transcript:
https://seekingalpha.com/article/4248300-pareteum-corporatio…

There’s a strong case for Pareteum to be considered an early stage, lower valued but expanded vision Twilio in the making.

Judge for yourself.

Ant

9 Likes

I can’t complain with the 5 week double that this stock gave me! Now sitting at 4% in my basket.

Thanks. I used to be in TEUM last year but bailed out when they had two bad quarters. I think its time to look carefuly.

Given their size and presence in Europe, would you consider TEUM a candidate for Twilio to buy them out? I know that is not a reason to buy a company, at all…just curious how they relate to TWLO with competition and maybe filling an international gap that TWLO hasn’t reached yet.

2 Likes

It’s possible but I thought Twilio had a global carrier coverage footprint. Maybe Wifi and other channels is another matter.
A

https://seekingalpha.com/pr/17466374-pareteum-achieves-100-m…

Pareteum delivered an incredible 36 month backlog update last week on its first full month of operating post the recent iPass integration which stood at $800m at their results announcement last month.

The numbers are off the charts for them. They had their first $100m new 36 month backlog month in their history. (Previously their monthly adds were ranging ~$25-50m per month). I expect by the time they announce their Q1 results their 36 month backlog will be $1bn. Not bad for a $500m market cap player.

I know it is easy to dismiss TEUM as a roll up play but I think their organic progress was there to see before the acquisitions were closing and are genuinely demonstrating 1+1=3 with revenue, cost and operating synergy plus complimentary offering build out & customer opportunities.

They anticipate being cash flow and EBITDA positive by mid year this year and end the year with over 100% growth rate on a very conservative forecast that internally they expect to smash.

There’s a very real probability that at these 36 month backlog addition levels we will have $2bn in backlog in 2020 and by 2021 sitting on a $100m/quarter run rate which would be 10x from 2018 revenues. If that happens I cannot imagine the market cap will trade sideways.

The business is an expanded PaaS on Twilio’s business with greater exposure potential to Wifi, 5G and IoT than Twilio is currently positioned (for better for worse) and potentially more geographically diversified.

I have bumped this up to a 1% holding now. As results start to materialise and I can see how 2019 is playing out versus potential I expect to raise this considerably.

As a backgrounder, here is the company overview presentation.
https://www.pareteum.com/wp-content/uploads/2019/03/March-12…

(NB some of the content, language and also reporting numbers are in European speak - e.g. 1,000 Bn instead of 1.0 Bn so don’t get too freaked out).

One of the key metrics they refer to that Twilio doesn’t which will be a marker of success and profitability will be the # of connections (Wifi/SMS/MNOs) & # of connected things/people/devices (Slide 3).

Other interesting points:-
A massive part of the MVNO TAM is in APAC! (Slide 9)
They have moved from 25 customers to 533 in 1 year (Slide 11)
Their Net dollar Expansion rate at Q4 2018 exit was 214% up from 147% (Slide 11)

Ant

14 Likes

Did anyone see the short sellers report today? I wrote a post on this in the board earlier:

I’m not sure if anyone else took a position in TEUM, I took a less then 1% position and today the stock crashed 25% because of it.
The summary is that the executives had engaged in crypto fraud in the past and they believe that TEUM is a fraud. I have to say I’ve been a little weary of the company myself. Between sloppy typos on their website and the financials not quite adding up with with the back billing they have claimed compared to the actual revenue that claim is being brought in.

What do you guys think? Is there truth in this or do you think it’s a classic short seller attempt?

https://www.google.com/amp/s/www.fool.com/amp/investing/2019…

I’m not sure if anyone else took a position in TEUM, I took a less then 1% position and today the stock crashed 25% because of it. What do you guys think?

I would do as Saul does. Why would you want to hold on to a stock that has gone down 45% over the past 3 weeks when there are so many other higher quality names that are up more than 10% this week alone? I would take my losses and put the money in any stock in Saul’s, Bear’s or stocknovice’s portfolio.

There are just too many questions about Parateum. Why hype the backlog with so many frequent press releases? Why mention an African mobile provider as a customer when they don’t even have a Web site? No thanks.

2 Likes

I was in TEUM for a very short time. Their financials looked amazing with at the time a 400M backlog and their claimed near 100% conversion rate of said backlog. But something didn’t seem right. Additional orders resulted in short term pops and fades. When good news is met with weak response, I figure I’d better wait on the sidelines. I’d rather pay up than sit in a stock where there are those who know something I don’t.

Rob

Thanks for the insight. I got in hoping they could become a relative competitor of TWILIO but able to enter at a lower price, not that I believe anyone is close to their tech. I also have had a bad feeling about the company based on their unprofessionalism and after this short seller article I actually believe a lot of what they’re claiming. But we’ll find out soon enough.