04-10-2019, 10:22 PM
From the little we know about the backlog, the available evidence points uncomfortably towards a significant overstatement:
That in itself might not be all that bad, even at 50% conversion the company still has a significant growth path in front of it (as backlog stands at a whopping $938M), but it opens up other, more problematic possibilities:
- In an August 2018 presentation, backlog for 2019 was $84M, since overall backlog has doubled since then, it should be considerably higher today. Yet the company's 2019 revenue guidance ($105M-$115M) contains only $30M-$40M of revenue for legacy Pareteum (ex Artilium and iPass). Either the company is going to blow out its guidance, or the conversion rate is way lower than the 80% they've guided for this year.
- We know only few names of the companies that signed these contracts, but of these few, there were quite a number which really seemed way too small to generate the kind of numbers contracts routinely mention.
- Management itself is moving the needle down from 100% conversion to 75%-80% conversion for this year.
That in itself might not be all that bad, even at 50% conversion the company still has a significant growth path in front of it (as backlog stands at a whopping $938M), but it opens up other, more problematic possibilities:
- If the company is way too aggressive with backlog, is it likely to stop just at that?
- For instance, in the light of this post above about iPass, is that $15M synergy number not a little aggressive too?
- Organic revenue growth (ex-acquisitions) was 101% in 2018.
- This was waay above guidance (2018 revenue growth was guided as 50%+), no aggressiveness here, quite the contrary.
- The CFO was fired from previous employment for cooking the books (in cohoot with the CEO, it seems).
- The auditor noted 'control problems' in the latest 10-K filing, although it did state that this hadn't led to unreliable figures and management listed a number of actions been taken to remedy the problem.