SHU what’s the deal?

[mikeyf]

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.