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+--- Thread: SHU what’s the deal? (/showthread.php?tid=12397)
RE: SHU what’s the deal? - admin - 04-12-2019
No, I didn't ask them for a response to the article. I never do as it happens. If that's petulant and childish and whatever other quality you ascribe to me than so be it.
Feel free to fill in the void of my unprofessionalism, petulance, childishness (etc.) and report back..
Or perhaps you have your own opinion about some of these awkward issues surrounding their backlog numbers, clients and projections, the floor is yours..
RE: SHU what’s the deal? - Coach24 - 04-13-2019
I'm as pissed as anyone and stupidly lost money on this stock. Sure it's easy to look for someone to blame but really can't blame anyone beside the company. After next earnings this company could drop to a $1.00 or double to $8.00. I agree with Shu to invest only what I'm comfortable losing so I also cut my shares in half.
For those still confident in the company this has created a buying opportunity for those who aren't a way out without risking a lot more.
I haven't given up or I would of sold everything but hard for people to be confident this thing will go either way at this point.
Part of investing in small companies possibly bigger profit definite bigger risk and a reminder if something looks to good to be true it just might be.
Still hope this turns positive. So like in the Movie Dumb and Dumber) I'm saying there's a chance.
I won't be mad at Shu he can make it up to me by giving me some future winners.
RE: SHU what’s the deal? - admin - 04-14-2019
Pretty wise words actually, Coach. And I'm sorry you lost money. I think it's beyond reasonable doubt that their backlog numbers are significantly inflated, but here is the snag. They could be inflated by 50% and the company could still do pretty well.
But here is the other snag. If they inflate on set of figures, the step to doing that with other figures is considerably smaller and the need to do that is likely to increase. There is NO EVIDENCE of that whatsoever, but it's reason to keep a wary eye.
RE: SHU what’s the deal? - mikeyf - 04-16-2019
(04-14-2019, 04:25 AM)admin Wrote: I think it's beyond reasonable doubt that their backlog numbers are significantly inflated, but here is the snag. They could be inflated by 50% and the company could still do pretty well.
You are clearly making false inferences and don't know how backlog works.
The most important thing to know is initial backlog dollar totals are based on CONTRACTUALLY SIGNED AGREEMENTS with customers. You can't "inflate" the numbers. Where did you even get this idea? I don't work at Pareteum, so I can only guess, but I will eat my shoe if I'm wrong in guessing that the backlog is accessible to all senior and executive level staff and the numbers are closely monitored and updated with every new contract, revision, and invoicing. What you suggest by saying the numbers are "inflated" is that there is a wholesale corruption at play by upper management to manipulate the numbers to deceive the investor. And by the nature of how backlog works to drive invoicing, this corruption would leak into the GAAP numbers (so they would have to over-invoice the customer to hide the lie!). That's an absolutely ridiculous notion! They are the words of a conspiracy theorist. If that were proved true in any way, I would immediately sell ever single one of my shares, not just half!
Now let me explain to you what's really going on:
What you perceive as inflation is more than likely base contracts revising upwards due to increased subscribers and/or up-selling acquired services. Are you in denial of the fact that this sector is rapidly growing and subscriber numbers are growing? You're throwing out to your readers an implausible bear thesis that is actually more than likely a plausible BULL THESIS. Let me give you a working example:
Let's take this deal: https://www.pareteum.com/news/pareteum-expands-customer-base-in-asia-with-3-year-50-million-contract/
5 points of my example:
1. Asia is blowing up right now.
2. This particular contract will grow beyond the 50M base when all said and done because of my first point
3. The base contract is for 10 million subscribers (throwing out a random number here)
4. Revenue conversion is at 15%, 30%, 55% per year
5. They deployed in January.
Now three months into deployment: One Development contacts Pareteum and says, "Our subscriber base is growing much faster than expected and we''ll hit our subscriber threshold soon. We need a quote for 2 million more subscriptions and also send us a quote for iPass wifi services". So what happens? That 50 million dollar contract just got an upward revision of at least 20%. In your typical backlog, there would be a dedicated column/category for prorated subscriber adjustments to existing contracts and/or added services and it would be recorded as such. Pareteum is not going to send out a PR for this, you'll only find out when they quote the total backlog figure (with no context). Bottom line is backlog mysteriously grows by $10+ million in their PR's but revenue will only grow by an additional 1.5M in that first year of that contract. That's where your perception of inflated numbers comes from. So when Hal says they are converting at greater than 100%, this is the sort of stuff going on behind the scenes.
Finally, I want to make it completely clear that I am making inferences based on how backlog works because I own a backlog driven business. The accuracy of the backlog is the cornerstone of my business. It isn't some numbers jotted down hastily on a piece of paper... it's an integral part of the overall accounting process. I put this example in front of you as a consideration to your conspiracy theory that the executives are manipulating backlog numbers. I joined this forum for good due diligence and I get this instead.
RE: SHU what’s the deal? - philipcarl3 - 04-16-2019
admin, looks like mikeyf slam dunked on you.
RE: SHU what’s the deal? - admin - 04-16-2019
Mikeyf,
Thanks for the reply.
["What you suggest by saying the numbers are "inflated" is that there is a wholesale corruption at play by upper management to manipulate the numbers to deceive the investor. And by the nature of how backlog works to drive invoicing, this corruption would leak into the GAAP numbers "]
No, I'm not suggesting that. What is difficult to refute is:
1) We know very few of companies that comprise their backlog. Of the few we know, quite a number turn out to be dodgy and really difficult to assume they signed up for multi-million dollar contracts (or if they did, it's difficult to assume they will actually deliver). I have no idea how representative this is, but it's not exactly reassuring.
2) Backlog exploded, but revenue guidance has been lowered significantly. How is that even possible if there is nothing wrong with backlog. The AVG presentation contained $84M in 2019 backlog (not including the acquisitions and not surprisingly, the last time they split that out per year and it should certainly be significantly higher now) and the iPass acquisition presentation contained $144M in 2019 revenue guidance (including the acquisitions). Now they guide for $105M-$115M in 2019 revenue.
That really is odd. That $84M 2019 backlog at the time of the AVG should be well over $100M today, yet Pareteum (without the acquisitions) guides less than half that now. How has that happened? Management argues only 75%-80% conversion, but given the unearthing of dodgy customers, I'm not at all sure what that actually means and the conversion rate seems way lower (unless they massively beat their own revenue guidance, something which I specifically acknowledge as a possibility).
["Are you in denial of the fact that this sector is rapidly growing and subscriber numbers are growing?"
No, I specifically stated that in several articles, including the one you argue is a bear thesis.
["I put this example in front of you as a consideration to your conspiracy theory that the executives are manipulating backlog numbers. I joined this forum for good due diligence and I get this instead."]
It isn't a conspiracy theory. I put forward two elements that made me reconsider the bull case (I thought previously double digit share price was a slam dunk, now I'm not so sure of that anymore), dodgy clients and the odd combination of exploding backlog but declining revenue guidance. I think both are real, as there is evidence supporting both. People can just simply chose to ignore that and accuse me of conspiracy theories, etc. but I find there is hard evidence of things not being as rosy.
RE: SHU what’s the deal? - mikeyf - 04-17-2019
(04-16-2019, 12:12 PM)admin Wrote: Mikeyf,
Thanks for the reply.
["What you suggest by saying the numbers are "inflated" is that there is a wholesale corruption at play by upper management to manipulate the numbers to deceive the investor. And by the nature of how backlog works to drive invoicing, this corruption would leak into the GAAP numbers "]
No, I'm not suggesting that. What is difficult to refute is:
1) We know very few of companies that comprise their backlog. Of the few we know, quite a number turn out to be dodgy and really difficult to assume they signed up for multi-million dollar contracts (or if they did, it's difficult to assume they will actually deliver). I have no idea how representative this is, but it's not exactly reassuring.
2) Backlog exploded, but revenue guidance has been lowered significantly. How is that even possible if there is nothing wrong with backlog. The AVG presentation contained $84M in 2019 backlog (not including the acquisitions and not surprisingly, the last time they split that out per year and it should certainly be significantly higher now) and the iPass acquisition presentation contained $144M in 2019 revenue guidance (including the acquisitions). Now they guide for $105M-$115M in 2019 revenue.
That really is odd. That $84M 2019 backlog at the time of the AVG should be well over $100M today, yet Pareteum (without the acquisitions) guides less than half that now. How has that happened? Management argues only 75%-80% conversion, but given the unearthing of dodgy customers, I'm not at all sure what that actually means and the conversion rate seems way lower (unless they massively beat their own revenue guidance, something which I specifically acknowledge as a possibility).
["Are you in denial of the fact that this sector is rapidly growing and subscriber numbers are growing?"
No, I specifically stated that in several articles, including the one you argue is a bear thesis.
["I put this example in front of you as a consideration to your conspiracy theory that the executives are manipulating backlog numbers. I joined this forum for good due diligence and I get this instead."]
It isn't a conspiracy theory. I put forward two elements that made me reconsider the bull case (I thought previously double digit share price was a slam dunk, now I'm not so sure of that anymore), dodgy clients and the odd combination of exploding backlog but declining revenue guidance. I think both are real, as there is evidence supporting both. People can just simply chose to ignore that and accuse me of conspiracy theories, etc. but I find there is hard evidence of things not being as rosy.
Well I think you've pretty much shown your hand as a full blown bear.
1. This question (why don't you disclose all your customers) was asked during the Q/A of a conference call. I urge you to start reading through all the Q/A portions and you'll get all your answers and a whole lot more regarding the revenue shortfalls and inner workings of the backlog. What you propose is to publicly disclose a list of all TEUM's customers in an emerging market so the competitors can poach them. At the very least, you'll piss off some of your customers due to the unwanted cold calls you've just cursed them with, and this would surely put a strain on the business relationship.
You also need to get used to the idea that many small companies do not have a large presence on the internet and limited advertising budgets outside their area.... so this genius idea to google information will be limited to your local ISP results which will give you plenty of false positives and send you down rabbit holes. If you don't believe me, pick a private successful small to medium sized business in your local area. Now get on a plane, fly to Italy, and try to Google/Bing/Yahoo search the name of that company to find out exactly how they operate. You'll get nothing because a search engine's algorithm queries relevant information based on your locale. Better yet, fly to Hawaii and Google Mobi wireless and compare the results to what you get stateside. That's all I have to say about the internet detectives trying to pick apart the backlog and getting "dodgy" results.
2. Regarding the revenue forward guidance downgrade from the previous numbers provided on the presentations pieces: In every single contract related PR, Pareteum provides the disclaimer for their CRB, "Timing of revenue recognition may vary from actual results". What you are doing is making assumptions but what Hal is doing is making adjustments.
Whether it's 84M or 144M... the top line is going to play out based on their ability to invoice after deployments. So it's no surprise that the pie in the sky projections, which were presented on a preliminary basis to voting shareholders to encourage the acquisition, don't match the more conservative guidance which Hal promises to update quarterly. For all we know, 144M might be a plausible number but just not 100% guaranteed based on the timing of certain deployments or other unknowns that would contribute to revenue.
Let me also note that I'm perfectly open to the idea that some of the companies sitting on the backlog will potentially dissolve before generating revenue. I recognize this as the reality of doing business. But those companies would be retired from the backlog, as is necessary to keep a backlog accurate. We all know it's not all puppy dogs and sunshine out there.... but I still say your head is flooded with ideas of widespread executive level corruption, and I just can't get on board with that.
RE: SHU what’s the deal? - admin - 04-17-2019
[" I urge you to start reading through all the Q/A portions and you'll get all your answers and a whole lot more regarding the revenue shortfalls and inner workings of the backlog. What you propose is to publicly disclose a list of all TEUM's customers in an emerging market so the competitors can poach them. At the very least, you'll piss off some of your customers due to the unwanted cold calls you've just cursed them with, and this would surely put a strain on the business relationship."]
I have read all of that several times, thanks. I'm not proposing anything, certainly not that they disclose all their customers.
The only think I noted was that of the very few customers we know by name, quite a few of these seemed quite dodgy and difficult to imagine they'll bring millions of dollars in revenue.
That has reduced my comfort level with the company because I have no idea how representative this is.
My question to you would be how you could simply brush that info aside, as you seem to do.
["Regarding the revenue forward guidance downgrade from the previous numbers provided on the presentations pieces: In every single contract related PR, Pareteum provides the disclaimer for their CRB, "Timing of revenue recognition may vary from actual results". What you are doing is making assumptions but what Hal is doing is making adjustments."]
What further reduces my confidence is the fact that when backlog explodes, revenue guidance went down and down significantly.
I expect when backlog almost doubles, revenue guidance goes up, not down, and certainly not down by tens of millions of dollars.
I can't decide for you how to feel about that, but I find it curious, especially in combination with the dodgy customers that the Oil & Gas Trader Bulletin article revealed.
That's basically all. I assumed the stock was as good as destined for double digits, if not this year than the next. Now I'm not at all sure of that as these elements have significantly lowered my confidence level.
It's not that my head "is flooded with ideas of widespread executive level corruption," it's simply that I don't know what is going on, which has reduced my confidence.
RE: SHU what’s the deal? - TurboTime - 04-17-2019
(04-12-2019, 02:04 AM)admin Wrote:(04-12-2019, 12:36 AM)TurboTime Wrote: No, what you did was help fuel shorts and create doubt in the mkt even though TEUM has been meeting and exceeding there #s Q after Q. All speculative. Not good to create fear. Let the fundamentals work itself..
- I didn't "create" anything, I wrote an substantiated opinion.
- I concur that they have been exceeding their revenue numbers and even said I expect them to do continue to do that.
- I do argue that I'm uncomfortable with their backlog numbers and gave ample evidence of that. None of it is actually new (although some of it was to me), but my question to you would be why you aren't uncomfortable with that.
At this point, I am comfortable with the stated backlog numbers. These SaaS contracts are based on connections which obviously ties to revenues. Ive been in the software biz for 25 years, some contracts undelivered and others over deliver. In the end it evens out usually to the positive side with the larger deals picking up the slack . I dont disagree that there are some sketchy smaller deals deals which will prob amount to very little, but there are others like Citrix, Vodafone, liberty, etc that will over deliver and provide significant upside via cross selling and growth.. Q1 numbers will confirm whether or not Im right or you are
RE: SHU what’s the deal? - admin - 04-17-2019
Quote:I dont disagree that there are some sketchy smaller deals deals which will prob amount to very little, but there are others like Citrix, Vodafone, liberty, etc that will over deliver and provide significant upside via cross selling and growth.. Q1 numbers will confirm whether or not Im right or you are undefined
I'm not sure Q1 settles it, even if they beat revenue, which I think is likely:
- We don't know how big a problem the dodgy part of the backlog is and I don't think anybody outside of the company knows. It could be they just have a few dodgy customers, it could be a bigger problem. No way of knowing.
- They could very well have sufficient "good" backlog to keep exceeding revenue guidance for quite some time.
- But remember, even management itself implicitly admits a considerable part of their backlog is dodgy (as in not likely to convert into revenues). When backlog basically doubled they didn't increase revenue guidance, they materially decreased it and guided 75%-80% conversion, which came out of the blue.
Another possibility is that they simply do not have the manpower to hook up clients fast enough. The iPass engineers are likely to be a welcome addition, but this could have considerable consequences for OpEx down the line. Again we don't have all that much in the way of firm data to make any informed decision how well their model scales.
I'm not short, I'm a long who became less firm in his convictions that this was a slam dunk to double digits in the face of some compelling evidence. But I readily admit that the problem might be small. We just don't know.